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. 58 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 59 [X]
STEIN ROE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
One South Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 1-800-338-2550
Heidi J. Walter Cameron S. Avery
Vice-President & Secretary Bell, Boyd & Lloyd
Stein Roe Investment Trust Three First National Plaza
One South Wacker Drive 70 W. Madison Street, Suite 3300
Chicago, Illinois 60606 Chicago, Illinois 60602
(Name and Address of Agents for Service)
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
Registrant has previously elected to register pursuant to Rule
24f-2 an indefinite number of shares of beneficial interest of
the following series: Stein Roe Growth & Income Fund, Stein
Roe Balanced Fund, Stein Roe Growth Stock Fund, Stein Roe
Capital Opportunities Fund, Stein Roe 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
Growth Investor Fund.
This amendment to the Registration Statement has also been
signed by SR&F Base Trust.
<PAGE>
The prospectuses and statements of additional information
relating to the series of Stein Roe Investment Trust
designated Stein Roe Young Investor Fund, Stein Roe Asia
Pacific Fund, Stein Roe Small Company Growth Fund, Stein Roe
Growth Investor Fund, and Stein Roe International Fund are not
affected by the filing of this Post-Effective Amendment No.
58.
<PAGE>
STEIN ROE INVESTMENT TRUST
Supplement to Feb. 1, 1999 Prospectus
________________
STEIN ROE CAPITAL OPPORTUNITIES FUND
The Board of Trustees of Stein Roe Investment Trust has called a
special meeting of shareholders of Stein Roe Capital Opportunities
Fund (Cap Op Fund) for August 17, 1999. Cap Op Fund shareholders
of record on June 18, 1999, will be entitled to vote at the
meeting. The Board has recommended that shareholders approve a
proposed reorganization under which shareholders of Cap Op Fund
would receive, in exchange for their Cap Op Fund shares, shares of
Stein Roe Growth Investor Fund, another series of the Trust. If
approved by shareholders, the reorganization is expected to take
place at 3:00 p.m. on August 20, 1999, at which time Cap Op Fund
would terminate. If the reorganization is approved by
shareholders, the Trust will not accept any purchase orders to
open new accounts of Cap Op Fund after the close of business on
the day of shareholder approval.
Effective May 6, 1999, Cap Op Fund's portfolio managers are Erik
P. Gustafson and David P. Brady. Mr. Gustafson joined Stein Roe &
Farnham Incorporated in 1992 as a portfolio manager for privately
managed accounts and is a senior vice president. He is portfolio
manager of SR&F Growth Investor Portfolio (the master fund of
Stein Roe Young Investor Fund and Stein Roe Growth Investor Fund)
and SR&F Growth Stock Portfolio. Mr. Brady joined Stein Roe in
1993 as an associate portfolio manager of Stein Roe Special Fund
and is a senior vice president. He is portfolio manager of SR&F
Growth Investor Portfolio and Stein Roe Large Company Focus Fund
and associate portfolio manager of SR&F Growth Stock Portfolio.
STEIN ROE SPECIAL FUND
Effective May 6, 1999, the name of Stein Roe Special Fund is
changed to Stein Roe Disciplined Stock Fund. The Fund's principal
investment strategy is changed to the following:
PRINCIPAL INVESTMENT STRATEGY Disciplined Stock Fund
invests all of its assets in SR&F Disciplined Stock Portfolio
as part of a master fund/feeder fund structure. Under normal
market circumstances, Disciplined Stock Portfolio will invest
primarily in common stocks of midcapitalization companies.
The Portfolio may also invest in companies having large-
market capitalizations. The Portfolio may invest up to 25
percent of its assets in foreign stocks. The portfolio will
be "blend" in nature, meaning that the manager will exercise
latitude in investing in the stocks of companies that have
"growth" and/or "value" characteristics. The portfolio
manager will generally avoid growth stocks with very high
relative price/earnings ratios and growth rates. These
strategies reflect the Fund's more conservative posture than
a fund investing only in growth stocks. In selecting stocks
for the Portfolio, the portfolio manger will focus on
companies with sales and earnings that he believes will
generally grow at above-average rates relative to their
industry peers. The portfolio manager may also look for
companies that are perhaps growing more slowly but whose
valuation may be attractive based on earnings, cash flow
and/or assets.
The first paragraph on page 30 of the prospectus, describing
principal investment risks, is changed to read as follows:
Investments in stocks of midsized companies can be riskier
than investments in larger companies. Midsized companies
often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on
a smaller management group than larger companies. Midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Effective May 6, 1999, the portfolio manager of Stein Roe
Disciplined Stock Fund and SR&F Disciplined Stock Portfolio is
Daniel K. Cantor. Mr. Cantor has also been portfolio manager of
SR&F Growth & Income Portfolio since its inception in 1997 and
manager of Stein Roe Growth & Income Fund since 1995. He joined
Stein Roe in 1985 as an equity analyst and served as an advisor to
Stein Roe Private Capital Management from 1992 to 1995. Mr.
Cantor was a co-manager of Stein Roe Young Investor Fund from 1994
to 1995. Mr. Cantor is a senior vice president of Stein Roe. A
chartered financial analyst, he received a B.A. degree from the
University of Rochester and an M.B.A. degree from the Wharton
School of the University of Pennsylvania.
Prior to Mr. Cantor becoming portfolio manager, the Fund generally
purchased stocks of companies that the portfolio manager believed
were undervalued, underfollowed or out of favor. Mr. Cantor will
implement the Fund's revised principal investment strategy as soon
as is practicable in the ordinary course of managing the Fund's
investment portfolio.
STEIN ROE GROWTH OPPORTUNITIES FUND
Effective May 6, 1999, the name of Stein Roe Growth Opportunities
Fund is changed to Stein Roe Midcap Growth Fund. The Fund's
principal investment strategy is changed to the following:
PRINCIPAL INVESTMENT STRATEGY Under normal market
conditions, the Fund invests at least 65 percent of its
assets in common stocks of midcap companies that the
portfolio managers believe have long-term growth potential.
The Fund may also invest in small- and large-capitalization
companies. The Fund may invest up to 25 percent of its
assets in foreign stocks. To select investments for the
Fund, the portfolio managers consider midcap companies that
show the potential to generate and sustain long-term earnings
growth at above-average rates. The portfolio managers select
companies based on their view of long-term rather than short-
term earnings growth prospects.
Prior to this change, the Fund invested in common stocks of
large-, mid- and small capitalization companies without any
predetermined emphasis on any single capitalization category. The
Fund's portfolio managers will implement the Fund's revised
principal investment strategy as soon as is practicable in the
ordinary course of managing the Fund's investment portfolio.
STEIN ROE SPECIAL VENTURE FUND
The Board of Trustees voted on May 4, 1999, to liquidate Stein Roe
Special Venture Fund. The Board directed that sales of Special
Venture Fund shares be suspended as of the close of business on
May 10, 1999, and that the Fund be liquidated on June 28, 1999, or
before that time if all shareholders have redeemed their interests
in the Fund. In the case of shares held in qualified retirement
plans for which Stein Roe does not receive transfer instructions
by the liquidation date, Stein Roe will transfer such shares to
Stein Roe Cash Reserves Fund.
The Board's decision to liquidate Special Venture Fund was
prompted by the Fund's relatively small size and the belief that,
under current conditions, it would not be likely to attract
significant new assets in the near future. Funds of nominal asset
size generally tend to be inefficient for shareholders-they may
have higher expense ratios, less investment flexibility and,
consequently, lower returns over the long term.
This Supplement is Dated May __, 1999
<PAGE>
Stein Roe Domestic Equity Funds
Balanced Fund
Growth & Income Fund
Growth Stock Fund
Growth Opportunities Fund
Special Fund
Special Venture Fund
Capital Opportunities Fund
Large Company Focus Fund
Prospectus
Feb. 1, 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>
Each fund section contains the following information specific to
that fund: investment goal; principal investment strategy;
principal investment risks; fund performance; and your expenses.
Please keep this prospectus as your reference manual.
1 Balanced Fund
9 Growth & Income Fund
16 Growth Stock Fund
22 Growth Opportunities Fund
29 Special Fund
36 Special Venture Fund
43 Capital Opportunities Fund
50 Large Company Focus Fund
55 Financial Highlights
64 Your Account
Purchasing Shares
Opening an Account
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
79 Other Investments and Risks
Market Capitalization
Futures
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
84 The Funds' Management
Investment Adviser
Portfolio Managers
Master/Feeder Fund Structure
Year 2000 Readiness
<PAGE>
[Callout]
DEFINING CAPITALIZATION
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 79.)
[End Callout]
THE FUNDS
STEIN ROE BALANCED FUND
INVESTMENT GOAL
Stein Roe Balanced Fund seeks long-term growth of capital and
current income consistent with reasonable investment risk.
PRINCIPAL INVESTMENT STRATEGY
Balanced Fund invests all of its assets in SR&F Balanced Portfolio
as part of a master fund/feeder fund structure. Balanced
Portfolio allocates its investments among common stocks and
securities convertible into common stocks, bonds and cash. The
Portfolio invests primarily in well-established companies that
have large market capitalizations. The portfolio managers may
invest in a company because it has a history of steady to
improving sales or earnings growth that they believe can be
sustained. They also may invest in a company because they believe
its stock is priced attractively compared to the value of its
assets. The Portfolio may invest up to 25 percent of its assets
in foreign stocks.
The Portfolio also invests at least 25 percent of its assets in
bonds. The Portfolio purchases bonds that are "investment grade"-
that is, within the four highest investment grades assigned by a
nationally recognized statistical rating organization. The
Portfolio may invest in unrated bonds if the portfolio managers
believe that the securities are investment-grade quality. To
select debt securities for the Portfolio, the portfolio managers
consider a bond's expected income together with its potential for
price gains or losses.
The portfolio managers set the Portfolio's asset allocation
between stocks, bonds and cash based upon recommendations of Stein
Roe's Investment Committee. The portfolio managers may change the
allocation if the Investment Committee recommends a change. The
committee makes its recommendations based upon economic, market
and other factors that affect investment opportunities.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks and bonds: management risk and market risk. For bonds,
market risk is primarily a factor of interest rate changes. These
risks may cause you to lose money when you sell your shares.
[Callout]
What are market and management risks? Management risk means that
Stein Roe's stock and bond 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 Callout]
Because the Portfolio invests in stocks and bonds, the price of
the Fund's shares-its net asset value per share (NAV)-fluctuates
daily in response to changes in the market value of the stocks and
bonds. In addition, the risks associated with the Portfolio's
investment strategy may cause the Fund's total return or yield to
decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
Debt Securities
The Portfolio's investments in debt securities, generally bonds,
expose the Fund to interest rate risk. Interest rate risk is the
risk of a decline in the price of a bond when interest rates
increase. In general, if interest rates rise, bond prices fall;
and if interest rates fall, bond prices rise. Interest rate risk
is generally greater for bonds having longer durations. Duration
mathematically measures how quickly the principal and interest of
a bond are expected to be prepaid.
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 Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Balanced Fund if you:
* are a long-term investor and want a fund that offers both stocks
and bonds in the same investment
* want a fund that can invest in both domestic and international
stocks
* are a first-time investor or want to invest primarily in just
one fund
* want to invest in stocks, but are uncomfortable with the risk
level of a fund that invests solely in stocks
* want to invest in bonds, but want more return potential than is
typically available from a fund that invests solely in bonds
Balanced Fund is not appropriate for investors who:
* can't tolerate volatility or possible losses
* are saving for a short-term investment
* don't want current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
45%
40%
35%
30%
25% 29.59%
20% 20.34% 22.65%
15% 17.05% 17.47%
10% 12.34% 12.19%
5% 7.89%
0%
- -5% -1.72% -4.12%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Balanced Fund
Best quarter: 4th quarter 1998, +12.53%
Worst quarter: 3rd quarter 1990, -9.49%
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 500
Index, which is a broad-based measure of market performance. 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 5 yr 10 yr
Balanced Fund 12.19% 12.65% 12.92%
S&P 500 Index* 28.60% 24.05% 19.19%
________
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
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 or the Portfolio 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) 0.70%
Distribution 12b-1 fees None
Other expenses 0.33%
Total annual fund operating expenses 1.03%
(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) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(c) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Balanced Fund $105 $328 $569 $1,259
Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services.
<PAGE>
THE FUNDS
STEIN ROE GROWTH & INCOME FUND
INVESTMENT GOAL
Stein Roe Growth & Income Fund seeks to provide both growth of
capital and current income.
PRINCIPAL INVESTMENT STRATEGY
Growth & Income Fund invests all of its assets in SR&F Growth &
Income Portfolio as part of a master fund/feeder fund structure.
Growth & Income Portfolio invests primarily in common stocks of
well-established companies having large-market capitalizations.
The Portfolio may also invest in companies having midsized market
capitalizations. The Portfolio may invest up to 25 percent of its
assets in foreign stocks. To select investments for the
Portfolio, the portfolio manager looks for common stocks that have
the potential to appreciate in value and to pay dividends. The
portfolio manager focuses on the stocks of companies that have
experienced management; broad, highly diversified product lines;
deep financial resources; easy access to credit; and a history of
paying dividends.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
[End Callout]
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
For more information on the Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Growth & Income Fund if you:
* want to invest in the stocks of large companies, but prefer to
temper stock price fluctuations by combining growth with the
potential of a steady source of income from dividends
* are a long-term investor looking for steady, not aggressive,
growth potential
* are a first-time investor or want to invest primarily in just
one stock fund
Growth & Income Fund is not appropriate for investors who:
* are unable to tolerate the risk and volatility associated with
stock market investing
* are saving for a short-term investment
* don't want current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
45%
40%
35%
30% 31.00% 32.42% 30.15%
25% 25.71%
20% 21.81%
15% 19.54%
10% 10.01% 12.86%
5%
0% -0.14%
- -5% -1.72%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Growth & Income Fund
Best quarter: 4th quarter 1998, +17.91%
Worst quarter: 3rd quarter 1990, -12.06%
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 500
Index, which is a broad-based measure of market performance. 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 5 yr 10 yr
Growth & Income Fund 19.54% 18.93% 17.55%
S&P 500 Index* 28.60% 24.05% 19.19%
________
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
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 or the Portfolio 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) 0.75%
Distribution 12b-1 fees None
Other expenses 0.32%
Total annual fund operating expenses 1.07%
(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) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(c) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Growth & Income Fund $109 $340 $590 $1,306
Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services.
<PAGE>
THE FUNDS
STEIN ROE GROWTH STOCK FUND
This Fund is closed to new investors except for purchases by
eligible investors as described under "Your Account."
INVESTMENT GOAL
Stein Roe Growth Stock Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Growth Stock Fund invests all of its assets in SR&F Growth Stock
Portfolio as part of a master fund/feeder fund structure. Growth
Stock Portfolio invests primarily in the common stocks of
companies with large-market capitalizations. The Portfolio
emphasizes the technology, financial services, health care, and
global consumer franchise sectors. The Portfolio may invest up to
25 percent of its assets in foreign stocks. To select investments
for the Portfolio, the portfolio manager considers companies that
he believes will generate earnings growth over the long term
regardless of the economic environment.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
[End Callout]
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
The Portfolio's emphasis on certain market sectors may increase
volatility in the Fund's NAV. If sectors that the Portfolio
invests in do not perform well, the Fund's NAV could decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
For more information on the Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Growth Stock Fund if you:
* are a long-term investor and want to participate in the market
for large-capitalization growth stocks
* can tolerate the risk and volatility associated with the general
stock market but want less risk and volatility than an
aggressive growth fund
Growth Stock Fund is not appropriate for investors who:
* are unable to tolerate the risk and volatility associated with
stock market investing
* are saving for a short-term investment
* want regular current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
45% 46.00%
40%
35% 35.49% 35.63%
30% 31.62%
25% 25.54%
20% 20.94%
15%
10%
5% 8.24%
0% 0.93% 2.84%
- -5% -3.78%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Growth Stock Fund
Best quarter: 4th quarter 1998, +24.78%
Worst quarter: 3rd quarter 1990, -16.61%
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 500
Index, which is a broad-based measure of market performance. 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 5 yr 10 yr
Growth Stock Fund 25.54% 21.13% 19.21%
S&P 500 Index* 28.60% 24.05% 19.19%
________
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
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 or the Portfolio 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) 0.73%
Distribution 12b-1 fees None
Other expenses 0.30%
Total annual fund operating expenses 1.03%
(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) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(c) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Growth Stock Fund $105 $328 $569 $1,259
Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services.
<PAGE>
THE FUNDS
STEIN ROE GROWTH OPPORTUNITIES FUND
INVESTMENT GOAL
Stein Roe Growth Opportunities Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Growth Opportunities Fund invests primarily in common stocks of
large-, mid- and small-capitalization companies that the portfolio
managers believe have long-term growth potential. The Fund may
invest up to 25 percent of its assets in foreign stocks. To
select investments for the Fund, the portfolio managers consider
companies of any size that show the potential to generate and
sustain long-term earnings growth at above-average rates. The
portfolio managers seek to moderate the risks of investing in
small and midsized companies by also investing in larger, more
established companies. They select companies based on their view
of long-term rather than short-term earnings growth prospects.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
[End Callout]
Investments in stocks of small and midsized companies can be
riskier than investments in larger companies. Small and midsized
companies often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on a
small management group. Small companies in particular are more
likely to fail or prove unable to grow. Small and midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Because the Fund invests in stocks, the price of its shares-its
net asset value per share (NAV)-fluctuates daily in response to
changes in the market value of the securities. In addition, the
risks associated with the Fund's investment strategy may cause the
Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Fund may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
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 Growth Opportunities Fund if you:
* want the diversification of a fund that invests in growth
companies of all sizes
* are a long-term investor
Growth Opportunities Fund is not appropriate for investors who:
* can't tolerate the risk and volatility associated with small
stock investing
* are saving for a short-term investment
* need regular current income
FUND PERFORMANCE
Growth Opportunities Fund commenced operations on June 30, 1997.
The following charts show the Fund's performance through Dec. 31,
1998. 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
This chart illustrates performance for the one year period ended
Dec. 31, 1998 and provides an indication of the risks of investing
in the Fund.
YEAR-BY-YEAR TOTAL RETURNS
45%
40%
35%
30%
25%
20%
15% 15.24%
10%
5%
0%
- -5%
1998
[ ] Growth Opportunities Fund
Best quarter: 4th quarter 1998, +21.33%
Worst quarter: 3rd quarter 1998, -18.35%
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 500
Index, which is a broad-based measure of market performance. 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
June 30, 1997
Growth Opportunities Fund 15.24% 16.83%
S&P 500 Index* 28.60% 26.45%
________
*The S&P 500 Index is an group of stocks that differs from the
Fund's composition; it is not available for direct investment.
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) 0.90%
Distribution 12b-1 fees None
Other Expenses 0.54%
Total annual fund operating expenses 1.44%
(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) Stein Roe will reimburse Growth Opportunities Fund if its
ordinary operating expenses exceed 1.25% of annual average net
assets. The expense undertaking expires on Jan. 31, 2000, but
may be terminated sooner by Stein Roe on 30 days' notice.
After reimbursement, management fees were 0.71% and total
annual fund operating expenses were 1.25%. A reimbursement
lowers the expense ratio and increases overall return to
investors.
(c) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Growth Opportunities Fund $147 $456 $787 $1,724
Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services.
<PAGE>
THE FUNDS
STEIN ROE SPECIAL FUND
INVESTMENT GOAL
Stein Roe Special Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Special Fund invests all of its assets in SR&F Special Portfolio
as part of a master fund/feeder fund structure. Special Portfolio
invests primarily in the common stocks of midcapitalization
companies. It may also purchase the common stocks of small- and
large- capitalization companies. The Portfolio generally
purchases stocks of companies that the portfolio manager believes
are undervalued, underfollowed or out of favor. It may invest in
stocks that have limited marketability. The Portfolio may invest
up to 25 percent of its assets in foreign stocks.
To select investments for the Portfolio, the portfolio manager
considers stocks that he believes have limited downside risk in
comparison to their potential for above-average appreciation over
the long term. The portfolio manager looks for companies that may
benefit from a change such as a change in management or demand for
its products that might cause its stock to appreciate.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
[End Callout]
Investments in stocks of small and midsized companies can be
riskier than investments in larger companies. Small and midsized
companies often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on a
small management group. Small companies in particular are more
likely to fail or prove unable to grow. Small and midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
For more information on the Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Special Fund if you:
* believe that investing in the securities of companies that are
undervalued, underfollowed or out of favor may provide strong
opportunities for appreciation with managed risk
* are a long-term investor
Special Fund is not appropriate for investors who:
* can't tolerate the volatility and risks of stock market
investing
* are saving for a short-term investment
* need regular current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
45%
40%
35% 37.84%
30% 34.04%
25% 25.94%
20% 20.42%
15% 18.73% 18.81%
10% 14.05%
5%
0% -3.35%
- -5% -5.81%
- -10% -11.25%
- -15%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Special Fund
Best quarter: 1st quarter 1991, +19.00%
Worst quarter: 3rd quarter 1998, -18.13%
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 Mid-
Cap 400 Index, which is a broad-based measure of market
performance. 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 5 yr 10 yr
Special Fund -11.25% 8.79% 13.80%
S&P Mid-Cap 400 Index* 18.25% 18.67% 19.21%
________
*The S&P Mid-Cap 400 Index is an unmanaged group of stocks that
differs from the Fund's composition; it is not available for
direct investment.
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 or the Portfolio 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) 0.84%
Distribution 12b-1 fees None
Other expenses 0.29%
Total annual fund operating expenses 1.13%
(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) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(c) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Special Fund $115 $359 $622 $1,375
Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services.
<PAGE>
THE FUNDS
STEIN ROE SPECIAL VENTURE FUND
INVESTMENT GOAL
Stein Roe Special Venture Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Special Venture Fund invests all of its assets in SR&F Special
Venture Portfolio as part of a master fund/feeder fund structure.
Special Venture Portfolio invests primarily in a well-diversified
portfolio of equity securities of attractively valued companies.
It emphasizes investments in financially strong, small and
midcapitalization companies. In selecting investments for the
Portfolio, the portfolio managers attempt to identify attractively
valued companies in the earlier phases of growth. The Portfolio
may invest up to 25 percent of its assets in foreign stocks.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
[End Callout]
Investments in stocks of small and midsized companies can be
riskier than investments in larger companies. Small and midsized
companies often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on a
small management group. Small companies in particular are more
likely to fail or prove unable to grow. Small and midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
For more information on the Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Special Venture Fund if you:
* like the upside potential of small- and midsized company stocks
and can accept their greater price volatility
* are a long-term investor
Special Venture Fund is not appropriate for investors who:
* can't tolerate the volatility and risks of stock market
investing
* are saving for a short-term investment
* need regular current income
FUND PERFORMANCE
Special Venture Fund commenced operations on Oct. 17, 1994. The
following charts show the Fund's performance for the past four
years through Dec. 31, 1998. 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
35%
30%
25% 27.17% 28.65%
20%
15%
10%
5% 9.67%
0%
- -5%
- -10%
- -15%
- -20% -21.55%
- -25%
1995 1996 1997 1998
[ ] Special Venture Fund
Best quarter: 2nd quarter 1997, +15.58%
Worst quarter: 3rd quarter 1998, -21.45%
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 Russell
2000 Index, which is a broad-based measure of market performance.
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
Oct. 17, 1994
Special Venture Fund -21.55% 9.71%
Russell 2000 Index* -2.55% 14.49%
________
*The Russell 2000 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 Russell
2000 Index is from Oct. 31, 1994 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 or the Portfolio 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) 0.90%
Distribution 12b-1 fees None
Other expenses 0.38%
Total annual fund operating expenses 1.28%
(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) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(c) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Special Venture Fund $130 $406 $702 $1,545
Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services.
<PAGE>
THE FUNDS
STEIN ROE CAPITAL OPPORTUNITIES FUND
INVESTMENT GOAL
Stein Roe Capital Opportunities Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Capital Opportunities Fund invests primarily in the common stocks
of aggressive growth companies. An aggressive growth company has
the ability to increase its earnings at an above-average rate. To
select stocks for the Fund, the manager concentrates on stocks of
small and midcapitalization companies which she believes have
opportunities for growth. The Fund may invest up to 25 percent of
its assets in foreign stocks.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
[End Callout]
Investments in stocks of small and midsized companies can be
riskier than investments in larger companies. Small and midsized
companies often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on a
small management group. Small companies in particular are more
likely to fail or prove unable to grow. Small and midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Because the Fund invests in stocks, the price of its shares-its
net asset value per share (NAV)-fluctuates daily in response to
changes in the market value of the securities. In addition, the
risks associated with the Fund's investment strategy may cause the
Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Fund may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
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 Capital Opportunities Fund if you:
* like the significant growth potential of aggressive growth
companies and can tolerate their greater price volatility
* believe that a company's earnings growth drives its stock price
* are a long-term investor and prefer a fund with a long-term
investment horizon
Capital Opportunities Fund is not appropriate for investors who:
* can't tolerate the increased price volatility and risks
associated with aggressive growth investing
* are saving for a short-term investment
* need regular current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
65%
60% 62.79%
55%
50% 50.77%
45%
40%
35% 36.84%
30%
25% 27.52%
20% 20.39%
15%
10%
5% 6.15%
0% 2.43% 0.00%
- -5% -1.61%
- -10%
- -15%
- -20%
- -25% -29.09%
- -30%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Capital Opportunities Fund
Best quarter: 1st quarter 1991, +24.90%
Worst quarter: 3rd quarter 1990, -33.14%
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 Mid-
Cap 400 Index, which is a broad-based measure of market
performance. 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 5 yr 10 yr
Capital Opportunities Fund -1.61% 13.65% 14.61%
S&P Mid-Cap 400 Index* 18.25% 18.67% 19.21%
________
*The S&P Mid-Cap 400 Index is an unmanaged group of stocks that
differs from the Fund's composition; it is not available for
direct investment.
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
(expenses that are deducted from Fund assets)
Management fees(b) 0.86%
Distribution 12b-1 fees None
Other expenses 0.34%
Total annual fund operating expenses 1.20%
(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 include both the management fee and the
administrative fee charged to the Fund.
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
Capital Opportunities Fund $122 $381 $660 $1,455
Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services.
<PAGE>
THE FUNDS
STEIN ROE LARGE COMPANY FOCUS FUND
INVESTMENT GOAL
Stein Roe Large Company Focus Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Large Company Focus Fund invests in a limited number of large
capitalization companies that the portfolio manager believes have
above-average growth potential. As a "focus" fund, under normal
conditions, the Fund will hold between 15-25 common stocks. To
select investments for the Fund, the portfolio manager considers
companies that are dominant in their particular industries or
markets that can generate consistent earnings growth. The
portfolio manager selects investments across many sectors. Since
the Fund is "non-diversified," the percentage of assets that it
may invest in any one issuer is not limited. The Fund may invest
up to 25 percent of its assets in foreign stocks.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
[Callout]
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
[End Callout]
Because the Fund invests in stocks, the price of its shares-its
net asset value per share (NAV)-fluctuates daily in response to
changes in the market value of the securities. In addition, the
risks associated with the Fund's investment strategy may cause the
Fund's total return or yield to decrease.
The Fund invests in a limited number of stocks and it owns a
higher concentration in a single stock than a "diversified" fund.
As a result, a single stock's increase or decrease in value may
have a greater impact on the Fund's NAV and cause the Fund's NAV
to fluctuate more than the NAV of diversified growth funds.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Fund may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
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 Large Company Focus Fund if you:
* want a mutual fund that invests in a limited number of large-cap
growth stocks
* want the added performance potential of a focus fund and are
comfortable with the increased price volatility that may
accompany focused investing
* are a long-term investor
Large Company Focus Fund is not appropriate for investors who:
* can't tolerate the greater price volatility associated with a
fund that invests in a limited number of stocks
* are saving for a short-term investment
* need regular current income
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) 0.90%
Distribution 12b-1 fees None
Other expenses 0.71%
Total annual fund operating expenses 1.61%
(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) Stein Roe will reimburse the Fund if its ordinary operating
expenses exceed 1.50% of annual average net assets. The
expense undertaking expires on Jan. 31, 2000, but may be
terminated sooner by Stein Roe on 30 days' notice. After
reimbursement, management fees were 0.79% and total annual
fund operating expenses were 1.50%. A reimbursement lowers
the expense ratio and increases overall return to investors.
(c) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Large Company Focus Fund $164 $508 $876 $1,911
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 tables explain the Funds' financial
performance. Consistent with other mutual funds, we show
information for the last five fiscal years or for the period of a
Fund's operations (if shorter). Each Fund's fiscal year runs from
October 1 to September 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 tables reflects the financial results for a single Fund
share. Arthur Andersen LLP, an international public accounting
firm, audits this information and issues a report that appears in
the Funds' annual report along with the financial statements. To
request a Fund's annual report, please call 800-338-2550.
BALANCED FUND PER SHARE DATA
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $33.41 $30.07 $27.82 $25.78 $27.57
Income from investment operations
Net investment income 0.95 0.95 1.00 1.33 1.15
Net gains (losses) on securities
(both realized and unrealized) (0.90) 5.61 2.96 2.22 (1.06)
Total income from investment operations 0.05 6.56 3.96 3.55 0.09
Less distributions
Dividends (from net investment income) (0.76) (0.96) (1.01) (1.23) (1.17)
Distributions (from capital gains) (2.00) (2.26) (0.70) (0.28) (0.71)
Total distributions (2.76) (3.22) (1.71) (1.51) (1.88)
Net asset value, end of period $30.70 $33.41 $30.07 $27.82 $25.78
Total return 0.14% 23.60% 14.83% 14.49% 0.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $247,852 $284,846 $231,063 $228,560 $229,274
Ratio of net expenses to average
net assets 1.03% 1.05% 1.05% 0.87% 0.83%
Ratio of net investment income to
average net assets 2.90% 3.02% 3.45% 5.14% 4.53%
Portfolio turnover rate N/A 15%(a) 87% 45% 29%
</TABLE>
GROWTH & INCOME FUND
Per Share Data
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $22.91 $18.39 $16.65 $14.54 $14.83
Income from investment operations
Net investment income 0.24 0.30 0.27 0.34 0.18
Net gains on securities (both
realized and unrealized) 0.55 5.15 3.22 2.56 0.40
Total income from investment operations 0.79 5.45 3.49 2.90 0.58
Less distributions
Dividends (from net investment income) (0.28) (0.28) (0.32) (0.20) (0.16)
Distributions (from capital gains) (0.97) (0.65) (1.43) (0.59) (0.71)
Total distributions (1.25) (0.93) (1.75) (0.79) (0.87)
Net asset value, end of period $22.45 $22.91 $18.39 $16.65 $14.54
Total return 3.45% 30.81% 22.67% 21.12% 4.03%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $351,052 $337,466 $204,387 $139,539 $129,680
Ratio of net expenses to average
net assets 1.07% 1.13% 1.18% 0.96% 0.90%
Ratio of net investment income to
average net assets 1.02% 1.52% 1.65% 1.78% 1.18%
Portfolio turnover rate N/A 2%(a) 13% 70% 85%
</TABLE>
GROWTH STOCK FUND
Per Share Data
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $35.29 $28.79 $26.13 $23.58 $24.89
Income from investment operations
Net investment income (loss) (0.04) 0.01 0.08 0.12 0.13
Net gains on securities (both
realized and unrealized) 1.61 8.79 5.01 5.60 0.41
Total income from investment operations 1.57 8.80 5.09 5.72 0.54
Less distributions
Dividends (from net investment income) - (0.07) (0.10) (0.15) (0.12)
Distributions (from capital gains) (2.15) (2.23) (2.33) (3.02) (1.73)
Total distributions (2.15) (2.30) (2.43) (3.17) (1.85)
Net asset value, end of period $34.71 $35.29 $28.79 $26.13 $23.58
Total return 4.69% 33.10% 21.04% 28.18% 2.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $615,345 $607,699 $417,964 $360,336 321,502
Ratio of net expenses to average
net assets 1.03% 1.07% 1.08% 0.99% 0.94%
Ratio of net investment income
(loss) to average net assets (0.10%) 0.04% 0.32% 0.56% 0.50%
Portfolio turnover rate N/A 5%(a) 39% 36% 27%
</TABLE>
GROWTH OPPORTUNITIES FUND
Per Share Data
For year For period
ending ending
Sept. 30, Sept. 30,
1998 1997(d)
Net asset value, beginning of period $ 10.77 $ 10.00
Income from investment operations
Net investment loss (0.07) -
Net gains (losses) on securities (both
realized and unrealized) (0.29) 0.77
Net asset value, end of period $ 10.41 $ 10.77
Total return (3.34%) 7.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $49,974 $49,830
Ratio of net expenses to average net assets(b) 1.25% 1.25%(e)
Ratio of net investment income (loss) to
average net assets (c) (0.64%) 0.02%(e)
Portfolio turnover rate 75% 3%
SPECIAL FUND
Per Share Data
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $33.79 $27.39 $25.26 $23.54 $25.04
Income from investment operations
Net investment income (loss) 0.07 (0.06) 0.01 0.13 0.15
Net gains (losses) on securities
(both realized and unrealized) (6.06) 8.57 4.14 3.05 0.33
Total income from investment
operations (5.99) 8.51 4.15 3.18 0.48
Less distributions
Dividends (from net investment income) - - (0.11) (0.15) (0.21)
Distributions (from capital gains) (3.32) (2.11) (1.91) (1.31) (1.77)
Total distributions (3.32) (2.11) (2.02) (1.46) (1.98)
Net asset value, end of period $24.48 $33.79 $27.39 $25.26 $23.54
Total return (19.17%) 33.67% 17.89% 14.60% 2.02%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $911,650 $1,327,578 $1,158,498 $1,201,469 $1,243,885
Ratio of net expenses to average
net assets 1.13% 1.14% 1.18% 1.02% 0.96%
Ratio of net investment income
(loss) to average net assets 0.21% (0.17%) 0.03% 0.56% 0.91%
Portfolio turnover rate N/A 7%(a) 32% 41% 58%
</TABLE>
SPECIAL VENTURE FUND
Per Share Data
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995(d)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.45 $15.87 $12.60 $10.00
Income from investment operations
Net investment income (loss) (0.09) (0.02) (0.02) 0.01
Net gains (losses) on securities (both
realized and unrealized) (5.08) 3.12 3.86 2.67
Total income from investment operations (5.17) 3.10 3.84 2.68
Less distributions
Dividends (from net investment income) - - - (0.03)
Distributions (from capital gains) (1.77) (1.52) (0.57) (0.05)
Total distributions (1.77) (1.52) (0.57) (0.08)
Net asset value, end of period $10.51 $17.45 $15.87 $12.60
Total return (32.05%) 21.73% 31.81% 26.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $116,079 $235,755 $144,528 $60,533
Ratio of net expenses to average
net assets (b) 1.28% 1.29% 1.25% 1.25%(e)
Ratio of net investment income (loss)
to average net assets (c) (0.50%) (0.18%) (2.19%) 0.12%(e)
Portfolio turnover rate N/A 44%(a) 72% 84%
</TABLE>
CAPITAL OPPORTUNITIES FUND
Per Share Data
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $29.10 $31.04 $21.69 $15.79 $15.44
Income from investment operations
Net investment income (loss) (0.25) (0.17) (0.06) 0.01 0.02
Net gains (losses) on securities
(both realized and unrealized) (3.60) (1.77) 10.41 5.91 0.34
Total income from investment
operations (3.85) (1.94) 10.35 5.92 0.36
Less distributions
Dividends (from net investment
income) - - (0.01) (0.02) (0.01)
Distributions (from capital gains) - - (0.99) - -
Total distributions - - (1.00) (0.02) (0.01)
Net asset value, end of period $25.25 $29.10 $31.04 21.69 $15.79
Total return (13.23%) (6.25%) 49.55% 37.46% 2.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $681,133 $1,110,642 $1,684,538 $242,381 $175,687
Ratio of net expenses to average
net assets 1.20% 1.17% 1.22% 1.05% 0.97%
Ratio of net investment income
(loss) to average net assets (0.72%) (0.69%) (0.40%) 0.08% 0.04%
Portfolio turnover rate 47% 35% 22% 60% 46%
</TABLE>
LARGE COMPANY FOCUS FUND
Per Share Data
For period
ending
September 30,
1998(d)
Net asset value, beginning of period $ 10.00
Income from investment operations
Net investment income (loss) -
Net losses on securities (both realized
and unrealized) (1.27)
Net asset value, end of period $ 8.73
Total return (12.70%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $44,716
Ratio of net expenses to average net assets (b) 1.50%(e)
Ratio of net investment loss to average net
assets (c) (0.12%)(e)
Portfolio turnover rate 21%
_____________________
(a) Prior to commencement of operations of the Portfolio.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by Stein Roe, this ratio would have
been 1.44% for the year ended Sept. 30, 1998, and 1.74% for
the period ended Sept. 30, 1997 for Growth Opportunities fund;
1.34% for the year ended Sept. 30, 1996, and 2.87% for the
period ended Sept. 30, 1995 for Special Venture Fund; and
1.61% for the period ended Sept. 30, 1998 for Large Company
Focus Fund.
(c) Computed with the effect of Stein Roe's expense reimbursement.
(d) From commencement of operations on: June 30, 1997 for Growth
Opportunities Fund, Oct. 17, 1994 for Special Venture Fund,
and June 26, 1998 for Large Company Focus Fund.
(e) 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.
<PAGE>
YOUR ACCOUNT
Purchasing Shares
You may purchase shares of a Fund without a sales charge. Your
purchases are made at the NAV next determined after the Fund
receives your check, wire transfer or electronic transfer. If a
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.
Growth Stock Fund Accounts
Growth Stock Fund is closed to purchases (including exchanges) by
new investors except for purchases by eligible investors as
described below. The Board of Trustees has taken this step to
facilitate management of the Fund's portfolio. If you are already
a shareholder of Growth Stock Fund, you may continue to add to
your account or open another account with the Fund in your name.
In addition, you may open a new account if:
- - you are a shareholder of any other Stein Roe Fund, having
purchased shares directly from Stein Roe, as of Oct. 15, 1997,
and you are opening a new account by exchange or by dividend
reinvestment;
- - you are a client of Stein Roe;
- - you are a trustee of the Trust; an employee of Stein Roe, or any
of its affiliated companies; or a member of the immediate family
of any trustee or employee;
- - you purchase shares (i) under an asset allocation program
sponsored by a financial advisor, broker-dealer, bank, trust
company or other intermediary or (ii) from certain financial
advisors who charge a fee for services and who, as of Oct. 15,
1997, had one or more clients who were Growth Stock Fund
shareholders; or
- - you purchase shares for an employee benefit plan, the records
for which are maintained by a trust company or third-party
administrator under an investment program with Growth Stock
Fund.
The Board of Trustees concluded that permitting the additional
investments described above would not adversely affect the ability
of Stein Roe to manage the Fund effectively. If you have
questions about your eligibility to purchase shares of Growth
Stock Fund, please call 800-338-2550.
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 Funds offer. There are no charges or limitations
if you purchase shares directly from a Fund, except those fees
described in this prospectus.
If an intermediary is an agent or designee of the Funds, 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. A Fund may reject any purchase order if it
determines that the order is not in the best interests of the Fund
and its investors. A 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.
Wire funds to:
First National Bank of Boston
ABA: 011000390
Attn.: SSI, Account No. 560-99696
Fund No. __; Stein Roe ____ Fund
Your name (exactly as in the registration).
Account number
(Counselor Account No. if you participate in the Stein
Roe Counselor program).
----------------
Fund Numbers:
31-Balanced Fund
11-Growth & Income Fund
32-Growth Stock Fund
20-Growth Opportunities Fund
34-Special Fund
16-Special Venture Fund
33-Capital Opportunities Fund
21-Large Company Focus Fund
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
Each Fund's share price is its NAV next determined. NAV is the
difference between the values of a 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 the 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
Funds with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
A Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
Selling Shares
You may sell your shares any day the Funds are 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 mail 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 mail a 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 a 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.
A Fund redeems shares at the NAV next determined after an order
has been accepted. We mail proceeds within seven days after the
sale. The Funds normally pay 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 a 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. A 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 a Fund into another
Stein Roe no-load fund and then back to that 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
Each Fund distributes, at least once a year, virtually all of its
net investment income and net realized capital gains. Growth &
Income Fund and Balanced Fund pay dividends quarterly.
A dividend from net investment income represents the income a 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 a Fund makes a distribution of income or capital gains, the
distribution is automatically invested in additional shares of
that Fund unless you elect on the account application to have
distributions paid by check.
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
If you elect to receive distributions by check and a distribution
check is returned to a 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 that 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 Fund shares. If a 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 a 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 primary investment strategies and risks are described in this
prospectus. (See "The Funds.") The Statement of Additional
Information (SAI) describes other investments that the Funds and
Portfolios may make and risks associated with them. The Board of
Trustees can change a Fund's investment objective without
shareholder approval.
The Funds' portfolio managers generally make decisions on buying
and selling portfolio investments based upon their judgment that
the decision will improve a 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. 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.
Futures
Growth & Income Portfolio uses futures to gain exposure to groups
of stocks or individual issuers. A future is an agreement to buy
or sell a specific amount of a financial instrument or physical
commodity for an agreed-upon price at a certain time in the
future. The Portfolio uses futures to invest cash pending direct
investments in stocks and to enhance its return. These
investments are efficient since they typically cost less than
direct investments in the underlying securities. However, the
Fund can lose money if the portfolio manager does not correctly
anticipate the market movements of those underlying securities.
Portfolio Turnover
There are no limits on turnover. Turnover may vary significantly
from year to year. Stein Roe does not expect it to exceed 100
percent under normal conditions. Portfolio turnover typically
produces capital gains or losses resulting in tax consequences for
Fund investors. It also increases transaction expenses, which
reduce a Fund's return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, a Fund or Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. A Fund may not achieve its investment objective if it
takes a defensive position.
Interfund Lending Program
The Funds and Portfolios may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
THE FUNDS' MANAGEMENT
Investment Adviser
Stein Roe & Farnham Incorporated, One South Wacker Drive, Chicago,
IL 60606, manages the day-to-day operations of the Funds and
Portfolios. 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. For the fiscal year
ended Sept. 30, 1998, the Funds paid to Stein Roe the following
aggregate fees (as a percent of average net assets):
Fund Fee
Balanced Fund 0.70%
Growth & Income Fund 0.75%
Growth Stock Fund 0.73%
Growth Opportunities Fund 0.90%
Special Fund 0.84%
Special Venture Fund 0.90%
Capital Opportunities Fund 0.86%
Large Company Focus Fund 0.90%
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 Funds.
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 a
Fund's portfolio, pursuant to procedures adopted by the Board of
Trustees.
Portfolio Managers
Balanced Fund. Harvey B. Hirschhorn has been portfolio manager of
Balanced Portfolio since its inception in 1997 and has managed
Balanced Fund since 1996. He joined Stein Roe in 1973 and is
executive vice president and chief economist and investment
strategist. He holds an A.B. degree from Rutgers College and an
M.B.A. degree from the University of Chicago, and is a chartered
financial analyst. Mr. Hirschhorn was responsible for managing
$615 million in mutual fund net assets at Sept. 30, 1998. William
Garrison and Sandra Knight have been associate portfolio managers
since 1995. Mr. Garrison joined Stein Roe in 1989 as an equity
research analyst and is a vice president. He received his A.B.
degree from Princeton University and an M.B.A. degree from the
University of Chicago. Ms. Knight is a vice president of Stein
Roe, which she joined in 1991 as a quantitative analyst. She
earned a B.S. degree from Lawrence Technological University and an
M.B.A. degree from Loyola University of Chicago.
Growth & Income Fund. Daniel K. Cantor has been portfolio manager
of Growth & Income Portfolio since its inception in 1997 and has
been manager of Growth & Income Fund since 1995. He joined Stein
Roe in 1985 as an equity analyst and served as an advisor to Stein
Roe Private Capital Management from 1992 to 1995. Mr. Cantor is a
senior vice president. A chartered financial analyst, he received
a B.A. degree from the University of Rochester and an M.B.A.
degree from the Wharton School of the University of Pennsylvania.
As of Sept. 30, 1998, Mr. Cantor was responsible for managing $338
million in mutual fund net assets. Jeffrey C. Kinzel is associate
portfolio manager. He is a vice president of Stein Roe and has
been employed as an analyst since 1991. Mr. Kinzel holds a B.A.
degree from Northwestern University, a J.D. degree from the
University of Michigan Law School, and an M.B.A. degree from the
Wharton School of the University of Pennsylvania.
Growth Stock Fund. Erik P. Gustafson has been portfolio manager
of Growth Stock Portfolio since its inception in 1997 and has
managed Growth Stock Fund since 1994. Mr. Gustafson joined Stein
Roe in 1992 as a portfolio manager for privately managed accounts
and is a senior vice president. He holds a B.A. degree from the
University of Virginia and M.B.A. and J.D. degrees from Florida
State University. Mr. Gustafson was responsible for managing $1.4
billion in mutual fund net assets at Sept. 30, 1998.
Growth Opportunities Fund. Eric S. Maddix and Arthur J. McQueen
have been co-managers Growth Opportunities Fund since its
inception in 1997. Mr. Maddix was co-manager of Capital
Opportunities Fund from 1996 to January 1999 and associate
portfolio manager from 1992 until 1996. Mr. Maddix is a vice
president of Stein Roe which he joined in 1987. He earned a
B.B.A. degree from Iowa State University and M.B.A. degree from
the University of Chicago. Mr. McQueen has been employed by Stein
Roe as an analyst since 1987 and is currently a senior vice
president. He received a B.S. degree from Villanova University
and an M.B.A. degree from the Wharton School of the University of
Pennsylvania. As of Sept. 30, 1998, Mr. Maddix co-managed $731
million in mutual fund net assets and Mr. McQueen co-managed $50
million in mutual fund net assets.
Special Fund. M. Gerard Sandel has been manager of Special
Portfolio and senior vice president of Stein Roe since July 1997.
Prior to joining Stein Roe, Mr. Sandel was portfolio manager of
the Marshall Mid-Cap Value Fund and its predecessor fund and vice
president of M&I Investment Management Corporation from 1993 until
1997. From 1991 to 1993 he was a portfolio manager at Acorn Asset
Management. A chartered financial analyst, Mr. Sandel earned a
B.A. degree from the University of Southern Mississippi and M.A.
degree from the American Graduate School. As of Sept. 30, 1998,
he was responsible for managing $917 million in mutual fund net
assets.
Special Venture Fund. The portfolio managers for Special Venture
Fund since October 1998 are James P. Haynie and Michael E. Rega,
who are jointly employed by CMA and Stein Roe. Mr. Haynie has
managed or co-managed the Colonial Small Cap Value Fund since
1993. A chartered financial analyst, Mr. Haynie received his
master's degree in business administration from the Amos Tuck
School at Dartmouth College. Mr. Rega has been employed by
Colonial as an analyst since 1993 and has co-managed the Colonial
Small Cap Value Fund and another Colonial equity fund since 1996.
A chartered financial analyst, Mr. Rega received his M.B.A. degree
in finance and computer science from Boston College. He received
his bachelor's degree from the College of the Holy Cross.
Capital Opportunities Fund. Gloria J. Santella has been portfolio
manager of Capital Opportunities Fund since 1991. Ms. Santella is
a senior vice president of Stein Roe which she joined in 1979.
She received her B.B.A. degree from Loyola University and M.B.A.
degree from the University of Chicago. As of Sept. 30, 1998, Ms.
Santella co-managed $731 million in mutual fund net assets.
Large Company Focus Fund. David P. Brady has been portfolio
manager of Large Company Focus Fund since its inception in 1998.
Mr. Brady has been portfolio manager of Young Investor Fund since
1995 and associate portfolio manager of Growth Stock Fund since
1996. Mr. Brady joined Stein Roe in 1993 and was employed as an
associate portfolio manager of Stein Roe Special Fund until 1995,
and is currently a senior vice president. He holds a B.S. degree
in finance, graduating Magna Cum Laude from the University of
Arizona, and an M.B.A. degree from the University of Chicago. Mr.
Brady managed $767 in mutual fund net assets as of Sept. 30, 1998.
Master/Feeder Fund Structure
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, Balanced Fund, Growth & Income Fund,
Growth Stock Fund, Special Fund and Special Venture Fund are
"feeder" funds in a "master/feeder" structure. This means that
the Fund invests its assets in a larger "master" portfolio of
securities (the Fund's corresponding Portfolio) that has
investment objectives and policies substantially identical to
those of the Fund. The investment performance of a Fund depends
upon the investment performance of its Portfolio. If the
investment policies of a Fund and its Portfolio became
inconsistent, the Board of Trustees of the Fund can decide what
actions to take. Actions the Board of Trustees may recommend
include withdrawal of the Fund's assets from the Portfolio. For
more information on the master/feeder fund structure, see the SAI.
Year 2000 Readiness
Like other investment companies, financial and business
organizations and individuals around the world, the Funds 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 Funds'
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 Funds to provide that date-related information and
data can be properly processed after Jan. 1, 2000. Many Fund
service providers and vendors, including the Funds' 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 Funds will not be adversely affected.
<PAGE>
[BACK COVER]
FOR MORE INFORMATION
You can obtain more information about the Funds' investments in
their semiannual and annual reports to investors. These reports
discuss the market conditions and investment strategies that
affected the Funds' performance over the past six months and year.
You may wish to read the Funds' SAI for more information. The SAI
is incorporated into this prospectus by reference, which means
that it is considered to be part of this prospectus and you are
deemed to have been told of its contents.
To obtain free copies of the Funds' semiannual and annual reports
or the SAI or to request other information about the Funds, 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 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.
Liberty Funds Distributor, Inc.
Investment Company Act file number of Stein Roe Investment Trust:
811-04978
<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
STEIN ROE GROWTH & INCOME FUND
Defined Contribution Plans Prospectus
Feb. 25, 1999
This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans.
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.
2 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
5 Financial Highlights
6 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
8 Other Investments and Risks
Market Capitalization
Futures
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
9 The Fund's Management
Investment Adviser
Portfolio Managers
Master/Feeder Fund Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
DEFINING CAPITALIZATION
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.
THE FUND
Stein Roe Growth & Income Fund
INVESTMENT GOAL
Stein Roe Growth & Income Fund seeks to provide both growth of
capital and current income.
PRINCIPAL INVESTMENT STRATEGY
Growth & Income Fund invests all of its assets in SR&F Growth &
Income Portfolio as part of a master fund/feeder fund structure.
Growth & Income Portfolio invests primarily in common stocks of
well-established companies having large-market capitalizations.
The Portfolio may also invest in companies having midsized market
capitalizations. The Portfolio may invest up to 25 percent of its
assets in foreign stocks. To select investments for the
Portfolio, the portfolio manager looks for common stocks that have
the potential to appreciate in value and to pay dividends. The
portfolio manager focuses on the stocks of companies that have
experienced management; broad, highly diversified product lines;
deep financial resources; easy access to credit; and a history of
paying dividends.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
For more information on the Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Growth & Income Fund if you:
* want to invest in the stocks of large companies, but prefer to
temper stock price fluctuations by combining growth with the
potential of a steady source of income from dividends
* are a long-term investor looking for steady, not aggressive,
growth potential
* are a first-time investor or want to invest primarily in just
one stock fund
Growth & Income Fund is not appropriate for investors who:
* are unable to tolerate the risk and volatility associated with
stock market investing
* are saving for a short-term investment
* don't want current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
45%
40%
35%
30% 31.00% 32.42% 30.15%
25% 25.71%
20% 21.81%
15% 19.54%
10% 10.01% 12.86%
5%
0% -0.14%
- -5% -1.72%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Growth & Income Fund
Best quarter: 4th quarter 1998, +17.91%
Worst quarter: 3rd quarter 1990, -12.06%
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 500
Index, which is a broad-based measure of market performance. 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 5 yr 10 yr
Growth & Income Fund 19.54% 18.93% 17.55%
S&P 500 Index* 28.60% 24.05% 19.19%
________
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
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. However, you pay various other
indirect expenses because the Fund or the Portfolio pays fees and
other expenses that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees(b) 0.75%
Distribution 12b-1 fees None
Other expenses 0.32%
Total annual fund operating expenses 1.07%
(a) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Growth & Income Fund $109 $340 $590 $1,306
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. The Fund's fiscal
year runs from October 1 to September 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 Fund share. Arthur Andersen LLP, an international public
accounting firm, audits this information and issues a report that
appears in the Fund's annual report along with the financial
statements. To request the Fund's annual report, please call 800-
322-1130.
GROWTH & INCOME FUND
PER SHARE DATA
<TABLE>
<CAPTION>
For years ending
September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $22.91 $18.39 $16.65 $14.54 $14.83
Income from investment operations
Net investment income 0.24 0.30 0.27 0.34 0.18
Net gains on securities (both
realized and unrealized) 0.55 5.15 3.22 2.56 0.40
Total income from investment operations 0.79 5.45 3.49 2.90 0.58
Less distributions
Dividends (from net investment income) (0.28) (0.28) (0.32) (0.20) (0.16)
Distributions (from capital gains) (0.97) (0.65) (1.43) (0.59) (0.71)
Total distributions (1.25) (0.93) (1.75) (0.79) (0.87)
Net asset value, end of period $22.45 $22.91 $18.39 $16.65 $14.54
Total return 3.45% 30.81% 22.67% 21.12% 4.03%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $351,052 $337,466 $204,387 $139,539 $129,680
Ratio of net expenses to average
net assets 1.07% 1.13% 1.18% 0.96% 0.90%
Ratio of net investment income to
average net assets 1.02% 1.52% 1.65% 1.78% 1.18%
Portfolio turnover rate N/A 2%(a) 13% 70% 85%
</TABLE>
_____________________
(a) Prior to commencement of operations of the Portfolio.
<PAGE>
YOUR ACCOUNT
Purchasing Shares
All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
Fund shares through your employer or limitations on the amount
that may be purchased, please consult your employer. Shares are
sold to eligible defined contribution plans at the NAV next
determined after the Fund receives your payment. Each purchase of
shares through a broker-dealer, bank or other intermediary that is
an authorized agent or designee of the Trust for the receipt of
orders is made at the NAV next determined after receipt of the
order by the intermediary. If an intermediary is an agent or
designee of the Funds, 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.
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 investors.
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 the NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
Selling Shares
Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange (NYSE)
is open. For more information about how to redeem your Fund
shares through your employer's plan, including any charges that
may be imposed by the plan, please consult with your employer.
The Fund redeems shares at the NAV next determined after an order
has been accepted.
