File No. 33-59216
File No. 811-7556
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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO.___ [ ]
POST-EFFECTIVE AMENDMENT NO. 8 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 9 [X]
(check appropriate box or boxes)
KEYPORT VARIABLE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
Federal Reserve Plaza, 600 Atlantic Avenue,
Boston, Massachusetts 02210
Registrant's Telephone Number Including Area Code: (617) 722-6000
JOHN A. BENNING, ESQ.
Senior Vice President and General Counsel
Liberty Financial Companies, Inc.
Federal Reserve Plaza, 600 Atlantic Avenue
(Name and Address of Agent for Service)
<PAGE>
Approximate Date of Proposed Public Offering:
It is proposed that this filing become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on ___ pursuant to paragraph (a)(i) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
[ ] on ___ pursuant to paragraph (a)(ii) of Rule 485
An indefinite number of shares of beneficial interest of all existing and
subsequently created series of the Trust under the Securities Act of 1933 were
registered by the Registration Statement filed on March 8, 1993 under the
Securities Act of 1933 pursuant to Rule 24f-2. A Rule 24f-2 Notice with respect
to the fiscal year ended December 31, 1996 was filed on February 28, 1997.
<PAGE>
KEYPORT VARIABLE INVESTMENT TRUST
CROSS REFERENCE SHEET
(as required by Rule 481(a))
PART A
FORM N-1A LOCATION
1. Cover Page Cover Page
2. Synopsis The Trust
3. Condensed Financial Information Financial Highlights; Investment
Return
4. General Description of Registrant Cover Page; The Trust
5. Management of the Fund Trust Management Organizations
5A. Management's Discussion of Fund Information required by Item 5A is
Performance included in the Registrant's Annual
Report for the year ended December
31, 1997. As required by said Item
5, the Registrant undertakes under
"Financial Highlights" in the
Prospectus to provide a copy of
said Annual Report free of charge
to persons requesting the same.
6. Capital Stock and Other Securities The Trust; Other Considerations:
Purchases and Redemptions, Net
Asset Value, Distributions, Taxes,
Shareholder Communications,
Organization, Meetings and Voting
Rights
7. Purchase of Securities Being Offered Other Considerations: Purchases and
Redemptions, Net Asset Value
8. Redemption or Repurchase Other Considerations: Purchases and
Redemptions
9. Pending Legal Proceedings Not Applicable
<PAGE>
PART B
FORM N-1A LOCATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History More Facts About the Trust: Mixed
and Shared Funding, Organization
13. Investment Objectives and Policies Investment Restrictions;
Description of Certain Investments
14. Management of the Fund Investment Management and Other
Services; More Facts About the
Trust: Trustees and Officers
15. Control Persons and Principal More Facts About the Trust:
Holders of Securities Principal Holders of Securities
16. Investment Advisory and Other Investment Management and Other
Services Services; More Facts About the
Trust: Custodian, Independent
Accountants and Financial
Statements
17. Brokers Allocation and Other Other Considerations: Portfolio
Practices Transactions
18. Capital Stock and Other Securities Other Considerations: Expenses
of the Funds, Purchases and
Redemptions, Net Asset Value
(Part A)
19. Purchase, Redemption and Pricing Other Considerations: Purchases
of Securities Being Offered and Redemptions, Net Asset Value
(Part A)
20. Tax Status Other Considerations: Taxes
(Part A)
<PAGE>
21. Underwriters Other Considerations: Purchases and
Redemptions (Part A)
22. Calculation of Performance Data Investment Performance
23. Financial Statements The financial statements required
by item 23 are incorporated by
reference from the Registrant's
Annual Report for the year ended
December 31, 1996 and are included
in Part B.
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE>
KEYPORT VARIABLE INVESTMENT TRUST
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210
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Keyport Variable Investment Trust ("Trust") is an open-end management investment
company that currently includes six separate Funds, each with its own investment
objective and policies. The six Funds and their investment objectives are:
[bullet] Colonial-Keyport Growth and Income Fund seeks primarily income and
long-term capital growth and, secondarily, preservation of capital.
[bullet] Colonial-Keyport Utilities Fund seeks primarily current income and,
secondarily, long-term capital growth.
[bullet] Colonial-Keyport International Fund For Growth seeks long-term capital
growth, by investing primarily in non-U.S. equity securities. The Fund
is non-diversified and may invest more than 5% of its total assets in
the securities of a single issuer, thereby increasing the risk of loss
compared to a diversified fund.
[bullet] Colonial-Keyport U.S. Stock Fund seeks growth exceeding over time the
S&P 500 Index (Standard & Poor's Corporation Composite Stock Price
Index) performance.
[bullet] Colonial-Keyport Strategic Income Fund seeks a high level of current
income, as is consistent with prudent risk and maximizing total return,
by diversifying investments primarily in U.S. and foreign government
and high yield, high risk corporate debt securities. The Fund may
invest a substantial portion of its assets in high yield, high risk
bonds (commonly referred to as "junk bonds") and therefore may not be
suitable for all investors. High risk, high yield bonds are regarded as
speculative as to payment of principal and interest. Purchasers should
carefully assess the risks associated with an investment in the Fund.
[bullet] Newport-Keyport Tiger Fund seeks long-term capital growth by investing
primarily in equity securities of companies located in the nine Tigers
of Asia (Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand,
Indonesia, China and the Philippines).
There is no assurance that the objectives of the Funds will be realized.
Other Funds may be added or deleted from time to time.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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This Prospectus contains information about the Funds that a prospective investor
should know before applying for certain variable annuity contracts and variable
life insurance policies offered by separate accounts of insurance companies
investing in the Trust. Please read it carefully and retain it for future
reference.
Additional facts about the Funds are included in a Statement of Additional
Information dated May 1, 1997, incorporated herein by reference, which has been
filed with the Securities and Exchange Commission. For a free copy write to
Keyport Financial Services Corp. at 125 High Street, Boston, Massachusetts 02110
or other broker-dealers offering the variable annuity contracts and variable
life insurance policies of Participating Insurance Companies (as such term is
defined in this Prospectus).
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SHARES OF THE TRUST ARE AVAILABLE AND ARE BEING MARKETED EXCLUSIVELY AS A POOLED
FUNDING VEHICLE FOR VARIABLE ANNUITY CONTRACTS ("VA CONTRACTS") AND VARIABLE
LIFE INSURANCE POLICIES ("VLI POLICIES") OF PARTICIPATING INSURANCE COMPANIES.
- --------------------------------------------------------------------------------
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE APPROPRIATE
VA CONTRACTS OR VLI POLICIES OF THE APPLICABLE PARTICIPATING INSURANCE COMPANY.
BOTH PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
The date of this Prospectus is May 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
THE TRUST ................................................... 3
FINANCIAL HIGHLIGHTS ....................................... 4
THE FUNDS ................................................... 10
How the Funds Invest ....................................... 10
Colonial-Keyport Growth and Income Fund .................. 10
Colonial-Keyport Utilities Fund ........................... 10
Colonial-Keyport International Fund For Growth ............ 11
Colonial-Keyport U.S. Stock Fund ........................... 11
Colonial-Keyport Strategic Income Fund ..................... 12
Newport-Keyport Tiger Fund ................................. 12
TRUST MANAGEMENT ORGANIZATIONS .............................. 13
The Trustees ............................................. 13
The Manager: Keyport Advisory Services Corp.
(KASC) ................................................... 13
Sub-Advisers: Colonial Management Associates, Inc.
(Colonial) and Newport Fund Management, Inc.
(Newport) ................................................ 13
TRUST SERVICE ORGANIZATIONS ................................. 14
Underwriter: Keyport Financial Services Corp. (KFSC) ...... 14
Custodians: Boston Safe Deposit and Trust Company
and UMB, n.a. ............................................. 14
Independent Accountants: Price Waterhouse LLP ............... 14
OTHER CONSIDERATIONS ....................................... 14
Expenses of the Funds .................................... 14
Purchases and Redemptions ................................. 15
Investment Return .......................................... 15
Net Asset Value .......................................... 15
Distributions ............................................. 15
Page
------
Taxes ...................................................... 16
Shareholder Communications ................................. 17
Organization, Meetings, and Voting Rights .................. 17
Additional Information .................................... 17
OTHER INVESTMENT PRACTICES, RISK
CONSIDERATIONS, AND POLICIES OF THE FUNDS . 17
Short-Term Trading ....................................... 17
Certain Investment Considerations Pertaining to
Government Debt Securities .............................. 18
Cash Reserves and Repurchase Agreements .................. 18
Forward Commitments and When-Issued Securities;
Dollar Roll Transactions ................................. 18
Foreign Securities ....................................... 19
Mortgage-Backed Securities ................................. 20
Collateralized Mortgage Obligations (CMOs) and
Real Estate Mortgage Investment Conduits
(REMICs) ................................................ 20
Zero-Coupon Bonds .......................................... 21
High Yield, High Risk Bonds ................................. 21
Foreign Stock Index Futures .............................. 21
Writing Covered Call Options and Purchasing
Covered Put Options on Securities ........................ 21
Interest Rate Futures ....................................... 22
Certain Policies to Reduce Risk ........................... 22
CHANGES TO INVESTMENT OBJECTIVES AND NON-
FUNDAMENTAL POLICIES ....................................... 22
APPENDIX A: Description of Bond Ratings ..................... A-1
APPENDIX B: C-K Strategic Income Fund -- Schedule of
Portfolio Asset Composition by Rating for 1996 ............ B-1
<PAGE>
THE TRUST
The Trust is an open-end management investment company currently consisting of
six series: Colonial-Keyport Growth and Income Fund ("C-K Growth and Income
Fund"), Colonial-Keyport Utilities Fund ("C-K Utilities Fund"), Colonial-Keyport
International Fund For Growth ("C-K International Fund For Growth"),
Colonial-Keyport U.S. Stock Fund ("C-K U.S. Stock Fund"), Colonial-Keyport
Strategic Income Fund ("C-K Strategic Income Fund") and Newport-Keyport Tiger
Fund ("N-K Tiger Fund") (individually referred to as a "Fund" or by the
abbreviated name indicated, or collectively as the "Funds"). Each of C-K Growth
and Income Fund, C-K Utilities Fund, C-K U.S. Stock Fund, C-K Strategic Income
Fund and N-K Tiger Fund is a diversified fund. C-K International Fund For Growth
is non-diversified and may invest more than 5% of its total assets in the
securities of a single issuer. This increases the risk of loss compared to a
diversified fund. The Trust issues shares of beneficial interest in each Fund
that represent interests in a separate portfolio of securities and other assets.
The Trust may add or delete Funds from time to time.
The Trust is the funding vehicle for variable annuity contracts ("VA contracts")
and variable life insurance policies ("VLI policies") offered by the separate
accounts of life insurance companies ("Participating Insurance Companies").
Certain Participating Insurance Companies are affiliated with the adviser to the
Funds ("Affiliated Participating Insurance Companies"). As of the date of this
Prospectus, such Affiliated Participating Insurance Companies are Keyport Life
Insurance Company ("Keyport"), Independence Life & Annuity Company
("Independence") and Liberty Life Assurance Company of Boston ("Liberty Life").
Shares of the Funds from time to time may be sold to other unaffiliated
Participating Insurance Companies.
The Participating Insurance Companies and their separate accounts are the
shareholders or investors ("shareholders") of the Funds. Owners of VA contracts
and owners of VLI policies invest in sub-accounts of separate accounts of the
Participating Insurance Companies that, in turn, invest in the Funds.
The prospectuses of the separate accounts of the Participating Insurance
Companies describe which Funds are available to the separate accounts offering
the VA contracts and VLI policies. The Trust assumes no responsibility for those
prospectuses. However, Keyport Advisory Services Corp. ("KASC") and the Board of
Trustees of the Trust ("Board of Trustees") monitor events to identify any
material conflicts that may arise between the interests of the Participating
Insurance Companies or between the interests of owners of VA contracts and VLI
policies. The Trust currently does not foresee any disadvantages to the owners
of VA contracts and VLI policies arising from the fact that certain interests of
the owners may differ. The Statement of Additional Information contains
additional information regarding such differing interests and related risks.
KASC provides investment management and advisory services to the Funds pursuant
to its Management Agreements with the Trust.
Colonial Management Associates, Inc. ("Colonial") provides sub-advisory services
to each Fund (other than N-K Tiger Fund) pursuant to separate Sub-Advisory
Agreements (the "Colonial Sub-Advisory Agreements") with each such Fund and
KASC.
Newport Fund Management, Inc. ("Newport") provides sub-advisory services to
N-K Tiger Fund pursuant to a separate Sub-Advisory Agreement (the "Newport
Sub-Advisory Agreement") with such Fund and KASC.
KASC has delegated various administrative matters to Colonial. Colonial also
provides transfer agency and pricing and record keeping services to the Trust.
Keyport Financial Services Corp. ("KFSC") serves as the principal underwriter of
the Trust.
KASC, Colonial, Newport, KFSC, Keyport and Independence are wholly-owned
indirect subsidiaries of Liberty Financial Companies, Inc. ("LFC"). As of March
31, 1997, approximately 80.6% of the combined voting power of LFC's issued and
outstanding voting stock was held, indirectly, by Liberty Mutual Insurance
Company ("Liberty Mutual"). Liberty Life is a subsidiary of Liberty Mutual.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below present certain financial information for each Fund in the
Trust for the period beginning with such Fund's commencement of operations (July
1, 1993 for each of C-K Growth and Income Fund and C-K Utilities Fund; May 2,
1994 for C-K International Fund For Growth; July 5, 1994 for each of C-K U.S.
Stock Fund and C-K Strategic Income Fund; and May 1, 1995 for N-K Tiger Fund)
and ended December 31, 1996. The information has been audited and reported on by
the Trust's independent accountants, Price Waterhouse LLP, whose report thereon
appears in the Trust's annual report to shareholders for the fiscal year ended
December 31, 1996 (which may be obtained without charge from KFSC or from the
Participating Insurance Company issuing the applicable VA contract or VLI
policy), and is incorporated by reference into the Statement of Additional
Information. The Funds' total returns presented below do not reflect the cost of
insurance and other insurance company separate account charges which vary with
the VA contracts and VLI policies offered through the separate accounts of
Participating Insurance Companies.
Colonial-Keyport Growth and Income Fund
<TABLE>
<CAPTION>
Period Ended December 31,
----------------------------------------------------------------
1996 1995 1994 1993***
--------------- --------------- ----------- -------------------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ........................ $ 12.60 $ 10.03 $ 10.36 $10.00
-------- -------- ------- ------
Net investment income (a) ................................. 0.28 0.29 0.26 0.09
Net realized and unrealized gains (losses) on investments and
foreign currency transactions (a) ........................ 1.98 2.72 (0.34) 0.41
-------- -------- ------- ------
Total from investment operations ........................... 2.26 3.01 (0.08) 0.50
-------- -------- ------- ------
Less distributions from:
Dividends from net investment income ..................... (0.28) (0.25) (0.25) (0.11)
Dividends from net realized gains on investments ......... (0.62) (0.19) -- (0.03)
-------- -------- ------- ------
Total distributions ....................................... (0.90) (0.44) (0.25) (0.14)
-------- -------- ------- ------
Net asset value, end of period .............................. $ 13.96 $ 12.60 $ 10.03 $10.36
======== ======== ======= ======
Total return:
Total investment return (b) ................................. 17.89% 30.03% (0.76)% 5.01%**(d)
Ratios/supplemental data:
Net assets, end of period (000) .............................. $ 93,247 $ 71,070 $48,052 $29,298
Ratio of net expenses to average net assets .................. 0.79%(e) 0.81%(e) 0.87% 1.00%*(c)
Ratio of net investment income to average net assets ...... 2.02%(e) 2.51%(e) 2.82% 2.32%*(d)
Portfolio turnover ratio .................................... 24% 79% 55% 8%**
Average commission rate (f) ................................. $ 0.0383 -- -- --
</TABLE>
- ----------------
* Annualized
** Not Annualized
*** For the period from the commencement of operations (July 1, 1993) to
December 31, 1993.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) If the Fund had paid all of its expenses and there had been no reimbursement
from KASC, this ratio would have been 1.23% (annualized) for the period
ended December 31, 1993.
(d) Computed giving effect to KASC's expense limitation undertaking.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Federal Income Tax Information (unaudited)
73.9% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
4
<PAGE>
Colonial-Keyport Utilities Fund
<TABLE>
<CAPTION>
Period Ended December 31,
-------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of period .............................. $ 10.50 $ 8.11
-------- --------
Net investment income (a) .......................................... 0.46 0.46
Net realized and unrealized gains (losses) on investments (a) ...... 0.23 2.39
-------- --------
Total from investment operations .................................... 0.69 2.85
-------- --------
Less distributions from:
Dividends from net investment income .............................. (0.49) (0.46)
-------- --------
Net asset value, end of period .................................... $ 10.70 $ 10.50
======== ========
Total return:
Total investment return (b) .......................................... 6.53% 35.15%
Ratios/supplemental data:
Net assets, end of period (000) .................................... $ 47,907 $ 51,597
Ratio of net expenses to average net assets ........................ 0.81%(d) 0.83%(d)
Ratio of net investment income to average net assets ............... 4.36%(d) 4.98%(d)
Portfolio turnover ratio .......................................... 14% 18%
Average commission rate (f) ....................................... $ 0.0468 --
<CAPTION>
Period Ended December 31,
------------------------------
1994 1993***
------------- ----------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of period .............................. $ 9.65 $10.00
-------- ------
Net investment income (a) .......................................... 0.54 0.18
Net realized and unrealized gains (losses) on investments (a) ...... (1.53) (0.35)
-------- ------
Total from investment operations .................................... (0.99) (0.17)
-------- ------
Less distributions from:
Dividends from net investment income .............................. (0.55) (0.18)
-------- ------
Net asset value, end of period .................................... $ 8.11 $ 9.65
======== ======
Total return:
Total investment return (b) .......................................... (10.27)% (1.70)%**(c)
Ratios/supplemental data:
Net assets, end of period (000) .................................... $ 38,156 $54,441
Ratio of net expenses to average net assets ........................ 0.86% 1.00%*(e)
Ratio of net investment income to average net assets ............... 5.80% 5.10%*(c)
Portfolio turnover ratio .......................................... 16% 2%**
Average commission rate (f) ....................................... -- --
</TABLE>
- ----------------
* Annualized
** Not Annualized
*** For the period from the commencement of operations (July 1, 1993) to
December 31, 1993.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to KASC's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits received,
if any.
(e) If the Fund had paid all of its expenses and there had been no reimbursement
from KASC, this ratio would have been 1.09% (annualized) for the period
ended December 31, 1993.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
5
<PAGE>
Colonial-Keyport International Fund For Growth
<TABLE>
<CAPTION>
Period Ended December 31,
----------------------------------------------------
1996 1995 1994***
--------------- --------------- ----------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period .............................. $ 1.97 $ 1.88 $ 2.00
-------- -------- ------
Net investment income (a) .......................................... 0.02 0.01 --
Net realized and unrealized gains (losses) on investments and foreign
currency transactions (a) .......................................... 0.09 0.10 (0.12)
-------- -------- ------
Total from investment operations .................................... 0.11 0.11 (0.12)
-------- -------- ------
Less distributions from:
Dividends from net investment income .............................. -- (0.02) --
-------- -------- ------
Dividends from net realized gains on investments .................. (0.12) -- --
Total distributions ............................................. (0.12) (0.02) --
Net asset value, end of period .................................... $ 1.96 $ 1.97 $ 1.88
======== ======== ======
Total return:
Total investment return (b) .......................................... 5.61% 5.85% (6.00)%**
Ratios/supplemental data:
Net assets, end of period (000) .................................... $ 26,593 $ 22,764 $19,146
Ratio of net expenses to average net assets ........................ 1.40%(c) 1.40%(c) 1.74%*
Ratio of net investment income to average net assets ............... 0.84%(c) 0.75%(c) 0.13%*
Portfolio turnover ratio .......................................... 114% 40% 31%**
Average commission rate (d) ....................................... $ 0.0010 -- --
</TABLE>
- ----------------
* Annualized
** Not Annualized
*** For the period from the commencement of operations (May 2, 1994) to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Federal Income Tax Information (unaudited)
51.8% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
6
<PAGE>
Colonial-Keyport U.S. Stock Fund
<TABLE>
<CAPTION>
Period Ended December 31,
-------------------------------------------------------------
1996 1995 1994***
--------------- --------------------- -------------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ..................... $ 12.36 $ 10.27 $10.00
-------- ------- ------
Net investment income (a) ................................. 0.19 0.21 0.09
Net realized and unrealized gains on investments (a) ...... 2.52 2.84 0.35
-------- ------- ------
Total from investment operations ........................... 2.71 3.05 0.44
-------- ------- ------
Less distributions from:
Dividends from net investment income ..................... (0.17) (0.16) (0.11)
Dividends from net realized gains on investments ......... (0.68) (0.80) (0.06)
-------- ------- ------
Total distributions ....................................... (0.85) (0.96) (0.17)
-------- ------- ------
Net asset value, end of period ........................... $ 14.22 $ 12.36 $10.27
======== ======= ======
Total return:
Total investment return (c) .............................. 21.84% 29.70%(b) 4.40%(b)**
Ratios/supplemental data:
Net assets, end of period (000) ........................... $ 60,855 $43,017 $15,373
Ratio of net expenses to average net assets ............... 0.95%(e) 1.00%(d)(e) 1.00%(d)*
Ratio of net investment income to average net assets ...... 1.39%(e) 1.72%(b)(e) 2.16%(b)*
Portfolio turnover ratio ................................. 77% 115% 52%**
Average commission rate (f) .............................. $ 0.0395 -- --
</TABLE>
- ----------------
* Annualized
** Not Annualized
*** For the period from the commencement of operations (July 5, 1994) to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Computed giving effect to KASC's expense limitation undertaking.
(c) Total return at net asset value assuming all distributions reinvested.
(d) If the Fund had paid all of its expenses and there had been no reimbursement
from KASC, these ratios would have been 1.07% and 1.64% (annualized),
respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Federal Income Tax Information (unaudited)
87.6% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
7
<PAGE>
Colonial-Keyport Strategic Income Fund
<TABLE>
<CAPTION>
Period Ended December 31,
-------------------------------------------------
1996 1995 1994***
--------------- --------------- -------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period .............................. $ 10.99 $ 9.79 $ 10.00
-------- -------- --------
Net investment income (a) .......................................... 0.92 0.55 0.30
Net realized and unrealized gains (losses) on investments and foreign
currency transactions (a) .......................................... 0.16 1.24 (0.19)
-------- -------- --------
Total from investment operations .................................... 1.08 1.79 0.11
-------- -------- --------
Less distributions from:
Dividends from net investment income .............................. (0.96) (0.56) (0.31)
Dividends from net realized gains on investments .................. (0.07) (0.03) (0.01)
-------- -------- --------
Total distributions ................................................ (1.03) (0.59) (0.32)
-------- -------- --------
Net asset value, end of period .................................... $ 11.04 $ 10.99 $ 9.79
======== ======== ========
Total return:
Total investment return (b) (c) .................................... 9.83% 18.30% 1.10%**
Ratios/supplemental data:
Net assets, end of period (000) .................................... $ 53,393 $ 48,334 $13,342
Ratio of net expenses to average net assets (e) ..................... 0.80%(d) 0.84%(d) 1.00%*
Ratio of net investment income to average net assets (c) ............ 8.13%(d) 8.08%(d) 7.33%*
Portfolio turnover ratio .......................................... 114% 281% 94%**
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations (July 5, 1994) to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to KASC's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits received,
if any.
(e) If the Fund had paid all of its expenses and there had been no reimbursement
from KASC, these ratios would have been 0.86%, 0.94% and 1.60% (annualized),
respectively.
Federal Income Tax Information (unaudited)
59.1% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
8
<PAGE>
Newport-Keyport Tiger Fund
Period Ended
---------------------
1996 1995**
Per share operating performance:
Net asset value, beginning of period ................. $ 2.28 $ 2.00
------ -------
Net investment income (a) .......................... 0.03 0.01
Net realized and unrealized gains on
investments and foreign currency transactions (a).... 0.24 0.29
------ -------
Total from investment operations .................... 0.27 0.30
------ -------
Less distributions from:
Dividends from net investment income .............. (0.02) (0.01)
In excess of net investment income ................. -- (0.01)
Dividends from net realized gains on investments .. (0.01) --
------ -------
Total distributions ................................ (0.03) (0.02)
------ -------
Net asset value, end of period ....................... $ 2.52 $ 2.28
====== =======
Total return:
Total investment return (b) .......................... 11.73% 15.00%***
Ratios/supplemental data:
Net assets, end of period (000) .................... $34,642 $18,977
Ratio of net expenses to average net assets (c) ..... 1.27% 1.79%*
Ratio of net investment income to average
net assets (c) .................................... 1.20% 0.89%*
Portfolio turnover ratio ............................. 7% 12%***
Average commission rate (d) .......................... $0.0172 --
* Annualized
** For the period from the commencement of operations (May 1, 1995) to December
31, 1995.
*** Not Annualized
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Federal Income Tax Information (unaudited)
87.7% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
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Further information about the performance of the Funds is contained in the
Trust's annual report to shareholders for the period ended December 31, 1996,
which may be obtained without charge from KFSC or from the Participating
Insurance Company issuing the applicable VA contract or VLI policy.
THE FUNDS
How The Funds Invest
All investments, including mutual funds, have risks, and no one mutual fund is
suitable for all investors. No one Fund by itself constitutes a complete
investment program. The net asset value of the shares of the Funds will vary
with market conditions and there can be no guarantee that any Fund will achieve
its investment objective.
Each Fund and its investment objectives and policies are described below.
Certain additional investment policies and techniques common to some or all of
the Funds are described under "OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS,
AND POLICIES OF THE FUNDS" below.
More information about the portfolio securities in which the Funds invest,
including certain risks and investment limitations, is provided in the Statement
of Additional Information.
Colonial-Keyport Growth and Income Fund
Investment Objective. The Fund seeks primarily income and long-term capital
growth and, secondarily, preservation of capital.
Investment Program. The Fund may invest without limit in U.S. stock exchange or
NASDAQ National Market System listed common stocks and foreign common stocks
which, when purchased, meet quantitative standards which in Colonial's judgment
indicate above average financial soundness and high intrinsic value relative to
price. Companies in which the Fund invests will fall into one of the following
three categories:
1. Companies whose current business activities provide earnings, dividends or
assets that represent above average value for each dollar invested; or
2. Companies whose business activities are concentrated in industries or
business strategies which are expected to provide above average stability or
value in turbulent markets; or
3. Companies with anticipated business growth prospects that represent above
average value for each dollar invested.
For this purpose, "average" will not be pegged to a specific index but rather
determined in Colonial's judgment based on an eligible universe of securities of
appropriate market capitalization for which sufficient data is available. Such
average may also be qualified by industry group or sector.
Up to 5% of the Fund's net assets may be invested in common stocks not meeting
any of the foregoing conditions at the time of purchase.
The U.S. Government Securities in which the Fund invests include (1) U.S.
Treasury obligations; (2) obligations issued or guaranteed by U.S. Government
agencies and instrumentalities ("Agencies") which are supported by (a) the full
faith and credit of the U.S. Government, (b) the right of the issuer or
guarantor to borrow an amount limited to a line of credit with the U.S.
Treasury, (c) discretionary power of the U.S. Government to purchase obligations
of the Agencies, or (d) the credit of the Agencies; (3) real estate mortgage
investment conduits ("REMICs"), and collateralized mortgage obligations
("CMOs"), including privately-issued asset-backed securities and privately-
issued mortgage-backed securities guaranteed by an Agency; (4) "when-issued"
commitments relating to the foregoing; and (5) certain high quality U.S.
Government money market instruments, including repurchase agreements ("REPOs")
collateralized by U.S. Government Securities.
The Fund will not invest in residual classes of CMOs. The Fund may invest in
U.S. Government Securities of any maturity that pay fixed, floating or
adjustable interest rates.
The Fund may invest without limit in securities traded outside of the U.S. and
may purchase foreign currencies on a spot or forward basis in conjunction with
its investments in foreign securities and to hedge against fluctuations in
foreign currencies.
Colonial-Keyport Utilities Fund
Investment Objective. The Fund seeks primarily current income and, secondarily,
long-term capital growth.
Investment Program. The Fund normally invests at least 65% of its total assets
in common and preferred equity securities of utility companies.
The Fund will normally invest substantially all of its total assets in the
equity securities (preferred and common stocks) of (i) companies engaged in the
manufacturing, production, generation, transmission, and sale of electricity,
natural gas or other types of energy, or water or sanitation services, (ii)
companies engaged in telecommunications, including telephone, telegraph,
satellite, microwave, cellular, wireless or other communications media, and
(iii) companies primarily engaged in public broadcasting, print media and cable
television ("Utility Companies").
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The values of securities issued by Utility Companies (and therefore the value of
Fund shares) are especially affected by changes in prevailing interest rate
levels (as interest rates increase, the values of securities issued by Utility
Companies tend to decrease, and vice versa). The values of and dividends paid on
such securities also are affected by general competitive and market forces in
the utility industries (in general, Utility Companies are facing increased
competition), changes in federal and state regulation, energy conservation
efforts and other environmental concerns, changes in energy demand due to
weather conditions and, particularly with respect to nuclear facilities,
shortened economic life and repair and decommissioning costs. Utility Companies
are facing a trend toward deregulation which (by replacing monopoly positions
with competition) can adversely affect their profitability by driving down
prices and profit margins. Moreover, unless specifically provided for by
regulatory agreements in the move toward a competitive environment, certain
electric Utility Companies may not be able to recover all of their investment,
in contracts or plants producing power, at above-market rates. Additionally,
Utility Companies, either directly or through joint ventures with other firms,
may make investments abroad. Such investments, whether for the construction of
power plants or for controlling or minority interests in foreign utility firms,
may subject the investing companies, and, in turn, the Fund's holdings of their
securities, to risks associated with foreign investments, such as adverse
foreign economic and political developments and unfavorable currency exchange
rates.
Colonial-Keyport International Fund For Growth
Investment Objective. The Fund seeks long-term capital growth by investing
primarily in non-U.S. equity securities.
Investment Program. The Fund normally invests at least 65% of its assets in
equity securities, consisting of common and preferred stock, warrants to
purchase such stock, and convertible debt, of issuers in at least three
countries other than the U.S. The Fund may also invest up to 35% of its assets
in high quality foreign government debt securities. The debt securities in which
the Fund may invest may be of any maturity that pay fixed, floating or
adjustable rates. The Fund may invest in both exchange and over-the-counter
traded securities.
The Fund is non-diversified and may invest more than 5% of its total assets in
the securities of a single issuer, increasing the risk of loss compared to a
diversified fund.
The Fund may invest up to 10% of its total assets in closed-end investment
companies commonly referred to as "country funds." Such investments will involve
the payment of duplicative fees through the indirect payment of a portion of the
expenses, including advisory fees, of such other investment companies.
The Fund may invest in smaller, less established companies which may offer
greater opportunities for capital appreciation than larger, better established
companies. These stocks may also involve certain special risks related to
limited product lines, markets or financial resources and dependence on a small
management group. Their securities may trade less frequently, in smaller volumes
and fluctuate more sharply in value than exchange listed securities of larger
companies.
For a discussion of certain special risks and other considerations pertaining to
investments in foreign securities applicable to the Fund, see "OTHER INVESTMENT
PRACTICES, RISK CONSIDERATIONS, AND POLICIES OF THE FUNDS: Foreign Securities;"
and "Foreign Stock Index Futures."
Colonial-Keyport U.S. Stock Fund
Investment Objective. The Fund seeks growth over time exceeding the S&P 500
Index's performance.
Investment Program. The Fund normally invests at least 65% of its total assets
in the common stock of U.S. companies with an equity market capitalization at
the time of purchase in excess of $3 billion. Up to 35% of the total assets may
be invested in U.S. companies with an equity market capitalization at the time
of purchase between $1 billion and $3 billion, and up to 10% in American
Depository Receipts (receipts issued in the U.S. by banks or trust companies
evidencing ownership of underlying foreign securities (ADRs)). The Fund will
purchase equity securities that Colonial believes have superior earnings and
value characteristics selected from a universe which meets certain guidelines
for liquidity and available investment information. Quantitative standards,
designed to identify above average intrinsic value relative to price and
favorable earnings trends, are used as the core of the process. Fundamental
company analysis is then used to select securities. The Fund will not
concentrate more than 25% of its total assets in any one industry.
The S&P 500 Index is a market-value weighted index of 500 common stocks publicly
traded in the open stock market chosen on the basis of market value and industry
diversification. Standard & Poor's Corporation ("S&P") and the S&P 500 Index are
not affiliated with nor do they sponsor nor recommend the Fund or the Trust.
The Fund's investments are not limited to securities in the S&P 500 Index and
will not precisely match the composition of the S&P 500 Index, but may be
managed to correlate with the sectors, capitalization and volatility of the S&P
500 Index.
Generally the Fund will maintain less than 5% of total assets in cash
equivalents to meet current cash flow needs. The Fund may also invest
temporarily available cash in money market investment companies, subject to the
limits of the Investment Company Act of 1940. This will involve the indirect
payment of a portion of the expenses, including advisory fees, of such
investment companies.
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<PAGE>
The Fund may lend securities to certain institutions (that Colonial considers
qualified) to increase income. The loans will not exceed 30% of total assets.
Securities lending involves the risk of loss to the Fund if the borrower
defaults.
Colonial-Keyport Strategic Income Fund
Investment Objectives. The Fund seeks a high level of current income, as is
consistent with prudent risk and maximizing total return, by diversifying
investments primarily in U.S. and foreign government and high yield, high risk
corporate debt securities.
Investment Program. The Fund will seek to achieve its objectives by investing
its assets in each of the following sectors of the debt securities markets: (i)
U.S. Government Securities; (ii) debt securities issued by foreign governments
and their political subdivisions; and (iii) high yield, high risk securities,
some of which may involve equity features. The Fund may invest in debt
securities of any maturity. The allocation of investments among these types of
securities at any given time is based on Colonial's estimate of expected
performance and risk of each type of investment. The value of debt securities
(and thus of Fund shares) usually will fluctuate inversely to changes in
interest rates.
The U.S. Government Securities in which the Fund invests include those described
as eligible for investment by C-K Growth and Income Fund. The Fund may invest in
U.S. Government Securities of any maturity and in zero coupon securities. The
Fund also may invest in certificates representing undivided interests in the
interest or principal of mortgage-backed securities (interest only/principal
only), which tend to be more volatile than other types of securities. See "OTHER
INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS:
Mortgage-Backed Securities."
The Fund may invest any portion of its assets in securities issued or guaranteed
by foreign governments. For a discussion of certain special risks and other
considerations pertaining to investments in foreign securities applicable to the
Fund, see "OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE
FUNDS: Foreign Securities."
