Registration Nos: 33-59216
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. 17 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 18 / X /
(Check appropriate box or boxes)
LIBERTY VARIABLE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices)
617-426-3750
(Registrant's Telephone Number, including Area Code)
Name and Address of
Agent for Service Copy to
- ----------------- -------
Nancy L. Conlin, Esq. John M. Loder, Esq.
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, MA 02111 Boston, MA 02110-2624
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b).
/ X / On May 1, 1999 pursuant to paragraph (b).
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / on (date) pursuant to paragraph (a)(1).
/ / 75 days after filing pursuant to paragraph (a)(2).
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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 18, 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>
LIBERTY VARIABLE INVESTMENT TRUST
Cross Reference Sheet Pursuant to Rule 481(a)
(Colonial Growth and Income Fund, Variable Series)
(Stein Roe Global Utilities Fund, Variable Series)
(Colonial Small Cap Value Fund, Variable Series)
(Colonial U.S. Stock Fund, Variable Series)
(Colonial Strategic Income Fund, Variable Series)
(Colonial High Yield Securities Fund, Variable Series)
(Liberty All-Star Equity Fund, Variable Series)
(Colonial International Fund for Growth, Variable Series)
(Newport Tiger Fund, Variable Series)
Item Number of Form N-1A Prospectus Location or Caption
- ------------------------ ------------------------------
PART A
- ------
1. Front Cover Page; Back Cover Page
2. The Funds; Other Investment Strategies and Risks
3. Not Applicable
4. The Funds
5. Not Applicable
6. Trust Management Organizations
7. Shareholder Information
8. The Trust
9. Financial Highlights
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
PROSPECTUS DATED MAY 1, 1999
Colonial Growth and Income Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial U.S. Stock Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Newport Tiger Fund, Variable Series
Trust shares available only through variable annuity contracts and variable life
insurance policies of participating insurance companies.
* * *
This Prospectus must be accompanied by a prospectus for your variable annuity
contract or variable life insurance policy. Retain both prospectuses for future
reference.
* * * *
Although trust shares have been registered with the Securities and Exchange
Commission (SEC), the SEC has not approved any shares offered in this prospectus
or determined whether this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
- ---------------------------------- -----------------------------------
NOT FDIC MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- ---------------------------------- -----------------------------------
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
THE TRUST................................................................. 3
THE FUNDS................................................................. 4
Each of these sections discusses the following
topics: Investment Goals, Primary Investment Strategies,
Primary Investment Risks and Performance History
Colonial Growth and Income Fund, Variable Series.......................... 4
Stein Roe Global Utilities Fund, Variable Series.......................... 6
Colonial Small Cap Value Fund, Variable Series............................ 8
Colonial U.S. Stock Fund, Variable Series................................. 9
Colonial Strategic Income Fund, Variable Series........................... 11
Colonial High Yield Securities Fund, Variable Series...................... 14
Liberty All-Star Equity Fund, Variable Series............................. 16
Colonial International Fund for Growth, Variable Series................... 19
Newport Tiger Fund, Variable Series....................................... 21
TRUST MANAGEMENT ORGANIZATIONS 23
Trustees.................................................................. 23
Investment Advisor........................................................ 23
Investment Sub-Advisors and Portfolio Managers............................ 23
OTHER INVESTMENT STRATEGIES AND RISKS 27
Temporary Defensive Measures.............................................. 27
U.S. Government Securities................................................ 27
Structure Risk............................................................ 27
Zero Coupon Bonds......................................................... 27
Hedging Strategies........................................................ 28
Year 2000 Compliance...................................................... 28
FINANCIAL HIGHLIGHTS 29
SHAREHOLDER INFORMATION 38
Purchases and Redemptions................................................. 38
How a Fund's Share Price is Determined.................................... 38
Dividends and Distributions............................................... 38
Tax Consequences.......................................................... 38
</TABLE>
2
<PAGE>
THE TRUST
Liberty Variable Investment Trust ("Trust") includes nine separate mutual funds
("Funds"), each with its own investment goal and strategies. This Prospectus
contains information about nine of the Funds in the Trust. Liberty Advisory
Services Corp. ("LASC") is the investment advisor to each Fund. LASC has
appointed a Sub-Advisor for each Fund, all of which are affiliates of LASC. Each
Fund is sub-advised by the following Sub-Advisor:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FUND SUB-ADVISOR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Colonial Growth and Income Fund, Variable Series (Growth & Income Fund) Colonial Management Associates, Inc. (Colonial)
Colonial International Fund for Growth, Variable Series (International Fund)
Colonial U.S. Stock Fund, Variable Series (U.S. Stock Fund)
Colonial Small Cap Value Fund, Variable Series (Small Cap Fund)
Colonial Strategic Income Fund, Variable Series (Strategic Income Fund)
Colonial High Yield Securities Fund, Variable Series (High Yield Fund)
- -----------------------------------------------------------------------------------------------------------------------------------
Stein Roe Global Utilities Fund, Variable Series (Global Utilities Fund) Stein Roe & Farnham Incorporated (Stein Roe)
- -----------------------------------------------------------------------------------------------------------------------------------
Newport Tiger Fund, Variable Series (Tiger Fund) Newport Fund Management, Inc. (Newport)
- -----------------------------------------------------------------------------------------------------------------------------------
Liberty All-Star Equity Fund, Variable Series (All-Star Equity Fund) Liberty Asset Management Company (LAMCO)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other Funds may be added to or deleted from the Trust from time to time.
The Trust's Funds are investment options under variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") issued by life
insurance companies ("Participating Insurance Companies"). Some (but not all)
Participating Insurance Companies are affiliated with the investment advisor to
the Funds. Participating Insurance Companies invest in the Funds through
separate accounts that they set up for that purpose. Owners of VA contracts and
of VLI policies invest in sub-accounts of those separate accounts through
instructions they give to their insurance company. The principal underwriters of
the Fund are Keyport Financial Services Corp. ("KFSC") and Liberty Funds
Distributor, Inc. ("LFD"). KFSC serves as principal underwriter of the shares of
the portfolios of the Trust with respect to the sale of shares to Participating
Insurance Companies that are affiliated with LASC and LFD serves as principal
underwriter with respect to the sale of shares to Participating Insurance
Companies that are not affiliated with LASC. KFSC and LFD are affiliates of
LASC.
The prospectuses of the Participating Insurance Companies' separate accounts
describe which Funds are available to the purchasers of their VA contracts and
VLI policies. The Trust assumes no responsibility for those prospectuses.
3
<PAGE>
THE FUNDS
COLONIAL GROWTH AND INCOME FUND, VARIABLE SERIES
INVESTMENT GOALS
The Fund seeks primarily income and long-term capital growth and, secondarily,
preservation of capital.
PRIMARY INVESTMENT STRATEGIES
The Fund invests in both U.S. and foreign common stocks. In selecting stocks for
the Fund, Colonial invests primarily in "value" stocks, but may also invest in
"growth" stocks of medium and large capitalized companies. Colonial generally
selects stocks which, when purchased, fall into one of the following categories:
1. Companies whose current business activities provide earnings,
dividends or assets that represent above average value; or
2. Companies which have a record of consistent earnings growth
that may provide above average stability or value in turbulent
markets; or
3. Companies with anticipated business growth prospects that
represent above average value.
Colonial assesses whether a company's prospects are "above average." Colonial
makes this judgement subjectively, based upon available information.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goals.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions, or due to the
financial condition of the company which issued the security.
Value Stocks are securities of companies that Colonial believes are undervalued.
These companies may have experienced adverse business or industry developments
or may be subject to special risks that have caused the stocks to be out of
favor. If Colonial's assessment of a company's prospects is wrong, the price of
its stock may fall or may not approach the value Colonial has placed on it.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may at times be unable to sell
foreign securities at desirable prices. Fluctuations in currency exchange rates
may impact the value of foreign securities. Brokerage commissions, custodial
fees and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
4
<PAGE>
THE FUNDS Colonial Growth and Income Fund, Variable Series
PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year, 5 years
and the life of the Fund. We compare the Fund to the Standard & Poor's 500 Index
(S&P 500 Index), an unmanaged index that tracks the performance of a selection
of widely held common stocks and the Lipper Growth & Income - Annuities peer
group average return (Lipper Average). This Lipper Average which is calculated
by Lipper, Inc. is composed of funds with similar investment objectives as the
Fund. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. It is not possible to invest
directly in an index. The chart and table are intended to illustrate some of the
risks of investing in the Fund by showing the changes in the Fund's performance.
All returns include the reinvestment of dividends and distributions. As with all
mutual funds, past performance does not predict the Fund's future performance.
Performance results include the effect of any expense reduction arrangements. If
these arrangements were not in place, then the performance results would have
been lower. We may cease any reduction arrangements at any time. The Fund's
performance results do not reflect the cost of insurance and separate account
charges which are imposed under your VA contract or VLI policy.
CALENDAR-YEAR TOTAL RETURNS
[BAR CHART]
The Fund's year to date total return through March 31, 1999 was - 0.24%.
Best Quarter: 4th quarter 1998, +16.92%
Worst Quarter: 3rd quarter 1998, -13.57%
AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE
INCEPTION ON
7/1/93
- ------------------------------------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
Fund (%) 11.13 16.87 16.23
- ------------------------------------------------- ----------------- ---------------- ----------------
S&P 500 Index (%) 28.60 24.05 N/A
- ------------------------------------------------- ----------------- ---------------- ----------------
Lipper Average (%) 16.37 18.55 N/A
- ------------------------------------------------- ----------------- ---------------- ----------------
</TABLE>
5
<PAGE>
STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
INVESTMENT GOALS
The Fund seeks current income and long-term growth of capital and income.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in U.S. and foreign
securities of utility companies. Stein Roe diversifies the Fund's investments
among a number of developed countries and market sectors and will have exposure
to at least three countries, including the U.S. In selecting investments for the
Fund, Stein Roe looks primarily for stocks of larger utility companies with
established records.
Utility companies in which the Fund may invest include 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. They also include companies engaged in telecommunications, including
telephone, telegraph, satellite, microwave and other communications media (but
excluding companies primarily engaged in public broadcasting, print media, cable
television or the internet).
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goals.
Utility company securities are subject to special risks. These securities are
especially affected by changes in prevailing interest rates (as interest rates
increase, the value of securities of utility companies tend to decrease, and
vice versa), as well as by general competitive and market forces in the
industry. In addition, utility companies are affected by changes in government
regulation. In particular, the profitability of utilities may in the future be
adversely affected by increased competition resulting from deregulation.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions, or due to the
financial condition of the company which issued the security.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may at times be unable to sell
foreign securities at desirable prices. Fluctuations in currency exchange rates
may impact the value of foreign securities. Brokerage commissions, custodial
fees and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
6
<PAGE>
THE FUNDS Stein Roe Global Utilities Fund, Variable Series
PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year, 5 years
and the life of the Fund. We compare the Fund to the Standard & Poor's Utilities
Index (S&P Index), Lipper Utilities - Annuities peer group average return
(Lipper Average) and Morgan Stanley Capital International World Index ND (MSCI
World Index). The S&P Index is an unmanaged index that tracks the performance of
domestic utilities stocks. The Lipper Average which is calculated by Lipper,
Inc. is composed of funds with similar investment objectives as the Fund. MSCI
World Index is an unmanaged index that tracks the performance of global stocks.
Unlike the Fund, indices are not investments, do not incur fees or expenses and
are not professionally managed. It is not possible to invest directly in an
index. The chart and table are intended to illustrate some of the risks of
investing in the Fund by showing the changes in the Fund's performance. All
returns include the reinvestment of dividends and distributions. As with all
mutual funds, past performance does not predict the Fund's future performance.
Performance results include the effect of any expense reduction arrangements. If
these arrangements were not in place, then the performance results would have
been lower. We may cease any reduction arrangements at any time. The Fund's
performance results do not reflect the cost of insurance and separate account
charges which are imposed under your VA contract or VLI policy.
CALENDAR-YEAR TOTAL RETURNS
[BAR CHART]
The Fund's year to date total return through March 31, 1999 was - 0.58%.
Best Quarter: 4th quarter 1997, +15.29%
Worst Quarter: 1st quarter 1994, -8.91%
AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE
INCEPTION ON
7/1/93
- ------------------------------------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
Fund (%) 18.33 14.50 12.73
- ------------------------------------------------- ----------------- ---------------- ----------------
MSCI World Index (%) 24.34 15.68 N/A
- ------------------------------------------------- ----------------- ---------------- ----------------
S&P Index (%) 14.77 13.90 N/A
- ------------------------------------------------- ----------------- ---------------- ----------------
Lipper Average (%) 18.61 14.76 N/A
- ------------------------------------------------- ----------------- ---------------- ----------------
</TABLE>
7
<PAGE>
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks long-term growth.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in small
capitalization stocks. These are stocks with market capitalizations of less than
the market capitalization of the stock in the Russell 2000 Index that has the
largest capitalization at the time of purchase. The remainder of the Fund's
assets may be invested in other stocks, or in bonds that are rated or considered
by the advisor to be investment grade. In managing the Fund, Colonial uses a
value investing strategy that focuses on buying stocks cheaply when they are
under valued or "out of favor." Colonial buys stocks that have attractive
current prices, consistent operating performance and/or favorable future growth
prospects. Colonial's strategy uses fact-based quantitative analysis supported
by fundamental business and financial analysis.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goals.
Smaller companies are more likely than larger companies to have limited product
lines, markets or financial resources, and to depend on a small, inexperienced
management team. They are more likely to fail or prove unable to grow. Stocks of
smaller companies may trade less frequently and in limited volume and their
prices may fluctuate more than stocks of other companies. In addition, they may
not be widely followed by the investment community, which can lower the demand
for their stock. Stocks of smaller companies may, therefore, be more vulnerable
to adverse developments than those of larger companies.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions, or due to the
financial condition of the company which issued the security.
PERFORMANCE HISTORY
We compare the Fund to the Russell 2000 Index, an unmanaged index that tracks
the performance of small capitalization stocks and the Lipper Small Cap -
Annuities peer group average return (Lipper Average). This Lipper Average which
is calculated by Lipper, Inc. is composed of funds with similar investment
objectives as the Fund. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. The Fund commenced investment operations on May 19,
1998, and therefore does not have a full calendar year of investment
performance.
8
<PAGE>
COLONIAL U.S. STOCK FUND, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks long-term capital growth.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in large
capitalization stocks. These are stocks with market capitalizations of greater
than $3 billion at the time of purchase.
In managing the Fund, Colonial uses a value investing strategy that focuses on
buying stocks cheaply when they are under valued or "out of favor." Colonial
buys stocks that have attractive current prices, consistent operating
performance and/or favorable future growth prospects. Colonial's strategy uses
quantitative analysis supported by fundamental business and financial analyses.
PRIMARY INVESTMENT RISKS
The primary risk of investing in the Fund is described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goal.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions, or due to the
financial condition of the company which issued the security.
9
<PAGE>
THE FUNDS Colonial U.S. Stock Fund, Variable Series
PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year and the
life of the Fund. We compare the Fund to the Standard & Poor's 500 Index (S&P
Index), an unmanaged index that tracks the performance of a selection of widely
held common stocks and the Lipper Growth & Income - Annuities peer group average
return (Lipper Average). This Lipper Average which is calculated by Lipper, Inc.
is composed of funds with similar investment objectives as the Fund. Unlike the
Fund, indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index. The
chart and table are intended to illustrate some of the risks of investing in the
Fund by showing the changes in the Fund's performance. All returns include the
reinvestment of dividends and distributions. As with all mutual funds, past
performance does not predict the Fund's future performance. Performance results
include the effect of any expense reduction arrangements. If these arrangements
were not in place, then the performance results would have been lower. We may
cease any reduction arrangements at any time. The Fund's performance results do
not reflect the cost of insurance and separate account charges which are imposed
under your VA contract or VLI policy.
CALENDAR-YEAR TOTAL RETURNS
[BAR CHART]
The Fund's year to date total return through March 31, 1999 was +1.70%.
Best Quarter: 4th quarter 1998, +21.79%
Worst Quarter: 3rd quarter 1998, -14.16%
AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
1 YEAR SINCE
INCEPTION ON
7/5/94
- ------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Fund (%) 20.15 23.90
- ------------------------------------------------- ----------------- ----------------
S&P Index (%) 28.60 N/A
- ------------------------------------------------- ----------------- ----------------
Lipper Average (%) 16.37 N/A
- ------------------------------------------------- ----------------- ----------------
</TABLE>
10
<PAGE>
COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES
INVESTMENT GOALS
The Fund seeks as high a level of current income as is consistent with prudent
risk and maximizing total return.
PRIMARY INVESTMENT STRATEGIES
The Fund seeks to achieve its investment goal by investing in:
- - debt securities issued by the U.S. government;
- - debt securities issued by foreign governments; and
- - lower rated corporate debt securities.
Colonial allocates the Fund's investments among these types of securities at any
given time based on its estimate of the expected performance and risk of each
type of investment.
The Fund pursues its investment goal by investing a portion of its assets in
lower rated corporate debt securities. These securities have the following
ratings:
- - BBB through C by Standard & Poor's Corporation;
- - Baa through D by Moody's Investor Services, Inc.;
- - a comparable rating by another nationally recognized rating service; or
- - the security is unrated and Colonial believes it to be comparable in
quality to securities having such ratings as noted above.
The Fund may invest in securities issued or guaranteed by foreign governments or
foreign companies, including securities issued in emerging market countries.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goal.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions, or due to the
financial condition of the company which issued the security.
Because the Fund may invest in fixed income securities issued by private
entities, including certain types of mortgage-backed securities and corporate
bonds, the Fund is subject to issuer risk. Issuer risk is the possibility that
changes in the financial condition of the issuer of a security, changes in
general economic conditions, or changes in economic conditions that affect the
issuer's industry may impact the issuer's ability to make timely payment of
interest or principal. This could result in decreases in the price of the
security.
Interest rate risk is the risk of a decline or increase in the price of a bond
when interest rates increase or decline. In general, if interest rates rise,
bond prices fall, and if interest rates fall, bond prices rise. Changes in the
values of bonds usually will not affect the amount of income the Fund receives
from them but will affect the value of the Fund's shares. Interest rate risk is
generally greater for bonds with longer maturities.
11
<PAGE>
THE FUNDS Colonial Strategic Income Fund, Variable Series
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may at times be unable to sell
foreign securities at desirable prices. Fluctuations in currency exchange rates
may impact the value of foreign securities. Brokerage commissions, custodial
fees and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
Emerging markets are also subject to special risks. The risks of foreign
investments are typically increased in less developed and developing countries.
For example, political and economic structures in these countries may be new and
developing rapidly, which may cause instability. These countries are also more
likely to experience high levels of inflation, deflation or currency
devaluations, which could hurt their economies and securities markets.
Lower rated debt securities are commonly referred to as "junk bonds" and are
considered speculative. Lower quality debt securities involve greater risk of
loss and are less liquid, especially during periods of economic uncertainty or
change, than higher quality debt securities.
12
<PAGE>
THE FUNDS Colonial Strategic Income Fund, Variable Series
PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year and the
life of the Fund. We compare the Fund to the Lehman Brothers
Government/Corporate Bond Index (Lehman Index), an unmanaged index that tracks
the performance of a selection of U.S. government agency, treasury and
investment grade corporate bonds and the Lipper Corporate Bonds - Annuities peer
group average return (Lipper Average). This Lipper Average which is calculated
by Lipper, Inc. is composed of funds with similar investment objectives as the
Fund. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. It is not possible to invest
directly in an index. The chart and table are intended to illustrate some of the
risks of investing in the Fund by showing the changes in the Fund's performance.
All returns include the reinvestment of dividends and distributions. As with all
mutual funds, past performance does not predict the Fund's future performance.
Performance results include the effect of any expense reduction arrangements. If
these arrangements were not in place, then the performance results would have
been lower. We may cease any reduction arrangements at any time. The Fund's
performance results do not reflect the cost of insurance and separate account
charges which are imposed under your VA contract or VLI policy.
CALENDAR-YEAR TOTAL RETURNS
[BAR CHART]
The Fund's year to date total return through March 31, 1999 was +0.99%.
Best Quarter: 1st quarter 1995, +5.62%
Worst Quarter: 1st quarter 1997, -1.00%
AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
1 YEAR SINCE
INCEPTION ON
7/5/94
- ------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Fund (%) 6.03 9.75
- ------------------------------------------------- ----------------- ----------------
Lehman Index (%) 9.47 N/A
- ------------------------------------------------- ----------------- ----------------
Lipper Average (%) 4.82 N/A
- ------------------------------------------------- ----------------- ----------------
</TABLE>
13
<PAGE>
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
INVESTMENT GOALS
The Fund seeks current income and total return.
PRIMARY INVESTMENT STRATEGIES
The Fund pursues its investment goal by investing primarily in lower rated
corporate debt securities. These securities have the following ratings:
- - BBB through C by Standard & Poor's Corporation;
- - Baa through D by Moody's Investor Services, Inc.;
- - a comparable rating by another nationally recognized rating service; or
- - the security is unrated and Colonial believes it to be comparable in
quality to securities having such ratings as noted above.
Although the Fund will invest primarily in debt securities, the Fund may invest
in equity securities to seek capital appreciation. Equity securities include
common stocks, preferred stocks, warrants and debt securities convertible into
common stocks. Additionally, the Fund may invest in securities issued or
guaranteed by foreign governments or foreign companies, including securities
issued in emerging market countries.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goal.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions, or due to the
financial condition of the company which issued the security.
Lower rated debt securities are commonly referred to as "junk bonds" and are
considered speculative. Lower quality debt securities involve greater risk of
loss and are less liquid, especially during periods of economic uncertainty or
change, than higher quality debt securities.
Interest rate risk is the risk of a decline or increase in the price of a bond
when interest rates increase or decline. In general, if interest rates rise,
bond prices fall, and if interest rates fall, bond prices rise. Changes in the
values of bonds usually will not affect the amount of income the Fund receives
from them but will affect the value of the Fund's shares. Interest rate risk is
generally greater for bonds with longer maturities.
Because the Fund may invest in fixed income securities issued by private
entities, including corporate bonds, the Fund is subject to issuer risk. Issuer
risk is the possibility that changes in the financial condition of the issuer of
a security, changes in general economic conditions, or changes in economic
conditions that affect the issuer's industry may impact the issuer's ability to
make timely payment of interest or principal. This could result in decreases in
the price of the security.
14
<PAGE>
THE FUNDS Colonial High Yield Securities Fund, Variable Series
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may at times be unable to sell
foreign securities at desirable prices. Fluctuations in currency exchange rates
may impact the value of foreign securities. Brokerage commissions, custodial
fees and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
Emerging markets are also subject to special risks. The risks of foreign
investments are typically increased in less developed and developing countries.
For example, political and economic structures in these countries may be new and
developing rapidly, which may cause instability. These countries are also more
likely to experience high levels of inflation, deflation or currency
devaluations, which could hurt their economies and securities markets.
PERFORMANCE HISTORY
We compare the Fund to the CS First Boston High Yield Index, an unmanaged index
that tracks the performance of high yield bond funds and the Lipper High Yield -
Annuities peer group average return (Lipper Average). This Lipper Average which
is calculated by Lipper, Inc. is composed of funds with similar investment
objectives as the Fund. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. The Fund commenced investment operations on May 19,
1998, and therefore does not have a full calendar year of investment
performance.
15
<PAGE>
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES
INVESTMENT GOALS
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.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in equity and equity
related securities, which include common stocks, bonds convertible into stocks,
warrants and other rights to purchase stocks.
The Fund's sub-advisor, LAMCO, utilizes a 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). There are
five Portfolio Managers as of the date of this prospectus each of which employs
a different investment style. LAMCO attempts to rebalance 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 for the following reasons:
- - Most equity investment management firms consistently employ a distinct
investment "style" which causes them to emphasize stocks with
particular characteristics;
- - 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;
- - Consequently, by allocating the Fund's portfolio on an approximately
equal basis among Portfolio Managers employing different styles, the
impact of any one 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
- - 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.
The Fund's current Portfolio Managers and investment styles are:
- - J. P. Morgan Investment Management Inc. uses a value approach by
investing in companies that are diversified across all sectors and that
are undervalued relative to the firm's projected growth rates.
- - Oppenheimer Capital uses a value approach by investing in companies
that exhibit the ability to generate excess cash flow while earning
high returns on invested capital.
- - Boston Partners Asset Management, L.P. uses a value approach by
investing in companies with low price-to-earnings and price-to-book
ratios where a catalyst for positive change has been identified.
- - Westwood Management Corporation uses a growth approach by investing in
growth companies selling at reasonable valuations based on the firm's
earnings projections which are not yet reflected in consensus
estimates.
- - Wilke/Thompson Capital Management, Inc. uses a growth approach by
investing in companies that demonstrate the ability to sustain strong
secular growth across a broad range of market capitalizations.
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.
16
<PAGE>
THE FUNDS Liberty All-Star Equity Fund, Variable Series
LAMCO also may recommend Portfolio Manager changes to change the mix of
investment styles employed by the Fund's Portfolio Managers. The Board of
Trustees must approve all Portfolio Manager changes. LAMCO is also the manager
of Liberty All-Star Equity Fund, a multi-managed, closed-end fund. This fund has
the same investment objective and investment program as the Fund, and currently
has the same Portfolio Managers. LAMCO expects that both funds will make
corresponding changes if and when Portfolio Managers are changed in the future.
The Fund will 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.
PRIMARY INVESTMENT RISKS
The primary risk of investing in the Fund is described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goals.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions, or due to the
financial condition of the company which issued the security.
17
<PAGE>
THE FUNDS Liberty All-Star Equity Fund, Variable Series
PERFORMANCE HISTORY
The bar chart below shows the Fund's performance by illustrating the Fund's
total calendar-year return. The performance table following the bar chart shows
how the Fund's average annual total returns compare with those of a broad
measure of market performance for one year and the life of the Fund. We compare
the Fund to the Standard & Poor's 500 Index(S&P Index), an unmanaged index that
tracks the performance of a selection of widely held common stocks and the
Lipper Growth & Income - Annuities peer group average return (Lipper Average).
This Lipper Average which is calculated by Lipper, Inc. is composed of funds
with similar investment objectives as the Fund. Unlike the Fund, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index. The chart and table are
intended to illustrate some of the risks of investing in the Fund by showing the
changes in the Fund's performance. All returns include the reinvestment of
dividends and distributions. As with all mutual funds, past performance does not
predict the Fund's future performance. Performance results include the effect of
any expense reduction arrangements. If these arrangements were not in place,
then the performance results would have been lower. We may cease any reduction
arrangements at any time. The Fund's performance results do not reflect the cost
of insurance and separate account charges which are imposed under your VA
contract or VLI policy.
CALENDAR-YEAR TOTAL RETURNS
[BAR CHART]
The Fund's year to date total return through March 31, 1999 was 0.00%.
Best Quarter: 4th quarter 1998, +18.67%
Worst Quarter: 3rd quarter 1998, -12.05%
AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
1 YEAR SINCE
INCEPTION ON
11/17/97
- ------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Fund (%) 18.67 17.29
- ------------------------------------------------- ----------------- ----------------
S&P Index (%) 28.60 N/A
- ------------------------------------------------- ----------------- ----------------
Lipper Average (%) 16.37 N/A
- ------------------------------------------------- ----------------- ----------------
</TABLE>
18
<PAGE>
COLONIAL INTERNATIONAL FUND FOR GROWTH, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks long-term capital growth.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in equity securities
of companies located outside the United States. The Fund may invest in equity
securities located in any foreign country, including emerging market countries.
The Fund may invest in companies of any size, including small capitalization
stocks. The Fund may also invest in high quality foreign government debt
securities. The Fund generally diversifies its holdings across several different
countries and regions.
The Fund is a non-diversified mutual fund and may invest more than 5% of its
total assets in the securities of a single issuer.
The Fund may invest up to 10% of its assets in shares of other investment
companies. Investing in investment companies may involve payment of duplicate
fees because the Fund, as a shareholder, will indirectly pay a portion of the
other investment company's expenses.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goals. Additionally, as a non-diversified mutual fund, the Fund is
allowed to invest a greater percentage of its total net assets in the securities
of a single company. Therefore, the Fund may have an increased risk of loss
compared to a similar diversified mutual fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions, or due to the
financial condition of the company which issued the security.
Interest rate risk is the risk of a decline or increase in the price of a bond
when interest rates increase or decline. In general, if interest rates rise,
bond prices fall, and if interest rates fall, bond prices rise. Changes in the
values of bonds usually will not affect the amount of income the Fund receives
from them but will affect the value of the Fund's shares. Interest rate risk is
generally greater for bonds with longer maturities.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may at times be unable to sell
foreign securities at desirable prices. Fluctuations in currency exchange rates
may impact the value of foreign securities. Brokerage commissions, custodial
fees and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
Emerging markets are also subject to risk. The risks of foreign investments are
typically increased in less developed and developing countries, which are
sometimes referred to as emerging markets. For example, political and economic
structures in these countries may be new and developing rapidly, which may cause
instability. These countries are also more likely to experience high levels of
inflation, deflation or currency devaluations, which could hurt their economies
and securities markets.
Smaller companies are more likely than larger companies to have limited product
lines, markets or financial resources, and to depend on a small, inexperienced
management team. Stocks of smaller companies may trade less frequently and in
limited volume and their prices may fluctuate more than stocks of other
companies. Stocks of smaller companies may, therefore, be more vulnerable to
adverse developments than those of larger companies.
19
<PAGE>
THE FUNDS Colonial International Fund for Growth, Variable Series
PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year and the
life of the Fund. We compare the Fund to the Morgan Stanley Capital
International EAFE Index (Morgan Stanley Index), an unmanaged index that tracks
the performance of a selection of widely held common stocks and the Lipper
International - Annuities peer group average return (Lipper Average). This
Lipper Average which is calculated by Lipper, Inc. is composed of funds with
similar investment objectives as the Fund. Unlike the Fund, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index. The chart and table are
intended to illustrate some of the risks of investing in the Fund by showing the
changes in the Fund's performance. All returns include the reinvestment of
dividends and distributions. As with all mutual funds, past performance does not
predict the Fund's future performance. Performance results include the effect of
any expense reduction arrangements. If these arrangements were not in place,
then the performance results would have been lower. We may cease any reduction
arrangements at any time. The Fund's performance results do not reflect the cost
of insurance and separate account charges which are imposed under your VA
contract or VLI policy.
CALENDAR-YEAR TOTAL RETURNS
[BAR CHART]
The Fund's year to date total return through March 31, 1999 was +1.50%.
Best Quarter: 4th quarter 1998, +17.40%
Worst Quarter: 3rd quarter 1998, -16.04%
AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
1 YEAR SINCE
INCEPTION ON
5/2/94
- ------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Fund (%) 12.96 3.00
- ------------------------------------------------- ----------------- ----------------
Morgan Stanley Index (%) 20.00 N/A
- ------------------------------------------------- ----------------- ----------------
Lipper Average (%) 13.26 N/A
- ------------------------------------------------- ----------------- ----------------
</TABLE>
20
<PAGE>
NEWPORT TIGER FUND, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks long-term capital appreciation.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in stocks of
companies located in the nine Tiger countries of Asia. The Tigers of Asia are
Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, The
People's Republic of China and the Philippines. In selecting investments for the
Fund, Newport typically purchases stocks of larger, well-established companies.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goal.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions, or due to the
financial condition of the company which issued the security.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may at times be unable to sell
foreign securities at desirable prices. Fluctuations in currency exchange rates
may impact the value of foreign securities. Brokerage commissions, custodial
fees and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
Because the Fund's investments are concentrated in the nine Tiger countries of
Asia, the Fund is particularly susceptible to regional risks. Events in any one
Tiger country may impact the other countries in the Southeast Asian region as a
whole. As a result events in the region will generally have a greater effect on
the Fund than if it were more geographically diversified, which may result in
greater losses and volatility.