Exchanging Shares
Subject to your plan's restrictions, 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 available through your
employer's defined contribution plan. (An exchange is commonly
referred to as a "transfer.") Please be sure to read the
prospectus of the fund you wish to exchange into before using the
Exchange Privilege. Contact your plan administrator for
instructions on how to exchange your shares or to obtain
prospectuses of other no-load Stein Roe Funds available through
your plan. We may change, suspend or eliminate the exchange
service after notification to you. 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.
Dividends and Distributions
The Fund pays dividends quarterly. 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.
The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital
gains distributions will be reinvested in additional Fund shares.
Tax Consequences
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
that are necessary for it to be relieved of federal taxes on
income and gain it distributes. The Fund will distribute
substantially all of its ordinary income and net capital gains on
a current basis. Generally, Fund distributions are taxable as
ordinary income, except that any distributions of net long-term
capital gains will be taxed as such. However, distributions by
the Fund to employer-sponsored defined contribution plans that
qualify for tax-exempt treatment under federal income tax laws
will not be taxable. Special tax rules apply to investments
through such plans. You should consult your tax advisor to
determine the suitability of the Fund as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts attributable through an investment in the
Fund) from such a plan. This section is not intended to be a full
discussion of income tax laws and their effect on shareholders.
OTHER INVESTMENTS AND RISKS
The primary investment strategies and risks are described in this
prospectus. (See "The Fund.") The Statement of Additional
Information (SAI) describes other investments that the Portfolio
may make and risks associated with them. The Board of Trustees
can change the Fund's investment objective without shareholder
approval.
The 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.
Futures
The Portfolio uses futures to gain exposure to groups of stocks or
individual issuers. A future is an agreement to buy or sell a
specific amount of a financial instrument or physical commodity
for an agreed-upon price at a certain time in the future. The
Portfolio uses futures to invest cash pending direct investments
in stocks and to enhance its return. These investments are
efficient since they typically cost less than direct investments
in the underlying securities. However, the Fund can lose money if
the portfolio manager does not correctly anticipate the market
movements of those underlying securities.
Portfolio Turnover
There are no limits on turnover. Turnover may vary significantly
from year to year. Stein Roe does not expect it to exceed 100
percent under normal conditions. Portfolio turnover typically
produces capital gains or losses resulting in tax consequences for
Fund investors. It also increases transaction expenses, which
reduce the Fund's return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, the Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. The Fund may not achieve its investment objective if it
takes a defensive position.
Interfund Lending Program
The Fund and Portfolio may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
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 and
Portfolio. 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. For the fiscal year
ended Sept. 30, 1998, the Fund paid to Stein Roe aggregate fees of
0.75% 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 Board of
Trustees.
Portfolio Managers
Daniel K. Cantor has been portfolio manager of the Portfolio since
its inception in 1997 and has been manager of the Fund since 1995.
He joined Stein Roe in 1985 as an equity analyst and served as an
advisor to Stein Roe Private Capital Management from 1992 to 1995.
Mr. Cantor is a senior vice president. A chartered financial
analyst, he received a B.A. degree from the University of
Rochester and an M.B.A. degree from the Wharton School of the
University of Pennsylvania. As of Sept. 30, 1998, Mr. Cantor was
responsible for managing $338 million in mutual fund net assets.
Jeffrey C. Kinzel is associate portfolio manager. He is a vice
president of Stein Roe and has been employed as an analyst since
1991. Mr. Kinzel holds a B.A. degree from Northwestern
University, a J.D. degree from the University of Michigan Law
School, and an M.B.A. degree from the Wharton School of the
University of Pennsylvania.
Master/Feeder Fund Structure
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, the Fund is a "feeder" fund in a
"master/feeder" structure. This means that the Fund invests its
assets in a larger "master" portfolio of securities (the
Portfolio) that has investment objectives and policies
substantially identical to those of the Fund. The investment
performance of the Fund depends upon the investment performance of
the Portfolio. If the investment policies of the Fund and the
Portfolio became inconsistent, the Board of Trustees of the Fund
can decide what actions to take. Actions the Board of Trustees
may recommend include withdrawal of the Fund's assets from the
Portfolio. For more information on the master/feeder fund
structure, see the SAI.
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>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to investors. 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
Statement of Additional Information contains information relating
to other series of Stein Roe Investment Trust that may not be
available as investment vehicles for your defined contribution
plan. The SAI is incorporated into this prospectus by reference,
which means that it is 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 the 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
800-322-1130
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the 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>
STEIN ROE INVESTMENT TRUST
Stein Roe Special Venture Fund
Supplement to Feb. 25, 1999 Defined Contribution Plans Prospectus
___________________
The Board of Trustees voted on May 4, 1999, to liquidate Stein Roe
Special Venture Fund. The Board directed that sales of Special
Venture Fund shares be suspended as of the close of business on
May 10, 1999, and that the Fund be liquidated on June 28, 1999, or
before that time if all shareholders have redeemed their interests
in the Fund. In the case of shares held in qualified retirement
plans for which Stein Roe does not receive transfer instructions
by the liquidation date, Stein Roe will transfer such shares to
Stein Roe Cash Reserves Fund.
The Board's decision to liquidate Special Venture Fund was
prompted by the Fund's relatively small size and the belief that,
under current conditions, it would not be likely to attract
significant new assets in the near future. Funds of nominal asset
size generally tend to be inefficient for shareholders-they may
have higher expense ratios, less investment flexibility and,
consequently, lower returns over the long term.
This Supplement is Dated May __, 1999
<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
STEIN ROE SPECIAL VENTURE FUND
Defined Contribution Plans Prospectus
Feb. 25, 1999
This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans.
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.
2 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
6 Financial Highlights
7 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
9 Other Investments and Risks
Market Capitalization
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
10 The Fund's Management
Investment Adviser
Portfolio Managers
Master/Feeder Fund Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
DEFINING CAPITALIZATION
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.
THE FUND
Stein Roe Special Venture Fund
INVESTMENT GOAL
Stein Roe Special Venture Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Special Venture Fund invests all of its assets in SR&F Special
Venture Portfolio as part of a master fund/feeder fund structure.
Special Venture Portfolio invests primarily in a well-diversified
portfolio of equity securities of attractively valued companies.
It emphasizes investments in financially strong, small and
midcapitalization companies. In selecting investments for the
Portfolio, the portfolio managers attempt to identify attractively
valued companies in the earlier phases of growth. The Portfolio
may invest up to 25 percent of its assets in foreign stocks.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
Investments in stocks of small and midsized companies can be
riskier than investments in larger companies. Small and midsized
companies often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on a
small management group. Small companies in particular are more
likely to fail or prove unable to grow. Small and midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
For more information on the Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Special Venture Fund if you:
* like the upside potential of small- and midsized company stocks
and can accept their greater price volatility
* are a long-term investor
Special Venture Fund is not appropriate for investors who:
* can't tolerate the volatility and risks of stock market
investing
* are saving for a short-term investment
* need regular current income
FUND PERFORMANCE
Special Venture Fund commenced operations on Oct. 17, 1994. The
following charts show the Fund's performance for the past four
years through Dec. 31, 1998. 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
35%
30%
25% 27.17% 28.65%
20%
15%
10%
5% 9.67%
0%
- -5%
- -10%
- -15%
- -20% -21.55%
- -25%
1995 1996 1997 1998
[ ] Special Venture Fund
Best quarter: 2nd quarter 1997, +15.58%
Worst quarter: 3rd quarter 1998, -21.45%
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 Russell
2000 Index, which is a broad-based measure of market performance.
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
Oct. 17, 1994
Special Venture Fund -21.55% 9.71%
Russell 2000 Index* -2.55% 14.49%
- ---------
*The Russell 2000 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 Russell
2000 Index is from Oct. 31, 1994 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. However, you pay various other
indirect expenses because the Fund or the Portfolio pays fees and
other expenses that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees(b) 0.90%
Distribution 12b-1 fees None
Other expenses 0.38%
Total annual fund operating expenses 1.28%
(a) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Special Venture Fund $130 $406 $702 $1,545
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 period of the Fund's operations. The Fund's
fiscal year runs from October 1 to September 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 Fund share. Arthur Andersen LLP, an international
public accounting firm, audits this information and issues a
report that appears in the Fund's annual report along with the
financial statements. To request the Fund's annual report, please
call 800-322-1130.
SPECIAL VENTURE FUND
PER SHARE DATA
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995(d)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.45 $15.87 $12.60 $10.00
Income from investment operations
Net investment income (loss) (0.09) (0.02) (0.02) 0.01
Net gains (losses) on securities (both
realized and unrealized) (5.08) 3.12 3.86 2.67
Total income from investment operations (5.17) 3.10 3.84 2.68
Less distributions
Dividends (from net investment income) - - - (0.03)
Distributions (from capital gains) (1.77) (1.52) (0.57) (0.05)
Total distributions (1.77) (1.52) (0.57) (0.08)
Net asset value, end of period $10.51 $17.45 $15.87 $12.60
Total return (32.05%) 21.73% 31.81% 26.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $116,079 $235,755 $144,528 $60,533
Ratio of net expenses to average
net assets (b) 1.28% 1.29% 1.25% 1.25%(e)
Ratio of net investment income (loss)
to average net assets (c) (0.50%) (0.18%) (2.19%) 0.12%(e)
Portfolio turnover rate N/A 44%(a) 72% 84%
</TABLE>
_____________________
(a) Prior to commencement of operations of the Portfolio.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by Stein Roe, this ratio would have
been 1.34% for the year ended Sept. 30, 1996, and 2.87% for
the period ended Sept. 30, 1995.
(c) Computed with the effect of Stein Roe's expense reimbursement.
(d) From commencement of operations on Oct. 17, 1994.
(e) 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.
<PAGE>
YOUR ACCOUNT
Purchasing Shares
All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
Fund shares through your employer or limitations on the amount
that may be purchased, please consult your employer. Shares are
sold to eligible defined contribution plans at the NAV next
determined after the Fund receives your payment. Each purchase of
shares through a broker-dealer, bank or other intermediary that is
an authorized agent or designee of the Trust for the receipt of
orders is made at the NAV next determined after receipt of the
order by the intermediary. If an intermediary is an agent or
designee of the Funds, 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.
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 investors.
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 the NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
Selling Shares
Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange (NYSE)
is open. For more information about how to redeem your Fund
shares through your employer's plan, including any charges that
may be imposed by the plan, please consult with your employer.
The Fund redeems shares at the NAV next determined after an order
has been accepted.
Exchanging Shares
Subject to your plan's restrictions, 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 available through your
employer's defined contribution plan. (An exchange is commonly
referred to as a "transfer.") Please be sure to read the
prospectus of the fund you wish to exchange into before using the
Exchange Privilege. Contact your plan administrator for
instructions on how to exchange your shares or to obtain
prospectuses of other no-load Stein Roe Funds available through
your plan. We may change, suspend or eliminate the exchange
service after notification to you. 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.
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.
The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital
gains distributions will be reinvested in additional Fund shares.
Tax Consequences
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
that are necessary for it to be relieved of federal taxes on
income and gain it distributes. The Fund will distribute
substantially all of its ordinary income and net capital gains on
a current basis. Generally, Fund distributions are taxable as
ordinary income, except that any distributions of net long-term
capital gains will be taxed as such. However, distributions by
the Fund to employer-sponsored defined contribution plans that
qualify for tax-exempt treatment under federal income tax laws
will not be taxable. Special tax rules apply to investments
through such plans. You should consult your tax advisor to
determine the suitability of the Fund as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts attributable through an investment in the
Fund) from such a plan. This section is not intended to be a full
discussion of income tax laws and their effect on shareholders.
OTHER INVESTMENTS AND RISKS
The primary investment strategies and risks are described in this
prospectus. (See "The Fund.") The Statement of Additional
Information (SAI) describes other investments that the Portfolio
may make and risks associated with them. The Board of Trustees
can change the Fund's investment objective without shareholder
approval.
The 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.
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 resulting in tax consequences for
Fund investors. It also increases transaction expenses, which
reduce the Fund's return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, the Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. The Fund may not achieve its investment objective if it
takes a defensive position.
Interfund Lending Program
The Fund and Portfolio may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
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 and
Portfolio. 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. For the fiscal year
ended Sept. 30, 1998, the Fund paid to Stein Roe aggregate fees of
0.90% 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 Board of
Trustees.
Portfolio Managers
The portfolio managers for the Fund since October 1998 are James
P. Haynie and Michael E. Rega, who are jointly employed by CMA and
Stein Roe. Mr. Haynie has managed or co-managed the Colonial
Small Cap Value Fund since 1993. A chartered financial analyst,
Mr. Haynie received his master's degree in business administration
from the Amos Tuck School at Dartmouth College. Mr. Rega has been
employed by Colonial as an analyst since 1993 and has co-managed
the Colonial Small Cap Value Fund and another Colonial equity fund
since 1996. A chartered financial analyst, Mr. Rega received his
M.B.A. degree in finance and computer science from Boston College.
He received his bachelor's degree from the College of the Holy
Cross.
Master/Feeder Fund Structure
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, the Fund is a "feeder" fund in a
"master/feeder" structure. This means that the Fund invests its
assets in a larger "master" portfolio of securities (the
Portfolio) that has investment objectives and policies
substantially identical to those of the Fund. The investment
performance of the Fund depends upon the investment performance of
the Portfolio. If the investment policies of the Fund and the
Portfolio became inconsistent, the Board of Trustees of the Fund
can decide what actions to take. Actions the Board of Trustees
may recommend include withdrawal of the Fund's assets from the
Portfolio. For more information on the master/feeder fund
structure, see the SAI.
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>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to investors. 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
Statement of Additional Information contains information relating
to other series of Stein Roe Investment Trust that may not be
available as investment vehicles for your defined contribution
plan. The SAI is incorporated into this prospectus by reference,
which means that it is 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 the 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
800-322-1130
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the 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>
STEIN ROE INVESTMENT TRUST
Stein Roe Growth Opportunities Fund
Supplement to Feb. 25, 1999 Defined Contribution Plans Prospectus
___________________
Effective May 6, 1999, the name of Stein Roe Growth Opportunities
Fund is changed to Stein Roe Midcap Growth Fund. The Fund's
principal investment strategy is changed to the following:
PRINCIPAL INVESTMENT STRATEGY Under normal market
conditions, the Fund invests at least 65 percent of its
assets in common stocks of midcap companies that the
portfolio managers believe have long-term growth potential.
The Fund may also invest in small- and large-capitalization
companies. The Fund may invest up to 25 percent of its
assets in foreign stocks. To select investments for the
Fund, the portfolio managers consider midcap companies that
show the potential to generate and sustain long-term earnings
growth at above-average rates. The portfolio managers select
companies based on their view of long-term rather than short-
term earnings growth prospects.
Prior to this change, the Fund invested in common stocks of large-
, mid- and small capitalization companies without any
predetermined emphasis on any single capitalization category. The
Fund's portfolio managers will implement the Fund's revised
principal investment strategy as soon as is practicable in the
ordinary course of managing the Fund's investment portfolio.
This Supplement is Dated May __, 1999
<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
STEIN ROE GROWTH OPPORTUNITIES FUND
Defined Contribution Plans Prospectus
Feb. 25, 1999
This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans.
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.
2 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
6 Financial Highlights
7 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
9 Other Investments and Risks
Market Capitalization
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
10 The Fund's Management
Investment Adviser
Portfolio Managers
Master/Feeder Fund Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
DEFINING CAPITALIZATION
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.
THE FUND
Stein Roe Growth Opportunities Fund
INVESTMENT GOAL
Stein Roe Growth Opportunities Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Growth Opportunities Fund invests primarily in common stocks of
large-, mid- and small-capitalization companies that the portfolio
managers believe have long-term growth potential. The Fund may
invest up to 25 percent of its assets in foreign stocks. To
select investments for the Fund, the portfolio managers consider
companies of any size that show the potential to generate and
sustain long-term earnings growth at above-average rates. The
portfolio managers seek to moderate the risks of investing in
small and midsized companies by also investing in larger, more
established companies. They select companies based on their view
of long-term rather than short-term earnings growth prospects.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
Investments in stocks of small and midsized companies can be
riskier than investments in larger companies. Small and midsized
companies often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on a
small management group. Small companies in particular are more
likely to fail or prove unable to grow. Small and midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Because the Fund invests in stocks, the price of its shares-its
net asset value per share (NAV)-fluctuates daily in response to
changes in the market value of the securities. In addition, the
risks associated with the Fund's investment strategy may cause the
Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Fund may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
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 Growth Opportunities Fund if you:
* want the diversification of a fund that invests in growth
companies of all sizes
* are a long-term investor
Growth Opportunities Fund is not appropriate for investors who:
* can't tolerate the risk and volatility associated with small
stock investing
* are saving for a short-term investment
* need regular current income
FUND PERFORMANCE
Growth Opportunities Fund commenced operations on June 30, 1997.
The following charts show the Fund's performance through Dec. 31,
1998. 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
This chart illustrates performance for the one year period ended
Dec. 31, 1998 and provides an indication of the risks of investing
in the Fund.
YEAR-BY-YEAR TOTAL RETURNS
45%
40%
35%
30%
25%
20%
15% 15.24%
10%
5%
0%
- -5%
1998
[ ] Growth Opportunities Fund
Best quarter: 4th quarter 1998, +21.33%
Worst quarter: 3rd quarter 1998, -18.35%
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 500
Index, which is a broad-based measure of market performance. 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
June 30, 1997
Growth Opportunities Fund 15.24% 16.83%
S&P 500 Index* 28.60% 26.45%
_______
*The S&P 500 Index is an group of stocks that differs from the
Fund's composition; it is not available for direct investment.
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. However, you pay various other
indirect expenses because the Fund pays fees and other expenses
that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees(b) 0.90%
Distribution 12b-1 fees None
Other Expenses 0.54%
Total annual fund operating expenses 1.44%
(a) Stein Roe will reimburse Growth Opportunities Fund if its
ordinary operating expenses exceed 1.25% of annual average net
assets. The expense undertaking expires on Jan. 31, 2000, but
may be terminated sooner by Stein Roe on 30 days' notice.
After reimbursement, management fees were 0.71% and total
annual fund operating expenses were 1.25%. A reimbursement
lowers the expense ratio and increases overall return to
investors.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Growth Opportunities Fund $147 $456 $787 $1,724
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 period of the Fund's operations. The Fund's
fiscal year runs from October 1 to September 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 Fund share. Arthur Andersen LLP, an international
public accounting firm, audits this information and issues a
report that appears in the Fund's annual report along with the
financial statements. To request the Fund's annual report, please
call 800-322-1130.
GROWTH OPPORTUNITIES FUND
PER SHARE DATA
For year For period
ending ending
Sept. 30, Sept. 30,
1998 1997(a)
Net asset value, beginning of period $ 10.77 $ 10.00
Income from investment operations
Net investment loss (0.07) -
Net gains (losses) on securities (both
realized and unrealized) (0.29) 0.77
Net asset value, end of period $ 10.41 $ 10.77
Total return (3.34%) 7.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $49,974 $49,830
Ratio of net expenses to average net assets(b) 1.25% 1.25%(d)
Ratio of net investment income (loss) to
average net assets (c) (0.64%) 0.02%(d)
Portfolio turnover rate 75% 3%
____________________
(a) From commencement of operations on: June 30, 1997.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by Stein Roe, this ratio would have
been 1.44% for the year ended Sept. 30, 1998, and 1.74% for
the period ended Sept. 30, 1997.
(c) Computed with the effect of Stein Roe's expense reimbursement.
(d) 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.
<PAGE>
YOUR ACCOUNT
Purchasing Shares
All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
Fund shares through your employer or limitations on the amount
that may be purchased, please consult your employer. Shares are
sold to eligible defined contribution plans at the NAV next
determined after the Fund receives your payment. Each purchase of
shares through a broker-dealer, bank or other intermediary that is
an authorized agent or designee of the Trust for the receipt of
orders is made at the NAV next determined after receipt of the
order by the intermediary. If an intermediary is an agent or
designee of the Funds, 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.
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 investors.
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 the NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
Selling Shares
Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange (NYSE)
is open. For more information about how to redeem your Fund
shares through your employer's plan, including any charges that
may be imposed by the plan, please consult with your employer.
The Fund redeems shares at the NAV next determined after an order
has been accepted.
Exchanging Shares
Subject to your plan's restrictions, 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 available through your
employer's defined contribution plan. (An exchange is commonly
referred to as a "transfer.") Please be sure to read the
prospectus of the fund you wish to exchange into before using the
Exchange Privilege. Contact your plan administrator for
instructions on how to exchange your shares or to obtain
prospectuses of other no-load Stein Roe Funds available through
your plan. We may change, suspend or eliminate the exchange
service after notification to you. 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.
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.
The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital
gains distributions will be reinvested in additional Fund shares.
Tax Consequences
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
that are necessary for it to be relieved of federal taxes on
income and gain it distributes. The Fund will distribute
substantially all of its ordinary income and net capital gains on
a current basis. Generally, Fund distributions are taxable as
ordinary income, except that any distributions of net long-term
capital gains will be taxed as such. However, distributions by
the Fund to employer-sponsored defined contribution plans that
qualify for tax-exempt treatment under federal income tax laws
will not be taxable. Special tax rules apply to investments
through such plans. You should consult your tax advisor to
determine the suitability of the Fund as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts attributable through an investment in the
Fund) from such a plan. This section is not intended to be a full
discussion of income tax laws and their effect on shareholders.
OTHER INVESTMENTS AND RISKS
The primary investment strategies and risks are described in this
prospectus. (See "The Fund.") The Statement of Additional
Information (SAI) describes 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 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.
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 resulting in tax consequences for
Fund investors. It also increases transaction expenses, which
reduce the Fund's return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, the 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. It 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.
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. For the fiscal year ended Sept. 30, 1998, the
Fund paid to Stein Roe aggregate fees of 0.90% 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 Board of
Trustees.
Portfolio Managers
Eric S. Maddix and Arthur J. McQueen have been co-managers the
Fund since its inception in 1997. Mr. Maddix was co-manager of
Stein Roe Capital Opportunities Fund from 1996 to January 1999 and
associate portfolio manager from 1992 until 1996. Mr. Maddix is a
vice president of Stein Roe which he joined in 1987. He earned a
B.B.A. degree from Iowa State University and M.B.A. degree from
the University of Chicago. Mr. McQueen has been employed by Stein
Roe as an analyst since 1987 and is currently a senior vice
president. He received a B.S. degree from Villanova University
and an M.B.A. degree from the Wharton School of the University of
Pennsylvania. As of Sept. 30, 1998, Mr. Maddix co-managed $731
million in mutual fund net assets and Mr. McQueen co-managed $50
million in mutual fund net assets.
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>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to investors. 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
Statement of Additional Information contains information relating
to other series of Stein Roe Investment Trust that may not be
available as investment vehicles for your defined contribution
plan. The SAI is incorporated into this prospectus by reference,
which means that it is 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 the 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
800-322-1130
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the 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>
[STEIN ROE MUTUAL FUNDS LOGO]
STEIN ROE LARGE COMPANY FOCUS FUND
Defined Contribution Plans Prospectus
Feb. 25, 1999
This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans.
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.
2 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
5 Financial Highlights
6 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
8 Other Investments and Risks
Market Capitalization
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
9 The Fund's Management
Investment Adviser
Portfolio Manager
Master/Feeder Fund Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
DEFINING CAPITALIZATION
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.
THE FUND
Stein Roe Large Company Focus Fund
INVESTMENT GOAL
Stein Roe Large Company Focus Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Large Company Focus Fund invests in a limited number of large
capitalization companies that the portfolio manager believes have
above-average growth potential. As a "focus" fund, under normal
conditions, the Fund will hold between 15-25 common stocks. To
select investments for the Fund, the portfolio manager considers
companies that are dominant in their particular industries or
markets that can generate consistent earnings growth. The
portfolio manager selects investments across many sectors. Since
the Fund is "non-diversified," the percentage of assets that it
may invest in any one issuer is not limited. The Fund may invest
up to 25 percent of its assets in foreign stocks.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
Because the Fund invests in stocks, the price of its shares-its
net asset value per share (NAV)-fluctuates daily in response to
changes in the market value of the securities. In addition, the
risks associated with the Fund's investment strategy may cause the
Fund's total return or yield to decrease.
The Fund invests in a limited number of stocks and it owns a
higher concentration in a single stock than a "diversified" fund.
As a result, a single stock's increase or decrease in value may
have a greater impact on the Fund's NAV and cause the Fund's NAV
to fluctuate more than the NAV of diversified growth funds.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Fund may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
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 Large Company Focus Fund if you:
* want a mutual fund that invests in a limited number of large-cap
growth stocks
* want the added performance potential of a focus fund and are
comfortable with the increased price volatility that may
accompany focused investing
* are a long-term investor
Large Company Focus Fund is not appropriate for investors who:
* can't tolerate the greater price volatility associated with a
fund that invests in a limited number of stocks
* are saving for a short-term investment
* need regular current income
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. However, you pay various other
indirect expenses because the Fund pays fees and other expenses
that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees(b) 0.90%
Distribution 12b-1 fees None
Other expenses 0.71%
Total annual fund operating expenses 1.61%
(a) Stein Roe will reimburse the Fund if its ordinary operating
expenses exceed 1.50% of annual average net assets. The
expense undertaking expires on Jan. 31, 2000, but may be
terminated sooner by Stein Roe on 30 days' notice. After
reimbursement, management fees were 0.79% and total annual
fund operating expenses were 1.50%. A reimbursement lowers
the expense ratio and increases overall return to investors.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Large Company Focus Fund $164 $508 $876 $1,911
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 period of the Fund's operations. The Fund's
fiscal year runs from October 1 to September 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 Fund share. Arthur Andersen LLP, an international
public accounting firm, audits this information and issues a
report that appears in the Fund's annual report along with the
financial statements. To request the Fund's annual report, please
call 800-322-1130.
LARGE COMPANY FOCUS FUND
PER SHARE DATA
<TABLE>
<CAPTION>
For period
ending
September 30,
1998(a)
<S> <C>
Net asset value, beginning of period $ 10.00
Income from investment operations
Net investment income (loss) -
Net losses on securities (both realized
and unrealized) (1.27)
Net asset value, end of period $ 8.73
Total return (12.70%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $44,716
Ratio of net expenses to average net assets (b) 1.50%(d)
Ratio of net investment loss to average net
assets (c) (0.12%)(d)
Portfolio turnover rate 21%
<FN>
_____________________
(a) From commencement of operations on: June 26, 1998.
(b) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by Stein Roe, this ratio would have
been 1.61% for the period ended Sept. 30, 1998.
(c) Computed with the effect of Stein Roe's expense reimbursement.
(d) 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.
</TABLE>
<PAGE>
YOUR ACCOUNT
Purchasing Shares
All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
Fund shares through your employer or limitations on the amount
that may be purchased, please consult your employer. Shares are
sold to eligible defined contribution plans at the NAV next
determined after the Fund receives your payment. Each purchase of
shares through a broker-dealer, bank or other intermediary that is
an authorized agent or designee of the Trust for the receipt of
orders is made at the NAV next determined after receipt of the
order by the intermediary. If an intermediary is an agent or
designee of the Funds, 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.
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 investors.
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 the NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
Selling Shares
Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange (NYSE)
is open. For more information about how to redeem your Fund
shares through your employer's plan, including any charges that
may be imposed by the plan, please consult with your employer.
The Fund redeems shares at the NAV next determined after an order
has been accepted.
Exchanging Shares
Subject to your plan's restrictions, 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 available through your
employer's defined contribution plan. (An exchange is commonly
referred to as a "transfer.") Please be sure to read the
prospectus of the fund you wish to exchange into before using the
Exchange Privilege. Contact your plan administrator for
instructions on how to exchange your shares or to obtain
prospectuses of other no-load Stein Roe Funds available through
your plan. We may change, suspend or eliminate the exchange
service after notification to you. 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.
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.
The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital
gains distributions will be reinvested in additional Fund shares.
Tax Consequences
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
that are necessary for it to be relieved of federal taxes on
income and gain it distributes. The Fund will distribute
substantially all of its ordinary income and net capital gains on
a current basis. Generally, Fund distributions are taxable as
ordinary income, except that any distributions of net long-term
capital gains will be taxed as such. However, distributions by
the Fund to employer-sponsored defined contribution plans that
qualify for tax-exempt treatment under federal income tax laws
will not be taxable. Special tax rules apply to investments
through such plans. You should consult your tax advisor to
determine the suitability of the Fund as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts attributable through an investment in the
Fund) from such a plan. This section is not intended to be a full
discussion of income tax laws and their effect on shareholders.
OTHER INVESTMENTS AND RISKS
The primary investment strategies and risks are described in this
prospectus. (See "The Fund.") The Statement of Additional
Information (SAI) describes 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 portfolio manager generally makes decisions on buying and
selling portfolio investments based upon his judgment that the
decision will improve the Fund's investment return and further its
investment goal. The portfolio manager 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.
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 resulting in tax consequences for
Fund investors. It also increases transaction expenses, which
reduce the Fund's return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, the 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. It 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.
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. For the fiscal year ended Sept. 30, 1998, the
Fund paid to Stein Roe aggregate fees of 0.90% 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 Board of
Trustees.
Portfolio Manager
David P. Brady has been portfolio manager of the Fund since its
inception in 1998. Mr. Brady has been portfolio manager of Stein
Roe Young Investor Fund since 1995 and associate portfolio manager
of Growth Stock Fund since 1996. Mr. Brady joined Stein Roe in
1993 and was employed as an associate portfolio manager of Stein
Roe Special Fund until 1995, and is currently a senior vice
president. He holds a B.S. degree in finance, graduating Magna
Cum Laude from the University of Arizona, and an M.B.A. degree
from the University of Chicago. Mr. Brady managed $767 in mutual
fund net assets as of Sept. 30, 1998.
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>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to investors. 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
Statement of Additional Information contains information relating
to other series of Stein Roe Investment Trust that may not be
available as investment vehicles for your defined contribution
plan. The SAI is incorporated into this prospectus by reference,
which means that it is 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 the 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
800-322-1130
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the 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>
[STEIN ROE MUTUAL FUNDS LOGO]
STEIN ROE BALANCED FUND
Defined Contribution Plans Prospectus
Feb. 25, 1999
This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans.
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.
2 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
6 Financial Highlights
7 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
9 Other Investments and Risks
Market Capitalization
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
10 The Fund's Management
Investment Adviser
Portfolio Managers
Master/Feeder Fund Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
DEFINING CAPITALIZATION
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.
THE FUND
STEIN ROE BALANCED FUND
INVESTMENT GOAL
Stein Roe Balanced Fund seeks long-term growth of capital and
current income consistent with reasonable investment risk.
PRINCIPAL INVESTMENT STRATEGY
Balanced Fund invests all of its assets in SR&F Balanced Portfolio
as part of a master fund/feeder fund structure. Balanced
Portfolio allocates its investments among common stocks and
securities convertible into common stocks, bonds and cash. The
Portfolio invests primarily in well-established companies that
have large market capitalizations. The portfolio managers may
invest in a company because it has a history of steady to
improving sales or earnings growth that they believe can be
sustained. They also may invest in a company because they believe
its stock is priced attractively compared to the value of its
assets. The Portfolio may invest up to 25 percent of its assets
in foreign stocks.
The Portfolio also invests at least 25 percent of its assets in
bonds. The Portfolio purchases bonds that are "investment grade"-
that is, within the four highest investment grades assigned by a
nationally recognized statistical rating organization. The
Portfolio may invest in unrated bonds if the portfolio managers
believe that the securities are investment-grade quality. To
select debt securities for the Portfolio, the portfolio managers
consider a bond's expected income together with its potential for
price gains or losses.
The portfolio managers set the Portfolio's asset allocation
between stocks, bonds and cash based upon recommendations of Stein
Roe's Investment Committee. The portfolio managers may change the
allocation if the Investment Committee recommends a change. The
committee makes its recommendations based upon economic, market
and other factors that affect investment opportunities.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks and bonds: management risk and market risk. For bonds,
market risk is primarily a factor of interest rate changes. These
risks may cause you to lose money when you sell your shares.
What are market and management risks? Management risk means that
Stein Roe's stock and bond 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.
Because the Portfolio invests in stocks and bonds, the price of
the Fund's shares-its net asset value per share (NAV)-fluctuates
daily in response to changes in the market value of the stocks and
bonds. In addition, the risks associated with the Portfolio's
investment strategy may cause the Fund's total return or yield to
decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
Debt Securities
The Portfolio's investments in debt securities, generally bonds,
expose the Fund to interest rate risk. Interest rate risk is the
risk of a decline in the price of a bond when interest rates
increase. In general, if interest rates rise, bond prices fall;
and if interest rates fall, bond prices rise. Interest rate risk
is generally greater for bonds having longer durations. Duration
mathematically measures how quickly the principal and interest of
a bond are expected to be prepaid.
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 Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Balanced Fund if you:
* are a long-term investor and want a fund that offers both stocks
and bonds in the same investment
* want a fund that can invest in both domestic and international
stocks
* are a first-time investor or want to invest primarily in just
one fund
* want to invest in stocks, but are uncomfortable with the risk
level of a fund that invests solely in stocks
* want to invest in bonds, but want more return potential than is
typically available from a fund that invests solely in bonds
Balanced Fund is not appropriate for investors who:
* can't tolerate volatility or possible losses
* are saving for a short-term investment
* don't want current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
45%
40%
35%
30%
25% 29.59%
20% 20.34% 22.65%
15% 17.05% 17.47%
10% 12.34% 12.19%
5% 7.89%
0%
- -5% -1.72% -4.12%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Balanced Fund
Best quarter: 4th quarter 1998, +12.53%
Worst quarter: 3rd quarter 1990, -9.49%
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 500
Index, which is a broad-based measure of market performance. 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 5 yr 10 yr
Balanced Fund 12.19% 12.65% 12.92%
S&P 500 Index* 28.60% 24.05% 19.19%
_______
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
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. However, you pay various other
indirect expenses because the Fund or the Portfolio pays fees and
other expenses that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees(b) 0.70%
Distribution 12b-1 fees None
Other expenses 0.33%
Total annual fund operating expenses 1.03%
(a) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Balanced Fund $105 $328 $569 $1,259
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. The Fund's fiscal
year runs from October 1 to September 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 Fund share. Arthur Andersen LLP, an international public
accounting firm, audits this information and issues a report that
appears in the Fund's annual report along with the financial
statements. To request the Fund's annual report, please call 800-
322-1130.
BALANCED FUND
PER SHARE DATA
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $33.41 $30.07 $27.82 $25.78 $27.57
Income from investment operations
Net investment income 0.95 0.95 1.00 1.33 1.15
Net gains (losses) on securities
(both realized and unrealized) (0.90) 5.61 2.96 2.22 (1.06)
Total income from investment operations 0.05 6.56 3.96 3.55 0.09
Less distributions
Dividends (from net investment income) (0.76) (0.96) (1.01) (1.23) (1.17)
Distributions (from capital gains) (2.00) (2.26) (0.70) (0.28) (0.71)
Total distributions (2.76) (3.22) (1.71) (1.51) (1.88)
Net asset value, end of period $30.70 $33.41 $30.07 $27.82 $25.78
Total return 0.14% 23.60% 14.83% 14.49% 0.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $247,852 $284,846 $231,063 $228,560 $229,274
Ratio of net expenses to average
net assets 1.03% 1.05% 1.05% 0.87% 0.83%
Ratio of net investment income to
average net assets 2.90% 3.02% 3.45% 5.14% 4.53%
Portfolio turnover rate N/A 15%(a) 87% 45% 29%
</TABLE>
_____________________
(a) Prior to commencement of operations of the Portfolio.
<PAGE>
YOUR ACCOUNT
Purchasing Shares
All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
Fund shares through your employer or limitations on the amount
that may be purchased, please consult your employer. Shares are
sold to eligible defined contribution plans at the NAV next
determined after receipt of the Fund receives your payment. Each
purchase of shares through a broker-dealer, bank or other
intermediary that is an authorized agent or designee of the Trust
for the receipt of orders is made at the NAV next determined after
receipt of the order by the intermediary. If an intermediary is
an agent or designee of the Funds, 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.
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 investors.
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 the NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
Selling Shares
Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange (NYSE)
is open. For more information about how to redeem your Fund
shares through your employer's plan, including any charges that
may be imposed by the plan, please consult with your employer.
The Fund redeems shares at the NAV next determined after an order
has been accepted.
Exchanging Shares
Subject to your plan's restrictions, 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 available through your
employer's defined contribution plan. (An exchange is commonly
referred to as a "transfer.") Please be sure to read the
prospectus of the fund you wish to exchange into before using the
Exchange Privilege. Contact your plan administrator for
instructions on how to exchange your shares or to obtain
prospectuses of other no-load Stein Roe Funds available through
your plan. We may change, suspend or eliminate the exchange
service after notification to you. 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.
Dividends and Distributions
The Fund pays dividends quarterly. It distributes, at least once
a year, virtually all of its 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.
The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital
gains distributions will be reinvested in additional Fund shares.
Tax Consequences
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
that are necessary for it to be relieved of federal taxes on
income and gain it distributes. The Fund will distribute
substantially all of its ordinary income and net capital gains on
a current basis. Generally, Fund distributions are taxable as
ordinary income, except that any distributions of net long-term
capital gains will be taxed as such. However, distributions by
the Fund to employer-sponsored defined contribution plans that
qualify for tax-exempt treatment under federal income tax laws
will not be taxable. Special tax rules apply to investments
through such plans. You should consult your tax advisor to
determine the suitability of the Fund as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts attributable through an investment in the
Fund) from such a plan. This section is not intended to be a full
discussion of income tax laws and their effect on shareholders.
OTHER INVESTMENTS AND RISKS
The primary investment strategies and risks are described in this
prospectus. (See "The Fund.") The Statement of Additional
Information (SAI) describes other investments that the Portfolio
may make and risks associated with them. The Board of Trustees
can change the Fund's investment objective without shareholder
approval.
The 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.
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 resulting in tax consequences for
Fund investors. It also increases transaction expenses, which
reduce the Fund's return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, the Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. The Fund may not achieve its investment objective if it
takes a defensive position.
Interfund Lending Program
The Fund and Portfolio may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
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 and
Portfolio. 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. For the fiscal year
ended Sept. 30, 1998, the Fund paid to Stein Roe aggregate fees of
0.70% 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 Board of
Trustees.
Portfolio Managers
Harvey B. Hirschhorn has been portfolio manager of the Portfolio
since its inception in 1997 and has managed the Fund since 1996.
He joined Stein Roe in 1973 and is executive vice president and
chief economist and investment strategist. He holds an A.B.
degree from Rutgers College and an M.B.A. degree from the
University of Chicago, and is a chartered financial analyst. Mr.
Hirschhorn was responsible for managing $615 million in mutual
fund net assets at Sept. 30, 1998. William Garrison and Sandra
Knight have been associate portfolio managers since 1995. Mr.
Garrison joined Stein Roe in 1989 as an equity research analyst
and is a vice president. He received his A.B. degree from
Princeton University and an M.B.A. degree from the University of
Chicago. Ms. Knight is a vice president of Stein Roe, which she
joined in 1991 as a quantitative analyst. She earned a B.S.
degree from Lawrence Technological University and an M.B.A. degree
from Loyola University of Chicago.
Master/Feeder Fund Structure
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, the Fund is a "feeder" fund in a
"master/feeder" structure. This means that the Fund invests its
assets in a larger "master" portfolio of securities (the
Portfolio) that has investment objectives and policies
substantially identical to those of the Fund. The investment
performance of the Fund depends upon the investment performance of
the Portfolio. If the investment policies of the Fund and the
Portfolio became inconsistent, the Board of Trustees of the Fund
can decide what actions to take. Actions the Board of Trustees
may recommend include withdrawal of the Fund's assets from the
Portfolio. For more information on the master/feeder fund
structure, see the SAI.
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>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to investors. 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
Statement of Additional Information contains information relating
to other series of Stein Roe Investment Trust that may not be
available as investment vehicles for your defined contribution
plan. The SAI is incorporated into this prospectus by reference,
which means that it is 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 the 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
800-322-1130
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the 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>
[STEIN ROE MUTUAL FUNDS LOGO]
STEIN ROE GROWTH STOCK FUND
Defined Contribution Plans Prospectus
Feb. 25, 1999
This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans.
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.
2 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
6 Financial Highlights
7 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
9 Other Investments and Risks
Market Capitalization
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
10 The Fund's Management
Investment Adviser
Portfolio Manager
Master/Feeder Fund Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
DEFINING CAPITALIZATION
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.
THE FUND
Stein Roe Growth Stock Fund
This Fund is closed to new investors except for purchases by
eligible investors as described under "Your Account."
INVESTMENT GOAL
Stein Roe Growth Stock Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Growth Stock Fund invests all of its assets in SR&F Growth Stock
Portfolio as part of a master fund/feeder fund structure. Growth
Stock Portfolio invests primarily in the common stocks of
companies with large-market capitalizations. The Portfolio
emphasizes the technology, financial services, health care, and
global consumer franchise sectors. The Portfolio may invest up to
25 percent of its assets in foreign stocks. To select investments
for the Portfolio, the portfolio manager considers companies that
he believes will generate earnings growth over the long term
regardless of the economic environment.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
The Portfolio's emphasis on certain market sectors may increase
volatility in the Fund's NAV. If sectors that the Portfolio
invests in do not perform well, the Fund's NAV could decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
For more information on the Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Growth Stock Fund if you:
* are a long-term investor and want to participate in the market
for large-capitalization growth stocks
* can tolerate the risk and volatility associated with the general
stock market but want less risk and volatility than an
aggressive growth fund
Growth Stock Fund is not appropriate for investors who:
* are unable to tolerate the risk and volatility associated with
stock market investing
* are saving for a short-term investment
* want regular current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
45% 46.00%
40%
35% 35.49% 35.63%
30% 31.62%
25% 25.54%
20% 20.94%
15%
10%
5% 8.24%
0% 0.93% 2.84%
- -5% -3.78%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Growth Stock Fund
Best quarter: 4th quarter 1998, +24.78%
Worst quarter: 3rd quarter 1990, -16.61%
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 500
Index, which is a broad-based measure of market performance. 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 5 yr 10 yr
Growth Stock Fund 25.54% 21.13% 19.21%
S&P 500 Index* 28.60% 24.05% 19.19%
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
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. However, you pay various other
indirect expenses because the Fund or the Portfolio pays fees and
other expenses that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees(b) 0.73%
Distribution 12b-1 fees None
Other expenses 0.30%
Total annual fund operating expenses 1.03%
(a) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Growth Stock Fund $105 $328 $569 $1,259
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. The Fund's fiscal
year runs from October 1 to September 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 Fund share. Arthur Andersen LLP, an international public
accounting firm, audits this information and issues a report that
appears in the Fund's annual report along with the financial
statements. To request the Fund's annual report, please call 800-
322-1130.
GROWTH STOCK FUND
PER SHARE DATA
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $35.29 $28.79 $26.13 $23.58 $24.89
Income from investment operations
Net investment income (loss) (0.04) 0.01 0.08 0.12 0.13
Net gains on securities (both
realized and unrealized) 1.61 8.79 5.01 5.60 0.41
Total income from investment operations 1.57 8.80 5.09 5.72 0.54
Less distributions
Dividends (from net investment income) - (0.07) (0.10) (0.15) (0.12)
Distributions (from capital gains) (2.15) (2.23) (2.33) (3.02) (1.73)
Total distributions (2.15) (2.30) (2.43) (3.17) (1.85)
Net asset value, end of period $34.71 $35.29 $28.79 $26.13 $23.58
Total return 4.69% 33.10% 21.04% 28.18% 2.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $615,345 $607,699 $417,964 $360,336 321,502
Ratio of net expenses to average
net assets 1.03% 1.07% 1.08% 0.99% 0.94%
Ratio of net investment income
(loss) to average net assets (0.10%) 0.04% 0.32% 0.56% 0.50%
Portfolio turnover rate N/A 5%(a) 39% 36% 27%
</TABLE>
_____________________
(a) Prior to commencement of operations of the Portfolio.
<PAGE>
YOUR ACCOUNT
The Fund is closed to purchases (including exchanges) by new
investors except for purchases by eligible investors as described
below. The Board of Trustees has taken this step to facilitate
management of the Fund's portfolio. If you are already a
shareholder of the Fund, you may continue to add to your account
or open another account with the Fund in your name. In addition,
you may open a new account if:
* you are a shareholder of any other Stein Roe Fund, having
purchased shares directly from Stein Roe, as of Oct. 15, 1997,
and you are opening a new account by exchange or by dividend
reinvestment;
* you are a client of Stein Roe;
* you are a trustee of the Trust; an employee of Stein Roe, or any
of its affiliated companies; or a member of the immediate family
of any trustee or employee;
* you purchase shares (i) under an asset allocation program
sponsored by a financial advisor, broker-dealer, bank, trust
company or other intermediary or (ii) from certain financial
advisors who charge a fee for services and who, as of Oct. 15,
1997, had one or more clients who were the Fund shareholders; or
* you purchase shares for an employee benefit plan, the records
for which are maintained by a trust company or third-party
administrator under an investment program with the Fund.
The Board of Trustees concluded that permitting the additional
investments described above would not adversely affect the ability
of Stein Roe to manage the Fund effectively. If you have
questions about your eligibility to purchase shares of Growth
Stock Fund, please call 800-322-1130.
Purchasing Shares
All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
Fund shares through your employer or limitations on the amount
that may be purchased, please consult your employer. Shares are
sold to eligible defined contribution plans at the NAV next
determined after the Fund receives your payment. Each purchase of
shares through a broker-dealer, bank or other intermediary that is
an authorized agent or designee of the Trust for the receipt of
orders is made at the NAV next determined after receipt of the
order by the intermediary. If an intermediary is an agent or
designee of the Funds, 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.
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 investors.
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 the NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
Selling Shares
Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange (NYSE)
is open. For more information about how to redeem your Fund
shares through your employer's plan, including any charges that
may be imposed by the plan, please consult with your employer.
The Fund redeems shares at the NAV next determined after an order
has been accepted.
Exchanging Shares
Subject to your plan's restrictions, 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 available through your
employer's defined contribution plan. (An exchange is commonly
referred to as a "transfer.") Please be sure to read the
prospectus of the fund you wish to exchange into before using the
Exchange Privilege. Contact your plan administrator for
instructions on how to exchange your shares or to obtain
prospectuses of other no-load Stein Roe Funds available through
your plan. We may change, suspend or eliminate the exchange
service after notification to you. 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.
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.
The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital
gains distributions will be reinvested in additional Fund shares.
Tax Consequences
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
that are necessary for it to be relieved of federal taxes on
income and gain it distributes. The Fund will distribute
substantially all of its ordinary income and net capital gains on
a current basis. Generally, Fund distributions are taxable as
ordinary income, except that any distributions of net long-term
capital gains will be taxed as such. However, distributions by
the Fund to employer-sponsored defined contribution plans that
qualify for tax-exempt treatment under federal income tax laws
will not be taxable. Special tax rules apply to investments
through such plans. You should consult your tax advisor to
determine the suitability of the Fund as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts attributable through an investment in the
Fund) from such a plan. This section is not intended to be a full
discussion of income tax laws and their effect on shareholders.
OTHER INVESTMENTS AND RISKS
The primary investment strategies and risks are described in this
prospectus. (See "The Fund.") The Statement of Additional
Information (SAI) describes other investments that the Portfolio
may make and risks associated with them. The Board of Trustees
can change the Fund's investment objective without shareholder
approval.
The portfolio manager generally makes decisions on buying and
selling portfolio investments based upon his judgment that the
decision will improve the Fund's investment return and further its
investment goal. The portfolio manager 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.
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 resulting in tax consequences for
Fund investors. It also increases transaction expenses, which
reduce the Fund's return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, the Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. The Fund may not achieve its investment objective if it
takes a defensive position.
Interfund Lending Program
The Fund and Portfolio may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
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 and
Portfolio. 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. For the fiscal year
ended Sept. 30, 1998, the Fund paid to Stein Roe aggregate fees of
0.73% 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 Board of
Trustees.
Portfolio Manager
Erik P. Gustafson has been portfolio manager of the Portfolio
since its inception in 1997 and has managed the Fund since 1994.
Mr. Gustafson joined Stein Roe in 1992 as a portfolio manager for
privately managed accounts and is a senior vice president. He
holds a B.A. degree from the University of Virginia and M.B.A. and
J.D. degrees from Florida State University. Mr. Gustafson was
responsible for managing $1.4 billion in mutual fund net assets at
Sept. 30, 1998.
Master/Feeder Fund Structure
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, the Fund is a "feeder" fund in a
"master/feeder" structure. This means that the Fund invests its
assets in a larger "master" portfolio of securities (the
Portfolio) that has investment objectives and policies
substantially identical to those of the Fund. The investment
performance of the Fund depends upon the investment performance of
the Portfolio. If the investment policies of the Fund and the
Portfolio became inconsistent, the Board of Trustees of the Fund
can decide what actions to take. Actions the Board of Trustees
may recommend include withdrawal of the Fund's assets from the
Portfolio. For more information on the master/feeder fund
structure, see the SAI.
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>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to investors. 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
Statement of Additional Information contains information relating
to other series of Stein Roe Investment Trust that may not be
available as investment vehicles for your defined contribution
plan. The SAI is incorporated into this prospectus by reference,
which means that it is 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 the 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
800-322-1130
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the 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>
STEIN ROE INVESTMENT TRUST
Stein Roe Capital Opportunities Fund
Supplement to Feb. 25, 1999 Defined Contribution Plans Prospectus
________________
The Board of Trustees of Stein Roe Investment Trust has called a
special meeting of shareholders of Stein Roe Capital Opportunities
Fund (Cap Op Fund) for August 17, 1999. Cap Op Fund shareholders
of record on June 18, 1999, will be entitled to vote at the
meeting. The Board has recommended that shareholders approve a
proposed reorganization under which shareholders of Cap Op Fund
would receive, in exchange for their Cap Op Fund shares, shares of
Stein Roe Growth Investor Fund, another series of the Trust. If
approved by shareholders, the reorganization is expected to take
place at 3:00 p.m. on August 20, 1999, at which time Cap Op Fund
would terminate. If the reorganization is approved by
shareholders, the Trust will not accept any purchase orders to
open new accounts of Cap Op Fund after the close of business on
the day of shareholder approval.
Effective May 6, 1999, Cap Op Fund's portfolio managers are Erik
P. Gustafson and David P. Brady. Mr. Gustafson joined Stein Roe &
Farnham Incorporated in 1992 as a portfolio manager for privately
managed accounts and is a senior vice president. He is portfolio
manager of SR&F Growth Investor Portfolio (the master fund of
Stein Roe Young Investor Fund and Stein Roe Growth Investor Fund)
and SR&F Growth Stock Portfolio. Mr. Brady joined Stein Roe in
1993 as an associate portfolio manager of Stein Roe Special Fund
and is a senior vice president. He is portfolio manager of SR&F
Growth Investor Portfolio and Stein Roe Large Company Focus Fund
and associate portfolio manager of SR&F Growth Stock Portfolio.
This Supplement is Dated May __, 1999
<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
STEIN ROE CAPITAL OPPORTUNITIES FUND
Defined Contribution Plans Prospectus
Feb. 25, 1999
This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans.
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.
2 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
6 Financial Highlights
7 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
9 Other Investments and Risks
Market Capitalization
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
10 The Fund's Management
Investment Adviser
Portfolio Manager
Master/Feeder Fund Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
DEFINING CAPITALIZATION
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.
THE FUND
Stein Roe Capital Opportunities Fund
INVESTMENT GOAL
Stein Roe Capital Opportunities Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Capital Opportunities Fund invests primarily in the common stocks
of aggressive growth companies. An aggressive growth company has
the ability to increase its earnings at an above-average rate. To
select stocks for the Fund, the manager concentrates on stocks of
small and midcapitalization companies which she believes have
opportunities for growth. The Fund may invest up to 25 percent of
its assets in foreign stocks.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
Investments in stocks of small and midsized companies can be
riskier than investments in larger companies. Small and midsized
companies often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on a
small management group. Small companies in particular are more
likely to fail or prove unable to grow. Small and midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Because the Fund invests in stocks, the price of its shares-its
net asset value per share (NAV)-fluctuates daily in response to
changes in the market value of the securities. In addition, the
risks associated with the Fund's investment strategy may cause the
Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Fund may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
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 Capital Opportunities Fund if you:
* like the significant growth potential of aggressive growth
companies and can tolerate their greater price volatility
* believe that a company's earnings growth drives its stock price
* are a long-term investor and prefer a fund with a long-term
investment horizon
Capital Opportunities Fund is not appropriate for investors who:
* can't tolerate the increased price volatility and risks
associated with aggressive growth investing
* are saving for a short-term investment
* need regular current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
65%
60% 62.79%
55%
50% 50.77%
45%
40%
35% 36.84%
30%
25% 27.52%
20% 20.39%
15%
10%
5% 6.15%
0% 2.43% 0.00%
- -5% -1.61%
- -10%
- -15%
- -20%
- -25% -29.09%
- -30%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Capital Opportunities Fund
Best quarter: 1st quarter 1991, +24.90%
Worst quarter: 3rd quarter 1990, -33.14%
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 Mid-
Cap 400 Index, which is a broad-based measure of market
performance. 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 5 yr 10 yr
Capital Opportunities Fund -1.61% 13.65% 14.61%
S&P Mid-Cap 400 Index* 18.25% 18.67% 19.21%
*The S&P Mid-Cap 400 Index is an unmanaged group of stocks that
differs from the Fund's composition; it is not available for
direct investment.
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. However, you pay various other
indirect expenses because the Fund pays fees and other expenses
that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management fees (a) 0.86%
Distribution 12b-1 fees None
Other expenses 0.34%
Total annual fund operating expenses 1.20%
(a) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Capital Opportunities Fund $122 $381 $660 $1,455
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. The Fund's fiscal
year runs from October 1 to September 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 Fund share. Arthur Andersen LLP, an international public
accounting firm, audits this information and issues a report that
appears in the Fund's annual report along with the financial
statements. To request the Fund's annual report, please call 800-
322-1130.
