File No. 33-59216
File No. 811-7556
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. 9 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 10 [X]
(check appropriate box or boxes)
KEYPORT VARIABLE INVESTMENT TRUST
(to be renamed "LIBERTY VARIABLE INVESTMENT TRUST"
on or before the effective date of this amendment)
(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
[ ] 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
[X] on November 15, 1997 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 or about February 28,
1997.
<PAGE>
KEYPORT VARIABLE INVESTMENT TRUST
(to be renamed "LIBERTY VARIABLE INVESTMENT TRUST"
on or before the effective date of this amendment)
CROSS REFERENCE SHEET
(as required by Rule 481(a))
PART A
<TABLE>
<CAPTION>
FORM N-1A LOCATION
<S> <C>
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, 1996 and the Registrant's
Semi-Annual Report for the six months ended June
30, 1997. As required by said Item 5, the
Registrant undertakes under "Financial Highlights"
in the Prospectus to provide a copy of said Annual
Report and Semi-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
3
<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: Principal
Holders of Securities 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:
Practices Portfolio 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:
of Securities Being Offered Purchases and Redemptions, Net Asset Value (Part A)
20. Tax Status Other Considerations: Taxes
(Part A)
4
<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 (i) the Registrant's Annual
Report for the year ended December 31, 1996 and
(ii) the Registrant's Semi-Annual Report for the six months
ended June 30, 1997.
</TABLE>
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.
5
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210
- --------------------------------------------------------------------------------
Liberty Variable Investment Trust (formerly named "Keyport Variable Investment
Trust") ("Trust") is an open-end management investment company that currently
includes seven separate Funds, each with its own investment objective and
policies. The seven Funds and their investment objectives are:
[bullet] Colonial Growth and Income Fund, Variable Series seeks primarily
income and long-term capital growth and, secondarily, preservation of
capital.
[bullet] Stein Roe Global Utilities Fund, Variable Series seeks current income
and long-term growth of capital and income.
[bullet] Colonial International Fund For Growth, Variable Series 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 U.S. Stock Fund, Variable Series seeks long-term capital
growth by investing primarily in large capitalization equity
securities.
[bullet] Colonial Strategic Income Fund, Variable Series 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. Purchasers should
carefully assess the risks associated with an investment in the Fund.
[bullet] Newport Tiger Fund, Variable Series 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).
[bullet] Liberty All-Star Equity Fund, Variable Series seeks total investment
return, comprised of long-term capital appreciation and current
income, through investment primarily in a diversified portfolio of
equity securities.
There is no assurance that the objectives of the Funds will be realized.
Other Funds may be added or deleted from time to time.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 November 15, 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).
- --------------------------------------------------------------------------------
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 November 15, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
THE TRUST ............................................................... 3
FINANCIAL HIGHLIGHTS ...................................................... 4
THE FUNDS ............................................................... 10
Colonial Growth and Income Fund, Variable Series ....................... 10
Stein Roe Global Utilities Fund, Variable Series ........................ 10
Colonial International Fund For Growth, Variable Series ................. 11
Colonial U.S. Stock Fund, Variable Series .............................. 12
Colonial Strategic Income Fund, Variable Series ........................ 12
Newport Tiger Fund, Variable Series .................................... 12
Liberty All-Star Equity Fund, Variable Series ........................... 13
TRUST MANAGEMENT ORGANIZATIONS .......................................... 14
The Trustees ............................................................ 14
The Manager: Liberty Advisory Services Corp. (LASC) ..................... 14
LASC's Sub-Advisers ................................................... 15
TRUST SERVICE ORGANIZATIONS ............................................. 16
Custodians ............................................................ 16
Independent Accountants: Price Waterhouse LLP ........................... 16
OTHER CONSIDERATIONS ................................................... 16
Expenses of the Funds ................................................... 16
Purchases and Redemptions ................................................ 17
Investment Return ...................................................... 17
Net Asset Value ......................................................... 17
Distributions ......................................................... 18
Taxes .................................................................. 18
Shareholder Communications ............................................. 19
Page
-----
<S> <C>
Organization, Meetings, and Voting Rights .............................. 19
Additional Information ................................................ 19
OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND
POLICIES OF THE FUNDS .................................................... 19
Short-Term Trading ...................................................... 19
Certain Investment Considerations Pertaining to Government
Debt Securities ...................................................... 20
Cash Reserves and Repurchase Agreements ................................. 20
Forward Commitments and When-Issued Securities;
Dollar Roll Transactions ................................................ 20
Securities Lending ...................................................... 21
Foreign Securities ...................................................... 21
Mortgage-Backed Securities ............................................. 22
Collateralized Mortgage Obligations (CMOs) and Real Estate Mortgage
Investment Conduits (REMICs) ......................................... 22
Certain Derivative Investments .......................................... 23
Zero-Coupon Bonds; Pay-in-Kind Securities .............................. 23
High Yield, High Risk Bonds ............................................. 24
Leverage Risks Associated with Certain Investment Techniques ............. 24
Certain Policies to Reduce Risk ....................................... 24
CHANGES TO INVESTMENT OBJECTIVES AND NON-FUNDAMENTAL POLICIES ............. 24
APPENDIX A: Description of Bond Ratings ................................. A-1
APPENDIX B: Colonial Strategic Income Fund, Variable Series
-- Schedule of Portfolio Asset Composition by Rating for 1996 ........... B-1
</TABLE>
<PAGE>
THE TRUST
The Trust is an open-end management investment company currently consisting of
seven series: Colonial Growth and Income Fund, Variable Series ("Growth and
Income Fund"), Stein Roe Global Utilities Fund, Variable Series ("Global
Utilities Fund"), Colonial International Fund For Growth, Variable Series
("International Fund For Growth"), Colonial U.S. Stock Fund, Variable Series
("U.S. Stock Fund"), Colonial Strategic Income Fund, Variable Series
("Strategic Income Fund"), Newport Tiger Fund, Variable Series (" Tiger Fund")
and Liberty All-Star Equity Fund, Variable Series ("All-Star Fund")
(individually referred to as a "Fund" or by the abbreviated name indicated, or
collectively as the "Funds"). Each Fund other than International Fund For
Growth is a diversified fund. 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, Liberty Advisory Services Corp. (formerly named
"Keyport Advisory Services Corp.") ("LASC") 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.
LASC provides investment management and advisory services to the Funds pursuant
to its Management Agreements with the Trust.
Colonial Management Associates, Inc. ("Colonial") sub-advises four Funds:
Growth and Income Fund, International Fund For Growth, U.S. Stock Fund and
Strategic Income Fund pursuant to separate Sub-Advisory Agreements (the
"Colonial Sub-Advisory Agreements") with each such Fund and LASC.
Stein Roe & Farnham Incorporated ("Stein Roe") sub-advises Global Utilities
Fund pursuant to a Sub-Advisory Agreement (the "Stein Roe Sub-Advisory
Agreement") with such Fund and LASC.
Newport Fund Management, Inc. ("Newport") sub-advises Tiger Fund pursuant to a
Sub-Advisory Agreement (the "Newport Sub-Advisory Agreement") with such Fund
and LASC.
Liberty Asset Management Company ("LAMCO") sub-advises All-Star Fund pursuant
to LASC's Management Agreement for such Fund (to which LAMCO is a party).
LASC 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 with respect to sales of shares to Affiliated Participating
Insurance Companies.
LASC, Colonial, Stein Roe, Newport, LAMCO, KFSC, Keyport and Independence are
wholly-owned indirect subsidiaries of Liberty Financial Companies, Inc.
("LFC"). As of October 31, 1997, approximately 74.7% 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 (other than All-Star Fund, which commenced operations on or about the
date of this Prospectus) for the period beginning with such Fund's commencement
of operations (July 1, 1993 for each of Growth and Income Fund and Global
Utilities Fund; May 2, 1994 for International Fund For Growth; July 5, 1994 for
each of U.S. Stock Fund and Strategic Income Fund; and May 1, 1995 for Tiger
Fund) and ended June 30, 1997. The information through the fiscal year ended
December 31, 1996 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
information for the six-month period ended June 30, 1997 is unaudited. 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 Growth and Income Fund, Variable Series
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June 30, Year Ended December 31,
--------- ----------------------------------------------
1997 1996 1995 1994 1993***
--------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ..................... $ 13.96 $ 12.60 $ 10.03 $ 10.36 $ 10.00
------ ------- ------- -------- ------
Net investment income (a) ................................. 0.14 0.28 0.29 0.26 0.09
Net realized and unrealized gains (losses) on
investments and foreign currency transactions (a) ......... 2.10 1.98 2.72 (0.34) 0.41
------ ------- ------- -------- ------
Total from investment operations ........................... 2.24 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 ........................... $ 16.20 $ 13.96 $ 12.60 $ 10.03 $ 10.36
====== ======= ======= ======== ======
Total return:
Total investment return (b) .............................. 16.05%** 17.89% 30.03% (0.76)% 5.01%**(d)
Ratios/supplemental data:
Net assets, end of period (000) ........................... $88,370 $93,247 $71,070 $48,052 $29,298
Ratio of net expenses to average net assets ............... 0.78%*(e) 0.79%(e) 0.81%(e) 0.87% 1.00%*(c)
Ratio of net investment income to average net assets ...... 1.91%*(e) 2.02%(e) 2.51%(e) 2.82% 2.32%*(d)
Portfolio turnover ratio .................................... 13%** 24% 79% 55% 8%**
Average commission rate (f) .............................. $0.0492 $0.0383 -- -- --
</TABLE>
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* 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 LASC'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.
4
<PAGE>
Stein Roe Global Utilities Fund, Variable Series
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June 30, Year Ended December 31,
---------- --------------------------------------------------
1997 1996 1995 1994 1993***
---------- -------- ------- -------- ------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ..................... $ 10.70 $10.50 $ 8.11 $ 9.65 $ 10.00
------ ------ ------- --------- ----
Net investment income (a) ................................. 0.22 0.46 0.46 0.54 0.18
Net realized and unrealized gains (losses) on
investments (a) .......................................... 0.56 0.23 2.39 (1.53) (0.35)
------ ------ ------- --------- ----
Total from investment operations ........................... 0.78 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 ........................... $ 11.48 $10.70 $ 10.50 $ 8.11 $ 9.65
====== ====== ======= ========= ====
Total return:
Total investment return (b) ................................. 7.29%** 6.53% 35.15% (10.27)% (1.70)%**(c)
Ratios/supplemental data:
Net assets, end of period (000) ........................... $47,296 $7,907 $51,597 $38,156 $54,441
Ratio of net expenses to average net assets ............... 0.78%*(e) 0.81%(d) 0.83%(d) 0.86% 1.00%*(e)
Ratio of net investment income to average net assets ...... 4.09%*(e) 4.36%(d) 4.98%(d) 5.80% 5.10%*(c)
Portfolio turnover ratio ................................. 4%** 14% 18% 16% 2%**
Average commission rate (f) .............................. $0.0446 $.0468 -- -- --
</TABLE>
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* 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 LASC'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 LASC, 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 International Fund For Growth, Variable Series
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June 30, Year Ended December 31,
----------- -----------------------------------
1997 1996 1995 1994***
----------- -------- -------- -------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ..................... $ 1.96 $ 1.97 $ 1.88 $ 2.00
------ ------- ------- -------
Net investment income (a) ................................. 0.01 0.02 0.01 --
Net realized and unrealized gains (losses) on investments and
foreign currency transactions (a) ........................ 0.27 0.09 0.10 (0.12)
------ ------- ------- -------
Total from investment operations ........................... 0.28 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 ........................... $ 2.24 $ 1.96 $ 1.97 $ 1.88
====== ======= ======= =======
Total return:
Total investment return (b) ................................. 14.29%** 5.61% 5.85% (6.00)%**
Ratios/supplemental data:
Net assets, end of period (000) ........................... $33,089 $26,593 $22,764 $19,146
Ratio of net expenses to average net assets ............... 1.51%*(c) 1.40%(c) 1.40%(c) 1.74%*
Ratio of net investment income to average net assets ...... 1.34%*(c) 0.84%(c) 0.75%(c) 0.13%*
Portfolio turnover ratio ................................. 16%** 115% 40% 31%**
Average commission rate (d) .............................. $0.0070 $0.0010 -- --
</TABLE>
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* 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.
6
<PAGE>
Colonial U.S. Stock Fund, Variable Series
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June 30, Year Ended December 31,
----------- ------------------------------------
1997 1996 1995 1994***
----------- --------- ------- -------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ..................... $ 14.22 $ 12.36 $ 10.27 $ 10.00
------ ------- ------- -------
Net investment income (a) ................................. 0.09 0.19 0.21 0.09
Net realized and unrealized gains on investments (a) ...... 2.61 2.52 2.84 0.35
------ ------- ------- -------
Total from investment operations ........................... 2.70 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 ........................... $ 16.92 $ 14.22 $ 12.36 $ 10.27
====== ======= ======= =======
Total return:
Total investment return (c) .............................. 18.99%** 21.84% 29.70%(b) 4.40%(b)**
Ratios/supplemental data:
Net assets, end of period (000) ........................... $77,835 $60,855 $43,017 $15,373
Ratio of net expenses to average net assets ............... 0.95%*(e) 0.95%(e) 1.00%(d)(e) 1.00%(d)*
Ratio of net investment income to average net assets ...... 1.18%*(e) 1.39%(e) 1.72%(b)(e) 2.16%(b)*
Portfolio turnover ratio ................................. 19%** 77% 115% 52%**
Average commission rate (f) .............................. $0.0421 $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 LASC'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 LASC, 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.
7
<PAGE>
Colonial Strategic Income Fund, Variable Series
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June 30, Year Ended December 31,
---------- ----------------------------------
1997 1996 1995 1994***
---------- ------- ------- -------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ........................ $ 11.04 $ 10.99 $ 9.79 $ 10.00
------ ------- ------- --------
Net investment income (a) .................................... 0.44 0.92 0.55 0.30
Net realized and unrealized gains (losses) on investments and
foreign currency transactions (a) ........................... (0.07) 0.16 1.24 (0.19)
------ ------- ------- --------
Total from investment operations .............................. 0.37 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 .............................. $ 11.41 $ 11.04 $ 10.99 $ 9.79
====== ======= ======= ========
Total return:
Total investment return (b) (c) .............................. 3.35%** 9.83% 18.30% 1.10%**
Ratios/supplemental data:
Net assets, end of period (000) .............................. $60,401 $53,393 $48,334 $13,342
Ratio of net expenses to average net assets (e) ............... 0.80%*(e) 0.80%(d) 0.84%(d) 1.00%*
Ratio of net investment income to average net assets (c) ...... 7.93%*(e) 8.13%(d) 8.08%(d) 7.33%*
Portfolio turnover ratio .................................... 51%** 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 LASC'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 LASC, these ratios would have been 0.86%, 0.94% and
1.60% (annualized), respectively.
8
<PAGE>
Newport Tiger Fund, Variable Series
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June 30, Year Ended December 31,
------------- ------------------------------
1997 1996 1995**
------------- ----------- ----------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ........................... $ 2.52 $ 2.28 $ 2.00
---------- ------- ----------
Net investment income (a) .................................... 0.02 0.03 0.01
Net realized and unrealized gains on investments and foreign
currency transactions (a) .................................... 0.10 0.24 0.29
---------- ------- ----------
Total from investment operations .............................. 0.12 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 ................................. $ 2.64 $ 2.52 $ 2.28
========== ======= ==========
Total return:
Total investment return (b) .................................... 4.76%** 11.73% 15.00%***
Ratios/supplemental data:
Net assets, end of period (000) .............................. $ 39,725 $34,642 $ 18,977
Ratio of net expenses to average net assets (c) ............... 1.20%* 1.27% 1.79%*
Ratio of net investment income to average net assets (c) ...... 1.42%* 1.20% 0.89%*
Portfolio turnover ratio ....................................... 6%** 7% 12%***
Average commission rate (d) .................................... $ 0.0103 $0.0172 --
</TABLE>
* 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.
9
<PAGE>
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
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 Growth and Income Fund, Variable Series
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.
Stein Roe Global Utilities Fund, Variable Series
Investment Objective. The Fund seeks current income and long-term growth of
capital and income.
Investment Program. The Fund normally invests at least 65% of its total assets
in U.S. and foreign equity and debt securities of companies engaged in the
manufacture, production, generation, transmission, sale or distribution of
electricity, natural gas or other types of energy, or water or other sanitary
services, and companies engaged in telecommunications, including telephone,
telegraph, satellite, microwave and other communications media (but not
companies primarily engaged in public broadcasting, print media or cable
television) ("Utility Companies"). The Fund will invest primarily in securities
of large, established Utility Companies located in developed countries,
including the U.S. The Fund may invest without limit in foreign securities. See
"OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS:
Foreign Securities." The Fund normally will invest in securities issued by
companies located in at least three countries including the U.S. Up to 35% of
the Fund's total assets may be invested in equity securities of any type and
investment grade debt
10
<PAGE>
securities that are not issued by Utility Companies. Because the Fund
concentrates its investments in securities of Utility Companies, an investment
in the Fund may entail more risk than an investment in a more diversified
portfolio.
Equity securities purchased by the Fund generally include common and preferred
stock, warrants (rights) to purchase such stock, debt securities convertible
into such stock, and structured and unstructured American Depositary Receipts
(receipts issued in the U.S. by banks or trust companies evidencing ownership
of underlying foreign securities (ADRs)). At least 20% of the Fund's total
assets will be invested in equity securities of Utility Companies.
Debt securities purchased by the Fund generally include securities of any
maturity that pay fixed, floating or adjustable interest rates. The Fund may
invest in zero-coupon bonds and pay-in-kind securities. See "OTHER INVESTMENT
PRACTICES, RISK CONSIDERATIONS AND OTHER POLICIES OF THE FUNDS: Zero-Coupon
Bonds; Pay-in-Kind Securities."
The debt securities in which the Fund invests will be rated at the time of
investment at least Baa by Moody's Investors Service ("Moody's") or BBB by
Standard & Poor's Corporation ("S&P") or will be unrated but considered by
Stein Roe to be of comparable credit quality. Such securities will not
necessarily be sold if the rating is subsequently reduced unless any such
downgrade would cause the Fund to hold more than 5% of its total assets in debt
securities rated below investment grade. Debt securities rated BBB or Baa have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of the issuers of
such securities to make principal and interest payments than would likely be
the case with investments in securities with higher credit ratings.
The values of debt securities generally fluctuate inversely with changes in
interest rates. This is less likely to be true for adjustable or floating rate
securities, since interest rate changes are more likely to be reflected in
changes in the rates paid on the securities. However, reductions in interest
rates may also translate into lower return.
The values of securities issued by Utility Companies are especially affected by
changes in prevailing interest rate levels (as interest rates increase, the
values of Utility Company securities tend to decrease, and vice versa), as well
as by general competitive and market forces in the utility industries, changes
in federal and state regulation, energy conservation efforts and other
environmental concerns and, particularly with respect to nuclear facilities,
shortened economic life and cost overruns. Certain utilities, especially gas
and telephone utilities, have in recent years been affected by increased
competition, which could adversely affect the profitability of such utilities.
Similarly, the profitability of certain electric utilities may in the future be
adversely affected by increased competition resulting from partial
deregulation.
The Fund may purchase and sell (i) U.S. and foreign stock and bond index
futures contracts, (ii) U.S. and foreign interest rate futures contracts and
(iii) options on any of the foregoing. Such transactions will be entered into
(x) for hedging purposes or (y) to gain exposure to a particular market pending
investment in individual securities. The Fund also may purchase and sell
options on individual securities for hedging purposes. See "OTHER INVESTMENT
PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS: Certain Derivative
Investments." The Fund will purchase and sell such derivative securities only
with respect to securities it may otherwise purchase or indices composed of
such securities.
