Registration Nos: 33-59216
811-7556
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 19 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 20 / X /
(Check appropriate box or boxes)
LIBERTY VARIABLE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices)
617-426-3750
(Registrant's Telephone Number, including Area Code)
Name and Address of
Agent for Service Copy to
Nancy L. Conlin, Esq. John M. Loder, Esq.
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, MA 02111 Boston, MA 02110-2624
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b).
/ / On (date) pursuant to paragraph (b).
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / on (date) pursuant to paragraph (a)(1).
/ / 75 days after filing pursuant to paragraph (a)(2).
/ X / on May 30, 2000 pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
An indefinite number of shares of beneficial interest of all existing and
subsequently created series of the Trust under the Securities Act of 1933 were
registered by the Registration Statement filed on March 18, 1993 under the
Securities Act of 1933 pursuant to Rule 24f-2. A Rule 24f-2 Notice with respect
to the fiscal year ended December 31, 1996 was filed on or about February 28,
1997.
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
Cross Reference Sheet Pursuant to Rule 481(a)
(Liberty Newport Japan Opportunities Fund, Variable Series)
(Liberty Mid-Cap Value Fund, Variable Series)
<TABLE>
<CAPTION>
Item Number of Form N-1A Prospectus Location or Caption
<S> <C>
Part A
1. Front Cover Page; Back Cover Page
2. The Funds; Other Investment Strategies and Risks
3. Not Applicable
4. The Funds
5. Not Applicable
6. Trust Management Organizations
7. Shareholder Information
8. The Trust
9. Not Applicable
</TABLE>
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
PROSPECTUS DATED JUNE 1, 2000
Liberty Newport Japan Opportunities Fund, Variable Series
Liberty Mid-Cap Value Fund, Variable Series
CLASS A AND B SHARES
Trust shares available only through variable annuity contracts and variable life
insurance policies of participating insurance companies.
* * * *
This Prospectus must be accompanied by a prospectus for your variable annuity
contract or variable life insurance policy. Retain both prospectuses for future
reference.
* * * *
Although these securities have been registered with the Securities and Exchange
Commission (SEC), the SEC 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 MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
THE TRUST 3
THE FUNDS 4
Each of these sections discusses the following
topics: Investment Goal, Primary Investment Strategies
and Primary Investment Risks
Liberty Newport Japan Opportunities Fund, Variable Series...............4
Liberty Mid-Cap Value Fund, Variable Series.............................5
TRUST MANAGEMENT ORGANIZATIONS 7
The Trustees............................................................7
Investment Advisor......................................................7
Investment Sub-Advisors.................................................7
Distribution and Service Fees...........................................8
SHAREHOLDER INFORMATION 10
Purchases and Redemptions...............................................10
How the Funds Calculate Net Asset Value.................................10
Dividends and Distributions.............................................10
Tax Consequences........................................................10
</TABLE>
2
<PAGE>
THE TRUST
Liberty Variable Investment Trust ("Trust") includes [eighteen] separate mutual
funds, each with its own investment goal and strategies. This Prospectus
contains information about two of the Funds ("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>
Liberty Newport Japan Opportunities Fund, Variable Series (Japan Opportunities Fund) Newport Fund Management, Inc.
("Newport")
- --------------------------------------------------------------------------------------------------------------------------
Liberty Mid-Cap Value Fund, Variable Series (Mid-Cap Value Fund) Colonial Management Associates, Inc.
("Colonial")
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other Funds may be added to or deleted from the Trust from time to time. The
Trust offers two classes of shares - Class A and Class B. Each share class has
its own separate expense structure.
The Trust's Funds are investment options under variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") issued by life
insurance companies ("Participating Insurance Companies"). Some (but not all)
Participating Insurance Companies are affiliated with the investment advisor to
the Funds. Participating Insurance Companies invest in the Funds through
separate accounts that they set up for that purpose. Owners of VA contracts and
of VLI policies invest in sub-accounts of those separate accounts through
instructions they give to their insurance company. The principal underwriters of
the Funds are Keyport Financial Services Corp. ("KFSC") and Liberty Funds
Distributor, Inc. ("LFD"). KFSC serves as principal underwriter of the shares of
the portfolios of the Trust with respect to the sale of shares to Participating
Insurance Companies that are affiliated with LASC and LFD serves as principal
underwriter with respect to the sale of shares to Participating Insurance
Companies that are not affiliated with LASC. KFSC and LFD are affiliates of
LASC.
The prospectuses of the Participating Insurance Companies' separate accounts
describe which Funds are available to the purchasers of their VA contracts and
VLI policies. The Trust assumes no responsibility for those prospectuses.
3
<PAGE>
THE FUNDS
LIBERTY NEWPORT JAPAN OPPORTUNITIES FUND, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks capital appreciation.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests substantially all of its assets
in stocks of companies whose principle activities are in Japan. Newport will
determine where a company's principle activities are located by considering its
country of organization, the principle trading market for its stocks and the
source of its revenues and location of its assets. The Fund invests in stocks of
well-established companies with histories of consistent earnings growth in
industries with attractive or improving prospects.
At times, Newport 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 the Fund from achieving its investment goal.
In seeking to achieve its goal, the Fund may invest in various types of
securities and engage in various investment techniques which are not the
principle focus of the Fund and therefore are not described in this prospectus.
These types of securities and investment practices are identified and discussed
in the Fund's Statement of Additional Information, which you may obtain free of
charge (see back cover). Approval by the Fund's shareholders is not required to
modify or change the Fund's investment goal or investment strategies.
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 or 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 intrinnsic 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 Japan, the value of the
Fund's shares is susceptible to country concentration risks. The political,
economic and market conditions within Japan and movements in the currency
exchange rates between Japan and the U.S. may cause the value of the Fund's
shares to fluctuate more widely than the value of the shares of a fund that
invests in companies located in a number of different countries. The Fund's
concentration in Japan may also result in greater losses to the Fund than if the
Fund were more geographically diversified.
4
<PAGE>
LIBERTY MID-CAP VALUE FUND, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks long-term growth.
PRIMARY INVESTMENT STRATEGIES
The Fund invests, under normal market conditions, primarily in middle
capitalization stocks. Middle capitalization stocks are stocks with market
capitalizations between $400 million and the largest stock in the Russell Mid
Cap Index at the time of purchase. In addition, any stock that is a member of
the S&P MidCap 400 Index is considered a middle capitalization stock.
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 analyses.
At times, Colonial 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 the Fund from achieving its investment goal.
In seeking to achieve its goal, the 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 Fund's Statement of Additional Information, which you may obtain free of
charge (see back cover). Approval by the Fund's shareholders is not required to
modify or change the Fund's goal or investment strategies.
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 economic, political or market 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 the advisor's assessment of a company's
prospects is wrong, the price of its stock may not approach the value the
advisor has placed on it.
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.
5
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
THE TRUSTEES
The business of the Trust and the Funds is supervised by the Trust's Board of
Trustees. The Statement of Additional Information (SAI) contains names of and
biographical information on the Trustees.
INVESTMENT ADVISOR
LASC, located at 125 High Street, Boston Massachusetts 02110, is the investment
advisor to the Trust. LASC is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. ("LFC"). LASC has been an investment advisor since
1993. As of March 31, 2000, LASC managed over $____ million in assets. LASC
designates the Trust's Sub-Advisors, evaluates and monitors the Sub-Advisors'
performance and investment programs and recommends to the Board of Trustees
whether the 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 its services as investment advisor, the Trust pays LASC a management fee at
the following annual rates of the average daily net assets of each specified
Fund:
<TABLE>
<S> <C>
Liberty Newport Japan Opportunities Fund, Variable Series ____%
Liberty Mid-Cap Value Fund, Variable Series ____%
</TABLE>
INVESTMENT SUB-ADVISORS
The Sub-Advisors manage the assets of the Funds under the supervision of LASC
and the Board of Trustees. Each Sub-Advisor determines which securities and
other instruments are purchased and sold for the Fund(s) it sub-advises. Each
Sub-Advisor is an indirect wholly-owned subsidiary of LFC.
NEWPORT
Newport, is the sub-advisor of Japan Opportunities Fund. Newport's principal
business address is 580 California Street, Suite 1960, San Francisco, California
94104. As of March 31, 2000, Newport managed over $1.3 billion in assets.
LASC, out of the management fees it receives from the Trust, pays Newport a
sub-advisory fee at the annual rate of ____% of the average daily net assets of
the Japan Opportunities Fund.
DAVID SMITH, a senior vice president of Newport and its immediate parent,
Newport Pacific Management, Inc. ("Newport Pacific"), is the manager for the
Japan Opportunities Fund and has managed various other funds or accounts on
behalf of Newport Pacific since October, 1994.
COLONIAL
Colonial, an investment advisor since 1931, is the Sub-Advisor of the Mid-Cap
Value 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 a
sub-advisory fee of ____% of the average daily net assets of the Mid-Cap Value
Fund.
JAMES P. HAYNIE, a senior vice president of Colonial, is a co-manager of the
Mid-Cap Value Fund. He has been employed by Colonial since 1993 and has managed
other funds Colonial advises since that time.
MICHAEL REGA, a vice president of Colonial, is a co-manager of the Mid-Cap Value
Fund. He has been employed by Colonial since 1993 as an analyst or co-manager of
other funds Colonial advises.
Colonial also provides transfer agency, pricing and record keeping services for
the Funds under separate agreements.
6
<PAGE>
Colonial's investment advisory business is managed together with the mutual
funds and institutional investment advisory business of its affiliate, Stein Roe
& Farnham Incorporated (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 is a registered investment advisor.
Colonial, the other entities that make up LFG and Stein Roe are subsidiaries of
Liberty Financial Companies, Inc.
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.
DISTRIBUTION AND SERVICE FEES
The Trust has adopted a plan for and on behalf of the Trust's Class B shares in
accordance with Rule 12b-1 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 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.
7
<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 net asset value ("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 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 regular trading on 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. A Fund values
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.
The 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.
8
<PAGE>
FOR MORE INFORMATION
You may wish to read the SAI for more information on the Funds and the
securities in which they invest. The SAI is incorporated into this prospectus by
reference, which means that it is considered to be part of this prospectus.
You can get free copies of reports, the SAI, or request other information and
discuss your questions about the Funds by writing or calling:
Keyport Financial Services Corp.
125 High Street
Boston, MA 02111
1-800-437-4466
or by calling or writing the Participating Insurance Company which issued your
VA contract or VLI policy.
Text-only versions of all Fund documents can be viewed online or downloaded from
the SEC at www.sec.gov.
You can review and copy information about the Funds by visiting the following
location and you can obtain copies, upon payment of a duplicating fee, by
electronic request at the E-mail address [email protected] or by writing or
calling:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
Information on the operation of the Public Reference Room may be obtained by
calling 1-202-942-8090.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Variable Investment Trust: 811-07556
Liberty Newport Japan Opportunities Fund, Variable Series
Liberty Mid-Cap Value Fund, Variable Series
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
Cross Reference Sheet Pursuant to Rule 481(a)
(Rydex Technology Fund, Variable Series)
(Rydex Financial Services Fund, Variable Series)
(Rydex Health Care Fund, Variable Series)
<TABLE>
<CAPTION>
Item Number of Form N-1A Prospectus Location or Caption
<S> <C>
Part A
1. Front Cover Page; Back Cover Page
2. The Funds; Other Investment Strategies and Risks
3. Not Applicable
4. The Funds
5. Not Applicable
6. Trust Management Organizations
7. Shareholder Information
8. The Trust
9. Not Applicable
</TABLE>
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
PROSPECTUS DATED JUNE 1, 2000
Rydex Financial Services Fund, Variable Series
Rydex Health Care Fund, Variable Series
Rydex Technology Fund, Variable Series
CLASS A AND B SHARES
Trust shares available only through variable annuity contracts and variable life
insurance policies of participating insurance companies.
* * * *
This Prospectus must be accompanied by a prospectus for your variable annuity
contract or variable life insurance policy. Retain both prospectuses for future
reference.
* * * *
Although these securities have been registered with the Securities and Exchange
Commission (SEC), the SEC 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 MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
THE TRUST 3
THE FUNDS 4
Each of these sections discusses the following
topics: Investment Goal, Primary Investment Strategies
and Primary Investment Risks
Rydex Financial Services Fund, Variable Series.......................................................................4
Rydex Health Care Fund, Variable Series..............................................................................5
Rydex Technology Fund, Variable Series...............................................................................6
TRUST MANAGEMENT ORGANIZATIONS 7
The Trustees.........................................................................................................7
Investment Advisor...................................................................................................7
Investment Sub-Advisor and Portfolio Manager.........................................................................7
Distribution and Service Fees........................................................................................8
OTHER INVESTMENT STRATEGIES AND RISKS 9
SHAREHOLDER INFORMATION 10
Purchases and Redemptions............................................................................................10
How the Funds Calculate Net Asset Value..............................................................................10
Dividends and Distributions..........................................................................................10
Tax Consequences.....................................................................................................10
</TABLE>
2
<PAGE>
THE TRUST
Liberty Variable Investment Trust ("Trust") includes [eighteen] separate mutual
funds, each with its own investment goal and strategies. This Prospectus
contains information about three of the Funds (collectively, "Funds") in the
Trust, Rydex Financial Services Fund, Variable Series ("Financial Services
Fund"), Rydex Health Care Fund, Variable Series ("Health Care Fund") and Rydex
Technology Fund, Variable Series ("Technology Fund"). Liberty Advisory Services
Corp. ("LASC") is the investment advisor to each Fund. LASC has appointed
Colonial Management Associates, Inc. ("Colonial") Sub-Advisor for each Fund,
which is an affiliate of LASC. Colonial delegates investment management
responsibility for the Funds to PADCO Advisors, Inc. ("PADCO"). Under these
arrangements, PADCO has full investment discretion and authority over each
Fund's investments.
Other Funds may be added to or deleted from the Trust from time to time. The
Trust offers two classes of shares - Class A and Class B. Each share class has
its own expense structure.
The Trust's Funds are investment options under variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") issued by life
insurance companies ("Participating Insurance Companies"). Some (but not all)
Participating Insurance Companies are affiliated with the investment advisor to
the Funds. Participating Insurance Companies invest in the Funds through
separate accounts that they set up for that purpose. Owners of VA contracts and
of VLI policies invest in sub-accounts of those separate accounts through
instructions they give to their insurance company. The principal underwriters of
the Funds are Keyport Financial Services Corp. ("KFSC") and Liberty Funds
Distributor, Inc. ("LFD"). KFSC serves as principal underwriter of the shares of
the portfolios of the Trust with respect to the sale of shares to Participating
Insurance Companies that are affiliated with LASC and LFD serves as principal
underwriter with respect to the sale of shares to Participating Insurance
Companies that are not affiliated with LASC. KFSC and LFD are affiliates of
LASC.
The prospectuses of the Participating Insurance Companies' separate accounts
describe which Funds are available to the purchasers of their VA contracts and
VLI policies. The Trust assumes no responsibility for those prospectuses.
3
<PAGE>
THE FUNDS
LIBERTY FINANCIAL SERVICES FUND, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks capital appreciation.
PRIMARY INVESTMENT STRATEGIES
The Fund invests in companies that are involved in the financial services sector
("Financial Services Companies"). The Fund invests substantially all of its
assets in equity securities of Financial Services Companies that are traded in
the United States. Financial Service Companies include commercial banks, savings
and loan associations, insurance companies and brokerage companies. Under SEC
regulations, the Fund may not invest more than 5% of its total assets in the
equity securities of any company that derives more than 15% of its revenues from
brokerage or investment management activities.
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.
Because the Fund primarily invests in equity securities, it is subject to equity
risk. The equity markets are volatile, and the value of the Fund's securities
and futures and options contracts may fluctuate drastically from day-to-day.
This volatility may cause the value of your investment in the Fund to decrease.
Since the Fund invests in the securities of a limited number of issuers
conducting business in the technology sector, it is subject to concentration
risk. Concentration risk is the risk that the securities of issuers in the
financial services sector that the Fund purchases will underperform the market
as a whole. To the extent that the Fund's investments are concentrated in
issuers conducting business in the same economic sector, the Fund is subject to
legislative or regulatory changes, adverse market conditions and/or increased
competition affecting that economic sector. Financial Services Companies are
subject to extensive governmental regulation, which may limit both the amounts
and types of loans and other financial commitments they can make, and the rates
and fees they can charge. Profitability is largely dependent on the availability
and cost of capital, and can fluctuate significantly when interest rates change.
Credit losses resulting from financial difficulties of borrowers also can
negatively impact the sector.
Since the Fund is non-diversified, the Fund may invest in the securities of a
relatively few number of issuers. To the extent that the Fund invests a
significant percentage of its assets in a limited number issuers, the Fund is
subject to the risks of investing in those few issuers, and may be susceptible
to a single adverse economic or regulatory occurrence.
4
<PAGE>
LIBERTY HEALTH CARE FUND, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks capital appreciation.
PRIMARY INVESTMENT STRATEGIES
The Fund invests in companies that are involved in the health care industry
("Health Care Companies"). The Fund invests substantially all of its assets in
equity securities of Health Care Companies that are traded in the United States.
Health Care Companies include pharmaceutical companies, companies involved in
research and development of pharmaceutical products and services, companies
involved in the operation of health care facilities, and other companies
involved in the design, manufacture, or sale of health care-related products or
services.
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.
Because the Fund primarily invests in equity securities, it is subject to equity
risk. The equity markets are volatile, and the value of the Fund's securities
and futures and options contracts may fluctuate drastically from day-to-day.
This volatility may cause the value of your investment in the Fund to decrease.
Since the Fund invests in the securities of a limited number of issuers
conducting business in the health care sector, it is subject to concentration
risk. Concentration risk is the risk that the securities of issuers in the
health care sector that the Fund purchases will underperform the market as a
whole. To the extent that the Fund's investments are concentrated in issuers
conducting business in the same economic sector, the Fund is subject to
legislative or regulatory changes, adverse market conditions and/or increased
competition affecting that economic sector. The prices of the securities of
Health Care Companies may fluctuate widely due to government regulation and
approval of their products and services, which can have a significant effect on
their price and availability. Furthermore, the types of products or services
produced or provided by these companies may quickly become obsolete. Moreover,
liability for products that are later alleged to be harmful or unsafe may be
substantial, and may have a significant impact on a Health Care Company's market
value and/or share price.
Since the Fund is non-diversified, the Fund may invest in the securities of a
relatively few number of issuers. To the extent that the Fund invests a
significant percentage of its assets in a limited number of issuers, the Fund is
subject to the risks of investing in those few issuers, and may be susceptible
to a single adverse economic or regulatory occurrence.
5
<PAGE>
LIBERTY TECHNOLOGY FUND, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks capital appreciation.
PRIMARY INVESTMENT STRATEGIES
The Fund invests in companies that are involved in the technology sector,
including computer software and service companies, semiconductor manufacturers,
networking and telecommunications equipment manufacturers, PC hardware and
peripherals companies ("Technology Companies"). The Fund invests substantially
all of its assets in equity securities of Technology Companies that are traded
in the United States. Technology Companies are companies which the Advisor
believes have, or will develop, products, processes, or services that will
provide technological advances and improvements. These companies may include,
for example, companies that develop, produce or distribute products or services
in the computer, semiconductor, electronics, communications.
health care, and biotechnology sectors.
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.
Because the Fund primarily invests in equity securities, it is subject to equity
risk. The equity markets are volatile, and the value of the Fund's securities
and futures and options contracts may fluctuate drastically from day-to-day.
This volatility may cause the value of your investment in the Fund to decrease.
Since the Fund invests in the securities of a limited number of issuers
conducting business in the technology sector, it is subject to concentration
risk. Concentration risk is the risk that the securities of issuers in the
technology sector that the Fund purchases will underperform the market as a
whole. To the extent that the Fund's investments are concentrated in issuers
conducting business in the same economic sector, the Fund is subject to
legislative or regulatory changes, adverse market conditions and/or increased
competition affecting that economic sector. The prices of the securities of
Technology Companies may fluctuate widely due to competitive pressures,
increased sensitivity to short product cycles and aggressive pricing, problems
relating to bringing their products to market, very high price/earnings ratios,
and high personnel turnover due to severe labor shortages for skilled technology
professionals.
Since the Fund is non-diversified, the Fund may invest in the securities of a
relatively few number of issuers. To the extent that the Fund invests a
significant percentage of its assets in a limited number of issuers, the Fund is
subject to the risks of investing in those few issuers, and may be susceptible
to a single adverse economic or regulatory occurrence.
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 (SAI) contains names of and
biographical information on the Trustees.
INVESTMENT ADVISOR
LASC, located at 125 High Street, Boston Massachusetts 02110, is the investment
advisor to the Trust. LASC is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. ("LFC"). LASC has been an investment advisor since
1993. As of March 31, 2000, LASC managed over $____ million in assets. LASC
designates the Trust's Sub-Advisors, evaluates and monitors the Sub-Advisors'
performance and investment programs and recommends to the Board of Trustees
whether the 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 its services as investment advisor, the Trust pays LASC a management fee at
the following annual rates of the average daily net assets of each specified
Fund:
<TABLE>
<CAPTION>
<S> <C>
Rydex Financial Services Fund, Variable Series 0.00%
Rydex Health Care Fund, Variable Series 0.00%
Rydex Technology Fund, Variable Series 0.00%
</TABLE>
INVESTMENT SUB-ADVISOR AND PORTFOLIO MANAGER
COLONIAL
Colonial, an investment advisor since 1931, is the Sub-Advisor of each of the
Financial Services Fund, Health Care Fund and Technology Fund. Colonial's
principal business address is One Financial Center, Boston, Massachusetts 02111.