21
<PAGE>
THE FUNDS Newport Tiger Fund, Variable Series
PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year and the
life of the Fund. We compare the Fund to the Morgan Stanley Capital
International EAFE Index GDP (Morgan Stanley Index), an unmanaged index that
tracks the performance of foreign stocks and the Lipper Pacific Region -
Annuities peer group average return (Lipper Average). This Lipper Average which
is calculated by Lipper, Inc. is composed of funds with similar investment
objectives as the Fund. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. The chart and table are intended to illustrate some
of the risks of investing in the Fund by showing the changes in the Fund's
performance. All returns include the reinvestment of dividends and
distributions. As with all mutual funds, past performance does not predict the
Fund's future performance. Performance results include the effect of any expense
reduction arrangements. If these arrangements were not in place, then the
performance results would have been lower. We may cease any reduction
arrangements at any time. The Fund's performance results do not reflect the cost
of insurance and separate account charges which are imposed under your VA
contract or VLI policy.
CALENDAR-YEAR TOTAL RETURNS
[BAR GRAPH]
The Fund's year to date total return through March 31, 1999 was +2.55%.
Best Quarter: 4th quarter 1998, +37.93%
Worst Quarter: 2nd quarter 1998, -28.81%
AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98
<TABLE>
<CAPTION>
1 YEAR SINCE
INCEPTION ON
5/1/95
- ------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Fund (%) -6.43 -5.01
- ------------------------------------------------- ----------------- ----------------
Morgan Stanley Index (%) 26.71 N/A
- ------------------------------------------------- ----------------- ----------------
Lipper Average (%) -6.46 N/A
- ------------------------------------------------- ----------------- ----------------
</TABLE>
22
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
THE TRUSTEES
The business of the Trust and the Funds is supervised by the Trust's Board of
Trustees. The Statement of Additional Information (SAI) contains names of and
biographical information on the Trustees.
INVESTMENT ADVISOR: LIBERTY ADVISORY SERVICES CORP.
LASC, located at 125 High Street, Boston Massachusetts 02110, is the investment
advisor to the Trust. LASC is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. ("LFC"). LASC has been an investment advisor since
1993. As of March 31, 1999, LASC managed over $727 million in assets. LASC
designates the Trust's Sub-Advisors, evaluates and monitors Sub-Advisors'
performance and investment programs and recommends to the Board of Trustees
whether Sub-Advisors' contracts should be continued or modified and the addition
or deletion of Sub-Advisors. LASC also has the responsibility of administering
the Trust's operations, which it may delegate, at its own expense, to certain
affiliates. LASC has delegated its administrative responsibilities to Colonial
in accordance with this authority.
For the 1998 fiscal year, the Trust paid LASC management fees at the following
annual rates of the average daily net assets of each specified Fund:
<TABLE>
<S> <C>
Colonial Growth and Income Fund, Variable Series 0.65%
Stein Roe Global Utilities Fund, Variable Series 0.65%
Colonial Small Cap Value Fund, Variable Series 0.80% (1)
Colonial U.S. Stock Fund, Variable Series 0.80%
Colonial Strategic Income Fund, Variable Series 0.65%
Colonial High Yield Securities Fund, Variable Series 0.60% (2)
Liberty All-Star Equity Fund, Variable Series 0.80% (3)
Colonial International Fund for Growth, Variable Series 0.90%
Newport Tiger Fund, Variable Series 0.90%
</TABLE>
(1) The Small Cap Fund's advisor has voluntarily agreed to waive its
management fee so that total expenses of the Fund do not exceed 1.00%.
As a result the actual management fee paid to the advisor for the 1998
fiscal year was 0.00%.
(2) The High Yield Fund's advisor has voluntarily agreed to waive its
management fee so that total expenses of the Fund do not exceed 0.80%.
As a result the actual management fee paid to the advisor for the 1998
fiscal year was 0.00%.
(3) The All-Star Equity Fund's advisor has voluntarily agreed to waive a
portion of its management fee. As a result the actual management fee
paid to the advisor for the 1998 fiscal year was 0.76%.
INVESTMENT SUB-ADVISORS AND PORTFOLIO MANAGERS
The Sub-Advisors manage the assets of the Funds under the supervision of LASC
and the Board of Trustees. Each Sub-Advisor determines which securities and
other instruments are purchased and sold for the Fund(s) it sub-advises. Each
Sub-Advisor is an indirect wholly-owned subsidiary of LFC.
COLONIAL
Colonial, an investment advisor since 1931, is the Sub-Advisor of each of the
Growth & Income Fund, Small Cap Fund, U.S. Stock Fund, Strategic Income Fund,
High Yield Fund and International Fund. Colonial's principal business address is
One Financial Center, Boston, Massachusetts 02111. As of March 31, 1999,
Colonial managed over $16.7 billion in assets.
23
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
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 each specified Fund:
<TABLE>
<S> <C>
Colonial Growth and Income Fund, Variable Series 0.45%
Colonial Small Cap Value Fund, Variable Series 0.60%
Colonial U.S. Stock Fund, Variable Series 0.60%
Colonial Strategic Income Fund, Variable Series 0.45%
Colonial High Yield Securities Fund, Variable Series 0.40%
Colonial International Fund for Growth, Variable Series 0.70%
</TABLE>
Colonial also provides transfer agency, pricing and record keeping services for
the Funds under separate agreements.
John E. Lennon, Senior Vice President of Colonial, has managed the Growth &
Income Fund since 1997 and has managed various other Colonial equity funds since
1982.
Mark Stoeckle has managed the U.S. Stock Fund since December, 1996. Mr. Stoeckle
is a Senior Vice President of Colonial. 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. He
also has managed the High Yield Fund since January, 1999. Mr. Ericson, a Senior
Vice President of Colonial and director of Colonial's Taxable Fixed Income
Group, has managed various Colonial taxable income funds since 1985.
James P. Haynie, Senior Vice President of Colonial, has co-managed the Colonial
Small Cap Fund since 1993.
Michael Rega, Vice President of Colonial, has co-managed the Colonial Small Cap
Fund since 1996. He was an analyst at Colonial from 1993 to 1996.
Gita Rao, a Senior Vice President of Colonial, manages the International Fund.
Ms. Rao has managed various other Colonial funds since 1995. Prior to joining
Colonial, she was a global equity analyst at Fidelity Management & Research
Company from 1994 to 1995 and a Vice President in the domestic equity research
group at Kidder, Peabody and Company from 1991 to 1994.
24
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
STEIN ROE
Stein Roe, an investment advisor since 1932, is the Sub-Advisor of the Global
Utilities Fund. Stein Roe's principal address is One South Wacker Drive,
Chicago, Illinois 60606. As of March 31, 1999, Stein Roe managed over $30.1
billion in assets.
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.
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, which include managing other Stein Roe and Colonial funds.
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.
LAMCO AND LAMCO'S PORTFOLIO MANAGERS
LAMCO, an investment advisor since 1985, is the Sub-Advisor of the All-Star
Equity Fund. LAMCO's principal address is 600 Atlantic Avenue, 23rd Floor,
Boston, Massachusetts 02210. As of March 31, 1999, LAMCO managed over $1.6
billion in assets.
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 Equity Fund.
LAMCO is a manager of other investment managers which LAMCO recommends to the
Board of Trustees for appointment pursuant to a portfolio management agreement
among the Trust, LAMCO and the Portfolio Manager. That management agreement
permits each Portfolio Manager to have full investment discretion and authority
over investment of a portion of the Fund's assets.
Out of the management fees it receives from LASC, LAMCO pays each Portfolio
Manager a fee at the annual rate of 0.30% of the average daily net assets of the
portion of the Fund's assets assigned to that Portfolio Manager.
No one individual at LAMCO is responsible for LAMCO's investment management of
the All-Star Equity Fund. The following individuals who work for the indicated
Portfolio Managers manage a portion of All-Star Equity Fund's assets:
- - Henry D. Cavanna, Managing Director of J.P. Morgan Investment
Management, Inc.
- - John Lindenthal, Managing Director of Oppenheimer Capital
- - Mark Donovan, Chairman, Equity Strategy Committee, of Boston Partners
Asset Management, L.P.
- - Susan M. Byrne, President and Chief Executive Officer of Westwood
Management Corp.
- - Mark A. Thompson, Chairman and Chief Investment Officer of
Wilke/Thompson Capital Management, Inc.
A more complete description of each Portfolio Manager is included in the SAI.
The Trust and LAMCO have received an exemptive order from the SEC that permits
the All-Star Equity Fund to change Portfolio Managers without a vote of the
shareholders. Information regarding any new Portfolio Manager is sent to holders
of VA contracts and VLI policies within 90 days following the effective date of
the change.
25
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
NEWPORT
Newport, an investment advisor since 1987, is the Sub-Advisor of the Tiger Fund.
Newport's principal address is 580 California Street, Suite 1960, San Francisco,
California 94104. As of March 31, 1999, Newport managed over $843.1 million in
assets.
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.
Thomas R. Tuttle and Lynda Couch, Senior Vice President and Vice President,
respectively, of Newport, co-manage the Fund. Mr. Tuttle has co-managed other
Newport Funds since November, 1995. Mr. Tuttle has been an officer of Newport
since 1984. Ms. Couch has managed other Newport Funds since April, 1995. Ms.
Couch has been an officer of Newport since 1994.
The mutual funds and institutional investment advisory business of both Stein
Roe and Colonial are managed together by a combined management team of employees
from both companies. Colonial also shares personnel, facilities and systems with
Stein Roe that may be used in providing administrative services to the Fund.
AFFILIATED BROKER/DEALER
Stein Roe and Colonial can use the services of AlphaTrade Inc., an affiliated
broker-dealer, when buying or selling equity securities for a fund's portfolio,
pursuant to procedures adopted by the Board of Trustees.
26
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
Each Fund's primary investments and its risks are described above in its
individual description. This section describes other investments a Fund may make
and the risks associated with them. In seeking to achieve its goal, each Fund
may invest in various types of securities and engage in various investment
techniques which are not the principle focus of the Fund and therefore are not
described in this prospectus. These types of securities and investment practices
are identified and discussed in the Funds' SAI, which you may obtain free of
charge (see back cover). Approval by the Funds' shareholders is not required to
modify or change any of the Funds' investment goals or investment strategies.
TEMPORARY DEFENSIVE MEASURES
With the exception of the All-Star Equity Fund, each Fund's Sub-Advisor may
determine that adverse market conditions make it desirable to temporarily
suspend the Fund's normal investment activities. During such times, as a
temporary defensive strategy, the Fund may, but is not required to, invest in
cash or high quality, short-term debt securities, without limit.
(High Yield Fund) If necessary, the Fund has the ability to invest 100% of its
assets in higher rated securities, if, in Colonial's opinion, economic
conditions create a situation where yield spreads narrow between lower and
higher rated securities.
Taking a temporary defensive position may prevent a Fund from achieving its
investment objective.
U.S. GOVERNMENT SECURITIES
(Strategic Income Fund) The Fund will invest in U.S. Government securities,
including U.S. Treasuries and securities of various U.S. government agencies.
Agency securities include mortgage-backed securities, which represent interests
in pools of mortgages. The Fund has flexibility to vary its allocation among
different types of U.S. Government securities based upon the Sub-Advisor's
judgement of which types of securities will outperform others. In selecting
investments for the Fund, the Sub-Advisor considers a security's expected
income, together with its potential to rise or fall in price.
STRUCTURE RISK
(Strategic Income Fund) Structure risk is the risk that an event will occur
(such as a security being prepaid or called) that alters the security's cash
flows. Prepayment risk is a particular type of risk that involves both
mortgage-backed securities (which are guaranteed by a U.S. Government agency)
and asset-backed securities (which are interests in pools of debt securities).
Prepayment risk is the possibility that asset-backed securities may be prepaid
if the underlying debt securities are prepaid. Prepayment risk for
mortgage-backed securities is the possibility that, as interest rates fall,
homeowners are more likely to refinance their home mortgages. When mortgages are
refinanced, the principal on mortgage-backed securities is paid earlier than
expected. In an environment of declining interest rates, asset-backed securities
and mortgage-backed securities may offer less potential for gain than other debt
securities. During periods of rising interest rates, these securities have a
high risk of declining in price because the declining prepayment rates
effectively increase the maturity of the securities. In addition, the potential
impact of prepayment on the price of a security may be difficult to predict and
result in greater volatility.
ZERO COUPON BONDS
(Global Utilities Fund, Strategic Income Fund, High Yield Fund) Zero coupon
bonds are issued at less than their fair value and do not make any payments of
interest. As a result, these bonds involve greater credit risk and are subject
to greater volatility than bonds that pay cash interest on a current basis.
27
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
HEDGING STRATEGIES
Each Fund may enter into a number of hedging strategies, including those that
employ futures and options, to gain or reduce exposure to particular securities
or markets. These strategies, which are commonly referred to as derivatives, may
involve the use of financial instruments whose values depend on, or are derived
from the value of an underlying security, an index or a currency. A Fund may use
these strategies for hedging purposes (attempting to offset a potential loss in
one position by establishing an interest in an opposite position) or to adjust
the Fund's duration. Hedging strategies involve the risk that they may
exaggerate a loss, potentially losing more money than the actual cost of the
security, or limit a potential gain. Also, with some hedging strategies there is
the risk that the other party to the transaction may fail to honor its contract
terms, causing a loss to a Fund.
YEAR 2000 COMPLIANCE
Like other investment companies, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by LASC, the Sub-Advisors and other service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Problem." LASC,
the Sub-Advisors, the Funds' distributors and transfer agent (Liberty Companies)
are taking steps that they believe are reasonably designed to address the Year
2000 Problem, including communicating with vendors who furnish services,
software and systems to the Funds, to provide that date-related information and
data can be properly processed after January 1, 2000. Many Fund service
providers and vendors, including the Liberty Companies, are in the process of
making Year 2000 modifications to their software and systems and believe that
such modifications will be completed on a timely basis prior to January 1, 2000.
However, no assurances can be given that all modifications required to ensure
proper data processing and calculation on and after January 1, 2000 will be
timely made or that services to the Fund will not be adversely affected. Some
of the Funds invest in emerging markets in developing countries and some reports
indicate that developing countries may be behind other countries
with respect to Year 2000 Compliance.
28
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow are intended to help you understand
the Funds' financial performance. Information is shown for the Funds' last five
fiscal years, (or shorter period if a Fund commenced operations less than five
years ago) which run from January 1 to December 31. Certain information reflects
financial results for a single fund share. This information has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report, along with
the Funds' financial statements, is included in the Trust's annual report. 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. You can request a free annual report by writing
Keyport Financial Services Corp. (see back cover for address) or by calling or
writing the Participating Insurance Company which issued your VA contract or VLI
policy.
COLONIAL GROWTH AND INCOME FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996 1995 1994
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 15.34 13.96 12.60 10.03 10.36
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.20 0.28 0.28 0.29 0.26
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on
investments and foreign currency transactions 1.50 3.75 1.98 2.72 (0.34)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.70 4.03 2.26 3.01 (0.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.18) (0.27) (0.28) (0.25) (0.25)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (0.00) (0.01) --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains (0.47) (2.37) (0.62) (0.19) ---
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains (0.00) --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.65) (2.65) (0.90) (0.44) (0.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 16.39 15.34 13.96 12.60 10.03
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b) 11.13 28.97 17.89 30.03 (0.76)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 149,820 106,909 93,247 71,070 48,052
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) 0.76(c) 0.79(c) 0.79(c) 0.81(c) 0.87
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to 1.24(c) 1.77(c) 2.02(c) 2.51(c) 2.82
average net assets (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 28 60 24 79 55
</TABLE>
(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.
29
<PAGE>
FINANCIAL HIGHLIGHTS
STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996 1995 1994
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 11.92 10.70 10.50 8.11 9.65
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.24 0.46 0.46 0.46 0.54
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
on investments 1.93 2.62 0.23 2.39 (1.53)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.17 3.08 0.69 2.85 (0.99)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.21) (0.48) (0.49) (0.46) (0.55)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (0.01) --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains (0.11) (1.38) --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.33) (1.86) (0.49) (0.46) (0.55)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 13.76 11.92 10.70 10.50 8.11
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%)(b) 18.33 28.75 6.53 35.15 (10.27)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 71,186 54,603 47,907 51,597 38,156
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) 0.82(c) 0.83(c) 0.81(c) 0.83(c) 0.86
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to 1.90(c) 3.96(c) 4.36(c) 4.98(c) 5.80
average net assets (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 53 89 14 18 16
</TABLE>
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
30
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
1998***
PER SHARE OPERATING PERFORMANCE:
<S> <C>
Net asset value, beginning of period ($) 10.00
- -----------------------------------------------------------------------------------------------------------
Net investment income (a) 0.08
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized losses on investments (1.41)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (1.33)
- -----------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.07)
- -----------------------------------------------------------------------------------------------------------
In excess of net investment income (0.01)
- -----------------------------------------------------------------------------------------------------------
Total distributions (0.08)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period 8.59
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN
Total investment return (%)(b)(c) (13.25)**
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 1,782
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d)(e) 1.00*
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income to 1.41*
average net assets (%) (c)(e)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 51**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations May 19, 1998 to
December 31, 1998.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 4.34%
(annualized).
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
31
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL U.S. STOCK FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Period Ended
Years Ended December 31, December 31,
1998 1997 1996 1995 1994***
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 16.29 14.22 12.36 10.27 10.00
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.16 0.20 0.19 0.21 0.09
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments 3.12 4.37 2.52 2.84 0.35
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.28 4.57 2.71 3.05 0.44
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.12) (0.18) (0.17) (0.16) (0.11)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- (0.01) --- --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains (0.64) (2.30) (0.68) (0.80) (0.06)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains (0.02) (0.01) --- --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.78) (2.50) (0.85) (0.96) (0.17)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 18.79 16.29 14.22 12.36 10.27
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b) 20.15 32.23 21.84 29.70(c) 4.40(c)**
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 146,239 96,715 60,855 43,017 15,373
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) 0.90(e) 0.94(e) 0.95(e) 1.00(d)(e) 1.00(d)*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 0.88(e) 1.19(e) 1.39(e) 1.72(c)(e) 2.16(c)*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 64 63 77 115 52**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations July 5, 1994 to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 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.
32
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Period Ended
Years Ended December 31, December 31,
1998 1997 1996 1995 1994***
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 11.15 11.04 10.99 9.79 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.91 0.90 0.92 0.55 0.30
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
on investments (0.24) 0.11 0.16 1.24 (0.19)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.67 1.01 1.08 1.79 0.11
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.72) (0.79) (0.96) (0.56) (0.31)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (0.02) (0.05) --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains --- (0.05) (0.07) (0.03) (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains --- (0.01) --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.74) (0.90) (1.03) (0.59) (0.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 11.08 11.15 11.04 10.99 9.79
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%)(b) 6.03 9.11(c) 9.83(c) 18.30(c) 1.10(c)**
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 118,985 73,175 53,393 48,334 13,342
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) 0.78(e) 0.80(d)(e) 0.80(d)(e) 0.84(d)(e) 1.00(d)*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 7.92(e) 7.86(c)(e) 8.13(c)(e) 8.08(c)(e) 7.33(c)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 50 94 114 281 94**
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations July 5, 1994 to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 0.82%,
0.86%, 0.94% and 1.60% (annualized), respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
33
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Period Ended
December 31,
1998***
PER SHARE OPERATING PERFORMANCE:
<S> <C>
Net asset value, beginning of period ($) 10.00
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.48
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized losses on investments (0.74)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.26)
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.43)
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (0.00)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions (0.43)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 9.31
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b)(c) (2.57)**
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 5,915
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d)(e) 0.80*
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) (c)(e) 7.93*
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 23**
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations May 19, 1998 to
December 31, 1998.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.84%
(annualized). (e) The benefits derived from custody credits and
directed brokerage arrangements had no impact.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
34
<PAGE>
FINANCIAL HIGHLIGHTS
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1998 1997***
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C>
Net asset value, beginning of year ($) 10.07 10.00
- ---------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.06 0.01
- ---------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments 1.82 0.07
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations 1.88 0.08
- ---------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.05) (0.01)
- ---------------------------------------------------------------------------------------------------------------
In excess of net investment income (0.00) ---
- ---------------------------------------------------------------------------------------------------------------
Total distributions (0.05) (0.01)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 11.90 10.07
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%)(b)(c) 18.67 0.80**
- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 44,870 22,228
- ---------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) (d)(e) 1.00 1.00*
- ---------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%)(c)(e) 0.54 0.83*
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 70 1**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations November 17, 1997 to
December 31, 1997.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.04% and
1.45% (annualized), respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
35
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL INTERNATIONAL FUND FOR GROWTH, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31, Period Ended
December 31,
1998 1997 1996 1995 1994***
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 1.78 1.96 1.97 1.88 2.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.02 0.02 0.02 0.01 ---
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on
investments and foreign currency transactions 0.21 (0.08) 0.09 0.10 (0.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.23 (0.06) 0.11 0.11 (0.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.00) (0.02) --- (0.02) ---
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (0.01) (0.02) --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains --- (0.08) (0.12) --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.01) (0.12) (0.12) (0.02) ---
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 2.00 1.78 1.96 1.97 1.88
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b) 12.96 (3.27) 5.61 5.85 (6.00)**
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 52,468 30,600 26,593 22,764 19,146
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) 1.24(c) 1.34(c) 1.40(c) 1.40(c) 1.74*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 0.77(c) 0.82(c) 0.84(c) 0.75(c) 0.13*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 28 28 115 40 31**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations May 2, 1994 to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
36
<PAGE>
FINANCIAL HIGHLIGHTS
NEWPORT TIGER FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31, Period Ended
December 31,
1998 1997 1996 1995***
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C>
Net asset value, beginning of year ($) 1.71 2.52 2.28 2.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.03 0.03 0.03 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on investments
and foreign currency transactions (0.14) (0.81) 0.24 0.29
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.11) (0.78) 0.27 0.30
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (0.03) (0.02) (0.02) (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- (0.01) --- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains --- --- (0.01) ---
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains --- (0.00) --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.03) (0.03) (0.03) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 1.57 1.71 2.52 2.28
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%)(b) (6.43) (31.14) 11.73 15.00**
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 23,655 24,934 34,642 18,977
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%)(c) 1.30 1.25 1.27 1.75*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)(c) 2.16 1.14 1.20 0.89*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 16 27 7 12**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations May 1, 1995 to
December 31, 1995.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
37
<PAGE>
SHAREHOLDER INFORMATION
PURCHASE AND REDEMPTIONS The Participating Insurance Companies place daily
orders to purchase and redeem shares of the Funds. These orders generally
reflect the net effect of instructions they receive from holders of their VA
contracts and VLI policies and certain other terms of those contracts and
policies. The Trust issues and redeems shares at NAV without imposing any
selling commissions, sales charge or redemption charge. Shares generally are
sold and redeemed at their NAV next determined after receipt of purchase or
redemption requests from Participating Insurance Companies. The right of
redemption may be suspended or payment postponed whenever permitted by
applicable law and regulations.
HOW A FUND'S SHARE PRICE IS DETERMINED Each share price is its NAV next
determined. NAV is the difference between the value of a fund's assets and
liabilities divided by the number of shares outstanding. The NAV is determined
at the close of the New York Stock Exchange ("NYSE"), usually 4:00 p.m. Eastern
time, on each business day that the NYSE is open (typically Monday through
Friday).
To calculate NAV on a given day, we value each stock listed or traded on a stock
exchange at its latest sale price on that day. If there are no sales on that
day, we value the security at the most recent quoted bid price. We value each
over-the-counter security or National Association of Securities Dealers
Automated Quotation (Nasdaq) security as of the last sales price of that day. We
value other over-the-counter securities that have reliable quotes at the latest
quoted bid price.
We value long-term debt obligations and securities convertible into common stock
at fair value. Pricing services provide the Funds with the value of the
securities. When the price of a security is not available, including days when
we determine that the sale or bid price of the security does not reflect that
security's market value, we will value the security at a fair value determined
in good faith under procedures established by the Board of Trustees.
We value a security at fair value when events have occurred after the last
available market price and before the close of the NYSE that materially affect
the security's price. In the case of foreign securities, this could include
events occurring after the close of the foreign market and before the close of
the NYSE.
A Fund's foreign securities may trade on days when the NYSE is closed for
trading and Participating Insurance Companies may not purchase or redeem shares.
DIVIDENDS AND DISTRIBUTIONS Each Fund intends to declare and distribute, as
dividends or capital gain 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
investment advisory and administrative fees). Income dividends will be declared
and distributed annually. All net short-term and long-term capital gains of each
Fund 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 NAV, as of the record date for the
distributions.
TAX CONSEQUENCES Each Fund is treated as a separate entity for federal income
tax purposes and has elected or intends to elect to be treated, and intends to
qualify each year as a "regulated investment company" under Subchapter M of the
Internal Revenue Code (the "Code"). Each Fund must satisfy certain requirements
relating to the sources of its income, diversification of its assets and
distribution of its income to shareholders to qualify as a regulated investment
company. As a regulated investment company, a Fund will not be subject to
federal income tax on any net investment income and net realized capital gains
that are distributed to its shareholders as required under the Code.
In addition, each Fund follows certain portfolio diversification requirements
imposed by the Code on separate accounts of insurance companies relating to the
tax-deferred status of VA contracts and VLI policies. More specific information
on these diversification requirements is contained in the prospectus that
describes a particular VA contract or VLI policy.
38
<PAGE>
FOR MORE INFORMATION You can get more information about the Funds' investments
in the Funds' semi-annual and annual reports to shareholders. The annual report
contains a discussion of the market conditions and investment strategies that
significantly affected the Funds' performance over their last fiscal year.
You may wish to read the SAI for more information on the Funds and the
securities in which they invest. The SAI is incorporated into this prospectus by
reference, which means that it is considered to be part of this prospectus.
You can get free copies of reports and the SAI, request other information and
discuss your questions about the Funds by writing or calling:
Keyport Financial Services Corp.
125 High Street
Boston, MA 02111
1-800-437-4466
or by calling or writing the Participating Insurance Company which issued your
VA contract or VLI policy.
Text-only versions of all Fund documents can be viewed online or downloaded from
the SEC at www.sec.gov.
You can review and copy information about the Funds by visiting the following
location, and you can obtain copies upon payment of a duplicating fee, by
writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Variable Investment Trust : 811-07556
Colonial Growth and Income Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial U.S. Stock Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Newport Tiger Fund, Variable Series
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
Cross Reference Sheet Pursuant to Rule 481(a)
(Colonial Growth and Income Fund, Variable Series)
(Stein Roe Global Utilities Fund, Variable Series)
(Colonial Small Cap Value Fund, Variable Series)
(Colonial U.S. Stock Fund, Variable Series)
(Colonial Strategic Income Fund, Variable Series)
(Colonial High Yield Securities Fund, Variable Series)
(Liberty All-Star Equity Fund, Variable Series)
(Colonial International Fund for Growth, Variable Series)
(Newport Tiger Fund, Variable Series)
Location or Caption in Statement of
Item Number of Form N-1A Additional Information
- ------------------------ ----------------------
PART B
- ------
10. Cover Page; Table of Contents
11. Organization and History
12. Investment Restrictions; Other Considerations;
Description of Certain Investments
13. Investment Management and Other Services; More Facts
About Trust
14. More Facts About Trust
15. Investment Management and Other Services
16. Other Considerations
17. More Facts About Trust
18. Other Considerations
19. More Facts About Trust
20. Other Considerations
21. Investment Performance
22. Independent Accountants and Financial Statements
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
One Financial Center
Boston, Massachusetts 02111
Colonial Growth and Income Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Colonial U.S. Stock Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Newport Tiger Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1999
The Statement of Additional Information ("SAI") is not a Prospectus,
but should be read in conjunction with the Trust's Prospectus, dated May 1, 1999
and any supplement thereto, which may be obtained at no charge by calling
Keyport Financial Services Corp. ("KFSC") at (800) 437-4466, or by contacting
the applicable Participating Insurance Company, or the broker-dealers offering
certain variable annuity contracts or variable life insurance policies issued by
the Participating Insurance Company.
The date of this SAI is May 1, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
ORGANIZATION AND HISTORY..................................................S-3
INVESTMENT MANAGEMENT AND OTHER SERVICES..................................S-3
General..........................................................S-3
Trust Charges and Expenses.......................................S-6
INVESTMENT RESTRICTIONS ...............................................S-7
Colonial Growth and Income Fund, Variable Series.................S-8
Stein Roe Global Utilities Fund, Variable Series.................S-9
Colonial International Fund for Growth, Variable Series..........S-10
Colonial U.S. Stock Fund, Variable Series........................S-11
Colonial Strategic Income Fund, Variable Series..................S-12
Newport Tiger Fund, Variable Series..............................S-13
Liberty All-Star Equity Fund, Variable Series....................S-14
Colonial Small Cap Value Fund, Variable Series...................S-16
Colonial High Yield Securities Fund, Variable Series.............S-17
MORE FACTS ABOUT TRUST ...............................................S-18
Mixed and Shared Funding.........................................S-18
Organization.....................................................S-19
Trustees and Officers............................................S-20
Principal Holders of Securities..................................S-26
Custodians.......................................................S-26
OTHER CONSIDERATIONS ...............................................S-27
Portfolio Turnover...............................................S-27
Suspension of Redemptions........................................S-27
Valuation of Securities..........................................S-28
Portfolio Transactions...........................................S-29
DESCRIPTION OF CERTAIN INVESTMENTS........................................S-33
Money Market Instruments.........................................S-33
Investments in Less Developed Countries..........................S-35
Foreign Currency Transactions....................................S-36
Options on Securities............................................S-40
Futures Contracts and Related Options............................S-43
Securities Loans ...............................................S-47
INVESTMENT PERFORMANCE ...............................................S-47
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS..........................S-49
</TABLE>
S-2
<PAGE>
ORGANIZATION AND HISTORY
Liberty 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
nine 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"); 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"); Liberty All-Star Equity Fund, Variable
Series ("All-Star Equity Fund"); Colonial Small Cap Value Fund, Variable Series
("Small Cap Fund") and Colonial High Yield Securities Fund, Variable Series
("High Yield Fund"). The Trust may add or delete Funds from time to time. The
Trust commenced operations on July 1, 1993.
The 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 of the owners
of VA contracts and VLI policies arising from the fact that certain interests of
owners may differ. Additional information regarding such differing interests and
related risks are described below under "MORE FACTS ABOUT THE TRUST -- MIXED AND
SHARED FUNDING."
INVESTMENT MANAGEMENT AND OTHER SERVICES
GENERAL
LASC serves as Manager pursuant to investment advisory agreements
between the Trust on behalf 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 December 31, 1998, approximately 71.95% 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, U.S. Stock Fund, Strategic Income Fund, Small Cap Fund and
High Yield 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
S-3
<PAGE>
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 Equity
Fund pursuant to the Management Agreement for such Fund (to which LAMCO is a
party). All-Star Equity 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 Portfolio Manager
provides these services under a Portfolio Management Agreement (the "Portfolio
Management Agreements") among the Trust, on behalf of All-Star Equity Fund,
LAMCO and such Portfolio Manager.
All-Star Equity Fund's current Portfolio Managers are:
J.P. Morgan Investment Management Inc.
Oppenheimer Capital
Boston Partners Asset Management, L.P.
Westwood Management Corp.
Wilke/Thompson Capital Management, Inc.
LASC. 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: Paul H. LeFevre, Jr. (principal
executive officer), Stewart R. Morrison, and Mark R. Tully. Mr. LeFevre also is
a director of KFSC, the principal underwriter for shares of the Funds sold to
Participating Insurance Companies (as such term is defined in the Prospectus)
that are affiliated with Keyport.
Colonial. Liberty Funds Group LLC ("LFG"), One Financial Center,
Boston, Massachusetts 02111, owns all of the outstanding common stock of
Colonial. LFG is an indirect wholly-owned subsidiary of LFC. The directors and
principal executive officer of Colonial are Nancy L. Conlin, Stephen E. Gibson
(principal executive officer) and Joseph R. Palombo.
Stein Roe. 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) and Thomas W. Butch.