Colonial International Fund For Growth, Variable Series
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."
The Fund may purchase and sell (i) foreign stock and bond index futures
contracts, (ii) foreign interest rate futures contracts and (iii) options on
any of the foregoing. Such transactions will be entered into (x) for hedging
purposes or (y) to gain exposure to a particular market pending investment in
individual securities. The Fund also may purchase and sell options on
individual securities for hedging purposes. See "OTHER
11
<PAGE>
INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS: Certain
Derivative Investments." The Fund will purchase and sell such derivative
securities only with respect to securities it may otherwise purchase or indices
composed of such securities.
Colonial U.S. Stock Fund, Variable Series
Investment Objective. The Fund seeks long-term capital growth by investing
primarily in large capitalization equity securities.
Investment Program. The Fund normally invests at least 65% of its total assets
in common stock of U.S. companies with equity market capitalizations at the
time of purchase in excess of $3 billion. Up to 35% of total assets may be
invested in common stock of U.S. companies with equity market capitalizations
at the time of purchase between $1 billion and $3 billion. Up to 10% of total
assets may be invested in ADRs. Up to 10% of total assets may be invested in
any combination of (i) convertible debt securities (i.e., debt securities that
are convertible into common stock at the holder's option), (ii) investment
grade corporate debt securities (i.e., rated investment grade by at least two
nationally recognized rating agencies), and (iii) debt securities issued or
guaranteed by the U.S. Government or its agencies. 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.
Colonial Strategic Income Fund, Variable Series
Investment Objective. 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 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 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 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.
The Fund may purchase and sell U.S. and foreign interest rate futures contracts
and options thereon to hedge against changes in interest rates. See "OTHER
INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS: Certain
Derivative Investments." The Fund will engage in such activities only with
respect to securities it may otherwise purchase or indices composed of such
securities.
Newport Tiger Fund, Variable Series
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.
12
<PAGE>
Equity securities in which the Fund invests include common and preferred stock,
warrants (rights) to purchase such stock, debt securities convertible into
stock, ADRs, Global Depositary 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.
On July 1, 1997, sovereignty over Hong Kong was transferred from Great Britain
to China and Hong Kong became 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.
Liberty All-Star Equity Fund, Variable Series
Investment Objective. The Fund seeks total investment return, comprised of
long-term capital appreciation and current income, through investment primarily
in a diversified portfolio of equity securities.
Investment Program. The Fund invests primarily in equity securities, defined as
common stocks and securities convertible into common stocks (such as bonds and
preferred stocks) and securities having common stock characteristics (such as
warrants and rights to purchase equity securities.) The Fund also may invest in
ADRs. The Fund may lend its portfolio securities.
The Fund's investment program is based upon LAMCO's multi-manager concept.
LAMCO allocates the Fund's portfolio assets on an approximately equal basis
among a number of independent investment management organizations ("Portfolio
Managers")--currently five in number--each of which employs a different
investment style, and from time to time rebalances the portfolio among the
Portfolio Managers so as to maintain an approximately equal allocation of the
portfolio among them throughout all market cycles.
In LAMCO's opinion, the multi-manager concept provides advantages over the use
of a single manager because of the following primary factors:
(i) Most equity investment management firms consistently employ a distinct
investment "style" which causes them to emphasize stocks with particular
characteristics;
(ii) because of changing investor preferences, any given investment style
will move into and out of market favor and will result in better investment
performance under certain market conditions but less successful performance
under other conditions;
(iii) consequently, by allocating the Fund's portfolio on an approximately
equal basis among Portfolio Managers employing different styles, the impact of
any one such style on investment performance will be diluted, and the
investment performance of the total portfolio will be more consistent and less
volatile over the long term than if a single style were employed throughout the
entire period; and
(iv) more consistent performance at a given annual rate of return over time
produces a higher rate of return for the long term than more volatile
performance having the same average annual rate of return.
LAMCO, based on the foregoing principles and on its analysis and evaluation of
information regarding the personnel and investment styles and performance of a
universe of several hundred professional investment management firms, has
selected for appointment by the Fund a group of Portfolio Managers representing
a blending of different investment styles which, in its opinion, is appropriate
to the Fund's investment objective.
LAMCO continuously monitors the performance and investment styles of the Fund's
Portfolio Managers and from time to time may recommend changes of Portfolio
Managers based on factors such as changes in a Portfolio Manager's investment
style or a departure by a Portfolio Manager from the investment style for which
it had been selected, a deterioration in a Portfolio Manager's performance
relative to that of other investment management firms practicing a similar
style, or adverse changes in its ownership or personnel.
13
<PAGE>
The Fund's current Portfolio Managers are:
Columbus Circle Investors, Inc.
J. P. Morgan Investment Management Inc.
Oppenheimer Capital
Palley-Needelman Asset Management, Inc.
Wilke/Thompson Capital Management, Inc.
Both the Fund and Liberty All-Star Equity Fund, a multi-managed closed-end fund
of which LAMCO also is the manager and which has the same investment objective
and investment program as the Fund, have, and likely will continue to have, the
same Portfolio Managers.
Although under normal circumstances the Fund will remain substantially fully
invested in equity securities, up to 35% of the value of the Fund's total
assets may be invested in U.S. dollar denominated money market instruments of
the type described under "OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND
POLICIES OF THE FUNDS: Cash Reserves and Repurchase Agreements."
The Fund may purchase and sell U.S. stock futures contracts and options
thereon. Such transactions will be entered into (i) for hedging purposes or
(ii) to maintain market exposure in connection with (A) LAMCO's rebalancing the
Funds' Portfolio among Portfolio Managers or (B) changes in Portfolio Managers.
The Fund also may purchase and sell options on individual securities (i) for
hedging purposes or (ii) to increase investment return. See "OTHER INVESTMENT
PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS: Certain Derivative
Investments." The Fund will purchase and sell such derivative securities only
with respect to securities it may otherwise purchase or indices composed of
such securities.
The Fund may remain substantially fully invested during periods when stock
prices generally rise and also during periods when they generally decline. The
Fund is intended to be a long-term investment vehicle and is not designed to
provide a means of speculating on short-term stock market movements.
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 Informa-tion contains the names of and
biographical information on the Trustees.
The Manager: Liberty Advisory Services Corp. (LASC)
LASC, 125 High Street, Boston Massachusetts 02110, is the manager of the Trust.
LASC was incorporated on January 8, 1993 under the laws of the Commonwealth of
Massachusetts.
In accordance with its Management Agreements with the Trust, LASC designs and
supervises a continuous investment program for the Trust, evaluates,
recommends, and monitors its Sub-Advisers' performance, investment programs,
and compliance with applicable laws and regulations, and recommends to the
Board of Trustees whether its Sub-Advisers' respective contracts should be
continued or modified and whether a new sub-adviser or multiple sub-advisers
should be added or deleted. LASC 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, LASC 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. LASC has delegated
its administrative responsibilities to Colonial in accordance with this
authority. LASC, or its affiliates, pay all compensation of the Trust's
directors and officers who are employees of LASC 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. LASC 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 LASC management fees, accrued daily and paid monthly, at the
following maximum annual rates of the average daily net assets of the specified
Fund.
<TABLE>
<S> <C>
Growth and Income Fund 0.65%
Global Utilities Fund 0.65%
International Fund For Growth 0.90%
U.S. Stock Fund 0.80%
Strategic Income Fund 0.65%
Tiger Fund 0.90%
All-Star Fund 0.80%
</TABLE>
14
<PAGE>
LASC's Sub-Advisers
Colonial
Colonial, an investment adviser since 1931, is the Sub-Adviser of each of
Growth and Income Fund, International Fund For Growth, U.S. Stock Fund and
Strategic Income Fund. Colonial, whose principal business address is One
Financial Center, Boston, Massachusetts 02111, is an indirect wholly owned
subsidiary of LFC.
LASC, 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:
Growth and Income Fund 0.45%
International Fund For Growth 0.70%
U.S. Stock Fund 0.60%
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 LASC 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.
Daniel Rie, Senior Vice President, Colonial, and director of Colonial's Equity
Group, has managed the 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.
Mark Stoeckle has managed the 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 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, have co-managed the 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 International Fund For Growth. In selecting broker-dealers,
Colonial may direct Stein Roe to consider research and brokerage services
furnished to Colonial.
Stein Roe
Stein Roe is the Sub-Adviser of the Global Utilities Fund. Stein Roe, whose
principal address is One South Wacker Drive, Chicago, Illinois 60606, is an
indirect wholly owned subsidiary of LFC.
LASC, out of the management fees it receives from the Trust, pays Stein Roe a
sub-advisory fee at the annual rate of 0.45% of the average daily net assets of
the Global Utilities Fund.
Under the Stein Roe Sub-Advisory Agreement, Stein Roe manages the assets of the
Fund in accordance with its investment objective, investment program, policies,
and restrictions under the supervision of LASC and the Board of Trustees. Stein
Roe determines which securities and other instruments are purchased and sold
for the Fund.
Ophelia Barsketis, Senior Vice President of Stein Roe, co-manages the Global
Utilities Fund. Ms. Barsketis joined Stein Roe in 1983 and progressed through a
variety of equity analyst positions before assuming her current
responsibilities.
Deborah A. Jansen, Vice President and Senior Research Analyst for global and
domestic equities and global economic forecasting for Stein Roe, co-manages the
Global Utilities Fund. Ms. Jansen joined Stein Roe in 1987 and served as an
associate economist and senior economist before assuming her current
responsibilities. Ms. Jansen left Stein Roe in January, 1995 and returned to
her position as Vice President in March, 1996. From June 5, 1995 through June
30, 1995, Ms. Jansen was a Senior Equity Research Analyst for BancOne
Investment Advisers Corporation.
Newport
Newport is the Sub-Adviser of the Tiger Fund. Newport, whose principal address
is 580 California Street, Suite 1960, San Francisco, California 94104, is an
indirect wholly owned subsidiary of LFC.
LASC, 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 Tiger Fund.
Under the Newport Sub-Advisory Agreement, Newport manages the assets of the
Fund in accordance with its investment objective, investment program, policies,
and restrictions under the supervision of LASC and the Board of Trustees.
Newport determines which securities and other instruments are purchased and
sold for the Fund.
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.
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LAMCO and LAMCO's Portfolio Managers
LAMCO is the Sub-Adviser of the All-Star Fund. LAMCO, whose principal address
is 600 Atlantic Avenue, 23rd Floor, Boston, Massachusetts 02210, is an indirect
wholly owned subsidiary of LFC.
LASC, out of the management fees it receives from the Trust, pays LAMCO a
sub-advisory fee at the annual rate of 0.60% of the average daily net assets of
the All-Star Fund.
LAMCO is party to LASC's Management Agreement with the Trust for the All-Star
Fund. Under the Management Agreement, LASC delegates investment management of
the Fund to LAMCO, in accordance with the Fund's investment objective,
investment program, policies and restrictions under the supervision of LASC and
the Board of Trustees. The Management Agreement further authorizes LAMCO to
recommend for appointment one or more Portfolio Managers pursuant to a
portfolio management agreement among the Trust, LAMCO and the applicable
Portfolio Manager. The Management Agreement provides that each Portfolio
Manager shall have full investment discretion and authority to make all
determinations with respect to the investment of the portion of the Fund's
assets assigned to such Portfolio Manager by LAMCO, in accordance with LAMCO's
multi-manager concept.
Pursuant to a separate portfolio management agreement with each Portfolio
Manager, LAMCO, out of the management fees it receives from LASC, pays each
such Portfolio Manager a fee at the annual rate of 0.30% of the average daily
net assets of that portion of the Fund's assets assigned to such Portfolio
Manager.
No one individual at LAMCO is responsible for LAMCO's investment management of
All-Star Fund.
Irwin F. Smith, Chairman and Managing Director of Columbus Circle Investors,
Inc., manages that portion of All-Star Fund's portfolio assigned to that firm.
Henry D. Cavanna, Managing Director of J.P. Morgan Investment Management, Inc.,
manages that portion of All-Star Fund's portfolio assigned to that firm.
John Lindenthal, Managing Director of Oppenheimer Capital, manages that portion
of All-Star Fund's portfolio assigned to that firm.
Roger B. Palley, President and Senior Investment Officer of Palley-Needelman
Asset Management, Inc., manages that portion of All-Star Fund's portfolio
assigned to that firm.
Mark A. Thompson, Chairman and Chief Investment Officer of Wilke/Thompson
Capital Management, Inc., manages that portion of All-Star Fund's portfolio
assigned to that firm.
The Trust and LAMCO have applied to the Securities and Exchange Commission for
an exemptive order that would permit LAMCO to enter into a new portfolio
management agreement with a new Portfolio Manager (whether or not in connection
with the replacement of an existing Portfolio Manager) and with an existing
Portfolio Manager (or its successor) following a transaction resulting in a
change of control of such Portfolio Manager without a vote of the shareholders
of the All-Star Fund. The application seeks an exemptive order permitting such
a new agreement, provided that the new agreement is at a fee no higher than
that provided in, and is on other terms and conditions substantially similar
to, the Fund's agreements with its other Portfolio Managers. Information
regarding the new Portfolio Manager will be sent to holders of VA contracts and
VLI policies within 90 days following the effective date of the change or
addition.
TRUST SERVICE ORGANIZATIONS
Custodian
As of the date of this Prospectus, (i) Boston Safe Deposit and Trust Company,
One Boston Place, Boston, Massachusetts 02109, is the custodian for each of the
Funds other than Tiger Fund and (ii) UMB, n.a., 928 Grand Ave., Kansas City,
Missouri 64141, is the custodian for Tiger Fund. The Board of Trustees has
approved the appointment of The Chase Manhattan Bank, 3 Chase Metro Tech
Center, 8th Floor, Brooklyn, New York 11245 to become the custodian for each of
the Funds. This change is expected to be completed not later than during the
first quarter of 1998. Foreign securities are maintained in the custody of
foreign branches of U.S. banks, foreign banks and foreign trust companies that
are members of the custodians' global custody network 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
LASC, Colonial, Stein Roe, Newport, LAMCO and LAMCO's Portfolio Managers. LASC
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) Growth and Income Fund, Global Utilities Fund, U.S. Stock Fund
and All-Star Fund in excess of 1.00% of average net asset value per annum, (ii)
each of International Fund For Growth and
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Tiger Fund in excess of 1.75% of average net asset value per annum and (iii)
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 LASC, described 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 record keeping services, and of equipment for communication among the
Funds' custodians, LASC, Colonial, Stein Roe, Newport, LAMCO, LAMCO's Portfolio
Managers 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 LASC, Colonial, Stein Roe, Newport, LAMCO, LAMCO's
Portfolio Managers 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
Average annual total returns for the Funds are calculated in accordance with
the Securities and Exchange Commission's formula and assume reinvestment of all
distributions. Other total returns differ from average annual total return only
in that they may relate to different time periods and may represent aggregate
as opposed to average annual total returns. 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 International Fund For
Growth and Tiger Fund) at the commencement of operations was established at
$10.00. The initial net asset value of each of International Fund For Growth
and 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.
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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 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
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that are treated as "passive foreign investment companies" under the Code. Each
of International Fund For Growth and Tiger Fund, 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 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, the applicable portfolio manager will buy or
sell portfolio securities whenever it believes it is appropriate. Their
decisions 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, cus-
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todian fees and other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities.
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%. Global Utilities Fund and 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 the portfolio manager considers a change in the Fund's portfolio.
Certain Investment Considerations Pertaining to Government Debt Securities
Each of Growth and Income Fund, Strategic Income Fund and U.S. Stock Fund may,
as part of its normal investment program, invest in U.S. Government Securities.
Similarly, each of International Fund For Growth and 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. 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 the applicable portfolio
manager. 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 Growth and Income Fund, Global Utilities Fund and 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 and Stein Roe do
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.
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
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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.
Securities Lending
Each of Global Utilities Fund, U.S. Stock Fund and All-Star Fund may lend
portfolio securities to certain institutions (principally broker-dealers) that
the applicable portfolio manager considers qualified in order 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.
Foreign Securities
Tiger Fund normally will remain fully invested in equity securities of
companies located in the Tiger countries. International Fund For Growth
normally invests primarily in foreign securities. Global Utilities Fund may
invest without limit in foreign securities. Similarly, Strategic Income Fund
may invest any portion of its assets in securities issued or guaranteed by
foreign governments. Growth and Income Fund also may invest 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. 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.
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. Tiger Fund, International Fund For Growth, Global
Utilities Fund, Strategic Income Fund and Growth and Income Fund may engage in
currency exchange transactions to convert currencies to or from U.S. dollars.
These Funds may purchase or sell 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 Fund, 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.
International Fund For Growth, Global Utilities Fund, and Strategic Income Fund
also may buy and sell currency futures contracts and options thereon for such
hedging purposes. Global Utilities Fund and Strategic Income Fund also may buy
or sell options on currencies for such 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 generally will not 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.
ADRs. With respect to equity securities, each of Tiger Fund, International Fund
For Growth, Global Utilities Fund, Growth and Income Fund, U.S. Stock Fund and
All-Star Fund may purchase structured and unstructured ADRs. ADRs are U.S.
dollar-denominated certificates issued by a United States bank or trust
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company representing the right to receive securities of a foreign 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
Strategic Income Fund and 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).
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)
Strategic Income Fund and 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.
22
<PAGE>
The Fund will 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.
Certain Derivative Investments
As specified above under "THE FUNDS," certain Funds may invest in derivative
securities for certain specified purposes. These derivative securities include
U.S. and foreign stock and bond index futures contracts, U.S. and foreign
interest rate futures contracts, options on stock, bond and interest rate
futures contracts, and options on individual securities.
A financial futures contract creates an obligation by the seller to sell and
the purchaser to buy an amount of cash equal to a specified cash amount
multiplied by the difference between the value of a specified index (based on
stocks, bonds, or interest rates) at the contract's settlement date and the
benchmark index value at which the contract is made. A sale of a futures
contract can be terminated in advance of the settlement date by subsequently
purchasing a similar offsetting (opposite way) contract. Similarly, a purchase
of a futures contract can be terminated by a similar offsetting sale. Gain or
loss on a futures contract generally is realized upon such termination.
An option generally gives the option holder the right, but not the obligation,
to purchase or sell a specified security or futures contract prior to the
option's specified expiration date. A call option gives the option purchaser
the right to buy from the option seller (writer); a put option gives the option
purchaser the right to sell to the option writer. A Fund will pay a premium to
purchase an option, which will become a loss if the option expires unexercised.
A Fund will receive a premium from writing an option, which increases its
return if the option expires unexercised or is closed out at a profit. When a
Fund writes a call option, it may become obligated to sell the underlying
security at a below market price. Similarly, if a Fund writes a put option, it
may become obligated to buy the underlying security at an above market price.
With respect to each futures contract or call option purchased, the Fund will
set aside in a segregated account maintained with its custodian (or broker, if
legally permitted) cash or liquid securities in an amount equal to the market
value of the futures contract or option, less the initial margin deposit. A
Fund will write only "covered" options, meaning that, so long as the Fund is
obligated under the option, it must own the underlying security subject to the
option (or comparable securities satisfying the cover requirements of the
Securities and Exchange Commission) in the case of a call option written by the
Fund, or maintain in a segregated account with the Fund's custodian cash or
liquid securities with a value sufficient at all times to cover its obligations
under put options written by it.
Transactions in futures and options may not precisely achieve the goals of
hedging, gaining or maintaining market exposure or increasing returns, as
applicable, to the extent there is an imperfect correlation between the price
movements of the futures contracts or options and of the underlying securities.