CAPITAL OPPORTUNITIES FUND
PER SHARE DATA
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $29.10 $31.04 $21.69 $15.79 $15.44
Income from investment operations
Net investment income (loss) (0.25) (0.17) (0.06) 0.01 0.02
Net gains (losses) on securities
(both realized and unrealized) (3.60) (1.77) 10.41 5.91 0.34
Total income from investment
operations (3.85) (1.94) 10.35 5.92 0.36
Less distributions
Dividends (from net investment
income) - - (0.01) (0.02) (0.01)
Distributions (from capital gains) - - (0.99) - -
Total distributions - - (1.00) (0.02) (0.01)
Net asset value, end of period $25.25 $29.10 $31.04 21.69 $15.79
Total return (13.23%) (6.25%) 49.55% 37.46% 2.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $681,133 $1,110,642 $1,684,538 $242,381 $175,687
Ratio of net expenses to average
net assets 1.20% 1.17% 1.22% 1.05% 0.97%
Ratio of net investment income
(loss) to average net assets (0.72%) (0.69%) (0.40%) 0.08% 0.04%
Portfolio turnover rate 47% 35% 22% 60% 46%
</TABLE>
<PAGE>
YOUR ACCOUNT
Purchasing Shares
All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
Fund shares through your employer or limitations on the amount
that may be purchased, please consult your employer. Shares are
sold to eligible defined contribution plans at the NAV next
determined after the Fund receives your payment. Each purchase of
shares through a broker-dealer, bank or other intermediary that is
an authorized agent or designee of the Trust for the receipt of
orders is made at the NAV next determined after receipt of the
order by the intermediary. If an intermediary is an agent or
designee of the Funds, 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.
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 investors.
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 the NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
Selling Shares
Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange (NYSE)
is open. For more information about how to redeem your Fund
shares through your employer's plan, including any charges that
may be imposed by the plan, please consult with your employer.
The Fund redeems shares at the NAV next determined after an order
has been accepted.
Exchanging Shares
Subject to your plan's restrictions, 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 available through your
employer's defined contribution plan. (An exchange is commonly
referred to as a "transfer.") Please be sure to read the
prospectus of the fund you wish to exchange into before using the
Exchange Privilege. Contact your plan administrator for
instructions on how to exchange your shares or to obtain
prospectuses of other no-load Stein Roe Funds available through
your plan. We may change, suspend or eliminate the exchange
service after notification to you. 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.
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.
The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital
gains distributions will be reinvested in additional Fund shares.
Tax Consequences
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
that are necessary for it to be relieved of federal taxes on
income and gain it distributes. The Fund will distribute
substantially all of its ordinary income and net capital gains on
a current basis. Generally, Fund distributions are taxable as
ordinary income, except that any distributions of net long-term
capital gains will be taxed as such. However, distributions by
the Fund to employer-sponsored defined contribution plans that
qualify for tax-exempt treatment under federal income tax laws
will not be taxable. Special tax rules apply to investments
through such plans. You should consult your tax advisor to
determine the suitability of the Fund as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts attributable through an investment in the
Fund) from such a plan. This section is not intended to be a full
discussion of income tax laws and their effect on shareholders.
OTHER INVESTMENTS AND RISKS
The primary investment strategies and risks are described in this
prospectus. (See "The Fund.") The Statement of Additional
Information (SAI) describes 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 portfolio manager generally makes decisions on buying and
selling portfolio investments based upon her judgment that the
decision will improve the Fund's investment return and further its
investment goal. The portfolio manager 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.
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 resulting in tax consequences for
Fund investors. It also increases transaction expenses, which
reduce the Fund's return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, the 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. It 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.
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. For the fiscal year ended Sept. 30, 1998, the
Fund paid to Stein Roe aggregate fees of 0.86% 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 Board of
Trustees.
Portfolio Manager
Gloria J. Santella has been portfolio manager of the Fund since
1991. Ms. Santella is a senior vice president of Stein Roe which
she joined in 1979. She received her B.B.A. degree from Loyola
University and M.B.A. degree from the University of Chicago. As
of Sept. 30, 1998, Ms. Santella co-managed $731 million in mutual
fund net assets.
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>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to investors. 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
Statement of Additional Information contains information relating
to other series of Stein Roe Investment Trust that may not be
available as investment vehicles for your defined contribution
plan. The SAI is incorporated into this prospectus by reference,
which means that it is 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 the 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
800-322-1130
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the 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>
STEIN ROE INVESTMENT TRUST
Stein Roe Special Fund
Supplement to Feb. 25, 1999 Defined Contribution Plans Prospectus
___________________
Effective May 6, 1999, the name of Stein Roe Special Fund is
changed to Stein Roe Disciplined Stock Fund. The Fund's principal
investment strategy is changed to the following:
PRINCIPAL INVESTMENT STRATEGY Disciplined Stock Fund
invests all of its assets in SR&F Disciplined Stock Portfolio
as part of a master fund/feeder fund structure. Under normal
market circumstances, Disciplined Stock Portfolio will invest
primarily in common stocks of midcapitalization companies.
The Portfolio may also invest in companies having large-
market capitalizations. The Portfolio may invest up to 25
percent of its assets in foreign stocks. The portfolio will
be "blend" in nature, meaning that the manager will exercise
latitude in investing in the stocks of companies that have
"growth" and/or "value" characteristics. The portfolio
manager will generally avoid growth stocks with very high
relative price/earnings ratios and growth rates. These
strategies reflect the Fund's more conservative posture than
a fund investing only in growth stocks. In selecting stocks
for the Portfolio, the portfolio manger will focus on
companies with sales and earnings that he believes will
generally grow at above-average rates relative to their
industry peers. The portfolio manager may also look for
companies that are perhaps growing more slowly but whose
valuation may be attractive based on earnings, cash flow
and/or assets.
The last paragraph on page 2 of the prospectus, describing
principal investment risks, is changed to read as follows:
Investments in stocks of midsized companies can be riskier
than investments in larger companies. Midsized companies
often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on
a smaller management group than larger companies. Midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Effective May 6, 1999, the portfolio manager of Stein Roe
Disciplined Stock Fund and SR&F Disciplined Stock Portfolio is
Daniel K. Cantor. Mr. Cantor has also been portfolio manager of
SR&F Growth & Income Portfolio since its inception in 1997 and
manager of Stein Roe Growth & Income Fund since 1995. He joined
Stein Roe in 1985 as an equity analyst and served as an advisor to
Stein Roe Private Capital Management from 1992 to 1995. Mr.
Cantor was a co-manager of Stein Roe Young Investor Fund from 1994
to 1995. Mr. Cantor is a senior vice president of Stein Roe. A
chartered financial analyst, he received a B.A. degree from the
University of Rochester and an M.B.A. degree from the Wharton
School of the University of Pennsylvania.
Prior to Mr. Cantor becoming portfolio manager, the Fund generally
purchased stocks of companies that the portfolio manager believed
were undervalued, underfollowed or out of favor. Mr. Cantor will
implement the Fund's revised principal investment strategy as soon
as is practicable in the ordinary course of managing the Fund's
investment portfolio.
This Supplement is Dated May __, 1999
<PAGE>
[STEIN ROE MUTUAL FUNDS LOGO]
STEIN ROE SPECIAL FUND
Defined Contribution Plans Prospectus
Feb. 25, 1999
This prospectus relates only to shares of the Fund purchased
through eligible employer-sponsored defined contribution plans.
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.
2 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
6 Financial Highlights
7 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
9 Other Investments and Risks
Market Capitalization
Portfolio Turnover
Temporary Defensive Positions
Interfund Lending Program
10 The Fund's Management
Investment Adviser
Portfolio Manager
Master/Feeder Fund Structure
Year 2000 Readiness
Please keep this prospectus as your reference manual.
<PAGE>
DEFINING CAPITALIZATION
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.
THE FUND
Stein Roe Special Fund
INVESTMENT GOAL
Stein Roe Special Fund seeks long-term growth.
PRINCIPAL INVESTMENT STRATEGY
Special Fund invests all of its assets in SR&F Special Portfolio
as part of a master fund/feeder fund structure. Special Portfolio
invests primarily in the common stocks of midcapitalization
companies. It may also purchase the common stocks of small- and
large- capitalization companies. The Portfolio generally
purchases stocks of companies that the portfolio manager believes
are undervalued, underfollowed or out of favor. It may invest in
stocks that have limited marketability. The Portfolio may invest
up to 25 percent of its assets in foreign stocks.
To select investments for the Portfolio, the portfolio manager
considers stocks that he believes have limited downside risk in
comparison to their potential for above-average appreciation over
the long term. The portfolio manager looks for companies that may
benefit from a change such as a change in management or demand for
its products that might cause its stock to appreciate.
PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. These risks may cause
you to lose money when you sell your shares.
What are market and management risks? Management risk means that
Stein Roe's stock selections and other investment decisions might
produce losses or cause the Fund to underperform when compared to
other funds with similar goals. Market risk means that security
prices in a market, sector or industry may move down. Downward
movements will reduce the value of your investment. Because of
management and market risk, there is no guarantee that the Fund
will achieve its investment goal or perform favorably compared
with competing funds.
Investments in stocks of small and midsized companies can be
riskier than investments in larger companies. Small and midsized
companies often have limited product lines, operating histories,
markets, or financial resources. They may depend heavily on a
small management group. Small companies in particular are more
likely to fail or prove unable to grow. Small and midsized
companies may trade less frequently, in smaller volumes, and
fluctuate more sharply in price than larger companies. In
addition, they may not be widely followed by the investment
community, which can lower the demand for their stock.
Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with the Portfolio's investment
strategy may cause the Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. It is not a complete investment program
and you can lose money by investing in the Fund.
For more information on the Portfolio's investment techniques,
please refer to "Other Investments and Risks."
Who Should Invest in the Fund?
You may want to invest in Special Fund if you:
* believe that investing in the securities of companies that are
undervalued, underfollowed or out of favor may provide strong
opportunities for appreciation with managed risk
* are a long-term investor
Special Fund is not appropriate for investors who:
* can't tolerate the volatility and risks of stock market
investing
* are saving for a short-term investment
* need regular current income
FUND PERFORMANCE
The following charts show the Fund's performance for the past 10
years through Dec. 31, 1998. 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
45%
40%
35% 37.84%
30% 34.04%
25% 25.94%
20% 20.42%
15% 18.73% 18.81%
10% 14.05%
5%
0% -3.35%
- -5% -5.81%
- -10% -11.25%
- -15%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Special Fund
Best quarter: 1st quarter 1991, +19.00%
Worst quarter: 3rd quarter 1998, -18.13%
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 Mid-
Cap 400 Index, which is a broad-based measure of market
performance. 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 5 yr 10 yr
Special Fund -11.25% 8.79% 13.80%
S&P Mid-Cap 400 Index* 18.25% 18.67% 19.21%
*The S&P Mid-Cap 400 Index is an unmanaged group of stocks that
differs from the Fund's composition; it is not available for
direct investment.
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. However, you pay various other
indirect expenses because the Fund or the Portfolio pays fees and
other expenses that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees(b) 0.84%
Distribution 12b-1 fees None
Other expenses 0.29%
Total annual fund operating expenses 1.13%
(a) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
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
Special Fund $115 $359 $622 $1,375
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. The Fund's fiscal
year runs from October 1 to September 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 Fund share. Arthur Andersen LLP, an international public
accounting firm, audits this information and issues a report that
appears in the Fund's annual report along with the financial
statements. To request the Fund's annual report, please call 800-
322-1130.
SPECIAL FUND
PER SHARE DATA
<TABLE>
<CAPTION>
For years ending September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $33.79 $27.39 $25.26 $23.54 $25.04
Income from investment operations
Net investment income (loss) 0.07 (0.06) 0.01 0.13 0.15
Net gains (losses) on securities
(both realized and unrealized) (6.06) 8.57 4.14 3.05 0.33
Total income from investment
operations (5.99) 8.51 4.15 3.18 0.48
Less distributions
Dividends (from net investment income) - - (0.11) (0.15) (0.21)
Distributions (from capital gains) (3.32) (2.11) (1.91) (1.31) (1.77)
Total distributions (3.32) (2.11) (2.02) (1.46) (1.98)
Net asset value, end of period $24.48 $33.79 $27.39 $25.26 $23.54
Total return (19.17%) 33.67% 17.89% 14.60% 2.02%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $911,650 $1,327,578 $1,158,498 $1,201,469 $1,243,885
Ratio of net expenses to average
net assets 1.13% 1.14% 1.18% 1.02% 0.96%
Ratio of net investment income
(loss) to average net assets 0.21% (0.17%) 0.03% 0.56% 0.91%
Portfolio turnover rate N/A 7%(a) 32% 41% 58%
</TABLE>
_____________________
(a) Prior to commencement of operations of the Portfolio.
<PAGE>
YOUR ACCOUNT
Purchasing Shares
All shares must be purchased through your employer's defined
contribution plan. For more information about how to purchase
Fund shares through your employer or limitations on the amount
that may be purchased, please consult your employer. Shares are
sold to eligible defined contribution plans at the NAV next
determined after the Fund receives your payment. Each purchase of
shares through a broker-dealer, bank or other intermediary that is
an authorized agent or designee of the Trust for the receipt of
orders is made at the NAV next determined after receipt of the
order by the intermediary. If an intermediary is an agent or
designee of the Funds, 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.
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 investors.
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 the NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
Selling Shares
Subject to restrictions imposed by your employer's plan, Fund
shares may be redeemed any day the New York Stock Exchange (NYSE)
is open. For more information about how to redeem your Fund
shares through your employer's plan, including any charges that
may be imposed by the plan, please consult with your employer.
The Fund redeems shares at the NAV next determined after an order
has been accepted.
Exchanging Shares
Subject to your plan's restrictions, 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 available through your
employer's defined contribution plan. (An exchange is commonly
referred to as a "transfer.") Please be sure to read the
prospectus of the fund you wish to exchange into before using the
Exchange Privilege. Contact your plan administrator for
instructions on how to exchange your shares or to obtain
prospectuses of other no-load Stein Roe Funds available through
your plan. We may change, suspend or eliminate the exchange
service after notification to you. 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.
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.
The terms of your plan will govern how you may receive
distributions from the Fund. Generally, dividend and capital
gains distributions will be reinvested in additional Fund shares.
Tax Consequences
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other requirements
that are necessary for it to be relieved of federal taxes on
income and gain it distributes. The Fund will distribute
substantially all of its ordinary income and net capital gains on
a current basis. Generally, Fund distributions are taxable as
ordinary income, except that any distributions of net long-term
capital gains will be taxed as such. However, distributions by
the Fund to employer-sponsored defined contribution plans that
qualify for tax-exempt treatment under federal income tax laws
will not be taxable. Special tax rules apply to investments
through such plans. You should consult your tax advisor to
determine the suitability of the Fund as an investment through
such a plan and the tax treatment of distributions (including
distributions of amounts attributable through an investment in the
Fund) from such a plan. This section is not intended to be a full
discussion of income tax laws and their effect on shareholders.
OTHER INVESTMENTS AND RISKS
The primary investment strategies and risks are described in this
prospectus. (See "The Fund.") The Statement of Additional
Information (SAI) describes other investments that the Portfolio
may make and risks associated with them. The Board of Trustees
can change the Fund's investment objective without shareholder
approval.
The portfolio manager generally makes decisions on buying and
selling portfolio investments based upon his judgment that the
decision will improve the Fund's investment return and further its
investment goal. The portfolio manager 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.
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 resulting in tax consequences for
Fund investors. It also increases transaction expenses, which
reduce the Fund's return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, the Portfolio may invest, without limit, in high-
quality debt securities or hold assets in cash and cash
equivalents. Stein Roe is not required to take a temporary
defensive position, and market conditions may prevent such an
action. The Fund may not achieve its investment objective if it
takes a defensive position.
Interfund Lending Program
The Fund and Portfolio may lend money to and borrow money from
other funds advised by Stein Roe. They will do so when Stein Roe
believes such lending or borrowing is necessary and appropriate.
Borrowing costs will be the same as or lower than the costs of a
bank loan.
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 and
Portfolio. 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. For the fiscal year
ended Sept. 30, 1998, the Fund paid to Stein Roe aggregate fees of
0.84% 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 Board of
Trustees.
Portfolio Manager
M. Gerard Sandel has been manager of the Portfolio and senior vice
president of Stein Roe since July 1997. Prior to joining Stein
Roe, Mr. Sandel was portfolio manager of the Marshall Mid-Cap
Value Fund and its predecessor fund and vice president of M&I
Investment Management Corporation from 1993 until 1997. From 1991
to 1993 he was a portfolio manager at Acorn Asset Management. A
chartered financial analyst, Mr. Sandel earned a B.A. degree from
the University of Southern Mississippi and M.A. degree from the
American Graduate School. As of Sept. 30, 1998, he was
responsible for managing $917 million in mutual fund net assets.
Master/Feeder Fund Structure
Unlike mutual funds that directly acquire and manage their own
portfolio of securities, the Fund is a "feeder" fund in a
"master/feeder" structure. This means that the Fund invests its
assets in a larger "master" portfolio of securities (the
Portfolio) that has investment objectives and policies
substantially identical to those of the Fund. The investment
performance of the Fund depends upon the investment performance of
the Portfolio. If the investment policies of the Fund and the
Portfolio became inconsistent, the Board of Trustees of the Fund
can decide what actions to take. Actions the Board of Trustees
may recommend include withdrawal of the Fund's assets from the
Portfolio. For more information on the master/feeder fund
structure, see the SAI.
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>
FOR MORE INFORMATION
You can obtain more information about the Fund's investments in
its semiannual and annual reports to investors. 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
Statement of Additional Information contains information relating
to other series of Stein Roe Investment Trust that may not be
available as investment vehicles for your defined contribution
plan. The SAI is incorporated into this prospectus by reference,
which means that it is 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 the 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
800-322-1130
www.steinroe.com
Text-only versions of all Fund documents can be viewed online or
downloaded from the 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>
STEIN ROE INVESTMENT TRUST
Balanced Fund Growth and Income Fund
-------------- ----------------------
Stein Roe Balanced Fund Stein Roe Growth & Income Fund
Growth Funds
------------
Stein Roe Growth Stock Fund
Stein Roe Special Venture Fund
Stein Roe Special Fund
Stein Roe Capital Opportunities Fund
Stein Roe Large Company Focus Fund
Stein Roe Growth Opportunities Fund
Supplement to Feb. 1, 1999 Statement of Additional Information
________________
In addition to the Funds' prospectus dated Feb. 1, 1999, this
Statement of Additional Information should be read in conjunction
with the Funds' defined contribution plans prospectuses dated Feb.
25, 1999.
* * * * *
STEIN ROE CAPITAL OPPORTUNITIES FUND
The Board of Trustees of Stein Roe Investment Trust has
called a special meeting of shareholders of Stein Roe Capital
Opportunities Fund (Cap Op Fund) for August 17, 1999. Cap Op Fund
shareholders of record on June 18, 1999, will be entitled to vote
at the meeting. The Board has recommended that shareholders
approve a proposed reorganization under which shareholders of Cap
Op Fund would receive, in exchange for their Cap Op Fund shares,
shares of Stein Roe Growth Investor Fund, another series of the
Trust. If approved by shareholders, the reorganization is
expected to take place at 3:00 p.m. on August 20, 1999, at which
time Cap Op Fund would terminate. If the reorganization is
approved by shareholders, the Trust will not accept any purchase
orders to open new accounts of Cap Op Fund after the close of
business on the day of shareholder approval.
STEIN ROE SPECIAL FUND
Effective May 6, 1999, the name of Stein Roe Special Fund is
changed to Stein Roe Disciplined Stock Fund. The Fund's principal
investment strategy is changed to the following:
Disciplined Stock Fund invests all of its assets in SR&F
Disciplined Stock Portfolio as part of a master fund/feeder
fund structure. Under normal market circumstances,
Disciplined Stock Portfolio will invest primarily in common
stocks of midcapitalization companies. The Portfolio may
also invest in companies having large-market capitalizations.
The Portfolio may invest up to 25 percent of its assets in
foreign stocks. The portfolio will be "blend" in nature,
meaning that the manager will exercise latitude in investing
in the stocks of companies that have "growth" and/or "value"
characteristics. The portfolio manager will generally avoid
growth stocks with very high relative price/earnings ratios
and growth rates. These strategies reflect the Fund's more
conservative posture than a fund investing only in growth
stocks. In selecting stocks for the Portfolio, the portfolio
manger will focus on companies with sales and earnings that
he believes will generally grow at above-average rates
relative to their industry peers. The portfolio manager may
also look for companies that are perhaps growing more slowly
but whose valuation may be attractive based on earnings, cash
flow and/or assets.
STEIN ROE GROWTH OPPORTUNITIES FUND
Effective May 6, 1999, the name of Stein Roe Growth
Opportunities Fund is changed to Stein Roe Midcap Growth Fund.
The Fund's principal investment strategy is changed to the
following:
Under normal market conditions, the Fund invests at least 65
percent of its assets in common stocks of midcap companies
that the portfolio managers believe have long-term growth
potential. The Fund may also invest in small- and large-
capitalization companies. The Fund may invest up to 25
percent of its assets in foreign stocks. To select
investments for the Fund, the portfolio managers consider
midcap companies that show the potential to generate and
sustain long-term earnings growth at above-average rates.
The portfolio managers select companies based on their view
of long-term rather than short-term earnings growth
prospects.
STEIN ROE SPECIAL VENTURE FUND
The Board of Trustees voted on May 4, 1999, to liquidate
Stein Roe Special Venture Fund. The Board directed that sales of
Special Venture Fund shares be suspended as of the close of
business on May 10, 1999, and that the Fund be liquidated on June
28, 1999, or before that time if all shareholders have redeemed
their interests in the Fund. In the case of shares held in
qualified retirement plans for which Stein Roe does not receive
transfer instructions by the liquidation date, Stein Roe will
transfer such shares to Stein Roe Cash Reserves Fund.
This Supplement is Dated May __, 1999
<PAGE>
Statement of Additional Information Dated Feb. 1, 1999
STEIN ROE INVESTMENT TRUST
Suite 3200, One South Wacker Drive, Chicago, IL 60606
800-338-2550
Balanced Fund Growth and Income Fund
------------- ----------------------
Stein Roe Balanced Fund Stein Roe Growth & Income Fund
Growth Funds
------------
Stein Roe Growth Stock Fund Stein Roe Special Venture Fund
Stein Roe Special Fund Stein Roe Capital Opportunities Fund
Stein Roe Large Company Stein Roe Growth Opportunities Fund
Focus Fund
This Statement of Additional Information ("SAI") is not a
prospectus, but provides additional information that should be
read in conjunction with the Funds' prospectuses dated Feb. 1,
1999, and any supplements thereto ("Prospectuses"). Financial
statements, which are contained in the Funds' Annual Reports, are
incorporated by reference into this SAI. The Prospectuses and
Annual Reports may be obtained at no charge by telephoning 800-
338-2550.
TABLE OF CONTENTS
Page
General Information and History................................2
Investment Policies............................................4
Balanced Fund...............................................4
Growth & Income Fund........................................4
Growth Stock Fund...........................................5
Special Fund................................................5
Large Company Focus Fund....................................5
Growth Opportunities Fund...................................6
Special Venture Fund........................................6
Capital Opportunities Fund..................................7
Portfolio Investments and Strategies...........................7
Investment Restrictions.......................................24
Additional Investment Considerations..........................26
Purchases and Redemptions.....................................27
Management....................................................31
Financial Statements..........................................35
Principal Shareholders........................................35
Investment Advisory and Other Services........................37
Distributor...................................................40
Transfer Agent................................................40
Custodian.....................................................40
Independent Public Accountants................................41
Portfolio Transactions........................................41
Additional Income Tax Considerations..........................45
Investment Performance........................................45
Master Fund/Feeder Fund: Structure and Risk Factors...........50
Appendix-Ratings..............................................52
GENERAL INFORMATION AND HISTORY
The mutual funds described in this SAI are the following
separate series of Stein Roe Investment Trust (the "Trust"):
Stein Roe Growth & Income Fund ("Growth & Income Fund")
Stein Roe Balanced Fund ("Balanced Fund")
Stein Roe Growth Stock Fund ("Growth Stock Fund")
Stein Roe Special Fund ("Special Fund")
SteinRoe Large Company Focus Fund ("Large Company Focus Fund")
Stein Roe Special Venture Fund ("Special Venture Fund")
Stein Roe Capital Opportunities Fund ("Capital Opportunities
Fund")
Stein Roe Growth Opportunities Fund ("Growth Opportunities
Fund")
The above series are referred to collectively as "the Funds."
On Feb. 1, 1996, the names of the Trust and each then-existing
Fund were changed to separate "SteinRoe" into two words. Prior to
Feb. 1, 1995, the name of Stein Roe Growth Stock Fund was SteinRoe
Stock Fund; prior to Feb. 1, 1996, Stein Roe Growth & Income Fund
was named SteinRoe Prime Equities; and prior to Apr. 17, 1996, the
name of Stein Roe Balanced Fund was Stein Roe Total Return Fund.
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.
Each series invests in a separate portfolio of securities and
other assets, with its own objectives and policies.
Under Massachusetts law, shareholders of a Massachusetts
business trust such as the Trust could, in some circumstances, be
held personally liable for unsatisfied obligations of the trust.
The Declaration of Trust provides that persons extending credit
to, contracting with, or having any claim against the Trust or any
particular series shall look only to the assets of the Trust or of
the respective series for payment under such credit, contract or
claim, and that the shareholders, trustees and officers shall have
no personal liability therefor. The Declaration of Trust requires
that notice of such disclaimer of liability be given in each
contract, instrument or undertaking executed or made on behalf of
the Trust. The Declaration of Trust provides for indemnification
of any shareholder against any loss and expense arising from
personal liability solely by reason of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is believed to be remote,
because it would be limited to circumstances in which the
disclaimer was inoperative and the Trust was unable to meet its
obligations. The risk of a particular series incurring financial
loss on account of unsatisfied liability of another series of the
Trust also is believed to be remote, because it would be limited
to claims to which the disclaimer did not apply and to
circumstances in which the other series was unable to meet its
obligations.
Each share of a series, without par value, is entitled to
participate pro rata in any dividends and other distributions
declared by the Board on shares of that series, and all shares of
a series have equal rights in the event of liquidation of that
series. Each whole share (or fractional share) outstanding on the
record date established in accordance with the By-Laws shall be
entitled to a number of votes on any matter on which it is
entitled to vote equal to the net asset value of the share (or
fractional share) in United States dollars determined at the close
of business on the record date (for example, a share having a net
asset value of $10.50 would be entitled to 10.5 votes). As a
business trust, the Trust is not required to hold annual
shareholder meetings. However, special meetings may be called for
purposes such as electing or removing trustees, changing
fundamental policies, or approving an investment advisory
contract. If requested to do so by the holders of at least 10% of
its outstanding shares, the Trust will call a special meeting for
the purpose of voting upon the question of removal of a trustee or
trustees and will assist in the communications with other
shareholders as if the Trust were subject to Section 16(c) of the
Investment Company Act of 1940. All shares of all series of the
Trust are voted together in the election of trustees. On any
other matter submitted to a vote of shareholders, shares are voted
in the aggregate and not by individual series, except that shares
are voted by individual series when required by the Investment
Company Act of 1940 or other applicable law, or when the Board of
Trustees determines that the matter affects only the interests of
one or more series, in which case shareholders of the unaffected
series are not entitled to vote on such matters.
Special Considerations Regarding Master Fund/Feeder Fund Structure
Rather than invest in securities directly, certain of the
Funds seek to achieve their objectives by pooling their assets
with those of other investment companies for investment in a
master fund having the identical investment objective and
substantially the same investment policies as its feeder funds.
The purpose of such an arrangement is to achieve greater
operational efficiencies and reduce costs. Each feeder Fund has
invested all of its net investable assets in a separate master
fund that is a series of SR&F Base Trust since Feb. 3, 1997, as
follows:
Feeder Fund Master Fund
Growth & Income Fund SR&F Growth & Income Portfolio ("Growth &
Income Portfolio")
Balanced Fund SR&F Balanced Portfolio ("Balanced
Portfolio")
Growth Stock Fund SR&F Growth Stock Portfolio ("Growth Stock
Portfolio")
Special Fund SR&F Special Portfolio ("Special
Portfolio")
Special Venture Fund SR&F Special Venture Portfolio ("Special
Venture Portfolio")
The master funds are referred to collectively as the
"Portfolios." For more information, please refer to Master
Fund/Feeder Fund: Structure and Risk Factors. Large Company Focus
Fund, Capital Opportunities Fund, and Growth Opportunities Fund
may convert into feeder funds at some time in the future.
Stein Roe & Farnham Incorporated ("Stein Roe") provides
administrative and accounting and recordkeeping services to the
Funds and Portfolios and provides investment management services
to each Portfolio, Large Company Focus Fund, Capital Opportunities
Fund, and Growth Opportunities Fund.
INVESTMENT POLICIES
The Trust and SR&F Base Trust are open-end management
investment companies. The Funds and the Portfolios are
diversified, as that term is defined in the Investment Company Act
of 1940.
In pursuing its respective objective, each Fund or Portfolio
will invest as described in the section below and may employ the
investment techniques described in its Prospectus and Portfolio
Investments and Strategies in this SAI. Each investment objective
is a non-fundamental policy and may be changed by the Board of
Trustees without the approval of a "majority of the outstanding
voting securities."/1/
- -------------
/1/ A "majority of the outstanding voting securities" means the
approval of the lesser of (i) 67% or more of the shares at a
meeting if the holders of more than 50% of the outstanding shares
are present or represented by proxy or (ii) more than 50% of the
outstanding shares.
- -------------
Balanced Fund
Balanced Fund seeks to achieve its objective by investing in
Balanced Portfolio. Their common investment objective is to seek
long-term growth of capital and current income, consistent with
reasonable investment risk. Balanced Portfolio allocates its
investments among equities, debt securities and cash. The
portfolio manager determines those allocations based on the views
of Stein Roe's investment strategists regarding economic, market
and other factors relative to investment opportunities.
The equity portion of Balanced Portfolio is invested
primarily in well-established companies having large market
capitalizations. Fixed income senior securities will make up at
least 25% of Balanced Portfolio's total assets. Investments in
debt securities are limited to those that are within the four
highest grades (generally referred to as "investment grade")
assigned by a nationally recognized statistical rating
organization or, if unrated, determined by Stein Roe to be of
comparable quality.
Growth & Income Fund
Growth & Income Fund seeks to achieve its objective by
investing in Growth & Income Portfolio. Their common investment
objective is to provide both growth of capital and current income.
Growth & Income Fund is designed for investors seeking a
diversified portfolio of securities that offers the opportunity
for long-term growth of capital while also providing a steady
stream of income. Growth & Income Portfolio invests primarily in
well-established companies whose common stocks are believed to
have the potential both to appreciate in value and to pay
dividends to shareholders.
Although it may invest in a broad range of securities
(including common stocks, preferred stocks, securities convertible
into or exchangeable for common stocks, and warrants or rights to
purchase common stocks), normally Growth & Income Portfolio
emphasizes investments in equity securities of companies having
large market capitalizations. The Portfolio may also invest in
companies having midsized market capitalizations. Securities of
these well-established companies are believed to be generally
less volatile than those of companies with smaller capitalizations
because companies with larger capitalizations tend to have
experienced management; broad, highly diversified product lines;
deep resources; and easy access to credit.
Growth Stock Fund
Growth Stock Fund seeks to achieve its objective by investing
in Growth Stock Portfolio. Their common investment objective is
long-term growth. Growth Stock Portfolio attempts to achieve its
objective by investing primarily in common stocks and other
equity-type securities (such as preferred stocks, securities
convertible into or exchangeable for common stocks, and warrants
or rights to purchase common stocks) that, in the opinion of Stein
Roe, have long-term appreciation possibilities.
Special Fund
Special Fund seeks to achieve its objective by investing in
Special Portfolio. Their common investment objective is to invest
in securities selected for long-term growth. Particular emphasis
is placed on securities that are considered to have limited
downside risk relative to their potential for above-average
growth, including securities of undervalued, underfollowed or out-
of-favor companies, and companies that are low-cost producers of
goods or services, financially strong or run by well-respected
managers. Special Portfolio may invest more than 5% of
its net assets in securities of seasoned, established companies
that appear to have appreciation potential, as well as securities
of relatively small, new companies. In addition, it may invest in
securities with limited marketability, new issues of securities,
securities of companies that, in Stein Roe's opinion, will benefit
from management change, new technology, new product or service
development or change in demand, and other securities that Stein
Roe believes have capital appreciation possibilities. Special
Portfolio does not, however, currently intend to invest more than
5% of its net assets in any of these types of securities.
Securities of smaller, newer companies may be subject to greater
price volatility than securities of larger, more well-established
companies. In addition, many smaller companies are less well
known to the investing public and may not be as widely followed by
the investment community. Although Special Portfolio invests
primarily in common stocks, it may also invest in other equity-
type securities, including preferred stocks and securities
convertible into equity securities.
Large Company Focus Fund
The investment objective of Large Company Focus Fund is long-
term growth of capital by investing in a non-diversified portfolio
of equity securities. Large Company Focus Fund invests in a
limited number of large-cap companies that Stein Roe
believes have above-average growth potential. As a "focus fund,"
under normal conditions, Large Company Focus Fund will hold
between 15-25 common stocks and will invest at least 65% of its
total assets in common stocks of large-cap companies.
As a "non-diversified" fund, Large Company Focus Fund is not
limited under the Investment Company Act of 1940 in the percentage
of its assets that it may invest in any one issuer. However,
Large Company Focus Fund intends to comply with the
diversification standards applicable to regulated investment
companies under the Internal Revenue Code of 1986. In order to
meet those standards, among other requirements, at the close of
each quarter of its taxable year (a) at least 50% of the value of
Large Company Focus Fund's total assets must be represented by one
or more of the following: (i) cash and cash items, including
receivables; (ii) U.S. Government securities; (iii) securities of
other regulated investment companies; and (iv) securities (other
than those in items (ii) and (iii) above) of any one or more
issuers as to which its investment in an issuer does not exceed 5%
of the value of Large Company Focus Fund's total assets (valued at
the time of investment); and (b) not more than 25% of its total
assets (valued at the time of investment) may be invested in the
securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
Since Large Company Focus Fund may invest more than 5% of its
assets in a single portfolio security, the appreciation or
depreciation of such a security will have a greater impact on the
net asset value of Large Company Focus Fund, and the net asset
value per share of Large Company Focus Fund can be expected to
fluctuate more than would the net asset value of a comparable
"diversified" fund (which generally, with respect to 75% of its
assets, cannot invest more than 5% of its assets in securities of
any one issuer).
Growth Opportunities Fund
The investment objective of Growth Opportunities Fund is
long-term growth. Growth Opportunities Fund attempts to achieve
its objective by investing primarily in a diversified portfolio of
common stocks of large, mid-sized, and small companies that, in
the view of Stein Roe, have the ability to generate and sustain
earnings growth at an above-average rate.
Growth Opportunities Fund's investments include securities of
both established companies that Stein Roe believes have
appreciation potential and emerging companies. Investment in
established companies tends to moderate the investment risks
associated with investing in emerging, generally smaller
companies. Growth Opportunities Fund invests a portion of its
assets in the securities of small and mid-sized companies. These
companies may present greater opportunities for capital
appreciation because of high potential earnings growth, but also
may involve greater risks. Securities of smaller companies may be
subject to greater price volatility and tend to be less liquid
than securities of larger companies. Small companies, as compared
to large companies, may have a shorter history of operations, may
not have as great an ability to raise additional capital, may have
a less diversified product line making them susceptible to market
pressure, and may have a smaller public market for their shares.
In addition, many smaller companies are less well known to the
investing public and may not be as widely followed by the
investment community. Although it invests primarily in common
stocks, Growth Opportunities Fund may invest in all types of
equity securities, including preferred stocks and securities
convertible into common stocks.
Special Venture Fund
Special Venture Fund seeks to achieve its objective by
investing in Special Venture Portfolio. Their common investment
objective is to seek long-term growth. Special Venture Portfolio
invests primarily in a diversified portfolio of common stocks and
other equity-type securities (such as preferred stocks, securities
convertible or exchangeable for common stocks, and warrants or
rights to purchase common stocks) of entrepreneurially managed
companies that Stein Roe believes represent special opportunities.
Special Venture Portfolio emphasizes investments in financially
strong small and medium-sized companies based principally on
appraisal of their management and stock valuations.
In both its initial and ongoing appraisals of a company's
management, Stein Roe seeks to know both the principal owners and
senior management and to assess, through personal visits, their
business judgment and strategies. Stein Roe favors companies
whose management has an owner/operator, risk-averse orientation
and a demonstrated ability to create wealth for investors.
Attractive company characteristics include unit growth, favorable
cost structures or competitive positions, and financial strength
that enables management to execute business strategies under
difficult conditions. A company is attractively valued when its
stock can be purchased at a meaningful discount to the value of
the underlying business.
Capital Opportunities Fund
The investment objective of Capital Opportunities Fund is
long-term capital appreciation, which it attempts to achieve by
investing in selected companies that, in the opinion of Stein Roe,
offer opportunities for capital appreciation.
Capital Opportunities Fund pursues its objective by investing
in aggressive growth companies. An aggressive growth company, in
general, is one that appears to have the ability to increase its
earnings at an above-average rate. Investments may include
securities of smaller emerging companies as well as securities of
well-seasoned companies of any size that offer strong earnings
growth potential. Such companies may benefit from new products or
services, technological developments, or changes in management.
Securities of smaller companies may be subject to greater price
volatility than securities of larger companies. In addition, many
smaller companies are less well known to the investing public and
may not be as widely followed by the investment community.
Although it invests primarily in common stocks, Capital
Opportunities Fund may invest in all types of equity securities,
including preferred stocks and securities convertible into common
stocks.
PORTFOLIO INVESTMENTS AND STRATEGIES
Unless otherwise noted, for purposes of discussion under
Portfolio Investments and Strategies, the term "Fund" refers to
each Fund and each Portfolio.
Debt Securities
In pursuing its investment objective, each Fund may invest in
debt securities of corporate and governmental issuers. The risks
inherent in debt securities depend primarily on the term and
quality of the obligations in a Fund's portfolio as well as on
market conditions. A decline in the prevailing levels of interest
rates generally increases the value of debt securities, while an
increase in rates usually reduces the value of those securities.
Investments in debt securities by Growth & Income Portfolio,
Balanced Portfolio, and Growth Stock Portfolio are limited to
those that are within the four highest grades (generally referred
to as "investment grade") assigned by a nationally recognized
statistical rating organization or, if unrated, deemed to be of
comparable quality by Stein Roe. Growth Opportunities Fund,
Special Venture Portfolio, Capital Opportunities Fund, Special
Portfolio, and Large Company Focus Fund may invest up to 35% of
their net assets in debt securities, but do not expect to invest
more than 5% of their net assets in debt securities that are rated
below investment grade.
Securities in the fourth highest grade may possess
speculative characteristics, and changes in economic conditions
are more likely to affect the issuer's capacity to pay interest
and repay principal. If the rating of a security held by a Fund
is lost or reduced below investment grade, the Fund is not
required to dispose of the security, but Stein Roe will consider
that fact in determining whether that Fund should continue to hold
the security.
Securities that are rated below investment grade are
considered predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal according to the
terms of the obligation and therefore carry greater investment
risk, including the possibility of issuer default and bankruptcy.
When Stein Roe determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, a Fund may invest without limitation in high-quality
fixed income securities or hold assets in cash or cash
equivalents.
Derivatives
Consistent with its objective, a Fund may invest in a broad
array of financial instruments and securities, including
conventional exchange-traded and non-exchange-traded options;
futures contracts; futures options; securities collateralized by
underlying pools of mortgages or other receivables; floating rate
instruments; and other instruments that securitize assets of
various types ("Derivatives"). In each case, the value of the
instrument or security is "derived" from the performance of an
underlying asset or a "benchmark" such as a security index, an
interest rate, or a currency.
Derivatives are most often used to manage investment risk or
to create an investment position indirectly because using them is
more efficient or less costly than direct investment that cannot
be readily established directly due to portfolio size, cash
availability, or other factors. They also may be used in an
effort to enhance portfolio returns.
The successful use of Derivatives depends on Stein Roe's
ability to correctly predict changes in the levels and directions
of movements in security prices, interest rates and other market
factors affecting the Derivative itself or the value of the
underlying asset or benchmark. In addition, correlations in the
performance of an underlying asset to a Derivative may not be well
established. Finally, privately negotiated and over-the-counter
Derivatives may not be as well regulated and may be less
marketable than exchange-traded Derivatives.
No Fund currently intends to invest more than 5% of its net
assets in any type of Derivative except for options, futures
contracts, and futures options. (See Options and Futures below.)
Some mortgage-backed debt securities are of the "modified
pass-through type," which means the interest and principal
payments on mortgages in the pool are "passed through" to
investors. During periods of declining interest rates, there is
increased likelihood that mortgages will be prepaid, with a
resulting loss of the full-term benefit of any premium paid by the
Fund on purchase of such securities; in addition, the proceeds of
prepayment would likely be invested at lower interest rates.
Mortgage-backed securities provide either a pro rata interest
in underlying mortgages or an interest in collateralized mortgage
obligations ("CMOs") that represent a right to interest and/or
principal payments from an underlying mortgage pool. CMOs are not
guaranteed by either the U.S. Government or by its agencies or
instrumentalities, and are usually issued in multiple classes each
of which has different payment rights, prepayment risks, and yield
characteristics. Mortgage-backed securities involve the risk of
prepayment on the underlying mortgages at a faster or slower rate
than the established schedule. Prepayments generally increase
with falling interest rates and decrease with rising rates but
they also are influenced by economic, social, and market factors.
If mortgages are 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, a Fund obtains the
right to benefit from the capital appreciation potential in the
underlying stock upon exercise of the conversion right, while
earning higher current income than would be available if the stock
were purchased directly. In determining whether to purchase a
convertible, Stein Roe will consider substantially the same
criteria that would be considered in purchasing the underlying
stock. While convertible securities purchased by a Fund are
frequently rated investment grade, a Fund may purchase unrated
securities or securities rated below investment grade if the
securities meet Stein Roe's other investment criteria.
Convertible securities rated below investment grade (a) tend to be
more sensitive to interest rate and economic changes, (b) may be
obligations of issuers who are less creditworthy than issuers of
higher quality convertible securities, and (c) may be more thinly
traded due to such securities being less well known to investors
than investment grade convertible securities, common stock or
conventional debt securities. As a result, Stein Roe's own
investment research and analysis tend to be more important in the
purchase of such securities than other factors.
Foreign Securities
Each Fund may invest up to 25% of its total assets in foreign
securities, which may entail a greater degree of risk (including
risks relating to exchange rate fluctuations, tax provisions, or
expropriation of assets) than investment in securities of domestic
issuers. For this purpose, foreign securities do not include
American Depositary Receipts (ADRs) or securities guaranteed by a
United States person. ADRs are receipts typically issued by an
American bank or trust company evidencing ownership of the
underlying securities. A Fund may invest in sponsored or
unsponsored ADRs. In the case of an unsponsored ADR, a Fund is
likely to bear its proportionate share of the expenses of the
depositary and it may have greater difficulty in receiving
shareholder communications than it would have with a sponsored
ADR. No Fund intends to invest, nor during the past fiscal year
has any Fund invested, more than 5% of its net assets in
unsponsored ADRs.
As of Sept. 30, 1998, holdings of foreign companies, as a
percentage of net assets, were as follows: Balanced Portfolio,
16.2% (9.6% in foreign securities and 6.6% in ADRs); Growth &
Income Portfolio, 3.0% (0.6% in foreign securities and 2.4% in
ADRs); Growth Stock Portfolio, 2.0% (none in foreign securities
and 2.0% in ADRs); Growth Opportunities Fund, 0.7% (none in
foreign securities and 0.7% in ADRs); Special Portfolio, 5.9%
(3.3% in foreign securities and 2.6% in ADRs and ADSs); Large
Company Focus Fund, none; Special Venture Portfolio, 1.0% (none in
foreign securities and 1.0% in ADRs); and Capital Opportunities
Fund, 2.9% (none in foreign securities and 2.9% in ADRs).
With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, a Fund's
investment performance is affected by the strength or weakness of
the U.S. dollar against these currencies. For example, if the
dollar falls in value relative to the Japanese yen, the dollar
value of a yen-denominated stock held in the portfolio will rise
even though the price of the stock remains unchanged. Conversely,
if the dollar rises in value relative to the yen, the dollar value
of the yen-denominated stock will fall. (See discussion of
transaction hedging and portfolio hedging under Currency Exchange
Transactions.)
Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities,
positions which are generally denominated in foreign currencies,
and utilization of forward foreign currency exchange contracts
involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S.
securities. These considerations include: fluctuations in
exchange rates of foreign currencies; possible imposition of
exchange control regulation or currency restrictions that would
prevent cash from being brought back to the United States; less
public information with respect to issuers of securities; less
governmental supervision of stock exchanges, securities brokers,
and issuers of securities; lack of uniform accounting, auditing,
and financial reporting standards; lack of uniform settlement
periods and trading practices; less liquidity and frequently
greater price volatility in foreign markets than in the United
States; possible imposition of foreign taxes; possible investment
in securities of companies in developing as well as developed
countries; and sometimes less advantageous legal, operational, and
financial protections applicable to foreign sub-custodial
arrangements. These risks are greater for emerging markets.
Although the Funds will try to invest in companies and
governments of countries having stable political environments,
there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of
foreign government restrictions, or other adverse political,
social or diplomatic developments that could affect investment in
these nations.
Currency Exchange Transactions. Currency exchange
transactions may be conducted either on a spot (i.e., cash) basis
at the spot rate for purchasing or selling currency prevailing in
the foreign exchange market or through forward currency exchange
contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at
a specified future date (or within a specified time period) and
price set at the time of the contract. Forward contracts are
usually entered into with banks and broker-dealers, are not
exchange traded, and are usually for less than one year, but may
be renewed.
The Funds' foreign currency exchange transactions are limited
to transaction and portfolio hedging involving either specific
transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward contracts with respect to specific
receivables or payables of a Fund arising in connection with the
purchase and sale of its portfolio securities. Portfolio hedging
is the use of forward contracts with respect to portfolio security
positions denominated or quoted in a particular foreign currency.
Portfolio hedging allows the Fund to limit or reduce its exposure
in a foreign currency by entering into a forward contract to sell
such foreign currency (or another foreign currency that acts as a
proxy for that currency) at a future date for a price payable in
U.S. dollars so that the value of the foreign-denominated
portfolio securities can be approximately matched by a foreign-
denominated liability. A Fund may not engage in portfolio hedging
with respect to the currency of a particular country to an extent
greater than the aggregate market value (at the time of making
such sale) of the securities held in its portfolio denominated or
quoted in that particular currency, except that a Fund may hedge
all or part of its foreign currency exposure through the use of a
basket of currencies or a proxy currency where such currencies or
currency act as an effective proxy for other currencies. In such
a case, a Fund may enter into a forward contract where the amount
of the foreign currency to be sold exceeds the value of the
securities denominated in such currency. The use of this basket
hedging technique may be more efficient and economical than
entering into separate forward contracts for each currency held in
a Fund. No Fund may engage in "speculative" currency exchange
transactions.
At the maturity of a forward contract to deliver a particular
currency, a Fund may either sell the portfolio security related to
such contract and make delivery of the currency, or it may retain
the security and either acquire the currency on the spot market or
terminate its contractual obligation to deliver the currency by
purchasing an offsetting contract with the same currency trader
obligating it to purchase on the same maturity date the same
amount of the currency.
It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a
forward contract. Accordingly, it may be necessary for a Fund to
purchase additional currency on the spot market (and bear the
expense of such purchase) if the market value of the security is
less than the amount of currency the Fund is obligated to deliver
and if a decision is made to sell the security and make delivery
of the currency. Conversely, it may be necessary to sell on the
spot market some of the currency received upon the sale of the
portfolio security if its market value exceeds the amount of
currency a Fund is obligated to deliver.
If a Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss to
the extent that there has been movement in forward contract
prices. If a Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between
a Fund's entering into a forward contract for the sale of a
currency and the date it enters into an offsetting contract for
the purchase of the currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward
prices increase, a Fund will suffer a loss to the extent the price
of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. A default on the contract would
deprive the Fund of unrealized profits or force the Fund to cover
its commitments for purchase or sale of currency, if any, at the
current market price.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be
possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the devaluation level it
anticipates. The cost to a Fund of engaging in currency exchange
transactions varies with such factors as the currency involved,
the length of the contract period, and prevailing market
conditions. Since currency exchange transactions are usually
conducted on a principal basis, no fees or commissions are
involved.
Structured Notes
Structured Notes are Derivatives on which the amount of
principal repayment and or interest payments is based upon the
movement of one or more factors. These factors include, but are
not limited to, currency exchange rates, interest rates (such as
the prime lending rate and the London Interbank Offered Rate
("LIBOR")), stock indices such as the S&P 500 Index and the price
fluctuations of a particular security. In some cases, the impact
of the movements of these factors may increase or decrease through
the use of multipliers or deflators. The use of Structured Notes
allows a Fund to tailor its investments to the specific risks and
returns Stein Roe wishes to accept while avoiding or reducing
certain other risks.
Swaps, Caps, Floors and Collars
A Fund may enter into swaps and may purchase or sell related
caps, floors and collars. A Fund would enter into these
transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique
or to protect against any increase in the price of securities it
purchases at a later date. The Funds intend to use these
techniques as hedges and not as speculative investments and will
not sell interest rate income stream a Fund may be obligated to
pay.
A swap agreement is generally individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on its structure, a swap
agreement may increase or decrease a Fund's exposure to changes in
the value of an index of securities in which the Fund might
invest, the value of a particular security or group of securities,
or foreign currency values. Swap agreements can take many
different forms and are known by a variety of names. A Fund may
enter into any form of swap agreement if Stein Roe determines it
is consistent with its investment objective and policies.
A swap agreement tends to shift a Fund's investment exposure
from one type of investment to another. For example, if a Fund
agrees to exchange payments in dollars at a fixed rate for
payments in a foreign currency the amount of which is determined
by movements of a foreign securities index, the swap agreement
would tend to increase exposure to foreign stock market movements
and foreign currencies. Depending on how it is used, a swap
agreement may increase or decrease the overall volatility of a
Fund's investments and its net asset value.
The performance of a swap agreement is determined by the
change in the specific currency, market index, security, or other
factors that determine the amounts of payments due to and from a
Fund. If a swap agreement calls for payments by a Fund, the Fund
must be prepared to make such payments when due. If the
counterparty's creditworthiness declines, the value of a swap
agreement would be likely to decline, potentially resulting in a
loss. A Fund will not enter into any swap, cap, floor or collar
transaction unless, at the time of entering into such transaction,
the unsecured long-term debt of the counterparty, combined with
any credit enhancements, is rated at least A by Standard & Poor's
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 a Fund enters into swap arrangements or purchases
or sells caps, floors or collars, liquid assets of the Fund having
a value at least as great as the commitment underlying the
obligations will be segregated on the books of the Fund and held
by the custodian throughout the period of the obligation.
Lending of Portfolio Securities
Subject to restriction (5) under Investment Restrictions in
this SAI, a Fund may lend its portfolio securities to broker-
dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current
basis in an amount at least equal to the market value of the
securities loaned by the Fund. The Fund would continue to receive
the equivalent of the interest or dividends paid by the issuer on
the securities loaned, and would also receive an additional return
that may be in the form of a fixed fee or a percentage of the
collateral. The Fund would have the right to call the loan and
obtain the securities loaned at any time on notice of not more
than five business days. The Fund would not have the right to
vote the securities during the existence of the loan but would
call the loan to permit voting of the securities if, in Stein
Roe's judgment, a material event requiring a shareholder vote
would otherwise occur before the loan was repaid. In the event of
bankruptcy or other default of the borrower, the Fund could
experience both delays in liquidating the loan collateral or
recovering the loaned securities and losses, including (a)
possible decline in the value of the collateral or in the value of
the securities loaned during the period while the Fund seeks to
enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c)
expenses of enforcing its rights. No Fund loaned portfolio
securities during the fiscal year ended Sept. 30, 1998 nor does it
currently intend to loan more than 5% of its net assets.
Repurchase Agreements
A Fund may invest in repurchase agreements, provided that it
will not invest more than 15% of net assets in repurchase
agreements maturing in more than seven days and any other illiquid
securities. A repurchase agreement is a sale of securities to a
Fund in which the seller agrees to repurchase the securities at a
higher price, which includes an amount representing interest on
the purchase price, within a specified time. In the event of
bankruptcy of the seller, a Fund could experience both losses and
delays in liquidating its collateral.
When-Issued and Delayed-Delivery Securities; Reverse Repurchase
Agreements
A Fund may purchase securities on a when-issued or delayed-
delivery basis. Although the payment and interest terms of these
securities are established at the time a Fund enters into the
commitment, the securities may be delivered and paid for a month
or more after the date of purchase, when their value may have
changed. A Fund make such commitments only with the intention of
actually acquiring the securities, but may sell the securities
before settlement date if Stein Roe deems it advisable for
investment reasons. No Fund had during its last fiscal year, nor
does any Fund currently intend to have, commitments to purchase
when-issued securities in excess of 5% of its net assets.
A Fund may enter into reverse repurchase agreements with
banks and securities dealers. A reverse repurchase agreement is a
repurchase agreement in which a Fund is the seller of, rather than
the investor in, securities and agrees to repurchase them at an
agreed-upon time and price. Use of a reverse repurchase agreement
may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction
costs. No Fund entered into reverse repurchase agreements during
the fiscal year ended Sept. 30, 1998.
At the time a Fund enters into a binding obligation to
purchase securities on a when-issued basis or enters into a
reverse repurchase agreement, liquid assets (cash, U.S. Government
securities or other "high-grade" debt obligations) of the Fund
having a value at least as great as the purchase price of the
securities to be purchased will be segregated on the books of the
Fund and held by the custodian throughout the period of the
obligation. The use of these investment strategies, as well as
borrowing under a line of credit as described below, may increase
net asset value fluctuation.
Short Sales "Against the Box"
A Fund may sell securities short against the box; that is,
enter into short sales of securities that it currently owns or has
the right to acquire through the conversion or exchange of other
securities that it owns at no additional cost. A Fund may make
short sales of securities only if at all times when a short
position is open it owns at least an equal amount of such
securities or securities convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short, at no additional cost.
In a short sale against the box, a Fund does not deliver from
its portfolio the securities sold. Instead, the Fund borrows the
securities sold short from a broker-dealer through which the short
sale is executed, and the broker-dealer delivers such securities,
on behalf of the Fund, to the purchaser of such securities. The
Fund is required to pay to the broker-dealer the amount of any
dividends paid on shares sold short. Finally, to secure its
obligation to deliver to such broker-dealer the securities sold
short, the Fund must deposit and continuously maintain in a
separate account with its custodian an equivalent amount of the
securities sold short or securities convertible into or
exchangeable for such securities at no additional cost. A Fund is
said to have a short position in the securities sold until it
delivers to the broker-dealer the securities sold. A Fund may
close out a short position by purchasing on the open market and
delivering to the broker-dealer an equal amount of the securities
sold short, rather than by delivering portfolio securities.
