<Page>
-----------------------------
OMB APPROVAL
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OMB Number: 3235-0570
Expires: November 30, 2005
Estimated average burden
hours per response....... 5.0
-----------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7556
811-5199
---------------------------------------------
Liberty Variable Investment Trust
SteinRoe Variable Investment Trust
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Russell L. Kane, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
- -------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-426-3363
----------------------------
Date of fiscal year end: December 31, 2003
--------------------------
Date of reporting period: June 30, 2003
-------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS
SEMIANNUAL REPORT - CLASS B SHARES
JUNE 30, 2003
[GRAPHIC]
LIBERTY VARIABLE INVESTMENT TRUST
STEINROE VARIABLE INVESTMENT TRUST
<Page>
PRESIDENT'S MESSAGE
Liberty Variable Investment Trust
SteinRoe Variable Investment Trust
Dear Shareholder:
Despite the uncertainty that hung over the markets and the economy as the nation
prepared to go to war in Iraq, the six-month period ended on a high note.
Virtually all major segments of the stock and bond markets posted positive
returns for the period. The economy, though still struggling, has made progress
toward recovery. And a new tax law is intended to boost consumer spending power
and make investing more attractive. The Jobs and Growth Tax Relief
Reconciliation Act of 2003 accelerates income tax rate cuts for virtually all
Americans and slashes the tax rates on dividends and long-term capital gains.
The government is counting on Americans to turn their good fortune into higher
spending. And the financial media has been full of advice on how to take
advantage of the new rate structure. As you debate what you will do if the lower
tax rate turns into a modest personal windfall, consider strategies that could
have a long-term impact on your portfolio. If your take-home pay increases as a
result of the tax break and any rebate check you are entitled to receive--and if
it's not eaten up by higher state taxes--consider investing at least one third
of it. Consider adding it to your retirement account, using it to start an
education account for your child or setting it aside for an emergency. But make
a commitment and stick to it. Think of it as found money, because that is what
it is. You didn't have it before. But now that you've found it, you can put it
to work for a long-term goal.
And, before you take advice from a television pundit or a magazine cover story,
talk to your financial advisor. There may be tax-related strategies that make
sense for you. But there are no one-size-fits-all solutions. Keep in mind that
tax rates change, and many of the provisions of this law are set to expire in
just a few short years.
CONSOLIDATION AND A NEW NAME: COLUMBIA
On a separate note, I am pleased to announce that, effective April 1, 2003, six
of the asset management firms brought together when Columbia Management Group,
Inc. was formed were consolidated and renamed Columbia Management Advisors, Inc.
(Columbia Management). This consolidation does not affect the management or
investment objectives of your fund and is the next step in our efforts to create
a consistent identity and to streamline our organization. By consolidating these
firms, we are able to create a more efficient organizational structure and
strengthen certain key functions, such as research. Although the name of the
asset manager familiar to you has changed, what hasn't changed is the commitment
of our specialized investment teams to a multi-disciplined approach to
investing, focused on our goal of offering shareholders the best products and
services.
Sincerely,
/s/ Joseph R. Palombo
Joseph R. Palombo
President
MEET THE NEW PRESIDENT
Joseph R. Palombo, president and chairman of the Board of Trustees for
Liberty Funds, is also chief operating officer and executive vice president
of Columbia Management. Mr. Palombo has over 19 years of experience in the
financial services industry. Prior to joining Columbia Management, he was
chief operating officer and chief compliance officer for Putnam Mutual Funds.
Prior to that, he was a partner at Coopers & Lybrand. Mr. Palombo received
his degree in economics/accounting from the College of the Holy Cross, where
he was a member of Phi Beta Kappa. He earned his master's degree in taxation
from Bentley College and participated in the Executive Program at the
Amos B. Tuck School at Dartmouth College.
- NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE
The examples provided should be viewed as illustrations. They do not constitute
tax or legal advice. Neither Columbia Management Advisors, Inc., nor its
affiliates, including Liberty Funds Distributor, Inc., provide tax or legal
advice. A tax advisor or attorney can provide you with answers to specific
questions about taxes and other legal issues.
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
<Page>
IMPORTANT NOTE TO SHAREHOLDERS
At a special meeting on February 19, 2003, shareholders approved the fund
mergers listed below. These mergers occurred during April 2003.
LIBERTY VARIABLE INVESTMENT TRUST
<Table>
<Caption>
MERGING FUND ACQUIRING FUND NEW NAME OF ACQUIRING FUND
- ------------------------------------------------------------------------------------------------------------------------------------
- - Colonial Global Equity Fund, Variable Colonial International Fund for Growth, Columbia International Fund, Variable
Series Variable Series Series
- - Colonial International Horizons Fund,
Variable Series
- - Stein Roe Global Utilities Fund,
Variable Series
- - Colonial High Yield Securities Fund, Columbia High Yield Fund, Variable Series Columbia High Yield Fund, Variable Series
Variable Series
- - Galaxy VIP Columbia High Yield Fund II
- - Crabbe Huson Real Estate Investment Columbia Real Estate Equity Fund, Variable Columbia Real Estate Equity Fund, Variable
Fund, Variable Series Series Series
- - Galaxy VIP Columbia Real Estate Equity
Fund II
- - Galaxy VIP Growth and Income Fund Liberty Equity Fund, Variable Series Liberty Equity Fund, Variable Series
- - Galaxy VIP Equity Fund
- - Liberty Value Fund, Variable Series Colonial U.S. Growth & Income Fund, Liberty Growth & Income Fund, Variable
Variable Series Series
</Table>
STEINROE VARIABLE INVESTMENT TRUST
<Table>
<Caption>
MERGING FUND ACQUIRING FUND NAME OF COMBINED FUND
- ------------------------------------------------------------------------------------------------------------------------------------
- - Galaxy VIP Asset Allocation Fund Stein Roe Balanced Fund, Variable Series Liberty Asset Allocation Fund, Variable
Series
- - Galaxy VIP Money Market Fund Stein Roe Money Market Fund, Variable Liberty Money Market Fund, Variable Series
Series
- - Galaxy VIP Quality Plus Bond Fund Liberty Federal Securities Fund, Variable Liberty Federal Securities Fund, Variable
Series Series
- - Galaxy VIP Small Company Growth Fund Stein Roe Small Company Growth Fund, Liberty Small Company Growth Fund,
Variable Series Variable Series
</Table>
If you were invested in a fund that merged, your investment is now in the
acquiring fund. If you have questions about this event, please contact your
insurance company.
<Page>
PERFORMANCE AT A GLANCE
Liberty Variable Investment Trust
SteinRoe Variable Investment Trust
Wanger Advisors Trust
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/03 (%)
(CUMULATIVE)
INCEPTION 6-MONTH 1-YEAR 5-YEAR 10-YEAR LIFE
- ---------------------------------------------------------------------------------------------------------------------------------
LIBERTY VARIABLE INVESTMENT TRUST
Colonial Small Cap Value Fund, Variable Series -- B(1) 6/1/00 10.12 -1.66 4.26 -- 4.26
Colonial Strategic Income Fund, Variable Series -- B(1) 6/1/00 11.81 18.71 5.44 -- 7.63
Columbia High Yield Fund, Variable Series -- B(1),(2) 4/14/03 7.84 11.39 5.45 -- 5.71
Columbia International Fund, Variable Series -- B(1) 6/1/00 10.32 -2.64 -4.01 -- -0.57
Columbia Real Estate Equity Fund, Variable Series -- B(1),(2) 4/14/03 11.79 2.81 6.19 -- 5.62
Liberty All-Star Equity Fund, Variable Series -- B(1) 6/1/00 16.58 3.64 -1.97 -- 0.66
Liberty Equity Fund, Variable Series -- B(1),(2) 4/14/03 11.91 -2.10 -1.67 8.08 --
Liberty Growth & Income Fund, Variable Series -- B(1) 6/1/00 7.78 -4.00 0.22 -- 10.90
Liberty S&P 500 Index Fund, Variable Series -- B 5/30/00 11.36 -0.60 -- -- -10.24
Liberty Select Value Fund, Variable Series -- B 5/30/00 7.51 -6.32 -- -- 3.14
Newport Tiger Fund, Variable Series -- B(1) 6/1/00 8.16 -4.66 6.05 -- -1.63
STEINROE VARIABLE INVESTMENT TRUST
Liberty Asset Allocation Fund, Variable Series -- B(1) 6/1/00 9.18 2.91 0.46 6.44 --
Liberty Federal Securities Fund, Variable Series -- B(1) 6/1/00 2.96 8.94 6.78 6.58 --
Liberty Money Market Fund, Variable Series 1/1/89 0.36 0.89 3.71 4.20 --
Liberty Small Company Growth Fund, Variable Series -- B(1) 6/1/00 17.30 0.50 -0.41 5.78 --
Stein Roe Growth Stock Fund, Variable Series -- B(1) 6/1/00 10.78 -5.16 -5.51 7.17 --
</Table>
Past performance is no guarantee of future investment results. The principal
value and investment returns will fluctuate, resulting in a gain or loss on
sales of shares.
(1) Class B shares (newer class shares) performance information includes
returns of the fund's class A shares (the older existing fund class) for
periods prior to the inception of the newer class shares. These Class A
share returns were not adjusted to reflect any expense differential (e.g.,
Rule 12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class shares would be lower.
(2) For funds not in existence as of the beginning of the calendar year, the
return is since inception.
<Page>
TABLE OF CONTENTS
Liberty Variable Investment Trust
<Table>
PORTFOLIO MANAGERS' DISCUSSIONS
Colonial Small Cap Value Fund, Variable Series 2
Colonial Strategic Income Fund, Variable Series 15
Columbia High Yield Fund, Variable Series 32
Columbia International Fund, Variable Series 49
Columbia Real Estate Equity Fund, Variable Series 63
Liberty All-Star Equity Fund, Variable Series 75
Liberty Equity Fund, Variable Series 88
Liberty Growth & Income Fund, Variable Series 101
Liberty S&P 500 Index Fund, Variable Series 113
Liberty Select Value Fund, Variable Series 129
Newport Tiger Fund, Variable Series 139
FINANCIAL STATEMENTS
Colonial Small Cap Value Fund, Variable Series 4
Colonial Strategic Income Fund, Variable Series 17
Columbia High Yield Fund, Variable Series 34
Columbia International Fund, Variable Series 51
Columbia Real Estate Equity Fund, Variable Series 65
Liberty All-Star Equity Fund, Variable Series 77
Liberty Equity Fund, Variable Series 90
Liberty Growth & Income Fund, Variable Series 103
Liberty S&P 500 Index Fund, Variable Series 115
Liberty Select Value Fund, Variable Series 131
Newport Tiger Fund, Variable Series 141
</Table>
<Page>
TABLE OF CONTENTS
SteinRoe Variable Investment Trust
Wanger Advisors Trust
<Table>
STEINROE VARIABLE INVESTMENT TRUST
PORTFOLIO MANAGERS' DISCUSSIONS
Liberty Asset Allocation Fund, Variable Series 152
Liberty Federal Securities Fund, Variable Series 177
Liberty Money Market Fund, Variable Series 192
Liberty Small Company Growth Fund, Variable Series 203
Stein Roe Growth Stock Fund, Variable Series 216
FINANCIAL STATEMENTS
Liberty Asset Allocation Fund, Variable Series 154
Liberty Federal Securities Fund, Variable Series 179
Liberty Money Market Fund, Variable Series 194
Liberty Small Company Growth Fund, Variable Series 205
Stein Roe Growth Stock Fund, Variable Series 218
</Table>
Must be preceded or accompanied by a prospectus.
Liberty Funds Distributor, Inc. 8/2003
<Page>
Liberty Variable Investment Trust
LIBERTY VARIABLE
INVESTMENT TRUST
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Colonial Small Cap Value Fund, Variable Series / June 30, 2003
Colonial Small Cap Value Fund, Variable Series seeks long-term growth by
investing primarily in smaller capitalization equities.
Stephen D. Barbaro, CFA, has managed the fund since June 2002. He joined a
predecessor of Columbia Management Advisors, Inc. in 1976.
After three years of declines, stocks made a strong comeback in the first half
of 2003. Nearly all sectors posted positive returns, buoyed by an end to the
major military campaigns in the war with Iraq and an improved economic outlook.
As investor optimism increased, small-cap stocks beat their large-cap
counterparts. The fund posted strong gains despite weak stock selection in the
industrial and health care sectors.
INEXPENSIVE STOCKS WITH GOOD FINANCIALS FELL FROM FAVOR
We maintained the fund's strategic focus on stocks with inexpensive valuations,
good earnings prospects and balance sheets that included low levels of debt and
high cash positions. We stayed with our discipline even though the best
performers during the spring rally were lower quality names.
Some of the fund's largest sector positions posted strong returns. Within
financials, the fund benefited from focusing on banks, insurers and specialty
financial companies. In the consumer discretionary sector, strong stock
selection among specialty retailers, restaurants and clothing manufacturers
helped performance. Our technology stock picks also did well. However, the
fund's technology holdings appreciated less than those in the S&P SmallCap/600
Barra Value Index because we underweighted more speculative Internet and
semiconductor equipment names. Our investments in industrial and health care
companies also fell behind the index because we avoided the lower-quality,
speculative companies that posted the best gains for the period.
OPPORTUNISTIC BUYING AND SELLING
When a stock's valuation is no longer inexpensive or a company's prospects
weaken, our strategy is generally to sell and look for better opportunities
elsewhere. As a result of this approach, we reduced our stake in the consumer
discretionary sector during the period. We sold specialty retailers that had
appreciated and restaurants whose prospects had weakened. We invested some of
the proceeds in economically-sensitive technology stocks with reasonable
valuations, including semiconductor and hardware stocks as well as software and
services names. As the economy continues to show slow and steady economic
improvement in the second half of 2003, we believe that small-cap stocks have
the potential to benefit.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
Investing in Colonial Small Cap Value Fund, Variable Series may present special
risks, including possible illiquidity and greater price volatility than stocks
of larger, more established companies.
2
<Page>
PERFORMANCE INFORMATION
Colonial Small Cap Value Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR LIFE
- --------------------------------------------------------------------------------
Class B(1) (6/1/00) 10.12 -1.66 4.26 4.26
S&P SmallCap 600/
Barra Value Index(2) 12.97 -8.38 3.81 3.74
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 5/19/98(3) - 6/30/03
<Table>
<Caption>
S&P SMALLCAP
CLASS B SHARES 600/BARRA VALUE INDEX
5/18/1998 $ 10,020 $ 10,000
6/30/1998 $ 10,050 $ 9,995
7/31/1998 $ 9,120 $ 9,070
8/31/1998 $ 7,201 $ 7,434
9/30/1998 $ 7,461 $ 7,829
10/31/1998 $ 7,881 $ 8,171
11/30/1998 $ 8,401 $ 8,520
12/31/1998 $ 8,675 $ 8,855
1/31/1999 $ 8,464 $ 8,753
2/28/1999 $ 7,626 $ 8,040
3/31/1999 $ 7,525 $ 8,009
4/30/1999 $ 8,030 $ 8,707
5/31/1999 $ 8,354 $ 9,054
6/30/1999 $ 8,788 $ 9,604
7/31/1999 $ 8,778 $ 9,454
8/31/1999 $ 8,324 $ 9,058
9/30/1999 $ 8,273 $ 8,891
10/31/1999 $ 8,313 $ 8,686
11/30/1999 $ 8,545 $ 8,881
12/31/1999 $ 9,226 $ 9,124
1/31/2000 $ 8,640 $ 8,656
2/29/2000 $ 9,216 $ 9,048
3/31/2000 $ 9,358 $ 9,382
4/30/2000 $ 9,459 $ 9,447
5/31/2000 $ 9,317 $ 9,293
6/30/2000 $ 9,692 $ 9,560
7/31/2000 $ 9,783 $ 9,748
8/31/2000 $ 10,582 $ 10,318
9/30/2000 $ 10,582 $ 10,297
10/31/2000 $ 10,633 $ 10,347
11/30/2000 $ 9,864 $ 9,663
12/31/2000 $ 10,969 $ 11,028
1/31/2001 $ 11,061 $ 11,901
2/28/2001 $ 10,743 $ 11,399
3/31/2001 $ 10,569 $ 10,926
4/30/2001 $ 11,346 $ 11,584
5/31/2001 $ 11,683 $ 11,879
6/30/2001 $ 11,765 $ 12,333
7/31/2001 $ 11,847 $ 12,217
8/31/2001 $ 11,613 $ 12,020
9/30/2001 $ 10,215 $ 10,300
10/31/2001 $ 10,460 $ 10,771
11/30/2001 $ 11,165 $ 11,633
12/31/2001 $ 11,978 $ 12,472
1/31/2002 $ 12,071 $ 12,706
2/28/2002 $ 12,310 $ 12,651
3/31/2002 $ 13,181 $ 13,750
4/30/2002 $ 13,410 $ 14,313
5/31/2002 $ 12,995 $ 13,770
6/30/2002 $ 12,591 $ 13,155
7/31/2002 $ 11,046 $ 11,016
8/31/2002 $ 11,295 $ 11,002
9/30/2002 $ 10,531 $ 10,192
10/31/2002 $ 10,749 $ 10,397
11/30/2002 $ 11,581 $ 10,958
12/31/2002 $ 11,243 $ 10,668
1/31/2003 $ 10,910 $ 10,227
2/28/2003 $ 10,352 $ 9,849
3/31/2003 $ 10,373 $ 9,818
4/30/2003 $ 11,190 $ 10,707
5/31/2003 $ 12,113 $ 11,705
6/30/2003 $ 12,378 $ 12,052
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 10.47 11.53
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The S&P (Standard & Poor's) SmallCap
600/Barra Value Index is designed to differentiate between fast growing
companies and slower growing or undervalued companies. Standard & Poor's and
Barra cooperate to employ a Price to Book value calculation, whereby the market
capitalization of an index (S&P SmallCap 600) is divided equally between growth
and value. The growth and value definition are only available on the US indices.
The indices are rebalanced twice per year. Indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. Securities in the fund may not match those in an
index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class shares would be lower.
(2) Index performance is from May 31, 1998.
(3) Inception date of class A shares (older existing share class).
3
<Page>
INVESTMENT PORTFOLIO
Colonial Small Cap Value Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCKS--96.5%
CONSUMER DISCRETIONARY--17.5%
AUTO COMPONENTS--1.1%
BorgWarner, Inc. 1,900 $ 122,360
Modine Manufacturing Co. 3,350 64,890
Standard Motor Products, Inc. 6,500 72,150
--------------
259,400
--------------
AUTOMOBILES--0.2%
Monaco Coach Corp. (a) 3,600 55,188
--------------
HOTELS, RESTAURANTS & LEISURE--2.9%
Bally Total Fitness Holding Corp. (a) 12,400 111,972
CBRL Group, Inc. 3,900 151,554
Landry's Restaurants, Inc. 6,650 156,940
Lone Star Steakhouse & Saloon 8,850 192,664
Magna Entertainment Corp. (a) 100 500
Prime Hospitality Corp. (a) 11,220 75,286
--------------
688,916
--------------
HOUSEHOLD DURABLES--2.0%
American Greetings Corp. (a) 6,500 127,660
Bassett Furniture Industries, Inc. 7,350 97,608
Jacuzzi Brands Inc. (a) 18,600 98,394
Russ Berrie & Co, Inc. 1,300 47,463
Toro Co. 2,900 115,275
--------------
486,400
--------------
LEISURE EQUIPMENT & PRODUCTS--0.8%
Jakks Pacific, Inc. (a) 8,650 114,958
Johnson Outdoors, Inc. (a) 4,600 62,790
Travis Boats & Motors, Inc. (a) 10,336 8,372
--------------
186,120
--------------
MEDIA--1.5%
Alliance Atlantis Communications, Inc. (a) 13,200 191,796
Liberty Corp. 3,800 161,500
--------------
353,296
--------------
MULTI-LINE RETAIL--0.9%
Neiman-Marcus Group, Inc. (a) 3,900 142,740
ShopKo Stores, Inc. (a) 5,850 76,050
--------------
218,790
--------------
SPECIALTY RETAIL--5.4%
Building Material Holding Corp. 3,900 57,759
Dress Barn, Inc. (a) 6,300 79,821
Friedman's, Inc. 6,800 77,316
Goody's Family Clothing, Inc. 11,900 102,935
GTSI Corp. (a) 3,650 31,755
Hughes Supply, Inc. 2,900 100,630
Monro Muffler, Inc. (a) 5,750 162,495
Movie Gallery, Inc. (a) 5,900 108,855
Office Max Inc. (a) 10,300 67,465
Rent-Way, Inc. (a) 18,100 84,165
TBC Corp. (a) 8,150 155,258
United Rentals, Inc. (a) 6,300 87,507
Zale Corp. (a) 3,950 158,000
--------------
1,273,961
--------------
TEXTILES & APPAREL--2.7%
Delta Apparel, Inc. 3,150 $ 51,187
Kellwood Co. 6,050 191,362
Maxwell Shoe Co. (a) 9,150 131,760
Nautica Enterprises, Inc. (a) 6,000 76,980
Phillips-Van Heusen 1,100 14,993
Russell Corp. 6,400 121,600
Stride Rite Corp. 5,200 51,792
--------------
639,674
--------------
CONSUMER STAPLES--2.7%
FOOD PRODUCTS--2.0%
Central Garden and Pet Co. (a) 4,800 114,480
Corn Products International, Inc. 6,500 195,195
Ralcorp Holdings, Inc. (a) 6,950 173,472
--------------
483,147
--------------
PERSONAL PRODUCTS--0.1%
Inter Parfums, Inc. (a) 4,800 35,520
--------------
TOBACCO--0.6%
Universal Corp.-Va 3,200 135,360
--------------
ENERGY--5.4%
ENERGY EQUIPMENT & SERVICES--1.6%
Lufkin Industries, Inc. 5,450 132,708
Universal Compression Holdings, Inc. (a) 4,650 96,999
Willbros Group, Inc. (a) 14,140 146,915
--------------
376,622
--------------
OIL & GAS--3.8%
Denbury Resources, Inc. (a) 8,850 118,855
Harvest Natural Resources, Inc. (a) 22,950 146,191
Peabody Energy Corp. 10,550 354,374
Vintage Petroleum, Inc. 12,700 143,256
Westport Resources Corp. (a) 6,650 151,288
--------------
913,964
--------------
FINANCIALS--20.9%
BANKS--10.5%
Bancfirst Corp. 700 36,302
BancorpSouth, Inc. 6,200 129,270
Bank of Granite Corp. 5,800 98,890
Bryn Mawr Bank Corp. 3,800 140,866
Capitol Bancorp, Ltd. 2,800 75,880
Chemical Financial Corp. 5,967 177,817
Chittenden Corp. 7,200 196,920
Community First Bankshares, Inc. 4,550 124,215
Community Trust Bancorp, Inc. 3,140 82,080
Corus Bankshares, Inc. 3,100 150,133
First Citizens BancShares, Inc. 900 90,756
First Financial Bankshares, Inc. 2,875 96,197
Hancock Holding Co. 1,400 65,884
</Table>
See Notes to Investment Portfolio.
4
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
MainSource Financial Group, Inc. 2,100 $ 51,177
MASSBANK Corp. 2,000 72,340
Merchants Bancshares, Inc. 4,800 124,800
MetroCorp. Bancshares, Inc. 1,150 13,915
Mid-State Bancshares 8,450 166,888
Northrim BanCorp., Inc. 4,400 79,772
Omega Financial Corp. 1,700 58,140
Riggs National Corp. 9,380 142,764
Simmons First National Corp. 4,600 92,046
Trico Bancshares 6,050 153,852
Whitney Holding Corp. 2,100 67,137
--------------
2,488,041
--------------
DIVERSIFIED FINANCIALS--1.9%
Cash America International, Inc. 16,340 216,015
CompuCredit Corp. (a) 3,200 38,880
Metris Cos., Inc. 17,800 98,790
MFC Bancorp, Ltd. (a) 13,600 112,866
--------------
466,551
--------------
INSURANCE--3.6%
AmerUs Group Co. 2,300 64,837
Commerce Group, Inc. 3,000 108,600
Delphi Financial Group 4,024 188,323
Kansas City Life Insurance Co. (a) 900 38,556
Navigators Group, Inc. 1,600 47,712
Phoenix Cos., Inc. 15,150 136,804
RLI Corp. 4,200 138,180
State Auto Financial Corp. 4,250 95,412
Universal American Financial Corp. (a) 5,700 36,309
--------------
854,733
--------------
REAL ESTATE--4.9%
American Financial Realty Trust 2,800 41,748
Boykin Lodging Co. 9,000 70,200
EastGroup Properties, Inc. 4,250 114,750
Equity One, Inc. 6,900 113,160
Getty Realty Corp. 4,850 108,252
Keystone Property Trust 4,850 89,774
Mid-America Apartment Communities, Inc. 4,950 133,699
Nationwide Health Properties, Inc. 8,150 129,829
PS Business Parks, Inc. 5,000 176,500
RFS Hotel Investors, Inc. 1,250 15,400
Universal Health Realty Income Trust 3,200 86,400
Urstadt Biddle Properties 6,600 84,876
--------------
1,164,588
--------------
HEALTH CARE--6.2%
HEALTH CARE EQUIPMENT & SUPPLIES--0.5%
Sola International, Inc. (a) 7,000 121,800
--------------
HEALTH CARE PROVIDERS & SERVICES--5.2%
Cross Country Healthcare Inc. (a) 6,800 89,692
Genesis Health Ventures, Inc. (a) 7,400 130,610
Humana, Inc. (a) 10,000 151,000
Kindred Healthcare, Inc. (a) 3,800 $ 67,792
LifePoint Hospitals, Inc. (a) 2,300 48,162
MAXIMUS, Inc. (a) 2,300 63,549
Pacificare Health Systems (a) 3,500 172,655
Pediatrix Medical Group, Inc. (a) 3,400 121,210
Province Healthcare Co. (a) 4,500 49,815
Stewart Enterprises, Inc. (a) 19,500 83,850
Sunrise Assisted Living, Inc. (a) 4,200 93,996
US Oncology, Inc. (a) 23,770 175,660
--------------
1,247,991
--------------
PHARMACEUTICALS--0.5%
Alpharma, Inc. 5,200 112,320
--------------
INDUSTRIALS--16.7%
AEROSPACE & DEFENSE--1.6%
Armor Holdings, Inc. (a) 7,700 103,180
Herley Industries, Inc. (a) 4,700 79,806
Ladish Co., Inc. (a) 10,950 72,489
Precision Castparts Corp. 4,200 130,620
--------------
386,095
--------------
AIR FREIGHT & COURIERS--0.5%
Ryder System, Inc. 4,900 125,538
--------------
AIRLINES--1.3%
Atlantic Coast Airlines Holdings, Inc. (a) 9,300 125,457
Mesaba Holdings, Inc. (a) 6,350 39,180
Skywest, Inc. 7,400 141,044
--------------
305,681
--------------
BUILDING PRODUCTS--0.9%
NCI Building Systems, Inc. (a) 5,100 85,170
Watsco, Inc. 8,150 134,964
--------------
220,134
--------------
COMMERCIAL SERVICES & SUPPLIES--5.2%
Banta Corp. 3,600 116,532
Cable Design Technologies Corp. (a) 8,900 63,635
Casella Waste Systems, Inc. (a) 17,000 153,510
Century Business Services, Inc. (a) 18,600 60,450
Consolidated Graphics, Inc. (a) 6,950 159,016
Electro Rent Corp. (a) 2,950 31,801
Handleman Co. (a) 9,000 144,000
Imagistics International, Inc. (a) 7,650 197,370
Kimball International 8,900 138,840
ProsoftTraining (a) 53,554 23,028
Sourcecorp (a) 4,700 101,520
Teletech Holdings Inc. (a) 9,400 39,762
--------------
1,229,464
--------------
CONSTRUCTION & ENGINEERING--2.0%
Chicago Bridge & Iron Co. NV 4,520 102,514
Comfort Systems USA, Inc. (a) 16,450 43,263
EMCOR Group, Inc. (a) 4,500 222,120
Shaw Group, Inc. (a) 7,850 94,592
--------------
462,489
--------------
</Table>
See Notes to Investment Portfolio.
5
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
ELECTRICAL EQUIPMENT--0.9%
Genlyte Group, Inc. (a) 2,600 $ 90,922
Tecumseh Products Co. 3,200 122,592
--------------
213,514
--------------
INDUSTRIAL CONGLOMERATES--0.4%
Carlisle Cos., Inc. 2,500 105,400
--------------
MACHINERY--3.1%
Alamo Group, Inc. 3,600 43,992
Briggs & Stratton 2,300 116,150
Esterline Technologies Corp. (a) 7,000 121,870
Harsco Corp. 5,400 194,670
Kadant, Inc. (a) 6,600 123,750
Oshkosh Truck Corp. 2,200 130,504
--------------
730,936
--------------
ROAD & RAIL--0.8%
Covenant Transport, Inc. (a) 5,450 92,650
Kansas City Southern 5,450 65,564
US Xpress Enterprises, Inc. (a) 3,200 34,112
--------------
192,326
--------------
INFORMATION TECHNOLOGY--14.8%
COMMUNICATIONS EQUIPMENT--1.6%
Allen Telecom, Inc. (a) 6,600 109,032
Black Box Corp. 3,000 108,600
Optical Communication Products, Inc. (a) 23,900 43,020
Tollgrade Communications, Inc. (a) 6,150 114,698
--------------
375,350
--------------
COMPUTERS & PERIPHERALS--1.9%
Crossroads Systems, Inc. (a) 11,800 19,930
Electronics for Imaging (a) 4,700 95,363
Hutchinson Technology, Inc. (a) 1,100 36,179
Imation Corp. 1,200 45,384
Intergraph Corp. (a) 5,000 107,500
Iomega Corp. (a) 12,900 136,740
--------------
441,096
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--4.3%
Analogic Corp. 1,900 92,644
Anixter International, Inc. (a) 2,950 69,118
Benchmark Electronics, Inc. (a) 3,500 107,660
Checkpoint Systems, Inc. (a) 7,100 100,465
MTS Systems Corp. 8,250 121,605
NU Horizons Electronics Corp. (a) 11,600 69,600
Pioneer Standard Electronics 11,750 99,640
Plexus Corp. (a) 7,400 85,322
Somera Communications, Inc. (a) 19,200 28,032
Tech Data Corp. (a) 4,400 117,524
Vishay Intertechnology, Inc. (a) 10,000 132,000
--------------
1,023,610
--------------
INTERNET SOFTWARE & SERVICES--1.2%
SonicWALL, Inc. (a) 24,650 118,320
Stellent Inc. (a) 13,000 70,200
Trizetto Group (a) 5,300 $ 32,012
Valueclick, Inc. (a) 11,650 70,250
--------------
290,782
--------------
INFORMATION TECHNOLOGY CONSULTING & SERVICES--2.4%
Acxiom Corp. (a) 6,900 104,121
American Management Systems, Inc. (a) 12,600 179,928
Computer Horizons Corp. (a) 8,500 38,590
Management Network Group, Inc. (a) 34,282 66,850
MPS Group, Inc. (a) 26,100 179,568
--------------
569,057
--------------
SEMICONDUCTOR EQUIPMENT & PRODUCTION--1.8%
Dupont Photomasks, Inc. (a) 5,350 100,740
Exar Corp. (a) 4,700 74,401
Integrated Device Technology (a) 10,200 112,710
Pericom Semiconductor Corp. (a) 7,100 66,030
Zoran Corp. (a) 4,300 82,603
--------------
436,484
--------------
SOFTWARE--1.6%
Novell, Inc. (a) 24,050 74,074
Pervasive Software, Inc. (a) 13,050 69,818
PLATO Learning, Inc. (a) 18,362 105,582
Sybase, Inc. (a) 8,600 119,626
--------------
369,100
--------------
MATERIALS--6.0%
CHEMICALS--3.0%
Cytec Industries, Inc. (a) 7,200 243,360
HB Fuller Co. 4,300 94,686
Lubrizol Corp. 5,100 158,049
Minerals Technologies, Inc. 2,700 131,382
Schulman (A.), Inc. 5,450 87,527
--------------
715,004
--------------
CONSTRUCTION MATERIALS--0.8%
Amcol International Corp. 5,000 40,000
Centex Construction Products, Inc. 3,500 140,315
--------------
180,315
--------------
CONTAINERS & PACKAGING--0.9%
Aptargroup, Inc. 3,200 115,200
Greif, Inc. 4,150 95,450
--------------
210,650
--------------
METALS & MINING--0.9%
Carpenter Technology Corp. 7,000 109,200
RTI International Metals, Inc. (a) 9,350 101,260
--------------
210,460
--------------
PAPER & FOREST PRODUCTS--0.4%
Glatfelter 3,700 54,575
Schweitzer-Mauduit International, Inc. 2,000 48,280
--------------
102,855
--------------
</Table>
See Notes to Investment Portfolio.
6
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
TELECOMMUNICATION SERVICES--1.6%
DIVERSIFIED TELECOMMUNICATION--1.5%
Advanced Fibre Communications (a) 7,800 $ 126,906
Mastec, Inc. (a) 23,800 137,088
North Pittsburgh Systems, Inc. 5,200 78,364
--------------
342,358
--------------
WIRELESS TELECOMMUNICATION SERVICES--0.1%
Metro One Telecommunications (a) 5,500 28,380
--------------
UTILITIES--4.7%
ELECTRIC UTILITIES--3.6%
Central Vermont Public Service Corp. 7,700 150,535
CH Energy Group, Inc. 5,200 234,000
El Paso Electric Co. (a) 8,400 103,572
Maine Public Service Co. 1,600 52,016
MGE Energy, Inc. 3,000 94,500
Northeast Utilities 12,400 207,576
--------------
842,199
--------------
GAS UTILITIES--0.8%
Cascade Natural Gas Corp. 3,400 64,940
Northwest Natural Gas Co. 2,400 65,400
WGL Holdings, Inc. 2,600 69,420
--------------
199,760
--------------
MULTI-UTILITIES--0.3%
MDU Resources Group, Inc. 1,900 63,631
--------------
TOTAL COMMON STOCKS
(cost of $20,780,056) 22,935,050
--------------
LIMITED PURPOSE TRUST--0.2%
INDUSTRIALS--0.2%
TRADING COMPANIES & DISTRIBUTORS--0.2%
Versacold Income Fund
(cost of $43,984) 8,150 49,474
--------------
SINGLE PURPOSE TRUST--0.2%
MATERIALS--0.2%
PAPER & FOREST PRODUCTS--0.2%
PRT Forest Regeneration Income Fund
(cost of $35,585) 5,500 37,323
--------------
<Caption>
PAR VALUE
-------------- --------------
SHORT-TERM OBLIGATION--3.6%
Repurchase agreement with
State Street Bank & Trust Co.,
dated 6/30/2003, due 7/1/2003 at
1.000%, collateralized by a
U.S.Treasury Bond maturing
5/15/2030, market
value $871,281
(repurchase proceeds $854,024)
(cost of $854,000) $ 854,000 $ 854,000
--------------
TOTAL INVESTMENTS--100.5%
(cost of $21,713,625) (b) 23,875,847
--------------
OTHER ASSETS & LIABILITIES, NET--(0.5)% (118,142)
--------------
NET ASSETS--100.0% $ 23,757,705
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for both financial statement and federal income tax purposes is the
same.
See Notes to Financial Statements.
7
<Page>
STATEMENT OF ASSETS & LIABILITIES
Colonial Small Cap Value Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 21,713,625
---------------
Investments, at value $ 23,875,847
Cash 281
Receivable for:
Fund shares sold 58,595
Interest 24
Dividends 21,707
Deferred Trustees' compensation plan 2,752
---------------
TOTAL ASSETS 23,959,206
---------------
LIABILITIES:
Expense reimbursement due to Manager/Distributer 6,328
Payable for:
Investments purchased 39,647
Fund shares repurchased 124,942
Management fee 15,177
Distribution fee--Class B 138
Transfer agent fee 595
Audit fee 4,804
Reports to Shareholders 6,671
Deferred Trustees' fee 2,752
Other liabilities 447
---------------
TOTAL LIABILITIES 201,501
---------------
NET ASSETS $ 23,757,705
---------------
COMPOSITION OF NET ASSETS:
Paid-in capital $ 21,731,794
Undistributed net investment income 54,459
Accumulated net realized loss (190,770)
Net unrealized appreciation on investments 2,162,222
---------------
NET ASSETS $ 23,757,705
---------------
CLASS A:
Net assets $ 8,483,342
Shares outstanding 735,535
===============
Net asset value per share $ 11.53
===============
CLASS B:
Net assets $ 15,274,363
Shares outstanding 1,325,159
===============
Net asset value per share $ 11.53
===============
</Table>
See Notes to Financial Statements.
8
<Page>
STATEMENT OF OPERATIONS
Colonial Small Cap Value Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 155,923
Interest 1,804
---------------
Total Investment Income (net of foreign taxes withheld
of $739) 157,727
---------------
EXPENSES:
Management fee 78,288
Distribution fee--Class B 14,965
Pricing and bookkeeping fees 5,404
Transfer agent fee 3,720
Trustees' fee 3,227
Custody fee 9,880
Audit fee 8,760
Other expenses 5,028
---------------
Total Expenses 129,272
Fees and expenses waived or reimbursed by Manager (6,658)
Fees reimbursed by Distributor--Class B (14,965)
Custody earnings credit (25)
---------------
Net Expenses 107,624
---------------
Net Investment Income 50,103
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments (614,575)
Foreign currency transactions 384
---------------
Net realized loss (614,191)
---------------
Net change in unrealized appreciation/depreciation on:
Investments 2,623,747
Foreign currency translations 23
---------------
Net change in unrealized appreciation/depreciation 2,623,770
---------------
Net Gain 2,009,579
---------------
Net Increase in Net Assets from Operations $ 2,059,682
===============
</Table>
See Notes to Financial Statements.
9
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
Colonial Small Cap Value Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- --------------- ---------------
OPERATIONS:
Net investment income $ 50,103 $ 37,492
Net realized gain (loss) on investments and foreign currency
transactions (614,191) 1,098,128
Net change in unrealized appreciation/depreciation on
investments and foreign currency translations 2,623,770 (2,952,616)
--------------- ---------------
Net Increase (Decrease) from Operations 2,059,682 (1,816,996)
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A -- (8,389)
Class B -- (12,808)
From net realized gains:
Class A -- (263,235)
Class B -- (401,913)
--------------- ---------------
Total Distributions Declared to Shareholders -- (686,345)
--------------- ---------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 1,043,530 4,146,927
Distributions reinvested -- 271,624
Redemptions (1,210,696) (4,761,716)
--------------- ---------------
Net Decrease (167,166) (343,165)
--------------- ---------------
Class B:
Subscriptions 3,200,644 6,130,731
Distributions reinvested -- 414,721
Redemptions (1,307,717) (2,107,183)
--------------- ---------------
Net Increase 1,892,927 4,438,269
--------------- ---------------
Net Increase from Share Transactions 1,725,761 4,095,104
--------------- ---------------
Total Increase in Net Assets 3,785,443 1,591,763
NET ASSETS:
Beginning of period 19,972,262 18,380,499
--------------- ---------------
End of period (including undistributed net investment income
of $54,459 and $4,356, respectively) $ 23,757,705 $ 19,972,262
=============== ===============
CHANGES IN SHARES:
Class A:
Subscriptions 99,825 350,768
Issued for distributions reinvested -- 25,946
Redemptions (117,541) (433,274)
--------------- ---------------
Net Decrease (17,716) (56,560)
--------------- ---------------
Class B:
Subscriptions 295,611 524,962
Issued for distributions reinvested -- 39,619
Redemptions (123,911) (191,963)
--------------- ---------------
Net Increase 171,700 372,618
--------------- ---------------
</Table>
See Notes to Financial Statements.
10
<Page>
NOTES TO FINANCIAL STATEMENTS
Colonial Small Cap Value Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Colonial Small Cap Value Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek long-term growth by investing primarily in
smaller capitalization stocks of U.S. companies. The Fund's capitalization
consists of an unlimited number of shares of beneficial interest without par
value that represent a separate series of the Trust. The Fund offers two classes
of shares: Class A and Class B. Each share of a class represents an equal
proportionate beneficial interest in that share class and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of their share class available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Liberty Advisory Services Corp., the investment advisor to the
Fund and Colonial Management Associates, Inc. ("Colonial"), the sub-advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Liberty Advisory Services Corp. and Colonial with respect to
the Fund. The merger did not change the way the Fund is managed, the investment
personnel assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at the current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
FOREIGN CURRENCY TRANSACTIONS--Net realized and unrealized gains (losses) on
foreign currency transactions and translations includes gains (losses) arising
from the fluctuations in exchange rates between trade and settlement dates on
securities transactions, gains (losses) arising from the disposition of foreign
currency, and currency gains (losses) between the accrual and payment dates on
dividends, interest income and foreign withholding taxes.
11
<Page>
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) on investments.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of non-reclaimable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of all
tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE--Columbia receives a monthly fee equal to 0.80% annually of
the Fund's average daily net assets.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. The Fund also pays out-of-pocket costs
for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Columbia and LFD have voluntarily agreed to reimburse all
expenses, including management fees and distribution fees, but excluding
interest, taxes, brokerage and extraordinary expenses incurred by the Fund, in
excess of 1.10% annually of the Fund's average daily net assets. LFD will first
reimburse the Class B distribution fee up to 0.25% annually to reach the 1.10%
limit on Class B expenses. If additional reimbursement is needed to meet the
limit for each class, Columbia will then reimburse other expenses to the extent
necessary. If additional reimbursement is still needed to reach the expense
limit, Columbia will then waive a portion of its management fee to reach the
expense limit. This arrangement may be terminated or modified by Columbia or LFD
at any time.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $25 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
12
<Page>
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $8,624,530 and
$7,381,518, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 3,047,775
Gross unrealized depreciation (885,553)
---------------
Net unrealized appreciation $ 2,162,222
===============
</Table>
OTHER--The Fund may focus its investments in certain industries, subjecting
it to greater risk than a fund that is more diversified. Investing in the Fund
may present special risks, including possible illiquidity and greater price
volatility than stocks of larger, more established companies.
13
<Page>
FINANCIAL HIGHLIGHTS
Colonial Small Cap Value Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, ----------------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
------------ ------------ ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.47 $ 11.55 $ 10.73 $ 9.21
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.03 0.02 0.02 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency 1.03 (0.73) 0.97 1.57
------------ ------------ ------------ ------------
Total from Investment Operations 1.06 (0.71) 0.99 1.63
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- (0.01) (0.02) (0.05)
From net realized gains -- (0.36) (0.15) (0.06)
------------ ------------ ------------ ------------
Total Distributions Declared to Shareholders -- (0.37) (0.17) (0.11)
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 11.53 $ 10.47 $ 11.55 $ 10.73
============ ============ ============ ============
Total return (c)(d)(e) 10.12%(f) (6.14)% 9.20% 17.72%(f)
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA:
Expenses (g) 1.10%(h) 1.10% 1.10% 1.10%(h)
Net investment income (g) 0.51%(h) 0.18% 0.22% 1.01%(h)
Waiver/reimbursement 0.32%(h) 0.29% 0.47% 1.07%(h)
Portfolio turnover rate 37%(f) 125% 56% 54%(f)
Net assets, end of period (000's) $ 15,274 $ 12,080 $ 9,020 $ 3,469
</Table>
(a) For the period from commencement of operations on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Manager and/or Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
14
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Colonial Strategic Income Fund, Variable Series / June 30, 2003
Colonial Strategic Income Fund, Variable Series seeks current income
consistent with prudent risk and maximum total return.
Laura A. Ostrander is the fund's portfolio manager. She has managed or
co-managed a number of funds for Columbia Management Advisors, Inc. and its
predecessors since 1996.
At the beginning of the period, investors remained wary of equities as issues
over corporate governance and accounting scandals undermined confidence, and
corporate profits showed little growth. Uncertainty about the outcome of a
confrontation with Iraq also hung over the financial markets. During the second
quarter, the major campaigns of the war ended, yields on US Treasuries reached a
45-year low and the Federal Reserve Board cut a key short-term interest rate to
1.0%. As a result, many investors were willing to take on additional risk in
order to get additional yield. Low interest rates and an accommodating attitude
on the part of banks also helped the environment for high-yield bonds. Debt
issued by emerging markets benefited from the reduced uncertainty that followed
the declaration of military victory in Iraq as well as low global interest
rates. In addition, the US dollar, long felt to be overvalued against other
world currencies, fell sharply.
We increased our exposure to high-yield bonds, which benefited performance.
The timing of our decision allowed us to participate significantly in the
high-yield rally that began in the fourth quarter of 2002. Our emerging markets
debt also performed well as investors looked outside the United States in search
of additional yield. Yields of non-US government bonds were generally in line
with US Treasuries. But as the value of the US dollar declined, non-US
government bonds outperformed US Treasuries. The fund's exposure to bonds
denominated in the Australian dollar, the New Zealand dollar, and the euro all
helped performance as the US dollar declined sharply against other world
currencies. At the end of the period, the fund's assets were divided roughly as
follows: 40% in high-yield bonds; 26% in US Treasuries, other US government
bonds and preferred stock; and 31% in non-US developed and emerging-market debt.
The balance of our investments was in short-term securities and other assets. We
kept our currency exposure stable during the period.
LOOKING AHEAD
We plan to maintain our exposure to high-yield bonds around the current level
because we expect firmer economic growth in the second half of 2003. We are
unlikely to increase exposure because we believe that this view on the economy
is already priced into the market. Emerging market bonds continue to offer value
at current levels, although we expect the pace of outperformance to slow. We
also believe that the pace of the US dollar's decline versus other currencies
will slow, and we will take this into consideration in managing our currency
exposure going forward.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
Strategic investing offers attractive income and total return opportunities, but
also involves certain risks. The value and return of your investment may
fluctuate as a result of changes in interest rates, the financial strength of
issuers of lower-rated bonds, foreign, political and economic developments, and
changes in currency exchange rates.
Some of the countries the fund invests in are considered emerging economies,
which means there may be greater risks associated with investing there than in
more developed countries. In addition, concentration of investments in a single
region may result in greater volatility.
Investing in high-yield securities offers the potential for high current income
and attractive total return, but involves certain risks. Lower-rated bond risks
include default of the issuer, rising interest rates and risk associated with
investing in securities of foreign and emerging markets, including currency
exchange rate fluctuations and economic and political change.
15
<Page>
PERFORMANCE INFORMATION
Colonial Strategic Income Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR LIFE
- -------------------------------------------------------------------
Class B(1) (6/1/00) 11.81 18.71 5.44 7.63
Lehman Brothers
Government/
Credit Index(2) 5.23 13.15 7.84 8.38
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 7/5/94(3) - 6/30/03
<Table>
<Caption>
CLASS B SHARES LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX
7/5/1994 $ 10,000 $ 10,000
7/31/1994 $ 10,080 $ 10,200
8/31/1994 $ 10,130 $ 10,204
9/30/1994 $ 10,091 $ 10,050
10/31/1994 $ 10,131 $ 10,039
11/30/1994 $ 10,021 $ 10,021
12/31/1994 $ 10,110 $ 10,087
1/31/1995 $ 10,244 $ 10,281
2/28/1995 $ 10,492 $ 10,519
3/31/1995 $ 10,678 $ 10,590
4/30/1995 $ 10,875 $ 10,738
5/31/1995 $ 11,174 $ 11,188
6/30/1995 $ 11,225 $ 11,277
7/31/1995 $ 11,328 $ 11,233
8/31/1995 $ 11,328 $ 11,377
9/30/1995 $ 11,524 $ 11,493
10/31/1995 $ 11,679 $ 11,662
11/30/1995 $ 11,792 $ 11,855
12/31/1995 $ 11,959 $ 12,029
1/31/1996 $ 12,134 $ 12,103
2/29/1996 $ 12,036 $ 11,847
3/31/1996 $ 11,982 $ 11,747
4/30/1996 $ 12,036 $ 11,666
5/31/1996 $ 12,046 $ 11,646
6/30/1996 $ 12,122 $ 11,801
7/31/1996 $ 12,220 $ 11,828
8/31/1996 $ 12,362 $ 11,799
9/30/1996 $ 12,612 $ 12,009
10/31/1996 $ 12,807 $ 12,289
11/30/1996 $ 13,112 $ 12,515
12/31/1996 $ 13,134 $ 12,376
1/31/1997 $ 13,099 $ 12,391
2/28/1997 $ 13,195 $ 12,417
3/31/1997 $ 13,005 $ 12,269
4/30/1997 $ 13,171 $ 12,448
5/31/1997 $ 13,386 $ 12,564
6/30/1997 $ 13,576 $ 12,715
7/31/1997 $ 13,898 $ 13,104
8/31/1997 $ 13,803 $ 12,957
9/30/1997 $ 14,101 $ 13,160
10/31/1997 $ 14,125 $ 13,371
11/30/1997 $ 14,197 $ 13,442
12/31/1997 $ 14,335 $ 13,583
1/31/1998 $ 14,566 $ 13,775
2/28/1998 $ 14,604 $ 13,747
3/31/1998 $ 14,706 $ 13,790
4/30/1998 $ 14,771 $ 13,859
5/31/1998 $ 14,836 $ 14,007
6/30/1998 $ 14,861 $ 14,150
7/31/1998 $ 14,990 $ 14,161
8/31/1998 $ 14,435 $ 14,437
9/30/1998 $ 14,757 $ 14,850
10/31/1998 $ 14,782 $ 14,745
11/30/1998 $ 15,207 $ 14,833
12/31/1998 $ 15,198 $ 14,870
1/31/1999 $ 15,321 $ 14,976
2/28/1999 $ 15,143 $ 14,619
3/31/1999 $ 15,349 $ 14,692
4/30/1999 $ 15,555 $ 14,729
5/31/1999 $ 15,239 $ 14,577
6/30/1999 $ 15,253 $ 14,532
7/31/1999 $ 15,239 $ 14,492
8/31/1999 $ 15,184 $ 14,480
9/30/1999 $ 15,266 $ 14,610
10/31/1999 $ 15,266 $ 14,648
11/30/1999 $ 15,362 $ 14,639
12/31/1999 $ 15,468 $ 14,550
1/31/2000 $ 15,320 $ 14,546
2/29/2000 $ 15,513 $ 14,728
3/31/2000 $ 15,454 $ 14,941
4/30/2000 $ 15,321 $ 14,868
5/31/2000 $ 15,188 $ 14,855
6/30/2000 $ 15,470 $ 15,158
7/31/2000 $ 15,589 $ 15,318
8/31/2000 $ 15,737 $ 15,534
9/30/2000 $ 15,566 $ 15,593
10/31/2000 $ 15,268 $ 15,692
11/30/2000 $ 15,016 $ 15,960
12/31/2000 $ 15,479 $ 16,274
1/31/2001 $ 16,120 $ 16,548
2/28/2001 $ 16,170 $ 16,718
3/31/2001 $ 15,808 $ 16,795
4/30/2001 $ 15,627 $ 16,669
5/31/2001 $ 15,743 $ 16,766
6/30/2001 $ 15,562 $ 16,846
7/31/2001 $ 15,627 $ 17,266
8/31/2001 $ 15,907 $ 17,487
9/30/2001 $ 15,446 $ 17,648
10/31/2001 $ 15,874 $ 18,096
11/30/2001 $ 16,088 $ 17,799
12/31/2001 $ 16,028 $ 17,658
1/31/2002 $ 16,083 $ 17,787
2/28/2002 $ 16,118 $ 17,939
3/31/2002 $ 16,171 $ 17,574
4/30/2002 $ 16,477 $ 17,915
5/31/2002 $ 16,550 $ 18,080
6/30/2002 $ 16,316 $ 18,234
7/31/2002 $ 16,155 $ 18,453
8/31/2002 $ 16,424 $ 18,866
9/30/2002 $ 16,515 $ 19,272
10/31/2002 $ 16,569 $ 19,087
11/30/2002 $ 16,911 $ 19,098
12/31/2002 $ 17,325 $ 19,604
1/31/2003 $ 17,540 $ 19,604
2/28/2003 $ 17,891 $ 19,953
3/31/2003 $ 18,066 $ 19,927
4/30/2003 $ 18,709 $ 20,140
5/31/2003 $ 19,235 $ 20,712
6/30/2003 $ 19,366 $ 20,634
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 8.89 9.94
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The Lehman Brothers Government/Credit Index
is an unmanaged index that tracks the performance of a selection of US
government and investment grade US corporate bonds. Indices are not investments,
do not incur fees or expenses, and are not professionally managed. It is not
possible to invest directly in an index. Securities in the fund may not match
those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class shares would be lower.
(2) Index performance is from June 30, 1994.
(3) Inception date of class A shares (older existing share class).
16
<Page>
INVESTMENT PORTFOLIO
Colonial Strategic Income Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
PAR VALUE
-------------- --------------
CORPORATE FIXED-INCOME
BONDS & NOTES--39.7%
CONSTRUCTION--1.2%
BUILDING CONSTRUCTION--1.2%
Associated Materials, Inc.,
9.750% 04/15/12 $ 190,000 $ 207,100
Atrium Companies, Inc.,
10.500% 05/01/09 130,000 137,800
Congoleum Corp.,
8.625% 08/01/08 140,000 87,500
D.R. Horton, Inc.,
9.750% 09/15/10 575,000 667,000
K. Hovnanian Enterprise, Inc.:
8.875% 04/01/12 45,000 48,712
10.500% 10/01/07 250,000 292,500
Lyon Williams Homes, Inc.,
10.750% 04/01/13 140,000 148,400
Standard Pacific Corp.,
9.250% 04/15/12 275,000 306,625
--------------
1,895,637
--------------
CONSUMER STAPLES--0.3%
HOUSEHOLD PRODUCTS--0.2%
American Greetings Corp.,
11.750% 07/15/08 175,000 201,688
Armkel LLC,
9.500% 08/15/09 115,000 129,950
--------------
331,638
--------------
OFFICE EQUIPMENTS--0.1%
Xerox Corp.,
7.125% 06/15/10 100,000 100,750
--------------
FINANCE, INSURANCE & REAL ESTATE--0.8%
FINANCIAL SERVICES--0.6%
Arch Western Finance,
6.750% 07/01/13 (a) 70,000 71,575
MDP Acquisitions PLC,
9.625% 10/01/12 (a) 340,000 375,700
Orion Power Holdings, Inc.,
12.000% 05/01/10 75,000 86,625
Thornburg Mortgage, Inc.,
8.000% 05/15/13 160,000 163,200
Tiers-MIR-2001-14,
7.200% 06/15/04 (a) 270,000 207,900
--------------
905,000
--------------
INSURANCE AGENTS & BROKERS--0.1%
Willis Corroon Corp.,
9.000% 02/01/09 190,000 203,300
--------------
REAL ESTATE--0.1%
Forest City Enterprises, Inc.,
7.625% 06/01/15 105,000 107,625
iStar Financial, Inc.,
8.750% 08/15/08 125,000 137,500
--------------
245,125
--------------
MANUFACTURING--10.8%
APPAREL--0.2%
Levi Strauss & Co.,
12.250% 12/15/12 $ 135,000 $ 112,388
Warnaco, Inc.,
8.875% 06/15/13 (a) 65,000 67,925
William Carter Co.,
10.875% 08/15/11 150,000 169,313
--------------
349,626
--------------
AUTO PARTS & EQUIPMENT--0.2%
Rexnord Corp.,
10.125% 12/15/12 (a) 85,000 93,500
TRW Automotive Acquisition,
11.000% 02/15/13 215,000 236,500
United Components, Inc.,
9.375% 06/15/13 (a) 40,000 42,100
--------------
372,100
--------------
AUTOMOBILES--0.0%
General Motors,
7.125% 07/15/13 80,000 80,251
--------------
CHEMICALS & ALLIED PRODUCTS--1.8%
Avecia Group PLC,
11.000% 07/01/09 200,000 180,000
Equistar Chemicals LP,
10.125% 09/01/08 145,000 148,987
FMC Corp.,
10.250% 11/01/09 (a) 280,000 316,400
Huntsman ICI Holdings LLC,
12/31/09 (b) 2,410,000 891,700
Lyondell Chemical Co.,
9.625% 05/01/07 440,000 433,400
MacDermid, Inc.,
9.125% 07/15/11 260,000 291,200
Polyone Corp.,
10.625% 05/15/10 170,000 167,450
Terra Capital, Inc.,
12.875% 10/15/08 400,000 436,000
--------------
2,865,137
--------------
ELECTRONIC & ELECTRICAL EQUIPMENT--1.2%
Amkor Technology, Inc.:
7.750% 05/15/13 85,000 79,900
9.250% 02/15/08 185,000 191,475
10.500% 05/01/09 180,000 184,500
Flextronics International Ltd.,
9.875% 07/01/10 300,000 330,000
TransDigm, Inc.,
10.375% 12/01/08 1,000,000 1,070,000
--------------
1,855,875
--------------
FABRICATED METAL--0.4%
Owens-Brockway Glass Container,
8.250% 05/15/13 370,000 384,800
Earle M. Jorgensen & Co.,
9.750% 06/01/12 250,000 265,000
--------------
649,800
--------------
</Table>
See Notes to Investment Portfolio.
17
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
FOOD & KINDRED PRODUCTS--1.4%
Del Monte Corp.,
9.250% 05/15/11 $ 420,000 $ 457,800
Dole Food Co.,
8.625% 05/01/09 275,000 291,500
Dominos, Inc.,
8.250% 07/01/11 (a) 130,000 134,225
Merisant Co.,
07/15/13
(9.500% 07/15/08) (a)(e) 135,000 139,387
Premier International Foods PLC,
12.000% 09/01/09 750,000 828,750
Smithfield Foods, Inc.,
8.000% 10/15/09 295,000 317,863
--------------
2,169,525
--------------
FURNITURE & FIXTURES--0.2%
Juno Lighting, Inc.,
11.875% 07/01/09 195,000 210,600
Simmons Co.,
10.250% 03/15/09 50,000 53,500
--------------
264,100
--------------
MACHINERY & COMPUTER EQUIPMENT--0.1%
Cummins, Inc.,
9.500% 12/01/10 195,000 219,375
--------------
MEASURING & ANALYZING INSTRUMENTS--0.2%
Fisher Scientific International Inc.,
8.125% 05/01/12 250,000 270,000
--------------
MISCELLANEOUS MANUFACTURING--2.1%
Actuant Corp.,
13.000% 05/01/09 211,000 246,870
AGCO Corp.,
9.500% 05/01/08 220,000 242,000
American Standard, Inc.,
7.375% 02/01/08 260,000 287,625
Applied Extrusion Technologies,
10.750% 07/01/11 215,000 159,100
Ball Corp.,
6.875% 12/15/12 300,000 318,750
Crown European Holdings SA,
10.875% 03/01/13 190,000 207,575
Flowserve Corp.,
12.250% 08/15/10 205,000 239,850
Hexcel Corp.:
9.750% 01/15/09 145,000 144,275
9.875% 10/01/08 40,000 43,600
Koppers Industries, Inc.,
9.875% 12/01/07 325,000 335,563
Owens-Illinois, Inc.,
7.150% 05/15/05 90,000 91,800
SPX Corp.,
7.500% 01/01/13 165,000 177,375
Tekni-Plex, Inc.,
12.750% 06/15/10 550,000 543,125
Terex Corp.,
10.375% 04/01/11 215,000 238,650
--------------
3,276,158
--------------
PAPER PRODUCTS--1.0%
Georgia Pacific Corp.,
8.875% 02/01/10 $ 200,000 $ 216,000
Jefferson Smurfit Corp.,
8.250% 10/01/12 (a) 165,000 178,200
Norske Skog Canada Ltd.,
8.625% 06/15/11 90,000 92,700
Packaging Corp.,
9.625% 04/01/09 260,000 286,000
Riverwood International Corp.,
10.875% 04/01/08 675,000 691,875
Tembec Industries, Inc.,
8.500% 02/01/11 150,000 148,500
--------------
1,613,275
--------------
POLLUTION CONTROL--0.0%
Envirosource, Inc.,
14.000% 12/15/08 68,416 61,574
--------------
PRIMARY METAL--0.4%
Bayou Steel Corp.,
9.500% 05/15/08 (d) 500,000 107,500
Kaiser Aluminum & Chemical Corp.,
10.875% 10/15/06 (d) 420,000 298,200
Steel Dymanics, Inc.,
9.500% 03/15/09 50,000 52,500
WCI Steel, Inc.,
10.000% 12/01/04 (c) 320,000 102,400
Wheeling-Pittsburgh Corp.,
9.250% 11/15/07 (d) 750,000 67,500
--------------
628,100
--------------
PRINTING & PUBLISHING--1.2%
CBD Media/CBD Finance,
8.625% 06/01/11 (a) 30,000 31,050
Dex Media East LLC,
12.125% 11/15/12 (a) 370,000 440,300
Hollinger, Inc.,
11.875% 03/01/11 195,000 217,425
Primedia, Inc.,
8.875% 05/15/11 375,000 398,438
Von Hoffman Corp.,
10.250% 03/15/09 285,000 304,950
Yell Finance BV,
10.750% 08/01/11 470,000 542,850
--------------
1,935,013
--------------
TEXTILE MILL PRODUCTS--0.1%
Collins & Aikman Floor Covering, Inc.,
9.750% 02/15/10 150,000 156,750
--------------
TRANSPORTATION EQUIPMENT--0.3%
Sequa Corp.,
8.875% 04/01/08 315,000 329,175
Teekay Shipping Corp.,
8.875% 07/15/11 85,000 90,950
--------------
420,125
--------------
</Table>
See Notes to Investment Portfolio.
18
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
MINING & ENERGY--5.0%
METAL MINING--0.2%
TriMas Corp.,
9.875% 06/15/12 (a) $ 355,000 $ 362,100
--------------
OIL & GAS EXTRACTION--4.6%
Benton Oil & Gas Co.,
9.375% 11/01/07 215,000 195,113
Chesapeake Energy Corp.:
7.750% 01/15/15 185,000 197,950
8.125% 04/01/11 100,000 107,750
Compton Petroleum Corp.,
9.90% 05/15/09 195,000 213,525
Denbury Management, Inc.,
7.500% 04/01/13 110,000 113,850
Dynegy Holdings, Inc.,
8.750% 02/15/12 200,000 187,000
El Paso Energy Corp.:
7.750% 06/15/10 380,000 355,300
7.750% 06/01/13 210,000 211,050
8.500% 06/01/10 175,000 187,687
Encore Acquisition Co.,
8.375% 06/15/12 (a) 195,000 207,675
Forest Oil Corp.,
8.000% 06/15/08 250,000 265,000
Houston Exploration Co.,
7.000% 06/15/13 (a) 50,000 52,375
Magnum Hunter Resources, Inc.,
9.600% 03/15/12 100,000 110,500
Mariner Energy, Inc.,
10.500% 08/01/06 215,000 215,000
Northwest Pipeline Corp.,
8.125% 03/01/10 85,000 91,588
PDVSA Finance Ltd.:
6.250% 02/15/06 EUR 396,750 424,611
6.650% 02/15/06 $ 240,000 226,800
Pemex Project Funding Master Trust:
7.375% 12/15/14 290,000 315,636
9.125% 10/13/10 950,000 1,149,500
Pioneer Natural Resource Co.:
7.500% 04/15/12 70,000 80,500
9.625% 04/01/10 315,000 385,875
Pogo Producing Co.,
8.250% 04/15/11 425,000 471,750
Premcor Refining Group,
7.500% 06/15/15 165,000 165,000
Sonat, Inc.,
7.625% 07/15/11 145,000 131,950
Southern Natural Gas Co.,
8.875% 03/15/10 130,000 142,675
Stone Energy Corp.,
8.250% 12/15/11 135,000 142,425
Tesoro Pete Corp.,
8.000% 04/15/08 70,000 72,100
Williams Companies, Inc.:
8.125% 03/15/12 430,000 441,825
8.625% 06/01/10 55,000 57,475
XTO Energy, Inc.,
7.500% 04/15/12 $ 325,000 $ 372,125
--------------
7,291,610
--------------
OIL & GAS FIELD SERVICES--0.2%
Frontier Escrow Corp.,
8.000% 4/15/13 55,000 57,612
Newpark Resources, Inc.,
8.625% 12/15/07 195,000 198,900
--------------
256,512
--------------
RETAIL TRADE--1.6%
FOOD & KINDRED PRODUCTS--0.3%
Constellation Brands,
8.125% 01/15/12 175,000 189,000
Roundy's Inc.,
8.875% 06/15/02 275,000 288,750
--------------
477,750
--------------
FOOD STORES--0.4%
Winn-Dixie Stores, Inc.,
8.875% 04/01/08 560,000 599,200
--------------
MISCELLANEOUS RETAIL--0.8%
Gap, Inc.,
10.550% 12/15/08 190,000 230,850
JC Penney Co., Inc.,
8.000% 03/01/10 270,000 283,500
Rite Aid Corp.:
8.125% 05/01/10 80,000 83,600
9.250% 06/01/13 295,000 292,050
Saks, Inc.,
8.250% 11/15/08 70,000 74,550
Steinway Musical Instruments, Inc.,
8.750% 04/15/11 270,000 270,000
--------------
1,234,550
--------------
RESTAURANTS--0.1%
Yum! Brands, Inc.,
7.700% 07/01/12 200,000 227,000
--------------
SERVICES--7.6%
AMUSEMENT & RECREATION--3.4%
Ameristar Casinos, Inc.,
10.750% 02/15/09 215,000 244,025
Argosy Gaming Co.,
10.750% 06/01/09 305,000 333,213
Boyd Gaming Corp.,
8.750% 04/15/12 85,000 93,075
Circus & Eldorado/Silver Legacy
Capital Corp.,
10.125% 03/01/12 270,000 265,275
Coast Hotels & Casinos, Inc.,
9.500% 04/01/09 325,000 347,750
Corrections Corp.,
9.875% 05/01/09 180,000 201,600
</Table>
See Notes to Investment Portfolio.
19
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
Corus Entertainment Inc.,
8.750% 03/01/12 $ 115,000 $ 123,625
Hollywood Casino Shreveport,
13.000% 08/01/06 470,000 319,600
Hollywood Entertainment Corp.,
9.625% 03/15/11 235,000 256,150
Majestic Investment Holdings LLC,
11.653% 11/30/07 135,000 135,000
Mohegan Tribal Gaming:
8.000% 04/01/12 350,000 377,125
8.375% 07/01/11 125,000 135,000
Park Place Entertainment Corp.,
9.375% 02/15/07 285,000 314,925
Penn National Gaming, Inc.,
11.125% 03/01/08 250,000 277,500
Pinnacle Entertainment, Inc.,
9.250% 02/15/07 750,000 742,500
Regal Cinemas, Inc.,
9.375% 02/01/12 360,000 396,000
Royal Caribbean Cruises, Ltd.,
8.000% 05/15/10 145,000 149,712
Six Flags, Inc.,
9.500% 02/01/09 435,000 428,475
Town Sports International, Inc.,
9.625% 04/15/11 115,000 121,325
Venetian Casino Resort LLC,
11.000% 06/15/10 (a) 205,000 231,650
--------------
5,493,525
--------------
AUTO EQUIPMENT & RENTAL SERVICES--0.9%
Accuride Corp.,
9.250% 02/01/08 75,000 68,625
Collins & Aikman Products Co.,
10.750% 12/31/11 285,000 252,225
Dana Corp.:
9.000% 08/15/11 135,000 146,137
10.125% 03/15/10 125,000 137,500
Dura Operating Corp.,
8.625% 04/15/12 225,000 232,312
Lear Corp.,
8.110% 05/15/09 370,000 426,425
United Rentals NA, Inc.,
10.750% 04/15/08 170,000 185,725
--------------
1,448,949
--------------
COMMERCIAL SERVICES--0.2%
Iron Mountains, Inc.,
6.625% 01/01/16 210,000 206,850
Moore North America,
7.875% 01/15/11 110,000 114,950
--------------
321,800
--------------
FUNERAL SERVICES--0.4%
Service Corp. International,
7.700% 04/15/09 400,000 407,000
Stewart Enterprises, Inc.,
10.750% 07/01/08 235,000 262,025
--------------
669,025
--------------
HEALTH SERVICES--2.2%
AmerisourceBergen Corp.:
7.250% 11/15/12 (a) $ 140,000 $ 152,250
8.125% 09/01/08 250,000 275,625
Coventry Health Care Inc.,
8.125% 02/15/12 265,000 288,850
HCA,
8.750% 09/01/10 610,000 721,496
Iasis Healthcare Corp.,
13.000% 10/15/09 185,000 206,275
Insight Health Services Corp.,
9.875% 11/01/11 230,000 239,200
Magellan Health Services, Inc.,
9.375% 11/15/07 (a) 210,000 208,950
Medquest, Inc.,
11.875% 08/15/12 (a) 335,000 353,425
Pacificare Health Systems, Inc.,
10.750% 06/01/09 325,000 372,125
Tenet Healthcare Corp.,
6.375% 12/01/11 405,000 382,725
United Surgical Partners
Holdings, Inc.,
10.000% 12/15/11 250,000 270,000
--------------
3,470,921
--------------
HOTELS, CAMPS & LODGING--0.5%
Hard Rock Hotel, Inc.,
8.875% 06/01/13 95,000 99,275
Host Marriott LP,
9.500% 01/15/07 225,000 243,562
Starwood Hotels & Resorts Worldwide, Inc.,
7.875% 05/01/12 (a) 375,000 410,625
--------------
753,462
--------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES--12.2%
AEROSPACE--0.2%
BE Aerospace, Inc.,
8.875% 05/01/11 175,000 137,375
Vought Aircraft Industries, Inc.,
8.000% 07/15/11 (a) 105,000 105,788
--------------
243,163
--------------
AIR TRANSPORTATION--0.5%
Northwest Airlines Inc.,
9.875% 03/15/07 220,000 179,300
Petroleum Helicopters, Inc.,
9.375% 05/01/09 325,000 364,000
U.S. Airways, Inc.,
10.375% 03/01/13 (c) 850,000 212,500
--------------
755,800
--------------
BROADCASTING--1.4%
Advanstar Communications, Inc.,
12.000% 02/15/11 300,000 282,750
</Table>
See Notes to Investment Portfolio.
20
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
Canwest Media, Inc.,
10.625% 05/15/11 $ 390,000 $ 446,550
Chancellor Media Corp.,
8.000% 11/01/08 85,000 100,300
Emmis Communications,
03/15/11
(12.500% 03/15/06) (e) 317,000 275,790
Quebecor Media, Inc.,
11.125% 07/15/11 400,000 460,000
Sinclair Broadcast Group, Inc.,
8.750% 12/15/11 250,000 275,000
TV Azteca SA de CV,
10.500% 02/15/07 470,000 470,000
--------------
2,310,390
--------------
CABLE--2.0%
British Sky Broadcasting Group,
8.200% 07/15/09 345,000 403,105
Charter Communications Holding LLC:
04/01/11
(9.920% 4/01/04) (e) 990,000 653,400
10.000% 04/01/09 275,000 207,625
Comcast UK Cable Partners Ltd.,
11.200% 11/15/07 450,000 439,875
CSC Holdings, Inc.,
7.625% 04/01/11 195,000 197,925
Direct TV Holdings LCC,
8.375% 3/15/13 200,000 223,500
EchoStar DBS Corp.:
9.125% 01/15/09 90,000 100,575
9.375% 02/01/09 200,000 213,500
Insight Communications, Inc.,
02/15/11
(12.250% 02/15/06) (e) 340,000 280,500
Northland Cable Television, Inc.,
10.250% 11/15/07 400,000 384,000
Rogers Cable, Inc.,
6.250% 06/15/13 (a) 105,000 105,150
--------------
3,209,155
--------------
COMMUNICATIONS--0.7%
L-3 Communications Corp.,
7.625% 06/15/12 280,000 308,000
Level 3 Communications,
10.500% 12/01/08 415,000 348,600
Vivendi SA,
9.250% 04/15/10 175,000 203,000
XM Satellite Radio Holdings, Inc.,
12/31/09
(14.000% 01/01/06) (e) 310,485 223,549
--------------
1,083,149
--------------
COMMUNICATION SERVICES--0.8%
Colt Telecom Group PLC:
2.000% 03/29/06 EUR 175,000 167,074
12.000% 12/15/06 $ 155,000 155,775
Crown Castle International Corp.:
05/15/11
(10.375% 05/15/04) (e) $ 175,000 $ 167,562
10.750% 08/01/11 30,000 32,625
Fairpoint Communications,
11.875% 03/01/10 115,000 133,400
Lucent Technologies, Inc.:
6.450% 03/15/29 220,000 149,600
7.250% 07/15/06 145,000 137,025
SBA Communication Corp.,
10.250% 02/01/09 290,000 265,350
--------------
1,208,411
--------------
ELECTRIC, GAS & SANITARY SERVICES--1.0%
Allied Waste North America, Inc.:
8.500% 12/01/08 285,000 307,088
10.000% 08/01/09 1,090,000 1,160,850
HydroChem Industrial Services, Inc.,
10.375% 08/01/07 150,000 105,000
--------------
1,572,938
--------------
ELECTRIC SERVICES--2.1%
AES Corp.:
9.000% 05/15/15 170,000 180,200
9.500% 06/01/09 432,000 438,480
Beaver Valley Funding Corp.,
9.000% 06/01/17 235,000 281,161
Caithness Coso Funding Corp.,
9.050% 12/15/09 312,054 327,657
Calpine Corp.:
8.500% 02/15/11 440,000 330,000
8.625% 08/15/10 140,000 105,000
CEnergy Corp.,
8.900% 07/15/08 260,000 273,000
Edison Mission Energy,
9.875% 04/15/11 200,000 188,000
Illinois Power Co.,
11.500% 12/15/10 75,000 85,687
Mission Energy Holdings Co.,
13.500% 07/15/08 60,000 40,800
MSW Energy Holdings,
8.500% 09/01/10 (a) 270,000 278,100
Nevada Power Co.,
10.875% 10/15/09 (a) 215,000 242,950
PG&E Corp.,
6.875% 07/15/08(a) 80,000 80,160
PSEG Energy Holdings,
8.625% 02/15/08 215,000 231,125
UCAR, Inc.,
10.250% 02/15/12 230,000 225,400
--------------
3,307,720
--------------
MARINE SERVICES--0.2%
Stena AB,
9.625% 12/01/12 (a) 170,000 186,575
Trico Marine Services, Inc.,
8.875% 05/15/12 170,000 148,750
--------------
335,325
--------------
</Table>
See Notes to Investment Portfolio.
