<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: 12/31/04 ---------------- 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. ANNUAL REPORT - CLASS B SHARES DECEMBER 31, 2004 [GRAPHIC] LIBERTY VARIABLE INVESTMENT TRUST 2004 ANNUAL REPORT - CLASS B SHARES <Page> PRESIDENT'S MESSAGE Liberty Variable Investment Trust Dear Shareholder: As a direct result of the merger of our former parent company, FleetBoston Financial and Bank of America, changes are in the works that we believe offer significant potential benefits for our shareholders. We plan to bring the funds of our respective organizations together in a single family that covers a wide range of markets, sectors and asset classes. As a result, some funds in your variable annuity may be merged in order to eliminate redundancies and fund management teams will be aligned to maximize performance potential. You will receive more detailed information about these proposed mergers and you may be asked to vote on certain changes, if they affect your investment. In this matter, your timely response will enable us to implement the changes in 2005. 12-MONTH ECONOMIC AND MARKET REVIEW As the economy continued to grow at a healthy pace, stock and bond markets delivered positive returns. The S&P 500 Index, a broad measure of US stock market performance, gained 10.88% for the 12-month period through December 31, 2004. Most of that gain came in the last 10 weeks of the year. Corporate profit growth was strong, interest rates remained relatively low and both consumer and business spending was robust. Value stocks outpaced growth stocks and small-cap stocks did better than large-cap stocks for the fifth consecutive year. Real estate investment trusts were the strongest-performing asset class with a 31.58% gain, as measured by the NAREIT Index. Foreign stock markets also performed well. The MSCI EAFE Index, which measures stock market performance in developed countries, returned 17.60%. Volatile, emerging market stocks gained 22.40%. The US bond market surprised investors with solid returns despite five short-term increases by the Federal Reserve Board, which heralded the end of an extended period of low borrowing rates. Long-term bond yields ended the period almost where they started. However, they experienced considerable volatility during the period, as the job market disappointed before it strengthened and economic growth faltered before it picked up in the second half. In this environment, the Lehman Brothers Aggregate Bond Index returned 4.34%. This index measures the performance of government, corporate, mortgage- and asset-backed fixed income securities. High-yield bonds turned in a second year of outstanding performance. The JPMorgan Global High Yield Index returned 11.55%. ABOUT YOUR FUND'S PERFORMANCE In the reports that follow, fund managers discuss the reasons for performance and strategies that aided or hindered performance during the 12-month period ended December 31, 2004. We encourage you to read the reports of the funds you own and to discuss any questions you may have with your financial professional. As always, thank you for your business. We look forward to helping you achieve your long-term financial goals, and we will continue to work hard to earn your confidence. Sincerely, /s/ Christopher L. Wilson Christopher L. Wilson President, Columbia Funds Not FDIC May Lose Value 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 12/31/04 (%) INCEPTION 1-YEAR 5-YEAR 10-YEAR LIFE - -------------------------------------------------------------------------------------------------------------------------------- LIBERTY VARIABLE INVESTMENT TRUST Colonial Small Cap Value Fund, Variable Series -- Class B(1) 6/1/00 22.51 15.77 -- 10.35 Colonial Strategic Income Fund, Variable Series -- Class B(1) 6/1/00 9.85 7.82 8.35 -- Columbia High Yield Fund, Variable Series -- Class B(1) 4/14/03 7.11 6.35 -- 6.11 Columbia International Fund, Variable Series -- Class B(1) 6/1/00 13.48 -3.94 3.46 -- Columbia Real Estate Equity Fund, Variable Series -- Class B(1) 4/14/03 30.27 19.16 -- 11.34 Liberty Equity Fund, Variable Series -- Class B(1) 4/14/03 7.33 -4.98 9.12 -- Liberty Growth & Income Fund, Variable Series -- Class B(1) 6/1/00 13.46 1.69 11.82 -- Liberty S&P 500 Index Fund, Variable Series -- Class B 5/30/00 10.12 -- -- -2.16 Liberty Select Value Fund, Variable Series -- Class B 5/30/00 15.32 -- -- 9.29 Newport Tiger Fund, Variable Series -- Class B(1) 6/1/00 15.74 -0.47 -- 3.22 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. PERFORMANCE NUMBERS REFLECT ALL FUND EXPENSES, BUT DO NOT INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE ACCOUNTS. IF PERFORMANCE INCLUDED THE EFFECT OF THESE ADDITIONAL CHARGES, IT WOULD BE LOWER. (1) Class B shares (newer class shares) performance information includes returns of the fund's class A shares (the 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 20 Columbia High Yield Fund, Variable Series 43 Columbia International Fund, Variable Series 61 Columbia Real Estate Equity Fund, Variable Series 78 Liberty Equity Fund, Variable Series 92 Liberty Growth & Income Fund, Variable Series 107 Liberty S&P 500 Index Fund, Variable Series 122 Liberty Select Value Fund, Variable Series 142 Newport Tiger Fund, Variable Series 158 FINANCIAL STATEMENTS Colonial Small Cap Value Fund, Variable Series 5 Colonial Strategic Income Fund, Variable Series 23 Columbia High Yield Fund, Variable Series 46 Columbia International Fund, Variable Series 64 Columbia Real Estate Equity Fund, Variable Series 81 Liberty Equity Fund, Variable Series 95 Liberty Growth & Income Fund, Variable Series 110 Liberty S&P 500 Index Fund, Variable Series 125 Liberty Select Value Fund, Variable Series 145 Newport Tiger Fund, Variable Series 161 </Table> Must be preceded or accompanied by a prospectus. Columbia Funds Distributor, Inc. 02/2005 <Page> PORTFOLIO MANAGER'S DISCUSSION Colonial Small Cap Value Fund, Variable Series / December 31, 2004 Colonial Small Cap Value Fund, Variable Series seeks long-term growth by investing primarily in smaller capitalization equities. Stephen D. Barbaro has managed the fund since June 2002. Small-cap stocks led the US stock market in 2004, benefiting from relatively cheap valuations compared to large-cap stocks, an improving economy and relatively low interest rates. Within the sector, value stocks outpaced their growth counterparts. The fund did well, keeping pace with the strong returns posted by both the S&P SmallCap 600/Barra Value Index and the Russell 2000 Value Index, which replaced the S&P/Barra Index as the fund's benchmark in 2004. STRONG STOCK SELECTION Successful stock picking was the key to the fund's performance in 2004. We focused on companies with strong competitive and financial positions, good earnings growth prospects and reasonable stock valuations. We also favored economically sensitive sectors with above-average stakes in industrials and technology. BIGGEST GAINS FROM SMALLER SECTORS Stock selection was particularly strong in health care and telecommunications, two of the smaller sectors in the fund. In health care, the fund benefited from investing in facilities-based stocks, such as nursing and funeral homes, with attractive stock valuations and good balance sheets. As these stocks gained investor recognition, they rallied nicely. The fund also owned three health care stocks that were bought out at a nice premium during the period. They included an oncology practice, a contact lens manufacturer and a hospital. Telecommunications stocks declined in 2004, making them one of the worst performing sectors in the small-cap value universe. However, they were one of the best contributors to the fund's returns. The fund benefited from investing in selected telecom stocks that generated exceptionally strong gains for the year, while avoiding companies that took sharp downturns. ADDED STRENGTH FROM FINANCIALS Financials, the fund's biggest sector, also posted strong returns. Among the best performers were consumer finance investments, including a credit card company and a pawnshop. The fund benefited by largely avoiding thrift institutions, where returns overall were weak. Thrifts are financial organizations, such as savings and loans, formed primarily as depositories of consumer savings. Despite issues in the thrift market as a whole, the fund's only thrift investment posted strong gains. Performance from financials would have been even better if the fund had invested more heavily in real estate investment trusts (REITs). We took a cautious approach to REITs because their valuations seemed expensive and they typically do poorly when interest rates rise. REITs, however, did well when intermediate- and long-term interest rates remained relatively stable and investors continued to search for yield. At the period's end, we remained comfortable with the fund's significant underweight relative to the benchmark in REITs, believing that they remain vulnerable to further interest rate hikes. MODEST DISAPPOINTMENT FROM TECH Technology stocks moved higher during 2004, but trailed other sectors when they did not live up to investors' expectations. Although the fund's returns were in line with the sector average, the size of the fund's tech stake somewhat dampened returns. We continued to focus on a mix of tech companies that included software, semiconductor, technology distribution and telecommunications equipment stocks. We avoided Internet-based names because their valuations seemed expensive. Industrials, which is another economically-sensitive sector, fared much better in 2004. The fund was well positioned with an above-average stake and strong returns overall from the sector. During the second half of the year, however, our focus on higher quality industrial companies modestly hampered performance as lower quality companies gained favor with investors. CAUTIOUSLY OPTIMISTIC We remain moderately optimistic about the potential for the US economy, the stock market and small-cap value stocks. We expect the economy to continue to grow at a measured pace. As long as economic expansion continues and stock valuations remain reasonable, we plan to keep the fund's bias toward economically sensitive sectors. Although small-cap stocks are no longer cheap compared to large-cap stocks, we still expect them to provide attractive investment opportunities in 2005. 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. Holdings are disclosed as of December 31, 2004, and are subject to change. 2 <Page> PERFORMANCE INFORMATION Colonial Small Cap Value Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR 5-YEAR LIFE - ----------------------------------------------------------------- Class B (6/1/00) 22.51 15.77 10.35 Russell 2000 Value Index(1) 22.25 17.23 10.21 S&P SmallCap 600/ Barra Value Index(2) 23.26 15.08 9.71 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 5/19/98(3) - 12/31/04 Class B: $19,187 <Table> <Caption> S&P SMALL CAP 600/ CLASS B SHARES BARRA VALUE INDEX RUSSELL 2000 VALUE INDEX 5/19/1998 $ 10,000 $ 10,000 5/31/1998 $ 10,020 $ 10,000 $ 9,794 6/30/1998 $ 10,050 $ 9,995 $ 9,739 7/31/1998 $ 9,120 $ 9,070 $ 8,977 8/31/1998 $ 7,201 $ 7,434 $ 7,571 9/30/1998 $ 7,461 $ 7,829 $ 7,999 10/31/1998 $ 7,881 $ 8,171 $ 8,236 11/30/1998 $ 8,401 $ 8,520 $ 8,459 12/31/1998 $ 8,675 $ 8,855 $ 8,725 1/31/1999 $ 8,464 $ 8,753 $ 8,527 2/28/1999 $ 7,626 $ 8,040 $ 7,945 3/31/1999 $ 7,525 $ 8,009 $ 7,879 4/30/1999 $ 8,030 $ 8,707 $ 8,599 5/31/1999 $ 8,354 $ 9,055 $ 8,863 6/30/1999 $ 8,788 $ 9,604 $ 9,184 7/31/1999 $ 8,778 $ 9,454 $ 8,966 8/31/1999 $ 8,324 $ 9,057 $ 8,638 9/30/1999 $ 8,273 $ 8,891 $ 8,465 10/31/1999 $ 8,313 $ 8,685 $ 8,296 11/30/1999 $ 8,545 $ 8,879 $ 8,339 12/31/1999 $ 9,226 $ 9,123 $ 8,595 1/31/2000 $ 8,640 $ 8,656 $ 8,370 2/29/2000 $ 9,216 $ 9,047 $ 8,881 3/31/2000 $ 9,358 $ 9,381 $ 8,923 4/30/2000 $ 9,459 $ 9,446 $ 8,975 5/31/2000 $ 9,317 $ 9,292 $ 8,838 6/30/2000 $ 9,692 $ 9,559 $ 9,096 7/31/2000 $ 9,783 $ 9,747 $ 9,399 8/31/2000 $ 10,582 $ 10,317 $ 9,819 9/30/2000 $ 10,582 $ 10,296 $ 9,763 10/31/2000 $ 10,633 $ 10,346 $ 9,728 11/30/2000 $ 9,864 $ 9,662 $ 9,530 12/31/2000 $ 10,969 $ 11,026 $ 10,553 1/31/2001 $ 11,061 $ 11,899 $ 10,844 2/28/2001 $ 10,743 $ 11,397 $ 10,829 3/31/2001 $ 10,569 $ 10,923 $ 10,656 4/30/2001 $ 11,346 $ 11,581 $ 11,149 5/31/2001 $ 11,683 $ 11,877 $ 11,436 6/30/2001 $ 11,765 $ 12,332 $ 11,896 7/31/2001 $ 11,847 $ 12,216 $ 11,629 8/31/2001 $ 11,613 $ 12,019 $ 11,588 9/30/2001 $ 10,215 $ 10,298 $ 10,309 10/31/2001 $ 10,460 $ 10,769 $ 10,578 11/30/2001 $ 11,165 $ 11,630 $ 11,339 12/31/2001 $ 11,978 $ 12,470 $ 12,033 1/31/2002 $ 12,071 $ 12,703 $ 12,193 2/28/2002 $ 12,310 $ 12,648 $ 12,267 3/31/2002 $ 13,181 $ 13,747 $ 13,185 4/30/2002 $ 13,410 $ 14,310 $ 13,649 5/31/2002 $ 12,995 $ 13,767 $ 13,197 6/30/2002 $ 12,591 $ 13,152 $ 12,905 7/31/2002 $ 11,046 $ 11,013 $ 10,988 8/31/2002 $ 11,295 $ 10,999 $ 10,939 9/30/2002 $ 10,531 $ 10,190 $ 10,158 10/31/2002 $ 10,749 $ 10,394 $ 10,311 11/30/2002 $ 11,581 $ 10,956 $ 11,133 12/31/2002 $ 11,243 $ 10,665 $ 10,658 1/31/2003 $ 10,910 $ 10,225 $ 10,357 2/28/2003 $ 10,352 $ 9,847 $ 10,009 3/31/2003 $ 10,373 $ 9,816 $ 10,116 4/30/2003 $ 11,190 $ 10,704 $ 11,078 5/31/2003 $ 12,113 $ 11,702 $ 12,209 6/30/2003 $ 12,382 $ 12,050 $ 12,415 7/31/2003 $ 13,037 $ 12,639 $ 13,034 8/31/2003 $ 13,617 $ 13,247 $ 13,530 9/30/2003 $ 13,496 $ 12,812 $ 13,374 10/31/2003 $ 14,583 $ 13,954 $ 14,464 11/30/2003 $ 15,161 $ 14,530 $ 15,020 12/31/2003 $ 15,667 $ 14,937 $ 15,563 1/31/2004 $ 16,230 $ 15,294 $ 16,102 2/29/2004 $ 16,483 $ 15,656 $ 16,414 3/31/2004 $ 16,814 $ 15,930 $ 16,641 4/30/2004 $ 16,120 $ 15,344 $ 15,780 5/31/2004 $ 16,220 $ 15,536 $ 15,971 6/30/2004 $ 17,091 $ 16,387 $ 16,783 7/31/2004 $ 16,308 $ 15,609 $ 16,011 8/31/2004 $ 16,231 $ 15,659 $ 16,167 9/30/2004 $ 16,887 $ 16,431 $ 16,808 10/31/2004 $ 17,132 $ 16,572 $ 17,068 11/30/2004 $ 18,686 $ 18,080 $ 18,582 12/31/2004 $ 19,187 $ 18,414 $ 19,030 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - ----------------------------------------------------------- Class B 14.22 16.92 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. Total return performance includes changes in share price and reinvestment of all distributions. Beginning in 2004, the fund's benchmark was changed to the Russell 2000 Value Index, an unmanaged index that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The 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. The advisor believes that the Russell Index offers shareholders a more useful comparison of the fund's relative performance than the S&P SmallCap 600/Barra Value Index. 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. 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 19, 1998. (2) Index performance for the life of the fund is from May 31, 1998. (3) Inception date of class A shares (oldest existing share class). 3 <Page> UNDERSTANDING YOUR EXPENSES Colonial Small Cap Value Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ---------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ---------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,123.22 1,019.61 5.87 5.58 1.10 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the distributor not waived/reimbursed a portion of expenses, account values at the end of the period would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 4 <Page> INVESTMENT PORTFOLIO Colonial Small Cap Value Fund, Variable Series / December 31, 2004 <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--99.5% CONSUMER DISCRETIONARY--12.9% AUTO COMPONENTS--1.2% BorgWarner, Inc. 31,000 $ 1,679,270 Modine Manufacturing Co. 22,950 775,021 Standard Motor Products, Inc. 52,400 827,920 --------------- 3,282,211 --------------- HOTELS, RESTAURANTS & LEISURE--3.8% Bally Total Fitness Holding Corp. (a) 69,700 295,528 Bob Evans Farms, Inc. 28,390 742,115 Buca, Inc. (a) 115,600 804,576 Dave & Buster's, Inc. (a) 61,500 1,242,300 Landry's Restaurants, Inc. 50,550 1,468,983 Lone Star Steakhouse & Saloon 67,350 1,885,800 Marcus Corp. 63,000 1,583,820 Scientific Games Corp., Class A (a) 91,600 2,183,744 Total Entertainment Restaurant Corp. (a) 6,000 71,520 Vail Resorts, Inc. (a) 19,500 437,190 --------------- 10,715,576 --------------- HOUSEHOLD DURABLES--1.2% American Greetings Corp., Class A 37,400 948,090 CSS Industries, Inc. 31,400 997,264 Kimball International, Inc., Class B 67,400 998,194 Russ Berrie & Co., Inc. 21,600 493,344 --------------- 3,436,892 --------------- LEISURE EQUIPMENT & PRODUCTS--0.3% Action Performance Companies, Inc. 75,900 834,141 Travis Boats & Motors, Inc. (a) 18,536 7,229 --------------- 841,370 --------------- MEDIA--1.6% 4Kids Entertainment, Inc. (a) 60,100 1,263,302 Journal Communications, Inc., Class A 40,600 733,642 Liberty Corp. 28,600 1,257,256 Media General, Inc., Class A 18,200 1,179,542 --------------- 4,433,742 --------------- MULTILINE RETAIL--0.3% ShopKo Stores, Inc. (a) 45,350 847,138 --------------- SPECIALTY RETAIL--2.6% Building Material Holding Corp. 30,300 1,160,187 GameStop Corp., Class A (a) 73,100 1,634,516 Goody's Family Clothing, Inc. 86,400 789,696 Monro Muffler, Inc. (a) 66,075 1,671,698 Movie Gallery, Inc. 21,600 411,912 Pier 1 Imports, Inc. 49,300 971,210 Rent-Way, Inc. (a) 100 801 TBC Corp. (a) 19,350 537,930 --------------- 7,177,950 --------------- TEXTILES, APPAREL & LUXURY GOODS--1.9% Culp, Inc. (a) 21,400 $ 145,092 Delta Apparel, Inc. 18,650 452,263 Hampshire Group Ltd. (a) 35,200 1,108,870 Kellwood Co. 45,450 1,568,025 Russell Corp. 49,900 972,052 Stride Rite Corp. 62,300 695,891 Tandy Brands Accessories, Inc. 15,000 222,300 --------------- 5,164,493 --------------- CONSUMER STAPLES--2.4% FOOD & STAPLES RETAILING--0.6% BJ's Wholesale Club, Inc. (a) 27,300 795,249 Chronimed, Inc. (a) 72,400 472,772 Winn-Dixie Stores, Inc. 70,700 321,685 --------------- 1,589,706 --------------- FOOD PRODUCTS--1.8% Central Garden & Pet Co. (a) 14,600 609,404 Corn Products International, Inc. 50,000 2,678,000 John B. Sanfilippo & Son, Inc. (a) 16,300 420,214 M&F Worldwide Corp. (a) 52,300 712,326 Omega Protein Corp. (a) 70,400 605,440 --------------- 5,025,384 --------------- ENERGY--6.8% ENERGY EQUIPMENT & SERVICES--1.9% Gulf Island Fabrication, Inc. 6,900 150,627 Lufkin Industries, Inc. 40,650 1,622,260 Universal Compression Holdings, Inc. (a) 35,650 1,244,542 Willbros Group, Inc. (a) 107,040 2,467,272 --------------- 5,484,701 --------------- OIL & GAS--4.9% Bill Barrett Corp. (a) 12,200 390,278 Brigham Exploration Co. (a) 73,300 659,700 Carrizo Oil & Gas, Inc. (a) 110,200 1,245,260 Cimarex Energy Co. (a) 33,400 1,265,860 Energy Partners Ltd. (a) 60,100 1,218,227 Harvest Natural Resources, Inc. (a) 87,250 1,506,807 InterOil Corp. (a) 24,300 919,512 Magnum Hunter Resources, Inc. (a) 98,000 1,264,200 Range Resources Corp. 61,300 1,254,198 Stone Energy Corp. (a) 35,200 1,587,168 Western Gas Resources, Inc. 50,800 1,485,900 Whiting Petroleum Corp. (a) 26,900 813,725 --------------- 13,610,835 --------------- </Table> See Accompanying Notes to Financial Statements. 5 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- FINANCIALS--27.4% CAPITAL MARKETS--0.2% LaBranche & Co., Inc. (a) 57,700 $ 516,992 --------------- COMMERCIAL BANKS--11.4% BancFirst Corp. 5,500 434,390 BancorpSouth, Inc. 46,800 1,140,516 BancTrust Financial Group, Inc. 31,900 785,059 Bank of Granite Corp. 45,300 946,770 Bryn Mawr Bank Corp. 55,700 1,224,843 Capitol Bancorp Ltd. 47,600 1,676,472 Chemical Financial Corp. 44,767 1,921,400 Chittenden Corp. 63,775 1,832,256 Columbia Banking System, Inc. 34,200 854,658 Community Bancorp (a) 1,000 30,600 Community Trust Bancorp, Inc. 30,542 988,352 Corus Bankshares, Inc. 42,000 2,016,420 First Citizens BancShares, Inc., Class A 6,300 933,975 First Financial Bankshares, Inc. 22,775 1,020,548 Greater Bay Bancorp 36,600 1,020,408 Hancock Holding Co. 21,100 706,006 ITLA Capital Corp. (a) 21,800 1,281,622 MASSBANK Corp. 16,300 610,435 Merchants Bancshares, Inc. 36,500 1,058,500 Mid-State Bancshares 64,450 1,846,492 Northrim BanCorp, Inc. 33,400 784,900 Riggs National Corp. 28,980 616,115 S.Y. Bancorp, Inc. 6,300 151,830 Sterling Bancshares, Inc. 107,800 1,538,306 TriCo Bancshares 91,500 2,141,100 UMB Financial Corp. 28,500 1,614,810 Whitney Holding Corp. 32,600 1,466,674 Wintrust Financial Corp. 19,000 1,082,240 --------------- 31,725,697 --------------- CONSUMER FINANCE--0.9% Cash America International, Inc. 83,840 2,492,563 --------------- DIVERSIFIED FINANCIAL SERVICES--1.7% Advance America Cash Advance Centers, Inc. (a) 13,400 306,860 Metris Companies, Inc. (a) 135,700 1,730,175 MFC Bancorp Ltd. (a) 110,200 2,204,000 QC Holdings, Inc. (a) 31,600 605,456 --------------- 4,846,491 --------------- INSURANCE--5.7% AmerUs Group Co. 19,300 874,290 Baldwin & Lyons, Inc., Class B 23,100 618,849 CNA Surety Corp. (a) 70,700 943,845 Commerce Group, Inc. 12,500 763,000 Delphi Financial Group, Inc., Class A 40,786 1,882,274 Harleysville Group, Inc. 55,600 1,327,172 Horace Mann Educators Corp. 54,200 1,034,136 Kansas City Life Insurance Co. 5,000 236,500 Navigators Group, Inc. (a) 41,800 1,258,598 Phoenix Companies, Inc. 113,250 1,415,625 ProCentury Corp. 76,800 952,320 Quanta Capital Holdings Ltd. (a) 89,600 $ 826,112 RLI Corp. 33,500 1,392,595 UICI 18,200 616,980 United National Group Ltd., Class A (a) 59,600 1,109,752 Universal American Financial Corp. (a) 46,800 723,996 --------------- 15,976,044 --------------- REAL ESTATE--7.5% Alexandria Real Estate Equities, Inc., REIT 23,300 1,733,986 American Financial Realty Trust, REIT 53,300 862,394 BioMed Realty Trust, Inc. 81,000 1,799,010 Boykin Lodging Co., REIT (a) 91,400 837,224 Brandywine Realty Trust, REIT 34,100 1,002,199 EastGroup Properties, Inc., REIT 40,250 1,542,380 Equity One, Inc., REIT 54,000 1,281,420 First Potomac Realty Trust, REIT 47,400 1,080,720 Getty Realty Corp., REIT 36,350 1,044,335 Gladstone Commercial Corp., REIT 43,300 740,430 Mid-America Apartment Communities, Inc., REIT 41,750 1,720,935 Nationwide Health Properties, Inc., REIT 68,950 1,637,563 PS Business Parks, Inc., REIT 48,700 2,196,370 Tanger Factory Outlet Centers, Inc., REIT 48,800 1,291,248 U-Store-It Trust, REIT 32,000 555,200 Universal Health Realty Income Trust, REIT 24,500 787,185 Urstadt Biddle Properties, Inc., Class A, REIT 52,700 898,535 --------------- 21,011,134 --------------- HEALTH CARE--4.6% HEALTH CARE PROVIDERS & SERVICES--3.9% Capital Senior Living Corp. (a) 25,000 141,500 Cross Country Healthcare, Inc. (a) 51,900 938,352 Genesis HealthCare Corp. (a) 28,100 984,343 Gentiva Health Services, Inc. (a) 52,600 879,472 Hooper Holmes, Inc. 130,000 769,600 Kindred Healthcare, Inc. (a) 60,400 1,808,980 OCA, Inc. (a) 106,300 675,005 PAREXEL International Corp. (a) 66,500 1,349,950 Pediatrix Medical Group, Inc. (a) 26,100 1,671,705 Province Healthcare Co. (a) 28,200 630,270 Stewart Enterprises, Inc., Class A (a) 168,500 1,177,815 --------------- 11,026,992 --------------- </Table> See Accompanying Notes to Financial Statements. 6 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- PHARMACEUTICALS--0.7% Bradley Pharmaceuticals, Inc. (a) 48,200 $ 935,080 Perrigo Co. 53,400 922,218 --------------- 1,857,298 --------------- INDUSTRIAL--19.3% AEROSPACE & DEFENSE--2.6% AAR Corp. (a) 76,023 1,035,433 Esterline Technologies Corp. (a) 52,400 1,710,860 Herley Industries, Inc. (a) 38,200 776,988 Kaman Corp., Class A 64,000 809,600 Ladish Co., Inc. (a) 80,250 922,073 Precision Castparts Corp. 31,000 2,036,080 --------------- 7,291,034 --------------- AIR FREIGHT & LOGISTICS--1.1% HUB Group, Inc., Class A (a) 38,803 2,026,292 Ryder System, Inc. 24,000 1,146,480 --------------- 3,172,772 --------------- AIRLINES - 0.5% MAIR Holdings, Inc. (a) 40,050 368,460 Skywest, Inc. 57,300 1,149,438 --------------- 1,517,898 --------------- BUILDING PRODUCTS--0.6% NCI Building Systems, Inc. (a) 41,800 1,567,500 --------------- COMMERCIAL SERVICES & SUPPLIES--4.6% ABM Industries, Inc. 54,500 1,074,740 Angelica Corp. 29,200 789,860 Casella Waste Systems, Inc., Class A (a) 113,600 1,663,104 Century Business Services, Inc. (a) 72,474 315,987 Consolidated Graphics, Inc. (a) 53,450 2,453,355 Danka Business Systems PLC, ADR (a) 75,400 238,264 Electro Rent Corp. (a) 23,650 336,539 Healthcare Services Group, Inc. 68,200 1,421,288 Imagistics International, Inc. (a) 59,250 1,994,355 NCO Group, Inc. (a) 36,500 943,525 SOURCECORP, Inc. (a) 35,600 680,316 TeleTech Holdings, Inc. (a) 84,700 820,743 --------------- 12,732,076 --------------- CONSTRUCTION & ENGINEERING--1.9% Comfort Systems USA, Inc. (a) 120,550 925,824 Dycom Industries, Inc. (a) 52,100 1,590,092 EMCOR Group, Inc. (a) 18,600 840,348 MasTec, Inc. (a) 21,800 220,398 Quanta Services, Inc. (a) 36,700 293,600 Washington Group International, Inc. (a) 34,000 1,402,500 --------------- 5,272,762 --------------- ELECTRICAL EQUIPMENT--1.6% C&D Technologies, Inc. 52,000 $ 886,080 Genlyte Group, Inc. (a) 20,600 1,765,008 Powell Industries, Inc. (a) 15,100 279,199 Woodward Governor Co. 20,400 1,460,844 --------------- 4,391,131 --------------- MACHINERY--3.5% Alamo Group, Inc. 25,600 695,296 Briggs & Stratton 39,000 1,621,620 EnPro Industries, Inc. (a) 55,100 1,629,307 Harsco Corp. 41,200 2,296,488 Kadant, Inc. (a) 53,100 1,088,550 Robbins & Myers, Inc. 49,287 1,174,509 Tecumseh Products Co., Class A 25,000 1,195,000 --------------- 9,700,770 --------------- ROAD & RAIL--1.5% Covenant Transport, Inc., Class A (a) 41,650 867,153 Dollar Thrifty Automotive Group, Inc. (a) 36,300 1,096,260 U.S. Xpress Enterprises, Inc., Class A (a) 25,000 732,500 Werner Enterprises, Inc. 60,700 1,374,248 --------------- 4,070,161 --------------- TRADING COMPANIES & DISTRIBUTORS--1.4% Hughes Supply, Inc. 56,622 1,831,722 Watsco, Inc. 62,750 2,210,055 --------------- 4,041,777 --------------- INFORMATION TECHNOLOGY--11.6% COMMUNICATIONS EQUIPMENT--1.2% Anaren, Inc. (a) 72,500 939,600 Belden CDT, Inc. 34,500 800,400 Black Box Corp. 22,000 1,056,440 Tollgrade Communications, Inc. (a) 55,550 679,932 --------------- 3,476,372 --------------- COMPUTERS & PERIPHERALS--1.1% ActivCard Corp. (a) 87,900 782,310 Advanced Digital Information Corp. (a) 16,900 169,338 Electronics for Imaging, Inc. (a) 18,800 327,308 Hypercom Corp. (a) 102,000 603,840 Imation Corp. 9,800 311,934 Innovex, Inc. (a) 68,800 374,960 Intergraph Corp. (a) 21,466 578,079 --------------- 3,147,769 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--3.5% Agilysys, Inc. 44,550 763,587 Anixter International, Inc. 22,250 800,777 Benchmark Electronics, Inc. (a) 29,200 995,720 Brightpoint, Inc. (a) 79,600 1,555,384 Checkpoint Systems, Inc. (a) 55,600 1,003,580 </Table> See Accompanying Notes to Financial Statements. 7 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- Identix, Inc. (a) 106,700 $ 787,446 MTS Systems Corp. 40,150 1,357,472 NU Horizons Electronics Corp. (a) 92,300 736,554 OSI Systems, Inc. (a) 36,500 828,915 Planar Systems, Inc. (a) 43,000 482,890 Vishay Intertechnology, Inc. (a) 34,600 519,692 --------------- 9,832,017 --------------- INTERNET SOFTWARE & SERVICES--0.6% Digitas, Inc. (a) 45,490 434,430 Keynote Systems, Inc. (a) 69,500 967,440 Stellent, Inc. (a) 17,100 150,822 --------------- 1,552,692 --------------- IT SERVICES--2.1% Acxiom Corp. 53,500 1,407,050 Computer Horizons Corp. (a) 99,900 380,619 Inforte Corp. (a) 69,300 546,084 Lightbridge, Inc. (a) 84,400 509,776 MAXIMUS, Inc. (a) 19,300 600,616 MPS Group, Inc. (a) 197,100 2,416,446 --------------- 5,860,591 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.5% Exar Corp. (a) 56,400 800,316 Pericom Semiconductor Corp. (a) 56,100 529,023 --------------- 1,329,339 --------------- SOFTWARE--2.6% Ascential Software Corp. (a) 66,100 1,078,091 Captaris, Inc. (a) 139,200 718,272 Internet Security Systems, Inc. (a) 51,700 1,202,025 Lawson Software, Inc. (a) 68,800 472,656 MSC.Software Corp. (a) 90,100 943,347 PLATO Learning, Inc. (a) 81,262 605,402 SeaChange International, Inc. (a) 3,400 59,296 Sybase, Inc. (a) 42,900 855,855 Transaction Systems Architects, Inc., Class A (a) 65,600 1,302,160 --------------- 7,237,104 --------------- MATERIALS--9.8% CHEMICALS--2.6% Cytec Industries, Inc. 27,200 1,398,624 HB Fuller Co. 31,400 895,214 LESCO, Inc. 4,000 51,560 Lubrizol Corp. 19,400 715,084 Minerals Technologies, Inc. 20,700 1,380,690 Schulman (A.), Inc. 41,750 893,867 Sensient Technologies Corp. 41,200 988,388 Stepan Co. 34,200 833,112 --------------- 7,156,539 --------------- CONSTRUCTION MATERIALS--0.8% Eagle Materials, Inc. 26,300 2,271,005 --------------- CONTAINERS & PACKAGING--1.3% Aptargroup, Inc. 24,600 $ 1,298,388 Greif, Inc., Class A 40,250 2,254,000 --------------- 3,552,388 --------------- METALS & MINING--4.3% AMCOL International Corp. 37,200 747,348 Carpenter Technology Corp. 57,300 3,349,758 Coeur d'Alene Mines Corp. (a) 208,200 818,226 Metal Management, Inc. 78,800 2,117,356 Peabody Energy Corp. 23,350 1,889,249 RTI International Metals, Inc. (a) 71,750 1,473,745 Steel Technologies, Inc. 58,400 1,606,584 --------------- 12,002,266 --------------- PAPER & FOREST PRODUCTS--0.8% Glatfelter 84,900 1,297,272 Mercer International, Inc. (a) 93,300 993,645 --------------- 2,290,917 --------------- TELECOMMUNICATION SERVICES--0.8% DIVERSIFIED TELECOMMUNICATION SERVICES--0.4% North Pittsburgh Systems, Inc. 43,000 1,063,390 --------------- WIRELESS TELECOMMUNICATION SERVICES--0.4% Price Communications Corp. (a) 55,075 1,023,844 --------------- UTILITIES--3.9% ELECTRIC UTILITIES--3.2% ALLETE, Inc. 24,200 889,350 Central Vermont Public Service Corp. 60,300 1,402,578 CH Energy Group, Inc. 40,600 1,950,830 El Paso Electric Co. (a) 67,800 1,284,132 Maine & Maritimes Corp. 13,900 366,265 MGE Energy, Inc. 24,200 871,926 Otter Tail Corp. 34,200 873,126 Puget Energy, Inc. 58,800 1,452,360 --------------- 9,090,567 --------------- GAS UTILITIES--0.7% Cascade Natural Gas Corp. 25,900 549,080 Northwest Natural Gas Co. 19,800 668,052 WGL Holdings, Inc. 20,900 644,556 --------------- 1,861,688 --------------- TOTAL COMMON STOCKS (cost of $236,129,241) 277,569,578 --------------- </Table> See Accompanying Notes to Financial Statements. 8 <Page> <Table> <Caption> PAR VALUE --------------- --------------- SHORT-TERM OBLIGATION--2.8% Repurchase agreement with State Street Bank & Trust Co., dated 12/31/04, due 01/03/05 at 1.500%, collateralized by a U.S. Treasury Bond maturing 11/15/27, market value of $8,015,933 (repurchase proceeds $7,855,982) $ 7,855,000 $ 7,855,000 --------------- TOTAL SHORT-TERM OBLIGATION (cost of $7,855,000) 7,855,000 --------------- TOTAL INVESTMENTS--102.3% (cost of $243,984,241) (b) 285,424,578 --------------- OTHER ASSETS & LIABILITIES, NET--(2.3)% (6,380,053) --------------- NET ASSETS--100.0% $ 279,044,525 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $243,995,460. At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> SECTOR (UNAUDITED) % OF NET ASSETS - ------------------ --------------- Financials 27.4% Industrial 19.3 Consumer Discretionary 12.9 Information Technology 11.6 Materials 9.8 Energy 6.8 Health Care 4.6 Utilities 3.9 Consumer Staples 2.4 Telecommunication Services 0.8 Short-Term Obligation 2.8 Other Assets & Liabilities, Net (2.3) ------ 100.0% ====== </Table> <Table> <Caption> ACRONYM NAME ---------- ---------------------------- ADR American Depositary Receipt REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 9 <Page> STATEMENT OF ASSETS & LIABILITIES Colonial Small Cap Value Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 243,984,241 --------------- Investments, at value $ 285,424,578 Cash 22,466 Receivable for: Fund shares sold 30,586 Interest 327 Dividends 260,833 Expense reimbursement due from Distributor 28,982 Deferred Trustees' compensation plan 5,122 --------------- TOTAL ASSETS 285,772,894 --------------- LIABILITIES: Payable for: Investments purchased 4,874,211 Fund shares repurchased 1,554,853 Investment advisory fee 178,304 Transfer agent fee 625 Pricing and bookkeeping fees 7,105 Custody fee 12,969 Distribution fee--Class B 52,673 Deferred Trustees' fees 5,122 Other liabilities 42,507 --------------- TOTAL LIABILITIES 6,728,369 --------------- NET ASSETS $ 279,044,525 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 237,056,366 Overdistributed net investment income (191,969) Accumulated net realized gain 739,791 Net unrealized appreciation on investments 41,440,337 --------------- NET ASSETS $ 279,044,525 =============== CLASS A: Net assets $ 14,557,437 Shares outstanding 859,289 =============== Net asset value per share $ 16.94 =============== CLASS B: Net assets $ 264,487,088 Shares outstanding 15,627,679 =============== Net asset value per share $ 16.92 =============== </Table> See Accompanying Notes to Financial Statements. 10 <Page> STATEMENT OF OPERATIONS Colonial Small Cap Value Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Dividends $ 2,454,005 Interest 44,288 --------------- Total Investment Income (net of foreign taxes withheld of $26) 2,498,293 --------------- EXPENSES: Investment advisory fee 1,306,990 Distribution fee--Class B 378,114 Transfer agent fee 7,500 Pricing and bookkeeping fees 54,220 Trustees' fees 8,177 Custody fee 141,144 Non-recurring costs (See Note 6) 7,353 Other expenses 68,684 --------------- TOTAL EXPENSES 1,972,182 Fees reimbursed by Distributor--Class B (183,342) Non-recurring costs assumed by Investment Advisor (See Note 6) (7,353) Custody earnings credit (347) --------------- Net Expenses 1,781,140 --------------- Net Investment Income 717,153 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on: Investments 6,089,363 Foreign currency transactions 3 --------------- Net realized gain 6,089,366 --------------- Net change in unrealized appreciation/depreciation on investments 32,496,427 --------------- Net Gain 38,585,793 --------------- Net Increase in Net Assets from Operations $ 39,302,946 =============== </Table> See Accompanying Notes to Financial Statements. 11 <Page> STATEMENT OF CHANGES IN NET ASSETS Colonial Small Cap Value Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, ---------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 717,153 $ 168,931 Net realized gain on investments and foreign currency transactions 6,089,366 2,017,004 Net change in unrealized appreciation/depreciation on investments and foreign currency translations 32,496,427 9,341,998 --------------- --------------- Net Increase from Operations 39,302,946 11,527,933 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (59,647) (22,479) Class B (777,348) (119,531) From net realized gains: Class A (363,580) (238,640) Class B (6,319,347) (908,385) --------------- --------------- Total Distributions Declared to Shareholders (7,519,922) (1,289,035) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 3,893,180 2,010,453 Distributions reinvested 423,227 259,626 Redemptions (2,651,167) (2,180,602) --------------- --------------- Net Increase 1,665,240 89,477 --------------- --------------- Class B: Subscriptions 175,158,904 40,839,812 Distributions reinvested 7,096,695 1,029,409 Redemptions (6,127,471) (2,701,725) --------------- --------------- Net Increase 176,128,128 39,167,496 --------------- --------------- Net Increase from Share Transactions 177,793,368 39,256,973 --------------- --------------- Total Increase in Net Assets 209,576,392 49,495,871 NET ASSETS: Beginning of period 69,468,133 19,972,262 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $(191,969) and $26,748, respectively) $ 279,044,525 $ 69,468,133 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 254,063 173,870 Issued for distributions reinvested 25,530 19,197 Redemptions (174,777) (191,845) --------------- --------------- Net Increase 104,816 1,222 --------------- --------------- Class B: Subscriptions 11,470,781 3,132,027 Issued for distributions reinvested 427,336 74,615 Redemptions (399,816) (230,723) --------------- --------------- Net Increase 11,498,301 2,975,919 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 12 <Page> NOTES TO FINANCIAL STATEMENTS Colonial Small Cap Value Fund, Variable Series / December 31, 2004 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. 