In addition, if the portfolio manager's prediction on stock or bond market
movements or changes in interest rates is inaccurate, the Fund may be worse off
than if it had not used such derivative investment techniques.
For more information on these derivative investments, see "DESCRIPTION OF
CERTAIN INVESTMENTS: Futures Contracts and Related Options" and "--Options on
Securities" in the Statement of Additional Information.
Zero-Coupon Bonds; Pay-In-Kind Securities
Global Utilities Fund and 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.
Global Utilities Fund also may invest in pay-in-kind securities. Such
securities pay interest, typically at the issuer's option, in additional
securities instead of cash. Similar to zero-coupon bonds, the Fund accrues
interest paid in kind and may have to sell other investments to raise the cash
needed to make income distributions.
23
<PAGE>
High Yield, High Risk Bonds
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.
Leverage Risks Associated with Certain Investment Techniques
Certain investment techniques used by the Funds and described above may present
additional risks associated with the use of leverage. These techniques are
forward commitments and the purchase of securities on a when-issued basis, the
purchase and sale of foreign currency on a forward basis, the purchase and sale
of certain futures contracts and options thereon, and the purchase and sale of
certain options. Leverage may magnify the effect on Fund shares of fluctuations
in the values of the securities underlying these transactions. In accordance
with Securities and Exchange Commission pronouncements, to reduce (but not
necessarily eliminate) leverage, the Fund will either "cover" its obligations
under such transactions by holding the securities or other commodities (or
rights to acquire the securities or such commodities) it is obligated to
deliver under such transactions, or deposit and maintain in segregated account
with its custodian cash, liquid securities, or securities denominated in the
particular foreign currency, equal in value to the Fund's obligations under
such transactions.
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 its total assets, invest
in more than 10% of its 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 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 its portfolio manager(s) deem 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 such portfolio managers
believe 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 non-fundamental policies may be changed without
shareholder approval. The holders of VA Contracts and VLI Policies will be
notified in connection with 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.
24
<PAGE>
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>
APPENDIX B
Colonial Strategic Income Fund, Variable Series -- Schedule of Portfolio Asset
Composition by Rating For 1996
<TABLE>
<CAPTION>
Month
-----------------------------------------------------------------------------------------------------------------
Rating January February March April May June July August September October November December
-------- -------- -------- ------- ------ ------- -------- --------- ------- -------- -------- --------
(percentage of portfolio)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aaa/AAA 44.0% 45.8% 41.7% 44.7% 40.7% 40.0% 44.1% 41.3% 38.7% 34.3% 36.3% 37.0%
Aa/AA ... 8.3% 8.1% 8.5% 8.6% 13.0% 13.1% 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% 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% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Ba/BB ... 11.1% 10.6% 10.8% 11.1% 10.2% 9.5% 9.8% 9.4% 8.9% 9.4% 9.9% 9.6%
B/B ...... 32.8% 31.7% 34.4% 32.9% 33.4% 34.1% 30.8% 29.9% 30.3% 33.9% 30.4% 30.4%
Caa/CCC 2.0% 2.0% 2.8% 2.7% 2.7% 3.4% 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% 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% 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% 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% 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% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== ===== ====== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
1996
Rating (percentage of portfolio)
-----------------------
<S> <C>
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%
=====
</TABLE>
B-1
<PAGE>
Distributed by: Keyport Financial Services Corp.
125 High Street, Boston, MA 02110-2712
[KEYPORT LOGO]
VA Contract and VLI Policy Service Hotline
800-367-3653 (Option 3)
Keyline 800-367-3654
Keyport Logo is a registered service mark of Keyport Life Insurance Company.
VIT 5/97
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
Federal Reserve Plaza, 600 Atlantic Avenue
Boston, Massachusetts 02210
STATEMENT OF ADDITIONAL INFORMATION
Dated November 15, 1997
The Statement of Additional Information ("SAI") is not a Prospectus,
but should be read in conjunction with the Trust's Prospectus, dated November
15, 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 November 15, 1997.
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
INVESTMENT MANAGEMENT AND OTHER SERVICES...................... S-3
General.............................................. S-3
Trust Charges and Expenses........................... S-6
INVESTMENT RESTRICTIONS ................................... S-7
Growth and Income Fund............................... S-7
Global Utilities Fund................................ S-8
International Fund For Growth........................ S-9
U.S. Stock Fund ................................... S-10
Strategic Income Fund................................ S-11
Tiger Fund........................................... S-12
All-Star Fund... ................................... S-14
MORE FACTS ABOUT TRUST ................................... S-16
Mixed and Shared Funding............................. S-16
Organization...... ................................... S-16
Trustees and Officers ................................... S-17
Principal Holders of Securities............................... S-20
Custodians.................................................... S-21
OTHER CONSIDERATIONS ................................... S-21
Portfolio Turnover ................................... S-21
Suspension of Redemptions............................ S-21
Valuation of Securities ................................... S-21
Portfolio Transactions ................................... S-23
DESCRIPTION OF CERTAIN INVESTMENTS............................ S-26
Money Market Instruments............................. S-26
Investments in Less Developed Countries....................... S-29
Foreign Currency Transactions........................ S-29
Options on Securities ................................... S-33
Futures Contracts and Related Options................ S-36
Passive Foreign Investment Companies................. S-40
Securities Loans ................................... S-40
INVESTMENT PERFORMANCE ................................... S-41
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS.............. S-42
S-2
<PAGE>
Liberty Variable Investment Trust (formerly "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 seven Funds: Colonial Growth and
Income Fund, Variable Series ("Growth and Income Fund"); Stein Roe Global
Utilities Fund, Variable Series ("Global Utilities Fund"); Colonial
International Fund For Growth, Variable Series ("International Fund For
Growth"); Colonial U.S. Stock Fund, Variable Series ("U.S. Stock Fund");
Colonial Strategic Income Fund, Variable Series ("Strategic Income Fund");
Newport Tiger Fund, Variable Series ("Tiger Fund") and Liberty All-Star Equity
Fund, Variable Series ("All-Star 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
Liberty Advisory Services Corp. ("LASC") serves as Manager pursuant to
four investment advisory agreements between the Trust on behalf of one or more
of the Funds and LASC (the "Management Agreements"). LASC 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 October 31, 1997, approximately 74.7% of the combined voting power of
LFC's outstanding voting stock was owned, indirectly, by Liberty Mutual
Insurance Company ("Liberty Mutual").
LASC and the Trust, on behalf of each of Growth and Income Fund,
International Fund For Growth, U.S. Stock Fund and Strategic Income Fund, have
entered into separate Sub-Advisory Agreements ("Colonial Sub-Advisory
Agreements") with Colonial Management Associates, Inc. ("Colonial"). Colonial is
an indirect wholly owned subsidiary of LFC.
LASC and the Trust, on behalf of the Global Utilities Fund, have
entered into a separate Sub-Advisory Agreement (the "Stein Roe Sub-Advisory
Agreement") with Stein Roe & Farnham Incorporated ("Stein Roe"). Stein Roe is an
indirect wholly owned subsidiary of LFC.
LASC and the Trust, on behalf of the Tiger Fund, have entered into a
separate Sub-Advisory Agreement (the "Newport Sub-Advisory Agreement;"
collectively, with the Colonial Sub-Advisory Agreements and the Stein Roe
Sub-Advisory Agreement, the "Sub-Advisory Agreements") with Newport Fund
Management, Inc. ("Newport"). Newport is an indirect wholly owned subsidiary of
LFC.
Liberty Asset Management Company ("LAMCO") sub-advises All-Star Fund
pursuant to the Management Agreement for such Fund (to which LAMCO is a party).
All-Star Fund's investment program is based upon LAMCO's multi-manager concept.
LAMCO allocates the Fund's portfolio assets on an equal basis among a number of
independent investment management organizations ("Portfolio Managers") --
currently five in number -- each of which employs a different investment style,
and periodically rebalances the Fund's portfolio among the Portfolio Managers so
as to maintain an approximately equal allocation of the portfolio among them
throughout all market cycles. Each
S-3
<PAGE>
Portfolio Manager provides these services under a Portfolio Management Agreement
(the "Portfolio Management Agreements") among the Trust, on behalf of All-Star
Fund, LAMCO and such Portfolio Manager.
All-Star Fund's current Portfolio Managers are:
Columbus Circle Investors, Inc.
J.P. Morgan Investment Management Inc.
Oppenheimer Capital
Palley-Needelman Asset Management, Inc.
Wilke/Thompson Capital Management, Inc.
Liberty Advisory Services Corp. Keyport owns all of the outstanding
common stock of LASC. LASC's address is 125 High Street, Boston, Massachusetts
02110. The directors and principal executive officer of LASC 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 sold
to Affiliated Participating Insurance Companies (as such term is defined in the
Prospectus).
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, Stephen Gibson
(principal executive officer), Carl C. Ericson, C. Frazier Evans, Donald S.
MacKinnon, Helen Frame Peters, Daniel Rie, Davey S. Scoon and Michael H. Koonce.
Stein Roe & Farnham Incorporated. Stein Roe, One South Wacker Drive,
Chicago, Illinois, 60606, is an indirect wholly owned subsidiary of LFC. The
directors and principal executive officer of Stein Roe are Kenneth R. Leibler,
C. Allen Merritt, Jr., Hans P. Ziegler (principal executive officer), Timothy K.
Armour, and Harold W. Cogger.
Newport. Newport Pacific Management, Inc. ("Newport Pacific"), 580
California Street, San Francisco, California 94104, 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 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.
Liberty Asset Management Company; LAMCO's Portfolio Managers. LAMCO,
600 Atlantic Avenue, 23rd Floor, Boston, Massachusetts 02210, is an indirect
wholly owned subsidiary of LFC. The directors and principal executive officer of
LAMCO are: Kenneth R. Leibler, Richard R. Christensen (principal executive
officer), Lindsay Cook and C. Allen Merritt, Jr. Mr. Christensen is Chairman of
the Board of Trustees of the Trust.
S-4
<PAGE>
As of the date of this Statement of Additional Information, the
following entities serve as LAMCO's Portfolio Managers for All-Star Fund:
[bullet] Columbus Circle Investors. Columbus Circle Investors, Inc.
("Columbus Circle"), Metro Center, One Station Place,
Stanford, Connecticut 06902, is a wholly-owned subsidiary of
PIMCO Advisors L.P. ("PIMCO"), 840 Newport Center Drive,
Newport Beach, California 92660. The executive board and
principal executive officer of PIMCO are [to be inserted in
Rule 497 SAI].
[bullet] J.P. Morgan Investment Management, Inc. J.P. Morgan Investment
Management Inc. ("J.P. Morgan"), 522 Fifth Avenue, New York,
New York 10036, is a wholly-owned subsidiary of J.P. Morgan &
Co. Incorporated, a New York Stock Exchange listed bank
holding company the principal banking subsidiary of which is
Morgan Guaranty Trust Company of New York. J.P. Morgan's
principal executive officer is Keith M. Schappert, and its
directors are Mr. Schappert and Messrs. William L. Cobb, Jr.,
C. Nicolas Potter, Michael R. Granito, John R. Thomas, Thomas
M. Luddy, Michael E. Patterson, Jean Louis Pierre Brunel,
Robert A. Anselmi, Milan Steven Soltis and K. Warren Anderson.
[bullet] Oppenheimer Capital. Oppenheimer Capital, Oppenheimer Tower,
World Financial Center, New York, New York 10281, also is a
wholly-owned subsidiary of PIMCO.
[bullet] Palley-Needelman Asset Management, Inc. Palley-Needelman Asset
Management, Inc.'s address is 800 Newport Center Drive, Suite
450, Newport Beach, California 92660. The firm is owned by
Roger B. Palley, President, and Chester J. Needelman, chief
executive officer. Messrs. Palley and Needelman are its
directors.
[bullet] Wilke/Thompson Capital Management, Inc. Wilke/Thompson Capital
Management, Inc. ("Wilke/Thompson"), 3800 Norwest Center, 90
South Seventh Street, Minneapolis, Minnesota 55402, is a
corporation of which Anthony L. Ventura, its President, owns
23%, and Mark A. Thompson, its Chairman and Chief Investment
Officer, owns 56%, of its outstanding shares. (The balance of
such shares are owned by other employees). Messrs. Thompson
and Ventura comprise its Board of Directors.
The Management Agreements, the Sub-Advisory Agreements and the
Portfolio Management Agreements provide that none of LASC, Colonial, Stein Roe,
Newport, LAMCO or LAMCO's Portfolio Managers (collectively, the "Advisers"), 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 such Adviser of its respective duties under such agreements,
except for liability resulting from willful misfeasance, bad faith or gross
negligence on the part of such Adviser, in the performance of its respective
duties or from reckless disregard by such Adviser of its respective obligations
and duties thereunder.
S-5
<PAGE>
Trust Charges and Expenses
Growth and Income Fund and Global Utilities Fund commenced operations
on July 1, 1993. International Fund For Growth commenced operations on May 2,
1994. U.S. Stock Fund and Strategic Income Fund commenced operations on July 5,
1994. Tiger Fund commenced operations on May 1, 1995. All-Star Fund commenced
operations on or about the date of this SAI.
Management Fees. Each Fund listed below paid LASC 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:
1994 1995 1996
---- ---- ----
Growth and Income Fund: $273,406 $384,179 $538,173
Global Utilities Fund: $269,227 $284,469 $315,944
International Fund For Growth: $ 88,260 $183,697 $224,146
U.S. Stock Fund: $ 48,403 $237,547 $418,745
Strategic Income Fund: $ 36,266 $181,811 $322,142
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
---- ---- ----
Growth and Income Fund: $ 27,000 $ 30,524 $ 40,025
Global Utilities Fund: $ 27,091 $ 27,000 $ 27,000
International Fund For Growth: $ 18,000 $ 27,000 $ 27,000
U.S. Stock Fund: $ 13,500 $ 27,000 $ 27,000
Strategic Income Fund: $ 13,500 $ 27,000 $ 27,000
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
---- ---- ----
Growth and Income Fund: $ 7,500 $ 7,500 $ 7,500
Global Utilities Fund: $ 7,500 $ 7,500 $ 7,500
International Fund For Growth: $ 5,000 $ 7,500 $ 7,500
U.S. Stock Fund: $ 3,750 $ 7,500 $ 7,500
Strategic Income Fund: $ 3,750 $ 7,500 $ 7,500
Tiger Fund: -- $ 5,000 $ 7,500
S-6
<PAGE>
Expense Limitations. LASC 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 Growth and
Income Fund, Global Utilities Fund, U.S. Stock Fund and All-Star Fund in excess
of 1.00% of average net asset value per annum, (ii) each of International Fund
For Growth and Tiger Fund in excess of 1.75% of average daily net asset value
per annum, and (iii) 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 Strategic
Income Fund were reduced during 1996 by $27,636.
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.
Growth and Income Fund
Fundamental Investment Policies. 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;
S-7
<PAGE>
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;
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 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; and
7. Own real estate if it is acquired as the result of owning
securities and not more than 5% of total assets.
Other Investment Policies. As non-fundamental investment policies of
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. Purchase and sell futures contracts and related options if the
total initial margin and premiums required to establish non-hedging
positions exceed 5% of its total assets; or
3. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount of
such securities.
Global Utilities Fund
Fundamental Investment Policies. Global 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;
S-8
<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; and
6. Own real estate if it is acquired as the result of owning
securities and not more than 5% of total assets.
Other Investment Policies. As non-fundamental investment policies of
Global 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 (this restriction does not apply
to securities purchased on a when-issued basis or to margin
deposits in connection with futures or options transactions);
2. Purchase and sell futures contracts and related options if the
total initial margin and premiums required to establish non-hedging
positions exceed 5% of its total assets; and
3. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount of
such securities.
International Fund For Growth
Fundamental Investment Policies. 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;
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
S-9
<PAGE>
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
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 more than 15% of its net assets in illiquid assets;
4. 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;
5. 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;
6. 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
7. 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.
U.S. Stock Fund
Fundamental Investment Policies. U.S. Stock Fund may:
S-10
<PAGE>
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 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
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 more than 15% of its net assets in illiquid assets; or
4. Purchase or sell commodity contracts if the total initial margin
and premiums on the contracts would exceed 5% of its total assets.
Strategic Income Fund
Fundamental Investment Policies. Strategic Income Fund may:
S-11
<PAGE>
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
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; or
3. Invest more than 15% of its net assets in illiquid assets.
Tiger Fund
Fundamental Investment Policies. 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
S-12
<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;
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;
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
Tiger Fund which may be changed without a shareholder vote, the Fund may not:
1. Invest in companies for the purpose of exercising control;
2. 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;
3. Participate on a joint and several basis in any securities trading
account;
4. Write or trade in put or call options;
S-13
<PAGE>
5. 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; or
6. Engage in short sales of securities.
All-Star Fund
Fundamental Investment Policies. All-Star Fund may not:
1. Issue senior securities, except as permitted by (2) below;
2. Borrow money, except that it may borrow in an amount not exceeding
7% of its total assets (including the amount borrowed) taken at
market value at the time of such borrowing, and except that it may
make borrowings in amounts up to an additional 5% of its total
assets (including the amount borrowed) taken at market value at the
time of such borrowing, to obtain such short-term credits as are
necessary for the clearance of securities transactions, or for
temporary or emergency purposes, and may maintain and renew any of
the foregoing borrowings, provided that the Fund maintains asset
coverage of 300% with respect to all such borrowings;
3. Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such
pledging, mortgaging or hypothecating does not exceed 12% of the
Fund's total assets taken at market value at the time of such
pledge, mortgage or hypothecation. The deposit in escrow of
securities in connection with the writing of put and call options
and collateral arrangements with respect to margin for future
contracts are not deemed to be pledges or hypothecation for this
purpose;
4. Act as an underwriter of securities of other issuers, except when
disposing of securities;
5. Purchase or sell real estate or any interest therein, except that
the Fund may invest in securities issued or guaranteed by corporate
or governmental entities secured by real estate or interests
therein, such as mortgage pass-through and collateralized mortgage
obligations, or issued by companies that invest in real estate or
interests therein;
6. Make loans to other persons except for loans of portfolio
securities (up to 30% of total assets) and except through the use
of repurchase agreements, the purchase of commercial paper or the
purchase of all or a portion of an issue of debt securities in
accordance with its investment objective, policies and
restrictions, and provided that not more than 10% of the Fund's
assets will be invested in repurchase agreements maturing in more
than seven days;
S-14
<PAGE>
7. Invested in commodities or in commodity contracts (except stock
index futures and options);
8. Purchase securities on margin (except to the extent that the
purchase of options and futures may involve margin and except that
it may obtain such short-term credits as may be necessary for the
clearance of purchases or sales of securities), or make short sales
of securities;
9. Purchase the securities of issuers conducting their principal
business activity in the same industry (other than securities
issued or guaranteed by the United States, its agencies and
instrumentalities) if, immediately after such purchase, the value
of its investments in such industry would comprise 25% or more of
the value of its total assets taken at market value at the time of
each investment;
10. Purchase securities of any one issuer, if
(a) more than 5% of the Fund's total assets taken at
market value would at the time be invested in the securities
of such issuer, except that such restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities or corporations sponsored
thereby, and except that up to 25% of the Fund's total assets
may be invested without regard to this limitation; or
(b) such purchase would at the time result in more
than 10% of the outstanding voting securities of such issuer
being held by the Fund, except that up to 25% of the Fund's
total assets may be invested without regard to this
limitation;
11. Invest in securities of another registered investment company,
except (i) as permitted by the Investment Company Act of 1940, as
amended from time to time, or any rule or order thereunder, or (ii)
in connection with a merger, consolidation, acquisition or
reorganization;
12. Purchase any security, including any repurchase agreement maturing
in more than seven days, which is subject to legal or contractual
delays in or restrictions on resale, or which is not readily
marketable, if more than 10% of the net assets of the Fund, taken
at market value, would be invested in such securities;
13. Invest for the purpose of exercising control over or management of
any company; or
14. Purchase securities unless the issuer thereof or any company on
whose credit the purchase was based, together with its
predecessors, has a record of at least three years' continuous
operations prior to the purchase, except for investments which, in
the aggregate, taken at cost do not exceed 5% of the Fund's total
assets.
