STEIN ROE INVESTMENT TRUST, 497, 1999-02-25

STEIN ROE INVESTMENT TRUST
497, 1999-02-25

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[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.

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 MUTUAL FUNDS LOGO]

STEIN ROE YOUNG INVESTOR 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.

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
Educational Materials

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>
THE FUND
Stein Roe Young Investor Fund

INVESTMENT GOAL
Stein Roe Young Investor Fund seeks long-term growth.

Principal Investment Strategy
The Fund invests all its assets in SR&F Growth Investor Portfolio
as part of a master fund/feeder fund structure. The Portfolio
invests primarily in common stocks believed to have long-term
growth potential. Under normal market conditions, the Portfolio
invests at least 65 percent of its assets in common stocks of
companies that Stein Roe believes affect the lives of children and
teenagers. These companies may produce products or services that
children and teenagers use, are aware of, or could have an
interest in. The Portfolio may invest in companies of any size
including smaller emerging companies. It emphasizes companies in
the technology sector and various consumer goods sectors,
including personal care products, pharmaceuticals and food
products. The Portfolio may invest up to 25 percent of its assets
in foreign stocks.

The Fund also has an educational objective. It seeks to teach
children and teenagers information about mutual funds, basic
economic principles and personal finance through a variety of
educational materials paid for by the Fund.

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.

Because the Portfolio invests in stocks, the price of the Fund's
shares-its net asset value per share (NAV)-fluctuates daily in
response to changes in the market value of the securities. In
addition, the risks associated with its investment strategy may
cause the Fund's total return or yield to decrease.

Due to its focus on companies in the technology sector and various
consumer goods sectors, including personal care products,
pharmaceuticals and food products, the Fund may perform
differently than the stock market. Shares of a small company may
pose greater risks than shares of a large company due to narrow
product lines, limited financial resources, less depth in
management or a limited trading market for its stock.

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 the Fund if you:
* are a long-term investor who wants to participate in the stock
market through a Fund that emphasizes growth companies
* can accept more investment risk and volatility than the general
stock market
* are attracted to the Fund's educational objective

The Fund is not appropriate for shareholders who:
* can't tolerate volatility or possible losses
* want to save for a short-term investment
* need regular current income

FUND PERFORMANCE
The following charts show the Fund's performance from Jan. 1,
1995, 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 since it
started. 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% 39.79% 35.10%
30%
25% 26.28%
20%
15% 17.65%
10%
5%
0%
- -5%
1995 1996 1997 1998

[ ] Young Investor Fund
Best quarter: 4th quarter 1998, +20.82%.
Worst quarter: 3rd quarter 1998, -16.46%

Average Annual Total Returns
Average annual total returns measure the Fund's performance over
time. We compare the Fund's return with returns for the S&P 500,
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
4/29/94
Young Investor Fund 17.65% 26.62%
S&P 500 Index * 28.60% 26.66%
__________
*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. Since inception performance for the S&P 500 Index is
from April 30, 1994 to Dec. 31, 1998.

ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees (b) 0.78%
Distribution 12b-1 fees None
Other expenses 0.53%
Total annual fund operating expenses 1.31%

(a) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio.
(b) Management fees includes both the management fee and the
administrative fee charged to the Fund.

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
Young Investor Fund $133 $415 $718 $1,579

Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services. They also include the expenses the Fund pays
for its educational materials.

<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 shareholders 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.

YOUNG INVESTOR FUND
PER SHARE DATA
<TABLE>
<CAPTION>
Period
ending
For years ending September 30, Sept. 30,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $22.75 $18.64 $14.29 $10.24 $10.00
Income from investment
operations
Net investment income (loss) (0.06) (0.04) 0.05 0.06 0.03
Net gains on securities (both
realized and unrealized) 0.31 4.79 4.86 4.07 0.21
Total income from investment
operations 0.25 4.75 4.91 4.13 0.24
Less distributions
Dividends (from net investment
income) - (0.02) (0.05) (0.08) -
Distributions (from capital
gains) (0.32) (0.62) (0.51) - -
Total distributions (0.32) (0.64) (0.56) (0.08) -
Net asset value, end of period $22.68 $22.75 $18.64 $14.29 $10.24
Total return (c) 1.14% 26.37% 35.55% 40.58% 2.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $686,024 $475,506 $179,089 $31,401 $8,176
Ratio of net expenses to
average net assets (b) 1.31% 1.43% 1.21% 0.99% 0.99%(d)
Ratio of net investment income
(loss) to average net assets
(c) (0.28%) (0.25%) 0.30% 0.47% 1.07%(d)
Portfolio turnover rate N/A 22%(e) 98% 55% 12%
<FN>
______________________
(a) From commencement of operations on April 29, 1994.
(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 4.58% for the period ended Sept. 30, 1994, and 2.87%,
2.04% and 1.49% for the next three years, respectively.
(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.
(e) Prior to commencement of operations of the Portfolio.
</TABLE>

<PAGE>

YOUR ACCOUNT

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.

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.

OTHER INVESTMENTS AND RISKS

The Portfolio's 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 Fund's portfolio managers generally make decisions on buying
and selling portfolio investments based upon their judgment that
the decision will improve the Fund's investment return and further
its investment goal. The portfolio managers may also be required
to sell portfolio investments to fund redemptions.

To select investments for the portfolio, the portfolio managers
look for companies that are market leaders with growing market
share in their respective industries. The managers also look for
companies with strong financial balance sheets and experienced
management teams.

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 shareholders. It also increases transaction expenses, which
reduce the Fund's return.

Interfund Lending Program
The Portfolio may lend money to and borrow money from other funds
advised by Stein Roe. The Portfolio 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.

Educational Materials
The Fund provides educational materials such as a newsletter and
an activity book to all Fund shareholders. The materials are
designed to teach children and teenagers basic investing
principles. The Fund also sends investors an owner's manual. The
educational materials are paid for by the Fund.

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 the
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, aggregate fees paid by the Fund to Stein Roe
amounted to 0.78 percent of average net assets.

Portfolio Managers
Erik P. Gustafson and David P. Brady, CFA, are the portfolio
managers.

Mr. Gustafson joined Stein Roe in 1992 as a portfolio manager for
privately managed accounts. Mr. Gustafson is a senior vice
president and has been portfolio manager of the Fund since
February 1995 and portfolio manager of SR&F Growth Stock Portfolio
since May 1994. He holds a B.A. from the University of Virginia
and M.B.A. and J.D. degrees from Florida State University. As of
Sept. 30, 1998, Mr. Gustafson managed $1.4 billion in mutual fund
net assets.

Mr. Brady joined Stein Roe in 1993 as an associate portfolio
manager of Stein Roe Special Fund. He currently is a senior vice
president and has been portfolio manager of the Fund since March
1995 and portfolio manager of Stein Roe Large Company Focus Fund
since June 1998. He holds a B.S. in finance, graduating Magna Cum
Laude, from the University of Arizona and an M.B.A. from the
University of Chicago. As of Sept. 30, 1998, Mr. Brady managed
$767 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 SR&F
Growth Investor Portfolio, which has investment objectives and
policies substantially identical to those of the Fund. The
investment performance of the Fund depends upon the investment
performance of the Portfolio. If the investment policies of the
Portfolio and the Fund became inconsistent, the Board of Trustees
of the Fund can decide what actions to take. Actions the Board of
Trustees may recommend include withdrawal of the Fund's assets
from the Portfolio. For more information on the master/feeder
fund structure, see the 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 timely made 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 shareholders. These reports
discuss the market conditions and investment strategies that
affected the Fund's performance over the past six months and year.

You may wish to read the Fund's SAI for more information. The SAI
is incorporated into this prospectus by reference, which means it
is 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

Investment Company Act file number: 811-04978

LIBERTY FUNDS DISTRIBUTOR, INC.

<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.

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>

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.

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.

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
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.

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%

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

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.

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.

OTHER INVESTMENTS AND RISKS

THE FUND'S MANAGEMENT

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.

<PAGE>

FOR MORE INFORMATION

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

Investment Company Act file number: 811-04978

LIBERTY FUNDS DISTRIBUTOR, INC.