Short sales may protect a Fund against the risk of losses in
the value of its portfolio securities because any unrealized
losses with respect to such portfolio securities should be wholly
or partially offset by a corresponding gain in the short position.
However, any potential gains in such portfolio securities should
be wholly or partially offset by a corresponding loss in the short
position. The extent to which such gains or losses are offset
will depend upon the amount of securities sold short relative to
the amount the Fund owns, either directly or indirectly, and, in
the case where the Fund owns convertible securities, changes in
the conversion premium.
Short sale transactions involve certain risks. If the price
of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund
will incur a loss and if the price declines during this period,
the Fund will realize a short-term capital gain. Any realized
short-term capital gain will be decreased, and any incurred loss
increased, by the amount of transaction costs and any premium,
dividend or interest which the Fund may have to pay in connection
with such short sale. Certain provisions of the Internal Revenue
Code may limit the degree to which a Fund is able to enter into
short sales. There is no limitation on the amount of a Fund's
assets that, in the aggregate, may be deposited as collateral for
the obligation to replace securities borrowed to effect short
sales and allocated to segregated accounts in connection with
short sales. Up to 20% of the assets of Balanced Portfolio may be
involved in short sales against the box, but no other Fund
currently expects that more than 5% of its total assets would be
involved in short sales against the box.
Rule 144A Securities
A Fund may purchase securities that have been privately
placed but that are eligible for purchase and sale under Rule 144A
under the Securities Act of 1933. That Rule permits certain
qualified institutional buyers, such as a Fund, to trade in
privately placed securities that have not been registered for sale
under the 1933 Act. Stein Roe, under the supervision of the Board
of Trustees, will consider whether securities purchased under Rule
144A are illiquid and thus subject to the restriction of investing
no more than 15% of its net assets in illiquid securities. A
determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, Stein Roe will
consider the trading markets for the specific security, taking
into account the unregistered nature of a Rule 144A security. In
addition, Stein Roe could consider the (1) frequency of trades and
quotes, (2) number of dealers and potential purchasers, (3) dealer
undertakings to make a market, and (4) nature of the security and
of marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer). The liquidity of Rule 144A securities would be
monitored and if, as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the
Fund's holdings of illiquid securities would be reviewed to
determine what, if any, steps are required to assure that the Fund
does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the
effect of increasing the amount of a Fund's assets invested in
illiquid securities if qualified institutional buyers are
unwilling to purchase such securities. No Fund expects to invest
as much as 5% of its total assets in Rule 144A securities that
have not been deemed to be liquid by Stein Roe.
Line of Credit
Subject to restriction (6) under Investment Restrictions in
this SAI, a Fund may establish and maintain a line of credit with
a major bank in order to permit borrowing on a temporary basis to
meet share redemption requests in circumstances in which temporary
borrowing may be preferable to liquidation of portfolio
securities.
Interfund Borrowing and Lending Program
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, a Fund may lend money to and borrow money
from other mutual funds advised by Stein Roe. A Fund will borrow
through the program when borrowing is necessary and appropriate
and the costs are equal to or lower than the costs of bank loans.
Portfolio Turnover
Although the Funds do not purchase securities with a view to
rapid turnover, there are no limitations on the length of time
that portfolio securities must be held. At times, Special
Portfolio and Capital Opportunities Fund may invest for short-term
capital appreciation. Portfolio turnover can occur for a number
of reasons such as general conditions in the securities markets,
more favorable investment opportunities in other securities, or
other factors relating to the desirability of holding or changing
a portfolio investment. Because of the Funds' flexibility of
investment and emphasis on growth of capital, they may have
greater portfolio turnover than that of mutual funds that have
primary objectives of income or maintenance of a balanced
investment position. The future turnover rate may vary greatly
from year to year. A high rate of portfolio turnover in a Fund,
if it should occur, would result in increased transaction
expenses, which must be borne by that Fund. High portfolio
turnover may also result in the realization of capital gains or
losses and, to the extent net short-term capital gains are
realized, any distributions resulting from such gains will be
considered ordinary income for federal income tax purposes.
Options on Securities and Indexes
A Fund may purchase and sell put options and call options on
securities, indexes or foreign currencies in standardized
contracts traded on recognized securities exchanges, boards of
trade, or similar entities, or quoted on Nasdaq. A Fund may
purchase agreements, sometimes called cash puts, that may
accompany the purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives
the purchaser (holder) of the option, in return for a premium, the
right to buy from (call) or sell to (put) the seller (writer) of
the option the security underlying the option (or the cash value
of the index) at a specified exercise price at any time during the
term of the option (normally not exceeding nine months). The
writer of an option on an individual security or on a foreign
currency has the obligation upon exercise of the option to deliver
the underlying security or foreign currency upon payment of the
exercise price or to pay the exercise price upon delivery of the
underlying security or foreign currency. Upon exercise, the
writer of an option on an index is obligated to pay the difference
between the cash value of the index and the exercise price
multiplied by the specified multiplier for the index option. (An
index is designed to reflect specified facets of a particular
financial or securities market, a specific group of financial
instruments or securities, or certain economic indicators.)
A Fund will write call options and put options only if they
are "covered." For example, in the case of a call option on a
security, the option is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or,
if additional cash consideration is required, cash or cash
equivalents in such amount are held in a segregated account by its
custodian) upon conversion or exchange of other securities held in
its portfolio.
If an option written by a Fund expires, the Fund realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by a Fund expires, the Fund
realizes a capital loss equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may
be closed out by an offsetting purchase or sale of an option of
the same series (type, exchange, underlying security or index,
exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be
effected when a Fund desires.
A Fund will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the
premium received from writing the option, or, if it is more, the
Fund will realize a capital loss. If the premium received from a
closing sale transaction is more than the premium paid to purchase
the option, the Fund will realize a capital gain or, if it is
less, the Fund will realize a capital loss. The principal factors
affecting the market value of a put or a call option include
supply and demand, interest rates, the current market price of the
underlying security or index in relation to the exercise price of
the option, the volatility of the underlying security or index,
and the time remaining until the expiration date.
A put or call option purchased by a Fund is an asset of the
Fund, valued initially at the premium paid for the option. The
premium received for an option written by a Fund is recorded as a
deferred credit. The value of an option purchased or written is
marked-to-market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid
and asked prices.
Risks Associated with Options on Securities and Indexes.
There are several risks associated with transactions in options.
For example, there are significant differences between the
securities markets, the currency markets, and the options markets
that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its
objectives. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-
conceived transaction may be unsuccessful to some degree because
of market behavior or unexpected events.
There can be no assurance that a liquid market will exist
when a Fund seeks to close out an option position. If a Fund were
unable to close out an option that it had purchased on a security,
it would have to exercise the option in order to realize any
profit or the option would expire and become worthless. If a Fund
were unable to close out a covered call option that it had written
on a security, it would not be able to sell the underlying
security until the option expired. As the writer of a covered
call option on a security, a Fund foregoes, during the option's
life, the opportunity to profit from increases in the market value
of the security covering the call option above the sum of the
premium and the exercise price of the call.
If trading were suspended in an option purchased or written
by a Fund, the Fund would not be able to close out the option. If
restrictions on exercise were imposed, the Fund might be unable to
exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts
A Fund may use interest rate futures contracts, index futures
contracts, and foreign currency futures contracts. An interest
rate, index or foreign currency futures contract provides for the
future sale by one party and purchase by another party of a
specified quantity of a financial instrument or the cash value of
an index/2/ at a specified price and time. A public market exists
in futures contracts covering a number of indexes (including, but
not limited to: the Standard & Poor's 500 Index, the Value Line
Composite Index, and the New York Stock Exchange Composite Index)
as well as financial instruments (including, but not limited to:
U.S. Treasury bonds, U.S. Treasury notes, Eurodollar certificates
of deposit, and foreign currencies). Other index and financial
instrument futures contracts are available and it is expected that
additional futures contracts will be developed and traded.
- --------------
/2/ A futures contract on an index is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at
which the index contract was originally written. Although the
value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is
made.
- --------------
A Fund may purchase and write call and put futures options.
Futures options possess many of the same characteristics as
options on securities, indexes and foreign currencies (discussed
above). A futures option gives the holder the right, in return
for the premium paid, to assume a long position (call) or short
position (put) in a futures contract at a specified exercise price
at any time during the period of the option. Upon exercise of a
call option, the holder acquires a long position in the futures
contract and the writer is assigned the opposite short position.
In the case of a put option, the opposite is true. A Fund might,
for example, use futures contracts to hedge against or gain
exposure to fluctuations in the general level of stock prices,
anticipated changes in interest rates or currency fluctuations
that might adversely affect either the value of the Fund's
securities or the price of the securities that the Fund intends to
purchase. Although other techniques could be used to reduce or
increase that Fund's exposure to stock price, interest rate and
currency fluctuations, the Fund may be able to achieve its
exposure more effectively and perhaps at a lower cost by using
futures contracts and futures options.
A Fund will only enter into futures contracts and futures
options that are standardized and traded on an exchange, board of
trade, or similar entity, or quoted on an automated quotation
system.
The success of any futures transaction depends on accurate
predictions of changes in the level and direction of stock prices,
interest rates, currency exchange rates and other factors. Should
those predictions be incorrect, the return might have been better
had the transaction not been attempted; however, in the absence of
the ability to use futures contracts, Stein Roe might have taken
portfolio actions in anticipation of the same market movements
with similar investment results but, presumably, at greater
transaction costs.
When a purchase or sale of a futures contract is made by a
Fund, the Fund is required to deposit with its custodian (or
broker, if legally permitted) a specified amount of cash or U.S.
Government securities or other securities acceptable to the broker
("initial margin"). The margin required for a futures contract is
set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is
in the nature of a performance bond or good faith deposit on the
futures contract, which is returned to the Fund upon termination
of the contract, assuming all contractual obligations have been
satisfied. A Fund expects to earn interest income on its initial
margin deposits. A futures contract held by a Fund is valued
daily at the official settlement price of the exchange on which it
is traded. Each day the Fund pays or receives cash, called
"variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking-to-market."
Variation margin paid or received by a Fund does not represent a
borrowing or loan by the Fund but is instead settlement between
the Fund and the broker of the amount one would owe the other if
the futures contract had expired at the close of the previous day.
In computing daily net asset value, a Fund will mark-to-market its
open futures positions.
A Fund is also required to deposit and maintain margin with
respect to put and call options on futures contracts written by
it. Such margin deposits will vary depending on the nature of the
underlying futures contract (and the related initial margin
requirements), the current market value of the option, and other
futures positions held by the Fund.
Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations
are closed out prior to delivery by offsetting purchases or sales
of matching futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting purchase price is
less than the original sale price, the Fund engaging in the
transaction realizes a capital gain, or if it is more, the Fund
realizes a capital loss. Conversely, if an offsetting sale price
is more than the original purchase price, the Fund engaging in the
transaction realizes a capital gain, or if it is less, the Fund
realizes a capital loss. The transaction costs must also be
included in these calculations.
Risks Associated with Futures
There are several risks associated with the use of futures
contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a
correlation between price movements in the futures contract and in
the portfolio exposure sought. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures
options and the related securities, including technical influences
in futures and futures options trading and differences between the
securities market and the securities underlying the standard
contracts available for trading. For example, in the case of
index futures contracts, the composition of the index, including
the issuers and the weighting of each issue, may differ from the
composition of the Fund's portfolio, and, in the case of interest
rate futures contracts, the interest rate levels, maturities, and
creditworthiness of the issues underlying the futures contract may
differ from the financial instruments held in the Fund's
portfolio. A decision as to whether, when and how to use futures
contracts involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree
because of market behavior or unexpected stock price or interest
rate trends.
Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit. The daily limit governs
only price movements during a particular trading day and therefore
does not limit potential losses because the limit may work to
prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and subjecting
some holders of futures contracts to substantial losses. Stock
index futures contracts are not normally subject to such daily
price change limitations.
There can be no assurance that a liquid market will exist at
a time when a Fund seeks to close out a futures or futures option
position. The Fund would be exposed to possible loss on the
position during the interval of inability to close, and would
continue to be required to meet margin requirements until the
position is closed. In addition, many of the contracts discussed
above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active
secondary market will develop or continue to exist.
Limitations on Options and Futures
If other options, futures contracts, or futures options of
types other than those described herein are traded in the future,
a Fund may also use those investment vehicles, provided the Board
of Trustees determines that their use is consistent with the
Fund's investment objective.
A Fund will not enter into a futures contract or purchase an
option thereon if, immediately thereafter, the initial margin
deposits for futures contracts held by that Fund plus premiums
paid by it for open futures option positions, less the amount by
which any such positions are "in-the-money,"/3/ would exceed 5% of
the Fund's total assets.
- ------------
/3/ A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price
exceeds the value of the futures contract that is the subject of
the option.
- ------------
When purchasing a futures contract or writing a put option on
a futures contract, a Fund must maintain with its custodian (or
broker, if legally permitted) cash or cash equivalents (including
any margin) equal to the market value of such contract. When
writing a call option on a futures contract, the Fund similarly
will maintain with its custodian cash or cash equivalents
(including any margin) equal to the amount by which such option is
in-the-money until the option expires or is closed out by the
Fund.
A Fund may not maintain open short positions in futures
contracts, call options written on futures contracts or call
options written on indexes if, in the aggregate, the market value
of all such open positions exceeds the current value of the
securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions. For this purpose, to the extent the Fund has written
call options on specific securities in its portfolio, the value of
those securities will be deducted from the current market value of
the securities portfolio.
In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," a Fund will use commodity futures or commodity options
contracts solely for bona fide hedging purposes within the meaning
and intent of Regulation 1.3(z), or, with respect to positions in
commodity futures and commodity options contracts that do not come
within the meaning and intent of 1.3(z), the aggregate initial
margin and premiums required to establish such positions will not
exceed 5% of the fair market value of the assets of a Fund, after
taking into account unrealized profits and unrealized losses on
any such contracts it has entered into [in the case of an option
that is in-the-money at the time of purchase, the in-the-money
amount (as defined in Section 190.01(x) of the Commission
Regulations) may be excluded in computing such 5%].
Taxation of Options and Futures
If a Fund exercises a call or put option that it holds, the
premium paid for the option is added to the cost basis of the
security purchased (call) or deducted from the proceeds of the
security sold (put). For cash settlement options and futures
options exercised by a Fund, the difference between the cash
received at exercise and the premium paid is a capital gain or
loss.
If a call or put option written by a Fund is exercised, the
premium is included in the proceeds of the sale of the underlying
security (call) or reduces the cost basis of the security
purchased (put). For cash settlement options and futures options
written by a Fund, the difference between the cash paid at
exercise and the premium received is a capital gain or loss.
Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by a Fund was in-the-
money at the time it was written and the security covering the
option was held for more than the long-term holding period prior
to the writing of the option, any loss realized as a result of a
closing purchase transaction will be long-term. The holding
period of the securities covering an in-the-money option will not
include the period of time the option is outstanding.
If a Fund writes an equity call option/4/ other than a
"qualified covered call option," as defined in the Internal
Revenue Code, any loss on such option transaction, to the extent
it does not exceed the unrealized gains on the securities covering
the option, may be subject to deferral until the securities
covering the option have been sold.
- -------------
/4/ An equity option is defined to mean any option to buy or sell
stock, and any other option the value of which is determined by
reference to an index of stocks of the type that is ineligible to
be traded on a commodity futures exchange (e.g., an option
contract on a sub-index based on the price of nine hotel-casino
stocks). The definition of equity option excludes options on
broad-based stock indexes (such as the Standard & Poor's 500
index).
- -------------
A futures contract held until delivery results in capital
gain or loss equal to the difference between the price at which
the futures contract was entered into and the settlement price on
the earlier of delivery notice date or expiration date. If a Fund
delivers securities under a futures contract, the Fund also
realizes a capital gain or loss on those securities.
For federal income tax purposes, a Fund generally is required
to recognize as income for each taxable year its net unrealized
gains and losses as of the end of the year on futures, futures
options and non-equity options positions ("year-end mark-to-
market"). Generally, any gain or loss recognized with respect to
such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and
40% short-term, without regard to the holding periods of the
contracts. However, in the case of positions classified as part
of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options
positions, the related securities and certain successor positions
thereto) may be deferred to a later taxable year. Sale of futures
contracts or writing of call options (or futures call options) or
buying put options (or futures put options) that are intended to
hedge against a change in the value of securities held by a Fund:
(1) will affect the holding period of the hedged securities; and
(2) may cause unrealized gain or loss on such securities to be
recognized upon entry into the hedge.
If a Fund were to enter into a short index future, short
index futures option or short index option position and the Fund's
portfolio were deemed to "mimic" the performance of the index
underlying such contract, the option or futures contract position
and the Fund's stock positions would be deemed to be positions in
a mixed straddle, subject to the above-mentioned loss deferral
rules.
In order for a Fund to continue to qualify for federal income
tax treatment as a regulated investment company, at least 90% of
its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or
foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts). Any net gain
realized from futures (or futures options) contracts will be
considered gain from the sale of securities and therefore be
qualifying income for purposes of the 90% requirement.
Each Fund distributes to shareholders annually any net
capital gains that have been recognized for federal income tax
purposes (including year-end mark-to-market gains) on options and
futures transactions. Such distributions are combined with
distributions of capital gains realized on the Fund's other
investments, and shareholders are advised of the nature of the
payments.
The Taxpayer Relief Act of 1997 (the "Act") imposed
constructive sale treatment for federal income tax purposes on
certain hedging strategies with respect to appreciated securities.
Under these rules, taxpayers will recognize gain, but not loss,
with respect to securities if they enter into short sales of
"offsetting notional principal contracts" (as defined by the Act)
or futures or "forward contracts" (as defined by the Act) with
respect to the same or substantially identical property, or if
they enter into such transactions and then acquire the same or
substantially identical property. These changes generally apply
to constructive sales after June 8, 1997. Furthermore, the
Secretary of the Treasury is authorized to promulgate regulations
that will treat as constructive sales certain transactions that
have substantially the same effect as short sales, offsetting
notional principal contracts, and futures or forward contracts to
deliver the same or substantially similar property.
INVESTMENT RESTRICTIONS
The Funds and the Portfolios operate under the following
investment restrictions. No Fund or Portfolio may:
(1) with respect to 75% of its total assets, invest more than
5% of its total assets, taken at market value at the time of a
particular purchase, in the securities of a single issuer, except
for securities issued or guaranteed by the U. S. Government or any
of its agencies or instrumentalities or repurchase agreements for
such securities, and [Funds only] except that all or substantially
all of the assets of the Fund may be invested in another
registered investment company having the same investment objective
and substantially similar investment policies as the Fund;
(2) acquire more than 10%, taken at the time of a particular
purchase, of the outstanding voting securities of any one issuer,
[Funds only] except that all or substantially all of the assets of
the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund;
(3) act as an underwriter of securities, except insofar as it
may be deemed an underwriter for purposes of the Securities Act of
1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale, [Funds only] except that all
or substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund;
(4) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, or
securities issued by companies which invest in real estate or
interests therein), commodities, or commodity contracts, except
that it may enter into (a) futures and options on futures and (b)
forward contracts;
(5) make loans, although it may (a) lend portfolio securities
and participate in an interfund lending program with other Stein
Roe Funds and Portfolios provided that no such loan may be made
if, as a result, the aggregate of such loans would exceed 33 1/3%
of the value of its total assets (taken at market value at the
time of such loans); (b) purchase money market instruments and
enter into repurchase agreements; and (c) acquire publicly
distributed or privately placed debt securities;
(6) borrow except that it may (a) borrow for nonleveraging,
temporary or emergency purposes, (b) engage in reverse repurchase
agreements and make other borrowings, provided that the
combination of (a) and (b) shall not exceed 33 1/3% of the value
of its total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage
permitted by law, and (c) enter into futures and options
transactions; it may borrow from banks, other Stein Roe Funds and
Portfolios, and other persons to the extent permitted by
applicable law;
(7) invest in a security if more than 25% of its total assets
(taken at market value at the time of a particular purchase) would
be invested in the securities of issuers in any particular
industry, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and [Funds only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund; or
(8) issue any senior security except to the extent permitted
under the Investment Company Act of 1940.
The above restrictions (other than bracketed portions thereof
and, in the case of Special Fund and Special Portfolio, other than
1 and 2) are fundamental policies and may not be changed without
the approval of a "majority of the outstanding voting securities"
as defined above. Each Fund and, in the case of Special Fund and
Special Portfolio, together with restrictions 1 and 2 above, is
also subject to the following non-fundamental restrictions and
policies, which may be changed by the Board of Trustees. None of
the following restrictions shall prevent a Fund from investing all
or substantially all of its assets in another investment company
having the same investment objective and substantially the same
investment policies as the Fund. No Fund or Portfolio may:
(a) invest in any of the following: (i) interests in oil,
gas, or other mineral leases or exploration or development
programs (except readily marketable securities, including but not
limited to master limited partnership interests, that may
represent indirect interests in oil, gas, or other mineral
exploration or development programs); (ii) puts, calls, straddles,
spreads, or any combination thereof (except that it may enter into
transactions in options, futures, and options on futures); (iii)
shares of other open-end investment companies, except in
connection with a merger, consolidation, acquisition, or
reorganization; and (iv) limited partnerships in real estate
unless they are readily marketable;
(b) invest in companies for the purpose of exercising control
or management;
(c) purchase more than 3% of the stock of another investment
company or purchase stock of other investment companies equal to
more than 5% of its total assets (valued at time of purchase) in
the case of any one other investment company and 10% of such
assets (valued at time of purchase) in the case of all other
investment companies in the aggregate; any such purchases are to
be made in the open market where no profit to a sponsor or dealer
results from the purchase, other than the customary broker's
commission, except for securities acquired as part of a merger,
consolidation or acquisition of assets;
(d) invest more than 5% of its net assets (valued at time of
purchase) in warrants, nor more than 2% of its net assets in
warrants that are not listed on the New York or American Stock
Exchange;
(e) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(f) invest more than 25% of its total assets (valued at time
of purchase) in securities of foreign issuers (other than
securities represented by American Depositary Receipts (ADRs) or
securities guaranteed by a U.S. person);
(g) purchase a put or call option if the aggregate premiums
paid for all put and call options exceed 20% of its net assets
(less the amount by which any such positions are in-the-money),
excluding put and call options purchased as closing transactions;
(h) purchase securities on margin (except for use of short-
term credits as are necessary for the clearance of transactions),
or sell securities short unless (i) it owns or has the right to
obtain securities equivalent in kind and amount to those sold
short at no added cost or (ii) the securities sold are "when
issued" or "when distributed" securities which it expects to
receive in a recapitalization, reorganization, or other exchange
for securities it contemporaneously owns or has the right to
obtain and provided that transactions in options, futures, and
options on futures are not treated as short sales;
(i) invest more than 5% of its total assets (taken at market
value at the time of a particular investment) in restricted
securities, other than securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933;
(j) invest more than 15% of its net assets (taken at market
value at the time of a particular investment) in illiquid
securities, including repurchase agreements maturing in more than
seven days.
ADDITIONAL INVESTMENT CONSIDERATIONS
Stein Roe seeks to provide superior long-term investment
results through a disciplined, research-intensive approach to
investment selection and prudent risk management. In working to
take sensible risks and make intelligent investments it has been
guided by three primary objectives which it believes are the
foundation of a successful investment program. These objectives
are preservation of capital, limited volatility through managed
risk, and consistent above-average returns as appropriate for the
particular client or managed account. Because every investor's
needs are different, Stein Roe mutual funds are designed to
accommodate different investment objectives, risk tolerance
levels, and time horizons. In selecting a mutual fund, investors
should ask the following questions:
What are my investment goals?
It is important to a choose a fund that has investment objectives
compatible with your investment goals.
What is my investment time frame?
If you have a short investment time frame (e.g., less than three
years), a mutual fund that seeks to provide a stable share price,
such as a money market fund, or one that seeks capital
preservation as one of its objectives may be appropriate. If you
have a longer investment time frame, you may seek to maximize your
investment returns by investing in a mutual fund that offers
greater yield or appreciation potential in exchange for greater
investment risk.
What is my tolerance for risk?
All investments, including those in mutual funds, have risks which
will vary depending on investment objective and security type.
However, mutual funds seek to reduce risk through professional
investment management and portfolio diversification.
In general, equity mutual funds emphasize long-term capital
appreciation and tend to have more volatile net asset values than
bond or money market mutual funds. Although there is no guarantee
that they will be able to maintain a stable net asset value of
$1.00 per share, money market funds emphasize safety of principal
and liquidity, but tend to offer lower income potential than bond
funds. Bond funds tend to offer higher income potential than
money market funds but tend to have greater risk of principal and
yield volatility.
PURCHASES AND REDEMPTIONS
Fund Closed
Growth Stock Fund is closed to purchases (including
exchanges) by new investors except for purchases by eligible
investors as described below. The Board of Trustees has taken
this step to facilitate management of the Fund's portfolio. If
you are already a shareholder of Growth Stock Fund, you may
continue to add to your account or open another account with the
Fund in your name. In addition, you may open a new account if:
- - you are a shareholder of any other Stein Roe Fund, having
purchased shares directly from Stein Roe, as of Oct. 15, 1997
and you are opening a new account by exchange or by dividend
reinvestment;
- - you are a client of Stein Roe;
- - you are a trustee of the Trust; an employee of Stein Roe, or any
of its affiliated companies; or a member of the immediate family
of any trustee or employee;
- - you purchase shares (i) under an asset allocation program
sponsored by a financial advisor, broker-dealer, bank, trust
company or other intermediary or (ii) from certain financial
advisors who charge a fee for services and who, as of Oct. 15,
1997, have one or more clients who were Growth Stock Fund
shareholders; or
- - you purchase shares for an employee benefit plan, the records
for which are maintained by a trust company or third party
administrator under an investment program with Growth Stock
Fund.
The Board of Trustees concluded that permitting the
additional investments described above would not adversely affect
the ability of Stein Roe to manage the Fund effectively. If you
have questions about your eligibility to purchase shares of Growth
Stock Fund, please call 800-338-2550.
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 SAIs, 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
Funds 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 Funds' 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 each 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 a 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 Prospectuses 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 Funds employ
procedures reasonably designed to confirm that instructions
communicated by telephone under any Special Redemption Privilege
or the Special Electronic Transfer Redemption Privilege are
genuine. Use of any Special Redemption Privilege or the Special
Electronic Transfer Redemption Privilege authorizes the Funds and
their transfer agent to tape-record all instructions to redeem.
In addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests that the shareholder review the transactions and inform
the Fund immediately if there is a problem. If the Funds do 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 a Fund or any of the
other Stein Roe Funds may be redeemed to the extent necessary to
reimburse any Stein Roe Fund for any loss you cause it to sustain
(such as loss from an uncollected check or electronic transfer for
the purchase of shares, or any liability under the Internal
Revenue Code provisions on backup withholding).
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 Funds.
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 Funds, 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
Funds. 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 Funds may refuse
requests for Telephone Exchanges in excess of four round-trips (a
round-trip being the exchange out of a Fund into another no-load
Stein Roe Fund, and then back to that Fund). In addition, 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(4) Senior Vice-President; Chief financial officer and chief administrative
Controller officer of the Mutual Funds division of Stein Roe;
senior vice president of Stein Roe since April 1996;
vice president of Stein Roe prior thereto
John A. Bacon Jr.,71(3)(4) Trustee Private investor
William W. Boyd, 72 Trustee Chairman and director of Sterling Plumbing
(2) (3) (4) (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 (4) President President of the Mutual Funds division of Stein Roe
since March 1998; senior vice president of Stein Roe
from Sept. 1994 to March 1998; first vice president,
corporate communications, of Mellon Bank Corporation
prior thereto
Daniel K. Cantor, 39 Vice-President Senior vice president of Stein Roe
Kevin M. Carome, 42 (4) Vice-President; Assistant Senior vice president, legal, COGRA LLC (an affiliate
Secretary 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.
(4) ("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)(4) 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 Trustee Senior vice president and chief financial officer of
(3) (4) UAL, Inc. (airline) since July 1994; senior vice
president, finance of UAL, Inc. prior thereto
Loren A. Hansen, 50 (4) Executive Vice-President Chief investment officer/equity of CMA since 1997;
executive vice president of Stein Roe since Dec. 1995;
vice president of The Northern Trust (bank) prior
thereto
James P. Haynie, 36 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 (4) 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 counsel
(3) (4) of Sara Lee Corporation (branded, packaged, consumer-
products manufacturer) since 1995; partner of Sidley &
Austin (law firm) prior thereto
Gail D. Knudsen, 36 (4) 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 Trustee Van Voorhis Professor of Political Economy, Department
(3) (4) of Economics of the University of Washington
Nicolette D. Parrish,49 Vice-President; Assistant Senior legal assistant and assistant secretary of
(4) Secretary 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 (4) 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 Trustee Managing director, William Blair Capital Partners
(3) (4) (private equity fund) since 1994; chief executive
officer and chairman of the Board of Directors of
Continental Bank Corporation, 1987-1994
Scott E. Volk, 27 (4) Treasurer Financial reporting manager for 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 (4) Vice-President; Secretary Vice president of Stein Roe since March 1998; senior
legal counsel for Stein Roe since Feb. 1998; legal
counsel for Stein Roe March 1995 to Jan. 1998;
associate with Beeler Schad & Diamond, PC (law firm)
prior thereto
Hans P. Ziegler, 57 (4) 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.
(4) This person holds the corresponding officer or trustee
position with SR&F Base Trust.
</TABLE>
Certain of the trustees and officers of the Trust are
trustees or officers of other investment companies managed by
Stein Roe. Mr. Anetsberger, Mr. Butch, and Ms. Walter are also
officers of Liberty Funds Distributor, Inc., the Fund's
distributor. The address of Mr. Bacon is 4N640 Honey Hill Road,
Box 296, Wayne, IL 60184; that of Mr. Boyd is 2900 Golf Road,
Rolling Meadows, IL 60008; that of Mr. Cook is 600 Atlantic
Avenue, Boston, MA 02210; that of Mr. Hacker is P.O. Box 66100,
Chicago, IL 60666; that of Ms. Kelly is Three First National
Plaza, Chicago, IL 60602; that of Mr. Nelson is Department of
Economics, University of Washington, Seattle, WA 98195; that of
Mr. Theobald is Suite 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 Funds' Sept. 30, 1998 Financial
Statements (statements of assets and liabilities and schedules of
investments as of Sept. 30, 1998 and the statements of operations,
changes in net assets, and notes thereto) and the report of
independent public accountants contained in the Sept. 30, 1998
Annual Reports of the Funds. The Financial Statements and the
report of independent public accountants (but no other material
from the Annual Reports ) are incorporated herein by reference.
The Annual Reports may be obtained at no charge by telephoning
800-338-2550.
PRINCIPAL SHAREHOLDERS
As of Oct. 31, 1998, the only persons known by the Trust to
own of record or "beneficially" 5% or more of the outstanding
shares of a Fund within the definition of that term as contained
in Rule 13d-3 under the Securities Exchange Act of 1934 were as
follows:
Approximate
Percentage of
Outstanding
Name and Address Fund Shares Held
- --------------------- --------------------------- -------------
U.S. Bank National Growth & Income Fund 11.31%
Association (1) Balanced Fund 18.97
410 N. Michigan Avenue Growth Stock Fund 17.80
Chicago, IL 60611 Growth Opportunities Fund 14.46
Special Fund 17.05
Special Venture Fund 6.37
Capital Opportunities Fund 11.36
Large Company Focus Fund 10.68
Charles Schwab & Co. Growth & Income Fund 30.55
Inc. Special Custody Special Venture Fund 6.43
Account for the Growth Opportunities Fund 34.21
Exclusive Benefit of Large Company Focus Fund 43.48
Customers (2) Balanced Fund 9.50
Attn Mutual Funds Growth Stock Fund 8.02
101 Montgomery Street Capital Opportunities Fund 29.48
San Francisco., CA Special Fund 18.19
94104-4122
The Northern Trust
Co. (3) Special Venture Fund 20.51
F/B/O Liberty Mutual Capital Opportunities Fund 5.58
Daily Valuation
P. O. Box 92956
Chicago, IL 60675
FTC & Co., Attn: Balanced Fund 7.40
Datalynx House Acct
P.O. Box 173736
Denver, CO 80217-3736
The Northern Trust Capital Opportunities Fund 5.58
Company Trustee FBO
Chiron 401(K)
P.O. Box 92956 DV
Chicago, IL 60606
__________________________________
(1) Shares held as custodian.
(2) Shares held for accounts of customers.
(3) Northern Trust Company holds shares of record on behalf of the
Liberty Mutual Employees' Thrift-Incentive Plan.
The following table shows shares of the Funds held by the
categories of persons indicated as of Oct. 31, 1998, and in each
case the approximate percentage of outstanding shares represented:
Clients of the Adviser Trustees and
in their Client Accounts* Officers
------------------------ -------------------
Shares Held Percent Shares Held Percent
----------- ------- ----------- -------
Growth & Income Fund 2,203,599 13.93% 22,864 **
Balanced Fund 544,583 6.78 1,284 **
Growth Stock Fund 1,727,124 9.75 11,420 **
Special Fund 2,884,764 8.04 23,446 **
Large Company Focus
Fund 320,631 6.30 2,208 **
Special Venture Fund 4,572,330 45.16 16,476 **
Capital Opportunities
Fund 1,368,298 5.09 76,777 **
Growth Opportunities
Fund 682,165 14.11 7,945 **
_________________________
*Stein Roe may have discretionary authority over such shares
and, accordingly, they could be deemed to be owned
"beneficially" by Stein Roe under Rule 13d-3. However, Stein
Roe disclaims actual beneficial ownership of such shares.
**Represents less than 1% of the outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Stein Roe & Farnham Incorporated provides investment
management services to each Portfolio, Capital Opportunities Fund,
Growth Opportunities Fund and Large Company Focus Fund, and
administrative services to each Fund and each Portfolio. Stein
Roe is a wholly owned subsidiary of SteinRoe Services Inc.
("SSI"), the Fund's transfer agent, which is a wholly owned
subsidiary of Liberty Financial Companies, Inc. ("Liberty
Financial"), which is a majority owned subsidiary of Liberty
Corporate Holdings, Inc., which is a wholly owned subsidiary of
LFC Holdings, Inc., which is a wholly owned subsidiary of Liberty
Mutual Equity Corporation, which is a wholly owned subsidiary of
Liberty Mutual Insurance Company. Liberty Mutual Insurance
Company is a mutual insurance company, principally in the
property/casualty insurance field, organized under the laws of
Massachusetts in 1912.
The directors of Stein Roe are Kenneth R. Leibler, C. Allen
Merritt, Jr., 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, 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
a monthly administrative fee from each Fund and a monthly
management fee from each non-feeder Fund and each Portfolio. The
table below shows the annual rates of such fees as a percentage of
average net assets (shown in millions), gross fees paid for the
three most recent fiscal years, and any expense reimbursements by
Stein Roe:
<TABLE>
<CAPTION>
Current Rates Year Ended Year Ended Year Ended
Fund/Portfolio Type (dollars shown in millions) 9/30/98 9/30/97 9/30/96
- -------------------- ------------- --------------------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Growth & Income Fund Management N/A N/A $ 484,689 $ 989,415
Administrative .15% up to $500,
.125% next $500,
.10% thereafter $ 545,089 422,974 247,354
Growth & Income Management .60% up to $500, .55% next
Portfolio $500, .50% thereafter 2,187,961 1,191,730 N/A
Balanced Fund Management N/A N/A 493,328 1,246,713
Administrative .15% up to $500, .125% next
$500, .10% thereafter 416,764 399,157 340,013
Balanced Portfolio Management .55% up to $500, .50% next
$500, .45% thereafter 1,530,467 971,102 N/A
Growth Stock Fund Management N/A N/A 933,019 2,316,351
Administrative .15% up to $500, .125% next
$500, .10% thereafter 946,539 757,086 579,088
Growth Stock Management .60% up to $500, .55% next
Portfolio $500, .50% thereafter 4,251,833 2,119,802 N/A
Special Fund Management N/A N/A 2,638,251 7,920,534
Administrative .15% up to $500, .125% next
$500, .10% next $500, .075%
thereafter 1,605,953 1,537,601 1,499,506
Special Portfolio Management .75% up to $500, .70% next
$500, .65% next $500, .60%
thereafter 8,771,718 5,249,467 N/A
Large Company Management .75% up to $500, .70% next
Focus Fund $500, .65% next $500, .60%
thereafter 88,815 N/A N/A
Administrative .15% up to $500, .125% next
$500, .10% next $500, .075%
thereafter 17,763 N/A N/A
Reimbursement Expenses exceeding 1.50% 13,361 N/A N/A
Special Venture Fund Management N/A N/A 396,022 807,861
Administrative .15% 305,753 267,585 46,272
Reimbursement N/A -0- -0- 85,898
Special Venture Management .75% 1,533,113 942,785 N/A
Portfolio
Capital Opportun- Management .75% up to $500, .70% next
ities Fund $500, .65% next $500, .60%
thereafter 6,827,994 9,097,549 5,695,180
Administrative .15% up to $500, .125% next
$500, .10% next $500, .075%
thereafter 1,298,073 1,655,427 1,064,461
Growth Opportun- Management .75% up to $500, .70% next
ities Fund $500, .65% next $500, .60%
thereafter 406,935 86,304 N/A
Administrative .15% up to $500, .125% next
$500, .10% next $500, .075%
thereafter 81,387 17,260 N/A
Reimbursement Expenses exceeding 1.25% 103,242 55,876 N/A
</TABLE>
Stein Roe provides office space and executive and other
personnel to the Funds, and bears any sales or promotional
expenses. Each Fund pays all expenses other than those paid by
Stein Roe, including but not limited to printing and postage
charges, securities registration and custodian fees, and expenses
incidental to its organization.
The administrative agreement provides that Stein Roe shall
reimburse the Fund to the extent that total annual expenses of the
Fund (including fees paid to Stein Roe, but excluding taxes,
interest, commissions and other normal charges incident to the
purchase and sale of portfolio securities, and expenses of
litigation to the extent permitted under applicable state law)
exceed the applicable limits prescribed by any state in which
shares of the Fund are being offered for sale to the public;
provided, however, Stein Roe is not required to reimburse a Fund
an amount in excess of fees paid by the Fund under that agreement
for such year. In addition, in the interest of further limiting
expenses of a Fund, Stein Roe may voluntarily waive its fees
and/or absorb certain expenses, as described under The Funds-Your
Expenses in the Prospectuses. Any such reimbursement will enhance
the yield of such Fund.
Each management agreement provides that neither Stein Roe,
nor any of its directors, officers, stockholders (or partners of
stockholders), agents, or employees shall have any liability to
the Trust or any shareholder of the Trust for any error of
judgment, mistake of law or any loss arising out of any
investment, or for any other act or omission in the performance by
Stein Roe of its duties under the agreement, except for liability
resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under the agreement.
Any expenses that are attributable solely to the
organization, operation, or business of a series of the Trust are
paid solely out of the assets of that series. Any expenses
incurred by the Trust that are not solely attributable to a
particular series are apportioned in such manner as Stein Roe
determines is fair and appropriate, unless otherwise specified by
the Board of Trustees.
Bookkeeping and Accounting Agreement
Pursuant to a separate agreement with the Trust, Stein Roe
receives a fee for performing certain bookkeeping and accounting
services. For such services, Stein Roe receives an annual fee of
$25,000 per series plus .0025 of 1% of average net assets over $50
million. During the fiscal years ended Sept. 30, 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 each 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 of each Fund to
investors in states where the shares are qualified for sale, at
net asset value, without sales commissions or other sales load to
the investor. In addition, no sales commission or "12b-1" payment
is paid by any Fund. The Distributor offers the Funds' 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 each Fund a fee based on an annual rate of .22 of 1% of the
Fund's average net assets. The Trust believes the charges by SSI
to the Funds are comparable to those of other companies performing
similar services. (See Investment Advisory and Other Services.)
Under a separate agreement, SSI also provides certain investor
accounting services to the Portfolios.
CUSTODIAN
State Street Bank and Trust Company (the "Bank"), 225
Franklin Street, Boston, MA 02101, is the custodian for the Trust
and SR&F Base Trust. It is responsible for holding all securities
and cash, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and
collecting income from investments, making all payments covering
expenses, and performing other administrative duties, all as
directed by authorized persons. The Bank does not exercise any
supervisory function in such matters as purchase and sale of
portfolio securities, payment of dividends, or payment of
expenses.
Portfolio securities purchased in the U.S. are maintained in
the custody of the Bank or of other domestic banks or
depositories. Portfolio securities purchased outside of the U.S.
are maintained in the custody of foreign banks and trust companies
that are members of the Bank's Global Custody Network and foreign
depositories ("foreign sub-custodians"). Each of the domestic and
foreign custodial institutions holding portfolio securities has
been approved by the Board of Trustees in accordance with
regulations under the Investment Company Act of 1940.
Each Board of Trustees reviews, at least annually, whether it
is in the best interests of each Fund, each Portfolio, and their
shareholders to maintain assets in each of the countries in which
a Fund or Portfolio invests with particular foreign sub-custodians
in such countries, pursuant to contracts between such respective
foreign sub-custodians and the Bank. The review includes an
assessment of the risks of holding assets in any such country
(including risks of expropriation or imposition of exchange
controls), the operational capability and reliability of each such
foreign sub-custodian, and the impact of local laws on each such
custody arrangement. Each Board of Trustees is aided in its
review by the Bank, which has assembled the network of foreign
sub-custodians, as well as by Stein Roe and counsel. However,
with respect to foreign sub-custodians, there can be no assurance
that a Fund and the value of its shares will not be adversely
affected by acts of foreign governments, financial or operational
difficulties of the foreign sub-custodians, difficulties and costs
of obtaining jurisdiction over or enforcing judgments against the
foreign sub-custodians, or application of foreign law to the
foreign sub-custodial arrangements. Accordingly, an investor
should recognize that the non-investment risks involved in holding
assets abroad are greater than those associated with investing in
the United States.
The Funds and the Portfolios may invest in obligations of the
Bank and may purchase or sell securities from or to the Bank.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Funds and the
Portfolios are Arthur Andersen LLP, 33 West Monroe Street,
Chicago, IL 60603. The accountants audit and report on the annual
financial statements, review certain regulatory reports and the
federal income tax returns, and perform other professional
accounting, auditing, tax and advisory services when engaged to do
so by the Trust.
PORTFOLIO TRANSACTIONS
Stein Roe places the orders for the purchase and sale of
portfolio securities and options and futures contracts. 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 Funds and the Portfolios do not believe they pay
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 its clients 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 table below shows information on brokerage commissions
paid by the Funds and the Portfolios (in the case of a feeder
fund, brokerage commissions were paid by the Fund prior to Feb. 3,
1997 and by its related Portfolio since that date):
Growth & Growth
Income Balanced Stock Special
Portfolio Portfolio Portfolio Portfolio
Total amount of bro-
kerage commissions
paid during fiscal
year ended 9/30/98 $100,196 $312,627 $562,354 $2,301,286
Amount of commissions
paid to brokers or
dealers who supplied
research services to
Stein Roe 93,226 300,396 479,454 2,048,250
Total dollar amount
involved in such
transactions (000
omitted) 113,429 194,943 450,572 1,006,542
Amount of commissions
paid to brokers or
dealers that were
allocated to such
brokers or dealers
by the Fund's portfolio
manager because of
research services
provided to the Fund 23,300 41,760 19,000 324,839
Total dollar amount
involved in such
transactions (000
omitted) 17,996 30,795 18,693 181,286
Total amount of brokerage
commissions paid during
fiscal year ended
9/30/97 120,469 144,101 240,427 766,278
Total amount of
brokerage commissions
paid during fiscal
year ended 9/30/96 76,692 276,367 259,829 1,519,821
Capital Growth Large
Special Oppor- Oppor- Company
Venture tunities tunities Focus
Portfolio Fund Fund Fund
Total amount of brokerage
commissions paid during
fiscal year ended 9/30/98 $442,643 $732,013 $67,521 $43,465
Amount of commissions paid
to brokers or dealers
who supplied research
services to Stein Roe 421,054 652,987 60,207 41,463
Total dollar amount
involved in such
transactions (000
omitted) 113,543 372,122 36,437 48,705
Amount of commissions paid
to brokers or dealers
that were allocated to
such brokers or dealers
by the Fund's portfolio
manager because of
research services
provided to the Fund 58,490 125,331 3,250 5,142
Total dollar amount involved
in such transactions
(000 omitted) 21,844 93,392 1,765 3,356
Total amount of brokerage
commissions paid during
fiscal year ended 9/30/97 389,281 543,951 38,375 N/A
Total amount of brokerage
commissions paid during
fiscal year ended 9/30/96 179,391 709,905 N/A N/A
Each Trust has arranged for its custodian to act as a
soliciting dealer to accept any fees available to the custodian as
a soliciting dealer in connection with any tender offer for
portfolio securities. The custodian will credit any such fees
received against its custodial fees. In addition, the Board of
Trustees has reviewed the legal developments pertaining to and the
practicability of attempting to recapture underwriting discounts
or selling concessions when portfolio securities are purchased in
underwritten offerings. However, the Board has been advised by
counsel that recapture by a mutual fund currently is not permitted
under the Rules of the Association of the National Association of
Securities Dealers.
During the last fiscal year, certain Funds and Portfolios
held securities issued by one or more of their regular broker-
dealers or the parent of such broker-dealers that derive more than
15% of gross revenue from securities-related activities. Such
holdings were as follows at Sept. 30, 1998:
Fund/Portfolio Broker-Dealer Value of
Securities Held
(in thousands)
Balanced Portfolio Lehman Brothers $ 2,506
Associates Corp. of North America 2,090
Growth & Income
Portfolio Associates Corp. of North America 17,330
Growth Stock
Portfolio Associates Corp. of North America 38,635
Travelers Group 18,750
Special Portfolio Associates Corp. of North America 39,850
Large Company Focus
Fund Associates Corp. of North America 2,340
Growth Opportunities
Fund Associates Corp. of North America 1,915
Special Venture
Portfolio Associates Corp. of North America 4,650
Capital Opportuni-
ties Fund Associates Corp. of North America 34,825
ADDITIONAL INCOME TAX CONSIDERATIONS
Each Fund and Portfolio intends to qualify under Subchapter
M of the Internal Revenue Code and to comply with the special
provisions of the Internal Revenue Code that relieve it of federal
income tax to the extent of its net investment income and capital
gains currently distributed to shareholders.
Because dividend and capital gains distributions reduce net
asset value, a shareholder who purchases shares shortly before a
record date will, in effect, receive a return of a portion of his
investment in such distribution. The distribution would
nonetheless be taxable to him, even if the net asset value of
shares were reduced below his cost. However, for federal income
tax purposes the shareholder's original cost would continue as his
tax basis.
Each Fund expects that less than 100% of its dividends will
qualify for the deduction for dividends received by corporate
shareholders.
To the extent a Fund invests in foreign securities, it may
be subject to withholding and other taxes imposed by foreign
countries. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Investors may be
entitled to claim U.S. foreign tax credits with respect to such
taxes, subject to certain provisions and limitations contained in
the Code. Specifically, if more than 50% of the Fund's total
assets at the close of any fiscal year consist of stock or
securities of foreign corporations, the Fund may file an election
with the Internal Revenue Service pursuant to which shareholders
of the Fund will be required to (i) include in ordinary gross
income (in addition to taxable dividends actually received) their
pro rata shares of foreign income taxes paid by the Fund even
though not actually received, (ii) treat such respective pro rata
shares as foreign income taxes paid by them, and (iii) deduct such
pro rata shares in computing their taxable incomes, or,
alternatively, use them as foreign tax credits, subject to
applicable limitations, against their United States income taxes.
Shareholders who do not itemize deductions for federal income tax
purposes will not, however, be able to deduct their pro rata
portion of foreign taxes paid by the Fund, although such
shareholders will be required to include their share of such taxes
in gross income. Shareholders who claim a foreign tax credit may
be required to treat a portion of dividends received from the Fund
as separate category income for purposes of computing the
limitations on the foreign tax credit available to such
shareholders. Tax-exempt shareholders will not ordinarily benefit
from this election relating to foreign taxes. Each year, the
Funds will notify shareholders of the amount of (i) each
shareholder's pro rata share of foreign income taxes paid by the
Fund and (ii) the portion of Fund dividends which represents
income from each foreign country, if the Fund qualifies to pass
along such credit.
INVESTMENT PERFORMANCE
A Fund may quote certain total return figures from time to
time. A "Total Return" on a per share basis is the amount of
dividends distributed per share plus or minus the change in the
net asset value per share for a period. A "Total Return
Percentage" may be calculated by dividing the value of a share at
the end of a period by the value of the share at the beginning of
the period and subtracting one. For a given period, an "Average
Annual Total Return" may be computed by finding the average annual
compounded rate that would equate a hypothetical initial amount
invested of $1,000 to the ending redeemable value.
n
Average Annual Total Return is computed as follows: ERV = P(1+T)
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the
end of the period (or fractional portion).
For example, for a $1,000 investment in a Fund, the "Total
Return," the "Total Return Percentage," and the "Average Annual
Total Return" at Sept. 30, 1998 were:
TOTAL RETURN AVERAGE ANNUAL
TOTAL RETURN PERCENTAGE TOTAL RETURN
------------ ------------- --------------
Growth & Income Fund
1 year $1,034 3.45% 3.45%
5 years 2,092 109.17 15.90
10 years 4,322 332.21 15.76
Balanced Fund
1 year 1,001 0.14 0.14
5 years 1,633 63.30 10.31
10 years 3,033 203.26 11.73
Growth Stock Fund
1 year 1,047 4.69 4.69
5 years 2,207 120.72 17.16
10 years 4,650 365.04 16.61
Special Fund
1 year 808 -19.17 -19.17
5 years 1,489 48.93 8.29
10 years 3,489 248.87 13.31
Large Company Focus
Fund
Life of Fund* 873 -12.70 -
Special Venture Fund
1 year 679 -32.05 -32.05
Life of Fund* 1,384 38.42 8.57
Capital Opportunities
Fund
1 year 868 -13.23 -13.23
5 years 1,711 71.08 11.34
10 years 3,186 218.61 12.29
Growth Opportunities
Fund
1 year 967 -3.34 -3.34
Life of Fund* 1,041 4.10 3.27
______________________________________
*Life of Fund is from its date of public offering: 10/17/94 for
Special Venture Fund; 6/30/97 for Growth Opportunities Fund; and
6/26/98 for Large Company Focus Fund.
Investment performance figures assume reinvestment of all
dividends and distributions and do not take into account any
federal, state, or local income taxes which shareholders must pay
on a current basis. They are not necessarily indicative of future
results. The performance of a Fund is a result of conditions in
the securities markets, portfolio management, and operating
expenses. Although investment performance information is useful
in reviewing a Fund's performance and in providing some basis for
comparison with other investment alternatives, it should not be
used for comparison with other investments using different
reinvestment assumptions or time periods.
A Fund may note its mention or recognition in newspapers,
magazines, or other media from time to time. However, the Funds
assume no responsibility for the accuracy of such data.
Newspapers and magazines which might mention the Funds include,
but are not limited to, the following:
Architectural Digest
Arizona Republic
Atlanta Constitution
Atlantic Monthly
Associated Press
Barron's
Bloomberg
Boston Globe
Boston Herald
Business Week
Chicago Tribune
Chicago Sun-Times
Cleveland Plain Dealer
CNBC
CNN
Crain's Chicago Business
Consumer Reports
Consumer Digest
Dow Jones Investment Advisor
Dow Jones Newswire
Fee Advisor
Financial Planning
Financial World
Forbes
Fortune
Fund Action
Fund Marketing Alert
Gourmet
Individual Investor
Investment Dealers' Digest
Investment News
Investor's Business Daily
Kiplinger's Personal Finance Magazine
Knight-Ridder
Lipper Analytical Services
Los Angeles Times
Louis Rukeyser's Wall Street
Money
Money on Line
Morningstar
Mutual Fund Market News
Mutual Fund News Service
Mutual Funds Magazine
Newsday
Newsweek
New York Daily News
The New York Times
No-Load Fund Investor
Pension World
Pensions and Investment
Personal Investor
Physicians Financial News
Jane Bryant Quinn (syndicated column)
Reuters
The San Francisco Chronicle
Securities Industry Daily
Smart Money
Smithsonian
Strategic Insight
Street.com
Time
Travel & Leisure
USA Today
U.S. News & World Report
Value Line
The Wall Street Journal
The Washington Post
Working Women
Worth
Your Money
In advertising and sales literature, a Fund may compare its
performance with that of other mutual funds, indexes or averages
of other mutual funds, indexes of related financial assets or
data, and other competing investment and deposit products
available from or through other financial institutions. The
composition of these indexes or averages differs from that of the
Funds. Comparison of a Fund to an alternative investment should
be made with consideration of differences in features and expected
performance. All of the indexes and averages noted below will be
obtained from the indicated sources or reporting services, which
the Funds believe to be generally accurate. All of the Funds may
compare their performance to the Consumer Price Index (All Urban),
a widely recognized measure of inflation. Each Fund's performance
may be compared to the following indexes or averages:
Dow-Jones Industrial Average New York Stock Exchange
Composite Index
Standard & Poor's 500 Stock Index American Stock Exchange
Composite Index
Standard & Poor's 400 Industrials Nasdaq Composite
Russell 2000 Index Nasdaq Industrials
Wilshire 5000
(These indexes are widely (These indexes generally
recognized indicators of reflect the performance of
general U.S. stock market stocks traded in the
results.) indicated markets.)
