File No. 33-11351
Rule 497(e)
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[STEIN ROE LOGO]
Stein Roe Balanced Fund
Defined Contribution Plans Prospectus
February 1, 2000
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 truthful or complete. Anyone who tells you otherwise is
committing a crime.
2 The Fund
Investment Goal
Principal Investment Strategy
Principal Investment Risks
Fund Performance
Your Expenses
6 Financial Highlights
7 Your Account
Purchasing Shares
Determining Share Price (NAV)
Selling Shares
Exchanging Shares
Dividends and Distributions
9 Other Investments and Risks
10 The Fund's Management
Investment Adviser
Portfolio Managers
Master/Feeder Fund Structure
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). In defining a company's market
capitalization, we use capitalization-based categories as they are
defined by Lipper, Inc.
According to Lipper, Inc. as of December 1999, large-cap companies
had market capitalizations greater than $9.0 billion, midcap
companies had market capitalizations between $2.2 and $9.0
billion, and small-cap companies had market capitalizations less
than $2.2 billion. These amounts are subject to change.
THE FUND-STEIN ROE BALANCED FUND
INVESTMENT GOAL Stein Roe Balanced Fund seeks long-term growth
of capital and current income consistent with reasonable
investment risk.
PRINCIPAL INVESTMENT STRATEGY Balanced Fund invests all of its
assets in SR&F Balanced Portfolio as part of a master fund/feeder
fund structure. Balanced Portfolio allocates its investments
among common stocks and securities convertible into common stocks,
bonds and cash. The Portfolio invests primarily in well-
established companies that have large market capitalizations. The
portfolio managers may invest in a company because it has a
history of steady to improving sales or earnings growth that they
believe can be sustained. They also may invest in a company
because they believe its stock is priced attractively compared to
the value of its assets. The Portfolio may invest up to 25% of
its assets in foreign stocks.
The Portfolio also invests at least 25% 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 manager sets the Portfolio's asset allocation
between stocks, bonds and cash. The portfolio manager may change
the allocation from time to time based upon economic, market and
other factors that affect investment opportunities.
The portfolio manager may sell a portfolio holding if the security
reaches the portfolio manager's price target or if the company has
a deterioration of fundamentals such as failing to meet key
operating benchmarks. The portfolio manager may also sell a
portfolio holding to fund redemptions.
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 by
investing in the Fund.
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.
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Portfolio may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
Debt securities. The Portfolio's investments in debt securities,
generally bonds, expose the Fund to interest rate risk. Interest
rate risk is the risk of a decline in the price of a bond when
interest rates increase or decrease. In general, if interest
rates rise, bond prices fall; and if interest rates fall, bond
prices rise. Changes in the value of bonds will not affect the
amount of income the Fund receives from them but will affect the
value of the Fund's shares. Interest rate risk is generally
greater for bonds having longer maturities.
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.
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:
* want to avoid volatility or possible losses
* are saving for a short-term investment
* are not interested in generating current income
FUND PERFORMANCE The following charts show the Fund's
performance for the past 10 calendar years through December 31,
1999. 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 total 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.
[bar chart]
YEAR-BY-YEAR TOTAL RETURNS
45%
40%
35%
30%
25% 29.59%
20% 22.65%
15% 17.05% 17.47%
10% 12.34% 12.19% 12.26%
5% 7.89%
0%
- -5% -1.72% -4.12%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
[ ] Balanced Fund
[end of bar chart]
Best quarter: 4th quarter 1998, +12.53%
Worst quarter: 3rd quarter 1990, -9.49%
Average Annual Total Returns
Average annual total returns measure the Fund's performance over
time. We compare the Fund's returns with returns for the S&P 500
Index. We show returns for calendar years to be consistent with
the way other mutual funds report performance in their
prospectuses. This provides an indication of the risks of
investing in the Fund.
AVERAGE ANNUAL TOTAL RETURNS
Periods ending December 31, 1999
1 yr 5 yr 10 yr
Balanced Fund 12.26% 16.26% 12.13%
S&P 500 Index* 21.03% 28.54% 18.19%
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
YOUR EXPENSES This table shows fees and expenses you may pay if
you buy and hold shares of the Fund. You do not pay any sales
charge when you purchase or sell your shares. However, you pay
various other indirect expenses because the Fund or the Portfolio
pays fees and other expenses that reduce your investment return.
ANNUAL FUND OPERATING EXPENSES (a)
(expenses that are deducted from Fund assets)
Management fees(b) 0.70%
Distribution (12b-1) fees None
Other expenses 0.44%
Total annual fund operating expenses 1.14%
(a) Annual fund operating expenses consist of Fund expenses plus
the Fund's share of the expenses of the Portfolio. Fund
expenses include management fees and administrative costs such
as furnishing the Fund with offices and providing tax and
compliance services.