<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.

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).

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.

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.

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
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.

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

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.

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.

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.

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

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.

<PAGE>

FOR MORE INFORMATION

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

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.

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.

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.

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.

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.

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

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.

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.

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.

THE FUND'S MANAGEMENT

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.

<PAGE>

FOR MORE INFORMATION

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

Investment Company Act file number: 811-04978

LIBERTY FUNDS DISTRIBUTOR, INC.

<PAGE>

[STEIN ROE MUTUAL FUNDS LOGO]

Stein Roe Small Company Growth 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.

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
Short Sales
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
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 Small Company Growth Fund

INVESTMENT GOAL
Stein Roe Small Company Growth Fund seeks long-term growth.

PRINCIPAL INVESTMENT STRATEGY
Under normal market conditions, the Fund invests at least 65
percent of its assets in common stocks of small-cap companies.
The Fund may invest in new issuers during periods when new issues
are being brought to market. The Fund may also invest in midcap
companies. The Fund invests in companies that compete within
large and growing markets and that have the ability to grow their
market share. To find companies with these growth
characteristics, the portfolio managers seek out companies that
are-or, in the portfolio managers' judgment, have the potential to
be-a market share leader within their respective industry. They
also look for companies with strong management teams that
participate in the ownership of the companies.

PRINCIPAL INVESTMENT RISKS
There are two basic risks for all mutual funds that invest in
stocks: management risk and market risk. Investments in small-
and medium-cap companies may increase these risks relative to
investments in larger-cap companies. These risks may cause you to
lose money when you sell your shares.

What are market and management risks? Management risk means that
stock selections and other investment decisions might produce
losses or cause the Fund to underperform when compared to other
funds with similar goals. Market risk means that security prices
in a market, sector or industry may move down. Downward movements
will reduce the value of your investment. Because of management
and market risk, there is no guarantee that the Fund will achieve
its investment goal or perform favorably compared with competing
funds.

Small- and Medium-Cap Companies
The securities the Fund purchases may involve certain special
risks. Small- and medium-sized companies and new issuers often
have limited product lines, operating histories, markets, or
financial resources. They also may depend heavily on a small
management group. Small-cap companies in particular are more
likely to fail or prove unable to grow. Their securities may
trade less frequently, in smaller volumes, and fluctuate more
sharply in price than securities of larger companies. The price
of the Fund's shares-its net asset value (NAV)-may fluctuate daily
in response to changes in the market value of the securities. In
addition, these risks could negatively impact the Fund's
performance or yield.

For more information on the Fund's investment techniques, please
refer to "Other Investments and Risks."

Who Should Invest in the Fund?
You may want to invest in the Fund if you:
* are a long-term investor who seeks the potentially greater
growth opportunities of small-cap stocks and can tolerate their
greater risks
* can tolerate fluctuations in the Fund's NAV due to greater
volatility of small-cap companies

The Fund is not appropriate for investors who:
* already have significant holdings in small-cap stocks or mutual
funds
* can't tolerate volatility or possible losses
* are saving for a short-term investment
* need regular current income

FUND PERFORMANCE
The following charts show the Fund's performance. The returns
include the reinvestment of dividends and distributions. As with
all mutual funds, past performance is no guarantee of future
results.

YEAR-BY-YEAR TOTAL RETURNS*
30%
25%
20%
15% 19.83%
10%
5% 7.85%
0%
- -5%
1997 1998
Best quarter: 4th quarter 1998, +20.21%
Worst quarter: 3rd quarter 1998, -19.32%

On Feb. 2, 1999, the Colonial Aggressive Growth Fund (Predecessor
Fund) was reorganized into the Fund. The Predecessor Fund had
multiple classes of shares, consisting of Class A, Class B, and
Class C shares. The performance information contained in the
chart is based on the historical returns of the Predecessor Fund's
Class A shares, which, unlike the Fund, had a 0.25% 12b-1 fee.
This chart does not reflect the sales load of the Predecessor
Fund's Class A shares.

Average Annual Total Returns
Average annual total returns measure the Fund's performance over
time. We compare the Fund's returns with returns for the S&P
Small-Cap 600 Index, which is a measure of market performance for
small-cap companies. We show returns for calendar years to be
consistent with the way other mutual funds report performance in
their prospectuses. This allows you to accurately compare similar
mutual fund investments and provides an indication of the risks of
investing in the Fund.

AVERAGE ANNUAL TOTAL RETURNS
Periods ending Dec. 31, 1998
1 yr Since Inception
Small Company Growth Fund* 7.85% 15.23%
S&P Small-Cap 600 Index** -1.31% 13.67%
______
* In February 1999, the Colonial Aggressive Growth Fund
(Predecessor Fund) was reorganized into the Fund. The
Predecessor Fund had multiple classes of shares, consisting of
Class A, Class B, and Class C shares. The performance
information contained in the table is based on the historical
returns of the Predecessor Fund's Class A shares, which, unlike
the Fund, had a 0.25% 12b-1 fee. The table does not reflect the
sales load of the Predecessor Fund's Class A shares.
**The S&P Small-Cap 600 Index is an unmanaged group of stocks that
differs from the Fund's composition; it is not available for
direct investment. Since inception performance for the S&P
Small-Cap 600 Index is from March 31, 1996 to Dec. 31, 1998.

YOUR EXPENSES
This table shows fees and expenses you may pay if you buy and hold
shares of the Fund. You do not pay any sales charge when you
purchase or sell your shares. 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) 1.00%
Distribution (12b-1) fees None
Other expenses 0.64%
Total annual fund operating expenses(c) 1.64%
Less expense reimbursement 0.14%
Net expenses 1.50%

(a) Management fees reflect increases effective February 1999.
Other Expenses are based on projected average annual assets of
$50 million. In addition, the Fund's 12b-1 fee of 0.25% and
load of 5.75% were eliminated effective February 1999.
(b) Management fees include both the management fee and the
administrative fee charged to the Fund.
(c) Stein Roe will reimburse the Fund if its annual ordinary
operating expenses exceed 1.50% of average daily net assets.
This commitment expires on Jan. 31, 2000. After
reimbursement, management fees will be 0.86%. A reimbursement
lowers the expense ratio and increases overall return to
investors.

Your actual costs may be higher or lower because in reality fund
returns and operating expenses change. Expenses based on these
assumptions are:

EXPENSE EXAMPLE
1 yr 3 yrs 5 yrs 10 yrs
Small Company Growth Fund $153 $504 $878 $1,930

Understanding Expenses
Fund expenses include management fees and administrative costs
such as furnishing the Fund with offices and providing tax and
compliance services.

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table explains the Fund's financial
performance. Consistent with other mutual funds, we show
information for the last five fiscal years or for the period of
the Fund's operations (if shorter). The Fund's fiscal year runs
from July 1 to June 30. The total returns in the table represent
the returns that investors earned assuming that they reinvested
all dividends and distributions. Certain information in the table
reflects the financial results for a single share of Class A of
the Predecessor Fund, outstanding throughout the period from March
31, 1996 through June 30, 1998. The information has been derived
from the financial statements of the Predecessor Fund.
Pricewaterhouse Coopers LLP, independent accountants, audited this
information and issued an unqualified report that appears in the
Predecessor Fund's 1998 annual report along with the financial
statements. To request the Predecessor Fund's annual report,
please call 800-322-1130.

