Registration Nos: 33-59216
811-7556
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 20 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 21 / X /
(Check appropriate box or boxes)
</TABLE>
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)
<TABLE>
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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
</TABLE>
It is proposed that this filing will become effective (check appropriate box):
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<S> <C>
/ / Immediately upon filing pursuant to paragraph (b).
/ / On (date) pursuant to paragraph (b).
/ X / 60 days after filing pursuant to paragraph (a)(1).
/ / on (date) pursuant to paragraph (a)(1).
/ / 75 days after filing pursuant to paragraph (a)(2).
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
</TABLE>
An indefinite number of shares of beneficial interest of all existing and
subsequently created series of the Trust under the Securities Act of 1933 were
registered by the Registration Statement filed on March 18, 1993 under the
Securities Act of 1933 pursuant to Rule 24f-2. A Rule 24f-2 Notice with respect
to the fiscal year ended December 31, 1996 was filed on or about February 28,
1997.
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
PROSPECTUS DATED JUNE 1, 2000
Colonial International Horizons Fund, Variable Series
Colonial Global Equity Fund, Variable Series
Crabbe Huson Real Estate Investment Fund, Variable Series
CLASS A SHARES
Trust shares are 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 or disapproved any shares offered in
this prospectus or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
THE TRUST
- -----------------------------------------------------------------------
THE FUNDS
- -----------------------------------------------------------------------
Each of these sections discusses the following
topics: Investment Goals, Primary Investment Strategies,
Primary Investment Risks and Performance History
Colonial International Horizons Fund, Variable Series..................
Colonial Global Equity Fund, Variable Series...........................
Crabbe Huson Real Estate Investment Fund, Variable Series..............
TRUST MANAGEMENT ORGANIZATIONS
- -----------------------------------------------------------------------
Trustees...............................................................
Investment Advisor.....................................................
Investment Sub-Advisors and Portfolio Managers.........................
OTHER INVESTMENT STRATEGIES AND RISKS
- -----------------------------------------------------------------------
Derivative Strategies..................................................
Temporary Defensive Measures...........................................
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------
SHAREHOLDER INFORMATION
- -----------------------------------------------------------------------
Purchases and Redemptions..............................................
How the Funds Calculate Net Asset Value................................
Dividends and Distributions............................................
Tax Consequences.......................................................
2
<PAGE>
THE TRUST
Liberty Variable Investment Trust (Trust) includes seventeen separate mutual
funds (Funds), each with its own investment goals and strategies. This
Prospectus contains information about three of the Funds in the Trust. Liberty
Advisory Services Corp. (LASC) is the investment advisor to each Fund. LASC has
appointed a Sub-Advisor for each Fund, all of which are affiliates of LASC.
Each Fund is sub-advised by the following Sub-Advisor:
<TABLE>
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FUND SUB-ADVISOR
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Colonial International Horizons Fund, Variable Series (International Horizons Fund) Colonial Management Associates, Inc.
Colonial Global Equity Fund, Variable Series (Global Equity Fund) (Colonial)
- --------------------------------------------------------------------------------------------------------------------------
Crabbe Huson Real Estate Investment Fund, Variable Series (Real Estate Fund) Crabbe Huson Group, Inc.
(Crabbe Huson)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other Funds may be added to or deleted from the Trust from time to time.
The Trust's Funds are investment options under variable annuity contracts (VA
contracts) and variable life insurance policies (VLI policies) issued by life
insurance companies (Participating Insurance Companies). Some (but not all)
Participating Insurance Companies are affiliated with the investment advisor to
the Funds. Participating Insurance Companies invest in the Funds through
separate accounts that they set up for that purpose. Owners of VA contracts and
of VLI policies invest in sub-accounts of those separate accounts through
instructions they give to their insurance company. The principal underwriter of
the Funds is Liberty Funds Distributor, Inc. (LFD). LFD is an affiliate of LASC.
The prospectuses of the Participating Insurance Companies' separate accounts
describe which Funds are available to the purchasers of their VA contracts and
VLI policies. The Trust assumes no responsibility for those prospectuses.
3
<PAGE>
THE FUNDS
---------
COLONIAL INTERNATIONAL HORIZONS FUND, VARIABLE SERIES
INVESTMENT GOALS
- -------------------------------------------------------------------------------
The Fund seeks long-term growth and preservation of capital purchasing power.
PRIMARY INVESTMENT STRATEGIES
- -------------------------------------------------------------------------------
The Fund invests primarily in non-U.S. equity securities which Colonial
believes will provide superior long-term growth. Colonial generally selects
stocks of companies in industries and markets that it believes will react
favorably to inflation in the U.S. economy. Inflation sensitive companies in
which the Fund may invest include:
- - companies engaged in the development and processing of natural resources,
and
- - companies engaged in consumer oriented businesses.
The Fund is a non-diversifed mutual fund and, although it generally will not,
may invest more than 5% of its total assets in the securities of a single
company.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. 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. 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.
As a non-diversified mutual fund, the Fund is allowed to invest a greater
percentage of its total 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.
PERFORMANCE HISTORY
- -------------------------------------------------------------------------------
Because the Fund has not completed one full calendar year of investment
performance, information related to the Fund's performance has not been included
in this prospectus.
The Fund's return is compared to the Morgan Stanley Capital International EAFE
GDP Index, an unmanaged index that tracks the performance of equity securities
of developed countries outside North America. Unlike the Fund, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in indices.
4
<PAGE>
COLONIAL GLOBAL EQUITY FUND, VARIABLE SERIES
INVESTMENT GOAL
- -------------------------------------------------------------------------------
The Fund seeks long-term growth by investing primarily in global equity
securities.
PRIMARY INVESTMENT STRATEGIES
- -------------------------------------------------------------------------------
Under normal market conditions, the Fund invests primarily in both U.S. and
foreign equity securities. The Fund may invest in companies of any size,
including small capitalization stocks. The Fund may also invest in high quality
U.S. and foreign government debt securities. The Fund generally diversifies its
holdings across several different countries and regions.
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.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goal. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions. Market risk includes
interest rate risk.
Interest rate risk is the risk of a change in the price of a bond when interest
rates increase or decline. In general, if interest rates rise, bond prices fall;
and if interest rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the 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. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. 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. 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
- -------------------------------------------------------------------------------
Because the Fund has not completed one full calendar year of investment
performance information related to the Fund's performance has not been included
in this prospectus.
The Fund's return is compared to the Morgan Stanley Capital International World
GDP Index, an unmanaged price index that tracks the performance of global
stocks. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. It is not possible to invest
directly in indices.
5
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND, VARIABLE SERIES
INVESTMENT GOALS
- -------------------------------------------------------------------------------
The Fund seeks to provide growth of capital and current income.
PRIMARY INVESTMENT STRATEGIES
- -------------------------------------------------------------------------------
Under normal market conditions, the Fund invests at least 75% of its total
assets in equity securities of real estate investment trusts (REITs) and other
real estate industry companies. In managing the Fund, the sub-advisor follows a
basic value contrarian approach in selecting securities for its portfolio.
The contrarian approach puts primary emphasis on security price, balance sheet
and cash flow analysis and on the relationship between the market price of a
security and its estimated intrinsic value as a share of an ongoing business.
The basic value contrarian approach is based on Crabbe Huson's belief that the
securities of many companies often sell at a discount from the securities'
estimated intrinsic value. The Fund attempts to identify and invest in such
undervalued securities in the hope that their market price will rise to their
estimated intrinsic value.
REITs are pooled investment vehicles that invest primarily in income producing
real estate or real estate related loans or interest. The Fund's REIT
investments will consist primarily of equity REITs which invest the majority of
their assets directly in real estate and derive income primarily from rents.
Other real estate industry companies in which the Fund may invest are companies
that derive at least 50% of their revenues or profits from either (a) the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or (b) products or services
related to the real estate industry, such as building supplies or mortgage
servicing.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions. Market risk includes
interest rate risk.
Investing in REITs involves certain unique risks in addition to those risks
associated with the real estate industry in general. The prices of equity REITs
are affected by changes in the value of the underlying property owned by the
REITs. REITs are subject to heavy cash flow dependency and default by borrowers.
A REIT must distribute 95% of its taxable income to qualify for beneficial
federal tax treatment. If a REIT is unable to qualify, then it would be taxed as
a corporation and distributions to shareholders would be reduced. In addition,
although the Fund does not invest directly in real estate, an investment in the
Fund is subject to certain of the risks associated with the ownership of real
estate. These risks include possible declines in the value of real estate, risks
related to general and local economic conditions, possible lack of availability
of mortgage funds, and changes in interest rates.
PERFORMANCE HISTORY
- -------------------------------------------------------------------------------
Because the Fund has not completed one full calendar year of investment
performance information related to the Fund's performance has not been included
in this prospectus.
The Fund's return is compared to the NAREIT Equity Index, an unmanaged index
that tracks the performance of all equity real estate investment trusts that
trade on the New York Stock Exchange, the American Stock Exchange and the
NASDAQ. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. It is not possible to invest
directly in indices.
6
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
------------------------------
THE TRUSTEES
- -------------------------------------------------------------------------------
The business of the Trust and the Funds is supervised by the Trust's Board of
Trustees. The Statement of Additional Information contains names of and
biographical information on the Trustees.
INVESTMENT ADVISOR: LIBERTY ADVISORY SERVICES CORP.
- -------------------------------------------------------------------------------
LASC, located at 125 High Street, Boston Massachusetts 02110, is the investment
advisor to the Funds. LASC is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. (LFC). LASC has been an investment advisor since 1993.
As of March 31, 2000, LASC managed over $ million in assets. LASC designates the
Trust's Sub-Advisors, evaluates and monitors Sub-Advisors' performance and
investment programs and recommends to the Board of Trustees whether
Sub-Advisors' contracts should be continued or modified and the addition or
deletion of Sub-Advisors. LASC also has the responsibility of administering the
Trust's operations, which it may delegate, at its own expense, to certain
affiliates. LASC has delegated its administrative responsibilities to Colonial
in accordance with this authority.
For the 1999 fiscal year, the Trust paid LASC management fees at the following
annual rates of the average daily net assets of each specified Fund:
<TABLE>
<S> <C>
Colonial International Horizons Fund, Variable Series 0.95%(1)
Colonial Global Equity Fund, Variable Series 0.95%(2)
Crabbe Huson Real Estate Investment Fund, Variable Series 1.00%(3)
</TABLE>
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(1) The International Horizons Fund's advisor has voluntarily agreed to
waive its management fee and reimburse other expenses so that the total
expenses of the Fund do not exceed 1.75%. As a result the actual
management fee paid to the advisor for the 1999 fiscal year was 0.00%
(2) The Global Equity Fund's advisor has voluntarily agreed to waive its
management fee and reimburse other expenses so that total expenses of
the Fund do not exceed 1.15%. As a result the actual management fee
paid to the advisor for the 1999 fiscal year was 0.12%.
(3) The Real Estate Fund's advisor has voluntarily agreed to waive its
management fee and reimburse other expenses so that total expenses of
the Fund do not exceed 1.20%. As a result the actual management fee
paid to the advisor for the 1999 fiscal year was 0.00%.
</TABLE>
7
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
INVESTMENT SUB-ADVISORS AND PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
The Sub-Advisors manage the assets of the Funds under the supervision of LASC
and the Board of Trustees. Each Sub-Advisor determines which securities and
other instruments are purchased and sold for the Fund(s) it sub-advises. Each
Sub-Advisor is an indirect wholly-owned subsidiary of LFC.
COLONIAL
Colonial, an investment advisor since 1931, is the Sub-Advisor of each of the
International Horizons Fund and Global Equity Fund. Colonial's principal
business address is One Financial Center, Boston, Massachusetts 02111. As of
March 31, 2000, Colonial managed over $ billion in assets.
LASC, out of the management fees it receives from the Trust, pays Colonial
sub-advisory fees at the following annual rates of the average daily net assets
of each specified Fund:
<TABLE>
<S> <C>
Colonial International Horizons Fund, Variable Series 0.75%
Colonial Global Equity Fund, Variable Series 0.75%
</TABLE>
Colonial also provides transfer agency, pricing and record keeping services for
the Funds under separate agreements.
Ophelia Barsketis, a senior vice president of Colonial, co-manages the Global
Equity Fund. Ms. Barsketis joined Stein Roe, an affiliate of Colonial, 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, a senior vice president of Colonial and senior research
analyst for global and domestic equities and global economic forecasting for
Stein Roe, co-manages the Global Equity Fund. Ms. Jansen joined Stein Roe in
1987 and served as an associate economist and senior economist before assuming
her current responsibilities, which include managing other Stein Roe and
Colonial Funds. Ms. Jansen left Stein Roe in January, 1995 and returned to her
position as a 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.
Charles R. Roberts, a senior vice president of Colonial, is the lead manager for
the International Horizons Fund. Mr. Roberts is also a senior vice president of
Newport and Newport Pacific Management, Inc. (Newport Pacific), an affiliate of
Colonial. Mr. Roberts has been employed with Newport and Newport Pacific since
November, 1998. Prior to joining Newport and Newport Pacific, he managed the
European component of institutional international equity accounts at Progress
Investment Management (Progress) since 1997. Prior to joining Progress in 1997,
he managed the European component of institutional international equity accounts
and was a member of the investment policy committee at Sit/Kim International
since prior to 1994.
Michael Ellis, a senior vice president of Colonial, is a co-manager of the
International Horizons Fund. Mr. Ellis is also a senior vice president of
Newport and Newport Pacific. Prior to joining Newport and Newport Pacific in
December, 1996, he was a vice president at Matthews International Capital
Management since September, 1991.
Deborah Snee, a Vice President of Colonial and Europe analyst at Colonial, Stein
Roe and Newport, is a co-manager of the International Horizons Fund. Prior to
working at Newport, Ms. Snee spent five years at Sit/Kim as an emerging markets
analyst.
Colonial's investment advisory business is managed together with the mutual
funds and institutional investment advisory businesses of its affiliate, Stein
Roe. Colonial is part of a larger business unit that includes several separate
legal entities known as Liberty Funds Group LLC (LFG). The LFG business unit and
Stein Roe are managed by a single management team. Stein Roe, Colonial and the
other LFG entities also share personnel, facilities and systems that may be used
in providing administrative or operational services to the Fund. Stein Roe and
Colonial are registered investment advisors. Colonial, the other entities that
make up LFG and Stein Roe are subsidiaries of Liberty Financial Companies, Inc.
CRABBE HUSON
Crabbe Huson, an investment advisor since 1980, is the Sub-Advisor of the Real
Estate Fund. Crabbe Huson's principal address is 121 S.W. Morrison, Suite 1400,
Portland, Oregon 97204. Crabbe Huson as of March 31, 2000, Crabbe Huson managed
over $ million in assets.
8
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
LASC, out of the management fees it receives from the Trust, pays Crabbe Huson a
sub-advisory fee at the annual rate of 0.80% of the average daily net assets of
the Real Estate Fund.
Michael B. Stokes has managed the Real Estate Fund since its inception. Mr.
Stokes joined Crabbe Huson in August, 1996. Prior to joining Crabbe Huson, he
was a financial analyst for Salomon Brothers from July, 1994 to June, 1996.
AFFILIATED BROKER/DEALER
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.
9
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
-------------------------------------
Each Fund's primary investment strategies and its associated risks are described
above in its individual description. This section describes other investments a
Fund may make and the risks associated with them. In seeking to achieve its
goals, each Fund may invest in various types of securities and engage in various
investment techniques which are not the principal 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' Statement of
Additional Information, 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.
DERIVATIVE STRATEGIES
- -------------------------------------------------------------------------------
Each Fund may enter into a number of hedging strategies, including those that
employ futures and options, to gain or reduce exposure to particular securities
or markets. These strategies, commonly referred to as derivatives, involve the
use of financial instruments whose value depends on, or are derived from, the
value of an underlying security, index or currency. A Fund may use these
strategies to adjust the Fund's sensitivity to changes in interest rates or for
other hedging purposes (i.e., attempting to offset a potential loss in one
position by establishing an interest in an opposite position). Derivative
strategies involve the risk that they may exaggerate a loss, potentially losing
more money than the actual cost of the derivative, or limit a potential gain.
Also, with some derivative 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.
TEMPORARY DEFENSIVE MEASURES
- -------------------------------------------------------------------------------
With the exception of the All-Star Equity Fund, each Fund's Sub-Advisor may
determine that adverse market conditions make it desirable to temporarily
suspend the Fund's normal investment activities. During such times, 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 a Fund from achieving its
investment goals.
10
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The financial highlights tables are intended to help you understand the Funds'
financial performance. Information is shown for the Funds' last five fiscal
years, (or shorter period if a Fund commenced operations less than five years
ago) which run from January 1 to December 31. Certain information reflects
financial results for a single fund share. This information is included in the
Funds' financial statements which have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report, along with the Funds' financial
statements, is included in the Funds' annual report. The Funds' total returns
presented below do not reflect the cost of insurance and other insurance company
separate account charges which vary with the VA contracts and VLI policies. You
can request a free annual report by writing Keyport Financial Services Corp.
(see back cover for address) or by calling or writing the Participating
Insurance Company which issued your VA contract or VLI policy. Because the Class
A shares are a new class of shares the financial highlights shown are for Class
B shares, the oldest existing Fund class.
<TABLE>
<CAPTION>
COLONIAL INTERNATIONAL HORIZONS FUND, VARIABLE SERIES
Period Ended December 31,
1999***
PER SHARE OPERATING PERFORMANCE:
<S> <C>
Net asset value, beginning of period ($) 10.00
- -----------------------------------------------------------------------------------------------------
Net investment income (a) 0.06
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency transactions 2.36
- -----------------------------------------------------------------------------------------------------
Total from investment operations 2.42
- -----------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.05)
- -----------------------------------------------------------------------------------------------------
In excess of net investment income (0.06)
- -----------------------------------------------------------------------------------------------------
Total distributions (0.11)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 12.31
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN
Total investment return (%)(b)(c) 24.24**
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 7,707
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d)(e) 1.40
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) (d) 0.85*
- -----------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 1**
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations June 1, 1999 to
December 31, 1999.
(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
11
<PAGE>
FINANCIAL HIGHLIGHTS
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 2.36%
(annualized).
12
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
COLONIAL GLOBAL EQUITY FUND, VARIABLE SERIES
Period Ended December 31,
1999***
PER SHARE OPERATING PERFORMANCE:
<S> <C>
Net asset value, beginning of period ($) 10.00
- ---------------------------------------------------------------------------------------------------
Net investment income (a) 0.04
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized losses on investments 1.22
- ---------------------------------------------------------------------------------------------------
Total from investment operations 1.26
- ---------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.05)
- ---------------------------------------------------------------------------------------------------
Total distributions (0.05)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 11.21
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN
Total investment return (%)(b)(c) 12.57**
- ---------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 7,284
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d)(e) 1.40*
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income to 0.55*
average net assets (%) (d)
- ---------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%)
1**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations June 1, 1999 to
December 31, 1999.
(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) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 2.23%
(annualized).
13
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CRABBE HUSON REAL ESTATE INVESTMENT FUND, VARIABLE SERIES
Period Ended December 31,
1999***
PER SHARE OPERATING PERFORMANCE:
<S> <C>
Net asset value, beginning of period ($) 10.00
- ------------------------------------------------------------------------------------------------------
Net investment income (a) 0.31
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized losses on investments (1.70)
- ------------------------------------------------------------------------------------------------------
Total from investment operations (1.39)
- ------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.22)
- ------------------------------------------------------------------------------------------------------
Return of capital (0.05)
- ------------------------------------------------------------------------------------------------------
Total distributions (0.27)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 8.34
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN
Total investment return (%)(b)(c) (13.80)**
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 2,180
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d)(e) 1.45*
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) (d) 5.90*
- ------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 57**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations June 1, 1999 to
December 31, 1999.
(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) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 4.25%
(annualized).
14
<PAGE>
SHAREHOLDER INFORMATION
-----------------------
PURCHASE AND REDEMPTIONS The Participating Insurance Companies place daily
orders to purchase and redeem shares of the Funds. These orders generally
reflect the net effect of instructions they receive from holders of their VA
contracts and VLI policies and certain other terms of those contracts and
policies. The Trust issues and redeems shares at NAV without imposing any
selling commissions, sales charge or redemption charge. Shares generally are
sold and redeemed at their NAV next determined after receipt of purchase or
redemption requests from Participating Insurance Companies. The right of
redemption may be suspended or payment postponed whenever permitted by
applicable law and regulations.
HOW THE FUNDS' CALCULATE NET ASSET VALUE Each share price is its NAV next
determined. NAV is the difference between the value of a fund's assets and
liabilities divided by the number of shares outstanding. The NAV is determined
at the close of the New York Stock Exchange ("NYSE"), usually 4:00 p.m. Eastern
time, on each business day that the NYSE is open (typically Monday through
Friday).
To calculate NAV on a given day, we value each stock listed or traded on a stock
exchange at its latest sale price on that day. If there are no sales on that
day, we value the security at the most recent quoted bid price. We value each
over-the-counter security or National Association of Securities Dealers
Automated Quotation (Nasdaq) security as of the last sales price of that day. We
value other over-the-counter securities that have reliable quotes at the latest
quoted bid price.
We value long-term debt obligations and securities convertible into common stock
at fair value. Pricing services provide the Funds with the value of the
securities. When the price of a security is not available, including days when
we determine that the sale or bid price of the security does not reflect that
security's market value, we will value the security at a fair value determined
in good faith under procedures established by the Board of Trustees.
We value a security at fair value when events have occurred after the last
available market price and before the close of the NYSE that materially affect
the security's price. In the case of foreign securities, this could include
events occurring after the close of the foreign market and before the close of
the NYSE.
A Fund's foreign securities may trade on days when the NYSE is closed for
trading and Participating Insurance Companies may not purchase or redeem shares.
DIVIDENDS AND DISTRIBUTIONS Each Fund intends to declare and distribute, as
dividends or capital gain distributions, at least annually, substantially all of
its net investment income and net profits realized from the sale of portfolio
securities, if any, to its shareholders (Participating Insurance Companies'
separate accounts). The net investment income of each Fund consists of all
dividends or interest received by such Fund, less estimated expenses (including
investment advisory and administrative fees). Income dividends will be declared
and distributed annually. All net short-term and long-term capital gains of each
Fund realized during the fiscal year are declared and distributed periodically,
no less frequently than annually. All dividends and distributions are reinvested
in additional shares of the Fund at NAV, as of the record date for the
distributions.
TAX CONSEQUENCES Each Fund is treated as a separate entity for federal income
tax purposes and has elected or intends to elect to be treated, and intends to
qualify each year as a "regulated investment company" under Subchapter M of the
Internal Revenue Code (the "Code"). Each Fund must satisfy certain requirements
relating to the sources of its income, diversification of its assets and
distribution of its income to shareholders to qualify as a regulated investment
company. As a regulated investment company, a Fund will not be subject to
federal income tax on any net investment income and net realized capital gains
that are distributed to its shareholders as required under the Code.
In addition, each Fund follows certain portfolio diversification requirements
imposed by the Code on separate accounts of insurance companies relating to the
tax-deferred status of VA contracts and VLI policies. More specific information
on these diversification requirements is contained in the prospectus that
describes a particular VA contract or VLI policy.
OTHER CLASS OF SHARES The Funds also offer an additional class of shares, Class
B shares, which are not available in this prospectus. Your particular VA
contract or VLI policy may not offer these shares.
15
<PAGE>
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
You can get more information about the Funds' investments in the Funds'
semi-annual and annual reports to shareholders. The annual report contains a
discussion of the market conditions and investment strategies that
significantly affected the Funds' performance over their last fiscal year.
You may wish to read the Statement of Additional Information for more
information on the Funds and the securities in which they invest. The Statement
of Additional Information 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 Statement of Additional Information,
request other information and discuss your questions about the Funds by writing
or calling:
Keyport Financial Services Corp.
125 High Street
Boston, MA 02111
1-800-437-4466
or by calling or writing the Participating Insurance Company which issued your
VA contract or VLI policy.
Text-only versions of all Fund documents can be viewed online or downloaded from
the Edgar database on the Securities and Exchange Commission internet site at
www.sec.gov.
You can review and copy information about the Funds by visiting the following
location, and you can obtain copies upon payment of a duplicating fee by
electronic request at the e-mail address [email protected] or by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling 1-202-942-8090.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Variable Investment Trust : 811-07556
Colonial International Horizons Fund, Variable Series
Colonial Global Equity Fund, Variable Series
Crabbe Huson Real Estate Investment Fund, Variable Series
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
PROSPECTUS DATED JUNE 1, 2000
Colonial Growth and Income Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial U.S. Growth & Income Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Newport Tiger Fund, Variable Series
CLASS B SHARES
Trust shares are 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 or disapproved 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
<TABLE>
<CAPTION>
THE TRUST
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
THE FUNDS
- ---------------------------------------------------------------------------------------------------------------------
Each of these sections discusses the following
topics: Investment Goals, Primary Investment Strategies,
Primary Investment Risks and Performance History
Colonial Growth and Income Fund, Variable Series.....................................................................
Stein Roe Global Utilities Fund, Variable Series.....................................................................
Colonial Small Cap Value Fund, Variable Series.......................................................................
Colonial U.S. Growth & Income Fund, Variable Series..................................................................
Colonial Strategic Income Fund, Variable Series......................................................................
Colonial High Yield Securities Fund, Variable Series.................................................................
Liberty All-Star Equity Fund, Variable Series........................................................................
Colonial International Fund for Growth, Variable Series..............................................................
Newport Tiger Fund, Variable Series..................................................................................
TRUST MANAGEMENT ORGANIZATIONS
- ---------------------------------------------------------------------------------------------------------------------
Trustees.............................................................................................................
Investment Advisor...................................................................................................
Investment Sub-Advisors and Portfolio Managers.......................................................................
Rule 12b-1 Plan......................................................................................................
OTHER INVESTMENT STRATEGIES AND RISKS
- ---------------------------------------------------------------------------------------------------------------------
Temporary Defensive Measures.........................................................................................
U.S. Government Securities...........................................................................................
Structure Risk.......................................................................................................
Zero Coupon Bonds....................................................................................................
Derivative Strategies................................................................................................
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- ---------------------------------------------------------------------------------------------------------------------
Purchases and Redemptions............................................................................................
How the Funds Calculate Net Asset Value..............................................................................
Dividends and Distributions..........................................................................................
Tax Consequences.....................................................................................................
</TABLE>
2
<PAGE>
THE TRUST
Liberty Variable Investment Trust (Trust) includes seventeen separate mutual
funds (Funds), each with its own investment goals and strategies. This
Prospectus contains information about nine of the Funds in the Trust. Liberty
Advisory Services Corp. (LASC) is the investment advisor to each Fund. LASC has
appointed a Sub-Advisor for each Fund, all of which are affiliates of LASC. Each
Fund is sub-advised by the following Sub-Advisor:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FUND Sub-Advisor
---- -----------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Colonial Growth and Income Fund, Variable Colonial Management
Series (Growth & Income Fund) Associates, Inc. (Colonial)
Colonial International Fund for Growth,
Variable Series (International Fund)
Colonial U.S. Growth & Income Fund, Variable
Series (U.S. Growth & Income Fund) (formerly
Colonial U.S. Stock Fund, Variable Series)
Colonial Small Cap Value Fund, Variable Series
(Small Cap Fund)
Colonial Strategic Income Fund, Variable Series
(Strategic Income Fund)
Colonial High Yield Securities Fund, Variable
Series (High Yield Fund)
Colonial International Horizons Fund, Variable
Series (International Horizons Fund)
Colonial Global Equity Fund, Variable Series
(Global Equity Fund)
- ------------------------------------------------------------------------------------------------------------------------------
Stein Roe Global Utilities Fund, Variable Stein Roe & Farnham
Series (Global Utilities Fund) Incorporated
(Stein Roe)
- ------------------------------------------------------------------------------------------------------------------------------
Newport Tiger Fund, Variable Series (Tiger Fund) Newport Fund Management, Inc.
(Newport)
- ------------------------------------------------------------------------------------------------------------------------------
Liberty All-Star Equity Fund, Variable Series Liberty Asset Management
(All-Star Equity Fund) Company (LAMCO)
- ------------------------------------------------------------------------------------------------------------------------------
Crabbe Huson Real Estate Investment Fund, Crabbe Huson Group, Inc.
Variable Series (Real Estate Fund) (Crabbe Huson)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other Funds may be added to or deleted from the Trust from time to time.
The Trust's Funds are investment options under variable annuity contracts (VA
contracts) and variable life insurance policies (VLI policies) issued by life
insurance companies (Participating Insurance Companies). Some (but not all)
Participating Insurance Companies are affiliated with the investment advisor to
the Funds. Participating Insurance Companies invest in the Funds through
separate accounts that they set up for that purpose. Owners of VA contracts and
of VLI policies invest in sub-accounts of those separate accounts through
instructions they give to their insurance company. The principal underwriter of
the Funds is Liberty Funds Distributor, Inc. (LFD). LFD is an affiliate of LASC.
The prospectuses of the Participating Insurance Companies' separate accounts
describe which Funds are available to the purchasers of their VA contracts and
VLI policies. The Trust assumes no responsibility for those prospectuses.
3
<PAGE>
THE FUNDS
COLONIAL GROWTH AND INCOME FUND, VARIABLE SERIES
INVESTMENT GOALS
- --------------------------------------------------------------------------------
The Fund seeks primarily income and long-term capital growth and, secondarily,
preservation of capital.
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund invests in both U.S. and foreign common stocks. In selecting stocks for
the Fund, Colonial invests primarily in "value" stocks. 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;
2. Companies which have a record of consitent earnings growth that may
provide above average stability or value in turbulent markets; or
3. Companies with anticipated business growth prospects that represent
above average value.
Colonial assesses whether a company's prospects are "above average." Colonial
makes this judgement subjectively, based upon available information.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Value stocks are securities of companies that may have experienced adverse
business or industry developments or may be subject to special risks that have
caused the stocks to be out of favor. If Colonial's assessment of a company's
prospects is wrong, the price of its stock may not approach the value Colonial
has placed on it.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. 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. Brokerage commissions, custodial fees
and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
4
<PAGE>
THE FUNDS Colonial Growth and Income Fund, Variable Series
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's calendar year total 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 1 year, 5 years and the life
of the Fund. The Fund's return is compared to the Standard & Poor's 500 Index
(S&P Index), an unmanaged index that tracks the performance of a selection of
widely held common stocks. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in indices. The Fund's return is also compared to the average
return of the funds included in the Lipper Growth & Income - Annuities Funds
category average (Lipper Average). This Lipper Average, which is calculated by
Lipper, Inc., is composed of funds with similar investment objectives to the
Fund. Sales charges are not reflected in the Lipper Average. 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. Performance results include the effect of expense
reduction arrangements, if any. As with all mutual funds, past performance does
not predict the Fund's future performance. 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. Because the Class B shares are a new class
of shares the bar chart and the average annual returns shown is for Class A
shares, the oldest existing Fund class. Class B share performance would have
been lower than the performance of the Fund's Class A shares due to a difference
in expenses.
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
- -------------------------------------------------------
1994 1995 1996 1997 1998 1999
- -------------------------------------------------------
- -0.76% 30.03% 17.89% 28.97% 11.13% 5.55%
- -------------------------------------------------------
The Fund's year to date total return through March 31, 2000 was %.
For period shown in bar chart:
Best quarter: 4th quarter 1998, +16.92%
Worst quarter: 3rd quarter 1998, -13.57%
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR 5 YEARS THE FUND
<S> <C> <C> <C> <C>
Fund-Class A Shares (%) 7/1/93 5.55 18.32 14.52
- -----------------------------------------------------------------------------------------------------------------
S&P Index (%) N/A 21.03 28.54 18.19(1)
- -----------------------------------------------------------------------------------------------------------------
Lipper Average (%) N/A 14.63 21.86 17.75(1)
</TABLE>
(1) Performance information is from June 30, 1993.
5
<PAGE>
STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
INVESTMENT GOALS
- --------------------------------------------------------------------------------
The Fund seeks current income and long-term growth of capital and income.
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
Under normal market conditions, the Fund invests primarily in U.S. and foreign
securities of utility companies. Stein Roe diversifies the Fund's investments
among a number of developed countries and market sectors and will have exposure
to at least three countries, including the U.S. In selecting investments for the
Fund, Stein Roe looks primarily for stocks of larger utility companies with
established records.