In addition, the Funds may compare performance to the
indicated benchmarks:
Benchmark Fund(s)
Lipper Balanced Fund Average Balanced Fund
Lipper Balanced Fund Index Balanced Fund
Lipper Capital Appreciation Fund
Average Capital Opportunities Fund,
Growth Opportunities Fund,
Large Company Focus Fund
Lipper Capital Appreciation Fund
Index Capital Opportunities Fund,
Growth Opportunities Fund,
Large Company Focus Fund
Lipper Equity Fund Average All Funds
Lipper General Equity Fund Average All Funds
Lipper Growth & Income Fund Average Growth & Income Fund
Lipper Growth & Income Fund Index Growth & Income Fund
Lipper Growth Fund Average Growth Stock Fund, Special
Fund
Lipper Growth Fund Index Growth Stock Fund, Special
Fund
Lipper Small Company Growth Fund
Average Special Venture Fund
Lipper Small Company Growth
Fund Index Special Venture Fund
Morningstar Aggressive Growth
Fund Average Capital Opportunities Fund,
Growth Opportunities Fund,
Large Company Focus Fund
Morningstar All Equity Funds
Average All Funds
Morningstar Advisor Balanced
Fund Average Balanced Fund
Morningstar Domestic Stock Average All Funds
Morningstar Equity Fund Average All Funds
Morningstar Growth & Income Fund
Average Growth & Income Fund
Morningstar Growth Fund Average Growth Stock Fund, Special
Fund
Morningstar Hybrid Fund Average Balanced Fund
Morningstar Small Company Growth
Fund Average Special Venture Fund
Morningstar Total Fund Average All Funds
Value Line Index
(Widely recognized indicator of
the performance of small- and
medium-sized company stocks) Capital Opportunities Fund,
Special Fund, Special Venture
Fund, Growth Opportunities
Fund, Large Company Focus Fund
*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 Funds
may also use comparative performance as computed in a ranking by
Lipper or category averages and rankings provided by another
independent service. Should Lipper or another service reclassify
a Fund to a different category or develop (and place a Fund into)
a new category, that Fund may compare its performance or ranking
with those of other funds in the newly assigned category, as
published by the service.
A Fund may also cite its rating, recognition, or other
mention by Morningstar or any other entity. Morningstar's rating
system is based on risk-adjusted total return performance and is
expressed in a star-rating format. The risk-adjusted number is
computed by subtracting a fund's risk score (which is a function
of the fund's monthly returns less the 3-month T-bill return) from
its load-adjusted total return score. This numerical score is
then translated into rating categories, with the top 10% labeled
five star, the next 22.5% labeled four star, the next 35% labeled
three star, the next 22.5% labeled two star, and the bottom 10%
one star. A high rating reflects either above-average returns or
below-average risk, or both.
Of course, past performance is not indicative of future
results.
________________
To illustrate the historical returns on various types of
financial assets, the Funds may use historical data provided by
Ibbotson Associates, Inc. ("Ibbotson"), a Chicago-based investment
firm. Ibbotson constructs (or obtains) very long-term (since
1926) total return data (including, for example, total return
indexes, total return percentages, average annual total returns
and standard deviations of such returns) for the following asset
types:
Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index
_____________________
A Fund may also use hypothetical returns to be used as an
example in a mix of asset allocation strategies. One such example
is reflected in the chart below, which shows the effect of tax
deferral on a hypothetical investment. This chart assumes that an
investor invested $2,000 a year on January 1, for any specified
period, in both a Tax-Deferred Investment and a Taxable
Investment, that both investments earn either 6%, 8% or 10%
compounded annually, and that the investor withdrew the entire
amount at the end of the period. (A tax rate of 39.6% is applied
annually to the Taxable Investment and on the withdrawal of
earnings on the Tax-Deferred Investment.)
<TABLE>
<CAPTION>
TAX-DEFERRED INVESTMENT VS. TAXABLE INVESTMENT
Interest
Rate 3% 5% 7% 9% 3% 5% 7% 9%
- --------------------------------------------------------------------------------
Com-
pound-
ing
Years Tax-Deferred Investment Taxable Investment
- ---- ------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 $82,955 $108,031 $145,856 $203,239 $80,217 $98,343 $121,466 $151,057
25 65,164 80,337 101,553 131,327 63,678 75,318 89,528 106,909
20 49,273 57,781 68,829 83,204 48,560 55,476 63,563 73,028
15 35,022 39,250 44,361 50,540 34,739 38,377 42,455 47,025
10 22,184 23,874 25,779 27,925 22,106 23,642 25,294 27,069
5 10,565 10,969 11,393 11,840 10,557 10,943 11,342 11,754
1 2,036 2,060 2,085 2,109 2,036 2,060 2,085 2,109
</TABLE>
Dollar Cost Averaging. Dollar cost averaging is an
investment strategy that requires investing a fixed amount of
money in Fund shares at set intervals. This allows you to
purchase more shares when prices are low and fewer shares when
prices are high. Over time, this tends to lower your average cost
per share. Like any investment strategy, dollar cost averaging
can't guarantee a profit or protect against losses in a steadily
declining market. Dollar cost averaging involves uninterrupted
investing regardless of share price and therefore may not be
appropriate for every investor.
From time to time, a Fund may offer in its advertising and
sales literature to send an investment strategy guide, a tax
guide, or other supplemental information to investors and
shareholders. It may also mention the Stein Roe Counselor
[service mark] and the Stein Roe Personal Counselor [service mark]
programs and asset allocation and other investment strategies.
MASTER FUND/FEEDER FUND: STRUCTURE AND RISK FACTORS
Each of Growth & Income Fund, Balanced Fund, Growth Stock
Fund, Special Fund, and Special Venture Fund (which are series of
the Trust, an open-end management investment company) seeks to
achieve its objective by investing all of its assets in another
mutual fund having an investment objective identical to that of
the Fund. The shareholders of each Fund approved this policy of
permitting a Fund to act as a feeder fund by investing in a
Portfolio. Please refer to Investment Policies, Portfolio
Investments and Strategies, and Investment Restrictions for a
description of the investment objectives, policies, and
restrictions of the Funds and the Portfolios. The management fees
and expenses of the Funds and the Portfolios are described under
Investment Advisory and Other Services. Each feeder Fund bears
its proportionate share of the expenses of its master Portfolio.
Stein Roe has provided investment management services in
connection with other mutual funds employing the master
fund/feeder fund structure since 1991.
Each Portfolio is a separate series of SR&F Base Trust ("Base
Trust"), a Massachusetts common law trust organized under an
Agreement and Declaration of Trust ("Declaration of Trust") dated
Aug. 23, 1993. The Declaration of Trust of Base Trust provides
that a Fund and other investors in a Portfolio will be liable for
all obligations of that Portfolio that are not satisfied by the
Portfolio. However, the risk of a Fund incurring financial loss
on account of such liability is limited to circumstances in which
liability was inadequately insured and a Portfolio was unable to
meet its obligations. Accordingly, the trustees of the Trust
believe that neither the Funds nor their shareholders will be
adversely affected by reason of a Fund's investing in a Portfolio.
The Declaration of Trust of Base Trust provides that a
Portfolio will terminate 120 days after the withdrawal of a Fund
or any other investor in the Portfolio, unless the remaining
investors vote to agree to continue the business of the Portfolio.
The trustees of the Trust may vote a Fund's interests in a
Portfolio for such continuation without approval of the Fund's
shareholders.
The common investment objectives of the Funds and the
Portfolios are nonfundamental and may be changed without
shareholder approval, subject, however, to at least 30 days'
advance written notice to a Fund's shareholders.
The fundamental policies of each Fund and the corresponding
fundamental policies of its master Portfolio can be changed only
with shareholder approval. If a Fund, as a Portfolio investor, is
requested to vote on a change in a fundamental policy of a
Portfolio or any other matter pertaining to the Portfolio (other
than continuation of the business of the Portfolio after
withdrawal of another investor), the Fund will solicit proxies
from its shareholders and vote its interest in the Portfolio for
and against such matters proportionately to the instructions to
vote for and against such matters received from Fund shareholders.
A Fund will vote shares for which it receives no voting
instructions in the same proportion as the shares for which it
receives voting instructions. There can be no assurance that any
matter receiving a majority of votes cast by Fund shareholders
will receive a majority of votes cast by all investors in a
Portfolio. If other investors hold a majority interest in a
Portfolio, they could have voting control over that Portfolio.
In the event that a Portfolio's fundamental policies were
changed so as to be inconsistent with those of the corresponding
Fund, the Board of Trustees of the Trust would consider what
action might be taken, including changes to the Fund's fundamental
policies, withdrawal of the Fund's assets from the Portfolio and
investment of such assets in another pooled investment entity, or
the retention of an investment adviser to invest those assets
directly in a portfolio of securities. Any of these actions would
require the approval of a Fund's shareholders. A Fund's inability
to find a substitute master fund or comparable investment
management could have a significant impact upon its shareholders'
investments. Any withdrawal of a Fund's assets could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution) to the Fund. Should such a distribution occur, the
Fund would incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution
in kind could result in a less diversified portfolio of
investments for the Fund and could affect the liquidity of the
Fund.
Each investor in a Portfolio, including a Fund, may add to or
reduce its investment in the Portfolio on each day the NYSE is
open for business. The investor's percentage of the aggregate
interests in the Portfolio will be computed as the percentage
equal to the fraction (i) the numerator of which is the beginning
of the day value of such investor's investment in the Portfolio on
such day plus or minus, as the case may be, the amount of any
additions to or withdrawals from the investor's investment in the
Portfolio effected on such day; and (ii) the denominator of which
is the aggregate beginning of the day net asset value of the
Portfolio on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate
investments in the Portfolio by all investors in the Portfolio.
The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio as of the close
of business.
Base Trust may permit other investment companies and/or other
institutional investors to invest in a Portfolio, but members of
the general public may not invest directly in the Portfolio.
Other investors in a Portfolio are not required to sell their
shares at the same public offering price as a Fund, might incur
different administrative fees and expenses than the Fund, and
might charge a sales commission. Therefore, Fund shareholders
might have different investment returns than shareholders in
another investment company that invests exclusively in a
Portfolio. Investment by such other investors in a Portfolio
would provide funds for the purchase of additional portfolio
securities and would tend to reduce the operating expenses as a
percentage of the Portfolio's net assets. Conversely, large-scale
redemptions by any such other investors in a Portfolio could
result in untimely liquidations of the Portfolio's security
holdings, loss of investment flexibility, and increases in the
operating expenses of the Portfolio as a percentage of its net
assets. As a result, a Portfolio's security holdings may become
less diverse, resulting in increased risk.
Information regarding other investors in a Portfolio may be
obtained by writing to SR&F Base Trust at Suite 3200, One South
Wacker Drive, Chicago, IL 60606, or by calling 800-338-2550.
Stein Roe may provide administrative or other services to one or
more of such investors.
APPENDIX-RATINGS
RATINGS IN GENERAL
A rating of a rating service represents the service's opinion
as to the credit quality of the security being rated. However,
the ratings are general and are not absolute standards of quality
or guarantees as to the creditworthiness of an issuer.
Consequently, Stein Roe believes that the quality of debt
securities invests should be continuously reviewed and that
individual analysts give different weightings to the various
factors involved in credit analysis. A rating is not a
recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a
particular investor. When a security has received a rating from
more than one service, each rating should be evaluated
independently. Ratings are based on current information furnished
by the issuer or obtained by the rating services from other
sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons.
The following is a description of the characteristics of
ratings of corporate debt securities used by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
RATINGS BY MOODY'S
Aaa. Bonds rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or an exceptionally stable margin and principal is secure.
Although the various protective elements are likely to change,
such changes as can be visualized are more unlikely to impair the
fundamentally strong position of such bonds.
Aa. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa bonds or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa bonds.
A. Bonds rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any
long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
NOTE: Moody's applies numerical modifiers 1, 2, and 3 in
each generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic
rating category.
RATINGS BY S&P
AAA. Debt rated AAA has the highest rating. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in
small degree.
A. Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than for debt in higher rated categories.
BB, B, CCC, CC, and C. Debt rated BB, B, CCC, CC, or C is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C1. This rating is reserved for income bonds on which no interest
is being paid.
D. Debt rated D is in default, and payment of interest and/or
repayment of principal is in arrears. The D rating is also used
upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
NOTES:
The ratings from AA to CCC may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within the
major rating categories. Foreign debt is rated on the same basis
as domestic debt measuring the creditworthiness of the issuer;
ratings of foreign debt do not take into account currency exchange
and related uncertainties.
The "r" is attached to highlight derivative, hybrid, and certain
other obligations that S&P believes may experience high volatility
or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or
interest return is indexed to equities, commodities, or
currencies; certain swaps and options; and interest only and
principal only mortgage securities. The absence of an "r" symbol
should not be taken as an indication that an obligation will
exhibit no volatility or variability in total return.
_______________________
<PAGE>
PART C. OTHER INFORMATION
ITEM 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)(1) Management Agreement between Registrant and Stein Roe
& Farnham Incorporated dated August 15, 1995, as
amended through February 2, 1999.
(2) Management Agreement between SR&F Base Trust and Stein
Roe & Farnham Incorporated dated August 15, 1995, as
amended through March 3, 1998.
(3) Sub-Advisor Agreement among Registrant, Stein Roe &
Farnham Incorporated, and Newport Pacific Management,
Inc. dated October 19, 1998.
(e)(1) Underwriting Agreement between Registrant and Liberty
Funds Distributor, Inc. (formerly named Liberty Financial
Investments, Inc.) dated January 1,1998, as amended
through March 31, 1999.
(2) Specimen copy of selected dealer agreement.
(Exhibit 6(b) to PEA #40.)*
(f) None.
(g) Custodian Contract between Registrant and State
Street Bank and Trust Company dated March 3, 1987, 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 as amended
through March 31, 1999.
(2) Accounting and Bookkeeping Agreement between Registrant
and Stein Roe & Farnham Incorporated dated August 1, 1994
as amended through March 31, 1999.
(3) Administrative Agreement between Registrant and Stein Roe
& Farnham Incorporated August 15, 1995 as amended through
March 31, 1999.
(4) Sub-Transfer Agent Agreement with Liberty Funds Services,
Inc. (formerly named Colonial Investors Service Center)
dated July 3, 1996, as amended through March 31, 1999.
(i)(1) Opinions and consents of Ropes & Gray. (Exhibit
10(a) to PEA #34).*
(2) Opinions and consents of Bell, Boyd & Lloyd with
respect to SteinRoe Prime Equities (now named Stein
Roe Growth & Income Fund), Stein Roe Capital
Opportunities Fund, Stein Roe Special Fund,
SteinRoe Stock Fund (now named Stein Roe Growth
Stock Fund), SteinRoe Total Return Fund (now named
Stein Roe Balanced Fund), Stein Roe International
Fund, Stein Roe Young Investor Fund, and Stein Roe
Special Venture Fund. (Exhibit 10(b) to PEA #34).*
(3) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Growth Opportunities Fund.
(Exhibit 10(d) to PEA #39.)*
(4) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Large Company Focus Fund.
(Exhibit 10(e) to PEA #45.)*
(5) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Asia Pacific Fund. (Exhibit
10(f) to PEA #46.)*
(6) Opinion and consent of Bell, Boyd & Lloyd with
respect to Stein Roe Small Company Growth Fund.
(Exhibit (i)(6) to PEA #54.)*
(j)(1) Consent of Arthur Andersen LLP.
(2) Consent of Bell, Boyd & Lloyd. (Exhibit j(3) to PEA
#49.)*
(3) Consent of Morningstar, Inc. (Exhibit 11(b) to PEA
#34).*
(k) None.
(l) Inapplicable.
(m) 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.
- ------
*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
Thomas W. Butch President; Director; Chmn. Vice President
Kevin M. Carome Assistant Clerk
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
Karl J. Maurer Comptroller
C. Allen Merritt, Jr. Director; Vice President
Heidi J. Walter Vice President; Secretary
SR&F BASE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
David P. Brady Vice-President
Thomas W. Butch President Executive V-P;
Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Executive VP; Asst. Secy. VP
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
Jane M. Naeseth Vice-President
Maureen G. Newman Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
M. Gerard Sandel Vice-President
Veronica M. Wallace Vice-President
Heidi J. Walter Vice-President; Secretary
STEIN ROE INCOME TRUST; STEIN ROE INSTITUTIONAL TRUST; AND
STEIN ROE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Kevin M. Carome Executive VP; Asst. Secy. VP
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
STEIN ROE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Executive VP; Asst. Secy. VP
E. Bruce Dunn Vice-President
William M. Garrison 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
Steven M. Salopek Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
LIBERTY-STEIN ROE ADVISOR TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Executive VP; Asst. Secy. VP
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
STEIN ROE MUNICIPAL TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Kevin M. Carome Executive VP; Asst. Secy. VP
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
STEINROE VARIABLE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President
Kevin M. Carome Executive VP; Asst. Secy. VP
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 President
Jane M. Naeseth Vice President
Steven M. Salopek Vice President
William M. Wadden IV Vice President
Heidi J. Walter Vice President
STEIN ROE FLOATING RATE INCOME TRUST; STEIN ROE INSTITUTIONAL
FLOATING RATE INCOME TRUST, STEIN ROE FLOATING RATE LIMITED
LIABILITY COMPANY
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior V-P; Treasurer Controller
Thomas W. Butch President; Trustee
Kevin M. Carome Executive VP; Asst. Secy. VP
Brian W. Good Vice-President
James R. Fellows Vice-President
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
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.,
acts as underwriter to Liberty Funds Trust I, Liberty Funds
Trust II, Liberty Funds Trust III, Liberty Funds Trust IV, Liberty
Funds Trust V, Liberty Funds Trust VI, Liberty Funds Trust VII,
Liberty Funds Trust IX, Stein Roe Investment Trust, Stein Roe
Income Trust, Stein Roe Municipal Trust, Liberty-Stein Roe
Advisor Trust, Stein Roe Institutional Trust, Stein Roe Trust,
Stein Roe Floating Rate Income Fund, Stein Roe Institutional
Floating Rate Income Fund, and SteinRoe Variable Investment
Trust. The table below lists the directors and officers of
Liberty Funds Distributor, Inc.
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- -------------------- --------------------- -------------
Anderson, Judith Vice President None
Anetsberger, Gary A. Senior Vice President Senior V-P;
Treasurer
Babbitt, Debra VP & Compliance Officer None
Ballou, Rick Senior Vice President None
Bartlett, John Managing Director None
Blakeslee, James Senior Vice President None
Blumenfeld, Alex Vice President None
Bozek, James Senior Vice President None
Brown, Beth Vice President None
Burtman, Tracy Vice President None
Butch, Thomas W. Senior Vice President President
Campbell, Patrick Vice President None
Chrzanowski, Daniel Vice President None
Clapp, Elizabeth A. Managing Director None
Conlin, Nancy L. Director; Clerk None
Davey, Cynthia Sr. Vice President None
Desilets, Marian H. Vice President None
Devaney, James Senior Vice President None
DiMaio, Steve Vice President None
Downey, Christopher Vice President None
Dupree, Robert Vice President None
Emerson, Kim P. Senior Vice President None
Erickson, Cynthia G. Senior Vice President None
Evans, C. Frazier Managing Director None
Feldman, David Managing Director None
Fifield, Robert Vice President None
Gariepy, Tom Vice President None
Gauger, Richard Vice President None
Gerokoulis, Stephen A. Senior Vice President None
Gibson, Stephen E. Director; Chairman of Board None
Goldberg, Matthew Senior Vice President None
Gupta, Neeti Vice President None
Geunard, Brian Vice President None
Harrington, Tom Sr. Vice President None
Harris, Carla L. Vice President None
Hodgkins, Joseph Sr. Vice President None
Hussey, Robert Senior Vice President None
Iudice, Jr., Philip Treasurer and CFO None
Jones, Cynthia Vice President None
Jones, Jonathan Vice President None
Kelley, Terry M. Vice President None
Kelson, David W. Senior Vice President None
Libutti, Chris Vice President None
Martin, John Senior Vice President None
Martin, Peter Vice President None
McCombs, Gregory Senior Vice President None
McKenzie, Mary Vice President None
Menchin, Catherine Senior Vice President None
Miller, Anthony Vice President None
Moberly, Ann R. Senior Vice President None
Morse, Jonathan Vice President None
Nickodemus, Paul Vice President None
O'Shea, Kevin Managing Director None
Piken, Keith Vice President None
Place, Jeffrey Managing Director None
Powell, Douglas Vice President None
Predmore, Tracy Vice President None
Quirk, Frank Vice President None
Raftery-Arpino, Linda Senior Vice President None
Ratto, Gregory Vice President None
Reed, Christopher B. Senior Vice President None
Riegel, Joyce B. Vice President None
Robb, Douglas Vice President None
Sandberg, Travis Vice President None
Santosuosso, Louise Senior Vice President None
Schulman, David Senior Vice President None
Shea, Terence Vice President None
Sideropoulos, Lou Vice President None
Sinatra, Peter Vice President None
Smith, Darren Vice President None
Soester, Trisha Vice President None
Studer, Eric Vice President None
Sweeney, Maureen Vice President None
Tambone, James Chief Executive Officer None
Tasiopoulos, Lou President None
VanEtten, Keith H. Senior Vice President None
Walter, Heidi J. Vice President V-P & Secy.
Wess, Valerie Senior Vice President None
Young, Deborah Vice President None
- ---------
* The address of Ms. Harris, Ms. Riegel, Ms. Walter, and Messrs.
Anetsberger and Butch is One South Wacker Drive, Chicago, IL
60606. The address of each other director and officer is One
Financial Center, Boston, MA 02111.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Registrant maintains the records required to be maintained by
it under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the
Investment Company Act of 1940 at its principal executive
offices at One South Wacker Drive, Chicago, Illinois 60606.
Certain records, including records relating to Registrant's
shareholders and the physical possession of its securities,
may be maintained pursuant to Rule 31a-3 at the main office of
Registrant's transfer agent or custodian.
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 6th day of
May, 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 May 6, 1999
Thomas W. Butch
Principal Executive Officer
GARY A. ANETSBERGER Senior Vice- May 6, 1999
Gary A. Anetsberger President; Treasurer
Principal Financial Officer
PATRICIA J. JUDGE Controller May 6, 1999
Patricia J. Judge
Principal Accounting Officer
JOHN A. BACON JR. Trustee May 6, 1999
John A. Bacon Jr.
WILLIAM W. BOYD Trustee May 6, 1999
William W. Boyd
LINDSAY COOK Trustee May 6, 1999
Lindsay Cook
___________________ Trustee ___________
Douglas A. Hacker
JANET LANGFORD KELLY Trustee May 6, 1999
Janet Langford Kelly
CHARLES R. NELSON Trustee May 6, 1999
Charles R. Nelson
THOMAS C. THEOBALD Trustee May 6, 1999
Thomas C. Theobald
*Each person signing this amendment is signing in his or her
indicated capacity with the Registrant and also in the same
capacity with SR&F Base Trust.
<PAGE>
STEIN ROE INVESTMENT TRUST
INDEX TO EXHIBITS FILED WITH THIS AMENDMENT
Exhibit
Number Description
- ------- ------------
(d)(1) Management Agreement
(2) SR&F Base Trust Management Agreement
(3) Sub-Advisory Agreement
(e)(1) Underwriting Agreement
(h)(1) Restated Transfer Agency Agreement
(2) Accounting and Bookkeeping Agreement
(3) Administrative Agreement
(4) Sub-Transfer Agent Agreement
(j)(1) Consent of Arthur Andersen 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
(p) Mutual Fund Application
<PAGE>
MANAGEMENT AGREEMENT
BETWEEN
STEINROE INVESTMENT TRUST
AND
STEIN ROE & FARNHAM INCORPORATED
STEINROE INVESTMENT TRUST, a Massachusetts business trust
registered under the Investment Company Act of 1940 ("1940 Act")
as an open-end diversified management investment company
("Trust"), hereby appoints STEIN ROE & FARNHAM INCORPORATED, a
Delaware corporation registered under the Investment Advisers
Act of 1940 as an investment adviser, of Chicago, Illinois
("Manager"), to furnish investment advisory and portfolio
management services with respect to the portion of its assets
represented by the shares of beneficial interest issued in each
series listed in Schedule A hereto, as such schedule may be
amended from time to time (each such series hereinafter referred
to as "Fund"). Trust and Manager hereby agree that:
1. INVESTMENT MANAGEMENT SERVICES. Manager shall manage
the investment operations of Trust and each Fund, subject to the
terms of this Agreement and to the supervision and control of
Trust's Board of Trustees ("Trustees"). Manager agrees to
perform, or arrange for the performance of, the following
services with respect to each Fund:
(a) to obtain and evaluate such information relating to
economies, industries, businesses, securities and
commodities markets, and individual securities, commodities
and indices as it may deem necessary or useful in
discharging its responsibilities hereunder;
(b) to formulate and maintain a continuing investment program in
a manner consistent with and subject to (i) Trust's
agreement and declaration of trust and by-laws; (ii) the
Fund's investment objectives, policies, and restrictions as
set forth in written documents furnished by the Trust to
Manager; (iii) all securities, commodities, and tax laws and
regulations applicable to the Fund and Trust; and (iv) any
other written limits or directions furnished by the Trustees
to Manager;
(c) unless otherwise directed by the Trustees, to determine from
time to time securities, commodities, interests or other
investments to be purchased, sold, retained or lent by the
Fund, and to implement those decisions, including the
selection of entities with or through which such purchases,
sales or loans are to be effected;
(d) to use reasonable efforts to manage the Fund so that it will
qualify as a regulated investment company under subchapter M
of the Internal Revenue Code of 1986, as amended;
(e) to make recommendations as to the manner in which voting
rights, rights to consent to Trust or Fund action, and any
other rights pertaining to Trust or the Fund shall be
exercised;
(f) to make available to Trust promptly upon request all of the
Fund's records and ledgers and any reports or information
reasonably requested by the Trust; and
(g) to the extent required by law, to furnish to regulatory
authorities any information or reports relating to the
services provided pursuant to this Agreement.
<PAGE> 2
Except as otherwise instructed from time to time by the
Trustees, with respect to execution of transactions for Trust on
behalf of a Fund, Manager shall place, or arrange for the
placement of, all orders for purchases, sales, or loans with
issuers, brokers, dealers or other counterparties or agents
selected by Manager. In connection with the selection of all
such parties for the placement of all such orders, Manager shall
attempt to obtain most favorable execution and price, but may
nevertheless in its sole discretion as a secondary factor,
purchase and sell portfolio securities from and to brokers and
dealers who provide Manager with statistical, research and other
information, analysis, advice, and similar services. In
recognition of such services or brokerage services provided by a
broker or dealer, Manager is hereby authorized to pay such
broker or dealer a commission or spread in excess of that which
might be charged by another broker or dealer for the same
transaction if the Manager determines in good faith that the
commission or spread is reasonable in relation to the value of
the services so provided.
Trust hereby authorizes any entity or person associated
with Manager that is a member of a national securities exchange
to effect any transaction on the exchange for the account of a
Fund to the extent permitted by and in accordance with Section
11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder. Trust hereby consents to the retention by such
entity or person of compensation for such transactions in
accordance with Rule 11a-2-2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate
orders for its other customers together with any securities of
the same type to be sold or purchased for Trust or one or more
Funds in order to obtain best execution or lower brokerage
commissions. In such event, Manager shall allocate the shares
so purchased or sold, as well as the expenses incurred in the
transaction, in a manner it considers to be equitable and fair
and consistent with its fiduciary obligations to Trust, the
Funds, and Manager's other customers.
Manager shall for all purposes be deemed to be an
independent contractor and not an agent of Trust and shall,
unless otherwise expressly provided or authorized, have no
authority to act for or represent Trust in any way.
2. ADMINISTRATIVE SERVICES. Manager shall supervise the
business and affairs of Trust and each Fund and shall provide
such services and facilities as may be required for effective
administration of Trust and Funds as are not provided by
employees or other agents engaged by Trust; provided that
Manager shall not have any obligation to provide under this
Agreement any such services which are the subject of a separate
agreement or arrangement between Trust and Manager, any
affiliate of Manager, or any third party administrator
("Administrative Agreements").
3. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In
connection with the services to be provided by Manager under
this Agreement, Manager may, to the extent it deems appropriate,
and subject to compliance with the requirements of applicable
laws and regulations and upon receipt of written approval of the
Trustees, make use of (i) its affiliated companies and their
directors, trustees, officers, and employees and (ii)
subcontractors selected by Manager, provided that Manager shall
supervise and remain fully responsible for the services of all
such third parties in
<PAGE> 3
accordance with and to the extent provided by this Agreement.
All costs and expenses associated with services provided by any
such third parties shall be borne by Manager or such parties.
4. EXPENSES BORNE BY TRUST. Except to the extent
expressly assumed by Manager herein or under a separate
agreement between Trust and Manager and except to the extent
required by law to be paid by Manager, Manager shall not be
obligated to pay any costs or expenses incidental to the
organization, operations or business of the Trust. Without
limitation, such costs and expenses shall include but not be
limited to:
(a) all charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities,
and other property;
(b) all charges for equipment or services used for obtaining
price quotations or for communication between Manager or
Trust and the custodian, transfer agent or any other agent
selected by Trust;
(c) all charges for administrative and accounting services
provided to Trust by Manager, or any other provider of such
services;
(d) all charges for services of Trust's independent auditors and
for services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated
with Manager, all expenses incurred in connection with their
services to Trust, and all expenses of meetings of the
Trustees or committees thereof;
(f) all expenses incidental to holding meetings of holders of
units of interest in the Trust ("Unitholders"), including
printing and of supplying each record-date Unitholder with
notice and proxy solicitation material, and all other proxy
solicitation expense;
(g) all expenses of printing of annual or more frequent
revisions of Trust prospectus(es) and of supplying each
then-existing Unitholder with a copy of a revised
prospectus;
(h) all expenses related to preparing and transmitting
certificates representing Trust shares;
(i) all expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees;
(j) all brokers' commissions and other normal charges incident
to the purchase, sale, or lending of portfolio securities;
(k) all taxes and governmental fees payable to Federal, state or
other governmental agencies, domestic or foreign, including
all stamp or other transfer taxes;
(l) all expenses of registering and maintaining the registration
of Trust under the 1940 Act and, to the extent no exemption
is available, expenses of registering Trust's shares under
the 1933 Act, of qualifying and maintaining qualification of
Trust and of Trust's shares for sale under securities laws
of various states or other jurisdictions and of registration
and qualification of Trust under all other laws applicable
to Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust or a
Fund; and
(n) all fees, dues and other expenses incurred by Trust in
connection with membership of Trust in any trade association
or other investment company organization.
<PAGE> 4
5. ALLOCATION OF EXPENSES BORNE BY TRUST. Any expenses
borne by Trust that are attributable solely to the organization,
operation or business of a Fund shall be paid solely out of Fund
assets. Any expense borne by Trust which is not solely
attributable to a Fund, nor solely to any other series of shares
of Trust, shall be apportioned in such manner as Manager
determines is fair and appropriate, or as otherwise specified by
the Board of Trustees.
6. EXPENSES BORNE BY MANAGER. Manager at its own expense
shall furnish all executive and other personnel, office space,
and office facilities required to render the investment
management and administrative services set forth in this
Agreement. Manager shall pay all expenses of establishing,
maintaining, and servicing the accounts of Unitholders in each
Fund listed in Exhibit A. However, Manager shall not be
required to pay or provide any credit for services provided by
Trust's custodian or other agents without additional cost to
Trust.
In the event that Manager pays or assumes any expenses of
Trust or a Fund not required to be paid or assumed by Manager
under this Agreement, Manager shall not be obligated hereby to
pay or assume the same or similar expense in the future;
provided that nothing contained herein shall be deemed to
relieve Manager of any obligation to Trust or a Fund under any
separate agreement or arrangement between the parties.
7. MANAGEMENT FEE. For the services rendered, facilities
provided, and charges assumed and paid by Manager hereunder,
Trust shall pay to Manager out of the assets of each Fund fees
at the annual rate for such Fund as set forth in Schedule B to
this Agreement. For each Fund, the management fee shall accrue
on each calendar day, and shall be payable monthly on the first
business day of the next succeeding calendar month. The daily
fee accrual shall be computed by multiplying the fraction of one
divided by the number of days in the calendar year by the
applicable annual rate of fee, and multiplying this product by
the net assets of the Fund, determined in the manner established
by the Board of Trustees, as of the close of business on the
last preceding business day on which the Fund's net asset value
was determined.
8. RETENTION OF SUB-ADVISER. Subject to obtaining the
initial and periodic approvals required under Section 15 of the
1940 Act, Manager may retain one or more sub-advisers at
Manager's own cost and expense for the purpose of furnishing one
or more of the services described in Section 1 hereof with
respect to Trust or one or more Funds. Retention of a sub-
adviser shall in no way reduce the responsibilities or
obligations of Manager under this Agreement, and Manager shall
be responsible to Trust and its Funds for all acts or omissions
of any sub-adviser in connection with the performance of
Manager's duties hereunder.
9. NON-EXCLUSIVITY. The services of Manager to Trust
hereunder are not to be deemed exclusive and Manager shall be
free to render similar services to others.
10. STANDARD OF CARE. Neither Manager, nor any of its
directors, officers, stockholders, agents or employees shall be
liable to Trust or its Unitholders for any error of judgment,
mistake of law, loss arising out of any investment, or any other
act or omission in the performance by Manager of its duties
under this Agreement,
<PAGE> 5
except for loss or liability resulting from willful misfeasance,
bad faith or gross negligence on Manager's part or from reckless
disregard by Manager of its obligations and duties under this
Agreement.
11. AMENDMENT. This Agreement may not be amended as to
Trust or any Fund without the affirmative votes (a) of a
majority of the Board of Trustees, including a majority of those
Trustees who are not "interested persons" of Trust or of
Manager, voting in person at a meeting called for the purpose of
voting on such approval, and (b) of a "majority of the
outstanding shares" of Trust or, with respect to an amendment
affecting an individual Fund, a "majority of the outstanding
shares" of that Fund. The terms "interested persons" and "vote
of a majority of the outstanding shares" shall be construed in
accordance with their respective definitions in the 1940 Act
and, with respect to the latter term, in accordance with Rule
18f-2 under the 1940 Act.
12. EFFECTIVE DATE AND TERMINATION. This Agreement shall
become effective as to any Fund as of the effective date for
that Fund specified in Schedule A hereto. This Agreement may be
terminated at any time, without payment of any penalty, as to
any Fund by the Board of Trustees of Trust, or by a vote of a
majority of the outstanding shares of that Fund, upon at least
sixty (60) days' written notice to Manager. This Agreement may
be terminated by Manager at any time upon at least sixty (60)
days' written notice to Trust. This Agreement shall terminate
automatically in the event of its "assignment" (as defined in
the 1940 Act). Unless terminated as hereinbefore provided, this
Agreement shall continue in effect with respect to any Fund
until the end of the initial term applicable to that Fund
specified in Schedule A and thereafter from year to year only so
long as such continuance is specifically approved with respect
to that Fund at least annually (a) by a majority of those
Trustees who are not interested persons of Trust or of Manager,
voting in person at a meeting called for the purpose of voting
on such approval, and (b) by either the Board of Trustees of
Trust or by a "vote of a majority of the outstanding shares" of
the Fund.
13. OWNERSHIP OF RECORDS; INTERPARTY REPORTING. All
records required to be maintained and preserved by Trust
pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are
maintained and preserved by Manager on behalf of Trust and any
other records the parties mutually agree shall be maintained by
Manager on behalf of Trust are the property of Trust and shall
be surrendered by Manager promptly on request by Trust; provided
that Manager may at its own expense make and retain copies of
any such records.
Trust shall furnish or otherwise make available to Manager
such copies of the financial statements, proxy statements,
reports, and other information relating to the business and
affairs of each Unitholder in a Fund as Manager may, at any time
or from time to time, reasonably require in order to discharge
its obligations under this Agreement.
Manager shall prepare and furnish to Trust as to each Fund
statistical data and other information in such form and at such
intervals as Trust may reasonably request.
<PAGE> 6
14. NON-LIABILITY OF TRUSTEES AND UNITHOLDERS. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Fund thereof) and shall not
be binding upon any Trustee, officer, employee, agent or
Unitholder of Trust. Neither the authorization of any action by
the Trustees or Unitholders of Trust nor the execution of this
Agreement on behalf of Trust shall impose any liability upon any
Trustee or any Unitholder.
15. USE OF MANAGER'S NAME. Trust may use the name
"SteinRoe Investment Trust" and the Fund names listed in
Schedule A or any other name derived from the name "Stein Roe &
Farnham" only for so long as this Agreement or any extension,
renewal, or amendment hereof remains in effect, including any
similar agreement with any organization which shall have
succeeded to the business of Manager as investment adviser. At
such time as this Agreement or any extension, renewal or
amendment hereof, or such other similar agreement shall no
longer be in effect, Trust will cease to use any name derived
from the name "Stein Roe & Farnham" or otherwise connected with
Manager, or with any organization which shall have succeeded to
Manager's business as investment adviser.
16. REFERENCES AND HEADINGS. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to
refer to this Agreement as amended or affected by any such
amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this
Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
Dated: August 15, 1995
STEINROE INVESTMENT TRUST
Attest: By: TIMOTHY K. ARMOUR
Timothy K. Armour
JILAINE HUMMEL BAUER President
Jilaine Hummel Bauer
Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: HANS P. ZIEGLER
Hans P. Ziegler
KEITH J. RUDOLF Chief Executive Officer
Keith J. Rudolf
Secretary
<PAGE>
STEIN ROE INVESTMENT TRUST
MANAGEMENT AGREEMENT
SCHEDULE A
The Funds of the Trust currently subject to this Agreement are
as follows:
Effective End of
Date Initial Term
--------- ------------
Stein Roe Capital Opportunities Fund 9/1/95 6/30/97
Stein Roe Growth Opportunities Fund 5/9/97** 6/30/98
Stein Roe Large Company Focus Fund 4/30/98*** 6/30/99
Stein Roe Asia Pacific Fund 10/19/98 6/30/99
Stein Roe Small Company Growth Fund 2/2/99 6/30/00
Dated: February 2, 1999
STEINROE INVESTMENT TRUST
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President, Mutual Funds Division
Nicolette D. Parrish
Assistant Secretary
*Commencing operations on February 27, 1997.
**Commencing operations on June 30, 1997.
***Commencing operations on or about June 26, 1998.
<PAGE>
STEIN ROE INVESTMENT TRUST
MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of this Agreement shall be
calculated in accordance with the following schedules applicable
to average daily net assets of the Funds:
Schedule for Stein Roe Capital Opportunities Fund, Stein Roe Growth
Opportunities Fund, and Stein Roe Large Company Focus Fund
- -------------------------------------------------------------------
0.750% on first $500 million
0.700% on next $500 million
0.650% on next $500 million
0.600% thereafter
Schedule for Stein Roe Asia Pacific Fund
- ----------------------------------------
0.95% of average daily net assets
Schedule for Stein Roe Small Company Growth Fund
- ------------------------------------------------
0.85% of average daily net assets
Dated: February 2, 1999
STEINROE INVESTMENT TRUST
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President, Mutual Funds Division
Nicolette D. Parrish
Assistant Secretary
<PAGE>
MANAGEMENT AGREEMENT
BETWEEN
SR&F BASE TRUST AND
STEIN ROE & FARNHAM INCORPORATED
SR&F BASE TRUST, a Massachusetts common law trust
registered under the Investment Company Act of 1940 ("1940 Act")
as an open-end diversified management investment company
("Trust"), hereby appoints STEIN ROE & FARNHAM INCORPORATED, a
Delaware corporation registered under the Investment Advisers
Act of 1940 as an investment adviser, of Chicago, Illinois
("Manager"), to furnish investment advisory and portfolio
management services with respect to the portion of its assets
represented by the shares of beneficial interest issued in each
series listed in Schedule A hereto, as such schedule may be
amended from time to time (each such series hereinafter referred
to as "Portfolio"). Trust and Manager hereby agree that:
1. Investment Management Services. Manager shall manage
the investment operations of Trust and each Portfolio, subject
to the terms of this Agreement and to the supervision and
control of Trust's Board of Trustees ("Trustees"). Manager
agrees to perform, or arrange for the performance of, the
following services with respect to each Portfolio:
(a) to obtain and evaluate such information relating to
economies, industries, businesses, securities and commodities
markets, and individual securities, commodities and indices
as it may deem necessary or useful in discharging its
responsibilities hereunder;
(b) to formulate and maintain a continuing investment program in
a manner consistent with and subject to (i) Trust's agreement
and declaration of trust and by-laws; (ii) the Portfolio's
investment objectives, policies, and restrictions as set
forth in written documents furnished by the Trust to Manager;
(iii) all securities, commodities, and tax laws and
regulations applicable to the Portfolio and Trust; and (iv)
any other written limits or directions furnished by the
Trustees to Manager;
(c) unless otherwise directed by the Trustees, to determine from
time to time securities, commodities, interests or other
investments to be purchased, sold, retained or lent by the
Portfolio, and to implement those decisions, including the
selection of entities with or through which such purchases,
sales or loans are to be effected;
(d) to use reasonable efforts to manage the Portfolio so that it
will qualify as a regulated investment company under
subchapter M of the Internal Revenue Code of 1986, as
amended;
(e) to make recommendations as to the manner in which voting
rights, rights to consent to Trust or Portfolio action, and
any other rights pertaining to Trust or the Portfolio shall
be exercised;
(f) to make available to Trust promptly upon request all of the
Portfolio's records and ledgers and any reports or
information reasonably requested by the Trust; and
(g) to the extent required by law, to furnish to regulatory
authorities any information or reports relating to the
services provided pursuant to this Agreement.
Except as otherwise instructed from time to time by the
Trustees, with respect to execution of transactions for Trust on
behalf of a Portfolio, Manager shall place, or arrange for the
placement of, all orders for purchases, sales, or loans with
issuers, brokers, dealers or other counterparties or agents
selected by Manager. In connection with the selection of all
such parties for the placement of all such orders, Manager shall
attempt to obtain most favorable execution and price, but may
nevertheless in its sole discretion as a secondary factor,
purchase and sell Portfolio securities from and to brokers and
dealers who provide Manager with statistical, research and other
information, analysis, advice, and similar services. In
recognition of such services or brokerage services provided by a
broker or dealer, Manager is hereby authorized to pay such
broker or dealer a commission or spread in excess of that which
might be charged by another broker or dealer for the same
transaction if the Manager determines in good faith that the
commission or spread is reasonable in relation to the value of
the services so provided.
Trust hereby authorizes any entity or person associated
with Manager that is a member of a national securities exchange
to effect any transaction on the exchange for the account of a
Portfolio to the extent permitted by and in accordance with
Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a2-2(T) thereunder. Trust hereby consents to the retention by
such entity or person of compensation for such transactions in
accordance with Rule 11a-2-2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate
orders for its other customers together with any securities of
the same type to be sold or purchased for Trust or one or more
Portfolios in order to obtain best execution or lower brokerage
commissions. In such event, Manager shall allocate the shares
so purchased or sold, as well as the expenses incurred in the
transaction, in a manner it considers to be equitable and fair
and consistent with its fiduciary obligations to Trust, the
Portfolios, and Manager's other customers.
Manager shall for all purposes be deemed to be an
independent contractor and not an agent of Trust and shall,
unless otherwise expressly provided or authorized, have no
authority to act for or represent Trust in any way.
2. Administrative Services. Manager shall supervise the
business and affairs of Trust and each Portfolio and shall
provide such services and facilities as may be required for
effective administration of Trust and Portfolios as are not
provided by employees or other agents engaged by Trust; provided
that Manager shall not have any obligation to provide under this
Agreement any such services which are the subject of a separate
agreement or arrangement between Trust and Manager, any
affiliate of Manager, or any third party administrator
("Administrative Agreements").
3. Use of Affiliated Companies and Subcontractors. In
connection with the services to be provided by Manager under
this Agreement, Manager may, to the extent it deems appropriate,
and subject to compliance with the requirements of applicable
laws and regulations and upon receipt of written approval of the
Trustees, make use of (i) its affiliated companies and their
directors, trustees, officers, and employees and (ii)
subcontractors selected by Manager, provided that Manager shall
supervise and remain fully responsible for the services of all
such third parties in accordance with and to the extent provided
by this Agreement. All costs and expenses associated with
services provided by any such third parties shall be borne by
Manager or such parties.
4. Expenses Borne by Trust. Except to the extent
expressly assumed by Manager herein or under a separate
agreement between Trust and Manager and except to the extent
required by law to be paid by Manager, Manager shall not be
obligated to pay any costs or expenses incidental to the
organization, operations or business of the Trust. Without
limitation, such costs and expenses shall include but not be
limited to:
(a) all charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities,
and other property;
(b) all charges for equipment or services used for obtaining
price quotations or for communication between Manager or
Trust and the custodian, transfer agent or any other agent
selected by Trust;
(c) all charges for administrative and accounting services
provided to Trust by Manager, or any other provider of such
services;
(d) all charges for services of Trust's independent auditors and
for services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated
with Manager, all expenses incurred in connection with their
services to Trust, and all expenses of meetings of the
Trustees or committees thereof;
(f) all expenses incidental to holding meetings of holders of
units of interest in the Trust ("Unitholders"), including
printing and of supplying each record-date Unitholder with
notice and proxy solicitation material, and all other proxy
solicitation expense;
(g) all expenses of printing of annual or more frequent
revisions of Trust prospectus(es) and of supplying each then-
existing Unitholder with a copy of a revised prospectus;
(h) all expenses related to preparing and transmitting
certificates representing Trust shares;
(i) all expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees;
(j) all brokers' commissions and other normal charges incident
to the purchase, sale, or lending of portfolio securities;
(k) all taxes and governmental fees payable to Federal, state or
other governmental agencies, domestic or foreign, including
all stamp or other transfer taxes;
(l) all expenses of registering and maintaining the registration
of Trust under the 1940 Act and, to the extent no exemption
is available, expenses of registering Trust's shares under
the 1933 Act, of qualifying and maintaining qualification of
Trust and of Trust's shares for sale under securities laws of
various states or other jurisdictions and of registration and
qualification of Trust under all other laws applicable to
Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust or a
Portfolio; and
(n) all fees, dues and other expenses incurred by Trust in
connection with membership of Trust in any trade association
or other investment company organization.
5. Allocation of Expenses Borne by Trust. Any expenses
borne by Trust that are attributable solely to the organization,
operation or business of a Portfolio shall be paid solely out of
Portfolio assets. Any expense borne by Trust which is not
solely attributable to a Portfolio, nor solely to any other
series of shares of Trust, shall be apportioned in such manner
as Manager determines is fair and appropriate, or as otherwise
specified by the Board of Trustees.
6. Expenses Borne by Manager. Manager at its own expense
shall furnish all executive and other personnel, office space,
and office facilities required to render the investment
management and administrative services set forth in this
Agreement. Manager shall pay all expenses of establishing,
maintaining, and servicing the accounts of Unitholders in each
Portfolio listed in Exhibit A. However, Manager shall not be
required to pay or provide any credit for services provided by
Trust's custodian or other agents without additional cost to
Trust.
In the event that Manager pays or assumes any expenses of
Trust or a Portfolio not required to be paid or assumed by
Manager under this Agreement, Manager shall not be obligated
hereby to pay or assume the same or similar expense in the
future; provided that nothing contained herein shall be deemed
to relieve Manager of any obligation to Trust or a Portfolio
under any separate agreement or arrangement between the parties.
7. Management Fee. For the services rendered, facilities
provided, and charges assumed and paid by Manager hereunder,
Trust shall pay to Manager out of the assets of each Portfolio
fees at the annual rate for such Portfolio as set forth in
Schedule B to this Agreement. For each Portfolio, the
management fee shall accrue on each calendar day, and shall be
payable monthly on the first business day of the next succeeding
calendar month. The daily fee accrual shall be computed by
multiplying the fraction of one divided by the number of days in
the calendar year by the applicable annual rate of fee, and
multiplying this product by the net assets of the Portfolio,
determined in the manner established by the Board of Trustees,
as of the close of business on the last preceding business day
on which the Portfolio's net asset value was determined.
8. Retention of Sub-Adviser. Subject to obtaining the
initial and periodic approvals required under Section 15 of the
1940 Act, Manager may retain one or more sub-advisers at
Manager's own cost and expense for the purpose of furnishing one
or more of the services described in Section 1 hereof with
respect to Trust or one or more Portfolios. Retention of a sub-
adviser shall in no way reduce the responsibilities or
obligations of Manager under this Agreement, and Manager shall
be responsible to Trust and its Portfolios for all acts or
omissions of any sub-adviser in connection with the performance
of Manager's duties hereunder.
9. Non-Exclusivity. The services of Manager to Trust
hereunder are not to be deemed exclusive and Manager shall be
free to render similar services to others.
10. Standard of Care. Neither Manager, nor any of its
directors, officers, stockholders, agents or employees shall be
liable to Trust or its Unitholders for any error of judgment,
mistake of law, loss arising out of any investment, or any other
act or omission in the performance by Manager of its duties
under this Agreement, except for loss or liability resulting
from willful misfeasance, bad faith or gross negligence on
Manager's part or from reckless disregard by Manager of its
obligations and duties under this Agreement.
11. Amendment. This Agreement may not be amended as to
Trust or any Portfolio without the affirmative votes (a) of a
majority of the Board of Trustees, including a majority of those
Trustees who are not "interested persons" of Trust or of
Manager, voting in person at a meeting called for the purpose of
voting on such approval, and (b) of a "majority of the
outstanding shares" of Trust or, with respect to an amendment
affecting an individual Portfolio, a "majority of the
outstanding shares" of that Portfolio. The terms "interested
persons" and "vote of a majority of the outstanding shares"
shall be construed in accordance with their respective
definitions in the 1940 Act and, with respect to the latter
term, in accordance with Rule 18f-2 under the 1940 Act.
12. Effective Date and Termination. This Agreement shall
become effective as to any Portfolio as of the effective date
for that Portfolio specified in Schedule A hereto. This
Agreement may be terminated at any time, without payment of any
penalty, as to any Portfolio by the Board of Trustees of Trust,
or by a vote of a majority of the outstanding shares of that
Portfolio, upon at least sixty (60) days' written notice to
Manager. This Agreement may be terminated by Manager at any
time upon at least sixty (60) days' written notice to Trust.
This Agreement shall terminate automatically in the event of its
"assignment" (as defined in the 1940 Act). Unless terminated as
hereinbefore provided, this Agreement shall continue in effect
with respect to any Portfolio until the end of the initial term
applicable to that Portfolio specified in Schedule A and
thereafter from year to year only so long as such continuance is
specifically approved with respect to that Portfolio at least
annually (a) by a majority of those Trustees who are not
interested persons of Trust or of Manager, voting in person at a
meeting called for the purpose of voting on such approval, and
(b) by either the Board of Trustees of Trust or by a "vote of a
majority of the outstanding shares" of the Portfolio.
13. Ownership of Records; Interparty Reporting. All
records required to be maintained and preserved by Trust
pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the
1940 Act or other applicable laws or regulations which are
maintained and preserved by Manager on behalf of Trust and any
other records the parties mutually agree shall be maintained by
Manager on behalf of Trust are the property of Trust and shall
be surrendered by Manager promptly on request by Trust; provided
that Manager may at its own expense make and retain copies of
any such records.
Trust shall furnish or otherwise make available to Manager
such copies of the financial statements, proxy statements,
reports, and other information relating to the business and
affairs of each Unitholder in a Portfolio as Manager may, at any
time or from time to time, reasonably require in order to
discharge its obligations under this Agreement.
Manager shall prepare and furnish to Trust as to each
Portfolio statistical data and other information in such form
and at such intervals as Trust may reasonably request.
14. Non-Liability of Trustees and Unitholders. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Portfolio thereof) and shall
not be binding upon any Trustee, officer, employee, agent or
Unitholder of Trust. Neither the authorization of any action by
the Trustees or Unitholders of Trust nor the execution of this
Agreement on behalf of Trust shall impose any liability upon any
Trustee or any Unitholder.
15. Use of Manager's Name. Trust may use the name "SR&F
Base Trust" and the Portfolio names listed in Schedule A or any
other name derived from the name "Stein Roe & Farnham" only for
so long as this Agreement or any extension, renewal, or
amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to
the business of Manager as investment adviser. At such time as
this Agreement or any extension, renewal or amendment hereof, or
such other similar agreement shall no longer be in effect, Trust
will cease to use any name derived from the name "Stein Roe &
Farnham" or otherwise connected with Manager, or with any
organization which shall have succeeded to Manager's business as
investment adviser.
16. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to
refer to this Agreement as amended or affected by any such
amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this
Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
Dated: August 15, 1995
SR&F BASE TRUST
By: TIMOTHY K. ARMOUR, President
Attest:
JILAINE HUMMEL BAUER
Secretary
STEIN ROE & FARNHAM INCORPORATED
By: HANS P. ZIEGLER
Chief Executive Officer
Attest:
KEITH J. RUDOLF
Secretary
<PAGE>
SR&F BASE TRUST
MANAGEMENT AGREEMENT
SCHEDULE A
The Portfolios of SR&F Base Trust currently subject to this
Agreement are as follows:
Effective End of
Date Initial Term
----------- ------------
SR&F Municipal Money Market Portfolio 9/28/95 6/30/97
SR&F High Yield Portfolio 11/01/96 6/30/98
SR&F Growth & Income Portfolio 02/03/97 6/30/98
SR&F International Portfolio 02/03/97 6/30/98
SR&F Growth Investor Portfolio 02/03/97 6/30/98
SR&F Special Venture Portfolio 02/03/97 6/30/98
SR&F Balanced Portfolio 02/03/97 6/30/98
SR&F Growth Stock Portfolio 02/03/97 6/30/98
SR&F Special Portfolio 02/03/97 6/30/98
SR&F Intermediate Bond Portfolio 02/02/98 6/30/99
SR&F Income Portfolio 02/02/98 6/30/99
SR&F High-Yield Municipals Portfolio 02/02/98 6/30/99
SR&F Cash Reserves Portfolio 03/02/98 6/30/99
Dated: March 2, 1998
SR&F BASE TRUST
By: TIMOTHY K. ARMOUR
Timothy K. Armour
President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
By: HANS P. ZIEGLER
Chief Executive Officer
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
<PAGE>
SR&F BASE TRUST
MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of the SR&F Base Trust
Management Agreement shall be calculated in accordance with the
following schedule(s):
SR&F MUNICIPAL MONEY MARKET PORTFOLIO
0.250% of average net assets
SR&F INTERMEDIATE BOND PORTFOLIO
0.35% of average net assets
SR&F HIGH YIELD PORTFOLIO
0.500% on first $500 million,
0.475% thereafter
SR&F HIGH-YIELD MUNICIPALS PORTFOLIO
0.450% up to $100 million,
0.425% next $100 million,
0.400% thereafter
SR&F INCOME PORTFOLIO
0.50% up to $100 million,
0.475% thereafter
SR&F CASH RESERVES PORTFOLIO
0.250% up to $500 million,
0.225% thereafter
SR&F INTERNATIONAL PORTFOLIO
0.85% of average net assets
SR&F SPECIAL VENTURE PORTFOLIO
0.75% of average net assets
SR&F SPECIAL PORTFOLIO
0.75% up to $500 million,
0.70% next $500 million,
0.65% next $500 million,
0.60% thereafter
SR&F BALANCED PORTFOLIO
0.55% up to $500 million,
0.50% next $500 million,
0.45% thereafter
SR&F GROWTH & INCOME PORTFOLIO,
SR&F GROWTH INVESTOR PORTFOLIO, AND
SR&F GROWTH STOCK PORTFOLIO
0.60% up to $500 million,
0.55% next $500 million,
0.50% thereafter
Dated: March 2, 1998
SR&F BASE TRUST
By: TIMOTHY K. ARMOUR
Timothy K. Armour
President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
By: HANS P. ZIEGLER
Chief Executive Officer
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
<PAGE>
STEIN ROE INVESTMENT TRUST
NEWPORT PACIFIC MANAGEMENT SUB-ADVISORY AGREEMENT
AGREEMENT dated as of October 19, 1998, among STEIN ROE
INVESTMENT TRUST, a Massachusetts common law trust (the "Trust"),
with respect to STEIN ROE ASIA PACIFIC FUND (the "Fund"), STEIN
ROE & FARNHAM INCORPORATED, a Delaware corporation ("Adviser"),
and NEWPORT PACIFIC MANAGEMENT, INC., a California corporation
(the "Sub-Adviser").