Small Company Fund
PER SHARE DATA Period
For years ended
ended June 30, June 30,
1998 1997 1996(a)
Net asset value, beginning of period $12.65 $11.30 $10.11
Income from investment operations
Net investment loss (e) (0.14) (0.11) (0.01)
Net gains on securities (both
realized and unrealized) 2.78 1.48 1.20
Total income from investment
operations 2.64 1.37 1.19
Less distributions
Dividends (from net investment income) - (0.01) -
Distributions (from capital gains) (0.90) (0.01) -
Total distributions (0.90) (0.02) -
Net asset value, end of period $14.39 $12.65 $11.30
Total return (b) 21.56% 12.14% 11.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000 omitted) $3,867 $3,185 $2,826
Ratio of net expenses to average net
assets (d) 1.55% 1.55% 1.55%(c)
Ratio of net investment loss to
average net assets (b) (1.04)% (0.99)% (0.58)%(c)
Portfolio turnover rate 70% 54% -%
_____________________
(a) The Predecessor Fund commenced operation on March 25, 1996.
The activity shown is from the effective date of registration
(March 31, 1996) with the Securities and Exchange Commission.
The Predecessor Fund was not publicly offered and may have
been managed differently than a publicly offered fund.
(b) Computed with the effect of the expense reimbursement.
(c) These percentages are for periods of less than one year. They
have been converted to an annual basis making it easier to
compare to prior years.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement by the previous investment adviser, this ratio
would have been 3.76% and 4.12% for the years ended June 30,
1998 and 1997, and 2.93% for the period ended June 30, 1996.
(e) Per share data was calculated using average shares outstanding
during the period.

<PAGE>

YOUR ACCOUNT

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.

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.

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.

OTHER INVESTMENTS AND RISKS

The Fund's primary investment strategies and risks are described
in this prospectus. (See "The Fund.") This section and the
Statement of Additional Information (SAI) describe other
investments that the Fund may make and risks associated with them.
The Board of Trustees can change the Fund's investment objective
without shareholder approval.

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.

Short Sales
The Fund may make short sales of securities. Short selling
involves the sale of borrowed securities. When the Fund thinks
the price of a stock will decline, it borrows the stock and then
sells the borrowed stock. When the Fund has to return the
borrowed stock, it tries to buy the stock at a lower price. If
the Fund is successful, it has a capital gain. If the Fund is
unsuccessful and buys the stock at a higher price than the price
at which it sold the stock, the Fund has a capital loss. The
Fund's capital gains and losses may result in federal income tax
consequences to the Fund's shareholders. Short selling involves
certain risks. The Fund could have a loss if the borrowed
security increases in value and if the purchased security declines
in value.

Portfolio Turnover
There are no limits on turnover. Turnover may vary significantly
from year to year. Stein Roe does not expect it to exceed 100
percent under normal conditions. Portfolio turnover typically
produces capital gains or losses for Fund shareholders resulting
in tax consequences for the Fund's shareholders. It also
increases transaction expenses, which reduce the Fund's return.

Interfund Lending Program
The Fund may lend money to and borrow money from other funds
advised by Stein Roe. The Fund will do so when Stein Roe believes
such lending or borrowing is necessary and appropriate. Borrowing
costs will be the same as or lower than the costs of a bank loan.

THE FUND'S MANAGEMENT

Investment Adviser
Stein Roe & Farnham Incorporated, One South Wacker Drive, Chicago,
IL 60606, manages the day-to-day operations of the Fund. Stein
Roe (and its predecessor) has advised and managed mutual funds
since 1949. As of Sept. 30, 1998, Stein Roe managed more than $28
billion in assets. The Fund pays Stein Roe (1) an annual
management fee of 0.85% of average net assets and (2) an annual
administrative fee of 0.15% of average net assets. For the most
recent fiscal year, the Fund paid 1.00% of average net assets to
Colonial Management Associates, Inc. (CMA). CMA is an affiliate
of Stein Roe and was investment adviser to the Fund from March 25,
1996 to September 1998. For providing services to the Fund, CMA
received an annual management fee of 0.85% of average net assets.

Portfolio Managers
William M. Garrison and Steven M. Salopek have been the portfolio
managers for the Fund since September 1998. Mr. Garrison has been
employed by Stein Roe since 1989 as an equity research analyst and
is a vice president. In addition, Mr. Garrison has served as
associate portfolio manager for SR&F Balanced Portfolio since
1995. He earned an A.B. degree from Princeton University and an
M.B.A. degree from the University of Chicago.

Mr. Salopek joined Stein Roe as a research analyst in June 1996
and is a vice president. He was an analyst with Banc One
Investment Advisors from 1990 to May 1996. Mr. Salopek earned a
B.A. degree and an M.B.A. degree from The Ohio State University.

<PAGE>

FOR MORE INFORMATION

You may wish to read the Fund's SAI for more information. The SAI
is incorporated into this prospectus by reference, which means
that it is legally considered to be part of this prospectus and
you are deemed to have been told of its contents.

To obtain free copies of the Fund's semiannual and annual reports
or SAI or to request other information about the Fund, write or
call:

Stein Roe Mutual Funds
One South Wacker Drive
Suite 3200
Chicago, IL 60606
800-322-1130

www.steinroe.com

Text-only versions of all Fund documents can be viewed online or
downloaded from the Securities and Exchange Commission (SEC) at
www.sec.gov. You can also obtain copies by visiting the SEC's
Public Reference Room in Washington, DC, by calling 800-SEC-0330,
or by sending your request and the appropriate fee to the SEC's
public reference section, Washington, DC 20549-6009.

Investment Company Act file number: 811-04978

LIBERTY FUNDS DISTRIBUTOR, INC.

<PAGE>

[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.

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.

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.

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.

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

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
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.

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%

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

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.

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.

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.

OTHER INVESTMENTS AND RISKS

THE FUND'S MANAGEMENT

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.

<PAGE>

FOR MORE INFORMATION

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

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.

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.

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.

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.

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

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
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.

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%

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

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.

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.

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.

OTHER INVESTMENTS AND RISKS

THE FUND'S MANAGEMENT

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.

<PAGE>

FOR MORE INFORMATION

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

Investment Company Act file number: 811-04978

LIBERTY FUNDS DISTRIBUTOR, INC.

<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.

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.

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.

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.

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

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.

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

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

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.

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.

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.

THE FUND'S MANAGEMENT

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.

<PAGE>

FOR MORE INFORMATION

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

Investment Company Act file number: 811-04978

LIBERTY FUNDS DISTRIBUTOR, INC.

<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.

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.

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.

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

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
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.

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%

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

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

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.

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.

OTHER INVESTMENTS AND RISKS

THE FUND'S MANAGEMENT

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.

<PAGE>

FOR MORE INFORMATION

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

Investment Company Act file number: 811-04978

LIBERTY FUNDS DISTRIBUTOR, INC.

<PAGE>

STEIN ROE INVESTMENT TRUST
Stein Roe Balanced Fund
Stein Roe Growth & Income Fund
Stein Roe Growth Stock Fund
Stein Roe Special Fund
Stein Roe Large Company Focus Fund
Stein Roe Special Venture Fund
Stein Roe Capital Opportunities 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.

This Supplement is Dated Feb. 25, 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:

_______________
* 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>

STEIN ROE INVESTMENT TRUST
Stein Roe Young Investor Fund

Supplement to Feb. 1, 1999 Statement of Additional Information

In addition to the Fund's prospectus dated Feb. 1, 1999, this
Statement of Additional Information should be read in conjunction
with the Fund's defined contribution plans prospectus dated Feb.
25, 1999.

This Supplement is Dated Feb. 25, 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

Stein Roe Young Investor Fund

This Statement of Additional Information ("SAI") is not a
prospectus, but provides additional information that should be
read in conjunction with the prospectus of Stein Roe Young
Investor Fund dated Feb. 1, 1999, and any supplements thereto
("Prospectus"). Financial statements, which are contained in the
Fund's Annual Report, are incorporated by reference into this SAI.
The Prospectus and Annual Report may be obtained at no charge by
telephoning 800-338-2550.

TABLE OF CONTENTS
Page
General Information...................................2
Investment Policies...................................3
Portfolio Investments and Strategies..................4
Investment Restrictions..............................20
Additional Investment Considerations.................22
Purchases and Redemptions............................23
Management...........................................27
Financial Statements.................................30
Principal Shareholders...............................30
Investment Advisory and Other Services...............31
Distributor..........................................33
Transfer Agent.......................................34
Custodian............................................34
Independent Public Accountants.......................35
Portfolio Transactions...............................35
Additional Income Tax Considerations.................37
Investment Performance...............................38
Master Fund/Feeder Fund: Structure and Risk Factors..41
Appendix-Ratings.....................................43

GENERAL INFORMATION

Stein Roe Young Investor Fund (the "Fund") is a series of
Stein Roe Investment Trust (the "Trust"). The Trust is a
Massachusetts business trust organized under an Agreement and
Declaration of Trust ("Declaration of Trust") dated Jan. 8, 1987,
which provides that each shareholder shall be deemed to have
agreed to be bound by the terms thereof. The Declaration of Trust
may be amended by a vote of either the Trust's shareholders or its
trustees. The Trust may issue an unlimited number of shares, in
one or more series as the Board may authorize. Currently, 12
series are authorized and outstanding. On Feb. 1, 1996, the names
of the Fund and of the Trust were changed to separate "SteinRoe"
into two words.