21
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
MOTOR FREIGHT & WAREHOUSING--0.2%
Allied Holdings, Inc.,
8.625% 10/01/07 $ 155,000 $ 139,500
Offshore Logistic,
6.125% 06/15/13 65,000 65,325
QDI LLC:
12.000% 06/15/09 (a) 83,857 12,474
12.500% 06/15/08 341,000 135,974
--------------
353,273
--------------
RADIO & TELEPHONE COMMUNICATIONS--1.7%
AirGate PCS, Inc.,
10/01/09
(13.500% 10/01/04) (e) 230,000 108,100
Avaya, Inc.,
11.125% 04/01/09 150,000 164,250
Horizon PCS, Inc.,
13.750% 06/15/11 285,000 51,300
Nextel Communications, Inc.:
9.750% 10/31/07 685,000 708,975
9.375% 11/15/09 415,000 448,200
Nextel Partners, Inc.,
11.000% 03/15/10 225,000 244,125
Nortel Networks Ltd.,
6.125% 02/15/06 340,000 329,800
Rogers Cantel, Inc.,
9.750% 06/01/16 460,000 520,950
US Unwired, Inc.,
11/01/09
(13.375% 11/01/04) (e) 500,000 220,000
--------------
2,795,700
--------------
RAIL ROAD--0.2%
Kansas City Southern,
7.500% 06/15/09 140,000 144,900
TFM SA de CV,
12.500% 06/15/12 (a) 230,000 248,400
--------------
393,300
--------------
TELECOMMUNICATIONS--1.2%
AT&T Wireless Services, Inc.,
7.875% 03/01/11 145,000 171,448
Carrier1 International SA,
13.250% 02/15/09 (d) 500,000 15,000
Centennial Cell/Communications,
10.125 6/15/13 (a) 80,000 79,200
Insight Midwest/Insight Capital,
9.750% 10/01/09 (a) 215,000 227,900
Qwest Corp.:
8.875% 03/15/12 280,000 312,200
13.500% 12/15/10 320,000 361,600
Spectrasite,
8.250% 05/15/10 130,000 135,525
Time Warner Telecom, LLC:
9.750% 07/15/08 200,000 194,500
10.125% 02/01/11 295,000 286,887
Triton PCS, Inc.,
8.750% 11/15/11 135,000 135,000
--------------
1,919,260
--------------
WHOLESALE TRADE--0.2%
DURABLE GOODS--0.2%
Playtex Products, Inc.,
9.375% 06/01/11 $ 300,000 $ 300,000
--------------
TOTAL CORPORATE FIXED INCOME BONDS & NOTES
(cost of $61,298,948) 63,262,222
--------------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS--24.9%
Federal Home Loan Mortgage Corp.,
8.000% 10/01/26 368,505 398,034
--------------
Federal National Mortgage Association,
6.500% TBA (f) 2,795,000 2,914,659
--------------
Government National Mortgage Association,
8.000% 04/15/17 121,983 133,389
--------------
U.S. Treasury Bonds:
7.500% 11/15/24 1,310,000 1,839,117
8.750% 05/15/17 4,911,000 7,350,962
10.375% 11/15/12 3,800,000 5,061,866
11.625% 11/15/04 2,900,000 3,312,345
12.000% 08/15/13 9,548,000 13,875,555
--------------
31,439,845
--------------
U.S. Treasury Notes:
5.625% 05/15/08 2,500,000 2,866,015
6.500% 10/15/06 1,730,000 1,987,607
--------------
4,853,622
--------------
TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS
(cost of $38,063,783) 39,739,549
--------------
FOREIGN GOVERNMENT OBLIGATIONS--31.3%
European Investment Bank,
7.625% 12/07/07 GBP 455,000 864,416
Government of Australia,
6.250% 04/15/15 AUD 1,750,000 1,293,983
Government of Canada:
5.500% 06/01/10 CAD 1,020,000 811,313
10.000% 06/01/08 2,656,000 2,502,018
Government of New Zealand:
6.000% 11/15/11 NZD 6,410,000 3,925,517
6.500% 04/15/13 2,545,000 1,617,457
Government of Sweden:
5.500% 10/08/12 SEK 10,210,000 1,393,863
6.750% 05/05/14 15,230,000 2,281,300
</Table>
See Notes to Investment Portfolio.
22
<Page>
<Table>
<Caption>
PAR VALUE
--------------- --------------
Republic of France:
5.000% 10/25/16 EUR 1,100,000 $ 1,368,055
5.500% 10/25/10 975,000 1,268,590
Kingdom of Norway:
6.000% 05/16/11 NOK 20,420,000 3,089,758
6.750% 01/15/07 2,985,000 452,848
Poland Government Bond,
8.500% 05/12/07 PLN 3,357,000 968,175
Republic of Brazil:
9.500% 01/24/11 $ 500,000 533,429
11.000% 08/17/40 EUR 443,000 404,237
11.500% 04/02/09 930,000 1,061,175
14.500% 10/15/09 $ 725,000 839,187
Republic of Bulgaria,
7.500% 01/15/13 EUR 1,238,000 1,569,971
Republic of Colombia:
9.750% 04/09/11 $ 651,123 740,653
10.000% 01/23/12 782,000 875,840
11.500% 05/31/11 EUR 335,000 439,088
Republic of Germany,
5.375% 01/04/10 905,000 1,163,902
Republic of Greece:
5.350% 05/08/11 $ 1,115,000 1,429,200
8.600% 03/26/08 381,000 545,069
Republic of Hungary,
8.500% 10/12/05 HUF 195,650,000 842,444
Republic of Italy,
5.250% 08/01/11 EUR 2,330,000 2,978,921
Republic of Peru,
9.875% 02/06/15 $ 435,000 477,413
Republic of South Africa:
5.250% 05/16/13 EUR 555,000 615,088
13.000% 08/31/10 ZAR 14,455,000 2,341,017
Republic of Venezuela,
9.250% 09/15/27 $ 1,103,000 816,220
Russian Federation:
5.000% 03/31/30 2,200,000 2,134,000
11.000% 07/24/18 445,000 638,130
12.750% 06/24/28 405,000 680,400
Treasury Corp. of Victoria, Australia,
7.500% 08/15/08 AUD 3,100,000 2,326,487
United Kingdom Treasury:
5.000% 03/07/12 GBP 540,000 947,013
9.000% 07/12/11 615,000 1,355,015
United Mexican States:
7.500% 03/08/10 EUR 375,000 478,792
8.300% 08/15/31 $ 665,000 765,748
11.375% 09/15/16 777,000 1,130,535
--------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(cost of $42,245,625) 49,966,267
--------------
TOTAL BONDS & NOTES
(cost of $141,608,356) 152,968,038
--------------
<Caption>
SHARES VALUE
-------------- --------------
PREFERRED STOCKS--0.6%
FINANCIAL SERVICES--0.1%
Sinclair Capital,
11.625% 2,000 $ 209,300
--------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES--0.4%
CSC Holdings Ltd.:
11.125% 3,232 332,896
11.750% 2,291 235,973
--------------
568,869
--------------
COMMUNICATIONS--0.1%
Dobson Communication Corp.,
12.25% PIK, 221 218,790
--------------
POLLUTION CONTROL--0.0%
Envirosource, Inc.,
7.250% 232 10,741
--------------
TOTAL PREFERRED STOCKS
(cost of $997,010) 1,007,700
--------------
COMMON STOCKS--0.0%
TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS
& SANITARY SERVICES--0.0%
POLLUTION CONTROL--0.0%
Envirosource, Inc. (h) 2,000 460
Fairlane Management Corp. (g) 2,000 --
--------------
460
--------------
TELECOMMUNICATIONS--0.0%
Price Communications Corp. 1 13
--------------
TOTAL COMMON STOCKS
(cost of $64) 473
--------------
WARRANTS (h)--0.1%
<Caption>
UNITS
---------------
RETAIL TRADE--0.0%
FOOD STORES--0.0%
Pathmark Stores, Inc.,
expires 9/19/10 2,938 3,731
--------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES--0.0%
CABLE--0.0%
Cable Satisfaction International, Inc.,
expires 03/01/05 515 5
Ono Finance PLC:
expires 02/15/11 150 2
expires 05/31/09 500 1
--------------
8
--------------
COMMUNICATIONS--0.1%
Horizon PCS, Inc.,
expires 10/1/10 (a) 315 --
UbiquiTel, Inc.,
expires 04/15/10 (a) 225 2
</Table>
See Notes to Investment Portfolio.
23
<Page>
<Table>
<Caption>
UNITS VALUE
--------------- --------------
XM Satellite Radio Holdings, Inc.:
expires 03/15/10 (a) 150 $ 825
expires 12/31/09 (a) 235 162,150
--------------
162,977
--------------
MOTOR FREIGHT & WAREHOUSING--0.0%
Quality Distribution Inc., LLC,
expires 06/15/06 (a) 1,020 --
--------------
--
--------------
TELECOMMUNICATIONS--0.0%
Jazztel PLC,
expires 07/15/10 95 --
Carrier1 International SA,
expires 02/19/09 235 2
--------------
2
--------------
TOTAL WARRANTS
(cost of $527,407) 166,718
--------------
SHORT-TERM OBLIGATION--3.0%
<Caption>
PAR
---------------
Repurchase agreement with
State Street Bank & Trust Co.,
dated 06/30/03, due 7/01/03 at
1.000%, collateralized by
a U.S. Treasury Bond
maturing 2/15/29, market
value $4,908,368
(repurchase proceeds
$4,809,134)
(cost of $4,809,000) $ 4,809,000 4,809,000
--------------
TOTAL INVESTMENTS--99.6%
(cost of $147,941,837) (i) 158,951,929
--------------
OTHER ASSETS & LIABILITIES, NET--0.4% 652,929
--------------
NET ASSETS--100.0% $ 159,604,858
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2003
the value of these securities amounted to $5,806,986 or 3.6% of net assets.
(b) Zero coupon bond.
(c) This issuer is in default of certain debt covenants. Income is not being
accrued.
(d) As of June 30, 2003, the Fund held certain securities that have filed for
bankruptcy protection under Chapter 11, representing 0.3% of net assets.
This issuer is in default of certain debt covenants. Income is not being
accrued.
(e) Stepped coupon bond currently accruing at zero. Shown parenthetically is
the next interest rate to be paid and the date the Fund will begin accruing
this rate.
(f) Settlement of this security is on delayed delivery basis.
(g) Represents fair value as determined in good faith under the direction of
the Trustees.
(h) Non-income producing.
(i) Cost for federal income tax purposes is $149,395,433. The difference
between cost for generally accepted accounting principles and cost on a tax
basis is related to amortization/accretion tax elections on fixed income
securities.
As of June 30, 2003, the Fund had entered into the following forward currency
contracts:
<Table>
<Caption>
IN
CONTRACTS EXCHANGE SETTLEMENT NET UNREALIZED
TO DELIVER FOR DATE APPRECIATION
- ---------------- -------------- ---------- --------------
CAD 746,000 US $ 548,830 08/11/03 $ 265
EUR 112,600 US $ 129,374 08/06/03 2,208
EUR 3,897,500 US $ 4,479,939 07/23/03 52,997
GBP 347,500 US $ 573,411 07/23/03 5,825
NOK 8,438,000 US $ 1,167,374 07/23/03 35,753
NZD 2,790,000 US $ 1,632,860 07/21/03 185
SEK 6,530,000 US $ 814,311 08/25/03 26,534
--------------
$ 123,767
==============
<Caption>
IN
CONTRACTS EXCHANGE SETTLEMENT NET UNREALIZED
TO DELIVER FOR DATE DEPRECIATION
- ---------------- -------------- ---------- --------------
AUD 2,430,669 US $ 1,628,364 07/21/03 $ (4,681)
==============
<Caption>
SUMMARY OF SECURITIES % OF TOTAL
BY COUNTRY VALUE INVESTMENTS
- --------------------- ------------- -----------
United States $ 102,091,230 64.2%
New Zealand 5,542,974 3.5%
Canada 5,400,561 3.4%
United Kingdom 4,745,373 3.0%
Sweden 3,861,738 2.4%
Australia 3,620,470 2.3%
Norway 3,542,606 2.2%
Russia 3,452,530 2.2%
Italy 2,978,921 1.9%
South Africa 2,956,105 1.9%
Mexico 2,845,074 1.8%
France 2,839,645 1.8%
Brazil 2,838,028 1.8%
Colombia 2,055,581 1.3%
Greece 1,974,269 1.2%
Bulgaria 1,569,971 1.0%
Germany 1,163,902 0.7%
Poland 968,175 0.6%
Hungary 842,444 0.5%
Venezuela 816,220 0.5%
Netherlands 542,850 0.3%
Peru 477,413 0.3%
Bermuda 439,875 0.3%
Cayman Islands 424,611 0.3%
Ireland 375,700 0.2%
Singapore 330,000 0.2%
Liberia 149,713 0.1%
Marshall Islands 90,950 0.1%
Luxembourg 15,000 0.0%
------------- -----
$ 158,951,929 100.0%
============= =====
</Table>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
<Table>
<Caption>
ACRONYM NAME
------- ----
PIK Payment-In-Kind
AUD Australian Dollars
CAD Canadian Dollars
EUR European Currency
GBP British Pounds
HUF Hungarian Forint
NOK Norwegian Krona
NZD New Zealand Dollars
PLN Polish Zloty
ZAR South African Rand
SEK Swedish Krona
</Table>
See Notes to Financial Statements.
24
<Page>
STATEMENT OF ASSETS & LIABILITIES
Colonial Strategic Income Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 147,941,837
---------------
Investments, at value $ 158,951,929
Cash 494
Foreign currency (cost of $496,631) 494,632
Receivable for:
Investments sold 189,475
Fund shares sold 883,545
Interest 2,984,639
Dividends 15,719
Net unrealized appreciation on forward foreign currency
contracts 119,086
Expense reimbursement due from Distributor 1,130
Deferred Trustees' compensation plan 5,339
---------------
TOTAL ASSETS 163,645,988
---------------
LIABILITIES:
Payable for:
Investments purchased 895,686
Investments purchased on a delayed delivery basis 2,912,697
Fund shares repurchased 86,681
Management fee 82,080
Distribution fee--Class B 917
Transfer agent fee 595
Trustees' fee 313
Reports to Shareholders 47,193
Deferred Trustees' fee 5,339
Other liabilities 9,629
---------------
TOTAL LIABILITIES 4,041,130
---------------
NET ASSETS $ 159,604,858
===============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 173,888,923
Undistributed net investment income 3,467,142
Accumulated net realized loss (28,902,565)
Net unrealized appreciation on:
Investments 11,010,092
Foreign currency translations 141,266
---------------
NET ASSETS $ 159,604,858
===============
CLASS A:
Net assets $ 110,780,339
Shares outstanding 11,128,834
===============
Net asset value per share $ 9.95
===============
CLASS B:
Net assets $ 48,824,519
Shares outstanding 4,913,759
===============
Net asset value per share $ 9.94
===============
</Table>
See Notes to Financial Statements.
25
<Page>
STATEMENT OF OPERATIONS
Colonial Strategic Income Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 30,684
Interest 5,647,195
Dollar roll fee income 15,704
---------------
Total Investment Income (net of foreign taxes withheld
of $18,336) 5,693,583
---------------
EXPENSES:
Management fee 480,131
Distribution fee--Class B 50,294
Pricing and bookkeeping fees 30,592
Transfer agent fee 3,720
Trustees' fee 5,969
Custody fee 20,928
Audit fee 13,436
Reports to shareholders 17,583
Other expenses 4,926
---------------
Total Expenses 627,579
Fees reimbursed by Distributor--Class B (6,242)
Custody earnings credit (181)
---------------
Net Expenses 621,156
---------------
Net Investment Income 5,072,427
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments 1,208,428
Foreign currency transactions (920,917)
---------------
Net realized gain 287,511
---------------
Net change in unrealized appreciation/depreciation on:
Investments 10,984,793
Foreign currency translations 295,612
---------------
Net change in unrealized appreciation/depreciation 11,280,405
---------------
Net Gain 11,567,916
---------------
Net Increase in Net Assets from Operations $ 16,640,343
===============
</Table>
See Notes to Financial Statements.
26
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Colonial Strategic Income Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- --------------- ---------------
OPERATIONS:
Net investment income $ 5,072,427 $ 9,896,562
Net realized gain (loss) on investments and foreign currency
transactions 287,511 (8,483,465)
Net change in unrealized appreciation/depreciation on
investments and foreign currency translations 11,280,405 9,597,438
--------------- ---------------
Net Increase from Operations 16,640,343 11,010,535
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A -- (8,337,510)
Class B -- (2,438,046)
Return of capital:
Class A -- (171,968)
Class B -- (50,287)
--------------- ---------------
Total Distributions Declared to Shareholders -- (10,997,811)
--------------- ---------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 3,349,817 3,738,599
Distributions reinvested -- 8,509,478
Redemptions (11,109,265) (29,202,076)
--------------- ---------------
Net Decrease (7,759,448) (16,953,999)
--------------- ---------------
Class B:
Subscriptions 14,884,414 15,913,161
Distributions reinvested -- 2,488,333
Redemptions (2,982,222) (5,160,875)
--------------- ---------------
Net Increase 11,902,192 13,240,619
--------------- ---------------
Net Increase (Decrease) from Share Transactions 4,142,744 (3,713,380)
--------------- ---------------
Total Increase (Decrease) in Net Assets 20,783,087 (3,700,656)
NET ASSETS:
Beginning of period 138,821,771 142,522,427
--------------- ---------------
End of period (including undistributed net investment income
of $3,467,142 and overdistributed net investment income
of $(1,605,285)) $ 159,604,858 $ 138,821,771
=============== ===============
CHANGES IN SHARES:
Class A:
Subscriptions 354,352 407,376
Issued for distributions reinvested -- 956,121
Redemptions (1,182,274) (3,201,245)
--------------- ---------------
Net Decrease (827,922) (1,837,748)
--------------- ---------------
Class B:
Subscriptions 1,587,002 1,749,903
Issued for distributions reinvested -- 279,902
Redemptions (318,121) (572,003)
--------------- ---------------
Net Increase 1,268,881 1,457,802
--------------- ---------------
</Table>
See Notes to Financial Statements.
27
<Page>
NOTES TO FINANCIAL STATEMENTS
Colonial Strategic Income Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Colonial Strategic Income Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek current income, consistent with prudent
risk and maximum total return. The Fund's capitalization consists of an
unlimited number of shares of beneficial interest without par value that
represent a separate series of the Trust. The Fund offers two classes of shares:
Class A and Class B. Each share of the class represents an equal proportionate
beneficial interest in that share class and, when issued and outstanding, is
fully paid and nonassessable. Shareholders would be entitled to share
proportionally in the net assets of their share class available for distribution
to shareholders upon liquidation of the Fund. Shares of the Fund are available
and are being marketed exclusively as a pooled funding vehicle for variable
annuity contracts ("VA contracts") and Variable Life Insurance Policies ("VLI
Policies") offered by the separate accounts of certain life insurance companies
("Participating Insurance Companies"). The Participating Insurance Companies and
their separate accounts own all the shares of the Fund.
On April 1, 2003, Liberty Advisory Services Corp., the investment advisor to the
Fund and Colonial Management Associates, Inc. ("Colonial"), the sub-advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Liberty Advisory Services Corp. and Colonial with respect to
the Fund. The merger did not change the way the Fund is managed, the investment
personnel assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Debt securities generally are valued by
a pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
the current quoted bid price.
Forward currency contracts are valued based on the weighted value of
exchange-traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation of
the Fund's net asset value. If events materially affecting the value of such
securities and such exchange rates occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Fund may enter into mortgage dollar roll transactions. A mortgage dollar
roll transaction involves a sale by the Fund of securities that it holds with an
agreement by the Fund to repurchase substantially similar securities at an
agreed upon price and date. During the period between
28
<Page>
the sale and the repurchase, the Fund will not be entitled to accrue interest
and receive principal payments on the securities sold. Mortgage dollar roll
transactions involve the risk that the market value of the securities sold by
the Fund may decline below the repurchase price of those securities. In the
event the buyer of the securities under a mortgage dollar roll transaction files
for bankruptcy or becomes insolvent, the Fund's use of proceeds of the
transaction may be restricted pending a determination by or with respect to the
other party.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
The Fund maintains U.S. government securities or other liquid high-grade debt
obligations as collateral with respect to mortgage dollar roll transactions and
securities traded on other than normal settlement terms.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM--Interest income is recorded on
the accrual basis. Discount is accreted to interest income over the life of a
security with a corresponding increase in the cost basis. Premium is amortized
against interest income with a corresponding decrease in the cost basis.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
FOREIGN CURRENCY TRANSACTIONS--Net realized and unrealized gains (losses) on
foreign currency transactions and translations includes gains (losses) arising
from the fluctuations in exchange rates between trade and settlement dates on
securities transactions, gains (losses) arising from the disposition of foreign
currency, and currency gains (losses) between the accrual and payment dates on
dividends, interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) on investments.
FORWARD CURRENCY CONTRACTS--The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined exchange rates
in connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions and translations.
Forward currency contracts do not eliminate fluctuations in the prices of the
Fund's portfolio securities. While the maximum potential loss from such
contracts is the aggregate face value in U.S. dollars at the time the contract
was opened, exposure is typically limited to the change in value of the contract
(in U.S. dollars) over the period it remains open. Risks may also arise if
counterparties fail to perform their obligations under the contracts.
OTHER--Corporate actions and dividend income are recorded on the ex-date
(except for certain foreign securities which are recorded as soon after ex-date
as the Fund becomes aware of such), net of non-reclaimable tax withholdings.
Where a high level of uncertainty as to collection exists, income on securities
is recorded net of all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
29
<Page>
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2006 $ 101,588
2007 844,603
2008 5,837,414
2009 11,079,118
2010 11,028,566
------------
$ 28,891,289
============
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE--Columbia receives a monthly fee equal to 0.65% annually of
the Fund's average daily net assets.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. For the six months ended June 30, 2003,
the annualized net asset based fee rate was 0.032%. The Fund also pays
out-of-pocket costs for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Columbia and LFD have voluntarily agreed to reimburse all
expenses, including management fees and distribution fees, but excluding
interest, taxes, brokerage and extraordinary expenses incurred by the Fund, in
excess of 1.00% annually of the Fund's average daily net assets. LFD will first
reimburse the Class B distribution fee up to 0.25% annually to reach the 1.00%
limit on Class B expenses. If additional reimbursement is needed to meet the
limit for each class, Columbia will then reimburse other expenses to the extent
necessary. If additional reimbursement is still needed to reach the expense
limit, Columbia will then waive a portion of its management fee to reach the
expense limit. This arrangement may be terminated or modified by Columbia or LFD
at any time.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $181 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and sales
of investments, other than short-term obligations, were $52,238,531 and
$45,261,513, respectively, of which $5,420,405 and $206,567, respectively, were
U.S. Government securities.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 15,091,378
Gross unrealized depreciation (5,534,882)
------------
Net unrealized appreciation $ 9,556,496
============
</Table>
OTHER--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of foreign currency
exchange or the imposition of other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
30
<Page>
FINANCIAL HIGHLIGHTS
Colonial Strategic Income Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, ----------------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
------------ ------------ ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.89 $ 8.91 $ 9.41 $ 10.24
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.31 0.63 0.79(c) 0.56
Net realized and unrealized gain (loss) on
investments and foreign currency 0.74 0.09 (0.46)(c) (0.37)
------------ ------------ ------------ ------------
Total from Investment Operations 1.05 0.72 0.33 0.19
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- (0.72) (0.81) (0.99)
Return of capital -- (0.02) (0.02) (0.03)
------------ ------------ ------------ ------------
Total Distributions Declared to Shareholders -- (0.74) (0.83) (1.02)
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 9.94 $ 8.89 $ 8.91 $ 9.41
============ ============ ============ ============
Total return (d) (e) (f) 11.81%(g) 8.08% 3.54% 1.92%(g)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (h) 1.00%(i) 1.00% 1.00% 1.00%(i)
Net investment income (h) 6.70%(i) 6.92% 8.27%(c) 9.39%(i)
Waiver/reimbursement 0.03%(i) 0.01% 0.10% 0.03%(i)
Portfolio turnover rate 31%(g) 62% 62% 31%(g)
Net assets, end of period (000's) $ 48,825 $ 32,407 $ 19,481 $ 3,579
</Table>
(a) For the period from commencement of operations on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective January 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing
and accreting premium and discount on all debt securities. The effect of
this change for the year ended December 31, 2001 was to decrease net
investment income per share by $0.03, increase net realized and unrealized
gain/loss per share by $0.03 and decrease the ratio of net investment
income to average net assets from 8.55% to 8.27%. Per share data and ratios
for periods prior to December 31, 2001 have not been restated to reflect
this change in presentation.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Had the Manager and/or Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
31
<Page>
PORTFOLIO MANAGERS' DISCUSSION
Columbia High Yield Fund, Variable Series / June 30, 2003
Columbia High Yield Fund, Variable Series seeks a high level of income, with
capital appreciation as a secondary goal, by investing primarily in
non-investment-grade corporate debt securities, commonly referred to as
"junk" or "high-yield" bonds.
Jeffrey L. Rippey and Kurt M. Havnaer are portfolio managers for the fund.
Mr. Rippey has managed the fund and its predecessor since 1998, and Mr.
Havnaer has comanaged the fund and its predecessor since 2000.
On April 14, 2003, Columbia High Yield Fund, Variable Series acquired two
funds: Colonial High Yield Securities Fund, Variable Series and Galaxy VIP
Columbia High Yield Fund II. The combined fund retained the name Columbia
High Yield Fund, Variable Series.
The fund's focus on high-quality issuers had a negative impact on relative
performance during the period because lower-quality issues delivered the
high-yield market's strongest returns. The energy, utility and cable industries
gained renewed strength following a wave of corporate scandals. Many of these
utility and energy companies were able to refinance their debt at lower interest
rates over longer terms, a strategy that helped strengthen their balance sheets.
One notable example of this strategy of extending maturities was AES. The fund
did not have an investment in AES.
Although we missed out on gains from these lower-quality investments, we
identified attractive opportunities in the homebuilding and the hotel sectors,
which benefited the portfolio.
CREDIT RESEARCH DRIVES SECURITY SELECTION
The fund uses bottom-up credit analysis to identify high-quality companies with
attractive long-term business prospects and also to stay abreast of potential
negative influences in order to limit or avoid potential losses. During the
period, our research led us to increase our weight in several existing holdings
and to add new names based on expectations for improving margins and debt. For
example, in the paper/forest products industry, we added Abitibi-Consolidated
and Cascades (0.9% and 0.9% of net assets, respectively). In the
publishing/printing industry, we purchased Houghton Mifflin (1.0% of net
assets). We also increased our position in the chemical sector, adding three new
names to the portfolio including Equistar Chemicals, MacDermid and Ethyl
Corporation (0.9%, 0.8% and 0.7% of net assets, respectively). Finally, in the
health care industry, we purchased Apogent and Province Healthcare (0.1% and
0.8% of net assets, respectively).
Ongoing credit analysis and careful portfolio monitoring also prompted us to
reduce or eliminate selected holdings. For example, we sold our position in
Pennzoil because we believed that its bonds had achieved fair value following
the company's acquisition by Royal Dutch Shell. In addition, IMC Global, a
chemical-related company, delivered weaker-than-anticipated performance and was
subsequently eliminated from the portfolio. We reduced our overall exposure to
homebuilders following the sale of Technical Olympic.
LOOKING AHEAD
We believe that a declining default rate, attractive yields and an increased
focus on corporate business practices bode well for the high-yield market.
High-yield investments are generally riskier, but they offer investors a
compelling alternative to traditional fixed-income investments. We remain
optimistic that when the economy finally recovers, these companies will be well
positioned to continue to deliver attractive returns on a risk-adjusted basis.
Economic and market conditions change frequently. There is no assurance that the
trends described here will continue or commence.
An investment in the Columbia High Yield Fund, Variable Series offers the
potential for high income and attractive total returns, but also involves
certain risks, including credit risks associated with lower-rated bonds, and
interest rate risks.
Holdings are disclosed as of June 30, 2003, and are subject to change.
32
<Page>
PERFORMANCE INFORMATION
Columbia High Yield Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR LIFE
- --------------------------------------------------------------------------------
Class B(1) (4/14/03) 7.84 11.39 5.45 5.71
Merrill Lynch
US High Yield,
Cash Pay Only Index(2) 17.24 21.11 3.59 3.86
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 3/3/98(3) - 6/30/03
<Table>
<Caption>
CLASS B SHARES MERRILL LYNCH US HIGH YIELD, CASH PAY ONLY INDEX
Mar-98 $ 10,000 $ 10,000
3/31/1998 $ 10,146 $ 10,086
4/30/1998 $ 10,173 $ 10,133
5/31/1998 $ 10,223 $ 10,204
6/30/1998 $ 10,307 $ 10,255
7/31/1998 $ 10,442 $ 10,314
8/31/1998 $ 10,319 $ 9,868
9/30/1998 $ 10,586 $ 9,888
10/31/1998 $ 10,543 $ 9,726
11/30/1998 $ 10,901 $ 10,168
12/31/1998 $ 10,959 $ 10,171
1/31/1999 $ 11,063 $ 10,272
2/28/1999 $ 11,011 $ 10,194
3/31/1999 $ 11,030 $ 10,282
4/30/1999 $ 11,152 $ 10,442
5/31/1999 $ 11,007 $ 10,370
6/30/1999 $ 10,974 $ 10,350
7/31/1999 $ 10,961 $ 10,366
8/31/1999 $ 10,845 $ 10,264
9/30/1999 $ 10,785 $ 10,221
10/31/1999 $ 10,806 $ 10,161
11/30/1999 $ 10,947 $ 10,277
12/31/1999 $ 11,022 $ 10,330
1/31/2000 $ 10,938 $ 10,278
2/29/2000 $ 10,930 $ 10,288
3/31/2000 $ 10,871 $ 10,144
4/30/2000 $ 10,891 $ 10,147
5/31/2000 $ 10,866 $ 10,035
6/30/2000 $ 11,119 $ 10,207
7/31/2000 $ 11,211 $ 10,280
8/31/2000 $ 11,386 $ 10,406
9/30/2000 $ 11,394 $ 10,345
10/31/2000 $ 11,223 $ 10,042
11/30/2000 $ 11,062 $ 9,728
12/31/2000 $ 11,426 $ 9,939
1/31/2001 $ 11,912 $ 10,531
2/28/2001 $ 12,027 $ 10,698
3/31/2001 $ 11,951 $ 10,557
4/30/2001 $ 11,942 $ 10,441
5/31/2001 $ 12,036 $ 10,642
6/30/2001 $ 11,838 $ 10,423
7/31/2001 $ 11,907 $ 10,584
8/31/2001 $ 12,049 $ 10,687
9/30/2001 $ 11,647 $ 10,002
10/31/2001 $ 11,992 $ 10,296
11/30/2001 $ 12,234 $ 10,631
12/31/2001 $ 12,132 $ 10,555
1/31/2002 $ 12,181 $ 10,614
2/28/2002 $ 12,122 $ 10,512
3/31/2002 $ 12,225 $ 10,762
4/30/2002 $ 12,354 $ 10,934
5/31/2002 $ 12,314 $ 10,875
6/30/2002 $ 12,067 $ 10,101
7/31/2002 $ 11,906 $ 9,699
8/31/2002 $ 12,078 $ 9,942
9/30/2002 $ 12,006 $ 9,783
10/31/2002 $ 12,031 $ 9,701
11/30/2002 $ 12,397 $ 10,282
12/31/2002 $ 12,464 $ 10,436
1/31/2003 $ 12,587 $ 10,736
2/28/2003 $ 12,704 $ 10,875
3/31/2003 $ 12,897 $ 11,157
4/30/2003 $ 13,234 $ 11,784
5/31/2003 $ 13,251 $ 11,911
6/30/2003 $ 13,442 $ 12,236
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 4/14/03 6/30/03
- --------------------------------------------------------------------------------
Class B 9.12 9.35
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The Merrill Lynch US High Yield, Cash Pay
Only Index is an unmanaged index comprised of non-investment-grade corporate
bonds. Indices are not investments, do not incur fees or expenses, and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to inception of the newer class of shares would be lower.
(2) Index performance is from February 28, 1998.
(3) Inception date of class A shares (older existing share class).
33
<Page>
INVESTMENT PORTFOLIO
Columbia High Yield Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
PAR VALUE
-------------- --------------
CORPORATE FIXED-INCOME BONDS & NOTES--91.8%
BASIC MATERIALS--1.8%
FOREST PRODUCTS & PAPER--1.8%
Abitibi Consolidated, Inc.,
7.875% 08/01/09 $ 300,000 $ 330,879
Cascades, Inc.,
7.250% 02/15/13 (a) 320,000 337,600
--------------
668,479
--------------
CONSUMER CYCLICALS--4.9%
HOME BUILDERS--4.9%
KB Home:
8.625% 12/15/08 400,000 452,000
9.500% 02/15/11 150,000 168,750
K. Hovnanian Enterprises, Inc.:
8.875% 04/01/12 155,000 167,788
10.500% 10/01/07 110,000 128,700
Standard Pacific Corp.,
9.250% 04/15/12 125,000 139,375
Toll Corp.:
7.750% 09/15/07 100,000 103,500
8.000% 05/01/09 50,000 52,750
8.250% 12/01/11 500,000 557,500
William Lyons Home, Inc.,
10.750% 04/01/13 60,000 63,600
--------------
1,833,963
--------------
CONSUMER NON-CYCLICALS -- 8.5%
COMMERCIAL SERVICES--1.9%
Tricon Global Restaurants, Inc.:
8.500% 04/15/06 50,000 55,125
8.875% 04/15/11 575,000 672,750
--------------
727,875
--------------
HEALTH CARE SERVICES--0.9%
Select Medical Corp.,
9.500% 06/15/09 300,000 327,000
--------------
HOUSEHOLD PRODUCTS & WARES--2.0%
Scotts Co.,
8.625% 01/15/09 700,000 749,000
--------------
PHARMACEUTICALS--1.6%
Omnicare, Inc.:
6.125% 06/01/13 300,000 307,500
8.125% 03/15/11 275,000 300,438
--------------
607,938
--------------
TOYS, GAMES & HOBBIES--2.1%
Hasbro, Inc.:
6.150% 07/15/08 725,000 757,625
8.500% 03/15/06 25,000 27,500
--------------
785,125
--------------
CONSUMER STAPLES--2.8%
FOOD, BEVERAGES & TOBACCO--2.7%
Cott Beverages, Inc.:
8.000% 12/15/11 $ 700,000 $ 756,875
8.500% 03/01/09 225,000 240,750
8.625% 08/01/06 25,000 27,313
--------------
1,024,938
--------------
HOUSEHOLD PRODUCTS--0.1%
Playtex Products, Inc.,
9.375% 06/01/11 20,000 20,000
--------------
ENERGY--1.8%
COAL--1.0%
Arch Western Financial LLC,
6.750% 07/01/03 (a) 225,000 230,062
Peabody Energy Corp.,
6.875% 03/15/13 (a) 125,000 131,250
--------------
361,312
--------------
ENERGY EQUIPMENT & SERVICES--0.8%
Offshore Logistics, Inc.,
6.125% 06/15/13 (a) 215,000 216,075
Universal Compression, Inc.,
7.250% 05/15/10 (a) 100,000 104,000
--------------
320,075
--------------
FINANCE, INSURANCE & REAL ESTATE--0.1%
FINANCIAL SERVICES--0.1%
QDI LLC:
12.000% 06/15/09 (a) 12,577 1,871
12.500% 06/15/08 50,750 20,237
--------------
22,108
--------------
INDUSTRIALS--4.5%
HAND & MACHINE TOOLS--0.1%
Kennametal, Inc.,
7.200% 06/15/12 40,000 43,923
--------------
PACKAGING & CONTAINERS--4.4%
Ball Corp.:
6.875% 12/15/12 110,000 116,875
7.750% 08/01/06 100,000 109,500
8.250% 08/01/08 370,000 386,650
Constar International, Inc.,
11.000% 12/01/12 250,000 271,250
Owens Brockway,
8.875% 02/15/09 250,000 271,250
Owens-Illinois, Inc.:
7.150% 05/15/05 40,000 40,800
7.350% 05/15/08 50,000 50,250
7.500% 05/15/10 90,000 87,300
8.100% 05/15/07 50,000 51,250
Silgan Corp.,
9.000% 06/01/09 275,000 284,625
--------------
1,669,750
--------------
</Table>
See Notes to Investment Portfolio.
34
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
MANUFACTURING--11.6%
AUTO PARTS & EQUIPMENT--2.3%
American Axle & Manufacturing, Inc.,
9.750% 03/01/09 $ 495,000 $ 533,362
Dura Operating Corp.,
8.625% 04/15/12 90,000 92,925
Lear Corp.:
7.960% 05/15/05 50,000 53,625
8.110% 05/15/09 170,000 195,925
--------------
875,837
--------------
CHEMICALS & ALLIED PRODUCTS--3.0%
Airgas, Inc.,
9.125% 10/01/11 110,000 123,200
Equistar Chemical Funding LP:
10.125% 09/01/08 155,000 159,262
10.625% 05/01/11 (a) 165,000 169,125
Ethyl Corp.,
8.875% 05/01/10 (a) 255,000 261,375
FMC Corp.,
10.250% 11/01/09 105,000 118,650
MacDermid, Inc.,
9.125% 07/15/11 275,000 308,000
--------------
1,139,612
--------------
ELECTRONIC & ELECTRICAL EQUIPMENT--0.4%
Flextronics International Ltd.,
9.875% 07/01/10 130,000 143,000
--------------
FOOD & KINDRED PRODUCTS--1.1%
Constellation Brands, Inc.,
8.125% 01/15/12 75,000 81,000
Del Monte Corp.,
9.250% 05/15/11 60,000 65,400
Dole Food Co., Inc.,
8.625% 05/01/09 135,000 143,100
Smithfield Foods, Inc.,
8.000% 10/15/09 115,000 123,913
--------------
413,413
--------------
FURNITURE & FIXTURES--0.1%
Congoleum Corp.,
8.625% 08/01/08 65,000 40,625
--------------
MEASURING & ANALYZING INSTRUMENTS--0.0%
Fisher Scientific International, Inc.,
8.125% 05/01/12 (a) 20,000 21,600
--------------
MISCELLANEOUS MANUFACTURING--0.6%
Flowserve Corp.,
12.250% 08/15/10 81,000 94,770
Terex Corp., Series 2001 B,
10.375% 04/01/11 105,000 116,550
--------------
211,320
--------------
PAPER PRODUCTS--0.4%
Jefferson Smurfit Corp.,
8.250% 10/01/12 70,000 75,600
Tembec Industries, Inc.,
8.500% 02/01/11 90,000 89,100
--------------
164,700
--------------
PRIMARY METAL--0.1%
Wheeling-Pittsburgh Corp.,
9.250% 11/15/07 (b) $ 250,000 $ 22,500
--------------
PRINTING & PUBLISHING--3.6%
Dex Media East LLC,
12.125% 11/15/12 145,000 172,550
Houghton Mifflin Co.,
9.875% 02/01/13 (a) 340,000 375,700
Moore North America Finance, Inc.,
7.875% 01/15/11 (a) 50,000 52,250
PriMedia Inc.,
8.875% 05/15/11 150,000 159,375
RH Donnelley Finance Corp.,
10.875% 12/15/12 (a) 510,000 591,600
--------------
1,351,475
--------------
MINING & ENERGY--8.8%
OIL & GAS EXTRACTION--8.5%
Chesapeake Energy Corp.:
7.500% 09/15/13 (a) 25,000 26,500
8.125% 04/01/11 200,000 215,500
9.000% 08/15/12 550,000 616,000
Denbury Resources, Inc.,
7.500% 04/01/13 (a) 55,000 56,925
Forest Oil Corp.,
8.000% 06/15/08 95,000 100,700
Grant Prideco, Inc.:
9.000% 12/15/09 25,000 27,875
9.625% 12/01/07 525,000 574,875
Key Energy Services, Inc.,
6.375% 05/01/13 315,000 319,725
Magnum Hunter Resources, Inc.,
9.600% 03/15/12 50,000 55,250
Pioneer Natural Resources Co.,
7.500% 04/15/12 25,000 28,750
Pogo Producing Co.,
8.250% 04/15/11 205,000 227,550
Pride International, Inc.,
10.000% 06/01/09 25,000 27,250
Semco Energy, Inc.:
7.125% 05/15/08 (a) 15,000 15,600
7.750% 05/15/13 (a) 100,000 106,000
Stone Energy Corp.,
8.250% 12/15/11 50,000 52,750
Trico Marine Services, Inc.,
8.875% 05/15/12 80,000 70,000
Westport Resources Corp.,
8.250% 11/01/11 350,000 381,500
XTO Energy, Inc.:
6.250% 04/15/13 (a) 100,000 106,500
7.500% 04/15/12 155,000 177,475
--------------
3,186,725
--------------
</Table>
See Notes to Investment Portfolio.
35
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
OIL & GAS FIELD SERVICES--0.3%
Premcor Refining Group:
9.500% 02/01/13 $ 65,000 $ 71,825
9.500% 02/01/10 50,000 54,500
--------------
126,325
--------------
REAL ESTATE INVESTMENT TRUSTS (REITs)--1.8%
Health Care REIT, Inc.,
7.500% 08/15/07 325,000 350,282
Istar Financial, Inc.:
7.000% 03/15/08 100,000 105,000
8.750% 08/15/08 220,000 242,000
--------------
697,282
--------------
RETAIL TRADE--1.6%
FOOD RETAIL--1.2%
Winn Dixie Stores, Inc.,
8.875% 04/01/08 410,000 438,700
--------------
MISCELLANEOUS RETAIL--0.4%
JC Penney Co., Inc.,
8.000% 03/01/10 175,000 183,750
--------------
SERVICES--23.8%
AMUSEMENT & RECREATION--2.3%
Cinemark USA, Inc.:
9.000% 02/01/13 (a) 10,000 10,900
9.000% 02/01/13 (a) 400,000 436,000
Premier Parks,
9.750% 06/15/07 10,000 9,900
Regal Cinemas, Inc.,
9.375% 02/01/12 150,000 165,000
Six Flags, Inc.,
9.500% 02/01/09 260,000 256,100
--------------
877,900
--------------
AUTO EQUIPMENT & RENTAL SERVICES--1.1%
United Rentals, Inc.:
8.800% 08/15/08 300,000 291,000
9.250% 01/15/09 50,000 49,250
9.500% 06/01/08 80,000 80,400
--------------
420,650
--------------
CASINOS & GAMING--6.2%
Coast Hotels & Casinos, Inc.,
9.500% 04/01/09 100,000 107,000
Harrah's Operating Co., Inc.,
7.875% 12/15/05 600,000 651,000
International Game Technology:
7.875% 05/15/04 25,000 26,125
8.375% 05/15/09 25,000 30,500
Mohegan Tribal Gaming Authority:
8.000% 04/01/12 40,000 43,100
8.375% 07/01/11 50,000 54,000
Park Place Entertainment:
7.875% 03/15/10 $ 100,000 $ 106,875
9.375% 02/15/07 550,000 607,750
Station Casinos, Inc.,
9.875% 07/01/10 545,000 604,950
Venetian Casino Resort LLC,
11.000% 06/15/10 100,000 113,000
--------------
2,344,300
--------------
ENTERTAINMENT--0.9%
Speedway Motorsports, Inc.,
6.750% 06/01/13 (a) 325,000 334,750
--------------
FUNERAL SERVICES--0.4%
Service Corp. International,
7.700% 04/15/09 160,000 162,800
--------------
HEALTH SERVICES--7.5%
AdvancePCS,
8.500% 04/01/08 400,000 430,000
AmerisourceBergen Corp.:
7.250% 11/15/12 655,000 712,312
8.125% 09/01/08 150,000 165,375
Apogent Technologies, Inc.,
6.500% 05/15/13 (a) 50,000 51,625
HCA Inc.,
8.750% 09/01/10 620,000 733,324
MedQuest, Inc.,
11.875% 08/15/12 125,000 131,875
Province Healthcare Co.,
7.500% 06/01/13 300,000 298,500
Triad Hospital, Inc.,
8.750% 05/01/09 300,000 324,000
--------------
2,847,011
--------------
LODGING--2.3%
Extended Stay America, Inc.:
9.150% 03/15/08 50,000 51,750
9.875% 06/15/11 300,000 322,500
Host Marriott LP,
9.500% 01/15/07 100,000 108,250
ITT Corp.,
6.750% 11/15/05 35,000 36,400
Starwood Hotels & Resorts Worldwide, Inc.:
7.375% 05/01/07 15,000 15,825
7.875% 05/01/12 290,000 317,550
--------------
852,275
--------------
OTHER SERVICES--3.1%
Corrections Corp.:
7.500% 05/01/11 275,000 288,062
9.875% 05/01/09 100,000 112,000
Iron Mountain, Inc.:
7.775% 01/15/15 50,000 53,000
8.625% 04/01/13 650,000 700,375
--------------
1,153,437
--------------
</Table>
See Notes to Investment Portfolio.
36
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES--19.8%
AEROSPACE--2.6%
K&F Industries,
9.625% 12/15/10 $ 275,000 $ 302,500
L-3 Communications Corp.,
7.625% 06/15/12 610,000 671,000
--------------
973,500
--------------
BROADCASTING--3.1%
British Sky Broadcasting PLC:
7.300% 10/15/06 20,000 22,068
8.200% 07/15/09 200,000 233,684
Chancellor Media Corp.,
8.000% 11/01/08 45,000 53,100
LIN Television Corp.,
6.500% 05/15/13 (a) 350,000 350,875
Sinclair Broadcast Group, Inc.,
8.750% 12/15/11 450,000 495,000
--------------
1,154,727
--------------
CABLE--4.1%
CSC Holdings, Inc.,
Senior Notes:
7.625% 04/01/11 50,000 50,750
9.875% 02/15/13 50,000 51,000
10.500% 05/15/16 425,000 463,250
DirecTV Holdings Finance,
8.375% 03/15/13 (a) 340,000 379,950
Mediacom LLC/Mediacom Capital One,
9.500% 01/15/013 475,000 505,875
Rogers Communications, Inc.,
8.875% 07/15/07 25,000 25,750
TCI Communications, Inc.,
8.750% 08/01/15 46,000 60,020
--------------
1,536,595
--------------
ELECTRIC, GAS & SANITARY SERVICES--2.2%
Allied Waste North America, Inc.,
10.000% 08/01/09 650,000 692,250
Synagro Technologies, Inc.,
9.500% 04/01/09 125,000 133,750
--------------
826,000
--------------
ELECTRIC SERVICES--0.1%
Beaver Valley Funding Corp.,
9.000% 06/01/17 45,000 53,839
--------------
MARINE TRANSPORTATION--1.7%
Teekay Shipping Corp.,
8.875% 07/15/11 595,000 636,650
--------------
MEDIA--2.1%
Lamar Media Corp.,
7.250% 01/01/13 675,000 718,875
Vivendi Universal SA,
9.250% 04/15/10 (a) 70,000 81,200
--------------
800,075
--------------
POLLUTION CONTROL--0.1%
Envirosource, Inc.,
14.000% 12/15/08 41,050 36,945
--------------
RADIOTELEPHONE COMMUNICATIONS--3.5%
Nextel Communications, Inc.:
9.75% 10/31/2007 $ 100,000 $ 103,500
9.375% 11/15/09 300,000 324,000
10.650% 09/15/07 25,000 25,875
Rogers Cantel, Inc.:
6.250% 06/15/13 (a) 650,000 650,930
9.750% 06/01/16 195,000 220,838
--------------
1,325,143
--------------
RAILROAD--0.2%
Kansas City Southern,
7.500% 06/15/09 80,000 82,800
--------------
TELECOMMUNICATIONS--0.1%
Colt Telecom Group PLC,
2.000% 03/29/06 EUR 40,000 38,188
--------------
TOTAL CORPORATE FIXED-INCOME BONDS & NOTES
(cost of $34,207,756) 34,635,935
--------------
<Caption>
SHARES
--------------
PREFERRED STOCKS--0.8%
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES--0.8%
CABLE--0.8%
CSC Holdings Ltd.
11.125% PIK 2,896 298,288
--------------
POLLUTION CONTROL--0.0%
EnviroSource, Inc.
7.250% 139 6,435
--------------
TOTAL PREFERRED STOCKS
(cost of $338,408) 304,723
--------------
COMMON STOCKS--0.1%
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES--0.1%
CABLE--0.1%
NTL, Inc. 1,259 42,957
--------------
POLLUTION CONTROL--0.0%
EnviroSource, Inc. 1,200 276
--------------
TOTAL COMMON STOCKS
(cost of $236,260) 43,233
--------------
<Caption>
UNITS
--------------
WARRANTS (c)--0.0%
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES--0.0%
CABLE--0.0%
Cable Satisfaction International, Inc.,
expires 03/01/05 220 2
Ono Finance PLC,
expires 02/15/11 85 --
--------------
2
--------------
</Table>
See Notes to Investment Portfolio.
37
<Page>
<Table>
<Caption>
UNITS VALUE
-------------- --------------
COMMUNICATIONS--0.0%
UbiquiTel Inc.,
expires 04/15/10 50 $ 1
XM Satellite Radio Holdings, Inc.,
expires 03/15/10 150 825
--------------
826
--------------
MOTOR FREIGHT & WAREHOUSING--0.0%
QDI LLC,
expires 06/15/06 (a) 153 --
--------------
TELECOMMUNICATIONS--0.0%
Horizon PCS, Inc.,
expires 10/01/10 145 --
Jazztel PLC,
expires 07/15/10 60 --
--------------
--
--------------
WIRELESS TELECOMMUNICATION--0.0%
Carrier 1 International SA,
expires 02/19/09 113 1
--------------
TOTAL WARRANTS
(cost of $22,621) 829
--------------
<Caption>
PAR VALUE
-------------- --------------
SHORT-TERM OBLIGATION--6.9%
Repurchase agreement with
State Street Bank & Trust Co., dated
06/30/03 due 07/01/03 at
0.95%, collateralized by
a U.S. Treasury Bond
maturing 11/15/10, market
value $2,658,375
(repurchase proceeds
$2,605,069)
(cost of $2,605,000) $ 2,605,000 $ 2,605,000
--------------
TOTAL INVESTMENTS--99.6%
(cost of $37,410,045) (d) 37,589,720
--------------
OTHER ASSETS & LIABILITIES, NET--0.4% 167,632
--------------
NET ASSETS--100.0% $ 37,757,352
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933 and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2003,
the value of these securities amounted to $5,100,263 which represents 13.5%
of net assets.
(b) As of June 30, 2003, the Fund held certain securities that have filed for
bankruptcy protection under chapter 11, representing 0.1% of net assets.
This issuer is in default of certain debt covenants. Income is not being
accrued.
(c) Non-incoming producing.
(d) Cost for federal income tax purposes is $37,425,909. The difference between
cost for generally accepted accounting principles and cost on a tax basis
is related to amortization/accretion tax elections on fixed income
securities.
<Table>
<Caption>
ACRONYM NAME
------- ----
EUR European Currency
PIK Payment-In-Kind
</Table>
See Notes to Financial Statements.
38
<Page>
STATEMENT OF ASSETS AND LIABILITIES
Columbia High Yield Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 37,410,045
---------------
Investments, at value $ 37,589,720
Cash 78
Receivable for:
Investments sold 284,463
Fund shares sold 629,623
Interest 639,004
Dividends 8,507
Merger 12,548
Deferred Trustees' compensation plan 756
Expense reimbursement due from Manager/Distributor 11,300
---------------
TOTAL ASSETS 39,175,999
---------------
LIABILITIES:
Payable for:
Investments purchased 1,381,324
Fund shares repurchased 3,249
Management fee 17,277
Administration fee 2,448
Distribution fee--Class B 179
Pricing and bookkeeping fees 3,424
Audit fee 5,512
Reports to shareholders 1,624
Deferred Trustees' fee 756
Other liabilities 2,854
---------------
TOTAL LIABILITIES 1,418,647
---------------
NET ASSETS $ 37,757,352
===============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 38,514,284
Overdistributed net investment income (5,167)
Accumulated net realized loss (931,443)
Net unrealized appreciation on:
Investment 179,675
Foreign currency translations 3
---------------
NET ASSETS $ 37,757,352
===============
CLASS A:
Net assets $ 15,417,772
Shares outstanding 1,648,084
===============
Net asset value per share $ 9.35
===============
CLASS B:
Net assets $ 22,339,580
Shares outstanding 2,387,983
===============
Net asset value per share $ 9.35
===============
</Table>
See Notes to Financial Statements.
39
<Page>
STATEMENT OF OPERATIONS
Columbia High Yield Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 10,038
Interest 596,783
---------------
Total Investment Income 606,821
---------------
EXPENSES:
Management fee 47,486
Administration fee 6,727
Distribution fee--Class B 10,474
Pricing and bookkeeping fees 15,923
Transfer agent fee 2,496
Trustees' fee 26
Custody fee 4,321
Audit fee 5,492
Other expenses 2,871
---------------
Total Expenses 95,816
Fees and expenses waived or reimbursed by Manager (31,307)
Fees waived by Distributor--Class B (7,960)
Custody earnings credit (384)
---------------
Net Expenses 56,165
---------------
Net Investment Income 550,656
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized loss on:
Investments (565,362)
Foreign currency transactions (1,918)
---------------
Net realized loss (567,280)
---------------
Net change in unrealized appreciation/depreciation on:
Investments 1,466,145
Foreign currency translations 3
---------------
Net change in unrealized appreciation/depreciation 1,466,148
---------------
Net Gain 898,868
---------------
Net Increase in Net Assets from Operations $ 1,449,524
===============
</Table>
See Notes to Financial Statements.
40
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Columbia High Yield Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- --------------- ---------------
OPERATIONS:
Net investment income $ 550,656 $ 153,065
Net realized loss on investments and foreign currency
transactions (567,280) (126,213)
Net change in unrealized appreciation/depreciation on
investments and foreign currency translations 1,466,148 30,091
--------------- ---------------
Net Increase from Operations 1,449,524 56,943
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A (266,167) (149,903)
Class B (303,403) --
--------------- ---------------
Total Distributions Declared to Shareholders (569,570) (149,903)
--------------- ---------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 4,459,161 626,496
Proceeds received in connection with merger 12,120,783 --
Distributions reinvested 266,167 149,903
Redemptions (4,035,937) (907,995)
--------------- ---------------
Net Increase (Decrease) 12,810,174 (131,596)
--------------- ---------------
Class B:
Subscriptions 4,776,203 --
Proceeds received in connection with merger 17,750,911 --
Distributions reinvested 303,403 --
Redemptions (960,028) --
--------------- ---------------
Net Increase 21,870,489 --
--------------- ---------------
Net Increase (Decrease) from Share Transactions 34,680,663 (131,596)
--------------- ---------------
Total Increase (Decrease) in Net Assets 35,560,617 (224,556)
NET ASSETS:
Beginning of period 2,196,735 2,421,291
--------------- ---------------
End of period (including overdistributed net investment income
of $(5,167) and undistributed net investment income
of $13,747) $ 37,757,352 $ 2,196,735
=============== ===============
CHANGES IN SHARES:
Class A:
Subscriptions 490,018 69,617
Issued in connection with merger 1,328,306 --
Issued for distributions reinvested 19,445 16,631
Redemptions (434,938) (101,745)
--------------- ---------------
Net Increase (Decrease) 1,402,831 (15,497)
--------------- ---------------
Class B:
Subscriptions 524,602 --
Issued in connection with merger 1,946,759 --
Issued for distributions reinvested 19,964 --
Redemptions (103,342) --
--------------- ---------------
Net Increase 2,387,983 --
--------------- ---------------
</Table>
See Notes to Financial Statements.
41
<Page>
NOTES TO FINANCIAL STATEMENTS
Columbia High Yield Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Columbia High Yield Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek a high level of income, with capital
appreciation as a secondary goal, by investing primarily in non-investment-grade
corporate debt securities, commonly referred to as "junk" or "high-yield" bonds.
The Fund's capitalization consists of an unlimited number of shares of
beneficial interest without par value that represent a separate series of the
Trust. The Fund offers two classes of shares: Class A and Class B. Class B
commenced operations on April 14, 2003. Each share of a class represents an
equal proportionate beneficial interest in that share class and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of their share class available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Fleet Investment Advisors Inc., the investment advisor to the
predecessor Fund, merged into Columbia Management Advisors, Inc. ("Columbia"),
formerly known as Columbia Management Co., an indirect wholly owned subsidiary
of FleetBoston Financial Corporation. At the time of the merger, Columbia
assumed the obligations of Fleet Investment Advisors Inc. with respect to the
predecessor Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
administrative and pricing and bookkeeping services to the Fund. Liberty Funds
Distributor, Inc. ("LFD"), an affiliate of Columbia, serves as the principal
underwriter of the Fund.
On April 14, 2003, the Colonial High Yield Securities Fund, Variable Series
merged into the Galaxy VIP Columbia High Yield Fund II, previously a fund of the
Galaxy VIP Fund, a separate Massachusetts business trust (the "predecessor
trust"). Also on April 14, 2003, Galaxy VIP Columbia High Yield Fund II, created
a Class B into which Colonial High Yield Securities Fund, Variable Series Class
B shares were reorganized. Galaxy VIP Columbia High Yield Fund II received a
tax-free transfer of assets from Colonial High Yield Securities Fund, Variable
Series as follows:
<Table>
<Caption>
SHARES NET ASSETS UNREALIZED
ISSUED RECEIVED DEPRECIATION(1)
--------- ------------ ---------------
3,275,065 $ 29,871,694 $ 1,356,159
<Caption>
NET ASSETS
OF GALAXY VIP NET ASSETS NET ASSETS OF
COLUMBIA OF COLONIAL HIGH GALAXY VIP COLUMBIA
HIGH YIELD YIELD SECURITIES HIGH YIELD FUND II
FUND II FUND, VARIABLE SERIES IMMEDIATELY
PRIOR TO IMMEDIATELY PRIOR TO AFTER
COMBINATION COMBINATION COMBINATION
------------- ------------- -------------
$ 2,264,927 $ 29,871,694 $ 32,136,621
</Table>
(1) Unrealized depreciation is included in the Net Assets Received amount shown
above.
Also on April 14, 2003, subsequent to the merger described above, the Galaxy VIP
Columbia High Yield Fund II was reorganized as the Columbia High Yield Fund,
Variable Series.
The accompanying statement of operations, statement of changes in net assets and
financial highlights for the Fund represents the historical operations of the
Galaxy VIP Columbia High Yield Fund II for periods prior to April 14, 2003.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Debt securities generally are valued by
a pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
the current quoted bid price.
Forward currency contracts are valued based on the weighted value of
exchange-traded contracts with similar durations.
42
<Page>
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation of
the Fund's net asset value. If events materially affecting the value of such
securities and such exchange rates occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM--Interest income is recorded on
the accrual basis. Discount is accreted to interest income over the life of a
security with a corresponding increase in the cost basis. Premium is amortized
against interest income with a corresponding decrease in the cost basis.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
FOREIGN CURRENCY TRANSACTIONS--Net realized and unrealized gains (losses) on
foreign currency transactions and translations includes gains (losses) arising
from the fluctuations in exchange rates between trade and settlement dates on
securities transactions, gains (losses) arising from the disposition of foreign
currency, and currency gains (losses) between the accrual and payment dates on
dividends, interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) on investments.
FORWARD CURRENCY CONTRACTS--The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined exchange rates
in connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions and translations.
Forward currency contracts do not eliminate fluctuations in the prices of the
Fund's portfolio securities. While the maximum potential loss from such
contracts is the aggregate face value in U.S. dollars at the time the contract
was opened, exposure is typically limited to the change in value of the contract
(in U.S. dollars) over the period it remains
43
<Page>
open. Risks may also arise if counterparties fail to perform their obligations
under the contracts.
OTHER--Corporate actions and dividend income are recorded on the ex-date
(except for certain foreign securities which are recorded as soon after ex-date
as the Fund becomes aware of such), net of non-reclaimable tax withholdings.
Where a high level of uncertainty as to collection exists, income on securities
is recorded net of all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2007 $ 33,837
2008 59,785
2009 150,572
2010 126,297
------------
$ 370,491
============
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT AND ADMINISTRATION FEES--Columbia receives a monthly management
fee equal to 0.60% annually of the Fund's average daily net assets.
Columbia provides, pursuant to an Administrative Agreement with the Fund,
certain administrative services for a monthly fee equal to 0.085% annually of
the Fund's average daily net assets. Prior to April 14, 2003, the administration
fee was computed daily and paid monthly at the annual rate of 0.085% of the
first $1 billion of the combined average daily net assets of the funds in the
predecessor trust, 0.078% of the next $1.5 billion of combined average daily net
assets and 0.073% of combined average daily net assets in excess of $2.5
billion.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual fee based on the average daily net assets of the Fund as
follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS FEE
- ------------------------ -----------
Under $50 million $ 25,000
Of $50 million but less than $200 million 35,000
Of $200 million but less than $500 million 50,000
Of $500 million but less than $1 billion 85,000
In excess of $1 billion 125,000
</Table>
The annual fees for a Fund with more than 25% in non-domestic assets will be
150% of the annual fees described above.
The Fund also pays out-of-pocket costs for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for a monthly fee based on
a per account charge or minimum of $5,000 annually per Fund.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Effective April 14, 2003, Columbia has voluntarily agreed to
waive expenses at the rate of 0.27% annually of the Fund's average daily net
assets. In addition, LFD has voluntarily agreed to waive Class B distribution
fees at the rate of 0.19% annually of the Class B average daily net assets.
These waiver agreements will continue until April 14, 2004, after which they may
be modified or terminated at any time.
Prior to April 14, 2003, Fleet Investment Advisors, Inc. and/or its affiliates
and/or PFPC Inc., the former fund administrator, could voluntarily waive all or
a portion of the fees payable to them by the predecessor fund.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
44
<Page>
The Fund has an agreement with its custodian bank under which $384 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $26,177,258 and
$19,025,482, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 918,109
Gross unrealized depreciation (754,298)
-----------
Net unrealized appreciation $ 163,811
===========
</Table>
OTHER--High yield investing offers the potential for high income and
attractive total return, but also certain additional risks. These include credit
risks associated with lower-rated bonds, changes in interest rates and certain
risks associated with foreign investments.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
45
<Page>
FINANCIAL HIGHLIGHTS
Columbia High Yield Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout the period is as follows:
<Table>
<Caption>
(UNAUDITED)
PERIOD
ENDED
JUNE 30,
2003 (a)
------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.12
------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.12
Net realized and unrealized gain on investments and foreign currency 0.25
------------
Total from Investment Operations 0.37
------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.14)
------------
NET ASSET VALUE, END OF PERIOD $ 9.35
============
Total return (c)(d)(e) 4.11%(f)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (g) 0.65%(h)
Net investment income (g) 6.87%(h)
Waiver/reimbursement 0.46%(h)
Portfolio turnover rate 127%(f)
Net assets, end of period (000's) $ 22,340
</Table>
(a) For the period from commencement of operations on April 14, 2003 to
June 30, 2003.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(e) Had the Manager and/or Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
46
<Page>
SHAREHOLDER MEETING RESULTS
Columbia High Yield Fund, Variable Series
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On February 19, 2003, the Annual Meeting of Shareholders of the Trust was held
to conduct a vote for or against the approval of the following items listed on
the Trust's Proxy Statement for said Meeting. On December 2, 2002, the record
date for the Meeting, the Colonial High Yield Securities Fund, Variable Series
had 4,180,951.887 common shares outstanding and the Galaxy VIP Columbia High
Yield Fund II had 245,636.316 common shares outstanding. The votes cast were as
follows:
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
FEBRUARY 19, 2003
1. To approve an Agreement and Plan of Reorganization providing for the sale of
all of the assets of the Colonial High Yield Securities Fund, Variable Series
to, and the assumption of all of the liabilities of the Colonial High Yield
Securities Fund, Variable Series by, the Columbia High Yield Fund, Variable
Series, in exchange for shares of the Columbia High Yield Fund, Variable
Series, and the distribution of such shares to the shareholders of the
Colonial High Yield Securities Fund, Variable Series in complete liquidation
of the Colonial High Yield Securities Fund, Variable Series.
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ----------- -------
Affirmative 3,601,167.762 86.133% 86.515%
Against 93,366.123 2.233% 2.243%
Abstain 467,931.327 11.192% 11.242%
TOTAL 4,162,465.212 99.558% 100.000%
<Caption>
**FUND TOTALS: SHARES
RECORD TOTAL 4,180,951.887
VOTED SHARES 4,162,465.212
PERCENT VOTED 99.558%
</Table>
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
GALAXY VIP COLUMBIA HIGH YIELD FUND II
FEBRUARY 19, 2003
2. To approve an Agreement and Plan of Reorganization providing for (i) the sale
of all of the assets of the Galaxy VIP Columbia High Yield Fund II to, and
the assumption of all of the liabilities of the Galaxy VIP Columbia High
Yield Fund II by, the Columbia High Yield Fund, Variable Series, in exchange
for shares of the Columbia High Yield Fund, Variable Series and the
distribution of such shares to the shareholders of the Galaxy VIP Columbia
High Yield Fund II in complete liquidation of the Galaxy VIP Columbia High
Yield Fund II; (ii) the de-registration of The Galaxy VIP Fund as an
investment company under the Investment Company Act of 1940, as amended, and
(iii) the Galaxy VIP Fund's termination as a Massachusetts business trust
under Massachusetts law.
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ----------- -------
Affirmative 222,628.183 90.633% 90.633%
Against 302.568 .123% .123%
Abstain 22,705.565 9.244% 9.244%
TOTAL 245,636.316 100.000% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 245,636.316
VOTED SHARES 245,636.316
PERCENT VOTED 100.000%
</Table>
47
<Page>
CHANGE IN INDEPENDENT AUDITOR
Columbia High Yield Fund, Variable Series
Based on the recommendation of the Audit Committee of the Fund on May 6, 2003,
the Board of Trustees determined not to retain Ernst & Young LLP ("E&Y") as the
Fund's independent auditor and voted to appoint PricewaterhouseCoopers LLP for
the fiscal year ended December 31, 2003. During the two most recent fiscal
years, E&Y's audit reports contained no adverse opinion or disclaimer of
opinion; nor were its reports qualified or modified as to uncertainty, audit
scope, or accounting principle. Further, in connection with its audits for the
two most recent fiscal years and through May 6, 2003, there were no
disagreements between the Fund and E&Y on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
if not resolved to the satisfaction of E&Y would have caused it to make
reference to the disagreements in its report on the financial statements for
such years.
48
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Columbia International Fund, Variable Series / June 30, 2003
Columbia International Fund, Variable Series seeks long-term capital growth by
investing primarily in equity securities of growth companies located outside
the United States.
James M. McAlear is the lead manager of the fund. He has managed international
portfolios since joining the Columbia Management Advisors, Inc. in 1992.
On April 7, 2003, Colonial International Fund for Growth, Variable Series
acquired the following funds: Stein Roe Global Utilities Fund, Variable
Series; Colonial International Horizons Fund, Variable Series and Colonial
Global Equity Fund, Variable Series. The new fund was renamed Columbia
International Fund, Variable Series.
For the six-month period that ended June 30, 2003, the portfolio performed in
line with its new benchmark, the MSCI All Country World Free ex US Index. We are
comparing the fund's returns to this index because it includes emerging markets
(such as China) and other countries (such as Canada and Mexico), which are part
of the fund's investment universe. By contrast, the fund's former benchmark, the
MSCI EAFE Index, only tracks stocks in Europe, Australia and the major markets
of the Far East (Japan, Hong Kong and Singapore). During the period, fund
performance was also comparable to the MSCI EAFE Index. Our investments in Japan
and China were largely responsible for the fund's strong return.
At the beginning of the period, uncertainty about the war in Iraq, the SARS
(severe acute respiratory syndrome) epidemic and the global economic slowdown
took their toll on the international stock markets. In this environment, the
portfolio benefited from a heavy commitment to defensive stocks--those that tend
to perform well during periods of economic weakness. These included companies in
the consumer staples and utility sectors.
Once the major military offensive in Iraq ended and the SARS outbreak
appeared to be abating, market sentiment became more positive. As a result, we
moved away from these defensive areas that had done well early in the period and
sought investments that we believe have the potential to perform well when
economic growth picks up. At the end of the six months, many international
markets had risen significantly. While European markets generated strong gains,
Asian markets--especially Japan--were the global leaders.
INVESTORS GRAVITATED TOWARD OUT-OF-FAVOR COMPANIES
As the international markets rose during the last three months of the period,
investors tended to emphasize companies that were selling at depressed prices
and that had been out-of-favor for a year or more. Consequently, some of the
portfolio's long-term holdings, which had generated strong performance in the
past, did poorly. For example, Unilever (0.9% of net assets), the world's
largest household products company, reported losses for the period. Heineken
also performed poorly and we eliminated our position in this company during the
period.
ASIAN STOCKS LED PORTFOLIO PERFORMANCE
The portfolio's position in Japan was a major contributor to performance. After
experiencing steep declines early in the year, Japanese stocks were attractively
valued and benefited from the widespread restructuring of individual companies.
The portfolio's investment in Olympus Optical (1.2% of net assets), a
manufacturer of endoscopes and other optical equipment, contributed to results.
Tokyo Electron (0.4% of net assets), a manufacturer of industrial electronics,
also aided total return.
About 7% of the portfolio was invested in China, an area that is benefiting
from regional growth and domestic expansion. In China, we favored utility
companies, which did well because of strong consumer and business demand.
GENERIC PHARMACEUTICALS WERE A THEME
Capitalizing on the global emphasis on reducing health care costs, we purchased
several generic pharmaceutical companies. These included Ranbaxy Laboratories in
India and Teva Pharmaceutical in Israel; (0.4%, and 1.2%, of net assets,
respectively). Both companies made positive contributions to the fund's
performance.
LOOKING FORWARD TO A GLOBAL ECONOMIC RECOVERY
Recently the Paris-based Organization for Economic Cooperation and Development
(OECD) forecasted an upturn in industrial production over the next six months.
In one of its latest publications, the OECD stated that economic indicators for
all major countries stabilized in April, started to improve in May and had a
sharp improvement in June. We believe these indicators are a precursor to more
positive economic news in the coming months. We intend to take advantage of the
better economic environment by maintaining a portfolio of high-quality companies
with attractive growth prospects.
Economic and market conditions can change frequently. There is no assurance that
the trends described here will continue or commence.
An investment in the Columbia International Fund, Variable Series may present
certain risks, including stock market fluctuations that occur in response to
economic and business developments. The fund invests in foreign securities,
which have special risks, including political or economic instability and higher
transactions costs; different regulations, accounting standards, trading
practices and levels of information; and currency exchange rate fluctuations.
As a non-diversified portfolio, the fund may invest a significant percentage of
its assets in a single issuer. As a result it may have increased risk compared
to a more diversified fund.
Holdings are disclosed as of June 30, 2003, and are subject to change.
49
<Page>
PERFORMANCE INFORMATION
Columbia International Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR LIFE
- ------------------------------------------------------------------------
Class B(1) (6/1/00) 10.32 -2.64 -4.01 -0.57
MSCI All Country
World Free
ex US Index(2) 11.10 -4.19 -2.81 1.72
MSCI EAFE Index(2) 9.47 -6.46 -4.00 1.38
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 5/2/94(3) - 6/30/03
<Table>
<Caption>
MSCI ALL COUNTRY
CLASS B SHARES WORLD FREE EX US INDEX MSCI EAFE INDEX
May-94 $ 10,000 $ 10,000 $ 10,000
5/31/1994 $ 9,900 $ 10,003 $ 9,943
6/30/1994 $ 9,700 $ 10,074 $ 10,083
7/31/1994 $ 9,950 $ 10,238 $ 10,180
8/31/1994 $ 10,251 $ 10,582 $ 10,421
9/30/1994 $ 9,950 $ 10,320 $ 10,093
10/31/1994 $ 10,000 $ 10,597 $ 10,429
11/30/1994 $ 9,550 $ 10,087 $ 9,927
12/31/1994 $ 9,400 $ 10,063 $ 9,990
1/31/1995 $ 8,850 $ 9,607 $ 9,606
2/28/1995 $ 8,701 $ 9,555 $ 9,579
3/31/1995 $ 8,850 $ 10,094 $ 10,176
4/30/1995 $ 9,100 $ 10,488 $ 10,559
5/31/1995 $ 9,100 $ 10,441 $ 10,433
6/30/1995 $ 9,050 $ 10,297 $ 10,251
7/31/1995 $ 9,549 $ 10,881 $ 10,889
8/31/1995 $ 9,549 $ 10,503 $ 10,474
9/30/1995 $ 9,699 $ 10,683 $ 10,679
10/31/1995 $ 9,549 $ 10,398 $ 10,391
11/30/1995 $ 9,699 $ 10,642 $ 10,680
12/31/1995 $ 9,949 $ 11,063 $ 11,111
1/31/1996 $ 9,898 $ 11,215 $ 11,156
2/29/1996 $ 9,898 $ 11,215 $ 11,194
3/31/1996 $ 10,100 $ 11,425 $ 11,431
4/30/1996 $ 10,656 $ 11,771 $ 11,764
5/31/1996 $ 10,555 $ 11,594 $ 11,548
6/30/1996 $ 10,605 $ 11,653 $ 11,612
7/31/1996 $ 10,201 $ 11,266 $ 11,273
8/31/1996 $ 10,353 $ 11,332 $ 11,298
9/30/1996 $ 10,455 $ 11,613 $ 11,599
10/31/1996 $ 10,202 $ 11,497 $ 11,480
11/30/1996 $ 10,606 $ 11,940 $ 11,937
12/31/1996 $ 10,508 $ 11,802 $ 11,783
1/31/1997 $ 10,562 $ 11,585 $ 11,371
2/28/1997 $ 10,670 $ 11,797 $ 11,557
3/31/1997 $ 10,670 $ 11,772 $ 11,599
4/30/1997 $ 10,616 $ 11,871 $ 11,660
5/31/1997 $ 11,421 $ 12,605 $ 12,419
6/30/1997 $ 12,010 $ 13,300 $ 13,104
7/31/1997 $ 12,064 $ 13,569 $ 13,316
8/31/1997 $ 11,226 $ 12,501 $ 12,321
9/30/1997 $ 11,656 $ 13,177 $ 13,011
10/31/1997 $ 10,635 $ 12,056 $ 12,011
11/30/1997 $ 10,312 $ 11,905 $ 11,888
12/31/1997 $ 10,165 $ 12,042 $ 11,992
1/31/1998 $ 10,508 $ 12,402 $ 12,540
2/28/1998 $ 11,021 $ 13,229 $ 13,345
3/31/1998 $ 11,707 $ 13,687 $ 13,756
4/30/1998 $ 11,935 $ 13,786 $ 13,864
5/31/1998 $ 11,935 $ 13,536 $ 13,796
6/30/1998 $ 11,650 $ 13,485 $ 13,901
7/31/1998 $ 11,992 $ 13,613 $ 14,042
8/31/1998 $ 10,238 $ 11,694 $ 12,302
9/30/1998 $ 9,780 $ 11,447 $ 11,924
10/31/1998 $ 10,524 $ 12,645 $ 13,167
11/30/1998 $ 11,095 $ 13,324 $ 13,841
12/31/1998 $ 11,481 $ 13,784 $ 14,386
1/31/1999 $ 11,481 $ 13,769 $ 14,343
2/28/1999 $ 11,252 $ 13,460 $ 14,002
3/31/1999 $ 11,653 $ 14,111 $ 14,586
4/30/1999 $ 12,342 $ 14,816 $ 15,176
5/31/1999 $ 11,768 $ 14,120 $ 14,395
6/30/1999 $ 12,456 $ 14,769 $ 14,956
7/31/1999 $ 12,916 $ 15,116 $ 15,400
8/31/1999 $ 13,031 $ 15,169 $ 15,457
9/30/1999 $ 13,088 $ 15,272 $ 15,613
10/31/1999 $ 13,433 $ 15,840 $ 16,199
11/30/1999 $ 14,294 $ 16,474 $ 16,761
12/31/1999 $ 16,139 $ 18,046 $ 18,266
1/31/2000 $ 15,156 $ 17,066 $ 17,106
2/29/2000 $ 15,735 $ 17,527 $ 17,566
3/31/2000 $ 15,966 $ 18,186 $ 18,248
4/30/2000 $ 14,751 $ 17,171 $ 17,288
5/31/2000 $ 14,462 $ 16,731 $ 16,866
6/30/2000 $ 14,520 $ 17,444 $ 17,526
7/31/2000 $ 14,057 $ 16,755 $ 16,791
8/31/2000 $ 14,230 $ 16,963 $ 16,938
9/30/2000 $ 13,777 $ 16,021 $ 16,113
10/31/2000 $ 13,250 $ 15,512 $ 15,732
11/30/2000 $ 12,898 $ 14,815 $ 15,142
12/31/2000 $ 13,159 $ 15,321 $ 15,680
1/31/2001 $ 12,750 $ 15,550 $ 15,672
2/28/2001 $ 11,795 $ 14,319 $ 14,497
3/31/2001 $ 10,841 $ 13,306 $ 13,530
4/30/2001 $ 11,386 $ 14,211 $ 14,470
5/31/2001 $ 11,045 $ 13,819 $ 13,959
6/30/2001 $ 10,841 $ 13,288 $ 13,388
7/31/2001 $ 10,501 $ 12,993 $ 13,145
8/31/2001 $ 10,432 $ 12,671 $ 12,812
9/30/2001 $ 9,750 $ 11,327 $ 11,514
10/31/2001 $ 9,750 $ 11,644 $ 11,809
11/30/2001 $ 9,887 $ 12,176 $ 12,245
12/31/2001 $ 9,955 $ 12,333 $ 12,317
1/31/2002 $ 9,478 $ 11,805 $ 11,663
2/28/2002 $ 9,546 $ 11,890 $ 11,745
3/31/2002 $ 9,819 $ 12,586 $ 12,436
4/30/2002 $ 9,956 $ 12,617 $ 12,461
5/31/2002 $ 9,888 $ 12,755 $ 12,620
6/30/2002 $ 9,752 $ 12,204 $ 12,117
7/31/2002 $ 8,865 $ 11,014 $ 10,921
8/31/2002 $ 8,933 $ 11,015 $ 10,896
9/30/2002 $ 8,320 $ 9,847 $ 9,726
10/31/2002 $ 8,524 $ 10,375 $ 10,248
11/30/2002 $ 8,661 $ 10,874 $ 10,714
12/31/2002 $ 8,606 $ 10,523 $ 10,354
1/31/2003 $ 8,197 $ 10,154 $ 9,922
2/28/2003 $ 8,265 $ 9,948 $ 9,695
3/31/2003 $ 8,265 $ 9,755 $ 9,505
4/30/2003 $ 8,811 $ 10,695 $ 10,436
5/31/2003 $ 9,426 $ 11,376 $ 11,068
6/30/2003 $ 9,494 $ 11,694 $ 11,336
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- ---------------------------------------------------------------
Class B 1.26 1.39
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The MSCI (Morgan Stanley Capital
International) All Country World Free ex US Index, is an unmanaged index of
global stock market performance excluding the US. The MSCI EAFE Index is an
unmanaged index that tracks the performance of equity securities of developed
countries outside North America. Indices are not investments, do not incur fees
or expenses and are not professionally managed. It is not possible to invest
directly in an index. Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g.,
Rule12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior to
the inception of the newer classes would be lower.