Newport. Newport Pacific Management, Inc. ("Newport Pacific"), 580
California Street, San Francisco, California 94104, owns 75.1% of the
outstanding common stock of Newport. LFC owns the balance. 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), Kenneth R. Leibler, and Lindsay Cook.
S-4
<PAGE>
LAMCO and 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, Lindsay Cook, C. Allen Merritt, Jr. and William
R. Parmentier (principal executive officer).
As of the date of this SAI, the following entities serve as LAMCO's
Portfolio Managers for All-Star Equity Fund:
- - J.P. Morgan Investment Management, Inc. J.P. Morgan Investment
Management Inc. ("J.P. Morgan"), an investment advisor since 1984, is
located at 522 Fifth Avenue, New York, New York 10036, is a
wholly-owned subsidiary of J.P. Morgan & Co. Incorporated, a New York
Stock Exchange ("NYSE") 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. Kenneth W. Anderson,
Jeff M. Garrity, John W. Schmidlin, Gilbert Van Hassel and Hendrick Van
Riel and Ms. Isabel H. Sloane. As of March 31, 1999, J.P. Morgan
managed over $316 billion in assets.
- - Oppenheimer Capital. Oppenheimer Capital, an investment advisor since
1969, is located at Oppenheimer Tower, 1 World Financial Center, New
York, New York 10281, is a Delaware partnership and an indirect
wholly-owned subsidiary of PIMCO Advisors L.P. Oppenheimer Capital's
Chief Operating Officer (principal executive officer) is James
McCaughan. As of December 31, 1998, Oppenheimer Capital managed over
$62 billion in assets.
- - Boston Partners Asset Management, L.P. Boston Partners Asset
Management, L.P. ("Boston Partners"), an investment advisor since 1995,
is located at 28 State Street, 21st Floor, Boston, Massachusetts 02109.
The firm is owned by its partners. Desmond J. Heathwood is the sole
General Partner. As of March 31, 1999, Boston Partners managed over
$15.2 billion in assets.
- - Westwood Management Corp. Westwood Management Corp. ("Westwood"), an
investment advisor since 1983, is located at 300 Crescent Court, Suite
1300, Dallas, Texas 75201, is a wholly owned subsidiary of Southwest
Securities Group, Inc. Its principal executive officer is Susan M.
Byrne. Its directors are Ms. Byrne, Raymond E. Wooldridge, Don A.
Buchhotz, David Glatstein, and Patricia R. Fraze. Westwood manages over
$2.4 billion in assets.
S-5
<PAGE>
- - Wilke/Thompson Capital Management, Inc. Wilke/Thompson Capital
Management, Inc. ("Wilke/Thompson"), an investment advisor since 1987,
is located at 2950 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. As of March 31, 1999,
Wilke/Thompson managed over $1.1 billion in assets.
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 "Advisors"), 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 LASC or such Advisor of its respective duties under such
agreements, except for liability resulting from willful misfeasance, bad faith
or gross negligence on the part of LASC or such Advisor, in the performance of
its respective duties or from reckless disregard by such Advisor of its
respective obligations and duties thereunder.
TRUST CHARGES AND EXPENSES
Growth and Income Fund and Global Utilities Fund commenced operations
on July 1, 1993. International Fund 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 Equity Fund commenced
operations on November 15, 1997. Small Cap Fund and High Yield Fund commenced
operations on May 19, 1998.
MANAGEMENT FEES. Each Fund listed below paid LASC management fees as
follows during each year in the three-year period ended December 31, pursuant to
the Management Agreements described in the Prospectus:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Growth and Income Fund: $ 805,967 $ 605,151 $ 538,173
Global Utilities Fund: $ 390,383 $ 310,458 $ 315,944
International Fund: $ 369,574 $ 270,532 $ 224,146
U.S. Stock Fund: $1,027,590 $ 623,484 $ 418,745
Strategic Income Fund: $ 590,688 $ 384,347(1) $ 322,142
Tiger Fund: $ 192,901 $ 303,701 $ 258,891
All-Star Equity Fund: $ 243,070(2) $ 8,804(1) --
Small Cap Fund: $ 0(2) -- --
High Yield Fund: $ 0(2) -- --
</TABLE>
- ----------
(1) Reduced to reflect applicable expense limitations. If the limitations had
not been in effect, Strategic Income Fund and All-Star Equity Fund would have
paid fees of $399,569 and $20,337, respectively.
S-6
<PAGE>
(2) Reduced to reflect applicable expense limitations. If the limitations had
not been in effect, All-Star Equity Fund, Small Cap Fund and High Yield Fund
would have paid fees of $255,783, $8,641 and $19,394, respectively.
CERTAIN ADMINISTRATIVE EXPENSES. During each year in the three-year period ended
December 31, 1998 each Fund listed below made payments as follows to Colonial or
an affiliate thereof for pricing and bookkeeping services.
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Growth and Income Fund: $53,025 $43,653 $40,025
Global Utilities Fund: $30,524 $27,071 $27,000
International Fund: $27,008 $27,000 $27,000
U.S. Stock Fund: $54,453 $39,024 $27,000
Strategic Income Fund: $41,331 $31,551 $27,000
Tiger Fund: $27,000 $27,000 $27,000
All-Star Equity Fund: $27,000 $ 3,225 --
Small Cap Fund: $16,694 -- --
High Yield Fund: $16,694 -- --
</TABLE>
In addition, during each year in the three-year period ended December
31, each Fund listed below made payments as follows to Colonial or an affiliate
thereof for transfer agent services:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Growth and Income Fund: $7,500 $7,500 $7,500
Global Utilities Fund: $7,500 $7,500 $7,500
International Fund: $7,500 $7,500 $7,500
U.S. Stock Fund: $7,500 $7,500 $7,500
Strategic Income Fund: $7,500 $7,500 $7,500
Tiger Fund: $7,500 $ 896 $7,500
All-Star Equity Fund: $7,500 -- --
Small Cap Fund: $4,637 -- --
High Yield Fund: $4,637 -- --
</TABLE>
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
principles, and extraordinary expenses, incurred by (i) each of Growth and
Income Fund, Global Utilities Fund, U.S. Stock Fund, All-Star Equity Fund and
Small Cap Fund in excess of 1.00% of average daily net asset value per annum,
(ii) each of International Fund and Tiger Fund in excess of 1.75% of average
daily net asset value per annum, and (iii) each of Strategic Income Fund and
High Yield Fund in excess of 0.80% of average daily net asset value per annum,
in each case for the period from May 1, 1999 until April 30, 2000.
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
S-7
<PAGE>
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. 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; 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
Growth and Income Fund which may be changed without a shareholder vote, the Fund
may not:
S-8
<PAGE>
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;
3. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
4. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities; and
5. Invest more than 15% of its net assets in illiquid assets.
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. 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. 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; and
5. 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;
S-9
<PAGE>
3. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
4. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities; and
5. Invest more than 15% of its net assets in illiquid assets.
INTERNATIONAL FUND
FUNDAMENTAL INVESTMENT POLICIES. International Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry;
5. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets; and
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
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
International 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;
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;
S-10
<PAGE>
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. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
7. 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 1940 Act) if the Fund would control such
person after such acquisition; or
8. 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:
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
S-11
<PAGE>
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:
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.
S-12
<PAGE>
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. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
3. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities; or
4. Invest more than 15% of its net assets in illiquid assets.
S-13
<PAGE>
TIGER FUND
FUNDAMENTAL INVESTMENT POLICIES. Tiger Fund may not:
1. Concentrate more than 25% of the Funds total assets in any
industry (other than obligations issued or guaranteed as to
principal and interest by the Government of the United States
or any agency or instrumentality thereof) or with respect to
75% of the Fund's assets purchase the securities of any
issuer, if, as a result of such purchase, more than 5% of the
Fund's total assets would be invested in the securities of
such issuer;
2. Underwrite securities issued by others except when disposing
of portfolio securities;
3. Purchase and sell futures contracts and related options if the
total initial margin and premiums exceed 5% of its total
assets;
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);
and
7. Own real estate unless such real estate is acquired as the
result of owning securities and does not constitute more than
5% of total assets.
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;
S-14
<PAGE>
4. Write or trade in put or call options;
5. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
6. Purchase securities on margin, but the Fund may utilize such
short-term credits as may be necessary for clearance of
purchases or sales of securities; or
7. Engage in short sales of securities.
ALL-STAR EQUITY FUND
FUNDAMENTAL INVESTMENT POLICIES. All-Star Equity 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;
S-15
<PAGE>
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;
7. Invest 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
S-16
<PAGE>
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.
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
All-Star Equity 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).
SMALL CAP FUND
FUNDAMENTAL INVESTMENT POLICIES. Small Cap 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, it will not purchase additional portfolio
securities while borrowings exceed 5% of net assets;
2. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets;
3. Purchase and sell futures contracts and related options so
long as the total initial margin and premiums on the contracts
does not exceed 5% of its total assets;
4. Underwrite securities issued by others only when disposing of
portfolio securities;
5. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments or
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements; and
6. Not concentrate more than 25% of its total assets in any one
industry or 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 voting securities of an issuer if,
as a result of purchase, the Fund would own more than 10% of
the outstanding voting shares of such issuer.
S-17
<PAGE>
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
Small Cap Fund which may be changed, 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. Purchase or sell commodity contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets; and
4. Invest more than 15% of its net assets in illiquid assets.
HIGH YIELD FUND
FUNDAMENTAL INVESTMENT POLICIES. High Yield 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. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets;
3. 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;
4. Underwrite securities issued by others only when disposing of
portfolio securities;
5. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments or
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements; and
6. Not concentrate more than 25% of its total assets in any one
industry or 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 voting securities of an issuer if,
as a result of such purchase, the Fund would own more than 10%
of the outstanding voting shares of such issuer.
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
High Yield Fund which may be changed, the Fund may not:
S-18
<PAGE>
1. Purchase securities on margin, but the Fund may receive
short-term credit to clear securities transactions and may
make initial or maintenance margin deposits in connection with
futures transactions;
2. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
3. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities; and
4. Invest more than 15% of its net assets in illiquid assets.
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") and Keyport Benefit Life Insurance Company
("Keyport Benefit"), each of which is a wholly owned subsidiary of Keyport, and
Liberty Life Assurance Company of Boston ("Liberty Life"), a 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.
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 investment policies.
S-19
<PAGE>
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 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, ages 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). In
this SAI, the "Liberty Funds" means Liberty Funds Trust I, Liberty Funds Trust
II, Liberty Funds Trust III, Liberty Funds Trust IV, Liberty Funds Trust V,
Liberty Funds Trust VI, Liberty Funds Trust VII, Liberty Funds Trust VIII,
Liberty Variable Investment Trust, Colonial High Income Municipal Trust,
Colonial InterMarket Income Trust I, Colonial Intermediate High Income Fund,
Colonial Investment Grade Municipal Trust and Colonial Municipal Income Trust.
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Robert J. Birnbaum (71) Trustee Consultant (formerly Special Counsel,
313 Bedford Road Dechert Price & Rhoads (law) from
Ridgewood, NJ 07450 September, 1988 to December, 1993).
Director or Trustee: Liberty Funds,
Liberty All-Star Equity Fund,
Liberty All-Star Growth Fund, Inc.,
The Emerging Germany Fund, Liberty
Funds Trust IX.
Tom Bleasdale (68) Trustee Retired (formerly Chairman of the Board and
11 Carriage Way Chief Executive Officer, Shore Bank & Trust
Danvers, MA 01923 Company (banking) from 1992 to 1993). Director
or Trustee: Liberty
</TABLE>
S-20
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Funds, Empire Company Limited.
</TABLE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
John V. Carberry* (51) Trustee Senior Vice President of LFC 1998-present
56 Woodcliff Road (formerly Managing Director, Salomon
Wellesley Hills, MA 02481 Brothers Inc.(investment banking)).
Director or Trustee: Liberty Funds, Liberty
All-Star Equity Fund, Liberty All-Star Growth
Fund, Inc., Liberty Funds Trust IX.
Lora S. Collins (63) Trustee Attorney (formerly Attorney with Kramer,
1175 Hill Road Levin, Naftalis & Frankel (law) from
Southold, NY 11971 September, 1986 to November, 1996).
Trustee: Liberty Funds.
James E. Grinnell (69) Trustee Private Investor since November, 1988.
22 Harbor Avenue Director or Trustee: Liberty Funds, Liberty
Marblehead, MA 01945 All-Star Equity Fund, Liberty All-Star
Growth Fund, Inc., Liberty Funds Trust IX.
Richard W. Lowry (62) Trustee Private Investor since August, 1987.
10701 Charleston Drive Director or Trustee: Liberty Funds, Liberty
Vero Beach, FL 32963 All-Star Equity Fund, Liberty All-Star
Growth Fund, Inc., Liberty Funds Trust IX.
Salvatore Macera (67) Trustee Private Investor (formerly Executive Vice
26 Little Neck Lane President of Itek Corp. and President of
New Seabury, MA 02649 Itek Optical & Electronic Industries, Inc.
(electronics)). Trustee: Liberty Funds.
William E. Mayer (58) Trustee Partner, Development Capital, LLC
500 Park Avenue, 5th Floor (investments); formerly Dean of the College
New York, NY 10022 of Business and Management, University of
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Maryland (higher education) from October,
1992 to November, 1996. Director or Trustee:
LibertyFunds, Liberty All-Star Equity Fund,
Liberty All-Star Growth Fund, Inc., Liberty
Funds Trust IX, Hambrecht & Quist
Incorporated, Chart House Enterprises,
Johns Manville.
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
James L. Moody, Jr. (67) Trustee Retired (formerly Chairman of the Board,
16 Running Tide Road Hannaford Bros. Co. from May, 1984 to May,
Cape Elizabeth, ME 04407 1997). Director or Trustee: Liberty Funds,
Penobscot Shoe Co., Staples, Inc., UNUM
Corporation, IDEXX Laboratories, Inc.,
Empire Company Limited.
John J. Neuhauser (55) Trustee Dean of the School of Management, Boston
140 Commonwealth Avenue College (higher education) since September,
Chestnut Hill, MA 02167 1977. Director or Trustee: Liberty Funds,
Liberty All-Star Equity Fund, Liberty
All-Star Growth Fund, Inc., Liberty Funds
Trust IX, Hyde Athletic Industries, Inc.
Thomas E. Stitzel (63) Trustee Professor of Finance, College of Business,
2208 Tawny Woods Place Boise State University (higher education);
Boise, ID 83706 Business consultant and author. Trustee:
Liberty Funds.
Robert L. Sullivan (70) Trustee Retired Partner, KPMG Peat Marwick LLP
45 Sankaty Avenue (management consulting). Trustee:
Siasconset, MA 02564 LibertyFunds.
Anne-Lee Verville (53) Trustee Consultant (formerly General Manager,
359 Stickney Hill Road Global Education Industry from 1994 to 1997
Hopkinton, NH 03229 (global education)). Trustee: Liberty Funds.
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Stephen E. Gibson (45) President President of the Liberty Funds since June,
One Financial Center 1998, Chairman of the Board since July,
Boston, MA 02111 1998, Chief Executive Officer and President
since December 1996 and Director, since
July, 1996 of Colonial (formerly Executive
Vice President from July, 1996 to
December, 1996); Chairman of the Board
since July, 1998, Director, Chief
Executive Officer and President of Liberty
Funds Group LLC ("LFG") since December,
1998 (formerly Chairman of the Board,
Director, Chief Executive Officer and
President of The Colonial Group, Inc.
("TCG") from December, 1996 to December,
1998); Assistant Chairman of Stein Roe
since August, 1998 (formerly Managing
Director of Marketing of Putnam
Investments, June, 1992 to July, 1996.).
Timothy J. Jacoby (45) Treasurer and Chief Treasurer and Chief Financial Officer of
One Financial Center Financial Officer the Liberty Funds; Senior Vice President,
Boston, MA 02111 Treasurer and Chief Financial Officer of
Colonial; Chief Financial Officer,
Treasurer and Vice President of LFG since
December, 1998 (formerly Chief Financial
Officer, Treasurer and Vice President of
TCG from July, 1997 to December, 1998)
formerly Senior Vice President, Fidelity
Accounting and Custody Services, Inc. and
Assistant Treasurer to the Fidelity Group
of Funds.
</TABLE>
S-24
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
J. Kevin Connaughton (34) Controller and Chief Controller and Chief Accounting Officer of
One Financial Center Accounting Officer the Liberty Funds since February, 1998;
Boston, MA 02111 Vice President of Colonial since February,
1998 (formerly Senior Tax Manager, Coopers
& Lybrand, LLP from April, 1996 to
January, 1998; Vice President, 440
Financial Group/First Data Investor
Services Group from March, 1994 to April,
1996; Vice President, The Boston Company
(subsidiary of Mellon Bank) from December,
1993 to March, 1994; Assistant Vice
President and Tax Manager, The Boston
Company from March, 1992 to December, 1993).
Joseph R. Palombo (46) Vice President Vice President of the Liberty Funds since
One Financial Center April, 1999; Executive Vice President and
Boston, MA 02111 Director of Colonial since April, 1999;
Executive Vice President and Chief
Administrative Officer of LFG since April,
1999
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
(formerly Chief Operating Officer,
Putnam Investments from 1994 to 1998).
</TABLE>
S-26
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Nancy L. Conlin (45) Secretary Director, Senior Vice President and General
One Financial Center Counsel, Colonial (April, 1998 to present);
Boston, MA 02111 Vice President and Counsel (February, 1994
to April, 1998).
</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.
Compensation of Trustees
The table below sets forth (1) the aggregate compensation paid by the
Trust to the Trustees for 1998, and (ii) the amount of compensation paid to the
Trustees of the Trust in their capacities as Trustees of the Liberty Funds
Complex for service for 1998 (a):
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation From Liberty Funds Complex
Aggregate 1998 Compensation Paid to the Directors/Trustees For The
Trustee from the Trust(b) Calendar Year Ended December 31, 1998(c)
- ------- --------------------------- ---------------------------------------------
<S> <C> <C>
Robert J. Birnbaum $ 592 $124,429
Tom Bleasdale 592 115,000(e)
John V. Carberry 0(d) 0(d)
Lora S. Collins 592 97,429
James E. Grinnell 592 128,071
Richard W. Lowry 592 123,214
Salvatore Macera 10,393 25,250
William E. Mayer 296 113,286
James L. Moody, Jr. 592(f) 105,857(g)
John J. Neuhauser 599 130,323
Thomas E. Stitzel 10,393 25,250
Robert L. Sullivan 649 104,100
Anne-Lee Verville 592(f) 23,445(h)
</TABLE>
(a) The Liberty Funds Complex does not currently provide pension or
retirement plan benefits to the Trustees.
(b) Messrs. Birnbaum, Bleasdale, Carberry, Grinnell, Lowry, Mayer, Moody,
Neuhauser and Sullivan and Mmes. Collins and Verville joined the Board
of the Trustees of the Trust on December 17, 1998.
S-27
<PAGE>
(c) At December 31, 1998, the Liberty Funds Complex consisted of 52
open-end and 5 closed-end management investment company portfolios
advised by the Administrator or its affiliates, Newport, Crabbe Huson
Group, Inc. and Stein Roe, nine funds of the Trust and the closed-end
Liberty All-Star Equity and Liberty All-Star Growth Fund, Inc., Liberty
Funds Trust IX advised by LAMCO, another affiliate of the
Administrator.
(d) Mr. Carberry does not receive compensation because he is an affiliated
Trustee and employee of LFC.
(e) Includes $52,000 payable in later years as deferred compensation.
(f) Total compensation of $592 is payable in later years as deferred
compensation.
(g) Total compensation of $105,857 is payable in later years as deferred
compensation.
(h) Total compensation of $23,445 is payable in later years as deferred
compensation.
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, 1999 the general account of Keyport owned of record 48% of All-Star Equity
Fund and 37% of Tiger Fund. 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 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, 1999 owned beneficially 5% or more of the outstanding shares of any
Fund.
CUSTODIAN
The Chase Manhattan Bank, 270 Park Avenue Park Avenue, New York, NY
110017, is custodian of the securities and cash owned by the Funds. The
custodian is responsible for holding all securities and cash of each Fund,
receiving and paying for securities purchased, delivering against payment
securities sold, receiving and collecting income from investments, making all
payments covering expenses of the Funds, and performing other administrative
duties, all as directed by persons authorized by the Trust. The custodian does
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 custodian and may be entered into
S-28
<PAGE>
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 custodian 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.
International Fund 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 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,
S-29
<PAGE>
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
Jr., Day, Presidents' Day, 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 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 "Advisor") 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.
S-30
<PAGE>
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 Advisor 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 Advisor 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 and
All-Star Equity Fund, securities transactions of the Funds may be executed by
broker-dealers who also provide research services (as defined below) to an
Advisor, the Funds or other accounts as to which such Advisor exercises
investment discretion. Such Advisor 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 Advisors, 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 Advisors may cause a Fund to pay a broker-dealer that provides brokerage
and research services to it an amount of commission for effecting a securities
transaction, including the sale of an option or a closing purchase transaction,
for a Fund in excess of the amount of commission that another broker-dealer
would have charged for effecting that transaction. As provided in Section 28(e)
of the Securities Exchange Act of 1934, "brokerage and research services"
include advice as to the value of securities, the advisability of investing in,
purchasing or selling securities and the availability of securities or
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
Advisor 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 Advisors may have
investment objectives and programs that are similar to those of the Funds.
Accordingly, occasions may arise when each of the Advisors 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 Advisor 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,
S-31
<PAGE>
each of the Advisors 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. The portfolio
manager for the International Fund is Gita Rao, who is jointly employed by
Colonial and Stein Roe (each of which is an indirect wholly owned subsidiary of
LFC). The International Fund and the other accounts advised by Ms. Rao 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) 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) 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 is concerned,
Colonial believes that in most cases these practices should produce better
executions. It is the opinion of Colonial that the advantages of these practices
outweigh the disadvantages, if any, which might result from them.
Portfolio transactions on behalf of the International Fund 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 or other accounts over which Colonial exercises investment
discretion.
Additional Matters Pertaining to All-Star Equity 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 Equity Fund or other accounts managed by LAMCO
(collectively with All-Star Equity Fund, "LAMCO Clients") or as to which an
ongoing relationship will be a value to the Fund in managing its assets. 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
S-32
<PAGE>
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 Equity 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.
The table below shows information on brokerage commissions paid by each
Fund during the periods indicated. (All-Star Equity Fund commenced operations on
or about November 17, 1997; Small Cap Fund and High Yield Fund commenced
operations on May 19, 1998.)
S-33
<PAGE>
<TABLE>
<CAPTION>
Growth & Global International U.S. Tiger Fund All-Star High Yield Small Cap Strategic
Income Fund Utilities Fund Stock Fund Equity Fund Fund Income
Fund Fund Fund
----------- --------- ------------- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total amount of $86,453 $124,815 $66,549 $147,449 $ 36,508 $58,697 $0 $3,240 $0
brokerage commissions
paid during 1998
Total amount of $0 $0 $0 $0 $0 $84,729 $0 $0 $0
directed transactions
paid during 1998
Total amount of $0 $0 $0 $0 $0 $80 $0 $0 $0
commissions on directed
transactions paid
during 1998
Total amount of $17,178 $0 $0 $45,117 $0 $0 $0 $1,170 $0
brokerage commissions
paid during 1998 to (20%) (31%) (36%)
AlphaTrade Inc.
(% of total commission
paid)
Total amount of $76,021 $108,414 $59,920 $80,839 $110,960 $18,207 -- -- $0
brokerage commissions
paid during 1997
Total amount of $35,863 $22,345 $92,485 $75,253 $109,515 -- -- -- $0
brokerage commissions
paid during 1996
</TABLE>
S-34
<PAGE>
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.
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
invest-
S-35
<PAGE>
ments 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 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.
S-36
<PAGE>
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.
INVESTMENTS IN LESS DEVELOPED COUNTRIES
International Fund'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, 1999, the following countries were
considered by Colonial to be emerging market countries:
<TABLE>
<CAPTION>
Europe and
Asia Latin America the Middle East Africa
- ---- ------------- --------------- ------
<S> <C> <C> <C>
China Argentina Czech Republic South Africa
Hong Kong Brazil Greece
India Chile Hungary
Indonesia Colombia Israel
South Korea Mexico Jordan
Malaysia Peru Poland
Pakistan Venezuela Russia
Philippines Turkey
</TABLE>
S-37
<PAGE>
<TABLE>
<S> <C> <C> <C>
Sri Lanka
Taiwan
Thailand
</TABLE>
Under normal market conditions, the Tiger Fund invests primarily in
stocks of companies located in the nine Tiger countries of Asia. The Tigers of
Asia are Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand,
Indonesia, The People's Republic of China and the Philippines.
FOREIGN CURRENCY TRANSACTIONS
Each of International Fund, 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, 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 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
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<PAGE>
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 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, 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
S-39
<PAGE>
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 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.
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<PAGE>
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.
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.
S-41
<PAGE>
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 and All-Star Equity
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 sub-advisor, 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 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
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<PAGE>
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.
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 SEC 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
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<PAGE>
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 sub-advisor 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 sub-advisor deems it desirable to
do so. Although the Fund will take an option position only if the sub-advisor
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.
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.
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<PAGE>
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, Strategic Income
Fund and All-Star Equity 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.
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.
S-45
<PAGE>
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.
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.
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<PAGE>
Risks of transactions in futures contracts and related options
Successful use of futures contracts by a Fund is subject its
subadvisor'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 been issued by a clearing corporation as a result of trades on
that exchange would continue to be exercisable in accordance with their terms.
S-47
<PAGE>
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
sub-advisor will attempt to reduce this risk by selling, to the extent possible,
futures on indices the movements of which will, in its judgment, 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 sub-advisor'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 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
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<PAGE>
correct forecast of general market trends by a Fund's sub-advisor 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.
SECURITIES LOANS
Each of Global Utilities Fund, U.S. Stock Fund and All-Star Equity Fund
may make loans of its portfolio securities amounting to not more than 30% of its
total assets. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
As a matter of policy, securities loans are made to broker-dealers pursuant to
agreements requiring that loans be continuously secured by collateral in cash or
short-term debt obligations at least equal at all times to the value of the
securities on loan. This collateral is deposited with the Trust's custodian
which segregates and identifies these assets on its books as security for the
loan. The borrower pays to the Fund an amount equal to any dividends, interest
or other distributions received on securities lent. The borrower is obligated to
return identical securities on termination of the loan. The Fund retains all or
a portion of the interest received on investment of the cash collateral or
receives a fee from the borrower. Although voting rights or rights to consent
with respect to the loaned securities pass to the borrower, the Fund retains the
right to call the loans at any time on reasonable notice, and it will do so in
order that the securities may be voted by the Fund if the holders of such
securities are asked to vote upon or consent to matters materially affecting the
investment. The Fund may also call such loans in order to sell the securities
involved. The Trust has adopted these policies, in part, so that interest,
dividends and other distributions received on the loaned securities, the
interest or fees paid by the borrower to the Fund for the loan, and the
investment income from the collateral will qualify under certain investment
limitations under Subchapter M of the Internal Revenue Code.
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<PAGE>
INVESTMENT PERFORMANCE
Each of the Funds may quote total return figures from time to time.
Total return on a per share basis is the reinvested amount of dividends and
capital gains 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 (including distribution reinvestment shares) 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 a hypothetical Annual Rate of return
which if achieved annually would produce the same return as the cumulative total
return percentage calculated for the period.
It 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 "Ending
Redeemable Value," 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 2, 1994, in the case of International Fund; July 5, 1994 in the case
of U.S. Stock Fund and Strategic Income Fund; May 1, 1995, in the case of Tiger
Fund; and November 17, 1997 in the case of All-Star Equity Fund; and May 19,1998
in the case of High Yield Fund and Small Cap Fund) through December 31, 1998
were:
<TABLE>
<CAPTION>
Fund Ending Cumulative Total Average Annual
Redeemable Value Return Percentage Total Return
- ---- ---------------- ----------------- --------------
<S> <C> <C> <C>
Colonial Growth and Income Fund, Variable Series $2,290 128.98% 16.23%
Stein Roe Global Utilities Fund, Variable Series 1,935 93.48 12.73
Colonial International Fund for Growth, Variable Series 1,148 14.82 3.00
Colonial U.S. Stock Fund, Variable Series 2,621 162.09 23.90
Colonial Strategic Income Fund, Variable Series 1,520 51.96 9.75
Newport Tiger Fund, Variable Series 828 (17.21) (5.01)
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Liberty All-Star Equity Fund, Variable Series 1,196 19.62 17.29
Colonial High Yield Securities Fund, Variable Series 974 (2.57) --
Colonial Small Cap Value Fund, Variable Series 868 (13.25) --
</TABLE>
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
PricewaterhouseCoopers LLP are the Trust's independent accountants. The
financial statements as of December 31, 1998 or for the fiscal years or periods
ended December 31, 1998 and December 31, 1997 incorporated by reference in this
SAI have been so incorporated, and the schedules of financial highlights for the
periods ended December 31, 1998 have been included in the Prospectus, in
reliance upon the report of PricewaterhouseCoopers 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 in the December 31, 1998 Annual Report of the Trust are
incorporated in this SAI by reference.
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<PAGE>
PART C. OTHER INFORMATION
Colonial Growth and Income Fund, Variable Series (CG&IF, VS)
Stein Roe Global Utilities Fund, Variable Series (SRGUF, VS)
Colonial Small Cap Value Fund, Variable Series (CSCVF, VS)
Colonial U.S. Stock Fund, Variable Series (CUSSF, VS)
Colonial Strategic Income Fund, Variable Series (CSIF, VS)
Colonial High Yield Securities Fund, Variable Series (CHYSF, VS)
Liberty All-Star Equity Fund, Variable Series (LASEF, VS)
Colonial International Fund for Growth, Variable Series (CIFfG, VS)
Newport Tiger Fund, Variable Series (NTF, VS)
Item 23. Exhibits:
(a) Agreement and Declaration of Trust
(b) By-Laws
(c) Not Applicable
(d)(1)(i) Form of Management Agreement between Liberty Variable Investment
Trust ("Trust"), with respect to CG&IF, VS, SRGUF, VS and Liberty
Advisory Services Corp. ("LASC")
(d)(1)(ii) Amendment No. 1 to Management Agreements between the Trust, with
respect to CG&IF, VS, SRGUF, VS, CIFfG, VS, CUSSF, VS, CSIF, VS
and LASC
(d)(1)(iii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CG&IF, VS, LASC and Colonial Management Associates, Inc.
("Colonial")(1)
(d)(1)(iv) Form of Sub-Advisory Agreement between the Trust, on behalf of
SRGUF, VS, LASC and Stein Roe & Farnham Incorporated ("Stein
Roe")(1)
(d)(2)(i) Form of Management Agreement between the Trust, with respect to
CSCVF, VS, CHYSF, VS and LASC
(d)(2)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CSCVF, VS, LASC and Colonial
(d)(2)(iii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CHYSF, VS, LASC and Colonial
(d)(3)(i) Form of Management Agreement between the Trust, with respect to
CIFfG, VS, CUSSF, VS, CSIF, VS and LASC
(d)(3)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CIFfG, VS, LASC and Colonial(1)
(d)(3)(iii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CUSSF, VS, LASC and Colonial(1)
(d)(3)(iv) Form of Sub-Advisory Agreement between the Trust, on behalf of
CSIF, VS, LASC and Colonial(1)
(d)(4)(i) Form of Management and Sub-Advisory Agreement between the Trust,
with respect to LASEF, VS, LASC and Liberty Asset Management
Company ("LAMCO")
(d)(4)(ii) Form of Portfolio Management Agreement(1)
(d)(5)(i) Form of Management Agreement between the Trust, with respect to
NTF, VS, and LASC
(d)(5)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of
<PAGE>
NTF, VS, LASC and Newport Fund Management, Inc.