The Fund may purchase high yield, high risk bonds (commonly referred to as junk
bonds), including bonds in the lowest rating categories (C for Moody's Investors
Services, Inc. ("Moody's") and D for S&P) and unrated bonds. The lowest rating
categories include bonds which are in default. Because these securities are
regarded as predominantly speculative as to payment of principal and interest,
the Fund will not purchase the debt securities of a single issuer rated by Ca by
Moody's or CC by S&P or lower or comparable unrated securities, if as a result
holdings of that issuer exceed 0.5% of the Fund's net assets. High yield, high
risk bonds are those rated lower than Baa by Moody's or BBB by S&P, or
comparable unrated securities. For a discussion of certain risks and other
considerations pertaining to investments in high yield bonds, see "OTHER
INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS: High Yield,
High Risk Bonds." Appendix A to this Prospectus provides a description of bond
ratings.
Newport-Keyport Tiger Fund
Investment Objective. The Fund seeks long-term capital growth.
Investment Program. The Fund invests primarily in equity securities of companies
located in the nine Tigers of East Asia (Hong Kong, Singapore, South Korea,
Taiwan, Malaysia, Thailand, Indonesia, China and the Philippines). These nine
countries are referenced to herein as the "Tiger countries." Normally, the Fund
will seek to be fully invested in equity securities of larger, well established
companies located in the Tiger countries.
Equity securities in which the Fund invests include common and preferred stock,
warrants (rights) to purchase stock, debt securities convertible into stock,
ADRs, Global Depository Receipts (receipts issued by foreign banks or trust
companies) and shares of other investment companies that invest primarily in the
foregoing securities.
The Fund may invest up to 10% of its total assets in other investment companies
commonly referred to as "country funds." Such investments will involve the
payment of duplicative fees through the indirect payment of a portion of the
expenses, including advisory fees, of such other investment companies.
For a discussion of certain special risks and other considerations pertaining to
investments in foreign securities applicable to the Fund, see "OTHER INVESTMENT
PRACTICES, RISK CONSIDERATIONS, AND POLICIES OF THE FUNDS: Foreign Securities."
Such special risks are particularly relevant to investments in equity securities
issued by companies located in the Tiger countries.
Although the securities markets of the Tiger countries, especially China, have
grown and evolved rapidly over the last several years, political, legal,
economic and regulatory systems continue to lag behind those of more developed
countries. Accordingly, the risk that restrictions on repatriation of Fund
investments may be imposed unexpectedly or other limitations on the Fund's
ability to realize on its investments may be instituted are greater with respect
to investments in the Tiger countries.
Hong Kong. A substantial amount of the Fund's investments have been and may
continue to be in companies located in Hong Kong. Although Hong Kong has the
most developed securities markets of the Tiger countries, a substantial portion
of its economy is dependent on investments in or trade with China and other
less-developed Asian countries. Political and economic developments in those
countries could adversely impact the Fund's Hong Kong investments.
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As of July 1, 1997, sovereignty over Hong Kong will be transferred from Great
Britain to China and Hong Hong will become a Special Administrative Region of
China. In connection with this transfer, China has agreed to maintain for 50
years Hong Kong's current economic and social systems, as well as most of the
personal freedoms currently enjoyed by Hong Kong residents. Nevertheless, it is
impossible to predict with certainty the ultimate effect Chinese sovereignty
will have on Hong Kong's business environment. Further, uncertainty surrounding
the transfer could hurt the value of the Fund's investments or make them more
volatile in the short-run.
TRUST MANAGEMENT ORGANIZATIONS
The Trustees
The business of the Trust and the Funds is supervised by the Trust's Board of
Trustees. The Statement of Additional Information contains the names of and
biographical information on the Trustees.
The Manager: Keyport Advisory Services Corp. (KASC)
KASC, 125 High Street, Boston Massachusetts 02110, is the manager of the Trust.
KASC was incorporated on January 8, 1993 under the laws of the Commonwealth of
Massachusetts.
In accordance with its Management Agreements with the Trust, KASC designs and
supervises a continuous investment program for the Trust, evaluates, recommends,
and monitors Colonial's and Newport's performance, investment programs, and
compliance with applicable laws and regulations, and recommends to the Board of
Trustees whether Colonial's and Newport's respective contracts should be
continued or modified and whether a new sub-adviser or multiple sub-advisers
should be added or deleted. KASC is also responsible for administering the
Trust's operations, including the provision of office space and equipment in
connection with the maintenance of the Trust's headquarters, preparation and
filing of required reports, arrangements for Trustees' and shareholders'
meetings, maintenance of the Trust's corporate books and records, communications
with shareholders, and oversight of custodial, accounting and other services
provided to the Funds by others. In accordance with its Management Agreements
with the Trust, KASC may, at its own expense, delegate the performance of
certain of its administrative responsibilities to its affiliate LFC, or any of
LFC's majority-owned subsidiaries. KASC has delegated its administrative
responsibilities to Colonial in accordance with this authority. KASC, or its
affiliates, pay all compensation of the Trust's directors and officers who are
employees of KASC or its affiliates.
The Trust may add funds that utilize the investment advisory services of more
than one portfolio adviser, whereby each portfolio adviser is responsible for
specified portions of the Funds' investments. KASC will be responsible for the
selection and supervision of such advisers and the allocation of the portions of
the assets among such advisers.
The Trust pays KASC management fees, accrued daily and paid monthly, at the
following maximum annual rates of the average daily net assets of the specified
Fund.
C-K Growth and Income Fund 0.65%
C-K Utilities Fund 0.65%
C-K International Fund For Growth 0.90%
C-K U.S. Stock Fund 0.80%
C-K Strategic Income Fund 0.65%
N-K Tiger Fund 0.90%
The fee for the C-K U.S. Stock Fund is higher than most management fees for
funds with comparable investment objectives.
Sub-Advisers: Colonial Management Associates, Inc. (Colonial) and
Newport Fund Management, Inc. (Newport)
Colonial
Colonial, an investment adviser since 1931, is the Sub-Adviser of each of the
current Funds (other than N-K Tiger Fund). Colonial, whose principal business
address is One Financial Center, Boston, Massachusetts, 02111, is an indirect
wholly owned subsidiary of LFC.
KASC, out of the management fees it receives from the Trust, pays Colonial
sub-advisory fees at the following annual rates of the average daily net assets
of the specified Fund:
C-K Growth and Income Fund 0.45%
C-K Utilities Fund 0.45%
C-K International Fund For Growth 0.70%
C-K U.S. Stock Fund 0.60%
C-K Strategic Income Fund 0.45%
Under the Colonial Sub-Advisory Agreements, Colonial manages the assets of the
respective Funds in accordance with their investment objectives, investment
programs, policies, and restrictions under the supervision of KASC and the Board
of Trustees. Colonial determines which securities and other instruments are
purchased and sold for each Fund. Colonial also provides transfer agency and
certain pricing and record keeping services for the Funds under separate
agreements.
Mr. Daniel Rie, Senior Vice President, Colonial, and director of Colonial's
Equity Group, has managed the C-K Growth and Income Fund since its inception.
Mr. Rie manages The Colonial Fund, and has managed or co-managed various other
Colonial equity funds since 1986.
John E. Lennon has managed or co-managed the C-K Utilities Fund since its
inception. Mr. Lennon has been a Vice President of
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<PAGE>
Colonial since 1983 and has managed or co-managed the Colonial Utilities Fund
since 1984 and various other Colonial Funds since 1982.
Mark Stoeckle has managed the C-K U.S. Stock Fund since December, 1996. Mr.
Stoeckle is a Vice President of Colonial. He also manages the Colonial U.S.
Stock Fund. Prior to joining Colonial in 1996, Mr. Stoeckle was a portfolio
manager at Massachusetts Financial Services Company and an investment banker at
Bear, Stearns & Co., Inc.
Carl C. Ericson has managed the C-K Strategic Income Fund since its inception.
Mr. Ericson, a Senior Vice President of Colonial and director of Colonial's
Taxable Fixed Income Group, has managed the Colonial Strategic Income Fund since
1991 and various other Colonial taxable income funds since 1985.
Bruno Bertocci and David Harris, each of whom is jointly employed by Colonial
and Stein Roe & Farnham Incorporated (Stein Roe), an indirect wholly owned
subsidiary of LFC, have co-managed the C-K International Fund For Growth since
January 1, 1996. Prior to joining Stein Roe in May, 1995, each of Messrs.
Bertocci and Harris was employed by Rockefeller & Co., Inc., Mr. Bertocci as a
Managing Director and Mr. Harris as a Portfolio Manager.
Colonial utilizes the trading facilities of Stein Roe to place all orders for
the purchase and sale of portfolio securities, futures contracts and foreign
currencies for the C-K International Fund For Growth. In selecting
broker-dealers, Colonial may direct Stein Roe to consider research and brokerage
services furnished to Colonial.
Newport
Newport is the Sub-Advisor of the N-K Tiger Fund. Newport, whose principal
address is 580 California Street, Suite 1960, San Francisco, California 94104,
is an indirect wholly owned subsidiary of LFC.
KASC, out of the management fees it receives from the Trust, pays Newport a
sub-advisory fee at the annual rate of 0.70% of the average daily net assets of
the N-K Tiger Fund.
Under the Newport Sub-Advisory Agreement, Newport manages the assets of the Fund
in accordance with its investment objective, its investment program, policies,
and restrictions under the supervision of KASC and the Board of Trustees.
Newport determines which securities and other instruments are purchased and sold
for the Fund and obtains and evaluates certain financial data relevant to the
Fund, which it provides to KASC.
John M. Mussey and Thomas R. Tuttle, President and Senior Vice President,
respectively, of Newport, co-manage the Fund. Mr. Mussey has managed the
Colonial Newport Tiger Fund since 1989. (The Colonial Newport Tiger Fund is the
successor by merger to the Newport Tiger Fund, which commenced operations in
1989). Mr. Tuttle has co-managed the Colonial Newport Tiger Fund since November,
1995. Messrs. Mussey and Tuttle have been officers of Newport since 1984.
TRUST SERVICE ORGANIZATIONS
Underwriter: Keyport Financial Services Corp. (KFSC)
KFSC, 125 High Street, Boston, Massachusetts 02110, serves as principal
underwriter for the Trust pursuant to an Underwriting Agreement. KFSC is
registered as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc.
Custodians: Boston Safe Deposit and Trust Company and UMB, n.a.
Boston Safe Deposit and Trust Company, One Boston Place, Boston, Massachusetts
02109, is the custodian for each of the Funds other than the N-K Tiger Fund.
UMB, n.a., 928 Grand Ave., Kansas City, Missouri 64141, is the custodian for the
N-K Tiger Fund. Foreign securities are maintained in the custody of foreign
branches of U.S. banks, foreign banks and foreign trust companies that are
members of such banks' respective global custody networks or foreign
depositories used by such members.
Independent Accountants: Price Waterhouse LLP
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110 are the
Trust's independent accountants.
OTHER CONSIDERATIONS
Expenses of the Funds
The Funds generally will pay all their expenses, other than those borne by KASC,
Colonial and Newport. KASC has agreed to reimburse all expenses, including
management fees, but excluding interest, taxes, brokerage, and other expenses
which are capitalized in accordance with accepted accounting procedures, and
extraordinary expenses, incurred by (i) C-K Growth and Income Fund, C-K
Utilities Fund and C-K U.S. Stock Fund in excess of 1.00% of average net asset
value per annum, (ii) each of C-K International Fund For Growth and N-K Tiger
Fund in excess of 1.75% of average net asset value per annum and (iii) C-K
Strategic Income Fund in excess of 0.80% of average net asset value per annum,
in each case for the period beginning May 1, 1997 until April 30, 1998.
The expenses payable by the Funds include, among other things, the management
fees payable to KASC, described
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<PAGE>
above; fees for services of independent accountants; consultant fees; legal
fees; transfer agent, custodian and portfolio record keeping and tax information
services fees; fees for pricing and recordkeeping services, and of equipment for
communication among the Funds' custodian, KASC, Colonial, Newport and others;
taxes and fees for the preparation of the Funds' tax returns; brokerage fees and
commissions; interest; costs of Board of Trustees and shareholder meetings; cost
of updates and printing of prospectuses and reports to shareholders; fees for
filing reports with regulatory bodies and the maintenance of the Trust's
existence; membership dues for industry trade associations; fees to federal
authorities for the registration of the shares of the Funds; fees and expenses
of Trustees who are not directors, officers, employees or stockholders of KASC,
Colonial, Newport or their affiliates; insurance and fidelity bond premiums; and
other extraordinary expenses of a non-recurring nature.
It is the policy of the Trust that expenses directly charged or attributable to
any particular Fund will be paid from the assets of that Fund. General expenses
of the Trust will be allocated among and charged to the assets of each of the
Funds on a basis that the Board of Trustees deems fair and equitable, which may
be based on the relative assets of each Fund or the nature of the services
performed and their relative applicability to each Fund.
Purchases and Redemptions
The Participating Insurance Companies place daily orders to purchase and redeem
shares of each Fund based on, among other things, the net amount of purchase
payments to be invested and surrender and transfer requests to be effected on
that day pursuant to the VA contracts and VLI policies, including deductions for
fees and charges by the applicable insurance company separate account. The Trust
continuously offers and redeems shares at net asset value without the addition
of any selling commission, sales load or redemption charge. Shares are sold and
redeemed at their net asset value as next determined after receipt of purchase
payments or redemption requests, respectively, by the separate accounts.
Similarly, shares are sold or redeemed as a result of such other transactions
under the VA contracts and VLI policies at the net asset value computed for the
day on which such transactions are effected by the separate accounts. The right
of redemption may be suspended or payments postponed whenever permitted by
applicable law and regulations.
Investment Return
The total return from an investment in a Fund is measured by the distributions
received (assuming reinvestment of all distributions) plus or minus the change
in the net asset value per share for a given period. A total return percentage
is calculated by first dividing the value of a share at the end of the period
(including reinvestment of distributions) by the value of the share at the
beginning of the period and then subtracting 1.0. A Fund's average annual total
return is determined by computing the annual percentage change in value of a
$1,000 investment in such Fund for a specified period, assuming reinvestment of
all dividends and distributions.
Performance information describes a Fund's performance for the period shown and
does not predict future performance. Comparison of a Fund's yield or total
return with those of alternative investments should consider differences between
the Fund and the alternative investments. A Fund's investment performance
figures do not reflect the cost of insurance and the separate account fees and
charges which vary with the VA contracts and VLI policies offered through the
separate accounts of the Participating Insurance Companies, and which will
decrease the return realized by a contract or policyholder.
Net Asset Value
The initial net asset value of each Fund (other than C-K International Fund For
Growth and N-K Tiger Fund) at the commencement of operations was established at
$10.00. The initial net asset value of each of C-K International Fund For Growth
and N-K Tiger Fund was established at $2.00. The net asset value per share of
each Fund is determined as of the close of regular trading on the New York Stock
Exchange ("NYSE") (currently 4:00 p.m., New York time). Net asset value per
share is calculated for each Fund by dividing the current market value of total
portfolio assets, less all liabilities (including accrued expenses), by the
total number of shares outstanding. Net asset value is determined on each day
when the NYSE is open, except on such days in which no order to purchase or
redeem shares is received. The NYSE is scheduled to be open Monday through
Friday throughout the year except for certain federal and other holidays.
All assets denominated in foreign currencies are converted to U.S. dollars. The
books and records of the Trust are recorded in U.S. dollars.
Fund securities are valued based on market quotations or, if such quotations are
not available, at fair market value determined in good faith under procedures
established by the Board of Trustees. Investments maturing in 60 days or less
are valued at amortized cost.
Distributions
Each Fund intends to declare and distribute, as dividends or capital gains
distributions, at least annually, substantially all of its net investment income
and net profits realized from the sale of portfolio securities, if any, to its
shareholders (Participating
15
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Insurance Companies' separate accounts). The net investment income of each Fund
consists of all dividends or interest received by such Fund, less estimated
expenses (including the advisory and administrative fees). Income dividends will
be declared and distributed annually in the case of each Fund. All net
short-term and long-term capital gains of each Fund, net of carry-forward
losses, if any, realized during the fiscal year, are declared and distributed
periodically, no less frequently than annually. All dividends and distributions
are reinvested in additional shares of the Fund at net asset value, as of the
record date for the distributions.
Taxes
Each Fund intends to elect to be treated and to qualify as a "regulated
investment company" under Subchapter M of the Code. As a result of such
election, for any tax year in which a Fund meets the investment limitations and
the distribution, diversification and other requirements referred to below, to
the extent a Fund distributes its taxable net investment income and its net
realized long-term and short-term capital gains, that Fund will not be subject
to federal income tax, and the income of the Fund will be treated as the income
of its shareholders. Under current law, since the shareholders are life
insurance company "segregated asset accounts," they will not be subject to
income tax currently on this income to the extent such income is applied to
increase the values of VA contracts and VLI policies.
Among the conditions for qualification and avoidance of taxation at the Trust
level, Subchapter M imposes investment limitations, distribution requirements,
and requirements relating to the diversification of investments. The
requirements of Subchapter M may affect the investments made by each Fund. Any
of the applicable diversification requirements could require a sale of assets of
a Fund that would affect the net asset value of the Fund.
In addition, the Tax Reform Act of 1986 made certain changes to the tax
treatment of regulated investment companies, including the imposition of a
nondeductible 4% excise tax on certain undistributed amounts. To avoid this tax,
each Fund must declare and distribute to its shareholders by the end of each
calendar year at least 98% of ordinary income earned during that calendar year
and at least 98% of capital gain net income, net of carry-forward losses, if
any, realized for the twelve-month period ending October 31 of that year, plus
any remaining undistributed income from the prior year.
Pursuant to the requirements of Section 817(h) of the Code, the only
shareholders of the Trust and its Funds will be Participating Insurance
Companies and their separate accounts that fund VA contracts, VLI policies and
other variable insurance contracts and retirement plans. The prospectus that
describes a particular VA contract or VLI policy discusses the taxation of both
separate accounts and the owner of such contract or policy.
Each Fund intends to comply with the requirements of Section 817(h) of the Code
and the related regulations issued thereunder by the Treasury Department. These
provisions impose certain diversification requirements affecting the securities
in which the Funds may invest and other limitations. The diversification
requirements of Section 817(h) of the Code are in addition to the
diversification requirements under Subchapter M and the Investment Company Act
of 1940. The consequences of failure to meet the requirements of Section 817(h)
could result in taxation of the Participating Insurance Company offering the VA
contracts and VLI policies and immediate taxation of all owners of the contracts
and policies to the extent of appreciation on investment under the contracts.
The Trust believes it is in compliance with these requirements.
The Secretary of the Treasury may issue additional rulings or regulations that
will prescribe the circumstances in which a variable insurance contract owner's
control of the investments of a segregated asset account may cause such owner,
rather than the insurance company, to be treated as an owner of the assets of a
segregated asset account. It is expected that such regulations would have
prospective application. However, if a ruling or regulation were not considered
to set forth a new position, the ruling or regulation could have retroactive
effect.
The Trust therefore may find it necessary, and reserves the right to take action
to assure, that a VA contract or VLI policy continues to qualify as an annuity
or insurance contract under federal tax laws. The Trust, for example, may be
required to alter the investment objectives of any Fund or substitute the shares
of one Fund for those of another. No such change of investment objectives or
substitution of securities will take place without notice to the contract and
policy owners with interests invested in the affected Fund and without prior
approval of the Securities and Exchange Commission, or the approval of a
majority of such owners, to the extent legally required.
To the extent a Fund invests in foreign securities, investment income received
by the Fund from sources within foreign countries may be subject to foreign
income taxes withheld at the source. The United States has entered into tax
treaties with many foreign countries which entitle a Fund to a reduced tax or
exemption from tax on such income.
Gains and losses from foreign currency dispositions, foreign-currency
denominated debt securities and payables or receivables, and foreign currency
forward contracts are subject to special tax rules that generally cause them to
be recharacterized as ordinary income and losses, and may affect the timing and
amount of the Fund's recognition of income, gain or loss.
In order to avoid adverse tax consequences, a Fund may be required to limit its
equity investments in non-U.S. corporations that are treated as "passive foreign
investment companies" under the Code. C-K International Fund For Growth,
however, does invest in such entities. See "PASSIVE FOREIGN INVESTMENT
COMPANIES" in the Statement of Additional Information.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of a Fund's assets, if any, to be invested
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within various countries will fluctuate and the extent to which tax refunds will
be recovered is uncertain. The Funds intend to operate so as to qualify for
treaty-reduced tax rates where applicable.
The preceding is a brief summary of some relevant tax considerations. This
discussion is not intended as a complete explanation or a substitute for careful
tax planning and consultation with individual tax advisers.
Shareholder Communications
Owners of VA contracts and VLI policies, issued by the Participating Insurance
Companies or for which shares of one or more Funds are the investment vehicles,
receive from the Participating Insurance Company unaudited semi-annual financial
statements and audited year-end financial statements of such Funds certified by
the Trust's independent auditors. Each report shows the investments owned by
each Fund and provides other information about the Trust and its operations.
Copies of such reports may be obtained from the Participating Insurance Company
or the Secretary of the Trust.
Organization, Meetings, and Voting Rights
The Trust is organized as a Massachusetts business trust under an Agreement and
Declaration of Trust ("Declaration of Trust") dated March 4, 1993. The
Declaration of Trust may be amended by a vote of either the Trust's shareholders
or the Board of Trustees. The Trust is authorized to issue an unlimited number
of shares of beneficial interest without par value, in one or more series as the
Board of Trustees may authorize. Each Fund is a separate series of the Trust.
Each share of a Fund is entitled to participate pro rata in any dividends and
other distributions declared by the Board of Trustees with respect to that Fund,
and all shares of a Fund have equal rights in the event of liquidation of that
Fund.
The Trust is not required to hold annual meetings and does not intend to do so.
However, special meetings may be called for purposes such as electing Trustees
or approving an amendment to an advisory contract. Shareholders receive one vote
for each Fund share. Shares of the Trust vote together except when required to
vote separately by Fund. Shareholders have the power to remove Trustees and to
call meetings to consider removal.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims liability of the
shareholders, the Trustees, or officers of the Trust for acts or obligations of
the Trust, which are binding only on the assets and property of the Trust (or
the applicable Fund thereof) and requires that notice of such disclaimer be
given in each agreement, obligation, or contract entered into or executed by the
Trust or the Board. The Declaration of Trust provides for indemnification out of
the Trust's assets (or the applicable Fund) for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is believed to be remote because it is limited to circumstances in
which the disclaimer is inoperative and the Trust itself is unable to meet its
obligations. The risk to any one Fund of sustaining a loss on account of
liabilities incurred by another Fund also is believed to be remote.
Additional Information
This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Trust with the Securities and
Exchange Commission under the Securities Act of 1933. Copies of the Registration
Statement may be obtained from the Commission or may be examined at the office
of the Commission in Washington, D.C.
OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS, AND POLICIES OF THE FUNDS
A number of the investment policies and techniques referred to below are subject
to certain additional risks described more fully in the Statement of Additional
Information.
Short-Term Trading
In seeking each Fund's objective, Colonial (or Newport, in the case of The N-K
Tiger Fund) will buy or sell portfolio securities whenever it believes it is
appropriate. The decisions of Colonial or Newport will not generally be
influenced by how long the Fund may have owned the security. A Fund may buy
securities intending to seek short-term trading profits, subject to limitations
imposed by the Code. A change in the securities held by a Fund is known as
"portfolio turnover" and generally involves some expense to the Fund. These
expenses may include brokerage commissions or dealer mark-ups, custodian fees
and other transaction costs on both the sale of securities and the reinvestment
of the proceeds in other securities. If sales of portfolio securities cause a
Fund to realize net short-term capital gains, such gains will be taxable as
ordinary income.
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As a result of a Fund's investment policies, under certain market conditions, a
Fund's portfolio turnover rate may be higher than that of other mutual funds.
Portfolio turnover rate for a fiscal year is the ratio of the lesser of
purchases or sales of portfolio securities to the monthly average of the value
of portfolio securities, excluding securities whose maturities at acquisition
were one year or less. A 100% turnover rate would occur if all of the securities
in the portfolio were sold and either repurchased or replaced within one year.
Although the Funds cannot predict portfolio turnover rate, it is estimated that,
under normal circumstances, the annual rate for each Fund will be no greater
than 100%. C-K Utilities Fund and C-K International Fund For Growth may have a
higher rate of turnover than the other Funds or alternative investment funds
because of the flexibility of their investment policies permitting shifts
between different types of investments and the use of aggressive strategies and
investments. The portfolio turnover rates of the Funds for the period ended
December 31, 1996 are shown under "FINANCIAL HIGHLIGHTS" above. A Fund's
portfolio turnover rate is not a limiting factor when Colonial or Newport
considers a change in the Fund's portfolio.
Certain Investment Considerations Pertaining to Government Debt Securities
Each of C-K Growth and Income Fund and C-K Strategic Income Fund may, as part of
its normal investment program, invest in U.S. Government Securities. Similarly,
each of C-K International Fund for Growth and C-K Strategic Income Fund may, as
part of its normal investment program, invest in foreign government debt
securities.
While U.S. Government Securities are considered virtually free of default risk,
their values nevertheless generally fluctuate inversely with changes in interest
rates. Further, U.S. Government Securities consisting of mortgage-backed
securities, CMOs or REMICs may decline in value more substantially than
comparable maturity treasury securities given an interest rate increase, but may
not increase in value as much given an interest rate decline. See
"Mortgage-Backed Securities" and "Collateralized Mortgage Obligations (CMOs) and
Real Estate Mortgage Investment Conduits (REMICs)" below.
The values of foreign government debt securities generally fluctuate inversely
with changes in interest rates in the countries where the securities are issued.
Foreign government debt securities are also subject generally to the additional
special risks and other considerations pertaining to investments in foreign
securities discussed below under "Foreign Securities."
Cash Reserves and Repurchase Agreements
Each of the Funds may invest temporarily available cash in U.S. dollar
denominated money market instruments. N-K Tiger Fund also may purchase foreign
currency denominated instruments. Such money market instruments will be limited
to high-quality securities rated within the two highest credit categories by any
nationally recognized securities rating organization or, if not rated, of
comparable investment quality as determined by Colonial or Newport. Such
domestic money market instruments may include: U.S. Government securities;
certificates of deposit; bankers' acceptances; bank time deposits; commercial
paper; short-term corporate debt securities; and repurchase agreements with a
securities dealer or bank. In these repurchase transactions, the underlying
security, which is held by the custodian through the federal book-entry system
for a Fund as collateral, will be marked to market on a daily basis to ensure
full collateralization of the repurchase agreement. In the event of a bankruptcy
or default of certain sellers of repurchase agreements, a Fund could experience
costs and delays in liquidating the underlying security and might incur a loss
if such collateral held declines in value during this period. Not more than 15%
of a Fund's total assets will be invested in repurchase agreements maturing in
more than seven days and other illiquid assets.
Forward Commitments and When-Issued Securities; Dollar Roll Transactions
Each of C-K Growth and Income Fund, C-K Utilities Fund and C-K Strategic Income
Fund may purchase securities on a when-issued, delayed delivery, or forward
commitment basis. When such transactions are negotiated, the price of such
securities is fixed at the time of the commitment, but delivery and payment for
the securities may take place up to 120 days after the date of the commitment to
purchase. The securities so purchased are subject to market fluctuation, and no
interest accrues to the purchaser during this period. When-issued securities or
forward commitments involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date. Colonial does not believe that
the net asset value or income of the Funds will be adversely affected by the
purchase of securities on a when-issued or forward commitment basis. The Funds
will not enter into such transactions for leverage (borrowing) purposes.
C-K Strategic Income Fund may enter into dollar roll transactions. A dollar roll
transaction involves a sale by the Fund of securities that it holds with an
agreement by the Fund to repurchase substantially similar securities at an
agreed upon price and date. During the period between the sale and repurchase,
the Fund will not be entitled to accrue interest and receive principal payments
on the securities sold. Dollar roll transactions involve the risk that the
market value of the securities sold by the Fund may decline below the repurchase
price of those securities. In the event the buyer of securities under a dollar
roll transaction files for bankruptcy or becomes insolvent, the Fund's use of
proceeds of the transaction may be restricted pending a determination by or with
respect to the other party.
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Foreign Securities
N-K Tiger Fund normally will remain fully invested in equity securities of
companies located in the Tiger countries. C-K International Fund For Growth
normally invests primarily in foreign securities. Investments in foreign
securities include sovereign risks and risks pertaining to the local economy in
the country or countries in which the foreign issuer conducts business. C-K
Strategic Income Fund may invest any portion of its assets in securities issued
or guaranteed by foreign governments. C-K Growth and Income Fund also may invest
in foreign securities. Investments in foreign securities also involve certain
risks that are not typically associated with investing in domestic issuers,
including: (i) foreign securities traded for foreign currencies and/or
denominated in foreign currencies may be affected favorably or unfavorably by
changes in currency exchange rates and exchange control regulations, and the
Fund may incur costs in connection with conversions between various currencies;
(ii) less publicly available information about the securities and about the
foreign company or government issuing them; (iii) less comprehensive accounting,
auditing, and financial reporting standards, practices, and requirements; (iv)
securities markets outside the United States may be less developed or efficient
than those in the United States and government supervision and regulation of
those securities markets and brokers and the issuers in those markets is less
comprehensive than that in the United States; (v) the securities of some foreign
issuers may be less liquid and more volatile than securities of comparable
domestic issuers; (vi) settlement of transactions with respect to foreign
securities may sometimes be delayed beyond periods customary in the United
States; (vii) fixed brokerage commissions on certain foreign securities
exchanges and custodial costs with respect to securities of foreign issuers
generally exceed domestic costs; and (viii) with respect to some countries,
there is the possibility of unfavorable changes in investment or exchange
control regulations, expropriation, or confiscatory taxation, taxation at the
source of the income payment or dividend distribution, difficulties in enforcing
judgements, limitations on the removal of funds or other assets of the Fund,
political or social instability, or diplomatic developments that could adversely
affect United States investments in those countries.
C-K International Fund For Growth's investments in foreign securities may
include investments in countries whose economies or securities markets are not
yet highly developed. Special risks associated with these investments (in
addition to the considerations regarding foreign investments generally) may
include, among others, greater political uncertainties, an economy's dependence
on revenues from particular commodities or on international aid or development
assistance, currency transfer restrictions, highly limited numbers of potential
buyers for such securities and delays and disruptions in securities settlement
procedures. See "DESCRIPTION OF CERTAIN INVESTMENTS: Investments in Less
Developed Countries" in the Statement of Additional Information for a list of
the countries whose economies or securities markets currently are considered by
Colonial not to be highly developed. Normally no more than 40% of the Fund's
assets will be invested in such securities.
Foreign Currency Transactions. Transactions in foreign securities include
currency conversion costs. N-K Tiger Fund, C-K International Fund For Growth,
C-K Strategic Income Fund and C-K Growth and Income Fund may engage in currency
exchange transactions to convert currencies to or from U.S. dollars. These Funds
may purchase foreign currencies on a spot or forward basis. Such transactions
will be entered into (i) to lock in a particular foreign exchange rate pending
settlement of a purchase or sale of a foreign security or pending the receipt of
interest, principal or dividend payments on a foreign security held by the
Funds, or (ii) to hedge against a decline in the value, in U.S. dollars or in
another currency, of a foreign currency in which securities held by the Fund are
denominated.
C-K International Fund For Growth and C-K Strategic Income Fund also may buy and
sell currency futures contracts and options thereon for such hedging purposes.
C-K Strategic Income Fund also may buy or sell options on currencies for hedging
purposes.
The Funds will not attempt, nor would they be able, to eliminate all foreign
currency risk. The precise matching of foreign currency exchange transactions
and the portfolio securities will not generally be possible since the future
value of such securities in foreign currencies will change as a consequence of
market movements which cannot be precisely forecast. Currency hedging does not
eliminate fluctuations in the underlying prices of securities, but rather
establishes a rate of exchange at some future point in time. Although hedging
may lessen the risk of loss due to a decline in the value of the hedged
currency, it tends to limit potential gain from increases in currency values.
The purchase and sale of foreign currencies on a forward basis and the purchase
and sale of currency futures contracts and options thereon may present
additional risks associated with the use of leverage. Leverage may magnify the
effect of fluctuations in the values of the Fund's portfolio securities
underlying these transactions. In accordance with Securities and Exchange
Commission pronouncements, to reduce (but not necessarily eliminate) leverage, a
Fund will either "cover" its obligations under such transactions by holding the
currency (or rights to acquire the currency) it is obligated to deliver under
such contracts, or deposit and maintain in a segregated account with its
custodian high quality liquid debt securities, or equity securities denominated
in the particular currency, equal in value to the Fund's obligations under such
contracts.
ADRs. With respect to equity securities, each of N-K Tiger Fund, C-K
International Fund For Growth, C-K Growth and Income Fund and C-K U.S. Stock
Fund may purchase American Depositary Receipts ("ADRs"). ADRs are U.S. dollar-
denominated certificates issued by a United States bank or trust company
representing the right to receive securities of a foreign
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issuer deposited in a domestic bank or foreign branch of that bank or a
corresponding bank and traded on a United States exchange or in an
over-the-counter market. Generally, ADRs are in registered form. There are no
fees imposed on the purchase or sale of ADRs when purchased from the issuing
bank or trust company in the initial underwriting, although the issuing bank or
trust company may impose charges for the collection of dividends and the
conversion of ADRs into the underlying securities. Investment in ADRs has
certain advantages over direct investment in the underlying foreign securities
since: (i) ADRs are U.S. dollar-denominated investments that are registered
domestically, easily transferable and for which market quotations are readily
available; and (ii) issuers whose securities are represented by ADRs are subject
to the same auditing, accounting, and financial reporting standards as domestic
issuers. Investments in ADRs, however, are otherwise subject to the same general
considerations and risks pertaining to foreign securities described above.
See "DESCRIPTION OF CERTAIN INVESTMENTS: Investments in Less Developed
Countries;" "Foreign Currency Transactions;" "Forward Currency and Futures
Contracts;" "Currency Options;" "Settlement Procedures;" "Foreign Currency
Conversion;" and "Passive Foreign Investment Companies" in the Statement of
Additional Information for more information about foreign investments.
Mortgage-Backed Securities
C-K Strategic Income Fund and C-K Growth and Income Fund may invest in
mortgage-backed securities, which are securities representing interests in pools
of mortgages. Principal and interest payments made on the mortgages in the pools
are passed through to the holder of such securities. Payment of principal and
interest on some mortgage-backed securities (but not the market value of the
securities themselves) may be guaranteed by the full faith and credit of the
U.S. Government (in the case of securities guaranteed by GNMA), or guaranteed by
agencies or instrumentalities of the U.S. Government (in the case of securities
guaranteed by the FNMA or FHLMC). Mortgage-backed securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers, and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit, which may be issued by governmental entities, private
insurers, or the mortgage poolers. The Fund will only invest in mortgage-
backed securities that are issued or guaranteed by governmental entities.