Special Considerations Regarding Master Fund/Feeder Fund Structure

The Fund converted into a "feeder fund" on Feb. 3, 1997; that
is, rather than invest in securities directly, it seeks to achieve
its objective by pooling its assets with those of other investment
companies for investment in a separate "master fund" having the
same investment objective and substantially the same investment
policies as its feeder funds. The purpose of such an arrangement
is to achieve greater operational efficiencies and reduce costs.
SR&F Growth Investor Portfolio (the "Portfolio"), the Fund's
master fund, is a series of SR&F Base Trust. For more
information, please see Master Fund/Feeder Fund: Structure and
Risk Factors.

Stein Roe & Farnham Incorporated ("Stein Roe") provides
administrative and accounting and recordkeeping services to the
Fund and investment management services to the Portfolio.

INVESTMENT POLICIES

The Trust and SR&F Base Trust are open-end management
investment companies. The Fund and the Portfolio are diversified,
as that term is defined in the Investment Company Act of 1940.

The Fund seeks to achieve its objective by investing in the
Portfolio. Their common investment objective is long-term capital
appreciation. The Portfolio invests primarily in common stocks
and other equity-type securities that, in the opinion of Stein
Roe, have long-term appreciation potential.

Under normal circumstances, at least 65% of the total assets
of the Portfolio will be invested in securities of companies that,
in the opinion of Stein Roe, directly or through one or more
subsidiaries, affect the lives of young people. Such companies
may include companies that produce products or services that young
people use, are aware of, or could potentially have an interest
in. Although the Portfolio invests 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), it may invest up to 35% of
its total assets in debt securities. It may invest in securities
of smaller emerging companies as well as securities of well-
seasoned companies of any size. Smaller companies, however,
involve higher risks in that they typically have limited product
lines, markets, and financial or management resources. In
addition, the securities of smaller companies may trade less
frequently and have greater price fluctuation than larger
companies, particularly those operating in countries with
developing markets.

In addition to the investment objective and policies, the
Fund also has an educational objective. It seeks to provide
education and insight about mutual funds, basic economic
principles, and personal finance through a variety of educational
materials prepared and paid for by the Fund.

The Fund is designed to be appropriate for growth-oriented
investors of all ages. Its focus on companies that affect the
lives of young people and its educational objective and materials
may make it especially appropriate for young people and investors
for whom education is an important objective.

In pursuing its objective, the Portfolio may employ the
investment techniques described in the Prospectus and under
Portfolio Investments and Strategies. The investment objective is
a nonfundamental policy and may be changed by the Board of
Trustees without the approval of a "majority of the outstanding
voting securities."/1/
- -------------
/1/ A "majority of the outstanding voting securities" means the
approval of the lesser of (i) 67% or more of the shares at a
meeting if the holders of more than 50% of the outstanding shares
are present or represented by proxy or (ii) more than 50% of the
outstanding shares.
- -------------

PORTFOLIO INVESTMENTS AND STRATEGIES

Debt Securities

In pursuing its investment objective, the Portfolio may
invest in debt securities of corporate and governmental issuers.
The risks inherent in debt securities depend primarily on the term
and quality of the obligations in the investment portfolio as well
as on market conditions. A decline in the prevailing levels of
interest rates generally increases the value of debt securities,
while an increase in rates usually reduces the value of those
securities.

Debt securities within the four highest grades are generally
referred to as "investment grade"). The Portfolio may invest up
to 35% of its net assets in debt securities, but does not expect
to invest more than 5% of its net assets in debt securities that
are rated below investment grade.

Securities in the fourth highest grade may possess
speculative characteristics, and changes in economic conditions
are more likely to affect the issuer's capacity to pay interest
and repay principal. If the rating of a security held is lost or
reduced below investment grade, the Portfolio is not required to
dispose of the security, but Stein Roe will consider that fact in
determining whether to should continue to hold the security.

When Stein Roe determines that adverse market or economic
conditions exist and considers a temporary defensive position
advisable, the Portfolio may invest without limitation in high-
quality fixed income securities or hold assets in cash or cash
equivalents.

Derivatives

Consistent with its objective, the Portfolio may invest in a
broad array of financial instruments and securities, including
conventional exchange-traded and non-exchange-traded options,
futures contracts, futures options, securities collateralized by
underlying pools of mortgages or other receivables, floating rate
instruments, and other instruments that securitize assets of
various types ("Derivatives"). In each case, the value of the
instrument or security is "derived" from the performance of an
underlying asset or a "benchmark" such as a security index, an
interest rate, or a currency.

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
Portfolio 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 Portfolio on purchase of the CMO, and the
proceeds of prepayment would likely be invested at lower interest
rates.

Convertible Securities

By investing in convertible securities, the Portfolio obtains
the right to benefit from the capital appreciation potential in
the underlying stock upon exercise of the conversion right, while
earning higher current income than would be available if the stock
were purchased directly. In determining whether to purchase a
convertible, Stein Roe will consider substantially the same
criteria that would be considered in purchasing the underlying
stock. While convertible securities it purchases are frequently
rated investment grade, the Portfolio may purchase unrated
securities or securities rated below investment grade if the
securities meet Stein Roe's other investment criteria.
Convertible securities rated below investment grade (a) tend to be
more sensitive to interest rate and economic changes, (b) may be
obligations of issuers who are less creditworthy than issuers of
higher quality convertible securities, and (c) may be more thinly
traded due to such securities being less well known to investors
than investment grade convertible securities, common stock or
conventional debt securities. As a result, Stein Roe's own
investment research and analysis tend to be more important in the
purchase of such securities than other factors.

Foreign Securities

The Portfolio may invest up to 25% of its total assets in
foreign securities, which may entail a greater degree of risk
(including risks relating to exchange rate fluctuations, tax
provisions, or expropriation of assets) than investment in
securities of domestic issuers. For this purpose, foreign
securities do not include American Depositary Receipts (ADRs) or
securities guaranteed by a United States person. ADRs are
receipts typically issued by an American bank or trust company
evidencing ownership of the underlying securities. The Portfolio
may invest in sponsored or unsponsored ADRs. In the case of an
unsponsored ADR, the Portfolio is likely to bear its proportionate
share of the expenses of the depositary and it may have greater
difficulty in receiving shareholder communications than it would
have with a sponsored ADR. The Portfolio does not intend to
invest, nor during the past fiscal year has it invested, more than
5% of its net assets in unsponsored ADRs.

As of Sept. 30, 1998, holdings of foreign companies amounted
to 3.9% of net assets of the Portfolio (none in foreign securities
and 3.9% in ADRs and ADSs).

With respect to portfolio securities that are issued by
foreign issuers or denominated in foreign currencies, investment
performance is affected by the strength or weakness of the U.S.
dollar against these currencies. For example, if the dollar falls
in value relative to the Japanese yen, the dollar value of a yen-
denominated stock held in the portfolio will rise even though the
price of the stock remains unchanged. Conversely, if the dollar
rises in value relative to the yen, the dollar value of the yen-
denominated stock will fall. (See discussion of transaction
hedging and portfolio hedging under Currency Exchange
Transactions.)

Although the Portfolio will try to invest in companies and
governments of countries having stable political environments,
there is the possibility of expropriation or confiscatory
taxation, seizure or nationalization of foreign bank deposits or
other assets, establishment of exchange controls, the adoption of
foreign government restrictions, or other adverse political,
social or diplomatic developments that could affect investment in
these nations.

