<Page> 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 --------------------------------------------- Liberty Variable Investment Trust - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) One Financial Center, Boston, Massachusetts 02111 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Vincent Pietropaolo, 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: 1-617-772-3698 ---------------------------- Date of fiscal year end: 12/31/04 -------------------------- Date of reporting period: 06/30/04 ------------------------- 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. <Page> [GRAPHIC] SEMIANNUAL REPORT - CLASS B SHARES JUNE 30, 2004 LIBERTY VARIABLE INVESTMENT TRUST <Page> PRESIDENT'S MESSAGE Liberty Variable Investment Trust Dear Shareholder: We are pleased to let you know that FleetBoston Financial Corporation and Bank of America Corporation have merged, effective April 1, 2004. As a result of the merger, Columbia Management Group became part of the Bank of America family of companies. Looking ahead, we believe this merger will be a real benefit to our shareholders. Preserving and leveraging our strengths, the combined organization intends to deliver additional research and management capabilities, as well as new products to you. There are no immediate changes planned for fund names or customer service contacts. As you might know, on March 15, 2004, FleetBoston Financial announced an agreement in principle between Columbia Management Advisors, Inc. and Columbia Funds Distributor, Inc. (collectively "Columbia Management") with the staff of the Securities and Exchange Commission ("SEC") and the New York Attorney General ("NYAG") to settle charges involving market timing in Columbia Management mutual funds. (Bank of America came to a similar settlement in principle at the same time.) Under the agreements Columbia Management agreed, among other things, to pay $70 million in disgorgement; $70 million in civil penalties and to reduce mutual fund fees by $80 million over a five-year period. Please rest assured that the settlement and all associated legal fees will be paid by Columbia Management; not by the affected funds or their shareholders. The agreement requires the final approval of the SEC and the NYAG. SIX-MONTH ECONOMIC AND MARKET REVIEW Uncertainty about the economic environment, interest rates and geopolitical factors weighed on investors during the period. Most segments of the financial markets delivered muted returns. Despite strong profit growth, the US stock market made only modest headway during the period. The S&P 500 Index returned 3.44%, led by energy stocks which gained nearly 12% in the first half of 2004. Foreign stock markets did slightly better than the US market. The MSCI EAFE Index gained 4.56%. However, performance varied widely from market to market. Japanese stocks were strong. But emerging Asia markets, which had done well in 2003, pulled back in 2004. Some European markets registered solid gains, but Germany--Europe's largest market--slumped under the weight of mounting economic woes. Although the bond market was essentially flat for the period, it experienced significant volatility. Early in the period, bonds gained as a weak job picture raised concerns about the sustainability of the economic recovery. However, when more than 1.2 million new jobs were added between March and June, the Federal Reserve Board signaled that it was prepared to put an end to the lowest short-term interest rates in four decades. Bond yields rose and prices fell in anticipation of the rate increase, which occurred on June 30. The Lehman Brothers Aggregate Bond Index returned 0.15% for the period. This index measures the performance of government, corporate, mortgage- and asset-backed fixed income securities. High-yield bonds were the strongest performing segment of the bond market. The Merrill Lynch US High Yield, Cash Pay Index gained 1.33% for the period. ABOUT YOUR FUND'S PERFORMANCE In the reports that follow your fund's managers will discuss the reasons for fund performance and the strategies that aided or hindered them during the six-month period ended June 30, 2004. As always, we encourage you to read the reports of the funds you own and to discuss them with your investment professional. We thank you for your business and look forward to helping you reach your financial goals. Sincerely, /s/ Thomas C. Theobald /s/ J. Kevin Connaughton Thomas C. Theobald J. Kevin Connaughton Chairman, Board of Trustees President, Columbia Funds J. Kevin Connaughton was named president of Columbia Funds on February 27, 2004 May Lose Value Not FDIC ----------------- Insured No Bank Guarantee Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. <Page> PERFORMANCE AT A GLANCE Liberty Variable Investment Trust <Table> <Caption> AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/04 (%) (CUMULATIVE) INCEPTION 6-MONTH 1-YEAR 5-YEAR 10-YEAR LIFE - ----------------------------------------------------------------------------------------------------------------------------------- LIBERTY VARIABLE INVESTMENT TRUST Colonial Small Cap Value Fund, Variable Series -- Class B(1) 6/1/00 9.07 38.01 14.22 -- 9.15 Colonial Strategic Income Fund, Variable Series -- Class B(1) 6/1/00 -0.20 5.70 6.06 -- 7.44 Columbia High Yield Fund, Variable Series -- Class B(1) 4/14/03 0.29 4.45 5.05 -- 5.51 Columbia International Fund, Variable Series -- Class B(1) 6/1/00 2.37 25.46 -0.90 2.07 -- Columbia Real Estate Equity Fund, Variable Series -- Class B(1) 4/14/03 5.93 26.58 12.39 -- 8.68 Liberty Equity Fund, Variable Series -- Class B(1) 4/14/03 3.21 14.47 -3.49 9.14 -- Liberty Growth & Income Fund, Variable Series -- Class B(1) 6/1/00 4.10 15.57 0.47 -- 11.36 Liberty S&P 500 Index Fund, Variable Series -- Class B 5/30/00 3.13 18.24 -- -- -3.98 Liberty Select Value Fund, Variable Series -- Class B 5/30/00 7.72 27.69 -- -- 8.67 Newport Tiger Fund, Variable Series -- Class B(1) 6/1/00 -4.72 27.90 0.88 -- 1.23 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. (1) Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the oldest 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 new class of shares would be lower. <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 16 Columbia High Yield Fund, Variable Series 36 Columbia International Fund, Variable Series 50 Columbia Real Estate Equity Fund, Variable Series 64 Liberty Equity Fund, Variable Series 74 Liberty Growth & Income Fund, Variable Series 86 Liberty S&P 500 Index Fund, Variable Series 98 Liberty Select Value Fund, Variable Series 115 Newport Tiger Fund, Variable Series 126 FINANCIAL STATEMENTS Colonial Small Cap Value Fund, Variable Series 4 Colonial Strategic Income Fund, Variable Series 18 Columbia High Yield Fund, Variable Series 38 Columbia International Fund, Variable Series 52 Columbia Real Estate Equity Fund, Variable Series 66 Liberty Equity Fund, Variable Series 76 Liberty Growth & Income Fund, Variable Series 88 Liberty S&P 500 Index Fund, Variable Series 100 Liberty Select Value Fund, Variable Series 117 Newport Tiger Fund, Variable Series 128 </Table> Must be preceded or accompanied by a prospectus. Columbia Funds Distributor, Inc. 08/2004 <Page> PORTFOLIO MANAGER'S DISCUSSION Colonial Small Cap Value Fund, Variable Series / June 30, 2004 Colonial Small Cap Value Fund, Variable Series seeks long-term growth by investing primarily in smaller capitalization equities. Stephen Barbaro has managed the fund since June 2002. Although the economy improved and many companies continued to deliver strong earnings growth, the pace of the stock market's climb slowed in the first half of 2004. Worries about rising interest rates, the economy's ability to maintain steady progress and geopolitical tensions put a damper on returns. Small-cap stocks, however, continued to fare well and outperformed large-cap stocks. In this environment, the fund's return was largely in line with its benchmark, the S&P SmallCap 600/Barra Value Index. STOCK SELECTION WAS THE KEY TO PERFORMANCE We continued to focus on identifying companies with strong competitive and financial positions, good earnings growth prospects and reasonable stock valuations. This strategy enabled us to pick stocks that were winners in their sectors during the period. Stock selection in health care, industrials and financials was particularly helpful to performance. STRONGEST GAINS CAME FROM HEALTH CARE AND INDUSTRIALS The fund's modest investment in the health care sector produced outsized gains. Standouts included nursing homes and other non-hospital and specialty facilities companies, an oncology practice that was bought out at a premium during the period and a funeral home. The fund also owned a contact lens manufacturer that was a strong performer. Overall, we benefited from our decision to avoid biotechnology and more expensive pharmaceutical stocks which were weak performers during the period. The fund also benefited from its investment in industrial stocks, which rallied as the economy improved. The fund owned machinery and equipment, transportation, business services, construction and security services companies that produced very strong gains. Financials also boosted performance. We also avoided the sector's worst performers, including real estate investment trusts and thrifts which are sensitive to interest rates. Our decision to focus on banks, insurance and specialty financial companies, resulted in moderately positive returns. Telecommunications and energy stocks, although small positions in the portfolio, also aided performance. TECHNOLOGY STOCKS MADE LITTLE HEADWAY After strong gains in 2003, technology stocks were basically flat in the first half of 2004. The fund's sizable stake in this weaker-performing sector, as well as below-average returns from the stocks we owned, hindered performance. Although earnings growth at many companies remained strong, investors became concerned that stock prices had gotten ahead of expectations. Semiconductor and computer storage stocks were the biggest disappointments for the fund, but software, telecommunications equipment and information technology services investments also hurt its return. Elsewhere, the fund's stakes in the consumer discretionary and materials sectors posted positive absolute returns that were in line with the average for their sectors. In the consumer discretionary area, our investments included restaurants and retailers, as well as manufacturers of apparel, shoes, toys and leisure products. In the economically sensitive materials groups, we owned metals, paper and chemicals companies. MORE VOLATILITY AHEAD Caught in a tug of war between positive earnings growth and worries about rising interest rates, inflation, the progress of the economic recovery and global tensions, the market is likely to remain choppy for the remainder of the year. Regardless of market conditions, our focus will remain on reasonably valued small-cap stocks with strong balance sheets and good management. We plan to maintain an economically sensitive bias as long as these stocks do not become expensive relative to opportunities in other sectors. Economic and market conditions 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 greater volatility and price fluctuations because small-cap stocks are generally thinly traded and less liquid than stocks of larger companies. Value stocks are securities of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor. If the advisor's assessment of a company's prospects is wrong, the price of its stock may not approach the value the advisor has placed on it. 2 <Page> PERFORMANCE INFORMATION Colonial Small Cap Value Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR LIFE - -------------------------------------------------------------------------------- Class B (6/1/00) 9.07 38.01 14.22 9.15 S&P SmallCap 600/Barra Value Index(1) 9.71 36.00 11.28 8.46 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 6/30/04 - ------------------------------------------------------- Class B 14.22 15.51 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 5/19/98(2) - 6/30/04 Class B: $17,083 <Table> <Caption> CLASS B SHARES S&P SMALLCAP 600/BARRA VALUE INDEX 5/19/98 $ 10,000 $ 10,000 5/31/98 $ 10,020 $ 10,000 6/30/98 $ 10,050 $ 9,995 7/31/98 $ 9,120 $ 9,070 8/31/98 $ 7,201 $ 7,434 9/30/98 $ 7,461 $ 7,829 10/31/98 $ 7,881 $ 8,171 11/30/98 $ 8,401 $ 8,520 12/31/98 $ 8,675 $ 8,855 1/31/99 $ 8,464 $ 8,753 2/28/99 $ 7,626 $ 8,040 3/31/99 $ 7,525 $ 8,009 4/30/99 $ 8,030 $ 8,707 5/31/99 $ 8,354 $ 9,055 6/30/99 $ 8,788 $ 9,604 7/31/99 $ 8,778 $ 9,454 8/31/99 $ 8,324 $ 9,057 9/30/99 $ 8,273 $ 8,891 10/31/99 $ 8,313 $ 8,685 11/30/99 $ 8,545 $ 8,879 12/31/99 $ 9,226 $ 9,123 1/31/2000 $ 8,640 $ 8,656 2/29/2000 $ 9,216 $ 9,047 3/31/2000 $ 9,358 $ 9,381 4/30/2000 $ 9,459 $ 9,446 5/31/2000 $ 9,317 $ 9,292 6/30/2000 $ 9,692 $ 9,559 7/31/2000 $ 9,783 $ 9,747 8/31/2000 $ 10,582 $ 10,317 9/30/2000 $ 10,582 $ 10,296 10/31/2000 $ 10,633 $ 10,346 11/30/2000 $ 9,864 $ 9,662 12/31/2000 $ 10,969 $ 11,026 1/31/2001 $ 11,061 $ 11,899 2/28/2001 $ 10,743 $ 11,397 3/31/2001 $ 10,569 $ 10,923 4/30/2001 $ 11,346 $ 11,581 5/31/2001 $ 11,683 $ 11,877 6/30/2001 $ 11,765 $ 12,332 7/31/2001 $ 11,847 $ 12,216 8/31/2001 $ 11,613 $ 12,019 9/30/2001 $ 10,215 $ 10,298 10/31/2001 $ 10,460 $ 10,769 11/30/2001 $ 11,165 $ 11,630 12/31/2001 $ 11,978 $ 12,470 1/31/2002 $ 12,071 $ 12,703 2/28/2002 $ 12,310 $ 12,648 3/31/2002 $ 13,181 $ 13,747 4/30/2002 $ 13,410 $ 14,310 5/31/2002 $ 12,995 $ 13,767 6/30/2002 $ 12,591 $ 13,152 7/31/2002 $ 11,046 $ 11,013 8/31/2002 $ 11,295 $ 10,999 9/30/2002 $ 10,531 $ 10,190 10/31/2002 $ 10,749 $ 10,394 11/30/2002 $ 11,581 $ 10,956 12/31/2002 $ 11,243 $ 10,665 1/31/2003 $ 10,910 $ 10,225 2/28/2003 $ 10,352 $ 9,847 3/31/2003 $ 10,373 $ 9,816 4/30/2003 $ 11,190 $ 10,704 5/31/2003 $ 12,113 $ 11,702 6/30/2003 $ 12,382 $ 12,050 7/31/2003 $ 13,037 $ 12,639 8/31/2003 $ 13,617 $ 13,247 9/30/2003 $ 13,496 $ 12,812 10/31/2003 $ 14,583 $ 13,954 11/30/2003 $ 15,161 $ 14,530 12/31/2003 $ 15,667 $ 14,937 1/31/2004 $ 16,230 $ 15,294 2/29/2004 $ 16,483 $ 15,656 3/31/2004 $ 16,814 $ 15,930 4/30/2004 $ 16,120 $ 15,344 5/31/2004 $ 16,220 $ 15,536 6/30/2004 $ 17,083 $ 16,391 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. Total return performance includes changes in share price and reinvestment of all distributions. The Standard & Poor's (S&P) SmallCap 600/Barra Value Index is an unmanaged index that tracks the performance of value stocks contained in the S&P SmallCap 600 Index, as determined by their low price to book 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. 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. Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the oldest 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 new class of shares would be lower. (1) Index performance for the life of the fund is from May 31, 1998. (2) Inception date of class A shares (oldest existing share class). 3 <Page> INVESTMENT PORTFOLIO Colonial Small Cap Value Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--99.3% CONSUMER DISCRETIONARY--16.2% AUTO COMPONENTS--1.1% BorgWarner, Inc. 21,700 $ 949,809 Modine Manufacturing Co. 16,050 511,192 Standard Motor Products, Inc. 36,700 540,591 --------------- 2,001,592 --------------- DISTRIBUTORS--0.1% Brightpoint, Inc. (a) 10,600 145,750 --------------- HOTELS, RESTAURANTS & LEISURE--4.0% Bally Total Fitness Holding Corp. (a) 67,400 337,000 Bob Evans Farms, Inc. 19,990 547,326 Buca, Inc. (a) 75,400 401,882 Dave & Buster's, Inc. (a) 42,800 804,212 Landry's Restaurants, Inc. 35,250 1,053,622 Lone Star Steakhouse & Saloon 47,050 1,279,290 Marcus Corp. 44,100 760,725 Prime Hospitality Corp. (a) 58,120 617,234 Scientific Games Corp., Class A (a) 63,700 1,219,218 --------------- 7,020,509 --------------- HOUSEHOLD DURABLES--1.4% American Greetings Corp. (a) 26,300 609,634 CSS Industries, Inc. 22,000 770,880 Kimball International, Inc., Class B 47,200 696,200 Russ Berrie & Co., Inc. 15,000 291,450 --------------- 2,368,164 --------------- LEISURE EQUIPMENT & PRODUCTS--1.3% Action Performance Companies, Inc. 53,000 798,710 Jakks Pacific, Inc. (a) 45,150 938,668 M&F Worldwide Corp. (a) 36,600 501,420 Travis Boats & Motors, Inc. (a) 18,536 13,902 --------------- 2,252,700 --------------- MEDIA--2.8% 4Kids Entertainment, Inc. (a) 41,800 999,856 Alliance Atlantis Communications, Inc. (a) 53,800 989,974 Catalina Marketing Corp. (a) 31,600 577,964 Journal Communications, Inc., Class A 28,100 529,123 Liberty Corp. 20,100 943,695 Media General, Inc. 12,400 796,328 --------------- 4,836,940 --------------- MULTILINE RETAIL--0.5% BJ's Wholesale Club, Inc. (a) 19,000 475,000 ShopKo Stores, Inc. (a) 31,550 446,117 --------------- 921,117 --------------- SPECIALTY RETAIL--2.8% Building Material Holding Corp. 21,100 $ 399,423 Compucom Systems, Inc. (a) 97,500 442,650 GameStop Corp., Class A (a) 41,300 628,586 Goody's Family Clothing, Inc. 60,800 630,496 Monro Muffler, Inc. (a) 46,175 1,120,206 Movie Gallery, Inc. 15,000 293,250 Rent-Way, Inc. (a) 50,400 453,600 TBC Corp. (a) 13,350 317,730 United Rentals, Inc. (a) 34,300 613,627 --------------- 4,899,568 --------------- TEXTILES, APPAREL & LUXURY GOODS--2.2% Culp, Inc. (a) 5,400 42,012 Delta Apparel, Inc. 14,150 344,552 Hampshire Group Ltd. (a) 24,500 710,255 Kellwood Co. 31,550 1,374,002 Russell Corp. 34,700 623,212 Stride Rite Corp. 43,400 478,702 Tandy Brands Accessories, Inc. 15,000 202,500 --------------- 3,775,235 --------------- CONSUMER STAPLES--2.2% FOOD & STAPLES RETAILING--0.2% Winn-Dixie Stores, Inc. 49,200 354,240 --------------- FOOD PRODUCTS--1.8% Central Garden and Pet Co. (a) 19,400 693,938 Corn Products International, Inc. 34,800 1,619,940 John B. Sanfilippo & Son, Inc. (a) 11,000 293,920 Omega Protein Corp. (a) 49,000 475,300 --------------- 3,083,098 --------------- TOBACCO--0.2% Schweitzer-Mauduit International, Inc. 11,100 339,993 --------------- ENERGY--5.6% ENERGY EQUIPMENT & SERVICES--1.8% Cimarex Energy Co. (a) 13,700 414,151 Lufkin Industries, Inc. 28,150 900,237 Universal Compression Holdings, Inc. (a) 24,650 756,262 Willbros Group, Inc. (a) 75,340 1,135,374 --------------- 3,206,024 --------------- OIL & GAS--3.8% Atlas America, Inc. (a) 8,900 178,089 Carrizo Oil & Gas, Inc. (a) 77,500 791,275 Energy Partners Ltd. (a) 41,700 638,010 </Table> See Notes to Investment Portfolio. 4 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- Harvest Natural Resources, Inc. (a) 61,450 $ 916,220 Magnum Hunter Resources, Inc. (a) 68,800 714,144 Range Resources Corp. 42,600 621,960 Stone Energy Corp. (a) 24,500 1,119,160 Western Gas Resources, Inc. 35,500 1,153,040 Whiting Petroleum Corp. (a) 18,800 472,820 --------------- 6,604,718 --------------- FINANCIALS--24.9% CAPITAL MARKETS--0.2% LaBranche & Co., Inc. 40,200 338,484 --------------- COMMERCIAL BANKS--11.2% BancFirst Corp. 4,200 250,950 BancorpSouth, Inc. 32,500 732,225 BancTrust Financial Group, Inc. 22,400 392,448 Bank of Granite Corp. 31,500 658,665 Bryn Mawr Bank Corp. 38,800 882,700 Capitol Bancorp Ltd. 33,200 863,532 Chemical Financial Corp. 31,167 1,149,751 Chittenden Corp. 35,600 1,251,340 Columbia Banking System, Inc. 20,100 446,220 Community Trust Bancorp, Inc. 19,184 585,112 Corus Bankshares, Inc. 29,100 1,196,301 First Citizens BancShares, Inc. 4,600 561,200 First Financial Bankshares, Inc. 15,975 669,832 Greater Bay Bancorp 25,500 736,950 Hancock Holding Co. 14,700 427,182 ITLA Capital Corp. (a) 900 36,513 MainSource Financial Group, Inc. 7,067 143,460 MASSBANK Corp. 11,100 384,171 Merchants Bancshares, Inc. 25,400 666,750 Mid-State Bancshares 44,850 1,054,424 Northrim BanCorp., Inc. 23,300 471,359 Omega Financial Corp. 5,100 175,593 Riggs National Corp. 49,680 1,049,242 Sterling Bancshares, Inc. 71,700 1,017,423 S.Y. Bancorp, Inc. 4,700 110,027 Trico Bancshares 63,800 1,205,820 UMB Financial Corp. 17,500 903,350 Whitney Holding Corp. 18,500 826,395 Wintrust Financial Corp. 13,000 656,630 --------------- 19,505,565 --------------- CONSUMER FINANCE--0.8% Cash America International, Inc. 58,740 1,351,020 --------------- DIVERSIFIED FINANCIAL SERVICES--1.3% Metris Companies, Inc. (a) 95,800 832,502 MFC Bancorp Ltd. (a) 77,100 1,433,289 --------------- 2,265,791 --------------- INSURANCE--5.1% AmerUs Group Co. 13,300 $ 550,620 CNA Surety Corp. (a) 49,200 538,740 Commerce Group, Inc. 15,900 784,983 Delphi Financial Group 28,286 1,258,727 Harleysville Group, Inc. 38,700 729,495 Horace Mann Educators Corp. 37,900 662,492 Kansas City Life Insurance Co. 3,600 151,524 Navigators Group, Inc. (a) 15,700 453,573 Phoenix Companies, Inc. 79,850 978,163 ProCentury Corp. (a) 53,300 518,609 Quanta Capital Holdings Ltd. 60,000 644,400 RLI Corp. 23,400 854,100 UICI (a) 10,500 250,005 United National Group Ltd. (a) 14,100 213,051 Universal American Financial Corp. (a) 32,500 356,850 --------------- 8,945,332 --------------- REAL ESTATE--6.3% American Financial Realty Trust, REIT 37,100 530,159 Alexandria Real Estate Equity, REIT 16,200 919,836 Boykin Lodging Co., REIT (a) 64,000 489,600 Brandywine Realty Trust, REIT 23,900 649,841 EastGroup Properties, Inc., REIT 27,950 941,076 Equity One, Inc., REIT 37,700 681,616 First Potomac Realty Trust, REIT 33,100 634,527 Getty Realty Corp. 25,250 635,290 Gladstone Commercial Corp. 30,000 495,000 Mid-America Apartment Communities, Inc., REIT 28,850 1,093,127 Nationwide Health Properties, Inc., REIT 48,050 908,145 PS Business Parks, Inc., REIT 34,100 1,372,184 Tanger Factory Outlet Centers, Inc., REIT 16,800 656,880 Universal Health Realty Income Trust, REIT 16,800 482,160 Urstadt Biddle Properties, REIT 36,800 545,008 --------------- 11,034,449 --------------- HEALTH CARE--5.2% HEALTH CARE EQUIPMENT & SUPPLIES--0.7% Ocular Sciences, Inc. (a) 22,300 847,400 Sola International, Inc. (a) 20,100 346,323 --------------- 1,193,723 --------------- HEALTH CARE PROVIDERS & SERVICES--4.5% Capital Senior Living Corp. (a) 17,200 82,732 Chronimed, Inc. (a) 50,400 410,760 </Table> See Notes to Investment Portfolio. 5 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- Cross Country Healthcare, Inc. (a) 36,300 $ 658,845 Genesis HealthCare Corp. (a) 19,700 572,088 Hooper Holmes, Inc. 65,800 377,692 Kindred Healthcare, Inc. (a) 42,300 1,114,605 MAXIMUS, Inc. (a) 13,300 471,618 Orthodontic Centers of America, Inc. (a) 74,300 608,517 Parexel International Corp. (a) 46,500 920,700 Pediatrix Medical Group, Inc. (a) 18,300 1,278,255 Province Healthcare Co. (a) 25,400 435,610 Stewart Enterprises, Inc. (a) 118,700 966,218 --------------- 7,897,640 --------------- INDUSTRIALS--21.1% AEROSPACE & DEFENSE--2.2% AAR Corp. (a) 53,123 602,946 Armor Holdings, Inc. (a) 10,100 343,400 Herley Industries, Inc. (a) 26,800 523,672 Kaman Corp. 44,600 623,954 Ladish Co., Inc. (a) 56,450 479,825 Precision Castparts Corp. 21,700 1,186,773 --------------- 3,760,570 --------------- AIR FREIGHT & LOGISTICS--0.9% HUB Group, Inc., Class A (a) 27,003 920,802 Ryder System, Inc. 17,100 685,197 --------------- 1,605,999 --------------- AIRLINES--0.6% Atlantic Coast Airlines Holdings, Inc. (a) 32,900 188,846 MAIR Holdings, Inc. (a) 26,350 215,016 Skywest, Inc. 39,900 694,659 --------------- 1,098,521 --------------- BUILDING PRODUCTS--2.1% Hughes Supply, Inc. 19,611 1,155,676 Jacuzzi Brands, Inc. (a) 42,000 338,520 NCI Building Systems, Inc. (a) 28,900 940,695 Watsco, Inc. 43,850 1,230,870 --------------- 3,665,761 --------------- COMMERCIAL SERVICES & SUPPLIES--6.4% ABM Industries, Inc. 31,600 615,252 ActivCard Corp. (a) 61,400 445,764 Angelica Corp. 20,500 514,755 Casella Waste Systems, Inc. (a) 80,500 1,058,575 Century Business Services, Inc. (a) 50,474 220,067 Consolidated Graphics, Inc. (a) 37,250 1,640,862 Danka Business Systems, ADR (a) 52,700 238,204 Electro Rent Corp. (a) 16,450 172,232 First Consulting Group, Inc. (a) 13,427 74,117 Healthcare Services Group, Inc. 47,600 728,280 Imagistics International, Inc. (a) 41,250 1,460,250 Lightbridge, Inc. (a) 59,400 $ 332,640 MPS Group, Inc. (a) 138,600 1,679,832 NCO Group, Inc. (a) 25,400 677,926 SourceCorp (a) 25,400 699,008 Teletech Holdings, Inc. (a) 59,200 519,184 --------------- 11,076,948 --------------- CONSTRUCTION & ENGINEERING--1.3% Comfort Systems USA, Inc. (a) 84,850 542,192 EMCOR Group, Inc. (a) 12,700 558,546 MasTec, Inc. (a) 15,200 82,536 Quanta Services, Inc. (a) 25,600 159,232 Washington Group International, Inc. (a) 23,800 854,182 --------------- 2,196,688 --------------- ELECTRICAL EQUIPMENT--1.9% C&D Technologies, Inc. 36,400 649,012 Genlyte Group, Inc. (a) 14,200 892,896 Powell Industries, Inc. (a) 4,300 73,444 Tecumseh Products Co. 17,200 708,468 Woodward Governor Co. 14,000 1,009,540 --------------- 3,333,360 --------------- MACHINERY--4.4% Alamo Group, Inc. 17,800 283,020 Briggs & Stratton 13,400 1,183,890 EnPro Industries, Inc. (a) 38,400 882,432 Esterline Technologies Corp. (a) 36,700 1,083,751 Harsco Corp. 28,400 1,334,800 Kadant, Inc. (a) 37,000 855,810 Robbins & Myers, Inc. 34,287 769,743 Stewart & Stevenson Services, Inc. 52,200 935,424 UNOVA, Inc. (a) 20,700 419,175 --------------- 7,748,045 --------------- ROAD & RAIL--1.3% Covenant Transport, Inc. (a) 28,750 491,338 Dollar Thrifty Automotive Group, Inc. (a) 25,200 691,488 US Xpress Enterprises, Inc. (a) 17,200 270,556 Werner Enterprises, Inc. 42,200 890,420 --------------- 2,343,802 --------------- INFORMATION TECHNOLOGY--11.1% COMMUNICATIONS EQUIPMENT--1.4% Anaren, Inc. (a) 50,500 825,170 Black Box Corp. 15,400 727,804 Cable Design Technologies Corp. (a) 48,400 513,040 Tollgrade Communications, Inc. (a) 38,650 410,463 --------------- 2,476,477 --------------- COMPUTERS & PERIPHERALS--1.7% Advanced Digital Information Corp. (a) 11,400 110,580 Electronics for Imaging, Inc. (a) 26,100 737,586 </Table> See Notes to Investment Portfolio. 6 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- Hutchinson Technology, Inc. (a) 22,200 $ 545,898 Hypercom Corp. (a) 72,200 610,090 Imation Corp. 6,900 294,009 Innovex, Inc. (a) 48,000 219,360 Intergraph Corp. (a) 14,866 384,435 --------------- 2,901,958 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--3.6% Analogic Corp. 17,200 729,796 Anixter International, Inc. (a) 15,650 532,569 Benchmark Electronics, Inc. (a) 20,500 596,550 Checkpoint Systems, Inc. (a) 38,700 693,891 Exar Corp. (a) 39,200 574,672 Identix, Inc. (a) 75,200 561,744 MTS Systems Corp. 27,850 653,082 NU Horizons Electronics Corp. (a) 64,000 576,000 OSI Systems, Inc. (a) 25,400 506,222 Planar Systems, Inc. (a) 29,800 399,022 Vishay Intertechnology, Inc. (a) 24,200 449,636 --------------- 6,273,184 --------------- INTERNET SOFTWARE & SERVICES--0.5% Keynote Systems, Inc. (a) 48,600 668,250 Modem Media, Inc. (a) 45,500 239,330 --------------- 907,580 --------------- IT SERVICES--1.2% Acxiom Corp. 37,300 926,159 Agilysys, Inc. 31,050 428,179 Computer Horizons Corp. (a) 70,500 281,295 Inforte Corp. (a) 48,400 488,792 --------------- 2,124,425 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.3% Pericom Semiconductor Corp. (a) 39,000 417,690 --------------- SOFTWARE--2.4% Captaris, Inc. (a) 98,300 635,018 Internet Security Systems, Inc. (a) 36,200 555,308 Lawson Software, Inc. (a) 48,200 341,256 MSC.Software Corp. (a) 62,700 561,165 PLATO Learning, Inc. (a) 81,262 805,306 SeaChange International, Inc. (a) 41,200 695,456 Sybase, Inc. (a) 29,700 534,600 --------------- 4,128,109 --------------- MATERIALS--8.6% CHEMICALS--3.0% Cytec Industries, Inc. 18,900 859,005 HB Fuller Co. 22,000 624,800 Lubrizol Corp. 27,500 1,007,050 Minerals Technologies, Inc. 14,300 829,400 Schulman (A.), Inc. 28,850 619,986 Sensient Technologies Corp. 28,500 612,180 Stepan Co. 24,000 627,600 --------------- 5,180,021 --------------- CONSTRUCTION MATERIALS--1.0% AMCOL International Corp. 26,100 $ 494,595 Eagle Materials, Inc. 18,400 1,306,768 --------------- 1,801,363 --------------- CONTAINERS & PACKAGING--1.1% Aptargroup, Inc. 16,800 733,992 Greif, Inc., Class A 27,950 1,180,887 --------------- 1,914,879 --------------- METALS & MINING--2.8% Carpenter Technology Corp. 39,900 1,358,595 Metal Management, Inc. (a) 47,700 944,937 Peabody Energy Corp. 16,250 909,838 RTI International Metals, Inc. (a) 49,950 796,702 Steel Technologies, Inc. 40,500 894,240 --------------- 4,904,312 --------------- PAPER & FOREST PRODUCTS--0.7% Glatfelter 35,500 499,840 Mercer International, Inc. (a) 65,500 640,590 --------------- 1,140,430 --------------- TELECOMMUNICATION SERVICES--0.7% DIVERSIFIED TELECOMMUNICATION SERVICES--0.4% North Pittsburgh Systems, Inc. 29,800 597,490 --------------- WIRELESS TELECOMMUNICATION SERVICES--0.3% Price Communications Corp. (a) 38,275 564,939 --------------- UTILITIES--3.7% ELECTRIC UTILITIES--3.0% Central Vermont Public Service Corp. 41,800 856,482 CH Energy Group, Inc. 28,100 1,304,964 El Paso Electric Co. (a) 47,300 730,312 Maine & Maritimes Corp. 9,300 297,600 MGE Energy, Inc. 16,600 541,658 Otter Tail Corp. 24,000 644,640 Puget Energy, Inc. 40,900 896,119 --------------- 5,271,775 --------------- GAS UTILITIES--0.7% Cascade Natural Gas Corp. 18,100 399,467 Northwest Natural Gas Co. 13,700 417,850 WGL Holdings, Inc. 14,500 416,440 --------------- 1,233,757 --------------- TOTAL COMMON STOCKS (cost of $158,643,487) 173,009,735 --------------- </Table> See Notes to Investment Portfolio. 7 <Page> <Table> <Caption> PAR VALUE --------------- --------------- SHORT-TERM OBLIGATION--2.2% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/04, due 07/01/04 at 1.170%, collateralized by a U.S. Treasury Bond maturing 08/15/22, market value $3,947,325 (repurchase proceeds $3,865,126) (cost of $3,865,000) $ 3,865,000 $ 3,865,000 --------------- TOTAL INVESTMENTS--101.5% (cost of $162,508,487) (b) 176,874,735 --------------- OTHER ASSETS & LIABILITIES, NET--(1.5)% (2,630,150) --------------- NET ASSETS--100.0% $ 174,244,585 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for both financial statement and federal income tax purposes is the same. <Table> <Caption> ACRONYM NAME ------- ---- ADR American Depositary Receipt REIT Real Estate Investment Trust </Table> See Notes to Financial Statements. 8 <Page> STATEMENT OF ASSETS & LIABILITIES Colonial Small Cap Value Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Investments, at cost $ 162,508,487 --------------- Investments, at value $ 176,874,735 Cash 2,214 Receivable for: Investments sold 2,178,649 Fund shares sold 932,075 Interest 126 Dividends 146,081 Expense reimbursement due from Distributor 14,978 Deferred Trustees' compensation plan 4,076 Other assets 51,242 --------------- TOTAL ASSETS 180,204,176 --------------- LIABILITIES: Payable for: Investments purchased 5,730,442 Fund shares repurchased 66,707 Investment advisory fee 104,654 Transfer agent fee 604 Pricing and bookkeeping fees 4,982 Audit fee 17,865 Distribution fee--Class B 30,261 Deferred Trustees' fees 4,076 --------------- TOTAL LIABILITIES 5,959,591 --------------- NET ASSETS $ 174,244,585 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 154,159,955 Undistributed net investment income 362,487 Accumulated net realized gain 5,355,895 Net unrealized appreciation on investments 14,366,248 --------------- NET ASSETS $ 174,244,585 =============== CLASS A: Net assets $ 12,406,016 Shares outstanding 798,380 =============== Net asset value per share $ 15.54 =============== CLASS B: Net assets $ 161,838,569 Shares outstanding 10,432,492 =============== Net asset value per share $ 15.51 =============== </Table> See Notes to Financial Statements. 9 <Page> STATEMENT OF OPERATIONS Colonial Small Cap Value Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 947,192 Interest 14,592 --------------- Total Investment Income (net of foreign taxes withheld of $26) 961,784 --------------- EXPENSES: Investment advisory fee 463,676 Distribution fee--Class B 130,498 Transfer agent fee 3,730 Pricing and bookkeeping fees 21,270 Trustees' fees 2,852 Custody fee 18,096 Audit fee 14,724 Non-recurring costs (See Note 6) 5,980 Other expenses 8,693 --------------- Total Expenses 669,519 Fees reimbursed by Distributor--Class B (37,333) Non-recurring costs assumed by Investment Advisor (See Note 6) (5,980) Custody earnings credit (161) --------------- Net Expenses 626,045 --------------- Net Investment Income 335,739 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on: Investments 4,057,956 Foreign currency transactions 10 --------------- Net realized gain 4,057,966 --------------- Net change in unrealized appreciation/depreciation on investments 5,485,798 --------------- Net Gain 9,543,764 --------------- Net Increase in Net Assets from Operations $ 9,879,503 =============== </Table> See Notes to Financial Statements. 10 <Page> STATEMENT OF CHANGES IN NET ASSETS Colonial Small Cap Value Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 335,739 $ 168,931 Net realized gain on investments and foreign currency transactions 4,057,966 2,017,004 Net change in unrealized appreciation/depreciation on investments and foreign currency translations 5,485,798 9,341,998 --------------- --------------- Net Increase from Operations 9,879,503 11,527,933 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (22,479) Class B -- (119,531) From net realized gains: Class A -- (238,640) Class B -- (908,385) --------------- --------------- Total Distributions Declared to Shareholders -- (1,289,035) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 2,012,258 2,010,453 Distributions reinvested -- 259,626 Redemptions (1,348,478) (2,180,602) --------------- --------------- Net Increase 663,780 89,477 --------------- --------------- Class B: Subscriptions 96,122,695 40,839,812 Distributions reinvested -- 1,029,409 Redemptions (1,889,526) (2,701,725) --------------- --------------- Net Increase 94,233,169 39,167,496 --------------- --------------- Net Increase from Share Transactions 94,896,949 39,256,973 --------------- --------------- Total Increase in Net Assets 104,776,452 49,495,871 NET ASSETS: Beginning of period 69,468,133 19,972,262 --------------- --------------- End of period (including undistributed net investment income of $362,487 and $26,748, respectively) $ 174,244,585 $ 69,468,133 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 134,501 173,870 Issued for distributions reinvested -- 19,197 Redemptions (90,594) (191,845) --------------- --------------- Net Increase 43,907 1,222 --------------- --------------- Class B: Subscriptions 6,431,815 3,132,027 Issued for distributions reinvested -- 74,615 Redemptions (128,701) (230,723) --------------- --------------- Net Increase 6,303,114 2,975,919 --------------- --------------- </Table> See Notes to Financial Statements. 11 <Page> NOTES TO FINANCIAL STATEMENTS Colonial Small Cap Value Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Colonial Small Cap Value Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust"), is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks long-term growth by investing primarily in smaller capitalization stocks of U.S. companies. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION--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. FOREIGN CURRENCY TRANSACTIONS--The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation 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. For financial statement purposes, 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. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class. 12 <Page> FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 977,202 Long-term capital gains 311,833 </Table> * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 19,032,730 Unrealized depreciation (4,666,482) ------------- Net unrealized appreciation $ 14,366,248 ============= </Table> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $500 million 0.80% Next $500 million 0.75% Over $1 billion 0.70% </Table> 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 Corporation ("State Street"). As a result, Columbia pays the total fees received 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 exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.037%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the six months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia and the Distributor have voluntarily agreed to waive fees and reimburse the Fund for certain expenses so that total expenses (exclusive of brokerage commissions, interest, taxes and extraordinary expenses, if any) would not exceed 1.10% annually of the Fund's average daily net assets. The Distributor 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 in 13 <Page> order to reach the expense limit, Columbia will then waive a portion of its investment advisory fee to the extent necessary. Columbia or the Distributor, at their discretion, may revise or discontinue this arrangement any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended June 30, 2004, the Fund paid $672 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $118,942,257 and $23,176,481, respectively. NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $5,980 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 14 <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, 2004 2003 2002 2001 2000 (a) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 14.22 $ 10.47 $ 11.55 $ 10.73 $ 9.21 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.04 0.07 0.02 0.02 0.06 Net realized and unrealized gain (loss) on investments and foreign currency 1.25 4.03 (0.73) 0.97 1.57 ------------ ------------ ------------ ------------ ------------ Total from Investment Operations 1.29 4.10 (0.71) 0.99 1.63 ------------ ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income -- (0.03) (0.01) (0.02) (0.05) From net realized gains -- (0.32) (0.36) (0.15) (0.06) ------------ ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders -- (0.35) (0.37) (0.17) (0.11) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 15.51 $ 14.22 $ 10.47 $ 11.55 $ 10.73 ============ ============ ============ ============ ============ Total return (c)(d)(e) 9.07%(f) 39.34% (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% 1.10%(h) Net investment income (g) 0.57%(h) 0.54% 0.18% 0.22% 1.01%(h) Waiver/reimbursement 0.07%(h) 0.36% 0.29% 0.47% 1.07%(h) Portfolio turnover rate 20%(f) 55% 125% 56% 54% Net assets, end of period (000's) $ 161,839 $ 58,730 $ 12,080 $ 9,020 $ 3,469 </Table> (a) For the period from commencement of operations on April 14, 2003 to December 31, 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 Investment Advisor 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. 