SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

[ X ]  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR 15(d) OF  THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended             June 30, 2000
                               -------------------------------------------------

                                       or

[   ] TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d) OF  THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from                           to
                                    --------------------    --------------------

                       Commission file number: 1-13654
                                               -------

                       LIBERTY FINANCIAL COMPANIES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


     Massachusetts                                       04-3260640
--------------------------------------------------------------------------------
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)


600 Atlantic Avenue, Boston, Massachusetts                        02210-2214
--------------------------------------------------------------------------------
(Address of principal executive offices)                          (Zip Code)

                                (617) 722-6000
--------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. [ X ] Yes [   ] No

     There were 48,209,421  shares of the  registrant's  Common Stock,  $.01 par
value,  and 216,322 shares of the  registrant's  Series A Convertible  Preferred
Stock, $.01 par value, outstanding as of July 31, 2000.

Exhibit Index - Page 22                                            Page 1 of 24

<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
          QUARTERLY REPORT ON FORM 10-Q FOR PERIOD ENDED JUNE 30, 2000


                                TABLE OF CONTENTS

Part I.      FINANCIAL INFORMATION                                      Page
------                                                                  ----

Item 1.      Financial Statements

             Consolidated Balance Sheets as of June 30, 2000 and
               December 31, 1999

             Consolidated Income Statements for the Three Months and
               Six Months Ended June 30, 2000 and 1999

             Consolidated Statements of Cash Flows for the Six Months
               Ended June 30, 2000 and 1999

             Consolidated Statement of Stockholders' Equity for the
               Six Months Ended June 30, 2000

             Notes to Consolidated Financial Statements

Item 2.      Management's Discussion and Analysis of Financial
               Condition and Results of Operations

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

Part II.     OTHER INFORMATION
-------
Item 4.      Submission of Matters to a Vote of Security Holders

Item 6.      Exhibits and Reports on Form 8-K

Signatures

Exhibit Index


<PAGE>


                       LIBERTY FINANCIAL COMPANIES, INC.
                          CONSOLIDATED BALANCE SHEETS

                                 (in millions)


                                                       June 30       December 31
                                                         2000           1999
                                                    ------------    ------------
                                                      Unaudited
                                     ASSETS
 Assets:
   Investments                                        $12,175.4       $12,195.1
   Cash and cash equivalents                            1,621.2         1,232.6
   Accrued investment income                              153.4           162.0
   Deferred policy acquisition costs                      758.9           739.2
   Deferred distribution costs                            162.3           153.7
   Intangible assets                                      274.4           282.0
   Other assets                                           296.6           244.8
   Separate account assets                              3,829.2         3,363.1
                                                    ------------    ------------
                                                      $19,271.4       $18,372.5
                                                    ============    ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

 Liabilities:

   Policyholder balances                              $12,018.4       $12,109.6
   Notes payable                                          567.1           552.0
   Payable for investments purchased and loaned         1,229.6           754.9
   Other liabilities                                      463.2           453.1
   Separate account liabilities                         3,780.3         3,301.0
                                                    ------------    ------------
      Total liabilities                                18,058.6        17,170.6
                                                    ------------    ------------

Series A redeemable convertible preferred
 stock, par value $.01;
 authorized, issued and outstanding
 216,322 shares in 2000 and 324,759
 shares in 1999                                            10.8            16.0
                                                    ------------    ------------
Stockholders' Equity:
 Common stock, par value $.01; authorized
  100,000,000 shares, issued and outstanding
  48,194,921 shares in 2000 and 47,462,995
  shares in 1999                                            0.5             0.5
 Additional paid-in capital                               934.3           923.0
 Retained earnings                                        468.8           425.2
 Accumulated other comprehensive loss                    (196.4)         (158.1)
 Unearned compensation                                     (5.2)           (4.7)
                                                    ------------    ------------
    Total stockholders' equity                          1,202.0         1,185.9
                                                    ------------    ------------
                                                      $19,271.4       $18,372.5
                                                    ============    ============

                See accompanying notes to consolidated financial statements.

<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
                         CONSOLIDATED INCOME STATEMENTS
                      (in millions, except per share data)
                                   Unaudited

                                          Three Months Ended   Six Months Ended
                                                June 30             June 30
                                          ------------------  ------------------
                                              2000     1999     2000      1999
                                          --------  --------  --------  --------

Investment income                          $216.4    $197.1    $422.3    $403.3
Interest credited to policyholders         (133.2)   (129.4)   (260.5)   (264.2)
                                          --------  --------  --------  --------
Investment spread                            83.2      67.7     161.8     139.1
                                          --------  --------  --------  --------
Net realized investment losses              (12.9)    (11.6)    (16.8)    (14.7)
                                          --------  --------  --------  --------
Fee income:
    Investment advisory and
     administrative fees                     71.3      68.2     143.2     134.4
    Distribution and service fees            15.1      15.3      30.5      30.0
    Transfer agency fees                     12.2      12.8      24.9      25.7
    Surrender charges and net commissions     9.3       9.0      20.0      17.4
    Separate account fees                    11.1       7.7      21.8      14.3
                                          --------  --------  --------  --------
Total fee income                            119.0     113.0     240.4     221.8
                                          --------  --------  --------  --------
Expenses:
    Operating expenses                      (99.6)    (90.5)   (201.9)   (179.2)
    Amortization of deferred policy
     acquisition costs                      (29.8)    (22.5)    (56.9)    (46.7)
    Amortization of deferred
     distribution costs                     (10.4)     (9.7)    (20.6)    (19.2)
    Amortization of intangible assets        (5.1)     (5.1)    (10.2)    (10.1)
    Interest expense, net                    (4.2)     (5.3)     (8.2)    (11.0)
                                          --------  --------  --------  --------
Total expenses                             (149.1)   (133.1)   (297.8)   (266.2)
                                          --------  --------  --------  --------
Pre-tax income                               40.2      36.0      87.6      80.0
Income tax expense                          (16.1)    (12.7)    (33.8)    (29.3)
                                          --------  --------  --------  --------
Net income                                  $24.1     $23.3     $53.8     $50.7
                                          ========  ========  ========  ========

Net income per share - basic                 $0.50     $0.49     $1.12     $1.08
                                          ========  ========  ========  ========

Net income per share - assuming dilution     $0.50     $0.49     $1.11     $1.06
                                          ========  ========  ========  ========


                See accompanying notes to consolidated financial statements.