(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 other mutual funds. It uses the same
hypothetical assumptions that other funds use in their
prospectuses:
* $10,000 initial investment
* 5% 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. This example reflects
expenses of both the Fund and the Portfolio. Expenses based on
these assumptions are:
EXPENSE EXAMPLE
1 yr 3 yrs 5 yrs 10 yrs
- ---------------------------------------------------------------
Balanced Fund $116 $362 $628 $1,386
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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. This information is included in the
Fund's financial statements which, for the year ended September
30, 1999, have been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report, along with the financial
statements, appears in the Fund's annual report. Arthur Andersen
LLP audited the Fund's financial statements for the years 1995
through 1998. To request the Fund's annual report, please call
800-322-1130.
<TABLE>
<CAPTION>
BALANCED FUND
PER SHARE DATA
Years ended September 30,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 30.70 $ 33.41 $ 30.07 $ 27.82 $ 25.78
Income from investment operations
Net investment income (c) 0.78 0.95 0.95 1.00 1.33
Net gains (losses) on securities
(both realized and unrealized) 3.85 (0.90) 5.61 2.96 2.22
Total income from investment
operations 4.63 0.05 6.56 3.96 3.55
Less distributions
Dividends (from net investment income) (0.90) (0.76) (0.96) (1.01) (1.23)
Distributions (from capital gains) (2.08) (2.00) (2.26) (0.70) (0.28)
Total distributions (2.98) (2.76) (3.22) (1.71) (1.51)
Net asset value, end of period $ 32.35 $ 30.70 $ 33.41 $ 30.07 $ 27.82
Total return 15.74% 0.14% 23.60% 14.83% 14.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $250,690 $247,852 $284,846 $231,063 $228,560
Ratio of net expenses to average
net assets .14%(b) 1.03% 1.05% 1.05% 0.87%
Ratio of net investment income to
average net assets 2.35%(b) 2.90% 3.02% 3.45% 5.14%
Portfolio turnover rate (a) 41% 61% 15% 87% 45%
<FN>
(a) Portfolio turnover rate for 1999 and 1998 shows the portfolio
turnover rate of the Portfolio. The Portfolio's turnover rate
from the commencement of operations on February 14, 1997
through September 30, 1997, was 21%. Portfolio turnover rate
for 1997, 1996 and 1995 shows that of the Fund prior to
commencement of operations of the Portfolio.
(b) During the year ended September 30, 1999, the Fund experienced
a one-time reduction in its expenses of 0.07% as a result of
expenses accrued in a prior period. The Fund's ratios
disclosed above reflect the actual rate at which expenses were
incurred through the current fiscal year without the
reduction.
(c) Per share data was calculated using average shares outstanding
during the period.
</TABLE>
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YOUR ACCOUNT
PURCHASING SHARES You will not pay a sales charge when you
purchase Fund 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. The intermediary must
segregate any orders it receives after the close of regular
trading on the New York Stock Exchange (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 it.
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 (NAV) 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 4 p.m. Eastern 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
Portfolio's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading. You will not be able to purchase or redeem shares
until the next NYSE-trading day.
SELLING SHARES Subject to restrictions imposed by your
employer's plan, Fund shares may be redeemed any day the NYSE is
open. For more information about how to redeem your Fund shares
through your employer's plan, including any charges that may be
imposed by the plan, please consult with your employer. The Fund
redeems shares at the NAV next determined after an order has been
accepted.
EXCHANGING SHARES Subject to your plan's restrictions, you may
redeem all or any portion of your Fund shares and use the proceeds
to purchase shares of any other no-load Stein Roe Fund available
through your employer's defined contribution plan. (An exchange
is commonly referred to as a "transfer.") Please be sure to read
the prospectus of the fund you wish to exchange into before using
the Exchange Privilege. Contact your plan administrator for
instructions on how to exchange your shares or to obtain
prospectuses of other no-load Stein Roe Funds available through
your plan. We may change, suspend or eliminate the exchange
service after notification to you. An exchange is a redemption
and purchase of shares for tax purposes, and you may realize a
gain or a loss when you exchange Fund shares for shares of another
fund.
Dividends and Distributions
The Fund pays dividends quarterly. It distributes, at least once
a year, virtually all of its net realized capital gains.
A dividend from net investment income represents the income the
Fund earns from dividends and interest paid on its investments,
after payment of the Fund's expenses.
A capital gain is the increase in value of a security that the
Portfolio 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 Portfolio 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.
<PAGE>
OTHER INVESTMENTS AND RISKS
The first portion of this prospectus describes the Fund's
principal investment strategy and principal investment risks. In
seeking to meet its investment goals, the Portfolio also may
invest in other securities and use other investment techniques.
The Portfolio may elect not to buy any of these other securities
or use any of these other investment techniques. The Fund may not
always achieve its investment goal.