15 <Page> PORTFOLIO MANAGER'S DISCUSSION Colonial Strategic Income Fund, Variable Series / June 30, 2004 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 and has managed or co-managed the fund since September 2000. Although the fund made no gain during this six-month reporting period, there was considerable return differential within the subsectors of the fund. High-yield corporate bonds were the best performing category, continuing a trend that has been in place since late 2002. Although the yield advantage of corporate versus Treasury bonds diminished considerably during the period, corporate bonds were still able to outperform because the economic recovery has created a much more favorable environment for many low-quality issuers. High-yield bonds as a group returned approximately 2.3% during the first six months of 2004, as measured by the JP Morgan Global High Yield Index, with the best performance coming from B- and CCC-rated securities. Within the fund's corporate bond holdings, the cable and cellular industries continued to rebound from the depressed levels that prevailed just 18 months ago. Charter Communications Holding (0.6% of net assets) solidified its turnaround with impressive gains in its subscriber base. On the negative side, the aerospace and airline sectors underperformed the overall market. Delta Air Lines (0.1% of net assets) was a poor performer, buffeted by higher fuel prices, pressure from labor unions, and increased competition from new, low-cost carriers. Despite these performance differentials, we continued to believe in the prospects for the high-yield sector. By the end of June, the fund had approximately 39.0% of its assets in high-yield corporate bonds, an allocation that we plan to maintain. TREASURIES AND FOREIGN BONDS FALTER US Treasury securities, which accounted for approximately 22.0% of the fund's assets, performed erratically during the period. They enjoyed a technical rally during the first three months of the year only to retreat during the second quarter when new economic data suggested that inflation was on the rise. Investors became concerned that the continued economic expansion would lead the Federal Reserve to raise interest rates from their historically low levels. In fact the federal funds rate--the overnight borrowing rate paid by banks--was raised by one-quarter of one percentage point as the second quarter ended. Foreign government bonds, which constitute approximately one-third of the portfolio, fell victim to currency translations and performed poorly during the second quarter. As the US economy strengthened and the likelihood of a rate hike increased, virtually every major foreign currency lost ground relative to the dollar. Meanwhile, emerging market bonds, which historically have performed best during periods of buoyant growth and ample global liquidity, lost ground amid fears that higher rates in the United States would lead to tighter global monetary conditions and ultimately slow global growth. ALL EYES ON THE FED Going forward, we do not expect to make significant shifts in the portfolio's asset allocations. We will be watching the Fed and new economic data for any signals that additional rate hikes are on the way. However, our current view is that inflation is sufficiently under control and that a quick move to higher rates is unlikely. With the economy expected to show nice gains for the remainder of the year, we believe that the environment remains favorable for corporate bonds and high-yield bonds in particular. Economic and market conditions 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 in which the fund invests 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. Holdings are disclosed as of June 30, 2004, and are subject to change. 16 <Page> PERFORMANCE INFORMATION Colonial Strategic Income Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR LIFE - ----------------------------------------------------------------- Class B (6/1/00) -0.20 5.70 6.06 7.44 Lehman Brothers Government/ Credit Bond Index(1) -0.19 -0.72 7.11 7.41 JP Morgan Global High Yield Index(2) 2.28 11.70 5.83 7.98 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 6/30/04 - --------------------------------------------------------- Class B 9.80 9.78 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 7/5/94(3) - 6/30/04 Class B: $20,471 <Table> <Caption> LEHMAN BROTHERS GOVERNMENT/CREDIT JP MORGAN GLOBAL CLASS B SHARES BOND INDEX HIGH YIELD INDEX 7/5/94 $ 10,000 $ 10,000 $ 10,000 7/31/94 $ 10,080 $ 10,170 $ 10,015 8/31/94 $ 10,130 $ 10,174 $ 10,055 9/30/94 $ 10,091 $ 10,020 $ 10,054 10/31/94 $ 10,131 $ 10,009 $ 10,069 11/30/94 $ 10,021 $ 9,991 $ 9,976 12/31/94 $ 10,110 $ 10,057 $ 10,276 1/31/95 $ 10,244 $ 10,250 $ 10,407 2/28/95 $ 10,492 $ 10,488 $ 10,778 3/31/95 $ 10,678 $ 10,559 $ 10,887 4/30/95 $ 10,875 $ 10,706 $ 11,168 5/31/95 $ 11,174 $ 11,155 $ 11,486 6/30/95 $ 11,225 $ 11,244 $ 11,532 7/31/95 $ 11,328 $ 11,200 $ 11,712 8/31/95 $ 11,328 $ 11,344 $ 11,757 9/30/95 $ 11,524 $ 11,459 $ 11,897 10/31/95 $ 11,679 $ 11,628 $ 12,008 11/30/95 $ 11,792 $ 11,820 $ 12,086 12/31/95 $ 11,959 $ 11,993 $ 12,282 1/31/96 $ 12,134 $ 12,068 $ 12,515 2/29/96 $ 12,036 $ 11,812 $ 12,590 3/31/96 $ 11,982 $ 11,713 $ 12,549 4/30/96 $ 12,036 $ 11,632 $ 12,626 5/31/96 $ 12,046 $ 11,612 $ 12,722 6/30/96 $ 12,122 $ 11,767 $ 12,777 7/31/96 $ 12,220 $ 11,794 $ 12,863 8/31/96 $ 12,362 $ 11,764 $ 13,053 9/30/96 $ 12,612 $ 11,974 $ 13,362 10/31/96 $ 12,807 $ 12,253 $ 13,485 11/30/96 $ 13,112 $ 12,478 $ 13,734 12/31/96 $ 13,134 $ 12,340 $ 13,880 1/31/97 $ 13,099 $ 12,354 $ 13,990 2/28/97 $ 13,195 $ 12,380 $ 14,231 3/31/97 $ 13,005 $ 12,233 $ 13,999 4/30/97 $ 13,171 $ 12,412 $ 14,130 5/31/97 $ 13,386 $ 12,527 $ 14,457 6/30/97 $ 13,576 $ 12,677 $ 14,648 7/31/97 $ 13,898 $ 13,065 $ 15,037 8/31/97 $ 13,803 $ 12,919 $ 15,046 9/30/97 $ 14,101 $ 13,122 $ 15,346 10/31/97 $ 14,125 $ 13,332 $ 15,324 11/30/97 $ 14,197 $ 13,402 $ 15,462 12/31/97 $ 14,335 $ 13,543 $ 15,601 1/31/98 $ 14,566 $ 13,734 $ 15,843 2/28/98 $ 14,604 $ 13,707 $ 15,965 3/31/98 $ 14,706 $ 13,749 $ 16,126 4/30/98 $ 14,771 $ 13,818 $ 16,207 5/31/98 $ 14,836 $ 13,966 $ 16,230 6/30/98 $ 14,861 $ 14,108 $ 16,264 7/31/98 $ 14,990 $ 14,119 $ 16,400 8/31/98 $ 14,435 $ 14,395 $ 15,338 9/30/98 $ 14,757 $ 14,806 $ 15,322 10/31/98 $ 14,782 $ 14,701 $ 14,993 11/30/98 $ 15,207 $ 14,789 $ 15,819 12/31/98 $ 15,198 $ 14,826 $ 15,754 1/31/99 $ 15,321 $ 14,932 $ 15,943 2/28/99 $ 15,143 $ 14,576 $ 15,862 3/31/99 $ 15,349 $ 14,649 $ 16,057 4/30/99 $ 15,555 $ 14,686 $ 16,465 5/31/99 $ 15,239 $ 14,535 $ 13,567 6/30/99 $ 15,253 $ 14,490 $ 16,230 7/31/99 $ 15,239 $ 14,449 $ 16,235 8/31/99 $ 15,184 $ 14,437 $ 16,073 9/30/99 $ 15,266 $ 14,567 $ 15,957 10/31/99 $ 15,266 $ 14,605 $ 15,869 11/30/99 $ 15,362 $ 14,596 $ 16,128 12/31/99 $ 15,468 $ 14,507 $ 16,286 1/31/2000 $ 15,320 $ 14,503 $ 16,224 2/29/2000 $ 15,513 $ 14,684 $ 16,289 3/31/2000 $ 15,454 $ 14,897 $ 16,012 4/30/2000 $ 15,321 $ 14,824 $ 16,009 5/31/2000 $ 15,188 $ 14,811 $ 15,782 6/30/2000 $ 15,470 $ 15,113 $ 16,092 7/31/2000 $ 15,589 $ 15,273 $ 16,234 8/31/2000 $ 15,737 $ 15,489 $ 16,359 9/30/2000 $ 15,566 $ 15,547 $ 16,145 10/31/2000 $ 15,268 $ 15,645 $ 15,672 11/30/2000 $ 15,016 $ 15,913 $ 15,073 12/31/2000 $ 15,479 $ 16,226 $ 15,338 1/31/2001 $ 16,120 $ 16,499 $ 16,268 2/28/2001 $ 16,170 $ 16,669 $ 16,457 3/31/2001 $ 15,808 $ 16,746 $ 16,134 4/30/2001 $ 15,627 $ 16,620 $ 15,965 5/31/2001 $ 15,743 $ 16,716 $ 16,277 6/30/2001 $ 15,562 $ 16,797 $ 15,996 7/31/2001 $ 15,627 $ 17,215 $ 16,157 8/31/2001 $ 15,907 $ 17,435 $ 16,367 9/30/2001 $ 15,446 $ 17,596 $ 15,287 10/31/2001 $ 15,874 $ 18,043 $ 15,668 11/30/2001 $ 16,088 $ 17,747 $ 16,201 12/31/2001 $ 16,028 $ 17,607 $ 16,180 1/31/2002 $ 16,083 $ 17,735 $ 16,298 2/28/2002 $ 16,118 $ 17,886 $ 16,175 3/31/2002 $ 16,171 $ 17,523 $ 16,541 4/30/2002 $ 16,477 $ 17,863 $ 16,792 5/31/2002 $ 16,550 $ 18,027 $ 16,735 6/30/2002 $ 16,316 $ 18,180 $ 16,133 7/31/2002 $ 16,155 $ 18,398 $ 15,684 8/31/2002 $ 16,424 $ 18,811 $ 15,829 9/30/2002 $ 16,515 $ 19,215 $ 15,643 10/31/2002 $ 16,569 $ 19,030 $ 15,531 11/30/2002 $ 16,911 $ 19,042 $ 16,335 12/31/2002 $ 17,325 $ 19,546 $ 16,525 1/31/2003 $ 17,540 $ 19,546 $ 16,954 2/28/2003 $ 17,891 $ 19,894 $ 17,202 3/31/2003 $ 18,066 $ 19,869 $ 17,617 4/30/2003 $ 18,709 $ 20,081 $ 18,490 5/31/2003 $ 19,235 $ 20,651 $ 18,747 6/30/2003 $ 19,371 $ 20,569 $ 19,295 7/31/2003 $ 18,904 $ 19,707 $ 19,173 8/31/2003 $ 18,982 $ 19,837 $ 19,363 9/30/2003 $ 19,625 $ 20,466 $ 19,899 10/31/2003 $ 19,684 $ 20,206 $ 20,269 11/30/2003 $ 19,995 $ 20,261 $ 20,553 12/31/2003 $ 20,517 $ 20,461 $ 21,073 1/31/2004 $ 20,642 $ 20,647 $ 21,459 2/29/2004 $ 20,768 $ 20,899 $ 21,476 3/31/2004 $ 20,937 $ 21,092 $ 21,644 4/30/2004 $ 20,392 $ 20,444 $ 21,563 5/31/2004 $ 20,288 $ 20,340 $ 21,229 6/30/2004 $ 20,471 $ 20,427 $ 21,545 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. Total return performance includes changes in share price and reinvestment of all distributions. The Lehman Brothers Government/Credit Bond Index is an unmanaged index that tracks the performance of US government and corporate bonds rated investment grade or better with maturities of at least one year. The JP Morgan Global High Yield Index is designed to mirror the investable universe of the US dollar global high-yield corporate debt market, including domestic and international issues. 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. 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. Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the oldest 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 new class of shares would be lower. (1) Index performance for the life of the fund is from July 5, 1994. (2) Index performance for the life of the fund is from June 30, 1994. (3) Inception date of class A shares (oldest existing share class). Index performance for the Lehman Brothers index is from July 5, 1994, and index performance for the JP Morgan index is from June 30, 1994. 17 <Page> INVESTMENT PORTFOLIO Colonial Strategic Income Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> PAR VALUE --------------- --------------- CORPORATE FIXED-INCOME BONDS & NOTES--39.1% AGRICULTURE--0.2% AGRICULTURE PRODUCTION--0.2% Seminis Vegetable Seeds, Inc. 10.250% 10/01/13 USD 303,000 $ 331,785 --------------- CONSTRUCTION--1.8% BUILDING CONSTRUCTION--1.8% Associated Materials, Inc.: (b) 03/01/14 (11.250% 03/01/09) (a) 130,000 87,100 9.750% 04/15/12 190,000 210,900 Atrium Companies, Inc., Series B, 10.500% 05/01/09 415,000 434,713 D.R. Horton, Inc., 9.750% 09/15/10 575,000 667,000 K. Hovnanian Enterprises, Inc.: 8.875% 04/01/12 45,000 47,700 10.500% 10/01/07 250,000 286,875 Norcraft Companies, 9.000% 11/01/11 (a) 90,000 94,950 Nortek Holdings, Inc., (b) 05/15/11 (10.000% 11/15/07) (a) 350,000 276,500 Standard Pacific Corp., 9.250% 04/15/12 275,000 299,063 WII Components, Inc., 10.000% 02/15/12 (a) 205,000 205,000 William Lyon Homes, Inc., 10.750% 04/01/13 140,000 154,350 --------------- 2,764,151 --------------- CONSUMER STAPLES--0.3% HOUSEHOLD PRODUCTS--0.3% Elizabeth Arden, Inc., 7.750% 01/15/14 (a) 155,000 157,713 Playtex Products, Inc., 9.375% 06/01/11 380,000 375,250 --------------- 532,963 --------------- FINANCE, INSURANCE & REAL ESTATE--1.4% DEPOSITORY INSTITUTIONS--0.1% Western Financial Bank, 9.625% 05/15/12 140,000 152,600 --------------- FINANCIAL SERVICES--1.3% Dollar Financial Group, 9.750% 11/15/11 260,000 271,700 E*Trade Financial Corp., 8.000% 06/15/11 (a) 150,000 149,062 Finova Group, Inc., 7.500% 11/15/09 358,792 197,335 Global Cash Access LLC/ Global Cash Finance Group, 8.750% 03/15/12 (a) USD 205,000 $ 213,969 LaBranche & Co., 11.000% 05/15/12 (a) 320,000 326,400 Pemex Finance Ltd.: 9.150% 11/15/18 310,000 377,992 10.610% 08/15/17 215,000 283,776 Thornburg Mortgage, Inc., 8.000% 05/15/13 160,000 160,000 --------------- 1,980,234 --------------- INDUSTRIALS--0.1% INDUSTRIAL CONGLOMERATES--0.1% SPX Corp., 7.500% 01/01/13 75,000 76,500 --------------- MANUFACTURING--12.1% APPAREL--0.4% Broder Brothers Co., 11.250% 10/15/10 150,000 142,125 Levi Strauss & Co., 12.250% 12/15/12 180,000 176,400 Phillips Van-Heusen: 7.250% 02/15/11 (a) 95,000 95,950 8.125% 05/01/13 90,000 94,275 Warnaco, Inc., 8.875% 06/15/13 65,000 69,225 --------------- 577,975 --------------- AUTO PARTS & EQUIPMENT--0.8% Accuride Corp., 9.250% 02/01/08 100,000 101,750 Dana Corp., 9.000% 08/15/11 135,000 157,950 Delco Remy International, Inc., 11.000% 05/01/09 200,000 212,000 Dura Operating Corp.: 8.625% 04/15/12 225,000 229,500 9.000% 05/01/09 190,000 186,675 Goodyear Tire & Rubber Co., 4.000% 06/15/34 (a) 90,000 91,125 Navistar International, 7.500% 06/15/11 175,000 177,625 TRW Automotive, Inc., 9.375% 02/15/13 (a) 49,000 55,370 --------------- 1,211,995 --------------- CHEMICALS & ALLIED PRODUCTS--2.1% Avecia Group PLC, 11.000% 07/01/09 200,000 151,000 BCP Caylux Holdings, 9.625% 06/15/14 (a) 140,000 145,600 Equistar Chemicals Funding LP: 10.125% 09/01/08 195,000 214,500 10.625% 05/01/11 130,000 144,300 </Table> See Notes to Investment Portfolio. 18 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Huntsman ICI Holdings LLC: (c) 12/31/09 USD 1,270,000 $ 615,950 11.500% 07/15/12 (a) 135,000 136,181 IMC Global, Inc., 10.875% 08/01/13 205,000 248,050 Invista, 9.250% 05/01/12 (a) 135,000 135,675 Koppers Industries, Inc., 9.875% 10/15/13 240,000 262,800 Lyondell Chemical Co.: 9.625% 05/01/07 290,000 303,050 9.875% 05/01/07 20,000 20,950 Nova Chemicals Corp., 6.500% 01/15/12 110,000 108,292 Terra Capital, Inc., 12.875% 10/15/08 310,000 369,675 UAP Holding Corp., (b) 07/15/12 (10.750% 01/15/08) (a) 190,000 147,250 United Agriculture Products, Inc., 8.250% 12/15/11 (a) 160,000 176,800 Westlake Chemical Corp., 8.750% 07/15/11 130,000 141,375 --------------- 3,321,448 --------------- ELECTRONIC & ELECTRICAL EQUIPMENT--0.2% Amkor Technology, Inc., 9.250% 02/15/08 195,000 204,750 Lucent Technologies, Inc., 6.450% 03/15/29 220,000 169,400 --------------- 374,150 --------------- FABRICATED METAL--0.2% Earle M. Jorgensen & Co., 9.750% 06/01/12 270,000 295,650 --------------- FOOD & KINDRED PRODUCTS--1.6% Constellation Brands, Inc., 8.125% 01/15/12 175,000 184,625 Del Monte Corp., 9.250% 05/15/11 420,000 453,600 Dole Food Co., Inc., 8.625% 05/01/09 275,000 289,437 Merisant Co., 9.500% 07/15/13 (a) 135,000 143,775 Pinnacle Foods Holdings, 8.250% 12/01/13 (a) 245,000 237,038 Premier International Foods PLC, 12.000% 09/01/09 750,000 798,750 Roundy's, Inc., 8.875% 06/15/12 145,000 154,787 Tabletop Holdings, Inc., (b) 05/15/14 (12.250% 11/15/08) (a) 340,000 207,400 Wornick Co., 10.875% 07/15/11 (a) 30,000 30,600 --------------- 2,500,012 --------------- FURNITURE & FIXTURES--0.2% Congoleum Corp., 8.625% 08/01/08 (d) USD 140,000 $ 110,600 Tempur-Pedic, Inc., 10.250% 08/15/10 173,000 195,058 --------------- 305,658 --------------- LUMBER & WOOD PRODUCTS--0.1% Millar Western Forest, 7.750% 11/15/13 (a) 145,000 145,725 --------------- MISCELLANEOUS MANUFACTURING--2.0% Amscan Holdings, Inc., 8.750% 05/01/14 (a) 225,000 221,063 Fastentech, Inc., 11.500% 05/01/11 (a) 290,000 317,550 Flowserve Corp., 12.250% 08/15/10 205,000 232,163 Hexcel Corp., 9.750% 01/15/09 225,000 236,250 J.B. Poindexter & Co., 8.750% 03/15/14 (a) 215,000 217,687 Maax Corp., 9.750% 06/15/12 (a) 130,000 134,427 Mueller Group, Inc., 10.000% 05/01/12 (a) 185,000 192,400 Rexnord Corp., 10.125% 12/15/12 125,000 137,500 Superior Essex Communications Group, 9.000% 04/15/12 (a) 165,000 159,225 Tekni-Plex, Inc., 12.750% 06/15/10 320,000 307,200 Terex Corp., Series 2001 B, 10.375% 04/01/11 215,000 239,188 TriMas Corp., 9.875% 06/15/12 455,000 484,575 Trinity Industries, Inc., 6.500% 03/15/14 (a) 105,000 95,550 Valmont Industries, Inc., 6.875% 05/01/14 (a) 65,000 63,700 --------------- 3,038,478 --------------- PAPER PRODUCTS--1.0% Buckeye Technologies, Inc., 8.500% 10/01/13 (a) 40,000 40,600 Caraustar Industries, Inc., 9.875% 04/01/11 190,000 188,575 Consolidated Container Co., (b) 06/15/09 (10.750% 06/15/07) (a) 175,000 133,000 Georgia-Pacific Corp., 8.000% 01/15/24 90,000 90,000 MDP Acquisitions PLC, 9.625% 10/01/12 340,000 377,400 Newark Group, Inc., 9.750% 03/15/14 (a) 130,000 122,850 </Table> See Notes to Investment Portfolio. 19 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Norske Skog Canada Ltd.: 7.375% 03/01/14 (a) USD 65,000 $ 63,504 8.625% 06/15/11 90,000 94,500 Portola Packaging, Inc., 8.250% 02/01/12 (a) 140,000 114,100 Smurfit-Stone Container Corp., 8.250% 10/01/12 165,000 170,775 Solo Cup Co., 8.500% 02/15/14 (a) 90,000 84,600 Tembec Industries, Inc., 8.500% 02/01/11 85,000 85,850 --------------- 1,565,754 --------------- PRIMARY METAL--0.7% Bayou Steel Corp., 9.000% 03/31/11 125,000 113,125 Kaiser Aluminum & Chemical Corp., 10.875% 10/15/06 (e) 240,000 249,600 Metallurg, Inc., 11.000% 12/01/07 120,000 54,000 Oregon Steel Mills, Inc., 10.000% 07/15/09 130,000 138,125 Steel Dynamics, Inc.: 9.500% 03/15/09 (a) 55,000 60,775 9.500% 03/15/09 50,000 55,250 UCAR Finance, Inc., 10.250% 02/15/12 250,000 277,500 Wise Metals Group LLC, 10.250% 05/15/12 (a) 200,000 202,500 --------------- 1,150,875 --------------- PRINTING & PUBLISHING--1.9% Dex Media, Inc.: (b) 11/15/13 (9.000% 11/15/08) (a) 160,000 103,200 8.000% 11/15/13 (a) 220,000 211,200 Dex Media East LLC, 12.125% 11/15/12 370,000 431,975 Dex Media West LLC, 9.875% 08/15/13 (a) 180,000 198,000 Haights Cross Communications, Inc.: (b) 08/15/11 (12.500% 02/01/09) (a) 205,000 112,750 11.750% 08/15/11 195,000 210,600 Hollinger, Inc., 11.875% 03/01/11 (a) 127,000 148,273 Primedia, Inc., 8.875% 05/15/11 285,000 283,575 Quebecor Media, Inc., 11.125% 07/15/11 400,000 456,000 Sheridan Group., 10.250% 08/15/11 (a) 155,000 163,912 Von Hoffman Corp., 10.250% 03/15/09 360,000 369,900 Yell Finance BV, 10.750% 08/01/11 255,000 297,713 --------------- 2,987,098 --------------- STONE, CLAY, GLASS & CONCRETE--0.7% Crown European Holdings SA, 10.875% 03/01/13 USD 190,000 $ 217,550 Owens-Brockway Glass Container, 8.250% 05/15/13 370,000 381,100 Owens-Illinois, Inc.: 7.350% 05/15/08 240,000 239,400 7.500% 05/15/10 45,000 44,100 US Concrete, Inc., 8.375% 04/01/14 (a) 195,000 195,000 --------------- 1,077,150 --------------- TEXTILE MILL PRODUCTS--0.1% Collins & Aikman Floor Covering, Inc., 9.750% 02/15/10 150,000 152,250 --------------- TOBACCO PRODUCTS--0.1% North Atlantic Trading, 9.250% 03/01/12 (a) 145,000 145,000 --------------- MINING & ENERGY--2.4% OIL & GAS EXTRACTION--1.7% Benton Oil & Gas Co., 9.375% 11/01/07 215,000 219,300 Chesapeake Energy Corp., 7.500% 06/15/14 (a) 185,000 190,088 Compton Petroleum Corp., 9.900% 05/15/09 195,000 212,061 Encore Acquisition Co., 8.375% 06/15/12 195,000 206,700 Energy Partners Ltd., 8.750% 08/01/10 125,000 130,625 Ferrellgas Partners LP, 8.750% 06/15/12 180,000 192,150 Gazprom, 9.625% 03/01/13 630,000 648,585 Magnum Hunter Resources, Inc., 9.600% 03/15/12 155,000 170,500 PDVSA Finance Ltd., 6.250% 02/15/06 EUR 254,150 309,135 Pride International, Inc., 7.375% 07/15/14 (a)(f) USD 105,000 106,050 Whiting Petroleum Corp., 7.250% 05/01/12 (a) 270,000 270,000 --------------- 2,655,194 --------------- OIL & GAS FIELD SERVICES--0.7% CHC Helicopter Corp., 7.375% 05/01/14 (a) 175,000 171,936 J. Ray McDermott SA, 11.000% 12/15/13 (a) 120,000 115,200 Newpark Resources, Inc., 8.625% 12/15/07 185,000 188,006 Petroleum Helicopters, Inc., 9.375% 05/01/09 325,000 341,250 Premcor Refining Group, 7.500% 06/15/15 165,000 170,775 </Table> See Notes to Investment Portfolio. 20 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Seitel, Inc., 11.750% 07/15/11 (a) USD 150,000 $ 147,000 --------------- 1,134,167 --------------- RETAIL TRADE--0.8% APPAREL AND ACCESSORY--0.2% Finlay Fine Jewelry Corp., 8.375% 06/01/12 (a) 175,000 182,000 Saks, Inc., 7.000% 12/01/13 55,000 54,313 --------------- 236,313 --------------- FOOD STORES--0.1% Stater Brothers Holdings, 8.125% 06/15/12 (a) 205,000 205,513 --------------- MISCELLANEOUS RETAIL--0.5% Asbury Automotive Group, 8.000% 03/15/14 195,000 186,225 Leiner Health Products, 11.000% 06/01/12 (a) 50,000 51,500 Nebraska Book Co., 8.625% 03/15/12 130,000 127,725 Rite Aid Corp., 9.250% 06/01/13 295,000 311,594 Steinway Musical Instruments, Inc., 8.750% 04/15/11 155,000 167,400 --------------- 844,444 --------------- SERVICES--7.0% AMUSEMENT & RECREATION--3.9% American Casino & Entertainment, 7.850% 02/01/12 (a) 250,000 253,750 Ameristar Casinos, Inc., 10.750% 02/15/09 215,000 244,563 AMF Bowling Worldwide, Inc., 10.000% 03/01/10 (a) 160,000 164,400 Bombardier Recreational, 8.375% 12/15/13 (a) 320,000 317,600 Boyd Gaming Corp., 8.750% 04/15/12 85,000 90,313 Cinemark, Inc., (b) 03/15/14 (9.750% 03/15/09) (a) 295,000 192,487 Circus & Eldorado/Silver Legacy Capital Corp., 10.125% 03/01/12 125,000 125,625 Equinox Holdings, Inc., 9.000% 12/15/09 (a) 240,000 238,800 Hard Rock Hotel, Inc., 8.875% 06/01/13 210,000 212,625 Hollywood Casino Shreveport, 13.000% 08/01/06 (g) 600,000 480,000 Inn of the Mountain Gods Resort, 12.000% 11/15/10 (a) USD 155,000 $ 172,050 K2, Inc., 7.375% 07/01/14 (a)(f) 120,000 122,707 Mohegan Tribal Gaming Authority: 8.000% 04/01/12 350,000 373,188 8.375% 07/01/11 125,000 134,531 Park Place Entertainment Corp., 9.375% 02/15/07 285,000 309,938 Pinnacle Entertainment, Inc.: 8.250% 03/15/12 (a) 450,000 429,750 8.750% 10/01/13 175,000 172,375 Premier Entertainment Biloxi Financial, 10.750% 02/01/12 (a) 130,000 136,825 River Rock Entertainment, 9.750% 11/01/11 (a) 225,000 245,250 Seneca Gaming Corp., 7.250% 05/01/12 (a) 215,000 214,463 Six Flags, Inc., 9.500% 02/01/09 550,000 567,875 Station Casinos, Inc.: 6.000% 04/01/12 105,000 101,325 6.875% 03/01/16 185,000 177,600 Town Sports International, Inc., (b) 02/01/14 (11.000% 02/01/09) (a) 280,000 130,200 Vail Resorts, Inc., 6.750% 02/15/14 (a) 180,000 170,550 Warner Music Group, 7.375% 04/15/14 (a) 220,000 211,750 Wynn Las Vegas LLC, 12.000% 11/01/10 97,000 115,915 --------------- 6,106,455 --------------- BUSINESS SERVICES--0.3% Buhrmann US, Inc., 8.250% 07/01/14 (a) 120,000 119,250 Iron Mountain, Inc., 7.750% 01/15/15 55,000 54,725 Language Line Holdings, Inc.: (b) 06/15/13 (14.125% 06/15/09) (a) 135,000 70,538 11.125% 06/15/12 (a) 170,000 172,550 --------------- 417,063 --------------- FUNERAL SERVICES--0.2% Service Corp. International, 7.700% 04/15/09 275,000 281,875 --------------- HEALTH SERVICES--1.5% Bio-Rad Laboratories, Inc., 7.500% 08/15/13 220,000 229,900 Coventry Health Care, Inc., 8.125% 02/15/12 265,000 290,838 HCA, Inc., 8.750% 09/01/10 140,000 159,429 </Table> See Notes to Investment Portfolio. 21 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Insight Health Services Corp., 9.875% 11/01/11 USD 230,000 $ 247,825 MedQuest, Inc., 11.875% 08/15/12 (a) 310,000 351,850 PacifiCare Health Systems, Inc., 10.750% 06/01/09 81,000 92,138 Team Health, Inc., 9.000% 04/01/12 (a) 190,000 183,350 Tenet Healthcare Corp.: 5.375% 11/15/06 80,000 80,200 6.375% 12/01/11 60,000 52,800 9.875% 07/01/14 (a) 445,000 451,675 United Surgical Partners International, Inc., 10.000% 12/15/11 250,000 282,500 --------------- 2,422,505 --------------- HOTELS, CAMPS & LODGING--0.3% Starwood Hotels & Resorts Worldwide, Inc., 7.875% 05/01/12 (a) 375,000 400,312 --------------- OTHER SERVICES--0.8% Advanstar Communications, Inc., 12.000% 02/15/11 330,000 351,450 Cornell Companies, Inc., 10.750% 07/01/12 (a) 160,000 163,200 Corrections Corp. of America, 9.875% 05/01/09 190,000 210,425 Geo Group, Inc., 8.250% 07/15/13 100,000 99,000 NationsRent, Inc., 9.500% 10/15/10 (a) 275,000 290,125 Williams Scotsman, Inc., 9.875% 06/01/07 125,000 123,750 --------------- 1,237,950 --------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES--11.0% AEROSPACE--0.5% Argo Tech Corp., 9.250% 06/01/11 (a) 125,000 128,750 BE Aerospace, Inc., 8.875% 05/01/11 270,000 252,450 Sequa Corp., 8.875% 04/01/08 145,000 152,975 TransDigm, Inc., 8.375% 07/15/11 (a) 155,000 159,650 Vought Aircraft Industries, Inc., 8.000% 07/15/11 (a) 105,000 99,750 --------------- 793,575 --------------- AIR TRANSPORTATION--0.5% Continental Airlines, Inc., 7.568% 12/01/06 255,000 204,000 Delta Air Lines, Inc., 7.900% 12/15/09 360,000 183,600 Northwest Airlines, Inc., 9.875% 03/15/07 USD 255,000 $ 201,450 United Airlines, 1.535% 03/02/49 (h) 226,143 183,176 --------------- 772,226 --------------- BROADCASTING--1.2% Canwest Media, Inc., 10.625% 05/15/11 290,000 325,525 Granite Broadcasting, 9.750% 12/01/10 (a) 275,000 255,750 Sinclair Broadcast Group, Inc., 8.750% 12/15/11 250,000 266,875 Spanish Broadcasting System, 9.625% 11/01/09 310,000 326,275 TV Azteca SA de CV, 10.500% 02/15/07 470,000 479,400 XM Satellite Radio, Inc., 6.650% 05/01/09 (a)(h) 160,000 160,000 --------------- 1,813,825 --------------- CABLE--2.0% Atlantic Broadband Financial, 9.375% 01/15/14 (a) 225,000 213,750 Cablevision Systems Corp., 5.670% 04/01/09 (a)(h) 185,000 189,625 Charter Communications Holding LLC: 9.920% 04/01/11 1,045,000 822,938 10.250% 09/15/10 (a) 160,000 162,000 CSC Holdings, Inc.: 6.750% 04/15/12 (a) 105,000 101,325 7.625% 04/01/11 25,000 25,187 DirecTV Holdings LLC, 8.375% 03/15/13 200,000 221,500 EchoStar DBS Corp., 6.375% 10/01/11 290,000 285,650 Insight Communications, Inc., (b) 02/15/11 (12.250% 02/15/06) 275,000 247,500 Insight Midwest, 9.750% 10/01/09 (a) 135,000 142,088 Northland Cable Television, Inc., 10.250% 11/15/07 305,000 295,850 NTL Cable PLC, 8.750% 04/15/14 (a) 155,000 160,038 Pegasus Satellite Communications, Inc., 11.250% 01/15/10 (a)(e) 220,000 110,000 Telenet Group Holding NV, (b) 06/15/14 (11.500% 12/15/08) (a) 260,000 163,800 --------------- 3,141,251 --------------- ELECTRIC, GAS & SANITARY SERVICES--0.6% Allied Waste North America, Inc.: 6.500% 11/15/10 (a) 470,000 462,950 Series 2001 B, 8.500% 12/01/08 305,000 333,594 </Table> See Notes to Investment Portfolio. 22 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Waste Services, Inc., 9.500% 04/15/14 (a) USD 140,000 $ 143,850 --------------- 940,394 --------------- ELECTRIC SERVICES--0.6% Beaver Valley Funding Corp., 9.000% 06/01/17 235,000 265,738 CMS Energy Corp., 8.900% 07/15/08 265,000 278,581 Illinova Power Co., 11.500% 12/15/10 75,000 88,500 Nevada Power Co.: 9.000% 08/15/13 (a) 125,000 135,625 10.875% 10/15/09 215,000 243,487 --------------- 1,011,931 --------------- MARINE SERVICES--0.5% Ship Finance International Ltd., 8.500% 12/15/13 375,000 350,464 Stena AB: 7.500% 11/01/13 230,000 227,125 9.625% 12/01/12 170,000 188,275 --------------- 765,864 --------------- MARINE TRANSPORT--0.1% Teekay Shipping Corp., 8.875% 07/15/11 85,000 93,925 --------------- PIPELINES--1.0% Coastal Corp., 7.750% 06/15/10 380,000 344,375 Northwest Pipeline Corp., 8.125% 03/01/10 85,000 92,225 Sonat, Inc.: 6.875% 06/01/05 135,000 135,337 7.625% 07/15/11 495,000 438,694 Southern Natural Gas Co., 8.875% 03/15/10 130,000 141,700 Williams Companies, Inc., 8.125% 03/15/12 410,000 436,650 --------------- 1,588,981 --------------- RADIO & TELEPHONE COMMUNICATIONS--2.1% AirGate PCS, Inc., 9.375% 09/01/09 26,600 26,002 American Cellular Corp., Series B, 10.000% 08/01/11 180,000 156,600 American Towers, Inc., 7.250% 12/01/11 130,000 130,325 Dobson Communications Corp., 8.875% 10/01/13 290,000 220,400 Horizon PCS, Inc., 13.750% 06/15/11 (e) 285,000 134,663 iPCS Escrow Co., 11.500% 05/01/12 (a) 105,000 107,888 Nextel Communications, Inc., 7.375% 08/01/15 485,000 488,638 Nextel Partners, Inc., 8.125% 07/01/11 265,000 270,300 Rogers Cantel, Inc., 9.750% 06/01/16 USD 380,000 $ 431,300 Rural Cellular Corp., 8.250% 03/15/12 (a) 130,000 133,575 SBA Communications Corp.: (b) 12/15/11 (9.750% 12/15/07) 160,000 120,000 10.250% 02/01/09 365,000 372,300 Spectrasite, Inc., 8.250% 05/15/10 (a) 150,000 154,500 US Unwired, Inc., 10.000% 06/15/12 (a) 230,000 232,875 Western Wireless Corp., 9.250% 07/15/13 250,000 256,875 --------------- 3,236,241 --------------- RAILROAD--0.2% Kansas City Southern, 7.500% 06/15/09 40,000 40,100 TFM SA de CV, 12.500% 06/15/12 230,000 239,200 --------------- 279,300 --------------- TELECOMMUNICATION SERVICES--1.5% Axtel SA, 11.000% 12/15/13 (a) 270,000 255,150 Carrier1 International SA, 13.250% 02/15/09 (e) 500,000 45,000 Cincinnati Bell, Inc., 8.375% 01/15/14 210,000 189,000 Fairpoint Communications, 11.875% 03/01/10 180,000 207,000 Level 3 Communications, 10.500% 12/01/08 200,000 159,000 Qwest Capital Funding: 7.250% 02/15/11 565,000 485,900 7.750% 02/15/31 265,000 212,000 Qwest Services Corp., 13.500% 12/15/10 (a) 420,000 488,250 Time Warner Telecom LLC: 9.750% 07/15/08 100,000 95,500 10.125% 02/01/11 255,000 237,150 --------------- 2,373,950 --------------- TRANSPORTATION SERVICES--0.2% Allied Holdings, Inc., 8.625% 10/01/07 155,000 137,950 QDI Capital Corp., 9.000% 11/15/10 (a) 240,000 228,000 --------------- 365,950 --------------- UTILITY--2.0% INDEPENDENT POWER PRODUCERS--2.0% AES Corp.: 9.000% 05/15/15 (a) 360,000 385,200 9.500% 06/01/09 182,000 194,740 </Table> See Notes to Investment Portfolio. 23 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Caithness Coso Funding Corp., 9.050% 12/15/09 USD 278,473 $ 303,535 Calpine Canada Energy Finance, 8.500% 05/01/08 130,000 88,400 Calpine Corp., 8.500% 07/15/10 (a) 230,000 193,200 Calpine Generating Co.: 10.250% 04/01/11 (a)(h) 240,000 220,800 11.500% 04/01/11 (a) 265,000 233,200 Dynegy Holdings, Inc.: 6.875% 04/01/11 200,000 171,500 9.875% 07/15/10 (a) 110,000 117,975 Edison Mission Energy, 9.875% 04/15/11 250,000 259,375 MSW Energy Holdings Finance: 7.375% 09/01/10 (a) 90,000 90,000 8.500% 09/01/10 270,000 284,850 NRG Energy, Inc., 8.000% 12/15/13 (a) 90,000 91,125 Orion Power Holdings, Inc., 12.000% 05/01/10 195,000 237,900 PSE&G Energy Holdings, Inc., 8.625% 02/15/08 275,000 296,313 --------------- 3,168,113 --------------- TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (cost of $58,716,534) 60,974,768 --------------- FOREIGN GOVERNMENT OBLIGATIONS--31.9% European Investment Bank, 7.625% 12/07/07 GBP 455,000 883,070 Government of Australia, 7.500% 09/15/09 AUD 1,425,000 1,067,767 Government of Canada: 6.000% 06/01/11 CAD 875,000 704,131 10.000% 06/01/08 2,846,000 2,579,729 Government of New Zealand: 6.000% 11/15/11 NZD 3,470,000 2,153,637 6.500% 04/15/13 2,545,000 1,626,158 Government of Sweden: 5.000% 01/28/09 SEK 18,785,000 2,593,871 6.750% 05/05/14 11,070,000 1,705,133 Hungary Government Bond, 6.250% 06/12/07 HUF 90,000,000 390,044 Kingdom of Norway, 5.500% 05/15/09 NOK 5,200,000 799,096 Kingdom of Spain, 5.500% 07/30/17 EUR 1,580,000 2,097,807 Ministry Finance Russia, 12.750% 06/24/28 USD 955,000 1,389,525 Poland Government Bond, 8.500% 05/12/07 PLN 3,357,000 928,293 Republic of Brazil: 7.309% 06/29/09 (h) USD 550,000 549,945 9.250% 10/22/10 500,000 472,500 11.000% 08/17/40 USD 643,000 $ 598,312 11.500% 04/02/09 EUR 480,000 611,055 14.500% 10/15/09 USD 1,200,000 1,389,000 Republic of Bulgaria: 2.000% 07/28/24 (h) 1,135,000 1,136,135 8.250% 01/15/15 460,000 536,360 Republic of Colombia: 10.000% 01/23/12 782,000 805,460 10.750% 01/15/13 240,000 255,000 11.500% 05/31/11 EUR 335,000 459,634 11.750% 02/25/20 USD 580,000 632,200 Republic of Germany: 5.375% 01/04/10 EUR 1,225,000 1,609,347 6.000% 07/04/07 1,210,000 1,592,075 Republic of Greece, 5.350% 05/18/11 1,115,000 1,458,425 Republic of Italy, 5.000% 02/01/12 2,560,000 3,280,468 Republic of Panama: 8.125% 04/28/34 USD 440,000 397,100 8.875% 09/30/27 365,000 354,050 Republic of Peru, 9.875% 02/06/15 660,000 686,400 Republic of Philippines, 8.250% 01/15/14 400,000 377,000 Republic of South Africa: 5.250% 05/16/13 EUR 855,000 1,011,379 6.500% 06/02/14 USD 540,000 545,400 13.000% 08/31/10 ZAR 5,790,000 1,058,497 Republic of Venezuela, 9.250% 09/15/27 USD 868,000 733,894 Russian Federation: 5.000% 03/31/30 865,000 789,745 11.000% 07/24/18 655,000 825,955 United Kingdom Treasury: 5.000% 03/07/12 GBP 368,000 663,006 7.500% 12/07/06 1,020,000 1,957,417 9.000% 07/12/11 615,000 1,370,895 United Mexican States: 7.500% 03/08/10 EUR 605,000 817,943 7.500% 04/08/33 USD 1,618,000 1,561,370 11.375% 09/15/16 620,000 868,000 Western Australia Treasury Group, 7.000% 04/15/11 AUD 2,000,000 1,463,021 --------------- TOTAL FOREIGN GOVERNMENT OBLIGATIONS (cost of $46,393,593) 49,785,249 --------------- U.S. GOVERNMENT AGENCIES & OBLIGATIONS--24.5% Federal Home Loan Mortgage Corp.: 5.000% 08/25/10 USD 500,000 502,391 8.000% 10/01/26 234,489 256,435 --------------- 758,826 --------------- </Table> See Notes to Investment Portfolio. 24 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Federal National Mortgage Association, To Be Announced, 6.500% 07/01/34 (f) USD 2,795,000 $ 2,909,422 --------------- Government National Mortgage Association, 8.000% 04/15/17 15,707 17,346 --------------- U.S. Treasury Notes/Bonds: 5.625% 05/15/08 2,900,000 3,121,577 6.500% 10/15/06 2,550,000 2,752,705 7.500% 11/15/24 1,310,000 1,658,992 8.750% 05/15/17 4,911,000 6,656,708 10.375% 11/15/12 3,800,000 4,640,157 11.625% 11/15/04 2,900,000 3,007,164 12.500% 08/15/14 9,012,000 12,590,043 --------------- 34,427,346 --------------- TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS (cost of $39,249,123) 38,112,940 --------------- CONVERTIBLE BONDS--0.7% TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES--0.7% INDEPENDENT POWER PRODUCERS--0.1% Mirant Corp., 2.500% 06/15/21 (e) 185,000 102,544 --------------- RADIO & TELEPHONE COMMUNICATIONS--0.4% Nortel Networks Corp., 4.250% 09/01/08 620,000 591,294 --------------- TELECOMMUNICATIONS--0.2% COLT Telecom Group PLC: 2.000% 03/29/06 (a) EUR 175,000 232,019 2.000% 12/16/06 (a) 80,000 109,959 --------------- 341,978 --------------- TOTAL CONVERTIBLE BONDS (cost of $887,646) 1,035,816 --------------- <Caption> SHARES --------------- COMMON STOCKS (i)0.1% MATERIALS--0.1% PRIMARY METAL--0.1% Bayou Steel Corp. 7,736 148,918 --------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES--0.0% CABLE--0.0% Ono Finance PLC (a)(j) 500 --(k) --------------- POLLUTION CONTROL--0.0% Fairlane Management Corp. (j) 2,000 --(k) --------------- TOTAL COMMON STOCKS (cost of $315,344) 148,918 --------------- <Caption> UNITS VALUE --------------- --------------- WARRANTS (i)--0.0% TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES--0.0% CABLE--0.0% Cable Satisfaction International, Inc., Expires 03/01/05 (j) 515 $ --(k) Ono Finance PLC, Expires 02/15/11 (a)(j) 150 --(k) --------------- -- --------------- RADIO & TELEPHONE COMMUNICATIONS--0.0% UbiquiTel, Inc., Expires 04/15/10 (a)(j) 225 --(k) --------------- TELECOMMUNICATIONS--0.0% Carrier1 International SA, Expires 02/19/09 (a)(j) 235 --(k) --------------- Horizon PCS, Inc., Expires 10/01/10 (a)(j) 315 --(k) Jazztel PLC, Expires 07/15/10 (a)(j) 95 --(k) --------------- -- --------------- TRANSPORTATION SERVICES--0.0% QDI LLC, Expires 01/15/07 (a)(j) 1,020 6,151 --------------- TOTAL WARRANTS (cost of $17,080) 6,151 --------------- <Caption> PAR --------------- SHORT-TERM OBLIGATION--3.3% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/04, due 07/01/04 at 1.170%, collateralized by a U.S. Treasury Bond maturing 08/15/23, market value $5,248,973 (repurchase proceeds $5,142,167) (cost of $5,142,000) $ 5,142,000 $ 5,142,000 --------------- TOTAL INVESTMENTS--99.6% (cost of $150,721,320) (l) 155,205,842 --------------- OTHER ASSETS & LIABILITIES, NET--0.4% 548,376 --------------- NET ASSETS--100.0% $ 155,754,218 =============== </Table> See Notes to Investment Portfolio. 25 <Page> NOTES TO INVESTMENT PORTFOLIO: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, these securities amounted to $19,471,586, which represents 12.5% of net assets. (b) Step bond. Shown parenthetically is the next interest rate to be paid. (c) Zero coupon bond. (d) The issuer has filed for bankruptcy protection under Chapter 11, and is in default of certain debt covenants, however, under the issuer's plan of reorganization, the issuer has guaranteed all interest due and therefore income is still being accrued. As of June 30, 2004, the value of this security represents 0.1% of net assets. (e) The issuer has filed for bankruptcy protection under Chapter 11 and is in default of certain debt covenants. Income is not being accrued. As of June 30, 2004, the value of these securities amounted to $641,807, which represents 0.4% of net assets. (f) Security purchased on a delayed delivery basis. (g) This issuer is in default of certain debt covenants. Income is not being accrued. As of June 30, 2004, the value of this security represents 0.3% of net assets. (h) Variable rate security. The interest rate shown reflects the rate as of June 30, 2004. (i) Non-income producing security. (j) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (k) Security has no value. (l) Cost for federal income tax purposes is $152,265,086. <Table> <Caption> ACRONYM NAME ------- ---- AUD Australian Dollar CAD Canadian Dollar EUR Euro Currency GBP British Pound HUF Hungarian Forint NOK Norwegian Krone NZD New Zealand Dollar PLN Polish Zloty SEK Swedish Krona USD United States Dollar ZAR South African Rand </Table> As of June 30, 2004, the Fund had entered into the following forward currency exchange contracts: <Table> <Caption> FORWARD UNREALIZED CURRENCY AGGEGATE SETTLEMENT APPRECIATION CONTRACTS TO SELL VALUE FACE VALUE DATE (DEPRECIATION) - ----------------- ----------- ----------- ---------- -------------- EUR $ 223,345 $ 224,665 07/12/04 $ 1,320 EUR 1,929,943 1,912,303 07/19/04 (17,640) GBP 741,924 749,890 07/21/04 7,966 EUR 1,071,319 1,069,200 07/28/04 (2,119) EUR 144,872 144,585 07/28/04 (287) EUR 584,356 583,200 07/28/04 (1,156) EUR 415,136 413,974 07/28/04 (1,162) EUR 1,356,801 1,353,003 07/28/04 (3,798) --------------- $ (16,876) =============== </Table> See Notes to Financial Statements. 