Utility companies in which the Fund may invest include companies engaged in the
manufacture, production, generation, transmission, sale or distribution of
electricity, natural gas or other types of energy, or water or other sanitary
services. They also include companies engaged in telecommunications, including
telephone, telegraph, satellite, microwave and other communications media (but
excluding companies primarily engaged in public broadcasting, print media, cable
television or the internet).
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Utility company securities are subject to special risks. These securities are
especially affected by changes in interest rates, as well as by general
competitive and market forces in the industry. As interest rates increase, the
value of securities of utility companies tends to decrease, and vice versa. 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.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. 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. Brokerage commissions, custodial fees
and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
6
<PAGE>
THE FUNDS Stein Roe Global Utilities Fund, Variable Series
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's calendar year total 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 1 year, 5 years and the life
of the Fund. The Fund's return is compared to the Standard & Poor's Utilities
Index (S&P Index), an unmanaged index that tracks the performance of domestic
utility stocks and the Morgan Stanley Capital International World Index ND (MSCI
Index), an unmanaged index that tracks the performance of global stocks. .
Unlike the Fund, indices are not investments, do not incur fees or expenses and
are not professionally managed. It is not possible to invest directly in
indices. The Fund's return is also compared to the average return of the funds
included in the Lipper Utilities-Annuities Funds category average (Lipper
Average). This Lipper Average, which is calculated by Lipper, Inc., is composed
of funds with similar investment objectives to the Fund. Sales charges are not
reflected in the Lipper Average. 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. Performance results include the effect of expense reduction
arrangements, if any. As with all mutual funds, past performance does not
predict the Fund's future performance. 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. Because the Class B shares are a new class
of shares the bar chart and the average annual returns shown is for Class A
shares, the oldest existing Fund class. Class B share performance would have
been lower than the performance of the Fund's Class A shares due to a difference
in expenses.
[BAR GRAPH]
- --------------------------------------------------------
1994 1995 1996 1997 1998 1999
- --------------------------------------------------------
- -10.27% 35.15% 6.53% 28.75% 18.33% 28.63%
- --------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
The Fund's year-to-date total return through March 31, 2000 was %.
For period shown in bar chart:
Best quarter: 4th quarter 1999, +24.73%
Worst quarter: 1st quarter 1994, -8.91%
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR 5 YEARS THE FUND
<S> <C> <C> <C> <C>
Fund - Class A Shares (%) 7/1/93 28.63 23.06 15.04
- -----------------------------------------------------------------------------------------------------------------
MSCI Index (%) N/A 24.93 19.76 16.86(2)
- -----------------------------------------------------------------------------------------------------------------
S&P Index (%) N/A 21.03 28.54 22.46(2)
- -----------------------------------------------------------------------------------------------------------------
Lipper Average (%) N/A 15.40 19.64 12.14(2)
</TABLE>
(2) Performance information is from June 30, 1993.
7
<PAGE>
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
INVESTMENT GOAL
- --------------------------------------------------------------------------------
The Fund seeks long-term growth.
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
Under normal market conditions, the Fund invests primarily in small
capitalization stocks. These are stocks with market capitalizations of less than
the market capitalization of the stock in the Russell 2000 Index that has the
largest capitalization at the time of purchase. The remainder of the Fund's
assets may be invested in other stocks, or in bonds that are rated or considered
by the advisor to be investment grade. In managing the Fund, Colonial uses a
value investing strategy that focuses on buying stocks cheaply when they are
under valued or "out of favor." Colonial buys stocks that have attractive
current prices, consistent operating performance and/or favorable future growth
prospects. Colonial's strategy uses fact-based quantitative analysis supported
by fundamental business and financial analysis.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Smaller companies are more likely than larger companies to have limited product
lines, operating histories, markets or financial resources. They may depend
heavily on a small management team. Stocks of smaller companies may trade less
frequently, may trade in smaller volumes and may fluctuate more sharply in price
than stocks of larger companies. In addition, they may not be widely followed by
the investment community, which can lower the demand for their stock.
8
<PAGE>
THE FUNDS Colonial Small Cap Value Fund, Variable Series
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
The bar chart below shows the Fund's performance by illustrating the Fund's
calendar year total 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 1 year and the life of the Fund. The Fund's return is
compared to the Russell 2000 Index (Russell Index), an unmanaged index that
tracks the performance of small-capitalization stocks traded on the New York
Stock Exchange, American Stock Exchange and the NASDAQ. Unlike the Fund, indices
are not investments, do not incur fees or expenses and are not professionally
managed. It is not possible to invest directly in indices. The Fund's return is
also compared to the average return of the funds included in the Lipper Small
Cap-Annuities Funds category average (Lipper Average). This Lipper Average,
which is calculated by Lipper, Inc., is composed of funds with similar
investment objectives to the Fund. Sales charges are not reflected in the Lipper
Average. 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 distribuitons. Performance
results include the effect of expense reduction arrangments, if any. If these
arrangements were not in place, then the performance results would have been
lower. Any expense reduction arrangments may be discontinued at any time. As
with all mutual funds, past performance does not predict the Fund's future
performance. 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. Because the Class B shares are a new class of shares the bar chart and
the average annual returns shown is for Class A shares, the oldest existing Fund
class. Class B share performance would have been lower than the performance of
the Fund's Class A shares due to a difference in expenses.
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
[BAR GRAPH]
- ----------------------------
1999
- ----------------------------
6.34%
- ----------------------------
The Fund's year-to-date total return through March 31, 2000 was +%.
For period shown in bar chart:
Best quarter: 2nd quarter 1999, +16.78%
Worst quarter: 3rd quarter 1998, -25.77%
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR THE FUND
<S> <C> <C> <C>
Fund - Class A Shares (%) 5/19/98 6.34 (4.85)
- -----------------------------------------------------------------------------------------------
Russell Index (%) N/A 21.26 4.01(3)
- -----------------------------------------------------------------------------------------------
Lipper Average (%) N/A 37.57 12.97(3)
</TABLE>
(3) Performance information is from April 30, 1998.
9
<PAGE>
COLONIAL U.S. GROWTH & INCOME FUND, VARIABLE SERIES
INVESTMENT GOALS
- --------------------------------------------------------------------------------
The Fund seeks long-term growth and income.
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. Up to 10% of the Fund's assets may be
invested in debt securities.
In selecting debt securities for the Fund, Colonial may invest in:
- debt securities that are convertible into common stock
- corporate debt securities noted investment grade by at least two
nationally recognized rating organizations; and
- debt securities issued or guaranteed by the U.S. Government
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.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Market risk includes interest rate risk.
Because the Fund may invest in debt securities issued by private entities,
including corporate bonds and privately issued mortgage-backed and asset-backed
securities, 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 may impact its willingness or ability to make timely payments of interest
or principal. This could result in a decrease in the price of the security and
in some cases a decrease in income.
Interest rate risk is the risk of a change in the price of a bond when interest
rates increase or decline. In general, if interest rates rise, bond prices fall;
and if interest rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the 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.
10
<PAGE>
THE FUNDS Colonial U.S. Growth & Income Fund, Variable Series
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's calendar year total 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 1 year, 5 years and the life
of the Fund. The Fund's return is compared to the Standard & Poor's 500 Index
(S&P Index), an unmanaged index that tracks the performance of a selection of
widely held common stocks. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in indices. The Fund's return is also compared to the average
return of the funds included in the Lipper Growth & Income - Annuities Funds
category average (Lipper Average). This Lipper Average, which is calculated by
Lipper, Inc. is composed of funds with similar investment objectives to the
Fund. Sales charges are not reflected in the Lipper Average. 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. Performance results include the effect of expense
reduction arrangements, if any. If these arrangements were not in place, then
the performance results would have been lower. Any expense reduction
arrangements may be discontinued at any time. As with all mutual funds, past
performance does not predict the Fund's future performance. 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. Because the
Class B shares are a new class of shares the bar chart and the average annual
returns shown is for Class A shares, the oldest existing Fund class. Class B
share performance would have been lower than the performance of the Fund's Class
A shares due to a difference in expenses.
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
[BAR GRAPH]
- --------------------------------------------------------
1995 1996 1997 1998 1999
- --------------------------------------------------------
29.70% 21.84% 32.23% 20.15% 12.00%
- --------------------------------------------------------
The Fund's year-to-date total return through March 31, 2000 was %.
For period shown in bar chart:
Best quarter: 4th quarter 1998, +21.79%
Worst quarter: 3rd quarter 1998, -14.16%
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR 5 YEARS THE FUND
<S> <C> <C> <C> <C>
Fund - Class A Shares (%) 7/5/94 12.00 22.97 21.64
- -----------------------------------------------------------------------------------------------------------------
S&P Index (%) N/A 21.03 28.54 26.73(4)
- -----------------------------------------------------------------------------------------------------------------
Lipper Average (%) N/A 14.63 21.86 20.44(4)
</TABLE>
(4) Performance information is from June 30, 1994.
11
<PAGE>
COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES
INVESTMENT GOALS
- --------------------------------------------------------------------------------
The Fund seeks as high a level of current income as is consistent with prudent
risk and maximizing total return.
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund seeks to achieve its investment 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 goals by investing a portion of its assets in
lower rated corporate debt securities. These securities have the following
ratings:
- - BBB through C by Standard & Poor's Corporation;
- - Baa through D by Moody's Investor Services, Inc.;
- - a comparable rating by another nationally recognized rating service; or
- - the security is unrated and Colonial believes it to be comparable in
quality to securities having such ratings as noted above.
The Fund may invest in securities issued or guaranteed by foreign governments or
foreign companies, including securities issued in emerging market countries.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Market risk includes interest rate risk.
Interest rate risk is the risk of a change in the price of a bond when interest
rates increase or decline. In general, if interest rates rise, bond prices fall;
and if interest rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the 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 debt securities issued by private entities,
including corporate bonds and privately issued mortgage-backed and asset-backed
securities, 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 may impact its willingness or ability to make timely payments of interest
or principal. This could result in a decrease in the price of the security and
in some cases a decrease in income.
12
<PAGE>
THE FUNDS Colonial Strategic Income Fund, Variable Series
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. 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. 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 subject to additional risk. The risks of foreign
investments are typically increased in less developed 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.
Lower-rated debt securities involve greater risk of loss due to credit
deterioration and are less liquid, especially during periods of economic
uncertainty or change, than higher quality debt securities. Lower-rated debt
securities have the added risk that the issuer of the security may default and
not make payment of interest or prinicpal.
13
<PAGE>
THE FUNDS Colonial Strategic Income Fund, Variable Series
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's calendar year total 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 1 year, 5 years and the life
of the Fund. The Fund's return is compared to the Lehman Brothers
Government/Corporate Bond Index (Lehman Index), an unmanaged index that tracks
the performance of a selection of U.S. government agency, Treasury and
investment-grade corporate bonds. Unlike the Fund, indices are not investments,
do not incur fees or expenses and are not professionally managed. It is not
possible to invest directly in indices. The Fund's return is also compared to
the average return of the funds included in the Lipper Corporate Bonds -
Annuities Funds category average (Lipper Average). This Lipper Average, which is
calculated by Lipper, Inc. is composed of funds with similar investment
objectives to the Fund. Sales charges are not reflected in the Lipper Average.
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. Performance results include the
effect of expense reduction arrangements, if any. If these arrangements were not
in place, then the performance results would have been lower. Any expense
reduction arrangements may be discontinued at any time. As with all mutual
funds, past performance does not predict the Fund's future performance. 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. Because
the Class B shares are a new class of shares the bar chart and the average
annual returns shown is for Class A shares, the oldest existing Fund class.
Class B share performance would have been lower than the performance of the
Fund's Class A shares due to a difference in expenses.
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
[BAR GRAPH]
- --------------------------------------------------------
1995 1996 1997 1998 1999
- --------------------------------------------------------
18.30% 9.83% 9.11% 6.03% 1.78%
- --------------------------------------------------------
The Fund's year-to-date total return through March 31, 2000 was %.
For period shown in bar chart:
Best quarter: 1st quarter 1995, +5.62%
Worst quarter: 1st quarter 1997, -1.00%
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR 5 YEARS THE FUND
<S> <C> <C> <C> <C>
Fund - Class A Shares (%) 7/5/94 1.78 8.88 8.26
- -----------------------------------------------------------------------------------------------------------------
Lehman Index (%) N/A (2.15) 7.61 7.06(5)
- -----------------------------------------------------------------------------------------------------------------
Lipper Average (%) N/A 0.76 7.84 7.03(5)
</TABLE>
(5) Performance information is from June 30, 1994.
14
<PAGE>
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
INVESTMENT GOALS
- --------------------------------------------------------------------------------
The Fund seeks current income and total return.
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund pursues its investment goals by investing primarily in lower-rated
corporate debt securities. These securities have the following ratings:
- - BBB through C by Standard & Poor's Corporation;
- - Baa through D by Moody's Investor Services, Inc.;
- - a comparable rating by another nationally recognized rating service; or
- - the security is unrated and Colonial believes it to be comparable in
quality to securities having such ratings as noted above.
Although the Fund will invest primarily in debt securities, the Fund may invest
in equity securities to seek capital appreciation. Equity securities include
common stocks, preferred stocks, warrants and debt securities convertible into
common stocks. Additionally, the Fund may invest in securities issued or
guaranteed by foreign governments or foreign companies, including securities
issued in emerging market countries.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Market risk includes interest rate risk.
Interest rate risk is the risk of a change in the price of a bond when interest
rates increase or decline. In general, if interest rates rise, bond prices fall;
and if interest rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the 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 debt securities issued by private entities,
including corporate bonds and privately issued mortgage-backed and asset-backed
securities, 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 may impact its willingness or ability to make timely payments of interest
or principal. This could result in a decrease in the price of the security and
in some cases a decrease in income.
Lower-rated debt securities involve greater risk of loss due to credit
deterioration and are less liquid, especially during periods of economic
uncertainty or change, than higher quality debt securities. Lower-rated debt
securities have the added risk that the issuer of the security may default and
not make payment of interest or principal.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. 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. 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.
15
<PAGE>
THE FUNDS COLONIAL HIGH YIELD SECURITIES FUND VARIABLE SERIES
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 subject to additional risk. The risks of foreign
investments are typically increased in less developed 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.
16
<PAGE>
THE FUNDS Colonial High Yield Securities Fund, Variable Series
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
The bar chart below shows the Fund's performance by illustrating the Fund's
calendar year total return. 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 1 year and the life of the Fund. The Fund's return is
compared to the CS First Boston High Yield Index (CS 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. It is not possible to invest directly in indices. The Fund's return is
also compared to the average return of the funds included in the Lipper High
Yield - Annuities Funds category average (Lipper Average). This Lipper Average,
which is calculated by Lipper, Inc. is composed of funds with similar investment
objectives to the Fund. Sales charges are not reflected in the Lipper Average.
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. Performance results include the
effect of expense reduction arrangements, if any. If these arrangements were not
in place, then the performance results would have been lower. Any expense
reduction arrangements may be discontinued at any time. As with all mutual
funds, past performance does not predict the Fund's future performance. 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. Because
the Class B shares are a new class of shares the bar chart and the average
annual returns shown is for Class A shares, the oldest existing Fund class.
Class B share performance would have been lower than the performance of the
Fund's Class A shares due to a difference in expenses.
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
[BAR GRAPH]
- ----------------------------
1999
- ----------------------------
1.65%
- ----------------------------
The Fund's year-to-date total return through March 31, 2000 was %.
For period shown in bar chart:
Best quarter: 1st quarter 1999, +3.11%
Worst quarter: 3rd quarter 1998, -5.77%
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR THE FUND
<S> <C> <C> <C>
Fund - Class A Shares (%) 5/19/98 1.65 (0.59)
- --------------------------------------------------------------------------------------------------
CS Index (%) N/A 3.28 0.06(6)
- --------------------------------------------------------------------------------------------------
Lipper Average (%) N/A 4.04 (0.28)(6)
</TABLE>
(6) Performance information is from April 30, 1998.
17
<PAGE>
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES
INVESTMENT GOALS
- --------------------------------------------------------------------------------
The Fund seeks total investment return, comprised of long-term capital
appreciation and current income, through investment primarily in a diversified
portfolio of equity securities.
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
Under normal market conditions, the Fund invests primarily in equity and equity
related securities, which include common stocks, bonds convertible into stocks,
warrants and other rights to purchase stocks.
The Fund's sub-advisor, LAMCO, utilizes a multi-manager concept. LAMCO allocates
the Fund's portfolio assets on an approximately equal basis among a number of
independent investment management organizations (Portfolio Managers). There are
five Portfolio Managers as of the date of this prospectus each of which employs
a different investment style. LAMCO attempts to rebalance the portfolio among
the Portfolio Managers so as to maintain an approximately equal allocation of
the portfolio among them throughout all market cycles.
In LAMCO's opinion, the multi-manager concept provides advantages over the use
of a single manager for the following reasons:
- - Most equity investment management firms consistently employ a distinct
investment "style" which causes them to emphasize stocks with particular
characteristics;
- - Because of changing investor preferences, any given investment style will
move into and out of market favor and will result in better investment
performance under certain market conditions, but less successful
performance under other conditions;
- - Consequently, by allocating the Fund's portfolio on an approximately equal
basis among Portfolio Managers employing different styles, the impact of
any one style on investment performance will be diluted, and the investment
performance of the total portfolio will be more consistent and less
volatile over the long term than if a single style were employed throughout
the entire period; and
- - More consistent performance at a given annual rate of return over time
produces a higher rate of return for the long term than more volatile
performance having the same average annual rate of return.
The Fund's current Portfolio Managers and investment styles are:
- - J. P. Morgan Investment Management Inc. uses a value approach by investing
in companies that are diversified across all sectors and that are
undervalued relative to the firm's projected growth rates.
- - Oppenheimer Capital uses a value approach by investing in companies that
exhibit the ability to generate excess cash flow while earning high returns
on invested capital.
- - Boston Partners Asset Management, L.P. uses a value approach by investing
in companies with low price-to-earnings and price-to-book ratios where a
catalyst for positive change has been identified.
- - Westwood Management Corporation uses a growth approach by investing in
growth companies selling at reasonable valuations based on the firm's
earnings projections which are not yet reflected in consensus estimates.
- - TCW Investment Management Company uses a "bottom-up" approach by investing
in primarily large-cap companies that have distinct business model
advantages and incorporates secular growth trends.
LAMCO continuously monitors the performance and investment styles of the Fund's
Portfolio Managers and from time to time may recommend changes of Portfolio
Managers based on factors such as:
- - Changes in a Portfolio Manager's investment style or a departure by a
Portfolio Manager from the investment style for which it had been selected;
- - A deterioration in a Portfolio Manager's performance relative to that of
other investment management firms practicing a similar style; or
- - Adverse changes in its ownership or personnel.
18
<PAGE>
THE FUNDS Liberty All-Star Equity Fund, Variable Series
LAMCO also may recommend Portfolio Manager changes to change the mix of
investment styles employed by the Fund's Portfolio Managers. The Board of
Trustees must approve all Portfolio Manager changes. LAMCO is also the manager
of Liberty All-Star Equity Fund, a multi-managed, closed-end fund. This fund has
the same investment objective and investment program as the Fund, and currently
has the same Portfolio Managers. LAMCO expects that both funds will make
corresponding changes if and when Portfolio Managers are changed in the future.
The Fund will remain substantially fully invested during periods when stock
prices generally rise and also during periods when they generally decline. The
Fund is intended to be a long-term investment vehicle and is not designed to
provide a means of speculating on short-term stock market movements.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
PRIMARY INVESTMENT RISK
- --------------------------------------------------------------------------------
The primary risk of investing in the Fund is described below. There are many
circumstances (including additional risks that are not described here) which
could prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
19
<PAGE>
THE FUNDS Liberty All-Star Equity Fund, Variable Series
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's calendar year total 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 1 year and the life of the
Fund. The Fund's return is compared to the Russell 3000 Index (Russell Index), a
capitalization weighted total return index which is comprised of 3000 of the
largest capitalized U.S. domiciled companies whose common stock traded in the
United States on the New York Stock Exchange, American Stock Exchange and
NASDAQ. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. It is not possible to invest
directly in indices. The Fund's return is also compared to the average return of
the funds included in the Lipper Growth & Income Annuities Funds category
average (Lipper Average). This Lipper Average, which is calculated by Lipper,
Inc. is composed of funds with similar investment objectives to the Fund. Sales
charges are not reflected in the Lipper Average. 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. Performance results include the effect of expense
reduction arrangements, if any. If these arrangements were not in place, then
the performance results would have been lower. Any expense reduction
arrangements may be discontinued at any time. As with all mutual funds, past
performance does not predict the Fund's future performance. 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. Because the
Class B shares are a new class of shares the bar chart and the average annual
returns shown is for Class A shares, the oldest existing Fund class. Class B
share performance would have been lower than the performance of the Fund's Class
A shares due to a difference in expenses.
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
[BAR GRAPH]
- --------------------------------------
1998 1999
- --------------------------------------
18.67% 8.47%
- --------------------------------------
The Fund's year-to-date total return through March 31, 2000 was %.
For the period shown in bar chart:
Best quarter: 4th quarter 1998, +18.67%
Worst quarter: 3rd quarter 1998, -12.05%
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR THE FUND
<S> <C> <C> <C>
Fund - Class A Shares(%) 11/17/97 8.47 13.05
- -------------------------------------------------------------------------------------------------
Russell Index (%) N/A 20.90 23.85(7)
- -------------------------------------------------------------------------------------------------
Lipper Average (%) N/A 14.63 16.24(7)
</TABLE>
(7) Performance information is from October 31, 1997.
20
<PAGE>
COLONIAL INTERNATIONAL FUND FOR GROWTH, VARIABLE SERIES
INVESTMENT GOAL
- --------------------------------------------------------------------------------
The Fund seeks long-term capital growth.
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
Under normal market conditions, the Fund invests primarily in equity securities
of companies located outside the United States. The Fund may invest in equity
securities located in any foreign country, including emerging market countries.
The Fund may invest in companies of any size, including small capitalization
stocks. The Fund may also invest in high-quality foreign government debt
securities. The Fund generally diversifies its holdings across several different
countries and regions.
The Fund is a non-diversified mutual fund and may invest more than 5% of its
total assets in the securities of a single issuer.
The Fund may invest up to 10% of its assets in shares of other investment
companies. Investing in investment companies may involve payment of duplicate
fees because the Fund, as a shareholder, will indirectly pay a portion of the
other investment company's expenses.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Market risk includes interest rate risk.
Interest rate risk is the risk of a change in the price of a bond when interest
rates increase or decline. In general, if interest rates rise, bond prices fall;
and if interest rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the 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 debt securities issued by private entities,
including corporate bonds and privately issued mortgage-backed and asset-backed
securities, 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 may impact its willingness or abiltiy to make timely payments of interest
or principal. This could result in a decrease in the price of the security and
in some cases a decrease in income.
As a non-diversified mutual fund, the Fund is allowed to invest more than 5% of
its total assets in the securities of a single issuer. This may concentrate
issuer risk and, therefore, the Fund may have an increased risk of loss compared
to a similar diversified mutual fund.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. 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. 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 subject to additional risk. The risks of foreign
investments are typically increased in less developed 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.
21
<PAGE>
THE FUNDS COLONIAL INTERNATIONAL FUND FOR GROWTH, VARIABLE SERIES
Smaller companies are more likely than larger companies to have limited product
lines, operating histories, markets or financial resources. They may depend
heavily on a small management team. Stocks of smaller companies may trade less
frequently, may trade in smaller volumes and may fluctuate more sharply in price
than stocks of larger companies. In addition, they may not be widely followed by
the investment community, which can lower the demand for their stock.
22
<PAGE>
THE FUNDS Colonial International Fund for Growth, Variable Series
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's calendar year total 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 1 year, 5 years and the life
of the Fund. The Fund's return is compared to the Morgan Stanley Capital
International EAFE Index(MSCI Index), an unmanaged index that tracks the
performance of international stocks by market capitalization. Unlike the Fund,
indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in indices. The
Fund's return is also compared to the average return of the funds included in
the Lipper International-Annuities Funds category average (Lipper Average). This
Lipper Average, which is calculated by Lipper, Inc., is composed of funds with
similar investment objectives to the Fund. Sales charges are not reflected in
the Lipper Average. 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..
Performance results include the effect of expense reduction arrangements, if
any. As with all mutual funds, past performance does not predict the Fund's
future performance. 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. Because the Class B shares are a new class of shares the bar
chart and the average annual returns shown is for Class A shares, the oldest
existing Fund class. Class B share performance would have been lower than the
performance of the Fund's Class A shares due to a difference in expenses.
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
[BAR GRAPH]
- --------------------------------------------------------
1995 1996 1997 1998 1999
- --------------------------------------------------------
5.85% 5.61% -3.27% 12.96% 40.58%
- --------------------------------------------------------
The Fund's year-to-date total return through March 31, 2000 was %.
For peirod shown in bar chart:
Best quarter: 4th quarter 1999, +23.31%
Worst quarter: 3rd quarter 1998, -16.04%
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 2000
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR 5 YEARS THE FUND
<S> <C> <C> <C> <C>
Fund - Class A Shares (%) 5/2/94 40.58 11.42 8.81
- -----------------------------------------------------------------------------------------------------------------
MSCI Index (%) N/A 26.96 12.83 11.21(8)
- -----------------------------------------------------------------------------------------------------------------
Lipper Average (%) N/A 43.23 17.36 14.16(8)
</TABLE>
(8) Performance information is from April 30, 1994.
23
<PAGE>
NEWPORT TIGER FUND, VARIABLE SERIES
INVESTMENT GOAL
- --------------------------------------------------------------------------------
The Fund seeks long-term capital appreciation.
PRIMARY INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
Under normal market conditions, the Fund invests primarily in stocks of
companies located in the nine Tiger countries of Asia. The Tigers of Asia are
Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, The
People's Republic of China and the Philippines. In selecting investments for the
Fund, Newport typically purchases stocks of larger, well-established companies.
Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."
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 prevent the Fund from achieving its goal. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. 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. Brokerage commissions, custodial fees
and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
Because the Fund's investments are concentrated in the nine Tiger countries of
Asia, the Fund is particularly susceptible to regional risks. Events in any one
Tiger country may impact the other countries in the Southeast Asian region as a
whole. As a result events in the region will generally have a greater effect on
the Fund than if the Fund were more geographically diversified, which may result
in greater losses and volatility.
24
<PAGE>
THE FUNDS Newport Tiger Fund, Variable Series
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's calendar year total 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 1 year and the life of the
Fund. The Fund's return is compared to the Morgan Stanley Capital International
EAFE GDP Index (MSCI Index), a broad-based, unmanaged index that tracks the
performance of foreign stocks. Unlike the Fund, indices are not investments, do
not incur fees or expenses and are not professionally managed. It is not
possible to invest directly in indices. The Fund's return is also compared to
the average return of the funds included in the Lipper Pacific-Region-Annuities
Funds category average (Lipper Average). This Lipper Average, which is
calculated by Lipper, Inc. is composed of funds with similar investment
objectives to the Fund. Sales charges are not reflected in the Lipper Average.
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. Performance results include the
effect of expense reduction arrangements, if any. As with all mutual funds, past
performance does not predict the Fund's future performance. 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. Because the
Class B shares are a new class of shares the bar chart and the average annual
returns shown is for Class A shares, the oldest existing Fund class. Class B
share performance would have been lower than the performance of the Fund's Class
A shares due to a difference in expenses.
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
[BAR GRAPH]
- --------------------------------------------------------
1996 1997 1998 1999
- --------------------------------------------------------
11.73% -31.14% -6.43% 68.01%
- --------------------------------------------------------
The Fund's year-to-date total return through March 31, 2000 was %.
For the period shown in bar chart:
Best quarter: 4th quarter 1998, +37.93%
Worst quarter: 2nd quarter 1998, -28.81%
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR THE FUND
<S> <C> <C> <C>
Fund - Class A Shares (%) 5/1/95 68.01 7.31
- -------------------------------------------------------------------------------------------------
MSCI Index (%) N/A 31.00 15.70(9)
- -------------------------------------------------------------------------------------------------
Lipper Average (%) N/A 79.74 4.24(9)
</TABLE>
(9) Performance information is from April 30, 1995.
25
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
THE TRUSTEES
- --------------------------------------------------------------------------------
The business of the Trust and the Funds is supervised by the Trust's Board of
Trustees. The Statement of Additional Information contains names of and
biographical information on the Trustees.
INVESTMENT ADVISOR: LIBERTY ADVISORY SERVICES CORP.
- --------------------------------------------------------------------------------
LASC, located at 125 High Street, Boston Massachusetts 02110, is the investment
advisor to the Funds. LASC is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. (LFC). LASC has been an investment advisor since 1993.
As of March 31, 2000, LASC managed over $ million in assets. LASC designates the
Trust's Sub-Advisors, evaluates and monitors Sub-Advisors' performance and
investment programs and recommends to the Board of Trustees whether
Sub-Advisors' contracts should be continued or modified and the addition or
deletion of Sub-Advisors. LASC also has the responsibility of administering the
Trust's operations, which it may delegate, at its own expense, to certain
affiliates. LASC has delegated its administrative responsibilities to Colonial
in accordance with this authority.
For the 1999 fiscal year, the Trust paid LASC management fees at the following
annual rates of the average daily net assets of each specified Fund:
<TABLE>
<S> <C>
Colonial Growth and Income Fund, Variable Series 0.65%
Stein Roe Global Utilities Fund, Variable Series 0.65%
Colonial Small Cap Value Fund, Variable Series 0.80% (1)
Colonial U.S. Growth & Income Fund, Variable Series 0.80%
Colonial Strategic Income Fund, Variable Series 0.65%
Colonial High Yield Securities Fund, Variable Series 0.60% (2)
Liberty All-Star Equity Fund, Variable Series 0.80%
Colonial International Fund for Growth, Variable Series 0.90%
Newport Tiger Fund, Variable Series 0.90%
</TABLE>
(1) The Small Cap Fund's advisor has voluntarily agreed to waive its management
fee and reimburse other expenses so that total expenses of the Fund do not
exceed 1.00%. As a result the actual management fee paid to the advisor for
the 1999 fiscal year was 0.00%
(2) The High Yield Fund's advisor has voluntarily agreed to waive its
management fee and reimburse other expenses so that total expenses of the
Fund do not exceed 0.80%. As a result the actual management fee paid to the
advisor for the 1999 fiscal year was 0.12%
INVESTMENT SUB-ADVISORS AND PORTFOLIO MANAGERS
- --------------------------------------------------------------------------------
The Sub-Advisors manage the assets of the Funds under the supervision of LASC
and the Board of Trustees. Each Sub-Advisor determines which securities and
other instruments are purchased and sold for the Fund(s) it sub-advises. Each
Sub-Advisor is an indirect wholly-owned subsidiary of LFC.
COLONIAL
Colonial, an investment advisor since 1931, is the Sub-Advisor of each of the
Growth & Income Fund, Small Cap Fund, U.S. Growth & Income Fund, Strategic
Income Fund, High Yield Fund and International Fund. Colonial's principal
business address is One Financial Center, Boston, Massachusetts 02111. As of
March 31, 2000, Colonial managed over $ billion in assets.
LASC, out of the management fees it receives from the Trust, pays Colonial
sub-advisory fees at the following annual rates of the average daily net assets
of each specified Fund:
26
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
<TABLE>
<S> <C>
Colonial Growth and Income Fund, Variable Series 0.45%
Colonial Small Cap Value Fund, Variable Series 0.60%
Colonial U.S. Growth & Income Fund, Variable Series 0.60%
Colonial Strategic Income Fund, Variable Series 0.45%
Colonial High Yield Securities Fund, Variable Series 0.40%
Colonial International Fund for Growth, Variable Series 0.70%
</TABLE>
Colonial also provides transfer agency, pricing and record keeping services for
the Funds under separate agreements.
Scott Schermerhorn, a senior vice president of Colonial, has managed the Growth
& Income Fund since November, 1999. Mr. Schermerhorn has managed various other
funds at Colonial since October, 1998. Prior to October, 1998, Mr. Schermerhorn
was the head of the value team at Federated Investors from 1996 to 1998 where he
managed the American Leader Fund, Federated Stock Trust, Federated Stock and
Bond Fund as well as other institutional accounts. Prior to 1996, Mr.
Schermerhorn was a member of the growth and income team at J&W Seligman.