Colonial is an indirect wholly-owned subsidiary of LFC. 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>
<CAPTION>
<S> <C>
Rydex Financial Services Fund, Variable Series 0.00%
Rydex Health Care Fund, Variable Series 0.00%
Rydex Technology Fund, Variable Series 0.00%
</TABLE>
Colonial also provides transfer agency, pricing and record keeping services for
the Funds under separate agreements.
As investment sub-advisor, Colonial provides investment management oversight to
the Funds' portfolio manager.
PADCO
PADCO, located at 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852
is the Portfolio Manager of the Funds. Albert P. Viragh, Jr., the Chairman at
the Board and President of PADCO, owns a controlling interest in PADCO. PADCO
has been an investment advisor since 199__. As of March 31, 2000, PADCO managed
over $____ in assets.
Out of the management fees received form LASC, Colonial pays PADCO a fee at the
following annual rates of average daily net assets of each specified Fund.
<TABLE>
<CAPTION>
<S> <C>
Rydex Financial Services Fund, Variable Series ____%
Rydex Health Care Fund, Variable Series ____%
Rydex Technology Fund, Variable Series ____%
</TABLE>
Each Fund is managed by a team and no one person is responsible for making
investment decisions for a specific Fund.
7
<PAGE>
DISTRIBUTION AND SERVICE FEES
The Trust has adopted a plan for and on behalf of the Trust's 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 Fund's 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.
8
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
Each Fund's primary investments and its risks are described above under "Primary
Investment Strategies" and "Primary Investment Risks". This section describes
other investments a Fund may make that are not primary strategies and the risks
associated with them. Additional types of securities and investment practices
are identified and discussed in the Funds' SAI, which you may obtain free of
charge (see back cover). Approval by the Funds' shareholders is not required to
modify or change any of the Funds' investment goals or investment strategies.
TEMPORARY DEFENSIVE MEASURES (ALL FUNDS)
Each Fund's Portfolio Manager may determine that adverse market conditions make
it desirable to temporarily suspend a Fund's normal investment activities.
During such times, as a temporary defensive strategy, a 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 objective.
EQUITY RISK (ALL FUNDS)
The Funds may invest in public and privately issued equity securities, including
common and preferred stocks, warrants, and rights, as well as instruments that
attempt to track the price movement of equity indices. Investments in equity
securities and equity derivatives in general are subject to market risks that
may cause their prices to fluctuate over time. The value of securities
convertible into equity securities, such as warrants or convertible debt, is
also affected by prevailing interest rates, the credit quality of the issuer and
any call provision. Fluctuations in the value of equity securities in which the
Funds invest will cause the net asset value of the Funds to fluctuate. An
investment in the Funds may be more suitable for long-term investors who can
bear the risk of short-term principal fluctuations.
TRADING HALT RISK (ALL FUNDS)
The Funds typically will hold short-term options and futures contracts. The
major exchanges on which these contracts are traded, such as the Chicago
Mercantile Exchange ("CME"), have established limits on how much an option or
futures contract may decline over various time periods within a day. If an
option or futures contract's price declines more than the established limits,
trading on the exchange is halted on that instrument If a trading halt occurs
at the close of a trading day, a Fund may not be able to purchase or sell
options or futures contracts. In such an event, a Fund also may be required to
use a "fair-value" method to price its outstanding contracts.
FUTURES AND OPTIONS CONTRACTS RISK (ALL FUNDS)
The Funds may invest a percentage of their assets in leveraged instruments such
as futures and options contracts. The more a Fund invests in leveraged
instruments, the more this leverage will magnify any losses on those
investments. The Funds may use futures contracts and related options for bona
fide hedging purposes to offset changes in the value of securities held or
expected to be acquired. They may also be used to gain exposure to a particular
market or instrument, to create a synthetic money market position, and for
certain other tax-related purposes. The Funds will only enter into futures
contracts traded on a national futures exchange or board of trade. Futures and
options contracts are described in more detail below:
FUTURES CONTRACTS - Futures contracts and options on futures contracts
provide for the future sale by one party and purchase by another party
of a specified amount of a specific security at a specified future time
and at a specified price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a position in
a futures contract at a specified exercise price during the term of the
option. Index futures are futures contracts for various indices that
are traded on registered securities exchanges.
OPTIONS - The buyer of an option acquires the right to buy (a call
option) or sell (a put option) a certain quantity of a security (the
underlying security) or instrument at a certain price up to a specified
point in time. The seller or writer of an option is obligated to sell
(a call option) or buy (a put option) the underlying security. When
writing (selling) call options on securities, a Fund may cover its
position by owning the underlying security on which the option is
written or by owning a call option on the underlying security.
Alternatively, a Fund may cover its position by maintaining in a
segregated account cash or liquid securities equal in value to the
exercise price of the call option written by the Fund.
The risks associated with the use of these leveraging techniques
include:
- A Fund experiencing losses over certain ranges in the market
that exceed losses experienced by a Fund that does not use
futures contracts and options.
- There may be an imperfect correlation between the changes in
market value of the securities held by a Fund and the prices
of futures and options on futures.
9
<PAGE>
- Although the Funds will only purchase exchange-traded futures
and options, due to market conditions there may be a liquid
secondary market for a futures contract or option. As a
result, the Funds may be unable to close out their futures or
options contracts at a time which is advantageous.
- Trading restrictions or limitations may be imposed by an
exchange, and government regulations may restrict trading in
futures contracts and options.
- Because option premiums paid or received by a Fund are small
in relation to the market value of the investments underlying
the options, buying and selling put and call options can be
more speculative than investing directly in securities.
PORTFOLIO TURNOVER RATE RISK (ALL FUNDS)
The Trust anticipates that investors that are part of a tactical or strategic
asset-allocation strategy will frequently redeem or exchange shares of a Fund,
which will cause that Fund to experience high portfolio turnover. A higher
portfolio turnover rate may result in a Fund paying higher levels of
transaction costs and generating greater tax liabilities for shareholders.
EARLY CLOSING RISK (ALL FUNDS)
The normal close of trading of securities listed on the National Association of
Securities Dealers Automated Quotations system ("NASDAQ") and the New York Stock
Exchange ("NYSE") is 4:00 P.M., Eastern time. Unanticipated early closings may
result in a Fund being unable to sell or buy securities on that day. If an
exchange closes early on a day when one or more of the Funds needs to execute a
high volume of securities traces late in a trading day, a Fund might incur
substantial trading losses.
FOREIGN COMPANY RISK (ALL FUNDS)
Investments in securities of foreign companies can be more volatile than
investments in U.S. companies. Diplomatic, political, or economic developments
could affect investments in foreign countries. Foreign companies generally are
not subject to uniform accounting, auditing, and financial reporting standards
comparable to those applicable to U.S. domestic companies.
10
<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 net asset value ("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 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 regular trading on the 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. A Fund values
each over-the-counter security or 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.
The 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.
11
<PAGE>
FOR MORE INFORMATION
You may wish to read the SAI for more information on the Funds and the
securities in which they invest. The SAI is incorporated into this prospectus by
reference, which means that it is considered to be part of this prospectus.
You can get free copies of reports, the SAI, or request other information and
discuss your questions about the Funds by writing or calling:
Keyport Financial Services Corp.
125 High Street
Boston, MA 02111
1-800-437-4466
or by calling or writing the Participating Insurance Company which issued your
VA contract or VLI policy.
Text-only versions of all Fund documents can be viewed online or downloaded from
the SEC at www.sec.gov.
You can review and copy information about the Funds by visiting the following
location and you can obtain copies, upon payment of a duplicating fee, by
electronic request at the E-mail address [email protected] or by writing or
calling:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
Information on the operation of the Public Reference Room may be obtained by
calling 1-202-942-8090.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Variable Investment Trust: 811-07556
Rydex Financial Services Fund, Variable Series
Rydex Health Care Fund, Variable Series
Rydex Technology Fund, Variable Series
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
Cross Reference Sheet Pursuant to Rule 481(a)
(Liberty S&P 500 Index Fund, Variable Series)
<TABLE>
<CAPTION>
Item Number of Form N-1A Prospectus Location or Caption
<S> <C>
Part A
1. Front Cover Page; Back Cover Page
2. The Funds; Other Investment Strategies and Risks
3. Not Applicable
4. The Funds
5. Not Applicable
6. Trust Management Organizations
7. Shareholder Information
8. The Trust
9. Not Applicable
</TABLE>
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
PROSPECTUS DATED JUNE 1, 2000
Liberty S&P 500 Index Fund, Variable Series
CLASS A AND B SHARES
Trust shares available only through variable annuity contracts and variable life
insurance policies of participating insurance companies.
* * * *
This Prospectus must be accompanied by a prospectus for your variable annuity
contract or variable life insurance policy. Retain both prospectuses for future
reference.
* * * *
Although these securities have been registered with the Securities and Exchange
Commission (SEC), the SEC 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 MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
THE TRUST 3
THE FUND 4
Investment Goal, Primary Investment Strategies
and Primary Investment Risks 4
TRUST MANAGEMENT ORGANIZATIONS 7
The Trustees 7
Investment Advisor 7
Investment Sub-Advisor and Portfolio Manager 7
Distribution and Service Fees 8
SHAREHOLDER INFORMATION 10
Purchases and Redemptions 10
How the Funds Calculate Net Asset Value 10
Dividends and Distributions 10
Tax Consequences 10
</TABLE>
2
<PAGE>
THE TRUST
Liberty Variable Investment Trust ("Trust") includes [eighteen] separate mutual
funds, each with its own investment goal and strategies. This Prospectus
contains information about one of the funds in the Trust, Liberty S&P 500 Index
Fund, Variable Series ("the Fund"). Liberty Advisory Services Corp. ("LASC") is
the investment advisor to the Fund. LASC has appointed Colonial Management
Associates, Inc. ("Colonial") Sub-Advisor for the Fund, which is an affiliate of
LASC. Colonial delegates investment management responsibility for the Fund to
____________________________________________________. Under these arrangements,
_______________________ has full investment discretion and authority over each
Fund's investments.
Other Funds may be added to or deleted from the Trust from time to time. The
Trust offers two classes of shares - Class A and Class B. Each share class has
its own expense structure.
The Trust's series (collectively, "Funds") are investment options under variable
annuity contracts ("VA contracts") and variable life insurance policies ("VLI
policies") issued by life insurance companies ("Participating Insurance
Companies"). Some (but not all) Participating Insurance Companies are affiliated
with the investment advisor to the Funds. Participating Insurance Companies
invest in the Funds through separate accounts that they set up for that purpose.
Owners of VA contracts and of VLI policies invest in sub-accounts of those
separate accounts through instructions they give to their insurance company. The
principal underwriters of the Funds are Keyport Financial Services Corp.
("KFSC") and Liberty Funds Distributor, Inc. ("LFD"). KFSC serves as principal
underwriter of the shares of the portfolios of the Trust with respect to the
sale of shares to Participating Insurance Companies that are affiliated with
LASC and LFD serves as principal underwriter with respect to the sale of shares
to Participating Insurance Companies that are not affiliated with LASC. KFSC and
LFD are affiliates of LASC.
The prospectuses of the Participating Insurance Companies' separate accounts
describe which Funds are available to the purchasers of their VA contracts and
VLI policies. The Trust assumes no responsibility for those prospectuses.
3
<PAGE>
THE FUNDS
LIBERTY S&P 500 INDEX FUND, VARIABLE SERIES
INVESTMENT GOAL
The Fund seeks capital appreciation by matching the performance of a benchmark
index that measures the investment returns of stocks of large U.S. companies.
PRIMARY INVESTMENT STRATEGIES
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.
The Fund employs a passive management strategy designed to match, as closely as
possible, the performance of the Standard & Poor's 500 composite Stock Price
Index (S&P Index), which is comprised of stocks of large U.S. companies. The
Fund invests at least 80% of its assets in the stocks that make up the S&P
Index. The Fund may also invest in stock index futures and options.
Although a security may be included in the S&P Index, the Fund's portfolio
manager may exclude or remove the security if adverse market conditions exist.
The Fund's Portfolio Manager may determine that adverse market conditions make
it desirable to temporarily suspend the Fund's normal investment activities.
During such times, as a temporary defensive strategy, the Fund may, but is not
required to, invest in cash or high quality, short-term debt securities, without
limit. Taking a temporary defensive position may prevent the Fund from achieving
its investment objective.
RISKS
Market Risk. Deteriorating market conditions might cause an overall weakness in
the market that reduces the absolute level of stock prices in that market.
Tracking Error. There are several reasons that the Fund's performance may not
track the S&P Index exactly:
Unlike the Index, the Fund incurs administrative expenses and transaction costs
in trading stocks.
The composition of the S&P Index and the stocks held by the Fund may
occasionally diverge.
The timing and magnitude of cash inflows from investors buying shares could
create large balances of uninvested cash. Conversely, the timing and magnitude
of cash outflows to investors selling shares could require large ready reserves
of uninvested cash. Either situation would likely cause the Fund's performance
to deviate from the "fully invested" S&P Index.
Futures and Options. The Fund may invest, to a limited extent, in stock index
futures or options, which are types of derivatives. The Fund will not use these
derivatives from speculative purposes or as leveraged investments that
magnify the gains or losses of an investment. The Fund invests in derivatives to
keep cash on hand to meet shareholder redemptions or other needs while
maintaining exposure to the stock market. Risks associated with derivatives
include:
- the risk that the derivative is not well correlated with the
security for which it is acting as a substitute;
- derivatives used for risk management may not have the intended
effects and may result in losses or missed opportunities; and
- the risk that the Fund cannot sell the derivative because of
an illiquid secondary market.
If the Fund invests in futures contracts and options on futures contracts for
non-hedging purposes, the margin and premiums required to make those investments
will not exceed 5% of the Fund's net asset value after taking into account
unrealized profits and losses on the contracts. Futures contracts and options on
futures contracts used for non-hedging purposes involve greater risks than stock
investments.
Pricing Risk. We value securities in the Fund at their stated market value if
price quotations are available and, if not, by the method that most accurately
reflects their current worth in the judgment of the Board of Trustees. This
procedure implies an unavoidable risk, the risk that our prices are higher or
lower than the prices that the securities might actually command if we sold
them. If we have valued the securities too highly, you may end up paying too
much for Fund share when you buy. If we underestimate their price, you may not
receive the full market value for your Fund shares when you sell.
4
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
THE TRUSTEES
The business of the Trust and the Funds is supervised by the Trust's Board of
Trustees. The Statement of Additional Information (SAI) contains names of and
biographical information on the Trustees.
INVESTMENT ADVISOR
LASC, located at 125 High Street, Boston Massachusetts 02110, is the investment
advisor to the Trust. LASC is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. ("LFC"). LASC has been an investment advisor since
1993. As of March 31, 2000, LASC managed over $____ million in assets. LASC
designates the Trust's Sub-Advisors, evaluates and monitors the Sub-Advisors'
performance and investment programs and recommends to the Board of Trustees
whether the 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 its services as investment advisor, the Trust pays LASC a management fee at
the annual rate of ____% the average daily net assets of the Fund.
INVESTMENT SUB-ADVISOR AND PORTFOLIO MANAGER
COLONIAL
Colonial, an investment advisor since 1931, is the Sub-Advisor of the Fund.
Colonial's principal business address is One Financial Center, Boston,
Massachusetts 02111. Colonial is an indirect wholly-owned subsidiary of LFC. As
of March 31, 2000, Colonial managed over $____ billion in assets.
LASC, out of the management fees it receives from the Trust, pays Colonial a
sub-advisory fee at the following annual rate of ____% of the average daily net
assets of the Fund:
Colonial also provides transfer agency, pricing and record keeping services for
the Funds under separate agreements.
As investment sub-advisor, Colonial provides investment management oversight to
the Fund's portfolio manager.
______________________
_________________, located at _______________________________________________,
is the Portfolio Manager of the Fund. _____________________ has been an
investment advisor since 199__. As of March 31, 2000, ______________________
managed over $____ in assets.
Out of the management fees received form LASC, Colonial pays ___________________
a fee at the annual rates ____% of the average daily net assets of Fund.
The Fund is managed by a team and no one person is responsible for making
investment decisions for the Fund.
DISTRIBUTION AND SERVICE FEES
The Trust has adopted a plan for and on behalf of the Trust's 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 Fund's 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.
5
<PAGE>
SHAREHOLDER INFORMATION
PURCHASE AND REDEMPTIONS The Participating Insurance Companies place daily
orders to purchase and redeem shares of the Fund. 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 net asset value ("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 FUND CALCULATES NET ASSET VALUE 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 regular trading on the 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. The Fund values
each over-the-counter security or 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 Fund 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.
DIVIDENDS AND DISTRIBUTIONS The 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 the Fund consists of all
dividends or interest received by the 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 the
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 The 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"). The 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, the 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, the 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.
6
<PAGE>
FOR MORE INFORMATION
You may wish to read the SAI for more information on the Fund and the securities
in which it invest. The SAI is incorporated into this prospectus by reference,
which means that it is considered to be part of this prospectus.
You can get free copies of reports, the SAI, or request other information and
discuss your questions about the Fund by writing or calling:
Keyport Financial Services Corp.
125 High Street
Boston, MA 02111
1-800-437-4466
or by calling or writing the Participating Insurance Company which issued your
VA contract or VLI policy.
Text-only versions of all Fund documents can be viewed online or downloaded from
the SEC at www.sec.gov.
You can review and copy information about the Funds by visiting the following
location and you can obtain copies, upon payment of a duplicating fee, by
electronic request at the E-mail address [email protected] or by writing or
calling:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
Information on the operation of the Public Reference Room may be obtained by
calling 1-202-942-8090.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Variable Investment Trust: 811-07556
Liberty S&P 500 Index Fund, Variable Series
<PAGE>
LIBERTY VARIABLE INVESTMENT TRUST
Cross Reference Sheet Pursuant to Rule 481(a)
(Liberty Newport Japan Opportunities Fund, Variable Series)
(Liberty Mid-Cap Value Fund, Variable Series)
(Rydex Technology Fund, Variable Series)
(Rydex Financial Services Fund, Variable Series)
(Rydex Health Care Fund, Variable Series)
(Liberty S&P 500 Index Fund, Variable Series)
<TABLE>
<CAPTION>
Location or Caption in
Item Number of Form N-1A Statement of Additional Information
<S> <C>
Part B
10. Cover Page; Table of Contents
11. Organization and History
12. Investment Restrictions; Other Considerations; Description
of Certain Investments
13. Investment Management and Other Services; More Facts About
Trust
14. More Facts About Trust
15. Investment Management and Other Services
16. Other Considerations
17. More Facts About Trust
18. Other Considerations
19. More Facts About Trust
20. Other Considerations
21. Investment Performance
22. Independent Accountants and Financial Statements
</TABLE>
<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
Liberty Newport Japan Opportunities Fund, Variable Series
Liberty Mid-Cap Value Fund, Variable Series
Rydex Financial Services Fund, Variable Series
Rydex Health Care Fund, Variable Series
Rydex Technology Fund, Variable Series
Liberty S&P 500 Index Fund, Variable Series
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2000, REVISED 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 May 1,
2000 and June 1, 2000 and any supplements thereto, which may be obtained at no
charge by calling Liberty Funds Distributor, Inc. ("LFD") at (800) 437-4466, or
by contacting the applicable Participating Insurance Company, or the
broker-dealers offering certain variable annuity contracts or variable life
insurance policies issued by the Participating Insurance Company.
The date of this SAI is May 1, 2000, Revised June 1, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
ORGANIZATION AND HISTORY ......................................... 3
INVESTMENT MANAGEMENT AND OTHER SERVICES ......................... 4
General ................................................. 4
Trust Charges and Expenses .............................. 7
INVESTMENT RESTRICTIONS .......................................... 10
Colonial Value Fund, Variable Series .................... 10
Stein Roe Global Utilities Fund, Variable Series ........ 11
Colonial International Fund for Growth, Variable Series . 12
Colonial U.S. Growth & Income Fund, Variable Series ..... 13
Colonial Strategic Income Fund, Variable Series ......... 14
Newport Tiger Fund, Variable Series ..................... 15
Liberty All-Star Equity Fund, Variable Series ........... 17
Colonial Small Cap Value Fund, Variable Series .......... 19
Colonial High Yield Securities Fund, Variable Series .... 20
Colonial International Horizons Fund, Variable Series ... 21
Colonial Global Equity Fund, Variable Series ............ 21
Crabbe Huson Real Estate Investment Fund, Variable Series 22
Liberty Newport Japan Opportunities Fund, Variable Series
Liberty Mid-Cap Value Fund, Variable Series..............
Rydex Financial Services Fund, Variable Series...........
Rydex Health Care Fund, Variable Series..................
Rydex Technology Fund, Variable Series...................
Liberty S&P 500 Index Fund, Variable Series..............