The Portfolio's foreign currency exchange transactions are
limited to transaction and portfolio hedging involving either
specific transactions or portfolio positions. Transaction hedging
is the purchase or sale of forward contracts with respect to
specific receivables or payables of the Portfolio arising in
connection with the purchase and sale of its portfolio securities.
Portfolio hedging is the use of forward contracts with respect to
portfolio security positions denominated or quoted in a particular
foreign currency. Portfolio hedging allows it to limit or reduce
its exposure in a foreign currency by entering into a forward
contract to sell such foreign currency (or another foreign
currency that acts as a proxy for that currency) at a future date
for a price payable in U.S. dollars so that the value of the
foreign-denominated portfolio securities can be approximately
matched by a foreign-denominated liability. The Portfolio may not
engage in portfolio hedging with respect to the currency of a
particular country to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in
its portfolio denominated or quoted in that particular currency,
except that it may hedge all or part of its foreign currency
exposure through the use of a basket of currencies or a proxy
currency where such currencies or currency act as an effective
proxy for other currencies. In such a case, the Portfolio may
enter into a forward contract where the amount of the foreign
currency to be sold exceeds the value of the securities
denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into
separate forward contracts for each currency it holds. The
Portfolio may not engage in "speculative" currency exchange
transactions.

At the maturity of a forward contract to deliver a particular
currency, the Portfolio may either sell the portfolio security
related to such contract and make delivery of the currency, or it
may retain the security and either acquire the currency on the
spot market or terminate its contractual obligation to deliver the
currency by purchasing an offsetting contract with the same
currency trader obligating it to purchase on the same maturity
date the same amount of the currency.

It is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a
forward contract. Accordingly, it may be necessary for the
Portfolio to purchase additional currency on the spot market (and
bear the expense of such purchase) if the market value of the
security is less than the amount of currency it is obligated to
deliver and if a decision is made to sell the security and make
delivery of the currency. Conversely, it may be necessary to sell
on the spot market some of the currency received upon the sale of
the portfolio security if its market value exceeds the amount of
currency it is obligated to deliver.

If the Portfolio retains the portfolio security and engages
in an offsetting transaction, it will incur a gain or a loss to
the extent that there has been movement in forward contract
prices. If the Portfolio engages in an offsetting transaction, it
may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between
the Portfolio's entering into a forward contract for the sale of a
currency and the date it enters into an offsetting contract for
the purchase of the currency, it will realize a gain to the extent
the price of the currency it has agreed to sell exceeds the price
of the currency it has agreed to purchase. Should forward prices
increase, the Portfolio will suffer a loss to the extent the price
of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. A default on the contract would
deprive it of unrealized profits or force it to cover its
commitments for purchase or sale of currency, if any, at the
current market price.

Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be
possible for the Portfolio to hedge against a devaluation that is
so generally anticipated that it is not able to contract to sell
the currency at a price above the devaluation level it
anticipates. The cost to the Portfolio of engaging in currency
exchange transactions varies with such factors as the currency
involved, the length of the contract period, and prevailing market
conditions. Since currency exchange transactions are usually
conducted on a principal basis, no fees or commissions are
involved.

Swaps, Caps, Floors and Collars

The Portfolio may enter into swaps and may purchase or sell
related caps, floors and collars. It would enter into these
transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique
or to protect against any increase in the price of securities it
purchases at a later date. The Portfolio intends to use these
techniques as hedges and not as speculative investments and will
not sell interest rate income stream it may be obligated to pay.

A swap agreement is generally individually negotiated and
structured to include exposure to a variety of different types of
investments or market factors. Depending on its structure, a swap
agreement may increase or decrease the exposure to changes in the
value of an index of securities in which the Portfolio might
invest, the value of a particular security or group of securities,
or foreign currency values. Swap agreements can take many
different forms and are known by a variety of names. The
Portfolio may enter into any form of swap agreement if Stein Roe
determines it is consistent with its investment objective and
policies.

A swap agreement tends to shift the Portfolio's investment
exposure from one type of investment to another. For example, if
it agrees to exchange payments in dollars at a fixed rate for
payments in a foreign currency the amount of which is determined
by movements of a foreign securities index, the swap agreement
would tend to increase exposure to foreign stock market movements
and foreign currencies. Depending on how it is used, a swap
agreement may increase or decrease the overall volatility of its
investments and its net asset value.

The performance of a swap agreement is determined by the
change in the specific currency, market index, security, or other
factors that determine the amounts of payments due to and from the
Portfolio. If a swap agreement calls for payments by the
Portfolio, it must be prepared to make such payments when due. If
the counterparty's creditworthiness declines, the value of a swap
agreement would be likely to decline, potentially resulting in a
loss. The Portfolio will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty,
combined with any credit enhancements, is rated at least A by
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.

At the time the Portfolio enters into swap arrangements or
purchases or sells caps, floors or collars, liquid assets having a
value at least as great as the commitment underlying the
obligations will be segregated on the books of the Portfolio and
held by the custodian throughout the period of the obligation.

Lending of Portfolio Securities

Subject to restriction (5) under Investment Restrictions in
this SAI, the Portfolio may lend its portfolio securities to
broker-dealers and banks. Any such loan must be continuously
secured by collateral in cash or cash equivalents maintained on a
current basis in an amount at least equal to the market value of
the securities loaned by the Portfolio. It would continue to
receive the equivalent of the interest or dividends paid by the
issuer on the securities loaned, and would also receive an
additional return that may be in the form of a fixed fee or a
percentage of the collateral. It would have the right to call the
loan and obtain the securities loaned at any time on notice of not
more than five business days. It would not have the right to vote
the securities during the existence of the loan but would call the
loan to permit voting of the securities if, in Stein Roe's
judgment, a material event requiring a shareholder vote would
otherwise occur before the loan was repaid. In the event of
bankruptcy or other default of the borrower, it could experience
both delays in liquidating the loan collateral or recovering the
loaned securities and losses, including (a) possible decline in
the value of the collateral or in the value of the securities
loaned during the period while it seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of
access to income during this period, and (c) expenses of enforcing
its rights. The Portfolio did not loan 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

The Portfolio may invest in repurchase agreements, provided
that it will not invest more than 15% of net assets in repurchase
agreements maturing in more than seven days and any other illiquid
securities. A repurchase agreement is a sale of securities to the
Portfolio in which the seller agrees to repurchase the securities
at a higher price, which includes an amount representing interest
on the purchase price, within a specified time. In the event of
bankruptcy of the seller, the Portfolio could experience both
losses and delays in liquidating its collateral.

When-Issued and Delayed-Delivery Securities; Reverse Repurchase
Agreements

The Portfolio may purchase securities on a when-issued or
delayed-delivery basis. Although the payment and interest terms
of these securities are established at the time the Portfolio
enters into the commitment, the securities may be delivered and
paid for a month or more after the date of purchase, when their
value may have changed. The Portfolio makes such commitments only
with the intention of actually acquiring the securities, but may
sell the securities before settlement date if Stein Roe deems it
advisable for investment reasons. During its last fiscal year,
the Portfolio did not, nor does it currently intend to have,
commitments to purchase when-issued securities in excess of 5% of
its net assets.

The Portfolio may enter into reverse repurchase agreements
with banks and securities dealers. A reverse repurchase agreement
is a repurchase agreement in which the Portfolio 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. The Portfolio did not enter into any
reverse repurchase agreements during the fiscal year ended Sept.
30, 1998.

At the time the Portfolio enters into a binding obligation to
purchase securities on a when-issued basis or enters into a
reverse repurchase agreement, liquid assets (cash, U.S. Government
securities or other "high-grade" debt obligations) of the
Portfolio having a value at least as great as the purchase price
of the securities to be purchased will be segregated on the books
of the Portfolio and held by the custodian throughout the period
of the obligation. The use of these investment strategies, as
well as borrowing under a line of credit as described below, may
increase net asset value fluctuation.

Short Sales "Against the Box"

The Portfolio may sell securities short against the box; that
is, enter into short sales of securities that it currently owns or
has the right to acquire through the conversion or exchange of
other securities that it owns at no additional cost. The
Portfolio may make short sales of securities only if at all times
when a short position is open it owns at least an equal amount of
such securities or securities convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short, at no additional cost.