(2) Index performance is from April 30, 1994.
(3) Inception date of class A shares (older existing class).
50
<Page>
INVESTMENT PORTFOLIO
Columbia International Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCKS--98.5%
CONSUMER DISCRETIONARY--10.6%
AUTO COMPONENTS -- 0.8%
FCC Co., Ltd. 6,700 $ 158,758
Nissan Shatai Co., Ltd. 113,000 379,951
--------------
538,709
--------------
AUTOMOBILES--1.0%
Honda Motor Co., Ltd. 9,100 345,459
Toyota Motor Corp. 14,400 373,652
--------------
719,111
--------------
HOUSEHOLD DURABLES--2.7%
Sanyo Electric Co., Ltd. 144,000 493,797
Koninklijke Philips Electronics NV 33,700 641,923
Pioneer Corp. 36,200 815,485
--------------
1,951,205
--------------
MEDIA--2.7%
JC Decaux SA (a) 30,100 377,386
Pearson PLC 81,300 760,596
Reed Elsevier PLC 48,600 405,069
VNU NV 13,000 401,196
--------------
1,944,247
--------------
MULTILINE RETAIL--1.3%
Wal-Mart de Mexico SA de CV 328,000 967,097
--------------
SPECIALTY RETAIL--1.3%
Kingfisher PLC 99,200 454,601
Next PLC 30,042 509,723
--------------
964,324
--------------
TEXTILES & APPAREL--0.8%
LVMH Moet Hennessy Louis Vuitton SA 8,000 397,434
Sanyo Shokai Ltd. 32,000 193,834
--------------
591,268
--------------
CONSUMER STAPLES--6.9%
BEVERAGES--1.5%
Diageo PLC 26,002 278,072
Foster's Group Ltd. 218,519 617,711
Pernod-Ricard 2,300 205,561
--------------
1,101,344
--------------
FOOD & DRUG RETAILING--1.3%
Carrefour SA 8,037 394,558
Seven-Eleven Japan Co., Ltd. 23,000 573,777
--------------
968,335
--------------
FOOD PRODUCTS--1.7%
Nestle SA 2,710 560,406
Unilever PLC 81,122 646,968
--------------
1,207,374
--------------
HOUSEHOLD PRODUCTS--1.0%
Reckitt Benckiser PLC 40,534 745,025
--------------
PERSONAL PRODUCTS--0.8%
L 'Oreal SA 8,427 595,160
--------------
TOBACCO--0.6%
Imperial Tobacco Group PLC 22,876 $ 409,501
--------------
ENERGY-- 3.3%
OIL & GAS--3.3%
BP PLC 76,306 530,046
ENI-Ente Nazionale Idrocarburi SpA 58,500 886,205
Fortum Oyj 100,000 802,875
Total SA 1,300 196,785
--------------
2,415,911
--------------
FINANCIALS-- 11.7%
BANKS--8.7%
Anglo Irish Bank Corp., PLC 73,100 647,441
Banco Popular Espanol SA 7,257 367,284
Banco Santander Central Hispano SA 82,900 727,564
Bank of Ireland 31,804 384,483
Credit Agricole SA 25,576 486,881
Credit Suisse Group 37,090 978,291
Danske Bank 25,300 493,437
Grupo Financiero BBVA Bancomer (a) 240,000 202,804
Royal Bank of Scotland Group PLC 30,337 852,449
Standard Chartered PLC 37,335 454,193
UniCredito Italiano SpA 149,500 713,644
--------------
6,308,471
--------------
DIVERSIFIED FINANCIALS--1.5%
Euronext NV 14,400 357,608
ING Groep NV 41,700 725,717
--------------
1,083,325
--------------
INSURANCE--0.9%
Converium Holding AG 3,200 147,973
Irish Life & Permanent PLC 48,500 524,399
--------------
672,372
--------------
REAL ESTATE--0.6%
Mitsubishi Estate Co., Ltd. 60,000 406,992
--------------
HEALTH CARE-- 9.1%
HEALTH CARE EQUIPMENT & SUPPLIES--2.2%
Olympus Optical Co., Ltd. 43,000 891,536
Smith & Nephew PLC 115,697 665,978
--------------
1,557,514
--------------
PHARMACEUTICALS--6.9%
Chugai Pharmaceutical Co., Ltd. 32,400 368,726
Dr. Reddy's Laboratories, Ltd., ADR 11,700 272,727
GlaxoSmithKline PLC 41,876 846,522
Novartis AG (Registered) 15,330 607,937
</Table>
See Notes to Investment Portfolio.
51
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
Ranbaxy Laboratories Ltd., ADR 14,600 $ 278,860
Roche Holding AG 5,200 408,775
Sanofi-Synthelabo SA 9,065 531,778
Takeda Chemical Industries Ltd. 22,000 813,149
Teva Pharmaceutical Industries, Ltd. ADR 15,800 899,494
--------------
5,027,968
--------------
INDUSTRIALS-- 10.8%
AIRLINES--1.1%
Cathay Pacific Airways Ltd. 289,000 389,131
Singapore Airlines Ltd. 65,000 383,927
--------------
773,058
--------------
COMMERCIAL SERVICES & SUPPLIES--0.4%
Capita Group PLC 70,660 263,954
--------------
ELECTRICAL EQUIPMENT--0.5%
Matsushita Electric Works Ltd. 66,000 391,523
--------------
INDUSTRIAL CONGLOMERATES--0.6%
Hutchison Whampoa Ltd. 8,000 48,730
Smiths Group PLC 32,900 382,294
--------------
431,024
--------------
TRANSPORTATION INFRASTRUCTURE--8.2%
Acesa Infraestructuras SA 251,636 3,522,538
BAA PLC 69,384 562,529
Brisa-Auto Estradas de Portugal SA 129,200 728,200
Jiangsu Express 3,026,000 1,135,019
--------------
5,948,286
--------------
INFORMATION TECHNOLOGY-- 6.8%
COMMUNICATIONS EQUIPMENT--0.8%
Nortel Networks Corp. (a) 119,700 321,378
Nokia Oyj 14,763 243,510
--------------
564,888
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.5%
Hoya Corp. 10,700 738,300
Keyence Corp. 1,700 312,044
--------------
1,050,344
--------------
IT CONSULTING & SERVICES--0.5%
Indra Sistemas SA 39,200 399,045
--------------
OFFICE ELECTRONICS--2.1%
Canon, Inc. 33,000 1,517,083
--------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--1.9%
ARM Holdings PLC (a) 182,000 201,555
Rohm Co., Ltd. 3,900 425,940
Taiwan Semiconductor Manufacturing Co., Ltd.,
ADR (a) 44,200 445,536
Tokyo Electron Ltd. 6,200 294,339
--------------
1,367,370
--------------
MATERIALS-- 2.5%
CHEMICALS--0.5%
Air Liquide 2,465 $ 366,046
--------------
CONTAINERS & PACKAGING--1.0%
Amcor Ltd. 138,000 752,400
--------------
METALS & MINING--1.0%
BHP Billiton Ltd. 119,300 692,099
--------------
PRIVATE PLACEMENT-- 0.0%
BANKS--0.0%
Fortis Bank Nederland (a)(b) 525 --
--------------
TELECOMMUNICATION SERVICES-- 8.7%
DIVERSIFIED TELECOMMUNICATION--4.5%
SBC Communications, Inc. 35,539 908,021
Telecom Italia SpA 40,800 369,810
Telefonica SA 82,872 963,721
Verizon Communications, Inc. 25,900 1,021,755
--------------
3,263,307
--------------
WIRELESS TELECOMMUNICATION SERVICES--4.2%
NTT DoCoMo, Inc. 402 872,054
Orange SA (a) 50,243 446,732
Vodafone Group PLC 897,546 1,758,012
--------------
3,076,798
--------------
UTILITIES-- 28.1%
ELECTRIC UTILITIES--16.4%
Beijing Datang Power Gen. Co., Ltd. 4,000,000 1,769,650
Edison International (a) 57,400 943,082
Exelon Corp. 13,100 783,511
FirstEnergy Corp. 12,300 472,935
FPL Group, Inc. 8,000 534,800
Huaneng Power International, Inc. 1,904,000 2,173,028
National Grid Transco PLC 127,404 865,509
Northeast Utilities 27,400 458,676
Pepco Holdings, Inc. 28,300 542,228
PG&E Corp. (a) 30,400 642,960
Pinnacle West Capital Corp. 19,500 730,275
PNM Resources, Inc. 22,000 588,500
Public Service Enterprise Group, Inc. 9,000 380,250
Scottish & Southern Energy PLC 100,000 1,031,410
--------------
11,916,814
--------------
GAS UTILITIES--10.6%
Enagas 366,311 3,139,053
Hong Kong & China Gas Co., Ltd. 1,168,970 1,476,550
Snam Rete Gas SpA. 577,000 2,269,835
Tokyo Gas Co., Ltd. 280,000 805,974
--------------
7,691,412
--------------
</Table>
See Notes to Investment Portfolio.
52
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
WATER UTILITIES--1.1%
Severn Trent PLC 70,324 $ 795,072
--------------
TOTAL COMMON STOCKS
(cost of $66,660,923) 71,435,776
--------------
<Caption>
PAR
--------------
CONVERTIBLE BOND--0.4%
PRIVATE PLACEMENT--0.4%
Bil Finance Ltd.,
8.19%, 10/15/03
(cost of $567,550) NZD 496,375 290,470
--------------
<Caption>
UNITS
--------------
WARRANT--0.0% (a)
FINANCIALS--0.0%
BANKS-0.0%
Siam Commercial Bank,
expires 06/22/04
(cost of $0) 12,000 1,740
--------------
<Caption>
PAR
--------------
SHORT-TERM OBLIGATION--1.5%
Repurchase agreement with State
Street Bank & Trust Co.,
dated 6/30/03, due 07/01/03
at 1.000%, collateralized
by U.S. Treasury Bond
maturing 08/15/23,
market value $1,069,625
(repurchase proceeds $1,047,029)
(cost of $1,047,000) $ 1,047,000 1,047,000
--------------
TOTAL INVESTMENTS--100.4%
(cost of $68,275,473) (c) 72,774,986
--------------
OTHER ASSETS & LIABILITIES, NET--(0.4%) (272,648)
--------------
NET ASSETS--100.0% $ 72,502,338
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Represents fair value as determined in good faith under the direction of
the Trustees.
(c) Cost for both financial statement and federal income tax purposes is the
same.
<Table>
<Caption>
SUMMARY OF SECURITIES % OF TOTAL
BY COUNTRY VALUE INVESTMENTS
United Kingdom $ 13,419,080 18.5%
Japan 11,172,372 15.5%
Spain 9,119,205 12.5%
United States 9,053,994 12.5%
China 5,077,698 7.0%
Italy 4,239,494 5.8%
France 3,998,321 5.5%
Switzerland 2,703,382 3.7%
Netherlands 2,126,444 2.9%
Australia 2,062,209 2.8%
Hong Kong 1,914,410 2.6%
Ireland 1,556,323 2.1%
Mexico 1,169,901 1.6%
Finland 1,046,384 1.4%
Israel 899,494 1.2%
Portugal 728,200 1.0%
India 551,587 0.8%
Denmark 493,437 0.7%
Taiwan 445,536 0.6%
Singapore 383,927 0.5%
Canada 321,378 0.4%
New Zealand 290,470 0.4%
Thailand 1,740 0.0%
Belgium -- 0.0%
------------ -----------
$ 72,774,986 100.0%
============ ===========
</Table>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
<Table>
<Caption>
ACRONYM NAME
------- ----
ADR American Depositary Receipt
NZD New Zealand Dollar
</Table>
See Notes to Financial Statements.
53
<Page>
STATEMENT OF ASSETS & LIABILITIES
Columbia International Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 68,275,473
------------
Investments, at value $ 72,774,986
Cash 307
Foreign currency (cost of $180,681) 180,698
Receivable for:
Interest 5,048
Dividends 338,440
Expense reimbursement due from Manager 25,816
Deferred Trustees' compensation plan 3,400
------------
TOTAL ASSETS 73,328,695
------------
LIABILITIES:
Payable for:
Fund shares repurchased 763,030
Distribution fee--Class B 434
Management fee 55,435
Transfer agent fee 595
Pricing and bookkeeping fees 899
Deferred Trustees' fee 3,400
Other liabilities 2,564
------------
TOTAL LIABILITIES 826,357
------------
NET ASSETS $ 72,502,338
============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 85,643,291
Undistributed net investment income 945,897
Accumulated net realized loss (18,591,540)
Net unrealized appreciation on:
Investments 4,499,513
Foreign currency translations 5,177
------------
NET ASSETS $ 72,502,338
============
CLASS A:
Net assets $ 66,613,412
Shares outstanding 47,607,643
============
Net asset value per share $ 1.40
============
CLASS B:
Net assets $ 5,888,926
Shares outstanding 4,224,482
============
Net asset value per share $ 1.39
============
</Table>
See Notes to Financial Statements.
54
<Page>
STATEMENT OF OPERATIONS
Columbia International Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 1,155,999
Interest 18,662
------------
Total Investment Income (net of foreign taxes withheld of $82,977) 1,174,661
------------
EXPENSES:
Management fee 218,753
Distribution fee--Class B 3,614
Pricing and bookkeeping fees 9,521
Transfer agent fee 3,720
Trustees' fee 3,189
Custody fee 13,976
Audit fee 12,342
Other expenses 7,142
------------
Total Expenses 272,257
Fees and expenses waived or reimbursed by Manager (36,335)
Custody earnings credit (83)
------------
Net Expenses 235,839
------------
Net Investment Income 938,822
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on:
Investments (2,699,464)
Foreign currency transactions (76,517)
------------
Net realized loss (2,775,981)
------------
Net change in unrealized appreciation/depreciation on:
Investments 9,562,317
Foreign currency translations (1,382)
------------
Net change in unrealized appreciation/depreciation 9,560,935
------------
Net Gain 6,784,954
------------
Net Increase in Net Assets from Operations $ 7,723,776
============
</Table>
See Notes to Financial Statements.
55
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Columbia International Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- ------------- -------------
OPERATIONS:
Net investment income $ 938,822 $ 213,923
Net realized loss on investments and foreign currency transactions (2,775,981) (8,171,078)
Net change in unrealized appreciation/depreciation
on investments and foreign currency translations 9,560,935 3,002,063
------------- -------------
Net Increase (Decrease) from Operations 7,723,776 (4,955,092)
------------- -------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A -- (113,012)
Class B -- (1)
------------- -------------
Total Distributions Declared to Shareholders -- (113,013)
------------- -------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 2,139,943 3,503,319
Proceeds received in connection with merger 35,910,049 --
Distributions reinvested -- 113,012
Redemptions (7,375,449) (10,964,351)
------------- -------------
Net Increase (Decrease) 30,674,543 (7,348,020)
------------- -------------
Class B:
Subscriptions 46,673 --
Proceeds received in connection with merger 5,503,084 --
Distributions reinvested -- 1
Redemptions (329,247) --
------------- -------------
Net Increase 5,220,510 1
------------- -------------
Net Increase (Decrease) from Share Transactions 35,895,053 (7,348,019)
------------- -------------
Total Increase (Decrease) in Net Assets 43,618,829 (12,416,124)
NET ASSETS:
Beginning of period 28,883,509 41,299,633
------------- -------------
End of period (including undistributed net investment income
of $945,897 and $7,075, respectively) $ 72,502,338 $ 28,883,509
============= =============
CHANGES IN SHARES:
Class A:
Subscriptions 1,618,297 2,647,684
Issued in connection with merger 28,728,067 --
Issued for distributions reinvested -- 90,410
Redemptions (5,590,748) (8,091,137)
------------- -------------
Net Increase (Decrease) 24,755,616 (5,353,043)
------------- -------------
Class B:
Subscriptions 34,974 --
Issued in connection with merger 4,437,971 --
Issued for distributions reinvested -- 1
Redemptions (248,951) --
------------- -------------
Net Increase 4,223,994 1
------------- -------------
</Table>
See Notes to Financial Statements.
56
<Page>
NOTES TO FINANCIAL STATEMENTS
Columbia International Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Columbia International Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a non-diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek long-term growth. The Fund's
capitalization consists of an unlimited number of shares of beneficial interest
without par value that represent a separate series of the Trust. The Fund offers
two classes of shares: Class A and Class B. Each share of a class represents an
equal proportionate beneficial interest in that share class and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of their share class available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Liberty Advisory Services Corp., the investment advisor to the
Fund and Colonial Management Associates, Inc. ("Colonial"), the sub-advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Liberty Advisory Services Corp. and Colonial with respect to
the Fund. The merger did not change the way the Fund is managed, the investment
personnel assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
On April 7, 2003, the Colonial International Horizons Fund, Variable Series,
Colonial Global Equity Fund, Variable Series and Stein Roe Global Utilities
Fund, Variable Series (collectively, "the target funds") merged into the
Colonial International Fund for Growth, Variable Series. The Colonial
International Fund for Growth, Variable Series, received a tax-free transfer of
assets from the target funds as follows:
<Table>
<Caption>
SHARES NET ASSETS UNREALIZED
ISSUED RECEIVED DEPRECIATION(1)
---------- ----------- ----------------
Colon
International
Horizons Fund,
Variable Series:
3,046,706 $ 3,777,920 $ 852,127
Colonial Global
Equity Fund,
Variable Series:
1,391,632 1,725,629 1,018,882
Stein Roe Global
Utilities Fund,
Variable Series:
28,727,700 35,909,584 610,951
</Table>
<Table>
<Caption>
NET ASSETS
NET ASSETS NET ASSETS OF COLONIAL
OF COLONIAL OF THE INTERNATIONAL
INTERNATIONAL TARGET FUND FOR
FUND FOR FUNDS GROWTH, VS
GROWTH, VS IMMEDIATELY IMMEDIATELY
PRIOR TO PRIOR TO AFTER
COMBINATION COMBINATION COMBINATION
------------- ------------- -------------
$ 27,327,712 $ 41,413,133 $ 68,740,845
</Table>
(1) Unrealized depreciation is included in the respective Net Assets Received
amount shown above.
Also on April 7, 2003, subsequent to the merger described above, the Colonial
International Fund for Growth, Variable Series was renamed Columbia
International Fund, Variable Series.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Debt securities generally are valued by
a pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
the current quoted bid price.
Forward currency contracts are valued based on the weighted value of
exchange-traded contracts with similar durations.
57
<Page>
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation of
the Fund's net asset value. If events materially affecting the value of such
securities and such exchange rates occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
FOREIGN CURRENCY TRANSACTIONS--Net realized and unrealized gains (losses) on
foreign currency transactions and translations includes gains (losses) arising
from the fluctuations in exchange rates between trade and settlement dates on
securities transactions, gains (losses) arising from the disposition of foreign
currency, and currency gains (losses) between the accrual and payment dates on
dividends, interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) on investments.
FORWARD CURRENCY CONTRACTS--The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined exchange rates
in connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions and translations.
Forward currency contracts do not eliminate fluctuations in the prices of the
Fund's portfolio securities. While the maximum potential loss from such
contracts is the aggregate face value in U.S. dollars at the time the contract
was opened, exposure is typically limited to the change in value of the contract
(in U.S. dollars) over the period it remains open. Risks may also arise if
counterparties fail to perform their obligations under the contracts.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of non-reclaimable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of all
tax withholdings with any rebates recorded when received.
58
<Page>
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carry-forwards) under income tax regulations.
The following capital loss carryforwards, determined as of December31, 2002, are
available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2009 $ 6,904,893
2010 7,745,544
------------
$ 14,650,437
============
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE--Columbia receives a monthly fee equal to 0.90% annually of
the first $1 billion of the Fund's average daily net assets and 0.85% in excess
of $1 billion.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. The Fund also pays out-of-pocket costs
for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Effective April 7, 2003, Columbia has voluntarily agreed to
waive expenses at the rate of 0.21% annually of the Fund's average daily net
assets. This waiver agreement will continue until April 7, 2004 after which it
may be modified or terminated at any time.
Prior to April 7, 2003, Liberty Advisory Services Corp. had voluntarily agreed
to reimburse all expenses, including management fees, but excluding interest,
taxes, distribution fees, brokerage and extraordinary expenses incurred by the
Fund in excess of 1.15% annually of the Fund's average daily net assets.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $83 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $18,652,134 and
$26,303,049, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 10,832,798
Gross unrealized depreciation (6,333,285)
------------
Net unrealized appreciation $ 4,499,513
============
</Table>
OTHER--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of foreign currency
exchange or the imposition of other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
59
<Page>
FINANCIAL HIGHLIGHTS
Columbia International Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED DECEMBER 31, ENDED
JUNE 30, --------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
----------- ------- ------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.26 $ 1.46 $ 1.93 $ 2.50
----------- ------- ------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (b) 0.03 0.01 --(c) (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.10 (0.21) (0.47) (0.22)
----------- ------- ------- ------------
Total from Investment Operations 0.13 (0.20) (0.47) (0.23)
----------- ------- ------- ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- --(c) -- (0.04)
In excess of net investment income -- -- -- --(c)
From net realized gains -- -- -- (0.30)
In excess of net realized gains -- -- -- --(c)
----------- ------- ------- ------------
Total Distributions Declared
to Shareholders -- -- -- (0.34)
----------- ------- ------- ------------
NET ASSET VALUE, END OF PERIOD $ 1.39 $ 1.26(c) $ 1.46 $ 1.93
=========== ======= ======= ============
Total return (d)(e) 10.32%(f)(g) (13.56)% (24.35)% (9.01)%(g)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 1.21%(i) 1.38% 1.48% 1.33%(i)
Net investment income (loss) (h) 3.62%(i) 0.37% 0.16% (0.43)%(i)
Waiver/reimbursement 0.15%(i) -- -- --
Portfolio turnover rate 41%(g) 39% 34% 76%(g)
Net assets, end of period (000's) $ 5,889 $ 1 $ 1 $ 1
</Table>
(a) For the period from commencement of operations on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Rounds to less than $0.01 per share.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(f) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
60
<Page>
SHAREHOLDER MEETING RESULTS
Columbia International Fund, Variable Series
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On February 19, 2003, the Annual Meeting of Shareholders of the Trust was held
to conduct a vote for or against the approval of the following items listed on
the Trust's Proxy Statement for said Meeting. On December 2, 2002, the record
date for the Meeting, the Colonial Global Equity Fund, Variable Series had
838,893.529 common shares outstanding, the Colonial International Horizons Fund,
Variable Series had 1,063,601.395 common shares outstanding, and the Stein Roe
Global Utilities Fund, Variable Series had 4,230,321.144 common shares
outstanding. The votes cast were as follows:
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
COLONIAL GLOBAL EQUITY FUND, VARIABLE SERIES
FEBRUARY 19, 2003
1. To approve an Agreement and Plan of Reorganization providing for the sale of
all of the assets of Colonial Global Equity Fund, Variable Series to, and the
assumption of all of the liabilities of the Colonial Global Equity Fund,
Variable Series by, the Colonial International Fund for Growth, Variable
Series, in exchange for shares of the Colonial International Fund for Growth,
Variable Series and the distribution of such shares to the shareholders of
the Colonial Global Equity Fund, Variable Series in complete liquidation of
the Colonial Global Equity Fund, Variable Series. (Item 1 of the Notice.)
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ------------- -------------
Affirmative 827,644.724 98.659% 98.659%
Against 182.199 .022% .022%
Abstain 11,066.606 1.319% 1.319%
TOTAL 838,893.529 100.000% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 838,893.529
VOTED SHARES 838,893.529
PERCENT VOTED 100.000%
</Table>
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
COLONIAL INTERNATIONAL HORIZONS FUND, VARIABLE SERIES
FEBRUARY 19, 2003
2. To approve an Agreement and Plan of Reorganization providing for the sale of
all of the assets of Colonial International Horizons Fund, Variable Series
to, and the assumption of all of the liabilities of the Colonial
International Horizons Fund, Variable Series by, the Colonial International
Fund for Growth, Variable Series, in exchange for shares of the Colonial
International Fund for Growth, Variable Series and the distribution of such
shares to the shareholders of the Colonial International Horizons Fund,
Variable Series in complete liquidation of the Colonial International
Horizons Fund, Variable Series. (Item 2 of the Notice.)
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ------------- -------------
Affirmative 949,134.858 89.238% 89.238%
Against 20,720.929 1.948% 1.948%
Abstain 93,745.608 8.814% 8.814%
TOTAL 1,063,601.395 100.000% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 1,063,601.395
VOTED SHARES 1,063,601.395
PERCENT VOTED 100.000%
</Table>
61
<Page>
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
FEBRUARY 19, 2003
3. To approve an Agreement and Plan of Reorganization providing for the sale of
all of the assets of Stein Roe Global Utilities Fund, Variable Series to, and
the assumption of all of the liabilities of the Stein Roe Global Utilities
Fund, Variable Series by, the Colonial International Fund for Growth,
Variable Series, in exchange for shares of the Colonial International Fund
for Growth, Variable Series and the distribution of such shares to the
shareholders of the Stein Roe Global Utilities Fund, Variable Series in
complete liquidation of the Stein Roe Global Utilities Fund, Variable
Series.(Item 3 of the Notice.)
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ------------- -------------
Affirmative 3,747,379.502 88.584% 88.694%
Against 101,566.732 2.401% 2.404%
Abstain 376,122.561 8.891% 8.902%
TOTAL 4,225,068.795 99.876% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 4,230,321.144
VOTED SHARES 4,225,068.795
PERCENT VOTED 99.876%
</Table>
62
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Columbia Real Estate Equity Fund, Variable Series / June 30, 2003
Columbia Real Estate Equity Fund, Variable Series seeks capital appreciation
and above-average current income.
David W. Jellison has managed the fund and its predecessor since its inception
in March 1998.
On April 14, 2003, Columbia Real Estate Equity Fund, Variable Series acquired
two funds: Crabbe Huson Real Estate Investment Fund, Variable Series and
Galaxy VIP Columbia Real Estate Equity Fund II. The combined fund retained the
name Columbia Real Estate Equity Fund, Variable Series.
The fund's performance fell short of the return of its benchmark, the NAREIT
Index, primarily because the fund was more heavily invested in forest products
securities. We made this investment late in 2002 in anticipation of a more rapid
improvement in the economy, which failed to materialize. The fund also was
significantly underexposed to health care real estate investment trusts (REITs).
This was a sector that performed well during the period. In addition, the fund's
defensive cash position detracted from performance.
UNDERLYING ECONOMIC CONDITIONS GENERALLY LESS HOSPITABLE TO GROWTH
Business conditions underlying the nation's real estate markets were generally
weak throughout the period. Job growth, which directly affects the health of the
US office and apartment markets, remained sluggish. The average vacancy rate in
the major metropolitan office markets reached 17%, a level that was
significantly higher than the historical average. For 2002, most office REITs
reported weaker earnings than the previous year, and few expected earnings to
turn positive before the end of 2004. With vacancy rates running high, we are
doubtful that landlords will be able to extract meaningful rent increases as
office leases come up for renewal. Similarly, apartment vacancy rates have
increased, as low mortgage rates and a single-family construction boom have been
prompting renters to buy houses. As a result of these factors, we have
maintained an underweight position in both office and apartment companies.
By contrast, the retail sector has benefited from a combination of brisk
consumer spending, attractive lease structures and unabated demand by retailers
for high-quality mall space. As a result, the fund's holdings of higher-quality
regional mall and shopping center companies have done well. Nevertheless, we
have some concerns about consumers who, saddled by high debt and static incomes,
may not be able to propel retail earnings growth indefinitely. As a result, we
have taken profits from some of the fund's retail holdings.
We continue to overweight the industrial sector, where we particularly like
ProLogis (4.6% of net assets), which has been leading the modernization of
logistics technology for distribution facilities in both Europe and Japan.
During the second quarter we added a new position in Duke Realty (2.4% of net
assets). Duke's management has significantly reduced the debt on its balance
sheet, which will help it achieve greater growth if the manufacturing economies
in which the company operates continue to improve.
RISKS RISE FOR REITs
REITs generated strong returns over the past year partly as investors looked for
higher yields than they could get from alternative fixed-income investments.
Going forward, we believe the business conditions underlying the REIT markets
likely have bottomed or are close to bottoming. As we have noted in the past,
however, REIT returns tend to lag those of the broader stock market, which could
make real estate securities less attractive if equities strengthen. The other
risk facing REITs is that investors may become disappointed if the economic
fundamentals underlying company earnings do not improve quickly enough to
justify what we perceive to be a pricier market for their shares. Overall,
however, we are generally encouraged by the income stability and liquidity that
REITs offer, and we believe the fund is well positioned to benefit from eventual
economic recovery over the long term.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
An investment in the fund may present certain risks, including stock market
fluctuations that occur in response to economic and business developments. The
fund may be subject to the same types of risks associated with direct ownership
of real estate including the decline of property value due to general, local and
regional economic conditions. In addition, the fund's share price will likely be
subject to more volatility than the overall stock market because it concentrates
in real estate stocks.
Holdings are disclosed as of June 30, 2003, and are subject to change.
63
<Page>
PERFORMANCE INFORMATION
Columbia Real Estate Equity Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR LIFE
- ------------------------------------------------------------------------------
Class B(1) (4/14/03) 11.79 2.81 6.19 5.62
NAREIT Index(2) 13.87 4.00 7.12 6.08
S&P 500 Index(2) 11.75 0.25 -1.61 0.02
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 3/3/98(3) - 6/30/03
<Table>
<Caption>
CLASS B SHARES NAREIT INDEX S&P 500 INDEX
3/3/1998 $ 10,000 $ 10,000 $ 10,000
3/31/1998 $ 10,350 $ 10,179 $ 10,512
4/30/1998 $ 9,981 $ 9,847 $ 10,618
5/31/1998 $ 9,931 $ 9,778 $ 10,436
6/30/1998 $ 9,908 $ 9,712 $ 10,859
7/31/1998 $ 9,356 $ 9,081 $ 10,744
8/31/1998 $ 8,664 $ 8,224 $ 9,191
9/30/1998 $ 9,079 $ 8,690 $ 9,780
10/31/1998 $ 8,917 $ 8,529 $ 10,575
11/30/1998 $ 9,079 $ 8,654 $ 11,216
12/31/1998 $ 9,044 $ 8,436 $ 11,862
1/31/1999 $ 8,889 $ 8,260 $ 12,357
2/28/1999 $ 8,827 $ 8,066 $ 11,973
3/31/1999 $ 8,753 $ 8,029 $ 12,452
4/30/1999 $ 9,406 $ 8,791 $ 12,934
5/31/1999 $ 9,675 $ 8,985 $ 12,629
6/30/1999 $ 9,443 $ 8,839 $ 13,330
7/31/1999 $ 9,077 $ 8,558 $ 12,914
8/31/1999 $ 9,066 $ 8,450 $ 12,850
9/30/1999 $ 8,645 $ 8,128 $ 12,498
10/31/1999 $ 8,454 $ 7,928 $ 13,289
11/30/1999 $ 8,370 $ 7,799 $ 13,559
12/31/1999 $ 8,670 $ 8,046 $ 14,358
1/31/2000 $ 8,702 $ 8,073 $ 13,637
2/29/2000 $ 8,487 $ 7,977 $ 13,379
3/31/2000 $ 8,925 $ 8,239 $ 14,688
4/30/2000 $ 9,466 $ 8,793 $ 14,246
5/31/2000 $ 9,552 $ 8,879 $ 13,954
6/30/2000 $ 9,874 $ 9,107 $ 14,298
7/31/2000 $ 10,772 $ 9,903 $ 14,075
8/31/2000 $ 10,323 $ 9,501 $ 14,949
9/30/2000 $ 10,731 $ 9,804 $ 14,160
10/31/2000 $ 10,234 $ 9,379 $ 14,101
11/30/2000 $ 10,521 $ 9,499 $ 12,989
12/31/2000 $ 11,145 $ 10,168 $ 13,053
1/31/2001 $ 11,023 $ 10,274 $ 13,516
2/28/2001 $ 10,866 $ 10,109 $ 12,284
3/31/2001 $ 10,659 $ 10,207 $ 11,505
4/30/2001 $ 11,041 $ 10,451 $ 12,399
5/31/2001 $ 11,254 $ 10,704 $ 12,482
6/30/2001 $ 11,776 $ 11,331 $ 12,179
7/31/2001 $ 11,527 $ 11,106 $ 12,059
8/31/2001 $ 11,900 $ 11,512 $ 11,304
9/30/2001 $ 11,101 $ 11,035 $ 10,391
10/31/2001 $ 10,688 $ 10,719 $ 10,589
11/30/2001 $ 11,352 $ 11,309 $ 11,402
12/31/2001 $ 11,668 $ 11,584 $ 11,502
1/31/2002 $ 11,737 $ 11,608 $ 11,334
2/28/2002 $ 11,979 $ 11,832 $ 11,115
3/31/2002 $ 12,477 $ 12,542 $ 11,533
4/30/2002 $ 12,569 $ 12,648 $ 10,834
5/31/2002 $ 12,812 $ 12,819 $ 10,754
6/30/2002 $ 13,010 $ 13,169 $ 9,988
7/31/2002 $ 12,277 $ 12,480 $ 9,210
8/31/2002 $ 12,149 $ 12,455 $ 9,270
9/30/2002 $ 11,642 $ 11,977 $ 8,263
10/31/2002 $ 11,256 $ 11,401 $ 8,990
11/30/2002 $ 11,852 $ 11,938 $ 9,519
12/31/2002 $ 11,966 $ 12,026 $ 8,960
1/31/2003 $ 11,643 $ 11,676 $ 8,726
2/28/2003 $ 11,768 $ 11,869 $ 8,595
3/31/2003 $ 11,988 $ 12,106 $ 8,678
4/30/2003 $ 12,510 $ 12,639 $ 9,393
5/31/2003 $ 13,121 $ 13,402 $ 9,888
6/30/2003 $ 13,377 $ 13,697 $ 10,011
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 4/14/03 6/30/03
- --------------------------------------------------------------------------------
Class B 9.82 10.72
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The NAREIT (National Association of Real
Estate Investment Trusts) Index is an unmanaged index that reflects performance
of all publicly-traded equity REITs. The S&P (Standard & Poor's) 500 Index is an
unmanaged index that tracks the performance of 500 widely held
large-capitalization U.S. stocks. Indices are not investments, do not incur
fees, expenses, or taxes and are not professionally managed. It is not possible
to invest directly in an index. Securities in the fund may not match those in an
index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND
MAY BE DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class shares would be lower.
(2) Index performance is from February 28, 1998.
(3) Inception date of class A shares (older existing share class).
64
<Page>
INVESTMENT PORTFOLIO
Columbia Real Estate Equity Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCKS--96.6%
CONSUMER DISCRETIONARY--6.1%
HOTELS, RESTAURANTS & LEISURE--6.1%
Hilton Hotels Corp. 4,775 $ 61,072
Marriott International, Inc. 850 32,657
Starwood Hotels & Resorts Worldwide, Inc. 3,225 92,203
--------------
185,932
--------------
FINANCIALS--83.2%
REAL ESTATE--83.2%
Alexandria Real Estate Equities, Inc. 2,475 111,375
American Financial Realty Trust 2,100 31,311
Apartment Investment & Management Co., Class A 1,800 62,280
Archstone-Smith Trust 2,400 57,600
Avalonbay Communities, Inc. 1,825 77,818
Boston Properties, Inc. 1,775 77,745
CarAmerica Realty Corp. 1,075 29,896
Catellus Development Corp. (a) 1,500 33,000
CenterPoint Properties Corp. 1,000 61,250
Chelsea Property Group, Inc. 1,500 60,465
Cousins Properties, Inc. 6,150 171,585
Duke Realty Corp. 2,650 73,008
Equity Office Properties Trust 3,636 98,208
Equity Residential 2,300 59,685
First Industrial Realty Trust, Inc. 1,025 32,390
General Growth Properties, Inc. 2,325 145,173
iStar Financial, Inc. 4,325 157,863
Kimco Realty Corp. 2,837 107,522
Liberty Property Trust 1,475 51,035
Manufactured Home Communities, Inc. 675 23,699
Newcastle Investment Corp. 2,425 47,481
Pan Pacific Retail Properties, Inc. 1,050 41,317
Parkway Properties, Inc. 325 13,666
Prentiss Properties Trust 725 21,743
ProLogis Trust 5,190 141,687
Public Storage, Inc. 2,300 77,901
Reckson Associates Realty Corp. 900 18,774
Regency Centers Corp. 3,200 111,936
Rouse Co. 3,000 114,300
Simon Property Group, Inc. 4,025 157,096
SL Green Realty Corp. 900 31,401
St. Joe Co. 3,150 98,280
Taubman Centers, Inc. 1,575 30,177
United Dominion Realty Trust, Inc. 1,875 32,287
Vornado Realty Trust 2,025 88,290
--------------
2,549,244
--------------
MATERIALS--7.3%
PAPER & FOREST PRODUCTS--7.3%
Bowater, Inc. 2,775 $ 103,924
International Paper Co. 1,950 69,674
MeadWestvaco Corp. 1,975 48,783
--------------
222,381
--------------
TOTAL COMMON STOCKS
(cost of $2,702,719) 2,957,557
--------------
<Caption>
PAR
--------------
SHORT-TERM OBLIGATION--4.0%
Repurchase agreement with State
Street Bank & Trust Co., dated
06/30/03, due 07/01/03 at 1.000%,
collateralized by a U.S. Treasury
Bond maturing 5/15/10, market
value $128,700, (repurchase
proceeds $124,003)
(cost of $124,000) $ 124,000 124,000
--------------
TOTAL INVESTMENTS--100.6%
(cost of $2,826,719) (b) 3,081,557
--------------
OTHER ASSETS & LIABILITIES, NET--(0.6)% (18,502)
--------------
NET ASSETS--100.0% $ 3,063,055
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for both financial statement and federal income tax purposes is the
same.
See Notes to Financial Statements.
65
<Page>
STATEMENT OF ASSETS & LIABILITIES
Columbia Real Estate Equity Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 2,826,719
--------------
Investments, at value $ 3,081,557
Cash 1,138
Receivable for:
Investments sold 3,885
Interest 3
Dividends 9,765
Deferred Trustees' compensation plan 522
--------------
TOTAL ASSETS 3,096,870
--------------
LIABILITIES:
Expense reimbursement due to Manager 453
Payable for:
Fund shares repurchased 7,545
Management fee 2,687
Administration fee 216
Distribution fee--Class B 26
Pricing and bookkeeping fees 2,477
Custody fee 2,061
Reports to Shareholders 17,195
Deferred Trustees' fee 522
Other liabilities 633
--------------
TOTAL LIABILITIES 33,815
--------------
NET ASSETS $ 3,063,055
==============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 2,498,569
Undistributed net investment income 7,587
Accumulated net realized gain 302,061
Net unrealized appreciation on investments 254,838
--------------
NET ASSETS $ 3,063,055
==============
CLASS A:
Net assets $ 962,608
Shares outstanding 89,787
==============
Net asset value per share $ 10.72
==============
CLASS B:
Net assets $ 2,100,447
Shares outstanding 195,912
==============
Net asset value per share $ 10.72
==============
</Table>
See Notes to Financial Statements.
66
<Page>
STATEMENT OF OPERATIONS
Columbia Real Estate Equity Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 38,910
Interest 646
--------------
Total Investment Income 39,556
--------------
EXPENSES:
Management fee 6,877
Administration fee 779
Distribution fee--Class B 1,115
Pricing and bookkeeping fees 13,469
Transfer agent fee 2,496
Trustees' fee 7
Custody fee 4,281
Audit fee 5,492
Reports to shareholders 7,214
Other expenses 886
--------------
Total Expenses 42,616
Fees and expenses waived or reimbursed by Manager (21,217)
Custody earnings credit (12)
--------------
Net Expenses 21,387
--------------
Net Investment Income 18,169
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 301,551
Net change in unrealized appreciation/depreciation
on investments (30,821)
--------------
Net Gain 270,730
--------------
Net Increase in Net Assets from Operations $ 288,899
==============
</Table>
See Notes to Financial Statements.
67
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Columbia Real Estate Equity Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- -------------- --------------
OPERATIONS:
Net investment income $ 18,169 $ 41,411
Net realized gain on investments 301,551 40,621
Net change in unrealized appreciation/depreciation
on investments (30,821) (66,916)
-------------- --------------
Net Increase from Operations 288,899 15,116
-------------- --------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A (5,360) (33,393)
Class B (5,208) --
From net realized gains:
Class A -- (39,385)
Class B -- --
-------------- --------------
Total Distributions Declared to Shareholders (10,568) (72,778)
-------------- --------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 90,949 224,088
Proceeds received in connection with merger 1,269 --
Distributions reinvested 5,360 72,778
Redemptions (216,844) (372,423)
-------------- --------------
Net Decrease (119,266) (75,557)
-------------- --------------
Class B:
Subscriptions 137,755 --
Proceeds received in connection with merger 1,868,312 --
Distributions reinvested 5,208 --
Redemptions (86,444) --
-------------- --------------
Net Increase 1,924,831 --
-------------- --------------
Net Increase (Decrease) from Share Transactions 1,805,565 (75,557)
-------------- --------------
Total Increase (Decrease) in Net Assets 2,083,896 (133,219)
NET ASSETS:
Beginning of period 979,159 1,112,378
-------------- --------------
End of period (including undistributed net
investment income of $7,587 and overdistributed net
investment income of $(14)) $ 3,063,055 $ 979,159
============== ==============
CHANGES IN SHARES:
Class A:
Subscriptions 8,583 20,934
Issued in connection with merger 129 --
Issued for distributions reinvested 531 7,407
Redemptions (21,047) (36,726)
-------------- --------------
Net Decrease (11,804) (8,385)
-------------- --------------
Class B:
Subscriptions 13,409 --
Issued in connection with merger 190,256 --
Issued for distributions reinvested 480 --
Redemptions (8,233) --
-------------- --------------
Net Increase 195,912 --
-------------- --------------
</Table>
See Notes to Financial Statements.
68
<Page>
NOTES TO FINANCIAL STATEMENTS
Columbia Real Estate Equity Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Columbia Real Estate Equity Fund, Variable Series (the "Fund"),
a series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to provide growth of capital and current income.
The Fund's capitalization consists of an unlimited number of shares of
beneficial interest without par value that represent a separate series of the
Trust. The Fund offers two classes of shares: Class A and Class B. Class B
commenced operations on April 14, 2003. Each share of a class represents an
equal proportionate beneficial interest in that share class and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of their share class available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Fleet Investment Advisors Inc., the investment advisor to the
predecessor Fund, merged into Columbia Management Advisors, Inc. ("Columbia"),
formerly known as Columbia Management Co., an indirect wholly owned subsidiary
of FleetBoston Financial Corporation. At the time of the merger, Columbia
assumed the obligations of Fleet Investment Advisors Inc. with respect to the
predecessor Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
administrative and pricing and bookkeeping services to the Fund. Liberty Funds
Distributor, Inc. ("LFD"), an affiliate of Columbia, serves as the principal
underwriter of the Fund.
On April 14, 2003, the Crabbe Huson Real Estate Investment Fund, Variable Series
merged into the Galaxy VIP Columbia Real Estate Equity Fund II, previously a
fund of the Galaxy VIP Fund, a separate Massachusetts business trust (the
"predecessor trust"). Also on April 14, 2003, Galaxy VIP Columbia Real Estate
Equity Fund II, created a Class B into which Crabbe Huson Real Estate Investment
Fund, Variable Series Class B shares were reorganized. The Galaxy VIP Columbia
Real Estate Equity Fund II received a tax-free transfer of assets from the
Crabbe Huson Real Estate Investment Fund, Variable Series as follows:
<Table>
<Caption>
SHARES NET ASSETS UNREALIZED
ISSUED RECEIVED APPRECIATION(1)
------ ---------- ---------------
190,385 $ 1,869,581 $ 243,393
<Caption>
NET ASSETS OF
GALAXY VIP NET ASSETS OF NET ASSETS OF GALAXY
COLUMBIA REAL CRABBE HUSON VIP COLUMBIA
ESTATE EQUITY REAL ESTATE INVESTMENT REAL ESTATE EQUITY
FUND II PRIOR TO FUND, VARIABLE SERIES FUND II IMMEDIATELY
COMBINATION PRIOR TO COMBINATION AFTER COMBINATION
------------- ---------------------- -------------------
$ 998,543 $ 1,869,581 $ 2,868,124
</Table>
(1) Unrealized appreciation is included in the Net Assets Received amount shown
above.
Also on April 14, 2003, subsequent to the merger described above, the Galaxy VIP
Columbia Real Estate Equity Fund II was reorganized as the Columbia Real Estate
Equity Fund, Variable Series.
The accompanying statement of operations, statement of changes in net assets and
financial highlights for the Fund represents the historical operations of the
Galaxy VIP Columbia Real Estate Equity Fund II for periods prior to April 14,
2003.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at the current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
69
<Page>
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT AND ADMINISTRATION FEES--Columbia receives a monthly management
fee equal to 0.75% annually of the Fund's average daily net assets.
Columbia provides, pursuant to an Administrative Agreement with the Fund,
certain administrative services for a monthly fee equal to 0.085% annually of
the Fund's average daily net assets. Prior to April 14, 2003, the administration
fee was computed daily and paid monthly at the annual rate of 0.085% of the
first $1 billion of the combined average daily net assets of the funds in the
predecessor trust, 0.078% of the next $1.5 billion of combined average daily net
assets and 0.073% of combined average daily net assets in excess of $2.5
billion.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual fee based on the average daily net assets of the Fund as
follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS FEE
Under $50 million $ 25,000
Of $50 million but less than $200 million 35,000
Of $200 million but less than $500 million 50,000
Of $500 million but less than $1 billion 85,000
In excess of $1 billion 125,000
</Table>
The annual fees for a Fund with more than 25% in non-domestic assets will be
150% of the annual fees described above.
The Fund also pays out-of-pocket costs for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for a monthly fee based on
a per account charge or minimum of $5,000 annually per Fund.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Effective April 14, 2003, Columbia has voluntarily agreed to
waive expenses at the rate of 0.90% annually of the Fund's average daily net
assets. This waiver agreement will continue until April 14, 2004, after which it
may be modified or terminated at any time.
Prior to April 14, 2003, Fleet Investment Advisors, Inc. and/or its affiliates
and/or PFPC Inc., the former fund administrator, could voluntarily waive all or
a portion of the fees payable to them by the predecessor fund.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
70
<Page>
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $12 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $6,663,720 and
$5,142,479, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for both financial statement and federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 277,712
Gross unrealized depreciation (22,874)
-----------
Net unrealized appreciation $ 254,838
===========
</Table>
OTHER--The Fund may focus its investments in certain industries, subjecting
it to greater risk than a fund that is more diversified.
71
<Page>
FINANCIAL HIGHLIGHTS
Columbia Real Estate Equity Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout the period is as follows:
<Table>
<Caption>
(UNAUDITED)
PERIOD
ENDED
JUNE 30,
2003 (a)
--------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.82
--------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.03
Net realized and unrealized gain on
investments 0.90
--------------
Total from Investment Operations 0.93
--------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.03)
--------------
Total Distributions Declared
to Shareholders (0.03)
--------------
NET ASSET VALUE, END OF PERIOD $ 10.72
==============
Total return (c)(d)(e) 9.43%(f)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (g) 2.64%(h)
Net investment income (g) 1.36%(h)
Waiver/reimbursement 0.90%(h)
Portfolio turnover rate 294%(f)
Net assets, end of period (000's) $ 2,100
</Table>
(a) For the period from commencement of operations April 14, 2003 to June 30,
2003.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
72
<Page>
SHAREHOLDER MEETING RESULTS
Columbia Real Estate Equity Fund, Variable Series
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On February 19, 2003, the Annual Meeting of Shareholders of the Trust was held
to conduct a vote for or against the approval of the following items listed on
the Trust's Proxy Statement for said Meeting. On December 2, 2002, the record
date for the Meeting, the Crabbe Huson Real Estate Investment Fund, Variable
Series had 428,385.881 common shares outstanding and the Galaxy VIP Columbia
Real Estate Equity Fund II had 96,432.390 common shares outstanding. The votes
cast were as follows:
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
CRABBE HUSON REAL ESTATE INVESTMENT FUND, VARIABLE SERIES
FEBRUARY 19, 2003
1. To approve an Agreement and Plan of Reorganization providing for the sale of
all of the assets of the Crabbe Huson Real Estate Investment Fund, Variable
Series to, and the assumption of all of the liabilities of the Crabbe Huson
Real Estate Investment Fund, Variable Series by, the Columbia Real Estate
Equity Fund, Variable Series, in exchange for shares of the Columbia Real
Estate Equity Fund, Variable Series, and the distribution of such shares to
the shareholders of the Crabbe Huson Real Estate Investment Fund, Variable
Series in complete liquidation of the Crabbe Huson Real Estate Investment
Fund, Variable Series.
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ------------- -------------
Affirmative 395,954.809 92.429% 92.429%
Against 881.446 .206% .206%
Abstain 31,549.626 7.365% 7.365%
TOTAL 428,385.881 100.000% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 428,385.881
VOTED SHARES 428,385.881
PERCENT VOTED 100.000%
</Table>
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
GALAXY VIP COLUMBIA REAL ESTATE EQUITY FUND II
FEBRUARY 19, 2003
2. To approve an Agreement and Plan of Reorganization providing for (i) the sale
of all of the assets of the Galaxy VIP Columbia Real Estate Equity Fund II
to, and the assumption of all of the liabilities of the Galaxy VIP Columbia
Real Estate Equity Fund II by, the Columbia Real Estate Equity Fund, Variable
Series, in exchange for shares of the Columbia Real Estate Equity Fund,
Variable Series and the distribution of such shares to the shareholders of
the Galaxy VIP Columbia Real Estate Equity Fund II in complete liquidation of
the Galaxy VIP Columbia Real Estate Equity Fund II; (ii) the de-registration
of The Galaxy VIP Fund as an investment company under the Investment Company
Act of 1940, as amended, and (iii) The Galaxy VIP Fund's termination as a
Massachusetts business trust under Massachusetts law.
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ------------- -------------
Affirmative 89,998.688 93.328% 93.328%
Against .000 .000% .000%
Abstain 6,433.702 6.672% 6.672%
TOTAL 96,432.390 100.000% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 96,432.390
VOTED SHARES 96,432.390
PERCENT VOTED 100.000%
</Table>
73
<Page>
CHANGE IN INDEPENDENT AUDITOR
Columbia Real Estate Equity Fund, Variable Series
Based on the recommendation of the Audit Committee of the Fund on May 6, 2003,
the Board of Trustees determined not to retain Ernst & Young LLP ("E&Y") as the
Fund's independent auditor and voted to appoint PricewaterhouseCoopers LLP for
the fiscal year ended December 31, 2003. During the two most recent fiscal
years, E&Y's audit reports contained no adverse opinion or disclaimer of
opinion; nor were its reports qualified or modified as to uncertainty, audit
scope, or accounting principle. Further, in connection with its audits for the
two most recent fiscal years and through May 6, 2003, there were no
disagreements between the Fund and E&Y on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
if not resolved to the satisfaction of E&Y would have caused it to make
reference to the disagreements in its report on the financial statements for
such years.
74
<Page>
PORTFOLIO MANAGERS' DISCUSSION
Liberty All-Star Equity Fund, Variable Series / June 30, 2003
Liberty All-Star Equity Fund, Variable Series seeks total investment return,
which is composed of long-term capital appreciation and current income,
through investment primarily in a diversified portfolio of equity securities.
The fund's investment program is based upon Liberty Asset Management
Company's (LAMCO) multi-manager concept. LAMCO allocates the fund's portfolio
assets on an approximately equal basis among a number of independent
investment management organizations ("Portfolio Managers") -- currently five
in number. Each Portfolio Manager employs a different investment style.
LAMCO, from time to time, rebalances the portfolio among the Portfolio
Managers to maintain an approximately equal allocation of the portfolio among
them throughout all market cycles.
The fund's current Portfolio Managers are:
- Boston Partners Asset Management, L.P.; INVESTMENT STYLE-VALUE
- Oppenheimer Capital; INVESTMENT STYLE-VALUE
- Schneider Capital Management; INVESTMENT STYLE-VALUE
- Mastrapasqua Asset Management, Inc.; INVESTMENT STYLE-GROWTH
- TCW Investment Management Company; INVESTMENT STYLE-GROWTH
INVESTMENT APPROACH
Instead of relying on a single investment manager, LAMCO employs a
multi-management approach for the fund.
Because investment styles go in and out of favor, a style that produces
strong returns one year may produce disappointing results the next. By contrast,
a multi-management approach combines managers who practice different but
complementary investment styles in an attempt to reduce volatility while
providing attractive returns.
Liberty All-Star Equity Fund, Variable Series is structured as a core
investment, combining both growth and value style managers within the fund.
Using our expertise, experience and state-of-the-art tools, we select managers
for the fund and evaluate them on an ongoing basis. The investment managers
LAMCO selects for the fund are distinguished by the following characteristics:
- - a consistent focus on a particular style of investing
- - a disciplined investment decision-making process
- - a record of success relative to their peers who practice the same strategy
- - continuity among the investment professionals, so that those who have built
the record remain the managers
- - a well-managed, highly responsive organization
LAMCO performs all the due diligence, research, selection and monitoring that
would be expected of a professional investment management firm. LAMCO adds value
by selecting best of breed managers and replacing them when necessary.
STRONG PERFORMANCE AFTER A WEAK START
The equity markets entered the new year facing strong headwinds. Stock prices
fell during the first quarter of 2003 as a result of geopolitical concerns.
After the major campaigns of the war ended, investors turned their attention
back to the economy and corporate profits. They responded favorably to
accommodative monetary and fiscal policies, both in the United States and
abroad. As a result, stock prices rose strongly in the second quarter, pushing
most widely-followed equity indices ahead by double digits for the first half of
the year.
The fund participated in the strong advance of stock prices, outpacing the
S&P 500 Index by a significant margin. While increasing our emphasis on
technology last year hurt the fund's results during the last half of 2002, that
strategy enhanced results in the first half of 2003. Selected technology stocks
turned around in response to increased investor optimism.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue to commence.
The fund is intended to be a long-term investment vehicle and is not designed to
provide a means of speculating on short-term stock market movements. The fund
has adopted certain investment policies in managing its portfolio that are
designed to maintain the diversity of the fund's investment portfolio and reduce
risk. The fund may not always achieve its investment objective. The fund's
investment objective and non-fundamental investment policies may be changed
without shareholder approval.
75
<Page>
PERFORMANCE INFORMATION
Liberty All-Star Equity Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR LIFE
- --------------------------------------------------------------------------------
Class B(1) (6/1/00) 16.58 3.64 -1.97 0.66
Russell 3000 Index(2) 12.71 0.77 -1.13 1.87
S&P 500 Index(2) 11.75 0.25 -1.61 1.79
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 11/17/97(3) - 6/30/03
<Table>
<Caption>
CLASS B SHARES RUSSELL 3000 INDEX S&P 500 INDEX
Nov-97 $ 10,000
11/30/1997 $ 10,000 $ 10,000 $ 10,000
12/31/1997 $ 10,080 $ 10,200 $ 10,172
1/31/1998 $ 10,030 $ 10,253 $ 10,284
2/28/1998 $ 10,900 $ 10,986 $ 11,025
3/31/1998 $ 11,421 $ 11,531 $ 11,590
4/30/1998 $ 11,522 $ 11,644 $ 11,708
5/31/1998 $ 11,212 $ 11,356 $ 11,507
6/30/1998 $ 11,462 $ 11,740 $ 11,974
7/31/1998 $ 11,221 $ 11,527 $ 11,847
8/31/1998 $ 9,469 $ 9,761 $ 10,135
9/30/1998 $ 10,080 $ 10,426 $ 10,785
10/31/1998 $ 10,821 $ 11,218 $ 11,660
11/30/1998 $ 11,351 $ 11,904 $ 12,367
12/31/1998 $ 11,962 $ 12,661 $ 13,079
1/31/1999 $ 11,982 $ 13,092 $ 13,626
2/28/1999 $ 11,561 $ 12,628 $ 13,202
3/31/1999 $ 11,963 $ 13,092 $ 13,730
4/30/1999 $ 12,677 $ 13,682 $ 14,262
5/31/1999 $ 12,496 $ 13,422 $ 13,925
6/30/1999 $ 12,988 $ 14,100 $ 14,695
7/31/1999 $ 12,456 $ 13,673 $ 14,238
8/31/1999 $ 12,073 $ 13,517 $ 14,167
9/30/1999 $ 11,782 $ 13,171 $ 13,779
10/31/1999 $ 12,275 $ 13,997 $ 14,651
11/30/1999 $ 12,395 $ 14,389 $ 14,949
12/31/1999 $ 12,976 $ 15,307 $ 15,828
1/31/2000 $ 12,550 $ 14,707 $ 15,033
2/29/2000 $ 12,404 $ 14,844 $ 14,749
3/31/2000 $ 13,653 $ 16,006 $ 16,191
4/30/2000 $ 13,466 $ 15,442 $ 15,704
5/31/2000 $ 13,497 $ 15,009 $ 15,382
6/30/2000 $ 13,559 $ 15,453 $ 15,760
7/31/2000 $ 13,434 $ 15,179 $ 15,515
8/31/2000 $ 14,371 $ 16,306 $ 16,478
9/30/2000 $ 14,063 $ 15,567 $ 15,608
10/31/2000 $ 14,273 $ 15,346 $ 15,542
11/30/2000 $ 13,158 $ 13,931 $ 14,318
12/31/2000 $ 13,787 $ 14,165 $ 14,388
1/31/2001 $ 13,998 $ 14,649 $ 14,899
2/28/2001 $ 12,865 $ 13,310 $ 13,541
3/31/2001 $ 12,011 $ 12,443 $ 12,684
4/30/2001 $ 12,977 $ 13,441 $ 13,668
5/31/2001 $ 13,065 $ 13,548 $ 13,760
6/30/2001 $ 12,821 $ 13,299 $ 13,426
7/31/2001 $ 12,521 $ 13,079 $ 13,294
8/31/2001 $ 11,743 $ 12,308 $ 12,463
9/30/2001 $ 10,414 $ 11,222 $ 11,457
10/31/2001 $ 10,858 $ 11,484 $ 11,676
11/30/2001 $ 11,871 $ 12,368 $ 12,572
12/31/2001 $ 12,018 $ 12,542 $ 12,682
1/31/2002 $ 11,789 $ 12,385 $ 12,497
2/28/2002 $ 11,356 $ 12,133 $ 12,256
3/31/2002 $ 11,995 $ 12,664 $ 12,717
4/30/2002 $ 11,345 $ 11,999 $ 11,946
5/31/2002 $ 11,083 $ 11,860 $ 11,859
6/30/2002 $ 10,010 $ 11,006 $ 11,015
7/31/2002 $ 9,074 $ 10,131 $ 10,157
8/31/2002 $ 9,086 $ 10,179 $ 10,223
9/30/2002 $ 8,035 $ 9,109 $ 9,112
10/31/2002 $ 8,777 $ 9,834 $ 9,913
11/30/2002 $ 9,621 $ 10,429 $ 10,496
12/31/2002 $ 8,898 $ 9,840 $ 9,880
1/31/2003 $ 8,681 $ 9,599 $ 9,622
2/28/2003 $ 8,601 $ 9,440 $ 9,478
3/31/2003 $ 8,739 $ 9,540 $ 9,570
4/30/2003 $ 9,482 $ 10,319 $ 10,358
5/31/2003 $ 10,340 $ 10,942 $ 10,902
E6/30/03 $ 10,376 $ 11,090 $ 11,042
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 7.78 9.07
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The Russell 3000 Index is an unmanaged index
that tracks the performance of the 3000 largest US companies based on total
market capitalization. The S&P (Standard & Poor's) 500 Index is an unmanaged
index that tracks the performance of 500 widely held, large-capitalization US
stocks. Indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class shares would be lower.
(2) Index performance is from November 30, 1997.
(3) Inception date of class A shares (older existing share class).
76
<Page>
INVESTMENT PORTFOLIO
Liberty All-Star Equity Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCKS--97.5%
CONSUMER DISCRETIONARY--15.2%
AUTO COMPONENTS--0.3%
Visteon Corp. 16,250 $ 111,638
--------------
AUTOMOBILES--0.2%
Harley-Davidson, Inc. 1,650 65,769
--------------
HOTELS RESTAURANTS & LEISURE--2.4%
Brinker International, Inc. (a) 2,600 93,652
Carnival Corp. 6,000 195,060
Harrah's Entertainment, Inc. (a) 4,100 164,984
Mandalay Resort Group 4,100 130,585
McDonald's Corp. 14,000 308,840
--------------
893,121
--------------
HOUSEHOLD DURABLES--0.4%
Clayton Homes, Inc. 10,950 137,422
--------------
INTERNET & CATALOG RETAIL--2.4%
Amazon.com, Inc. (a) 13,600 496,264
eBay, Inc. (a) 3,600 375,048
--------------
871,312
--------------
LEISURE EQUIPMENT & PRODUCTS--0.8%
Brunswick Corp. 2,950 73,809
Eastman Kodak Co. 5,000 136,750
Mattel, Inc. 4,000 75,680
--------------
286,239
--------------
MEDIA--4.7%
AOL Time Warner, Inc. (a) 10,000 160,900
Clear Channel Communications, Inc. (a) 6,000 254,340
Comcast Corp. (a) 2,500 72,075
Walt Disney Co. 3,200 63,200
Fox Entertainment Group, Inc. (a) 5,000 143,900
InterActiveCorp. (a) 2,000 79,140
Liberty Media Corp. (a) 30,761 355,597
Pixar, Inc. (a) 4,100 249,444
Scripps Co. (E.W.) 1,600 141,952
Viacom, Inc. (a) 4,750 207,385
--------------
1,727,933
--------------
MULTI-LINE RETAIL--2.5%
Dollar General Corp. 10,000 182,600
JC Penney Co., Inc. 15,300 257,805
May Department Stores Co. 4,000 89,040
Target Corp. 4,800 181,632
Wal-Mart Stores, Inc. 3,750 201,262
--------------
912,339
--------------
SPECIALTY RETAIL--0.7%
Gap, Inc. 3,500 65,660
Home Depot, Inc. 5,000 165,600
Toys R US, Inc. (a) 2,400 29,088
--------------
260,348
--------------
TEXTILES & APPAREL--0.8%
Liz Claiborne, Inc. 8,500 299,625
--------------
CONSUMER STAPLES--6.9%
BEVERAGES--0.5%
PepsiCo, Inc. 4,500 $ 200,250
--------------
FOOD & DRUG RETAILING--2.1%
CVS Corp. 14,100 395,223
Kroger Co. (a) 15,000 250,200
Walgreen Co. 4,500 135,450
--------------
780,873
--------------
FOOD PRODUCTS--1.9%
Smithfield Foods, Inc. (a) 3,350 76,782
Archer-Daniels-Midland Co. 9,250 119,048
Kraft Foods, Inc. 3,600 117,180
Tate & Lyle Plc 14,150 319,888
Tyson Foods, Inc. 4,950 52,569
--------------
685,467
--------------
HOUSEHOLD PRODUCTS--0.8%
Procter & Gamble Co. 3,400 303,212
--------------
PERSONAL PRODUCTS--0.8%
Avon Products, Inc. 2,000 124,400
Gillette Co. 5,000 159,300
--------------
283,700
--------------
TOBACCO--0.8%
UST, Inc. 8,000 280,240
--------------
ENERGY--4.8%
ENERGY EQUIPMENT & SERVICES--1.2%
Nabors Industries, Ltd. (a) 1,950 77,122
Patterson-UTI Energy, Inc. (a) 2,450 79,380
Transocean, Inc. (a) 12,900 283,413
--------------
439,915
--------------
OIL & GAS--3.6%
Burlington Resources, Inc. 350 18,924
Canadian Natural Resources, Ltd. 4,100 163,631
ChevronTexaco Corp. 8,100 584,820
EL Paso Corp. (a) 6,000 48,480
Kerr-McGee Corp. 8,400 376,320
Premcor, Inc. (a) 5,400 116,370
--------------
1,308,545
--------------
FINANCIALS--20.5%
BANKS--2.6%
FleetBoston Financial Corp. (b) 12,000 356,520
National City Corp. 3,900 127,569
Wachovia Corp. 3,200 127,872
Wells Fargo & Co. 7,000 352,800
--------------
964,761
--------------
DIVERSIFIED FINANCIALS--9.4%
CIT Group, Inc., New 13,950 343,868
Charles Schwab Corp. 17,450 176,070
Citigroup, Inc. 15,000 642,000
</Table>
See Notes to Investment Portfolio.
77
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
Countrywide Financial Corp. 8,450 $ 587,866
Freddie Mac 17,850 906,244
Goldman Sachs Group, Inc. 1,700 142,375
iShares Russell 1000 Value Index Fund 5,200 262,964
Merrill Lynch & Co., Inc. 5,500 256,740
Morgan Stanley 3,000 128,250
--------------
3,446,377
--------------
INSURANCE--7.8%
ACE, Ltd. 9,100 312,039
AFLAC, Inc. 12,850 395,138
Allstate Corp. 2,725 97,146
American International Group, Inc. 6,181 341,068
AON Corp. 5,700 137,256
Loews Corp. 1,400 66,206
PartnerRe, Ltd. 2,350 120,108
The Progressive Corp. 10,560 771,936
Travelers Property Casualty Corp. 5,050 80,295
UnumProvident Corp. 7,000 93,870
XL Capital, Ltd. 5,000 415,000
--------------
2,830,062
--------------
REAL ESTATE--0.7%
The St. Joe Co. 2,250 70,200
Starwood Hotels & Resorts Worldwide, Inc. 6,450 184,406
--------------
254,606
--------------
HEALTH CARE--12.1%
BIOTECHNOLOGY--6.4%
Amgen, Inc. (a) 10,100 671,044
Genentech, Inc. (a) 10,070 726,248
Genzyme Corp. (a) 6,000 250,800
IDEC Pharmaceuticals Corp. (a) 3,900 132,600
Invitrogen Corp. (a) 4,100 157,317
MedImmune, Inc. (a) 11,200 407,344
--------------
2,345,353
--------------
HEALTH CARE PROVIDERS & SERVICES--1.3%
Aetna, Inc. 2,400 144,480
AmerisourceBergen Corp. 2,000 138,700
Cigna Corp. 1,400 65,716
Quest Diagnostics, Inc. (a) 900 57,420
Tenet Healthcare Corp. (a) 4,300 50,095
--------------
456,411
--------------
PHARMACEUTICALS--4.4%
Biovail Corp. (a) 5,000 235,300
Bristol-Myers Squibb Co. 7,000 190,050
Eli Lilly & Co. 4,400 303,468
Pfizer, Inc. 10,620 362,673
Shire Pharmaceuticals Group PLC (a) 7,900 155,630
Wyeth 8,200 373,510
--------------
1,620,631
--------------
INDUSTRIALS--7.0%
AEROSPACE & DEFENSE--1.1%
Boeing Co. 7,850 $ 269,412
Lockheed Martin Corp. 2,400 114,168
--------------
383,580
--------------
AIR FREIGHT & COURIERS--0.9%
Expeditors International Washington, Inc. 4,500 155,880
FedEx Corp. 700 43,421
Ryder System, Inc. 4,400 112,728
--------------
312,029
--------------
AIRLINES--0.7%
Delta Air Lines, Inc. 1,450 21,286
Southwest Airlines Co. 13,850 238,220
--------------
259,506
--------------
INDUSTRIAL CONGLOMERATES--2.5%
3M Co. 2,000 257,960
General Electric Co. 5,800 166,344
Tyco International, Ltd. 26,400 501,072
--------------
925,376
--------------
MACHINERY--0.7%
Navistar International Corp. (a) 5,600 182,728
PACCAR, Inc. 1,250 84,450
--------------
267,178
--------------
ROAD & RAIL--1.1%
CSX Corp. 7,100 213,639
Swift Transportation Co., Inc. (a) 9,900 184,338
--------------
397,977
--------------
INFORMATION TECHNOLOGY--24.5%
COMMUNICATIONS EQUIPMENT--2.6%
3Com Corp. (a) 18,000 84,240
Cisco Systems, Inc. (a) 33,200 554,108
Nokia Oyj, ADR 9,600 157,728
QUALCOMM, Inc. 4,100 146,575
--------------
942,651
--------------
COMPUTERS & PERIPHERALS--4.5%
Dell Computer Corp. (a) 16,400 524,144
EMC Corp. (a) 31,100 325,617
Hewlett-Packard Co. 12,800 272,640
Network Appliance, Inc. (a) 24,350 394,714
Sun Microsystems, Inc. (a) 29,200 134,320
--------------
1,651,435
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--2.8%
Agilent Technologies, Inc. (a) 21,200 414,460
Arrow Electronics, Inc. (a) 1,350 20,574
Avnet, Inc. (a) 14,350 181,958
Jabil Circuit, Inc. (a) 3,000 66,300
Sanmina-SCI Corp. (a) 26,550 167,530
Waters Corp. (a) 6,000 174,780
--------------
1,025,602
--------------
</Table>
See Notes to Investment Portfolio.
78
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
INTERNET SOFTWARE & SERVICES--1.0%
Yahoo, Inc. (a) 10,800 $ 353,808
--------------
INFORMATION TECHNOLOGY CONSULTING &
SERVICES--0.8%
Computer Sciences Corp. (a) 4,800 182,976
Electronic Data Systems Corp. 5,550 119,048
--------------
302,024
--------------
OFFICE ELECTRONICS--0.5%
Xerox Corp. (a) 16,100 170,499
--------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--7.9%
Analog Devices, Inc. (a) 5,000 174,100
Applied Materials, Inc. (a) 33,100 524,966
Intel Corp. 22,700 471,797
Maxim Integrated Products, Inc. 9,800 335,062
Micron Technology, Inc. (a) 30,500 354,715
Novellus Systems, Inc. (a) 5,000 183,105
Teradyne, Inc. (a) 28,050 485,546
Texas Instruments, Inc. 8,700 153,120
Xilinx, Inc. (a) 8,500 215,135
--------------
2,897,546
--------------
SOFTWARE--4.4%
Microsoft Corp. 34,725 889,307
Oracle Corp. (a) 23,300 280,066
Siebel Systems, Inc. (a) 26,260 250,520
Symantec Corp. (a) 1,000 43,860
VERITAS Software Corp. (a) 5,600 160,552
--------------
1,624,305
--------------
MATERIALS--2.6%
CHEMICALS--0.8%
Dow Chemical Co. 3,950 122,292
IMC Global, Inc. 20,400 136,884
Monsanto Co. 682 14,758
--------------
273,934
--------------
CONTAINERS & PACKAGING--0.3%
Smurfit-Stone Container Corp. (a) 8,000 104,240
--------------
METALS & MINING--1.3%
Alcan, Inc. 4,850 151,757
CONSOL Energy, Inc. 3,550 80,727
Freeport-McMoRan Copper & Gold, Inc. 6,000 147,000
United States Steel Corp. 5,950 97,402
--------------
476,886
--------------
PAPER & FOREST PRODUCTS--0.2%
Bowater, Inc. 2,350 88,008
--------------
TELECOMMUNICATION SERVICES--2.2%
DIVERSIFIED TELECOMMUNICATION--1.6%
Alltel Corp. 3,300 $ 159,126
SBC Communications, Inc. 8,200 209,510
Verizon Communications, Inc. 5,000 197,250
--------------
565,886
--------------
WIRELESS TELECOMMUNICATION SERVICES--0.6%
AT&T Wireless Services, Inc. (a) 27,300 224,133
--------------
UTILITIES--1.7%
ELECTRIC UTILITIES--1.7%
Edison International (a) 3,200 52,576
FirstEnergy Corp. 6,500 249,925
PG&E Corp. (a) 16,100 340,515
--------------
643,016
--------------
TOTAL COMMON STOCKS
(cost of $39,955,419) 35,655,768
--------------
<Caption>
PAR
--------------
CONVERTIBLE BONDS--0.6%
INFORMATION TECHNOLOGY--0.2%
TELECOMMUNICATIONS EQUIPMENT--0.2%
Corning, Inc.,
3.500%, 11/1/2008 $ 51,000 54,761
--------------
MATERIALS--0.3%
METALS & MINING--0.3%
Freeport-McMoRan
Copper & Gold, Inc.,
8.250%, 01/31/2006 69,000 122,561
--------------
UTILITIES--0.1%
GAS UTILITIES--0.0%
El Paso Corp.,
02/28/2021 (c) 19,000 8,313
--------------
MULTI-UTILITIES & UNREGULATED POWER--0.1%
Calpine Corp.,
4.000%, 12/26/2006 34,000 30,600
--------------
TOTAL CONVERTIBLE BONDS
(cost of $180,135) 216,235
--------------
</Table>
See Notes to Investment Portfolio.