Unscheduled or early repayment of principal on mortgage-backed securities
(arising from prepayment of principal due to the sale of the underlying
property, refinancing, or foreclosure, net of fees and costs which may be
incurred) may expose the Fund to a lower rate of return upon reinvestment of
principal. The Fund may only be able to invest prepaid principal at lower
yields. The prepayment of securities purchased at a premium may result in losses
equal to the premium. Like other fixed-income securities, when interest rates
rise, the value of a mortgage-related security generally will decline; however,
when interest rates are declining, the value of mortgage-related securities with
prepayment features may not increase as much as other fixed-income securities.
This is because the mortgages underlying the securities can be prepaid, and
prepayment rates tend to increase as interest rates decline (effectively
shortening the mortgage-backed security's maturity) and decrease as interest
rates rise (effectively lengthening the mortgage-backed security's maturity).
C-K Strategic Income Fund also may invest in certificates representing undivided
interests in the interest or principal of mortgage-backed securities (interest
only/principal only securities). These securities tend to be more volatile than
other types of debt securities. The interest only class involves the risk of
loss of the entire value of the investment if the underlying mortgages are
prepaid. In the case of principal only class securities, the Fund recognizes
(accrues) as income for accounting purposes a portion of the difference between
purchase price and face value. Because the Fund includes this accrued income in
calculating its dividend even though it has not received payment, the Fund may
have to sell other investments to obtain cash needed to make income
distributions.
Collateralized Mortgage Obligations (CMOs)
and Real Estate Mortgage Investment Conduits (REMICs)
C-K Strategic Income Fund and C-K Growth and Income Fund may invest in CMOs and
REMICs of investments grade or considered by Colonial to be of comparable
quality. CMOs and REMICs are debt securities issued by special-purpose trusts
collateralized by underlying mortgage loans or pools of mortgage-backed
securities guaranteed by GNMA, FHLMC, or FNMA. CMOs and REMICs may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in mortgage loans, including depository institutions, mortgage
banks, investment banks and special-purpose subsidiaries of the foregoing.
CMOs and REMICs are not, however, "mortgage pass-through" securities, such as
those described above under "Mortgage-Backed Securities." Rather they are
pay-through securities, i.e., securities backed by the cash flow from the
underlying mortgages. Investors in CMOs and REMICs are not owners of the
underlying mortgages, which serve as collateral for such debt securities, but
are simply owners of a fixed-income security backed by such pledged assets. CMOs
and REMICs typically are structured into multiple classes, with each class
bearing a different stated maturity and having different payment streams. One
class (the Residual) is in the nature of equity. The Fund will
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not invest in the Residual class. Although the structures of CMOs and REMICs
vary greatly, monthly payments of principal, including prepayments, typically
are first returned to the investors holding the shortest maturity class;
investors holding longer maturity classes typically receive principal payments
only after the shorter class or classes have been retired. The Fund may
experience costs and delays in liquidating the collateral if the issuer defaults
or enters bankruptcy and may incur a loss. Principal on a REMIC, CMO or other
mortgage-backed security may be prepaid if the underlying mortgages are prepaid.
Because of the prepayment feature these investments may not increase in value
when interest rates fall. The Fund may be able to invest prepaid principal only
at lower yields. The prepayment of REMICs, CMOs or other mortgage-backed
securities purchased at a premium may result in losses equal to the premium.
Zero-Coupon Bonds
C-K Strategic Income Fund may invest in zero-coupon bonds. Such bonds may be
issued directly by agencies and instrumentalities of the U.S. Government or by
private corporations. Zero-coupon bonds may originate as such or may be created
by stripping an outstanding bond. Zero-coupon bonds do not make regular interest
payments. Instead, they are sold at a deep discount from their face value.
Because a zero-coupon bond does not pay current income, its price can be very
volatile when interest rates change. In calculating its dividend, the Fund takes
into account as income a portion of the difference between a zero-coupon bond's
purchase price and its face value. Thus, the Fund may have to sell other
investments to obtain cash needed to make income distributions.
High Yield, High Risk Bonds
C-K Strategic Income Fund may invest a significant portion of its assets in
lower rated bonds (commonly referred to as "junk bonds") which are regarded as
speculative as to payment of principal and interest. Relative to comparable
securities of higher quality:
1. The market price is likely to be more volatile because:
a. an economic downturn or increased interest rates may have a more
significant effect on the yield, price and potential for default;
b. the secondary market may at times become less liquid or respond to
adverse publicity or investor perceptions, increasing the difficulty in
valuing or disposing of the bonds;
c. existing or future legislation limits and may further limit (i)
investment by certain institutions and (ii) tax deductibility of the
interest by the issuer, which may adversely affect value; and
d. certain high yield, high risk bonds do not pay interest in cash on a
current basis. However, the Fund will accrue and distribute this
interest on a current basis, and may have to sell securities to generate
cash for distributions.
2. The Fund's achievement of its investment objectives in respect of
investments in high yield, high risk bonds is more dependent on Colonial's
credit analysis.
3. High yield, high risk bonds are less sensitive to interest rate changes but
are more sensitive to adverse economic developments.
Foreign Stock Index Futures
C-K International Fund For Growth may purchase futures contracts on foreign
stock indexes (index futures). Under an index future, the Fund will either
receive or pay cash on a specified maturity date, based on the value of a
specified stock index on that date. The Fund may also seek to "close out" an
index futures position before the maturity date, realizing either a gain or a
loss, by entering into an offsetting transaction on a futures exchange. The Fund
may invest in index futures to invest cash temporarily pending investment in
stocks, but not to hedge against market declines.
Writing Covered Call Options and
Purchasing Covered Put Options on Securities
C-K Utilities Fund may write covered call options and purchase put options on
stocks to hedge. A call option gives the purchaser the right to buy from the
Fund, and a put option gives the Fund the right to sell to the seller of the
put, a specified security at the exercise price at any time prior to the
expiration of the contract. The Fund will receive a premium from writing a call
option which increases its return on the underlying security if the option
expires or is closed out at a profit. Written calls may obligate the Fund to
sell the underlying security at a below market price. The Fund will pay a
premium for a put option, which will represent a loss to the Fund if the option
expires unexercised. Both are exercisable at any time prior to expiration.
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Interest Rate Futures
C-K Strategic Income Fund may engage in transactions involving interest rate
futures contracts and options thereon to hedge against changes in interest
rates. See "DESCRIPTION OF CERTAIN INVESTMENTS: Futures Contracts and Related
Options" in the Statement of Additional Information. The Fund will engage in
such activities only with respect to securities it may otherwise purchase or
indices composed of such securities. The Fund will enter into such futures
contracts only when, in compliance with the requirements of the Securities and
Exchange Commission, cash or high quality liquid debt securities equal in value
to the commodity value (less any applicable margin deposits) have been deposited
in a segregated account of the Fund's custodian.
Certain Policies to Reduce Risk
Each Fund has adopted certain fundamental investment policies in managing its
portfolio that are designed to maintain the portfolio's diversity and reduce
risk. Each Fund will not: (i) with respect to 75% of each Fund's total assets,
invest in more than 10% of the outstanding voting securities of any one issuer
or invest more than 5% of its total assets in the securities of any one issuer;
or (ii) borrow money except temporarily from banks to facilitate redemption
requests that might otherwise require untimely disposition of portfolio
securities and in amounts not exceeding 10% of each Fund's total assets.
Limitation (i) does not apply to the C-K International Fund For Growth or, in
the case of the other Funds, to U.S. Government Securities. The investment
policies described above in this paragraph are fundamental and may be changed
for a Fund only by approval of that Fund's shareholders.
It is the policy of each Fund that when Colonial (or Newport, as the case may
be) deems a temporary defensive position advisable, the Fund may invest, without
limitation (i.e., up to 100% of its assets), in high-quality fixed-income
securities, or hold assets in cash or cash equivalents, to the extent Colonial
(or Newport, as the case may be) believes such alternative investments to be
less risky than those securities in which the Fund normally invests.
Additional investment restrictions are set forth in the Statement of Additional
Information.
CHANGES TO INVESTMENT OBJECTIVES AND NON-FUNDAMENTAL POLICIES
The Funds may not always achieve their investment objectives. The Funds
investment objectives and nonfundamental policies may be changed without
shareholder approval. The holders of VA Contracts and VLI Policies will be
notified at least thirty days prior to any material change in a Fund's
investment objective. A Fund's fundamental investment policies listed in the
Statement of Additional Information cannot be changed without shareholder
majority approval.
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APPENDIX A
Description of Bond Ratings
The ratings of certain debt instruments in which one or more of the Funds may
invest are described below:
Standard and Poor's Corporation--Bond Ratings
AAA bonds have the highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA bonds have a very strong capacity to pay interest and repay principal, and
they differ from AAA only in small degree.
A bonds have a strong capacity to pay interest and repay principal, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB bonds are regarded as having an adequate capacity to pay interest and repay
principal. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal than for bonds in the A
category.
BB, B, CCC and CC bonds are 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
CC the highest degree. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or large
exposures to adverse conditions.
C ratings are reserved for income bonds on which no interest is being paid.
D bonds are in default, and payment of interest and/or principal is in arrears.
Plus (+) or minus (-) are modifiers relative to the standing within the major
rating categories.
Moody's Investors Service, Inc.--Bond Ratings
Aaa bonds are judged to be of 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 by an exceptionally stable margin and
principal is secure. While various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa bonds are judged to be of high quality by all standards. Together with Aaa
bonds 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 securities 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 securities. Those bonds in the Aa through B
groups which Moody's believes possess the strongest investment attributes are
designated by the symbol Aa1, A1 and Baa1.
A bonds 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 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 are judged to have speculative elements; their future cannot be
considered as well secured. 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 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 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 represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings.
C bonds are the lowest rated class of bonds and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
A-1
<PAGE>
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<PAGE>
APPENDIX B
C-K Strategic Income Fund -- Schedule of Portfolio Asset
Composition by Rating For 1996
Month
--------------------------------------------------------------
Rating January February March April May June
---------- ----------- -------- -------- ---------- ----------
(percentage of portfolio)
--------------------------------------------------------------
Aaa/AAA 44.0% 45.8% 41.7% 44.7% 40.7% 40.0%
Aa/AA ... 8.3% 8.1% 8.5% 8.6% 13.0% 13.1%
A/A ...... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Baa/BBB 1.8% 1.7% 1.7% 0.0% 0.0% 0.0%
Ba/BB ... 11.1% 10.6% 10.8% 11.1% 10.2% 9.5%
B/B ...... 32.8% 31.7% 34.4% 32.9% 33.4% 34.1%
Caa/CCC 2.0% 2.0% 2.8% 2.7% 2.7% 3.4%
Ca/CC ... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
C ...... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
D ...... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unrated 0.0% 1.4% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------ ------
Total ... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
Month
-------------------------------------------------------------------
Rating July August September October November December
---------- --------- ------------ ---------- ----------- ----------
(percentage of portfolio)
-------------------------------------------------------------------
Aaa/AAA 44.1% 41.3% 38.7% 34.3% 36.3% 37.0%
Aa/AA ... 11.9% 16.3% 19.1% 19.5% 19.4% 19.0%
A/A ...... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Baa/BBB 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Ba/BB ... 9.8% 9.4% 8.9% 9.4% 9.9% 9.6%
B/B ...... 30.8% 29.9% 30.3% 33.9% 30.4% 30.4%
Caa/CCC 3.3% 3.1% 3.0% 3.0% 4.0% 4.0%
Ca/CC ... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
C ...... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
D ...... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unrated 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------ ------
Total ... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ====== ======
1996
Rating (percentage of portfolio)
---------------------------
Aaa/AAA ...... 40.7%
Aa/AA ......... 13.7%
A/A ......... 0.0%
Baa/BBB ...... 0.4%
Ba/BB ......... 10.0%
B/B ......... 32.1%
Caa/CCC ...... 3.0%
Ca/CC ......... 0.0%
C ............ 0.0%
D ............ 0.0%
Unrated ...... 0.0%
------
Total ......... 100.0%
======
B-1
<PAGE>
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<PAGE>
KEYPORT VARIABLE INVESTMENT TRUST
Federal Reserve Plaza, 600 Atlantic Avenue
Boston, Massachusetts 02210
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1997
The Statement of Additional Information ("SAI") is not a Prospectus,
but should be read in conjunction with the Trust's Prospectus, dated May 1, 1997
and any supplement thereto, which may be obtained at no charge by calling
Keyport Financial Services Corp. at (800) 437-4466, or by contacting the
applicable Participating Insurance Company, or the broker-dealers offering
certain variable annuity contracts or variable life insurance policies issued by
the Participating Insurance Company.
The date of this SAI is May 1, 1997.
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
INVESTMENT MANAGEMENT AND OTHER SERVICES ...... S-3
General .............................. S-3
KASC's Responsibilities .............. S-4
Trust Charges and Expenses ........... S-4
INVESTMENT RESTRICTIONS ....................... S-6
C-K Growth and Income Fund ........... S-6
C-K Utilities Fund ................... S-7
C-K International Fund For Growth .... S-8
C-K U.S. Stock Fund .................. S-10
C-K Strategic Income Fund ............ S-12
N-K Tiger Fund ....................... S-13
MORE FACTS ABOUT TRUST ........................ S-14
Mixed and Shared Funding ............. S-14
Organization ......................... S-15
Trustees and Officers ................ S-16
Principal Holders of Securities ...... S-18
Custodians ........................... S-19
OTHER CONSIDERATIONS .......................... S-19
Portfolio Turnover ................... S-19
Suspension of Redemptions ............ S-20
Valuation of Securities .............. S-20
Portfolio Transactions ............... S-21
DESCRIPTION OF CERTAIN INVESTMENTS ............ S-23
Money Market Instruments ............. S-24
Investments in Less Developed Countries S-26
Foreign Currency Transactions ........ S-27
Options on Securities ................ S-31
Futures Contracts and Related Options S-31
Passive Foreign Investment Companies . S-34
Securities Loans ..................... S-34
INVESTMENT PERFORMANCE ........................ S-34
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENT S-36
S-2
<PAGE>
Keyport Variable Investment Trust (the "Trust"), a Massachusetts
business trust, is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company. The Trust currently offers
six Funds: Colonial-Keyport Growth and Income Fund ("C-K Growth and Income
Fund"); Colonial-Keyport Utilities Fund ("C-K Utilities Fund"); Colonial-Keyport
International Fund For Growth ("C-K International Fund For Growth");
Colonial-Keyport U.S. Stock Fund ("C-K U.S. Stock Fund"); Colonial-Keyport
Strategic Income Fund ("C-K Strategic Income Fund"); and Newport-Keyport Tiger
Fund ("N-K Tiger Fund"). The Trust may add or delete Funds from time to time.
The Trust commenced operations on July 1, 1993.
INVESTMENT MANAGEMENT AND OTHER SERVICES
General
Keyport Advisory Services Corp. ("KASC") serves as Manager pursuant to
three investment advisory agreements between the Trust on behalf of one or more
of the Funds and KASC (the "Management Agreements"). KASC is a direct
wholly-owned subsidiary of Keyport Life Insurance Company ("Keyport"), which is
an indirect wholly-owned subsidiary of Liberty Financial Companies, Inc.
("LFC"). As of March 31, 1997, approximately 80.6% of the combined voting power
of LFC's outstanding voting stock was owned, indirectly, by Liberty Mutual
Insurance Company ("Liberty Mutual").
KASC and the Trust, on behalf of each Fund (other than N-K Tiger Fund),
have entered into a separate Sub-Advisory Agreement ("Colonial Sub-Advisory
Agreements") with Colonial Management Associates, Inc. ("Colonial"). Colonial is
an indirect wholly owned subsidiary of LFC.
KASC and the Trust, on behalf of the N-K Tiger Fund, have entered into
a separate Sub-Advisory Agreement (the "Newport Sub-Advisory Agreement") with
Newport Fund Management, Inc. ("Newport"). Newport is an indirect wholly owned
subsidiary of LFC.
Keyport Advisory Services Corp. Keyport owns all of the outstanding
common stock of KASC. The directors and principal executive officer of KASC are:
John W. Rosensteel, (principal executive officer); John E. Arant, III; James J.
Klopper; and Paul H. LeFevre, Jr. Mr. Rosensteel also is a director of Keyport
Financial Services Corp. ("KFSC"), the principal underwriter for shares of the
Funds.
Colonial Management Associates, Inc. The Colonial Group, Inc., One
Financial Center, Boston, Massachusetts 02111, owns all of the outstanding
common stock of Colonial. LFC owns all of the outstanding common stock of The
Colonial Group, Inc. The directors and principal executive officer of Colonial
are Bonny E. Boatman, Sheila A. Carroll, Harold W. Cogger (principal executive
officer), Carl C. Ericson, C. Frazier Evans, Donald S. MacKinnon, Charles A.
O'Neill, Helen Frame Peters, Daniel Rie, Davey S. Scoon and Arthur O. Stern.
Newport. Newport Pacific Management, Inc. ("Newport Pacific") owns all
of the outstanding common stock of Newport. Liberty Newport Holdings, Ltd.
("LNH") owns all of the outstanding common stock of Newport Pacific. LFC owns
all of the outstanding stock of LNH. The directors and
S-3
<PAGE>
principal executive officer of Newport are John M. Mussey (principal executive
officer), Sabino Marinella, Kenneth R. Leibler, Lindsay Cook, Thomas R. Tuttle,
Pamela Frantz and Linda Couch.
The Management Agreements and the Sub-Advisory Agreements provide that
none of KASC, Colonial or Newport, nor any of their respective directors,
officers, stockholders (or partners of stockholders), agents, or employees shall
have any liability to the Trust or any shareholder of any Fund 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 KASC, Colonial or Newport of its
respective duties under the Agreement and the Sub-Advisory Agreements to which
it is party, except for liability resulting from willful misfeasance, bad faith
or gross negligence on the part of KASC, Colonial or Newport, as the case may
be, in the performance of its respective duties or from reckless disregard by
KASC, Colonial or Newport, as the case may be, of its respective obligations and
duties under the Management Agreements and Sub-Advisory Agreements.
KASC's Responsibilities
In addition to its duties described in the Prospectus, KASC, in
furtherance of such duties and responsibilities, gathers and evaluates general
economic, statistical, and financial data for presentation to the Board of
Trustees, recommends, following inquiry, the addition or deletion of Funds,
assists Colonial and Newport in the performance of their respective duties,
coordinates the provision of information to shareholders, coordinates with
Colonial, Newport and KFSC to provide requested performance information and
coordinates the activities of other service entities such as (i) the custodian,
(ii) independent auditors, (iii) outside legal counsel, (iv) Colonial as the
transfer agent or as delegated to perform administrative duties, and (v) KFSC.
KASC, at its own expense, provides office space, facilities and
supplies, equipment and personnel for the performance of its functions under the
Agreement and pays all compensation of the Trustees, officers, and employees who
are employees of KASC, KFSC or Keyport. Employees of other affiliates of KASC
are paid by such other affiliates.
Trust Charges and Expenses
Each of C-K Growth and Income Fund and C-K Utilities Fund commenced
operations on July 1, 1993. C-K International Fund For Growth commenced
operations on May 2, 1994. Each of C-K U.S. Stock Fund and C-K Strategic Income
Fund commenced operations on July 5, 1994. N-K Tiger Fund commenced operations
on May 1, 1995.
Management Fees. Each Fund listed below paid KASC management fees as
follows during each year in the three year period ended December 31, 1996,
pursuant to the Management Agreements described in the Prospectus:
S-4
<PAGE>
1994 1995 1996
-------- -------- --------
C-K Growth and Income Fund: $273,406 $384,179 $538,173
C-K Utilities Fund: $269,227 $284,469 $315,944
C-K International Fund For Growth: $88,260 $183,697 $224,146
C-K U.S. Stock Fund: $48,403 $237,54 $418,745
C-K Strategic Income Fund: $36,266 $181,811 $322,142
N-K Tiger Fund: -- $86,228 $258,891
Certain Administrative Expenses. During each year in the three year
period ended December 31, 1996 each Fund listed below made payments as follows
to Colonial or an affiliate thereof for pricing and bookkeeping services.
1994 1995 1996
-------- -------- --------
C-K Growth and Income Fund: $27,000 $30,524 $40,025
C-K Utilities Fund: $27,091 $27,000 $27,000
C-K International Fund For Growth: $18,000 $27,000 $27,000
C-K U.S. Stock Fund: $13,500 $27,000 $27,000
C-K Strategic Income Fund: $13,500 $27,000 $27,000
N-K Tiger Fund: -- $18,000 $27,000
In addition, during each year in the three year period ended December
31, 1996 each Fund listed below made payments as follows to Colonial or an
affiliate thereof for transfer agent services:
1994 1995 1996
-------- -------- --------
C-K Growth and Income Fund: $7,500 $7,500 $7,500
C-K Utilities Fund: $7,500 $7,500 $7,500
C-K International Fund For Growth: $5,000 $7,500 $7,500
C-K U.S. Stock Fund: $3,750 $7,500 $7,500
C-K Strategic Income Fund: $3,750 $7,500 $7,500
N-K Tiger Fund: -- $5,000 $7,500
Expense Limitations. KASC has agreed to reimburse all expenses,
including management fees, but excluding interest, taxes, brokerage, and other
expenses which are capitalized in accordance with generally accepted accounting
procedures, and extraordinary expenses, incurred by (i) each of C-K Growth and
Income Fund, C-K Utilities Fund and C-K U.S. Stock Fund in excess of 1.00% of
average net asset value per annum, (ii) each of C-K International Fund For
Growth and the N-K Tiger Fund in excess of 1.75% of average daily net asset
value per annum, and (iii) C-K Strategic Income Fund in excess of 0.80% of
average daily net asset value per annum, in each case for the period from May 1,
1997 until April 30, 1998. Pursuant to such limitations the total expenses of
C-K Strategic Income Fund were reduced during 1996 by $27,636.
S-5
<PAGE>
INVESTMENT RESTRICTIONS
In addition to the restrictions set forth in the Prospectus with
respect to each Fund which are described as fundamental investment policies, the
investment restrictions specified below with respect to each Fund as
"Fundamental Investment Policies" have been adopted as fundamental investment
policies of each Fund. Such fundamental investment policies may be changed only
with the consent of a "majority of the outstanding voting securities" of the
particular Fund. As used in the Prospectus and in this SAI, the term "majority
of the outstanding voting securities" means the lesser of (i) 67% of the voting
securities of a Fund present at a meeting where the holders of more than 50% of
the outstanding voting securities of a Fund are present in person or by proxy,
or (ii) more than 50% of the outstanding voting securities of a Fund. Shares of
each Fund will be voted separately on matters affecting only that Fund,
including approval of changes in the fundamental objectives, policies, or
restrictions of that Fund.
Total assets and net assets are determined at current value for
purposes of compliance with investment restrictions and policies. All percentage
limitations will apply at the time of investment and are not violated unless an
excess or deficiency occurs as a result of such investment. For purposes of the
diversification requirement of the Investment Company Act of 1940, as amended
(the "1940 Act"), the issuer with respect to a security is the entity whose
revenues support the security.
C-K Growth and Income Fund
Fundamental Investment Policies. The C-K Growth and Income Fund may:
1. Issue senior securities only through borrowing money from banks
for temporary or emergency purposes up to 10% of its net assets;
however, the Fund will not purchase additional portfolio
securities while borrowings exceed 5% of net assets;
2. Invest up to 15% of its net assets in illiquid assets;
3. Underwrite securities issued by others only when disposing of
portfolio securities;
4. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements;
5. Not concentrate more than 25% of its total assets in any one
industry; and
6. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its total
assets would then be invested in securities of a single issuer or
purchase the
S-6
<PAGE>
voting securities of an issuer if, as a result of such purchase,
the Fund would own more than 10% of the outstanding voting shares
of such issuer.
Other Investment Policies. As non-fundamental investment policies of
the C-K Growth and Income Fund which may be changed without a shareholder vote,
the Fund may not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial or
maintenance margin deposits in connection with futures
transactions;
2. Own real estate unless it is acquired as the result of owning
securities and not more than 5% of total assets;
3. Purchase and sell futures contracts and related options if the
total initial margin and premiums required to establish
non-hedging positions exceeds 5% of its total assets;
4. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount
of such securities;
5. Invest in interests in oil, gas, or other mineral exploration or
development programs, including leases;
6. Purchase any security resulting in the Fund having more than 5% of
its total assets invested in securities of companies (including
predecessors) less than three years old; or
7. Pledge more than 33% of its total assets.
C-K Utilities Fund
Fundamental Investment Policies. The C-K Utilities Fund may:
1. Issue senior securities only through borrowing money from banks
for temporary or emergency purposes up to 10% of its net assets;
however, the Fund will not purchase additional portfolio
securities while borrowings exceed 5% of net assets;
2. Invest up to 15% of its net assets in illiquid assets;
3. Underwrite securities issued by others only when disposing of
portfolio securities;
4. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements; and
S-7
<PAGE>
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its total
assets would then be invested in securities of a single issuer or
purchase the voting securities of an issuer if, as a result of
such purchase, the Fund would own more than 10% of the outstanding
voting shares of such issuer.
Other Investment Policies. As non-fundamental investment policies of
C-K Utilities Fund which may be changed without a shareholder vote, the Fund may
not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial or
maintenance margin deposits in connection with futures
transactions;
2. Own real estate unless it is acquired as the result of owning
securities and not more than 5% of total assets;
3. Purchase and sell futures contracts and related options if the
total initial margin and premiums required to establish
non-hedging positions exceeds 5% of its total assets;
4. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount
of such securities;
5. Invest in interests in oil, gas, or other mineral exploration or
development programs, including leases;
6. Purchase any security resulting in the Fund having more than 5% of
its total assets invested in securities of companies (including
predecessors) less than three years old; or
7. Pledge more than 33% of its total assets.
C-K International Fund For Growth
Fundamental Investment Policies. The C-K International Fund For Growth
may:
1. Issue senior securities only through borrowing money from banks
for temporary or emergency purposes up to 10% of its net assets;
however, the Fund will not purchase additional portfolio
securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements;
S-8
<PAGE>
4. Not concentrate more than 25% of its total assets in any one
industry;
5. Only own real estate acquired as the result of owning securities
and not more than 5% of total assets;
6. Purchase and sell futures contracts and related options so long as
the total initial margin and premiums on the contracts do not
exceed 5% of its total assets; and
7. Not purchase any security issued by another investment company if
immediately after such purchase the Fund would own in the
aggregate (i) more than 3% of the total outstanding voting
securities of such other investment company, (ii) securities
issued by such other investment company having an aggregate value
in excess of 5% of the Fund's total assets, or (iii) securities
issued by investment companies having an aggregate value in excess
of 10% of the Fund's total assets.
Other Investment Policies. As non-fundamental investment policies of
the C-K International Fund For Growth which may be changed without a shareholder
vote, the Fund may not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial or
maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount
of such securities;
3. Invest in interests in oil, gas, or other mineral exploration or
development programs, including leases;
4. Purchase any security resulting in the Fund having more than 5% of
its total assets invested in securities of companies (including
predecessors) less than three years old;
5. Pledge more than 33% of its total assets;
6. Purchase any security if, as a result of such purchase, more than
10% of its total assets would be invested in the securities of
issuers which are restricted as to disposition;
7. Invest more than 15% of its net assets in illiquid assets;
8. Invest in warrants if, immediately after giving effect to any such
investment, the Fund's aggregate investment in warrants, valued at
the lower of cost or market, would exceed 10% of the value of the
Fund's net assets. Included within that amount, but not to exceed
2% of the value of the Fund's net assets, may be warrants whose
underlying securities are not traded on principal domestic or
foreign exchanges. Warrants
S-9
<PAGE>
acquired by the Fund in units or attached to securities will be
deemed to be without value;
9. With respect to 75% of total assets, purchase any voting security
of an issuer if, as a result of such purchase, the Fund would own
more than 10% of the outstanding voting securities of such issuer;
10. Purchase puts, calls, straddles, spreads, or any combination
thereof if, as a result of such purchase, the Fund's aggregate
investment in such securities would exceed 5% of total assets;
11. Acquire any security issued by a person that, in its most recent
fiscal year, derived 15% or less of its gross revenues from
securities related activities (within the meaning of Rule 12d3-1
under the Investment Company Act of 1940 (the "1940 Act")) if the
Fund would control such person after such acquisition; or
12. Acquire any security issued by a person that, in its most recent
fiscal year, derived more than 15% of its gross revenues from
securities related activities (as so defined) unless (i)
immediately after such acquisition of any equity security, the
Fund owns 5% or less of the outstanding securities of that class
of the issuer's equity securities, (ii) immediately after such
acquisition of a debt security, the Fund owns 10% or less of the
outstanding principal amount of the issuer's debt securities, and
(iii) immediately after such acquisition, the Fund has invested
not more than 5% of its total assets in the securities of the
issuer.
C-K U.S. Stock Fund
Fundamental Investment Policies. The C-K U.S. Stock Fund may:
1. Issue senior securities only through borrowing money from banks
for temporary or emergency purposes up to 10% of its net assets;
however, the Fund will not purchase additional portfolio
securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry; and
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its total
assets would then be invested in securities of a single issuer or
purchase the
S-10
<PAGE>
voting securities of an issuer if, as a result of such purchase,
the Fund would own more than 10% of the outstanding voting shares
of such issuer;
6. Only own real estate acquired as the result of owning securities
and not more than 5% of total assets; and
7. Purchase and sell futures contracts and related options so long as
the total initial margin and premiums on the contracts do not
exceed 5% of its total assets.
Other Investment Policies. As non-fundamental investment policies of
C-K U.S. Stock Fund which may be changed without a shareholder vote, the Fund
may not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial or
maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount
of such securities;
3. Invest in interests in oil, gas, or other mineral exploration or
development programs, including leases;
4. Purchase any security resulting in the Fund having more than 5% of
its total assets invested in securities of companies (including
predecessors) less than three years old; and
5. Pledge more than 33% of its total assets;
6. Purchase any security if, as a result of such purchase, more than
10% of its total assets would be invested in the securities of
issuers which are restricted as to disposition;
7. Invest more than 15% of its net assets in illiquid assets;
8. Invest in warrants if, immediately after giving effect to any such
investment, the Fund's aggregate investment in warrants, valued at
the lower of cost or market, would exceed 10% of the value of the
Fund's net assets. Included within that amount, but not to exceed
2% of the value of the Fund's net assets, may be warrants whose
underlying securities are not traded on principal domestic or
foreign exchanges. Warrants acquired by the Fund in units or
attached to securities will be deemed to be without value; or
9. Purchase or sell commodity contracts if the total initial margin
and premiums on the contracts would exceed 5% of its total assets.
S-11
<PAGE>
C-K Strategic Income Fund
Fundamental Investment Policies. The C-K Strategic Income Fund may:
1. Issue senior securities only through borrowing money from banks
for temporary or emergency purposes up to 10% of its net assets;
however, the Fund will not purchase additional portfolio
securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry;
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its total
assets would then be invested in securities of a single issuer or
purchase the voting securities of an issuer if, as a result of
such purchase, the Fund would own more than 10% of the outstanding
voting shares of such issuer;
6. Only own real estate acquired as the result of owning securities
and not more than 5% of total assets; and
7. Purchase and sell futures contracts and related options so long as
the total initial margin and premiums on the contracts do not
exceed 5% of its total assets.
Other Investment Policies. As non-fundamental investment policies of
the C-K Strategic Income Fund which may be changed without a shareholder vote,
the Fund may not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial or
maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount
of such securities;
3. Invest in interests in oil, gas, or other mineral exploration or
development programs, including leases;
4. Purchase any security resulting in the Fund having more than 5% of
its total assets invested in securities of companies (including
predecessors) less than three years old;
S-12
<PAGE>
5. Pledge more than 33% of its total assets;
6. Purchase any security if, as a result of such purchase, more than
10% of its total assets would be invested in the securities of
issuers which are restricted as to disposition;
7. Invest more than 15% of its net assets in illiquid assets; or
8. Invest in warrants if, immediately after giving effect to any such
investment, the Fund's aggregate investment in warrants, valued at
the lower of cost or market, would exceed 10% of the value of the
Fund's net assets. Included within that amount, but not to exceed
2% of the value of the Fund's net assets, may be warrants whose
underlying securities are not traded on principal domestic or
foreign exchanges. Warrants acquired by the Fund in units or
attached to securities will be deemed to be without value.
N-K Tiger Fund
Fundamental Investment Policies. The N-K Tiger Fund may not:
1. With respect to 75% of total assets purchase any security (other
than obligations of the U.S. Government and cash items including
receivables) if as a result more than 5% of its total assets would
then be invested in securities of a single issuer or purchase the
voting securities of an issuer if, as a result of such purchase,
the Fund would own more than 10% of the outstanding voting shares
of such issuer;
2. Underwrite securities issued by others except when disposing of
portfolio securities;
3. Buy or sell commodities or commodity contracts (other than
currency forward contracts);
4. Borrow amounts in excess of 5% of the Fund's net asset value, and
only from banks as a temporary measure for extraordinary or
emergency purposes and not for investment in securities. To avoid
the untimely disposition of assets to meet redemptions it may
borrow up to 20% of the net value of its assets to meet
redemptions. The Fund will not make other investments while such
borrowings referred to above in this item are outstanding. The
Fund will not mortgage, pledge or in any other manner transfer, as
security for indebtedness, any of its assets. (Short-term credits
necessary for the clearance of purchases or sales of securities
will not be deemed to be borrowings by the Fund.);
5. Make loans, except that the Fund may: (a) acquire for investment a
portion of an issue of bonds, debentures, notes or other evidences
of indebtedness of a corporation or government; (b) enter into
repurchase agreements, secured by obligations of the United States
or any agency or instrumentality thereof;
S-13
<PAGE>
6. Issue senior securities (except in accordance with 4 above);
7. Concentrate more than 25% of its total assets in any one of its
industry;
8. Purchase or sell real estate, provided that securities of
companies which deal in real estate or interests therein will not
be deemed to be investments in real estate.
Other Investment Policies. As non-fundamental investment policies of
the N-K Tiger Fund which may be changed without a shareholder vote, the Fund may
not:
1. Purchase any security resulting in the Fund having more than 5% of
its total assets invested in securities of companies (including
predecessors) less than three years old;
2. Invest in companies for the purpose of exercising control;
3. Invest in securities of other investment companies except by
purchase in the open market involving only customary broker's
commissions, or as part of a merger, consolidation, or acquisition
of assets;
4. Participate on a joint and several basis in any securities trading
account;
5. Write or trade in put or call options;
6. Purchase securities on margin, but the Fund may utilize such
short-term credits as may be necessary for clearance of purchases
or sales of securities;
7. Engage in short sales of securities; or
8. Invest in interests in oil, gas or other mineral exploration or
development programs, including leases.