Mark Stoeckle has managed the U.S. Growth & Income Fund since December,
1996. Mr. Stoeckle is a senior vice president of Colonial. Prior to
joining Colonial in 1996, Mr. Stoeckle was a portfolio manager at
Massachusetts Financial Services Company and an investment banker at Bear,
Stearns & Co., Inc.
Carl C. Ericson has managed the Strategic Income Fund since its inception. He
also has co-managed the High Yield Fund since January, 1999. Mr. Ericson, a
senior vice president of Colonial and director of Colonial's Taxable Fixed
Income Group, has managed various other Colonial taxable income funds since
1985.
Scott B. Richards, a senior vice president of Colonial, has co-managed the High
Yield Fund since May, 1999. Prior to joining Colonial he was employed with State
Street Research & Management Company as a vice president and a portfolio manager
from 1994 to May, 1999.
James P. Haynie, a senior vice president of Colonial, has co-managed the Small
Cap Fund since 1993.
Michael Rega, a vice president of Colonial, has co-managed the Small Cap Fund
since 1996. He was an analyst at Colonial from 1993 to 1996.
Charles R. Roberts, a senior vice president of Colonial, is the lead manager for
the International Fund. Mr. Roberts is also a senior vice president of Newport
and Newport Pacific Management, Inc. (Newport Pacific), an affiliate of
Colonial. Mr. Roberts has been employed with Newport and Newport Pacific since
November, 1998. Prior to joining Newport and Newport Pacific, he managed the
European component of institutional international equity accounts at Progress
Investment Management (Progress) since 1997. Prior to joining Progress in 1997,
he managed the European component of institutional international equity accounts
and was a member of the investment policy committee at Sit/Kim International
since prior to 1994.
Michael Ellis, a senior vice president of Colonial, is a co-manager of the
International Fund. Mr. Ellis is also a senior vice president of Newport and
Newport Pacific. Prior to joining Newport and Newport Pacific in December, 1996,
he was a vice president at Matthews International Capital Management since
September, 1991.
Deborah Snee, a Vice President of Colonial and Europe analyst at Colonial, Stein
Roe and Newport, is a co-manager of the International Fund. Prior to working at
Newport, Ms. Snee spent five years at Sit/Kim as an emerging markets analyst.
STEIN ROE
Stein Roe, an investment advisor since 1932, is the Sub-Advisor of the Global
Utilities Fund. Stein Roe's principal address is One South Wacker Drive,
Chicago, Illinois 60606. As of March 31, 2000, Stein Roe managed over $ billion
in assets.
LASC, out of the management fees it receives from the Trust, pays Stein Roe a
sub-advisory fee at the annual rate of 0.45% of the average daily net assets of
the Global Utilities Fund.
Ophelia Barsketis, a senior vice president of Stein Roe, co-manages the Global
Utilities Fund. Ms. Barsketis joined Stein Roe in 1983
27
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
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, a senior 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 a 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.
Colonial's investment advisory business is managed together with the mutual
funds and institutional investment advisory businesses of its affiliate, Stein
Roe. Colonial is part of a larger business unit that includes several separate
legal entities known as Liberty Funds Group LLC (LFG). The LFG business unit and
Stein Roe are managed by a single management team. Stein Roe, Colonial and the
other LFG entities also share personnel, facilities and systems that may be used
in providing administrative or operational services to the Fund. Stein Roe and
Colonial are registered investment advisors. Colonial, the other entities that
make up LFG and Stein Roe are subsidiaries of Liberty Financial Companies, Inc.
LAMCO AND LAMCO'S PORTFOLIO MANAGERS
LAMCO, an investment advisor since 1985, is the Sub-Advisor of the All-Star
Equity Fund. LAMCO's principal address is 600 Atlantic Avenue, 23rd Floor,
Boston, Massachusetts 02210. As of March 31, 2000, LAMCO managed over $ billion
in assets.
LASC, out of the management fees it receives from the Trust, pays LAMCO a
sub-advisory fee at the annual rate of 0.60% of the average daily net assets of
the All-Star Equity Fund.
LAMCO is a manager of other investment managers which LAMCO recommends to the
Board of Trustees for appointment pursuant to a portfolio management agreement
among the Trust, LAMCO and the Portfolio Manager. That management agreement
permits each Portfolio Manager to have full investment discretion and authority
over investment of a portion of the Fund's assets.
Out of the management fees it receives from LASC, LAMCO pays each Portfolio
Manager a fee at the annual rate of 0.30% of the average daily net assets of the
portion of the Fund's assets assigned to that Portfolio Manager.
No one individual at LAMCO is responsible for LAMCO's investment management of
the All-Star Equity Fund. The following individuals who work for the indicated
Portfolio Managers manage a portion of All-Star Equity Fund's assets:
- - Henry D. Cavanna, Managing Director of J.P. Morgan Investment Management,
Inc.
- - John Lindenthal, Managing Director of Oppenheimer Capital
- - Mark Donovan, Chairman, Equity Strategy Committee, of Boston Partners Asset
Management, L.P.
- - Susan M. Byrne, President and Chief Executive Officer of Westwood
Management Corp.
- - Glen E. Bickerstaff, Managing Director - U.S. Equities of TCW Investment
Management Company
A more complete description of each Portfolio Manager is included in the
Statement of Additional Information. The Trust and LAMCO have received an
exemptive order from the SEC that permits the All-Star Equity Fund to change
Portfolio Managers without a vote of the shareholders. Information regarding any
new Portfolio Manager is sent to holders of VA contracts and VLI policies within
90 days following the effective date of the change.
NEWPORT
Newport, an investment advisor since 1987, is the Sub-Advisor of the Tiger Fund.
Newport's principal address is 580 California Street, Suite 1960, San Francisco,
California 94104. As of March 31, 2000, Newport managed over $ million in
assets.
28
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
LASC, out of the management fees it receives from the Trust, pays Newport a
sub-advisory fee at the annual rate of 0.70% of the average daily net assets of
the Tiger Fund.
Thomas R. Tuttle and Lynda Couch, president and a managing director,
respectively, of Newport, co-manage the Fund. Mr. Tuttle has co-managed
other Newport Funds since November, 1995. Mr. Tuttle has been an officer
of Newport since 1984. Ms. Couch has managed other Newport Funds since
April, 1995. Ms. Couch has been an officer of Newport since 1994.
AFFILIATED BROKER/DEALER
Stein Roe and Colonial can use the services of AlphaTrade Inc., an affiliated
broker-dealer, when buying or selling equity securities for a fund's portfolio,
pursuant to procedures adopted by the Board of Trustees.
RULE 12B-1 PLAN
- --------------------------------------------------------------------------------
The Trust has adopted a plan for and on behalf of the Funds Class B shares in
accordance with Rule 12b-1 ("Plan") under the Investment Company Act of 1940.
Under the plan, the Trust pays the distributor a service fee of 0.25% of the
average daily net assets attributable to the Funds' Class B shares. Because
these fees are an ongoing expense, over time they increase the cost of an
investment and the shares may cost more than shares that are not subject to a
service fee.
29
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
Each Fund's primary investment strategies and its associated risks are described
above in its individual description. This section describes other investments a
Fund may make and the risks associated with them. In seeking to achieve its
goals, each Fund may invest in various types of securities and engage in various
investment techniques which are not the principal 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' Statement of
Additional Information, 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.
U.S. GOVERNMENT SECURITIES
- --------------------------------------------------------------------------------
(Strategic Income Fund) The Fund will invest in U.S. government securities,
including U.S. Treasuries and securities of various U.S. government agencies.
Agency securities include mortgage-backed securities, which represent interests
in pools of mortgages. The Fund has flexibility to vary its allocation among
different types of U.S. government securities based upon the Sub-Advisor's
judgement of which types of securities will outperform others. In selecting
investments for the Fund, the Sub-Advisor considers a security's expected
income, together with its potential to rise or fall in price.
STRUCTURE RISK
- --------------------------------------------------------------------------------
(Strategic Income Fund) Structure risk is the risk that an event will occur
(such as a security being prepaid or called) that alters the security's cash
flows. Prepayment risk is a particular type of structure risk that is present in
a Fund because of its investments in mortgage-backed securities and asset-backed
securities. Prepayment risk is the possibility that asset-backed securities may
be prepaid if the underlying debt securities are prepaid. Prepayment risk for
mortgage-backed securities is the possibility that, as interest rates fall,
homeowners are more likely to refinance their home mortgages. When mortgages are
refinanced, the principal on mortgage-backed securities is paid earlier than
expected. In an environment of declining interest rates, asset-backed securities
and mortgage-backed securities may offer less potential for gain than other debt
securities. During periods of rising interest rates, these securities have a
high risk of declining in price because the declining prepayment rates
effectively increase the maturity of the security. In addition, the potential
impact of prepayment on the price of a security may be difficult to predict and
result in greater volatility.
ZERO COUPON BONDS
- --------------------------------------------------------------------------------
(Global Utilities Fund, Strategic Income Fund, High Yield Fund) Zero coupon
bonds do not pay interest in cash on a current basis, but instead accrue
interest over the life of the bond. As a result, these securities are issued at
a deep discount. The value of these securities may fluctuate more than similar
securities that pay interest periodically. Although these securities pay no
interest to holders prior to maturity, interest on these securities is reported
as income to the Fund and distributed to its shareholders..
30
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
DERIVATIVE STRATEGIES
- --------------------------------------------------------------------------------
Each Fund may enter into a number of hedging strategies, including those that
employ futures and options, to gain or reduce exposure to particular securities
or markets. These strategies, commonly referred to as derivatives, involve the
use of financial instruments whose value depends on, or are derived from, the
value of an underlying security, index or currency. A Fund may use these
strategies to adjust the Fund's sensitivity to changes in interest rates or for
other hedging purposes (i.e., attempting to offset a potential loss in one
position by establishing an interest in an opposite position). Derivative
strategies involve the risk that they may exaggerate a loss, potentially losing
more money than the actual cost of the derivative, or limit a potential gain.
Also, with some derivative 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.
TEMPORARY DEFENSIVE MEASURES
- --------------------------------------------------------------------------------
With the exception of the All-Star Equity Fund, each Fund's Sub-Advisor may
determine that adverse market conditions make it desirable to temporarily
suspend the Fund's normal investment activities. During such times, the Fund
may, but is not required to, invest in cash or high-quality, short-term debt
securities, without limit.
(High Yield Fund) If necessary, the Fund has the ability to invest 100% of its
assets in higher rated securities, if, in Colonial's opinion, economic
conditions create a situation where yield spreads narrow between lower and
higher rated securities.
Taking a temporary defensive position may prevent a Fund from achieving its
investment goals.
31
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds'
financial performance. Information is shown for the Funds' last five fiscal
years, (or shorter period if a Fund commenced operations less than five years
ago) which run from January 1 to December 31. Certain information reflects
financial results for a single fund share. This information is included in the
Funds' financial statements which have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report, along with the Funds' financial
statements, is included in the Funds' annual report. The Funds' total returns
presented below do not reflect the cost of insurance and other insurance company
separate account charges which vary with the VA contracts and VLI policies. You
can request a free annual report by writing Keyport Financial Services Corp.
(see back cover for address) or by calling or writing the Participating
Insurance Company which issued your VA contract or VLI policy. Because the Class
B shares are a new class of shares the financial highlights shown are for Class
A shares, the oldest existing Fund class.
COLONIAL GROWTH AND INCOME FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ($) 16.39 15.34 13.96 12.60 10.03
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.17 0.20 0.28 0.28 0.29
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments 0.69 1.50 3.75 1.98 2.72
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.86 1.70 4.03 2.26 3.01
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.15) (0.18) (0.27) (0.28) (0.25)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- (0.00) (0.01) --- ---
- -----------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains (3.85) (0.47) (2.37) (0.62) (0.19)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains (0.07) (0.00) --- --- ---
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (4.07) (0.65) (2.65) (0.90) (0.44)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 13.18 16.39 15.34 13.96 12.60
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b) 5.55 11.13 28.97 17.89 30.03
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 197,523 149,820 106,909 93,247 71,070
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (c) 0.73 0.76 0.79 0.79 0.81
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) (c) 0.99 1.24 1.77 2.02 2.51
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 172 28 60 24 79
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
32
<PAGE>
FINANCIAL HIGHLIGHTS
STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 13.76 11.92 10.70 10.50 8.11
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.28 0.24 0.46 0.46 0.46
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
on investments 3.63 1.93 2.62 0.23 2.39
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.91 2.17 3.08 0.69 2.85
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.23) (0.21) (0.48) (0.49) (0.46)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- (0.01) --- --- ---
- -----------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains on investments (0.29) (0.11) (1.38) --- ---
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (0.52) (0.33) (1.86) (0.49) (0.46)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 17.15 13.76 11.92 10.70 10.50
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%)(b) 28.63 18.33 28.75 6.53 35.15
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 110,150 71,186 54,603 47,907 51,597
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) 0.77 0.82(c) 0.83(c) 0.81(c) 0.83(c)
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 1.91 1.90(c) 3.96(c) 4.36(c) 4.98(c)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 52 53 89 14 18
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
33
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1999 1998***
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ($) 8.59 10.00
- ------------------------------------------------------------------------------------------------------
Net investment income (a) 0.02 0.08
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on investments 0.52 (1.41)
- ------------------------------------------------------------------------------------------------------
Total from investment operations 0.54 (1.33)
- ------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.01) (0.07)
- ------------------------------------------------------------------------------------------------------
In excess of net investment income --- (0.01)
- ------------------------------------------------------------------------------------------------------
Total distributions (0.01) (0.08)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of year 9.12 8.59
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN
Total investment return (%)(b)(c) 6.34 (13.25)**
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 3,817 1,782
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d)(e) 1.00 1.00*
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) (d) 0.23 1.41*
- ------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 74 51**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations May 19, 1998 to December
31, 1998.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Had the manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 3.66% and
4.32% (annualized), respectively..
34
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL U.S. GROWTH & INCOME FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 18.79 16.29 14.22 12.36 10.27
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.14 0.16 0.20 0.19 0.21
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments 2.07 3.12 4.37 2.52 2.84
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.21 3.28 4.57 2.71 3.05
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.11) (0.12) (0.18) (0.17) (0.16)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- --- (0.01) --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains on investments (1.04) (0.64) (2.30) (0.68) (0.80)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains --- (0.02) (0.01) --- ---
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.15) (0.78) (2.50) (0.85) (0.96)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 19.85 18.79 16.29 14.22 12.36
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b) 12.00 20.15 32.23 21.84 29.70(c)
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 212,355 146,239 96,715 60,855 43,017
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d) 0.88 0.90 0.94 0.95 1.00(e)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) (d) 0.69 0.88 1.19 1.39 1.72(c)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 101 64 63 77 115
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.07%.
35
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 11.08 11.15 11.04 10.99 9.79
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.95 0.91 0.90 0.92 0.55
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
on investments and foreing currency transactions (0.75) (0.24) 0.11 0.16 1.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.20 0.67 1.01 1.08 1.79
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.84) (0.72) (0.79) (0.96) (0.56)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- (0.02) (0.05) --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains --- --- (0.05) (0.07) (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains --- --- (0.01) --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.84) (0.74) (0.90) (1.03) (0.59)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 10.44 11.08 11.15 11.04 10.99
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b) 1.78 6.03 9.11(c) 9.83(c) 18.30(c)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 170,702 118,985 73,175 53,393 48,334
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (e) 0.75 0.78(e) 0.80(d) 0.80(d) 0.84(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) (e) 8.57 7.92(e) 7.86(c) 8.13(c) 8.08(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 35 50 94 114 281
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 0.82%, 0.86%
and 0.94%, respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
36
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1999 1998***
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C>
Net asset value, beginning of year ($) 9.31 10.00
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.88 0.48
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized losses (0.72) (0.74)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.16 (0.26)
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.62) (0.43)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- (0.00)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.62) (0.43)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 8.85 9.31
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b)(c) 1.65 (2.57)**
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 15,358 5,915
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d)(e) 0.80 0.80*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) (c)(d) 9.36 7.93*
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 16 23**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations May 19, 1998 to December
31, 1998.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 1.28% and
1.84% (annualized), respectively.
37
<PAGE>
FINANCIAL HIGHLIGHTS
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended December 31, Period Ended
December
31,
1999 1998 1997***
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 11.90 10.07 10.00
- ----------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.06 0.06 0.01
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments 0.94 1.82 0.07
- ----------------------------------------------------------------------------------------------------------------
Total from investment operations 1.00 1.88 0.08
- ----------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.01)
- ----------------------------------------------------------------------------------------------------------------
Dividends from net realized gains on investments (0.38) --- ---
- ----------------------------------------------------------------------------------------------------------------
Total distributions (0.43) (0.05) (0.01)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 12.47 11.90 10.07
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%)(b) 8.47 18.67(c) 0.80**(c)
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 80,095 44,870 22,228
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d) 0.95 1.00(e) 1.00*(e)
- ----------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) (d) 0.47 0.54(c) 0.83*(c)
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 75 70 1**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations November 17, 1997 to
December 31, 1997.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 1.04% and
1.45% (annualized), respectively.
38
<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL INTERNATIONAL FUND FOR GROWTH, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 2.00 1.78 1.96 1.97 1.88
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.03 0.02 0.02 0.02 0.01
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on
investments 0.78 0.21 (0.08) 0.09 0.10
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.81 0.23 (0.06) 0.11 0.11
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.02) (0.00) (0.02) --- (0.02)
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- (0.01) (0.02) --- ---
- --------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains --- --- (0.08) (0.12) ---
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.02) (0.01) (0.12) (0.12) (0.02)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 2.79 2.00 1.78 1.96 1.97
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b) 40.58 12.96 (3.27) 5.61 5.85
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 82,071 52,468 30,600 26,593 22,764
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (c) 1.10 1.24 1.34 1.40 1.40
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) (c) 1.14 0.77 0.82 0.84 0.75
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 35 28 28 115 40
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
39
<PAGE>
FINANCIAL HIGHLIGHTS
NEWPORT TIGER FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31, Period Ended
December 31,
1999 1998 1997 1996 1995***
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 1.57 1.71 2.52 2.28 2.00
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.03 0.03 0.03 0.03 0.01
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) on investments 1.04 (0.14) (0.81) 0.24 0.29
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.07 (0.11) (0.78) 0.27 0.30
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (0.02) (0.03) (0.02) (0.02) (0.01)
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- --- (0.01) --- (0.01)
Total distributions (0.02) (0.03) (0.03) (0.03) (0.02)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 2.62 1.57 1.71 2.52 2.28
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%)(b) 68.01 (6.43) (31.14) 11.73 15.00**
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 46,125 23,655 24,934 34,642 18,977
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.21 1.30 1.25 1.27 1.75*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%)(c) 1.65 2.16 1.14 1.20 0.89*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 12 16 27 7 12**
</TABLE>
* Annualized.
** Not Annualized.
*** For the period from the commencement of operations May 1, 1995 to December
31, 1995.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
40
<PAGE>
SHAREHOLDER INFORMATION
PURCHASE AND REDEMPTIONS The Participating Insurance Companies place daily
orders to purchase and redeem shares of the Funds. These orders generally
reflect the net effect of instructions they receive from holders of their VA
contracts and VLI policies and certain other terms of those contracts and
policies. The Trust issues and redeems shares at NAV without imposing any
selling commissions, sales charge or redemption charge. Shares generally are
sold and redeemed at their NAV next determined after receipt of purchase or
redemption requests from Participating Insurance Companies. The right of
redemption may be suspended or payment postponed whenever permitted by
applicable law and regulations.
HOW THE FUNDS' CALCULATE NET ASSET VALUE Each share price is its NAV next
determined. NAV is the difference between the value of a fund's assets and
liabilities divided by the number of shares outstanding. The NAV is determined
at the close of the New York Stock Exchange ("NYSE"), usually 4:00 p.m. Eastern
time, on each business day that the NYSE is open (typically Monday through
Friday).
To calculate NAV on a given day, we value each stock listed or traded on a stock
exchange at its latest sale price on that day. If there are no sales on that
day, we value the security at the most recent quoted bid price. We value each
over-the-counter security or National Association of Securities Dealers
Automated Quotation (Nasdaq) security as of the last sales price of that day. We
value other over-the-counter securities that have reliable quotes at the latest
quoted bid price.
We value long-term debt obligations and securities convertible into common stock
at fair value. Pricing services provide the Funds with the value of the
securities. When the price of a security is not available, including days when
we determine that the sale or bid price of the security does not reflect that
security's market value, we will value the security at a fair value determined
in good faith under procedures established by the Board of Trustees.
We value a security at fair value when events have occurred after the last
available market price and before the close of the NYSE that materially affect
the security's price. In the case of foreign securities, this could include
events occurring after the close of the foreign market and before the close of
the NYSE.
A Fund's foreign securities may trade on days when the NYSE is closed for
trading and Participating Insurance Companies may not purchase or redeem shares.
DIVIDENDS AND DISTRIBUTIONS Each Fund intends to declare and distribute, as
dividends or capital gain distributions, at least annually, substantially all of
its net investment income and net profits realized from the sale of portfolio
securities, if any, to its shareholders (Participating Insurance Companies'
separate accounts). The net investment income of each Fund consists of all
dividends or interest received by such Fund, less estimated expenses (including
investment advisory and administrative fees). Income dividends will be declared
and distributed annually. All net short-term and long-term capital gains of each
Fund realized during the fiscal year are declared and distributed periodically,
no less frequently than annually. All dividends and distributions are reinvested
in additional shares of the Fund at NAV, as of the record date for the
distributions.
TAX CONSEQUENCES Each Fund is treated as a separate entity for federal income
tax purposes and has elected or intends to elect to be treated, and intends to
qualify each year as a "regulated investment company" under Subchapter M of the
Internal Revenue Code (the "Code"). Each Fund must satisfy certain requirements
relating to the sources of its income, diversification of its assets and
distribution of its income to shareholders to qualify as a regulated investment
company. As a regulated investment company, a Fund will not be subject to
federal income tax on any net investment income and net realized capital gains
that are distributed to its shareholders as required under the Code.
In addition, each Fund follows certain portfolio diversification requirements
imposed by the Code on separate accounts of insurance companies relating to the
tax-deferred status of VA contracts and VLI policies. More specific information
on these diversification requirements is contained in the prospectus that
describes a particular VA contract or VLI policy.
OTHER CLASS OF SHARES The Funds also offer an additional class of shares, Class
A shares, which are not available in this prospectus. Your particular VA
contract or VLI policy may not offer these shares.
41
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
You can get more information about the Funds' investments in the Funds'
semi-annual and annual reports to shareholders. The annual report contains a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance over their last fiscal year.
You may wish to read the Statement of Additional Information for more
information on the Funds and the securities in which they invest. The Statement
of Additional Information 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 Statement of Additional Information,
request other information and discuss your questions about the Funds by writing
or calling:
Keyport Financial Services Corp.
125 High Street
Boston, MA 02111
1-800-437-4466
or by calling or writing the Participating Insurance Company which issued your
VA contract or VLI policy.
Text-only versions of all Fund documents can be viewed online or downloaded from
the Edgar database on the Securities and Exchange Commission internet site at
www.sec.gov.
You can review and copy information about the Funds by visiting the following
location, and you can obtain copies upon payment of a duplicating fee by
electronic request at the e-mail address [email protected] or by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling 1-202-942-8090.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Variable Investment Trust: 811-07556
Colonial Growth and Income Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial U.S. Growth & Income Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Newport Tiger Fund, Variable Series
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
One Financial Center
Boston, Massachusetts 02111
Colonial Growth and Income Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Colonial U.S. Growth & Income Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Newport Tiger Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Colonial International Horizons Fund, Variable Series
Colonial Global Equity Fund, Variable Series
Crabbe Huson Real Estate Investment Fund, Variable Series
STATEMENT OF ADDITIONAL INFORMATION
DATED JUNE 1, 2000
The Statement of Additional Information ("SAI") is not a Prospectus,
but should be read in conjunction with the Trust's Prospectuses, dated June 1,
2000 and any supplements thereto, which may be obtained at no charge by calling
Keyport Financial Services Corp. ("KFSC") at (800) 437-4466, or by contacting
the applicable Participating Insurance Company, or the broker-dealers offering
certain variable annuity contracts or variable life insurance policies issued by
the Participating Insurance Company.
The date of this SAI is June 1, 2000.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ITEM PAGE
ORGANIZATION AND HISTORY............................................................
INVESTMENT MANAGEMENT AND OTHER SERVICES.............................................
General.....................................................................
Trust Charges and Expenses..................................................
INVESTMENT RESTRICTIONS..............................................................
Colonial Growth and Income Fund, Variable Series............................
Stein Roe Global Utilities Fund, Variable Series............................
Colonial International Fund for Growth, Variable Series.....................
Colonial U.S. Growth & Income Fund, Variable Series.........................
Colonial Strategic Income Fund, Variable Series.............................
Newport Tiger Fund, Variable Series.........................................
Liberty All-Star Equity Fund, Variable Series...............................
Colonial Small Cap Value Fund, Variable Series..............................
Colonial High Yield Securities Fund, Variable Series........................
Colonial International Horizons Fund, Variable Series.......................
Colonial Global Equity Fund, Variable Series................................
Crabbe Huson Real Estate Investment Fund, Variable Series...................
MORE FACTS ABOUT THE 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.......................................
Securities Loans............................................................
INVESTMENT PERFORMANCE...............................................................
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS.....................................
</TABLE>
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
twelve Funds: Colonial Growth and Income Fund, Variable Series ("Growth and
Income Fund"); Stein Roe Global Utilities Fund, Variable Series ("Global
Utilities Fund"); Colonial International Fund for Growth, Variable Series
("International Fund"); Colonial U.S. Growth & Income Fund, Variable Series
("U.S. Growth Fund"); Colonial Strategic Income Fund, Variable Series
("Strategic Income Fund"); Newport Tiger Fund, Variable Series ("Tiger Fund");
Liberty All-Star Equity Fund, Variable Series ("All-Star Equity Fund"); Colonial
Small Cap Value Fund, Variable Series ("Small Cap Fund"), Colonial High Yield
Securities Fund, Variable Series ("High Yield Fund"), Colonial International
Horizons Fund, Variable Series, ("International Horizons Fund"), Colonial Global
Equity Fund, Variable Series ("Global Equity Fund") and Crabbe Huson Real Estate
Investment Fund, Variable Series ("Real Estate Fund"). The Trust may add or
delete Funds from time to time. The Trust commenced operations on July 1, 1993.
Each Fund, except the International Fund and the International Horizons Fund, is
a diversified series of the Trust, each representing the entire interest in a
separate series of the Trust. The International Fund and the International
Horizons Fund are non-diversified series of the Trust, each representing the
entire interest in a separate series of the Trust.
Effective November 15, 1997, the Trust changed its name from "Keyport Variable
Investment Trust" to its current name. Effective November 15, 1997, the Growth
and Income Fund changed its name from "Colonial-Keyport Growth and Income Fund"
to its current name. Effective June 1, 2000 the Growth and Income Fund will
change its name to the _Fund. Effective November 15, 1997, the Global Utilities
Fund changed its name from "Colonial-Keyport Utilities Fund" to its current
name. Effective November 15, 1997, the International Fund changed its name from
"Colonial-Keyport International Fund for Growth" to its current name. Effective
May 1, 1997, the U.S. Growth Fund changed its name from "Colonial-Keyport U.S.
Fund for Growth" to Colonial-Keyport U.S. Stock Fund. Effective November 15,
1997, the U.S. Growth Fund changed its name from "Colonial-Keyport U.S. Stock
Fund" to Colonial U.S. Stock Fund, Variable Series. Effective June 1, 1999, the
U.S. Growth Fund changed its name from "Colonial U.S. Stock Fund, Variable
Series " to its current name. Effective November 15, 1997 the Strategic Income
Fund changed its name from "Colonial Keyport Strategic Income Fund" to its
current name. Effective November 15, 1997 the Tiger Fund changed its name from
"Newport-Keyport Tiger Fund" to its current name.
The Trustees of the Trust ("Board of Trustees") monitor events to identify any
material conflicts that may arise between the interests of the Participating
Insurance Companies or between the interests of owners of VA contracts and VLI
policies. The Trust currently does not foresee any disadvantages to the owners
of VA contracts and VLI policies arising from the fact that certain interests of
owners may differ. Additional information regarding such differing interests and
related risks are described below under "MORE FACTS ABOUT THE TRUST--MIXED AND
SHARED FUNDING."
3
<PAGE>
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 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,
1999, approximately 71.48% of the combined voting power of LFC's outstanding
voting stock was owned, indirectly, by Liberty Mutual Insurance Company
("Liberty Mutual").
LASC and the Trust, on behalf of each of Growth and Income Fund,
International Fund, U.S. Growth Fund, Strategic Income Fund, Small Cap Fund,
High Yield Fund, International Horizons Fund and Global Equity 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") with
Newport Fund Management, Inc. ("Newport"). Newport is an indirect wholly owned
subsidiary of LFC.
LASC and the Trust, on behalf of the Real Estate Fund, have entered
into a separate Sub-Advisory Agreement (the "Crabbe Huson Sub-Advisory
Agreement," collectively, with the Colonial Sub-Advisory Agreements, the Stein
Roe Sub-Advisory Agreement and the Newport Sub-Advisory Agreement, the
"Sub-Advisory Agreements":) with Crabbe Huson Group, Inc. ("Crabbe Huson").
Crabbe Huson is an indirect wholly owned subsidiary of LFC.
Liberty Asset Management Company ("LAMCO") sub-advises All-Star Equity
Fund pursuant to the Management Agreement for such Fund (to which LAMCO is a
party). All-Star Equity Fund's investment program is based upon LAMCO's
multi-manager concept. LAMCO allocates the Fund's portfolio assets on an equal
basis among a number of independent investment management organizations
("Portfolio Managers") -- currently five in number -- each of which employs a
different investment style, and periodically rebalances the Fund's portfolio
among the Portfolio Managers so as to maintain an approximately equal allocation
of the portfolio among them throughout all market cycles. Each Portfolio Manager
provides these services under a Portfolio Management Agreement (the "Portfolio
Management Agreements") among the Trust, on behalf of All-Star Equity Fund,
LAMCO and such Portfolio Manager.
4
<PAGE>
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.
TCW Investment Management Company
LASC. Keyport owns all of the outstanding common stock of LASC.
LASC's address is 125 High Street, Boston, Massachusetts 02110. The directors
and principal executive officer of LASC are: Philip K. Polkinghorn (principal
executive officer and director) and Stewart R. Morrison.
Colonial. Liberty Funds Group LLC ("LFG"), One Financial Center,
Boston, Massachusetts 02111, owns all of the outstanding common stock of
Colonial. LFG is an indirect wholly-owned subsidiary of LFC. The directors and
principal executive officer of Colonial are Nancy L. Conlin, Stephen E. Gibson
(principal executive officer and director) and Joseph R. Palombo.
Stein Roe. Stein Roe, One South Wacker Drive, Chicago, Illinois,
60606, is an indirect wholly-owned subsidiary of LFC. The directors and
principal executive officer of Stein Roe are Gary L. Countryman, C. Allen
Merritt, Jr. and Stephen E. Gibson (principal executive officer).
Newport. Newport Pacific Management, Inc. ("Newport Pacific"), 580
California Street, San Francisco, California 94104, owns 75.1% of the
outstanding common stock of Newport. LFC owns the balance. Liberty Newport
Holdings, Ltd. ("LNH") owns all of the outstanding common stock of Newport
Pacific. LFC owns all of the outstanding stock of LNH. The directors and
principal executive officer of Newport are Thomas R. Tuttle (principal executive
officer), John M. Mussey and Lindsay Cook.
Crabbe Huson. Crabbe Huson, 121 S.W. Morrison, Suite 1400, Portland,
Oregon 97204, is a wholly-owned subsidiary of LFC. The directors and principal
executive officer of Crabbe Huson are James E. Crabbe (principal executive
officer and director) and Lindsay Cook.
LAMCO and LAMCO's Portfolio Managers. LAMCO, 600 Atlantic Avenue, 23rd
Floor, Boston, Massachusetts 02210, is an indirect wholly owned-subsidiary of
LFC. The directors and principal executive officer of LAMCO are: John V.
Carberry, Lindsay Cook and William R. Parmentier (principal executive officer
and director).