<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in millions)
                                   Unaudited
                                                          Six Months Ended
                                                               June 30
                                                    ----------------------------
                                                         2000        1999
                                                    ------------    ------------
Cash flows from operating activities:
Net income                                                $53.8           $50.7
Adjustments to reconcile net income to net cash
provided by operating activities:
 Depreciation and amortization                             39.7            41.3
 Interest credited to policyholders                       260.5           264.2
 Net realized investment losses                            16.8            14.7
 Net amortization on investments                           44.3            39.3
 Change in deferred policy acquisition costs              (22.9)          (10.9)
 Net change in other assets and liabilities               (43.6)          (50.2)
                                                    ------------    ------------
    Net cash provided by operating activities             348.6           349.1
                                                    ------------    ------------

Cash flows from investing activities:
 Investments purchased available for sale              (1,821.8)       (3,080.4)
 Investments sold available for sale                    1,609.0         2,529.3
 Investments matured available for sale                    58.6           159.2
 Change in policy loans, net                              (13.9)           (8.3)
 Change in mortgage loans, net                              1.5            41.7
 Other                                                     23.9           (28.6)
                                                    ------------    ------------
    Net cash used in investing activities                (142.7)         (387.1)
                                                    ------------    ------------

Cash flows from financing activities:
 Withdrawals from policyholder accounts                (1,106.5)         (962.4)
 Deposits to policyholder accounts                        754.8           358.0
 Securities lending                                       526.2           570.3
 Change in notes payable                                   15.1            39.5
 Exercise of stock options                                  1.7             2.8
 Dividends paid                                            (3.2)           (3.2)
 Redemption of preferred stock                             (5.4)            0.0
                                                    ------------    ------------
    Net cash provided by financing activities             182.7             5.0
                                                    ------------    ------------
 Increase (decrease) in cash and cash equivalents         388.6           (33.0)
 Cash and cash equivalents at beginning of period       1,232.6           984.1
                                                    ------------    ------------
 Cash and cash equivalents at end of period            $1,621.2         $ 951.1
                                                    ============    ============

          See accompanying notes to consolidated financial statements.

<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (in millions)
                                   Unaudited

                                               Accum.
                          Addit'l              Other                  Total
                  Common  Paid-In  Retained  Comprehen.  Unearned  Stockholders'
                  Stock   Capital  Earnings    Loss       Compen.     Equity
                  ------  -------  --------  ---------- ---------- -------------
Balance,
 December 31,
 1999              $0.5   $923.0    $425.2     $(158.1)     $(4.7)     $1,185.9
Common stock
 issued for
 acquisition                 1.8                                            1.8
Effect of
 stock-based
 compensation
 plans                       2.7                             (0.5)          2.2
Accretion to
 face value
 of preferred
 stock                                (0.2)                                (0.2)
Common stock
 dividends                   6.8      (9.6)                                (2.8)
Preferred stock
 dividends                            (0.4)                                (0.4)
Net income                            53.8                                 53.8
Other comprehensive
 loss, net of tax                                (38.3)                   (38.3)
                  ------  -------  --------  ---------- ---------- -------------
Balance,
 June 30, 2000     $0.5   $934.3    $468.8     $(196.4)     $(5.2)     $1,202.0
                  ======  =======  ========  ========== ========== =============


                See accompanying notes to consolidated financial statements.

<PAGE>

                       LIBERTY FINANCIAL COMPANIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 June 30, 2000
                                   Unaudited

1.    General

       The accompanying  unaudited consolidated financial statements include all
   adjustments,   consisting  of  normal  recurring  accruals,  that  management
   considers  necessary  for a  fair  presentation  of the  Company's  financial
   position  and  results  of  operations  as of and  for  the  interim  periods
   presented.  Certain  footnote  disclosures  normally  included  in  financial
   statements   prepared  in  accordance  with  generally  accepted   accounting
   principles  have  been  condensed  or  omitted  pursuant  to  the  rules  and
   regulations  of the  Securities  and Exchange  Commission.  Therefore,  these
   consolidated  financial  statements  should be read in  conjunction  with the
   audited  consolidated  financial  statements  contained in the Company's Form
   10-K for the year ended  December 31, 1999. The results of operations for the
   three  months  and six  months  ended  June  30,  2000  are  not  necessarily
   indicative  of  the  results  to be  expected  for  the  full  year.  Certain
   previously  reported  amounts  have been  reclassified  to  conform  with the
   current period presentation.

2.    Segment Information

      The  Company is an asset  accumulation  and  management  company  with two
   reportable segments:  retirement-oriented  insurance (principally  annuities)
   and asset management.  The annuity insurance business is conducted at Keyport
   Life Insurance  Company  ("Keyport").  Keyport  generates  investment  spread
   income from the investment  portfolio  which supports  policyholder  balances
   associated with its fixed and indexed  annuity  business and its closed block
   of single premium whole life insurance.  The annuity insurance  business also
   derives fee income from the  administration  of fixed,  indexed and  variable
   annuity  contracts.  The asset  management  business is  conducted at Liberty
   Funds  Group,  an  investment   advisor  (through  its  subsidiary   Colonial
   Management Associates), distributor and transfer agent to mutual funds, Stein
   Roe & Farnham Incorporated, a diversified investment advisor, Newport Pacific
   Management,  Inc.,  an investment  advisor to mutual funds and  institutional
   accounts  specializing in Asian equity markets,  Crabbe Huson Group, Inc., an
   investment  advisor  to mutual  funds and  institutional  accounts,  Progress
   Investment   Management  Company,  an  investment  advisor  to  institutional
   accounts,  and Liberty Asset  Management  Company,  an investment  advisor to
   mutual  funds.  The  asset  management   business  derives  fee  income  from
   investment products and services.

      The Company's  reportable  segments offer different  products and are each
   managed  separately.  Information  by  reportable  segment is shown below (in
   millions):

                                          Three Months Ended   Six Months Ended
                                                June 30            June 30
                                          ------------------  ------------------
                                            2000      1999      2000      1999
                                          --------  --------  --------  --------
Statement of Operations Data
Revenues (excluding net realized
 investment gains and losses):
 Annuity:
  Unaffiliated                             $237.5    $213.3    $463.8    $433.1
  Intersegment                               (4.3)     (3.9)     (8.1)     (6.8)
                                          --------  --------  --------  --------
  Total annuity                             233.2     209.4     455.7     426.3
                                          --------  --------  --------  --------
 Asset management:
  Unaffiliated                               97.9      96.8     198.9     192.0
  Intersegment                                4.3       3.9       8.1       6.8
                                          --------  --------  --------  --------
  Total asset management                    102.2     100.7     207.0     198.8
                                          --------  --------  --------  --------
  Total revenues (excluding net
   realized investment gains and losses)   $335.4    $310.1    $662.7    $625.1
                                          ========  ========  ========  ========

<PAGE>

                                          Three Months Ended   Six Months Ended
                                                June 30            June 30
                                          ------------------  ------------------
                                            2000      1999      2000      1999
                                          --------  --------  --------  --------
Income before income taxes:
 Annuity:
  Income before amortization of
   intangible assets                        $50.5     $42.7    $100.7     $84.9
  Amortization of intangible assets          (0.3)     (0.3)     (0.6)     (0.6)
                                          --------  --------  --------  --------
   Subtotal annuity                          50.2      42.4     100.1      84.3
                                          --------  --------  --------  --------
  Asset management:
   Income before amortization of
    intangible assets                        16.9      21.2      33.9      43.2
   Amortization of intangible assets         (4.8)     (4.8)     (9.6)     (9.4)
                                          --------  --------  --------  --------
    Subtotal asset management                12.1      16.4      24.3      33.8
                                          --------  --------  --------  --------
  Other:
   Loss before amortization of
    intangible assets                        (9.2)    (11.2)    (20.0)    (23.3)
   Amortization of intangible assets          0.0       0.0       0.0      (0.1)
                                          --------  --------  --------  --------
    Subtotal other                           (9.2)    (11.2)    (20.0)    (23.4)
                                          --------  --------  --------  --------
  Income before net realized investment
   losses and income taxes                   53.1      47.6     104.4      94.7

  Net realized investment losses            (12.9)    (11.6)    (16.8)    (14.7)
                                          --------  --------  --------  --------
    Total income before income taxes        $40.2     $36.0     $87.6     $80.0
                                          ========  ========  ========  ========

3.    Investments

      Investments were comprised of the following (in millions):

                                          June 30      December 31
                                            2000          1999
                                         -----------   ------------

          Fixed maturities                $10,534.5      $10,516.1
          Equity securities                    63.5           37.9
          Policy loans                        613.4          599.5
          Other invested assets               964.0        1,041.6
                                         -----------   ------------
              Total                       $12,175.4      $12,195.1
                                         ===========   ============

      The  Company's  general  investment  policy  is  to  hold  fixed  maturity
   securities for long-term  investment and,  accordingly,  the Company does not
   have a trading  portfolio.  To provide for maximum portfolio  flexibility and
   appropriate  tax planning,  the Company  classifies  its entire  portfolio of
   fixed  maturity  securities as "available for sale" and  accordingly  carries
   such investments at fair value.