MORE FACTS ABOUT THE TRUST
Mixed and Shared Funding
As described in the Prospectus, the Trust serves as the funding medium
for VA contracts and VLI policies of Keyport, Independence Life & Annuity
Company ("Independence"), a wholly owned subsidiary of Keyport, and Liberty Life
Assurance Company of Boston ("Liberty Life"), 90%-owned subsidiary of Liberty
Mutual. This is referred to as "mixed and shared funding." The interests of
owners of VA contracts and VLI policies could diverge based on differences in
state regulatory requirements, changes in the tax laws or other unanticipated
developments. The Trust does not foresee any such differences or disadvantages
at this time. However, the Board of Trustees monitors for such developments to
identify any material irreconcilable conflicts and to determine what action, if
any,
S-14
<PAGE>
should be taken in response to such conflicts. If such a conflict were to occur,
one or more separate accounts of Participating Insurance Companies (as such term
is defined in the Prospectus) might be required to withdraw its investments in
one or more Funds or shares of another Fund may be substituted. This might force
a Fund to sell securities at disadvantageous prices.
At this time the Trust does not offer its shares to separate accounts
of insurance companies that are unaffiliated with Keyport or Liberty Mutual, but
may do so in the future.
Organization
The Trust is required to hold a shareholders' meeting to elect Trustees
to fill vacancies in the event that less than a majority of Trustees were
elected by shareholders. Trustees may also be removed by the vote of two-thirds
of the outstanding shares at a meeting called at the request of shareholders
whose interests represent 10% or more of the outstanding shares.
The shares do not have cumulative voting rights, which means that the
holders of more than 50% of the shares of the Funds voting for the election of
Trustees can elect all of the Trustees, and, in such event, the holders of the
remaining shares will not be able to elect any Trustees.
The Funds are not required by law to hold regular annual meetings of
their shareholders and do not intend to do so. However, special meetings may be
called for purposes such as electing or removing Trustees or changing
fundamental policies.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable for the obligations of the
Trust. The Trust's shareholders are the separate accounts and general accounts
of Keyport, Independence and Liberty Life. However, the Trust's Declaration of
Trust disclaims liability of the shareholders, the Trustees, or officers of the
Trust for acts or obligations of the Trust, which are binding only on the assets
and property of the Trust (or the applicable Fund thereof) and requires that
notice of such disclaimer be given in each agreement, obligation, or contract
entered into or executed by the Trust or the Board of Trustees. The Declaration
of Trust provides for indemnification out of the Trust's assets (or the
applicable Fund) for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is believed to be
remote because it is limited to circumstances in which the disclaimer is
inoperative and the Trust itself is unable to meet its obligations. The risk to
any one Fund of sustaining a loss on account of liabilities incurred by another
Fund is also believed to be remote.
S-15
<PAGE>
Trustees and Officers
The Trustees and officers of the Trust, together with information as to
their principal addresses and business occupations during the last five years,
are shown below. An asterisk next to a name indicates that a Trustee is
considered an "interested person" of the Trust (as defined in the 1940 Act).
Positions(s) held Principal occupations
Name and Address with the Trust during past five years
================================================================================
Richard R. Christensen* President and Trustee President, Liberty Investment
Federal Reserve Plaza Services, Inc.; since 1994,
600 Atlantic Avenue President, Liberty Asset
Boston, MA 02210 Management Company
- --------------------------------------------------------------------------------
John A. Bacon Jr. Trustee Private Investor
4N640 Honey Hill Road
Box 296
Wayne, IL 60184
- --------------------------------------------------------------------------------
Salvatore Macera Trustee Private Investor
20 Rowes Wharf
Boston, MA 02109
- --------------------------------------------------------------------------------
Dr. Thomas E. Stitzel Professor of Finance, College
2208 Tawny Woods Place Trustee of Business, Boise State
Boise, ID 83706 University; Business Consultant
and Author
- --------------------------------------------------------------------------------
Timothy J. Jacoby Treasurer and Chief Treasurer and Chief Financial
One Financial Center Financial Officer Officer of the Colonial Funds;
Boston, MA 02111 Senior Vice President of
Colonial Management Associates,
Inc.; formerly Senior Vice
President, Fidelity Accounting
and Custody Services, Inc. and
Assistant Treasurer to the
Fidelity Group of Funds
- --------------------------------------------------------------------------------
Peter L. Lydecker Controller and Chief Controller and Chief Accounting
One Financial Center Accounting Officer Officer of the Colonial Funds,
Boston, MA 02111 Vice President, Colonial
Management Associates, Inc.
S-16
<PAGE>
Daniel Rie Vice President Senior Vice President and Head
One Financial Center of the Equity Group,
Boston, MA 02111 Colonial Management
Associates, Inc.
- --------------------------------------------------------------------------------
John E. Lennon Vice President Vice President, Colonial
One Financial Center Management Associates, Inc.
Boston, MA 02111
- --------------------------------------------------------------------------------
Michael H. Koonce Vice President Vice President and Counsel,
One Financial Center Colonial Management Associates,
Boston, MA 02111 Inc. (1992-present); Associate,
Ropes & Gray, Boston, MA (prior
thereto)
- --------------------------------------------------------------------------------
Carl C. Ericson Vice President Senior Vice President (Vice
One Financial Center President prior to 1996)
Boston, MA 02111 Director and Manager of the
Taxable Fixed Income Group,
Colonial Management Associates,
Inc.
- --------------------------------------------------------------------------------
John M. Mussey Vice President President, Newport Fund
580 California Street Management, Inc.
San Francisco, CA 94104
- --------------------------------------------------------------------------------
John A. Benning Secretary Senior Vice President and
Federal Reserve Plaza General Counsel, Liberty
600 Atlantic Avenue Financial Companies, Inc.
Boston, MA 02210
- --------------------------------------------------------------------------------
Kevin M. Carome Assistant Secretary Since April 1993, Associate
Federal Reserve Plaza General Counsel and Vice
600 Atlantic Avenue President (since February
Boston, MA 02210 1995), Liberty Financial
Companies, Inc.; Associate,
Ropes & Gray, prior thereto
- --------------------------------------------------------------------------------
As indicated in the above table, certain Trustees and officers of the
Trust also hold positions with LFC, Keyport, KASC, KFSC, Colonial, Newport
and/or certain of their affiliates. Certain of the Trustees and officers of the
Trust hold comparable positions with certain other investment companies.
S-17
<PAGE>
Compensation of Trustees
The table set forth below presents certain information regarding the
fees paid to the Trustees for their services in such capacity and total fees
paid to them by all other investment companies affiliated with the Trust.
Trustees do not receive any pension or retirement benefits from the Trust. No
officers of the Trust or other individuals who are affiliated with the Trust
receive any compensation from the Trust for services provided to it.
Compensation Table
- --------------------------------------------------------------------------------
Total Compensation
From the Trust and
Affiliated Investment
Name of Trustee Aggregate 1996 Compensation* Companies in 1996**
- --------------- --------------------------- ---------------------
Richard R. Christensen -- --
John A. Bacon Jr $9,000 $27,000
Salvatore Macera 9,000 27,000
Dr. Thomas E. Stitzel 9,000 27,000
- ------------
* Consists of Trustee fees in the amount of (i) a $5,000 annual retainer, (ii)
a $1,000 meeting fee for each meeting attended in person and (iii) a $500
meeting fee for each telephone meeting. Beginning in 1997, the fee for
meetings attended in person has been increased to $1,500 per meeting.
** Includes Trustee fees paid by the Trust and Trustee fees paid by SteinRoe
Variable Investment Trust.
Principal Holders of Securities
All the shares of the Funds are held of record by sub-accounts of
separate accounts of Keyport, Independence or Liberty Life on behalf of the
owners of VA contracts and VLI policies or by the general account of Keyport. At
March 31, 1997 the general account of Keyport owned of record 37.5% of C-K
International Fund For Growth, 26.2% of C-K U.S. Stock Fund and 35.7% of N-K
Tiger Fund. As of that date, Keyport's general account owned of record less than
25% of the outstanding shares of the other Funds. At all meetings of
shareholders of the Funds, Keyport, Independence and Liberty Life will vote the
shares held of record by subaccounts of their respective separate accounts as to
which instructions are received from the VA contract and VLI policy owners on
behalf of whom such shares are held only in accordance with such instructions.
All such shares as to which no instructions are received (as well as, in the
case of Keyport, all shares held by its general account) will be voted in the
same proportion as shares as to which instructions are received (with Keyport's
general account shares being voted in the proportions determined by instructing
owners of Keyport VA contracts and VLI policies). There is no requirement as to
the minimum level of instructions which must be received from policy and
contract owners. Accordingly, each of Keyport,
S-18
<PAGE>
Independence and Liberty Life disclaims beneficial ownership of the shares of
the Funds held of record by the sub-accounts of their respective separate
accounts (or, in the case of Keyport, its general account). None of Keyport,
Independence or Liberty Life know of any owner of a VA contract or VLI policy
issued by it which on March 31, 1997 owned beneficially 5% or more of the
outstanding shares of any Fund.
Custodians
Boston Safe Deposit and Trust Company ("The Boston Company"), One
Boston Place, Boston, Massachusetts 02108, is custodian of the securities and
cash owned by the Funds, other than N-K Tiger Fund. UMB, n.a. ("UMB"), 928 Grand
Ave., Kansas City, Missouri 64141, is custodian for N-K Tiger Fund. Each of the
Boston Company and UMB is responsible for holding all securities and cash of
each Fund for which it acts as custodian, receiving and paying for securities
purchased, delivering against payment securities sold, receiving and collecting
income from investments, making all payments covering expenses of the Fund, and
performing other administrative duties, all as directed by persons authorized by
the Trust. The custodians do not exercise any supervisory function in such
matters as the purchase and sale of portfolio securities, payment of dividends,
or payment of expenses of the Funds or the Trust. Portfolio securities of the
Funds purchased in the U.S. are maintained in the custody of the applicable
custodian and may be entered into the Federal Reserve Book Entry system, or the
security depository system of the Depository Trust Company or other security
depository systems. Pursuant to the custodian agreement between the Trust and
the applicable custodian, portfolio securities purchased outside the U.S. are
maintained in the custody of various foreign branches of The Boston Company
and/or third party subcustodians, including foreign banks and foreign securities
depositories.
OTHER CONSIDERATIONS
Portfolio Turnover
Although no Fund purchases securities with a view to rapid turnover,
there are no limitations on the length of time that securities must be held by
any Fund and a Fund's annual portfolio turnover rate may vary significantly from
year to year. A 100% turnover rate would occur if all of the securities in the
portfolio were sold and either repurchased or replaced within one year. Although
the Funds cannot predict portfolio turnover rate, it is estimated that, under
normal circumstances, the annual rate for each Fund will be no greater than
100%. The portfolio turnover rates of the Funds are shown under "Financial
Highlights" in the Prospectus.
If a Fund writes a substantial number of call or put options (on
securities or indexes) or engages in the use of futures contracts or options on
futures contracts (all referred to as "Collateralized Transactions"), and the
market prices of the securities underlying the Collateralized Transactions move
inversely to the Collateralized Transaction, there may be a very substantial
turnover of the portfolios. The Funds pay brokerage commissions in connection
with options and futures transactions and effecting closing purchase or sale
transactions, as well as for the purchases and sales of other portfolio
securities other than fixed income securities.
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<PAGE>
C-K International Fund For Growth may be expected to experience higher
portfolio turnover rates if such Fund makes a change in its investments from one
geographic sector (e.g., Europe; Japan; emerging Asian markets; etc.) to another
geographic sector. Costs will be greater if the change is from the sector in
which the greatest proportion of its assets are invested.
Suspension of Redemptions
The right to redeem shares or to receive payment with respect to any
redemption of shares of the Funds may only be suspended (i) for any period
during which trading on the New York Stock Exchange ("NYSE") is restricted or
the NYSE is closed, other than customary weekend and holiday closing, (ii) for
any period during which an emergency exists as a result of which disposal of
securities or determination of the net asset value of the Funds is not
reasonably practicable, or (iii) for such other periods as the SEC may by order
permit for protection of shareholders of the Funds.
Valuation of Securities
The assets of the Funds are valued as follows:
Debt securities generally are valued by a pricing service which
determines valuations based upon market transactions for normal,
institutional-size trading units of similar securities. However, in
circumstances where such prices are not available or where Colonial (the Trust's
pricing and bookkeeping agent) deems it appropriate to do so, an
over-the-counter or exchange bid quotation is used. Securities listed on an
exchange or on NASDAQ are valued at the last sale price. Listed securities for
which there were no sales during the day and unlisted securities are valued at
the last quoted bid prices. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost when such cost approximates market value
pursuant to procedures approved by the Trustees. The values of foreign
securities quoted in foreign currencies are translated into U.S. dollars at the
exchange rate as of 3:00 p.m. Eastern time. Portfolio positions for which there
are no such valuations and other assets are valued at fair value as determined
in good faith under the direction of the Trustees.
The net asset value of shares of each Fund is normally calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m., Eastern time, on
every day the NYSE is open for trading, except on days where both (i) the degree
of trading in a Fund's portfolio securities would not materially affect the net
asset value of that Fund's shares and (ii) no shares of a Fund were tendered for
redemption and no purchase order was received. The NYSE is open Monday through
Friday, except on the following national holidays: New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day.
Generally, trading in certain securities (such as foreign securities)
is substantially completed each day at various times prior to the close of the
NYSE. The values of these securities used in determining the net asset value are
computed as of such times. Also, because of the amount of time required to
collect and process trading information as to large numbers of securities
issues, the values of certain securities (such as convertible bonds and U.S.
government securities) are determined based
S-20
<PAGE>
on market quotations collected earlier in the day at the latest practicable time
prior to the close of the NYSE. Occasionally, events affecting the value of such
securities may occur between such times and the close of the NYSE which will not
be reflected in the computation of a Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value following procedures
approved by the Trustees.
Portfolio Transactions
The Trust has no obligation to do business with any broker-dealer or
group of broker-dealers in executing transactions in securities with respect to
the Funds, and the Funds have no intention to deal exclusively with any
particular broker-dealer or group of broker-dealers.
Each of Colonial and Newport places the transactions of the Funds with
broker-dealers selected by it and, if applicable, negotiates commissions.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including the purchase and writing of options, the effecting of closing purchase
and sale transactions, and the purchase and sale of underlying securities upon
the exercise of options and the purchase or sale of other instruments. The Funds
from time to time may also execute portfolio transactions with such
broker-dealers acting as principals.
Except as described below in connection with commissions paid to a
clearing agent on sales of securities, it is each Fund's policy and the policy
of each of Colonial and Newport always to seek best execution, which is to place
the Fund's transactions where the Fund can obtain the most favorable combination
of price and execution services in particular transactions or provided on a
continuing basis by a broker-dealer, and to deal directly with a principal
market maker in connection with over-the-counter transactions, except when
Colonial or Newport believes that best execution is obtainable elsewhere. In
evaluating the execution services of, including the overall reasonableness of
brokerage commissions paid to, a broker-dealer, consideration is given to, among
other things, the firm's general execution and operational capabilities, and to
its reliability, integrity and financial condition.
Subject to such policy of always seeking best execution, securities
transactions of the Funds may be executed by broker-dealers who also provide
research services (as defined below) to Colonial, Newport, the Funds or other
accounts as to which Colonial or Newport exercises investment discretion. Each
of Colonial and Newport may use all, some or none of such research services in
providing investment advisory services to each of its clients, including the
Funds it advises. To the extent that such services are used by Colonial or
Newport they tend to reduce their expenses. In the opinion of Colonial and
Newport, it is impossible to assign an exact dollar value for such services.
Subject to such policies as the Board of Trustees may determine, each
of Colonial and Newport may cause a Fund to pay a broker-dealer that provides
brokerage and research services to it an amount of commission for effecting a
securities transaction, including the sale of an option or a closing purchase
transaction, for a Fund in excess of the amount of commission that another
broker-dealer would have charged for effecting that transaction. As provided in
Section 28(e) of the Securities Exchange Act of 1934, "brokerage and research
services" include advice as to the value of securities, the advisability of
investing in, purchasing or selling securities and the availability of
securities or
S-21
<PAGE>
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends and portfolio
strategy and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). Each
of Colonial and Newport must determine in good faith that such greater
commission is reasonable in relation to the value of the brokerage and research
services provided to it by the executing broker-dealer viewed in terms of that
particular transaction or its overall responsibilities to the Fund and all its
other clients.
Certain of the other accounts of Colonial and Newport may have
investment objectives and programs that are similar to those of the Funds.
Accordingly, occasions may arise when each of Colonial and Newport engages in
simultaneous purchase and sale transactions of securities that are consistent
with the investment objectives and programs of a Fund and such other accounts.
On those occasions, Colonial or Newport will allocate purchase and sale
transactions in an equitable manner according to written procedures as approved
by the Board of Trustees. Such procedures may, in particular instances, be
either advantageous or disadvantageous to a Fund.
The portfolio managers for the C-K International Fund For Growth are
Bruno Bertocci and David Harris, each of whom is jointly employed by Colonial
and Stein Roe & Farnham Incorporated ("Stein Roe"), an affiliate of Colonial and
KASC and a wholly owned subsidiary of LFC. Messrs. Bertocci and Harris also are
the portfolio managers for the Colonial International Fund For Growth, an
open-end investment company sponsored by Colonial, and various investment
company and non-investment company clients of Stein Roe. Colonial utilizes the
trading facilities of Stein Roe to place all orders on behalf of the C-K
International Fund For Growth and the Colonial International Fund For Growth for
the purchase and sale of portfolio securities, futures contracts and foreign
currencies. The C-K International Fund For Growth and the other accounts advised
by Messrs. Bertocci and Harris sometimes invest in the same securities and
sometimes enter into similar transactions utilizing futures contracts and
foreign currencies. In certain cases, purchases and sales on behalf of the Fund
and such other accounts will be bunched and executed on an aggregate basis. In
such cases, each participating account (including the C-K International Fund for
Growth) will receive the average price at which the trade is executed. Where
less than the desired aggregate amount is able to be purchased or sold, the
actual amount purchased or sold will be allocated among the participating
accounts (including the C-K International Fund for Growth) in proportion to the
amounts desired to be purchased or sold by each. Although in some cases these
practices could have a detrimental effect on the price or volume of the
securities, futures or currencies as far as the C-K International Fund for
Growth is concerned, Colonial believes that in most cases these practices should
produce better executions. It is the opinion of Colonial that the advantages of
these practices outweigh the disadvantages, if any, which might result from
them.
Portfolio transactions on behalf of the C-K International Fund for
Growth may be executed by broker-dealers who provide research services to
Colonial and Stein Roe which are used in the investment management of such Fund
or other accounts over which Colonial and Stein Roe exercise investment
discretion. Such transactions will be effected in accordance with the policies
described above. No portfolio transactions on behalf of the Fund will be
directed to a broker-dealer in consideration of the broker-dealer's provision of
research services to Colonial, or to Colonial and Stein
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<PAGE>
Roe, unless a determination is made that such research assists Colonial in its
investment management of the C-K International Fund for Growth or other accounts
over which Colonial exercises investment discretion (including, without
limitation, the Colonial International Fund For Growth).
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best execution and such
other policies as the Board of Trustees may determine, each of Colonial and
Newport may consider sales of VA contracts and VLI policies as a factor in the
selection of broker-dealers to execute securities transactions for the Funds.
The table below shows information on brokerage commissions paid by each
Fund during the periods indicated (other than C-K Strategic Income Fund, which
did not pay commissions on any of its transactions).
<TABLE>
<CAPTION>
C-K Growth C-K C-K
and Income Utilities International C-K U.S. N-K
Fund Fund Fund For Growth Stock Fund Tiger Fund
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total amount of brokerage $ 35,863 $22,345 $92,485 $ 75,253 $109,515
commissions paid during
1996
- -------------------------------------------------------------------------------------------------
Amount of such commissions $ 3,535 $ 4,081 $0 $0 $0
paid to brokers or dealers
who supplied research
services
- -------------------------------------------------------------------------------------------------
Amount of commissions paid $ 3,535 $ 4,081 $0 $0 $0
to brokers or dealers that
were allocated to such
brokers or dealers because
of research services
provided to the Fund
- -------------------------------------------------------------------------------------------------
Total amount of brokerage $110,453 $24,902 $52,394 $ 81,150 $129,019
commissions paid during
1995
- -------------------------------------------------------------------------------------------------
Total brokerage paid $ 64,373 $37,872 $68,394 $ 31,950 --
during 1994
- -------------------------------------------------------------------------------------------------
</TABLE>
DESCRIPTION OF CERTAIN INVESTMENTS
The following is a description of certain types of investments which
may be made by one or more of the Funds.
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<PAGE>
Money Market Instruments
As stated in the Prospectus, each Fund may invest in a variety of
high-quality money market instruments. The money market instruments that may be
used by each Fund may include:
United States Government Obligations. These consist of various types of
marketable securities issued by the U.S. Treasury, i.e., bills, notes and bonds.
Such securities are direct obligations of the U.S. Government and differ mainly
in the length of their maturity. Treasury bills, the most frequently issued
marketable government security, have a maturity of up to one year and are issued
on a discount basis.
United States Government Agency Securities. These consist of debt
securities issued by agencies and instrumentalities of the U.S. Government,
including the various types of instruments currently outstanding or which may be
offered in the future. Agencies include, among others, the Federal Housing
Administration, Government National Mortgage Association, Farmer's Home
Administration, Export-Import Bank of the United States, Maritime
Administration, and General Services Administration. Instrumentalities include,
for example, each of the Federal Home Loan Banks, the National Bank for
Cooperatives, the Federal Home Loan Mortgage Corporation, the Farm Credit Banks,
the Federal National Mortgage Association, and the United States Postal Service.
These securities are either: (i) backed by the full faith and credit of the U.S.
Government (e.g., U.S. Treasury Bills); (ii) guaranteed by the U.S. Treasury
(e.g., Government National Mortgage Association mortgage-backed securities);
(iii) supported by the issuing agency's or instrumentality's right to borrow
from the U.S. Treasury (e.g., Federal National Mortgage Association Discount
Notes); or (iv) supported only by the issuing agency's or instrumentality's own
credit (e.g., securities issued by the Farmer's Home Administration).
Bank and Savings and Loan Obligations. These include certificates of
deposit, bankers' acceptances, and time deposits. Certificates of deposit
generally are short-term, interest-bearing negotiable certificates issued by
commercial banks or savings and loan associations against funds deposited in the
issuing institution. Bankers' acceptances are time drafts drawn on a commercial
bank by a borrower, usually in connection with an international commercial
transaction (e.g., to finance the import, export, transfer, or storage of
goods). With a bankers' acceptance, the borrower is liable for payment as is the
bank, which unconditionally guarantees to pay the draft at its face amount on
the maturity date. Most bankers' acceptances have maturities of six months or
less and are traded in secondary markets prior to maturity. Time deposits are
generally short-term, interest-bearing negotiable obligations issued by
commercial banks against funds deposited in the issuing institutions. The Funds
will not invest in any security issued by a commercial bank or a savings and
loan association unless the bank or savings and loan association is organized
and operating in the United States, has total assets of at least one billion
dollars, and is a member of the Federal Deposit Insurance Corporation ("FDIC"),
in the case of banks, or insured by the FDIC in the case of savings and loan
associations; provided, however, that such limitation will not prohibit
investments in foreign branches of domestic banks which meet the foregoing
requirements. The Funds will not invest in time-deposits maturing in more than
seven days.
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<PAGE>
Short-Term Corporate Debt Instruments. These include commercial paper
(i.e., short-term, unsecured promissory notes issued by corporations to finance
short-term credit needs). Commercial paper is usually sold on a discount basis
and has a maturity at the time of issuance not exceeding nine months. Also
included are non-convertible corporate debt securities (e.g., bonds and
debentures). Corporate debt securities with a remaining maturity of less than 13
months are liquid (and tend to become more liquid as their maturities lessen)
and are traded as money market securities. Each Fund may purchase corporate debt
securities having greater maturities.
Repurchase Agreements. The Funds may invest in repurchase agreements. A
repurchase agreement is an instrument under which the investor (such as a Fund)
acquires ownership of a security (known as the "underlying security") and the
seller (i.e., a bank or primary dealer) agrees, at the time of the sale, to
repurchase the underlying security at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results in
a fixed rate of return insulated from market fluctuations during such period,
unless the seller defaults on its repurchase obligations. The underlying
securities will consist only of securities issued by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Securities"). Repurchase
agreements are, in effect, collateralized by such underlying securities, and,
during the term of a repurchase agreement, the seller will be required to
mark-to-market such securities every business day and to provide such additional
collateral as is necessary to maintain the value of all collateral at a level at
least equal to the repurchase price. Repurchase agreements usually are for short
periods, often under one week, and will not be entered into by a Fund for a
duration of more than seven days if, as a result, more than 15% of the value of
that Fund's total assets would be invested in such agreements or other
securities which are illiquid.
The Funds will seek to assure that the amount of collateral with
respect to any repurchase agreement is adequate. As with any extension of
credit, however, there is risk of delay in recovery or the possibility of
inadequacy of the collateral should the seller of the repurchase agreement fail
financially. In addition, a Fund could incur costs in connection with
disposition of the collateral if the seller were to default. The Funds will
enter into repurchase agreements only with sellers deemed to be creditworthy
under creditworthiness standards approved by the Board of Trustees and only when
the economic benefit to the Funds is believed to justify the attendant risks.
The Board of Trustees believes these standards are designed to reasonably assure
that such sellers present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the repurchase agreement. The
Funds may enter into repurchase agreements only with commercial banks or
registered broker-dealers.
Adjustable Rate and Floating Rate Securities. Adjustable rate
securities (i.e., variable rate and floating rate instruments) are securities
that have interest rates that are adjusted periodically, according to a set
formula. The maturity of some adjustable rate securities may be shortened under
certain special conditions described more fully below.
Variable rate instruments are obligations (usually certificates of
deposit) that provide for the adjustment of their interest rates on
predetermined dates or whenever a specific interest rate changes. A variable
rate instrument subject to a demand feature is considered to have a maturity
equal to the
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<PAGE>
longer of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand.
Floating rate instruments (generally corporate notes, bank notes or
Eurodollar certificates of deposit) have interest rate reset provisions similar
to those for variable rate instruments and may be subject to demand features
like those for variable rate instruments. The interest rate is adjusted,
periodically (e.g. daily, monthly, semi-annually), to the prevailing interest
rate in the marketplace. The interest rate on floating rate securities is
ordinarily determined by reference to, or is a percentage of, a bank's prime
rate, the 90-day U.S. Treasury bill rate, the rate of return on commercial paper
or bank certificates of deposit, an index of short-term interest rates or some
other objective measure. The maturity of a floating rate instrument is
considered to be the period remaining until the principal amount can be
recovered through demand.
Investments in Less Developed Countries
The C-K International Fund For Growth's investments in foreign
securities may include investments in countries whose economies or securities
markets are considered by Colonial not to be highly developed (referred to as
"emerging market countries"). Normally no more than 40% of the Fund's assets
will be invested in such emerging market countries. As of May 1, 1997, the
following countries were considered by Colonial to be emerging market countries:
Europe and
Asia Latin America the Middle East Africa
================================================================
India Argentina Czech Republic South Africa
----------------------------------------------------------------
Indonesia Brazil Egypt
----------------------------------------------------------------
Korea Chile Greece
----------------------------------------------------------------
Pakistan Colombia Hungary
----------------------------------------------------------------
Philippines Mexico Israel
----------------------------------------------------------------
Sri Lanka Peru Jordan
----------------------------------------------------------------
Taiwan Venezuela Portugal
----------------------------------------------------------------
Thailand Russia
----------------------------------------------------------------
Turkey
----------------------------------------------------------------
N-K Tiger Fund invests primarily in companies located in the Tiger
countries of East Asia, which include Indonesia, Korea, the Philippines, Taiwan
and Thailand.
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<PAGE>
Foreign Currency Transactions
Each of C-K International Fund For Growth, N-K Tiger Fund, C-K
Strategic Income Fund and C-K Growth and Income Fund may engage in currency
exchange transactions to protect against uncertainty in the level of future
currency exchange rates. These Funds may purchase foreign currencies on a spot
or forward basis in conjunction with their investments in foreign securities and
to hedge against fluctuations in foreign currencies. C-K International Fund For
Growth and C-K Strategic Income Fund also may buy and sell currency futures
contracts and options thereon for such hedging purposes. C-K Strategic Income
Fund also may buy options on currencies for hedging purposes.
A Fund may engage in both "transaction hedging" and "position hedging."
When it engages in transaction hedging, a Fund enters into foreign currency
transactions with respect to specific receivables or payables of the Fund
generally arising in connection with purchases or sales of its portfolio
securities. A Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging a Fund attempts to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payments is declared, and the date on which such payments are made or
received.
A Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with the settlement of
transactions in portfolio securities denominated in that foreign currency. A
Fund may also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and (if the Fund is so authorized) purchase
and sell foreign currency futures contracts.
For transaction hedging purposes a Fund which is so authorized may also
purchase exchange-listed and over-the-counter call and put options on foreign
currency futures contracts and on foreign currencies. Over-the-counter options
are considered to be illiquid by the SEC staff. A put option on a futures
contract gives the Fund the right to assume a short position in the futures
contract until expiration of the option. A put option on a currency gives the
Fund the right to sell a currency at an exercise price until the expiration of
the option. A call option on a futures contract gives the Fund the right to
assume a long position in the futures contract until the expiration of the
option. A call option on a currency gives the Fund the right to purchase a
currency at the exercise price until the expiration of the option.
When it engages in position hedging, a Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which its portfolio securities are denominated (or an
increase in the value of currency for securities which the Fund expects to
purchase, when the Fund holds cash or short-term investments). In connection
with position hedging, a Fund which is so authorized may purchase put or call
options on foreign currency and foreign currency futures contracts and buy or
sell forward contracts and foreign currency futures contracts. A Fund
S-27
<PAGE>
may enter into short sales of a foreign currency to hedge a position in a
security denominated in that currency. In such circumstances, the Fund will
maintain in a segregated account with the Fund's Custodian an amount of cash or
liquid debt securities equal to the excess of (i) the amount of foreign currency
required to cover such short sale position over (ii) the amount of such foreign
currency which could then be realized through the sale of the foreign securities
denominated in the currency subject to the hedge.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security or securities being hedged is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security or securities and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security or securities
if the market value of such security or securities exceeds the amount of foreign
currency the Fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which the Fund can achieve at
some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
value of such currency.
Currency Forward and Futures Contracts
Each of C-K International Fund For Growth, C-K Strategic Income Fund
and N-K Tiger Fund will enter into such contracts only when cash or equivalents
equal in value to either (i) the commodity value (less any applicable margin
deposits) or (ii) the difference between the commodity value (less any
applicable margin deposits) and the aggregate market value of all equity
securities denominated in the particular currency held by the Fund have been
deposited in a segregated account of the Fund's custodian. A forward currency
contract involves an obligation to purchase or sell specific currency at a
future date, which may be any fixed number of days from the date of the contract
as agreed by the parties, at a price set at the time of the contract. In the
case of a cancelable contract, the holder has the unilateral right to cancel the
contract at maturity by paying a specified fee. The contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A contract generally has no deposit
requirement, and no commissions are charged at any stage for trades. A currency
futures contract is a standardized contract for the future delivery of a
specified amount of a foreign currency at a future date at a price set at the
time of the contract. Currency futures contracts traded in the United States are
designed and traded on exchanges regulated
S-28
<PAGE>
by the Commodities Futures Trading Commission ("CFTC"), such as the New York
Mercantile Exchange. (N-K Tiger Fund may not invest in currency futures
contracts.)
Forward currency contracts differ from currency futures contracts in
certain respects. For example, the maturity date of a forward contract may be
any fixed number of days from the date of the contract agreed upon the parties,
rather than a predetermined date in a given month. Forward contracts may be in
any amounts agreed upon by the parties rather than predetermined amounts. Also,
forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in currency futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market in such contracts.
Although the Funds intend to purchase or sell currency futures contracts only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time. In such
event, it may not be possible to close a futures position and, in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments or variation margin.
Currency Options
In general, options on currencies operate similarly to options on
securities and are subject to many risks similar to those applicable to currency
futures and forward contracts. Currency options are traded primarily in the
over-the-counter market, although options on currencies have recently been
listed on several exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit ("ECU"). The ECU is
composed of amounts of a number of currencies, and is the official medium of
exchange of the European Economic Community's European Monetary System.
C-K Strategic Income Fund will only purchase or write currency options
when Colonial believes that a liquid secondary market exists for such options.
There can be no assurance that a liquid secondary market will exist for a
particular option at any specified time. Currency options are affected by all of
those factors which influence exchange rates and investments generally. To the
extent that these options are traded over the counter, they are considered to be
illiquid by the SEC staff.
The value of any currency, including the U.S. dollar, may be affected
by complex political and economic factors applicable to the issuing country. In
addition, the exchange rates of currencies (and
S-29
<PAGE>
therefore the value of currency options) may be significantly affected, fixed,
or supported directly or indirectly by government actions. Government
intervention may increase risks involved in purchasing or selling currency
options, since exchange rates may not be free to fluctuate in respect to other
market forces.
The value of a currency option reflects the value of an exchange rate
which in turn reflects relative values of two currencies, the U.S. dollar and
the foreign currency in question. Because currency transactions occurring in the
interbank market involve substantially larger amounts than those that may be
involved in the exercise of currency options, investors may be disadvantaged by
having to deal in an odd-lot market for the underlying currencies in connection
with options at prices that are less favorable than for round-lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.
Valuations
There is no systematic reporting of last sale information for
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
round-lot transactions in the interbank market and thus may not reflect exchange
rates for smaller odd-lot transactions (less than $1 million) where rates may be
less favorable. The interbank market in currencies is a global, around-the-clock
market. To the extent that options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
Settlement Procedures
Settlement procedures relating to the Funds' investments in foreign
securities and to their foreign currency exchange transactions may be more
complex than settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not present in such
Funds' domestic investments, including foreign currency risks and local custom
and usage. Foreign currency transactions may also involve the risk that an
entity involved in the settlement may not meet its obligations.
Foreign Currency Conversion
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Funds at one rate, while
offering a lesser rate of exchange should the Funds desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligations.
S-30
<PAGE>
Options on Securities
C-K Utilities Fund may write covered put options on securities and may
purchase put options on securities. The Fund will only utilize options on
securities that are exchange traded.
A put option is a contract that gives the purchaser thereof, during the
term of the option, the right to sell a specified amount of the security
underlying the put option at the exercise price upon exercise of the option.
Through the writing of a covered put option, the Fund will receive
premium income but will also thereby obligate itself during the term of the
option, upon the exercise thereof, to purchase from the holder of the put option
the security underlying the option regardless of the market value of the
security during the option period.
To cover a put option written, the Fund may, for example, establish a
segregated asset account with the Trust's custodian containing cash or liquid
assets that, when added to amounts, if any, deposited with its broker as margin,
equal the market value of the securities underlying the put option written.