(e)(1)(i) Underwriting Agreement between the Trust and Keyport Financial
Services Corp. ("KFSC")(1)
(e)(1)(ii) Amendment No. 1 to KFSC Underwriting Agreement(1)
(e)(2) Underwriting Agreement between the Trust and Liberty Funds
Distributor, Inc. (LFDI)
(f) Not applicable
(g) Form of Custody Agreement between the Trust and The Chase
Manhattan Bank(1)
(h)(1)(i) Form of Pricing and Bookkeeping Agreement between the Trust and
Colonial
(h)(1)(ii) Amendment No. 1 to Pricing and Bookkeeping Agreement
(h)(1)(iii) Amendment No. 2 to Pricing and Bookkeeping Agreement
(h)(1)(iv) Amendment No. 3 to Pricing and Bookkeeping Agreement
(h)(2)(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 Liberty Funds Services, Inc.
("LFSI")(including form of Transfer Agency Agreement and
Amendment No. 1 thereto)
(h)(2)(ii) Amendment No. 2 to Transfer Agency Agreement
(h)(2)(iii) Amendment No. 3 to Transfer Agency Agreement
(h)(3) Participation Agreement among the Trust, KFSC, Keyport Life
Insurance Company and Liberty Life Assurance Company of Boston(1)
(i) Opinion and consent of counsel as to the legality of the
securities being registered (included with annual Rule 24f-2
Notices)
(j) Independent Accountants Consent
(k) Not applicable
(l) Not applicable
(m) Distribution Plan adopted pursuant to Section 12b-1 of the
Investment Company Act of 1940, incorporated by reference to the
Distributor's contract filed as Exhibits (e)(1)(i) and (e)(2)
(n)(1) Financial Data Schedule (CG&IF,VS)
(n)(2) Financial Data Schedule (SRGUF, VS)
(n)(3) Financial Data Schedule (CSCVF, VS)
(n)(4) Financial Data Schedule (CHYSF, VS)
(n)(5) Financial Data Schedule (CIFfG, VS)
(n)(6) Financial Data Schedule (CUSSF, VS)
(n)(7) Financial Data Schedule (CSIF, VS)
(n)(8) Financial Data Schedule (LASEF, VS)
(n)(9) Financial Data Schedule (NTF, VS)
(o) Not Applicable
<PAGE>
Power of Attorney for: Robert J. Birnbaum, Tom Bleasdale, John V. Carberry, Lora
S. Collins, James E. Grinnell, Richard W. Lowry, Salvatore Macera, William E.
Mayer, James L. Moody, Jr., John J. Neuhauser, Thomas E. Stitzel, Robert L.
Sullivan and Anne-Lee Verville - filed as Exhibit 15(a) in Part C, Item 24(b) of
Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A of
Liberty Variable Investment Trust (File Nos. 33-59216 and 811-7556) and is
hereby incorporated by reference and made a part of this Registration Statement
(1) To be filed by amendment.
(2) Incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement filed with the Commission via EDGAR on or
about August 29, 1997.
Item 24. 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 also
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 LFDI, the Trust's principal underwriters, LASC, the Trust's
investment manager, Colonial, LASC's sub-adviser with respect to GIF,
IFFG, USSF, SCVF, HYSF and SIF, Stein Roe, LASC's sub-adviser with
respect to GUF, Newport, LASC's sub-adviser with respect to NTF, LAMCO,
are LASC's sub-adviser with respect to All-Star, subsidiaries of
Liberty Financial Companies, Inc. ("Liberty Financial"), Boston,
Massachusetts. Liberty Mutual Insurance Company ("Liberty Mutual"),
Boston, Massachusetts, as of December 31, 1998 owned, indirectly,
approximately 71% 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 25. Indemnification
<PAGE>
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
<PAGE>
(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 trial-type
inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
Any approval of indemnification pursuant to Article Tenth does not
prevent the recovery from any Covered Person of any amount paid to such
Covered Person in accordance with Article 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 or 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
person 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,
<PAGE>
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, LASC, 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 effort, omission, or breach of any duty owed to the
Trust or any Fund by the investment manager.
Item 26. Business and Other Connections of Investment Adviser
Certain information pertaining to business and other connections of the
Registrant's investment manager, LASC, Colonial, the sub-adviser to
each of GIF, IFFG, USSF, SCVF, HYSF and SIF, Stein Roe, the sub-adviser
to GUF, Newport, the sub-adviser to NTF, and LAMCO, the sub-adviser to
All-Star Fund, and each of J.P. Morgan Investment Management, Inc.,
Oppenheimer Capital, Westwood Management Corp., Wilke-Thompson Capital
Management, Inc. and Boston Partners Asset Management, L.P., each of
which firms serves as a Portfolio Manager to LAMCO, is incorporated
herein by reference to the section of the Prospectus relating to GIF,
IFFG, USSF, SCVF, HYSF, SIF, GUF, NTF and All-Star Fund captioned
"TRUST MANAGEMENT ORGANIZATIONS" and to the section of the Statement of
Additional Information relating to those Funds captioned "INVESTMENT
MANAGEMENT AND OTHER SERVICES."
Set forth below is a list of each director and officer of LASC, and
each director and certain officers of Colonial, Newport,
LAMCO, and each of LAMCO's Portfolio Managers indicating
each business, profession, vocation, or employment of a substantial
nature in which each such person has been, at any time during the past
two fiscal years, engaged for his or her own account or in the capacity
of director, officer, partner, or trustee.
<PAGE>
Liberty Advisory Services, Inc.
Liberty Advisory Services, Inc. is a direct wholly owned subsidiary of
Keyport. Keyport is a direct wholly owned subsidiary of SteinRoe
Services, Inc. ("SSI"). SSI is a direct wholly owned subsidiary of
Liberty Financial. As stated above, Liberty Financial is an indirect
majority owned subsidiary of Liberty Mutual.
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <C> <C>
Paul H. LeFevre, Jr. President, Chief Executive President and Chief Executive
Officer and Chairman of the Board Officer (since November, 1998),
of Directors Executive Vice President, Senior
Vice President and Chief Financial
Officer (prior to November, 1998),
Keyport
Stewart R. Morrison Director, Senior Vice President Senior Vice President and Chief
and Chief Investment Officer Investment Officer of Keyport
Mark R. Tully Director and Senior Vice President Senior Vice President and Chief
Sales Officer of Keyport
James J. Klopper Vice President and Clerk Vice President, Counsel and
Secretary of Keyport; Clerk of KFSC
Daniel C. Bryant Vice President Vice President and Assistant
Secretary of Keyport (since
December, 1997): Chief Legal
Counsel, Department of Business
Regulation, State of Rhode Island
(March, 1995 to November, 1997)
Jeffrey J. Whitehead Vice President and Treasurer Vice President and Treasurer of
Keyport
Jacob M. Herschler Vice President Vice President of Keyport
</TABLE>
The business address of LASC and each
individual listed in the foregoing table is
c/o Keyport Life Insurance Company, 125 High
Street, Boston, Massachusetts 02110.
Colonial Management Associates, Inc.
(Colonial)
Colonial is a direct wholly owned subsidiary
of Liberty Funds Group LLC ("LFG"). LFG is a
indirect owned subsidiary of Liberty
Financial.
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <C> <C>
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Stephen E. Gibson President, Chief Executive Director, CEO, President,
Officer and Chairman of the Board Executive Committee Member and
of Directors Chairman of the Board of Directors
of LFG
Nancy L. Conlin Senior Vice President, General Vice President, Secretary and
Counsel and Director General Counsel of LFG
Timothy J. Jacoby Senior Vice President, Chief Vice President, Treasurer and
Financial Officer and Treasurer Chief Financial Officer of LFG
Joseph R. Palombo Executive Vice President and Vice President, Chief Administrative
Director Officer and Director of LFG
(formerly, Chief Operating Officer of
Putnam Investments)
</TABLE>
The business address of Colonial and each
individual listed in the foregoing table is
c/o Colonial Management Associates, Inc.,
One Financial Center, Boston, Massachusetts
02111.
Newport
Newport is a direct wholly owned subsidiary
of Newport Pacific Management, Inc.
("Newport Pacific"). Newport Pacific is a
direct wholly owned subsidiary of Liberty
Newport Holdings, Ltd. ("LNH"). LNH is a
direct wholly owned subsidiary of Liberty
Financial.
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <C> <C>
John M. Mussey President, Chief Executive Holds same offices at Newport
Officer and Chairman of the Board Pacific Management, Inc.
of Directors.
R James Carlson Chief Operating Officer, Holds same offices at Newport
Treasurer, Secretary and Chief Pacific Management, Inc.:
Compliance Officer Controller and Compliance Officer
of Spare, Kaplan, Bischel &
Associates, Inc., San Francisco
Kenneth R. Leibler Director President, Chief Executive Officer
and Director of Liberty Financial
Lindsay Cook Senior Vice President and Director Executive Vice President since
February 1997; Senior Vice
President of Liberty Financial
prior thereto
Thomas R. Tuttle Senior Vice President Senior Vice President of Newport
and Managing Director Pacific Management, Inc.
Robert B. Cameron Senior Vice President Senior Vice President of Newport
Pacific Management, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Michael Ellis Senior Vice President Senior Vice President of Newport
Pacific Management, Inc.
Christopher H. Legallet Senior Vice President Senior Vice President of Newport
Pacific Management, Inc.,: Managing
Director of Jupiter Asset
Management (Asia) Ltd., Hong Kong
David Richie Smith Senior Vice President Senior Vice President of Newport
Pacific Management, Inc.
Lynda Couch Vice President Same
</TABLE>
The principal business address of Newport
and Messrs. Mussey and Tuttle and Mss.
Frantz and Couch is 580 California Street,
Suite 1960, San Francisco, California 94104.
The principal address of each other person
listed in the preceding table is 600
Atlantic Avenue, Suite 2400, Boston,
Massachusetts 02210.
<PAGE>
J.P. Morgan Investment Management, Inc.
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <C> <C>
Keith M. Schappert President, Chairman, Director and --
Managing Director
Jeff M. Garrity Director and Managing Director --
Isabel H. Sloane Director and Managing Director --
Kenneth W. Anderson Director and Managing Director --
Gilbert Van Hassel Director and Managing Director --
Hendrik Van Riel Director and Managing Director --
John W. Schmidlin Director --
Henry D. Cavanna Managing Director --
</TABLE>
The principal business address of such firm
and each such person is 522 Fifth Avenue,
New York, NY 10036.
Oppenheimer Capital
Oppenheimer Capital is a wholly-owned
subsidiary of PIMCO Advisers L.P.
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <C> <C>
George Long Chairman, Chief Executive --
Officer & Chief Investment
Officer
Frank LeCates Managing Director, Director of --
Research
Pierre Daviron President, Oppenheimer Capital --
International
Robert Bluestone Managing Director, Fixed Income --
Management
Joseph M. Rusbarsky Managing Director, Client --
Relations & Marketing
Julius A. Nicolai Managing Director --
John G. Lindenthal Managing Director --
Herbert S. Fitzgibbon Managing Director --
Kenneth H. Mortenson Managing Director --
Philip T. Rodilosso Managing Director --
Eugene Vesell Managing Director --
Dick Glasebrook Managing Director --
Eileen P. Rominger Managing Director --
Linda Ferrante Managing Director --
Tom Rackley Managing Director --
Johnathan K. Greenburg Senior Vice President --
Jeffrey Tarnoff Senior Vice President --
Colin Glinsman Senior Vice President --
David Santry Senior Vice President --
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Thomas Scerbo Senior Vice President --
Jeff Whittington Senior Vice President --
Irv Rotkowitz Senior Vice President --
Sandra Birnbaum Senior Vice President --
Mary Ann Schreiber Senior Vice President --
Paul Doane Senior Vice President --
Geoff Mullen Senior Vice President --
Brad Goldman Senior Vice President --
Michael Borkan Senior Vice President --
Malcolm Bishop Senior Vice President --
Evan Weston Senior Vice President --
</TABLE>
The business address of such firm and each
such person is Oppenheimer Tower, 1 World
Financial Center, New York, NY 10281.
Boston Partners Asset Management, L.P.
The firm is owned by its 39 partners.
Desmond J. Heathwood is the sole General
Partner. Its and his address is 28 State
Street, 21st Floor, Boston, Massachusetts
02109.
Westwood Management Corp.
The firm is owned by Southwest Securities
Group, Inc.
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <C> <C>
Susan M. Byrne Director, President, Chief Director of each of Southwest
Executive Officer and Treasurer Securities Group, Inc. and Westwood
Trust
Jacquiline L. Finney Secretary and Assistant Treasurer --
</TABLE>
The address of such firm and each such
person is 300 Crescent Court, Suite 1300,
Dallas, Texas 75201.
Wilke/Thompson Capital Management, Inc.
The firm is employee owned. Mr. Thompson
(see below) owns the controlling interest.
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <C> <C>
Mark A. Thompson Director, Chairman and Principal --
Investment Officer
Anthony L. Ventura Director, President and Chief Partner of Wessels, Arnold &
Executive Officer Henderson
Dona L. Feick Portfolio Manager --
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Stephen M. Kensinger Portfolio Manager --
</TABLE>
The business address of such firm and each
such person is 2950 Norwest Center, 90
South Seventh Street, Minneapolis,
Minnesota 55402
Item 27. Principal Underwriters
(a) KFSC and LFDI act as principal
underwriters of the Registrant's shares on
a best-efforts basis.
KFSC also acts as principal underwriter for
the following investment companies:
SteinRoe Variable Investment Trust
Special Venture Fund, Variable Series
Growth Stock Fund, Variable Series
Balanced Fund, Variable Series Mortgage
Securities Fund, Variable Series Money
Market Fund, Variable Series
LFDI also acts as a principal underwriter
for the following investment companies:
Liberty Funds Trust I
Colonial High Yield Securities Fund
Colonial Income Fund
Colonial Strategic Income Fund
Stein Roe Advisor Tax-Managed Growth
Fund
Liberty Funds Trust II
Colonial Money Market Fund
Colonial Intermediate U.S. Government
Fund
Colonial Short Duration U.S. Government
Fund
Newport Japan Opportunities Fund
Newport Tiger Cub Fund
Newport Greater China Fund
Liberty Funds Trust III
Colonial Select Value Fund
The Colonial Fund
Colonial Federal Securities Fund
Colonial Global Equity Fund
Colonial International Horizons Fund
Colonial Strategic Balanced Fund
Colonial Global Utilities Fund
The Crabbe Huson Special Fund
Crabbe Huson Small Cap Fund
Crabbe Huson Real Estate Investment Fund
Crabbe Huson Equity Fund
Crabbe Huson Managed Income & Equity
Fund
Crabbe Huson Oregon Tax-Free Fund
Crabbe Huson Contrarian Income Fund
Crabbe Huson Contrarian Fund
Liberty Funds Trust IV
Colonial Tax-Exempt Fund
Colonial Tax-Exempt Insured Fund
Colonial High Yield Municipal Fund
Colonial Utilities Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Municipal Money Market Fund
Counselor Select Income Fund
Counselor Select Balanced Fund
Counselor Select Growth Fund
<PAGE>
Liberty Funds Trust V
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial Massachusetts Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund
Liberty Funds Trust VI
Colonial U.S. Growth & Income Fund
Colonial Small Cap Value Fund
Colonial Value Fund
Newport Asia Pacific Fund
Liberty Funds Trust VII
Colonial Newport Tiger Fund
Colonial Intermediate High Income Fund
Colonial InterMarket Income Trust I
Colonial Municipal Income Trust
Colonial High Income Municipal Trust
Colonial Investment Grade Municipal Trust
Liberty Funds Trust VIII
Liberty Funds Trust IX
Liberty All-Star Growth & Income Fund
Liberty Newport World Portfolio
Global Opportunity Fund
Newport Tiger Fund
Newport Pacific Fund
Stein Roe Latin America Fund
(b) Set forth below is information
concerning each director and officer of
KFSC.
<TABLE>
<CAPTION>
Name and Current Position with Adviser* Other Positions During
Past Two Fiscal Years
<S> <C> <C>
Paul H. LeFevere President and Director None
Rogelio P. Zaplit Treasurer None
</TABLE>
*The principal business address of KFSC and
each person listed in the table is c/o
Keyport Life Insurance Company, 125 High
Street, Boston, Massachusetts 02110.
<TABLE>
<S> <C> <C>
Francis E. Reinhart Director None
James J. Klopper Clerk and Director None
Donald A. Truman Assistant Clerk None
</TABLE>
Set forth below is information concerning
each director and officer of LFDI.
<PAGE>
<TABLE>
<CAPTION>
Name and Current Position with Adviser* Other Positions During
Past Two Fiscal Years
<S> <C> <C>
Stephen E. Gibson Chairman of the Board None
James Tambone Chief Executive Officer None
Lou Tasiopoulos President None
Kevin O'Shea Managing Director None
C. Frazier Evans Managing Director None
John Bartlett Managing Director None
Marilyn Karagiannis Managing Director None
Elizabeth Clapp Senior Vice President None
Bryan Eckelman Senior Vice President None
David Feldman Senior Vice President None
Stephen A. Gerolkoulis Senior Vice President None
Keith H. VanEtten Senior Vice President None
Cynthia Erickson Zarker Senior Vice President None
Cynthia Davey Regional Vice President None
Thomas Harrington Regional Vice President None
Joseph Hodgkins Regional Vice President None
David W. Kelson Regional Vice President None
Gregory McCombs Regional Vice President None
Ann R. Moberly Regional Vice President None
Christopher Reed Regional Vice President None
Michael W. Scott Regional Vice President None
Judith Anderson Vice President None
Debra Babbitt Vice President None
Beth Brown Vice President None
Stacy Burtman Vice President None
Patrick Campbell Vice President None
Marian Desilets Vice President None
Steve DiMaio Vice President None
Christopher Downey Vice President None
Cynthia Jones Vice President None
Mary McKenzie Vice President None
Catherne Menchin Vice President None
Patrick Morner Vice President None
Kevin Noin Vice President None
Frank Quirk Vice President None
Rebecca Scarlott Vice President None
Lou Sideropoulos Vice President None
Deborah Young Vice President None
Rick Ballou Regional Vice President None
Gregory Carroll Regional Vice President None
Daniel Chrzanowski Regional Vice President None
Andrew Crossfield Regional Vice President None
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
James Devaney Regional Vice President None
John Donovan Regional Vice President None
Kim P. Emerson Regional Vice President None
Robert Fifield Regional Vice President None
Matthew Goldberg Regional Vice President None
Brian Guenard Regional Vice President None
Terry M. Kelley Regional Vice President None
Andrew Nerney Regional Vice President None
Tracy Predmore Regional Vice President None
David Schulman Regional Vice President None
Darren Smith Regional Vice President None
Eric Studer Regional Vice President None
R. Andrew Sutton Regional Vice President None
Brian Tuttle Regional Vice President None
Paul Villanova Regional Vice President None
Valerie Wess Regional Vice President None
Linda Brandon Assistant Vice President None
Diana Castagna Assistant Vice President None
Donna Donovan Assistant Vice President None
Thomas Gariepy Assistant Vice President None
Douglas Geer Assistant Vice President None
Leslie Moon Assistant Vice President None
Linda Raftery Assistant Vice President None
Peter Tufts Assistant Vice President None
John Vaccaro Assistant Vice President None
John Ziolkowski Assistant Vice President None
Philip J. Iudice, Jr. Treasurer and Chief Financial None
Officer
Nancy L. Conlin Clerk and Director None
Kevin S. Jacobs Assistant Clerk None
John W. Reading Assistant Clerk None
Joseph R. Palombo Director None
</TABLE>
*LFDI's address is One Financial Center,
Boston, Massachusetts 02111.
(c) not applicable.
Item 28. 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
<PAGE>
and such records are the property of the
entity required to maintain and preserve
such records and will be surrendered
promptly on request.
The Chase Manhattan Bank, 3 Chase Metro
Tech Center, 8th Floor, Brooklyn, New York
11745, serves as custodian for the Trust.
In such capacity, the custodian bank keeps
records regarding securities and other
assets in custody and in transfer, bank
statements, canceled checks, financial
books and records, and other records
relating to its duties as custodian.
Liberty Funds Services, Inc. (formerly
Colonial Investors Service Center, Inc.),
One Financial Center, Boston, MA 02111,
serves as the transfer agent and dividend
disbursing agent for the Registrant, and in
such capacities is responsible for records
regarding each shareholder's account and
all disbursements made to shareholders. In
addition, LASC, 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 LFDI, 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 29. Management Services
LASC, 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 30. Undertakings
Not Applicable
<PAGE>
******************
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of Colonial Trust
I is on file with the Secretary of State of the Commonwealth of Massachusetts
and notice is hereby given that the instrument has been executed on behalf of
the Trust by an officer of the Trust as an officer and by its Trustees as
trustees and not individually and the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Liberty Variable Investment Trust,
certifies that it meets all of the requirements for effectiveness of the
Registration Statement pursuant to Rule 485(b) and has duly caused this
Post-Effective Amendment No. 17 to its Registration Statement under the
Securities Act of 1933 and Amendment No. 18 under the Investment Company Act of
1940, to be signed on its behalf by the undersigned, duly authorized, in the
City of Boston, and The Commonwealth of Massachusetts on this 16th day of April,
1999.
LIBERTY VARIABLE INVESTMENT TRUST
By: STEPHEN E. GIBSON
-----------------
Stephen E. Gibson, President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in their capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
STEPHEN E. GIBSON President (chief April 16, 1999
- ----------------- Executive officer)
Stephen E. Gibson
TIMOTHY J. JACOBY Treasurer and Chief Financial Officer April 16, 1999
- ----------------- (principal financial officer)
Timothy J. Jacoby
J. KEVIN CONNAUGHTON Controller and Chief Accounting April 16, 1999
- -------------------- Officer (principal accounting officer)
J. Kevin Connaughton
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ROBERT J. BIRNBAUM* Trustee
- -------------------
Robert J. Birnbaum
TOM BLEASDALE* Trustee
- --------------
Tom Bleasdale
JOHN V. CARBERRY* Trustee
- -----------------
John V. Carberry
LORA S. COLLINS* Trustee
- ----------------
Lora S. Collins
JAMES E. GRINNELL* Trustee
- ------------------
James E. Grinnell
RICHARD W. LOWRY* Trustee */s/ SUZAN M. BARRON
- ----------------- ------------------
Richard W. Lowry Suzan M. Barron
Attorney-in-fact
For each Trustee
April 16, 1999
SALVATORE MACERA* Trustee
- -----------------
Salvatore Macera
WILLIAM E. MAYER* Trustee
- -----------------
William E. Mayer
JAMES L. MOODY, JR.* Trustee
- --------------------
James L. Moody, Jr.
JOHN J. NEUHAUSER* Trustee
- ------------------
John J. Neuhauser
THOMAS E. STITZEL* Trustee
- ------------------
Thomas E. Stitzel
ROBERT L. SULLIVAN* Trustee
- -------------------
Robert L. Sullivan
ANNE-LEE VERVILLE* Trustee
- ------------------
Anne-Lee Verville
</TABLE>
<PAGE>
EXHIBITS
(a) Agreement and Declaration of Trust
(b) By-Laws
(d)(1)(i) Form of Management Agreement between Liberty Variable
Investment Trust ("Trust"), with respect to CG&IF,
VS, SRGUF, VS and Liberty Advisory Services Corp. ("LASC")
(d)(1)(ii) Amendment No. 1 to Management Agreements between the Trust,
with respect to CG&IF, VS, SRGUF, VS, CIFfG,
VS, CUSSF, VS, CSIF, VS and LASC
(d)(2)(i) Form of Management Agreement between the Trust, with respect
to CSCVF, VS, CHYSF, VS and LASC
(d)(2)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf
of CSCVF, VS, LASC and Colonial
(d)(2)(iii) Form of Sub-Advisory Agreement between the Trust, on behalf
of CHYSF, VS, LASC and Colonial
(d)(3)(i) Form of Management Agreement between the Trust, with respect
to CIFfG, VS, CUSSF, VS, CSIF, VS and LASC
(d)(4)(i) Form of Management and Sub-Advisory Agreement between the
Trust, with respect to LASEF, VS, LASC and
Liberty Asset Management Company ("LAMCO")
(d)(5)(i) Form of Management Agreement between the Trust, with respect
to NTF, VS, and LASC
(d)(5)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf
of NTF, VS, LASC and Newport Fund Management, Inc.
(e)(2) Underwriting Agreement between the Trust and Liberty Funds
Distributor, Inc. (LFDI)
(h)(1)(i) Form of Pricing and Bookkeeping Agreement between the Trust
and Colonial
(h)(1)(ii) Amendment No. 1 to Pricing and Bookkeeping Agreement
(h)(1)(iii) Amendment No. 2 to Pricing and Bookkeeping Agreement
(h)(1)(iv) Amendment No. 3 to Pricing and Bookkeeping Agreement
(h)(2)(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 Liberty
Funds Services, Inc. ("LFSI")(including form of
Transfer Agency Agreement and Amendment No. 1 thereto)
(h)(2)(ii) Amendment No. 2 to Transfer Agency Agreement
(h)(2)(iii) Amendment No. 3 to Transfer Agency Agreement
(j) Independent Accountants Consent
(n)(1) Financial Data Schedule (CG&IF,VS)
(n)(2) Financial Data Schedule (SRGUF, VS)
(n)(3) Financial Data Schedule (CSCVF, VS)
(n)(4) Financial Data Schedule (CHYSF, VS)
(n)(5) Financial Data Schedule (CIFfG, VS)
(n)(6) Financial Data Schedule (CUSSF, VS)
(n)(7) Financial Data Schedule (CSIF, VS)
(n)(8) Financial Data Schedule (LASEF, VS)
(n)(9) Financial Data Schedule (NTF, VS)
AGREEMENT AND DECLARATION OF TRUST
THIS AGREEMENT AND DECLARATION OF TRUST ("Declaration of Trust") is
made at Boston, Massachusetts, this 4th day of March, 1993, by the Trustee
hereinunder, and by the holders of shares of beneficial interest to be issued
hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed as a voluntary association with
transferable shares under the laws of the Commonwealth of Massachusetts to carry
on the business of an investment company; and
WHEREAS, the Trustee has agreed to manage all property coming into his
hands as Trustee of a voluntary association in the form of a Massachusetts
business trust in accordance with the provisions hereinafter set forth.
NOW THEREFORE, the Trustee hereby declares that he will hold all cash,
securities and other assets that he may from time to time acquire in any manner
as Trustee hereunder in Trust to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders from time
to time of shares of the applicable series in this Trust as hereinafter set
forth.
FIRST: Name.
The name of this Trust is Keyport Variable Investment Trust (the
"Trust").
SECOND: Purposes.
The purposes for which the Trust is formed are:
1. To engage in the business of a management investment company;
2. To invest and reinvest in, to buy or otherwise acquire, to
hold, for investment or otherwise, to sell or otherwise
dispose of, to lend or to pledge, to trade in or deal in,
securities or interests of all kinds, or obligations of all
kinds, or rights, warrants, or contracts, and to acquire such
securities, interests, or obligations, of or guaranteed by any
private or public company, corporation, association, general
or limited partnership, trust or other enterprise or
organization, foreign or domestic, or of or guaranteed by any
national, state or local government, foreign or domestic, or
their agencies, instrumentalities or subdivisions, including
but not limited to bonds, debentures, preferred stocks, common
stocks, convertible securities, bills, time notices and all
other evidences of indebtedness; negotiable or non-negotiable
instruments; options; futures contracts and options on futures
contracts; government securities; and money market
instruments, including but not limited to bank certificates of
deposit, finance paper, commercial paper, bankers'
acceptances, and all kinds of repurchase agreements, of any
corporation, company, trust, association, firm or other
business organization, however established, and of any county,
state, municipality or other political subdivision, or of any
other government or quasi-governmental agency or
instrumentality;
3. To invest and reinvest in, to buy or otherwise acquire, to
hold, for investment or otherwise, to sell or otherwise
dispose of, foreign currencies, funds, and exchange, and to
make deposits in banks, savings banks, trust companies, and
savings and loan associations, foreign or domestic;
4. To exercise all rights, powers, and privileges as owner of any
securities, property, or assets which might be exercised by
any individual owning such securities, property, or assets in
his own right;
5. To acquire (by purchase, lease, or otherwise) and to hold,
use, maintain, develop, and dispose of (by sale or otherwise);
any property, real or personal, and any interest therein;
6. To aid by further investment any corporation, company, trust,
association, or firm, any obligation of or interest in which
is held by the Trust or in the affairs of which the Trust has
any direct or indirect interest; to do all acts and things
designed to protect, preserve, improve, or enhance the value
of such obligation or interest; to guarantee or become surety
of any or all of the contracts, stocks, bonds, notes,
debentures, and other obligations of any such corporation,
company, trust, association, or firm; and
7. In general, to carry on any other business in connection with
or incidental to any of the foregoing objects and purposes,
and to engage in any and all lawful business except as may be
prohibited to be engaged in by a business trust organized
under the laws of the Commonwealth of Massachusetts as in
force from time to time, to do everything necessary, suitable,
or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power
hereinbefore set forth, either alone or in association with
others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects, or powers.
The Trust shall have the power to conduct and carry on its business, or
any part thereof, and to have one or more offices, and to exercise any or all of
its trust powers and rights, in the Commonwealth of Massachusetts, in any other
states, territories, districts, colonies, and dependencies of the United States,
and in any or all foreign countries.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trust.
THIRD: Address and Resident Agent.
The post office address of the principal office of the Trust in the
Commonwealth of Massachusetts is:
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
or such other office as the Board of Trustees may from time to time designate.
The name and post office address of the resident agent of the Trust in
the Commonwealth of Massachusetts is:
John A. Benning, Esq.
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
or such other person as the Board of Trustees may from time to time designate.
FOURTH: Shares.
A. Definitions. "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest in the Trust shall be
divided from time to time or, if more than one series of shares is authorized by
the Board of Trustees, the equal proportionate units into which each series
shall be divided from time to time.
B. Division of Beneficial Interest. The shares of the Trust shall be
issued in one or more series as the Board of Trustees may, without shareholder
approval, authorize. Each series shall be preferred over all other series with
respect to the assets allocated to that series. The beneficial interest in each
series shall at all times be divided into shares, with or without par value as
the Board of Trustees shall determine, each of which shall represent an equal
proportionate interest in the series with each other share of the same series,
none having priority or preference over another. The number of shares authorized
shall be unlimited, and the shares so authorized may be represented in part by
fractional shares. The Board of Trustees may from time to time divide or combine
the shares of any series into a greater or lesser number without thereby
changing the proportionate beneficial interests in the series.
C. Ownership of Shares. The ownership of shares shall be recorded on
the books of the Trust or its transfer or similar agent. No certificates
certifying the ownership of shares shall be issued except as the Board of
Trustees may otherwise determine from time to time. The Board of Trustees may
make such rules as it considers appropriate for the issuance of share
certificates, the transfer of shares and similar matters. The record books of
the Trust as kept by the Trust or any transfer or similar agent of the Trust, as
the case may be, shall be conclusive as to who are the shareholders of each
series and as to the number of shares of each series held from time to time by
each shareholder.
D. Status of Shares and Limitation of Personal Liability. Shares shall
be deemed to be personal property giving only the rights provided in this
instrument. Every shareholder by virtue of having become a shareholder shall be
deemed to have expressly assented to and agreed to be bound by the terms hereof
and to have become a party hereto. The death of a shareholder during the
continuance of the Trust shall not operate to terminate the same nor entitle the
representative of such deceased shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Board of Trustees, but
only to the rights of said decedent under this Trust. Ownership of shares shall
not entitle the shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of shares constitute the shareholders to
be partners. Neither the Trust nor the Board of Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
shareholder, nor, except as specifically provided herein, to call upon any
shareholder for the payment of any sum of money or assessment whatsoever other
than such as the shareholder may at any time personally agree to pay.
FIFTH. No Preemptive Rights.
Shareholders shall have no preemptive or other right to receive,
purchase, or subscribe for any additional shares or other securities issued by
the Trust.
SIXTH. Issue, Redemption, and Repurchase of Shares.
