<PAGE>
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. 15 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 16 / 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).
/ / On [date] pursuant to paragraph (b).
/ / 60 days after filing pursuant to paragraph (a)(1).
/ X / on May 1, 1999 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.
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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)
(Colonial International Fund for Growth, Variable Series)
(Liberty All-Star Equity Fund, 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
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<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
* Colonial International Fund for Growth, Variable Series
* Liberty All-Star Equity Fund, 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, the Commission 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-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- -----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
THE TRUST
THE FUNDS
Investment Goals
Primary Investment Strategies
Primary Investment Risks
Performance Histories
TRUST MANAGEMENT ORGANIZATIONS
Trustees
Investment Advisor
Investment Sub-Advisors and Portfolio Managers
OTHER INVESTMENT STRATEGIES AND RISKS
Temporary Defensive Measures
U.S. Government Securities
Structured Risk
Zero Coupon Bonds
Hedging Strategies
Year 2000 Compliance
FINANCIAL HIGHLIGHTS
SHAREHOLDER INFORMATION
2
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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 LASC. Each
Fund is sub-advised by the following Sub-Advisor:
- ------------------------------ -----------------------------------------------
FUND SUB-ADVISOR
- ------------------------------ -----------------------------------------------
Growth and Income Fund Colonial Management Associates, Inc. (Colonial)
International Fund for Growth
U.S. Stock Fund
Small Cap Value Fund
Strategic Income Fund
High Yield Securities Fund
- ------------------------------ -----------------------------------------------
Global Utilities Fund Stein Roe & Farnham Incorporated (Stein Roe)
- ------------------------------ -----------------------------------------------
Tiger Fund Newport Fund Management, Inc. (Newport)
- ------------------------------ -----------------------------------------------
Liberty All-Star Equity Fund Liberty Asset Management Company (LAMCO)
- ------------------------------ -----------------------------------------------
Other Funds may be added or deleted 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. ("LFDI"). 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 LFDI serves
as principal underwriter with respect to the sale of shares to Participating
Insurance Companies that are not so affiliated. KFSC and LFDI are affiliates
of LASC.
The prospectuses of the Participating Insurance Companies' separate accounts
describe which Funds are available to the purchasers of their own VA contracts
and VLI policies. The Trust assumes no responsibility for those prospectuses.
3
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THE FUNDS
INVESTMENT GOALS - COLONIAL GROWTH AND INCOME FUND, VARIABLE SERIES
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The Fund seeks primarily income and long-term capital growth and, secondarily,
preservation of capital.
PRIMARY INVESTMENT STRATEGIES
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The Fund invests in both U.S. and foreign common stocks. 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 whose business activities are concentrated in industries or
business strategies which are expected to provide above average
stability or value in turbulent markets; or
3. Companies with anticipated business growth prospects that represent
above average value.
Colonial assesses whether a company's prospects are "above average." Colonial
makes this judgement subjectively, based upon available information.
The Fund also invests in U.S. Government securities consisting of U.S.
Treasuries and mortgaged-backed securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. Additionally, the Fund may invest
in fixed income 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 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.
Because the Fund may invest in fixed income securities issued by private
entities, including certain types of mortgaged-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 in the price of a bond
when interest rates increase. 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.
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 returns compare with
those of a broad measure of market performance for one year, five years and the
life of the Fund. We compare the Fund to the Standard & Poor's 500 Index, an
unmanaged index that tracks the performance of a selection of widely held common
stocks. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. 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 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.
4
<PAGE>
CALENDAR-YEAR TOTAL RETURNS
The Fund S&P 500
-------- -------
7/1/93 % %
12/31/93
12/31/94
12/31/95
12/31/96
12/31/97
12/31/98
The Fund's year to date total return through March 31, 1999 was XX%.
Best Quarter: X quarter 1998, XX%
Worst Quarter: X quarter 1998, XX%
Average Annual Total Return - for Periods Ended 12/31/98
1 YEAR 5 YEARS SINCE
INCEPTION
ON 7/1/93
Fund
- ---------------------------------------------------------------
Standard & Poor's 500 Index
- ---------------------------------------------------------------
5
<PAGE>
INVESTMENT GOALS - STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
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The Fund seeks current income and long-term growth of capital and income.
PRIMARY INVESTMENT STRATEGIES
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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.
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 returns compare with
those of a broad measure of market performance for one year, five years and the
life of the Fund. We compare the Fund to the Standard & Poor's Utilities Index
and Morgan Stanley Capital International Workd Index ND. S&P Utilities Index is
an unmanaged index that tracks the performance of domestic utilities stocks.
MSCI World Index ND 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. 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 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
The Fund S&P Utilities MSCI World Index ND
-------- ------------- -------------------
7/1/93 % % %
12/31/93
12/31/94
12/31/95
12/31/96
12/31/97
12/31/98
The Fund's year to date total return through March 31, 1999 was XX%.
Best Quarter: X quarter 1998, XX%
Worst Quarter: X quarter 1998, XX%
Average Annual Total Return - for Periods Ended 12/31/98
1 YEAR 5 YEARS SINCE
INCEPTION
ON 7/1/93
Fund
- ---------------------------------------------------------------
MSCI World Index ND
- ---------------------------------------------------------------
Standard & Poor's Utilities Index
- ---------------------------------------------------------------
6
<PAGE>
7
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT GOALS - COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
- --------------------------------------------------------------------------------
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 uses 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, or 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.
8
<PAGE>
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 returns compare with
those of a broad measure of market performance for the life of the Fund. We
compare the Fund to the Russell 2000 Index, an unmanaged index that tracks the
performance of small capitalization stocks. Unlike the Fund, indices are not
investments, do not incur fees or expenses and are not professionally managed.
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 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
The Fund Russell 2000
-------- ------------
X/X/98 % %
12/31/98
The Fund's year to date total return through March 31, 1999 was XX%.
Best Quarter: X quarter 1998, XX%
Worst Quarter: X quarter 1998, XX%
Average Annual Total Return - for Periods Ended 12/31/98
SINCE
INCEPTION
ON XX/XX/XX
Fund
- ---------------------------------------------------------------
Russell 2000
- ---------------------------------------------------------------
9
<PAGE>
INVESTMENT GOALS - COLONIAL U.S. STOCK FUND, VARIABLE SERIES
- --------------------------------------------------------------------------------
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 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.
10
<PAGE>
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 returns compare with
those of a broad measure of market performance for one year, five years and the
life of the Fund. We compare the Fund to Standard & Poor's 500 Index, an
unmanaged index that tracks the performance of a selection of widely held
common stocks. Unlike the Fund, indices are not investments, do not incur fees
or expenses and are not professionally managed. 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 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
The Fund S&P 500
-------- -------
7/15/94 % %
12/31/94
12/31/95
12/31/96
12/31/97
12/31/98
The Fund's year to date total return through March 31, 1999 was XX%.
Best Quarter: X quarter 1998, XX%
Worst Quarter: X quarter 1998, XX%
Average Annual Total Return - for Periods Ended 12/31/98
1 YEAR 5 YEARS SINCE
INCEPTION
ON 7/15/94
Fund
- ---------------------------------------------------------------
Standard & Poor's 500 Index
- ---------------------------------------------------------------
11
<PAGE>
INVESTMENT GOALS - COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES
- --------------------------------------------------------------------------------
The Fund seeks a high level of current income, as is consistent with prudent
risk and maximizing total return.
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund seeks to achieve its investment goals 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.
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 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.
Because the Fund may invest in fixed income securities issued by private
entities, including certain types of mortgaged-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 in the price of a bond
when interest rates increase. 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 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, are subject to greater price volatility and are less liquid, especially
during periods of economic uncertainty or change, than higher quality debt
securities.
12
<PAGE>
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 returns compare with
those of a broad measure of market performance for one year, five years and and
the life of Fund. We compare the Fund to the Lehman Brothers Government/
Corporate Bond Index, an unmanaged index that tracks the performance of a
selection of U.S. government agency, Treasury and investment grade corporate
bonds. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. 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 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
The Fund LB Government/Corporate Bond Index
-------- ----------------------------------
7/15/94 % %
12/31/94
12/31/95
12/31/96
12/31/97
12/31/98
The Fund's year to date total return through March 31, 1999 was XX%.
Best Quarter: X quarter 1998, XX%
Worst Quarter: X quarter 1998, XX%
Average Annual Total Return - for Periods Ended 12/31/98
1 YEAR 5 YEARS SINCE
INCEPTION
ON 7/15/94
Fund
- ---------------------------------------------------------------
Lehman Brothers Government/Corporate Bond Index
- ---------------------------------------------------------------
13
<PAGE>
INVESTMENT GOALS - COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
- --------------------------------------------------------------------------------
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.
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 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.
Lower rated debt securities are commonly referred to as "junk bonds" and are
considered speculative. Lower quality debt securities involve greater risk of
loss, are subject to greater price volatility 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 in the price of a bond
when interest rates increase. 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.
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
- --------------------------------------------------------------------------------
14
<PAGE>
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 returns compare with
those of a broad measure of market performance for the life of Fund.
We compare the Fund to the CS First Boston High Yield Index, an unmanaged index
that tracks the performance of high yield bond funds. Unlike the Fund, indices
are not investments, do not incur fees or expenses and are not professionally
managed. 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 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
The Fund CS First Boston
-------- ---------------
X/X/98 % %
12/31/98
The Fund's year to date total return through March 31, 1999 was XX%.
Best Quarter: X quarter 1998, XX%
Worst Quarter: X quarter 1998, XX%
Average Annual Total Return - for Periods Ended 12/31/98
SINCE
INCEPTION
ON XX/XX/98
Fund
- ---------------------------------------------------------------
CS Boston High Yield Index
- ---------------------------------------------------------------
15
<PAGE>
INVESTMENT GOALS - LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES
- --------------------------------------------------------------------------------
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
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 because of the following primary factors:
* 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 are:
J. P. Morgan Investment Management Inc.
Oppenheimer Capital
Boston Partners Asset Management, L.P.
Westwood Management Corp.
Wilke/Thompson Capital Management, Inc.
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 of personnel.
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.
16
<PAGE>
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.
- --------------------------------------------------------------------------------
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 returns compare with
those of a broad measure of market performance for one year, five years and and
the life of Fund. We compare the Fund to [Standrad & Poor's 500 Index, an
unmanaged index that tracks the performance of a selection of widely common
stocks Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. 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 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
The Fund S&P 500
-------- -------
11/17/97 % %
12/31/97
12/31/98
The Fund's year to date total return through March 31, 1999 was XX%.
Best Quarter: X quarter 1998, XX%
Worst Quarter: X quarter 1998, XX%
Average Annual Total Return - for Periods Ended 12/31/98
1 YEAR SINCE
INCEPTION
ON 11/17/97
Fund
- ---------------------------------------------------------------
Standard & Poor's 500 Index
- ---------------------------------------------------------------
17
<PAGE>
INVESTMENT GOALS - COLONIAL INTERNATIONAL FUND FOR GROWTH, VARIABLE SERIES
- --------------------------------------------------------------------------------
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 in the price of a bond
when interest rates increase. 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, or 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.
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
18
<PAGE>
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 returns compare with
those of a broad measure of market performance for one year, five years and
the life of the Fund. We compare the Fund to the Morgan Stanley Capital
International EAFE Index, an unmanaged index that tracks the performance of a
selection of widely held common stocks. Unlike the Fund, indices are not
investments, do not incur fees or expenses and are not professionally managed.
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 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
The Fund MSCI EAFE Index
-------- --------------
5/2/94 % %
12/31/94
12/31/95
12/31/96
12/31/97
12/31/98
The Fund's year to date total return through March 31, 1999 was XX%.
Best Quarter: X quarter 1998, XX%
Worst Quarter: X quarter 1998, XX%
Average Annual Total Return - for Periods Ended 12/31/98
1 YEAR 5 YEARS SINCE
INCEPTION
ON 5/2/94
Fund
- ---------------------------------------------------------------
Morgan Stanley Capital
International EAFE Index
- ---------------------------------------------------------------
19
<PAGE>
INVESTMENT GOALS - NEWPORT TIGER FUND, VARIABLE SERIES
- --------------------------------------------------------------------------------
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, 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 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.