The Fund may purchase put options on securities for defensive purposes
in order to hedge against an anticipated decline in the value of its portfolio
securities. In addition, the Fund may write put options on securities, which may
partially offset the effects of adverse changes in the value of the Fund's
portfolio securities.
Although these investment practices will be used to attempt to reduce
the effect of any adverse price movement in the securities subject to the
option, they do involve certain risks that are different, in some respects, from
the investment risks associated with similar funds that do not engage in such
activities. These risks include the inability to effect closing transactions at
favorable prices and the obligation to purchase the specified securities at
prices which may not reflect their current market values. In addition, when
purchasing put options, the Fund is exposed to the possible loss of the entire
premium paid if the option expires unexercised.
Futures Contracts and Related Options
C-K Strategic Income Fund may engage in transactions involving interest
rate futures contracts and options thereon to hedge against changes in interest
rates. The Fund will engage in such transactions only with respect to securities
it may otherwise purchase or indices composed of such securities.
A futures contract sale creates an obligation by the seller to deliver
the type of financial instrument called for in the contract in a specified
delivery month for a stated price. A futures contract purchase creates an
obligation by the purchaser to take delivery of the type of financial instrument
called for in the contract in a specified delivery month at a stated price. The
specific instruments delivered or taken at settlement date are not determined
until on or near that date. The determination
S-31
<PAGE>
is made in accordance with the rules of the exchanges on which the futures
contract was made. Futures contracts are traded in the United States only on a
commodity exchange or boards of trade -- known as "contract markets" -- approved
for such trading by the CFTC, and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant contract market.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying financial instruments, the contracts usually are
closed out before the settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a futures contract
for the same aggregate amount of the specific type of financial instrument with
the same delivery date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid the difference
and realizes a gain. Conversely, if the price of the offsetting purchase exceeds
the price of the initial sale, the seller realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the purchaser's
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, the purchaser realizes a loss.
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract, although
the Fund is required to deposit with its custodian in a segregated account in
the name of the futures broker an amount of cash and/or U.S. Government
Securities. This amount is known as "initial margin." The nature of initial
margin in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the Fund to finance the transactions. Rather, initial margin is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts also involve
brokerage costs.
Subsequent payments, called "variation margin", to and from the broker
(or the custodian) are made on a daily basis as the price of the underlying
security or commodity fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as "marking to market."
The Fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to reduce
or eliminate the hedge position then currently held by the Fund. The Fund may
close its positions by taking opposite positions which will operate to terminate
the Fund's position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or gain. Such closing transactions
involve additional commission costs.
The Fund will enter into futures contracts only when, in compliance
with the SEC's requirements, cash or high quality liquid debt securities equal
in value to the commodity value (less any applicable margin deposits) have been
deposited in a segregated account of the Fund's custodian.
Options on futures contracts
The Fund may purchase and write call and put options on futures
contracts it may buy or sell and enter into closing transactions with respect to
such options to terminate existing positions. The
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<PAGE>
Fund may use such options on futures contracts in lieu of purchasing and selling
the underlying futures contracts. Such options generally operate in the same
manner as options purchased or written directly on the underlying investments.
As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an offsetting option. There is
no guarantee that such closing transactions can be effected.
The Fund will be required to deposit initial margin and maintenance
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. The Fund
will enter into written options on futures contracts only when, in compliance
with the SEC's requirements, cash or equivalents equal in value to the commodity
value (less any applicable margin deposits) have been deposited in a segregated
account of the Fund's custodian.
Risks of transactions in futures contracts and related options
Successful use of futures contracts by the Fund is subject to
Colonial's ability to predict correctly movements in the direction of interest
rates and other factors affecting securities markets.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when the purchase
of a call or put option on a futures contract would result in a loss to the Fund
when the purchase or sale of a futures contract would not, such as when there is
no movement in the prices of the hedged investments. The writing of an option on
a futures contract involves risks similar to those relating to the sale of
futures contracts.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not at times render certain market clearing
facilities inadequate, and thereby result in the institution by exchanges of
special procedures which may interfere with the timely execution of customer
orders.
To reduce or eliminate a hedge position held by the Fund, the Fund may
seek to close out a position. The ability to establish and close out positions
will be subject to the development and maintenance of a liquid secondary market.
It is not certain that this market will develop or continue to exist for a
particular futures contract. Reasons for the absence of a liquid secondary
market on an exchange include the following: (i) there may be insufficient
trading interest in certain contracts or options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of contracts or options, or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current trading volume;
or (vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some
S-33
<PAGE>
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange (or in the class or series of contacts or options), would cease to
exist, although outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
Passive Foreign Investment Companies
The C-K International Fund For Growth and N-K Tiger Fund may invest in
certain Passive Foreign Investment Companies (PFICs) which may be subject to
U.S. federal income tax on a portion of any "excess distribution" or gain (PFIC
tax) related to the investment. The PFIC tax is the highest ordinary income rate
and it could be increased by an interest charge on the deemed tax deferral. The
Funds may possibly elect to include in its income its pro rata share of the
ordinary earnings and net capital gain of the PFIC. This election requires
certain annual information from the PFICs which in many cases may be difficult
to obtain. An alternative election would permit the Fund to recognize as income
any appreciation (but not depreciation) on its holdings of PFICs as of the end
of its fiscal year.
Securities Loans
C-K U.S. Stock Fund may make loans of its portfolio securities
amounting to not more than 30% of its total assets. The risks in lending
portfolio securities, as with other extensions of credit, consist of possible
delay in recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. As a matter of policy, securities loans
are made to broker-dealers pursuant to agreements requiring that loans be
continuously secured by collateral in cash or short-term debt obligations at
least equal at all times to the value of the securities on loan. This collateral
is deposited with the Trust's custodian which segregates and identifies these
assets on its books as security for the loan. The borrower pays to the Fund an
amount equal to any dividends, interest or other distributions received on
securities lent. The borrower is obligated to return identical securities on
termination of the loan. The Fund retains all or a portion of the interest
received on investment of the cash collateral or receives a fee from the
borrower. Although voting rights or rights to consent with respect to the loaned
securities pass to the borrower, the Fund retains the right to call the loans at
any time on reasonable notice, and it will do so in order that the securities
may be voted by the Fund if the holders of such securities are asked to vote
upon or consent to matters materially affecting the investment. The Fund may
also call such loans in order to sell the securities involved. The Trust has
adopted these policies, in part, so that interest, dividends and other
distributions received on the loaned securities, the interest or fees paid by
the borrower to the Fund for the loan, and the investment income from the
collateral will qualify under certain investment limitations under Subchapter M
of the Internal Revenue Code.
INVESTMENT PERFORMANCE
Each of the Funds may quote total return figures from time to time.
Total return on a per share basis is the amount of dividends received per share
plus or minus the change in the net asset value per
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share for a given period. Total return percentages may be calculated by dividing
the value of a share at the end of a given period by the value of the share at
the beginning of the period and subtracting one.
Average Annual Total Return is computed as follows:
n
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 (or
fractional portion thereof).
For example, for a $1,000 investment in the Funds, the "Total Return",
the "Total Return Percentage" and (where applicable) the "Average Annual Total
Return" for the life of each Fund listed below (the period from July 1, 1993 in
the case of C-K Growth and Income Fund and C-K Utilities Fund; May 1, 1994, in
the case of C-K International Fund For Growth; July 5, 1994 in the case of C-K
U.S. Stock Fund and C-K Strategic Income Fund; and May 1, 1995, in the case of
N-K Tiger Fund) through December 31, 1996 were:
================================================================================
Total Total Return Average Annual
Fund Return Percentage Total Return
- --------------------------------------------------------------------------------
C-K Growth and Income Fund $1,598 59.76% 14.29%
- --------------------------------------------------------------------------------
C-K Utilities Fund $1,270 26.99% 7.05%
- --------------------------------------------------------------------------------
C-K International Fund For Growth $1,051 5.09% 1.87%
- --------------------------------------------------------------------------------
C-K U.S. Stock Fund $1,650 64.97% 22.21%
- --------------------------------------------------------------------------------
C-K Strategic Income Fund $1,314 31.35% 11.55%
- --------------------------------------------------------------------------------
N-K Tiger Fund $1,285 28.50% 16.16%
- --------------------------------------------------------------------------------
The figures contained in this "Investment Performance" section assume
reinvestment of all dividends and distributions. 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 information such as that shown above 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. The Fund's
total returns do not reflect the cost of insurance and other insurance company
separate account charges which vary with the VA contracts and VLI policies
offered through the separate accounts of the Participating Insurance Companies.
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<PAGE>
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse LLP are the Trust's independent accountants. The
financial statements incorporated by reference in this SAI have been so
incorporated, and the schedule of financial highlights has been included in the
Prospectus, in reliance upon the report of Price Waterhouse LLP given on the
authority of said firm as experts in accounting and auditing.
The financial statements of the Trust and Report of Independent
Accountants appearing on pages 15 to 53 of the December 31, 1996 Annual Report
of the Trust are incorporated in this SAI by reference.
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<PAGE>
- ------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
To the Shareholders and Trustees of
Keyport Variable Investment Trust
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the six series
(Colonial-Keyport Growth and Income Fund, Colonial-Keyport Utilities Fund,
Colonial-Keyport International Fund for Growth, Colonial-Keyport Strategic
Income Fund, Colonial-Keyport U.S. Fund for Growth and Newport-Keyport Tiger
Fund), constituting Keyport Variable Investment Trust (the "Trust"), at December
31, 1996, the results of their operations, the changes in their net assets and
the financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and the financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1996 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 12, 1997
15
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Keyport Variable Investment Trust Colonial-Keyport Growth and Income Fund /
December 31, 1996
- ------------------------------------------------------------------------------
Country
Abbrev. Shares Value
------------------------------------------
COMMON STOCKS--(87.2%)
Construction--(2.0%)
Building Construction--(2.0%)
Hollandsche Beton Groep NV Ne 6,850 $ 1,418,512
Koninklijke Volker Stevin NV Ne 3,000 280,333
Lennar Corp. 5,300 144,425
------------------
1,843,270
------------------
Special Trade Contractors--(0.0%)
Ericsson SPA It 3,000 40,794
------------------
Finance, Insurance & Real Estate--(23.8%)
Depository Institutions--(8.0%)
Astoria Financial Corp. 80,800 2,979,500
Bank of Montreal Ca 17,300 550,348
Commerce Bancshares, Inc. 1,365 63,131
Den Danske Bank De 3,000 241,751
Greenpoint Financial Corp. 42,500 2,013,437
Jyske Bank De 3,000 225,464
National Australia Bank Ltd. Au 38,800 456,435
Toronto Dominion Bank Ca 34,100 875,794
------------------
7,405,860
------------------
Insurance Carriers--(11.0%)
Allstate Corp. 4,100 237,287
American Bankers Insurance Group,
Inc. 27,700 1,416,162
Bankers Life Holding Corp. 16,500 412,500
CIGNA Corp. 18,500 2,527,562
CMAC Investment Corp. 5,000 183,750
Loews Corp. 14,700 1,385,475
Mercury General Corp. 11,800 619,500
Old Republic International Corp. 65,400 1,749,450
Reinsurance Group of America 1,500 70,687
Safeco Corp. 6,000 236,625
Sunamerica, Inc. 14,400 639,000
Vesta Insurance Group, Inc. 24,300 762,412
------------------
10,240,410
------------------
Security Brokers & Dealers--(4.8%)
A.G. Edwards, Inc. 88,200 2,965,725
Alex Brown, Inc. 18,000 1,305,000
John Nuveen & Co., Inc. 9,000 238,500
------------------
4,509,225
------------------
Manufacturing--(40.8%)
Apparel--(0.2%)
Gamma Holding NV Ne 3,000 144,766
------------------
Chemicals & Allied Products--(7.5%)
ARCO Chemical Co. 11,400 $ 558,600
Akzo Nobel NV Ne 14,074 949,995
Johnson & Johnson 24,900 1,238,775
Norsk Hydro A.S. No 7,100 380,737
Pharmacia & Upjohn, Inc. 43,355 1,717,942
Rhone-Poulene Rorer, Inc. 24,700 1,929,687
Wellman, Inc. 11,000 188,375
------------------
6,964,111
------------------
Electronic & Electrical Equipment--(0.7%)
Komag, Inc. (a) 20,800 564,200
SCI Systems, Inc. (a) 2,300 102,637
------------------
666,837
------------------
Fabricated Metal--(1.5%)
Ball Corp. 8,500 221,000
Harsco Corp. 17,500 1,198,750
------------------
1,419,750
------------------
Food & Kindred Products--(2.5%)
Archer Daniels Midland Co. 38,970 857,340
IBP, Inc. 62,800 1,522,900
------------------
2,380,240
------------------
Furniture & Fixtures--(0.3%)
Johnson Controls, Inc. 3,000 248,625
------------------
Machinery & Computer Equipment--(2.7%)
Sun Microsystems, Inc. (a) 82,800 2,126,925
Tecumseh Products Co., Class A 6,100 349,987
------------------
2,476,912
------------------
Measuring & Analyzing Instruments--(0.9%)
Becton, Dickinson & Co. 8,200 355,675
Hologic, Inc. (a) 900 22,275
Medtronic, Inc. 4,100 278,800
Raytheon Co. 4,600 221,375
------------------
878,125
------------------
Miscellaneous Manufacturing--(1.1%)
Callaway Golf Co. 36,200 1,040,750
------------------
Paper Products--(1.5%)
Potlatch Corp. 29,600 1,272,800
Westvaco Corp. 5,700 163,875
------------------
1,436,675
------------------
Petroleum Refining--(6.3%)
Amerada Hess Corp. 26,600 1,539,475
Exxon Corp. 4,400 431,200
Mobil Corp. 8,100 990,225
Phillips Petroleum Co. 60,100 2,659,425
Sun Co., Inc. 11,700 285,187
------------------
5,905,512
------------------
See Notes to Investment Portfolio.
16
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport Growth and Income Fund /
December 31, 1996
- --------------------------------------------------------------------------------
Country
Abbrev. Shares Value
-----------------------------------------
Primary Metal--(2.3%)
Alumax, Inc. (a) 24,400 $ 814,350
Asarco, Inc. 29,700 738,787
Texas Industries, Inc. 11,100 561,937
------------------
2,115,074
------------------
Primary Smelting--(1.3%)
Phelps Dodge Corp. 17,400 1,174,500
------------------
Printing & Publishing--(0.9%)
Moore Corp. Ltd. 8,200 167,075
New York Times Co., Class A 15,800 600,400
Standard Register Co. 2,900 94,250
------------------
861,725
------------------
Rubber & Plastic--(1.7%)
Goodyear Tire & Rubber Co. 31,300 1,608,038
------------------
Stone, Clay, Glass & Concrete--(0.7%)
Global Industrial Technologies,
Inc. (a) 27,500 608,438
------------------
Textile Mill Products--(1.3%)
Springs Industries, Inc. 29,000 1,247,000
------------------
Tobacco Products--(2.6%)
American Brands, Inc. 41,100 2,039,588
UST, Inc. 11,100 359,363
------------------
2,398,951
------------------
Transportation Equipment--(4.8%)
Equipements et Composants pour
l'Industrie Automobile Fr 2,050 316,782
Fleetwood Enterprises, Inc. 13,900 382,250
General Dynamics Corp. 7,200 507,600
Harley-Davidson, Inc. 10,400 488,800
McDonnell Douglas Corp. 27,400 1,753,600
Strattec Security Corp. (a) 120 2,190
TRW, Inc. 6,400 316,800
Thiokol Corp. 15,900 711,525
------------------
4,479,547
------------------
Mining & Energy--(0.3%)
Metal Mining
Cleveland-Cliffs, Inc. 6,700 304,013
------------------
Retail Trade--(4.2%)
Apparel & Accessory Stores--(0.3%)
Koninklijke Bijenkorf Beheer Ne 3,000 216,108
Macintosh N.V. Ne 3,000 65,961
------------------
282,069
------------------
Food Stores--(1.3%)
Vendex International N.V. Ne 22,700 970,624
Weis Markets, Inc. 7,700 245,438
------------------
1,216,062
------------------
General Merchandise Stores--(1.8%)
Bon-Ton Stores, Inc. (a) 6,500 39,813
Dillard Department Stores, Inc. 22,700 $ 700,863
Fred Meyer, Inc. 11,300 401,150
Mercantile Stores Co., Inc. 10,600 523,375
1,665,201
------------------
Miscellaneous Retail--(0.8%)
Revco D.S., Inc. (a) 7,000 259,000
Walgreen Co. 12,200 488,000
------------------
747,000
------------------
Services--(5.1%)
Amusement & Recreation--(0.0%)
Grand Casinos, Inc. (a) 3,450 46,575
------------------
Business Services--(2.1%)
Cadence Design Systems, Inc. (a) 16,650 661,838
HBO & Co. 7,200 427,500
Omnicom Group, Inc. 19,400 887,550
------------------
1,976,888
------------------
Engineering, Accounting, Research &
Management--(1.0%)
Corrections Corp. of
America (a) 15,600 477,750
International-Muller N.V. Ne 18,400 462,049
------------------
939,799
------------------
Health Services--(2.0%)
Sun Healthcare Group,
Inc. (a) 11,500 155,250
Universal Health Services, Inc.,
Class B (a) 58,500 1,674,563
------------------
1,829,813
------------------
Transportation, Communication, Electric, Gas & Sanitary Services--(10.4%)
Communications--(2.3%)
Ameritech Corp. 19,700 1,194,313
BellSouth Corp. 9,000 363,375
Frontier Corp. 26,900 608,613
------------------
2,166,301
------------------
Electric, Gas & Sanitary Services--(0.7%)
Gas y Electricidad SA Sp 4,550 290,746
Teco Energy, Inc. 14,300 344,988
------------------
635,734
------------------
Electric Services--(2.5%)
Boston Edison Co. 19,000 510,625
DTE Energy Co. 3,100 100,363
NIPSCO Industries, Inc. 16,400 649,850
Portland General Corp. 25,400 1,066,800
------------------
2,327,638
------------------
Gas Services--(3.5%)
Brooklyn Union Gas Co. 10,600 319,325
Consolidated Natural Gas Co. 15,900 878,475
See Notes to Investment Portfolio.
17
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport Growth and Income Fund /
December 31, 1996
- --------------------------------------------------------------------------------
Country
Abbrev. Shares Value
-----------------------------------------
National Fuel Gas Co. 10,700 $ 441,375
People's Energy Corp. 30,300 1,026,413
Sonat, Inc. 10,800 556,200
------------------
3,221,788
------------------
Sanitary Services--(0.6%)
Severn Trent Water PLC UK 25,000 285,214
United Utilities PLC UK 25,100 267,007
------------------
552,221
------------------
Water Transportation--(0.8%)
APL Ltd. 32,400 765,450
------------------
Wholesale Trade--(0.6%)
Durable Goods
Beers NV Ne 7,235 257,451
Marshall Industries (a) 10,300 315,438
------------------
572,889
------------------
Total Common Stocks
(Cost of $61,570,282) 81,344,576
------------------
Par
-------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--(5.3%)
U.S. Government Agencies--(3.2%)
Federal National Mortgage
Association, 6.500% maturities
ranging from 08/01/08-04/01/09 $3,048,720 2,995,073
-------------
Par Value
------------- --------------
U.S. Government Bonds--(2.1%)
U.S. Treasury Notes, 7.875%
04/15/98 $1,895,000 $ 1,944,441
--------------
Total Government Obligations
(Cost of $5,047,715) 4,939,514
--------------
Total Investments--(92.5%)
(Cost of $66,617,997) (b) 86,284,090
--------------
SHORT-TERM OBLIGATIONS--(7.4%)
Repurchase agreement with Lehman
Brothers, Inc., dated 12/31/96,
due 01/02/97 at 6.900%,
collateralized by U.S. Treasury
notes with various maturities to
2022, market value $7,002,790
(repurchase proceeds $6,910,648) 6,908,000 6,908,000
--------------
Other Assets & Liabilities, Net--(0.1%) 54,750
--------------
Net Assets--(100.0%) $93,246,840
==============
Notes to investment portfolio:
(a) Non-income producing.
(b) The cost for federal income tax purposes is identical.
Gross unrealized appreciation and depreciation at
December 31, 1996 is as follows:
Gross unrealized appreciation $20,646,099
Gross unrealized depreciation (980,006)
--------------
Net unrealized appreciation $19,666,093
==============
Summary of Securities by Country
% of Total
Country Securities
Country Abbrev. Value at Value
- --------------- --------- ------------- ------------
United States $ $77,587,219 89.9%
Netherlands Ne 4,765,799 5.5
Canada Ca 1,426,142 1.7
United Kingdom UK 552,221 0.6
Denmark De 467,215 0.5
Australia Au 456,435 0.5
Norway No 380,737 0.5
France Fr 316,782 0.4
Spain Sp 290,746 0.3
Italy It 40,794 0.1
-------------- ------------
$86,284,090 100.0%
============== ============
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
See Notes to Financial Statements.
18
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Keyport Variable Investment Trust Colonial-Keyport Growth and Income Fund /
December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (Identified cost $66,617,997) $86,284,090
Short-term obligations 6,908,000
Cash (including foreign currencies) 986
Dividends and interest receivable 175,312
Receivable for fund shares sold 8,840
Unamortized organization expenses 8,032
Other assets 3,411
-----------
Total assets 93,388,671
-----------
Liabilities:
Payable for fund shares repurchased 62,512
Management fee payable 50,806
Bookkeeping fee payable 3,648
Transfer agent fee payable 625
Accrued expenses payable 24,240
-----------
Total liabilities 141,831
-----------
Net assets $93,246,840
===========
Net assets represented by:
Paid-in capital $73,572,564
Accumulated undistributed net investment income 11,633
Accumulated net realized losses on investments and foreign currency transactions (3,468)
Net unrealized appreciation on investments and foreign currency transactions 19,666,111
-----------
Total net assets applicable to shares of beneficial interest outstanding $93,246,840
===========
Shares of beneficial interest outstanding 6,678,712
===========
Net asset value per share $13.96
===========
</TABLE>
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year ended December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends (net of nonrebatable foreign taxes withheld at source of $34,718) $ 1,599,302
Interest income 719,838
-----------
Total investment income 2,319,140
-----------
Expenses:
Management fee 538,173
Bookkeeping fee 40,025
Transfer agent fee 7,500
Audit fee 16,658
Printing expense 17,145
Trustees' expense 6,287
Custodian fee 8,227
Legal fee 1,508
Amortization of organization expense 5,384
Miscellaneous expense 11,099
-----------
Total expenses 652,006
-----------
Net investment income 1,667,134
Realized and unrealized gains on investments and foreign currency transactions:
Net realized gains on investments 3,883,301
Net realized gains on foreign currency transactions 10,848
Change in unrealized appreciation on investments and foreign currency transactions 8,029,922
-----------
Net increase in net assets resulting from operations $13,591,205
===========
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Keyport Variable Investment Trust Colonial-Keyport Growth and Income Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1996 1995
-------------- --------------
<S> <C> <C>
Operations:
Net investment income $ 1,667,134 $ 1,484,201
Net realized gains on investments 3,883,301 1,935,503
Net realized gains on foreign currency transactions 10,848 3,868
Unrealized appreciation on investments and foreign currency transactions 8,029,922 11,876,516
-------------- --------------
Net increase in net assets resulting from operations 13,591,205 15,300,088
-------------- --------------
Distributions declared from:
Net investment income (1,744,707) (1,366,483)
Net realized gains (3,888,095) (1,027,019)
-------------- --------------
Total distributions (5,632,802) (2,393,502)
-------------- --------------
Fund share transactions:
Proceeds from fund shares sold 18,289,038 14,488,981
Cost of fund shares repurchased (9,703,359) (6,771,090)
Distributions reinvested 5,632,802 2,393,502
-------------- --------------
Net increase in net assets resulting from fund share transactions 14,218,481 10,111,393
-------------- --------------
Total increase in net assets 22,176,884 23,017,979
Net assets:
Beginning of period 71,069,956 48,051,977
-------------- --------------
End of period $93,246,840 $71,069,956
============== ==============
Accumulated undistributed net investment income included in ending net assets $ 11,633 $ 83,580
============== ==============
Analysis of changes in shares of beneficial interest:
Shares sold 1,353,533 1,243,691
Shares redeemed (716,029) (587,044)
Distributions reinvested 402,075 190,717
-------------- --------------
Net increase 1,039,579 847,364
============== ==============
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Keyport Variable Investment Trust Colonial-Keyport Growth and Income Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1996 1995 1994 1993***
---------------------- --------- -------------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period $ 12.60 $ 10.03 $ 10.36 $ 10.00
---------------------- --------- -------------
Net investment income (a) 0.28 0.29 0.26 0.09
Net realized and unrealized gains (losses) on investments
and foreign currency transactions (a) 1.98 2.72 (0.34) 0.41
---------------------- --------- -------------
Total from investment operations 2.26 3.01 (0.08) 0.50
---------------------- --------- -------------
Less distributions from:
Dividends from net investment income (0.28) (0.25) (0.25) (0.11)
Dividends from net realized gains on investments (0.62) (0.19) -- (0.03)
---------------------- --------- -------------
Total distributions (0.90) (0.44) (0.25) (0.14)
====================== ========= =============
Net asset value, end of period $ 13.96 $ 12.60 $ 10.03 $ 10.36
====================== ========= =============
Total return:
Total investment return (b) 17.89% 30.03% (0.76)% 5.01%**(d)
Ratios/supplemental data:
Net assets, end of period (000) $93,247 $71,070 $48,052 $29,298
Ratio of net expenses to average net assets 0.79%(e) 0.81%(e) 0.87% 1.00%*(c)
Ratio of net investment income to average net assets 2.02%(e) 2.51%(e) 2.82% 2.32%*(d)
Portfolio turnover ratio 24% 79% 55% 8%**
Average commission rate (f) $0.0383 -- -- --
</TABLE>
* Annualized
** Not Annualized.
*** For the period from the commencement of operations July 1, 1993 to
December 31, 1993.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.23%
(annualized) for the period ended December 31, 1993.
(d) Computed giving effect to Manager's expense limitation undertaking.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net benefits
received, if any.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Federal Income Tax Information (unaudited)
73.9% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
See Notes to Financial Statements.
21
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Keyport Variable Investment Trust Colonial-Keyport Utilities Fund / December
31, 1996
- ------------------------------------------------------------------------------
Shares Value
------------- --------------
COMMON STOCKS & CONVERTIBLES--(83.1%)
Transportation, Communication, Electric,
Gas & Sanitary Services--(83.1%)
Communications--(26.5%)
AT&T Corp. 7,500 $ 326,250
Ameritech Corp. 32,400 1,964,250
Bell Atlantic Corp. 15,500 1,003,625
BellSouth Corp. 39,000 1,574,625
Frontier Corp. 18,400 416,300
GTE Corp. 40,000 1,820,000
Lucent Technologies, Inc. 4,862 224,844
MCI Communications Corp. 11,500 375,906
NYNEX Corp. 39,000 1,876,875
Pacific Telesis Group, Inc. 16,000 588,000
SBC Communications, Inc. 29,100 1,505,925
Sprint Corp. 3,500 139,563
360 Communications Co. (a) 1,500 34,687
US West Communications Group 18,000 580,500
US West Media Group (a) 15,000 277,500
--------------
12,708,850
--------------
Electric Services--(44.6%)
American Electric Power Co., Inc. 19,500 801,937
Boston Edison Co. 13,000 349,375
CMS Energy Corp. 25,000 840,625
CMS Energy Corp., Class G 25,000 459,375
Carolina Power & Light Co. 17,000 620,500
Cinergy Corp. 45,500 1,518,562
Citizens Utilities Co. 5% Convertible
Preferred 5,000 238,750
DPL, Inc. 58,000 1,421,000
DTE Energy Co. 26,600 861,175
Eastern Utilities Assoc. 11,300 196,337
Edison International 35,000 695,625
Entergy Corp. 6,200 172,050
FPL Group, Inc. 33,000 1,518,000
GPU, Inc. 37,000 1,244,125
Houston Industries, Inc. 29,100 658,387
IES Industries, Inc. 12,900 385,388
KU Energy Corp. 8,000 240,000
Kansas City Power & Light Co. 22,500 641,250
MidAmerican Energy Co. 20,000 317,500
North Carolina Natural Gas Corp. 8,000 231,000
Ohio Edison Co. 11,700 266,175
PacifiCorp 56,500 1,158,250
Pinnacle West Capital Corp. 15,000 476,250
Portland General Corp. 22,000 924,000
Public Service Co. of Colorado 23,500 913,563
Public Service Enterprise Group, Inc. 7,500 204,375
Puget Sound Power & Light Co. 2,700 64,800
Rochester Gas & Electric Corp. 1,600 30,600
Scana Corp. 15,000 401,250
Sierra Pacific Resources 10,000 $ 287,500
Southern Co. 47,000 1,063,375
Texas Utilities Co. 33,000 1,344,750
Union Electric Co. 3,800 146,300
Utilicorp United, Inc. 16,800 453,600
Western Resources, Inc. 6,500 200,688
--------------
21,346,437
--------------
Gas Services--(12.0%)
Consolidated Natural Gas Co. 10,000 552,500
Energen Corp. 900 27,225
MCN Corp. 37,500 1,082,813
MDU Resources Group, Inc. 6,500 149,500
Pacific Enterprises 15,500 470,813
PanEnergy Corp. 18,700 841,500
Peoples Energy Corp. 7,600 257,450
Public Service Co. of North Carolina 25,000 456,250
UGI Corp. 21,000 469,875
Williams Companies, Inc. 38,850 1,456,875
--------------
5,764,801
--------------
Total Common Stocks & Convertibles
(Cost of $32,967,473) 39,820,088
--------------
PREFERRED STOCKS--(11.5%)
Transportation, Communication, Electric,
Gas & Sanitary Services--(11.5%)
Electric Services--(9.7%)
Arizona Public Service Co.,
Series W $1.8125 12,000 301,500
Baltimore Gas & Electric Co., 6.75%,
Series 1987 1,503 151,239
Central Power & Light Co., 7.12% 6,000 591,000
Commonwealth Edison Co., 7.24%, 5,500 534,875
Montana Power Co., $6.875 5,000 505,625
Northern Indiana Public Service Co.,
7.44% 1,000 98,750
Peco Energy Co., 7.48% 2,000 208,250
PSI Energy, Inc., 7.44% 13,000 329,875
PSI Energy, Inc., 6.875% 4,000 422,500
Pennsylvania Power & Light Co., 6.75% 5,000 521,250
Southern California Edison Co., 7.36% 11,000 270,875
TU Electric Capital, 8.25% 28,000 700,000
--------------
4,635,739
--------------
Gas Services--(1.8%)
Enron Corp., 8.00% 20,000 502,500
MCN Corp., 8.75% 2,500 69,063
Pacific Enterprises, $4.50 550 36,850
Williams Cos., Inc., $3.50 3,000 262,875
--------------
871,288
--------------
See Notes to Investment Portfolio.
22
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport Utilities Fund / December
31, 1996
- ------------------------------------------------------------------------------
Shares Value
------------- --------------
PREFERRED STOCKS (Continued)
Total Preferred Stocks
(Cost of $5,630,879) $ 5,507,027
--------------
Total Investments
(Cost of $38,598,352) (b) 45,327,115
--------------
SHORT-TERM OBLIGATIONS--(3.8%)
Par
-------------
Repurchase agreement with Lehman
Brothers, Inc., dated 12/31/96, due
01/02/97 at 6.900% collateralized by
U.S. Treasury notes with various
maturities to 2022, market value
$1,826,727 (repurchase proceeds
$1,802,691) $1,802,000 1,802,000
--------------
Other Assets & Liabilities, Net--(1.6%) 777,682
--------------
Net Assets--(100.0%) $47,906,797
==============
Notes to investment portfolio:
(a) Non-income producing
(b) Cost for federal income tax purposes is $38,600,695. Gross unrealized
appreciation and depreciation at December 31, 1996 is as follows:
Gross unrealized appreciation $7,275,005
Gross unrealized depreciation (548,585)
-------------
Net unrealized appreciation $6,726,420
=============
See Notes to Financial Statements.
23
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Keyport Variable Investment Trust Colonial-Keyport Utilities Fund / December
31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (Identified cost $38,598,352) $45,327,115
Short-term obligations 1,802,000
Cash 132
Receivable for investments sold 662,920
Dividends and interest receivable 168,430
Unamortized organization expenses 8,244
Other assets 2,792
--------------
Total assets 47,971,633
--------------
Liabilities:
Payable for fund shares repurchased 15,771
Management fee payable 26,099
Bookkeeping fee payable 2,250
Transfer agent fee payable 625
Accrued expenses payable 19,858
Other liabilities 233
--------------
Total liabilities 64,836
--------------
Net assets $47,906,797
==============
Net assets represented by:
Paid-in capital $45,903,470
Accumulated overdistributed net investment income (16,477)
Accumulated net realized losses on investments (4,708,959)
Net unrealized appreciation on investments 6,728,763
--------------
Total net assets applicable to shares of beneficial interest outstanding $47,906,797
==============
Shares of beneficial interest outstanding 4,476,115
==============
Net asset value per share $10.70
==============
</TABLE>
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year ended December 31, 1996
- ------------------------------------------------------------------------------
Investment income:
Dividends $2,438,433
Interest income 67,813
-------------
Total investment income 2,506,246
-------------
Expenses:
Management fee 315,944
Bookkeeping fee 27,000
Transfer agent fee 7,500
Audit fee 16,824
Printing expense 11,013
Trustees' fees 3,511
Custodian fee 4,393
Legal fee 57
Amortization of organization expense 5,527
Miscellaneous expense 2,880
-------------
Total expenses 394,649
-------------
Net investment income 2,111,597
Realized and unrealized gains (losses) on investments:
Net realized losses on investments (45,156)
Change in unrealized appreciation on investments 871,144
-------------
Net increase in net assets resulting from operations $2,937,585
=============
See Notes to Financial Statements.