5
<PAGE>
As of the date of this SAI, the following entities serve as LAMCO's
Portfolio Managers for All-Star Equity Fund:
- J.P. Morgan Investment Management, Inc. J.P. Morgan
Investment Management Inc. ("J.P. Morgan"), an investment
advisor since 1984, is located at 522 Fifth Avenue, New
York, New York 10036, is a wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated, a New York Stock Exchange
("NYSE") listed bank holding company the principal banking
subsidiary of which is Morgan Guaranty Trust Company of New
York. J.P. Morgan's principal executive officer is Keith M.
Schappert, and its directors are Mr. Schappert and Messrs.
Kenneth W. Anderson, Jeff M. Garrity, John W. Schmidlin,
Gilbert Van Hassel and Hendrick Van Riel and Ms. Isabel H.
Sloane. As of March 31, 2000, J.P. Morgan managed over $
billion in assets.
- Oppenheimer Capital. Oppenheimer Capital, an investment
advisor since 1969, is located at 1345 Avenue of the Americas,
New York, New York 10105, is a Delaware partnership and an
indirect wholly-owned subsidiary of PIMCO Advisors L.P.
Oppenheimer Capital's principal executive officer is Kenneth
Poovey. As of March 31, 2000, Oppenheimer Capital managed over
$ billion in assets.
- Boston Partners Asset Management, L.P. Boston Partners Asset
Management, L.P. ("Boston Partners"), an investment advisor
since 1995, is located at 28 State Street, 21st Floor,
Boston, Massachusetts 02109. The firm is owned by its
partners. Desmond J. Heathwood is the sole General Partner.
As of March 31, 2000, Boston Partners managed over $
billion in assets.
- Westwood Management Corp. Westwood Management Corp.
("Westwood"), an investment advisor since 1983, is located
at 300 Crescent Court, Suite 1300, Dallas, Texas 75201, is
a wholly owned subsidiary of Southwest Securities Group,
Inc. Its principal executive officer is Susan M. Byrne. Its
directors are Ms. Byrne, Brian Casey, Don A. Buchhotz,
David Glatstein, and Patricia R. Fraze. As of March 31,
2000, Westwood manages over $2.5 billion in assets.
TCW Investment Management Company. TCW Investment Management
Company ("TCW"), located at 865 South Figueroa Street, Los
Angeles, California 90017, is a wholly-owned subsidiary of The
TCW Group, Inc. ("TCW Group"). Established in 1971, TCW
Group's direct and indirect subsidiaries, including TCW,
provide a variety of trust, investment management and
investment advisory services. Ownership of the TCW Group lies
approximately 95% with its employees and 5% with its
directors. Robert A. Day, who is Chairman of the Board of
Directors of TCW Group, may be deemed to be a control person
of TCW by virtue of the aggregate ownership by Mr. Day and his
family of more than 25% of the outstanding voting stock of the
TCW Group. As of March 31, 2000, TCW had over $xx billion in
assets under management.
6
<PAGE>
The Management Agreements, the Sub-Advisory Agreements and the
Portfolio Management Agreements provide that none of LASC, Colonial, Stein Roe,
Newport, Crabbe Huson, 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
All-Star Equity Fund commenced operations on November 15, 1997. Small
Cap Fund and High Yield Fund commenced operations on May 19, 1998. International
Horizons Fund, Global Equity Fund and Real Estate Fund commenced operations on
June 1, 1999.
MANAGEMENT FEES. Each Fund listed below paid LASC management fees as follows
during each year in the three-year period ended December 31, pursuant to the
Management Agreements described in the Prospectus:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Growth and Income Fund: $1,157,822 $805,967 $605,151
Global Utilities Fund: $554,892 $390,383 $310,458
International Fund: $569,988 $369,574 $270,532
U.S. Growth Fund: $1,429,390 $1,027,590 $623,484
Strategic Income Fund: $971,490 $590,688 $384,347(1)
Tiger Fund: $277,720 $192,901 $303,701
All-Star Equity Fund: $493,641 $243,070(2) $8,804(1)
Small Cap Fund: $18,928(3) $0(2) ----
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
High Yield Fund: $61,532(3) $0(2) ----
International Horizons Fund: $27,964(3) ---- ----
Global Equity Fund: $31,164(3) ---- ----
Real Estate Fund: $11,210(3) ---- ----
</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.
(2) Reduced to reflect applicable expense limitations. If the limitations had
not been in effect, All-Star Equity Fund, Small Cap Fund and High Yield Fund
would have paid fees of $255,783, $8,641 and $19,394, respectively.
(3) Reduced to reflect applicable expense limitations. If the limitations had
not been in effect, Small Cap Fund, High Yield Fund, International Horizons
Fund, Global Equity Fund and Real Estate Fund would have paid fees of $82,150,
$111,081, $56,292, $58,260 and $42,873, respectively.
CERTAIN ADMINISTRATIVE EXPENSES. During each year in the three-year period ended
December 31, each Fund listed below made payments as follows to Colonial or an
affiliate thereof for pricing and bookkeeping services.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Growth and Income Fund: $74,390 $53,025 $43,653
Global Utilities Fund: $40,059 $30,524 $27,071
International Fund: $31,946 $27,008 $27,000
U.S. Growth Fund: $74,490 $54,453 $39,024
Strategic Income Fund: $63,800 $41,331 $31,551
Tiger Fund: $27,000 $27,000 $27,000
All-Star Equity Fund: $31,497 $27,000 $3,225
Small Cap Fund: $27,000 $16,694 ----
High Yield Fund: $27,000 $16,694 ----
International Horizons Fund: $15,750 ---- ----
Global Equity Fund: $15,750 ---- ----
Real Estate Fund: $15,750 ---- ----
</TABLE>
In addition, during each year in the three-year period ended December
31, each Fund listed below made payments as follows to Colonial or an affiliate
thereof for transfer agent services:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Growth and Income Fund: $7,500 $7,500 $7,500
Global Utilities Fund: $7,500 $7,500 $7,500
International Fund: $7,500 $7,500 $7,500
U.S. Growth Fund: $7,500 $7,500 $7,500
Strategic Income Fund: $7,500 $7,500 $7,500
Tiger Fund: $7,500 $7,500 $896
All-Star Equity Fund: $7,500 $7,500 ----
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C>
Small Cap Fund: $7,500 $4,637 ----
High Yield Fund: $7,500 $4,637 ----
International Horizons Fund: $4,375 ---- ----
Global Equity Fund: $7,044 ---- ----
Real Estate Fund: $4,375 ---- ----
</TABLE>
12b-1 FEES. Each Fund's Class B shares listed below paid Liberty Funds
Distributor, Inc. (LFD) services fees as follows during the year ended December
31, 1999, as described in the Prospectus:
<TABLE>
<CAPTION>
<S> <C>
International Horizons Fund: $6,601
Global Equity Fund: $7,044
Real Estate Fund: $2,415
</TABLE>
The other Funds of the Trust began offering Class B shares on June 1, 2000,
therefore they did not pay any service fees during the year ended December 31,
1999.
PRINCIPAL UNDERWRITER
Liberty Funds Distributor, Inc. (LFD), One Financial Center, Boston, MA 02111,
serves as the principal underwriter to the Funds. LFD is an affiliate of LASC.
The Trustees have approved a Distribution Plan and Agreement (Plan) pursuant to
Rule 12b-1 under the 1940 Act for the Funds Class B shares. Under the Plan,
these Funds will pay the distributor a monthly service fee at the aggregate
annual rate of 0.25% of each Fund's average daily net assets. The distributor
may use the entire amount of such fees to defray the cost of commissions and
service fees paid to financial service firms (FSFs) and for certain other
purposes. Since the service fees are payable regardless of the amount of the
distributor's expenses, the distributor may realize a profit from the fees.
The Plan authorizes any other payments by these Funds to the distributor and its
affiliates (including the Advisor) to the extent that such payments might be
construed to be indirect financing of the distribution of fund shares.
The Trustees believe the Plan could be a significant factor in the growth and
retention of Fund assets resulting in a more advantageous expense ratio and
increased investment flexibility which could benefit each Fund's shareholders.
The Plan will continue in effect from year to year so long as continuance is
specifically approved at least annually by a vote of the Trustees, including
9
<PAGE>
the Trustees who are not interested persons of the Trust and have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan (Independent Trustees), cast in person at a meeting called
for the purpose of voting on the Plan. The Plan may not be amended to increase
the fee materially without approval by vote of a majority of the outstanding
voting securities of the relevant class of shares and all material amendments of
the Plan must be approved by the Trustees in the manner provided in the
foregoing sentence. The Plan may be terminated at any time by vote of a majority
of the Independent Trustees or by vote of a majority of the outstanding voting
securities of the relevant Fund's shares, on 60 days' written notice to the
distributor. The continuance of the Plan will only be effective if the selection
and nomination of the Trustees who are not interested persons of the Trust is
effected by such disinterested Trustees.
EXPENSE LIMITATIONS. LASC has agreed to reimburse all expenses,
including management fees, but excluding interest, taxes, 12b-1, brokerage, and
other expenses which are capitalized in accordance with generally accepted
accounting principles, and extraordinary expenses, incurred by (i) each of
Growth and Income Fund, Global Utilities Fund, U.S. Growth Fund, All-Star Equity
Fund and Small Cap Fund in excess of 1.00% of average daily net asset value per
annum, (ii) each of International Fund and Tiger Fund in excess of 1.75% of
average daily net asset value per annum, (iii) each of Strategic Income Fund and
High Yield Fund in excess of 0.80% of average daily net asset value per annum,
(iv) each of International Horizons Fund and Global Equity Fund in excess of
1.15% of average daily net asset value per annum, and (v) Real Estate Fund in
excess of 1.20% of average daily net asset value per annum, in each case for the
period from May 1, 2000 until April 30, 2001.
10
<PAGE>
INVESTMENT RESTRICTIONS
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 Prospectuses and in this SAI, the term "majority
of the outstanding voting securities" means the lesser of (i) 67% of the voting
securities of a Fund present at a meeting where the holders of more than 50% of
the outstanding voting securities of a Fund are present in person or by proxy,
or (ii) more than 50% of the outstanding voting securities of a Fund. Shares of
each Fund will be voted separately on matters affecting only that Fund,
including approval of changes in the fundamental objectives, policies, or
restrictions of that Fund.
Total assets and net assets are determined at current value for
purposes of compliance with investment restrictions and policies. All percentage
limitations will apply at the time of investment and are not violated unless an
excess or deficiency occurs as a result of such investment. For purposes of the
diversification requirement of the Investment Company Act of 1940, as amended
(the "1940 Act"), the issuer with respect to a security is the entity whose
revenues support the security.
GROWTH AND INCOME FUND
FUNDAMENTAL INVESTMENT POLICIES. Growth and Income Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry;
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer or purchase the voting securities of an issuer if, as a
result of such purchase, the Fund would own more than 10% of
the outstanding voting shares of such issuer; and
6. Own real estate if it is acquired as the result of owning
securities and not more than 5% of total assets.
11
<PAGE>
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. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
4. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities; and
5. Invest more than 15% of its net assets in illiquid assets.
GLOBAL UTILITIES FUND
FUNDAMENTAL INVESTMENT POLICIES. Global Utilities Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer; and
5. Own real estate if it is acquired as the result of owning
securities and not more than 5% of total assets.
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
Global Utilities Fund which may be changed without a shareholder vote, the Fund
may not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions (this restriction does
not apply to securities purchased on a when-issued basis or to
margin deposits in connection with futures or options
transactions);
12
<PAGE>
2. Purchase and sell futures contracts and related options if the
total initial margin and premiums required to establish
non-hedging positions exceed 5% of its total assets;
3. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
4. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities; and
5. Invest more than 15% of its net assets in illiquid assets.
INTERNATIONAL FUND
FUNDAMENTAL INVESTMENT POLICIES. International Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry;
5. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets; and
6. Purchase and sell futures contracts and related options so
long as the total initial margin and premiums on the contracts
do not exceed 5% of its total assets; and
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
International Fund which may be changed without a shareholder vote, the Fund may
not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial
or maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities;
3. Invest more than 15% of its net assets in illiquid assets;
13
<PAGE>
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. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
7. Acquire any security issued by a person that, in its most
recent fiscal year, derived 15% or less of its gross revenues
from securities related activities (within the meaning of Rule
12d3-1 under the 1940 Act) if the Fund would control such
person after such acquisition; or
8. Acquire any security issued by a person that, in its most recent
fiscal year, derived more than 15% of its gross revenues from
securities related activities (as so defined) unless (i)
immediately after such acquisition of any equity security, the
Fund owns 5% or less of the outstanding securities of that class
of the issuer's equity securities, (ii) immediately after such
acquisition of a debt security, the Fund owns 10% or less of the
outstanding principal amount of the issuer's debt securities, and
(iii) immediately after such acquisition, the Fund has invested
not more than 5% of its total assets in the securities of the
issuer.
U.S. GROWTH FUND
FUNDAMENTAL INVESTMENT POLICIES. U.S. Growth Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry; and
14
<PAGE>
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer or purchase the voting securities of an issuer if, as a
result of such purchase, the Fund would own more than 10% of
the outstanding voting shares of such issuer;
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. Growth Fund which may be changed without a shareholder vote, the Fund may
not:
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial
or maintenance margin deposits in connection with futures
transactions;
2. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities;
3. Invest more than 15% of its net assets in illiquid assets; or
4. Purchase or sell commodity contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets.
STRATEGIC INCOME FUND
FUNDAMENTAL INVESTMENT POLICIES. Strategic Income Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry;
15
<PAGE>
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer or purchase the voting securities of an issuer if, as a
result of such purchase, the Fund would own more than 10% of
the outstanding voting shares of such issuer;
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. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
3. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities; or
4. Invest more than 15% of its net assets in illiquid assets.
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;
16
<PAGE>
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 or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
6. Purchase securities on margin, but the Fund may utilize such
short-term credits as may be necessary for clearance of
purchases or sales of securities; or
7. Engage in short sales of securities.
17
<PAGE>
ALL-STAR EQUITY FUND
FUNDAMENTAL INVESTMENT POLICIES. All-Star Equity Fund may not:
1. Issue senior securities, except as permitted by (2) below;
2. Borrow money, except that it may borrow in an amount not
exceeding 7% of its total assets (including the amount borrowed)
taken at market value at the time of such borrowing, and except
that it may make borrowings in amounts up to an additional 5% of
its total assets (including the amount borrowed) taken at market
value at the time of such borrowing, to obtain such short-term
credits as are necessary for the clearance of securities
transactions, or for temporary or emergency purposes, and may
maintain and renew any of the foregoing borrowings, provided that
the Fund maintains asset coverage of 300% with respect to all such
borrowings;
3. Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if
such pledging, mortgaging or hypothecating does not exceed 12%
of the Fund's total assets taken at market value at the time
of such pledge, mortgage or hypothecation. The deposit in
escrow of securities in connection with the writing of put and
call options and collateral arrangements with respect to
margin for future contracts are not deemed to be pledges or
hypothecation for this purpose;
4. Act as an underwriter of securities of other issuers, except when
disposing of securities;
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);
18
<PAGE>
8. Purchase securities on margin (except to the extent that the
purchase of options and futures may involve margin and except that
it may obtain such short-term credits as may be necessary for the
clearance of purchases or sales of securities), or make short
sales of securities;
9. Purchase the securities of issuers conducting their principal
business activity in the same industry (other than securities
issued or guaranteed by the United States, its agencies and
instrumentalities) if, immediately after such purchase, the value
of its investments in such industry would comprise 25% or more of
the value of its total assets taken at market value at the time of
each investment;
10. Purchase securities of any one issuer, if
(a) more than 5% of the Fund's total assets taken at
market value would at the time be invested in the securities
of such issuer, except that such restriction does not apply to
securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities or corporations sponsored
thereby, and except that up to 25% of the Fund's total assets
may be invested without regard to this limitation; or
(b) such purchase would at the time result in more
than 10% of the outstanding voting securities of such issuer
being held by the Fund, except that up to 25% of the Fund's
total assets may be invested without regard to this
limitation;
11. Invest in securities of another registered investment company,
except (i) as permitted by the Investment Company Act of 1940,
as amended from time to time, or any rule or order thereunder,
or (ii) in connection with a merger, consolidation,
acquisition or reorganization;
12. Purchase any security, including any repurchase agreement
maturing in more than seven days, which is subject to legal or
contractual delays in or restrictions on resale, or which is not
readily marketable, if more than 10% of the net assets of the
Fund, taken at market value, would be invested in such securities;
13. Invest for the purpose of exercising control over or management of
any company; or
14. Purchase securities unless the issuer thereof or any company on
whose credit the purchase was based, together with its
predecessors, has a record of at least three years' continuous
operations prior to the purchase, except for investments which, in
the aggregate, taken at cost do not exceed 5% of the Fund's total
assets.
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).
19
<PAGE>
SMALL CAP FUND
FUNDAMENTAL INVESTMENT POLICIES. Small Cap Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, it will not purchase additional portfolio
securities while borrowings exceed 5% of net assets;
2. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets;
3. Purchase and sell futures contracts and related options so
long as the total initial margin and premiums on the contracts
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 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 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.
20
<PAGE>
HIGH YIELD FUND
FUNDAMENTAL INVESTMENT POLICIES. High Yield Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets;
3. Purchase and sell futures contracts and related options so
long as the total initial margin and premiums on the contracts
do not exceed 5% of its total assets;
4. Underwrite securities issued by others only when disposing of
portfolio securities;
5. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments or
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements; and
6. Not concentrate more than 25% of its total assets in any one
industry or with respect to 75% of total assets purchase any
security (other than obligations of the U.S. Government and
cash items including receivables) if as a result more than 5%
of its total assets would then be invested in securities of a
single issuer, or purchase voting securities of an issuer if,
as a result of such purchase, the Fund would own more than 10%
of the outstanding voting shares of such issuer.
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
High Yield Fund which may be changed, the Fund may not:
1. Purchase securities on margin, but the Fund may receive
short-term credit to clear securities transactions and may
make initial or maintenance margin deposits in connection with
futures transactions;
2. Purchase or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of its
total assets;
3. Have a short securities position, unless the Fund owns, or
owns rights (exercisable without payment) to acquire, an equal
amount of such securities; and
4. Invest more than 15% of its net assets in illiquid assets.
21
<PAGE>
INTERNATIONAL HORIZONS FUND
FUNDAMENTAL INVESTMENT POLICIES. International Horizons Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, the Fund will not purchase additional
portfolio securities while borrowings exceed 5% of net assets;
2. Underwrite securities issued by others only when disposing of
portfolio securities;
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry;
5. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets; and
6. Purchase and sell futures contracts and related options so
long as the total initial margin and premiums on the contracts
do not exceed 5% of its total assets; and
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
International Horizons 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; and
3. Invest more than 15% of its net assets in illiquid assets.
GLOBAL EQUITY FUND
FUNDAMENTAL INVESTMENT POLICIES. The Global Equity 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;
22
<PAGE>
3. Make loans through lending of securities not exceeding 30% of
total assets, through the purchase of debt instruments and
similar evidences of indebtedness typically sold privately to
financial institutions and through repurchase agreements;
4. Not concentrate more than 25% of its total assets in any one
industry;
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer or purchase the voting securities of an issuer if, as a
result of such purchase, the Fund would own more than 10% of
the outstanding voting shares of such issuer; and
6. Only own real estate acquired as the result of owning
securities and not more than 5% of total assets;
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
the Global Equity 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 assets in illiquid assets.
REAL ESTATE FUND
FUNDAMENTAL INVESTMENT POLICIES. The Real Estate 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. Concentrate more than 25% of its total assets in any one industry;
23
<PAGE>
5. With respect to 75% of total assets not purchase any security
(other than obligations of the U.S. Government and cash items
including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer or purchase the voting securities of an issuer if, as a
result of such purchase, the Fund would own more than 10% of
the outstanding voting shares of such issuer; and
6. Own real estate if it is acquired as the result of owning
securities and not more than 5% of total assets; provided that
the Fund may invest in securities that are secured by real
estate or interest therein and may purchase and sell
mortgage-related securities and may hold and sell real estate
acquired by the Fund as a result of the ownership of
securities.
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
the Real Estate 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 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
24
<PAGE>
its investments in one or more Funds or shares of another Fund may be
substituted. This might force a Fund to sell securities at disadvantageous
prices.
ORGANIZATION
The Trust is required to hold a shareholders' meeting to elect Trustees
to fill vacancies in the event that less than a majority of Trustees were
elected by shareholders. Trustees may also be removed by the vote of two-thirds
of the outstanding shares at a meeting called at the request of shareholders
whose interests represent 10% or more of the outstanding shares.
The shares do not have cumulative voting rights, which means that the
holders of more than 50% of the shares of the Funds voting for the election of
Trustees can elect all of the Trustees, and, in such event, the holders of the
remaining shares will not be able to elect any Trustees.
The Funds are not required by law to hold regular annual meetings of
their shareholders and do not intend to do so. However, special meetings may be
called for purposes such as electing or removing Trustees or changing
fundamental investment policies.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable for the obligations of the
Trust. The Trust's shareholders are the separate accounts of Participating
Insurance Companies, and, in certain cases, the general account of Keyport.
However, the Trust's Declaration of Trust disclaims liability of the
shareholders, the Trustees, or officers of the Trust for acts or obligations of
the Trust, which are binding only on the assets and property of the Trust (or
the applicable Fund thereof) and requires that notice of such disclaimer be
given in each agreement, obligation, or contract entered into or executed by the
Trust or the Board of Trustees. The Declaration of Trust provides for
indemnification out of the Trust's assets (or the applicable Fund) for all
losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is believed to be remote because it is
limited to circumstances in which the disclaimer is inoperative and the Trust
itself is unable to meet its obligations. The risk to any one Fund of sustaining
a loss on account of liabilities incurred by another Fund is also believed to be
remote.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, together with information as to
their principal addresses, ages and business occupations during the last five
years, are shown below. An asterisk next to a name indicates that a Trustee is
considered an "interested person" of the Trust (as defined in the 1940 Act). In
this SAI, the "Liberty Funds" means Liberty Funds Trust I, Liberty Funds Trust
II, Liberty Funds Trust III, Liberty Funds Trust IV, Liberty Funds Trust V,
Liberty Funds Trust VI, Liberty Funds Trust VII, Liberty Funds Trust VIII,
Liberty Variable Investment Trust, Colonial High Income Municipal Trust,
Colonial InterMarket Income Trust I, Colonial Intermediate High Income Fund,
Colonial Investment Grade Municipal Trust, Colonial Municipal Income Trust,
Colonial Insured Municipal Fund, Colonial California Insured
25
<PAGE>
Municipal Fund, Colonial New York Insured Municipal Fund, Liberty-Stein Roe
Advisor Floating Rate Advantage Fund and Colonial Investment Grade Bond Fund.
<TABLE>
<CAPTION>
============================================================================================================
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
============================================================================================================
<S> <C> <C>
Tom Bleasdale (69) Trustee Retired (formerly Chairman of the Board and
102 Clubhouse Drive #275 Chief Executive Officer, Shore Bank & Trust
Naples, FL 34105 Company (banking) from 1992 to 1993).
Director or Trustee: Liberty Funds, Empire
Co.
- ------------------------------------------------------------------------------------------------------------
John V. Carberry* (52) Trustee Senior Vice President of LFC since 1998
56 Woodcliff Road (formerly Managing Director, Salomon
Wellesley Hills, MA 02481 Brothers (investment banking) from
January, 1988 to January, 1998). Director or
Trustee: Liberty Funds, Liberty All-Star
Funds.
- ------------------------------------------------------------------------------------------------------------
Lora S. Collins (64) Trustee Attorney (formerly Attorney with Kramer,
1175 Hill Road Levin, Naftalis & Frankel (law) from
Southold, NY 11971 September, 1986 to November, 1996).
Trustee: Liberty Funds.
- ------------------------------------------------------------------------------------------------------------
James E. Grinnell (70) Trustee Private Investor since November, 1988.
22 Harbor Avenue Director or Trustee: Liberty Funds, Liberty
Marblehead, MA 01945 All-Star Funds.
- ------------------------------------------------------------------------------------------------------------
Richard W. Lowry (63) Private Investor since August, 1987.
10701 Charleston Drive Trustee Director or Trustee: Liberty Funds,
- ------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
============================================================================================================
<S> <C> <C>
Vero Beach, FL 32963 Liberty All-Star Funds.
- ------------------------------------------------------------------------------------------------------------
Salvatore Macera (68) Trustee Private Investor (formerly Executive Vice
26 Little Neck Lane President and Director of Itek Corporation
New Seabury, MA 02649 (electronics) from 1975 to 1981).Director
or Trustee: Liberty Funds and Stein Roe
Variable Investment Trust.
- ------------------------------------------------------------------------------------------------------------
William E. Mayer (59) Trustee Partner, Development Capital, LLC (venture
500 Park Avenue, 5th Floor capital) (formerly Dean, College of
New York, NY 10022 Business and Management, University of
Maryland (higher education) from October,
1992 to November, 1996). Director or
Trustee: Liberty Funds, Liberty All-Star
Funds, Johns Manville, Lee Enterprises,
Premier, Rosemore.
- ------------------------------------------------------------------------------------------------------------
James L. Moody, Jr. (68) Trustee Retired (formerly Chairman of the Board,
16 Running Tide Road Hannaford Bros. Co. (food retailer) from
Cape Elizabeth, ME 04107 May, 1984 to May, 1997 and Chief Executive
Officer, Hannaford Bros. Co. from May, 1993
to May, 1992). Director or Trustee:
Liberty Funds, Staples, Inc., UNUM
Provident Corporation, IDEXX Laboratories,
Inc., Empire Company Limited.
- ------------------------------------------------------------------------------------------------------------
John J. Neuhauser (56) Trustee Dean of the School of Management, Boston
84 College Road College (higher education) since September,
Chestnut Hill, MA 02467 1977. Director or Trustee: Liberty Funds,
Liberty All-Star Funds,
- ------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
============================================================================================================
<S> <C> <C>
Saucony, Inc.
- ------------------------------------------------------------------------------------------------------------
Thomas E. Stitzel (64) Trustee Business Consultant (formerly Professor of
2208 Tawny Woods Place Finance from 1975 to 1999 and Dean from
Boise, ID 83706 1977 to 1991, College of Business, Boise
State University (higher education),
Chartered Financial Analyst. Director or
Trustee: Liberty Funds, Stein Roe Variable
Investment Trust, Farmers and Merchants
State Bank..
- ------------------------------------------------------------------------------------------------------------
Anne-Lee Verville (54) Trustee Consultant (formerly General Manager,
359 Stickney Hill Road Global Education Industry from 1994 to
Hopkinton, NH 03229 1997, and President, Applications
Solutions Division from 1991 to 1994, IBM
Corporation (global education and global
applications)). Director or Trustee:
Liberty Funds, Enesco Group, Inc., National
Skill Standards Board.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
============================================================================================================
<S> <C> <C>
Stephen E. Gibson (46) President President of the Liberty Funds since June,
One Financial Center 1998, Chairman of the Board since July,
Boston, MA 02111 1998, Chief Executive Officer and
President since December, 1996 and
Director, since July, 1996 of Colonial
(formerly Executive Vice President from
July, 1996 to December, 1996); Director,
Chief Executive Officer and President of
Liberty Funds Group LLC ("LFG") 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
since August, 1998 (formerly Managing
Director of Marketing of Putnam
Investments, June, 1992 to July, 1996.).
- ------------------------------------------------------------------------------------------------------------
Timothy J. Jacoby (47) Treasurer and Chief Treasurer and Chief Financial Officer of
One Financial Center Financial Officer the Liberty Funds since October, 1996
Boston, MA 02111 (formerly Controller and Chief Accounting
Officer from October, 1997 to February,
1998); Treasurer since December, 1998 of
Liberty All-Star Funds; Senior Vice
President since December, 1996 of Colonial
(formerly Treasurer and Chief Financial
Officer of Colonial from December, 1996 to
December, 1999); Vice President since
December, 1998 of LFG (formerly Chief
Financial Officer and Treasurer from
December, 1998 to December, 1999 of LFG;
Chief Financial Officer, Treasurer and
Vice President from July, 1997 to
December, 1998 of TCG; Senior
- ------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
============================================================================================================
<S> <C> <C>
Vice President since August, 1998 of Stein
Roe formerly Senior Vice
President, Fidelity Accounting and Custody
Services, Inc. from September, 1993 to
September, 1996.
- ------------------------------------------------------------------------------------------------------------
J. Kevin Connaughton (35) Controller and Chief Controller and Chief Accounting Officer of
One Financial Center Accounting Officer the Liberty Funds since February, 1998;
Boston, MA 02111 Controller since December, 1998 of Liberty
All-Star Funds; Vice President of Colonial
since February, 1998 (formerly Senior Tax
Manager, Coopers & Lybrand, LLP from
April, 1996 to January, 1998; Vice
President, 440
Financial Group/First Data Investor
Services Group from March, 1994 to April,
1996).
- ------------------------------------------------------------------------------------------------------------
Joseph R. Palombo (46) Vice President Vice President of the Liberty Funds since
One Financial Center April, 1999; Executive Vice President and
Boston, MA 02111 Director of Colonial since April, 1999;
Executive Vice President and Chief
Administrative Officer of LFG since April,
1999 (formerly Chief Operating Officer,
Putnam Mutual Funds from 1994 to 1998).
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
============================================================================================================
<S> <C> <C>
Nancy L. Conlin (46) Secretary Secretary of the Liberty Funds since
One Financial Center April, 1998 (formerly Assistant
Boston, MA 02111 Secretary from July, 1994 to April,
- ------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
============================================================================================================
<S> <C> <C>
1998); Director, Senior Vice President,
General Counsel, Clerk and Secretary of
Colonial since April, 1998 (formerly
Vice President, Counsel, Assistant
Secretary and Assistant Clerk from July,
1994 to April, 1998); Vice President -
Legal, General Counsel and Secretary of
LFG since December, 1998 (formerly Vice
President - Legal, General
Counsel, Secretary and Clerk of TCG from
April, 1998 to December, 1998; Assistant
Clerk from July, 1994 to April, 1998).
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* As Trustee who is an "interested person" (as defined in the Investment Company
Act of 1940 ("1940 Act")) of the Funds or the Advisor.
As indicated in the above table, certain Trustees and officers of the
Trust also hold positions with LFC, Keyport, LASC, LFD, Colonial, Stein Roe,
Newport, Crabbe Huson, LAMCO and/or certain of their affiliates. Certain of the
Trustees and officers of the Trust hold comparable positions with certain other
investment companies.
31
<PAGE>
Compensation of Trustees
The table below sets forth (1) the aggregate compensation paid by the
Trust to the Trustees for 1999, and (ii) the amount of compensation paid to the
Trustees of the Trust in their capacities as Trustees of the Liberty Funds
Complex for service for 1999 (a):
<TABLE>
<CAPTION>
COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------
Total Compensation From Liberty
Aggregate 1999 Compensation Funds Complex Paid to the Year
from the Trustees For The Calendar
Trustee Trust Ended December 31, 1999(b)
- ------- ----- --------------------------
<S> <C> <C>
Robert J. Birnbaum(c) $ 7,807 $97,000
Tom Bleasdale 8,296(d) 103,000(e)
John V. Carberry(f) N/A N/A
Lora S. Collins 7,732 96,000
James E. Grinnell 8,048 100,000
Richard W. Lowry 7,813 97,000
Salvatore Macera 7,725 95,000
William E. Mayer 8,123 101,000
James L. Moody, Jr. 7,348(g) 91,000(h)
John J. Neuhauser 8,166 101,252
Thomas E. Stitzel 7,725 95,000
Robert L. Sullivan(i) 8,581 104,100
Anne-Lee Verville 7,745(j) 96,000(k)
</TABLE>
(a) The Liberty Funds Complex does not currently provide pension or retirement
plan benefits to the Trustees.
(b) At December 31, 1999, the Liberty Funds Complex consisted of 51 open-end
and 8 closed-end management investment portfolios in the Liberty Funds
Group-Boston and 12 open-end management investment portfolios in the
Liberty Variable Investment Trust (together, the Liberty Funds Complex).
(c) Retired as Trustee of the Trust on December 31, 1999.
(d) Includes $4,109 payable in later years as deferred compensation.
(e) Includes $52,000 payable in later years as deferred compensation.
(f) Does not receive compensation because he is an affiliated Trustee and
employee of LFC.
(g) Total compensation of $7,348 for the fiscal year ended December 31, 1999
will be payable in later years as deferred compensation.
32
<PAGE>
(h) Total compensation of $91,000 for the calendar year ended December 31,
1999 will be payable in later years as deferred compensation.