<PAGE>

4.    Net Income Per Share

      The  following  table  sets  forth  the  computation  of  net  income  per
   share-basic and net income per share-assuming dilution:

                                    Three Months Ended       Six Months Ended
                                          June 30                  June 30
                                  ----------------------  ----------------------
                                      2000       1999        2000        1999
                                  ----------  ----------  ----------  ----------
Numerator (in millions)
 Net income                           $24.1       $23.3       $53.8       $50.7
 Less: preferred stock dividends       (0.2)       (0.3)       (0.4)       (0.5)
                                  ----------  ----------  ----------  ----------
 Numerator for net income per
  share - basic - income available
  to common stockholders               23.9        23.0        53.4        50.2
 Plus: income impact of assumed
  conversions
   Preferred stock dividends            0.2         0.3         0.4         0.5
                                  ----------  ----------  ----------  ----------
   Numerator for net income per
    share - assuming dilution -
    income available to common
    stockholders after assumed
    conversions                       $24.1       $23.3       $53.8       $50.7

Denominator

   Denominator for net income
    per share - basic -
    weighted- average shares      47,741,444  46,591,115  47,556,268  46,464,123
Effect of dilutive securities:
  Employee stock options             339,333     673,304     347,816     676,460
  Convertible preferred stock        468,824     514,370     491,597     514,370
  Common stock issuable as
   contingent purchase price               0      35,883           0      25,090
                                  ----------  ----------  ----------  ----------
Dilutive potential common shares     808,157   1,223,557     839,413   1,215,920
                                  ----------  ----------  ----------  ----------
   Denominator for net income
    per share - assuming
    dilution                      48,549,601  47,814,672  48,395,681  47,680,043
                                  ==========  ==========  ==========  ==========
Net income per share - basic           $0.50       $0.49       $1.12       $1.08
                                  ==========  ==========  ==========  ==========
Net income per share - assuming
 dilution                              $0.50       $0.49       $1.11       $1.06
                                  ==========  ==========  ==========  ==========


5.     Comprehensive Income

      Comprehensive income (loss) was comprised of the following (in millions):

                                         Three Months Ended   Six Months Ended
                                              June 30             June 30
                                         ------------------- -------------------
                                            2000      1999      2000     1999
                                         --------- --------- --------- ---------
Net income                                  $24.1      23.3     $53.8     $50.7
Other comprehensive loss, net of taxes:
 Net unrealized losses on securities        (33.8)    (38.0)    (38.3)    (46.5)
Comprehensive income (loss)              --------- --------- --------- ---------
                                            $(9.7)   $(14.7)    $15.5      $4.2
                                         ========= ========= ========= =========


6.    Recent Accounting Pronouncement

      In June 1998, the Financial  Accounting  Standards  Board ("FASB")  issued
   Statement of Financial  Accounting Standards ("SFAS") No. 133 "Accounting for
   Derivative  Instruments and Hedging Activities." This statement  standardizes
   the  accounting  for derivative  instruments  and the  derivative  portion of
   certain other contracts that have similar  characteristics  by requiring that
   an entity  recognize  those  instruments  at fair value.  This statement also
   requires a new method of accounting for hedging transactions,  prescribes the
   type of items and  transactions  that may be hedged,  and specifies  detailed
   criteria to be met to qualify for hedge  accounting.  In June 1999,  the FASB
   issued  SFAS No. 137  "Accounting  for  Derivative  Instruments  and  Hedging
   Activities - Deferral of the Effective  Date of FASB Statement No. 133." SFAS
   No.  137  defers  the  effective  date of SFAS No.  133  until  fiscal  years
   beginning after June 15, 2000. Upon adoption, the Company will be required to
   record a cumulative effect  adjustment to reflect this accounting  change. At
   this time,  the Company has not completed its analysis and  evaluation of the
   requirements and impact of this statement.

7.    Acquisition

     On June 12, 2000,  the Company  announced  an  agreement to acquire  Wanger
Asset  Management,  L.P.  ("Wanger"),  a  registered  investment  advisor.  This
acquisition is expected to close during the fourth quarter of 2000. Total assets
under management of Wanger as of June 30, 2000 were  approximately $9.0 billion.
The purchase price for this  transaction is $280.0 million in cash. In addition,
the Company has agreed to make  additional  payments over the next five years of
up to $170.0 million in cash, contingent upon the attainment of certain earnings
objectives. The purchase price and contingent payments are subject to adjustment
in certain circumstances.  This transaction will be accounted for as a purchase.
The Company expects to fund the acquisition of Wanger with $80.0 million of cash
and  investments  and $200.0 million of debt issued to Liberty Mutual  Insurance
Company.

<PAGE>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS
OF OPERATIONS

Results of Operations

   Net Income was $24.1  million or $0.50 per share for the  quarter  ended June
30, 2000 compared to $23.3 million or $0.49 per share for the quarter ended June
30,  1999.  For the first six months of 2000,  net  income was $53.8  million or
$1.11 per share  compared to $50.7  million or $1.06 per share for the first six
months of 1999. These increases  resulted largely from higher  investment spread
and  fee  income.  In  addition,  interest  expense,  net  decreased.  Partially
offsetting these items were higher  operating  expenses,  amortization  expense,
income tax expense and net realized investment losses.

   Pre-tax Income was $40.2 million for the quarter ended June 30, 2000 compared
to $36.0 million for the quarter  ended June 30, 1999.  For the first six months
of 2000,  pre-tax  income was $87.6  million  compared to $80.0  million for the
first  six  months  of  1999.  These  increases  resulted  largely  from  higher
investment spread and fee income. In addition,  interest expense, net decreased.
Partially  offsetting these items were higher operating  expenses,  amortization
expense and net realized investment losses.

   Investment  Spread is the  amount by which  investment  income  earned on the
Company's  investments  exceeds  interest  credited  on  policyholder  balances.
Investment spread was $83.2 million for the quarter ended June 30, 2000 compared
to $67.7  million for the quarter  ended June 30, 1999.  The amount by which the
average  yield on  investments  exceeds the average  interest  credited  rate on
policyholder balances is the investment spread percentage. The investment spread
percentage  for the quarter ended June 30, 2000 was 2.40%  compared to 1.90% for
the quarter  ended June 30, 1999.  For the first six months of 2000,  investment
spread was $161.8 million compared to $139.1 million for the first six months of
1999.  The  investment  spread  percentage was 2.34% for the first six months of
2000  compared  to 1.95% for the first six months of 1999.  These  increases  in
investment spread percentage resulted primarily from increased yields on average
invested  assets,  largely  relating to returns on investments in private equity
funds.