24
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Keyport Variable Investment Trust Colonial-Keyport Utilities Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
Operations:
Net investment income $ 2,111,597 $ 2,180,202
Net realized losses on investments (45,156) (1,331,430)
Unrealized appreciation on investments 871,144 12,515,955
--------------- --------------
Net increase in net assets resulting from operations 2,937,585 13,364,727
--------------- --------------
Distributions declared from:
Net investment income (2,098,660) (2,164,475)
--------------- --------------
Fund share transactions:
Proceeds from fund shares sold 5,054,022 8,726,703
Cost of fund shares repurchased (11,681,570) (8,650,479)
Distributions reinvested 2,098,660 2,164,475
--------------- --------------
Net increase (decrease) in net assets resulting from fund share transactions (4,528,888) 2,240,699
--------------- --------------
Total increase (decrease) in net assets (3,689,963) 13,440,951
Net assets:
Beginning of period 51,596,760 38,155,809
--------------- --------------
End of period $ 47,906,797 $51,596,760
=============== ==============
Accumulated overdistributed net investment income included in ending net assets $ (16,477) $ (29,414)
=============== ==============
Analysis of changes in shares of beneficial interest:
Shares sold 478,345 942,276
Shares redeemed (1,111,326) (940,625)
Distributions reinvested 194,321 206,533
--------------- --------------
Net increase (decrease) (438,660) 208,184
=============== ==============
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Keyport Variable Investment Trust Colonial-Keyport Utilities Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1996 1995 1994 1993***
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period $ 10.50 $ 8.11 $ 9.65 $ 10.00
----------- ----------- ----------- ---------------
Net investment income (a) 0.46 0.46 0.54 0.18
Net realized and unrealized gains (losses) on investments (a) 0.23 2.39 (1.53) (0.35)
----------- ----------- ----------- ---------------
Total from investment operations 0.69 2.85 (0.99) (0.17)
----------- ----------- ----------- ---------------
Less distributions from:
Dividends from net investment income (0.49) (0.46) (0.55) (0.18)
----------- ----------- ----------- ---------------
Net asset value, end of period $ 10.70 $ 10.50 $ 8.11 $ 9.65
=========== =========== =========== ===============
Total return:
Total investment return (b) 6.53% 35.15% (10.27)% (1.70)%**(c)
Ratios/supplemental data:
Net assets, end of period (000) $47,907 $51,597 $38,156 $54,441
Ratio of net expenses to average net assets 0.81%(d) 0.83%(d) 0.86% 1.00%*(e)
Ratio of net investment income to average net assets 4.36%(d) 4.98%(d) 5.80% 5.10%*(c)
Portfolio turnover ratio 14% 18% 16% 2%**
Average commission rate (f) $0.0468 -- -- --
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations July 1, 1993 to
December 31, 1993.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.09%
(annualized) for the period ended December 31, 1993.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
See Notes to Financial Statements.
26
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Keyport Variable Investment Trust Colonial-Keyport International Fund For
Growth / December 31, 1996
- ------------------------------------------------------------------------------
Country
Abbrev. Shares Value
--------- ----------- -------------
COMMON STOCKS--(92.4%)
Agriculture, Forestry & Fishing--(0.3%)
Agricultural--Crops
PT Chareon Pokphand Indonesia In 65,000 $ 73,613
-------------
Construction--(1.8%)
Heavy Construction
Non Building Construction--(1.8%)
Company Generale des Eaux Fr 2,355 291,766
Kaneshita Construction Ja 13,000 123,329
Sino Thai Engineering &
Construction Public Co., Ltd. Th 28,600 74,700
-------------
489,795
-------------
Finance, Insurance & Real Estate--(20.1%)
Depository Institutions--(5.5%)
Banco Latinoamericano de
Exportaciones SA Po 8,300 421,225
Banco Popolare di Milano It 51,000 258,829
Generale de Banque SA Be 1,155 413,910
Generale de Banque SA STRIPS
(a) Be 105 60
International Bank of Asia HK 190,000 126,511
Korea Exchange Bank HK 25,591 233,419
-------------
1,453,954
-------------
Holding Companies--(1.6%)
Fortis Amev NV Ne 12,407 434,313
-------------
Insurance Carriers--(1.3%)
Reinsurance Australia Corp. Au 89,000 346,634
-------------
Holding & Other Investment Companies--(4.1%)
Fleming Russia Securities Fund
(a) Ru 32,000 344,000
Japan OTC Equity Fund,
Inc. (a) Ja 170 127,500
ROC Taiwan Fund Tw 24,975 255,994
World Equity Benchmark Share
(a) Ja 27,000 352,620
-------------
1,080,114
-------------
Nondepository Credit Institution--(1.7%)
Promise Co., Ltd. Ja 9,000 442,432
-------------
Real Estate--(4.6%)
Diligentia Ab (a) Sw 24,000 376,662
HKR International Ltd. HK 131,000 221,029
Kawasan Industri Jababeka In 212,000 246,825
New World Development Co., Ltd. HK 41,000 276,973
Property Perfect Public Co.,
Ltd. Th 39,800 41,116
Tian An China Investments HK 490,000 70,321
-------------
1,232,926
-------------
Security Brokers & Dealers--(1.3%)
Kokusai Securities Co., Ltd. Ja 20,000 $ 188,012
L.G. Securities (a) Ko 16,000 162,840
-------------
350,852
-------------
Manufacturing--(38.6%)
Apparel--(1.0%)
Tokyo Style Ja 19,000 265,459
-------------
Chemicals & Allied Products--(8.0%)
Henkel KGAA (a) G 1,067 51,083
Indian Petrochemicals Corp.,
Ltd. GDR In 15,800 181,700
Indupa S.A. (a) Ar 186,285 214,268
Kemira Oy Fi 40,300 507,557
Norsk Hydro A/S No 8,200 444,842
PT Evershine Textile Industry In 427,396 126,662
Reliance Industries Ltd. GDR In 6,000 72,000
Smithkline Beecham PLC UK 24,206 334,882
Yizheng Cemical Fibre Co., Ltd. HK 846,000 205,634
-------------
2,138,628
-------------
Electronic & Electrical Equipment--(6.1%)
Alcatel Alsthom Fr 3,455 277,465
Koor Industries Ltd. ADR UK 7,200 122,400
LG Electronics Ko 11,000 141,031
Matsushaita Electric Industrial
Co. Ja 26,000 423,804
Moulinex Fr 13,000 299,326
Murata Manufacturing Co., Ltd. Ja 10,000 327,728
Samsung Electronics GDR Bonus
Shares Ko 52 1,872
Samsung Electronics GDS Bonus
Shares (a) Ko 175 7,241
1,600,867
-------------
Food & Kindred Products--(0.7%)
Perdigao SA Comercio e
Industria (a) Br 70,000,000 134,732
Vitasoy International Holdings
Ltd. HK 133,000 58,035
-------------
192,767
-------------
Lumber & Wood Products--(1.6%)
Metsa-Serla, Series B Fi 56,000 419,526
-------------
Machinery & Computer Equipment--(6.1%)
Agiv-AG G 14,300 206,870
Canon, Inc. Ja 14,000 309,099
Hitachi Ltd. Ja 42,000 391,203
Mannesmann AG G 1,070 462,984
Mori Seiki Ja 19,000 262,182
-------------
1,632,338
-------------
See Notes to Investment Portfolio.
27
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport International Fund For
Growth / December 31, 1996
- ------------------------------------------------------------------------------
Country
Abbrev. Shares Value
--------- ----------- -------------
Paper Products--(2.3%)
Enso-Gutzeit Oy Fi 45,000 $ 364,479
Metro Pacific Corp. Ph 950,000 234,791
-------------
599,270
-------------
Petroleum Refining--(3.4%)
NESTE Oy Fi 11,700 282,007
YPF Sociedad Anonima ADR Ar 15,000 378,750
Yukong Ltd. (a) Ko 12,700 240,473
-------------
901,230
-------------
Primary Metal--(5.1%)
Acerinox SA Sp 2,100 303,303
Avesta Sheffield Sw 42,400 454,972
Svenskt Stal AB (SSAB), Series
B Sw 30,000 499,296
TransTec PLC UK 48,222 85,908
-------------
1,343,479
-------------
Rubber & Plastic--(0.2%)
World Houseware Holdings Ltd. HK 990,000 56,319
-------------
Stone, Clay, Glass & Concrete--(2.6%)
Companion Building Materials,
Ltd. HK 731,200 136,134
Freidrich Grohe AG G 1,200 330,847
Kim Hin Industry Bhd (a) Ma 57,000 95,696
N.V. Koninklijke Sphinx
Gustavberg Ne 11,546 132,943
-------------
695,620
-------------
Textile Mill Products--(0.5%)
Companhia de Tecidos Norte de
Minas Br 440,000 140,418
-------------
Transportation Equipment--(1.0%)
Suzuki Motor Co., Ltd. Ja 28,000 255,972
-------------
Mining & Energy--(3.6%)
Coal Mining--(0.9%)
Samchully Co. Ko 2,600 182,900
Samchully Co. New 1 (a) Ko 488 35,493
Samchully Co. New 2 (a) Ko 195 13,834
-------------
232,227
-------------
Crude Petroleum & Natural Gas--(2.7%)
Compagnie Francaise de
Petroleum Total B Fr 4,089 332,477
Saga Petroleum A/S No 23,100 387,535
-------------
720,012
-------------
Retail Trade--(7.8%)
Auto Dealers & Gas Stations--(2.0%)
Inchcape PLC UK 115,472 536,048
-------------
Food Stores--(2.6%)
Jardine Matheson Holdings Ltd.
(a) Ja 29,394 $ 194,001
Jusco Co., Ltd. Ja 15,000 508,409
-------------
702,410
-------------
General Merchandise Stores--(2.4%)
Ito-Yokado Co., Ltd. Ja 7,000 304,269
PT Matahari Putra Prima In 278,000 323,666
-------------
627,935
-------------
General Merchandise Stores--(0.8%)
Globex Utilidades SA (a) Br 13,000 211,433
-------------
Services--(2.3%)
Business Services--(1.2%)
Ing C. Olivetti & SPA (a) It 782,000 274,266
Intrum Justitia UK 32,186 57,340
-------------
331,606
-------------
Health Services--(1.1%)
Novartis Sz 260 296,894
-------------
Transportation, Communication, Electric, Gas & Sanitary
Services--(13.3%)
Air Transportation--(1.0%)
Helikopter Service A/S No 22,000 286,297
-------------
Communications--(8.1%)
DDI Corp. Ja 40 264,252
Portugal Telecom ADR Po 17,000 480,250
Royal Koninklijke PTT Nederland
NV Ne 11,583 441,659
Tele-Communications
International, Inc. (a) 18,400 243,800
Telecom Argentina SA ADR Ar 5,600 226,100
Telecom Italia It 72,000 143,004
Telecom Italia SPA It 135,000 350,394
-------------
2,149,459
-------------
Gas Services--(1.9%)
British Gas Corp. UK 130,000 501,053
-------------
Transportation Services--(0.9%)
Danzas Holding Sz 120 132,737
Precious Shipping Public Co.,
Ltd. Th 60,800 117,324
-------------
250,061
-------------
Water Transportation--(1.4%)
Hong Kong Ferry Holdings Co. HK 90,000 175,706
Transpotacion Maritima Meicana
ADR Mx 35,400 185,850
-------------
361,556
-------------
See Notes to Investment Portfolio.
28
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport International Fund For
Growth / December 31, 1996
- ------------------------------------------------------------------------------
Country
Abbrev. Shares Value
--------- ----------- -------------
Wholesale Trade--(4.6%)
Durable Goods--(3.8%)
Brierley Investments Ltd. NZ 353,000 $ 326,614
Celsis International PLC (a) UK 82,685 151,554
Powerscreen International PLC UK 25,800 249,704
Yamazen Corp. (a) Ja 73,000 270,720
-------------
998,592
-------------
Nondurable Goods--(0.8%)
Lion Nathan Ltd. NZ 88,600 212,140
-------------
Total Common Stocks
(Cost $23,862,074) 24,564,249
-------------
PREFERRED STOCKS--(2.3%)
Manufacturing--(2.0%)
Chemicals and Allied Products--(1.5%)
Henkel KGAA (a) G 7,733 387,779
-------------
Electronic & Electrical Equipment--(0.5%)
Samsung Electronics Ko 400 10,338
Samsung Electronics GDS Ko 6,197 114,335
Samsung Electronics GDR Bonus
Shares (a) Ko 1,867 29,872
-------------
154,545
-------------
Transportation, Communication, Electric, Gas & Sanitary
Services--(0.3%)
Electric Integrated--(0.3%)
Electricidade Sao Paulo, Class
B Br 490,000 72,385
-------------
Total Preferred Stocks
(Cost $717,015) 614,709
-------------
Total Investments
(Cost $24,579,089) (b) 25,178,958
-------------
Par Value
------------- --------------
SHORT-TERM OBLIGATIONS--(5.5%)
Repurchase agreement with
Lehman Brothers, Inc., dated
12/31/96, due 01/02/97 at
6.900%, collateralized by
U.S. Treasury notes with
various maturities to 2022,
market value $1,479,020
(repurchase proceeds
$1,459,559) $1,459,000 $ 1,459,000
--------------
Other Assets & Liabilities, Net--(-0.2%) (44,911)
--------------
Net Assets--(100%) $26,593,047
==============
Notes to investment portfolio:
(a) Non-income producing.
(b) The cost for federal income tax purposes is $24,583,636. Gross unrealized
appreciation and depreciation at December 31, 1996 is as follows:
Gross unrealized appreciation $ 3,422,613
Gross unrealized depreciation (2,827,291)
--------------
Net unrealized appreciation $ 595,322
==============
See Notes to Investment Portfolio.
29
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport International Fund for
Growth / December 31, 1996
- ------------------------------------------------------------------------------
Summary of Securities by Country
% of Total
Country Securities
Country Abbrev. Value at Value
- ---------------- --------- ------------- ------------
Japan Ja $ 5,010,991 19.9%
United Kingdom UK 2,038,889 8.1
Finland Fi 1,573,569 6.2
Hong Kong HK 1,560,081 6.2
Germany G 1,439,563 5.7
Sweden Sw 1,330,930 5.3
France Fr 1,201,034 4.8
Norway No 1,118,674 4.4
Italy It 1,026,493 4.1
Indonesia In 1,024,466 4.1
Netherlands Ne 1,008,915 4.0
Korea Ko 940,229 3.7
Portugal Po 901,475 3.6
Argentina Ar 819,118 3.3
Brazil Br 558,968 2.2
New Zealand NZ 538,754 2.1
Switzerland Sz 429,631 1.7
Belgium Be 413,970 1.6
Australia Au 346,634 1.4
Russia Ru 344,000 1.4
Spain Sp 303,303 1.2
Taiwan Tw 255,994 1.0
United States $ 243,800 1.0
Thailand Th 233,140 0.9
Philippines Ph 234,791 0.9
Mexico Mx 185,850 0.7
Malaysia Ma 95,696 0.5
------------- ------------
$25,178,958 100.0%
============= ============
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
- ----------------------------------------------------
ADR American Depository Receipt
GDR Global Depository Receipt
GDS Global Depository Shares
STRIPS Separately Traded of Registered Interest
and Principal of Security
See Notes to Financial Statements.
30
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Keyport Variable Investment Trust Colonial-Keyport International Fund for
Growth / December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (Identified cost $24,579,089) $25,178,958
Short-term obligations 1,459,000
Cash (including foreign currencies) 293,521
Dividends, tax reclaims and interest receivable 51,318
Unamortized organization expenses 10,068
Other assets 622
--------------
Total assets 26,993,487
--------------
Liabilities:
Foreign currencies 289,202
Payable for investments bought 52,923
Payable for fund shares repurchased 3,552
Management fee payable 19,934
Bookkeeping fee payable 2,250
Transfer agent fee payable 625
Accrued expenses payable 31,954
--------------
Total liabilities 400,440
--------------
Net assets $26,593,047
==============
Net assets represented by:
Paid-in capital $25,953,311
Accumulated overdistributed net investment income (3,447)
Accumulated net realized gains on investments and foreign currency transactions 42,816
Net unrealized appreciation on investments and foreign currency transactions 600,367
--------------
Total net assets applicable to outstanding shares of beneficial interest $26,593,047
==============
Shares of beneficial interest outstanding 13,597,431
==============
Net asset valueer share $1.96
==============
</TABLE>
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year ended December 31, 1996
- ------------------------------------------------------------------------------
Investment income:
Dividends (net of nonrebatable foreign taxes withheld at
source of $63,801) $ 499,762
Interest income 55,711
------------
Total investment income 555,473
------------
Expenses:
Management fee 224,146
Bookkeeping fee 27,000
Transfer agent fee 7,500
Audit fee 20,400
Printing expense 4,710
Trustees' expense 2,014
Custodian fee 56,655
Amortization of organization expense 4,331
Miscellaneous expense 1,020
------------
Total expenses 347,776
------------
Net investment income 207,697
Realized and unrealized gains (losses) on investments and
foreign currency transactions:
Net realized gains on investments 1,628,143
Net realized losses on foreign currency transactions (41,603)
Change in unrealized depreciation on investments and
foreign currency transactions (520,184)
------------
Net increase in net assets resulting from operations $1,274,053
============
See Notes to Financial Statements.
31
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Keyport Variable Investment Trust Colonial-Keyport International Fund for
Growth
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1996 1995
-------------- --------------
<S> <C> <C>
Operations:
Net investment income $ 207,697 $ 153,289
Net realized gains (losses) on investments 1,628,143 (747,347)
Net realized losses on foreign currency transactions (41,603) (158,469)
Change in unrealized appreciation (depreciation) on investments and foreign
currency transactions (520,184) 2,044,305
-------------- --------------
Net increase in net assets resulting from operations 1,274,053 1,291,778
-------------- --------------
Distributions declared from:
Net investment income -- (228,274)
Net realized gains (1,535,936) --
-------------- --------------
Total distributions (1,535,936) (228,274)
-------------- --------------
Fund share transactions:
Proceeds from fund shares sold 6,030,306 7,406,320
Cost of fund shares repurchased (3,475,389) (5,079,991)
Distributions reinvested 1,535,936 228,274
-------------- --------------
Net increase in net assets resulting from fund share transactions 4,090,853 2,554,603
-------------- --------------
Total increase in net assets 3,828,970 3,618,107
Net assets:
Beginning of period 22,764,077 19,145,970
-------------- --------------
End of period $26,593,047 $22,764,077
-------------- --------------
Accumulated overdistributed net investment income included in ending net assets $ (3,447) $ (53,329)
============== ==============
Analysis of changes in shares of beneficial interest:
Shares sold 2,963,621 4,012,557
Shares redeemed (1,708,699) (2,743,550)
Distributions reinvested 787,660 115,875
-------------- --------------
Net increase 2,042,582 1,384,882
============== ==============
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Keyport Variable Investment Trust Colonial-Keyport International Fund for
Growth
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Year Ended December Ended
31, December 31,
---------------------- ---------------
1996 1995 1994***
---------------------- ---------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period $ 1.97 $ 1.88 $ 2.00
---------------------- ---------------
Net investment income (a) 0.02 0.01 --
Net realized and unrealized gains (losses) on investments and foreign
currency transactions (a) 0.09 0.10 (0.12)
---------------------- ---------------
Total from investment operations 0.11 0.11 (0.12)
---------------------- ---------------
Less distributions from:
Dividends from net investment income -- (0.02) --
Dividends from net realized gains on investments (0.12) -- --
Total distributions (0.12) (0.02) --
---------------------- ---------------
Net asset value, end of period $ 1.96 $ 1.97 $ 1.88
====================== ===============
Total return:
Total investment return (b) 5.61% 5.85% (6.00)%**
Ratios/supplemental data:
Net assets, end of period (000) $26,593 $22,764 $19,146
Ratio of net expenses to average net assets 1.40%(c) 1.40%(c) 1.74%*
Ratio of net investment income to average net assets 0.84%(c) 0.75%(c) 0.13%*
Portfolio turnover ratio 114% 40% 31%**
Average commission rate (d) $0.0010 -- --
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations May 2, 1994 to December
31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(d) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for trades on which
commissions are charged.
Federal Income Tax Information (unaudited)
51.8% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
See Notes to Financial Statements.
33
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Keyport Variable Investment Trust Colonial-Keyport Strategic Income Fund /
December 31, 1996
- ------------------------------------------------------------------------------
Par Value
----------- ------------
BONDS & NOTES--(95.5%)
CORPORATE FIXED-INCOME BONDS
& NOTES--(39.0%)
Construction--(0.5%)
Building Construction
USG Corp., 9.250% 09/15/01 $250,000 $ 266,875
------------
Manufacturing--(14.1%)
Chemicals & Allied Products--(1.2%)
Agricultural Minerals Co., L.P., 10.750%
09/30/03 200,000 213,250
Revlon Worldwide Corp., (a) 03/15/98 500,000 430,000
------------
643,250
------------
Electronic & Electrical Equipment--(1.0%)
UNISYS Corp., 11.750% 10/15/04 500,000 533,750
------------
Fabricated Metal--(3.0%)
Euramax International, PLC, 11.250% 10/01/06
(b)(e) 250,000 258,750
Renco Metals, Inc., 11.500% 07/01/03 500,000 523,125
Rexnord Holdings, Inc., 10.750% 07/01/02 750,000 805,178
------------
1,587,053
------------
Food & Kindred Products--(1.5%)
FoodBrands America, Inc., 10.750% 05/15/06 250,000 266,250
Van De Kamps, Inc., 12.000% 09/15/05 500,000 551,250
------------
817,500
------------
Lumber & Wood Products--(0.5%)
Triangle Pacific Corp., 10.500% 08/01/03 250,000 266,563
------------
Machinery & Computer Equipment--(0.9%)
IMO Industries, 11.750% 05/01/06 500,000 467,500
------------
Miscellaneous Manufacturing--(0.9%)
American Standard Co., stepped coupon, (10.500%
06/01/98) (c) 06/01/05 350,000 327,688
Coleman Holdings Co., Series B, (a) 05/27/98 200,000 166,750
------------
494,438
------------
Primary Metal--(2.0%)
Algoma Steel, Inc., 12.375%
07/15/05 500,000 541,250
US Can Corp., 10.125% 10/15/06 (b) 500,000 525,000
------------
1,066,250
------------
Stone, Clay, Glass & Concrete--(1.0%)
Owens-Illinois, Inc., 10.500% 06/15/02 $500,000 $ 528,750
------------
Transportation Equipment--(2.1%)
Aftermarket Technology Corp., Series B, 12.000%
08/01/04 500,000 558,750
Collins & Aikman Products Co., 11.500% 04/15/06 500,000 547,500
------------
1,106,250
------------
Mining & Energy--(3.0%)
Crude Petroleum & Natural Gas--(0.5%)
Ferrellgas Finance Corp., L.P., 10.000%
08/01/01 250,000 262,813
------------
Oil & Gas Extraction--(2.5%)
Coastal Corp., 9.750% 08/01/03 500,000 572,205
Gulf Canada Resources Ltd., 9.250% 01/15/04 (d) 250,000 264,375
Nevo Energy Co., 9.500%
04/15/06 250,000 265,000
Santa Fe Energy Resources, Inc., 11.000%
05/15/04 225,000 248,625
------------
1,350,205
------------
Retail Trade--(2.0%)
Food Stores--(1.5%)
Pathmark Stores, Inc., 9.625% 05/01/03 250,000 239,375
Smiths Food & Drug, 11.250% 05/15/07 500,000 552,500
------------
791,875
------------
Miscellaneous Retail--(0.5%)
Finlay Fine Jewelry Corp., 10.625% 05/01/03 250,000 261,875
------------
Services--(5.1%)
Health Services--(3.1%)
GranCare, Inc., 9.375% 09/15/05 500,000 545,000
OrNda Health Corp., 11.375% 08/15/04 250,000 289,375
Tenet Healthcare Corp., 10.125% 03/01/05 750,000 828,750
------------
1,663,125
------------
Hotels, Camps & Lodging--(2.0%)
Eldorado Resorts Corp., 10.500% 08/15/06 (b) 500,000 527,500
HMH Properties, Inc., 9.500% 05/15/05 250,000 260,938
Wyndham Hotel Corp., 10.500% 05/15/06 250,000 266,250
------------
1,054,688
------------
See Notes to Investment Portfolio.
34
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport Strategic Income Fund /
December 31, 1996
- ------------------------------------------------------------------------------
Par Value
----------- ------------
Transportation, Communication, Electric, Gas & Sanitary
Services--(14.3%)
Air Transportation--(2.0%)
Greenwich Air Services, Inc., 10.500% 06/01/06 $250,000 $ 267,500
U.S. Air, Inc., 10.375% 03/01/13 500,000 521,250
United Airlines, Inc., 9.200% 03/22/08 276,590 302,136
------------
1,090,886
------------
Broadcasting--(2.0%)
NWCG Holding Corp., (a)
06/15/99 425,000 353,813
Young Broadcasting Corp., 11.750% 11/15/04 650,000 715,000
------------
1,068,813
------------
Cable--(3.9%)
Bell Cablemedia PLC, stepped coupon, (11.950%
07/15/99) (c) 07/15/04 (e) 400,000 350,000
Cablevision Systems Corp., 10.750% 04/01/04 250,000 258,125
Comcast Cable Partners Ltd., stepped coupon,
(11.200% 11/15/00) (c) 11/15/07 (e) 500,000 353,750
Lenfest Communications, Inc., 8.375% 11/01/05 400,000 387,000
Marcus Cable Co., L.P. 11.875% 10/01/05 500,000 536,250
Videotron Holding PLC, stepped coupon, (11.000%
08/15/00) (c) 08/15/05 (e) 250,000 201,250
------------
2,086,375
------------
Electric, Gas & Sanitary Services--(1.0%)
Mesa Operating Co., 10.625% 07/01/06 500,000 543,750
------------
Electric Services--(0.3%)
California Energy Co., Inc., 9.500% 09/15/06 150,000 154,125
------------
Gas Services--(0.5%)
California Energy Co., Inc., 9.875% 06/30/03 250,000 260,000
------------
Telecommunication--(4.6%)
Brooks Fiber Properties, Inc., stepped coupon,
(10.875% 03/01/01) (c) 03/01/06 500,000 333,750
ICG Holding, Inc., stepped coupon, (13.500%
09/15/00)
(c) 09/15/05 500,000 358,750
MFS Communications Co., Inc., stepped coupon:
(8.875% 01/15/01) (c) 01/15/06 500,000 365,625
(9.375% 01/15/99) (c) 01/15/04 500,000 435,000
Paging Network, Inc., 10.125% 08/01/07 $500,000 $ 510,625
PanAmSat Corp., stepped coupon, (11.375%
08/01/98) (c) 08/01/03 500,000 463,750
------------
2,467,500
------------
Total Corporate Fixed-Income
Bonds & Notes (Cost of $20,083,707) 20,834,209
------------
Currency
-----------
Foreign Government & Agency Obligations--(32.7%)
Argentina Global Bonds,
11.000% 10/09/06 (f) 400,000 419,200
Government of Finland Bond,
7.250% 04/18/06 FM 12,000,000 2,791,488
Kingdom of Denmark, 8.000%
05/15/03 DK 15,841,000 2,978,199
Republic of Poland (Brady),
Past Due Interest, stepped
coupon, (5.000% 10/27/98)
4.000% 10/27/14 (g) 1,705,000 1,438,594
Spanish Government Bonds,
11.300%
01/15/02 SP 332,910,000 3,123,033
Swedish Government Bonds,
10.250%
05/05/03 SK 15,200,000 2,695,686
Treasury Corp. of Victoria,
10.250% 11/15/06 A$ 2,493,000 2,340,878
Western Australia Treasury
Corp., 12.000% 08/01/01 A$ 1,740,000 1,647,047
--------------
Total Foreign
Government & Agency Obligations
(Cost of $16,748,050) 17,434,125
--------------
US Government & Agency Obligations--(23.8%)
Federal Home Loan Mortgage
Corp., CMO, 9.500% 04/15/19 21,935 22,712
--------------
MDC Mortgage Funding Corp., CMO, 8.850%
03/20/18 161,795 165,436
--------------
U.S. Treasury Bonds:
8.750% 05/15/17 (h) 4,056,000 4,948,969
11.625% 11/15/04 166,000 219,171
--------------
5,168,140
--------------
U.S. Treasury Notes, 11.875%
11/15/03 (h) 5,625,000 7,337,981
--------------
Total U.S. Government & Agency Obligations
(Cost of $12,495,374) 12,694,269
--------------
Total Bonds & Notes
(Cost of $49,327,131) 50,962,603
--------------
See Notes to Investment Portfolio.
35
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport Strategic Income Fund /
December 31, 1996
- ------------------------------------------------------------------------------
Shares Value
-------- ------------
Preferred Stocks--(0.7%)
Transportation, Communication, Electric,
Gas & Sanitary Services
Communications
Cablevision Systems Corp.,
11.125% PIK, Series M
(Cost $413,001) 4,287 $ 384,800
Total Investments--(96.2%)
(Cost of $49,740,132) (i) 51,347,403
------------
Par
-----------
Short-Term Obligations--(1.2%)
Repurchase agreement with Lehman
Brothers, Inc., dated 12/31/96,
due 01/02/97 at 6.900%,
collateralized by U.S. Treasury
notes with various maturities to
2022, market value $651,823
(repurchase proceeds $643,246) $643,000 643,000
-------------
Forward Currency Contracts--(0.0%) (j) 11,223
Other Assets & Liabilities, Net--(2.6%) 1,391,309
-------------
Net Assets--100.0% $53,392,935
=============
Notes to Investment Portfolio:
(a) Zero coupon bond.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1996, the value of these securities amounted to $1,311,250 or 2.5% of net
assets.
(c) Currently zero coupon. Shown parenthetically is the interest rate to be paid
and the date the Fund will begin accruing this rate.
(d) This is a Canadian security. Par amount is stated in U.S. dollars.
(e) This is a British security. Par amount is stated in U.S. dollars.
(f) This is an Argentinean security. Par amount is stated in U.S. dollars.
(g) This is a Polish security. Par amount is stated in U.S. dollars. Shown
parenthetically is the interest rate to be paid and the date the Fund will
begin accruing this rate.
(h) These securities, or a portion thereof, with a total market value of
$7,826,045 are being used to collateralize the forward currency contracts
shown below.
(i) Cost for federal income tax purposes is $49,750,870. Gross unrealized
appreciation and depreciation at December 31, 1996 is as follows:
Gross unrealized appreciation $1,898,412
Gross unrealized depreciation (301,879)
-------------
Net unrealized appreciation $1,596,533
=============
(j) As of December 31, 1996, the Fund had entered into the following forward
currency exchange contracts:
Net Unrealized
Appreciation
Contracts Settlement (Depreciation)
to deliver In exchange for Date (U.S. $)
- -------------------------------- ------------- ----------------
FF 178,867 US$ 34,279 01/16/1997 (216)
FF 4,056,525 US$ 773,613 01/13/1997 (8,554)
FF 4,517,198 US$ 874,422 01/08/1997 3,714
FM 1,210,822 US$ 260,953 01/13/1997 (2,191)
FM 1,106,764 US$ 240,053 01/16/1997 (531)
DK 8,764,649 US$ 1,485,436 01/16/1997 (2,704)
DK 244,831 US$ 41,781 01/08/1997 231
A$ 1,260,328 US$ 1,001,961 01/23/1997 520
FM 4,290,205 US$ 934,474 01/08/1997 2,450
SK 5,944,766 US$ 874,037 01/16/1997 5,576
SK 3,472,794 US$ 520,074 01/08/1997 12,928
----------------
$11,223
================
Summary of Securities by Currency
Currency Value % of Total
---------- -------------- -------------
United States $ $35,771,072 69.7%
Australia A$ 3,987,925 7.8
Spain SP 3,123,033 6.1
Denmark DK 2,978,199 5.8
Finland FM 2,791,488 5.4
Sweden SK 2,695,686 5.2
-------------- -------------
$51,347,403 100.0%
============== =============
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
- ---------------------------------
PIK Payment-In-Kind
FF French Francs
See Notes to Financial Statements.
36
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Keyport Variable Investment Trust Colonial-Keyport Strategic Income Fund /
December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (Identified cost $49,740,132) $51,347,403
Short-term obligations 643,000
Cash 697
Dividends and interest receivable 1,459,958
Expense reimbursement due from Adviser 7,152
Unrealized appreciation on forward currency exchange contracts 11,223
Unamortized organization expenses 9,958
Other assets 2,987
--------------
Total assets 53,482,378
--------------
Liabilities:
Payable for fund shares repurchased 29,641
Management fee payable 29,187
Bookkeeping fee payable 2,250
Transfer agent fee payable 625
Accrued expenses payable 27,740
--------------
Total liabilities 89,443
--------------
Net assets $53,392,935
==============
Net assets represented by:
Paid-in capital $51,796,138
Accumulated overdistributed net investment income (5,726)
Accumulated net realized losses on investments and foreign currency transactions (10,977)
Net unrealized appreciation on investments and foreign currency transactions 1,613,500
--------------
Total net assets applicable to outstanding shares of beneficial interest $53,392,935
==============
Shares of beneficial interest outstanding 4,838,352
==============
Net asset value per share $11.04
==============
</TABLE>
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year ended December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Interest income $4,372,353
Dividends 41,090
-------------
Total investment income 4,413,443
-------------
Expenses:
Management fee 322,142
Bookkeeping fee 27,000
Transfer agent fee 7,500
Audit fee 20,000
Printing expense 12,934
Trustees' expense 4,392
Custodian fee 19,302
Legal fee 1,971
Amortization of organization expense 3,982
Miscellaneous expense 3,714
-------------
Total expenses 422,937
-------------
Less:
Expenses reimbursable by Manager (27,636)
-------------
Net expenses 395,301
-------------
Net investment income 4,018,142
Realized and unrealized gains on investments and foreign currency transactions:
Net realized gains on investments 259,150
Net realized gains on foreign currency transactions 330,664
Change in unrealized appreciation on investments and foreign currency transactions 22,412
-------------
Net increase in net assets resulting from operations $4,630,368
=============
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Keyport Variable Investment Trust Colonial-Keyport Strategic Income Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1996 1995
--------------- ---------------
<S> <C> <C>
Operations:
Net investment income $ 4,018,142 $ 2,260,858
Net realized gains on investments 259,150 356,528
Net realized gains (losses) on foreign currency transactions 330,664 (89,581)
Change in unrealized appreciation on investments and foreign currency transactions 22,412 1,745,890
--------------- ---------------
Net increase in net assets resulting from operations 4,630,368 4,273,695
--------------- ---------------
Distributions declared from:
Net investment income (4,244,982) (2,313,068)
Net realized gains on investments (309,530) (140,532)
--------------- ---------------
Total distributions (4,554,512) (2,453,600)
--------------- ---------------
Fund share transactions:
Proceeds from fund shares sold 15,151,911 17,078,534
Receipts for shares issued in acquisition of SteinRoe Managed Income Fund -- 37,220,278
Cost of fund shares repurchased (14,723,831) (23,580,161)
Distributions reinvested 4,554,512 2,453,600
--------------- ---------------
Net increase in net assets resulting from fund share transactions 4,982,592 33,172,251
--------------- ---------------
Total increase in net assets 5,058,448 34,992,346
Net assets:
Beginning of period 48,334,487 13,342,141
--------------- ---------------
End of period $ 53,392,935 $ 48,334,487
=============== ===============
Accumulated overdistributed net investment income included in ending net assets $ (5,726) $ (68,878)
=============== ===============
Analysis of changes in shares of beneficial interest:
Shares sold 1,337,261 1,586,240
Issued in acquisition of SteinRoe Managed Income Fund -- 3,302,598
Shares redeemed (1,307,531) (2,079,174)
Distributions reinvested 412,547 223,869
--------------- ---------------
Net increase 442,277 3,033,533
=============== ===============
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Keyport Variable Investment Trust Colonial-Keyport Strategic Income Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Year Ended December Ended
31, December 31,
---------------------- ---------------
1996 1995 1994***
----------- ----------- ---------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period $ 10.99 $ 9.79 $ 10.00
----------- ----------- ---------------
Net investment income (a) 0.92 0.55 0.30
Net realized and unrealized gains (losses) on investments and
foreign currency transactions (a) 0.16 1.24 (0.19)
----------- ----------- ---------------
Total from investment operations 1.08 1.79 0.11
----------- ----------- ---------------
Less distributions:
Dividends from net investment income (0.96) (0.56) (0.31)
Dividends from net realized gains on investments (0.07) (0.03) (0.01)
----------- ----------- ---------------
Total distributions (1.03) (0.59) (0.32)
----------- ----------- ---------------
Net asset value, end of period $ 11.04 $ 10.99 $ 9.79
=========== =========== ===============
Total return:
Total investment return (b)(c) 9.83% 18.30% 1.10%**
Ratios/supplemental data:
Net assets, end of period (000) $53,393 $48,334 $13,342
Ratio of net expenses to average net assets (d) 0.80%(e) 0.84%(e) 1.00%*
Ratio of net investment income to average net assets (c) 8.13%(e) 8.08%(e) 7.33%*
Portfolio turnover ratio 114% 281% 94%**
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations July 5, 1994 to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 0.86%, 0.94%
and 1.60% (annualized), respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
Federal Income Tax Information (unaudited)
59.1% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
See Notes to Financial Statements.