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. If the Fund no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains. 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. 13 <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 timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for foreign currency transactions, distribution reclassifications, partnership adjustments and REIT adjustments were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT INCOME NET REALIZED GAIN CAPITAL --------------------- ----------------- ------- $ (35,415) $ 35,423 $ (8) </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 -------------- -------------- Distributions paid from: Ordinary income* $ 5,382,821 $ 977,202 Long-term capital gains 2,137,101 311,833 </Table> * For tax purposes short-term capital gains distributions are considered ordinary income distributions. As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- $ 701,734 $ 49,277 $ 41,429,118 </Table> * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales and REIT adjustments. Unrealized appreciation and depreciation at December 31, 2004, based on cost of investments for federal income tax purposes, was: <Table> Unrealized appreciation $ 47,006,164 Unrealized depreciation (5,577,046) ------------- Net unrealized appreciation $ 41,429,118 ============= </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 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 14 <Page> 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 year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.033%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the year ended December 31, 2004, the Fund's 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 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. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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 year ended December 31, 2004, the Fund paid $1,344 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $220,123,072 and $48,082,341, 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--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, 15 <Page> Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $7,353 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 16 <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> PERIOD YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- 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) 0.07 0.07 0.02 0.02 0.06 Net realized and unrealized gain (loss) on investments and foreign currency 3.12 4.03 (0.73) 0.97 1.57 ---------- ------------ ------------ ------------ ------------ Total from Investment Operations 3.19 4.10 (0.71) 0.99 1.63 ---------- ------------ ------------ ------------ ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.05) (0.03) (0.01) (0.02) (0.05) From net realized gains (0.44) (0.32) (0.36) (0.15) (0.06) ---------- ------------ ------------ ------------ ------------ Total Distributions Declared to Shareholders (0.49) (0.35) (0.37) (0.17) (0.11) ---------- ------------ ------------ ------------ ------------ NET ASSET VALUE, END OF PERIOD $ 16.92 $ 14.22 $ 10.47 $ 11.55 $ 10.73 ========== ============ ============ ============ ============ Total return (c)(d)(e) 22.51% 39.34% (6.14)% 9.20% 17.72%(f) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (g) 1.10% 1.10% 1.10% 1.10% 1.10%(h) Net investment income (g) 0.43% 0.54% 0.18% 0.22% 1.01%(h) Waiver/reimbursement 0.12% 0.36% 0.29% 0.47% 1.07%(h) Portfolio turnover rate 30% 55% 125% 56% 54% Net assets, end of period (000's) $ 264,487 $ 58,730 $ 12,080 $ 9,020 $ 3,469 </Table> (a) For the period from commencement of operations on June 1, 2000 to December 31, 2000. (b) Per share data was calculated using average shares outstanding during the period. (c) Total return at net asset value assuming all distributions reinvested. (d) Had the Investment Advisor and/or Distributor not waived 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. 17 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Colonial Small Cap Value Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Colonial Small Cap Value Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 18 <Page> UNAUDITED INFORMATION Colonial Small Cap Value Fund, Variable Series FEDERAL INCOME TAX INFORMATION For the fiscal year ended December 31, 2004, the Fund designates long-term capital gains of $1,920,100. 41.84% of the ordinary income distributed by the Fund for the year ended December 31, 2004, qualifies for the corporate dividends received deduction. 19 <Page> PORTFOLIO MANAGER'S DISCUSSION Colonial Strategic Income Fund, Variable Series / December 31, 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. The fund delivered a solid return in 2004, outpacing the US Treasury market and the average return of competing funds in its peer group, the Lipper Variable Series General Bond Category(1). The fund's high-yield securities and investments in foreign debt were instrumental in producing an above-average return. HIGH YIELD CONTINUES TO OUTPERFORM Lower quality corporate bonds outperformed US Treasury obligations during this reporting period, continuing a pattern that has been in place for most of the last two years. With approximately 39% of assets invested in the US high-yield marketplace, the fund has been positioned to take advantage of this positive environment for credit which rewarded holders of bonds with lower credit quality. The fund's high-yield holdings carry an average credit quality of single B, compared to a weighted average of BBB+ for the fund as a whole. An overweight position in B and CCC-rated bonds in this sector paid off handsomely, especially during the stock market rally that followed the US election in early November. By contrast, the fund's position in Treasury securities was limited to just 23% of the fund's assets during the period. Specific holdings that helped the fund included Levi Strauss & Co., the casual clothing maker, and chemicals manufacturer Huntsman ICI Holdings LLC (0.3% and 0.4% of net assets, respectively). Levi Strauss stabilized its operations as it investigated a possible sale of its Dockers brand. (In October, the company announced plans to retain the brand.) Huntsman ICI benefited from the upward trend in commodity chemical prices and from anticipation of a proposed transaction that would retire the bonds at a premium. Poor performers included Delta Air Lines, Inc. which faced high fuel prices and high labor costs, and Merisant Co., manufacturer of Equal, a popular sugar substitute (0.1% and 0.1% of net assets, respectively). Equal lost market share to Johnson & Johnson's Splenda. FOREIGN BONDS OUTPERFORMED DOMESTIC HOLDINGS Throughout the period, approximately 35% of the fund's total assets were invested outside the United States. The fund's exposure to the non-dollar denominated bonds of developed countries was of particular value because of the ongoing decline in the US dollar. The euro and the British pound made significant gains versus the dollar, as did the South African rand. Toward the end of the period we took some profits in rand-denominated positions. Bonds from emerging markets accounted for approximately 14-15% of the assets. Emerging market bonds performed well during the period as the global interest rate environment remained favorable and the demand for commodities remained strong. In particular, oil producing countries such as Russia, Venezuela and Mexico benefited from the sustained strength in oil prices. Overall, the fund has been positioned so that high oil prices are a net positive, even though they tend to hurt the economies of developed oil importers, notably in Europe. The credit quality of many emerging market countries has improved over the past two years, adding to the strong performance of emerging market debt. PREPARING FOR HIGHER RATES AND A LOWER DOLLAR We have structured the fund to benefit from continued stable economic growth in the United States and abroad. As long as the US economy continues to grow at a reasonable rate, we expect the Federal Reserve Board to continue to raise short-term rates, a course that it set in motion with five increases during this reporting period. We continue to maintain substantial allocations to the high-yield and foreign government sectors, including exposure to foreign currency. Although the dollar has been weak for some time now, investors are paying increasing attention to the United States' fiscal, current account and trade deficits. If the financial markets bid the dollar down even further to adjust these imbalances, the fund is positioned to benefit. We also believe that the fixed-income markets are likely to become more discriminating in the year ahead. Whereas overweighting higher-yielding bonds as a group was a successful strategy in 2004, we believe that investors are likely to become more discerning in judging which lower quality issues merited their swift run-ups and which did not. We believe this environment calls for a more defensive approach, so we plan to look for opportunities to reduce the fund's risk exposure where appropriate. 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. The value of fixed-income securities generally move inversely with changes in interest rates such that when interest rates rise, bond values fall and vice versa. Holdings are disclosed as of December 31, 2004, and are subject to change. (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 20 <Page> PERFORMANCE INFORMATION Colonial Strategic Income Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR 5-YEAR 10-YEAR - ----------------------------------------------------------------- Class B (6/1/00) 9.85 7.82 8.35 Lehman Brothers Government/ Credit Bond Index 4.19 8.00 7.80 JP Morgan Global High Yield Index 11.55 7.61 8.62 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 1/1/95 - 12/31/04 Class B: $22,289 <Table> <Caption> LEHMAN BROTHERS GOVERNMENT/ JP MORGAN GLOBAL CLASS B SHARES CREDIT BOND INDEX HIGH YIELD INDEX 1/1/1995 $ 10,000 $ 10,000 $ 10,000 1/31/1995 $ 10,133 $ 10,192 $ 10,128 2/28/1995 $ 10,378 $ 10,428 $ 10,489 3/31/1995 $ 10,562 $ 10,498 $ 10,594 4/30/1995 $ 10,756 $ 10,645 $ 10,868 5/31/1995 $ 11,052 $ 11,091 $ 11,178 6/30/1995 $ 11,103 $ 11,180 $ 11,222 7/31/1995 $ 11,205 $ 11,136 $ 11,397 8/31/1995 $ 11,205 $ 11,279 $ 11,442 9/30/1995 $ 11,399 $ 11,394 $ 11,578 10/31/1995 $ 11,552 $ 11,562 $ 11,686 11/30/1995 $ 11,664 $ 11,752 $ 11,762 12/31/1995 $ 11,829 $ 11,925 $ 11,952 1/31/1996 $ 12,002 $ 11,999 $ 12,179 2/29/1996 $ 11,905 $ 11,745 $ 12,252 3/31/1996 $ 11,851 $ 11,646 $ 12,212 4/30/1996 $ 11,905 $ 11,566 $ 12,288 5/31/1996 $ 11,915 $ 11,546 $ 12,381 6/30/1996 $ 11,990 $ 11,700 $ 12,434 7/31/1996 $ 12,087 $ 11,726 $ 12,517 8/31/1996 $ 12,228 $ 11,697 $ 12,703 9/30/1996 $ 12,475 $ 11,905 $ 13,004 10/31/1996 $ 12,668 $ 12,183 $ 13,123 11/30/1996 $ 12,970 $ 12,407 $ 13,365 12/31/1996 $ 12,992 $ 12,269 $ 13,508 1/31/1997 $ 12,956 $ 12,284 $ 13,615 2/28/1997 $ 13,051 $ 12,310 $ 13,849 3/31/1997 $ 12,863 $ 12,163 $ 13,623 4/30/1997 $ 13,028 $ 12,341 $ 13,751 5/31/1997 $ 13,240 $ 12,456 $ 14,069 6/30/1997 $ 13,428 $ 12,605 $ 14,254 7/31/1997 $ 13,746 $ 12,991 $ 14,634 8/31/1997 $ 13,653 $ 12,845 $ 14,642 9/30/1997 $ 13,948 $ 13,047 $ 14,934 10/31/1997 $ 13,972 $ 13,256 $ 14,913 11/30/1997 $ 14,043 $ 13,326 $ 15,047 12/31/1997 $ 14,179 $ 13,466 $ 15,183 1/31/1998 $ 14,407 $ 13,656 $ 15,418 2/28/1998 $ 14,445 $ 13,628 $ 15,537 3/31/1998 $ 14,546 $ 13,671 $ 15,694 4/30/1998 $ 14,610 $ 13,739 $ 15,772 5/31/1998 $ 14,674 $ 13,886 $ 15,794 6/30/1998 $ 14,699 $ 14,028 $ 15,827 7/31/1998 $ 14,827 $ 14,039 $ 15,960 8/31/1998 $ 14,278 $ 14,313 $ 14,926 9/30/1998 $ 14,597 $ 14,722 $ 14,911 10/31/1998 $ 14,622 $ 14,617 $ 14,590 11/30/1998 $ 15,041 $ 14,705 $ 15,394 12/31/1998 $ 15,032 $ 14,742 $ 15,331 1/31/1999 $ 15,154 $ 14,847 $ 15,515 2/28/1999 $ 14,978 $ 14,493 $ 15,436 3/31/1999 $ 15,182 $ 14,566 $ 15,626 4/30/1999 $ 15,385 $ 14,602 $ 16,023 5/31/1999 $ 15,073 $ 14,452 $ 13,203 6/30/1999 $ 15,087 $ 14,407 $ 15,795 7/31/1999 $ 15,073 $ 14,367 $ 15,799 8/31/1999 $ 15,019 $ 14,355 $ 15,641 9/30/1999 $ 15,100 $ 14,484 $ 15,529 10/31/1999 $ 15,100 $ 14,522 $ 15,443 11/30/1999 $ 15,195 $ 14,513 $ 15,695 12/31/1999 $ 15,300 $ 14,425 $ 15,849 1/31/2000 $ 15,153 $ 14,420 $ 15,789 2/29/2000 $ 15,344 $ 14,601 $ 15,852 3/31/2000 $ 15,286 $ 14,812 $ 15,582 4/30/2000 $ 15,154 $ 14,740 $ 15,579 5/31/2000 $ 15,022 $ 14,726 $ 15,358 6/30/2000 $ 15,302 $ 15,027 $ 15,660 7/31/2000 $ 15,419 $ 15,186 $ 15,798 8/31/2000 $ 15,566 $ 15,400 $ 15,920 9/30/2000 $ 15,396 $ 15,459 $ 15,711 10/31/2000 $ 15,102 $ 15,556 $ 15,251 11/30/2000 $ 14,853 $ 15,822 $ 14,668 12/31/2000 $ 15,311 $ 16,134 $ 14,927 1/31/2001 $ 15,944 $ 16,405 $ 15,831 2/28/2001 $ 15,994 $ 16,574 $ 16,015 3/31/2001 $ 15,636 $ 16,650 $ 15,701 4/30/2001 $ 15,457 $ 16,525 $ 15,536 5/31/2001 $ 15,572 $ 16,621 $ 15,841 6/30/2001 $ 15,393 $ 16,701 $ 15,567 7/31/2001 $ 15,457 $ 17,117 $ 15,724 8/31/2001 $ 15,734 $ 17,336 $ 15,928 9/30/2001 $ 15,278 $ 17,495 $ 14,877 10/31/2001 $ 15,701 $ 17,940 $ 15,247 11/30/2001 $ 15,913 $ 17,646 $ 15,766 12/31/2001 $ 15,854 $ 17,506 $ 15,745 1/31/2002 $ 15,908 $ 17,634 $ 15,860 2/28/2002 $ 15,943 $ 17,784 $ 15,741 3/31/2002 $ 15,995 $ 17,423 $ 16,097 4/30/2002 $ 16,298 $ 17,761 $ 16,342 5/31/2002 $ 16,369 $ 17,924 $ 16,286 6/30/2002 $ 16,139 $ 18,077 $ 15,700 7/31/2002 $ 15,979 $ 18,293 $ 15,263 8/31/2002 $ 16,246 $ 18,703 $ 15,404 9/30/2002 $ 16,335 $ 19,105 $ 15,224 10/31/2002 $ 16,389 $ 18,922 $ 15,114 11/30/2002 $ 16,727 $ 18,933 $ 15,897 12/31/2002 $ 17,136 $ 19,435 $ 16,081 1/31/2003 $ 17,349 $ 19,435 $ 16,499 2/28/2003 $ 17,696 $ 19,781 $ 16,740 3/31/2003 $ 17,869 $ 19,755 $ 17,144 4/30/2003 $ 18,505 $ 19,967 $ 17,994 5/31/2003 $ 19,025 $ 20,534 $ 18,244 6/30/2003 $ 19,161 $ 20,452 $ 18,777 7/31/2003 $ 18,699 $ 19,595 $ 18,659 8/31/2003 $ 18,775 $ 19,724 $ 18,843 9/30/2003 $ 19,412 $ 20,349 $ 19,365 10/31/2003 $ 19,470 $ 20,091 $ 19,725 11/30/2003 $ 19,778 $ 20,145 $ 20,002 12/31/2003 $ 20,294 $ 20,344 $ 20,508 1/31/2004 $ 20,418 $ 20,530 $ 20,883 2/29/2004 $ 20,542 $ 20,780 $ 20,900 3/31/2004 $ 20,709 $ 20,971 $ 21,063 4/30/2004 $ 20,170 $ 20,327 $ 20,985 5/31/2004 $ 20,067 $ 20,224 $ 20,659 6/30/2004 $ 20,254 $ 20,307 $ 20,973 7/31/2004 $ 20,481 $ 20,522 $ 21,238 8/31/2004 $ 20,915 $ 20,957 $ 21,595 9/30/2004 $ 21,206 $ 21,030 $ 21,906 10/31/2004 $ 21,600 $ 21,213 $ 22,274 11/30/2004 $ 21,952 $ 20,978 $ 22,523 12/31/2004 $ 22,289 $ 21,202 $ 22,865 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - --------------------------------------------------------- Class B 9.80 9.95 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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 a selection of US government and investment grade US corporate bonds. 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. 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. 21 <Page> UNDERSTANDING YOUR EXPENSES Colonial Strategic Income Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ------------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ------------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,100.80 1,020.11 5.28 5.08 1.00 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the distributor not waived/reimbursed a portion of expenses, account values at the end of the period would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 22 <Page> INVESTMENT PORTFOLIO Colonial Strategic Income Fund, Variable Series / December 31, 2004 <Table> <Caption> PAR VALUE --------------- --------------- CORPORATE FIXED-INCOME BONDS & NOTES--41.0% BASIC MATERIALS--3.9% CHEMICALS--2.1% AGRICULTURAL CHEMICALS--0.6% IMC Global, Inc. 10.875% 08/01/13 $ 205,000 $ 256,250 Terra Capital, Inc. 12.875% 10/15/08 310,000 379,750 UAP Holding Corp. (a) 07/15/12 (10.750% 01/15/08) (b) 190,000 147,250 United Agri Products 8.750% 12/15/11 (b) 162,000 173,745 --------------- 956,995 --------------- CHEMICALS - DIVERSIFIED--1.3% BCP Caylux Holding Luxembourg SCA 9.625% 06/15/14 (b) 140,000 157,325 Equistar Chemicals LP 10.625% 05/01/11 310,000 359,212 HMP Equity Holdings Corp. (c) 05/15/08 560,000 369,600 Huntsman ICI Holdings LLC (c) 12/31/09 1,090,000 611,763 Huntsman International LLC 7.375% 01/01/15 (b) 115,000 115,575 Lyondell Chemical Co. 9.625% 05/01/07 350,000 385,000 NOVA Chemicals Corp. 6.500% 01/15/12 110,000 117,361 Westlake Chemical Corp. 8.750% 07/15/11 85,000 95,838 --------------- 2,211,674 --------------- CHEMICALS - SPECIALTY--0.2% Crompton Corp. 7.670% 08/01/10 (b)(d) 115,000 123,912 Rhodia SA 8.875% 06/01/11 195,000 197,925 --------------- 321,837 --------------- FOREST PRODUCTS & PAPER--0.8% FORESTRY--0.2% Millar Western Forest Products Ltd. 7.750% 11/15/13 145,000 155,150 Tembec Industries, Inc. 8.500% 02/01/11 120,000 120,600 --------------- 275,750 --------------- PAPER & RELATED PRODUCTS--0.6% Boise Cascade LLC 5.005% 10/15/12 (b)(d) 105,000 108,937 7.125% 10/15/14 (b) 120,000 126,900 Buckeye Technologies, Inc. 8.500% 10/01/13 40,000 43,900 Caraustar Industries, Inc. 9.875% 04/01/11 190,000 206,625 Georgia-Pacific Corp. 8.000% 01/15/24 125,000 146,250 Neenah Paper, Inc. 7.375% 11/15/14 (b) $ 85,000 $ 86,063 Newark Group, Inc. 9.750% 03/15/14 (b) 180,000 191,700 Norske Skog Canada Ltd. 7.375% 03/01/14 65,000 67,600 8.625% 06/15/11 90,000 96,525 --------------- 1,074,500 --------------- IRON/STEEL--0.6% METAL - IRON--0.2% Wise Metals Group LLC 10.250% 05/15/12 (b) 270,000 272,700 --------------- STEEL - PRODUCERS--0.1% Bayou Steel Corp. 9.000% 03/31/11 125,000 117,500 Steel Dynamics, Inc. 9.500% 03/15/09 105,000 115,763 --------------- 233,263 --------------- STEEL - SPECIALTY--0.3% Oregon Steel Mills, Inc. 10.000% 07/15/09 130,000 144,950 UCAR Finance, Inc. 10.250% 02/15/12 250,000 287,500 --------------- 432,450 --------------- MINING--0.4% METAL - ALUMINUM--0.1% Kaiser Aluminum & Chemical Corp. 10.875% 10/15/06 (e) 240,000 212,400 --------------- METAL - DIVERSIFIED--0.2% Earle M. Jorgensen & Co. 9.750% 06/01/12 240,000 270,000 --------------- METAL SERVICES--0.1% HudBay Mining and Smelting Co. Ltd. 9.625% 01/15/12 (b) 155,000 151,900 --------------- COMMUNICATIONS--9.3% ADVERTISING--0.1% ADVERTISING SERVICES--0.1% WDAC Subsidiary Corp. 8.375% 12/01/14 (b)(f) 180,000 178,200 --------------- MEDIA--4.5% BROADCAST SERVICES/PROGRAMS--0.2% Fisher Communications, Inc. 8.625% 09/15/14 (b) 180,000 194,625 XM Satellite Radio Holdings, Inc. 7.660% 05/01/09 (d) 160,000 163,200 --------------- 357,825 --------------- CABLE TV--1.9% Atlantic Broadband Finance LLC 9.375% 01/15/14 (b) 235,000 227,950 Cablevision Systems Corp. 6.669% 04/01/09 (b)(d) 185,000 197,025 </Table> See Accompanying Notes to Financial Statements. 23 <Page> <Table> <Caption> PAR VALUE --------------- --------------- CCO Holdings LLC/Capital Corp. 6.615% 12/15/10 (b)(d) $ 140,000 $ 139,650 Charter Communications Holding LLC 9.920% 04/01/11 975,000 829,969 10.250% 09/15/10 160,000 169,600 CSC Holdings, Inc. 6.750% 04/15/12 (b) 205,000 210,637 7.625% 04/01/11 25,000 26,937 DirecTV Holdings LLC 8.375% 03/15/13 115,000 128,944 EchoStar DBS Corp. 6.375% 10/01/11 290,000 297,250 Insight Communications (a) 02/15/11 (12.250% 02/15/06) 105,000 102,900 Insight Midwest LP 9.750% 10/01/09 115,000 120,606 Northland Cable Television, Inc. 10.250% 11/15/07 305,000 302,713 Pegasus Satellite Communications, Inc. 11.250% 01/15/10 (b)(e) 270,000 174,150 Telenet Group Holding NV (a) 06/15/14 (11.500% 12/15/08) (b) 260,000 200,200 --------------- 3,128,531 --------------- MULTIMEDIA--0.7% Advanstar Communications, Inc. (a) 10/15/11 (15.000% 10/15/05) 185,000 156,325 12.000% 02/15/11 195,000 209,625 Haights Cross Communications, Inc. (a) 08/15/11 (12.500% 02/01/09) 205,000 134,275 Haights Cross Operating Co. 11.750% 08/15/11 (b) 85,000 96,050 11.750% 08/15/11 195,000 220,350 Quebecor Media, Inc. 11.125% 07/15/11 205,000 234,725 --------------- 1,051,350 --------------- PUBLISHING - NEWSPAPERS--0.1% Hollinger, Inc. 11.875% 03/01/11 (b)(g) 81,000 88,137 12.875% 03/01/11 (b) 127,000 137,319 --------------- 225,456 --------------- PUBLISHING - PERIODICALS--0.8% CBD Media Holdings & Finance, Inc. 9.250% 07/15/12 (b) 145,000 149,350 Dex Media East LLC 12.125% 11/15/12 240,000 292,800 Dex Media, Inc. (a) 11/15/13 (9.000% 11/15/08) 160,000 125,200 8.000% 11/15/13 220,000 237,600 Dex Media West LLC 9.875% 08/15/13 $ 176,000 $ 202,840 Primedia, Inc. 8.875% 05/15/11 315,000 333,900 --------------- 1,341,690 --------------- RADIO--0.2% Spanish Broadcasting System 9.625% 11/01/09 295,000 309,750 --------------- TELEVISION--0.6% Granite Broadcasting Corp. 9.750% 12/01/10 365,000 349,487 Paxson Communications 10.750% 07/15/08 355,000 371,863 Sinclair Broadcast Group, Inc. 8.750% 12/15/11 250,000 272,500 --------------- 993,850 --------------- TELECOMMUNICATIONS--4.7% CELLULAR TELECOMMUNICATIONS--2.0% American Cellular Corp. Series B 10.000% 08/01/11 180,000 154,350 Dobson Cellular Systems 8.375% 11/01/11 (b) 55,000 57,131 Dobson Communications Corp. 8.875% 10/01/13 345,000 242,362 Horizon PCS, Inc. 11.375% 07/15/12 (b) 145,000 163,125 iPCS Escrow Co. 11.500% 05/01/12 (b) 105,000 119,437 Nextel Communications, Inc. 7.375% 08/01/15 390,000 431,438 Nextel Partners, Inc. 8.125% 07/01/11 255,000 283,050 Rogers Cantel, Inc. 9.750% 06/01/16 400,000 479,000 Rogers Wireless, Inc. 8.000% 12/15/12 (b) 140,000 148,050 Rural Cellular Corp. 8.250% 03/15/12 150,000 158,250 UbiquiTel Operating Co. 9.875% 03/01/11 150,000 168,000 9.875% 03/01/11 (b) 110,000 123,200 US Unwired, Inc. 10.000% 06/15/12 300,000 338,250 Western Wireless Corp. 9.250% 07/15/13 270,000 293,625 --------------- 3,159,268 --------------- SATELLITE TELECOMMUNICATIONS--0.3% Inmarsat Finance II PLC (a) 11/15/12 (10.375% 11/15/08) (b) 140,000 100,800 New Skies Satellites NV 9.125% 11/01/12 (b) 125,000 126,250 PanAmSat Corp. 9.000% 08/15/14 (b) 120,000 133,800 </Table> See Accompanying Notes to Financial Statements. 24 <Page> <Table> <Caption> PAR VALUE --------------- --------------- PanAmSat Holding Corp. (a) 11/01/14 (10.375% 11/01/09) (b) $ 275,000 $ 188,375 --------------- 549,225 --------------- TELECOMMUNICATION EQUIPMENT--0.1% Lucent Technologies, Inc. 6.450% 03/15/29 220,000 200,200 --------------- TELECOMMUNICATION SERVICES--0.7% Axtel SA 11.000% 12/15/13 270,000 290,250 Carrier1 International SA 13.250% 02/15/09 (e)(l) 500,000 45,000 FairPoint Communications, Inc. 11.875% 03/01/10 180,000 210,600 Securus Technologies, Inc. 11.000% 09/01/11 (b) 225,000 225,000 Time Warner Telecom LLC 9.750% 07/15/08 100,000 101,250 10.125% 02/01/11 255,000 250,538 --------------- 1,122,638 --------------- TELEPHONE - INTEGRATED--1.3% Cincinnati Bell, Inc. 8.375% 01/15/14 300,000 304,500 Qwest Capital Funding, Inc. 7.250% 02/15/11 665,000 650,038 7.750% 02/15/31 265,000 231,875 Qwest Services Corp. 14.000% 12/15/10 (b) 680,000 817,700 US LEC Corp. 10.670% 10/01/09 (b)(d) 115,000 114,750 --------------- 2,118,863 --------------- WIRELESS EQUIPMENT--0.3% American Towers, Inc. 7.250% 12/01/11 130,000 137,800 SBA Communications Corp. (a) 12/15/11 (9.750% 12/15/07) 220,000 185,350 Spectrasite Inc. 8.250% 05/15/10 150,000 160,125 --------------- 483,275 --------------- CONSUMER CYCLICAL--8.2% AIRLINES--0.5% AIRLINES--0.5% Continental Airlines, Inc. 7.568% 12/01/06 275,000 220,000 Delta Air Lines, Inc. 7.900% 12/15/09 135,000 84,375 Northwest Airlines, Inc. 9.875% 03/15/07 400,000 360,000 United Air Lines Inc. 2.020% 03/02/04 (d)(h) 198,207 170,458 --------------- 834,833 --------------- APPAREL--0.6% APPAREL MANUFACTURERS--0.6% Broder Brothers Co. 11.250% 10/15/10 $ 170,000 $ 177,650 11.250% 10/15/10 (b) 85,000 88,825 Levi Strauss & Co. 12.250% 12/15/12 420,000 466,200 Phillips-Van Heusen Corp. 7.250% 02/15/11 95,000 99,750 8.125% 05/01/13 115,000 124,775 --------------- 957,200 --------------- AUTO MANUFACTURERS--0.1% AUTO--MEDIUM & HEAVY DUTY TRUCKS--0.1% Navistar International Corp. 7.500% 06/15/11 175,000 187,687 --------------- AUTO PARTS & EQUIPMENT--0.7% AUTO/TRUCK PARTS & EQUIPMENT--ORIGINAL--0.3% Accuride Corp. Series B 9.250% 02/01/08 100,000 101,500 Delco Remy International, Inc. 11.000% 05/01/09 200,000 212,250 Dura Operating Corp. 8.625% 04/15/12 225,000 234,562 --------------- 548,312 --------------- AUTO/TRUCK PARTS & EQUIPMENT-- REPLACEMENT--0.1% Rexnord Corp. 10.125% 12/15/12 150,000 169,688 --------------- RUBBER--TIRES--0.3% Cooper Standard Auto 8.375% 12/15/14 (b) 125,000 125,000 Goodyear Tire & Rubber Co. 7.857% 08/15/11 310,000 311,550 --------------- 436,550 --------------- ENTERTAINMENT--1.3% GAMBLING (NON-HOTEL)--0.2% Global Cash Access LLC 8.750% 03/15/12 265,000 285,537 --------------- MUSIC--0.3% Steinway Musical Instruments, Inc. 8.750% 04/15/11 155,000 168,175 Warner Music Group 7.375% 04/15/14 (b) 240,000 246,000 --------------- 414,175 --------------- RESORTS/THEME PARKS--0.4% Six Flags, Inc. 9.625% 06/01/14 485,000 491,063 Universal City Florida Holding Co. 7.200% 05/01/10 (b)(d) 80,000 83,400 8.375% 05/01/10 (b) 30,000 31,275 --------------- 605,738 --------------- THEATERS--0.4% LCE Acquisition Corp. 9.000% 08/01/14 (b) 290,000 314,650 </Table> See Accompanying Notes to Financial Statements. 25 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Marquee Holdings, Inc. (a) 08/15/14 (12.000% 08/15/09) (b) $ 595,000 $ 398,650 --------------- 713,300 --------------- HOME BUILDERS--0.8% BUILDINGS--RESIDENTIAL/COMMERCIAL--0.8% D.R. Horton, Inc. 9.750% 09/15/10 575,000 697,187 K. Hovnanian Enterprises, Inc. 8.875% 04/01/12 45,000 49,725 10.500% 10/01/07 250,000 287,813 Standard Pacific Corp. 9.250% 04/15/12 185,000 215,063 --------------- 1,249,788 --------------- HOME FURNISHINGS--0.3% HOME FURNISHINGS--0.3% Norcraft Companies 9.000% 11/01/11 90,000 97,200 WII Components, Inc. 10.000% 02/15/12 375,000 378,750 --------------- 475,950 --------------- LEISURE TIME--0.6% CRUISE LINES--0.0% NCL Corp. 10.625% 07/15/14 (b) 80,000 79,400 --------------- LEISURE & RECREATIONAL PRODUCTS--0.2% Bombardier Recreational Products, Inc. 8.375% 12/15/13 155,000 165,850 K2, Inc. 7.375% 07/01/14 (b) 120,000 131,700 --------------- 297,550 --------------- RECREATIONAL CENTERS--0.4% AMF Bowling Worldwide, Inc. 10.000% 03/01/10 225,000 240,750 Equinox Holdings, Inc. 9.000% 12/15/09 240,000 255,600 Town Sports International, Inc. (a) 02/01/14 (11.000% 02/01/09) 280,000 158,200 --------------- 654,550 --------------- LODGING--2.0% CASINO HOTELS--2.0% Circus & Eldorado/Silver Legacy Capital Corp. 10.125% 03/01/12 125,000 135,937 Hard Rock Hotel, Inc. 8.875% 06/01/13 225,000 246,937 Hollywood Casino Shreveport 13.000% 08/01/06 (i) 600,000 510,000 Inn of the Mountain Gods Resort & Casino 12.000% 11/15/10 205,000 240,363 MGM Mirage 6.750% 09/01/12 255,000 269,025 Mohegan Tribal Gaming Authority 7.125% 08/15/14 (b) $ 45,000 $ 47,531 Pinnacle Entertainment, Inc. 8.250% 03/15/12 490,000 520,625 8.750% 10/01/13 165,000 178,200 Premier Entertainment Biloxi Financial LLC 10.750% 02/01/12 130,000 142,350 River Rock Entertainment 9.750% 11/01/11 275,000 308,000 Seneca Gaming Corp. 7.250% 05/01/12 215,000 227,363 Station Casinos, Inc. 6.875% 03/01/16 65,000 67,925 Virgin River Casino Corp. (a) 01/15/13 (12.750% 01/15/09) (b) 150,000 93,750 9.000% 01/15/12 (b) 83,000 86,320 Wynn Las Vegas LLC 6.625% 12/01/14 (b) 230,000 227,700 --------------- 3,302,026 --------------- RETAIL--1.1% RETAIL--AUTOMOBILES--0.1% Asbury Automotive Group, Inc. 8.000% 03/15/14 200,000 199,000 --------------- RETAIL--DRUG STORES--0.3% Jean Coutu Group (PJC), Inc., 8.500% 08/01/14 (b) 145,000 148,987 Rite Aid Corp. 9.250% 06/01/13 295,000 300,900 --------------- 449,887 --------------- RETAIL--HOME FURNISHINGS--0.2% Levitz Home Furnishings, Inc. 12.000% 11/01/11 (b) 140,000 142,800 Tempur-Pedic, Inc. 10.250% 08/15/10 173,000 199,815 --------------- 342,615 --------------- RETAIL--JEWELRY--0.1% Finlay Fine Jewelry Corp. 8.375% 06/01/12 185,000 199,800 --------------- RETAIL--MAJOR DEPARTMENT STORES--0.1% Saks, Inc. 7.000% 12/01/13 55,000 56,169 --------------- RETAIL--PROPANE DISTRIBUTORS--0.1% Ferrellgas Partners LP 8.750% 06/15/12 180,000 195,300 --------------- RETAIL--RESTAURANTS--0.2% Denny's Holdings, Inc. 10.000% 10/01/12 (b) 170,000 183,600 Landry's Restaurants, Inc. 7.500% 12/15/14 (b) 130,000 129,025 --------------- 312,625 --------------- </Table> See Accompanying Notes to Financial Statements. 26 <Page> <Table> <Caption> PAR VALUE --------------- --------------- TEXTILES--0.2% TEXTILE--PRODUCTS--0.2% Collins & Aikman Floor Covering, Inc. 9.750% 02/15/10 $ 170,000 $ 182,750 INVISTA 9.250% 05/01/12 (b) 135,000 150,356 --------------- 333,106 --------------- CONSUMER NON-CYCLICAL--5.2% AGRICULTURE--0.3% AGRICULTURAL OPERATIONS--0.2% Seminis Vegetable Seeds, Inc. 10.250% 10/01/13 303,000 340,875 --------------- TOBACCO--0.1% North Atlantic Trading Co., Inc. 9.250% 03/01/12 155,000 130,975 --------------- BEVERAGES--0.1% BEVERAGES--WINE/SPIRITS--0.1% Constellation Brands, Inc. 8.125% 01/15/12 175,000 191,187 --------------- BIOTECHNOLOGY--0.2% MEDICAL--BIOMEDICAL/GENE--0.2% Bio-Rad Laboratories, Inc. 7.500% 08/15/13 220,000 241,175 --------------- COMMERCIAL SERVICES--1.4% COMMERCIAL SERVICES--0.2% Iron Mountain, Inc. 7.750% 01/15/15 55,000 55,550 Language Line Holdings, Inc. 11.125% 06/15/12 (b) 310,000 328,600 --------------- 384,150 --------------- COMMERCIAL SERVICES--FINANCE--0.3% Dollar Financial Group, Inc. 9.750% 11/15/11 400,000 435,000 --------------- FUNERAL SERVICES & RELATED ITEMS--0.2% Service Corp. International 7.700% 04/15/09 275,000 299,063 --------------- PRINTING--COMMERCIAL--0.3% American Color Graphics, Inc. 10.000% 06/15/10 115,000 97,031 Sheridan Group 10.250% 08/15/11 (b) 155,000 169,337 Vertis, Inc. 13.500% 12/07/09 (b) 245,000 259,700 --------------- 526,068 --------------- PRIVATE CORRECTIONS--0.1% GEO Group, Inc. 8.250% 07/15/13 120,000 128,400 --------------- RENTAL AUTO/EQUIPMENT--0.3% NationsRent, Inc. 9.500% 10/15/10 335,000 374,362 Williams Scotsman, Inc. 9.875% 06/01/07 155,000 155,000 --------------- 529,362 --------------- COSMETICS/PERSONAL CARE--0.1% COSMETICS & TOILETRIES--0.1% Elizabeth Arden, Inc. 7.750% 01/15/14 $ 175,000 $ 185,500 --------------- FOOD--1.2% FOOD--CONFECTIONERY--0.2% Merisant Co. 9.750% 07/15/13 (b) 160,000 142,400 Tabletop Holdings, Inc. (a) 05/15/14 (12.250% 11/15/08) (b) 480,000 204,000 --------------- 346,400 --------------- FOOD--MISCELLANEOUS/DIVERSIFIED--0.8% Del Monte Corp. 9.250% 05/15/11 420,000 458,850 Dole Food Co., Inc. 8.625% 05/01/09 285,000 309,225 Pinnacle Foods Holding Corp. 8.250% 12/01/13 (b) 365,000 346,750 Reddy Ice Holdings, Inc. (a) 11/01/12 (10.500% 11/01/08) (b) 160,000 110,000 --------------- 1,224,825 --------------- FOOD--RETAIL--0.2% Stater Brothers Holdings 8.125% 06/15/12 295,000 311,962 --------------- HEALTHCARE--SERVICES--1.4% MEDICAL--HMO--0.1% Coventry Health Care, Inc. 8.125% 02/15/12 220,000 240,900 --------------- MEDICAL--HOSPITALS--0.5% Tenet Healthcare Corp. 9.875% 07/01/14 (b) 475,000 515,375 United Surgical Partners International, Inc. 10.000% 12/15/11 250,000 285,000 --------------- 800,375 --------------- MRI/MEDICAL DIAGNOSTIC IMAGING--0.6% InSight Health Services Corp. 9.875% 11/01/11 305,000 308,050 MedQuest, Inc. 11.875% 08/15/12 280,000 329,000 MQ Associates, Inc. (a) 08/15/12 (12.250% 08/15/08) 480,000 362,400 --------------- 999,450 --------------- PHYSICIAN PRACTICE MANAGEMENT--0.2% US Oncology, Inc. 9.000% 08/15/12 (b) 235,000 262,613 --------------- HOUSEHOLD PRODUCTS/WARES--0.5% CONSUMER PRODUCTS - MISCELLANEOUS--0.5% AAC Group Holdings Corp. (a) 10/01/12 (10.250% 10/01/08) (b) 60,000 40,200 </Table> See Accompanying Notes to Financial Statements. 27 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Amscan Holdings, Inc. 8.750% 05/01/14 $ 270,000 $ 270,675 Jostens IH Corp. 7.625% 10/01/12 (b) 145,000 151,163 Playtex Products, Inc. 9.375% 06/01/11 380,000 406,600 --------------- 868,638 --------------- ENERGY--3.5% OIL & GAS--1.9% OIL COMPANIES--EXPLORATION & PRODUCTION--1.6% Chesapeake Energy Corp. 6.375% 06/15/15 (b) 55,000 56,787 7.500% 06/15/14 110,000 120,175 Compton Petroleum Corp. 9.900% 05/15/09 275,000 303,875 Encore Acquisition Co. 8.375% 06/15/12 195,000 217,425 Energy Partners Ltd. 8.750% 08/01/10 125,000 136,250 Gazprom 9.625% 03/01/13 630,000 746,991 Magnum Hunter Resources, Inc. 9.600% 03/15/12 101,000 114,635 Pemex Finance Ltd. 9.150% 11/15/18 310,000 388,548 10.610% 08/15/17 215,000 290,007 Whiting Petroleum Corp. 7.250% 05/01/12 215,000 225,213 --------------- 2,599,906 --------------- OIL & GAS DRILLING--0.2% Ocean Rig Norway AS 10.250% 06/01/08 195,000 200,850 Pride International, Inc. 7.375% 07/15/14 (b) 130,000 142,025 --------------- 342,875 --------------- OIL REFINING & MARKETING--0.1% Premcor Refining Group, Inc. 7.500% 06/15/15 165,000 178,612 --------------- OIL & GAS SERVICES--0.1% OIL--FIELD SERVICES--0.1% Newpark Resources, Inc. 8.625% 12/15/07 185,000 186,850 --------------- PIPELINES--1.5% PIPELINES--1.5% Coastal Corp. 7.750% 06/15/10 460,000 483,000 Dynegy Holdings, Inc. 6.875% 04/01/11 300,000 288,375 9.875% 07/15/10 (b) 110,000 122,925 Northwest Pipeline Corp. 8.125% 03/01/10 85,000 94,137 Sonat, Inc. 6.875% 06/01/05 135,000 137,363 7.625% 07/15/11 525,000 546,000 Southern Natural Gas Co. 8.875% 03/15/10 $ 130,000 $ 146,413 Williams Companies, Inc. 8.125% 03/15/12 430,000 497,725 --------------- 2,315,938 --------------- FINANCIALS--2.0% DIVERSIFIED FINANCIAL SERVICES--0.7% FINANCE--COMMERCIAL--0.1% FINOVA Group, Inc. 7.500% 11/15/09 (j) 284,700 139,859 --------------- FINANCE INVESTMENT BANKER/BROKER--0.4% E*Trade Financial Corp. 8.000% 06/15/11 (b) 180,000 193,050 LaBranche & Co., Inc. 11.000% 05/15/12 440,000 471,900 --------------- 664,950 --------------- FINANCE--OTHER SERVICES--0.2% Aries Vermogensverwaltng 7.750% 10/25/09 (b) EUR 250,000 386,354 --------------- REITs--0.2% REITs--HOTELS--0.1% La Quinta Properties, Inc. 7.000% 08/15/12 (b) USD 60,000 63,300 --------------- REITs--MORTGAGES--0.1% Thornburg Mortgage, Inc. 8.000% 05/15/13 160,000 169,200 --------------- SAVINGS & LOANS--1.1% SAVINGS & LOANS/THRIFT--WESTERN US--0.1% Western Financial Bank 9.625% 05/15/12 USD 90,000 102,600 --------------- SUPRANATIONAL BANKS--1.0% Corp. Andina de Fomento 6.375% 06/18/09 USD 510,000 771,649 European Investment Bank 7.625% 12/07/07 GBP 455,000 938,161 --------------- 1,709,810 --------------- INDUSTRIAL--6.3% AEROSPACE/DEFENSE--0.6% AEROSPACE/DEFENSE--EQUIPMENT--0.6% Argo-Tech Corp. 9.250% 06/01/11 USD 140,000 154,000 BE Aerospace, Inc. 8.875% 05/01/11 270,000 284,175 Sequa Corp. 8.875% 04/01/08 145,000 158,775 Standard Aero Holdings, Inc. 8.250% 09/01/14 (b) 175,000 189,000 TransDigm, Inc. 8.375% 07/15/11 155,000 165,850 --------------- 951,800 --------------- </Table> See Accompanying Notes to Financial Statements. 