26 <Page> STATEMENT OF ASSETS & LIABILITIES Colonial Strategic Income Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Investments, at cost $ 150,721,320 --------------- Investments, at value $ 155,205,842 Cash 562,678 Foreign currency (cost of $24) 25 Net unrealized appreciation on forward currency exchange contracts 9,286 Receivable for: Investments sold 582,562 Fund shares sold 916,630 Interest 2,935,916 Dollar roll fee income 9,280 Foreign tax reclaim 4,640 Expense reimbursement due from Investment Advisor 3,319 Deferred Trustees' compensation plan 7,541 Other assets 31 --------------- TOTAL ASSETS 160,237,750 --------------- LIABILITIES: Net unrealized depreciation on forward currency exchange contracts 26,162 Payable for: Investments purchased 1,134,901 Investments purchased on a delayed delivery basis 3,117,578 Fund shares repurchased 65,536 Investment advisory fee 79,641 Transfer agent fee 604 Audit fee 25,050 Custody fee 2,739 Distribution fee--Class B 11,981 Deferred Trustees' fees 7,541 Other liabilities 11,799 --------------- TOTAL LIABILITIES 4,483,532 --------------- NET ASSETS $ 155,754,218 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 172,280,293 Undistributed net investment income 2,426,313 Accumulated net realized loss (23,424,685) Net unrealized appreciation (depreciation) on: Investments 4,484,522 Foreign currency translations (12,225) --------------- NET ASSETS $ 155,754,218 =============== CLASS A: Net assets $ 101,090,292 Shares outstanding 10,318,587 =============== Net asset value per share $ 9.80 =============== CLASS B: Net assets $ 54,663,926 Shares outstanding 5,589,434 =============== Net asset value per share $ 9.78 =============== </Table> See Notes to Financial Statements. 27 <Page> STATEMENT OF OPERATIONS Colonial Strategic Income Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Interest $ 5,573,106 Dollar roll fee income 35,778 --------------- Total Investment Income (net of foreign taxes withheld of $12,225) 5,608,884 --------------- EXPENSES: Investment advisory fee 522,572 Distribution fee--Class B 68,765 Transfer agent fee 3,729 Pricing and bookkeeping fees 44,734 Trustees' fees 4,537 Custody fee 24,522 Non-recurring costs (See Note 6) 6,865 Other expenses 39,186 --------------- Total Expenses 714,910 Fees reimbursed by Distributor--Class B (12,307) Non-recurring costs assumed by Investment Advisor (See Note 6) (6,865) Custody earnings credit (367) --------------- Net Expenses 695,371 --------------- Net Investment Income 4,913,513 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on: Investments 4,592,502 Foreign currency transactions 25,449 --------------- Net realized gain 4,617,951 --------------- Net change in unrealized appreciation/depreciation on: Investment (9,760,121) Foreign currency translations 71,993 --------------- Net change in unrealized appreciation/depreciation (9,688,128) --------------- Net Loss (5,070,177) --------------- Net Decrease in Net Assets from Operations $ (156,664) =============== </Table> See Notes to Financial Statements. 28 <Page> STATEMENT OF CHANGES IN NET ASSETS Colonial Strategic Income Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 4,913,513 $ 9,799,409 Net realized gain on investments and foreign currency transactions 4,617,951 1,918,158 Net change in unrealized appreciation/depreciation on investments and foreign currency translations (9,688,128) 14,289,472 --------------- --------------- Net Increase (Decrease) from Operations (156,664) 26,007,039 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (7,812,669) Class B -- (3,845,123) --------------- --------------- Total Distributions Declared to Shareholders -- (11,657,792) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 2,467,408 5,759,085 Distributions reinvested -- 7,812,669 Redemptions (11,212,164) (20,673,030) --------------- --------------- Net Decrease (8,744,756) (7,101,276) --------------- --------------- Class B: Subscriptions 4,460,420 23,225,342 Distributions reinvested -- 3,845,123 Redemptions (5,524,500) (7,420,489) --------------- --------------- Net Increase (Decrease) (1,064,080) 19,649,976 --------------- --------------- Net Increase (Decrease) from Share Transactions (9,808,836) 12,548,700 --------------- --------------- Total Increase (Decrease) in Net Assets (9,965,500) 26,897,947 NET ASSETS: Beginning of period 165,719,718 138,821,771 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $2,426,313 and $(2,487,200), respectively) $ 155,754,218 $ 165,719,718 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 250,087 594,081 Issued for distributions reinvested -- 798,025 Redemptions (1,143,198) (2,137,164) --------------- --------------- Net Decrease (893,111) (745,058) --------------- --------------- Class B: Subscriptions 452,454 2,427,732 Issued for distributions reinvested -- 393,162 Redemptions (562,397) (766,395) --------------- --------------- Net Increase (Decrease) (109,943) 2,054,499 --------------- --------------- </Table> See Notes to Financial Statements. 29 <Page> NOTES TO FINANCIAL STATEMENTS Colonial Strategic Income Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Colonial Strategic Income Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks current income consistent with prudent risk and maximum total return. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Debt securities generally are valued by a pricing service approved by the Fund's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Certain debt securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may vary from the actual amounts realized upon sale of the securities, and the potential variation may be greater for those securities valued using fundamental analysis. Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Forward currency exchange contracts are valued at the prevailing forward exchange rate of the underlying currencies. Foreign securities are generally valued at the last sale price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. 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 generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the values of such foreign 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 values of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. 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--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS--Forward foreign currency exchange contracts are agreements to exchange one currency for another at a future date at a specified price. These contracts are used to minimize the exposure to foreign exchange rate fluctuations during the period between trade and settlement date of the contracts. The Fund may utilize forward foreign currency exchange contracts in connection with the settlement of 30 <Page> purchases and sales of securities. The Fund may also enter into these contracts to hedge certain other foreign currency denominated assets. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Forward currency contracts are valued daily at the forward exchange rate of the underlying currency, resulting in unrealized gains (losses) which become realized at the time the foreign 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. The use of forward currency contracts does 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. The Fund could also be exposed to risk if the counterparties of the contracts are unable to fulfill the terms of the contracts. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. MORTGAGE DOLLAR ROLL TRANSACTIONS--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 repurchase, the Fund will not be entitled to accrue interest and receive principal payment 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 identifies U.S. Government securities or other liquid high grade debt obligations as segregated with the custodian in an amount equal to the mortgage dollar roll transactions. DELAYED DELIVERY SECURITIES--The Fund may trade securities on other than normal settlement terms, including securities purchased or sold on a "when-issued" basis. 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 identifies cash or liquid portfolio securities as segregated with the custodian in an amount equal to the delayed delivery commitment. INCOME RECOGNITION--Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. 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. Fee income attributable to mortgage dollar roll transactions is recorded on the accrual basis over the term of the transaction. FOREIGN CURRENCY TRANSACTIONS--The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation 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. For financial statement purposes, 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. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. 31 <Page> DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 11,657,792 Long-term capital gains -- </Table> Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 8,083,546 Unrealized depreciation (5,142,790) ------------ Net unrealized appreciation $ 2,940,756 ============ </Table> The following capital loss carryforwards, determined as of December 31, 2003, may be 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 $ 5,670,014 2009 11,079,118 2010 11,028,566 ------------ $ 27,777,698 ============ </Table> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $1 billion 0.65% Next $1 billion 0.60% Over $2 billion 0.55% </Table> 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 Corporation ("State Street"). As a result, Columbia pays the total fees received 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 exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.056%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the six months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia and the Distributor have voluntarily agreed to waive fees and reimburse the Fund for certain expenses so that total expenses (exclusive of brokerage commissions, interest, taxes and extraordinary expenses, if any) would not exceed 1.00% annually of the Fund's average daily net assets. The Distributor 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 32 <Page> reimbursement is still needed in order to reach the expense limit, Columbia will then waive a portion of its investment advisory fee to the extent necessary. Columbia or the Distributor, at their discretion, may revise or discontinue this arrangement any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended June 30, 2004, the Fund paid $768 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $71,645,632 and $75,911,165, respectively of which $15,148,998 and $14,708,295, respectively, were U.S. Government securities. NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES FOREIGN SECURITIES--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 currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. Investments in emerging market countries are subject to additional risk. The risk of foreign investments is typically increased in less developed countries. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could hurt their economies and securities markets. HIGH-YIELD SECURITIES--Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. Government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid to the extent there is no established secondary market. INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the 33 <Page> agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $6,865 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 34 <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, 2004 2003 2002 2001 2000 (a) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 9.80 $ 8.89 $ 8.91 $ 9.41 $ 10.24 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.29 0.60 0.63 0.79(c) 0.56 Net realized and unrealized gain (loss) on investments and foreign currency (0.31) 1.04 0.09 (0.46)(c) (0.37) ------------ ------------ ------------ ------------ ------------ Total from Investment Operations (0.02) 1.64 0.72 0.33 0.19 ------------ ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income -- (0.73) (0.72) (0.81) (0.99) Return of capital -- -- (0.02) (0.02) (0.03) ------------ ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders -- (0.73) (0.74) (0.83) (1.02) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 9.78 $ 9.80 $ 8.89 $ 8.91 $ 9.41 ============ ============ ============ ============ ============ Total return (d)(e)(f) (0.20)%(g) 18.43% 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% 1.00%(i) Net investment income (h) 5.97%(i) 6.17% 6.92% 8.27%(c) 9.39%(i) Waiver/reimbursement 0.04%(i) 0.05% 0.01% 0.10% 0.03%(i) Portfolio turnover rate 46%(g) 61% 62% 62% 31% Net assets, end of period (000's) $ 54,664 $ 55,825 $ 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 Investment Advisor 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. 35 <Page> PORTFOLIO MANAGERS' DISCUSSION Columbia High Yield Fund, Variable Series / June 30, 2004 Columbia High Yield Fund, Variable Series seeks a high level of current 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 or co-managed the fund and its predecessor since 1998. Mr. Havnaer has co-managed the fund and its predecessor since 2000. During the period from March 2004 to April 2004, Mr. Havnaer was on a leave of absence. Although the fund achieved a modestly positive return during this six-month reporting period, it underperformed the Merrill Lynch US High Yield, Cash Pay Only Index because of the fund's emphasis on higher-quality companies in a market that was led by lower-quality issuers. CCC-rated bonds accounted for approximately 16% of the index, but they represented only 1.2% of the fund's total assets. The market's preference for B- and CCC-rated credits began in the fourth quarter of 2002. These low-rated issuers benefited disproportionately from the ongoing economic recovery, as evidenced by the dramatic decline in default rates from approximately 11% in 2002 to just 3.3% in 2004. However, the yield advantage of lower-quality securities came down significantly over the past year. SECURITY SELECTION AIDED RETURN On balance, the fund's security selection was well-tailored to the current environment. Good news about Westport Resources and XTO Energy (1.4% and 0.4% of net assets, respectively) in the energy sector translated into gains for their bonds. Westport was bought out by Kerr McGee, and XTO's bonds were upgraded to investment grade. The fund also benefited from security selection in the cable industry. And in the telecom sector, the fund's only holding--Nextel Communications (2.0% of net assets)-- increased its subscriber base and thereby increased investor confidence in its business model. Avoiding the electric utility and airlines industries also worked well. The airline sector was the single worst-performing sector of the high-yield market, as higher fuel prices, difficult labor negotiations, and increased competition took a toll. However, the fund's performance was hurt by its under-representation in automotives, consumer products, and textiles, all of which were strong performers. The auto sector was aided by Goodyear, the consumer products industry by Revlon and textiles by Levi's (none of which were in the portfolio). All three issues made big upward moves. NO SIGNIFICANT CHANGES TO INDUSTRY OR ASSET ALLOCATION We did not make any significant changes to our industry or asset allocation during the period. In terms of individual securities, we began building our position in Royal Caribbean Cruises (1.0% of net assets) in February. The company's capital spending budget has come down significantly now that it has taken delivery of a number of new ships, which placed its BB rating on a surer footing. The company's operational prospects have also improved now that the travel business has emerged from its recent slump. POSITIONING FOR THE FUTURE If the economic recovery remains strong and inflation stays low, the investment environment may remain favorable for CCC and other lower-rated credits. However, if economic growth begins to slow and or inflation continues to accelerate, higher-quality bonds that are well-represented in the portfolio may outperform. With these possibilities in mind, we have maintained an average credit quality of low BB and an average maturity slightly shorter than the market. Economic and market conditions change frequently. There is no assurance that the trends described here will continue or commence. An investment in 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, 2004, and are subject to change. 36 <Page> PERFORMANCE INFORMATION Columbia High Yield Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR LIFE - ----------------------------------------------------------------- Class B (4/14/03) 0.29 4.45 5.05 5.51 Merrill Lynch US High Yield, Cash Pay Index(1) 1.33 9.97 5.38 4.85 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 6/30/04 - ------------------------------------------------------- Class B 9.42 9.25 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 3/3/98(2) - 6/30/04 Class B: $14,041 <Table> <Caption> CLASS B SHARES MERRILL LYNCH US HIGH YIELD, CASH PAY INDEX 3/3/98 $ 10,000 $ 10,000 3/31/98 $ 10,146 $ 10,103 4/30/98 $ 10,173 $ 10,150 5/31/98 $ 10,223 $ 10,222 6/30/98 $ 10,307 $ 10,273 7/31/98 $ 10,442 $ 10,331 8/31/98 $ 10,319 $ 9,885 9/30/98 $ 10,586 $ 9,905 10/31/98 $ 10,543 $ 9,742 11/30/98 $ 10,901 $ 10,185 12/31/98 $ 10,959 $ 10,189 1/31/99 $ 11,063 $ 10,289 2/28/99 $ 11,011 $ 10,211 3/31/99 $ 11,030 $ 10,299 4/30/99 $ 11,152 $ 10,460 5/31/99 $ 11,007 $ 10,388 6/30/99 $ 10,974 $ 10,368 7/31/99 $ 10,961 $ 10,383 8/31/99 $ 10,845 $ 10,277 9/30/99 $ 10,785 $ 10,238 10/31/99 $ 10,806 $ 10,178 11/30/99 $ 10,947 $ 10,294 12/31/99 $ 11,022 $ 10,348 1/31/2000 $ 10,938 $ 10,296 2/29/2000 $ 10,930 $ 10,305 3/31/2000 $ 10,871 $ 10,161 4/30/2000 $ 10,891 $ 10,164 5/31/2000 $ 10,866 $ 10,052 6/30/2000 $ 11,119 $ 10,224 7/31/2000 $ 11,211 $ 10,298 8/31/2000 $ 11,386 $ 10,423 9/30/2000 $ 11,394 $ 10,363 10/31/2000 $ 11,223 $ 10,059 11/30/2000 $ 11,062 $ 9,744 12/31/2000 $ 11,426 $ 9,956 1/31/2001 $ 11,912 $ 10,549 2/28/2001 $ 12,027 $ 10,716 3/31/2001 $ 11,951 $ 10,574 4/30/2001 $ 11,942 $ 10,459 5/31/2001 $ 12,036 $ 10,660 6/30/2001 $ 11,838 $ 10,440 7/31/2001 $ 11,907 $ 10,602 8/31/2001 $ 12,049 $ 10,705 9/30/2001 $ 11,647 $ 10,019 10/31/2001 $ 11,992 $ 10,313 11/30/2001 $ 12,234 $ 10,648 12/31/2001 $ 12,132 $ 10,573 1/31/2002 $ 12,181 $ 10,632 2/28/2002 $ 12,122 $ 10,530 3/31/2002 $ 12,225 $ 10,781 4/30/2002 $ 12,354 $ 10,952 5/31/2002 $ 12,314 $ 10,893 6/30/2002 $ 12,067 $ 10,118 7/31/2002 $ 11,906 $ 9,716 8/31/2002 $ 12,078 $ 9,959 9/30/2002 $ 12,006 $ 9,799 10/31/2002 $ 12,031 $ 9,717 11/30/2002 $ 12,397 $ 10,296 12/31/2002 $ 12,464 $ 10,453 1/31/2003 $ 12,587 $ 10,754 2/28/2003 $ 12,704 $ 10,892 3/31/2003 $ 12,897 $ 11,174 4/30/2003 $ 13,234 $ 11,802 5/31/2003 $ 13,251 $ 11,930 6/30/2003 $ 13,442 $ 12,256 7/31/2003 $ 13,212 $ 12,080 8/31/2003 $ 13,240 $ 12,239 9/30/2003 $ 13,540 $ 12,565 10/31/2003 $ 13,704 $ 12,822 11/30/2003 $ 13,831 $ 12,999 12/31/2003 $ 14,000 $ 13,300 1/31/2004 $ 14,133 $ 13,508 2/29/2004 $ 14,195 $ 13,502 3/31/2004 $ 14,335 $ 13,597 4/30/2004 $ 14,193 $ 13,499 5/31/2004 $ 13,919 $ 13,283 6/30/2004 $ 14,041 $ 13,494 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. Total return performance includes changes in share price and reinvestment of all distributions. The Merrill Lynch US High Yield, Cash Pay Index is an unmanaged index that tracks the performance 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. 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. Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the oldest 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 new class of shares would be lower. (1) Index performance for the life of the fund is from March 3, 1998. (2) Inception date of class A shares (oldest existing share class). 37 <Page> INVESTMENT PORTFOLIO Columbia High Yield Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> PAR VALUE --------------- --------------- CORPORATE FIXED-INCOME BONDS & NOTES--89.9% CONSTRUCTION--3.3% BUILDING CONSTRUCTION--3.3% KB Home: 7.750% 02/01/10 $ 250,000 $ 258,125 8.625% 12/15/08 400,000 429,000 9.500% 02/15/11 150,000 166,125 Toll Corp.: 8.000% 05/01/09 50,000 51,500 8.250% 02/01/11 325,000 351,000 8.250% 12/01/11 425,000 461,125 --------------- 1,716,875 --------------- FINANCE, INSURANCE & REAL ESTATE--1.4% REAL ESTATE--1.4% Health Care REIT, Inc., 7.500% 08/15/07 200,000 217,100 iStar Financial, Inc.: 5.125% 04/01/11(a) 200,000 189,000 6.000% 12/15/10 30,000 29,550 7.000% 03/15/08 85,000 90,100 8.750% 08/15/08 176,000 192,720 --------------- 718,470 --------------- MANUFACTURING--23.5% AUTO PARTS & EQUIPMENT--1.2% Lear Corp., 8.110% 05/15/09 570,000 648,523 --------------- CHEMICALS & ALLIED PRODUCTS--3.5% Acetex Corp., 10.875% 08/01/09 210,000 229,425 Airgas, Inc.: 6.250% 07/15/14 (a) 200,000 192,000 9.125% 10/01/11 350,000 394,188 Equistar Chemical Funding LP, 10.125% 09/01/08 155,000 170,500 Ethyl Corp., 8.875% 05/01/10 255,000 269,025 MacDermid, Inc., 9.125% 07/15/11 300,000 334,500 Nalco Co., 7.750% 11/15/11 (a) 225,000 235,125 --------------- 1,824,763 --------------- CONSUMER PRODUCTS--2.4% Hasbro, Inc., 6.150% 07/15/08 825,000 851,813 K2, Inc., 7.375% 07/01/14 (a)(b) 120,000 122,707 Scotts Co., 6.625% 11/15/13 300,000 300,000 --------------- 1,274,520 --------------- FABRICATED METAL PRODUCTS--1.0% Kennametal, Inc., 7.200% 06/15/12 $ 490,000 $ 519,831 --------------- FOOD & KINDRED PRODUCTS--3.7% Constellation Brands, Inc.: 8.000% 02/15/08 275,000 296,313 8.125% 01/15/12 575,000 606,625 8.625% 08/01/06 25,000 26,875 Cott Beverages, Inc., 8.000% 12/15/11 950,000 1,007,000 --------------- 1,936,813 --------------- PACKAGING--4.2% Ball Corp.: 6.875% 12/15/12 895,000 907,306 7.750% 08/01/06 100,000 106,750 Owens-Brockway Glass Container, 8.875% 02/15/09 290,000 313,200 Owens-Illinois, Inc.: 7.350% 05/15/08 50,000 49,875 7.500% 05/15/10 90,000 88,200 8.100% 05/15/07 50,000 51,500 Silgan Corp., 6.750% 11/15/13 735,000 712,950 --------------- 2,229,781 --------------- PAPER & FOREST PRODUCTS--1.1% Smurfit-Stone Container Corp.: 8.250% 10/01/12 70,000 72,450 8.375% 07/01/12 125,000 130,938 9.750% 02/01/11 350,000 385,000 --------------- 588,388 --------------- PRINTING & PUBLISHING--5.3% Dex Media East LLC, 12.125% 11/15/12 345,000 402,788 Houghton Mifflin Co., 9.875% 02/01/13 165,000 165,619 Lamar Media Corp., 7.250% 01/01/13 950,000 969,000 R.H. Donnelley Finance Corp.: 10.875% 12/15/12 350,000 406,875 10.875% 12/15/12 (a) 510,000 592,875 Warner Music Group, 7.375% 04/15/14 (a) 240,000 231,000 --------------- 2,768,157 --------------- TRANSPORTATION EQUIPMENT--1.1% Wabtec Corp., 6.875% 07/31/13 (a) 605,000 595,925 --------------- MINING & ENERGY--16.0% OIL & GAS EXTRACTION--8.3% Chesapeake Energy Corp.: 7.500% 09/15/13 25,000 25,875 7.750% 01/15/15 250,000 260,000 8.125% 04/01/11 200,000 216,000 9.000% 08/15/12 550,000 618,063 </Table> See Notes to Investment Portfolio. 38 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Plains Exploration & Production Co., 7.125% 06/15/14 (a) $ 380,000 $ 384,275 Pogo Producing Co., 8.250% 04/15/11 455,000 498,225 Pride International, Inc.: 7.375% 07/15/14 (a)(b) 450,000 454,500 9.375% 05/01/07 335,000 340,025 10.000% 06/01/09 25,000 26,325 Vintage Petroleum, Inc.: 7.875% 05/15/11 300,000 308,250 8.250% 05/01/12 290,000 306,675 Westport Resources Corp., 8.250% 11/01/11 650,000 736,125 XTO Energy, Inc., 7.500% 04/15/12 190,000 213,676 --------------- 4,388,014 --------------- METALS & MINING--3.6% Arch Western Financial LLC, 6.750% 07/01/13 (a) 825,000 820,875 Peabody Energy Corp.: 5.875% 04/15/16 125,000 114,063 6.875% 03/15/13 695,000 705,425 Russel Metals, Inc., 6.375% 03/01/14 250,000 235,000 --------------- 1,875,363 --------------- OIL & GAS FIELD SERVICES--4.1% Grant Prideco, Inc.: 9.000% 12/15/09 25,000 27,188 9.625% 12/01/07 700,000 770,000 Key Energy Services, Inc., 6.375% 05/01/13 235,000 222,075 Offshore Logistics, Inc., 6.125% 06/15/13 465,000 441,750 Suburban Propane Partners, 6.875% 12/15/13 215,000 209,088 Universal Compression, Inc., 7.250% 05/15/10 500,000 515,000 --------------- 2,185,101 --------------- RETAIL TRADE--3.3% AUTOMOBILES--0.9% AutoNation, Inc., 9.000% 08/01/08 300,000 339,000 Group 1 Automotive, Inc., 8.250% 08/15/13 125,000 131,875 --------------- 470,875 --------------- MISCELLANEOUS RETAIL--1.0% Couche-Tard, 7.500% 12/15/13 405,000 401,963 Finlay Fine Jewelry Corp., 8.375% 06/01/12 (a) 130,000 135,200 --------------- 537,163 --------------- RESTAURANTS--1.4% Tricon Global Restaurants, Inc.: 8.500% 04/15/06 $ 50,000 $ 54,401 8.875% 04/15/11 575,000 692,967 --------------- 747,368 --------------- SERVICES--25.1% AMUSEMENT & RECREATION--11.0% Cinemark USA, Inc., 9.000% 02/01/13 485,000 528,650 Harrah's Operating Co., Inc., 7.875% 12/15/05 800,000 846,000 MGM Mirage: 6.000% 10/01/09 500,000 490,000 9.750% 06/01/07 475,000 520,125 Park Place Entertainment: 7.875% 03/15/10 100,000 105,000 8.875% 09/15/08 150,000 163,500 9.375% 02/15/07 750,000 815,625 Royal Caribbean Cruises: 6.750% 03/15/08 145,000 150,075 6.875% 12/01/13 100,000 98,500 8.000% 05/15/10 35,000 37,713 8.750% 02/02/11 235,000 261,438 Speedway Motorsports, Inc., 6.750% 06/01/13 450,000 453,375 Station Casinos, Inc.: 6.500% 02/01/14 570,000 545,775 6.875% 03/01/16 570,000 547,200 Sun International Hotels, 8.875% 08/15/11 215,000 229,513 --------------- 5,792,489 --------------- BUSINESS SERVICES--2.1% Iron Mountain, Inc.: 7.750% 01/15/15 175,000 174,125 8.625% 04/01/13 900,000 954,000 --------------- 1,128,125 --------------- HEALTH SERVICES--8.2% AmerisourceBergen Corp.: 7.250% 11/15/12 330,000 338,250 8.125% 09/01/08 200,000 216,500 Apogent Technologies, Inc., 6.500% 05/15/13 495,000 503,663 HCA, Inc., 6.950% 05/01/12 625,000 649,075 Omnicare, Inc.: 6.125% 06/01/13 400,000 378,000 8.125% 03/15/11 275,000 294,250 Province Healthcare Co., 7.500% 06/01/13 550,000 528,000 Select Medical Corp.: 7.500% 08/01/13 200,000 197,000 9.500% 06/15/09 425,000 453,688 Triad Hospital, Inc.: 7.000% 05/15/12 525,000 526,313 7.000% 11/15/13 250,000 239,688 --------------- 4,324,427 --------------- </Table> See Notes to Investment Portfolio. 39 <Page> <Table> <Caption> PAR VALUE --------------- --------------- HOTELS, CAMPS & LODGING--1.1% ITT Corp., 6.750% 11/15/05 $ 35,000 $ 36,225 Starwood Hotels & Resorts Worldwide, Inc.: 7.375% 05/01/07 200,000 212,500 7.875% 05/01/12 290,000 309,575 --------------- 558,300 --------------- OTHER SERVICES--1.5% Corrections Corp. of America: 7.500% 05/01/11 475,000 478,563 9.875% 05/01/09 275,000 304,563 --------------- 783,126 --------------- RENTAL SERVICES--1.2% United Rentals, Inc.: 7.000% 02/15/14 125,000 111,563 7.750% 11/15/13 555,000 523,088 --------------- 634,651 --------------- TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES--17.3% AEROSPACE--3.8% K&F Industries, 9.625% 12/15/10 545,000 598,138 L-3 Communications Corp., 7.625% 06/15/12 960,000 1,022,400 Transdigm, Inc., 8.375% 07/15/11 375,000 386,250 --------------- 2,006,788 --------------- BROADCASTING--2.0% LIN Television Corp., 6.500% 05/15/13 600,000 579,000 Sinclair Broadcast Group, Inc., 8.750% 12/15/11 450,000 480,375 --------------- 1,059,375 --------------- CABLE--5.3% DirecTV Holdings Finance, 8.375% 03/15/13 590,000 653,425 EchoStar DBS Corp., 5.750% 10/01/08 1,100,000 1,086,250 Rogers Cable, Inc.: 6.250% 06/15/13 1,075,000 1,024,335 7.875% 05/01/12 10,000 10,601 --------------- 2,774,611 --------------- ENVIRONMENTAL SERVICES--2.3% Allied Waste North America, Inc.: 6.375% 04/15/11 (a) 225,000 220,500 6.500% 11/15/10 (a) 350,000 344,750 7.375% 04/15/14 (a) 300,000 291,750 9.250% 09/01/12 150,000 167,625 Synagro Technologies, Inc., 9.500% 04/01/09 175,000 182,875 --------------- 1,207,500 --------------- MARINE TRANSPORTATION--1.9% Teekay Shipping Corp., 8.875% 07/15/11 $ 885,000 $ 977,925 --------------- TELECOMMUNICATIONS--2.0% Nextel Communications, Inc.: 5.950% 03/15/14 375,000 344,051 7.375% 08/01/15 125,000 125,938 9.375% 11/15/09 500,000 536,250 9.500% 02/01/11 60,000 67,050 --------------- 1,073,289 --------------- TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (cost of $47,679,460) 47,346,536 --------------- <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 (e) 220 --(d) Ono Finance PLC, expires 03/16/11 (a)(e) 85 --(d) --------------- -- --------------- COMMUNICATION SERVICES--0.0% UbiquiTel, Inc., expires 04/15/10 (a)(e) 50 --(d) --------------- MOTOR FREIGHT & WAREHOUSING--0.0% QDI LLC, expires 01/15/07 (a)(e) 153 923 --------------- TELECOMMUNICATIONS--0.0% Carrier 1 International SA, expires 02/19/09 (a)(e) 113 --(d) Horizon PCS, Inc., expires 10/01/10 (a)(e) 145 --(d) Jazztel PLC, expires 07/15/10 (a)(e) 60 --(d) --------------- -- --------------- TOTAL WARRANTS (cost of $5,213) 923 --------------- <Caption> SHARES --------------- COMMON STOCK (c)--0.0% TRANSPORTATION, COMMUNICATIONS, ELECTRIC, GAS & SANITARY SERVICES--0.0% POLLUTION CONTROL--0.0% Fairlane Management Corp. (e) (cost of $0) 1,200 --(d) --------------- </Table> See Notes to Investment Portfolio. 40 <Page> <Table> <Caption> PAR VALUE --------------- --------------- SHORT-TERM OBLIGATION--9.4% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/04, due 07/01/04 at 1.150%, collateralized by a U.S. Treasury Note maturing 02/15/12, market value $5,032,891 (repurchase proceeds $4,932,158) (cost of $4,932,000) $ 4,932,000 $ 4,932,000 --------------- TOTAL INVESTMENTS--99.3% (cost of $52,616,673) (f) 52,279,459 --------------- OTHER ASSETS & LIABILITIES, NET--0.7% 390,011 --------------- NET ASSETS--100.0% $ 52,669,470 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2004, these securities amounted to $4,811,405, which represents 9.1% of net assets. (b) Security purchased on a delayed delivery basis. (c) Non-income producing security. (d) Security has no value. (e) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (f) Cost for federal income tax purposes is $52,824,444. <Table> <Caption> ACRONYM NAME ------- ---- REIT Real Estate Investment Trust </Table> See Notes to Financial Statements. 41 <Page> STATEMENT OF ASSETS & LIABILITIES Columbia High Yield Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Investments, at cost $ 52,616,673 --------------- Investments, at value $ 52,279,459 Cash 317 Receivable for: Investments sold 117,575 Fund shares sold 138,883 Interest 798,393 Expense reimbursement due from Investment Advisor 10,910 Deferred Trustees' compensation plan 1,696 --------------- TOTAL ASSETS 53,347,233 --------------- LIABILITIES: Payable for: Investments purchased on a delayed delivery basis 572,061 Fund shares repurchased 51,966 Investment advisory fee 24,383 Transfer agent fee 403 Pricing and bookkeeping fees 1,973 Audit fee 15,178 Custody fee 884 Reports to shareholders 5,337 Distribution fee--Class B 2,220 Deferred Trustees' fees 1,696 Other liabilities 1,662 --------------- TOTAL LIABILITIES 677,763 --------------- NET ASSETS $ 52,669,470 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 62,085,060 Undistributed net investment income 281,204 Accumulated net realized loss (9,359,580) Net unrealized depreciation on investments (337,214) --------------- NET ASSETS $ 52,669,470 =============== CLASS A: Net assets $ 10,560,768 Shares outstanding 1,141,500 =============== Net asset value per share $ 9.25 =============== CLASS B: Net assets $ 42,108,702 Shares outstanding 4,551,230 =============== Net asset value per share $ 9.25 =============== </Table> See Notes to Financial Statements. 42 <Page> STATEMENT OF OPERATIONS Columbia High Yield Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Interest (net of foreign taxes withheld of $432) $ 1,414,781 --------------- EXPENSES: Investment advisory fee 132,195 Distribution fee--Class B 40,960 Transfer agent fee 2,486 Pricing and bookkeeping fees 12,469 Trustees' fees 3,422 Custody fee 3,219 Audit fee 14,177 Non-recurring costs (See Note 6) 2,042 Other expenses 9,972 --------------- Total Expenses 220,942 Fees and expenses waived or reimbursed by Investment Advisor (59,488) Fees waived by Distributor--Class B (31,130) Non-recurring costs assumed by Investment Advisor (See Note 6) (2,042) Custody earnings credit (271) --------------- Net Expenses 128,011 --------------- Net Investment Income 1,286,770 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on: Investments 113,128 Foreign currency transactions 544 --------------- Net realized gain 113,672 --------------- Net change in unrealized appreciation/depreciation on: Investments (1,308,815) Foreign currency translations (66) --------------- Net change in unrealized appreciation/depreciation (1,308,881) --------------- Net Loss (1,195,209) --------------- Net Increase in Net Assets from Operations $ 91,561 =============== </Table> See Notes to Financial Statements. 43 <Page> STATEMENT OF CHANGES IN NET ASSETS Columbia High Yield Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 1,286,770 $ 1,658,060 Net realized gain (loss) on investments and foreign currency transactions 113,672 (856,112) Net change in unrealized appreciation/depreciation on investments and foreign currency translations (1,308,881) 2,257,504 --------------- --------------- Net Increase from Operations 91,561 3,059,452 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (250,282) (666,816) Class B (641,908) (1,094,776) From net realized gains: Class A -- (20,678) Class B -- (48,075) --------------- --------------- Total Distributions Declared to Shareholders (892,190) (1,830,345) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 2,831,807 8,243,839 Proceeds received in connection with merger -- 12,120,783 Distributions reinvested 250,282 687,494 Redemptions (4,479,223) (11,587,253) --------------- --------------- Net Increase (Decrease) (1,397,134) 9,464,863 --------------- --------------- Class B: Subscriptions 19,763,796 13,066,846 Proceeds received in connection with merger -- 17,750,911 Distributions reinvested 641,908 1,142,851 Redemptions (6,027,028) (4,362,756) --------------- --------------- Net Increase 14,378,676 27,597,852 --------------- --------------- Net Increase from Share Transactions 12,981,542 37,062,715 --------------- --------------- Total Increase in Net Assets 12,180,913 38,291,822 NET ASSETS: Beginning of period 40,488,557 2,196,735 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $281,204 and $(113,376), respectively) $ 52,669,470 $ 40,488,557 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 303,763 896,663 Issued in connection with merger -- 1,328,306 Issued for distributions reinvested 26,517 73,952 Redemptions (476,809) (1,256,145) --------------- --------------- Net Increase (Decrease) (146,529) 1,042,776 --------------- --------------- Class B: Subscriptions 2,118,369 1,411,911 Issued in connection with merger -- 1,946,759 Issued for distributions reinvested 68,026 122,973 Redemptions (645,749) (471,059) --------------- --------------- Net Increase 1,540,646 3,010,584 --------------- --------------- </Table> See Notes to Financial Statements. 44 <Page> NOTES TO FINANCIAL STATEMENTS Columbia High Yield Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Columbia High Yield Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks a high level of income by investing primarily in non-investment grade corporate debt securities, commonly referred to as "junk" or "high yield" bonds. The Fund's secondary goal is capital appreciation. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Debt securities generally are valued by a pricing service approved by the Fund's Board of Trustees, based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Certain debt securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may vary from the actual amounts realized upon sale of the securities, and the potential variation may be greater for those securities valued using fundamental analysis. Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Foreign securities are generally valued at the last sale price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. 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 generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the values of such foreign 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 values of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. 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--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a 45 <Page> possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. DELAYED DELIVERY SECURITIES--The Fund may trade securities on other than normal settlement terms, including securities purchased or sold on a "when-issued" basis. 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 identifies cash or liquid portfolio securities as segregated with the custodian in an amount equal to the delayed delivery commitment. INCOME RECOGNITION--Interest income is recorded on the accrual basis. Premium and discount are amortized and accreted, respectively, on all debt securities. Corporate actions and dividend income are recorded on the ex-date. FOREIGN CURRENCY TRANSACTIONS--The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation 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. For financial statement purposes, 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. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis for purposes of determining the net asset value of each class. Income and expenses are allocated to each class based on the settled shares method, while realized and unrealized gains (losses) are allocated based on the relative net assets of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 1,830,345 Long-term capital gains -- </Table> * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 408,918 Unrealized depreciation (953,903) ----------- Net unrealized depreciation $ (544,985) =========== </Table> The following capital loss carryforwards, determined as of December 31, 2003, may be 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 $ 48,985 2006 52,900 2007 1,170,066 2008 2,794,418 2009 4,226,387 2010 260,165 2011 908,941 ------------ $ 9,461,862 ============ </Table> Of the capital loss carryforwards attributable to the Fund, $8,182,430 was obtained upon the Fund's merger with Colonial High Yield Securities Fund, Variable Series (See Note 7). NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The 46 <Page> acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $1 billion 0.60% Next $500 million 0.55% Over $1.5 billion 0.50% </Table> ADMINISTRATION FEE--Columbia provides administrative and other services to the Fund. The Fund is not charged a fee for these 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 Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives an annual fee based on the average daily net assets of the Fund as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- Under $50 million $ 25,000 Over $50 million but less than $200 million $ 35,000 Over $200 million but less than $500 million $ 50,000 Over $500 million but less than $1 billion $ 85,000 Over $1 billion $ 125,000 </Table> The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.056%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $5,000. For the six months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia has agreed to reimburse certain fees of the Fund at the annual rate of 0.27% of the Fund's average daily net assets. In addition, the Distributor has agreed to waive Class B distribution fees at an annual rate of 0.19% of the Class B average daily net assets. Columbia and the Distributor had contractually agreed to maintain this arrangement until April 13, 2004. Subsequent to this date Columbia and the Distributor, at their discretion, may revise or discontinue this arrangement any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended June 30, 2004, the Fund paid $672 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $19,492,702 and $7,898,195, respectively. NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES HIGH-YIELD SECURITIES--Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. Government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid to the extent there is no established secondary market. INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. FOREIGN SECURITIES--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 currency exchange or other 47 <Page> foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares as well as other industry wide issues. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $2,042 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. NOTE 7. BUSINESS COMBINATIONS AND MERGERS FUND MERGERS--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. 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 $ 1,355,526 </Table> <Table> <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 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. 48 <Page> FINANCIAL HIGHLIGHTS Columbia High Yield 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 ENDED JUNE 30, DECEMBER 31, 2004 2003 (a) --------------- --------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 9.42 $ 9.12 --------------- --------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.27 0.41 Net realized and unrealized gain (loss) on investments and foreign currency (0.24) 0.34 --------------- --------------- Total from Investment Operations 0.03 0.75 --------------- --------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.20) (0.43) From net realized gains -- (0.02) --------------- --------------- Total Distributions Declared to Shareholders (0.20) (0.45) --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 9.25 $ 9.42 =============== =============== Total return (c)(d)(e)(f) 0.29% 8.44% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (g)(h) 0.60% 0.76% Net investment income (g)(h) 5.82% 6.21% Waiver/reimbursement (h) 0.46% 0.46% Portfolio turnover rate 20%(f) 112% Net assets, end of period (000's) $ 42,109 $ 28,356 </Table> (a) For the period from commencement of operations on April 14, 2003 to December 31, 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 Investment Advisor 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. 49 <Page> PORTFOLIO MANAGERS' DISCUSSION Columbia International Fund, Variable Series / June 30, 2004 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, Penelope L. Burgess and Deborah F. Snee are the fund's portfolio managers. Mr. McAlear has managed or co-managed the fund since February 2003. He has been with the advisor since 1992. Ms. Burgess and Ms. Snee have been co-managing the fund since July 2004. Ms. Burgess has been with the advisor since 1993. Ms. Snee has been with the firm since 1999. Generally speaking, international stock markets were stronger performers than the US markets during the first six months of 2004. For example, markets in the United Kingdom, France and Switzerland all rose between 3.0% and 4.0%. Japan, however, was a standout. Its markets gained 10.8%. In this environment, the portfolio enjoyed strong returns from its investments in Japan. However, fund performance fell short of its benchmark, the MSCI All Country World ex US Index, for the six-month period that ended June 30, 2004. The fund's underperformance can be attributed to its significant commitments in the German and Thai markets. The German market was weak, particularly in the first half of the period, as investors reacted to increasing evidence that the 2003 profit recovery had begun to falter. Business and consumer confidence also began to deteriorate during this time. In the Thai market, one of the strongest performers in 2003, we began the period with a relatively large weighting. However, Thai stocks declined along with other Asian markets after China's growth showed signs of tapering off. We sold our positions in Siam Cement and Land & Houses at a profit, which significantly reduced our exposure to the Thai market. An underweight position in the strong energy sector in the United Kingdom also detracted from the portfolio's return. However, we added to our UK energy holdings in the second half of the period by adding to our position in BP and with the purchase of Shell Transport & Trading (2.5% and 0.7% of net assets, respectively). A SIZEABLE STAKE IN JAPAN AIDED PERFORMANCE The fund benefited from its large exposure in Japanese stocks (25.1% of net assets). Although Japanese stock prices pulled back somewhat in the second quarter of 2004, we believe its economic prospects are the brightest in a decade as domestic demand growth complements what began as an export-led recovery. We continued to emphasize financial holdings, such as Millea Holdings, Japan's largest insurance company; Mitsubishi Estate, a leading real estate group; and UFJ Holdings, a leading bank (1.1%, 1.0% and 0.4% of net assets, respectively). PORTFOLIO POSITIONED FOR AN INCREASE IN INTEREST RATES AND INFLATION We are optimistic about the prospects for international markets in the second half of 2004. In general, we believe earnings growth prospects are positive and current valuations are at historically attractive levels for all major foreign stock markets. However, central banks have begun to increase short-term interest rates and there are clear signs that inflation has begun to warrant more attention. As a result, we have slightly lowered the portfolio's risk exposure. We reduced the fund's holdings in emerging markets as well as its exposure to smaller companies, and we increased the fund's emphasis on financially strong companies with attractive growth prospects. In the United Kingdom, we increased our holdings in energy and consumer staples, adding positions in Unilever, one of the world's largest producers of brand-name consumer goods, and William Morrison Supermarkets, a leading supermarket chain (1.6% and 0.5% of net assets, respectively). We also added to several pharmaceuticals positions, including AstraZeneca and GlaxoSmithKline (1.2% and 1.5% of net assets, respectively). Economic and market conditions change frequently. There is no assurance that the trends described here will continue or commence. An investment in 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, 2004 and are subject to change. 50 <Page> PERFORMANCE INFORMATION Columbia International Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR 10-YEAR - ------------------------------------------------------------------- Class B (6/1/00) 2.37 25.46 -0.90 2.07 MSCI All Country World ex US Index 4.11 32.48 0.96 4.40 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 6/30/04 - ------------------------------------------------------- Class B 1.69 1.73 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 7/1/94(1) - 6/30/04 Class B: $12,279 <Table> <Caption> CLASS B SHARES MSCI ALL COUNTRY WORLD EX US INDEX 7/1/94 $ 10,000 $ 10,000 7/31/94 $ 10,258 $ 10,163 8/31/94 $ 10,568 $ 10,504 9/30/94 $ 10,258 $ 10,244 10/31/94 $ 10,309 $ 10,520 11/30/94 $ 9,846 $ 10,012 12/31/94 $ 9,691 $ 9,989 1/31/95 $ 9,124 $ 9,536 2/28/95 $ 8,970 $ 9,484 3/31/95 $ 9,124 $ 10,020 4/30/95 $ 9,381 $ 10,411 5/31/95 $ 9,381 $ 10,364 6/30/95 $ 9,330 $ 10,221 7/31/95 $ 9,845 $ 10,801 8/31/95 $ 9,845 $ 10,426 9/30/95 $ 9,999 $ 10,604 10/31/95 $ 9,844 $ 10,321 11/30/95 $ 9,999 $ 10,564 12/31/95 $ 10,257 $ 10,982 1/31/96 $ 10,205 $ 11,132 2/29/96 $ 10,205 $ 11,132 3/31/96 $ 10,413 $ 11,341 4/30/96 $ 10,985 $ 11,684 5/31/96 $ 10,881 $ 11,509 6/30/96 $ 10,933 $ 11,568 7/31/96 $ 10,517 $ 11,184 8/31/96 $ 10,674 $ 11,250 9/30/96 $ 10,778 $ 11,529 10/31/96 $ 10,517 $ 11,413 11/30/96 $ 10,934 $ 11,854 12/31/96 $ 10,833 $ 11,716 1/31/97 $ 10,888 $ 11,501 2/28/97 $ 10,999 $ 11,711 3/31/97 $ 10,999 $ 11,687 4/30/97 $ 10,944 $ 11,786 5/31/97 $ 11,774 $ 12,513 6/30/97 $ 12,382 $ 13,204 7/31/97 $ 12,437 $ 13,471 8/31/97 $ 11,573 $ 12,411 9/30/97 $ 12,016 $ 13,082 10/31/97 $ 10,964 $ 11,967 11/30/97 $ 10,631 $ 11,818 12/31/97 $ 10,479 $ 11,954 1/31/98 $ 10,832 $ 12,311 2/28/98 $ 11,362 $ 13,132 3/31/98 $ 12,069 $ 13,587 4/30/98 $ 12,304 $ 13,684 5/31/98 $ 12,304 $ 13,435 6/30/98 $ 12,010 $ 13,386 7/31/98 $ 12,363 $ 13,513 8/31/98 $ 10,555 $ 11,608 9/30/98 $ 10,083 $ 11,363 10/31/98 $ 10,849 $ 12,553 11/30/98 $ 11,438 $ 13,228 12/31/98 $ 11,836 $ 13,683 1/31/99 $ 11,836 $ 13,667 2/28/99 $ 11,599 $ 13,361 3/31/99 $ 12,014 $ 14,007 4/30/99 $ 12,724 $ 14,707 5/31/99 $ 12,132 $ 14,016 6/30/99 $ 12,842 $ 14,661 7/31/99 $ 13,316 $ 15,004 8/31/99 $ 13,434 $ 15,056 9/30/99 $ 13,493 $ 15,157 10/31/99 $ 13,848 $ 15,721 11/30/99 $ 14,736 $ 16,350 12/31/99 $ 16,638 $ 17,909 1/31/2000 $ 15,625 $ 16,937 2/29/2000 $ 16,222 $ 17,394 3/31/2000 $ 16,460 $ 18,048 4/30/2000 $ 15,207 $ 17,041 5/31/2000 $ 14,909 $ 16,605 6/30/2000 $ 14,969 $ 17,312 7/31/2000 $ 14,492 $ 16,628 8/31/2000 $ 14,670 $ 16,835 9/30/2000 $ 14,203 $ 15,900 10/31/2000 $ 13,659 $ 15,395 11/30/2000 $ 13,297 $ 14,705 12/31/2000 $ 13,566 $ 15,206 1/31/2001 $ 13,144 $ 15,435 2/28/2001 $ 12,160 $ 14,212 3/31/2001 $ 11,176 $ 13,207 4/30/2001 $ 11,738 $ 14,105 5/31/2001 $ 11,387 $ 13,716 6/30/2001 $ 11,176 $ 13,191 7/31/2001 $ 10,825 $ 12,897 8/31/2001 $ 10,755 $ 12,577 9/30/2001 $ 10,052 $ 11,242 10/31/2001 $ 10,052 $ 11,557 11/30/2001 $ 10,192 $ 12,085 12/31/2001 $ 10,263 $ 12,241 1/31/2002 $ 9,771 $ 11,717 2/28/2002 $ 9,841 $ 11,802 3/31/2002 $ 10,123 $ 12,428 4/30/2002 $ 10,264 $ 12,524 5/31/2002 $ 10,194 $ 12,661 6/30/2002 $ 10,053 $ 12,114 7/31/2002 $ 9,139 $ 10,933 8/31/2002 $ 9,210 $ 10,934 9/30/2002 $ 8,577 $ 9,775 10/31/2002 $ 8,788 $ 10,299 11/30/2002 $ 8,929 $ 10,794 12/31/2002 $ 8,872 $ 10,446 1/31/2003 $ 8,450 $ 10,080 2/28/2003 $ 8,520 $ 9,875 3/31/2003 $ 8,520 $ 9,684 4/30/2003 $ 9,083 $ 10,617 5/31/2003 $ 9,717 $ 11,293 6/30/2003 $ 9,787 $ 11,606 7/31/2003 $ 9,928 $ 11,915 8/31/2003 $ 10,069 $ 12,270 9/30/2003 $ 10,424 $ 12,613 10/31/2003 $ 11,057 $ 13,431 11/30/2003 $ 11,198 $ 13,724 12/31/2003 $ 11,995 $ 14,771 1/31/2004 $ 12,209 $ 15,009 2/29/2004 $ 12,421 $ 15,390 3/31/2004 $ 12,563 $ 15,485 4/30/2004 $ 12,137 $ 15,004 5/31/2004 $ 11,995 $ 15,052 6/30/2004 $ 12,279 $ 15,379 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. Total return performance includes changes in share price and reinvestment of all distributions. The Morgan Stanley Capital International (MSCI) All Country World ex US Index is an unmanaged index of global stock market performance that includes developed and emerging markets but excludes the United States. 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. 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. Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the oldest 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 new class of shares would be lower. (1) Inception date of class A shares (oldest existing share class) is May 2, 1994. 51 <Page> INVESTMENT PORTFOLIO Columbia International Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--98.3% CONSUMER DISCRETIONARY--15.7% AUTOMOBILES--2.6% Renault SA 14,000 $ 1,068,777 Toyota Motor Corp. 23,700 961,451 --------------- 2,030,228 --------------- HOTELS, RESTAURANTS & LEISURE--2.0% Accor SA 14,440 610,839 Carnival Corp. 11,100 521,700 Compass Group PLC 61,922 379,103 --------------- 1,511,642 --------------- HOUSEHOLD DURABLES--2.7% Funai Electric Co., Ltd. 2,800 422,722 Koninklijke Philips Electronics NV 33,700 912,356 Matsushita Electric Industrial Co., Ltd. 55,000 783,685 --------------- 2,118,763 --------------- MEDIA--4.2% Dentsu, Inc. 118 304,989 JC Decaux SA (a) 30,100 645,734 News Corp., Ltd. 45,300 398,906 Reuters Group PLC 79,300 535,715 Pearson PLC 79,000 962,492 WPP Group PLC 37,400 380,945 --------------- 3,228,781 --------------- PERSONAL PRODUCTS--0.3% Oriflame Cosmetics SA, SDR (a) 6,900 246,811 --------------- MULTILINE RETAIL--2.7% Aeon Co., Ltd. 9,300 375,161 Isetan Co., Ltd. 39,000 562,096 Seiyu Ltd. (a) 85,000 279,567 Takashimaya Co., Ltd. 43,000 497,826 Wal-Mart de Mexico SA de CV, Series V 119,600 355,093 --------------- 2,069,743 --------------- SPECIALTY RETAIL--1.2% Aoyama Trading Co., Ltd. 20,300 549,861 Nitori Co., Ltd. 6,350 398,216 --------------- 948,077 --------------- CONSUMER STAPLES--8.7% BEVERAGES--1.0% Diageo PLC 59,400 802,473 --------------- FOOD & STAPLES RETAILING--1.2% Metro AG 12,152 577,933 William Morrison Supermarkets PLC 87,325 367,943 --------------- 945,876 --------------- FOOD PRODUCTS--3.6% Nestle SA 5,811 1,550,813 Unilever PLC 121,640 1,197,034 --------------- 2,747,847 --------------- HOUSEHOLD PRODUCTS--1.5% Reckitt Benckiser PLC 40,534 1,148,857 --------------- TOBACCO--1.4% Imperial Tobacco Group PLC 51,218 $ 1,106,226 --------------- ENERGY--9.0% OIL & GAS--9.0% BP PLC 220,020 1,945,393 EnCana Corp. 25,200 1,084,895 ENI-Ente Nazionale Idrocarburi SpA 82,000 1,631,447 Norsk Hydro ASA 5,660 367,813 PTT Public Co., Ltd., NVDR 147,000 560,072 Shell Transport & Trading Co., PLC 77,100 567,319 Total SA 3,900 745,546 --------------- 6,902,485 --------------- FINANCIALS--22.8% CAPITAL MARKETS--1.1% Credit Suisse Group (a) 23,420 833,974 --------------- COMMERCIAL BANKS--13.8% Alpha Bank AE 22,440 572,364 Anglo Irish Bank Corp., PLC 33,600 526,328 Banco Popolare di Verona e Novara 23,100 397,297 Banco Popular Espanol SA 8,170 462,005 Bank of Ireland 30,352 405,228 Barclays PLC 88,170 753,345 Credit Agricole SA 37,600 917,300 Danske Bank SA 16,400 388,832 Erste Bank der Oesterreichischen Sparkassen AG 3,800 597,386 Hansabank Ltd. 38,400 322,284 HBOS PLC 29,780 369,591 Kookmin Bank, ADR (a) 10,300 323,214 Lloyds TSB Group PLC 49,650 389,865 Mitsubishi Tokyo Financial Group, Inc. 65 605,103 Mizuho Financial Group, Inc. 101 460,316 National Bank of Greece SA 17,355 376,441 Siam Commercial Bank Public Co., Ltd., Foreign Registered Shares 255,900 289,689 Skandinaviska Enskilda Banken AB 27,000 391,220 Societe Generale 4,700 400,824 Sumitomo Mitsui Financial Group, Inc. 61 418,456 Royal Bank of Scotland Group PLC 33,420 964,957 UFJ Holdings, Inc. 68 302,415 --------------- 10,634,460 --------------- DIVERSIFIED FINANCIAL SERVICES--1.9% ING Groep NV 36,457 865,226 Nomura Holdings, Inc. 42,000 625,379 --------------- 1,490,605 --------------- INSURANCE--4.3% Allianz AG, Registered Shares 6,075 660,750 AXA 18,300 404,971 Irish Life & Permanent PLC 31,800 490,135 Millea Holdings, Inc. 55 817,056 Mitsui Sumitomo Insurance Co., Ltd. 42,000 397,132 T&D Holdings, Inc. 10,800 538,573 --------------- 3,308,617 --------------- </Table> See Notes to Investment Portfolio. 52 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- REAL ESTATE--1.7% Mitsubishi Estate Co., Ltd. 63,000 $ 785,585 Sumitomo Realty & Development Co., Ltd. 43,000 534,126 --------------- 1,319,711 --------------- HEALTH CARE--10.5% HEALTH CARE EQUIPMENT & SUPPLIES--2.2% Nobel Biocare Holding AG 3,000 470,142 Smith & Nephew PLC 115,697 1,248,476 --------------- 1,718,618 --------------- PHARMACEUTICALS--8.3% AstraZeneca PLC 20,200 908,618 Chugai Pharmaceutical Co., Ltd. 72,500 1,136,790 GlaxoSmithKline PLC 58,300 1,182,986 Novartis AG, Registered Shares 21,950 970,023 Sanofi-Synthelabo SA 14,600 926,515 Takeda Pharmaceutical Co., Ltd. 11,400 501,215 Teva Pharmaceutical Industries Ltd., ADR 11,800 794,022 --------------- 6,420,169 --------------- INDUSTRIALS--10.7% BUILDING PRODUCTS--0.8% Wienerberger AG 17,200 600,046 --------------- COMMERCIAL SERVICES & SUPPLIES--1.7% Capita Group PLC 152,270 880,993 Randstad Holding NV 14,900 409,755 --------------- 1,290,748 --------------- CONSTRUCTION & ENGINEERING--2.2% JGC Corp. 37,000 358,059 Shimizu Corp. 95,000 430,380 Taisei Corp. 111,000 419,298 Vinci SA 5,290 533,767 --------------- 1,741,504 --------------- INDUSTRIAL CONGLOMERATES--1.8% Aeon Mall Co., Ltd. 1,700 101,045 Burberry Group PLC 88,400 656,780 NIWS Co., Ltd. 66 197,923 Siemens AG, Registered Shares 5,549 401,323 --------------- 1,357,071 --------------- MACHINERY--2.7% Atlas Copco AB, Class B 22,900 783,718 Heidelberger Druckmaschinen AG 12,800 422,909 Linde AG 8,400 463,802 Volvo AB, Class B 11,100 387,330 --------------- 2,057,759 --------------- ROAD & RAIL--1.0% Canadian National Railway Co. 9,273 400,186 Tokyu Corp. 79,000 404,741 --------------- 804,927 --------------- TRADING COMPANIES & DISTRIBUTORS--0.5% Mitsubishi Corp. 41,000 $ 398,445 --------------- INFORMATION TECHNOLOGY--6.9% COMPUTERS & PERIPHERALS--0.9% Fujitsu Ltd. 98,000 695,427 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--3.5% Celestica, Inc. (a) 23,600 470,625 Keyence Corp. 1,700 389,501 Kyocera Corp. 4,800 409,981 Samsung Electronics Co., Ltd., GDR 3,143 650,192 Tandberg ASA 41,000 433,697 TDK Corp. 4,400 334,233 --------------- 2,688,229 --------------- IT SERVICES--0.5% TIS, Inc. 9,100 388,880 --------------- OFFICE ELECTRONICS--1.5% Canon, Inc. 22,300 1,181,901 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.5% ARM Holdings PLC 152,278 333,104 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 5,128 42,610 --------------- 375,714 --------------- MATERIALS--4.8% CHEMICALS--3.6% BASF AG 15,600 837,967 L'Air Liquide SA 3,586 594,554 Mitsubishi Chemical Corp. 168,000 446,421 Syngenta AG 11,000 923,758 --------------- 2,802,700 --------------- CONSTRUCTION MATERIALS--0.8% Cemex SA de CV, ADR 19,600 570,360 --------------- PAPER & FOREST PRODUCTS--0.4% UPM-Kymmene Oyj 17,600 335,317 --------------- TELECOMMUNICATION SERVICES--5.8% DIVERSIFIED TELECOMMUNICATION SERVICES--3.0% Bharti Tele-Ventures Ltd. (a) 103,400 306,904 France Telecom SA 15,049 393,814 Nippon Telegraph & Telephone Corp. 81 432,143 Telefonaktiebolaget LM Ericsson, ADR (a) 39,700 1,187,824 --------------- 2,320,685 --------------- WIRELESS TELECOMMUNICATION SERVICES--2.8% Mobile Telesystems, ADR 3,100 378,200 NTT DoCoMo, Inc. 295 530,757 Vodafone Group PLC 557,900 1,225,897 --------------- 2,134,854 --------------- </Table> See Notes to Investment Portfolio. 53 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- UTILITIES--3.4% ELECTRIC UTILITIES--2.9% E.ON AG 16,474 $ 1,191,744 National Grid Transco PLC 79,850 620,454 Scottish Power PLC 53,502 387,607 --------------- 2,199,805 --------------- GAS UTILITIES--0.5% Enagas 36,300 394,437 --------------- TOTAL COMMON STOCKS (cost of $65,394,727) 75,872,772 --------------- <Caption> PAR --------------- SHORT-TERM OBLIGATION--1.6% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/04, due 07/01/04 at 1.170%, collateralized by a U.S. Treasury Note maturing 08/15/05, market value $1,306,925 (repurchase proceeds $1,277,042) (cost of $1,277,000) $ 1,277,000 1,277,000 --------------- TOTAL INVESTMENTS--99.9% (cost of $66,671,727) (b) 77,149,772 --------------- OTHER ASSETS & LIABILITIES, NET--0.1% 38,861 --------------- NET ASSETS--100.0% $ 77,188,633 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for both financial statement and federal income tax purposes is the same. <Table> <Caption> SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY VALUE INVESTMENTS - --------------------- ------------- ----------- Japan $ 19,376,856 25.1% United Kingdom 19,316,175 25.0 France 7,242,639 9.4 Switzerland 4,748,710 6.2 Germany 4,556,428 5.9 Sweden 2,750,093 3.6 Netherlands 2,187,337 2.8 Italy 2,028,743 2.6 Canada 1,955,706 2.5 Ireland 1,421,690 1.9 United States 1,277,000 1.7 Austria 1,197,432 1.6 Korea, Republic of 973,406 1.3 Greece 948,805 1.2 Mexico 925,453 1.2 Spain 856,442 1.1 Thailand 849,761 1.1 Norway 801,510 1.0 Israel 794,022 1.0 Panama 521,700 0.7 Australia 398,906 0.5 Denmark 388,832 0.5 Russian Federation 378,200 0.5 Finland 335,317 0.4 Estonia 322,284 0.4 India 306,904 0.4 Luxembourg 246,811 0.3 Taiwan 42,610 0.1 ------------- ----- $ 77,149,772 100.0% ============= ===== </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 GDR Global Depositary Receipt NVDR Non-Voting Depositary Receipt SDR Swedish Depositary Receipt </Table> See Notes to Financial Statements. 54 <Page> STATEMENT OF ASSETS & LIABILITIES Columbia International Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Investments, at cost $ 66,671,727 --------------- Investments, at value $ 77,149,772 Cash 406 Foreign currency (cost of $307,715) 308,172 Receivable for: Fund shares sold 95,643 Interest 95 Dividends 101,769 Foreign tax reclaim 40,196 Expense reimbursement due from Investment Advisor 25,894 Deferred Trustees' compensation plan 4,762 Other assets 2,708 --------------- TOTAL ASSETS 77,729,417 --------------- LIABILITIES: Payable for: Investments purchased 398,585 Fund shares repurchased 49,912 Investment advisory fee 43,787 Transfer agent fee 530 Pricing and bookkeeping fees 3,846 Reports to shareholders 6,680 Distribution fee--Class B 1,767 Deferred Trustees' fees 4,762 Foreign capital gains tax 30,915 --------------- TOTAL LIABILITIES 540,784 --------------- NET ASSETS $ 77,188,633 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 80,451,754 Undistributed net investment income 749,729 Accumulated net realized loss (14,463,492) Net unrealized appreciation (depreciation) on: Investments 10,478,045 Foreign currency translations 3,512 Foreign capital gains tax (30,915) --------------- NET ASSETS $ 77,188,633 =============== CLASS A: Net assets $ 70,631,253 Shares outstanding 40,749,838 =============== Net asset value per share $ 1.73 =============== CLASS B: Net assets $ 6,557,380 Shares outstanding 3,798,731 =============== Net asset value per share $ 1.73 =============== </Table> See Notes to Financial Statements. 55 <Page> STATEMENT OF OPERATIONS Columbia International Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 1,012,573 Interest 3,519 --------------- Total Investment Income (net of foreign taxes withheld of $134,681) 1,016,092 --------------- EXPENSES: Investment advisory fee 361,455 Distribution fee--Class B 8,427 Transfer agent fee 3,654 Pricing and bookkeeping fees 16,671 Trustees' fees 2,932 Custody fee 29,891 Non-recurring costs (See Note 7) 3,413 Other expenses 29,284 --------------- Total Expenses 455,727 Fees and expenses waived or reimbursed by Investment Advisor (84,340) Non-recurring costs assumed by Investment Advisor (See Note 7) (3,413) --------------- Net Expenses 367,974 --------------- Net Investment Income 648,118 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments 10,492,508 Foreign currency transactions (10,112) Net realized loss on the disposal of investments purchased in error (See Note 6) -- --------------- Net realized gain 10,482,396 --------------- Net change in unrealized appreciation/depreciation on: Investments (9,280,510) Foreign currency translations (44,284) Foreign capital gains tax 72,852 --------------- Net change in unrealized appreciation/depreciation (9,251,942) --------------- Net Gain 1,230,454 --------------- Net Increase in Net Assets from Operations $ 1,878,572 =============== </Table> See Notes to Financial Statements. 56 <Page> STATEMENT OF CHANGES IN NET ASSETS Columbia International Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 648,118 $ 1,145,148 Net realized gain (loss) on investments and foreign currency transactions 10,482,396 (2,602,025) Net change in unrealized appreciation/depreciation on investments, foreign currency translations and foreign capital gains tax (9,251,942) 24,758,829 --------------- --------------- Net Increase from Operations 1,878,572 23,301,952 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (780,341) Class B -- (54,564) --------------- --------------- Total Distributions Declared to Shareholders -- (834,905) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 1,711,628 22,045,783 Proceeds received in connection with merger -- 35,910,049 Distributions reinvested -- 780,341 Redemptions (7,985,954) (33,015,574) --------------- --------------- Net Increase (Decrease) (6,274,326) 25,720,599 --------------- --------------- Class B: Subscriptions 302,295 261,779 Proceeds received in connection with merger -- 5,503,084 Distributions reinvested -- 54,564 Redemptions (719,716) (888,774) --------------- --------------- Net Increase (Decrease) (417,421) 4,930,653 --------------- --------------- Net Increase (Decrease) from Share Transactions (6,691,747) 30,651,252 --------------- --------------- Total Increase (Decrease) in Net Assets (4,813,175) 53,118,299 NET ASSETS: Beginning of period 82,001,808 28,883,509 --------------- --------------- End of period (including undistributed net investment income of $749,729 and $101,611, respectively) $ 77,188,633 $ 82,001,808 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 981,880 15,774,129 Issued in connection with merger -- 28,728,067 Issued for distributions reinvested -- 468,404 Redemptions (4,624,240) (23,430,429) --------------- --------------- Net Increase (Decrease) (3,642,360) 21,540,171 --------------- --------------- Class B: Subscriptions 180,200 180,431 Issued in connection with merger -- 4,437,971 Issued for distributions reinvested -- 32,782 Redemptions (418,191) (614,950) --------------- --------------- Net Increase (Decrease) (237,991) 4,036,234 --------------- --------------- </Table> See Notes to Financial Statements. 57 <Page> NOTES TO FINANCIAL STATEMENTS Columbia International Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Columbia International Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a non-diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks long-term growth. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Forward currency exchange contracts are valued at the prevailing forward exchange rate of the underlying currencies. Foreign securities are generally valued at the last sale price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. 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 generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the values of such foreign 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 values of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. 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--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS--Forward foreign currency exchange contracts are agreements to exchange one currency for another at a future date at a specified price. These contracts are used to minimize the exposure to foreign exchange rate fluctuations during the period between trade and settlement date of the contracts. The Fund may utilize forward foreign currency exchange contracts in connection with the settlement of purchases and sales of securities. The Fund may also enter into these contracts to hedge certain other foreign currency denominated assets. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Forward currency contracts are valued daily at the forward exchange rate of the underlying currency, resulting in unrealized gains (losses) which become realized at the time the foreign 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. The use of forward currency contracts does 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. The Fund could also be exposed 58 <Page> to risk if the counterparties of the contracts are unable to fulfill the terms of the contracts. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION--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. FOREIGN CURRENCY TRANSACTIONS--The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation 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. For financial statement purposes, 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. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. 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. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 834,905 Long-term capital gains -- </Table> * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes, and excluding any unrealized appreciation and depreciation from changes in the value of assets and liabilities resulting from changes in exchange rates, was: <Table> Unrealized appreciation $ 11,756,944 Unrealized depreciation (1,278,899) ------------- Net unrealized appreciation $ 10,478,045 ============= </Table> The following capital loss carryforwards, determined as of December 31, 2003, may be 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 $ 5,245 2007 771,402 2008 668,968 2009 17,959,809 2010 3,027,462 2011 779,506 ------------ $ 23,212,392 ============ </Table> Of the capital loss carryforwards attributable to the Fund, $12,752,633 was obtained upon the Fund's merger with 59 <Page> Colonial International Horizons Fund, Variable Series, Colonial Global Equity Fund, Variable Series and Stein Roe Global Utilities Fund, Variable Series (See Note 8). NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $1 billion 0.90% Next $500 million 0.85% Over $1.5 billion 0.80% </Table> 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 Corporation ("State Street"). As a result, Columbia pays the total fees received 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 exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.042%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the six-months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia has agreed to reimburse certain fees of the Fund at the annual rate of 0.21% of the Fund's average daily net assets. Columbia had contractually agreed to maintain this arrangement until April 6, 2004. Subsequent to this date Columbia, at its discretion, may revise or discontinue this arrangement any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. For the six months ended June 30, 2004, there were no such credits. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended June 30, 2004, the Fund paid $702 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $54,091,853 and $60,878,272, respectively. NOTE 6. OTHER During the six months ended June 30, 2004, the Fund purchased shares of Compass Group PLC in error. This position was subsequently sold off at a loss of $25,637 and the Fund was reimbursed by Columbia. 60 <Page> NOTE 7. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES FOREIGN SECURITIES--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 currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. Investments in emerging market countries are subject to additional risk. The risk of foreign investments is typically increased in less developed countries. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could hurt their economies and securities markets. INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. ISSUER FOCUS--As a non-diversified fund, the Fund may invest a greater percentage of its total assets in the securities of fewer issuers than a diversified fund. The Fund may, therefore, have a greater risk of loss from a few issuers than a similar fund that invests more broadly. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $3,413 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. NOTE 8. BUSINESS COMBINATIONS AND MERGERS FUND MERGERS--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 61 <Page> 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) ---------- ------------ --------------- Colonial 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 the Columbia International Fund, Variable Series. 62 <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 YEAR ENDED DECEMBER 31, ENDED JUNE 30, ------------------------------------------------ DECEMBER 31, 2004 2003 2002 2001 2000 (a) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 1.69 $ 1.26 $ 1.46 $ 1.93 $ 2.50 ------------ ------------ ------------ ------------ ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (b) 0.01 0.03 0.01 --(c) (0.01) Net realized and unrealized gain (loss) on investments, foreign currency and foreign capital gains tax 0.03 0.41 (0.21) (0.47) (0.22) ------------ ------------ ------------ ------------ ----------- Total from Investment Operations 0.04 0.44 (0.20) (0.47) (0.23) ------------ ------------ ------------ ------------ ----------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income -- (0.01) --(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 -- (0.01) -- -- (0.34) ------------ ------------ ------------ ------------ ----------- NET ASSET VALUE, END OF PERIOD $ 1.73 $ 1.69 $ 1.26 $ 1.46 $ 1.93 ============ ============ ============ ============ =========== Total return (d)(e) 2.37%(f)(g) 35.21%(f) (13.56)% (24.35)% (9.01)%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 1.15%(i) 1.22% 1.38% 1.48% 1.33%(i) Net investment income (loss) (h) 1.39%(i) 1.71% 0.37% 0.16% (0.43)%(i) Waiver/reimbursement 0.21%(i) 0.18% -- -- -- Portfolio turnover rate 68%(g) 104% 39% 34% 76% Net assets, end of period (000's) $ 6,557 $ 6,817 $ 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 Investment Advisor 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. 63 <Page> PORTFOLIO MANAGER'S DISCUSSION Columbia Real Estate Equity Fund, Variable Series / June 30, 2004 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. The market for real estate investment trusts (REITs) reversed abruptly during the six-month period ended June 30, 2004. Following a strong jobs report on April 2, which sparked a rise in interest rates, REIT prices declined along with those of other yield-driven securities. The fund's benchmark, the NAREIT Index, lost about 21% of its value at the beginning of the second quarter. However, it experienced a modest bounce late in the period and outperformed the S&P 500 Index through the end of June. The fund succeeded in outperforming both the NAREIT Index and the S&P 500 Index for the year-to-date period. An overweight allocation to securities in the forest products sector helped the fund, as did a double weight allocation to lodging stocks, one of the better performing sectors during the second quarter. ECONOMIC RECOVERY BOOSTS RESULTS Because we believe REIT stocks remain expensive compared to other securities and relative to the value of their underlying real estate assets, we have maintained the fund's defensive positioning. During the first half of 2004, we continued to add to our investments in non-real estate related companies, including paper and forest products companies which represented 9.7% of net assets by the end of the period. (The fund's investment policy permits us to hold up to 20% of assets in non-real estate related companies.) We have begun to see positive results from this group, which we believe stands to benefit from an improving economy and healthy cash flow growth. We also increased our allocation to non-REIT lodging stocks, which benefited from a rise in business travel. EMPHASIS ON BUSINESS PROSPECTS AIDS PERFORMANCE We continued to maintain an underweight position in office and residential REITs because of poor business prospects in both sectors. Office vacancy rates remained high. Also, large unused blocks of space, which were leased prior to the 2001 recession, have put a crimp on demand. We raised our exposure to residential REITs somewhat as demand for apartments improved. However, an oversupply of units--the result of overbuilding--has kept us cautious about the sector. We began the period with an overweight allocation in retail and industrial REITs, which benefited from positive prospects linked to an improving economy. We have since reduced our exposure to both sectors. We moved to an underweight relative to our index in shopping mall REITs because we believed business growth rates had peaked. Our move was well timed because these stocks performed poorly during the second quarter of 2004. We also trimmed our position in industrial REITs because we believed the securities were priced at full value. REIT STOCKS REMAIN EXPENSIVE Because the April downturn in the REIT market was not long-lived, valuations remain high. The sector also faces the additional challenges of slow property cash flow growth and higher relative dividend tax rates. Therefore, we plan to continue to position the portfolio away from REIT stocks and towards other real-estate related issues, particularly in sectors that are linked to a recovering economy. We also continue to carefully monitor the sectors of the REIT market for positive and negative changes in light of the improving economic situation. We believe our invest-ment portfolio should benefit from the improved economic conditions we expect going forward. Economic and market conditions 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, 2004, and are subject to change. 