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 on 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.
20
<PAGE>
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 returns compare with
those of a broad measure of market performance for one year, five years and and
the life of Fund. We compare the Fund to Morgan Stanley Capital International
EAFE Index GDP, an unmanaged index that tracks the performance of foriegn
stocks. Unlike the Fund, indices are not investments, do not incur
fees or expenses and are not professionally managed. 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 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
The Fund MSCI EAFE Index GDP
-------- -------------------
5/1/95 % %
12/31/95
12/31/96
12/31/97
12/31/98
The Fund's year to date total return through March 31, 1999 was XX%.
Best Quarter: X quarter 1998, XX%
Worst Quarter: X quarter 1998, XX%
Average Annual Total Return - for Periods Ended 12/31/98
1 YEAR SINCE
INCEPTION
ON 5/1/95
Fund
- ---------------------------------------------------------------
Morgan Stanley Capital International EAFE Index GDP
- ---------------------------------------------------------------
21
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
THE TRUSTEES
- --------------------------------------------------------------------------------
The business of the Trust and the Funds is supervised by the Trust's Board
of Trustees. The SAI contains names of and biographical information on the
Trustees.
THE ADVISOR: LIBERTY ADVISORY SERVICES CORP. (LASC)
- --------------------------------------------------------------------------------
LASC, located at 125 High Street, Boston Massachusetts 02110, is the investment
advisor to the Trust. LASC is a wholly owned subsidiary of Liberty Financial
Companies, Inc. ("LFC"). 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 to administer the Trust's operations which it may delegate, at
its own expense, to certain affiliates. LASC has delegated its admiistrative
responsibiities to Coloinal 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 the specified Fund.
Growth and Income Fund 0.65%
Global Utilities Fund 0.65%
Small Cap Value Fund 0.80%
U.S. Stock Fund 0.80%
Strategic Income Fund 0.65%
High Yield Securities Fund 0.60%
International Fund for Growth 0.90%
All-Star Equity Fund 0.80%
Tiger Fund 0.70%
THE SUB-ADVISORS
- --------------------------------------------------------------------------------
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 Management Associates, Inc. ("Colonial"), an investment advisor since
1931, is the Sub-Advisor of each of Growth and Income Fund, Small Cap Value
Fund, U.S. Stock Fund, Strategic Income Fund, High Yield Securities Fund and
International Fund for Growth. Colonial's principal business address is
One Financial Center, Boston, Massachusetts 02111.
LASC, out of the management fees it receives from the Trust, pays Colonial
sub-advisory fees at the following annual rates of the average daily net assets
of the specified Fund:
Growth and Income Fund 0.45%
Small Cap Value Fund 0.60%
U.S. Stock Fund 0.60%
Strategic Income Fund 0.45%
High Yield Securities Fund 0.40%
International Fund for Growth 0.70%
Colonial also provides transfer agency and pricing and record keeping services
for the Funds under separate agreements.
John E. Lennon, Vice President of Colonial, has co-managed the Growth and Income
Fund since 1997 and has managed various other Colonial equity funds since 1982.
Gordon A. Johnson, Vice President of Colonial, has co-managed the Growth and
Income Fund since 1997. From 1993 to 1995, Mr. Johnson served as a senior equity
analyst with Colonial.
Mark Stoeckle has managed the U.S. Stock Fund since December, 1996. Mr. Stoeckle
is a 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.
22
<PAGE>
Carl C. Ericson has managed the Strategic Income Fund since its inception. He
also manages the High Yield Securities Fund. 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, Vice President of Colonial, has co-managed the Colonial Small
Cap Value Fund since 1993. Prior to joining Colonial in 1993, Mr. Haynie was a
Vice President at Massachusetts Financial Services Company and a portfolio
manager at Trinity Investment Management.
Michael Rega, Vice President of Colonial, has co-managed the Colonial Small Cap
Value Fund since 1996. Prior to 1996, has was an analyst at Colonial since 1993.
Gita Rao, a Vice President of Colonial, co-manages the International Fund for
Growth. 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 PResdient in the domestic equity
resarch group at Kidder, Peabody and Company from 1991 to 1994.
Nicholas Ghajar co-manages the International Fund for Growth. Mr. Ghajar has
either been an associate portfolio manager or an equity analyst of various
other equity funds at Colonial since 1991.
STEIN ROE
Stein Roe & Farnham Incorporated ("Stein Roe") is the Sub-Advisor of the Global
Utilities Fund. Stein Roe's principal address is One South Wacker Drive,
Chicago, Illinois 60606.
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 is the Sub-Advisor of the All-Star Equity Fund. LAMCO's principal
address is 600 Atlantic Avenue, 23rd Floor, Boston, Massachusetts 02210.
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
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.
The Trust and LAMCO have received an exemptive order from the Securities and
Exchange Commission 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.
23
<PAGE>
NEWPORT
Newport Fund Management, Inc. ("Newport") is the Sub-Advisor of the Tiger Fund.
Newport's principal address is 580 California Street, Suite 1960, San
Francisco, California 94104.
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.
John M. Mussey and Thomas R. Tuttle, President and Senior Vice President,
respectively, of Newport, co-manage the Fund. Mr. Mussey has managed the Newport
Tiger Fund since 1989. Mr. Tuttle has co-managed the Newport Tiger Fund since
November, 1995. Messrs. Mussey and Tuttle have been officers of Newport since
1984.
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.
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.
24
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
Each Fund's primary investments and its risks are described above in its
individual description. This section describe 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 Liberty All-Star Equity Fund, each Fund's Sub-Advisor
may determine that adverse market conditions make it desirable to suspend
temporarily the Fund's normal investment activities. During such times, the Fund
may, but is not required to, invest in cash or high quality, short-term debt
securities, without limit. Taking a temporary defensive position may prevent the
Fund from achieving its investment objective.
(High Yield Securities 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
- --------------------------------------------------------------------------------
(Growth and Income Fund, 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 mortgaged-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.
STRUCTURED RISK
- --------------------------------------------------------------------------------
(Growth and Income Fund, 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 mortgaged-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 mortgaged-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 mortgaged backed
securities is paid earlier than expected. In an environment of declining
interest rates, asset-backed securities and mortgaged-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, Stategic Income Fund, High Yield Securities Fund) Zero
coupon bonds are issued at less than their fair value and make payments of
interest only at maturity, rather than during the life of the bond. 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.
HEDGING STRATEGIES
- --------------------------------------------------------------------------------
Each Fund may enter into a number of hedging strategies, including the use of
futures and options, to gain or reduce exposure to particular securities or
markets. These strategies, which are commonly referred to as derivatives,
involve the use of financial instruments whose values derive from the future,
not current, performance 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 maturity. 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 working 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.
25
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow are intended to help you understand
the Funds' financial information for the last five fiscal years (or shorter
period if a Fund commenced operations less than five years ago). The information
has been audited by PricewaterhouseCoopers LLP, whose report appears 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.
COLONIAL GROWTH AND INCOME FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value--
Beginning of period ($) 13.96 12.60 10.03 10.36
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($)
Net investment income (a)(c) 0.28 0.28 0.29 0.26
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 3.75 1.98 2.72 (0.34)
- ---------------------------------------------------------------------------------------------------
Total from Investment Operations 4.03 2.26 3.01 (0.08)
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net investment income (0.27) (0.28) (0.25) (0.25)
- ---------------------------------------------------------------------------------------------------
In excess of net investment income (0.01) -- -- --
- ---------------------------------------------------------------------------------------------------
From net realized gains (loss) (2.37) (0.62) (0.19) --
- ---------------------------------------------------------------------------------------------------
Total Distributions Declared to Shareholders (2.65) (0.90) (0.44) (0.25)
- ---------------------------------------------------------------------------------------------------
Net asset value--
End of period ($) 15.34 13.96 12.60 10.03
- ---------------------------------------------------------------------------------------------------
Total return (%) (b) 28.97 17.89 30.03 (0.76)
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000) ($) 106,909 93,247 71,070 48,052
- ---------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets
(%) 0.79(e) 0.79(e) 0.81(e) 0.87
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%) 1.77(e) 2.02(e) 2.51(e) 2.82
- ---------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 60 24 79 55
- ---------------------------------------------------------------------------------------------------
Average commission rate ($) (f) 0.0401 0.0383 -- --
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations (July 1, 1993)
to December 31, 1993.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, this ratio would have been 1.23% (annualized)
for the period ended December 31, 1993.
(d) Computed giving effect to LASC's expense limitation undertaking.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
26
<PAGE>
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
27
<PAGE>
STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value--
Beginning of period ($) 10.70 10.50 8.11 9.65
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($)
Net investment income (a) 0.46 0.46 0.46 0.54
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2.62 0.23 2.39 (1.53)
- ---------------------------------------------------------------------------------------------------
Total from investment operations 3.08 0.69 2.85 (0.99)
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net investment income (0.48) (0.49) (0.46) (0.55)
- ---------------------------------------------------------------------------------------------------
From net realized gains (loss) (1.38) -- -- --
- ---------------------------------------------------------------------------------------------------
Total Distributions Declared to Shareholders (1.86) (0.49) (0.46) (0.55)
- ---------------------------------------------------------------------------------------------------
Net asset value--
End of period ($) 11.92 10.70 10.50 8.11
- ---------------------------------------------------------------------------------------------------
Total return (%) (b) 28.75 6.53 35.15 (10.27)
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000) ($) 54,603 47,907 51,597 38,156
- ---------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets
(%) 0.83(d) 0.81(d) 0.83(d) 0.86
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets (%) 3.96(d) 4.36(d) 4.98(d) 5.80
- ---------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 89 14 18 16
- ---------------------------------------------------------------------------------------------------
Average commission rate ($) (f) 0.0041 0.0468 -- --
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations (July 1, 1993) to
December 31, 1993.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to LASC's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior year's ratios are net of benefits
received, if any.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, this ratios would have been 1.09%
(annualized) for the period ended December 31, 1993.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
28
<PAGE>
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
Year Ended December 31
1998***
Net asset value--
Beginning of period ($)
- ---------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($)
Net investment income (a)
- ---------------------------------------------------------------------------
Net realized and unrealized gain (loss)
- ---------------------------------------------------------------------------
Total from investment operations
- ---------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net investment income
- ---------------------------------------------------------------------------
Net asset value--
End of period ($)
- ---------------------------------------------------------------------------
Total return (%) (b) (c)
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------
Net assets, end of period (000) ($)
- ---------------------------------------------------------------------------
Ratio of net expenses to average net assets
(%)(d)(e)
- ---------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%)(c)(e)
- ---------------------------------------------------------------------------
Portfolio turnover ratio (%)
- ---------------------------------------------------------------------------
Average commission rate
- ---------------------------------------------------------------------------
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations (XX, 1998)
to December 31, 1998.
(a) Per share data was calculated using average shares outstanding
during the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to LASC's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, these ratios would have been % (annualized).
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
29
<PAGE>
COLONIAL U.S. STOCK FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value--
Beginning of period ($) 14.22 12.36 10.27 10.00
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($)
Net investment income (a) 0.20 0.19 0.21 0.09
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.37 2.52 2.84 0.35
- ---------------------------------------------------------------------------------------------------
Total from investment operations 4.57 2.71 3.05 0.44
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net investment income (0.18) (0.17) (0.16) (0.11)
- ---------------------------------------------------------------------------------------------------
From net realized gains (loss) (2.30) (0.68) (0.80) (0.06)
- ---------------------------------------------------------------------------------------------------
In excess of net realized gains (0.01) -- -- --
- ---------------------------------------------------------------------------------------------------
Total Distributions Declared to Shareholders (2.50) (0.85) (0.96) (0.17)
- ---------------------------------------------------------------------------------------------------
Net asset value--
End of period ($) 16.29 14.22 12.36 10.27
- ---------------------------------------------------------------------------------------------------
Total return (%) (c) 32.23 21.84 29.70(b) 4.40(b)**
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000) ($) 96,715 60,855 43,017 15,373
- ---------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets
(%) 0.94(e) 0.95(e) 1.00(d)(e) 1.00(d)*
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%) 1.19(e) 1.39(e) 1.72(b)(e) 2.16(b)*
- ---------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 63 77 115 52
- ---------------------------------------------------------------------------------------------------
Average commission rate ($) (f) 0.0400 0.0395 -- --
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations (July 5, 1994)
to December 31, 1994.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Computed giving effect to LASC's expense limitation undertaking.