In a short sale against the box, the Portfolio does not
deliver from its portfolio the securities sold. Instead, it
borrows the securities sold short from a broker-dealer through
which the short sale is executed, and the broker-dealer delivers
such securities, on its behalf, to the purchaser of such
securities. The Portfolio is required to pay to the broker-dealer
the amount of any dividends paid on shares sold short. Finally,
to secure its obligation to deliver to such broker-dealer the
securities sold short, it must deposit and continuously maintain
in a separate account with its custodian an equivalent amount of
the securities sold short or securities convertible into or
exchangeable for such securities at no additional cost. The
Portfolio is said to have a short position in the securities sold
until it delivers to the broker-dealer the securities sold. It
may close out a short position by purchasing on the open market
and delivering to the broker-dealer an equal amount of the
securities sold short, rather than by delivering portfolio
securities.

Short sales may protect against the risk of losses in the
value of portfolio securities because any unrealized losses with
respect to such portfolio securities should be wholly or partially
offset by a corresponding gain in the short position. However,
any potential gains in such portfolio securities should be wholly
or partially offset by a corresponding loss in the short position.
The extent to which such gains or losses are offset will depend
upon the amount of securities sold short relative to the amount it
owns, either directly or indirectly, and, in the case where it
owns convertible securities, changes in the conversion premium.

Short sale transactions involve certain risks. If the price
of the security sold short increases between the time of the short
sale and the time the Portfolio replaces the borrowed security, it
will incur a loss and if the price declines during this period, it
will realize a short-term capital gain. Any realized short-term
capital gain will be decreased, and any incurred loss increased,
by the amount of transaction costs and any premium, dividend or
interest which it may have to pay in connection with such short
sale. Certain provisions of the Internal Revenue Code may limit
the degree to which the Portfolio is able to enter into short
sales. There is no limitation on the amount of assets that, in
the aggregate, may be deposited as collateral for the obligation
to replace securities borrowed to effect short sales and allocated
to segregated accounts in connection with short sales. The
Portfolio currently expects that no more than 5% of its total
assets would be involved in short sales against the box.

Rule 144A Securities

The Portfolio may purchase securities that have been
privately placed but that are eligible for purchase and sale under
Rule 144A under the Securities Act of 1933. That Rule permits
certain qualified institutional buyers, such as the Portfolio, to
trade in privately placed securities that have not been registered
for sale under the 1933 Act. 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 Portfolio's holdings of illiquid securities
would be reviewed to determine what, if any, steps are required to
assure that it does not invest more than 15% of its assets in
illiquid securities. Investing in Rule 144A securities could have
the effect of increasing the amount of assets invested in illiquid
securities if qualified institutional buyers are unwilling to
purchase such securities. The Portfolio does not expect to invest
as much as 5% of its total assets in Rule 144A securities that
have not been deemed to be liquid by Stein Roe.

Line of Credit

Subject to restriction (6) under Investment Restrictions in
this SAI, the Fund and the Portfolio may establish and maintain a
line of credit with a major bank in order to permit borrowing on a
temporary basis to meet share redemption requests in circumstances
in which temporary borrowing may be preferable to liquidation of
portfolio securities.

Interfund Borrowing and Lending Program

Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the Portfolio may lend money to and borrow
money from other mutual funds advised by Stein Roe. The Portfolio
will borrow through the program when borrowing is necessary and
appropriate and the costs are equal to or lower than the costs of
bank loans.

Portfolio Turnover

Although the Portfolio does not purchase securities with a
view to rapid turnover, there are no limitations on the length of
time that portfolio securities must be held. Portfolio turnover
can occur for a number of reasons such as general conditions in
the securities markets, more favorable investment opportunities in
other securities, or other factors relating to the desirability of
holding or changing a portfolio investment. The Portfolio may
have greater portfolio turnover than that of a mutual funds that
have the primary objectives of income or maintenance of a balanced
investment position. The future turnover rate may vary greatly
from year to year. A high rate of portfolio turnover, if it
should occur, would result in increased transaction expenses,
which must be borne by the Portfolio. High portfolio turnover may
also result in the realization of capital gains or losses and, to
the extent net short-term capital gains are realized, any
distributions resulting from such gains will be considered
ordinary income for federal income tax purposes.

Options on Securities and Indexes

The Portfolio may purchase and sell put options and call
options on securities, indexes or foreign currencies in
standardized contracts traded on recognized securities exchanges,
boards of trade, or similar entities, or quoted on Nasdaq. The
Portfolio may purchase agreements, sometimes called cash puts,
that may accompany the purchase of a new issue of bonds from a
dealer.

The Portfolio will write call options and put options only if
they are "covered." For example, in the case of a call option on
a security, the option is "covered" if the Portfolio owns the
security underlying the call or has an absolute and immediate
right to acquire that security without additional cash
consideration (or, if additional cash consideration is required,
cash or cash equivalents in such amount are held in a segregated
account by its custodian) upon conversion or exchange of other
securities held in its portfolio.

If an option written by the Portfolio expires, it realizes a
capital gain equal to the premium received at the time the option
was written. If an option purchased by the Portfolio expires, it
realizes a capital loss equal to the premium paid.

The Portfolio will realize a capital gain from a closing
purchase transaction if the cost of the closing option is less
than the premium received from writing the option, or, if it is
more, it will realize a capital loss. If the premium received
from a closing sale transaction is more than the premium paid to
purchase the option, the Portfolio will realize a capital gain or,
if it is less, it will realize a capital loss. The principal
factors affecting the market value of a put or a call option
include supply and demand, interest rates, the current market
price of the underlying security or index in relation to the
exercise price of the option, the volatility of the underlying
security or index, and the time remaining until the expiration
date.

A put or call option purchased by the Portfolio is an asset
of the Portfolio, valued initially at the premium paid for the
option. The premium received for an option written by the
Portfolio is recorded as a deferred credit. The value of an
option purchased or written is marked-to-market daily and is
valued at the closing price on the exchange on which it is traded
or, if not traded on an exchange or no closing price is available,
at the mean between the last bid and asked prices.

There can be no assurance that a liquid market will exist
when the Portfolio seeks to close out an option position. If it
were unable to close out an option that it had purchased on a
security, it would have to exercise the option in order to realize
any profit or the option would expire and become worthless. If it
were unable to close out a covered call option that it had written
on a security, it would not be able to sell the underlying
security until the option expired. As the writer of a covered
call option on a security, it foregoes, during the option's life,
the opportunity to profit from increases in the market value of
the security covering the call option above the sum of the premium
and the exercise price of the call.

If trading were suspended in an option purchased or written
by the Portfolio, it would not be able to close out the option.
If restrictions on exercise were imposed, it might be unable to
exercise an option it has purchased.

Futures Contracts and Options on Futures Contracts

The Portfolio may use interest rate futures contracts, index
futures contracts, and foreign currency futures contracts. An
interest rate, index or foreign currency futures contract provides
for the future sale by one party and purchase by another party of
a specified quantity of a financial instrument or the cash value
of an index/2/ at a specified price and time. A public market
exists in futures contracts covering a number of indexes
(including, but not limited to: the Standard & Poor's 500 Index,
the Value Line Composite Index, and the New York Stock Exchange
Composite Index) as well as financial instruments (including, but
not limited to: U.S. Treasury bonds, U.S. Treasury notes,
Eurodollar certificates of deposit, and foreign currencies).
Other index and financial instrument futures contracts are
available and it is expected that additional futures contracts
will be developed and traded.
- --------
/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.
- --------

The Portfolio may purchase and write call and put futures
options. Futures options possess many of the same characteristics
as options on securities, indexes and foreign currencies
(discussed above). A futures option gives the holder the right,
in return for the premium paid, to assume a long position (call)
or short position (put) in a futures contract at a specified
exercise price at any time during the period of the option. Upon
exercise of a call option, the holder acquires a long position in
the futures contract and the writer is assigned the opposite short
position. In the case of a put option, the opposite is true. The
Portfolio might, for example, use futures contracts to hedge
against or gain exposure to fluctuations in the general level of
stock prices, anticipated changes in interest rates or currency
fluctuations that might adversely affect either the value of its
securities or the price of the securities that it intends to
purchase. Although other techniques could be used to reduce or
increase exposure to stock price, interest rate and currency
fluctuations, the Portfolio may be able to achieve its exposure
more effectively and perhaps at a lower cost by using futures
contracts and futures options.