79
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
PREFERRED STOCK--0.3%
CONSUMER DISCRETIONARY--0.3%
MEDIA--0.3%
News Corp., Ltd. ADR
(cost of $161,823) 5,000 $ 125,250
--------------
<Caption>
PAR
--------------
SHORT-TERM OBLIGATION--2.9%
Repurchase agreement with
State Street Bank & Trust Co.,
dated 06/30/03, due 07/01/03
at 1.000%, collateralized by
U.S. Treasury Bonds and
Federal National Mortgage
Association Note with
various maturities to 02/15/29,
market value $1,082,572
(repurchase proceeds $1,059,029)
(cost of $1,059,000) $ 1,059,000 1,059,000
--------------
TOTAL INVESTMENTS--101.3%
(cost of $41,356,377) (d) 37,056,253
--------------
OTHER ASSETS & LIABILITIES, NET--(1.3)% (493,390)
--------------
NET ASSETS--100.0% $ 36,562,863
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Investments in Affiliates during the six months ended June 30, 2003:
Security Name: Fleet Boston Financial Corp., the parent company of the
Manager.
<Table>
Shares as of 12/31/02: 12,000
Shares purchased: -
Shares sold: -
Shares as of 06/30/03: 12,000
Net realized gain (loss): -
Dividend income earned: $ 4,200
Value at end of period: $ 356,520
</Table>
(c) Zero-coupon bond.
(d) Cost for both financial statement and federal income tax purposes is the
same.
<Table>
<Caption>
ACRONYM NAME
------- ----
ADR American Depositary Receipt
</Table>
See Notes to Financial Statements.
80
<Page>
STATEMENT OF ASSETS & LIABILITIES
Liberty All-Star Equity Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 41,356,377
--------------
Investments, at value $ 37,056,253
Cash 20,906
Receivable for:
Investments sold 93,408
Fund shares sold 84
Interest 2,738
Dividends 22,777
Deferred Trustees' compensation plan 3,690
--------------
TOTAL ASSETS 37,199,856
--------------
LIABILITIES:
Expense reimbursement due to Manager/Distributor 37,789
Payable for:
Investments purchased 103,651
Fund shares repurchased 433,111
Management fee 26,098
Distribution fee--Class B 16
Transfer agent fee 595
Trustees' fee 209
Audit fee 11,189
Custody fee 10,263
Reports to Shareholders 10,231
Deferred Trustees' fee 3,690
Other liabilities 151
--------------
TOTAL LIABILITIES 636,993
--------------
NET ASSETS $ 36,562,863
==============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 48,446,054
Undistributed net investment income 28,981
Accumulated net realized loss (7,612,047)
Net unrealized depreciation on:
Investments (4,300,124)
Foreign currency translations (1)
--------------
NET ASSETS $ 36,562,863
==============
CLASS A:
Net assets $ 33,495,424
Shares outstanding 3,692,955
==============
Net asset value per share $ 9.07
==============
CLASS B:
Net assets $ 3,067,439
Shares outstanding 338,057
==============
Net asset value per share $ 9.07
==============
</Table>
See Notes to Financial Statements.
81
<Page>
STATEMENT OF OPERATIONS
Liberty All-Star Equity Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 194,808
Interest 7,751
--------------
Total Investment Income (net of foreign taxes withheld
of $1,078) 202,559
--------------
EXPENSES:
Management fee 135,783
Distribution fee--Class B 3,622
Pricing and bookkeeping fees 5,697
Transfer agent fee 3,720
Trustees' fee 3,091
Custody fee 22,852
Audit fee 10,114
Other expenses 7,736
--------------
Total Expenses 192,615
Fees and expenses waived or reimbursed by Manager (18,856)
Fees reimbursed by Distributor--Class B (3,622)
Custody earnings credit (454)
--------------
Net Expenses 169,683
--------------
Net Investment Income 32,876
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized loss on:
Investments (1,593,445)
Foreign currency transactions (1)
--------------
Net realized loss (1,593,446)
--------------
Net change in unrealized appreciation/depreciation on:
Investments 6,866,393
Foreign currency translations 4
--------------
Net change in unrealized appreciation/depreciation 6,866,397
--------------
Net Gain 5,272,951
--------------
Net Increase in Net Assets from Operations $ 5,305,827
==============
</Table>
See Notes to Financial Statements.
82
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Liberty All-Star Equity Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- -------------- --------------
OPERATIONS:
Net investment income $ 32,876 $ 63,580
Net realized loss on investments and foreign
currency transactions (1,593,446) (4,338,083)
Net change in unrealized appreciation/depreciation on
investments and foreign currency translations 6,866,397 (9,538,018)
-------------- --------------
Net Increase (Decrease) from Operations 5,305,827 (13,812,521)
-------------- --------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A -- (65,711)
Class B -- (6,028)
-------------- --------------
Total Distributions Declared to Shareholders -- (71,739)
-------------- --------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 396,787 1,891,429
Distributions reinvested -- 65,711
Redemptions (3,090,871) (10,155,230)
-------------- --------------
Net Decrease (2,694,084) (8,198,090)
-------------- --------------
Class B:
Subscriptions 124,632 665,510
Distributions reinvested -- 6,028
Redemptions (423,345) (965,793)
-------------- --------------
Net Decrease (298,713) (294,255)
-------------- --------------
Net Decrease from Share Transactions (2,992,797) (8,492,345)
-------------- --------------
Total Increase (Decrease) in Net Assets 2,313,030 (22,376,605)
NET ASSETS:
Beginning of period 34,249,833 56,626,438
-------------- --------------
End of period (including undistributed net
investment income of $28,981 and
overdistributed net investment income of $(3,895)) $ 36,562,863 $ 34,249,833
============== ==============
CHANGES IN SHARES:
Class A:
Subscriptions 45,619 233,321
Issued for distributions reinvested -- 8,478
Redemptions (383,532) (1,168,100)
-------------- --------------
Net Decrease (337,913) (926,301)
-------------- --------------
Class B:
Subscriptions 15,288 70,849
Issued for distributions reinvested -- 777
Redemptions (51,495) (113,272)
-------------- --------------
Net Decrease (36,207) (41,646)
-------------- --------------
</Table>
See Notes to Financial Statements.
83
<Page>
NOTES TO FINANCIAL STATEMENTS
Liberty All-Star Equity Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Liberty All-Star Equity Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek total investment return, comprised of
long-term capital appreciation and current income, through investments primarily
in a diversified portfolio of equity securities. The Fund's capitalization
consists of an unlimited number of shares of beneficial interest without par
value that represent a separate series of the Trust. The Fund offers two classes
of shares: Class A and Class B. Each share of a class represents an equal
proportionate beneficial interest in that share class and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of their share class available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Liberty Advisory Services Corp., the investment advisor to the
Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Liberty Advisory Services Corp. with respect to the Fund. The
merger did not change the way the Fund is managed, the investment personnel
assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Debt securities generally are valued by
a pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
the current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
FOREIGN CURRENCY TRANSACTIONS--Net realized and unrealized gains (losses) on
foreign currency transactions and translations includes gains (losses) arising
from the
84
<Page>
fluctuations in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency,
and currency gains (losses) between the accrual and payment dates on dividends,
interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) on investments.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of non-reclaimable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of all
tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2009 $ 524,787
2010 3,157,493
------------
$ 3,682,280
============
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT AND SUB-ADVISORY FEES--Columbia receives a monthly management fee
equal to 0.80% annually of the Fund's average daily net assets. Columbia, out of
the management fee it receives, pays Liberty Asset Management Company a monthly
sub-advisory fee equal to 0.60% annually of the Fund's average daily net assets.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. The Fund also pays out-of-pocket costs
for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Columbia and LFD have voluntarily agreed to reimburse all
expenses, including management fees and distribution fees, but excluding
interest, taxes, brokerage and extraordinary expenses incurred by the Fund, in
excess of 1.00% annually of the Fund's average daily net assets. LFD will first
reimburse the Class B distribution fee up to 0.25% annually to reach the 1.00%
limit on Class B expenses. If additional reimbursement is needed to meet the
limit for each class, Columbia will then reimburse other expenses to the extent
necessary. If additional reimbursement is still needed to reach the expense
limit, Columbia will then waive a portion of its management fee to reach the
expense limit. This arrangement may be terminated or modified by the Columbia or
LFD at any time.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $454 of custody
fees were reduced by balance credits
85
<Page>
for the six months ended June 30, 2003. The Fund could have invested a portion
of the assets utilized in connection with the expense offset arrangement in an
income-producing asset if it had not entered into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and sales
of investments, other than short-term obligations, were $8,753,910 and
$11,763,572, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 4,155,083
Gross unrealized depreciation (8,455,207)
-------------
Net unrealized depreciation $ (4,300,124)
=============
</Table>
86
<Page>
FINANCIAL HIGHLIGHTS
Liberty All-Star Equity Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, ------------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
----------- ---------- ---------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.78 $ 10.53 $ 12.42 $ 12.97
----------- ---------- ---------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.01 0.01 0.03 0.05
Net realized and unrealized gain (loss)
on investments and foreign currency 1.28 (2.74) (1.66) 0.24
----------- ---------- ---------- ------------
Total from Investment Operations 1.29 (2.73) (1.63) 0.29
----------- ---------- ---------- ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- (0.02) (0.03) (0.05)
From net realized gains -- -- (0.23) (0.79)
----------- ---------- ---------- ------------
Total Distributions Declared
to Shareholders -- (0.02) (0.26) (0.84)
----------- ---------- ---------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.07 $ 7.78 $ 10.53 $ 12.42
=========== ========== ========== ============
Total return (c)(d)(e) 16.58%(f) (25.96)% (12.82)% 2.17%(f)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (g) 1.00%(h) 1.00% 1.00% 1.00%(h)
Net investment income(g) 0.19%(h) 0.14% 0.26% 0.63%(h)
Waiver/reimbursement 0.36%(h) 0.29% 0.25% 0.45%(h)
Portfolio turnover rate 26%(f) 84% 62% 97%
Net assets, end of period (000's) $ 3,067 $ 2,911 $ 4,382 $ 2,727
</Table>
(a) For the period from commencement of operations on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Manager and/or Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
87
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Liberty Equity Fund, Variable Series / June 30, 2003
Liberty Equity Fund, Variable Series seeks long-term growth by investing in
companies that the fund's investment advisor believes have above-average
earnings potential.
Robert Armknecht, CFA has managed Liberty Equity Fund, Variable Series and its
predecessors since 1998. Mr. Armknecht has managed equity portfolios for
Columbia Management Advisors, Inc. and its predecessors since 1988.
The fund is the successor to the Galaxy VIP Equity Fund. On April 14, 2003,
Galaxy VIP Growth and Income Fund merged into Galaxy VIP Equity Fund. The new
fund was renamed Liberty Equity Fund, Variable Series.
LARGE-CAP GROWTH STOCKS ADVANCE STRONGLY
After falling sharply in the first quarter of 2003, US stocks rallied strongly
enough in the second quarter to produce sizable gains for the six months ended
June 30, 2003. In addition to reduced tensions in Iraq during the latter half of
the period, stocks benefited from yet another cut in a key short-term interest
rate and from news that a scheduled reduction in federal income tax rates would
be accelerated into 2003. Both fostered expectations for faster economic growth
and improvements in corporate earnings. Stocks of large growth companies
participated fully in the market's advance, and the fund's returns were in line
with those of its market benchmarks.
POSITIVE CONTRIBUTIONS FROM INDUSTRIAL, HEALTH CARE AND FINANCIAL STOCKS
The fund benefited from above-average performances by its holdings in the
industrial, health care and financial sectors. Among industrial stocks, where
the fund had a slight overweight position, Raytheon, Cendant and United
Technologies Corporation (0.7%, 1.6% and 2.0% of net assets, respectively)
generated superior performance. In the health care sector, a significant
overweight position for the fund, investments in Boston Scientific Corporation,
Biovail Corp., Abbott Laboratories and Teva Pharmaceutical Industries Ltd. all
did well (1.7%, 1.1%, 1.3% and 1.5% of net assets, respectively). Financial
stocks such as Bank of America Corporation, Bank of New York Company, Inc.,
J.P. Morgan Chase & Co. and Citigroup Inc. (2.3%, 1.2%, 1.7% and 2.8% of net
assets, respectively) also contributed positively to fund returns.
In the technology sector, which led the market's advance, stock selection
dampened fund returns. We were disappointed by the performance of Microsoft
Corp. (4.0% of net assets), which suffered from concerns about the company's
near-term business prospects. Stock selection also detracted from returns in the
energy sector, where the fund was overweight, as well as in the consumer staples
and defense areas.
TRADES IN TECHNOLOGY AND HEALTH CARE SECTORS
During the reporting period, we added Lexmark International, Inc. (1.0% of net
assets), a manufacturer of computer printers. In addition to continued gains in
market share, we believe the company should benefit from a new partnership with
Dell Computer Corporation (0.9% of net assets), which we also added to the
portfolio. Within the technology sector, we eliminated our investment in Texas
Instruments Incorporated and used the proceeds to invest in companies that we
believe demonstrate better earnings potential, such as Oracle Corporation,
VERITAS Software Corporation and SAP AG (0.5%, 0.5% and 0.5% of net assets,
respectively).
In health care, we initiated a position in Amgen Inc., a biotech firm with
above-average returns for the period, and in Biovail Corporation, a
pharmaceutical company (0.7% and 1.1% of net assets, respectively). We paid for
these purchases by selling Forest Laboratories, Inc. and Wyeth and reducing the
fund's position in Pfizer, Inc. (3.9% of net assets). In the communications
sector, we eliminated our position in The Walt Disney Company.
FURTHER ADVANCE REQUIRES BETTER EARNINGS
Given the strength of the market's recent advance, further improvements in stock
prices are likely to depend on actual earnings improvement rather than the
anticipation of better earnings. If economic conditions continue to strengthen,
as we expect, earnings should strengthen as well. In an improving economy, we
believe that larger growth companies should participate fully in an earnings
revival.
The fund maintains overweight positions in the health care and energy
sectors. We believe health care stocks should benefit from new product
development, particularly in generic drugs. Energy stocks should continue to
benefit from the need for further exploration to develop new natural gas
supplies. We expect to keep underweight positions in basic materials and utility
firms, believing that these sectors have below-average growth potential.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
An investment in the fund offers the potential for long-term growth, but also
involves certain risks, including stock market fluctuations due to economic and
business development.
The fund's approach offers the potential for long-term growth, but also involves
the possibility of losses due to the sensitivity of growth stock prices to
changes in current or expected earnings.
Holdings are disclosed as of June 30, 2003, and are subject to change.
88
<Page>
PERFORMANCE INFORMATION
Liberty Equity Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR 10-YEAR
- --------------------------------------------------------------------
Class B(1) (4/14/03) 11.91 -2.10 -1.67 8.08
S&P 500 Index 11.75 0.25 -1.61 10.04
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 6/30/93(2) - 6/30/03
<Table>
<Caption>
CLASS B SHARES S&P 500 INDEX
6/30/1993 $ 10,000 $ 10,000
7/31/1993 $ 9,970 $ 9,960
8/31/1993 $ 10,253 $ 10,337
9/30/1993 $ 10,184 $ 10,258
10/31/1993 $ 10,337 $ 10,470
11/30/1993 $ 10,348 $ 10,371
12/31/1993 $ 10,461 $ 10,496
1/31/1994 $ 10,768 $ 10,853
2/28/1994 $ 10,604 $ 10,559
3/31/1994 $ 10,298 $ 10,100
4/30/1994 $ 10,380 $ 10,229
5/31/1994 $ 10,595 $ 10,396
6/30/1994 $ 10,391 $ 10,141
7/31/1994 $ 10,607 $ 10,474
8/31/1994 $ 10,978 $ 10,902
9/30/1994 $ 10,765 $ 10,636
10/31/1994 $ 11,014 $ 10,874
11/30/1994 $ 10,745 $ 10,478
12/31/1994 $ 10,825 $ 10,633
1/31/1995 $ 11,076 $ 10,909
2/28/1995 $ 11,409 $ 11,333
3/31/1995 $ 11,728 $ 11,668
4/30/1995 $ 11,990 $ 12,011
5/31/1995 $ 12,345 $ 12,490
6/30/1995 $ 12,574 $ 12,780
7/31/1995 $ 12,930 $ 13,203
8/31/1995 $ 12,784 $ 13,236
9/30/1995 $ 13,035 $ 13,794
10/31/1995 $ 13,119 $ 13,744
11/30/1995 $ 13,635 $ 14,346
12/31/1995 $ 13,724 $ 14,623
1/31/1996 $ 14,093 $ 15,121
2/29/1996 $ 14,124 $ 15,261
3/31/1996 $ 14,385 $ 15,408
4/30/1996 $ 14,555 $ 15,634
5/31/1996 $ 14,926 $ 16,036
6/30/1996 $ 14,899 $ 16,097
7/31/1996 $ 14,464 $ 15,385
8/31/1996 $ 14,794 $ 15,710
9/30/1996 $ 15,463 $ 16,593
10/31/1996 $ 15,739 $ 17,051
11/30/1996 $ 16,838 $ 18,338
12/31/1996 $ 16,671 $ 17,975
1/31/1997 $ 17,526 $ 19,097
2/28/1997 $ 17,430 $ 19,248
3/31/1997 $ 17,097 $ 18,459
4/30/1997 $ 18,287 $ 19,559
5/31/1997 $ 19,028 $ 20,754
6/30/1997 $ 19,639 $ 21,677
7/31/1997 $ 21,111 $ 23,401
8/31/1997 $ 20,250 $ 22,090
9/30/1997 $ 21,011 $ 23,299
10/31/1997 $ 20,429 $ 22,520
11/30/1997 $ 21,012 $ 23,563
12/31/1997 $ 21,295 $ 23,968
1/31/1998 $ 21,436 $ 24,232
2/28/1998 $ 22,668 $ 25,979
3/31/1998 $ 23,466 $ 27,309
4/30/1998 $ 23,694 $ 27,588
5/31/1998 $ 23,140 $ 27,113
6/30/1998 $ 23,676 $ 28,214
7/31/1998 $ 23,317 $ 27,915
8/31/1998 $ 19,420 $ 23,881
9/30/1998 $ 20,925 $ 25,412
10/31/1998 $ 23,028 $ 27,476
11/30/1998 $ 24,281 $ 29,141
12/31/1998 $ 26,299 $ 30,819
1/31/1999 $ 27,519 $ 32,107
2/28/1999 $ 26,300 $ 31,109
3/31/1999 $ 27,715 $ 32,353
4/30/1999 $ 28,305 $ 33,605
5/31/1999 $ 27,538 $ 32,812
6/30/1999 $ 29,763 $ 34,627
7/31/1999 $ 28,793 $ 33,550
8/31/1999 $ 28,502 $ 33,382
9/30/1999 $ 28,226 $ 32,467
10/31/1999 $ 29,725 $ 34,522
11/30/1999 $ 31,015 $ 35,223
12/31/1999 $ 33,452 $ 37,294
1/31/2000 $ 32,128 $ 35,422
2/29/2000 $ 33,063 $ 34,753
3/31/2000 $ 36,405 $ 38,152
4/30/2000 $ 35,728 $ 37,003
5/31/2000 $ 34,281 $ 36,245
6/30/2000 $ 35,382 $ 37,136
7/31/2000 $ 34,872 $ 36,557
8/31/2000 $ 37,533 $ 38,827
9/30/2000 $ 35,780 $ 36,777
10/31/2000 $ 35,197 $ 36,623
11/30/2000 $ 31,733 $ 33,737
12/31/2000 $ 32,844 $ 33,902
1/31/2001 $ 33,655 $ 35,106
2/28/2001 $ 30,159 $ 31,907
3/31/2001 $ 27,589 $ 29,888
4/30/2001 $ 29,678 $ 32,207
5/31/2001 $ 29,977 $ 32,423
6/30/2001 $ 28,556 $ 31,635
7/31/2001 $ 28,154 $ 31,325
8/31/2001 $ 26,341 $ 29,367
9/30/2001 $ 23,791 $ 26,997
10/31/2001 $ 24,614 $ 27,513
11/30/2001 $ 26,477 $ 29,623
12/31/2001 $ 26,880 $ 29,884
1/31/2002 $ 25,840 $ 29,447
2/28/2002 $ 25,033 $ 28,879
3/31/2002 $ 26,763 $ 29,965
4/30/2002 $ 25,085 $ 28,149
5/31/2002 $ 24,481 $ 27,944
6/30/2002 $ 22,233 $ 25,954
7/31/2002 $ 20,455 $ 23,932
8/31/2002 $ 20,590 $ 24,088
9/30/2002 $ 18,191 $ 21,472
10/31/2002 $ 19,803 $ 23,359
11/30/2002 $ 20,995 $ 24,733
12/31/2002 $ 19,454 $ 23,281
1/31/2003 $ 18,915 $ 22,673
2/28/2003 $ 18,746 $ 22,333
3/31/2003 $ 18,973 $ 22,550
4/30/2003 $ 20,472 $ 24,406
5/31/2003 $ 21,619 $ 25,689
6/30/2003 $ 21,770 $ 26,018
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 4/14/03 6/30/03
- --------------------------------------------------------------------------------
Class B 11.57 12.92
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The Standard & Poor's (S&P) 500 Index is an
unmanaged index that tracks the performance of 500 widely held,
large-capitalization US stocks. Indices are not investments, do not incur fees
or expenses and are not professionally managed. It is not possible to invest
directly in an index. Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B shares (newer class shares) performance information includes
returns of the fund's class A shares (the older existing fund class) for
periods prior to the inception of the newer class shares. These class A
share returns were not restated to reflect any expense differential (e.g.,
Rule 12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class of shares would be lower.
(2) Inception date of class A shares (older existing share class) is January
11, 1993.
89
<Page>
INVESTMENT PORTFOLIO
Liberty Equity Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCK--99.7%
CONSUMER DISCRETIONARY--14.3%
MEDIA--3.8%
InterActiveCorp (a) 7,500 $ 296,775
Liberty Media Corp. (a) 50,000 578,000
Viacom, Inc., Class B (a) 20,000 873,200
--------------
1,747,975
--------------
MULTI-LINE RETAIL--6.7%
Costco Wholesale Corp. 13,000 475,800
Kohl's Corp. (a) 9,000 462,420
Target Corp. 29,000 1,097,360
Wal-Mart Stores, Inc. 20,000 1,073,400
--------------
3,108,980
--------------
SPECIALTY RETAIL--3.8%
Bed Bath & Beyond, Inc. (a) 19,800 768,438
Home Depot, Inc. 15,000 496,800
Staples, Inc. (a) 25,500 467,925
--------------
1,733,163
--------------
CONSUMER STAPLES--8.3%
BEVERAGES--4.2%
Anheuser-Busch Cos., Inc. 11,000 561,550
Coca-Cola Co. 12,300 570,843
PepsiCo, Inc. 17,900 796,550
--------------
1,928,943
--------------
FOOD & DRUG RETAILING--1.0%
Walgreen Co. 14,700 442,470
--------------
FOOD PRODUCTS--1.4%
Kraft Foods, Inc. 20,000 651,000
--------------
HOUSEHOLD PRODUCTS--1.7%
Procter & Gamble Co. 9,000 802,620
--------------
ENERGY--8.4%
ENERGY EQUIPMENT & SERVICES--3.7%
Baker Hughes, Inc. 15,900 533,763
National-Oilwell, Inc. (a) 25,000 550,000
Noble Corp. (a) 17,800 610,540
--------------
1,694,303
--------------
OIL & GAS--4.7%
BP PLC ADR 20,500 861,410
ConocoPhillips 16,000 876,800
Kerr-McGee Corp. 10,150 454,720
--------------
2,192,930
--------------
FINANCIALS--18.8%
BANKS--6.9%
Bank of America Corp. 13,400 1,059,002
Bank of New York Co., Inc. 20,000 575,000
Mellon Financial Corp. 20,000 $ 555,000
Wells Fargo & Co. 20,000 1,008,000
--------------
3,197,002
--------------
DIVERSIFIED FINANCIALS--8.2%
Citigroup, Inc. 29,700 1,271,160
Fannie Mae 11,300 762,072
Goldman Sachs Group, Inc. 11,200 938,000
J.P. Morgan Chase & Co. 23,500 803,230
--------------
3,774,462
--------------
INSURANCE--3.7%
American International Group, Inc. 17,500 965,650
Marsh & McLennan Cos., Inc. 14,250 727,747
--------------
1,693,397
--------------
HEALTH CARE--19.7%
BIOTECHNOLOGY--0.7%
Amgen, Inc. (a) 4,700 312,268
--------------
HEALTH CARE EQUIPMENT & SUPPLIES--6.5%
Alcon, Inc. 13,000 594,100
Baxter International, Inc. 20,000 520,000
Boston Scientific Corp. (a) 12,500 763,750
Medtronic, Inc. 23,200 1,112,904
--------------
2,990,754
--------------
HEALTH CARE PROVIDERS & SERVICES--0.9%
WellPoint Health Networks, Inc. (a) 5,000 421,500
--------------
PHARMACEUTICALS--11.6%
Abbott Laboratories 13,500 590,760
Biovail Corp. (a) 11,000 517,660
Johnson & Johnson 17,350 896,995
Merck & Co., Inc. 10,700 647,885
Pfizer, Inc. 52,500 1,792,875
Teva Pharmaceutical Industries, Ltd. ADR 12,500 711,625
Watson Pharmaceuticals, Inc. (a) 5,500 222,035
--------------
5,379,835
--------------
INDUSTRIALS--12.1%
AEROSPACE & DEFENSE--4.2%
L-3 Communications Holdings, Inc. (a) 8,500 369,665
Northrop Grumman Corp. 4,000 345,160
Raytheon Co. 10,000 328,400
United Technologies Corp. 12,700 899,541
--------------
1,942,766
--------------
AIR FREIGHT & LOGISTICS--1.0%
FedEx Corp. 7,500 465,225
--------------
COMMERCIAL SERVICES & SUPPLIES--1.6%
Cendant Corp. (a) 40,000 732,800
--------------
</Table>
See Notes to Investment Portfolio.
90
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
INDUSTRIAL CONGLOMERATES--3.9%
3M Co. 4,500 $ 580,410
General Electric Co. 42,100 1,207,428
--------------
1,787,838
--------------
MACHINERY--1.4%
Illinois Tool Works, Inc. 10,000 658,500
--------------
INFORMATION TECHNOLOGY--16.7%
COMMUNICATIONS EQUIPMENT--2.4%
Cisco Systems, Inc. (a) 43,200 721,008
Nokia Oyj 24,800 407,464
--------------
1,128,472
--------------
COMPUTERS & PERIPHERALS--3.7%
Dell Computer Corp. (a) 12,500 399,500
International Business Machines Corp. 10,400 858,000
Lexmark International, Inc. (a) 6,500 460,005
--------------
1,717,505
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.9%
Celestica, Inc. (a) 25,000 394,000
Flextronics International Ltd. (a) 45,000 467,550
--------------
861,550
--------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--3.2%
Analog Devices, Inc. (a) 6,600 229,812
Intel Corp. 25,000 519,600
Maxim Integrated Products, Inc. 10,000 341,900
Teradyne, Inc. (a) 22,000 380,820
--------------
1,472,132
--------------
SOFTWARE--5.5%
Microsoft Corp. 72,500 1,856,725
Oracle Corp. (a) 18,200 218,764
SAP AG 7,500 219,150
VERITAS Software Corp. (a) 8,000 229,360
--------------
2,523,999
--------------
TELECOMMUNICATION SERVICES--1.0%
DIVERSIFIED TELECOMMUNICATION SERVICES--1.0%
American Tower Corp. (a) 50,000 $ 442,500
--------------
UTILITIES--0.4%
MULTI-UTILITIES--0.4%
The Williams Cos., Inc. 25,000 197,500
--------------
TOTAL COMMON STOCKS
(cost of $47,602,400) 46,002,389
--------------
PREFERRED STOCK--0.7%
UTILITIES--0.7%
GAS UTILITIES--0.7%
The Williams Companies, Inc.
(cost of $956,379) 25,000 308,750
--------------
TOTAL INVESTMENTS--100.4%
(cost of $48,558,779) (b) 46,311,139
--------------
OTHER ASSETS & LIABILITIES, NET--(0.4)% (194,169)
--------------
NET ASSETS--100.0% $ 46,116,970
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for both financial statement and federal income tax purposes is the
same.
<Table>
<Caption>
ACRONYM NAME
------- ----
ADR American Depositary Receipt
</Table>
See Notes to Financial Statements.
91
<Page>
STATEMENT OF ASSETS & LIABILITIES
Liberty Equity Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 48,558,779
---------------
Investments, at value $ 46,311,139
Receivable for:
Investments sold 851,122
Fund shares sold 1,047
Dividends 27,502
Expense reimbursement due from Manager 6,938
Deferred Trustees' compensation plan 7
---------------
TOTAL ASSETS 47,197,755
---------------
LIABILITIES:
Payable to custodian bank 737,512
Payable for:
Fund shares repurchased 218,438
Management fee 29,308
Administration fee 3,322
Pricing and bookkeeping fees 2,827
Merger costs 8,682
Trustees' fee 348
Reports to Shareholders 43,640
Deferred Trustees' fee 7
Other liabilities 36,701
---------------
TOTAL LIABILITIES 1,080,785
---------------
NET ASSETS $ 46,116,970
===============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 58,015,251
Undistributed net investment income 10,588
Accumulated net realized loss (9,661,229)
Net unrealized depreciation on investments (2,247,640)
---------------
NET ASSETS $ 46,116,970
===============
CLASS A:
Net assets $ 46,115,859
Shares outstanding 3,570,189
===============
Net asset value per share $ 12.92
===============
CLASS B:
Net assets $ 1,111
Shares outstanding 86
===============
Net asset value per share $ 12.92
===============
</Table>
See Notes to Financial Statements.
92
<Page>
STATEMENT OF OPERATIONS
Liberty Equity Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 312,167
Interest 1,179
---------------
Total Investment Income (net of foreign taxes withheld of $3,309) 313,346
---------------
EXPENSES:
Management fee 161,753
Administration fee 18,332
Distribution fee--Class B 1
Pricing and bookkeeping fees 14,067
Transfer agent fee 2,497
Trustees' fee 362
Custody fee 4,436
Legal fee 19,588
Reports to shareholders 25,639
Other expenses 7,304
---------------
Total Expenses 253,979
Fees and expenses waived or reimbursed by Manager (1,992)
---------------
Net Expenses 251,987
---------------
Net Investment Income 61,359
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (2,186,204)
Net change in unrealized appreciation on investments 7,138,140
---------------
Net Gain 4,951,936
---------------
Net Increase in Net Assets from Operations $ 5,013,295
===============
</Table>
See Notes to Financial Statements.
93
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Liberty Equity Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- --------------- ---------------
OPERATIONS:
Net investment income $ 61,359 $ 108,103
Net realized loss on investments (2,186,204) (3,306,702)
Net change in unrealized appreciation/depreciation on investments 7,138,140 (17,120,856)
--------------- ---------------
Net Increase (Decrease) from Operations 5,013,295 (20,319,455)
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A (49,167) (125,623)
--------------- ---------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 148,676 851,624
Proceeds received in connection with merger 4,822,551 --
Distributions reinvested 49,167 125,623
Redemptions (7,471,836) (16,742,361)
--------------- ---------------
Net Decrease (2,451,442) (15,765,114)
--------------- ---------------
Class B:
Subscriptions 1,000 --
--------------- ---------------
Net Decrease from Share Transactions (2,450,442) (15,765,114)
--------------- ---------------
Total Increase (Decrease) in Net Assets 2,513,686 (36,210,192)
NET ASSETS:
Beginning of period 43,603,284 79,813,476
--------------- ---------------
End of period (including undistributed net investment income of $10,588
and overdistributed net investment income of $(1,604)) $ 46,116,970 $ 43,603,284
=============== ===============
CHANGES IN SHARES:
Class A:
Subscriptions 12,210 58,751
Issued in connection with merger 416,815 --
Issued for distributions reinvested 4,449 10,720
Redemptions (633,863) (1,280,602)
--------------- ---------------
Net Decrease (200,389) (1,211,131)
--------------- ---------------
Class B:
Subscriptions 86 --
--------------- ---------------
</Table>
See Notes to Financial Statements.
94
<Page>
NOTES TO FINANCIAL STATEMENTS
Liberty Equity Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Liberty Equity Fund, Variable Series (the "Fund"), a series of
Liberty Variable Investment Trust (the "Trust"), is a diversified portfolio of a
Massachusetts business trust, registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund's
investment goal is to seek long term growth by investing in companies which are
believed to have above average earnings potential. The Fund's capitalization
consists of an unlimited number of shares of beneficial interest without par
value that represent a separate series of the Trust. The Fund offers two classes
of shares: Class A and Class B. Class B commenced operations on April 14, 2003.
Each share of a class represents an equal proportionate beneficial interest in
that share class and, when issued and outstanding, is fully paid and
nonassessable. Shareholders would be entitled to share proportionally in the net
assets of their share class available for distribution to shareholders upon
liquidation of the Fund. Shares of the Fund are available and are being marketed
exclusively as a pooled funding vehicle for variable annuity contracts ("VA
contracts") and Variable Life Insurance Policies ("VLI Policies") offered by the
separate accounts of certain life insurance companies ("Participating Insurance
Companies"). The Participating Insurance Companies and their separate accounts
own all the shares of the Fund.
On April 1, 2003, Fleet Investment Advisors Inc., the investment advisor to the
predecessor Fund, merged into Columbia Management Advisors, Inc. ("Columbia"),
formerly known as Columbia Management Co., an indirect wholly owned subsidiary
of FleetBoston Financial Corporation. At the time of the merger, Columbia
assumed the obligations of Fleet Investment Advisors Inc. with respect to the
predecessor Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
administrative and pricing and bookkeeping services to the Fund. Liberty Funds
Distributor, Inc. ("LFD"), an affiliate of Columbia, serves as the principal
underwriter of the Fund.
On April 14, 2003, the Galaxy VIP Growth & Income Fund, previously a fund of the
Galaxy VIP Fund, a separate Massachusetts business trust ("the predecessor
trust"), merged into the Galaxy VIP Equity Fund, also previously a fund of the
predecessor trust and collectively, the "target funds". The Galaxy VIP Equity
Fund received a tax-free transfer of assets from the Galaxy VIP Growth & Income
Fund, as follows:
<Table>
<Caption>
SHARES NET ASSETS UNREALIZED
ISSUED RECEIVED DEPRECIATION(1)
--------- ------------ ---------------
416,815 $ 4,822,551 $ 1,331,049
<Caption>
NET ASSETS NET ASSETS NET ASSETS
OF GALAXY OF GALAXY OF GALAXY
VIP EQUITY VIP GROWTH & INCOME VIP EQUITY FUND
FUND PRIOR TO FUND, PRIOR TO IMMEDIATELY AFTER
COMBINATION COMBINATION COMBINATION
------------- ------------------- -----------------
$ 39,395,832 $ 4,822,551 $ 44,218,383
</Table>
(1) Unrealized depreciation is included in the Net Assets Received amount
above.
Also on April 14, 2003, subsequent to the merger described above, the Galaxy VIP
Equity Fund was reorganized as the Liberty Equity Fund, Variable Series.
The accompanying statement of operations, statement of changes in net assets and
financial highlights for the Fund represents the historical operations of the
Galaxy VIP Equity Fund for periods prior to April 14, 2003.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at the current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
95
<Page>
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
------------ ------------
2009 $ 2,908,429
2010 3,698,775
------------
$ 6,607,204
============
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT AND ADMINISTRATION FEES--Columbia receives a monthly management
fee equal to 0.75% annually of the Fund's average daily net assets.
Columbia provides, pursuant to an Administrative Agreement with the Fund,
certain administrative services for a monthly fee equal to 0.085% annually of
the Fund's average daily net assets. Prior to April 14, 2003, the administration
fee was computed daily and paid monthly at the annual rate of 0.085% of the
first $1 billion of the combined average daily net assets of the funds in the
predecessor trust, 0.078% of the next $1.5 billion of combined average daily net
assets and 0.073% of combined average daily net assets in excess of $2.5
billion.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual fee based on the average daily net assets of the Fund as
follows:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS FEE
- ------------------------------------------ ----------
Under $50 million $ 25,000
Of $50 million but less than $200 million 35,000
Of $200 million but less than $500 million 50,000
Of $500 million but less than $1 billion 85,000
In excess of $1 billion 125,000
</Table>
The annual fees for a Fund with more than 25% in non-domestic assets will be
150% of the annual fees described above.
The Fund also pays out-of-pocket costs for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for a monthly fee based on
a per account charge or minimum of $5,000 annually per Fund.
96
<Page>
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Effective April 14, 2003, Columbia has voluntarily agreed to
waive expenses at the rate of 0.02% annually of the Fund's average daily net
assets. This waiver agreement will continue until April 14, 2004, after which it
may be modified or terminated at any time.
Prior to April 14, 2003, Fleet Investment Advisors, Inc. and/or its affiliates
and/or PFPC Inc., the former fund administrator, could voluntarily waive all or
a portion of the fees payable to them by the predecessor fund.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $9,356,632 and
$16,615,222, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 4,990,113
Gross unrealized depreciation (7,237,753)
--------------
Net unrealized depreciation $ (2,247,640)
==============
</Table>
97
<Page>
FINANCIAL HIGHLIGHTS
Liberty Equity Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
PERIOD
ENDED
JUNE 30,
2003 (a)
---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.57
---------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.02
Net realized and unrealized gain on investments 1.33
---------------
Total from Investment Operations 1.35
---------------
NET ASSET VALUE, END OF PERIOD $ 12.92
===============
Total return (c)(d)(e) 11.67%(f)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses 1.38%(g)
Net investment income 0.06%(g)
Waiver/reimbursement 0.02%(g)
Portfolio turnover rate 22%(f)
Net assets, end of period (000's) $ 1
</Table>
(a) For the period from commencement of operations April 14, 2003 to June 30,
2003.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(f) Not annualized.
(g) Annualized.
98
<Page>
SHAREHOLDER MEETING RESULTS
Liberty Equity Fund, Variable Series
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On February 19, 2003, the Annual Meeting of Shareholders of the Trust was held
to conduct a vote for or against the approval of the following items listed on
the Trust's Proxy Statement for said Meeting. On December 2, 2002, the record
date for the Meeting, the Galaxy VIP Growth and Income Fund had 730,203.532
common shares outstanding and the Galaxy VIP Equity Fund had 3,825,799.735
common shares outstanding. The votes cast were as follows:
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
GALAXY VIP GROWTH AND INCOME FUND
FEBRUARY 19, 2003
1. To approve an Agreement and Plan of Reorganization providing for i) the sale
of all of the assets of the Galaxy VIP Growth and Income Fund to, and the
assumption of all of the liabilities of the Galaxy VIP Growth and Income Fund
by, the Liberty Equity Fund, Variable Series, in exchange for shares of the
Liberty Equity Fund, Variable Series, and the distribution of such shares to
the shareholders of the Galaxy VIP Growth and Income Fund in complete
liquidation of the Galaxy VIP Growth and Income Fund; (ii) the
de-registration of The Galaxy VIP Fund as an investment company under the
Investment Company Act of 1940, as amended, and (iii) The Galaxy VIP Fund's
termination as a Massachusetts business trust under Massachusetts law. (Item
1 in the Notice.)
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ------------- --------
Affirmative 673,392.240 92.220% 93.123%
Against 2,781.596 .381% .385%
Abstain 46,944.481 6.429% 6.492%
TOTAL 723,118.317 99.030% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 730,203.532
VOTED SHARES 723,118.317
PERCENT VOTED 99.030%
</Table>
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
GALAXY VIP EQUITY FUND
FEBRUARY 19, 2003
2. To approve an Agreement and Plan of Reorganization providing for (i) the sale
of all of the assets of the Galaxy VIP Equity Fund to, and the assumption of
all of the liabilities of the Galaxy VIP Equity Fund by, the Liberty Equity
Fund, Variable Series, in exchange for shares of the Liberty Equity Fund,
Variable Series, and the distribution of such shares to the shareholders of
the Galaxy VIP Equity Fund in complete liquidation of the Galaxy VIP Equity
Fund; (ii) the de-registration of The Galaxy VIP Fund as an investment
company under the Investment Company Act of 1940, as amended, and (iii) The
Galaxy VIP Fund's termination as a Massachusetts business trust under
Massachusetts law. (Item 2 of the Notice.)
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ------------- -------------
Affirmative 3,402,836.839 88.944% 89.137%
Against 98,743.838 2.581% 2.587%
Abstain 315,933.927 8.258% 8.276%
TOTAL 3,817,514.604 99.783% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 3,825,799.735
VOTED SHARES 3,817,514.604
PERCENT VOTED 99.783%
</Table>
99
<Page>
CHANGE IN INDEPENDENT AUDITOR
Liberty Equity Fund, Variable Series
Based on the recommendation of the Audit Committee of the Fund on May 6, 2003,
the Board of Trustees determined not to retain Ernst & Young LLP ("E&Y") as the
Fund's independent auditor and voted to appoint PricewaterhouseCoopers LLP for
the fiscal year ended December 31, 2003. During the two most recent fiscal
years, E&Y's audit reports contained no adverse opinion or disclaimer of
opinion, nor were its reports qualified or modified as to uncertainty, audit
scope, or accounting principle. Further, in connection with its audits for the
two most recent fiscal years and through May 6, 2003, there were no
disagreements between the Fund and E&Y on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
if not resolved to the satisfaction of E&Y would have caused it to make
reference to the disagreements in its report on the financial statements for
such years.
100
<Page>
PORTFOLIO MANAGERS' DISCUSSION
Liberty Growth & Income Fund, Variable Series / June 30, 2003
Liberty Growth & Income Fund, Variable Series seeks long-term growth and
income.
Scott L. Davis and Gregory M. Miller have co-managed the fund since April 30,
2003. Prior to that date, Scott Schermerhorn managed the fund. Mr. Davis and
Mr. Miller have been with Columbia Management Advisors, Inc. since 1985.
On April 7, 2003, Liberty Value Fund, Variable Series was merged into
Colonial US Growth & Income Fund, Variable Series. The new fund was renamed
Liberty Growth & Income Fund, Variable Series.
SLOW START, STRONG FINISH
The fund did not perform as well as the broader US stock market during a period
that began poorly for stocks but ended with impressive gains. Stock selection in
the consumer discretionary and consumer staples sectors hurt the fund's relative
performance. Several of our largest holdings generated disappointing returns
during the first quarter. However, the fund regained much of its lost ground by
the end of the period.
The first three months of the year were dominated by concerns about the
economy and impending war with Iraq. Stocks trended downward as corporations and
investors were paralyzed by uncertainty. But markets rallied once it became
clear that the US military action would be victorious, and returns remained
strong through the end of June.
DISAPPOINTING RESULTS FROM CONSUMER STAPLES
Three of our top ten holdings performed poorly during the period: Safeway, Sara
Lee and ConAgra. We sold Safeway, a food retailer whose prospects were clouded
by concern over competition with WalMart. In Sara Lee's case, we determined that
its cheap price was due to weakness in its underlying businesses, including
brands that the company may not be able to revive in today's markets. We again
eliminated our stake. Shares of ConAgra (2.5% of net assets) declined early in
the period when the company's earnings fell short of expectations. However,
ConAgra gained ground later in the period when it restructured to emphasize its
key food processing business. One of the worst performers in the first quarter
of 2003, McDonald's (2.6% of net assets), generated strong double-digit returns
in the second quarter. Our research showed that the company was in the process
of making management improvements and enhanced menu offerings. This news
improved investor perception of the company's potential and resulted in a
dramatically higher stock price. Other names that did well included industrials
Textron and Honeywell and electric utility PG&E (2.3%, 2.0% and 0.7% of net
assets, respectively).
FINE TUNING OUR HOLDINGS
When we took over the management of the fund on April 30, we evaluated the size
and quality of the fund's holdings. In some cases we trimmed or eliminated
positions that we felt were too large. One example is managed health care
provider Aetna Inc., a stock that had generated solid performance but had grown
to almost 5% of net assets. We took some gains and pared back that position to
2.4% of net assets. We also eliminated several holdings that had low prices, but
in our opinion little rebound potential, including AT&T and Motorola.
We favored the financial sector during the period and added to holdings to
bring the fund's allocation more in line with the index. We also established new
positions in Bank of America Corporation, U.S. Bancorp and State Street
Corporation (2.5%, 1.5% and 0.5% of net assets, respectively). We also made some
changes based on our expectation of an improving economy.
LOOKING AHEAD
Moving forward, we believe that conditions could become somewhat more difficult
for stocks because market expectations have risen. Valuation is still important,
but we expect quality to become a bigger factor in determining which companies
will succeed. As bottom-up, research-driven managers, we will continue to select
the companies we believe have the best prospects under a variety of market
environments.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
An investment in the Liberty Growth & Income Fund, Variable Series offers
significant long-term growth potential, but also involves certain risks. The
fund may be affected by stock market fluctuations due to economic and business
developments.
Holdings are disclosed as of June 30, 2003, and are subject to change.
101
<Page>
PERFORMANCE INFORMATION
Liberty Growth & Income Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR LIFE
- ------------------------------------------------------------------
Class B(1) (6/1/00) 7.78 -4.00 0.22 10.90
S&P 500 Index(2) 11.75 0.25 -1.61 11.04
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 7/5/94(3) - 6/30/03
<Table>
<Caption>
CLASS B SHARES S&P 500 INDEX
7/5/1994 $ 10,000 $ 10,000
7/30/1994 $ 10,260 $ 10,328
8/31/1994 $ 10,670 $ 10,750
9/30/1994 $ 10,460 $ 10,488
10/31/1994 $ 10,631 $ 10,723
11/30/1994 $ 10,251 $ 10,333
12/31/1994 $ 10,441 $ 10,486
1/31/1995 $ 10,705 $ 10,757
2/28/1995 $ 11,132 $ 11,176
3/31/1995 $ 11,427 $ 11,505
4/30/1995 $ 11,661 $ 11,844
5/31/1995 $ 12,078 $ 12,316
6/30/1995 $ 12,342 $ 12,602
7/31/1995 $ 12,769 $ 13,019
8/31/1995 $ 12,718 $ 13,052
9/30/1995 $ 13,145 $ 13,602
10/31/1995 $ 13,094 $ 13,553
11/30/1995 $ 13,592 $ 14,147
12/31/1995 $ 13,541 $ 14,420
1/31/1996 $ 13,903 $ 14,910
2/29/1996 $ 14,177 $ 15,049
3/31/1996 $ 14,253 $ 15,193
4/30/1996 $ 14,779 $ 15,417
5/31/1996 $ 15,130 $ 15,813
6/30/1996 $ 14,801 $ 15,873
7/31/1996 $ 14,089 $ 15,172
8/31/1996 $ 14,560 $ 15,492
9/30/1996 $ 15,272 $ 16,362
10/31/1996 $ 15,655 $ 16,814
11/30/1996 $ 16,773 $ 18,083
12/31/1996 $ 16,498 $ 17,725
1/31/1997 $ 17,704 $ 18,831
2/28/1997 $ 17,692 $ 18,980
3/31/1997 $ 16,984 $ 18,202
4/30/1997 $ 17,889 $ 19,287
5/31/1997 $ 18,911 $ 20,465
6/30/1997 $ 19,629 $ 21,376
7/31/1997 $ 21,196 $ 23,075
8/31/1997 $ 20,465 $ 21,783
9/30/1997 $ 21,520 $ 22,975
10/31/1997 $ 20,535 $ 22,207
11/30/1997 $ 21,371 $ 23,235
12/31/1997 $ 21,815 $ 23,635
1/31/1998 $ 22,055 $ 23,895
2/28/1998 $ 23,581 $ 25,618
3/31/1998 $ 24,772 $ 26,930
4/30/1998 $ 24,760 $ 27,204
5/31/1998 $ 24,143 $ 26,736
6/30/1998 $ 25,068 $ 27,822
7/31/1998 $ 24,572 $ 27,527
8/31/1998 $ 20,569 $ 23,549
9/30/1998 $ 21,519 $ 25,059
10/31/1998 $ 23,355 $ 27,094
11/30/1998 $ 24,775 $ 28,735
12/31/1998 $ 26,209 $ 30,391
1/31/1999 $ 26,893 $ 31,661
2/28/1999 $ 25,820 $ 30,676
3/31/1999 $ 26,657 $ 31,903
4/30/1999 $ 27,395 $ 33,138
5/31/1999 $ 27,034 $ 32,356
6/30/1999 $ 28,610 $ 34,145
7/31/1999 $ 27,897 $ 33,083
8/31/1999 $ 27,590 $ 32,918
9/30/1999 $ 26,641 $ 32,016
10/31/1999 $ 27,702 $ 34,043
11/30/1999 $ 28,064 $ 34,734
12/31/1999 $ 29,355 $ 36,776
1/31/2000 $ 27,773 $ 34,930
2/29/2000 $ 26,826 $ 34,270
3/31/2000 $ 29,474 $ 37,621
4/30/2000 $ 29,444 $ 36,489
5/31/2000 $ 29,297 $ 35,741
6/30/2000 $ 28,884 $ 36,620
7/31/2000 $ 29,092 $ 36,049
8/31/2000 $ 30,954 $ 38,287
9/30/2000 $ 30,233 $ 36,266
10/31/2000 $ 30,447 $ 36,113
11/30/2000 $ 28,962 $ 33,268
12/31/2000 $ 30,366 $ 33,431
1/31/2001 $ 30,166 $ 34,617
2/28/2001 $ 29,949 $ 31,464
3/31/2001 $ 28,802 $ 29,472
4/30/2001 $ 29,300 $ 31,759
5/31/2001 $ 29,848 $ 31,972
6/30/2001 $ 29,149 $ 31,195
7/31/2001 $ 29,997 $ 30,889
8/31/2001 $ 29,815 $ 28,959
9/30/2001 $ 28,616 $ 26,622
10/31/2001 $ 28,762 $ 27,130
11/30/2001 $ 29,921 $ 29,211
12/31/2001 $ 30,169 $ 29,468
1/31/2002 $ 29,666 $ 29,038
2/28/2002 $ 29,354 $ 28,478
3/31/2002 $ 30,696 $ 29,548
4/30/2002 $ 29,587 $ 27,758
5/31/2002 $ 29,549 $ 27,555
6/30/2002 $ 26,402 $ 25,593
7/31/2002 $ 24,226 $ 23,599
8/31/2002 $ 24,537 $ 23,753
9/30/2002 $ 21,020 $ 21,173
10/31/2002 $ 22,807 $ 23,034
11/30/2002 $ 24,557 $ 24,389
12/31/2002 $ 23,515 $ 22,957
1/31/2003 $ 22,669 $ 22,358
2/28/2003 $ 21,390 $ 22,023
3/31/2003 $ 21,330 $ 22,236
4/30/2003 $ 22,885 $ 24,066
5/31/2003 $ 24,773 $ 25,332
6/30/2003 $ 25,341 $ 25,656
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 11.95 12.88
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The S&P (Standard & Poor's) 500 Index is an
unmanaged index that tracks the performance of 500 widely held,
large-capitalization US stocks. Indices are not investments, do not incur fees
or expenses and are not professionally managed. It is not possible to invest
directly in an index. Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class of shares would be lower.
(2) Index performance is from June 30, 1994.
(3) Inception date of class A shares (older existing share class).
102
<Page>
INVESTMENT PORTFOLIO
Liberty Growth & Income Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCKS--95.6%
CONSUMER DISCRETIONARY--8.9%
AUTO COMPONENTS--1.7%
Delphi Corp. 486,878 $ 4,201,757
--------------
AUTOMOBILES--0.0%
Ford Motor Co. 16 176
--------------
HOTELS RESTAURANTS & LEISURE--2.6%
McDonald's Corp. 291,800 6,437,108
--------------
MEDIA--2.4%
AOL Time Warner, Inc. (a) 155,600 2,503,604
Interpublic Group of Companies, Inc. 245,700 3,287,466
--------------
5,791,070
--------------
SPECIALTY RETAIL--2.2%
Office Depot, Inc. (a) 368,300 5,344,033
--------------
CONSUMER STAPLES--7.2%
BEVERAGES--1.3%
Coca-Cola Co. 68,700 3,188,367
--------------
FOOD PRODUCTS--3.9%
ConAgra Foods, Inc. 263,000 6,206,800
Kraft Foods, Inc. 103,300 3,362,415
--------------
9,569,215
--------------
HOUSEHOLD PRODUCTS--1.0%
Kimberly-Clark Corp. 46,100 2,403,654
--------------
TOBACCO--1.0%
Altria Group, Inc. 55,000 2,499,200
--------------
ENERGY--13.6%
ENERGY EQUIPMENT & SERVICES--2.8%
Baker Hughes, Inc. 84,900 2,850,093
Halliburton Co. 173,300 3,985,900
--------------
6,835,993
--------------
OIL & GAS--10.8%
BP PLC, ADR 140,000 5,882,800
ConocoPhillips 109,870 6,020,876
Exxon Mobil Corp. 167,370 6,010,257
Marathon Oil Corp. 176,000 4,637,600
Royal Dutch Petroleum Co., NY Shares 80,700 3,762,234
--------------
26,313,767
--------------
FINANCIALS--25.5%
BANKS--7.3%
Bank of America Corp. 78,300 6,188,049
Bank of New York Co., Inc. 107,600 3,093,500
Bank One Corp. 98,100 3,647,358
Fifth Third Bancorp 23,100 1,324,554
US Bancorp 144,700 3,545,150
--------------
17,798,611
--------------
DIVERSIFIED FINANCIALS--9.4%
Citigroup, Inc. 298,800 12,788,640
Freddie Mac 69,400 3,523,438
JP Morgan Chase & Co. 152,700 $ 5,219,286
State Street Corp. 32,700 1,288,380
--------------
22,819,744
--------------
INSURANCE--8.8%
AMBAC Financial Group, Inc. 52,500 3,478,125
American International Group, Inc. 130,300 7,189,954
Berkshire Hathaway, Inc., Class A (a) 63 4,567,500
Lincoln National Corp. 123,300 4,393,179
MGIC Investment Corp. 38,300 1,786,312
--------------
21,415,070
--------------
HEALTH CARE--8.7%
HEALTH CARE PROVIDERS & SERVICES--3.4%
Aetna, Inc. 98,400 5,923,680
McKesson Corp. 65,100 2,326,674
--------------
8,250,354
--------------
PHARMACEUTICALS--5.3%
Bristol-Myers Squibb Co. 100,500 2,728,575
Merck & Co., Inc. 126,300 7,647,465
Pfizer, Inc. 71,900 2,455,385
--------------
12,831,425
--------------
INDUSTRIALS--9.1%
AEROSPACE & DEFENSE--4.2%
General Dynamics Corp. 34,400 2,494,000
Honeywell International, Inc. 179,800 4,827,630
Raytheon Co. 90,900 2,985,156
--------------
10,306,786
--------------
COMMERCIAL SERVICES & SUPPLIES--1.8%
Waste Management, Inc. 180,400 4,345,836
--------------
INDUSTRIAL CONGLOMERATES--2.3%
Textron, Inc. 143,600 5,603,272
--------------
MACHINERY--0.8%
Dover Corp. 68,250 2,044,770
--------------
INFORMATION TECHNOLOGY--3.6%
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.0%
Celestica, Inc. (a) 146,400 2,307,264
--------------
INFORMATION TECHNOLOGY CONSULTING &
SERVICES--1.1%
Electronic Data Systems Corp. 127,700 2,739,165
--------------
OFFICE ELECTRONICS--1.5%
Xerox Corp. (a) 342,100 3,622,839
--------------
MATERIALS--3.5%
CHEMICALS--1.0%
Air Products & Chemicals, Inc. 57,400 2,387,840
--------------
METALS & MINING--1.2%
Barrick Gold Corp. 164,600 2,946,340
--------------
</Table>
See Notes to Investment Portfolio.
103
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
PAPER & FOREST PRODUCTS--1.3%
Bowater, Inc. 54,200 $ 2,029,790
Weyerhaeuser Co. 23,100 1,247,400
--------------
3,277,190
--------------
TELECOMMUNICATION SERVICES--9.0%
DIVERSIFIED TELECOMMUNICATION--9.0%
BellSouth Corp. 249,100 6,633,533
SBC Communications, Inc. 302,500 7,728,875
Verizon Communications, Inc. 194,300 7,665,135
--------------
22,027,543
--------------
UTILITIES--6.5%
ELECTRIC UTILITIES--4.5%
American Electric Power Co., Inc. 105,900 3,158,997
Consolidated Edison, Inc. 84,900 3,674,472
PG&E Corp. (a) 77,200 1,632,780
TXU Corp. 105,100 2,359,495
--------------
10,825,744
--------------
MULTI-UTILITIES & UNREGULATED POWER--2.0%
Duke Energy Corp. 245,500 4,897,725
--------------
TOTAL COMMON STOCKS
(cost of $225,749,460) 233,031,858
--------------
<Caption>
PAR VALUE
-------------- --------------
SHORT-TERM OBLIGATION--3.3%
Repurchase agreement with
State Street Bank & Trust Co.,
dated 06/30/03, due 07/01/03 at
1.000%, collateralized by a
U.S. Treasury Bond maturing
02/15/29, market value $8,175,104
(repurchase proceeds $8,013,223)
(cost of $8,013,000) $ 8,013,000 $ 8,013,000
--------------
TOTAL INVESTMENTS--98.9%
(cost of $233,762,460) (b) 241,044,858
--------------
OTHER ASSETS & LIABILITIES, NET--1.1% 2,774,146
--------------
NET ASSETS--100.0% $ 243,819,004
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for financial statement and federal income tax purposes is the same.
<Table>
<Caption>
ACRONYM NAME
------- ----
ADR American Depositary Receipt
</Table>
See Notes to Financial Statements.
104
<Page>
STATEMENT OF ASSETS & LIABILITIES
Liberty Growth & Income Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 233,762,460
---------------
Investments, at value $ 241,044,858
Cash 319
Receivable for:
Investments sold 4,819,618
Fund shares sold 50,514
Interest 223
Dividends 312,738
Expense reimbursement due from Manager 19,195
Deferred Trustees' compensation plan 11,914
---------------
TOTAL ASSETS 246,259,379
---------------
LIABILITIES:
Payable for:
Investments purchased 326,440
Fund shares repurchased 1,827,858
Distribution fee--Class B 236
Management fee 165,290
Transfer agent fee 594
Pricing and bookkeeping fees 9,739
Merger costs 28,600
Reports to Shareholders 59,078
Deferred Trustees' fee 11,914
Other liabilities 10,626
---------------
TOTAL LIABILITIES 2,440,375
---------------
NET ASSETS $ 243,819,004
===============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 285,555,050
Undistributed net investment income 1,483,755
Accumulated net realized loss (50,502,199)
Net unrealized appreciation on investments 7,282,398
---------------
NET ASSETS $ 243,819,004
===============
CLASS A:
Net assets $ 204,920,304
Shares outstanding 15,880,221
===============
Net asset value per share $ 12.90
===============
CLASS B:
Net assets $ 38,898,700
Shares outstanding 3,019,361
===============
Net asset value per share $ 12.88
===============
</Table>
See Notes to Financial Statements.
105
<Page>
STATEMENT OF OPERATIONS
Liberty Growth & Income Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 2,238,267
Interest 30,484
---------------
Total Investment Income (net of foreign taxes withheld of $51,751) 2,268,751
---------------
EXPENSES:
Management fee 725,568
Distribution fee--Class B 39,072
Pricing and bookkeeping fees 34,701
Transfer agent fee 3,720
Trustees' fee 4,253
Custody fee 5,609
Other expenses 40,462
---------------
Total Expenses 853,385
Fees and expenses waived or reimbursed by Manager: (60,799)
Fees reimbursed by Distributor--Class B (14,089)
---------------
Net Expenses 778,497
---------------
Net Investment Income 1,490,254
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (21,466,615)
Net change in unrealized appreciation/depreciation on investments 44,200,452
---------------
Net Gain 22,733,837
---------------
Net Increase in Net Assets from Operations $ 24,224,091
===============
</Table>
See Notes to Financial Statements.
106
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Liberty Growth & Income Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- --------------- ---------------
OPERATIONS:
Net investment income $ 1,490,254 $ 1,860,948
Net realized loss on investments (21,466,615) (28,158,847)
Net change in unrealized appreciation/depreciation on investments 44,200,452 (19,133,885)
--------------- ---------------
Net Increase (Decrease) from Operations 24,224,091 (45,431,784)
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A -- (1,556,810)
Class B -- (354,201)
--------------- ---------------
Total Distributions Declared to Shareholders -- (1,911,011)
--------------- ---------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 2,091,226 6,842,505
Proceeds received in connection with merger 88,842,502 --
Distributions reinvested -- 1,556,810
Redemptions (20,239,046) (35,673,636)
--------------- ---------------
Net Increase (Decrease) 70,694,682 (27,274,321)
--------------- ---------------
Class B:
Subscriptions 10,513,574 13,543,954
Proceeds received in connection with merger 7,935,880 --
Distributions reinvested -- 354,201
Redemptions (10,640,209) (3,985,341)
--------------- ---------------
Net Increase 7,809,245 9,912,814
--------------- ---------------
Net Increase (Decrease) from Share Transactions 78,503,927 (17,361,507)
--------------- ---------------
Total Increase (Decrease) in Net Assets 102,728,018 (64,704,302)
NET ASSETS:
Beginning of period 141,090,986 205,795,288
--------------- ---------------
End of period (including undistributed net investment income of $1,483,755
and overdistributed net investment income of $(6,499)) $ 243,819,004 $ 141,090,986
=============== ===============
CHANGES IN SHARES:
Class A:
Subscriptions 177,833 498,777
Issued in connection with merger 7,939,987 --
Issued for distributions reinvested -- 131,377
Redemptions (1,706,957) (2,737,362)
--------------- ---------------
Net Increase (Decrease) 6,410,863 (2,107,208)
--------------- ---------------
Class B:
Subscriptions 929,860 950,359
Issued in connection with merger 710,257 --
Issued for distributions reinvested -- 29,941
Redemptions (944,168) (314,657)
--------------- ---------------
Net Increase 695,949 665,643
--------------- ---------------
</Table>
See Notes to Financial Statements.
107
<Page>
NOTES TO FINANCIAL STATEMENTS
Liberty Growth & Income Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Liberty Growth & Income Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek long-term growth and income. The Fund's
capitalization consists of an unlimited number of shares of beneficial interest
without par value that represent a separate series of the Trust. The Fund offers
two classes of shares: Class A and Class B. Each share of a class represents an
equal proportionate beneficial interest in that share class and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of their share class available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Liberty Advisory Services Corp., the investment advisor to the
Fund and Colonial Management Associates, Inc. ("Colonial"), the sub-advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Liberty Advisory Services Corp. and Colonial with respect to
the Fund. The merger did not change the way the Fund is managed, the investment
personnel assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
On April 7, 2003, the Liberty Value Fund, Variable Series (the target fund),
merged into the Colonial U.S. Growth & Income Fund, Variable Series (the
surviving fund). The Colonial U.S. Growth & Income Fund, Variable Series
received a tax-free transfer of assets from the Liberty Value Fund, Variable
Series as follows:
<Table>
<Caption>
SHARES NET ASSETS UNREALIZED
ISSUED RECEIVED DEPRECIATION(1)
--------- ------------ ---------------
8,650,244 $ 96,778,382 $ 17,342,259
<Caption>
NET ASSETS
NET ASSETS NET ASSETS OF COLONIAL
OF COLONIAL OF LIBERTY U.S. GROWTH &
U.S. GROWTH & VALUE FUND, INCOME FUND,
INCOME FUND, VARIABLE SERIES VARIABLE SERIES
VARIABLE SERIES IMMEDIATELY IMMEDIATELY
PRIOR TO PRIOR TO AFTER
COMBINATION COMBINATION COMBINATION
--------------- --------------- ---------------
$ 126,206,600 $ 96,778,382 $ 222,984,982
</Table>
(1) Unrealized depreciation is included in the Net Assets Received amount shown
above.
Also on April 7, 2003, subsequent to the merger described above, the Colonial
U.S. Growth & Income Fund, Variable Series was renamed the Liberty Growth &
Income Fund, Variable Series. Class A and Class B shares of the surviving fund
were issued in exchange for Class A and Class B shares, respectively, of the
target fund.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at the current quoted bid price.
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid
quotation is used.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
108
<Page>
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2010 $ 28,492,336
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE--Columbia receives a monthly fee equal to 0.80% annually of
the first $1 billion of the Fund's average daily net assets and 0.70% in excess
of $1 billion.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. For the six months ended June 30, 2003,
the annualized net asset based fee rate was .032%. The Fund also pays
out-of-pocket costs for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Effective April 7, 2003, Columbia has voluntarily agreed to
waive expenses at the rate of 0.11% annually of the Fund's average daily net
assets. In addition, LFD has voluntarily agreed to waive Class B distribution
fees at the rate of 0.02% annually of the Class B average daily net assets.
These waiver agreements will continue until April 7, 2004, after which they may
be modified or terminated at any time.
109
<Page>
Prior to April 7, 2003, Liberty Advisory Services Corp. and LFD had voluntarily
agreed to reimburse all expenses, including management fees and distribution
fees, but excluding interest, taxes, brokerage and extraordinary expenses
incurred by the Fund in excess of 1.00% annually of the Fund's average daily net
assets. LFD would first reimburse the Class B distribution fee up to 0.25%
annually to reach the 1.00% limit on Class B expenses. If additional
reimbursement were necessary to meet the limit for each class, the Manager would
then reimburse other expenses to the extent necessary. If additional
reimbursement were still necessary to reach the expense limit, the Manager would
then waive a portion of its management fee to reach the expense limit.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $65,379,140 and
$92,029,460, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for both financial statement and federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 23,537,322
Gross unrealized depreciation (16,254,924)
--------------
Net unrealized appreciation $ 7,282,398
==============
</Table>
OTHER--The Fund may focus its investments in certain industries, subjecting
it to greater risk than a fund that is more diversified.
110
<Page>
FINANCIAL HIGHLIGHTS
Liberty Growth & Income Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, ------------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
----------- ---------- ---------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.95 $ 15.53 $ 18.26 $ 19.82
----------- ---------- ---------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.09 0.13 0.15 0.08
Net realized and unrealized gain (loss) on
investments 0.84 (3.56) (0.35) 0.65
----------- ---------- ---------- ------------
Total from Investment Operations 0.93 (3.43) (0.20) 0.73
----------- ---------- ---------- ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- (0.15) (0.15) (0.17)
In excess of net investment income -- -- -- --(c)
From net realized gains -- -- (2.34) (2.12)
Return of capital -- -- (0.04) --
----------- ---------- ---------- ------------
Total Distributions Declared
to Shareholders -- (0.15) (2.53) (2.29)
----------- ---------- ---------- ------------
NET ASSET VALUE, END OF PERIOD $ 12.88 $ 11.95 $ 15.53 $ 18.26
=========== ========== ========== ============
Total return (d)(e)(f) 7.78%(g) (22.06)% (0.65)% 3.64%(g)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (h) 0.99%(i) 1.00% 1.00% 1.00%(i)
Net investment income (h) 1.51%(i) 0.96% 0.88% 0.71%(i)
Waiver/reimbursement 0.16%(i) 0.13% 0.21% 0.13%(i)
Portfolio turnover rate 38%(g) 69% 53% 120%
Net assets, end of period (000's) $ 38,899 $ 27,756 $ 25,742 $ 4,318
</Table>
(a) For the period from commencement of operaitons on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Rounds to less than $0.01 per share.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Had the Manager and/or Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
111
<Page>
SHAREHOLDER MEETING RESULTS
Liberty Growth & Income Fund, Variable Series
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On February 19, 2003, the Annual Meeting of Shareholders of the Trust was held
to conduct a vote for or against the approval of the following items listed on
the Trust's Proxy Statement for said Meeting. On December 2, 2002, the record
date for the Meeting, the Liberty Value Fund, Variable Series had 10,198,577.979
common shares outstanding. The votes cast were as follows:
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
LIBERTY VALUE FUND, VARIABLE SERIES
FEBRUARY 19, 2003
1. To approve an Agreement and Plan of Reorganization providing for the sale of
all of the assets of Liberty Value Fund, Variable Series to, and the
assumption of all of the liabilities of the Liberty Value Fund, Variable
Series by, the Colonial U.S. Growth & Income Fund, Variable Series, in
exchange for shares of the Colonial U.S. Growth & Income Fund, Variable
Series and the distribution of such shares to the shareholders of the Liberty
Value Fund, Variable Series in complete liquidation of the Liberty Value
Fund, Variable Series.
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
-------------- ----------- ----------
Affirmative 9,014,841.643 88.393% 88.393%
Against 418,060.682 4.099% 4.099%
Abstain 765,675.654 7.508% 7.508%
TOTAL 10,198,577.979 100.000% 100.000%
<Caption>
**FUND TOTALS: SHARES
RECORD TOTAL 10,198,577.979
VOTED SHARES 10,198,577.979
PERCENT VOTED 100.000%
</Table>
112
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Liberty S&P 500 Index Fund, Variable Series / June 30, 2003
Liberty S&P 500 Index Fund, Variable Series seeks capital appreciation by
matching the performance of the S&P 500 Index that measures the investment
returns of stocks of large US companies.
Tom O'Brien, a principal of SSgA Funds Management, Inc., is the portfolio
manager of the fund.
After a relatively weak start to the new year, returns on stocks were positive
during the first half of 2003. The S&P 500 Index rose 11.75% for the six-month
period ended June 30, 2003. The fund's performance was comparable to the index
for the period. Uncertainty over Iraq quickly dissipated when it became apparent
that the major military campaigns of war would be brief and the US economy was
stabilizing. Investors responded favorably to fiscal stimulus in the form of a
tax package, monetary stimulus from a cut in interest rates and reduced
geopolitical concerns.
Large-cap stocks trailed both mid-cap and small-cap stocks during the first
half of the year. Overall, small-cap stocks were the best performers. So far
this year, value stocks have edged out growth stocks.
ALL SECTORS RALLY
All ten economic sectors posted gains for the first half of 2003. In an
environment which favored sectors that had suffered the worst beatings over the
past three years, information technology made the largest positive contribution
to returns. Intel, Cisco Systems and Dell Computer turned in the strongest
performances (1.5%, 1.3% and 0.9% of net assets, respectively). The financial
sector, which struggled early in the year, was another standout performer helped
by low interest rates and an outlook for economic improvement. Citigroup, JP
Morgan Chase and Bank of America also made strong gains (2.4%, 0.7% and 1.3% of
net assets, respectively). In telecommunications, the smallest sector in the S&P
500 Index, Nextel (0.2% of net assets) was the strongest performer.
The industrial and financial sectors were also home to some of the index's
weakest performers. In the industrial sector, Automatic Data Processing (0.2% of
net assets) dampened the sector's positive return. ADP shares had a double-digit
loss for the period. The weakest performers in the financial sector included
AIG, Freddie Mac and Charles Schwab (1.6%, 0.4% and 0.1% of net assets,
respectively). In the telecommunications sector, AT&T (0.2% of net assets) had
the most significant negative impact on results. The stock lost more than 24%
during the period.
FOCUS ON COST-EFFECTIVE EXECUTION
Our focus on cost-effective trade execution is the hallmark of our management
style. Unlike actively managed funds where the portfolio managers spend time
researching which stocks to include or exclude from a fund, we concentrate on
trading in a low-cost manner when buying the stocks listed in the S&P 500 Index.
We manage the fund with a full replication investment strategy. This approach
means that the fund generally holds each of the 500 securities included in the
S&P 500 Index in approximately the same weighting as the company's
representation in the index. A full replication strategy tends to match the
performance of the index more closely than other methods. Of course, the fund's
return can diverge from the index: the fund incurs trading costs associated with
seeking to maintain the appropriate weight of each security in the index. In
addition, the fund may be required to sell securities to meet redemption demand
or buy securities to invest new monies that come into the fund.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
The primary risks involved with investing in the fund include equity risk,
market risk and tracking error risk. Unlike the S&P 500 Index, the fund incurs
administrative expenses and transaction costs in trading stocks. The composition
of the S&P 500 Index and the stocks held by the fund may occasionally diverge.
Holdings are disclosed as of June 30, 2003, and are subject to change.
113
<Page>
PERFORMANCE INFORMATION
Liberty S&P 500 Index Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR LIFE
- -------------------------------------------------------------
Class B (5/30/00) 11.36 -0.60 -10.24
S&P 500 Index(1) 11.75 0.25 -10.20
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 5/30/00 - 6/30/03
<Table>
<Caption>
CLASS B SHARES S&P 500 INDEX
May-00 $ 10,000
5/31/2000 $ 10,008 $ 10,000
6/30/2000 $ 10,316 $ 10,246
7/31/2000 $ 10,167 $ 10,086
8/31/2000 $ 10,784 $ 10,713
9/30/2000 $ 10,225 $ 10,147
10/31/2000 $ 10,201 $ 10,104
11/30/2000 $ 9,417 $ 9,308
12/31/2000 $ 9,471 $ 9,354
1/31/2001 $ 9,806 $ 9,686
2/28/2001 $ 8,935 $ 8,803
3/31/2001 $ 8,357 $ 8,246
4/30/2001 $ 8,994 $ 8,886
5/31/2001 $ 9,053 $ 8,946
6/30/2001 $ 8,826 $ 8,728
7/31/2001 $ 8,742 $ 8,643
8/31/2001 $ 8,190 $ 8,102
9/30/2001 $ 7,536 $ 7,449
10/31/2001 $ 7,679 $ 7,591
11/30/2001 $ 8,265 $ 8,173
12/31/2001 $ 8,327 $ 8,245
1/31/2002 $ 8,201 $ 8,125
2/28/2002 $ 8,041 $ 7,968
3/31/2002 $ 8,335 $ 8,267
4/30/2002 $ 7,822 $ 7,766
5/31/2002 $ 7,763 $ 7,710
6/30/2002 $ 7,207 $ 7,161
7/31/2002 $ 6,643 $ 6,603
8/31/2002 $ 6,677 $ 6,646
9/30/2002 $ 5,953 $ 5,924
10/31/2002 $ 6,467 $ 6,445
11/30/2002 $ 6,846 $ 6,824
12/31/2002 $ 6,434 $ 6,423
1/31/2003 $ 6,264 $ 6,256
2/28/2003 $ 6,170 $ 6,162
3/31/2003 $ 6,222 $ 6,222
4/30/2003 $ 6,732 $ 6,734
5/31/2003 $ 7,081 $ 7,088
6/30/2003 $ 7,164 $ 7,178
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 7.57 8.43
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The S&P (Standard & Poor's) 500 Index is an
unmanaged index that tracks the performance of 500 widely held,
large-capitalization US stocks. Indices are not investments, do not incur fees
or expenses and are not professionally managed. It is not possible to invest
directly in an index. Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVERTIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Index performance is from May 31, 2000.