(c) Total return at net asset value assuming all distributions reinvested.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, this 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 year's ratios are net of benefits
received, if any.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
trades on which commissions are charged.
30
<PAGE>
COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996 1995 1994***
<S> <C> <C> <C> <C> <C>
Net asset value--
Beginning of period ($) 11.04 10.99 9.79 10.00
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($)
Net investment income (a) 0.90 0.92 0.55 0.30
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 0.11 0.16 1.24 (0.19)
- ---------------------------------------------------------------------------------------------------
Total from investment operations 1.01 1.08 1.79 0.11
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net investment income (0.79) (0.96) (0.56) (0.31)
- ---------------------------------------------------------------------------------------------------
In excess of net investment income (0.05) -- -- --
- ---------------------------------------------------------------------------------------------------
From net realized gains (loss) (0.05) (0.07) (0.03) (0.01)
- ---------------------------------------------------------------------------------------------------
In excess of net realized gains (0.01) -- -- --
- ---------------------------------------------------------------------------------------------------
Total Distributions Declared to Shareholders (0.90) (1.03) (0.59) (0.32)
- ---------------------------------------------------------------------------------------------------
Net asset value--
End of period ($) 11.15 11.04 10.99 9.79
- ---------------------------------------------------------------------------------------------------
Total return (%) (b) (c) 9.11 9.83 18.30 1.10**
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000) ($) 73,175 53,393 48,334 13,342
- ---------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets
(%)(e) 0.80(d) 0.80(d) 0.84(d) 100*
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income to average net
assets (%) (c) 7.86(d) 8.13(d) 8.08(d) 7.33*
- ---------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 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 LASC's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior year's ratios are net of benefits
received, if any.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, these ratios would have been 0.82%, 0.86%,
0.94% and 1.60% (annualized) respectively.
31
<PAGE>
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994***
Net asset value--
Beginning of period ($)
- ---------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($)
Net investment income (a)
- ---------------------------------------------------------------------------
Net realized and unrealized gain (loss)
- ---------------------------------------------------------------------------
Total from investment operations
- ---------------------------------------------------------------------------
In excess of net investment income
- ---------------------------------------------------------------------------
From net realized gains (loss)
- ---------------------------------------------------------------------------
In excess of net realized gains
- ---------------------------------------------------------------------------
Total Distributions Declared
to Shareholders
- ---------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net investment income
- ---------------------------------------------------------------------------
Net asset value--
End of period ($)
- ---------------------------------------------------------------------------
Total return (%) (b) (c)
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------
Net assets, end of period (000) ($)
- ---------------------------------------------------------------------------
Ratio of net expenses to average net assets
(%)(e)
- ---------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%)(c)
- ---------------------------------------------------------------------------
Portfolio turnover ratio (%)
- ---------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations (July 5, 1994)
to December 31, 1994.
(a) Per share data was calculated using average shares outstanding
during the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to LASC's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior year's ratios are net of benefits
recieved, if any.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, these ratios would have been 0.82%, 0.80%,
0.94% and 1.60% (annualized) respectively.
<PAGE>
COLONIAL INTERNATIONAL FUND FOR GROWTH, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994***
Net asset value--
Beginning of period ($) 1.96 1.97 1.88 2.00
- --------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($)
Net investment income (a) 0.02 0.02 0.02 ---
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (0.08) 0.09 0.10 (0.12)
- ---------------------------------------------------------------------------------------------------------
Total from investment operations (0.06) 0.11 0.11 (0.12)
- ---------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net investment income (0.02) --- (0.02) ---
- ---------------------------------------------------------------------------------------------------------
In excess of net investment income (0.02) --- --- ---
- ---------------------------------------------------------------------------------------------------------
From net realized gains (loss) (0.08) (0.12) --- ---
- ---------------------------------------------------------------------------------------------------------
Total Distributions Delcared To Shareholders (0.12) (0.12) (0.02) ---
- ---------------------------------------------------------------------------------------------------------
Net asset value--
End of period ($) 1.78 1.96 1.97 1.88
- ---------------------------------------------------------------------------------------------------------
Total return (%) (b) (3.27) 5.61 5.85 (6.00)**
- ---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (000) ($) 30.600 26.593 22.764 19.146
- ----------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) 1.34(c) 1.40(c) 1.40(c) 1.74
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%) 0.82(c) 0.84(c) 0.75(c) 0.13
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 28 115 40 31
- ----------------------------------------------------------------------------------------------------------
Average commission rate ($)(d) 0.0082 0.0010 --- ---
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations (May 2, 1994)
to December 31, 1994.
(a) Per share data was calculated using average shares outstanding
during the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior year's ratios are net of benefits
recieved, if any.
(d) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades
on which commissions are charged.
<PAGE>
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES
Year Ended December 31
1998 1997
Net asset value--
Beginning of period ($) 10.00
- ---------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($)
Net investment income (a) 0.01
- ---------------------------------------------------------------------------
Net realized and unrealized gain (loss) 0.07
- ---------------------------------------------------------------------------
Total from investment operations 0.08
- ---------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net investment income (0.01)
- ---------------------------------------------------------------------------
Net asset value--
End of period ($) 10.07
- ---------------------------------------------------------------------------
Total return (%) (b) (c) 0.80**
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------
Net assets, end of period (000) ($) 22.228
- ---------------------------------------------------------------------------
Ratio of net expenses to average net assets
(%)(d)(e) 1.00*
- ---------------------------------------------------------------------------
Ratio of net investment income to average
net assets (%)(c)(e) 0.83*
- ---------------------------------------------------------------------------
Portfolio turnover ratio (%) 1**
- ---------------------------------------------------------------------------
Average commission rate 0.0475
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations November 17, 1997
to December 31, 1997.
(a) Per share data was calculated using average shares outstanding
during the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to LASC's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, these ratios would have been 1.45%
(annualized).
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
<PAGE>
NEWPORT TIGER FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997 1996 1995***
<S> <C> <C> <C> <C> <C>
Net asset value--
Beginning of period ($) 2.52 2.28 2.00
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($)
Net investment income (a) 0.03 0.03 0.01
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (0.81) 0.24 0.29
- ---------------------------------------------------------------------------------------------------
Total from investment operations (0.78) 0.27 0.30
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net investment income (0.02) (0.02) (0.01)
- ---------------------------------------------------------------------------------------------------
In excess of net investment income (0.01) -- (0.01)
- ---------------------------------------------------------------------------------------------------
From net realized gains (loss) -- (0.01) --
- ---------------------------------------------------------------------------------------------------
Total Distributions Declared to Shareholders (0.03) (0.03) (0.02)
- ---------------------------------------------------------------------------------------------------
Net asset value--
End of period ($) 1.71 2.52 2.28
- ---------------------------------------------------------------------------------------------------
Total return (%) (b) (31.14) 11.73 15.00**
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000) ($) 24,934 34,642 18,977
- ---------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) (c) 1.25 1.27 1.75*
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%)
(c) 1.14 1.20 0.89*
- ---------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 27 7 12**
- ---------------------------------------------------------------------------------------------------
Average commission rate ($) (d) 0.0083 0.0172 --
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations (May 1, 1995) to
December 31, 1995.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
32
<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 net asset value ("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. We determine NAV at
the close of regular trading on the New York Stock Exchange ("NYSE"), usually
4:00 p.m. New York time.
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 sale 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) secuirty 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 delcare and distribute, as
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
portfolio securities, if any, to its shareholders (Participating Insurance
Companies' separate accounts). The net investment income of each Fund consists
of all dividends or interest received by such Fund, less estimated expenses
(including investment advisory and administrative fees). Income dividends will
be declared and distributed annaully. All net short-term and long-term capital
gains of each Fund, net of carry-forward losses, if any, realized during the
fiscal year, are declared and distributed periodically, no less frequently than
annually. All dividends and distributions are reinvested in additional shares
of the Fund at NAV, as of record date for the distributions.
35
<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 its last fiscal year.
You may wish to read the SAI for more information on the Fund and the securities
in which it invests. 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:
Keport Financial Services Corp.
125 High Street
Boston, MA 02111
or by calling or writing the Participating Insurance Company which issued your
variable annuity contract or variable life insurance 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 Fund by visiting the following
location, and you can obtain copies upon payment of a duplicating fee, by
writing or calling 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 the Commission at 1-800-SEC-0330.
INVESTMENT COMPANY ACT FILE NUMBER:
811-07556
36
LIBERTY VARIABLE INVESTMENT TRUST
Cross Reference Sheet Pursuant to Rule 481(a)
Location or Caption in Statement of
Additional Information
Item Number of Form N-1A
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
Stein Roe Global Utilities Fund
Colonial International Fund for Growth
Colonial U.S. Stock Fund
Colonial Strategic Income Fund
Newport Tiger Fund
Liberty All-Star Equity Fund
Colonial Small Cap Value Fund
Colonial High Yield Securities Fund
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. 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
ITEM PAGE
ORGANIZATION AND HISTORY............................................
INVESTMENT MANAGEMENT AND OTHER SERVICES............................
General....................................................
Trust Charges and Expenses.................................
INVESTMENT RESTRICTIONS.............................................
Colonial Growth and Income Fund............................
Stein Roe Global Utilities Fund............................
Colonial International Fund for Growth.....................
Colonial U.S. Stock Fund...................................
Colonial Strategic Income Fund.............................
Newport Tiger Fund.........................................
Liberty All-Star Equity Fund...............................
Colonial Small Cap Value Fund..............................
Colonial High Yield Securities Fund........................
MORE FACTS ABOUT TRUST..............................................
Mixed and Shared Funding...................................
Organization...............................................
Trustees and Officers......................................
Principal Holders of Securities............................
Custodians.................................................
OTHER CONSIDERATIONS................................................
Portfolio Turnover.........................................
Suspension of Redemptions..................................
Valuation of Securities....................................
Portfolio Transactions.....................................
DESCRIPTION OF CERTAIN INVESTMENTS..................................
Money Market Instruments...................................
Investments in Less Developed Countries....................
Foreign Currency Transactions..............................
Options on Securities......................................
Futures Contracts and Related Options......................
Passive Foreign Investment Companies.......................
Securities Loans...........................................
INVESTMENT PERFORMANCE..............................................
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS....................
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 for Growth"); Colonial U.S. Stock Fund, Variable Series ("U.S. Stock
Fund"); Colonial Strategic Income Fund, Variable Series ("Strategic Income
Fund"); Newport Tiger Fund, Variable Series ("Tiger Fund"); Liberty All-Star
Equity Fund, Variable Series ("All-Star Equity Fund"); Colonial Small Cap Value
Fund, Variable Series ("Small Cap Value Fund") and Colonial High Yield
Securities Fund, Variable Series ("High Yield Securities Fund"). The Trust may
add or delete Funds from time to time. The Trust commenced operations on
July 1, 1993.
INVESTMENT MANAGEMENT AND OTHER SERVICES
GENERAL
Liberty Advisory Services Corp. ("LASC") serves as Manager pursuant to
investment advisory agreements between the Trust on behalf of
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 For Growth, U.S. Stock Fund, Strategic Income Fund, Small Cap
Value Fund and High Yield Securities Fund, have entered into separate
Sub-Advisory Agreements ("Colonial Sub-Advisory Agreements") with Colonial
Management Associates, Inc. ("Colonial"). Colonial is an indirect wholly owned
subsidiary of LFC.