MORE FACTS ABOUT THE TRUST ....................................... 23
Mixed and Shared Funding ................................ 23
Organization ............................................ 24
Trustees and Officers ................................... 24
Principal Holders of Securities ......................... 30
Custodians .............................................. 30
OTHER CONSIDERATIONS ............................................. 31
Portfolio Turnover ...................................... 31
Suspension of Redemptions ............................... 31
Valuation of Securities ................................. 32
Portfolio Transactions .................................. 32
DESCRIPTION OF CERTAIN INVESTMENTS ............................... 36
Money Market Instruments ................................ 36
Investments in Less Developed Countries ................. 39
Foreign Currency Transactions ........................... 40
Options on Securities ................................... 44
Futures Contracts and Related Options ................... 47
Securities Loans ........................................ 51
INVESTMENT PERFORMANCE ........................................... 52
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS ................. 53
</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 is permitted to
offer separate series and different classes of shares. The Trust currently
offers two separate classes of shares, Class A shares and Class B shares. Class
B shares differ from Class A shares solely in that Class B shares has a fee
pursuant to Rule 12b-1 of the Investment Company Act of 1940 which is used for
certain shareholder services and distribution expenses. Sales of shares of each
class are made without a sales charge at each Fund's per share net asset value.
The Trust currently offers eighteen Funds: Colonial Value Fund, Variable Series
("Value 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"), Crabbe Huson Real Estate
Investment Fund, Variable Series ("Real Estate Fund") Liberty Newport Japan
Opportunities Fund, Variable Series ("Japan Opportunities Fund"), Liberty
Mid-Cap Value Fund, Variable Series ("Mid-Cap Value Fund"), Rydex Financial
Services Fund, Variable Series ("Financial Services Fund"), Rydex Health Care
Fund, Variable Series ("Health Care Fund"), Rydex Technology Fund, Variable
Series ("Technology Fund"), Liberty S&P 500 Index Fund, Variable Series ("500
Index Fund"). The Trust may add or delete Funds and/or classes from time to
time. The Trust commenced operations on July 1, 1993.
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 Colonial Growth and Income Fund. Effective May 1, 2000, the Value Fund
changed its name from "Colonial Growth and Income Fund" to its current name.
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.
3
<PAGE>
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."
4
<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 % 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 Value Fund, International
Fund, U.S. Growth Fund, Strategic Income Fund, Small Cap Fund, High Yield Fund,
International Horizons Fund, Global Equity Fund, Mid-Cap Value Fund, Financial
Services Fund, Health Care Fund, Technology Fund and 500 Index 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 and Japan Opportunities
Fund, have entered into separate Sub-Advisory Agreements (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.
5
<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.
Wilke/Thompson Capital Management, Inc.
PADCO Advisors, Inc. ("PADCO") sub-advises Financial Services Fund,
Health Care Fund and Technology Fund pursuant to the Management Agreement for
such Funds and a Portfolio Management Agreement among the Trust, on behalf of
Financial Services Fund, Health Care Fund and Technology Fund, Colonial and
PADCO.
__________________________________________________ sub-advises 500
Index Fund pursuant to the Management Agreement for 500 Index Fund and a
Portfolio Management Agreement among the Trust on behalf of 500 Index Fund,
Colonial and _______________________.
LASC. Keyport owns all of the outstanding common stock of LASC. LASC's
address is 125 High Street, Boston, Massachusetts 02110. The directors and
principal executive officer of LASC are: Paul H. LeFevre, Jr. (principal
executive officer), Stewart R. Morrison, and Mark R. Tully. Mr. LeFevre also is
a director of KFSC, the principal underwriter for shares of the Funds sold to
Participating Insurance Companies (as such term is defined in the Prospectus)
that are affiliated with Keyport.
Colonial. Liberty Funds Group LLC ("LFG"), One Financial Center,
Boston, Massachusetts 02111, owns all of the outstanding common stock of
Colonial. LFG is an indirect wholly-owned subsidiary of LFC. The directors and
principal executive officer of Colonial are Nancy L. Conlin, Stephen E. Gibson
(principal executive officer) and Joseph R. Palombo.
Stein Roe. Stein Roe, One South Wacker Drive, Chicago, Illinois, 60606,
is an indirect wholly-owned subsidiary of LFC. The directors and principal
executive officer of Stein Roe are C. Allen Merritt, Jr. and [ ] (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 John M. Mussey (principal executive
officer), 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 Lindsay Cook.
6
<PAGE>
LAMCO and LAMCO's Portfolio Managers. LAMCO, 600 Atlantic Avenue, 23rd
Floor, Boston, Massachusetts 02210, is an indirect wholly owned subsidiary of
LFC. The directors and principal executive officer of LAMCO are: Richard R.
Christensen, Lindsay Cook, C. Allen Merritt, Jr. and William R. Parmentier
(principal executive officer).
As of the date of this SAI, the following entities serve as LAMCO's
Portfolio Managers for All-Star Equity Fund:
- J.P. Morgan Investment Management, Inc. J.P. Morgan Investment
Management Inc. ("J.P. Morgan"), an investment advisor since
1984, is located at 522 Fifth Avenue, New York, New York
10036, is a wholly-owned subsidiary of J.P. Morgan & Co.
Incorporated, a New York Stock Exchange ("NYSE") listed bank
holding company the principal banking subsidiary of which is
Morgan Guaranty Trust Company of New York. J.P. Morgan's
principal executive officer is Keith M. Schappert, and its
directors are Mr. Schappert and Messrs. Kenneth W. Anderson,
Jeff M. Garrity, John W. Schmidlin, Gilbert Van Hassel and
Hendrick Van Riel and Ms. Isabel H. Sloane. As of March 31,
1999, J.P. Morgan managed over $316 billion in assets.
- Oppenheimer Capital. Oppenheimer Capital, an investment
advisor since 1969, is located at Oppenheimer Tower, 1 World
Financial Center, New York, New York 10281, is a Delaware
partnership and an indirect wholly-owned subsidiary of PIMCO
Advisors L.P. Oppenheimer Capital's Chief Operating Officer
(principal executive officer) is James McCaughan. As of
December 31, 1998, Oppenheimer Capital managed over $62
billion in assets.
- Boston Partners Asset Management, L.P. Boston Partners Asset
Management, L.P. ("Boston Partners"), an investment advisor
since 1995, is located at 28 State Street, 21st Floor, Boston,
Massachusetts 02109. The firm is owned by its partners.
Desmond J. Heathwood is the sole General Partner. As of March
31, 1999, Boston Partners managed over $15.2 billion in
assets.
- Westwood Management Corp. Westwood Management Corp.
("Westwood"), an investment advisor since 1983, is located at
300 Crescent Court, Suite 1300, Dallas, Texas 75201, is a
wholly owned subsidiary of Southwest Securities Group, Inc.
Its principal executive officer is Susan M. Byrne. Its
directors are Ms. Byrne, Raymond E. Wooldridge, Don A.
Buchhotz, David Glatstein, and Patricia R. Fraze. Westwood
manages over $2.4 billion in assets.
- Wilke/Thompson Capital Management, Inc. Wilke/Thompson Capital
Management, Inc. ("Wilke/Thompson"), an investment advisor
since 1987, is located at 2950 Norwest Center, 90 South
Seventh Street, Minneapolis, Minnesota 55402, is a corporation
of which Anthony L. Ventura, its President, owns 23%, and Mark
A. Thompson, its Chairman and Chief Investment Officer, owns
56%, of its outstanding shares. (The balance of such shares
are owned by other employees).
7
<PAGE>
Messrs. Thompson and Ventura comprise its Board of Directors.
As of March 31, 1999, Wilke/Thompson managed over $1.1 billion
in assets.
- PADCO. PADCO has its office at 6116 Executive Boulevard, Suite
400, Rockville, Maryland 20852. Albert P. Viragh, Jr. is
President of PADCO and owns a controlling interest in PADCO.
- _________________________________________ has its offices at
____________________________________________________________.
______________________ is a division of ___________________
_____________________. The Directors and principal executive
officer of _____________________ are_______________.
The Management Agreements, the Sub-Advisory Agreements and the
Portfolio Management Agreements provide that none of LASC, Colonial, Stein Roe,
Newport, Crabbe Huson, LAMCO, LAMCO's Portfolio Managers, PADCO or ___________
(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
Value Fund and Global Utilities Fund commenced operations on July 1,
1993. International Fund commenced operations on May 2, 1994. U.S. Growth Fund
and Strategic Income Fund commenced operations on July 5, 1994. Tiger Fund
commenced operations on May 1, 1995. All-Star Equity Fund commenced operations
on November 15, 1997. Small Cap Fund and High Yield Fund commenced operations on
May 19, 1998. International Horizons Fund, Global Equity Fund and Real Estate
Fund commenced operations on June 1, 1999. Japan Opportunities Fund, Mid-Cap
Value Fund, Financial Services Fund, Health Care Fund, Technology Fund and 500
Index Fund commenced operations on June 1, 2000.
8
<PAGE>
MANAGEMENT FEES. Each Fund listed below paid LASC management fees as
follows during each year in the three-year period ended December 31, 1999
pursuant to the Management Agreements described in the Prospectus:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Value Fund: $805,967 $605,151
Global Utilities Fund: $390,383 $310,458
International Fund: $369,574 $270,532
U.S. Growth Fund: $1,027,590 $623,484
Strategic Income Fund: $590,688 $384,347(1)
Tiger Fund: $192,901 $303,701
All-Star Equity Fund: $243,070(2) $8,804(1)
Small Cap Fund: $0(2) ----
High Yield Fund: $0(2) ----
International Horizons Fund: ---- ----
Global Equity Fund: ---- ----
Real Estate Fund: ---- ----
Japan Opportunities Fund(3):
Mid-Cap Value Fund(3):
Financial Services Fund(3):
Health Care Fund(3):
Technology Fund(3):
500 Index Fund(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) Japan Opportunities Fund, Mid-Cap Value Fund, Financial Services Fund,
Health Care Fund, Technology Fund and 500 Index Fund did not commence investment
operations until June 1, 2000.
CERTAIN ADMINISTRATIVE EXPENSES. During each year in the three-year period ended
December 31, 1999 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>
Value Fund: $53,025 $43,653
Global Utilities Fund: $30,524 $27,071
International Fund: $27,008 $27,000
U.S. Growth Fund: $54,453 $39,024
Strategic Income Fund: $41,331 $31,551
Tiger Fund: $27,000 $27,000
All-Star Equity Fund: $27,000 $3,225
Small Cap Fund: $16,694 ----
High Yield Fund: $16,694 ----
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C>
International Horizons Fund: ---- ----
Global Equity Fund: ---- ----
Real Estate Fund: ---- ----
Japan Opportunities Fund(4):
Mid-Cap Value Fund(4):
Financial Services Fund(4):
Health Care Fund(4):
Technology Fund(4):
500 Index Fund(4):
</TABLE>
- ---------
(4) Japan Opportunities Fund, Mid-Cap Value Fund, Financial Services Fund,
Health Care Fund, Technology Fund and 500 Index Fund Fund did not commence
investment operations until June 1, 2000.
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>
Value Fund: $7,500 $7,500
Global Utilities Fund: $7,500 $7,500
International Fund: $7,500 $7,500
U.S. Growth Fund: $7,500 $7,500
Strategic Income Fund: $7,500 $7,500
Tiger Fund: $7,500 $896
All-Star Equity Fund: $7,500 ----
Small Cap Fund: $4,637 ----
High Yield Fund: $4,637 ----
International Horizons Fund: ---- ----
Global Equity Fund: ---- ----
Real Estate Fund: ---- ----
Japan Opportunities Fund(5):
Mid-Cap Value Fund(5):
Financial Services Fund(5):
Health Care Fund(5):
Technology Fund(5):
500 Index Fund(5):
</TABLE>
- ---------
(5) Japan Opportunities Fund, Mid-Cap Value Fund, Financial Services Fund,
Health Care Fund, Technology Fund and 500 Index Fund did not commence investment
operations until June 1, 2000.
PRINCIPAL UNDERWRITER
Liberty Funds Distributor, Inc. (LFD), One Financial Center, Boston, MA 02111,
serves as the principal underwriter with respect to the sale of shares to both
affiliated and non affiliated Participating Insurance Companies are affiliates
of LASC.
10
<PAGE>
The Trustees have approved a Distribution Plan and Agreement (Plan) pursuant to
Rule 12b-1 under the 1940 Act for the Class B shares of the Funds. Under the
Plan, the Funds pay the distributor a monthly service fee at the aggregate
annual rate of up to 0.25% of each Fund's Class B share's average daily net
assets. The distributor has agreed to waive the fee to an amount not to exceed
0.20% of each Fund's Class B share'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 the 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 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 Value
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, (v) Real Estate Fund in excess of 1.20% of
average daily net asset value per annum, and (vi) Japan Opportunities Fund,
Mid-Cap Value Fund, Financial Services Fund, Health Care Fund, Technology Fund
and 500 Index Fund in excess of ___% of average daily net assets value per
annum.
11
<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.
VALUE FUND
FUNDAMENTAL INVESTMENT POLICIES. Value Fund may:
1. Issue senior securities only through borrowing money from
banks for temporary or emergency purposes up to 10% of its net
assets; however, 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.
12
<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);
13
<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;
14
<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
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
15
<PAGE>
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;
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;
16
<PAGE>
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;
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.
17
<PAGE>
(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.
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
18
<PAGE>
necessary for the clearance of securities transactions, or for
temporary or emergency purposes, and may maintain and renew
any of the foregoing borrowings, provided that the Fund
maintains asset coverage of 300% with respect to all such
borrowings;
3. Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if
such pledging, mortgaging or hypothecating does not exceed 12%
of the Fund's total assets taken at market value at the time
of such pledge, mortgage or hypothecation. The deposit in
escrow of securities in connection with the writing of put and
call options and collateral arrangements with respect to
margin for future contracts are not deemed to be pledges or
hypothecation for this purpose;
4. Act as an underwriter of securities of other issuers, except
when disposing of securities;
5. Purchase or sell real estate or any interest therein, except
that the Fund may invest in securities issued or guaranteed by
corporate or governmental entities secured by real estate or
interests therein, such as mortgage pass-through and
collateralized mortgage obligations, or issued by companies
that invest in real estate or interests therein;
6. Make loans to other persons except for loans of portfolio
securities (up to 30% of total assets) and except through the
use of repurchase agreements, the purchase of commercial paper
or the purchase of all or a portion of an issue of debt
securities in accordance with its investment objective,
policies and restrictions, and provided that not more than 10%
of the Fund's assets will be invested in repurchase agreements
maturing in more than seven days;
7. Invest in commodities or in commodity contracts (except stock
index futures and options);
8. Purchase securities on margin (except to the extent that the
purchase of options and futures may involve margin and except
that it may obtain such short-term credits as may be necessary
for the clearance of purchases or sales of securities), or
make short sales of securities;
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
19
<PAGE>
the time be invested in the securities of such issuer, except
that such restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities or corporations sponsored thereby, and
except that up to 25% of the Fund's total assets may be
invested without regard to this limitation; or
(b) such purchase would at the time result in more
than 10% of the outstanding voting securities of such issuer
being held by the Fund, except that up to 25% of the Fund's
total assets may be invested without regard to this
limitation;
11. Invest in securities of another registered investment company,
except (i) as permitted by the Investment Company Act of 1940,
as amended from time to time, or any rule or order thereunder,
or (ii) in connection with a merger, consolidation,
acquisition or reorganization;
12. Purchase any security, including any repurchase agreement
maturing in more than seven days, which is subject to legal or
contractual delays in or restrictions on resale, or which is
not readily marketable, if more than 10% of the net assets of
the Fund, taken at market value, would be invested in such
securities;
13. Invest for the purpose of exercising control over or
management of any company; or
14. Purchase securities unless the issuer thereof or any company
on whose credit the purchase was based, together with its
predecessors, has a record of at least three years' continuous
operations prior to the purchase, except for investments
which, in the aggregate, taken at cost do not exceed 5% of the
Fund's total assets.
OTHER INVESTMENT POLICIES. As non-fundamental investment policies of
All-Star Equity Fund which may be changed without a shareholder vote, the Fund
may not borrow in an amount in excess of 5% of its total assets (including the
amount borrowed).
SMALL CAP 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;
20
<PAGE>
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.
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
21
<PAGE>
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.
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
22
<PAGE>
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;
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:
23
<PAGE>
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial
or maintenance margin deposits in connection with futures
transactions;
2. Purchase and sell futures contracts and related options if the
total initial margin and premiums required to establish
non-hedging positions exceed 5% of its total assets;
3. 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;
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:
24
<PAGE>
1. Purchase securities on margin, but it may receive short-term
credit to clear securities transactions and may make initial
or maintenance margin deposits in connection with futures
transactions;
2. Purchase and sell futures contracts and related options if the
total initial margin and premiums required to establish
non-hedging positions exceed 5% of its total assets;
3. 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.
JAPAN OPPORTUNITIES FUND
FUNDAMENTAL INVESTMENT POLICIES. Japan Opportunities Fund may:
1. Borrow from banks, other affiliated funds and other entities to the
extent permitted by applicable law, provided that the Fund's borrowings
shall not exceed 33 1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings) or such
other percentage permitted by law;
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 as long as the
total initial margin and premiums on contracts do not exceed 5% of
total assets;
4. Not issue senior securities except as provided in paragraph 1 above;
5. Underwrite securities issued by others only when disposing of portfolio
securities;
6. Make loans (a) through lending of securities, (b) through the purchase
of debt instruments or similar evidences of indebtedness typically sold
privately to financial institutions, (c) through an interfund lending
program with other affiliated funds provided that no such loan may be
made if, as a result, the aggregate of such loans would exceed 33 1/3%
of the value of its total assets (taken at market value at the time of
such loans) and (d) through repurchase agreements; and
7. 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 the voting
securities of an issuer if, as a result of such purchases, the Fund
would own more than 10% of the outstanding voting shares of such
issuer.
As non-fundamental investment policies which may be changed without a
shareholder vote, the Japan Opportunities 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.
25
<PAGE>
MID-CAP VALUE FUND
FUNDAMENTAL INVESTMENT POLICIES. Mid-Cap Value Fund may:
1. Borrow from banks, other affiliated funds and other entities to the
extent permitted by applicable law, provided that the Fund's borrowings
shall not exceed 33 1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings) or such
other percentage permitted by law;
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. Not issue senior securities except as provided in paragraph 1 above and
to the extent permitted by the Act;
5. Underwrite securities issued by others only when disposing of portfolio
securities;
6. Make loans (a) through lending of securities, (b) through the purchase
of debt instruments or similar evidences of indebtedness typically sold
privately to financial institutions, (c) through an interfund lending
program with other affiliated funds provided that no such loan may be
made if, as a result, the aggregate of such loans would exceed 33 1/3%
of the value of its total assets (taken at market value at the time of
such loans) and (d) through repurchase agreements; and
7. 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.
As non-fundamental investment policies which may be changed without a
shareholder vote, the Mid-Cap Value 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.
FINANCIAL SERVICES FUND, HEALTH CARE FUND AND TECHNOLOGY FUND
FUNDAMENTAL POLICIES. The Financial Services Fund, Health Care Fund and
Technology Fund may not:
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;
26
<PAGE>
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
As non-fundamental investment policies which may be changed with shareholder
vote, each 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
500 INDEX FUND
FUNDAMENTAL INVESTMENT POLICIES. 500 Index may:
1. Borrow from banks, other affiliated funds and other entities to the
extent permitted by applicable law, provided that the Fund's borrowings
shall not exceed 33 1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings) or such
other percentage permitted by law;
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. Not issue senior securities except as provided in paragraph 1 above and
to the extent permitted by the Act;
5. Underwrite securities issued by others only when disposing of portfolio
securities;
6. Make loans (a) through lending of securities, (b) through the purchase
of debt instruments or similar evidences of indebtedness typically sold
privately to financial institutions, (c) through an interfund lending
program with other affiliated funds provided that no such loan may be
made if, as a result, the aggregate of such loans would exceed 33 1/3%
of the value of its total assets (taken at market value at the time of
such loans) and (d) through repurchase agreements; and
7. 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.
As non-fundamental investment policies which may be changed without a
shareholder vote, the 500 Index 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)
27
<PAGE>
to acquire, an equal amount of such securities; and
3. Invest more than 15% of its net assets in illiquid assets.
MORE FACTS ABOUT THE TRUST
MIXED AND SHARED FUNDING
As described in the Prospectus, the Trust serves as the funding medium
for VA contracts and VLI policies of Participating Insurance Companies (as such
term is defined therein), including those of Keyport, Independence Life &
Annuity Company ("Independence") and Keyport Benefit Life Insurance Company
("Keyport Benefit"), each of which is a wholly owned subsidiary of Keyport, and
Liberty Life Assurance Company of Boston ("Liberty Life"), a 90%-owned
subsidiary of Liberty Mutual. This is referred to as "mixed and shared funding."
The interests of owners of VA contracts and VLI policies could diverge based on
differences in state regulatory requirements, changes in the tax laws or other
unanticipated developments. The Trust does not foresee any such differences or
disadvantages at this time. However, the Board of Trustees monitors for such
developments to identify any material irreconcilable conflicts and to determine
what action, if any, should be taken in response to such conflicts. If such a
conflict were to occur, one or more separate accounts of Participating Insurance
Companies might be required to withdraw its investments in one or more Funds or
shares of another Fund may be substituted. This might force a Fund to sell
securities at disadvantageous prices.