The Portfolio will only enter into futures contracts and
futures options that are standardized and traded on an exchange,
board of trade, or similar entity, or quoted on an automated
quotation system.

When a purchase or sale of a futures contract is made by the
Portfolio, it is required to deposit with its custodian (or
broker, if legally permitted) a specified amount of cash or U.S.
Government securities or other securities acceptable to the broker
("initial margin"). The margin required for a futures contract is
set by the exchange on which the contract is traded and may be
modified during the term of the contract. The initial margin is
in the nature of a performance bond or good faith deposit on the
futures contract, which is returned to the Portfolio upon
termination of the contract, assuming all contractual obligations
have been satisfied. The Portfolio expects to earn interest
income on its initial margin deposits. A futures contract held is
valued daily at the official settlement price of the exchange on
which it is traded. Each day the Portfolio pays or receives cash,
called "variation margin," equal to the daily change in value of
the futures contract. This process is known as "marking-to-
market." Variation margin paid or received by the Portfolio does
not represent a borrowing or loan by it but is instead settlement
between it and the broker of the amount one would owe the other if
the futures contract had expired at the close of the previous day.
In computing daily net asset value, the Portfolio will mark-to-
market its open futures positions.

The Portfolio is also required to deposit and maintain margin
with respect to put and call options on futures contracts written
by it. Such margin deposits will vary depending on the nature of
the underlying futures contract (and the related initial margin
requirements), the current market value of the option, and other
futures positions held.

Although some futures contracts call for making or taking
delivery of the underlying securities, usually these obligations
are closed out prior to delivery by offsetting purchases or sales
of matching futures contracts (same exchange, underlying security
or index, and delivery month). If an offsetting purchase price is
less than the original sale price, the Portfolio realizes a
capital gain, or if it is more, it realizes a capital loss.
Conversely, if an offsetting sale price is more than the original
purchase price, it realizes a capital gain, or if it is less, it
realizes a capital loss. The transaction costs must also be
included in these calculations.

Risks Associated with Futures

There are several risks associated with the use of futures
contracts and futures options. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in
the futures contract. In trying to increase or reduce market
exposure, there can be no guarantee that there will be a
correlation between price movements in the futures contract and in
the portfolio exposure sought. In addition, there are significant
differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a
given transaction not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as:
variations in speculative market demand for futures, futures
options and the related securities, including technical influences
in futures and futures options trading and differences between the
securities market and the securities underlying the standard
contracts available for trading. For example, in the case of
index futures contracts, the composition of the index, including
the issuers and the weighting of each issue, may differ from the
composition of the investment portfolio, and, in the case of
interest rate futures contracts, the interest rate levels,
maturities, and creditworthiness of the issues underlying the
futures contract may differ from the financial instruments held in
the investment portfolio. A decision as to whether, when and how
to use futures contracts involves the exercise of skill and
judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or
unexpected stock price or interest rate trends.

There can be no assurance that a liquid market will exist at
a time when the Portfolio seeks to close out a futures or futures
option position. The Portfolio would be exposed to possible loss
on the position during the interval of inability to close, and
would continue to be required to meet margin requirements until
the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a
significant trading history. As a result, there can be no
assurance that an active secondary market will develop or continue
to exist.

Limitations on Options and Futures

If other options, futures contracts, or futures options of
types other than those described herein are traded in the future,
the Portfolio may also use those investment vehicles, provided the
Board of Trustees determines that their use is consistent with the
investment objective.

The Portfolio will not enter into a futures contract or
purchase an option thereon if, immediately thereafter, the initial
margin deposits for futures contracts held by it plus premiums
paid by it for open futures option positions, less the amount by
which any such positions are "in-the-money,"/3/ would exceed 5% of
total assets.
- -------------
/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, the Portfolio must maintain with its custodian
(or broker, if legally permitted) cash or cash equivalents
(including any margin) equal to the market value of such contract.
When writing a call option on a futures contract, the Portfolio
similarly will maintain with its custodian cash or cash
equivalents (including any margin) equal to the amount by which
such option is in-the-money until the option expires or is closed
out.

The Portfolio may not maintain open short positions in
futures contracts, call options written on futures contracts or
call options written on indexes if, in the aggregate, the market
value of all such open positions exceeds the current value of the
securities in its portfolio, plus or minus unrealized gains and
losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the
positions. For this purpose, to the extent it has written call
options on specific securities in its portfolio, the value of
those securities will be deducted from the current market value of
the securities portfolio.

In order to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool
operator," the Portfolio will use commodity futures or commodity
options contracts solely for bona fide hedging purposes within the
meaning and intent of Regulation 1.3(z), or, with respect to
positions in commodity futures and commodity options contracts
that do not come within the meaning and intent of 1.3(z), the
aggregate initial margin and premiums required to establish such
positions will not exceed 5% of the fair market value of the
assets of the Portfolio, after taking into account unrealized
profits and unrealized losses on any such contracts it has entered
into [in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount (as defined in Section 190.01(x)
of the Commission Regulations) may be excluded in computing such
5%].

Taxation of Options and Futures

If the Portfolio exercises a call or put option that it
holds, the premium paid for the option is added to the cost basis
of the security purchased (call) or deducted from the proceeds of
the security sold (put). For cash settlement options and futures
options exercised by it, the difference between the cash received
at exercise and the premium paid is a capital gain or loss.

If a call or put option written by the Portfolio is
exercised, the premium is included in the proceeds of the sale of
the underlying security (call) or reduces the cost basis of the
security purchased (put). For cash settlement options and futures
options written by it, the difference between the cash paid at
exercise and the premium received is a capital gain or loss.

Entry into a closing purchase transaction will result in
capital gain or loss. If an option written by the Portfolio was
in-the-money at the time it was written and the security covering
the option was held for more than the long-term holding period
prior to the writing of the option, any loss realized as a result
of a closing purchase transaction will be long-term. The holding
period of the securities covering an in-the-money option will not
include the period of time the option is outstanding.

If the Portfolio writes an equity call option/4/ other than a
"qualified covered call option," as defined in the Internal
Revenue Code, any loss on such option transaction, to the extent
it does not exceed the unrealized gains on the securities covering
the option, may be subject to deferral until the securities
covering the option have been sold.
- -------------
/4/ An equity option is defined to mean any option to buy or sell
stock, and any other option the value of which is determined by
reference to an index of stocks of the type that is ineligible to
be traded on a commodity futures exchange (e.g., an option
contract on a sub-index based on the price of nine hotel-casino
stocks). The definition of equity option excludes options on
broad-based stock indexes (such as the Standard & Poor's 500
index).
- -------------

A futures contract held until delivery results in capital
gain or loss equal to the difference between the price at which
the futures contract was entered into and the settlement price on
the earlier of delivery notice date or expiration date. If the
Portfolio delivers securities under a futures contract, it also
realizes a capital gain or loss on those securities.

For federal income tax purposes, the Portfolio generally is
required to recognize as income for each taxable year its net
unrealized gains and losses as of the end of the year on futures,
futures options and non-equity options positions ("year-end mark-
to-market"). Generally, any gain or loss recognized with respect
to such positions (either by year-end mark-to-market or by actual
closing of the positions) is considered to be 60% long-term and
40% short-term, without regard to the holding periods of the
contracts. However, in the case of positions classified as part
of a "mixed straddle," the recognition of losses on certain
positions (including options, futures and futures options
positions, the related securities and certain successor positions
thereto) may be deferred to a later taxable year. Sale of futures
contracts or writing of call options (or futures call options) or
buying put options (or futures put options) that are intended to
hedge against a change in the value of securities held: (1) will
affect the holding period of the hedged securities; and (2) may
cause unrealized gain or loss on such securities to be recognized
upon entry into the hedge.