LASC and the Trust, on behalf of the Global Utilities Fund, have
entered into a separate Sub-Advisory Agreement (the "Stein Roe Sub-Advisory
Agreement") with Stein Roe & Farnham Incorporated ("Stein Roe"). Stein Roe is an
indirect wholly owned subsidiary of LFC.
LASC and the Trust, on behalf of the Tiger Fund, have entered into a
separate Sub-Advisory Agreement (the "Newport Sub-Advisory Agreement;"
collectively, with the Colonial Sub-Advisory Agreements and the Stein Roe
Sub-Advisory Agreement, the "Sub-Advisory Agreements") with Newport Fund
Management, Inc. ("Newport"). Newport is an indirect wholly owned subsidiary of
LFC.
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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.
Liberty Advisory Services Corp. Keyport owns all of the outstanding
common stock of LASC. LASC's address is 125 High Street, Boston, Massachusetts
02110. The directors and principal executive officer of LASC are: Paul H.
LeFevre, Jr. (principal executive officer), and Mark R. Tulley. Mr. LeFevre
also is a director of Keyport Financial Services Corp. ("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 Management Associates, Inc. COGRA, LLC (COGRA), One
Financial Center, Boston, Massachusetts 02111, owns all of the outstanding
common stock of Colonial. COGRA 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 Davey S. Scoon.
Stein Roe & Farnham Incorporated. Stein Roe, One South Wacker Drive,
Chicago, Illinois, 60606, is an indirect wholly owned subsidiary of LFC. The
directors and principal executive officer of Stein Roe are Kenneth R. Leibler,
C. Allen Merritt, Jr., Hans P. Ziegler (principal executive officer) and
Thomas W. Butch.
Newport. Newport Pacific Management, Inc. ("Newport Pacific"), 580
California Street, San Francisco, California 94104, owns xx.x% of the
outstanding common stock of Newport. LFC owns the balance. Liberty Newport
Holdings, Ltd. ("LNH") owns all of the outstanding common
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stock of Newport Pacific. LFC owns all of the outstanding stock of LNH. The
directors and principal executive officers of Newport are John M. Mussey
(principal executive officer), Kenneth R. Leibler, Lindsay Cook, Thomas R.
Tuttle, R James Carlson and Linda Couch.
Liberty Asset Management Company; LAMCO's Portfolio Managers. LAMCO,
600 Atlantic Avenue, 23rd Floor, Boston, Massachusetts 02210, is an indirect
wholly owned subsidiary of LFC. The directors and principal executive officer of
LAMCO are: Kenneth R. Leibler, Richard R. Christensen (principal executive
officer), Lindsay Cook and C. Allen Merritt, Jr. Mr. Christensen is Chairman of
the Board of Trustees of the Trust.
As of the date of this Statement of Additional Information, 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"), 522 Fifth Avenue, New York, New York
10036, is a wholly-owned subsidiary of J.P. Morgan & Co. Incorporated,
a New York Stock Exchange listed bank holding company the principal
banking subsidiary of which is Morgan Guaranty Trust Company of New
York. J.P. Morgan's principal executive officer is Keith M. Schappert,
and its directors are Mr. Schappert and Messrs. William L. Cobb, Jr.,
C. Nicolas Potter, Michael R. Granito, John R. Thomas, Thomas M. Luddy,
Michael E. Patterson, Jean Louis Pierre Brunel, Robert A. Anselmi,
Milan Steven Soltis and K. Warren Anderson.
- - Oppenheimer Capital. Oppenheimer Capital, Oppenheimer Tower, World
Financial Center, New York, New York 10281, also is a wholly-owned
subsidiary of PIMCO Advisors L.P. Oppenheimer Capital's principal
executive officer is George Long, and its directors are Mr. Long and
Frank LaCates.
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- - Boston Partners Asset Management, L.P. Boston Partners Asset
Management, L.P.'s address is One Financial Center, Boston,
Massachusetts 02111. The firm is owned by its partners. Desmond S.
Heathwood is the sole General Partner.
- - Westwood Management Corp. Westwood Management Corp., 300 Crescent
Court, Suite 1320, 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 M. Glatstein, and Patricia R. Fraze.
- - Wilke/Thompson Capital Management, Inc. Wilke/Thompson Capital
Management, Inc. ("Wilke/Thompson"), 3800 Norwest Center, 90 South
Seventh Street, Minneapolis, Minnesota 55402, is a corporation of which
Anthony L. Ventura, its President, owns 23%, and Mark A. Thompson, its
Chairman and Chief Investment Officer, owns 56%, of its outstanding
shares. (The balance of such shares are owned by other employees).
Messrs. Thompson and Ventura comprise its Board of Directors.
The Management Agreements, the Sub-Advisory Agreements and the
Portfolio Management Agreements provide that none of LASC, Colonial, Stein Roe,
Newport, LAMCO or LAMCO's Portfolio Managers (collectively, the "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 For Growth commenced operations on May 2,
1994. U.S. Stock Fund and Strategic Income Fund commenced operations on July 5,
1994. Tiger Fund commenced operations on May 1, 1995. All-Star Equity Fund
commenced operations on November 15, 1997. Small Cap Value Fund and High Yield
Securities 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, 1998
pursuant to the Management Agreements described in the Prospectus:
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<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Growth and Income Fund: $538,173 $605,151 $
Global Utilities Fund: $315,944 $310,458 $
International Fund For Growth: $224,146 $270,532 $
U.S. Stock Fund: $418,745 $623,484 $
Strategic Income Fund: $322,142 $384,347(1) $
Tiger Fund: $258,891 $303,701 $
All-Star Equity Fund: -- 8,804(1) $
Small Cap Value: -- --
High Yield Securities: -- --
</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.
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>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Growth and Income Fund: $40,025 $43,653 $
Global Utilities Fund: $27,000 $27,071 $
International Fund For Growth: $27,000 $27,000 $
U.S. Stock Fund: $27,000 $39,024 $
Strategic Income Fund: $27,000 $31,551 $
Tiger Fund: $27,000 $27,000 $
All-Star Equity Fund: -- 3,225 $
Small Cap Value: -- -- $
High Yield Securities: -- -- $
</TABLE>
In addition, 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 transfer agent services:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Growth and Income Fund: $7,500 $7,500 $
Global Utilities Fund: $7,500 $7,500 $
International Fund For Growth: $7,500 $7,500 $
U.S. Stock Fund: $7,500 $7,500 $
Strategic Income Fund: $7,500 $7,500 $
Tiger Fund: $7,500 $ 896 $
All-Star Equity Fund: -- -- $
Small Cap Value: -- -- $
High Yield Securities: -- -- $
</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
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(i) each of Growth and Income Fund, Global Utilities Fund, U.S. Stock Fund,
All-Star Equity Fund and Small Cap Value Fund in excess of 1.00% of average
daily net asset value per annum, (ii) each of International Fund For Growth
and Tiger Fund in excess of 1.75% of average daily net asset value per annum,
and (iii) each of Strategic Income Fund and High Yield Securities Fund in
excess of 0.80% of average daily net asset value per annum, in each case for
the period from May 1, 1998 until April 30, 1999.
INVESTMENT RESTRICTIONS
In addition to the restrictions set forth in the Prospectus with
respect to each Fund which are described as fundamental investment policies, the
investment restrictions specified below with respect to each Fund as
"FUNDAMENTAL INVESTMENT POLICIES" have been adopted as fundamental investment
policies of each Fund. Such fundamental investment policies may be changed only
with the consent of a "majority of the outstanding voting securities" of the
particular Fund. As used in the Prospectus and in this SAI, the term "majority
of the outstanding voting securities" means the lesser of (i) 67% of the voting
securities of a Fund present at a meeting where the holders of more than 50% of
the outstanding voting securities of a Fund are present in person or by proxy,
or (ii) more than 50% of the outstanding voting securities of a Fund. Shares of
each Fund will be voted separately on matters affecting only that Fund,
including approval of changes in the fundamental objectives, policies, or
restrictions of that Fund.
Total assets and net assets are determined at current value for
purposes of compliance with investment restrictions and policies. All percentage
limitations will apply at the time of investment and are not violated unless an
excess or deficiency occurs as a result of such investment. For purposes of the
diversification requirement of the Investment Company Act of 1940, as amended
(the "1940 Act"), the issuer with respect to a security is the entity whose
revenues support the security.
GROWTH AND INCOME FUND
FUNDAMENTAL INVESTMENT POLICIES. Growth and Income Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. 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;
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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:
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. 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.
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 or purchase the voting securities of an issuer; and
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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;
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.
INTERNATIONAL FUND FOR GROWTH
FUNDAMENTAL INVESTMENT POLICIES. International Fund For Growth may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry;
5. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets; 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.
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<PAGE>
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
International Fund For Growth which may be changed without a shareholder vote,
the Fund may not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial
or maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities;
3. Invest more than 15% of its net assets in illiquid assets;
4. With respect to 75% of total assets, purchase any voting
security of an issuer if, as a result of such purchase, the
Fund would own more than 10% of the outstanding voting
securities of such issuer;
5. Purchase puts, calls, straddles, spreads, or any combination
thereof if, as a result of such purchase, the Fund's aggregate
investment in such securities would exceed 5% of total assets;
6. Acquire any security issued by a person that, in its most
recent fiscal year, derived 15% or less of its gross revenues
from securities related activities (within the meaning of Rule
12d3-1 under the Investment Company Act of 1940 (the "1940
Act")) if the Fund would control such person after such
acquisition; or
7. Acquire any security issued by a person that, in its most
recent fiscal year, derived more than 15% of its gross
revenues from securities related activities (as so defined)
unless (i) immediately after such acquisition of any equity
security, the Fund owns 5% or less of the outstanding
securities of that class of the issuer's equity securities,
(ii) immediately after such acquisition of a debt security,
the Fund owns 10% or less of the outstanding principal amount
of the issuer's debt securities, and (iii) immediately after
such acquisition, the Fund has invested not more than 5% of
its total assets in the securities of the issuer.
U.S. STOCK FUND
FUNDAMENTAL INVESTMENT POLICIES. U.S. Stock Fund may:
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;
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2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry; and
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer or purchase the voting securities of an issuer if, as a
result of such purchase, the Fund would own more than 10% of
the outstanding voting shares of such issuer;
6. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets; and
7. Purchase and sell futures contracts and related options so
long as the total initial margin and premiums on the contracts
do not exceed 5% of its total assets.
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
U.S. Stock Fund which may be changed without a shareholder vote, the Fund may
not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial
or maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities;
3. Invest more than 15% of its net assets in illiquid assets; or
4. Purchase or sell commodity contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets.
STRATEGIC INCOME FUND
FUNDAMENTAL INVESTMENT POLICIES. Strategic Income Fund may:
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;
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3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry;
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer or purchase the voting securities of an issuer if, as a
result of such purchase, the Fund would own more than 10% of
the outstanding voting shares of such issuer;
6. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets; and
7. Purchase and sell futures contracts and related options so
long as the total initial margin and premiums on the contracts
do not exceed 5% of its total assets.