ORGANIZATION
The Trust is required to hold a shareholders' meeting to elect Trustees
to fill vacancies in the event that less than a majority of Trustees were
elected by shareholders. Trustees may also be removed by the vote of two-thirds
of the outstanding shares at a meeting called at the request of shareholders
whose interests represent 10% or more of the outstanding shares.
The shares do not have cumulative voting rights, which means that the
holders of more than 50% of the shares of the Funds voting for the election of
Trustees can elect all of the Trustees, and, in such event, the holders of the
remaining shares will not be able to elect any Trustees.
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
28
<PAGE>
executed by the Trust or the Board of Trustees. The Declaration of Trust
provides for indemnification out of the Trust's assets (or the applicable Fund)
for all losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is believed to be remote because it is
limited to circumstances in which the disclaimer is inoperative and the Trust
itself is unable to meet its obligations. The risk to any one Fund of sustaining
a loss on account of liabilities incurred by another Fund is also believed to be
remote.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, together with information as to
their principal addresses, ages and business occupations during the last five
years, are shown below. An asterisk next to a name indicates that a Trustee is
considered an "interested person" of the Trust (as defined in the 1940 Act). In
this SAI, the "Liberty Funds" means Liberty Funds Trust I, Liberty Funds Trust
II, Liberty Funds Trust III, Liberty Funds Trust IV, Liberty Funds Trust V,
Liberty Funds Trust VI, Liberty Funds Trust VII, Liberty Funds Trust VIII,
Liberty Variable Investment Trust, Colonial High Income Municipal Trust,
Colonial InterMarket Income Trust I, Colonial Intermediate High Income Fund,
Colonial Investment Grade Municipal Trust and Colonial Municipal Income Trust.
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- -------------- ----------------------
<S> <C> <C>
Tom Bleasdale (68) Trustee Retired (formerly Chairman of the Board and
11 Carriage Way Chief Executive Officer, Shore Bank & Trust
Danvers, MA 01923 Company (banking) from 1992 to 1993).
Director or Trustee: Liberty Funds, Empire
Company Limited.
John V. Carberry* (51) Trustee Senior Vice President of LFC 1998-present
56 Woodcliff Road (formerly Managing Director, Salomon
Wellesley Hills, MA 02481 Brothers Inc.(investment banking)).
Director or Trustee: Liberty Funds,
Liberty All-Star Equity Fund, Liberty
All-Star Growth Fund, Inc., Liberty Funds
Trust IX.
Lora S. Collins (63) Trustee Attorney (formerly Attorney with Kramer,
1175 Hill Road Levin, Naftalis & Frankel (law) from
Southold, NY 11971 September, 1986 to November, 1996).
Trustee: Liberty Funds.
James E. Grinnell (69) Trustee Private Investor since November, 1988.
22 Harbor Avenue Director or Trustee: Liberty Funds, Liberty
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- -------------- ----------------------
<S> <C> <C>
Marblehead, MA 01945 All-Star Equity Fund, Liberty All-Star
Growth Fund, Inc., Liberty Funds Trust IX.
Richard W. Lowry (62) Trustee Private Investor since August, 1987.
10701 Charleston Drive Director or Trustee: Liberty Funds, Liberty
Vero Beach, FL 32963 All-Star Equity Fund, Liberty All-Star
Growth Fund, Inc., Liberty Funds Trust IX.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- -------------- ----------------------
<S> <C> <C>
Salvatore Macera (67) Trustee Private Investor (formerly Executive Vice
26 Little Neck Lane President of Itek Corp. and President of
New Seabury, MA 02649 Itek Optical & Electronic Industries, Inc.
(electronics)). Trustee: Liberty Funds.
William E. Mayer (58) Trustee Partner, Development Capital, LLC
500 Park Avenue, 5th Floor (investments); formerly Dean of the College
New York, NY 10022 of Business and Management, University of
Maryland (higher education) from October,
1992 to November, 1996. Director or
Trustee: Liberty Funds, Liberty All-Star
Equity Fund, Liberty All-Star Growth Fund,
Inc., Liberty Funds Trust IX, Hambrecht &
Quist Incorporated, Chart House
Enterprises, Johns Manville.
James L. Moody, Jr. (67) Trustee Retired (formerly Chairman of the Board,
16 Running Tide Road Hannaford Bros. Co. from May, 1984 to May,
Cape Elizabeth, ME 04407 1997). Director or Trustee: Liberty Funds,
Penobscot Shoe Co., Staples, Inc., UNUM
Corporation, IDEXX Laboratories, Inc.,
Empire Company Limited.
John J. Neuhauser (55) Trustee Dean of the School of Management, Boston
140 Commonwealth Avenue College (higher education) since September,
Chestnut Hill, MA 02167 1977. Director or Trustee: Liberty Funds,
Liberty All-Star Equity Fund, Liberty
All-Star Growth Fund, Inc., Liberty Funds
Trust IX, Hyde Athletic Industries, Inc.
Thomas E. Stitzel (63) Trustee Professor of Finance, College of Business,
2208 Tawny Woods Place Boise State University (higher education);
Boise, ID 83706 Business consultant and author. Trustee:
Liberty Funds.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- -------------- ----------------------
<S> <C> <C>
Robert L. Sullivan (70) Trustee Retired Partner, KPMG Peat Marwick LLP
45 Sankaty Avenue (management consulting). Trustee: Liberty
Siasconset, MA 02564 Funds.
Anne-Lee Verville (53) Trustee Consultant (formerly General Manager,
359 Stickney Hill Road Global Education Industry from 1994 to 1997
Hopkinton, NH 03229 (global education)). Trustee: Liberty
Funds.
Stephen E. Gibson (45) President President of the Liberty Funds since June,
One Financial Center 1998, Chairman of the Board since July,
Boston, MA 02111 1998, Chief Executive Officer and President
since December 1996 and Director, since
July, 1996 of Colonial (formerly Executive
Vice President from July, 1996 to December,
1996); Chairman of the Board since July,
1998, Director, Chief Executive Officer and
President of Liberty Funds Group LLC
("LFG") since December, 1998 (formerly
Chairman of the Board, Director, Chief
Executive Officer and President of The
Colonial Group, Inc. ("TCG") from December,
1996 to December, 1998); Assistant Chairman
of Stein Roe since August, 1998 (formerly
Managing Director of Marketing of Putnam
Investments, June, 1992 to July, 1996.).
Timothy J. Jacoby (45) Treasurer and Chief Treasurer and Chief Financial Officer of
One Financial Center Financial Officer the Liberty Funds; Senior Vice President,
Boston, MA 02111 Treasurer and Chief Financial Officer of
Colonial; Chief Financial Officer,
Treasurer and Vice President of LFG since
December, 1998 (formerly Chief Financial
Officer, Treasurer and Vice President of
TCG from July, 1997 to December, 1998)
formerly Senior Vice President, Fidelity
Accounting and Custody Services, Inc. and
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- -------------- ----------------------
<S> <C> <C>
Assistant Treasurer to the Fidelity Group
of Funds.
J. Kevin Connaughton (34) Controller and Chief Controller and Chief Accounting Officer of
One Financial Center Accounting Officer the Liberty Funds since February, 1998;
Boston, MA 02111 Vice President of Colonial since February,
1998 (formerly Senior Tax Manager, Coopers
& Lybrand, LLP from April, 1996 to January,
1998; Vice President, 440 Financial
Group/First Data Investor Services Group
from March, 1994 to April, 1996; Vice
President, The Boston Company (subsidiary
of Mellon Bank) from December, 1993 to
March, 1994; Assistant Vice President and
Tax Manager, The Boston Company from March,
1992 to December, 1993).
Joseph R. Palombo (46) Vice President Vice President of the Liberty Funds since
One Financial Center April, 1999; Executive Vice President and
Boston, MA 02111 Director of Colonial since April, 1999;
Executive Vice President and Chief
Administrative Officer of LFG since April,
1999 (formerly Chief Operating Officer,
Putnam Investments from 1994 to 1998).
Nancy L. Conlin (45) Secretary Director, Senior Vice President and General
One Financial Center Counsel, Colonial (April, 1998 to present);
Boston, MA 02111 Vice President and Counsel (February, 1994
to April, 1998).
</TABLE>
* As 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, KFSC, 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.
Compensation of Trustees
33
<PAGE>
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 Funds Complex
Aggregate 1999 Compensation Paid to the Directors/Trustees For The
Trustee from the Trust(b) Calendar Year Ended December 31, 1999(c)
- ------- ----------------- ----------------------------------------
<S> <C> <C>
Robert J. Birnbaum $ $
Tom Bleasdale (e)
John V. Carberry (d) (d)
Lora S. Collins
James E. Grinnell
Richard W. Lowry
Salvatore Macera
William E. Mayer
James L. Moody, Jr. (f) (g)
John J. Neuhauser
Thomas E. Stitzel
Robert L. Sullivan
Anne-Lee Verville (f) (h)
</TABLE>
(a) The Liberty Funds Complex does not currently provide pension or retirement
plan benefits to the Trustees.
(b) Messrs. Birnbaum, Bleasdale, Carberry, Grinnell, Lowry, Mayer, Moody,
Neuhauser and Sullivan and Mmes. Collins and Verville joined the Board of
the Trustees of the Trust on December 17, 1998.
(c) At December 31, 1998, the Liberty Funds Complex consisted of 52 open-end
and 5 closed-end management investment company portfolios advised by the
Administrator or its affiliates, Newport, Crabbe Huson Group, Inc. and
Stein Roe, nine funds of the Trust and the closed-end Liberty All-Star
Equity and Liberty All-Star Growth Fund, Inc., Liberty Funds Trust IX
advised by LAMCO, another affiliate of the Administrator.
(d) Mr. Carberry does not receive compensation because he is an affiliated
Trustee and employee of LFC.
(e) Includes $52,000 payable in later years as deferred compensation.
(f) Total compensation of $592 is payable in later years as deferred
compensation.
(g) Total compensation of $105,857 is payable in later years as deferred
compensation.
(h) Total compensation of $23,445 is payable in later years as deferred
compensation.
PRINCIPAL HOLDERS OF SECURITIES
All the shares of the Funds are held of record by sub-accounts of
separate accounts of Participating Insurance Companies on behalf of the owners
of VA contracts and VLI policies or by the general account of Keyport. At March
31, 2000 the general account of Keyport owned of
34
<PAGE>
record % of Fund and % of Fund. At June 1, 2000 the general account of Keyport
owned of record 100% of Japan Opportunities Fund, Mid-Cap Value Fund, Financial
Services fund, Health Care Fund, Technology Fund and 500 Index Fund,
respectively. At all meetings of shareholders of the Funds, Participating
Insurance Companies will vote the shares held of record by sub-accounts of their
respective separate accounts as to which instructions are received from the VA
contract and VLI policy owners on behalf of whom such shares are held only in
accordance with such instructions. All such shares as to which no instructions
are received (as well as, in the case of Keyport, all shares held by its general
account) will be voted in the same proportion as shares as to which instructions
are received (with Keyport's general account shares being voted in the
proportions determined by instructing owners of Keyport VA contracts and VLI
policies). There is no requirement as to the minimum level of instructions which
must be received from policy and contract owners. Accordingly, each
Participating Insurance Company and Keyport disclaims beneficial ownership of
the shares of the Funds held of record by the sub-accounts of their respective
separate accounts (or, in the case of Keyport, its general account). No
Participating Insurance Company has informed the Trust that it knows of any
owner of a VA contract or VLI policy issued by it which on March 31, 2000 owned
beneficially 5% or more of the outstanding shares of any Fund.
CUSTODIANS
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,
except the Real Estate Fund. The custodians are 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 custodians do not exercise any supervisory function in such matters as the
purchase and sale of portfolio securities, payment of dividends, or payment of
expenses of the Funds or the Trust. Portfolio securities of the Funds purchased
in the U.S. are maintained in the custody of the custodians and may be entered
into the Federal Reserve Book Entry system, or the security depository system of
the Depository Trust Company or other securities depository systems. Portfolio
securities purchased outside the U.S. are maintained in the custody of various
foreign branches of the custodians and/or third party subcustodians, including
foreign banks and foreign securities depositories.
35
<PAGE>
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 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
36
<PAGE>
securities for which there were no sales during the day and unlisted securities
are valued at the last quoted bid prices. Short-term obligations with a maturity
of 60 days or less are valued at amortized cost when such cost approximates
market value pursuant to procedures approved by the Trustees. The values of
foreign securities quoted in foreign currencies are translated into U.S. dollars
at the exchange rate as of 3:00 p.m. Eastern time. Portfolio positions for which
there are no such valuations and other assets are valued at fair value as
determined in good faith under the direction of the Trustees.
The net asset value of shares of each Fund is normally calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m., Eastern time, on
every day the NYSE is open for trading, except on days where both (i) the degree
of trading in a Fund's portfolio securities would not materially affect the net
asset value of that Fund's shares and (ii) no shares of a Fund were tendered for
redemption and no purchase order was received. The NYSE is open Monday through
Friday, except on the following holidays: New Year's Day, Martin Luther King
Jr., Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
Generally, trading in certain securities (such as foreign securities)
is substantially completed each day at various times prior to the close of the
NYSE. The values of these securities used in determining the net asset value are
computed as of such times. Also, because of the amount of time required to
collect and process trading information as to large numbers of securities
issues, the values of certain securities (such as convertible bonds and U.S.
government securities) are determined based on market quotations collected
earlier in the day at the latest practicable time prior to the close of the
NYSE. Occasionally, events affecting the value of such securities may occur
between such times and the close of the NYSE which will not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value following procedures approved by the Trustees.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to do business with any broker-dealer or
group of broker-dealers in executing transactions in securities with respect to
the Funds, and the Funds have no intention to deal exclusively with any
particular broker-dealer or group of broker-dealers.
Each of Colonial, Stein Roe, Newport, Crabbe Huson, each of LAMCO's
Portfolio Managers, PADCO and _________________ (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.
37
<PAGE>
Except as described below in connection with commissions paid to a
clearing agent on sales of securities, it is each Fund's policy and the policy
of its Advisor always to seek best execution, which is to place the Fund's
transactions where the Fund can obtain the most favorable combination of price
and execution services in particular transactions or provided on a continuing
basis by a broker-dealer, and to deal directly with a principal market maker in
connection with over-the-counter transactions, except when the Advisor believes
that best execution is obtainable elsewhere. In evaluating the execution
services of, including the overall reasonableness of brokerage commissions paid
to, a broker-dealer, consideration is given to, among other things, the firm's
general execution and operational capabilities, and to its reliability,
integrity and financial condition.
Subject to such policy of always seeking best execution, and subject to
the additional matters described below regarding each of International Fund,
International Horizons Fund, Global Equity Fund, Japan Opportunities Fund, Tiger
Fund and All-Star Equity Fund, securities transactions of the Funds may be
executed by broker-dealers who also provide research services (as defined below)
to an Advisor, the Funds or other accounts as to which such Advisor exercises
investment discretion. Such advisor may use all, some or none of such research
services in providing investment advisory services to each of its clients,
including the Fund(s) it advises. To the extent that such services are used by
the Advisors, they tend to reduce their expenses. It is not possible to assign
an exact dollar value for such services.
Subject to such policies as the Board of Trustees may determine, each
of the Advisors may cause a Fund to pay a broker-dealer that provides brokerage
and research services to it an amount of commission for effecting a securities
transaction, including the sale of an option or a closing purchase transaction,
for a Fund in excess of the amount of commission that another broker-dealer
would have charged for effecting that transaction. As provided in Section 28(e)
of the Securities Exchange Act of 1934, "brokerage and research services"
include advice as to the value of securities, the advisability of investing in,
purchasing or selling securities and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends and portfolio
strategy and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). An
Advisor placing a brokerage transaction must determine in good faith that such
greater commission is reasonable in relation to the value of the brokerage and
research services provided to it by the executing broker-dealer viewed in terms
of that particular transaction or its overall responsibilities to the applicable
Fund and all its other clients.
Certain of the other accounts of any of the Advisors may have
investment objectives and programs that are similar to those of the Funds.
Accordingly, occasions may arise when each of the Advisors engages in
simultaneous purchase and sale transactions of securities that are consistent
with the investment objectives and programs of a Fund and such other accounts.
On those occasions, the Advisor will allocate purchase and sale transactions in
an equitable manner according to written procedures as approved by the Board of
Trustees. Such procedures may, in particular instances, be either advantageous
or disadvantageous to a Fund.
38
<PAGE>
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 manager for the
International Fund, International Horizons Fund and Global Equity Fund is Gita
Rao, who is jointly employed by Colonial and Stein Roe (each of which is an
indirect wholly owned subsidiary of LFC). The Funds and the other accounts
advised by Ms. Rao sometimes invest in the same securities and sometimes enter
into similar transactions utilizing futures contracts and foreign currencies. In
certain cases, purchases and sales on behalf of the 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 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, Colonial believes that in most cases these
practices should produce better executions. It is the opinion of Colonial that
the advantages of these practices outweigh the disadvantages, if any, which
might result from them.
Portfolio transactions on behalf of the International Fund,
International Horizons Fund and Global Equity Fund may be executed by
broker-dealers who provide research services to Colonial or Stein Roe which are
used in the investment management of such Funds or other accounts over which
Colonial or Stein Roe exercise investment discretion. Such transactions will be
effected in accordance with the policies described above. No portfolio
transactions on behalf of the Funds will be directed to a broker-dealer in
consideration of the broker-dealer's provision of research services to Colonial,
or to Colonial and Stein Roe, unless a determination is made that such research
assists Colonial in its investment management of the International Fund,
International Horizons Fund, Global Equity Fund or other accounts over which
Colonial exercises investment discretion.
Additional Matters Pertaining to All-Star Equity Fund. The Portfolio
Management Agreements with LAMCO's Portfolio Managers provide that LAMCO has the
right to request that transactions giving rise to brokerage commissions, in
amounts to be agreed upon from time to time between LAMCO and the Portfolio
Manager, be executed by brokers and dealers (to be agreed upon from time to time
between LAMCO and the Portfolio Manager) which provide research products and
services to LAMCO or to All-Star Equity Fund or other accounts managed by LAMCO
(collectively with All-Star Equity Fund, "LAMCO Clients") or as to which an
ongoing relationship will be a value to the Fund in managing its assets. The
commissions paid on such transactions may exceed the amount of commissions
another broker would have charged for effecting that transaction. Research
products and services made available to LAMCO through brokers and dealers
executing transactions for LAMCO Clients involving brokerage commissions include
performance and other qualitative and quantitative data relating to investment
managers in
39
<PAGE>
general and the Portfolio Managers in particular; data relating to the historic
performance of categories of securities associated with particular investment
styles; mutual fund portfolio and performance data; data relating to portfolio
manager changes by pension plan fiduciaries; quotation equipment; and related
computer hardware and software, all of which research products and services are
used by LAMCO in connection with its selection and monitoring of portfolio
managers (including the Portfolio Managers) for LAMCO Clients, the assembly of a
mix of investment styles appropriate to LAMCO's Clients' investment objectives,
and the determination of overall portfolio strategies.
LAMCO from time to time reaches understandings with each of the
Portfolio Managers as to the amount of the All-Star Equity Fund portfolio
transactions initiated by such Portfolio Manager that are to be directed to
brokers and dealers which provide research products and services to LAMCO. These
amounts may differ among the Portfolio Managers based on the nature of the
markets for the types of securities managed by them and other factors.
These research products and services are used by LAMCO in connection
with its management of LAMCO Clients' portfolios, regardless of the source of
the brokerage commissions. In instances where LAMCO receives from broker-dealers
products or services which are used both for research purposes and for
administrative or other non-research purposes, LAMCO makes a good faith effort
to determine the relative proportions of such products or services which may be
considered as investment research, based primarily on anticipated usage, and
pays for the costs attributable to the non-research usage in cash.
The table below shows information on brokerage commissions paid by each
Fund during the periods indicated. (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; and Japan Opportunities Fund, Mid-Cap
Value Fund, Financial Services Fund, Health Care Fund, Technology Fund and 500
Index Fund commenced on June 1, 2000.
40
<PAGE>
<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 of $ 86,453 $ 124,815 $ 66,549 $ 147,449 $ 36,508 $ 58,697
brokerage commissions
paid during 1998
Total amount of $ 0 $ 0 $ 0 $ 0 $ 0 $ 84,729
directed transactions
paid during 1998
Total amount of $ 0 $ 0 $ 0 $ 0 $ 0 $ 80
commissions on directed
transactions paid
during 1998
Total amount of $ 17,178 $ 0 $ 0 $ 45,117 $ 0 $ 0
brokerage commissions
paid during 1998 to (20%) (31%)
AlphaTrade Inc.
(% of total
commission paid)
Total amount of $ 76,021 $ 108,414 $ 59,920 $ 80,839 $ 110,960 $ 18,207
brokerage commissions
paid during 1997
Total amount of $ 35,863 $ 22,345 $ 92,485 $ 75,253 $ 109,515 --
brokerage commissions
paid during 1996
High Small Strategic
Yield Cap Income
Fund Fund Fund
---- ---- ----
<S> <C> <C> <C>
Total amount of $ 0 $ 3,240 $ 0
brokerage commissions
paid during 1998
Total amount of $ 0 $ 0 $ 0
directed transactions
paid during 1998
Total amount of $ 0 $ 0 $ 0
commissions on directed
transactions paid
during 1998
Total amount of $ 0 $ 1,170 $ 0
brokerage commissions
paid during 1998 to (36%)
AlphaTrade Inc.