64 <Page> PERFORMANCE INFORMATION Columbia Real Estate Equity Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR LIFE - ---------------------------------------------------------------- Class B (4/14/03) 5.93 26.58 12.39 8.68 NAREIT Index(1) 5.51 27.06 14.51 9.14 S&P 500 Index(2) 3.44 19.11 -2.20 2.78 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 6/30/04 - --------------------------------------------------------------- Class B 10.99 11.61 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 3/3/98(3) - 6/30/04 Class B: $16,932 <Table> <Caption> CLASS B SHARES NAREIT INDEX S&P 500 Index 3/3/98 $ 10,000 $ 10,000 $ 10,000 3/31/98 $ 10,350 $ 10,179 $ 10,485 4/30/98 $ 9,981 $ 9,847 $ 10,591 5/31/98 $ 9,931 $ 9,778 $ 10,409 6/30/98 $ 9,908 $ 9,712 $ 10,831 7/31/98 $ 9,356 $ 9,081 $ 10,717 8/31/98 $ 8,664 $ 8,224 $ 9,167 9/30/98 $ 9,079 $ 8,690 $ 9,755 10/31/98 $ 8,917 $ 8,529 $ 10,548 11/30/98 $ 9,079 $ 8,654 $ 11,187 12/31/98 $ 9,044 $ 8,436 $ 11,831 1/31/99 $ 8,889 $ 8,260 $ 12,326 2/28/99 $ 8,827 $ 8,066 $ 11,942 3/31/99 $ 8,753 $ 8,029 $ 12,420 4/30/99 $ 9,406 $ 8,791 $ 12,901 5/31/99 $ 9,675 $ 8,985 $ 12,596 6/30/99 $ 9,443 $ 8,839 $ 13,295 7/31/99 $ 9,077 $ 8,558 $ 12,880 8/31/99 $ 9,066 $ 8,450 $ 12,817 9/30/99 $ 8,645 $ 8,128 $ 12,466 10/31/99 $ 8,454 $ 7,928 $ 13,255 11/30/99 $ 8,370 $ 7,799 $ 13,524 12/31/99 $ 8,670 $ 8,046 $ 14,321 1/31/2000 $ 8,702 $ 8,073 $ 13,602 2/29/2000 $ 8,487 $ 7,977 $ 13,345 3/31/2000 $ 8,925 $ 8,239 $ 14,650 4/30/2000 $ 9,466 $ 8,793 $ 14,209 5/31/2000 $ 9,552 $ 8,879 $ 13,918 6/30/2000 $ 9,874 $ 9,107 $ 14,262 7/31/2000 $ 10,772 $ 9,903 $ 14,039 8/31/2000 $ 10,323 $ 9,501 $ 14,911 9/30/2000 $ 10,731 $ 9,804 $ 14,124 10/31/2000 $ 10,234 $ 9,379 $ 14,064 11/30/2000 $ 10,521 $ 9,499 $ 12,956 12/31/2000 $ 11,145 $ 10,168 $ 13,020 1/31/2001 $ 11,023 $ 10,274 $ 13,482 2/28/2001 $ 10,866 $ 10,109 $ 12,252 3/31/2001 $ 10,659 $ 10,207 $ 11,475 4/30/2001 $ 11,041 $ 10,451 $ 12,367 5/31/2001 $ 11,254 $ 10,704 $ 12,450 6/30/2001 $ 11,776 $ 11,331 $ 12,147 7/31/2001 $ 11,527 $ 11,106 $ 12,028 8/31/2001 $ 11,900 $ 11,512 $ 11,275 9/30/2001 $ 11,101 $ 11,035 $ 10,364 10/31/2001 $ 10,688 $ 10,719 $ 10,562 11/30/2001 $ 11,352 $ 11,309 $ 11,372 12/31/2001 $ 11,668 $ 11,584 $ 11,472 1/31/2002 $ 11,737 $ 11,608 $ 11,305 2/28/2002 $ 11,979 $ 11,832 $ 11,087 3/31/2002 $ 12,477 $ 12,542 $ 11,504 4/30/2002 $ 12,569 $ 12,648 $ 10,807 5/31/2002 $ 12,812 $ 12,819 $ 10,727 6/30/2002 $ 13,010 $ 13,169 $ 9,963 7/31/2002 $ 12,277 $ 12,480 $ 9,187 8/31/2002 $ 12,149 $ 12,455 $ 9,246 9/30/2002 $ 11,642 $ 11,977 $ 8,241 10/31/2002 $ 11,256 $ 11,401 $ 8,967 11/30/2002 $ 11,852 $ 11,938 $ 9,495 12/31/2002 $ 11,966 $ 12,026 $ 8,937 1/31/2003 $ 11,643 $ 11,676 $ 8,703 2/28/2003 $ 11,768 $ 11,869 $ 8,573 3/31/2003 $ 11,988 $ 12,106 $ 8,656 4/30/2003 $ 12,510 $ 12,639 $ 9,369 5/31/2003 $ 13,121 $ 13,402 $ 9,863 6/30/2003 $ 13,377 $ 13,694 $ 9,989 7/31/2003 $ 14,051 $ 14,427 $ 10,165 8/31/2003 $ 14,288 $ 14,505 $ 10,363 9/30/2003 $ 14,633 $ 14,998 $ 10,253 10/31/2003 $ 14,820 $ 15,270 $ 10,834 11/30/2003 $ 15,397 $ 15,935 $ 10,929 12/31/2003 $ 15,985 $ 16,493 $ 11,502 1/31/2004 $ 16,479 $ 17,206 $ 11,713 2/29/2004 $ 16,871 $ 17,507 $ 11,876 3/31/2004 $ 17,603 $ 18,475 $ 11,697 4/30/2004 $ 15,503 $ 15,781 $ 11,513 5/31/2004 $ 16,393 $ 16,906 $ 11,671 6/30/2004 $ 16,932 $ 17,404 $ 11,894 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. Total return performance includes changes in share price and reinvestment of all distributions. The National Association of Real Estate Investment Trusts (NAREIT) Index is an unmanaged index that reflects performance of all publicly traded equity REITs. 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. 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. Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the oldest 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 new class of shares would be lower. (1) Index performance for the life of the fund is from February 28, 1998. (2) Index performance for the life of the fund is from March 3, 1998. (3) Inception date of class A shares (oldest existing share class). Index performance for the NAREIT Index is from February 28, 1998, and index performance for the S&P 500 Index is from March 3, 1998. 65 <Page> INVESTMENT PORTFOLIO Columbia Real Estate Equity Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--94.4% CONSUMER DISCRETIONARY--10.2% HOTELS, RESTAURANTS & LEISURE--10.2% Hilton Hotels Corp. 8,625 $ 160,943 La Quinta Corp. (a) 7,610 63,924 Marriott International, Inc. 1,940 96,767 Starwood Hotels & Resorts Worldwide, Inc. 1,885 84,542 --------------- 406,176 --------------- FINANCIALS--71.5% REAL ESTATE--71.5% Alexandria Real Estate Equities, Inc., REIT 2,530 143,653 American Financial Realty Trust, REIT 2,050 29,295 Apartment Investment & Management Co., Class A, REIT 1,270 39,535 Archstone-Smith Trust, REIT 2,540 74,498 AvalonBay Communities, Inc., REIT 1,400 79,128 Boston Properties, Inc., REIT 985 49,329 Brookfield Properties Corp. 1,800 51,750 CenterPoint Properties Corp., REIT 975 74,831 Chelsea Property Group, Inc., REIT 820 53,480 Corporate Office Properties Trust, REIT 1,600 39,760 Cousins Properties, Inc., REIT 5,300 174,635 Duke Realty Corp., REIT 2,900 92,249 Equity Office Properties Trust, REIT 3,836 104,339 Equity Residential, REIT 5,740 170,650 Essex Property Trust, Inc., REIT 400 27,340 General Growth Properties, Inc., REIT 5,300 156,721 iStar Financial, Inc., REIT 5,100 204,000 Kimco Realty Corp., REIT 1,817 82,674 Liberty Property Trust, REIT 2,960 119,022 Newcastle Investment Corp., REIT 2,655 79,517 Pan Pacific Retail Properties, Inc., REIT 1,240 62,645 ProLogis Trust, REIT 4,380 144,190 Public Storage, Inc., REIT 2,530 116,405 Regency Centers Corp., REIT 2,960 126,984 Rouse Co., REIT 2,660 126,350 Simon Property Group, Inc., REIT 3,800 195,396 SL Green Realty Corp., REIT 1,060 49,608 St. Joe Co. 1,960 77,812 United Dominion Realty Trust, Inc., REIT 2,200 43,516 Vornado Realty Trust, REIT 1,180 67,390 --------------- 2,856,702 --------------- MATERIALS--12.7% CONTAINERS & PACKAGING--3.0% Smurfit-Stone Container Corp. (a) 4,000 $ 79,800 Temple-Inland, Inc. 560 38,780 --------------- 118,580 --------------- PAPER & FOREST PRODUCTS--9.7% Bowater, Inc. 3,555 147,852 International Paper Co. 2,960 132,312 MeadWestvaco Corp. 2,205 64,805 Weyerhaeuser Co. 670 42,290 --------------- 387,259 --------------- TOTAL COMMON STOCKS (cost of $3,092,114) 3,768,717 --------------- INCOME DEPOSIT SECURITY--0.9% CONSUMER DISCRETIONARY--0.9% HOTELS, RESTAURANTS & LEISURE--0.9% Volume Services America Holdings, Inc. (cost of $40,971) 2,700 36,531 --------------- <Caption> PAR --------------- SHORT-TERM OBLIGATION--4.7% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/04, due 07/01/04 at 1.150%, collateralized by a U.S. Treasury Note maturing 02/15/12, market value $193,573 (repurchase proceeds $186,006) (cost of $186,000) $ 186,000 186,000 TOTAL INVESTMENTS--100.0% (cost of $3,319,085) (b) 3,991,248 --------------- OTHER ASSETS & LIABILITIES, NET--0.0% (55) --------------- NET ASSETS--100.0% $ 3,991,193 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $3,340,660. <Table> <Caption> ACRONYM NAME ------- ---- REIT Real Estate Investment Trust </Table> See Notes to Financial Statements. 66 <Page> STATEMENT OF ASSETS & LIABILITIES Columbia Real Estate Equity Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Investments, at cost $ 3,319,085 --------------- Investments, at value $ 3,991,248 Cash 5 Receivable for: Fund shares sold 10,473 Interest 6 Dividends 11,906 Expense reimbursement due from Investment Advisor 2,879 Deferred Trustees' compensation plan 1,094 --------------- TOTAL ASSETS 4,017,611 --------------- LIABILITIES: Payable for: Fund shares repurchased 552 Investment advisory fee 2,383 Administration fee 268 Transfer agent fee 403 Pricing and bookkeeping fees 2,016 Audit fee 16,837 Custody fee 189 Distribution fee--Class B 573 Deferred Trustees' fees 1,094 Other liabilities 2,103 --------------- TOTAL LIABILITIES 26,418 --------------- NET ASSETS $ 3,991,193 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 3,099,718 Undistributed net investment income 12,023 Accumulated net realized gain 207,289 Net unrealized appreciation on investments 672,163 --------------- NET ASSETS $ 3,991,193 =============== CLASS A: Net assets $ 1,246,193 Shares outstanding 107,597 =============== Net asset value per share $ 11.58 =============== CLASS B: Net assets $ 2,745,000 Shares outstanding 236,482 =============== Net asset value and per share $ 11.61 =============== </Table> See Notes to Financial Statements. 67 <Page> STATEMENT OF OPERATIONS Columbia Real Estate Equity Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 57,645 Interest 952 --------------- Total Investment Income (net of foreign taxes withheld of $73) 58,597 --------------- EXPENSES: Investment advisory fee 14,077 Administration fee 1,595 Distribution fee--Class B 3,289 Transfer agent fee 2,486 Pricing and bookkeeping fees 12,432 Trustees' fees 2,951 Custody fee 2,033 Audit fee 8,125 Non-recurring costs (See Note 6) 168 Other expenses 4,330 --------------- Total Expenses 51,486 Fees and expenses waived or reimbursed by Investment Advisor (16,893) Non-recurring costs assumed by Investment Advisor (See Note 6) (168) Custody earnings credit (16) --------------- Net Expenses 34,409 --------------- Net Investment Income 24,188 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 158,489 Net change in unrealized appreciation/depreciation on investments 17,880 --------------- Net Gain 176,369 --------------- Net Increase in Net Assets from Operations $ 200,557 =============== </Table> See Notes to Financial Statements. 68 <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: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 24,188 $ 20,974 Net realized gain on investments 158,489 540,776 Net change in unrealized appreciation/depreciation on investments 17,880 323,613 --------------- --------------- Net Increase from Operations 200,557 885,363 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (3,815) (6,669) Class B (7,565) (12,646) From net realized gains: Class A -- (127,579) Class B -- (344,419) --------------- --------------- Total Distributions Declared to Shareholders (11,380) (491,313) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 372,832 689,817 Proceeds received in connection with merger -- 1,269 Distributions reinvested 3,815 137,660 Redemptions (107,600) (1,058,627) --------------- --------------- Net Increase (Decrease) 269,047 (229,881) --------------- --------------- Class B: Subscriptions 506,050 429,718 Proceeds received in connection with merger -- 1,868,312 Distributions reinvested 7,565 353,653 Redemptions (335,483) (440,174) --------------- --------------- Net Increase 178,132 2,211,509 --------------- --------------- Net Increase from Share Transactions 447,179 1,981,628 --------------- --------------- Total Increase in Net Assets 636,356 2,375,678 NET ASSETS: Beginning of period 3,354,837 979,159 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $12,023 and $(785), respectively) $ 3,991,193 $ 3,354,837 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 33,354 50,234 Issued in connection with merger -- 129 Issued for distributions reinvested 331 12,550 Redemptions (9,512) (81,080) --------------- --------------- Net Increase (Decrease) 24,173 (18,167) --------------- --------------- Class B: Subscriptions 43,948 38,575 Issued in connection with merger -- 190,256 Issued for distributions reinvested 655 32,073 Redemptions (30,210) (38,815) --------------- --------------- Net Increase 14,393 222,089 --------------- --------------- </Table> See Notes to Financial Statements. 69 <Page> NOTES TO FINANCIAL STATEMENTS Columbia Real Estate Equity Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Columbia Real Estate Equity Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks to provide capital appreciation and above-average current income. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION--Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date. The Fund estimates components of distributions from Real Estate Investment Trusts ("REITs"). Distributions received in excess of income are recorded as a reduction of the cost of the related investments. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 165,123 Long-term capital gains 326,190 </Table> * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. 70 <Page> Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 683,458 Unrealized depreciation (32,870) ---------- Net unrealized appreciation $ 650,588 ========== </Table> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $500 million 0.75% Next $500 million 0.70% Over $1 billion 0.65% </Table> ADMINISTRATION FEE--Columbia provides administrative and other services to the Fund for a monthly administration fee based on the Fund's average daily net assets at the following annual rates: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $1 billion 0.085% Next $1.5 billion 0.078% Over $2.5 billion 0.073% </Table> 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 Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives an annual fee based on the average daily net assets of the Fund as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- Under $50 million $ 25,000 Over $50 million but less than $200 million $ 35,000 Over $200 million but less than $500 million $ 50,000 Over $500 million but less than $1 billion $ 85,000 Over $1 billion $ 125,000 </Table> The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.662%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $5,000. For the six-months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was 0.13%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia has agreed to reimburse certain fees of the Fund at the annual rate of 0.90% of the Fund's average daily net assets. Columbia had contractually agreed to maintain this arrangement until April 13, 2004. Subsequent to this date Columbia, at its discretion, may revise or discontinue this arrangement any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended June 30, 2004, the Fund paid $646 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $1,088,228 and $742,031, respectively. 71 <Page> NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $168 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. NOTE 7. BUSINESS COMBINATIONS AND MERGERS FUND MERGERS--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. Also on April 14, 2003, the 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 </Table> <Table> <Caption> NET ASSETS OF GALAXY VIP NET ASSETS NET ASSETS OF COLUMBIA OF CRABBE HUSON GALAXY VIP COLUMBIA REAL ESTATE REAL ESTATE REAL ESTATE EQUITY INVESTMENT EQUITY FUND II FUND II FUND, VARIABLE IMMEDIATELY PRIOR TO SERIES PRIOR TO AFTER COMBINATION COMBINATION 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 changes in net assets and financial highlights for the Fund represent the historical operations of the Galaxy VIP Columbia Real Estate Equity Fund II for periods prior to April 14, 2003. 72 <Page> FINANCIAL HIGHLIGHTS Columbia Real Estate 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 ENDED JUNE 30, DECEMBER 31, 2004 2003 (a) --------------- --------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.99 $ 9.82 INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.07 0.05 Net realized and unrealized gain on investments 0.58 2.97 --------------- --------------- Total from Investment Operations 0.65 3.02 --------------- --------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.03) (0.05) From net realized gains -- (1.80) --------------- --------------- Total Distributions Declared to Shareholders (0.03) (1.85) --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 11.61 $ 10.99 =============== =============== Total return (c)(d)(e)(f) 5.93% 30.75% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (g)(h) 1.91% 3.13% Net investment income (g)(h) 1.20% 0.64% Waiver/reimbursement (h) 0.90% 0.90% Portfolio turnover rate 20%(f) 152% Net assets, end of period (000's) $ 2,745 $ 2,441 </Table> (a) For the period from commencement of operations on April 14, 2003 to December 31, 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 Investment Advisor 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. 73 <Page> PORTFOLIO MANAGERS' DISCUSSION Liberty Equity Fund, Variable Series / June 30, 2004 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. Paul Berlinguet and Ed Hickey have co-managed the fund since October 2003. Mr. Berlinguet is co-head of the large-cap growth team for Columbia Management Advisors, Inc. He joined the advisor in October 2003. Mr. Hickey has been with the advisor since 1998. Stocks made modest gains during the first half of 2004. Concerns about inflation, rising interest rates and geopolitical issues overshadowed corporate earnings growth that exceeded analysts' expectations. In this environment, stock selection generally contributed to the portfolio's performance, but sector allocation was a slight negative. The portfolio's emphasis on cyclical companies, which tend to benefit from an economic recovery, also held back total return. A relatively light exposure to stable growth companies, compared to the S&P 500 Index, also detracted from the fund's return. Stable growth stocks performed better than the US stock market as a whole. MATURING ECONOMIC RECOVERY SPARKED A MOVE TO QUALITY During the period, investors shifted their focus away from lower-quality stocks to higher-quality names. This change in emphasis is typical during the later stage of an economic rebound. As economic recoveries mature, corporate earnings tend to grow at a slower and steadier pace. Investors generally gravitate to the highest quality companies with proven records of earnings and long-term positive performance. When data began to indicate that the rapid acceleration phase of the current economic rebound could be coming to an end, we sought to improve the quality of our holdings. We emphasized established companies with solid competitive positions, consistent earnings, good balance sheets and strong management teams. SEEKING GROWTH IN INFORMATION TECHNOLOGY, HEALTH CARE AND CONSUMER STAPLES Information technology was the largest sector weight in the portfolio. After producing strong gains for more than a year, information technology stocks took a breather and their presence in the portfolio detracted from total return. However, we maintained an overweight position in this sector because we believe the companies in the portfolio should benefit if capital spending picks up later in the year. Stock selection in the health care sector was the biggest positive contributor to performance. In this area, we sought companies that are likely to increase their market share and enhance their growth and valuations by developing new products or services that are more effective than existing products. Examples included Teva Pharmaceutical Industries, a generic pharmaceutical company; Alcon, a producer of eye-care products; and Caremark Rx, a mail-order prescription drug company (2.1%, 2.0% and 1.6% of net assets, respectively). All of these companies generated double-digit returns during the period. In the consumer staples area, good performance came from companies whose growth prospects were greater than what was perceived by the market. We favored leading companies with new products and/or business initiatives that should enable them to accelerate their existing growth rates. Such companies included Costco Wholesale, Hershey Foods and Alberto-Culver (1.7%, 0.5% and 0.6% of net assets, respectively). A POSITIVE OUTLOOK DESPITE SOME UNCERTAINTY As we look ahead, we expect the economy to continue to expand at a respectable pace. We also believe that earnings have the potential to grow, but at a slower rate than over the past few quarters. We believe that interest rates will continue to rise slowly. While these factors are positive for the stock market, concerns exist. The threat of global terrorism and the uncertainty about the outcome of the US presidential election are tied to economic growth. In weighing all of these factors, we determined that the best approach is to maintain a more defensive portfolio, one that emphasizes diversification among leading growth companies in the most attractive economic sectors. Economic and market conditions 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, 2004, and are subject to change. 74 <Page> PERFORMANCE INFORMATION Liberty Equity Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR 10-YEAR - --------------------------------------------------------------------------- Class B (4/14/03) 3.21 14.47 -3.49 9.14 S&P 500 Index 3.44 19.11 -2.20 11.83 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 6/30/04 - ------------------------------------------------------- Class B 14.33 14.79 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 7/1/94(1) - 6/30/04 Class B: $23,974 <Table> <Caption> CLASS B SHARES S&P 500 INDEX 7/1/94 $ 10,000 $ 10,000 7/31/94 $ 10,208 $ 10,328 8/31/94 $ 10,565 $ 10,751 9/30/94 $ 10,360 $ 10,488 10/31/94 $ 10,600 $ 10,724 11/30/94 $ 10,341 $ 10,334 12/31/94 $ 10,419 $ 10,487 1/31/95 $ 10,659 $ 10,758 2/28/95 $ 10,980 $ 11,178 3/31/95 $ 11,288 $ 11,508 4/30/95 $ 11,539 $ 11,846 5/31/95 $ 11,881 $ 12,320 6/30/95 $ 12,102 $ 12,605 7/31/95 $ 12,444 $ 13,024 8/31/95 $ 12,304 $ 13,057 9/30/95 $ 12,545 $ 13,608 10/31/95 $ 12,626 $ 13,559 11/30/95 $ 13,123 $ 14,154 12/31/95 $ 13,208 $ 14,427 1/31/96 $ 13,563 $ 14,917 2/29/96 $ 13,593 $ 15,056 3/31/96 $ 13,844 $ 15,201 4/30/96 $ 14,008 $ 15,424 5/31/96 $ 14,365 $ 15,822 6/30/96 $ 14,339 $ 15,882 7/31/96 $ 13,920 $ 15,180 8/31/96 $ 14,238 $ 15,501 9/30/96 $ 14,881 $ 16,373 10/31/96 $ 15,148 $ 16,825 11/30/96 $ 16,205 $ 18,097 12/31/96 $ 16,045 $ 17,739 1/31/97 $ 16,868 $ 18,847 2/28/97 $ 16,775 $ 18,994 3/31/97 $ 16,455 $ 18,214 4/30/97 $ 17,600 $ 19,301 5/31/97 $ 18,313 $ 20,477 6/30/97 $ 18,900 $ 21,394 7/31/97 $ 20,318 $ 23,097 8/31/97 $ 19,489 $ 21,803 9/30/97 $ 20,222 $ 22,998 10/31/97 $ 19,662 $ 22,230 11/30/97 $ 20,222 $ 23,259 12/31/97 $ 20,495 $ 23,660 1/31/98 $ 20,630 $ 23,922 2/28/98 $ 21,816 $ 25,647 3/31/98 $ 22,584 $ 26,960 4/30/98 $ 22,803 $ 27,232 5/31/98 $ 22,270 $ 26,764 6/30/98 $ 22,787 $ 27,851 7/31/98 $ 22,440 $ 27,555 8/31/98 $ 18,690 $ 23,571 9/30/98 $ 20,139 $ 25,082 10/31/98 $ 22,163 $ 27,121 11/30/98 $ 23,369 $ 28,764 12/31/98 $ 25,310 $ 30,421 1/31/99 $ 26,485 $ 31,693 2/28/99 $ 25,312 $ 30,707 3/31/99 $ 26,673 $ 31,935 4/30/99 $ 27,242 $ 33,171 5/31/99 $ 26,503 $ 32,389 6/30/99 $ 28,645 $ 34,186 7/31/99 $ 27,711 $ 33,119 8/31/99 $ 27,431 $ 32,957 9/30/99 $ 27,165 $ 32,054 10/31/99 $ 28,607 $ 34,083 11/30/99 $ 29,849 $ 34,775 12/31/99 $ 32,195 $ 36,823 1/31/2000 $ 30,920 $ 34,975 2/29/2000 $ 31,820 $ 34,314 3/31/2000 $ 35,037 $ 37,670 4/30/2000 $ 34,385 $ 36,536 5/31/2000 $ 32,993 $ 35,787 6/30/2000 $ 34,052 $ 36,671 7/31/2000 $ 33,561 $ 36,099 8/31/2000 $ 36,122 $ 38,340 9/30/2000 $ 34,435 $ 36,316 10/31/2000 $ 33,874 $ 36,164 11/30/2000 $ 30,541 $ 33,314 12/31/2000 $ 31,610 $ 33,477 1/31/2001 $ 32,390 $ 34,666 2/28/2001 $ 29,025 $ 31,504 3/31/2001 $ 26,552 $ 29,507 4/30/2001 $ 28,562 $ 31,799 5/31/2001 $ 28,851 $ 32,012 6/30/2001 $ 27,483 $ 31,234 7/31/2001 $ 27,096 $ 30,928 8/31/2001 $ 25,351 $ 28,992 9/30/2001 $ 22,897 $ 26,650 10/31/2001 $ 23,689 $ 27,159 11/30/2001 $ 25,482 $ 29,242 12/31/2001 $ 25,869 $ 29,499 1/31/2002 $ 24,868 $ 29,068 2/28/2002 $ 24,092 $ 28,507 3/31/2002 $ 25,757 $ 29,579 4/30/2002 $ 24,142 $ 27,787 5/31/2002 $ 23,560 $ 27,581 6/30/2002 $ 21,398 $ 25,617 7/31/2002 $ 19,686 $ 23,622 8/31/2002 $ 19,816 $ 23,775 9/30/2002 $ 17,507 $ 21,191 10/31/2002 $ 19,058 $ 23,056 11/30/2002 $ 20,206 $ 24,414 12/31/2002 $ 18,723 $ 22,981 1/31/2003 $ 18,204 $ 22,379 2/28/2003 $ 18,042 $ 22,043 3/31/2003 $ 18,260 $ 22,257 4/30/2003 $ 19,703 $ 24,091 5/31/2003 $ 20,806 $ 25,360 6/30/2003 $ 20,952 $ 25,685 7/31/2003 $ 21,212 $ 26,137 8/31/2003 $ 21,634 $ 26,647 9/30/2003 $ 21,179 $ 26,364 10/31/2003 $ 22,185 $ 27,856 11/30/2003 $ 22,460 $ 28,101 12/31/2003 $ 23,240 $ 29,574 1/31/2004 $ 23,614 $ 30,118 2/29/2004 $ 23,921 $ 30,537 3/31/2004 $ 23,646 $ 30,076 4/30/2004 $ 23,225 $ 29,603 5/31/2004 $ 23,518 $ 30,009 6/30/2004 $ 23,974 $ 30,582 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the oldest 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 new class of shares would be lower. (1) Inception date of class A shares (oldest existing share class) is January 11, 1993. 75 <Page> INVESTMENT PORTFOLIO Liberty Equity Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--100.0% CONSUMER DISCRETIONARY--12.2% HOTELS, RESTAURANTS & LEISURE--0.9% Wendy's International, Inc. 9,700 $ 337,948 --------------- INTERNET & CATALOG RETAIL--0.7% eBay, Inc. (a) 3,000 275,850 --------------- MEDIA--2.9% News Corp., Ltd., ADR 14,650 481,692 Viacom, Inc., Class B 18,530 661,892 --------------- 1,143,584 --------------- MULTILINE RETAIL--3.2% Target Corp. 18,770 797,162 Wal-Mart Stores, Inc. 8,660 456,902 --------------- 1,254,064 --------------- SPECIALTY RETAIL--4.5% Bed Bath & Beyond, Inc. (a) 8,900 342,205 Home Depot, Inc. 17,210 605,792 Lowe's Companies, Inc. 15,480 813,474 --------------- 1,761,471 --------------- CONSUMER STAPLES--11.1% BEVERAGES--3.5% Coca-Cola Co. 13,040 658,259 PepsiCo, Inc. 12,870 693,436 --------------- 1,351,695 --------------- FOOD & STAPLES RETAILING--3.3% Costco Wholesale Corp. 15,690 644,388 Walgreen Co. 17,710 641,279 --------------- 1,285,667 --------------- FOOD PRODUCTS--1.3% Bunge Ltd. 7,670 298,670 Hershey Foods Corp. 4,480 207,290 --------------- 505,960 --------------- HOUSEHOLD PRODUCTS--2.5% Procter & Gamble Co. 18,000 979,920 --------------- PERSONAL PRODUCTS--0.5% Alberto-Culver Co. 4,240 212,593 --------------- ENERGY--6.1% ENERGY EQUIPMENT & SERVICES--2.4% Baker Hughes, Inc. 12,500 470,625 National-Oilwell, Inc. (a) 14,700 462,903 --------------- 933,528 --------------- OIL & GAS--3.7% BP PLC, ADR 18,800 1,007,116 EOG Resources, Inc. 7,500 447,825 --------------- 1,454,941 --------------- FINANCIALS--19.4% COMMERCIAL BANKS--4.7% Bank of New York Co., Inc. 20,000 $ 589,600 Wachovia Corp. 8,900 396,050 Wells Fargo & Co. 14,800 847,004 --------------- 1,832,654 --------------- DIVERSIFIED FINANCIAL SERVICES--9.9% Citigroup, Inc. 29,700 1,381,050 Fannie Mae 5,950 424,592 Goldman Sachs Group, Inc. 10,000 941,600 J.P. Morgan Chase & Co. 18,100 701,737 Merrill Lynch & Co., Inc. 7,360 397,293 --------------- 3,846,272 --------------- INSURANCE--4.8% American International Group, Inc. 12,500 891,000 Marsh & McLennan Companies, Inc. 12,500 567,250 Willis Group Holdings Ltd. 11,100 415,695 --------------- 1,873,945 --------------- HEALTH CARE--15.2% BIOTECHNOLOGY--1.4% Amgen, Inc. (a) 10,200 556,614 --------------- HEALTH CARE EQUIPMENT & SUPPLIES--4.6% Alcon, Inc. 10,000 786,500 Boston Scientific Corp. (a) 8,940 382,632 Medtronic, Inc. 12,670 617,282 --------------- 1,786,414 --------------- HEALTH CARE PROVIDERS & SERVICES--3.0% Caremark Rx, Inc. (a) 19,020 626,519 WellPoint Health Networks, Inc. (a) 5,000 560,050 --------------- 1,186,569 --------------- PHARMACEUTICALS--6.2% Johnson & Johnson 9,000 501,300 Pfizer, Inc. 31,460 1,078,449 Teva Pharmaceutical Industries Ltd., ADR 12,390 833,723 --------------- 2,413,472 --------------- INDUSTRIALS--13.0% AEROSPACE & DEFENSE--4.2% Boeing Co. 10,300 526,227 United Technologies Corp. 12,100 1,106,908 --------------- 1,633,135 --------------- COMMERCIAL SERVICES & SUPPLIES--1.5% Cendant Corp. 24,100 589,968 --------------- </Table> See Notes to Investment Portfolio. 76 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- INDUSTRIAL CONGLOMERATES--4.8% 3M Co. 3,880 $ 349,239 General Electric Co. 46,680 1,512,432 --------------- 1,861,671 --------------- MACHINERY--2.5% Illinois Tool Works, Inc. 10,140 972,325 --------------- INFORMATION TECHNOLOGY--21.8% COMMUNICATIONS EQUIPMENT--3.5% Cisco Systems, Inc. (a) 57,800 1,369,860 --------------- COMPUTERS & PERIPHERALS--4.4% Dell, Inc. (a) 24,300 870,426 International Business Machines Corp. 3,800 334,970 Lexmark International, Inc., Class A (a) 5,180 500,025 --------------- 1,705,421 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--1.5% Agilent Technologies, Inc. (a) 6,350 185,928 Flextronics International Ltd. (a) 24,730 394,443 --------------- 580,371 --------------- IT SERVICES--0.3% Accenture Ltd., Class A (a) 5,000 137,400 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.3% Analog Devices, Inc. 6,010 282,951 Intel Corp. 34,230 944,748 Marvell Technology Group Ltd. (a) 11,660 311,322 Maxim Integrated Products, Inc. 10,000 524,200 --------------- 2,063,221 --------------- SOFTWARE--6.8% Electronic Arts, Inc. (a) 4,640 253,112 Microsoft Corp. 52,790 1,507,682 Oracle Corp. (a) 35,480 423,276 SAP AG, ADR 5,460 228,283 VERITAS Software Corp. (a) 8,000 221,600 --------------- 2,633,953 --------------- MATERIALS--1.2% METALS & MINING--1.2% Phelps Dodge Corp. 5,700 441,807 --------------- TOTAL INVESTMENTS--100.0% (cost of $32,664,409)(b) 38,982,293 --------------- OTHER ASSETS & LIABILITIES, NET--0.0% 18,371 --------------- NET ASSETS--100.0% $ 39,000,664 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (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. 77 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty Equity Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Investments, at cost $ 32,664,409 --------------- Investments, at value $ 38,982,293 Receivable for: Investments sold 399,876 Fund shares sold 172 Dividends 19,284 Foreign tax reclaim 1,196 Expense reimbursement due from Investment Advisor 648 Deferred Trustees' compensation plan 3,636 --------------- TOTAL ASSETS 39,407,105 --------------- LIABILITIES: Payable to custodian bank 333,641 Payable for: Fund shares repurchased 5,323 Investment advisory fee 24,234 Administration fee 2,147 Transfer agent fee 402 Pricing and bookkeeping fees 2,016 Trustees' fees 33 Audit fee 13,226 Custody fee 360 Legal fee 7,288 Reports to shareholders 10,435 Deferred Trustees' fees 3,636 Other liabilities 3,700 --------------- TOTAL LIABILITIES 406,441 --------------- NET ASSETS $ 39,000,664 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 45,526,813 Undistributed net investment income 42,682 Accumulated net realized loss (12,886,715) Net unrealized appreciation on investments 6,317,884 --------------- NET ASSETS $ 39,000,664 =============== CLASS A: Net assets $ 38,999,392 Shares outstanding 2,639,065 =============== Net asset value per share $ 14.78 =============== CLASS B: Net assets $ 1,272 Shares outstanding 86 =============== Net asset value per share $ 14.79 =============== </Table> See Notes to Financial Statements. 78 <Page> STATEMENT OF OPERATIONS Liberty Equity Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 235,336 Interest 455 --------------- Total Investment Income (net of foreign taxes withheld of $3,779) 235,791 --------------- EXPENSES: Investment advisory fee 155,621 Administration fee 13,902 Distribution fee--Class B 2 Transfer agent fee 2,486 Pricing and bookkeeping fees 12,432 Trustees' fees 1,690 Custody fee 2,927 Non-recurring costs (See Note 6) 1,748 Other expenses 6,303 --------------- Total Expenses 197,111 Fees and expenses waived or reimbursed by Investment Advisor (4,150) Non-recurring costs assumed by Investment Advisor (See Note 6) (1,748) --------------- Net Expenses 191,213 --------------- Net Investment Income 44,578 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (35,034) Net change in unrealized appreciation/depreciation on investments 1,361,958 --------------- Net Gain 1,326,924 --------------- Net Increase in Net Assets from Operations $ 1,371,502 =============== </Table> See Notes to Financial Statements. 79 <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: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 44,578 $ 146,742 Net realized loss on investments (35,034) (4,782,702) Net change in unrealized appreciation/depreciation on investments 1,361,958 14,341,706 --------------- --------------- Net Increase from Operations 1,371,502 9,705,746 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income -- Class A -- (147,146) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 121,043 2,333,191 Proceeds received in connection with merger -- 4,822,551 Distributions reinvested -- 147,146 Redemptions (6,541,854) (16,415,799) --------------- --------------- Net Decrease (6,420,811) (9,112,911) --------------- --------------- Class B: Subscriptions -- 1,000 --------------- --------------- Net Decrease from Share Transactions (6,420,811) (9,111,911) --------------- --------------- Total Increase (Decrease) in Net Assets (5,049,309) 446,689 NET ASSETS: Beginning of period 44,049,973 43,603,284 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $42,682 and $(1,896), respectively) $ 39,000,664 $ 44,049,973 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 8,400 177,747 Issued in connection with merger -- 416,815 Issued for distributions reinvested -- 11,315 Redemptions (449,253) (1,296,537) --------------- --------------- Net Decrease (440,853) (690,660) --------------- --------------- Class B: Subscriptions -- 86 --------------- --------------- </Table> See Notes to Financial Statements. 80 <Page> NOTES TO FINANCIAL STATEMENTS Liberty Equity Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Liberty Equity Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks long-term growth by investing in companies which are believed to have above average earnings potential. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION--Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 147,146 Long-term capital gains -- </Table> * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. 81 <Page> Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 7,747,705 Unrealized depreciation (1,429,821) ------------- Net unrealized appreciation $ 6,317,884 ============= </Table> The following capital loss carryforwards, determined as of December 31, 2003, may be 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 $ 25,237 2009 3,277,087 2010 4,000,679 2011 5,417,761 ------------ $ 12,720,764 ============ </Table> Of the capital loss carryforwards attributable to the Fund, $695,798 was obtained upon the Fund's merger with Galaxy Growth & Income Fund (See Note 7). NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $500 million 0.75% Next $500 million 0.70% Next $500 million 0.65% Next $500 million 0.60% Over $2 billion 0.55% </Table> ADMINISTRATION FEE--Columbia provides administrative and other services to the Fund for a monthly administration fee based on the Fund's average daily net assets at the following annual rates: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $1 billion 0.067% Next $1.5 billion 0.060% Over $2.5 billion 0.055% </Table> 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 Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives an annual fee based on the average daily net assets of the Fund as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- Under $50 million $ 25,000 Over $50 million but less than $200 million $ 35,000 Over $200 million but less than $500 million $ 50,000 Over $500 million but less than $1 billion $ 85,000 Over $1 billion $ 125,000 </Table> The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.060%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $5,000. For the six months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia has agreed to reimburse certain fees of the Fund at the annual rate of 0.02% of the Fund's average daily net assets. Columbia had contractually agreed to maintain this arrangement until April 13, 2004. Subsequent to this date, Columbia, at its discretion, may revise or discontinue this arrangement any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. 82 <Page> OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended June 30, 2004, the Fund paid $679 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $6,647,168 and $12,598,181, respectively. NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $1,748 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 83 <Page> NOTE 7. BUSINESS COMBINATIONS AND MERGERS FUND MERGERS--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. 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 </Table> <Table> <Caption> NET ASSETS OF GALAXY VIP NET ASSETS NET ASSETS GROWTH & OF GALAXY VIP OF GALAXY VIP INCOME FUND EQUITY FUND EQUITY FUND IMMEDIATELY IMMEDIATELY PRIOR TO PRIOR TO 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 renamed as the Liberty Equity Fund, Variable Series. The accompanying statement of changes in net assets and financial highlights for the Fund represent the historical operations of the Galaxy VIP Equity Fund for periods prior to April 14, 2003. 84 <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) SIX MONTHS PERIOD ENDED ENDED JUNE 30, DECEMBER 31, 2004 2003 (a) --------------- --------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 14.33 $ 11.57 --------------- --------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (b) --(c) 0.02 Net realized and unrealized gain on investments 0.46 2.74 --------------- --------------- Total from Investment Operations 0.46 2.76 --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 14.79 $ 14.33 =============== =============== Total return (d)(e)(f)(g) 3.21% 23.85% RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h)(i) 1.17% 1.18% Net investment income (loss) (h)(i) (0.03)% 0.16% Waiver/reimbursement (i) 0.02% 0.04% Portfolio turnover rate 16%(g) 46% Net assets, end of period (000's) $ 1 $ 1 </Table> (a) For the period from commencement of operations on April 14, 2003 to December 31, 2003. (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 Investment Advisor 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. 