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
Strategic Income Fund which may be changed without a shareholder vote, the Fund
may not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial
or maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities; or
3. Invest more than 15% of its net assets in illiquid assets.
TIGER FUND
FUNDAMENTAL INVESTMENT POLICIES. Tiger Fund may not:
1. 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;
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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;
4. Write or trade in put or call options;
5. Purchase securities on margin, but the Fund may utilize such
short-term credits as may be necessary for clearance of
purchases or sales of securities; or
6. Engage in short sales of securities.
ALL-STAR EQUITY FUND
FUNDAMENTAL INVESTMENT POLICIES. All-Star Equity Fund may not:
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1. Issue senior securities, except as permitted by (2) below;
2. Borrow money, except that it may borrow in an amount not
exceeding 7% of its total assets (including the amount
borrowed) taken at market value at the time of such borrowing,
and except that it may make borrowings in amounts up to an
additional 5% of its total assets (including the amount
borrowed) taken at market value at the time of such borrowing,
to obtain such short-term credits as are necessary for the
clearance of securities transactions, or for temporary or
emergency purposes, and may maintain and renew any of the
foregoing borrowings, provided that the Fund maintains asset
coverage of 300% with respect to all such borrowings;
3. Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if
such pledging, mortgaging or hypothecating does not exceed 12%
of the Fund's total assets taken at market value at the time
of such pledge, mortgage or hypothecation. The deposit in
escrow of securities in connection with the writing of put and
call options and collateral arrangements with respect to
margin for future contracts are not deemed to be pledges or
hypothecation for this purpose;
4. Act as an underwriter of securities of other issuers, except
when disposing of securities;
5. Purchase or sell real estate or any interest therein, except
that the Fund may invest in securities issued or guaranteed by
corporate or governmental entities secured by real estate or
interests therein, such as mortgage pass-through and
collateralized mortgage obligations, or issued by companies
that invest in real estate or interests therein;
6. Make loans to other persons except for loans of portfolio
securities (up to 30% of total assets) and except through the
use of repurchase agreements, the purchase of commercial paper
or the purchase of all or a portion of an issue of debt
securities in accordance with its investment objective,
policies and restrictions, and provided that not more than 10%
of the Fund's assets will be invested in repurchase agreements
maturing in more than seven days;
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;
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<PAGE>
9. Purchase the securities of issuers conducting their principal
business activity in the same industry (other than securities
issued or guaranteed by the United States, its agencies and
instrumentalities) if, immediately after such purchase, the
value of its investments in such industry would comprise 25%
or more of the value of its total assets taken at market value
at the time of each investment;
10. Purchase securities of any one issuer, if
(a) more than 5% of the Fund's total assets taken at
market value would at the time be invested in the securities
of such issuer, except that such restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities or corporations sponsored
thereby, and except that up to 25% of the Fund's total assets
may be invested without regard to this limitation; or
(b) such purchase would at the time result in more
than 10% of the outstanding voting securities of such issuer
being held by the Fund, except that up to 25% of the Fund's
total assets may be invested without regard to this
limitation;
11. Invest in securities of another registered investment company,
except (i) as permitted by the Investment Company Act of 1940,
as amended from time to time, or any rule or order thereunder,
or (ii) in connection with a merger, consolidation,
acquisition or reorganization;
12. Purchase any security, including any repurchase agreement
maturing in more than seven days, which is subject to legal or
contractual delays in or restrictions on resale, or which is
not readily marketable, if more than 10% of the net assets of
the Fund, taken at market value, would be invested in such
securities;
13. Invest for the purpose of exercising control over or
management of any company; or
14. Purchase securities unless the issuer thereof or any company
on whose credit the purchase was based, together with its
predecessors, has a record of at least three years' continuous
operations prior to the purchase, except for investments
which, in the aggregate, taken at cost do not exceed 5% of the
Fund's total assets.
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 VALUE FUND
FUNDAMENTAL INVESTMENT POLICIES. Small Cap Value 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
S-16
<PAGE>
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.
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
Small Cap Value 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 SECURITIES FUND
FUNDAMENTAL INVESTMENT POLICIES. High Yield Securities 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;
S-17
<PAGE>
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.
S-18
<PAGE>
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
High Yield Securities fund which may be changed, the Fund may not:
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. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an
equal amount of such securities; and
3. 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.
S-19
<PAGE>
The Funds are not required by law to hold regular annual meetings of
their shareholders and do not intend to do so. However, special meetings may be
called for purposes such as electing or removing Trustees or changing
fundamental policies.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable for the obligations of the
Trust. The Trust's shareholders are the separate accounts of Participating
Insurance Companies, and, in certain cases, the general account of Keyport.
However, the Trust's Declaration of Trust disclaims liability of the
shareholders, the Trustees, or officers of the Trust for acts or obligations of
the Trust, which are binding only on the assets and property of the Trust (or
the applicable Fund thereof) and requires that notice of such disclaimer be
given in each agreement, obligation, or contract entered into or executed by the
Trust or the Board of Trustees. The Declaration of Trust provides for
indemnification out of the Trust's assets (or the applicable Fund) for all
losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is believed to be remote because it is
limited to circumstances in which the disclaimer is inoperative and the Trust
itself is unable to meet its obligations. The risk to any one Fund of sustaining
a loss on account of liabilities incurred by another Fund is also believed to be
remote.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, together with information as to
their principal addresses and business occupations during the last five years,
are shown below. An asterisk next to a name indicates that a Trustee is
considered an "interested person" of the Trust (as defined in the 1940 Act).
<TABLE>
<CAPTION>
======================================================================================
Positions(s) held Principal occupations
Name and Address with the Trust during past five years
======================================================================================
<S> <C> <C>
Robert J. Birnbaum Trustee Retired (formerly Special Counsel,
Dechert Price & Rhoads (law) from
September, 1988 to December, 1993).
Director or Trustee: Colonial Funds,
Liberty All-Star Equity Fund, Liberty
All-Star Growth Fund, Inc., The
Emerging Germany Fund.
======================================================================================
Tom Bleasdale Trustee Retired (formerly Chairman of the
Board and Chief Executive Officer,
Shore Bank & Trust Company (banking)
from 1992 to 1993). Director or Trustee:
Colonial Funds, Empire Company Limited.
======================================================================================
</TABLE>
S-20
<PAGE>
<TABLE>
<S> <C> <C>
==========================================================================================================
John V. Carberry* Trustee Senior Vice President of Liberty Financial
Companies, Inc. 1998-present (prior thereto
Managing Director, Salomon Brothers Inc.).
Trustee: Colonial Funds.
==========================================================================================================
Lora S. Collins Trustee Attorney (formerly Attorney, Kramer, Levin,
Naftalis & Frankel (law) prior to November,
1996). Trustee: Colonial Funds.
==========================================================================================================
James E. Grinnell Trustee Private Investor. Director or Trustee:
Colonial Funds, Liberty All-Star Equity Fund,
Liberty All-Star Growth Fund, Inc.
==========================================================================================================
Richard W. Lowry Trustee Private Investor. Director or Trustee:
Colonial Funds, Liberty All-Star Equity Fund,
Liberty All-Star Growth Fund, Inc.
==========================================================================================================
Salvatore Macera Trustee Private Investor (formerly Executive Vice
President of Itek Corp. and President of Itek
Optical & Electronic Industries, Inc.). Trustee
of LVIT and SRVIT.
==========================================================================================================
William E. Mayer Trustee Partner, Development Capital, LLC (investments);
formerly Dean of the College of Business and
Management, University of Maryland (higher
education) from October, 1992 to November, 1996.
Director or Trustee: Colonial Funds, Liberty
All-Star Equity Fund, Hambrecht & Quist
Incorporated, Chart House Enterprises,
Johns Manville.
==========================================================================================================
James L. Moody, Jr. Trustee Retired (formerly Chairman of the Board from
May, 1994 to May, 1997, Chief Executive
Officer and Director from May, 1973 to May,
1992, Hannaford Bros. Co. (food distributor)).
Director or Trustee: Colonial Funds, Penobscot
Shoe Co., Staples, Inc. UNUM Corporation,
IDEXX Laboratories, Inc., Empire Company Limited.
==========================================================================================================
John J. Neuhauser Trustee Dean of the School of Management, Boston
College (higher education). Director or Trustee:
Colonial Funds, Liberty All-Star Equity Fund,
Liberty All-Star Growth Fund, Inc., Hyde
Athletic Industries, Inc.
==========================================================================================================
</TABLE>
S-21
<PAGE>
<TABLE>
==========================================================================================================
Positions(s) held Principal occupations
Name and Address with the Trust during past five years
==========================================================================================================
<S> <C> <C>
Thomas E. Stitzel Trustee Professor of Finance, College of Business,
Boise State University; Business consultant
and author. Trustee of LVIT and SRVIT.
==========================================================================================================
Robert L. Sullivan Trustee Retired Partner, KPMG Peat Marwick LLP
(management consulting) (formerly self-
employed Management Consultant). Trustee:
Colonial Funds.
==========================================================================================================
Anne-Lee Verville Trustee Consultant (formerly General Manager, Global
Education Industry from 1994 to 1997, and
President, Applications Solutions Division
from 1991 to 1994, IBM Corporation). Trustee:
Colonial Funds.
==========================================================================================================
Stephen E. Gibson President President of the Colonial Funds since June, 1998,
One Financial Center Chairman of the Board since July, 1998, Chief
Boston, MA 02111 Executive Officer and President since December
1996 and Director, since July 1996 of Colonial
Management Associates, Inc.
(formerly Executive Vice President from July, 1996
to December, 1996); Director, Chief Executive Officer
and President of COGRA since December, 1998
(formerly Director, Chief Executive Officer and
President of The Colonial Group, Inc. (TCG) from
December, 1996 to December, 1998); Assistant Chairman
of Stein Roe & Farnham Incorporated (SR&F)
since August, 1998 (formerly Managing Director of
Marketing of Putnam Investments, June, 1992 to
July, 1996.)
==========================================================================================================
Timothy J. Jacoby Treasurer and Treasurer and Chief Financial Officer of the
One Financial Center Chief Financial Colonial Funds; Senior Vice President and Chief
Boston, MA 02111 Officer Financial Officer of Colonial Management
Associates, Inc.; formerly Senior Vice President,
Fidelity Accounting and Custody Services, Inc.
and Assistant Treasurer to the Fidelity Group of
Funds
==========================================================================================================
Davey S. Scoon Vice President Vice President of the Colonial Funds since June,
One Financial Center 1993;, Executive Vice President since July, 1993
Boston, MA 02111 and Director since March, 1985 of Colonial
Management Associates, Inc. (formerly Senior Vice
President and Treasurer of Colonial Management
Associates, Inc. from March, 1985 to July, 1993);
Executive Vice President and Chief Operating Officer
of COGRA since December, 1998 (formerly Executive
Vice President and Chief Operating Officer, TCG from
March, 1995 to December, 1998; Vice President -
Finance and Administration from November, 1985 to
March, 1995); Executive Vice President of
SR&F since August, 1998.
==========================================================================================================
J. Kevin Connaughton Controller and Controller and Chief Accounting Officer of the Colonial
One Financial Center Chief Accounting Officer Funds since February, 1998; Vice President of Colonial
Boston, MA 02111 Management Associates, Inc. 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).
==========================================================================================================
Nancy L. Conlin Secretary Director, Senior Vice President and General
One Financial Center Counsel, Colonial Management Associates, Inc.
Boston, MA 02111 (April, 1998 to present); 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 set forth below presents certain information regarding the
fees paid to the Trustees for their services in such capacity and total fees
paid to them by all other investment companies affiliated with the Trust.
Trustees do not receive any pension or retirement benefits from the Trust. No
officers of the Trust or other individuals who are affiliated with the Trust
receive any compensation from the Trust for services provided to it.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation From
Liberty Funds Complex Paid
To The Directors/Trustees For
Aggregate 1998 Compensation The Calendar Year Ended
Trustee from the Trust (b) 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(e) 105,857(e)
John J. Neuhauser 599 130,323
Thomas E. Stitzel 10,393 25,250
Robert L. Sullivan 649 104,100
Anne-Lee Verville 592(e) 23,445(e)
</TABLE>
S-23
<PAGE>
- ------------
(a) The Liberty Funds do not currently provide pension or retirement plan
benefits to the Trustees.
(b) Messrs. Birnbaum, Bleasdale, Carberry, Grinnell, Lowry, Mayer, Moody,
Neuhauser and Sullivan and Ms. Collins and Verville joined the Board of
Trustees of the Trust on December 17, 1998.
(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 Fund Management
Inc., Crabbe Huson Group, Inc. and Stein Roe & Farnham Incorporated,
nine funds of the Trust (not including the Fund), and the closed-end
Liberty All-Star Equity and Liberty All-Star Growth Fund, Inc. advised
by Liberty Asset Management Company, another affiliate of the
Administrator.