S-15
<PAGE>
Other Investment Policies. As non-fundamental investment policies of
All-Star Fund which may be changed without a shareholder vote, the Fund may not
borrow in an amount in excess of 5% of its total assets (including the amount
borrowed).
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 Participating Insurance Companies (as such
term is defined therein), including those 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, should be taken in response to such conflicts. If such a
conflict were to occur, one or more separate accounts of Participating Insurance
Companies 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
anticipates doing 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 of Participating
Insurance Companies, and, in certain cases, the general account of Keyport.
However, the Trust's Declaration of Trust disclaims liability of the
shareholders, the Trustees, or
S-16
<PAGE>
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.
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).
<TABLE>
<CAPTION>
=======================================================================================
Positions(s)
held with Principal occupations
Name and Address the Trust during past five years
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Richard R. Christensen* President President, Liberty Investment
Federal Reserve Plaza and Trustee Services, Inc.; since 1994,
600 Atlantic Avenue President, LAMCO
Boston, MA 02210
- ---------------------------------------------------------------------------------------
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 of
2208 Tawny Woods Place Trustee Business, Boise State University;
Boise, ID 83706 Business Consultant and Author
- ---------------------------------------------------------------------------------------
Timothy J. Jacoby Treasurer Treasurer and Chief Financial
One Financial Center and Chief Officer of the Colonial Funds;
Boston, MA 02111 Financial Senior Vice President and Chief
Officer Financial Officer of Colonial
Management Associates, Inc.;
formerly Senior Vice President,
Fidelity
S-17
<PAGE>
======================================================================================
Positions(s)
held with Principal occupations
Name and Address the Trust during past five years
- ---------------------------------------------------------------------------------------
Accounting and Custody
Services, Inc. and Assistant
Treasurer to the Fidelity Group of
Funds
- ---------------------------------------------------------------------------------------
Peter L. Lydecker Controller Controller and Chief Accounting
One Financial Center and Chief Officer of the Colonial Funds,
Boston, MA 02111 Accounting Vice President, Colonial
Officer Management Associates, Inc.
- ---------------------------------------------------------------------------------------
Daniel Rie Vice President Senior Vice President and Head of
One Financial Center 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 Senior Vice President and General
One Financial Center Counsel, Colonial Management
Boston, MA 02111 Associates, Inc. (August, 1997 to
present); Vice President and
Counsel (prior thereto)
- ---------------------------------------------------------------------------------------
Carl C. Ericson Vice President Senior Vice President (Vice
One Financial Center President prior to 1996) Director
Boston, MA 02111 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
- ---------------------------------------------------------------------------------------
Ophelia Barsketis One Vice President Senior Vice President, Stein Roe
South Wacker Drive
Chicago, Illinois
60606
- ---------------------------------------------------------------------------------------
S-18
<PAGE>
=======================================================================================
Positions(s)
held with Principal occupations
Name and Address the Trust during past five years
- ---------------------------------------------------------------------------------------
Deborah A. Jansen One Vice President Vice President and Senior Research
South Wacker Drive Analyst, Stein Roe (March 1996 to
Chicago, Illinois present and 1987 to January,
60606 1995); from June 5, 1995 to June
30, 1995, Senior Equity Research
Analyst, BankOne Investment
Advisers Corporation
- ---------------------------------------------------------------------------------------
William R. Parmentier, Jr. 600 Vice President Chief Investment Officer, LAMCO
Atlantic Avenue (April, 1995 to present); Chief
Boston, Massachusetts 02210 Investment Officer of Grumman
Corporation, 1979-1994
- ---------------------------------------------------------------------------------------
Christopher S. Carabell 600 Vice President Vice President, Investments, LAMCO
Atlantic Avenue (March, 1996 to present);
Boston, Massachusetts 02210 Associate Director, U.S. Equity
Research, Rogers Casey &
Associates, January, 1995 to
March, 1996; Director of
Investments, Boy Scouts of
America, Inc., June, 1990 to
January, 1995
- ---------------------------------------------------------------------------------------
John A. Benning Assistant Senior Vice President and General
Federal Reserve Plaza Secretary Counsel, Liberty Financial
600 Atlantic Avenue Companies, Inc.
Boston, MA 02210
- ---------------------------------------------------------------------------------------
Kevin M. Carome Secretary Since August 1993, Associate
Federal Reserve Plaza General Counsel and Vice President
600 Atlantic Avenue (since February 1995), Liberty
Boston, MA 02210 Financial Companies, Inc.;
Associate, Ropes & Gray, prior
thereto
- ---------------------------------------------------------------------------------------
</TABLE>
As indicated in the above table, certain Trustees and officers of the
Trust also hold positions with LFC, Keyport, LASC, KFSC, Colonial, Stein Roe,
Newport, LAMCO and/or certain of their affiliates. Certain of the Trustees and
officers of the Trust hold comparable positions with certain other investment
companies.
S-19
<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 Participating Insurance Companies 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 International
Fund For Growth, 26.2% of U.S. Stock Fund and 35.7% of 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,
Participating Insurance Companies will vote the shares held of record by
sub-accounts 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 Participating Insurance Company and Keyport disclaims
beneficial
S-20
<PAGE>
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).
No Participating Insurance Company has informed the Trust that it knows 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
As of the date of this SAI, (i) Boston Safe Deposit and Trust Company,
One Boston Place, Boston, Massachusetts 02108, is custodian of the securities
and cash owned by each Fund other than Tiger Fund and (ii) UMB, n.a., 928 Grand
Avenue, Kansas City, Missouri 64141 is custodian for Tiger Fund. The Board of
Trustee has approved the appointment of The Chase Manhattan Bank, 3 MetroTech
Center, 8th Floor, Brooklyn, New York 11245, to become custodian of all the
Funds. This change is expected to be effected not later than during the first
quarter of 1998. The custodians are responsible for holding all securities and
cash of each Fund they serve, 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 custodians and may be entered
into the Federal Reserve Book Entry system, or the security depository system of
the Depository Trust Company or other securities depository systems. Portfolio
securities purchased outside the U.S. are maintained in the custody of various
foreign branches of the custodians 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.
S-21
<PAGE>
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 holidays: New Year's Day, Martin Luther King
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-22
<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, Stein Roe, Newport and each of LAMCO's Portfolio
Managers (each an "Adviser") 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 its Adviser 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 the Adviser 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, and subject to
the additional matters described below regarding each of International Fund For
Growth and All-Star Fund, securities transactions of the Funds may be executed
by broker-dealers who also provide research services (as defined below) to an
Adviser, the Funds or other accounts as to which such Adviser exercises
investment discretion. Such Adviser may use all, some or none of such research
services in providing investment advisory services to each of its clients,
including the Fund(s) it advises. To the extent that such services are used by
the Advisers, they tend to reduce their expenses. It is not possible to assign
an exact dollar value for such services.
Subject to such policies as the Board of Trustees may determine, each
of the Advisers 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
S-23
<PAGE>
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 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). An Adviser placing a brokerage
transaction 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 applicable Fund and all its
other clients.
Certain of the other accounts of any of the Advisers may have
investment objectives and programs that are similar to those of the Funds.
Accordingly, occasions may arise when each of the Advisers 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, the Adviser 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.
Consistent with applicable rules 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 the Advisers 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.
Additional Matters Pertaining to International Fund For Growth. The
portfolio managers for the International Fund For Growth are Bruno Bertocci and
David Harris, each of whom is jointly employed by Colonial and Stein Roe (each
of which is an indirect 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 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 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 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 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 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.
S-24
<PAGE>
Portfolio transactions on behalf of the International Fund For Growth
may be executed by broker-dealers who provide research services to Colonial or
Stein Roe which are used in the investment management of such Fund or other
accounts over which Colonial or 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 Roe, unless a determination is
made that such research assists Colonial in its investment management of the
International Fund For Growth or other accounts over which Colonial exercises
investment discretion (including, without limitation, the Colonial International
Fund For Growth).
Additional Matters Pertaining to All-Star Fund. The Portfolio
Management Agreements with LAMCO's Portfolio Managers provide that LAMCO has the
right to request that transactions giving rise to brokerage commissions, in
amounts to be agreed upon from time to time between LAMCO and the Portfolio
Manager, be executed by brokers and dealers (to be agreed upon from time to time
between LAMCO and the Portfolio Manager) which provide research products and
services to LAMCO or to All-Star Fund or other accounts managed by LAMCO
(collectively with All-Star Fund, "LAMCO Clients"). The commissions paid on such
transactions may exceed the amount of commissions another broker would have
charged for effecting that transaction. Research products and services made
available to LAMCO through brokers and dealers executing transactions for LAMCO
Clients involving brokerage commissions include performance and other
qualitative and quantitative data relating to investment managers in general and
the Portfolio Managers in particular; data relating to the historic performance
of categories of securities associated with particular investment styles; mutual
fund portfolio and performance data; data relating to portfolio manager changes
by pension plan fiduciaries; quotation equipment; and related computer hardware
and software, all of which research products and services are used by LAMCO in
connection with its selection and monitoring of portfolio managers (including
the Portfolio Managers) for LAMCO Clients, the assembly of a mix of investment
styles appropriate to LAMCO's Clients' investment objectives, and the
determination of overall portfolio strategies.
LAMCO from time to time reaches understandings with each of the
Portfolio Managers as to the amount of the All-Star Fund portfolio transactions
initiated by such Portfolio Manager that are to be directed to brokers and
dealers which provide research products and services to LAMCO. These amounts may
differ among the Portfolio Managers based on the nature of the markets for the
types of securities managed by them and other factors.
These research products and services are used by LAMCO in connection
with its management of LAMCO Clients' portfolios, regardless of the source of
the brokerage commissions. In instances where LAMCO receives from broker-dealers
products or services which are used both for research purposes and for
administrative or other non-research purposes, LAMCO makes a good faith effort
to determine the relative proportions of such products or services which may be
considered as investment research, based primarily on anticipated usage, and
pays for the costs attributable to the non-research usage in cash.
S-25
<PAGE>
The table below shows information on brokerage commissions paid by each
Fund during the periods indicated. (Strategic Income Fund did not pay
commissions on any of its transactions; All-Star Fund commenced operations on or
about November 15, 1997.)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Growth and Income Global Utilities International U.S. Stock Fund Tiger Fund
Fund Fund Fund For Growth
- ---------------------------------------------------------------------------------------------------------------------------
<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.
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.
S-26
<PAGE>
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.
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
S-27
<PAGE>
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 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.
S-28
<PAGE>
Investments in Less Developed Countries
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
- ------------------------------------------------------------
Tiger Fund invests primarily in companies located in the Tiger
countries of East Asia, which include Indonesia, Korea, the Philippines, Taiwan
and Thailand.
Foreign Currency Transactions
Each of International Fund For Growth, Tiger Fund, Global Utilities
Fund, Strategic Income Fund and 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. International Fund For
Growth, Global Utilities Fund, and Strategic Income Fund also may buy and sell
currency futures contracts and options thereon for such hedging purposes. Global
Utilities Fund and 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
S-29
<PAGE>
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 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 its 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
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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 International Fund For Growth, Global Utilities Fund, Strategic
Income Fund and 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 by the Commodities Futures
Trading Commission ("CFTC"), such as the New York Mercantile Exchange. (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
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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.
Global Utilities Fund and Strategic Income Fund will only purchase or
write currency options when Stein Roe or 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 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.
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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.
Options on Securities
Each of Global Utilities Fund, International Fund For Growth and
All-Star Fund may purchase and sell options on individual securities.
Writing covered options.
A Fund may write covered call options and covered put options on
securities held in its portfolio when, in the opinion of the Adviser, such
transactions are consistent with the Fund's investment objective and policies.
Call options written by the Fund give the purchaser the right to buy the
underlying securities from the Fund at a stated exercise price; put options give
the purchaser the right to sell the underlying securities to the Fund at a
stated price.
A Fund may write only covered options, which means that, so long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the
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Fund will hold cash and/or high-grade short-term debt obligations equal to the
price to be paid if the option is exercised. In addition, the Fund will be
considered to have covered a put or call option if and to the extent that it
holds an option that offsets some or all of the risk of the option it has
written. The Fund may write combinations of covered puts and calls on the same
underlying security.
A Fund will receive a premium from writing a put or call option, which
increases the Fund's return on the underlying security if the option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
the Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
A Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an offsetting option. The Fund realizes a profit or loss from a closing
transaction if the cost of the transaction (option premium plus transaction
costs) is less or more than the premium received from writing the option.
Because increases in the market price of a call option generally reflect
increases in the market price of the security underlying the option, any loss
resulting from a closing purchase transaction may be offset in whole or in part
by unrealized appreciation of the underlying security.
If a Fund writes a call option but does not own the underlying
security, and then it writes a put option, the Fund may be required to deposit
cash or securities with its broker as "margin" or collateral for its obligation
to buy or sell the underlying security. As the value of the underlying security
varies, the Fund may have to deposit additional margin with the broker. Margin
requirements are complex and are fixed by individual brokers, subject to minimum
requirements currently imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.
Purchasing put options.
A Fund may purchase put options to protect its portfolio holdings in an
underlying security against a decline in market value. Such hedge protection is
provided during the life of the put option since the Fund, as holder of the put
option, is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. For a put
option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, the Fund will reduce any
profit it might otherwise have realized from appreciation of the underlying
security by the premium paid for the put option and by transaction costs.
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Purchasing call options.
A Fund may purchase call options to hedge against an increase in the
price of securities that the Fund wants ultimately to buy. Such hedge protection
is provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.
Over-the-Counter (OTC) options.
The Staff of the Division of Investment Management of the Securities
and Exchange Commission has taken the position that OTC options purchased by a
Fund and assets held to cover OTC options written by the Fund are illiquid
securities. Although the Staff has indicated that it is continuing to evaluate
this issue, pending further developments, a Fund will enter into OTC options
transactions only with primary dealers in U.S. Government Securities and, in the
case of OTC options written by the Fund, only pursuant to agreements that will
assure that the Fund will at all times have the right to repurchase the option
written by it from the dealer at a specified formula price. The Fund will treat
the amount by which such formula price exceeds the amount, if any, by which the
option may be "in the money" as an illiquid investment. It is the present policy
of the Fund not to enter into any OTC option transaction if, as a result, more
than 15% of the Fund's net assets would be invested in (i) illiquid investments
(determined under the foregoing formula) relating to OTC options written by the
Fund, (ii) OTC options purchased by the Fund, (iii) securities which are not
readily marketable and (iv) repurchase agreements maturing in more than seven
days.
Risk factors in options transactions.
The successful use of a Fund's options strategies depends on the
ability of its Adviser to forecast interest rate and market movements correctly.
When it purchases an option, the Fund runs the risk that it will lose
its entire investment in the option in a relatively short period of time, unless
the Fund exercises the option or enters into a closing sale transaction with
respect to the option during the life of the option. If the price of the
underlying security does not rise (in the case of a call) or fall (in the case
of a put) to an extent sufficient to cover the option premium and transaction
costs, the Fund will lose part or all of its investment in the option. This
contrasts with an investment by the Fund in the underlying securities, since the
Fund may continue to hold its investment in those securities notwithstanding the
lack of a change in price of those securities.
The effective use of options also depends on a Fund's ability to
terminate option positions at times when its Adviser deems it desirable to do
so. Although the Fund will take an option position only if the Adviser believes
there is a liquid secondary market for the option, there is no assurance that
the Fund will be able to effect closing transactions at any particular time or
at an acceptable price.
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If a secondary trading market in options were to become unavailable, a
Fund could no longer engage in closing transactions. Lack of investor interest
might adversely affect the liquidity of the market for particular options or
series of options. A marketplace may discontinue trading of a particular option
or options generally. In addition, a market could become temporarily unavailable
if unusual events -- such as volume in excess of trading or clearing capability
- -- were to interrupt normal market operations.
A marketplace may at times find it necessary to impose restrictions on
particular types of options transactions, which may limit a Fund's ability to
realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options
purchased or sold by a Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
("OCC") or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the Fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by the Fund has
expired, the Fund could lose the entire value of its option.
Special risks are presented by internationally-traded options. Because
of time differences between the United States and various foreign countries, and
because different holidays are observed in different countries, foreign options
markets may be open for trading during hours or on days when U.S. markets are
closed. As a result, option premiums may not reflect the current prices of the
underlying interest in the United States.
Futures Contracts and Related Options
Each of Global Utilities Fund, International Fund For Growth, Strategic
Income Fund and All-Star Fund may buy and sell certain future contracts (and in
certain cases related options), to the extent and for the purposes specified in
the Prospectus.
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 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.
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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 a 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."
A 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.
A 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
A 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 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.
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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.
A 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 a Fund is subject its Adviser'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 a 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 a 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 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
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been issued by a clearing corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms.
Index futures contracts and related options; associated risks
An index futures contract is a contract to buy or sell units of an
index at a specified future date at a price agreed upon when the contract is
made. Entering into a contract to buy units of an index is commonly referred to
as buying or purchasing a contract or holding a long position in the index.
Entering into a contract to sell units of an index is commonly referred to as
selling a contract or holding a short position. A unit is the current value of
the index. A Fund may enter into stock index future contracts, debt index
futures contracts, or other index futures contracts (e.g., an interest rate
futures contract), as specified in the Prospectus. A Fund may also purchase and
sell options on index futures contracts, to the extent specified in the
Prospectus.
There are several risks in connection with the use by a Fund of index
futures as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the index futures and movements
in the prices of securities which are the subject of the hedge. The Fund's
Adviser will attempt to reduce this risk by selling, to the extent possible,
futures on indices the movements of which will, in its judgement, have a
significant correlation with movements in the prices of the Fund's portfolio
securities sought to be hedged.
Successful use of index futures by a Fund for hedging purposes is also
subject to its Adviser's ability to predict correctly movements in the direction
of the market. It is possible that, where the Fund has sold futures to hedge its
portfolio against a decline in the market, the index on which the futures are
written may advance and the value of securities subject to the hedge held in the
Fund's portfolio may decline. If this occurs, the Fund would lose money on the
futures and also experience a decline in the value in its portfolio securities.
However, while this could occur to a certain degree, over time the value of the
Fund's portfolio should tend to move in the same direction as the market indices
which are intended to correlate to the price movements of the portfolio
securities sought to be hedged. It is also possible that, if the Fund has hedged
against the possibility of a decline in the market adversely affecting
securities held in its portfolio and securities prices increase instead, the
Fund will lose part or all of the benefit of the increased values of those
securities that it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the index futures
and the securities of the portfolio being hedged, the prices of index futures
may not correlate perfectly with movements in the underlying index due to
certain market distortions. First, all participants in the futures markets are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions which would distort the normal relationship
between the index and futures markets. Second, margin requirements in the
futures markets are less onerous than margin requirements in the securities
markets, and as a result the futures markets may attract more speculators than
the securities markets. Increased participation by speculators in the futures
markets may also
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cause temporary price distortions. Due to the possibility of price distortions
in the futures markets and also because of the imperfect correlation between
movements in the index and movements in the prices of index futures, even a
correct forecast of general market trends by a Fund's Adviser may still not
result in a successful hedging transaction.