114
<Page>
INVESTMENT PORTFOLIO
Liberty S&P 500 Index Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
COMMON STOCKS--96.8%
CONSUMER DISCRETIONARY--13.3%
AUTO COMPONENTS--0.2%
Cooper Tire & Rubber Co. 300 $ 5,277
Dana Corp. 473 5,468
Delphi Corp. 2,141 18,477
Goodyear Tire & Rubber Co. (a) 531 2,788
Johnson Controls, Inc. 330 28,248
Visteon Corp. 346 2,377
---------------
62,635
---------------
AUTOMOBILES--0.6%
Ford Motor Co. 7,108 78,117
General Motors Corp. 2,170 78,120
Harley-Davidson, Inc. 1,196 47,673
---------------
203,910
---------------
HOTELS RESTAURANTS & LEISURE--1.1%
Carnival Corp. 2,435 79,162
Darden Restaurants, Inc. 571 10,838
Harrah's Entertainment, Inc. 419 16,861
Hilton Hotels Corp. 1,361 17,407
International Game Technology, Inc. 319 32,643
Marriott International, Inc., Class A 926 35,577
McDonald's Corp. 4,899 108,072
Starbucks Corp. (a) 1,504 36,878
Starwood Hotels & Resorts Worldwide, Inc. 743 21,242
Wendy's International, Inc. 440 12,747
Yum! Brands, Inc. 1,161 34,319
---------------
405,746
---------------
HOUSEHOLD DURABLES--0.5%
American Greetings Corp., Class A (a) 257 5,047
Black & Decker Corp. 278 12,079
Centex Corp. 250 19,447
Fortune Brands, Inc. 593 30,955
KB Home Corp. 190 11,776
Leggett & Platt, Inc. 716 14,678
Maytag Corp. 251 6,129
Newell Rubbermaid, Inc. 1,050 29,400
Pulte Homes, Inc. 223 13,750
Snap-On, Inc. 238 6,909
Stanley Works 381 10,516
Tupperware Corp. 150 2,154
Whirlpool Corp. 253 16,116
---------------
178,956
---------------
INTERNET & CATALOG RETAIL--0.3%
eBay, Inc. (a) 1,222 127,308
---------------
LEISURE EQUIPMENT & PRODUCTS--0.2%
Brunswick Corp. 391 9,783
Eastman Kodak Co. 1,148 31,398
Hasbro, Inc. 672 11,753
Mattel, Inc. 1,765 33,394
---------------
86,328
---------------
MEDIA--4.0%
AOL Time Warner, Inc. (a) 17,315 278,598
Clear Channel Communications, Inc. 2,366 100,295
Comcast Corp., Special Class A (a) 8,659 $ 261,329
Dow Jones & Co., Inc. 285 12,264
Gannett Co., Inc. 1,035 79,498
Interpublic Group Cos., Inc. 1,472 19,695
Knight-Ridder, Inc. 312 21,506
McGraw-Hill Cos., Inc. 761 47,182
Meredith Corp. 157 6,908
New York Times Co., Class A 607 27,618
Omnicom Group, Inc. 733 52,556
Tribune Co. 1,193 57,622
Univision Communications, Inc., Class A (a) 845 25,688
Viacom, Inc., Class B (a) 6,823 297,892
Walt Disney Co. 7,852 155,077
---------------
1,443,728
---------------
MULTILINE RETAIL--3.8%
Big Lots, Inc. (a) 401 6,031
Costco Wholesale Corp. 1,771 64,819
Dillard's, Inc., Class A 322 4,337
Dollar General Corp. 1,210 22,095
Family Dollar Stores, Inc. 643 24,530
Federated Department Stores, Inc. 724 26,679
JC Penney Co., Inc. 976 16,446
Kohl's Corp. (a) 1,308 67,205
May Department Stores Co. 1,091 24,286
Nordstrom, Inc. 520 10,150
Sears, Roebuck and Co. 1,239 41,680
Target Corp. 3,500 132,440
Wal-Mart Stores, Inc. 16,976 911,102
---------------
1,351,800
---------------
SPECIALTY RETAIL--2.3%
Autonation, Inc. (a) 1,004 15,783
AutoZone, Inc. (a) 388 29,476
Bed Bath & Beyond, Inc. (a) 1,177 45,679
Best Buy Co., Inc. (a) 1,261 55,383
Circuit City Stores, Inc. 672 5,914
Gap, Inc. 3,436 64,459
Home Depot, Inc. 8,917 295,331
Limited Brands 2,076 32,178
Lowe's Cos., Inc. 3,007 129,151
Office Depot, Inc. (a) 1,176 17,064
RadioShack Corp. 605 15,918
Sherwin-Williams Co. 518 13,924
Staples, Inc. (a) 1,861 34,149
Tiffany & Co. 589 19,249
TJX Cos., Inc. 2,106 39,677
Toys R US, Inc. (a) 846 10,254
---------------
823,589
---------------
TEXTILES & APPAREL--0.3%
Jones Apparel Group, Inc. (a) 531 15,537
Liz Claiborne, Inc. 406 14,312
Nike, Inc. 1,029 55,041
Reebok International, Ltd. (a) 285 9,585
VF Corp. 453 15,388
---------------
109,863
---------------
</Table>
See Notes to Investment Portfolio.
115
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
CONSUMER STAPLES--8.6%
BEVERAGES--2.7%
Anheuser-Busch Cos., Inc. 3,213 $ 164,024
Brown-Forman Corp., Class B 231 18,161
Coca-Cola Co. 9,562 443,772
Coca-Cola Enterprises, Inc. 1,805 32,761
Coors (Adolph) 129 6,318
Pepsi Bottling Group, Inc. 1,032 20,661
PepsiCo, Inc. 6,622 294,679
---------------
980,376
---------------
FOOD & DRUG RETAILING--1.0%
Albertson's, Inc. 1,373 26,362
CVS Corp. 1,494 41,877
Kroger Co. 3,000 50,040
Safeway, Inc. (a) 1,739 35,580
Supervalu, Inc. 529 11,278
Sysco Corp. 2,531 76,031
Walgreen Co. 3,948 118,835
Winn-Dixie Stores, Inc. 458 5,638
---------------
365,641
---------------
FOOD PRODUCTS--1.2%
Archer-Daniels-Midland Co. 2,421 31,158
Campbell Soup Co. 1,618 39,641
ConAgra Foods, Inc. 2,106 49,702
General Mills, Inc. 1,431 67,844
Hershey Foods Corp. 535 37,268
HJ Heinz Co. 1,314 43,336
Kellogg Co. 1,599 54,958
McCormick & Co., Inc. 513 13,954
Sara Lee Corp. 3,046 57,295
WM Wrigley Jr. Co. 884 49,707
---------------
444,863
---------------
HOUSEHOLD PRODUCTS--2.0%
Clorox Co. 826 35,229
Colgate-Palmolive Co. 2,074 120,188
Kimberly-Clark Corp. 1,985 103,498
Procter & Gamble Co. 5,025 448,130
---------------
707,045
---------------
PERSONAL PRODUCTS--0.6%
Alberto-Culver Co., Inc., Class B 219 11,191
Avon Products, Inc. 904 56,229
Gillette Co. 4,021 128,109
---------------
195,529
---------------
TOBACCO--1.1%
Altria Group, Inc. 7,866 357,431
RJ Reynolds Tobacco Holdings, Inc. 300 11,163
UST, Inc. 624 21,859
---------------
390,453
---------------
ENERGY--5.7%
ENERGY EQUIPMENT & SERVICES--0.8%
Baker Hughes, Inc. 1,262 42,365
BJ Services Co. (a) 581 21,706
Halliburton Co. 1,711 $ 39,353
Nabors Industries, Ltd. (a) 534 21,120
Noble Corp. (a) 517 17,733
Rowan Cos., Inc. 340 7,616
Schlumberger, Ltd. 2,246 106,842
Transocean, Inc. (a) 1,237 27,177
---------------
283,912
---------------
OIL & GAS--4.9%
Amerada Hess Corp. 342 16,820
Anadarko Petroleum Corp. 989 43,981
Apache Corp. 627 40,793
Ashland, Inc. 276 8,468
Burlington Resources, Inc. 831 44,932
ChevronTexaco Corp. 4,151 299,702
ConocoPhillips 2,605 142,754
Devon Energy Corp. 943 50,356
EL Paso Corp. 2,264 18,293
EOG Resources, Inc. 445 18,619
Exxon Mobil Corp. 25,894 929,854
Kerr-McGee Corp. 388 17,382
Marathon Oil Corp. 1,215 32,015
Occidental Petroleum Corp. 1,475 49,486
Sunoco, Inc. 339 12,794
Unocal Corp. 1,014 29,092
---------------
1,755,341
---------------
FINANCIALS--19.8%
BANKS--7.1%
AmSouth Bancorp 1,295 28,283
Bank of America Corp. 5,814 459,480
Bank of New York Co., Inc. 2,963 85,186
Bank One Corp. 4,474 166,343
BB&T Corp. 1,829 62,735
Charter One Financial, Inc. 826 25,755
Comerica, Inc. 688 31,992
Fifth Third Bancorp 2,225 127,582
First Tennessee National Corp. 467 20,506
FleetBoston Financial Corp. (b) 4,044 120,147
Golden West Financial Corp. 604 48,326
Huntington Bancshares, Inc. 861 16,807
KeyCorp 1,590 40,179
Marshall & Ilsley Corp. 830 25,381
Mellon Financial Corp. 1,684 46,731
National City Corp. 2,367 77,425
North Fork Bancorporation, Inc. 612 20,845
Northern Trust Corp. 833 34,811
PNC Financial Services Group, Inc. 1,106 53,984
Regions Financial Corp. 874 29,524
SouthTrust Corp. 1,297 35,278
SunTrust Banks, Inc. 1,096 65,037
Synovus Financial Corp. 1,216 26,144
Union Planters Corp. 802 24,886
US Bancorp 7,477 183,186
Wachovia Corp. 5,222 208,671
</Table>
See Notes to Investment Portfolio.
116
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
Washington Mutual, Inc. 3,642 $ 150,415
Wells Fargo & Co. 6,484 326,794
Zions Bancorporation 340 17,207
---------------
2,559,640
---------------
DIVERSIFIED FINANCIALS--7.9%
American Express Co. 5,045 210,931
Bear Stearns Cos., Inc. 392 28,389
Capital One Financial Corp. 867 42,639
Charles Schwab Corp. 5,230 52,771
Citigroup, Inc. 19,959 854,245
Countrywide Financial Corp. 497 34,576
Fannie Mae 3,815 257,284
Federated Investors, Inc. 428 11,736
Franklin Resources, Inc. 967 37,781
Freddie Mac 2,675 135,810
Goldman Sachs Group, Inc. 1,815 152,006
Janus Capital Group, Inc. 861 14,120
JP Morgan Chase & Co. 7,821 267,322
Lehman Brothers Holdings, Inc. 941 62,558
MBNA Corp. 4,930 102,741
Merrill Lynch & Co., Inc. 3,625 169,215
Moody's Corp. 553 29,149
Morgan Stanley 4,234 181,004
Principal Financial Group 1,260 40,635
Providian Financial Corp. (a) 1,146 10,612
SLM Corp. 1,785 69,918
State Street Corp. 1,316 51,850
T Rowe Price Group, Inc. 462 17,440
---------------
2,834,732
---------------
INSURANCE--4.5%
ACE, Ltd. 1,033 35,422
Aflac, Inc. 2,018 62,054
Allstate Corp. 2,715 96,790
AMBAC Financial Group, Inc. 390 25,837
American International Group, Inc. 10,119 558,366
AON Corp. 1,231 29,642
Chubb Corp. 713 42,780
Cincinnati Financial Corp. 593 21,994
Hartford Financial Services Group, Inc. 1,095 55,144
Jefferson-Pilot Corp. 545 22,596
John Hancock Financial Services, Inc. 1,072 32,943
Lincoln National Corp. 717 25,547
Loews Corp. 763 36,082
Marsh & McLennan Cos., Inc. 2,072 105,817
MBIA, Inc. 546 26,618
Metlife, Inc. 2,940 83,261
MGIC Investment Corp. 359 16,744
Progressive Corp. 847 61,916
Prudential Financial, Inc. 2,194 73,828
SAFECO Corp. 555 19,580
St. Paul Cos. 899 32,822
Torchmark Corp. 487 18,141
Travelers Property Casualty Corp., Class B 3,909 61,645
UnumProvident Corp. 1,114 $ 14,939
XL Capital, Ltd., Class A 534 44,322
---------------
1,604,830
---------------
REAL ESTATE--0.3%
Apartment Investment & Management Co. 400 13,840
Equity Office Properties Trust 1,562 42,190
Equity Residential 1,081 28,052
Plum Creek Timber Co., Inc. 682 17,698
Simon Property Group Inc. 700 27,321
---------------
129,101
---------------
HEALTH CARE--14.4%
BIOTECHNOLOGY--1.3%
Amgen, Inc. (a) 4,894 325,157
Biogen, Inc. (a) 623 23,674
Chiron Corp. (a) 740 32,353
Genzyme Corp. (a) 842 35,196
MedImmune, Inc. (a) 1,006 36,588
---------------
452,968
---------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.9%
Applera Corp. - Applied Biosystems Group 804 15,300
Bausch & Lomb, Inc. 179 6,712
Baxter International, Inc. 2,307 59,982
Becton Dickinson & Co. 999 38,811
Biomet, Inc. 1,017 29,147
Boston Scientific Corp. (a) 1,577 96,355
CR Bard, Inc. 213 15,189
Guidant Corp. 1,226 54,422
Medtronic, Inc. 4,744 227,570
St. Jude Medical, Inc. 696 40,020
Stryker Corp. 776 53,831
Zimmer Holdings, Inc. 769 34,643
---------------
671,982
---------------
HEALTH CARE PROVIDERS & SERVICES--1.7%
Aetna, Inc. 606 36,481
AmerisourceBergen Corp. 412 28,572
Anthem, Inc. (a) 557 42,973
Cardinal Health, Inc. 1,744 112,139
Cigna Corp. 565 26,521
HCA, Inc. 1,994 63,888
Health Management Associates, Inc. 926 17,085
Humana, Inc. (a) 550 8,305
IMS Health, Inc. 867 15,597
Manor Care, Inc. (a) 358 8,954
McKesson Corp. 1,149 41,065
Quest Diagnostics, Inc. (a) 421 26,860
Quintiles Transnational Corp. (a) 396 5,619
Tenet Healthcare Corp. (a) 1,880 21,902
UnitedHealth Group, Inc. 2,282 114,670
WellPoint Health Networks (a) 581 48,978
---------------
619,609
---------------
</Table>
See Notes to Investment Portfolio.
117
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
PHARMACEUTICALS--9.5%
Abbott Laboratories 6,068 $ 265,536
Allergan, Inc. 508 39,167
Bristol-Myers Squibb Co. 7,543 204,792
Eli Lilly & Co. 4,366 301,123
Forest Laboratories, Inc. (a) 1,406 76,978
Johnson & Johnson 11,516 595,377
King Pharmaceuticals, Inc. (a) 854 12,605
Merck & Co., Inc. 8,700 526,785
Pfizer, Inc. 30,602 1,045,058
Schering-Plough Corp. 5,657 105,220
Watson Pharmaceuticals, Inc. (a) 462 18,651
Wyeth 5,164 235,220
---------------
3,426,512
---------------
INDUSTRIALS--11.1%
AEROSPACE & DEFENSE--1.7%
Boeing Co. 3,240 111,197
General Dynamics Corp. 749 54,302
Goodrich Corp. 385 8,085
Honeywell International, Inc. 3,307 88,793
Lockheed Martin Corp. 1,764 83,913
Northrop Grumman Corp. 710 61,266
Raytheon Co. 1,584 52,019
Rockwell Collins, Inc. 673 16,576
United Technologies Corp. 1,812 128,344
---------------
604,495
---------------
AIR FREIGHT & COURIERS--1.0%
FedEx Corp. 1,157 71,769
Ryder System, Inc. 264 6,764
United Parcel Service, Inc. 4,374 278,624
---------------
357,157
---------------
AIRLINES--0.2%
Delta Air Lines, Inc. 400 5,872
Southwest Airlines Co. 3,039 52,271
---------------
58,143
---------------
BUILDING PRODUCTS--0.2%
American Standard Cos., Inc. (a) 292 21,588
Crane Co. 250 5,657
Masco Corp. 1,839 43,860
---------------
71,105
---------------
COMMERCIAL SERVICES & SUPPLIES--1.9%
Allied Waste Industries, Inc. (a) 770 7,738
Apollo Group, Inc., Class A (a) 675 41,688
Automatic Data Processing, Inc. 2,320 78,555
Avery Dennison Corp. 481 24,146
Cendant Corp. (a) 3,996 73,207
Cintas Corp. 682 24,170
Concord EFS, Inc. (a) 1,924 28,321
Convergys Corp. (a) 680 10,880
Deluxe Corp. 237 10,618
Equifax, Inc. 496 12,896
First Data Corp. 2,897 120,052
Fiserv, Inc. (a) 764 27,206
H&R Block, Inc. 670 $ 28,977
Monster Worldwide, Inc. (a) 400 7,892
Paychex, Inc. 1,472 43,144
Pitney Bowes, Inc. 952 36,566
Robert Half International, Inc. 600 11,364
RR Donnelley & Sons Co. 481 12,573
Sabre Holdings Corp. 556 13,705
Waste Management, Inc. 2,315 55,768
---------------
669,466
---------------
CONSTRUCTION & ENGINEERING--0.0%
Fluor Corp. 309 10,395
McDermott International, Inc. (a) 150 950
---------------
11,345
---------------
ELECTRICAL EQUIPMENT--0.4%
American Power Conversion Corp. 693 10,804
Cooper Industries, Ltd. 399 16,479
Emerson Electric Co. 1,627 83,140
Molex, Inc. 715 19,298
Power-One, Inc. (a) 167 1,194
Rockwell Automation, Inc. 698 16,640
Thomas & Betts Corp. (a) 150 2,168
---------------
149,723
---------------
INDUSTRIAL CONGLOMERATES--4.1%
3M Co. 1,522 196,308
General Electric Co. 38,737 1,110,977
Textron, Inc. 565 22,046
Tyco International, Ltd. 7,684 145,842
---------------
1,475,173
---------------
MACHINERY--1.1%
Caterpillar, Inc. 1,334 74,250
Cummins, Inc. 180 6,460
Danaher Corp. 597 40,626
Deere & Co. 897 40,993
Dover Corp. 740 22,170
Eaton Corp. 298 23,426
Illinois Tool Works, Inc. 1,190 78,362
Ingersoll-Rand Co. 678 32,083
ITT Industries, Inc. 340 22,256
Navistar International Corp. 271 8,843
Paccar, Inc. 432 29,186
Pall Corp. 500 11,250
Parker Hannifin Corp. 456 19,147
---------------
409,052
---------------
ROAD & RAIL--0.4%
Burlington Northern Santa Fe Corp. 1,403 39,901
CSX Corp. 863 25,968
Norfolk Southern Corp. 1,562 29,990
Union Pacific Corp. 987 57,266
---------------
153,125
---------------
TRADING COMPANIES & DISTRIBUTION--0.1%
Genuine Parts Co. 645 20,646
WW Grainger, Inc. 325 15,197
---------------
35,843
---------------
</Table>
See Notes to Investment Portfolio.
118
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
INFORMATION TECHNOLOGY--14.7%
COMMUNICATIONS EQUIPMENT--2.2%
ADC Telecommunications, Inc. (a) 3,064 $ 7,133
Andrew Corp. (a) 250 2,300
Avaya, Inc. (a) 1,498 9,677
CIENA Corp. (a) 2,019 10,479
Cisco Systems, Inc. (a) 27,238 454,602
Comverse Technology, Inc. (a) 736 11,062
Corning, Inc. (a) 4,874 36,019
JDS Uniphase Corp. (a) 5,393 18,929
Lucent Technologies, Inc. 15,398 31,258
Motorola, Inc. 8,908 84,002
Qualcomm, Inc. 3,045 108,859
Scientific-Atlanta, Inc. 605 14,423
Tellabs, Inc. (a) 1,419 9,323
---------------
798,066
---------------
COMPUTERS & PERIPHERALS--3.8%
Apple Computer, Inc. (a) 1,336 25,544
Dell Computer Corp. (a) 9,978 318,897
EMC Corp. 8,499 88,985
Gateway, Inc. (a) 845 3,084
Hewlett-Packard Co. 11,869 252,810
International Business Machines Corp. 6,704 553,080
Lexmark International Group, Inc. 498 35,243
NCR Corp. 380 9,736
Network Appliance, Inc. (a) 1,384 22,435
Sun Microsystems, Inc. (a) 12,407 57,072
---------------
1,366,886
---------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.4%
Agilent Technologies, Inc. (a) 1,873 36,617
Jabil Circuit, Inc. (a) 815 18,012
Millipore Corp. 201 8,918
PerkinElmer, Inc. 537 7,416
Sanmina Corp. (a) 2,003 12,639
Solectron Corp. (a) 2,986 11,168
Symbol Technologies, Inc. 894 11,631
Tektronix, Inc. (a) 287 6,199
Thermo Electron Corp. (a) 677 14,231
Waters Corp. (a) 451 13,138
---------------
139,969
---------------
INTERNET SOFTWARE & SERVICES--0.2%
Yahoo, Inc. 2,295 75,184
---------------
IT CONSULTING & SERVICES--0.3%
Computer Sciences Corp. (a) 741 28,247
Electronic Data Systems Corp. 1,791 38,417
Sungard Data Systems, Inc. (a) 1,123 29,097
Unisys Corp. (a) 1,137 13,962
---------------
109,723
---------------
OFFICE ELECTRONICS--0.1%
Xerox Corp. (a) 3,009 31,865
---------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--3.2%
Advanced Micro Devices, Inc. 1,337 8,570
Altera Corp. (a) 1,517 24,879
Analog Devices, Inc. (a) 1,435 49,967
Applied Materials, Inc. (a) 6,369 $ 101,012
Applied Micro Circuits Corp. (a) 1,304 7,889
Broadcom Corp., Class A (a) 1,041 25,931
Intel Corp. 25,353 526,937
KLA-Tencor Corp. (a) 713 33,147
Linear Technology Corp. 1,244 40,069
LSI Logic Corp. (a) 1,591 11,264
Maxim Integrated Products, Inc. 1,287 44,003
Micron Technology, Inc. 2,324 27,028
National Semiconductor Corp. (a) 695 13,705
Novellus Systems, Inc. (a) 542 19,849
NVIDIA Corp. (a) 622 14,312
PMC - Sierra, Inc. (a) 698 8,188
QLogic Corp. (a) 355 17,157
Teradyne, Inc. 776 13,433
Texas Instruments, Inc. 6,663 117,269
Xilinx, Inc. (a) 1,326 33,561
---------------
1,138,170
---------------
SOFTWARE--4.5%
Adobe Systems, Inc. 893 28,639
Autodesk, Inc. 400 6,464
BMC Software, Inc. (a) 862 14,076
Citrix Systems, Inc. (a) 661 13,458
Computer Associates International, Inc. 2,239 49,885
Compuware Corp. (a) 1,536 8,863
Electronic Arts, Inc. (a) 578 42,766
Intuit, Inc. (a) 813 36,203
Mercury Interactive Corp. (a) 307 11,853
Microsoft Corp. 41,615 1,065,760
Novell, Inc. (a) 1,136 3,499
Oracle Corp. (a) 20,210 242,924
Parametric Technology Corp. (a) 691 2,108
PeopleSoft, Inc. (a) 1,281 22,533
Siebel Systems, Inc. (a) 1,775 16,934
Symantec Corp. (a) 547 23,991
Veritas Software Corp. (a) 1,602 45,929
---------------
1,635,885
---------------
MATERIALS--2.6%
CHEMICALS--1.4%
Air Products & Chemicals, Inc. 892 37,107
Dow Chemical Co. 3,514 108,793
Du Pont EI de Nemours & Co. 3,824 159,231
Eastman Chemical Co. 267 8,456
Ecolab, Inc. 1,020 26,112
Engelhard Corp. 484 11,989
Great Lakes Chemical Corp. 155 3,162
Hercules, Inc. 383 3,792
International Flavors & Fragrances, Inc. 327 10,441
Monsanto Co. 955 20,666
PPG Industries, Inc. 669 33,945
Praxair, Inc. 626 37,623
Rohm & Haas Co. 881 27,337
Sigma-Aldrich Corp. 253 13,708
---------------
502,362
---------------
</Table>
See Notes to Investment Portfolio.
119
<Page>
<Table>
<Caption>
SHARES VALUE
--------------- ---------------
CONSTRUCTION MATERIALS--0.0%
Vulcan Materials Co. 422 $ 15,644
---------------
CONTAINERS & PACKAGING--0.2%
Ball Corp. 190 8,647
Bemis Co., Inc. 198 9,266
Pactiv Corp. (a) 672 13,245
Sealed Air Corp. (a) 290 13,821
Temple-Inland, Inc. 213 9,140
---------------
54,119
---------------
METALS & MINING--0.5%
Alcoa, Inc. 3,268 83,334
Allegheny Technologies, Inc. 282 1,861
Freeport-McMoRan Copper & Gold, Inc., Class B 580 14,210
Newmont Mining Corp. 1,589 51,579
Nucor Corp. 294 14,362
Phelps Dodge Corp. (a) 314 12,039
United States Steel Corp. 409 6,695
Worthington Industries, Inc. 301 4,033
---------------
188,113
---------------
PAPER & FOREST PRODUCTS--0.5%
Boise Cascade Corp. 250 5,975
Georgia-Pacific Corp. 909 17,226
International Paper Co. 1,820 65,029
Louisiana-Pacific Corp. (a) 370 4,011
MeadWestvaco Corp. 811 20,032
Weyerhaeuser Co. 857 46,278
---------------
158,551
---------------
TELECOMMUNICATION SERVICES--3.8%
DIVERSIFIED TELECOMMUNICATION--3.3%
Alltel Corp. 1,243 59,937
AT&T Corp. 3,044 58,597
BellSouth Corp. 7,149 190,378
CenturyTel, Inc. 588 20,492
Citizens Communications Co. 1,079 13,908
Qwest Communications International, Inc. 6,656 31,816
SBC Communications, Inc. 12,906 329,748
Sprint Corp. (FON Group) 3,492 50,285
Verizon Communications, Inc. 10,676 421,168
---------------
1,176,329
---------------
WIRELESS TELECOMMUNICATION SERVICES--0.5%
AT&T Wireless Services, Inc. (a) 10,488 86,106
Nextel Communications, Inc., Class A (a) 3,997 72,266
Sprint Corp. (PCS Group) (a) 3,746 21,540
---------------
179,912
---------------
UTILITIES--2.8%
ELECTRIC UTILITIES--2.2%
Allegheny Energy, Inc. (a) 367 $ 3,101
Ameren Corp. 603 26,592
American Electric Power Co., Inc. 1,521 45,371
Cinergy Corp. 678 24,944
CMS Energy Corp. (a) 400 3,240
Consolidated Edison, Inc. 860 37,221
Constellation Energy Group, Inc. 608 20,854
Dominion Resources, Inc. 1,190 76,481
DTE Energy Co. 629 24,305
Edison International (a) 1,206 19,815
Entergy Corp. 869 45,866
Exelon Corp. 1,252 74,882
FirstEnergy Corp. 1,159 44,564
FPL Group, Inc. 726 48,533
PG&E Corp. (a) 1,622 34,305
Pinnacle West Capital Corp. 312 11,684
PPL Corp. 657 28,251
Progress Energy, Inc. 929 40,783
Public Service Enterprise Group, Inc. 900 38,025
Southern Co. 2,760 86,002
TECO Energy, Inc. 600 7,194
TXU Corp. 1,200 26,940
Xcel Energy, Inc. 1,457 21,913
---------------
790,866
---------------
GAS UTILITIES--0.3%
KeySpan Corp. 569 20,171
Kinder Morgan, Inc. 446 24,374
Nicor, Inc. 145 5,381
NiSource, Inc. 1,009 19,171
Peoples Energy Corp. 152 6,519
Sempra Energy 780 22,253
---------------
97,869
---------------
MULTI-UTILITIES--0.3%
AES Corp.(a) 2,526 16,040
Calpine Corp. (a) 1,526 10,072
Centerpoint Energy, Inc. 1,093 8,908
Duke Energy Corp. 3,461 69,047
Dynegy, Inc. 1,600 6,720
Mirant Corp. (a) 1,228 3,561
Williams Cos., Inc. 2,058 16,258
---------------
130,606
---------------
TOTAL COMMON STOCKS
(cost of $38,852,813) 34,801,143
---------------
</Table>
See Notes to Investment Portfolio.
120
<Page>
<Table>
<Caption>
PAR VALUE
--------------- ---------------
U.S. GOVERNMENT OBLIGATION--0.2%
GOVERNMENT ISSUES--0.2%
U.S. Treasury Bills,
0.900%, 09/11/03
(cost of $69,874)(c) $ 70,000 $ 69,874
---------------
SHORT-TERM OBLIGATION--2.6%
Repurchase agreement with State
Street Bank & Trust Co., dated 6/30/03,
due 07/01/03 at 1.000%, collateralized
by U.S. Treasury Bond maturing
2/15/29, market value $975,063
(repurchase proceeds $954,027)
(cost of $954,000) 954,000 954,000
---------------
TOTAL INVESTMENTS--99.6%
(cost of $39,876,687)(d) 35,825,017
---------------
OTHER ASSETS & LIABILITIES, NET--0.4% 135,831
---------------
NET ASSETS--100.0% $ 35,960,848
===============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Investments in Affiliates during the six months ended June 30, 2003:
Security Name: Fleet Boston Financial Corp., the parent company of the
investment manager (see Note 3).
<Table>
Shares as of 12/31/02: 3,612
Shares purchased: 485
Shares sold: 53
Shares as of 06/30/03: 4,044
Net realized loss: $ 785
Dividend income earned: $ 2,629
Value at end of period: $ 120,147
</Table>
(c) This security, or portion thereof, with total market value of $69,874 is
being used to collateralize the futures contracts shown below.
(d) Cost for both financial statements and federal income tax purposes is the
same.
Long futures contracts open on June 30, 2003:
<Table>
<Caption>
NUMBER OF EXPIRATION UNREALIZED
TYPE CONTRACTS MONTH DEPRECIATION
- ---- --------- ---------- ------------
S&P Mini 500 21 September $ (37,200)
============
</Table>
See Notes to Financial Statements.
121
<Page>
STATEMENT OF ASSETS & LIABILITIES
Liberty S&P 500 Index Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 39,876,687
---------------
Investments, at value $ 35,825,017
Cash 643
Receivable for:
Fund shares sold 362,519
Interest 27
Dividends 42,101
Futures variation margin 78
Deferred Trustees' compensation plan 1,367
Other assets 3,668
---------------
TOTAL ASSETS 36,235,420
---------------
LIABILITIES:
Expense reimbursement due to Distributor 1,706
Payable for:
Fund shares repurchased 234,310
Distribution fee--Class B 823
Management fee 11,662
Transfer agent fee 594
Audit fee 9,361
Custody fee 3,417
Reports to shareholders 11,332
Deferred Trustees' fee 1,367
---------------
TOTAL LIABILITIES 274,572
---------------
NET ASSETS $ 35,960,848
===============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 43,273,216
Undistributed net investment income 155,839
Accumulated net realized loss (3,379,337)
Net unrealized depreciation on:
Investments (4,051,670)
Futures contracts (37,200)
---------------
NET ASSETS $ 35,960,848
===============
CLASS A:
Net assets $ 71,947
Shares outstanding 8,505
===============
Net asset value per share $ 8.46
===============
CLASS B:
Net assets $ 35,888,901
Shares outstanding 4,254,777
===============
Net asset value per share $ 8.43
===============
</Table>
See Notes to Financial Statements.
122
<Page>
STATEMENT OF OPERATIONS
Liberty S&P 500 Index Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 264,805
Interest 5,071
---------------
Total Investment Income 269,876
---------------
EXPENSES:
Management fee 60,420
Distribution fee--Class B 37,680
Pricing and bookkeeping fees 4,818
Transfer agent fee 3,720
Trustees' fee 2,701
Custody fee 12,002
Audit fee 8,604
Other expenses 1,879
---------------
Total Expenses 131,824
Fees reimbursed by Distributor--Class B (18,566)
Custody earnings credit (13)
---------------
Net Expenses 113,245
---------------
Net Investment Income 156,631
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments (499,845)
Futures contracts 122,567
---------------
Net realized loss (377,278)
---------------
Net change in unrealized appreciation/depreciation on:
Investments 3,590,150
Futures contracts (11,785)
---------------
Net change in unrealized appreciation/depreciation 3,578,365
---------------
Net Gain 3,201,087
---------------
Net Increase in Net Assets from Operations $ 3,357,718
===============
</Table>
See Notes to Financial Statements.
123
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Liberty S&P 500 Index Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- --------------- ---------------
OPERATIONS:
Net investment income $ 156,631 $ 245,814
Net realized loss on investments and futures contracts (377,278) (2,364,659)
Net change in unrealized appreciation/depreciation on investments and
futures contracts 3,578,365 (5,099,064)
--------------- ---------------
Net Increase (Decrease) from Operations 3,357,718 (7,217,909)
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A -- (587)
Class B -- (243,630)
Return of capital:
Class A -- (53)
Class B -- (21,942)
--------------- ---------------
Total Distributions Declared to Shareholders -- (266,212)
--------------- ---------------
SHARE TRANSACTIONS:
Class A:
Distributions reinvested -- 640
--------------- ---------------
Net Increase -- 640
--------------- ---------------
Class B:
Subscriptions 5,545,118 13,853,223
Distributions reinvested -- 265,572
Redemptions (1,768,215) (6,727,578)
--------------- ---------------
Net Increase 3,776,903 7,391,217
--------------- ---------------
Net Increase from Share Transactions 3,776,903 7,391,857
--------------- ---------------
Total Increase (Decrease) in Net Assets 7,134,621 (92,264)
NET ASSETS:
Beginning of period 28,826,227 28,918,491
--------------- ---------------
End of period (including undistributed net investment income of $155,839
and overdistributed net investment income of $(792)) $ 35,960,848 $ 28,826,227
=============== ===============
CHANGES IN SHARES:
Class A:
Issued for distributions reinvested -- 85
--------------- ---------------
Net Increase -- 85
--------------- ---------------
Class B:
Subscriptions 683,736 1,597,362
Issued for distributions reinvested -- 35,222
Redemptions (227,166) (749,858)
--------------- ---------------
Net Increase 456,570 882,726
--------------- ---------------
</Table>
See Notes to Financial Statements.
124
<Page>
NOTES TO FINANCIAL STATEMENTS
Liberty S&P 500 Index Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Liberty S&P 500 Index Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek capital appreciation by matching the
performance of a benchmark index that measures the investment returns of stocks
of large U.S. companies. The Fund's capitalization consists of an unlimited
number of shares of beneficial interest without par value that represent a
separate series of the Trust. The Fund offers two classes of shares: Class A and
Class B. Each share of a class represents an equal proportionate beneficial
interest in that share class and, when issued and outstanding, is fully paid and
nonassessable. Shareholders would be entitled to share proportionally in the net
assets of their share class available for distribution to shareholders upon
liquidation of the Fund. Shares of the Fund are available and are being marketed
exclusively as a pooled funding vehicle for variable annuity contracts ("VA
contracts") and Variable Life Insurance Policies ("VLI Policies") offered by the
separate accounts of certain life insurance companies ("Participating Insurance
Companies"). The Participating Insurance Companies and their separate accounts
own all the shares of the Fund.
On April 1, 2003, Liberty Advisory Services Corp., the investment advisor to the
Fund and Colonial Management Associates, Inc. ("Colonial"), the sub-advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Liberty Advisory Services Corp. and Colonial with respect to
the Fund. The merger did not change the way the Fund is managed, the investment
personnel assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at the current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Short-term obligations with a maturity of greater than 60 days are valued at
their market yield.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
125
<Page>
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with
income tax regulations, which may differ from accounting principles generally
accepted in the United States of America. Reclassifications are made to the
Fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2008 $ 19,479
2009 243,840
2010 1,209,651
-----------
$ 1,472,970
===========
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE--Columbia receives a monthly fee equal to 0.40% annually of
the Fund's average daily net assets. Columbia, out of the management fee it
receives, pays State Street Global Advisors ("SSgA") a sub-advisory fee at the
annual rate of $25,000 on average daily net assets up to $50 million and 0.05%
on average daily net assets thereafter.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. The Fund also pays out-of-pocket costs
for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Columbia and LFD have voluntarily agreed to reimburse all
expenses, including management fees and distribution fees, but excluding
interest, taxes, brokerage and extraordinary expenses incurred by the Fund in
excess of 0.75% annually of the Fund's average daily net assets. LFD will first
reimburse the Class B distribution fee up to 0.25% annually to reach the 0.75%
limit on Class B expenses. If additional reimbursement is needed to meet the
limit for each class, Columbia will then reimburse other expenses to the extent
necessary. If additional reimbursement is still needed to reach the expense
limit, Columbia will then waive a portion of its management fee to reach the
expense limit. This arrangement may be terminated or modified by Columbia or LFD
at any time.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $13 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $4,250,145 and
$732,365, respectively.
126
<Page>
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 2,628,294
Gross unrealized depreciation (6,679,964)
------------
Net unrealized depreciation $(4,051,670)
============
</Table>
OTHER--The Fund may purchase or sell futures contracts. The Fund will use
these instruments to hedge against the effects of changes in the portfolio
securities due to market conditions and not for trading purposes. The use of
futures contracts involves certain risks which include (1) imperfect correlation
between the price movement of the instruments and the underlying securities, (2)
inability to close out a position due to different trading hours, or the absence
of a liquid market for either the instrument or the underlying securities or (3)
an inaccurate prediction by Columbia of the future direction of the market or
stock price or interest rate trends. Any of these risks may involve amounts
exceeding the variation margin recorded in the Fund's Statement of Assets and
Liabilities at any given time.
127
<Page>
FINANCIAL HIGHLIGHTS
Liberty S&P 500 Index Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, ------------------------------ DECEMBER 31,
2003 2000 2001 2000 (a)
------------ ------------ ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.57 $ 9.89 $ 11.31 $ 12.00
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.04 0.08 0.07 0.07
Net realized and unrealized gain (loss) on
investments and futures contracts 0.82 (2.33) (1.43) (0.70)
------------ ------------ ------------ ------------
Total from Investment Operations 0.86 (2.25) (1.36) (0.63)
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- (0.06) (0.06) (0.06)
Return of capital -- (0.01) -- --
------------ ------------ ------------ ------------
Total Distributions Declared to Shareholders -- (0.07) (0.06) (0.06)
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 8.43 $ 7.57 $ 9.89 $ 11.31
============ ============ ============ ============
Total return (c)(d)(e) 11.36%(f) (22.75)% (12.07)% (5.29)%(f)
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA:
Expenses (g) 0.75%(h) 0.75% 0.75% 0.75%(h)
Net investment income (g) 1.03%(h) 0.88% 0.72% 0.89%(h)
Waiver/reimbursement 0.12%(h) 0.14% 0.53% 0.61%(h)
Portfolio turnover rate 2%(f) 17% 7% 2%(f)
Net assets, end of period (000's) $ 35,889 $ 28,762 $ 28,835 $ 12,098
</Table>
(a) For the period from commencement of operations May 30, 2000 to December 31,
2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Had the Manager and/or Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) Total return figures do not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
128
<Page>
PORTFOLIO MANAGERS DISCUSSION
Liberty Select Value Fund, Variable Series / June 30, 2003
Liberty Select Value Fund, Variable Series seeks long-term growth.
Daniel K. Cantor and Jeffrey C. Kinzel are co-managers of the fund Mr. Cantor
has been affiliated with Columbia Management Advisors, Inc. and its
predecessors since 1985. Mr. Kinzel has been with the firm and its
predecessors since 1991.
CONSERVATIVE STRATEGY RESTRAINED PERFORMANCE
The fund continued to focus on stable, less risky value stocks during the
period. This strategy, which helped the fund outperform in previous periods,
restrained performance during the past six months as more aggressive stocks did
particularly well. Stock selection in the technology, consumer discretionary and
health care sectors also hampered the fund's performance relative to its
benchmark and peer group.
The reporting period was marked by a sharp shift in investor sentiment.
Uncertainty related to the war in Iraq dominated the first quarter of 2003,
resulting in weak equity returns. However, in the second quarter, expectations
for economic recovery fueled a strong rally. Investors responded favorably to
the relatively swift end to the major fighting in Iraq, further interest rate
cuts and increasing consumer confidence. Legislation that included reductions in
dividend and capital gains tax rates further buoyed the market. With investors
demonstrating an increased appetite for risk, aggressive, volatile stocks were
the top performers. Among the biggest gainers were technology stocks and
companies with high amounts of debt on their balance sheets.
ECLECTIC MIX OF GOOD AND POOR PERFORMERS
Dean Foods, a leading dairy processor, and Cendant, a diversified travel and
real estate company (2.6% and 1.5% of net assets, respectively), contributed
most positively to the fund's performance. Other strong gains came from AMR, the
parent company of American Airlines, and Federated Department Stores, Inc., the
country's largest upscale department store company (0.6% and 1.9% of net assets,
respectively).
Individual issues that hurt performance included HCA, the nation's largest
for-profit hospital company, and Pepsi Bottling Group (0.7% and 0.8% of net
assets, respectively). HCA declined because hospital admissions growth was lower
than expected and because a potential regulatory change could have a negative
impact on earnings. Pepsi Bottling Group performed poorly primarily because cold
weather and a lull in new product introductions hurt first quarter sales and
earnings.
A GRADUAL CHANGE IN STRATEGY
During the period, we pared back investments in several defensive stocks to
create a somewhat more aggressively positioned portfolio. We eliminated the
fund's position in Patterson Dental, a manufacturer of dental supplies, because
we believed the shares were fully valued, and we trimmed our holdings in Ecolab
and Zebra Technologies (0.3% and 1.1% of net assets, respectively). We gradually
added to more cyclical areas, such as paper companies Georgia-Pacific and
Meadwestvaco (1.2% and 1.1% of net assets, respectively), as well as Carlisle
Companies (1.1% of net assets), a diversified industrial firm. We expect these
companies to benefit from an economic recovery.
We continue to manage the fund consistent with our objective of running a
concentrated portfolio of about 100 securities. During the period we increased
the number of investments to 101 from 97 at the start of the year. In addition,
we lowered our cash and cash equivalents from 8.9 to 4.7% of net assets.
OUTLOOK
We continue to focus on identifying well-managed companies in good or improving
businesses with attractive valuations. We believe that the pendulum favoring
aggressive stocks may have swung too far, and that the market could rotate back
to the higher quality names that the fund tends to favor. Longer term, the lower
capital gains tax rate included in President Bush's fiscal package is likely to
help stocks. More importantly, the reduction in taxes on dividends should
benefit value stocks disproportionately, as they tend to pay higher dividends
than growth stocks.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
An investment in the Liberty Select Value Fund, Variable Series offers the
potential for long-term growth, but also involves certain risks, including stock
market fluctuations due to economic and business developments. The value and
returns earned on an investment in the fund may also be affected by stock market
fluctuations. Mid-cap stocks can present special risks including greater price
volatility than stocks of larger, more established companies.
Holdings are disclosed as of June 30, 2003, and are subject to change.
129
<Page>
PERFORMANCE INFORMATION
Liberty Select Value Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR LIFE
- --------------------------------------------------------------
Class B (5/30/00) 7.51 -6.32 3.14
S&P MidCap 400 Index(1) 12.41 -0.71 1.45
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 5/30/00 - 6/30/03
<Table>
<Caption>
CLASS B SHARES S&P MIDCAP 400 INDEX
May-00 $ 10,200 $ 10,000
6/30/2000 $ 10,066 $ 10,147
7/31/2000 $ 10,333 $ 10,307
8/31/2000 $ 11,184 $ 11,459
9/30/2000 $ 10,983 $ 11,381
10/31/2000 $ 11,034 $ 10,995
11/30/2000 $ 10,309 $ 10,165
12/31/2000 $ 11,139 $ 10,942
1/31/2001 $ 11,551 $ 11,186
2/28/2001 $ 11,206 $ 10,548
3/31/2001 $ 10,961 $ 9,764
4/30/2001 $ 11,769 $ 10,841
5/31/2001 $ 12,098 $ 11,094
6/30/2001 $ 11,862 $ 11,049
7/31/2001 $ 11,962 $ 10,885
8/31/2001 $ 11,660 $ 10,529
9/30/2001 $ 10,221 $ 9,219
10/31/2001 $ 10,423 $ 9,626
11/30/2001 $ 11,062 $ 10,343
12/31/2001 $ 11,525 $ 10,876
1/31/2002 $ 11,618 $ 10,820
2/28/2002 $ 11,812 $ 10,833
3/31/2002 $ 12,361 $ 11,607
4/30/2002 $ 12,395 $ 11,553
5/31/2002 $ 12,437 $ 11,357
6/30/2002 $ 11,744 $ 10,526
7/31/2002 $ 10,908 $ 9,505
8/31/2002 $ 10,984 $ 9,553
9/30/2002 $ 9,819 $ 8,783
10/31/2002 $ 10,021 $ 9,164
11/30/2002 $ 10,603 $ 9,694
12/31/2002 $ 10,232 $ 9,296
1/31/2003 $ 9,970 $ 9,024
2/28/2003 $ 9,742 $ 8,810
3/31/2003 $ 9,717 $ 8,884
4/30/2003 $ 10,334 $ 9,529
5/31/2003 $ 10,925 $ 10,319
6/30/2003 $ 11,002 $ 10,451
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 12.11 13.02
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The S&P (Standard & Poor's) MidCap 400 Index
is an unmanaged index that tracks the performance of middle-capitalization US
stocks. Indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Index performance is from May 31, 2000.
130
<Page>
INVESTMENT PORTFOLIO
Liberty Select Value Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
------------- -------------
COMMON STOCKS--99.2%
CONSUMER DISCRETIONARY--18.9%
AUTO COMPONENTS--4.2%
Gentex Corp. (a) 9,700 $ 296,917
Johnson Controls, Inc. 3,000 256,800
Lear Corp. (a) 7,900 363,558
Superior Industries International 7,400 308,580
-------------
1,225,855
-------------
HOTELS RESTAURANTS & LEISURE--4.7%
Brinker International, Inc. (a) 14,000 504,280
Darden Restaurants, Inc. 8,700 165,126
Harrah's Entertainment, Inc. (a) 5,300 213,272
International Game Technology, Inc. 3,000 306,990
Six Flags, Inc. (a) 28,000 189,840
-------------
1,379,508
-------------
HOUSEHOLD DURABLES--1.2%
Newell Rubbermaid, Inc. 12,600 352,800
-------------
LEISURE EQUIPMENT & PRODUCTS--0.8%
Mattel, Inc. 12,600 238,392
-------------
MEDIA--2.5%
Knight-Ridder, Inc. 3,300 227,469
Mediacom Communications Corp. (a) 18,800 185,556
The New York Times Co., Class A 7,000 318,500
-------------
731,525
-------------
MULTI-LINE RETAIL--1.9%
Federated Department Stores, Inc. 15,000 552,750
-------------
SPECIALTY RETAIL--3.1%
Borders Group, Inc. (a) 13,100 230,691
Ross Stores, Inc. 4,400 188,056
TJX Companies., Inc. 26,000 489,840
-------------
908,587
-------------
TEXTILES & APPAREL--0.5%
Wolverine World Wide, Inc. 7,100 136,746
-------------
CONSUMER STAPLES--5.5%
BEVERAGES--0.8%
Pepsi Bottling Group, Inc. 12,000 240,240
-------------
FOOD PRODUCTS--3.1%
Dean Foods Co. (a) 24,300 765,450
Hormel Foods Corp. 5,900 139,830
-------------
905,280
-------------
PERSONAL PRODUCTS--1.6%
Avon Products, Inc. 7,400 460,280
-------------
ENERGY--7.4%
ENERGY EQUIPMENT & SERVICES--3.2%
BJ Services Co. (a) 5,400 201,744
Noble Corp. (a) 8,200 281,260
Transocean, Inc. (a) 12,650 $ 277,920
Weatherford International, Ltd. (a) 4,400 184,360
-------------
945,284
-------------
OIL & GAS--4.2%
Amerada Hess Corp. 7,100 349,178
Occidental Petroleum Corp. 6,100 204,655
XTO Energy, Inc. 32,833 660,272
-------------
1,214,105
-------------
FINANCIALS--22.1%
BANKS--11.2%
Banknorth Group, Inc. 11,800 301,136
Charter One Financial, Inc. 9,895 308,526
City National Corp. 6,300 280,728
Cullen/Frost Bankers, Inc. 3,800 121,980
Golden West Financial Corp. 8,600 688,086
Greenpoint Financial Corp. 9,000 458,460
North Fork Bancorporation, Inc. 13,900 473,434
Sovereign Bancorp, Inc. 26,500 414,725
Webster Financial Corp. 6,100 230,580
-------------
3,277,655
-------------
DIVERSIFIED FINANCIALS--4.4%
Bear Stearns Cos., Inc. 3,700 267,954
Citigroup, Inc. 6,831 292,367
Janus Capital Group, Inc. 30,700 503,480
Lehman Brothers Holdings, Inc. 3,500 232,680
-------------
1,296,481
-------------
INSURANCE--6.5%
AMBAC Financial Group, Inc. 7,250 480,312
Cincinnati Financial Corp. 3,300 122,397
Loews Corp. 3,300 156,057
Nationwide Financial Services, Class A 5,300 172,250
PMI Group, Inc. 12,300 330,132
Radian Group, Inc. 9,900 362,835
St. Paul Companies, Inc. 7,900 288,429
-------------
1,912,412
-------------
HEALTH CARE--4.9%
HEALTH CARE EQUIPMENT & SUPPLIES--1.0%
Biomet, Inc. 10,000 286,600
-------------
HEALTH CARE PROVIDERS & SERVICES--3.9%
Anthem, Inc. (a) 2,700 208,305
First Health Group Corp. (a) 15,800 436,080
HCA, Inc. 6,800 217,872
WellPoint Health Networks (a) 3,200 269,760
-------------
1,132,017
-------------
INDUSTRIALS--11.8%
AEROSPACE & DEFENSE--0.9%
Alliant Techsystems, Inc. (a) 3,300 171,303
Northrop Grumman Corp. 1,200 103,548
-------------
274,851
-------------
</Table>
See Notes to Investment Portfolio.
131
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
AIR FREIGHT & LOGISTICS--0.6%
CNF, Inc. 6,500 $ 164,970
-------------
AIRLINES--0.6%
AMR Corp. (a) 16,600 182,600
-------------
COMMERCIAL SERVICES & SUPPLIES--4.1%
The Brinks Co. 18,000 262,260
Cendant Corp. (a) 24,400 447,008
DST Systems, Inc. (a) 6,500 247,000
Manpower, Inc. 6,700 248,503
-------------
1,204,771
-------------
ELECTRICAL EQUIPMENT--0.4%
Ametek, Inc. 3,000 109,950
-------------
INDUSTRIAL CONGLOMERATES--1.1%
Carlisle Cos., Inc. 7,900 333,064
-------------
MACHINERY--4.1%
Dover Corp. 4,800 143,808
Ingersoll-Rand Co. 6,000 283,920
Mueller Industries, Inc. (a) 4,700 127,417
Navistar International Corp. (a) 14,300 466,609
Parker Hannifin Corp. 4,000 167,960
-------------
1,189,714
-------------
INFORMATION TECHNOLOGY--10.1%
COMMUNICATIONS EQUIPMENT--0.9%
Andrew Corp. (a) 28,900 265,880
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--5.9%
Amphenol Corp. (a) 10,000 468,200
Arrow Electronics, Inc. (a) 10,400 158,496
AVX Corp. 13,600 149,464
Littelfuse, Inc. (a) 11,000 245,960
Millipore Corp. (a) 7,900 350,523
Varian, Inc. (a) 6,700 232,289
Vishay Intertechnology, Inc. (a) 9,450 124,740
-------------
1,729,672
-------------
INFORMATION TECHNOLOGY CONSULTING & SERVICES--1.1%
Affiliated Computer Services, Inc. (a) 6,900 315,537
-------------
OFFICE ELECTRONICS--1.1%
Zebra Technologies Corp. (a) 4,200 315,798
-------------
SOFTWARE--1.1%
Reynolds & Reynolds Co. 11,100 317,016
-------------
MATERIALS--11.1%
CHEMICALS--7.7%
Air Products & Chemicals, Inc. 6,800 282,880
Eastman Chemical Co. 9,100 288,197
Ecolab, Inc. 3,600 92,160
Engelhard Corp. 8,500 210,545
International Flavors & Fragrances, Inc. 12,900 411,897
Lubrizol Corp. 7,900 244,821
OM Group, Inc. (a) 4,700 69,231
PPG Industries, Inc. 6,700 $ 339,958
Praxair, Inc. 5,300 318,530
-------------
2,258,219
-------------
CONTAINERS & PACKAGING--0.8%
Packaging Corp. of America (a) 12,200 224,846
-------------
PAPER & FOREST PRODUCTS--2.6%
Boise Cascade Corp. 4,500 107,550
Georgia-Pacific Corp. 18,100 342,995
MeadWestvaco Corp. 12,634 312,060
-------------
762,605
-------------
TELECOMMUNICATION SERVICES--1.4%
WIRELESS TELECOMMUNICATION SERVICES--1.4%
Telephone & Data Systems, Inc. 8,500 422,450
-------------
UTILITIES--6.0%
ELECTRIC UTILITIES--5.4%
Allete, Inc. 6,700 177,885
Entergy Corp. 5,400 285,012
Exelon Corp. 7,850 469,509
PPL Corp. 4,800 206,400
Progress Energy, Inc. 9,800 430,220
-------------
1,569,026
-------------
MULTI-UTILITIES & UNREGULATED POWER--0.6%
Energy East Corp. 9,300 193,068
-------------
TOTAL COMMON STOCKS
(cost of $28,386,403) 29,030,554
-------------
<Caption>
PAR
-------------
SHORT-TERM OBLIGATION--4.7%
Repurchase agreement with State Street
Bank & Trust Co., dated
06/30/03, due 07/01/03 at 1.000%,
collateralized by a U.S. Treasury
Bond maturing 02/15/29,
market value $1,404,752
(repurchase proceeds $1,372,038)
(cost of $1,372,000) $ 1,372,000 1,372,000
-------------
TOTAL INVESTMENTS--103.9%
(cost of $29,758,403) (b) 30,402,554
-------------
OTHER ASSETS & LIABILITIES, NET--(3.9)% (1,141,655)
-------------
NET ASSETS--100.0% $ 29,260,899
=============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for financial statement and federal income tax purposes is the same.
See Notes to Financial Statements.
132
<Page>
STATEMENT OF ASSETS & LIABILITIES
Liberty Select Value Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 29,758,403
------------
Investments, at value $ 30,402,554
Cash 3
Receivable for:
Fund shares sold 1,945
Interest 38
Dividends 18,613
Deferred Trustees' compensation plan 1,294
------------
TOTAL ASSETS 30,424,447
------------
LIABILITIES:
Expense reimbursement due to Distributor 1,070
Payable for:
Fund shares repurchased 1,128,986
Management fee 17,259
Distribution fee--Class B 237
Transfer agent fee 594
Custody fee 1,807
Reports to Shareholders 6,216
Deferred Trustees' fee 1,294
Other liabilities 6,085
------------
TOTAL LIABILITIES 1,163,548
------------
NET ASSETS $ 29,260,899
============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 29,644,232
Undistributed net investment income 23,929
Accumulated net realized loss (1,051,413)
Net unrealized appreciation on investments 644,151
------------
NET ASSETS $ 29,260,899
============
CLASS A:
Net assets $ 1,100,369
Shares outstanding 84,366
============
Net asset value per share $ 13.04
============
CLASS B:
Net assets $ 28,160,530
Shares outstanding 2,163,022
============
Net asset value per share $ 13.02
============
</Table>
See Notes to Financial Statements.
133
<Page>
STATEMENT OF OPERATIONS
Liberty Select Value Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 157,167
Interest 12,217
------------
Total Investment Income 169,384
------------
EXPENSES:
Management fee 92,391
Distribution fee--Class B 31,905
Pricing & bookkeeping fees 5,408
Transfer agent fee 3,720
Trustees' fee 2,708
Custody fee 2,838
Audit fee 8,604
Other expenses 4,717
------------
Total Expenses 152,291
Fees reimbursed by Distributor--Class B (7,929)
Custody earnings credit (3)
------------
Net Expenses 144,359
------------
Net Investment Income 25,025
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (982,265)
Net change in unrealized appreciation/depreciation on investments 3,076,733
------------
Net Gain 2,094,468
------------
Net Increase in Net Assets from Operations $ 2,119,493
============
</Table>
See Notes to Financial Statements.
134
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Liberty Select Value Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- ------------ ------------
OPERATIONS:
Net investment income $ 25,025 $ 18,662
Net realized loss on investments (982,265) (64,635)
Net change in unrealized appreciation/depreciation on investments 3,076,733 (2,874,205)
------------ ------------
Net Increase (Decrease) from Operations 2,119,493 (2,920,178)
------------ ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A -- (1,387)
Class B -- (20,257)
From net realized gains:
Class A -- --
Class B -- --
------------ ------------
Total Distributions Declared to Shareholders -- (21,644)
------------ ------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 439,707 546,422
Distributions reinvested -- 1,387
Redemptions (54,942) (9,127)
------------ ------------
Net Increase 384,765 538,682
------------ ------------
Class B:
Subscriptions 3,623,415 14,432,250
Distributions reinvested -- 20,257
Redemptions (2,114,167) (3,803,086)
------------ ------------
Net Increase 1,509,248 10,649,421
------------ ------------
Net Increase from Share Transactions 1,894,013 11,188,103
------------ ------------
Total Increase in Net Assets 4,013,506 8,246,281
NET ASSETS:
Beginning of period 25,247,393 17,001,112
------------ ------------
End of period (including undistributed net investment income of
$23,929 and overdistributed net investment income of $(1,096)) $ 29,260,899 $ 25,247,393
============ ============
CHANGES IN SHARES:
Class A:
Subscriptions 36,646 44,354
Issued for distributions reinvested -- 115
Redemptions (4,440) (752)
------------ ------------
Net Increase 32,206 43,717
------------ ------------
Class B:
Subscriptions 298,970 1,069,404
Issued for distributions reinvested -- 1,685
Redemptions (169,333) (275,153)
------------ ------------
Net Increase 129,637 795,936
------------ ------------
</Table>
See Notes to Financial Statements.
135
<Page>
NOTES TO FINANCIAL STATEMENTS
Liberty Select Value Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Liberty Select Value Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek long-term growth. The Fund's
capitalization consists of an unlimited number of shares of beneficial interest
without par value that represent a separate series of the Trust. The Fund offers
two classes of shares: Class A and Class B. Each share of a class represents an
equal proportionate beneficial interest in that share class and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of their share class available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Liberty Advisory Services Corp., the investment advisor to the
Fund and Colonial Management Associates, Inc. ("Colonial"), the sub-advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Liberty Advisory Services Corp. and Colonial with respect to
the Fund. The merger did not change the way the Fund is managed, the investment
personnel assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at the current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may
136
<Page>
experience costs and delays in liquidating the collateral if the issuer defaults
or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2010 $ 20,614
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE--Columbia receives a monthly fee equal to 0.70% annually of
the Fund's average daily net assets.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. The Fund also pays out-of-pocket costs
for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Columbia and LFD have voluntarily agreed to reimburse all
expenses, including management fees and distribution fees, but excluding
interest, taxes, brokerage and extraordinary expenses incurred by the Fund, in
excess of 1.10% annually of the Fund's average daily net assets. LFD will first
reimburse the Class B distribution fee up to 0.25% annually to reach the 1.10%
limit on Class B expenses. If additional reimbursement is needed to meet the
limit for each class, Columbia will then reimburse other expenses to the extent
necessary. If additional reimbursement is still needed to reach the expense
limit, Columbia will then waive a portion of its management fee to reach the
expense limit. This arrangement may be terminated or modified by Columbia or LFD
at any time.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $3 of custody fees
were reduced by balance credits for the six months ended June 30, 2003. The Fund
could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $6,439,834 and
$2,550,298, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 3,285,061
Gross unrealized depreciation (2,640,910)
------------
Net unrealized appreciation $ 644,151
============
</Table>
OTHER--The Fund may focus its investments in certain industries, subjecting
it to greater risk than a fund that is more diversified.
137
<Page>
FINANCIAL HIGHLIGHTS
Liberty Select Value Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, ----------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
----------- --------- --------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.11 $ 13.65 $ 13.24 $ 12.00
----------- --------- --------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.01 0.01 0.05 0.09
Net realized and unrealized gain (loss)
on investments 0.90 (1.54) 0.41 1.28
----------- --------- --------- ------------
Total from Investment Operations 0.91 (1.53) 0.46 1.37
----------- --------- --------- ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- (0.01) (0.03) (0.07)
From net realized gains -- -- (0.02) --(c)
Return of capital -- -- -- (0.06)
----------- --------- --------- ------------
Total Distributions Declared
to Shareholders -- (0.01) (0.05) (0.13)
----------- --------- --------- ------------
NET ASSET VALUE, END OF PERIOD $ 13.02 $ 12.11 $ 13.65 $ 13.24
=========== ========= ========= ============
Total return (d)(e)(f) 7.51%(g) (11.21)% 3.47% 11.38%(g)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 1.10%(i) 1.10% 1.10% 1.10%(i)
Net investment income (h) 0.18%(i) 0.09% 0.34% 1.13%(i)
Waiver/reimbursement 0.06%(i) 0.08% 0.73% 1.56%(i)
Portfolio turnover rate 10%(g) 21% 15% 26%(g)
Net assets, end of period (000's) $ 28,161 $ 24,615 $ 16,886 $ 3,762
</Table>
(a) For the period from commencement of operations on May 30, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Rounds to less than $0.01 per share.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Had the Distributor and/or Manager not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
138
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Newport Tiger Fund, Variable Series / June 30, 2003
Newport Tiger Fund, Variable Series seeks long-term capital appreciation.
Eric Sandlund has managed the fund since August 2002.
Early in the six-month period, the war in Iraq, slow economic growth and the
SARS (severe acute respiratory syndrome) epidemic had a negative effect on the
Asian stock markets. However, once the major military campaigns in Iraq were
over and SARS appeared under control, the stock markets began to recover.
During the six-month period that ended June 30, 2003, the fund benefited from
this reversal of fortune in the markets. However, it underperformed its
benchmark, the MSCI AC Free Asia ex Japan Index, because of an overweight
position in Hong Kong. Hong Kong was severely affected by the SARS epidemic.
Performance was also hurt by the fund's position in Infosys Technologies (2.8%
of net assets), an India-based technology services company. Infosys's share
price declined after forecasting disappointing earnings. We continue to hold
Infosys in the portfolio because we believe it has a competitive advantage in
the rapidly growing area of technology outsourcing.
SHIFT IN SOME LONG-TERM HOLDINGS
We trimmed some of our long-term holdings in China, Singapore and Hong Kong. In
China we reduced Huaneng Power International (3.7% of net assets), which had
appreciated nicely. We also sold Legend Group, a personal computer manufacturer,
because we were concerned that increased competition from multinational
companies selling into the China market would cut into Legend's market share and
profits. In Singapore, we reduced our positions in Singapore Press Holdings
(2.7% of net assets) and Venture Corp. (0.8% of net assets). Also we eliminated
our position in Singapore Technologies Engineering during the period. We made
the biggest reductions in Hong Kong. We pared back on our positions in Hang Seng
Bank (2.7% of net assets) and Hong Kong and China Gas (3.9% of net assets).
BUILDING POSITIONS IN SOUTHEAST ASIA
We invested the proceeds from these sales primarily in the Philippines,
Indonesia, Taiwan and India, where we favored companies with attractive
valuations and prospects for significant growth. In the Philippines and
Indonesia, declining interest rates, strengthening currencies relative to the US
dollar, and improving economies provided a favorable backdrop for stocks.
We added Philippine Long Distance Telephone (PLDT) (1.4% of net assets), the
country's largest integrated telephone company. PLDT has restructured its
balance sheet, dramatically reducing its debt and improving its cash flow. We
believe the company should be in a position to pay a dividend by 2005.
In Indonesia, we purchased Astra International (1.2% of net assets), a
conglomerate whose core business is selling automobiles and motor cycles in
distributorships throughout the Indonesian archipelago. Astra also runs heavy
equipment, agriculture and vehicle financing businesses. The company has
significantly improved its balance sheet and should benefit from low interest
rates. We also invested in Telkom Indonesia (0.9% of net assets). The country's
leading wireless company, Telkom Indonesia has been paying an attractive
dividend.
We increased our share in technology companies in Taiwan, whose stock prices
had been beaten down below what we thought they were worth. We added to Asustek
(1.6% of net assets) and built new positions in Ambit Microsystems, Phoenixtec
Power and Realtek Semiconductor (0.9%, 0.4% and 0.9% of net assets,
respectively). In an effort to capitalize on the global trend of limiting health
care costs, we also invested in Ranbaxy Laboratories Ltd. (1.2% of net assets),
a generic pharmaceutical company in India with cost advantages that give it a
competitive edge.
GROWING DOMESTIC ECONOMIES SHOULD BENEFIT THE FUND
We believe the fund is well positioned to take advantage of the developing
domestic economies of Asia. Many companies are trading at historically low
valuations, have good balance sheets and returns on invested capital that either
match or exceed their American counterparts. Because exports are a major
component of many of the markets in which we invest, an economic recovery in the
United States would be an added benefit to the companies in the fund.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
An investment in the Newport Tiger Fund, Variable Series offers long-term growth
potential; however, the net asset value of the fund will fluctuate due to
economic and political developments and currency exchange rate fluctuations.
Many of the Asian countries are considered emerging economies, which means there
may be greater risks associated with investing there than in more developed
countries. In addition, concentration of investments in a single region may
result in greater volatility.
Holdings are disclosed as of June 30, 2003, and are subject to change.
139
<Page>
PERFORMANCE INFORMATION
Newport Tiger Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR LIFE
- --------------------------------------------------------------------------------
Class B(1) (6/1/00) 8.16 -4.66 6.05 -1.63
MSCI AC Free Asia
ex Japan Index(2) 9.85 -4.00 4.93 -4.63
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 5/1/95(3) - 6/30/03
<Table>
<Caption>
CLASS B SHARES MSCI AC FREE ASIA EX JAPAN INDEX
May-95 $ 10,000 $ 10,000
5/31/1995 $ 11,100 $ 11,125
6/30/1995 $ 10,900 $ 10,951
7/31/1995 $ 11,200 $ 11,157
8/31/1995 $ 10,851 $ 10,643
9/30/1995 $ 11,050 $ 10,770
10/31/1995 $ 11,000 $ 10,584
11/30/1995 $ 11,050 $ 10,344
12/31/1995 $ 11,501 $ 10,856
1/31/1996 $ 12,661 $ 11,700
2/29/1996 $ 12,560 $ 11,827
3/31/1996 $ 12,560 $ 11,914
4/30/1996 $ 12,510 $ 12,342
5/31/1996 $ 12,460 $ 12,204
6/30/1996 $ 12,208 $ 12,022
7/31/1996 $ 11,552 $ 11,135
8/31/1996 $ 11,956 $ 11,471
9/30/1996 $ 12,308 $ 11,669
10/31/1996 $ 12,207 $ 11,447
11/30/1996 $ 12,813 $ 11,987
12/31/1996 $ 12,851 $ 11,945
1/31/1997 $ 12,750 $ 12,193
2/28/1997 $ 12,750 $ 12,296
3/31/1997 $ 11,985 $ 11,602
4/30/1997 $ 11,781 $ 11,429
5/31/1997 $ 12,852 $ 11,946
6/30/1997 $ 13,464 $ 12,384
7/31/1997 $ 13,668 $ 12,488
8/31/1997 $ 11,324 $ 10,274
9/30/1997 $ 11,681 $ 10,227
10/31/1997 $ 9,028 $ 7,954
11/30/1997 $ 8,876 $ 7,408
12/31/1997 $ 8,850 $ 7,132
1/31/1998 $ 7,556 $ 6,515
2/28/1998 $ 9,212 $ 7,897
3/31/1998 $ 9,161 $ 7,781
4/30/1998 $ 8,385 $ 7,098
5/31/1998 $ 7,246 $ 6,015
6/30/1998 $ 6,522 $ 5,340
7/31/1998 $ 6,004 $ 5,205
8/31/1998 $ 5,124 $ 4,455
9/30/1998 $ 6,003 $ 4,897
10/31/1998 $ 7,763 $ 5,961
11/30/1998 $ 8,281 $ 6,442
12/31/1998 $ 8,281 $ 6,576
1/31/1999 $ 7,806 $ 6,472
2/28/1999 $ 7,806 $ 6,345
3/31/1999 $ 8,492 $ 7,106
4/30/1999 $ 10,338 $ 8,405
5/31/1999 $ 9,652 $ 8,224
6/30/1999 $ 10,707 $ 9,509
7/31/1999 $ 10,707 $ 9,300
8/31/1999 $ 10,760 $ 9,530
9/30/1999 $ 10,338 $ 8,863
10/31/1999 $ 11,023 $ 9,148
11/30/1999 $ 12,342 $ 10,017
12/31/1999 $ 13,912 $ 10,829
1/31/2000 $ 13,274 $ 10,776
2/29/2000 $ 13,646 $ 10,551
3/31/2000 $ 14,177 $ 10,799
4/30/2000 $ 13,274 $ 9,809
5/31/2000 $ 12,530 $ 8,955
6/30/2000 $ 13,864 $ 9,429
7/31/2000 $ 13,811 $ 9,026
8/31/2000 $ 13,757 $ 8,959
9/30/2000 $ 12,851 $ 7,932
10/31/2000 $ 12,211 $ 7,309
11/30/2000 $ 11,571 $ 7,026
12/31/2000 $ 11,786 $ 7,015
1/31/2001 $ 12,701 $ 7,918
2/28/2001 $ 11,947 $ 7,543
3/31/2001 $ 10,548 $ 6,690
4/30/2001 $ 11,140 $ 6,700
5/31/2001 $ 10,817 $ 6,690
6/30/2001 $ 10,494 $ 6,530
7/31/2001 $ 10,279 $ 6,283
8/31/2001 $ 9,633 $ 6,185
9/30/2001 $ 8,126 $ 5,213
10/31/2001 $ 8,395 $ 5,494
11/30/2001 $ 9,364 $ 6,228
12/31/2001 $ 9,823 $ 6,746
1/31/2002 $ 9,823 $ 7,015
2/28/2002 $ 9,606 $ 7,067
3/31/2002 $ 9,985 $ 7,542
4/30/2002 $ 9,985 $ 7,618
5/31/2002 $ 9,660 $ 7,446
6/30/2002 $ 9,171 $ 7,075
7/31/2002 $ 8,682 $ 6,807
8/31/2002 $ 8,465 $ 6,687
9/30/2002 $ 7,760 $ 5,951
10/31/2002 $ 8,086 $ 6,253
11/30/2002 $ 8,520 $ 6,585
12/31/2002 $ 8,084 $ 6,184
1/31/2003 $ 8,084 $ 6,235
2/28/2003 $ 7,809 $ 5,983
3/31/2003 $ 7,479 $ 5,703
4/30/2003 $ 7,644 $ 5,883
5/31/2003 $ 8,194 $ 6,391
6/30/2003 $ 8,743 $ 6,793
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 1.47 1.59
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The MSCI (Morgan Stanley Capital
International) AC Free Asia ex Japan Index is an unmanaged index that tracks the
performance of equity securities in eleven countries in Asia, excluding Japan
and taking into account local market restrictions on share ownership by
foreigners. Indices are not investments, do not incur fees or expenses and are
not professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class of shares would be lower.
(2) Index performance is from April 30, 1995.
(3) Inception date of class A shares (older existing share class).
140
<Page>
INVESTMENT PORTFOLIO
Newport Tiger Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
------------- -------------
COMMON STOCKS--96.6%
CONSUMER DISCRETIONARY--11.3%
AUTOMOBILES--3.1%
Hyundai Motors Co., Ltd. 15,200 $ 402,110
PT Astra International Tbk (a) 596,500 258,483
-------------
660,593
-------------
HOTELS, RESTAURANTS & LEISURE--2.4%
Genting Berhad 128,000 505,263
-------------
MEDIA--3.8%
Singapore Press Holdings Ltd. 54,164 562,943
Television Broadcasts Ltd. 66,000 235,710
-------------
798,653
-------------
TEXTILES, APPAREL & LUXURY GOODS--2.0%
Li & Fung Ltd. 328,000 422,716
-------------
CONSUMER STAPLES--1.1%
FOOD & DRUG RETAILING--0.2%
Convenience Retail Asia Ltd. (a) 198,000 45,957
-------------
FOOD PRODUCTS--0.9%
Nestle India Ltd. 14,800 186,477
-------------
FINANCIALS--27.6%
BANKS--13.3%
Bangkok Bank Public Co., Ltd. (a) 297,400 395,874
DBS Group Holdings Ltd. 32,638 190,925
Hang Seng Bank Ltd. 54,300 572,722
Hong Leong Bank Berhad 167,000 203,037
Kookmin Bank 13,783 415,394
Public Bank Berhad 525,750 417,833
Siam Commercial Bank Public Co., Ltd. (a) 189,500 162,158
United Overseas Bank Ltd. 66,000 464,802
-------------
2,822,745
-------------
DIVERSIFIED FINANCIALS--4.3%
Housing Development Finance Corp., Ltd. 78,108 689,491
Swire Pacific Ltd., Series A 50,000 218,000
-------------
907,491
-------------
REAL ESTATE--10.0%
City Developments Ltd. 133,000 335,380
Henderson Land Development Co., Ltd. 70,000 200,176
Land & Houses Public Co., Ltd. 1,827,300 412,630
SM Prime Holdings, Inc. 2,599,000 286,806
Sun Hung Kai Properties Ltd. 173,000 871,861
-------------
2,106,853
-------------
HEALTH CARE--4.2%
PHARMACEUTICALS--4.2%
Dr. Reddy's Laboratories Ltd., ADR 27,800 $ 648,018
Ranbaxy Laboratories Ltd. (a) 14,700 248,917
-------------
896,935
-------------
INDUSTRIALS--8.2%
ELECTRICAL EQUIPMENT--0.4%
Phoenixtec Power Co., Ltd 96,000 80,717
-------------
INDUSTRIAL CONGLOMERATES--7.8%
Big C Supercenter
Public Co., Ltd. (Non Voting Depository Receipts) 99,400 42,057
China Merchants Holdings
International Co., Ltd. 337,000 302,508
Hutchison Whampoa Ltd. 156,500 953,271
Kasikornbank Public Co., Ltd.