28 <Page> <Table> <Caption> PAR VALUE --------------- --------------- BUILDING MATERIALS--0.6% BUILDING & CONSTRUCTION PRODUCTS--MISCELLANEOUS--0.2% Associated Materials, Inc. (a) 03/01/14 (11.250% 03/01/09) $ 130,000 $ 93,600 Congoleum Corp. 8.625% 08/01/08 (e) 140,000 140,700 Nortek Holdings, Inc. 8.500% 09/01/14 (b) 85,000 88,825 --------------- 323,125 --------------- BUILDING PRODUCTS--CEMENT/AGGREGATION--0.3% RMCC Acquisition Co. 9.500% 11/01/12 (b) 225,000 224,437 US Concrete, Inc. 8.375% 04/01/14 195,000 210,113 --------------- 434,550 --------------- BUILDING PRODUCTS--DOORS & WINDOWS--0.1% ACIH, Inc. (a) 12/15/12 (11.500% 12/15/07) (b) 260,000 188,500 --------------- ELECTRICAL COMPONENTS & EQUIPMENT--0.2% WIRE & CABLE PRODUCTS--0.2% Coleman Cable, Inc. 9.875% 10/01/12 (b) 260,000 275,600 --------------- ELECTRONICS--0.0% ELECTRONIC COMPONENTS--MISCELLANEOUS--0.0 Flextronics International Ltd. 6.250% 11/15/14 (b) 85,000 84,362 --------------- ENGINEERING & CONSTRUCTION--0.2% BUILDING & CONSTRUCTION--MISCELLANEOUS--0.2% J. Ray McDermott SA 11.000% 12/15/13 (b) 260,000 287,300 --------------- ENVIRONMENTAL CONTROL--0.6% NON--HAZARDOUS WASTE DISPOSAL--0.5% Allied Waste North America, Inc. 7.875% 04/15/13 390,000 400,238 8.500% 12/01/08 150,000 159,375 Waste Services, Inc. 9.500% 04/15/14 (b) 340,000 338,300 --------------- 897,913 --------------- RECYCLING--0.1% Aventine Renewable Energy Holdings, Inc. 8.501% 12/15/11 (b)(d) 40,000 40,400 IMCO Recycling Escrow 9.000% 11/15/14 (b) 70,000 72,975 --------------- 113,375 --------------- MACHINERY--CONSTRUCTION & MINING--0.1% MACHINERY--CONSTRUCTION & MINING--0.1% Terex Corp. Series 2001 B 10.375% 04/01/11 215,000 241,606 --------------- MACHINERY DIVERSIFIED--0.1% MACHINERY - GENERAL INDUSTRIAL--0.1% Douglas Dynamics LLC 7.750% 01/15/12 (b) 110,000 111,925 --------------- METAL FABRICATE/HARDWARE--0.9% METAL PROCESSORS & FABRICATION--0.6% Altra Industrial Motion, Inc. 9.000% 12/01/11 (b) $ 110,000 $ 111,925 Hawk Corp. 8.750% 11/01/14 (b) 45,000 46,350 Mueller Group, Inc. 10.000% 05/01/12 200,000 212,000 Mueller Holdings, Inc. (a) 04/15/14 (14.750% 04/15/09) 255,000 170,850 TriMas Corp. 9.875% 06/15/12 455,000 482,300 --------------- 1,023,425 --------------- METAL PRODUCTS--FASTENERS--0.3% FastenTech, Inc. 12.500% 05/01/11 (b) 340,000 391,850 --------------- MISCELLANEOUS MANUFACTURERS--0.5% DIVERSIFIED MANUFACTURER OPERATIONS--0.3% J.B. Poindexter & Co. 8.750% 03/15/14 (b) 215,000 230,050 Koppers Industries, Inc. 9.875% 10/15/13 210,000 239,400 Trinity Industries, Inc. 6.500% 03/15/14 105,000 105,394 --------------- 574,844 --------------- FILTERATION/SEPARATION PRODUCTS--0.1% Polypore, Inc. (a) 10/01/12 (10.500% 10/01/08) (b) 295,000 189,537 --------------- MISCELLANEOUS MANUFACTURERS--0.1% MAAX Corp. 9.750% 06/15/12 (b) 100,000 108,000 --------------- PACKAGING & CONTAINERS--1.2% CONTAINERS--METAL/GLASS--0.6% Crown European Holdings SA 10.875% 03/01/13 190,000 224,675 Owens-Brockway Glass Container 8.250% 05/15/13 370,000 406,075 Owens-Illinois, Inc. 7.350% 05/15/08 240,000 252,000 7.500% 05/15/10 45,000 47,700 --------------- 930,450 --------------- CONTAINERS--PAPER/PLASTIC--0.6% Consolidated Container Co. LLC (a) 06/15/09 (10.750% 06/15/07) 175,000 147,000 JSG Funding PLC 9.625% 10/01/12 340,000 379,100 Portola Packaging, Inc. 8.250% 02/01/12 190,000 146,775 Smurfit-Stone Container Corp. 8.250% 10/01/12 165,000 180,262 Tekni-Plex, Inc. 12.750% 06/15/10 205,000 194,238 --------------- 1,047,375 --------------- </Table> See Accompanying Notes to Financial Statements. 29 <Page> <Table> <Caption> PAR VALUE --------------- --------------- TRANSPORTATION--1.3% TRANSPORTATION--MARINE--0.6% Ship Finance International Ltd. 8.500% 12/15/13 $ 445,000 $ 460,575 Stena AB 7.500% 11/01/13 260,000 272,350 9.625% 12/01/12 170,000 192,100 Teekay Shipping Corp. 8.875% 07/15/11 60,000 69,450 --------------- 994,475 --------------- TRANSPORTATION--RAIL--0.2% TFM SA de CV 12.500% 06/15/12 230,000 266,800 --------------- TRANSPORTATION--SERVICES -- 0.3% CHC Helicopter Corp. 7.375% 05/01/14 175,000 184,188 Petroleum Helicopters, Inc. 9.375% 05/01/09 325,000 352,625 --------------- 536,813 --------------- TRANSPORTATION--TRUCK -- 0.2% Allied Holdings, Inc. 8.625% 10/01/07 155,000 124,000 QDI Capital Corp. 9.000% 11/15/10(b) 240,000 239,400 --------------- 363,400 --------------- TECHNOLOGY--0.2% SEMICONDUCTORS--0.2% ELECTONIC COMPONENTS--SEMICONDUCTORS--0.2% Amkor Technology, Inc. 9.250% 02/15/08 310,000 316,975 --------------- UTILITIES--2.4% ELECTRIC--2.4% ELECTRIC--GENERATION--0.6% AES Corp. 9.000% 05/15/15 (b) 70,000 80,062 9.500% 06/01/09 182,000 206,797 Edison Mission Energy 9.875% 04/15/11 290,000 342,925 Mission Energy Holding 13.500% 07/15/08 85,000 106,037 Texas Genco LLC 6.875% 12/15/14 (b) 150,000 155,063 --------------- 890,884 --------------- ELECTRIC--INTEGRATED--0.7% CMS Energy Corp. 8.900% 07/15/08 265,000 292,494 Nevada Power Co. 9.000% 08/15/13 125,000 146,250 10.875% 10/15/09 215,000 248,325 PSE&G Energy Holdings, Inc. 8.625% 02/15/08 275,000 301,813 TNP Enterprises, Inc. 10.250% 04/01/10 195,000 208,163 --------------- 1,197,045 --------------- INDEPENDENT POWER PRODUCERS--1.1% Caithness Coso Funding Corp. 9.050% 12/15/09 $ 256,758 $ 282,434 Calpine Corp. 8.500% 07/15/10 (b) 305,000 262,300 Calpine Generating Co. LLC 11.169% 04/01/11 (b)(d) 360,000 351,900 11.500% 04/01/11 (b) 205,000 195,775 MSW Energy Holdings LLC 7.375% 09/01/10 90,000 94,500 8.500% 09/01/10 270,000 294,975 Orion Power Holdings, Inc. 12.000% 05/01/10 250,000 317,500 --------------- 1,799,384 --------------- TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (cost of $61,628,689) 66,782,861 --------------- MUNICIPAL BOND (TAXABLE)--0.2% CONSUMER CYCLICAL--0.2% LODGING--0.2% CASINO HOTELS--0.2% Cabazon Band Mission Indians 13.000% 10/01/11 (g) 350,000 348,744 --------------- TOTAL MUNICIPAL BOND (TAXABLE) (cost of $350,000) 348,744 --------------- FOREIGN GOVERNMENT OBLIGATIONS--33.8% SOVEREIGN--33.8% Commonwealth of Australia 8.750% 08/15/08 AUD 1,425,000 1,243,482 Federal Republic of Brazil 3.063% 04/15/24 (d) USD 965,000 887,800 8.250% 01/20/34 795,000 773,535 11.500% 04/02/09 EUR 480,000 788,319 14.500% 10/15/09 USD 1,200,000 1,597,500 Government of Canada 5.250% 06/01/13 CAD 920,000 822,178 10.000% 06/01/08 2,846,000 2,873,674 Government of New Zealand 6.000% 11/15/11 NZD 3,470,000 2,492,813 6.500% 04/15/13 2,545,000 1,888,546 Government of Norway 5.500% 05/15/09 NOK 5,200,000 934,613 Government of Spain 5.500% 07/30/17 EUR 1,580,000 2,486,424 Government of Sweden 5.000% 01/28/09 SEK 18,785,000 3,018,655 6.750% 05/05/14 11,070,000 2,026,918 Poland Government Bond 8.500% 05/12/07 PLZ 3,357,000 1,167,276 Republic of Bulgaria 2.750% 07/28/11 (d) USD 1,028,300 1,027,683 8.250% 01/15/15 460,000 578,404 </Table> See Accompanying Notes to Financial Statements. 30 <Page> <Table> <Caption> PAR VALUE --------------- --------------- Republic of Colombia 9.750% 04/09/11 USD 225,432 $ 258,120 10.000% 01/23/12 782,000 901,255 11.500% 05/31/11 EUR 335,000 572,869 11.750% 02/25/20 USD 580,000 739,500 Republic of France 4.000% 04/25/14 EUR 945,000 1,316,811 Republic of Germany 4.250% 07/04/14 1,450,000 2,059,739 6.000% 07/04/07 1,210,000 1,770,611 Republic of Greece 5.350% 05/18/11 555,000 835,581 Republic of Italy 5.000% 02/01/12 2,030,000 3,018,458 Republic of Panama 8.875% 09/30/27 USD 795,000 874,500 Republic of Peru 7.500% 10/14/14 EUR 315,000 471,468 9.875% 02/06/15 USD 660,000 805,200 Republic of Philippines 10.625% 03/16/25 375,000 400,313 Republic of South Africa 5.250% 05/16/13 EUR 1,320,000 1,895,216 13.000% 08/31/10 ZAR 2,895,000 632,233 Republic of Venezuela 9.250% 09/15/27 USD 868,000 915,740 Russian Federation 5.000% 03/31/30 865,000 894,756 11.000% 07/24/18 655,000 915,821 12.750% 06/24/28 955,000 1,566,487 United Kingdom Treasury 5.000% 03/07/12 GBP 368,000 725,904 7.500% 12/07/06 1,020,000 2,064,018 9.000% 07/12/11 615,000 1,474,913 United Mexican States 7.500% 03/08/10 EUR 605,000 954,415 7.500% 04/08/33 USD 1,210,000 1,297,725 11.375% 09/15/16 930,000 1,367,100 Western Australia Treasury 7.500% 10/15/09 AUD 2,045,000 1,733,401 --------------- TOTAL FOREIGN GOVERNMENT OBLIGATIONS (cost of $46,189,641) 55,069,974 --------------- U.S. GOVERNMENT AGENCIES & OBLIGATIONS--21.4% AGENCY--0.3% Federal Farm Credit Bank 5.000% 08/25/10 USD 500,000 505,678 --------------- MORTGAGE-BACKED SECURITIES--2.0% Federal Home Loan Mortgage Corp. 8.000% 10/01/26 231,828 252,396 Federal National Mortgage Association To Be Announced 6.500% 12/13/34 (f) 2,795,000 2,930,384 --------------- 3,182,780 --------------- U.S. TREASURY BONDS & NOTES--19.1% U.S. Treasury Bonds 7.500% 11/15/24 $ 1,310,000 $ 1,750,896 8.750% 05/15/17 4,911,000 6,881,347 10.375% 11/15/12 3,800,000 4,530,611 12.500% 08/15/14 9,012,000 12,399,593 --------------- 25,562,447 --------------- U.S. Treasury Notes 5.625% 05/15/08 2,900,000 3,110,476 6.500% 10/15/06 2,350,000 2,490,817 --------------- 5,601,293 --------------- TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS (cost of $35,410,812) 34,852,198 --------------- ASSET-BACKED SECURITIES--0.7% Equity One ABS, Inc. 4.205% 04/25/34 625,000 612,181 GMAC Mortgage Corp. 4.865% 09/25/34 (d) 520,000 524,763 --------------- TOTAL ASSET-BACKED SECURITIES (cost of $1,140,508) 1,136,944 --------------- CONVERTIBLE BONDS - 0.3% COMMUNICATIONS--0.2% TELECOMMUNICATIONS--0.2% TELECOMMUNICATIONS EQUIPMENT--0.2% Nortel Networks Corp. 4.250% 09/01/08 385,000 371,336 --------------- UTILITIES--0.1% ELECTRIC--0.1% INDEPENDENT POWER PRODUCERS--0.1% Mirant Corp. 2.500% 06/15/21 (e) 185,000 131,350 --------------- TOTAL CONVERTIBLE BONDS (cost of $469,094) 502,686 --------------- <Caption> SHARES --------------- COMMON STOCKS (k)--0.2% BASIC MATERIALS--0.1% IRON/STEEL--0.1% STEEL-PRODUCERS--0.1% Bayou Steel Corp. 2,871 100,485 --------------- COMMUNICATIONS--0.1% TELECOMMUNICATIONS--0.1% CELLULAR TELECOMMUNICATIONS--0.1% Horizon PCS, Inc., Class A 6,357 157,336 --------------- INDUSTRIAL--0.0% ENVIRONMENTAL CONTROL--0.0% NON - HAZARDOUS WASTE DISPOSAL--0.0% Fairlane Management Corp. (m)(l) 2,000 -- --------------- TOTAL COMMON STOCKS (cost of $209,571) 257,821 --------------- </Table> See Accompanying Notes to Financial Statements. 31 <Page> <Table> <Caption> UNITS VALUE --------------- --------------- WARRANTS (k)--0.0% COMMUNICATIONS--0.0% MEDIA--0.0% CABLE TV--0.0% Cable Satisfaction International, Inc. Expires 03/01/05 (b)(l)(m) 515 $ -- Ono Finance PLC Expires 03/16/11 (b)(l)(m) 150 -- Expires 05/31/09 (b)(l)(m) 500 -- --------------- -- --------------- TELECOMMUNICATIONS--0.0% CELLULAR TELECOMMUNICATIONS--0.0% Horizon PCS, Inc. Expires 10/01/10 (b)(l)(m) 315 -- UbiquiTel, Inc. Expires 04/15/10 (b)(l)(m) 225 -- --------------- -- --------------- TELECOMMUNICATION SERVICES--0.0% Carrier1 International SA Expires 02/19/09 (b)(l)(m) 235 -- Jazztel PLC Expires 07/15/10 (b)(l)(m) 95 -- --------------- -- --------------- INDUSTRIAL--0.0% TRANSPORTATION--0.0% TRANSPORTATION--TRUCKS--0.0% QDI LLC Expires 01/15/07 (b)(l) 1,020 3,519 --------------- TOTAL WARRANTS (cost of $63,205) 3,519 --------------- <Caption> PAR --------------- SHORT-TERM OBLIGATION--2.4% Repurchase agreement with State Street Bank & Trust Co., dated 12/31/04, due 01/03/05 at 1.500%, collateralized by a U.S. Treasury Bond maturing 08/15/25, market value of $4,048,750 (repurchase proceeds $3,968,496) $ 3,968,000 3,968,000 --------------- TOTAL SHORT-TERM OBLIGATION (cost of $3,968,000) 3,968,000 --------------- TOTAL INVESTMENTS--100.0% (cost of $149,429,520) (n) 162,922,747 --------------- OTHER ASSETS & LIABILITIES, NET--(0.0)% (100,388) --------------- NET ASSETS--100.0% $ 162,822,359 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Step bond. These securities are currently not paying coupons. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing at this rate. (b) 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 December 31, 2004, these securities amounted to $16,437,821, which represents 10.1% of net assets. (c) Zero coupon bond. (d) Floating rate note. The interest rate shown reflects the rate as of December 31, 2004. (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 December 31, 2004, the value of these securities amounted to $703,600, which represents 0.4% of net assets. (f) Security purchased on a delayed delivery basis. (g) Illiquid security. (h) The issuer has filed for bankruptcy protection under Chapter 11 and is in default of certain debt covenants. Income is being accrued. As of December 31, 2004, the value of this security represents 0.1% of net assets. (i) The issuer is in default of certain debt covenants. Income is not being accrued. As of December 31, 2004, the value of this security represents 0.3% of net assets. (j) Issued as part of bankruptcy reorganization. (k) Non-income producing security. (l) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (m) Security has no value. (n) Cost for federal income tax purposes is $151,079,459. As of December 31, 2004, the Fund had entered into the following forward currency exchange contracts: <Table> <Caption> FORWARD UNREALIZED CURRENCY AGGREGATE SETTLEMENT APPRECIATION CONTRACTS TO SELL VALUE FACE VALUE DATE (DEPRECIATION) - ----------------- ------------ ------------ ---------- -------------- EUR 1,585,000 $ 2,122,680 $ 2,145,961 01/24/05 $ (23,281) EUR 119,000 155,619 161,119 01/26/05 (5,500) EUR 468,250 612,537 633,981 01/26/05 (21,444) EUR 880,000 1,151,726 1,191,504 01/31/05 (39,778) EUR 1,050,000 1,390,609 1,421,681 01/31/05 (31,072) GBP 892,000 1,710,856 1,707,380 01/13/05 3,476 GBP 410,000 763,420 784,068 01/26/05 (20,648) ---------- $ (138,247) ========== </Table> At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> HOLDINGS BY REVENUE SOURCE (UNAUDITED) % OF NET ASSETS - -------------------------------------- --------------- Corporate Fixed-Income Bonds & Notes 41.0 Foreign Government Obligations 33.8 U.S. Government Agencies & Obligations 21.4 Asset-Backed Securities 0.7 Convertible Bonds 0.3 Municipal Bond 0.2 Common Stocks 0.2 Short-Term Obligation 2.4 Other Assets & Liabilities, Net (0.0) ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- AUD Australian Dollar CAD Canadian Dollar EUR Euro GBP British Pound NOK Norwegian Krone NZD New Zealand Dollar PLZ Polish Zloty REIT Real Estate Investment Trust SEK Swedish Krona USD United States Dollar ZAR South African Rand </Table> See Accompanying Notes to Financial Statements. 32 <Page> STATEMENT OF ASSETS & LIABILITIES Colonial Strategic Income Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 149,429,520 --------------- Investments, at value $ 162,922,747 Cash 11,161 Net unrealized appreciation on foreign forward currency contracts 3,476 Receivable for: Investments sold 46,950 Fund shares sold 229,062 Interest 3,134,865 Dollar roll fee income 2,833 Expense reimbursement due from Distributor 1,226 Deferred Trustees' compensation plan 8,988 --------------- TOTAL ASSETS 166,361,308 --------------- LIABILITIES: Net unrealized depreciation on foreign forward currency contracts 141,723 Payable for: Investments purchased 56,732 Investments purchased on a delayed delivery basis 2,937,370 Fund shares repurchased 230,641 Investment advisory fee 86,055 Transfer agent fee 625 Pricing and bookkeeping fees 13,082 Trustees' fees 1,277 Audit fee 28,380 Custody fee 5,669 Distribution fee--Class B 13,521 Deferred Trustees' fees 8,988 Other liabilities 14,886 --------------- TOTAL LIABILITIES 3,538,949 --------------- NET ASSETS $ 162,822,359 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 176,549,177 Overdistributed net investment income (1,431,078) Accumulated net realized loss (25,722,731) Net unrealized appreciation (depreciation) on: Investments 13,493,227 Foreign currency translations (66,236) --------------- NET ASSETS $ 162,822,359 =============== CLASS A: Net assets $ 102,612,303 Shares outstanding 10,306,913 =============== Net asset value per share $ 9.96 =============== CLASS B: Net assets $ 60,210,056 Shares outstanding 6,053,597 =============== Net asset value per share $ 9.95 =============== </Table> See Accompanying Notes to Financial Statements. 33 <Page> STATEMENT OF OPERATIONS Colonial Strategic Income Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Interest $ 10,958,522 Dollar roll fee income 76,261 --------------- Total Investment Income (net of foreign taxes withheld of $16,877) 11,034,783 --------------- EXPENSES: Investment advisory fee 1,042,328 Distribution fee--Class B 141,240 Transfer agent fee 7,500 Pricing and bookkeeping fees 106,577 Trustees' fees 10,460 Custody fee 48,375 Non-recurring costs (See Note 6) 7,929 Other expenses 64,204 --------------- Total Expenses 1,428,613 Fees reimbursed by Distributor--Class B (26,709) Non-recurring costs assumed by Investment Advisor (See Note 6) (7,929) Custody earnings credit (1,203) --------------- Net Expenses 1,392,772 --------------- Net Investment Income 9,642,011 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments 6,795,889 Foreign currency transactions (548,457) --------------- Net realized gain 6,247,432 --------------- Net change in unrealized appreciation/depreciation on: Investments (751,416) Foreign currency translations 17,982 --------------- Net change in unrealized appreciation/depreciation (733,434) --------------- Net Gain 5,513,998 --------------- Net Increase in Net Assets from Operations $ 15,156,009 =============== </Table> See Accompanying Notes to Financial Statements. 34 <Page> STATEMENT OF CHANGES IN NET ASSETS Colonial Strategic Income Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, --------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 9,642,011 $ 9,799,409 Net realized gain on investments and foreign currency transactions 6,247,432 1,918,158 Net change in unrealized appreciation/depreciation on investments and foreign currency translations (733,434) 14,289,472 --------------- --------------- Net Increase from Operations 15,156,009 26,007,039 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (7,965,743) (7,812,669) Class B (4,548,504) (3,845,123) --------------- --------------- Total Distributions Declared to Shareholders (12,514,247) (11,657,792) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 4,779,974 5,759,085 Distributions reinvested 7,965,743 7,812,669 Redemptions (21,801,483) (20,673,030) --------------- --------------- Net Decrease (9,055,766) (7,101,276) --------------- --------------- Class B: Subscriptions 8,617,658 23,225,342 Distributions reinvested 4,548,504 3,845,123 Redemptions (9,649,517) (7,420,489) --------------- --------------- Net Increase 3,516,645 19,649,976 --------------- --------------- Net Increase (Decrease) from Share Transactions (5,539,121) 12,548,700 --------------- --------------- Total Increase (Decrease) in Net Assets (2,897,359) 26,897,947 NET ASSETS: Beginning of period 165,719,718 138,821,771 --------------- --------------- End of period (including overdistributed net investment income of $(1,431,078) and $(2,487,200), respectively) $ 162,822,359 $ 165,719,718 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 471,285 594,081 Issued for distributions reinvested 799,774 798,025 Redemptions (2,175,844) (2,137,164) --------------- --------------- Net Decrease (904,785) (745,058) --------------- --------------- Class B: Subscriptions 862,989 2,427,732 Issued for distributions reinvested 457,136 393,162 Redemptions (965,905) (766,395) --------------- --------------- Net Increase 354,220 2,054,499 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 35 <Page> NOTES TO FINANCIAL STATEMENTS Colonial Strategic Income Fund, Variable Series / December 31, 2004 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 pricing services 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 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 36 <Page> 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 current 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 investments from its portfolio with an agreement by the Fund to repurchase similar, but not identical, 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 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 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. 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 37 <Page> 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 timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for foreign currency transactions, discount accretion/premium amortization on debt securities, distributions in excess, market discount reclassifications and paydown reclassifications were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT INCOME NET REALIZED LOSS CAPITAL --------------------- ----------------- ------- $ 3,928,358 $ (3,927,527) $ (831) </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 ------------ ------------ Distributions paid from: Ordinary income $ 12,514,247 $ 11,657,792 Long-term capital gains -- -- </Table> As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- $ -- $ -- $ 11,915,299 </Table> * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales and discount accretion/premium amortization on debt securities. Unrealized appreciation and depreciation at December 31, 2004, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 14,658,756 Unrealized depreciation (2,815,468) ------------ Net unrealized appreciation $ 11,843,288 ============ </Table> The following capital loss carryforwards 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 $ 3,347,414 2009 11,079,118 2010 11,028,566 ------------- $ 25,455,098 ============= </Table> Capital loss carryforwards of $2,322,600 were utilized during the year ended December 31, 2004 for the Fund. Under current tax rules, certain currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2004, post-October currency losses of $141,868 and capital losses of $10,470 attributed to security transactions were deferred to January 1, 2005. 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 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 0.60% Next $500 million 0.55% Next $500 million 0.52% Over $1.5 billion 0.49% </Table> Prior to November 1, 2004, Columbia received 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 38 <Page> 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 year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.066%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the year ended December 31, 2004, the Fund's effective transfer agent 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 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 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. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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 year ended December 31, 2004, the Fund paid $1,535 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $156,807,902 and $163,063,648 respectively of which $19,647,248 and $19,415,928 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 39 <Page> 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 that 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--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $7,929 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 40 <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> PERIOD YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ 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) 0.59 0.60 0.63 0.79(c) 0.56 Net realized and unrealized gain (loss) on investments and foreign currency 0.38 1.04 0.09 (0.46)(c) (0.37) --------- --------- --------- --------- ------------ Total from Investment Operations 0.97 1.64 0.72 0.33 0.19 --------- --------- --------- --------- ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.82) (0.73) (0.72) (0.81) (0.99) Return of capital -- -- (0.02) (0.02) (0.03) --------- --------- --------- --------- ------------ Total Distributions Declared to Shareholders (0.82) (0.73) (0.74) (0.83) (1.02) --------- --------- --------- --------- ------------ NET ASSET VALUE, END OF PERIOD $ 9.95 $ 9.80 $ 8.89 $ 8.91 $ 9.41 ========= ========= ========= ========= ============ Total return (d)(e)(f) 9.85% 18.43% 8.08% 3.54% 1.92%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 1.00% 1.00% 1.00% 1.00% 1.00%(i) Net investment income (h) 5.88% 6.17% 6.92% 8.27%(c) 9.39%(i) Waiver/reimbursement 0.05% 0.05% 0.01% 0.10% 0.03%(i) Portfolio turnover rate 103% 61% 62% 62% 31% Net assets, end of period (000's) $ 60,210 $ 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 premium and accreting discount on all debt securities. The effect of this change for the year ended December 31, 2001 was to decrease net investment income per share by $0.03, 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. 41 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Colonial Strategic Income Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Colonial Strategic Income Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 42 <Page> PORTFOLIO MANAGERS' DISCUSSION Columbia High Yield Fund, Variable Series / December 31, 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 predecessors since 1998. Mr. Havnaer has co-managed the fund and its predecessor since 2000. Mr. Havnaer was on a leave of absence for the period of March 2004 to April 2004. The high-yield market had another good year in 2004, buoyed by a surprisingly strong fourth-quarter rally. As a result, the fund delivered a solid return. However, it underperformed both its benchmark and peer group, Lipper Variable Series High Current Yield Category(1), because it was under represented in lower quality credits, which led the rally. A FAVORABLE ENVIRONMENT FOR HIGH-YIELD A strengthening economy enabled companies in the high-yield universe to improve their cash flows and to pay down debt. As balance sheets improved, corporate default rates continued to decline. The Moody's trailing 12-month issuer-based default rate--a widely monitored indicator of corporate credit quality--finished 2004 at just 2.1%, down from 5% at the beginning of the year and nearly 11% two years ago. The health of the high-yield sector was confirmed by a record level of new issue activity, which totaled $158.2 billion for the year. Although the Federal Reserve Board pushed short-term rates higher, long-term interest rates ended the year very near where they began. This favorable development surprised many market observers, which helped explain the strength of the late-year rally. The fund participated in this rally, but the fund's relatively high average credit quality placed it at a competitive disadvantage during this reporting period. The fund holds almost no securities with credit ratings as low as CCC, and the CCC index was up 9.5% for the fourth quarter, far above the 3% gain posted by the higher-quality BB index. Our high-quality focus is an essential part of the fund's strategy, and it has helped the fund to solid long-term performance. PORTFOLIO ACTIVITY DURING 2004 The energy and utility industries were strong performers over the past 12 months, and the fund added to its holdings in each category. We purchased bonds issued by the Williams Companies (1.6% of net assets), a well-known high-yield issuer. Williams is traditionally a natural gas and pipeline company, but suffered a severe setback beginning three years ago because of its involvement in the ill-fated power trading business. We are optimistic that these bonds will someday return to investment-grade quality. We also purchased AES Corp. (1.1% of net assets), an independent power producer that has improved its financial position by selling off non-performing assets. Chemical companies rebounded with the economy in 2004, benefiting fund holdings such as Ethyl Corp. and Equistar Chemical (0.3% and 0.5% of net assets, respectively). The fund also owned several companies that were acquisition candidates during the year, including health care companies Apogent and Province Healthcare (0.8% of net assets), and wireless communications company Nextel Communications (2.2% of net assets), which was targeted by Sprint. While the acquisition of Apogent has been completed, the acquisitions of Province and Nextel have been announced but not completed. One specific disappointment during the past year was Allied Waste North America (1.6% of net assets), a non-hazardous solid waste management company. Allied had difficulty controlling its expenses and produced several quarters of substandard earnings. It was downgraded during the year. We sold a portion of the fund's holding, but the company remains in the portfolio because of our expectation that it can generate the free cash flow necessary to reduce its debt burden. POSITIONING FOR THE YEAR AHEAD As we look ahead to 2005, we believe that the fund is well-positioned with its emphasis on higher quality high-yield bonds. We continue to seek companies that are experiencing improving credit fundamentals. As the yield spread between lower quality and higher quality bonds has narrowed, we believe these types of companies have the potential to do well for the fund. Economic and market conditions change frequently. There is no assurance that the trends described here will continue or commence. An investment in the Columbia High Yield Fund, Variable Series offers the potential for high income and attractive total returns, but also involves certain risks, including credit risks associated with lower-rated bonds, and interest rate risks. The value of fixed-income securities generally move inversely with changes in interest rates such that when interest rates rise, bond values fall and vice versa. Holdings are disclosed as of December 31, 2004, and are subject to change. (1) Lipper Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as those of the fund. 43 <Page> PERFORMANCE INFORMATION Columbia High Yield Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR 5-YEAR LIFE - ------------------------------------------------------------------ Class B (4/14/03) 7.11 6.35 6.11 Merrill Lynch US High Yield, Cash Pay Index(1) 10.76 7.32 5.85 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 3/3/98(2) - 12/31/04 Class B: $14,996 <Table> <Caption> MERRILL LYNCH US HIGH YIELD, CLASS B SHARES CASH PAY INDEX 3/3/1998 $ 10,000 $ 10,000 3/31/1998 $ 10,146 $ 10,115 4/30/1998 $ 10,173 $ 10,163 5/31/1998 $ 10,223 $ 10,234 6/30/1998 $ 10,307 $ 10,285 7/31/1998 $ 10,442 $ 10,343 8/31/1998 $ 10,319 $ 9,897 9/30/1998 $ 10,586 $ 9,916 10/31/1998 $ 10,543 $ 9,754 11/30/1998 $ 10,901 $ 10,198 12/31/1998 $ 10,959 $ 10,201 1/31/1999 $ 11,063 $ 10,302 2/28/1999 $ 11,011 $ 10,223 3/31/1999 $ 11,030 $ 10,311 4/30/1999 $ 11,152 $ 10,472 5/31/1999 $ 11,007 $ 10,400 6/30/1999 $ 10,974 $ 10,380 7/31/1999 $ 10,961 $ 10,396 8/31/1999 $ 10,845 $ 10,290 9/30/1999 $ 10,785 $ 10,251 10/31/1999 $ 10,806 $ 10,190 11/30/1999 $ 10,947 $ 10,306 12/31/1999 $ 11,022 $ 10,360 1/31/2000 $ 10,938 $ 10,308 2/29/2000 $ 10,930 $ 10,317 3/31/2000 $ 10,871 $ 10,173 4/30/2000 $ 10,891 $ 10,176 5/31/2000 $ 10,866 $ 10,064 6/30/2000 $ 11,119 $ 10,236 7/31/2000 $ 11,211 $ 10,310 8/31/2000 $ 11,386 $ 10,436 9/30/2000 $ 11,394 $ 10,375 10/31/2000 $ 11,223 $ 10,071 11/30/2000 $ 11,062 $ 9,756 12/31/2000 $ 11,426 $ 9,968 1/31/2001 $ 11,912 $ 10,562 2/28/2001 $ 12,027 $ 10,728 3/31/2001 $ 11,951 $ 10,587 4/30/2001 $ 11,942 $ 10,471 5/31/2001 $ 12,036 $ 10,672 6/30/2001 $ 11,838 $ 10,453 7/31/2001 $ 11,907 $ 10,615 8/31/2001 $ 12,049 $ 10,718 9/30/2001 $ 11,647 $ 10,031 10/31/2001 $ 11,992 $ 10,326 11/30/2001 $ 12,234 $ 10,661 12/31/2001 $ 12,132 $ 10,585 1/31/2002 $ 12,181 $ 10,645 2/28/2002 $ 12,122 $ 10,542 3/31/2002 $ 12,225 $ 10,793 4/30/2002 $ 12,354 $ 10,965 5/31/2002 $ 12,314 $ 10,906 6/30/2002 $ 12,067 $ 10,130 7/31/2002 $ 11,906 $ 9,727 8/31/2002 $ 12,078 $ 9,970 9/30/2002 $ 12,006 $ 9,811 10/31/2002 $ 12,031 $ 9,728 11/30/2002 $ 12,397 $ 10,308 12/31/2002 $ 12,464 $ 10,465 1/31/2003 $ 12,587 $ 10,766 2/28/2003 $ 12,704 $ 10,905 3/31/2003 $ 12,897 $ 11,188 4/30/2003 $ 13,234 $ 11,816 5/31/2003 $ 13,251 $ 11,944 6/30/2003 $ 13,442 $ 12,270 7/31/2003 $ 13,212 $ 12,095 8/31/2003 $ 13,240 $ 12,253 9/30/2003 $ 13,540 $ 12,580 10/31/2003 $ 13,704 $ 12,837 11/30/2003 $ 13,831 $ 13,014 12/31/2003 $ 14,000 $ 13,316 1/31/2004 $ 14,133 $ 13,524 2/29/2004 $ 14,195 $ 13,518 3/31/2004 $ 14,335 $ 13,613 4/30/2004 $ 14,193 $ 13,515 5/31/2004 $ 13,919 $ 13,299 6/30/2004 $ 14,040 $ 13,493 7/31/2004 $ 14,238 $ 13,678 8/31/2004 $ 14,495 $ 13,925 9/30/2004 $ 14,710 $ 14,119 10/31/2004 $ 14,938 $ 14,387 11/30/2004 $ 14,953 $ 14,532 12/31/2004 $ 14,996 $ 14,750 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - -------------------------------------------------------- Class B 9.42 9.56 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. 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) is March 3, 1998. 