(% of total
commission paid)
Total amount of -- -- $ 0
brokerage commissions
paid during 1997
Total amount of -- -- $ 0
brokerage commissions
paid during 1996
</TABLE>
DESCRIPTION OF CERTAIN INVESTMENTS
The following is a description of certain types of investments which
may be made by one or more of the Funds.
MONEY MARKET INSTRUMENTS
As stated in the Prospectus, each Fund may invest in a variety of
high-quality money market instruments. The money market instruments that may be
used by each Fund may include:
UNITED STATES GOVERNMENT OBLIGATIONS. These consist of various types of
marketable securities issued by the U.S. Treasury, i.e., bills, notes and bonds.
Such securities are direct obligations of the U.S. Government and differ mainly
in the length of their maturity. Treasury bills, the most frequently issued
marketable government security, have a maturity of up to one year and are issued
on a discount basis.
41
<PAGE>
UNITED STATES GOVERNMENT AGENCY SECURITIES. These consist of debt
securities issued by agencies and instrumentalities of the U.S. Government,
including the various types of instruments currently outstanding or which may be
offered in the future. Agencies include, among others, the Federal Housing
Administration, Government National Mortgage Association, Farmer's Home
Administration, Export-Import Bank of the United States, Maritime
Administration, and General Services Administration. Instrumentalities include,
for example, each of the Federal Home Loan Banks, the National Bank for
Cooperatives, the Federal Home Loan Mortgage Corporation, the Farm Credit Banks,
the Federal National Mortgage Association, and the United States Postal Service.
These securities are either: (i) backed by the full faith and credit of the U.S.
Government (e.g., U.S. Treasury Bills); (ii) guaranteed by the U.S. Treasury
(e.g., Government National Mortgage Association mortgage-backed securities);
(iii) supported by the issuing agency's or instrumentality's right to borrow
from the U.S. Treasury (e.g., Federal National Mortgage Association Discount
Notes); or (iv) supported only by the issuing agency's or instrumentality's own
credit (e.g., securities issued by the Farmer's Home Administration).
BANK AND SAVINGS AND LOAN OBLIGATIONS. These include certificates of
deposit, bankers' acceptances, and time deposits. Certificates of deposit
generally are short-term, interest-bearing negotiable certificates issued by
commercial banks or savings and loan associations against funds deposited in the
issuing institution. Bankers acceptances are time drafts drawn on a commercial
bank by a borrower, usually in connection with an international commercial
transaction (e.g., to finance the import, export, transfer, or storage of
goods). With a bankers' acceptance, the borrower is liable for payment as is the
bank, which unconditionally guarantees to pay the draft at its face amount on
the maturity date. Most bankers' acceptances have maturities of six months or
less and are traded in secondary markets prior to maturity. Time deposits are
generally short-term, interest-bearing negotiable obligations issued by
commercial banks against funds deposited in the issuing institutions. The Funds
will not invest in any security issued by a commercial bank or a savings and
loan association unless the bank or savings and loan association is organized
and operating in the United States, has total assets of at least one billion
dollars, and is a member of the Federal Deposit Insurance Corporation ("FDIC"),
in the case of banks, or insured by the FDIC in the case of savings and loan
associations; provided, however, that such limitation will not prohibit
investments in foreign branches of domestic banks which meet the foregoing
requirements. The Funds will not invest in time-deposits maturing in more than
seven days.
SHORT-TERM CORPORATE DEBT INSTRUMENTS. These include commercial paper
(i.e., short-term, unsecured promissory notes issued by corporations to finance
short-term credit needs). Commercial paper is usually sold on a discount basis
and has a maturity at the time of issuance not exceeding nine months. Also
included are non-convertible corporate debt securities (e.g., bonds and
debentures). Corporate debt securities with a remaining maturity of less than 13
months are liquid (and tend to become more liquid as their maturities lessen)
and are traded as money market securities. Each Fund may purchase corporate debt
securities having greater maturities.
REPURCHASE AGREEMENTS. The Funds may invest in repurchase agreements. A
repurchase agreement is an instrument under which the investor (such as a Fund)
acquires ownership of a security (known as the "underlying security") and the
seller (i.e., a bank or primary dealer) agrees,
42
<PAGE>
at the time of the sale, to repurchase the underlying security at a mutually
agreed upon time and price, thereby determining the yield during the term of the
agreement. This results in a fixed rate of return insulated from market
fluctuations during such period, unless the seller defaults on its repurchase
obligations. The underlying securities will consist only of securities issued by
the U.S. Government, its agencies or instrumentalities ("U.S. Government
Securities"). Repurchase agreements are, in effect, collateralized by such
underlying securities, and, during the term of a repurchase agreement, the
seller will be required to mark-to-market such securities every business day and
to provide such additional collateral as is necessary to maintain the value of
all collateral at a level at least equal to the repurchase price. Repurchase
agreements usually are for short periods, often under one week, and will not be
entered into by a Fund for a duration of more than seven days if, as a result,
more than 15% of the value of that Fund's total assets would be invested in such
agreements or other securities which are illiquid.
The Funds will seek to assure that the amount of collateral with
respect to any repurchase agreement is adequate. As with any extension of
credit, however, there is risk of delay in recovery or the possibility of
inadequacy of the collateral should the seller of the repurchase agreement fail
financially. In addition, a Fund could incur costs in connection with
disposition of the collateral if the seller were to default. The Funds will
enter into repurchase agreements only with sellers deemed to be creditworthy
under creditworthiness standards approved by the Board of Trustees and only when
the economic benefit to the Funds is believed to justify the attendant risks.
The Board of Trustees believes these standards are designed to reasonably assure
that such sellers present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the repurchase agreement. The
Funds may enter into repurchase agreements only with commercial banks or
registered broker-dealers.
ADJUSTABLE RATE AND FLOATING RATE SECURITIES. Adjustable rate
securities (i.e., variable rate and floating rate instruments) are securities
that have interest rates that are adjusted periodically, according to a set
formula. The maturity of some adjustable rate securities may be shortened under
certain special conditions described more fully below.
Variable rate instruments are obligations (usually certificates of
deposit) that provide for the adjustment of their interest rates on
predetermined dates or whenever a specific interest rate changes. A variable
rate instrument subject to a demand feature is considered to have a maturity
equal to the 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.
43
<PAGE>
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 Colonial 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, 1999,
the following countries were considered by Colonial to be emerging market
countries:
<TABLE>
<CAPTION>
Europe and
Asia Latin America the Middle East Africa
- ---- ------------- --------------- ------
<S> <C> <C> <C>
China Argentina Czech Republic South Africa
Hong Kong Brazil Greece
India Chile Hungary
Indonesia Colombia Israel
South Korea Mexico Jordan
Malaysia Peru Poland
Pakistan Venezuela Russia
Philippines Turkey
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
44
<PAGE>
thereon for such hedging purposes. Global Utilities Fund and Strategic Income
Fund also may buy options on currencies for hedging purposes.
A Fund may engage in both "transaction hedging" and "position hedging."
When it engages in transaction hedging, a Fund enters into foreign currency
transactions with respect to specific receivables or payables of the Fund
generally arising in connection with purchases or sales of its portfolio
securities. A Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging a Fund attempts to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payments is declared, and the date on which such payments are made or
received.
A Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with the settlement of
transactions in portfolio securities denominated in that foreign currency. A
Fund may also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and (if the Fund is so authorized) purchase
and sell foreign currency futures contracts.
For transaction hedging purposes a Fund which is so authorized may also
purchase exchange-listed and over-the-counter call and put options on foreign
currency futures contracts and on foreign currencies. Over-the-counter options
are considered to be illiquid by the SEC staff. A put option on a futures
contract gives the Fund the right to assume a short position in the futures
contract until expiration of the option. A put option on a currency gives the
Fund the right to sell a currency at an exercise price until the expiration of
the option. A call option on a futures contract gives the Fund the right to
assume a long position in the futures contract until the expiration of the
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
45
<PAGE>
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the dates the currency
exchange transactions are entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security or securities being hedged is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security or securities and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security or securities
if the market value of such security or securities exceeds the amount of foreign
currency the Fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which the Fund can achieve at
some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
value of such currency.
Currency Forward and Futures Contracts
Each of International Fund, Global Utilities Fund, Strategic Income
Fund, 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.
46
<PAGE>
Also, forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in currency futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market in such contracts.
Although the Funds intend to purchase or sell currency futures contracts only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time. In such
event, it may not be possible to close a futures position and, in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments or variation margin.
Currency Options
In general, options on currencies operate similarly to options on
securities and are subject to many risks similar to those applicable to currency
futures and forward contracts. Currency options are traded primarily in the
over-the-counter market, although options on currencies have recently been
listed on several exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit ("ECU"). The ECU is
composed of amounts of a number of currencies, and is the official medium of
exchange of the European Economic Community's European Monetary System.
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.
47
<PAGE>
The value of a currency option reflects the value of an exchange rate
which in turn reflects relative values of two currencies, the U.S. dollar and
the foreign currency in question. Because currency transactions occurring in the
interbank market involve substantially larger amounts than those that may be
involved in the exercise of currency options, investors may be disadvantaged by
having to deal in an odd-lot market for the underlying currencies in connection
with options at prices that are less favorable than for round-lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.
Valuations
There is no systematic reporting of last sale information for
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
round-lot transactions in the interbank market and thus may not reflect exchange
rates for smaller odd-lot transactions (less than $1 million) where rates may be
less favorable. The interbank market in currencies is a global, around-the-clock
market. To the extent that options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
Settlement Procedures
Settlement procedures relating to the Funds' investments in foreign
securities and to their foreign currency exchange transactions may be more
complex than settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not present in such
Funds' domestic investments, including foreign currency risks and local custom
and usage. Foreign currency transactions may also involve the risk that an
entity involved in the settlement may not meet its obligations.
Foreign Currency Conversion
Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Funds at one rate, while
offering a lesser rate of exchange should the Funds desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligations.
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.
48
<PAGE>
Writing covered options.
A Fund may write covered call options and covered put options on
securities held in its portfolio when, in the opinion of the 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.
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
49
<PAGE>
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.
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.
50
<PAGE>
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 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.
51
<PAGE>
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.
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."
52
<PAGE>
A Fund may elect to close some or all of its futures positions at any
time prior to their expiration. The purpose of making such a move would be to
reduce or eliminate the hedge position then currently held by the Fund. The Fund
may close its positions by taking opposite positions which will operate to
terminate the Fund's position in the futures contracts. Final determinations of
variation margin are then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or gain. Such closing
transactions involve additional commission costs.
A Fund will enter into futures contracts only when, in compliance with
the SEC's requirements, cash or high quality liquid debt securities equal in
value to the commodity value (less any applicable margin deposits) have been
deposited in a segregated account of the Fund's custodian.
Options on futures contracts
A Fund may purchase and write call and put options on futures contracts
it may buy or sell and enter into closing transactions with respect to such
options to terminate existing positions. The Fund may use such options on
futures contracts in lieu of purchasing and selling the underlying futures
contracts. Such options generally operate in the same manner as options
purchased or written directly on the underlying investments.
As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an offsetting option. There is
no guarantee that such closing transactions can be effected.
A Fund will be required to deposit initial margin and maintenance
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. The Fund
will enter into written options on futures contracts only when, in compliance
with the SEC's requirements, cash or equivalents equal in value to the commodity
value (less any applicable margin deposits) have been deposited in a segregated
account of the Fund's custodian.
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 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.
53
<PAGE>
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.
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
54
<PAGE>
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.
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
55
<PAGE>
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>
ERV = P(1+T)n
<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>
For example, for a $1,000 investment in the Funds, the "Ending
Redeemable Value," the "Total Return Percentage" and (where applicable) the
"Average Annual Total Return" for the life of each Fund listed below (the period
from July 1, 1993 in the case of Growth and Income Fund and Global Utilities
Fund; May 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
56
<PAGE>
17, 1997 in the case of All-Star Equity Fund; May 19,1998 in the case of High
Yield Fund and Small Cap 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 $ % %
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 High Yield Securities Fund, Variable Series ---
Colonial Small Cap Value Fund, Variable Series ---
Colonial International Horizons Fund, Variable Series
Colonial Global Equity Fund, Variable Series
Crabbe Huson Real Estate Investment Fund, Variable Series
</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.
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.
57
<PAGE>
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
Liberty Newport Japan Opportunities Fund, Variable Series (NJOF, VS)
Liberty Mid-Cap Value Fund, Variable Series (CSVF, VS)
Rydex Technology Fund, Variable Series (RTF, VS)
Rydex Financial Services Fund, Variable Series (RFSF, VS)
Rydex Health Care Fund, Variable Series (RHCF, VS)
Liberty S&P 500 Index Fund, Variable Series (L500, VS)
<TABLE>
<CAPTION>
Item 23. Exhibits:
<S> <C>
(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 the Trust, with respect to NJOF, VS and LASC(1)
(d)(1)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of NJOF, VS, LASC and
Newport(1)
(d)(2)(i) Form of Management Agreement between the Trust, with respect to CSVF, VS and LASC(1)
(d)(2)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of CSVF, VS, LASC and
Colonial(1)
(d)(3)(i) Form of Management Agreement between the Trust, with respect to RTF, VS and LASC(1)
(d)(3)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of RTF, VS, LASC and
Colonial (1)
(d)(3)(iii) Form of Portfolio Management Agreement between the Trust, Colonial and Padco Advisors,
Inc., with respect to RTF, VS(1)
(d)(4)(i) Form of Management Agreement between the Trust, with respect to RFSF, VS and LASC(1)
(d)(4)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of RFSF, VS, LASC and
Colonial (1)
(d)(4)(iii) Form of Portfolio Management Agreement between the Trust, Colonial and Padco Advisors,
Inc., with respect to RFSF, VS(1)
(d)(5)(i) Form of Management Agreement between the Trust, with respect to RHCF, VS and LASC(1)
(d)(5)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of RHCF, VS, LASC and
Colonial (1)
(d)(5)(iii) Form of Portfolio Management Agreement between the Trust, Colonial and Padco Advisors,
Inc., with respect to RHCF, VS(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(d)(6)(i) Form of Management Agreement between the Trust, with respect to L500, VS and LASC(1)
(d)(6)(ii) Form of Sub-Advisory Agreement between the Trust, on behalf of L500, VS, LASC and
Colonial (1)
(d)(6)(iii) Form of Portfolio Management Agreement between the Trust, Colonial and
_______________________, with respect to L500, VS(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)
(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)
(i) Opinion and consent of counsel(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(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
(p)(2) Code of Ethics of Funds, LFDI and Colonial
(p)(3) Code of Ethics of Newport
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
(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.
</TABLE>
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
<PAGE>
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 SVF, RTF, RFSF, RHCF,
L500, Newport, LASC's sub-adviser with respect to NTF
and NJOF, are subsidiaries of Liberty Financial
Companies, Inc. ("Liberty Financial"), Boston,
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;
<PAGE>
(ii) in the absence of a final decision on the
merits by a court or other body before
whom a proceeding was brought that a
Covered Person was not liable by reason of
willful misfeasance, bad faith, gross
negligence, or reckless disregard of the
duties involved in the conduct of his
office, no indemnification is permitted
under Article Tenth unless a determination
that such person was not so liable is
made on behalf of Registrant by (a) the
vote of a majority of the trustees who are
neither "interested persons" of
Registrant, as defined in Section 2(a)(19)
of the 1940 Act, nor parties to the
proceeding ("disinterested, non-party
trustees"), or (b) an
independent legal counsel as expressed in
a written opinion; and
(iii) Registrant will not advance attorney's
fees or other expenses
incurred by a Covered Person in connection
with a civil or criminal
action, suit or proceeding unless
Registrant receives an undertaking
by or on behalf of the Covered Person to
repay the advance (unless it
is ultimately determined that he is
entitled to indemnification) and
(a) the Covered Person provides security
for his undertaking, or (b)
Registrant is insured against losses
arising by reason of any lawful
advances, or (c) a majority of the
disinterested, non-party trustees
of Registrant or an independent legal
counsel as expressed in a
written opinion, determine, based on a
review of readily-available
facts (as opposed to a full trial-type
inquiry), that there is reason
to believe that the Covered Person
ultimately will be found entitled
to indemnification.
Any approval of indemnification pursuant to Article
Tenth does not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in
accordance with Article Tenth as indemnification if
such Covered Person is subsequently adjudicated by a
court of competent jurisdiction not to have acted in
good faith in the reasonable belief that such Covered
Person's action was in, or not opposed to, the best
interests of Registrant or to have been liable to
Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of
such Covered Person's office.
Article Tenth also provides that its indemnification
provisions are not exclusive.
Insofar as indemnification for liabilities arising
under the 1933 Act may be permitted to trustees,
officers, and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of
the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In
<PAGE>
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 SVF, RTF,
RFSF, RHCF, L500 and Padco Advisors, Inc., Portfolio
Manager with respect to RTF, RFSF and RHCF,
___________________, Portfolio Manager with respect
to L500, Newport, the sub-adviser to NJOF, is
incorporated herein by reference to the section of
the Prospectus relating to SVF, RTF, RFSF, RHCF, L500
and NJOF captioned "TRUST MANAGEMENT ORGANIZATIONS"
and to the section of the Statement of Additional
Information relating to those Funds captioned
"INVESTMENT MANAGEMENT AND OTHER SERVICES."
Set forth below is a list of each director and
officer of LASC, and each director and certain
<PAGE>
officers of Colonial, Newport, Padco, and
______________, indicating each business, profession,
vocation, or employment of a substantial nature in
which each such person has been, at any time during
the past two fiscal years, engaged for his or her own
account or in the capacity of director, officer,
partner, or trustee.
Liberty Advisory Services, Inc.
Liberty Advisory Services, Inc. is a direct wholly
owned subsidiary of Keyport. Keyport is a direct
wholly owned subsidiary of SteinRoe Services, Inc.
("SSI"). SSI is a direct wholly owned subsidiary of
Liberty Financial. As stated above,
Liberty Financial is an indirect majority owned
subsidiary of Liberty Mutual.
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <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
</TABLE>
The business address of LASC and each
individual listed in the foregoing table is
c/o Keyport Life Insurance Company, 125 High
Street, Boston, Massachusetts 02110.
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 1/31/00. 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.
Newport
Newport is a direct wholly owned subsidiary of Newport Pacific
Management, Inc. ("Newport Pacific"). Newport Pacific is a direct
wholly owned subsidiary of Liberty Newport Holdings, Ltd. ("LNH"). LNH
is a direct wholly owned subsidiary of Liberty Financial.
<TABLE>
<CAPTION>
Name and Current Position with Adviser Other Positions During
Past Two Fiscal Years
<S> <C>
Thomas R. Tuttle President Holds same offices at Newport
Pacific Management, Inc.
R James Carlson Chief Operating Officer, Holds same offices at Newport
Treasurer, Secretary and Chief Pacific Management, Inc.:
Compliance Officer Controller and Compliance Officer
of Spare, Kaplan, Bischel &
Associates, Inc., San Francisco
Lindsay Cook Senior Vice President and Director Executive Vice President since
February 1997; Senior Vice
President of Liberty Financial
prior thereto
John Mussey Director and Vice Chairman Holds same offices at Newport
Pacific Management, Inc.
Michael Ellis Senior Vice President Senior Vice President of Newport
Pacific Management, Inc.
Christopher H. Legallet Senior Vice President Senior Vice President of Newport
Pacific Management, Inc.,: Managing
Director of Jupiter Asset
Management (Asia) Ltd., Hong Kong
David Richie Smith Senior Vice President Senior Vice President of Newport
Pacific Management, Inc.
Lynda Couch Managing Director --
</TABLE>
<PAGE>
The principal business address of Newport
and Messrs. Mussey, Carlson, Ellis,
Legallet, Smith and Tuttle and Ms. Couch is
580 California Street, Suite 1960, San
Francisco, California 94104. The principal
address of each other person listed in the
preceding table is 600 Atlantic Avenue,
Suite 2400, Boston, Massachusetts 02210.
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 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
<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 has duly caused this Post-Effective Amendment No.
19 to its Registration Statement under the
Securities Act of 1933 and Amendment No. 20 under the Investment Company Act of
1940, to be signed on its behalf by the undersigned, duly authorized, in the
City of Boston, and The Commonwealth of Massachusetts on this 16th day of 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 16, 2000
- -----------------
Stephen E. Gibson Executive officer)
/s/TIMOTHY J. JACOBY Treasurer and Chief Financial Officer March 16, 2000
- -----------------
Timothy J. Jacoby (principal financial officer)
/s/J. Kevin Connaughton Controller and Chief Accounting March 16, 2000
- --------------------
J. Kevin Connaughton Officer (principal accounting officer)
</TABLE>
<PAGE>
/s/TOM BLEASDALE* Trustee
Tom Bleasdale
/s/JOHN V. CARBERRY* Trustee
John V. Carberry
/s/LORA S. COLLINS* Trustee
Lora S. Collins
/s/JAMES E. GRINNELL* Trustee
James E. Grinnell
/s/RICHARD W. LOWRY* Trustee */s/ SUZAN M. BARRON
Richard W. Lowry Suzan M. Barron
Attorney-in-fact
For each Trustee
/s/SALVATORE MACERA* Trustee March 16, 2000
Salvatore Macera
/s/WILLIAM E. MAYER* Trustee
William E. Mayer
/s/JAMES L. MOODY, JR. * Trustee
James L. Moody, Jr.