SECTION I
ISSUE OF THE TRUST'S SHARES
1.01. General. The Board of Trustees may from time to time issue,
reissue, sell or cause to be issued and sold any of the Trust's shares in one or
more series as the Board of Trustees may, without shareholder approval,
authorize, including any shares redeemed or repurchased by the Trust, for a
consideration determined in accordance with Section 1.02 hereof; except that
only shares previously contracted to be sold may be issued during any period
when the determination of net asset value is suspended pursuant to the
provisions of Section III hereof.
1.02. Price. No shares of a series shall be issued or sold by the
Trust, except as a share dividend distributed to shareholders of such series,
for less than an amount which would result in proceeds to the Trust, in
connection with such transaction, of at least the net asset value per share of
such series, determined as set forth in Section III hereof. The net asset value
per share applicable to any such transaction shall be the net asset value per
share of such series next determined after receipt of an unconditional order for
purchase of shares of such series; except that, subject to applicable rules and
regulations, if any, of the Securities and Exchange Commission or any other
governmental body having similar jurisdiction over the Trust (the "SEC"), the
Board of Trustees may prescribe that requests for purchase received prior to a
time of day (the "cutoff time") preceding the time of day prescribed for
determination of net asset value per share of such series shall be transacted at
the net asset value per share next determined and that requests for purchase
received after the cutoff time and before the time for determination of the next
net asset value per share shall be transacted at the net asset value per share
next determined after the next net asset value per share of such series. The
criteria for determining what constitutes an unconditional order for purchase of
shares of a series and the receipt of such an order shall be prescribed by the
Board of Trustees. All shares, when issued in accordance with the terms of this
Section I, shall be fully paid and nonassessable.
1.03. Fractional Shares. The Trust may issue and sell or cause to be
issued and sold fractions of shares of a series having pro rata all the rights
of full shares of such series, including, without limitation, the right to vote
and to receive dividends.
1.04. Assets of a Series. All consideration received by the Trust for
the issue or sale of shares of each series authorized by the Board of Trustees,
together with all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and any funds
or payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to the series of shares with respect to
which the same were received by the Trust for all purposes, subject only to the
rights of creditors of Trust assets allocated to such series, and shall be so
recorded upon the books of account of the Trust and are herein referred to as
"assets of" such series.
SECTION II
REDEMPTION AND REPURCHASE OF THE TRUST'S SHARES
2.01. Redemption of Shares. Any shares of any series of the Trust may
be redeemed at the option of the holder of such shares and, to the extent
permitted in Section 2.06 hereof, at the option of the Trust, at the redemption
price for such shares, determined in the manner set out in this Declaration of
Trust or in any amendment hereto. Unless otherwise provided by resolution of the
Board of Trustees, shares redeemed shall be cancelled. Redeemed shares which
have not been cancelled may be resold by the Trust. The Trust shall redeem
shares subject to the conditions and at the price determined as hereinafter set
forth.
2.02. Price. Shares shall be redeemed at the net asset value per share
of the appropriate series, determined as set forth in Section III hereof. The
net asset value per share of such series applicable to any such redemption of
shares shall be the net asset value per share next determined after receipt of a
request for redemption of such shares in proper form, except that, subject to
applicable rules and regulations, if any, of the SEC, the Board of Trustees may
prescribe that requests for redemption received prior to the cutoff time
preceding the time of day prescribed for determination of net asset value per
share of such series shall be transacted at the net asset value per share next
determined and that requests for redemption after the cutoff time and before the
time for determination of the next net asset value per share shall be transacted
at the net asset value per share next determined after the next net asset value
per share. The criteria for determining what constitutes a proper request for
redemption of shares of a series and the receipt of such request for redemption
shall be prescribed by the Board of Trustees.
2.03. Payment. Subject to the provisions of Section 2.04 hereof,
payment for shares of a series shall be made in cash to, or upon the direction
of, the shareholder of record within seven calendar days after the date of
receipt of (a) a written, unconditional and irrevocable instruction of the
shareholder to redeem, in a form acceptable to the Trust or its designated
agent, together with any certificates which may have been issued therefor,
endorsed or accompanied by proper instrument of transfer, and such other
documents as the Trust or its designated agent may require or (b) such other
direction or authorization of redemption by the shareholder as the Board of
Trustees shall authorize. Subject to applicable rules and regulations, if any,
of the SEC, the Trust may pay the redemption price for such shares of a series
in whole or in part by a distribution in kind of securities from the portfolio
of the Trust allocated to such series, in lieu of money, valuing such securities
at their value employed for determining the net asset value governing such
redemption price, and selecting the securities in such manner as the Board of
Trustees may determine to be fair and equitable.
2.04. Effect of Suspension of Determination of Net Asset Value. If,
pursuant to Section 3.03 hereof, the Board of Trustees shall declare a
suspension of the determination of net asset value of a particular series, (a)
the rights of shareholders (including those who shall have requested redemption
pursuant to Sections 2.01, 2.02, and 2.03 hereof but for whom the redemption
price shall not yet have been determined) to have shares redeemed and paid for
by the Trust, and (b) the obligation of the Trust to pay for shares previously
redeemed, shall be suspended until the termination of such suspension. Any
record holder of shares not previously redeemed who shall have his redemption
right so suspended may, during the period of such suspension, by appropriate
written notice of revocation at the office or agency where request for
redemption was made, revoke any request or instruction for redemption not
honored and withdraw any certificates tendered for redemption. The redemption
price of shares for which redemption requests have been made and not revoked
shall be the net asset value of such shares next determined as set forth in
Section III hereof after the termination of such suspension, and payment shall
be made within seven days after the date upon which the requirements of Section
2.03 were met plus the period during which the determination of net asset value
was suspended.
2.05. Repurchase by Agreement. The Trust may repurchase shares of the
Trust directly, or through a principal underwriter, if any, or another agent
designated for the purpose, by agreement with the owner thereof at a price not
exceeding the net asset value per share of the appropriate series determined as
of the time when the purchase or contract of purchase is made or the net asset
value as of any time which may be later determined pursuant to Section III
hereof, provided payment is not made for the shares prior to the time as of
which such net asset value is determined. Repurchased shares may be resold by
the Trust.
2.06. Redemption of Shareholder's Interest. The Trust shall have the
right at its option and at any time to redeem shares of any shareholder at the
net asset value thereof determined in accordance with Section III hereof: (i) if
at such time such shareholder owns fewer shares than, or shares having an
aggregate net asset value of less than, an amount determined from time to time
by the Board of Trustees; or (ii) to the extent that such shareholder owns
shares of a particular series of shares equal to or in excess of a percentage of
the outstanding shares of that series determined from time to time by the Board
of Trustees; or (iii) to the extent that such shareholder owns shares of the
Trust representing a percentage equal to or in excess of a percentage of the
aggregate number of outstanding shares of the Trust or the aggregate net asset
value of the Trust determined from time to time by the Board of Trustees, and
subject to the Trust's giving general notice to all shareholders of its
intention to avail itself of such right, either by publication in the Trust's
prospectus, if any, or by such other means as the Board of Trustees may
determine. Subject to the same terms and conditions, the Trust shall also have
the right to redeem shares of the Trust, or a particular series, owned by any
shareholder if in the opinion of the Board of Trustees, ownership of shares of
the Trust or series, respectively, has or may become concentrated to an extent
which could cause the Trust to become a personal holding company within the
meaning of the Internal Revenue Code.
2.07. Additional Provisions Relating to Redemptions and Repurchases.
The completion of redemption of shares shall constitute a full discharge of the
Trust and the Trustees with respect to such shares, and the Trustees may require
that any certificate or certificates issued by the Trust to evidence the
ownership of such shares shall be surrendered to the Trustees for cancellation
or notation.
SECTION III
NET ASSET VALUE OF SHARES
3.01. By Whom Determined. Subject to the provisions of Section 3.04 of
this Article SIXTH, the Board of Trustees shall have the power and duty to
determine from time to time the net asset value per share of the outstanding
shares of each series authorized by the Board of Trustees and any such
determination shall be binding on all parties.
3.02. When Determined. The net asset value of a series shall be
determined at such times as the Board of Trustees, subject to applicable rules
and regulations, if any, of the SEC, shall prescribe, provided that such net
asset value shall be determined at least once each week. In the absence of a
resolution of the Board of Trustees, the net asset value of a series shall be
determined as of the close of trading on the New York Stock Exchange on each
business day.
3.03. Suspension of Determination of Net Asset Value. The Board of
Trustees may declare a suspension of the determination of net asset value of a
series (a) for any period during which trading on the New York Stock Exchange is
restricted, as determined by the SEC, or that Exchange is closed (other than
customary weekend and holiday closing), (b) for any period during which an
emergency exists as a result of which disposal of the investments held by that
series or determination of net asset value of that series is not reasonably
practicable, or (c) for such period as the SEC by order may permit. Such
suspension shall take effect at such time as the Board of Trustees shall specify
and thereafter there shall be no determination of net asset value until the
Board of Trustees shall declare the suspension terminated, except that the
suspension shall terminate in any event on the first day on which (1) the
condition giving rise to the suspension shall have ceased to exist and (2) no
other condition exists under which suspension is authorized under this Section
3.03. Each declaration by the Board of Trustees pursuant to this Section 3.03
shall be consistent with such official rules and regulations, if any, relating
to the subject matter thereof as shall have been promulgated by the SEC. To the
extent not inconsistent with such official rules and regulations, the
determination of the Board of Trustees shall be conclusive.
3.04. Computation of Per Share Net Asset Value.
a. Net Asset Value Per Share. The net asset value of each share of a
series as of any particular time shall be the quotient obtained by dividing the
value of the net assets of the Trust allocated to such series by the total
number of shares of such series outstanding, rounded to such extent as the Board
of Trustees shall determine from time to time.
b. Value of Trust's Net Assets. The value of the net assets of the
Trust allocated to any series as of any particular time shall be the value of
the assets so allocated less the liabilities of the Trust so allocated,
determined as follows:
(1) each security for which market quotations are readily available
shall be valued at current market value determined by methods specified by the
Board of Trustees;
(2) each other security, including any security within (1) for which
the specified price does not appear to represent a dependable quotation for such
security as of the time of valuation, shall be valued at a fair value as
determined in good faith by the Board of Trustees;
(3) any cash on hand shall be valued at the face amount thereof,
(4) any cash on deposit, accounts receivable, and cash dividends and
interest declared or accrued and not yet received, any prepaid expenses, and any
other current asset shall be valued at the face amount thereof, unless the Board
of Trustees shall determine that any such item is not worth its face amount, in
which case such asset shall be valued at a fair value determined in good faith
by the Board of Trustees; and
(5) any other asset shall be valued at a fair value determined in good
faith by the Board of Trustees.
Notwithstanding the foregoing, short-term debt obligations, commercial paper and
repurchase agreements may be, but need not be, valued on the basis of quoted
yields for securities of comparable maturity, quality and type, or on the basis
of amortized cost. The Board of Trustees may appoint persons to assist it in the
determination of the value of assets, liabilities and net asset value per share
of any series and to make the actual calculations pursuant to the direction of
the Board of Trustees.
3.05. Miscellaneous. For the purposes of this Section III:
a. Shares of any series issued shall be deemed to be outstanding
commencing immediately after the time for determination of net asset value per
share for purposes of determining their sales price, pursuant to Section 1.02
hereof, and the net sale price thereof shall thereupon be deemed an asset of
that series.
b. Shares of any series for which a request for redemption has been
made in proper form or which are being repurchased by the Trust shall be deemed
to be outstanding up to and including the time as of which the redemption of
repurchase price for such shares is determined. After such time, they shall be
deemed to be no longer outstanding and the price until paid shall thereupon be
deemed to be a liability of that series.
c. Funds on deposit and contractual obligations payable to the Trust in
foreign currency and liabilities and contractual obligations payable by the
Trust in foreign currency shall be taken at the current applicable rate of
exchange as nearly as practicable at the time as of which the net asset value is
computed for the series to which such items relate.
SECTION IV
COMPLIANCE WITH INVESTMENT COMPANY ACT OF 1940
Notwithstanding any of the foregoing provisions of this Article SIXTH,
the Board of Trustees may prescribe such other bases and times for determining
the per share net asset value of any series of the Trust as it shall deem
necessary or desirable to enable the Trust to comply with any provision of the
Investment Company Act of 1940, or any rule or regulation thereunder, all as now
in effect or hereafter amended or added (the "1940 Act"), including any rule or
regulation adopted by any securities association registered under the Securities
Exchange Act of 1934.
SEVENTH: Board of Trustees.
A. Election. The number of Trustees shall be fixed pursuant to the
By-Laws. Trustees shall be elected by the shareholders, except as otherwise
provided herein. The initial Trustees, each of whom shall serve until the first
meeting of shareholders at which Trustees are elected and until his or her
successor is elected and qualified, or until he or she sooner dies, resigns or
is removed, shall be John W. Rosensteel,* and such other persons as the Trustee
or Trustees then in office shall, prior to any sale of shares pursuant to a
public offering, appoint.
Any vacancy occurring in the Board of Trustees may be filled by the Trustees,
unless immediately after filling any such vacancy, less than two-thirds of the
Trustees then holding office would have been elected to such office by the
shareholders. The Board of Trustees shall call a meeting of shareholders for the
purpose of electing Trustees whenever less than a majority of the Trustees have
been elected by shareholders. Each Trustee elected by the shareholders or by the
Board of Trustees shall serve until the next meeting of shareholders, if any,
called for the purpose of reelecting such Trustee or electing a successor to
such Trustee and until the election and qualification of his or her successor,
or until he or she sooner dies, resigns or is removed. A Trustee may be removed
with or without cause (a) at any meeting called for such purpose by a vote of
two-thirds of the outstanding shares, (b) by the holders of two-thirds of the
outstanding shares by declaration in writing filed with the Custodian of the
securities of the Trust, or (c) by vote of a majority of the Trustees then in
office.
* Paul H. LeFevre, Jr. and Robert R. Baird
B. Effect of Death, Resignation, Etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity of the Trustees, or
any one of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust.
C. Powers. Subject to the provisions of this Declaration of Trust, the
business of the Trust shall be managed by the Board of Trustees, and they shall
have all powers necessary or convenient to carry out that responsibility.
Without limiting the foregoing, the Board of Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent that such
By-Laws do not reserve that right to the shareholders; they may fill vacancies
in their number, including vacancies resulting from increases in their number,
and may elect and remove such officers and appoint and terminate such agents as
they consider appropriate; they may appoint from their own number, and
terminate, any one or more committees consisting of two or more Trustees,
including an executive committee which may, when the Board of Trustees is not in
session, exercise some or all of the power and authority of the Board of
Trustees as the Trustees may determine; they may appoint an advisory board, the
members of which shall not be Trustees and need not be shareholders; they may
employ one or more custodians of the assets of the Trust and may authorize such
custodians to employ subcustodians and to deposit all or any part of such assets
in a system or systems for the central handling of securities, retain a transfer
agent or a shareholder services agent, or both, provide for the distribution of
shares by the Trust, through one or more principal underwriters or otherwise,
set record dates for the determination of shareholders with respect to various
matters and in general delegate such authority as they consider desirable to any
officers of the Trust, to any committee of the Board of Trustees and to any
agent or employee of the Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Board of Trustees shall have power
and authority:
1. To invest and reinvest in securities, options, futures
contracts, options on futures contracts and other property, and to hold cash
uninvested;
2. To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust;
3. To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Board of Trustees
shall deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Board of Trustees shall deem
proper;
4. To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities or other assets;
5. To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in the name of the
Trustees or of the Trust or in the name of a custodian, subcustodian or other
depository or a nominee or nominees or otherwise;
6. To allocate assets, liabilities and expenses of the Trust to a
particular series of shares or to apportion the same among two or more series,
provided that any liabilities or expenses incurred by a particular series of
shares shall be payable solely out of the assets of that series;
7. To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of which is
or was held in the Trust; to consent to any contract, lease, mortgage, purchase
or sale of property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security held in the Trust;
8. To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Board of Trustees
shall deem proper, and to agree to pay, and to pay, such portion of the expenses
and compensation of such committee, depositary or trustee as the Board of
Trustees shall deem proper;
9. To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust on any matter in controversy, including but not limited to
claims for taxes;
10. To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
11. To borrow funds, securities or other assets;
12. To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guarantee or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust property or any part thereof to secure any of or all of such obligations
or obligations incurred pursuant to Clause II hereof;
13. To purchase and pay for, entirely out of Trust property, such
insurance as they may deem necessary or appropriate for the conduct of the
business, including without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the shareholders, Trustees,
officers, employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action alleged to
have been taken or omitted by any such person as shareholder, Trustee, officer,
employee, agent, investment adviser or manager, principal underwriter, or
independent contractor, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have the
power to indemnify such person against such liability;
14. To pay pensions for faithful service, as deemed appropriate by the
Board of Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees, and agents of the Trust;
15. To pay remuneration to each Trustee for his services, including
reimbursement of expenses incurred, as shall be fixed from time to time by
resolution of the Board of Trustees. Nothing herein contained shall be construed
to preclude any Trustee from serving the Trust in any other capacity and
receiving compensation therefor; and
16. To do all acts and things appropriate in the furtherance of the
foregoing and in furtherance of the purposes of the Trust.
The Board of Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by Trustees. Except as
otherwise provided herein or from time to time in the By-Laws, any action to be
taken by the Board of Trustees may be taken by a majority of the Trustees
present at a meeting of the Board of Trustees (a quorum being present), within
or without Massachusetts, including any meeting held by means of conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting. or
by written consent of a majority of the Trustees then in office.
D. Payment of Expenses by Trust. The Board of Trustees is authorized to
pay or to cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, as they deem appropriate, all
expenses, fees, charges, taxes and liabilities incurred or arising in connection
with the Trust, or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser or manager,
principal underwriter, auditor, counsel, custodian, transfer agent, shareholder
servicing agent, and such other agents or independent contractors and such other
expenses and charges as the Board of Trustees may deem necessary or proper to
incur, provided, however, that all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with a particular series of
shares, as determined by the Board of Trustees, shall be payable solely out of
the assets of that series.
E. Ownership of Assets of the Trust. Title to all of the assets of the
Trust, including all assets allocated to each series of shares, shall at all
times be considered as vested in the Board of Trustees.
F. Advisory, Management and Distribution. Subject to a vote meeting the
requirements of the 1940 Act, the Board of Trustees may, at any time and from
time to time, contract for exclusive or nonexclusive advisory and/or management
services with any partnership, corporation, trust, association or other
organization (the 'Adviser'), every such contract to comply with such
requirements and restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms interpretive of or in addition to said
requirements and restrictions as the Board of Trustees may determine, including.
without limitation, authority to determine from time to time what investments
shall be purchased, held, sold or exchanged and what portion, if any, of the
assets of the Trust shall be held uninvested, and to make changes in the Trust's
investments. The Board of Trustees may also, at any time and from time to time,
contract with the Adviser or any other partnership, corporation, trust,
association or other organization, appointing it exclusive or nonexclusive
distributor or principal underwriter for the shares, every such contract to
comply with such requirements and restrictions as may be set forth in the
By-Laws; and any such contract may contain such other terms interpretive of or
in addition to said requirements and restrictions as the Board of Trustees may
determine.
The fact that:
(i) any of the shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee,
employee, manager, adviser, principal underwriter, or
distributor or agent of or for any corporation, trust,
association, or other organization, or of or for any parent or
affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder services or
other agency contract may have been or may hereafter be made,
or that any such organization, or any parent or affiliate
thereof, is a shareholder or has an interest in the Trust, or
that
(ii) any corporation, trust, association or other organization
with which an advisory or management contract or principal
underwriter's or distributor's contract, or transfer,
shareholder services or other agency contract may have been or
may hereafter be made by the Trust also has an advisory or
management contract, or principal underwriters or
distributor's contract, or transfer, shareholder services or
other agency contract with one or more other corporations,
trusts, associations, or other organizations, or has other
business or interests,
shall not affect the validity of any such contract or disqualify any
shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its shareholders.
EIGHTH: Liability:
A. Trustees, Shareholders, Etc, Not Personally Liable: Notice. All
persons extending credit to, contracting with or having any claim against the
Trust or a particular series of shares shall look only to the assets of the
Trust or the assets of that particular series of shares for payment under such
credit, contract or claim; and neither the shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future shall be personally liable therefor.
The Board of Trustees shall not be responsible or liable in any event
for any neglect or wrongdoing of any officer, agent, employee, investment
adviser or principal underwriter of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee, but nothing herein
shall protect any Trustee against any liability to which such Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by any Trustees or Trustee or by any officers or officer shall give
notice that this Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the shareholders individually but
are binding only upon the assets and property of the Trust, or of the particular
series of shares to which such instrument relates, and may contain such further
recital as he or she or they may deem appropriate, but the omission thereof
shall not operate to bind any Trustees or Trustee or officers or officer, or
shareholders or shareholder individually.
Every note, bond, contract, instrument, certificate, share or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Board of Trustees or any of them in connection with the Trust shall
be conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee, and such Trustees or Trustee shall
not be personally liable thereon.
B. Trustee's Good Faith Action: Expert Advice: No Bond or Surety. The
exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. 'Me
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
C. Liability of Third Persons Dealing with Trustees, No person dealing
with the Board of Trustees or any Trustee shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by either or to
see to the application of any payments made or property transferred to the Trust
or upon its order.
NINTH: Determination of Net Profits, Etc.: Dividends.
With respect to each series of shares authorized by the Board of
Trustees, the Board is expressly authorized to determine in accordance with
generally accepted accounting principles and practices what constitutes net
income, profits or earnings, or surplus and capital to include in net income,
profits or earnings the portion of subscription or redemption prices
attributable to accrued net income, profits or earnings in such prices, and to
determine what accounting periods shall be used by the Trust for any purpose,
whether annual or any other period, including daily; to set apart out of any
funds of such series such reserves for such purposes as it shall determine and
to abolish the same; to declare and pay dividends and distributions in cash,
securities, or other property from surplus or capital or any funds of such
series legally available therefor, at such intervals (which may be as frequently
as daily) or on such other periodic basis as it shall determine; to declare such
dividends or distributions by means of a formula or other method of determining
at meetings held less frequently than the frequency of the effectiveness of such
declarations; to establish payment dates for dividends or any other
distributions on any basis, including dates occurring less frequently than the
effectiveness of the declaration thereof; and to provide for the payment of
declared dividends on a date earlier than the specified payment date in the case
of shareholders of such series redeeming their entire ownership of shares of
such series. Inasmuch as the computation of net income, profits or earnings for
Federal income tax purposes may vary from the computation thereof on the books,
the above provisions shall be interpreted to give to the Board of Trustees the
power in its discretion to distribute for any fiscal year as dividends and as
capital gain distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce its liability for taxes.
No dividend or distribution (including, without limitation, any
distribution paid upon termination of the Trust or of any series) with respect
to, nor any redemption or repurchase of, the shares of any series shall be
effected by the Trust other than from the assets of such series.
TENTH: Indemnification.
A. Indemnification Generally. The Trust shall indemnify, to the fullest
extent permitted by applicable law, each person who is or has been a Trustee or
officer (including each person who serves or has served at the Trust's request
as a director, officer, or trustee of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise, and any heir,
administrator or executor of such person) (a "Covered Person') against all
liabilities and expenses, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
attorney's fees reasonably incurred by such Covered Person in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil, criminal, administrative or investigative, and any appeal therefrom (a
'Proceeding'), before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party or otherwise or
with which such person may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a Covered Person.
B. Determination of Eligibility, Notwithstanding the provisions of
Section A of Article TENTH, to the extent required under the 1940 Act,
(i) Article TENTH, Section A, shall not protect any person
against any liability to the Trust 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 shall be permitted unless a
determination that such person was not so liable shall have been made
on behalf of the Trust by (a) the vote of a majority of the
"disinterested, non-party Trustees," as defined below, or (b) an
independent legal counsel as expressed in a written opinion; and
(iii) the Trust shall not advance attorneys' fees incurred by
a Covered Person in connection with Proceeding unless the Trust
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 shall provide security for
his undertaking, or (b) the Trust shall be insured against losses
arising by reason of any lawful advances, or (c) a majority of the
disinterested, non-party Trustees of the Trust or an independent '
legal counsel, as expressed in a written opinion, shall determine,
based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification. Such
undertaking shall provide that the Covered Person to whom the advance
was made shall not be obligated to repay pursuant to such undertaking
until the final determination of any pending Proceeding in a court of
competent jurisdiction, including appeals therefrom, concerning the
right of such Covered Person to be indemnified by the Trust or the
obligation of such person to repay pursuant to the undertaking.
Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in accordance
with this Section 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 the Trust or to have been liable to the Trust
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.
As used in this Article TENTH, the term disinterested, "non-party
Trustee" is a Trustee who is not an "interested person" of the Trust, as defined
in Section 2(a)(19) of the 1940 Act and against whom none of the Proceedings in
question or another action, suit or other Proceeding on the same or similar
grounds is then or has been pending.
C. Indemnification Not Exclusive. The rights of indemnification hereby
provided shall not be exclusive of or affect any other rights to which any such
Covered Person may be entitled. Nothing contained in this Article shall affect
any rights to indemnification to which Covered Persons and other persons may be
entitled by contract (apart from the provisions of this Article TENTH) or
otherwise under law, nor to limit the power of the Trust to indemnify such
persons.
D. Shareholders, In case any shareholder or former shareholder shall be
held to be personally liable solely by reason of his or her being or having been
a shareholder and not because of his or her acts or omissions, his or her
noncompliance with applicable federal tax law, or for some other reason, the
shareholder or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled to be
held harmless from and indemnified against all loss and expense arising from
such liability.
E. Contractual Rights. This Article TENTH shall be deemed to be a
contract between the Trust and each person who is a Covered Person at any time
this Article TENTH is in effect. Any repeal or other modification of this
Article TENTH or of any applicable laws shall not limit any rights of
indemnification then existing or arising out of events, acts, or omissions
occurring prior to such repeal or modification, including, without limitation,
the right to indemnification for Proceedings commenced after such repeal or
modification to enforce this Article TENTH with respect to events, acts or
omissions prior to such repeal or modification.
F. Protection of Rights. If a written claim for indemnification by a
Covered Person under this Article TENTH is not promptly paid in full by the
Trust after receipt by the Trust of such a claim, or if expenses have not been
promptly advanced after compliance by a Covered Person with the requirements of
this Article TENTH for such advancement, such Covered Person may, at any time
thereafter, bring suit against the Trust to recover the unpaid amount of the
claim or the advancement of expenses. If successful, in whole or in part, in
such suit, such Covered Person shall also be entitled to be paid the reasonable
expense therefor. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the requirements of this Article TENTH
for advancement of expenses have been met by such Covered Person) that the
indemnification of the Covered Person is prohibited, but the burden of proving
such defense shall be on the Trust. Neither the failure of the Trust, including
its disinterested non-party Trustees or independent legal counsel, to have made
a determination that indemnification of a Covered Person is proper in the
circumstances because he or she has met the applicable standard of conduct
required under the 1940 Act, nor the actual determination by the Trust,
including its disinterested non-party Trustees or independent legal counsel that
the Covered Person had not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that such Covered Person had not
met the applicable standard of conduct.
ELEVENTH: Reservation of Right to Amend.
A. By Board of Trustees. Except when otherwise required by the 1940
Act, this Declaration of Trust may be amended at any time by a majority of the
Trustees then in office, provided notice of any amendment (other than amendments
having the purpose of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision contained
herein, or having any other purpose which is ministerial or clerical in nature)
shall be mailed promptly to shareholders of record at the close of business on
the effective date of such amendment
B. By Shareholders. Except when otherwise required by the 1940 Act,
this Declaration of Trust may be amended at any time by a majority vote of the
shares of the Trust entitled to be voted.
TWELFTH: Shareholders' Voting Powers and Meetings.
A. Shareholders' Voting Powers. The shareholders shall have power to
vote only (i) for the election or removal of Trustees as provided in Article
SEVENTH, Section A; (ii) with respect to any investment adviser as provided in
Article SEVENTH, Section F; (iii) with respect to any termination of this Trust
or a series thereof to the extent and as provided in Article FOURTEENTH; (iv)
with respect to any amendment of this Declaration of Trust to the extent and as
provided in Article ELEVENTH, Section B; (v) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the shareholders;
and (vi) with respect to such additional matters relating to the Trust as may be
required by the 1940 Act, this Declaration of Trust, the By-Laws or any
registration of the Trust with the SEC, or as the Board of Trustees may consider
necessary or desirable. Each whole share outstanding on the record date
established in accordance with the By-Laws shall be entitled to one vote as to
any matter on which it is entitled to vote and each fractional share shall be
entitled to a proportionate fractional vote. Notwithstanding any other provision
of this Declaration of Trust, on any matter submitted to a vote of shareholders,
shares shall be voted in the aggregate and not by individual series except: (1)
when required by the 1940 Act or other applicable law, shares shall be voted by
individual series; or (2) when the Board of Trustees has determined that the
matter affects only the interests of one or more series, then shareholders of
the unaffected series shall not be entitled to vote thereon. There shall be no
cumulative voting in the election of the Board of Trustees.
Shares may be voted in person or by proxy. A proxy with respect to
shares held in the names of two or more persons shall be valid if executed by
any one of them unless at or prior to exercise of the proxy, the Trust receives
a specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a shareholder shall be deemed valid
unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. At all meetings of shareholders, unless
inspectors of election have been appointed, all questions relating to the
qualification of voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the meeting. Unless
otherwise specified in the proxy, the proxy shall apply to all shares of each
series of the Trust owned by the shareholder.
Until shares are issued, the Board of Trustees may exercise all rights
of shareholders and may take any action required by law, this Declaration of
Trust or the By-Laws to be taken by shareholders.
B. Meetings. Meetings of shareholders of the Trust or of any series may
be called by the Board of Trustees, the President, the Executive Vice-President,
any Vice-President, or such other person or persons as may be specified in the
By-Laws and held from time to time for the purpose of taking action upon any
matter requiring the vote or the authority of the shareholders of the Trust or
any series as herein provided or upon any other matter deemed by the Board of
Trustees to be necessary or desirable. Meetings of shareholders of the Trust or
of any series shall be called by the Secretary or such other person or persons
as may be specified in the By-Laws upon written application by shareholders
holding at least 10% of the outstanding shares of the Trust, if shareholders of
all series are required hereunder to vote in the aggregate and not by individual
series at such meeting, or of any series, if shareholders of such series are
entitled hereunder to vote by individual series at such meeting, requesting that
a meeting be called for a purpose requiring action by the shareholders as
provided herein or in the By-Laws and provided that such application shall state
the purpose or purposes of such meeting and the matters proposed to be acted on.
C. Quorum and Required Vote, Thirty percent of the shares entitled to
vote shall be a quorum for the transaction of business at a shareholders'
meeting, except that if any provision of law or of this Declaration of Trust
permits or requires that holders of any series shall vote as a series, then
thirty percent of the aggregate number of shares of each series entitled to vote
shall be necessary to constitute a quorum for the transaction of business by
that series. Any lesser number, however, shall be sufficient for adjournments or
if no shares are represented thereat, any officer present thereat entitled to
preside or act as secretary of such meeting may adjourn the meeting. Any
adjourned session or sessions may be held within a reasonable time after the
date set for the original meeting without the necessity of further notice.
Except when a larger vote is required by any provision of this Declaration of
Trust or the By-Laws, a majority of the shares voted shall decide any questions
and a plurality shall elect any Trustee, provided that where any provision of
law or of this Declaration of Trust permits or requires that the holders of any
series shall vote as a series, then a majority of the shares of that series
voted on the matter shall decide that matter insofar as that series is
concerned.
The vote upon any question shall be by written ballot whenever
requested by any person entitled to vote but, unless such a request is made,
voting may be conducted by voice vote or in any other way approved by the
meeting.
D. Place of Meeting. All shareholders' meetings shall be held at the
office of the Trust in the City of Boston, State of Massachusetts, except that
the Board of Trustees or the President of the Trust may fix a different place of
meeting within the United States, which shall be specified in the notice or
waiver of notice of such meeting.