   Investment  income was $216.4  million  for the  quarter  ended June 30, 2000
compared to $197.1  million for the quarter ended June 30, 1999. The increase of
$19.3 million in 2000  compared to 1999  includes a $24.1 million  increase as a
result of a higher average investment yield,  partially offset by a $4.8 million
decrease  resulting  from a lower  level of average  invested  assets.  The 2000
investment  income  was net of  $23.5  million  of S&P  500  Index  call  option
amortization expense related to the Company's  equity-indexed annuities compared
to $19.4 million in 1999. The average investment yield was 6.83% for the quarter
ended June 30, 2000 compared to 6.08% for the quarter  ended June 30, 1999.  For
the first six months of 2000,  investment  income was $422.3 million compared to
$403.3  million for the first six months of 1999.  The increase of $19.0 million
in 2000  compared  to 1999  includes a $30.6  million  increase as a result of a
higher average  investment yield,  partially offset by an $11.6 million decrease
resulting from a lower level of average  invested  assets.  The 2000  investment
income  was net of $44.6  million  of S&P 500  Index  call  option  amortization
expense  related to the  Company's  equity-indexed  annuities  compared to $38.8
million in 1999. The average investment yield was 6.67% for the first six months
of 2000 compared to 6.20% for the first six months of 1999.

   Interest  credited to  policyholders  totaled  $133.2 million for the quarter
ended June 30, 2000  compared to $129.4  million for the quarter  ended June 30,
1999. The increase of $3.8 million in 2000 compared to 1999 primarily relates to
a $7.8 million increase as a result of a higher average interest  credited rate,
partially  offset by a $4.0  million  decrease  as a result of a lower  level of
average  policyholder  balances.  Policyholder  balances  averaged $12.0 billion
(including $9.6 billion of fixed  products,  consisting of fixed annuities and a
closed  block of single  premium  whole  life  insurance,  and $2.4  billion  of
equity-indexed  annuities) for the quarter ended June 30, 2000 compared to $12.4
billion  (including  $10.2  billion  of  fixed  products  and  $2.2  billion  of
equity-indexed  annuities)  for the  quarter  ended June 30,  1999.  The average
interest  credited  rate  was  4.43%  (5.26%  on  fixed  products  and  0.85% on
equity-indexed  annuities) for the quarter ended June 30, 2000 compared to 4.18%
(4.98% on fixed products and 0.85% on equity-indexed  annuities) for the quarter
ended June 30, 1999. Keyport's  equity-indexed  annuities credit interest to the
policyholder at a "participation  rate" equal to a portion (ranging for existing
policies  from  25% to  100%)  of the  change  in  value  of the S&P 500  Index.
Keyport's equity-indexed annuities also provide a full guarantee of principal if
held to  term,  plus  interest  at  0.85%  annually.  For  each  of the  periods
presented, the interest credited to equity-indexed  policyholders related to the
participation  rate was offset by  investment  income  recognized on the S&P 500
Index call options  resulting in a 0.85% net  credited  rate.  For the first six
months of 2000,  interest  credited  to  policyholders  totaled  $260.5  million
compared  to $264.2  million for the first six months of 1999.  The  decrease of
$3.7  million in 2000  compared  to 1999  primarily  relates to an $8.6  million
decrease  resulting  from  a  lower  level  of  average  policyholder  balances,
partially  offset by a $4.9  million  increase  as a result of a higher  average
interest credited rate.  Policyholder balances averaged $12.0 billion (including
$9.7 billion of fixed products and $2.3 billion of equity-indexed annuities) for
the first six months of 2000 compared to $12.4 billion  (including $10.3 billion
of fixed  products and $2.1 billion of  equity-indexed  annuities) for the first
six months of 1999. The average interest credited rate was 4.33% (5.13% on fixed
products and 0.85% on equity-indexed annuities) for the first six months of 2000
compared  to  4.25%  (5.00%  on  fixed  products  and  0.85%  on  equity-indexed
annuities) for the first six months of 1999.

   Average investments in the Company's general account (computed without giving
effect to Statement  of Financial  Accounting  Standards  No. 115),  including a
portion of the Company's cash and cash  equivalents,  were $12.7 billion for the
quarter ended June 30, 2000 compared to $13.0 billion for the quarter ended June
30, 1999. For the first six months of 2000, such average  investments were $12.7
billion  compared  to $13.0  billion  for the  first six  months of 1999.  These
decreases  were  primarily  due to net  redemptions  and  transfers  to separate
accounts,  partially  offset by the  reinvestment of portfolio  earnings for the
twelve months ended June 30, 2000.

   Net Realized  Investment Losses were $12.9 million for the quarter ended June
30, 2000 compared to $11.6 million for the quarter ended June 30, 1999.  For the
first six months of 2000,  net  realized  investment  losses were $16.8  million
compared  to $14.7  million for the first six months of 1999.  The net  realized
investment  losses in 2000  included  losses of $5.4 million for the quarter and
$8.7 million for the six months for certain fixed maturity investments where the
decline in value was determined to be other than temporary.

   Investment  Advisory and Administrative Fees are based on the market value of
assets managed for mutual funds,  private capital  management and  institutional
investors.  Investment  advisory and administrative  fees were $71.3 million for
the quarter  ended June 30, 2000 compared to $68.2 million for the quarter ended
June 30,  1999.  For the  first  six  months of 2000,  investment  advisory  and
administrative fees were $143.2 million compared to $134.4 million for the first
six months of 1999.  These  increases  during 2000  compared  to 1999  primarily
reflect a higher level of average fee-based assets under management.

   Average  fee-based assets under management were $52.2 billion for the quarter
ended June 30,  2000  compared to $48.1  billion for the quarter  ended June 30,
1999.  For the  first  six  months  of  2000,  average  fee-based  assets  under
management were $51.8 billion compared to $47.8 billion for the first six months
of 1999.  These  increases  during 2000 compared to 1999 resulted from net sales
and market  appreciation  for the twelve months ended June 30, 2000.  Investment
advisory  and  administrative  fees were  0.55% and 0.57% of  average  fee-based
assets  under  management  for the  quarters  ended  June  30,  2000  and  1999,
respectively.  For the first six months of 2000 and 1999, such  percentages were
0.55% and 0.56%, respectively.

   The amount of fee-based assets under management are affected by product sales
and  redemptions  and  changes  in  the  market  values  of  such  assets  under
management. Fee-based assets under management and changes in such assets are set
forth in the tables below (in billions).



Fee-Based Assets Under Management
                                                           As of June 30
                                                       ---------------------
                                                          2000        1999
                                                       ----------  ---------
     Mutual Funds:
        Intermediary-distributed                           $17.6      $18.3
        Direct-marketed                                      6.5        6.6
        Closed-end                                           2.8        2.4
        Variable annuity                                     2.1        1.8
                                                       ----------  ---------
                                                            29.0       29.1
     Private Capital Management                              9.5        8.5
     Institutional                                          14.0       11.5
                                                       ----------  ---------
        Total Fee-Based Assets Under Management*           $52.5      $49.1
                                                       ==========  =========
--------------
*  As of June 30, 2000 and 1999, Keyport's insurance assets of $14.0 billion and
   $13.6  billion,  respectively,  bring total assets under  management to $66.5
   billion and $62.7 billion, respectively.