(Non Voting Depository Receipts) (a) 455,000 367,720
-------------
1,665,556
-------------
INFORMATION TECHNOLOGY--21.7%
COMMUNICATIONS EQUIPMENT--1.3%
UTStarcom, Inc. (a) 7,800 277,446
-------------
COMPUTERS & PERIPHERALS--2.5%
Ambit Microsystems Corp. 63,000 194,770
Asustek Computer, Inc. 132,000 333,719
-------------
528,489
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.8%
Venture Corp., Ltd. 18,000 164,589
-------------
INFORMATION TECHNOLOGY CONSULTING & SERVICES--2.8%
Infosys Technologies Ltd. 8,557 602,747
-------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--14.3%
Realtek Semiconductor Corp. 92,000 187,402
Samsung Electronics Co., Ltd. 5,450 1,619,715
Taiwan Semiconductor Manufacturing Co., Ltd. (a) 738,541 1,216,320
-------------
3,023,437
-------------
</Table>
See Notes to Investment Portfolio.
141
<Page>
<Table>
<Caption>
SHARES VALUE
------------- -------------
MATERIALS--2.1%
CONSTRUCTION MATERIALS--2.1%
The Siam Cement Public Co., Ltd. (Non Voting
Depository Receipts) 123,450 $ 440,159
-------------
TELECOMMUNICATION SERVICES--10.1%
DIVERSIFIED TELECOMMUNICATION SERVICES--5.8%
PT Telekomunikasi Indonesia 323,600 181,412
KT Corp., ADR 19,200 750,640
Philippine Long Distance Telephone Co. (a) 27,600 291,667
-------------
1,223,719
-------------
WIRELESS TELECOMMUNICATION SERVICES--4.3%
China Mobile (Hong Kong) Ltd. (a)(b) 385,500 909,600
-------------
TRANSPORTATION--1.3%
TRANSPORTATION INFRASTRUCTURE--1.3%
Zhejiang Expressway Co., Ltd. 692,000 286,183
-------------
UTILITIES--9.0%
ELECTRIC UTILITIES--5.1%
Beijing Datang Power Generation Co., Ltd. 700,000 309,689
Huaneng Power International, Inc. 686,000 782,929
-------------
1,092,618
-------------
GAS UTILITIES--3.9%
Hong Kong & China Gas Co., Ltd. 653,002 824,820
-------------
TOTAL COMMON STOCKS
(cost of $17,559,079) 20,473,763
-------------
<Caption>
PAR VALUE
------------- -------------
SHORT-TERM OBLIGATION--1.9%
Repurchase agreement with
State Street Bank &
Trust Co., dated 06/30/03,
due 07/01/03 at 1.000%,
collateralized by a
U.S. Treasury Bond
maturing 2/15/29, market
value $402,145,
(repurchase proceeds $393,011)
(cost of $393,000) $ 393,000 $ 393,000
-------------
TOTAL INVESTMENTS--98.5%
(cost of $17,952,079) (c) 20,866,763
-------------
OTHER ASSETS & LIABILITIES, NET--1.5% 320,319
-------------
NET ASSETS--100.0% $ 21,187,082
=============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Represents fair value as determined in good faith under the direction of
the Trustees.
(c) Cost for both financial statements and federal income tax purposes is the
same.
<Table>
<Caption>
SUMMARY OF
SECURITIES % OF TOTAL
BY COUNTRY VALUE INVESTMENTS
- -------------------- ------------ -----------
Hong Kong $ 5,088,668 24.4%
South Korea 3,187,859 15.3
India 2,375,649 11.4
Taiwan 2,012,928 9.7
Thailand 1,820,598 8.7
Singapore 1,718,638 8.2
China 1,378,801 6.6
Malaysia 1,126,133 5.4
United States 670,446 3.2
Philippines 578,474 2.8
Indonesia 439,896 2.1
Bermuda 422,716 2.0
Cayman Islands 45,957 0.2
------------ -----
$ 20,866,763 100.0%
============ =====
</Table>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
<Table>
<Caption>
ACRONYM NAME
------- ----
ADR American Depository Receipt
</Table>
See Notes to Financial Statements.
142
<Page>
STATEMENT OF ASSETS & LIABILITIES
Newport Tiger Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 17,952,079
------------
Investments, at value $ 20,866,763
Cash 770
Foreign currency (cost of $54,918) 54,915
Receivable for:
Fund shares sold 410,417
Interest 11
Dividends 19,802
Deferred Trustees' compensation plan 3,324
Other assets 1,465
------------
TOTAL ASSETS 21,357,467
------------
LIABILITIES:
Payable for:
Investments purchased 36,378
Fund shares repurchased 16,516
Distribution fee--Class B 47
Management fee 15,354
Transfer agent fee 595
Audit fee 8,553
Custody fee 12,679
Reports to shareholders 8,373
Foreign capital gains tax 68,566
Deferred Trustees' fee 3,324
------------
TOTAL LIABILITIES 170,385
------------
NET ASSETS $ 21,187,082
============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 30,726,250
Undistributed net investment income 208,679
Accumulated net realized loss (12,593,812)
Net unrealized appreciation (depreciation) on:
Investments 2,914,684
Foreign currency translations (68,719)
------------
NET ASSETS $ 21,187,082
============
CLASS A:
Net assets $ 19,604,874
Shares outstanding 12,527,970
============
Net asset value per share $ 1.56
============
CLASS B:
Net assets $ 1,582,208
Shares outstanding 994,343
============
Net asset value per share $ 1.59
============
</Table>
See Notes to Financial Statements.
143
<Page>
STATEMENT OF OPERATIONS
Newport Tiger Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 371,075
Interest 1,686
------------
Total Investment Income (net of foreign taxes withheld
of $23,901) 372,761
------------
EXPENSES:
Management fee 98,715
Distribution fee--Class B 1,355
Pricing and bookkeeping fees 5,421
Transfer agent fee 3,720
Trustees' fee 2,946
Custody fee 29,965
Audit fee 11,353
Other expenses 7,106
------------
Total Expenses 160,581
Custody earnings credit (61)
------------
Net Expenses 160,520
------------
Net Investment Income 212,241
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized loss on:
Investments (453,109)
Foreign currency transactions (20,565)
Foreign capital gains tax (3,531)
------------
Net realized loss (477,205)
------------
Net change in unrealized appreciation/depreciation on:
Investments 1,775,847
Foreign currency translations (68,278)
------------
Net change in unrealized appreciation/depreciation 1,707,569
------------
Net Gain 1,230,364
------------
Net Increase in Net Assets from Operations $ 1,442,605
============
</Table>
See Notes to Financial Statements.
144
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Newport Tiger Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- ------------ ------------
OPERATIONS:
Net investment income $ 212,241 $ 304,732
Net realized loss on investments and foreign currency transactions
and foreign capital gains tax (477,205) (48,595)
Net change in unrealized appreciation/depreciation on investments
and foreign currency translations 1,707,569 (3,025,068)
------------ ------------
Net Increase (Decrease) from Operations 1,442,605 (2,768,931)
------------ ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A -- (253,001)
Class B -- (11,587)
Return of capital:
Class A -- (62,217)
Class B -- (2,850)
------------ ------------
Total Distributions Declared to Shareholders -- (329,655)
------------ ------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 3,431,799 349,774,001
Distributions reinvested -- 315,218
Redemptions (8,261,919) (357,739,000)
------------ ------------
Net Decrease (4,830,120) (7,649,781)
------------ ------------
Class B:
Subscriptions 449,300 2,488,667
Distributions reinvested -- 14,437
Redemptions (47,833) (3,501,399)
------------ ------------
Net Increase (Decrease) 401,467 (998,295)
------------ ------------
Net Decrease from Share Transactions (4,428,653) (8,648,076)
------------ ------------
Total Decrease in Net Assets (2,986,048) (11,746,662)
NET ASSETS:
Beginning of period 24,173,130 35,919,792
------------ ------------
End of period (including undistributed net investment income of
$208,679 and overdistributed net investment income of $(3,562)) $ 21,187,082 $ 24,173,130
============ ============
CHANGES IN SHARES:
Class A:
Subscriptions 2,378,545 199,407,089
Issued for distributions reinvested -- 214,434
Redemptions (5,821,645) (202,704,318)
------------ ------------
Net Decrease (3,443,100) (3,082,795)
------------ ------------
Class B:
Subscriptions 289,405 1,369,557
Issued for distributions reinvested -- 9,625
Redemptions (33,451) (1,874,153)
------------ ------------
Net Increase (Decrease) 255,954 (494,971)
------------ ------------
</Table>
See Notes to Financial Statements.
145
<Page>
NOTES TO FINANCIAL STATEMENTS
Newport Tiger Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Newport Tiger Fund, Variable Series (the "Fund"), a series of
Liberty Variable Investment Trust (the "Trust"), is a diversified portfolio of a
Massachusetts business trust, registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund's
investment goal is to seek capital appreciation. The Fund's capitalization
consists of an unlimited number of shares of beneficial interest without par
value that represent a separate series of the Trust. The Fund offers two classes
of shares: Class A and Class B. Each share of a class represents an equal
proportionate beneficial interest in that share class and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of their share class available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Liberty Advisory Services Corp., the investment advisor to the
Fund and Newport Fund Management, Inc. ("Newport"), the sub-advisor to the Fund,
merged into Columbia Management Advisors, Inc. ("Columbia"), formerly known as
Columbia Management Co., an indirect wholly owned subsidiary of FleetBoston
Financial Corporation. At the time of the merger, Columbia assumed the
obligations of Liberty Advisory Services Corp. and Newport with respect to the
Fund. The merger did not change the way the Fund is managed, the investment
personnel assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at the current quoted bid price.
Forward currency contracts are valued based on the weighted value of
exchange-traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation of
the Fund's net asset value. If events materially affecting the value of such
securities and such exchange rates occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to
146
<Page>
distribute all of its taxable income, no federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
FOREIGN CURRENCY TRANSACTIONS--Net realized and unrealized gains (losses) on
foreign currency transactions and translations includes gains (losses) arising
from the fluctuations in exchange rates between trade and settlement dates on
securities transactions, gains (losses) arising from the disposition of foreign
currency, and currency gains (losses) between the accrual and payment dates on
dividends, interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) on investments.
FORWARD CURRENCY CONTRACTS--The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined exchange rates
in connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions and translations.
Forward currency contracts do not eliminate fluctuations in the prices of the
Fund's portfolio securities. While the maximum potential loss from such
contracts is the aggregate face value in U.S. dollars at the time the contract
was opened, exposure is typically limited to the change in value of the contract
(in U.S. dollars) over the period it remains open. Risks may also arise if
counterparties fail to perform their obligations under the contracts.
FOREIGN CAPITAL GAINS TAXES--Realized gains in certain countries may be
subject to foreign taxes at the fund level, at rates ranging from approximately
10% to 30%. The Fund accrues for such foreign taxes on net realized and
unrealized gains at the appropriate rate for each jurisdiction.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of non-reclaimable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of all
tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with
income tax regulations, which may differ from accounting principles generally
accepted in the United States of America. Reclassifications are made to the
Fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2005 $ 2,191,366
2006 5,726,423
2007 1,050,865
2009 2,161,521
2010 879,602
------------
$ 12,009,777
============
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE--Columbia receives a monthly fee equal to 0.90% annually of
the Fund's average daily net assets.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
147
<Page>
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. The Fund also pays out-of-pocket costs
for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $61 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $3,822,849 and
$8,534,153, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 4,351,707
Gross unrealized depreciation (1,437,023)
------------
Net unrealized appreciation $ 2,914,684
============
</Table>
OTHER--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of foreign currency
exchange or the imposition of other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
148
<Page>
FINANCIAL HIGHLIGHTS
Newport Tiger Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, ----------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
----------- --------- --------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.47 $ 1.81 $ 2.19 $ 2.35
----------- --------- --------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.01 0.01 0.01 --(c)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.11 (0.33) (0.37) (0.14)
----------- --------- --------- ------------
Total from Investment Operations 0.12 (0.32) (0.36) (0.14)
----------- --------- --------- ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- (0.02) (0.02) (0.02)
Return of capital -- --(c) -- --
----------- --------- --------- ------------
Total Distributions Declared
to Shareholders -- (0.02) (0.02) (0.02)
----------- --------- --------- ------------
NET ASSET VALUE, END OF PERIOD $ 1.59 $ 1.47 $ 1.81 $ 2.19
=========== ========= ========= ============
Total return (d)(e) 8.16%(f) (17.70)% (16.66)% (5.94)%(f)
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Expenses (g) 1.70%(h) 1.52% 1.56% 1.47%(h)
Net investment income (g) 1.70%(h) 0.71% 0.74% 0.11%(h)
Portfolio turnover rate 18%(f) 28% 24% 22%
Net assets, end of period (000's) $ 1,582 $ 1,086 $ 2,232 $ 644
</Table>
(a) For the period from commencement of operations on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Rounds to less than $0.01 per share.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Total return figures do not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
149
<Page>
LIBERTY VARIABLE INVESTMENT TRUST
INVESTMENT MANAGER AND ADMINISTRATOR
Columbia Management Advisors, Inc.
100 Federal Street
Boston, MA 02110
TRANSFER AGENT
Liberty Funds Services, Inc.
PO Box 8081
Boston, MA 02266-8081
150
<Page>
SteinRoe Variable Investment Trust
STEINROE VARIABLE
INVESTMENT TRUST
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Liberty Asset Allocation Fund, Variable Series / June 30, 2003
Liberty Asset Allocation Fund, Variable Series seeks high total investment
return.
Harvey B. Hirschhorn, CFA, is the lead portfolio manager of the fund. Inc. He
has been associated with Columbia Management Advisors, and its predecessors
since 1973. Mr. Hirschhorn is responsible for allocating the fund's assets
among various asset classes, while investment decisions for the portion of
the fund allocated to each asset class are made by investment professionals
with particular expertise in such asset class.
On April 7, 2003, Galaxy VIP Asset Allocation Fund was merged into Stein Roe
Balanced Fund, Variable Series. The combined fund was renamed Liberty Asset
Allocation Fund, Variable Series.
For the six-month period ended June 30, 2003, the fund did not perform as well
as its equity benchmark, the S&P 500 Index, primarily because one-third of the
portfolio was invested in fixed-income securities. During the period,
fixed-income securities generally did not perform as well as stocks. However,
fund performance outpaced the Lehman Brothers Aggregate Bond Index because of
its equity exposure. The equity portion of the fund benefited from the stock
market rally during the second half of the period. The fund's investments in
growth stocks of all capitalization categories and real estate investment trusts
(REITs) had the highest total returns.
UNCERTAINTY, THEN RELIEF
At the start of 2003, the US equity markets were paralyzed by uncertainty over
the looming war in Iraq. But three major events helped get them back on track.
First, the relatively short duration of the major battles of the war--and the
absence of any significant surprises--jolted the stock market out of its
doldrums. Then, first quarter corporate profits came in somewhat higher than
expected, adding additional momentum to the rally. Finally, Congress signed a
fiscal stimulus bill that accelerated income tax cuts that were passed in 2001
and cut the tax rate on dividends and long-term capital gains. These additional
incentives helped propel stock prices higher. Also during the period, weakness
in the dollar improved corporate earnings of foreign subsidiaries, and the
lowest long-term interest rates in 40+ years continued to help reduce the cost
of consumer and corporate debt.
EFFECTIVE ASSET ALLOCATION HELPED PERFORMANCE
We made only minor changes to the fund's allocations during the period. Through
price appreciation the overall exposure to stocks increased, from 59.6% of net
assets on December 31, 2002 to 66.4% of net assets on June 30, 2003. We had only
a small allocation to international stocks, which did not perform as well as
domestic stocks. The fund's positions in growth and value companies were about
equal, but growth generally outperformed value during these past six months. Our
preference for large- and small-cap US companies over foreign stocks also had a
positive impact on returns. In general, small-cap stocks were the strongest
performers, a reflection that investors expect these companies to benefit when a
full-blown economic recovery materializes.
We reduced fixed-income exposure by about two percentage points and continued
to favor high-yield securities and to underweight investment-grade securities, a
strategy that worked well for the fund. The relatively strong performance of
REITs took us by surprise. Late last year, we had pared back our REIT position
believing that prospects for the real estate market were weakening. But in a
market desperate for income-producing securities, the relatively high yields on
REITs made them more attractive to investors than we had anticipated.
A BRIGHTER OUTLOOK
We believe short-term interest rates are likely to remain low, as the Federal
Reserve Board has indicated that it will keep them there for some time. However,
we expect longer-term interest rates to move higher over the next six to 12
months if economic growth picks up. We believe that earnings growth is likely to
be a key indicator of an improving economy. If economic growth of 3.5% to 4%
occurs as we anticipate, it would bode well for stocks because it would reflect
higher corporate profits, but less well for bonds. As a result, we plan to
maintain the current allocation between equities and fixed income.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
An investment in Liberty Asset Allocation Fund, Variable Series offers the
potential for long-term growth, but also involves certain risks, including stock
market fluctuations due to economic and business developments. In addition,
because the fund invests in high-yield securities it offers the potential for
high current income and attractive total return, but involves certain risks,
including credit risks associated with lower-rated bonds and interest rate
risks. The fund also invests in foreign securities, which have risks greater
than US investments including currency fluctuations, political and economical
instability and less regulations.
Investing in small-cap stocks may present special risks, including possible
illiquidity and greater price volatility than stocks of larger, more established
companies.
An investment in the fund may be subject to certain risks associated with
ownership of real estate such as possible declines in value, environmental
problems, natural disasters, changes in interest rates, liquidity and local
economic conditions.
152
<Page>
PERFORMANCE INFORMATION
Liberty Asset Allocation Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR 10-YEAR
- --------------------------------------------------------------------------------
Class B(1) (6/1/00) 9.18 2.91 0.46 6.44
S&P 500 Index 11.75 0.25 -1.61 10.04
Lehman Brothers
Aggregate
Bond Index 3.93 10.40 7.55 7.21
Lehman Brothers
Government/
Credit Index 5.23 13.15 7.84 7.35
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 6/30/93(2) - 6/30/03
<Table>
<Caption>
LEHMAN BROTHERS AGGREGATE BOND LEHMAN BROTHERS
CLASS B SHARES S&P 500 INDEX INDEX GOVERNMENT/CREDIT INDEX
Jun-93 $ 10,000 $ 10,000 $ 10,000 $ 10,000
7/31/1993 $ 9,977 $ 9,960 $ 10,057 $ 10,024
8/31/1993 $ 10,251 $ 10,337 $ 10,233 $ 10,183
9/30/1993 $ 10,251 $ 10,258 $ 10,261 $ 10,226
10/31/1993 $ 10,365 $ 10,470 $ 10,299 $ 10,254
11/30/1993 $ 10,289 $ 10,371 $ 10,211 $ 10,196
12/31/1993 $ 10,429 $ 10,496 $ 10,266 $ 10,243
1/31/1994 $ 10,636 $ 10,853 $ 10,405 $ 10,357
2/28/1994 $ 10,501 $ 10,559 $ 10,224 $ 10,204
3/31/1994 $ 10,151 $ 10,100 $ 9,971 $ 10,035
4/30/1994 $ 10,135 $ 10,229 $ 9,891 $ 9,967
5/31/1994 $ 10,238 $ 10,396 $ 9,890 $ 9,974
6/30/1994 $ 10,071 $ 10,141 $ 9,869 $ 9,975
7/31/1994 $ 10,286 $ 10,474 $ 10,065 $ 10,119
8/31/1994 $ 10,516 $ 10,902 $ 10,077 $ 10,150
9/30/1994 $ 10,262 $ 10,636 $ 9,929 $ 10,057
10/31/1994 $ 10,245 $ 10,874 $ 9,920 $ 10,056
11/30/1994 $ 9,943 $ 10,478 $ 9,898 $ 10,010
12/31/1994 $ 10,095 $ 10,633 $ 9,967 $ 10,045
1/31/1995 $ 10,211 $ 10,909 $ 10,164 $ 10,215
2/28/1995 $ 10,571 $ 11,333 $ 10,406 $ 10,427
3/31/1995 $ 10,737 $ 11,668 $ 10,469 $ 10,486
4/30/1995 $ 10,969 $ 12,011 $ 10,616 $ 10,615
5/31/1995 $ 11,316 $ 12,490 $ 11,027 $ 10,936
6/30/1995 $ 11,524 $ 12,780 $ 11,107 $ 11,009
7/31/1995 $ 11,855 $ 13,203 $ 11,083 $ 11,010
8/31/1995 $ 11,880 $ 13,236 $ 11,217 $ 11,110
9/30/1995 $ 12,112 $ 13,794 $ 11,326 $ 11,190
10/31/1995 $ 11,996 $ 13,744 $ 11,473 $ 11,314
11/30/1995 $ 12,402 $ 14,346 $ 11,645 $ 11,463
12/31/1995 $ 12,665 $ 14,623 $ 11,808 $ 11,583
1/31/1996 $ 12,917 $ 15,121 $ 11,886 $ 11,683
2/29/1996 $ 13,026 $ 15,261 $ 11,679 $ 11,546
3/31/1996 $ 13,187 $ 15,408 $ 11,597 $ 11,487
4/30/1996 $ 13,241 $ 15,634 $ 11,532 $ 11,447
5/31/1996 $ 13,350 $ 16,036 $ 11,509 $ 11,438
6/30/1996 $ 13,494 $ 16,097 $ 11,664 $ 11,559
7/31/1996 $ 13,242 $ 15,385 $ 11,695 $ 11,594
8/31/1996 $ 13,431 $ 15,710 $ 11,675 $ 11,603
9/30/1996 $ 13,818 $ 16,593 $ 11,878 $ 11,764
10/31/1996 $ 14,205 $ 17,051 $ 12,142 $ 11,972
11/30/1996 $ 14,817 $ 18,338 $ 12,350 $ 12,130
12/31/1996 $ 14,647 $ 17,975 $ 12,235 $ 12,053
1/31/1997 $ 15,105 $ 19,097 $ 12,273 $ 12,100
2/28/1997 $ 14,942 $ 19,248 $ 12,303 $ 12,123
3/31/1997 $ 14,576 $ 18,459 $ 12,167 $ 12,039
4/30/1997 $ 15,013 $ 19,559 $ 12,349 $ 12,180
5/31/1997 $ 15,624 $ 20,754 $ 12,467 $ 12,281
6/30/1997 $ 15,991 $ 21,677 $ 12,615 $ 12,393
7/31/1997 $ 16,908 $ 23,401 $ 12,956 $ 12,644
8/31/1997 $ 16,328 $ 22,090 $ 12,846 $ 12,581
9/30/1997 $ 17,040 $ 23,299 $ 13,034 $ 12,727
10/31/1997 $ 16,735 $ 22,520 $ 13,223 $ 12,868
11/30/1997 $ 16,907 $ 23,563 $ 13,284 $ 12,897
12/31/1997 $ 17,110 $ 23,968 $ 13,418 $ 13,000
1/31/1998 $ 17,262 $ 24,232 $ 13,590 $ 13,170
2/28/1998 $ 17,749 $ 25,979 $ 13,579 $ 13,160
3/31/1998 $ 18,164 $ 27,309 $ 13,625 $ 13,202
4/30/1998 $ 18,210 $ 27,588 $ 13,696 $ 13,268
5/31/1998 $ 17,973 $ 27,113 $ 13,826 $ 13,365
6/30/1998 $ 18,232 $ 28,214 $ 13,944 $ 13,450
7/31/1998 $ 18,164 $ 27,915 $ 13,973 $ 13,497
8/31/1998 $ 16,546 $ 23,881 $ 14,201 $ 13,709
9/30/1998 $ 17,130 $ 25,412 $ 14,533 $ 14,053
10/31/1998 $ 17,882 $ 27,476 $ 14,456 $ 14,039
11/30/1998 $ 18,499 $ 29,141 $ 14,539 $ 14,038
12/31/1998 $ 19,252 $ 30,819 $ 14,582 $ 14,094
1/31/1999 $ 19,735 $ 32,107 $ 14,686 $ 14,171
2/28/1999 $ 19,285 $ 31,109 $ 14,429 $ 13,963
3/31/1999 $ 19,644 $ 32,353 $ 14,508 $ 14,068
4/30/1999 $ 19,911 $ 33,605 $ 14,555 $ 14,111
5/31/1999 $ 19,618 $ 32,812 $ 14,426 $ 14,003
6/30/1999 $ 20,287 $ 34,627 $ 14,380 $ 14,013
7/31/1999 $ 19,934 $ 33,550 $ 14,318 $ 14,000
8/31/1999 $ 19,825 $ 33,382 $ 14,311 $ 14,011
9/30/1999 $ 19,860 $ 32,467 $ 14,477 $ 14,141
10/31/1999 $ 20,371 $ 34,522 $ 14,531 $ 14,178
11/30/1999 $ 20,674 $ 35,223 $ 14,529 $ 14,195
12/31/1999 $ 21,660 $ 37,294 $ 14,460 $ 14,148
1/31/2000 $ 21,136 $ 35,422 $ 14,412 $ 14,096
2/29/2000 $ 21,282 $ 34,753 $ 14,586 $ 14,212
3/31/2000 $ 22,446 $ 38,152 $ 14,779 $ 14,359
4/30/2000 $ 21,712 $ 37,003 $ 14,736 $ 14,326
5/31/2000 $ 21,215 $ 36,245 $ 14,729 $ 14,349
6/30/2000 $ 22,040 $ 37,136 $ 15,035 $ 14,602
7/31/2000 $ 21,961 $ 36,557 $ 15,172 $ 14,713
8/31/2000 $ 23,114 $ 38,827 $ 15,392 $ 14,887
9/30/2000 $ 22,367 $ 36,777 $ 15,489 $ 15,022
10/31/2000 $ 22,130 $ 36,623 $ 15,591 $ 15,091
11/30/2000 $ 21,081 $ 33,737 $ 15,847 $ 15,296
12/31/2000 $ 21,408 $ 33,902 $ 16,141 $ 15,578
1/31/2001 $ 21,866 $ 35,106 $ 16,406 $ 15,833
2/28/2001 $ 20,541 $ 31,907 $ 16,549 $ 15,982
3/31/2001 $ 19,648 $ 29,888 $ 16,632 $ 16,105
4/30/2001 $ 20,575 $ 32,207 $ 16,562 $ 16,063
5/31/2001 $ 20,449 $ 32,423 $ 16,661 $ 16,153
6/30/2001 $ 20,155 $ 31,635 $ 16,724 $ 16,213
7/31/2001 $ 20,098 $ 31,325 $ 17,099 $ 16,550
8/31/2001 $ 19,299 $ 29,367 $ 17,296 $ 16,716
9/30/2001 $ 18,343 $ 26,997 $ 17,498 $ 16,960
10/31/2001 $ 18,596 $ 27,513 $ 17,864 $ 17,241
11/30/2001 $ 19,398 $ 29,623 $ 17,617 $ 17,069
12/31/2001 $ 19,398 $ 29,884 $ 17,505 $ 16,975
1/31/2002 $ 19,216 $ 29,447 $ 17,646 $ 17,063
2/28/2002 $ 19,004 $ 28,879 $ 17,818 $ 17,198
3/31/2002 $ 19,394 $ 29,965 $ 17,522 $ 16,937
4/30/2002 $ 18,959 $ 28,149 $ 17,862 $ 17,216
5/31/2002 $ 18,931 $ 27,944 $ 18,013 $ 17,388
6/30/2002 $ 18,123 $ 25,954 $ 18,168 $ 17,538
7/31/2002 $ 17,184 $ 23,932 $ 18,388 $ 17,745
8/31/2002 $ 17,285 $ 24,088 $ 18,699 $ 18,009
9/30/2002 $ 16,172 $ 21,472 $ 19,002 $ 18,332
10/31/2002 $ 16,924 $ 23,359 $ 18,915 $ 18,260
11/30/2002 $ 17,545 $ 24,733 $ 18,909 $ 18,244
12/31/2002 $ 17,082 $ 23,281 $ 19,300 $ 18,641
1/31/2003 $ 16,764 $ 22,673 $ 19,318 $ 18,641
2/28/2003 $ 16,533 $ 22,333 $ 19,584 $ 18,904
3/31/2003 $ 16,617 $ 22,550 $ 19,569 $ 18,923
4/30/2003 $ 17,530 $ 24,406 $ 19,731 $ 19,067
5/31/2003 $ 18,411 $ 25,689 $ 20,098 $ 19,450
6/30/2003 $ 18,661 $ 26,037 $ 20,064 $ 20,333
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 11.82 12.48
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The S&P (Standard & Poor's) 500 Index is an
unmanaged index that tracks the performance of 500 widely held,
large-capitalization US stocks. The Lehman Brothers Aggregate Bond Index is a
market value-weighted index that tracks the daily price, coupon, pay-downs, and
total return performance of fixed-rate, publicly placed, dollar-denominated, and
non-convertible investment grade debt issues with at least $100 million par
amount outstanding and with at least one year to final maturity. The Lehman
Brothers Government/Credit Index is an unmanaged index that tracks the
performance of a selection of US government and investment-grade US corporate
bonds. Indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class shares would be lower.
(2) Inception date of class A shares (older existing class) is January 1, 1989.
153
<Page>
INVESTMENT PORTFOLIO
Liberty Asset Allocation Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCKS--63.7%
CONSUMER DISCRETIONARY--9.1%
AUTO COMPONENTS--0.6%
BorgWarner, Inc. 900 $ 57,960
Delphi Corp. 126,300 1,089,969
Gentex Corp. (a) 5,000 153,050
Johnson Controls, Inc. 800 68,480
Lear Corp. (a) 2,200 101,244
Modine Manufacturing Co. 1,400 27,118
Standard Motor Products, Inc. 3,300 36,630
Superior Industries International 2,000 83,400
--------------
1,617,851
--------------
AUTOMOBILES--0.1%
Honda Motor Co., Ltd. 10,700 406,199
Monaco Coach Corp. (a) 1,500 22,995
--------------
429,194
--------------
DISTRIBUTORS--0.0%
Handleman Co. (a) 4,300 68,800
--------------
HOTELS, RESTAURANTS & LEISURE--1.5%
Applebee's International, Inc. 4,400 138,292
Bally Total Fitness Holding Corp.(a) 5,600 50,568
Brinker International, Inc. (a) 6,300 226,926
California Pizza Kitchen, Inc. (a) 4,000 86,000
Carnival Plc 5,633 171,412
CBRL Group, Inc. 1,900 73,834
Compass Group Plc 56,920 307,417
Darden Restaurants, Inc. 6,600 125,268
Harrah's Entertainment, Inc. (a) 1,600 64,384
Hilton Hotels Corp. 4,575 58,514
International Game Technology, Inc. 1,000 102,330
Landry's Restaurants, Inc. 3,200 75,520
Lone Star Steakhouse & Saloon 4,200 91,434
Marriott International, Inc. 775 29,775
McDonald's Corp. 75,200 1,658,912
MGM Mirage, Inc. (a) 1,800 61,524
Outback Steakhouse, Inc. 1,500 58,500
Prime Hospitality Corp. (a) 4,500 30,195
Red Robin Gourmet Burgers, Inc. (a) 1,300 24,648
Scientific Games Corp. (a) 10,400 97,760
Six Flags, Inc. (a) 9,600 65,088
Starwood Hotels & Resorts Worldwide, Inc. 5,350 152,956
Station Casinos, Inc. (a) 6,300 159,075
Wendy's International, Inc. 9,800 283,906
YUM! Brands, Inc. (a) 8,900 263,084
--------------
4,457,322
--------------
HOUSEHOLD DURABLES--0.3%
American Greetings Corp. (a) 3,200 62,848
Bassett Furniture Industries, Inc. 3,500 46,480
Beazer Homes USA, Inc. (a) 1,100 91,850
Harman International Industries, Inc. 900 71,226
Kimball International 4,300 67,080
Koninklijke Philips Electronics NV 21,300 405,725
Meritage Corp. (a) 900 44,334
Newell Rubbermaid, Inc. 3,400 $ 95,200
Russ Berrie & Co, Inc. 700 25,557
Toro Co. 1,400 55,650
--------------
965,950
--------------
INTERNET & CATALOG RETAIL--0.2%
eBay, Inc. (a) 4,900 510,482
Sharper Image Corp. (a) 3,800 103,626
--------------
614,108
--------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Jakks Pacific, Inc. (a) 4,100 54,489
Johnson Outdoors, Inc. (a) 1,100 15,015
Mattel, Inc. 4,800 90,816
SCP Pool Corp. (a) 2,100 72,240
--------------
232,560
--------------
MEDIA--2.5%
Alliance Atlantis Communications, Inc. (a) 6,500 94,445
AOL Time Warner, Inc. (a) 76,300 1,227,667
British Sky Broadcasting Plc (a) 31,000 344,076
Clear Channel Communications, Inc. (a) 17,400 737,586
Comcast Corp. (a) 8,100 249,412
COX Radio, Inc. (a) 3,900 90,129
Gray Television, Inc. 4,300 53,320
Grupo Televisa SA (a) 6,600 227,700
Hispanic Broadcasting Corp. (a) 4,200 106,890
Interactive Corp. (a) 15,150 599,485
Interpublic Group Cos., Inc. 64,600 864,348
Knight-Ridder, Inc. 600 41,358
Liberty Corp. 1,800 76,500
Liberty Media Corp. (a) 37,600 434,656
Lin TV Corp. (a) 4,000 94,200
Mediacom Communications Corp. (a) 5,200 51,324
New York Times Co. 1,700 77,350
Radio One, Inc. (a) 5,900 104,843
Sinclair Broadcast Group, Inc. (a) 5,400 62,694
Societe Television Francaise 1 9,420 290,388
Univision Communications, Inc. (a) 1,900 57,760
Viacom, Inc. (a) 13,700 598,142
Westwood One, Inc. (a) 1,100 37,323
WPP Group Plc 33,650 264,196
XM Satellite Radio Holdings, Inc. (a) 22,500 248,625
--------------
7,034,417
--------------
MULTI-LINE RETAIL--1.4%
Dollar Tree Stores, Inc. (a) 1,200 38,076
Family Dollar Stores, Inc. 1,500 57,225
Federated Department Stores, Inc. 4,000 147,400
Ito-Yokado Co., Ltd. 3,000 71,962
Kohl's Corp. (a) 20,100 1,032,738
Neiman-Marcus Group, Inc. (a) 1,900 69,540
ShopKo Stores, Inc. (a) 2,800 36,400
Target Corp. 29,000 1,097,360
Wal-Mart Stores, Inc. 28,500 1,529,595
--------------
4,080,296
--------------
</Table>
See Notes to Investment Portfolio.
154
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
SPECIALTY RETAIL--2.1%
Advance Auto Parts (a) 2,600 $ 158,340
Bed Bath & Beyond, Inc. (a) 15,500 601,555
Blue Rhino Corp. (a) 6,400 76,736
Borders Group, Inc. (a) 3,400 59,874
Building Materials Holding Corp. 1,900 28,139
Chico's FAS, Inc. (a) 24,900 524,145
Cost Plus, Inc. (a) 2,500 89,150
Dress Barn, Inc. (a) 3,000 38,010
Friedman's, Inc. 3,300 37,521
Goody's Family Clothing, Inc. 5,500 47,575
GTSI Corp. (a) 1,700 14,790
Home Depot, Inc. 28,300 937,296
Hughes Supply, Inc. 1,300 45,110
Kingfisher Plc 37,700 172,767
Lowe's Cos., Inc. 16,100 691,495
Monro Muffler, Inc. (a) 2,800 79,128
Mothers Work, Inc. (a) 1,700 45,509
Movie Gallery, Inc. (a) 2,900 53,505
Office Depot, Inc. (a) 95,400 1,384,254
OfficeMax, Inc. (a) 4,100 26,855
Party City Corp. (a) 3,100 31,837
Petco Animal Supplies, Inc. (a) 6,600 143,484
Rent-Way, Inc. (a) 8,900 41,385
Ross Stores, Inc. 1,400 59,836
TBC Corp. (a) 3,100 59,055
TJX Cos., Inc. 6,400 120,576
Too, Inc. (a) 4,900 99,225
Ultimate Electronics, Inc. (a) 2,200 28,204
United Rentals, Inc. (a) 3,100 43,059
Williams-Sonoma, Inc. (a) 5,500 160,600
Zale Corp. (a) 1,800 72,000
--------------
5,971,015
--------------
TEXTILES & APPAREL--0.3%
Delta Apparel, Inc. 1,100 17,875
Fast Retailing Co. 3,800 117,625
Gucci Group NV 3,385 331,345
Kellwood Co. 2,800 88,564
Maxwell Shoe Co. (a) 4,400 63,360
Nautica Enterprises, Inc. (a) 2,800 35,924
Phillips-Van Heusen 700 9,541
Russell Corp. 2,600 49,400
Stride Rite Corp. 2,500 24,900
Wolverine World Wide, Inc. 2,100 40,446
--------------
778,980
--------------
CONSUMER STAPLES--4.2%
BEVERAGES--1.1%
Anheuser-Busch Cos., Inc. 4,600 234,830
Coca-Cola Co. 30,500 1,415,505
Diageo Plc 17,400 186,080
Pepsi Bottling Group, Inc. 3,100 62,062
PepsiCo, Inc. 28,100 1,250,450
--------------
3,148,927
--------------
FOOD & DRUG RETAILING--0.3%
Performance Food Group Co. (a) 3,000 $ 111,000
Sysco Corp. 14,300 429,572
Whole Foods Market, Inc. (a) 3,900 185,367
--------------
725,939
--------------
FOOD PRODUCTS--1.6%
American Italian Pasta Co. (a) 2,000 83,300
Central Garden and Pet Co. (a) 2,300 54,855
ConAgra Foods, Inc. 68,200 1,609,520
Corn Products International, Inc. 3,100 93,093
Dean Foods Co. (a) 18,500 582,750
Hormel Foods Corp. 900 21,330
Kraft Foods, Inc. 27,200 885,360
Nestle SA 3,930 812,692
Numico NV 9,887 152,392
Ralcorp Holdings, Inc. (a) 3,400 84,864
WM Wrigley Jr Co. 4,300 241,789
--------------
4,621,945
--------------
HOUSEHOLD PRODUCTS--0.4%
Kimberly-Clark Corp. 11,900 620,466
Procter & Gamble Co. 6,200 552,916
--------------
1,173,382
--------------
PERSONAL PRODUCTS--0.4%
Alberto-Culver Co., Inc., Class B 8,450 431,795
Avon Products, Inc. 1,900 118,180
Gillette Co. 18,300 583,038
Inter Parfums, Inc. 2,400 17,760
Shiseido Co., Ltd. 9,000 87,631
--------------
1,238,404
--------------
TOBACCO--0.4%
Altria Group, Inc. 24,200 1,099,648
Schweitzer-Mauduit International, Inc. 1,000 24,140
Universal Corp.-Va 1,400 59,220
--------------
1,183,008
--------------
ENERGY--5.6%
ENERGY EQUIPMENT & SERVICES--1.9%
Baker Hughes, Inc. 21,400 718,398
BJ Services Co. (a) 15,800 590,288
Halliburton Co. 47,100 1,083,300
Key Energy Services, Inc. (a) 15,600 167,232
Lufkin Industries, Inc. 2,500 60,875
Matrix Service Co. 7,600 130,568
Maverick Tube Corp. (a) 8,200 157,030
Nabors Industries, Ltd. (a) 12,300 486,465
National-Oilwell, Inc. (a) 3,400 74,800
Noble Corp. (a) 10,500 360,150
Patterson-UTI Energy, Inc. (a) 11,400 369,360
Saipem SpA 20,000 149,993
Schlumberger, Ltd. 7,400 352,018
Smith International, Inc. (a) 6,000 220,440
Superior Energy Services (a) 7,400 70,152
Transocean, Inc. (a) 3,200 70,304
</Table>
See Notes to Investment Portfolio.
155
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
Unit Corp. (a) 6,400 $ 133,824
Universal Compression Holdings, Inc. (a) 2,200 45,892
Weatherford International, Ltd. (a) 1,000 41,900
Willbros Group, Inc. (a) 6,500 67,535
--------------
5,350,524
--------------
OIL & GAS--3.7%
Amerada Hess Corp. 2,000 98,360
Apache Corp. 6,460 420,288
BP Plc 37,000 257,014
BP Plc, ADR 35,600 1,495,912
Comstock Resources, Inc. (a) 4,300 58,824
ConocoPhillips 31,100 1,704,280
ENI-Ente Nazionale Idrocarburi SpA 17,000 257,530
Exxon Mobil Corp. 43,400 1,558,494
Frontier Oil Corp. 6,600 100,320
Harvest Natural Resources, Inc. (a) 11,100 70,707
Marathon Oil Corp. 42,800 1,127,780
Murphy Oil Corp. 4,900 257,740
Occidental Petroleum Corp. 1,300 43,615
Patina Oil & Gas Corp. 3,000 96,450
Premcor, Inc. (a) 1,400 30,170
Remington Oil & Gas Corp. (a) 2,900 53,302
Royal Dutch Petroleum Co. 4,060 188,762
Royal Dutch Petroleum Co., New York Shares 22,100 1,030,302
Shell Transport & Trading Co. Plc 79,100 522,978
Spinnaker Exploration Co. (a) 3,600 94,320
St. Mary Land & Exploration Co. 2,900 79,170
Tom Brown, Inc. (a) 2,100 58,359
Total Fina Elf SA 4,100 620,629
Valero Energy Corp. 2,500 90,825
Vintage Petroleum, Inc. 6,300 71,064
Westport Resources Corp. (a) 3,300 75,075
XTO Energy, Inc. 11,533 231,929
--------------
10,694,199
--------------
FINANCIALS--11.8%
BANKS--3.7%
Allied Irish Banks Plc 6,500 97,271
Bancfirst Corp. 400 20,744
Bancorpsouth, Inc. 2,900 60,465
Bank of America Corp. 20,300 1,604,309
Bank of Granite Corp. 2,800 47,740
Bank of New York Co., Inc. 27,800 799,250
Bank One Corp. 25,500 948,090
Bankinter SA 2,555 90,900
Banknorth Group, Inc. 2,700 68,904
Boston Private Financial Holdings, Inc. 2,400 50,592
Bryn Mawr Bank Corp. 1,700 63,019
Capitol Bancorp, Ltd. 1,300 35,230
Charter One Financial, Inc. 2,300 71,714
Chemical Financial Corp. 2,810 83,738
Chittenden Corp. 3,200 $ 87,520
City National Corp./CA 1,600 71,296
Commercial Capital Bancorp, Inc. (a) 1,900 29,165
Community First Bankshares, Inc. 2,200 60,060
Community Trust Bancorp, Inc. 1,600 41,824
Corus Bankshares, Inc. 1,500 72,645
Cullen/Frost Bankers, Inc. 1,000 32,100
DBS Group Holdings, Ltd. 30,000 175,493
Deutsche Bank AG 2,450 159,167
Dime Community Bancshares, Inc. 5,400 137,430
East-West Bancorp, Inc. 2,700 97,578
Fifth Third Bancorp 7,200 412,848
First Citizens BancShares, Inc. 500 50,420
First Financial Bankshares, Inc. 1,375 46,008
ForeningsSparbanken AB 20,450 282,635
Golden West Financial Corp. 2,600 208,026
Greenpoint Financial Corp. 1,700 86,598
Hancock Holding Co. 700 32,942
Lloyds TSB Group Plc 98,790 702,556
MainSource Financial Group, Inc. 1,050 25,588
MASSBANK Corp. 900 32,553
Mercantile Bankcorp 1,300 37,128
Merchants Bancshares, Inc. 2,300 59,800
Mid-State Bancshares 4,000 79,000
North Fork Bancorporation, Inc. 2,600 88,556
Northrim BanCorp., Inc. 2,100 38,073
Omega Financial Corp. 800 27,360
Prosperity Bancshares, Inc. 4,400 84,700
Riggs National Corp. 4,500 68,490
Sanpaolo IMI SpA 35,150 327,089
Simmons First National Corp. 2,000 40,020
Sovereign Bancorp, Inc. 5,900 92,335
Sumitomo Mitsui Financial Group, Inc. 20 43,719
Trico Bancshares 2,900 73,747
UBS AG 18,750 1,045,289
UCBH Holdings, Inc. 3,300 94,644
UFJ Holdings, Inc. (a) 73 107,196
UniCredito Italiano SpA 70,350 335,818
US Bancorp 37,600 921,200
W Holding Co., Inc. 1,900 32,148
Webster Financial Corp. 1,500 56,700
Whitney Holding Corp. 1,000 31,970
--------------
10,571,400
--------------
DIVERSIFIED FINANCIALS--3.9%
Asta Funding, Inc. (a) 1,100 26,400
Bear Stearns Cos., Inc. 1,000 72,420
Cash America International, Inc. 8,100 107,082
Citigroup, Inc. 125,400 5,367,120
CompuCredit Corp. (a) 1,700 20,655
Fannie Mae 8,950 603,588
Fortis 18,040 313,748
Freddie Mac 17,900 908,783
Goldman Sachs Group, Inc. 5,900 494,125
</Table>
See Notes to Investment Portfolio.
156
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
Investors Financial Services Corp. 5,400 $ 156,654
Janus Capital Group, Inc. 6,900 113,160
Jefferies Group, Inc. 1,800 89,622
JP Morgan Chase & Co. 39,700 1,356,946
Legg Mason, Inc. 700 45,465
Lehman Brothers Holdings, Inc. 1,200 79,776
Metris Cos., Inc. 8,600 47,730
MFC Bancorp, Ltd. (a) 7,000 58,093
Moody's Corp. 900 47,439
MTC Technologies, Inc. (a) 2,700 63,342
Nomura Holdings, Inc. 25,000 317,884
Promise Co., Ltd. 3,300 123,624
Providian Financial Corp. (a) 4,200 38,892
SLM Corp. 9,300 364,281
State Street Corp. 8,500 334,900
--------------
11,151,729
--------------
INSURANCE--3.1%
Alleanza Assicurazioni SpA 35,650 339,533
AMB Generali Holding AG 3,400 223,310
AMBAC Financial Group, Inc. 17,400 1,152,750
American International Group, Inc. 47,800 2,637,604
AmerUs Group Co. 1,100 31,009
Arthur J Gallagher & Co. 2,800 76,160
Berkshire Hathaway, Inc. (a) 16 1,160,000
Cincinnati Financial Corp. 900 33,381
Commerce Group, Inc. 1,400 50,680
Delphi Financial Group 2,000 93,600
Hilb Rogal & Hamilton Co. 2,900 98,716
Infinity Property & Casualty Corp. 2,700 63,828
Kansas City Life Insurance Co. 300 12,852
Lincoln National Corp. 31,500 1,122,345
Loews Corp. 900 42,561
Marsh & McLennan Cos., Inc. 5,500 280,885
MGIC Investment Corp. 11,400 531,696
Nationwide Financial Services 1,400 45,500
Navigators Group, Inc. (a) 900 26,838
Philadelphia Consolidated Holding Co. (a) 2,100 84,840
Phoenix Cos., Inc. 6,900 62,307
PMI Group, Inc. 3,400 91,256
Radian Group, Inc. 2,100 76,965
RLI Corp. 2,700 88,830
St. Paul Cos 1,400 51,114
Stancorp Financial Group, Inc. 2,200 114,884
State Auto Financial Corp. 2,100 47,145
Swiss Re 1,650 91,619
Universal American Financial Corp. (a) 2,900 18,473
--------------
8,750,681
--------------
REAL ESTATE--1.1%
Alexandria Real Estate Equities, Inc. 2,475 111,375
Apartment Investment & Management Co. 1,700 58,820
Archstone-Smith Trust 2,425 58,200
American Financial Realty Trust 11,200 166,992
Avalonbay Communities, Inc. 1,750 74,620
Boston Properties, Inc. 1,750 $ 76,650
Boykin Lodging Co. 4,500 35,100
CarrAmerica Realty Corp. 1,000 27,810
Catellus Development Corp. (a) 1,350 29,700
CenterPoint Properties Trust 925 56,656
Chelsea Property Group, Inc. 1,375 55,426
Cousins Properties, Inc. 5,800 161,820
Duke Realty Corp. 2,550 70,253
EastGroup Properties, Inc. 2,100 56,700
Equity Office Properties Trust 3,300 89,133
Equity One, Inc. 3,400 55,760
Equity Residential 2,275 59,036
First Industrial Realty Trust, Inc. 1,000 31,600
General Growth Properties, Inc. 2,300 143,612
Getty Realty Corp. 2,200 49,104
iStar Financial, Inc. 4,150 151,475
Keystone Property Trust 2,300 42,573
Kimco Realty Corp. 2,750 104,225
Liberty Property Trust 1,475 51,035
Manufactured Home Communities, Inc. 650 22,821
Mid-America Apartment Communities, Inc. 2,200 59,422
Nationwide Health Properties, Inc. 3,700 58,941
Newcastle Investment Corp. 2,300 45,034
PS Business Parks, Inc. 2,400 84,720
Pan Pacific Retail Properties, Inc. 1,075 42,301
Parkway Properties, Inc. 350 14,717
Prentiss Properties Trust 675 20,243
ProLogis 5,075 138,548
Public Storage, Inc. 2,225 75,361
RFS Hotel Investors, Inc. 600 7,392
Reckson Associates Realty Corp. 850 17,731
Regency Centers Corp. 3,100 108,438
Rouse Co. 2,825 107,632
Simon Property Group, Inc. 3,950 154,169
SL Green Realty Corp. 900 31,401
St. Joe Co. (The) 3,100 96,720
Taubman Centers, Inc. 1,600 30,656
United Dominion Realty Trust, Inc. 1,750 30,135
Universal Health Realty Income Trust 1,500 40,500
Urstadt Biddle Properties 3,300 42,438
Vornado Realty Trust 1,950 85,020
--------------
3,132,015
--------------
HEALTH CARE--10.4%
BIOTECHNOLOGY--0.8%
Amgen, Inc. (a) 24,400 1,621,136
Biogen, Inc. (a) 400 15,200
BioMarin Pharmaceuticals, Inc. (a) 4,700 45,872
Charles River Laboratories International, Inc. (a) 3,100 99,758
Ciphergen Biosystems, Inc. (a) 5,200 53,300
Gilead Sciences, Inc. (a) 1,100 61,138
Idec Pharmaceuticals Corp. (a) 1,000 34,000
</Table>
See Notes to Investment Portfolio.
157
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<Caption>
SHARES VALUE
-------------- --------------
MedImmune, Inc. (a) 600 $ 21,822
Neurocrine Biosciences, Inc. (a) 1,200 59,928
Protein Design Labs, Inc. (a) 4,500 62,910
Serologicals Corp. (a) 9,800 133,574
Telik, Inc. (a) 4,200 67,494
--------------
2,276,132
--------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.5%
Alcon, Inc. 6,600 301,620
American Medical Systems Holdings, Inc. (a) 4,900 82,663
Becton Dickinson & Co. 12,500 485,625
Bio Rad Laboratories, Inc. (a) 1,800 99,630
Biomet, Inc. 3,400 97,444
Boston Scientific Corp. (a) 10,950 669,045
Cie Generale D'Optique Essilor International SA 8,700 351,052
Hillenbrand Industries, Inc. 700 35,315
Integra LifeSciences Holdings Corp. (a) 5,400 142,452
Kyphon, Inc. (a) 5,900 89,208
Medical Action Industries, Inc. (a) 8,300 135,539
Medtronic, Inc. 15,300 733,941
Noven Pharmaceuticals, Inc. (a) 8,000 81,920
Respironics, Inc. (a) 1,700 63,784
Sola International, Inc. (a) 3,100 53,940
SonoSite, Inc. (a) 3,900 77,805
St. Jude Medical, Inc. (a) 10,800 621,000
Varian Medical Systems, Inc. (a) 1,270 73,114
Wright Medical Group, Inc. (a) 3,600 68,400
Zoll Medical Corp. (a) 1,800 60,408
--------------
4,323,905
--------------
HEALTH CARE PROVIDERS & SERVICES--2.6%
Accredo Health, Inc. (a) 2,400 52,320
Aetna, Inc. 26,100 1,571,220
AmerisourceBergen Corp. 2,600 180,310
Anthem, Inc. (a) 8,300 640,345
Caremark Rx, Inc. (a) 25,200 647,136
Cobalt Corp. (a) 3,900 80,145
Community Health Systems, Inc. (a) 3,100 59,799
Cross Country Healthcare, Inc. (a) 3,400 44,846
DaVita, Inc. (a) 2,900 77,662
First Health Group Corp. (a) 7,000 193,200
Genesis Health Ventures, Inc. (a) 3,600 63,540
HCA, Inc. 1,900 60,876
Hooper Holmes, Inc. 6,600 42,504
Humana, Inc. (a) 4,700 70,970
Kindred Healthcare, Inc. (a) 1,900 33,896
Laboratory Corporation of America Holdings (a) 2,200 66,330
LifePoint Hospitals, Inc. (a) 4,700 98,418
Lincare Holdings, Inc. (a) 2,500 78,775
MAXIMUS, Inc. (a) 1,100 30,393
McKesson Corp. 22,400 800,576
Pacificare Health Systems (a) 1,700 83,861
Pediatrix Medical Group, Inc. (a) 1,600 57,040
Province Healthcare Co. (a) 2,200 24,354
Stewart Enterprises, Inc. (a) 9,700 $ 41,710
Sunrise Assisted Living, Inc. (a) 2,100 46,998
UnitedHealth Group, Inc. 22,600 1,135,650
US Oncology, Inc. (a) 11,100 82,029
WebMD Corp. (a) 7,400 80,142
WellChoice, Inc. (a) 4,500 131,760
WellPoint Health Networks (a) 8,100 682,830
--------------
7,259,635
--------------
PHARMACEUTICALS--5.5%
Abbott Laboratories 18,000 787,680
Adolor Corp. (a) 1,600 19,632
Alpharma, Inc. 2,100 45,360
Andrx Corp. (a) 4,800 95,520
Atrix Labs, Inc. (a) 2,600 57,174
Aventis SA 8,200 451,890
Barr Laboratories, Inc. (a) 2,650 173,575
Biovail Corp. (a) 14,400 677,664
Bristol-Myers Squibb Co. 28,700 779,205
GlaxoSmithKline plc 21,350 431,590
InterMune, Inc. (a) 2,600 41,886
Johnson & Johnson 31,600 1,633,720
Merck & Co., Inc. 44,300 2,682,365
Nektar Therapeutics (a) 2,900 26,767
Novartis AG 15,950 632,524
Novo-Nordisk A/S 7,000 245,418
Pfizer, Inc. 138,500 4,729,775
Salix Pharmaceuticals, Ltd. (a) 4,000 41,960
SFBC International, Inc. (a) 2,000 36,200
Shire Pharmaceuticals Plc (a) 21,325 140,992
SICOR, Inc. (a) 5,200 105,768
Takeda Chemical Industries, Ltd. 8,100 299,387
Taro Pharmaceuticals Industries (a) 1,900 104,272
Teva Pharmaceutical Industries, Ltd., ADR 12,700 723,011
Trimeris, Inc. (a) 2,000 91,360
Wyeth 16,100 733,355
--------------
15,788,050
--------------
INDUSTRIALS--6.6%
AEROSPACE & DEFENSE--1.3%
Alliant Techsystems, Inc. (a) 600 31,146
Armor Holdings, Inc. (a) 3,100 41,540
DRS Technologies, Inc. (a) 4,000 111,680
General Dynamics Corp. 10,300 746,750
Herley Industries, Inc. (a) 1,800 30,564
Honeywell International, Inc. 45,800 1,229,730
Integrated Defense Technologies, Inc. (a) 2,500 38,775
Ladish Co., Inc. (a) 5,100 33,762
Lockheed Martin Corp. 8,700 413,859
Mercury Computer Systems, Inc.(a) 2,100 38,136
Northrop Grumman Corp. 300 25,887
Precision Castparts Corp. 2,000 62,200
Raytheon Co. 25,000 821,000
--------------
3,625,029
--------------
</Table>
See Notes to Investment Portfolio.
158
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
AIR FREIGHT & COURIERS--0.5%
CNF, Inc. 1,500 $ 38,070
EGL Inc. (a) 2,700 41,040
Exel plc 17,000 174,778
FedEx Corp. 7,100 440,413
JB Hunt Transport Services, Inc. (a) 2,000 75,500
Ryder System, Inc. 2,300 58,926
TPG NV 15,502 269,607
United Parcel Service, Inc. 5,000 318,500
UTI Worldwide, Inc. 1,900 59,261
--------------
1,476,095
--------------
AIRLINES--0.1%
AMR Corp. (a) 5,100 56,100
Atlantic Coast Airlines Holdings, Inc. (a) 4,600 62,054
Mesaba Holdings, Inc. (a) 2,700 16,659
Ryanair Holding Plc, ADR (a) 4,000 179,600
Skywest, Inc. 3,600 68,616
--------------
383,029
--------------
BUILDING PRODUCTS--0.1%
Jacuzzi Brands, Inc. (a) 9,500 50,255
NCI Building Systems, Inc. (a) 2,600 43,420
Watsco, Inc. 3,900 64,584
--------------
158,259
--------------
COMMERCIAL SERVICES & SUPPLIES--1.8%
Adecco SA 5,000 206,422
Arbitron, Inc. (a) 2,900 103,530
Banta Corp. 1,700 55,029
Bellsystem 24, Inc. 700 112,428
BISYS Group, Inc. (a) 4,200 77,154
Brinks Co. 4,500 65,565
Casella Waste Systems, Inc. (a) 8,100 73,143
Cendant Corp. (a) 6,900 126,408
Century Business Services, Inc. (a) 7,100 23,075
ChoicePoint, Inc. (a) 2,700 93,204
Chubb Plc 127,650 159,300
Concord EFS, Inc. (a) 39,600 582,912
Consolidated Graphics, Inc. (a) 3,400 77,792
Corporate Executive Board Co. (a) 3,800 155,116
Dai Nippon Printing Co., Ltd. 16,000 169,538
DST Systems, Inc. (a) 900 34,200
Electro Rent Corp. (a) 3,400 36,652
First Data Corp. 10,700 443,408
FTI Consulting, Inc. (a) 3,450 86,146
Imagistics International, Inc. (a) 3,700 95,460
Kroll, Inc. (a) 1,200 32,472
Manpower, Inc. 1,900 70,471
Navigant Consulting, Inc. (a) 1,900 22,515
NCO Group, Inc. (a) 3,700 66,267
Republic Services, Inc. (a) 3,300 74,811
Robert Half International, Inc. (a) 3,400 64,396
Secom Co., Ltd. 8,000 234,951
Securitas AB 10,000 $ 102,562
Sourcecorp (a) 4,600 99,360
Sylvan Learning Systems, Inc. (a) 4,700 107,348
TeleTech Holdings, Inc. (a) 4,100 17,343
United Stationers, Inc. (a) 1,400 50,638
Waste Connections, Inc. (a) 2,300 80,615
Waste Management, Inc. 51,500 1,240,635
Weight Watchers International, Inc. (a) 2,200 100,078
--------------
5,140,944
--------------
CONSTRUCTION & ENGINEERING--0.1%
Chicago Bridge & Iron Co., NV 5,500 124,740
Comfort Systems USA, Inc. (a) 7,600 19,988
EMCOR Group, Inc. (a) 2,200 108,592
Mastec, Inc. (a) 11,000 63,360
Shaw Group, Inc. (a) 3,700 44,585
--------------
361,265
--------------
ELECTRICAL EQUIPMENT--0.3%
American Power Conversion 2,500 38,975
Ametek, Inc. 1,000 36,650
Genlyte Group, Inc. (a) 1,300 45,461
Rayovac Corp. (a) 4,000 51,800
Samsung Electronics Co., GDR 1,600 238,000
Tecumseh Products Co. 1,500 57,465
Ushio, Inc. 21,000 243,544
--------------
711,895
--------------
INDUSTRIAL CONGLOMERATES--1.6%
Carlisle Cos., Inc. 3,200 134,912
Denbury Resources, Inc. (a) 4,400 59,092
General Electric Co. 72,700 2,085,036
Siemens AG 2,925 143,731
Textron, Inc. 37,200 1,451,544
Tyco International, Ltd. 34,900 662,402
--------------
4,536,717
--------------
MACHINERY--0.6%
AGCO Corp. (a) 3,800 64,904
Alamo Group, Inc. 1,800 21,996
Briggs & Stratton 1,200 60,600
Cuno, Inc. (a) 2,600 93,912
Dover Corp. 19,000 569,240
Esterline Technologies Corp. (a) 3,300 57,453
Harsco Corp. 2,500 90,125
Ingersoll-Rand Co., Ltd. 1,900 89,908
Kadant, Inc. (a) 3,300 61,875
Mueller Industries, Inc. (a) 1,500 40,665
Navistar International Corp. (a) 3,600 117,468
Oshkosh Truck Corp. 1,100 65,252
Parker Hannifin Corp. 1,000 41,990
Sandvik AB 5,000 131,016
Tomra Systems ASA 29,600 127,203
--------------
1,633,607
--------------
</Table>
See Notes to Investment Portfolio.
159
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
ROAD & RAIL--0.1%
Covenant Transport, Inc. (a) 2,200 $ 37,400
Dollar Thrifty Automotive Group (a) 3,000 55,650
Genesee & Wyoming, Inc. (a) 4,400 90,508
Heartland Express, Inc. (a) 3,600 80,100
Kansas City Southern (a) 2,700 32,481
Old Dominion Freight Line (a) 1,800 38,916
US Xpress Enterprises, Inc. (a) 1,600 17,056
--------------
352,111
--------------
TRADING COMPANIES & DISTRIBUTORS--0.1%
CDW Corp. (a) 1,600 73,280
Fastenal Co. 2,100 71,274
Mitsubishi Corp. 26,000 180,702
WW Grainger, Inc. 2,100 98,196
--------------
423,452
--------------
INFORMATION TECHNOLOGY--9.4%
COMMUNICATIONS EQUIPMENT--1.3%
3Com Corp. (a) 6,700 31,356
Advanced Fibre Communications (a) 3,100 50,437
Allen Telecom, Inc. (a) 3,000 49,560
Andrew Corp. (a) 8,500 78,200
Avocent Corp. (a) 1,600 47,888
Black Box Corp. 1,400 50,680
Cable Design Technologies Corp. (a) 4,400 31,460
Cisco Systems, Inc. (a) 98,500 1,643,965
Comverse Technology, Inc. (a) 6,400 96,192
Datacraft Asia, Ltd. (a) 76,000 76,000
F5 Networks, Inc. (a) 4,400 74,140
Juniper Networks, Inc. (a) 4,400 54,428
Motorola, Inc. 27,500 259,325
Nokia Oyj 26,060 429,849
Optical Communication Products, Inc. (a) 12,100 21,780
Scientific-Atlanta, Inc. 2,800 66,752
Tollgrade Communications, Inc. (a) 2,800 52,220
Utstarcom, Inc. (a) 20,000 711,400
--------------
3,825,632
--------------
COMPUTERS & PERIPHERALS--1.0%
Applied Films Corp. (a) 4,500 116,460
AU Optronics Corp., ADR (a) 5,900 40,828
Cray, Inc. (a) 12,300 97,170
Crossroads Systems, Inc. (a) 3,000 5,067
Dell Computer Corp. (a) 39,500 1,262,420
Electronics for Imaging (a) 2,100 42,609
Hutchinson Technology, Inc. (a) 500 16,445
Imation Corp. 500 18,910
Intergraph Corp. (a) 2,300 49,450
Iomega Corp. (a) 6,100 64,660
Legend Group, Ltd. 338,000 112,693
Lexmark International, Inc. (a) 14,400 1,019,088
--------------
2,845,800
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.9%
Amphenol Corp. (a) 2,800 $ 131,096
Analogic Corp. 800 39,008
Anixter International, Inc. (a) 3,700 86,691
Arrow Electronics, Inc. (a) 3,100 47,244
AVX Corp. 4,400 48,356
Benchmark Electronics, Inc. (a) 1,600 49,216
Brocade Communications Systems, Inc. (a) 21,400 126,046
Celestica, Inc. (a) 38,100 600,456
Checkpoint Systems, Inc. (a) 3,400 48,110
Garmin, Ltd. (a) 4,800 191,376
Global Imaging Systems, Inc. (a) 4,300 99,588
Hoya Corp. 3,400 234,600
Itron, Inc. (a) 4,600 99,176
Jabil Circuit, Inc. (a) 5,800 128,180
Littelfuse, Inc. (a) 3,400 76,024
Millipore Corp. (a) 2,300 102,051
MTS Systems Corp. 3,800 56,012
NU Horizons Electronics Corp. (a) 5,800 34,800
Pioneer Standard Electronics 5,600 47,488
Planar Systems, Inc. (a) 2,600 50,856
Plexus Corp. (a) 12,400 142,972
Somera Communications, Inc. (a) 9,100 13,286
Symbol Technologies, Inc. 3,900 50,739
Tech Data Corp. (a) 2,100 56,091
Varian, Inc. (a) 1,600 55,472
Vishay Intertechnology, Inc. (a) 6,200 81,840
--------------
2,696,774
--------------
INTERNET SOFTWARE & SERVICES--0.2%
Check Point Software Technologies (a) 1,900 37,145
Digital River, Inc. (a) 4,900 94,570
Fidelity National Information Solutions, Inc. (a) 3,100 80,848
SonicWALL, Inc. (a) 11,600 55,680
Stellent, Inc. (a) 5,800 31,320
Trizetto Group (a) 2,300 13,892
Valueclick, Inc. (a) 5,600 33,768
webMethods, Inc. (a) 8,400 68,292
--------------
415,515
--------------
INFORMATION TECHNOLOGY CONSULTING & SERVICES--0.6%
Acxiom Corp. (a) 3,400 51,306
Affiliated Computer Services, Inc. (a) 2,600 118,898
American Management Systems, Inc. (a) 6,000 85,680
Cognizant Technology Solutions Corp. (a) 3,400 82,824
Computer Horizons Corp. (a) 4,100 18,614
Electronic Data Systems Corp. 31,500 675,675
Management Network Group, Inc. (a) 15,900 31,005
</Table>
See Notes to Investment Portfolio.
160
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
MPS Group, Inc. (a) 12,500 $ 86,000
PEC Solutions, Inc. (a) 5,400 86,940
Priority Healthcare Corp. (a) 2,300 42,665
SAP AG, ADR 14,800 432,456
SRA International Inc. (a) 3,300 105,600
--------------
1,817,663
--------------
OFFICE ELECTRONICS--0.4%
Canon, Inc. 3,000 137,917
Xerox Corp. (a) 88,800 940,392
Zebra Technologies Corp. (a) 1,200 90,228
--------------
1,168,537
--------------
SEMICONDUCTOR EQUIPMENT & PRODUCTION--2.9%
Agere Systems, Inc. (a) 29,700 69,201
Altera Corp. (a) 2,100 34,440
Amkor Technology, Inc. (a) 3,100 40,734
Analog Devices, Inc. (a) 8,800 306,416
Applied Micro Circuits Corp. (a) 24,200 146,410
Artisan Components, Inc. (a) 2,800 63,308
ASML Holding NV, New York Shares (a) 13,000 124,280
Broadcom Corp. (a) 14,000 348,740
Brooks Automation, Inc. (a) 9,900 112,266
Cabot Microelectronics Corp. (a) 12,400 625,828
Cymer, Inc. (a) 2,000 64,020
DSP Group, Inc. (a) 2,600 55,978
Dupont Photomasks, Inc. (a) 2,500 47,075
Entegris, Inc. (a) 11,500 154,560
Exar Corp. (a) 2,100 33,243
Fairchild Semiconductor International, Inc. (a) 3,600 46,044
Helix Technology Corp. 3,100 41,013
Infineon Technologies AG, ADR (a) 40,500 388,395
Integrated Circuit Systems, Inc. (a) 1,500 47,145
Integrated Device Technology, Inc. (a) 4,100 45,305
Intel Corp. 48,900 1,016,338
Intersil Corp. (a) 33,900 902,079
Lattice Semiconductor Corp. (a) 10,200 83,946
Marvell Technology Group, Ltd. (a) 19,000 653,030
Maxim Integrated Products, Inc. 2,500 85,475
Microchip Technology, Inc. 13,580 334,475
Mykrolis Corp. (a) 5,400 54,810
National Semiconductor Corp. (a) 3,200 63,104
Novellus Systems, Inc. (a) 2,700 98,877
NVIDIA Corp. (a) 30,050 691,450
Pericom Semiconductor Corp. (a) 3,500 32,550
PMC-Sierra, Inc. (a) 52,900 620,517
Skyworks Solutions, Inc. (a) 5,000 33,850
Taiwan Semiconductor Manufacturing Co., Ltd., ADR (a) 31,900 321,552
Teradyne, Inc. (a) 2,160 37,390
Texas Instruments, Inc. 16,650 293,040
Zoran Corp. (a) 5,500 105,655
--------------
8,222,539
--------------
SOFTWARE--2.1%
Activision, Inc. (a) 6,450 $ 83,334
Adobe Systems, Inc. 10,000 320,700
Amdocs, Ltd. (a) 5,800 139,200
BMC Software, Inc. (a) 3,500 57,155
Borland Software Corp. (a) 11,600 113,332
Electronic Arts, Inc. (a) 6,050 447,640
Henry (Jack) & Associates 3,000 53,370
Intuit, Inc. (a) 1,400 62,342
Magma Design Automation, Inc. (a) 3,000 51,450
Mercury Interactive Corp. (a) 2,500 96,525
Micromuse, Inc. (a) 3,500 27,965
Microsoft Corp. 105,900 2,712,099
Novell, Inc. (a) 11,200 34,496
Oracle Corp. (a) 38,300 460,366
Pervasive Software, Inc. (a) 5,800 31,030
PLATO Learning, Inc. (a) 8,500 48,875
Reynolds & Reynolds Co. 2,900 82,824
SAP AG 3,205 378,609
Siebel Systems, Inc. (a) 5,000 47,700
Sybase, Inc. (a) 4,000 55,640
Symantec Corp. (a) 2,500 109,650
Take-Two Interactive Software (a) 1,700 48,178
VERITAS Software Corp. (a) 16,500 473,055
--------------
5,935,535
--------------
MATERIALS--1.9%
CHEMICALS--0.8%
Air Products & Chemicals, Inc. 16,600 690,560
Cytec Industries, Inc. (a) 3,400 114,920
DSM NV 5,000 211,186
Eastman Chemical Co. 2,100 66,507
Ecolab, Inc. 1,600 40,960
Engelhard Corp. 2,100 52,017
HB Fuller Co. 2,000 44,040
International Flavors & Fragrances, Inc. 3,700 118,141
Kaneka Corp. 37,000 228,443
Lubrizol Corp. 4,200 130,158
Methanex Corp. 1,200 12,827
Minerals Technologies, Inc. 1,300 63,258
PPG Industries, Inc. 1,000 50,740
Praxair, Inc. 1,500 90,150
Schulman (A.), Inc. 2,600 41,756
Shin-Etsu Chemical Co., Ltd. 5,000 171,040
--------------
2,126,703
--------------
CONSTRUCTION MATERIALS--0.0%
Amcol International Corp. 2,900 23,200
Centex Construction Products, Inc. 1,600 64,144
--------------
87,344
--------------
CONTAINERS & PACKAGING--0.1%
Aptargroup, Inc. 1,500 54,000
Crown Holdings, Inc. (a) 7,300 52,122
</Table>
See Notes to Investment Portfolio.
161
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
Greif, Inc. 2,000 $ 46,000
Jarden Corp. (a) 5,800 160,486
Packaging Corp. of America (a) 2,000 36,860
--------------
349,468
--------------
METALS & MINING--0.5%
Barrick Gold Corp. 40,800 730,320
BHP Billiton, Ltd. 15,000 87,020
Carpenter Technology Corp. 3,100 48,360
JFE Holdings, Inc. 11,600 174,210
Peabody Energy Corp. 5,000 167,950
Pechiney SA 4,650 167,199
RTI International Metals, Inc. (a) 4,500 48,735
--------------
1,423,794
--------------
PAPER & FOREST PRODUCTS--0.5%
Boise Cascade Corp. 1,000 23,900
Bowater, Inc. 15,800 591,710
Georgia-Pacific Corp. 3,200 60,640
Glatfelter 1,700 25,075
International Paper Co. 1,850 66,101
MeadWestvaco Corp. 4,575 113,002
UPM-Kymmene Oyj 17,050 249,266
Weyerhaeuser Co. 6,000 324,000
--------------
1,453,694
--------------
TELECOMMUNICATION SERVICES--2.8%
DIVERSIFIED TELECOMMUNICATION--2.2%
BellSouth Corp. 63,100 1,680,353
Intrado, Inc. (a) 2,100 33,159
North Pittsburgh Systems, Inc. 2,700 40,689
SBC Communications, Inc. 76,800 1,962,240
Telecom Italia SpA 31,150 282,343
Telefonica SA (a) 38,333 445,776
Verizon Communications, Inc. 50,400 1,988,280
--------------
6,432,840
--------------
WIRELESS TELECOMMUNICATION SERVICES--0.6%
AT&T Wireless Services, Inc. (a) 16,200 133,002
China Mobile, Ltd./HK 98,000 231,234
Metro One Telecommunications (a) 3,000 15,480
Mobile Telesystems, ADR (a) 3,300 194,700
NTT DoCoMo, Inc. 140 303,700
Sprint Corp.-PCS Group (a) 15,600 89,700
Telephone & Data Systems, Inc. 2,400 119,280
Vodafone Group Plc 295,000 577,813
--------------
1,664,909
--------------
UTILITIES--1.9%
ELECTRIC UTILITIES--1.4%
Allete, Inc. 1,900 50,445
American Electric Power Co., Inc. 26,500 790,495
Central Vermont Public Service Corp. 3,800 74,290
CH Energy Group, Inc. 2,500 112,500
Consolidated Edison, Inc. 22,000 952,160
El Paso Electric Co. (a) 3,700 45,621
Entergy Corp. 1,300 $ 68,614
Exelon Corp. 1,600 95,696
Maine Public Service Co. 900 29,259
MGE Energy, Inc. 1,500 47,250
National Grid Transco Plc 54,400 369,562
Northeast Utilities 6,100 102,114
PG&E Corp. (a) 19,400 410,310
PPL Corp. 1,000 43,000
Progress Energy, Inc. 2,100 92,190
TXU Corp. 28,200 633,090
--------------
3,916,596
--------------
GAS UTILITIES--0.0%
Cascade Natural Gas Corp. 1,600 30,560
Northwest Natural Gas Co. 1,200 32,700
WGL Holdings, Inc. 1,200 32,040
--------------
95,300
--------------
MULTI-UTILITIES--0.5%
Duke Energy Corp. 62,200 1,240,890
Energy East Corp. 2,600 53,976
MDU Resources Group, Inc. 1,000 33,490
--------------
1,328,356
--------------
TOTAL COMMON STOCKS
(cost of $172,667,040) 182,249,770
--------------
<Caption>
PAR
--------------
CORPORATE BONDS--17.1%
CONSUMER DISCRETIONARY--2.5%
AUTO COMPONENTS--0.1%
American Axle & Manufacturing, Inc.,
9.750%, 03/01/09 $ 75,000 80,813
Lear Corp.,
8.110%, 05/15/09 275,000 316,937
--------------
397,750
--------------
AUTOMOBILES--0.1%
General Motors Corp.,
7.125%, 07/15/13 150,000 150,471
--------------
HOTELS, RESTAURANTS & LEISURE--1.0%
Cinemark USA, Inc.,
02/01/13 (b) 250,000 272,500
Extended Stay America,
9.150%, 03/15/08 230,000 238,050
Harrah's Entertainment, Inc.,
7.875%, 12/15/05 400,000 434,000
Host Marriott LP,
9.500%, 01/15/07 135,000 146,137
International Game Technology, Inc.,
8.375%, 05/15/09 100,000 122,000
Park Place Entertainment Corp.,
9.375%, 02/15/07 325,000 359,125
Six Flags, Inc.,
9.500%, 02/01/09 5,000 4,925
9.750%, 06/15/07 110,000 108,900
</Table>
See Notes to Investment Portfolio.