85 <Page> PORTFOLIO MANAGERS' DISCUSSION Liberty Growth & Income Fund, Variable Series / June 30, 2004 Liberty Growth & Income Fund, Variable Series seeks long-term growth and income. Brian Cunningham, Gregory M. Miller and Richard Dahlberg are co-managers of the fund. Mr. Cunningham has co-managed the fund since October 2003 and has been with Columbia Management Advisors, Inc. and its predecessors (Columbia) since 1987. Mr. Miller has co-managed the fund since April 2003 and joined Columbia in 1985. Mr. Dahlberg, head of the Columbia large-cap value team, has co-managed the fund since October 2003. He joined the firm in September 2003. In a period that began on a fairly strong note for stocks, the fund's performance was slightly better than that of its benchmark. An above-index weighting in the energy and industrial sectors helped boost the portfolio's return. Lackluster returns from financial and technology holdings detracted from performance. Excellent stock market performance in 2003 provided a strong tailwind early in the period, supported by reports of higher corporate profits in the first quarter, continuing low interest rates, and strong consumer spending. But by late spring, oil and other commodity prices had soared and inflation seemed a possibility. When employment numbers improved, the Federal Reserve Board made it clear that it was prepared to begin to raise short-term interest rates in an effort to steer the economy clear of inflation. The stock market gave back some of its earlier gains, and indeed, on the last day of the period, the Fed raised a key short-term interest rate from 1.00% to 1.25%. POSITIONED FOR AN IMPROVING ECONOMY Throughout the period the fund was positioned to benefit from a modestly improving economy, which generally worked in its favor. Utilities, which occupied a relatively small position in the portfolio, provided a solid return, primarily on the strength of a single holding--TXU (1.9% of net assets). The company's new management team embarked on an aggressive restructuring and asset sales program that worked out better than expected. Our exposure to industrials was higher than that of our benchmark, and that also helped performance. These companies typically have high fixed-cost business models, so even relatively modest increases in volume from an improving economy can result in impressive profits. HIGH OIL PRICES HELPED AND HURT Oil and gas prices moved up sharply during the period. This benefited our energy holdings, a sector where we had greater exposure than the index. ConocoPhillips (2.6% of net assets) rose more than 16.0%. But rising oil prices had the opposite effect on consumer discretionary companies such as fast food restaurants. Wendy's International (1.4% of net assets) declined 11.0% during the period after strong growth in 2003. DISAPPOINTING RETURNS FROM FINANCIALS, TECHNOLOGY Financial stocks, the largest sector in the benchmark index, also hurt the fund's performance despite our relative underweight position. Citigroup and Bank of New York (4.5% and 1.3% of net assets, respectively) were affected by the steady slowdown in capital markets activity, particularly toward the end of the period. In technology, we lost ground with Finnish cell phone manufacturer Nokia (1.0% of net assets). The company's market share declined during the period, but we believe its plans to introduce a wide range of new phones with varying price points could help its share price over the next six to nine months. MAINTAINING OUR STRATEGY Valuations within the market appear compressed today. Until more disparities appear, offering opportunities for us to capitalize on, we plan to maintain the fund's broad diversification in relation to the Russell 1000 Value Index. As quality-oriented value investors, we take a company-by-company approach to stock selection, choosing fund holdings that we believe have the potential to do well in many different market environments. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. An investment in 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. Value stocks are securities of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor. If the advisor's assessment of a company's prospects is wrong, the price of its stock may not approach the value the advisor has placed on it. Holdings are disclosed as of June 30, 2004, and are subject to change. 86 <Page> PERFORMANCE INFORMATION Liberty Growth & Income Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR LIFE - ---------------------------------------------------------------- Class B (6/1/00) 4.10 15.57 0.47 11.36 S&P 500 Index(1) 3.44 19.11 -2.20 11.79 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 6/30/04 - ------------------------------------------------------- Class B 14.14 14.72 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 7/5/94(2) - 6/30/04 Class B: $29,287 <Table> <Caption> CLASS B SHARES S&P 500 INDEX 7/5/94 $ 10,000 $ 10,000 7/31/94 $ 10,260 $ 10,275 8/31/94 $ 10,670 $ 10,696 9/30/94 $ 10,460 $ 10,434 10/31/94 $ 10,631 $ 10,669 11/30/94 $ 10,251 $ 10,281 12/31/94 $ 10,441 $ 10,433 1/31/95 $ 10,705 $ 10,703 2/28/95 $ 11,132 $ 11,120 3/31/95 $ 11,427 $ 11,448 4/30/95 $ 11,661 $ 11,785 5/31/95 $ 12,078 $ 12,256 6/30/95 $ 12,342 $ 12,541 7/31/95 $ 12,769 $ 12,957 8/31/95 $ 12,718 $ 12,990 9/30/95 $ 13,145 $ 13,538 10/31/95 $ 13,094 $ 13,489 11/30/95 $ 13,592 $ 14,081 12/31/95 $ 13,541 $ 14,353 1/31/96 $ 13,903 $ 14,841 2/29/96 $ 14,177 $ 14,979 3/31/96 $ 14,253 $ 15,123 4/30/96 $ 14,779 $ 15,345 5/31/96 $ 15,130 $ 15,741 6/30/96 $ 14,801 $ 15,801 7/31/96 $ 14,089 $ 15,102 8/31/96 $ 14,560 $ 15,421 9/30/96 $ 15,272 $ 16,289 10/31/96 $ 15,655 $ 16,739 11/30/96 $ 16,773 $ 18,004 12/31/96 $ 16,498 $ 17,648 1/31/97 $ 17,704 $ 18,751 2/28/97 $ 17,692 $ 18,897 3/31/97 $ 16,984 $ 18,120 4/30/97 $ 17,889 $ 19,202 5/31/97 $ 18,911 $ 20,372 6/30/97 $ 19,629 $ 21,284 7/31/97 $ 21,196 $ 22,978 8/31/97 $ 20,465 $ 21,692 9/30/97 $ 21,520 $ 22,880 10/31/97 $ 20,535 $ 22,116 11/30/97 $ 21,371 $ 23,140 12/31/97 $ 21,815 $ 23,538 1/31/98 $ 22,055 $ 23,799 2/28/98 $ 23,581 $ 25,515 3/31/98 $ 24,772 $ 26,822 4/30/98 $ 24,760 $ 27,093 5/31/98 $ 24,143 $ 26,627 6/30/98 $ 25,068 $ 27,708 7/31/98 $ 24,572 $ 27,414 8/31/98 $ 20,569 $ 23,450 9/30/98 $ 21,519 $ 24,953 10/31/98 $ 23,355 $ 26,982 11/30/98 $ 24,775 $ 28,617 12/31/98 $ 26,209 $ 30,265 1/31/99 $ 26,893 $ 31,530 2/28/99 $ 25,820 $ 30,550 3/31/99 $ 26,657 $ 31,772 4/30/99 $ 27,395 $ 33,001 5/31/99 $ 27,034 $ 32,222 6/30/99 $ 28,610 $ 34,011 7/31/99 $ 27,897 $ 32,950 8/31/99 $ 27,590 $ 32,788 9/30/99 $ 26,641 $ 31,890 10/31/99 $ 27,702 $ 33,908 11/30/99 $ 28,064 $ 34,597 12/31/99 $ 29,355 $ 36,634 1/31/2000 $ 27,773 $ 34,795 2/29/2000 $ 26,826 $ 34,138 3/31/2000 $ 29,474 $ 37,476 4/30/2000 $ 29,444 $ 36,348 5/31/2000 $ 29,297 $ 35,603 6/30/2000 $ 28,884 $ 36,483 7/31/2000 $ 29,092 $ 35,913 8/31/2000 $ 30,954 $ 38,144 9/30/2000 $ 30,233 $ 36,130 10/31/2000 $ 30,447 $ 35,978 11/30/2000 $ 28,962 $ 33,143 12/31/2000 $ 30,366 $ 33,305 1/31/2001 $ 30,166 $ 34,488 2/28/2001 $ 29,949 $ 31,342 3/31/2001 $ 28,802 $ 29,355 4/30/2001 $ 29,300 $ 31,636 5/31/2001 $ 29,848 $ 31,848 6/30/2001 $ 29,149 $ 31,074 7/31/2001 $ 29,997 $ 30,770 8/31/2001 $ 29,815 $ 28,843 9/30/2001 $ 28,616 $ 26,513 10/31/2001 $ 28,762 $ 27,019 11/30/2001 $ 29,921 $ 29,092 12/31/2001 $ 30,169 $ 29,348 1/31/2002 $ 29,666 $ 28,919 2/28/2002 $ 29,354 $ 28,361 3/31/2002 $ 30,696 $ 29,427 4/30/2002 $ 29,587 $ 27,644 5/31/2002 $ 29,549 $ 27,440 6/30/2002 $ 26,402 $ 25,486 7/31/2002 $ 24,226 $ 23,501 8/31/2002 $ 24,537 $ 23,653 9/30/2002 $ 21,020 $ 21,082 10/31/2002 $ 22,807 $ 22,937 11/30/2002 $ 24,557 $ 24,288 12/31/2002 $ 23,515 $ 22,863 1/31/2003 $ 22,669 $ 22,264 2/28/2003 $ 21,390 $ 21,930 3/31/2003 $ 21,330 $ 22,142 4/30/2003 $ 22,885 $ 23,967 5/31/2003 $ 24,773 $ 25,230 6/30/2003 $ 25,343 $ 25,553 7/31/2003 $ 25,244 $ 26,003 8/31/2003 $ 25,658 $ 26,510 9/30/2003 $ 25,166 $ 26,229 10/31/2003 $ 26,072 $ 27,713 11/30/2003 $ 26,327 $ 27,957 12/31/2003 $ 28,136 $ 29,422 1/31/2004 $ 28,533 $ 29,964 2/29/2004 $ 29,309 $ 30,380 3/31/2004 $ 29,188 $ 29,921 4/30/2004 $ 28,491 $ 29,452 5/31/2004 $ 28,511 $ 29,855 6/30/2004 $ 29,287 $ 30,423 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the oldest 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 new class of shares would be lower. (1) Index performance for the life of the fund is from July 5, 1994. (2) Inception date of class A shares (oldest existing share class). 87 <Page> INVESTMENT PORTFOLIO Liberty Growth & Income Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--99.5% CONSUMER DISCRETIONARY--7.8% AUTOMOBILES--0.8% General Motors Corp. 45,037 $ 2,098,274 --------------- HOTELS, RESTAURANTS & LEISURE--1.7% Harrah's Entertainment, Inc. 13,313 720,233 Wendy's International, Inc. 103,846 3,617,995 --------------- 4,338,228 --------------- LEISURE EQUIPMENT & PRODUCTS--0.5% Mattel, Inc. 63,415 1,157,324 --------------- MEDIA--3.8% Clear Channel Communications, Inc. 49,048 1,812,324 Gannett Co., Inc. 15,253 1,294,217 McGraw-Hill Companies, Inc. 33,134 2,537,070 Time Warner, Inc. (a) 171,021 3,006,549 Viacom, Inc., Class A 29,879 1,086,102 --------------- 9,736,262 --------------- SPECIALTY RETAIL--1.0% Office Depot, Inc. (a) 143,363 2,567,631 --------------- CONSUMER STAPLES--9.4% BEVERAGES--1.8% PepsiCo, Inc. 86,607 4,666,385 --------------- FOOD & STAPLES RETAILING--0.6% Costco Wholesale Corp. 37,094 1,523,451 --------------- FOOD PRODUCTS--2.2% ConAgra Foods, Inc. 108,338 2,933,793 Kraft Foods, Inc., Class A 83,160 2,634,509 --------------- 5,568,302 --------------- HOUSEHOLD PRODUCTS--3.8% Clorox Co. 55,997 3,011,519 Kimberly-Clark Corp. 50,669 3,338,074 Procter & Gamble Co. 59,586 3,243,862 --------------- 9,593,455 --------------- TOBACCO--1.0% Altria Group, Inc. 49,809 2,492,940 --------------- ENERGY--12.9% ENERGY EQUIPMENT & SERVICES--1.8% Halliburton Co. 150,962 4,568,110 --------------- OIL & GAS--11.1% BP PLC, ADR 113,247 6,066,642 ConocoPhillips 85,845 6,549,115 Exxon Mobil Corp. 183,944 8,168,953 Marathon Oil Corp. 126,620 4,791,301 Royal Dutch Petroleum Co., NY Shares 54,012 2,790,800 --------------- 28,366,811 --------------- FINANCIALS--31.9% CAPITAL MARKETS--5.2% Bank of New York Co., Inc. 116,487 3,434,037 Goldman Sachs Group, Inc. 19,646 1,849,867 Merrill Lynch & Co., Inc. 58,780 $ 3,172,944 Morgan Stanley 56,882 3,001,663 State Street Corp. 35,938 1,762,400 --------------- 13,220,911 --------------- COMMERCIAL BANKS--7.8% Bank One Corp. 85,147 4,342,497 National City Corp. 53,801 1,883,573 U.S. Bancorp 197,348 5,438,911 Wachovia Corp. 56,390 2,509,355 Wells Fargo & Co. 97,218 5,563,786 --------------- 19,738,122 --------------- CONSUMER FINANCE--1.0% MBNA Corp. 100,638 2,595,454 --------------- DIVERSIFIED FINANCIAL SERVICES--6.1% Citigroup, Inc. 245,848 11,431,932 J.P. Morgan Chase & Co. 104,072 4,034,871 --------------- 15,466,803 --------------- INSURANCE--8.5% AFLAC, Inc. 36,252 1,479,444 Ambac Financial Group, Inc. 35,938 2,639,287 American International Group, Inc. 77,837 5,548,221 Lincoln National Corp. 49,664 2,346,624 Marsh & McLennan Companies, Inc. 28,437 1,290,471 St. Paul Travelers Companies, Inc. 68,279 2,768,031 Willis Group Holdings Ltd. 73,958 2,769,727 XL Capital Ltd., Class A 36,630 2,764,100 --------------- 21,605,905 --------------- REAL ESTATE--1.6% Archstone-Smith Trust 44,087 1,293,072 Kimco Realty Corp. 30,003 1,365,135 Vornado Realty Trust 24,349 1,390,571 --------------- 4,048,778 --------------- THRIFTS & MORTGAGE FINANCE--1.7% Countrywide Financial Corp. 23,325 1,638,581 Freddie Mac 44,106 2,791,910 --------------- 4,430,491 --------------- HEALTH CARE--4.5% HEALTH CARE PROVIDERS & SERVICES--1.8% Aetna, Inc. 55,812 4,744,020 --------------- PHARMACEUTICALS--2.7% Bristol-Myers Squibb Co. 45,635 1,118,057 Johnson & Johnson 23,820 1,326,774 Merck & Co., Inc. 28,949 1,375,077 Pfizer, Inc. 86,607 2,968,888 --------------- 6,788,796 --------------- INDUSTRIALS--11.7% AEROSPACE & DEFENSE--4.3% General Dynamics Corp. 30,715 3,049,999 Honeywell International, Inc. 89,637 3,283,403 Raytheon Co. 36,867 1,318,733 United Technologies Corp. 35,185 3,218,724 --------------- 10,870,859 --------------- </Table> See Notes to Investment Portfolio. 88 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- COMMERCIAL SERVICES & SUPPLIES--1.7% Avery Dennison Corp. 6,810 $ 435,908 Waste Management, Inc. 128,600 3,941,590 --------------- 4,377,498 --------------- INDUSTRIAL CONGLOMERATES--3.5% General Electric Co. 156,857 5,082,167 Textron, Inc. 63,546 3,771,455 --------------- 8,853,622 --------------- MACHINERY--2.2% Deere & Co. 42,297 2,966,712 Dover Corp. 62,175 2,617,568 --------------- 5,584,280 --------------- INFORMATION TECHNOLOGY--7.1% COMMUNICATIONS EQUIPMENT--1.0% Nokia Oyj, ADR 174,155 2,532,214 --------------- COMPUTERS & PERIPHERALS--2.1% International Business Machines Corp. 27,894 2,458,856 Lexmark International, Inc., Class A (a) 29,993 2,895,224 --------------- 5,354,080 --------------- IT SERVICES--1.3% Accenture Ltd., Class A (a) 119,749 3,290,703 --------------- OFFICE ELECTRONICS--1.2% Xerox Corp. (a) 205,140 2,974,530 --------------- SOFTWARE--1.5% Electronic Arts, Inc. (a) 50,218 2,739,392 Microsoft Corp. 41,162 1,175,587 --------------- 3,914,979 --------------- MATERIALS--3.5% CHEMICALS--1.5% Air Products & Chemicals, Inc. 74,769 3,921,634 --------------- PAPER & FOREST PRODUCTS--2.0% MeadWestvaco Corp. 98,726 2,901,557 Weyerhaeuser Co. 32,377 2,043,636 --------------- 4,945,193 --------------- TELECOMMUNICATION SERVICES--4.7% DIVERSIFIED TELECOMMUNICATION SERVICES--4.7% BellSouth Corp. 151,066 $ 3,960,951 SBC Communications, Inc. 162,350 3,936,988 Verizon Communications, Inc. 113,144 4,094,681 --------------- 11,992,620 --------------- UTILITIES--6.0% ELECTRIC UTILITIES--6.0% American Electric Power Co., Inc. 82,637 2,644,384 Consolidated Edison, Inc. 93,398 3,713,504 Entergy Corp. 36,005 2,016,640 Southern Co. 67,725 1,974,184 TXU Corp. 120,456 4,879,674 --------------- 15,228,386 --------------- TOTAL COMMON STOCKS (cost of $215,137,661) 253,157,051 --------------- INVESTMENT MANAGEMENT COMPANY--0.2% iShares Russell 1000 Value Index Fund (cost of $491,766) 8,368 502,582 --------------- TOTAL INVESTMENTS--99.7% (cost of $215,629,427) (b) 253,659,633 --------------- OTHER ASSETS & LIABILITIES, NET--0.3% 834,836 NET ASSETS--100.0% $ 254,494,469 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (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. 89 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty Growth & Income Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Investments, at cost $ 215,629,427 --------------- Investments, at value $ 253,659,633 Receivable for: Investments sold 2,134,789 Dividends 296,181 Expense reimbursement due from Investment Advisor / Distributor 26,894 Deferred Trustees' compensation plan 15,700 --------------- TOTAL ASSETS 256,133,197 --------------- LIABILITIES: Payable to custodian bank 696,679 Payable for: Fund shares repurchased 685,138 Investment advisory fee 168,103 Transfer agent fee 605 Pricing and bookkeeping fees 7,676 Audit fee 23,257 Reports to shareholders 26,521 Distribution fee--Class B 10,058 Deferred Trustees' fees 15,700 Other liabilities 4,991 --------------- TOTAL LIABILITIES 1,638,728 --------------- NET ASSETS $ 254,494,469 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 280,691,232 Undistributed net investment income 2,024,851 Accumulated net realized loss (66,251,820) Net unrealized appreciation on investments 38,030,206 --------------- NET ASSETS $ 254,494,469 =============== CLASS A: Net assets $ 209,063,400 Shares outstanding 14,174,381 =============== Net asset value per share $ 14.75 =============== CLASS B: Net assets $ 45,431,069 Shares outstanding 3,086,417 =============== Net asset value per share $ 14.72 =============== </Table> See Notes to Financial Statements. 90 <Page> STATEMENT OF OPERATIONS Liberty Growth & Income Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 2,950,669 Interest 12,765 --------------- Total Investment Income (net of foreign taxes withheld of $29,001) 2,963,434 --------------- EXPENSES: Investment advisory fee 1,035,939 Distribution fee--Class B 56,158 Transfer agent fee 3,729 Pricing and bookkeeping fees 36,952 Trustees' fees 4,686 Custody fee 5,663 Non-recurring costs (See Note 6) 11,138 Other expenses 45,975 --------------- Total Expenses 1,200,240 Fees and expenses waived or reimbursed by Investment Advisor (142,441) Fees waived by Distributor--Class B (4,493) Non-recurring costs assumed by Investment Advisor (See Note 6) (11,138) Custody earnings credit (1) --------------- Net Expenses 1,042,167 --------------- Net Investment Income 1,921,267 --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investment 8,531,354 Net change in unrealized appreciation/depreciation on investments 286,651 --------------- Net Gain 8,818,005 --------------- Net Increase in Net Assets from Operations $ 10,739,272 =============== </Table> See Notes to Financial Statements. 91 <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: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 1,921,267 $ 3,475,469 Net realized gain (loss) on investments 8,531,354 (27,529,590) Net change in unrealized appreciation/depreciation on investments 286,651 74,661,609 --------------- --------------- Net Increase from Operations 10,739,272 50,607,488 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (2,859,733) Class B -- (497,712) --------------- --------------- Total Distributions Declared to Shareholders -- (3,357,445) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 3,633,491 7,840,182 Proceeds received in connection with merger -- 88,842,502 Distributions reinvested -- 2,859,733 Redemptions (20,402,626) (35,938,840) --------------- --------------- Net Increase (Decrease) (16,769,135) 63,603,577 --------------- --------------- Class B: Subscriptions 1,598,231 14,226,069 Proceeds received in connection with merger -- 7,935,880 Distributions reinvested -- 497,712 Redemptions (2,590,848) (13,087,318) --------------- --------------- Net Increase (Decrease) (992,617) 9,572,343 --------------- --------------- Net Increase (Decrease) from Share Transactions (17,761,752) 73,175,920 --------------- --------------- Total Increase (Decrease) in Net Assets (7,022,480) 120,425,963 NET ASSETS: Beginning of period 261,516,949 141,090,986 --------------- --------------- End of period (including undistributed net investment income of $2,024,851 and $103,584, respectively) $ 254,494,469 $ 261,516,949 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 251,465 613,478 Issued in connection with merger -- 7,939,987 Issued for distributions reinvested -- 202,962 Redemptions (1,408,970) (2,893,899) --------------- --------------- Net Increase (Decrease) (1,157,505) 5,862,528 --------------- --------------- Class B: Subscriptions 110,901 1,213,974 Issued in connection with merger -- 710,257 Issued for distributions reinvested -- 35,349 Redemptions (179,048) (1,128,428) --------------- --------------- Net Increase (Decrease) (68,147) 831,152 --------------- --------------- </Table> See Notes to Financial Statements. 92 <Page> NOTES TO FINANCIAL STATEMENTS Liberty Growth & Income Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Liberty Growth & Income Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks long-term growth and income. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Equity securities and exchange traded funds are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION--Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 3,357,445 Long-term capital gains -- </Table> * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. 93 <Page> Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 42,415,094 Unrealized depreciation (4,384,888) ------------ Net unrealized appreciation $ 38,030,206 ============ </Table> The following capital loss carryforwards, determined as of December 31, 2003, may be 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 $ 11,754,808 2010 34,444,008 2011 26,847,476 ------------ $ 73,046,292 ============ </Table> Of the capital loss carryforwards attributable to the Fund, $17,706,480 was obtained upon the fund's merger with Liberty Value Fund, Variable Series (see Note 7). NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $500 million 0.80% Next $500 million 0.75% Over $1 billion 0.70% </Table> 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 Corporation ("State Street"). As a result, Columbia pays the total fees received 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 exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.029%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the six months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was less than 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia has agreed to reimburse certain fees of the Fund at the annual rate of 0.11% of the Fund's average daily net assets. In addition, the Distributor has agreed to waive Class B distribution fees at the annual rate of 0.02% of the Class B average daily net assets. Columbia and the Distributor have contractually agreed to maintain this arrangement until April 6, 2004. Subsequent to this date Columbia and the Distributor, at their discretion, may revise or discontinue this arrangement any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. 94 <Page> OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended June 30, 2004, the Fund paid $839 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $52,041,892 and $68,129,269, respectively. NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $11,138 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. NOTE 7. BUSINESS COMBINATIONS AND MERGERS FUND MERGERS--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 95 <Page> 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 </Table> <Table> <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. 96 <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, 2004 2003 2002 2001 2000 (a) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 14.14 $ 11.95 $ 15.53 $ 18.26 $ 19.82 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.09 0.18 0.13 0.15 0.08 Net realized and unrealized gain (loss) on investments 0.49 2.17 (3.56) (0.35) 0.65 ------------ ------------ ------------ ------------ ------------ Total from Investment Operations 0.58 2.35 (3.43) (0.20) 0.73 ------------ ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income -- (0.16) (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 -- (0.16) (0.15) (2.53) (2.29) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 14.72 $ 14.14 $ 11.95 $ 15.53 $ 18.26 ============ ============ ============ ============ ============ Total return (d)(e)(f) 4.10%(g) 19.66% (22.06)% (0.65)% 3.64%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 1.00%(i) 1.00% 1.00% 1.00% 1.00%(i) Net investment income (h) 1.29%(i) 1.46% 0.96% 0.88% 0.71%(i) Waiver/reimbursement 0.13%(i) 0.14% 0.13% 0.21% 0.13%(i) Portfolio turnover rate 20%(g) 73% 69% 53% 120% Net assets, end of period (000's) $ 45,431 $ 44,594 $ 27,756 $ 25,742 $ 4,318 </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) Had the Investment Advisor 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. 97 <Page> PORTFOLIO MANAGER'S DISCUSSION Liberty S&P 500 Index Fund, Variable Series / June 30, 2004 Liberty S&P 500 Index Fund, Variable Series seeks capital appreciation by matching the performance of a benchmark 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. Investors were cautious as a result of instability in Iraq, higher oil prices and the prospect of higher short-term interest rates. Despite a rocky stretch in April and early May, US stocks made a comeback as the economy's outlook brightened. The S&P 500 Index rose 3.44% for the six-month period ended June 30, 2004 and the fund's performance was comparable to the index for the period. Small-cap stocks outperformed both large- and mid-cap stocks during the first half of the year. During this six-month period, the S&P SmallCap 600 Index rose 10.05%, outpacing the S&P 500 Index by almost seven percentage points. As measured by the Russell indices, value stocks outperformed growth stocks. However, growth stocks gained ground relative to value as the six-month period wore on. ALL SECTORS IN POSITIVE TERRITORY All ten economic sectors represented in the index posted positive results during this reporting period. Energy was a top performer as a result of rising oil prices. Exxon Mobil (2.7% of net assets) was one of the top contributors to the index's return for the period. Industrials, led by General Electric (3.2% of net assets), also performed well. General Electric's share price rose as a result of an acquisition it made in April. Information technology was one of the weakest performing sectors for the six-month period. Within the sector, Intel was one of the largest detractors from the fund's performance (1.7% of net assets). However, technology was also home to one of the index's strongest performers, Yahoo! (0.5% of net assets). FOCUS ON COST-EFFECTIVE EXECUTION Our focus on cost-effective trade execution is one hallmark of our management style. We also manage the fund with a full replication investment strategy. The approach means that the fund generally holds each of the 500 securities included in the S&P 500 Index in approximately the same weight as the company's representation in the index. Since the fund incurs expenses in seeking to maintain the appropriate weight of each security in the index, the fund's return is typically lower than that of 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 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, 2004, and are subject to change. 98 <Page> PERFORMANCE INFORMATION Liberty S&P 500 Index Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR LIFE - -------------------------------------------------------------- Class B (5/30/00) 3.13 18.24 -3.98 S&P 500 Index 3.44 19.11 -3.04 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 6/30/04 - ------------------------------------------------------- Class B 9.59 9.89 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 5/30/00 - 6/30/04 Class B: $8,470 <Table> <Caption> CLASS B SHARES S&P 500 INDEX 5/30/2000 $ 10,000 $ 10,000 5/31/2000 $ 10,008 $ 10,312 6/30/2000 $ 10,316 $ 10,567 7/31/2000 $ 10,167 $ 10,402 8/31/2000 $ 10,784 $ 11,048 9/30/2000 $ 10,225 $ 10,465 10/31/2000 $ 10,201 $ 10,421 11/30/2000 $ 9,417 $ 9,599 12/31/2000 $ 9,471 $ 9,646 1/31/2001 $ 9,806 $ 9,989 2/28/2001 $ 8,935 $ 9,078 3/31/2001 $ 8,357 $ 8,502 4/30/2001 $ 8,994 $ 9,163 5/31/2001 $ 9,053 $ 9,224 6/30/2001 $ 8,826 $ 9,000 7/31/2001 $ 8,742 $ 8,912 8/31/2001 $ 8,190 $ 8,354 9/30/2001 $ 7,536 $ 7,679 10/31/2001 $ 7,679 $ 7,826 11/30/2001 $ 8,265 $ 8,426 12/31/2001 $ 8,327 $ 8,500 1/31/2002 $ 8,201 $ 8,376 2/28/2002 $ 8,041 $ 8,214 3/31/2002 $ 8,335 $ 8,523 4/30/2002 $ 7,822 $ 8,007 5/31/2002 $ 7,763 $ 7,948 6/30/2002 $ 7,207 $ 7,382 7/31/2002 $ 6,643 $ 6,807 8/31/2002 $ 6,677 $ 6,851 9/30/2002 $ 5,953 $ 6,106 10/31/2002 $ 6,467 $ 6,644 11/30/2002 $ 6,846 $ 7,035 12/31/2002 $ 6,434 $ 6,622 1/31/2003 $ 6,264 $ 6,448 2/28/2003 $ 6,170 $ 6,352 3/31/2003 $ 6,222 $ 6,413 4/30/2003 $ 6,732 $ 6,942 5/31/2003 $ 7,081 $ 7,308 6/30/2003 $ 7,166 $ 7,401 7/31/2003 $ 7,293 $ 7,531 8/31/2003 $ 7,429 $ 7,678 9/30/2003 $ 7,344 $ 7,597 10/31/2003 $ 7,752 $ 8,027 11/30/2003 $ 7,812 $ 8,097 12/31/2003 $ 8,216 $ 8,522 1/31/2004 $ 8,361 $ 8,679 2/29/2004 $ 8,473 $ 8,799 3/31/2004 $ 8,344 $ 8,666 4/30/2004 $ 8,207 $ 8,530 5/31/2004 $ 8,310 $ 8,647 6/30/2004 $ 8,470 $ 8,813 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. Index performance for the life of the fund is from May 30, 2000. 99 <Page> INVESTMENT PORTFOLIO Liberty S&P 500 Index Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--98.8% CONSUMER DISCRETIONARY--12.8% AUTO COMPONENTS--0.2% Cooper Tire & Rubber Co. 300 $ 6,900 Dana Corp. 657 12,877 Delphi Corp. 2,741 29,274 Goodyear Tire & Rubber Co. 731 6,645 Johnson Controls, Inc. 932 49,750 Visteon Corp. 746 8,706 --------------- 114,152 --------------- AUTOMOBILES--0.7% Ford Motor Co. 8,850 138,502 General Motors Corp. 2,729 127,144 Harley-Davidson, Inc. 1,396 86,468 --------------- 352,114 --------------- HOTELS, RESTAURANTS & LEISURE--1.4% Carnival Corp. 3,024 142,128 Darden Restaurants, Inc. 771 15,844 Harrah's Entertainment, Inc. 519 28,078 Hilton Hotels Corp. 1,761 32,860 International Game Technology, Inc. 1,697 65,504 Marriott International, Inc., Class A 1,126 56,165 McDonald's Corp. 6,091 158,366 Starbucks Corp. (a) 1,913 83,177 Starwood Hotels & Resorts Worldwide, Inc. 1,031 46,240 Wendy's International, Inc. 540 18,814 Yum! Brands, Inc. 1,463 54,453 --------------- 701,629 --------------- HOUSEHOLD DURABLES--0.5% Black & Decker Corp. 378 23,485 Centex Corp. 584 26,718 Fortune Brands, Inc. 693 52,273 KB Home Corp. 190 13,040 Leggett & Platt, Inc. 916 24,466 Maytag Corp. 351 8,603 Newell Rubbermaid, Inc. 1,350 31,725 Pulte Homes, Inc. 640 33,299 Snap-On, Inc. 238 7,985 Stanley Works 381 17,366 Whirlpool Corp. 295 20,237 --------------- 259,197 --------------- INTERNET & CATALOG RETAIL--0.6% eBay, Inc. (a) 3,190 293,320 --------------- LEISURE EQUIPMENT & PRODUCTS--0.2% Brunswick Corp. 491 20,033 Eastman Kodak Co. 1,357 36,612 Hasbro, Inc. 772 14,668 Mattel, Inc. 2,025 36,956 --------------- 108,269 --------------- MEDIA--3.5% Clear Channel Communications, Inc. 2,966 $ 109,594 Comcast Corp., Class A (a) 10,894 305,359 Dow Jones & Co., Inc. 447 20,160 Gannett Co., Inc. 1,265 107,335 Interpublic Group of Companies, Inc. 1,972 27,076 Knight-Ridder, Inc. 412 29,664 McGraw-Hill Companies, Inc. 861 65,927 Meredith Corp. 257 14,125 New York Times Co., Class A 707 31,610 Omnicom Group, Inc. 915 69,439 Time Warner, Inc. (a) 22,138 389,186 Tribune Co. 1,551 70,633 Univision Communications, Inc., Class A (a) 1,545 49,332 Viacom, Inc., Class B 8,375 299,155 Walt Disney Co. 9,985 254,518 --------------- 1,843,113 --------------- MULTILINE RETAIL--3.1% Big Lots, Inc. (a) 501 7,244 Dillard's, Inc., Class A 422 9,411 Dollar General Corp. 1,564 30,592 Family Dollar Stores, Inc. 812 24,701 Federated Department Stores, Inc. 924 45,368 JC Penney Co., Inc. 1,376 51,958 Kohl's Corp. (a) 1,671 70,650 May Department Stores Co. 1,391 38,239 Nordstrom, Inc. 720 30,679 Sears Roebuck and Co. 1,101 41,574 Target Corp. 4,385 186,231 Wal-Mart Stores, Inc. 20,735 1,093,979 --------------- 1,630,626 --------------- SPECIALTY RETAIL--2.3% Autonation, Inc. (a) 1,304 22,298 AutoZone, Inc. (a) 388 31,079 Bed Bath & Beyond, Inc. (a) 1,477 56,791 Best Buy Co., Inc. 1,561 79,205 Circuit City Stores, Inc. 972 12,587 Gap, Inc. 4,336 105,148 Home Depot, Inc. 10,819 380,829 Lowe's Companies, Inc. 3,807 200,058 Limited Brands 2,376 44,431 Office Depot, Inc. (a) 1,476 26,435 RadioShack Corp. 806 23,076 Sherwin-Williams Co. 718 29,833 Staples, Inc. 2,361 69,201 Tiffany & Co. 689 25,390 TJX Companies, Inc. 2,406 58,081 Toys "R" US, Inc. (a) 1,046 16,663 --------------- 1,181,105 --------------- TEXTILES, APPAREL & LUXURY GOODS--0.3% Jones Apparel Group, Inc. 631 24,912 Liz Claiborne, Inc. 506 18,206 Nike, Inc. 1,281 97,036 Reebok International Ltd. 285 10,254 VF Corp. 553 26,931 --------------- 177,339 --------------- </Table> See Notes to Investment Portfolio. 100 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- CONSUMER STAPLES--8.9% BEVERAGES--2.7% Adolph Coors Co. 129 $ 9,332 Anheuser-Busch Companies, Inc. 3,871 209,034 Brown-Forman Corp. 662 31,955 Coca-Cola Co. 11,771 594,200 Coca-Cola Enterprises, Inc. 2,305 66,822 Pepsi Bottling Group, Inc. 1,232 37,625 PepsiCo, Inc. 8,277 445,965 --------------- 1,394,933 --------------- FOOD & STAPLES RETAILING--1.3% Albertson's, Inc. 1,814 48,144 Costco Wholesale Corp. 2,272 93,311 CVS Corp. 1,895 79,628 Kroger Co. (a) 3,600 65,520 Safeway, Inc. (a) 2,172 55,038 Supervalu, Inc. 629 19,254 Sysco Corp. 3,131 112,309 Walgreen Co. 4,961 179,638 Winn-Dixie Stores, Inc. 658 4,738 --------------- 657,580 --------------- FOOD PRODUCTS--1.2% Archer-Daniels-Midland Co. 3,128 52,488 Campbell Soup Co. 1,941 52,174 ConAgra Foods, Inc. 2,606 70,570 General Mills, Inc. 1,791 85,126 Hershey Foods Corp. 1,256 58,115 HJ Heinz Co. 1,714 67,189 Kellogg Co. 1,979 82,821 McCormick & Co., Inc. 613 20,842 Sara Lee Corp. 3,846 88,420 WM Wrigley Jr Co. 1,084 68,346 --------------- 646,091 --------------- HOUSEHOLD PRODUCTS--2.0% Clorox Co. 1,026 55,178 Colgate-Palmolive Co. 2,574 150,450 Kimberly-Clark Corp. 2,436 160,484 Procter & Gamble Co. 12,410 675,600 --------------- 1,041,712 --------------- PERSONAL PRODUCTS--0.6% Alberto-Culver Co., Class B 478 23,967 Avon Products, Inc. 2,296 105,937 Gillette Co. 4,821 204,410 --------------- 334,314 --------------- TOBACCO--1.1% Altria Group, Inc. 9,957 498,348 RJ Reynolds Tobacco Holdings, Inc. 400 27,036 UST, Inc. 824 29,664 --------------- 555,048 --------------- ENERGY--6.3% ENERGY EQUIPMENT & SERVICES--0.9% Baker Hughes, Inc. 1,662 $ 62,574 BJ Services Co. (a) 756 34,655 Halliburton Co. 2,111 63,879 Nabors Industries Ltd. (a) 734 33,191 Noble Corp. (a) 617 23,378 Rowan Companies, Inc. (a) 540 13,138 Schlumberger Ltd. 2,846 180,749 Transocean, Inc. (a) 1,537 44,481 --------------- 456,045 --------------- OIL & GAS--5.4% Amerada Hess Corp. 442 35,002 Anadarko Petroleum Corp. 1,255 73,543 Apache Corp. 1,544 67,241 Ashland, Inc. 376 19,857 Burlington Resources, Inc. 1,962 70,985 ChevronTexaco Corp. 5,149 484,572 ConocoPhillips 3,305 252,138 Devon Energy Corp. 1,143 75,438 EOG Resources, Inc. 545 32,542 Exxon Mobil Corp. 31,580 1,402,468 Kerr-McGee Corp. 488 26,240 Marathon Oil Corp. 1,720 65,085 Occidental Petroleum Corp. 1,875 90,769 Sunoco, Inc. 339 21,567 Unocal Corp. 1,314 49,932 Valero Energy Corp. 600 44,256 --------------- 2,811,635 --------------- FINANCIALS--20.2% CAPITAL MARKETS--2.7% Bank of New York Co., Inc. 3,757 110,756 Bear Stearns Companies, Inc. 537 45,274 Charles Schwab Corp. 6,530 62,753 E*Trade Financial Corp. (a) 1,700 18,955 Federated Investors, Inc. 528 16,020 Franklin Resources, Inc. 1,233 61,749 Goldman Sachs Group, Inc. 2,352 221,464 Janus Capital Group, Inc. 1,108 18,271 Lehman Brothers Holdings, Inc. 1,291 97,148 Mellon Financial Corp. 2,086 61,182 Merrill Lynch & Co., Inc. 4,656 251,331 Morgan Stanley 5,278 278,520 Northern Trust Corp. 1,072 45,324 State Street Corp. 1,616 79,249 T Rowe Price Group, Inc. 631 31,803 --------------- 1,399,799 --------------- COMMERCIAL BANKS--6.2% AmSouth Bancorp 1,645 41,898 Bank of America Corp. (b) 9,836 832,322 Bank One Corp. 5,431 276,981 BB&T Corp. 2,720 100,558 Charter One Financial, Inc. 1,126 49,758 Comerica, Inc. 888 48,733 </Table> See Notes to Investment Portfolio. 101 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- Fifth Third Bancorp 2,687 $ 144,507 First Horizon National Corp. 567 25,782 Huntington Bancshares, Inc. 1,061 24,297 KeyCorp 1,990 59,481 M&T Bank Corp. 600 52,380 Marshall & Ilsley Corp. 1,130 44,172 National City Corp. 3,249 113,747 North Fork Bancorporation, Inc. 812 30,897 PNC Financial Services Group, Inc. 1,406 74,631 Regions Financial Corp. 1,074 39,255 SouthTrust Corp. 1,597 61,980 SunTrust Banks, Inc. 1,342 87,217 Synovus Financial Corp. 1,416 35,853 Union Planters Corp. 902 26,889 US Bancorp 9,072 250,024 Wachovia Corp. 6,326 281,507 Wells Fargo & Co. 8,201 469,343 Zions Bancorporation 440 27,038 --------------- 3,199,250 --------------- CONSUMER FINANCE--1.3% American Express Co. 6,232 320,200 Capital One Financial Corp. 1,121 76,654 MBNA Corp. 6,217 160,336 Providian Financial Corp. (a) 1,446 21,213 SLM Corp. 2,167 87,655 --------------- 666,058 --------------- DIVERSIFIED FINANCIAL SERVICES--3.2% Citigroup, Inc. 24,966 1,160,919 JP Morgan Chase & Co. 10,087 391,073 Moody's Corp. 706 45,650 Principal Financial Group 1,548 53,839 --------------- 1,651,481 --------------- INSURANCE--4.6% ACE Ltd. 1,333 56,359 AFLAC, Inc. 2,515 102,637 Allstate Corp. 3,408 158,642 Ambac Financial Group, Inc. 536 39,364 American International Group, Inc. 12,586 897,130 AON Corp. 1,531 43,588 Chubb Corp. 866 59,044 Cincinnati Financial Corp. 802 34,903 Hartford Financial Services Group, Inc. 1,395 95,892 Jefferson-Pilot Corp. 645 32,766 Lincoln National Corp. 917 43,328 Loews Corp. 863 51,746 Marsh & McLennan Companies, Inc. 2,533 114,948 MBIA, Inc. 746 42,612 MetLife, Inc. 3,640 130,494 Progressive Corp. 1,040 88,712 Prudential Financial, Inc. 2,594 120,543 SAFECO Corp. 655 28,820 St. Paul Travelers Companies, Inc. 3,239 131,309 Torchmark Corp. 587 31,581 UnumProvident Corp. 1,414 22,483 XL Capital Ltd., Class A 678 51,162 --------------- 2,378,063 --------------- REAL ESTATE--0.4% Apartment Investment & Management Co., REIT 500 $ 15,565 Equity Office Properties Trust, REIT 1,962 53,366 Equity Residential, REIT 1,381 41,057 Plum Creek Timber Co., Inc., REIT 881 28,703 Prologis, REIT 900 29,628 Simon Property Group, Inc., REIT 1,000 51,420 --------------- 219,739 --------------- THRIFTS & MORTGAGE FINANCE--1.8% Countrywide Financial Corp. 1,367 96,032 Fannie Mae 4,712 336,248 Freddie Mac 3,336 211,169 Golden West Financial Corp. 743 79,018 MGIC Investment Corp. 513 38,916 Sovereign Bancorp, Inc. 1,400 30,940 Washington Mutual, Inc. 4,194 162,056 --------------- 954,379 --------------- HEALTH CARE--13.2% BIOTECHNOLOGY--1.2% Amgen, Inc. (a) 6,109 333,368 Biogen Idec, Inc. (a) 1,616 102,212 Chiron Corp. (a) 940 41,962 Genzyme Corp. (a) 1,142 54,051 Gilead Sciences, Inc. (a) 1,000 67,000 Medimmune, Inc. (a) 1,206 28,220 --------------- 626,813 --------------- HEALTH CARE EQUIPMENT & SUPPLIES--2.2% Applera Corp - Applied Biosystems Group 1,004 21,837 Bausch & Lomb, Inc. 279 18,155 Baxter International, Inc. 3,018 104,151 Becton Dickinson & Co. 1,199 62,108 Biomet, Inc. 1,217 54,083 Boston Scientific Corp. (a) 4,054 173,511 CR Bard, Inc. 526 29,798 Guidant Corp. 1,526 85,273 IMS Health, Inc. 1,167 27,355 Hospira, Inc. (a) 745 20,562 Medtronic, Inc. 5,898 287,351 Millipore Corp. (a) 201 11,330 St. Jude Medical, Inc. (a) 796 60,217 Stryker Corp. 1,930 106,150 Zimmer Holdings, Inc. (a) 1,169 103,106 --------------- 1,164,987 --------------- HEALTH CARE PROVIDERS & SERVICES--2.0% Aetna, Inc. 706 60,010 AmerisourceBergen Corp. 551 32,939 Anthem, Inc. (a) 703 62,961 Cardinal Health, Inc. 2,085 146,054 Caremark Rx, Inc. (a) 2,193 72,237 CIGNA Corp. 665 45,759 Express Scripts, Inc. (a) 400 31,692 HCA, Inc. 2,387 99,275 Health Management Associates, Inc. 1,226 27,487 </Table> See Notes to Investment Portfolio. 