Options on index futures are similar to options on securities except
that options on index futures give the purchaser the right, in return for the
premium paid, to assume a position in an index futures contract (a long position
if the option is a call and a short position if the option is a put), at a
specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which represents the
amount by which the market price of the index futures contract, at exercise,
exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the index future. If an option is exercised on
the last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise price
of the option and the closing level of the index on which the future is based on
the expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
Passive Foreign Investment Companies
International Fund For Growth and 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. A Fund
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
Each of Global Utilities Fund, U.S. Stock Fund and All-Star 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
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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 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:
ERV = P(1+T)n
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 Growth and Income Fund and Global Utilities Fund; May 1, 1994, in
the case of International Fund For Growth; July 5, 1994 in the case of U.S.
Stock Fund and Strategic Income Fund; and May 1, 1995, in the case of Tiger
Fund) through December 31, 1996 were:
=========================================================================
Fund Total Total Return Average Annual
Return Percentage Total Return
- -------------------------------------------------------------------------
Growth and Income Fund $1,598 59.76% 14.29%
- -------------------------------------------------------------------------
Global Utilities Fund $1,270 26.99% 7.05%
- -------------------------------------------------------------------------
International Fund For Growth $1,051 5.09% 1.87%
- -------------------------------------------------------------------------
U.S. Stock Fund $1,650 64.97% 22.21%
- -------------------------------------------------------------------------
Strategic Income Fund $1,314 31.35% 11.55%
- -------------------------------------------------------------------------
Tiger Fund $1,285 28.50% 16.16%
=========================================================================
S-41
<PAGE>
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 Funds'
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.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse LLP are the Trust's independent accountants. The
financial statements as of December 31, 1996 or for the fiscal years or periods
ended December 31, 1995 and December 31, 1996 incorporated by reference in this
SAI have been so incorporated, and the schedule of financial highlights for the
periods ended December 31, 1996 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. In addition, the
unaudited financial statements of the Trust appearing on pages 15 to 53 of the
June 30, 1997 Semi-Annual Report of the Trust are incorporated in this SAI by
reference.
<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
(other than Liberty All-Star Equity Fund, Variable Series ("All-Star Fund")) are
incorporated by reference into Part B of this filing from the Registrant's
December 31, 1996 Annual Report:
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
The following unaudited financial statements for each of the Funds in
the Trust (other than All-Star Fund) are incorporated by references into Part B
of this filing:
Schedule of Investments as of June 30, 1997
Statement of Assets and Liabilities as of June 30, 1997
Statement of Operations for the six months ended June 30, 1996
Statement of Changes in Net Assets for the six months ended June 30,
1997
Financial Highlights for the six months ended June 30, 1997
(b) Exhibits.
1. Agreement and Declaration of Trust (1)
2. By-Laws (1)
3. Not Applicable
4. Not Applicable
5(a)(i). Management Agreement between the Trust, on behalf of each
of Colonial Growth and Income Fund, Variable Series
("GIF") (under its former name "Colonial-Keyport Growth
and Income Fund") and Stein Roe Global Utilities Fund,
Variable Series ("GUF") (under its former name
"Colonial-Keyport Utilities Fund"), and Keyport Advisory
Services Corp. ("KASC") (2)(8)
C-1
<PAGE>
5(a)(ii). Management Agreement between the Trust, on behalf of each
of Colonial International Fund For Growth, Variable Series
("IFFG") (under its former name "Colonial-Keyport
International Fund For Growth"), Colonial U.S. Stock Fund,
Variable Series ("USSF") (under its former name
"Colonial-Keyport U.S. Fund For Growth") and Colonial
Strategic Income Fund, Variable Series ("SIF") (under its
former name "Colonial-Keyport Strategic Income Fund"), and
KASC. (3)(8)
5(a)(iii) Amendment No. 1 to Management Agreements listed as
Exhibits 5(a)(i) and 5(a)(ii). (5)(8)
5(a)(iv). Management Agreement between the Trust, on behalf of
Newport Tiger Fund, Variable Series ("NTF") (under its
former name "Newport-Keyport Tiger Fund"), and KASC.
(5)(8)
5(a)(v) Management and Sub-Advisory Agreement between the Trust,
on behalf of All-Star Fund, Liberty Advisory Services
Corp. ("LASC") and Liberty Asset Management Company
("LAMCO").
5(b)(i). [deleted]
5(b)(ii). Sub-Advisory Agreement among the Trust, on behalf of the
GIF, KASC and Colonial Management Associates, Inc.
("Colonial"). (2)(8)
5(b)(iii). Sub-Advisory Agreement among the Trust, on behalf of GUF,
LASC and Stein Roe & Farnham Incorporated ("Stein Roe").
5(b)(iv). Sub-Advisory Agreement among the Trust, on behalf of IFFG,
KASC and Colonial. (3)(8)
5(b)(v). [deleted]
5(b)(vi). Sub-Advisory Agreement among the Trust, on behalf of USSF,
KASC and Colonial. (4)(8)
5(b)(vii). [deleted]
5(b)(viii). Sub-Advisory Agreement among the Trust, on behalf of SIF,
KASC and Colonial. (4)(8)
5(b)(ix). Sub-Advisory Agreement among the Trust, on behalf of NTF,
KASC and Newport Fund Management, Inc. ("Newport"). (5)(8)
5(b)(x) Form of Portfolio Management Agreement among the Trust, on
behalf of All-Star Fund, LAMCO and LAMCO's Portfolio
Managers.
C-2
<PAGE>
6(a). Underwriting Agreement between the Trust and Keyport
Financial Services Corp. ("KFSC") (2)
6(b) Amendment No. One to KFSC Underwriting Agreement.
6(c) Underwriting Agreement between the Trust and Colonial
Investment Services Inc. ("CISI").
7. Not Applicable
8. Form of Custody Agreement between the Trust and The Boston
Safe Deposit and Trust Company (1)(8)
9(a)(i). Joinder and Release Agreement with Respect to Transfer
Agency Agreement dated as of January 3, 1995 among the
Trust, Liberty Investment Services, Inc. and Colonial
Investors Service Center, Inc. (including form of Transfer
Agency Agreement and Amendment No. One thereto) (5)(8)
9(a)(ii). Amendment No. Two to Transfer Agency Agreement (5)(8)
9(a)(iii). Amendment No. Three to Transfer Agency Agreement
9(b). Participation Agreement among the Trust, Keyport Financial
Services Corp., Keyport Life Insurance Company, and
Liberty Life Assurance Company of Boston (2)(8)
9(c)(i). Pricing and Bookkeeping Agreement between the Trust and
Colonial (2)(8)
9(c)(ii). Amendment No. One to Pricing and Bookkeeping Agreement
(3)(8)
9(c)(iii). Amendment No. Two to Pricing and Bookkeeping Agreemen
(5)(8)
9(c)(iv) Amendment No. Three to Pricing and Bookkeeping Agreement
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
C-3
<PAGE>
15. Not applicable
16. Calculation of Total Returns (7)
17. Financial Data Schedules
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. 8 to this
Registration Statement filed April, 1997.
(8) Note: The name of the Trust will change to "Liberty Variable Investment
Trust" on or before the effective date of this amendment. Agreements
designated by this note (8) were entered into under the Trust's
original name. In addition, the name of KASC will change to "Liberty
Advisory Services Corp." on or before the effective date of this
amendment. Finally, on or before such effective date, the changes to
the names of the Trust's Funds reflected in this amendment will become
effective.
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.
KFSC and CISC, the Trust's principal underwriters, KASC, the Trust's
investment manager, Colonial, KASC's sub-adviser with respect to GIF, IFFG, USSF
and SIF, Stein Roe, KASC's sub-adviser with respect to GUF, Newport, KASC's
sub-adviser with respect to NTF, LAMCO, KASC's sub-adviser with respect to
All-Star, 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 July 31, 1997 owned, indirectly, approximately 73.8% 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 August 15, 1997, the number of holders of shares of beneficial
interest of each Fund of the Trust was as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Colonial-Keyport Growth and Income Fund 12
Colonial-Keyport Utilities Fund 10
Colonial-Keyport International
Fund For Growth 10
Colonial-Keyport U.S. Stock 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.
C-6
<PAGE>
Any approval of indemnification pursuant to Article Tenth does not
prevent the recovery from any Covered Person of any amount paid to such Covered
Person in accordance with Article Tenth as indemnification if such Covered
Person is subsequently adjudicated by a court of competent jurisdiction not to
have acted in good faith in the reasonable belief that such Covered Person's
action was in, or not opposed to, the best interests of Registrant or to have
been liable to Registrant or its shareholders by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Article Tenth also provides that its indemnification provisions are not
exclusive.
Insofar as indemnification for liabilities arising under the 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.
C-7
<PAGE>
Item 28. Business and Other Connections of Investment Advisers
Certain information pertaining to business and other connections of the
Registrant's investment manager, KASC, Colonial, the sub-adviser to each of GIF,
IFFG, USSF and SIF, Stein Roe, the sub-adviser to GUF, Newport, the sub-adviser
to NTF, and LAMCO, the sub-adviser to All-Star, and each of Columbus Circle
Investors (a division of Thomson Advisory Group L.P.), J.P. Morgan Investment
Management, Inc., Oppenheimer Capital, Palley-Needlemen Asset Management, Inc.
and Wilke-Thompson Capital Management, Inc., each of which five firms will serve
as a Portfolio Manager to LAMCO, 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." The information required by this item regarding
the directors and officers of KASC, its sub-advisers named above and LAMCO's
Portfolio Managers named above is incorporated herein by reference from the
applicable firm's Form ADV, as most-recently filed with the Securities and
Exchange Commission.
Item 29. Principal Underwriters
(a) KFSC and CISI act as principal underwriters of the Registrant's
shares on a best-efforts basis.
(b) The information concerning each director and officer of KFSC and
CISI required by this item is incorporated herein by reference from the
applicable firm's Form BD, as most-recently filed with the Securities and
Exchange Commission.
(c) Not applicable.
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
C-8
<PAGE>
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, 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 also maintains all records pursuant to its Pricing and
Bookkeeping Agreement with the Trust. KFSC, 125 High Street, Boston,
Massachusetts 02110, and CISI, One Financial Center, Boston, MA 02111, serve as
principal underwriters for the Trust, and in such capacity each such firm
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) 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-9
<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
27th day of August, 1997.
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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ RICHARD R. CHRISTENSEN* President and Trustee August 27, 1997
- ------------------------------------- (Principal Executive
Richard R. Christensen Officer)
/s/ TIMOTHY J. JACOBY Treasurer (Principal August 27, 1997
- ------------------------------------- Financial Officer)
Timothy J. Jacoby
/s/ PETER L. LYDECKER Controller (Principal August 27, 1997
- ------------------------------------- Accounting Officer)
Peter L. Lydecker
/s/ JOHN A. BACON, JR.* Trustee August 27, 1997
- -------------------------------------
John A. Bacon, Jr.
/s/ SALVATORE MACERA* Trustee August 27, 1997
- -------------------------------------
Salvatore Macera
/s/ THOMAS E. STITZEL* Trustee August 27, 1997
- -------------------------------------
Thomas E. Stitzel
By: /s/ KEVIN M. CAROME
-----------------------------
Attorney-in-Fact
</TABLE>
C-10
<PAGE>
Exhibit Index
5(a)(v). Management and Sub-Advisory Agreement between the Trust, on
behalf of All-Star Fund, LASC and LAMCO.
5(b)(iii). Sub-Advisory Agreement among the Trust, on behalf of GUF,
LASC and Stein Roe.
5(b)(x) Form of Portfolio Management Agreement among the Trust, on
behalf of All-Star Fund, LAMCO and LAMCO's Portfolio Managers.
6(b) Amendment No. One to KFSC Underwriting Agreement.
6(c) Underwriting Agreement between the Trust and CISI.
9(a)(iii) Amendment No. Three to Transfer Agency Agreement.
9(c)(iv) Amendment No. Three to Pricing and Bookkeeping Agreement.
11. Consent of Independent Accountants
17. Financial Data Schedule
C-11
Exhibit 99.B5(a)(v)
LIBERTY VARIABLE INVESTMENT TRUST
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES
MANAGEMENT AND SUB-ADVISORY AGREEMENT
MANAGEMENT AND SUB-ADVISORY AGREEMENT ("Agreement"), made this 15th day
of November, 1997, between LIBERTY VARIABLE INVESTMENT TRUST, a business trust
organized under the laws of The Commonwealth of Massachusetts (formerly named
"Keyport Variable Investment Trust") (the "Trust"), on its own behalf and on
behalf of the Liberty All-Star Equity Fund, Variable Series (the "Fund"),
LIBERTY ADVISORY SERVICES CORP., a corporation organized under the laws of The
Commonwealth of Massachusetts (formerly named "Keyport Advisory Services Corp.")
("LASC"), and Liberty Asset Management Company, a corporation organized under
the laws of the State of Delaware ("LAMCO").
WHEREAS, the Trust has been organized as an open-end management
investment company registered as such under the Investment Company Act of 1940,
as amended ("Investment Company Act"), and is authorized to issue shares of
beneficial interest in one or more separate series (each representing interests
in a separate portfolio of securities and other assets), including the Fund,
which shares are to be issued and sold to and held by various separate accounts
of Keyport Life Insurance Company ("Keyport"), or separate accounts of other
insurance companies that are affiliated or are not affiliated with Keyport
(collectively, "Participating Insurance Companies");
WHEREAS, the Trust heretofore has created (i) two other separate funds
which are covered by the Management Agreement dated June 7, 1993 among the
Trust, on its own behalf and on behalf of such other two series funds, and LASC,
(ii) three other separate funds which are covered by the Management Agreement
dated as of May 2, 1994 among the Trust, on its own behalf and on behalf of such
other three series funds, and LASC and, (iii) one other separate fund which is
covered by the Management Agreement dated as of May 1, 1995 among the Trust, on
its own behalf and on behalf of such other series fund, and LASC; and the Trust
may in the future create additional fund(s) that may be covered by other
separate agreements;
WHEREAS, the Trust desires LASC to render certain investment management
and administrative services to the Trust and the Fund, all in the manner and on
the terms and conditions hereinafter set forth;
WHEREAS, the Trust and LASC desire that LAMCO, as sub-adviser to LASC,
provide investment management services to the Fund based on LAMCO's
multi-manager concept, under which LAMCO recommends, over-sees and coordinates,
and allocates the Fund's portfolio assets among, several portfolio managers
("Portfolio Managers"), each having a different investment style, each of which
manages a different portion of the Fund's investment portfolio; and
<PAGE>
WHEREAS, each of LASC and LAMCO is registered as an investment adviser
under the Investment Adviser's of 1940 (the "Investment Act Adviser's Act"), and
desires to provide services to the Trust and the Fund, in the manner
contemplated above, in consideration of and on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, the Trust, on its own behalf and on behalf of the Fund,
LASC and LAMCO hereby agree as follows:
1. Employment of the Investment Adviser.
The Trust hereby employs LASC (i) to provide certain
administrative and limited oversight services and (ii) to provide certain
investment management and related services to the Trust and the Fund, all in the
manner set forth in Section 2 of this Agreement, subject to the direction of the
Trustees, and for the period, in the manner, and on the terms set forth
hereinafter. LASC hereby accepts such employment and agrees during such period
to render the services and to assume the obligations herein set forth. LASC
shall for all purposes herein be deemed to be an independent contractor and,
except as expressly provided or authorized (whether herein or otherwise), shall
have no authority to act for or represent the Trust in any way or otherwise be
deemed an agent of the Trust.
2. Obligations of, and Services to be Provided by, the Manager.
LASC undertakes to provide the services hereinafter set forth
and to assume the following obligations:
A. Administrative Services.
(a) LASC will provide general administrative services as
hereinafter set forth ("Administrative Services"), all subject to the overall
direction and control of the Board of Trustees of the Trust (the "Board").
(b) Such Administrative Services shall not include investment
advisory, custodian, underwriting and distribution, transfer agency or pricing
and bookkeeping services, but shall include: (i) provision of office space,
equipment and facilities necessary in connection with the services to be
performed hereunder and the maintenance of the headquarters of the Trust; (ii)
maintenance of the corporate books and records of the Trust (other than those of
its records maintained by LAMCO or the Portfolio Managers, the transfer agent,
the custodian and the pricing and bookkeeping agent); (iii) administration of
all dealings and relationships with the Trustees for meetings of the Board, the
scheduling of such meetings and the conduct thereof; (iv) preparation and filing
of proxy materials and administration of arrangements for meetings of
shareholders or beneficial owners of the Funds; (v) preparation and filing of
all required reports and all updating and other amendments to the Trust's
Registration Statement under the Investment Company Act, the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
thereunder; (vi) calculation of distributions required or advisable under the
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Investment Company Act and the Internal Revenue Code of 1986, as amended (the
"Code"); (vii) periodic computation and reporting to the Trustees of each Fund's
compliance with diversification and other portfolio requirements of the
Investment Company Act and the Code; (viii) development and implementation of
general shareholder and beneficial owner correspondence and communications
relating to the Funds, including the preparation and filing of shareholder and
beneficial owner reports as are required or deemed advisable; and (ix) general
oversight of the custodial, net asset value computation, portfolio accounting,
financial statement preparation, legal, tax and accounting services performed
for the Trust or the Fund by others.
It is understood that LASC may, in its discretion and at its expense,
delegate some or all of its administrative duties and responsibilities under
this subsection 2A to its affiliate, Liberty Financial Companies, Inc. ("LFC"),
or any majority or greater owned subsidiaries of LFC.
B. Investment Advisory Services.
(a) LASC shall have overall supervisory responsibility for the
management and investment of the assets of the Fund, subject to and in
accordance with the investment objectives, policies and limitations of the Fund,
as provided in the Trust's Prospectus and Statement of Additional Information
and governing instruments, as amended from time to time, and any directions and
policies which the Trustees may issue to LASC from time to time (collectively,
"Investment Policies").
(b) With the consent of the Trust, on behalf of the Fund, LASC
hereby delegates to LAMCO the obligation to provide the Fund, as sub-advisor to
LASC, an overall investment program and strategy, in accordance with LAMCO's
multi-manager concept. LASC shall be solely responsible for paying the fees of
LAMCO from the fees it collects from the Trust as provided in paragraph 5 below.
(c) In accordance with LAMCO's multi-manager concept, LAMCO
will recommend to the Trustees one or more persons or companies registered as
investment advisers under the Investment Adviser's Act or qualifying as a "bank"
within the meaning of the Investment Adviser's Act and thereby exempted from the
requirement to be so registered ("Portfolio Managers"), pursuant to a portfolio
management agreement among the Trust, on behalf of the Fund, each Portfolio
Manager and LAMCO. Each Portfolio Manager shall have full investment discretion
and authority to make all determinations with respect to the investment and
reinvestment of the portion of the Fund's assets assigned to that Portfolio
Manager by LAMCO from time to time and the purchase and sale of portfolio
securities with those assets, all within the Fund's Investment Policies. Subject
to Section 6, LAMCO shall not be responsible or liable for the investment merits
of any decision by a Portfolio Manager to purchase hold or sell a security for
the Fund's portfolio. LAMCO shall advise the Trustees as to which persons or
companies LAMCO believes are best suited for appointment as Portfolio Managers;
shall monitor and evaluate the investment performance of each Portfolio Manager,
shall allocate and reallocate from time to time, in its sole discretion, the
respective portions of the Fund's assets to be managed by the Portfolio
Managers; shall recommend to the Trustees changes of, additions to or
terminations of Portfolio Managers when it believes such changes, additions or
terminations are appropriate;
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and shall coordinate the investment activities of the Portfolio Managers with a
view to ensuring their compliance with the Fund's Investment Policies and
applicable laws.
(d) LAMCO shall be solely responsible for paying the fees of
each Portfolio Manager from the fees it collects from LASC as provided in
paragraph 5 below.