44 <Page> UNDERSTANDING YOUR EXPENSES Columbia High Yield Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ------------------------------------------------------------------------------------------------------------------------------ ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ------------------------------------------------------------------------------------------------------------------------------ Class B 1,000.00 1,000.00 1,068.02 1,021.62 3.64 3.56 0.70 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the investment advisor and its affiliates not waived/reimbursed a portion of expenses, account values at the end of the period would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 45 <Page> INVESTMENT PORTFOLIO Columbia High Yield Fund, Variable Series / December 31, 2004 PAR VALUE <Table> <Caption> PAR VALUE --------------- --------------- CORPORATE FIXED-INCOME BONDS & NOTES--91.9% BASIC MATERIALS--4.2% CHEMICALS--2.6% CHEMICALS--DIVERSIFIED--0.5% Equistar Chemical LP 10.125% 09/01/08 $ 155,000 $ 178,638 10.625% 05/01/11 180,000 208,575 --------------- 387,213 --------------- CHEMICALS -- SPECIALTY--1.1% Ethyl Corp. 8.875% 05/01/10 255,000 281,775 MacDermid, Inc. 9.125% 07/15/11 300,000 333,000 Nalco Co. 7.750% 11/15/11 225,000 242,156 --------------- 856,931 --------------- INDUSTRIAL GASES--1.0% Airgas, Inc. 6.250% 07/15/14 440,000 449,350 9.125% 10/01/11 350,000 392,437 --------------- 841,787 --------------- FOREST PRODUCTS & PAPER--1.0% PAPER & RELATED PRODUCTS--1.0% Boise Cascade LLC 7.125% 10/15/14 (a) 785,000 830,138 --------------- IRON/STEEL--0.6% STEEL--PRODUCERS--0.6% Russel Metals, Inc. 6.375% 03/01/14 500,000 507,500 --------------- COMMUNICATIONS--14.9% ADVERTISING--1.7% ADVERTISING SALES--1.7% Lamar Media Corp. 7.250% 01/01/13 1,300,000 1,405,625 --------------- MEDIA--9.6% CABLE TV--4.8% DirecTV Holdings LLC 8.375% 03/15/13 1,390,000 1,558,538 EchoStar DBS Corp. 5.750% 10/01/08 780,000 791,700 6.625% 10/01/14 (a) 700,000 710,500 Rogers Cable, Inc. 6.250% 06/15/13 625,000 628,125 7.875% 05/01/12 160,000 175,200 --------------- 3,864,063 --------------- MULTIMEDIA--0.5% Emmis Operating Co. 6.875% 05/15/12 410,000 427,425 --------------- PUBLISHING--PERIODICALS--2.8% Dex Media West LLC 5.875% 11/15/11 (a) $ 1,270,000 $ 1,263,650 R.H. Donnelley Finance Corp. 10.875% 12/15/12 (a) 510,000 605,625 10.875% 12/15/12 350,000 415,625 --------------- 2,284,900 --------------- TELEVISION--1.5% LIN Television Corp. 6.500% 05/15/13 700,000 720,125 Sinclair Broadcast Group, Inc. 8.750% 12/15/11 450,000 490,500 --------------- 1,210,625 --------------- TELECOMMUNICATIONS--3.6% CELLULAR TELECOMMUNICATIONS--3.6% Nextel Communications, Inc. 5.950% 03/15/14 960,000 996,000 6.875% 10/31/13 60,000 65,550 7.375% 08/01/15 625,000 691,406 Rogers Wireless, Inc. 7.500% 03/15/15 (a) 210,000 222,075 8.000% 12/15/12 (a) 940,000 994,050 --------------- 2,969,081 --------------- CONSUMER CYCLICAL--21.3% ENTERTAINMENT--2.1% MUSIC--0.4% Warner Music Group 7.375% 04/15/14 (a) 340,000 348,500 --------------- RACETRACKS--1.0% Speedway Motorsports, Inc. 6.750% 06/01/13 740,000 780,700 --------------- THEATERS--0.7% Cinemark USA, Inc. 9.000% 02/01/13 485,000 554,113 --------------- HOME BUILDERS--2.7% BUILDING--RESIDENTIAL/COMMERCIAL--2.7% KB Home 5.875% 01/15/15 400,000 397,000 7.750% 02/01/10 250,000 270,625 8.625% 12/15/08 400,000 452,000 Toll Corp. 8.000% 05/01/09 50,000 51,937 8.250% 02/01/11 325,000 351,813 8.250% 12/01/11 600,000 663,000 --------------- 2,186,375 --------------- LEISURE TIME--2.7% CRUISE LINES--2.2% Royal Caribbean Cruises 6.750% 03/15/08 145,000 155,150 6.875% 12/01/13 550,000 595,375 8.750% 02/02/11 890,000 1,052,425 --------------- 1,802,950 --------------- </Table> See Accompanying Notes to Financial Statements. 46 <Page> <Table> <Caption> PAR VALUE --------------- --------------- LEISURE & RECREATIONAL PRODUCTS--0.5% K2, Inc. 7.375% 07/01/14 (a) $ 410,000 $ 449,975 --------------- LODGING--8.8% CASINO HOTELS--8.1% Harrah's Operating Co., Inc. 7.875% 12/15/05 550,000 572,687 Kerzner International 8.875% 08/15/11 820,000 897,900 MGM Mirage 6.000% 10/01/09 440,000 453,200 9.750% 06/01/07 800,000 890,000 Park Place Entertainment Corp. 7.875% 03/15/10 600,000 677,280 8.875% 09/15/08 300,000 340,515 9.375% 02/15/07 635,000 698,532 Station Casinos, Inc. 6.500% 02/01/14 870,000 893,925 6.875% 03/01/16 570,000 595,650 Wynn Las Vegas LLC 6.625% 12/01/14 (a) 565,000 559,350 --------------- 6,579,039 --------------- HOTELS & MOTELS--0.7% Starwood Hotels & Resorts Worldwide, Inc. 7.375% 05/01/07 200,000 213,500 7.875% 05/01/12 325,000 370,500 --------------- 584,000 --------------- RETAIL--3.9% RETAIL--AUTOMOBILE--1.5% AutoNation, Inc. 9.000% 08/01/08 630,000 718,200 Group 1 Automotive, Inc. 8.250% 08/15/13 450,000 479,812 --------------- 1,198,012 --------------- RETAIL--CONVENIENCE STORES--1.0% Couche-Tard 7.500% 12/15/13 745,000 800,875 --------------- RETAIL--JEWELRY--0.5% Finlay Fine Jewelry Corp. 8.375% 06/01/12 405,000 437,400 --------------- RETAIL--PROPANE DISTRIBUTOR--0.5% Suburban Propane Partners 6.875% 12/15/13 415,000 423,300 --------------- RETAIL--RESTAURANTS--0.4% Domino's, Inc. 8.250% 07/01/11 325,000 355,469 --------------- TOYS--1.1% TOYS/GAMES/HOBBIES--1.1% Hasbro, Inc. 6.150% 07/15/08 825,000 875,531 --------------- CONSUMER NON-CYCLICAL--17.7% BEVERAGES--3.5% BEVERAGES--NON-ALCOHOLIC--1.6% Cott Beverages, Inc. 8.000% 12/15/11 1,225,000 1,330,656 --------------- BEVERAGES--WINE/SPIRITS--1.9% Constellation Brands, Inc. 8.000% 02/15/08 $ 575,000 $ 629,625 8.125% 01/15/12 825,000 901,313 8.625% 08/01/06 25,000 26,750 --------------- 1,557,688 --------------- COMMERCIAL SERVICES--3.7% COMMERCIAL SERVICES--1.4% Iron Mountain, Inc. 7.750% 01/15/15 530,000 535,300 8.625% 04/01/13 605,000 642,812 --------------- 1,178,112 --------------- PRIVATE CORRECTIONS--1.5% Corrections Corp. of America 7.500% 05/01/11 850,000 909,500 9.875% 05/01/09 275,000 305,594 --------------- 1,215,094 --------------- RENTAL AUTO/EQUIPMENT--0.8% United Rentals, Inc. 7.000% 02/15/14 125,000 117,500 7.750% 11/15/13 535,000 526,975 --------------- 644,475 --------------- HEALTHCARE SERVICES--7.2% MEDICAL--NURSING HOMES--0.7% Extendicare Health Services, Inc. 6.875% 05/01/14 455,000 464,100 9.500% 07/01/10 45,000 50,400 --------------- 514,500 --------------- MEDICAL--HOSPITALS--3.3% HCA, Inc. 6.950% 05/01/12 850,000 893,384 Province Healthcare Co. 7.500% 06/01/13 550,000 616,687 Triad Hospitals, Inc. 7.000% 05/15/12 525,000 552,563 7.000% 11/15/13 600,000 612,000 --------------- 2,674,634 --------------- MEDICAL--OUTPATIENT/HOME MEDICAL--1.5% Select Medical Corp. 7.500% 08/01/13 700,000 791,000 9.500% 06/15/09 425,000 455,281 --------------- 1,246,281 --------------- MEDICAL--PRODUCTS--1.7% Fisher Scientific International, Inc. 6.750% 08/15/14 (a) 1,310,000 1,404,975 --------------- HOUSEHOLD PRODUCTS/WARES--0.9% CONSUMER PRODUCTS--MISCELLANEOUS--0.8% Scotts Co. 6.625% 11/15/13 625,000 659,375 --------------- SOAP & CLEANING PRODUCTS--0.1% Church & Dwight Co., Inc. 6.000% 12/15/12 (a) 35,000 35,700 --------------- </Table> See Accompanying Notes to Financial Statements. 47 <Page> <Table> <Caption> PAR VALUE --------------- --------------- PHARMACEUTICALS--2.4% MEDICAL--WHOLESALE DRUG DISTRIBUTOR--1.4% AmerisourceBergen Corp. 7.250% 11/15/12 $ 330,000 $ 370,012 8.125% 09/01/08 675,000 750,938 --------------- 1,120,950 --------------- PHARMACY SERVICES--1.0% Omnicare, Inc. 6.125% 06/01/13 400,000 402,000 8.125% 03/15/11 420,000 450,450 --------------- 852,450 --------------- ENERGY--15.2% COAL--3.2% COAL--3.2% Arch Western Finance LLC 7.500% 07/01/13 1,075,000 1,109,937 Peabody Energy Corp. 5.875% 04/15/16 375,000 374,062 6.875% 03/15/13 1,070,000 1,160,950 --------------- 2,644,949 --------------- OIL & GAS--6.4% OIL COMPANIES--EXPLORATION & PRODUCTION--5.6% Chesapeake Energy Corp. 6.375% 06/15/15 (a) 815,000 841,487 7.500% 09/15/13 425,000 463,250 7.750% 01/15/15 250,000 271,875 Newfield Exploration Co. 6.625% 09/01/14 (a) 1,000,000 1,060,000 Plains Exploration & Production Co. 7.125% 06/15/14 685,000 753,500 Pogo Producing Co. 8.250% 04/15/11 455,000 496,519 Vintage Petroleum, Inc. 7.875% 05/15/11 300,000 318,750 8.250% 05/01/12 290,000 320,450 --------------- 4,525,831 --------------- OIL & GAS DRILLING--0.8% Pride International, Inc. 7.375% 07/15/14 625,000 682,813 --------------- OIL & GAS SERVICES - 3.3% OIL FIELD MACHINERY & EQUIPMENT--1.7% Grant Prideco, Inc. 9.000% 12/15/09 25,000 27,750 9.625% 12/01/07 1,200,000 1,344,000 --------------- 1,371,750 --------------- OIL -- FIELD SERVICES--1.6% Hornbeck Offshore Services, Inc. 6.125% 12/01/14 (a) 575,000 575,000 Universal Compression, Inc. 7.250% 05/15/10 695,000 743,650 --------------- 1,318,650 --------------- PIPELINES--2.3% PIPELINES--2.3% Markwest Energy Partners 6.875% 11/01/14 (a) $ 545,000 $ 553,175 Williams Companies, Inc. 7.125% 09/01/11 65,000 71,013 8.125% 03/15/12 1,060,000 1,226,950 --------------- 1,851,138 --------------- FINANCIALS--0.9% REITs--0.9% REITs--DIVERSIFIED--0.9% iStar Financial, Inc. 5.125% 04/01/11 200,000 201,926 6.000% 12/15/10 30,000 31,625 7.000% 03/15/08 85,000 91,844 8.750% 08/15/08 381,000 433,917 --------------- 759,312 --------------- INDUSTRIAL--13.9% AEROSPACE & DEFENSE--2.6% AEROSPACE/DEFENSE--EQUIPMENT--0.9% TransDigm, Inc. 8.375% 07/15/11 675,000 722,250 --------------- ELECTRONICS--MILITARY--1.7% L-3 Communications Corp. 6.125% 07/15/13 340,000 351,900 7.625% 06/15/12 960,000 1,044,000 --------------- 1,395,900 --------------- ENVIRONMENTAL CONTROL--1.8% ALTERNATIVE WASTE--0.2% Synagro Technologies, Inc. 9.500% 04/01/09 175,000 190,750 --------------- NON-HAZARDOUS WASTE DISPOSAL--1.6% Allied Waste North America, Inc. 6.500% 11/15/10 560,000 547,400 7.375% 04/15/14 650,000 619,125 9.250% 09/01/12 100,000 108,625 --------------- 1,275,150 --------------- HAND/MACHINE TOOLS--0.7% MACHINE TOOLS & RELATED PRODUCTS--0.7% Kennametal, Inc. 7.200% 06/15/12 490,000 541,122 --------------- MACHINERY DIVERSIFIED--1.1% MACHINERY--GENERAL INDUSTRIAL--1.1% Manitowoc Co., Inc. 7.125% 11/01/13 75,000 81,187 Westinghouse Air Brake 6.875% 07/31/13 805,000 845,250 --------------- 926,437 --------------- </Table> See Accompanying Notes to Financial Statements. 48 <Page> <Table> <Caption> PAR VALUE --------------- --------------- PACKAGING & CONTAINERS--5.5% CONTAINERS--METAL/GLASS--4.0% Ball Corp. 6.875% 12/15/12 $ 1,045,000 $ 1,123,375 7.750% 08/01/06 100,000 105,000 Owens-Brockway Glass Container 6.750% 12/01/14 (a) 125,000 126,875 8.875% 02/15/09 290,000 315,375 Owens-Illinois, Inc. 7.350% 05/15/08 50,000 52,500 7.500% 05/15/10 700,000 742,000 8.100% 05/15/07 50,000 53,125 Silgan Holdings, Inc. 6.750% 11/15/13 735,000 760,725 --------------- 3,278,975 --------------- CONTAINERS--PAPER/PLASTIC--1.5% Smurfit-Stone Container Corp. 7.375% 07/15/14 625,000 662,500 8.250% 10/01/12 400,000 437,000 8.375% 07/01/12 125,000 135,937 --------------- 1,235,437 --------------- TRANSPORTATION--2.2% TRANSPORTATION--MARINE--1.5% Teekay Shipping Corp. 8.875% 07/15/11 1,035,000 1,198,013 --------------- TRANSPORTATION--SERVICES--0.7% Offshore Logistics, Inc. 6.125% 06/15/13 570,000 577,125 --------------- TECHNOLOGY--1.0% SEMICONDUCTORS--1.0% ELECTRONIC COMPONENTS--SEMICONDUCTOR--1.0% Freescale Semiconductor, Inc. 6.875% 07/15/11 715,000 768,625 --------------- UTILITIES--2.8% ELECTRIC--2.8% ELECTRIC GENERATION--2.1% AES Corp. 7.750% 03/01/14 835,000 904,931 Texas Genco LLC 6.875% 12/15/14 (a) 800,000 827,000 --------------- 1,731,931 --------------- ELECTRIC--INTEGRATED--0.7% Nevada Power Co. 5.875% 01/15/15 (a) 275,000 276,375 6.500% 04/15/12 200,000 210,250 Northwestern Corp. 5.875% 11/01/14 (a) 50,000 51,000 --------------- 537,625 --------------- TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (cost of $73,214,484) 74,930,200 --------------- <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--0.0% INDUSTRIAL--0.0% COMMERCIAL SERVICES & SUPPLIES--0.0% Fairlane Management Corp. (b)(c)(d) 1,200 $ -- --------------- TOTAL COMMON STOCKS (cost of $0) -- --------------- <Caption> UNITS --------------- WARRANTS (b)--0.0% COMMUNICATIONS--0.0% MEDIA--0.0% Cable Satisfaction International, Inc. Expires 03/01/05 (a)(c)(d) 220 -- Ono Finance PLC Expires 03/16/11 (a)(c)(d) 85 -- --------------- -- --------------- TELECOMMUNICATIONS--0.0% Carrier1 International SA Expires 02/19/09 (a)(c)(d) 113 -- Horizon PCS, Inc. Expires 10/01/10 (a)(c)(d) 145 -- Jazztel PLC Expires 07/15/10 (a)(c)(d) 60 -- UbiquiTel, Inc. Expires 04/15/10 (a)(c)(d) 50 -- --------------- -- --------------- INDUSTRIAL--0.0% TRANSPORTATION--0.0% QDI LLC Expires 01/15/07 (a)(d) 153 528 --------------- TOTAL WARRANTS (cost of $5,213) 528 --------------- <Caption> PAR --------------- SHORT-TERM OBLIGATION--6.5% Repurchase agreement with State Street Bank & Trust Co., dated 12/31/04, due 01/03/05 at 1.500%, collateralized by a U.S. Treasury Note maturing 08/31/06, market value of $5,364,272 (repurchase proceeds $5,256,657) $ 5,256,000 5,256,000 --------------- TOTAL SHORT-TERM OBLIGATION (cost of $5,256,000) 5,256,000 --------------- TOTAL INVESTMENTS--98.4% (cost of $78,475,697) (e) 80,186,728 --------------- OTHER ASSETS & LIABILITIES, NET--1.6% 1,297,466 --------------- NET ASSETS--100.0% $ 81,484,194 =============== </Table> See Accompanying Notes to Financial Statements. 49 <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 December 31, 2004, these securities amounted to $11,735,978, which represents 14.4% of net assets. (b) Non-income producing security. (c) Security has no value. (d) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (e) Cost for federal income tax purposes is $78,808,227. At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> HOLDINGS BY REVENUE SOURCE (UNAUDITED) % OF NET ASSETS - -------------------------------------- --------------- Consumer Cyclical 21.3% Consumer Non--Cyclical 17.7 Energy 15.2 Communications 14.9 Industrial 13.9 Basic Materials 4.2 Utilities 2.8 Technology 1.0 Financials 0.9 Short-Term Obligation 6.5 Other Assets & Liabilities, Net 1.6 ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 50 <Page> STATEMENT OF ASSETS & LIABILITIES Columbia High Yield Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 78,475,697 --------------- Investments, at value $ 80,186,728 Cash 150 Receivable for: Fund shares sold 659,538 Interest 1,284,762 Expense reimbursement due from Investment Advisor/Distributor 15,088 Deferred Trustees' compensation plan 2,634 --------------- TOTAL ASSETS 82,148,900 --------------- LIABILITIES: Payable for: Investments purchased 578,797 Fund shares repurchased 901 Investment advisory fee 38,513 Transfer agent fee 417 Pricing and bookkeeping fees 2,959 Trustees' fees 183 Audit fee 16,230 Custody fee 753 Reports to shareholders 5,275 Distribution fee--Class B 14,265 Deferred Trustees' fees 2,634 Other liabilities 3,779 --------------- TOTAL LIABILITIES 664,706 --------------- NET ASSETS $ 81,484,194 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 89,358,945 Overdistributed net investment income (334,201) Accumulated net realized loss (9,251,581) Net unrealized appreciation on investments 1,711,031 --------------- NET ASSETS $ 81,484,194 =============== CLASS A: Net assets $ 9,722,420 Shares outstanding 1,017,639 =============== Net asset value per share $ 9.55 =============== CLASS B: Net assets $ 71,761,774 Shares outstanding 7,503,627 =============== Net asset value per share $ 9.56 =============== </Table> See Accompanying Notes to Financial Statements. 51 <Page> STATEMENT OF OPERATIONS Columbia High Yield Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Interest $ 3,451,296 --------------- EXPENSES: Investment advisory fee 331,369 Distribution fee--Class B 111,205 Transfer agent fee 5,000 Pricing and bookkeeping fees 30,963 Trustees' fees 7,454 Custody fee 7,478 Non-recurring costs (See Note 6) 2,473 Other expenses 41,313 --------------- Total Expenses 537,255 Fees and expenses waived or reimbursed by Investment Advisor (91,694) Fees waived by Distributor--Class B (84,515) Non-recurring costs assumed by Investment Advisor (See Note 6) (2,473) Custody earnings credit (515) --------------- Net Expenses 358,058 --------------- Net Investment Income 3,093,238 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on: Investments 375,239 Foreign currency transactions 544 --------------- Net realized gain 375,783 --------------- Net change in unrealized appreciation/depreciation on: Investments 698,689 Foreign currency translations (66) --------------- Net change in unrealized appreciation/depreciation 698,623 --------------- Net Gain 1,074,406 --------------- Net Increase in Net Assets from Operations $ 4,167,644 =============== </Table> See Accompanying Notes to Financial Statements. 52 <Page> STATEMENT OF CHANGES IN NET ASSETS Columbia High Yield Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, ---------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 3,093,238 $ 1,658,060 Net realized gain (loss) on investments and foreign currency transactions 375,783 (856,112) Net change in unrealized appreciation/depreciation on investments and foreign currency translations 698,623 2,257,504 --------------- --------------- Net Increase from Operations 4,167,644 3,059,452 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (566,446) (666,816) Class B (2,926,406) (1,094,776) From net realized gains: Class A -- (20,678) Class B -- (48,075) --------------- --------------- Total Distributions Declared to Shareholders (3,492,852) (1,830,345) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 3,321,916 8,243,839 Proceeds received in connection with merger -- 12,120,783 Distributions reinvested 566,446 687,494 Redemptions (6,454,849) (11,587,253) --------------- --------------- Net Increase (Decrease) (2,566,487) 9,464,863 --------------- --------------- Class B: Subscriptions 48,472,376 13,066,846 Proceeds received in connection with merger -- 17,750,911 Distributions reinvested 2,926,406 1,142,851 Redemptions (8,511,450) (4,362,756) --------------- --------------- Net Increase 42,887,332 27,597,852 --------------- --------------- Net Increase from Share Transactions 40,320,845 37,062,715 --------------- --------------- Total Increase in Net Assets 40,995,637 38,291,822 NET ASSETS: Beginning of period 40,488,557 2,196,735 --------------- --------------- End of period (including overdistributed net investment income of $(334,201) and $(113,376), respectively) $ 81,484,194 $ 40,488,557 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 352,089 896,663 Issued in connection with merger -- 1,328,306 Issued for distributions reinvested 59,622 73,952 Redemptions (682,101) (1,256,145) --------------- --------------- Net Increase (Decrease) (270,390) 1,042,776 --------------- --------------- Class B: Subscriptions 5,089,040 1,411,911 Issued in connection with merger -- 1,946,759 Issued for distributions reinvested 306,985 122,973 Redemptions (902,982) (471,059) --------------- --------------- Net Increase 4,493,043 3,010,584 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 53 <Page> NOTES TO FINANCIAL STATEMENTS Columbia High Yield Fund, Variable Series / December 31, 2004 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 pricing services 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. 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. 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 54 <Page> 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 timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for foreign currency transactions, discount accretion/premium amortization on debt securities, market discount reclassifications and distributions in excess were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT INCOME NET REALIZED LOSS CAPITAL --------------------- ----------------- ------- $ 194,653 $ (154,112) $ (40,541) </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 ----------- ----------- Distributions paid from: Ordinary income $ 3,492,852 $ 1,830,345 Long-term capital gains -- -- </Table> As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- $ -- $ -- $ 1,378,501 </Table> * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales and discount accretion/premium amortization on debt securities. Unrealized appreciation at December 31, 2004, based on cost of investments for federal income tax purposes, was: <Table> Unrealized appreciation $ 1,729,781 Unrealized depreciation (351,280) ----------- Net unrealized appreciation $ 1,378,501 =========== </Table> The following capital loss carryforwards 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 ---------- ------------ 2007 $ 1,061,194 2008 2,794,418 2009 4,226,387 2010 260,165 2011 908,941 ----------- $ 9,251,105 =========== </Table> 55 <Page> Of the capital loss carryforwards attributable to the Fund, $7,971,674 ($1,027,358 expiring 12/31/07, $2,734,633 expiring 12/31/08, $4,075,815 expiring 12/31/09 and $133,868 expiring 12/31/10) remain from the Fund's merger with Colonial High Yield Securities Fund, Variable Series (See Note 7). Utilization of these losses could be subject to limitations imposed by the Internal Revenue Code. Capital loss carryforwards of $210,757 were utilized during the year ended December 31, 2004 for the Fund. 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 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 $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 year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.056%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $5,000. 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 up to an annual rate of 0.27% of the Fund's average daily net assets. For the year ended December 31, 2004, fees reimbursed by Columbia amounted to 0.16% 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 contractually agreed to maintain these arrangements until April 13, 2004. Effective April 14, 2004, Columbia and the Distributor voluntarily agreed to continue these arrangements, however Columbia or the Distributor, at their discretion, may revise or discontinue these arrangements any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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. 56 <Page> OTHER--Columbia provides certain services to the Fund related to Sarbanes-Oxley compliance. For the year ended December 31, 2004, the Fund paid $1,343 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $56,555,450 and $19,463,181, 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 that 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 foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. LEGAL PROCEEDINGS--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the 57 <Page> Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $2,473 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. 58 <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> YEAR PERIOD ENDED ENDED DECEMBER 31, DECEMBER 31, 2004 2003 (a) --------------- --------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 9.42 $ 9.12 --------------- --------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.53 0.41 Net realized and unrealized gain on investments and foreign currency 0.13 0.34 --------------- --------------- Total from Investment Operations 0.66 0.75 --------------- --------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.52) (0.43) From net realized gains -- (0.02) --------------- --------------- Total Distributions Declared to Shareholders (0.52) (0.45) --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 9.56 $ 9.42 =============== =============== Total return (c)(d)(e) 7.11% 8.44%(f) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (g) 0.66% 0.76%(h) Net investment income (g) 5.56% 6.21%(h) Waiver/reimbursement 0.35% 0.46%(h) Portfolio turnover rate 38% 112%(f) Net assets, end of period (000's) $ 71,762 $ 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) 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. 59 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Columbia High Yield Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Columbia High Yield Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the years ended December 31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of the Fund for periods prior to January 1, 2003 were audited by another independent registered public accounting firm whose report dated February 7, 2003 expressed an unqualified opinion on those highlights. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 60 <Page> PORTFOLIO MANAGERS' DISCUSSION Columbia International Fund, Variable Series / December 31, 2004 Columbia International Fund, Variable Series seeks long-term growth by investing primarily in equity securities of growth companies located outside the United States. Penelope L. Burgess and Deborah F. Snee are the fund's portfolio managers. Ms. Burgess and Ms. Snee have co-managed the fund since July 2004. Ms. Burgess has been with the advisor and its predecessors or affiliate organizations since 1993. Ms. Snee has been with the advisor and its predecessors or affiliate organizations since 1999. Most international markets finished 2004 with a positive performance, as improving economic growth and a weak US dollar attracted investors. In this environment, the portfolio had strong returns from developed countries. However, it had less exposure to emerging markets than its benchmark, the MSCI All Country World ex US Index. Because emerging markets were strong performers, this underexposure detracted from performance. For most of the year, the portfolio was underexposed compared to its benchmark in Mexico and Brazil, which produced exceptional returns. In addition, for most of the year the portfolio had an emphasis on Thailand, which did poorly. Stock selection in Europe and Japan also held back returns. A SLOW DOMESTIC RECOVERY IN JAPAN Early in the year, we boosted investment in Japan on the belief that, after more than 10 years of recession and deflation, there would be a strong domestic recovery. We favored companies that had the potential to benefit from the reemergence of inflation, the economy and consumer spending. In fact, we were premature in our assessment of how quickly this domestic expansion would occur. Inflation did not return as fast as forecasts suggested, and consumer spending did not rebound at the pace we originally thought. As a result, consumer-related Japanese stocks declined. Retailers Isetan Co. Ltd. and Shimamura Co. Ltd., which we sold, detracted considerably from performance. In the telecommunications area, NTT DoCoMo a wireless communications company, suffered from stiff competition and was a disappointment (0.7% of net assets). A FOCUS ON EUROPE'S SMALLER ECONOMIES We raised our commitment to Europe and the United Kingdom (UK), where long-term growth prospects appeared strong. In Europe we focused on small markets that were growing faster than Europe as a whole and that were attractively priced relative to their earnings potential compared to larger markets. This strategy benefited the portfolio. Two areas that were particularly helpful were Austria and Greece. Both countries have fast-growing economies, relatively low interest rates and policies that are generally friendly to business. For example, Austria trimmed corporate taxes and Greece announced it would do the same in 2005. When selecting stocks in Austria and Greece, we gravitated toward banks, which have had a substantial increase in loan demand in the improving economic environment. In Austria, Erste Bank der oesterreichischen Sparkassen helped returns (0.6% of net assets). In Greece, the National Bank of Greece was also a positive contributor to the portfolio (0.7% of net assets). Ireland, another small economy, was also supportive, with long-term holding Anglo Irish Bank posting significant returns (0.7% of net assets). In the UK, performance was mixed. Rising oil prices aided energy stock performance. In addition, cruise line Carnival Corp., was a standout, benefiting from strong demand, cost reductions and higher fares. Carnival upgraded its earnings forecast several times (0.8% of net assets). However, pharmaceutical companies GlaxoSmithKline and AstraZeneca were disappointments (1.8% and 0.9% of net assets, respectively). AstraZeneca's stock price fell on news of disappointing sales as well as a delay in approval of Iressa, a cancer drug. GlaxoSmithKline experienced a substantial decline in sales, primarily because its antidepressant Paxil encountered competition from generics. A weak dollar also lowered margins. However, we believe that the stock still has attractive long-term potential and we continue to own it in the portfolio. A FOUR-PRONGED APPROACH FOR 2005 We expect to emphasize four themes in 2005. First, we will seek more high-yielding companies that we believe are likely to increase dividends and/or share buybacks. Many of these companies are in the financials and telecommunications sectors. Second, we plan to increase the portfolio's exposure to companies that could benefit from increased capital expenditures. After earning record-breaking profits in 2004, many companies have large cash positions, which we believe they are likely to put to work in the year ahead. Third, because we believe that improved employment growth could have a favorable impact on consumer confidence, we plan to increase our exposure to retailers, which have suffered for two consecutive years. Fourth, we plan to emphasize large-cap stocks. We believe they have the potential to outperform small-cap stocks, which have led the global markets for three years and are considerably more expensive relative to their earnings potential than large-cap stocks. Economic and market conditions change frequently. There is no assurance that the trends described here will continue or commence. An investment in the Columbia International Fund, Variable Series may present certain risks, including stock market fluctuations that occur in response to economic and business developments. The fund invests in foreign securities, which have special risks, including political or economic instability and higher transactions costs; different regulations, accounting standards, trading practices and levels of information; and currency exchange rate fluctuations. As a non-diversified portfolio, the fund may invest a significant percentage of its assets in a single issuer. As a result it may have increased risk compared to a more diversified fund. Holdings are disclosed as of December 31, 2004 and are subject to change. 61 <Page> PERFORMANCE INFORMATION Columbia International Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR 5-YEAR 10-YEAR - ------------------------------------------------------------------- Class B (6/1/00) 13.48 -3.94 3.46 MSCI All Country World ex US Index 21.37 0.02 6.02 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 1/1/95(1) - 12/31/04 Class B: $14,047 <Table> <Caption> CLASS B SHARES MSCI ALL COUNTRY WORLD EX US INDEX 1/1/1995 $ 10,000 $ 10,000 1/31/1995 $ 9,415 $ 9,546 2/28/1995 $ 9,256 $ 9,494 3/31/1995 $ 9,415 $ 10,031 4/30/1995 $ 9,681 $ 10,422 5/31/1995 $ 9,681 $ 10,375 6/30/1995 $ 9,627 $ 10,232 7/31/1995 $ 10,159 $ 10,812 8/31/1995 $ 10,159 $ 10,437 9/30/1995 $ 10,318 $ 10,615 10/31/1995 $ 10,158 $ 10,332 11/30/1995 $ 10,318 $ 10,575 12/31/1995 $ 10,584 $ 10,994 1/31/1996 $ 10,530 $ 11,144 2/29/1996 $ 10,530 $ 11,144 3/31/1996 $ 10,745 $ 11,353 4/30/1996 $ 11,336 $ 11,697 5/31/1996 $ 11,228 $ 11,521 6/30/1996 $ 11,282 $ 11,580 7/31/1996 $ 10,852 $ 11,195 8/31/1996 $ 11,014 $ 11,261 9/30/1996 $ 11,122 $ 11,541 10/31/1996 $ 10,853 $ 11,425 11/30/1996 $ 11,282 $ 11,866 12/31/1996 $ 11,179 $ 11,729 1/31/1997 $ 11,236 $ 11,513 2/28/1997 $ 11,350 $ 11,724 3/31/1997 $ 11,350 $ 11,699 4/30/1997 $ 11,294 $ 11,798 5/31/1997 $ 12,150 $ 12,526 6/30/1997 $ 12,776 $ 13,218 7/31/1997 $ 12,834 $ 13,485 8/31/1997 $ 11,942 $ 12,424 9/30/1997 $ 12,399 $ 13,096 10/31/1997 $ 11,313 $ 11,980 11/30/1997 $ 10,970 $ 11,830 12/31/1997 $ 10,814 $ 11,966 1/31/1998 $ 11,178 $ 12,324 2/28/1998 $ 11,725 $ 13,146 3/31/1998 $ 12,454 $ 13,601 4/30/1998 $ 12,697 $ 13,699 5/31/1998 $ 12,697 $ 13,450 6/30/1998 $ 12,393 $ 13,400 7/31/1998 $ 12,758 $ 13,527 8/31/1998 $ 10,891 $ 11,620 9/30/1998 $ 10,404 $ 11,375 10/31/1998 $ 11,195 $ 12,567 11/30/1998 $ 11,803 $ 13,241 12/31/1998 $ 12,214 $ 13,697 1/31/1999 $ 12,214 $ 13,682 2/28/1999 $ 11,969 $ 13,375 3/31/1999 $ 12,397 $ 14,021 4/30/1999 $ 13,129 $ 14,723 5/31/1999 $ 12,519 $ 14,031 6/30/1999 $ 13,251 $ 14,676 7/31/1999 $ 13,740 $ 15,019 8/31/1999 $ 13,862 $ 15,072 9/30/1999 $ 13,923 $ 15,173 10/31/1999 $ 14,290 $ 15,737 11/30/1999 $ 15,206 $ 16,367 12/31/1999 $ 17,169 $ 17,928 1/31/2000 $ 16,123 $ 16,955 2/29/2000 $ 16,739 $ 17,413 3/31/2000 $ 16,985 $ 18,067 4/30/2000 $ 15,692 $ 17,059 5/31/2000 $ 15,385 $ 16,622 6/30/2000 $ 15,446 $ 17,331 7/31/2000 $ 14,954 $ 16,646 8/31/2000 $ 15,138 $ 16,852 9/30/2000 $ 14,656 $ 15,917 10/31/2000 $ 14,095 $ 15,411 11/30/2000 $ 13,721 $ 14,720 12/31/2000 $ 13,999 $ 15,222 1/31/2001 $ 13,563 $ 15,451 2/28/2001 $ 12,547 $ 14,227 3/31/2001 $ 11,532 $ 13,221 4/30/2001 $ 12,112 $ 14,120 5/31/2001 $ 11,750 $ 13,731 6/30/2001 $ 11,533 $ 13,205 7/31/2001 $ 11,171 $ 12,910 8/31/2001 $ 11,098 $ 12,590 9/30/2001 $ 10,372 $ 11,254 10/31/2001 $ 10,372 $ 11,569 11/30/2001 $ 10,517 $ 12,098 12/31/2001 $ 10,590 $ 12,254 1/31/2002 $ 10,083 $ 11,730 2/28/2002 $ 10,155 $ 11,814 3/31/2002 $ 10,446 $ 12,441 4/30/2002 $ 10,591 $ 12,537 5/31/2002 $ 10,519 $ 12,674 6/30/2002 $ 10,374 $ 12,126 7/31/2002 $ 9,431 $ 10,944 8/31/2002 $ 9,503 $ 10,945 9/30/2002 $ 8,851 $ 9,785 10/31/2002 $ 9,068 $ 10,309 11/30/2002 $ 9,213 $ 10,805 12/31/2002 $ 9,155 $ 10,457 1/31/2003 $ 8,720 $ 10,090 2/28/2003 $ 8,792 $ 9,886 3/31/2003 $ 8,792 $ 9,694 4/30/2003 $ 9,373 $ 10,628 5/31/2003 $ 10,027 $ 11,305 6/30/2003 $ 10,099 $ 11,618 7/31/2003 $ 10,245 $ 11,927 8/31/2003 $ 10,390 $ 12,283 9/30/2003 $ 10,756 $ 12,627 10/31/2003 $ 11,410 $ 13,445 11/30/2003 $ 11,555 $ 13,738 12/31/2003 $ 12,378 $ 14,786 1/31/2004 $ 12,598 $ 15,024 2/29/2004 $ 12,817 $ 15,406 3/31/2004 $ 12,963 $ 15,502 4/30/2004 $ 12,524 $ 15,019 5/31/2004 $ 12,377 $ 15,067 6/30/2004 $ 12,671 $ 15,394 7/31/2004 $ 12,085 $ 14,946 8/31/2004 $ 12,085 $ 15,066 9/30/2004 $ 12,322 $ 15,551 10/31/2004 $ 12,689 $ 16,092 11/30/2004 $ 13,496 $ 17,209 12/31/2004 $ 14,047 $ 17,948 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - ------------------------------------------------------------ Class B 1.69 1.90 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. 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. 62 <Page> UNDERSTANDING YOUR EXPENSES Columbia International Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - -------------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - -------------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,108.59 1,019.10 6.36 6.09 1.20 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the investment advisor not waived/reimbursed a portion of expenses, account values at the end of the period would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 63 <Page> INVESTMENT PORTFOLIO Columbia International Fund, Variable Series / December 31, 2004 <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--97.8% CONSUMER DISCRETIONARY--13.8% AUTO COMPONENTS--1.3% Continental AG 6,500 $ 411,063 Denso Corp. 22,800 610,547 --------------- 1,021,610 --------------- AUTOMOBILES--2.4% Nissan Motor Co., Ltd. 26,000 283,778 Renault SA 9,300 775,336 Toyota Motor Corp. 19,100 777,745 --------------- 1,836,859 --------------- HOTELS, RESTAURANTS & LEISURE--1.1% Carnival Corp. 11,100 639,693 OPAP SA 8,800 242,445 --------------- 882,138 --------------- HOUSEHOLD DURABLES--2.8% Koninklijke (Royal) Philips Electronics NV 23,900 631,588 Matsushita Electric Industrial Co., Ltd. 55,000 876,379 Pioneer Corp. 16,300 317,944 Sharp Corp. 19,000 308,456 --------------- 2,134,367 --------------- LEISURE EQUIPMENT & PRODUCTS--1.0% Fuji Photo Film Co., Ltd. 22,000 810,827 --------------- MEDIA--3.9% Dentsu, Inc. 118 317,357 JC Decaux SA (a) 30,100 875,749 News Corp., Class B 22,650 434,880 Pearson PLC 79,000 951,621 WPP Group PLC 37,400 410,732 --------------- 2,990,339 --------------- MULTILINE RETAIL--0.2% Takashimaya Co., Ltd. 17,000 163,398 --------------- SPECIALTY RETAIL--0.2% Nitori Co., Ltd. 2,450 159,412 --------------- TEXTILES, APPAREL & LUXURY GOODS--0.9% Burberry Group PLC 88,400 679,404 --------------- CONSUMER STAPLES--9.3% BEVERAGES--1.9% Diageo PLC 59,400 845,876 SABMiller PLC 37,666 623,728 --------------- 1,469,604 --------------- FOOD & STAPLES RETAILING--0.7% Ito-Yokado Co., Ltd. 10,000 419,643 William Morrison Supermarkets PLC 33,968 134,763 --------------- 554,406 --------------- FOOD PRODUCTS--3.5% Nestle SA, Registered Shares 5,811 $ 1,517,607 Unilever PLC 121,640 1,192,487 --------------- 2,710,094 --------------- HOUSEHOLD PRODUCTS--1.9% Kao Corp. 13,000 330,894 Reckitt Benckiser PLC 36,727 1,107,955 --------------- 1,438,849 --------------- TOBACCO--1.3% Imperial Tobacco Group PLC 21,689 593,192 Japan Tobacco, Inc. 34 386,746 --------------- 979,938 --------------- ENERGY--8.7% ENERGY EQUIPMENT & SERVICES--0.2% Saipem S.p.A. 17,100 204,888 --------------- OIL & GAS--8.5% BG Group PLC 54,771 371,608 BP PLC 153,300 1,492,580 EnCana Corp. 25,200 1,436,220 ENI S.p.A. 55,200 1,380,893 Norsk Hydro ASA 5,660 444,780 Shell Transport & Trading Co., PLC 77,100 656,099 Total SA 3,500 761,838 --------------- 6,544,018 --------------- FINANCIALS--23.5% CAPITAL MARKETS--1.3% Deutsche Bank AG, Registered Shares 7,719 682,425 Nomura Holdings, Inc. 22,000 318,887 --------------- 1,001,312 --------------- COMMERCIAL BANKS--15.0% Anglo Irish Bank Corp., PLC 21,900 530,977 Banco Popolare di Verona e Novara 23,100 467,891 Banco Popular Espanol SA 8,170 536,432 Bank of Ireland 37,068 611,039 Bank of Yokohama Ltd. (a) 24,000 150,767 Barclays PLC 88,170 990,262 BNP Paribas SA 14,691 1,060,614 Danske Bank A/S 16,400 500,920 DNB NOR ASA 46,600 457,198 Erste Bank der oesterreichischen Sparkassen AG 9,415 500,832 HSBC Holdings PLC 66,900 1,127,059 Mitsubishi Tokyo Financial Group, Inc. 65 656,191 Mizuho Financial Group, Inc. 101 505,521 </Table> See Accompanying Notes to Financial Statements. 