(i) Retired as Trustee of the Trust on April 30, 2000.
(j) Total compensation of $7,745 for the fiscal year ended December 31, 1999
will be payable in later years as deferred compensation.
(k) Total compensation of $96,000 for the calendar year ended December 31, 1999
will be payable in later years as deferred compensation.
For the fiscal year ended December 31, 1999, some of the Trustees received the
following compensation in their capacities as trustees or directors of the
Liberty All-Star Equity Fund, the Liberty All-Star Growth Fund, Inc. and Liberty
Funds Trust IX (together, Liberty All-Star Funds):
<TABLE>
<CAPTION>
Total Compensation from Liberty All-Star Funds
Trustee for the Calendar Year Ended December 31, 1999(l)
- ------- --------------------------------------------
<S> <C>
Robert J. Birnbaum(m) $25,000
John V. Carberry(m)(n) N/A
James E. Grinnell(m) 25,000
Richard W. Lowry(m) 25,000
William E. Mayer(m) 25,000
John J. Neuhauser(m) 25,000
</TABLE>
(l) The Liberty All-Star Funds are advised by Liberty Asset Management Company
(LAMCO). LAMCO is an indirect wholly-owned subsidiary of LFC (an
intermediate parent of the Advisor).
(m) Elected by the sole Trustee of Liberty Funds Trust XI on December 17,
1998.
(n) Does not receive compensation because he is an affiliated Trustee and
employee of LFC.
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, 2000 the general account of Keyport owned of record % of All-Star Equity
Fund, % of Tiger Fund,% of International Horizons Fund, % of Global Equity Fund
and % of Real Estate Fund. At all meetings of shareholders of the Funds,
Participating Insurance Companies will vote the shares held of record by
sub-accounts of their respective separate accounts as to which instructions are
received from the VA contract and VLI policy owners on behalf of whom such
shares are held only in accordance with such instructions. All such shares as to
which no instructions are received (as well as, in the case of Keyport, all
shares held by its general account) will be voted in the same proportion as
shares as to which instructions are
33
<PAGE>
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, 2000 owned beneficially
5% or more of the outstanding shares of any Fund.
CUSTODIAN
The Chase Manhattan Bank, 270 Park Avenue Park Avenue, New York, NY
10017-2070, is custodian of the securities and cash owned by all of 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
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 Prospectuses.
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
34
<PAGE>
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, International Horizons Fund and Global Equity Fund
may be expected to experience higher portfolio turnover rates if such Funds make
a change in its respective investments from one geographic sector (e.g., Europe;
Japan; emerging Asian markets; etc.) to another geographic sector. Costs will be
greater if the change is from the sector in which the greatest proportion of its
assets are invested.
SUSPENSION OF REDEMPTIONS
The right to redeem shares or to receive payment with respect to any
redemption of shares of the Funds may only be suspended (i) for any period
during which trading on the NYSE is restricted or the NYSE is closed, other than
customary weekend and holiday closing, (ii) for any period during which an
emergency exists as a result of which disposal of securities or determination of
the net asset value of the Funds is not reasonably practicable, or (iii) for
such other periods as the SEC may by order permit for protection of shareholders
of the Funds.
VALUATION OF SECURITIES
The assets of the Funds are valued as follows:
Debt securities generally are valued by a pricing service which
determines valuations based upon market transactions for normal,
institutional-size trading units of similar securities. However, in
circumstances where such prices are not available or where Colonial (the Trust's
pricing and bookkeeping agent) deems it appropriate to do so, an
over-the-counter or exchange bid quotation is used. Securities listed on an
exchange or on Nasdaq are valued at the last sale price. Listed securities for
which there were no sales during the day and unlisted securities are valued at
the last quoted bid prices. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost when such cost approximates market value
pursuant to procedures approved by the Trustees. The values of foreign
securities quoted in foreign currencies are translated into U.S. dollars at the
exchange rate as of 3:00 p.m. Eastern time. Portfolio positions for which there
are no such valuations and other assets are valued at fair value as determined
in good faith under the direction of the Trustees.
The net asset value of shares of each Fund is normally calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m., Eastern time, on
every day the NYSE is open for trading, except on days where both (i) the degree
of trading in a Fund's portfolio securities would not materially affect the net
asset value of that Fund's shares and (ii) no shares of a Fund were tendered for
redemption and no purchase order was received. The NYSE is open Monday through
Friday, except on the following holidays: New Year's Day, Martin Luther King
Jr., Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
35
<PAGE>
Generally, trading in certain securities (such as foreign securities)
is substantially completed each day at various times prior to the close of the
NYSE. The values of these securities used in determining the net asset value are
computed as of such times. Also, because of the amount of time required to
collect and process trading information as to large numbers of securities
issues, the values of certain securities (such as convertible bonds and U.S.
government securities) are determined based on market quotations collected
earlier in the day at the latest practicable time prior to the close of the
NYSE. Occasionally, events affecting the value of such securities may occur
between such times and the close of the NYSE which will not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value following procedures approved by the Trustees.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to do business with any broker-dealer or
group of broker-dealers in executing transactions in securities with respect to
the Funds, and the Funds have no intention to deal exclusively with any
particular broker-dealer or group of broker-dealers.
Each of Colonial, Stein Roe, Newport, Crabbe Huson 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,
International Horizons Fund, Global Equity Fund and All-Star Equity Fund,
securities transactions of the Funds may be executed by broker-dealers who also
provide research services (as defined below) to an Advisor, the Funds or other
accounts as to which such Advisor exercises investment discretion. Such advisor
may use all, some or none of such research services in providing investment
advisory services to each of its clients, including the Fund(s) it advises. To
the extent that such services are used by the Advisors,
36
<PAGE>
they tend to reduce their expenses. It is not possible to assign an exact dollar
value for such services.
Subject to such policies as the Board of Trustees may determine, each
of the Advisors may cause a Fund to pay a broker-dealer that provides brokerage
and research services to it an amount of commission for effecting a securities
transaction, including the sale of an option or a closing purchase transaction,
for a Fund in excess of the amount of commission that another broker-dealer
would have charged for effecting that transaction. As provided in Section 28(e)
of the Securities Exchange Act of 1934, "brokerage and research services"
include advice as to the value of securities, the advisability of investing in,
purchasing or selling securities and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends and portfolio
strategy and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). An
Advisor placing a brokerage transaction must determine in good faith that such
greater commission is reasonable in relation to the value of the brokerage and
research services provided to it by the executing broker-dealer viewed in terms
of that particular transaction or its overall responsibilities to the applicable
Fund and all its other clients.
Certain of the other accounts of any of the Advisors may have
investment objectives and programs that are similar to those of the Funds.
Accordingly, occasions may arise when each of the Advisors engages in
simultaneous purchase and sale transactions of securities that are consistent
with the investment objectives and programs of a Fund and such other accounts.
On those occasions, the Advisor will allocate purchase and sale transactions in
an equitable manner according to written procedures as approved by the Board of
Trustees. Such procedures may, in particular instances, be either advantageous
or disadvantageous to a Fund.
Consistent with applicable rules of the National Association of
Securities Dealers, Inc., and subject to seeking best execution and such other
policies as the Board of Trustees may determine, 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, International
Horizons Fund and Global Equity Fund. The portfolio managers for the
International Fund and the International Horizons Fund are Charles R. Roberts,
Michael Ellis and Deborah Snee and for the Global Equity Fund are Ophelia
Barsketis and Deborah A. Jansen all of whom are employed by Newport (which is an
indirect wholly owned subsidiary of LFC). The Funds and the other accounts
advised by these managers 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 Funds and
such other accounts will be bunched and executed on an aggregate basis. In such
cases, each participating account (including the International Fund,
International Horizons Fund and Global Equity Fund) will receive the average
price at which the trade is executed. Where less than the desired aggregate
amount is able to be purchased or sold, the actual amount purchased or sold will
be allocated among the participating accounts (including the International Fund,
International Horizons Fund and Global Equity Fund) in proportion to the amounts
desired to be purchased or
37
<PAGE>
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, International Horizons Fund and Global Equity are
concerned, Newport believes that in most cases these practices should produce
better executions. It is the opinion of Newport that the advantages of these
practices outweigh the disadvantages, if any, which might result from them.
Portfolio transactions on behalf of the International Fund,
International Horizons Fund and Global Equity Fund may be executed by
broker-dealers who provide research services to Newport which are used in the
investment management of such Funds or other accounts over which Newport
exercises investment discretion. Such transactions will be effected in
accordance with the policies described above. No portfolio transactions on
behalf of the Funds will be directed to a broker-dealer in consideration of the
broker-dealer's provision of research services to Newport unless a determination
is made that such research assists Newport in its investment management of the
International Fund, International Horizons Fund, Global Equity Fund or other
accounts over which Newport exercises investment discretion.
Additional Matters Pertaining to All-Star Equity Fund. The Portfolio
Management Agreements with LAMCO's Portfolio Managers provide that LAMCO has the
right to request that transactions giving rise to brokerage commissions, in
amounts to be agreed upon from time to time between LAMCO and the Portfolio
Manager, be executed by brokers and dealers (to be agreed upon from time to time
between LAMCO and the Portfolio Manager) which provide research products and
services to LAMCO or to All-Star Equity Fund or other accounts managed by LAMCO
(collectively with All-Star Equity Fund, "LAMCO Clients") or as to which an
ongoing relationship will be a value to the Fund in managing its assets. The
commissions paid on such transactions may exceed the amount of commissions
another broker would have charged for effecting that transaction. Research
products and services made available to LAMCO through brokers and dealers
executing transactions for LAMCO Clients involving brokerage commissions include
performance and other qualitative and quantitative data relating to investment
managers in general and the Portfolio Managers in particular; data relating to
the historic performance of categories of securities associated with particular
investment styles; mutual fund portfolio and 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.
38
<PAGE>
These research products and services are used by LAMCO in connection
with its management of LAMCO Clients' portfolios, regardless of the source of
the brokerage commissions. In instances where LAMCO receives from broker-dealers
products or services which are used both for research purposes and for
administrative or other non-research purposes, LAMCO makes a good faith effort
to determine the relative proportions of such products or services which may be
considered as investment research, based primarily on anticipated usage, and
pays for the costs attributable to the non-research usage in cash.
The table below shows information on brokerage commissions paid by each
Fund during the periods indicated. (All-Star Equity Fund commenced operations on
November 15, 1997; Small Cap Fund and High Yield Fund commenced operations on
May 19, 1998; International Horizons Fund, Global Equity Fund and Real Estate
Fund commenced operations on June 1, 1999.)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Growth & Global International U.S. Tiger All-Star
Income Utilities Fund Growth Fund Equity
Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total amount $521,325 $171,492 $54,904 $250,696 $42,877 $101,560
of brokerage
commissions
paid during
1999
- ---------------------------------------------------------------------------------------------------------
Total amount $0 $0 $0 $0 $0 $10,533,313
of directed
transactions
paid during
1999
- ---------------------------------------------------------------------------------------------------------
Total amount of $0 $0 $0 $0 $0 $12,038
commissions
on directed
transactions
paid during
1999
- ---------------------------------------------------------------------------------------------------------
Total amount $210,205 $0 $180 $95,068 $0 $0
of brokerage
commissions (40%) (0.5%) (38%)
paid during
1999 to
AlphaTrade
Inc.
(% of total
commission
paid)
- ---------------------------------------------------------------------------------------------------------
Total amount $86,453 $124,815 $66,549 $147,449 $36,508 $58,697
of brokerage
commissions
paid during
1998
- ---------------------------------------------------------------------------------------------------------
Total amount $0 $0 $0 $0 $0 $84,729
of directed
transactions
paid during
1998
- ---------------------------------------------------------------------------------------------------------
Total amount of $0 $0 $0 $0 $0 $80
commissions
on directed
transactions
paid during
1998
- ---------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total amount $17,178 $0 $0 $45,117 $0 $0
of brokerage
commissions
paid during (20%) (31%)
1998 to
AlphaTrade
Inc.
(% of total
commission
paid)
- ------------------------------------------------------------------------------------------------
Total amount $76,021 $108,414 $59,920 $80,839 $110,960 $18,207
of brokerage
commissions
paid during
1997
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
High Small Strategic International Global Real
Yield Cap Income Horizons Equity Estate
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total amount $0 $4,635 $1,563 $4,344 $4,530 $11,892
of brokerage
commissions
paid during
1999
- ------------------------------------------------------------------------------------------------------
Total amount $0 $0 $0 $0 $0 $0
of directed
transactions
paid during
1999
- ------------------------------------------------------------------------------------------------------
Total amount $0 $0 $0 $0 $0 $0
of
commissions
on directed
transactions
paid during
1999
- ------------------------------------------------------------------------------------------------------
Total amount $0 $2,299 $0 $0 $0 $0
of brokerage
commissions
paid during
1999 to (50%)
AlphaTrade
Inc.
(% of total
commission
paid)
- ------------------------------------------------------------------------------------------------------
Total amount $0 $3,240 $0 ---- ---- ----
of brokerage
commissions
paid during
1998
- ------------------------------------------------------------------------------------------------------
Total amount $0 $0 $0 ---- ---- ----
of directed
transactions
paid during
1998
- ------------------------------------------------------------------------------------------------------
Total amount $0 $0 $0 ---- ---- ----
of
commissions
on directed
transactions
paid during
1998
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
High Small Strategic International Global Real
Yield Cap Income Horizons Equity Estate
Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Total amount $0 $1,170 $0 ---- ---- ----
of brokerage
commissions
paid during (36%)
1998 to
AlphaTrade
Inc.
(% of total
commission
paid)
- ------------------------------------------------------------------------------------------------------
Total amount ---- ---- $0 ---- ---- ----
of brokerage
commissions
paid during
1997
- ------------------------------------------------------------------------------------------------------
</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
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).
41
<PAGE>
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
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
42
<PAGE>
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 and International Horizons Fund's investments in
foreign securities may include investments in countries whose economies or
securities markets are considered by Newport not to be highly developed
(referred to as "emerging market countries"). Normally no more than 40% of the
International Fund's assets and up to 35% of the International Horizons Fund's
assets will be invested in such emerging market countries. As of May 1, 2000,
the following countries were considered by Newport to be emerging market
countries:
43
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================
Europe and
Asia Latin America the Middle East Africa
----- ------------- --------------- ------
<S> <C> <C> <C>
==================================================================================================================
China Argentina Czech Republic South Africa
- ------------------------------------------------------------------------------------------------------------------
Hong Kong Brazil Greece
- ------------------------------------------------------------------------------------------------------------------
India Chile Hungary
- ------------------------------------------------------------------------------------------------------------------
Indonesia Colombia Israel
- ------------------------------------------------------------------------------------------------------------------
South Korea Mexico Jordan
- ------------------------------------------------------------------------------------------------------------------
Malaysia Peru Poland
- ------------------------------------------------------------------------------------------------------------------
Pakistan Venezuela Russia
- ------------------------------------------------------------------------------------------------------------------
Philippines Turkey
- ------------------------------------------------------------------------------------------------------------------
Sri Lanka
- ------------------------------------------------------------------------------------------------------------------
Taiwan
- ------------------------------------------------------------------------------------------------------------------
Thailand
==================================================================================================================
</TABLE>
Under normal market conditions, the Tiger Fund invests primarily in
stocks of companies located in the nine Tiger countries of Asia. The Tigers of
Asia are Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand,
Indonesia, The People's Republic of China and the Philippines.
FOREIGN CURRENCY TRANSACTIONS
Each of International Fund, Tiger Fund, Global Utilities Fund,
Strategic Income Fund, International Horizons Fund, Global Equity Fund and
Growth and Income Fund may engage in currency exchange transactions to protect
against uncertainty in the level of future currency exchange rates. These Funds
may purchase foreign currencies on a spot or forward basis in conjunction with
their investments in foreign securities and to hedge against fluctuations in
foreign currencies. International Fund, Global Utilities Fund, International
Horizons Fund, Global Equity 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
44
<PAGE>
dividend or interest payment in a foreign currency. By transaction hedging a
Fund attempts to protect itself against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and the applicable
foreign currency during the period between the date on which the security is
purchased or sold, or on which the dividend or interest payments is declared,
and the date on which such payments are made or received.
A Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with the settlement of
transactions in portfolio securities denominated in that foreign currency. A
Fund may also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and (if the Fund is so authorized) purchase
and sell foreign currency futures contracts.
For transaction hedging purposes a Fund which is so authorized may also
purchase exchange-listed and over-the-counter call and put options on foreign
currency futures contracts and on foreign currencies. Over-the-counter options
are considered to be illiquid by the SEC staff. A put option on a futures
contract gives the Fund the right to assume a short position in the futures
contract until expiration of the option. A put option on a currency gives the
Fund the right to sell a currency at an exercise price until the expiration of
the option. A call option on a futures contract gives the Fund the right to
assume a long position in the futures contract until the expiration of the
option. A call option on a currency gives the Fund the right to purchase a
currency at the exercise price until the expiration of the option.
When it engages in position hedging, a Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which its portfolio securities are denominated (or an
increase in the value of currency for securities which the Fund expects to
purchase, when the Fund holds cash or short-term investments). In connection
with position hedging, a Fund which is so authorized may purchase put or call
options on foreign currency and foreign currency futures contracts and buy or
sell forward contracts and foreign currency futures contracts. A Fund may enter
into short sales of a foreign currency to hedge a position in a security
denominated in that currency. In such circumstances, the Fund will maintain in a
segregated account with its Custodian an amount of cash or liquid debt
securities equal to the excess of (i) the amount of foreign currency required to
cover such short sale position over (ii) the amount of such foreign currency
which could then be realized through the sale of the foreign securities
denominated in the currency subject to the hedge.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Fund to 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
45
<PAGE>
currency the Fund is obligated to deliver and if a decision is made to sell the
security or securities and make delivery of the foreign currency. Conversely, it
may be necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security or securities if the market
value of such security or securities exceeds the amount of foreign currency the
Fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which the Fund can achieve at
some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
value of such currency.
Currency Forward and Futures Contracts
Each of International Fund, Global Utilities Fund, Strategic Income
Fund, International Horizons Fund, Global Equity 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
46
<PAGE>
commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in currency futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market in such contracts.
Although the Funds intend to purchase or sell currency futures contracts only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time. In such
event, it may not be possible to close a futures position and, in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments or variation margin.
Currency Options
In general, options on currencies operate similarly to options on
securities and are subject to many risks similar to those applicable to currency
futures and forward contracts. Currency options are traded primarily in the
over-the-counter market, although options on currencies have recently been
listed on several exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit ("ECU"). The ECU is
composed of amounts of a number of currencies, and is the official medium of
exchange of the European Economic Community's European Monetary System.
Global Utilities Fund, International Horizons Fund, Global Equity 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
47
<PAGE>
There is no systematic reporting of last sale information for
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
round-lot transactions in the interbank market and thus may not reflect exchange
rates for smaller odd-lot transactions (less than $1 million) where rates may be
less favorable. The interbank market in currencies is a global, around-the-clock
market. To the extent that options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
Settlement Procedures
Settlement procedures relating to the Funds' investments in foreign
securities and to their foreign currency exchange transactions may be more
complex than settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not present in such
Funds' domestic investments, including foreign currency risks and local custom
and usage. Foreign currency transactions may also involve the risk that an
entity involved in the settlement may not meet its obligations.
Foreign Currency Conversion
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Funds at one rate, while
offering a lesser rate of exchange should the Funds desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligations.
48
<PAGE>
OPTIONS ON SECURITIES
Each of Global Utilities Fund, International Fund, International
Horizons Fund, Global Equity Fund, Real Estate Fund and All-Star Equity Fund may
purchase and sell options on individual securities.
Writing covered options.
A Fund may write covered call options and covered put options on
securities held in its portfolio when, in the opinion of the sub-advisor, such
transactions are consistent with the Fund's investment objective and policies.
Call options written by the Fund give the purchaser the right to buy the
underlying securities from the Fund at a stated exercise price; put options give
the purchaser the right to sell the underlying securities to the Fund at a
stated price.
A Fund may write only covered options, which means that, so long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the Fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The Fund may
write combinations of covered puts and calls on the same underlying security.
A Fund will receive a premium from writing a put or call option, which
increases the Fund's return on the underlying security if the option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
the Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
A Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an offsetting option. The Fund realizes a profit 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.
49
<PAGE>
If a Fund writes a call option but does not own the underlying
security, and then it writes a put option, the Fund may be required to deposit
cash or securities with its broker as "margin" or collateral for its obligation
to buy or sell the underlying security. As the value of the underlying security
varies, the Fund may have to deposit additional margin with the broker. Margin
requirements are complex and are fixed by individual brokers, subject to minimum
requirements currently imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.
Purchasing put options.
A Fund may purchase put options to protect its portfolio holdings in an
underlying security against a decline in market value. Such hedge protection is
provided during the life of the put option since the Fund, as holder of the put
option, is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. For a put
option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, the Fund will reduce any
profit it might otherwise have realized from appreciation of the underlying
security by the premium paid for the put option and by transaction costs.
Purchasing call options.
A Fund may purchase call options to hedge against an increase in the
price of securities that the Fund wants ultimately to buy. Such hedge protection
is provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.
Over-the-Counter (OTC) options.
The Staff of the Division of Investment Management of the SEC has taken
the position that OTC options purchased by a Fund and assets held to cover OTC
options written by the Fund are illiquid securities. Although the Staff has
indicated that it is continuing to evaluate this issue, pending further
developments, a Fund will enter into OTC options transactions only with primary
dealers in U.S. Government Securities and, in the case of OTC options written by
the Fund, only pursuant to agreements that will assure that the Fund will at all
times have the right to repurchase the option written by it from the dealer at a
specified formula price. The Fund will treat the amount by which such formula
price exceeds the amount, if any, by 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.
50
<PAGE>
Risk factors in options transactions.
The successful use of a Fund's options strategies depends on the
ability of its sub-advisor to forecast interest rate and market movements
correctly.
When it purchases an option, the Fund runs the risk that it will lose
its entire investment in the option in a relatively short period of time, unless
the Fund exercises the option or enters into a closing sale transaction with
respect to the option during the life of the option. If the price of the
underlying security does not rise (in the case of a call) or fall (in the case
of a put) to an extent sufficient to cover the option premium and transaction
costs, the Fund will lose part or all of its investment in the option. This
contrasts with an investment by the Fund in the underlying securities, since the
Fund may continue to hold its investment in those securities notwithstanding the
lack of a change in price of those securities.
The effective use of options also depends on a Fund's ability to
terminate option positions at times when its sub-advisor deems it desirable to
do so. Although the Fund will take an option position only if the sub-advisor
believes there is a liquid secondary market for the option, there is no
assurance that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price.
If a secondary trading market in options were to become unavailable, a
Fund could no longer engage in closing transactions. Lack of investor interest
might adversely affect the liquidity of the market for particular options or
series of options. A marketplace may discontinue trading of a particular option
or options generally. In addition, a market could become temporarily unavailable
if unusual events -- such as volume in excess of trading or clearing capability
- -- were to interrupt normal market operations.
A marketplace may at times find it necessary to impose restrictions on
particular types of options transactions, which may limit a Fund's ability to
realize its profits or limit its losses.
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
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<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, Strategic Income
Fund, International Horizons Fund, Global Equity Fund, Real Estate 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
Prospectuses.
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.
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<PAGE>
Subsequent payments, called "variation margin," to and from the broker
(or the custodian) are made on a daily basis as the price of the underlying
security or commodity fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as "marking to market."
A Fund may elect to close some or all of its futures positions at any
time prior to their expiration. The purpose of making such a move would be to
reduce or eliminate the hedge position then currently held by the Fund. The Fund
may close its positions by taking opposite positions which will operate to
terminate the Fund's position in the futures contracts. Final determinations of
variation margin are then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or gain. Such closing
transactions involve additional commission costs.
A Fund will enter into futures contracts only when, in compliance with
the SEC's requirements, cash or high quality liquid debt securities equal in
value to the commodity value (less any applicable margin deposits) have been
deposited in a segregated account of the Fund's custodian.
Options on futures contracts
A Fund may purchase and write call and put options on futures contracts
it may buy or sell and enter into closing transactions with respect to such
options to terminate existing positions. The Fund may use such options on
futures contracts in lieu of purchasing and selling the underlying futures
contracts. Such options generally operate in the same manner as options
purchased or written directly on the underlying investments.
As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an offsetting option. There is
no guarantee that such closing transactions can be effected.
A Fund will be required to deposit initial margin and maintenance
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. The Fund
will enter into written options on futures contracts only when, in compliance
with the SEC's requirements, cash or equivalents equal in value to the commodity
value (less any applicable margin deposits) have been deposited in a segregated
account of the Fund's custodian.
Risks of transactions in futures contracts and related options
Successful use of futures contracts by a Fund is subject its
sub-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
53
<PAGE>
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.
There are several risks in connection with the use by a Fund of index
futures as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the index futures and movements
in the prices of securities which are the subject of the hedge. The Fund's
sub-advisor will attempt to reduce this risk by selling, to the extent possible,
futures on indices the movements of which will, in its judgment, have a
significant correlation with movements in the prices of the Fund's portfolio
securities sought to be hedged.
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<PAGE>
Successful use of index futures by a Fund for hedging purposes is also
subject to its sub-advisor's ability to predict correctly movements in the
direction of the market. It is possible that, where the Fund has sold futures to
hedge its portfolio against a decline in the market, the index on which the
futures are written may advance and the value of securities subject to the hedge
held in the Fund's portfolio may decline. If this occurs, the Fund would lose
money on the futures and also experience a decline in the value in its portfolio
securities. However, while this could occur to a certain degree, over time the
value of the Fund's portfolio should tend to move in the same direction as the
market indices which are intended to correlate to the price movements of the
portfolio securities sought to be hedged. It is also possible that, if the Fund
has hedged against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices increase
instead, the Fund will lose part or all of the benefit of the increased values
of those securities that it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the index futures
and the securities of the portfolio being hedged, the prices of index futures
may not correlate perfectly with movements in the underlying index due to
certain market distortions. First, all participants in the futures markets are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions which would distort the normal relationship
between the index and futures markets. Second, margin requirements in the
futures markets are less onerous than margin requirements in the securities
markets, and as a result the futures markets may attract more speculators than
the securities markets. Increased participation by speculators in the futures
markets may also cause temporary price distortions. Due to the possibility of
price distortions in the futures markets and also because of the imperfect
correlation between movements in the index and movements in the prices of index
futures, even a correct forecast of general market trends by a Fund's
sub-advisor may still not result in a successful hedging transaction.
Options on index futures are similar to options on securities except
that options on index futures give the purchaser the right, in return for the
premium paid, to assume a position in an index futures contract (a long position
if the option is a call and a short position if the option is a put), at a
specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which represents the
amount by which the market price of the index futures contract, at exercise,
exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the index future. If an option is exercised on
the last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise price
of the option and the closing level of the index on which the future is based on
the expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
55
<PAGE>
SECURITIES LOANS
Each of Global Utilities Fund, U.S. Growth Fund, International Horizons
Fund, Global Equity Fund, Real Estate 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 reinvested amount of dividends and
capital gains received per share plus or minus the change in the net asset value
per share for a given period. Total return percentages may be calculated by
dividing the value of a share (including distribution reinvestment shares) at
the end of a given period by the value of the share at the beginning of the
period and subtracting one.
Average Annual Total Return is a hypothetical Annual Rate of return
which if achieved annually would produce the same return as the cumulative total
return percentage calculated for the period.
It is computed as follows:
<TABLE>
<CAPTION>
n
ERV = P(1+T)
<S> <C> <C> <C>
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).
</TABLE>
56
<PAGE>
For example, for a $1,000 investment in the Funds Class A shares, the
"Ending Redeemable Value," the "Total Return Percentage" and (where applicable)
the "Average Annual Total Return" for the life of each Fund listed below (the
period from July 1, 1993 in the case of Growth and Income Fund and Global
Utilities Fund; May 1, 1994, in the case of International Fund; July 5, 1994 in
the case of U.S. Growth Fund and Strategic Income Fund; May 1, 1995, in the case
of Tiger Fund; November 17, 1997 in the case of All-Star Equity Fund; May
19,1998 in the case of High Yield Fund and Small Cap Fund and June 1, 1999 in
the case of International Horizons Fund, Global Equity Fund and Real Estate
Fund) through December 31, 1999 were:
<TABLE>
<CAPTION>
===========================================================================================================================
Fund Ending Cumulative Total Average Annual
Redeemable Value Return Percentage Total Return
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Colonial Growth and Income Fund, Variable Series $2,417 141.68% 14.52%
- ---------------------------------------------------------------------------------------------------------------------------
Stein Roe Global Utilities Fund, Variable Series 2,489 148.88 15.04
- ---------------------------------------------------------------------------------------------------------------------------
Colonial International Fund for Growth, Variable Series 1,614 61.42 8.81
- ---------------------------------------------------------------------------------------------------------------------------
Colonial U.S. Growth & Income Fund, Variable Series 2,935 193.53 21.64
- ---------------------------------------------------------------------------------------------------------------------------
Colonial Strategic Income Fund, Variable Series 1,547 54.67 8.26
- ---------------------------------------------------------------------------------------------------------------------------
Newport Tiger Fund, Variable Series 1,391 39.09 7.31
- ---------------------------------------------------------------------------------------------------------------------------
Liberty All-Star Equity Fund, Variable Series 1,298 29.76 13.05
- ---------------------------------------------------------------------------------------------------------------------------
Colonial High Yield Securities Fund, Variable Series 990 (0.96) (0.59)
- ---------------------------------------------------------------------------------------------------------------------------
Colonial Small Cap Value Fund, Variable Series 922 (7.75) (4.85)
- ---------------------------------------------------------------------------------------------------------------------------
Colonial International Horizons Fund, Variable Series 1,242 24.24 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Colonial Global Equity Fund, Variable Series 1,126 12.57 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Crabbe Huson Real Estate Investment Fund, Variable Series 862 (13.80) N/A
===========================================================================================================================
</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'
performance numbers reflect all Fund expenses, net of any voluntary waiver of
expenses by the advisor, sub-advisor or their affiliates, but 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. If performance information
included the effect of these additional amounts, returns would be lower.
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<PAGE>
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP are the Trust's independent accountants. The
financial statements as of December 31, 1999 and for the fiscal years or periods
ended December 31, 1999 and December 31, 1998 incorporated by reference in this
SAI have been so incorporated, and the schedules of financial highlights for the
periods ended December 31, 1999 have been included in the Prospectus, in
reliance upon the report of PricewaterhouseCoopers LLP given on the authority of
said firm as experts in accounting and auditing.
The financial statements of the Trust and Report of Independent
Accountants appearing in the December 31, 1999 Annual Report of the Trust are
incorporated in this SAI by reference.
58
<PAGE>
PART C. OTHER INFORMATION
Colonial Growth and Income Fund, Variable Series (CG&IF, VS)
Stein Roe Global Utilities Fund, Variable Series (SRGUF, VS)
Colonial Small Cap Value Fund, Variable Series (CSCVF, VS)
Colonial U.S. Growth & Income Fund, Variable Series (CUSG&IF, VS)
Colonial Strategic Income Fund, Variable Series (CSIF, VS)
Colonial High Yield Securities Fund, Variable Series (CHYSF, VS)
Liberty All-Star Equity Fund, Variable Series (LASEF, VS)
Colonial International Fund for Growth, Variable Series (CIFfG, VS)
Newport Tiger Fund, Variable Series (NTF, VS)
Colonial International Horizons Fund, Variable Series (CIHF, VS)
Colonial Global Equity Fund, Variable Series (CGEF, VS)
Crabbe Huson Real Estate Investment Fund, Variable Series (CHREIF, VS)
<TABLE>
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Item 23. Exhibits:
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(a)(1) Agreement and Declaration of Trust(3)
(a)(2) Amended and Restated Establishment and Designation(1)
(b) Amended and Restated 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, SRGUF, VS
and Liberty Advisory Services Corp. ("LASC")(3)
(d)(1)(ii) Amendment No. 1 to Management Agreements between the
Trust, with respect to CG&IF, VS, SRGUF, VS, CIFfG, VS, CUSG&IF,
VS, CSIF, VS and LASC(3)
(d)(1)(iii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CG&IF, VS, LASC and Colonial Management Associates, Inc.