<PAGE>

 Changes in Fee-Based Assets Under
 Management

                                          Three Months Ended   Six Months Ended
                                               June 30             June 30
                                          ------------------  ------------------
                                             2000      1999      2000     1999
                                          --------  --------  --------  --------
Fee-based assets under management -
 beginning                                  $53.1      $47.4    $51.4     $47.9
Sales and reinvestments:
  Mutual funds                                1.6       1.9       3.2       3.7
  Private Capital Management                  0.5       0.4       0.9       0.6
  Institutional                               1.3       0.9       2.2       1.5
                                          --------  --------  --------  --------
                                              3.4       3.2       6.3       5.8
                                          --------  --------  --------  --------
Redemptions and withdrawals:
  Mutual funds                               (1.6)     (2.0)     (3.8)     (3.9)
  Private Capital Management                 (0.3)     (0.2)     (0.5)     (0.3)
  Institutional                              (0.6)     (0.7)     (1.0)     (1.6)
                                          --------  --------  --------  --------
                                             (2.5)     (2.9)     (5.3)     (5.8)
                                          --------  --------  --------  --------
Market appreciation (depreciation)           (1.5)      1.4       0.1       1.2
                                          --------  --------  --------  --------
Fee-based assets under management -
 ending                                     $52.5     $49.1     $52.5     $49.1
                                          ========  ========  ========  ========

   Distribution  and Service Fees are based on the market value of the Company's
intermediary-distributed  mutual funds. Distribution fees of 0.75% are generally
earned  on the  average  assets  attributable  to such  funds  sold  with  12b-1
distribution  fees and  contingent  deferred  sales  charges and service fees of
0.25% (net of amounts passed on to selling  brokers) are generally earned on the
total of such average  mutual fund assets.  These fees totaled $15.1 million for
the quarter  ended June 30, 2000 compared to $15.3 million for the quarter ended
June 30, 1999. For the first six months of 2000,  distribution  and service fees
were $30.5  million  compared to $30.0 million for the first six months of 1999.
As  a  percentage  of  intermediary-distributed   average  mutual  fund  assets,
distribution  and service fees were  approximately  0.35% for the quarters ended
June 30,  2000 and  1999.  For the  first  six  months  of 2000 and  1999,  such
percentages were 0.35% and 0.34%, respectively.

    Transfer  Agency Fees are based on the market value of assets managed in the
Company's intermediary-distributed,  direct-marketed and variable annuity mutual
funds.  Such fees were $12.2 million on average  assets of $26.3 billion for the
quarter ended June 30, 2000 and $12.8 million on average assets of $26.3 billion
for the quarter ended June 30, 1999. For the first six months of 2000,  transfer
agency  fees were $24.9  million on average  assets of $26.5  billion  and $25.7
million on average  assets of $26.2 billion for the first six months of 1999. As
a percentage of total average assets under management, transfer agency fees were
approximately 0.19% for the quarters ended June 30, 2000 and 1999. For the first
six  months  of  2000  and  1999,  such   percentages   were  0.19%  and  0.20%,
respectively.

   Surrender  Charges and Net  Commissions  are revenues earned on: a) the early
withdrawal   of  annuity   policyholder   balances   and   redemptions   of  the
intermediary-distributed  mutual  funds which were sold with 12b-1  distribution
fees and contingent deferred sales charges; b) the distribution of the Company's
intermediary-distributed  mutual funds (net of the  substantial  portion of such
commissions  that is  passed  on to the  selling  brokers);  and c) the sales of
non-proprietary  products in the Company's  bank  marketing  businesses  (net of
commissions  that are paid to the  Company's  client banks and  brokers).  Total
surrender  charges and net  commissions  were $9.3 million for the quarter ended
June 30, 2000 compared to $9.0 million for the quarter ended June 30, 1999.  For
the first six months of 2000,  total surrender  charges and net commissions were
$20.0 million compared to $17.4 million for the first six months of 1999.

   Surrender  charges on fixed and variable  annuity  withdrawals  generally are
assessed at declining rates applied to policyholder withdrawals during the first
five to seven years of the contract; contingent deferred sales charges on mutual
fund redemptions are assessed at declining rates on amounts  redeemed  generally
during the first six years.  Such  charges  totaled $7.3 million for the quarter
ended June 30, 2000 and $6.0 million for the quarter  ended June 30,  1999.  For
the first six months of 2000,  surrender  charges were $14.7 million compared to
$11.5  million  for the first  six  months of 1999.  Total  annuity  withdrawals
represented  16.9% and  15.0% of the  total  average  annuity  policyholder  and
separate  account  balances  for the  quarters  ended  June 30,  2000 and  1999,
respectively.  For the first six  months  of 2000 and  1999,  the  corresponding
percentages  were  15.9% and  14.0%,  respectively.  Net  commissions  were $2.0
million  for the quarter  ended June 30,  2000 and $3.0  million for the quarter
ended June 30, 1999. For the first six months of 2000, net commissions were $5.3
million compared to $5.9 million for the first six months of 1999.

   Separate  Account Fees are primarily  mortality and expense charges earned on
variable  annuity and variable  life  policyholder  balances.  In addition,  for
certain  separate  institutional  accounts,  the difference  between  investment
income and  interest  credited  on these  institutional  accounts is included in
separate  account  fees.  These fees,  which are  primarily  based on the market
values of the assets in separate accounts  supporting the contracts,  were $11.1
million for the quarter  ended June 30,  2000  compared to $7.7  million for the
quarter ended June 30, 1999. For the first six months of 2000,  separate account
fees were $21.8  million  compared to $14.3  million for the first six months of
1999. The increase in separate  account fees was due to the increase in separate
account  assets in 2000.  Such  fees  represented  1.23%  and  1.26% of  average
variable annuity,  variable life and institutional separate account balances for
the  quarters  ended  June 30,  2000 and 1999,  respectively.  For the first six
months of 2000 and 1999, such percentages were 1.25% and 1.27%, respectively.

   Operating Expenses primarily  represent  compensation,  marketing,  and other
general and administrative  expenses.  These expenses were $99.6 million for the
quarter ended June 30, 2000 compared to $90.5 million for the quarter ended June
30,  1999.  For the first six months of 2000,  operating  expenses  were  $201.9
million  compared  to $179.2  million  for the first six  months of 1999.  These
increases  during 2000 compared to 1999 were primarily  related to the expansion
of investment management capabilities,  mutual fund product lines,  distribution
and electronic commerce activities. Operating expenses expressed as a percent of
average total assets under  management were 0.60% for the quarter ended June 30,
2000  compared to 0.59% for the quarter  ended June 30, 1999.  For the first six
months of 2000 and 1999, such percentages were 0.62% and 0.59%, respectively.

   Amortization  of Deferred  Policy  Acquisition  Costs relates to the costs of
acquiring  new  business,  which vary with,  and are  primarily  related to, the
production of new annuity  business.  Such costs include  commissions,  costs of
policy issuance and  underwriting and selling  expenses.  Amortization was $29.8
million for the quarter  ended June 30, 2000  compared to $22.5  million for the
quarter ended June 30, 1999. For the first six months of 2000,  amortization  of
deferred policy  acquisition  costs was $56.9 million  compared to $46.7 million
for the first six months of 1999. The increase  during 2000 compared to 1999 was
due to the  increased  profit  realized on the in-force  business.  Amortization
expense  represented  31.6% and 29.8% of investment  spread and separate account
fees for the quarters ended June 30, 2000 and 1999, respectively.  For the first
six months of 2000 and 1999, the corresponding percentages were 31.0% and 30.4%,
respectively.