162
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
Speedway Motorsports, Inc.,
6.750%, 06/01/13 (b) $ 200,000 $ 206,000
Starwood Hotels & Resorts, Inc.,
7.875%, 05/01/12 225,000 246,375
Station Casinos, Inc.,
8.875%, 12/01/08 350,000 365,750
YUM! Brands, Inc.,
7.450%, 05/15/05 50,000 53,000
7.650%, 05/15/08 50,000 55,500
7.700%, 07/01/12 195,000 221,325
8.875%, 04/15/11 45,000 52,650
--------------
2,886,237
--------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Scotts Co.,
8.625%, 01/15/09 250,000 267,500
--------------
MEDIA--1.0%
AOL Time Warner, Inc.,
7.625%, 04/15/31 75,000 85,926
British Sky Broadcasting Plc,
8.200%, 07/15/2009 150,000 175,263
CSC Holdings, Inc.,
8.125%, 08/15/09 50,000 51,250
9.875%, 02/15/13 220,000 224,400
Dex Media East LLC,
12.125%, 11/15/12 250,000 297,500
DirectTV Holdings LLC,
8.375%, 03/15/13 (b) 110,000 122,925
Houghton Mifflin Co.,
9.875%, 02/01/13 (b) 275,000 303,875
Lamar Media Corp.,
7.250%, 01/01/13 375,000 399,375
Lin TV Corp.,
6.500%, 05/15/13 (b) 175,000 175,438
Mediacom Communications Corp.,
9.500%, 01/15/13 325,000 346,125
Rogers Cable, Inc.,
7.875%, 05/01/12 350,000 363,328
Sinclair Broadcast Group, Inc.,
8.750%, 12/15/11 260,000 286,000
TCI Communications, Inc.,
8.750%, 08/01/15 100,000 130,478
--------------
2,961,883
--------------
SPECIALTY RETAIL--0.2%
Hasbro, Inc.,
8.500%, 03/15/06 200,000 220,000
United Rentals, Inc.,
8.800%, 08/15/08 200,000 194,000
--------------
414,000
--------------
CONSUMER STAPLES--0.8%
BEVERAGES--0.2%
Constellation Brands, Inc.,
8.125%, 01/15/12 $ 300,000 $ 324,000
8.500%, 03/01/09 50,000 53,500
Cott Beverages, Inc.,
8.000%, 12/15/11 350,000 378,438
--------------
755,938
--------------
FOOD & DRUG RETAILING--0.1%
Winn-Dixie Stores, Inc.,
8.875%, 04/01/08 206,000 220,420
--------------
HOUSEHOLD PRODUCTS--0.5%
Procter & Gamble Co.,
4.750%, 06/15/07 1,250,000 1,358,275
--------------
ENERGY--2.0%
ENERGY EQUIPMENT & SERVICES--0.2%
Grant Prideco, Inc.,
9.625%, 12/01/07 400,000 438,000
Key Energy Services, Inc.,
6.375%, 05/01/13 75,000 76,125
Universal Compression Holdings, Inc.,
7.250%, 05/15/10 (b) 25,000 26,000
--------------
540,125
--------------
OIL & GAS--1.8%
Amerada Hess Corp.,
7.125%, 03/15/33 725,000 830,045
Devon Financing Corp.,
6.875%, 09/30/11 1,000,000 1,174,730
Nexen, Inc.,
7.875%, 03/15/32 1,250,000 1,545,575
Pride International, Inc.,
10.000%, 06/01/09 350,000 381,500
Pemex Project Funding Master Trust,
7.875%, 02/01/09 300,000 342,000
Vintage Petroleum, Inc.,
7.875%, 05/15/11 250,000 261,875
Westport Resources Corp.,
8.250%, 11/01/11 350,000 381,500
XTO Energy, Inc.,
7.500%, 04/15/12 220,000 251,900
--------------
5,169,125
--------------
FINANCIALS--6.0%
BANKS--0.4%
Den Danske Bank,
6.550%, 09/15/03 (b) 1,250,000 1,261,788
--------------
DIVERSIFIED FINANCIALS--4.5%
Countrywide Home Loan, Inc.,
6.850%, 06/15/04 1,000,000 1,050,760
</Table>
See Notes to Investment Portfolio.
163
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
Fannie Mae,
4.500%, 04/25/13 $ 615,000 $ 629,929
5.000%, 12/25/15-04/01/49 2,115,000 2,191,814
6.250%, 05/15/29 50,000 58,558
6.625%, 09/15/09 2,320,000 2,783,573
Freddie Mac,
5.250%, 01/15/06 150,000 163,289
6.000%, 06/15/11 100,000 116,788
6.250%, 07/15/04 100,000 105,279
Ford Motor Credit Corp.,
7.375%, 02/01/11 925,000 951,057
Goldman Sachs Group, Inc.,
5.700%, 09/01/12 600,000 661,308
6.600%, 01/15/12 300,000 348,840
Household Financial Corp.,
5.875%, 02/01/09 900,000 1,009,548
IBM Canada Credit Services Company,
3.750%, 11/30/07 (b) 1,000,000 1,027,140
International Lease Financial Corp.,
6.375%, 03/15/09 1,250,000 1,400,987
RH Donnelley Financial Corp.,
10.875%, 12/15/12 (b) 350,000 406,000
--------------
12,904,870
--------------
INSURANCE--1.0%
Florida Windstorm Underwriting Association,
7.125%, 02/25/19 (b) 1,150,000 1,378,609
Prudential Insurance Co.,
7.650%, 07/01/07 (b) 1,150,000 1,335,483
--------------
2,714,092
--------------
REAL ESTATE--0.1%
Health Care REIT, Inc.,
7.500%, 08/15/07 200,000 215,558
IStar Financial, Inc.,
7.000%, 03/15/08 100,000 105,000
--------------
320,558
--------------
HEALTH CARE--1.4%
HEALTH CARE EQUIPMENT & SUPPLIES--0.0%
Apogent Technologies, Inc.,
6.500%, 05/15/13 (b) 25,000 25,813
--------------
HEALTH CARE PROVIDERS & SERVICES--1.4%
AmerisourceBergen Corp.,
7.250%, 11/15/12 100,000 108,750
8.125%, 09/01/08 265,000 292,163
HCA Healthcare Co.,
7.125%, 06/01/06 900,000 973,404
7.875%, 02/01/11 50,000 55,381
8.750%, 09/01/10 75,000 88,708
Omnicare, Inc.,
8.125%, 03/15/11 400,000 437,000
Province Healthcare Co.,
7.500%, 06/01/13 175,000 174,125
Select Medical Corp.,
9.500%, 06/15/09 250,000 272,500
Tenet Healthcare Corp.,
5.375%, 11/15/06 $ 1,125,000 $ 1,091,250
Triad Hospitals, Inc.,
8.750%, 05/01/09 350,000 378,000
--------------
3,871,281
--------------
INDUSTRIALS--1.4%
AEROSPACE & DEFENSE--0.7%
K&F Industries, Inc.,
9.625%, 12/15/10 175,000 192,500
Raytheon Co.,
8.300%, 03/01/10 1,500,000 1,856,790
--------------
2,049,290
--------------
AIR FREIGHT & COURIERS--0.0%
Offshore Logistics, Inc.,
6.125%, 06/15/13 (b) 50,000 50,250
--------------
COMMERCIAL SERVICES & SUPPLIES--0.3%
Allied Waste North America, Inc.,
7.875%, 01/01/09 300,000 310,500
10.000%, 08/01/09 75,000 79,875
Corrections Corp. of America,
7.500%, 05/01/11 125,000 130,938
Iron Mountain, Inc.,
8.625%, 04/01/13 350,000 377,125
Synagro Technologies, Inc.,
9.500%, 04/01/09 25,000 26,750
--------------
925,188
--------------
CONSTRUCTION & ENGINEERING--0.2%
KB Home,
7.750%, 02/01/10 100,000 108,000
8.625%, 12/15/08 225,000 254,250
9.500%, 02/15/11 25,000 28,125
Toll Corp.,
7.750%, 09/15/07 200,000 207,000
--------------
597,375
--------------
MACHINERY--0.1%
Kennametal, Inc.,
7.200%, 06/15/12 150,000 164,712
--------------
ROAD & RAIL--0.1%
Burlington Northern Santa Fe,
6.875%, 02/15/16 100,000 119,248
Kansas City Southern,
7.500%, 06/15/09 54,000 55,890
9.500%, 10/01/08 150,000 167,625
--------------
342,763
--------------
MATERIALS--1.2%
CHEMICALS--0.2%
Airgas, Inc.,
9.125%, 10/01/11 85,000 95,200
Ethyl Corp.,
8.875%, 05/01/10 (b) 195,000 199,875
</Table>
See Notes to Investment Portfolio.
164
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
Equistar Chemicals LP,
10.125%, 09/01/08 $ 60,000 $ 61,650
10.625%, 05/01/11 (b) 140,000 143,500
Macdermid, Inc.,
9.125%, 07/15/11 20,000 22,400
--------------
522,625
--------------
CONTAINERS & PACKAGING--0.5%
Ball Corp.,
6.875%, 12/15/12 350,000 371,875
Constar International, Inc.,
11.000%, 12/01/12 150,000 162,750
Owens-Illinois, Inc.,
7.350%, 05/15/08 270,000 271,350
Silgan Holdings, Inc.,
9.000%, 06/01/09 375,000 388,125
Stone Container Corp.,
9.750%, 02/01/11 200,000 218,000
--------------
1,412,100
--------------
METALS & MINING--0.1%
Peabody Energy Corp.,
6.875%, 03/15/13 (b) 200,000 210,000
--------------
PAPER & FOREST PRODUCTS--0.4%
Abitibi Consolidated, Inc.,
7.875%, 08/01/09 200,000 220,586
Cascades, Inc.,
7.250%, 02/15/13 (b) 140,000 147,700
Georgia Pacific Corp.,
8.875%, 05/15/31 1,000,000 980,000
--------------
1,348,286
--------------
TELECOMMUNICATION SERVICES--1.2%
DIVERSIFIED TELECOMMUNICATION--0.4%
France Telecom SA,
10.000%, 03/01/31 50,000 68,966
L 3 Communications Corp.,
7.625%, 06/15/12 225,000 247,500
Sprint Capital Corp.,
6.125%, 11/15/08 375,000 407,906
Worldcom, Inc.,
8.250%, 05/15/31 (c) 1,525,000 453,688
--------------
1,178,060
--------------
WIRELESS TELECOMMUNICATION SERVICES--0.8%
AT&T Wireless Services, Inc.,
7.875%, 03/01/11 400,000 472,960
Advance PCS,
8.500%, 04/1/08 400,000 430,000
Nextel Comunications, Inc.,
9.950%, 02/15/08 50,000 52,125
10.650%, 09/15/07 275,000 284,625
Verizon Wireless Capital LLC,
5.375%, 12/15/06 900,000 988,794
--------------
2,228,504
--------------
UTILITIES--0.6%
ELECTRIC UTILITIES--0.6%
Chesapeake Energy Corp.,
7.500%, 09/15/13 (b) $ 165,000 $ 174,900
8.125%, 04/01/11 50,000 53,875
8.375%, 11/01/08 100,000 108,000
9.000%, 08/15/12 25,000 28,000
FirstEnergy Corp.,
5.500%, 11/15/06 1,050,000 1,125,107
Indiana Michigan Power Co.,
6.125%, 12/15/06 35,000 38,937
6.875%, 07/01/04 50,000 52,298
Transalta Corp.,
7.450%, 05/15/05 75,000 77,659
--------------
1,658,776
--------------
GAS UTILITIES--0.0%
Semco Energy, Inc.,
7.125%, 05/15/08 (b) 10,000 10,400
--------------
TOTAL CORPORATE BONDS
(cost of $46,794,037) 48,918,455
--------------
FOREIGN GOVERNMENT OBLIGATION--0.1%
State of Israel,
6.625%, 08/15/03
(cost of $267,872) 250,000 251,605
--------------
U.S. GOVERNMENT OBLIGATIONS--7.6%
U.S. GOVERNMENT AGENCIES--6.0%
Federal Home Loan Mortgage Corp.,
5.500%, 12/01/32 188,742 194,981
6.500%, 12/01/10-07/01/31 5,782,551 6,040,383
7.000%, 04/01/29-08/01/31 142,735 149,717
7.500%, 07/01/15-01/01/30 86,255 91,749
8.000%, 09/01/15 41,535 44,895
12.000%, 07/01/20 218,278 251,379
--------------
6,773,104
--------------
Federal National
Mortgage Association,
5.500%, 05/01/16 119,023 123,657
6.000%, 04/01/16-07/01/31 379,231 395,158
6.120%, 10/01/08 236,589 260,347
6.500%, 08/01/31-12/01/31 2,181,771 2,275,210
7.000%, 07/01/31-12/01/32 1,573,807 1,657,372
7.500%, 09/01/15-08/01/31 335,794 357,419
8.000%, 04/01/30-05/01/30 94,801 102,229
--------------
5,171,392
--------------
</Table>
See Notes to Investment Portfolio.
165
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
Government National
Mortgage Association,
5.750%, 07/20/25 $ 75,176 $ 76,781
6.000%, 12/15/28-03/15/29 3,100,687 3,255,332
6.500%, 05/15/13-05/15/29 521,964 551,067
7.000%, 11/15/13-06/15/31 76,795 81,395
7.500%, 09/15/29 175,345 186,403
8.000%, 03/15/26 995,757 1,079,454
9.000%, 12/15/17 12,275 13,673
--------------
5,244,105
--------------
U.S. GOVERNMENT BONDS & NOTES--1.6%
U.S. Treasury Bonds,
5.375%, 02/15/31 695,000 782,608
7.250%, 08/15/22 150,000 203,232
7.625%, 02/15/25 150,000 213,275
8.125%, 08/15/19 150,000 216,943
12.000%, 08/15/13 35,000 50,863
--------------
1,466,921
--------------
U.S. Treasury Notes,
3.000%, 11/15/07 205,000 211,454
3.625%, 05/15/13 55,000 55,430
3.875%, 02/15/13 930,000 956,991
4.000%, 11/15/12 1,700,000 1,768,996
5.500%, 05/15/09 200,000 230,359
--------------
3,223,230
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(cost of $20,503,399) 21,878,752
--------------
NON-AGENCY MORTGAGE-BACKED & ASSET-BACKED SECURITIES--5.9%
ASSET-BACKED SECURITIES--3.5%
American Express Credit Card Trust,
5.600%, 11/15/06 125,000 129,348
Chase Manhattan Auto Owner Trust,
3.800%, 05/15/08 250,000 258,965
Chase Manhattan Auto Owner Trust,
5.070%, 02/15/08 100,000 104,604
Chemical Bank Master Credit
Card Trust,
5.980%, 09/15/08 150,000 160,623
Citibank Credit Card Issuance Trust,
4.950%, 02/09/09 205,000 221,656
Continental Airlines
Pass-Through Trust,
7.461%, 04/01/15 334,171 307,438
Federal Express Corp.
Pass-Through Certificate,
7.530%, 09/23/06 871,992 970,624
Honda Auto Receivables,
5.090%, 10/18/06 50,000 51,521
MBNA Master Credit Card Trust,
6.600%, 04/16/07 4,250,000 4,541,380
Standard Credit Card Master Trust,
6.550%, 10/07/07 1,500,000 1,652,325
Toyota Auto Receivables,
4.720%, 09/15/08 200,000 209,038
United Airlines
Pass-Through Certificate,
7.032%, 10/01/10 (d) $ 1,372,048 $ 1,166,241
9.200%, 03/22/08 (c) 507,021 111,545
Wells Fargo Auto Trust,
5.070%, 03/15/08 250,000 256,950
--------------
10,142,258
--------------
NON-AGENCY MORTGAGE-BACKED SECURITIES--2.4%
American Mortgage Trust,
7.432%, 09/27/22 89,094 80,184
Citicorp Pass-Through Trust,
8.040%, 12/15/19 (b) 1,950,000 2,353,943
LB-UBS Commercial Mortgage Trust,
6.510%, 12/15/26 3,750,000 4,393,487
Rural Housing Trust,
6.330%, 04/01/26 20,707 21,041
--------------
6,848,655
--------------
TOTAL NON-AGENCY MORTGAGE-BACKED & ASSET-BACKED SECURITIES
(cost of $16,263,427) 16,990,913
--------------
MUNICIPAL BONDS--0.5%
California Infrastructure &
Economic Development Authority,
6.420%, 12/26/09 1,200,000 1,369,956
New Jersey Economic
Development Authority,
7.425%, 02/15/29 100,000 132,506
--------------
TOTAL MUNICIPAL BONDS
(cost of $1,481,723) 1,502,462
--------------
<Caption>
SHARES
--------------
POOLED INVESTMENT VEHICLES--1.8%
S&P MidCap 400 Depositary Receipts 23,300 2,043,876
SPDR Trust Series 1 30,000 2,928,900
--------------
TOTAL POOLED INVESTMENT VEHICLES
(cost of $4,298,020) 4,972,776
--------------
PREFERRED STOCKS--0.9%
CONSUMER DISCRETIONARY--0.1%
MEDIA--0.1%
News Corp., Ltd., ADR 12,600 315,630
--------------
FINANCIALS--0.7%
DIVERSIFIED FINANCIALS--0.7%
HSBC Capital Funding 1,000,000 1,320,344
RBS Capital Trust 700,000 704,907
--------------
2,025,251
--------------
HEALTH CARE--0.1%
HEALTH CARE EQUIPMENT & SUPPLIES--0.1%
Fresenius AG 5,475 259,147
--------------
TOTAL PREFERRED STOCKS
(cost of $2,877,532) 2,600,028
--------------
</Table>
See Notes to Investment Portfolio.
166
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
SHORT-TERM OBLIGATIONS--2.5%
Repurchase agreement with
State Street Bank & Trust Co., dated
06/30/03, due 07/01/03 at
0.95%, collateralized by
U.S. Treasury Bonds with
various maturities to 11/15/10,
market value $2,290,125
(repurchase proceeds
$2,241,059) $ 2,241,000 $ 2,241,000
--------------
Repurchase agreement with
State Street Bank & Trust Co., dated
06/30/03, due 07/01/03 at
1.00%, collateralized by
U.S. Treasury Bonds with
various maturities to 02/15/29,
market value $4,887,204
(repurchase proceeds
$4,777,133) 4,777,000 4,777,000
--------------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $7,018,000) 7,018,000
--------------
TOTAL INVESTMENTS--100.1%
(cost of $272,171,050) (e) 286,382,761
--------------
OTHER ASSETS & LIABILITIES, NET--(0.1)% (310,310)
--------------
NET ASSETS--100.0% $ 286,072,451
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2003,
the value of these securities amounted to $9,832,139 or 3.4% of the net
assets.
(c) As of June 30, 2003 the Fund held certain securities that have filed for
bankruptcy protection under Chapter 11, representing 0.2% of net assets.
This issuer is in default of certain debt covenants. Income is not being
accrued.
(d) As of June 30, 2003, this security has filed for bankruptcy protection
under Chapter 11, representing 0.4% of net assets. This issuer is in
default of certain debt covenants, however, income is being accrued as a
special escrow account has been set up for eighteen months of interest.
(e) Cost for federal income tax purposes is $272,370,389. The difference
between cost for generally accepted accounting principles and cost on a tax
basis is related to amortization/accretion elections on fixed income
securities.
<Table>
<Caption>
ACRONYM NAME
------- ----
ADR American Depositary Receipt
GDR Global Depositary Receipt
</Table>
See Notes to Financial Statements.
167
<Page>
STATEMENT OF ASSETS & LIABILITIES
Liberty Asset Allocation Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 272,171,050
-------------
Investments, at value $ 286,382,761
Cash 157,819
Foreign currency (cost of $861,266) 838,589
Receivable for:
Investments sold 5,447,922
Fund shares sold 143,163
Interest 1,032,758
Dividends 228,147
Expense reimbursement due from Manager/Distributor 27,027
Deferred Trustees' compensation plan 3,263
Other assets 28,906
-------------
TOTAL ASSETS 294,290,355
-------------
LIABILITIES:
Payable for:
Investments purchased 5,336,061
Fund shares repurchased 2,626,315
Management fee 110,144
Administration fee 35,931
Transfer agent fee 594
Pricing and bookkeeping fees 3,827
Merger costs 25,843
Trustees' fee 334
Reports to Shareholders 75,592
Deferred Trustees' fee 3,263
-------------
TOTAL LIABILITIES 8,217,904
-------------
NET ASSETS $ 286,072,451
=============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 296,803,534
Undistributed net investment income 3,098,610
Accumulated net realized loss (28,024,938)
Net unrealized appreciation (depreciation) on:
Investments 14,211,711
Foreign currency translations (16,466)
-------------
NET ASSETS $ 286,072,451
=============
CLASS A:
Net assets $ 231,917,367
Shares outstanding 18,522,489
=============
Net asset value per share $ 12.52
=============
CLASS B:
Net assets $ 54,155,084
Shares outstanding 4,338,075
=============
Net asset value per share $ 12.48
=============
</Table>
See Notes to Financial Statements.
168
<Page>
STATEMENT OF OPERATIONS
Liberty Asset Allocation Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 1,456,777
Interest 2,742,293
-------------
Total Investment Income (net of foreign taxes withheld of $61,774) 4,199,070
-------------
EXPENSES:
Management fee 576,432
Administration fee 192,144
Distribution fee--Class B 64,056
Pricing and bookkeeping fees 49,665
Transfer agent fee 3,720
Trustees' fee 5,781
Custody fee 20,480
Other expenses 55,540
-------------
Total Expenses 967,818
Fees reimbursed by Distributor--Class B (14,362)
-------------
Net Expenses 953,456
-------------
Net Investment Income 3,245,614
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN
CURRENCY AND FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments (2,955,086)
Foreign currency transactions 54,064
Futures contracts (49,412)
Net increase in reimbursement due from Manager (See Note 5) 24,301
-------------
Net realized loss (2,926,133)
-------------
Net change in unrealized appreciation/depreciation on:
Investments 24,479,225
Foreign currency translations (38,539)
Futures contracts 42,065
-------------
Net change in unrealized appreciation/depreciation 24,482,751
-------------
Net Gain 21,556,618
-------------
Net Increase in Net Assets from Operations $ 24,802,232
=============
</Table>
See Notes to Financial Statements.
169
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Liberty Asset Allocation Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- ------------- -------------
OPERATIONS:
Net investment income $ 3,245,614 $ 7,651,311
Net realized loss on investments, foreign currency transactions and
futures contracts (2,926,133) (18,935,561)
Net change in unrealized appreciation/depreciation on investments,
foreign currency translations and futures contracts 24,482,751 (25,560,282)
------------- -------------
Net Increase (Decrease) from Operations 24,802,232 (36,844,532)
------------- -------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A (6,166,140) (8,018,427)
Class B (1,566,119) (1,439,933)
------------- -------------
Total Distributions Declared to Shareholders (7,732,259) (9,458,360)
------------- -------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 1,022,765 4,404,498
Proceeds received in connection with merger 38,966,649 --
Distributions reinvested 6,166,140 8,018,427
Redemptions (22,615,815) (59,391,356)
------------- -------------
Net Increase (Decrease) 23,539,739 (46,968,431)
------------- -------------
Class B:
Subscriptions 4,158,920 16,230,124
Distributions reinvested 1,566,119 1,439,933
Redemptions (6,128,611) (5,779,970)
------------- -------------
Net Increase (Decrease) (403,572) 11,890,087
------------- -------------
Net Increase (Decrease) from Share Transactions 23,136,167 (35,078,344)
------------- -------------
Total Increase (Decrease) in Net Assets 40,206,140 (81,381,236)
NET ASSETS:
Beginning of period 245,866,311 327,247,547
------------- -------------
End of period (including undistributed net investment income of
$3,098,610 and $7,585,255, respectively) $ 286,072,451 $ 245,866,311
============= =============
CHANGES IN SHARES:
Class A:
Subscriptions 82,997 337,897
Issued in connection with merger 3,421,128 --
Issued for distributions reinvested 570,939 595,723
Redemptions (1,919,756) (4,734,716)
------------- -------------
Net Increase (Decrease) 2,155,308 (3,801,096)
------------- -------------
Class B:
Subscriptions 348,443 1,269,931
Issued for distributions reinvested 145,415 107,218
Redemptions (514,452) (476,977)
------------- -------------
Net Increase (Decrease) (20,594) 900,172
------------- -------------
</Table>
See Notes to Financial Statements.
170
<Page>
NOTES TO FINANCIAL STATEMENTS
Liberty Asset Allocation Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Liberty Asset Allocation Fund, Variable Series (the "Fund"), a
series of SteinRoe Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek high total investment return by investing
primarily in a diversified portfolio of common stocks, securities convertible to
common stock, bonds, and cash. The Fund's capitalization consists of an
unlimited number of shares of beneficial interest without par value that
represent a separate series of the Trust. The Fund offers two classes of shares:
Class A and Class B. Each share of a class represents an equal proportionate
beneficial interest in that share class and, when issued and outstanding, is
fully paid and nonassessable. Shareholders would be entitled to share
proportionally in the net assets of their share class available for distribution
to shareholders upon liquidation of the Fund. Shares of the Fund are available
and are being marketed exclusively as a pooled funding vehicle for variable
annuity contracts ("VA contracts") and Variable Life Insurance Policies ("VLI
Policies") offered by the separate accounts of certain life insurance companies
("Participating Insurance Companies"). The Participating Insurance Companies and
their separate accounts own all the shares of the Fund.
On April 1, 2003, Stein Roe & Farnham Incorporated, the investment advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Stein Roe & Farnham Incorporated with respect to the Fund.
The merger did not change the way the Fund is managed, the investment personnel
assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
On April 7, 2003, the Galaxy VIP Asset Allocation Fund (the target fund),
previously a single class fund of Galaxy VIP Fund, a separate Massachusetts
business trust, merged into the Stein Roe Balanced Fund, Variable Series. The
Stein Roe Balanced Fund, Variable Series received a tax-free transfer of assets
from the Galaxy VIP Asset Allocation Fund as follows:
<Table>
<Caption>
SHARES NET ASSETS UNREALIZED
ISSUED RECEIVED DEPRECIATION(1)
--------- ------------ ---------------
3,421,128 $ 38,966,649 $ 3,453,289
<Caption>
NET ASSETS NET ASSETS
NET ASSETS OF GALAXY VIP OF STEIN ROE
OF STEIN ROE ASSET ALLOCATION BALANCED FUND,
BALANCED FUND, FUND VARIABLE SERIES
VARIABLE SERIES IMMEDIATELY IMMEDIATELY
PRIOR TO PRIOR TO AFTER
COMBINATION COMBINATION COMBINATION
--------------- ---------------- ----------------
$ 233,114,098 $ 38,966,649 $ 272,080,747
</Table>
(1) Unrealized depreciation is included in the Net Assets Received amount shown
above.
Also on April 7, 2003, subsequent to the merger described above, the Stein Roe
Balanced Fund, Variable Series was renamed the Liberty Asset Allocation Fund,
Variable Series.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Debt securities generally are valued by
a pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
the current quoted bid price.
171
<Page>
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation of
the Fund's net asset value. If events materially affecting the value of such
securities and such exchange rates occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM--Interest income is recorded on
the accrual basis. Discount is accreted to interest income over the life of a
security with a corresponding increase in the cost basis. Premium is amortized
against interest income with a corresponding decrease in the cost basis.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
FOREIGN CURRENCY TRANSACTIONS--Net realized and unrealized gains (losses) on
foreign currency transactions and translations includes gains (losses) arising
from the fluctuations in exchange rates between trade and settlement dates on
securities transactions, gains (losses) arising from the disposition of foreign
currency, and currency gains (losses) between the accrual and payment dates on
dividends, interest income and foreign withholding taxes.
The Fund does not distinguish the portion of gains (losses) on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains (losses) on investments.
OTHER--Corporate actions and dividend income are recorded on the ex-date
(except for certain foreign securities which are recorded as soon after ex-date
as the Fund becomes aware of such), net of non-reclaimable tax withholdings.
Where a high level of uncertainty as to collection exists, income on securities
is recorded net of all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
172
<Page>
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2009 $ 4,375,998
2010 14,373,391
------------
$ 18,749,389
============
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT AND ADMINISTRATIVE FEES--Columbia receives monthly fees equal to
0.45% and 0.15% annually of the Fund's average daily net assets for management
and administrative services, respectively.
Nordea Investment Management North America, Inc. ("Nordea") has been retained by
Columbia as sub-advisor to manage the portion of the Fund's assets allocated to
foreign stocks. Columbia, out of the management fee it receives, pays Nordea a
monthly sub-advisory fee equal to 0.40% annually of the average daily net assets
of that portion of the Fund's assets managed by Nordea.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). The
Manager pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. For the six months ended June 30, 2003,
the net asset based fee rate was 0.033%. The Fund also pays out-of-pocket costs
for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee totaling 0.25% annually on Class B average daily
net assets.
EXPENSE LIMITS--Columbia has voluntarily agreed to reimburse all expenses,
including management fees, but excluding interest, taxes, distribution fees,
brokerage and extraordinary expenses of the Fund in excess of 0.75% annually of
the Fund's average daily net assets.
LFD has voluntarily agreed to reimburse the Fund's Class B share distribution
fee in excess of 0.15% when the total operating expenses of the Fund applicable
to Class B shares, including distribution fees, are in excess of 0.90% annually
of Class B average daily net assets.
These arrangements may be terminated or modified by Columbia or LFD at any time.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $140,959,934 and
$157,262,027, respectively, of which $9,290,113 and $10,669,215, respectively,
were U.S. Government securities.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 28,321,110
Gross unrealized depreciation (14,308,738)
-------------
Net unrealized appreciation $ 14,012,372
=============
</Table>
173
<Page>
OTHER--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of foreign currency
exchange or the imposition of other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell futures contracts. The Fund will use these
instruments to hedge against the effects of changes in the portfolio securities
due to market conditions and not for trading purposes. The use of futures
contracts involves certain risks which include (1) imperfect correlation between
the price movement of the instruments and the underlying securities, (2)
inability to close out a position due to different trading hours, or the absence
of a liquid market for either the instrument or the underlying securities or (3)
an inaccurate prediction by the Manager of the future direction of the market or
stock price or interest rate trends. Any of these risks may involve amounts
exceeding the variation margin recorded in the Fund's Statement of Assets and
Liabilities at any given time.
NOTE 5. OTHER
During the six months ended June 30, 2003, the Fund was reimbursed $24,301 by
the Manager for a loss incurred outside of the Fund's direct control on the sale
of a portion of Barrick Gold Corp. shares.
174
<Page>
FINANCIAL HIGHLIGHTS
Liberty Asset Allocation Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, --------------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
----------- ----------- ------------ -------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.82 $ 13.81 $ 16.33 $ 16.18
----------- ----------- ------------ -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.14 0.33 0.35(c) 0.25
Net realized and unrealized gain (loss) on
investments, foreign currency, and
futures contracts 0.89 (1.93) (1.85)(c) (0.10)
----------- ----------- ------------ -------------
Total from Investment Operations 1.03 (1.60) (1.50) 0.15
----------- ----------- ------------ -------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.37) (0.39) (0.45) --
From net realized gains -- -- (0.57) --
----------- ----------- ------------ -------------
Total Distributions Declared
to Shareholders (0.37) (0.39) (1.02) --
----------- ----------- ------------ -------------
NET ASSET VALUE, END OF PERIOD $ 12.48 $ 11.82 $ 13.81 $ 16.33
=========== =========== ============ =============
Total return (d)(e)(f) 9.18%(g) (11.94)% (9.39)% 0.93%(g)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 0.90%(i) 0.90% 0.90% 0.90%(i)
Net investment income (h) 2.37%(i) 2.53% 2.49%(c) 2.57%(i)
Waiver/reimbursement 0.05%(i) 0.05% 0.06% 0.04%(i)
Portfolio turnover rate 57%(g) 118% 57% 39%
Net assets, end of period (000's) $ 54,155 $ 51,540 $ 47,754 $ 14,985
</Table>
(a) For the period from commencement of operations on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) As required, effective January 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium and accreting discount on all debt securities. The
effect of this change, for the year ended December 31, 2001, was to
decrease net investment income per share by $0.01, decrease net realized
and unrealized gain per share by $0.01 and to decrease the ratio of net
investment income to average net assets from 2.54% to 2.49%. Per share data
and ratios for periods prior to December 31, 2001 have not been restated to
reflect this change in presentation.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Had the Distributor not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
175
<Page>
SHAREHOLDER MEETING RESULTS
Liberty Asset Allocation Fund, Variable Series
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On February 19, 2003, the Annual Meeting of Shareholders of the Trust was held
to conduct a vote for or against the approval of the following items listed on
the Trust's Proxy Statement for said Meeting. On December 2, 2002, the record
date for the Meeting, the Galaxy VIP Asset Allocation Fund had 3,715,956.172
common shares outstanding. The votes cast were as follows:
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
GALAXY VIP ASSET ALLOCATION FUND
FEBRUARY 19, 2003
1. To approve an Agreement and Plan of Reorganization providing for (i) the sale
of all of the assets of the Galaxy VIP Asset Allocation Fund to, and the
assumption of all of the liabilities of the Galaxy VIP Asset Allocation Fund
by, the Stein Roe Balanced Fund, Variable Series, in exchange for shares of
the Stein Roe Balanced Fund, Variable Series, and the distribution of such
shares to the shareholders of the Galaxy VIP Asset Allocation Fund in
complete liquidation of the Galaxy VIP Asset Allocation Fund; (ii) the
de-registration of The Galaxy VIP Fund as an investment company under the
Investment Company Act of 1940, as amended, and (iii) The Galaxy VIP Fund's
termination as a Massachusetts business trust under Massachusetts law.
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ----------- -------
Affirmative 3,344,940.074 90.016% 90.464%
Against 41,413.212 1.114% 1.120%
Abstain 311,197.311 8.375% 8.416%
TOTAL 3,697,550.597 99.505% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 3,715,956.172
VOTED SHARES 3,697,550.597
PERCENT VOTED 99.505%
</Table>
176
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Liberty Federal Securities Fund, Variable Series / June 30, 2003
Liberty Federal Securities Fund, Variable Series seeks the highest possible
level of current income, consistent with the safety of principal and
maintenance of liquidity.
Ann T. Peterson has managed or co-managed the fund since June 2000. Since
1993 she has managed or co-managed other funds for the advisor.
On April 7, 2003, Galaxy VIP Quality Plus Bond Fund was merged into Liberty
Federal Securities Fund, Variable Series.
DECLINING INTEREST RATES BENEFIT BONDS
Government bonds continued to post modest gains during the first half of 2003.
As the economy remained sluggish with no inflation in sight, interest rates,
which drive government bond returns, continued to decline. The yield on the
five-year US Treasury bond bottomed in mid-June at 2.03%. Soon after, the
Federal Reserve lowered the federal funds rate--the target overnight interest
rate at which commercial banks lend money to each other--to 1.00%. With interest
rates at historical lows, investors reached for yield. The best performers were
bonds with a yield advantage over Treasuries, including mortgage bonds,
asset-backed securities and corporate bonds.
MORTGAGES AND LONGER DURATION BOOST PERFORMANCE
The fund, which focuses on government bonds,
benefited from maintaining a high concentration in mortgage bonds and other
bonds that provided additional yield. About 47% of the fund's net assets were in
mortgage bonds, which did well in an environment in which investors looked to
purchase bonds with higher yields than Treasuries. During the period, we added
mortgage bonds with relatively lower coupons (or stated interest rates). As
interest rates declined, these coupons helped lower prepayment risk (or the risk
that a bond might be paid off before its maturity date). Prepayments occur as
homeowners refinance to take advantage of lower interest rates. When this
happens, bond investors lose income as they are forced to reinvest at lower
prevailing rates.
The fund acquired a small position in high-quality corporate bonds as a
result of its merger in April with Galaxy VIP Quality Plus Bond Fund, an
investment grade bond fund. The corporate bond position represented about 4% of
the fund's net assets at the end of the period. Investment-grade corporate bonds
did well as investors looked to add higher yielding securities in an environment
of low interest rates. The merger also effectively reduced our stake in
Treasuries from 43% to approximately 38% of net assets. Within the Treasury
area, we focused on bonds with five-year maturities, which turned in slightly
better performance than either shorter- or longer-maturity bonds.
In an environment of declining interest rates, the fund's relatively longer
duration further benefited performance. Duration is a measure of a bond's
interest-rate sensitivity. The longer a bond's duration, the more its price will
rise as interest rates fall, or fall as interest rates rise. We actively manage
the fund's duration by lengthening it when we expect interest rates to fall and
shortening it when we expect interest rates to rise. Our strategy going forward
will be to continue to look for relative value primarily among Treasuries and
mortgage bonds, while actively managing the fund's exposure to interest rate
risk.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
An investment in Liberty Federal Securities Fund, Variable Series offers the
potential for attractive current income and total returns, but also involves
certain risks. The value and return of your investment may fluctuate as a result
of changes in interest rates; the financial strength of issuers of lower-rated
bonds; foreign, political and economic developments; and changes in currency
exchange rates.
177
<Page>
PERFORMANCE INFORMATION
Liberty Federal Securities Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------
Class B(1) (6/1/00) 2.96 8.94 6.78 6.58
Lehman Brothers
Intermediate US
Government Bond
Index 2.63 8.62 7.28 6.59
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 6/30/93(2) - 6/30/03
<Table>
<Caption>
LEHMAN BROTHERS INTERMEDIATE
CLASS B SHARES US GOVERNMENT BOND INDEX
Jun-93 $ 10,000 $ 10,000
9/30/1993 $ 10,065 $ 10,211
12/31/1993 $ 10,132 $ 10,226
3/31/1994 $ 9,953 $ 10,037
6/30/1994 $ 9,883 $ 9,981
9/30/1994 $ 9,954 $ 10,058
12/31/1994 $ 9,973 $ 10,048
3/31/1995 $ 10,435 $ 10,466
6/30/1995 $ 10,951 $ 10,954
9/30/1995 $ 11,176 $ 11,124
12/31/1995 $ 11,543 $ 11,496
3/31/1996 $ 11,463 $ 11,418
6/30/1996 $ 11,531 $ 11,494
9/30/1996 $ 11,770 $ 11,692
12/31/1996 $ 12,085 $ 11,962
3/31/1997 $ 12,073 $ 11,960
6/30/1997 $ 12,491 $ 12,293
9/30/1997 $ 12,859 $ 12,608
12/31/1997 $ 13,178 $ 12,887
3/31/1998 $ 13,356 $ 13,081
6/30/1998 $ 13,630 $ 13,323
9/30/1998 $ 14,047 $ 13,945
12/31/1998 $ 14,074 $ 13,980
3/31/1999 $ 14,142 $ 13,942
6/30/1999 $ 14,073 $ 13,915
9/30/1999 $ 14,211 $ 14,055
12/31/1999 $ 14,225 $ 14,048
3/31/2000 $ 14,447 $ 14,278
6/30/2000 $ 14,638 $ 14,538
9/30/2000 $ 15,092 $ 14,928
12/31/2000 $ 15,692 $ 15,521
3/31/2001 $ 16,100 $ 15,986
6/30/2001 $ 16,147 $ 16,053
9/30/2001 $ 16,940 $ 16,851
12/31/2001 $ 16,769 $ 16,828
3/31/2002 $ 16,717 $ 16,784
6/30/2002 $ 17,367 $ 17,432
9/30/2002 $ 18,277 $ 18,272
12/31/2002 $ 18,374 $ 18,449
3/31/2003 $ 18,547 $ 18,621
Jun-03 $ 18,920 $ 18,933
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 11.30 11.19
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The Lehman Brothers Intermediate US
Government Bond Index is an unmanaged index that tracks the performance of
investment grade bonds. Indices are not investments, do not incur fees or
expenses, and are not professionally managed. It is not possible to invest
directly in an index. Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for periods prior to
inception of the newer class shares would be lower.
(2) Inception date for Class A shares (older existing share class) is
January 1, 1989.
178
<Page>
INVESTMENT PORTFOLIO
Liberty Federal Securities Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
PAR VALUE
------------ --------------
U.S. GOVERNMENT AGENCIES--47.8%
Federal Home Loan Mortgage Corp.:
3.000% 07/15/04 $ 140,000 $ 142,705
5.500% 8/1/17-12/01/17 449,044 465,742
5.875% 03/21/11 180,000 202,476
6.000% 04/01/32 83,838 86,928
6.250% 7/15/04-07/15/32 250,000 275,581
6.750% 03/15/31 265,000 329,926
7.000% 06/01/16-01/01/26 421,453 444,057
7.500% 02/01/23-05/01/24 677,689 725,431
8.500% 05/01/06 2,994 3,161
10.500% 02/01/19-06/01/13 71,614 80,133
10.750% 11/01/09 42,830 47,685
11.250% 10/1/09-07/01/13 13,299 15,031
12.000% 07/01/13-07/01/20 169,263 195,112
To Be Announced:
5.000% (a) 11,365,000 11,734,362
5.500% (a) 27,300,000 28,161,643
--------------
42,909,973
--------------
Federal National Mortgage Association:
5.000% 09/25/12-2/1/18 443,303 455,676
5.500% 02/15/06 200,000 219,556
6.000% 12/15/05-7/25/26 2,353,519 2,420,801
6.500% 03/01/09-08/01/31 5,007,574 5,231,233
7.000% 07/01/11-03/01/29 1,282,473 1,358,399
7.125% 03/15/07 250,000 294,465
7.500% 11/01/29 545,130 579,440
8.000% 04/01/30 61,199 65,994
8.500% 05/01/30 1,136,532 1,222,518
9.000% 10/01/05-05/01/20 29,518 32,457
9.250% 03/25/18 157,401 172,127
10.000% 03/01/16 72,934 82,052
12.250% 09/01/12 30,586 35,784
To Be Announced:
5.000% (a) 5,850,000 6,041,950
5.500% (a) 5,049,000 5,243,073
6.000% (a) 32,455,000 33,734,477
7.500% (a) 6,544,000 6,953,000
--------------
64,143,002
--------------
Government National Mortgage Association:
5.750% 07/20/22-07/20/25 232,946 237,956
6.000% 03/15/29-08/15/29 5,926,136 6,220,502
6.500% 10/15/13-03/15/28 2,481,320 2,610,990
7.000% 09/15/29 202,737 214,285
7.500% 10/15/27-09/15/29 90,488 96,260
8.000% 04/15/08-07/15/08 190,689 205,882
8.500% 04/15/30 38,014 40,961
9.000% 06/15/16-01/15/20 206,517 230,225
9.500% 06/15/09-08/15/22 1,182,808 1,325,816
10.000% 06/15/10-11/15/19 96,802 109,209
11.500% 04/15/13-05/15/13 83,956 98,110
To Be Announced:
6.000% (a) 2,500,000 2,618,750
--------------
14,008,946
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(cost of $119,302,067) 121,061,921
--------------
U.S. GOVERNMENT OBLIGATIONS--37.7%
U.S. Treasury Bonds/Notes:
3.250% 12/31/03 $ 475,000 $ 480,381
3.375% 04/30/04 25,000 25,491
5.250% 05/15/04 220,000 228,061
6.000% 08/15/04 793,000 836,677
5.875% 11/15/04 160,000 170,281
1.750% 12/31/04 100,000 100,867
7.500% 02/15/05 8,078,000 8,895,897
5.750% 11/15/05 4,050,000 4,457,373
9.375% 02/15/06 5,525,000 6,640,575
7.000% 07/15/06 6,840,000 7,905,542
3.000% 11/15/07 100,000 103,148
5.500% 05/15/09 3,260,000 3,754,858
6.000% 08/15/09 250,000 294,892
6.500% 02/15/10 (b) 638,000 773,999
5.750% 08/15/10 18,084,000 21,167,467
4.375% 08/15/12 12,290,000 13,177,670
3.875% 02/15/13 220,000 226,385
7.125% 02/15/23 3,333,000 4,466,350
6.875% 08/15/25 5,745,000 7,569,486
6.750% 08/15/26 5,820,000 7,583,961
5.500% 08/15/28 3,610,000 4,060,828
5.250% 11/15/28 2,200,000 2,394,821
5.375% 02/15/31 235,000 264,623
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(cost of $90,495,444) 95,579,633
--------------
CORPORATE BONDS--3.8%
BASIC MATERIALS--0.1%
FOREST PRODUCTS & PAPER--0.1%
International Paper Co.:
5.850% 10/30/12 50,000 54,572
8.125% 07/08/05 80,000 89,617
Weyerhaeuser Company, Debenture,
7.375% 03/15/32 100,000 114,676
--------------
258,865
--------------
CONSUMER CYCLICAL--0.2%
AUTO MANUFACTURER--0.1%
Ford Motor Co.,
7.450% 07/16/31 205,000 189,980
--------------
RETAIL--0.1%
Dayton Hudson Corp.,
6.650% 08/01/28 125,000 143,196
Home Depot, Inc., Senior Note,
5.375% 04/01/06 120,000 131,029
--------------
274,225
--------------
TEXTILES--0.0%
Cintas Corp., Number 2,
6.000% 06/01/12 100,000 113,021
--------------
</Table>
See Notes to Investment Portfolio.
179
<Page>
<Table>
<Caption>
PAR VALUE
------------ --------------
CONSUMER DISCRETIONARY--0.3%
MEDIA--0.3%
AOL Time Warner, Inc.,
6.875% 05/01/12 $ 100,000 $ 114,314
Cox Communications, Inc.,
7.750% 11/01/10 125,000 152,024
Disney (Walt) Co.:
7.300% 02/08/05 100,000 108,555
6.375% 03/01/12 75,000 85,161
Gannett Co., Inc.:
5.500% 04/01/07 100,000 110,935
6.375% 04/01/12 100,000 117,048
--------------
688,037
--------------
CONSUMER NON-CYCLICAL--0.2%
AGRICULTURE--0.1%
Cargill, Inc.,
6.375% 06/01/12 (c) 130,000 148,853
--------------
COMMERCIAL SERVICES--0.1%
Leland Stanford Junior Univ.,
6.875% 02/01/24 150,000 180,955
--------------
COSMETICS/PERSONAL CARE--0.0%
Gillette Co.,
4.000% 06/30/05 60,000 63,014
--------------
PHARMACEUTICALS--0.0%
Pharmacia Corp., Debenture,
6.600% 12/01/28 20,000 24,357
--------------
CONSUMER STAPLES--0.3%
BEVERAGES--0.0%
Anheuser Busch Cos., Inc.,
7.550% 10/01/30 40,000 52,922
--------------
FOOD & DRUG RETAILING--0.3%
Bestfoods Medium Term,
6.625% 04/15/28 125,000 145,472
ConAgra Foods, Inc.,
6.750% 09/15/11 100,000 117,677
Kellogg Co., Series B,
6.000% 04/01/06 25,000 27,629
Kroger Co.,
6.200% 06/15/12 50,000 54,851
Pepsi Bottling Holdings, Inc.,
5.625% 02/17/09 (c) 100,000 113,063
Safeway, Inc.,
5.800% 08/15/12 50,000 53,160
Sara Lee Corp.,
6.250% 09/15/11 100,000 115,741
Sysco Corp., Debenture,
6.500% 08/01/28 100,000 114,772
--------------
742,365
--------------
ENERGY--0.2%
OIL & GAS--0.2%
Amerada Hess Corp.,
7.125% 03/15/33 $ 100,000 $ 114,489
Anadarko Finance Co., Series B,
6.750% 05/01/11 100,000 116,998
Conoco, Inc., Senior Note,
6.950% 04/15/29 65,000 78,044
Occidental Petroleum Corp.,
Senior Note,
6.500% 04/01/05 140,000 150,786
Texaco Capital, Inc.,
5.500% 01/15/09 75,000 84,275
--------------
544,592
--------------
FINANCIALS--1.5%
BANKS--0.6%
Bank of America Corp., Senior
Note,
4.875% 01/15/13 175,000 185,750
Bank of New York Co., Inc.,
Senior Note,
5.200% 07/01/07 150,000 164,489
Bank One Corp., Subordinated
Note,
7.875% 08/01/10 50,000 62,221
Comerica, Inc., Subordinated
Note, 7.250% 08/01/07 150,000 171,465
Deutsche Bank Financial LLC,
5.375% 03/02/15 100,000 107,115
European Investment Bank,
4.625% 03/01/07 80,000 87,318
Mellon Bank, N.A., Subordinated
Bank Note,
7.625% 09/15/07 100,000 119,354
National City Corp, Subordinated
Note,
5.750% 02/01/09 110,000 120,454
Sovereign Bank,
5.125% 03/15/13 100,000 103,507
SunTrust Bank, Atlanta
Subordinated Note, BN,
7.250% 09/15/06 125,000 143,368
U.S. Bancorp.,
3.125% 03/15/08 150,000 151,757
Wachovia Corp., Senior Note,
7.450% 07/15/05 100,000 111,310
Wells Fargo Bank, N.A.,
Subordinated Note,
6.450% 02/01/11 50,000 58,579
--------------
1,586,687
--------------
DIVERSIFIED FINANCIALS SERVICES--0.8%
American Express Co.,
6.875% 11/01/05 55,000 61,537
Bear Stearns Cos., Inc.,
3.000% 03/30/06 90,000 92,218
</Table>
See Notes to Investment Portfolio.
180
<Page>
<Table>
<Caption>
PAR VALUE
------------ --------------
Boeing Capital Corp., Senior Note,
5.750% 02/15/07 $ 100,000 $ 109,332
Chase Manhattan Corp.,
Subordinated Note,
7.875% 06/15/10 125,000 152,015
Citigroup, Inc., Senior Note,
6.750% 12/01/05 100,000 111,319
Citigroup, Inc., Subordinated Note,
7.250% 10/01/10 100,000 120,745
Ford Motor Credit Co.,
7.600% 08/01/05 120,000 128,758
General Electric Capital Corp.,
Series A MTN:
6.750% 03/15/32 100,000 117,508
6.800% 11/01/05 125,000 139,523
General Motors Acceptance Corp.:
6.750% 01/15/06 150,000 159,331
7.250% 03/02/11 50,000 51,080
7.500% 07/15/05 50,000 53,580
Goldman Sachs Group, Inc.:
4.125% 01/15/08 50,000 52,505
5.250% 04/01/13 50,000 53,252
Household Finance Corp.:
4.625% 01/15/08 50,000 53,296
6.375% 10/15/11 50,000 56,937
International Lease Finance Corp.,
4.000% 01/17/06 90,000 93,105
John Deere Capital Corp.,
Series D, MTN, Senior Note,
3.125% 12/15/05 75,000 77,103
Mellon Funding Corp.,
4.875% 06/15/07 50,000 53,861
Merrill Lynch & Co., Inc.,
Series B, MTN,
4.000% 11/15/07 150,000 157,370
Morgan Stanley Dean Witter & Co.,
Unsubordinated Note,
6.100% 04/15/06 80,000 88,330
--------------
1,982,705
--------------
INSURANCE--0.0%
Marsh & McLennan Cos., Inc.,
Senior Note,
6.250% 03/15/12 100,000 115,829
--------------
REAL ESTATE--0.1%
EOP Operating Ltd.,
7.000% 07/15/11 110,000 128,525
--------------
INDUSTRIALS--0.4%
AEROSPACE & DEFENSE--0.0%
Raytheon Co.,
7.200% 08/15/27 50,000 58,476
--------------
HAND & MACHINE TOOLS--0.0%
Black & Decker Corp., Senior Note,
7.125% 06/01/11 50,000 59,090
--------------
MISCELLANEOUS MANUFACTURING--0.2%
Illinois Tool Works, Inc.,
5.750% 03/01/09 $ 155,000 $ 175,878
Minnesota Mining &
Manufacturing Co.,
6.375% 02/15/28 155,000 177,384
--------------
353,262
--------------
PACKAGING & CONTAINERS--0.0%
Bemis Co., Inc.,
6.500% 08/15/08 50,000 57,789
--------------
ROAD & RAIL--0.2%
Burlington Northern Santa Fe Corp.,
Debenture,
7.000% 12/15/25 150,000 173,139
Norfolk Southern Corp., Senior Note,
7.250% 02/15/31 75,000 89,691
Union Pacific Corp., Debenture,
6.625% 02/01/29 50,000 56,803
United Parcel Services, Inc.,
Debenture,
8.375% 04/01/30 90,000 126,882
--------------
446,515
--------------
MANUFACTURING--0.0%
METALS & MINING--0.0%
Alcoa, Inc.,
7.250% 08/01/05 25,000 27,846
--------------
MATERIALS--0.0%
CHEMICALS--0.0%
Rohm & Haas Co., Debenture,
7.850% 07/15/29 50,000 64,938
--------------
TECHNOLOGY--0.1%
COMPUTERS--0.1%
IBM Corp.,
4.875% 10/01/06 200,000 216,980
IBM Corp., Debenture,
6.220% 08/01/27 100,000 111,756
--------------
328,736
--------------
TELECOMMUNICATION SERVICES--0.3%
DIVERSIFIED TELECOMMUNICATIONS--0.3%
AT&T Corp., Senior Note,
7.000% 11/15/06 70,000 77,505
AT&T Corp., Senior Note,
8.500% 11/15/31 (c) 20,000 22,813
Ameritech Capital Funding Corp.,
6.550% 01/15/28 50,000 56,686
BellSouth Capital Funding, Debenture,
7.875% 02/15/30 100,000 128,514
SBC Communications, Inc.,
5.750% 05/02/06 100,000 110,239
</Table>
See Notes to Investment Portfolio.
181
<Page>
<Table>
<Caption>
PAR VALUE
------------ --------------
Sprint Capital Corp.:
6.000% 01/15/07 $ 50,000 $ 53,888
6.875% 11/15/28 50,000 50,958
Verizon New England, Inc.,
Senior Note,
6.500% 09/15/11 120,000 138,787
--------------
639,390
--------------
WIRELESS TELECOMMUNICATION SERVICES--0.0%
AT&T Wireless Services, Inc.,
Senior Note,
8.750% 03/01/31 50,000 62,328
Cingular Wireless LLC, Senior Note,
7.125% 12/15/31 45,000 52,793
--------------
115,121
--------------
UTILITIES--0.2%
ELECTRIC UTILITIES--0.2%
Consolidated Edison Co. of
New York, Inc.,
7.150% 12/01/09 50,000 60,854
Consolidated Edison Co. of
New York, Inc., Series B,
Debenture,
4.875% 02/01/13 50,000 52,515
Florida Power & Light Co.,
First Mortgage,
6.875% 12/01/05 100,000 111,788
Potomac Electric Power Co.,
First Mortgage,
6.250% 10/15/07 100,000 111,576
Virginia Electric & Power,
Series A, Senior Note,
5.375% 02/01/07 100,000 109,475
--------------
446,208
--------------
TOTAL CORPORATE BONDS
(cost of $7,573,984) 9,692,303
--------------
NON-AGENCY MORTGAGE-BACKED &
ASSET-BACKED SECURITIES--8.6%
Advanta Mortgage Loan Trust,
7.550% 06/25/27 253,558 259,079
American Mortgage Trust,
7.432% 09/27/22 33,658 30,292
Asset Securitization Corp.,
6.750% 02/14/43 1,375,000 1,578,128
BMW Vehicle Owner Trust,
Series 2002-A,
Class A-3,
3.800% 05/25/06 90,000 91,892
Chase Funding Mortgage Loan:
6.448% 09/25/30 2,300,000 2,354,970
5.638% 11/25/31 2,000,000 2,047,540
6.975% 02/25/32 3,000,000 3,209,970
Chase Manhattan Auto
Owner Trust,
Series 2001-A, Class A-4,
5.070% 02/15/08 $ 125,000 $ 130,755
Chase Manhattan Auto
Owner Trust,
Series 2001-B, Class A-4,
3.800% 05/15/08 250,000 258,965
Citibank Credit Card Issuance Trust,
Series 2002-A1,
Class A-1, 4.950% 02/09/09 250,000 270,312
Citicorp Mortgage Securities, Inc.,
10.000% 07/01/17 27,700 27,655
Comfed Bancorp, Inc.,
6.033% 01/01/18 22,405 17,924
Glendale Federal Bank,
9.125% 01/25/08 3,699 3,692
GS Mortgage Securities Corp.,
7.750% 09/20/27 1,469,628 1,522,944
Harley-Davidson Motorcycle Trust,
Series 2001-2, Class A-1,
3.770% 04/17/06 34,238 34,739
Honda Auto Receivables
Owner Trust,
Series 2002-2, Class A-3,
3.830% 02/15/06 185,000 188,783
Imperial Savings Association,
8.888% 07/25/17 4,491 4,481
JP Morgan Commercial
Mortgage Finance Corp.,
7.400% 07/15/31 2,000,000 2,383,221
LB Commercial Conduit
Mortgage Trust:
6.210% 10/15/35 1,800,000 2,039,680
6.590% 02/18/30 1,500,000 1,702,395
Merrill Lynch Mortgage
Investors, Inc.,
7.127% 12/26/25 428,850 444,842
Mid-State Trust,
7.340% 07/01/35 1,273,882 1,403,069
Nomura Asset Securities Corp.,
7.120% 04/13/39 1,000,000 1,120,514
Private Export Funding Corp.,
5.340% 03/15/06 125,000 136,783
Rural Housing Trust,
6.330% 04/01/26 103,536 105,208
Structured Asset Securities Corp.,
Interest Only
1.869% 02/25/28 2,475,065 131,287
Wells Fargo Auto Trust
Series 2001-A, Class A-4,
5.070% 03/15/08 200,000 205,560
--------------
TOTAL NON-AGENCY MORTGAGE-BACKED &
ASSET-BACKED SECURITIES
(cost of $19,991,988) 21,704,680
--------------
</Table>
See Notes to Investment Portfolio.
182
<Page>
<Table>
<Caption>
PAR VALUE
------------ --------------
SOVEREIGN DEBT--0.3%
Export Development of Canada,
4.000% 08/01/07 $ 100,000 $ 106,313
Hydro-Quebec,
Series HH, Yankee,
8.500% 12/01/29 75,000 111,105
Inter-American Development
Bank Yankee, Debenture,
8.875% 06/01/09 125,000 164,056
Province of British Columbia,
5.375% 10/29/08 50,000 56,201
Province of Manitoba,
4.250% 11/20/06 100,000 107,014
Province of Manitoba,
Yankee, Debenture,
5.500% 10/01/08 50,000 56,524
Province of New Brunswick,
Senior Unsubordinated Note,
3.500% 10/23/07 50,000 52,015
Province of Nova Scotia,
5.750% 02/27/12 15,000 17,162
Province of Ontario,
6.000% 02/21/06 40,000 44,301
State of Israel,
6.750% 08/15/04 100,000 104,334
--------------
TOTAL SOVEREIGN DEBT
(cost of $749,257) 819,025
--------------
SHORT-TERM OBLIGATIONS--37.9%
U.S. GOVERNMENT AGENCY--9.2%
Federal Home Loan Mortgage Corp.
0.950% 07/01/03 23,268,000 23,268,000
--------------
REPURCHASE AGREEMENT--28.7%
Repurchase agreement with State Street Bank &
Trust Co., dated 06/30/03, due 07/01/03
at 1.050%, collateralized by Federal
Home Loan Bank with various maturities to
04/13/04, market value $74,215,229
(repurchase proceeds $72,756,122) 72,754,000 72,754,000
--------------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $96,022,000) 96,022,000
--------------
TOTAL INVESTMENTS--136.1%
(cost of $334,134,740) (d) 344,879,562
--------------
OTHER ASSETS & LIABILITIES, NET--(36.1)% (91,494,971)
--------------
NET ASSETS--100.0% $ 253,384,591
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) These securities, or a portion thereof, have been purchased on a delayed
delivery basis whereby the terms that are fixed are the purchase price,
interest rate and settlement date. The exact quantity purchased may be
slightly more or less than the amount shown.
(b) This security, or portion thereof, with a total market value of $773,999 is
being used to collateralize open futures contracts.
(c) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933 and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2003,
the value of these securities amounted to $284,729 which represents 0.1% of
net assets.
(d) Cost for federal income tax purposes is $335,318,091. The difference
between cost for generally accepted accounting principles and cost on a tax
basis is related to amortization/accretion tax elections on fixed income
securities.
Short futures contracts open on June 30, 2003:
<Table>
<Caption>
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
TYPE CONTRACTS MONTH (DEPRECIATION)
- ---- --------- ---------- --------------
2 Year U.S. Treasury Note 11 September $ (3,151)
10 Year U.S. Treasury Note 17 September 17,570
U.S. Treasury Bond 3 September 1,953
--------
$ 16,372
========
<Caption>
ACRONYM NAME
------- ----
MTN Medium Term Note
</Table>
See Notes to Financial Statements.
183
<Page>
STATEMENT OF ASSETS & LIABILITIES
Liberty Federal Securities Fund, Variable Series/June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost (includes short-term obligation) $ 334,134,740
-------------
Investments, at value $ 272,125,562
Repurchase agreement 72,754,000
Cash 143
Receivable for:
Fund shares sold 2,225,287
Interest 2,216,697
Dollar Rolls 161,383
Expense reimbursement due from Distributor 2,160
Deferred Trustees' compensation plan 2,159
-------------
TOTAL ASSETS 349,487,391
-------------
LIABILITIES:
Payable for:
Investments purchased on a delayed delivery basis 94,675,139
Fund shares repurchased 1,218,731
Futures variation margin 10,844
Distribution fee--Class B 513
Management fee 82,418
Administration fee 30,851
Transfer agent fee 595
Pricing and bookkeeping fees 11,735
Merger costs 21,481
Reports to shareholders 36,066
Deferred Trustees' fee 2,159
Other liabilities 12,268
-------------
TOTAL LIABILITIES 96,102,800
-------------
NET ASSETS $ 253,384,591
=============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 237,048,432
Undistributed net investment income 3,357,154
Accumulated net realized gain 2,217,811
Net unrealized appreciation on:
Investments 10,744,822
Futures contracts 16,372
-------------
NET ASSETS $ 253,384,591
=============
CLASS A:
Net assets $ 141,055,163
Shares outstanding 12,540,501
=============
Net asset value per share $ 11.25
=============
CLASS B:
Net assets $ 112,329,428
Shares outstanding 10,040,027
=============
Net asset value per share $ 11.19
=============
</Table>
See Notes to Financial Statements.
184
<Page>
STATEMENT OF OPERATIONS
Liberty Federal Securities Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 4,018,082
Dollar roll fee income 1,175,388
-------------
Total Investment Income 5,193,470
-------------
EXPENSES:
Management fee 477,971
Administration fee 179,239
Distribution fee--Class B 132,738
Pricing and bookkeeping fees 48,005
Transfer agent fee 3,719
Trustees' fee 5,280
Custody fee 8,938
Other expenses 36,156
-------------
Net Expenses 892,046
-------------
Net Investment Income 4,301,424
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FUTURES CONTRACTS:
Net realized gain (loss) on:
Investments 2,713,173
Futures contracts (265,146)
-------------
Net realized gain 2,448,027
-------------
Net change in unrealized appreciation/depreciation on:
Investments 441,937
Futures contracts 101,130
-------------
Net change in unrealized appreciation/depreciation 543,067
-------------
Net Gain 2,991,094
-------------
Net Increase in Net Assets from Operations $ 7,292,518
=============
</Table>
See Notes to Financial Statements.
185
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Liberty Federal Securities Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- ------------- -------------
OPERATIONS:
Net investment income $ 4,301,424 $ 8,005,123
Net realized gain on investments and futures contracts 2,448,027 2,774,759
Net change in unrealized appreciation/depreciation on investments
and futures contracts 543,067 7,193,833
------------- -------------
Net Increase from Operations 7,292,518 17,973,715
------------- -------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A (5,108,886) (4,876,880)
Class B (4,100,433) (2,478,958)
------------- -------------
Total Distributions Declared to Shareholders (9,209,319) (7,355,838)
------------- -------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 6,913,561 27,971,432
Proceeds received in connection with merger 20,365,187 --
Distributions reinvested 5,108,886 4,876,880
Redemptions (16,361,814) (22,614,928)
------------- -------------
Net Increase 16,025,820 10,233,384
------------- -------------
Class B:
Subscriptions 14,580,706 54,512,916
Distributions reinvested 4,100,433 2,478,958
Redemptions (8,022,495) (8,937,222)
------------- -------------
Net Increase 10,658,644 48,054,652
------------- -------------
Net Increase from Share Transactions 26,684,464 58,288,036
------------- -------------
Total Increase in Net Assets 24,767,663 68,905,913
NET ASSETS:
Beginning of period 228,616,928 159,711,015
------------- -------------
End of period (including undistributed net investment income of
$3,357,154 and $8,265,049, respectively) $ 253,384,591 $ 228,616,928
============= =============
CHANGES IN SHARES:
Class A:
Subscriptions 611,355 2,555,228
Issued in connection with merger 1,854,753 --
Issued for distributions reinvested 460,675 470,741
Redemptions (1,459,099) (2,074,589)
------------- -------------
Net Increase 1,467,684 951,380
------------- -------------
Class B:
Subscriptions 1,303,880 5,022,381
Issued for distributions reinvested 371,416 240,442
Redemptions (719,733) (815,987)
------------- -------------
Net Increase 955,563 4,446,836
------------- -------------
</Table>
See Notes to Financial Statements.
186
<Page>
NOTES TO FINANCIAL STATEMENTS
Liberty Federal Securities Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Liberty Federal Securities Fund, Variable Series (the "Fund"),
a series of SteinRoe Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek the highest possible level of current
income consistent with the safety of principal and maintenance of liquidity. The
Fund's capitalization consists of an unlimited number of shares of beneficial
interest without par value that represent a separate series of the Trust. The
Fund offers two classes of shares: Class A and Class B. Each share of a class
represents an equal proportionate beneficial interest in that share class and,
when issued and outstanding, is fully paid and nonassessable. Shareholders would
be entitled to share proportionally in the net assets of their share class
available for distribution to shareholders upon liquidation of the Fund. Shares
of the Fund are available and are being marketed exclusively as a pooled funding
vehicle for variable annuity contracts ("VA contracts") and Variable Life
Insurance Policies ("VLI Policies") offered by the separate accounts of certain
life insurance companies ("Participating Insurance Companies"). The
Participating Insurance Companies and their separate accounts own all the shares
of the Fund.
On April 1, 2003, Stein Roe & Farnham Incorporated, the investment advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Stein Roe & Farnham Incorporated with respect to the Fund.
The merger did not change the way the Fund is managed, the investment personnel
assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
On April 7, 2003, the Galaxy VIP Quality Plus Bond Fund, previously a single
class fund of Galaxy VIP Fund, a separate Massachusetts business trust, merged
into the Fund's Class A shares. The Fund received a tax-free transfer of assets
from the Galaxy VIP Quality Plus Bond Fund as follows:
<Table>
<Caption>
SHARES NET ASSETS UNREALIZED
ISSUED RECEIVED APPRECIATION(1)
--------- ------------ ---------------
1,854,753 $ 20,365,187 $ 1,020,254
<Caption>
NET ASSETS
OF GALAXY VIP
QUALITY PLUS NET ASSETS
NET ASSETS BOND FUND OF THE FUND
OF THE FUND IMMEDIATELY IMMEDIATELY
PRIOR TO PRIOR TO AFTER
COMBINATION COMBINATION COMBINATION
------------- -------------- -------------
$ 231,382,451 $ 20,365,187 $ 251,747,638
</Table>
(1) Unrealized appreciation is included in the Net Assets Received amount shown
above.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Debt securities generally are valued by
a pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Fund may enter into mortgage dollar roll transactions. A mortgage dollar
roll transaction involves a sale by the Fund of securities that it holds with an
agreement by the Fund to repurchase substantially similar securities at an
agreed upon price and date. During the period between the sale and the
repurchase, the Fund will not be entitled to accrue interest and receive
principal payments on the securities sold. Mortgage dollar roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the repurchase price of those securities. In the event the buyer
of the securities under a mortgage dollar roll transaction files for bankruptcy
or
187
<Page>
becomes insolvent, the Fund's use of proceeds of the transaction may be
restricted pending a determination by or with respect to the other party.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
The Fund maintains U.S. government securities or other liquid high-grade debt
obligations as collateral with respect to mortgage dollar roll transactions and
securities traded on other than normal settlement terms.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM--Interest income is recorded on
the accrual basis. Fee income attributable to mortgage dollar roll transactions
is recorded on the accrual basis over the term of the transaction. Discount is
accreted to interest income over the life of a security with a corresponding
increase in the cost basis. Premium is amortized against interest income with a
corresponding decrease in the cost basis.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
OTHER--The Fund's custodian takes possession through the federal book-entry
system of securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and delays
in liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT AND ADMINISTRATIVE FEES--Columbia receives monthly fees equal to
0.40% and 0.15% annually of the Fund's average daily net assets for management
and administrative services, respectively.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. For the six months ended June 30, 2003,
the annualized net asset based fee rate was 0.033%. The Fund also pays
out-of-pocket costs for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Columbia has voluntarily agreed to reimburse all expenses,
including management fees, but excluding interest, taxes, distribution fees,
brokerage and extraordinary expenses of the Fund in excess of 0.70% annually of
the Fund's average daily net assets.
LFD has voluntarily agreed to reimburse the Fund's Class B share distribution
fee in excess of 0.20% when the total operating expenses of the Fund applicable
to Class B shares, including distribution fees, are in excess of 0.90% annually
of Class B average daily net assets.
188
<Page>
These arrangements may be terminated or modified by Columbia or LFD at any time.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $37,617,394 and
$49,204,945, respectively, of which $33,317,446 and $48,378,871, respectively,
were U.S. Government securities.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 10,027,395
Gross unrealized depreciation (465,924)
------------
Net unrealized appreciation $ 9,561,471
============
</Table>
OTHER--The Fund may purchase or sell futures contracts. The Fund will use
these instruments to hedge against the effects of changes in the portfolio
securities due to market conditions and not for trading purposes. The use of
futures contracts involves certain risks which include (1) imperfect correlation
between the price movement of the instruments and the underlying securities, (2)
inability to close out a position due to different trading hours, or the absence
of a liquid market for either the instrument or the underlying securities or (3)
an inaccurate prediction by Columbia of the future direction of the market or
interest rate trends. Any of these risks may involve amounts exceeding the
variation margin recorded in the Fund's Statement of Assets and Liabilities at
any given time.
189
<Page>
FINANCIAL HIGHLIGHTS
Liberty Federal Securities Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED DECEMBER 31, ENDED
JUNE 30, ------------------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
----------- ----------- ------------ -------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.30 $ 10.78 $ 10.72 $ 9.87
----------- ----------- ------------ -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.19 0.44 0.54(c) 0.38
Net realized and unrealized gain on investments
and futures contracts 0.14 0.55 0.17(c) 0.47
----------- ----------- ------------ -------------
Total from Investment Operations 0.33 0.99 0.71 0.85
----------- ----------- ------------ -------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.44) (0.47) (0.65) --
----------- ----------- ------------ -------------
NET ASSET VALUE, END OF PERIOD $ 11.19 $ 11.30 $ 10.78 $ 10.72
=========== =========== ============ =============
Total return (d)(e) 2.96%(f) 9.59%(g) 6.86%(g) 8.61%(f)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 0.88%(i) 0.90% 0.91% 0.87%(i)
Net investment income (h) 3.46%(i) 4.03% 5.02%(c) 6.25%(i)
Waiver/reimbursement -- 0.01% 0.04% --
Portfolio turnover rate 26%(f) 69% 36% 43%
Net assets, end of period (000's) $ 112,329 $ 102,671 $ 49,987 $ 7,663
</Table>
(a) For the period from commencement of operations on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective January 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing
and accreting premium and discount on all debt securities. The effect of
this change, for the year ended December 31, 2001, was to decrease the
ratio of net investment income to average net assets from 5.05% to 5.02%.
The impact to net investment income and net realized and unrealized gain
per share was less than $0.01. Per share data and ratios for periods prior
to December 31, 2001 have not been restated to reflect this change in
presentation.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(f) Not annualized.
(g) Had the Manager and/or Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
190
<Page>
SHAREHOLDER MEETING RESULTS
Liberty Federal Securities Fund, Variable Series
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On February 19, 2003, the Annual Meeting of Shareholders of the Trust was held
to conduct a vote for or against the approval of the following items listed on
the Trust's Proxy Statement for said Meeting. On December 2, 2002, the record
date for the Meeting, the Galaxy VIP Quality Plus Bond Fund had 1,788,366.817
common shares outstanding. The votes cast were as follows:
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
GALAXY VIP QUALITY PLUS BOND FUND
FEBRUARY 19, 2003
1. To approve an Agreement and Plan of Reorganization providing for (i) the sale
of all of the assets of the Galaxy VIP Quality Plus Bond Fund to, and the
assumption of all of the liabilities of the Galaxy VIP Quality Plus Bond Fund
by, the Liberty Federal Securities Fund, Variable Series, in exchange for
shares of the Liberty Federal Securities Fund, Variable Series, and the
distribution of such shares to the shareholders of the Galaxy VIP Quality
Plus Bond Fund in complete liquidation of the Galaxy VIP Quality Plus Bond
Fund; (ii) the de-registration of The Galaxy VIP Fund as an investment
company under the Investment Company Act of 1940, as amended, and (iii) The
Galaxy VIP Fund's termination as a Massachusetts business trust under
Massachusetts law.
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
------------- ----------- -------
Affirmative 1,572,115.272 87.908% 90.280%
Against 12,124.421 .678% .696%
Abstain 157,143.545 8.787% 9.024%
TOTAL 1,741,383.238 97.373% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 1,788,366.817
VOTED SHARES 1,741,383.238
PERCENT VOTED 97.373%
</Table>
191
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Liberty Money Market Fund, Variable Series / June 30, 2003
Liberty Money Market Fund, Variable Series seeks maximum current income,
consistent with capital preservation and the maintenance of liquidity.
Karen M. Arneil has been the fund's portfolio manager since 2002. She has
managed other funds for Columbia Management Advisors, Inc. and its
predecessors since 1996.
