COLONIAL COUNSELOR SELECT(SM) INCOME PORTFOLIO
COLONIAL COUNSELOR SELECT(SM) BALANCED PORTFOLIO
COLONIAL COUNSELOR SELECT(SM) GROWTH PORTFOLIO
Supplement to the January 29, 1999 Prospectus, Revised February 26, 1999
Replacing Supplement dated August 16, 1999
The Portfolios' Prospectus is amended as follows:
Crabbe Huson Contrarian Income Fund, advised by Crabbe Huson Group, Inc. (Crabbe
Huson) is added to the list of Underlying Liberty Bond Funds. Newport Asia
Pacific Fund, advised by Newport Funds Management, Inc. (Newport), is added to
the list of Underlying Liberty Stock Funds. The Newport Tiger Fund is deleted
from the list of Underlying Liberty Stock Funds.
Crabbe Huson Contrarian Income Fund (Crabbe Huson Fund) seeks the highest level
of current income that is consistent with preservation of capital. Crabbe Huson
Fund normally invests at least 65% of its total assets in a combination of (i)
U.S. government debt securities (such as U.S. Treasury bonds and mortgage-backed
securities), (ii) "investment grade" corporate bonds ranked in the four highest
grades by Moody's Investors Service, Inc. or Standard & Poor's Corporation, and
(iii) cash and cash equivalents. In managing the Crabbe Huson Fund, Crabbe Huson
follows a basic value, contrarian approach in selecting securities for its
portfolio. There are no limitations on the average maturity of the Crabbe Huson
Fund's holdings. Crabbe Huson may adjust the maturity from time-to-time in
response to changes in interest rates.
At times, Crabbe Huson may determine that adverse market conditions make it
desirable to temporarily suspend the Crabbe Huson Fund's normal investment
activities. During such times, the Crabbe Huson Fund may, but is not required
to, invest in cash or high-quality, short-term debt securities, without limit.
Taking a temporary defensive position may prevent the Crabbe Huson Fund from
achieving its investment goal.
The primary risks of investing in the Crabbe Huson Fund are described below.
There are many circumstances (including additional risks that are not described
here) which could cause you to lose money by investing in the Crabbe Huson Fund
or prevent the Crabbe Huson Fund from achieving its goal.
Market risk is the risk that the price of a security held by the Crabbe Huson
Fund will fall due to changing market, economic or political conditions. Market
risk includes interest rate risk.
Interest rate risk is the risk of a change in the price of a bond when interest
rates increase or decline. In general, if interest rates rise, bond prices fall,
and if interest rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the Crabbe Huson Fund receives from
them but will affect the value of the Crabbe Huson Fund's shares. Interest rate
risk is generally greater for bonds with longer maturities.
Because the Crabbe Huson Fund may invest in debt securities issued by private
entities, including corporate bonds and privately issued mortgage-backed and
asset backed securities, the Crabbe Huson Fund is subject to issuer risk. Issuer
risk is the possibility that changes in the financial condition of the issuer of
a security, changes in general economic conditions or changes in economic
conditions that affect the issuer may impact its ability to make timely payments
of interest or principal. This could result in a decrease in the price of the
security.
Structure risk is the risk that an event will occur (such as a security being
prepaid or called) that alters the security's cashflows. Prepayment risk is a
particular type of structure risk that is present in the Crabbe Huson Fund
because of its investments in mortgage-backed securities. Prepayment risk is the
possibility that, as interest rates fall, homeowners are more likely to
refinance their home mortgages. When mortgages are refinanced, the principal on
mortgage-backed securities is paid earlier than expected. In an environment of
declining interest rates, mortgage-backed securities may offer less potential
for gain than other debt securities. During periods of rising interest rates,
mortgage-backed securities have a high risk of declining in price because the
declining prepayment rates effectively increase the maturity of the security. In
addition, the potential impact of prepayment on the price of a mortgage-backed
security may be difficult to predict and result in greater volatility.
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Newport Asia Pacific Fund (Newport Fund) seeks capital appreciation.