("Colonial")
(d)(1)(iv) Form of Sub-Advisory Agreement between the Trust, on behalf of
SRGUF, VS, LASC and Stein Roe & Farnham Incoporated
("Stein Roe")
(d)(2)(i) Form of Management Agreement between the Trust, with respect to
CSCVF, VS, CHYSF, VS and LASC(3)
(d)(2)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CSCVF, VS, LASC and Colonial(3)
(d)(2)(iii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CHYSF, VS, LASC and Colonial(3)
(d)(3)(i) Form of Management Agreement between the Trust, with respect to
CIFfG, VS, CUSG&IF, VS, CSIF, VS and LASC(3)
(d)(3)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CIFfG, VS, LASC and Colonial(1)
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(d)(3)(iii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CUSG&IF, VS, LASC and Colonial(1)
(d)(3)(iv) Form of Sub-Advisory Agreement between the Trust, on behalf of
CSIF, VS, LASC and Colonial(4)
(d)(4)(i) Form of Management and Sub-Advisory
Agreement between the Trust, with respect to LASEF, VS, LASC
and Liberty Asset Management Company ("LAMCO")(3)
(d)(4)(ii) Form of Portfolio Management Agreement between the Trust,
LAMCO and Boston Partners Asset Management, L.P., with
respect to LASEF, VS(1)
(d)(4)(iii) Form of Portfolio Management Agreement between the Trust,
LAMCO and J.P. Morgan Investment Management, Inc., with
respect to LASEF, VS(1)
(d)(4)(iv) Form of Portfolio Management Agreement between the Trust,
LAMCO and Oppenheimer Capital, with respect to LASEF, VS(1)
(d)(4)(v) Form of Portfolio Management Agreement between the Trust,
LAMCO and Westwood Management Corp., with respect
to LASEF, VS(1)
(d)(4)(vi) Form of Portfolio Management Agreement between the Trust,
LAMCO and Wilke/Thompson Capital Management, Inc., with
respect to LASEF, VS(1)
(d)(5)(i) Form of Management Agreement between the Trust, with respect
to NTF, VS and LASC(3)
(d)(5)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of
NTF, VS, LASC and Newport Fund Management, Inc.(3)
(d)(6)(i) Form of Management Agreement between the Trust, with respect to
CIHF, VS, CGEF, VS, CHREIF, VS and LASC(1)
(d)(6)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CIHF, VS, LASC and Colonial(1)
(d)(7) Form of Sub-Advisory Agreement between the Trust, on behalf of
CGEF, VS, LASC and Colonial(1)
(d)(8) Form of Sub-Advisory Agreement between the Trust, on behalf of
CHREIF, VS, LASC and Crabbe Huson Group, Inc.(1)
(e)(1)(i) Underwriting Agreement between the Registrant and Keyport Financial
Services Corp. ("KFSC")(1)
(e)(1)(ii) Amendment No. 1 to KFSC Underwriting Agreement(1)
(e)(2) Underwriting Agreement between the Registrant and Liberty Funds
Distributor, Inc. (LFDI)(3)
(e)(3) 12b-1 Plan Implementing Agreement between the Registrant and KFSC(1)
</TABLE>
<PAGE>
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(e)(4) 12b-1 Plan Implementing Agreement between the Registrant and LFDI(1)
(f) Not applicable
(g)(1)(i) Global Custody Agreement with The Chase Manhattan Bank - filed as Exhibit 8.
in Part C, Item 24(b) of Post-Effective Amendment No 13 to the Registration
Statement on Form N-1A of Colonial Trust VI (File Nos. 33-45117 and 811-6529) and
is hereby incorporated by reference and made a part of this Registration Statement
(g)(1)(ii) Amendment No. 12 to Appendix A of Custody Agreement with the Chase Manhattan Bank(1)
(h)(1)(i) Pricing and Bookkeeping Agreement between the Trust and Colonial(3)
(h)(1)(ii) Amendment No. 3 to Pricing and Bookkeeping Agreement(3)
(h)(2)(i) Transfer Agency Agreement between the Trust and Liberty Investment Services, Inc.(1)
(h)(2)(ii) Amendment No. 1 to Transfer Agency Agreement(1)
(h)(2)(iii) 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)(3)
(h)(2)(iv) Amendment No. 2 to Transfer Agency Agreement(3)
(h)(2)(v) Amendment No. 3 to Transfer Agency Agreement(3)
(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(1)
(j) Not applicable
(k) Not applicable
(l) Not applicable
(m) Rule 12b-1 Distribution Plan(1)
(n) Not applicable
(o) Not Applicable
(p)(1) Code of Ethics of LASC(5)
(p)(2) Code of Ethics of LAMCO
(p)(3) Code of Ethics of Funds, LFDI and Colonial(5)
(p)(4) Code of Ethics of Newport(5)
(p)(5) Code of Ethics of Stein Roe
(p)(6) Code of Ethics of Crabbe Huson(1)
</TABLE>
<PAGE>
Power of Attorney for: 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
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(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.
(3) Incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement filed with the Commission via EDGAR on or about April
16, 1999.
(4) Incorporated by reference to Post-Effective Amendment No. 18 to the
Registration Statement filed with the Commission via EDGAR on or about June
1, 1999.
(5) Incorporated by reference to Post-Effective Amendment No. 19 to the
Registration Statement filed with the Commission via EDGAR on or about March
16, 2000.
</TABLE>
<TABLE>
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Item 24. Persons Controlled by or under Common Control with Registrant
Shares of the Trust registered pursuant to
this Registration Statement will be offered
and sold to Keyport Life Insurance Company
("Keyport"), a stock life insurance company
organized under the laws of Rhode Island, and
to certain of its separate investment
accounts and certain of the respective
separate investment accounts of Liberty Life
Assurance Company of Boston ("Liberty Life"),
a stock life insurance company organized as a
Massachusetts corporation, and Independence
Life & Annuity Company, a stock life
insurance company organized under the laws of
Rhode Island (formerly known as "Crown
America Life Insurance Company" and
thereafter formerly known as "Keyport America
Life Insurance Company")("Independence").
Shares of the Registrant may also be sold to
other separate accounts of Keyport, Liberty
Life, Independence or other life insurance
companies as the funding medium for other
insurance contracts and policies in addition
to the currently offered contracts and
policies. The purchasers of insurance
contracts and policies issued in connection
with such accounts will have the right to
instruct Keyport, Liberty Life and
Independence with respect to the voting of
the Registrant's shares held by their
respective separate accounts. Subject to such
voting instruction rights, Keyport, Liberty
Life, Independence and their respective
separate accounts directly control the
Registrant.
LFDI, the Trust's principal underwriter,
LASC, the Trust's investment manager,
Colonial, LASC's sub-adviser with respect to
G&IF, IFFG, USG&IF, SCVF, HYSF, IHF, GEF,
SIF, Stein Roe, LASC's sub-adviser with
respect to GUF, Newport, LASC's sub-adviser
with respect to NTF, LAMCO, LASC's
sub-adviser with respect to All-Star, Crabbe
Huson, LASC's sub-adviser with respect to
REIF, are subsidiaries of Liberty Financial
Companies, Inc. ("Liberty Financial"),
Boston,
</TABLE>
<PAGE>
<TABLE>
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Massachusetts. Liberty Mutual Insurance
Company ("Liberty Mutual"), Boston,
Massachusetts, as of December 31, 1999 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;
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(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.
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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
Adviser
Certain information pertaining to business
and other connections of the Registrant's
investment manager, LASC, Colonial, the
sub-adviser to each of G&IF, IFFG, USG&IF,
IHF, GEF, SCVF, HYSF, SIF, Stein Roe, the
sub-adviser to GUF, Newport, the sub-adviser
to NTF, Crabbe Huson, the sub-adviser to REIF
and LAMCO, the sub-adviser to All-Star Fund,
and each of J.P. Morgan Investment
Management, Inc., Oppenheimer Capital,
Westwood Management Corp., TCW Investment
Management Company 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 G&IF,
IFFG, USG&IF, SCVF, HYSF, IHF, GEF, SIF, GUF,
NTF, REIF and All-Star Fund captioned "TRUST
MANAGEMENT ORGANIZATIONS" and to the
</TABLE>
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section of the Statement of Additional
Information relating to those Funds captioned
"INVESTMENT MANAGEMENT AND OTHER SERVICES."
Set forth below is a list of each director and
officer of LASC, and each director and certain
officers of Colonial, Newport, Stein Roe,
Crabbe Huson, 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>
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <C> <C>
Philip K. Polkinghorn President, Director
Stewart R. Morrison Diector, Senior Vice President Senior Vice President and Chief
and Chief Investment Officer Investment Officer of Keyport
James J. Klopper Vice President and Clerk Vice President, Counsel and
Secretary of Keyport; Clerk of KFSC
Daniel C. Bryant Vice President Vice President and Assistant
Secretary of Keyport
(since December, 1997): Chief Legal
Counsel, Department of Business
Regulation, State of Rhode Island
(March, 1995 to November, 1997)
Jeffrey J. Whitehead Vice President and Treasurer Vice President and Treasurer
of Keyport
Jacob M. Herschler Vice President Vice President of Keyport
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)
</TABLE>
Registrant's investment advisor, Colonial Management
Associates, Inc. ("Colonial"), is registered as an investment adviser under
the Investment Advisers Act of 1940("Advisers Act"). Colonial Advisory Services,
Inc. ("CASI"), an affiliate of Colonial, is also registered as an investment
advisor under the 1940 Act. As of the end of the fiscal year, December
31, 1999, CASI had four institutional, corporate or other accounts under
management or supervision, the total market value of which was approximately
$704 million. As of the end of the fiscal year, December 31, 1999,
Colonial was the investment advisor, sub-advisor and/or administrator to 71
mutual funds, including funds sub-advised by Colonial, the total market value of
which investment companies was approximately $18,589.50 million. Liberty
Funds Distributor, Inc., a subsidiary of Colonial Management Associates,
Inc., is the principal underwriter and the national distributor of all of
the funds in the Liberty Mutual Funds complex, including the Registrant.
The following sets forth the business and other connections of each
director and officer of Colonial Management Associates, Inc.:
(1) (2) (3) (4)
Name and principal
business
addresses* Affiliation
of officers and with Period is through 2/29/00. Other
directors of investment business, profession, vocation or
investment adviser adviser employment connection Affiliation
- ------------------ ---------- -------------------------------- -----------
Allard, Laurie V.P.
Archer, Joseph A. V.P.
Ballou, William J. V.P., Liberty Funds Trust I through
Asst. IX Asst. Sec.
Sec., Colonial High Income
Counsel Municipal Trust Asst. Sec.
Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
AlphaTrade Inc. Asst. Clerk
Liberty Funds Distributor,
Inc. Asst. Clerk
Liberty Funds Group LLC Asst. Sec.
Liberty Variable Investment
Trust Asst. Sec.
Liberty All-Star Equity Fund Asst. Sec.
Liberty All-Star Growth Fund,
Inc. Asst. Sec.
Colonial Insured Municipal Fund Asst. Sec
Colonial California Insured
Municipal Fund Asst. Sec
Colonial New York Insured
Municipal Fund Asst. Sec
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund Asst. Sec
Barron, Suzan M. V.P., Liberty Funds Trust I through
Asst. IX Asst. Sec.
Sec., Colonial High Income
Counsel Municipal Trust Asst. Sec.
Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
AlphaTrade Inc. Asst. Clerk
Liberty Funds Distributor,
Inc. Asst. Clerk
Liberty Funds Group LLC Asst. Sec.
Liberty Variable Investment
Trust Asst. Sec.
Liberty All-Star Equity Fund Asst. Sec.
Liberty All-Star Growth Fund,
Inc. Asst. Sec.
Colonial Insured Municipal Fund Asst. Sec
Colonial California Insured
Municipal Fund Asst. Sec
Colonial New York Insured
Municipal Fund Asst. Sec
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund Asst. Sec
Barsketis, Ophelia Sr.V.P. Stein Roe & Farnham Incorporated Snr. V.P.
Berliant, Allan V.P.
Bissonnette,
Michael Sr.V.P.
Boatman, Bonny E. Sr.V.P.; Colonial Advisory Services, Exec. V.P.
IPC Mbr. Inc.
Stein Roe & Farnham
Incorporated Exec. V.P.
Bunten, Walter V.P.
Campbell, Kimberly V.P.
Carnabucci,
Dominick V.P.
Carome, Kevin M. Sr.V.P.; Liberty Funds Distributor,
IPC Mbr. Inc. Assistant Clerk
Liberty Funds Group LLC Sr. V.P.;
General Counsel
Stein Roe & Farnham General Counsel;
Incorporated Secretary
Stein Roe Services, Inc. Asst. Clerk
Liberty-Stein Roe Funds
Investment Trust Exec. V.P.;
Asst. Sec
Liberty-Stein Roe Funds Income
Trust Exec. V.P.;
Asst. Sec
Liberty-Stein Roe Funds
Institutional Trust Exec. V.P.;
Asst. Sec
Liberty-Stein Roe Funds Trust Exec. V.P.;
Asst. Sec
Liberty-Stein Roe Funds
Municipal Trust Exec. V.P.;
Asst. Sec
Liberty-Stein Roe Advisor Trust Exec. V.P.;
Asst. Sec
SR&F Base Trust Exec. V.P.;
Asst. Sec
Stein Roe Variable Investment
Trust Exec. V.P.;
Asst. Sec
Liberty-Stein Roe Advisor
Floating Rate Fund Exec. V.P.;
Asst. Sec
Liberty-Stein Roe Institutional
Floating Rate Income Fund Exec. V.P.;
Asst. Sec
Stein Roe Floating Rate
Limited Liability Company Exec. V.P.;
Asst. Sec
Carroll, Sheila A. Sr.V.P.
Citrone, Frank, Jr. Sr.V.P.
Conlin, Nancy L. Sr. V.P.; Liberty Funds Trust I through
Sec.; Clerk IX Secretary
IPC Mbr.; Colonial High Income
Dir; Gen. Municipal Trust Secretary
Counsel Colonial InterMarket Income
Trust I Secretary
Colonial Intermediate High
Income Fund Secretary
Colonial Investment Grade
Municipal Trust Secretary
Colonial Municipal Income
Trust Secretary
Liberty Funds Distributor,
Inc. Dir.; Clerk
Liberty Funds Services, Inc. Clerk; Dir.
Liberty Funds Group LLC V.P.; Gen.
Counsel and
Secretary
Liberty Variable Investment
Trust Secretary
Colonial Advisory Services,
Inc. Dir.; Clerk
AlphaTrade Inc. Dir.; Clerk
Liberty All-Star Equity Fund Secretary
Liberty All-Star Growth Fund,
Inc. Secretary
Colonial Insured Municipal Fund Secretary
Colonial California Insured
Municipal Fund Secretary
Colonial New York Insured
Municipal Fund Secretary
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund Secretary
Connaughton, V.P. Liberty Funds Trust I through
J. Kevin VIII CAO; Controller
Liberty Variable Investment
Trust CAO; Controller
Colonial High Income
Municipal Trust CAO; Controller
Colonial Intermarket Income
Trust I CAO; Controller
Colonial Intermediate High
Income Fund CAO; Controller
Colonial Investment Grade
Municipal Trust CAO; Controller
Colonial Municipal Income
Trust CAO; Controller
Liberty All-Star Equity Fund Controller
Liberty All-Star Growth Fund,
Inc. Controller
Liberty Funds Trust IX Controller
Colonial Insured Municipal Fund CAO; Controller
Colonial California Insured
Municipal Fund CAO; Controller
Colonial New York Insured
Municipal Fund CAO; Controller
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund CAO; Controller
Liberty-Stein Roe Funds
Investment Trust V.P.; Treasurer
Liberty-Stein Roe Funds Income
Trust V.P.; Treasurer
Liberty-Stein Roe Funds
Institutional Trust V.P.; Treasurer
Liberty-Stein Roe Funds Trust V.P.; Treasurer
Liberty-Stein Roe Funds
Municipal Trust V.P.; Treasurer
Liberty-Stein Roe Advisor Trust V.P.; Treasurer
SR&F Base Trust V.P.; Treasurer
Stein Roe Variable Investment
Trust V.P.; Treasurer
Liberty-Stein Roe Advisor
Floating Rate Fund V.P.; Treasurer
Liberty-Stein Roe Institutional
Floating Rate Income Fund V.P.; Treasurer
Stein Roe Floating Rate
Limited Liability Company V.P.; Treasurer
Daniszewski, V.P.
Joseph J.
Dearborn, James V.P.
Desilets, Marian H. V.P. Liberty Funds Distributor,
Inc. V.P.
Liberty Funds Trust I through
IX Asst. Sec.
Colonial High Income
Municipal Trust Asst. Sec.
Colonial Intermarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
Liberty Variable Investment
Trust Asst. Sec.
Liberty All-Star Equity Fund Asst. Sec.
Liberty All-Star Growth Fund,
Inc. Asst. Sec.
Colonial Insured Municipal Fund Asst. Sec
Colonial California Insured
Municipal Fund Asst. Sec
Colonial New York Insured
Municipal Fund Asst. Sec
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund Asst. Sec
DiSilva-Begley, V.P. Colonial Advisory Services, Compliance
Linda IPC Mbr. Inc. Officer
Eckelman, Marilyn Sr.V.P.
Ericson, Carl C. Sr.V.P. Colonial Intermediate High
IPC Mbr. Income Fund V.P.
Colonial Advisory Services, Pres.; CEO
Inc. and CIO
Evans, C. Frazier Sr.V.P. Liberty Funds Distributor,
Inc. Mng. Director
Finnemore, Sr.V.P. Colonial Advisory Services,
Leslie W. Inc. Sr. V.P.
Franklin, Sr. V.P. AlphaTrade Inc. President
Fred J. IPC Mbr. Liberty Financial Companies, Chief
Inc. Compliance Ofcr;
V.P.
Garrison, V.P. Stein Roe & Farnham
William M. Incorporated V.P.
Gibson, Stephen E. Dir.; Pres.; Liberty Funds Group LLC Dir.;
CEO; Pres.; CEO;
Chairman of Exec. Cmte.
the Board; Mbr.; Chm.
IPC Mbr. Liberty Funds Distributor,
Inc. Dir.; Chm.
Colonial Advisory Services,
Inc. Dir.; Chm.
Liberty Funds Services, Inc. Dir.; Chm.
AlphaTrade Inc. Dir.
Liberty Funds Trust I through
VIII President
Colonial High Income
Municipal Trust President
Colonial InterMarket Income
Trust I President
Colonial Intermediate High
Income Fund President
Colonial Investment Grade
Municipal Trust President
Colonial Municipal Income
Trust President
Stein Roe & Farnham Asst. Chairman;
Incorporated President
Liberty Variable Investment
Trust President
Colonial Insured Municipal Fund President
Colonial California Insured
Municipal Fund President
Colonial New York Insured
Municipal Fund President
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund President
Liberty-Stein Roe Funds
Investment Trust President
Liberty-Stein Roe Funds Income
Trust President
Liberty-Stein Roe Funds
Institutional Trust President
Liberty-Stein Roe Funds Trust President
Liberty-Stein Roe Funds
Municipal Trust President
Liberty-Stein Roe Advisor Trust President
SR&F Base Trust President
Stein Roe Variable Investment
Trust President
Liberty-Stein Roe Advisor
Floating Rate Fund President
Liberty-Stein Roe Institutional
Floating Rate Income Fund President
Stein Roe Floating Rate
Limited Liability Company President
Hansen, Loren A. Sr. V.P.; Stein Roe & Farnham
IPC Mbr. Incorporated Exec. V.P.
Liberty-Stein Roe Funds
Investment Trust Exec. V.P.
Liberty-Stein Roe Funds Income
Trust Exec. V.P.
Liberty-Stein Roe Funds
Institutional Trust Exec. V.P.
Liberty-Stein Roe Funds Trust Exec. V.P.
Liberty-Stein Roe Funds
Municipal Trust Exec. V.P.
Liberty-Stein Roe Advisor Trust Exec. V.P.
SR&F Base Trust Exec. V.P.
Stein Roe Variable Investment
Trust Exec. V.P.
Liberty-Stein Roe Advisor
Floating Rate Fund Exec. V.P.
Liberty-Stein Roe Institutional
Floating Rate Income Fund Exec. V.P.
Stein Roe Floating Rate
Limited Liability Company Exec. V.P.
Harasimowicz, V.P.
Stephen
Hartford, Brian Sr.V.P. Liberty-Stein Roe Funds
Municipal Trust V.P.
Haynie, James P. Sr.V.P. Colonial Advisory Services,
Inc. Sr. V.P.
Stein Roe & Farnham
Incorporated Sr. V.P.
Held, Dorothy V.P.
Hernon, Mary V.P.
Hirschhorn,
Harvey B. Sr. V.P. Stein Roe & Farnham
Incorporated Exec. V.P.
Hounsell, Clare F. V.P. Stein Roe & Farnham
Incorporated V.P.
Iudice, V.P.; Liberty Funds Group LLC Controller,
Philip J., Jr. Controller CAO, Asst.
Asst. Treas.
Treasurer Liberty Funds Distributor, CFO,
Inc. Treasurer
Colonial Advisory Services, Controller;
Inc. Asst. Treas.
AlphaTrade Inc. CFO, Treas.
Jacoby, Timothy J. Sr. V.P.; Liberty Funds Group LLC V.P., Treasr.,
CFO
Liberty Funds Trust I through
VIII Treasr.,CFO
Colonial High Income
Municipal Trust Treasr.,CFO
Colonial InterMarket Income
Trust I Treasr.,CFO
Colonial Intermediate High
Income Fund Treasr.,CFO
Colonial Investment Grade
Municipal Trust Treasr.,CFO
Colonial Municipal Income
Trust Treasr.,CFO
Colonial Advisory Services,
Inc. CFO, Treasr.
Stein Roe & Farnham
Incorporated Snr. V.P.
Liberty Variable Investment
Trust Treasurer, CFO
Liberty All-Star Equity Fund Treasurer
Liberty All-Star Growth Fund,
Inc. Treasurer
Liberty Funds Trust IX Treasurer
Colonial Insured Municipal Fund Treasr.; CFO
Colonial California Insured
Municipal Fund Treasr.; CFO
Colonial New York Insured
Municipal Fund Treasr.; CFO
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund Treasr.; CFO
Liberty-Stein Roe Funds
Investment Trust Senior V.P.
Liberty-Stein Roe Funds Income
Trust Senior V.P.
Liberty-Stein Roe Funds
Institutional Trust Senior V.P.
Liberty-Stein Roe Funds Trust Senior V.P.
Liberty-Stein Roe Funds
Municipal Trust Senior V.P.
Liberty-Stein Roe Advisor Trust Senior V.P.
SR&F Base Trust Senior V.P.
Stein Roe Variable Investment
Trust Senior V.P.
Liberty-Stein Roe Advisor
Floating Rate Fund Senior V.P.
Liberty-Stein Roe Institutional
Floating Rate Income Fund Senior V.P.
Stein Roe Floating Rate
Limited Liability Company Senior V.P.
Jansen, Deborah Sr.V.P. Stein Roe & Farnham
Incorporated Senior V.P.
Jersild, North T. V.P. Stein Roe & Farnham
Incorporated V.P.
Johnson, Gordon V.P.
Kennedy, Michael T. Sr.V.P. Stein Roe & Farnham
Incorporated Sr. V.P.
Knudsen, Gail E. V.P. Liberty Funds Trust I through
IX Asst. Treas.
Colonial High Income
Municipal Trust Asst. Treas.
Colonial InterMarket Income
Trust I Asst. Treas.
Colonial Intermediate High
Income Fund Asst. Treas.
Colonial Investment Grade
Municipal Trust Asst. Treas.
Colonial Municipal Income
Trust Asst. Treas.
Liberty Variable Investment
Trust Asst. Treas.
Liberty All-Star Equity Fund Asst. Treas.
Liberty All-Star Growth Fund,
Inc. Asst. Treas.
Colonial Insured Municipal Fund Asst. Treas.
Colonial California Insured
Municipal Fund Asst. Treas.
Colonial New York Insured
Municipal Fund Asst. Treas.
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund Asst. Treas.
Liberty-Stein Roe Funds
Investment Trust V.P.; Controller
Liberty-Stein Roe Funds Income
Trust V.P.; Controller
Liberty-Stein Roe Funds
Institutional Trust V.P.; Controller
Liberty-Stein Roe Funds Trust V.P.; Controller
Liberty-Stein Roe Funds
Municipal Trust V.P.; Controller
Liberty-Stein Roe Advisor TrustV.P.; Controller
SR&F Base Trust V.P.; Controller
Stein Roe Variable Investment
Trust V.P.; Controller
Liberty-Stein Roe Advisor
Floating Rate Fund V.P.; Controller
Liberty-Stein Roe Institutional
Floating Rate Income Fund V.P.; Controller
Stein Roe Floating Rate
Limited Liability Company V.P.; Controller
Lal, Ishwar V.P.
Lapointe, Thomas V.P.
Lasman, Gary V.P.
Lennon, John E. Sr.V.P. Colonial Advisory Services,
Inc. V.P.
Lenzi, Sharon V.P.
Lessard, Kristen V.P.
Loring, William
C., Jr. Sr.V.P. Liberty-Stein Roe Funds
Municipal Trust V.P.
MacKinnon,
Donald S. Sr.V.P.
Marcus, Harold V.P.
McGrath, Pamela Sr.V.P.;
CFO;
Treasurer
Muldoon, Robert V.P.
Newman, Maureen Sr.V.P. Liberty-Stein Roe Funds
Municipal Trust V.P.
Liberty-Stein Roe Advisor Trust V.P.
SR&F Base Trust V.P.
O'Brien, David Sr.V.P.
Olsheskie, Mark V.P.
Ostrander, Laura Sr.V.P. Colonial Advisory Services,
Inc. V.P.
Palombo, Joseph R. Dir.; Colonial Advisory Services,
Exe.V.P.; Inc. Dir.
IPC Mbr.; Colonial High Income
Municipal Trust V.P.
Colonial InterMarket Income
Trust I V.P.
Colonial Intermediate High
Income Fund V.P.
Colonial Investment Grade
Municipal Trust V.P.
Colonial Municipal Income
Trust V.P.
Liberty Funds Trust I through
IX V.P.
Liberty Funds Services, Inc. Director
Liberty Funds Group LLC CAO; Ex. V.P.
Liberty Funds Distributor,
Inc. Director
AlphaTrade Inc. Director
Stein Roe & Farnham
Incorporated Exec. V.P.
Liberty Variable Investment
Trust V.P.
Liberty All-Star Equity Fund V.P.
Liberty All-Star Growth Fund,
Inc. V.P.
Colonial Insured Municipal Fund V.P.
Colonial California Insured
Municipal Fund V.P.
Colonial New York Insured
Municipal Fund V.P.
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund V.P.
Peishoff, William V.P.
Peterson, Ann T. V.P. Colonial Advisory Services,
Inc. V.P.
Pielech, Mitchell V.P.
Pietropaolo,
Vincent V.P.; Liberty Funds Group LLC Asst. Sec.
Asst.
Sec.;
Counsel
Pope, David V.P.
Quirk, Alison Sr. V.P.
Reading, John V.P.; Liberty Funds Services, Inc. Asst. Clerk
Asst. Liberty Funds Group LLC Asst. Sec.
Sec.; Colonial Advisory Services,
Asst. Inc. Asst. Clerk
Clerk and Liberty Funds Distributor,
Counsel Inc. Asst. Clerk
AlphaTrade Inc. Asst. Clerk
Liberty Funds Trust I through
IX Asst. Sec.
Colonial High Income
Municipal Trust Asst. Sec.
Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
Liberty Variable Investment
Trust Asst. Sec.
Liberty All-Star Equity Fund Asst. Sec.
Liberty All-Star Growth Fund,
Inc. Asst. Sec.
Colonial Insured Municipal Fund Asst. Sec
Colonial California Insured
Municipal Fund Asst. Sec
Colonial New York Insured
Municipal Fund Asst. Sec
Liberty-Stein Roe Advisor
Floating Rate Advantage Fund Asst. Sec
Rega, Michael V.P. Colonial Advisory Services,
Inc. V.P.
Richards, Scott B. Sr. V.P. Colonial Advisory Services,
Inc. Senior V.P.
Roye, Michael V.P.
Schermerhorn, Scott Sr. V.P.
Seibel, Sandra L. V.P. Colonial Advisory Services,
Inc. V.P.
Shields, Yvonne B. V.P. Stein Roe & Farnham
Incorporated V.P.
Smalley, Gregg V.P.
Spanos, Gregory J. Sr. V.P. Colonial Advisory Services,
Inc. Exec. V.P.
Stevens, Richard V.P. Colonial Advisory Services,
Inc. V.P.
Stoeckle, Mark Sr.V.P. Colonial Advisory Services,
Inc. V.P.
Swayze, Gary Sr.V.P.
Thomas, Ronald V.P.
Turcotte,
Frederick J. V.P. Liberty Funds Services, Inc. V.P.
Liberty Funds Distributor, Inc. V.P.
Colonial Advisory Services,
Inc. V.P.
AlphaTrade Inc. V.P.
Liberty Funds Group LLC V.P.
Liberty Financial Services,
Inc. V.P.
Liberty Financial Companies,
Inc. V.P. and
Managing Dir
of Taxation
LREG, Inc. V.P.
Liberty Newport Holdings,
Limited V.P.
Newport Pacific Management,
Inc. V.P.
Newport Fund Management, Inc. V.P.
Newport Private Equity Asia,
Inc. V.P.
Independent Holdings, Inc. V.P.
IFS Agencies, Inc. V.P.
IFMG Agencies of Maine, Inc. V.P.
IFMG of Oklahoma, Inc. V.P.
IFS Agencies of Alabama, Inc. V.P.
IFS Agencies of New Mexico,
Inc. V.P.
IFS Insurance Agencies of
Ohio, Inc. V.P.
IFS Insurance Agencies of
Texas, Inc. V.P.
Liberty Securities Corporation V.P.
Stein Roe Services, Inc. V.P.
Stein Roe & Farnham
Incorporated V.P.
Stein Roe Futures, Inc. V.P.
Progress Investment Management
Company V.P.
Crabbe Huson Group, Inc. V.P.
Wallace, John R. V.P. Colonial Advisory Services,
Asst.Tres. Inc. Asst. Treas.
Liberty Funds Group LLC Asst. Treas.
Ware, Elizabeth M. V.P.
White, John V.P.
Wiley, Christine V.P.
Wiley, Peter V.P.
- ------------------------------------------------
*The Principal address of all of the officers and directors of the investment
advisor is One Financial Center, Boston, MA 02111.
<PAGE>
Newport
The business and other connections of the officers,
directors of Newport are listed on the Form ADV of
Newport Fund Management, Inc. as currently on file with
the Commission, the text of which is
incorporated herein by reference: (a) Items 1 and 2 of
Part 2, and (b) Section 6, Business Background of each
Schedule D.
Stein Roe
The business and other connections of the officers,
directors of Stein Roe are listed on the Form ADV of
Stein Roe & Farnham Incorporated as currently on file
with the Commission (File No. 801-27653), the text of
which is incorporated herein by reference: (a) Items 1
and 2 of Part 2, and (b) Section 6, Business Background
of each Schedule D.
Crabbe Huson Group, Inc.
The business and other connections of the officers,
directors of Crabbe Huson are listed on the Form ADV of
Crabbe Huson Group, Inc. as currently on file with
the Commission (File No. 801-15154), the text of which is
incorporated herein by reference: (a) Items 1 and 2 of
Part 2, and (b) Section 6, Business Background of each
Schedule D.
LAMCO
The business and other connections of the officers,
directors of LAMCO are listed on the Form ADV of
Liberty Asset Management Company as currently on file
with the Commission (File No. 801-26296), the text of
which is incorporated herein by reference: (a) Items 1
and 2 of Part 2, and (b) Section 6, Business Background
of each Schedule D.
The business and other connections of the officers, directors or partners of the
Portfolio Managers of LASEF,VS is incorporated by reference from the respective
Portfolio Manager's Form ADV, as most recently filed with the Securities and
Exchange Commission. The file numbers of such ADV Forms are as follows:
Oppenheimer Capital 801-27180
J.P. Morgan Investment Management Inc. 801-9755
Westwood Management Corporation 801-18727
Boston Partners Asset Management, L.P. 801-49059
TCW Investment Management Company 801-29075
Item 27. Principal Underwriter
(a) Liberty Funds Distributor, Inc. (LFDI), a subsidiary of Colonial
Management Associates, Inc., is the Registrant's principal
underwriter. LFDI acts in such capacity for each series of Liberty Funds
Trust I, Liberty Funds Trust II, Liberty Funds Trust III, Liberty Funds
Trust IV, Liberty Funds Trust V, Liberty Funds Trust VI, Liberty Funds
Trust VII, Liberty Funds Trust IX, Liberty Variable Investment Trust,
Liberty-Stein Roe Advisor Trust, Stein Roe Income Trust, Stein Roe
Municipal Trust, Stein Roe Investment Trust, Stein Roe Floating Rate
Income Fund, Stein Roe Institutional Floating Rate Income Fund,
SteinRoe Variable Investment Trust and Stein Roe Trust.