E. Notice of Meetings: Adjournment. The Secretary or an Assistant
Secretary shall cause notice of the place, date and hour and the purpose or
purposes for which a meeting is called, to be mailed, postage prepaid, not less
than seven days before the date of such meeting, to each shareholder entitled to
vote at such meeting, at his address as it appears on the records of the Trust.
Notice of any shareholders' meeting need not be given to any shareholder who
shall sign a written waiver of such notice, whether before or after the time of
such meeting, which waiver shall be filed with the record of such meeting, or to
any shareholder who shall attend such meeting in person or by proxy. A meeting
of shareholders convened on the date for which it was called may be adjourned
from time to time, without further notice, to a date not more than 120 days
after the original record date.
F. Share Ledger. It shall be the duty of the Secretary or Assistant
Secretary of the Trust to cause an original or duplicate share ledger to be
maintained at the office of the Trust's transfer agent. Such share ledger may be
in written form or any other form capable of being converted into written form
within a reasonable time for visual inspection.
G. Action by Written Consent. Any action taken by shareholders may be
taken without a meeting if a majority of shareholders entitled to vote on the
matter (or such larger proportion thereof as shall be required by any express
provision of this Declaration of Trust or the By-Laws) consent to the action in
writing and such written consents are filed with the records of the meetings of
shareholders. Such consent shall be treated for all purposes as a vote taken at
a meeting of shareholders.
THIRTEENTH: Use of Name.
The Trust acknowledges that it is adopting its trust name, and may
adopt the names of various series of the Trust, through permission of Keyport
Life Insurance Company, a Rhode Island corporation, and agrees that Keyport Life
Insurance Company reserves to itself and any successor to its business the right
to grant the non-exclusive right to use the name "Keyport Variable Investment
Trust," or any similar name to any other entity, including but not limited to
any investment company of which Keyport Life Insurance Company or any subsidiary
or affiliate thereof or any successor to the business thereof shall be the
investment adviser.
FOURTEENTH: Miscellaneous.
A. Duration and Termination of Trust, Unless terminated as proved
herein, the Trust shall continue without limitation of time. The Trust may be
terminated at any time by the Trustees by written notice to the shareholders
unless otherwise required by law. Any series of shares may be terminated at any
time by the Trustees by written notice to the shareholders of such series unless
otherwise required by law.
Upon termination of the Trust or of any one or more series of shares,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated as may be determined by the
Trustees, The Trust shall, in accordance with such procedures as the Trustees
consider appropriate, reduce the remaining assets to distributable form in cash
or shares or other securities, or any combination thereof, and distribute the
proceeds to the shareholders of the series involved, ratably according to the
number of shares of such series held by the several shareholders of such series
on the date of termination.
Anything contained herein or otherwise to the contrary notwithstanding,
the Trustees upon affirmative majority vote, may (a) select any entity, be it a
corporation, association, trust or other kind of organization, or organize any
such kind of entity, to take over the Trust property and carry on the affairs of
the Trust, (b) merge the Trust into or sell, convey and transfer the Trust
property to any such entity for such consideration and upon terms and conditions
without limitation as they in their discretion deem suitable, and (c) take such
other action as they may in their discretion deem either necessary or
appropriate to accomplish or implement any action taken hereunder.
B. Filing of Copies, References, Headings. The original or a copy of
this instrument and of each amendment hereto shall be kept at the office of the
Trust where it may be inspected by any shareholder. A copy of this instrument
and of each amendment hereto shall be filed by the Trust with the Secretary of
the Commonwealth of Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such amendments have been made and as to any
matters in connection with the Trust hereunder; and, with the same effect as if
it were the original, may rely on a copy certified by an officer of the Trust to
be a copy of this instrument or of any such amendments. In this instrument and
in any such amendment, references to this instrument, and all expressions such
as "herein', "hereof", and "hereunder', shall be deemed to refer to this
instrument as amended or affected by any such amendments. Headings are placed
herein for convenience of reference only and shall not be taken as a part hereof
or control or affect the meaning, construction or effect of this instrument.
This instrument may be executed in any number of counterparts, each of which
shall be deemed an original.
C. Applicable Law. This Declaration of Trust is made in the
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
D. Severability. If any Article or other portion of this Declaration of
Trust shall be invalidated or held to be unenforceable on any ground by any
court of competent jurisdiction, the decision of which shall have not been
reversed on appeal, such invalidity or unenforceability shall not affect the
other provisions hereof, and this Declaration of Trust shall be construed in all
respects as if such invalid or unenforceable provision has been omitted
herefrom.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
in the City of Boston, Massachusetts, for himself and his assigns, as of the day
and year first above written.
Robert R. Baird
Trustee
COMMONWEALTH OF MASSACHUSETTS )
)SS:
COUNTY OF SUFFOLK )
Boston MARCH 4, 1993.
Then personally appeared the above-named ROBERT R. BAIRD Trustee, and
acknowledged the foregoing instrument to be his free act and deed, before me.
Colleen McGillicuddy
Notary Public
My commission expires: 9-26-97
(NOTARIAL SEAL)
Keyport Variable Investment Trust
BY-LAWS
MARCH 4, 1993
ARTICLE I
AGREEMENT AND DECLARATION OF TRUST,
LOCATION OF OFFICES AND SEAL
Section 1.01. Agreement and Declaration of Trust. These By-Laws shall be subject
to the Agreement and Declaration of Trust as now in effect and as hereafter
amended ("Declaration of Trust") of Keyport Variable Investment Trust, a
Massachusetts business trust established by the Declaration of Trust (the
"Trust"). For all purposes, except as noted in these By-Laws, "series" as used
hereinafter shall refer to the Trust's investment portfolios ('Funds") and any
series issued by such Funds.
Section 1.02. Principal Office. A principal office of the Trust shall be located
in Boston, Massachusetts. The Trust may, in addition, establish and maintain
such other offices and places of business as the Board of Trustees may from time
to time determine.
Section 1.03. Seal. The seal of the Trust shall be circular in form and shall
bear the name of the Trust, the word "Massachusetts," and the year of its
organization. The form of the seal shall be subject to alteration by the Board
of Trustees and the seal may be used by causing it or a facsimile to be
impressed or affixed or printed or otherwise reproduced. Any officer or Trustee
of the Trust shall have authority to affix the seal of the Trust to any document
requiring the same. Unless otherwise required by the Board of Trustees, the seal
shall not be necessary to be placed on, and its absence shall not impair the
validity of, any document, instrument or other paper executed and delivered by
or on behalf of the Trust.
ARTICLE II
BOARD OF TRUSTEES
Section 2.01. Number and Term of Office. The Board of Trustees shall initially
consist of the initial sole Trustee and his or her successor, which number may
be increased or subsequently decreased by a resolution of a majority of the
entire Board of Trustees, provided that the number of Trustees shall not be less
than one nor more than twenty-three. Each Trustee (whenever selected) shall hold
office until the next meeting of shareholders and until his successor is elected
and qualified or until his earlier death, resignation, or removal. The initial
Trustee shall be the person designated in the Declaration of Trust.
Section 2.02. Power to Declare Dividends.
(a) The Board of Trustees, from time to time as it may deem advisable, may
declare and pay dividends to the shareholder of any series of the Trust in cash
or other property of that series, out of any source available to that series for
dividends, according to the respective rights and interest of shareholders of
that series and in accordance with the applicable provisions of the Declaration
of Trust.
(b) The Board of Trustees may prescribe, from time to time, that dividends
declared on shares of a series may be payable at the election of any of the
shareholders of that series (exercisable before the declaration of the
dividend), either in cash or in shares of that series; provided that the net
asset value of the shares received by a shareholder electing to receive
dividends in shares (determined as of such time as the Board of Trustees shall
have prescribed in accordance with the Declaration of Trust) shall not exceed
the full amount of cash to which the shareholder would be entitled if he elected
to receive cash.
Section 2.03. Annual and Regular Meetings. Annual and regular meetings of the
Board of Trustees may be held without call or notice and at such places at such
times as the Board of Trustees may from time to time determine provided that
notice of the first regular meeting following any such determination shall be
given to absent Trustees. Unless otherwise required by the Investment Company
Act of 1940 (the "1940 Act"), members of the Board of Trustees or any committee
designated thereby may participate in a meeting of such Board or committee by
means of a conference telephone or other communications equipment, by means of
which all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.
Section 2.04. Special Meeting. Special meetings of the Board of Trustees shall
be held whenever called and at such place and time determined by the President,
or by any one of the Trustees, at the time being in office, at the time and
place specified in the respective notices or waivers of notice of such meetings.
Section 2.05. Notice. If notice of a meeting of the Board of Trustees is
required or desired to be given, notice stating the time and place shall be
mailed to each Trustee at his residence or regular place of business at least
two days before the day on which the meeting is to be held, or caused to be
delivered to him personally or to be transmitted to him by telephone, telegraph,
cable, or wireless at least one day before the meeting. A notice or waiver of
notice of a meeting need not specify the purpose thereof.
Section 2.06. Waiver of Notice. No notice required or desired to be given of any
meeting need be given to any Trustee who attends such meeting in person or to
any Trustee who waives notice of such meeting in writing (which waiver shall be
filed with records of such meeting), whether before or after the time of the
meeting.
Section 2.07. Quorum and Voting. At all meetings of the Board of Trustees, the
presence of a majority of the Trustees then in office shall constitute a quorum
for the transaction of business. In the absence of a quorum a majority of the
Trustees present may adjourn the meeting without further notice, from time to
time, until a quorum shall be present The action of a majority of the Trustees
present at a meeting at which a quorum is present shall be the action of the
Board of Trustees, unless the concurrence of a greater proportion of a
proportion of Trustees who a-re not interested persons as defined by the 1940
Act is required for such action by law, by the Declaration of Trust, or by these
By-Laws.
Section 2.08. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Trustees may be taken without a meeting,
unless otherwise required by the 1940 Act, if all the Trustees consent to the
action in writing, and such written consents are filed with the minutes of
proceedings of the Board of Trustees. Such consents shall be treated as a vote
for all purposes.
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. By resolution adopted by the Board of Trustees,
the Board may designate one or more committees, including an Executive
Committee. The number composing such committees (not less than two in the case
of any Executive Committee) shall be determined by the Board of Trustees. Each
member of a committee shall be a Trustee and shall hold office during the
pleasure of the Board.
Section 3.02. Powers of the Executive Committee. Unless otherwise provided by
resolution of the Board of Trustees, the Executive Committee shall have and may
exercise all powers of the Board of Trustees in the management of the business
and affairs of the Trust that may lawfully be exercised by an executive
committee, except the power to recommend to shareholders any matter requiring
shareholder approval amend the Declaration of Trust or By-Laws, or approve any
merger or share exchange that does not require shareholder approval.
Section 3.03. Other Committees of the Board of Trustees. To the extent
provided by resolution of the Board, other committees of the Board shall have
and may exercise any of the powers that may lawfully be granted to the Executive
Committee.
Section 3.04. Proceedings, Quorum and Manner of Acting. In the absence of
appropriate resolution of the Board of Trustees, each committee may adopt such
rules and regulations governing its proceedings, quorum and manner of acting, as
it shall deem proper and desirable. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum may appoint a member of the Board of Trustees to act in the
place of such absent member.
Section 3.05. Other Committees. The Board of Trustees may appoint other
committees, each consisting of one or more persons, who need not be Trustees.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the Board of Trustees, but shall not
exercise any power which may lawfully be exercised only by the Board of Trustees
or a committee thereof.
Section 3.06. Action without a Meeting. Any action required or permitted to be
taken at any meeting of any committee may be taken without a meeting, if all the
members thereof consent to the action in writing, and such written consents are
filed with the minutes of proceedings of the Board of Trustees or of the
committee.
Section 3.07. Waiver of Notice. Whenever any notice of the time, place or
purpose of any meeting of any committee is required to be given under the
provisions of any applicable law or under the provisions of the Declaration of
Trust or these By-Laws, a waiver thereof in writing, signed by the person or
persons entitled to such notice and filed with the records of the meeting,
whether before or after the holding of such meeting, or actual attendance at the
meeting in person, shall be deemed equivalent to the giving of such notice to
such persons.
ARTICLE IV
OFFICERS
Section 4.01. General. The officers of the Trust shall be a President, a
Secretary, and a Treasurer, who shall be elected by the Trustees. The Trustees
may elect or appoint such other officers or agents as they deem advisable
including, without limitation, a Controller, one or more Vice Presidents, one or
more Assistant Treasurers, and one or more Assistant Secretaries.
Section 4.02. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration of Trust of these by-laws, the President, the
Treasurer and the Secretary shall each hold office until his successor shall
have been duly elected and qualified or until his or her earlier death,
resignation or removal, and all other officers shall hold office at the pleasure
of the Trustees. Any person may hold one or more offices of the Trust except the
offices of President and Vice-President, but no officer shall execute,
acknowledge, or verify an instrument in more than one capacity, if such
instrument is required by law, by the Declaration of Trust, or by these By-Laws
to be executed, acknowledged or verified by two or more officers. The Chairman
of the Board, if any, shall be chosen from among the Trustees of the Trust and
may hold such office only so long as he continues to be a Trustee. No other
officer need be a Trustee.
Section 4.03. Resignation. Any officer may resign his office at any time by
delivering a written resignation to the Board of Trustees, the President, the
Secretary, or any Assistant Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 4.04. Removal. Any officer may be removed from office, whenever in the
Board's judgment the best interest of the Trust will be served thereby, by the
vote of a majority of the Trustees then in office given at any regular or
special meeting. In addition, any officer or agent appointed by an officer or
committee may be removed, either with or without cause, by such appointing
officer or committee.
Section 4.05. Chairman of the Board. In the absence or disability of the
President, the Chairman of the Board, if there be such an officer, shall preside
at all shareholders' meetings and at all meetings of the Board of Trustees. He
shall have such other powers and perform such other duties as may be assigned to
him or her from time to time by the Board of Trustees.
Section 4.06. Powers and Duties of the President. The President may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and shall preside at all meetings of the Shareholders. Subject to the control of
the Trustees and to the control of any Committees of the Trustees, within their
respective spheres, as provided by the Trustees, he shall at all times exercise
a general supervision and direction over the affairs of the Trust. He shall have
the power to employ attorneys and counsel for the Trust and to employ such
subordinate officers. agents, clerks and employees as he may find necessary to
transact the business of the Trust. He shall also have the power to grant,
issue, execute or sign such powers of attorney, proxies or other documents as
may be deemed advisable or necessary in furtherance of the interests of the
Trust. The President shall have such other powers and duties, as from time to
time may be conferred upon or assigned to him by the Trustees.
Section 4.07. Powers and Duties of Vice Presidents. In the absence or disability
of the President, the Vice President or, if there be more than one Vice
president, any Vice President designated by the Trustees shall perform all the
duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees and the President.
Section 4.08. Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial officer of the Trust, and, in the absence of a Controller of
the Trust serving as the principal accounting officer, shall be the principal
accounting officer of the Trust. He shall deliver all funds of the Trust which
may come into his hands to such Custodian as the Trustees may employ pursuant to
Article V of these By-Laws. He shall render a statement of condition of the
finances of the Trust to the Trustees as often as they shall require the same
and he shall in general perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Trustees. The Treasurer shall give a bond for the faithful discharge of his
duties, if required so to do by the Trustees, in such sum and with such surety
or sureties as the Trustees shall require.
Section 4.09. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Trustees and of the Shareholders in proper books
provided for that purpose; he shall have custody of the seal of the Trust; he
shall have charge of the Share transfer books, lists and records unless the same
are in the charge of the Transfer Agent. He shall attend to the giving and
serving of all notices by the Trust in accordance with the provision of these
By-Laws and as required by law; and subject to these By-Laws, he shall in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Trustees.
Section 4.10. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform such other duties as from time to time may be assigned to him by
the Trustees. Each Assistant Treasurer shall give a bond for the faithful
discharge of his duties if required so to do by the Trustees, in such sum and
with such surety or sureties as the Trustees shall require.
Section 4.11. Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him by the Trustees.
Section 4.12. Remuneration. The compensation, if any, or other compensation of
the officers and Trustees of the Trust shall be fixed from time to time by the
Board of Trustees.
Section 4.13. Surety Bonds. The Board of Trustees may require any officer or
agent of the Trust to execute a bond to the Trust (including, without
limitation, any bond required by the 1940 Act and the rules and regulations of
the SEC thereunder) in such sum and with such surety or sureties as the Board of
Trustees may determine, conditioned upon the faithful performance of his duties
to the Trust, including responsibility for negligence and for the accounting of
any of the Trust's property, funds, or securities that may come into his hands.
ARTICLE V
CUSTODY OF SECURITIES
Section 5.01. Employment of a Custodian. The Trust shall place and at all times
maintain in the custody of a Custodian (including any sub-custodian for the
Custodian) all securities and similar investments owned by the Trust for the
benefit of any series and cash representing the proceeds from sales of
securities owned by the Trust for the benefit of any series and of capital stock
or other units of beneficial interest issued to the Trust for the benefit of any
series, payments of principal upon securities owned by the Trust for the benefit
of any series, or capital distribution in respect to capital stock or other
units of beneficial interest owned by the Trust for the benefit of any series,
pursuant to a written contract with such Custodian. The Custodian shall be a
bank or trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits (as shown in its last published report).
Section 5.02. Provisions of Custodian Contract. The Custodian contract shall be
upon such terms and conditions and may provide for such compensation as the
Board of Trustees deems necessary or appropriate, provided that such contract
shall include all such provisions that are required by, and shall otherwise
comply with, the applicable provisions of the 1940 Act and the rules and
regulations thereunder as in effect from time to time.
ARTICLE VI
EXECUTION OF INSTRUMENTS, RIGHTS AS SECURITY HOLDER
Section 6.01. General. All deeds, documents, transfers, contracts, agreements
and other instruments requiring execution by the Trust shall be signed by the
President, any Vice-President, or the Treasurer, or as the Board of Trustees
may otherwise, from time to time, authorize. Any such authorization may be
general or confined to specific instances.
Section 6.02. Rigbts as Security Holder. Unless otherwise ordered by the Board
of Trustees, any officer shall have full power and authority on behalf of the
Trust to (1) exercise (or waive) any and all rights, powers and privileges
incident to the ownership of any securities or other obligations which may be
owned by the Trust; and (2) attend and to act and to vote, or in the name of the
Trust to execute proxies to vote, at any meeting of security holders of any
company in which the Trust may hold securities. At any such meeting, any officer
shall possess and may exercise (in person or by proxy) any and all rights,
powers and privileges incident to the ownership of such securities.
ARTICLE VII
SHARES OF BENEFICIAL INTEREST
Section 7.01. Certificates. Each shareholder shall be entitled, upon request, to
a certificate or certificates which shall represent and certify the number,
kind, series and class of full shares owned by him in the Trust. No certificates
shall be issued for fractional shares. Each certificate shall be signed by the
President or a Vice President and countersigned by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and shall be sealed with
the Seal. The signatures may be either manual or facsimile signatures and the
seal may be either facsimile or any other form of seal. In case any officer who
has signed any certificate ceases to be an officer of the Trust before the
certificate is issued, the certificate may nevertheless be issued by the Trust
with the same effect as if the officer had not ceased to be such officer as of
the date of its issue.
Section 7.02. Uncertificated Shares. The Trust's share ledger shall be deemed to
represent and certify the number of full and/or fractional shares of a series
owned of record by a shareholder in those instances where a certificate for such
shares has not been issued.
Section 7.03. Transfers of Shares. Shares of any series of the Trust shall be
transferable on the books of the Trust at the request of the record holder
thereof in person or by a duly authorized attorney, upon presentation to the
Trust or its transfer agent of a duly executed assignment or authority to
transfer, or proper evidence of succession, and, if the shares are represented
by a certificate, a duly endorsed certificate or certificates of shares
surrendered for cancellation, and with such proof of the authenticity of the
signatures and as to other relevant matters as the Trust or its transfer agent
may reasonably require.
The transfer shall be recorded on the books of the Trust, the old certificates,
if any, shall be canceled, and the new record holder, upon request, shall be
entitled to a new certificate or certificates.
Section 7.04. Registered Shareholders. The Trust shall be entitled to treat the
holder of record of shares of each series as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof except as otherwise provided by the laws of
Commonwealth of Massachusetts.
Section 7.05. Transfer Agents and Registrars. The Board of Trustees may, from
time to time, appoint or remove transfer agents and/or registrars of transfers
of shares of the Trust, and it may appoint the same person as both transfer
agent and registrar. Upon any such appointment being made, all certificates
representing shares thereafter issued shall be countersigned by one of such
transfer agents or by one of such registrars of transfers or by both and shall
not be valid unless so countersigned. If the same person shall be both transfer
agent and registrar, only one countersignature by such person shall be required.
Section 7.06. Fixing of Record Date. The Board of Trustees may fix in advance a
date as a record date for the determination of the shareholders of any series
entitled to notice of or to vote at any meeting of such shareholders or any
adjournment thereof, or to express consent to Trust action in writing without a
meeting, or to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of any change,
conversion, or exchange of shares of such series, or for the purpose of any
other lawful action, provided that such record date shall not be a date more
than 60 days, and, in the case of a meeting of shareholders, not less than 10
days, prior to the date on which the particular action requiring such
determination of shareholders of such series is to be taken. In such case only
such shareholders as shall be shareholders of record of such series on the
record date so fixed shall be entitled to such notice of, and to vote at, such
meeting or adjournment, or to give such consent, or to receive payment of such
dividend or other distribution, or to receive such allotment of rights, or to
exercise such rights, or to take such other action, as the case may be,
notwithstanding any transfer or redemption of any shares of such series on the
books of the Trust after any such record date. If no record date has been fixed
for the determination of shareholders, the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day on which notice of the meeting is mailed,
which shall not be more than 70 days before the meeting, or, if notice is waived
by all shareholders entitled thereto, at the close of business on the tenth day
before the day on which the meeting is held.
Section 7.07. Lost, Stolen, or Destroyed Certificates. Before issuing a new
certificate for shares of any series of the Trust alleged to have been lost,
stolen, or destroyed, the Board of Trustees or any officer authorized by the
Board may, in its or his discretion, require the owner of the lost, stolen, or
destroyed certificate (or his legal representative) to give the Trust a bond or
other indemnity, in such form and in such amount as the Board or any such
officer may direct and with such surety or sureties as may be satisfactory to
the Board or any such officer, sufficient to indemnify the Trust against any
claim that may be made against it on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of such new certificate.
Section 7.08. Discontinuance of Issuance of Certificates. The Trustees may at
any time discontinue the issuance of share certificates and may, by written
notice to each shareholder, require the surrender of share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE VIII
FISCAL YEAR ACCOUNTANT
Section 8.01. Fiscal Year. The fiscal year of the Trust shall be established
by the Board of Trustees.
Section 8.02. Accountant. The Trust shall employ an independent public
accountant or firm of independent public accountants as its Accountant to
examine and certify or issue its report on the financial statements of the
Trust.
ARTICLE IX
AMENDMENTS
Section 9.01. General. Except as provided in Section 9.02 hereof, all ByLaws of
the Trust, whether adopted by the Board of Trustees or the shareholders, shall
be subject to amendment, alteration, or repeat and new By-Laws may be made, by
the affirmative vote of a majority of either:
(a) the holders of record of the outstanding shares of the Trust entitled to
vote to any meeting, the notice or waiver of notice of which shall have
specified or summarized the proposed amendment, alteration, repeal, or new
By-Laws or
(b) the Trustees, at any regular or special meeting.
Section 9.02. By Shareholders Only.
(a) No amendment of any section of these By-Laws shall be made except by the
shareholders of the Trust, if the By-Laws provide that such section may not be
amended, altered or repealed except by the shareholders.
(b) From and after the effectiveness of the Trust's Registration Statement under
the Securities Act of 1933, no amendment of this Article IV or Article X shall
be made except by the shareholders of the Trust.
ARTICLE X
MISCELLANEOUS
Section 10.01. Restrictions and Limitations
(a) The Trust shall not lend assets of the Trust to any officer or Trustee of
the Trust or to any officer, director, or stockholder (or partner of a
stockholder) of, or person financially interested in, the investment adviser or
any underwriter of the Trust, or to the investment adviser of the Trust or to
any underwriter of the Trust.
(b) The Trust shall not restrict the transferability or negotiability of
the shares of the Trust, except in conformity with the statements with respect
thereto contained in the Trust's Registration Statement, and not in
contravention of such rules and regulations as the SEC may prescribe.
(c) The Trust shall not permit any officer or Trustee of the Trust, or any
officer, director, or stockholder (or partner of a stockholder) of the
investment adviser or any underwriter of the Trust to deal for or on behalf of
the Trust with himself as principal or agent, or with any partnership,
association or trust in which he has a financial interest; provided that the
foregoing provisions shall not prevent, to the extent consistent with applicable
securities laws: (1) officers and Trustees of the Trust from buying, holding,
redeeming, or selling shares in the Trust, or from being officers, directors, or
stockholders (or partners of a stockholder) of or otherwise financially
interested in the investment adviser or any underwriter of the Trust; (2)
purchases or sales of securities or other property by the Trust from or to an
affiliated person or to the investment adviser or any underwriter of the Trust,
if such transactions are not prohibited by the 1940 Act or have been exempted by
SEC order from the prohibitions of the 1940 Act; (3) purchases of investments
for the portfolio of the Trust through a securities dealer who is, or one or
more of whose partners, stockholders, officers, or directors is, an officer or
Trustee of the Trust, if such transactions are handled in the capacity of broker
only and commissions charged do not exceed customary brokerage charges for such
services; (4) employment of legal counsel, registrar, transfer agent, dividend
disbursing agent, or custodian who is, or has a partner, stockholder, officer,
or director who is, an officer or Trustee of the Trust, if only customary fees
are charged for services to the Trust; (5) sharing statistical research, legal
and management expenses and office hire and expenses with any other investment
company in which an officer or Trustee of the Trust is an officer, trustee, or
director or otherwise financially interested.
KEYPORT VARIABLE INVESTMENT TRUST
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT ("Agreement"), made this 7th day of June, 1993, between
KEYPORT VARIABLE INVESTMENT TRUST, a business trust organized under the laws of
the Commonwealth of Massachusetts (the "Trust"), on its own behalf and on behalf
of the Colonial-Keyport U.S. Government Fund, the Colonial-Keyport Growth and
Income Fund, and the Colonial-Keyport Utilities Fund (collectively, the
"Funds"), and KEYPORT ADVISORY SERVICES CORP., a corporation organized under the
laws of the Commonwealth of Massachusetts (the "Manager").
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 Funds, which
shares are to be issued and sold to and held by various separate accounts of
Keyport Life Insurance Company ("Keyport"), and Liberty Life Assurance Company
of Boston ("Liberty Life") or separate accounts of other insurance companies
that are affiliated or are not affiliated with Keyport ("Participating Insurance
Company");
WHEREAS, the Trust may in the future create additional fund(s) that may be
covered by appropriate separate agreements;
WHEREAS, the Trust desires the Manager to render certain administrative services
and to render total investment management services to the Trust and the Funds,
all in the manner and on the terms and conditions hereinafter set forth;
WHEREAS, the Trust authorizes the Manager to enter into sub-advisory agreements
with one or more firms registered as investment advisers under the Investment
Advisors Act of 1940, as amended ("the Investment Adviser's Act), to manage all
or a portion of a Fund's assets, as determined by the Manager from time to time
("Sub-Adviser")
WHEREAS, the Manager is registered as an investment adviser under the Investment
Adviser's Act, and desires to provide services to the Trust and the Funds 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 Funds, and the
Manager agree as follows:
1. Employment of the Investment Adviser.
The Trust hereby employs the Manager (i) to provide certain administrative and
limited oversight services and (ii) to provide investment management and related
services to the Trust and the Funds, 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. The Manager hereby accepts
such employment and agrees during such period to render the services and to
assume the obligations herein set forth. The Manager shall for all purposes
herein be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), 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.
The Manager undertakes to provide the services hereinafter set forth and to
assume the following obligations:
A. Administrative Services.
(a) The Manager 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 accounting
services, but shall include, (i) the 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) the maintenance of
the corporate books and records of the Trust, other than its accounting books
and records and those of its records maintained by the Sub-Advisers referred to
in subsection 2(B)(c) below, the transfer agent, the custodian and the pricing
and bookkeeping agent; (iii) 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 making 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 and the rules and regulations thereunder; (vi) calculation of
distributions required or advisable under the Investment Company Act and the
Internal Revenue Code; (vii) periodic computation and reporting to the Trust of
each Fund's compliance with diversification and other portfolio requirements of
the Investment Company Act and the Internal Revenue 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 Funds by others.
It is understood that the Manager may, in its discretion and at its expense,
delegate some or all of its administrative duties and responsibilities under
this subsection 2(A) to its affiliate, Liberty Investment Services, Inc.
B. Investment Advisory Services.
(a) The Manager shall have responsibility for the management and investment of
the assets of each Fund, subject to and in accordance with the separate
investment objectives, policies and limitations of each 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 the Manager from time to time.
(b) The Manager shall provide a continuous investment program for each Fund,
shall revise each such program as necessary, and shall monitor implementation of
the program.
(c) The Manager may delegate its investment responsibilities under paragraph 2
(B)(a) with respect to the Trust or any Fund to one or more persons or companies
("SubAdvisers") pursuant to an agreement among the Trust, such Fund and each
Sub-Adviser ("Sub-Advisory Agreement"). Each SubAdvisory Agreement may provide
that the Sub-Adviser, subject to the control and supervision of the Trustees and
the Manager, shall have full investment discretion for the affected Fund and
shall make all determinations with respect to the investment of that Fund's
assets or any portion thereof specified by the Manager. Any selection of duties
pursuant to this paragraph shall comply with any applicable provisions of
Section 15 of the Investment Company Act, except to the extent permitted by any
exemptive order of the Securities and Exchange commission or similar relief.
(d) The Manager shall be solely responsible for paying the fees of each
Sub-Adviser from the fees it collects as provided in paragraph 6 below.
(e) The Manager shall evaluate possible Sub-Advisers and shall advise the
Trustees of the candidates which the Manager believes are best suited to invest
the assets of each Fund; shall monitor and evaluate the investment performance
of each SubAdviser; shall recommend changes of or additions of Sub-Advisers when
appropriate and shall coordinate the investment activities of the Sub-Advisers.
(f) It is understood that the Manager may seek advice with respect to the
performance of any or all of its duties under Paragraphs 2(B)(b) and (c) from a
person or company ("Consultant") pursuant to an agreement among the Manager, the
Trust and the Consultant ("Fund Consulting Agreement"). The Fund Consulting
Agreement may provide that the Consultant, subject to the control and
supervision of the Trustees and the Manager, shall provide assistance to the
Manager with respect to each Fund's investment program, the selection,
monitoring and evaluation of Sub-Advisers and the allocation of each Fund's
assets to the Sub-Advisers.
(g) The Funds shall be solely responsible for paying the fees of any Consultant.
(h) The Manager shall render regular reports to the Trustees relating to the
performance of its duties specified in paragraphs 2(B)(a), (b) and (c).
C. Expenses Borne By Manager.
To the extent necessary to perform its obligations under this Agreement, the
Manager, at its own expense, shall furnish executive and other personnel and
office space, equipment and facilities, and shall pay any other expenses
incurred by it, in connection with the performance of its duties hereunder,
except that the Trust or the Funds, as appropriate, shall reimburse the Manager
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 Funds. The Manager shall pay all salaries, fees and expenses of Trustees
or officers of the Trust who are employees of the Manager. The Manager shall not
be obligated to bear any other expenses incidental to the operations and
business of the Trust. The Manager 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.
The Manager will make available and provide such information as the Trust may
reasonable 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.
The Manager 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 the code of ethics and evidence of its adoption. Within fortyfive (45)
days of the end of the last calendar quarter of each year while this Agreement
is in effect, an executive officer of the Manager shall verify to the Trustees
that the Manager has complied with the requirements of Rule 17j-1 during the
previous year and that there has been no violation of the Manager's 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, the
Manager shall permit the Trust to examine the reports required to be made to the
Manager by Rule 17j-1(c)(1).