64 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- National Bank of Greece SA 17,355 $ 570,758 Royal Bank of Scotland Group PLC 33,420 1,122,205 Skandinaviska Enskilda Banken AB, Class A 55,600 1,072,248 Sumitomo Mitsui Financial Group, Inc. 61 441,832 UniCredito Italiano S.p.A. 53,400 305,808 --------------- 11,608,554 --------------- CONSUMER FINANCE--0.4% Credit Saison Co., Ltd. 9,000 327,639 --------------- DIVERSIFIED FINANCIAL SERVICES--1.1% ING Groep NV, CVA 27,957 842,936 --------------- INSURANCE--4.8% Aegon NV 52,800 717,321 Allianz AG, Registered Shares 5,552 733,322 AXA 18,300 450,634 Irish Life & Permanent PLC 31,800 594,409 Mitsui Sumitomo Insurance Co., Ltd. 42,000 364,429 Riunione Adriatica di Sicurta S.p.A. 12,982 293,014 T&D Holdings, Inc. (a) 10,800 514,833 --------------- 3,667,962 --------------- REAL ESTATE--0.9% Sumitomo Realty & Development Co., Ltd. 34,000 441,474 Swire Pacific Ltd., Class A 25,500 213,238 --------------- 654,712 --------------- HEALTH CARE--11.6% HEALTH CARE EQUIPMENT & SUPPLIES--1.9% GN Store Nord A/S 18,000 193,219 Nobel Biocare Holding AG 1,800 324,932 Smith & Nephew PLC 74,871 764,844 Synthes, Inc. (a) 1,800 200,935 --------------- 1,483,930 --------------- PHARMACEUTICALS--9.7% AstraZeneca PLC 20,200 731,333 Chugai Pharmaceutical Co., Ltd. 34,200 564,600 GlaxoSmithKline PLC 58,300 1,365,436 Novartis AG, Registered Shares 21,950 1,101,374 Sanofi-Aventis 14,600 1,162,811 Schering AG 4,500 334,664 Shire Pharmaceuticals Group PLC 23,200 243,224 Takeda Pharmaceutical Co., Ltd. 25,400 1,277,505 Teva Pharmaceutical Industries Ltd., ADR 23,600 704,696 --------------- 7,485,643 --------------- INDUSTRIAL--9.8% BUILDING PRODUCTS--0.9% Nippon Sheet Glass Co. Ltd. 49,000 201,989 Wienerberger AG 9,591 457,092 --------------- 659,081 --------------- COMMERCIAL SERVICES & SUPPLIES--0.8% Randstad Holding NV 14,900 584,270 --------------- CONSTRUCTION & ENGINEERING--1.5% Shimizu Corp. 95,000 $ 474,523 Vinci SA 5,290 707,932 --------------- 1,182,455 --------------- ELECTRICAL EQUIPMENT--0.4% Mitsubishi Electric Corp. 62,000 303,545 --------------- INDUSTRIAL CONGLOMERATES--1.7% Hutchison Whampoa Ltd. 46,000 430,529 Siemens AG, Registered Shares 5,549 468,518 Smiths Group PLC 28,491 448,860 --------------- 1,347,907 --------------- MACHINERY--2.4% Atlas Copco AB, Class B 22,900 952,615 Heidelberger Druckmaschinen AG (a) 12,800 433,299 Volvo AB, Class B 11,100 438,878 --------------- 1,824,792 --------------- ROAD & RAIL--1.4% Canadian National Railway Co. 9,273 564,578 ComfortDelGro Corp., Ltd. 263,000 249,663 East Japan Railway Co. 54 299,912 --------------- 1,114,153 --------------- TRADING COMPANIES & DISTRIBUTORS--0.7% Mitsubishi Corp. 41,000 527,847 --------------- INFORMATION TECHNOLOGY--5.0% COMMUNICATIONS EQUIPMENT--1.6% Nokia Oyj 27,400 428,946 Tandberg ASA 41,000 506,365 Telefonaktiebolaget LM Ericsson, ADR (a) 9,100 286,559 --------------- 1,221,870 --------------- COMPUTERS & PERIPHERALS--0.4% Toshiba Corp. 73,000 313,416 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.7% Hoya Corp. 1,800 203,228 TDK Corp. 4,400 325,893 --------------- 529,121 --------------- INTERNET SOFTWARE & SERVICES--0.3% NIWS Co., Ltd. 66 190,253 --------------- OFFICE ELECTRONICS--0.6% Canon, Inc. 9,000 485,965 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.3% Marvell Technology Group Ltd. (a) 1,800 63,846 Samsung Electronics Co., Ltd., GDR, Registered Shares 3,143 688,317 STMicroelectronics NV, N.Y. Registered Shares 14,400 278,208 --------------- 1,030,371 --------------- </Table> See Accompanying Notes to Financial Statements. 65 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- SOFTWARE--0.1% Sage Group PLC 14,284 $ 55,370 --------------- MATERIALS--5.4% CHEMICALS--4.0% BASF AG 8,500 609,799 Novozymes A/S, Class B 4,150 210,022 Shin-Etsu Chemical Co., Ltd. 9,600 392,991 Sumitomo Chemical Co., Ltd. 107,000 521,494 Syngenta AG (a) 11,000 1,163,573 Teijin Ltd. 45,000 194,532 --------------- 3,092,411 --------------- CONSTRUCTION MATERIALS--0.9% Cemex SA de CV, ADR 19,600 713,832 --------------- PAPER & FOREST PRODUCTS--0.5% UPM-Kymmene Oyj 17,600 390,904 --------------- TELECOMMUNICATION SERVICES--6.8% DIVERSIFIED TELECOMMUNICATION SERVICES--4.1% Belgacom SA (a) 11,100 478,111 Deutsche Telekom AG, Registered Shares (a) 42,126 951,046 France Telecom SA 15,049 496,551 Nippon Telegraph & Telephone Corp. 96 430,867 TDC A/S 7,000 295,460 Telecom Italia S.p.A. 122,856 500,454 --------------- 3,152,489 --------------- WIRELESS TELECOMMUNICATION SERVICES--2.7% NTT DoCoMo, Inc. 295 542,696 Vodafone Group PLC 557,900 1,510,346 --------------- 2,053,042 --------------- UTILITIES--3.9% ELECTRIC UTILITIES--1.6% E.ON AG 4,474 406,237 Fortum Oyj 25,400 468,445 Tokyo Electric Power Co., Inc. 13,300 325,876 --------------- 1,200,558 --------------- GAS UTILITIES--0.8% Centrica PLC 72,000 326,014 Tokyo Gas Co., Ltd. 78,000 319,060 --------------- 645,074 --------------- MULTI-UTILITIES & UNREGULATED POWER--0.7% National Grid Transco PLC 58,550 556,596 --------------- WATER UTILITIES--0.8% Veolia Environnement 17,800 642,052 --------------- TOTAL COMMON STOCKS (cost of $59,760,637) 75,470,213 --------------- PREFERRED STOCKS--0.9% CONSUMER DISCRETIONARY--0.9% AUTOMOBILES--0.9% Porsche AG 1,100 $ 699,161 --------------- TOTAL PREFERRED STOCKS (cost of $703,184) 699,161 --------------- <Caption> UNITS --------------- WARRANTS--0.0% INFORMATION TECHNOLOGY--0.0% COMMUNICATIONS EQUIPMENT--0.0% Lucent Technologies, Inc. (a) 113 178 --------------- TOTAL WARRANTS (cost of $0) 178 --------------- <Caption> PAR --------------- SHORT-TERM OBLIGATION--1.4% Repurchase agreement with State Street Bank & Trust Co., dated 12/31/04, due 01/03/05 at 1.500%, collateralized by a U.S. Treasury Bond maturing 11/15/27, market value of $1,077,379 (repurchase proceeds $1,056,132) $ 1,056,000 1,056,000 --------------- TOTAL SHORT-TERM OBLIGATION (cost of $1,056,000) 1,056,000 --------------- TOTAL INVESTMENTS--100.1% (cost of $61,519,821) (b) 77,225,552 --------------- OTHER ASSETS & LIABILITIES, NET--(0.1)% (41,740) --------------- NET ASSETS--100.0% $ 77,183,812 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $62,045,370. See Accompanying Notes to Financial Statements. 66 <Page> The Fund was invested in the following countries at December 31, 2004: <Table> <Caption> SUMMARY OF SECURITIES BY % OF TOTAL COUNTRY (UNAUDITED) VALUE INVESTMENTS - ------------------------ ------------ ----------- United Kingdom $ 18,301,594 23.7% Japan 17,380,891 22.5 France 6,933,517 9.0 Germany 5,729,534 7.4 Switzerland 4,107,486 5.3 Italy 3,152,948 4.1 Netherlands 3,054,323 4.0 Sweden 2,750,300 3.6 Canada 2,000,798 2.6 United States* 1,755,839 2.3 Ireland 1,736,425 2.2 Norway 1,408,343 1.8 Finland 1,288,295 1.7 Denmark 1,199,621 1.6 Austria 957,924 1.2 Greece 813,203 1.1 Mexico 713,832 0.9 Israel 704,696 0.9 South Korea 688,317 0.9 Hong Kong 643,767 0.8 Panama 639,693 0.8 Spain 536,432 0.7 Belgium 478,111 0.6 Singapore 249,663 0.3 ------------ ----- $ 77,225,552 100.0% ============ ===== </Table> * Includes short-term obligation. Certain securities are listed by country of underlying exposure but may trade predominantly on other exchanges. At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> SECTOR (UNAUDITED) % OF NET ASSETS - ------------------ --------------- Financials 23.5% Consumer Discretionary 14.7 Health Care 11.6 Industrial 9.8 Consumer Staples 9.3 Energy 8.7 Telecommunication Services 6.8 Materials 5.4 Information Technology 5.0 Utilities 3.9 Short-Term Obligation 1.4 Other Assets & Liabilities, Net (0.1) ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- ADR American Depositary Receipt GDR Global Depositary Receipt </Table> See Accompanying Notes to Financial Statements. 67 <Page> STATEMENT OF ASSETS & LIABILITIES Columbia International Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 61,519,821 --------------- Investments, at value $ 77,225,552 Cash 59 Foreign currency (cost of $7,317) 7,307 Receivable for: Investments sold 1,091,573 Interest 44 Dividends 74,823 Foreign tax reclaim 21,631 Expense reimbursement due from Investment Advisor 13,838 Deferred Trustees' compensation plan 5,783 --------------- TOTAL ASSETS 78,440,610 --------------- LIABILITIES: Payable for: Investments purchased 339,346 Fund shares repurchased 811,340 Investment advisory fee 58,493 Transfer agent fee 606 Pricing and bookkeeping fees 3,760 Trustees' fees 379 Audit fee 19,250 Custody fee 9,114 Distribution fee--Class B 1,848 Deferred Trustees' fees 5,783 Other liabilities 6,879 --------------- TOTAL LIABILITIES 1,256,798 --------------- NET ASSETS $ 77,183,812 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 73,776,010 Overdistributed net investment income (7,668) Accumulated net realized loss (12,293,699) Net unrealized appreciation on: Investments 15,705,731 Foreign currency translations 3,438 --------------- NET ASSETS $ 77,183,812 =============== CLASS A: Net assets $ 70,391,359 Shares outstanding 37,001,999 =============== Net asset value per share $ 1.90 =============== CLASS B: Net assets $ 6,792,453 Shares outstanding 3,582,100 =============== Net asset value per share $ 1.90 =============== </Table> See Accompanying Notes to Financial Statements. 68 <Page> STATEMENT OF OPERATIONS Columbia International Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Dividends $ 1,476,810 Interest 10,665 --------------- Total Investment Income (net of foreign taxes withheld of $185,526) 1,487,475 --------------- EXPENSES: Investment advisory fee 694,542 Distribution fee--Class B 16,418 Transfer agent fee 7,500 Pricing and bookkeeping fees 35,986 Trustees' fees 9,299 Custody fee 84,826 Non-recurring costs (See Note 7) 3,909 Other expenses 64,399 --------------- Total Expenses 916,879 Fees and expenses waived or reimbursed by Investment Advisor (162,060) Non-recurring costs assumed by Investment Advisor (See Note 7) (3,909) Custody earnings credit (43) --------------- Net Expenses 750,867 --------------- Net Investment Income 736,608 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments 12,932,946 Foreign currency transactions (12,136) Foreign capital gains tax (68,972) Net realized loss on disposal of invesments purchased in error (See Note 6) -- --------------- Net realized gain 12,851,838 --------------- Net change in unrealized appreciation/depreciation on: Investments (4,052,824) Foreign currency translations (44,358) Foreign capital gains tax 103,767 --------------- Net change in unrealized appreciation/depreciation (3,993,415) --------------- Net Gain 8,858,423 --------------- Net Increase in Net Assets from Operations $ 9,595,031 =============== </Table> See Accompanying Notes to Financial Statements. 69 <Page> STATEMENT OF CHANGES IN NET ASSETS Columbia International Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, ----------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 736,608 $ 1,145,148 Net realized gain (loss) on investments and foreign currency transactions 12,851,838 (2,602,025) Net change in unrealized appreciation/depreciation on investments, foreign currency translations and foreign capital gains tax (3,993,415) 24,758,829 --------------- --------------- Net Increase from Operations 9,595,031 23,301,952 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (812,607) (780,341) Class B (62,958) (54,564) --------------- --------------- Total Distributions Declared to Shareholders (875,565) (834,905) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 2,715,897 22,045,783 Proceeds received in connection with merger -- 35,910,049 Distributions reinvested 812,607 780,341 Redemptions (16,270,373) (33,015,574) --------------- --------------- Net Increase (Decrease) (12,741,869) 25,720,599 --------------- --------------- Class B: Subscriptions 504,785 261,779 Proceeds received in connection with merger -- 5,503,084 Distributions reinvested 62,958 54,564 Redemptions (1,363,336) (888,774) --------------- --------------- Net Increase (Decrease) (795,593) 4,930,653 --------------- --------------- Net Increase (Decrease) from Share Transactions (13,537,462) 30,651,252 --------------- --------------- Total Increase (Decrease) in Net Assets (4,817,996) 53,118,299 NET ASSETS: Beginning of period 82,001,808 28,883,509 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $(7,668) and $101,611, respectively) $ 77,183,812 $ 82,001,808 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 1,543,162 15,774,129 Issued in connection with merger -- 28,728,067 Issued for distributions reinvested 432,171 468,404 Redemptions (9,365,532) (23,430,429) --------------- --------------- Net Increase (Decrease) (7,390,199) 21,540,171 --------------- --------------- Class B: Subscriptions 302,309 180,431 Issued in connection with merger -- 4,437,971 Issued for distributions reinvested 33,751 32,782 Redemptions (790,682) (614,950) --------------- --------------- Net Increase (Decrease) (454,622) 4,036,234 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 70 <Page> NOTES TO FINANCIAL STATEMENTS Columbia International Fund, Variable Series / December 31, 2004 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. 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. The Fund may use a systematic fair valuation model provided by an independent third party to value securities principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. If a security is valued at a "fair value", such value is likely to be different from the last quoted market price for the security. 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 current 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 71 <Page> 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. 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 timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for distributions in excess, foreign currency transactions and foreign capital gains tax were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT INCOME NET REALIZED LOSS CAPITAL --------------------- ----------------- ------- $ 29,678 $ (199,649) $ 169,971 </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 ------------ ------------ Distributions paid from: Ordinary income $ 875,565 $ 834,905 Long-term capital gains -- -- </Table> 72 <Page> As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- $ -- $ -- $ 15,181,595 </Table> * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales and changes in the value of assets and liabilities resulting from changes in exchange rates. Unrealized appreciation and depreciation at December 31, 2004, based on cost of investments for federal income tax purposes, was: <Table> Unrealized appreciation $ 15,786,144 Unrealized depreciation (605,962) ------------ Net unrealized appreciation $ 15,180,182 ============ </Table> The following capital loss carryforwards 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 ---------- ------------ 2007 $ 339,440 2008 668,968 2009 6,672,015 2010 3,027,462 2011 1,060,264 ------------ $ 11,768,149 ============ </Table> Of the capital loss carryforwards attributable to the Fund, $1,038,036 ($106,582 expiring 12/31/07, $585,442 expiring 12/31/08, $173,006 expiring 12/31/09 and $173,006 expiring 12/31/10) remain from the Fund's merger with Colonial International Horizons Fund, Variable Series and $474,576 ($232,858 expiring 12/31/07, $83,526 expiring 12/31/08, $79,096 expiring 12/31/09 and $79,096 expiring 12/31/10) remain from the Fund's merger with Colonial Global Equity Fund, Variable Series (See Note 8). Utilization of these losses could be subject to limitations imposed by the Internal Revenue Code. Capital loss carryforwards of $11,725,001 were utilized during the year ended December 31, 2004 for the Fund. 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 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 0.87% Next $500 million 0.82% Next $500 million 0.77% $1.5 billion to $3 billion 0.72% $3 billion to $6 billion 0.70% Over $6 billion 0.68% </Table> Prior to November 1, 2004, Columbia received 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 year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.049%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the year ended December 31, 2004, the Fund's 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 73 <Page> 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 contractually agreed to maintain this arrangement until April 6, 2004. Effective April 7, 2004, Columbia voluntarily agreed to continue this arrangement, however 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. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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 year ended December 31, 2004, the Fund paid $1,404 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $77,081,937 and $91,184,283, respectively. NOTE 6. OTHER During the year ended December 31, 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. 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--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to 74 <Page> reduce certain Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $3,909 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 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. 75 <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> PERIOD YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------------- 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 0.22 0.41 (0.21) (0.47) (0.22) --------- --------- --------- --------- ------------ Total from Investment Operations 0.23 0.44 (0.20) (0.47) (0.23) --------- --------- --------- --------- ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.02) (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 (0.02) (0.01) -- -- (0.34) --------- --------- --------- --------- ------------ NET ASSET VALUE, END OF PERIOD $ 1.90 $ 1.69 $ 1.26 $ 1.46 $ 1.93 ========= ========= ========= ========= ============ Total return (d)(e) 13.48%(f)(g) 35.21%(f) (13.56)% (24.35)% (9.01)%(h) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (i) 1.20% 1.22% 1.38% 1.48% 1.33%(j) Net investment income (loss) (i) 0.72% 1.71% 0.37% 0.16% (0.43)%(j) Waiver/reimbursement 0.21% 0.18% -- -- -- Portfolio turnover rate 101% 104% 39% 34% 76% Net assets, end of period (000's) $ 6,792 $ 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) Total return includes a voluntary reimbursement by the Investment Advisor for a realized investment loss on an investment not meeting the Fund's investment restrictions. This reimbursement had an impact of less than 0.01% on the Fund's total return. (h) Not annualized. (i) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (j) Annualized. 76 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Columbia International Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Columbia International Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 77 <Page> PORTFOLIO MANAGER'S DISCUSSION Columbia Real Estate Equity Fund, Variable Series / December 31, 2004 Columbia Real Estate Equity Fund, Variable Series seeks to provide capital appreciation and above-average current income. David W. Jellison has managed the fund and its predecessor since its inception in March 1998. Buoyed by a strong economy and a relatively favorable interest rate environment, the market for real estate investment trusts (REITs) took in a stampede of investor money during 2004. As a result, REIT stock prices were propelled higher and the sector delivered exceptional returns for the year ended December 31, 2004. The fund and its benchmark, the NAREIT Index, both handily outperformed the S&P 500 Index. However, a defensive posture, represented by an allocation to the paper and forest product sectors, caused the fund to modestly underperform its benchmark for the 12-month period. Even so, we continue to believe that these securities will help cushion the fund in a less favorable REIT environment. ECONOMIC GROWTH INCREASED DEMAND FOR SPACE Steady economic growth benefited REIT stocks because it generally increased the demand for space. Relatively low interest rates also tended to favor REITs. Despite five increases in short-term interest rates by the Federal Reserve Board, yields on longer term securities, such as the 10-year bond, were virtually unchanged from where they started the year. LODGING AND OFFICE REIT STOCKS AID PERFORMANCE During the year, we increased the fund's allocation to lodging stocks from approximately 5% to 17.5% of net assets. This allocation, which was approximately three times the sector's weight in the index, paid off as lodging REITs performed strongly--particularly in the last nine months. We used proceeds from the sale of retail and industrial REITs to add to the lodging sector. We shifted the fund's exposure to industrial REITs from an overweight to an underweight relative to the index, a move that did not benefit performance because the sector continued to perform strongly. However, we believe industrial REITs have become expensive relative to their earnings prospects while valuation concerns justify lower exposure going forward. We also reduced the fund's retail REIT allocation even though retail was the fastest growing sector of the REIT market. We believe that cash flow growth rates for these companies have peaked. We believe the fund's allocation has the potential to help performance going forward. Although the office REIT sector underperformed, we zeroed in on some strong performers in the sector. And the fund had less exposure to office REITs than the index, which also helped relative performance. We have underweighted office REITs because the sector continues to struggle with oversupply in the face of a very slow recovery in the employment market. REIT DIVIDEND YIELDS FALL The average dividend yield on REIT stocks fell from 5.5% to 4.7% during this reporting period. Because REITs are pass-through vehicles that are taxed at the ordinary income tax rate (as compared to the lower dividend tax rate), this decline was significant for investors. To help offset the impact of declining yields, we sought more income potential by purchasing additional income deposit securities (IDS). An IDS combines a share of dividend-paying common stock with an interest in corporate subordinated debt. The security pays both a dividend, which is now taxed at the lower dividend tax rate, and interest, which is taxed at the ordinary income rate. The fund now holds three of these securities, representing 2.4% of net assets as of year end. THREAT OF RISING RATES LOOMS The biggest threat to REIT stocks is the potential for intermediate- and long-term interest rates to rise as the Federal Reserve continues to apply the brakes to inflation and manage economic growth. Because we believe economic good news is already priced into many of these stocks, rising rates could provide a valuation headwind for the REIT market. As a result, we plan to continue to position the fund away from REIT stocks and toward other real estate related issues, particularly in sectors we believe are linked to a strengthening economy such as lodging and paper and forest products. On October 13, 2004, the Board of Trustees of the fund voted to liquidate the fund. The fund was liquidated on February 18, 2005. 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 December 31, 2004, and are subject to change. 78 <Page> PERFORMANCE INFORMATION Columbia Real Estate Equity Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR 5-YEAR LIFE - ------------------------------------------------------------- Class B (4/14/03) 30.27 19.16 11.34 NAREIT Index(1) 31.58 21.95 12.00 S&P 500 Index(2) 10.88 -2.30 3.62 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 3/3/98(3) - 12/31/04 Class B: $20,824 <Table> <Caption> CLASS B SHARES NAREIT INDEX S&P 500 INDEX 3/3/1998 $ 10,000 $ 10,000 $ 10,000 3/31/1998 $ 10,350 $ 10,179 $ 10,485 4/30/1998 $ 9,981 $ 9,847 $ 10,591 5/31/1998 $ 9,931 $ 9,778 $ 10,409 6/30/1998 $ 9,908 $ 9,712 $ 10,831 7/31/1998 $ 9,356 $ 9,081 $ 10,717 8/31/1998 $ 8,664 $ 8,224 $ 9,167 9/30/1998 $ 9,079 $ 8,690 $ 9,755 10/31/1998 $ 8,917 $ 8,529 $ 10,548 11/30/1998 $ 9,079 $ 8,654 $ 11,187 12/31/1998 $ 9,044 $ 8,436 $ 11,831 1/31/1999 $ 8,889 $ 8,260 $ 12,326 2/28/1999 $ 8,827 $ 8,066 $ 11,942 3/31/1999 $ 8,753 $ 8,029 $ 12,420 4/30/1999 $ 9,406 $ 8,791 $ 12,901 5/31/1999 $ 9,675 $ 8,985 $ 12,596 6/30/1999 $ 9,443 $ 8,839 $ 13,295 7/31/1999 $ 9,077 $ 8,558 $ 12,880 8/31/1999 $ 9,066 $ 8,450 $ 12,817 9/30/1999 $ 8,645 $ 8,128 $ 12,466 10/31/1999 $ 8,454 $ 7,928 $ 13,255 11/30/1999 $ 8,370 $ 7,799 $ 13,524 12/31/1999 $ 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 $ 17,402 $ 11,897 7/31/2004 $ 16,844 $ 17,459 $ 11,503 8/31/2004 $ 17,880 $ 18,846 $ 11,549 9/30/2004 $ 18,066 $ 18,834 $ 11,674 10/31/2004 $ 18,778 $ 19,842 $ 11,853 11/30/2004 $ 19,756 $ 20,697 $ 12,333 12/31/2004 $ 20,824 $ 21,704 $ 12,749 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - -------------------------------------------------------------- Class B 10.99 12.42 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. 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. 79 <Page> UNDERSTANDING YOUR EXPENSES Columbia Real Estate Equity Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ------------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ------------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,229.80 1,019.51 6.28 5.69 1.12 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the investment advisor not waived/reimbursed a portion of expenses, account values at the end of the period would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 80 <Page> INVESTMENT PORTFOLIO Columbia Real Estate Equity Fund, Variable Series / December 31, 2004 <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--99.3% CONSUMER DISCRETIONARY--13.7% HOTELS, RESTAURANTS & LEISURE--13.1% Hilton Hotels Corp. 7,515 $ 170,891 La Quinta Corp. (a) 7,520 68,357 Marriott International, Inc., Class A 1,970 124,071 Starwood Hotels & Resorts Worldwide, Inc. 2,535 148,044 --------------- 511,363 --------------- MULTILINE RETAIL--0.6% Sears, Roebuck and Co. 400 20,412 --------------- FINANCIALS--76.8% REAL ESTATE--76.8% Alexandria Real Estate Equities, Inc., REIT 2,310 171,910 Archstone-Smith Trust, REIT 2,440 93,452 AvalonBay Communities, Inc., REIT 1,060 79,818 Boston Properties, Inc., REIT 925 59,820 Brookfield Properties Corp. 1,670 62,458 CenterPoint Properties Trust, REIT 1,870 89,554 Corporate Office Properties Trust, REIT 1,500 44,025 Cousins Properties, Inc., REIT 4,920 148,928 Duke Realty Corp., REIT 2,740 93,544 Equity Office Properties Trust, REIT 3,606 105,007 Equity Residential, REIT 5,090 184,156 Essex Property Trust, Inc., REIT 400 33,520 General Growth Properties, Inc., REIT 4,650 168,144 Host Marriott Corp., REIT 10,210 176,633 iStar Financial, Inc., REIT 4,520 204,575 Kimco Realty Corp., REIT 2,037 118,126 Liberty Property Trust, REIT 1,800 77,760 Newcastle Investment Corp., REIT 1,295 41,155 Pan Pacific Retail Properties, Inc., REIT 1,210 75,867 ProLogis Trust, REIT 3,890 168,554 Public Storage, Inc., REIT 2,370 132,127 Regency Centers Corp., REIT 2,640 146,256 Simon Property Group, Inc., REIT 3,180 205,651 SL Green Realty Corp., REIT 1,050 63,578 St. Joe Co. 1,850 118,770 United Dominion Realty Trust, Inc., REIT 2,030 50,344 Vornado Realty Trust, REIT 1,110 84,504 --------------- 2,998,236 --------------- MATERIALS--8.8% PAPER & FOREST PRODUCTS--8.8% Bowater, Inc. 3,415 $ 150,157 International Paper Co. 2,860 120,120 MeadWestvaco Corp. 2,175 73,711 --------------- 343,988 --------------- TOTAL COMMON STOCKS (cost of $2,723,998) 3,873,999 --------------- INCOME DEPOSIT SECURITIES--2.4% CONSUMER DISCRETIONARY--0.9% HOTELS, RESTAURANTS & LEISURE--0.9% Centerplate, Inc. 2,700 35,721 --------------- CONSUMER STAPLES--1.0% FOOD & STAPLES RETAILING--1.0% B&G Foods, Inc. 2,600 38,948 --------------- TELECOMMUNICATION SERVICES--0.5% DIVERSIFIED TELECOMMUNICATION SERVICES--0.5% Otelco, Inc. 1,300 20,670 --------------- TOTAL INCOME DEPOSIT SECURITIES (cost of $99,771) 95,339 --------------- TOTAL INVESTMENTS--101.7% (cost of $2,823,769) (b) 3,969,338 --------------- OTHER ASSETS & LIABILITIES, NET--(1.7)% (66,013) --------------- NET ASSETS--100.0% $ 3,903,325 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $2,831,845. At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> SECTOR (UNAUDITED) % OF NET ASSETS - ------------------ --------------- Financials 76.8% Consumer Discretionary 14.6 Materials 8.8 Consumer Staples 1.0 Telecommunication Services 0.5 Other Assets & Liabilities, Net (1.7) ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 81 <Page> STATEMENT OF ASSETS & LIABILITIES Columbia Real Estate Equity Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 2,823,769 --------------- Investments, at value $ 3,969,338 Receivable for: Fund shares sold 571 Dividends 13,873 Expense reimbursement due from Investment Advisor 3,231 Deferred Trustees' compensation plan 1,718 --------------- TOTAL ASSETS 3,988,731 --------------- LIABILITIES: Payable to custodian bank 39,685 Payable for: Investments purchased 3,040 Fund shares repurchased 26,820 Investment advisory fee 2,676 Administration fee 301 Transfer agent fee 417 Pricing and bookkeeping fees 2,085 Trustees' fees 33 Audit fee 7,544 Custody fee 416 Distribution fee--Class B 640 Deferred Trustees' fees 1,718 Other liabilities 31 --------------- TOTAL LIABILITIES 85,406 --------------- NET ASSETS $ 3,903,325 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 2,709,077 Overdistributed net investment income (1,705) Accumulated net realized gain 50,384 Net unrealized appreciation on investments 1,145,569 --------------- NET ASSETS $ 3,903,325 =============== CLASS A: Net assets $ 1,149,381 Shares outstanding 92,784 =============== Net asset value per share $ 12.39 =============== CLASS B: Net assets $ 2,753,944 Shares outstanding 221,695 =============== Net asset value per share $ 12.42 =============== </Table> See Accompanying Notes to Financial Statements. 82 <Page> STATEMENT OF OPERATIONS Columbia Real Estate Equity Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Dividends $ 177,777 Interest 1,988 --------------- Total Investment Income (net of foreign taxes withheld of $156) 179,765 --------------- EXPENSES: Investment advisory fee 29,082 Administration fee 3,296 Distribution fee--Class B 6,680 Transfer agent fee 5,000 Pricing and bookkeeping fees 25,000 Trustees' fees 6,275 Custody fee 3,953 Audit fee 4,833 Non-recurring costs (See Note 6) 194 Other expenses 5,900 --------------- Total Expenses 90,213 Fees and expenses waived or reimbursed by Investment Advisor (34,899) Non-recurring costs assumed by Investment Advisor (See Note 6) (194) Custody earnings credit (102) --------------- Net Expenses 55,018 --------------- Net Investment Income 124,747 --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments 420,171 Net change in unrealized appreciation/depreciation on investments 491,286 --------------- Net Gain 911,457 --------------- Net Increase in Net Assets from Operations $ 1,036,204 =============== </Table> See Accompanying Notes to Financial Statements. 83 <Page> STATEMENT OF CHANGES IN NET ASSETS Columbia Real Estate Equity Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, --------------------------------- 2004 2003 --------------- --------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 124,747 $ 20,974 Net realized gain on investments 420,171 540,776 Net change in unrealized appreciation/depreciation on investments 491,286 323,613 --------------- --------------- Net Increase from Operations 1,036,204 885,363 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (45,038) (6,669) Class B (94,997) (12,646) From net realized gains: Class A (127,115) (127,579) Class B (277,739) (344,419) --------------- --------------- Total Distributions Declared to Shareholders (544,889) (491,313) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 496,124 689,817 Proceeds received in connection with merger -- 1,269 Distributions reinvested 172,153 137,660 Redemptions (596,466) (1,058,627) --------------- --------------- Net Increase (Decrease) 71,811 (229,881) --------------- --------------- Class B: Subscriptions 647,949 429,718 Proceeds received in connection with merger -- 1,868,312 Distributions reinvested 372,736 353,653 Redemptions (1,035,323) (440,174) --------------- --------------- Net Increase (Decrease) (14,638) 2,211,509 --------------- --------------- Net Increase from Share Transactions 57,173 1,981,628 --------------- --------------- Total Increase in Net Assets 548,488 2,375,678 NET ASSETS: Beginning of period 3,354,837 979,159 --------------- --------------- End of period (including overdistributed net investment income of $(1,705) and $(785), respectively) $ 3,903,325 $ 3,354,837 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 43,392 50,234 Issued in connection with merger -- 129 Issued for distributions reinvested 13,969 12,550 Redemptions (48,001) (81,080) --------------- --------------- Net Increase (Decrease) 9,360 (18,167) --------------- --------------- Class B: Subscriptions 55,312 38,575 Issued in connection with merger -- 190,256 Issued for distributions reinvested 30,157 32,073 Redemptions (85,863) (38,815) --------------- --------------- Net Increase (Decrease) (394) 222,089 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 84 <Page> NOTES TO FINANCIAL STATEMENTS Columbia Real Estate Equity Fund, Variable Series / December 31, 2004 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. If the Fund no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains. 