   Amortization of Deferred  Distribution  Costs relates to the  distribution of
mutual fund shares sold with 12b-1  distribution  fees and  contingent  deferred
sales  charges.  Amortization  was $10.4  million for the quarter ended June 30,
2000 compared to $9.7 million for the quarter ended June 30, 1999. For the first
six  months  of 2000,  amortization  of  deferred  distribution  costs was $20.6
million compared to $19.2 million for the first six months of 1999.

   Amortization   of   Intangible   Assets   relates  to  goodwill  and  certain
identifiable  intangible assets arising from business combinations accounted for
as purchases. Amortization was $5.1 million for the quarters ended June 30, 2000
and 1999. For the first six months of 2000,  amortization  of intangible  assets
was $10.2  million  compared to $10.1  million for the first six months of 1999.
The Company has experienced higher than anticipated  redemptions of assets under
management at an acquired company, which at June 30, 2000 had goodwill and other
intangible  assets of $82.1 million.  Although the Company has  determined  that
there is no impairment of goodwill and other intangible  assets at this time, if
the higher level of redemptions were to continue and sales were not to increase,
the Company's estimate of related future cash flows may change, resulting in the
need to record an impairment loss.

   Interest  Expense,  Net was $4.2 million for the quarter  ended June 30, 2000
compared to $5.3 million for the quarter ended June 30, 1999.  For the first six
months of 2000, interest expense, net was $8.2 million compared to $11.0 million
for the first  six  months  of 1999.  Interest  expense  primarily  consists  of
interest on notes  payable and  interest  on the Liberty  Funds Group  revolving
credit facility which is utilized to finance deferred sales  commissions paid in
connection  with  the  distribution  of  mutual  fund  shares  sold  with  12b-1
distribution  fees and contingent  deferred sales charges.  Interest expense was
net of interest  income of $5.9 million and $3.8 million for the quarters  ended
June 30, 2000 and 1999, respectively. For the first six months of 2000 and 1999,
interest  expense was net of interest  income of $11.7 million and $6.9 million,
respectively.

   Income Tax  Expense  was $16.1  million  or 40.0% of  pre-tax  income for the
quarter  ended June 30,  2000  compared  to $12.7  million,  or 35.3% of pre-tax
income for the quarter  ended June 30,  1999.  For the first six months of 2000,
income tax  expense  was $33.8  million or 38.6% of pre-tax  income  compared to
$29.3 million or 36.6% of pre-tax income for the first six months of 1999.

Financial Condition

   Stockholders'  Equity was $1.20 billion as of June 30, 2000 compared to $1.19
billion as of December 31, 1999. Net income for the first six months of 2000 was
$53.8  million and cash  dividends on the  Company's  preferred and common stock
totaled  $3.2  million.  Common  stock  totaling  $1.7  million  was  issued  in
connection with the exercise of stock options.  An increase in accumulated other
comprehensive  loss, which consists of net unrealized  investment losses, net of
adjustments to deferred policy  acquisition  costs and income taxes,  during the
period decreased stockholders' equity by $38.3 million.

   Book Value Per Share  amounted to $24.94 at June 30, 2000  compared to $24.99
at December 31, 1999. Excluding net unrealized losses on investments, book value
per share  amounted to $29.02 at June 30, 2000 and $28.32 at December  31, 1999.
As of June 30, 2000, there were 48.2 million common shares outstanding  compared
to 47.5 million shares as of December 31, 1999.

   Investments not including cash and cash equivalents, totaled $12.2 billion at
June 30, 2000 and December 31, 1999.

   The Company  manages the  majority of its  invested  assets  internally.  The
Company's  general  investment  policy is to hold fixed maturity  securities for
long-term  investment  and,  accordingly,  the  Company  does not have a trading
portfolio.  To provide for maximum  portfolio  flexibility  and  appropriate tax
planning,  the  Company  classifies  its  entire  portfolio  of  fixed  maturity
securities as "available for sale" and accordingly  carries such  investments at
fair value.  The Company's  total  investments at June 30, 2000 and December 31,
1999  reflected  net  unrealized  losses of $343.7  million and $318.6  million,
respectively.

   Approximately  $11.2 billion,  or 80.2%, of the Company's general account and
certain separate account  investments at June 30, 2000, were rated by Standard &
Poor's  Corporation,  Moody's  Investors  Service or under comparable  statutory
rating  guidelines   established  by  the  National   Association  of  Insurance
Commissioners  ("NAIC").  At June 30, 2000, the carrying value of investments in
below investment  grade  securities  represented $1.2 billion or 8.5% of general
account  investments,  including  cash and  cash  equivalents  in the  Company's
annuity operations,  and certain separate account investments.  Below investment
grade securities  generally provide higher yields and involve greater risks than
investment  grade  securities  because their  issuers  typically are more highly
leveraged and more  vulnerable to adverse  economic  conditions  than investment
grade issuers. In addition,  the trading market for these securities may be more
limited than for investment grade securities.

   The Company  routinely  reviews its portfolio of investment  securities.  The
Company identifies  monthly any investments that require additional  monitoring,
and carefully  reviews the carrying value of such investments at least quarterly
to determine whether specific investments should be placed on a nonaccrual basis
and to determine  declines in value that may be other than temporary.  In making
these reviews, the Company principally  considers the adequacy of collateral (if
any),  compliance with contractual  covenants,  the borrower's  recent financial
performance, news reports, and other externally generated information concerning
the  borrower's   affairs.  In  the  case  of  publicly  traded  fixed  maturity
securities,  management also considers market value quotations if available.  As
of June 30, 2000 and  December 31, 1999,  the carrying  value of fixed  maturity
securities that were  non-income  producing was $28.3 million and $22.6 million,
respectively.

Derivatives

   As a  component  of its  investment  strategy  and to reduce its  exposure to
interest  rate risk,  the Company  utilizes  interest rate and total return swap
agreements  to match  assets more  closely to  liabilities.  Interest  rate swap
agreements are agreements to exchange with a counterparty interest rate payments
of differing  character (e.g.,  fixed-rate  payments exchanged for variable-rate
payments) based on an underlying principal balance (notional principal) to hedge
against interest rate changes. The Company currently utilizes interest rate swap
agreements  to reduce  asset  duration and to better  match  interest  earned on
longer-term  fixed-rate assets with interest credited to policyholders.  A total
return  swap  agreement  is an  agreement  to  exchange  payments  based upon an
underlying  notional  balance  and  changes in  variable  rate and total  return
indices.  The  Company  utilizes  total  return  swap  agreements  to hedge  its
obligations related to certain separate account liabilities.  The Company had 61
and 67 outstanding swap agreements with an aggregate  notional  principal amount
of $2.9  billion and $3.4  billion as of June 30, 2000 and  December  31,  1999,
respectively.

   With respect to the Company's  equity-indexed  annuities and certain separate
account  liabilities,  the Company buys call options,  futures and certain total
return swap  agreements on the S&P 500 Index to hedge its obligations to provide
returns  based upon this index.  The Company  had call  options  with a carrying
value of $489.0  million and $701.1 million as of June 30, 2000 and December 31,
1999, respectively. The Company had total return swap agreements with a carrying
value of $29.9  million and $37.8  million as of June 30, 2000 and  December 31,
1999, respectively.