(d) Mr. Carberry does not receive compensation for serving as a Trustee.
(e) Payable in later years as deferred compensation $52,000.
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 xxx% of Liberty All-Star
Equity Fund, Variable Series and xx.xx% of Tiger Fund. As of that date,
Keyport's general account owned of record less than xx% of the outstanding
shares of the other Funds. At all meetings of shareholders of the Funds,
Participating Insurance Companies will vote the shares held of record by
sub-accounts of their respective separate accounts as to which instructions are
received from the VA contract and VLI policy owners on behalf of whom such
shares are held only in accordance with such instructions. All such shares as to
which no instructions are received (as well as, in the case of Keyport, all
shares held by its general account) will be voted in the same proportion as
shares as to which instructions are received (with Keyport's general account
shares being voted in the proportions determined by instructing owners of
Keyport VA contracts and VLI policies). There is no requirement as to the
minimum level of instructions which must be received from policy and contract
owners. Accordingly, each Participating Insurance Company and Keyport disclaims
beneficial 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, 3 MetroTech Center, 8th Floor, Brooklyn, NY
11245, 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 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
S-24
<PAGE>
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 For Growth may be expected to experience higher
portfolio turnover rates if such Fund makes a change in its investments from one
geographic sector (e.g., Europe; Japan; emerging Asian markets; etc.) to another
geographic sector. Costs will be greater if the change is from the sector in
which the greatest proportion of its assets are invested.
SUSPENSION OF REDEMPTIONS
The right to redeem shares or to receive payment with respect to any
redemption of shares of the Funds may only be suspended (i) for any period
during which trading on the New York Stock Exchange ("NYSE") is restricted or
the NYSE is closed, other than customary weekend and holiday closing, (ii) for
any period during which an emergency exists as a result of which disposal of
securities or determination of the net asset value of the Funds is not
reasonably practicable, or (iii) for such other periods as the SEC may by order
permit for protection of shareholders of the Funds.
S-25
<PAGE>
VALUATION OF SECURITIES
The assets of the Funds are valued as follows:
Debt securities generally are valued by a pricing service which
determines valuations based upon market transactions for normal,
institutional-size trading units of similar securities. However, in
circumstances where such prices are not available or where Colonial (the Trust's
pricing and bookkeeping agent) deems it appropriate to do so, an
over-the-counter or exchange bid quotation is used. Securities listed on an
exchange or on Nasdaq are valued at the last sale price. Listed securities for
which there were no sales during the day and unlisted securities are valued at
the last quoted bid prices. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost when such cost approximates market value
pursuant to procedures approved by the Trustees. The values of foreign
securities quoted in foreign currencies are translated into U.S. dollars at the
exchange rate as of 3:00 p.m. Eastern time. Portfolio positions for which there
are no such valuations and other assets are valued at fair value as determined
in good faith under the direction of the Trustees.
The net asset value of shares of each Fund is normally calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m., Eastern time, on
every day the NYSE is open for trading, except on days where both (i) the degree
of trading in a Fund's portfolio securities would not materially affect the net
asset value of that Fund's shares and (ii) no shares of a Fund were tendered for
redemption and no purchase order was received. The NYSE is open Monday through
Friday, except on the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Generally, trading in certain securities (such as foreign securities)
is substantially completed each day at various times prior to the close of the
NYSE. The values of these securities used in determining the net asset value are
computed as of such times. Also, because of the amount of time required to
collect and process trading information as to large numbers of securities
issues, the values of certain securities (such as convertible bonds and U.S.
government securities) are determined based 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.
S-26
<PAGE>
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.
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 For
Growth 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
S-27
<PAGE>
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, 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 For Growth. The
portfolio manager for the International Fund For Growth is Gita Rao, who is
jointly employed by Colonial and Stein Roe (each of which is an indirect wholly
owned subsidiary of LFC). Colonial utilizes the trading facilities of Stein Roe
to place all orders on behalf of the International Fund For Growth for the
purchase and sale of portfolio securities, futures contracts and foreign
currencies. The International Fund For Growth and the other accounts advised by
Mr. Harris sometimes invest in the same securities and sometimes enter into
similar transactions utilizing futures contracts and foreign currencies. In
certain cases, purchases and sales on behalf of the Fund and such other accounts
will be bunched and executed on an aggregate basis. In such cases, each
participating account (including the International Fund For Growth) will receive
the average price at which the trade is executed. Where less than the desired
aggregate amount is able to be purchased or sold, the actual amount purchased or
sold will be allocated among the participating accounts (including the
International Fund For Growth) in proportion to the amounts desired to be
purchased or sold by each. Although in some cases these practices could have a
detrimental effect on the price or volume of the securities, futures or
currencies as far as the International Fund For Growth is concerned, Colonial
believes that in most cases these practices should produce better executions. It
is the opinion of Colonial that the advantages of these practices outweigh the
disadvantages, if any, which might result from them.
Portfolio transactions on behalf of the International Fund For Growth
may be executed by broker-dealers who provide research services to Colonial or
Stein Roe which are used in the investment management of such Fund or other
accounts over which Colonial or Stein Roe exercise investment discretion. Such
transactions will be effected in accordance with the policies described above.
No portfolio transactions on behalf of the Fund will be directed to a
broker-dealer in consideration of the broker-dealer's provision of research
services to Colonial, or to Colonial and Stein Roe, unless a determination is
made that such research assists Colonial in its investment management of the
International Fund For Growth or other accounts over which Colonial exercises
investment discretion.
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
S-28
<PAGE>
services to LAMCO or to All-Star Equity Fund or other accounts managed by LAMCO
(collectively with All-Star Equity Fund, "LAMCO Clients"). The commissions paid
on such transactions may exceed the amount of commissions another broker would
have charged for effecting that transaction. Research products and services made
available to LAMCO through brokers and dealers executing transactions for LAMCO
Clients involving brokerage commissions include performance and other
qualitative and quantitative data relating to investment managers in general and
the Portfolio Managers in particular; data relating to the historic performance
of categories of securities associated with particular investment styles; mutual
fund portfolio and performance data; data relating to portfolio manager changes
by pension plan fiduciaries; quotation equipment; and related computer hardware
and software, all of which research products and services are used by LAMCO in
connection with its selection and monitoring of portfolio managers (including
the Portfolio Managers) for LAMCO Clients, the assembly of a mix of investment
styles appropriate to LAMCO's Clients' investment objectives, and the
determination of overall portfolio strategies.
LAMCO from time to time reaches understandings with each of the
Portfolio Managers as to the amount of the All-Star 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. (Strategic Income Fund did not pay
commissions on any of its transactions; All-Star Equity Fund commenced
operations on or about November 17, 1997; Small Cap Value Fund and High Yield
Securities Fund commenced operations on May 19, 1998.)
S-29
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Growth and Global Utilities International U.S. Stock Tiger Fund All-Star
Income Fund Fund Fund For Growth Fund Equity Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total amount of brokerage $ $ $ $ $
commissions paid during 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Total amount of brokerage $76,021 $108,414 $59,920 $80,839 $110,960 $18,207
commissions paid during 1997
- ----------------------------------------------------------------------------------------------------------------------------------
Amount of such commissions $22,718 $3,394 $0 $3,640 $0 $0
paid to brokers or dealers who
supplied research services
- ----------------------------------------------------------------------------------------------------------------------------------
Amount of commissions paid to $22,718 $3,394 $0 $3,640 $0 $0
brokers or dealers that were
allocated to such brokers or
dealers because of research
services provided to the Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Total amount of brokerage $35,863 $22,345 $92,485 $75,253 $109,515 $0
commissions paid during 1996
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
High Yield Small Cap Strategic Income
Securities Value Fund Fund
Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total amount of brokerage $ $ $
commissions paid during 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Total amount of brokerage $ $ $
commissions paid during 1997
- ----------------------------------------------------------------------------------------------------------------------------------
Amount of such commissions $ $ $
paid to brokers or dealers who
supplied research services
- ----------------------------------------------------------------------------------------------------------------------------------
Amount of commissions paid to $ $ $
brokers or dealers that were
allocated to such brokers or
dealers because of research
services provided to the Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Total amount of brokerage $ $ $
commissions paid during 1996
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DESCRIPTION OF CERTAIN INVESTMENTS
The following is a description of certain types of investments which
may be made by one or more of the Funds.
MONEY MARKET INSTRUMENTS
As stated in the Prospectus, each Fund may invest in a variety of
high-quality money market instruments. The money market instruments that may be
used by each Fund may include:
UNITED STATES GOVERNMENT OBLIGATIONS. These consist of various types of
marketable securities issued by the U.S. Treasury, i.e., bills, notes and bonds.
Such securities are direct obligations of the U.S. Government and differ mainly
in the length of their maturity. Treasury bills, the most frequently issued
marketable government security, have a maturity of up to one year and are issued
on a discount basis.
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
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<PAGE>
Administration, Export-Import Bank of the United States, Maritime
Administration, and General Services Administration. Instrumentalities include,
for example, each of the Federal Home Loan Banks, the National Bank for
Cooperatives, the Federal Home Loan Mortgage Corporation, the Farm Credit Banks,
the Federal National Mortgage Association, and the United States Postal Service.
These securities are either: (i) backed by the full faith and credit of the U.S.
Government (e.g., U.S. Treasury Bills); (ii) guaranteed by the U.S. Treasury
(e.g., Government National Mortgage Association mortgage-backed securities);
(iii) supported by the issuing agency's or instrumentality's right to borrow
from the U.S. Treasury (e.g., Federal National Mortgage Association Discount
Notes); or (iv) supported only by the issuing agency's or instrumentality's own
credit (e.g., securities issued by the Farmer's Home Administration).
BANK AND SAVINGS AND LOAN OBLIGATIONS. These include certificates of
deposit, bankers' acceptances, and time deposits. Certificates of deposit
generally are short-term, interest-bearing negotiable certificates issued by
commercial banks or savings and loan associations against funds deposited in the
issuing institution. Bankers' acceptances are time drafts drawn on a commercial
bank by a borrower, usually in connection with an international commercial
transaction (e.g., to finance the import, export, transfer, or storage of
goods). With a bankers' acceptance, the borrower is liable for payment as is the
bank, which unconditionally guarantees to pay the draft at its face amount on
the maturity date. Most bankers' acceptances have maturities of six months or
less and are traded in secondary markets prior to maturity. Time deposits are
generally short-term, interest-bearing negotiable obligations issued by
commercial banks against funds deposited in the issuing institutions. The Funds
will not invest in any security issued by a commercial bank or a savings and
loan association unless the bank or savings and loan association is organized
and operating in the United States, has total assets of at least one billion
dollars, and is a member of the Federal Deposit Insurance Corporation ("FDIC"),
in the case of banks, or insured by the FDIC in the case of savings and loan
associations; provided, however, that such limitation will not prohibit
investments in foreign branches of domestic banks which meet the foregoing
requirements. The Funds will not invest in time-deposits maturing in more than
seven days.
SHORT-TERM CORPORATE DEBT INSTRUMENTS. These include commercial paper
(i.e., short-term, unsecured promissory notes issued by corporations to finance
short-term credit needs). Commercial paper is usually sold on a discount basis
and has a maturity at the time of issuance not exceeding nine months. Also
included are non-convertible corporate debt securities (e.g., bonds and
debentures). Corporate debt securities with a remaining maturity of less than 13
months are liquid (and tend to become more liquid as their maturities lessen)
and are traded as money market securities. Each Fund may purchase corporate debt
securities having greater maturities.
REPURCHASE AGREEMENTS. The Funds may invest in repurchase agreements. A
repurchase agreement is an instrument under which the investor (such as a Fund)
acquires ownership of a security (known as the "underlying security") and the
seller (i.e., a bank or primary dealer) agrees, at the time of 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
S-31
<PAGE>
agreements are, in effect, collateralized by such underlying securities, and,
during the term of a repurchase agreement, the seller will be required to
mark-to-market such securities every business day and to provide such additional
collateral as is necessary to maintain the value of all collateral at a level at
least equal to the repurchase price. Repurchase agreements usually are for short
periods, often under one week, and will not be entered into by a Fund for a
duration of more than seven days if, as a result, more than 15% of the value of
that Fund's total assets would be invested in such agreements or other
securities which are illiquid.