39
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Keyport Variable Investment Trust Colonial-Keyport U.S. Fund For Growth /
December 31, 1996
- ------------------------------------------------------------------------------
Shares Value
------------- ---------------
COMMON STOCKS--(94.1%)
Finance, Insurance & Real Estate--(15.3%)
Depository Institutions--(5.8%)
BankAmerica Corp. 10,500 $1,047,375
Charter One Financial, Inc. 6,100 256,200
Chase Manhattan Corp. 8,200 731,850
Comerica, Inc. 5,100 267,112
First Bank System, Inc. 3,900 266,175
First Union Corp. 6,900 510,600
Keycorp 8,000 404,000
Nations Bank Corp. 500 48,875
---------------
3,532,187
---------------
Insurance Carriers--(4.1%)
AMBAC, Inc. 1,200 79,650
Allmerica Financial Corp. 300 10,050
Allstate Corp. 8,724 504,900
CIGNA Corp. 4,400 601,150
Everest Reinsurance Holdings, Inc. 15,800 454,250
Mercury General Corp. 4,800 252,000
Old Republic International Corp. 8,550 228,712
Travelers Group, Inc. 3,266 148,195
Wellpoint Health Networks, Inc.,
Class A 6,135 210,891
---------------
2,489,798
---------------
Nondepository Credit Institutions--(4.6%)
American Express Co. 15,800 892,700
Beneficial Corp. 10,300 652,762
ITT Hartford Group, Inc. 9,700 654,750
Student Loan Marketing Association 6,600 614,625
---------------
2,814,837
---------------
Security Brokers & Dealers--(0.8%)
Donaldson, Lufkin & Jenrette, Inc. 5,900 212,400
Merrill Lynch & Co., Inc. 3,200 260,800
---------------
473,200
---------------
Manufacturing--(51.7%)
Chemicals & Allied Products--(11.7%)
Abbott Laboratories 1,700 86,275
American Home Products Corp. 12,000 703,500
Amgen, Inc. (a) 13,200 717,750
Bristol-Myers Squibb Co. 11,500 1,250,625
Clorox Co. 3,100 311,162
Dow Chemical Co. 6,600 517,275
International Specialty Products,
Inc. (a) 100 1,225
Johnson & Johnson 18,000 895,500
Merck & Co., Inc. 20,500 1,624,625
PPG Industries, Inc. 2,200 123,475
Procter & Gamble Co. 800 86,000
Schering-Plough Corp. 5,300 $ 343,175
Union Carbide Corp. 11,500 470,062
---------------
7,130,649
---------------
Electronic & Electrical Equipment--(6.2%)
Cooper Industries, Inc. 9,000 379,125
General Electric Co. 11,300 1,117,288
Intel Corp. 14,400 1,885,500
Pairgain Technologies, Inc. (a) 600 18,262
SCI Systems, Inc. (a) 8,200 365,925
---------------
3,766,100
---------------
Food & Kindred Products--(6.7%)
Archer Daniels Midland Co. 7,200 158,400
Coca Cola Co. 16,000 842,000
Conagra, Inc. 8,900 442,775
Heinz (H.J.) Co. 13,200 471,900
Hershey Foods, Corp. 8,400 367,500
Hormel Foods Corp. 1,000 27,000
Interstate Bakeries Corp. 9,000 442,125
Philip Morris Co., Inc. 7,300 822,162
Sara Lee Corp. 14,300 532,675
---------------
4,106,537
---------------
Furniture & Fixtures--(1.2%)
Johnson Controls, Inc. 7,200 596,700
Leggett & Platt, Inc. 4,200 145,425
---------------
742,125
---------------
Lumber & Wood Products--(0.1%)
Georgia Pacific Corp. 600 43,200
---------------
Machinery & Computer Equipment--(8.1%)
Case Corp. 4,500 245,250
Caterpillar, Inc. 8,900 669,725
Compaq Computer Corp. (a) 12,500 928,125
Cooper Cameron Corp. (a) 1,900 145,350
Dell Computer Corp. (a) 15,600 828,750
Gateway 2000, Inc. (a) 10,000 535,625
Storage Technology Corp. (a) 8,800 419,100
Sun Microsystems, Inc. (a) 7,400 190,087
Tecumseh Products Co., Class A 5,300 304,087
Western Digital Corp. (a) 11,900 676,812
---------------
4,942,911
---------------
Measuring & Analyzing Instruments--(3.4%)
Beckman Instruments, Inc. 9,300 356,888
Becton, Dickinson & Co. 8,600 373,025
Honeywell, Inc. 10,200 670,650
Tektronix, Inc. 12,600 645,750
---------------
2,046,313
---------------
Miscellaneous Manufacturing--(0.8%)
Callaway Golf Co. 17,400 500,250
---------------
See Notes to Investment Portfolio.
40
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport U.S. Fund For Growth /
December 31, 1996
- ------------------------------------------------------------------------------
Shares Value
------------- ---------------
Paper Products--(1.3%)
Consolidated Papers, Inc. 2,000 $ 98,250
Fort Howard Corp. (a) 11,300 312,869
International Paper Co. 1,400 56,525
Mead Corp. 5,100 296,438
---------------
764,082
---------------
Petroleum Refining--(7.1%)
Amoco Corp. 7,900 635,950
Atlantic Richfield Co. 2,300 304,750
Exxon Corp. 16,100 1,577,800
Mobil Corp. 8,400 1,026,900
Phillips Petroleum Co. 6,800 300,900
USX-Marathon Group 19,800 472,725
---------------
4,319,025
---------------
Primary Metal--(0.4%)
USX-US Steel Group 8,200 257,275
---------------
Printing & Publishing--(0.8%)
Tribune Co. 6,400 504,800
---------------
Stone, Clay, Glass & Concrete--(0.4%)
USG Corp. (a) 7,900 267,613
---------------
Tobacco Products--(0.8%)
American Brands, Inc. 7,100 352,338
RJR Nabisco Holdings Corp. 4,600 156,400
---------------
508,738
---------------
Transportation Equipment--(2.7%)
Chrysler Corp. 17,800 587,400
General Dynamics Corp. 500 35,250
McDonnell Douglas Corp. 13,900 889,600
Trinity Industries, Inc. 3,500 131,250
---------------
1,643,500
---------------
Mining & Energy--(2.0%)
Crude Petroleum & Natural Gas--(1.1%)
Apache Corp. 18,800 665,050
---------------
Nonmetallic, Except Fuels--(0.1%)
Vulcan Materials Co. 800 48,700
---------------
Oil & Gas Extraction--(0.8%)
Rowan Companies, Inc. (a) 6,500 147,063
Trans Ocean Offshore Drilling, Inc. 5,400 338,175
---------------
485,238
---------------
Retail Trade--(5.8%)
Apparel & Accessory Stores--(1.3%)
TJX Companies, Inc. 16,900 800,638
---------------
Building, Hardware & Garden Supply--(0.9%)
Lowes Companies, Inc. 15,100 536,050
---------------
Food Stores--(0.6%)
Vons Companies, Inc. (a) 6,200 371,225
---------------
General Merchandise Stores--(1.3%)
Dayton Hudson Corp. 16,500 $ 647,625
Staples, Inc. (a) 6,800 122,825
---------------
770,450
---------------
Home Furnishings & Equipment--(0.3%)
CompUSA, Inc. (a) 7,600 156,750
---------------
Miscellaneous Retail--(1.4%)
Borders Group, Inc. (a) 15,000 538,125
Office Depot, Inc. (a) 16,500 292,875
Tiffany & Co. 1,000 36,625
---------------
867,625
---------------
Services--(6.4%)
Business Services--(2.5%)
Computer Associates International,
Inc. 12,750 634,313
Microsoft Corp. (a) 4,600 380,075
Sterling Software, Inc. (a) 2,700 85,388
The Learning Company, Inc. (a) 28,900 415,438
---------------
1,515,214
---------------
Health Services--(1.8%)
Manor Care, Inc. 6,300 170,100
OrNda Health Corp. (a) 12,900 377,325
Tenet Healthcare Corp. (a) 25,400 555,625
---------------
1,103,050
---------------
Hotels, Camps & Lodging--(0.9%)
Choice Hotels Holdings, Inc. (a) 6,300 111,038
MGM Grand, Inc. (a) 12,900 449,888
---------------
560,926
---------------
Motion Pictures--(1.2%)
King World Productions, Inc. (a) 11,800 435,125
Walt Disney Co. 3,900 271,538
---------------
706,663
---------------
Transportation, Communication, Electric,
Gas & Sanitary Services--(12.7%)
Air Transportation--(0.1%)
Delta Air Lines, Inc. 800 56,700
---------------
Communications--(8.7%)
AT&T Corp. 2,400 104,400
Ameritech Corp. 17,600 1,067,000
Bell Atlantic Corp. 2,700 174,825
BellSouth Corp. 9,000 363,375
Compuware Corp. (a) 12,300 616,538
GTE Corp. 13,700 623,350
Lucent Technologies, Inc. 3,678 170,100
NYNEX Corp. 6,600 317,625
Pacific Telesis Group, Inc. 6,400 235,200
SBC Communications, Inc. 12,700 657,225
Southern New England
Telecommunications Corp. 2,600 101,075
See Notes to Investment Portfolio.
41
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Colonial-Keyport U.S. Fund For Growth /
December 31, 1996
- ------------------------------------------------------------------------------
Shares Value
------------- ---------------
Sprint Corp. 20,700 $ 825,412
---------------
5,256,125
---------------
Electric, Gas & Sanitary Services--(0.7%)
Enova Corp. 18,400 418,600
---------------
Electric Services--(2.2%)
Boston Edison Co. 6,500 174,688
Central & South West Corp. 10,900 279,312
Consolidated Edison Co.
of New York 2,700 78,975
Entergy Corp. 7,700 213,675
Ohio Edison Co. 20,100 457,275
Rochester Gas & Electric Corp. 3,200 61,200
Texas Utilities Co. 1,600 65,200
---------------
1,330,325
---------------
Gas Services--(0.3%)
Consolidated Natural Gas Co. 1,900 104,975
National Fuel Gas Co. 2,300 94,875
---------------
199,850
---------------
Railroad--(0.7%)
CSX Corp. 5,400 228,150
Illinois Central Corp. 200 6,400
Kansas City Southern Industries, Inc. 4,600 207,000
---------------
441,550
---------------
Wholesale Trade--(0.2%)
Nondurable Goods--(0.2%)
Caraustar Industries, Inc. 1,100 $ 36,575
Richfood Holdings, Inc. 2,850 69,112
---------------
105,687
---------------
Total Common Stocks
(Cost of $46,202,643) (b) 57,249,556
---------------
SHORT TERM OBLIGATIONS--(5.8%)
Repurchase agreement with Lehman Par
Brothers, Inc., dated 12/31/96, due
01/02/97 at 6.900%, collateralized
by U.S. Treasury notes with various
maturities to 2022, market value
$3,557,150 (repurchase proceeds
$3,510,345) $3,509,000 3,509,000
---------------
Other Assets & Liabilities, Net--(0.1%) 96,071
---------------
Net Assets--(100%) $60,854,627
===============
Notes to Investment Portfolio:
(a) Non-income producing.
(b) The cost for federal income tax purposes is $46,204,622. Gross unrealized
appreciation and depreciation at December 31, 1996 is as follows:
Gross unrealized appreciation $11,849,801
Gross unrealized depreciation 804,867
--------------
Net unrealized appreciation $11,044,934
==============
See Notes to Financial Statements.
42
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Keyport Variable Investment Trust Colonial-Keyport U.S. Fund for Growth /
December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (Identified cost $46,202,643) $57,249,556
Short-term obligations 3,509,000
Cash 725
Dividends and interest receivable 109,293
Unamortized organization expenses 9,958
Other assets 100,408
--------------
Total assets 60,978,940
--------------
Liabilities:
Management fee payable 41,342
Bookkeeping fee payable 2,250
Transfer agent fee payable 625
Accrued expenses payable 22,150
Other liabilities 57,946
--------------
Total liabilities 124,313
--------------
Net assets $60,854,627
==============
Net assets represented by:
Paid-in capital $49,824,192
Accumulated overdistributed net investment income (1)
Accumulated net realized losses on investments (16,477)
Net unrealized appreciation on investments 11,046,913
--------------
Total net assets applicable to outstanding shares of beneficial interest $60,854,627
==============
Shares of beneficial interest outstanding 4,279,066
==============
Net asset value per share $14.22
==============
</TABLE>
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year ended December 31, 1996
- ------------------------------------------------------------------------------
Investment income:
Dividends $ 1,157,283
Interest income 68,626
-------------
Total investment income 1,225,909
-------------
Expenses:
Management fee 418,745
Bookkeeping fee 27,000
Transfer agent fee 7,500
Audit fee 13,132
Printing expense 8,573
Trustees' expense 3,853
Custodian fee 8,930
Legal fee 233
Amortization of organization expense 3,982
Miscellaneous expense 6,296
-------------
Total expenses 498,244
-------------
Net investment income 727,665
Realized and unrealized gains on investments:
Net realized gains on investments 2,722,737
Change in unrealized appreciation on investments 6,906,156
-------------
Net increase in net assets resulting from operations $10,356,558
=============
See Notes to Financial Statements.
43
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Keyport Variable Investment Trust Colonial-Keyport U.S. Fund for Growth
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
Operations:
Net investment income $ 727,665 $ 512,329
Net realized gains on investments 2,722,737 2,620,298
Change in unrealized appreciation on investments 6,906,156 3,846,518
--------------- --------------
Net increase in net assets resulting from operations 10,356,558 6,979,145
--------------- --------------
Distributions declared from:
Net investment income (692,338) (518,493)
Net realized gains on investments (2,738,643) (2,576,965)
--------------- --------------
Total distributions (3,430,981) (3,095,458)
--------------- --------------
Fund share transactions:
Proceeds from fund shares sold 17,615,945 26,906,230
Cost of fund shares repurchased (10,135,228) (6,240,626)
Distributions reinvested 3,430,981 3,095,458
--------------- --------------
Net increase in net assets resulting from fund share transactions 10,911,698 23,761,062
--------------- --------------
Total increase in net assets 17,837,275 27,644,749
Net assets:
Beginning of period 43,017,352 15,372,603
--------------- --------------
End of period $ 60,854,627 $43,017,352
=============== ==============
Accumulated overdistributed net investment income included
in ending net assets $ (1) $ (35,328)
=============== ==============
Analysis of changes in shares of beneficial interest:
Shares sold 1,304,388 2,240,739
Shares redeemed (742,371) (508,643)
Distributions reinvested 237,611 250,442
--------------- --------------
Net increase 799,628 1,982,538
=============== ==============
</TABLE>
See Notes to Financial Statements.
44
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Keyport Variable Investment Trust Colonial-Keyport U.S. Fund for Growth
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Ended
Year Ended December 31, December 31,
-------------------------- ---------------
1996 1995 1994***
----------- -------------- ---------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period $ 12.36 $ 10.27 $ 10.00
----------- -------------- ---------------
Net investment income (a) 0.19 0.21 0.09
Net realized and unrealized gains on investments (a) 2.52 2.84 0.35
----------- -------------- ---------------
Total from investment operations 2.71 3.05 0.44
----------- -------------- ---------------
Less distributions:
Dividends from net investment income (0.17) (0.16) (0.11)
Dividends from net realized gains on investments (0.68) (0.80) (0.06)
----------- -------------- ---------------
Total Distributions (0.85) (0.96) (0.17)
----------- -------------- ---------------
Net asset value, end of period $ 14.22 $ 12.36 $ 10.27
=========== ============== ===============
Total return:
Total investment return (c) 21.84% 29.70%(b) 4.40%(b)**
Ratios/supplemental data:
Net assets, end of period (000) $60,855 $43,017 $15,373
Ratio of net expenses to average net assets 0.95%(e) 1.00%(d)(e) 1.00%(d)*
Ratio of net investment income to average net assets 1.39%(e) 1.72%(b)(e) 2.16%(b)*
Portfolio turnover ratio 77% 115% 52%**
Average commission rate (f) $0.0395 -- --
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations July 5, 1994 to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Computed giving effect to Manager's expense limitation undertaking.
(c) Total return at net asset value assuming all distributions reinvested.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 1.07% and
1.64% (annualized), respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Federal Income Tax Information (unaudited)
87.6% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
See Notes to Financial Statements.
45
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Keyport Variable Investment Trust Newport-Keyport Tiger Fund / December 31,
1996
- ------------------------------------------------------------------------------
Country
Abbrev. Shares Value
--------- ------------ --------------
COMMON STOCKS--(94.8%)
Agriculture, Forestry & Fishing--(2.0%)
Agriculture--(Crops--(2.0%)
Sime Darby Bhd Ma 173,000 $ 681,588
--------------
Construction--(4.2%)
Heavy Construction--Non Building
Construction--(4.2%)
Citic Pacific Ltd. HK 254,000 1,474,510
--------------
Finance, Insurance & Real Estate--(22.8%)
Depository Institutions--(22.8%)
Bank of Ayudhya Ltd. Th 97,250 229,363
Development Bank of Singapore
Ltd. Si 94,000 1,269,453
Guoco Group Ltd. HK 147,000 822,949
HSBC Holdings PLC HK 76,200 1,630,500
Hang Seng Bank HK 122,600 1,489,999
Oversea-Chinese Banking Corp.
Ltd (Foreign) Si 88,500 1,100,322
Public Bank Bhd Ma 397,666 842,413
Thai Farmers Bank Ltd. Th 81,500 508,342
--------------
7,893,341
--------------
Holding & Other Investment Companies--(6.6%)
Ayala Land Inc., Class B Ph 30,000 34,221
Hutchison Whampoa Ltd. HK 197,000 1,547,320
Singapore Technologies
Industrial Corp. Si 256,000 640,229
Taiwan Fund, Inc. Tw 3,000 66,750
--------------
2,288,520
--------------
Real Estate--(21.4%)
China Overseas Land &
Investment HK 400,000 202,987
Cheung Kong (Holdings) Ltd. HK 187,000 1,662,195
City Developments Ltd. Si 133,000 1,197,428
Filinvest Development Corp. Ph 325,000 96,388
Land and House Co., Ltd. Th 30,000 218,696
New World Development Co., Ltd. HK 163,000 1,101,138
SM Prime Holdings, Inc. Ph 130,000 33,612
Sun Hung Kai Properties Ltd. HK 118,000 1,445,536
Swire Pacific Ltd., Series A HK 153,000 1,458,885
--------------
7,416,865
--------------
Manufacturing--(9.8%)
Chemicals & Allied Products--(0.7%)
Kalbe Farma In 129,000 147,460
PT Darya Varia Laboratoria In 62,640 100,776
--------------
248,236
--------------
Electronic & Electrical Equipment--(0.8%)
Nylex Malaysia Bhd Ma 120,000 $ 270,837
--------------
Fabricated Metal--(1.1%)
Kian Joo Can Factory Bhd Ma 72,000 399,129
--------------
Food & Kindred Products--(2.9%)
Guangdong Investments HK 802,000 772,500
PT Mayora Indah (Foreign) In 515,000 239,839
--------------
1,012,339
--------------
Measuring & Analyzing Instruments--(1.1%)
China Hong Kong Photo Products
Holdings Ltd. HK 460,000 154,632
Pt Modern Photo Film Reg. In 73,500 233,383
--------------
388,015
--------------
Printing & Publishing--(2.8%)
Singapore Press Holdings Ltd. Si 48,800 962,401
--------------
Stone, Clay, Glass & Concrete--(0.4%)
Siam Cement Co., Ltd. Th 5,000 156,713
--------------
Retail Trade--(3.5%)
Apparel & Accessory Stores--(1.2%)
Giordano International Ltd. HK 472,000 402,767
--------------
Auto Dealers & Gas Stations--(2.3%)
Cycle & Carriage Ltd. Si 65,000 794,212
--------------
Services--(5.5%)
Hotels, Camps & Lodging--(2.4%)
Genting Berhad Ma 121,000 833,657
--------------
Miscellaneous Repair Services--(3.1%)
Keppel Corp. Si 137,000 1,067,024
--------------
Transportation, Communication, Electric,
Gas & Sanitary Services--(19.0%)
Communications--(9.4%)
Advanced Information Services Th 46,000 383,752
Hong Kong Telecommunications
Ltd. HK 493,369 794,162
PT Indosat In 132,000 363,251
PT Telekomunikasi Indonesia In 250,000 431,308
Philippine Long Distance
Telephone ADR Ph 7,550 385,050
Telekom Malaysia Berhad Ma 101,000 899,822
--------------
3,257,345
--------------
Electric Services--(4.0%)
Hong Kong Electric Holdings
Ltd. HK 332,000 1,103,161
Korea Electric Power Corp., ADR Ko 13,000 266,500
--------------
1,369,661
--------------
See Notes to Investment Portfolio.
46
<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Keyport Variable Investment Trust Newport-Keyport Tiger Fund / December 31,
1996
- ------------------------------------------------------------------------------
Country
Abbrev. Shares Value
--------- ------------- --------------
Gas Services--(5.6%)
Hong Kong And China Gas Co.,
Ltd. HK 823,280 $ 1,591,316
Petronas Gas Berhad Ma 80,000 332,607
--------------
1,923,923
--------------
Total Common Stocks
(Cost of $28,837,762) 32,841,083
--------------
Warrants--(0.0%)
Thai Farmers Bank
(Cost of $7,427) Th 7,500 5,921
--------------
Total Investments
(Cost of $28,845,189) (a) 32,847,004
--------------
SHORT-TERM OBLIGATIONS--(3.7%) Par
-------------
Repurchase agreement with Lehman Brothers,
Inc., dated 12/31/96 due 01/02/97 at
6.900% collateralized by a U.S. Treasury
note with a maturity of 1998, market
value $1,306,602 (repurchase proceeds
$1,276,489) $ 1,276,000 1,276,000
--------------
Value
--------------
Other Assets & Liabilities, Net--(1.5%) $ 519,371
--------------
Nets Assets--(100.0%) $34,642,375
==============
Notes to Investment Portfolio:
(a) Cost for federal income tax purposes is identical. Gross unrealized
appreciation and depreciation at December 31, 1996 is as follows:
Gross unrealized appreciation $ 6,430,280
Gross unrealized depreciation (2,428,465)
--------------
Net unrealized appreciation $ 4,001,815
==============
Acronym Name
------------ --------------------------------
ADR American Depository Receipt
Summary of Securites by Country
Country
Country Abbrev. Value % of Total
- --------------- ------- ----- ----------
Hong Kong HK $17,654,557 53.7%
Singapore Si 7,031,069 21.4
Malaysian Ma 4,260,053 13.0
Indonesia In 1,516,017 4.6
Thailand Th 1,502,787 4.6
Philippines Ph 549,271 1.7
South Korea Ko 266,500 0.8
Taiwan Tw 66,750 0.2
-------------- ------------
$32,847,004 100.0%
============== ============
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
See Notes to Financial Statements.
47
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Keyport Variable Investment Trust Newport-Keyport Tiger Fund / December 31,
1996
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (Identified cost $28,845,189) $32,847,004
Short-term obligations 1,276,000
Cash (including foreign currencies) 1,283,940
Receivable for fund shares sold 15,250
Dividends and interest receivable 21,875
--------------
Total assets 35,444,069
--------------
Liabilities:
Payable for investments purchased 739,566
Payable for fund shares repurchased 7,340
Management fee payable 25,901
Bookkeeping fee payable 2,250
Transfer agent fee payable 625
Accrued expenses payable 26,012
--------------
Total liabilities 801,694
--------------
Net assets $34,642,375
==============
Net assets represented by:
Paid-in capital $30,666,336
Accumulated undistributed net investment income 920
Accumulated net realized losses on investments and foreign currency transactions (26,302)
Net unrealized appreciation on investments and foreign currency transactions 4,001,421
--------------
Total net assets applicable to shares of beneficial interest outstanding $34,642,375
==============
Shares of beneficial interest outstanding 13,746,402
==============
Net asset value per share $2.52
==============
</TABLE>
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year ended December 31, 1996
- ----------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends (net of nonrebatable foreign taxes withheld at source of $39,548) $ 564,771
Interest income 142,061
------------
Total investment income 706,832
------------
Expenses:
Management fee 258,891
Bookkeeping fee 27,000
Transfer agent fee 7,500
Audit fee 7,759
Printing expense 4,434
Trustees' expense 1,911
Custodian fee 51,295
Legal expense 535
Miscellaneous expense 4,191
------------
Total expenses 363,516
------------
Net investment income 343,316
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized gains on investments 109,471
Net realized losses on foreign currency transactions (11,295)
Change in unrealized appreciation on investments and foreign currency transactions 2,259,060
------------
Net increase in net assets resulting from operations $2,700,552
============
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Keyport Variable Investment Trust Newport-Keyport Tiger Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1996 1995*
-------------- --------------
<S> <C> <C>
Operations:
Net investment income $ 343,316 $ 85,551
Net realized gains (losses) on investments 109,471 (75)
Net realized losses on foreign currency transactions (11,295) (14,780)
Unrealized appreciation on investments and foreign currency transactions 2,259,060 1,742,361
-------------- --------------
Net increase in net assets resulting from operations 2,700,552 1,813,057
-------------- --------------
Distributions declared from:
Net investment income (237,595) (85,551)
In excess of net investment income -- (78,657)
Net realized gains (135,767) --
-------------- --------------
Total distributions (373,362) (164,208)
-------------- --------------
Fund share transactions:
Proceeds from fund shares sold 19,071,741 17,964,083
Cost of fund shares repurchased (6,107,372) (799,686)
Distributions reinvested 373,362 164,208
-------------- --------------
Net increase in net assets resulting from fund share transactions 13,337,731 17,328,605
-------------- --------------
Total increase in net assets 15,664,921 18,977,454
Net assets:
Beginning of period 18,977,454 0
-------------- --------------
End of period $34,642,375 $18,977,454
============== ==============
Accumulated undistributed (overdistributed) net investment income included in
ending net assets 920 $ (93,375)
============== ==============
Analysis of changes in shares of beneficial interest:
Shares sold 7,766,949 8,623,798
Shares redeemed (2,495,545) (369,219)
Distributions reinvested 148,081 72,338
-------------- --------------
Net increase 5,419,485 8,326,917
============== ==============
</TABLE>
* For the period from the commencement of operations May 1, 1995 to December 31,
1995.
See Notes to Financial Statements.
49
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Keyport Variable Investment Trust Newport-Keyport Tiger Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
-------------- ---------------
1996 1995***
-------------- ---------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of period $ 2.28 $ 2.00
-------------- ---------------
Net investment income (a) 0.03 0.01
Net realized and unrealized gains on investments and foreign currency transactions (a) 0.24 0.29
-------------- ---------------
Total from investment operations 0.27 0.30
-------------- ---------------
Less distributions from:
Dividends from net investment income (0.02) (0.01)
In excess of net investment income -- (0.01)
Dividends from net realized gains on investments (0.01) --
-------------- ---------------
Total distributions (0.03) (0.02)
-------------- ---------------
Net asset value, end of period $ 2.52 $ 2.28
============== ===============
Total return:
Total investment return (b) 11.73% 15.00%**
Ratios/supplemental data:
Net assets, end of period (000) $34,642 $18,977
Ratio of net expenses to average net assets (c) 1.27% 1.75%*
Ratio of net investment income to average net assets (c) 1.20% 0.89%*
Portfolio turnover ratio 7% 12%**
Average commission rate (d) $0.0172 --
</TABLE>
* Annualized
** Not Annualized.
*** For the period from the commencement of operations May 1, 1995 to
December 31, 1995.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
Federal Income Tax Information (unaudited)
87.7% of the gain distribution recorded in December 1996 and paid in January
1997 was derived from long-term gains.
See Notes to Financial Statements.
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Keyport Variable Investment Trust (the "Trust") an open-end, diversified
management investment company, was organized as a Massachusetts business trust
on March 4, 1993. At December 31, 1996 the Trust consisted of six series of
Funds with different investment objectives, policies, and restrictions:
Colonial-Keyport Growth and Income Fund ("Growth and Income Fund"),
Colonial-Keyport Utilities Fund ("Utilities Fund"), Colonial-Keyport
International Fund for Growth ("International Fund for Growth"),
Colonial-Keyport Strategic Income Fund ("Strategic Income Fund"),
Colonial-Keyport U.S. Fund for Growth ("U.S. Fund for Growth"), and Newport-
Keyport Tiger Fund ("Tiger Fund") (individually referred to as a "Fund", or
collectively referred to as the "Funds"). Each Fund's objective is as follows:
Growth and Income Fund seeks primarily income and capital growth and,
secondarily, capital preservation.
Utilities Fund seeks primarily current income and, secondarily, long-term
capital growth.
International Fund for Growth seeks long-term growth.
Strategic Income Fund seeks a high level of current income and total return,
as is consistent with prudent risk.
U.S. Fund for Growth seeks growth over time exceeding the S&P 500 Index's
performance.
Tiger Fund seeks capital appreciation.
Shares of the Trust are available and are being marketed exclusively as a pooled
funding vehicle for variable annuity contracts ("VA contracts") and Variable
Life insurance Policies ("VLI Policies") of Keyport Life Insurance Company
("Keyport"), Keyport America Life Insurance Company (formerly Crown America Life
Insurance Company) (a wholly- owned subsidiary of Keyport), and the VA contracts
of Liberty Life Assurance Company of Boston ("Liberty Life"). The insurance
companies and their separate accounts own all the shares of the Funds. Keyport
Advisory Services Corp. (the "Manager"), a wholly-owned subsidiary of Keyport,
provides investment management, advisory, and administrative services to the
Trust. Colonial Management Associates, Inc. ("Colonial") provides sub-advisory
services to each Fund of the Trust, other than the Tiger Fund. Newport Fund
Management, Inc. ("Newport") provides sub-advisory services to the Tiger Fund.
Colonial also provides pricing and recordkeeping services to the Trust. Keyport
Financial Services Corp., a wholly-owned subsidiary of Keyport, serves as the
underwriter of the Trust. The Manager, Keyport, Colonial and Newport are
indirect wholly-owned subsidiaries of Liberty Financial Companies, Inc.
("Liberty Financial"). Liberty Mutual Insurance Company ("Liberty Mutual") owns
approximately 82% of the outstanding voting shares of Liberty Financial. Liberty
Life is a wholly-owned subsidiary of Liberty Mutual and Liberty Mutual Fire
Insurance Company.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Valuation of Investments--Portfolio securities listed on an exchange and
over-the-counter securities quoted on the NASDAQ system are valued on the basis
of the last sale on the date as of which the valuation is made, or, lacking any
sales, at the current bid prices. Over-the-counter securities not quoted on the
NASDAQ system are valued at the latest bid quotation. Long- term debt securities
are valued on the basis of dealer-supplied quotations or valuations furnished by
a pricing service which may employ electronic data processing techniques,
including a "matrix" system to determine the valuations. Foreign debt securities
are valued at the current bid price furnished by market makers. Foreign equity
securities listed on an exchange are valued on the basis of last sale on the
date as of which the valuation is made, or lacking any sales, at the current bid
prices. Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations. In certain countries, the Fund
may hold foreign designated shares. If the foreign share price is not readily
available as a result of limited share activity, the securities are valued at
the last sale price of the local shares in the principal market in which such
securities are normally traded. Korean equity securities that have reached the
limit for aggregate foreign ownership and for which premiums to the local
exchange prices may be paid by foreign investors are valued by applying a broker
quoted premium to the local share price. Securities for which reliable
quotations are not readily available are valued at fair value, as determined in
good faith and pursuant to procedures established by the Trustees. Short-term
instruments with remaining maturities of 60 days or less are valued at amortized
cost unless the Trustees determine this does not represent fair value.
Federal Income Taxes--The Funds intend to qualify as "regulated investment
companies" and as such (and by complying with the applicable provisions of the
Internal Revenue Code) will not be subject to Federal income tax on taxable
income (including realized capital gains) distributed to shareholders. By making
the distributions required under the Internal Revenue Code, the Funds intend to
avoid excise tax liability.
Organization Expenses--Costs incurred in connection with the organization and
offering of the Funds are being deferred and amortized over 60 months from the
date those Funds commenced business.
Delayed Delivery Transactions--Growth and Income Fund and Strategic Income Fund
may purchase or sell secu-
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
rities on a when-issued or forward commitment basis. Payment and delivery may
take place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered and
paid for are fixed at the time the transaction is negotiated. This may increase
the risk if the other party involved in the transaction fails to deliver and
causes the Funds to subsequently invest at less advantageous prices. The Funds
identify securities as segregated in their custodial records with a value at
least equal to the amount of the purchase commitment.
Expenses--Most expenses of the Trust can be attributed to a Fund. Expenses which
cannot be directly attributed are apportioned among the Funds in the Trust.