   There are risks  associated  with some of the  techniques the Company uses to
match its assets and liabilities. The primary risk associated with swap, cap and
call option  agreements is counterparty  non-performance.  The Company  believes
that  the  counterparties  to its  swap,  cap and  call  option  agreements  are
financially  responsible  and that the  counterparty  risk associated with these
transactions  is minimal.  Futures  contracts  trade on organized  exchanges and
therefore  have minimal credit risk. In addition,  swap and cap agreements  have
interest  rate risk and call  options,  futures  and certain  total  return swap
agreements  have  stock  market  risk.  These  swap  and  cap  agreements  hedge
fixed-rate  assets and the Company expects that any interest rate movements that
adversely  affect the market value of swap and cap agreements would be offset by
changes in the market values of such fixed rate assets. However, there can be no
assurance  that these  hedges will be  effective  in  offsetting  the  potential
adverse  effects of changes in  interest  rates.  Similarly,  the call  options,
futures and certain total return swap agreements hedge the Company's obligations
to provide returns on equity-indexed  annuities and certain separate liabilities
based upon the S&P 500 Index,  and the Company  believes  that any stock  market
movements that adversely  affect the market value of S&P 500 Index call options,
futures and certain total return swap agreements would be  substantially  offset
by a  reduction  in  policyholder  and  certain  separate  account  liabilities.
However,  there can be no  assurance  that these  hedges  will be  effective  in
offsetting the  potentially  adverse effects of changes in S&P 500 Index levels.
The Company's profitability could be adversely affected if the value of its swap
and cap agreements  increase less than (or decrease more than) the change in the
market  value of its fixed rate assets  and/or if the value of its S&P 500 Index
call  options,  futures and certain total return swap  agreements  increase less
than (or decrease more than) the value of the guarantees made to  equity-indexed
and certain separate account policyholders.

   In June 1998,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 133  "Accounting for
Derivative  Instruments and Hedging Activities." This statement standardizes the
accounting for  derivative  instruments  and the  derivative  portion of certain
other  contracts that have similar  characteristics  by requiring that an entity
recognize  those  instruments at fair value.  This statement also requires a new
method of accounting for hedging transactions,  prescribes the type of items and
transactions  that may be hedged,  and specifies  detailed criteria to be met to
qualify  for hedge  accounting.  In June  1999,  the FASB  issued  SFAS No.  137
"Accounting for Derivative  Instruments and Hedging Activities - Deferral of the
Effective  Date of FASB  Statement  No. 133." SFAS No. 137 defers the  effective
date of SFAS No. 133 until fiscal  years  beginning  after June 15,  2000.  Upon
adoption,  the Company will be required to record a cumulative effect adjustment
to reflect this accounting  change.  At this time, the Company has not completed
its  analysis  and  evaluation  of the  requirements  and  the  impact  of  this
statement.

Acquisition

     On June 12, 2000,  the Company  announced  an  agreement to acquire  Wanger
Asset  Management,  L.P.  ("Wanger"),  a  registered  investment  advisor.  This
acquisition is expected to close during the fourth quarter of 2000. Total assets
under management of Wanger as of June 30, 2000 were  approximately $9.0 billion.
The purchase price for this  transaction is $280.0 million in cash. In addition,
the Company has agreed to make  additional  payments over the next five years of
up to $170.0 million in cash, contingent upon the attainment of certain earnings
objectives. The purchase price and contingent payments are subject to adjustment
in certain circumstances. This transaction will be accounted for as a purchase.

Liquidity

   The Company is a holding company whose liquidity needs include the following:
(i) operating  expenses;  (ii) debt service;  (iii) dividends on preferred stock
and common stock; (iv) acquisitions; and (v) working capital where needed by its
operating  subsidiaries.  The Company's  principal sources of cash are dividends
from its operating  subsidiaries,  and, in the case of funding for  acquisitions
and certain long-term capital needs of its  subsidiaries,  long-term  borrowings
and offerings of preferred and common stock.

   The Company has a $150.0 million  revolving credit facility (the "Facility"),
established in April 1999 which is utilized to finance sales commissions paid in
connection  with  the  distribution  of  mutual  fund  shares  sold  with  12b-1
distribution fees and contingent deferred sales charges. This five year Facility
is  secured  by such  12b-1  distribution  fees and  contingent  deferred  sales
charges.  Interest accrues on the outstanding borrowings under the Facility at a
rate determined by sales of highly rated  commercial paper backed in part by the
security interest in such fees and charges.  At June 30, 2000, the interest paid
on borrowings under the Facility was at the rate of 6.66% per annum.

   Current Rhode Island  insurance law applicable to Keyport permits the payment
of dividends or distributions,  which, together with dividends and distributions
paid  during the  preceding  12  months,  do not exceed the lesser of (i) 10% of
Keyport's  statutory  surplus as of the preceding  December 31 or (ii) Keyport's
statutory net gain from  operations for the preceding  fiscal year. Any proposed
dividend in excess of this amount is called an "extraordinary  dividend" and may
not be paid until it is approved by the  Commissioner  of Insurance of the State
of Rhode Island. As of June 30, 2000, the amount of dividends that Keyport could
pay without  such  approval was $47.8  million.  Future  regulatory  changes and
credit  agreements  may  create  additional  limitations  on the  ability of the
Company's subsidiaries to pay dividends.

   Based upon the  historical  cash flow of the Company,  the Company's  current
financial  condition  and the  Company's  expectation  that  there will not be a
material  adverse  change in the  results of  operations  of the Company and its
subsidiaries  during the next twelve months, the Company believes that cash flow
provided  by  operating  activities  over this period  will  provide  sufficient
liquidity for the Company to meet its working  capital,  capital  investment and
other operational cash needs, its debt service  obligations,  its obligations to
pay dividends on the preferred  stock and its intentions to pay dividends on the
common stock.  The Company may require external sources of liquidity in order to
finance  material  acquisitions  where the purchase price is not paid in equity.
The Company expects to fund the acquisition of Wanger with $80.0 million of cash
and  investments  and $200.0 million of debt issued to Liberty Mutual  Insurance
Company.

   Each of the  Company's  business  segments  has its own  liquidity  needs and
financial resources.  In the Company's annuity insurance  operations,  liquidity
needs and financial  resources  pertain to the management of the general account
assets and policyholder  balances.  In the Company's asset management  business,
liquidity needs and financial resources pertain to the investment management and
distribution  of mutual funds,  private  capital  management  and  institutional
accounts.  The Company expects that,  based upon their  historical cash flow and
current  prospects,  these  operating  subsidiaries  will be able to meet  their
liquidity  needs from internal  sources and, in the case of Liberty Funds Group,
from its credit  facility  used to finance sales of mutual fund shares sold with
12b-1 distribution fees and contingent deferred sales charges.

   Keyport  uses cash for the  payment of annuity and life  insurance  benefits,
operating   expenses  and  policy   acquisition   costs,  and  the  purchase  of
investments.  Keyport  generates  cash from annuity  premiums and deposits,  net
investment  income,  and from the sales  and  maturities  of fixed  investments.
Annuity   premiums,   maturing   investments  and  net  investment  income  have
historically  been  sufficient  to meet  Keyport's  cash  requirements.  Keyport
monitors cash and cash equivalents in an effort to maintain sufficient liquidity
and has  strategies  in place  to  maintain  sufficient  liquidity  in  changing
interest  rate  environments.  Consistent  with the  nature of its  obligations,
Keyport  has  invested a  substantial  amount of its general  account  assets in
readily marketable securities.  As of June 30, 2000, $11.2 billion, or 78.2%, of
Keyport's   general  account  and  certain  separate  account   investments  are
considered readily marketable.