The Funds will seek to assure that the amount of collateral with
respect to any repurchase agreement is adequate. As with any extension of
credit, however, there is risk of delay in recovery or the possibility of
inadequacy of the collateral should the seller of the repurchase agreement fail
financially. In addition, a Fund could incur costs in connection with
disposition of the collateral if the seller were to default. The Funds will
enter into repurchase agreements only with sellers deemed to be creditworthy
under creditworthiness standards approved by the Board of Trustees and only when
the economic benefit to the Funds is believed to justify the attendant risks.
The Board of Trustees believes these standards are designed to reasonably assure
that such sellers present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the repurchase agreement. The
Funds may enter into repurchase agreements only with commercial banks or
registered broker-dealers.
ADJUSTABLE RATE AND FLOATING RATE SECURITIES. Adjustable rate
securities (i.e., variable rate and floating rate instruments) are securities
that have interest rates that are adjusted periodically, according to a set
formula. The maturity of some adjustable rate securities may be shortened under
certain special conditions described more fully below.
Variable rate instruments are obligations (usually certificates of
deposit) that provide for the adjustment of their interest rates on
predetermined dates or whenever a specific interest rate changes. A variable
rate instrument subject to a demand feature is considered to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand.
Floating rate instruments (generally corporate notes, bank notes or
Eurodollar certificates of deposit) have interest rate reset provisions similar
to those for variable rate instruments and may be subject to demand features
like those for variable rate instruments. The interest rate is adjusted,
periodically (e.g. daily, monthly, semi-annually), to the prevailing interest
rate in the marketplace. The interest rate on floating rate securities is
ordinarily determined by reference to, or is a percentage of, a bank's prime
rate, the 90-day U.S. Treasury bill rate, the rate of return on commercial paper
or bank certificates of deposit, an index of short-term interest rates or some
other objective measure. The maturity of a floating rate instrument is
considered to be the period remaining until the principal amount can be
recovered through demand.
INVESTMENTS IN LESS DEVELOPED COUNTRIES
International Fund For Growth's investments in foreign securities may
include investments in countries whose economies or securities markets are
considered by Colonial not to be highly
S-32
<PAGE>
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>
India Argentina Czech Republic South Africa
=====================================================================================================
Indonesia Brazil Egypt
=====================================================================================================
Korea Chile Greece
=====================================================================================================
Pakistan Colombia Hungary
=====================================================================================================
Philippines Mexico Israel
=====================================================================================================
Sri Lanka Peru Jordan
=====================================================================================================
Taiwan Venezuela Portugal
=====================================================================================================
Thailand Russia
=====================================================================================================
Turkey
=====================================================================================================
</TABLE>
Tiger Fund invests primarily in companies located in the Tiger
countries of East Asia, which include Indonesia, Korea, the Philippines, Taiwan
and Thailand.
FOREIGN CURRENCY TRANSACTIONS
Each of International Fund For Growth, Tiger Fund, Global Utilities
Fund, Strategic Income Fund and Growth and Income Fund may engage in currency
exchange transactions to protect against uncertainty in the level of future
currency exchange rates. These Funds may purchase foreign currencies on a spot
or forward basis in conjunction with their investments in foreign securities and
to hedge against fluctuations in foreign currencies. International Fund For
Growth, Global Utilities Fund, and Strategic Income Fund also may buy and sell
currency futures contracts and options thereon for such hedging purposes. Global
Utilities Fund and Strategic Income Fund also may buy options on currencies for
hedging purposes.
A Fund may engage in both "transaction hedging" and "position hedging."
When it engages in transaction hedging, a Fund enters into foreign currency
transactions with respect to specific receivables or payables of the Fund
generally arising in connection with purchases or sales of its 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
S-33
<PAGE>
security is purchased or sold, or on which the dividend or interest payments is
declared, and the date on which such payments are made or received.
A Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with the settlement of
transactions in portfolio securities denominated in that foreign currency. A
Fund may also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and (if the Fund is so authorized) purchase
and sell foreign currency futures contracts.
For transaction hedging purposes a Fund which is so authorized may also
purchase exchange-listed and over-the-counter call and put options on foreign
currency futures contracts and on foreign currencies. Over-the-counter options
are considered to be illiquid by the SEC staff. A put option on a futures
contract gives the Fund the right to assume a short position in the futures
contract until expiration of the option. A put option on a currency gives the
Fund the right to sell a currency at an exercise price until the expiration of
the option. A call option on a futures contract gives the Fund the right to
assume a long position in the futures contract until the expiration of the
option. A call option on a currency gives the Fund the right to purchase a
currency at the exercise price until the expiration of the option.
When it engages in position hedging, a Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which its portfolio securities are denominated (or an
increase in the value of currency for securities which the Fund expects to
purchase, when the Fund holds cash or short-term investments). In connection
with position hedging, a Fund which is so authorized may purchase put or call
options on foreign currency and foreign currency futures contracts and buy or
sell forward contracts and foreign currency futures contracts. A Fund may enter
into short sales of a foreign currency to hedge a position in a security
denominated in that currency. In such circumstances, the Fund will maintain in a
segregated account with its Custodian an amount of cash or liquid debt
securities equal to the excess of (i) the amount of foreign currency required to
cover such short sale position over (ii) the amount of such foreign currency
which could then be realized through the sale of the foreign securities
denominated in the currency subject to the hedge.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Fund to 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
S-34
<PAGE>
the market value of such security or securities exceeds the amount of foreign
currency the Fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which the Fund can achieve at
some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
value of such currency.
Currency Forward and Futures Contracts
Each of International Fund For Growth, Global Utilities Fund, Strategic
Income Fund and Tiger Fund will enter into such contracts only when cash or
equivalents equal in value to either (i) the commodity value (less any
applicable margin deposits) or (ii) the difference between the commodity value
(less any applicable margin deposits) and the aggregate market value of all
equity securities denominated in the particular currency held by the Fund have
been deposited in a segregated account of the Fund's custodian. A forward
currency contract involves an obligation to purchase or sell specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable contract, the holder has the unilateral right to
cancel the contract at maturity by paying a specified fee. The contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A contract generally has
no deposit requirement, and no commissions are charged at any stage for trades.
A currency futures contract is a standardized contract for the future delivery
of a specified amount of a foreign currency at a future date at a price set at
the time of the contract. Currency futures contracts traded in the United States
are designed and traded on exchanges regulated by the Commodities Futures
Trading Commission ("CFTC"), such as the New York Mercantile Exchange. (Tiger
Fund may not invest in currency futures contracts.)
Forward currency contracts differ from currency futures contracts in
certain respects. For example, the maturity date of a forward contract may be
any fixed number of days from the date of the contract agreed upon the parties,
rather than a predetermined date in a given month. Forward contracts may be in
any amounts agreed upon by the parties rather than predetermined amounts. Also,
forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
S-35
<PAGE>
Positions in currency futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market in such contracts.
Although the Funds intend to purchase or sell currency futures contracts only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time. In such
event, it may not be possible to close a futures position and, in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments or variation margin.
Currency Options
In general, options on currencies operate similarly to options on
securities and are subject to many risks similar to those applicable to currency
futures and forward contracts. Currency options are traded primarily in the
over-the-counter market, although options on currencies have recently been
listed on several exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit ("ECU"). The ECU is
composed of amounts of a number of currencies, and is the official medium of
exchange of the European Economic Community's European Monetary System.
Global Utilities Fund and Strategic Income Fund will only purchase or
write currency options when Stein Roe or Colonial believes that a liquid
secondary market exists for such options. There can be no assurance that a
liquid secondary market will exist for a particular option at any specified
time. Currency options are affected by all of those factors which influence
exchange rates and investments generally. To the extent that these options are
traded over the counter, they are considered to be illiquid by the SEC staff.
The value of any currency, including the U.S. dollar, may be affected
by complex political and economic factors applicable to the issuing country. In
addition, the exchange rates of currencies (and therefore the value of currency
options) may be significantly affected, fixed, or supported directly or
indirectly by government actions. Government intervention may increase risks
involved in purchasing or selling currency options, since exchange rates may not
be free to fluctuate in respect to other market forces.
The value of a currency option reflects the value of an exchange rate
which in turn reflects relative values of two currencies, the U.S. dollar and
the foreign currency in question. Because currency transactions occurring in the
interbank market involve substantially larger amounts than those that may be
involved in the exercise of currency options, investors may be disadvantaged by
having to deal in an odd-lot market for the underlying currencies in connection
with options at prices that are less favorable than for round-lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.
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
S-36
<PAGE>
round-lot transactions in the interbank market and thus may not reflect exchange
rates for smaller odd-lot transactions (less than $1 million) where rates may be
less favorable. The interbank market in currencies is a global, around-the-clock
market. To the extent that options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
Settlement Procedures
Settlement procedures relating to the Funds' investments in foreign
securities and to their foreign currency exchange transactions may be more
complex than settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not present in such
Funds' domestic investments, including foreign currency risks and local custom
and usage. Foreign currency transactions may also involve the risk that an
entity involved in the settlement may not meet its obligations.
Foreign Currency Conversion
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Funds at one rate, while
offering a lesser rate of exchange should the Funds desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligations.
OPTIONS ON SECURITIES
Each of Global Utilities Fund, International Fund For Growth and
All-Star Equity Fund may purchase and sell options on individual securities.
S-37
<PAGE>
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 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 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.
S-38
<PAGE>
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 Securities
and Exchange Commission has taken the position that OTC options purchased by a
Fund and assets held to cover OTC options written by the Fund are illiquid
securities. Although the Staff has indicated that it is continuing to evaluate
this issue, pending further developments, a Fund will enter into OTC options
transactions only with primary dealers in U.S. Government Securities and, in the
case of OTC options written by the Fund, only pursuant to agreements that will
assure that the Fund will at all times have the right to repurchase the option
written by it from the dealer at a specified formula price. The Fund will treat
the amount by which such formula price exceeds the amount, if any, by which the
option may be "in the money" as an illiquid investment. It is the present policy
of the Fund not to enter into any OTC option transaction if, as a result, more
than 15% of the Fund's net assets would be invested in (i) illiquid investments
(determined under the foregoing formula) relating to OTC options written by the
Fund, (ii) OTC options purchased by the Fund, (iii) securities which are not
readily marketable and (iv) repurchase agreements maturing in more than seven
days.
S-39
<PAGE>
Risk factors in options transactions.
The successful use of a Fund's options strategies depends on the
ability of its 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 Advisor deems it desirable to do
so. Although the Fund will take an option position only if the 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.
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
S-40
<PAGE>
days when U.S. markets are closed. As a result, option premiums may not reflect
the current prices of the underlying interest in the United States.
FUTURES CONTRACTS AND RELATED OPTIONS
Each of Global Utilities Fund, International Fund For Growth, Strategic
Income Fund and All-Star 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.
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."
S-41
<PAGE>
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.
S-42
<PAGE>
Risks of transactions in futures contracts and related options
Successful use of futures contracts by a Fund is subject its Advisor'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.
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.
S-43
<PAGE>
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
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 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 correct forecast of general market trends by a Fund's 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
S-44
<PAGE>
(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.
INVESTMENT PERFORMANCE
Each of the Funds may quote total return figures from time to time.
Total return on a per share basis is the amount of dividends received per share
plus or minus the change in the net asset value per share for a given period.
Total return percentages may be calculated by dividing the value of a share at
the end of a given period by the value of the share at the beginning of the
period and subtracting one.
S-45
<PAGE>
Average Annual Total Return is computed as follows:
ERV = P(1+T)n
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1,000 payment made at
the beginning of the period (or
fractional portion thereof).