In consideration of the promises and covenants herein, the
parties agree as follows:
1. The Sub-Adviser will manage the investment of the
assets of the Fund in accordance with its investment objectives,
policies, and limitations set forth in the Trust's prospectus and
statement of additional information, as amended form time to time,
and will perform the other services herein set forth, subject to
the supervision of the Adviser and the Board of Trustees of the
Trust.
2. In carrying out its investment management obligations,
the Sub-Adviser shall:
(a) evaluate such economic, statistical and financial
information and undertake such investment research
as it shall believe advisable;
(b) purchase and sell securities and other investments
for the Fund in accordance with the procedures
described in the Trust's prospectus and statement of
additional information; and
(c) report results to the Adviser and to the Board of
Trustees.
3. The Sub-Adviser shall be free to render similar services
to others so longer as its services hereunder are not impaired
thereby.
4. The Adviser shall pay the Sub-Adviser a monthly fee at
the annual rate of 0.55% of the average daily net assets of the
Fund for managing the investment of the assets of the Fund as
provided in paragraph 1 above. Such fee shall be paid in arrears
on or before the 10th day of the next following calendar month.
5. This Agreement shall become effective on the date first
written above, and (a) unless otherwise terminated, shall continue
until June 30, 1999, and from year to year thereafter so long as
approved annually in accordance with the 1940 Act; (b) may be
terminated without penalty on sixty days' written notice to the
Sub-Adviser either by vote of the Board of Trustees or by vote of
a majority of the outstanding voting securities of the Fund; (c)
shall automatically terminate in the event of its assignment; and
(d) may be terminated without penalty by the Sub-Adviser on sixty
days' written notice to the Trust.
6. This Agreement may be amended in accordance with the 1940
Act.
7. For the propose of the Agreement, the terms "vote of a
majority of the outstanding shares," "affiliated person" and
"assignment" shall have their respective meanings defined in the
1940 Act and exemptions and interpretations issued by the
Securities and Exchange Commission under the 1940 Act.
8. In the absence of willful misfeasance, bad faith and
gross negligence on the part of the Sub-Adviser, or reckless
disregard of its obligations and duties hereunder, the Sub-Adviser
shall not be subject to any liability to the Trust or the Fund, to
any shareholder of the Trust or the Fund or to any other person,
firm or organization, for any act or omission in the course of or
connection with rendering services hereunder.
9. The Fund may use the name "Newport," or any name derived
from that name, only for so long as this Agreement or any
extension, renewal, or amendment hereof remains in effect,
including any similar agreement with any organization that shall
have succeeded to the business of the Sub-Adviser. At such times
as this Agreement or any extension, renewal or amendment hereof,
or each such other similar successor organization agreement shall
no longer be in effect, the Fund will cease to use any name
derived from the name "Newport," any name similar thereto, or any
other name indicating that it is advised by or otherwise connected
with the Sub-Adviser, or with any organization which shall have
succeeded to the Sub-Adviser's business as an investment adviser.
10. The Sub-Adviser is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the
Declaration of Trust of the Trust and agrees that obligations
assumed by the Trust pursuant to this Agreement shall be limited
in all cases to the assets of the Fund. The Sub-Adviser further
agrees that it shall not seek satisfaction of any such obligation
from the shareholders of the Fund, nor from the Trustees or any
individual Trustee of the Trust.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
STEIN ROE ASIA PACIFIC FUND
BY: STEIN ROE INVESTMENT TRUST
BY: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President
NEWPORT PACIFIC MANAGEMENT, INC.
BY: JAMES CARLSON
Name: James Carlson
Title: Chief Operating Officer
STEIN ROE & FARNHAM INCORPORATED
BY: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President, Mutual Funds
Division
<PAGE>
UNDERWRITING AGREEMENT BETWEEN
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
AND LIBERTY FINANCIAL INVESTMENTS, INC.
THIS UNDERWRITING AGREEMENT ("Agreement"), made as of
the 1st day of January 1998 by and between Stein Roe Income
Trust, Stein Roe Investment Trust, Stein Roe Municipal
Trust, Stein Roe Trust and Stein Roe Institutional Trust,
each a business trust organized and existing under the laws
of the Commonwealth of Massachusetts (hereinafter
collectively referred to as the "Fund"), and Liberty
Financial Investments, Inc., a corporation organized and
existing under the laws of the State of Delaware
(hereinafter call the "Distributor").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end
management investment company registered under the
Investment Company Act of 1940, as amended ("ICA-40"); and
WHEREAS, the Distributor is registered as a broker-
dealer under the Securities Exchange Act of 1934, as amended
("SEA-34") and, the laws of each state (including the
District of Columbia and Puerto Rico) in which it engages in
business to the extent such law requires, and is a member of
the National Association of Securities Dealers ("NASD")
(such registrations and membership are referred to
collectively as the "Registrations"); and
WHEREAS, the Fund desires the Distributor to act as the
distributor in the public offering of its shares of
beneficial interest (hereinafter called "Shares");
WHEREAS, the Fund shall pay all charges of its
transfer, shareholder recordkeeping, dividend disbursing and
redemption agents, if any; all expenses of notices, proxy
solicitation material and reports to shareholders; all
expenses of preparation and printing of annual or more
frequent revisions of the Fund's Prospectus and Statement of
Additional Information and of supplying copies thereof to
shareholders; all expenses of registering and maintaining
the registration of the Fund under ICA-40 and of the Fund's
Shares under the Securities Act of 1933, as amended ("SA-
33"); all expenses of qualifying and maintaining
qualification of such Fund and of the Fund's Shares for sale
under securities laws of various states or other
jurisdictions and of registration and qualification of the
Fund under all laws applicable to the Fund or its business
activities;
WHEREAS, Stein Roe & Farnham Incorporated, investment
adviser to the Funds, shall pay all expenses incurred in the
sale and promotion of the Fund;
NOW, THEREFORE, in consideration of the premises and
the mutual promises hereinafter set forth, the parties
hereto agree as follows:
1. Appointment. The Fund appoints Distributor to act
as principal underwriter (as such term is defined in
Sections 2(a)(29) of ICA-40) of its Shares.
2. Delivery of Fund Documents. The Fund has furnished
Distributor with properly certified or authenticated copies
of each of the following in effect on the date hereof and
shall furnish Distributor from time to time properly
certified or authenticated copies of all amendments or
supplements thereto:
(a) Agreement and Declaration of Trust;
(b) By-Laws;
(c) Resolutions of the Board of Trustees of the Fund
(hereinafter referred to as the "Board") selecting
Distributor as distributor and approving this form
of agreement and authorizing its execution.
The Fund shall furnish Distributor promptly with copies
of any registration statements filed by it with the
Securities and Exchange Commission ("SEC") under SA-33 or
ICA-40, together with any financial statements and exhibits
included therein, and all amendments or supplements thereto
hereafter filed.
The Fund also shall furnish Distributor such other
certificates or documents which Distributor may from time to
time, in its discretion, reasonably deem necessary or
appropriate in the proper performance of its duties.
3. Solicitation of Orders for Purchase of Shares.
(a) Subject to the provisions of Paragraphs 4, 5 and 7
hereof, and to such minimum purchase requirements as may
from time to time be indicated in the Fund's Prospectus,
Distributor is authorized to solicit, as agent on behalf of
the Fund, unconditional orders for purchases of the Fund's
Shares authorized for issuance and registered under SA-33,
provided that:
(1) Distributor shall act solely as a disclosed agent
on behalf of and for the account of the Fund;
(2) In all cases except for orders transmitted through
the FundSERV/NSCC system, the Fund or its transfer
agent shall receive directly from investors all
payments for the purchase of the Fund's Shares and
also shall pay directly to shareholders amounts
due to them for the redemption or repurchase of
all the Fund's Shares with Distributor having no
rights or duties to accept such payment or to
effect such redemptions or repurchases;
(3) The Distributor shall receive directly from
financial intermediaries which trade through the
FundSERV/NSCC system all payments for the purchase
of the Fund's Shares and shall also cause to be
paid directly to such intermediaries amounts due
to them for the redemption or repurchase of all
the Fund's Shares. The Distributor shall be
acting as the Fund's agent in accepting payment
for the orders and not be acting in a principal
capacity.
(4) Distributor shall confirm all orders received for
purchase of the Fund's Shares which confirmation
shall clearly state (i) that Distributor is acting
as agent of the Fund in the transaction (ii) that
all certificates for redemption, remittances, and
registration instructions should be sent directly
to the Fund, and (iii) the Fund's mailing address;
(5) Distributor shall have no liability for payment
for purchases of the Fund's Shares it sells as
agent; and
(5) Each order to purchase Shares of the Fund received
by Distributor shall be subject to acceptance by
an officer of the Fund in Chicago and entry of the
order on the Fund's records or shareholder
accounts and is not binding until so accepted and
entered.
The purchase price to the public of the Fund's Shares
shall be the public offering price as defined in Paragraph 6
hereof.
(b) In consideration of the rights granted to the
Distributor under this Agreement, Distributor will use its
best efforts (but only in states in which Distributor may
lawfully do so) to solicit from investors unconditional
orders to purchase Shares of the Fund. The Fund shall make
available to the Distributor without cost to the Distributor
such number of copies of the Fund's currently effective
Prospectus and Statement of Additional Information and
copies of all information, financial statements and other
papers which the Distributor may reasonably request for use
in connection with the distribution of Shares.
3.A. Selling Agreements. Distributor is authorized,
as agent on behalf of each Fund, to enter into agreements
with other broker-dealers providing for the solicitation of
unconditional orders for purchases of Fund's Shares
authorized for issuance and registered under SA-33. All
such agreements shall be either in the form of agreement
attached hereto or in such other form as may be approved by
the officers of the Fund ("Selling Agreement"). All
solicitations made by other broker-dealers pursuant to a
Selling Agreement shall be subject to the same terms of this
Agreement which apply to solicitations made by Distributor.
4. Solicitation of Orders to Purchase Shares by Fund.
The rights granted to the Distributor shall be non-exclusive
in that the Fund reserves the right to solicit purchases
from, and sell its Shares to, investors. Further, the Fund
reserves the right to issue Shares in connection with the
merger or consolidation of any other investment company,
trust or personal holding company with the Fund, or the
Fund's acquisition, by the purchase or otherwise, of all or
substantially all of the assets of an investment company,
trust or personal holding company, or substantially all of
the outstanding shares or interests of any such entity. Any
right granted to Distributor to solicit purchases of Shares
will not apply to Shares that may be offered by the Fund to
shareholders by virtue of their being shareholders of the
Fund.
5. Shares Covered by this Agreement. This Agreement
relates to the solicitation of orders to purchase Shares
that are duly authorized and registered and available for
sale by the Fund, including redeemed or repurchased Shares
if and to the extent that they may be legally sold and if,
but only if, the Fund authorizes the Distributor to sell
them.
6. Public Offering Price. All solicitations by the
Distributor pursuant to this Agreement shall be for orders
to purchase Shares of the Fund at the public offering price.
The public offering price for each accepted subscription for
the Fund's Shares will be the net asset value per share next
determined by the Fund after it accepts such subscription.
The net asset value per share shall be determined in the
manner provided in the Fund's Agreement and Declaration of
Trust as now in effect or as they may be amended, and as
reflected in the Fund's then current Prospectus and
Statement of Additional Information.
7. Suspension of Sales. If and whenever the
determination of the Fund's net asset value is suspended and
until such suspension is terminated, no further orders for
Shares shall be accepted by the Fund except such
unconditional orders placed with the Fund and accepted by it
before the suspension. In addition, the Fund reserves the
right to suspend sales of Shares if, in the judgement of the
Board of the Fund, it is in the best interest of the Fund to
do so, such suspension to continue for such period as may be
determined by the Board of the Fund; and in that event, (i)
at the direction of the Fund, Distributor shall suspend its
solicitation of orders to purchase Shares of the Fund until
otherwise instructed by the Fund and (ii) no orders to
purchase Shares shall be accepted by the Fund while such
suspension remains in effect unless otherwise directed by
its Board.
8. Authorized Representations. No Fund is authorized
by the Distributor to give on behalf of the Distributor any
information or to make any representations other than the
information and representations contained in the Fund's
registration statement filed with the SEC under SA-33 and/or
ICA-40 as it may be amended from time to time.
Distributor is not authorized by the Fund to give on
behalf of the Fund any information or to make any
representations in connection with the sale of Shares other
than the information and representations contained in the
Fund's registration statement filed with the SEC under SA-33
and/or ICA-40, covering Shares, as such registration
statement or the Fund's prospectus may be amended or
supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on
behalf of the Fund or approved by the Fund for the
Distributor's use. No person other than Distributor is
authorized to act as principal underwriter (as such term is
defined in ICA-40, as amended) for the Funds.
9. Registration of Additional Shares. The Fund hereby
agrees to register either (i) an indefinite number of Shares
pursuant to Rule 24f-2 under ICA-40, or (ii) a definite
number of Shares as the Fund shall deem advisable pursuant
to Rule 24e-2 under ICA-40, as amended. The Fund will, in
cooperation with the Distributor, take such action as may be
necessary from time to time to qualify the Shares (so
registered or otherwise qualified for sale under SA-33), in
any state mutually agreeable to the Distributor and the
Fund, and to maintain such qualification; provided, however,
that nothing herein shall be deemed to prevent the Fund from
registering its shares without approval of the Distributor
in any state it deems appropriate.
10. Conformity With Law. Distributor agrees that in
soliciting orders to purchase Shares it shall duly conform
in all respects with applicable federal and state laws and
the rules and regulations of the NASD. Distributor will use
its best efforts to maintain its Registrations in good
standing during the term of this Agreement and will promptly
notify the Fund and Stein Roe & Farnham Incorporated in the
event of the suspension or termination of any of the
Registrations.
11. Independent Contractor. Distributor shall be an
independent contractor and neither the Distributor, nor any
of its officers, directors, employees, or representatives is
or shall be an employee of the Fund in the performance of
Distributor's duties hereunder. Distributor shall be
responsible for its own conduct and the employment, control,
and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents and
employees and agrees to pay all employee taxes thereunder.
12. Indemnification. Distributor agrees to indemnify
and hold harmless the Fund and each of the members of its
Board and its officers, employees and representatives and
each person, if any, who controls the Fund within the
meaning of Section 15 of SA-33 against any and all losses,
liabilities, damages, claims and expenses (including the
reasonable costs of investigating or defending any alleged
loss, liability, damage, claim or expense and reasonable
legal counsel fees incurred in connection therewith) to
which the Fund or such of the members of its Board and of
its officers, employees, representatives, or controlling
person or persons may become subject under SA-33, under any
other statute, at common law, or otherwise, arising out of
the acquisition of any Shares of the Fund by any person
which (i) may be based upon any wrongful act by Distributor
or any of Distributor's directors, officers, employees or
representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact
contained in a registration statement, Prospectus, Statement
of Additional Information, shareholder report or other
information covering Shares of the Fund filed or made public
by the Fund or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement
or omission was made in reliance upon information furnished
to the Fund by Distributor in writing. In no case (i) is
Distributor's indemnity in favor of the Fund, or any person
indemnified, to be deemed to protect the Fund or such
indemnified person against any liability to which the Fund
or such person would otherwise be subject by reason of
willful misfeasance, bad faith, or negligence in the
performance of its or his duties or by reason of its or his
reckless disregard of its or his obligations and duties
under this Agreement or (ii) is Distributor to be liable
under its indemnity agreement contained in this paragraph
with respect to any claim made against the Fund or any
person indemnified unless the Fund or such person, as the
case may be, shall have notified Distributor in writing of
the claim within a reasonable time after the summons, or
other first written notification, giving information of the
nature of the claim served upon the Fund or upon such person
(or after the Fund or such person shall have received notice
of such service on any designated agent). However, failure
to notify Distributor of any such claim shall not relieve
Distributor from any liability which Distributor may have to
the Fund or any person against whom such action is brought
otherwise than on account of Distributor's indemnity
agreement contained in this Paragraph.
Distributor shall be entitled to participate, at its
own expense, in the defense, or, if Distributor so elects,
to assume the defense of any suit brought to enforce any
such claim but, if Distributor elects to assume the defense,
such defense shall be conducted by legal counsel chosen by
Distributor and satisfactory to the persons indemnified who
are defendants in the suit. In the event that Distributor
elects to assume the defense of any such suit and retain
such legal counsel, persons indemnified who are defendants
in the suit shall bear the fees and expenses of any
additional legal counsel retained by them. If Distributor
does not elect to assume the defense of any such suit,
Distributor will reimburse persons indemnified who are
defendants in such suit for the reasonable fees of any legal
counsel retained by them in such litigation.
The Fund agrees to indemnify and hold harmless
Distributor and each of its directors, officers, employees,
and representatives and each person, if any, who controls
Distributor within the meaning of Section 15 of SA-33
against any and all losses, liabilities, damages, claims or
expenses (including the damage, claim or expense and
reasonable legal counsel fees incurred in connection
therewith) to which Distributor or such of its directors,
officers, employees, representatives or controlling person
or persons may become subject under SA-33, under any other
statute, at common law, or otherwise arising out of the
acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Fund or any of the
members of the Fund's Board, or the Fund's officers,
employees or representatives other than Distributor, or (ii)
may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, Prospectus, Statement of Additional Information,
shareholder report or other information covering Shares
filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading
unless such statement or omission was made in reliance upon
information furnished by Distributor to the Fund. In no
case (i) is the Fund's indemnity in favor of the Distributor
or any person indemnified to be deemed to protect the
Distributor or such indemnified person against any liability
to which Distributor or such indemnified person would
otherwise be subject by reason of willful misfeasance, bad
faith, or negligence in the performance of its or his duties
or by reason of its or his reckless disregard of its or his
obligations and duties under this Agreement, or (ii) is the
Fund to be liable under its indemnity agreement contained in
this Paragraph with respect to any claim made against
Distributor or any person indemnified unless Distributor, or
such person, as the case may be, shall have notified the
Fund in writing of the claim within a reasonable time after
the summons, or other first written notification, giving
information of the nature of the claim served upon
Distributor or upon such person (or after Distributor or
such person shall have received notice of such service on
any designated agent). However, failure to notify a Fund of
any such claim shall not relieve the Fund from any liability
which the Fund may have to Distributor or any person against
whom such action is brought otherwise than on account of the
Fund's indemnity agreement contained in this Paragraph.
The Fund shall be entitled to participate, at its own
expense, in the defense or, if the Fund so elects, to assume
the defense of any suit brought to enforce such claim but,
if the Fund elects to assume the defense, such defense shall
be conducted by legal counsel chosen by the Fund and
satisfactory to the persons indemnified who are defendants
in the suit. In the event that the Fund elects to assume
the defense of any such suit and retain such legal counsel,
the persons indemnified who are defendants in the suit shall
bear the fees and expenses of any additional legal counsel
retained by them. If the Fund does not elect to assume the
defense of any such suit, the Fund will reimburse the
persons indemnified who are defendants in such suit for the
reasonable fees and expenses of any legal counsel retained
by them in such litigation.
13. Duration and Termination of this Agreement. With
respect to the Fund and the Distributor, this Agreement
shall become effective upon its execution ("Effective Date")
and unless terminated as provided herein, shall remain in
effect through June 30, 1998, and from year to year
thereafter, but only so long as such continuance is
specifically approved at least annually (a) by a vote of
majority of the members of the Board of the Fund who are not
interested persons of the Distributor or of the Fund, voting
in person at a meeting called for the purpose of voting on
such approval, and (b) by the vote of either the Board of
the Fund or a majority of the outstanding shares of the
Fund. This Agreement may be terminated by and between an
individual Fund and Distributor at any time, without the
payment of any penalty (a) on 60 days' written notice, by
the Board of the Fund or by a vote of a majority of the
outstanding Shares of the Fund, or by Distributor, or (b)
immediately, on written notice by the Board of the Fund, in
the event of termination or suspension of any of the
Registrations. This Agreement will automatically terminate
in the event of its assignment. In interpreting the
provisions of this Paragraph 13, the definitions contained
in Section 2(a) of ICA-40 (particularly the definitions of
"interested person", "assignment", and "majority of the
outstanding shares") shall be applied.
14. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by each
party against which enforcement of the change, waiver,
discharge, or termination is sought. If the Fund should at
any time deem it necessary or advisable in the best
interests of the Fund that any amendment of this Agreement
be made in order to comply with the recommendations or
requirements of the SEC or any other governmental authority
or to obtain any advantage under state or Federal tax laws
and notifies Distributor of the form of such amendment, and
the reasons therefor, and if Distributor should decline to
assent to such amendment, the Fund may terminate this
Agreement forthwith. If Distributor should at any time
request that a change be made in the Fund's Agreement and
Declaration of Trust or By-Laws or in its methods of doing
business, in order to comply with any requirements of
Federal law or regulations of the SEC, or of a national
securities association of which Distributor is or may be a
member, relating to the sale of Shares, and the Fund should
not make such necessary changes within a reasonable time,
Distributor may terminate this Agreement forthwith.
15. Liability. It is understood and expressly
stipulated that neither the shareholders of the Fund nor the
members of the Board of the Fund shall be personally liable
hereunder. The obligations of the Fund are not personally
binding upon, nor shall resort to the private property of,
any of the members of the Board of the Fund, nor of the
shareholders, officers, employees or agents of the Fund, but
only the Fund's property shall be bound. A copy of the
Declaration of Trust and of each amendment thereto has been
filed by the Trust with the Secretary of State of The
Commonwealth of Massachusetts and with the Clerk of the City
of Boston, as well as any other governmental office where
such filing may from time to time be required.
16. Miscellaneous. The captions in this Agreement are
included for convenience or reference only, and in no way
define or limit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
17. Notice. Any notice required or permitted to be
given by a party to this Agreement or to any other party
hereunder shall be deemed sufficient if delivered in person
or sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to each such other
party at the address provided below or to the last address
furnished by each such other party to the party giving
notice.
If to the Fund: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
If to Distributor: One Financial Center
Boston, Massachusetts 02111
Attn: Secretary
If to Stein Roe & Farnham
Incorporated: One South Wacker Drive
Chicago, Illinois 60606
Attn: Secretary
LIBERTY FINANCIAL INVESTMENTS, INC.
By: TIMOTHY K. ARMOUR
ATTEST:
MARJORIE M. PLUSKOTA
Assistant Clerk
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
By: HANS P. ZIEGLER
ATTEST:
NICOLETTE D. PARRISH
Asst. Secretary
ACKNOWLEDGED BY: STEIN ROE & FARNHAM INCORPORATED
By: HANS P. ZIEGLER
Chief Executive Officer
ATTEST:
NICOLETTE D. PARRISH
Asst. Secretary
<PAGE>
Revised Exhibit A to Underwriting Agreement
Between Stein Roe Investment Trust, Stein Roe Income Trust,
Stein Roe Municipal Trust, Stein Roe Trust and Stein Roe
Institutional Trust and Liberty Funds Distributor, Inc.
(f/k/a Liberty Financial Investments, Inc.)
STEIN ROE INCOME TRUST STEIN ROE INVESTMENT TRUST
Stein Roe Income Fund Stein Roe Growth & Income Fund
Stein Roe High Yield Fund Stein Roe International Fund
Stein Roe Intermediate Bond Stein Roe Young Investor Fund
Fund Stein Roe Special Venture Fund
Stein Roe Cash Reserves Fund Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Capital
Opportunities Fund
STEIN ROE MUNICIPAL TRUST Stein Roe Special Fund
Stein Roe Managed Municipals Stein Roe Growth Opportunities
Fund Fund
Stein Roe Municipal Money Stein Roe Large Company Focus
Market Fund Fund
Stein Roe High Yield Munici- Stein Roe Asia Pacific
pals Fund Fund
Stein Roe Intermediate Stein Roe Small Company Growth Fund
Municipals Fund Stein Roe Growth Investor Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
Dated: March 31, 1999
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE TRUST
STEIN ROE INSTITUTIONAL TRUST
By: THOMAS W. BUTCH
Thomas W. Butch, President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
LIBERTY FUNDS DISTRIBUTOR, INC.
By: NANCY L. CONLIN
Name: Nancy L. Conlin
Title: Clerk
Attest:
KEVIN JACOBS
Name: Kevin Jacobs
Title: Asst. Clerk
<PAGE>
LIBERTY FINANCIAL INVESTMENTS, INC.
STEIN ROE ____ FUND
SELLING AGREEMENT
Dear Sirs:
As the principal underwriter of Stein Roe ____ Fund
(the "Fund"), a series of Stein Roe _____ Trust (the
"Trust"), a Massachusetts business trust registered under
the Investment Company Act of 1940 as an open-end investment
company, we invite you as agent for your customer to
participate in the distribution of shares of beneficial
interest in the Fund ("Shares"), subject to the following
terms and conditions:
1. We hereby grant to you the right to make Shares
available to, and to solicit orders to purchase Shares by,
the public, subject to applicable federal and state law, the
Agreement and Declaration of Trust and By-laws of the Trust,
and the current Prospectus and Statement of Additional
Information relating to the Fund attached hereto (the
"Prospectus"). You will forward to us or to the Trust's
transfer agent, as we may direct from time to time, all
orders for the purchase of Shares obtained by you, subject
to such terms and conditions as to the form of payment,
minimum initial and subsequent purchase and otherwise, and
in accordance with such procedures and directions, as we may
specify from time to time. All orders are subject to
acceptance by an authorized officer of the Trust in Chicago
and the Trust reserves the right in its sole discretion to
reject any order. Share purchases are not binding on the
Trust until accepted and entered on the books of the Fund.
No Share purchase shall be effective until payment is
received by the Trust in the form of Federal funds. If a
Share purchase by check is cancelled because the check does
not clear, you will be responsible for any loss to the Fund
or to us resulting therefrom.
2. The public offering price of the Shares shall be
the net asset value per share of the outstanding Shares
determined in accordance with the then current Prospectus.
No sales charge shall apply.
3. As used in this Agreement, the term "Registration
Statement" with regard to the Fund shall mean the
Registration Statement most recently filed by the Trust with
the Securities and Exchange Commission and effective under
the Securities Act of 1933, as such Registration Statement
is amended by any amendments thereto at the time in effect,
and the terms "prospectus" and "statement of additional
information" with regard to the Fund shall mean the form of
prospectus and statement of additional information relating
to the Fund as attached hereto filed by the Trust as part of
the Registration Statement, as such form of prospectus and
statement of additional information may be amended or
supplemented from time to time.
4. You hereby represent that you are and will remain
during the term of this Agreement duly registered as a
broker-dealer under the Securities Exchange Act of 1934 and
under the securities laws of each state where your
activities require such registration, and that you are and
will remain during the term of this Agreement a member in
good standing of the National Association of Securities
Dealers, Inc. ("NASD"). In the conduct of your activities
hereunder, you will abide by all applicable rules and
regulations of the NASD, including, without limitation, Rule
26 of the Rules of Fair Practice of the NASD as in effect
form time to time, and all applicable federal and state
securities laws, including without limitation, the
prospectus delivery requirements of the Securities Act of
1933.
5. This Agreement is subject to the right of the Trust
at any time to withdraw all offerings of the Shares by
written notice to us at our principal office. You
acknowledge that the Trust will not issue certificates
representing Shares.
6. Your obligations under this Agreement are not to be
deemed exclusive, and you shall be free to render similar
services to others so long as your services hereunder are
not impaired thereby.
7. You will sell Shares only to residents of states or
other jurisdictions where we have notified you that the
Shares have been registered or qualified for sale to the
public or are exempt from such qualification or
registration. Neither we nor the Trust will have any
obligation to register or qualify the Shares in any
particular jurisdiction. We shall not be liable or
responsible for the issue, form validity, enforceability or
value of the Shares or for any matter in connection
therewith, except lack of good faith on our part, and no
obligation not expressly assumed by us in this Agreement
shall be implied therefrom. Nothing herein contained,
however, shall be deemed to be a condition, stipulation or
provision binding any person acquiring any Shares to waive
compliance with any provision of the Securities Act of 1933,
or to relieve the parties hereto from any liability arising
thereunder.
8. You are not authorized to make any representations
concerning the Fund, the Trust or the Shares except those
contained in the then current prospectus and statement of
additional information relating to the Fund, or printed
information issued by the Trust or by us as information
supplemental to such prospectus and statement of additional
information. We will supply you with a reasonable number of
copies of the then current prospectus and statement of
additional information of the Fund, and reasonable
quantities of any supplemental sales literature, sales
bulletins, and additional information as may be issued by us
or the Trust. You will not use any advertising or sales
material relating to the Fund other than materials supplied
by the Trust or us, unless such other material is approved
in writing by us in advance of such use.
9. You will not have any authority to act as agent for
the Trust, for us or for any other dealer. All transactions
between you and us contemplated by this Agreement shall be
as agents.
10. Either party to this Agreement may terminate this
Agreement by giving written notice to the other. Such
notice shall be deemed to have been given on the date on
which it is either delivered personally to the other party,
is mailed postpaid or delivered by telecopier to the other
party at its address listed below. This Agreement may be
amended by us at any time, and your placing of an order
after the effective date of any such amendment shall
constitute your acceptance thereof.
Liberty Financial Investments, Inc. Dealer
One Financial Center ________________
Boston, Massachusetts 02211 ________________
Attention: ________________ ________________
Telecopier: _______________
with copy to:
Stein Roe _____ Trust
One South Wacker Drive
Chicago, Illinois 60606
Attention: Secretary
Telecopier: ________
11. This Agreement constitutes the entire agreement
between you and us relating to the subject matter hereof and
supersedes all prior or written agreements between us. This
Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts and shall be binding upon
both parties hereto when signed by us and accepted by you in
the space provided below.
Very truly yours,
LIBERTY FINANCIAL INVESTMENTS, INC.
BY: ____________________
The undersigned hereby accepts your invitation to
participate in the distribution of Shares and agrees to each
of the terms and conditions set forth in this letter.
___________________________
Dealer
Date: ____________________ By: _______________________
(Signature of Officer)
Pay Office of Dealer:
__________________________ ___________________________
Street Address (Print Name of Officer)
__________________________
City/State/Zip
__________________________
Telephone Number
<PAGE>
RESTATED AGENCY AGREEMENT
This agreement, effective this 1st day of August, 1995,
amends and restates (a) the agreement dated December 31, 1987,
as amended by amendments dated May 1, 1995, July 29, 1992,
February 1, 1991, and August 1, 1988 (the "Agreement") by and
between STEINROE MUNICIPAL TRUST, a Massachusetts business
trust, and STEINROE SERVICES INC. (hereinafter referred to as
"SSI"), a Massachusetts corporation and (b) the agreement
dated February 11, 1986, as amended by amendments dated May 1,
1995, July 29, 1992, February 1, 1991, August 1, 1988, and
March 3, 1987, among STEINROE INCOME TRUST and STEINROE
INVESTMENT TRUST, each a Massachusetts business trust, and
SSI. [SteinRoe Municipal Trust, SteinRoe Income Trust, and
SteinRoe Investment Trust are referred to hereinafter
individually as a "Trust" and collectively as the "Trusts."]
WITNESSETH:
1. APPOINTMENT. Each Trust hereby appoints SSI,
effective as of the date hereof, as its agent in connection
with the issue, redemption, and transfer of shares of
beneficial interest of the Trust, including shares of each
respective series of the Trust (hereinafter called the
"Shares"), and to process investment income and capital gain
distributions with respect to such Shares, to perform certain
duties in connection with the Trust's withdrawal and other
plans, to mail proxy and other materials to the Trust's
shareholders upon the terms and conditions set forth herein,
and to perform such other and further duties as are agreed
upon between the parties from time to time.
2. ACKNOWLEDGMENT. SSI acknowledges that it has
received from each Trust the following documents:
A. A certified copy of the Agreement and Declaration of
Trust and any amendments thereto;
B. A certified copy of the By-Laws of Trust;
C. A certified copy of the resolution of its Board of
Trustees authorizing this Agreement;
D. Specimens of all forms of Share certificates as
approved by its Board of Trustees with a statement
of its Secretary certifying such approval;
E. Samples of all account application forms and other
documents relating to shareholders accounts,
including terms of its Systematic Withdrawal Plan;
F. Certified copies of any resolutions of the Board of
Trustees authorizing the issue of authorized but
unissued Shares;
G. An opinion of counsel for the Trust with respect to
the validity of the Shares, the status of
repurchased Shares and the number of Shares
<PAGE> 2
with respect to which a Registration Statement has
been filed and is in effect;
H. A certificate of incumbency bearing the signatures of
the officers of the Trust who are authorized to sign
Share certificates, to sign checks and to sign
written instructions to SSI.
3. ADDITIONAL DOCUMENTATION. Each Trust will also furnish
SSI from time to time with the following documents:
A. Certified copies of each amendment to its Agreement
and Declaration of Trust and By-Laws;
B. Each Registration Statement filed with the Securities
and Exchange Commission and amendments thereto with
respect to its Shares;
C. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions
to SSI;
D. Specimens of all new Share certificates accompanied
by certified copies of Board of Trustees resolutions
approving such forms;
E. Forms and terms with respect to new plans that may be
instituted and such other certificates, documents or
opinions that SSI may from time to time, in its
discretion, deem necessary or appropriate in the
proper performance of its duties.
4. AUTHORIZED SHARES. Each Trust certifies to SSI that,
as of the date of this Agreement, it may issue unlimited
number of Shares of the same class in one or more series as
the Board of Trustees may authorize. The series authorized as
of the date of this Agreement are listed in Schedule B.
5. REGISTRATION OF SHARES. SSI shall record issuances
of Shares based on the information provided by each Trust.
SSI shall have no obligation to a Trust, when countersigning
and issuing Shares, whether evidenced by certificates or in
uncertificated form, to take cognizance of any law relating to
the issuance and sale of Shares, except as specifically agreed
in writing between SSI and the Trusts, and shall have no such
obligation to any shareholder except as specifically provided
in Sections 8-205, 8-208 and 8-406 of the Uniform Commercial
Code. Based on data provided by each Trust of Shares
registered or qualified for sale in various states, SSI will
advise the Trusts when any sale of Shares to a resident of a
state would result in total sales in that state in excess of
the amount registered or qualified in that state.
6. SHARE CERTIFICATES. Each Trust shall supply SSI with
a sufficient supply of serially pre-numbered blank Share
certificates, which shall contain the appropriate series
designation, if applicable. Such blank certificates shall be
properly prepared and signed by authorized officers of Trust
manually or, if authorized by Trust, by facsimile and shall
bear the seal of Trust or a facsimile thereof. Notwithstanding
the death, resignation, or removal of any officer authorized to
sign
<PAGE> 3
certificates, SSI may continue to countersign certificates
which bear the manual or facsimile signature of such officer
as directed by Trust.
7. CHECKS. Each Trust shall supply SSI with a
sufficient supply of serially pre-numbered blank checks for
the dividend bank accounts and for the principal bank accounts
of Trust. SSI shall prepare and sign by facsimile signature
plates, bearing the facsimiles of the signatures of authorized
signatories, dividend account checks for payment of ordinary
income dividends and capital gain distributions and principal
account checks for payment of redemptions of Shares, including
those in connection with the Trusts' Withdrawal Plans, refunds
on subscriptions and other capital payments on Shares, in
accordance with this Agreement. SSI shall hold signature
facsimile plates for this purpose and shall exercise
reasonable care in their transportation, storage or use. SSI
may deliver such signature facsimile plates to an agent or
contractor to perform the services described herein, but shall
not be relieved of its duties hereunder by any such delivery.
8. RECORDKEEPING. SSI shall maintain records showing
for each shareholder's account in the appropriate series of
each Trust, the following information and such other
information as may be mutually agreed to from time to time by
the Trusts and SSI:
A. To the extent such information is provided by
shareholders: name(s), address, alphabetical sort
key, client number, tax identification number,
account number, the existence of any special service
or transaction privilege offered by the Trust and
applicable to the shareholder's account including
but not limited to the telephone exchange privilege,
and other similar information;
B. Number of Shares held;
C. Amount of accrued dividends;
D. Information for the current calendar year regarding
the account of the shareholder, including
transactions to date, date of each transaction,
price per share, amount and type of each purchase
and redemption, transfers, amount of accrued
dividends, the amount and date of all distributions
paid, price per share, and amount of all
distributions reinvested;
E. Any stop order currently in effect against the
shareholder's account;
F. Information with respect to any withholding for the
calendar year as required under applicable Federal
and state laws, rules and regulations;
G. The certificate number and date of issuance of each
Share certificate outstanding, if any, representing
a shareholder's Shares in each account, the number
of Shares so represented, and any stop legend on
each certificate;
<PAGE> 4
H. Information with respect to gross proceeds of all
sales transactions as required under applicable
Federal income tax laws, rules and regulations; and
I. Such other information as may be agreed upon by the
Trusts and SSI from time to time.
SSI shall maintain for any account that is closed
("Closed Account") the aforesaid records through the June of
the calendar year following the year in which the account is
closed or such other period as may be mutually agreed to from
time to time by such Trust and SSI.
9. ADMINISTRATIVE SERVICES. SSI shall furnish the
following administrative services to each Trust:
A. Coordination of the printing and dissemination of
Prospectuses, financial reports, and other
shareholder information as are agreed to by SSI and
the Trust from time to time.
B Maintenance of data and statistics and preparation of
reports for internal use and for distribution to the
Board of Trustees concerning shareholder transaction
and service activity.
C. Handling of requests from third parties involving
shareholder records, including, but not limited to,
record subpoenas, tax levies, and orders issued by
courts or administrative or regulatory agencies.
D. Development and monitoring of shareholder service
programs that may be offered from time to time,
including, but not limited to, individual retirement
account and tax-qualified retirement plan programs,
checkwriting redemption privileges, automatic
purchase, exchange and redemption programs, audio
response services, programs involving electronic
transfer of funds, and lock box facilities.
E. Provision of facilities, hardware and software
systems, and equipment in Chicago (and other
locations mutually agreed to by SSI and the Trusts)
to meet the needs of shareholders and prospective
shareholders, including, but not limited to, walk-in
facilities, toll-free telephone numbers, electronic
audio and other communication, accounting and
recordkeeping systems to handle shareholder
transaction, inquiry and other activity, and to
provide management and other personnel required to
staff such facilities and administer such systems.
10. SHAREHOLDER SERVICES. SSI shall provide the
following services as are requested by a Trust in addition to
the transactional and recordkeeping services provided for
elsewhere herein:
A. Responding to communications from shareholders or
their representatives or agents concerning any
matters pertaining to shares
<PAGE> 5
registered in their names, including, but not
limited to, (i) net asset value and average cost
basis information; (ii) shareholder services, plans,
options, and privileges; and (ii) with respect to
the series of the Trust represented by such shares,
information concerning investment policies,
portfolio holdings, performance, and shareholder
distributions and the classification thereof for tax
purposes.
B. Handling of shareholder complaints and correspondence
directed to or brought to the attention of SSI.
C. Soliciting and tabulating proxies of shareholders and
answering questions concerning the subject matter
thereof.
D. Under the direction of the officers of the Trust,
administering a program whereby shareholders whose
mail from the Trust is returned are identified,
current address information for such shareholders is
solicited, and shares and dividend or redemption
proceeds owned by shareholders who cannot be located
are escheated to the proper authorities in
accordance with applicable laws and regulations.
E. Preparing and disseminating special data, notices,
reports, programs, and literature for certain
categories of shareholders based on account
characteristics, or for shareholders generally in
light of industry, market, product, tax, or legal
developments.
F. Assisting any institutional servicing or
recordkeeping agent engaged by SSI and approved by
the Trust in the development, implementation, and
maintenance of special programs and systems to
enhance overall shareholder servicing capability,
consisting of:
(i) Product and system training for personnel of
the institutional servicing agent.
(ii) Joint programs with the institutional servicing
agent to develop customized shareholder
software systems, account statements, and other
information and reports.
(iii) Electronic and telephonic systems and other
technological means by which shareholder
information, account data, and cost of
securities may be exchanged among SSI, the
institutional servicing agent, and their
respective agents or vendors.
G. Furnishing sub-accounting services for retirement
plan shareholders and other shareholders
representing group relationships with special
recordkeeping needs.
H. Providing and supervising the services of employees
whose principal responsibility and function will be
to preserve and strengthen the Trust's relationships
with its shareholders.
I. Such other shareholder and shareholder-related
services, whether similar to or different from those
described in this section as the parties may from
time to time agree in writing.
<PAGE> 6
11. PURCHASES. Upon receipt of a request for purchase
of Shares containing data required by a Trust for processing
of a purchase transaction, SSI will:
A. Compute the number of Shares of the appropriate
series of the Trust to which the purchaser is
entitled and the dollar value of the transaction
according to the price of such Shares as provided by
the Trust for purchases made at that time and date;
B. In the case of a new shareholder, establish an
account for the shareholder, including the
information specified in Section 8 hereof; in the
case of an Exchange as described in Section 14 below
by telephone or telegraph, the account shall have
exactly the same registration as that of the account
of the other series of the Trust or any other series
of another Trust from which the Exchange was made;
C. Transmit to the shareholder by mail or electronically
a confirmation of the purchase, as directed by the
Trust, in such format as agreed to by SSI and the
Trusts, including all information called for
thereby, and, in the case of a purchase for a new
account, shall also furnish the shareholder a
current Prospectus of the applicable series;
D. If applicable, prepare a refund check in the amount
of any overpayment of the subscription price and
deliver it to the Trust for signing; and
E. If a certificate is requested by the shareholder,
prepare, countersign, issue and mail, not earlier
than 30 days after the date of purchase, to the
shareholder at his address of record a Share
certificate for such full Shares purchased.
12. REDEMPTIONS. Instructions to redeem Shares of any
series of a Trust, including instructions for an Exchange as
described in Section 14 below, may be furnished in written
form, or by other means, including but not limited to
telephonic or electronic transmission or by writing a special
form of check, as may be mutually agreed to from time to time
by each Trust and SSI. Upon receipt by SSI of instructions to
redeem which are in "good order," as defined in the Prospectus
of the applicable series and satisfactory to SSI, SSI will:
A. Compute the amount due for the Shares and the total
number of all the Shares redeemed in accordance with
the price per Share as provided by the Trust for
redemptions of such Shares at that time and date,
and transmit to the shareholder by mail or
electronically a confirmation of the redemption, as
directed by the Trust, in such format as agreed to
by SSI and the Trust, including all information
called for thereby;
B. Confirmations of redemptions that result in the
payment of accrued dividends shall indicate the
amount of such payment and any amounts withheld;
<PAGE> 7
C. In the case of a redemption in written form other
than by Exchange, SSI shall transmit to the
shareholder by check or, as may be mutually agreed
to by the Trust and SSI and requested by the
shareholder, electronic means, an amount equal to
the redemption price and any payment of accrued
dividends occasioned by the redemption, net of any
amounts withheld under applicable Federal and state
laws, rules and regulations on or before the seventh
calendar day following the date on which
instructions to redeem in "good order" as defined in
the Prospectus of the applicable series, which
instructions are satisfactory to SSI as received by
SSI. In the case of an Exchange, SSI shall use the
proceeds of the redemption, net of any amounts
withheld under applicable Federal and state laws,
rules and regulations, to purchase Shares of any
other series of the Trust or any other series of
another Trust selected by the person requesting the
Exchange;
D. In the case of Exchanges by telephone or telegraph,
redemptions by telephone or electronic transmission
and redemptions by writing a special form of check,
SSI shall deliver to the Trust, on the business day
following the effective date of such transaction, a
listing of such transaction data in a format agreed
to by the Trusts and SSI from time to time;
E. If any Share certificate or instruction to redeem
tendered to SSI is not satisfactory to SSI, it shall
promptly notify the Trust of such fact together with
the reason therefor;
F. SSI shall cancel promptly Share certificates received
in proper form for redemption and issue, countersign
and mail new Share certificates for the Shares
represented by certificates so cancelled which are
not redeemed;
G. SSI shall advise the Trust and refuse to process any
redemption by electronic transmission or Exchange by
telephone or telegraph or redemptions by writing a
special form of check, if such transaction would
result in the redemption of Shares represented by
outstanding certificates, unless otherwise
instructed by an officer of the Trust.
13. ADMINISTRATION OF WITHDRAWAL PLANS. A redemption
made pursuant to a Withdrawal Plan offered by the Trusts shall
be effected by SSI at the net asset value per Share of the
appropriate series of the Trust on the twentieth day or the
next business day of the month in which the recipient is
scheduled to receive the withdrawal payment. SSI shall
prepare and mail to the recipient on or before the seventh
calendar day after the date of redemption a check in the
amount of each required payment, net of any amounts withheld
under applicable Federal and state laws, rules and
regulations, and also furnish the shareholder a confirmation
of the redemption as described in Section 12 above.
14. EXCHANGES. Upon receipt by SSI of a request to
exchange Shares of a series of a Trust held in a shareholder's
account for those of any other series of the
<PAGE> 8
Trust or any other series of another Trust or vice versa in
written form, by telephone or telegraph or by other electronic
means, containing data required by the Trust for processing
such a transaction, SSI will:
A. If the request is by telephone, telegraph or other
electronic means, verify that the shareholder has
furnished both the series of a Trust from and to
which the Exchange is to be made authorization, in a
form acceptable to such Trust, to accept Exchange
instructions for his account by such means.
B. Process a redemption of the Shares of the series of
the Trust to be redeemed in connection with the
Exchange and apply the proceeds thereof, net of any
amounts withheld under applicable Federal and state
laws, rules and regulations, to purchase shares of
any other series of the Trust or any other series of
another Trust being acquired in accordance with the
respective Trust's redemption and purchase policies
and Sections 11 and 12 of this Agreement.
Any redemption and purchase pursuant to an Exchange shall
be effected as of the time and prices applicable to an order
for redemption or purchase received at the time the request
for Exchange is received.
15. TRANSFER OF SHARES. Upon receipt by SSI of a
request for a transfer of Shares of any series of a Trust, and
receipt of a Share certificate for transfer or an order for
the transfer of Shares in the case of an uncertificated
account, in either case with such endorsements, instruments of
assignment or evidence of succession as may be required by SSI
and accompanied by payment of such transfer taxes, if any, as
may be applicable, and satisfaction of any other conditions
for registration of transfers contained in the Trust's By-
Laws, Prospectuses, and Statements of Additional Information,
SSI will verify the balance of Shares of such series of the
Trust in the account; record the transfer of ownership of such
Shares in its Share certificate and shareholder records for
such series; cancel Share certificates for Shares surrendered
for transfer; establish an account pursuant to Section 8 for
the transferee if a new shareholder; prepare, countersign and
mail new Share certificates for a like number of Shares in the
case of a certificated account; and transmit to the
shareholder by mail or electronically confirmation of the
transfer for each account affected, in a format agreed to by
SSI and the Trust, including all information called for
thereby. SSI shall be responsible for determining that
certificates, orders for transfer, and supporting documents,
if any, are in proper legal form for the transfer of Shares.
16. CHANGES IN SHAREHOLDER RECORDS. Changes in items of
information specified in Section 8 not relating to change in
ownership of Shares will be made by SSI upon receipt of a
request for such change in a format agreed to by SSI and the
Trusts. In the case of any change that SSI and the Trusts
agree requires confirmation, a confirmation of such change in
a format agreed to by SSI and the Trusts shall be transmitted
to the shareholder by mail or electronically.
<PAGE> 9
17. REFUSAL TO REDEEM OR TRANSFER. SSI reserves the
right to refuse to redeem or transfer Shares until reasonably
satisfied that the endorsement on the Share certificates or
written request presented is valid and genuine, and for such
purpose may require where reasonably necessary or appropriate
a guarantee of signature. SSI also reserves the right to
refuse to redeem or transfer Shares until satisfied that the
requested transfer or redemption is legally authorized, and it
shall incur no liability for the refusal in good faith to make
transfers or redemptions which it, in its judgment, deems
improper or unauthorized. Notwithstanding the foregoing, SSI
shall redeem or transfer Shares even though not satisfied as
to the endorsement or legal authority if it is first
indemnified to its reasonable satisfaction against all
expenses and liabilities to which it might, in its judgment,
be subjected by such action.
18. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. Each
Trust will promptly inform SSI of the declaration of any
dividend or other distribution with respect to Shares of any
series of the Trust, including the amount of distribution, the
amount of withholding under applicable Federal and state laws,
rules and regulations, if any, dividend number, if any, record
date, ex-dividend date, payable date and price at which
dividends or other distributions are to be reinvested.
In the case of any series of a Trust for which dividends
shall be declared daily and paid monthly or quarterly, SSI
will credit the dividend payable to each shareholder thereof
to a dividend account of the shareholder and will provide the
Trust on each business day with reports of the total amount of
dividends credited and such other data as are agreed upon by
the Trust and SSI. Promptly after the payable date for the
Trust, SSI will provide the Trust with reports showing the
accounts which have been paid a dividend or other
distribution, the amount received by each account, the amount
withheld as required under applicable Federal and state laws,
rules and regulations, if any, the amount of the dividend or
distribution paid in cash or reinvested in Shares, and the
total amount of cash and Shares required for payment of the
dividend or other distribution.
In the case of each other series of the Trust, SSI will
provide the Trust promptly following the record date therefor
with reports of the total amount of dividends payable with
respect thereto and such other data as are agreed to by the
Trusts and SSI. Promptly after the payable date therefor, SSI
will provide the Trust with reports showing the accounts which
are to be paid a dividend or other distribution, the amount to
be received by each account, the amount to be withheld as
required under applicable Federal and state laws, rules and
regulations, if any, whether such dividend or distribution is
to be paid in cash or reinvested in Shares, and the total
amount of cash and Shares required for the payment of such
dividend or distribution.
At times agreed to by the Trusts and SSI, SSI will
transmit by mail or electronically to shareholders the
proceeds of such dividend or other distribution and
confirmation thereof. Where distributions are reinvested, the
price and date of reinvestment will be those supplied by the
Trusts. Confirmations will be prepared by SSI in a format
agreed to by SSI and the Trusts.
<PAGE> 10
19. WITHHOLDING. Under applicable Federal and state
laws, rules and regulations requiring withholding from
dividends and other distributions and payments to
shareholders, SSI shall be responsible for determining the
amount to be withheld and the Trusts shall forward that amount
to SSI, which will deposit said amount with, and report said
amount to, the proper governmental agency as required
thereunder. Liability for any amounts withheld, whether or
not actually withheld, and for any penalties which may be
imposed upon the payor for failure to withhold, report, or
deposit the proper amount, and for any interest due on said
amount, shall be borne by the Trusts and SSI as provided in
Section 37 hereof.
Upon receipt of a certificate from a shareholder
pertaining to withholding (including exemptions therefrom)
containing such information as required by a Trust of the
shareholder under applicable Federal and state laws, rules and
regulations, SSI shall promptly process the certificate, which
shall become effective as soon as reasonably possible after
receipt by SSI, but no later than may be required by
applicable Federal and state laws, rules and regulations.
At the time a shareholder account is established with a
Trust, the Trust shall be responsible for (i) soliciting the
shareholder's tax identification number in the manner and form
required under applicable Federal and state laws, rules and
regulations; (ii) identifying and rejecting an obviously
incorrect number (as defined under applicable Federal and
state laws, rules and regulations) and (iii) furnishing to SSI
the number and any related information provided by or on
behalf of the shareholder. SSI shall be responsible for any
subsequent communications to the shareholder that may be
required in this regard.
In the case of withholding an amount in excess of the
proper amount from a payment made by or on behalf of a Trust
to a shareholder except as otherwise provided by applicable
Federal and state laws, rules and regulations, SSI, at the
direction of the Trust, shall immediately adjust the
shareholder's account, as well as succeeding deposits;
provided, however, that when an adjustment would result in an
adjustment across calendar years, SSI shall not be required to
make such adjustment.
In the case of (i) a failure to withhold the proper
amount from a dividend or other distribution or payment made
by or on behalf of any series of a Trust to a shareholder or
(ii) any penalties attributable to (a) a failure to withhold
the proper amount or (b) the shareholder's failure to provide
the Trust or SSI with correct information requested in order
to comply with withholding requirements under applicable
Federal and state laws, rules and regulations, SSI, at the
direction of the Trust, shall immediately cause the redemption
of Shares from the shareholder's account with such series
having a value not exceeding the sum of such deficit amount
and applicable penalties and apply the proceeds to reimburse
whomever has borne the expense resulting from the
shareholder's failure. If the value of the Shares in the
shareholder's account with the series is less than the sum of
the deficit amount and applicable penalties, SSI may cause the
redemption of Shares having a value not exceeding such
difference from any account, including a joint
<PAGE> 11
account, of the shareholder with any other series of the Trust
or any other series of another Trust, subject to the consent
of the other Trust, and apply the proceeds to reimburse
whoever has borne the expense resulting from the shareholder's
failure.
20. MAILINGS. SSI shall take all steps required,
including the addressing of envelopes, to make the following
additional mailings to shareholders:
A. SSI shall mail financial reports furnished by each
series of a Trust to shareholders as requested and
will mail the current Prospectus for each series of
the Trust to shareholders of such series once each
year;
B. SSI shall mail to shareholders of each series of a
Trust proxy material for each duly scheduled meeting
of shareholders of that series;
C. SSI shall include in any of the above mailings such
other enclosures as are compatible for mailing
purposes as reasonably requested by the Trusts;
D. SSI shall make such other mailings upon such terms
and conditions and for such fees as are agreed to by
SSI and each Trust from time to time.