(e) LASC and/or LAMCO shall render regular reports to the
Board relating to the performance of their duties specified in paragraphs 2B(a),
(b) and (c).
C. Expenses Borne By Manager.
To the extent necessary to perform its obligations under this
Agreement, LASC and/or LAMCO, at their own expense, shall furnish executive and
other personnel and office space, equipment and facilities, and shall pay any
other expenses incurred by them, in connection with the performance of their
duties hereunder, except that the Trust or the Fund, as appropriate, shall
reimburse LASC and/or LAMCO (as appropriate) for its out-of-pocket costs,
including telephone, postage and supplies, incurred by it in connection with
communications with shareholders and beneficial owners of the Fund. LASC and/or
LAMCO shall pay all salaries, fees and expenses of Trustees or officers of the
Trust who are their employees. LASC and LAMCO shall not be obligated to bear any
other expenses incidental to the operations and business of the Trust. LASC and
LAMCO shall not be required to pay or provide any credit for services provided
by the Trust's custodian, transfer agent or other agents.
D. Provision of Information Necessary for Preparation of
Registration Statement Amendments and Other Materials.
LASC will make available and provide such information as the
Trust may reasonably request for use in the preparation of its Registration
Statement, reports and other documents required by federal laws and any
securities and insurance laws of the other states and other jurisdictions in
which the Trust's shares are sold.
E. Code of Ethics.
Each of LASC and LAMCO has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Investment Company Act
and has provided the Trust with a copy of such code of ethics and evidence of
its adoption. On or before June 1 in each year, an executive officer of each of
LASC and LAMCO shall verify to the Trustees that it has complied with the
requirements of Rule 17j-1 during the previous year and that there has been no
material violation of its code of ethics or, if such a violation has occurred,
that appropriate action was taken in response to such violation. Upon the
written request of the Trust, each of LASC and LAMCO shall permit the Trust to
examine the reports required to be made to it by Rule 17j-1(c)(1).
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F. Disqualification.
Each of LASC and LAMCO shall immediately notify the Trustees
of the occurrence of any event which would disqualify it from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the
Investment Company Act or any other applicable statute or regulation.
G. Other Obligations and Service.
Each of LASC and LAMCO shall make its officers and employees
available to the Trustees and officers of the Trust for consulting and
discussions regarding the management of the Trust and its investment activities.
3. Expenses of the Trust.
It is understood that the Trust (or each of its funds
(including the Fund), where applicable) will pay, or will enter into
arrangements that require third parties to pay, all of the expenses of the Trust
or such funds, other than those expressly assumed by LASC and LAMCO herein,
including without limitation:
A. Advisory, sub-advisory and administrative fees;
B. Fees for services of independent public accountants;
C. Legal and consulting fees;
D. Transfer agent, custodian and portfolio pricing,
recordkeeping and tax information services;
E. Expenses of periodic calculations of the funds' net
asset values and of equipment for communication among
the funds' custodian, transfer agent and others;
F. Taxes and the preparation of the funds' tax returns;
G. Brokerage fees and commissions;
H. Interest;
I. Costs of Board of Trustees and shareholder meetings;
J. Updates and printing of prospectuses, proxy
statements and reports to shareholders;
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K. Fees for filing reports with regulatory bodies and
the maintenance of the Trust's existence;
L. Membership dues for industry trade associations;
M. Fees to federal authorities for the registration of
the shares of the funds;
N. Fees and expenses of Trustees who are not directors,
officers, employees or stockholders of LASC, LAMCO or
any of their respective affiliates;
O. Insurance and fidelity bond premiums; and
P. Litigation and other extraordinary expenses of a
non-recurring nature.
4. Activities and Affiliates of the Manager.
A. The Trust acknowledges that each of LASC and LAMCO or one
or more of its affiliates may have investment or administrative responsibilities
or render investment advice to or perform other investment advisory services for
other individuals or entities, and that each of LASC and LAMCO, its affiliates
or any of its or their directors, officers, agents or employees may buy, sell or
trade in securities for its or their respective accounts ("Affiliated
Accounts"). The Trust agrees that each of LASC and LAMCO or its affiliates may
give advice or exercise investment responsibility and take such other action
with respect to Affiliated Accounts which may differ from the advice given or
the timing or nature of action with respect to the Fund, provided that it acts
in good faith. The Trust acknowledges that one or more of the Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Fund may have an
interest.
B. Subject to and in accordance with the Declaration of Trust
and By-Laws of the Trust as currently in effect and the Investment Company Act
and the rules thereunder, it is understood that Trustees, officers and agents of
the Trust and shareholders of the Trust are or may be interested persons as
defined by the Investment Company Act of LASC and/or LAMCO or of their
respective affiliates as directors, officers, agents and shareholders thereof;
that directors, officers, agents and shareholders of LASC and/or LAMCO or of
their respective affiliates are or may be interested persons of the Trust as
Trustees, officers, agents, shareholders or otherwise; that LASC and/or LAMCO or
their respective affiliates may be interested persons of the Trust as
shareholders or otherwise; and that the effect of any such interests shall be
governed by said Declaration of Trust and By-Laws and the Investment Company Act
and the rules thereunder.
5. Compensation of LASC and LAMCO.
For all services to be rendered and payments made pursuant to this
Agreement, (a) the Trust, on its own behalf and on behalf of Fund, will pay LASC
monthly in arrears a fee at an annual rate equal to 0.80% of the net asset value
of the Fund, and (b) LASC, on its own behalf,
6
<PAGE>
will pay LAMCO monthly in arrears a fee at an annual rate equal to 0.60% of such
net asset value. LAMCO acknowledges and agrees that the Trust shall have no
obligation to LAMCO to pay any portion of such fee, which shall be solely the
responsibility of LASC. Each such fee shall be accrued for each calendar day and
the sum of the daily fee accruals shall be paid monthly on or before the tenth
day of the following calendar month. The daily accruals of the fee will be
computed by (i) multiplying the annual percentage rate referred to above by the
fraction the numerator of which is one and the denominator of which is the
number of calendar days in the year, and (ii) multiplying the product obtained
pursuant to clause (i) above by the net asset value of the Fund as determined in
accordance with the Trust's Prospectus as of the previous business day on which
the Fund was open for business. The foregoing fee shall be prorated for any
month during which this Agreement is in effect for only a portion of the month.
6. Liabilities of LASC and LAMCO.
A. Except as provided below, in the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties hereunder on the part of LASC or LAMCO, as the case may be, LASC or
LAMCO shall not be subject to liability to the Trust or to any shareholder of
the Trust for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
B. LAMCO shall indemnify and hold harmless the Trust from any
loss, cost, expense or damage resulting from the failure of any Portfolio
Manager to comply with (i) any statement included in the Prospectus and
Statement of Additional Information of the Trust, or (ii) instructions given by
LAMCO to any Portfolio Manager for the purpose of ensuring the Trust's
compliance with securities, tax and other requirements applicable to the Trust's
business and the investment activities of its Funds; provided, however, that the
indemnification provided in this paragraph 6B shall apply only to the extent
that a Portfolio Manager is liable to the Trust and, after demand by the Trust,
is unable or refuses to discharge its obligations to the Trust.
C. No provision of this Agreement shall be construed to
protect any Trustee or officer of the Trust, or the LASC or LAMCO, as the case
may be, from liability in violation of Sections 17(h) and (i) of the Investment
Company Act.
7. Effective Date: Term.
This Agreement shall become effective on the later of (i) the date
first written above or (ii) the date on which the offer and sale of shares of
the Fund has been registered under the Securities Act and the Investment Company
Act pursuant to an effective Registration Statement of the Trust on Form N-1A
and shall continue until June 7, 1999, and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually by a
vote of the Trustees, including the vote of a majority of the Trustees who are
not interested persons of the Trust, cast in person at a meeting called for the
purpose of voting on such approval, or by vote of a majority of the outstanding
voting securities. The aforesaid provision shall be construed in a manner
consistent with the Investment Company Act and the rules and regulations
thereunder.
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<PAGE>
8. Assignment.
No assignment of this Agreement shall be made by LASC or LAMCO, and
this Agreement shall terminate automatically in the event of any such
assignment. Each of LASC and LAMCO shall notify the Trust in writing in advance
of any proposed change of control with respect to it to enable the Trust to take
the steps necessary to enter into a new advisory contract.
9. Amendment
This Agreement may be amended at any time, but only by written
agreement between LASC, LAMCO and the Trust, which is subject to the approval of
the Trustees of the Trust and the shareholders of any affected Fund in the
manner required by the Investment Company Act and the rules thereunder.
10. Termination.
This Agreement:
(a) may at any time be terminated without payment of any
penalty, by the Trust (by the Board of Trustees of
the Trust or by the vote of a majority of the
outstanding voting securities of the Fund) on sixty
(60) days' written notice to LASC and LAMCO;
(b) shall immediately terminate in the event of its
assignment; and
(c) may be terminated by LASC or LAMCO on sixty (60) days
written notice to the other parties hereto.
11. Definitions.
As used in this Agreement, the terms "affiliated person," "assignment,"
"control," "interested person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act and
the rules and regulations thereunder, subject to any applicable orders of
exemption issued by the Securities and Exchange Commission.
12. Notice.
Any notice under this Agreement shall be given in writing addressed and
delivered or mailed postpaid to the other party to this Agreement at its
principal place of business.
13. Severability.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
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<PAGE>
14. Shareholder Liability.
Each of LASC and LAMCO is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of Trust of
the Trust and agrees that obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the Trust and its assets, and if the
liability relates to one or more Funds, the obligations thereunder shall be
limited to the respective assets of such Funds. Each of LASC and LAMCO further
agrees that it shall not seek satisfaction of any such obligation from the
shareholders of the Funds, nor from the Trustees or any individual Trustee of
the Trust.
15. Governing Law.
This Agreement shall be interpreted under, and the performance of each
of LASC and LAMCO under this Agreement shall be consistent with, the provisions
of the Agreement and Declaration of Trust and By-Laws of the Trust, the terms of
the Investment Company Act, applicable rules and regulations thereunder, the
Code and regulations thereunder, and the Trust's Prospectus and Statement of
Additional Information, in each case as from time to time in effect. The
provisions of this Agreement shall be construed and interpreted in accordance
with the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice or conflict of laws rules or provisions that would
result in the application of the domestic substantive laws of any other
jurisdiction; provided, however, that if such law or any of the provisions of
this Agreement conflict with the applicable provisions of the Investment Company
Act, the latter shall control.
16. Use of Manager's Name.
The Trust may use the names "Liberty" and "All-Star" or any other name
derived from such names only for so long as this Agreement (or another similar
management agreement with LFC or a majority or greater owned subsidiary thereof
pertaining to other series funds of the Trust) or any extension, renewal, or
amendment hereof (or thereof) remains in effect. At such time as this Agreement
(and each such other similar agreement pertaining to such other series funds) or
any extension, renewal or amendment hereof (or thereof), or each such other
similar successor organization agreement shall no longer be in effect, the Trust
will cease to use any name derived from any such names similar thereto, or any
other name indicating that it is managed by or otherwise connected with the
Manager, or with any organization which shall have succeeded to Manager's
business as investment advisor or manager.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement on the date first above written.
LIBERTY VARIABLE INVESTMENT TRUST,
on its own behalf and on behalf of
The Liberty All-Star Fund, Variable Series.
By: __________________________________
Title:
LIBERTY ADVISORY SERVICES CORP.
By: ___________________________________
Title:
LIBERTY ASSET MANAGEMENT COMPANY
By: ___________________________________
Title:
10
Exhibit 99.B5(b)(iii)
STEIN ROE GLOBAL UTILITIES, VARIABLE SERIES
STEIN ROE SUB-ADVISORY AGREEMENT
AGREEMENT dated as of November 15, 1997 among LIBERTY VARIABLE
INVESTMENT TRUST, a Massachusetts business trust (the "Trust"), with respect to
STEINROE GLOBAL UTILITIES, VARIABLE SERIES (the "Fund"), LIBERTY ADVISORY
SERVICES CORP., a Massachusetts corporation ("Adviser"), and STEIN ROE & FARNHAM
INCORPORATED, a Delaware corporation (the "Sub-Adviser").
In consideration of the promises and covenants herein, the parties
agree as follows:
1. The Sub-Adviser will manage the investment of the assets of the Fund
in accordance with its investment objective, policies and limitations set forth
in the Trust's prospectus and statement of additional information, as amended
from time to time, and will perform the other services herein set forth, subject
to the supervision of the Adviser and the Board of Trustees of the Trust.
2. In carrying out its investment management obligations, the
Sub-Adviser shall:
(a) evaluate such economic, statistical and financial information
and undertake such investment research as it shall believe advisable;
(b) purchase and sell securities and other investments for the Fund
in accordance with the procedures described in the Trust's prospectus and
statement of additional information; and
(c) report results to the Adviser and to the Board of Trustees.
3. The Sub-Adviser shall be free to render similar services to others
so long as its services hereunder are not impaired thereby.
4. The Advisor shall pay the Sub-Adviser a monthly fee at the annual
rate of 0.45% of the average daily net assets of the Fund for managing the
investment of the assets of the Fund as provided in paragraph 1 above. Such fee
shall be paid in arrears on or before the 10th day of the next following
calendar month.
5. This Agreement shall become effective on the date first written
above, and (a) unless otherwise terminated, shall continue until June 7, 1999
and from year to year thereafter so long as approved annually in accordance with
the Investment Company Act of 1940 (the "1940 Act"); (b) may be terminated
without penalty on sixty days' written notice to the Sub-Adviser either by vote
of the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund; (c) shall automatically terminate in
the event of its assignment; and (d) may be terminated without penalty by the
Sub-Adviser on sixty day's written notice to the Trust.
<PAGE>
6. This Agreement may be amended in accordance with the 1940 Act.
7. For the purpose of the Agreement, the terms "vote of a majority of
the outstanding shares," "affiliated person" and "assignment" shall have their
respective meanings defined in the 1940 Act and exemptions and interpretations
issued by the Securities and Exchange Commission under the 1940 Act.
8. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Sub-Adviser, or reckless disregard of its obligations and
duties hereunder, the Sub-Adviser shall not be subject to any liability to the
Trust or the Fund, to any shareholder of the Trust or the Fund or to any other
person, firm or organization, for any act or omission in the course of or
connection with rendering services hereunder.
9. The Fund may use the name "Stein Roe," or any other name derived
from the name "Stein Roe," only for so long as this Agreement or any extension,
renewal, or amendment hereof remains in effect, including any similar agreement
with any organization that shall have succeeded to the business of the
Sub-Advisor, so long as such organization is a majority or greater owned
subsidiary of Liberty Financial Companies, Inc.. At such time as this Agreement
or any extension, renewal or amendment hereof, or each such other similar
successor organization agreement shall no longer be in effect, the Fund will
cease to use any name derived from the name "Stein Roe," any name similar
thereto, or any other name indicating that it is advised by or otherwise
connected with the Sub-Adviser, or with any organization which shall have
succeeded to the Sub-Adviser's business as an investment adviser.
10. The Sub-Adviser is hereby expressly put on notice of the limitation
of shareholder liability as set forth in the Declaration of Trust of the Trust
and agrees that obligations assumed by the Trust pursuant to this Agreement
shall be limited in all cases to the assets of the Fund. The Sub-Adviser further
agrees that it shall not seek satisfaction of any such obligation from the
shareholders of the Fund, nor from the Trustees or any individual Trustee of the
Trust.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
By: LIBERTY VARIABLE INVESTMENT TRUST
By:
------------------------------
Title:
STEIN ROE & FARNHAM INCORPORATED
By:
------------------------------
Title:
LIBERTY ADVISORY SERVICES CORP.
By:
------------------------------
Title:
3
Exhibit 99.B5(b)(x)
FORM OF
PORTFOLIO MANAGEMENT AGREEMENT
WITH LAMCO'S PORTFOLIO MANAGERS
as of November 15, 1997
[Name and address of Portfolio Manager]
Re: Portfolio Management Agreement
Ladies and Gentlemen:
Liberty All-Star Equity Fund, Variable Series (the "Fund") is a series
of the Liberty Variable Investment Trust (the "Trust"), a diversified open-end
investment company registered under the Investment Company Act of 1940 (the
"Act"), and is subject to the rules and regulations promulgated thereunder.
Liberty Advisor Services Corp. ("LASC") is the manager of the Fund.
Pursuant to the Management and Sub-Advisory Agreement of even date herewith (the
"Management and Sub-Advisory Agreement") among the Trust, on behalf of the Fund,
LASC and Liberty Asset Management Company (the "Fund Manager"), LASC delegates
to the Fund Manager responsibility for investment management of the Fund. In
furtherance thereof, the Fund Manager evaluates and recommends portfolio
managers for the Fund and is responsible for certain administrative matters
relating to the Fund.
l. Employment as a Portfolio Manager. The Trust being duly authorized
hereby employs ________________________________ (the "Portfolio Manager") as a
discretionary portfolio manager, on the terms and conditions set forth herein,
of those assets of the Fund which the Fund Manager determines to assign to the
Portfolio Manager (those assets being referred to as the "Fund Account"). The
Fund Manager may, from time to time, make additions to and withdrawals from the
Fund Account.
2. Acceptance of Employment; Standard of Performance. The Portfolio
Manager accepts its employment as a discretionary portfolio manager and agrees
to use its best professional judgment to make timely investment decisions for
the Fund Account in accordance with the provisions of this Agreement.
<PAGE>
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Fund Account, the Portfolio Manager shall
be subject to the investment objectives, policies and restrictions of the Fund
as set forth in the Trust's current registration statement under the Act (as the
same may be modified from time to time), and the investment restrictions set
forth in the Act and the Rules thereunder (as and to the extent set forth in
such registration statement or in other documentation furnished to the Portfolio
Manager by the Fund or the Fund Manager), to the supervision and control of the
Trustees of the Trust (the "Trustees"), and to instructions from the Fund
Manager. The Portfolio Manager shall not, without the prior approval of the Fund
or the Fund Manager, effect any transactions which would cause the Fund Account,
treated as a separate fund, to be out of compliance with any of such
restrictions or policies.
4. Transaction Procedures. All portfolio transactions for the Fund
Account will be consummated by payment to or delivery by the custodian of the
assets of the Fund (the "Custodian"), or such depositories or agents as may be
designated by the Custodian in writing, as custodian for the Fund, of all cash
and/or securities due to or from the Fund Account, and the Portfolio Manager
shall not have possession or custody thereof or any responsibility or liability
with respect to such custody. The Portfolio Manager shall advise and confirm in
writing to the Custodian all investment orders for the Fund Account placed by it
with brokers and dealers at the time and in the manner set forth in Schedule A
hereto (as Schedule A may be amended from time to time). The Fund shall issue to
the Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Portfolio Manager. The Fund shall
be responsible for all custodial arrangements and the payment of all custodial
charges and fees, and, upon giving proper instructions to the Custodian, the
Portfolio Manager shall have no responsibility or liability with respect to
custodial arrangements or the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority
and discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager, and to select the markets on or in which the
transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility
shall be to seek to obtain best net price and execution for
the Fund. However, this responsibility shall not obligate the
Portfolio Manager to solicit competitive bids for each
transaction or to seek the lowest available commission cost to
the Fund, so long as the Portfolio Manager reasonably believes
that the broker or dealer selected by it can be expected to
obtain a "best execution" market price on the particular
transaction and determines in good faith that the commission
cost is reasonable in relation to the value of the brokerage
and research services (as defined in Section 28(e)(3) of the
Securities Exchange Act of 1934) provided by such broker or
dealer to the Portfolio Manager viewed in terms of either that
particular transaction or of the Portfolio Manager's overall
responsibilities with respect to its clients, including the
Fund, as to which the Portfolio Manager exercises investment
discretion, notwithstanding that the Fund may not be the
direct or exclusive beneficiary of any
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<PAGE>
such services or that another broker may be willing to charge
the Fund a lower commission on the particular transaction.