On April 7, 2003, Galaxy VIP Money Market Fund was merged into Stein Roe
Money Market Fund, Variable Series. The new fund was renamed Liberty Money
Market Fund, Variable Series.
INTEREST RATES FURTHER REDUCED
The Federal Reserve Board cut the federal funds rate twice during the 12-month
reporting period. These moves brought the key interbank overnight borrowing rate
down from 1.75% to 1.00%--a 45-year low. The most recent reduction in this
leading indicator for short-term interest rates took place late in June as the
Fed once again tried to jump-start growth in a weak US economy. The lower rate
may have been a welcomed move for consumers and businesses, but the effect on
money market funds was to bring returns on eligible portfolio securities down to
an all-time low.
HIGH QUALITY AND LIQUIDITY REMAIN THE FUND'S FOCUS
Despite declining short-term rates, we are committed to our universe of
government agency obligations and high quality corporate and bank obligations.
To strive for the highest available yield from these securities, we employed a
"barbell" management strategy. We invested in a mix of securities with
maturities ranging from one month to three months and also in securities with
maturities of one year. The shorter-term investments keep the portfolio liquid,
while the longer-term securities bring a higher return. Additionally, we
emphasized purchases in floating-rate debt over traditional fixed-rate
securities. This strategy brought higher levels of income to the fund and
enabled us to sustain an average portfolio maturity of 64 days.
STAYING THE COURSE
We don't expect any major rate changes in the foreseeable future, and our
strategy remains unchanged. We will continue to pursue the highest possible
returns from high quality, liquid investments in this now very low-rate
environment.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
192
<Page>
PERFORMANCE INFORMATION
Liberty Money Market Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------
The Fund (1/1/89) 0.36 0.89 3.71 4.20
US Consumer
Price Index 1.10 2.11 2.43 2.44
</Table>
Inception date of the fund is in parentheses.
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- -------------------------------------------------------------
The Fund 1.00 1.00
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN CAN VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES.
Total return performance includes changes in share price and reinvestment of all
distributions. The US Consumer Price Index is the government's measure of retail
inflation.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
193
<Page>
INVESTMENT PORTFOLIO
Liberty Money Market Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
PAR VALUE (a)
------------ --------------
BANK NOTES--4.6%
Bank One Corp.,
1.320% 04/13/04 (b) $ 10,000,000 $ 10,006,706
Wells Fargo Bank,
0.984% 11/24/03 (b) 700,000 700,000
--------------
TOTAL BANK NOTES
(cost of $10,706,706) 10,706,706
--------------
CERTIFICATES OF DEPOSIT--9.8%
Canadian Imperial
Bank of Canada,
1.200% 07/15/04 (b) 7,000,000 7,000,000
First Tennessee Bank,
1.240% 02/04/04 5,700,000 5,699,382
Rabobank Nederland N.V.,
1.330% 04/19/04 5,000,000 5,000,000
Toronto-Dominion Bank,
0.930% 09/23/03 5,000,000 5,000,058
--------------
TOTAL CERTIFICATES OF DEPOSIT
(cost of $22,699,440) 22,699,440
--------------
COMMERCIAL PAPER--54.3% (c)
Amstel Funding Corp.,
1.240% 07/07/03 (d) 8,000,000 7,998,347
Amstel Funding Corp.,
1.270% 07/07/03 (d) 2,500,000 2,499,471
Aventis, Inc.,
1.230% 07/10/03 (d) 3,000,000 2,999,078
Aventis, Inc.,
1.230% 08/05/03 (d) 7,000,000 6,991,629
Credit Suisse First Boston,
1.040% 10/01/03 10,000,000 9,973,422
Falcon Asset Securitization,
0.960% 07/23/03 (d) 4,000,000 3,997,653
Falcon Asset Securitization,
0.980% 09/15/03 (d) 6,000,000 5,987,587
Fountain Square Commercial
Funding Corp.,
1.230% 08/04/03 (d) 5,000,000 4,994,192
Govco Inc.,
1.230% 07/07/03 (d) 4,000,000 3,999,180
Govco Inc.,
0.930% 09/15/03 (d) 6,000,000 5,988,220
Johnson & Johnson,
1.160% 08/19/03 (d) 10,000,000 9,984,211
Jupiter Securitization Corp.,
1.230% 07/01/03 (d) 6,000,000 6,000,000
Jupiter Securitization Corp.,
0.990% 07/25/03 (d) 4,000,000 3,997,360
Koch Industries,
1.230% 07/01/03 (d) 10,000,000 10,000,000
National Rural Utilities Corp.,
1.150% 07/18/03 5,500,000 5,497,013
Old Line Funding Corp.,
1.230% 07/07/03 (d) $ 5,506,000 $ 5,504,871
Old Line Funding Corp.,
0.980% 08/01/03 (d) 4,511,000 4,507,193
Preferred Receivables
Funding Corp.,
0.960% 07/30/03 (d) 5,000,000 4,996,133
UBS Finance Corp.,
1.310% 07/01/03 10,000,000 10,000,000
Variable Funding Capital Corp.,
1.220% 07/08/03 (d) 10,000,000 9,997,628
--------------
TOTAL COMMERCIAL PAPER
(cost of $125,913,188) 125,913,188
--------------
CORPORATE BONDS--10.9%
American Express Corp.,
1.124% 07/19/04 (b)(e) 3,000,000 3,000,000
American Express Corp.,
1.350% 03/05/04 (b) 5,000,000 5,000,000
American Honda Finance Corp.,
1.439% 07/15/04 (b)(e) 5,000,000 5,010,350
Autumn House at
Powder Mill,Inc.,
(LOC: Suntrust Bank)
1.100% 02/01/28 (b) 1,000,000 1,000,000
Citigroup, Inc.
1.520% 03/09/04 (b) 8,000,000 8,016,976
NBD Bank,
6.250% 08/15/03 580,000 582,915
Pepin Distributing Co., Inc.,
(Series 1998),
(LOC: Wachovia Bank N.A.)
1.090% 06/01/08 (b) 2,230,000 2,230,000
Walmart Stores, Inc.,
4.375% 08/01/03 500,000 500,856
--------------
TOTAL CORPORATE BONDS
(cost of $25,341,097) 25,341,097
--------------
MUNICIPAL BONDS--7.0%
Dade County Florida Expressway
Authority Toll System,
Revenue Bonds,
(FGIC INS),
1.000% 07/01/19 (b) 20,000 20,000
Detroit MI,
(LOC: Bank One)
1.050% 05/01/05 (b) 1,750,000 1,750,000
Fairview Hospital Healthcare &
Services, MN,
(FSA INS)/ (SPA: U.S. Bank)
1.050% 11/01/15 (b) 700,000 700,000
Missouri St, Health &
Educational Facilities,
(LOC: U.S. Bank N.A.)
1.200% 11/15/22 (b) 3,710,000 3,710,000
</Table>
See Notes to Investment Portfolio.
194
<Page>
<Table>
<Caption>
PAR VALUE (a)
------------ --------------
New Jersey Economic
Development Authority
St. Pension Funding, (FSA INS)/
(SPA: Dexia Credit Local)
1.040% 02/15/29 (b) $ 10,000,000 $ 10,000,000
--------------
TOTAL MUNICIPAL BONDS
(cost of $16,180,000) 16,180,000
--------------
U.S. GOVERNMENT AGENCIES--18.9%
Federal Home Loan Bank,
4.875% 04/16/04 8,000,000 8,222,779
Federal Home Loan Bank,
1.310% 04/13/04 5,400,000 5,400,000
Federal Home Loan Bank,
1.335% 05/07/04 2,500,000 2,500,000
Federal Home Loan
Mortgage Corp.,
5.250% 02/15/04 1,000,000 1,024,211
Federal Home Loan Mortgage,
Discount Note,
1.030% 09/12/03 (c) 4,800,000 4,790,072
Federal Home Loan Mortgage,
Discount Note,
0.980% 09/25/03 (c) 5,000,000 4,988,294
Federal Home Loan Mortgage,
Discount Note,
0.900% 09/30/03 (c) 4,950,000 4,938,739
Federal Home Loan Mortgage,
Discount Note,
0.960% 11/14/03 (c) 1,400,000 1,394,923
Federal Home Loan Mortgage,
Discount Note,
1.040% 05/20/04 (c) 3,200,000 3,170,048
Federal National
Mortgage Association,
1.300% 01/09/04 2,000,000 1,986,133
Federal National
Mortgage Association,
Discount Note,
1.040% 05/28/04 (c) 2,500,000 2,476,022
Student Loan
Marketing Association,
1.400% 02/20/04 3,050,000 3,050,000
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(cost of $43,941,221) 43,941,221
--------------
REPURCHASE AGREEMENT--0.6%
Repurchase agreement with State
Street Bank & Trust Co.,
dated 06/30/03, due 07/01/03
at 1.050%, collateralized by
a Federal Home Loan Bank
Note, maturing 06/17/05,
market value $1,291,613
(repurchase proceeds
$1,266,037)
(cost of $1,266,000) $ 1,266,000 $ 1,266,000
--------------
TOTAL INVESTMENTS--106.1%
(cost of $246,047,652) (f) 246,047,652
--------------
OTHER ASSETS & LIABILITIES, NET--(6.1)% (14,113,260)
--------------
NET ASSETS--100.0% $ 231,934,392
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) See Note 1.
(b) Interest rates on variable rate securities change periodically. The rate
listed is as of June 30, 2003.
(c) The interest rates listed reflect the effective rate at the date of
purchase.
(d) Represents private placement securities exempt from registration by Section
4(2) of the Securities Act of 1933. These securities generally are issued
to investors who agree that they are purchasing the securities for
investments and not for public distribution. Any resale by the Fund must be
in an exempt transaction, normally to other institutional investors. At
June 30, 2003, the aggregate amortized cost of the Fund's private placement
securities was $100,442,753 which represents 43.3% of net assets. None of
these securities were deemed illiquid.
(e) This security is exempt from registration under Rule 144A of the Securities
Act of 1933 and may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 2003, the value of
these securities amounted to $8,010,350 which represents 3.5% of net
assets.
(f) Cost for both financial statement and federal income tax purposes is the
same.
<Table>
<Caption>
ACRONYM NAME
------- ----
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance
INS Insured
LOC Letter of Credit
SPA Stand-by Purchase Agreement
</Table>
See Notes to Financial Statements.
195
<Page>
STATEMENT OF ASSETS & LIABILITIES
Liberty Money Market Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at amortized cost approximating value $ 246,047,652
-------------
Cash 547
Receivable for:
Fund shares sold 1,035,935
Interest 274,522
Expense reimbursement due from Advisor 6,449
Deferred Trustees' compensation plan 2,814
-------------
TOTAL ASSETS 247,367,919
-------------
LIABILITIES:
Payable for:
Investments purchased 14,973,565
Fund shares repurchased 220,906
Management fee 68,448
Administration fee 29,263
Transfer agent fee 594
Pricing and bookkeeping fees 17,445
Merger fee 12,519
Reports to shareholders 99,853
Deferred Trustees' fee 2,814
Other liabilities 8,120
-------------
TOTAL LIABILITIES 15,433,527
-------------
NET ASSETS $ 231,934,392
=============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 231,943,174
Overdistributed net investment income (8,799)
Accumulated net realized gain 17
=============
NET ASSETS $ 231,934,392
=============
Net assets $ 231,934,392
Shares outstanding 231,977,863
=============
Net asset value per share $ 1.00
=============
</Table>
See Notes to Financial Statements.
196
<Page>
STATEMENT OF OPERATIONS
Liberty Money Market Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest $ 1,677,551
-------------
EXPENSES:
Management fee 447,143
Administration fee 191,633
Pricing and bookkeeping fees 51,669
Transfer agent fee 3,719
Trustees' fee 5,940
Custody fee 5,460
Reports to shareholders 44,340
Other expenses 14,566
-------------
Total Expenses 764,470
Custody earnings credit (213)
-------------
Net Expenses 764,257
-------------
Net Investment Income 913,294
-------------
NET REALIZED GAIN ON INVESTMENTS:
Net realized gain on investment 17
-------------
Net Increase in Net Assets from Operations $ 913,311
=============
</Table>
See Notes to Financial Statements.
197
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Money Market Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- -------------- -------------
OPERATIONS:
Net investment income $ 913,294 $ 3,281,299
Net realized gain on investments 17 --
-------------- -------------
Net Increase from Operations 913,311 3,281,299
-------------- -------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (922,093) (3,321,856)
-------------- -------------
SHARE TRANSACTIONS:
Subscriptions 148,304,195 708,951,720
Proceeds received in connection with merger 14,534,445 --
Distributions reinvested 922,093 3,321,856
Redemptions (190,720,286) (720,315,374)
-------------- -------------
Net Decrease from Share Transactions (26,959,553) (8,041,798)
-------------- -------------
Total Decrease in Net Assets (26,968,335) (8,082,355)
NET ASSETS:
Beginning of period 258,902,727 266,985,082
-------------- -------------
End of period (including overdistribution of net investment
income of $(8,799) at June 30, 2003) $ 231,934,392 $ 258,902,727
============== =============
CHANGES IN SHARES:
Subscriptions 148,297,364 708,951,720
Issued in connection with merger 14,534,816 --
Issued for distributions reinvested 922,093 3,321,856
Redemptions (190,720,286) (720,313,147)
-------------- -------------
Net Decrease (26,966,013) (8,039,571)
-------------- -------------
</Table>
See Notes to Financial Statements.
198
<Page>
NOTES TO FINANCIAL STATEMENTS
Liberty Money Market Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Liberty Money Market Fund, Variable Series (the "Fund"), a
series of SteinRoe Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek high current income consistent with
capital preservation and maintenance of liquidity. The Fund's capitalization
consists of an unlimited number of shares of beneficial interest without par
value that represent a separate series of the Trust. Each share of the Fund
represents an equal proportionate beneficial interest in the Fund and, when
issued and outstanding, is fully paid and nonassessable. Shareholders would be
entitled to share proportionally in the net assets of the Fund available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Stein Roe & Farnham Incorporated, the investment advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Stein Roe & Farnham Incorporated with respect to the Fund.
The merger did not change the way the Fund is managed, the investment personnel
assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
On April 7, 2003, Galaxy VIP Money Market Fund, previously a fund of the Galaxy
VIP Fund, a separate Massachusetts business trust, merged into the Stein Roe
Money Market Fund, Variable Series Class A shares. Stein Roe Money Market Fund,
Variable Series received a tax-free transfer of assets from Galaxy VIP Money
Market Fund as follows:
<Table>
<Caption>
SHARES ISSUED NET ASSETS RECEIVED
------------- -------------------
14,534,816 $ 14,534,445
<Caption>
NET ASSETS NET ASSETS
OF STEIN ROE NET ASSETS OF OF STEIN ROE
MONEY MARKET GALAXY VIP MONEY MONEY MARKET
FUND, VARIABLE MARKET FUND FUND, VARIABLE
SERIES PRIOR TO IMMEDIATELY PRIOR SERIES IMMEDIATELY
COMBINATION TO COMBINATION AFTER COMBINATION
--------------- ----------------- ------------------
$ 256,836,286 $ 14,534,445 $ 271,370,731
</Table>
Also on April 7, 2003, subsequent to the merger described above, Stein Roe Money
Market Fund, Variable Series was renamed the Liberty Money Market Fund, Variable
Series.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--The Fund values securities utilizing the
amortized cost valuation technique permitted in accordance with Rule 2a-7 under
the Investment Company Act of 1940, which requires the Fund to comply with
certain conditions. This technique involves valuing a portfolio security
initially at its cost and thereafter, assuming a constant amortization to
maturity of any discount or premium with amortized cost approximating value.
199
<Page>
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM--Interest income, including
discount accretion and premium amortization, is recorded daily on the accrual
basis.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund declares dividends daily and
reinvests all dividends declared monthly in additional shares at net asset
value.
OTHER--The Fund's custodian takes possession through the federal book-entry
system of securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and delays
in liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution under
income tax regulations.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT AND ADMINISTRATIVE FEES--Columbia receives monthly fees equal to
0.35% and 0.15% annually of the Fund's average daily net assets for management
and administrative services, respectively.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. For the six months ended June 30, 2003,
the annualized net asset based fee rate was 0.034%. The Fund also pays
out-of-pocket costs for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
EXPENSE LIMITS--Columbia has voluntarily agreed to reimburse all expenses,
including management fees, but excluding interest, taxes, brokerage and
extraordinary expenses of the Fund in excess of 0.65% annually of the Fund's
average daily net assets.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $213 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
200
<Page>
FINANCIAL HIGHLIGHTS
Liberty Money Market Fund, Variable Series
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.004 0.012 0.036 0.059 0.047 0.050
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.004) (0.012) (0.036) (0.059) (0.047) (0.050)
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
=========== ========= ========= ========= ========= =========
Total return (b)(c) 0.36%(d) 1.23% 3.64% 6.05% 4.79% 5.17%
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (e) 0.60%(f) 0.65% 0.56% 0.56% 0.52%(g) 0.62%
Net investment income (e) 0.72%(f) 1.25% 3.45% 5.90% 4.75%(g) 4.99%
Net assets, end of period (000's) $ 231,934 $ 258,903 $ 266,985 $ 212,317 $ 170,539 $ 101,340
</Table>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(d) Not annualized.
(e) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(f) Annualized.
(g) During the year ended December 31, 1999, the Fund experienced a one-time
reduction in its expenses of two basis points as a result of expenses
accrued in a prior period. The Fund's ratios disclosed above reflect the
actual rate at which expenses were incurred throughout the fiscal year
without the reduction.
201
<Page>
SHAREHOLDER MEETING RESULTS
Liberty Money Market Fund, Variable Series
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On February 19, 2003, the Annual Meeting of Shareholders of the Trust was held
to conduct a vote for or against the approval of the following items listed on
the Trust's Proxy Statement for said Meeting. On December 2, 2002, the record
date for the Meeting, the Galaxy VIP Money Market Fund had 16,289,880.934 common
shares outstanding. The votes cast were as follows:
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
GALAXY VIP MONEY MARKET FUND
FEBRUARY 19, 2003
1. To approve an Agreement and Plan of Reorganization providing for (i) the sale
of all of the assets of the Galaxy VIP Money Market Fund to, and the
assumption of all of the liabilities of the Galaxy VIP Money Market Fund by,
the Stein Roe Money Market Fund, Variable Series, in exchange for shares of
the Stein Roe Money Market Fund, Variable Series, and the distribution of
such shares to the shareholders of the Galaxy VIP Money Market Fund in
complete liquidation of the Galaxy VIP Money Market Fund; (ii) the
de-registration of The Galaxy VIP Fund as an investment company under the
Investment Company Act of 1940, as amended, and (iii) The Galaxy VIP Fund's
termination as a Massachusetts business trust under Massachusetts law.
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
-------------- ----------- -------
Affirmative 13,000,904.962 79.810% 84.548%
Against 608,194.097 3.733% 3.956%
Abstain 1,767,803.935 10.852% 11.496%
TOTAL 15,376,902.994 94.395% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 16,289,880.934
VOTED SHARES 15,376,902.994
PERCENT VOTED 94.395%
</Table>
202
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Liberty Small Company Growth Fund, Variable Series / June 30, 2003
Liberty Small Company Growth Fund, Variable Series seeks long-term growth.
William M. Garrison is the fund's portfolio manager. He has managed other
funds for Columbia Management Advisors, Inc. and its predecessors since
September 1998.
On April 14, 2003, Galaxy VIP Small Company Growth Fund was merged into Stein
Roe Small Company Growth Fund, Variable Series. The combined fund was renamed
Liberty Small Company Growth Fund, Variable Series.
STOCKS OF SMALL COMPANIES AMONG MARKET LEADERS
After trailing the market in the first quarter of 2003, stocks of smaller firms
rebounded strongly in the second quarter and outpaced large and mid-cap stocks
for the six-month reporting period. Investors bet on the tendency of smaller
companies to respond more quickly to improving business conditions and to
benefit more from a domestic recovery than larger firms tied to foreign
economies. Stocks of small companies were also boosted by a sizable
representation of technology firms, which led other industry sectors.
THE FUND'S TECHNOLOGY EXPOSURE HAMPERED PERFORMANCE
The fund's underweight position in technology stocks relative to its benchmark,
the Russell 2000 Growth Index, hampered performance because technology was the
best performing sector during the six-month reporting period. The fund's
performance was also hindered by an underweight stake in the micro-cap sector,
which was a strong performer, and an overweight position the energy sector,
which underperformed.
The fund derived its returns from a variety of industry groups. Gaming
operator Station Casinos, Inc. (1.4% of net assets) benefited from improved
business in Las Vegas and a new enterprise in California. Integra LifeSciences
Corporation, a medical technology firm, beat earnings expectations, and Taro
Pharmaceutical Industries Ltd., a generic drug manufacturer, benefited from
approvals for new products and solid earnings results (1.4% and 0.9% of net
assets, respectively). Stocks that trailed for the period were concentrated in
the health care sector. One such stock was Accredo Health, Inc. (0.5% of net
assets), whose earnings disappointed investors.
COMPETITIVE CONCERNS, ECONOMY DROVE PORTFOLIO ACTIVITY
In the face of regulatory and competitive concerns, we reduced the fund's health
care position by selling disappointing issues such as Cerner Corporation and
taking profits in stocks that had performed particularly well--such as American
Healthways Inc. We also took profits in stocks of several biotechnology firms.
When the economic outlook dimmed early in the reporting period, we eliminated
retail holdings such as Hot Topic Inc. As consumer confidence improved, we
increased our exposure, adding stocks such as specialty retailer The Sharper
Image and media firm Sinclair Broadcast Group, Inc. (0.9% and 0.5% of net
assets, respectively).
Within the energy sector, we increased existing holdings such as Key Energy
Services, Inc. and Maverick Tube Corporation (1.5% and 1.4% of net assets,
respectively). We eliminated Cal Dive International, Inc. and highly-valued
exploration companies such as Evergreen Resources, Inc. and Ultra Petroleum
Corporation.
The fund remained underweight relative to its benchmark in financial stocks.
However, we increased our position with new holdings such as Investors Financial
Services Corp, an asset management firm whose stock price became attractive when
falling interest rates threatened profits from the company's money market funds,
and Jefferies Group, Inc., an investment bank and securities broker that should
benefit from an improving stock market (1.4% and 0.8% of net assets,
respectively).
MANY ATTRACTIVE OPPORTUNITIES
Stocks could face another turning point over the next six months, as it remains
to be seen whether earnings can support further market advances. Although prices
for stocks of smaller companies have recently outpaced other sectors, we believe
they have the potential to go higher if earnings continue to improve. If
earnings remain weak, stocks of smaller firms may be more vulnerable to a price
retreat than those of larger firms.
Individually, we believe stocks of many small companies offer attractive
opportunities. With a stronger economic outlook, we expect to boost sectors that
could benefit from an expansion, such as technology and consumer cyclical firms.
In the meantime, we plan to watch the energy sector, which may be vulnerable to
a changing balance of supply and demand.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
Investing in small-cap stocks may present special risks, including possible
illiquidity and greater price volatility than stocks of larger, more established
companies.
Holdings are disclosed as of June 30, 2003, and are subject to change.
203
<Page>
PERFORMANCE INFORMATION
Liberty Small Company Growth Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------
Class B(1) (6/1/00) 17.30 0.50 -0.41 5.78
Russell 2000 Growth
Index 19.33 0.69 -4.25 4.35
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 6/30/93(2) - 6/30/03
<Table>
<Caption>
CLASS B SHARES RUSSELL 2000 GROWTH INDEX
6/30/1993 $ 10,000 $ 10,000
9/30/1993 $ 11,335 $ 10,934
12/31/1993 $ 12,345 $ 11,222
3/31/1994 $ 11,697 $ 10,764
6/30/1994 $ 11,516 $ 10,086
9/30/1994 $ 12,593 $ 11,028
12/31/1994 $ 12,491 $ 10,948
3/31/1995 $ 12,491 $ 11,548
6/30/1995 $ 12,245 $ 12,694
9/30/1995 $ 13,627 $ 14,137
12/31/1995 $ 13,959 $ 14,346
3/31/1996 $ 15,155 $ 15,170
6/30/1996 $ 16,275 $ 16,056
9/30/1996 $ 17,345 $ 15,919
12/31/1996 $ 17,721 $ 15,961
3/31/1997 $ 16,431 $ 14,286
6/30/1997 $ 18,989 $ 16,794
9/30/1997 $ 20,687 $ 19,635
12/31/1997 $ 19,106 $ 18,025
3/31/1998 $ 20,650 $ 20,166
6/30/1998 $ 17,912 $ 19,009
9/30/1998 $ 14,131 $ 14,758
12/31/1998 $ 15,801 $ 18,247
3/31/1999 $ 14,583 $ 17,941
6/30/1999 $ 16,753 $ 20,587
9/30/1999 $ 17,275 $ 19,574
12/31/1999 $ 23,389 $ 26,110
3/31/2000 $ 29,040 $ 28,533
6/30/2000 $ 27,324 $ 26,430
9/30/2000 $ 28,285 $ 25,381
12/31/2000 $ 22,102 $ 20,254
3/31/2001 $ 18,272 $ 17,175
6/30/2001 $ 21,848 $ 20,262
9/30/2001 $ 16,298 $ 14,572
12/31/2001 $ 19,807 $ 18,386
3/31/2002 $ 19,873 $ 18,025
6/30/2002 $ 17,460 $ 15,195
9/30/2002 $ 14,192 $ 11,925
12/31/2002 $ 14,959 $ 12,821
3/31/2003 $ 14,301 $ 12,323
6/30/2003 $ 17,544 $ 15,303
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 6.82 8.00
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The Russell 2000 Growth Index comprises
securities in the Russell 2000 Index with a greater-than-average growth
orientation. Companies in this index tend to exhibit higher price-to-book and
price-to-earnings ratios. Indices are not investments, do not incur fees or
expenses, and are not professionally managed. It is not possible to invest
directly in an index. Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b1 fees) between class A shares and the newer class shares. If the
differences in expenses were reflected, the returns for periods prior to
inception of the newer class of shares would be lower.
(2) Inception date for Class A shares (older existing share class) is January
1, 1989.
204
<Page>
INVESTMENT PORTFOLIO
Liberty Small Company Growth Fund / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCK--97.1%
CONSUMER DISCRETIONARY--16.4%
HOTELS, RESTAURANTS & LEISURE--4.5%
Applebee's International, Inc. 21,900 $ 688,317
California Pizza
Kitchen, Inc. (a) 20,400 438,600
Red Robin Gourmet
Burgers (a) 7,600 144,096
Scientific Games Corp.,
Class A (a) 51,400 483,160
Station Casinos, Inc. (a) 30,700 775,175
--------------
2,529,348
--------------
HOUSEHOLD DURABLES--1.8%
Beazer Homes USA, Inc. (a) 5,700 475,950
Harman International
Industries, Inc. 4,000 316,560
Meritage Corp. 4,200 206,892
--------------
999,402
--------------
LEISURE EQUIPMENT & PRODUCTS--0.6%
SCP Pool Corp. (a) 10,400 357,760
--------------
MEDIA--2.7%
Gray Television, Inc. 19,400 240,560
Lin TV Corp. (a) 19,400 456,870
Radio One, Inc. (a) 27,900 495,783
Sinclair Broadcast
Group, Inc. (a) 26,300 305,343
--------------
1,498,556
--------------
SPECIALTY RETAIL--6.8%
Advance Auto Parts, Inc. (a) 13,100 797,790
Blue Rhino Corp. (a) 31,600 378,884
Cost Plus, Inc. (a) 11,400 406,524
Mothers Work, Inc. (a) 7,800 208,806
Party City Corp. (a) 15,100 155,077
Petco Animal Supplies, Inc. (a) 32,300 702,202
Sharper Image Corp. (a) 18,700 509,949
Too, Inc. (a) 23,800 481,950
Ultimate Electronics, Inc. (a) 10,900 139,738
--------------
3,780,920
--------------
CONSUMER STAPLES--1.7%
FOOD & DRUG RETAILING--1.0%
Performance Food
Group Co. (a) 14,800 547,600
--------------
FOOD PRODUCTS--0.7%
American Italian
Pasta Co. (a) 10,200 424,830
--------------
ENERGY--10.6%
ENERGY EQUIPMENT & SERVICES--5.8%
Key Energy Services, Inc. (a) 76,600 821,152
Matrix Service Co. (a) 37,200 639,096
Maverick Tube Corp. (a) 40,400 773,660
Superior Energy
Services, Inc. (a) 36,600 346,968
Unit Corp. (a) 31,400 $ 656,574
--------------
3,237,450
--------------
OIL & GAS--4.8%
Comstock Resources, Inc. (a) 21,200 290,016
Frontier Oil Corp. 32,500 494,000
Patina Oil & Gas Corp. 14,525 466,979
Premcor, Inc. (a) 7,000 150,850
Remington Oil & Gas Corp. (a) 12,600 231,588
Spinnaker Exploration Co. (a) 17,700 463,740
St. Mary Land &
Exploration Co. 12,120 330,876
Tom Brown, Inc. (a) 10,000 277,900
--------------
2,705,949
--------------
FINANCIALS--11.3%
BANKS--4.7%
Boston Private Financial
Holdings, Inc. 11,300 238,204
Dime Community Bancshares 26,500 674,425
East-West Bancorp, Inc. 14,100 509,574
Mercantile Bank Corp. 7,400 211,344
Prosperity Bancshares, Inc. 22,100 425,425
UCBH Holdings, Inc. 15,000 430,200
W Holding Co., Inc. 9,400 159,048
--------------
2,648,220
--------------
DIVERSIFIED FINANCIALS--3.2%
ASTA Funding, Inc. (a) 5,400 129,600
Commercial Capital
Bancorp, Inc. (a) 9,300 142,755
Investors Financial
Services Corp. 26,200 760,062
Jefferies Group, Inc. 9,100 453,089
MTC Technologies, Inc. (a) 13,300 312,018
--------------
1,797,524
--------------
INSURANCE--2.4%
Hilb, Rogal and Hamilton Co. 14,400 490,176
Infinity Property & Casualty
Corp. 11,800 278,952
Philadelphia Consolidated
Holding Co. (a) 10,900 440,360
RLI Corp. 3,100 101,990
--------------
1,311,478
--------------
REAL ESTATE--1.0%
American Financial
Realty Trust 37,800 563,598
--------------
HEALTH CARE--19.5%
BIOTECHNOLOGY--4.6%
Bio-Marin
Pharmaceuticals, Inc. (a) 23,700 231,312
Charles River Laboratories
International, Inc. (a) 16,000 514,880
Ciphergen Biosystems, Inc. (a) 25,700 263,425
Neurocrine Biosciences, Inc. (a) 6,100 304,634
</Table>
See Notes to Investment Portfolio.
205
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
Protein Design Labs, Inc. (a) 22,000 $ 307,560
Serologicals Corp. (a) 48,100 655,603
Telik, Inc. (a) 20,600 331,042
--------------
2,608,456
--------------
HEALTH CARE EQUIPMENT & SUPPLIES--7.7%
American Medical
Systems Holdings, Inc. (a) 25,500 430,185
Bio-Rad Laboratories, Inc. (a) 9,000 498,150
Integra LifeSciences
Holdings (a) 29,500 778,210
Kyphon, Inc. (a) 21,200 320,544
Medical Action
Industries, Inc. (a) 41,200 672,796
Noven Pharmaceuticals, Inc. (a) 26,700 273,408
Respironics, Inc. (a) 8,200 307,664
SonoSite, Inc. (a) 21,600 430,920
Wright Medical Group, Inc. (a) 17,900 340,100
Zoll Medical Corp. (a) 7,900 265,124
--------------
4,317,101
--------------
HEALTH CARE PROVIDERS & SERVICES--2.6%
Accredo Health, Inc. (a) 11,650 253,970
Cobalt Corp. (a) 19,300 396,615
LifePoint Hospitals, Inc. (a) 17,900 374,826
WellChoice, Inc. (a) 14,600 427,488
--------------
1,452,899
--------------
PHARMACEUTICALS--4.6%
Adolor Corp. (a) 7,600 93,252
Atrix Laboratories, Inc. (a) 12,800 281,472
InterMune, Inc. (a) 12,000 193,320
Nektar Therapeutics (a) 14,500 133,835
Salix Pharmaceuticals, Ltd. (a) 19,500 204,555
SFBC International, Inc. (a) 8,900 161,090
SICOR, Inc. (a) 25,400 516,636
Taro Pharmaceuticals
Industries Ltd. (a) 9,500 521,360
Trimeris, Inc. (a) 10,050 459,084
--------------
2,564,604
--------------
INDUSTRIALS--13.8%
AEROSPACE & DEFENSE--1.6%
DRS Technologies, Inc. (a) 19,400 541,648
Integrated Defense
Technologies, Inc. (a) 12,000 186,120
Mercury Computer
Systems, Inc. (a) 10,500 190,680
--------------
918,448
--------------
AIR FREIGHT & LOGISTICS--1.4%
EGL, Inc. (a) 11,900 180,880
J.B. Hunt Transport
Services, Inc. (a) 8,100 305,775
UTI Worldwide, Inc. 9,600 299,424
--------------
786,079
--------------
COMMERCIAL SERVICES & SUPPLIES--5.6%
Arbitron, Inc. 14,100 $ 503,370
Corporate Executive
Board Co. (a) 10,000 408,200
FTI Consulting, Inc. (a) 17,550 438,224
Kroll, Inc. (a) 6,000 162,360
Navigant Consulting, Inc. (a) 9,200 109,020
NCO Group, Inc. (a) 18,200 325,962
SOURCECORP (a) 500 10,800
Sylvan Learning
Systems, Inc. (a) 23,100 527,604
United Stationers, Inc. 7,000 253,190
Waste Connections, Inc. (a) 11,300 396,065
--------------
3,134,795
--------------
CONSTRUCTION & ENGINEERING--0.7%
Chicago Bridge &
Iron Co. NV 16,300 369,684
--------------
ELECTRICAL EQUIPMENT--0.6%
Rayovac Corp. (a) 23,900 309,505
--------------
MACHINERY--1.4%
AGCO Corp. (a) 22,300 380,884
Cuno, Inc. (a) 11,475 414,477
--------------
795,361
--------------
ROAD & RAIL--2.5%
Dollar Thrifty Automotive
Group, Inc. (a) 15,600 289,380
Genesee & Wyoming, Inc. (a) 23,100 475,167
Heartland Express, Inc. (a) 21,000 467,250
Old Dominion Freight
Line, Inc. (a) 9,150 197,823
--------------
1,429,620
--------------
INFORMATION TECHNOLOGY--21.6%
COMMUNICATIONS EQUIPMENT--1.1%
Avocent Corp. (a) 7,900 236,447
F5 Networks, Inc. (a) 21,300 358,905
--------------
595,352
--------------
COMPUTERS & PERIPHERALS--1.9%
Applied Films Corp. (a) 22,200 574,536
Cray, Inc. (a) 60,400 477,160
--------------
1,051,696
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.6%
Anixter International, Inc. (a) 11,000 257,730
Global Imaging
Systems, Inc. (a) 21,800 504,888
Itron, Inc. (a) 22,500 485,100
Planar Systems, Inc. (a) 12,800 250,368
Plexus Corp. (a) 43,500 501,555
--------------
1,999,641
--------------
INTERNET SOFTWARE & SERVICES--2.2%
Digital River, Inc. (a) 23,900 461,270
Fidelity National Information
Solutions, Inc. (a) 17,400 453,792
</Table>
See Notes to Investment Portfolio.
206
<Page>
<Table>
<Caption>
SHARES VALUE
-------------- --------------
webMethods, Inc. (a) 40,600 $ 330,078
--------------
1,245,140
--------------
INFORMATION TECHNOLOGY CONSULTING & SERVICES--2.8%
Cognizant Technology
Solutions Corp. (a) 16,700 406,812
PEC Solutions, Inc. (a) 26,200 421,820
Priority Healthcare Corp. (a) 11,600 215,180
SRA International, Inc. (a) 16,300 521,600
--------------
1,565,412
--------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--6.7%
Artisan Components, Inc. (a) 13,700 309,757
Brooks Automation, Inc. (a) 43,100 488,754
Cymer, Inc. (a) 9,700 310,497
DSP Group, Inc. (a) 13,200 284,196
Entegris, Inc. (a) 56,400 758,016
Helix Technology Corp. 15,000 198,450
Integrated Circuit
Systems, Inc. (a) 7,500 235,725
Lattice Semiconductor Corp. (a) 40,300 331,669
Mykrolis Corp. (a) 33,200 336,980
Skyworks Solutions, Inc. 24,700 167,219
Zoran Corp. (a) 18,000 345,780
--------------
3,767,043
--------------
SOFTWARE--3.3%
Activision, Inc. (a) 31,500 406,980
Borland Software Corp. (a) 56,900 555,913
Henry (Jack) &
Associates, Inc. 15,000 266,850
Magma Design
Automation, Inc. (a) 16,000 274,400
Micromuse, Inc. (a) 17,000 135,830
Secure Computing Corp. (a) 88 768
Take-Two Interactive
Software, Inc. (a) 8,200 232,388
--------------
1,873,129
--------------
MATERIALS--1.8%
CONTAINERS & PACKAGING--1.8%
Crown Holdings, Inc. (a) 31,100 222,054
Jarden Corp. (a) 29,400 813,498
--------------
1,035,552
--------------
TELECOMMUNICATION SERVICES--0.4%
DIVERSIFIED TELECOMMUNICATION SERVICES--0.4%
Intrado, Inc. (a) 12,500 197,375
--------------
TOTAL COMMON STOCKS
(cost of $48,169,809) 54,419,527
--------------
<Caption>
PAR VALUE
-------------- --------------
SHORT-TERM OBLIGATION--1.7%
Repurchase agreement with State Street Bank & Trust Co.,
dated 06/30/03, due 07/01/03 at 1.000%, collateralized by
a U.S. Treasury Bond maturing 2/15/29, market value
$991,589, (repurchase proceeds $970,027)
(cost of $970,000) $ 970,000 $ 970,000
--------------
TOTAL INVESTMENTS--98.8%
(cost of $49,139,809) (b) 55,389,527
--------------
OTHER ASSETS & LIABILITIES, NET--1.2% 648,076
--------------
NET ASSETS--100.0% $ 56,037,603
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for both financial statements and federal income tax purposes is the
same.
See Notes to Financial Statements.
207
<Page>
STATEMENT OF ASSETS & LIABILITIES
Liberty Small Company Growth Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 49,139,809
---------------
Investments, at value $ 55,389,527
Cash 557
Receivable for:
Investments sold 1,997,144
Fund shares sold 297
Interest 27
Dividends 4,040
Expense reimbursement due from Manager 11,493
Deferred Trustees' compensation plan 1,501
---------------
TOTAL ASSETS 57,404,586
---------------
LIABILITIES:
Payable for:
Investments purchased 1,147,116
Fund shares repurchased 142,021
Management fee 23,042
Administration fee 6,724
Transfer agent fee 595
Pricing and bookkeeping fees 1,811
Merger costs 9,081
Trustees' fee 321
Audit fee 15,325
Reports to Shareholders 18,573
Deferred Trustees' fee 1,501
Other liabilities 873
---------------
TOTAL LIABILITIES 1,366,983
---------------
NET ASSETS $ 56,037,603
===============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 92,403,950
Accumulated net investment loss (147,124)
Accumulated net realized loss (42,468,941)
Net unrealized appreciation on investments 6,249,718
---------------
NET ASSETS $ 56,037,603
===============
CLASS A:
Net assets $ 56,036,819
Shares outstanding 6,949,700
===============
Net asset value per share $ 8.06
===============
CLASS B:
Net assets $ 784
Shares outstanding 98
===============
Net asset value per share $ 8.00
===============
</Table>
See Notes to Financial Statements.
208
<Page>
STATEMENT OF OPERATIONS
Liberty Small Company Growth Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 36,288
Interest 9,060
---------------
Total Investment Income (net of foreign taxes withheld of $384) 45,348
---------------
EXPENSES:
Management fee 121,200
Administration fee 36,360
Distribution fee--Class B 1
Pricing and bookkeeping fees 5,466
Transfer agent fee 3,720
Trustees' fee 2,209
Custody fee 4,546
Audit fee 12,365
Other expenses 11,664
---------------
Total Expenses 197,531
Fees and expenses waived or reimbursed by Manager (6,149)
Custody earnings credit (28)
---------------
Net Expenses 191,354
---------------
Net Investment Loss (146,006)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (2,920,982)
Net change in unrealized appreciation/depreciation on investments 11,401,269
---------------
Net Gain 8,480,287
---------------
Net Increase in Net Assets from Operations $ 8,334,281
===============
</Table>
See Notes to Financial Statements.
209
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Liberty Small Company Growth Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- --------------- ---------------
OPERATIONS:
Net investment loss $ (146,006) $ (350,644)
Net realized loss on investments (2,920,982) (7,350,449)
Net change in unrealized appreciation/depreciation on investments 11,401,269 (10,352,594)
--------------- ---------------
Net Increase (Decrease) from Operations 8,334,281 (18,053,687)
--------------- ---------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 1,561,876 5,528,253
Proceeds received in connection with merger 2,419,589 --
Redemptions (5,210,859) (17,837,585)
--------------- ---------------
Net Decrease from Share Transactions (1,229,394) (12,309,332)
--------------- ---------------
Total Increase (Decrease) in Net Assets 7,104,887 (30,363,019)
NET ASSETS:
Beginning of period 48,932,716 79,295,735
--------------- ---------------
End of period (including accumulated net investment loss of $(147,124) and
$(1,118), respectively) $ 56,037,603 $ 48,932,716
=============== ===============
CHANGES IN SHARES:
Class A:
Subscriptions 225,017 696,301
Issued in connection with merger 368,840 --
Issued for distributions reinvested -- (2,304,947)
Redemptions (752,208) --
--------------- ---------------
Net Decrease (158,351) (1,608,646)
--------------- ---------------
</Table>
See Notes to Financial Statements.
210
<Page>
NOTES TO FINANCIAL STATEMENTS
Liberty Small Company Growth Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Liberty Small Company Growth Fund, Variable Series (the
"Fund"), a series of SteinRoe Variable Investment Trust (the "Trust"), is a
diversified portfolio of a Massachusetts business trust, registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund's investment goal is to seek long-term growth of capital by
investing at least 85% of its assets in common stocks of small-cap companies.
The Fund's capitalization consists of an unlimited number of shares of
beneficial interest without par value that represent a separate series of the
Trust. The Fund offers two classes of shares: Class A and Class B. Each share of
a class represents an equal proportionate beneficial interest in that share
class and, when issued and outstanding, is fully paid and nonassessable.
Shareholders would be entitled to share proportionally in the net assets of
their share class available for distribution to shareholders upon liquidation of
the Fund. Shares of the Fund are available and are being marketed exclusively as
a pooled funding vehicle for variable annuity contracts ("VA contracts") and
Variable Life Insurance Policies ("VLI Policies") offered by the separate
accounts of certain life insurance companies ("Participating Insurance
Companies"). The Participating Insurance Companies and their separate accounts
own all the shares of the Fund.
On April 1, 2003, Stein Roe & Farnham Incorporated, the investment advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Stein Roe & Farnham Incorporated with respect to the Fund.
The merger did not change the way the Fund is managed, the investment personnel
assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
On April 14, 2003, the Galaxy VIP Small Company Growth Fund (the target fund),
previously a single class fund of Galaxy VIP Fund, a separate Massachusetts
business trust, merged into the Stein Roe Small Company Growth Fund, Variable
Series Class A shares. The Stein Roe Small Company Growth Fund, Variable Series
received a tax-free transfer of assets from the Galaxy VIP Small Company Growth
Fund as follows:
<Table>
<Caption>
SHARES NET ASSETS UNREALIZED
ISSUED RECEIVED DEPRECIATION(1)
------ -------- ---------------
368,840 $ 2,419,589 $ 86,415
<Caption>
NET ASSETS
NET ASSETS NET ASSETS OF STEIN ROE
OF STEIN ROE OF GALAXY VIP SMALL COMPANY
SMALL COMPANY SMALL COMPANY GROWTH FUND,
GROWTH FUND, GROWTH FUND VARIABLE SERIES
VARIABLE SERIES IMMEDIATELY IMMEDIATELY
PRIOR TO PRIOR TO AFTER
COMBINATION COMBINATION COMBINATION
--------------- ------------- ---------------
$ 44,410,684 $ 2,419,589 $ 46,830,273
</Table>
(1) Unrealized depreciation is included in the Net Assets Received amount shown
above.
Also on April 14, 2003, subsequent to the merger described above, the Stein Roe
Small Company Growth Fund, Variable Series was renamed the Liberty Small Company
Growth Fund, Variable Series.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at the current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
211
<Page>
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2009 $ 28,523,554
2010 9,969,519
------------
$ 38,493,073
============
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT AND ADMINISTRATIVE FEES--Columbia receives monthly fees equal to
0.50% and 0.15% annually of the Fund's average daily net assets for management
and administrative services, respectively.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. The Fund also pays out-of-pocket costs
for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Effective April 14, 2003, Columbia has voluntarily agreed to
waive expenses at the rate of 0.02% annually of the Fund's average daily net
assets. This waiver agreement will continue until April 14, 2004, after which it
may be modified or terminated at any time.
Prior to April 14, 2003, Stein Roe & Farnham Incorporated had voluntarily agreed
to reimburse all expenses, including management fees, but excluding interest,
taxes, distribution fees, brokerage and extraordinary expenses of the Fund in
excess of 0.80% annually of the Fund's average daily net assets.
212
<Page>
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $28 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $32,089,624 and
$35,992,982, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 8,409,187
Gross unrealized depreciation (2,159,469)
-------------
Net unrealized appreciation $ 6,249,718
=============
</Table>
OTHER--The Fund may focus its investments in certain industries, subjecting
it to greater risk than a fund that is more diversified.
213
<Page>
FINANCIAL HIGHLIGHTS
Liberty Small Company Growth Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, --------------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
----------- ---------- ---------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.82 $ 9.03 $ 19.05 $ 19.39
----------- ---------- ---------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (b) (0.02) (0.07) (0.06) (0.06)
Net realized and unrealized gain (loss)
on investments 1.20 (2.14) (2.32) (0.28)
----------- ---------- ---------- ------------
Total from Investment Operations 1.18 (2.21) (2.38) (0.34)
----------- ---------- ---------- ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gains -- -- (7.64) --
----------- ---------- ---------- ------------
NET ASSET VALUE, END OF PERIOD $ 8.00 $ 6.82 $ 9.03 $ 19.05
=========== ========== ========== ============
Total return (c)(d) 17.30%(e)(f) (24.47)%(e) (10.38)%(e) (1.75)%(f)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (g) 1.03%(h) 1.05% 1.07% 1.00%(h)
Net investment loss (g) (0.85)%(h) (0.82)% (0.57)% (0.49)%(h)
Waiver/reimbursement 0.03%(h) 0.02% 0.04% --
Portfolio turnover rate 67%(f) 117% 146% 155%
Net assets, end of period (000's) $ 1 $ 1 $ 1 $ 1
</Table>
(a) For the period from commencement of operations on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested.
(d) Total return figures do not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(e) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(h) Annualized.
214
<Page>
SHAREHOLDER MEETING RESULTS
Liberty Small Company Growth Fund, Variable Series
RESULTS OF THE ANNUAL MEETING OF SHAREHOLDERS
On February 19, 2003, the Annual Meeting of Shareholders of the Trust was held
to conduct a vote for or against the approval of the following items listed on
the Trust's Proxy Statement for said Meeting. On December 2, 2002, the record
date for the Meeting, the Galaxy VIP Small Company Growth Fund had 361,265.328
common shares outstanding. The votes cast were as follows:
SHAREHOLDER RESPONSE SUMMARY REPORT
LIBERTY VARIABLE INVESTMENT TRUST/STEINROE VARIABLE INVESTMENT TRUST
GALAXY VIP SMALL COMPANY GROWTH FUND
FEBRUARY 19, 2003
1. To approve an Agreement and Plan of Reorganization providing for (i) the sale
of all of the assets of the Galaxy VIP Small Company Growth Fund to, and the
assumption of all of the liabilities of the Galaxy VIP Small Company Growth
Fund by, the Stein Roe Small Company Growth Fund, Variable Series, in
exchange for shares of the Stein Roe Small Company Growth Fund, Variable
Series, and the distribution of such shares to the shareholders of the Galaxy
VIP Small Company Growth Fund in complete liquidation of the Galaxy VIP Small
Company Growth Fund; (ii) the de-registration of The Galaxy VIP Fund as an
investment company under the Investment Company Act of 1940, as amended, and
(iii) The Galaxy VIP Fund's termination as a Massachusetts business trust
under Massachusetts law.
<Table>
<Caption>
% OF % OF
NO. OF OUTSTANDING SHARES
SHARES SHARES VOTED
----------- ----------- -------
Affirmative 302,442.104 83.717% 86.300%
Against 15,518.917 4.296% 4.428%
Abstain 32,494.839 8.995% 9.272%
TOTAL 350,455.860 97.008% 100.000%
<Caption>
** FUND TOTALS: SHARES
RECORD TOTAL 361,265.328
VOTED SHARES 350,455.860
PERCENT VOTED 97.008%
</Table>
215
<Page>
PORTFOLIO MANAGER'S DISCUSSION
Stein Roe Growth Stock Fund, Variable Series / June 30, 2003
Stein Roe Growth Stock Fund, Variable Series seeks long-term growth.
Erik P. Gustafson, portfolio manager of the fund, has been with Columbia
Management Advisors, Inc., or its predecessors since 1992.
For the six-month period ended June 30, 2003, the fund's performance fell short
of the S&P 500 Index. The fund's emphasis on large capitalization, high-quality
companies hindered performance during a period when many smaller companies made
surprising comebacks.
BETTER MARKET FOR GROWTH STOCKS
The first six months of the year were marked by continued instability in world
politics, including the war with Iraq and concerns about SARS. The markets
responded first by selling off in anticipation of the war. Then, they rebounded
strongly when the major military campaign against Iraq ended faster than
expected. Technology and telecommunications stock--sectors that have been the
weakest for the last three years--led the rebound. The fund benefited from a
larger weighting than the market in technology. However, our focus was on large
cap, high quality stocks. During this rally, the smaller, speculative tech
stocks--those that had suffered the greatest losses in previous years--posted
the most spectacular gains.
Health care stocks also were strong performers during the period. Teva
Pharmaceuticals and Watson Pharmaceuticals (2.0% and 2.5% of assets,
respectively), generic drug manufacturers, did well in an environment of rising
health care costs and growing demand for less expensive alternatives.
Biotechnology shares were also strong. In this area, the fund benefited from a
large stake in Amgen (2.8% of net assets). Increasing demand for its core
products, including those that treat anemia and help the immune system fight
viral infections, bode well for the company's prospects.
NEW NAMES IN THE PORTFOLIO
We increased the fund's holdings from 36 to 46 during the period. We added to
our technology position, believing that the current recovery has additional
potential. Among the new names we added were Analog Devices, Maxim and Comverse,
which makes the software for such popular services as call waiting and caller ID
(2.0%, 1.5% and 0.2% of net assets, respectively).
We also bolstered holdings in the retail sector, based on our belief that a
combination of lower taxes and lower interest rates will indeed spur economic
growth in the second half of the year. We added to or initiated positions in
companies that we think may benefit from increased consumer spending. These
include Coach, WalMart and Carnival (1.0%, 1.5% and 2.0% of net assets,
respectively). We also initiated a position in Clear Channel (2.0% of net
assets), the largest radio station owner in the country, with 1500 outlets
nationwide. We feel the company stands to benefit from rising advertising
revenues and a favorable regulatory climate. Finally, we added to our oil
service holdings in anticipation of the start of a strong cycle for drilling.
New names in oil service include Schlumberger, Smith International and
Transocean (2.3%, 1.5% and 1.2% of net assets respectively).
BETTER GROWTH PROSPECTS AHEAD
We believe the US economy will experience faster growth in the second half of
the year. Greater geopolitical stability, continued low interest rates and new
tax incentives should ultimately spur businesses to reinvest in their
infrastructure. Improved economic growth should lead to further market advances,
and we believe that high quality growth stocks--which have been among the
weakest performers in recent years--have the potential to regain their position
as market leaders.
Economic and market conditions can frequently change. There is no assurance that
the trends described here will continue or commence.
An investment in Stein Roe Growth Stock Fund, Variable Series offers the
potential for long-term growth, but also involves certain risks, including stock
market fluctuations due to economic and business developments. The fund may also
invest up to 25% of its assets in foreign stocks. There are also specific risks
involved when investing in foreign stocks, such as currency exchange rate
fluctuations, economic change, instability of emerging countries and political
developments.
Holdings are disclosed as of June 30, 2003, and are subject to change.
216
<Page>
PERFORMANCE INFORMATION
Stein Roe Growth Stock Fund, Variable Series / June 30, 2003
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2003 (%)
<Table>
<Caption>
(CUMULATIVE)
6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------
Class B(1) (6/1/00) 10.78 -5.16 -5.51 7.17
S&P 500 Index 11.75 0.25 -1.61 10.04
</Table>
Inception date of share class is in parentheses.
[CHART]
VALUE OF A $10,000 INVESTMENT, 6/30/93(2) - 6/30/03
<Table>
<Caption>
CLASS B SHARES S&P 500 INDEX
Jun-93 $ 10,348 $ 10,186
12/31/1993 $ 10,808 $ 10,353
3/31/1994 $ 10,123 $ 9,893
6/30/1994 $ 9,809 $ 9,861
9/30/1994 $ 10,260 $ 10,270
12/31/1994 $ 10,122 $ 10,194
3/31/1995 $ 10,860 $ 11,114
6/30/1995 $ 11,944 $ 12,093
9/30/1995 $ 13,145 $ 12,973
12/31/1995 $ 13,941 $ 13,672
3/31/1996 $ 14,590 $ 14,328
6/30/1996 $ 15,588 $ 14,886
9/30/1996 $ 16,061 $ 15,256
12/31/1996 $ 16,906 $ 16,442
3/31/1997 $ 16,816 $ 16,805
6/30/1997 $ 20,214 $ 19,647
9/30/1997 $ 21,403 $ 21,026
12/31/1997 $ 22,362 $ 21,539
3/31/1998 $ 24,956 $ 24,453
6/30/1998 $ 26,541 $ 25,165
9/30/1998 $ 22,623 $ 22,573
12/31/1998 $ 28,602 $ 27,284
3/31/1999 $ 31,906 $ 28,553
6/30/1999 $ 32,879 $ 30,469
9/30/1999 $ 31,120 $ 28,470
12/31/1999 $ 39,165 $ 32,609
3/31/2000 $ 45,024 $ 33,262
6/30/2000 $ 42,971 $ 32,287
9/30/2000 $ 41,566 $ 31,887
12/31/2000 $ 34,404 $ 29,307
3/31/2001 $ 28,493 $ 25,758
6/30/2001 $ 29,265 $ 27,180
9/30/2001 $ 23,389 $ 23,106
12/31/2001 $ 25,873 $ 25,483
3/31/2002 $ 24,869 $ 25,468
6/30/2002 $ 21,074 $ 21,971
9/30/2002 $ 17,232 $ 18,098
12/31/2002 $ 18,042 $ 19,529
3/31/2003 $ 17,533 $ 22,464
Jun-03 $ 19,991 $ 25,922
</Table>
<Table>
<Caption>
NET ASSET VALUE PER SHARE ($) 12/31/02 6/30/03
- --------------------------------------------------------------------------------
Class B 19.40 21.43
</Table>
PAST PERFORMANCE CANNOT PREDICT FUTURE INVESTMENT RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Total return performance includes changes in share price and
reinvestment of all distributions. The S&P (Standard & Poor's) 500 Index is an
unmanaged index that tracks the performance of 500 widely held
large-capitalization US stocks. Indices are not investments, do not incur fees
or expenses and are not professionally managed. It is not possible to invest
directly in an index. Securities in the fund may not match those in an index.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. CURRENT RETURNS FOR THE FUND MAY BE
DIFFERENT THAN THAT SHOWN.
Performance numbers reflect all fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional charges, it would be lower.
(1) Class B share (newer class shares) performance information includes returns
of the fund's class A shares (the older existing fund class) for periods
prior to the inception of the newer class shares. These class A share
returns were not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between class A shares and the newer class shares. If
differences in expenses were reflected, the returns for the periods prior
to the inception of the newer class shares would be lower.
(2) Inception date for Class A shares (older existing share class) is January
1, 1989.
217
<Page>
INVESTMENT PORTFOLIO
Stein Roe Growth Stock Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCKS--99.7%
CONSUMER DISCRETIONARY--15.9%
HOTELS RESTAURANTS & LEISURE--2.0%
Carnival Corp. 90,000 $ 2,925,900
--------------
MEDIA--5.1%
Clear Channel Communications, Inc. 70,000 2,967,300
Liberty Media Corp., Class A (a) 380,000 4,392,800
--------------
7,360,100
--------------
MULTILINE RETAIL--4.0%
Kohl's Corp. (a) 70,000 3,596,600
Wal-Mart Stores, Inc. 40,000 2,146,800
--------------
5,743,400
--------------
SPECIALTY RETAIL--3.8%
Chico's FAS, Inc. (a) 40,000 842,000
Home Depot, Inc. 140,000 4,636,800
--------------
5,478,800
--------------
TEXTILES & APPAREL--1.0%
Coach, Inc. (a) 30,000 1,492,200
--------------
CONSUMER STAPLES--9.0%
BEVERAGES--4.1%
Coca-Cola Co. 60,000 2,784,600
PepsiCo, Inc. 70,000 3,115,000
--------------
5,899,600
--------------
HOUSEHOLD PRODUCTS--2.7%
Procter & Gamble Co. 45,000 4,013,100
--------------
PERSONAL PRODUCTS--2.2%
Gillette Co. 100,000 3,186,000
--------------
ENERGY--5.0%
ENERGY EQUIPMENT & SERVICES--5.0%
Smith International, Inc. 60,000 2,204,400
Schlumberger, Ltd. 70,000 3,329,900
Transocean, Inc. 80,000 1,757,600
--------------
7,291,900
--------------
FINANCIALS--7.5%
DIVERSIFIED FINANCIALS--4.8%
Citigroup, Inc. 135,000 5,778,000
Merrill Lynch & Co., Inc. 25,000 1,167,000
--------------
6,945,000
--------------
INSURANCE--2.7%
American International Group, Inc. 70,000 3,862,600
--------------
HEALTH CARE--24.4%
BIOTECHNOLOGY--4.0%
Amgen, Inc. (a) 60,000 3,986,400
Gilead Sciences, Inc. (a) 20,000 1,128,598
Idec Pharmaceuticals Corp. (a) 20,000 680,000
--------------
5,794,998
--------------
HEALTH CARE EQUIPMENT & SUPPLIES--7.1%
Boston Scientific Corp. (a) 75,000 $ 4,582,500
Medtronic, Inc. 120,000 5,756,400
--------------
10,338,900
--------------
HEALTH CARE PROVIDERS & SERVICES--1.7%
UnitedHealth Group, Inc. 50,000 2,512,500
--------------
PHARMACEUTICALS--11.6%
Johnson & Johnson 80,000 4,136,000
Pfizer, Inc. 180,000 6,147,000
Teva Pharmaceutical
Industries, Ltd. ADR 50,000 2,846,500
Watson Pharmaceuticals, Inc. 90,000 3,633,300
--------------
16,762,800
--------------
INDUSTRIALS--13.5%
AEROSPACE & DEFENSE--2.0%
Lockheed Martin Corp. 60,000 2,854,200
--------------
COMMERCIAL SERVICES & SUPPLIES--3.5%
First Data Corp. 70,000 2,900,800
Paychex, Inc. 75,000 2,198,250
--------------
5,099,050
--------------
INDUSTRIAL CONGLOMERATES--4.4%
General Electric Co. 220,000 6,309,600
--------------
MACHINERY--3.6%
Caterpillar, Inc. 95,000 5,287,700
--------------
INFORMATION TECHNOLOGY--23.6%
COMMUNICATIONS EQUIPMENT--5.5%
Cisco Systems, Inc. (a) 325,000 5,424,250
Comverse Technology, Inc. (a) 20,000 300,600
Nokia Oyj ADR 135,000 2,218,050
--------------
7,942,900
--------------
COMPUTERS & PERIPHERALS--3.1%
Dell Computer Corp. (a) 140,000 4,474,400
--------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--5.2%
Analog Devices, Inc. (a) 85,000 2,959,700
Maxim Integrated Products, Inc. 65,000 2,222,350
Texas Instruments, Inc. 135,000 2,376,000
--------------
7,558,050
--------------
SOFTWARE--9.8%
Microsoft Corp. 300,000 7,683,000
Oracle Corp. (a) 200,000 2,404,000
SAP AG ADR 80,000 2,337,600
VERITAS Software Corp. (a) 60,000 1,720,200
--------------
14,144,800
--------------
TELECOMMUNICATION SERVICES--0.8%
WIRELESS TELECOMMUNICATION SERVICES--0.8%
Sprint Corp.--PCS Group (a) 200,000 1,150,000
--------------
TOTAL COMMON STOCKS
(cost of $137,364,098) 144,428,498
--------------
</Table>
See Notes to Investment Portfolio.
218
<Page>
<Table>
<Caption>
PAR VALUE
-------------- --------------
SHORT-TERM OBLIGATION--0.5%
Repurchase agreement with State
Street Bank & Trust Co., dated
6/30/03, due 07/01/03 at 1.000%,
collateralized by U.S. Treasury
Bond maturing 2/15/2029,
market value $699,621
(repurchase proceeds $685,019)
(cost of $685,000) $ 685,000 $ 685,000
--------------
TOTAL INVESTMENTS--100.2%
(cost of $138,049,098) (b) 145,113,498
--------------
OTHER ASSETS & LIABILITIES, NET--(0.2)% (338,572)
--------------
NET ASSETS--100.0% $ 144,774,926
==============
</Table>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for both financial statement and federal income tax purposes is the
same.
<Table>
<Caption>
ACRONYM NAME
------- ----
ADR American Depositary Receipt
</Table>
See Notes to Financial Statements.
219
<Page>
STATEMENT OF ASSETS & LIABILITIES
Stein Roe Growth Stock Fund, Variable Series / June 30, 2003 (Unaudited)
<Table>
ASSETS:
Investments, at cost $ 138,049,098
---------------
Investments, at value $ 145,113,498
Cash 347
Receivable for:
Investments sold 2,317,566
Fund shares sold 178,345
Interest 19
Dividends 77,375
Expense reimbursement due from Distributor 806
Deferred Trustees' compensation plan 2,761
---------------
TOTAL ASSETS 147,690,717
---------------
LIABILITIES:
Payable for:
Investments purchased 1,952,552
Fund shares repurchased 810,236
Distributions--Class B 251
Management fee 65,593
Administration fee 18,796
Transfer agent fee 594
Pricing and bookkeeping fees 8,639
Reports to Shareholders 40,729
Deferred Trustees' fee 2,761
Other liabilities 15,640
---------------
TOTAL LIABILITIES 2,915,791
---------------
NET ASSETS $ 144,774,926
===============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 215,711,428
Undistributed net investment income 147,682
Accumulated net realized loss (78,148,584)
Net unrealized appreciation on investments 7,064,400
---------------
NET ASSETS $ 144,774,926
===============
CLASS A:
Net assets $ 122,501,944
Shares outstanding 5,700,193
===============
Net asset value per share $ 21.49
===============
CLASS B:
Net assets $ 22,272,982
Shares outstanding 1,039,232
===============
Net asset value per share $ 21.43
===============
</Table>
See Notes to Financial Statements.
220
<Page>
STATEMENT OF OPERATIONS
Stein Roe Growth Stock Fund, Variable Series
For the Six Months Ended June 30, 2003 (Unaudited)
<Table>
INVESTMENT INCOME:
Dividends $ 700,583
Interest 8,992
---------------
Total Investment Income (net of foreign taxes withheld of $14,632) 709,575
---------------
EXPENSES:
Management fee 349,087
Administration fee 104,726
Distribution fee--Class B 27,252
Pricing and bookkeeping fees 28,729
Transfer agent fee 3,720
Trustees' fee 3,313
Custody fee 4,575
Other expenses 38,340
---------------
Total Expenses 559,742
Fees reimbursed by Distributor--Class B (6,640)
Custody earnings credit (65)
---------------
Net Expenses 553,037
---------------
Net Investment Income 156,538
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
Net realized loss on investments (21,177,579)
Net change in unrealized appreciation/depreciation on investments 35,236,114
---------------
Net Gain 14,058,535
---------------
Net Increase in Net Assets from Operations $ 14,215,073
===============
</Table>
See Notes to Financial Statements.
221
<Page>
STATEMENT OF CHANGES IN NET ASSETS
Stein Roe Growth Stock Fund, Variable Series
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
- ---------------------------------- --------------- ---------------
OPERATIONS:
Net investment income $ 156,538 $ 567,697
Net realized loss on investments (21,177,579) (17,315,003)
Net change in unrealized appreciation/depreciation on investments 35,236,114 (55,764,886)
--------------- ---------------
Net Increase (Decrease) from Operations 14,215,073 (72,512,192)
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A (506,499) (370,940)
Class B (55,280) --
--------------- ---------------
Total Distributions Declared to Shareholders (561,779) (370,940)
--------------- ---------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 1,719,944 6,190,686
Distributions reinvested 506,499 370,940
Redemptions (14,217,013) (45,952,620)
--------------- ---------------
Net Decrease (11,990,570) (39,390,994)
--------------- ---------------
Class B:
Subscriptions 857,476 5,347,058
Distributions reinvested 55,280 --
Redemptions (2,857,838) (5,774,260)
--------------- ---------------
Net Decrease (1,945,082) (427,202)
--------------- ---------------
Net Decrease from Share Transactions (13,935,652) (39,818,196)
--------------- ---------------
Total Decrease in Net Assets (282,358) (112,701,328)
NET ASSETS:
Beginning of period 145,057,284 257,758,612
--------------- ---------------
End of period (including undistributed net investment income of $147,682 and
$552,923, respectively) $ 144,774,926 $ 145,057,284
=============== ===============
CHANGES IN SHARES:
Class A:
Subscriptions 83,535 264,894
Issued for distributions reinvested 28,632 13,805
Redemptions (727,947) (2,015,798)
--------------- ---------------
Net Decrease (615,780) (1,737,099)
--------------- ---------------
Class B:
Subscriptions 43,065 224,649
Issued for distributions reinvested 3,130 --
Redemptions (142,958) (268,599)
--------------- ---------------
Net Decrease (96,763) (43,950)
--------------- ---------------
</Table>
See Notes to Financial Statements.
222
<Page>
NOTES TO FINANCIAL STATEMENTS
Stein Roe Growth Stock Fund, Variable Series / June 30, 2003 (Unaudited)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
ORGANIZATION--Stein Roe Growth Stock Fund, Variable Series (the "Fund"), a
series of SteinRoe Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment goal is to seek long-term growth of capital. The Fund's
capitalization consists of an unlimited number of shares of beneficial interest
without par value that represent a separate series of the Trust. The Fund offers
two classes of shares: Class A and Class B. Each share of a class represents an
equal proportionate beneficial interest in that share class and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of their share class available for
distribution to shareholders upon liquidation of the Fund. Shares of the Fund
are available and are being marketed exclusively as a pooled funding vehicle for
variable annuity contracts ("VA contracts") and Variable Life Insurance Policies
("VLI Policies") offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund.
On April 1, 2003, Stein Roe & Farnham Incorporated, the investment advisor to
the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect wholly owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Stein Roe & Farnham Incorporated with respect to the Fund.
The merger did not change the way the Fund is managed, the investment personnel
assigned to manage the Fund or the fees paid by the Fund.
Columbia provides investment management and advisory services to the Fund
pursuant to its Management Agreement with the Fund. Columbia also provides
pricing and bookkeeping services to the Fund. Liberty Funds Distributor, Inc.
("LFD"), an affiliate of Columbia, serves as the principal underwriter of the
Fund.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at the current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation of
the 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 as determined in good faith by or under the supervision of the
Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS--All income,
expenses (other than the Class B distribution fee), and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class B net investment income per share data and ratios
reflect the distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
223
<Page>
DISTRIBUTIONS TO SHAREHOLDERS--The Fund intends to distribute as income
dividends or capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the sale of
investments. All dividends and distributions are reinvested in additional shares
of the Fund at net asset value as of the record date of the distribution. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
FOREIGN CURRENCY TRANSACTIONS--Net realized and unrealized gains (losses) on
foreign currency transactions and translations includes gains (losses) arising
from the fluctuations in exchange rates between trade and settlement dates on
securities transactions, gains (losses) arising from the disposition of foreign
currency, and currency gains (losses) between the accrual and payment dates on
dividends, interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) on investments.
OTHER--Interest income is recorded on the accrual basis. Corporate actions
and dividend income are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of non-reclaimable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of all
tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
The following capital loss carryforwards, determined as of December 31, 2002,
are available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
<Table>
<Caption>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2009 $ 28,434,611
2010 28,364,195
------------
$ 56,798,806
============
</Table>
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT AND ADMINISTRATIVE FEES--Columbia receives a monthly management
fee equal to 0.50% annually of the first $1 billion of the Fund's average daily
net assets and 0.45% in excess of $1 billion for management services. Columbia
receives a monthly administration fee equal to 0.15% annually of average daily
net assets for administrative services.
PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing
and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement.
Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated
those functions to State Street Bank & Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. For the six months ended June 30, 2003,
the annualized net asset based fee rate was 0.033%. The Fund also pays
out-of-pocket costs for pricing services.
TRANSFER AGENT FEE--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of Columbia, provides shareholder services for an annual rate of
$7,500.
DISTRIBUTION FEE--The Fund has adopted a 12b-1 plan, which requires it to pay
LFD a monthly distribution fee equal to 0.25% annually of Class B average daily
net assets.
EXPENSE LIMITS--Columbia has voluntarily agreed to reimburse all expenses,
including management fees, but excluding interest, taxes, distribution fees,
brokerage and extraordinary expenses of the Fund in excess of 0.80% annually of
the Fund's average daily net assets.
224
<Page>
LFD has voluntarily agreed to reimburse the Fund's Class B share distribution
fee in excess of 0.15% when the total operating expenses of the Fund applicable
to Class B shares, including distribution fees, are in excess of 0.95% annually
of Class B average daily net assets.
These arrangements may be terminated or modified by Columbia or LFD at any time.
OTHER--The Fund pays no compensation to its officers, all of whom are
employees of Columbia or its affiliates.
The Fund's Independent Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be paid solely
out of the Fund's assets.
The Fund has an agreement with its custodian bank under which $65 of custody
fees were reduced by balance credits for the six months ended June 30, 2003. The
Fund could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY--For the six months ended June 30, 2003, purchases and
sales of investments, other than short-term obligations, were $69,764,083 and
$82,309,620, respectively.
Unrealized appreciation (depreciation) at June 30, 2003, based on cost of
investments for federal income tax purposes, was:
<Table>
Gross unrealized appreciation $ 23,050,987
Gross unrealized depreciation (15,986,587)
-------------
Net unrealized appreciation $ 7,064,400
=============
</Table>
OTHER--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of foreign currency
exchange or the imposition of other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
225
<Page>
FINANCIAL HIGHLIGHTS
Stein Roe Growth Stock Fund, Variable Series--Class B Shares
Selected data for a share outstanding throughout each period is as follows:
<Table>
<Caption>
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, --------------------------- DECEMBER 31,
2003 2002 2001 2000 (a)
----------- ---------- ---------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.40 $ 27.82 $ 44.59 $ 50.85
----------- ---------- ---------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (b) 0.01 0.03 (0.02) (0.12)
Net realized and unrealized gain (loss)
on investments 2.07 (8.45) (10.27) (6.14)
----------- ---------- ---------- ------------
Total from Investment Operations 2.08 (8.42) (10.29) (6.26)
----------- ---------- ---------- ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.05) -- --(c) --
In excess of net realized gains -- -- (6.48) --
----------- ---------- ---------- ------------
Total Distributions Declared
to Shareholders (0.05) -- (6.48) --
----------- ---------- ---------- ------------
NET ASSET VALUE, END OF PERIOD $ 21.43 $ 19.40 $ 27.82 $ 44.59
=========== ========== ========== ============
Total return (d)(e) 10.78%(f)(g) (30.27)%(f) (24.80)%(f) (12.31)%(g)
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Expenses (h) 0.95%(i) 0.95% 0.95% 0.95%(i)
Net investment income (loss) (h) 0.06%(i) 0.14% (0.06)% (0.43)%(i)
Waiver/reimbursement 0.06%(i) 0.07% 0.06% --
Portfolio turnover rate 50%(g) 68% 57% 65%(g)
Net assets, end of period (000's) $ 22,273 $ 22,042 $ 32,830 $ 20,059
</Table>
(a) For the period from commencement of operations on June 1, 2000 to
December 31, 2000.
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Rounds to less than $0.01 per share.
(d) Total return at net asset value assuming all distributions reinvested.
(e) Total return figure does not include any insurance company charges
associated with a variable annuity. If included, total return would be
reduced.
(f) Had the Distributor not waived or reimbursed a portion of expenses, total
return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(i) Annualized.
226
<Page>
STEINROE VARIABLE INVESTMENT TRUST
INVESTMENT MANAGER AND ADMINISTRATOR
Columbia Management Advisors, Inc.
100 Federal Street
Boston, MA 02110
TRANSFER AGENT
Liberty Funds Services, Inc.
PO Box 8081
Boston, MA 02266-8081
227
<Page>
(This page intentionally left blank)
228
<Page>
[KEYPORT LOGO]
P.O. Box 9133
Wellesley Hills, MA 02481
2003 SEMIANNUAL REPORT - CLASS B SHARES
LIBERTY VARIABLE INVESTMENT TRUST
- - STEINROE VARIABLE INVESTMENT TRUST
- - WANGER ADVISORS TRUST
ANN-03/626O-0603 (08/03) 03/2166b
<Page>
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable at this time.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Registrant's Chief Executive Officer and Chief Financial Officer,
based on their evaluation of the Registrant's disclosure controls and
procedures as of a date within 90 days of the filing date of this report,
have concluded that such controls and procedures are adequately designed to
ensure that information required to be disclosed by the Registrant in its
reports that it files or submits under the Securities Exchange Act of 1934,
as amended, is accumulated and communicated to the Registrant's management,
including the Chief Executive Officer and Chief Financial Officer, or persons
performing similar functions, as appropriate, to allow timely decisions
regarding required disclosure.
(b) There was no change in the registrant's internal control over financial
reporting that occurred over the registrant's last fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
at this time.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a)
under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)). Attached
hereto as Exhibit 99.CERT.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(b)
under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)). Attached
hereto as Exhibit 99.906CERT.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Liberty Variable Investment Trust
SteinRoe Variable Investment Trust
-------------------------------------------------------------------
By (Signature and Title)* /s/ Joseph R. Palombo
------------------------------------------------------
Joseph R. Palombo, President
Date September 5, 2003
---------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Joseph R. Palombo
------------------------------------------------------
Joseph R. Palombo, President
Date September 5, 2003
---------------------------------------------------------------------------
By (Signature and Title)* /s/ J. Kevin Connaughton
------------------------------------------------------
J. Kevin Connaughton, Treasurer
Date September 5, 2003
---------------------------------------------------------------------------