The Trusts shall deliver all material required to be
furnished to SSI for any scheduled mailing sufficiently in
advance of the date for such mailing, so that SSI may effect
the scheduled mailing.
21. TAX INFORMATION RETURNS AND REPORTS. SSI will
prepare and file with the appropriate governmental agencies,
such information, returns and reports as are required to be so
filed for reporting (i) dividends and other distributions
made, (ii) amounts withheld on dividends and other
distributions and payments under applicable Federal and state
laws, rules and regulations, and (iii) gross proceeds of sales
transactions as required and as the Trusts shall direct SSI.
Further, SSI shall prepare and deliver to the Trusts reports
showing amounts withheld from dividends and other
distributions and payments made for each series of the Trusts.
22. INFORMATION TO BE FURNISHED TO SHAREHOLDERS. SSI
will prepare and transmit to each shareholder of each Trust
annually in such format as is reasonably requested by the
Trust, and as agreed to by SSI, information returns and
reports for reporting dividends and other distribution and
payments, amounts withheld, if any, and gross proceeds of
sales transactions as required under applicable Federal and
state laws, rules and regulations.
23. STOP ORDERS. Upon receipt of a request from a Trust
or a shareholder that a "stop" should be placed on the
shareholder's account, SSI will maintain a record of such
"stop" and notify the Trust if any transaction request is
received from a shareholder which would reduce the number of
Shares in an account on which a "stop" has been placed. SSI
will inform the Trusts of any information SSI receives
relating to a "stop." SSI shall also maintain for the Trusts
the record of share certificates on which a "stop" has been
placed, it being understood that a
<PAGE> 12
certificate "stop" does not mean a "stop" on the shareholder's
entire account to which a certificate may relate.
24. SHARE SPLITS AND SHARE DIVIDENDS. If a Trust elects
to declare a Share dividend or split for any series, the
services and fees with respect thereto will be negotiated by
the Trust and SSI.
25. REPLACEMENT OF SHARE CERTIFICATES. SSI may issue a
new Share certificate in place of a Share certificate
represented as not having been received or as having been
lost, stolen, seized or destroyed, upon receiving instructions
from a Trust and indemnity satisfactory to SSI, and may issue
a new Share certificate in exchange for, and upon surrender
of, an identifiable mutilated Share certificate. Such
instructions from the Trust shall be in such form as has been
approved by its Board of Trustees and shall be in accordance
with the provisions of its By-Laws governing such matters.
26. UNCLAIMED AND UNDELIVERED SHARE CERTIFICATES. Where
a Share certificate is in the possession of SSI for any
reason, and has not been claimed by the record holder or
cannot be delivered to the record holder, SSI shall cancel
said certificate and reflect as uncertificated Shares on the
shareholder's account record the Shares represented by said
cancelled certificate.
27. REPORTS AND FILES. SSI shall maintain the files and
furnish the statistical and other information listed on
Schedule C. However, SSI reserves the right to delete, change
or add to the files maintained and information provided so
long as such deletions, additions or changes do not impair the
receipt of services described elsewhere in this Agreement.
SSI shall also use its best efforts to obtain such additional
statistical and other information as the Trusts may reasonably
request within the capabilities of SSI, for such additional
consideration as may be agreed to by SSI and the Trusts.
28. EXAMINATION OF DAILY TRANSACTIONS. The Trusts will
examine reports reflecting each day's transactions and other
data delivered to it for the accuracy of the transactions
reflected therein and failure to reflect transactions that
should have been reflected therein. If SSI has not received
from a Trust, within five (5) business days after delivery of
such reports to the Trust, written notice, which may be in the
form of an appropriate transaction instruction submitted by
the Trust for the purpose of correcting the error or omission,
as to any errors or omissions which a reasonable inspection
and normal audit and control procedure would reveal, then all
transactions reflected in such reports shall be deemed to be
correct and accepted by the Trust, and SSI shall have no
further responsibility for the omission from or correction,
deletion, or inclusion of any transaction reflected or which
should have been reflected therein, or any liability to the
Trust or any third person on account of such error or
omission.
29. DISPOSITION OF BOOKS, RECORDS, AND CANCELLED SHARE
CERTIFICATES. SSI will periodically send to each Trust all
books, documents, and records of the Trust no longer needed
for current purposes and Share certificates which have been
<PAGE> 13
cancelled in transfer or in redemption; such books, documents,
records, and Share certificates shall be safely stored by the
Trusts for future reference for such period as is required and
by any means permitted by the Investment Company Act of 1940,
or the rules and regulations issued thereunder, or other
relevant statutes. SSI shall have no liability for loss or
destruction of said books, documents, records, or Share
certificates after they are returned to the Trusts.
30. INSPECTION OF SHARE BOOKS. In case of any request
or demand for inspection of the books of a Trust reflecting
ownership of the Shares therein ("Share books"), SSI will make
a reasonable effort to notify the Trust and to secure
instructions as to permitting or refusing such inspection.
SSI reserves the right, however, to exhibit the Share books to
any person in case it is advised by its counsel that it may be
held liable for the failure to exhibit the Share books to such
person.
31. FEES. Each Trust shall pay to SSI for its services
hereunder fees computed as set forth in Schedule A hereto.
32. OUT-OF-POCKET EXPENSES. Each Trust shall reimburse
SSI for any and all out-of-pocket expenses and charges in
performing services under this Agreement (other than charges
for normal data processing services and related software,
equipment and facilities) including, but not limited to,
mailing service, postage, printing of shareholder statements,
the cost of any and all forms of the Trust and other materials
used by SSI in communicating with shareholders of the Trust,
the cost of any equipment or service used for communicating
with the Trust's custodian bank or other agent of the Trust,
and all costs of telephone communication with or on behalf of
shareholders allocated in a manner mutually acceptable to the
Trust and SSI.
33. INSTRUCTIONS, OPINION OF COUNSEL, AND SIGNATURES.
At any time SSI may apply to a duly authorized agent of a
Trust for instructions regarding the Trust, and may consult
counsel for the Trust or its own counsel, in respect of any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or with the advice
or opinion of such counsel. SSI shall be protected in acting
upon any such instruction, advice, or opinion and upon any
other paper or document delivered by the Trust or such counsel
believed by SSI to be genuine and to have been signed by the
proper person or persons and shall not be held to have notice
of any change of authority of any officer or agent of the
Trust, until receipt of written notice thereof from the Trust.
34. TRUSTS' LEGAL RESPONSIBILITY. Each Trust assumes
full responsibility for the preparation, contents, and
distribution of each Prospectus and Statement of Additional
Information of the Trust, and for complying with all
applicable requirements of the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and
any laws, rules, and regulations of government authorities
having jurisdiction over the Trust except that SSI shall be
responsible for all laws, rules and regulations of government
authorities having jurisdiction over transfer agents and their
activities. SSI assumes full responsibility for complying
<PAGE> 14
with due diligence requirements of payors of reportable
dividends and of brokers under the Internal Revenue Code with
respect to shareholder accounts.
35. REGISTRATION OF SSI AS TRANSFER AGENT. SSI
represents that it is registered with the Securities and
Exchange Commission as a transfer agent under Section 17A of
the Securities Exchange Act of 1934 and will notify the Trusts
promptly if such registration is revoked or if any proceeding
is commenced before the Securities and Exchange Commission
which may lead to such revocation.
36. CONFIDENTIALITY OF RECORDS. SSI agrees not to
disclose any information received from the Trusts to any other
customer of SSI or to any other person except SSI's employees
and agents, and shall use its best efforts to maintain such
information as confidential. Upon termination of this
Agreement, SSI shall return to the Trusts all records in the
possession and control of SSI related to the Trusts'
activities, other than SSI's own business records, it being
also understood that any programs and systems used by SSI to
provide the services rendered hereunder will not be given to
the Trusts.
Notwithstanding the foregoing, it is understood and
agreed that SSI may maintain with the Trusts' records
information and data to be utilized by SSI in providing
services to entities serving as trustees and/or custodians of
prototype Tax-Qualified Retirement Plans, IRA Plans, plans for
employees of public schools or tax-exempt organizations, or
other plans which invest in the Shares. In the event that
this Agreement is terminated, SSI may transfer and retain from
the records maintained for the Trusts such information and
data relating to participants in such aforementioned plans as
may be required for SSI to continue providing its services to
such trustees and/or custodians.
37. LIABILITY AND INDEMNIFICATION. SSI shall not be
liable to the Trusts for any action taken or thing done by it
or its agents or contractors on behalf of a Trust in carrying
out the terms and provisions of this Agreement if done in good
faith and without negligence or misconduct on the part of SSI,
its agents or contractors.
Each Trust shall indemnify and hold SSI, and its
controlling persons, if any, harmless from any and all claims,
actions, suits, losses, costs, damages, and expenses,
including reasonable expenses for counsel, incurred by it in
connection with its acceptance of this Agreement, in
connection with any action or omission by it or its agents or
contractors in the performance of its duties hereunder to the
Trusts, or as a result of acting upon any instruction believed
by it to have been executed by a duly authorized agent of a
Trust or as a result of acting upon information provided by a
Trust in form and under policies agreed to by SSI and the
Trusts provided that: (i) to the extent such claims, actions,
suits, losses, costs, damages, or expenses relate solely to a
particular series or group of series of Shares, such
indemnification shall be only out of the assets of that series
or group of series; (ii) this indemnification shall not apply
to actions or omissions constituting negligence or misconduct
of SSI or its agents or contractors, including but not limited
to willful misfeasance, bad faith, or gross negligence in the
performance of their duties, or reckless disregard of their
obligations and duties under this Agreement;
<PAGE> 15
and (iii) SSI shall give a Trust prompt notice and reasonable
opportunity to defend against any such claim or action in its
own name or in the name of SSI.
SSI shall indemnify and hold harmless each Trust from and
against any and all claims, demands, expenses and liabilities
which the Trust may sustain or incur arising out of, or
incurred because of, the negligence or misconduct of SSI or
its agents or contractors, provided that: (i) this
indemnification shall not apply to actions or omissions
constituting negligence or misconduct of the Trust or its
other agents or contractors and (ii) the Trust shall give SSI
prompt notice and reasonable opportunity to defend against any
such claim or action in its own name or in the name of the
Trust.
38. INSURANCE. SSI represents that it has available to
it the insurance coverage set forth on Schedule D hereto, and
agrees to notify the Trusts in advance of any proposed
deletion or reduction in said insurance.
39. FURTHER ASSURANCES. Each party agrees to perform
such further acts and execute such further documents as are
necessary to effectuate the purposes hereof.
40. DUAL INTERESTS. It is understood that some person
or persons may be trustees, directors, officers, or
shareholders of both the Trusts and SSI, and that the
existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder except as
otherwise provided by specific provision of applicable law.
41. AMENDMENT AND TERMINATION. This Agreement may be
modified or amended from time to time by mutual agreement
between the parties hereto and may be terminated by at least
one hundred eighty (180) days' written notice given by one
party to the other. Upon termination hereof, each Trust shall
pay to SSI such compensation as may be due as of the date of
such termination and shall reimburse SSI for its costs,
expenses, and disbursements payable under this Agreement to
such date. In the event that in connection with termination a
successor to any of the duties or responsibilities of SSI
hereunder is designated by the Trust by written notice to SSI,
it shall promptly upon such termination and at the expense of
the Trust, transfer to such successor a certified list of
shareholders of each series of the Trust (with name, address,
and tax identification number), a record of the account of
each shareholder and status thereof, and all other relevant
books, records, and data established or maintained by SSI
under this Agreement and shall cooperate in the transfer of
such duties and responsibilities, including provision, at the
expense of the Trust, for assistance from SSI personnel in the
establishment of books, records, and other data by such
successor.
42. ASSIGNMENT.
A. Except as provided below, neither this Agreement nor
any rights or obligations hereunder may be assigned
by either party without the written consent of the
other party.
<PAGE> 16
B. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective
permitted successors and assigns.
C. SSI may subcontract for the performance of any of its
duties or obligations under this Agreement with any
person if such subcontract is approved by the Board
of Trustees of a Trust provided, however, that SSI
shall be as fully responsible to the Trust for the
acts and omissions of any subcontractor as it is for
its own acts and omissions.
43. NOTICE. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail,
postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that
the address of the Trusts is One South Wacker Drive, Chicago,
Illinois 60606, Attention: Secretary, and that of SSI for this
purpose is One South Wacker Drive, Chicago, Illinois 60606,
Attention: Secretary.
44. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any
obligation of a Trust hereunder shall be binding only upon the
assets of that Trust (or the applicable series thereof), as
provided in its Agreement and Declaration of Trust, and shall
not be binding upon any Trustee, officer, employee, agent or
shareholder of the Trust or upon any other Trust. Neither the
authorization of any action by the Trustees or the
shareholders of a Trust, nor the execution of this Agreement
on behalf of the Trust shall impose any liability upon any
Trustee or any shareholder. Nothing in this Agreement shall
protect any Trustee against any liability to which such
Trustee would otherwise be subject by willful misfeasance, bad
faith or gross negligence in the performance of his duties, or
reckless disregard of his obligations and duties under this
Agreement.
45. REFERENCES AND HEADINGS. In this Agreement and in
any such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder," shall
be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or
effect of this Agreement. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original.
<PAGE> 17
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the day and year first above
written.
STEINROE MUNICIPAL TRUST
STEINROE INCOME TRUST
STEINROE INVESTMENT TRUST
ATTEST: By: TIMOTHY K. ARMOUR
President
JILAINE HUMMEL BAUER
Secretary
STEINROE SERVICES INC.
ATTEST: By: STEPHEN P. LAUTZ
Vice President
JILAINE HUMMEL BAUER
Secretary
<PAGE> 18
Schedule A
Agency Agreement
(August 1, 1995)
Fees pursuant to Section 31 of the Agency Agreement shall
be calculated in accordance with the following schedule. For
each series, the fee shall accrue on each calendar day and
shall be payable monthly on the first business day of the next
succeeding calendar month.
The daily fee accrual shall be computed by multiplying
the fraction of one divided by the number of days in the
calendar year by the applicable annual fee and multiplying
this product by the net assets of the series, determined in
the manner established by the Board of Trustees of the
applicable Trust, as of the close of business on the last
preceding business day on which the series' net asset value
was determined.
Type of Series Annual Fee
- -------------------------------- ---------------------------
Fixed Income (non-money fund) 0.140% of average daily net
assets
Fixed Income (money market fund) 0.150% of average daily net
assets
Equity 0.220% of average daily net
assets
Dated: August 1, 1995
<PAGE> 19
Schedule B
Agency Agreement
The Series of the Trusts covered by this agreement are as
follows:
STEIN ROE INVESTMENT TRUST
Stein Roe Growth & Income Fund
Stein Roe International Fund
Stein Roe Young Investor Fund
Stein Roe Special Venture Fund
Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Capital Opportunities Fund
Stein Roe Special Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
Stein Roe Asia Pacific Fund
Stein Roe Small Company Growth Fund
Stein Roe Growth Investor Fund
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Cash Reserves
Stein Roe High Yield Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals
Stein Roe High-Yield Municipals
Stein Roe Municipal Money Market Fund
Stein Roe Managed Municipals
Dated: March 31, 1999
STEIN ROE INCOME TRUST
STEIN ROE MUNICIPAL TRUST
STEIN ROE INVESTMENT TRUST
By: THOMAS W. BUTCH
Thomas W. Butch, President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
STEINROE SERVICES INC.
By: THOMAS W. BUTCH
Thomas W. Butch,
Vice President
Attest:
NICOLETTE D. PARRISH
Nicolette D. Parrish
Assistant Secretary
<PAGE> 20
SCHEDULE C
SYSTEM DESCRIPTION
TRANSACTION PROCESSING LOG - PROCESSING SPAN IN DAYS
EXPEDITED REDEMPTION FILE - BATCH MAINTENANCE JOURNAL
DAILY CRT OPERATOR STATISTICS
DAILY BATCH MONITORING REPORT
ONLINE NEW ACCOUNT REPORT
DETAIL DAILY "AS OF" REPORT - BY ACCOUNTABILITY
SPECIAL HANDLING - DAILY CONFIRMATIONS
BANK ACCOUNT OUTSTANDING BALANCE VERIFICATION
MISCELLANEOUS FEE JOURNAL
BATCH ENTRY SUMMARY REPORT
ACCOUNT CLOSEOUT ADJUSTMENTS - SUMMARY REPORT
REDEMPTION CHECK REGISTER
WIRE INSTRUCTION REPORT FOR EXPEDITED REDEMPTIONS
DST INC. - DDPS DAILY CASH RECAP REPORT
DAILY UPDATE (MU100) ERROR LISTING
EXCHANGE DISTRIBUTION SUMMARY REPORT
BATCH TRANSMISSION ERRORS - TRANSACTION ID: DFUNP
DAILY CHECK RECONCILIATION UPDATE REGISTER UCHECK UPDATES
WIRE INSTRUCTION REPORT FOR EXPEDITED REDEMPTIONS
WIRE INSTRUCTION REPORT FOR DIRECT REDEMPTIONS
TRANSFER RECORD DAILY DVND INCREASE JOURNAL
RECORD DATE JOURNAL
DAILY RECAP & SHARE CONTROL SHEET - SHARE AMOUNT
EXCHANGE CLOSE-OUT AUTOMATIC REINVESTMENT REPORT BY EXCHANGE
(FROM) FUND
DETAIL DAILY "AS OF" REPORT - BY REASON CODE
SHAREOWNER CHECK-CONFIRM RECONCILIATION
<PAGE> 21
DAILY/FREE DAILY BALANCE LISTING - ALPHA CODE SEQUENCE
CONSOLIDATED ERROR REPORTING
DAILY CONFIRMED UNPAID PURCHASE JOURNAL - NO LOAD
REQUESTS FOR DUPLICATE CONFIRMS
CALCULATED DAILY DIVIDEND RATE
EXTERNAL CHECK/INVESTMENT ISSUANCE REPORT
IN-HOUSE CHECK ISSUANCE REPORT
AUTOMATED CLEARING HOUSE REDEMPTION TRANSACTIONS
STEINROE FUNDS
ACH PURCHASE TRANSACTIONS REPORT
ACH MONTHLY REDEMPTION/PURCHASE - TRANSACTION REPORT
STEIN ROE & FARNHAM TRANSFER RECORD FOR DIRECT
PAYMENTS
REDEMPTION CHECK REGISTER
DAILY DIVIDEND ACCRUAL CLOSEOUTS COMBINED WITH
CLOSEOUT REDEMPTION WIRES
DAILY DIVIDEND ACCRUAL CLOSEOUTS UNMATCHED CLOSEOUT
ACCRUAL ERROR REPORT
AVERAGE COST ACCOUNT CALCULATION EXCEPTION REPORT
FOR DAILY AVERAGE COST FORMS REQUEST
NEW FOREIGN ACCOUNT REPORT
BATCH BALANCE LISTING
TRANSACTION TRACER REPORT
BATCH BALANCE LISTING - ACCOUNT DETAIL
TIMER - SWITCH UPDATE VERIFICATION
REDEMPTION & ADDRESS CHANGE PROCESSED SAME DAY
WARNING REPORT
AUTOMATE CLEARING HOUSE PRENOTE TRANSACTIONS
STEINROE FUNDS
EXRED WARNING REPORT
EXCHANGE WARNING REPORT UNLIKE TAX ID NUMBERS
INVESTOR TRANSFER TRANSACTIONS LISTING INVESTOR DISTRIBUTOR CODE:
STR
<PAGE> 22
DETAIL DAILY "AS OF" REPORT BY TRANSACTION CODE
DAILY "AS OF" REPORT
DAILY FUND SHARE BALANCE ERROR LIST
DAILY BATCH BALANCE
DAILY SHAREOWNER MAINTENANCE ERROR LISTING
EXPEDITED REDEMPTION FILE STATUS JOURNAL
NEW ACCOUNT VERIFICATION QUALITY REPORT
SYSTEMATIC EXCHANGE DAILY MAINTENANCE ACTIVITY
ADDITIONAL MAIL MAINTENANCE JOURNAL
BATCH TRANSMISSION ERRORS TRANSACTION ID: ATRANS
DEALER FILE MAINTENANCE REPORT
CHECK-WRITING REDEMPTION REPORT
ASSET ALLOCATION - REALLOCATION
NEW ACCOUNT REPORT
<PAGE> 23
<TABLE>
SCHEDULE D
SCHEDULE OF INSURANCE
STEIN ROE & FARNHAM INCORPORATED
ONE SOUTH WACKER DRIVE
CHICAGO, IL 60606-4685
<CAPTION>
CARRIER POLICY NO. TERM COVERAGE EXPOSURE/RATE LIMITS PREMIUM
- --------- ------------ -------- --------- ---------------------------- -------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Federal (96)7626-89 01/01/95 Workers' FL-8810 $213,000 .71 Workers' Compensation: Statutory $61,612
Insurance. -79 -96 Compensation NY-8810 $660,000 .57
Co sation Experience Mod. .97 Employers Liability:
Premium Disc. 10.1% Bodily Injury by Accident:
$100,000 each accident
IL-8810 $18,900,000 .42
IL-8742 $ 710,000 .92 Bodily Injury by Disease:
Experience Mod. .97 $500,000 policy limit
IL Schedule Credit 25%
Premium Discount 10.1% Bodily Injury by Disease:
$100,000 each employee
Flat Coverage Monopolistic
Fund States 50. x 6
Expense Constant 160
- --------------------------------------------------------------------------------------------------------------------------------
Federal 681-26-32 01/01/95 Financial Blanket Personal $2,000,000 General Aggregate $21,686.92
Insurance -96 Package Property Limit $11,070,000 (other than Products Completed
Co. Policy Operations)
Two Scheduled Locations: $1,000,000 Products Completed
Puerto Rico $30,300 Operations Aggregate Limit
1510 Skokie Blvd. $600,000
$1,000,000 Personal & Advertising
Library Values: $80,000 Injury Limit
Fine Arts: $399,387 $1,000,000 Each Occurrence Limit
Inland Marine - Valuable $10,000 Medical Expense Limit
Papers
General Liability based on $100,000 Personal Property Damage
square feet to Rented Premises Limit
- --------------------------------------------------------------------------------------------------------------------------------
Vigilant 7312-72-46 01/01/95 Foreign Liability & N.O. Auto $1,765 General Liability: $3,100
Insurance -96 Package Policy Workers' Compensation 1,335 $1,000,000 Commercial Liability
Co. for Bodily Injury or Property
General Damage Liability per occurrence
Liability $50 Per Person, per trip- & Personal Injury or Advertising
Flat. Based on: Injury caused by an offense
Automobile Total Employees - 20 $1,000,000 Annual Aggregate -
Liability-DIC/ No. of Trips 49 Products/Completed Operations
Excess Auto Total No. of Days 104
$250,000 Fire Legal Liability
Foreign Volun- $10,000 Medical Expense Per person
ary Workers'
Compensation $30,000 Medical Expense per accident
Automobile Liability - DIC/Excess Auto
$1,000,000 Bodily Injury per person
$1,000,000 Bodily Injury per occurrence
$1,000,000 Property damage per occurrence
$10,000 Medial Expense per person
$30,000 Medical Per Accident
Foreign Voluntary Workers'
Compensation - Statutory
$100,000 Employers Liability Limit
$20,000 Repatriation Expense for
any one Employee
- --------------------------------------------------------------------------------------------------------------------------------
St. Paul IM01200804 01/01/95 Electronic Data/Media Flat $400 for Computer Equipment $4,132,731 $6,987
Insurance -96 Data $500,000 limit
Co. Processing
Business Interruption -
1,000,000 limit Valuable Papers & Records 600,000
Contingent Business Interrup-
tion: 1,000,000 - Kansas City Business Interruption 1,000,000
100,000 - Downers Grove
Deductible Contingent Business
Computer Equipment, Data and Interruption 1,100,000
Media and Extra Expense
Combined $1,000
Special Breakdown Deductible Extra Expense 500,000
$5,000
Transit
Computer Equipment $50,000
Data & Media $50,000
Valuable Papers $5,000
- --------------------------------------------------------------------------------------------------------------------------------
Gulf GA5743948P 02/15/96 Excess Mutual $15,000,000 excess of $5,000,000 $540,935
Insurance -96 Fund D&O/E&O excess of underlying deductible
Company
- --------------------------------------------------------------------------------------------------------------------------------
Federal 81391969-A 02/15/95 Investment Limits of Liability $25,000,000 $211,312
Insurance -96 Company Assets Extended Forgery 10,000,000
Co. Protection Bond Threats to Persons 5,000,000
Uncollectible items of Deposit 500,000
Audit Expense 100,000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STEINROE FUNDS
ACCOUNTING AND BOOKKEEPING AGREEMENT
(AUGUST 1,1994)
This Agreement is made this 1st day of August. 1994, by
and between SteinRoe Investment Trust, a Massachusetts common
law trust, (hereinafter referred to as the "Trust") and Stein
Roe & Farnham Incorporated ("SteinRoe"), a Delaware corporation.
1. Appointment. Each Trust hereby appoints SteinRoe to act as
its agent to perform the services described herein with respect
to each series of shares of the Trust (the "Series") identified
in and beginning on the date specified on Appendix I to this
Agreement, as may be amended from time to time. SteinRoe
hereby accepts appointment as each Trust's agent and agrees to
perform the services described herein.
2. Accounting.
(a) Pricing. For each Series of the Trust, SteinRoe shall
value all securities and other assets of the Series,
and compute the net asset value per share of such
Series, at such times and dates and in the manner and
by such methodology as is specified in the then
currently effective prospectus and statement of
additional information for such Series, and pursuant
to such other written procedures or instructions
furnished to SteinRoe by the Trust. To the extent
procedures or instructions used to value securities
or other assets of a Series under this Agreement are
at any time inconsistent with any applicable law or
regulation, the Trust shall provide SteinRoe with
written instructions for valuing such securities or
assets in a manner which the Trust represents to be
consistent with applicable law and regulation.
(b) Net Income. SteinRoe shall calculate with such
frequency as the Trust shall direct, the net income
of each Series of the Trust for dividend purposes and
on a per share basis. Such calculation shall be at
such times and dates and in such manner as the Trust
shall instruct SteinRoe in writing. For purposes of
such calculation, SteinRoe shall not be responsible
for determining whether any dividend or interest
accruable to the Trust is or will be actually paid,
but will accrue such dividend and interest unless
otherwise instructed by the Trust.
(c) Capital Gains and Losses. SteinRoe shall calculate
gains or losses of each Series of the Trust from the
sale or other disposition of assets of that Series as
the Trust shall direct.
<PAGE> 2
(d) Yields. At the request of the Trust, SteinRoe shall
compute yields for each Series of the Trust for such
periods and using such formula as shall be instructed
by the Trust.
(e) Communication of Information. SteinRoe shall provide
the Trust, the Trust's transfer agent and such other
parties as directed by the Trust with the net asset
value per share, the net income per share and yields
for each Series of the Trust at such time and in such
manner and format and with such frequency as the
parties mutually agree.
(f) Information Furnished by the Trust. The Trust shall
furnish SteinRoe with any and all instructions,
explanations, information, specifications and
documentation deemed necessary by SteinRoe in the
performance of its duties hereunder, including,
without limitation, the amounts and/or written
formula for calculating the amounts, and times of
accrual of liabilities and expenses of each Series of
the Trust. The Trust shall also at any time and from
time to time furnish SteinRoe with bid, offer and/or
market values of securities owned by the Trust if the
same are not available to SteinRoe from a pricing or
similar service designated by the Trust for use by
SteinRoe to value securities or other assets.
SteinRoe shall at no time be required to commence or
maintain any utilization of, or subscriptions to, any
such service which shall be the sole responsibility
and expense of the Trust.
3. Recordkeeping.
(a) SteinRoe shall, as agent for the Trust, maintain and
keep current and preserve the general ledger and
other accounts, books, and financial records of the
Trust relating to activities and obligations under
this Agreement in accordance with the applicable
provisions of Section 31(a) of the General Rules and
Regulations under the Investment Company Act of 1940,
as amended (the "Rules").
(b) All records maintained and preserved by SteinRoe
pursuant to this Agreement which the Trust is
required to maintain and preserve in accordance with
the Rules shall be and remain the property of the
Trust and shall be surrendered to the Trust promptly
upon request in the form in which such records have
been maintained and preserved.
(c) SteinRoe shall make available on its premises during
regular business hours all records of a Trust for
reasonable audit, use
<PAGE> 3
and inspection by the Trust, its agents and any
regulatory agency having authority over the Trusts.
4. Instructions, Opinion of Counsel, and Signatures.
(a) At any time Stein Roe may apply to a duly authorized
agent of the Trust for instructions regarding the
Trust, and may consult counsel for such Trust or its
own counsel, in respect of any matter arising in
connection with this Agreement, and it shall not be
liable for any action taken or omitted by it in good
faith in accordance with such instructions or with
the advice or opinion of such counsel. SteinRoe
shall be protected in acting upon any such
instruction, advice, or opinion and upon any other
paper or document delivered by the Trust or such
counsel believed by SteinRoe to be genuine and to
have been signed by the proper person or persons and
shall not be held to have notice of any change of
authority of any officer or agent of the Trust, until
receipt of written notice thereof from such Trust.
(b) SteinRoe may receive and accept a certified copy of a
vote of the Board of Trustees of the Trust as
conclusive evidence of (i) the authority of any
person to act in accordance with such vote or (ii)
any determination or any action by the Board of
Trustees pursuant to its Agreement and Declaration of
Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt
by SteinRoe of written notice to the contrary.
5. Compensation. The Trust shall reimburse SteinRoe from the
assets of the respective applicable Series of the Trust, for
any and all out-of-pocket expenses and charges in performing
services under this Agreement and such compensation as is
provided in Appendix II to this Agreement, as amended from time
to time. SteinRoe shall invoice the Trust as soon as
practicable after the end of each calendar month, with
allocation among the respective Series and full detail, and the
Trust shall promptly pay SteinRoe the invoiced amount.
6. Confidentiality of Records. SteinRoe agrees not to
disclose any information received from the Trust to any other
client of SteinRoe or to any other person except its employees
and agents, and shall use its best efforts to maintain such
information as confidential. Upon termination of this
Agreement, SteinRoe shall return to each Trust all records in
the possession and control of SteinRoe related to such Trust's
activities, other than SteinRoe's own business records, it
being also understood and agreed that any programs and systems
used by SteinRoe to provide the services rendered hereunder
will not be given to any Trust.
<PAGE> 4
7. Liability and Indemnification.
(a) SteinRoe shall not be liable to any Trust for any
action taken or thing done by it or its employees or
agents on behalf of the Trust in carrying out the
terms and provisions of this Agreement if done in
good faith and without negligence or misconduct on
the part of SteinRoe, its employees or agents.
(b) Each Trust shall indemnify and hold SteinRoe, and its
controlling persons, if any, harmless from any and
all claims, actions, suits, losses, costs, damages,
and expenses, including reasonable expenses for
counsel, incurred by it in connection with its
acceptance of this Agreement, in connection with any
action or omission by it or its employees or agents
in the performance of its duties hereunder to the
Trust, or as a result of acting upon instructions
believed by it to have been executed by a duly
authorized agent of the Trust or as a result of
acting upon information provided by the Trust in form
and under policies agreed to by SteinRoe and the
Trust, provided that: (i) to the extent such claims,
actions, suits, losses, costs, damages, or expenses
relate solely to one or more Series, such
indemnification shall be only out of the assets of
that Series or group of Series; (ii) this
indemnification shall not apply to actions or
omissions constituting negligence or misconduct on
the part of SteinRoe or its employees or agents,
including but not limited to willful misfeasance, bad
faith, or gross negligence in the performance of
their duties, or reckless disregard of their
obligations and duties under this Agreement; and
(iii) SteinRoe shall give the Trust prompt notice and
reasonable opportunity to defend against any such
claim or action in its own name or in the name of
SteinRoe.
(c) SteinRoe shall indemnify and hold harmless each Trust
from and against any and all claims, demands,
expenses and liabilities which such Trust may sustain
or incur arising out of, or incurred because of, the
negligence or misconduct of SteinRoe or its agents or
contractors, or the breach by SteinRoe of its
obligations under this Agreement, provided that: (i)
this indemnification shall not apply to actions or
omissions constituting negligence or misconduct on
the part of such Trust or its other agents or
contractors and (ii) such Trust shall give SteinRoe
prompt notice and reasonable opportunity to defend
against any such claim or action in its own name or
in the name of such Trust.
<PAGE> 5
8. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are
necessary to effectuate the purposes hereof.
9. Dual Interests. It is understood and agreed that some
person or persons may be trustees, officers, or shareholders of
both the Trusts and SteinRoe, and that the existence of any
such dual interest shall not affect the validity hereof or of
any transactions hereunder except as otherwise provided by
specific provision of applicable law.
10. Amendment and Termination. This Agreement may be modified
or amended from time to time, or terminated, by mutual
agreement between the parties hereto and may be terminated by
at least one hundred eighty (180) days' written notice given by
one party to the other. Upon termination hereof, each Trust
shall pay to SteinRoe such compensation as may be due from it
as of the date of such termination, and shall reimburse
SteinRoe for its costs, expenses, and disbursements payable
under this Agreement to such date. In the event that, in
connection with termination, a successor to any of the duties
or responsibilities of SteinRoe hereunder is designated by a
Trust by written notice to SteinRoe, SteinRoe shall promptly
upon such termination and at the expense of such Trust, deliver
to such successor all relevant books, records, and data
established or maintained by SteinRoe under this Agreement and
shall cooperate in the transfer of such duties and
responsibilities, including provision, at the expense of such
Trust, for assistance from SteinRoe personnel in the
establishment of books, records, and other data by such
successor.
11. Assignment. Any interest of SteinRoe under this Agreement
shall not be assigned or transferred either voluntarily or
involuntarily, by operation of law or otherwise, without prior
written notice to each Trust.
12. Notice. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail,
postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that
the address of each Trust and SteinRoe is One South Wacker
Drive, Chicago, Illinois 60606, Attention: Secretary.
13. Non-Liability of Trustees and Shareholders. Any
obligation of the Trust hereunder shall be binding only upon
the assets of that Trust (or the applicable Series thereof), as
provided in the Agreement and Declaration of Trust of that
Trust, and shall not be binding upon any Trustee, officer,
employee, agent or shareholder of the Trust or upon any other
Trust. Neither the authorization of any action by the Trustees
or the shareholders of the Trust, nor the execution of this
Agreement on behalf of the Trust shall impose any liability
upon any Trustee or any shareholder. Nothing in this
<PAGE> 6
Agreement shall protect any Trustee against any liability to
which such Trustee would otherwise be subject by willful
misfeasance, bad faith or gross negligence in the performance of
his duties, or reckless disregard of his obligations and duties
under this Agreement. In connection with the discharge and
satisfaction of any claim made by SteinRoe against the Trust
involving more than one Series, the Trust shall have the
exclusive right to determine the appropriate allocations of
liability for any such claim between or among the Series.
14. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder," shall
be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as part
hereof or control or affect the meaning, construction or effect
of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an
original.
15. Governing Law. This Agreement shall be governed by the
laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
STEINROE INVESTMENT TRUST
By: TIMOTHY K. ARMOUR
President
Attest:
JILAINE HUMMEL BAUER
Secretary
STEIN ROE & FARNHAM INCORPORATED
By: TIMOTHY K. ARMOUR
President - Fund Division
Attest:
JILAINE HUMMEL BAUER
Assistant Secretary
<PAGE>
APPENDIX I
FUND EFFECTIVE DATE
- --------- --------------
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund August 1, 1994
Stein Roe Young Investor Fund August 1, 1994
Stein Roe Growth & Income Fund February 1, 1995
Stein Roe Special Venture Fund February 1, 1995
Stein Roe Balanced Fund February 1, 1995
Stein Roe Growth Stock Fund February 1, 1995
Stein Roe Capital Opportunities Fund February 1, 1995
Stein Roe Special Fund February 1, 1995
Stein Roe Growth Opportunities Fund May 9, 1997
Stein Roe Large Company Focus Fund April 30, 1998
Stein Roe Asia Pacific Fund October 19, 1998
Stein Roe Small Company Growth Fund February 2, 1999
Stein Roe Growth Investor Fund March 31, 1999
Dated: March 31, 1999
STEINROE INVESTMENT TRUST
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President, Mutual Funds Division
Assistant Secretary
<PAGE>
APPENDIX II
For the services provided under the Accounting Agreement
(the "Agreement"), the Trust shall pay SteinRoe an annual fee
with respect to each Fund, calculated and paid monthly, equal to
$25,000 plus .0025 percent per annum of the average daily net
assets of the Fund in excess of $50 million. Such fee shall be
paid within thirty days after receipt of monthly invoice.
<PAGE>
ADMINISTRATIVE AGREEMENT
BETWEEN
STEINROE INVESTMENT TRUST
AND
STEIN ROE & FARNHAM INCORPORATED
STEINROE INVESTMENT TRUST, a Massachusetts business trust
registered under the Securities Act of 1933 ("1933 Act") and the
Investment Company Act of 1940 ("1940 Act") (the "Trust"), hereby
appoints STEIN ROE & FARNHAM INCORPORATED, a Delaware
corporation, of Chicago, Illinois ("Administrator"), to furnish
certain administrative services with respect to the Trust and the
series of the Trust listed in Schedule A hereto, as such schedule
may be amended from time to time (each such series hereinafter
referred to as "Fund").
The Trust and Administrator hereby agree that:
1. ADMINISTRATIVE SERVICES. Subject to the terms of this
Agreement and the supervision and control of the Trust's Board of
Trustees ("Trustees"), Administrator shall provide the following
services with respect to the Trust:
(a) Preparation and maintenance of the Trust's registration
statement with the Securities and Exchange Commission
("SEC");
(b) Preparation and periodic updating of the prospectus and
statement of additional information for the Fund
("Prospectus");
(c) Preparation, filing with appropriate regulatory authorities,
and dissemination of various reports for the Fund, including
but not limited to semiannual reports to shareholders under
Section 30(d) of the 1940 Act, annual and semiannual reports
on Form N-SAR, and notices pursuant to Rule 24f-2;
(d) Arrangement for all meetings of shareholders, including the
collection of all information required for preparation of
proxy statements, the preparation and filing with appropriate
regulatory agencies of such proxy statements, the supervision
of solicitation of shareholders and shareholder nominees in
connection therewith, tabulation (or supervision of the
tabulation) of votes, response to all inquiries regarding
such meetings from shareholders, the public and the media,
and preparation and retention of all minutes and all other
records required to be kept in connection with such meetings;
(e) Maintenance and retention of all Trust charter documents and
the filing of all documents required to maintain the Trust's
status as a Massachusetts business trust and as a registered
open-end investment company;
(f) Arrangement and preparation and dissemination of all
materials for meetings of the Board of Trustees and
committees thereof and preparation and retention of all
minutes and other records thereof;
(g) Preparation and filing of the Trust's Federal, state, and
local income tax returns and calculation of any tax required
to be paid in connection therewith;
(h) Calculation of all Trust and Fund expenses and arrangement
for the payment thereof;
(i) Calculation of and arrangement for payment of all income,
capital gain, and other distributions to shareholders of each
Fund;
<PAGE> 2
(j) Determination, after consultation with the officers of the
Trust, of the jurisdictions in which shares of beneficial
interest of each Fund ("Shares") shall be registered or
qualified for sale, or may be sold pursuant to an exemption
from such registration or qualification, and preparation and
maintenance of the registration or qualification of the
Shares for sale under the securities laws of each such
jurisdiction;
(k) Provision of the services of persons who may be appointed as
officers of the Trust by the Board of Trustees (it is agreed
that some person or persons may be officers of both the Trust
and the Administrator, and that the existence of any such
dual interest shall not affect the validity of this Agreement
except as otherwise provided by specific provision of
applicable law);
(l) Preparation and, subject to approval of the Trust's Chief
Financial Officer, dissemination of the Trust's and each
Fund's quarterly financial information to the Board of
Trustees and preparation of such other reports relating to
the business and affairs of the Trust and each Fund as the
officers and Board of Trustees may from time to time
reasonably request;
(m) Administration of the Trust's Code of Ethics and periodic
reporting to the Board of Trustees of Trustee and officer
compliance therewith;
(n) Provision of internal legal, accounting, compliance, audit,
and risk management services and periodic reporting to the
Board of Trustees with respect to such services;
(o) Negotiation, administration, and oversight of third party
services to the Trust including, but not limited to, custody,
tax, transfer agency, disaster recovery, audit, and legal
services;
(p) Negotiation and arrangement for insurance desired or required
of the Trust and administering all claims thereunder;
(q) Response to all inquiries by regulatory agencies, the press,
and the general public concerning the business and affairs of
the Trust, including the oversight of all periodic
inspections of the operations of the Trust and its agents by
regulatory authorities and responses to subpoenas and tax
levies;
(r) Handling and resolution of any complaints registered with the
Trust by shareholders, regulatory authorities, and the
general public;
(s) Monitoring legal, tax, regulatory, and industry developments
related to the business affairs of the Trust and
communicating such developments to the officers and Board of
Trustees as they may reasonably request or as the
Administrator believes appropriate;
(t) Administration of operating policies of the Trust and
recommendation to the officers and the Board of Trustees of
the Trust of modifications to such policies to facilitate the
protection of shareholders or market competitiveness of the
Trust and Fund and to the extent necessary to comply with new
legal or regulatory requirements;
(u) Responding to surveys conducted by third parties and
reporting of Fund performance and other portfolio
information; and
(v) Filing of claims, class actions involving portfolio
securities, and handling administrative matters in connection
with the litigation or settlement of such claims.
2. USE OF AFFILIATED COMPANIES AND SUBCONTRACTORS. In
connection with the services to be provided by Administrator
under this Agreement, Administrator may,
<PAGE> 3
to the extent it deems appropriate, and subject to compliance
with the requirements of applicable laws and regulations and upon
receipt of approval of the Trustees, make use of (i) its
affiliated companies and their directors, trustees, officers, and
employees and (ii) subcontractors selected by Administrator,
provided that Administrator shall supervise and remain fully
responsible for the services of all such third parties in
accordance with and to the extent provided by this Agreement.
All costs and expenses associated with services provided by any
such third parties shall be borne by Administrator or such
parties.
3. INSTRUCTIONS, OPINIONS OF COUNSEL, AND SIGNATURES. At
any time Administrator may apply to a duly authorized agent of
Trust for instructions regarding the Trust, and may consult
counsel for the Trust or its own counsel, in respect of any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or omitted by it in good faith
in accordance with such instructions or with the advice or
opinion of such counsel. Administrator shall be protected in
acting upon any such instruction, advice, or opinion and upon any
other paper or document delivered by the Trust or such counsel
believed by Administrator to be genuine and to have been signed
by the proper person or persons and shall not be held to have
notice of any change of authority of any officer or agent of the
Trust, until receipt of written notice thereof from the Trust.
4. EXPENSES BORNE BY TRUST. Except to the extent expressly
assumed by Administrator herein or under a separate agreement
between the Trust and Administrator and except to the extent
required by law to be paid by Administrator, the Trust shall pay
all costs and expenses incidental to its organization, operations
and business. Without limitation, such costs and expenses shall
include but not be limited to:
(a) All charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities,
and other property;
(b) All charges for equipment or services used for obtaining
price quotations or for communication between Administrator
or the Trust and the custodian, transfer agent or any other
agent selected by the Trust;
(c) All charges for investment advisory, portfolio management,
and accounting services provided to the Trust by the
Administrator, or any other provider of such services;
(d) All charges for services of the Trust's independent auditors
and for services to the Trust by legal counsel;
(e) All compensation of Trustees, other than those affiliated
with Administrator, all expenses incurred in connection with
their services to the Trust, and all expenses of meetings of
the Trustees or committees thereof;
(f) All expenses incidental to holding meetings of shareholders,
including printing and of supplying each record-date
shareholder with notice and proxy solicitation material, and
all other proxy solicitation expenses;
(g) All expenses of printing of annual or more frequent revisions
of the Trust's prospectus(es) and of supplying each then-
existing shareholder with a copy of a revised prospectus;
(h) All expenses related to preparing and transmitting
certificates representing the Trust's shares;
<PAGE> 4
(i) All expenses of bond and insurance coverage required by law
or deemed advisable by the Board of Trustees;
(j) All brokers' commissions and other normal charges incident to
the purchase, sale, or lending of Fund securities;
(k) All taxes and governmental fees payable to Federal, state or
other governmental agencies, domestic or foreign, including
all stamp or other transfer taxes;
(l) All expenses of registering and maintaining the registration
of the Trust under the 1940 Act and, to the extent no
exemption is available, expenses of registering the Trust's
shares under the 1933 Act, of qualifying and maintaining
qualification of the Trust and of the Trust's shares for sale
under securities laws of various states or other
jurisdictions and of registration and qualification of the
Trust under all other laws applicable to the Trust or its
business activities;
(m) All interest on indebtedness, if any, incurred by the Trust
or a Fund; and
(n) All fees, dues and other expenses incurred by the Trust in
connection with membership of the Trust in any trade
association or other investment company organization.
5. ALLOCATION OF EXPENSES BORNE BY TRUST. Any expenses
borne by the Trust that are attributable solely to the
organization, operation or business of a Fund shall be paid
solely out of Fund assets. Any expense borne by the Trust which
is not solely attributable to a Fund, nor solely to any other
series of shares of the Trust, shall be apportioned in such
manner as Administrator determines is fair and appropriate, or as
otherwise specified by the Board of Trustees.
6. EXPENSES BORNE BY ADMINISTRATOR. Administrator at its
own expense shall furnish all executive and other personnel,
office space, and office facilities required to render the
services set forth in this Agreement. However, Administrator
shall not be required to pay or provide any credit for services
provided by the Trust's custodian or other agents without
additional cost to the Trust.
In the event that Administrator pays or assumes any expenses
of the Trust or a Fund not required to be paid or assumed by
Administrator under this Agreement, Administrator shall not be
obligated hereby to pay or assume the same or similar expense in
the future; provided that nothing contained herein shall be
deemed to relieve Administrator of any obligation to the Trust or
a Fund under any separate agreement or arrangement between the
parties.
7. ADMINISTRATION FEE. For the services rendered,
facilities provided, and charges assumed and paid by
Administrator hereunder, the Trust shall pay to Administrator out
of the assets of each Fund fees at the annual rate for such Fund
as set forth in Schedule B to this Agreement. For each Fund, the
administrative fee shall accrue on each calendar day, and shall
be payable monthly on the first business day of the next
succeeding calendar month. The daily fee accrual shall be
computed by multiplying the fraction of one divided by the number
of days in the calendar year by the applicable annual rate of
fee, and multiplying this product by the net assets of the Fund,
determined in the manner established by the Board of Trustees, as
of the close of business on the last preceding business day on
which the Fund's net asset value was determined.
<PAGE> 5
8. STATE EXPENSE LIMITATION. If for any fiscal year of a
Fund, its aggregate operating expenses ("Aggregate Operating
Expenses") exceed the applicable percentage expense limit imposed
under the securities law and regulations of any state in which
Shares of the Fund are qualified for sale (the "State Expense
Limit"), the Administrator shall pay such Fund the amount of such
excess. For purposes of this State Expense Limit, Aggregate
Operating Expenses shall (a) include (i) any fees or expense
reimbursements payable to Administrator pursuant to this
Agreement and (ii) to the extent the Fund invests all or a
portion of its assets in another investment company registered
under the 1940 Act, the pro rata portion of that company's
operating expenses allocated to the Fund, and (iii) any
compensation payable to Administrator pursuant to any separate
agreement relating to the Fund's investment operations and
portfolio management, but (b) exclude any interest, taxes,
brokerage commissions, and other normal charges incident to the
purchase, sale or loan of securities, commodity interests or
other investments held by the Fund, litigation and
indemnification expense, and other extraordinary expenses not
incurred in the ordinary course of business. Except as otherwise
agreed to by the parties or unless otherwise required by the law
or regulation of any state, any reimbursement by Administrator to
a Fund under this section shall not exceed the administrative fee
payable to Administrator by the Fund under this Agreement.
Any payment to a Fund by Administrator hereunder shall be
made monthly, by annualizing the Aggregate Operating Expenses for
each month as of the last day of the month. An adjustment for
payments made during any fiscal year of the Fund shall be made on
or before the last day of the first month following such fiscal
year of the Fund if the Annual Operating Expenses for such fiscal
year (i) do not exceed the State Expense Limitation or (ii) for
such fiscal year there is no applicable State Expense Limit.
9. NON-EXCLUSIVITY. The services of Administrator to the
Trust hereunder are not to be deemed exclusive and Administrator
shall be free to render similar services to others.
10. STANDARD OF CARE. Neither Administrator, nor any of
its directors, officers or stockholders, agents or employees
shall be liable to the Trust, any Fund, or its shareholders for
any action taken or thing done by it or its subcontractors or
agents on behalf of the Trust or the Fund in carrying out the
terms and provisions of this Agreement if done in good faith and
without negligence or misconduct on the part of Administrator,
its subcontractors, or agents.
11. INDEMNIFICATION. The Trust shall indemnify and hold
Administrator and its controlling persons, if any, harmless from
any and all claims, actions, suits, losses, costs, damages, and
expenses, including reasonable expenses for counsel, incurred by
it in connection with its acceptance of this Agreement, in
connection with any action or omission by it or its agents or
subcontractors in the performance of its duties hereunder to the
Trust, or as a result of acting upon any instruction believed by
it to have been executed by a duly authorized agent of the Trust
or as a result of acting upon information provided by the Trust
in form and under policies agreed to by
<PAGE> 6
Administrator and the Trust, provided that: (i) to the extent
such claims, actions, suits, losses, costs, damages, or expenses
relate solely to a particular Fund or group of Funds, such
indemnification shall be only out of the assets of that Fund or
group of Funds; (ii) this indemnification shall not apply to
actions or omissions constituting negligence or misconduct of
Administrator or its agents or subcontractors, including but not
limited to willful misfeasance, bad faith, or gross negligence in
the performance of their duties, or reckless disregard of their
obligations and duties under this Agreement; and (iii)
Administrator shall give the Trust prompt notice and reasonable
opportunity to defend against any such claim or action in its own
name or in the name of Administrator.
Administrator shall indemnify and hold harmless the Trust
from and against any and all claims, demands, expenses and
liabilities which such Trust may sustain or incur arising out of,
or incurred because of, the negligence or misconduct of
Administrator or its agents or subcontractors, provided that such
Trust shall give Administrator prompt notice and reasonable
opportunity to defend against any such claim or action in its own
name or in the name of such Trust.
12. EFFECTIVE DATE, AMENDMENT, AND TERMINATION. This
Agreement shall become effective as to any Fund as of the
effective date for that Fund specified in Schedule A hereto and,
unless terminated as hereinafter provided, shall remain in effect
with respect to such Fund thereafter from year to year so long as
such continuance is specifically approved with respect to that
Fund at least annually by a majority of the Trustees who are not
interested persons of Trust or Administrator.
As to any Trust or Fund of that Trust, this Agreement may be
modified or amended from time to time by mutual agreement between
the Administrator and the Trust and may be terminated by
Administrator or Trust by at least sixty (60) days' written
notice given by the terminating party to the other party. Upon
termination as to any Fund, the Trust shall pay to Administrator
such compensation as may be due under this Agreement as of the
date of such termination and shall reimburse Administrator for
its costs, expenses, and disbursements payable under this
Agreement to such date. In the event that, in connection with a
termination, a successor to any of the duties or responsibilities
of Administrator hereunder is designated by the Trust by written
notice to Administrator, upon such termination Administrator
shall promptly, and at the expense of the Trust or Fund with
respect to which this Agreement is terminated, transfer to such
successor all relevant books, records, and data established or
maintained by Administrator under this Agreement and shall
cooperate in the transfer of such duties and responsibilities,
including provision, at the expense of such Fund, for assistance
from Administrator personnel in the establishment of books,
records, and other data by such successor.
13. ASSIGNMENT. Any interest of Administrator under this
Agreement shall not be assigned either voluntarily or
involuntarily, by operation of law or otherwise, without the
prior written consent of Trust.
14. BOOKS AND RECORDS. Administrator shall maintain, or
oversee the maintenance by such other persons as may from time to
time be approved by the Board of
<PAGE> 7
Trustees to maintain, the books, documents, records, and data
required to be kept by the Trust under the 1940 Act, the laws of
the Commonwealth of Massachusetts or such other authorities
having jurisdiction over the Trust or the Fund or as may
otherwise be required for the proper operation of the business
and affairs of the Trust or the Fund (other than those required
to be maintained by any investment adviser retained by the Trust
on behalf of a Fund in accordance with Section 15 of the 1940
Act).
Administrator will periodically send to the Trust all books,
documents, records, and data of the Trust and each of its Funds
listed in Schedule A that are no longer needed for current
purposes or required to be retained as set forth herein.
Administrator shall have no liability for loss or destruction of
said books, documents, records, or data after they are returned
to such Trust.
Administrator agrees that all such books, documents,
records, and data which it maintains shall be maintained in
accordance with Rule 31a-3 of the 1940 Act and that any such
items maintained by it shall be the property of the Trust.
Administrator further agrees to surrender promptly to the Trust
any such items it maintains upon request, provided that the
Administrator shall be permitted to retain a copy of all such
items. Administrator agrees to preserve all such items
maintained under Rule 31a-1 for the period prescribed under Rule
31a-2 of the 1940 Act.
Trust shall furnish or otherwise make available to
Administrator such copies of the financial statements, proxy
statements, reports, and other information relating to the
business and affairs of each Fund of the Trust as Administrator
may, at any time or from time to time, reasonably require in
order to discharge its obligations under this Agreement.
15. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any
obligation of Trust hereunder shall be binding only upon the
assets of Trust (or the applicable Fund thereof) and shall not be
binding upon any Trustee, officer, employee, agent or shareholder
of Trust. Neither the authorization of any action by the
Trustees or shareholders of Trust nor the execution of this
Agreement on behalf of Trust shall impose any liability upon any
Trustee or any shareholder.
16. USE OF ADMINISTRATOR'S NAME. The Trust may use its
name and the names of its Funds listed in Schedule A or any other
name derived from the name "Stein Roe & Farnham" only for so long
as this Agreement or any extension, renewal, or amendment hereof
remains in effect, including any similar agreement with any
organization which shall have succeeded to the business of
Administrator as it relates to the services it has agreed to
furnish under this Agreement. At such time as this Agreement or
any extension, renewal or amendment hereof, or such other similar
agreement shall no longer be in effect, Trust will cease to use
any name derived from the name "Stein Roe & Farnham" or otherwise
connected with Administrator, or with any organization which
shall have succeeded to Administrator's business herein
described.