102 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- Humana, Inc. (a) 717 $ 12,117 Manor Care, Inc. 458 14,967 McKesson Corp. 1,449 49,744 Medco Health Solutions, Inc. (a) 1,330 49,875 Quest Diagnostics, Inc. 471 40,011 Tenet Healthcare Corp. (a) 2,180 29,234 UnitedHealth Group, Inc. 2,982 185,630 WellPoint Health Networks (a) 778 87,144 --------------- 1,047,136 --------------- PHARMACEUTICALS--7.8% Abbott Laboratories 7,551 307,779 Allergan, Inc. 652 58,367 Bristol-Myers Squibb Co. 9,470 232,015 Eli Lilly & Co. 5,486 383,526 Forest Laboratories, Inc. (a) 1,824 103,293 Johnson & Johnson 14,317 797,457 King Pharmaceuticals, Inc. (a) 1,127 12,904 Merck & Co., Inc. 10,778 511,955 Mylan Laboratories 1,300 26,325 Pfizer, Inc. 36,769 1,260,441 Schering-Plough Corp. 7,057 130,413 Watson Pharmaceuticals, Inc. (a) 562 15,118 Wyeth 6,439 232,834 --------------- 4,072,427 --------------- INDUSTRIALS--12.1% AEROSPACE & DEFENSE--1.7% Boeing Co. 4,128 210,900 General Dynamics Corp. 995 98,804 Goodrich Corp. 585 18,913 Lockheed Martin Corp. 2,133 111,087 Northrop Grumman Corp. 1,780 95,586 Raytheon Co. 2,165 77,442 Rockwell Collins, Inc. 873 29,088 United Technologies Corp. 2,500 228,700 --------------- 870,520 --------------- AIR FREIGHT & LOGISTICS--1.0% FedEx Corp. 1,395 113,958 Ryder System, Inc. 364 14,585 United Parcel Service, Inc. 5,393 405,392 --------------- 533,935 --------------- AIRLINES--0.1% Delta Air Lines, Inc. (a) 600 4,272 Southwest Airlines Co. 3,739 62,703 --------------- 66,975 --------------- BUILDING PRODUCTS--0.2% American Standard Companies, Inc. (a) 1,020 41,116 Crane Co. 250 7,848 Masco Corp. 2,160 67,349 --------------- 116,313 --------------- COMMERCIAL SERVICES & SUPPLIES--2.0% Allied Waste Industries, Inc. (a) 1,470 19,375 Apollo Group, Inc. (a) 868 76,636 Automatic Data Processing, Inc. 2,900 121,452 Avery Dennison Corp. 481 $ 30,789 Cendant Corp. 4,951 121,200 Cintas Corp. 882 42,045 Convergys Corp. (a) 680 10,472 Deluxe Corp. 237 10,310 Equifax, Inc. 696 17,226 First Data Corp. 4,279 190,501 Fiserv, Inc. (a) 964 37,490 H&R Block, Inc. 832 39,670 Monster Worldwide, Inc. (a) 500 12,860 Paychex, Inc. 1,859 62,983 Pitney Bowes, Inc. 1,152 50,976 Robert Half International, Inc. 800 23,816 R.R. Donnelley & Sons Co. 1,081 35,695 Sabre Holdings Corp. 708 19,619 Waste Management, Inc. 2,815 86,280 --------------- 1,009,395 --------------- CONSTRUCTION & ENGINEERING--0.0% Fluor Corp. 409 19,497 --------------- ELECTRICAL EQUIPMENT--0.4% American Power Conversion Corp. 893 17,547 Cooper Industries Ltd. 399 23,705 Emerson Electric Co. 2,084 132,438 Power-One, Inc. (a) 467 5,128 Rockwell Automation, Inc. 909 34,097 Thomas & Betts Corp. 250 6,808 --------------- 219,723 --------------- INDUSTRIAL CONGLOMERATES--4.8% 3M Co. 3,734 336,097 General Electric Co. 50,939 1,650,424 Honeywell International, Inc. 4,214 154,359 Textron, Inc. 665 39,468 Tyco International Ltd. 9,729 322,419 --------------- 2,502,767 --------------- MACHINERY--1.4% Caterpillar, Inc. 1,592 126,468 Cummins, Inc. 180 11,250 Danaher Corp. 1,492 77,360 Deere & Co. 1,197 83,958 Dover Corp. 940 39,574 Eaton Corp. 766 49,591 Illinois Tool Works, Inc. 1,433 137,410 Ingersoll-Rand Co. 878 59,976 ITT Industries, Inc. 481 39,923 Navistar International Corp. (a) 371 14,380 Paccar, Inc. 819 47,494 Pall Corp. 600 15,714 Parker Hannifin Corp. 556 33,060 --------------- 736,158 --------------- ROAD & RAIL--0.4% Burlington Northern Santa Fe Corp. 1,803 63,231 CSX Corp. 1,063 34,835 Norfolk Southern Corp. 1,862 49,380 Union Pacific Corp. 1,239 73,659 --------------- 221,105 --------------- </Table> See Notes to Investment Portfolio. 103 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- TRADING COMPANIES & DISTRIBUTORS--0.1% Genuine Parts Co. 845 $ 33,530 WW Grainger, Inc. 425 24,438 --------------- 57,968 --------------- INFORMATION TECHNOLOGY--16.2% COMMUNICATIONS EQUIPMENT--3.1% ADC Telecommunications, Inc. (a) 3,764 10,690 Andrew Corp. (a) 787 15,748 Avaya, Inc. (a) 2,098 33,127 CIENA Corp. (a) 2,719 10,115 Cisco Systems, Inc. (a) 32,635 773,450 Comverse Technology, Inc. (a) 921 18,365 Corning, Inc. (a) 6,609 86,314 JDS Uniphase Corp. (a) 6,993 26,503 Lucent Technologies, Inc. (a) 20,798 78,616 Motorola, Inc. 11,308 206,371 QUALCOMM, Inc. 3,945 287,906 Scientific-Atlanta, Inc. 705 24,322 Tellabs, Inc. (a) 1,991 17,401 --------------- 1,588,928 --------------- COMPUTERS & PERIPHERALS--3.5% Apple Computer, Inc. (a) 1,836 59,743 Dell, Inc. (a) 12,179 436,252 EMC Corp. (a) 11,792 134,429 Gateway, Inc. (a) 1,545 6,952 Hewlett-Packard Co. 14,809 312,470 International Business Machines Corp 8,110 714,896 Lexmark International, Inc. (a) 595 57,435 NCR Corp. (a) 480 23,803 Network Appliance, Inc. (a) 1,684 36,257 Sun Microsystems, Inc. (a) 15,975 69,332 --------------- 1,851,569 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.5% Agilent Technologies, Inc. (a) 2,273 66,553 Jabil Circuit, Inc. (a) 915 23,040 Molex, Inc. 915 29,353 PerkinElmer, Inc. 537 10,762 Sanmina Corp. (a) 2,403 21,867 Solectron Corp. (a) 4,886 31,612 Symbol Technologies, Inc. 1,094 16,126 Tektronix, Inc. 387 13,166 Thermo Electron Corp. (a) 777 23,885 Waters Corp. (a) 539 25,753 --------------- 262,117 --------------- INTERNET SOFTWARE & SERVICES--0.5% Yahoo!, Inc. (a) 6,588 239,342 --------------- IT SERVICES--0.4% Affiliated Computer Services, Inc., Class A (a) 700 37,058 Computer Sciences Corp. (a) 941 43,691 Electronic Data Systems Corp. 2,291 43,873 Sungard Data Systems, Inc. (a) 1,423 36,998 Unisys Corp. (a) 1,537 21,334 --------------- 182,954 --------------- OFFICE ELECTRONICS--0.1% Xerox Corp. (a) 3,809 $ 55,230 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.6% Advanced Micro Devices, Inc. (a) 1,637 26,028 Altera Corp. (a) 1,817 40,374 Analog Devices, Inc. 1,808 85,121 Applied Materials, Inc. (a) 8,130 159,511 Applied Micro Circuits Corp. (a) 1,304 6,937 Broadcom Corp. (a) 1,541 72,073 Intel Corp. 31,209 861,368 KLA-Tencor Corp. (a) 913 45,084 Linear Technology Corp. 1,523 60,113 LSI Logic Corp. (a) 1,791 13,647 Maxim Integrated Products 1,587 83,191 Micron Technology, Inc. (a) 2,915 44,629 National Semiconductor Corp. (a) 1,790 39,362 Novellus Systems, Inc. (a) 742 23,329 NVIDIA Corp. (a) 780 15,990 PMC-Sierra, Inc. (a) 798 11,451 QLogic Corp. (a) 455 12,098 Teradyne, Inc. (a) 876 19,885 Texas Instruments, Inc. 8,363 202,217 Xilinx, Inc. 1,726 57,493 --------------- 1,879,901 --------------- SOFTWARE--4.5% Adobe Systems, Inc. 1,193 55,474 Autodesk, Inc. 600 25,686 BMC Software, Inc. (a) 1,062 19,647 Citrix Systems, Inc. (a) 793 16,145 Computer Associates International, Inc. 2,839 79,662 Compuware Corp. (a) 1,836 12,118 Electronic Arts, Inc. (a) 1,428 77,897 Intuit, Inc. (a) 913 35,224 Mercury Interactive Corp. (a) 407 20,281 Microsoft Corp. 52,039 1,486,234 Novell, Inc. (a) 1,736 14,565 Oracle Corp. (a) 25,142 299,944 Parametric Technology Corp. (a) 1,191 5,955 PeopleSoft, Inc. (a) 1,781 32,948 Siebel Systems, Inc. (a) 2,348 25,077 Symantec Corp. (a) 1,516 66,370 Veritas Software Corp. (a) 2,094 58,004 --------------- 2,331,231 --------------- MATERIALS--3.0% CHEMICALS--1.5% Air Products & Chemicals, Inc. 1,092 57,275 Dow Chemical Co. 4,510 183,557 Du Pont EI de Nemours & Co. 4,824 214,282 Eastman Chemical Co. 367 16,966 Ecolab, Inc. 1,220 38,674 Engelhard Corp. 584 18,869 Great Lakes Chemical Corp. 255 6,900 Hercules, Inc. (a) 483 5,888 International Flavors & Fragrances, Inc. 416 15,558 </Table> See Notes to Investment Portfolio. 104 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- Monsanto Co. 1,255 $ 48,318 PPG Industries, Inc. 821 51,304 Praxair, Inc. 1,540 61,461 Rohm & Haas Co. 1,081 44,948 Sigma-Aldrich Corp. 301 17,943 --------------- 781,943 --------------- CONSTRUCTION MATERIALS--0.1% Vulcan Materials Co. 522 24,821 --------------- CONTAINERS & PACKAGING--0.2% Ball Corp. 290 20,894 Bemis Co. 496 14,012 Pactiv Corp. (a) 772 19,254 Sealed Air Corp. (a) 390 20,775 Temple-Inland, Inc. 213 14,750 --------------- 89,685 --------------- METALS & MINING--0.7% Alcoa, Inc. 4,182 138,131 Allegheny Technologies, Inc. 382 6,895 Freeport-McMoRan Copper & Gold, Inc., Class B 880 29,172 Newmont Mining Corp. 2,189 84,846 Nucor Corp. 394 30,243 Phelps Dodge Corp. 414 32,089 United States Steel Corp. 509 17,876 Worthington Industries, Inc. 401 8,233 --------------- 347,485 --------------- PAPER & FOREST PRODUCTS--0.5% Boise Cascade Corp. 450 16,938 Georgia-Pacific Corp. 1,245 46,040 International Paper Co. 2,320 103,704 Louisiana-Pacific Corp. 570 13,480 MeadWestvaco Corp. 1,011 29,713 Weyerhaeuser Co. 1,157 73,030 --------------- 282,905 --------------- TELECOMMUNICATION SERVICES--3.3% DIVERSIFIED TELECOMMUNICATION SERVICES--2.7% Alltel Corp. 1,543 78,107 AT&T Corp. 3,820 55,887 BellSouth Corp. 8,882 232,886 CenturyTel, Inc. 689 20,698 Citizens Communications Co. 1,279 15,476 Qwest Communications International (a) 8,256 29,639 SBC Communications, Inc. 15,951 386,812 Sprint Corp-FON Group 6,918 121,757 Verizon Communications, Inc. 13,305 481,508 --------------- 1,422,770 --------------- WIRELESS TELECOMMUNICATION SERVICES--0.6% AT&T Wireless Services, Inc. (a) 13,140 188,165 Nextel Communications, Inc. (a) 5,409 144,204 --------------- 332,369 --------------- UTILITIES--2.8% ELECTRIC UTILITIES--2.2% AES Corp. (a) 2,926 $ 29,055 Allegheny Energy, Inc. (a) 567 8,737 Ameren Corp. 864 37,117 American Electric Power Co., Inc. 1,932 61,824 CenterPoint Energy, Inc. 1,393 16,020 Cinergy Corp. 878 33,364 CMS Energy Corp. (a) 800 7,304 Consolidated Edison, Inc. 1,160 46,122 Constellation Energy Group, Inc. 787 29,827 Dominion Resources, Inc. 1,545 97,459 DTE Energy Co. 804 32,594 Edison International 1,606 41,065 Entergy Corp. 1,128 63,179 Exelon Corp. 3,198 106,461 FirstEnergy Corp. 1,632 61,053 FPL Group, Inc. 875 55,956 PG&E Corp. (a) 2,022 56,495 Pinnacle West Capital Corp. 412 16,641 PPL Corp. 857 39,336 Progress Energy, Inc. 1,229 54,137 Public Service Enterprise Group, Inc. 1,200 48,036 Southern Co. 3,559 103,744 TECO Energy, Inc. 800 9,592 TXU Corp. 1,528 61,899 Xcel Energy, Inc. 1,857 31,030 --------------- 1,148,047 --------------- GAS UTILITIES--0.3% El Paso Corp. 3,064 24,144 KeySpan Corp. 769 28,222 Kinder Morgan, Inc. 646 38,301 Nicor, Inc. 245 8,323 NiSource, Inc. 1,209 24,930 Peoples Energy Corp. 152 6,407 Sempra Energy 1,080 37,184 --------------- 167,511 --------------- MULTI-UTILITIES & UNREGULATED POWER--0.3% Calpine Corp. 1,926 8,320 Duke Energy Corp. 4,386 88,992 Dynegy, Inc. 1,600 6,816 Williams Companies, Inc. 2,458 29,250 --------------- 133,378 --------------- TOTAL COMMON STOCKS (cost of $48,472,579) 51,414,896 --------------- </Table> See Notes to Investment Portfolio. 105 <Page> <Table> <Caption> PAR VALUE --------------- --------------- SHORT TERM OBLIGATIONS--1.3% U.S. GOVERNMENT OBLIGATION--0.2% U.S. Treasury Bill, 1.220% 09/09/04 (c) $ 80,000 $ 79,810 REPURCHASE AGREEMENT--1.1% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/04, due 07/01/04 at 1.170%, collateralized by a U.S. Treasury Bond maturing 08/15/29, market value $563,743 (repurchase proceeds $551,018) 551,000 551,000 --------------- TOTAL SHORT-TERM OBLIGATIONS (cost of $630,810) 630,810 --------------- TOTAL INVESTMENTS--100.1% (cost of $49,103,389) (d) 52,045,706 --------------- OTHER ASSETS & LIABILITIES, NET--(0.1)% (29,471) --------------- NET ASSETS--100.0% $ 52,016,235 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Investments in Affiliates during the six months ended June 30, 2004: Security Name: FleetBoston Financial Corp., the parent company of the Investment Advisor prior to April 1, 2004. <Table> Shares as of 12/31/03: 4,858 Shares purchased: 200 Shares disposed of through acquisition: (5,058) Shares as of 06/30/04: -- Net realized gain (loss): $ -- Dividend income earned: $ 1,770 Value at end of period: $ -- </Table> Security Name: Bank of America Corp. (As a result of the acquisition of FleetBoston Financial Corp. effective April 1, 2004, Bank of America Corp. became the parent company of the Investment Advisor.) <Table> Shares as of 12/31/03: 6,928 Shares purchased: 500 Shares sold: (401) Share acquired through acquisition: 2,809 Shares as of 12/31/04: 9,836 Net realized gain*: $ 23 Dividend income earned*: $ 7,869 Value at end of period: $ 832,322 </Table> * Represents activity for the period April 1, 2004 through June 30, 2004. (c) Security pledged as collateral for open futures contracts. (d) Cost for both financial statement and federal income tax purposes is the same. At June 30, 2004, the Fund held the following open long futures contracts: <Table> <Caption> AGGREGATE EXPIRATION UNREALIZED TYPE VALUE FACE VALUE DATE APPRECIATION ---- --------- ---------- ---------- ------------ S&P Mini 500 $ 912,400 $ 904,799 Sep-2004 $ 7,601 ======= </Table> <Table> <Caption> ACRONYM NAME ------- ---- REIT Real Estate Investment Trust </Table> See Notes to Financial Statements. 106 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty S&P 500 Index Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Unaffiliated investments, at cost $ 48,495,829 Affiliated investments, at cost 607,560 --------------- Unaffiliated investments, at value $ 51,213,384 Affiliated investments, at value 832,322 Cash 52 Receivable for: Investments sold 327,000 Fund shares sold 595 Interest 18 Dividends 58,341 Futures variation margin 3,878 Expense reimbursement due from Distributor 3,953 Deferred Trustees' compensation plan 2,440 --------------- TOTAL ASSETS 52,441,983 --------------- LIABILITIES: Payable for: Investments purchased 104,901 Fund shares repurchased 252,460 Investment advisory fee 16,911 Transfer agent fee 605 Pricing and bookkeeping fees 7,218 Audit fee 16,984 Custody fee 7,356 Distribution fee--Class B 11,413 Deferred Trustees' fees 2,440 Other liabilities 5,460 --------------- TOTAL LIABILITIES 425,748 --------------- NET ASSETS $ 52,016,235 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 52,265,766 Undistributed net investment income 222,432 Accumulated net realized loss (3,421,881) Net unrealized appreciation on: Investments 2,942,317 Futures contracts 7,601 --------------- NET ASSETS $ 52,016,235 =============== CLASS A: Net assets $ 85,049 Shares outstanding 8,576 =============== Net asset value per share $ 9.92 =============== CLASS B: Net assets $ 51,931,186 Shares outstanding 5,252,879 =============== Net asset value per share $ 9.89 =============== </Table> See Notes to Financial Statements. 107 <Page> STATEMENT OF OPERATIONS Liberty S&P 500 Index Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 400,700 Dividends from affiliates 7,869 Interest 4,476 --------------- Total Investment Income 413,045 --------------- EXPENSES: Investment advisory fee 100,938 Distribution fee--Class B 62,982 Transfer agent fee 3,729 Pricing and bookkeeping fees 18,584 Trustees' fee 3,520 Custody fee 14,180 Audit fee 13,093 Non-recurring costs (See Note 6) 2,208 Other expenses 7,451 --------------- Total Expenses 226,685 Fees reimbursed by Distributor--Class B (34,756) Non-recurring costs assumed by Investment Advisor (See Note 6) (2,208) Custody earnings credit (42) --------------- Net Expenses 189,679 --------------- Net Investment Income 223,366 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS: Net realized gain (loss) on: Unaffiliated investments (110,024) Affiliated investments 23 Futures contracts 60,697 --------------- Net realized loss (49,304) --------------- Net change in unrealized appreciation/depreciation on: Investments 1,381,218 Futures contracts (32,565) --------------- Net change in unrealized appreciation/depreciation 1,348,653 --------------- Net Gain 1,299,349 --------------- Net Increase in Net Assets from Operations $ 1,522,715 =============== </Table> See Notes to Financial Statements. 108 <Page> STATEMENT OF CHANGES IN NET ASSETS Liberty S&P 500 Index Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 223,366 $ 377,448 Net realized loss on investments and futures contracts (49,304) (371,434) Net change in unrealized appreciation/depreciation on investments and futures contracts 1,348,653 9,268,500 --------------- --------------- Net Increase from Operations 1,522,715 9,274,514 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (680) Class B -- (377,651) --------------- --------------- Total Distributions Declared to Shareholders -- (378,331) --------------- --------------- SHARE TRANSACTIONS: Class A: Distributions reinvested -- 680 --------------- --------------- Class B: Subscriptions 4,023,518 13,560,308 Distributions reinvested -- 377,651 Redemptions (2,054,225) (3,136,822) --------------- --------------- Net Increase 1,969,293 10,801,137 --------------- --------------- Net Increase from Share Transactions 1,969,293 10,801,817 --------------- --------------- Total Increase in Net Assets 3,492,008 19,698,000 NET ASSETS: Beginning of period 48,524,227 28,826,227 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $222,432 and $(934), respectively) $ 52,016,235 $ 48,524,227 =============== =============== CHANGES IN SHARES: Class A: Issued for distributions reinvested -- 71 --------------- --------------- Class B: Subscriptions 413,207 1,585,888 Issued for distributions reinvested -- 39,462 Redemptions (209,677) (374,208) --------------- --------------- Net Increase 203,530 1,251,142 --------------- --------------- </Table> See Notes to Financial Statements. 109 <Page> NOTES TO FINANCIAL STATEMENTS Liberty S&P 500 Index Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Liberty S&P 500 Index Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks capital appreciation by matching the performance of a benchmark index that measures the investment returns of stocks of large U.S. companies. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. FUTURES CONTRACTS--The Fund may invest in municipal and U.S. Treasury futures contracts. The Fund may invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Fund 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 positions due to differing trading hours, or the temporary absence of a liquid market, for either the instrument or the underlying securities, or (3) an inaccurate prediction by Columbia Management Advisors, Inc. of the future direction of interest rates. 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. Upon entering into a futures contract, the Fund deposits cash or securities with the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin payable or receivable and offset in unrealized gains or losses. The Fund also identifies portfolio securities as segregated with the custodian in a separate account in an amount equal to the futures contract. The Fund recognizes a realized gain or loss when the contract is closed or expires. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. 110 <Page> INCOME RECOGNITION--Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 378,331 Long-term capital gains -- </Table> * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 7,926,489 Unrealized depreciation (4,984,172) ------------ Net unrealized appreciation $ 2,942,317 ============ </Table> The following capital loss carryforwards, determined as of December 31, 2003, may be 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 2011 12,140 ------------ $ 1,485,110 ============ </Table> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee at the annual rate of 0.40% of the Fund's average daily net assets. SUB-ADVISORY FEE--State Street Global Advisors ("SSgA") has been retained by Columbia as sub-advisor to the Fund. As the sub-advisor, SSgA is responsible for daily investment operations, including placing all orders for the purchase and sale of portfolio securities for the Fund. Columbia, out of the investment advisory fee it receives, pays SSgA a monthly sub-advisory fee at the following annual rates: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $50 million $ 25,000 Over $50 million 0.05% </Table> 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 Corporation ("State Street"). As a result, Columbia pays the total fees received 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 111 <Page> average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.074%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the six months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia and the Distributor have voluntarily agreed to waive fees and reimburse the Fund for certain expenses so that total expenses (exclusive of brokerage commissions, interest, taxes and extraordinary expenses, if any) would not exceed 0.75% annually of the Fund's average daily net assets. The Distributor 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 in order to reach the expense limit, Columbia will then waive a portion of its investment advisory fee to the extent necessary. Columbia or the Distributor, at their discretion, may revise or discontinue this arrangement any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended June 30, 2004, the Fund paid $676 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $3,383,968 and $1,079,064, respectively. NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief 112 <Page> from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $2,208 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 113 <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, 2004 2003 2002 2001 2000 (a) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 9.59 $ 7.57 $ 9.89 $ 11.31 $ 12.00 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.04 0.09 0.08 0.07 0.07 Net realized and unrealized gain (loss) on investments and futures contracts 0.26 2.01 (2.33) (1.43) (0.70) ------------ ------------ ------------ ------------ ------------ Total from Investment Operations 0.30 2.10 (2.25) (1.36) (0.63) ------------ ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net realized gains -- (0.08) (0.06) (0.06) (0.06) Return of capital -- -- (0.01) -- -- ------------ ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders -- (0.08) (0.07) (0.06) (0.06) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 9.89 $ 9.59 $ 7.57 $ 9.89 $ 11.31 ============ ============ ============ ============ ============ Total return (c)(d)(e) 3.13%(f) 27.68% (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% 0.75%(h) Net investment income (g) 0.88%(h) 1.05% 0.88% 0.72% 0.89%(h) Waiver/reimbursement 0.14%(h) 0.22% 0.14% 0.53% 0.61%(h) Portfolio turnover rate 2%(f) 3% 17% 7% 2%(f) Net assets, end of period (000's) $ 51,931 $ 48,442 $ 28,762 $ 28,835 $ 12,098 </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) Total return at net asset value assuming all distributions reinvested. (d) Had the Investment Advisor 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. 114 <Page> PORTFOLIO MANAGERS' DISCUSSION Liberty Select Value Fund, Variable Series / June 30, 2004 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 since 1991. The fund provided a competitive return for the six-month period, outpacing its benchmark, the Russell Midcap Value Index. Strong performance from energy and technology holdings offset disappointing returns in the consumer discretionary sector. Mid-cap stocks advanced solidly in the first half of the year as strong corporate profits outweighed concerns about higher interest rates and a spike in raw material costs, including energy and steel. Corporate profits benefited as companies enjoyed robust volume growth and increased prices, which helped offset higher input costs. POWERFUL BOOST FROM ENERGY AND TECHNOLOGY The fund's overweight in energy stocks relative to its benchmark was the single largest positive contributor to performance. Rising oil and natural gas prices helped XTO Energy and Amerada Hess (3.2% and 1.4% of net assets, respectively) post significant gains during the period. Our technology holdings also aided performance, although we had a modest underweight in the sector. Andrew, which sells wireless infrastructure equipment, rose sharply, as did electronics components manufacturer Littelfuse (1.5% and 1.0% of net assets, respectively). We sold our position in Zebra Technologies, which specializes in bar code scanning devices. The stock performed well for several years, and it no longer fit our value criteria. DISAPPOINTING RETURNS FROM CONSUMER DISCRETIONARY AND SELECT INDUSTRIAL STOCKS Rising energy prices and interest rates may have contributed to poor performance in the consumer discretionary sector, as investors became concerned that these factors would have a negative impact on consumer spending. The fund had an overweight in the sector relative to its benchmark. Disappointments included auto parts supplier Superior Industries International (0.7% of net assets), which suffered from pricing pressures and manufacturing problems in its core aluminum wheels business. In the industrial area, we lost ground with Navistar International (1.3% of net assets), which had difficulty meeting surging demand for truck orders because of parts shortages. Rising steel costs further pressured profit margins. FINE-TUNING OUR HOLDINGS During the period, we trimmed positions that had risen in price and added to names that were attractively valued. For example, we took profits in medical device manufacturer Biomet and Gentex, which makes automatic-dimming car mirrors (1.0% and 0.7% of net assets, respectively). We added to our holdings of Pactiv and Dean Foods (0.7% and 2.6% of net assets, respectively) when their stock prices retreated. We also established a new position in Willis Group Holdings (0.2% of net assets), an insurance broker with the number three position in the industry. A relatively new management team has rejuvenated the company, leading to market share gains against the top two players, as well as smaller firms. In addition, we believe several specific investor concerns that have been weighing on the stock could be resolved favorably in the near term. MIXED SIGNALS AHEAD The outlook for profit growth in the second half of 2004 has been clouded by mixed economic signals late in the second quarter. For instance, strong jobs reports in April and May were followed by a relatively weak report in June. Further, there were indications that both consumer and business spending moderated in June. In addition to raw material costs, several other wild cards add uncertainty to the near-term direction of the market, such as the upcoming presidential election and the ongoing risk of terrorism. As always, we will continue to seek to identify well-managed companies in good or improving businesses that we believe have the potential to prosper under a variety of market conditions. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. An investment in 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. Value stocks are securities of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor. If the advisor's assessment of a company's prospects is wrong, the price of its stock may not approach the value the advisor has placed on it. Holdings are disclosed as of June 30, 2004, and are subject to change. 115 <Page> PERFORMANCE INFORMATION Liberty Select Value Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR LIFE - ------------------------------------------------------------- Class B (5/30/00) 7.72 27.69 8.67 Russell Midcap Value Index 7.17 30.81 11.89 S&P MidCap 400 Index 6.09 27.99 7.42 </Table> Inception date of share class is in parentheses. <Table> <Caption> Net asset value per share ($) 12/31/03 6/30/04 - ------------------------------------------------------------- Class B 15.41 16.60 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 5/30/00 - 6/30/04 CLASS B: $14,048 <Table> <Caption> CLASS B SHARES RUSSELL MIDCAP VALUE INDEX S&P MIDCAP 400 INDEX 5/30/2000 $ 10,000 $ 10,000 $ 10,000 5/31/2000 $ 10,200 $ 10,011 $ 10,014 6/30/2000 $ 10,066 $ 9,649 $ 10,175 7/31/2000 $ 10,333 $ 9,874 $ 10,336 8/31/2000 $ 11,184 $ 10,480 $ 11,491 9/30/2000 $ 10,983 $ 10,580 $ 11,412 10/31/2000 $ 11,034 $ 10,781 $ 11,026 11/30/2000 $ 10,309 $ 10,641 $ 10,193 12/31/2000 $ 11,139 $ 11,580 $ 10,973 1/31/2001 $ 11,551 $ 11,538 $ 11,218 2/28/2001 $ 11,206 $ 11,490 $ 10,577 3/31/2001 $ 10,961 $ 11,171 $ 9,791 4/30/2001 $ 11,769 $ 11,786 $ 10,871 5/31/2001 $ 12,098 $ 12,120 $ 11,124 6/30/2001 $ 11,862 $ 11,959 $ 11,080 7/31/2001 $ 11,962 $ 11,911 $ 10,915 8/31/2001 $ 11,660 $ 11,693 $ 10,558 9/30/2001 $ 10,221 $ 10,578 $ 9,245 10/31/2001 $ 10,423 $ 10,634 $ 9,653 11/30/2001 $ 11,062 $ 11,378 $ 10,371 12/31/2001 $ 11,525 $ 11,850 $ 10,908 1/31/2002 $ 11,618 $ 11,970 $ 10,851 2/28/2002 $ 11,812 $ 12,164 $ 10,864 3/31/2002 $ 12,361 $ 12,786 $ 11,641 4/30/2002 $ 12,395 $ 12,777 $ 11,586 5/31/2002 $ 12,437 $ 12,758 $ 11,390 6/30/2002 $ 11,744 $ 12,189 $ 10,556 7/31/2002 $ 10,908 $ 10,995 $ 9,532 8/31/2002 $ 10,984 $ 11,123 $ 9,581 9/30/2002 $ 9,819 $ 9,999 $ 8,809 10/31/2002 $ 10,021 $ 10,317 $ 9,190 11/30/2002 $ 10,603 $ 10,967 $ 9,722 12/31/2002 $ 10,232 $ 10,706 $ 9,323 1/31/2003 $ 9,970 $ 10,410 $ 9,050 2/28/2003 $ 9,742 $ 10,237 $ 8,835 3/31/2003 $ 9,717 $ 10,272 $ 8,909 4/30/2003 $ 10,334 $ 11,053 $ 9,556 5/31/2003 $ 10,925 $ 12,025 $ 10,348 6/30/2003 $ 11,001 $ 12,109 $ 10,480 7/31/2003 $ 11,322 $ 12,486 $ 10,852 8/31/2003 $ 11,686 $ 12,929 $ 11,344 9/30/2003 $ 11,466 $ 12,828 $ 11,171 10/31/2003 $ 12,236 $ 13,770 $ 12,015 11/30/2003 $ 12,506 $ 14,169 $ 12,433 12/31/2003 $ 13,041 $ 14,781 $ 12,644 1/31/2004 $ 13,269 $ 15,172 $ 12,918 2/29/2004 $ 13,693 $ 15,546 $ 13,228 3/31/2004 $ 13,701 $ 15,571 $ 13,284 4/30/2004 $ 13,430 $ 14,913 $ 12,848 5/31/2004 $ 13,642 $ 15,294 $ 13,114 6/30/2004 $ 14,048 $ 15,823 $ 13,395 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. Total return performance includes changes in share price and reinvestment of all distributions. As reported in the annual report dated December 31, 2003, the Russell Midcap Value Index is the fund's new benchmark. The Standard & Poor's (S&P) MidCap 400 Index was the fund's previous benchmark. The Russell Midcap Value Index is an unmanaged index that measures the performance of those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values. The S&P MidCap 400 Index is an unmanaged market value-weighted index that tracks the performance of 400 mid-cap US companies. 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. 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. Index performance for the life of the fund is from May 30, 2000. 116 <Page> INVESTMENT PORTFOLIO Liberty Select Value Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--95.6% CONSUMER DISCRETIONARY--16.1% AUTO COMPONENTS--3.8% BorgWarner, Inc. 4,000 $ 175,080 Gentex Corp. 7,700 305,536 Johnson Controls, Inc. 6,600 352,308 Lear Corp. 7,900 466,021 Superior Industries International 8,400 280,980 --------------- 1,579,925 --------------- HOTELS, RESTAURANTS & LEISURE--3.1% Brinker International, Inc. (a) 14,000 477,680 Darden Restaurants, Inc. 8,700 178,785 Harrah's Entertainment, Inc. 6,300 340,830 Six Flags, Inc. (a) 38,000 275,880 --------------- 1,273,175 --------------- HOUSEHOLD DURABLES--0.7% Newell Rubbermaid, Inc. 12,600 296,100 --------------- LEISURE EQUIPMENT & PRODUCTS--0.6% Mattel, Inc. 14,600 266,450 --------------- MEDIA--2.0% Knight-Ridder, Inc. 4,100 295,200 Mediacom Communications Corp. (a) 18,800 147,016 New York Times Co., Class A 8,000 357,680 --------------- 799,896 --------------- MULTILINE RETAIL--2.3% Federated Department Stores, Inc. 19,000 932,900 --------------- SPECIALTY RETAIL--3.1% Borders Group, Inc. 16,100 377,384 Ross Stores, Inc. 10,800 289,008 TJX Companies, Inc. 26,000 627,640 --------------- 1,294,032 --------------- TEXTILES, APPAREL & LUXURY GOODS--0.5% Wolverine World Wide, Inc. 7,100 186,375 --------------- CONSUMER STAPLES--5.2% BEVERAGES--0.9% Pepsi Bottling Group, Inc. 12,000 366,480 --------------- FOOD PRODUCTS--3.1% Dean Foods Co. (a) 28,300 1,055,873 Hormel Foods Corp. 6,900 214,590 --------------- 1,270,463 --------------- PERSONAL PRODUCTS--1.2% Avon Products, Inc. 10,800 498,312 --------------- ENERGY--7.4% ENERGY EQUIPMENT & SERVICES--2.5% BJ Services Co. (a) 5,400 247,536 Noble Corp. (a) 8,200 310,698 Transocean, Inc. (a) 9,650 279,271 Weatherford International Ltd. (a) 4,400 197,912 --------------- 1,035,417 --------------- OIL & GAS--4.9% Amerada Hess Corp. 7,100 $ 562,249 Occidental Petroleum Corp. 3,000 145,230 XTO Energy, Inc. 44,791 1,334,324 --------------- 2,041,803 --------------- FINANCIALS--21.3% CAPITAL MARKETS--2.9% Bear Stearns Companies, Inc. 4,200 354,102 Janus Capital Group, Inc. 34,700 572,203 Lehman Brothers Holdings, Inc. 3,500 263,375 --------------- 1,189,680 --------------- COMMERCIAL BANKS--4.9% Banknorth Group, Inc. 12,800 415,744 Charter One Financial, Inc. 10,895 481,450 City National Corp. 6,300 413,910 Cullen/Frost Bankers, Inc. 3,800 170,050 North Fork Bancorporation, Inc. 13,900 528,895 --------------- 2,010,049 --------------- DIVERSIFIED FINANCIAL SERVICES--0.4% Citigroup, Inc. 3,831 178,142 --------------- INSURANCE--4.4% Ambac Financial Group, Inc. 7,250 532,440 Cincinnati Financial Corp. 5,565 242,189 Loews Corp. 4,300 257,828 Nationwide Financial Services, Class A 7,400 278,314 Old Republic International Corp. 4,500 106,740 St. Paul Travelers Companies, Inc. 7,900 320,266 Willis Group Holdings Ltd. 2,600 97,370 --------------- 1,835,147 --------------- THRIFTS & MORTGAGE FINANCE--8.7% Golden West Financial Corp. 9,600 1,020,960 Greenpoint Financial Corp. 13,500 535,950 PMI Group, Inc. 12,300 535,296 Radian Group, Inc. 9,900 474,210 Sovereign Bancorp, Inc. 26,500 585,650 Webster Financial Corp. 9,100 427,882 --------------- 3,579,948 --------------- HEALTH CARE--4.6% HEALTH CARE EQUIPMENT & SUPPLIES--1.9% Biomet, Inc. 9,000 399,960 Millipore Corp. (a) 6,900 388,953 --------------- 788,913 --------------- HEALTH CARE PROVIDERS & SERVICES--2.7% Anthem, Inc. (a) 2,700 241,812 First Health Group Corp. (a) 15,800 246,638 HCA, Inc. 6,800 282,812 WellPoint Health Networks, Inc. (a) 3,200 358,432 --------------- 1,129,694 --------------- INDUSTRIALS--13.1% AEROSPACE & DEFENSE--1.0% Alliant Techsystems, Inc. (a) 4,300 272,362 Northrop Grumman Corp. 2,400 128,880 --------------- 401,242 --------------- </Table> See Notes to Investment Portfolio. 117 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- AIR FREIGHT & LOGISTICS--0.7% CNF, Inc. 6,500 $ 270,140 --------------- AIRLINES--0.5% AMR Corp. (a) 18,600 225,246 --------------- COMMERCIAL SERVICES & SUPPLIES--4.7% Brink's Co. 20,000 685,000 Cendant Corp. 24,400 597,312 DST Systems, Inc. (a) 6,500 312,585 Manpower, Inc. 6,700 340,159 --------------- 1,935,056 --------------- ELECTRICAL EQUIPMENT--1.0% Ametek, Inc. 8,000 247,200 Hubbell, Inc., Class B 3,900 182,169 --------------- 429,369 --------------- INDUSTRIAL CONGLOMERATES--1.4% Carlisle Companies, Inc. 8,900 554,025 --------------- MACHINERY--3.8% AGCO Corp. (a) 6,000 122,220 Dover Corp. 5,800 244,180 Ingersoll-Rand Co., Class A 6,200 423,522 Navistar International Corp. (a) 14,300 554,268 Parker Hannifin Corp. 4,000 237,840 --------------- 1,582,030 --------------- INFORMATION TECHNOLOGY--8.1% COMMUNICATIONS EQUIPMENT--1.5% Andrew Corp. (a) 31,900 638,319 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--4.9% Amphenol Corp., Class A (a) 20,000 666,400 Arrow Electronics, Inc. (a) 10,400 278,928 AVX Corp. 13,600 196,520 Littelfuse, Inc. (a) 10,000 424,100 Varian, Inc. (a) 6,700 282,405 Vishay Intertechnology, Inc. (a) 9,450 175,581 --------------- 2,023,934 --------------- IT SERVICES--0.9% Affiliated Computer Services, Inc., Class A (a) 6,900 365,286 --------------- SOFTWARE--0.8% Reynolds & Reynolds Co., Class A 14,100 326,133 --------------- MATERIALS--12.9% CHEMICALS--7.2% Air Products & Chemicals, Inc. 6,800 356,660 Eastman Chemical Co. 9,100 420,693 Engelhard Corp. 11,200 361,872 International Flavors & Fragrances, Inc. 14,900 557,260 Lubrizol Corp. 7,900 289,298 OM Group, Inc. (a) 4,700 155,147 PPG Industries, Inc. 6,700 418,683 Praxair, Inc. 10,600 423,046 --------------- 2,982,659 --------------- CONTAINERS & PACKAGING--2.3% Crown Holdings, Inc. (a) 25,000 $ 249,250 Packaging Corp. of America 17,300 413,470 Pactiv Corp. (a) 11,000 274,340 --------------- 937,060 --------------- PAPER & FOREST PRODUCTS--3.4% Boise Cascade Corp. 8,500 319,940 Georgia-Pacific Corp. 18,100 669,338 MeadWestvaco Corp. 13,634 400,703 --------------- 1,389,981 --------------- TELECOMMUNICATION SERVICES--1.5% WIRELESS TELECOMMUNICATION SERVICES--1.5% Telephone & Data Systems, Inc. 8,500 605,200 --------------- UTILITIES--5.4% ELECTRIC UTILITIES--4.7% Allete, Inc. 6,700 223,110 Entergy Corp. 5,400 302,454 Exelon Corp. 15,700 522,653 PPL Corp. 5,700 261,630 Progress Energy, Inc. 10,800 475,740 Reliant Energy, Inc. (a) 14,900 161,367 --------------- 1,946,954 --------------- MULTI-UTILITIES & UNREGULATED POWER--0.7% Energy East Corp. 11,300 274,025 --------------- TOTAL COMMON STOCKS (cost of $30,732,298) 39,439,560 --------------- <Caption> PAR --------------- SHORT-TERM OBLIGATION--5.0% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/04, due 07/01/04 at 1.170%, collateralized by a U.S. Treasury Bond maturing 08/15/28, market value $2,101,403 (repurchase proceeds $2,059,067) (cost of $2,059,000) $ 2,059,000 2,059,000 --------------- TOTAL INVESTMENTS--100.6% (cost of $32,791,298) (b) 41,498,560 --------------- OTHER ASSETS & LIABILITIES, NET--(0.6)% (250,708) --------------- NET ASSETS--100.0% $ 41,247,852 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for both financial statement and federal income tax purposes is the same. See Notes to Financial Statements. 