(b) The table below lists each director or officer of the principal
underwriter named in the answer to Item 21.
(1) (2) (3)
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- ------------------ ------------------- --------------
Anderson, Judith V.P. None
Babbitt, Debra V.P. and None
Comp. Officer
Bartlett, John Managing Director None
Blakeslee, James Sr. V.P. None
Blumenfeld, Alex V.P. None
Bozek, James Sr. V.P. None
Brown, Beth V.P. None
Burtman, Tracy V.P. None
Carroll, Sean V.P. None
Campbell, Patrick V.P. None
Chrzanowski, V.P. None
Daniel
Clapp, Elizabeth A. Managing Director None
Claiborne, Doug V.P. None
Conlin, Nancy L. Dir; Clerk Secretary
Davey, Cynthia Sr. V.P. None
Desilets, Marian V.P. Asst. Sec
Devaney, James Sr. V.P. None
Downey, Christopher V.P. None
Dupree, Robert V.P. None
Emerson, Kim P. Sr. V.P. None
Erickson, Cynthia G. Sr. V.P. None
Evans, C. Frazier Managing Director None
Evitts, Stephen V.P. None
Feldman, David Managing Director None
Fifield, Robert V.P. None
Fragasso, Philip Managing Director None
Gerokoulis, Sr. V.P. None
Stephen A.
Gibson, Stephen E. Director; Chairman President
of the Board
Goldberg, Matthew Sr. V.P. None
Grace, Anthony V.P. None
Guenard, Brian V.P. None
Harrington, Tom Sr. V.P. None
Hodgkins, Joseph Sr. V.P. None
Huennekens, James V.P. None
Hussey, Robert Sr. V.P. None
Iudice, Jr., Philip Treasurer and CFO None
Jones, Cynthia V.P. None
Jones, Jonathan V.P. None
Kelley, Terry M. V.P. None
Kelson, David W. Sr. V.P. None
Lichtenberg, Susyn V.P. None
Lynn, Jerry V.P. None
Marsh, Curtis Sr. V.P. None
Martin, John Sr. V.P. None
Martin, Peter V.P. None
McCombs, Gregory Sr. V.P. None
McKenzie, Mary V.P. None
Menchin, Catherine Sr. V.P. None
Miller, Anthony V.P. None
Moberly, Ann R. Sr. V.P. None
Morse, Jonathan V.P. None
Nickodemus, Paul V.P. None
O'Shea, Kevin Managing Director None
Palombo, Joseph R. Director Vice President
Piken, Keith V.P. None
Place, Jeffrey Managing Director None
Powell, Douglas V.P. None
Quirk, Frank V.P. None
Raftery-Arpino, Linda Sr. V.P. None
Ratto, Gregory V.P. None
Reed, Christopher B. Sr. V.P. None
Riegel, Joyce V.P. None
Robb, Douglas V.P. None
Santosuosso, Louise Sr. V.P. None
Schulman, David Sr. V.P. None
Scully-Power, Adam V.P. None
Shea, Terence V.P. None
Sideropoulos, Lou V.P. None
Sinatra, Peter V.P. None
Smith, Darren V.P. None
Soester, Trisha V.P. None
Studer, Eric V.P. None
Sweeney, Maureen V.P. None
Tambone, James CEO; Co-President None
Tasiopoulos, Lou Co-President None
Torrisi, Susan V.P. None
VanEtten, Keith H. Sr. V.P. None
Warfield, James V.P. None
Wess, Valerie Sr. V.P. None
Young, Deborah V.P. None
- --------------------------
* The address for each individual is One Financial Center, Boston, MA 02111.
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 all
series of 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
<PAGE>
<TABLE>
<S> <C>
books and records, and other records relating to its duties
as custodian. Liberty Funds Services, 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. LFDI, One Financial Center, Boston, MA 02111,
serves as principal underwriter for the Trust, and in such
capacity maintains all records required pursuant to its
underwriting Agreement with the Registrant.
Item 29. Management Services
LASC, pursuant to its Fund Managed Agreements with the Trust,
has delegated its duties thereunder to provide certain
administrative services to the Trust to Colonial and Liberty
Financial.
Item 30. Undertakings
Not Applicable
</TABLE>
<PAGE>
******************
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of Liberty
Variable Investment Trust is on file with the Secretary of State of the
Commonwealth of Massachusetts and notice is hereby given that the instrument
has been executed on behalf of the Trust by an officer of the Trust as an
officer and by its Trustees as trustees and not individually and the
obligations of or arising out of this instrument are not binding upon any of
the Trustees, officers or shareholders individually but are binding only upon
the assets and property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Liberty Variable Investment Trust,
certifies that it meets all of the requirements for effectiveness of the
Registration Statement pursuant to Rule 485(b) and has duly caused this
Post-Effective Amendment No. 20 to its Registration Statement under the
Securities Act of 1933 and Amendment No. 21 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 31st day of
March, 2000.
LIBERTY VARIABLE INVESTMENT TRUST
By: /s/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>
/s/STEPHEN E. GIBSON President (chief March 31, 2000
Stephen E. Gibson Executive officer)
/s/TIMOTHY J. JACOBY Treasurer and Chief March 31, 2000
Timothy J. Jacoby Financial Officer (principal
financial officer)
/s/J. KEVIN CONNAUGHTON Controller and Chief March 31, 2000
J. Kevin Connaughton Accounting Officer (principal
accounting officer)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOM BLEASDALE* Trustee
Tom Bleasdale
JOHN V. CARBERRY* Trustee
John V. Carberry
LORA S. COLLINS* Trustee
Lora S. Collins
JAMES E. GRINNELL* Trustee
James E. Grinnell
RICHARD W. LOWRY* Trustee */s/ SUZAN M. BARRON
Richard W. Lowry Suzan M. Barron
Attorney-in-fact
For each Trustee
SALVATORE MACERA* Trustee March 31, 2000
Salvatore Macera
WILLIAM E. MAYER* Trustee
William E. Mayer
JAMES L. MOODY, JR. * Trustee
James L. Moody, Jr.
JOHN J. NEUHAUSER* Trustee
John J. Neuhauser
THOMAS E. STITZEL* Trustee
Thomas E. Stitzel
ROBERT L. SULLIVAN* Trustee
Robert L. Sullivan
ANNE-LEE VERVILLE* Trustee
Anne-Lee Verville
</TABLE>
<PAGE>
EXHIBITS
(d)(1)(iii) Form of Sub-Advisory Agreement between the Trust, on behalf of
CG&IF, VS, LASC and Colonial Management Associates, Inc.
("Colonial")
(d)(1)(iv) Form of Sub-Advisory Agreement between the Trust, on behalf of
SRGUF, VS, LASC and Stein Roe & Farnham Incoporated
("Stein Roe")
(p)(2) Code of Ethics of LAMCO
(p)(5) Code of Ethics of Stein Roe
COLONIAL-KEYPORT GROWTH AND INCOME FUND
COLONIAL MANAGEMENT SUB-ADVISORY AGREEMENT
AGREEMENT dated June 7, 1993 among KEYPORT VARIABLE INVESTMENT TRUST, a
Massachusetts business trust (the "Trust") with respect to COLONIAL-KEYPORT
GROWTH AND INCOME FUND (the "Fund"), KEYPORT ADVISORY SERVICES CORP., a
Massachusetts corporation ("Adviser"), and COLONIAL MANAGEMENT ASSOCIATES, INC.,
a Massachusetts corporation (the "Sub-Adviser").
In consideration of the promises and covenants herein, the parties agree as
follows:
1. The Sub-Adviser will manage the investment of the assets of the Fund in
accordance with its investment objective, policies and limitations set forth in
the Trust's prospectus and statement of additional information as amended from
time to time, and will perform the other services herein set forth, subject to
the supervision of the Adviser and the Board of Trustees of the Trust.
2. In carrying out its investment management obligations, the Sub-Adviser shall:
(a) evaluate such economic, statistical and financial information and undertake
such investment research as it shall believe advisable;
(b) purchase and sell securities and other investments for the Fund in
accordance with the procedures described in the Trust's prospectus and statement
of additional information; and
(c) report results to the Adviser and to the Board of Trustees.
3. The Sub-Adviser shall be free to render similar services to others so long as
its services hereunder are not impaired thereby.
4. The Advisor shall pay the Sub-Adviser a monthly fee at the annual rate
of 0.45% of the average daily net assets of the Fund for managing the investment
of the assets of the Fund s provided in 1. above.
5. This Agreement shall become effective on the date first written above, and
(a) unless otherwise terminated, shall continue until two years from the date of
its execution and from year to year thereafter so long as approved annually in
accordance with the Investment Company Act of 1940 (the "1940 Act"); (b) may be
terminated without penalty on sixty days' written notice to the Sub-Adviser
either by vote of the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the Fund; (c) shall automatically terminate
in the event of its assignment; and (d) may be terminated without penalty by the
Sub-Adviser on sixty day's written notice to the Trust.
6. This Agreement may be amended in accordance with the 1940 Act.
7. For the purpose of the Agreement, the terms "vote of a majority of the
outstanding shares," "affiliated person" and "assignment" shall have their
respective meanings defined in the 1940 Act and exemptions and interpretations
issued by the Securities and Exchange Commission under the 1940 Act.
8. In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Sub-Adviser, or reckless disregard of its obligation and duties
hereunder, the Sub-Adviser shall not be subject to any liability to the Trust or
the Fund, to any shareholder of the Trust or the Fund or to any other person,
firm or organization, for any act or omission in the course of or connection
with rendering services hereunder.
9. The Fund may use the name "Colonial", or any other name derived from the
name "Colonial" only for so long as this Agreement or any extension, renewal, or
amendment hereof remains in effect, including any similar agreement with any
organization that shall have succeeded to the business of the Sub-Advisor. At
such time as this Agreement or any extension, renewal or amendment hereof, or
such other similar agreement shall no longer be in effect, the Fund will cease
to use any name derived from the name "Colonial," any name similar thereto, or
any other name indicating that it is advised by or otherwise connected with the
Sub-Adviser, or with any organization which shall have succeeded to the
Sub-Adviser's business as an investment adviser.
COLONIAL-KEYPORT GROWTH AND INCOME
FUND
COLONIAL-KEYPORT UTILITIES FUND
By: KEYPORT VARIABLE INVESTMENT TRUST
By: /s/Richard Christensen
Its
COLONIAL MANAGEMENT ASSOCIATES INC.
By: /s/Arthur O. Stern
Its
KEYPORT ADVISORY SERVICES CORP.
By: /s/Robert R Baird
Its Secretary
COLONIAL KEYPORT UTILITIES FUND
COLONIAL MANAGEMENT SUB-ADVISORY AGREEMENT
AGREEMENT dated June 7, 1993 among KEYPORT VARIABLE INVESTMENT TRUST, a
Massachusetts business trust (the "Trust") with respect to COLONIAL-KEYPORT
UTILITIES FUND (the "Fund"), KEYPORT ADVISORY SERVICES CORP., a Massachusetts
corporation ("Adviser"), and COLONIAL MANAGEMENT ASSOCIATES, INC., a
Massachusetts corporation (the "Sub-Adviser").
In consideration of the promises and covenants herein, the parties agree as
follows:
1. The Sub-Adviser will manage the investment of the assets of the Fund
in accordance with its investment objective, policies and limitations set forth
in the Trust's prospectus and statement of additional information as amended
from time to time, and will perform the other services herein set forth, subject
to the supervision of the Adviser and the Board of Trustees of the Trust.
2. In carrying out its investment management obligations, the
Sub-Adviser shall:
(a) evaluate such economic, statistical and financial
information and undertake such investment research as it shall believe
advisable;
(b) purchase and sell securities and other investments for the
Fund in accordance with the procedures described in the Trust's prospectus and
statement of additional information; and
(c) report results to the Adviser and to the Board of Trustees.
3. The Sub-Adviser shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
4. The Advisor shall pay the Sub-Adviser a monthly fee at the annual
rate of 0.45% of the average daily net assets of the Fund for managing the
investment of the assets of the Fund as provided in 1. above.
5. This Agreement shall become effective on the date first written
above, and (a) unless otherwise terminated, shall continue until two years from
the date of its execution and from year to year thereafter so long as approved
annually in accordance with the Investment Company Act of 1940 (the "1940 Act");
(b) may be terminated without t penalty on sixty days' written notice to the
Sub-Adviser either by vote of the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Fund; (c) shall
automatically terminate in the event of its assignment; and (d) may be
terminated without penalty by the Sub-Adviser on sixty day's written notice to
the Trust.
6. This Agreement may be amended in accordance with the 1940 Act.
7. For the purpose of the Agreement, the terms "vote of a majority of
the outstanding shares," "affiliated person" and "assignment" shall have their
respective meanings defined in the 1940 Act and exemptions and interpretations
issued by the Securities and Exchange Commission under the 1940 Act.
8. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Sub-Adviser, or reckless disregard of its
obligation and duties hereunder, the Sub-Adviser shall not be subject to any
liability to the Trust or the Fund, to any shareholder of the Trust or the Fund
or to any other person, firm or organization, for any act or omission in the
course of or connection with rendering services hereunder.
9. The Fund may use the name "Colonial", or any other name derived from
the name "Colonial" only for so long as this Agreement or any extension,
renewal, or amendment hereof remains in effect, including any similar agreement
with any organization that shall have succeeded to the business of the
Sub-Advisor. At such time as this Agreement or any extension, renewal or
amendment hereof, or such other similar agreement shall no longer be in effect,
the Fund will cease to use any name derived from the name "Colonial," any name
similar thereto, or any other name indicating that it is advised by or otherwise
connected with the Sub-Adviser, or with any organization which shall have
succeeded to the Sub-Adviser's business as an investment adviser.
COLONIAL-KEYPORT UTILITIES FUND
By: KEYPORT VARIABLE INVESTMENT TRUST
By: /s/Richard Christensen
Its President
COLONIAL MANAGEMENT ASSOCIATES INC.
By: /s/Arthur O. Stern
Its Senior Vice President
KEYPORT ADVISORY SERVICES CORP.
By: /s/Robert R. Baird
Its Secretary
As amended through March 2000(1)
LIBERTY ASSET MANAGEMENT COMPANY
LIBERTY ADVISORY SERVICES CORP.
STEIN ROE & FARNHAM INC.(2)
CRABBE HUSON GROUP INC.
NEWPORT FUND MANAGEMENT, INC.
Code of Ethics With Respect To
LIBERTY ALL-STAR EQUITY FUND
LIBERTY ALL-STAR GROWTH FUND, INC.
LIBERTY TRUST IX
LIBERTY VARIABLE INVESTMENT TRUST3
NEWPORT FUNDS(4)
1. Background.
Liberty Asset Management Company ("LAMCO") serves as an "investment
adviser", as defined in the Investment Company Act of 1940 (the "1940 Act"), by
being the adviser or sub-adviser of several multi-managed funds (the "All-Star
Funds"): Liberty All-Star Equity Fund and Liberty All-Star Growth Fund, Inc.,
both registered closed-end investment companies, Liberty All-Star Equity Fund,
Variable Series, a multi-managed series of Liberty Variable Investment Trust
("LVIT") an open-end series investment company which serves as an investment
vehicle for variable annuity and variable life insurance contracts issued by
participating insurance companies, and Liberty Trust IX, an open-end series
investment company with several multi-managed series. Liberty Funds Distributor,
Inc. distributes shares of LVIT and Liberty Trust IX. The All-Star Funds differ
from conventional registered investment companies in that LAMCO is not
responsible for the purchase or sale of their individual portfolio securities.
That responsibility is assigned to independent Portfolio Managers recommended
and monitored by LAMCO who make investment decisions regarding the purchase or
sale of particular portfolio securities for the respective portions of the
portfolios of the All-Star Funds assigned to them by LAMCO without the prior
approval and, in most instances, the prior knowledge of LAMCO. All-Star Fund
Portfolio Managers have no affiliation with LAMCO.
LAMCO also allocates the assets of the three Colonial Counselor Select
Portfolios among mutual funds advised by Colonial Management Associates, Inc. or
affiliates thereof.
Liberty Advisory Services Corp. ("LASC"), a subsidiary of Liberty
Financial Companies, Inc. ("LFC"), recommends sub-advisors for and provides
general investment programs for the funds of Liberty Variable Investment Trust
(the "LVIT Funds"). Day-to-day portfolio management responsibility for the
LVIT Funds is performed by Colonial Management Associates, Inc. ("Colonial"),
Newport Fund Management, Inc. ("Newport"), and Crabbe Huson Group, Inc.
("Crabbe Huson"), all of whose directors, officers and access persons are
subject to codes of ethics adopted by those organizations, or LAMCO (in the
case of Liberty All-Star Equity Fund, Variable Series, and Liberty Trust IX).
Investment decisions for the LVIT Funds are made without the prior approval or
prior knowledge of LASC.
- --------
(1) The Code of Ethics was amended in March 2000 to reflect (i) the
reconstitution of the Board of Trustees of the Liberty Variable Investment
Trust and its adoption of the Code of Ethics applicable to the Liberty Funds,
and (ii) the establishment of Liberty Trust 9, the umbrella trust for the
open-end funds advised by LAMCO.
(2)
(3) This Code of Ethics is applicable to LASC, LVIT, Newport, Crabbe Huson, and
Stein Roe only with respect to officers and directors of those funds or
companies located at 600 Atlantic Avenue, Boston, MA.
(4) This Code of Ethics is applicable to Newport Fund Management, Inc. and the
Colonial Newport Funds only with respect to officers and directors of Newport
Fund Management, Inc. located at 600 Atlantic Avenue, Boston, MA.
(5) Colonial and Newport and their respective directors, officers and access
persons (other than directors and officers of Newport located at 600 Atlantic
Avenue, Boston) are subject to separate codes of ethics.
Newport is the investment adviser of the Newport Funds, which are
series of other Liberty Trusts, as well as of one of the LVIT Funds.
Crabbe Huson is the investment adviser of the Crabbe Huson Funds, which
are series of other Liberty Trusts, as well as of one of the LVIT Funds.
Section 17(j) of the 1940 Act provides, inter alia, that it is unlawful
for any principal underwriter of or investment adviser for a registered
investment company, or any affiliated person of an investment adviser or
principal underwriter, "to engage in any act, practice, or course of business in
connection with the purchase or sale, directly or indirectly, by such person of
any security held or to be acquired by the investment company in contravention
of such rules and regulations as the [Securities and Exchange] Commission may
adopt to define, and prescribe means reasonably necessary to prevent, such acts,
practices or courses of business as are fraudulent, deceptive or manipulative."
The Commission has adopted Rule 17j-1 which provides, inter alia, that
it is unlawful for any affiliated person of a registered investment company or
its investment adviser, in connection with the purchase or sale, directly or
indirectly, by such person of a security held or to be acquired by the
investment company:
(i) to employ any device, scheme or artifice to defraud such
investment company;
(ii) to make to such investment company any untrue statement of a
material fact or to omit to state to the investment company a
material fact necessary in order to make the statements made,
in light of the circumstances under which they are made, not
misleading;
(iii) to engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon the
investment company; or
(iv) to engage in any manipulative practice with respect to the
investment company.
This Code of Ethics is designed to satisfy LAMCO's and LASC's
obligation (and Newport's and Crabbe Huson's with respect to their officers and
directors located at 600 Atlantic Avenue, Boston, Massachusetts) as investment
advisers (i) to have a written Code of Ethics prohibiting certain "access
persons" (as defined below) from engaging in practices prohibited by Rule 17j-1,
and (ii) to require reporting of certain securities transactions by access
persons.
2. Definitions.
For purposes of this Code of Ethics, the following definitions shall
apply:
a. The term "access person" means: (i) every director, officer
and "advisory person" (as defined below) of
LAMCO and LASC; (ii) every officer and advisory person of the
All-Star closed-end funds and Liberty
Trust IX other than access persons of Colonial, Newport, or
Crabbe Huson covered by those firms' codes
of ethics; (iii) every officer or advisory person of LVIT who
is not an access person of Colonial,
Newport or Crabbe Huson5; (iv) every director and officer of
Newport or Crabbe Huson located at 600
Atlantic Avenue, Boston, Massachusetts, and (v) every trustee
or director of the All-Star closed-end
funds, Liberty Trust IX and LVIT who is not an "interested
person" of such investment companies (i.e.,
---
"outside" trustees or directors), but only if such outside
trustee or director knew or, in the ordinary
-----------
course of fulfilling his official duties as a trustee or
director should have known, that during the
15-day period immediately preceding or after the date of the
transactions in a security by the trustee
or director such security is or was purchased or sold by the
Fund of which he or she is a trustee or
director or such purchase or sale by such Fund is or was
considered by it or its portfolio managers.
b. The term "advisory person" of LAMCO, LASC, the All-Star
closed-end funds, Liberty Trust IX or LVIT means every
employee of LAMCO, LASC, the All-Star closed-end funds,
Liberty Trust IX or LVIT other than access persons of
Colonial, Newport or Crabbe Huson who, in connection with his
or her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of a
security by the All-Star closed-end funds, Liberty All-Star
Growth and Income Fund, any of the LVIT Funds (including
Liberty All-Star Equity Fund, Variable Series), or any series
of Liberty Trust IX, or whose functions relate to the making
of any recommendations with respect to such purchases or
sales.
c. The term "beneficially" as applied to a person's ownership of
securities means, in general, interests in securities, the
benefits of which, substantially equivalent to those of
ownership, are enjoyed, directly or indirectly, by the person
by reason of any contract, understanding, relationship (such
as, for example, that of spouse, child or other close familial
relationship), agreement or other arrangement, and by reason
of which such person should be regarded as the beneficial
owner, although such securities may not be registered or
standing in the books of the issuer in the name of such
person. See: Attachment "B" for additional information
concerning beneficial ownership of securities.
d. The term "purchase or sale of a security" includes the writing
of an option to purchase or sell a security.
e. The term "security" has the meaning set forth in Section
2(a)(36) of the 1940 Act, except that it does not include
securities issued by the Government of the United States,
bankers' acceptances, bank certificates of deposit, commercial
paper and shares of registered open-end investment companies.
f. The phrase "security held or to be acquired" means any
security which, within the most recent 15 days, is or has been
held by one of the All-Star closed-end funds, Liberty All-Star
Growth and Income Fund, any of the LVIT funds, or any series
of Liberty Trust IX, or is being or has been considered by it.
3. Statement of Policy.
The fundamental position of LFC with respect to the All-Star closed-end
funds, Liberty All-Star Growth and Income Fund, the LVIT Funds, Liberty Trust
IX, and (with respect only to officers and directors of Newport or Crabbe Huson
located at 600 Atlantic Avenue) the Newport Funds or the Crabbe Huson funds,
respectively (collectively, the "Related Funds") is and has been that all action
which is detrimental, or potentially detrimental, to such investment companies
and all action by their access persons which is designed to profit by the market
effect of securities transactions of such investment companies must be avoided.
Accordingly, private financial transactions by access persons must be conducted
in a manner consistent with their duties to the Related Funds without any actual
or potential conflict with the interests of the Funds.
It should be noted, however, that LAMCO, LASC, Newport and Crabbe Huson
consider it proper that purchases be made by access persons in the market place
of securities that may be owned by an Related Fund, provided that such purchases
are made in amounts consistent with the normal investment practice of the person
involved and with an investment, rather than a trading, outlook. In making
personal investment decisions with respect to any security, however, extreme
care must be exercised by access persons to ensure that the prohibitions of this
Code of Ethics are not violated.
4. General Restrictions
No access person may:
a. knowingly purchase or sell securities, directly or indirectly,
in such a way as to personally compete in the market with any
Related Fund, or otherwise personally act to injure their
transactions:
b. use knowledge of securities transactions by an Related Fund to
profit personally, directly or indirectly, by the market
effect of such transactions; and
c. give to any person information not generally available to the
public of proposed or current purchases or sales by any
Related Fund.
5. Specific Restrictions
a. Initial Public Offerings and Underwritings
Access persons may not purchase securities in an initial public
offering (defined as an initial offering through underwriters of a security of a
company that is not then public).
b. Acceptance of Favors or other Gifts
No access person may accept any personal favor or receive any gift or
other thing of more than de minimus value from any broker, investment management
firm or other person that does business with or on behalf of an Related Fund, or
which might have the effect of obligating an Related Fund to such broker,
investment management firm or other person in any manner.
c. Participation in Private Placements
Access persons may not acquire securities in a private placement
without the prior approval of the Review Officer specified in Section 8. The
Review Officer's decision to approve or disapprove such acquisition shall take
into account (i) the likelihood of the issuer becoming a publicly traded company
and of an Related Fund acquiring securities of that issuer, and (ii) whether the
opportunity to invest in the private placement is being offered to the LAMCO,
LASC or Newport access person by virtue of his or her position with or
relationship to the Related Funds.
d. Service as a director of publicly traded companies
No access person may serve on the board of directors of any publicly
traded companies, unless specifically authorized in advance by the Review
Officer designated in Section 8 below.
6. Reporting Requirements.
No report or additional report need be filed by the outside trustees or
directors of the Related Funds who are excluded from the definition of "access
persons."
Each access person shall submit to the Review Officer or Alternate
Review Officer referred to in Section 8 below a report in the form annexed
hereto as Attachment "A" or in similar form (such as a computer printout),
within 10 days of each of March 31, June 30, September 30 and December 31 of
each year, which report shall set forth at least the following information as to
all transactions in securities (as defined in Section 2(e) above) during the
quarterly period ended on such March 31, June 30, September 30 or December 31 in
which such access person has, or by reason of such transaction acquires or
disposes of, any direct or indirect beneficial ownership:
a. the date of the transaction and the title, class and number
of shares or principal amount of each
security involved:
b. the nature of the transaction (i.e., purchase, sale or other
type of acquisition or disposition);
c. the price at which the transaction was effected; and
d. the name of the broker, dealer, or bank with or through whom the
transaction was effected.
Such report, however, need not include transactions effected for any account
over which such person does not have any direct or indirect influence or
control.
7. Notice to Access Persons.
LAMCO and LASC shall identify all access persons who are under a duty
to submit reports pursuant to Section 6, inform such persons of such duty and
provide such persons with copies of this Code of Ethics.
8. Review of Reports.
Each report submitted pursuant to Section 6 shall be reviewed with
respect to its compliance with this Code of Ethics by the General Counsel of LFC
or the Chief Compliance Officer of LFC, or such other Review Officer or
Alternate Review Officer as may be designated by the trustees or directors of
the Related Funds.
9. Sanctions.
Any violation of this Code of Ethics or Rule 17j-1 shall result in the
imposition of such sanctions as the Board of Directors of LAMCO, LASC, Newport
or Crabbe Huson, as the case may be, may deem appropriate under the
circumstances, including, but not limited to, removal or suspension from office,
a letter of censure and/or restitution to the affected Related Fund of an amount
equal to the advantage the offending person shall have gained by reason of such
violation.
<PAGE>
10. Record Keeping Requirements.
LAMCO, LASC, and (with respect only to officers and directors located
at 600 Atlantic Avenue, Boston) Newport and Crabbe Huson shall maintain and
preserve for five years in an easily accessible place:
a. a copy of this Code of Ethics, and any amendments thereto or
replacements;
b. records of any violations of this Code of Ethics;
c. copies of all reports submitted under this Code of Ethics; and
d. a list of all persons required to submit reports hereunder.
March 27, 1986 As amended through March, 2000.
<PAGE>
ATTACHMENT A
MEMORANDUM
TO:
FROM: Fred J. Franklin, Chief Compliance Officer, Liberty Financial
Companies, Inc.
DATE:
RE: Report of Securities Transactions for Quarter Ended ______________
- --------------------------------------------------------------------------------
_______ The following securities transactions are being reported for the
above-stated quarter.
<TABLE>
<CAPTION>
- --------------- ----------------------- ---------------------------- ----------------- ---------- --------------------
Number of
Shares or
Date of Principal Amount Person Through
Transaction Nature of Transaction* Title and Class of Price Whom Effected**
Securities
- --------------- ----------------------- ---------------------------- ----------------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
/*/ Purchase, sale or other type of acquisition or deposit (describe).
/**/ Broker, dealer or bank with or through whom the transaction was
effected.
Note: Transactions in shares of registered open-end investment companies
(mutual funds) need not be reported.
_______ I have no transactions to report for the above-stated quarter.
--------------------------------
Signature
PLEASE RETURN THIS COMPLETED FORM BY _______________TO:
Joe Tobin, Liberty Financial Companies, Inc.
Revised Nov 1999
[GRAPHIC OMITTED] code of ethics
regarding
personal Trading
in
securities
and Conflicts of Interest
- --------------------------------------------------------------------------------
I. introduction
A. Purpose
Although Stein Roe & Farnham Incorporated ("SRF") believes that individual
investment activities by its officers and employees should not be prohibited or
discouraged, the fiduciary obligations of SRF to its clients and of the Funds to
their shareholders necessarily require some restrictions on the personal
investment activities of the directors, officers, trustees and employees of SRF
and the Funds and of members of their families.
This Code of Ethics is intended to address three fundamental principles which
must guide our personal investment activities in light of our fiduciary duties:
First, the interests of clients and Fund shareholders must always take
precedence over personal interests;
Second, SRF personnel must not take inappropriate advantage of their positions
as securities industry professionals; and,
Third, personal investing activities must be conducted in such a way as to avoid
any actual or potential conflict with investment activities undertaken for
clients or Fund shareholders.
Further, Securities and Exchange Commission rule 17j-1 under the Investment
Company Act of 1940 requires that every investment company and any adviser to an
investment company adopt a code of ethics regarding personal investment
activities of persons having access to information about portfolio transactions
of the investment company, and rule 204-2 under the Investment Advisers Act
requires that investment advisers keep certain records, which must be available
for inspection by representatives of the SEC, regarding personal investment
activities of advisory personnel.
This Code of Ethics ("Code") has been adopted by SRF and by the respective
boards of trustees (the "Fund Boards") or similar governing bodies of the
investment companies managed by SRF ("Funds"), to address these principles and
regulatory requirements.
B. Compliance with this Code is a Condition of Employment
Compliance with this Code and the principles described above is a condition of
employment of each officer and employee of SRF. Violation of this Code or the
principles may be cause for disciplinary action by SRF, including termination of
employment. Other disciplinary actions can include warnings, and periods of
"probation" during which all personal investment activities (except for
specifically approved liquidation of current positions) is prohibited.
Personal investment activities of persons covered by this Code must adhere to
the fundamental principles described above, as well as the specific provisions
of the Code. It bears emphasis that technical compliance with the letter of the
Code's requirements and procedures will not automatically insulate from scrutiny
transactions which appear to indicate a pattern of abuse of an individual's
fiduciary duties to the Funds or other clients of SRF.
C. Interpretation and Enforcement
Questions regarding personal investment activities under the Code should be
directed to SRF's Compliance Manager who also is responsible for the enforcement
of the Code subject, in the case of disciplinary sanctions, to the approval of
the General Counsel of SRF and the Chief Compliance Officer of Liberty Financial
Companies, Inc. Violations resulting in disciplinary action, including
identification of the persons involved, description of the nature of the
violation, and the disciplinary action taken, also are reported periodically to
the respective Executive Committees of Stein Roe & Farnham Private Capital
Management and Liberty Funds Group (a business unit which includes SRF's mutual
funds and institutional asset management businesses) and to the boards of the
Funds.
D. Definitions
This Code classifies directors, officers, trustees, and employees of SRF and the
Funds into several categories, and imposes varying requirements by category
appropriate to the sensitivity of the positions included in that category.
INVESTMENT PERSONNEL
Investment Personnel includes: portfolio manager, associate manager, and
research analysts entrusted with the direct responsibility and authority, either
alone or as part of a co-manager team or group, to make investment decisions
regarding a Fund or other client; and
members of investment strategy and policy committees, portfolio administrators,
trading personnel and all other directors and officers of SRF, who, in
connection with their regular duties know or have access to information about
the purchase or sale of a security by a fund or client.