For example, for a $1,000 investment in the Funds, the "Total Return",
the "Total Return Percentage" and (where applicable) the "Average Annual Total
Return" for the life of each Fund listed below (the period from July 1, 1993 in
the case of Growth and Income Fund and Global Utilities Fund; May 1, 1994, in
the case of International Fund For Growth; July 5, 1994 in the case of U.S.
Stock Fund and Strategic Income Fund; 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 Securities Fund and Small Cap Value fund) through
December 31, 1998 were:
<TABLE>
<CAPTION>
=========================================================================================================
Fund Total Return Total Return Average Annual
Percentage Total Return
=========================================================================================================
<S> <C> <C> <C>
Growth and Income Fund $ % %
=========================================================================================================
Global Utilities Fund $ % %
=========================================================================================================
International Fund For Growth $ % %
=========================================================================================================
U.S. Stock Fund $ % %
=========================================================================================================
Strategic Income Fund $ % %
=========================================================================================================
Tiger Fund $ % %
=========================================================================================================
All-Star Equity Fund $ % %
=========================================================================================================
High Yield Securities Fund $ % %
=========================================================================================================
Small Cap Value Fund $ % %
=========================================================================================================
</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.
S-46
<PAGE>
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 schedule of financial highlights for the
periods ended December 31, 1998 has 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.
S-47
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits:
(a) Agreement and Declaration of Trust (1)
(b) By-Laws (1)
(c) Not Applicable
(d)(1)(i) Form of Management Agreement between Liberty Variable
Investment Trust ("Trust"), with respect to CG&IF,VS and
Liberty Advisory Services Corp. ("LASC")(1)
(d)(1)(ii) Form of Sub-Advisory Agreement between the Trust, on
behalf of CG&IF, VS, LASC and Colonial Management
Associates, Inc. ("Colonial")(1)
(d)(2)(i) Form of Management Agreement between the Trust, with
respect to SRGUF, VS and LASC (1)
(d)(2)(ii) Form of Sub-Advisory Agreement between the Trust, on
behalf of SRGUF, VS, LASC and Stein Roe & Farnham
Incorporated(1)
(d)(3)(i) Form of Management Agreement between the Trust, with
respect to CSCVF, VS and LASC (1)
(d)(3)(ii) Form of Sub-Advisory Agreement between the Trust, on
behalf of CSCVF, VS, LASC and Colonial(1)
(d)(4)(i) Form of Management Agreement between the Trust, with
respect to CUSSF, VS and LASC(1)
(d)(4)(ii) Form of Sub-Advisory Agreement between the Trust, on
behalf of CUSSF, VS, LASC and Colonial(1)
(d)(5)(i) Form of Management Agreement between the Trust, with
respect to CSIF, VS and LASC (1)
(d)(5)(ii) Form of Sub-Advisory Agreement between the Trust, on
behalf of CSIF, VS, LASC and Colonial(1)
(d)(6)(i) Form of Management Agreement between the Trust, with
respect to CHYSF, VS and LASC (1)
(d)(6)(ii) Form of Sub-Advisory Agreement between the Trust, on
behalf of CHYSF, VS, LASC and Colonial(1)
(d)(7)(i) Form of Management Agreement between the Trust, with
respect to CIFfG, VS and LASC (1)
(d)(7)(ii) Form of Sub-Advisory Agreement between the Trust, with
respect to CIFfG, VS, LASC and Colonial(1)
(d)(8) Form of Management and Sub-Advisory Agreement between
the Trust, with respect to LASEF, VS, LASC and Liberty
Asset Management Company ("LAMCO") (1)
(d)(9)(i) Form of Management Agreement between the Trust, with
respect to NTF, VS and LASC (1)
(d)(9)(ii) Form of Sub-Advisory Agreement between the Trust, with
respect to NTF, VS, KASC and Newport Fund Management,
Inc.(1)
(d)(10) Form of Portfolio Management Agreement among the Trust,
on behalf of LASEF, LAMCO and LAMCO's Portfolio
Managers.(1)
(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
(e)(2) Underwriting Agreement between the Trust and Liberty
Funds Distributor, Inc. ("LFDI") (2)
(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(1)
(h)(1)(ii) Amendment No. 1 to Pricing and Bookkeeping Agreement(1)
(h)(1)(iii) Amendment No. 2 to Pricing and Bookkeeping Agreement(1)
(h)(1)(iv) Amendment No. 3 to Pricing and Bookkeeping Agreement(1)
(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)(1)
(h)(2)(ii) Amendment No. 2 to Transfer Agency Agreement(1)
(h)(2)(iii) Amendment No. 3 to Transfer Agency Agreement(1)
(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) Not applicable
(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 Distributer's contract filed as
Exhibits (e)(1)(i) and (e)(2)
(n) Financial Data Schedules (1)
(o) Not Applicable
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 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.
<PAGE>
KFSC and LFDI, the Trust's principal underwriters,
LASC, the Trust's investment manager, Colonial,
LASC's sub-advisor with respect to GIF, IFFG, USSF
and SIF, Stein Roe, LASC's sub-advisor with respect
to GUF, Newport, LASC's sub-advisor with respect to
NTF, LAMCO, LASC's sub-advisor 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
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;
<PAGE>
(ii) in the absence of a final decision on the
merits by a court or other body before whom
a proceeding was brought that a Covered
Person was not liable by reason of willful
misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in
the conduct of his office, no
indemnification is permitted under Article
Tenth unless a determination that such
person was not so liable is made on behalf
of Registrant by (a) the vote of a majority
of the trustees who are neither "interested
persons" of Registrant, as defined in
Section 2(a)(19) of the 1940 Act, nor
parties to the proceeding ("disinterested,
non-party trustees"), or (b) an independent
legal counsel as expressed in a written
opinion; and
(iii) Registrant will not advance attorney's fees
or other expenses incurred by a Covered
Person in connection with a civil or
criminal action, suit or proceeding unless
Registrant receives an undertaking by or on
behalf of the Covered Person to repay the
advance (unless it is ultimately determined
that he is entitled to indemnification) and
(a) the Covered Person provides security for
his undertaking, or (b) Registrant is
insured against losses arising by reason of
any lawful advances, or (c) a majority of
the disinterested, non-party trustees of
Registrant or an independent legal counsel
as expressed in a written opinion,
determine, based on a review of
readily-available facts (as opposed to a
full 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.
<PAGE>
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, 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 Advisor
Certain information pertaining to business and other
connections of the Registrant's investment manager,
LASC, Colonial, the sub-advisor to each of GIF, IFFG,
USSF and SIF, Stein Roe, the sub-advisor to GUF,
Newport, the sub-advisor to NTF, and LAMCO, the
sub-advisor to All-Star, 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, SIF, GUF, NTF and All-Star
captioned "TRUST MANAGEMENT ORGANIZATIONS" and to the
section of the Statement of Additional Information
relating to those Funds captioned "INVESTMENT
MANAGEMENT AND
<PAGE>
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.
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 Advisor 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 Senior Vice President and Chief Senior Vice President and Chief
Investment Officer Investment Officer of Keyport
Mark R. Tully 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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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 COGRA, LLC ("COGRA"). COGRA
is a indirect owned subsidiary of Liberty Financial.
<TABLE>
<CAPTION>
Name and Current Position with Advisor Other Positions During
Past Two Fiscal Years
<S> <C> <C>
Stephen E. Gibson President, Chief Executive Managing Director, Marketing, of
Officer and Chairman of the Board Putnam Mutual Funds, Inc.
of Directors
Nancy L. Conlin Senior Vice President, General Vice President and Counsel
Counsel and Director
Timothy J. Jacoby Senior Vice President, Chief Senior Vice President of Fidelity
Financial Officer and Treasurer Accounting and Custody Services,
Inc.
Davey S. Scoon Executive Vice President and Same
Director
</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 Advisor 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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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
Pacific Management, Inc.
Robert B. Cameron Senior Vice President Senior Vice President of Newport
Pacific Management, Inc.
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.
</TABLE>
The principal business address of Newport and Messrs. Mussey and Tuttle and Ms.
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.
J.P. Morgan Investment Management, Inc.
J.P. Morgan Investment Management, Inc. is a wholly-owned subsidiary of
J.P. Morgan & Co., Incorporated.
<TABLE>
<CAPTION>
Name and Current Position with Advisor Other Positions During
Past Two Fiscal Years
<S> <C> <C>
Frederick A. Nelson, III Managing Director --
Henry D. Cavanna Managing Director --
William B. Peterson Managing Director --
William M. Riegal Managing Director --
Timothy J. Devlin Vice President Vice President, Mitchell Hutchins
Asset Management, Inc.
Patrick Jakobson Vice President --
</TABLE>
The principal business address of such firm and each such person is 552 Fifth
Avenue, New York, NY 10036.
Oppenheimer Capital
Oppenheimer Capital is a wholly-owned subsidiary of PIMCO Advisors L.P.
<TABLE>
<CAPTION>
Name and Current Position with Advisor 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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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 --
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,
World Financial Center, New York, NY 10281.
Boston Partners Asset Management, L.P.
The firm is owned by its 39 partners. Desmond S. Heathwood is the sole
General Partner. Its and his address is One Financial Center, Boston,
Massachusetts 02111.
Westwood Management Corp.
The firm is owned by Southwest Securities Group, Inc.
Name and Current Position with Advisor Other Positions During
Past Two Fiscal Years
<PAGE>
<TABLE>
<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 1320,
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 Advisor 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 --
Stephen M. Kensinger Portfolio Manager --
</TABLE>
The business address of such firm and each such person is 3800 Norwest Center,
90 South Seventh M. 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:
Colonial Trust I
Colonial High Yield Securities Fund
Colonial Income Fund
Colonial Strategic Income Fund
Stein Roe Adviser Tax-Managed Growth Fund
Colonial Trust II
Colonial Money Market Fund
Colonial Intermediate U.S. Government Fund
<PAGE>
Colonial Short Duration U.S. Government Fund
Newport Japan Opportunities Fund
Newport Tiger Cub Fund
Newport Greater China Fund
Colonial 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
Colonial 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
Colonial 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
Colonial Trust VI
Colonial U.S. Growth & Income Fund
Colonial Small Cap Value Fund
Colonial Value Fund
Newport Asia Pacific Fund
Colonial Trust VII
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
LFC Utilities Trust
LAMCO Trust I
Liberty All-Star Growth and Income Fund
Liberty Newport World Portfolio
Global Opportunity Fund
Newport Tiger Fund
<PAGE>
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 Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with the Registrant
<S> <C> <C>
Paul H. LeFever 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.
Francis E. Reinhart Director None
James J. Klopper Clerk and Director None
Donald A. Truman Assistant Clerk None
Set forth below is information concerning each director and officer of LFDI.
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions with Underwriter Positions and Officers
with the Registrant
<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
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 Senior Vice President None
Thomas Harrington Regional Senior Vice President None
Joseph Hodgkins Regional Senior Vice President None
David W. Kelson Regional Senior Vice President None
Gregory McCombs Regional Senior Vice President None
Ann R. Moberly Regional Senior Vice President None
Christopher Reed Regional Senior Vice President None
Michael W. Scott Regional Senior Vice President None
Judith Anderson Vice President None
Debra Babbitt Vice President None
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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
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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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
Davey S. Scoon 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 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.
<PAGE>
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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 15 to its Registration Statement under the Securities Act of 1933
and Amendment No. 16 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 3rd day of March, 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 March 3, 1999
- ---------------------- Executive officer)
Stephen E. Gibson
TIMOTHY J. JACOBY Treasurer and Chief March 3, 1999
- ----------------- Financial Officer
Timothy J. Jacoby (principal financial
officer)
J. KEVIN CONNAUGHTON Controller and Chief March 3, 1999
- -------------------- Accounting Officer
J. Kevin Connaughton (principal accounting
officer)
</TABLE>
<PAGE>
<TABLE>
<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/ William J. Ballou
- ---------------------- --------------------
Richard W. Lowry William J. Ballou
Attorney-in-fact
For each Trustee
SALVATORE MACERA* Trustee March 3, 1999
- ----------------------
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>