The Newport Fund normally invests at least 80% of its total assets in equity
securities of companies whose principal activities are in Asia or the Pacific
Basin. Such countries may include Australia, Hong Kong, India, Indonesia, Japan,
Malaysia, New Zealand, the People's Republic of China, the Philippines,
Singapore, South Korea, Taiwan and Thailand. Many of these countries do not have
highly developed economies and securities markets (emerging market countries).
Although the amount of the Newport Fund's assets invested in emerging market
countries will vary over time, the Newport Fund may invest all of its assets in
emerging markets securities. Normally, the Newport Fund expects to invest its
assets in a number of countries and issuers. Under normal conditions, a
significant portion of the Newport Fund's assets will be invested in issuers
whose principal activities are in Japan and Hong Kong (including Chinese issuers
whose securities trade principally in Hong Kong markets).
The Newport Fund will not limit its investments to any particular type of
company. The Newport Fund may invest in the equity securities of companies,
large or small, whose earnings, Newport believes, are in a relatively strong
growth trend, or in companies whose securities Newport believes are undervalued.
These companies may present greater opportunities for capital appreciation, but
also may involve greater risk.
Newport determines where an issuer's principal activities are located by
considering such factors as its country of organization, the principal trading
market for its securities and the source of its revenues and location of its
assets.
Regional Concentration and Trends. Because the Newport Fund, under normal
circumstances, invests substantially all of its assets in a single region, the
Asia and Pacific Basin region, the Newport Fund's investments will be
susceptible to regional trends. The prices of the Newport Fund's portfolio
securities, and, therefore, the net asset value of Newport Fund shares, may be
adversely affected by negative economic or political events in any of the
countries in the Asian and Pacific Basin region and in the region as a whole. In
addition, recent events in a number of the Tiger countries of Asia (i.e., Hong
Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, the
People's Republic of China and the Philippines) have highlighted the financial
interdependence of the region and demonstrated that negative financial events in
one such country may have far-reaching negative effects throughout the region.
The uncertainty surrounding the effects of these events may negatively impact
the Newport Fund's return and the value of the Newport Fund's shares.
Investments in One or a Limited Number of Countries. The Newport Fund seeks to
reduce risk by investing its assets in a number of markets and issuers. However,
the Newport Fund may invest a substantial amount of its net assets in issuers
located in a single country. Under normal conditions, the Newport Fund intends
to invest a significant portion of its assets in issuers whose principal
activities are in Japan and Hong Kong (including Chinese issuers whose
securities trade principally in Hong Kong markets). To the extent that the
Newport Fund invests a significant portion of its assets in a single or limited
number of countries, the Newport Fund's investment performance correspondingly
will be more dependent upon the economic, political and social conditions and
changes in that country or countries, and the risks associated with investments
in such country or countries will be particularly significant. The Newport
Fund's ability to focus its investments in one or a limited number of countries
may have the effect of increasing the volatility (fluctuations in share value)
of the Newport Fund. The Newport Fund's performance or investments may be
particularly sensitive to the economic, political and social conditions in Japan
and Hong Kong as a result of significant investment of assets in Japanese and
Hong Kong issuers and issuers in other Asian and Pacific Basin countries, many
of which are directly affected by Japanese and Hong Kong capital investments in
the region and by consumer demands in Japan and Hong Kong. In Japan economic
growth has weakened since 1990. With the current unsettled political situation
and low consumer confidence, it is possible that the Japanese economy may
experience further weakness before its fundamental problems are addressed and a
more normal growth rate is achieved.
The following subcaptions under the caption "Information about the Policies,
Investments and Risks of the Underlying Liberty Funds" also apply to the Newport
Fund: "Common Stocks Generally," "Small Capitalization Stocks," "Foreign
Investments; Emerging Markets," and "Derivatives."
Effective September 30, 1999, Ernst & Young LLP, 200 Clarendon Street, Boston,
MA 02116-5072, will be the Portfolios' independent auditors, replacing
PriceWaterhouse Coopers LLP.
September 15, 1999