118 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty Select Value Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Investments, at cost $ 32,791,298 --------------- Investments, at value $ 41,498,560 Cash 751 Receivable for: Investments sold 44,479 Fund shares sold 789 Interest 67 Dividends 24,467 Expense reimbursement due from Distributor 2,581 Deferred Trustees' compensation plan 2,296 --------------- TOTAL ASSETS 41,573,990 --------------- LIABILITIES: Payable for: Fund shares repurchased 271,622 Investment advisory fee 22,781 Transfer agent fee 604 Pricing and bookkeeping fees 296 Audit fee 16,462 Custody fee 653 Distribution fee--Class B 8,184 Deferred Trustees' fees 2,296 Other liabilities 3,240 --------------- TOTAL LIABILITIES 326,138 --------------- NET ASSETS $ 41,247,852 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 32,931,344 Undistributed net investment income 24,485 Accumulated net realized loss (415,239) Net unrealized appreciation on Investments 8,707,262 --------------- NET ASSETS $ 41,247,852 =============== CLASS A: Net assets $ 1,485,632 Shares outstanding 89,331 =============== Net asset value per share $ 16.63 =============== CLASS B: Net assets $ 39,762,220 Shares outstanding 2,395,781 =============== Net asset value per share $ 16.60 =============== </Table> See Notes to Financial Statements. 119 <Page> STATEMENT OF OPERATIONS Liberty Select Value Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 233,898 Interest 8,040 --------------- Total Investment Income 241,938 --------------- EXPENSES: Investment advisory fee 138,452 Distribution fee--Class B 47,712 Transfer agent fee 3,729 Pricing and bookkeeping fees 5,195 Trustees' fee 3,529 Custody fee 2,559 Audit fee 12,571 Non-recurring costs (See Note 6) 1,736 Other expenses 8,256 --------------- Total Expenses 223,739 Fees reimbursed by Distributor--Class B (5,951) Non-recurring costs assumed by Investment Advisor (See Note 6) (1,736) Custody earnings credit (2) --------------- Net Expenses 216,050 --------------- Net Investment Income 25,888 --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments 359,522 Net change in unrealized appreciation/depreciation on investments 2,575,351 --------------- Net Gain 2,934,873 --------------- Net Increase in Net Assets from Operations $ 2,960,761 =============== </Table> See Notes to Financial Statements. 120 <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: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 25,888 $ 59,485 Net realized gain (loss) on investments 359,522 (705,613) Net change in unrealized appreciation/depreciation on investments 2,575,351 8,564,493 --------------- --------------- Net Increase from Operations 2,960,761 7,918,365 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (4,195) Class B -- (55,597) --------------- --------------- Total Distributions Declared to Shareholders -- (59,792) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 202,354 578,918 Distributions reinvested -- 4,195 Redemptions (241,185) (93,140) --------------- --------------- Net Increase (Decrease) (38,831) 489,973 --------------- --------------- Class B: Subscriptions 1,900,653 7,832,430 Distributions reinvested -- 55,597 Redemptions (1,775,129) (3,283,568) --------------- --------------- Net Increase 125,524 4,604,459 --------------- --------------- Net Increase from Share Transactions 86,693 5,094,432 --------------- --------------- Total Increase in Net Assets 3,047,454 12,953,005 NET ASSETS: Beginning of period 38,200,398 25,247,393 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $24,485 and $(1,403), respectively) $ 41,247,852 $ 38,200,398 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 12,570 46,620 Issued for distributions reinvested -- 272 Redemptions (15,188) (7,103) --------------- --------------- Net Increase (Decrease) (2,618) 39,789 --------------- --------------- Class B: Subscriptions 119,135 601,441 Issued for distributions reinvested -- 3,606 Redemptions (110,404) (251,382) --------------- --------------- Net Increase 8,731 353,665 --------------- --------------- </Table> See Notes to Financial Statements. 121 <Page> NOTES TO FINANCIAL STATEMENTS Liberty Select Value Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Liberty Select Value Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks long-term growth. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments for which market quotations are not readily available, or quotations which management believes are not appropriate, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board of Trustees. SECURITY TRANSACTIONS--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION--Interest income is recorded on the accrual basis. Corporate actions and dividend income are recorded on the ex-date. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 59,792 Long-term capital gains -- </Table> * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. 122 <Page> Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 10,019,627 Unrealized depreciation (1,312,365) ------------ Net unrealized appreciation $ 8,707,262 ============ </Table> The following capital loss carryforwards, determined as of December 31, 2003, may be 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 2011 705,613 ------------ $ 726,227 ============ </Table> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $500 million 0.70% Next $500 million 0.65% Over $1 billion 0.60% </Table> 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 Corporation ("State Street"). As a result, Columbia pays the total fees received 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 exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.026%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the six months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was 0.02%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia and the Distributor have voluntarily agreed to waive fees and reimburse the Fund for certain expenses so that total expenses (exclusive of brokerage commissions, interest, taxes and extraordinary expenses, if any) would not exceed 1.10% annually of the Fund's average daily net assets. The Distributor 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 in order to reach the expense limit, Columbia will then waive a portion of its investment advisory fee to the extent necessary. Columbia or the Distributor, at their discretion, may revise or discontinue this arrangement any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months 123 <Page> ended June 30, 2004, the Fund paid $669 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $893,480 and $1,118,174, respectively. NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $1,736 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 124 <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, 2004 2003 2002 2001 2000 (a) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 15.41 $ 12.11 $ 13.65 $ 13.24 $ 12.00 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.01 0.03 0.01 0.05 0.09 Net realized and unrealized gain (loss) on investments 1.18 3.29 (1.54) 0.41 1.28 ------------ ------------ ------------ ------------ ------------ Total from Investment Operations 1.19 3.32 (1.53) 0.46 1.37 ------------ ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income -- (0.02) (0.01) (0.03) (0.07) From net realized gains -- -- -- (0.02) --(c) Return of capital -- -- -- -- (0.06) ------------ ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders -- (0.02) (0.01) (0.05) (0.13) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 16.60 $ 15.41 $ 12.11 $ 13.65 $ 13.24 ============ ============ ============ ============ ============ Total return (d)(e)(f) 7.72%(g) 27.44% (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% 1.10%(i) Net investment income (h) 0.12%(i) 0.20% 0.09% 0.34% 1.13%(i) Waiver/reimbursement 0.03%(i) 0.10% 0.08% 0.73% 1.56%(i) Portfolio turnover rate 2%(g) 12% 21% 15% 26%(g) Net assets, end of period (000's) $ 39,762 $ 36,782 $ 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 Investment Advisor 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. 125 <Page> PORTFOLIO MANAGER'S DISCUSSION Newport Tiger Fund, Variable Series / June 30, 2004 Newport Tiger Fund, Variable Series seeks capital appreciation. Eric Sandlund has managed or co-managed the fund since August 2002. Asian markets made little headway during the first half of 2004, as concerns about rising interest rates and a slowdown in earnings growth contributed to an uncertain investment environment. Markets in India and Thailand posted disappointing returns during the period. The fund's overweight position in each of these markets was the main reason it underperformed its benchmark, the MSCI All Country Asia ex Japan Index. An emphasis on high-quality stocks also held back total return, as investors tended to favor lower-quality names during the period. An underweight in China also detracted from performance because the Chinese stocks were strong early in the year. By contrast, our decision to maintain an underweight position in South Korean stocks aided performance. South Korea was affected by a slowdown in trade with China and by political problems that resulted in the impeachment of its president. The South Korean market fell sharply, as widely anticipated growth in consumer spending failed to materialize. INFRASTRUCTURE DEVELOPMENT AND DOMESTIC CONSUMPTION WERE THEMES We made relatively few changes to the portfolio during this six-month reporting period. Going into 2004, the fund was positioned to take advantage of companies whose products and services are used in infrastructure development or in the growing trend toward increased domestic consumption. Many of these companies were in India and Thailand. Although the fund's India and Thailand positions declined, we maintained our commitment to both markets because we believed their near-term poor performance was the result of profit-taking after their strong run-up in 2003. We also think that investors overreacted to the slowdown in earnings growth from the rapid pace of the past several quarters. In our view, earnings growth has the potential to remain reasonably strong going forward. FOCUSING ON FINANCIALS, TECHNOLOGY AND CONSUMER SECTORS The portfolio's largest sector weight was in financials--an area that suffered because of concerns about higher interest rates. However, we think that financial stocks are poised for improvement. Capital spending among Asian corporations has been at depressed levels since the financial crisis of the late 1990s. Over the past year, however, we saw a pickup in expenditures for capital equipment. We have also witnessed an upturn in the demand and cost of real estate. We believe this emphasis on acquiring hard assets should boost loan demand throughout Asia and that it should be positive for the banks, insurance companies and real estate businesses in the portfolio. Within information technology, which was the fund's second largest sector position, we added Media-Tek and Acer and maintained a position in long-time holding Taiwan Semiconductor Manufacturing (0.6%, 1.0% and 4.7% of net assets, respectively.) While Taiwan Semiconductor declined significantly because of a general pullback in the semiconductor industry, we believe its long-term prospects are favorable and have kept it in the portfolio. Consumer discretionary stocks were the third largest sector position, with newspaper company Singapore Press Holdings (2.5% of net assets) being one of the best performers. Singapore Press Holdings benefited from higher subscription and advertising rates and from increased advertising lineage. The company has been selling some of its property holdings and returning the proceeds to shareholders in the form of special dividends. POSITIONED TO CAPITALIZE ON DOMESTIC AND GLOBAL ECONOMIC EXPANSION We believe that Asia has the potential to benefit from improving domestic and global economic growth. Our emphasis on the financial, information technology and consumer discretionary sectors reflects our view that the strong consumer and business trends that are emerging throughout Asia could lead to long-term growth opportunities for the portfolio. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. An investment in 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, 2004, and are subject to change. 126 <Page> PERFORMANCE INFORMATION Newport Tiger Fund, Variable Series / June 30, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2004 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR LIFE - --------------------------------------------------------------------- Class B (6/1/00) -4.72 27.90 0.88 1.23 MSCI All Country Asia ex Japan Index(1) -2.35 30.66 -1.37 -1.29 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 6/30/04 - ------------------------------------------------------ Class B 2.12 2.02 </Table> [CHART] VALUE OF A $10,000 INVESTMENT, 5/1/95(2) - 6/30/04 CLASS B: $14,048 <Table> <Caption> MSCI ALL COUNTRY CLASS B SHARES ASIA EX JAPAN INDEX 5/1/95 $ 10,000 $ 10,000 5/31/95 $ 11,100 $ 11,125 6/30/95 $ 10,900 $ 10,951 7/31/95 $ 11,200 $ 11,157 8/31/95 $ 10,851 $ 10,643 9/30/95 $ 11,050 $ 10,770 10/31/95 $ 11,000 $ 10,584 11/30/95 $ 11,050 $ 10,344 12/31/95 $ 11,501 $ 10,855 1/31/96 $ 12,661 $ 11,699 2/29/96 $ 12,560 $ 11,826 3/31/96 $ 12,560 $ 11,912 4/30/96 $ 12,510 $ 12,341 5/31/96 $ 12,460 $ 12,203 6/30/96 $ 12,208 $ 12,021 7/31/96 $ 11,552 $ 11,134 8/31/96 $ 11,956 $ 11,470 9/30/96 $ 12,308 $ 11,668 10/31/96 $ 12,207 $ 11,446 11/30/96 $ 12,813 $ 11,986 12/31/96 $ 12,851 $ 11,944 1/31/97 $ 12,750 $ 12,191 2/28/97 $ 12,750 $ 12,295 3/31/97 $ 11,985 $ 11,600 4/30/97 $ 11,781 $ 11,428 5/31/97 $ 12,852 $ 11,944 6/30/97 $ 13,464 $ 12,381 7/31/97 $ 13,668 $ 12,485 8/31/97 $ 11,324 $ 10,272 9/30/97 $ 11,681 $ 10,225 10/31/97 $ 9,028 $ 7,952 11/30/97 $ 8,876 $ 7,407 12/31/97 $ 8,850 $ 7,130 1/31/98 $ 7,556 $ 6,514 2/28/98 $ 9,212 $ 7,895 3/31/98 $ 9,161 $ 7,779 4/30/98 $ 8,385 $ 7,097 5/31/98 $ 7,246 $ 6,014 6/30/98 $ 6,522 $ 5,339 7/31/98 $ 6,004 $ 5,204 8/31/98 $ 5,124 $ 4,454 9/30/98 $ 6,003 $ 4,896 10/31/98 $ 7,763 $ 5,961 11/30/98 $ 8,281 $ 6,442 12/31/98 $ 8,281 $ 6,576 1/31/99 $ 7,806 $ 6,471 2/28/99 $ 7,806 $ 6,345 3/31/99 $ 8,492 $ 7,106 4/30/99 $ 10,338 $ 8,405 5/31/99 $ 9,652 $ 8,223 6/30/99 $ 10,707 $ 9,508 7/31/99 $ 10,707 $ 9,299 8/31/99 $ 10,760 $ 9,529 9/30/99 $ 10,338 $ 8,862 10/31/99 $ 11,023 $ 9,147 11/30/99 $ 12,342 $ 10,017 12/31/99 $ 13,912 $ 10,829 1/31/2000 $ 13,274 $ 10,775 2/29/2000 $ 13,646 $ 10,550 3/31/2000 $ 14,177 $ 10,798 4/30/2000 $ 13,274 $ 9,808 5/31/2000 $ 12,530 $ 8,955 6/30/2000 $ 13,864 $ 9,428 7/31/2000 $ 13,811 $ 9,024 8/31/2000 $ 13,757 $ 8,957 9/30/2000 $ 12,851 $ 7,931 10/31/2000 $ 12,211 $ 7,307 11/30/2000 $ 11,571 $ 7,024 12/31/2000 $ 11,786 $ 7,013 1/31/2001 $ 12,701 $ 7,916 2/28/2001 $ 11,947 $ 7,542 3/31/2001 $ 10,548 $ 6,688 4/30/2001 $ 11,140 $ 6,698 5/31/2001 $ 10,817 $ 6,688 6/30/2001 $ 10,494 $ 6,528 7/31/2001 $ 10,279 $ 6,281 8/31/2001 $ 9,633 $ 6,183 9/30/2001 $ 8,126 $ 5,211 10/31/2001 $ 8,395 $ 5,492 11/30/2001 $ 9,364 $ 6,226 12/31/2001 $ 9,823 $ 6,744 1/31/2002 $ 9,823 $ 7,013 2/28/2002 $ 9,606 $ 7,065 3/31/2002 $ 9,985 $ 7,538 4/30/2002 $ 9,985 $ 7,616 5/31/2002 $ 9,660 $ 7,444 6/30/2002 $ 9,171 $ 7,074 7/31/2002 $ 8,682 $ 6,806 8/31/2002 $ 8,465 $ 6,685 9/30/2002 $ 7,760 $ 5,949 10/31/2002 $ 8,086 $ 6,251 11/30/2002 $ 8,520 $ 6,583 12/31/2002 $ 8,084 $ 6,182 1/31/2003 $ 8,084 $ 6,233 2/28/2003 $ 7,809 $ 5,981 3/31/2003 $ 7,479 $ 5,701 4/30/2003 $ 7,644 $ 5,881 5/31/2003 $ 8,194 $ 6,389 6/30/2003 $ 8,744 $ 6,791 7/31/2003 $ 9,459 $ 7,370 8/31/2003 $ 10,174 $ 7,936 9/30/2003 $ 10,394 $ 7,996 10/31/2003 $ 11,164 $ 8,682 11/30/2003 $ 10,999 $ 8,575 12/31/2003 $ 11,738 $ 9,088 1/31/2004 $ 12,236 $ 9,641 2/29/2004 $ 12,458 $ 9,967 3/31/2004 $ 12,125 $ 9,801 4/30/2004 $ 11,627 $ 9,263 5/31/2004 $ 11,406 $ 8,952 6/30/2004 $ 11,183 $ 8,875 </Table> PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PROVIDED. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. Total return performance includes changes in share price and reinvestment of all distributions. The Morgan Stanley Capital International (MSCI) All Country 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. 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. Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the oldest 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 new class of shares would be lower. (1) Index performance for the life of the fund is from April 30, 1995. (2) Inception date of class A shares (oldest existing share class). 127 <Page> INVESTMENT PORTFOLIO Newport Tiger Fund, Variable Series / June 30, 2004 (Unaudited) <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--96.9% CONSUMER DISCRETIONARY--12.7% AUTOMOBILES--4.6% Bajaj Auto Ltd. 4,000 $ 76,993 Hyundai Motor Co., Ltd. 14,120 545,426 Maruti Udyog Ltd. 33,944 297,338 PT Astra International, Inc. 489,500 287,443 --------------- 1,207,200 --------------- HOTELS, RESTAURANTS & LEISURE--1.2% Genting Bherhad 79,800 321,807 --------------- MEDIA--3.2% Singapore Press Holdings Ltd. 264,197 639,400 Television Broadcasts Ltd. 43,000 185,579 --------------- 824,979 --------------- SPECIALTY RETAIL--1.2% Esprit Holdings Ltd. 67,500 303,502 --------------- TEXTILES, APPAREL & LUXURY GOODS--2.5% Li & Fung Ltd. 454,000 665,506 --------------- CONSUMER STAPLES--1.1% FOOD PRODUCTS--1.1% People's Food Holdings Ltd. 195,000 128,311 Thai Union Frozen Products Public Co., Ltd. 320,100 160,436 --------------- 288,747 --------------- FINANCIALS--38.5% COMMERCIAL BANKS--17.9% Bangkok Bank Public Co., Ltd. (a) 333,800 766,232 Bank Rakyat Indonesia (a) 1,701,500 304,588 Chinatrust Financial Holding Co., Ltd. 506,000 566,088 Dah Sing Banking, Reserved Shares 4,080 --(b) Dah Sing Financial Group 20,400 120,485 Hong Leong Bank Berhad 307,300 391,283 Kasikornbank Public Co., Ltd., NVDR 406,300 501,054 Kookmin Bank (a) 20,283 633,377 Oversea-Chinese Banking Corp., Ltd. 39,000 274,810 Standard Chartered Public Co., Ltd. 22,530 367,940 United Overseas Bank Ltd. 96,000 748,703 --------------- 4,674,560 --------------- DIVERSIFIED FINANCIAL SERVICES--5.3% Hong Leong Credit Berhad 68,000 72,776 Housing Development Finance Corp., Ltd. 72,872 820,058 Public Bank Berhad 287,494 500,389 --------------- 1,393,223 --------------- INSURANCE--2.9% Cathay Financial Holding Co., Ltd. 173,000 312,516 Samsung Fire & Marine Insurance Co., Ltd. 6,840 438,474 --------------- 750,990 --------------- REAL ESTATE--12.4% City Developments Ltd. 150,000 $ 472,588 Henderson Land + Development Co., Ltd. 127,000 548,467 Land & House Public Co., Ltd., NVDR 1,738,700 380,009 SM Prime Holdings, Inc. 2,464,000 267,770 Sun Hung Kai Properties Ltd. 151,000 1,242,993 Swire Pacific Ltd., Series A 47,500 309,095 --------------- 3,220,922 --------------- HEALTH CARE--2.6% HEALTH CARE EQUIPMENT & SUPPLIES--0.3% Pihsiang Machinery Manufacturing Co., Ltd. 30,150 63,344 --------------- PHARMACEUTICALS--2.3% Dr. Reddy's Laboratories Ltd., ADR 18,700 325,006 Ranbaxy Laboratories Ltd. 13,991 276,861 --------------- 601,867 --------------- INDUSTRIALS--3.2% INDUSTRIAL CONGLOMERATES--2.1% China Merchants Holdings International Co., Ltd. 207,000 280,294 Hutchison Whampoa Ltd. 39,500 270,372 --------------- 550,666 --------------- MACHINERY--0.3% Bharat Forge Ltd. 6,200 82,547 --------------- TRANSPORTATION INFRASTRUCTURE--0.8% Zhejiang Expressway Co., Ltd. 284,000 203,043 --------------- INFORMATION TECHNOLOGY--24.7% COMPUTERS & PERIPHERALS--2.4% Acer, Inc. 187,000 264,124 Lite-On Technology Corp. 357,000 378,439 --------------- 642,563 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--4.1% Hon Hai Precision Industry Co., Ltd. 151,433 564,977 MFS Technology Ltd. 175,000 111,341 Synnex Technology International Corp. 120,000 196,116 Venture Corp., Ltd. 18,000 189,226 --------------- 1,061,660 --------------- INTERNET SOFTWARE & SERVICES--1.5% NCSoft Corp. (a) 4,680 389,655 --------------- IT SERVICES--3.2% Infosys Technologies Ltd. 6,934 833,373 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--13.5% MediaTek, Inc. 18,000 144,161 Samsung Electronics Co., Ltd. 5,190 2,158,359 Taiwan Semiconductor Manufacturing Co., Ltd. (a) 838,108 1,213,061 --------------- 3,515,581 --------------- </Table> See Notes to Investment Portfolio. 128 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- MATERIALS--2.4% CONSTRUCTION MATERIALS--2.4% Siam Cement Public Co., Ltd., NVDR 108,450 $ 614,418 --------------- TELECOMMUNICATION SERVICES--7.6% DIVERSIFIED TELECOMMUNICATION SERVICES--1.1% PT Telekomunikasi Indonesia 376,600 295,216 --------------- WIRELESS TELECOMMUNICATION SERVICES--6.5% China Mobile Hong Kong Ltd. 366,000 1,110,822 Taiwan Cellular Corp. (a) 609,000 580,901 --------------- 1,691,723 --------------- UTILITIES--4.1% ELECTRIC UTILITIES--2.2% Datang International Power Generation Co., Ltd., Class H 254,000 200,385 Huaneng Power International, Inc. 432,000 386,477 --------------- 586,862 --------------- GAS UTILITIES--1.9% Hong Kong & China Gas Co., Ltd. 295,002 484,405 Xinao Gas Holdings Ltd. (a) 8,000 3,580 --------------- 487,985 --------------- TOTAL COMMON STOCKS (cost of $19,753,838) 25,271,939 --------------- <Caption> UNITS --------------- WARRANTS--0.1% FINANCIALS--0.1% REAL ESTATE--0.1% City Developments Ltd. (a) (cost of $0) 15,600 26,653 --------------- <Caption> PAR --------------- SHORT-TERM OBLIGATION--2.4% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/04, due 07/01/04 at 1.170%, collateralized by a U.S. Treasury Note maturing 08/15/05, market value $632,038 (repurchase proceeds $616,020) (cost of $616,000) $ 616,000 616,000 --------------- TOTAL INVESTMENTS--99.4% (cost of $20,369,838) (c) 25,914,592 --------------- OTHER ASSETS & LIABILITIES, NET--0.6% 146,652 --------------- NET ASSETS--100.0% $ 26,061,244 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Amount rounds to less than $1. (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 - --------------------- ------------ ----------- Hong Kong $ 4,552,513 17.6% Taiwan 4,283,727 16.5 Korea, Republic of 4,165,291 16.1 India 2,712,175 10.5 Singapore 2,462,721 9.5 Thailand 2,422,149 9.3 Malasia 1,286,255 5.0 Bermuda 1,097,319 4.2 Indonesia 887,247 3.4 China 789,905 3.1 United States 616,000 2.4 United Kingdom 367,940 1.4 Philippines 267,770 1.0 Cayman Islands 3,580 0.0 ------------ ----------- $ 25,914,592 100.0% ============ =========== </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 NVDR Non-Voting Depositary Receipt </Table> See Notes to Financial Statements. 129 <Page> STATEMENT OF ASSETS & LIABILITIES Newport Tiger Fund, Variable Series / June 30, 2004 (Unaudited) <Table> ASSETS: Investments, at cost $ 20,369,838 --------------- Investments, at value $ 25,914,592 Cash 847 Foreign currency (cost of $241,244) 237,495 Receivable for: Investments sold 60,954 Fund shares sold 78,100 Interest 20 Dividends 34,801 Deferred Trustees' compensation plan 4,985 --------------- TOTAL ASSETS 26,331,794 --------------- LIABILITIES: Payable for: Investments purchased 3,551 Fund shares repurchased 9,457 Investment advisory fee 18,906 Transfer agent fee 604 Pricing and bookkeeping fees 1,521 Audit fee 30,253 Distribution fee--Class B 677 Deferred Trustees' fees 4,985 Foreign capital gains tax 200,542 Other liabilities 54 --------------- TOTAL LIABILITIES 270,550 --------------- NET ASSETS $ 26,061,244 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 29,783,065 Undistributed net investment income 215,590 Accumulated net realized loss (9,277,763) Net unrealized appreciation (depreciation) on: Investments 5,544,754 Foreign currency translations (3,860) Foreign capital gains tax (200,542) --------------- NET ASSETS $ 26,061,244 =============== CLASS A: Net assets $ 22,971,397 Shares outstanding 11,562,653 =============== Net asset value per share $ 1.99 =============== CLASS B: Net assets $ 3,089,847 Shares outstanding 1,529,716 =============== Net asset value per share $ 2.02 =============== </Table> See Notes to Financial Statements. 130 <Page> STATEMENT OF OPERATIONS Newport Tiger Fund, Variable Series For the Six Months Ended June 30, 2004 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 418,498 Interest 2,510 --------------- Total Investment Income (net of foreign taxes withheld of $41,137) 421,008 --------------- EXPENSES: Investment advisory fee 128,388 Distribution fee--Class B 3,998 Transfer agent fee 3,730 Pricing and bookkeeping fees 5,995 Trustees' fees 2,871 Custody fee 31,415 Audit fee 18,245 Non-recurring costs (See Note 6) 1,188 Other expenses 5,435 --------------- Total Expenses 201,265 Non-recurring costs assumed by Investment Advisor (See Note 6) (1,188) Custody earnings credit (2) --------------- Net Expenses 200,075 --------------- Net Investment Income 220,933 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments 2,763,503 Foreign currency transactions (6,905) --------------- Net realized gain 2,756,598 --------------- Net change in unrealized appreciation/depreciation on: Investments (4,448,752) Foreign currency translations (4,033) Foreign capital gains tax 226,240 --------------- Net change in unrealized appreciation/depreciation (4,226,545) --------------- Net Loss (1,469,947) --------------- Net Decrease in Net Assets from Operations $ (1,249,014) =============== </Table> See Notes to Financial Statements. 131 <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: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 220,933 $ 242,310 Net realized gain on investments and foreign currency transactions 2,756,598 38,348 Net change in unrealized appreciation/depreciation on investments, foreign currency translations and forgein capital gains tax (4,226,545) 8,428,501 --------------- --------------- Net Increase (Decrease) from Operations (1,249,014) 8,709,159 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (238,610) Class B -- (19,194) --------------- --------------- Total Distributions Declared to Shareholders -- (257,804) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 1,450,751 4,595,945 Distributions reinvested -- 238,610 Redemptions (3,075,940) (9,993,129) --------------- --------------- Net Decrease (1,625,189) (5,158,574) --------------- --------------- Class B: Subscriptions 478,262 1,441,440 Distributions reinvested -- 19,194 Redemptions (226,432) (242,928) --------------- --------------- Net Increase 251,830 1,217,706 --------------- --------------- Net Decrease from Share Transactions (1,373,359) (3,940,868) --------------- --------------- Total Increase (Decrease) in Net Assets (2,622,373) 4,510,487 NET ASSETS: Beginning of period 28,683,617 24,173,130 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $215,590 and $(5,343), respectively) $ 26,061,244 $ 28,683,617 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 683,462 2,997,732 Issued for distributions reinvested -- 115,267 Redemptions (1,461,258) (6,743,620) --------------- --------------- Net Decrease (777,796) (3,630,621) --------------- --------------- Class B: Subscriptions 221,802 802,770 Issued for distributions reinvested -- 9,140 Redemptions (107,917) (134,468) --------------- --------------- Net Increase 113,885 677,442 --------------- --------------- </Table> See Notes to Financial Statements. 132 <Page> NOTES TO FINANCIAL STATEMENTS Newport Tiger Fund, Variable Series / June 30, 2004 (Unaudited) NOTE 1. ORGANIZATION Newport Tiger Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks capital appreciation. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available 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. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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--Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Foreign securities are generally valued at the last sale price on the foreign exchange or market on which they trade. If any foreign share prices are not readily available as a result of limited share activity, the securities are valued at the last sale price of the local shares in the principal market in which such securities are normally traded. 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 generally determined at 2:00 p.m. Eastern (U.S.) time. Occasionally, events affecting the values of such foreign 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 values of such foreign securities occur and it is determined that market quotations are not reliable, then these foreign securities will be valued at their fair value using procedures approved by the Board of Trustees. 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--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. REPURCHASE AGREEMENTS--The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION--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. FOREIGN CURRENCY TRANSACTIONS--The values of all assets and liabilities quoted in foreign currencies are translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation 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. 133 <Page> For financial statement purposes, 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. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. 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. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2003 was as follows: <Table> Distributions paid from: Ordinary income* $ 257,804 Long-term capital gains -- </Table> * For tax purposes short-term capital gains distributions, if any, are considered ordinary income distributions. Unrealized appreciation and depreciation at June 30, 2004, based on cost of investments for federal income tax purposes, and excluding any unrealized appreciation and depreciation from changes in the value of assets and liabilities resulting from changes in exchange rates, was: <Table> Unrealized appreciation $ 6,878,415 Unrealized depreciation (1,333,661) ------------ Net unrealized appreciation $ 5,544,754 ============ </Table> The following capital loss carryforwards, determined as of December 31, 2003, may be 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 $ 2,121,889 2006 5,726,423 2007 1,050,865 2009 2,161,521 2010 879,602 ------------ $ 11,940,300 ============ </Table> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES Columbia Management Advisors, Inc. ("Columbia") is the investment advisor to the Fund. Prior to April 1, 2004, Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"). Effective April 1, 2004, FleetBoston, including the Fund's investment advisor, transfer agent and distributor, was acquired by Bank of America Corporation ("BOA"). The acquisition did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund. INVESTMENT ADVISORY FEE--Columbia provides administrative and other services to the Fund in addition to investment advisory services. Columbia receives a monthly investment advisory fee based on the Fund's average daily net assets as follows: <Table> <Caption> AVERAGE DAILY NET ASSETS ANNUAL FEE RATE - ------------------------ --------------- First $1 billion 0.90% Next $500 million 0.85% Over $1.5 billion 0.80% </Table> 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 Corporation ("State Street"). As a result, Columbia pays the total fees received 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 134 <Page> of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.042%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the six months ended June 30, 2004, the Fund's annualized effective transfer agent fee rate was 0.03%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. 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. FEES PAID TO OFFICERS AND TRUSTEES--The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's 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. OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the six months ended June 30, 2004, the Fund paid $663 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $6,136,460 and $8,055,426, respectively. NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES FOREIGN SECURITIES--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 currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. Investments in emerging market countries are subject to additional risk. The risk of foreign investments is typically increased in less developed countries. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could hurt their economies and securities markets. INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS--Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds, as well as other industry wide issues. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment advisor or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's 135 <Page> investment advisor and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, among other things, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or FleetBoston (and affiliated entities). These suits and certain regulatory investigations are ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, cannot currently be made. For the six months ended June 30, 2004, Columbia has assumed $1,188 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 136 <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, 2004 2003 2002 2001 2000 (a) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 2.12 $ 1.47 $ 1.81 $ 2.19 $ 2.35 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.01 0.01 0.01 0.01 --(c) Net realized and unrealized gain (loss) on investments, foreign currency and foreign capital gains tax (0.11) 0.65 (0.33) (0.37) (0.14) ------------ ------------ ------------ ------------ ------------ Total from Investment Operations (0.10) 0.66 (0.32) (0.36) (0.14) ------------ ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income -- (0.01) (0.02) (0.02) (0.02) Return of capital -- -- --(c) -- -- ------------ ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders -- (0.01) (0.02) (0.02) (0.02) ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 2.02 $ 2.12 $ 1.47 $ 1.81 $ 2.19 ============ ============ ============ ============ ============ Total return (d)(e) (4.72)%(f) 45.19% (17.70)% (16.66)% (5.94)%(f) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (g) 1.62%(h) 1.77% 1.52% 1.56% 1.47%(h) Net investment income (g) 1.32%(h) 0.53% 0.71% 0.74% 0.11%(h) Portfolio turnover rate 22%(f) 28% 28% 24% 22% Net assets, end of period (000's) $ 3,090 $ 3,000 $ 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 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. 137 <Page> LIBERTY VARIABLE INVESTMENT TRUST INVESTMENT MANAGER AND ADMINISTRATOR Columbia Management Advisors, Inc. 100 Federal Street Boston, MA 02110 TRANSFER AGENT Columbia Funds Services, Inc. PO Box 8081 Boston, MA 02266-8081 IMPORTANT INFORMATION A description of the policies and procedures that the funds use to determine how to vote proxies relating to their portfolio securities and a copy of the fund's voting record are available (i) at www.columbiamanagement.com; and (ii) on the Securities and Exchange Commission's website at www.sec.gov. 138 <Page> [KEYPORT LOGO] P.O. Box 9133 Wellesley Hills, MA 02481 ANN-03/222S-0604 (08/04) 04/1822 2004 SEMIANNUAL REPORT - CLASS B SHARES LIBERTY VARIABLE INVESTMENT TRUST <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. ITEM 6. SCHEDULE OF INVESTMENTS Not applicable at this time. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The registrant has not filed Schedule 14A subsequent to the effective date of that Schedule's Item 7(d)(2)(ii)(G). However, it is the registrant's policy to consider candidates for the Board of Trustees/Directors who are recommended by shareholders. A Fund shareholder who wishes to nominate a candidate to the Board may send information regarding prospective candidates to the Fund's Governance Committee, care of the <Page> Fund's Secretary. The information should include evidence of the shareholder's Fund ownership, a full listing of the proposed candidate's education, experience, current employment, date of birth, names and addresses of at least three professional references, information as to whether the candidate is not an "interested person" under the 1940 Act and "independent" under NYSE Listing Standards in relation to the Fund, and such other information as may be helpful to the independent trustees/directors in evaluating the candidate. All satisfactorily completed information packages regarding a candidate will be forwarded to an independent trustee/director for consideration. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer, based on his evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, has concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not applicable at this time. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to 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 -------------------------------------------------------------------- By (Signature and Title) /s/ J. Kevin Connaughton -------------------------------------------------------- J. Kevin Connaughton, President and Treasurer Date September 2, 2004 ---------------------------------------------------------------------------- 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/ J. Kevin Connaughton -------------------------------------------------------- J. Kevin Connaughton, President and Treasurer Date September 2, 2004 ----------------------------------------------------------------------------