Other--Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date. Net realized and unrealized gains (losses) on foreign currency
transactions include gains (losses) arising from the fluctuation in exchange
rates between trade and settlement dates on security transactions, gains
(losses) arising from the disposition of foreign currency, and currency gains
(losses) between the accrual and payment dates on dividend and interest income
and foreign withholding taxes. The Funds do not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gains (losses) from investments. The Funds may enter into forward
currency contracts to purchase or sell foreign currencies at predetermined
exchange rates in connection with the settlement of purchases and sales of
securities. The Funds may also enter into forward currency contracts to hedge
certain other foreign currency denominated assets. The contracts are used to
minimize the exposure to foreign exchange rate fluctuations during the period
between trade and settlement date of the contracts. All contracts are marked-
to-market daily, resulting in unrealized gains (losses) which become realized at
the time the forward currency contracts are closed or mature. Realized and
unrealized gains (losses) arising from such transactions are included in net
realized and unrealized gains (losses) on foreign currency transactions. Forward
currency contracts do not eliminate fluctuations in the prices of the Funds'
portfolio securities. While the maximum potential loss from such contracts is
the aggregate face value in U.S. dollars at the time the contract was opened,
exposure is typically limited to the change in value of the contract (in U.S.
dollars) over the period it remains open. Risks may also arise if counterparties
fail to perform their obligations under the contracts.
Note 2. Fund Share Transactions
Each Fund's capitalization consists of an unlimited number of shares of
beneficial interest without par value that represent a separate series of the
Trust. Each share of a Fund represents an equal proportionate beneficial
interest in that Fund and, when issued and outstanding, is fully paid and
nonassessable. Shareholders would be entitled to share proportionally in the net
assets of a Fund available for distribution to shareholders upon liquidation of
a Fund.
Note 3. Security Transactions
Realized gains (losses) are computed on the identified cost basis for both
financial reporting and Federal income tax purposes. At December 31, 1996,
Utilities Fund had capital loss carryovers of $4,706,616 which will expire in or
before 2004, if not utilized.
The cost of investments purchased and proceeds from investments sold excluding
short-term investments for the year ended December 31, 1996, for the Funds were
as follows:
Growth International
and Income Utilities Fund for
Fund Fund Growth
-------------- ------------- ---------------
Cost of investments
purchased $26,192,900 $ 6,670,567 $30,426,903
Proceeds from
investments sold 18,328,874 10,470,243 27,201,372
Strategic
Income U.S. Fund
Fund for Growth Tiger Fund
-------------- -------------- --------------
Cost of investments
purchased $58,496,088 $45,412,339 $14,919,603
Proceeds from
investments sold 53,554,221 39,139,763 1,874,363
For Growth and Income Fund and Strategic Income Fund, none and $359,576 and
$12,408,233 and $11,672,392, respectively, represent the purchase cost and
proceeds of sales of U.S. Government securities, respectively.
Note 4. Distributions to Shareholders
The Funds intend to distribute as dividends or capital gain distributions, at
least annually, substantially all of their net investment income and net profits
realized from the sale of investments. All dividends and distributions are
reinvested in additional shares of the Funds at net asset value as of the record
date of the distribution. Income and capital gain distributions are determined
in accordance with Federal Income tax regulations, which may differ from
generally accepted accounting principles. The character of income and gains to
be distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Reclassifications are
made to the Fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryforwards) under income tax
regulations. Accordingly, amounts as of December 31, 1996 have been reclassified
as follows:
52
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Inter-
Growth national Strategic
and Income Fund for Income Tiger
Fund Growth Fund Fund
------------ ------------------------- ------------
Accumulated net
investment
income $ 5,626 $(157,815) $ 289,992 $(11,426)
Accumulated net
realized gain
(losses) on
investments (5,743) 949,336 (289,992) 11,426
Paid in capital 117 (791,521) -- --
In all cases net assets were not affected by these changes.
Note 5. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory Fees--The Funds have management and sub-advisory
agreements with the Manager, Colonial and Newport, respectively. For all the
Funds, the management fee to be paid to the Manager is computed daily and paid
monthly based upon the average daily net assets of the Funds at annual rates as
follows:
Annual Rate
as a Percent
of Average
Daily
Fund Net Assets
- ------------------------------------ ----------------
Growth and Income Fund 0.65 of 1%
Utilities Fund 0.65 of 1%
International Fund for Growth 0.90 of 1%
Strategic Income Fund 0.65 of 1%
U.S. Fund for Growth 0.80 of 1%
Tiger Fund 0.90 of 1%
The Manager, out of the management fee it receives from the Funds, pays Colonial
and Newport a sub-advisory fee based upon the average daily net assets of the
Funds at annual rates as follows:
Annual Rate
as a Percent
of Average
Daily
Fund Net Assets
- ------------------------------------ ----------------
Growth and Income Fund 0.45 of 1%
Utilities Fund 0.45 of 1%
International Fund for Growth 0.70 of 1%
Strategic Income Fund 0.45 of 1%
U.S. Fund for Growth 0.60 of 1%
Tiger Fund 0.70 of 1%
Bookkeeping Fee--Colonial provides bookkeeping and pricing services to each Fund
for $27,000 per year plus 0.035% of the Fund's average daily net assets over $50
million.
Transfer Agent Fee--Each of the Funds paid Colonial Investment Services, Inc.,
an affiliate of Colonial, for transfer agent services rendered at an annual rate
of $7,500.
Expense Reimbursement-- Through April 30, 1997, the Manager has agreed to
reimburse all expenses, including management fees, in excess of 1.00% of average
daily net assets per annum for Growth and Income Fund, Utilities Fund and U.S.
Fund for Growth, in excess of 0.80% of average daily net assets for Strategic
Income Fund and in excess of 1.75% of average daily net assets for International
Fund for Growth and Tiger Fund.
Note 6. Investment in Repurchase Agreements
Each Fund may enter into repurchase agreements, which require the seller of the
instrument to maintain on deposit with the Funds' custodian bank or in the
Federal Reserve Book- Entry System securities in the amount at all times equal
to or in excess of the value of the repurchase agreement plus accrued interest.
The Funds may experience costs and delays in liquidating the collateral if the
issuer defaults or enters bankruptcy.
Note 7. Fund Substitutions
The Trustees approved the substitution of shares of Colonial Keyport Strategic
Income Fund ("CKSIF") for the shares of Managed Income Fund ("MIF") and the
substitution of shares of the Mortgage Securities Income Fund ("MSIF") for the
shares of Colonial Keyport U.S. Government Fund ("CKUSGF") (formerly a series of
the Trust). MIF and MSIF are series funds of the SteinRoe Variable Investment
Trust. The substitutions occurred on October 13, 1995 as the net asset value of
shares totaling $37,220,278 in MIF were substituted for shares in CKSIF.
Additionally on this date, the net asset value of shares totaling $25,976,438 in
CKUSGF were substituted for shares of MSIF.
53
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
The following financial statements for each of the Funds in the
Trust are included in this filing as part of Part B:
Independent Accountants' Report
Schedule of Investments as of December 31, 1996
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year or period ended December 31, 1996
Statement of Changes in Net Assets for the years or periods ended
December 31, 1996 and 1995
Financial Highlights for the years or periods ended December 31, 1996
and 1995
(b) Exhibits.
1. Agreement and Declaration of Trust (1)
2. By-Laws (1)
3. Not Applicable
4(a). [Deleted]
4(b). Specimen Share Certificate for Colonial-Keyport Growth and
Income Fund (2)
4(c). Specimen Share Certificate for Colonial-Keyport Utilities
Fund (2)
4(d). Specimen Share Certificate for Colonial-Keyport
International Fund For Growth (3)
4(e). Specimen Share Certificate for Colonial-Keyport U.S. Stock
Fund (4)
4(f). Specimen Share Certificate For Colonial-Keyport Strategic
Income Fund (4)
4(g). Specimen Share Certificate For Newport-Keyport Tiger Fund
(5)
C-1
<PAGE>
5(a)(i). Management Agreement between Keyport Variable Investment
Trust, on behalf of Colonial-Keyport Growth and Income Fund
and Colonial-Keyport Utilities Fund, and Keyport Advisory
Services Corp. (2)
5(a)(ii). Management Agreement between Keyport Variable Investment
Trust, on behalf of each of the Colonial-Keyport
International Fund For Growth, the Colonial-Keyport U.S.
Stock Fund and the Colonial-Keyport Strategic Income Fund,
and Keyport Advisory Services Corp. (3)
5(a)(iii). Amendment No. 1 to Management Agreements listed as Exhibits
5(a)(i) and 5(a)(ii). (5)
5(a)(iv). Management Agreement between Keyport Variable Investment
Trust, on behalf of the Newport-Keyport Tiger Fund, and
Keyport Advisory Services Corp. (5)
5(b)(i). [Deleted]
5(b)(ii). Colonial-Keyport Growth and Income Fund: Colonial
Management Sub-Advisory Agreement among Keyport Variable
Investment Trust, on behalf of the Colonial-Keyport Growth
and Income Fund, Keyport Advisory Services Corp. and
Colonial Management Associates, Inc. (2)
5(b)(iii). Colonial-Keyport Utilities Fund Colonial Management
Sub-Advisory Agreement among Keyport Variable Investment
Trust, on behalf of the Colonial-Keyport Utilities Fund,
Keyport Advisory Services Corp. and Colonial Management
Associates, Inc. (2)
5(b)(iv). Colonial-Keyport International Fund For Growth Colonial
Management Sub-Advisory Agreement among Keyport Variable
Investment Trust, on behalf of Colonial-Keyport
International Fund For Growth, Keyport Advisory Services
Corp. and Colonial Management Associates, Inc. (3)
5(b)(v). [Deleted]
5(b)(vi). Colonial-Keyport U.S. Fund For Growth Colonial Management
Sub-Advisory Agreement among Keyport Variable Investment
Trust, on behalf of Colonial-Keyport U.S. Fund For Growth,
Keyport Advisory Services Corp. and Colonial Management
Associates, Inc. (4)
5(b)(vii). [deleted]
5(b)(viii). Colonial-Keyport Strategic Income Fund Colonial Management
Sub-Advisory Agreement among Keyport Variable Investment
Trust, on behalf of Colonial Strategic Income Fund, Keyport
Advisory Services Corp. and Colonial Management Associates,
Inc. (4)
C-2
<PAGE>
5(b)(ix). Newport-Keyport Tiger Fund Newport Management Sub-Advisory
Agreement among Keyport Variable Investment Trust, on
behalf of Newport-Keyport Tiger Fund, Keyport Advisory
Services Corp. and Newport Fund Management, Inc. (5)
6. Underwriting Agreement between Keyport Variable Investment
Trust and Keyport Financial Services Corp. (2)
7. Not Applicable
8. Form of Custody Agreement between Keyport Variable
Investment Trust and The Boston Safe Deposit and Trust
Company (1)
9(a)(i). Joinder and Release Agreement with Respect to Transfer
Agency Agreement dated as of January 3, 1995 among Keyport
Variable Investment Trust, Liberty Investment Services,
Inc. and Colonial Investors Service Center, Inc. (including
form of Transfer Agency Agreement and Amendment No. One
thereto) (5)
9(a)(ii). Amendment No. Two to Transfer Agency Agreement (5)
9(b). Participation Agreement among Keyport Variable Investment
Trust, Keyport Financial Services Corp., Keyport Life
Insurance Company, and Liberty Life Assurance Company of
Boston (2)
9(c)(i). Pricing and Bookkeeping Agreement between Keyport Variable
Investment Trust and Colonial Management Associates, Inc.
(2)
9(c)(ii). Amendment No. One to Pricing and Bookkeeping Agreement (3)
9(c)(iii). Amendment No. Two to Pricing and Bookkeeping Agreement (5)
C-3
<PAGE>
10. Opinion and consent of counsel as to the legality of the
securities being registered (included with annual Rule
24f-2 Notices)
11. Consent of Independent Accountants
12. Not Applicable
13. Not Applicable
14. Not applicable
15. Not applicable
16. Calculation of Total Returns (7)
17. Financial Data Schedule
18. Not applicable
19(a). Power of Attorney executed by each Trustee of the Trust
pertaining to this Registration Statement (6)
19(b). [deleted]
(1) Incorporated by reference to Keyport Variable Investment Trust,
Registration Statement on Form N-1A (33-59216) (the "Registration
Statement"), as filed with the SEC on March 8, 1993.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement, as filed with the SEC on June 11, 1993.
(3) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement, as filed with the SEC on April 27, 1994.
(4) Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement, as filed with the SEC on May 4, 1994.
(5) Incorporated by reference to Post-Effective Amendment No. 6 to the
Registration Statement, as filed on April 27, 1995.
(6) Contained on Signature Pages to Post-Effective Amendment No. 3 to
the Registration Statement, as filed with the SEC on April 27,
1994 (and incorporated therefrom by reference).
(7) Incorporated by reference to Post-Effective Amendment No. 7 to
this Registration Statement filed April, 1996.
C-4
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
Shares of the Trust registered pursuant to this Registration Statement
will be offered and sold to Keyport Life Insurance Company ("Keyport"), a stock
life insurance company organized under the laws of Rhode Island, and to certain
of its separate investment accounts and certain of the respective separate
investment accounts of Liberty Life Assurance Company of Boston ("Liberty
Life"), a stock life insurance company organized as a Massachusetts corporation,
and Independence Life & Annuity Company, a stock life insurance company
organized under the laws of Rhode Island (formerly known as "Crown America Life
Insurance Company" and thereafter formerly known as "Keyport America Life
Insurance Company") ("Independence"). Shares of the Registrant may in the future
be sold to other separate accounts of Keyport, Liberty Life, Independence or
other life insurance companies as the funding medium for other insurance
contracts and policies in addition to the currently offered contracts and
policies. The purchasers of insurance contracts and policies issued in
connection with such accounts will have the right to instruct Keyport, Liberty
Life and Independence with respect to the voting of the Registrant's shares held
by their respective separate accounts. Subject to such voting instruction
rights, Keyport, Liberty Life, Independence and their respective separate
accounts directly control the Registrant.
Keyport Financial Services Corp. ("KFSC"), the Trust's principal
underwriter, Keyport Advisory Services Corp. ("KASC"), the Trust's investment
manager, Colonial Management Associates, Inc. ("Colonial"), KASC's sub-adviser
with respect to each Fund of the Registrant (other than the Newport-Keyport
Tiger Fund), Newport Fund Management, Inc. ("Newport"), KASC's sub-adviser with
respect to the Newport-Keyport Tiger Fund, Keyport and Independence are each
wholly owned indirect subsidiaries of Liberty Financial Companies, Inc.
("Liberty Financial"), Boston, Massachusetts. Liberty Mutual Insurance Company
("Liberty Mutual"), Boston, Massachusetts, as of March 31, 1997 owned,
indirectly, approximately 80.6% of the combined voting power of the outstanding
voting stock of Liberty Financial (with the balance being publicly-held).
Liberty Life is a 90%-owned subsidiary of Liberty Mutual.
Item 26. Number of Holders of Securities.
As of March 31, 1997, the number of holders of shares of beneficial
interest of each Fund of the Trust was as follows:
Number of
Title of Class Record Holders
-------------- --------------
Colonial-Keyport Growth and Income Fund 12
Colonial-Keyport Utilities Fund 10
Colonial-Keyport International
Fund For Growth 10
Colonial-Keyport Stock U.S. Fund 10
Colonial-Keyport Strategic Income Fund 13
Newport-Keyport Tiger Fund 10
C-5
<PAGE>
Item 27. Indemnification.
Article Tenth of the Agreement and Declaration of Trust of Registrant
(Exhibit 1), which Article is incorporated herein by reference, provides that
Registrant shall provide indemnification of its trustees and officers (including
each person who serves or has served at Registration's request as a director,
officer, or trustee of another organization in which Registrant has any interest
as a shareholder, creditor or otherwise) ("Covered Persons") under specified
circumstances.
Section 17(h) of the 1940 Act provides that neither the Agreement and
Declaration of Trust nor the By-Laws of Registrant, nor any other instrument
pursuant to which Registrant is organized or administered, shall contain any
provision which protects or purports to protect any trustee or officer of
Registrant against any liability to Registrant or its shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. In accordance with Section 17(h) of the 1940 Act, Article Tenth shall
not protect any person against any liability to Registrant or its shareholders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office.
To the extent required under the 1940 Act:
(i) Article Tenth does not protect any person against any liability to
Registrant or to its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office;
(ii) in the absence of a final decision on the merits by a court or
other body before whom a proceeding was brought that a Covered Person was not
liable by reason of willful misfeasance, bad, faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office, no
indemnification is permitted under Article Tenth unless a determination that
such person was not so liable is made on behalf of Registrant by (a) the vote of
a majority of the trustees who are neither "interested persons" of Registrant,
as defined in Section 2(a)(19) of the 1940 Act, nor parties to the proceeding
("disinterested, non-party trustees"), or (b) an independent legal counsel as
expressed in a written opinion; and
(iii) Registrant will not advance attorney's fees or other expenses
incurred by a Covered Person in connection with a civil or criminal action, suit
or proceeding unless Registrant receives an undertaking by or on behalf of the
Covered Person to repay the advance (unless it is ultimately determined that he
is entitled to indemnification) and (a) the Covered Person provides security for
his undertaking, or (b) Registrant is insured against losses arising by reason
of any lawful advances, or (c) a majority of the disinterested, non-party
trustees of Registrant or an independent legal counsel as expressed in a written
opinion, determine, based on a review of readily-available facts (as opposed to
a full trail-type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
Any approval of indemnification pursuant to Article Tenth does not
prevent the recovery from any Covered Person of any amount paid to such Covered
Person in accordance with Article
C-6
<PAGE>
Tenth as indemnification if such Covered Person is subsequently adjudicated by a
court of competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in, or not opposed to,
the best interests of Registrant or to have been liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
Article Tenth also provides that its indemnification provisions are not
exclusive.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
Registrant, its trustees and officers, its investment manager, and
persons affiliated with them are insured against certain expenses in connection
with the defense of actions, suits, or proceedings, and certain liabilities that
might be imposed as a result of such actions, suits, or proceedings. Registrant
will not pay any portion of the premiums for coverage under such insurance that
would (1) protect any trustee or officer against any liability to Registrant or
its shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office or (2) protect its investment manager or
principal underwriter, if any, against any liability to Registrant or its
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence, in the performance of its
duties, or by reason of its reckless disregard of its duties and obligations
under its contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by the insurance
company.
In addition, KASC, Registrant's investment manager, maintains
investment advisory professional liability insurance to insure it, for the
benefit of the Trust and its non-interested trustees, against loss arising out
of any error, omission, or breach of any duty owed to the Trust or any Fund by
the investment manager.
Item 28. Business and Other Connections of Investment Adviser
Certain information pertaining to business and other connections of the
Registrant's investment manager, KASC, of Colonial Management Associates Inc.
("Colonial"), the sub-adviser to each of Registrant's Funds (other than the
Newport-Keyport Tiger Fund), and of Newport Fund Management, Inc. ("Newport"),
the sub-adviser to the Newport-Keyport Tiger
C-7
<PAGE>
Fund, is incorporated herein by reference to the section of the Prospectus
captioned "TRUST MANAGEMENT ORGANIZATIONS" and to the section of the Statement
of Additional Information captioned "INVESTMENT MANAGEMENT AND OTHER SERVICES."
Set forth below is a list of each director and officer of KASC, and each
director and certain officers of Colonial and Newport indicating each business,
profession, vocation, or employment of a substantial nature in which each such
person has been, at any time during the past two fiscal years, engaged for his
or her own account or in the capacity of director, officer, partner, or trustee.
KASC
KASC is a direct wholly owned subsidiary of Keyport. Keyport is a
direct wholly owed subsidiary of SteinRoe Services, Inc. ("SSI"). SSI is a
direct wholly owned subsidiary of Liberty Financial. As stated above, Liberty
Financial is an indirect majority owned subsidiary of Liberty Mutual.
Position During
Name and Current Position with Adviser Past Two Fiscal Years
================================================================================
John W. Rosensteel President and Director and President and
Chairman of the Chief Executive Officer of Keyport,
Board of Directors Chairman of the Board of KFSC and
Chairman of the Board and President
of KASC since January 1, 1993;
President, Chief Executive Officer
and Chairman of the Board of Keyport
America since October 1, 1993; prior
to 1993 Senior Vice President of
Aetna International, Inc., a
division of Aetna Life and Casualty
Company
- --------------------------------------------------------------------------------
Paul H. LeFevre, Jr. Senior Vice Senior Vice President-Chief
President and Financial Officer of Keyport and
Director Director and Senior Vice
President-Chief Financial Officer of
KASC; Senior Vice President, Chief
Financial Officer and Director of
Keyport America since October 1,
1993
- --------------------------------------------------------------------------------
William L. Dixon Vice President Vice President-Compliance of
Keyport, KFSC and KASC; Vice
President--Compliance and Assistant
Secretary of Keyport America since
October 1, 1993
- --------------------------------------------------------------------------------
Stewart R. Morrison Vice President Vice President-Investments of
Keyport and KASC; Vice
President-Investments of Keyport
America since October 1, 1993
- --------------------------------------------------------------------------------
C-8
<PAGE>
Francis E. Reinhart Senior Vice Senior Vice President-Chief
President Administrative Officer of Keyport
and KASC and Vice
President-Administration of KFSC;
Senior Vice President and Chief
Administrative Officer of Keyport
America since October 1, 1993
- --------------------------------------------------------------------------------
John E. Arant, III Senior Vice Senior Vice President and Chief
President and Sales Officer of Keyport since May
Director 16, 1994; Vice President and Chief
Sales Officer of KFSC since May 20,
1994; Director and Senior Vice
President and Chief Sales Officer of
KASC and Keyport America since March
10, 1995
- --------------------------------------------------------------------------------
James J. Klopper Vice President and Vice President, Counsel and
Director Assistant Secretary of Keyport;
Clerk of KFSC; Director, Vice
President, Counsel and Secretary of
KASC and Keyport America since March
10, 1995
- --------------------------------------------------------------------------------
The business address of KASC and each individual listed in the
foregoing table is c/o Keyport Life Insurance Company, 125 High Street, Boston,
Massachusetts 02110.
Colonial
Colonial is a direct wholly owned subsidiary of The Colonial Group,
Inc. ("TCG"). TCG is a direct wholly owned subsidiary of Liberty Financial.
Positions During
Name and Current Position with Colonial Past Two Fiscal Years
================================================================================
Bonny E. Boatman Director, Senior Vice President Vice President
and Head of Tax-Exempt Group
- -------------------------------------------------------------------------------
Sheila A. Carroll Director and
Senior Vice President
- --------------------------------------------------------------------------------
Harold W. Cogger Chairman of the Board President and Chief
Executive Officer;
Executive Vice President
- --------------------------------------------------------------------------------
Carl C. Ericson Director, Senior Vice President, Vice President
Director and Manager of Taxable
Fixed Income Group
- --------------------------------------------------------------------------------
Stephen E. Gibson Director, President and Managing Director/
Chief Executive Officer Marketing of Putnam
Investments
- --------------------------------------------------------------------------------
C-9
<PAGE>
- --------------------------------------------------------------------------------
Timothy J. Jacoby Senior Vice President Senior Vice President,
Fidelity Accounting and
Custody Services, Inc.
- --------------------------------------------------------------------------------
Donald S. MacKinnon Director, Senior Vice President
- --------------------------------------------------------------------------------
Charlie A. O'Neill Director and Vice President
- --------------------------------------------------------------------------------
Helen Frame Peters Director, Senior Vice President Director of Taxable
and Chief Investment Officer Fixed Income Investments
- --------------------------------------------------------------------------------
Daniel Rie Director, Senior Vice President
and Head of Equity Group
- --------------------------------------------------------------------------------
Davey S. Scoon Director,
Executive Vice President
- --------------------------------------------------------------------------------
Arthur O. Stern Director,
Executive Vice President,
General Counsel and Clerk
- --------------------------------------------------------------------------------
Stephen T. Welsh Treasurer
- --------------------------------------------------------------------------------
The business address of Colonial and each individual listed in the
foregoing table is c/o Colonial Management Associates, Inc., One Financial
Place, Boston, Massachusetts 02111.
Newport
Newport is a direct wholly owned subsidiary of Newport Pacific
Management, Inc. ("Newport Pacific"). Newport Pacific is a direct wholly owned
subsidiary of Liberty Newport Holdings, Ltd. ("LNH"). LNH is a direct wholly
owned subsidiary of Liberty Financial.
At the time the shares of the Newport-Keyport Tiger Fund covered by
this Registration Statement are first offered to Keyport and separate accounts
of Participating Insurance Companies, the officers and directors of Newport will
be as follows:
Positions and Offices Positions During
Name with Newport Past Two Fiscal Years
================================================================================
John M. Mussey President and Director Similar positions with
Newport Pacific
- --------------------------------------------------------------------------------
Kenneth R. Leibler Director President and (since
January 1, 1995) Chief
Executive Officer of
Liberty Financial
- --------------------------------------------------------------------------------
Lindsay Cook Director and Senior Vice Senior Vice President --
President Mutual Funds of Liberty
Financial since February
1994; Vice President of
Liberty Financial prior
thereto
- --------------------------------------------------------------------------------
Thomas R. Tuttle Senior Vice President Similar position with
Newport Pacific
- --------------------------------------------------------------------------------
C-10
<PAGE>
- --------------------------------------------------------------------------------
Pamela Frantz Executive Vice President, Similar positions with
Treasurer and Secretary Newport Pacific
- --------------------------------------------------------------------------------
Linda Couch Vice President Similar position with
Newport Pacific
- --------------------------------------------------------------------------------
The principal business address of Newport and Messrs. Mussey and Tuttle
and Mss. Frantz and Couch is 580 California Street, Suite 1960, San Francisco,
California 94104. The principal address of each other person listed in the
preceding table is 600 Atlantic Avenue, Suite 2400, Boston, Massachusetts 02210.
Item 29. Principal Underwriters
(a) KFSC acts as principal underwriter of the Registrant's shares on a
best-efforts basis. KFSC also serves as principal underwriter for the SteinRoe
Variable Investment Trust.
(b) Set forth below is information concerning each director and
officer of KFSC.
Positions and
Name and Principal Positions and Offices Offices with
Business Address* with Underwriter the Registrant
- ----------------- ---------------- --------------
John W. Rosensteel Chairman and President None
William L. Dixon Vice President - Compliance None
Francis E. Reinhart Vice President - Administration None
and Director
John E. Arant, III Vice President -- None
Chief Sales Officer
and Director
James J. Klopper Clerk None
Donald A. Truman Assistant Clerk None
- ------------------
* The principal business address of KFSC and each person listed in the table is
c/o Keyport Life Insurance Company, 125 High Street, Boston, Massachusetts
02110.
(c) Not applicable.
C-11
<PAGE>
Item 30. Location of Accounts and Records
The following entities prepare, maintain, and preserve the records
required by Section 31(a) of the Investment Company Act of 1940 (the "1940 Act")
for the Registrant. These services are provided to the Registrant through
written agreements between the parties to the effect that such services will be
provided to the Registrant for such periods prescribed by the rules and
regulations of the Securities and Exchange Commission under the 1940 Act and
such records are the property of the entity required to maintain and preserve
such records and will be surrendered promptly on request.
Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA
02108, serves as custodian for the Registrant with respect to each Fund other
than the Newport-Keyport Tiger Fund; UMB, n.a., 928 Grand Ave., Kansas City,
Missouri 64141, serves as custodian for the Newport-Keyport Tiger Fund; and in
such respective capacities, such custodian banks keep records regarding
securities and other assets in custody and in transfer, bank statements,
canceled checks, financial books and records, and other records relating to
their duties in their respective capacities as custodians. Colonial Investors
Service Center, Inc., One Financial Center, Boston, MA 02111, serves as the
transfer agent and dividend disbursing agent for the Registrant, and in such
capacities is responsible for records regarding each shareholder's account and
all disbursements made to shareholders. In addition, KASC, pursuant to its Fund
Management Agreements with the Registrant with respect to the Trust, has
delegated to (i) Colonial Management Associates, Inc., One Financial Center,
Boston, Massachusetts 02111, and (ii) Liberty Financial Companies, Inc., 600
Atlantic Avenue, Boston, Massachusetts 02210, the obligation to maintain the
records required pursuant to such agreements. Colonial Management Associates,
Inc., One Financial Center, Boston, MA 02111, pursuant to its Sub-Advisory
Agreement with each Fund (other than the Newport-Keyport Tiger Fund), maintains
all records required pursuant to those Agreements. Colonial Management
Associates, Inc. also maintains all records pursuant to its Pricing and
Bookkeeping Agreement with the Trust. Newport Fund Management, Inc., 580
California Street, Suite 1960, San Francisco, CA 94104, pursuant to its
Sub-Advisory Agreement with the Newport-Keyport Tiger Fund, will maintain all
records required pursuant to that Agreement. KFSC, 125 High Street, Boston,
Massachusetts 02110, serves as principal underwriter for the Trust, and in such
capacity maintains all records required pursuant to its Underwriting Agreement
with the Registrant.
Item 31. Management Services
KASC, pursuant to its Fund Managed Agreements with the Trust, has
delegated its duties thereunder to provide certain administrative services to
the Trust to Colonial and Liberty Financial.
Item 32. Undertakings
(a) Not applicable.
(b) Reference is made to Item 32 of Pre-Effective Amendment No. 1 to
this Registration Statement filed on June 11, 1993, incorporated herein by
reference.
C-12
<PAGE>
(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Boston, and Commonwealth of Massachusetts on the
25th day of April, 1997. The Registrant hereby certifies, in accordance with
Rule 485(b)(4) under the Securities Act of 1933, that this amendment meets the
requirements for effectiveness under Rule 485(b) thereunder.
KEYPORT VARIABLE INVESTMENT TRUST
(Registrant)
By: /s/ RICHARD R. CHRISTENSEN *
--------------------------------
Richard R. Christensen
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ RICHARD R. CHRISTENSEN * President and Trustee April 25, 1997
- ----------------------------- (Principal Executive
Richard R. Christensen Officer)
/s/ TIMOTHY J. JACOBY Treasurer (Principal April 25, 1997
- ----------------------------- Financial Officer)
Timothy J. Jacoby
/s/ PETER L. LYDECKER Controller (Principal April 25, 1997
- ----------------------------- Accounting Officer)
Peter L. Lydecker
/s/ JOHN A. BACON, JR. * Trustee April 25, 1997
- -----------------------------
John A. Bacon, Jr.
/s/ SALVATORE MACERA * Trustee April 25, 1997
- -----------------------------
Salvatore Macera
/s/ THOMAS E. STITZEL * Trustee April 25, 1997
- -----------------------------
Thomas E. Stitzel
*By /s/ KEVIN M. CAROME
-------------------------------
Kevin M. Carome
Attorney-in-Fact
C-14
<PAGE>
Exhibit Index
11. Consent of Independent Accountants
17. Financial Data Schedule
C-15
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 8
to the registration statement on Form N-1A (the "Registration Statement") of our
report dated February 12, 1997, relating to the financial statements and
financial highlights appearing in the December 31, 1996 Annual Report of Keyport
Variable Investment Trust, which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectus and under the heading
"Independent Accountants and Financial Statements" in the Statement of
Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
April 25, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL KEYPORT GROWTH AND INCOME FUND YEAR END DEC-31-1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL KEYPORT GROWTH AND INCOME FUND YEAR END DEC-31-1996
</LEGEND>
<CIK> 0000898445
<NAME> KEYPORT VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME> COLONIAL-KEYPORT GROWTH AND INCOME FUND
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 73526
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<TOTAL-LIABILITIES> 142
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<PAID-IN-CAPITAL-COMMON> 73573
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<ACCUMULATED-NET-GAINS> 0
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<EXPENSES-NET> 652
<NET-INVESTMENT-INCOME> 1667
<REALIZED-GAINS-CURRENT> 3894
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<NET-CHANGE-FROM-OPS> 13591
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<DISTRIBUTIONS-OF-INCOME> 1745
<DISTRIBUTIONS-OF-GAINS> 3888
<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> 9703
<SHARES-REINVESTED> 5632
<NET-CHANGE-IN-ASSETS> 22177
<ACCUMULATED-NII-PRIOR> 84
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL KEYPORT UTILITIES FUND YEAR END DEC-31-1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
- -KEYPORT UTILITIES FUND YEAR END DEC-31-1996
</LEGEND>
<CIK> 0000898445
<NAME> KEYPORT VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 2
<NAME> COLONIAL-KEYPORT UTILITIES FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> DEC-31-1996
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 4709
<ACCUM-APPREC-OR-DEPREC> 6729
<NET-ASSETS> 47907
<DIVIDEND-INCOME> 2438
<INTEREST-INCOME> 68
<OTHER-INCOME> 0
<EXPENSES-NET> 395
<NET-INVESTMENT-INCOME> 2112
<REALIZED-GAINS-CURRENT> (45)
<APPREC-INCREASE-CURRENT> 871
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<DISTRIBUTIONS-OF-INCOME> 2099
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5054
<NUMBER-OF-SHARES-REDEEMED> 11682
<SHARES-REINVESTED> 2099
<NET-CHANGE-IN-ASSETS> (3690)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 29
<OVERDISTRIB-NII-PRIOR> 29
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 395
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<PER-SHARE-NAV-BEGIN> 10.50
<PER-SHARE-NII> 0.46
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<EXPENSE-RATIO> 0.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL KEYPORT INTERNATIONAL FUND FOR GROWTH YEAR ENDEC-31-1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONAIL KEYPORT INTERNATIONAL FUND FOR GROWTH YEAR END DEC-31-1996
</LEGEND>
<CIK> 0000898445
<NAME> KEYPORT VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 4
<NAME> COLONIAL-KEYPORT INTERNATIONAL FUND FOR GROWTH
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 26038
<INVESTMENTS-AT-VALUE> 26638
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<OTHER-ITEMS-ASSETS> 304
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 26593
<DIVIDEND-INCOME> 500
<INTEREST-INCOME> 56
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<EXPENSES-NET> 348
<NET-INVESTMENT-INCOME> 208
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<APPREC-INCREASE-CURRENT> (520)
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL KEYPORT STRATEGIC INCOME FUND YEAR END DEC-31-1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
KEYPORT STRATEGIC INCOME FUND YEAR END DEC-31-1996
</LEGEND>
<CIK> 0000898445
<NAME> KEYPORT VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 5
<NAME> COLONIAL-KEYPORT STRATEGIC INCOME FUND
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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<GROSS-EXPENSE> 423
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL US FUND FOR GROWTH YEAR END DEC-31-1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL US FUND
FOR GROWTH YEAR END DEC-31-1996
</LEGEND>
<CIK> 0000898445
<NAME> KEYPORT VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 6
<NAME> COLONIAL-KEYPORT US STOCK FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 49712
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<NET-CHANGE-FROM-OPS> 10357
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<NET-CHANGE-IN-ASSETS> 60855
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF NEWPORT-KEYPORT TIGER FUND YEAR END DEC-31-1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF NEWPORT-KEYPORT
TIGER FUND YEAR END DEC-31-1996
</LEGEND>
<CIK> 0000898445
<NAME> KEYPORT VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 7
<NAME> NEWPORT KEYPORT TIGER FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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<OVERDISTRIB-NII-PRIOR> 93
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<GROSS-EXPENSE> 364
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<PER-SHARE-NAV-END> 2.52
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</TABLE>