17. REFERENCES AND HEADINGS. In this Agreement and in any
such amendment, references to this Agreement and all expressions
such as "herein," "hereof," and "hereunder" shall be deemed to
refer to this Agreement as amended or affected by any such
amendments. Headings are placed herein for convenience of
reference only
<PAGE> 8
and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this Agreement. This
Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
Dated: August 15, 1995
STEINROE INVESTMENT TRUST
Attest: By: TIMOTHY K. ARMOUR
Timothy K. Armour
JILAINE HUMMEL BAUER President
Jilaine Hummel Bauer
Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: HANS P. ZIEGLER
Hans P. Ziegler
KEITH J. RUDOLF Chief Executive Officer
Keith J. Rudolf
Secretary
<PAGE>
STEIN ROE INVESTMENT TRUST
ADMINISTRATIVE AGREEMENT
SCHEDULE A
The Funds of the Trust currently subject to this Agreement are as
follows:
Effective Date
------------------
Stein Roe Growth & Income Fund September 1, 1995
Stein Roe Young Investor Fund September 1, 1995
Stein Roe Balanced Fund September 1, 1995
Stein Roe Growth Stock Fund September 1, 1995
Stein Roe Capital Opportunities Fund September 1, 1995
Stein Roe Special Fund September 1, 1995
Stein Roe International Fund July 1, 1996
Stein Roe Special Venture Fund July 1, 1996
Stein Roe Growth Opportunities Fund May 9, 1997
Stein Roe Large Company Focus Fund April 30, 1998
Stein Roe Asia Pacific Fund October 19, 1998
Stein Roe Small Company Growth Fund February 2, 1999
Stein Roe Growth Investor Fund March 31, 1999
Dated: March 31, 1999
STEINROE INVESTMENT TRUST
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President, Mutual Funds Division
Assistant Secretary
<PAGE>
STEIN ROE INVESTMENT TRUST
ADMINISTRATIVE AGREEMENT
SCHEDULE B
Compensation pursuant to Section 7 of this Agreement shall be
calculated with respect to each Fund in accordance with the
following schedule applicable to average daily net assets of the
Fund:
Fund Administrative Fee Schedule B1
- ----------------------------- ------------------------------
Stein Roe Young Investor Fund 0.200% of first $500 million,
0.150% of next $500 million,
0.125% thereafter
Fund Administrative Fee Schedule B2
- -------------------------------- ------------------------------
Stein Roe Growth Stock Fund 0.150% of first $500 million,
Stein Roe Growth & Income Fund 0.125 of next $500 million,
Stein Roe Balanced Fund 0.100% thereafter
Stein Roe Growth Investor Fund
Fund Administrative Fee Schedule B3
- ---------------------------------- ------------------------------
Stein Roe Special Fund 0.150% of first $500 million,
Stein Roe Capital Opportunities 0.125% of next $500 million,
Fund 0.100% of next $500 million,
Stein Roe Growth Opportunities Fund 0.075% thereafter
SteinRoe Large Company Focus Fund
Fund Administrative Fee Schedule B4
- ------------------------------- ------------------------------
Stein Roe International Fund 0.150%
Stein Roe Special Venture Fund
Stein Roe Asia Pacific Fund
Stein Roe Small Company Growth Fund
Dated: March 31, 1999
STEINROE INVESTMENT TRUST
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President
Assistant Secretary
STEIN ROE & FARNHAM INCORPORATED
Attest: By: THOMAS W. BUTCH
Thomas W. Butch
NICOLETTE D. PARRISH President, Mutual Funds Division
Assistant Secretary
<PAGE>
SUB-TRANSFER AGENT AGREEMENT
Agreement dated as of July 3, 1996, between SteinRoe
Services Inc. ("SSI"), a Massachusetts corporation, for
itself and on behalf SteinRoe Municipal Trust, SteinRoe
Income Trust and SteinRoe Investment Trust, each a
Massachusetts business trust (all referred to herein as the
"Trust") comprised of the series of portfolios listed in
Schedule A (as the same may from time to time be amended to
add or to delete one or more series, all referred to herein
as the "Fund"), and Colonial Investors Service Center, Inc.
("CISC"), a Massachusetts corporation.
WHEREAS, the Trust has appointed SSI as Transfer Agent,
Registrar and Dividend Disbursing Agent for the Fund, a
registered investment company, pursuant to Restated Agency
Agreement dated August 1, 1995 ("Transfer Agent Agreement");
WHEREAS, SSI is a registered transfer agent duly
authorized to appoint CISC as its agent for purposes of
performing certain transfer agency, registration and dividend
disbursement services in respect of the Trust;
WHEREAS, CISC desires to accept such appointment and to
perform such services upon the terms and subject to the
conditions set forth herein; and
WHEREAS, Stein Roe & Farnham, Inc. ("SRF") is the
investment adviser to the Fund and Liberty Securities
Corporation is the principal underwriter of its shares.
NOW THEREFORE, in consideration of the mutual promises
and covenants set forth herein, the parties hereto agree as
follows:
1. Appointment. SSI hereby appoints CISC to act as its
agent in respect of the purchase, redemption and transfer of
Fund shares and dividend disbursing services in connection
with such shares other than with respect to Fund shares (a)
held under Stein Roe Counselor [service mark] for which SSI
shall perform such services and (b) held in omnibus accounts
with respect to which such services are performed by third
party financial institutions as described in the Fund's
Prospectus from time to time. CISC accepts such appointments
and will perform the duties and functions described herein in
the manner hereinafter set forth. In respect of its duties
and obligations pursuant to this Agreement, CISC will act as
agent of SSI and not as agent of the Trust nor the Fund.
CISC agrees to provide the necessary facilities,
equipment and personnel to perform its duties and obligations
hereunder in accordance with the practice of transfer agents
of investment companies registered with the Securities and
Exchange Commission and in compliance with all laws
applicable to mutual fund transfer agents and the Fund.
<PAGE> 2
CISC agrees that it shall perform usual and ordinary
services as transfer agent, registrar and dividend disbursing
agent, which are necessary and appropriate for investment
companies registered with the Securities and Exchange
Commission, except as otherwise specifically excluded herein,
including but not limited to: receiving and processing
payments for purchases of Fund shares, opening shareholder
accounts, receiving and processing requests for liquidation
of Fund shares , transferring and canceling stock
certificates, maintaining all shareholder accounts, preparing
annual shareholder meetings lists, corresponding with
shareholders regarding transaction rejections, providing
order room services to brokers, withholding taxes on
accounts, disbursing income dividends and capital gains
distributions, preparing and filing U.S. Treasury Department
Form 1099 for shareholders, preparing and mailing
confirmation forms to shareholders for all purchases and
liquidations of Fund shares and other confirmable
transactions in shareholder accounts, recording reinvestment
of dividends and distributions in Fund shares, and causing
liquidation of shares and disbursements to be made to
withdrawal plan holders. The services to be performed by
CISC under this Agreement may be set forth in a procedures
manual and other documents as mutually agreed to by CISC and
SSI. Specifically excluded from the services to be provided
by CISC are the following: mailing proxy materials,
receiving and tabulating proxies, mailing shareholder reports
and prospectuses, account research, shareholder
correspondence and telephone services regarding general
inquiries, information requests and all other matters except
transaction rejections, all of which SRS agrees to continue
to perform directly on behalf of the Trust and the Fund.
2. Fees and Charges. SSI will pay CISC for the services
provided hereunder in accordance with and in the manner set
forth in Schedule B to this Agreement.
3. Representations and Warranties of CISC. CISC
represents and warrants to SSI that:
(a) It is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of
Massachusetts;
(b) It is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
(c) It is empowered under applicable state and federal
laws and by its Articles of Organization and By-Laws
to enter into and perform the services contemplated
by this Agreement and it is in compliance and shall
continue during the term of this Agreement to be in
compliance with all such applicable laws;
(d) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
(e) It has and shall continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement; and
<PAGE> 3
(f) It has filed a Registration Statement on SEC Form TA-
1 and will file timely an amendment to same
respecting this Sub-Transfer Agent Agreement with the
Securities and Exchange Commission, it is duly
registered as a transfer agent as provided in Section
17Ac of the Securities and Exchange Act of 1934, and
it will remain so registered and will comply with all
state and federal laws and regulations relating to
transfer agents throughout the term of this
Agreement.
4. Representations and Warranties of SSI. SSI
represents and warrants to CISC that:
(a) It is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of
Massachusetts;
(b) It is duly qualified to carry on its business in the
State of Illinois;
(c) It is empowered under applicable state and federal
laws and by its Articles of Organization and By-Laws
to enter into and perform the services contemplated
in this Agreement and in the Transfer Agent Agreement
and it is in compliance and shall continue during the
term of this Agreement to be in compliance with the
Transfer Agent Agreement and all such applicable
laws;
(d) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement;
(e) It has and shall continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement and the Transfer Agent Agreement; and
(f) It has filed a Registration Statement on SEC Form TA-
1 and will file timely an amendment to same
respecting this Sub-Transfer Agent Agreement with the
Securities and Exchange Commission; it is duly
registered as a Transfer Agent as provided in Section
17Ac of the Securities Exchange Act of 1934; and it
will remain so registered and comply with all state
and federal laws and regulations relating to transfer
agents throughout the term of this Agreement.
5. Representations and Warranties of the Trust. The
Trust represents and warrants to CISC that:
(a) It is a business trust duly organized and existing
and in good standing under the laws of the State of
Massachusetts;
(b) The Fund is an open-end diversified management
investment company registered under the Investment
Company Act of 1940;
<PAGE> 4
(c) Registration statements under the Securities Act of
1933 and applicable state laws are currently
effective and will remain effective at all times with
respect to all shares of the Fund being offered for
sale;
(d) The Trust is empowered under applicable laws and
regulations and by its Agreement and Declaration of
Trust and By-Laws to enter into and perform this
Agreement; and
(e) All requisite proceedings and actions have been
taken to authorize it to enter into and perform this
Agreement.
6. Copies of Documents. SSI promptly from time to time
will furnish CISC with copies of the following Trust and Fund
documents and all amendments or supplements thereto: the
Agreement and Declaration of Trust ; the By-Laws; and the
Registration Statement under Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended,
together with any other information reasonably requested by
CISC. The Prospectus and Statement of Additional Information
contained in such Registration Statement, as from time to
time amended and supplemented, are herein collectively
referred to as the "Fund's Prospectus."
On or before the date of effectiveness of this
Agreement, or as soon thereafter as is reasonably
practicable, and from time-to-time thereafter, SSI will
furnish CISC with certified copies of the resolutions of the
Trustees of the Trust authorizing this Agreement and
designating authorized persons to give instructions to CISC;
if applicable, a specimen of the certificate for shares of
the Fund in the form approved by the Trustees of the Trust,
with a certificate of the Secretary of the Trust as to such
approval; and certificates as to any change in any officer,
director, or authorized person of the SSI and the Trust.
7. Share Certificates. The Fund has resolved that all
of the Fund's shares shall hereafter be issued in
uncertificated form. Thus, CISC shall not be responsible for
the issuance of certificates representing shares in the Fund.
However, CISC shall maintain a record of each certificate
previously issued and outstanding, the number of shares
represented thereby, and the holder of record of such shares.
8. Lost or Destroyed Certificates. In case of the
alleged loss or destruction of any share certificate, no new
certificate shall be issued in lieu thereof, unless there
shall first be furnished to CISC an affidavit of loss or non-
receipt by the holder of shares with respect to which a
certificate has been lost or destroyed, supported by an
appropriate bond paid for by the shareholder which is
satisfactory to CISC and issued by a surety company
satisfactory to CISC. CISC shall place and maintain stop
transfer instructions on all lost certificates as to which it
receives notice.
9. Receipt of Funds for Investment. CISC will maintain
one or more accounts with The First National Bank of Boston
("Bank"),in the name of SSI into which
<PAGE> 5
it will deposit funds payable to CISC or SSI as agent for, or
otherwise identified as being for the account of, the Trust
or the Fund.
10. Shareholder Accounts. Upon receipt of any funds
referred to in paragraph 9, CISC will compute the number of
shares purchased by the shareholder according to the net
asset value of Fund shares determined in accordance with
applicable federal laws and regulations and as described in
the Prospectus of the Fund and:
(a) In the case of a new shareholder, open and maintain
an open account for such shareholder in the name or
names set forth in the subscription application form;
(b) Send to the shareholder a confirmation indicating the
amount of full and fractional shares purchased (in
the case of fractional shares, rounded to three
decimal places) and the price per share;
(c) In the case of a request to establish a plan or
program being offered by the Fund's Prospectus, open
and maintain such plan or program for the shareholder
in accordance with the terms thereof; and
(d) Perform such other services and initiate and maintain
such other books and records as are customarily
undertaken by transfer agents in maintaining
shareholder accounts for registered investment
company investors;
all subject to requirements set forth in the Fund's
Prospectus with respect to rejection of orders.
For closed accounts, CISC will maintain account records
through June of the calendar year following the year in which
the account is closed, or such other period of time as CISC
and SSI shall mutually agree in writing from time to time.
11. Unpaid Checks; Accounts Assigned for Collection.
If any check or other order for payment of money on the
account of any shareholder or new investor is returned unpaid
for any reason, CISC will:
(a) Give prompt notification to SRS of such non-payment
by facsimile sent prior to 9 a.m. E.S.T.; and
(b) Upon SSI's written instruction, received by facsimile
delivery not later than 11 a.m. E.S.T., authorize
payment of such order notwithstanding insufficient
shareholder account funds, on the condition that SSI
shall indemnify CISC and payor bank in respect of
such payment.
12. Dividends and Distributions. SSI will promptly
notify CISC of the declaration of any dividend or
distribution with respect to Fund shares, the amount of
<PAGE> 6
such dividend or distribution, the date each such dividend or
distribution shall be paid, and the record date for
determination of shareholders entitled to receive such
dividend or distribution. As dividend disbursing agent, CISC
will, on or before the payment date of any such dividend or
distribution, notify the Trust's custodian of the estimated
amount of cash required to pay such dividend or distribution,
and the Trust agrees that on or before the mailing date of
such dividend or distribution it will instruct its custodian
to make available to CISC sufficient funds in the dividend
and distribution account maintained by CISC with the Bank.
As dividend disbursing agent, CISC will prepare and
distribute to shareholders any funds to which they are
entitled by reason of any dividend or distribution and, in
the case of shareholders entitled to receive additional
shares by reason of any such dividend or distribution, CISC
will make appropriate credits to their accounts and cause to
be prepared and mailed to shareholders confirmation
statements and, of such additional shares. CISC will maintain
all records necessary to reflect the crediting of dividends
and distributions which are reinvested in shares of the Fund.
13. Redemptions. CISC will receive and process for
redemption in accordance with the Fund's Prospectus, share
certificates and requests for redemption of shares as
follows:
(a) If such certificate or request complies with
standards for redemption, CISC will, in accordance
with the Fund's current Prospectus, pay to the
shareholder from funds deposited by the Fund from
time to time in the redemption account maintained by
CISC with the Bank, the appropriate redemption price
as set forth in the Fund's Prospectus; and
(b) If such certificate or request does not comply with
the standards for redemption, CISC will promptly
notify the shareholder and shall effect the
redemption at the price in effect at the time of
receipt of documents complying with the standard.
14. Transfer and Exchanges. CISC will review and
process transfers of shares of the Fund and to the extent, if
any, permitted in the Prospectus of the Fund, exchanges
between series of the Trust received by CISC. If shares to
be transferred are represented by outstanding certificates,
CISC will, upon surrender to it of the certificates in proper
form for transfer, credit the same to the transferee on its
books. If shares are to be exchanged for shares of another
Fund, CISC will process such exchange in the same manner as a
redemption and sale of shares, in accordance with the Fund's
Prospectus may in its.
15. Plans. CISC will process such plans or programs
for investing in shares, and such systematic withdrawal
plans, as are provided for in the Fund's Prospectus.
16. Tax Returns and Reports. CISC will prepare and
file tax returns and reports with the Internal Revenue
Service and any other federal, state or local governmental
agency which may require such filings, including state
abandoned
<PAGE> 7
property laws, and conduct appropriate communications
relating thereto, and, if required, mail to shareholders such
forms for reporting dividends and distributions paid by the
Fund as are required by applicable laws, rules and
regulations, and CISC will withhold such sums as are required
to be withheld under applicable Federal and state income tax
laws, rules and regulations. CISC will periodically provide
SSI with reports showing dividends and distributions paid and
any amounts withheld. CISC will also make reasonable attempt
to obtain such tax withholding information from shareholders
as is required to be obtained on behalf of the Trust under
applicable federal or state laws.
17. Record Keeping. CISC will maintain records, which
at all times will be the property of the Trust and available
for inspection by SSI, showing for each shareholder's account
the following information and such other information as CISC
and SSI shall mutually agree in writing from time to time:
(a) Name, address, and United States taxpayer
identification or Social Security number, if provided
(or amounts withheld with respect to dividends and
distributions on shares if a taxpayer identification
or Social Security number is not provided);
(b) Number of shares held for which certificates have not
been issued and for which certificates have been
issued;
(c) Historical information regarding the account of each
shareholder, including dividends and distributions
paid, if any, gross proceeds of sales transactions,
and the date and price for transactions on a
shareholder's account;
(d) Any stop or restraining order placed against a
shareholder's account of which SSI has notified CISI;
(e) Information with respect to withholdings of taxes as
required under applicable Federal and state laws and
regulations;
(f) Any capital gain or dividend reinvestment order and
plan application relating to the current maintenance
of a shareholder's account; and
(g) Any instructions as to record addresses and any
correspondence or instructions relating to the
current maintenance of a shareholder's account.
SSI hereby agrees that CISC shall have no liability or
obligation with respect to the accuracy or completeness of
shareholder account information received by CISC on or about
the Operational Date.
<PAGE> 8
By mutual agreement of CISC and SSI, CISC shall
administer a program whereby reasonable attempt is made to
identify current address information from shareholders whose
mail from the Trust is returned.
CISC shall maintain at its expense those records
necessary to carry out its duties under this Agreement. In
addition, CISC shall maintain at its expense for periods
prescribed by law all records which the Fund or CISC is
required to keep and maintain pursuant to any applicable
statute, rule or regulation, including without limitation
Rule 31(a)-1 under the Investment Company Act of 1940,
relating to the maintenance of records in connection with the
services to be provided hereunder. Upon mutual agreement of
CISC and SSI, CISC shall also maintain other records
requested from time to time by SSI, at SSI's expense.
At the end of the period in which records must be
retained by law, such records and documents will either be
provided to the Trust or destroyed in accordance with prior
written authorization from the Trust.
18. Retirement Plan Services. CISC shall provide sub-
accounting services for retirement plan shareholders
representing group relationships with special recordkeeping
needs.
19. Other Information Furnished. CISC will furnish to
SSI such other information, including shareholder lists and
statistical information as may be agreed upon from time to
time between CISC and SSI. CISC shall notify SSI and the
Trust of any request or demand to inspect the share records
of the Fund, and will not permit or refuse such inspection
until receipt of written instructions from the Trust as to
such permission or refusal unless required by law.
CISC shall provide to the Trust any results of studies
and evaluations of systems of internal accounting controls
performed for the purpose of meeting the requirements of
Regulation 240.17Ad-13(a) of the Securities Exchange Act of
1934.
20. Shareholder Inquiries. CISC will not respond to
written correspondence from fund shareholders or others
relating to the Fund other than those regarding transaction
rejections and clarification of transaction instructions, but
shall forward all such correspondence to SSI.
21. Communications to Shareholders and Meetings. CISC
will determine all shareholders entitled to receive, and will
cause to be addressed and mailed, all communications by the
Fund to its shareholders, including quarterly and annual
reports, proxy material for meetings, and periodic
communications. CISC will cause to be received, examined and
tabulated return proxy cards for meetings of shareholders and
certify the vote to the Trust Fund.
22. Other Services by CISC. CISC shall provide SSI,
with the following additional services:
<PAGE> 9
(a) All CTRAN, CIMAGE, Price Waterhouse Blue Sky 2, and
Pegashares functionality and enhancements (on a
remote basis) as they now exist and as they are
developed and made available to CISC clients;
(b) Initial programs and report enhancements to the CTRAN
System which are necessary to accommodate the Fund as
a no-load fund group;
(c) Development, systems training, technical support,
implementation, and maintenance of special programs
and systems to enhance overall shareholder servicing
capability;
(d) Product and system training for personnel of
institutional servicing agents.
23. Insurance. CISC will not reduce or allow to lapse
any of its insurance coverages from time to time in effect,
including but not limited to errors and omissions, fidelity
bond and electronic data processing coverage, without the
prior written consent of SSI. Attached as Schedule D to this
Agreement is a list of the insurance coverage which CISC has
in effect as of the date of execution of this Agreement and,
if different, will have in effect on the Operational Date.
24. Duty of Care and Indemnification. CISC will at all
times use reasonable care, due diligence and act in good
faith in performing its duties hereunder. CISC will not be
liable or responsible for delays or errors by reason of
circumstances beyond its control, including without
limitation acts of civil or military authority, national or
state emergencies, labor difficulties, fire, mechanical
breakdown, flood or catastrophe, acts of God, insurrection,
war, riots or failure of transportation, communication or
power supply.
CISC may rely on certifications of those individuals
designated as authorized persons to give instructions to CISC
as to proceedings or facts in connection with any action
taken by the shareholders of the Fund or Trustees of the
Trust, and upon instructions not inconsistent with this
Agreement from individuals who have been so authorized. Upon
receiving authorization from an individual designated as an
authorized person to give instructions to CISC, CISC may
apply to counsel for the Trust, or counsel for SSI or the
Fund's investment adviser, at the Fund's expense, for advice.
With respect to any action reasonably taken on the basis of
such certifications or instructions or in accordance with the
advice of counsel of the Trust, or counsel for SSI or the
Fund's investment adviser, the Fund will indemnify and hold
harmless CSC from any and all losses, claims, damages,
liabilities and expenses (including reasonable counsel fees
and expenses).
SSI will indemnify CISC against and hold CISC harmless
from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect of any claim, demand, action or suit not resulting
from CISC's bad faith, negligence, lack of due diligence or
willful misconduct and arising out of, or in connection with
its duties under this Agreement.
<PAGE> 10
CISC shall indemnify SSI against and hold SSI harmless
from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect to any claim, demand, action or suit resulting from
CISC's bad faith, negligence, lack of due diligence or
willful misconduct, and arising out of, or in connection
with, its duties under this Agreement. For purposes of this
Sub-Transfer Agent Agreement, "lack of due diligence" shall
mean the processing by CISC of a Fund share transaction in
accordance with a practice that is not substantially in
compliance with (1) a transaction processing practice of SSI
approved by Fund Trustees, (2) insurance coverages, or (3)
generally accepted industry practices of mutual fund agents.
CISC shall also be indemnified and held harmless by SSI
against any loss, claim, damage, liability and expenses
(including reasonable counsel fees and expenses) by reason of
any act done by it in good faith with due diligence and in
reasonable reliance upon any instrument or certificate for
shares reasonably believed by it (a) to be genuine and (b) to
be signed, countersigned or executed by any person or persons
authorized to sign, countersign, or execute such instrument
or certificate.
In addition, SSI will indemnify and hold CISC harmless
against any loss, claim, damage, liability and expense
(including reasonable counsel fees and expenses) in respect
of any claim, demand, action or suit as a result of the
negligence of the Fund, Trust SRF or SSI, or as a result of
CISC's acting upon any instructions reasonably believed by
CISC to have been executed or orally communicated by a duly
authorized officer or employee of the Fund, Trust SRF or SSI,
or as a result of acting in reliance upon written or oral
advice reasonably believed by CISC to have been given by
counsel for the Fund, Trust SRF or SSI.
In any case in which a party to this Agreement may be
asked to indemnify or hold harmless the other party hereto,
the party seeking indemnification shall advise the other
party of all pertinent facts concerning the situation giving
rise to the claim or potential claim for indemnification, and
each party shall use reasonable care to identify and notify
the other promptly concerning any situation which presents or
appears likely to present a claim for indemnification.
Prior to admitting to or agreeing to settle any claim subject
to this Section, each party shall give the other reasonable
opportunity to defend against said claim in either party's
name.
25. Employees. CISC and SSI are separately
responsible for the employment, control and conduct of their
respective agents and employees and for injury to such agents
or employees or to others caused by such agents or employees.
CISC and SSI severally assume full responsibility for their
respective agents and employees under applicable statues and
agree to pay all employer taxes thereunder. The conduct of
their respective agents and employees shall be included in
any reference to the conduct of CISC or SSI for all purposes
hereunder.
26. Termination and Amendment. This Agreement shall
continue in effect for eighteen (18) months from the
Operational Date, and will automatically be
<PAGE> 11
renewed for successive one year terms thereafter. After
eighteen (18) months from the Operational Date the Agreement
may be terminated at any time by not less than one hundred
eighty (180) days written notice. Upon termination hereof,
SSI shall pay CISC such compensation as may be due to CISC as
of the date of such termination for services rendered and
expenses incurred, as described in Schedule B. This
Agreement may be modified or amended from time to time by
mutual agreement between SSI and CISC.
27. Successors. In the event that in connection with
termination of this Agreement a successor to any of CISC's
duties or responsibilities hereunder is designated by SSI by
written notice to CISC, CISC shall promptly at the expense of
SSI, transfer to such successor, or if no successor is
designated, transfer to the Trust, a certificate list of the
shareholders of the Fund (with name, address and taxpayer
identification or Social Security number), a historical
record of the account of each shareholder and the status
thereof, all other relevant books, records, correspondence
and other data established or maintained by CISC under this
Agreement in machine readable form and will cooperate in the
transfer of such duties and responsibilities, and in the
establishment of books, records and other data by such
successor. CISC shall be entitled to reimbursement of its
reasonable out-of-pocket expenses in respect of assistance
provided in accordance with the preceding sentence.
28. Miscellaneous. This Agreement shall be construed
in accordance with and governed by the laws of The
Commonwealth of Massachusetts.
The captions in this Agreement are included for
convenience of reference only and in no way define or limit
any of the provisions of this Agreement or otherwise affect
their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
CISC shall keep confidential all records and information
provided to CISC by the Trust, SSI, SRF, and prior, present
or prospective shareholders of the Fund, except, after notice
to SSI , to the extent disclosures are required by this
Agreement, by the Fund's registration statement, or by a
reasonable request or a valid subpoena or warrant issued by a
court, state or federal agency or other governmental
authority.
Neither CISC nor SSI may use each other's name in any
written material without written consent of such other party,
provided , however, that such consent shall not unreasonably
withheld. CISC and SSI hereby consent to all uses of their
respective names which refer in accurate terms to appointment
and duties under this Agreement or which are required by any
governmental or regulatory authority including required
filings. SSI, SRF, the Trust and the Fund consent to use of
their respective names and logos by CISC for shareholder
correspondence and statements
This Agreement shall be binding upon and shall inure to
the benefit of SSI and CISC and their respective successors
and assigns. Neither SSI nor CISC shall assign this
<PAGE> 12
Agreement nor its rights and obligations under this Agreement
without the express written consent of the other party.
This Agreement may be amended only in writing by mutual
agreement of the parties.
Any notice and other instrument in writing authorized or
required by this Agreement t be given to SSI or CISC shall
sufficiently be given if addressed to that party and mailed
or delivered to it as its office set for the below or at such
other place as it may from time to time designate in writing.
SSI, the Trust and the Fund:
SteinRoe Services Inc.
One South Wacker Drive
Suite 3300
Chicago, Illinois 60606
Attn: Jilaine Hummel Bauer, Esq.
CISC:
Colonial Investors Service Center, Inc.
One Financial Center
Boston, Massachusetts 02111
Attn: Mary McKenzie; with a separate copy to
Attn: Nancy L. Conlin, Esq., Legal Department
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and sealed as of the date first
above written.
STEINROE SERVICES INC.
By: TIMOTHY K. ARMOUR
Name:
Title: Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By: D.S. SCOON
Name: Davey S. Scoon
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
STEIN ROE INCOME TRUST
STEIN ROE INVESTMENT TRUST
STEIN ROE MUNICIPAL TRUST
By: TIMOTHY K. ARMOUR
Name: Timothy K. Armour
Title: President
<PAGE>
SCHEDULE A
Stein Roe Mutual Funds (the "Fund"), consists of the
following series of portfolios:
Stein Roe Investment Trust
- --------------------------
Stein Roe Growth & Income Fund
Stein Roe International Fund
Stein Roe Young Investor Fund
Stein Roe Balanced Fund
Stein Roe Growth Stock Fund
Stein Roe Capital Opportunities Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Income Trust
- ----------------------
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
Stein Roe Limited Maturity Income Fund
Stein Roe Municipal Trust
- -------------------------
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Municipal Money Market Fund
Stein Roe Managed Municipals Fund
<PAGE>
SCHEDULE B
This Schedule B is attached to and is part of a certain
Sub-Transfer Agent Agreement ("Agreement") dated July 3, 1996
between SteinRoe Services Inc. ("SSI") and Colonial Investors
Center, Inc. ("CISC").
A. SSI will pay CISC for services rendered under the
Agreement and in accordance with a negotiated allocation of
revenues and reimbursement of costs as follows:
1. As of the Operational Date, CISC and SSI shall agree upon
a fixed monthly per account fee to be paid under the
Agreement, which shall be in an amount equal to 1/12 (a) the
estimated total, determined on an annualized basis, of (1)
all incremental costs incurred by CISC in connection with the
sub-transfer agency relationship, plus (2) 1/2 the net
economic benefit derived by Liberty Financial Companies, the
parent company of both CISC and SSI, as a result of the sub-
transfer agency relationship, (b) divided by the number of
shareholder accounts to be serviced by CISC pursuant to the
Agreement as of the Operational Date.
2. For the first eighteen (18) months of the Agreement, SSI
shall pay CISC, monthly in arrears, commencing with the first
day of August, 1996, and on the first day of each month
thereafter, the greater of (a) the product of the fixed per
account fee determined as provided in paragraph 1. above
multiplied by the number of shareholder accounts serviced by
CISC pursuant to the Agreement as of the end of the preceding
month, and (b) 1/12 the annualized estimated total costs and
benefit determined pursuant to (a) of paragraph 1. above.
All estimates under this paragraph shall be determined no
later than September 30, 1996. The annual fee for the first
eighteen months shall not be less than $1.4 million.
3. Commencing January 1, 1998, and during each calendar year
thereafter, SSI shall pay CISC a fee equal to CISC's budgeted
annual per account expense of providing services pursuant to
the Agreement. Said fee shall be paid monthly in arrears, on
the first day of each month, in an amount equal to the
product of 1/12 the budgeted annual per account fee
multiplied by the number of shareholder accounts serviced by
CISC pursuant to the Agreement as of the end of the preceding
month. All budgeted numbers under this paragraph shall be
determined no later than November 30 each year.
B. The Fund shall be credited each month with balance
credits earned on all Fund cash balances.
Upon thirty (30) days' notice to SSI, CISC may increase
the fees it charges to the extent the cost to CISC of
providing services increases (i) because of changes in the
Fund's Prospectus, or (ii) on account of any change after the
date hereof in law or regulations governing performance of
obligations hereunder.
Fees for any additional services not provided herein, ad
hoc reports or special programming requirements to be
provided by CISC shall be agreed upon by SSI and CISC at such
time as CISC agrees to provide any such services.
In addition to paying CISC fees as described herein, SSI
agrees to reimburse CISC for any and all out-of-pocket
expenses and charges in performing services under the
Agreement (other than charges for normal data processing
services and related software, equipment and facilities)
including, but not limited to, mailing service, postage,
printing of shareholder statements, the cost of any and all
forms of the Trust and other materials used in communicating
with shareholders of the Trust, the cost of any equipment or
service used for communicating with the Trust's custodian
bank or other agent of the Trust, and all costs of telephone
communication with or on behalf of shareholders allocated in
a manner mutually acceptable to CISC and SSI.
<PAGE>
SCHEDULE C
SRS and CSC hereby agree that the date on which the
complete services began ("Operational Date") under the Sub-
Transfer Agent Agreement between them dated July 3, 1996, is:
July , 1996
STEINROE SERVICES INC.
By:________________________________________
Name:
Title: Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By:________________________________________
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of January 1, 1997, and
effective that date unless otherwise indicated below, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust and Stein Roe Investment Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to add Stein Roe Advisor Trust
(effective February 14, 1997), Stein Roe Institutional Trust
(effective January 2, 1997) and Stein Roe Trust (effective
February 14, 1997), comprised of the Series listed on
Schedule A, as amended, and assenting parties to the
contract and to add new series of the existing Trusts. The
amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
STEIN ROE ADVISOR TRUST
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor International Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor Young Investor Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
Colonial Investors Service Center, Inc.
By: MARY DILLON MCKENZIE
Name: Mary Dillon McKenzie
Title: Senior Vice President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: JILAINE HUMMEL BAUER
Name: Jilaine Hummel Bauer
Title: Executive Vice President and Secretary
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of June 30, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Advisor Trust, Stein Roe Trust and Stein Roe
Institutional Trust (collectively the "Trust") and Colonial
Investors Service Center, Inc. ("CISC") to add additional
series of the existing Trusts. The amended Schedule A is as
follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE ADVISOR TRUST
Stein Roe Advisor Balanced Fund
Stein Roe Advisor Growth & Income Fund
Stein Roe Advisor Growth Stock Fund
Stein Roe Advisor International Fund
Stein Roe Advisor Special Fund
Stein Roe Advisor Special Venture Fund
Stein Roe Advisor Young Investor Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
Colonial Investors Service Center, Inc.
By: JOHN W. BYRNE
Name: John W. Byrne
Title: Vice President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HEIDI J. WALTER
Name: Heidi J. Walter
Title: Vice President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 15, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Advisor Trust, Stein Roe Trust and Stein Roe
Institutional Trust (collectively the "Trust") and Colonial
Investors Service Center, Inc. ("CISC") to remove Stein Roe
Advisor Trust as a party to this agreement. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Government Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
Stein Roe Government Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HANS P. ZIEGLER
Name:
Title:
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HANS P. ZIEGLER
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 17, 1997, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to remove two series of Income Trust
from Schedule A. The amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: ANNE E. MARCEL
Name: Anne E. Marcel
Title: Vice President
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: Vice President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of April 30, 1998, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Colonial Investors Service
Center, Inc. ("CISC") to add one series of Investment Trust
to Schedule A. The amended Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: HANS P. ZIEGLER
Name:
Title:
Colonial Investors Service Center, Inc.
By: MARY D. MCKENZIE
Name: Mary D. McKenzie
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Advisor Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: HANS P. ZIEGLER
Name:
Title:
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of October 19, 1998, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Liberty Funds Services, Inc.
(f/k/a Colonial Investors Service Center, Inc. ("CISC") to add
one series of Investment Trust to Schedule A. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Emerging Markets Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
Stein Roe Asia Pacific Fund
STEIN ROE INSTITUTIONAL TRUST
Stein Roe Institutional High Yield Fund
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title:
Liberty Funds Services, Inc.
By: DAVEY SCOON
Name: Davey Scoon
Title: President
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of February 2, 1999, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Liberty Funds Services, Inc.
(f/k/a Colonial Investors Service Center, Inc.) to add
one series of Investment Trust to Schedule A. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
Stein Roe Asia Pacific Fund
Stein Roe Small Company Growth Fund
STEIN ROE INSTITUTIONAL TRUST
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title:
Liberty Funds Services, Inc.
By: NANCY L. CONLIN
Name: Nancy L. Conlin
Title: Clerk
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President
<PAGE>
AMENDMENT TO
SUB-TRANSFER AGENT AGREEMENT
This Amendment dated as of March 31, 1999, amends
the agreement dated as of July 3, 1996 (the "Agreement"),
between SteinRoe Services Inc.("SSI"), Stein Roe Municipal
Trust, Stein Roe Income Trust, Stein Roe Investment Trust,
Stein Roe Trust and Stein Roe Institutional Trust
(collectively the "Trust") and Liberty Funds Services, Inc.
(f/k/a Colonial Investors Service Center, Inc.) to add
one series of Investment Trust to Schedule A. The amended
Schedule A is as follows:
STEIN ROE INCOME TRUST
Stein Roe Income Fund
Stein Roe Intermediate Bond Fund
Stein Roe High Yield Fund
Stein Roe Cash Reserves Fund
STEIN ROE MUNICIPAL TRUST
Stein Roe Intermediate Municipals Fund
Stein Roe High-Yield Municipals Fund
Stein Roe Managed Municipals Fund
Stein Roe Municipal Money Market Fund
STEIN ROE INVESTMENT TRUST
Stein Roe International Fund
Stein Roe Growth & Income Fund
Stein Roe Balanced Fund
Stein Roe Young Investor Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities Fund
Stein Roe Growth Opportunities Fund
Stein Roe Large Company Focus Fund
Stein Roe Asia Pacific Fund
Stein Roe Small Company Growth Fund
Stein Roe Growth Investor Fund
STEIN ROE INSTITUTIONAL TRUST
STEIN ROE TRUST
Stein Roe Institutional Client High Yield Fund
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and sealed as of the date
first above written.
SteinRoe Services Inc.
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: Vice President
Liberty Funds Services, Inc.
By: NANCY L. CONLIN
Name: Nancy L. Conlin
Title: Clerk
Assented to on behalf of Trust and Stein Roe Mutual Funds:
Stein Roe Income Trust
Stein Roe Investment Trust
Stein Roe Municipal Trust
Stein Roe Institutional Trust
Stein Roe Trust
By: THOMAS W. BUTCH
Name: Thomas W. Butch
Title: President
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of
our reports dated November 6, 1998 and November 16, 1998, and to
all references to our Firm included in or made a part of this
Registration Statement on Form N-1A of the Stein Roe Investment
Trust (comprising the Stein Roe Growth & Income Fund, Stein Roe
Balanced Fund, Stein Roe Growth Stock Fund, Stein Roe Special
Fund, Stein Roe Young Investor Fund, Stein Roe Capital
Opportunities Fund, Stein Roe Special Venture Fund, Stein Roe
Large Company Focus Fund and Stein Roe Growth Opportunities Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 4, 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
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<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
<PERIOD-START> JUN-26-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 49,317
<INVESTMENTS-AT-VALUE> 44,758
<RECEIVABLES> 54
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44,843
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 127
<TOTAL-LIABILITIES> 127
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,272
<SHARES-COMMON-STOCK> 5,122
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,997)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,559)
<NET-ASSETS> 44,716
<DIVIDEND-INCOME> 110
<INTEREST-INCOME> 53
<OTHER-INCOME> 0
<EXPENSES-NET> 177
<NET-INVESTMENT-INCOME> (14)
<REALIZED-GAINS-CURRENT> (1,997)
<APPREC-INCREASE-CURRENT> (4,559)
<NET-CHANGE-FROM-OPS> (6,570)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,607
<NUMBER-OF-SHARES-REDEEMED> 485
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 44,716
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 89
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 190
<AVERAGE-NET-ASSETS> 45,024
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (1.27)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.73
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT (p)
[Logo] Stein Roe Mutual Funds IN40297
Sensible Risks. Intelligent Investments. [service mark]
MUTUAL FUND APPLICATION
Mail to:
STEIN ROE MUTUAL FUNDS
P.O. Box 8900
Boston, MA 02205-8900
This application is for:
[ ] New account
[ ] Change to current account (see Section 13)
- -----------------------------------------------------------------
If you have questions, please call us toll-free.
Monday - Friday--7 a.m. to 8 p.m. (CST)
Saturday & Sunday--9 a.m. to 2 p.m. (CST)
800-338-2550
www.steinroe.com
Stein Roe Mutual Funds, P.O. Box 8900, Boston, MA 02205-8900 800-
338-2550
- -----------------------------------------------------------------
1. ACCOUNT REGISTRATION
Please check one box below to indicate the type of account
and complete the related information.
[ ] INDIVIDUAL OR [ ] JOINT* ACCOUNT
______________________________________________
Owner's name (First, middle initial, last)
_______________________________________________
Joint owner's name (First, middle initial, last)
__________________________________________________________________
Owner's Social Security number Joint owner's Social Security
number
*Joint tenants with right of survivorship, unless indicated
otherwise.
[ ] UNIFORM GIFTS (TRANSFERS) TO MINORS ACCOUNT (UGMA/UTMA)
_________________________________________
Name of one custodian only
_________________________________________
Name of one minor only
_________________________________________
State of residence
_________________________________________
Minor's Social Security number
[ ] ORGANIZATION OR OTHER ACCOUNT
Please complete and return the Certificate of Authorization on the
last page of the prospectus.
_______________________________________________
Name of corporation, partnership, estate, etc.
_______________________________________________
Tax identification number
[ ] TRUST OR RETIREMENT ACCOUNT
For a Stein Roe IRA, please call us for a separate application.
_________________________________________
Name of trustee(s)
_________________________________________
_________________________________________
Name of trust
____________________________________________________
Date of trust Trust's tax identification number
_________________________________________
Trust beneficiary(ies)
_________________________________________
Trust beneficiary(ies)
2. ADDRESS
______________________________________________
Street Address or P.O. box
______________________________________________
______________________________________________
City State Zip code
______________________________________________
Owner's citizenship Joint owner's citizenship
______________________________________________
Daytime telephone Evening Telephone
[ ] CONSOLIDATED QUARTERLY STATEMENTS
Check the box above if you would like to link your new Stein Roe
account to an existing Stein Roe account--even if the existing
account is registered to another member in your household.
Linking your accounts allows us to consolidate your Stein Roe
accounts on one quarterly statement. Please provide the existing
Stein Roe account number below. Statements will be sent to the
address on the existing account.
________________________________________________
Existing account number
3. FUND SELECTION
Fill in the amount you would like to invest in each of the funds
below. The initial minimum is $2,500; for custodial accounts
(UGMAs), the minimum is $1,000. When an Automatic Investment Plan
in Section 6 is established, Stein Roe reduces the minimum initial
investment to $1,000 for each new account ($500 for UGMAs and $100
for Young Investor Fund). If you do not specify a fund, your
investment will be in Stein Roe Cash Reserves Fund, a money market
fund.
MONEY MARKET FUNDS
Cash Reserves Fund (036) $_____
TAX-EXEMPT FUNDS
Municipal Money Market Fund (030) _____
Intermediate Municipals Fund (008)_____
Managed Municipals Fund (037) _____
High-Yield Municipals Fund (028) _____
BOND FUNDS
Intermediate Bond Fund (035) _____
Income Fund (009) _____
High Yield Fund (015) _____
GROWTH AND INCOME FUNDS
Balanced Fund (031) _____
Growth & Income Fund (011) _____
GROWTH FUNDS
Growth Stock Fund (032) CLOSED*
Young Investor Fund (014) _____
Growth Opportunities Fund (20) _____
Special Fund (034) _____
Large Company Focus Fund (021) _____
Special Venture Fund (016) _____
Capital Opportunities (033) _____
International Fund (012) _____
Small Company Growth Fund (025) _____
*This Fund is closed to new investors. If you are a shareholder
in any Stein Roe Fund as of Oct. 15, 1997, you may open an
additional account in your name. See a prospectus for more
information. To verify your status as an eligible shareholder,
please provide existing account number with your new investment
amount below.
_________________________________________________________________
Current Stein Roe Fund account number New Growth Stock Fund
investment amount
**To discourage short-term trading, there is a 1 percent
redemption fee imposed on the sale of shares held for less than 90
days.
4. INVESTMENT METHOD
Check one box below. (Money orders not accepted.)
[ ] BY CHECK: Payable to Stein Roe Mutual Funds
[ ] BY EXCHANGE FROM:
Your account must be registered identically to invest by exchange.
______________________________
Fund name
______________________________________________________________
Account number Number of shares or $ amount
[ ] BY WIRE: Call us for instructions at 800-338-2550
5. TELEPHONE AND ONLINE REDEMPTION OPTIONS
A. Telephone/Online Redemption Options. You can redeem shares by
telephone or online two ways: with Telephone/Online Redemption, a
check is mailed to your address of record; with Telephone/Online
Exchange, redemption proceeds are used to purchase shares in
another Stein Roe Fund. Most shareholders prefer these
conveniences. They apply unless you check the boxes below.
I DO NOT WANT:
[ ] Telephone Redemption [ ] Online Redemption
[ ] Telephone Exchange [ ] Online Exchange
B. ACH Redemption Option. Check either or both boxes if you wish
to be able to redeem shares at any time by telephone or online and
have the proceeds sent to your bank account designated in Section
8. ($50 minimum; $100,000 maximum.)
[ ] ACH Telephone Redemption
[ ] ACH Online Redemption
C. Telephone Redemption by Wire. Check the box below if you wish
to redeem shares at any time and wire the proceeds to your bank
account designated in Section 8. ($1,000 minimum for all funds;
$100,000 maximum for all funds except money market funds.) [ ]
If you decide to add these options at a later date, you will be
required to obtain a signature guarantee.
6. AUTOMATIC INVESTMENT PLAN
Please allow 3 weeks to establish this option.
[ ] A. Regular Investments. This option allows you to make
scheduled investments into your accounts(s) directly from
your bank account by electronic transfer. When this
option is established, Stein Roe reduces the minimum
initial investment to $1,000 for each new account ($500
for UGMAs and $100 for Young Investor Fund). Please
remember to include a check for the appropriate minimum
and also complete Section 8.
__________________________________________________________________
Fund name Account number or ("new") Amount (minimum $50 monthly)
__________________________________________________________________
Fund name Account number or ("new") Amount (minimum $50 monthly)
I authorize Stein Roe Mutual Funds to draw on my bank account to
purchase shares for the account(s) listed above. Check one box
below to indicate the frequency of your automatic investments.
[ ] Monthly [ ] Quarterly [ ] Every 6 months [ ] Annually
Check one box below to indicate which day of the month your
investment should be made:
[ ] 5th or [ ] 20th day of the month
Please begin: [ ] Immediately or [ ] _______ (specify month)
[ ] B. Special Investments. You can also make subsequent
purchases by telephone or online and pay for them by
electronic transfer from your bank account on request.
Check the box above for this option, which saves you the
trouble and expense of arranging for a wire transfer or
writing a check. Please also complete Section 8. ($50
minimum; $100,000 maximum).
7. DISTRIBUTION OPTIONS
We will automatically reinvest all distributions for you. If you
want this option, you do not need to fill out this section.
Please check below only if you prefer that your distributions be:
invested in shares of another Stein Roe Fund with the same account
registration (a $1,000 minimum applies to the account in which you
are investing); deposited into your bank account; or sent by check
to your registered address.
Dividends Capital Gains
(check one or both)
[ ] A. Distribution purchase [ ] [ ]
Invest into ____________________________________________
Fund name Account number (or "new")
from: ___________________________________________________
Fund name Account number (or "new")
[ ] B. Automatic deposit direct to your bank [ ] [ ]
account. Please also complete Section 8.
[ ] C. Send check to registered address [ ] [ ]
8. BANK INFORMATION
Complete this section if you have selected options from Sections
5B, 5C,6A, 6B, or 7B. You must use the same bank account for
these options.
[ ] Checking [ ] Savings
________________________________________________________________
Name of bank
________________________________________________________________
Street address of bank
________________________________________________________________
City State Zip code
________________________________________________________________
Name(s) on bank account
___________________________ ____________________________________
Bank account number ACH Routing number (see diagram below)
Attach voided check here.
- ------------------------------------------------------
Joe Investor 0000
123 Main Street ______ 19__
Anytown, USA 12345
Pay to the
order of ________________________________ $_________
______________________________________________ Dollars
Anytown Bank USA
Memo ____________ ______________________________
1 000 000000 00 0000000000
- ------------------------------------------------------
ACH ROUTING NUMBER YOUR ACCOUNT NUMBER
A unique nine-digit number Unique to your account at
that allows for the electronic your financial institution
transfer of funds and identifies your financial institution
within the Automatic Clearing House Network.
9. AUTOMATIC EXCHANGE PLAN
With this option you can authorize Stein Roe to regularly exchange
shares from one existing Stein Roe Fund account to another with
the same account registration. A $1,000 minimum applies to each
new account.
________________________________________________________________
Redeem shares from (Fund name) Account number
________________________________________________________________
Amount ($50 minimum)
________________________________________________________________
Purchase shares from (Fund name) Account number
Check one box below to indicate frequency of exchange and fill in
dates between the 1st and 28th of the month:
[ ] Twice monthly on the ___ and ___ beginning ___ (Specify month)
[ ] Monthly on the ______ beginning __________ (Specify month)
[ ] Quarterly on the ______ of _______________ (List four months)
[ ] Twice yearly on the _____ of _____________ (List two months)
[ ] Annually on the _____ of _________________ (Specify month)
10. MONEY MARKET FUND OPTIONS
[ ] FREE CHECK WRITING
Available for Cash Reserves Fund and Municipal Money Market Fund
only.
Check the above box and complete the signature card below if
you wish to write checks ($50 minimum) on your money market
fund account Please also complete Section 12.
PLEASE DO NOT DETACH
- ------------------------------------------------------------------
Bank of Boston Check Writing Signature Card (for money market
funds only)
Select Fund:[ ] Cash Reserves Fund [ ] Municipal Money Market Fund
Account name(s) as registered: ____________________________
By signing this card, I authorize Bank of Boston to honor any
check drawn by me on an account with the bank and to redeem and
pay to bank shares in my Fund account having a redemption price
equal to the amount of such check. I agree to be subject to the
rules governing the Check Writing Redemption option as in effect
from time to time.
Signature (sign as you will on checks) Signature guarantee*
__________________________________________________________________
__________________________________________________________________
Number of signatures on each check**: __________
*Required if you are adding these options to an existing account;
or if you are requesting check writing for a Trust, Corporation
or other Organization account, guarantee required for any person
signing these cards who has not signed in Section 12. Otherwise
a signature guarantee is not required.
**If left blank, only one signature is required for joint tenant
accounts, but all signatures are required for all other types of
accounts.
For office use only: Account no. _______________ Date: __________
You are subject to Fund and bank rules pertaining to checking
accounts under the privilege as in effect from time to time. For
a joint tenancy account with rights of survivorship, each owner
appoints each other owner as attorney-in-fact with power to
authorize redemptions on his behalf by signing checks under the
privilege unless the reverse side indicates all owners must sign
checks.
You agree to hold Fund and its transfer agent free from any
liability resulting from payment of any forged, altered, lost or
stolen check unless you notify Fund and bank of such
misappropriation no later than 14 days after the earliest of the
date on which you (a) discover the misappropriation or (b) receive
a copy of the check cancelled by bank. A copy of a cancelled
check paid during a calendar month is deemed received 6 days after
posting in the U.S. mail to your registered address with Fund
unless you notify Fund of non-receipt by certified mail within 20
days after the close of such month.
You agree to hold Fund and its transfer agent free from any
liability for any other check misappropriated by the same
wrongdoer and paid from proceeds of a redemption made in good
faith on or after the date you notify Fund of the first
misappropriated check.
- ------------------------------------------------------------------
11. TERMS AND CONDITIONS OF SERVICES
Please read carefully before signing in Section 12. By electing
an automatic service, you agree to the following terms and
conditions and those stated in the Fund prospectus as in effect
from time to time.
*By signing this application, you agree that any privilege you
elect may be restricted or terminated at any time without notice
to you. Your termination of a privilege will be effective no
later than five business days after the Fund(s) or its transfer
agent receives 1) your request; 2) notice and proof of your
death, or if a trust, termination thereof; or 3) the closing of
an affected Fund or bank account.
*All privileges except Automatic Dividend Deposit, Dividend
Purchase Option, Automatic Investment Plan, Money Market Fund
Check Writing, Automatic Exchange, Automatic Redemption Plan and
Telephone Redemption by Wire will be transferred automatically to
any new account you open in any other Fund offering the
privileges into which a telephone or written exchange is made.
*You authorize the Fund(s) and its transfer agent to initiate any
and all credit or debit entries (and reversals thereof) to effect
electronic transfers under any privilege and redeem shares of any
Fund(s) you own equal to the amount of any loss incurred by any
of them in effecting any electronic transfer and retain the
proceeds.
*To discourage short-term trading, there is a 1 percent redemption
fee imposed on the sale of Emerging Markets Fund shares held for
less than 90 days.
12. SIGNATURE(S)
By signing this form, I certify that:
*I have received the current Fund prospectus and have read the
Terms and Conditions of Services in Section 11 and agree to be
bound by their terms as governed by Illinois law. I have full
authority and legal capacity to purchase Fund shares and
establish and use any related privileges.
*By signing below, I certify under penalties or perjury that:
-All information and certifications on this application are true
and correct, including the Social Security or other tax
identification number (TIN) in Section 1.
-If I have not provided a TIN, I have not been issued a number
but have applied (or will apply) for one and understand that if
I do not provide the Fund(s) a TIN within 60 days, the Fund(s)
will withhold 31 percent from all my dividend, capital gain and
redemption payments until I provide one.
-Check one of the following only if applicable:
[ ] The IRS has informed me I am subject to backup withholding as
a result of a failure to report all interest or dividend
income.
[ ] I am a trust or organization that qualifies for the IRS backup
withholding exemption.
*Unless I have declined the Telephone Redemption, Telephone
Exchange, Online Redemption and Online Exchange privileges in
Section 5A, I have authorized the Fund and its agents to act upon
instructions received by telephone or online to redeem my shares
of the Fund or to exchange them for shares of another Stein Roe
Fund, and I agree that, subject to the Funds employing reasonable
procedures to confirm that such telephone or online instructions
are genuine, neither the Fund, nor any of its agents will be
liable for any loss, injury, damage, or expense as a result of
acting upon, and will not be responsible for the authenticity of,
any telephone or online instructions, and will hold the Fund and
its agents harmless from any loss, claims or liability arising
from its or their compliance with these instructions.
Accordingly, I understand that I will bear any risk of loss
resulting from unauthorized instructions.
*THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED
TO AVOID BACKUP WITHHOLDING.
Sign below exactly as your name(s) appears in Section 1.
x________________________________________________________________
Signature Date
_________________________________________________________________
Title (if owner is an organization)
_________________________________________________________________
joint owner's signature Date
x________________________________________________________________
Title (if owner is an organization)
13. SIGNATURE GUARANTEE (IF REQUIRED)
A signature guarantee is not required if you are establishing a
new account. For existing accounts, a signature guarantee is
required if you are adding or making changes to options listed in
Sections 5, 6, 7B, 8 or 10. We are unable to accept
notarizations.
Signature(s) guaranteed by:
________________________________________________________________
Name of institution
________________________________________________________________
Name of authorized officer
________________________________________________________________
Signature of authorized officer
Guarantor's stamp:
LIBERTY FUNDS DISTRIBUTOR, INC.
IN40297