F. Disqualification.
The Manager shall immediately notify the Trustees of the occurrence of any event
which would disqualify the Manager from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the Investment Company Act of any
other applicable statute or regulation.
G. Other Obligations and Service.
The Manager 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. Execution and Allocation of Portfolio Brokerage.
A. The manager, subject to the control and direction of the Trustees, and any
Sub-Advisers, subject to the control and direction of the Trustees and the
Manager, shall have authority and discretion, as appropriate, to select brokers
and dealers to execute portfolio transactions for each Fund, and for the
selection of the markets on or in which the transactions will be executed.
B. In acting pursuant to paragraph 3(A), the Manager and the Sub-Advisers may
place orders through such brokers and dealers in conformity with the policy with
respect to brokerage set forth in the Trust's registration statement.
C. It is understood that neither the Trust, the Manager nor any Sub-Advisers
will adopt a formula for allocation of the Trust's brokerage, except as may be
provided for in the Custody Services Agreement with the Trust's Custodian.
D. It is understood that the Manager or a Sub-Adviser may, to the extent
permitted by applicable laws and regulations, aggregate securities to be sold or
purchased for a Fund and for other clients in order to obtain the most favorable
price and efficient execution. In that event, allocation of the securities
purchased or sold, as well as expenses incurred in the transaction, will be made
by the Manager or Sub-Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Trust and to its
other clients.
E. The Manager shall provide such reports as the Trustees may reasonably request
with respect to each Fund's total brokerage and the manner in which that
brokerage was allocated.
4. Expenses of the Trust.
It is understood that the Trust (or each of its Funds, where applicable) will
pay, or will enter into arrangements that require third parties to pay, all of
the expenses of the Trust or the Funds, other than those expressly assumed by
the Manager 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 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 and reports to shareholders;
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 Fund;
N. Fees and expenses of Trustees who are not directors, officers, employees or
stockholders of the Manager of its affiliates;
0. Insurance and fidelity bond premiums;
P. Litigation and other extraordinary expenses of a non-recurring nature.
5. Activities and Affiliates of the Manager.
A. The Trust acknowledges that the Manager 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 the Manager, 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"). Subject to the provisions of
paragraph 3, the Trust agrees that the Manager 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 Funds, provided that the Manager 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 Funds may have an interest. The
Manager shall have no obligation to recommend for a Fund a position in any
investment which an Affiliated Account may acquire, and the Trust shall have no
first refusal, co-investment or other rights in respect of any such investment,
either for the Funds or otherwise.
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 ("Interested Persons") of the Manager or its affiliates
as directors, officers, agents and shareholders of the Manager or its
affiliates; that directors, officers, agents and shareholders of the Manager or
its affiliates are or may be Interested Persons of the Trust as Trustees,
officers, agents, shareholders or otherwise; that the Manager or its 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,
By-Laws and the Investment Company Act and the rules thereunder.
6. Compensation of the Manager.
For all services to be rendered and payments made pursuant to this Agreement,
the Trust, on its own behalf and on behalf of each Fund, will pay the Manager on
the last day of each month a fee at an annual rate equal to a percentage of the
net asset value of each Fund as follows: the Colonial Government Securities
Income Fund -- 0.60%; the Colonial Growth and Income Fund -- 0.65%; the Colonial
Utilities Income Fund -- 0.65%. 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
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 (i) above by the net asset value of each Fund as determined in
accordance with the Trust's prospectus as of the previous business day on which
each 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.
7. Liabilities of the Manager.
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 the Manager, the Manager 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. The Manager shall indemnify and hold harmless the Trust from any loss, cost,
expense or damage resulting from the failure of any sub-Advisor to comply with
(i) any statement included in the Prospectus and Statement of Additional
Information of the Trust, or (ii) instructions given by the Manager to any
Sub-Advisor 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 subsection 7(B) shall apply only to the extent that a Sub-Adviser 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 of
Officer of the Trust, or the Manager, from liability in violation of Sections
17(h) and (i) of the Investment Company Act.
8. Effective Date: Term.
This Agreement shall become effective on the date first written above and shall
continue until two years from its date of execution, 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.
9. Assignment.
No "assignment" of this Agreement shall be made by the Manager, and this
Agreement shall terminate automatically in the event of any such assignment. The
Manager shall notify the Trust in writing in advance of any proposed change of
"control" to enable the Trust to take the steps necessary to enter into a new
advisory contract.
10. Amendment
This Agreement may be amended at any time, but only by written Agreement between
the Manager 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.
11. Termination.
This Agreement:
(a) may at any time be terminated without payment of any penalty, by the Trust
or, as to any Fund, by that Fund (by the Board of Trustees of the Trust or by
the vote of a majority of the outstanding voting securities) on sixty (60) days'
written notice to the Manager;
(b) shall immediately terminate in the event of its assignment; and
(c) may be terminated by the Manager on sixty (60) days written notice to the
Trust.
12. 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 SEC.
13. 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.
14. 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.
15. Shareholder Liability.
The Manager 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. The Manager 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.
16. Governing Law.
This Agreement shall be interpreted under, and the performance of the Manager
under this Agreement shall be consistent with, the provisions of the Agreement
and Declaration of Trust and By-Laws of the Trust, as in effect from time to
time, the terms of the Investment Company Act, other applicable laws and
regulations thereunder (including any amendments hereafter adopted), the
Internal Revenue Code of 1986, and regulations thereunder, and the Trust's
prospectus and statement of additional information. The provisions of this
Agreement shall be construed and interpreted in accordance with the laws of the
Commonwealth of Massachusetts, without giving effect to the conflict of laws
provisions thereof, 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.
17. Severability.
If any provision of this Agreement shall be held or made invalid by a court
decision, a statute, a rule, or otherwise, the remainder of this Agreement shall
not be affected thereby.
18. Effective Date.
This Agreement shall become effective as of its date.
19. Use of Manager's Name.
The Trust may use the name "Keyport" or any other name derived from the name
"Keyport" 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 Manager. At such
time as this Agreement or any extension, renewal or amendment hereof, or such
other similar agreement shall no longer be in effect, the Trust will cease to
use any name derived from the name "Keyport," any name 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement on the
date first above written.
ATTEST KEYPORT VARIABLE INVESTMENT TRUST on its own behalf and on behalf of
each FUND
John Davenport By:Richard R. Christensen
Title: Assistant Secretary
ATTEST KEYPORT ADVISORY SERVICES CORP.
Robert R. Baird By:Paul H. LeFevre, Jr.
Title: Secretary
KEYPORT VARIABLE INVESTMENT TRUST
Amendment No. 1
to
Management Agreements
With
Keyport Advisory Services Corp.
AGREEMENT, made as of February 28, 1995, among KEYPORT VARIABLE
INVESTMENT TRUST, a business trust organized under the laws of The Commonwealth
of Massachusetts (the "Trust"), on behalf of each of its six series funds named
below (the "Funds"), and Keyport Advisory Services Corp., a Massachusetts
corporation ("KASC").
1. Reference is made to each of (i) the Management Agreement dated June
7, 1993 between KASC and the Trust, on behalf of Colonial-Keyport U.S.
Government Fund, Colonial-Keyport Growth and Income Fund and Colonial-Keyport
Utilities Fund, and (ii) the Management Agreement dated May 2, 1994 between KASC
and the Trust, on behalf of Colonial-Keyport International Fund For Growth,
Colonial-Keyport U.S. Fund For Growth and Colonial-Keyport Strategic Income Fund
(each a "Management Agreement").
2. Each of the Trust and KASC hereby agrees that the second paragraph
of Section 2A(b) of each Management Agreement shall hereby be amended to read in
its entirely as follows:
"It is understood that the Manager may, in its discretion and
at its expense, delegate some or all of its administrative duties and
responsibilities under this subsection 2A to the Manager's affiliate,
Liberty Financial Companies, Inc. (`LFC'), or to any of LFC's majority
or greater owned subsidiaries."
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed and delivered this Agreement as of the date first written
above.
KEYPORT VARIABLE INVESTMENT TRUST,
on behalf of each of the Funds.
By: Richard R. Christensen
Title: President
KEYPORT ADVISORY SERVICES CORP.
By: Paul H. LeFevre, Jr.
Title: President
LIBERTY VARIABLE INVESTMENT TRUST
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT ("Agreement"), made this 19th day of May, 1998,
between LIBERTY VARIABLE INVESTMENT TRUST, a business trust organized under the
laws of The Commonwealth of Massachusetts (the "Trust"), on its own behalf and
on behalf of Colonial Small Cap Value Fund, Variable Series and Colonial High
Yield Securities Fund, Variable Series (each a "Fund," and collectively, the
"Funds"), and LIBERTY ADVISORY SERVICES CORP., a corporation organized under the
laws of The Commonwealth of Massachusetts (the "Manager").
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 Funds,
which shares are to be issued and sold to and held by various separate accounts
of Keyport Life Insurance Company ("Keyport"), Independence Life & Annuity
Insurance Company ("Independence") and Liberty Life Assurance Company of Boston
("Liberty Life") 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 the
Manager, (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 two series funds, and the Manager, (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 the
Manager and (iv) one other separate fund which is covered by the Managers
Agreement dated as of November 15, 1998 among the Trust, on its own behalf and
on behalf of such other series fund, and the Manager; and the Trust may in the
future create additional fund(s) that may be covered by other separate
agreements;
WHEREAS, the Trust desires the Manager to render certain administrative
services and to render total investment management services to the Trust and the
Funds, all in the manner and on the terms and conditions hereinafter set forth;
WHEREAS, the Trust authorizes the Manager to enter into sub-advisory
agreements with one or more firms registered as investment advisers under the
Investment Advisors Act of 1940, as amended (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, to manage all or a
portion of a Fund's assets, as determined by the Manager from time to time (a
"Sub-Adviser"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Adviser's Act, and desires to provide services to the Trust and the
Funds 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
Funds, and the Manager hereby agree as follows:
1. Employment of the Investment Adviser.
The Trust hereby employs the Manager (i) to provide certain
administrative and limited oversight services and (ii) to provide investment
management and related services to the Trust and the Funds, 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. The Manager hereby accepts such employment and agrees during such
period to render the services and to assume the obligations herein set forth.
The Manager 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.
The Manager undertakes to provide the services hereinafter set
forth and to assume the following obligations:
A. Administrative Services.
(a) The Manager 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 the Sub-Advisers referred to in paragraph 2(B)(c)
below, 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 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 Funds by others.
It is understood that the Manager 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) The Manager shall have responsibility for the management
and investment of the assets of the Funds, subject to and in accordance with the
separate investment objectives, policies and limitations of the Funds, 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 the Manager from time to time.
(b) The Manager shall provide a continuous investment program
for the Funds, shall revise each such program as necessary, and shall monitor
implementation of the program.
(c) The Manager may delegate its investment responsibilities
under paragraph 2B(a) with respect to each Fund to 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 ("Sub-Advisers")
pursuant to an agreement among the Trust, such Fund and each Sub-Adviser
("Sub-Advisory Agreement"). Each Sub-Advisory Agreement may provide that the
Sub-Adviser, subject to the control and supervision of the Trustees and the
Manager, shall have full investment discretion for the Fund and shall make all
determinations with respect to the investment of the Fund's assets or any
portion thereof specified by the Manager. Any delegation of duties pursuant to
this paragraph shall comply with any applicable provisions of Section 15 of the
Investment Company Act, except to the extent permitted by any exemptive order of
the Securities and Exchange Commission or similar relief.
(d) The Manager shall be solely responsible for paying the
fees of each Sub-Adviser from the fees it collects as provided in paragraph 6
below.
(e) The Manager shall evaluate possible Sub-Advisers and shall
advise the Trustees of the candidates which the Manager believes are best suited
to invest the assets of each Fund; shall monitor and evaluate the investment
performance of each Sub-Adviser; shall recommend changes of or additions of
Sub-Advisers when appropriate; and shall coordinate the investment activities of
the Sub-Advisers.
(f) It is understood that the Manager may seek advice with
respect to the performance of any or all of its duties under paragraphs 2B(b)
and (c) from a person or company ("Consultant") pursuant to an agreement among
the Manager, the Trust and the Consultant (a "Fund Consulting Agreement"). A
Fund Consulting Agreement may provide that the Consultant, subject to the
control and supervision of the Trustees and the Manager, shall provide
assistance to the Manager with respect to each Fund's investment program, the
selection, monitoring and evaluation of Sub-Advisers and the allocation of each
Fund's assets to the Sub-Advisers.
(g) The Funds shall be solely responsible for paying the fees
of any Consultant.
(h) The Manager shall render regular reports to the Trustees
relating to the performance of its 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, the Manager, at its own expense, shall furnish executive and other
personnel and office space, equipment and facilities, and shall pay any other
expenses incurred by it, in connection with the performance of its duties
hereunder, except that the Trust or the Funds, as appropriate, shall reimburse
the Manager 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 Funds. The Manager shall pay all salaries, fees and
expenses of Trustees or officers of the Trust who are employees of the Manager.
The Manager shall not be obligated to bear any other expenses incidental to the
operations and business of the Trust. The Manager 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.
The Manager 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.
The Manager 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 the code of ethics and evidence of its
adoption. Within forty-five (45) days of the end of the last calendar quarter of
each year while this Agreement is in effect, an executive officer of the Manager
shall verify to the Trustees that the Manager has complied with the requirements
of Rule 17j-1 during the previous year and that there has been no violation of
the Manager's 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, the Manager shall permit the Trust to examine the reports
required to be made to the Manager by Rule 17j-1(c)(1).
F. Disqualification.
The Manager shall immediately notify the Trustees of the
occurrence of any event which would disqualify the Manager 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.
The Manager 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. Execution and Allocation of Portfolio Brokerage.
A. The Manager, subject to the control and direction of the
Trustees, any Sub-Advisers, subject to the control and direction of the Trustees
and the Manager, shall have authority and discretion, as appropriate, to select
brokers and dealers to execute portfolio transactions for each Fund, and for the
selection of the markets on or in which the transactions will be executed.
B. In acting pursuant to paragraph 3A, the Manager and the
Sub-Advisers may place orders through such brokers and dealers in conformity
with the policy with respect to brokerage set forth in the Trust's then
effective Registration Statement.
C. It is understood that none of the Trust, the Manager or any
Sub-Advisers will adopt a formula for allocation of the Trust's brokerage,
except as may be provided for in the custody agreement with the Trust's
Custodian.
D. It is understood that the Manager or a Sub-Adviser may, to
the extent permitted by applicable laws and regulations, aggregate securities to
be sold or purchased for a Fund and for other clients in order to obtain the
most favorable price and efficient execution. In that event, allocation of the
securities purchased or sold, as well as expenses incurred in the transaction,
will be made by the Manager or Sub-Adviser, as the case may be, in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Trust and to its other clients, and in conformity with any applicable
policies adopted by the Board of Trustees.
E. The Manager shall provide such reports as the Trustees may
reasonably request with respect to each Fund's total brokerage and the manner in
which that brokerage was allocated.
4. Expenses of the Trust.
It is understood that the Trust (or each of its funds
(including the Funds), 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 the Manager
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 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 and reports to
shareholders;
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 the Manager of
its affiliates;
O. Insurance and fidelity bond premiums; and
P. Litigation and other extraordinary expenses of a
non-recurring nature.
5. Activities and Affiliates of the Manager.
A. The Trust acknowledges that the Manager 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 the Manager, 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"). Subject
to the provisions of paragraph 3, the Trust agrees that the Manager 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 Funds,
provided that the Manager 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. The Manager shall have no obligation to recommend
for the Funds a position in any investment which an Affiliated Account may
acquire, and the Trust shall have no first refusal, co-investment or other
rights in respect of any such investment, either for the Funds or otherwise.
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 ("Interested Persons") of the Manager or
its affiliates as directors, officers, agents and shareholders of the Manager or
its affiliates; that directors, officers, agents and shareholders of the Manager
or its affiliates are or may be Interested Persons of the Trust as Trustees,
officers, agents, shareholders or otherwise; that the Manager or its 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,
By-Laws and the Investment Company Act and the rules thereunder.
6. Compensation of the Manager.
For all services to be rendered and payments made pursuant to this
Agreement, the Trust, on its own behalf and on behalf of Funds, will pay the
Manager monthly in arrears a fee at an annual rate equal to 0.80%, in the case
of Colonial Small Cap Value Fund, Variable Series, and 0.60%, in the case of
Colonial High Yield Securities Fund, Variable Series, of the net asset value of
such Fund. 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 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 such Fund as determined in accordance with
the Trust's Prospectus as of the previous business day on which such 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.
7. Liabilities of the Manager.
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 the Manager, the Manager 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. The Manager shall indemnify and hold harmless the Trust
from any loss, cost, expense or damage resulting from the failure of any
Sub-Advisor to comply with (i) any statement included in the Prospectus and
Statement of Additional Information of the Trust, or (ii) instructions given by
the Manager to any Sub-Advisor 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 7B shall apply only to the extent
that a Sub-Adviser 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 Manager, from liability in
violation of Sections 17(h) and (i) of the Investment Company Act.
8. 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 the second anniversary of the date hereof, 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.
9. Assignment.
No assignment of this Agreement shall be made by the Manager, and this
Agreement shall terminate automatically in the event of any such assignment. The
Manager shall notify the Trust in writing in advance of any proposed change of
control to enable the Trust to take the steps necessary to enter into a new
advisory contract.
10. Amendment
This Agreement may be amended at any time, but only by written
Agreement between the Manager 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.
11. 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 the Manager;
(b) shall immediately terminate in the event of its
assignment; and
(c) may be terminated by the Manager on sixty (60) days
written notice to the Trust.
12. 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 SEC.
13. 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.
14. 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.
15. Shareholder Liability.
The Manager 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. The Manager 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.
16. Governing Law.
This Agreement shall be interpreted under, and the performance of the
Manager 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.
17. Use of Manager's Name.
The Trust may use the name "Keyport" or any other name derived from the
name "Keyport" only for so long as this Agreement (or another similar management
agreement pertaining to other series funds of the Trust) or any extension,
renewal, or amendment hereof (or thereof) remains in effect, including any
similar agreement with any organization that shall have succeeded to the
business of the Manager. At such time as this Agreement (and each 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 the name "Keyport," any name 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement on the date first above written.
ATTEST: LIBERTY VARIABLE INVESTMENT TRUST,
on its own behalf and on behalf of
Colonial Small Cap Value Fund, Variable
Series and Colonial High Yield Securities
Fund, Variable Series
Kevin Carome By: Richard R. Christensen
Title: Secretary Title: President
ATTEST: LIBERTY ADVISORY SERVICES CORP.
__________________ By: Stewart R. Morrison
Title: Secretary Title: Chief Investment Officer
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
COLONIAL MANAGEMENT SUB-ADVISORY AGREEMENT
AGREEMENT dated May 19, 1998 among LIBERTY VARIABLE INVESTMENT TRUST, a
Massachusetts business trust (the "Trust"), with respect to COLONIAL SMALL CAP
VALUE FUND, VARIABLE SERIES (the "Fund"), LIBERTY ADVISORY SERVICES CORP., a
Massachusetts corporation ("Adviser"), and COLONIAL MANAGEMENT ASSOCIATES, INC.,
a Massachusetts 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 Adviser shall pay the Sub-Adviser a monthly fee at the annual rate
of 0.60% of the average daily net assets of the Fund for managing the
investment of the assets of the Fund 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,
an (a) unless otherwise terminated, shall continue until the second
anniversary of the date hereof, and from year to year thereafter so
long as approved annually in accordance with 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 even of its assignment; and
(d) may be terminated without penalty by the Sub-Adviser on sixty day's
written notice to the Trust.
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," 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 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 "Colonial," or any other name derived from
the name "Colonial," 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-Adviser. 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 "Colonial," 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.
<PAGE>
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.
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
By: LIBERTY VARIABLE INVESTMENT TRUST
By: Richard R. Christensen, President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Stephen E. Gibson, President
LIBERTY ADVISORY SERVICES CORP.
By:
Title:
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
COLONIAL MANAGEMENT SUB-ADVISORY AGREEMENT
AGREEMENT dated May 19, 1998 among LIBERTY VARIABLE INVESTMENT TRUST, a
Massachusetts business trust (the "Trust"), with respect to COLONIAL HIGH YIELD
SECURITIES FUND, VARIABLE SERIES (the "Fund"), LIBERTY ADVISORY SERVICES CORP.,
a Massachusetts corporation ("Adviser"), and COLONIAL MANAGEMENT ASSOCIATES,
INC., a Massachusetts 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 Adviser shall pay the Sub-Adviser a monthly fee at the annual rate
of 0.40% of the average daily net assets of the Fund for managing the
investment of the assets of the Fund 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,
an (a) unless otherwise terminated, shall continue until the second
anniversary of the date hereof, and from year to year thereafter so
long as approved annually in accordance with 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 even of its assignment; and
(d) may be terminated without penalty by the Sub-Adviser on sixty day's
written notice to the Trust.
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," 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 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 "Colonial," or any other name derived from
the name "Colonial," 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-Adviser. 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 "Colonial," 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.
<PAGE>
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.
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
By: LIBERTY VARIABLE INVESTMENT TRUST
By: Richard R. Christensen, President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Stephen E. Gibson, President
LIBERTY ADVISORY SERVICES CORP.
By:
Title:
KEYPORT VARIABLE INVESTMENT TRUST
COLONIAL-KEYPORT INTERNATIONAL FUND FOR GROWTH
COLONIAL-KEYPORT U.S. FUND FOR GROWTH
COLONIAL-KEYPORT STRATEGIC INCOME FUND
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT ("Agreement"), made this 2nd day of May, 1994,
between KEYPORT VARIABLE INVESTMENT TRUST, a business trust organized under the
laws of The Commonwealth of Massachusetts (the "Trust"), on its own behalf and
on behalf of the Colonial-Keyport International Fund For Growth ("IFFG"), the
Colonial-Keyport U.S. Fund For Growth ("USFFG"), and the Colonial-Keyport
Strategic Income Fund "SIF" (collectively, the "Funds", and individually a
"Fund"), and KEYPORT ADVISORY SERVICES CORP., a corporation organized under the
laws of The Commonwealth of Massachusetts (the "Manager").
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 Funds,
which shares are to be issued and sold to and held by various separate accounts
of Keyport Life Insurance Company ("Keyport"), Keyport America Life Insurance
Company ("Keyport America") and Liberty Life Assurance Company of Boston
("Liberty Life") 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 three 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 three series funds, and the
Manager, and the Trust may in the future create additional fund(s) that may be
covered by other separate agreements;
WHEREAS, the Trust desires the Manager to render certain administrative
services and to render total investment management services to the Trust and the
Funds, all in the manner and on the terms and conditions hereinafter set forth;
WHEREAS, the Trust authorizes the Manager to enter into
sub-advisory agreements with one or more firms registered as investment advisers
under the Investment Advisors Act of 1940, as amended ("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, to manage all
or a portion of a Fund's assets, as determined by the Manager from time to time
("Sub-Adviser"), and further authorizes such Sub-Advisers, with the consent of
the Manager, to enter into their own sub-advisory agreements with one or more
other firms so registered or qualified, to manage all or a portion of such
assets ("Second-Tier Sub-Adviser"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Adviser's Act, and desires to provide services to the Trust and the
Funds in consideration of and on the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Trust, on its own behalf and on behalf of each of
the Funds, and the Manager hereby agree as follows:
1. Employment of the Investment Adviser.
The Trust hereby employs the Manager (i) to provide certain
administrative and limited oversight services and (ii) to provide investment
management and related services to the Trust and the Funds, 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. The Manager hereby accepts such employment and agrees during such
period to render the services and to assume the obligations herein set forth.
The Manager 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.
The Manager undertakes to provide the services hereinafter set
forth and to assume the following obligations:
A. Administrative Services.
(a) The Manager 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 the Sub-Advisers referred to in paragraph 2(B)(c)
below, 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 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 Funds by others.
It is understood that the Manager may, in its discretion and at its
expense, delegate some or all of its administrative duties and responsibilities
under this subsection 2(A) to its affiliate, Liberty Investment Services, Inc.
B. Investment Advisory Services.
(a) The Manager shall have responsibility for the management
and investment of the assets of each Fund, subject to and in accordance with the
separate investment objectives, policies and limitations of each 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 the Manager from time to time.
(b) The Manager shall provide a continuous investment program
for each Fund, shall revise each such program as necessary, and shall monitor
implementation of the program.
(c) The Manager may delegate its investment responsibilities
under paragraph 2 (B)(a) with respect to the Trust or any Fund to 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
("Sub-Advisers") pursuant to an agreement among the Trust, such Fund and each
Sub-Adviser ("Sub-Advisory Agreement"). Each Sub-Advisory Agreement may provide
that the Sub-Adviser, subject to the control and supervision of the Trustees and
the Manager, shall have full investment discretion for the affected Fund and
shall make all determinations with respect to the investment of that Fund's
assets or any portion thereof specified by the Manager. Any selection of duties
pursuant to this paragraph shall comply with any applicable provisions of
Section 15 of the Investment Company Act, except to the extent permitted by any
exemptive order of the Securities and Exchange Commission or similar relief.
In addition, the Sub-Advisory Agreement may provide that the
Sub-Advisor may delegate its investment responsibilities under this paragraph 2
(B) (c) with respect to the Trust or any Fund to one or more persons or
companies registered or qualified under the Investment Adviser's Act as provided
in the immediately preceding paragraph ("Second-Tier Sub-Advisers") pursuant to
an agreement among the Trust, such Fund, such Sub-Adviser and each such
Second-Tier Sub-Adviser ("Second-Tier Sub-Advisory Agreement"). Each Second-Tier
Sub-Advisory Agreement may provide that the Second-Tier Sub-Adviser, subject to
the control and supervision of the Trustees, the Manager, and the Sub-Adviser,
shall make all determinations with respect to the investment of that Fund's
assets or any portion thereof specified by the Sub-Adviser. Any selection of
duties pursuant to this paragraph shall comply with any applicable provisions of
Section 15 of the Investment Company Act, except to the extent permitted by any
exemptive order of the Securities and Exchange Commission or similar relief.
(d) The Manager shall be solely responsible for paying the
fees of each Sub-Adviser from the fees it collects as provided in paragraph 6
below. Each Sub-Adviser shall be solely responsible for paying the fees of each
of its Second-Tier Sub-Advisers from the fees it collects pursuant to its
Sub-Advisory Agreement.
(e) The Manager shall evaluate possible Sub-Advisers and
Second-Tier Sub-Advisers and shall advise the Trustees of the candidates which
the Manager believes are best suited to invest the assets of each Fund; shall
monitor and evaluate the investment performance of each Sub-Adviser and
Second-Tier Sub Advisers shall recommend changes of or additions of Sub-Advisers
and Second-Tier Sub-Advisers when appropriate and shall coordinate the
investment activities of the Sub-Advisers and Second Tier Sub-Advisers.
(f) It is understood that the Manager may seek advice with
respect to the performance of any or all of its duties under paragraphs 2(B)(b)
and (c) from a person or company ("Consultant") pursuant to an agreement among
the Manager, the Trust and the Consultant (a "Fund Consulting Agreement"). A
Fund Consulting Agreement may provide that the Consultant, subject to the
control and supervision of the Trustees and the Manager, shall provide
assistance to the Manager with respect to each Fund's investment program, the
selection, monitoring and evaluation of Sub-Advisers and Second-Tier
Sub-Advisers and the allocation of each Fund's assets to the Sub-Advisers and
Second-Tier Sub-Advisers.
(g) The Funds shall be solely responsible for paying the fees
of any Consultant.
(h) The Manager shall render regular reports to the Trustees
relating to the performance of its duties specified in paragraphs 2(B)(a), (b)
and (c).
C. Expenses Borne By Manager.
To the extent necessary to perform its obligations under this
Agreement, the Manager, at its own expense, shall furnish executive and other
personnel and office space, equipment and facilities, and shall pay any other
expenses incurred by it, in connection with the performance of its duties
hereunder, except that the Trust or the Funds, as appropriate, shall reimburse
the Manager 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 Funds. The Manager shall pay all salaries, fees and
expenses of Trustees or officers of the Trust who are employees of the Manager.
The Manager shall not be obligated to bear any other expenses incidental to the
operations and business of the Trust. The Manager 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.
The Manager will make available and provide such information
as the Trust may reasonable 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.
The Manager 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 the code of ethics and evidence of its
adoption. Within forty-five (45) days of the end of the last calendar quarter of
each year while this Agreement is in effect, an executive officer of the Manager
shall verify to the Trustees that the Manager has complied with the requirements
of Rule 17j-1 during the previous year and that there has been no violation of
the Manager's 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, the Manager shall permit the Trust to examine the reports
required to be made to the Manager by Rule 17j-1(c)(1).
F. Disqualification.
The Manager shall immediately notify the Trustees of the
occurrence of any event which would disqualify the Manager 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.
The Manager 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. Execution and Allocation of Portfolio Brokerage.
A. The Manager, subject to the control and direction of the
Trustees, any Sub-Advisers, subject to the control and direction of the Trustees
and the Manager, and any Second-Tier Sub-Advisers, subject to the control and
direction of the Trustees, the Manager and the applicable Sub-Adviser, shall
have authority and discretion, as appropriate, to select brokers and dealers to
execute portfolio transactions for each Fund, and for the selection of the
markets on or in which the transactions will be executed.
B. In acting pursuant to paragraph 3(A), the Manager, the
Sub-Advisers and the Second-Tier Sub-Adviser may place orders through such
brokers and dealers in conformity with the policy with respect to brokerage set
forth in the Trust's then effective Registration Statement.
C. It is understood that none of the Trust, the Manager, any
Sub-Advisers or any Second-Tier Sub-Advisors will adopt a formula for allocation
of the Trust's brokerage, except as may be provided for in the Custody Services
Agreement with the Trust's Custodian.
D. It is understood that the Manager, a Sub-Adviser or a
Second-Tier Sub-Adviser may, to the extent permitted by applicable laws and
regulations, aggregate securities to be sold or purchased for a Fund and for
other clients in order to obtain the most favorable price and efficient
execution. In that event, allocation of the securities purchased or sold, as
well as expenses incurred in the transaction, will be made by the Manager,
Sub-Adviser or Second-Tier Sub-Adviser, as the case may be, in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Trust and to its other clients.
E. The Manager shall provide such reports as the Trustees may
reasonably request with respect to each Fund's total brokerage and the manner in
which that brokerage was allocated.
4. Expenses of the Trust.
It is understood that the Trust (or each of its funds
(including the Funds), 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 the Manager
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 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 and reports to
shareholders;
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 the Manager of
its affiliates;
O. Insurance and fidelity bond premiums; and
P. Litigation and other extraordinary expenses of a
non-recurring nature.
5. Activities and Affiliates of the Manager.
A. The Trust acknowledges that the Manager 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 the Manager, 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"). Subject
to the provisions of paragraph 3, the Trust agrees that the Manager 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 Funds,
provided that the Manager 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 Funds may have an interest. The Manager shall have no obligation to
recommend for a Fund a position in any investment which an Affiliated Account
may acquire, and the Trust shall have no first refusal, co-investment or other
rights in respect of any such investment, either for the Funds or otherwise.
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 ("Interested Persons") of the Manager or
its affiliates as directors, officers, agents and shareholders of the Manager or
its affiliates; that directors, officers, agents and shareholders of the Manager
or its affiliates are or may be Interested Persons of the Trust as Trustees,
officers, agents, shareholders or otherwise; that the Manager or its 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,
By-Laws and the Investment Company Act and the rules thereunder.
6. Compensation of the Manager.
For all services to be rendered and payments made pursuant to this
Agreement, the Trust, on its own behalf and on behalf of each Fund, will pay the
Manager monthly in arrears a fee at an annual rate equal to a percentage of the
net asset value of each Fund as follows: IFFG -- 0.90%, USFFG -- 0.80%; and SIF
- -- 0.65%. 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 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 each Fund as determined in accordance with
the Trust's prospectus as of the previous business day on which each 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.