This section describes other securities and techniques, and risks
associated with them. The Statement of Additional Information
(SAI) contains additional information about the Fund's securities
and investment techniques (including other securities and
techniques) and the risks associated with them. Such risks could
cause you to lose money by investing in the Fund or could cause
the Fund's total return to decrease. The SAI also contains the
Fund's fundamental and non-fundamental investment policies.
The Board of Trustees can change the Fund's investment objective
without shareholder approval.
FUTURES AND OPTIONS The Portfolio uses futures to gain exposure
to groups of stocks or individual issuers. It uses futures to
invest cash pending direct investments in stocks and to enhance
their return. It also uses futures and options on futures to
decrease equity exposure or to adjust interest rate duration of
its fixed-income security holdings. The Portfolio uses options on
securities to earn additional income or to hedge against price
erosion in the underlying security for the intermediate term. 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. Futures and options 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.
SHORT SALES The Portfolio 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% under normal conditions. The Portfolio
generally intends to purchase securities for long-term investment
although, to a limited extent, it may purchase securities
(including securities purchased in initial public offerings) in
anticipation of relatively short-term price gains. Portfolio
turnover typically produces capital gains or losses resulting in
tax consequences for Fund investors. It also increases
transaction expenses, which reduce the Fund's return.
TEMPORARY DEFENSIVE POSITIONS When Stein Roe believes that a
temporary defensive position is necessary, the Portfolio may
invest, without limit, in high-quality debt securities or hold
assets in cash and cash equivalents. Stein Roe is not required to
take a temporary defensive position, and market conditions may
prevent such an action. The Fund may not achieve its investment
objective if the Portfolio takes a temporary 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.
<PAGE>
THE FUND'S MANAGEMENT
INVESTMENT ADVISER Stein Roe & Farnham Incorporated, One South
Wacker Drive, Chicago, IL 60606, manages the day-to-day operations
of the Fund and the Portfolio. Stein Roe (and its predecessor)
has advised and managed mutual funds since 1949. For the fiscal
year ended September 30, 1999, aggregate fees paid by the Fund to
Stein Roe amounted to 0.70% of average net assets.
Stein Roe's mutual funds and institutional investment advisory
businesses are part of a larger business unit known as Liberty
Funds Group (LFG) that includes several separate legal entities.
LFG includes certain affiliates of Stein Roe, including Colonial
Management Associates, Inc. (Colonial). The LFG business unit is
managed by a single management team. Colonial and other LFG
entities also share personnel, facilities, and systems with Stein
Roe that may be used in providing administrative or operational
services to the Funds. Colonial is a registered investment
adviser. Stein Roe also has a wealth management business that is
not part of LFG and is managed by a different team. Stein Roe
and the other entities that make up LFG are subsidiaries of
Liberty Financial Companies, Inc.
Stein Roe may use the services of AlphaTrade Inc., an affiliated
broker-dealer, when buying or selling equity securities for the
Portfolio, pursuant to procedures adopted by the Board of
Trustees.
PORTFOLIO MANAGERS 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.
William Garrison and Sandra Knight have been associate portfolio
managers since 1995. Mr. Garrison joined Stein Roe in 1989 as an
equity research analyst and is a vice president. He received his
A.B. degree from Princeton University and an M.B.A. degree from
the University of Chicago. Ms. Knight is a vice president of
Stein Roe, which she joined in 1991 as a quantitative analyst.
She earned a B.S. degree from Lawrence Technological University
and an M.B.A. degree from Loyola University of Chicago.
MASTER/FEEDER FUND STRUCTURE Unlike mutual funds that directly
acquire and manage their own portfolio of securities, the Fund is
a "feeder" fund in a "master/feeder" structure. This means that
the Fund invests its assets in a larger "master" portfolio of
securities (the Portfolio) that has investment objectives and
policies substantially identical to those of the Fund. The
investment performance of the Fund depends upon the investment
performance of the Portfolio. If the investment policies of the
Fund and the Portfolio became inconsistent, the Board of Trustees
of the Fund can decide what actions to take. Actions the Board of
Trustees may recommend include withdrawal of the Fund's assets
from the Portfolio. For more information on the master/feeder
fund structure, see the SAI.
<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,
latest quarterly profile, or the SAI or to request other
information about the Fund, write or call:
Stein Roe Mutual Funds
One Financial Center
Boston, MA 02111
800-322-1130
www.steinroe.com
Information about the Fund (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange
Commission (SEC) in Washington, D.C. Information on the Public
Reference Room may be obtained by calling the SEC at 202-942-8090.
Reports and other information about the Fund are available on the
EDGAR database on the SEC's Internet site at http://www.sec.gov.
Copies of this information may be obtained, after paying a
duplicating fee, by electronic request at the following E-mail
address: [email protected] or by writing the SEC's Public
Reference Section, Washington, D.C. 20549-0102.
Investment Company Act file number of Liberty-Stein Roe Funds
Investment Trust: 811-04978
LIBERTY FUNDS DISTRIBUTOR, INC.