B. Subject to the requirements of paragraph A above, the Fund
Manager shall have the right to request that transactions
giving rise to brokerage commissions shall be executed by
brokers and dealers (and in amounts), to be agreed upon from
time to time between the Fund Manager and the Portfolio
Manager, that provide brokerage or research services to the
Fund or the Fund Manager, or as to which an on-going
relationship will be of value to the Fund in the management of
its assets, which services and relationship may, but need not,
be of direct benefit to the Fund Account. Notwithstanding any
other provision of this Agreement, the Portfolio Manager shall
not be responsible under paragraph A above with respect to
transactions executed through any such broker or dealer.
C. The Portfolio Manager shall not execute any portfolio
transactions for the Fund Account with a broker or dealer
which is an "affiliated person" (as defined in the Act) of the
Fund, the Portfolio Manager or any other Portfolio Manager of
the Fund without the prior written approval of the Fund. The
Fund will provide the Portfolio Manager with a list of brokers
and dealers which are "affiliated persons" of the Fund or its
Portfolio Managers.
6. Proxies. The Portfolio Manager will vote all proxies solicited by or
with respect to the issuers of securities in which assets of the Fund Account
may be invested from time to time in accordance with such policies as shall be
determined by the Fund Manager.
7. Fees for Services. As its compensation for its services under this
Agreement, the Fund Manager will pay the Portfolio Manager monthly in arrears a
fee at an annual rate equal to 0.32% of the net asset value of the Fund Account.
The fee shall be accrued for each calendar day and the sum of the daily fee
accruals shall be paid monthly on or before the fifteenth day of the following
calendar month. The daily accruals of the fee will be computed by (i)
multiplying the annual percentage rate referred to above by the fraction the
numerator of which is one and the denominator of which is the number of days in
the year, and (ii) multiplying the product obtained pursuant to clause (i) above
by the net asset value of the Fund Account as determined in accordance with the
Trust's Prospectus as of the previous day on which the Fund was open for
business. The foregoing fee shall be prorated for any month during which this
Agreement is in effect for only a portion of the month. Pursuant to the
Management and Sub-Advisory Agreement, the Fund Manager is solely responsible
for the payment of fees to the Portfolio Manager, and the Portfolio Manager
agrees to seek payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Trust on
behalf of the Fund acknowledges that the Portfolio Manager or one or more of its
affiliates has investment responsibilities, renders investment advice to and
performs other investment advisory services for other individuals or entities
("Client Accounts"), and that the Portfolio Manager, its affiliates or
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<PAGE>
any of its or their directors, officers, agents or employees may buy, sell or
trade in any securities for its or their respective accounts ("Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, the Trust on behalf
of the Fund agrees that the Portfolio Manager or its affiliates may give advice
or exercise investment responsibility and take such other action with respect to
other Client Accounts and Affiliated Accounts which may differ from the advice
given or the timing or nature of action taken with respect to the Fund Account,
provided that the Portfolio Manager acts in good faith, and provided further,
that it is the Portfolio Manager's policy to allocate, within its reasonable
discretion, investment opportunities to the Fund Account over a period of time
on a fair and equitable basis relative to the Client Accounts and the Affiliated
Accounts, taking into account the cash position and the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto. The Trust on behalf of the Fund acknowledges that one or more Client
Accounts and Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Fund Account may have an interest from time to time, whether in transactions
which involve the Fund Account or otherwise. The Portfolio Manager shall have no
obligation to acquire for the Fund Account a position in any investment which
any Client Account or Affiliated Account may acquire, and the Fund shall have no
first refusal, coinvestment or other rights in respect of any such investment,
either for the Fund Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable
for any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund or the Fund Manager, provided, however, that such acts or omissions
shall not have resulted from the Portfolio Manager's willful misfeasance, bad
faith or gross negligence, a violation of the standard of care established by
and applicable to the Portfolio Manager in its actions under paragraph 2 hereof
or breach of its duty or of its obligations hereunder (provided, however, that
the foregoing shall not be construed to protect the Portfolio Manager from
liability in violation of Section 17(i) of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and
the Fund to comply with applicable law, including any demand of any regulatory
or taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Fund Account and the actions of
the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the
event of its assignment, as that term is defined in Section 2(a)(4) of the Act.
The Portfolio Manager shall notify the Fund in writing sufficiently in advance
of any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in Section
2(a)(4) of the Act will occur, and whether to take the steps necessary to enter
into a new contract with the Portfolio Manager.
12. Representations, Warranties and Agreements of the Fund. The Trust
on behalf of the Fund represents, warrants and agrees that:
4
<PAGE>
A. The Portfolio Manager has been duly appointed to provide
investment services to the Fund Account as contemplated
hereby.
B. The Trust on behalf of the Fund will deliver to the Portfolio
Manager a true and complete copy of its then current
registration statement as effective from time to time and such
other documents governing the investment of the Fund Account,
or such other information as is necessary for the Portfolio
Manager to carry out its obligations under this Agreement.
13. Representations, Warranties and Agreements of the Portfolio
Manager. The Portfolio Manager represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the
Investment Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of the
Fund, in the manner required or permitted by the Act and the
Rules thereunder, the records identified in Schedule B (as
Schedule B may be amended from time to time). The Portfolio
Manager agrees that such records are the property of the Fund,
and will be surrendered to the Fund promptly upon request.
C. It will maintain in effect a written code of ethics complying
with the requirements of Rule l7j-l under the Act. Within 45
days of the end of each year while this Agreement is in
effect, an officer or general partner of the Portfolio Manager
shall certify to the Fund that the Portfolio Manager has
complied with the requirements of Rule l7j-l during the
previous year and that there has been no violation of its code
of ethics or, if such a violation has occurred, that
appropriate action was taken in response to such violation.
D. Upon request, the Portfolio Manager will promptly supply the
Trust with any information concerning the Portfolio Manager
and its stockholders, employees and affiliates which the Trust
may reasonably require in connection with the preparation of
its registration statement, proxy material, reports and other
documents relating to the Fund required to be filed under the
Act, the Securities Act of 1933, or other applicable
securities laws.
E. Reference is hereby made to the Declaration of Trust dated
March 4, 1993, as amended, establishing the Trust, a copy of
which has been filed with the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The name
Liberty Variable Investment Trust refers to the Trustees under
said Declaration of Trust, as Trustees and not personally, and
no Trustee, shareholder, officer, agent or employee of the
Trust shall be held
5
<PAGE>
to any personal liability hereunder or in connection with the
affairs of the Trust or the Fund, but only the assets of the
Fund are liable under this Agreement. Without limiting the
generality of the foregoing, neither the Portfolio Manager nor
any of its officers, directors, partners, shareholders or
employees shall, under any circumstances, have recourse or
cause or willingly permit recourse to be had directly or
indirectly to any personal, statutory, or other liability of
any shareholder, Trustee, officer, agent or employee of the
Trust or of any successor of the Trust or the Fund, whether
such liability now exists or is hereafter incurred, for claims
against the Trust estate, but shall look for payment solely to
the assets of the Fund or any successor thereto.
14. Amendment. This Agreement may be amended at any time, but only by
written agreement among the Portfolio Manager, the Fund Manager and the Trust,
on behalf of the Fund, which amendment, other than amendments to Schedules A and
B (which may be amended by the Fund Manager acting alone), is subject to the
approval of the Trustees and the Shareholders of the Fund as and to the extent
required by the Act.
15. Effective Date; Term. This Agreement shall continue in effect until
June 7, 1999 and shall continue in effect thereafter provided such continuance
is specifically approved at least annually by (i) the Trust's Board of Trustees
or (ii) a vote of a "majority" (as defined in the Act) of the Fund's outstanding
voting securities, provided that in either event the continuance is also
approved by a majority of the Board of Trustees who are not "interested persons"
(as defined in the Act) of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval. The aforesaid
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the Act and the
Rules and Regulations thereunder.
16. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event of a
breach of any provision thereof by a party so notified, or otherwise upon not
less than thirty (30) days' written notice to the Portfolio Manager in the case
of termination by the Trust on behalf of the Fund or the Fund Manager, or ninety
(90) days' written notice to the Trust and the Fund Manager in the case of
termination by the Portfolio Manager, but any such termination shall not affect
the status, obligations or liabilities of any party hereto to the other parties.
17. Applicable Law. To the extent that state law is not preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the Commonwealth
of Massachusetts.
18. Severability. If any term or condition of this Agreement shall be
invalid or unenforceable to any extent or in any application, then the remainder
of this Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby, and
6
<PAGE>
each and every term and condition of this Agreement shall be valid and enforced
to the fullest extent and in the broadest application permitted by law.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
date first written above.
LIBERTY VARIABLE INVESTMENT TRUST
on its own behalf and on behalf of the
Liberty All-Star Equity Fund, Variable Series
By:
-----------------------------------------
Title:
-----------------------------------------
LIBERTY ASSET MANAGEMENT COMPANY
By:
-----------------------------------------
Title:
-----------------------------------------
ACCEPTED AND AGREED TO:
[Name of Portfolio Manager]
By:
--------------------------------
Title:
--------------------------------
SCHEDULES: *
A. Operational Procedures
B. Record Keeping Requirements
- ------------------
* The Schedules relate to day-to-day operational logistics and to technical
compliance matters.
7
Exhibit 99.B6(b)
AMENDMENT NO. 1 TO
UNDERWRITING AGREEMENT
AGREEMENT made as of this fifteenth day of August, 1997 between Keyport
Variable Investment Trust, a Massachusetts business trust (the "Trust"), and
Keyport Financial Services Corp., a Massachusetts corporation ("KFSC").
Recital
-------
Reference is made to the Underwriting Agreement dated June 7, 1993
between the Trust and KFSC (the "Underwriting Agreement"). The parties are
entering into this Agreement to amend the Underwriting Agreement.
Agreement
---------
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, receipt of which is hereby acknowledged by each party, the
parties hereby agree as follows:
1. The Underwriting Agreement shall be limited (and KFSC's role as
principal underwriter of the Trust shall be limited) to sales of shares of the
Trust to separate accounts of insurance companies which are affiliates of
Keyport Life Insurance Company or Liberty Mutual Life Insurance Company, except
as the parties may otherwise agree in writing.
IN WITNESS WHEREOF, the parties have entered into this Agreement as if
under seal as of the date first written above.
KEYPORT VARIABLE INVESTMENT TRUST
By
------------------------------
Title:
KEYPORT FINANCIAL SERVICES CORP.
By
------------------------------
Title:
Exhibit 99.B6(c)
KEYPORT VARIABLE INVESTMENT TRUST
UNDERWRITING AGREEMENT
WITH
COLONIAL INVESTORS SERVICES, INC.
AGREEMENT made as of August 15, 1997 between Keyport Variable
Investment Trust, a Massachusetts business trust (the "Trust"), and Colonial
Investors Services, Inc., a Massachusetts corporation (the "Underwriter").
W I T N E S S E T H:
WHEREAS, as the Trust is an open-end investment company registered
under the Investment Company Act of 1940 (the "1940 Act"), the shares of
beneficial interest ("shares") of which are registered under the Securities Act
of 1933 (the "1933 Act"); and
WHEREAS, the Trust has agreed to sell its shares to the separate
accounts ("Separate Accounts") of various insurance companies, including Keyport
Life Insurance Company ("Keyport"), investing in the Trust pursuant to a
Participation Agreement in order to fund such Separate Accounts and certain
variable life insurance policies and variable annuity contracts (the
"Contracts") issued by such insurance companies; and
WHEREAS, the Trust heretofore has entered into Participation Agreements
only with Keyport or other insurance companies affiliated with Keyport, and has
entered into an underwriting Agreement dated as of June 7, 1993 with Keyport
Financial Services Corp ("KFSC"), a subsidiary of Keyport; and
WHEREAS, the Underwriter will seek to establish distribution
relationships on behalf of the Trust with other insurance companies that are not
affiliates of Keyport (such insurance companies hereinafter referred to as
"Unaffiliated Participating Insurance Companies"); and it is not useful or
appropriate for either the Underwriter or KFSC to have KFSC act as underwriter
in those transactions; and, accordingly, the Underwriting Agreement between the
Trust and KFSC is being amended to limit KFSC's role to exclude transactions
underwritten by the Underwriter;
WHEREAS, the Underwriter is a broker-dealer registered under the
Securities Exchange Act of 1934 (the "1934 Act) and is a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Underwriter is able and willing to serve as the principal
underwriter for sales of the Trust's shares to certain Separate Accounts
maintained by Unaffiliated Participating Insurance Companies in connection with
the sale of the Contracts written by such entities; and
<PAGE>
WHEREAS, the Trust desires to appoint the Underwriter as the principal
underwriter for the Trust's shares that the Trust will sell for the purpose of
funding Contracts and any other variable insurance products issued by
Unaffiliated Participating Insurance Companies funded through their Separate
Accounts under a Participation Agreement facilitated by the Underwriter, and the
Underwriter is willing to accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints the Underwriter as a principal underwriter
and distributor for the Trust, on the terms and conditions herein provided, to
sell its shares to the Separate Accounts of Unaffiliated Participating Insurance
Companies, under Participation Agreements facilitated by the Underwriter, in
jurisdictions wherein shares of the Trust may legally be offered to the Separate
Accounts for sale, it being understood that the Trust in its absolute discretion
may issue or sell shares directly to holders of shares of the Trust upon such
terms and conditions and for such consideration, if any as it may determine,
whether in connection with the distribution of subscription or purchase rights,
the payment or reinvestment of dividends or distributions, or otherwise. The
Underwriter shall act solely as a disclosed agent on behalf of and for account
of the Trust. The Trust or its transfer agent shall receive directly from the
Separate Accounts all payments for purchase of shares of the Trust, and shall
pay directly to the Separate Accounts all amounts due them upon redemption of
such shares, and the Underwriter shall have no liability for the payment for
purchase of shares of the Trust which it sells as agent.
2. The Underwriter hereby accepts its appointment as a principal
underwriter and distributor for the Trust's shares with respect to the
transactions contemplated by Section 1 above. The Underwriter shall be subject
to the direction and control of the Trust in the sale of its shares and shall
not be obligated to sell any specific number of shares of any Fund.
3. The Trust will use its best efforts to keep effectively registered
under the 1933 Act for sales herein contemplated such shares as the Underwriter
shall reasonably request and as the Securities and Exchange Commission (the
"SEC") shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Trust may terminate,
suspend or withdraw the offering of shares whenever, in its sole discretion, it
deems such action to be desirable.
5. Shares of the Trust shall be sold, repurchased or redeemed at the
current public offering price per share. The current public offering price of
the Trust's shares shall be the net asset value per share as determined in the
manner and at the times as set forth in the current prospectus for the Trust.
2
<PAGE>
6. The Trust shall continuously offer and redeem its shares at net
asset value without addition of selling commission sales load or redemption
charge. The Underwriter will receive no compensation from the Trust for the
performance of its duties hereunder, except as otherwise specifically provided.
7. The Underwriter, or its agent, shall issue and deliver on behalf of
the Trust such confirmations of sales to the Separate Accounts made by the
Underwriter as agent pursuant to this Agreement as may be required.
Certificates, if any, shall be issued or shares registered on the record books
of the Trust or its transfer or similar agent in such names and denominations as
the Underwriter may specify.
8. The Trust will furnish to the Underwriter from time to time such
information with respect to the Trust and its shares as the Underwriter may
reasonably request for use in connection with the sale and distribution of
shares of the Trust. The Trust will furnish to the Underwriter in reasonable
quantities, upon request by the Underwriter, copies of annual and interim
reports of the Trust.
9. The Underwriter will not use, distribute or disseminate or authorize
the use, distribution or dissemination, in connection with the sale and
distribution of shares of the Trust, any statements other than those contained
in the Trust's current prospectus, except such supplemental literature or
advertising as shall be lawful under federal and any state securities laws and
regulations. The Underwriter will furnish the Trust with copies of all material
containing such statements. Neither the Underwriter nor any other person is
authorized by the Trust to give any information or to make any representations,
other than those contained in the registration statement (or related prospectus
or statement of additional information), or any advertising or sales literature
authorized by reasonable officers of the Trust. The Underwriter shall cause any
sales literature, advertising, or other similar materials to be filed with and
reviewed by the NASD, the SEC, or any other required securities regulatory body,
as appropriate.
10. The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of shares of the Trust and each Fund for
sale under the federal securities laws and the securities laws of such states,
if any, as the Underwriter may reasonably request. The Trust shall promptly
notify the Underwriter if the registration or qualification of any Trust shares
under Federal or any state securities laws, or the Trust's registration under
the 1940 Act, is suspended or terminated, or if any governmental body or agency
institutes proceedings to terminate the offer and sale of any Trust shares in
any jurisdiction.
11. The Underwriter shall order shares of the Trust from the Trust only
to the extent that it shall have received purchase orders therefor. The
Underwriter will not make any short sales of shares of the Trust.
12. In selling or reacquiring shares of the Trust the Underwriter will
in all respects conform to the requirements of federal and state laws, if any,
and the Rules of
3
<PAGE>
Conduct of the NASD, relating to such sale or reacquisition, as the case may be.
The Underwriter will observe and be bound by all the provisions of the Trust's
Agreement and Declaration of Trust (and of any fundamental policies adopted by
the Trust pursuant to the 1940 Act, written notice of which shall have been
given to the Underwriter) which at the time in any way require, limit, restrict
or prohibit or otherwise regulate any action on the part of the Underwriter.
13. The Underwriter will conform to the provisions hereof and the
registration statement at the time in effect under the 1933 Act and 1940 Act
with respect to the Trust and the Trust's shares, and the Underwriter shall not
withhold the placing of purchase orders so as to make a profit thereby.
14. The Trust will pay or cause to be paid expenses (including the fees
and disbursements of its own counsel) and all taxes and fees payable to any
federal, state, or other governmental agencies on account of the registration or
qualifications of securities issued by the Trust or otherwise. The Trust will
also pay or cause to be paid expenses incident tot he issuance of shares of
beneficial interest, such as the cost of share certificates, issue taxes, and
fees of the transfer agent. The Underwriter will pay all expenses in connection
with its own operations. All other expenses related hereto shall be borne by the
Trust or parties related to the Trust.
15. The Underwriter, or its agent, shall maintain all books and records
required by the 1934 Act and rules thereunder with respect to purchase,
redemption or repurchase of Trust shares underwritten by the Underwriter. All
books and records required to be maintained by this paragraph shall be
maintained and preserved in conformity with the requirements of Rule 17a-3 and
17a-4 under the 1934 Act, be and remain the property of the Underwriter, and be
at all times subject to inspection by the SEC in accordance with Section 17(a)
of the 1934 Act. The Underwriter shall itself maintain the books and records
relating to the Underwriter's general assets and liabilities or financial
statements, the computation of its aggregate indebtedness or net capital,
employment records or any other records not specifically relating to particular
purchases, redemptions or repurchases of Trust shares.
16. The Underwriter shall be an independent contractor with respect to
the Trust and nothing herein contained shall constitute the Underwriter, its
agents or representatives, or any employee thereof as employees of the Trust in
connection with sale of shares of the Trust. The Underwriter is responsible for
its own conduct and the employment, control and conduct of its agents,
representatives or employees. The Underwriter assumes full responsibility for
its agents, representatives and employees under applicable statutes and agrees
to pay all applicable employer taxes.