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. 85 <Page> NOTE 3. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for REIT adjustments and distribution reclassifications were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT INCOME NET REALIZED LOSS CAPITAL --------------------- ----------------- ------- $ 14,368 $ (13,733) $ (635) </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 ------------ ------------ Distributions paid from: Ordinary income* $ 157,871 $ 165,123 Long-term capital gains 387,018 326,190 </Table> * For tax purposes short-term capital gains distributions are considered ordinary income distributions. As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- $ -- $ 58,459 $ 1,137,493 </Table> * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales. Unrealized appreciation and depreciation at December 31, 2004, based on cost of investments for federal income tax purposes, was: <Table> Unrealized appreciation $ 1,144,894 Unrealized depreciation (7,401) ------------ Net unrealized appreciation $ 1,137,493 ============ </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 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 at the annual rate of 0.65% of the Fund's average daily net assets. Prior to November 1, 2004, Columbia received 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> For the year ended December 31, 2004, the Fund's effective administration fee rate was 0.085%. 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> ANNUAL AVERAGE DAILY NET ASSETS 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> 86 <Page> The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.644%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $5,000. For the year ended December 31, 2004, the Fund's 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 contractually agreed to maintain this arrangement until April 13, 2004. Effective April 14, 2004, Columbia voluntarily agreed to continue this arrangement, however 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. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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 year ended December 31, 2004, the Fund paid $1,291 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $1,390,821 and $1,616,890, 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--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 87 <Page> 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $194 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 DEPRECIATION(1) -------------------- -------------------- ------------------- 190,385 $ 1,869,581 $ 243,393 <Caption> NET ASSETS NET ASSETS OF GALAXY VIP OF CRABBE HUSON COLUMBIA REAL ESTATE NET ASSETS OF REAL ESTATE INVESTMENT GALAXY VIP COLUMBIA EQUITY FUND II FUND, VARIABLE REAL ESTATE EQUITY PRIOR TO SERIES PRIOR TO FUND II IMMEDIATELY COMBINATION COMBINATION AFTER COMBINATION -------------------- -------------------- -------------------- $ 998,543 $ 1,869,581 $ 2,868,124 </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 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. NOTE 8. PLAN OF LIQUIDATION On October 13, 2004, the Board of Trustees of the Fund voted to liquidate the Fund. The Fund was liquidated on February 18, 2005. 88 <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> YEAR PERIOD ENDED ENDED DECEMBER 31, DECEMBER 31, 2004 2003 (a) --------------- --------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 10.99 $ 9.82 --------------- --------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.37 0.05 Net realized and unrealized gain on investments 2.92 2.97 --------------- --------------- Total from Investment Operations 3.29 3.02 --------------- --------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.47) (0.05) From net realized gains (1.39) (1.80) --------------- --------------- Total Distributions Declared to Shareholders (1.86) (1.85) --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 12.42 $ 10.99 =============== =============== Total return (c)(d)(e) 30.27% 30.75%(f) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (g) 1.50% 3.13%(h) Net investment income (g) 3.12% 0.64%(h) Waiver/reimbursement 0.90% 0.90%(h) Portfolio turnover rate 37% 152% Net assets, end of period (000's) $ 2,754 $ 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. 89 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Columbia Real Estate Equity Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Columbia Real Estate Equity Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the years ended December 31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of the Fund for periods prior to January 1, 2003 were audited by another independent registered public accounting firm whose report dated February 7, 2003 expressed an unqualified opinion on those highlights. The Trustees of the Fund approved a plan of liquidation for the Fund as described in Note 8. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 90 <Page> UNAUDITED INFORMATION Columbia Real Estate Equity Fund, Variable Series FEDERAL INCOME TAX INFORMATION For the fiscal year ended December 31, 2004, the Fund designates long-term capital gains of $388,337. 15.60% of the ordinary income distributed by the Fund for the year ended December 31, 2004, qualifies for the corporate dividends received deduction. 91 <Page> PORTFOLIO MANAGERS' DISCUSSION Liberty Equity Fund, Variable Series / December 31, 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 or its predecessors since 1998. The economic backdrop for stocks was mixed during 2004. For much of the year, the war in Iraq, a huge spike in oil prices, and the possibility of higher interest rates restrained investors, and stocks went nowhere. However, oil prices trended down and stocks rose in the last two months of the year. Improving economic growth, strong consumer spending and robust corporate earnings were also instrumental in sparking the late-year rally in stocks. All stock categories went up for the year; however, large-cap growth stocks trailed smaller-cap and value stocks. In this environment, the fund fell behind its benchmark, the S&P 500 Index, which returned 10.88% for the year. FINANCIALS AND INFORMATION TECHNOLOGY FELL SHORT OF OUR EXPECTATIONS Stock selection and an underweight in financials were largely responsible for the portfolio's underperformance relative to the S&P 500. The fund owned Marsh & McLennan, Inc., which came under investigation by the attorney general of New York. Another holding was the Federal National Mortgage Association (Fannie Mae), which declined because of an accounting controversy. Both stocks were sold. The fund also lost out on the strong performance of our parent company, Bank of America. The stock accounts for a significant position in the S&P 500 Index, but the fund is prohibited from purchasing it due to regulatory requirements. An emphasis on corporate cost cutting, rather than on capital spending, had a negative impact on the information technology sector. For many companies, the technology upgrades that were installed in the late 1990s in preparation for the year 2000 continued to be adequate. We believe we are coming to the end of this upgrade cycle and that capital spending for technology should pick up. Therefore, we maintained the fund's relatively large weight in information technology. The fund had a relatively big position in semiconductor company Analog Devices, Inc., which declined (0.6% of net assets). It also owned Agilent Technologies, Inc. and Veritas Software Corporation. Both stocks detracted from performance and were sold. SEEKING SOLUTIONS TO THE HIGH COST OF HEALTH CARE WAS A THEME Health care stocks made the biggest contribution to performance. In this area, we de-emphasized large pharmaceutical companies in favor of companies that we believe are part of the solution to rising health care costs. The fund owned Caremark Rx, Inc., a prescription drug benefit manager, which aided returns (2.5% of net assets). An investment in generic drug producer Teva Pharmaceutical Industries Ltd. also added to results. (1.7% of net assets). HMOs were represented in the portfolio, and WellPoint, Inc. was a significant benefit to performance (1.6% of net assets). While the consumer staples sector did not perform as well as the benchmark, the fund's holdings in the area were a main driver of performance. We focused on companies with new products and/or business initiatives that could accelerate their growth. The fund owned Costco Wholesale Corp., which led the sector. We sold the stock when it reached our target price. Bunge Ltd., the world's largest soybean processor, added substantially to the fund's return (0.5% of net assets). Procter & Gamble Co., PepsiCo, Inc. and Hershey Foods Corp. were also large contributors to results (2.6%, 1.9% and 0.7% of net assets, respectively). A POSITIVE OUTLOOK Solid economic growth and declining oil prices have raised our hopes for another positive year for the stock market. However, there are offsetting factors that make us somewhat cautious, such as the threat of higher interest rates. As a result, we do not expect outsized returns in 2005. Because we believe that there is a good chance that companies will spend more heavily on technology, we have positioned the portfolio for that possibility. We also plan to continue to monitor areas that have been underweighted in the portfolio. For example, we have avoided owning large pharmaceutical companies, which has been a fortunate move because they have underperformed for three years. However, they account for a significant percentage of the fund's benchmark, and as such, we believe they bear watching. That said, we do not expect to make any dramatic shifts in the portfolio, and we will continue to diversify assets among leading growth companies in what we believe are 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 and the possibility of losses due to the sensitivity of growth stock prices to changes in current or expected earnings. Holdings are disclosed as of December 31, 2004, and are subject to change. 92 <Page> PERFORMANCE INFORMATION Liberty Equity Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR 5-YEAR 10-YEAR - ----------------------------------------------------------------- Class B (4/14/03) 7.33 -4.98 9.12 S&P 500 Index 10.88 -2.30 12.07 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 1/1/95(1) - 12/31/04 Class B: $23,934 <Table> <Caption> CLASS B SHARES S&P 500 INDEX 1/1/1995 $ 10,000 $ 10,000 1/31/1995 $ 10,231 $ 10,259 2/28/1995 $ 10,539 $ 10,659 3/31/1995 $ 10,834 $ 10,974 4/30/1995 $ 11,076 $ 11,296 5/31/1995 $ 11,403 $ 11,748 6/30/1995 $ 11,616 $ 12,021 7/31/1995 $ 11,944 $ 12,420 8/31/1995 $ 11,809 $ 12,451 9/30/1995 $ 12,041 $ 12,976 10/31/1995 $ 12,119 $ 12,929 11/30/1995 $ 12,595 $ 13,497 12/31/1995 $ 12,677 $ 13,757 1/31/1996 $ 13,018 $ 14,225 2/29/1996 $ 13,047 $ 14,358 3/31/1996 $ 13,288 $ 14,495 4/30/1996 $ 13,445 $ 14,708 5/31/1996 $ 13,788 $ 15,088 6/30/1996 $ 13,763 $ 15,145 7/31/1996 $ 13,361 $ 14,476 8/31/1996 $ 13,666 $ 14,781 9/30/1996 $ 14,284 $ 15,613 10/31/1996 $ 14,539 $ 16,044 11/30/1996 $ 15,554 $ 17,257 12/31/1996 $ 15,400 $ 16,916 1/31/1997 $ 16,190 $ 17,973 2/28/1997 $ 16,101 $ 18,113 3/31/1997 $ 15,793 $ 17,369 4/30/1997 $ 16,893 $ 18,406 5/31/1997 $ 17,577 $ 19,526 6/30/1997 $ 18,141 $ 20,401 7/31/1997 $ 19,502 $ 22,025 8/31/1997 $ 18,706 $ 20,792 9/30/1997 $ 19,409 $ 21,931 10/31/1997 $ 18,872 $ 21,199 11/30/1997 $ 19,410 $ 22,180 12/31/1997 $ 19,672 $ 22,562 1/31/1998 $ 19,801 $ 22,812 2/28/1998 $ 20,940 $ 24,457 3/31/1998 $ 21,677 $ 25,709 4/30/1998 $ 21,887 $ 25,969 5/31/1998 $ 21,375 $ 25,522 6/30/1998 $ 21,871 $ 26,558 7/31/1998 $ 21,539 $ 26,277 8/31/1998 $ 17,940 $ 22,477 9/30/1998 $ 19,330 $ 23,918 10/31/1998 $ 21,273 $ 25,862 11/30/1998 $ 22,430 $ 27,430 12/31/1998 $ 24,294 $ 29,010 1/31/1999 $ 25,421 $ 30,222 2/28/1999 $ 24,295 $ 29,282 3/31/1999 $ 25,602 $ 30,454 4/30/1999 $ 26,147 $ 31,632 5/31/1999 $ 25,439 $ 30,886 6/30/1999 $ 27,494 $ 32,600 7/31/1999 $ 26,598 $ 31,583 8/31/1999 $ 26,329 $ 31,428 9/30/1999 $ 26,074 $ 30,567 10/31/1999 $ 27,458 $ 32,502 11/30/1999 $ 28,650 $ 33,161 12/31/1999 $ 30,902 $ 35,115 1/31/2000 $ 29,678 $ 33,352 2/29/2000 $ 30,542 $ 32,722 3/31/2000 $ 33,629 $ 35,922 4/30/2000 $ 33,004 $ 34,840 5/31/2000 $ 31,667 $ 34,126 6/30/2000 $ 32,684 $ 34,969 7/31/2000 $ 32,213 $ 34,424 8/31/2000 $ 34,671 $ 36,561 9/30/2000 $ 33,052 $ 34,631 10/31/2000 $ 32,513 $ 34,485 11/30/2000 $ 29,314 $ 31,768 12/31/2000 $ 30,340 $ 31,924 1/31/2001 $ 31,089 $ 33,057 2/28/2001 $ 27,859 $ 30,042 3/31/2001 $ 25,485 $ 28,137 4/30/2001 $ 27,415 $ 30,324 5/31/2001 $ 27,692 $ 30,527 6/30/2001 $ 26,379 $ 29,785 7/31/2001 $ 26,007 $ 29,493 8/31/2001 $ 24,332 $ 27,647 9/30/2001 $ 21,977 $ 25,413 10/31/2001 $ 22,737 $ 25,898 11/30/2001 $ 24,458 $ 27,885 12/31/2001 $ 24,830 $ 28,130 1/31/2002 $ 23,869 $ 27,720 2/28/2002 $ 23,125 $ 27,185 3/31/2002 $ 24,722 $ 28,207 4/30/2002 $ 23,172 $ 26,497 5/31/2002 $ 22,614 $ 26,301 6/30/2002 $ 20,538 $ 24,429 7/31/2002 $ 18,895 $ 22,526 8/31/2002 $ 19,020 $ 22,672 9/30/2002 $ 16,804 $ 20,208 10/31/2002 $ 18,293 $ 21,986 11/30/2002 $ 19,394 $ 23,281 12/31/2002 $ 17,970 $ 21,914 1/31/2003 $ 17,473 $ 21,340 2/28/2003 $ 17,317 $ 21,020 3/31/2003 $ 17,527 $ 21,224 4/30/2003 $ 18,911 $ 22,973 5/31/2003 $ 19,970 $ 24,183 6/30/2003 $ 20,110 $ 24,493 7/31/2003 $ 20,359 $ 24,924 8/31/2003 $ 20,765 $ 25,410 9/30/2003 $ 20,328 $ 25,141 10/31/2003 $ 21,294 $ 26,564 11/30/2003 $ 21,558 $ 26,797 12/31/2003 $ 22,306 $ 28,202 1/31/2004 $ 22,665 $ 28,721 2/29/2004 $ 22,960 $ 29,120 3/31/2004 $ 22,696 $ 28,680 4/30/2004 $ 22,292 $ 28,230 5/31/2004 $ 22,573 $ 28,617 6/30/2004 $ 23,024 $ 29,172 7/31/2004 $ 22,106 $ 28,206 8/31/2004 $ 21,935 $ 28,319 9/30/2004 $ 22,201 $ 28,625 10/31/2004 $ 22,279 $ 29,063 11/30/2004 $ 23,165 $ 30,240 12/31/2004 $ 23,934 $ 31,258 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - --------------------------------------------------------- Class B 14.33 15.31 </Table> PERFORMANCE HISTORY INCLUDES PERIODS FROM ITS PREDECESSOR FUND. PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. 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. 93 <Page> UNDERSTANDING YOUR EXPENSES Liberty Equity Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ------------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ------------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,040.02 1,018.35 6.92 6.85 1.35 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the investment advisor not waived/reimbursed a portion of expenses, account values at the end of the period would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 94 <Page> INVESTMENT PORTFOLIO Liberty Equity Fund, Variable Series / December 31, 2004 <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--98.7% CONSUMER DISCRETIONARY--13.6% HOTELS, RESTAURANTS & LEISURE - 2.6% Hilton Hotels Corp. 8,290 $ 188,514 Marriott International, Inc., Class A 5,750 362,135 Wendy's International, Inc. 9,700 380,822 --------------- 931,471 --------------- INTERNET & CATALOG RETAIL--1.0% eBay, Inc. (a) 3,000 348,840 --------------- MEDIA--2.8% News Corp., Class A 17,300 322,818 Viacom Inc., Class B 18,530 674,307 --------------- 997,125 --------------- MULTILINE RETAIL--2.6% Nordstrom, Inc. 7,910 369,634 Target Corp. 10,550 547,862 --------------- 917,496 --------------- SPECIALTY RETAIL--4.6% Bed Bath & Beyond, Inc. (a) 4,540 180,828 Home Depot, Inc. 17,210 735,555 Lowe's Companies, Inc. 12,510 720,451 --------------- 1,636,834 --------------- CONSUMER STAPLES--12.6% BEVERAGES - 2.9% Coca-Cola Co. 8,040 334,705 PepsiCo, Inc. 12,870 671,814 --------------- 1,006,519 --------------- FOOD & STAPLES RETAILING--3.2% Wal-Mart Stores, Inc. 8,660 457,421 Walgreen Co. 17,710 679,533 --------------- 1,136,954 --------------- FOOD PRODUCTS--1.2% Bunge Ltd. 3,270 186,423 Hershey Foods Corp. 4,480 248,819 --------------- 435,242 --------------- HOUSEHOLD PRODUCTS--3.1% Colgate-Palmolive Co. 3,650 186,734 Procter & Gamble Co. 16,600 914,328 --------------- 1,101,062 --------------- PERSONAL PRODUCTS - 2.2% Alberto-Culver Co. 7,710 374,475 Avon Products, Inc. 10,500 406,350 --------------- 780,825 --------------- ENERGY--7.1% ENERGY EQUIPMENT & SERVICES--2.9% Baker Hughes, Inc. 12,500 533,375 National-Oilwell, Inc. (a) 13,700 483,473 --------------- 1,016,848 --------------- OIL & GAS--4.2% Ashland, Inc. 6,000 $ 350,280 BP PLC, ADR 11,900 694,960 EOG Resources, Inc. 6,500 463,840 --------------- 1,509,080 --------------- FINANCIALS--17.4% CAPITAL MARKETS--2.7% Bank of New York Co., Inc. 18,000 601,560 Merrill Lynch & Co., Inc. 5,990 358,022 --------------- 959,582 --------------- COMMERCIAL BANKS--4.9% U.S. Bancorp 18,000 563,760 Wachovia Corp. 7,400 389,240 Wells Fargo & Co. 12,540 779,361 --------------- 1,732,361 --------------- CONSUMER FINANCE--1.1% MBNA Corp. 13,470 379,719 --------------- DIVERSIFIED FINANCIAL SERVICES--4.8% Citigroup, Inc. 22,900 1,103,322 JPMorgan Chase & Co. 15,460 603,095 --------------- 1,706,417 --------------- INSURANCE--3.9% AFLAC, Inc. 9,400 374,496 American International Group, Inc. 8,540 560,822 Willis Group Holdings Ltd. 11,100 456,987 --------------- 1,392,305 --------------- HEALTH CARE--16.0% BIOTECHNOLOGY--1.3% Amgen, Inc. (a) 6,980 447,767 --------------- HEALTH CARE EQUIPMENT & SUPPLIES--4.9% Alcon, Inc. 10,000 806,000 Boston Scientific Corp. (a) 8,940 317,817 Medtronic, Inc. 12,670 629,319 --------------- 1,753,136 --------------- HEALTH CARE PROVIDERS & SERVICES--4.1% Caremark Rx, Inc. (a) 22,820 899,793 WellPoint, Inc. (a) 5,000 575,000 --------------- 1,474,793 --------------- PHARMACEUTICALS--5.7% Johnson & Johnson 9,000 570,780 Pfizer, Inc. 31,460 845,959 Teva Pharmaceutical Industries Ltd., ADR 19,780 590,631 --------------- 2,007,370 --------------- </Table> See Accompanying Notes to Financial Statements. 95 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- INDUSTRIAL--12.6% AEROSPACE & DEFENSE--4.1% Boeing Co. 9,020 $ 466,965 United Technologies Corp. 9,480 979,758 --------------- 1,446,723 --------------- COMMERCIAL SERVICES & SUPPLIES--1.4% Cendant Corp. 20,900 488,642 --------------- INDUSTRIAL CONGLOMERATES--5.1% 3M Co. 3,880 318,432 General Electric Co. 41,210 1,504,165 --------------- 1,822,597 --------------- MACHINERY--2.0% Illinois Tool Works, Inc. 7,780 721,050 --------------- INFORMATION TECHNOLOGY--19.4% COMMUNICATIONS EQUIPMENT--2.6% Cisco Systems, Inc. (a) 48,150 929,295 --------------- COMPUTERS & PERIPHERALS--5.2% Dell, Inc. (a) 24,300 1,024,002 International Business Machines Corp. 3,800 374,604 Lexmark International, Inc., Class A (a) 5,180 440,300 --------------- 1,838,906 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--1.0% Flextronics International Ltd. (a) 24,730 341,769 --------------- IT SERVICES--0.4% Accenture Ltd., Class A (a) 5,000 135,000 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.8% Analog Devices, Inc. 6,010 221,889 Intel Corp. 31,230 730,470 Marvell Technology Group Ltd. (a) 11,660 413,580 --------------- 1,365,939 --------------- SOFTWARE--6.4% Electronic Arts, Inc. (a) 4,640 286,195 Microsoft Corp. 47,350 1,264,718 Oracle Corp. (a) 35,480 486,786 SAP AG, ADR 5,460 241,387 --------------- 2,279,086 --------------- TOTAL INVESTMENTS--98.7% (cost of $28,972,633) (b) 35,040,753 --------------- OTHER ASSETS & LIABILITIES, NET--1.3% 458,139 --------------- NET ASSETS--100.0% $ 35,498,892 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $29,098,186. At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> SECTOR (UNAUDITED) % OF NET ASSETS - ------------------ --------------- Information Technology 19.4% Financials 17.4 Health Care 16.0 Consumer Discretionary 13.6 Industrial 12.6 Consumer Staples 12.6 Energy 7.1 Other Assets & Liabilities, Net 1.3 ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ADR American Depositary Receipt </Table> See Accompanying Notes to Financial Statements. 96 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty Equity Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 28,972,633 --------------- Investments, at value $ 35,040,753 Receivable for: Investments sold 753,025 Fund shares sold 191 Dividends 27,165 Expense reimbursement due from Investment Advisor 615 Deferred Trustees' compensation plan 4,336 --------------- TOTAL ASSETS 35,826,085 --------------- LIABILITIES: Payable to custodian bank 187,593 Payable for: Fund shares repurchased 53,486 Investment advisory fee 23,020 Administration fee 2,039 Transfer agent fee 415 Pricing and bookkeeping fees 2,085 Merger fee 25,570 Trustees' fees 689 Audit fee 15,119 Custody fee 1,072 Deferred Trustees' fees 4,336 Other liabilities 11,769 --------------- TOTAL LIABILITIES 327,193 --------------- NET ASSETS $ 35,498,892 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 40,959,690 Overdistributed net investment income (2,895) Accumulated net realized loss (11,526,023) Net unrealized appreciation on investments 6,068,120 --------------- NET ASSETS $ 35,498,892 =============== CLASS A: Net assets $ 35,497,560 Shares outstanding 2,324,848 =============== Net asset value per share $ 15.27 =============== CLASS B: Net assets $ 1,332 Shares outstanding 87 =============== Net asset value per share $ 15.31 =============== </Table> See Accompanying Notes to Financial Statements. 97 <Page> STATEMENT OF OPERATIONS Liberty Equity Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Dividends $ 631,201 Interest 1,119 --------------- Total Investment Income (net of foreign taxes withheld of $6,222) 632,320 --------------- EXPENSES: Investment advisory fee 291,421 Administration fee 26,034 Distribution fee--Class B 3 Transfer agent fee 5,000 Pricing and bookkeeping fees 25,000 Trustees' fees 3,268 Custody fee 6,345 Merger costs 25,570 Non-recurring costs (See Note 6) 1,991 Other expenses 14,761 --------------- Total Expenses 399,393 Fees and expenses waived or reimbursed by Investment Advisor (7,771) Non-recurring costs assumed by Investment Advisor (See Note 6) (1,991) --------------- Net Expenses 389,631 --------------- Net Investment Income 242,689 --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments 1,325,658 Net change in unrealized appreciation/depreciation on investments 1,112,194 --------------- Net Gain 2,437,852 --------------- Net Increase in Net Assets from Operations $ 2,680,541 =============== </Table> See Accompanying Notes to Financial Statements. 98 <Page> STATEMENT OF CHANGES IN NET ASSETS Liberty Equity Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, --------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 242,689 $ 146,742 Net realized gain (loss) on investments 1,325,658 (4,782,702) Net change in unrealized appreciation/depreciation on investments 1,112,194 14,341,706 --------------- --------------- Net Increase from Operations 2,680,541 9,705,746 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (248,755) (147,146) Class B (6) -- --------------- --------------- Total Distributions Declared to Shareholders (248,761) (147,146) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 367,950 2,333,191 Proceeds received in connection with merger -- 4,822,551 Distributions reinvested 248,755 147,146 Redemptions (11,599,572) (16,415,799) --------------- --------------- Net Decrease (10,982,867) (9,112,911) --------------- --------------- Class B: Subscriptions -- 1,000 Distributions reinvested 6 -- --------------- --------------- Net Increase 6 1,000 --------------- --------------- Net Decrease from Share Transactions (10,982,861) (9,111,911) --------------- --------------- Total Increase (Decrease) in Net Assets (8,551,081) 446,689 NET ASSETS: Beginning of period 44,049,973 43,603,284 --------------- --------------- End of period (including overdistributed net investment income of $(2,895) and $(1,896), respectively) $ 35,498,892 $ 44,049,973 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 25,469 177,747 Issued in connection with merger -- 416,815 Issued for distributions reinvested 16,258 11,315 Redemptions (796,797) (1,296,537) --------------- --------------- Net Decrease (755,070) (690,660) --------------- --------------- Class B: Subscriptions -- 86 Issued for distributions reinvested 1 -- --------------- --------------- Net Increase 1 86 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 99 <Page> NOTES TO FINANCIAL STATEMENTS Liberty Equity Fund, Variable Series / December 31, 2004 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. Awards from class action litigation are recorded as a reduction of cost if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities, the proceeds are recorded as realized gains. 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 timing and character of income and capital gain distributions are determined in accordance with income tax 100 <Page> regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for distributions in excess were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT INCOME NET REALIZED LOSS CAPITAL --------------------- ----------------- -------- $ 5,073 $ -- $ (5,073) </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 ------------ ------------ Distributions paid from: Ordinary income $ 248,761 $ 147,146 Long-term capital gains -- -- </Table> As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- $ -- $ -- $ 5,942,567 </Table> * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales. Unrealized appreciation and depreciation at December 31, 2004, based on cost of investments for federal income tax purposes, was: <Table> Unrealized appreciation $ 7,304,431 Unrealized depreciation (1,361,864) ------------- Net unrealized appreciation $ 5,942,567 ============= </Table> The following capital loss carryforwards 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 $ 1,982,030 2010 4,000,679 2011 5,417,761 ------------ $ 11,400,470 ============ </Table> Of the capital loss carryforward attributable to the Fund, $316,971 ($15,067 expiring 12/31/09 and $301,904 expiring 12/31/10) remain from the Fund's merger with Galaxy VIP Growth & Income Fund (See Note 7.) Utilization of these losses could be subject to limitations imposed by the Internal Revenue Code. Capital loss carryforwards of $1,320,294 were utilized during the year ended December 31, 2004 for the Fund. 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 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 0.700% Next $500 million 0.650% Next $500 million 0.610% $1.5 billion to $3 billion 0.560% $3 billion to $6 billion 0.545% Over $6 billion 0.525% </Table> Prior to November 1, 2004, Columbia received 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> For the year ended December 31, 2004, the Fund's effective administration fee rate was 0.067%. 101 <Page> 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> ANNUAL AVERAGE DAILY NET ASSETS 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 year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.064%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $5,000. For the year ended December 31, 2004, the Fund's 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 contractually agreed to maintain this arrangement until April 13, 2004. Effective April 14, 2004, Columbia, voluntarily agreed to continue this arrangement, however 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. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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 year ended December 31, 2004, there were no such credits. FEES PAID TO OFFICERS AND TRUSTEES--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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 year ended December 31, 2004, the Fund paid $1,358 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $9,984,428 and $20,850,468, 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--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an 102 <Page> independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $1,991 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 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 NET ASSETS NET ASSETS OF GALAXY VIP OF GALAXY VIP OF GALAXY VIP EQUITY FUND GROWTH & INCOME EQUITY FUND PRIOR TO FUND IMMEDIATELY IMMEDIATELY COMBINATION PRIOR TO COMBINATION AFTER COMBINATION -------------------- -------------------- -------------------- $ 39,395,832 $ 4,822,551 $ 44,218,383 </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 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. NOTE 8. PROPOSED REORGANIZATION FUND MERGER--On October 13, 2004, the Board of Trustees approved a proposal to merge the Fund into the Stein Roe Growth Stock Fund, Variable Series, subject to shareholder approval and the satisfaction of certain other conditions. The effective date of the merger is expected to be on or around February 25, 2005 or such date that the parties may agree. 103 <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> YEAR PERIOD ENDED ENDED DECEMBER 31, DECEMBER 31, 2004 2003 (a) --------------- --------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 14.33 $ 11.57 --------------- --------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.07(c) 0.02 Net realized and unrealized gain on investments 0.98 2.74 --------------- --------------- Total from Investment Operations 1.05 2.76 --------------- --------------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.07) -- --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 15.31 $ 14.33 =============== =============== Total return (d)(e)(f) 7.33% 23.85%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 1.25% 1.18%(i) Net investment income (h) 0.37% 0.16%(i) Waiver/reimbursement 0.02% 0.04%(i) Portfolio turnover rate 26% 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) Net investment income per share reflects a special dividend which amounted to $0.07 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. 104 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Liberty Equity Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Liberty Equity Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the years ended December 31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial statements and financial highlights of the Fund for the periods prior to January 1, 2003 were audited by another independent registered public accounting firm whose report dated February 7, 2003 expressed an unqualified opinion on those statements. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 105 <Page> UNAUDITED INFORMATION Liberty Equity Fund, Variable Series FEDERAL INCOME TAX INFORMATION 97.96% of the ordinary income distributed by the Fund for the year ended December 31, 2004, qualifies for the corporate dividends received deduction. 106 <Page> PORTFOLIO MANAGERS' DISCUSSION Liberty Growth & Income Fund, Variable Series / December 31, 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 November 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 Income Strategies Group, has co-managed the fund since October 2003. He joined Columbia in September 2003. The fund produced solid, double-digit returns for the year, with most gains posted during the fourth quarter. Until that time, the stock market was mired in a trading range, as high energy prices, the fear of higher interest rates and continued hostilities in Iraq served to dampen investor confidence despite an impressive upward move in corporate profits. The uncertainties surrounding the presidential election added to investor caution, so when these uncertainties were removed in early November, a strong year-end rally ensued. Value-oriented stocks easily outpaced growth stocks for the year. This environment was beneficial to the fund because of our emphasis on value in our investment process. The fund's return for the year solidly outpaced the 10.88% total return of the S&P 500 Index. ENERGY AND UTILITIES LEAD THE WAY The fund benefited from its emphasis on the energy sector. Robust growth in emerging markets such as China created a surge in demand for oil, and many analysts also expressed concern about the adequacy of reserves. The combination of these effects pushed the price of oil over $50 a barrel, a 21-year high. The fund's holdings in integrated oil companies appreciated nicely, although we took some profits within our energy holdings. The utility sector, though not as big a holding for the fund in absolute terms, was the best performing sector for the fund, finishing the year up over 47%. TXU (2.3% of net assets), a Texas-based utility, was an especially important holding. The company brought in new management and sold off non-performing assets. When those efforts enabled the company to raise its earnings estimates and maintain its dividend, the stock price appreciated sharply. INFORMATION TECHNOLOGY AND HEALTH CARE SECTOR The weakest performing sector for the fund was information technology, where we were hurt by our stock selection. In particular, we did not own Apple Computer, which tripled during 2004. We also had disappointing results from our investment in Hewlett-Packard. Our concerns about the company's challenging foray into the consumer electronics business eventually led us to sell the stock. We bought Lexmark International (1.0% of net assets) with the proceeds, thereby obtaining a more direct play in the ink and printing business, long the source of Hewlett-Packard's profits. The health care sector suffered from the well-publicized difficulties at many of the major pharmaceuticals manufacturers, notably Merck and Pfizer (0.7% and 0.9% of net assets, respectively). However, the fund was not hurt by this sector because of the performance of a single stock, Aetna (1.4% of net assets), which rallied strongly amid impressive margin improvement. SLOWER PROFIT GROWTH EXPECTED IN THE YEAR AHEAD Corporate profits have grown at over a 20% annual rate for the past two years. Some tapering from this torrid pace was in evidence late in 2004, and we believe that growth in the high single-digits is a more realistic expectation for the year ahead. Interest rates are likely to be stable or slightly higher, which makes it unlikely that price-earnings multiples will expand from current levels. One potential swing factor that could boost corporate profit margins would be lower energy prices, but the possibility of supply disruptions and the longer-term outlook for oil demand makes us reluctant to commit to this scenario at this time. Although we reduced our commitment to the energy sector via profit taking in selected areas, we maintained an overweight at the end of the period. