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Columbia Management Group
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Variable Series Fund Reorganization
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Q&A
For Use with Financial Professionals
and Fund Shareholders Only
Q1. What are the proposed transactions?
A1.
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Target Fund* Acquiring Fund
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Galaxy VIP Quality Plus Bond Fund Liberty Federal Securities Fund, VS
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Colonial High Yield Securities Fund, VS Columbia High Yield Fund, VS**
Galaxy VIP Columbia High Yield Fund II
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Stein Roe Global Utilities Fund, VS Colonial International Fund for
Colonial International Horizons Fund, VS Growth, VS
Colonial Global Equity Fund, VS
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Galaxy VIP Asset Allocation Fund Stein Roe Balanced Fund, VS
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Galaxy VIP Growth & Income Fund Liberty Equity Fund, VS***
Galaxy VIP Equity Fund
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Liberty Value Fund, VS Colonial US Growth & Income Fund, VS
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Crabbe Huson Real Estate Investment Fund, VS Columbia Real Estate Equity Fund,
Galaxy VIP Columbia Real Estate Equity Fund II VS****
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Galaxy VIP Small Company Growth Fund Stein Roe Small Company Growth
Fund, VS
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Galaxy VIP Money Market Fund Stein Roe Money Market Fund, VS
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Liquidating Fund: AUM as of 9/30/02 (Mil. $)
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Liberty Newport Japan Opportunities Fund, VS $1.2
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Rydex Health Care Fund, VS $6.0
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Rydex Financial Services Fund, VS $4.0
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* "Target Fund" refers to the fund whose assets are being merged into the
surviving or "Acquiring Fund."
** This will be a new series of a Liberty Trust that will continue the
investment policies of Galaxy VIP Columbia High Yield Fund II.
*** This will be a new series of a Liberty Trust that will continue the
investment policies of Galaxy VIP Equity Fund.
****This will be a new series of a Liberty Trust that will continue the
investment policies of Galaxy VIP Columbia Real Estate Equity Fund
II.
Q2. Why are you merging/liquidating funds?
A2. These variable series mergers and liquidations are intended to more
closely align Columbia Management Group's variable series fund lineup
with the demands of the market. These moves are also designed to
clarify and simplify the company's lineup for current and prospective
shareholders by decreasing the overlap between funds and creating
larger, more efficient funds.
The decision was made to liquidate three funds because they were unable
to attract significant assets in the variable annuity marketplace.
Q3. What is a shell fund merger? What does it mean for my fund?
A3. These mergers are transactions that will move assets from a Galaxy
Trust to a Liberty Trust. These mergers have no effect on the
management or investment strategies of the funds.
Q4. When will this reorganization take effect?
A4. The proposed transactions have been approved by the funds' Trustees and
must now be approved by the shareholders of the target funds. The
Shareholder Meeting is scheduled for February 19, 2003. Columbia
Management Group expects that the transactions, if approved, will be
completed by May 2003.
Q5. What is a proxy statement?
A5. A proxy statement is a document that the SEC requires a company to send
to its shareholders that provides material facts concerning matters on
which the shareholders will vote.
Q6. When will the proxy statements be mailed?
A6. The mailing of the proxy statements began on January 13, 2003.
Q7. How and when can I vote on the proxy?
A7. Proxy instruction cards were mailed to policyholders starting January
13, 2003. To vote, you must complete the proxy instruction card and
mail it in the business reply envelope provided to: PO Box 9124,
Hingham, MA 02043. The proxy instruction card must be received prior to
the shareholder meeting scheduled for February 19, 2003, so please
allow enough time for delivery.
Q8. What impact will these mergers have on my variable annuity contract?
A8. These mergers only impact certain investment options available in your
contract. They do not have any impact on your Contract's provisions.
Please refer to your contract or your participating insurance company.
Q9. What effect will the merger have on a shareholder's account balance and
the value of his or her account?
A9. The merger will not result in any immediate change a shareholder's
account balance or the value of his or her account. The number of
shares of the acquiring fund that a shareholder receives may, however,
be different than the number the shareholder owned of the target fund,
depending on the net asset value (NAV) per share of the acquiring fund
on the date of the merger.
Q10. What if shareholders do not approve the proposed mergers?
A10. If the shareholders of a target fund do not approve a given merger, the
merger will not occur. However, in some cases, the respective Board of
Trustees has approved the liquidation of a fund if the merger does not
occur.
Q11. What are the tax implications for shareholders?
A11. Columbia Management Group expects each merger to be a non-taxable
transaction. It is expected that shareholders of the funds will not
realize any gains or losses as a result of the mergers. However, these
transactions could cause the funds to pay out dividend income and
capital gains prior to merging.
[We recommend that you review your situation with a tax advisor.]
Q12. What will happen if a shareholder already owns shares of the surviving
fund?
A12. If a shareholder currently owns shares of the surviving fund and its
registration for both funds is the same, then the shares will be
combined in a single account.
Q13. Will expenses increase for shareholders because of these mergers?
A13. Columbia Management Group believes that, after giving effect to any
applicable expense limitation, in most cases, expenses will not rise as
a result of the mergers.]
Q14. Can shareholders exchange their shares into another fund prior to the
proposed merger?
A14. Shareholders can exchange, subject to the limitations imposed by their
participating insurance company, among other investments available
through their contract prior to the Acquisition. Please refer to your
contract for more information.
Q15. Is the performance of the acquiring funds better than the merged funds?
A15. The relative performance of each target fund and acquiring fund can be
found in the combined Prospectus/Proxy Statement relating to that fund,
in the section entitled "Performance Information." Past performance is
no guarantee of future results.
Q16. Are all of the mergers of compatible funds? Will there be changes to
the investment objectives and policies of the acquiring funds?
A16. These mergers were designed so that the acquiring fund in each merger
has an investment goal and strategies generally similar to those of the
target fund(s). Except as noted, we do not expect the objectives and
policies of the acquiring funds to change based on the mergers.
Q17. What will happen to the securities held in the merging funds?
A17. They will become part of the acquiring fund's portfolio. These mergers
were planned so that the portfolio holdings of the merging funds are
substantially compatible with the objectives, policies and restrictions
of the acquiring funds.
Q18. How long will the acquiring fund keep the merging assets -- are there
regulatory laws that dictate how long the assets of a merged fund must
stay in the acquiring portfolio?
A18. In general, regulations do not state how long a security must be held
in the acquiring fund. However, because these transactions were
structured to be tax-free to shareholders, the portfolio manager may
limit the sales of the securities gained in the merger to meet the IRS
definition for the continuity of business standard for the fund.
Q19. Who will manage the fund -- the same person/team or a new one?
A19. For many of the mergers, there will be no change in fund management. In
other cases, the manager(s) of the acquiring fund will assume
responsibility for the fund.
Q20. Who can I contact for more information?
A20. Proxy Advantage 866-840-5469
Media Inquiries: Charles Salmans, Corporate Communications
(212) 893-7280
Jon Ullman, Corporate Communications
(617) 434-8249
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