If the Portfolio were to enter into a short index future,
short index futures option or short index option position and its
portfolio were deemed to "mimic" the performance of the index
underlying such contract, the option or futures contract position
and its stock positions would be deemed to be positions in a mixed
straddle, subject to the above-mentioned loss deferral rules.

In order for the Portfolio to continue to qualify for federal
income tax treatment as a regulated investment company, at least
90% of its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or
foreign currencies, or other income (including but not limited to
gains from options, futures, or forward contracts). Any net gain
realized from futures (or futures options) contracts will be
considered gain from the sale of securities and therefore be
qualifying income for purposes of the 90% requirement.

The Fund distributes to shareholders annually any net capital
gains that have been recognized for federal income tax purposes
(including year-end mark-to-market gains) on options and futures
transactions. Such distributions are combined with distributions
of capital gains realized on its other investments, and
shareholders are advised of the nature of the payments.

INVESTMENT RESTRICTIONS

The Fund and the Portfolio operate under the following
investment restrictions. Neither the Fund nor the 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 [Fund only] except that all or substantially
all of the assets of the Fund may be invested in another
registered investment company having the same investment objective
and substantially similar investment policies as the Fund;

(2) acquire more than 10%, taken at the time of a particular
purchase, of the outstanding voting securities of any one issuer,
[Fund only] except that all or substantially all of the assets of
the Fund may be invested in another registered investment company
having the same investment objective and substantially similar
investment policies as the Fund;

(3) act as an underwriter of securities, except insofar as it
may be deemed an underwriter for purposes of the Securities Act of
1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale, [Fund only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund;

(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 [Fund only] except that all or
substantially all of the assets of the Fund may be invested in
another registered investment company having the same investment
objective and substantially similar investment policies as the
Fund; or

(8) issue any senior security except to the extent permitted
under the Investment Company Act of 1940.

The above restrictions are fundamental policies and may not
be changed without the approval of a "majority of the outstanding
voting securities" as defined above. The Fund and the Portfolio
are also subject to the following nonfundamental restrictions and
policies, which may be changed by the Board of Trustees. None of
the following restrictions shall prevent the Fund from investing
all or substantially all of its assets in another investment
company having the same investment objective and substantially the
same investment policies as the Fund. Neither the Fund nor the
Portfolio may:

(b) invest in companies for the purpose of exercising control
or management;

(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;

(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

What are my investment goals?
It is important to a choose a fund that has investment objectives
compatible with your investment goals.

PURCHASES AND REDEMPTIONS

Purchases Through Third Parties

You may purchase (or redeem) shares through certain broker-
dealers, banks, or other intermediaries ("Intermediaries"). The
state of Texas has asked that investment companies disclose in
their Statements of Additional Information, as a reminder to any
such bank or institution, that it must be registered as a
securities dealer in Texas. Intermediaries may charge for their
services or place limitations on the extent to which you may use
the services offered by the Trust. It is the responsibility of
any such Intermediary to establish procedures insuring the prompt
transmission to the Trust of any such purchase order. An
Intermediary, who accepts orders that are processed at the net
asset value next determined after receipt of the order by the
Intermediary, accepts such orders as authorized agent or designee
of the Fund. The Intermediary is required to segregate any orders
received on a business day after the close of regular session
trading on the New York Stock Exchange and transmit those orders
separately for execution at the net asset value next determined
after that business day.

Some Intermediaries that maintain nominee accounts with the
Fund for their clients for whom they hold Fund shares charge an
annual fee of up to 0.35% of the average net assets held in such
accounts for accounting, servicing, and distribution services they
provide with respect to the underlying Fund shares. Stein Roe and
the Fund's transfer agent share in the expense of these fees, and
Stein Roe pays all sales and promotional expenses.

Net Asset Value

The net asset value of the Fund is determined on days on
which the New York Stock Exchange (the "NYSE") is open for regular
session trading. The NYSE is regularly closed on Saturdays and
Sundays and on New Year's Day, the third Monday in January, the
third Monday in February, Good Friday, the last Monday in May,
Independence Day, Labor Day, Thanksgiving, and Christmas. If one
of these holidays falls on a Saturday or Sunday, the NYSE will be
closed on the preceding Friday or the following Monday,
respectively. Net asset value will not be determined on days when
the NYSE is closed unless, in the judgment of the Board of
Trustees, net asset value of the Fund should be determined on any
such day, in which case the determination will be made at 3 p.m.,
Central time. Please refer to Your Account-Determining Share
Price in the Prospectus for additional information on how the
purchase and redemption price of Fund shares is determined.

General Redemption Policies

Neither the Trust, its transfer agent, nor their respective
officers, trustees, directors, employees, or agents will be
responsible for the authenticity of instructions provided under
the Privileges, nor for any loss, liability, cost or expense for
acting upon instructions furnished thereunder if they reasonably
believe that such instructions are genuine. The Fund employs
procedures reasonably designed to confirm that instructions
communicated by telephone under any Special Redemption Privilege
or the Special Electronic Transfer Redemption Privilege are
genuine. Use of any Special Redemption Privilege or the Special
Electronic Transfer Redemption Privilege authorizes the Fund and
its transfer agent to tape-record all instructions to redeem. In
addition, callers are asked to identify the account number and
registration, and may be required to provide other forms of
identification. Written confirmations of transactions are mailed
promptly to the registered address; a legend on the confirmation
requests that the shareholder review the transactions and inform
the Fund immediately if there is a problem. If the Fund does not
follow reasonable procedures for protecting shareholders against
loss on telephone transactions, it may be liable for any losses
due to unauthorized or fraudulent instructions.

Shares in any account you maintain with the Fund or any of
the other Stein Roe Funds may be redeemed to the extent necessary
to reimburse any Stein Roe Fund for any loss you cause it to
sustain (such as loss from an uncollected check or electronic
transfer for the purchase of shares, or any liability under the
Internal Revenue Code provisions on backup withholding).

The Trust reserves the right to suspend or terminate, at any
time and without prior notice, the use of the Telephone Exchange
Privilege by any person or class of persons. The Trust believes
that use of the Telephone Exchange Privilege by investors
utilizing market-timing strategies adversely affects the Fund.
Therefore, regardless of the number of telephone exchange round-
trips made by an investor, the Trust generally will not honor
requests for Telephone Exchanges by shareholders identified by the
Trust as "market-timers" if the officers of the Trust determine
the order not to be in the best interests of the Trust or its
shareholders. The Trust generally identifies as a "market-timer"
an investor whose investment decisions appear to be based on
actual or anticipated near-term changes in the securities markets
other than for investment considerations. Moreover, the Trust
reserves the right to suspend, limit, modify, or terminate, at any
time and without prior notice, the Telephone Exchange Privilege in
its entirety. Because such a step would be taken only if the
Board of Trustees believes it would be in the best interests of
the Fund, the Trust expects that it would provide shareholders
with prior written notice of any such action unless the resulting
delay in the suspension, limitation, modification, or termination
of the Telephone Exchange Privilege would adversely affect the
Fund. If the Trust were to suspend, limit, modify, or terminate
the Telephone Exchange Privilege, a shareholder expecting to make
a Telephone Exchange might find that an exchange could not be
processed or that there might be a delay in the implementation of
the exchange. During periods of volatile economic and market
conditions, you may have difficulty placing your exchange by
telephone.

Redemption Privileges

Telephone Exchange Privilege. You may use the Telephone
Exchange Privilege to exchange an amount of $50 or more from your
account by calling 800-338-2550 or by sending a telegram; new
accounts opened by exchange are subject to the $2,500 initial
purchase minimum. Generally, you will be limited to four
Telephone Exchange round-trips per year and the Fund may refuse
requests for Telephone Exchanges in excess of four round-trips (a
round-trip being the exchange out of the Fund into another no-load
Stein Roe Fund, and then back to the Fund). In addition, the
Trust's general redemption policies apply to redemptions of shares
by Telephone Exchange.

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.

MANAGEMENT

<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