/s/JOHN J. NEUHAUSER* Trustee
John J. Neuhauser
/s/THOMAS E. STITZEL* Trustee
Thomas E. Stitzel
/s/ROBERT L. SULLIVAN* Trustee
Robert L. Sullivan
/s/ANNE-LEE VERVILLE* Trustee
Anne-Lee Verville
<PAGE>
EXHIBITS
(p)(1) Code of Ethics of LASC
(p)(2) Code of Ethics of Funds, LFDI and Colonial
(p)(3) Code of Ethics of Newport
KEYPORT LIFE INSURANCE COMPANY
KEYPORT BENEFIT LIFE INSURANCE COMPANY
INDEPENDENCE LIFE AND ANNUITY COMPANY
LIBERTY ADVISORY SERVICES CORP.
KEYPORT FINANCIAL SERVICES CORP.
CODE OF ETHICS
A. Definitions
1. "The Company" - Keyport Life Insurance Company, Keyport
Benefit Life Insurance Company, Independence Life and Annuity
Company, Liberty Advisory Services Corp. and Keyport Financial
Services Corp. This reference in Section B shall apply only to
Keyport Life Insurance Company, Keyport Benefit Life Insurance
Company or Independence Life and Annuity Company.
2. "Key Employee" - any employee designated as such by name or
job title by the President of the Company.
B. Commissions
No director, officer or key employee of the Company shall have an
interest, direct or indirect, in the sales of insurance policies by the
Company, except as contained in employment or agency contracts between
the Company and such director, officer or key employee.
C. Affiliations
No director, officer or key employee of the Company shall hold another
office or position (1) in an organization where the duties of such
position or office conflict or are likely to conflict with such
person's duties with the Company, or (2) in an organization which
competes directly or indirectly with the Company. No director, officer
or key employee shall engage in any outside activity which might affect
the objectivity and independence of their judgment or conduct in
performing their duties and responsibilities for the Company. With
respect to outside activities, no director, officer or key employee
shall place themselves in a position which gives them the appearance of
representing the Company or implies that the Company endorses a
particular product, service or company.
D. Business Dealings
No officer, whose primary business activities are rendered on behalf of
the Company, or key employee of the Company will hold a position,
office or employment with an organization other than the Company which
requires a substantial amount of time during the ordinary business
hours of such person unless such other organization is affiliated with
the Company.
<PAGE>
E. Prohibited Transactions
1. No director, officer or key employee shall purchase or sell,
directly or indirectly, any security in which he or she has,
or by reason of such transaction acquires, any direct or
indirect beneficial ownership and which to his or her actual
knowledge at the time of such purchase or sale:
(a) Is being considered for purchase or sale by the Company;
or
(b) Is being purchased or sold by the Company.
"Purchase or sale of a security" - includes the writing
of an option to purchase or sell a security.
2. No director, officer or key employee, directly or indirectly,
shall, in connection with any transaction, (a) employ any
device, scheme or artifice to defraud the Company; (b) make to
the Company any untrue statement of a material fact or omit to
state to the Company a material fact necessary in order to
make the statements made, in light of the circumstances under
which they were made, not misleading; (c) engage in any act,
practice or course of business which operates or would operate
as a fraud or deceit upon the Company; or (d) engage in any
manipulative practice with respect to the Company.
3. No director, officer or key employee shall seek or knowingly
accept, directly or indirectly, any gift, favor, service,
gratuity or anything of value, beyond common courtesies, from
any person or organization which could receive benefits from
the Company as a result of the influence of the director,
officer or key employee. This section also applies to members
of a director's, officer's or key employee's family.
F. Confidentiality
Each director, officer or key employee shall keep confidential all
information regarding past or future transactions, investment programs
and studies of the Company, except as may be required by applicable law
or approved by the Company's Board of Directors.
G. Directors, Officers and Key Employees
Each director, officer or key employee of the Company shall avoid
placing himself or herself in positions of actual or potential
conflicts of interest with the Company.
H. Enforcement
1. If any director, officer or key employee has not complied with
all of the requirements of this Code, he or she shall promptly
so state in writing to the Secretary of the Company, setting
forth all relevant facts.
2. The President shall report each violation of this Code to the
Company's Board of Directors at or before the next regular
meeting of the Board.
3. The President, after consultation with the Chairman of the
Board, may impose such sanctions upon a violator of this Code
as are deemed appropriate under the circumstances, including
written censure, suspension, removal from office, or
termination of employment.
I. Reports
Before the twentieth day of each January and July, each director,
officer and key employee shall report to the Secretary of the Company
in writing on the appropriate form that he or she has complied with
this Code for the six-month period ending December 31 and June 30,
respectively, or shall set forth on such report, if not otherwise
already done, all relevant facts concerning any violation of this Code.
J. Exceptions
1. Any officer, director, or key employee who wishes to be
excepted from the requirements of one or more of paragraphs
B,C,F,G,H, or I shall submit a request in writing to the
Secretary of the Company. The request shall disclose all
relevant facts and set forth the reasons why an exception
should be granted. Granting an exception shall be at the
discretion of the President after consultation with the
Chairman of the Board.
2. Once granted, an exception request shall be submitted for
re-evaluation annually. Any interim change in relevant facts
shall be promptly reported to the Secretary.
3. The disposition of each exception request shall be reported to
the Company's Board of Directors at or before the next regular
meeting of the Board.
<PAGE>
KEYPORT LIFE INSURANCE COMPANY
KEYPORT BENEFIT LIFE INSURANCE COMPANY
INDEPENDENCE LIFE AND ANNUITY COMPANY
LIBERTY ADVISORY SERVICES CORP.
KEYPORT FINANCIAL SERVICES CORP.
Code of Ethics Reporting Form
I have read the Code of Ethics and understand it fully. Neither I, my spouse nor
any dependent of mine is or has been involved in any activity or transaction
prohibited by the Code of Ethics for the six month period covered by this
report.
I am reporting the following item(s) so that there may be full disclosure of all
potential problems or conflicts of interest.
[ ] None
[ ] Items listed:
Date Signature
LIBERTY FUNDS GROUP LLC
(FORMERLY THE COLONIAL GROUP, INC.)
THE COLONIAL FUNDS
THE NEWPORT FUNDS
THE STEIN ROE ADVISER FUNDS
THE CRABBE HUSON FUNDS
LIBERTY VARIABLE INVESTMENT TRUST
Code of Ethics
Effective January 1, 1999 (Revised February 15, 2000)
The business units within Liberty Financial Companies have a
long-standing tradition of high ethical standards. We have built our reputation
on our customers' trust and their confidence in our professional standards and
abilities. We will always put the interests of our investors above our own. Our
Code of Ethics represents not only our obligations under the laws that govern
our business, but also our moral commitment to the investors who have entrusted
their assets to us.
This Code of Ethics establishes rules for personal securities
transactions by officers, directors and employees (and certain of their family
members) of the LFG Companies to ensure (i) that any personal transactions do
not interfere with portfolio transactions for any of the investment companies
the LFG Companies advise or service, or LFG's other advisory clients, and (ii)
that LFG employees do not take inappropriate advantage of their relationship to
LFG and its investment company and advisory clients.
Every year LFG requires every employee to acknowledge receiving the
Code of Ethics and to agree to comply with the Code as a condition of
employment.
If any questions arise concerning the meaning or interpretation of this
Code, an employee must consult the Investment Compliance Officer, who will
consult legal counsel as needed.
The Code uses many defined terms, set in boldface type. The Definitions
in Section I explain these defined terms.
I. DEFINITIONS
Access Person: A director of Colonial Management Associates, Inc.
(CMA), Colonial Advisory Services,
Inc. (CASI), Liberty Funds Distributor, Inc.
(LFDI), Liberty Funds Services, Inc.
(LFSI), AlphaTrade Inc. (ATI), or Liberty Funds
Group LLC (LFG), but excluding (i) any
director designated as an "access person" by
Liberty Asset Management Co. (LAMCO),
Liberty Advisory Services Corporation (LASC), or
Stein Roe & Farnham, Inc. (SRF) and
(ii) any director excluded, in writing, by the
Chief Compliance Officer, with the
approval of the General Counsel of Liberty Financial
Companies (LFC).
Each officer of CMA or CASI.
An officer of LFDI, LFSI, ATI or LFG who, in
connection with his or her regular duties knows or
has access to information about the purchase or sale
of a Security by a Fund or a Fund Adviser.
<PAGE>
An Employee in the CMA Investment Department or the
CMA Fund Administration Department, who in connection
with his or her regular duties knows or has access to
information about the purchase or sale of a Security
by a Fund or Fund Adviser.
A director or trustee of any Fund who is a director,
officer or employee of Liberty Mutual Insurance Group
or any of its affiliates or subsidiaries, including
Liberty Financial Companies, Inc. or LFG.
Any person, not a Employee, who is a director,
officer or employee of any Fund Adviser or
sub-adviser, provided that such person shall not be
considered an Access Person if:
(i) such Fund Adviser or sub-adviser has
adopted a code of ethics complying
with Rule 17j-1 under the Investment
Company Act of 1940 (an "Affiliate
Code");
(ii) such person's personal securities
transactions are governed by that
Affiliate Code;
(iii) such Fund Adviser or sub-adviser has
agreed to inform the Trustees of the
Funds and the Chief Compliance
Officer (A) promptly in writing of
any changes to that Affiliate Code,
and (B) at least quarterly of any
violations of that Affiliate Code
and any action taken in response to
each such violation; and
(iv) the Trustees agree to consider such
Affiliate Code as a code of ethics
of the Funds governing such person.
Accounts over which an Employee has
No Direct or Indirect Influence or Control:
A trust or account holding Securities of which an
Employee (or a member of his or her immediate family)
has Beneficial Ownership but in which such Employee
(or family member) has no direct or indirect control
or influence over the selection of investments.
Asset Group Head:
The Employee in charge of Equity Investments
(including all subdivisions of Equity Investments),
Fixed Income Investments or Tax-Exempt Investments.
<PAGE>
Beneficial Ownership:
A direct or indirect financial interest in an
investment giving a person the opportunity directly
or indirectly to participate in the risks and rewards
of a transaction, by written or unwritten
understanding, regardless of the actual owner of
record. Securities in which an Employee may have
Beneficial Ownership include, but are not limited to:
(1) Securities owned by a spouse, by or for
minor children or by relatives of the
Employee or his/her spouse who live in
his/her home, including Securities in trusts
of which such persons are beneficiaries
(other than Securities in a trust over which
neither the Employee nor the beneficial
owner has any Direct or Indirect Influence
or Control over investments, provided that
the Compliance Officer has approved such
trust arrangement in writing).
(2) A proportionate interest in Securities held
by a partnership of which the Employee is a
general partner;
(3) Securities for which an Employee has a right
to dividends that is separated or separable
from the underlying securities;
(4) Securities that an Employee has a right to
acquire through the exercise or conversion
of another Security; and
(5) Securities held in accounts from which an
Employee receives a performance-related fee
based on less than one year's performance.
Chief Compliance Officer: The Chief Compliance Officer of LFC.
Compliance Officer: The Fund Adviser Compliance Officer who
administers the Code of Ethics and is responsible for
reviewing transactions and holding reports. He/she
reports to the Chief Compliance Officer. In the
Compliance Officer's absence, the Chief Compliance
Officer shall act for him/her. In the absence of
both, CMA's General Counsel or his/her designee shall
act for them.
Derivative: Every financial arrangement whose value is linked to,
or derived from, fluctuations in the prices of stock,
bonds, currencies or other assets. Derivatives
include but are not limited to futures, forward
contracts, options and swaps on interest rates,
currencies and stocks.
Disinterested Trustee:
A person whose only affiliation with the Funds or
LFC is as trustee of an investment
company advised or administered by any LFC company.
[Note: Disinterested Trustees may own shares of
the Funds, but may not own shares of LFC.]
Employee: Any director, officer or employee of LFG, including
temporary or part-time employees and employees on
short-term disability or leave of absence.
Independent contractors and their employees providing
services to LFG, if designated by the Compliance
Officer, shall be treated as Employees under this
Code.
<PAGE>
Fund: Any investment company or investment account that (i)
a Fund Adviser manages or advises; or (ii) for which
an affiliate of LFG is the distributor of shares, or
(iii) for which an affiliate of LFG provides other
services (which may include administrative services).
Fund Adviser: CMA, CASI, LAMCO (only with respect to LVIT
All-Star Fund, Variable Series), LASC,
Newport Fund Management, Inc. (NFM), Crabbe
Huson Group, Inc (CHG), or Stein Roe &
Farnham (only with respect to the Stein Roe Adviser
Funds)
LFG: Liberty Funds Group LLC (formerly The Colonial
Group, Inc.) and all of its direct or
indirect subsidiaries, and any successor entity to
LFG or any subsidiary.
Material Nonpublic Information, also called "Inside Information"
[Insider Trading Policy] [See Attachment A]
Personal Account:
Any holding of Securities by an Employee for which
such Employee has, or would have by reason of a
transaction, Beneficial Ownership. NOTE: a "Personal
Account" is not limited to securities accounts
maintained at a brokerage firm, but also includes
securities owned directly by an Employee.
Portfolio Person: An Access Person who is a CMA Asset Group
Head or a Fund portfolio manager, securities analyst
or trader. Any person providing administrative or
clerical assistance to a Portfolio Person is also
considered a Portfolio Person unless specifically
excluded in writing by the Compliance Officer with
approval of the Chief Compliance Officer.
Reporting Person:
An officer of LFDI, LFSI, ATI or LFG who is not an
Access Person, unless specifically excluded, in
writing, by the Chief Compliance Officer, with the
approval of the CMA General Counsel.
An Employee in the CMA Investment Department and the
CMA Fund Accounting Department who is not an Access
Person, unless specifically excluded in writing by
the Compliance Officer with approval of the Chief
Compliance Officer.
Security: Any type of equity or debt instrument and any
rights relating thereto, such as
derivatives, warrants and convertible securities.
Shares of all closed-end investment companies,
including those in the Funds, are
included in the definition of Security.
Unless otherwise noted, Security does not include:
<PAGE>
U.S. Government Securities;
Commercial paper, certificates of deposit, repurchase
agreements, bankers' acceptances, or any other money
market instruments; Commodities; Derivatives related
to excluded investments; and Shares of open-end
registered investment companies, including those in
the Funds.
U.S. Government Securities:
All securities issued by the U.S. government;
Indirect obligations of its agencies and instrumentalities
(for instance, obligations of GNMA, FNMA, FHLCC, or FLHBs)
having less than one year to maturity, and, Derivatives
related to the obligations specified in (1) and (2).
NOTE that the definition of U.S. Government
Securities in this Code of Ethics is more limited
than the definition customarily used by the Funds
when investing their portfolios.
II. PROHIBITED ACTIVITIES
A. No Employee shall engage in any Security transaction, activity
or relationship that creates or has the appearance of creating
a conflict of interest (financial or other) between the
Employee and LFG or any Fund. Each Employee shall always place
the financial and business interests of LFG and its clients
(including the Funds) before his or her own personal,
financial or business interests.
B. No Employee shall:
- - employ any device, scheme or artifice to defraud a Fund;
- - engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon a Fund; or
- - engage in any fraudulent, deceptive or manipulative practice with
respect to a Fund.
C. No Employee shall purchase or sell, directly or indirectly,
any Security for any Personal Account, the account of a Fund
or of LFG, or any other account, while in possession of
Material Nonpublic Information concerning that Security or the
issuer without the prior written approval of the CMA General
Counsel, which approval shall specifically determine that no
misuse of inside information is likely to occur with respect
to such Material Nonpublic Information.
D. No Employee shall recommend or cause a Fund or LFG to take
action or refrain from taking action for the Employee's own
personal benefit.
E. (1) No Employee shall purchase or sell any Security
for any Personal Account if he or she knows such
Security is being purchased or sold for any Fund or
LFG or is being actively considered for purchase or
sale by any Fund or LFG.
<PAGE>
(2) LFG shall not purchase or sell any Security for its
own account if the Employee making such purchase or
sale knows such Security is being purchased or sold
for any Fund or is being actively considered for
purchase or sale by any Fund.
F. No Employee shall purchase a Security for any Personal Account
in an Initial Public Offering (IPO) unless the Employee has a
right to purchase the Security based on a preexisting status
as a policyholder or depositor.
G. No Access Person or Reporting Person shall maintain a
brokerage account for any Personal Account that holds
Securities unless that person (i) notifies the Compliance
Officer that he/she has established such account and (ii)
arranges to have duplicate confirmations and periodic
statements showing all account activity forwarded to the
Compliance Officer.
NOTE: Employees of LFDI are subject to SEC/NASD
reporting requirements for brokerage accounts that
are more stringent than this Section, and must comply
with those requirements in addition to those set out
in this Code.
H. No Employee shall use any Derivative to evade the restrictions of
this Code of Ethics.
I. No Employee shall use any subterfuge to evade the restrictions
of this Code of Ethics.
J. No Employee shall be a director of a publicly traded company
other than Liberty Financial Companies, Inc. without prior
written approval of the Chief Compliance Officer, which
approval generally will not be granted.
K. No Access Person shall make investments for any Personal
Account in any investment club without prior written approval
from the Compliance Officer; if approval is granted, an Access
Person shall be deemed to have Beneficial Ownership of all
securities owned by the investment club.
L. No Access Person may purchase a Security for any Personal
Account in a private offering without prior written approval
of the Compliance Officer and, for CMA, the appropriate Asset
Group Head. In considering whether to grant such approval, the
Compliance Officer and Asset Group Head will consider several
factors, including but not limited to:
(1) whether the investment opportunity should be reserved
for a Fund; and
(2) whether the opportunity is being offered to the Access
Person by virtue of his or her position with the Fund
or LFG.
Before approval is granted, the Compliance Officer and, for
CMA, the appropriate Asset Group Head or his/her designee must
also consider whether a Fund should invest in such Security or
in another Security issued by the same issuer. In such
circumstances, the Compliance Officer, and for CMA, the
appropriate Asset Group Head, will conduct a review by
investment personnel with no interest in the issuer prior to a
purchase on behalf of a Fund.
<PAGE>
M. Outside the scope of his/her employment, no Access Person may
offer investment advice or manage any person's portfolio in
which he or she does not have Beneficial Ownership without
prior written approval from the Compliance Officer.
N. No Portfolio Person may profit from the purchase and sale or
sale and purchase of the same (or equivalent) Securities in a
Personal Account within 60 calendar days. Any resulting
profits may be disgorged as instructed by the Compliance
Officer.
NOTE 1: Portfolio Persons are reminded that their
personal trading must not be detrimental to the Funds
and that no personal trades may be structured so as
to profit from the market effect of any Fund
portfolio transaction. Personal trades must be
consistent with the normal investment practices of
the individual involved and reflect an investment,
rather than a trading, outlook.
NOTE 2: The 60-day
restriction does not apply to the exercise of options
to purchase shares of Liberty Financial Companies,
Inc. and the immediate sale of the same or identical
shares, including so-called "cashless exercise"
transactions.
O. No Portfolio Person may buy or sell a Security for any Personal
Account within seven calendar days before or after a Fund that
he or she manages, or provides information or advice to, or
executes investment decisions for, trades in that Security. Any
related profits from such transaction may be disgorged as
instructed by the Compliance Officer.
NOTE 1: The seven-day restriction DOES NOT APPLY to
securities of issuers having a market capitalization
of $5 billion or more at the time of the transaction;
however, a Portfolio Person must preclear these
trades as with any other personal trade.
NOTE 2: In
interpreting this provision, the Compliance Officer
shall be guided by the then-current CMA
organizational structure in determining the
relationship between a Portfolio Person and a Fund.
P. No Employee shall, directly or indirectly, in connection with
any purchase or sale of securities to or from a Fund or LFG,
accept or receive from a third party any compensation or gift,
or any other item of more than de minimis value. An Employee
shall refer all questions regarding the permissibility of
accepting items of more than de minimis value to the Compliance
Officer.
NOTE: This requirement of the Code of Ethics
shall supersede any less stringent
requirement of the NASD Conduct Rules.
Q. No Disinterested Trustee may buy or sell any Security,
directly or indirectly, for any Personal Account if at the
time of the transaction he or she knows that a Fund is
considering or executing a transaction in the same Security,
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 a pro rata
issue to all holders of such Securities and the sale
of such rights;
<PAGE>
(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 from such account within 10 days prior to
the call;
(4) transactions for an account over which the
Disinterested Trustee has No Direct or Indirect
Influence or Control; and
(5) transactions previously approved in writing by the
Compliance Officer that have been determined not to
be harmful to any Fund because of the size of the
market in the Security.
A Disinterested Trustee who knows that a Fund is buying or
selling a Security and who trades in that Security within 15
days of the Fund's transaction must report his/her trade to
the Compliance Officer within 10 days after the end of the
calendar quarter in which his/her trade occurs.
III. PRE-CLEARING PERSONAL TRADES
LFG permits Employees to trade for their Personal Account if such
trading complies with this Code of Ethics and does not conflict with
the management of any Fund or private account advised or administered
by LFG. All LFG Access Persons must follow the pre-clearance procedures
set forth below. They have been designed to allow pre-clearing of
trades in an orderly manner. Please note that since procedures can
never cover every contingency, each LFG Employee must always remember
that our foremost responsibility is to act in the best interests of
Fund shareholders and advisory clients.