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. An investment in the Liberty Growth & Income Fund, Variable Series offers significant long-term growth potential, but also involves certain risks. The fund may be affected by stock market fluctuations due to economic and business developments. 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 December 31, 2004, and are subject to change. 107 <Page> PERFORMANCE INFORMATION Liberty Growth & Income Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR 5-YEAR 10-YEAR - --------------------------------------------------------------- Class B (6/1/00) 13.46 1.69 11.82 S&P 500 Index 10.88 -2.30 12.07 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 1/1/95(1) - 12/31/04 Class B: $30,576 <Table> <Caption> CLASS B SHARES S&P 500 INDEX 1/1/1995 $ 10,000 $ 10,000 1/31/1995 $ 10,253 $ 10,259 2/28/1995 $ 10,662 $ 10,659 3/31/1995 $ 10,945 $ 10,974 4/30/1995 $ 11,169 $ 11,296 5/31/1995 $ 11,568 $ 11,748 6/30/1995 $ 11,821 $ 12,021 7/31/1995 $ 12,230 $ 12,420 8/31/1995 $ 12,181 $ 12,451 9/30/1995 $ 12,590 $ 12,976 10/31/1995 $ 12,541 $ 12,929 11/30/1995 $ 13,018 $ 13,497 12/31/1995 $ 12,970 $ 13,757 1/31/1996 $ 13,316 $ 14,225 2/29/1996 $ 13,578 $ 14,358 3/31/1996 $ 13,652 $ 14,495 4/30/1996 $ 14,155 $ 14,708 5/31/1996 $ 14,491 $ 15,088 6/30/1996 $ 14,176 $ 15,145 7/31/1996 $ 13,495 $ 14,476 8/31/1996 $ 13,945 $ 14,781 9/30/1996 $ 14,627 $ 15,613 10/31/1996 $ 14,994 $ 16,044 11/30/1996 $ 16,065 $ 17,257 12/31/1996 $ 15,802 $ 16,916 1/31/1997 $ 16,957 $ 17,973 2/28/1997 $ 16,945 $ 18,113 3/31/1997 $ 16,267 $ 17,369 4/30/1997 $ 17,134 $ 18,406 5/31/1997 $ 18,112 $ 19,526 6/30/1997 $ 18,801 $ 20,401 7/31/1997 $ 20,301 $ 22,025 8/31/1997 $ 19,600 $ 20,792 9/30/1997 $ 20,612 $ 21,931 10/31/1997 $ 19,668 $ 21,199 11/30/1997 $ 20,468 $ 22,180 12/31/1997 $ 20,894 $ 22,562 1/31/1998 $ 21,124 $ 22,812 2/28/1998 $ 22,586 $ 24,457 3/31/1998 $ 23,726 $ 25,709 4/30/1998 $ 23,714 $ 25,969 5/31/1998 $ 23,124 $ 25,522 6/30/1998 $ 24,010 $ 26,558 7/31/1998 $ 23,534 $ 26,277 8/31/1998 $ 19,700 $ 22,477 9/30/1998 $ 20,611 $ 23,918 10/31/1998 $ 22,369 $ 25,862 11/30/1998 $ 23,729 $ 27,430 12/31/1998 $ 25,103 $ 29,010 1/31/1999 $ 25,758 $ 30,222 2/28/1999 $ 24,730 $ 29,282 3/31/1999 $ 25,531 $ 30,454 4/30/1999 $ 26,239 $ 31,632 5/31/1999 $ 25,892 $ 30,886 6/30/1999 $ 27,402 $ 32,600 7/31/1999 $ 26,719 $ 31,583 8/31/1999 $ 26,425 $ 31,428 9/30/1999 $ 25,516 $ 30,567 10/31/1999 $ 26,532 $ 32,502 11/30/1999 $ 26,880 $ 33,161 12/31/1999 $ 28,116 $ 35,115 1/31/2000 $ 26,601 $ 33,352 2/29/2000 $ 25,693 $ 32,722 3/31/2000 $ 28,229 $ 35,922 4/30/2000 $ 28,201 $ 34,840 5/31/2000 $ 28,060 $ 34,126 6/30/2000 $ 27,665 $ 34,969 7/31/2000 $ 27,864 $ 34,424 8/31/2000 $ 29,647 $ 36,561 9/30/2000 $ 28,956 $ 34,631 10/31/2000 $ 29,162 $ 34,485 11/30/2000 $ 27,739 $ 31,768 12/31/2000 $ 29,084 $ 31,924 1/31/2001 $ 28,892 $ 33,057 2/28/2001 $ 28,684 $ 30,042 3/31/2001 $ 27,585 $ 28,137 4/30/2001 $ 28,063 $ 30,324 5/31/2001 $ 28,587 $ 30,527 6/30/2001 $ 27,919 $ 29,785 7/31/2001 $ 28,731 $ 29,493 8/31/2001 $ 28,556 $ 27,647 9/30/2001 $ 27,408 $ 25,413 10/31/2001 $ 27,548 $ 25,898 11/30/2001 $ 28,658 $ 27,885 12/31/2001 $ 28,896 $ 28,130 1/31/2002 $ 28,413 $ 27,720 2/28/2002 $ 28,115 $ 27,185 3/31/2002 $ 29,400 $ 28,207 4/30/2002 $ 28,338 $ 26,497 5/31/2002 $ 28,301 $ 26,301 6/30/2002 $ 25,287 $ 24,429 7/31/2002 $ 23,204 $ 22,526 8/31/2002 $ 23,501 $ 22,672 9/30/2002 $ 20,133 $ 20,208 10/31/2002 $ 21,844 $ 21,986 11/30/2002 $ 23,520 $ 23,281 12/31/2002 $ 22,522 $ 21,914 1/31/2003 $ 21,712 $ 21,340 2/28/2003 $ 20,487 $ 21,020 3/31/2003 $ 20,430 $ 21,224 4/30/2003 $ 21,919 $ 22,973 5/31/2003 $ 23,727 $ 24,183 6/30/2003 $ 24,273 $ 24,493 7/31/2003 $ 24,178 $ 24,924 8/31/2003 $ 24,575 $ 25,410 9/30/2003 $ 24,103 $ 25,141 10/31/2003 $ 24,971 $ 26,564 11/30/2003 $ 25,216 $ 26,797 12/31/2003 $ 26,948 $ 28,202 1/31/2004 $ 27,328 $ 28,721 2/29/2004 $ 28,071 $ 29,120 3/31/2004 $ 27,956 $ 28,680 4/30/2004 $ 27,288 $ 28,230 5/31/2004 $ 27,307 $ 28,617 6/30/2004 $ 28,050 $ 29,172 7/31/2004 $ 27,536 $ 28,206 8/31/2004 $ 27,842 $ 28,319 9/30/2004 $ 28,274 $ 28,625 10/31/2004 $ 28,539 $ 29,063 11/30/2004 $ 29,741 $ 30,240 12/31/2004 $ 30,576 $ 31,258 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - -------------------------------------------------------- Class B 14.14 15.80 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. 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 July 5, 1994. 108 <Page> UNDERSTANDING YOUR EXPENSES Liberty Growth & Income Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balanceby $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ------------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ------------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,089.89 1,020.16 5.20 5.03 0.99 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the investment advisor and its affiliates not waived/reimbursed a portion of expenses, account values at the end of the period would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 109 <Page> INVESTMENT PORTFOLIO Liberty Growth & Income Fund, Variable Series / December 31, 2004 <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--98.7% CONSUMER DISCRETIONARY--8.0% HOTELS, RESTAURANTS & LEISURE--1.1% Harrah's Entertainment, Inc. 13,313 $ 890,507 McDonald's Corp. 59,340 1,902,440 --------------- 2,792,947 --------------- MEDIA--3.6% Clear Channel Communications, Inc. 49,048 1,642,618 McGraw-Hill Companies, Inc. 33,134 3,033,086 Time Warner, Inc. (a) 171,021 3,324,648 Viacom, Inc., Class A 29,879 1,107,913 --------------- 9,108,265 --------------- MULTILINE RETAIL--1.0% Federated Department Stores, Inc. 34,641 2,001,903 May Department Stores Co. 22,959 674,995 --------------- 2,676,898 --------------- SPECIALTY RETAIL--2.3% Home Depot, Inc. 44,671 1,909,239 Limited Brands, Inc. 58,723 1,351,803 Office Depot, Inc. (a) 143,363 2,488,782 --------------- 5,749,824 --------------- CONSUMER STAPLES--10.4% BEVERAGES--1.8% PepsiCo, Inc. 86,607 4,520,885 --------------- FOOD PRODUCTS--2.5% ConAgra Foods, Inc. 91,711 2,700,889 Kraft Foods, Inc., Class A 97,557 3,474,005 --------------- 6,174,894 --------------- HOUSEHOLD PRODUCTS--3.9% Clorox Co. 55,997 3,299,903 Kimberly-Clark Corp. 50,669 3,334,527 Procter & Gamble Co. 59,586 3,281,997 --------------- 9,916,427 --------------- PERSONAL PRODUCTS--1.0% Gillette Co. 56,633 2,536,026 --------------- TOBACCO--1.2% Altria Group, Inc. 49,809 3,043,330 --------------- ENERGY--13.0% ENERGY EQUIPMENT & SERVICES--1.2% Halliburton Co. 80,378 3,154,033 --------------- OIL & GAS--11.8% BP PLC, ADR 113,247 6,613,625 ChevronTexaco Corp. 24,992 1,312,330 ConocoPhillips 85,845 7,453,921 Exxon Mobil Corp. 183,944 9,428,969 Marathon Oil Corp. 49,974 1,879,522 Royal Dutch Petroleum Co., N.Y. Registered Shares 54,012 3,099,209 --------------- 29,787,576 --------------- FINANCIALS--30.9% CAPITAL MARKETS--4.0% Bank of New York Co., Inc. 104,487 $ 3,491,955 Goldman Sachs Group, Inc. 22,017 2,290,649 Janus Capital Group, Inc. 77,214 1,297,967 Morgan Stanley 22,803 1,266,023 State Street Corp. 35,938 1,765,275 --------------- 10,111,869 --------------- COMMERCIAL BANKS--7.2% National City Corp. 64,585 2,425,167 U.S. Bancorp 197,348 6,180,939 Wachovia Corp. 65,607 3,450,928 Wells Fargo & Co. 97,218 6,042,099 --------------- 18,099,133 --------------- CONSUMER FINANCE--0.8% MBNA Corp. 75,141 2,118,225 --------------- DIVERSIFIED FINANCIAL SERVICES--7.1% Citigroup, Inc. 222,283 10,709,595 JPMorgan Chase & Co. 188,059 7,336,182 --------------- 18,045,777 --------------- INSURANCE--8.0% AFLAC, Inc. 36,252 1,444,280 Ambac Financial Group, Inc. 35,938 2,951,588 American International Group, Inc. 77,837 5,111,556 Chubb Corp. 17,662 1,358,208 Hartford Financial Services Group, Inc. 31,268 2,167,185 Lincoln National Corp. 65,951 3,078,593 St. Paul Travelers Companies, Inc. 1 37 Willis Group Holdings Ltd. 34,098 1,403,814 XL Capital Ltd., Class A 36,630 2,844,319 --------------- 20,359,580 --------------- REAL ESTATE--2.0% Archstone-Smith Trust, REIT 44,087 1,688,532 AvalonBay Communities, Inc., REIT 20,344 1,531,903 Kimco Realty Corp., REIT 30,003 1,739,874 --------------- 4,960,309 --------------- THRIFTS & MORTGAGE FINANCE--1.8% Countrywide Financial Corp. 46,650 1,726,516 Freddie Mac 37,620 2,772,594 --------------- 4,499,110 --------------- HEALTH CARE--4.1% HEALTH CARE PROVIDERS & SERVICES--1.4% Aetna, Inc. 29,065 3,625,859 --------------- PHARMACEUTICALS--2.7% Bristol-Myers Squibb Co. 45,635 1,169,169 Johnson & Johnson 23,820 1,510,664 Merck & Co., Inc. 54,153 1,740,478 Pfizer, Inc. 86,607 2,328,862 --------------- 6,749,173 --------------- </Table> See Accompanying Notes to Financial Statements. 110 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- INDUSTRIAL--12.3% AEROSPACE & DEFENSE--3.7% General Dynamics Corp. 30,715 $ 3,212,789 Raytheon Co. 36,867 1,431,546 United Technologies Corp. 45,952 4,749,139 --------------- 9,393,474 --------------- COMMERCIAL SERVICES & SUPPLIES--1.9% Cendant Corp. 55,834 1,305,399 Republic Services, Inc. 21,794 730,971 Waste Management, Inc. 91,351 2,735,049 --------------- 4,771,419 --------------- INDUSTRIAL CONGLOMERATES--4.7% General Electric Co. 197,055 7,192,507 Textron, Inc. 63,546 4,689,695 --------------- 11,882,202 --------------- MACHINERY--2.0% Deere & Co. 42,297 3,146,897 Eaton Corp. 28,416 2,056,181 --------------- 5,203,078 --------------- INFORMATION TECHNOLOGY--5.7% COMMUNICATIONS EQUIPMENT--1.1% Nokia Oyj, ADR 174,155 2,729,009 --------------- COMPUTERS & PERIPHERALS--2.1% International Business Machines Corp. 27,894 2,749,790 Lexmark International, Inc., Class A (a) 29,993 2,549,405 --------------- 5,299,195 --------------- IT SERVICES--1.3% Accenture Ltd., Class A (a) 119,749 3,233,223 --------------- OFFICE ELECTRONICS--0.8% Xerox Corp. (a) 115,061 1,957,188 --------------- SOFTWARE--0.4% Microsoft Corp. 41,162 1,099,437 --------------- MATERIALS--3.9% CHEMICALS--1.7% Air Products & Chemicals, Inc. 74,769 4,334,359 --------------- PAPER & FOREST PRODUCTS--2.2% MeadWestvaco Corp. 98,726 3,345,824 Neenah Paper, Inc. (a) 1,535 50,041 Weyerhaeuser Co. 32,377 2,176,382 --------------- 5,572,247 --------------- TELECOMMUNICATION SERVICES--4.8% DIVERSIFIED TELECOMMUNICATION SERVICES--4.8% BellSouth Corp. 72,490 2,014,497 SBC Communications, Inc. 210,301 5,419,457 Verizon Communications, Inc. 113,144 4,583,463 --------------- 12,017,417 --------------- UTILITIES--5.6% ELECTRIC UTILITIES--5.6% American Electric Power Co., Inc. 82,637 $ 2,837,755 Entergy Corp. 36,005 2,433,578 Exelon Corp. 44,443 1,958,603 PG&E Corp. (a) 40,394 1,344,312 TXU Corp. 88,595 5,719,693 --------------- 14,293,941 --------------- TOTAL COMMON STOCKS (cost of $199,888,347) 249,816,329 --------------- INVESTMENT COMPANY--1.5% iShares Russell 1000 Value Index Fund 55,360 3,674,243 --------------- TOTAL INVESTMENT COMPANY (cost of $3,373,129) 3,674,243 --------------- <Caption> UNITS --------------- WARRANTS--0.0% INFORMATION TECHNOLOGY--0.0% COMMUNICATIONS EQUIPMENT--0.0% Lucent Technologies, Inc. (a) 3,846 6,077 --------------- TOTAL WARRANTS (cost of $0) 6,077 --------------- TOTAL INVESTMENTS--100.2% (cost of $203,261,476) (b) 253,496,649 --------------- OTHER ASSETS & LIABILITIES, NET--(0.2)% (405,396) --------------- NET ASSETS--100.0% $ 253,091,253 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $203,496,573. At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> SECTOR (UNAUDITED) % OF NET ASSETS - ------------------ --------------- Financials 30.9% Energy 13.0 Industrial 12.3 Consumer Staples 10.4 Consumer Discretionary 8.0 Information Technology 5.7 Utilities 5.6 Telecommunications Services 4.8 Health Care 4.1 Materials 3.9 Investment Company 1.5 Other Assets & Liabilities, Net (0.2) ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- ADR American Depositary Receipt REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 111 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty Growth & Income Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 203,261,476 --------------- Investments, at value $ 253,496,649 Cash 15,627 Receivable for: Fund shares sold 18,546 Dividends 485,743 Expense reimbursement due from Investment Advisor / Distributor 24,346 Deferred Trustees' compensation plan 17,938 --------------- TOTAL ASSETS 254,058,849 --------------- LIABILITIES: Payable for: Fund shares repurchased 694,471 Investment advisory fee 171,582 Transfer agent fee 625 Pricing and bookkeeping fees 6,576 Trustees' fees 74 Audit fee 27,430 Custody fee 1,407 Distribution fee--Class B 10,561 Deferred Trustees' fees 17,938 Other liabilities 36,932 --------------- TOTAL LIABILITIES 967,596 --------------- NET ASSETS $ 253,091,253 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 261,949,264 Overdistributed net investment income (16,722) Accumulated net realized loss (59,076,462) Net unrealized appreciation on investments 50,235,173 --------------- NET ASSETS $ 253,091,253 =============== CLASS A: Net assets $ 206,695,219 Shares outstanding 13,065,168 =============== Net asset value per share $ 15.82 =============== CLASS B: Net assets $ 46,396,034 Shares outstanding 2,935,828 =============== Net asset value per share $ 15.80 =============== </Table> See Accompanying Notes to Financial Statements. 112 <Page> STATEMENT OF OPERATIONS Liberty Growth & Income Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Dividends $ 6,173,301 Interest 20,074 --------------- Total Investment Income (net of foreign taxes withheld of $47,021) 6,193,375 --------------- EXPENSES: Investment advisory fee 2,030,029 Distribution fee--Class B 112,316 Transfer agent fee 7,500 Pricing and bookkeeping fees 72,344 Trustees' fees 10,360 Custody fee 14,941 Non-recurring costs (See Note 6) 12,796 Other expenses 75,793 --------------- Total Expenses 2,336,079 Fees and expenses waived or reimbursed by Investment Advisor (279,266) Fees waived by Distributor--Class B (8,985) Non-recurring costs assumed by Investment Advisor (See Note 6) (12,796) Custody earnings credit (103) --------------- Net Expenses 2,034,929 --------------- Net Investment Income 4,158,446 --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments 15,629,602 Net change in unrealized appreciation/depreciation on investments 12,488,990 --------------- Net Gain 28,118,592 --------------- Net Increase in Net Assets from Operations $ 32,277,038 =============== </Table> See Accompanying Notes to Financial Statements. 113 <Page> STATEMENT OF CHANGES IN NET ASSETS Liberty Growth & Income Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, --------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 4,158,446 $ 3,475,469 Net realized gain (loss) on investments 15,629,602 (27,529,590) Net change in unrealized appreciation/depreciation on investments 12,488,990 74,661,609 --------------- --------------- Net Increase from Operations 32,277,038 50,607,488 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (3,575,650) (2,859,733) Class B (703,626) (497,712) --------------- --------------- Total Distributions Declared to Shareholders (4,279,276) (3,357,445) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 4,999,188 7,840,182 Proceeds received in connection with merger -- 88,842,502 Distributions reinvested 3,575,650 2,859,733 Redemptions (41,791,870) (35,938,840) --------------- --------------- Net Increase (Decrease) (33,217,032) 63,603,577 --------------- --------------- Class B: Subscriptions 2,762,038 14,226,069 Proceeds received in connection with merger -- 7,935,880 Distributions reinvested 703,626 497,712 Redemptions (6,672,090) (13,087,318) --------------- --------------- Net Increase (Decrease) (3,206,426) 9,572,343 --------------- --------------- Net Increase (Decrease) from Share Transactions (36,423,458) 73,175,920 --------------- --------------- Total Increase (Decrease) in Net Assets (8,425,696) 120,425,963 NET ASSETS: Beginning of period 261,516,949 141,090,986 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $(16,722) and $103,584, respectively) $ 253,091,253 $ 261,516,949 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 341,822 613,478 Issued in connection with merger -- 7,939,987 Issued for distributions reinvested 226,127 202,962 Redemptions (2,834,667) (2,893,899) --------------- --------------- Net Increase (Decrease) (2,266,718) 5,862,528 --------------- --------------- Class B: Subscriptions 189,109 1,213,974 Issued in connection with merger -- 710,257 Issued for distributions reinvested 44,566 35,349 Redemptions (452,411) (1,128,428) --------------- --------------- Net Increase (Decrease) (218,736) 831,152 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 114 <Page> NOTES TO FINANCIAL STATEMENTS Liberty Growth & Income Fund, Variable Series / December 31, 2004 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 certain investment companies 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. If the Fund no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains. 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. 115 <Page> NOTE 3. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for non-deductible excise tax, distributions in excess and REIT adjustments were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT INCOME NET REALIZED LOSS CAPITAL --------------------- ----------------- --------- $ 3,152 $ 77,110 $ (80,262) </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 ----------- ------------ Distributions paid from: Ordinary income $ 4,279,276 $ 3,357,445 Long-term capital gains -- -- </Table> As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- $ -- $ -- $ 50,000,076 </Table> * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales. Unrealized appreciation and depreciation at December 31, 2004, based on cost of investments for federal income tax purposes, was: <Table> Unrealized appreciation $ 53,576,378 Unrealized depreciation (3,576,302) ------------- Net unrealized appreciation $ 50,000,076 ============= </Table> The following capital loss carryforwards 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 $ 5,586,639 2010 26,407,250 2011 26,847,476 -------------- $ 58,841,365 ============== </Table> Of the capital loss carryforwards attributable to the Fund, $11,538,311 ($5,586,639 expiring 12/31/09 and $5,951,672 expiring 12/31/10) remain from the Fund's merger with Liberty Value Fund, Variable Series (See Note 7). Utilization of these losses could be subject to limitations imposed by the Internal Revenue Code. Capital loss carryforwards of $14,204,927 were utilized during the year ended December 31, 2004 for the Fund. 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 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 0.77% Next $500 million 0.72% Next $500 million 0.67% $1.5 billion to $3 billion 0.62% $3 billion to $6 billion 0.60% Over $6 billion 0.58% </Table> Prior to November 1, 2004, Columbia received 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> 116 <Page> 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 year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.028%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the year ended December 31, 2004, the Fund's 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 contractually agreed to maintain this arrangement until April 6, 2004. Effective April 7, 2004, Columbia and the Distributor voluntarily agreed to continue this arrangement, however, Columbia or the Distributor, at their discretion, may revise or discontinue these arrangements any time. CUSTODY CREDITS--The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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 year ended December 31, 2004, the Fund paid $1,677 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $93,767,587 and $129,256,085, 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--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, 117 <Page> control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $12,796 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 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. 118 <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> PERIOD YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------- 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) 0.21 0.18 0.13 0.15 0.08 Net realized and unrealized gain (loss) on investments 1.69 2.17 (3.56) (0.35) 0.65 ---------- ---------- ---------- ---------- ------------ Total from Investment Operations 1.90 2.35 (3.43) (0.20) 0.73 ---------- ---------- ---------- ---------- ------------ LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.24) (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 (0.24) (0.16) (0.15) (2.53) (2.29) ---------- ---------- ---------- ---------- ------------ NET ASSET VALUE, END OF PERIOD $ 15.80 $ 14.14 $ 11.95 $ 15.53 $ 18.26 ========== ========== ========== ========== ============ Total return (d)(e)(f) 13.46% 19.66% (22.06)% (0.65)% 3.64%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 0.99% 1.00% 1.00% 1.00% 1.00%(i) Net investment income (h) 1.45% 1.46% 0.96% 0.88% 0.71%(i) Waiver/reimbursement 0.13% 0.14% 0.13% 0.21% 0.13%(i) Portfolio turnover rate 37% 73% 69% 53% 120% Net assets, end of period (000's) $ 46,396 $ 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. 119 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Liberty Growth & Income Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Liberty Growth & Income Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 120 <Page> UNAUDITED INFORMATION Liberty Growth & Income Fund, Variable Series FEDERAL INCOME TAX INFORMATION 98.13% of the ordinary income distributed by the Fund for the year ended December 31, 2004, qualifies for the corporate dividends received deduction. 121 <Page> PORTFOLIO MANAGER'S DISCUSSION Liberty S&P 500 Index Fund, Variable Series / December 31, 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. James May, a principal of State Street Global Advisors, is the portfolio manager of the fund. Large-company stocks generated a small positive return in the first half of 2004. However, they experienced a rocky stretch before staging a comeback in the fourth quarter. Investor concern over a slowdown in corporate earnings, several weak job reports and a sharp rise in crude oil prices held stocks back during the third quarter. However, US stocks ended the year on a high note after the presidential election was decided quickly and without controversy. The S&P 500 Index rose 10.88% for the 12-month period ended December 31, 2004, and the fund's performance was comparable to the index for the period. Large-cap stocks trailed both mid-cap and small-cap stocks during the year. Overall, small-cap stocks were the best performers. For the year, the S&P SmallCap 600 Index gained 22.7%, outpacing the S&P 500 Index by more than 10 percentage points. The S&P MidCap 400 Index rose 16.48%. ALL SECTORS POSTED POSITIVE RETURNS All ten economic sectors of the S&P 500 had positive returns for 2004. Energy and utilities were the strongest performers as surging oil prices fueled investor optimism. Exxon Mobil (2.9% of net assets) was one of the top contributors to the index's return for the year. Financials and industrials also made significant positive contributions to performance. In the financials sector, Bank of America (1.7% of net assets) benefited from its merger with FleetBoston Financial Corporation, which brought an expanded customer base and new focus on its higher-margin consumer loan department. Health care and technology stocks turned in the most disappointing performances for the year. In health care, the threat of competition from drug imports and concerns about declining new-product pipelines punished several of the larger companies within the sector. In late September, Merck (0.6% of net assets) recalled its multi-billion-dollar arthritis drug Vioxx after research concluded that the drug doubled the risk of heart attack or stroke. Pfizer (1.8% of net assets) also hurt the sector's performance after it lowered its third quarter revenue expectations. The technology sector turned in a poor performance as a result of lackluster corporate spending on technology. Intel and Cisco Systems (1.3% and 1.1% of net assets, respectively) were the sector's largest detractors. ABOUT OUR MANAGEMENT STYLE Cost-effective trade execution is a hallmark of our management style. We also manage the fund with a full replication investment strategy. As a result, 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. Because the fund incurs trading costs in seeking to maintain the appropriate weight of each security in the index, its 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 December 31, 2004, and are subject to change. 122 <Page> PERFORMANCE INFORMATION Liberty S&P 500 Index Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR LIFE - --------------------------------------------------------------- Class B (5/30/00) 10.12 -2.16 S&P 500 Index(1) 10.88 -1.23 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 5/30/00 - 12/31/04 Class B: $9,044 <Table> <Caption> CLASS B SHARES S&P 500 INDEX 5/30/2000 $ 10,000 5/31/2000 $ 10,008 $ 10,000 6/1/2000 $ 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 $ 10,464 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 $ 8,472 $ 8,815 7/31/2004 $ 8,181 $ 8,523 8/31/2004 $ 8,206 $ 8,557 9/30/2004 $ 8,292 $ 8,650 10/31/2004 $ 8,412 $ 8,782 11/30/2004 $ 8,746 $ 9,138 12/31/2004 $ 9,044 $ 9,447 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - --------------------------------------------------------------------- Class B 9.59 10.43 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. (1) Index performance for the life of the fund is from May 30, 2000. 123 <Page> UNDERSTANDING YOUR EXPENSES Liberty S&P 500 Index Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ---------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ---------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,067.82 1,021.37 3.90 3.81 0.75 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the distributor not waived/reimbursed a portion of expenses, account values at the end of the period would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 124 <Page> INVESTMENT PORTFOLIO Liberty S&P 500 Index Fund, Variable Series / December 31, 2004 <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--98.8% CONSUMER DISCRETIONARY--11.8% AUTO COMPONENTS--0.2% Cooper Tire & Rubber Co. 300 $ 6,465 Dana Corp. 657 11,386 Delphi Corp. 2,741 24,724 Goodyear Tire & Rubber Co. (a) 731 10,717 Johnson Controls, Inc. 932 59,126 Visteon Corp. 646 6,311 --------------- 118,729 --------------- AUTOMOBILES--0.6% Ford Motor Co. 8,850 129,564 General Motors Corp. 2,729 109,324 Harley-Davidson, Inc. 1,396 84,807 --------------- 323,695 --------------- DISTRIBUTORS--0.1% Genuine Parts Co. 845 37,231 --------------- HOTELS, RESTAURANTS & LEISURE--1.6% Carnival Corp. 3,024 174,273 Darden Restaurants, Inc. 771 21,388 Harrah's Entertainment, Inc. 519 34,716 Hilton Hotels Corp. 1,761 40,045 International Game Technology, Inc. 1,697 58,343 Marriott International, Inc., Class A 1,026 64,618 McDonald's Corp. 5,991 192,071 Starbucks Corp. (a) 1,913 119,295 Starwood Hotels & Resorts Worldwide, Inc. 1,031 60,210 Wendy's International, Inc. 540 21,200 Yum! Brands, Inc. 1,363 64,306 --------------- 850,465 --------------- HOUSEHOLD DURABLES--0.5% Black & Decker Corp. 378 33,389 Centex Corp. 584 34,795 Fortune Brands, Inc. 693 53,486 KB Home 190 19,836 Leggett & Platt, Inc. 916 26,042 Maytag Corp. 351 7,406 Newell Rubbermaid, Inc. 1,350 32,656 Pulte Homes, Inc. 640 40,832 Snap-On, Inc. 238 8,177 Stanley Works 381 18,665 Whirlpool Corp. 295 20,417 --------------- 295,701 --------------- INTERNET & CATALOG RETAIL--0.7% eBay, Inc. (a) 3,190 370,933 --------------- LEISURE EQUIPMENT & PRODUCTS--0.2% Brunswick Corp. 491 24,305 Eastman Kodak Co. 1,357 43,763 Hasbro, Inc. 772 14,961 Mattel, Inc. 2,025 39,467 --------------- 122,496 --------------- MEDIA--3.9% Clear Channel Communications, Inc. 2,766 92,633 Comcast Corp., Class A (a) 10,594 352,568 Dow Jones & Co., Inc. 347 14,942 Gannett Co., Inc. 1,265 $ 103,351 Interpublic Group of Companies, Inc. (a) 1,972 26,425 Knight-Ridder, Inc. 412 27,579 McGraw-Hill Companies, Inc. 861 78,816 Meredith Corp. 257 13,929 New York Times Co., Class A 707 28,846 News Corp., Ltd., ADR, Class A 12,700 236,982 Omnicom Group, Inc. 915 77,153 Time Warner, Inc. (a) 21,938 426,475 Tribune Co. 1,551 65,359 Univision Communications, Inc., Class A (a) 1,545 45,222 Viacom Inc., Class B 8,166 297,161 Walt Disney Co. 9,885 274,803 --------------- 2,162,244 --------------- MULTILINE RETAIL--1.1% Big Lots, Inc. (a) 501 6,077 Dillard's, Inc., Class A 422 11,339 Dollar General Corp. 1,564 32,484 Family Dollar Stores, Inc. 812 25,359 Federated Department Stores, Inc. 824 47,619 J.C. Penney Co., Inc. 1,376 56,967 Kohl's Corp. (a) 1,671 82,163 May Department Stores Co. 1,391 40,895 Nordstrom, Inc. 720 33,646 Sears, Roebuck and Co. 1,001 51,081 Target Corp. 4,285 222,520 --------------- 610,150 --------------- SPECIALTY RETAIL--2.4% Autonation, Inc. (a) 1,304 25,050 AutoZone, Inc. (a) 388 35,428 Bed Bath & Beyond, Inc. (a) 1,477 58,829 Best Buy Co., Inc. 1,561 92,755 Circuit City Stores, Inc. 972 15,202 Gap, Inc. 4,336 91,576 Home Depot, Inc. 10,519 449,582 Limited Brands 1,879 43,255 Lowe's Companies, Inc. 3,707 213,486 Office Depot, Inc. (a) 1,476 25,624 OfficeMax, Inc. 450 14,121 RadioShack Corp. 806 26,501 Sherwin Williams Co. 718 32,044 Staples, Inc. 2,361 79,589 Tiffany & Co. 689 22,027 TJX Companies, Inc. 2,406 60,463 Toys "R" Us, Inc. (a) 1,046 21,412 --------------- 1,306,944 --------------- TEXTILES, APPAREL & LUXURY GOODS--0.5% Coach, Inc. (a) 900 50,760 Jones Apparel Group, Inc. 631 23,076 Liz Claiborne, Inc. 506 21,358 NIKE, Inc., Class B 1,281 116,174 Reebok International Ltd. 285 12,540 V.F. Corp. 553 30,625 --------------- 254,533 --------------- </Table> See Accompanying Notes to Financial Statements. 125 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- CONSUMER STAPLES--10.4% BEVERAGES--2.2% Adolph Coors Co., Class B 129 $ 9,762 Anheuser-Busch Companies, Inc. 3,771 191,303 Brown-Forman Corp., Class B 662 32,226 Coca-Cola Co. 11,571 481,701 Coca-Cola Enterprises, Inc. 2,305 48,059 Pepsi Bottling Group, Inc. 1,232 33,313 PepsiCo, Inc. 8,077 421,619 --------------- 1,217,983 --------------- FOOD & STAPLES RETAILING--3.2% Albertson's, Inc. 1,814 43,318 Costco Wholesale Corp. 2,272 109,988 CVS Corp. 1,895 85,408 Kroger Co. (a) 3,600 63,144 Safeway, Inc. (a) 2,172 42,875 SUPERVALU, Inc. 629 21,713 Sysco Corp. 3,131 119,510 Wal-Mart Stores, Inc. 20,235 1,068,813 Walgreen Co. 4,861 186,517 --------------- 1,741,286 --------------- FOOD PRODUCTS--1.3% Archer-Daniels-Midland Co. 3,128 69,786 Campbell Soup Co. 1,941 58,016 ConAgra Foods, Inc. 2,506 73,802 General Mills, Inc. 1,791 89,031 H.J. Heinz Co. 1,714 66,829 Hershey Foods Corp. 1,156 64,204 Kellogg Co. 1,979 88,382 McCormick & Co., Inc. 613 23,662 Sara Lee Corp. 3,846 92,842 Wrigley (Wm.) Jr. Co. 1,084 75,002 --------------- 701,556 --------------- HOUSEHOLD PRODUCTS--1.8% Clorox Co. 726 42,783 Colgate-Palmolive Co. 2,574 131,686 Kimberly-Clark Corp. 2,336 153,732 Procter & Gamble Co. 12,110 667,019 --------------- 995,220 --------------- PERSONAL PRODUCTS--0.6% Alberto-Culver Co. 478 23,217 Avon Products, Inc. 2,296 88,855 Gillette Co. 4,821 215,884 --------------- 327,956 --------------- TOBACCO--1.3% Altria Group, Inc. 9,857 602,263 Reynolds American, Inc. 700 55,020 UST, Inc. 824 39,642 --------------- 696,925 --------------- ENERGY--7.1% ENERGY EQUIPMENT & SERVICES--1.0% Baker Hughes, Inc. 1,662 70,917 BJ Services Co. 756 35,184 Halliburton Co. 2,111 82,836 Nabors Industries Ltd. (a) 734 37,647 Noble Corp. (a) 617 $ 30,690 Rowan Companies, Inc. (a) 540 13,986 Schlumberger Ltd. 2,846 190,540 Transocean, Inc. (a) 1,537 65,153 --------------- 526,953 --------------- OIL & GAS--6.1% Amerada Hess Corp. 442 36,412 Anadarko Petroleum Corp. 1,155 74,856 Apache Corp. 1,544 78,080 Ashland, Inc. 376 21,951 Burlington Resources, Inc. 1,862 80,997 ChevronTexaco Corp. 10,098 530,246 ConocoPhillips 3,305 286,973 Devon Energy Corp. 2,386 92,863 El Paso Corp. 3,064 31,866 EOG Resources, Inc. 545 38,891 Exxon Mobil Corp. 30,880 1,582,909 Kerr-McGee Corp. 688 39,759 Kinder Morgan, Inc. 546 39,929 Marathon Oil Corp. 1,720 64,689 Occidental Petroleum Corp. 1,875 109,425 Sunoco, Inc. 339 27,700 Unocal Corp. 1,314 56,817 Valero Energy Corp. 1,200 54,480 Williams Companies, Inc. 2,658 43,299 XTO Energy, Inc. 1,200 42,456 --------------- 3,334,598 --------------- FINANCIALS--20.4% CAPITAL MARKETS--2.8% Bank of New York Co., Inc. 3,757 125,559 Bear Stearns Companies, Inc. 537 54,940 Charles Schwab Corp. 6,530 78,099 E*TRADE Financial Corp. (a) 1,700 25,415 Federated Investors, Inc., Class B 528 16,051 Franklin Resources, Inc. 1,233 85,878 Goldman Sachs Group, Inc. 2,352 244,702 Janus Capital Group, Inc. 1,108 18,626 Lehman Brothers Holdings, Inc. 1,291 112,937 Mellon Financial Corp. 2,086 64,895 Merrill Lynch & Co., Inc. 4,456 266,335 Morgan Stanley 5,278 293,035 Northern Trust Corp. 1,072 52,078 State Street Corp. 1,616 79,378 T. Rowe Price Group, Inc. 631 39,248 --------------- 1,557,176 --------------- COMMERCIAL BANKS--5.9% AmSouth Bancorp 1,645 42,606 Bank of America Corp. (b) 19,372 910,290 BB&T Corp. 2,620 110,171 Comerica, Inc. 788 48,084 Compass Bancshares, Inc. 500 24,335 Fifth Third Bancorp 2,687 127,041 First Horizon National Corp. 567 24,443 Huntington Bancshares, Inc. 1,061 26,292 KeyCorp 1,990 67,461 M&T Bank Corp. 600 64,704 </Table> See Accompanying Notes to Financial Statements. 