7. Liabilities of the Manager.
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 the Manager, the Manager 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. The Manager shall indemnify and hold harmless the Trust
from any loss, cost, expense or damage resulting from the failure of any
Sub-Advisor or any Second-Tier Sub-Advisor to comply with (i) any statement
included in the Prospectus and Statement of Additional Information of the Trust,
or (ii) instructions given by the Manager to any Sub-Advisor or any Second-Tier
Sub-Advisor 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 7(B) shall apply only to the extent that a Sub-Adviser or
Second-Tier Sub-Advisor 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 Manager, from liability in
violation of Sections 17(h) and (i) of the Investment Company Act.
8. Effective Date: Term.
This Agreement shall become effective, with respect to any Fund, on 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 and shall continue until June 7, 1995, 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.
9. Assignment.
No assignment of this Agreement shall be made by the Manager, and this
Agreement shall terminate automatically in the event of any such assignment. The
Manager shall notify the Trust in writing in advance of any proposed change of
control to enable the Trust to take the steps necessary to enter into a new
advisory contract.
10. Amendment
This Agreement may be amended at any time, but only by written
Agreement between the Manager 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.
11. Termination.
This Agreement:
(a) may at any time be terminated without payment of any
penalty, by the Trust or, as to any Fund, by that
Fund (by the Board of Trustees of the Trust or by the
vote of a majority of the outstanding voting
securities) on sixty (60) days' written notice to the
Manager;
(b) shall immediately terminate in the event of its
assignment; and
(c) may be terminated by the Manager on sixty (60) days
written notice to the Trust.
12. 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 SEC.
13. 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.
14. 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.
15. Shareholder Liability.
The Manager 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. The Manager 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.
16. Governing Law.
This Agreement shall be interpreted under, and the performance of the
Manager 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.
17. Use of Manager's Name.
The Trust may use the name "Keyport" or any other name derived from the
name "Keyport" only for so long as this Agreement (or another similar management
agreement pertaining to other series funds of the Trust) or any extension,
renewal, or amendment hereof (or thereof) remains in effect, including any
similar agreement with any organization that shall have succeeded to the
business of the Manager. At such time as this Agreement (and each 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 the name "Keyport," any name 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement on the date first above written.
ATTEST: KEYPORT VARIABLE INVESTMENT TRUST,
on its own behalf and on behalf of each Fund
By: Richard R. Christensen
Title: Secretary President
ATTEST: KEYPORT ADVISORY SERVICES CORP.
By: John W. Ponnatus
Title: Secretary Title:
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
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
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; 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).
<PAGE>
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;
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, 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.
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.
<PAGE>
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.
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.
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: Richard R. Christensen
Title: President
LIBERTY ADVISORY SERVICES CORP.
By: Stewart R. Morrison
Title: Chief Investment Officer
LIBERTY ASSET MANAGEMENT COMPANY
By: Richard R. Christensen
Title: Chairman of the Board
KEYPORT VARIABLE INVESTMENT TRUST
NEWPORT-KEYPORT TIGER FUND
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT ("Agreement"), made this 1st day of May, 1995,
between KEYPORT VARIABLE INVESTMENT TRUST, a business trust organized under the
laws of The Commonwealth of Massachusetts (the "Trust"), on its own behalf and
on behalf of the Newport-Keyport Tiger Fund (the "Fund"), and KEYPORT ADVISORY
SERVICES CORP., a corporation organized under the laws of The Commonwealth of
Massachusetts (the "Manager").
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"), Keyport America Life Insurance
Company ("Keyport America") and Liberty Life Assurance Company of Boston
("Liberty Life") 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) three 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 three series funds, and the
Manager, and (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 the Manager; and the Trust may in
the future create additional fund(s) that may be covered by other separate
agreements;
WHEREAS, the Trust desires the Manager to render certain administrative
services and to render total investment management services to the Trust and the
Fund, all in the manner and on the terms and conditions hereinafter set forth;
WHEREAS, the Trust authorizes the Manager to enter into sub-advisory
agreements with one or more firms registered as investment advisers under the
Investment Advisors Act of 1940, as amended (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, to manage all or a
portion of a Fund's assets, as determined by the Manager from time to time (a
"Sub-Adviser"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Adviser's Act, and desires to provide services to the Trust and the
Fund 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,
and the Manager hereby agree as follows:
1. Employment of the Investment Adviser.
The Trust hereby employs the Manager (i) to provide certain
administrative and limited oversight services and (ii) to provide 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. The
Manager hereby accepts such employment and agrees during such period to render
the services and to assume the obligations herein set forth. The Manager 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.
The Manager undertakes to provide the services hereinafter set
forth and to assume the following obligations:
A. Administrative Services.
(a) The Manager 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 the Sub-Advisers referred to in paragraph 2(B)(c)
below, 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 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 Funds by others.
It is understood that the Manager 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) The Manager shall have responsibility for the management
and investment of the assets of the Fund, subject to and in accordance with the
separate 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 the Manager from time to time.
(b) The Manager shall provide a continuous investment program
for the Fund, shall revise each such program as necessary, and shall monitor
implementation of the program.
(c) The Manager may delegate its investment responsibilities
under paragraph 2B(a) with respect to the Fund to 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 ("Sub-Advisers")
pursuant to an agreement among the Trust, such Fund and each Sub-Adviser
("Sub-Advisory Agreement"). Each Sub-Advisory Agreement may provide that the
Sub-Adviser, subject to the control and supervision of the Trustees and the
Manager, shall have full investment discretion for the Fund and shall make all
determinations with respect to the investment of the Fund's assets or any
portion thereof specified by the Manager. Any delegation of duties pursuant to
this paragraph shall comply with any applicable provisions of Section 15 of the
Investment Company Act, except to the extent permitted by any exemptive order of
the Securities and Exchange Commission or similar relief.
(d) The Manager shall be solely responsible for paying the
fees of each Sub-Adviser from the fees it collects as provided in paragraph 6
below.
(e) The Manager shall evaluate possible Sub-Advisers and shall
advise the Trustees of the candidates which the Manager believes are best suited
to invest the assets of each Fund; shall monitor and evaluate the investment
performance of each Sub-Adviser; shall recommend changes of or additions of
Sub-Advisers when appropriate; and shall coordinate the investment activities of
the Sub-Advisers.
(f) It is understood that the Manager may seek advice with
respect to the performance of any or all of its duties under paragraphs 2B(b)
and (c) from a person or company ("Consultant") pursuant to an agreement among
the Manager, the Trust and the Consultant (a "Fund Consulting Agreement"). A
Fund Consulting Agreement may provide that the Consultant, subject to the
control and supervision of the Trustees and the Manager, shall provide
assistance to the Manager with respect to each Fund's investment program, the
selection, monitoring and evaluation of Sub-Advisers and the allocation of each
Fund's assets to the Sub-Advisers.
(g) The Funds shall be solely responsible for paying the fees
of any Consultant.
(h) The Manager shall render regular reports to the Trustees
relating to the performance of its 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, the Manager, at its own expense, shall furnish executive and other
personnel and office space, equipment and facilities, and shall pay any other
expenses incurred by it, in connection with the performance of its duties
hereunder, except that the Trust or the Fund, as appropriate, shall reimburse
the Manager 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. The Manager shall pay all salaries, fees and
expenses of Trustees or officers of the Trust who are employees of the Manager.
The Manager shall not be obligated to bear any other expenses incidental to the
operations and business of the Trust. The Manager 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.
The Manager 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.
The Manager 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 the code of ethics and evidence of its
adoption. Within forty-five (45) days of the end of the last calendar quarter of
each year while this Agreement is in effect, an executive officer of the Manager
shall verify to the Trustees that the Manager has complied with the requirements
of Rule 17j-1 during the previous year and that there has been no violation of
the Manager's 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, the Manager shall permit the Trust to examine the reports
required to be made to the Manager by Rule 17j-1(c)(1).
F. Disqualification.
The Manager shall immediately notify the Trustees of the
occurrence of any event which would disqualify the Manager 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.
The Manager 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. Execution and Allocation of Portfolio Brokerage.
A. The Manager, subject to the control and direction of the
Trustees, any Sub-Advisers, subject to the control and direction of the Trustees
and the Manager, shall have authority and discretion, as appropriate, to select
brokers and dealers to execute portfolio transactions for each Fund, and for the
selection of the markets on or in which the transactions will be executed.
B. In acting pursuant to paragraph 3A, the Manager and the
Sub-Advisers may place orders through such brokers and dealers in conformity
with the policy with respect to brokerage set forth in the Trust's then
effective Registration Statement.
C. It is understood that none of the Trust, the Manager or any
Sub-Advisers will adopt a formula for allocation of the Trust's brokerage,
except as may be provided for in the custody agreement with the Trust's
Custodian.
D. It is understood that the Manager or a Sub-Adviser may, to
the extent permitted by applicable laws and regulations, aggregate securities to
be sold or purchased for a Fund and for other clients in order to obtain the
most favorable price and efficient execution. In that event, allocation of the
securities purchased or sold, as well as expenses incurred in the transaction,
will be made by the Manager or Sub-Adviser, as the case may be, in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Trust and to its other clients, and in conformity with any applicable
policies adopted by the Board of Trustees.
E. The Manager shall provide such reports as the Trustees may
reasonably request with respect to each Fund's total brokerage and the manner in
which that brokerage was allocated.
4. 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 the Manager
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 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 and reports to
shareholders;
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 the Manager of
its affiliates;
O. Insurance and fidelity bond premiums; and
P. Litigation and other extraordinary expenses of a
non-recurring nature.
5. Activities and Affiliates of the Manager.
A. The Trust acknowledges that the Manager 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 the Manager, 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"). Subject
to the provisions of paragraph 3, the Trust agrees that the Manager 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 the Manager 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. The Manager shall have no obligation to recommend
for the Fund a position in any investment which an Affiliated Account may
acquire, and the Trust shall have no first refusal, co-investment or other
rights in respect of any such investment, either for the Fund or otherwise.
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 ("Interested Persons") of the Manager or
its affiliates as directors, officers, agents and shareholders of the Manager or
its affiliates; that directors, officers, agents and shareholders of the Manager
or its affiliates are or may be Interested Persons of the Trust as Trustees,
officers, agents, shareholders or otherwise; that the Manager or its 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,
By-Laws and the Investment Company Act and the rules thereunder.
6. Compensation of the Manager.
For all services to be rendered and payments made pursuant to this
Agreement, the Trust, on its own behalf and on behalf of Fund, will pay the
Manager monthly in arrears a fee at an annual rate equal to 0.90% of the net
asset value of the Fund. 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 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.
7. Liabilities of the Manager.
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 the Manager, the Manager 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. The Manager shall indemnify and hold harmless the Trust
from any loss, cost, expense or damage resulting from the failure of any
Sub-Advisor to comply with (i) any statement included in the Prospectus and
Statement of Additional Information of the Trust, or (ii) instructions given by
the Manager to any Sub-Advisor 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 7B shall apply only to the extent
that a Sub-Adviser 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 Manager, from liability in
violation of Sections 17(h) and (i) of the Investment Company Act.
8. 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, 1996, 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.
9. Assignment.
No assignment of this Agreement shall be made by the Manager, and this
Agreement shall terminate automatically in the event of any such assignment. The
Manager shall notify the Trust in writing in advance of any proposed change of
control to enable the Trust to take the steps necessary to enter into a new
advisory contract.
10. Amendment
This Agreement may be amended at any time, but only by written
Agreement between the Manager 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.
11. 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 the Manager;
(b) shall immediately terminate in the event of its
assignment; and
(c) may be terminated by the Manager on sixty (60)
days written notice to the Trust.
12. 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 SEC.
13. 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.
14. 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.
15. Shareholder Liability.
The Manager 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. The Manager 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.
16. Governing Law.
This Agreement shall be interpreted under, and the performance of the
Manager 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.
17. Use of Manager's Name.
The Trust may use the name "Keyport" or any other name derived from the
name "Keyport" only for so long as this Agreement (or another similar management
agreement pertaining to other series funds of the Trust) or any extension,
renewal, or amendment hereof (or thereof) remains in effect, including any
similar agreement with any organization that shall have succeeded to the
business of the Manager. At such time as this Agreement (and each 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 the name "Keyport," any name 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement on the date first above written.
ATTEST: KEYPORT VARIABLE INVESTMENT TRUST,
on its own behalf and on behalf of The
Newport-Keyport Tiger Fund
_____________________ By: Richard R. Christensen
Title: Secretary Title: President
ATTEST: KEYPORT ADVISORY SERVICES CORP.
__________________ By: Paul H. LeFevre, Jr.
Title: Secretary Title: President
NEWPORT-KEYPORT TIGER FUND
NEWPORT MANAGEMENT SUB-ADVISORY AGREEMENT
AGREEMENT dated as of May 1, 1995 among KEYPORT VARIABLE INVESTMENT
TRUST, a Massachusetts business trust (the "Trust"), with respect to
NEWPORT-KEYPORT TIGER FUND (the "Fund"), KEYPORT ADVISORY SERVICES CORP., a
Massachusetts corporation ("Adviser"), and NEWPORT FUND MANAGEMENT, INC., a
California 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 0.70% 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, 1996
and from year to year thereafter so long as approved annually in accordance with
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.
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 "Newport," or any other name derived from
the name "Colonial," 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. 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 "Newport," 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. (It is hereby specifically agreed that the name "Keyport"
does not derive from the name "Newport" for purposes of this Section 10.)
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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
NEWPORT-KEYPORT TIGER FUND
By: KEYPORT VARIABLE INVESTMENT TRUST
By: Richard R. Christensen
Title: President
NEWPORT FUND MANAGEMENT, INC.
By: Lindsay Cook
Title: Senior Vice President
KEYPORT ADVISORY SERVICES CORP.
By: Paul H. LeFevre, Jr.
Title: President
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
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.
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 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 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 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 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: Richard R. Christensen
Title: President
COLONIAL INVESTORS SERVICES, INC.
By: John W. Reading
Title: Asst. Secretary
PRICING AND BOOKKEEPING AGREEMENT
AGREEMENT dated as of June 7, 1993, between Keyport Variable Investment
Trust (the "Trust"), and Colonial Management Associates, Inc. ("Colonial"), a
Massachusetts corporation. The Trust and Colonial agree as follows:
1. Appointment. The Trust may offer an unlimited number of series
("Funds"), each of which may have multiple classes of shares ("Shares"). This
Agreement will apply to each Fund on the Effective Date set forth in Appendix I
as amended from time to time.
2. Services. Colonial shall (i) determine and timely communicate to
persons designated by the Trust the Fund's net asset values and offering prices
per Share; and (ii) maintain and preserve in a secure manner the accounting
records of the Fund. All records shall be the property of the Fund. Colonial
will provide disaster planning to minimize possible service interruption.
3. Audit, Use and Inspection. Colonial shall make available on its
premises during regular business hours all records of a Fund for reasonable
audit, use and inspection by the Trust, its agents and any regulatory agency
having authority over the Fund.
4. Compensation. The Trust will pay Colonial for each Fund a monthly
fee of $2,250 for the first $50 million of Fund assets, plus a monthly
percentage fee at the following annual rates: .04% on the next $550 million;
.03% on the next $400 million; and .025% on the excess over $1 billion of the
average daily net assets of the Fund for such month.
5. Compliance. Colonial shall comply with applicable provisions of the
prospectus and statement of additional information of the Trust and applicable
laws and rules in the provision of services under this Agreement.
6. Limitation of Liability. In the absence of willful misfeasance, bad
faith or gross negligence on the part of Colonial, or reckless disregard of its
obligations and duties hereunder, Colonial shall not be subject to any liability
to the Trust or 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
connected with, rendering services hereunder.
7. Amendments. The Trust shall submit to Colonial a reasonable time in
advance of filing with the Securities and Exchange Commission copies of any
changes in its Registration Statement. If a change in documents or procedures
materially increases the cost to Colonial of performing its obligations,
Colonial shall be entitled to receive reasonable additional compensation.
8. Duration and Termination, etc. This Agreement may be changed only by
writing executed by each party. This Agreement: (a) shall continue in effect
until two years from the date of its execution, and thereafter, from year to
year so long as approved annually by vote of a majority of the Trustees who are
not affiliated with Colonial; (b) may be terminated at any time without penalty
by sixty days' written notice to either party; and (c) may be terminated at any
time for cause by either party if such cause remains unremedied for a reasonable
period not to exceed ninety days after receipt of written specification of such
cause. Paragraph 6 of this Agreement shall survive termination. If the Trust
designates a successor to any of Colonial's obligations, Colonial shall, at the
expense and direction of the Trust, transfer to the successor all trust records
maintained by Colonial.
9. Miscellaneous. This Agreement shall be governed by the laws of The
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above.
KEYPORT VARIABLE INVESTMENT TRUST
By: Richard R. Christensen
President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Arthur 0. Stern
Senior Vice President
A copy of the document establishing the Trust is filed with the Secretary of The
Commonwealth of Massachusetts. This Agreement is executed by officers not as
individuals and is not binding upon any of the Trustees, officers or
shareholders of the Trust individually but only upon the assets of the Fund.
s:funds/lvit/legaldoc/pricing.doc
AMENDMENT NO. ONE
TO
PRICING AND BOOKKEEPING AGREEMENT
AGREEMENT dated May 2, 1994 between Keyport Variable Investment Trust,
a Massachusetts business 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. The parties hereby agree that
Appendix I to such agreement 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.
KEYPORT VARIABLE INVESTMENT TRUST
By: Richard R. Christensen
President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Harold W. Cogger
Title:
<PAGE>
Schedule I to Amendment No. One
to Pricing and Bookkeeping Agreement
Form of Appendix I
Appendix I
Fund Effective Date
Colonial-Keyport Growth and Income Fund June 7, 1993
Colonial-Keyport U.S. Government Securities Fund June 7, 1993
Colonial-Keyport Utilities Fund June 7, 1993
Colonial-Keyport International Fund For Growth May 2, 1994
Colonial-Keyport U.S. Fund For Growth July 1, 1994*
Colonial-Keyport Strategic Income Fund July 1, 1994*
* 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.
RASICOT\KVIT\PRICEAGT.AM1
AMENDMENT NO. TWO
TO
PRICING AND BOOKKEEPING AGREEMENT
AGREEMENT dated May 1, 1995 between Keyport Variable Investment Trust,
a Massachusetts business 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 Amendment No. One
thereto dated May 2, 1994. 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.
KEYPORT VARIABLE INVESTMENT TRUST
By: Richard R. Christensen
Title: President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Harold W. Cogger
Title:
<PAGE>
Schedule I to Amendment No. Two
to Pricing and Bookkeeping Agreement
Form of Appendix I
Appendix I
Fund Effective Date
Colonial-Keyport Growth and Income Fund June 7, 1993
Colonial-Keyport U.S. Government Securities Fund June 7, 1993
Colonial-Keyport Utilities Fund June 7, 1993
Colonial-Keyport International Fund For Growth May 2, 1994
Colonial-Keyport U.S. Fund For Growth July 5, 1994
Colonial-Keyport Strategic Income Fund July 5, 1994
Newport-Keyport Tiger Fund May 1, 1995*
* 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.
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.
KEYPORT VARIABLE INVESTMENT TRUST
By: Richard R. Christensen
Title: President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Nancy L. Conlin
Title: Vice President
<PAGE>
Schedule I to Amendment No. Three to Pricing
and Bookkeeping Agreement
Form of Appendix I
Appendix I
Fund Effective Date
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 the shares
(the date of authorization of this of such Fund shall
Agreement by the Board of Trustees) have been
registered for sale
under the
Securities Act of
1933 and the
Investment Company
Act of 1940
* 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.
KEYPORT VARIABLE INVESTMENT TRUST
Joinder And Release Agreement
With Respect To
Transfer Agency Agreement
AGREEMENT, made as of January 3, 1995, among KEYPORT VARIABLE
INVESTMENT TRUST, a business trust organized under the laws of The Commonwealth
of Massachusetts (the "Trust"), LIBERTY INVESTMENT SERVICES, INC., a
Massachusetts corporation ("LIS"), and COLONIAL INVESTORS SERVICE CENTER, INC.,
a Massachusetts corporation ("Colonial").
1. Reference is made to the Transfer Agency Agreement dated June 7, 1993 between
the Trust and LIS (as amended by Amendment No. One thereto dated May 2, 1994 and
in effect on the date hereof, the "Transfer Agency Agreement"). A copy of the
Transfer Agency Agreement (including said Amendment No. One) is attached hereto
as Annex A.
2. Each of the parties hereby agrees that, from and after the date hereof, (i)
Colonial shall become a party to the Transfer Agency Agreement in place of LIS,
and shall be the "Transfer Agent" for all purposes thereof, and (ii) LIS shall
be released from its obligations as Transfer Agent under the Transfer Agency
Agreement for all periods following the effectiveness of this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed and delivered this Agreement as of the date first written
above.
KEYPORT VARIABLE INVESTMENT TRUST
By:Richard R. Christensen
Name: Richard R. Christensen
Title: President
COLONIAL INVESTORS SERVICE CENTER, INC.
By: Cynthia Jones
Name: Cynthia Jones
Title: Vice President
LIBERTY INVESTMENT SERVICES, INC.
By: Paul H. LeFevre, Jr.
Name: Paul H. LeFevre, Jr.
Title:
<PAGE>
Annex A
FORM OF TRANSFER AGENCY AGREEMENT AND AMENDMENT
KEYPORT VARIABLE INVESTMENT TRUST
TRANSFER AGENCY AGREEMENT
TRANSFER AGENCY AGREEMENT dated June 7, 1993 between KEYPORT VARIABLE
INVESTMENT TRUST, a business trust organized under the laws of the Commonwealth
of Massachusetts (the "Trust"), and LIBERTY INVESTMENT SERVICES, INC., a
corporation organized under the laws of the Commonwealth of Massachusetts (the
"Transfer Agent").
WHEREAS, the Trust has been organized as an open-end management
investment company registered as such under the Investment Company Act of 1940
("Investment Company Act") and has authorized the issuance of shares of
beneficial interest in (i) Colonial-Keyport Government Securities Income Fund,
(ii) Colonial-Keyport Growth and Income Fund, and (iii) Colonial-Keyport
Utilities Income Fund (such funds, or series, being hereinafter collectively
referred to as the "Funds"), each Fund representing interests in a separate
portfolio of securities and other assets, which shares are to be issued and sold
to and held by various separate accounts of Keyport Life Insurance Company
("Keyport") and Liberty Life Assurance Company of Boston ("Liberty Life") or
separate accounts of other insurance companies that are affiliated or are not
affiliated with Keyport ("Participating Insurance Company") pursuant to a
Participation Agreement among the Trust, its principal underwriter and the
Participating Insurance Company ("Participation Agreement");
WHEREAS, the Trust desires the Transfer Agent to act as transfer and
dividend disbursing agent for the shares of the Funds in the manner and on the
terms and conditions hereinafter set forth.
NOW THEREFORE, the Trust and the Transfer Agent agree as follows:
1. Employment of the Transfer Agent. The Trust hereby appoints the Transfer
Agent as the transfer agent and the dividend disbursing agent for the shares of
the Funds for the period and on the terms hereinafter set forth. The Transfer
Agent hereby accepts such appointment and agrees during such period to render
the services and to assume the obligations herein set forth.
2. Representations and Agreements of the Trust. The Trust represents that the
number of authorized shares of each Fund is unlimited, and agrees to furnish to
the Transfer Agent such certificates and documents as the Transfer Agent may
reasonably request in connection with the performance of its duties hereunder.
The Trust will be responsible for compliance with the Investment
Company Act, the Securities Act of 1933 and all other applicable federal and
state laws in connection with the offering, issuance and sale and the redemption
or repurchase of shares of the Funds and the payment of dividends and
distributions thereon, and the Transfer Agent will have no responsibility,
liability or obligation thereunder.
3. Services to be provided. The Transfer Agent will perform the services set
forth on Schedule A hereto. It is understood that the shares of the Funds will
be held of record only by separate accounts ("Separate Accounts") of Keyport,
Liberty Life or other Participating Insurance Companies for the benefit of the
holders of variable annuity contracts ("VA contracts") and variable life
insurance policies ("VLI policies") offered and sold by the Separate Accounts,
and that the Transfer Agent's obligations, duties and responsibilities hereunder
shall relate only to the record Fund shareholder accounts of the Separate
Accounts, and not to the accounts of the holders of the VA contracts and VLI
policies.
The Transfer Agent shall maintain all records relating to the accounts
of record shareholders of the Funds which the Trust is required to maintain
pursuant to Rule 31a-1 under the Investment Company Act and shall preserve such
records for the periods prescribed by Rule 31a-2 thereunder. All such records
are and shall remain the property and under the control of the Trust and shall
upon request be made available during reasonable business hours to the Trust's
Board of Trustees or auditors at the Transfer Agent's offices.
4. Standard of Care. The Transfer Agent will at all times act in good faith in
the performance of its duties and obligations hereunder, but assumes no
responsibility and shall not be liable for loss or damage unless caused by the
negligence, bad faith or willful or wanton misconduct of the Transfer Agent or
its employees. The Transfer Agent shall be entitled to act, and shall have no
responsibility or liability for actions taken without negligence or willful or
wanton misconduct, upon any instruction believed by it to have been authorized
by the Trust or any Fund. The Transfer Agent shall in no event be liable for
consequential damages, lost profits or other special damages, even if informed
of the possibility of such damage or loss.
5. Uncontrollable Events. The Transfer Agent shall not be liable for damage,
delays or errors occurring by reason of circumstances beyond its control,
including but not limited to acts of civil or military authority, national
emergencies, fires, flood or catastrophe, acts of God, insurrection, war, riots
or failure of transportation, communication or power supply. However, the
Transfer Agent shall use reasonable care to minimize the likelihood of damage,
delays and errors resulting from an uncontrollable event, and should such
damage, delays or errors occur, shall use its best efforts to mitigate the
effects of such occurrence.
6. Indemnification. The Trust shall indemnify and hold the Transfer Agent, its
employees and agents harmless against any losses, claims, damages, judgments,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from action taken by the Transfer Agent in good faith with due care
and without negligence pursuant hereto or in accordance with instructions
believed by it to have been authorized by the Trust or any Fund.
7. Fees and Charges. For the services rendered by the Transfer Agent pursuant
hereto, the Trust, for the benefit of the Funds, shall pay the Transfer Agent a
fee in the amount shown in Schedule B hereto.
8. Term. This Agreement shall begin on the dated first written above and shall
continue until terminated by either party hereto upon not less than 120 days'
prior written notice to the other party.
9. Non-Liability of Trustees and Shareholders. As provided in the Declaration of
Trust of the Trust, a copy of which is on file with the Secretary of the
Commonwealth of Massachusetts, any obligation of the Trust or the Funds
hereunder shall be binding only upon the assets and property of the Trust or the
Funds, as the case may be, and shall not be binding upon any Trustee, officer,
employee, agent or shareholder (or beneficial owner of shares) of the Trust,
including, without limitation, the officer of the Trust executing this Agreement
on its behalf. Neither the authorization of any action by the Trustees or
shareholders (or beneficial owners of shares) of the Trust shall impose any
liability upon any Trustee or any shareholder (or beneficial owner of shares).
10. Interpretation; Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of Massachusetts, without
giving effect to the conflict of laws provisions thereof.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement on the
date first above written.
KEYPORT VARIABLE INVESTMENT TRUST
By: Richard R. Christensen
President
LIBERTY INVESTMENT SERVICES, INC.
By: Richard R. Christensen
President
<PAGE>
SCHEDULE A
Transfer Agency Agreement
The services to be performed by the Transfer Agent with respect to the
shares of each Fund pursuant to paragraph 3 are as follows:
1. Establishing and maintaining shareholder accounts as instructed and
reporting thereon;
2. Processing the issuance, transfer and redemption of shares in certificate
form, and recording and controlling shares outstanding in certificate and
non-certificate form. Acting as the designee of the Trust to receive orders for
the purchase of shares of the Funds from a Participating Insurance Company
pursuant to Section 1.1 of the Participation Agreement.
3. Reporting the number of outstanding Fund shares to the Trust and the Trust's
custodian on a daily basis.
4. Passing upon the adequacy of documents submitted by or on behalf of a
shareholder to transfer ownership or redeem shares.
5. Transferring ownership of shares upon the books of the appropriate Fund.
6. Redeeming shares and authorizing payment of the proceeds as instructed.
Acting as the designee of the Trust to receive requests for redemption of shares
of the Funds from a Participating Insurance Company pursuant to Section 1.5 of
the Participation Agreement.
7. Preparing and mailing account statements to the shareholder whenever
transaction activity effecting share balances are posted to a Fund account that
is of the type that should receive such statement.
8. Maintaining and updating a stop transfer file.
9. Balancing outstanding shares of record with the custodian prior to each
distribution and processing the reinvestment of dividends and distributions as
instructed.
10. Processing exchanges of shares of one Fund for another.
11. Reporting to the Trust and its custodian daily the capital stock activities
and dollar amount of transactions.
12. Maintaining and safeguarding an inventory of unissued blank stock
certificates, checks and other Trust records.
13. Providing such assistance as may be required to enable the Trust and its
properly authorized auditors, examiners and others designated by the Trust to
properly understand and examine all books, records, computer files, microfilm
and other items maintained pursuant to this Agreement, and to assist as required
in such examination.
14. Maintaining information, performing the necessary research and producing
reports required to comply with all applicable state escheat or abandoned
property laws.
15. Furnishing the Participating Company with notices of dividends and
distributions declared by the Funds.
The transfer agent will produce reports as requested by the Trust
including, but not limited to, the following:
Shareholder Account Confirmation As required
Certificates When requested
Proxy When required
1099 Annually
1042-S Annually
Transaction journals Daily
Record date position control Daily
Daily and (monthly) cash proof Daily
Daily (month) share proof Daily
Daily master control Daily
Account information reports When requested
(Monthly) cumulative transactions Monthly
Shareholder master list When requested
Activities statistics Monthly
Distribution journals As required
<PAGE>
SCHEDULE B
Transfer Agency Agreement
The Transfer Agency fee referred to in paragraph 7 of this Agreement for each
Fund shall be in the amount of $7,500 per year, payable in monthly installments
of $625. The foregoing fee shall be pro-rated for any month during which this
Agreement is in effect for only a portion of the month.
<PAGE>
AMENDMENT NO. ONE
TO
TRANSFER AGENCY AGREEMENT
AGREEMENT dated May 2, 1994 between Keyport Variable Investment Trust,
a Massachusetts business trust (the "Trust"), and Liberty Investment Services,
Inc. a Massachusetts corporation ("LIS").
Reference is made to the Transfer Agency Agreement dated as of June 7.
1993 between the Trust and LIS. The parties hereby agree that each of
Colonial-Keyport International Fund for Growth, Colonial-Keyport U.S. Fund for
Growth and Colonial-Keyport Strategic Income Fund shall become a "Fund" for all
purposes of such 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
KEYPORT VARIABLE INVESTMENT TRUST
By: Richard R. Christensen
President
LIBERTY INVESTMENT SERVICES, INC.
By: Ernest E. Dunbar
Title:
AMENDMENT NO. TWO
TO
TRANSFER AGENCY AGREEMENT
AGREEMENT dated May 1, 1995 between Keyport Variable Investment Trust,
a Massachusetts business 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 and (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 (as so amended, the "Transfer Agency
Agreement"). The parties hereby agree that Newport-Keyport Tiger Fund 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-IA.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
KEYPORT VARIABLE INVESTMENT TRUST
By: Richard R. Christensen
Title: President
COLONIAL INVESTORS SERVICE CENTER, INC.
By: Cynthia Jones
Title: Vice President
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: Richard R. Christensen
Title: President
COLONIAL INVESTORS SERVICE CENTER, INC.
By: Nancy L. Conlin
Title:Assistant Secretary
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 17 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 16, 1999, relating to the financial
statements and financial highlights appearing in the December 31, 1998 Annual
Report to Shareholders of the Liberty Variable Investment Trust, which is 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.
PRICEWATERHOUSECOOPERS LLP
- --------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 13, 1999
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