Pre-Clearance Procedures and Standards
A. Each Access Person must pre-clear personal transactions in
Securities. Pre-clearance begins with completing the Personal
Securities Transaction Pre-Clearance Form (see Attachment B).
Please provide the name of the Security you wish to purchase
or sell, not just the corresponding ticker symbol.
For proposed personal transactions in a Security in an asset
group in which a Access Person serves, the trade will be
cleared if no LFG Fund bought or sold such securities during
the preceding seven calendar days. If a LFG Fund buys or sells
the Security within seven days after the execution of a
personal transaction of an Access Person in that Security,
that individual may be required to reverse the trade and
disgorge any profits. (See NOTE 1 to Section II.O above
exempting transactions in securities of large-capitalization
issuers from this restriction.)
B. The Compliance Officer will notify an Access Person who
requests a pre-clearance whether or not a trade is cleared (by
telephone and in writing or by e-mail). The Access Person may
trade as soon as he/she receives clearance.
C. An Access Person must submit a pre-clearance request for each
securities trade; a request received after 3 PM may be held
until the next business day. A CLEARANCE IS EFFECTIVE ONLY
DURING THE BUSINESS DAY IT IS ISSUED. If you decide not to
purchase or sell a security on the day LFG pre-clears the
trade, you must repeat the pre-clearance process on the day
you wish to make the trade.
<PAGE>
D. Each Employee shall pre-clear through the Compliance Officer,
in writing, any transaction in shares of a closed-end Fund
(other than reinvestment of distributions).
E. The following transactions are excluded from the pre-clearing
requirement:
(1) Purchase(s) pursuant to a dividend reinvestment
program (DRIP) or purchase(s) based upon preexisting
status as a policyholder or depositor;
(2) Purchase(s) of a Security through the exercise of
rights issued to the Employee as part of a 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 so long as collateral was not
withdrawn within 10 calendar days prior to the call;
(4) Transactions for an account previously approved in
writing by the Compliance Officer over which the
Access Person has No Direct or Indirect Influence or
Control; and
(5) Transactions previously approved in writing by the
Compliance Officer that have been determined not to
conflict with the interests of any Fund because of
the volume of trading in the Security; and
(6) Transactions in U.S. Government Securities, as
defined in this Code of Ethics, and other securities
excluded from the definition of Security as above.
IV. Reporting Requirements
A. Each year each Employee must complete and file a form of
acknowledgment stating that he/she has received and reviewed,
and will comply with, this Code of Ethics.
The Compliance Officer will notify each Employee of his/her
status as an Access Person or a Reporting Person, as
applicable: (i) upon employment, (ii) at least annually, and
(iii) when the Employee's job title or responsibilities so
change as to affect his/her status.
B. Each Access Person and Reporting Person shall notify the CMA
Compliance Department each time he/she opens a brokerage
account that may be used to transact business in Securities.
The CMA Compliance Department shall instruct the appropriate
firm to provide duplicate confirmations and periodic
statements showing all purchases and sales of Securities to:
Colonial Management Associates, Inc.
One Financial Center
Boston, Massachusetts 02111
Attention: Compliance Department
Although the CMA Compliance Department will instruct the firm
to provide duplicate confirmations and periodic statements, it
remains the responsibility of the person who opens the account
to see that the firm sends the required confirmations or
statements to LFG.
<PAGE>
C. Each Access Person and Reporting Person shall file with the
Compliance Officer (except the Compliance Officer and the
Chief Compliance Officer, who will file the report with LFC's
General Counsel), within ten calendar days after the end of
each calendar quarter (March 31, June 30, September 30,
December 31) a report, listing each Security transaction
(including those exempt from the pre-clearance requirements)
effected during the quarter for any Personal
Account. Each quarterly report shall also identify and
provide the dates during the quarter on which an account
dealing in Securities was established in which the person
making the report has a beneficial interest.
D. Each Disinterested Trustee shall file with the Compliance
Officer within ten calendar days after the end of each quarter
(March 31, June 30, September 30 and December 31) a report,
listing each Security transaction effected during the quarter
in any Personal Account which at the time of the transaction
the Trustee knew or, in the ordinary course of fulfilling his
or her official duties as a Trustee should have known, that
during the 15 days prior to or after the transaction any Fund
is or was considering or executing a transaction in the same
security.
NOTE: Unlike Access Persons, Disinterested Trustees
are not required to file reports for calendar
quarters in which they have made (i) no transactions
in a Security, or (ii) no transactions described in
this subsection. A report is required only for a
quarter in which one or more Security transactions
involving knowledge of a Fund's portfolio activity
has occurred.
E. No Access Person may become a member of a creditors committee
for any issuer of securities. If it is necessary for any Fund
Adviser to become a member of a creditors committee, senior
management of that Fund Adviser shall request LFC's General
Counsel to designate a lawyer representing the appropriate LFC
company (who shall be advised not to transmit information to
any Access Person) to sit on the committee. The designated
lawyer shall maintain all documents from the creditor
committee containing information that may be considered Inside
Information in secure storage.
F. Any Employee who becomes aware of any person trading on or
communicating Inside Information (or contemplating such
actions) must inform the Chief Compliance Officer and CMA's
General Counsel.
G. Any Employee who becomes aware of any person violating this
Code of Ethics must inform the Chief Compliance Officer and
CMA's General Counsel.
H. At least annually, LFG (on behalf of itself and its
subsidiaries, including CMA) and each Fund Adviser other
than CMA shall provide the Funds' Board of Trustees with
a written report describing issues arising under the Code
of Ethics and related procedures that govern LFG and
the Fund Advisers. This report shall include (i) information
about material violations of the Code of Ethics or procedures
during the previous year and (ii) any sanctions imposed
because of such violations. Each year, LFG and each Fund
Adviser shall certify and report to the Funds'
Board of Trustees that each has adopted procedures
reasonably designed to detect and prevent
violations of the Code of Ethics.
<PAGE>
I. Effective March 1, 2000, each new Employee who is designated
as an Access Person upon employment, and each current Employee
not an Access Person who is subsequently designated as one,
shall file with the Compliance Officer within 10 days after
such designation an Initial Holdings Report on the prescribed
form listing all Securities he or she beneficially owns.
V. Enforcement
A. Review
The Compliance Officer shall review reports filed under the
Code of Ethics to determine whether any violation of this Code
of Ethics may have occurred.
B. Investigation
The Chief Compliance Officer, acting at the direction of the
LFC General Counsel, shall investigate any alleged violation
of the Code of Ethics. An Employee allegedly involved in a
violation of the Code of Ethics may be required to deliver to
LFC's General Counsel or his/her designee all documentation
related to any Personal Account or any Securities for which
the Employee has Beneficial Ownership for all years requested.
Failure to comply will result in termination.
C. Sanctions
In determining the sanctions to be imposed for a violation of
this Code of Ethics, LFG may consider any factors deemed
relevant, including but not limited:
(1) the degree of willfulness of the violation;
(2) the severity of the violation;
(1) the extent, if any to which an Employee profited or
benefited from the violation; (4) the adverse effect, if any,
of the violation on a Fund, on LFG or any client of LFG; (5)
any history of prior violations of the Code; (6) the extent to
which the employee voluntarily disclosed the violation and./or
cooperated in any investigation of the violation.
LFG may impose any sanctions it deems appropriate, such as:
(1) Disgorgement of profits;
(2) Fines;
(3) Letter of reprimand;
(4) Suspension or termination of employment;
(5) Such other actions as the Chief Executive Officer or
Board of Directors of LFG or the Board of Trustees of
the Funds (exclusive of the violating individual),
shall determine.
<PAGE>
All violations of the Code of Ethics and any sanctions imposed shall be
reported to the Board of Trustees of the Funds and any regulatory
agency requiring such reporting, and may be recorded in the Employee's
personnel record.
D. Legal Penalties for Misuse of Inside Information
Civil penalties up to three times the profit gained or loss
avoided;
Disgorgement of profits;
Injunctions, including being banned from securities industry;
Criminal penalties up to $1 million;
Jail sentences.
VI. TRANSITION PROVISIONS
Liberty Financial Companies is currently integrating the management,
servicing and distribution functions of its subsidiary companies that
support the LFG, Newport, Stein Roe Advisor, and Crabbe Huson Groups of
investment companies and the Liberty Variable Investment Trust. During
this transition period, it may be necessary to amend the provisions of
this Code temporarily, or to include in or exclude from its coverage
certain employees of LFC and its subsidiaries (including LFG).
Accordingly, the Chief Compliance Officer, with the concurrence of
counsel for any affected Fund and LFC's General Counsel, is authorized
to make temporary amendments to this Code, or to designate certain
individuals or groups of employees of LFC subsidiaries as covered by or
excluded from the provisions of this Code. This temporary authority
granted to the Chief Compliance Officer shall continue through
September 30, 2000.
<PAGE>
LIST OF ATTACHMENTS
ATTACHMENT A
Insider Trading Policy
ATTACHMENT B
PERSONAL SECURITIES TRANSACTION
PRE-CLEARANCE FORM
ATTACHMENT C
ACCESS PERSON/REPORTING PERSON
QUARTERLY PERSONAL SECURITIES TRANSACTION REPORT
<PAGE>
ATTACHMENT A
LIBERTY FUNDS GROUP, INC.
INSIDER TRADING POLICY
Material information:
a. Is information a reasonable investor would consider important
in an investment decision; or
b. Is that which is reasonably likely to have a significant
effect on the price of the company's securities;
c. Includes, but is not limited to dividend changes, earnings
estimate, changes from previously released earnings estimates,
proposed mergers or acquisitions, purchases or sales of
material assets, significant new products or discoveries,
litigation, investigation, liquidity difficulties and
management changes.
Nonpublic information:
Is that which has not yet been effectively communicated to the public
through an SEC filing or widely distributed news release.
Misuse of Inside Information:
Unlawful inside trading occurs when there is a duty not to "take
advantage" of Material Nonpublic Information. Questions as to whether a
duty exists should be referred to the LFC General Counsel. Corporate
insiders have such a duty and they include officers, directors,
employees and other temporary insiders having special confidential
relationships with a corporation.
Temporary insiders may include investment bankers, accounting firms,
consulting firms, law firms, banks and the employees of such
organizations. Certain people who are not insiders also have a duty not
to take advantage of inside information. Included in this category is
any individual who misappropriates Material Nonpublic Information in
violation of a duty owed to the corporation or some other entity.
Finally, tippees who receive Material Nonpublic Information from an
insider or misappropriation have a duty not to trade while in
possession of that information if they knew or should have known that
the information was provided by the tipper for an improper purpose or
in breach of a duty owed by the tipper.
<PAGE>
ATTACHMENT B
COLONIAL MANAGEMENT ASSOCIATES, INC.
PERSONAL SECURITIES TRANSACTION PRE-CLEARANCE FORM
I. To Be Completed By Access Person
Name: _____________________ Date: ____________________________
Department: ___________________ Supervisor: ______________________
Name of Account Owner: ___________________ Relationship to Access Person:_____
Issuer of Security Symbol Buy/Sell Quantity
======================= ============ =========== =============
- ----------------------- ------------ ----------- -------------
I confirm that the above transaction(s) does not constitute a conflict of
interest or bear any material economic relationship with securities held or
about to be held by any of the LFG Funds.
Employee Signature: ____________________________________
II. To Be Completed By Reviewers
________ There are no open orders, partially filled orders or
transactions completed by any LFG Fund in these securities or,
if an option, in the underlying securities.
________ There are open orders or partially filled orders by a LFG Fund
in these securities or, if an option, in the underlying
securities.
Open or Unfilled Orders: _________________________________________________
Have any LFG Funds bought or sold the security in the past seven calendar days?
Yes____________ No____________
(Date of Trade(s):__________________________________)
- ------------------------------------ ------------------------------
Director of Equity Systems (or Designee) or Head Trader (Tax-Exempt or
Taxables) (or Designee).
Investment Department Compliance Officer or Designee: ________________________
Date: ________________________
<PAGE>
ATTACHMENT C
LIBERTY FUNDS GROUP, INC.
ACCESS/PORTFOLIO/REPORTING PERSON
QUARTERLY PERSONAL SECURITIES TRANSACTION REPORT
Name: FIRST LAST
STATUS:
For Quarter Ended: [Date]
You must report your personal securities transactions NO MORE THAN 10
CALENDAR DAYS after the end of each calendar quarter. Complete this form and
return it to Linda DiSilva (12th Floor) in the Compliance Department no later
than [Date]. Please report chronologically, all transactions in which you have
any direct or indirect beneficial ownership. "Indirect beneficial ownership"
includes shares held in the name of (1) your spouse; (2) your minor children;
(3) your adult children and any relative who lives in your home; (4) any nominee
or other person if you can reacquire title now or in the future.
DO NOT REPORT transactions (1) in an account over which you have no
direct or indirect influence or control; (2) in U.S. Government Securities,
commercial paper, certificates of deposit, repurchase agreements, bankers'
acceptances, and any other money market instruments, and (3) in all open-end
mutual funds (including the Liberty Funds).
DO REPORT transactions in all other securities (including shares of
Liberty Financial Companies, Inc.)
<TABLE>
<CAPTION>
If you have no transactionS to report please write "none" and sign below.
<S> <C> <C> <C> <C> <C>
- --------------- ----------------- ---------------- ----------------- ---------------------------------- ----------------------
Trade Date Buy/Sell No. of Shares Price per share Name and description of security Broker/dealer/
Bank
- --------------- ----------------- ---------------- ----------------- ---------------------------------- ----------------------
- --------------- ----------------- ---------------- ----------------- ---------------------------------- ----------------------
- --------------- ----------------- ---------------- ----------------- ---------------------------------- ----------------------
- --------------- ----------------- ---------------- ----------------- ---------------------------------- ----------------------
- --------------- ----------------- ---------------- ----------------- ---------------------------------- ----------------------
- --------------- ----------------- ---------------- ----------------- ---------------------------------- ----------------------
</TABLE>
Signature Date
NEWPORT PACIFIC MANAGEMENT, INC.
NEWPORT FUND MANAGEMENT, INC.
CODE OF ETHICS
AND
STATEMENT ON INSIDER TRADING
Code of Ethics------------------------------------------Page 1
Beneficial Ownership---------------------------------Exhibit A
Statement of Insider Trading-------------------------Exhibit B
Initial Security Accounts Report---------------------Exhibit C
Annual Security Accounts Report----------------------Exhibit D
Quarterly Security Transactions Report---------------Exhibit E
<PAGE>
NEWPORT PACIFIC MANAGEMENT, INC.(1)
NEWPORT FUND MANAGEMENT, INC.(1)
CODE OF ETHICS
Rule 17j-1 under the Investment Company Act of 1940 (the "Act")
requires registered investment companies ("investment companies") and their
investment advisers and principal underwriters to adopt written codes of ethics
designed to prevent fraudulent trading by those persons covered under Rule
17j-1. Rule 17j-1 also makes it unlawful for certain persons, including any
officer or director of an investment company, in connection with the purchase or
sale by such person of a security held or to be acquired by an investment
company to:
1. employ any device, scheme or artifice to defraud the
investment company;
2. make to the investment company any untrue statement of a
material fact or 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;
3. engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon the
investment company; or
4. engage in any manipulative practice with respect to the investment
company.
Rule 17j-1 also requires that each investment company and its
affiliates use reasonable diligence, and institute procedures reasonably
necessary, to prevent violations of its code of ethics.
In addition to Rule 17j-1 of the Act, the Insider Trading and
Securities Fraud Enforcement Act of 1988 ("ITSFEA") requires that all investment
advisors and broker-dealers establish, maintain, and enforce written policies
and procedures designed to detect and prevent the misuse of material non-public
information by such investment advisor and/or broker-dealer. Section 204A of the
Investment Advisors Act of 1940 (the "Advisors Act") states that an investment
advisor must adopt and disseminate written policies with respect to ITSFEA, and
an investment advisor must also vigilantly review, update, and enforce them.
Section 204A provides that every person subject to Section 204 of the Advisors
Act shall be required to establish procedures to prevent insider trading.
Attached to this Code of Ethics (the "Code"), as Exhibit A, is a
Statement on Insider Trading. All persons who are affiliated with Newport
Pacific Management Inc. ("NPM") and
(1) This Code of Ethics is applicable to Newport Pacific Management, Inc.
("NPM") and Newport Fund Management, Inc. ("NFM") except with respect to
officers and directors of NPM & NFM located at 600 Atlantic Ave, Boston, MA.
<PAGE>
Newport Fund Management, Inc. ("NFM") ("the Company"), i.e. Directors,
Officers, and employees are obligated to comply with the policy and procedures
outlined in the Statement on Insider Trading
This Code is being adopted by the Company for implementation with
respect to covered persons of the Company.
STATEMENT OF GENERAL PRINCIPLES
This Code is based on the principal that the officers, directors, and
employees of the Company owe a fiduciary duty to the clients of the Company and,
therefore, the Company's personnel must place the clients' interests ahead of
their own. the Company's personnel must also avoid any conduct which could
create a potential conflict of interest, and must ensure that their personal
securities transactions do not in any way interfere with the client's portfolio
transactions and that they do not take inappropriate advantage of their
positions. All persons covered by this Code must adhere to these general
principles as well as the Code's specific provisions, procedures, and
restrictions.
DEFINITIONS
For the purposes of this Code:
"Access Person" means any director, officer, employee, or advisory
person of the Company, or those persons who have an active part in the
management, or portfolio selection of the Company's client accounts, or who, in
the course of their normal duties, obtain prior information about the client's
purchases or sales of securities (i.e. traders and analysts).
"Advisory Person" With respect to an Investment Advisor, an Advisory
Person means any director, officer, general partner, or employee who, in
connection with his/her regular functions or duties, makes, participates in, or
obtains current information regarding the purchase or sale of a security for
client accounts, or whose functions relate to the making of any recommendations
with respect to such purchases or sales, including any natural person in a
control relationship to the Company who obtains current information concerning
recommendations made with regard to the purchase or sale of a security for
client accounts.
"Investment Personnel" shall mean any securities analyst, portfolio
manager, or a member of an investment committee who is directly involved in the
decision making process as to whether or not to purchase or sell a portfolio
security and those persons who provide information and advice to a Portfolio
Manager or who help execute a Portfolio Manager's decisions.
"Personnel of the Company" shall mean an Access Person, Advisory
Person, and/or Investment Personnel.
"Portfolio Manager" shall mean an employee of an Investment Advisor
entrusted with the direct responsibility and authority to make investment
decisions affecting clients' accounts.
"Beneficial Ownership" shall be defined in Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, which, when
applied to a person's ownership of securities means, in general, interest in
securities, the benefits of which, substantially equivalent to those of
<PAGE>
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 "A" for additional
information concerning beneficial ownership of securities.
"Security" shall have the meaning set forth in Section 2 (a) (36) of
the Act, except that it shall not include shares of registered open-end
investment companies, securities issued by the Government of the United States
or by Federal agencies which are direct obligations of the United States,
bankers' acceptances, bank certificates of deposits, and commercial paper. A
future or an option on a future will be deemed to be a security subject to this
Code.
"Purchase or sale of a security" includes the writing of an option to
purchase or sell a security.
A security is "being considered for purchase or sale" or is "being
purchased or sold" when a recommendation to purchase or sell the security has
been made by a Portfolio Manager and such determination has been communicated to
the client. With respect to the Investment Advisor making the recommendation, a
security is being considered for purchase or sale when an officer, director or
employee of the Company seriously considers making such a recommendation.
Solely for purposes of this Code, any agent of the Company charged with
arranging the execution of a transaction shall be subject to the reporting
requirements of this Code as to any such security as and from the time the
security is identified to such agent as though such agent was an Investment
Advisor hereunder.
NOTE: An officer or employee of the Company whose duties do not include
the advisory functions described above, who does not have access to the
advisory information contemplated above, and whose assigned place of
employment is at a location where no investment advisory services are
performed for the Company, is not an "Advisory Person" or an "Access
Person" unless actual advance knowledge of a covered transaction is
furnished to such person.
PROHIBITED TRANSACTIONS
Personnel of the Company shall not engage in any act, practice or
course of conduct which would violate the provision of Rule 17j-1 set forth
above. No Access Person or Advisory Person shall purchase or sell, directly or
indirectly, any security in which he/she has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership and which, to his/her
actual knowledge, at the time of such purchase or sale (i) is being considered
for purchase or sale by the Company for client accounts; or (ii) is being
purchased or sold by the Company for client accounts; except that the
prohibitions of this section shall not apply to:
(1) purchase or sales affected in any account over which the Access
Person or Advisory Person has no direct or indirect influence or
control;
<PAGE>
(2) purchases or sales which are non-volitional on the part of
either the Access Person, the Advisory Person, or the Company;
(3) purchases which are part of an automatic dividend reinvestment
or other plan established by personnel of the Company prior to
the time the security involved came within the purview of this
Code; and
(4) 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.
PROHIBITED TRANSACTIONS BY INVESTMENT PERSONNEL
No Investment Personnel shall:
(a) acquire any securities in an initial public offering; or
(b) acquire securities in a private placement without prior written
approval of the Company's compliance officer or other officer
designated by the Board of Directors.