ACCESS PERSONNEL
Access Persons include Investment Personnel and all other directors, officers
and employees of SRF (except Limited Access Persons), regardless of job
function, as any SRF employee can be exposed from time to time to information
about client or Fund portfolio activities.
Limited Access Person
A Limited Access Persons is a person who (1) is (i) a Fund trustee who is
neither an unaffiliated trustee nor a director, officer or employee of SRF, (ii)
a director or officer, but not an employee, of SRF who does not in the course of
his or her normal duties obtain information about client or fund portfolio
activities or (iii) an employee, but not an exclusive employee, of SRF who is
also a director, officer or employee of another investment adviser or
sub-adviser to a Fund (including a person who may be dually employed by SRF and
such other adviser or sub-adviser) and (2) is subject to an Affiliate Code (as
such term is described below) of another investment adviser (the "Affiliated
Adviser") controlled by Liberty Financial Companies, Inc. ("LFC"), provided
that:
1. the Affiliated Adviser has adopted a Code of Ethics complying with
Rule 17j-1 under the Investment Company Act 1940 that has been
adopted by the Fund Boards (an "Affiliate Code");
2. such person's personal securities transactions are governed by the
Affiliate Code and;
3. the Affiliated Adviser maintains a procedure to inform the Trustees
of the Funds and the Chief Compliance Officer of SRF (a) promptly
in writing of any change to the Affiliate Code, and (b) at least
quarterly of any violations of the Affiliate Code and any action
taken in response to each such violation.
Unaffiliated Trustees are the trustees or similar governing board members
("trustees") of the Funds who are not directors, officers or employees of SRF or
of any company controlling, controlled by or under common control with SRF.
Other DeFINED TERMS
Personal Transactions include transactions in securities and security derivative
interests for the account of any individual subject to this Code for his or her
own account, for an account owned jointly with another person, or as guardian,
executor or trustee, or for any account in which such individual, his or her
spouse or minor child residing in the same household, has an interest.
Exceptions regarding specified accounts may be made on a case-by-case basis by
the Compliance Manager where the Access Person certifies in writing (and
annually re-certifies, as applicable) that he or she has no control over the
account, e.g., a trust or estate managed by an independent trustee or executor,
or that the account belongs to a spouse whose transactions in securities are
subject to a code of ethics of his or her employer. In making such exceptions,
the Compliance Manager may require the Access Person to comply with various
requirements under this Code, e.g., periodic filing of holdings or transaction
reports, as the Compliance Manager deems appropriate in the circumstances.
Securities include equities and equity-related securities, such as common
stocks, options on common stocks, preferred stocks, shares of closed-end
investment companies, convertible or participating debentures or notes, various
derivative and corporate and municipal bonds and notes. Securities also include
limited partnership interests and private placement common or preferred stocks
or debt instruments.
Securities for purposes of this Code do not include:
U.S. Government obligations, bankers' acceptances, bank certificates of deposit,
commercial paper, shares of registered open-end investment companies (mutual
funds), index-based futures/options, options/futures on Treasury Notes or Bills,
Currency options/futures, or Liberty Financial Companies, Inc. stock or options
thereon.
Commodity Interests include futures contracts, and options on futures, relating
to any stock or bond. Commodity interests in agricultural or industrial
commodities, such as agricultural products or precious metals, are not covered
under this Code.
II. General Requirements
The following general requirements of the Code are applicable to all Access
Persons (that is, to all SRF directors, officers and employees except those
persons described above who are not subject to this Code of Ethics, or to other
sub-groups as indicated:
A. Disclosure of Holdings and Accounts; Annual Certification of Compliance
All Access Persons must disclose to the Compliance Manager upon commencement of
employment, and thereafter on an annual basis for all non-Investment Personnel,
all securities and commodity interest holdings and accounts.
1. Each Access Person shall notify the Compliance Department each time
he/she opens a brokerage account that may be used to transact business
in Securities. The Compliance Department shall instruct the appropriate
firm to provide duplicate confirmations and periodic statements showing
all purchases and sales of securities to:
Stein Roe & Farnham Incorporated
Attn.: Compliance Manager
P.O. Box 4859
Chicago, Illinois 60680-4859
Although the Compliance Department will instruct the firm to provide
duplicate confirmations and periodic statements, it remains the
responsibility for the person who opens the account to see that the
firm sends the required confirmations and statements to SRF.
2. For any Access Person who maintains a bank custody account for personal
holdings, the bank custodian's statements will be accepted in lieu of
broker account statements.
Each calendar year each Access Person must complete and submit to the Compliance
Manager, the form of certification stating that he/she has received and
reviewed, and will comply with, this Code of Ethics.
B. Disclosure of Family Members Employed in the Securities or Commodity Industry
Every Access Person must disclose in writing to the Compliance Manager the
employment of a spouse, other family member or anyone residing at the Access
Person's address (including a parent, sibling, spouse, child, grandchild, aunt,
uncle, nephew or niece, or the parent, sibling, child, grandchild, aunt, uncle,
nephew or niece of his or her spouse) in the securities or commodity industry
with their job title. It is prohibited for any director, officer or employee to
influence the investment activities of SRF for clients for direct or indirect
personal or familial benefit.
C. Trading While In Possession of Material Non-Public ("Inside") Information is
Prohibited
All directors, officers and employees should read, understand and comply with
SRF's "Policies and Procedures Regarding Misuse of Material Non-Public
("Inside") Information" which is distributed annually to all personnel by the
Compliance Department. It bears emphasis that an Access Person's knowledge of
pending Fund or other client transactions in a security may be material
non-public information, and that personal trading in such security by the Access
Person or others in possession of that information not only would violate this
Code, but also could subject the trader to criminal penalties under federal
securities laws.
D. Receipt of Gifts, Preferred Investment Opportunities or Other Things of More
Than "de Minimis" Value from Persons or Entities Doing Business or Seeking to Do
Business With SRF Is Prohibited Receipt by an Access Person of a non-cash gift
of more then a "de minimis" value (i.e., in excess of $100), a cash payment in
any amount, a preferred personal investment opportunity, or other thing of more
than "de minimis" value from any person or entity doing business or seeking to
do business with SRF or any Fund, including a broker-dealer or security issuer,
poses a potential conflict of interest and is prohibited. All directors,
officers and employees should read, understand and comply with SRF's statement
of policy regarding "Conflicts of Interest in Relationships with Clients and
Service or Supply Vendors" which is attached.
E. Purchase of Securities From or Sale of Securities To Clients Prohibited
Directors, officers and employees are prohibited from, directly or indirectly,
purchasing any security from or selling any security to a client account. Such a
transaction would pose a direct conflict with SRF's fiduciary duty to the
client, and would violate applicable federal and state securities laws
(including, investment company clients, Section 17(a) of the Investment Company
Act) and ERISA.
F. Purchase of Equity Securities in an Initial Public Offering is Prohibited
Purchase of equity securities in initial public offerings (IPOs) by Access
Persons creates an appearance that such personnel have taken inappropriate
advantage of their positions for personal benefit. Accordingly, purchase of
equity securities in an IPO by Access Persons is prohibited without exception.
Further, it is prohibited to use the facilities of SRF to secure an IPO equity
purchase, directly or indirectly, for any non-client, or to indirectly (that is,
in circumvention of SRF procedures for allocation of IPO purchases among
clients) secure an IPO equity issue for any client. The prohibition on
purchasing equity securities in an IPO will not apply if the Access Person has
the right to purchase such security based on a pre-existing status as a
policyholder or depositor. Evidence of the pre-existing status must be presented
to the Compliance Department prior to participation in the IPO.
H. Day Trading is Prohibited
Access Persons are permitted to execute personal trades on the Internet but day
trading (purchase then sell or vice versa the same security in the same day) is
prohibited.
III. Personal Trading procedures for all access persons
A. All Transactions in Securities and Commodity Interests Must Be Pre-Cleared
With the Compliance Department Every transaction in a security (including both
publicly traded and private placement securities) or commodity interest by an
Access Person must be pre-cleared and approved by the Compliance Department
prior to executing an order. Once granted, pre-clearance approval is valid only
until the close of business on the next business day (or, in the case of a
private placement purchase, the closing of the private placement transaction).
An order which is not executed within that time must be re-submitted for
pre-clearance approval. Pre-clearance approval is requested by utilizing the
FlexSpace application on your Windows NT desktop. Choose "Personal Trades" from
the list of applications. Once the Personal trades application has been started,
open the "Trade Clearance" view by selecting that option from the View list. To
enter a trade request use the "Enter Trade" screen. The Compliance Administrator
will notify an Access Person whether or not a trade is approved via "Trade
Clearance-My Trades" screen. The Access Person may place the trade with his/her
broker as soon as he/she receives an approved pre-clearance.
In submitting a proposed transaction for pre-clearance approval, an Access
Person must certify that the proposed transaction complies with the requirements
of this Code. In addition, a Portfolio Manager or Associate Manager submitting a
pre-clearance approval request must certify that he or she has determined that
it is not then appropriate to buy/sell the particular security for a client
portfolio for whom he or she has responsibility (including Funds in regard to
Fund managers). However, because compliance with this Code of transactions by
Investment Personnel may depend on their subsequent investment activities for
clients, pre-clearance approval of a transaction by the Compliance Department
does not necessarily mean the transaction complies with this Code.
Trades can only be placed in accounts that have previously been disclosed to the
Compliance Department and for which duplicate statements are being received (or
will be received, for a new account). Once an Access Person has been notified
that a trade has been approved, it is the Access Person's responsibility to
release the trade to the broker with instructions to fill the trade no later
than the close of business on the business day following authorization.
In determining whether to approve purchases of private placement securities by
Investment Personnel, the Compliance Department shall consider, among other
factors, whether the investment opportunity should be reserved for Funds or
other clients, and whether the opportunity is being offered to the Access Person
by virtue of his or her position with SRF.
EXCEPTIONS TO PRE-CLEARANCE RULE:
1. Third Party Investment Advisers:
An exception to the pre-clearance rule is made for employees whose
assets are managed on a discretionary basis by an independent third
party registered investment adviser. The registered investment adviser
or representative thereof, may not be a family member. Verification of
the investment adviser's discretionary relationship must be provided to
and approved by the Compliance Manager in writing on an annual basis
(copy of the signed contract is required). Although, a power of
attorney with a broker usually provides the broker with trading
authority, it normally does not give the broker investment discretion
and therefore, a power of attorney by itself normally will not satisfy
the requirements for a pre-clearance exception. Any agreement with a
broker will only qualify for the exception if the agreement identifies
the broker as an investment adviser, not as an agent.
While these accounts are exempt from pre-clearance, they are still
subject to all other provisions of the Code (i.e., 60 day ban on short
term profits, seven-day pre-and post transaction blackout period
surrounding client or Fund transactions, prohibition on the purchase of
IPO's and providing duplicate confirmations and periodic statements).
2. Liberty Financial Companies, Inc. ("LFC") Stock Options:
An exception to the pre-clearance requirement will be made for certain
employees who received LFC stock options and wish to exercise these
stock options. These options are exercised through LFC, who will report
the exercise directly to the Compliance Manager. A cashless exercise of
a LFC stock option is permitted through Merrill Lynch. LFC should be
contacted for instructions on exercising options.
3. Purchase or sale of LFC Stock:
An exception to the pre-clearance requirement will be made for those
purchases or sales of LFC stock.
4. No-Load Stock Programs, Dividend Reinvestment Plans or Investment Clubs:
Participation in these programs for all Access Persons requires
approval by the Compliance Manager. Purchases directly from an issuer
or a pre-approved Investment Club are not subject to the pre-clearance
requirement but the transaction must be reported within three days of
receipt of confirmation that the transaction has been executed.
5. Exercise of rights issued by an issuer pro rata to all holders of a
class of its securities: Purchases effected upon the exercise of rights
issued by an issuer pro rata to all holders of a class of its
securities, to the extent such rights were acquired from such issuer,
and sales of such rights so acquired, do not need to be pre-cleared but
a report of the exercise must be forwarded to the Compliance Manager.
(Purchases of such rights in the secondary market and subsequent sale
thereof are subject to pre-clearance.)
B. Seven-Day Blackout Period Applicable to Certain Model Portfolio Stocks and
Related Securities Model Portfolios (such as the Taxable Core Equity Portfolio)
are intended to provide guidance to portfolio managers in making investment
decisions for client accounts, and are widely communicated throughout SRF.
Because SRF does not manage all client accounts identically, changes in a Model
Portfolio can be expected to result in transactions for client accounts
occurring over a period of several days following the change. Accordingly, a
"blackout" period on personal investment activity in securities which are the
subject of such a change, or of a related security, is appropriate following any
such change.
No purchase or sale of a stock (or related option or other derivative of such
security) by any Access Person is permitted for a period of seven calendar days
(exclusive of the day of the relevant change) following:
1. the addition or deletion of such stock to or from the Taxable Core
Equity Portfolio, the Non-Taxable Core Equity Portfolio, the Tax
Managed Growth Portfolio and the Monitor List (collectively "Model
Portfolios") or
2. a change in recommendation (Increase, Accumulate or Decrease) of any
stock in any Model Portfolio.
With respect to personal sales only, exceptions to the seven calendar day
blackout period may be made on a case-by-case basis by the Compliance Manager
where it appears all anticipated client and Fund transactions have been
completed prior to the expiration of the blackout period.
C. Blackout Periods Not Applicable to Certain Highly Liquid Securities or LFC
stock
Personal investment transactions in stocks (and in convertible bonds or
convertible preferred stocks convertible into such common stocks) of companies
with a market capitalization of $5 billion or more at the time of purchase or
sale are not subject to the seven-day blackout period otherwise applicable to
all Access Persons described in III.B., above. In addition such securities and
LFC stock are not subject to the 15 day pre- and post-transaction blackout
period otherwise applicable to Portfolio Managers and other Investment Personnel
described in IV.A., below. Since LFC stock may not be held by SRF clients, the
model portfolios, or mutual funds, activity by Access Persons in LFC stock will
not adversely affect our clients. This includes LFC options. Stocks with a
market capitalization of $5 billion or more are sufficiently liquid and actively
traded that investment transactions undertaken for SRF clients and Funds are
unlikely to have any significant impact on the market price of such stocks.
However, because options and other derivatives may involve leverage which
magnifies the effect of even small price changes in the underlying stock,
personal investment transactions in options and other derivatives remain subject
to the blackout periods described in III.B. and IV.A.
IV. Additional restrictions applicable to portfolio managers and other
investment personnel
A. 15 Day Pre- and Post-Transaction Blackout Period Surrounding Client or Fund
Transactions and Model Portfolio Changes Portfolio Managers and Associate
Managers are prohibited from buying or selling a security (or a related option
or other derivative of such security) during the 15 calendar days commencing on
the seventh calendar day preceding the day on which transaction in such security
is executed for the account of a Fund or other client managed by such Portfolio
Manager. This 15-day blackout period also applies to all co-managers of a Fund
or client account.
The 15-day blackout period also applies to any research analyst who recommends
the purchase or sale of the particular security to a Portfolio Manager; provided
however, that if the recommendation is only a reiteration (Maintain) of a prior
recommendation, the analyst is prohibited from buying or selling a security on
the business day before, the day of and the business day after the reiteration
(Maintain) of the prior recommendation. Equity analysts are prohibited from
buying or selling a security (or a related option or other derivative of such
security) during the 15 calendar days commencing on the seventh calendar day
preceding the day on which such analyst's addition or deletion of such security
to Model Portfolios or such analyst's change in recommendation of such security
on Model Portfolios.
Model Portfolio team members are prohibited from buying or selling a security
(or a related option or other derivative of such security) during the 15
calendar days commencing on the seventh calendar day preceding the day on which
ANY purchase or sale of such security in the Model Portfolio for which such team
is responsible.
SRF recognizes that the application of the 15-day blackout period poses certain
procedural difficulties and may result in inadvertent violations from time to
time by covered personnel. Where such a violation results from a transaction
which can be reversed prior to settlement, such transaction should be reversed,
with the cost of reversal being borne by the covered person; or, if reversal is
impractical or impossible, exceptions to this prohibition may be allowed by the
Compliance Manager on a case-by-case basis, but only where no abuse is involved
and the equities of the situation strongly support an exception. If no exception
is granted the employee will be required to disgorge any profits, net of
brokerage commission, to the Stein Roe & Farnham Foundation or monetary
penalties may be imposed.
B. Ban on Short Term Trading Profits.
Portfolio Managers and other Investment Personnel are prohibited from profiting
in the purchase and sale, or sale and purchase, of the same (or equivalent)
securities within 60 calendar days. Where a violation of this prohibition
results from a transaction which can be reversed prior to settlement, such
transaction should be reversed, with the cost of reversal being borne by the
covered person; or, if reversal is impractical or impossible, then any profit
realized on such short-term investment, net of brokerage commissions but before
tax effect, shall be disgorged to the Stein Roe & Farnham Foundation.
The 60-day ban on short term profits does not apply to purchase or sale of LFC
stock or the exercise of options to purchase shares of LFC and the immediate
sale of the same or identical shares, including "cashless exercise"
transactions.
It is recognized that this prohibition effectively limits the utility of options
trading, short sales of securities, and various legitimate and non-abusive
hedging activities by Portfolio Managers and other Investment Personnel.
SRF also recognizes that inadvertent violations of this prohibition may result
in some instances from "involuntary" sales, e.g., where the issuer of a security
purchased for long-term investment becomes the subject of a takeover bid, or
presents a tender offer prior to the 60 days, or from routine dividend
reinvestment or periodic purchase plan transactions. Accordingly, exceptions to
this prohibition may be allowed by the Compliance Manager on a case-by-case
basis, but only where no abuse is involved and the equities of the situation
strongly support an exception. If no exception is granted the employee will be
required to disgorge any profits, net brokerage commission, to the Stein Roe &
Farnham Foundation or monetary penalties may be imposed.
C. Disclosure and Compliance/Investment Peer Review of Certain Holdings
A Fund Portfolio Manager and other Investment Personnel owning a security (or an
option or other derivative relating to such security, or any privately placed
security of the same issuer, whether debt or equity) being considered for
initial purchase by a Fund which such Portfolio Manager manages or co-manages,
or which such other Investment Personnel has recommended to a Fund Portfolio
Manager, or proposed for addition to a Model Portfolio, must disclose the fact
of his or her ownership in advance.
On or before the date any Investment Personnel recommends for a Fund (or Model
Portfolio) the purchase or sale of a security that he or she personally owns, he
or she must disclose such ownership by completing a form (Exhibit II attached)
and submitting it to the Head of Equity or the Head of Fixed Income for
signature. This disclosure requirement is specific to the individual Fund or
Model Portfolio. This means that a separate form must be completed at the time
of the initial recommendation for each Fund or Model Portfolio, even if such a
form was previously completed for a different Fund or Model Portfolio. (However,
the form does not need to be completed each time there is an addition to or
deletion from a Fund or Model Portfolio position.) The form will then be
forwarded to the Compliance Manager.
The investment decision to purchase such a security for a Fund or add such a
security to a Model Portfolio shall be subject to independent review by
Investment Personnel with no personal interest in the issuer, as follows:
1. In the case of a holding by a Fund Portfolio Manager, the
independent review shall be by the co-manager of the Fund or, if
none, then by the Head of Equity Investments, the Head of Fixed
Income or the Chief Investment Strategist;
2. In the case of a holding by an equity analyst, the independent
review shall be by the Head of Equity Investments or the Chief
Investment Strategist; and,
3. In the case a holding by a member of a Model Portfolio team, the
independent review shall be by the other member(s) of that Model
Portfolio team.
D. Service as a Director of a Public Company
Portfolio Managers and other Investment Personnel are prohibited from serving as
directors of publicly traded companies (other than LFC), except with the prior
authorization of the Chief Compliance Officer of LFC. Such authorization, if
granted, shall be based on a determination that the board service would not be
inconsistent with the interests of the Funds and other SRF clients. In
considering such authorization, the Chief Compliance Officer of LFC shall
consult with the General Counsel of SRF concerning the imposition of appropriate
procedures to prevent the misuse of material non-public information which may be
acquired through board service, and other procedures or investment restrictions
which may be required to prevent actual or potential conflicts of interest.
<PAGE>
V. Reporting procedures applicable to all Investment Personnel
A. Quarterly Reporting for Investment Personnel only:
Investment Personnel (and any joint accounts or accounts in which they have an
interest) are required to report and confirm their securities transactions to
the Compliance Manager on a quarterly basis. Attached is the required form to be
completed. (Exhibit I). The appropriate box must be checked or the required
information completed and the form signed by the employee and returned to the
Compliance Manager within 10 calendar days after the end of each calendar
quarter (March 31, June 30, September 30 and December 31). Failure to
complete/confirm and submit this quarterly transaction report within 10 calendar
days following the quarter end will result in a monetary penalty for the first
offense and the monetary penalty will continue to increase in determined
increments for every additional quarter violation. Reporting violations will be
reported quarterly to the respective Executive Committees of the Stein Roe &
Farnham Private Capital Management and the Liberty Funds Group (a business unit
which includes the Firm's mutual funds and institutional asset management
businesses) and to the boards of trustees of the Funds.
Access persons who are not Investment Personnel will annually report their
security holdings - see Section II.
General Requirements.
B. Enforcement
The Compliance Manager shall review reports filed under the Code of Ethics to
determine whether any violation of this Code of Ethics may have occurred. The
Compliance Manager, acting at the direction of Stein Roe's General Counsel and
the Chief Compliance Officer of Liberty Financial Companies, shall investigate
any alleged violation of the Code of Ethics.
<PAGE>
VI. Requirements applicable to Limited access persons
A. Exempt Transactions
Limited Access Persons are not subject to any procedural restrictions or
reporting requirements with respect to personal investments in U.S. Government
obligations, bankers' acceptances, bank certificates of deposit, commercial
paper, or shares of registered open-end investment companies, index-based
futures/options, options/futures on Treasury Notes or Bills, Currency
options/futures or LFC stock or options therein.
(collectively, "exempt transactions").
B. Reports of Non-Exempt Transactions
Pursuant to the requirements of rule 204-2 under the Investment Advisers Act,
Limited Access Persons must report in writing to the Compliance Manager all
non-exempt personal transactions in securities within 10 days of the end of the
calendar quarter in which the transactions were effected. Such report shall
include:
1. the date of the transaction, the name and number of shares or
principal amount of the security or commodity interest involved;
2. the nature of the transaction (i.e., purchase, sale or other type of
acquisition or disposition)
3. the price at which the transaction was effected; and,
4. the name of the broker, dealer or bank with or through which the
transaction was effected.
A Limited Access Person who has no reportable transactions within a calendar
quarter shall file with the Compliance Manager within ten days of the end of
such quarter a written report so stating.
C. Annual Reports of Holdings and Accounts; Annual Certification of Compliance
Each Limited Access Person shall file annually with the Compliance Manager a
statement in writing disclosing all security and commodity interest accounts and
holdings, as well as a certification that such person has read, understands and
is in compliance with this Code.
D. Certain Other General Provisions of Code Applicable to Non-Employee Directors
and Officers
The provisions of sections II.B., II.D., II.E, and II.F. of this Code, above,
regarding disclosure to the Compliance Manager of the employment of a spouse or
other family member in the securities or commodity industry, trading while in
possession of material non-public information, receipt of gifts or other things
of value from certain persons or entities, and purchase or sale of securities
from or to clients, respectively, shall be applicable to non-employee directors
and officers of SRF.
E. Conflict with Fund Security or Commodity Interest Transactions
A Limited Access Person who knows or should know, by reason of his or her
receipt of information, that a specific security or commodity interest is to be
purchased or sold by any Fund, or is being considered for purchase or sale by
any Fund, is prohibited from effecting any personal transaction in such security
or commodity interest (or a related option or other derivative thereof) until
the transaction(s) of the Fund(s) in such security or commodity interest have
been completed.
VII. requirements applicable to unaffiliated trustees of funds
A. Exempt Transactions
Unaffiliated trustees are not subject to any procedural restrictions or
reporting requirements with respect to personal investments in U.S. Government
obligations, bankers' acceptances, bank certificates of deposit, commercial
paper, or shares of registered open-end investment companies, index-based
futures/options, options/futures on Treasury Notes or Bills, Currency
options/future, or LFC stock or options therein (collectively, "exempt
transactions").
B. Reports of Certain Non-Exempt Transactions
An unaffiliated trustee shall report in writing to the Compliance Officer a
non-exempt personal transaction in a security or commodity interest within 10
days of the end of the calendar quarter in which such transaction was effected,
if at the time such transaction was effected, the unaffiliated trustee knows, or
in the ordinary course of fulfilling his or her official duties as a trustee
should have known, that such security or commodity interest (or a related option
or other derivative thereof or, in the case of a security or commodity interest
which is an option or derivative, the underlying security or commodity) was or
would be purchased or sold by a Fund, or such purchase or sale was or would be
considered by a Fund or SRF as a Fund's investment adviser, during the 15
calendar day period immediately preceding or following the date of such
unaffiliated trustee's transaction.
The report of an unaffiliated trustee of any such transaction shall include: the
date of the transaction; the name and number of shares or principal amount of
the security or commodity interest involved; the nature of the transaction
(i.e., purchase, sale or other type of acquisition or disposition); the price at
which the transaction was effected; and, the name of the broker, dealer or bank
with or through which the transaction was effected.
The filing of any such report of a transaction by an unaffiliated trustee shall
not be deemed an admission of an infraction of this Code nor any other
impropriety.
C. Certain Other General Provisions of Code Applicable to Unaffiliated Trustees
of the Funds.
The provisions of sections II.C. of this Code, above, regarding trading while in
possession of material non-public information, shall be applicable to
unaffiliated trustees of the Funds.
D. Conflict with Fund Security or Commodity Interest Transactions
An unaffiliated trustee of a Fund who knows or should have known that a specific
security or commodity interest is to be purchased or sold by any Fund, or is
being considered for purchase or sale by any Fund, is prohibited from effecting
any personal transaction in such security or commodity interest (or a related
option or other derivative thereof) until the transaction(s) of the Fund(s) in
such security or commodity interest have been completed, except:
1. purchases pursuant to a dividend reinvestment program or purchases
based upon preexisting status as a policy holder or depositor;
2. purchases of securities through the exercise of rights that have
been issued as part of the pro rata issue to all holders of such
securities and the sale of such rights
3. transactions that are non-volitional, including any sale out of a
brokerage account resulting from a bona fide margin call as long as
collateral was not withdrawn form such account with 10 days prior
to the call;
4. transactions for an account over which the unaffiliated trustee has
no direct or indirect influence or control, including any
transaction in a personal account managed by a registered
investment adviser with discretion provided trustee did not have
prior knowledge of the transaction;
5. transactions in securities of issuers with market capitalization's
of $5 billion or more.
VIII. Periodic reports to management and trustees
The Compliance Manager shall prepare and deliver to the respective Executive
Committees of the Stein Roe & Farnham Private Capital Management and the Liberty
Funds Group (a business unit which includes the Firm's mutual funds and
institutional asset management businesses) and to the boards of trustees of the
Funds reports in writing which, at a minimum:
1. not less frequently than quarterly, identify any violations of
this Code (or of an Affiliate Code by a Limited Access Person)
detected since the last such report which required significant
remedial action, including the nature of the violation, the person
or persons involved, and the disciplinary or other remedial action
taken;
2. not less frequently than annually, summarize existing procedures
concerning personal investing, and any changes in such procedures
since the last such report; and,
3. not less frequently than annually, identify any recommended
changes in existing restrictions or procedures based upon
experience under the Code, evolving industry practices, or
developments in applicable laws or regulations.
<PAGE>
conflicts of interest
in relationships with
clients and service or supply vendors
Statement of Policy
The policy of Stein Roe & Farnham Incorporated ("SRF") is to procure supplies
and services, including brokerage services for the execution of client
transactions, and to provide services to its clients, on the basis of quality,
appropriate requirements, and reasonable cost, consistent with high professional
standards. Accordingly, all officers and employees must remain free from any
improper influences exerted either directly or indirectly by persons or firms
which may have a material interest in or influential relationships with persons
or firms dealing with SRF or its clients.
Guidelines to Implement the Policy
All officers and employees of SRF are prohibited from, directly or indirectly:
(1) accepting payments, gifts, services, loans or other gratuities offered
in the course of their employment by persons or firms doing or seeking
to do business with SRF or any client or prospective client of SRF, if
the circumstances surrounding the acceptance of such gratuities might
be construed to obligate SRF, influence a business decision involving
the person or firm involved, or provide an officer or employee
something of significant value. Examples of the types of gratuities
which are prohibited include, but are not limited to:
(a) cash payments in any amount;
(b) gifts in excess of "de minimis" value, i.e., in excess of
$100;
(c) lavish entertainment, i.e., beyond normal business
luncheons or dinners; (d) domestic or foreign travel or
lodging, or reimbursement for the cost thereof, even if
in connection with an otherwise legitimate business
purpose such as meetings with clients or prospective
clients, security issuers or underwriters1;
(e) loans of money or facilities; or,
(f) preferred personal investment opportunities.
(2) offering or giving payments, gifts, services, loans or other gratuities
to clients, prospective clients, government officials or government
employees2, or employees of any other firm to promote special treatment
for SRF or to influence a business decision.
(3) asking or suggesting that any other officer or employee of SRF, or an
officer or employee of any other firm, make personal political3 or
charitable contributions or payments which could be construed to
directly benefit SRF; or from using SRF funds to compensate or
reimburse the donor for any such personal political4 or charitable
contribution or payment.
Enforcement of the Policy
Strict adherence to this policy is required of all officers and employees as a
condition of employment with SRF. Further, all officers and employees are
required:
(1) to disclose to SRF's compliance manager the receipt of any payments,
gifts, services, loans or other gratuities which might be in violation
of this policy; and,
(2) to annually certify in writing their understanding of and adherence to this
policy.
Notice of this policy shall be directed to all officers and employees of SRF,
and to all service or supply vendors which do business with SRF, including
broker-dealers used for the execution of client transactions
- --------
(1)It is the position of the Securities and Exchange Commission that, while
direction of client brokerage transactions in respect of the acquisition of
investment research provided by broker-dealers is protected under ss.28(e) of
the Securities Exchange Act, the provision of travel, entertainment and lodging
expenses in connection with research activities is not so protected.
Accordingly, travel, entertainment or lodging expenses, or reimbursement
therefor, may not be accepted from broker-dealers doing business or seeking to
do business with SRF, even if in connection with appropriate investment research
activities.
(2) The offering or giving of gifts or gratuities to government
officials or employees may violate applicable federal, state or local
anti-bribery laws, and subject the officer or employee, or SRF, to civil or
criminal penalties, including imprisonment.
(3)Solicitation of personal
contributions to Political Action Committees by officers and employees is not
prohibited.
(4)Reimbursement from corporate funds of personal political
contributions may violate federal, state or local campaign finance laws, and
subject the violator to civil or criminal penalties, including imprisonment.
<PAGE>
Exhibit I
STEIN ROE & FARNHAM - QUARTERLY PERSONAL TRANSACTION REPORT
For Investment Personnel and Affiliated Trustees
For the period _____________________
Employee:_________________________
During the quarter listed above, in the accounts that I directly or indirectly
control and in which I have a direct or beneficial interest, I (check one):
_____ had no reportable transactions
_____ previously reported all securities transactions and I
confirm that these transactions were placed through
the accounts for which Stein Roe receives duplicate
confirmations and statements.
_____ need to report the following securities transactions:
<TABLE>
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Trade Date B Amount Description Price Broker
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</TABLE>
* if other than Bought or Sold, please explain on reverse side
I certify that the transactions reported herein are in compliance with the
provisions of the Code of Ethics regarding personal transactions in securities
and commodities interests.
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Date Signature
<PAGE>
Exhibit II
Notification of Personal Securities Held
The purpose of this form is to disclose your personal holdings of the
recommended client portfolio/fund security purchase, in advance of the purchase
for the client portfolio/fund. A written authorization is required for each
portfolio/fund for which you have investment discretion. Please provide this
form to the Head of Equity or the Head of Fixed Income to determine if holding
or position may require sale or closure.
Please complete all requested information.
Name:____________________________________________
Date: ____________________________________
<TABLE>
<CAPTION>
Personal Holdings
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<S> <C> <C>
Cost Basis & Year Acquired
Name of Security/Bond Current Price
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List all portfolios/funds for which the purchase is being made.
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</TABLE>
Signature _____________________________________________
(Head of Equity or Head of Fixed Income)
cc: Compliance Manager 20-Dec-99 form