17. The Underwriter shall indemnify and hold harmless the Trust and
each of its directors and officers (or former officers and directors) and each
person, if any, who controls the Trust (collectively, "Indemnitees") against any
loss, liability, claim, damage, or expense (including the reasonable cost of
investigating and defending against the same
4
<PAGE>
and any counsel fees reasonably incurred in connection therewith) incurred by
any Indemnitees under the 1933 Act or under common law or otherwise which arise
out of or are based upon (1) any untrue or alleged untrue statement of a
material fact contained in information furnished by the Underwriter to the Trust
for use in the Trust's registration statement, prospectus and statement of
additional information or any supplements thereto (hereinafter collectively
referred to as the "prospectus," unless otherwise noted), or annual or interim
reports to shareholders, (2) any omission or alleged omission to state a
material fact in connection with such information furnished by the Underwriter
to the Trust which such information furnished by the Underwriter to the Trust
which is required to be stated in any of such documents or necessary to make
such information not misleading, (3) any misrepresentation or omission or
alleged misrepresentation or omission to state a material fact on the part of
the Underwriter or any agent or employee of the Underwriter or any other person
for whose acts the Underwriter is responsible, unless such misrepresentation or
omission or alleged misrepresentation or omission was made in reliance on
written information furnished by the Trust, (4) any untrue or alleged untrue
statement of a material fact, any omission or alleged omission to state a
material fact, or any other misrepresentation or omission or alleged omission to
state a material fact, on the part of the Underwriter or any agent or employee
of the Underwriter or any other person for whose acts the Underwriter is
responsible, contained in or incorporated into any sales literature or similar
materials prepared by the Underwriter or any such agent or employee of the
Underwriter unless such misrepresentation or omission or alleged
misrepresentation or omission was made in reliance on written information
furnished by the Trust, or (5) the willful misconduct or failure to exercise
reasonable care and diligence on the part of any such persons enumerated in
clauses (3) and (4) of this Section 17 with respect to services rendered under
this Agreement. This indemnity provision, however, shall not operate to protect
any officer or Trustee of the Trust from any liability to the Trust or any
shareholder by reason or willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the officer of such
officer or Trustee.
In case any action shall be brought against any Indemnitee, the
Underwriter shall not be liable under its indemnity agreement contained in this
Section with respect to any claim made against any Indemnitee, unless the
Indemnitee shall have notified the Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim that shall have been served upon the Indemnitee (or after
the Indemnitee shall have received notice of such service on any designated
agent). Failure to notify the Underwriter of any such claim shall not relieve it
from liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
Section. The Underwriter will be entitled to participate at its own expense in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Underwriter elects to assume the defense,
such defense shall be conducted by counsel choose by it and satisfactory to the
Indemnitees which are defendants in the suit. In the event the Underwriter
elects to assume the defense of any such suit and retain such counsel, the
Indemnitees which are defendants in the suit shall bear the fees and expenses of
any additional counsel retained by them, but, in case the Underwriter does not
elect to
5
<PAGE>
assume the defense of any such suit, the Underwriter will reimburse the
Indemnitees which are defendants in the suit for the reasonable fees and
expenses of any counsel retained by them.
The Underwriter shall promptly notify the Trust of the commencement of
any litigation or proceedings in connection with the issuance or sale of the
shares.
The Trust will indemnify and hold harmless the Underwriter against any
loss, liability, claim, damage or expense, to which the Underwriter may become
subject insofar as such loss, liability, claim, damage or expense (or action in
respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of material fact contained in the Trust's registration statement (or
related prospectus) or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse the
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending against such loss, claim, damage,
liability or action; provided, however, that the Trust shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Trust's prospectus in reliance upon
and in conformity with written information furnished by the Underwriter
specifically for use in the preparation thereof.
The Trust shall not indemnify the Underwriter for any action where a
purchaser of the Contracts was not furnished or sent or given, at or prior to
written confirmation of the sale of the Contracts, a copy of the then current
prospectus for the Trust.
18. This Agreement shall become effective on the date hereof and shall
continue in effect until June 7, 1999, and from year to year thereafter, but
only so long as such continuance is specifically approved in the manner required
by the 1940 Act. Either party hereto may terminate this Agreement without
payment of any penalty on any date by giving the other party at least six months
prior written notice of such termination specifying the date fixed therefor.
Without prejudice to any other remedies of the Trust, in any such event the
Trust may terminate this Agreement at any time immediately upon any failure of
fulfillment of any of the obligations of the Underwriter hereunder.
19. This Agreement shall automatically terminate in the event of its
assignment. Without limiting the generality of the foregoing, the term
"assignment" when used in this Agreement, shall have the meaning specified in
the 1940 Act and the rules thereunder.
20. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at its principal
executive offices (or such other address as such other party may designate by
notice under this Section 20).
21. All parties hereto are expressly put on notice of the Trust's
Agreement and Declaration of Trust dated March 4, 1993, and all amendments
thereto, all of which are on
6
<PAGE>
file with the Secretary of the Commonwealth of Massachusetts and with the Boston
City Clerk, and the limitation of shareholder and trustee liability contained
therein. This Agreement has been executed by and on behalf of the Trust by its
representatives as such representatives and not individually, and the
obligations of the Trust hereunder are not binding upon any of the Trustees,
officers, employees, agents or shareholders of the Trust individually but are
binding upon only the assets and property of the Trust. With respect to any
claim by the Underwriter for recovery of any liability of the Trust arising
hereunder allocated to a particular Fund of the Trust if there be more than one
(whether in accordance with the express terms hereof or otherwise), the
Underwriter shall have recourse solely against the assets of that Fund to
satisfy such claim and shall have no recourse against the assets of any other
Fund for such purpose.
22. This Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable provisions of the 1940 Act
and rules thereunder. To the extent the applicable law of the Commonwealth of
Massachusetts or any provisions herein conflict with applicable provisions of
the 1940 act or rules thereunder, the latter shall control.
IN WITNESS WHEREOF, the Trust and the Underwriter have each caused this
Agreement to be excited as of the day and year first above written.
KEYPORT VARIABLE INVESTMENT TRUST
By:
-----------------------------
Title:
COLONIAL INVESTORS SERVICES, INC.
By:
-----------------------------
Title:
7
Exhibit 99.B9(a)(iii)
AMENDMENT NO. THREE
TO
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of November 15, 1997 between Liberty Variable
Investment Trust, a Massachusetts business trust (formerly named "Keyport
Variable Investment Trust") (the "Trust"), and Colonial Investors Service
Center, Inc., a Massachusetts corporation ("CISC").
Reference is made to the Transfer Agency Agreement dated as of June 7,
1993 between the Trust and Liberty Investment Services, Inc. a Massachusetts
corporation ("LIS"), as amended by each of (i) Amendment No. One thereto dated
May 2, 1994 between the Trust and LIS, (ii) the Joinder and Release Agreement
with Respect to Transfer Agency Agreement dated as of January 3, 1995, pursuant
to which CISC replaced LIS s transfer agent, and (iii) Amendment No. Two thereto
dated May 1, 1995 (as so amended, the "Transfer Agency Agreement"). The parties
hereby agree that each of (i) Liberty All-Star Equity Fund, Variable Series and
(ii) any additional series funds created after August 14, 1997 (the date on
which this Agreement was approved by the Board of Trustees of the Trust) shall
become a "Fund" for all purposes of the Transfer Agency Agreement, effective
from and after the later of (i) the date first written above or (ii) the date on
which the offer and sale of shares of such Fund has been registered under the
Securities Act and the Investment Company Act pursuant to an effective
Registration Statement of the Trust on Form N-1A.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
LIBERTY VARIABLE INVESTMENT TRUST
By:
-----------------------------------
Title:
COLONIAL INVESTORS SERVICE CENTER, INC.
By:
-----------------------------------
Title:
Exhibit 99.B9(c)(iv)
AMENDMENT NO. THREE
TO
PRICING AND BOOKKEEPING AGREEMENT
AGREEMENT dated as of August 15, 1997 between Liberty Variable
Investment Trust, a Massachusetts business trust (formerly named "Keyport
Variable Investment Trust") (the "Trust"), and Colonial Management Associations,
Inc., a Massachusetts corporation ("Colonial").
Reference is made to the Pricing and Bookkeeping Agreement dated as of
June 7, 1993 between the Trust and Colonial, as amended by each of (i) Amendment
No. One thereto dated May 2, 1994 and (ii) Amendment No. Two thereto dated May
1, 1995. The parties hereby agree that Appendix I to such agreement, as so
amended, is hereby amended and restated in its entirety in the form of Schedule
I to this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
LIBERTY VARIABLE INVESTMENT TRUST
By:
--------------------------------
Title:
COLONIAL MANAGEMENT ASSOCIATES, INC.
By:
--------------------------------
Title:
<PAGE>
Schedule I to Amendment No. Three to
Pricing and Bookkeeping Agreement
---------------------------------
Form of Appendix I
Appendix I
----------
<TABLE>
<CAPTION>
Fund Effective Date
- ---- --------------
<S> <C>
Colonial Growth and Income Fund, Variable Series June 7, 1993
Stein Roe Global Utilities Fund, Variable Series June 7, 1993
Colonial International Fund For Growth, Variable Series May 2, 1994
Colonial U.S. Stock Fund, Variable Series July 5, 1994
Colonial Strategic Income Fund, Variable Series July 5, 1994
Newport Tiger Fund, Variable Series May 1, 1995
Liberty-All Star Fund, Variable Series November 15, 1997*
Each other Fund Created after August 14, 1997 (the date of The date the shares of such
authorization of this Agreement by the Board of Trustees) Fund shall have been registered
for sale under the Securities Act
of 1933 and the Investment Company
Act of 1940
</TABLE>
- ---------------------------
* Or such later date as the shares of such Fund shall have been registered for
sale under the Securities Act of 1933 and the Investment Company Act of 1940.
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. 9
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
August 27, 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
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 73526
<INVESTMENTS-AT-VALUE> 93192
<RECEIVABLES> 184
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 9
<TOTAL-ASSETS> 93388
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142
<TOTAL-LIABILITIES> 142
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73573
<SHARES-COMMON-STOCK> 6679
<SHARES-COMMON-PRIOR> 5639
<ACCUMULATED-NII-CURRENT> 11
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3
<ACCUM-APPREC-OR-DEPREC> 19666
<NET-ASSETS> 93247
<DIVIDEND-INCOME> 1599
<INTEREST-INCOME> 720
<OTHER-INCOME> 0
<EXPENSES-NET> 652
<NET-INVESTMENT-INCOME> 1667
<REALIZED-GAINS-CURRENT> 3894
<APPREC-INCREASE-CURRENT> 8030
<NET-CHANGE-FROM-OPS> 13591
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1745
<DISTRIBUTIONS-OF-GAINS> 3888
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18289
<NUMBER-OF-SHARES-REDEEMED> 9703
<SHARES-REINVESTED> 5632
<NET-CHANGE-IN-ASSETS> 22177
<ACCUMULATED-NII-PRIOR> 84
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 3898
<GROSS-ADVISORY-FEES> 538
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 652
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<PER-SHARE-NAV-BEGIN> 12.60
<PER-SHARE-NII> 0.28
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<PER-SHARE-DIVIDEND> 0.28
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.96
<EXPENSE-RATIO> 0.79
<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 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
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 40400
<INVESTMENTS-AT-VALUE> 47129
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<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 8
<TOTAL-ASSETS> 47971
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 65
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<SHARES-COMMON-STOCK> 4476
<SHARES-COMMON-PRIOR> 4915
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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
<NET-CHANGE-FROM-OPS> 2938
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 0
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<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
<PER-SHARE-GAIN-APPREC> 0.23
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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 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
<RECEIVABLES> 51
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 304
<TOTAL-ASSETS> 26994
<PAYABLE-FOR-SECURITIES> 53
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 347
<TOTAL-LIABILITIES> 400
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25953
<SHARES-COMMON-STOCK> 13597
<SHARES-COMMON-PRIOR> 11554
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 3
<ACCUMULATED-NET-GAINS> 43
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 600
<NET-ASSETS> 26593
<DIVIDEND-INCOME> 500
<INTEREST-INCOME> 56
<OTHER-INCOME> 0
<EXPENSES-NET> 348
<NET-INVESTMENT-INCOME> 208
<REALIZED-GAINS-CURRENT> 1587
<APPREC-INCREASE-CURRENT> (520)
<NET-CHANGE-FROM-OPS> 1274
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> 3475
<SHARES-REINVESTED> 1536
<NET-CHANGE-IN-ASSETS> 3829
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 53
<OVERDIST-NET-GAINS-PRIOR> 1544
<GROSS-ADVISORY-FEES> 224
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 348
<AVERAGE-NET-ASSETS> 24905
<PER-SHARE-NAV-BEGIN> 1.97
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.12
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<PER-SHARE-NAV-END> 1.96
<EXPENSE-RATIO> 1.40
<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
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 50383
<INVESTMENTS-AT-VALUE> 51990
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<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 1489
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<SENIOR-EQUITY> 0
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<SHARES-COMMON-PRIOR> 4396
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<DIVIDEND-INCOME> 41
<INTEREST-INCOME> 4372
<OTHER-INCOME> 0
<EXPENSES-NET> 395
<NET-INVESTMENT-INCOME> 4018
<REALIZED-GAINS-CURRENT> 590
<APPREC-INCREASE-CURRENT> 22
<NET-CHANGE-FROM-OPS> 4630
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4245
<DISTRIBUTIONS-OF-GAINS> 310
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15152
<NUMBER-OF-SHARES-REDEEMED> 14724
<SHARES-REINVESTED> 4555
<NET-CHANGE-IN-ASSETS> 5058
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<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 69
<OVERDIST-NET-GAINS-PRIOR> 601
<GROSS-ADVISORY-FEES> 322
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 423
<AVERAGE-NET-ASSETS> 49560
<PER-SHARE-NAV-BEGIN> 10.99
<PER-SHARE-NII> 0.92
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> 0.96
<PER-SHARE-DISTRIBUTIONS> 0.07
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 0.80
<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
<INVESTMENTS-AT-VALUE> 60759
<RECEIVABLES> 109
<ASSETS-OTHER> 100
<OTHER-ITEMS-ASSETS> 11
<TOTAL-ASSETS> 60979
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124
<TOTAL-LIABILITIES> 124
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49824
<SHARES-COMMON-STOCK> 4279
<SHARES-COMMON-PRIOR> 3479
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 16
<ACCUM-APPREC-OR-DEPREC> 11047
<NET-ASSETS> 60854
<DIVIDEND-INCOME> 1157
<INTEREST-INCOME> 69
<OTHER-INCOME> 0
<EXPENSES-NET> 498
<NET-INVESTMENT-INCOME> 728
<REALIZED-GAINS-CURRENT> 2723
<APPREC-INCREASE-CURRENT> 6906
<NET-CHANGE-FROM-OPS> 10357
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 692
<DISTRIBUTIONS-OF-GAINS> 2739
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17616
<NUMBER-OF-SHARES-REDEEMED> 10135
<SHARES-REINVESTED> 3431
<NET-CHANGE-IN-ASSETS> 60855
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 35
<OVERDIST-NET-GAINS-PRIOR> 2723
<GROSS-ADVISORY-FEES> 419
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 498
<AVERAGE-NET-ASSETS> 52343
<PER-SHARE-NAV-BEGIN> 12.36
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> 2.52
<PER-SHARE-DIVIDEND> 0.17
<PER-SHARE-DISTRIBUTIONS> 0.68
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.22
<EXPENSE-RATIO> 0.95
<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 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
<INVESTMENTS-AT-COST> 30121
<INVESTMENTS-AT-VALUE> 34123
<RECEIVABLES> 37
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1284
<TOTAL-ASSETS> 35444
<PAYABLE-FOR-SECURITIES> 740
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 62
<TOTAL-LIABILITIES> 62
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30666
<SHARES-COMMON-STOCK> 13746
<SHARES-COMMON-PRIOR> 8327
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 26
<ACCUM-APPREC-OR-DEPREC> 4001
<NET-ASSETS> 34642
<DIVIDEND-INCOME> 565
<INTEREST-INCOME> 142
<OTHER-INCOME> 0
<EXPENSES-NET> 364
<NET-INVESTMENT-INCOME> 343
<REALIZED-GAINS-CURRENT> 98
<APPREC-INCREASE-CURRENT> 2259
<NET-CHANGE-FROM-OPS> 2701
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 238
<DISTRIBUTIONS-OF-GAINS> 136
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19072
<NUMBER-OF-SHARES-REDEEMED> 6107
<SHARES-REINVESTED> 373
<NET-CHANGE-IN-ASSETS> 15665
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 93
<OVERDIST-NET-GAINS-PRIOR> 124
<GROSS-ADVISORY-FEES> 259
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 364
<AVERAGE-NET-ASSETS> 28766
<PER-SHARE-NAV-BEGIN> 2.28
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.24
<PER-SHARE-DIVIDEND> 0.02
<PER-SHARE-DISTRIBUTIONS> 0.1
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<PER-SHARE-NAV-END> 2.52
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000898445
<NAME> KEYPORT VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 1
<NAME> Colonial-Keyport Growth and Income Fund
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Jun-30-1997
<INVESTMENTS-AT-COST> 62,572
<INVESTMENTS-AT-VALUE> 88,263
<RECEIVABLES> 303
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 8,302
<TOTAL-ASSETS> 96,871
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<OTHER-ITEMS-LIABILITIES> 66
<TOTAL-LIABILITIES> 207
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55,941
<SHARES-COMMON-STOCK> 5,455
<SHARES-COMMON-PRIOR> 6,679
<ACCUMULATED-NII-CURRENT> 829
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,909
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,691
<NET-ASSETS> 88,370
<DIVIDEND-INCOME> 865
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<OTHER-INCOME> 0
<EXPENSES-NET> 342
<NET-INVESTMENT-INCOME> 834
<REALIZED-GAINS-CURRENT> 5,908
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<NET-CHANGE-FROM-OPS> 12,767
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 870
<NUMBER-OF-SHARES-REDEEMED> (2,904)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (4,877)
<ACCUMULATED-NII-PRIOR> 12
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<GROSS-EXPENSE> 342
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<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 2.10
<PER-SHARE-DIVIDEND> 0.00
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<PER-SHARE-NAV-END> 16.20
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000898445
<NAME> KEYPORT VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 2
<NAME> Colonial Keyport Utilities Fund
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 38,725
<INVESTMENTS-AT-VALUE> 47,137
<RECEIVABLES> 246
<ASSETS-OTHER> 10
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<TOTAL-ASSETS> 47,393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 97
<TOTAL-LIABILITIES> 97
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,027
<SHARES-COMMON-STOCK> 4,120
<SHARES-COMMON-PRIOR> 4,476
<ACCUMULATED-NII-CURRENT> 937
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,080)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,412
<NET-ASSETS> 47,296
<DIVIDEND-INCOME> 1,069
<INTEREST-INCOME> 67
<OTHER-INCOME> 0
<EXPENSES-NET> 183
<NET-INVESTMENT-INCOME> 953
<REALIZED-GAINS-CURRENT> 629
<APPREC-INCREASE-CURRENT> 1,683
<NET-CHANGE-FROM-OPS> 3,265
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 214
<NUMBER-OF-SHARES-REDEEMED> (570)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (611)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (4,709)
<OVERDISTRIB-NII-PRIOR> (16)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 150
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 183
<AVERAGE-NET-ASSETS> 46,626
<PER-SHARE-NAV-BEGIN> 10.700
<PER-SHARE-NII> 0.220
<PER-SHARE-GAIN-APPREC> 0.560
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<PER-SHARE-NAV-END> 11.480
<EXPENSE-RATIO> 0.78
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000898445
<NAME> KEYPORT VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 4
<NAME> Keyport International Fund for Growth
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