In considering a request to invest in a private placement, the
Company's compliance officer will take into account, among other factors,
whether the investment opportunity should be reserved for clients, and whether
the opportunity is being offered to Investment Personnel by virtue of
their/his/her position with the Company. Should Investment Personnel be
authorized to acquire securities through a private placement, they/he/she shall,
in addition to reporting the transaction on the quarterly report to the Company,
disclose the interest in that investment to other Investment Personnel
participating in that investment decision if and when they/he/she plays a part
in the Company's subsequent consideration of an investment in that issuer. In
such a case, the Company's decision to purchase securities of that issuer will
be subject to an independent review by Investment Personnel who have no personal
interest in the issuer.
BLACKOUT PERIODS
No Access Person or Advisory Person shall execute a securities
transaction on a day during which the Company has a pending "buy" or "sell"
order in that same security until that order is executed or withdrawn. In
addition, a Portfolio Manager is expressly prohibited from purchasing or selling
a security within seven (7) calendar days before or after the client accounts
that he/she manages trades in that security.
Should personnel of the Company trade within the proscribed period,
such trade should be canceled if possible. If it is not possible to cancel the
trade, all profits from the trade must be disgorged and the profits will be paid
to a charity selected by personnel of the Company and approved by the officers
of the Company.
The prohibitions of this section shall not apply to:
(1) purchases or sales affected in any account over which the Access
Person or Advisory Person has no direct or indirect influence or
control if the person making the investment decision with
respect to such account has no actual knowledge about the
Company's pending "buy" or "sell" order;
<PAGE>
(2) purchases or sales which are non-volitional on the part of
either the Access Person, the Advisory Person, or the Company;
(3) purchases which are part of an automatic dividend reinvestment
or other plan established by Personnel of the Company prior to
the time the security involved came within the purview of this
Code; and
(4) 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.
SHORT-TERM TRADING
No Investment Personnel shall profit from the purchase and sale, or
sale and purchase of the same (or equivalent) securities which are owned by
client accounts or which are of a type suitable for purchase by client accounts,
within sixty (60) calendar days. Any profits realized on such short-term trades
must be disgorged and the profits will be paid to a charity selected by the
Investment Personnel and approved by the officers of the Company. The compliance
officer or other officer designated by the Board of Directors may permit in
writing exemptions to the prohibition of this section, on a case-by-case basis,
when no abuse is involved and the equities of the circumstances support an
exemption.
GIFTS
No Investment Personnel shall accept a gift or other thing of more than
de minimis value ("gift") from any person or entity that does business with or
on behalf of the Company if such gift is in relation to the business of the
employer of the recipient of the gift. In addition, any Investment Personnel who
receive an unsolicited gift or a gift with an unclear status under this section
shall promptly notify the compliance officer and accept the gift only upon
written approval of the compliance officer.
SERVICE AS A DIRECTOR
No Investment Personnel shall serve as a director of a publicly traded
company absent prior written authorization from the Board of Directors based
upon a determination that such board service would not be inconsistent with the
interests of the Company and its clients.
COMPLIANCE PROCEDURES
1. All personnel of the Company shall preclear their personal securities
transactions prior to executing an order. A written request must be
submitted to the Company's compliance officer, and the compliance
officer must give his/her written authorization prior to personnel of
the Company placing a purchase or sell order with a broker. Should the
compliance officer deny the request, he/she will give a reason for the
denial. An approved request will remain valid for two (2) business days
from the date of approval.
<PAGE>
2. Personnel of the Company shall instruct their broker(s) to supply the
compliance officer, on a timely basis, with duplicate copies of
confirmations of all personal securities transactions and copies of all
periodic statements for all securities accounts.
3. Personnel of the Company, other than directors or officers required to
report their securities transactions to a registered investment advisor
pursuant to Rule 204-2(a)(12) or (13) under the Investment Advisors
Act, shall submit reports showing all transactions in securities as
defined herein in which the person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership.
4. Each director, who is not an interested person of the Company as
defined in the Act, shall submit reports as required under subparagraph
3 above, but only for transactions in reportable securities where at
the time of the transaction the director knew, or in the ordinary
course of fulfilling his/her official duties as a director should have
known, that during the seven (7) day period immediately preceding the
date of the transaction by the director, such security was purchased or
sold by the Company or was being considered for purchase or sale by the
Company.
5. Every report required to be made under subparagraphs 3 and 4 above
shall be made not later than ten (10) days after the end of the
calendar quarter in which the transaction to which the report relates
was effected. The report shall contain the following information
concerning any transaction required to be reported therein:
(a) the date of the transaction;
(b) the title and number of shares;
(c) the principal amount involved;
(d) the nature of the transaction (i.e. purchase, sale, or other type
of acquisition or disposition);
(e) the price at which the transaction was effected; and
(f) the name of the broker, dealer or bank with or through whom the
transaction was effected.
6. The compliance officer shall identify all personnel of the Company who
have a duty to make the reports required hereunder and shall inform
each such person of such duty, and shall receive all reports required
hereunder.
7. The compliance officer shall promptly report to the Company's Board of
Directors (a) any apparent violation of the prohibitions contained in
this Code and (b) any reported transactions in a security which was
purchased or sold by the Company for client accounts within seven (7)
days before or after the date of the reported transaction.
8. The Company's Board of Directors, or a Committee of Directors created
by the Board of Directors for that purpose, shall consider reports made
<PAGE>
to the Board of Directors hereunder and shall determine whether or not
this Code has been violated and what sanctions, if any, should be
imposed.
9. This Code, a list of all persons required to make reports hereunder
from time to time, a copy of each report made by personnel of the
Company, each memorandum made by the compliance officer hereunder, and
a record of any violation hereof and any action taken as a result of
such violation, shall be maintained by the Company as required under
Rule17j-1.
10. Upon the commencement of employment of a person who would be deemed to
fall within the definition of "Personnel of the Company", that person
must disclose all personal securities holdings to the compliance
officer.
11. All personnel of the Company must report, on an annual basis, all personal
securities holdings.
12. At least annually, all personnel of the Company will be required to
certify that they (a) have read and understand the Code; (b) recognize
that they are subject to the requirements outlined therein; (c) have
complied with the requirements of the Code; (d) have disclosed and
reported all personal securities transactions required to be disclosed;
and (e) have disclosed all personal securities holdings.
13. The Company's compliance officer shall prepare an annual report to the
Company's Board of Directors. Such report shall (a) include a copy of the
Company's Code; (b) summarize existing procedures concerning personal
investing and any changes in the Code's policies or procedures during the
past year; (c) identify any violations of the Code; and (d) identify any
recommended changes in existing restrictions, policies or procedures based
upon the Company's experience under the Code, any evolving industry
practices, or developments in applicable laws or regulations.
<PAGE>
Exhibit A
Further Comment: Beneficial Ownership
Securities held for a person's benefit in the names of others, such as
nominees, trustees and other fiduciaries, securities held by any partnership of
which a person is a partner, and securities held by any corporation which is
controlled by a person (directly or through intermediaries), should be regarded
as owned beneficially. Similarly, a person ordinarily obtains benefits
equivalent to ownership from, and thus is generally regarded as the "beneficial
owner" of , securities held in the name of his or her spouse, a minor child, or
a relative of his or hers or of his or her spouse, who shares the same home with
him or her. Other illustrations of benefits substantially equivalent to those of
ownership include application of he income derived from securities to maintain a
common home and application of the income derived from securities to meet
expenses which the person otherwise would meet from other sources. Such
interests which confer beneficial ownership of a security include having, or
sharing with another: (1) voting power, including the power to vote, or to
direct the voting of, the security; and/or (2) investment power, including the
power to dispose, or to direct the disposition, of such security. A person is
also deemed to be the beneficial owner of securities when such person has the
right to acquire beneficial ownership for such securities: (i) through the
exercise of an option, warrant or right (including options traded on options
exchanges) exercisable within sixty days; (ii) through the conversion of
securities which are immediately convertible within 60 days, or (iii) pursuant
to a power to revoke within 60 days, or pursuant to the automatic termination
within 60 days of, a trust, discretionary account or similar arrangement. In
addition, beneficial ownership is conferred if voting or investment power is
shared with one or more other persons and, therefore, the same shares of stock
may be deemed beneficially owned by a number of persons. The Commission regards
securities held in trust for others as beneficially owned by the trustee if he
or she or shares voting or investment power with respect to such securities.
<PAGE>
EXHIBIT B
STATEMENT OF INSIDER TRADING
The Insider Trading and Securities Fraud Enforcement Act of 1988
("ITSFEA") requires that all investment advisors and broker-dealers establish,
maintain, and enforce written policies and procedures designed to detect and
prevent the misuse of material non-public information by such investment advisor
and/or broker-dealer, or any person associated with the investment advisor
and/or broker dealer.
Section 204A of the Investment Advisers Act of 1940 (the "Advisers
Act") states that an investment advisor must adopt and disseminate written
policies with respect to ITSFEA, and an investment advisor must also vigilantly
review, update, and enforce them. Section 204A provides that every person
subject to Section 204 of the Advisers Act shall be required to establish
procedures to prevent insider trading.
SECTION I - POLICY
The purpose of this Section 1 is to familiarize the officers,
directors, and employees of the Company with issues concerning insider trading
and to assist them in putting into context the policy and procedures on insider
trading.
Policy Statement:
No person to whom this Statement on Insider Trading applies, including
officers, directors, and employees, may trade, either personally or on behalf of
others (such as mutual funds and private accounts managed by the Company) while
in possession of material, non-public information; nor may any officer,
director, or employee of the Company communicate material, non-public
information to others in violation of the law. This conduct is frequently
referred to as "insider trading." This policy applies to every officer,
director, and employee of the Company and extends to activities within and
outside their duties with the Company. It covers not only personal transactions
of covered persons, but indirect trading by family, friends and others, or the
non-public distribution of inside information from you to others. Every officer,
director, and employee must read and retain this policy statement. Any questions
regarding the policy and procedures should be referred to the compliance
officer.
The term "insider trading" is not defined in the Federal securities
laws, but generally is used to refer to the use of material non-public
information to trade in securities (whether or not one is an "insider") or the
communications of material non-public information to others who may then seek to
benefit from such information.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
(a) trading by an insider, while in possession of material
non-public information, or
(b) trading by a non-insider, while in possession of material
non-public information, where the information either was
disclosed to the non-insider in violation of an insider's duty
to keep it confidential or was misappropriated, or
<PAGE>
(c) communicating material non-public information to others.
The elements of insider trading and the penalties for such unlawful
conduct are discussed below.
1. Who is an Insider? The concept of "insider" is broad. It includes officers,
directors, and employees of a company. In addition, a person can be a "temporary
insider" if he or she enters into a special confidential relationship in the
conduct of a company's affairs and as a result is given access to information
solely for the company's purposes. A temporary insider can include, among
others, a company's attorneys, accountants, consultants, bank lending officers,
and the employees of such organizations. In addition, an investment advisor may
become a temporary insider of a company it advises or for which it performs
other services. According to the Supreme Court, the company must expect the
outsider to keep the disclosed non-public information confidential and the
relationship must at least imply such a duty before the outsider will be
considered an insider.
2. What is Material Information? Trading on inside information can be the basis
for liability when the information is material. In general, information is
"material" when there is a substantial likelihood that a reasonable investor
would consider it important in making his or her investment decisions, or
information that is reasonable certain to have a substantial effect on the price
of a company's securities. Information that officers, directors, and employees
should consider material includes, but is not limited to: dividend changes,
earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major litigation,
liquidation problems, and extraordinary management developments.
3. What is Non-public Information? Information is non-public until it has been
effectively communicated to the market place. One must be able to point to some
fact to show that the information is generally public. For example, information
found in a report filed with the SEC, or appearing in Dow Jones, Reuters
Economic Services, the Wall Street Journal or other publications of general
circulation would be considered public. (Depending on the nature of the
information, and the type and timing of the filing or other public release, it
may be appropriate to allow for adequate time for the information to be
"effectively" disseminated.)
4. Reason for Liability. (a) Fiduciary duty theory - in 1980 the Supreme Court
found that there is no general duty to disclose before trading on material
non-public information, but that such a duty arises only where there is a direct
or indirect fiduciary relationship with the issuer or its agents. That is, there
must be a relationship between the parties to the transaction such that one
party has a right to expect that the other party will disclose any material
non-public information or refrain from trading. (b) Misappropriation theory
another basis for insider trading liability is the "misappropriation" theory,
where liability is established when trading occurs on material non-public
information that was stolen or misappropriated from any other person.
5. Penalties for Insider Trading. Penalties for trading on or communicating
material non-public information are severe, both for individuals and their
employers. A person can be subject to some or all of the penalties below even if
he or she does not personally benefit from the violation. Penalties include:
o civil injunctions
o treble damages
<PAGE>
o disgorgement of profits
o jail sentences
o fines for the person who committed the violation of up to
three times the profit gained or loss
avoided, whether or not the person actually benefited, and
o fines for the employer or other controlling person of up to the
greater of $1 million or three times the amount of the profit
gained or loss avoided.
In addition, any violation of this policy statement can be expected to
result in serious sanctions, including dismissal of the persons involved.
SECTION II - PROCEDURES
The following procedures have been established to aid the officers,
directors, and employees of the Company in avoiding insider trading, and to aid
in preventing, detecting, and imposing sanctions against insider trading. Every
officer, director, and employee of the Company must follow these procedures or
risk serious sanctions, including dismissal, substantial personal liability,
and/or criminal penalties. If you have any questions about these procedures you
should consult the compliance officer.
1. Identifying Inside Information. Before trading for yourself or others,
including investment companies or private accounts managed by the Company, in
the securities of a company about which you may have potential inside
information, ask yourself the following questions:
i. Is the information material? Is this information that an
investor would consider important in making his or her
investment decisions? Is this information that would
substantially affect the market price of the securities if
generally disclosed?
ii. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to
the marketplace by being published in Reuters, The Wall Street
Journal or other publications of general circulation?
If, after consideration of the above, you believe that the information
is material and non-public, or if you have questions as to whether the
information is material and non-public, you should take the following steps:
(a) Report the matter immediately to the compliance officer.
(b) Do not purchase or sell the security on behalf of yourself or
others, including investment companies or private accounts
managed by the Company.
(c) Do not communicate the information to anybody, other than to the
compliance official.
(d) After the compliance official has reviewed the issue, you will
be instructed to either continue the prohibitions against
trading and communication, or you will be allowed to communicate
the information and then trade.
<PAGE>
2. Personal Security Trading. All officers, directors, and employees of the
Company (other than officers, directors and employees who are required to report
their securities transactions to a registered investment company in accordance
with a Code of Ethics) shall submit to the compliance officer, on a quarterly
basis, a report of every securities transaction in which they, their families
(including the spouse, minor children, and adults living in the same household
as the officer, director, or employee), and trusts of which they are trustees or
in which they have a beneficial interest have participated, or at such lesser
intervals as may be required from time to time. The report shall include the
name of the Security, date of the transaction, quantity, price, and
broker-dealer through which the transaction was effected. All officers,
directors and employees must also instruct their broker(s) to supply the
compliance officer, on a timely basis, with duplicate copies of confirmations of
all personal securities transactions and copies of all periodic statements for
all securities accounts.
3. Restricting Access to Material Non-public Information. Any information in
your possession that you identify as material and non-public may not be
communicated other than in the course of performing your duties to anyone,
including persons within your company, except as provided in paragraph 1 above.
In addition, care should be taken so that such information is secure. For
example, files containing material non-public information should be sealed;
access to computer files containing material non-public information should be
restricted.
4. Resolving Issues Concerning Insider Trading. If, after consideration of the
items set forth in paragraph 1, doubt remains as to whether information is
material or non-public, or if there is any unresolved question as to the
applicability or interpretation of the foregoing procedures, or as to the
propriety of any action, it must be discussed with the compliance officer before
trading or communicating the information to anyone.
SECTION III - SUPERVISION
The role of the compliance officer is critical to the implementation
and maintenance of this Statement on Insider Trading. These supervisory
procedures can be divided into two classifications, (1) prevention of insider
trading, and (2) the detection of insider trading.
1. Prevention of Insider Trading:
To prevent insider trading the compliance official should:
(a) answer promptly any questions regarding the Statement on Insider
Trading;
(b) resolve issues of whether information received by an officer,
director, or employee is material and non-public;
(c) review and ensure that officers, directors, and employees
review, at least annually, and update as necessary, the
Statement on Insider Trading; and
(d) when it has been determined that an officer, director, or
employee has material non-public information,
(i) implement measures to prevent dissemination of such
information, and
<PAGE>
(ii) if necessary, restrict officers, directors, and employees
from trading the securities.
2. Detection of Insider Trading:
To detect insider trading, the Compliance Officer should:
(a) review the trading activity reports filed by each officer,
director, and employee, to ensure no trading took place in
securities in which the Company has material non-public
information;
(b) review the trading activity of the mutual funds and pooled accounts
managed the Company;
(c) coordinate, if necessary, the review of such reports with other
appropriate officers, directors, or employees of the Company.
3. Special Reports to Management:
Promptly, upon learning of a potential violation of the Statement on
Insider Trading, the Compliance Officer must prepare a written report to
management of the Provider, and provide a copy of such report to the Board of
Directors of Newport Pacific Management, Inc. ("NPM") and Newport Fund
Management, Inc. ("NFM"), providing full details and recommendations for further
action.
4. Annual Reports:
On an annual basis, the Compliance Officer of the Company will
prepare a written report to the Board of Directors of Newport Pacific
Management, Inc. ("NPM") and Newport Fund Management, Inc. ("NFM"), setting
forth the following:
(a) a summary of the existing procedures to detect and prevent
insider trading;
(b) full details of any investigation, either internal or by a
regulatory agency, of any suspected insider trading and the
results of such investigation;
(c) an evaluation of the current procedures and any recommendations for
improvement.
<PAGE>
Exhibit C
NEWPORT PACIFIC MANAGEMENT, INC. ("NPM")
AND
NEWPORT FUND MANAGEMENT, INC. ("NFM")
CODE OF ETHICS
INITIAL SECURITY ACCOUNT REPORT
To the Compliance Officer of Newport Pacific Management, Inc. ("NPM") and
Newport Fund Management, Inc. ("NFM"):
1. I hereby acknowledge receipt of a copy of the Code of Ethics for
Newport Pacific Management, Inc. ("NPM") and Newport Fund Management, Inc.
("NFM")
2. I have read and understand the Code and recognize that I am subject
thereto in the capacity of "Personnel of the Company."
3. Except as noted below, I hereby certify that I have no knowledge of
the existence of any personal conflict of interest relationship which may
involve the Company, such as any economic relationship between my transactions
and securities held or to be acquired by the Company's client accounts.
4. As of the date below I had a direct or indirect beneficial ownership
in the following security accounts:
<TABLE>
<CAPTION>
Name of Brokerage House Account Number (Direct or Indirect)
<S> <C> <C>
--------------------- ------------------ ------------
--------------------- ------------------ ------------
--------------------- ------------------ ------------
--------------------- ------------------ ------------
--------------------- ------------------ ------------
</TABLE>
I do not have a direct or indirect beneficial ownership in a security
account not listed above.
1. Date: ______________ Signature: _____________________________
Print Name: ____________________________
<PAGE>
Exhibit D
NEWPORT PACIFIC MANAGEMENT, INC. ("NPM")
AND
NEWPORT FUND MANAGEMENT, INC. ("NFM")
CODE OF ETHICS
ANNUAL SECURITY ACCOUNT REPORT
To the Compliance Officer of Newport Pacific Management, Inc. ("NPM") and
Newport Fund Management, Inc. ("NFM"):
1. I have read and understand the Code and recognize that I am
subject thereto in the capacity of "Personnel of the Company."
2. I hereby certify that, during the year ended December 31, 1998, I
have complied with requirements of the Code and I have reported all securities
transactions required to be reported pursuant to the Code. I have requested that
my brokerage house send duplicate copies of securities transactions to the
Compliance Officer.
3. Except as noted below, I hereby certify that I have no knowledge of
the existence of any personal conflict of interest relationship which may
involve the Company, such as any economic relationship between my transactions
and securities held or to be acquired by the Company's client accounts.
4. As of December 31, 1998, I had a direct or indirect beneficial
ownership in the following accounts that could hold securities governed by the
Code of Ethics:
<TABLE>
<CAPTION>
Type of Interest
Name of Brokerage House Account Number (Direct or Indirect)
<S> <C> <C>
--------------------- ------------------ ------------
--------------------- ------------------ ------------
--------------------- ------------------ ------------
--------------------- ------------------ ------------
--------------------- ------------------ ------------
--------------------- ------------------ ------------
</TABLE>
I do not have a direct or indirect beneficial ownership in a security
account not listed above.
Date: _________ Signature: _____________________________
Print Name: ____________________________
<PAGE>
Exhibit E
NEWPORT PACIFIC MANAGEMENT, INC
and
NEWPORT FUND MANAGEMENT, INC
QUARTERLY SECURITY TRANSACTIONS REPORT
FOR THE PERIOD JULY - SEPTEMBER 1999
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
confirm that these transactions were placed through
accounts for which Newport receives duplicate
confirmations and statements.
or _____ need to report the following securities
transactions:
<TABLE>
<CAPTION>
Number of
Title and Shares or
Date of Nature of Class of Principal
Transaction Transaction* Securities Amount Price Security House
<S> <C> <C> <C> <C> <C>
</TABLE>
Date: ____________________ Signature: _____________________________
- --------------------------
*Purchase, sale or other type of acquisition or disposition (describe)