   To the  extent  that  unanticipated  surrenders  cause  Keyport  to sell  for
liquidity purposes a material amount of securities prior to their maturity, such
surrenders  could have a material  adverse  effect on the  Company.  Although no
assurances can be given,  Keyport  believes that  liquidity to fund  anticipated
withdrawals  would  be  available  through  incoming  cash  flow and the sale of
short-term or floating-rate  investments,  thereby  precluding the sale of fixed
maturity  investments  in a potentially  unfavorable  market.  In addition,  the
Company's  fixed-rate  products  incorporate   surrender  charges  to  encourage
persistency and to make the cost of its policyholder  balances more predictable.
Approximately  75.0% of the Company's fixed annuity  policyholder  balances were
subject to surrender charges or restrictions as of June 30, 2000.

Effects of Inflation

   Inflation has not had a material effect on the Company's consolidated results
of operations to date. The Company  manages its investment  portfolio in part to
reduce its exposure to interest rate fluctuations.  In general, the market value
of the  Company's  fixed  maturity  portfolio  increases or decreases in inverse
relationship  with  fluctuations  in  interest  rates,  and  the  Company's  net
investment  income increases or decreases in direct  relationship  with interest
rate changes.  For example,  if interest  rates  decline,  the  Company's  fixed
maturity  investments  generally  will  increase  in  market  value,  while  net
investment income will decrease as fixed maturity investments mature or are sold
and the  proceeds  are  reinvested  at reduced  rates.  Inflation  may result in
increased  operating expenses that may not be readily  recoverable in the prices
of the services charged by the Company.

Forward-Looking Statements

   The Company desires to take advantage of the "safe harbor"  provisions of the
Private Securities  Litigation Reform Act of 1995 (the "Reform Act").  Investors
are cautioned that all statements not based on historical  fact,  trend analyses
and  other  information  contained  in this  report  or in any of the  Company's
filings under Section 13 or 15 (d) of the  Securities  Exchange Act of 1934 (the
"Exchange Act"),  relative to the markets for the Company's  products and trends
in the Company's  operations or financial  results,  as well as other statements
including words such as "anticipate",  "believe", "plan", "estimate",  "expect",
"intend" and other similar expressions,  constitute  forward-looking  statements
under the Reform Act. These forward-looking statements are made based on current
expectations  and  assumptions  and are  subject  to known  and  unknown  risks,
uncertainties and other factors, many of which are beyond the Company's control,
that may cause actual results to be materially different from those expressed or
implied by the  forward-looking  statements.  Such factors include,  among other
things: (1) general economic  conditions and market factors,  such as prevailing
interest rate levels,  stock market  performance and  fluctuations in the market
for  retirement-oriented  savings products and investment  management  products,
which may  adversely  affect the ability of the Company to sell its products and
services  and the market  value of the  Company's  investments  and assets under
management  and,  therefore,  the  portion of its  revenues  that are based on a
percentage  of assets  under  management;  (2) the  Company's  ability to manage
effectively its investment  spread (i.e. the amount by which  investment  income
exceeds  interest  credited to annuity and life  insurance  policyholders)  as a
result of changes in interest rates and crediting rates to policyholders, market
conditions and other factors (the Company's  results of operations and financial
condition  are  significantly  dependent  on the  Company's  ability  to  manage
effectively its investment  spread);  (3) levels of surrenders,  withdrawals and
net  redemptions  of the Company's  retirement-oriented  insurance  products and
investment  management  products;  (4) relationships with investment  management
clients,  including  levels of assets under  management;  (5) the ability of the
Company  to manage  effectively  certain  risks with  respect to its  investment
portfolio, including risks relating to holding below investment grade securities
and the ability to dispose of illiquid and/or  restricted  securities at desired
times and prices,  and the  ability to manage and hedge  against  interest  rate
changes through  asset/liability  management techniques;  (6) competition in the
sale of the Company's products and services,  including the Company's ability to
establish and maintain  relationships  with  distributors  of its products;  (7)
changes in  financial  ratings of Keyport or those of its  competitors;  (8) the
Company's  ability  to  attract  and  retain  key  employees,  including  senior
officers,  portfolio  managers  and  sales  executives;  (9) the  impact  of and
compliance  by the  Company  with  existing  and  future  regulation,  including
restrictions  on the ability of certain  subsidiaries  to pay  dividends and any
obligations of the Company under any guaranty fund assessment laws; (10) changes
in  applicable  tax laws  which may  affect  the  relative  tax  advantages  and
attractiveness  of  some of the  Company's  products;  (11)  the  result  of any
litigation or legal proceedings involving the Company; (12) changes in generally
accepted  accounting  principles  and the impact of  accounting  principles  and
pronouncements on the Company's  financial  condition and results of operations;
(13) changes in the  Company's  senior debt  ratings;  (14) changes in operating
expense levels; (15) acquisition risks,  including risks that the acquisition of
Wanger  Asset  Management,  L.P.  will  not  close or that,  if it  closes,  the
acquisition  and integration of Wanger will not be as successful as anticipated;
and (16) the other risk factors or uncertainties  contained from time to time in
any document  incorporated by reference in this report or otherwise filed by the
Company under the Exchange Act. Given these uncertainties, prospective investors
are cautioned not to place undue reliance on such forward-looking statements and
no assurances can be given that the estimates and expectations reflected in such
statements will be achieved.

<PAGE>

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

   There have been no  material  changes  during the first six months of 2000 in
the  Company's  market risks or in the methods  which the Company uses to manage
such risks,  which are described in the  Company's  Form 10-K for the year ended
December 31, 1999.

                                     Part II

 Item 4.  Submission of Matters to a Vote of Security Holders

   The Annual  Meeting of  Stockholders  was held on May 8, 2000.  The following
matters were submitted to a vote of the  shareholders at the Annual Meeting with
the following results:

     1. Election of the following  individuals as directors of the Company for a
term of three years:



                                Common Stock          Series A Preferred Stock
                             ---------------------    ------------------------
                              For         Withheld       For          Withheld
                             ----         --------      ----          --------
 Michael J. Babcock        46,526,145      97,913       444,454        14,061

 Gary L. Countryman        44,715,971   1,908,087       444,454        14,061

 John P. Hamill            46,525,445      98,613       444,454        14,061

 Marian L. Heard           46,504,116     119,942       444,454        14,061


      No other matters were submitted to the shareholders for a vote.

 Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

   12 Statement re Computation of Ratios
   27 Financial Data Schedule

(b) Reports on Form 8-K

       There were no reports on Form 8-K filed during the quarter ended June 30,
2000.

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                        LIBERTY FINANCIAL COMPANIES, INC.

                                              /s/ J. Andy Hilbert
                                      -------------------------------------
                                                J. Andy Hilbert
                                          (Duly Authorized Officer and
                                            Chief Financial Officer)






Date:   August 11, 2000


<PAGE>



                                  Exhibit Index

Exhibit No.   Description                                              Page
-----------   -----------                                              ----
     12      Statement re Computation of Ratios
     27      Financial Data Schedule