126 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- Marshall & Ilsley Corp. 1,030 $ 45,526 National City Corp. 3,249 122,000 North Fork Bancorporation, Inc. 2,268 65,432 PNC Financial Services Group, Inc. 1,406 80,761 Regions Financial Corp. 2,227 79,259 SunTrust Banks, Inc. 1,742 128,699 Synovus Financial Corp. 1,516 43,327 U.S. Bancorp 8,972 281,003 Wachovia Corp. 7,647 402,232 Wells Fargo & Co. 8,101 503,477 Zions Bancorporation 440 29,933 --------------- 3,227,076 --------------- CONSUMER FINANCE--1.4% American Express Co. 6,032 340,024 Capital One Financial Corp. 1,121 94,399 MBNA Corp. 6,117 172,438 Providian Financial Corp. (a) 1,446 23,816 SLM Corp. 2,067 110,357 --------------- 741,034 --------------- DIVERSIFIED FINANCIAL SERVICES--3.7% CIT Group, Inc. 1,000 45,820 Citigroup, Inc. 24,866 1,198,044 JPMorgan Chase & Co. 17,055 665,316 Moody's Corp. 706 61,316 Principal Financial Group 1,548 63,375 --------------- 2,033,871 --------------- INSURANCE--4.2% ACE Ltd. 1,333 56,986 AFLAC, Inc. 2,415 96,214 Allstate Corp. 3,308 171,090 Ambac Financial Group, Inc. 536 44,022 American International Group, Inc. 12,486 819,956 Aon Corp. 1,531 36,530 Chubb Corp. 866 66,595 Cincinnati Financial Corp. 802 35,496 Hartford Financial Services Group, Inc. 1,395 96,687 Jefferson-Pilot Corp. 645 33,514 Lincoln National Corp. 817 38,137 Loews Corp. 863 60,669 Marsh & McLennan Companies, Inc. 2,533 83,336 MBIA, Inc. 646 40,879 MetLife, Inc. 3,640 147,456 Progressive Corp. 940 79,750 Prudential Financial, Inc. 2,494 137,070 SAFECO Corp. 655 34,217 St. Paul Travelers Companies, Inc. 3,239 120,070 Torchmark Corp. 487 27,827 UnumProvident Corp. 1,414 25,367 XL Capital Ltd., Class A 678 52,647 --------------- 2,304,515 --------------- REAL ESTATE--0.6% Apartment Investment & Management Co., Class A, REIT 500 19,270 Archstone-Smith Trust, REIT 900 34,470 Equity Office Properties Trust, REIT 1,962 57,133 Equity Residential, REIT 1,381 49,965 Plum Creek Timber Co., Inc., REIT 881 $ 33,866 ProLogis Trust, REIT 900 38,997 Simon Property Group, Inc., REIT 1,100 71,137 --------------- 304,838 --------------- THRIFTS & MORTGAGE FINANCE--1.8% Countrywide Financial Corp. 2,734 101,185 Fannie Mae 4,612 328,421 Freddie Mac 3,336 245,863 Golden West Financial Corp. 1,486 91,270 MGIC Investment Corp. 413 28,460 Sovereign Bancorp, Inc. 1,700 38,335 Washington Mutual, Inc. 4,194 177,322 --------------- 1,010,856 --------------- HEALTH CARE--12.5% BIOTECHNOLOGY--1.3% Amgen, Inc. (a) 6,109 391,892 Applera Corp. - Applied Biosystems Group 1,004 20,993 Biogen Idec, Inc. (a) 1,616 107,642 Chiron Corp. (a) 940 31,330 Genzyme Corp. (a) 1,142 66,316 Gilead Sciences, Inc. (a) 2,100 73,479 MedImmune, Inc. (a) 1,206 32,695 --------------- 724,347 --------------- HEALTH CARE EQUIPMENT & SUPPLIES--2.2% Bausch & Lomb, Inc. 279 17,984 Baxter International, Inc. 2,918 100,788 Becton, Dickinson & Co. 1,199 68,103 Biomet, Inc. 1,217 52,806 Boston Scientific Corp. (a) 4,054 144,120 C.R. Bard, Inc. 526 33,653 Fisher Scientific International, Inc. (a) 600 37,428 Guidant Corp. 1,526 110,025 Hospira, Inc. (a) 745 24,957 Medtronic, Inc. 5,798 287,987 Millipore Corp. (a) 201 10,012 PerkinElmer, Inc. 537 12,077 St. Jude Medical, Inc. (a) 1,692 70,946 Stryker Corp. 1,930 93,122 Thermo Electron Corp. (a) 777 23,458 Waters Corp. (a) 539 25,220 Zimmer Holdings, Inc. (a) 1,169 93,660 --------------- 1,206,346 --------------- HEALTH CARE PROVIDERS & SERVICES--2.2% Aetna, Inc. 706 88,073 AmerisourceBergen Corp. 551 32,333 Cardinal Health, Inc. 2,085 121,243 Caremark Rx, Inc. (a) 2,193 86,470 CIGNA Corp. 665 54,244 Express Scripts, Inc. (a) 400 30,576 HCA, Inc. 1,987 79,400 Health Management Associates, Inc., Class A 1,126 25,583 Humana, Inc. (a) 717 21,288 IMS Health, Inc. 1,167 27,086 </Table> See Accompanying Notes to Financial Statements. 127 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- Laboratory Corp. of America Holdings (a) 600 $ 29,892 Manor Care, Inc. 458 16,227 McKesson Corp. 1,449 45,586 Medco Health Solutions, Inc. (a) 1,330 55,328 Quest Diagnostics, Inc. 471 45,004 Tenet Healthcare Corp. (a) 2,180 23,936 UnitedHealth Group, Inc. 3,082 271,308 WellPoint, Inc. (a) 1,381 158,815 --------------- 1,212,392 --------------- PHARMACEUTICALS--6.8% Abbott Laboratories 7,451 347,589 Allergan, Inc. 652 52,858 Bristol-Myers Squibb Co. 9,270 237,497 Eli Lilly & Co. 5,386 305,656 Forest Laboratories, Inc. (a) 1,824 81,825 Johnson & Johnson 14,217 901,642 King Pharmaceuticals, Inc. (a) 1,127 13,975 Merck & Co., Inc. 10,578 339,977 Mylan Laboratories, Inc. 1,300 22,984 Pfizer, Inc. 36,069 969,895 Schering-Plough Corp. 7,057 147,350 Watson Pharmaceuticals, Inc. (a) 562 18,439 Wyeth 6,439 274,237 --------------- 3,713,924 --------------- INDUSTRIAL--11.6% AEROSPACE & DEFENSE--2.0% Boeing Co. 4,028 208,530 General Dynamics Corp. 995 104,077 Goodrich Corp. 585 19,094 Honeywell International, Inc. 4,114 145,677 L-3 Communications Holdings, Inc. 500 36,620 Lockheed Martin Corp. 2,133 118,488 Northrop Grumman Corp. 1,780 96,761 Raytheon Co. 2,165 84,067 Rockwell Collins, Inc. 873 34,431 United Technologies Corp. 2,400 248,040 --------------- 1,095,785 --------------- AIR FREIGHT & LOGISTICS--1.1% FedEx Corp. 1,395 137,394 Ryder System, Inc. 264 12,611 United Parcel Service, Inc., Class B 5,393 460,886 --------------- 610,891 --------------- AIRLINES--0.1% Delta Air Lines, Inc. (a) 600 4,488 Southwest Airlines Co. 3,739 60,871 --------------- 65,359 --------------- BUILDING PRODUCTS--0.2% American Standard Cos., Inc. (a) 1,020 42,146 Masco Corp. 2,160 78,905 --------------- 121,051 --------------- COMMERCIAL SERVICES & SUPPLIES--1.0% Allied Waste Industries, Inc. (a) 1,470 13,642 Apollo Group, Inc., Class A (a) 868 70,056 Avery Dennison Corp. 481 $ 28,846 Cendant Corp. 5,151 120,430 Cintas Corp. 782 34,298 Equifax, Inc. 696 19,558 H&R Block, Inc. 832 40,768 Monster Worldwide, Inc. (a) 500 16,820 Pitney Bowes, Inc. 1,152 53,315 R.R. Donnelley & Sons Co. 1,081 38,148 Robert Half International, Inc. 800 23,544 Waste Management, Inc. 2,815 84,281 --------------- 543,706 --------------- CONSTRUCTION & ENGINEERING--0.0% Fluor Corp. 409 22,295 --------------- ELECTRICAL EQUIPMENT--0.4% American Power Conversion Corp. 893 19,110 Cooper Industries Ltd. 399 27,088 Emerson Electric Co. 1,984 139,078 Power-One, Inc. (a) 467 4,166 Rockwell Automation, Inc. 909 45,041 --------------- 234,483 --------------- INDUSTRIAL CONGLOMERATES--4.7% 3M Co. 3,734 306,449 General Electric Co. 50,639 1,848,324 Textron, Inc. 665 49,077 Tyco International Ltd. 9,629 344,140 --------------- 2,547,990 --------------- MACHINERY--1.5% Caterpillar, Inc. 1,592 155,236 Cummins, Inc. 180 15,082 Danaher Corp. 1,492 85,656 Deere & Co. 1,197 89,057 Dover Corp. 940 39,424 Eaton Corp. 766 55,428 Illinois Tool Works, Inc. 1,433 132,810 Ingersoll-Rand Co., Class A 778 62,473 ITT Industries, Inc. 481 40,620 Navistar International Corp. (a) 371 16,317 Paccar, Inc. 819 65,913 Pall Corp. 600 17,370 Parker Hannifin Corp. 556 42,111 --------------- 817,497 --------------- ROAD & RAIL--0.5% Burlington Northern Santa Fe Corp. 1,803 85,300 CSX Corp. 1,063 42,605 Norfolk Southern Corp. 1,862 67,386 Union Pacific Corp. 1,239 83,322 --------------- 278,613 --------------- TRADING COMPANIES & DISTRIBUTORS--0.1% W.W. Grainger, Inc. 425 28,314 --------------- </Table> See Accompanying Notes to Financial Statements. 128 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- INFORMATION TECHNOLOGY--15.8% COMMUNICATIONS EQUIPMENT--2.6% ADC Telecommunications, Inc. (a) 3,764 $ 10,088 Andrew Corp. (a) 787 10,727 Avaya, Inc. (a) 2,098 36,086 CIENA Corp. (a) 2,719 9,081 Cisco Systems, Inc. (a) 31,535 608,625 Comverse Technology, Inc. (a) 921 22,518 Corning, Inc. (a) 6,609 77,788 JDS Uniphase Corp. (a) 6,993 22,168 Lucent Technologies, Inc. (a) 20,798 78,200 Motorola, Inc. 11,608 199,658 QUALCOMM, Inc. 7,790 330,296 Scientific-Atlanta, Inc. 705 23,272 Tellabs, Inc. (a) 1,991 17,103 --------------- 1,445,610 --------------- COMPUTERS & PERIPHERALS--3.9% Apple Computer, Inc. (a) 1,936 124,678 Dell, Inc. (a) 11,879 500,581 EMC Corp. (a) 11,392 169,399 Gateway, Inc. (a) 1,545 9,285 Hewlett-Packard Co. 14,609 306,351 International Business Machines Corp. 8,010 789,626 Lexmark International, Inc., Class A (a) 595 50,575 NCR Corp. (a) 480 33,230 Network Appliance, Inc. (a) 1,684 55,943 QLogic Corp. (a) 455 16,712 Sun Microsystems, Inc. (a) 15,975 85,946 --------------- 2,142,326 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.3% Agilent Technologies, Inc. (a) 2,273 54,779 Jabil Circuit, Inc. (a) 915 23,406 Molex, Inc. 915 27,450 Sanmina-SCI Corp. (a) 2,403 20,354 Solectron Corp. (a) 4,686 24,976 Symbol Technologies, Inc. 1,094 18,926 Tektronix, Inc. 387 11,691 --------------- 181,582 --------------- INTERNET SOFTWARE & SERVICES--0.5% Yahoo! Inc. (a) 6,588 248,236 --------------- IT SERVICES--1.2% Affiliated Computer Services, Inc., Class A (a) 600 36,114 Automatic Data Processing, Inc. 2,800 124,180 Computer Sciences Corp. (a) 941 53,044 Convergys Corp. (a) 680 10,193 Electronic Data Systems Corp. 2,591 59,852 First Data Corp. 3,979 169,267 Fiserv, Inc. (a) 964 38,743 Paychex, Inc. 1,859 63,355 Sabre Holdings Corp., Class A 708 15,689 SunGard Data Systems, Inc. (a) 1,423 40,314 Unisys Corp. (a) 1,537 15,647 --------------- 626,398 --------------- OFFICE ELECTRONICS--0.1% Xerox Corp. (a) 4,409 $ 74,997 --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.0% Advanced Micro Devices, Inc. (a) 1,837 40,451 Altera Corp. (a) 1,817 37,612 Analog Devices, Inc. 1,808 66,751 Applied Materials, Inc. (a) 8,130 139,023 Applied Micro Circuits Corp. (a) 1,304 5,490 Broadcom Corp., Class A (a) 1,541 49,743 Freescale Semiconductor, Inc., Class B (a) 1,881 34,535 Intel Corp. 30,309 708,928 KLA-Tencor Corp. (a) 913 42,528 Linear Technology Corp. 1,523 59,031 LSI Logic Corp. (a) 1,791 9,815 Maxim Integrated Products, Inc. 1,587 67,273 Micron Technology, Inc. (a) 2,915 36,000 National Semiconductor Corp. 1,690 30,335 Novellus Systems, Inc. (a) 742 20,694 NVIDIA Corp. (a) 780 18,377 PMC-Sierra, Inc. (a) 798 8,978 Teradyne, Inc. (a) 876 14,953 Texas Instruments, Inc. 8,363 205,897 Xilinx, Inc. 1,626 48,211 --------------- 1,644,625 --------------- SOFTWARE--4.2% Adobe Systems, Inc. 1,193 74,849 Autodesk, Inc. 1,000 37,950 BMC Software, Inc. (a) 1,062 19,753 Citrix Systems, Inc. (a) 793 19,452 Computer Associates International, Inc. 2,839 88,179 Compuware Corp. (a) 1,836 11,879 Electronic Arts, Inc. (a) 1,428 88,079 Intuit, Inc. (a) 913 40,181 Mercury Interactive Corp. (a) 407 18,539 Microsoft Corp. 52,039 1,389,962 Novell, Inc. (a) 1,736 11,718 Oracle Corp. (a) 24,542 336,716 Parametric Technology Corp. (a) 1,191 7,015 Siebel Systems, Inc. (a) 2,348 24,654 Symantec Corp. (a) 3,032 78,104 VERITAS Software Corp. (a) 2,094 59,784 --------------- 2,306,814 --------------- MATERIALS--3.1% CHEMICALS--1.6% Air Products & Chemicals, Inc. 1,092 63,303 Dow Chemical Co. 4,510 223,290 E.I. du Pont de Nemours & Co. 4,724 231,712 Eastman Chemical Co. 367 21,187 Ecolab, Inc. 1,220 42,859 Engelhard Corp. 584 17,911 Great Lakes Chemical Corp. 255 7,265 Hercules, Inc. (a) 483 7,173 </Table> See Accompanying Notes to Financial Statements. 129 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- International Flavors & Fragrances, Inc. 416 $ 17,821 Monsanto Co. 1,255 69,715 PPG Industries, Inc. 821 55,959 Praxair, Inc. 1,540 67,991 Rohm and Haas Co. 1,081 47,813 Sigma-Aldrich Corp. 301 18,199 --------------- 892,198 --------------- CONSTRUCTION MATERIALS--0.1% Vulcan Materials Co. 522 28,507 --------------- CONTAINERS & PACKAGING--0.2% Ball Corp. 580 25,508 Bemis Co., Inc. 496 14,429 Pactiv Corp. (a) 772 19,524 Sealed Air Corp. (a) 390 20,775 Temple-Inland, Inc. 313 21,409 --------------- 101,645 --------------- METALS & MINING--0.7% Alcoa, Inc. 4,182 131,398 Allegheny Technologies, Inc. 382 8,278 Freeport-McMoRan Copper & Gold, Inc., Class B 880 33,642 Newmont Mining Corp. 2,189 97,214 Nucor Corp. 788 41,244 Phelps Dodge Corp. 414 40,953 United States Steel Corp. 509 26,086 --------------- 378,815 --------------- PAPER & FOREST PRODUCTS--0.5% Georgia-Pacific Corp. 1,245 46,663 International Paper Co. 2,320 97,440 Louisiana-Pacific Corp. 570 15,242 MeadWestvaco Corp. 1,011 34,263 Weyerhaeuser Co. 1,157 77,773 --------------- 271,381 --------------- TELECOMMUNICATION SERVICES--3.2% DIVERSIFIED TELECOMMUNICATION SERVICES--2.9% ALLTEL Corp. 1,443 84,791 AT&T Corp. 3,820 72,809 BellSouth Corp. 8,782 244,052 CenturyTel, Inc. 689 24,439 Citizens Communications Co. 1,579 21,774 Qwest Communications International, Inc. (a) 8,256 36,657 SBC Communications, Inc. 15,851 408,480 Sprint Corp. 7,118 176,882 Verizon Communications, Inc. 13,205 534,935 --------------- 1,604,819 --------------- WIRELESS TELECOMMUNICATION SERVICES--0.3% Nextel Communications, Inc., Class A (a) 5,309 159,270 --------------- UTILITIES--2.9% ELECTRIC UTILITIES--2.0% Allegheny Energy Inc. (a) 567 $ 11,176 Ameren Corp. 964 48,335 American Electric Power Co., Inc. 1,932 66,345 CenterPoint Energy, Inc. 1,393 15,741 Cinergy Corp. 878 36,551 Consolidated Edison, Inc. 1,160 50,750 DTE Energy Co. 804 34,676 Edison International 1,606 51,440 Entergy Corp. 1,028 69,483 Exelon Corp. 3,198 140,936 FirstEnergy Corp. 1,632 64,480 FPL Group, Inc. 875 65,406 PG&E Corp. (a) 2,022 67,292 Pinnacle West Capital Corp. 412 18,297 PPL Corp. 957 50,989 Progress Energy, Inc. 1,229 55,600 Southern Co. 3,559 119,298 TECO Energy, Inc. 800 12,272 TXU Corp. 1,128 72,824 Xcel Energy, Inc. 1,857 33,797 --------------- 1,085,688 --------------- GAS UTILITIES--0.1% KeySpan Corp. 769 30,337 Nicor, Inc. 245 9,050 NiSource, Inc. 1,209 27,541 Peoples Energy Corp. 152 6,681 --------------- 73,609 --------------- MULTI-UTILITIES & UNREGULATED POWER--0.8% AES Corp. (a) 3,326 45,466 Calpine Corp. (a) 1,926 7,589 CMS Energy Corp. (a) 800 8,360 Constellation Energy Group 887 38,771 Dominion Resources, Inc. 1,545 104,658 Duke Energy Corp. 4,586 116,163 Dynegy, Inc., Class A (a) 1,600 7,392 Public Service Enterprise Group, Inc. 1,100 56,947 Sempra Energy 1,080 39,614 --------------- 424,960 --------------- TOTAL COMMON STOCKS (cost of $47,794,895) 54,089,437 --------------- <Caption> UNITS --------------- WARRANT--0.0% INFORMATION TECHNOLOGY--0.0% COMMUNICATIONS EQUIPMENT--0.0% Lucent Technologies, Inc. (a) 197 311 --------------- TOTAL WARRANT (cost of $0) 311 --------------- </Table> See Accompanying Notes to Financial Statements. 130 <Page> <Table> <Caption> PAR VALUE --------------- --------------- SHORT-TERM OBLIGATIONS--1.7% GOVERNMENT & AGENCY DISCOUNT NOTE--0.2% United States Treasury Bill 2.185% 08/10/05 (c) $ 80,000 $ 79,670 REPURCHASE AGREEMENT--1.5% Repurchase agreement with State Street Bank & Trust Co., dated 12/31/04, due 01/03/05 at 1.500%, collateralized by a U.S. Treasury Bond maturing 11/15/27, market value of $854,877 (repurchase proceeds $835,104) 835,000 835,000 --------------- TOTAL SHORT-TERM OBLIGATIONS (cost of $914,670) 914,670 --------------- TOTAL INVESTMENTS--100.5% (cost of $48,709,565) (d) 55,004,418 --------------- OTHER ASSETS & LIABILITIES, NET--(0.5)% (267,642) --------------- NET ASSETS--100.0% $ 54,736,776 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Investments in affiliates during the year ended December 31, 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 12/31/04: -- 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: 1,000 Shares sold: (1,101) Shares acquired through acquisition: 2,809 Shares acquired through two for one stock split: 9,736 Shares as of 12/31/04: 19,372 Net realized gain*: $ 1,588 Dividend income earned*: $ 31,196 Value at end of period: $ 910,290 </Table> * Represents activity for the period April 1, 2004 through December 31, 2004. (c) Security pledged as collateral for open futures contracts. (d) Cost for federal income tax purposes is $50,709,403. At December 31, 2004, the Fund held the following open long futures contracts: <Table> <Caption> AGGREGATE SETTLEMENT UNREALIZED TYPE CONTRACTS VALUE FACE VALUE DATE APPRECIATION ---- --------- ----- ---------------- ---------- ------------ S&P Mini 500 16 $ 970,960 $ 961,980 Mar-05 $ 8,980 </Table> At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> SECTOR (UNAUDITED) % OF NET ASSETS - ------------------ --------------- Financials 20.4% Information Technology 15.8 Health Care 12.5 Consumer Discretionary 11.8 Industrial 11.6 Consumer Staples 10.4 Energy 7.1 Telecommunication Services 3.2 Materials 3.1 Utilities 2.9 Short-Term Obligations 1.7 Other Assets & Liabilities, Net (0.5) ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- ADR American Depositary Receipt REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 131 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty S&P 500 Index Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 48,114,132 Affiliated investments, at cost 595,433 --------------- Investments, at value $ 54,094,128 Affiliated investments, at value 910,290 Cash 229 Receivable for: Interest 35 Dividends 70,701 Expense reimbursement due from Distributor 22,521 Deferred Trustees' compensation plan 3,281 --------------- TOTAL ASSETS 55,101,185 --------------- LIABILITIES: Payable for: Fund shares repurchased 287,896 Futures variation margin 800 Investment advisory fee 18,499 Transfer agent fee 625 Pricing and bookkeeping fees 3,011 Trustees' fees 78 Audit fee 21,260 Custody fee 2,139 Distribution fee--Class B 12,404 Deferred Trustees' fees 3,281 Other liabilities 14,416 --------------- TOTAL LIABILITIES 364,409 --------------- NET ASSETS $ 54,736,776 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 52,097,832 Overdistributed net investment income (1,760) Accumulated net realized loss (3,663,129) Net unrealized appreciation on: Investments 6,294,853 Futures contracts 8,980 --------------- NET ASSETS $ 54,736,776 =============== CLASS A: Net assets $ 90,880 Shares outstanding 8,695 =============== Net asset value per share $ 10.45 =============== CLASS B: Net assets $ 54,645,896 Shares outstanding 5,241,565 =============== Net asset value per share $ 10.43 =============== </Table> See Accompanying Notes to Financial Statements. 132 <Page> STATEMENT OF OPERATIONS Liberty S&P 500 Index Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Dividends $ 1,000,525 Dividends from affiliates 32,966 Interest 10,883 --------------- Total Investment Income 1,044,374 --------------- EXPENSES: Investment advisory fee 205,138 Distribution fee--Class B 128,000 Transfer agent fee 7,500 Pricing and bookkeeping fees 42,965 Trustees' fee 7,276 Custody fee 19,173 Audit fee 23,369 Non-recurring costs (See Note 6) 2,554 Other expenses 20,618 --------------- Total Expenses 456,593 Fees waived by Distributor--Class B (69,352) Non-recurring costs assumed by Investment Advisor (See Note 6) (2,554) Custody earnings credit (67) --------------- Net Expenses 384,620 --------------- Net Investment Income 659,754 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS: Net realized gain (loss) on: Unaffiliated investments (408,394) Affiliated investments 1,588 Futures contracts 109,227 --------------- Net realized loss (297,579) --------------- Net change in unrealized appreciation/depreciation on: Investments 4,732,247 Futures contracts (31,186) --------------- Net change in unrealized appreciation/depreciation 4,701,061 --------------- Net Gain 4,403,482 --------------- Net Increase in Net Assets from Operations $ 5,063,236 =============== </Table> See Accompanying Notes to Financial Statements. 133 <Page> STATEMENT OF CHANGES IN NET ASSETS Liberty S&P 500 Index Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, --------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 659,754 $ 377,448 Net realized loss on investments and futures contracts (297,579) (371,434) Net change in unrealized appreciation/depreciation on investments and futures contracts 4,701,061 9,268,500 --------------- --------------- Net Increase from Operations 5,063,236 9,274,514 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (1,243) (680) Class B (677,613) (377,651) --------------- --------------- Total Distributions Declared to Shareholders (678,856) (378,331) --------------- --------------- SHARE TRANSACTIONS: Class A: Distributions reinvested 1,243 680 --------------- --------------- Class B: Subscriptions 6,819,068 13,560,308 Distributions reinvested 677,613 377,651 Redemptions (5,669,755) (3,136,822) --------------- --------------- Net Increase 1,826,926 10,801,137 --------------- --------------- Net Increase from Share Transactions 1,828,169 10,801,817 --------------- --------------- Total Increase in Net Assets 6,212,549 19,698,000 NET ASSETS: Beginning of period 48,524,227 28,826,227 --------------- --------------- End of period (including overdistributed net investment income of $(1,760) and $(934), respectively) $ 54,736,776 $ 48,524,227 =============== =============== CHANGES IN SHARES: Class A: Issued for distributions reinvested 119 71 --------------- --------------- Class B: Subscriptions 700,537 1,585,888 Issued for distributions reinvested 64,905 39,462 Redemptions (573,226) (374,208) --------------- --------------- Net Increase 192,216 1,251,142 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 134 <Page> NOTES TO FINANCIAL STATEMENTS Liberty S&P 500 Index Fund, Variable Series / December 31, 2004 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. 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 futures contracts. The Fund will invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in market conditions 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 or (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. 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 receivable or payable 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. 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. If the Fund no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains. 135 <Page> 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 timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for REIT adjustments and distributions in excess were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED NET ACCUMULATED NET PAID-IN INVESTMENT INCOME REALIZED LOSS CAPITAL ------------------- --------------- ---------- $ 19,783 $ 7,027 $ (26,810) </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 ------------ ------------ Distributions paid from: Ordinary income $ 678,856 $ 378,331 Long-term capital gains -- -- </Table> As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- -------------- -------------- $ -- $ -- $ 4,295,015 </Table> * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales and return of capital distributions received Unrealized appreciation and depreciation at December 31, 2004, based on cost of investments for federal income tax purposes, was: <Table> Unrealized appreciation $ 9,022,591 Unrealized depreciation (4,727,576) ------------- Net unrealized appreciation $ 4,295,015 ============= </Table> The following capital loss carryforwards 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 9,406 2012 61,449 ------------ $ 1,543,825 ============ </Table> Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2004, post-October capital losses of $109,288 attributed to security transactions were deferred to January 1, 2005. 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 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 0.20% of the Fund's average daily net assets. 136 <Page> Prior to November 1, 2004, Columbia received a monthly investment advisory fee at the annual rate of 0.40% of the Fund's averagae 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, from 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 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 year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.084%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the year ended December 31, 2004, the Fund's 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. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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 year ended December 31, 2004, the Fund paid $1,352 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $5,270,512 and $2,997,575, respectively. 137 <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--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $2,554 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 138 <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> PERIOD YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------- 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) 0.13(c) 0.09 0.08 0.07 0.07 Net realized and unrealized gain (loss) on investments and futures contracts 0.84 2.01 (2.33) (1.43) (0.70) ---------- ---------- ---------- ---------- ---------- Total from Investment Operations 0.97 2.10 (2.25) (1.36) (0.63) ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.13) (0.08) (0.06) (0.06) (0.06) Return of capital -- -- (0.01) -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions Declared to Shareholders (0.13) (0.08) (0.07) (0.06) (0.06) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.43 $ 9.59 $ 7.57 $ 9.89 $ 11.31 ========== ========== ========== ========== ========== Total return (d)(e)(f) 10.12% 27.68% (22.75)% (12.07)% (5.29)%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 0.75% 0.75% 0.75% 0.75% 0.75%(i) Net investment income (h) 1.29% 1.05% 0.88% 0.72% 0.89%(i) Waiver/reimbursement 0.14% 0.22% 0.14% 0.53% 0.61%(i) Portfolio turnover rate 6% 3% 17% 7% 2%(g) Net assets, end of period (000's) $ 54,646 $ 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) Net investment income per share reflects a special dividend which amounted to $0.03 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. 139 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Liberty S&P 500 Index Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Liberty S&P 500 Index Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 140 <Page> UNAUDITED INFORMATION Liberty S&P 500 Index Fund, Variable Series FEDERAL INCOME TAX INFORMATION 96.49% of the ordinary income distributed by the Fund for the year ended December 31, 2004, qualifies for the corporate dividends received deduction. 141 <Page> PORTFOLIO MANAGERS' DISCUSSION Liberty Select Value Fund, Variable Series / December 31, 2004 Liberty Select Value Fund, Variable Series seeks long-term growth. Diane L. Sobin, the lead manager, and David I. Hoffman co-manage the fund. Ms. Sobin and Mr. Hoffman have been affiliated with Columbia Management Advisors, Inc. and its predecessors since August 2001. Mid-cap value stocks were exceptional performers in 2004, the beneficiaries of steady economic growth and continued low interest rates. The portfolio participated in these gains, aided by its emphasis on the energy sector, which was the period's strongest performer. A late-year rally in stocks tied to consumer spending in the leisure and retail areas, also made a positive contribution to returns. However, the portfolio underperformed its benchmark, the Russell Midcap Value Index. Disappointing results from cyclical technology stocks, the impact of a larger-than-normal cash position and our decision to underweight interest-rate sensitive sectors, such as financials, utilities and real estate investment trusts (REITs), restrained performance. ENERGY, BASIC MATERIALS AND CONSUMER STOCKS AIDED PERFORMANCE Energy and basic materials holdings were amongst the largest contributors to the fund's performance during the year. These stocks were the beneficiaries of a significant rise in commodity prices, which were buoyed by worldwide economic growth. XTO Energy, Amerada Hess, and Transocean (1.8%, 1.4%, and 1.0% of net assets, respectively) were top contributors. On the basic materials side, plastic bottle manufacturer Eastman Chemical (1.2% of net assets) rode the petrochemical cycle to higher levels. Improving payroll numbers near the end of the year helped boost consumer stocks, including Harrah's Entertainment (1.0% of net assets) in the leisure area, and Federated Department Stores (1.8% of net assets), which benefited from a rising sales base. NEW POSITIONS IN FINANCIALS, REITs AND UTILITIES We positioned the portfolio away from interest-rate sensitive sectors early in the period because we expected rates to rise, an environment that is generally negative for sectors such as financials, utilities and REITs. Short-term interest rates began to rise midway through the year. However, intermediate and long-term interest rates held steady or declined during the year and these sectors were among the best performers. During the second half of the year, we increased the fund's exposure to financial stocks. We added to holdings in the commercial lending area, which is less sensitive to rising interest rates than other areas of the sector. The financial sector was the largest contributor to performance for the year. We also added selectively to hotel and office REITs with reasonable valuations and the potential to benefit from continued economic growth. We believe that the hotel sector has strong business prospects due to increased travel. We added Host Marriott (1.1% of net assets) based on its city center locations, which limit new development and enhance its ability to increase room rates at an above average rate. We believe prospects for office property REITs are also beginning to improve. Finally, we added Constellation Energy (0.9% of net assets) in the utility sector, a company that we believe has the potential to benefit from rising power prices. TRIMMING WINNERS AND LOSERS The portfolio phased in new management during the second half of the period. We continued to use a disciplined approach to finding attractive value stocks among middle capitalization companies. We look for companies that are "cheap" on the basis of price/earnings, price/sales and price/book value--common measures of valuing stocks versus their peers. We also use fundamental research to identify companies that we believe have the potential to increase their operating margins from currently depressed levels over a one- to three-year time horizon. During the period, our disciplined approach led us to reduce exposure to the auto parts industry because we believe that auto sales and production have reached peak levels. SEEKING COMPANIES THAT ARE FOCUSED ON PRUDENT CAPITAL DEPLOYMENT Despite the strong performance of mid-cap value stocks during the past year, we continue to find attractively-valued stocks with the potential for continued improvement in operating margins. In particular, we believe that companies that generate excess cash, increase their dividends, repurchase their own shares and make prudent investments in their own businesses are poised to reward shareholders. Our research continues to point us toward economically-sensitive companies. However, our focus has shifted from early-cycle industries, such as semiconductors, to late-cycle industries, such as commercial construction and infrastructure builders. We are also seeking companies that have the potential to benefit from higher spending on equipment and technology. CAREFULLY POSITIONED FOR OPPORTUNITY We believe the US economy will continue to grow into 2005, albeit at a slower pace. We also foresee continued increases in short-term interest rates by the Federal Reserve Board, which could lead to higher long-term bond rates and increased pressure on the dollar. In this environment, we are looking for attractively-valued stocks of companies that have the opportunity to improve operating performance while minimizing the fund's exposure to rising interest rates and currency factors. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. An investment in the Liberty Select Value Fund, Variable Series offers the potential for long-term growth, but also involves certain risks, including stock market fluctuations due to economic and business developments. The value and returns earned on an investment in the fund may also be affected by stock market fluctuations. Mid-cap stocks can present special risks including greater price volatility than stocks of larger, more established companies. 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 December 31, 2004, and are subject to change. 142 <Page> PERFORMANCE INFORMATION Liberty Select Value Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR LIFE - ---------------------------------------------------------------- Class B (5/30/00) 15.32 9.29 Russell Midcap Value Index(1) 23.71 14.44 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 5/30/00 - 12/31/04 Class B: $15,039 <Table> <Caption> CLASS B SHARES RUSSELL MIDCAP VALUE INDEX 5/30/2000 $ 10,000 $ 10,000 5/31/2000 $ 10,200 $ 10,183 6/30/2000 $ 10,066 $ 9,803 7/31/2000 $ 10,333 $ 10,033 8/31/2000 $ 11,184 $ 10,648 9/30/2000 $ 10,983 $ 10,750 10/31/2000 $ 11,034 $ 10,954 11/30/2000 $ 10,309 $ 10,812 12/31/2000 $ 11,139 $ 11,765 1/31/2001 $ 11,551 $ 11,723 2/28/2001 $ 11,206 $ 11,674 3/31/2001 $ 10,961 $ 11,350 4/30/2001 $ 11,769 $ 11,975 5/31/2001 $ 12,098 $ 12,315 6/30/2001 $ 11,862 $ 12,151 7/31/2001 $ 11,962 $ 12,102 8/31/2001 $ 11,660 $ 11,881 9/30/2001 $ 10,221 $ 10,747 10/31/2001 $ 10,423 $ 10,804 11/30/2001 $ 11,062 $ 11,561 12/31/2001 $ 11,525 $ 12,040 1/31/2002 $ 11,618 $ 12,162 2/28/2002 $ 11,812 $ 12,359 3/31/2002 $ 12,361 $ 12,991 4/30/2002 $ 12,395 $ 12,981 5/31/2002 $ 12,437 $ 12,962 6/30/2002 $ 11,744 $ 12,384 7/31/2002 $ 10,908 $ 11,171 8/31/2002 $ 10,984 $ 11,301 9/30/2002 $ 9,819 $ 10,160 10/31/2002 $ 10,021 $ 10,483 11/30/2002 $ 10,603 $ 11,143 12/31/2002 $ 10,232 $ 10,878 1/31/2003 $ 9,970 $ 10,577 2/28/2003 $ 9,742 $ 10,401 3/31/2003 $ 9,717 $ 10,436 4/30/2003 $ 10,334 $ 11,230 5/31/2003 $ 10,925 $ 12,218 6/30/2003 $ 11,001 $ 12,303 7/31/2003 $ 11,322 $ 12,686 8/31/2003 $ 11,686 $ 13,136 9/30/2003 $ 11,466 $ 13,034 10/31/2003 $ 12,236 $ 13,991 11/30/2003 $ 12,506 $ 14,396 12/31/2003 $ 13,041 $ 15,018 1/31/2004 $ 13,269 $ 15,415 2/29/2004 $ 13,693 $ 15,795 3/31/2004 $ 13,701 $ 15,821 4/30/2004 $ 13,430 $ 15,151 5/31/2004 $ 13,642 $ 15,539 6/30/2004 $ 14,048 $ 16,094 7/31/2004 $ 13,430 $ 15,658 8/31/2004 $ 13,346 $ 15,910 9/30/2004 $ 13,718 $ 16,373 10/31/2004 $ 13,803 $ 16,751 11/30/2004 $ 14,598 $ 17,884 12/31/2004 $ 15,039 $ 18,577 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - --------------------------------------------------------------- Class B 15.41 17.64 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. Total return performance includes changes in share price and reinvestment of all distributions. 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. 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. (1) Index performance for the life of the fund is from May 30, 2000. 143 <Page> UNDERSTANDING YOUR EXPENSES Liberty Select Value Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ----------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ----------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,070.48 1,019.61 5.72 5.58 1.10 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. Had the distributor not waived/reimbursed a portion of expenses, account values at the end of the period would have been reduced. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 144 <Page> INVESTMENT PORTFOLIO Liberty Select Value Fund, Variable Series / December 31, 2004 <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--98.9% CONSUMER DISCRETIONARY--14.4% AUTO COMPONENTS--2.5% BorgWarner, Inc. 5,900 $ 319,603 Johnson Controls, Inc. 6,600 418,704 Lear Corp. 5,500 335,555 --------------- 1,073,862 --------------- HOTELS, RESTAURANTS & LEISURE--2.7% Brinker International, Inc. (a) 14,000 490,980 Darden Restaurants, Inc. 8,700 241,338 Harrah's Entertainment, Inc. 6,300 421,407 --------------- 1,153,725 --------------- HOUSEHOLD DURABLES--0.7% Newell Rubbermaid, Inc. 12,600 304,794 --------------- LEISURE EQUIPMENT & PRODUCTS--0.7% Mattel, Inc. 14,600 284,554 --------------- MEDIA--1.4% Knight-Ridder, Inc. 4,100 274,454 New York Times Co., Class A 8,000 326,400 --------------- 600,854 --------------- MULTILINE RETAIL--2.8% Federated Department Stores, Inc. 13,500 780,165 J.C. Penney Co., Inc. 10,200 422,280 --------------- 1,202,445 --------------- SPECIALTY RETAIL--3.1% Borders Group, Inc. 16,100 408,940 OfficeMax, Inc. 8,500 266,730 TJX Companies, Inc. 26,000 653,380 --------------- 1,329,050 --------------- TEXTILES, APPAREL & LUXURY GOODS--0.5% Wolverine World Wide, Inc. 7,100 223,082 --------------- CONSUMER STAPLES--4.2% BEVERAGES -- 0.7% Pepsi Bottling Group, Inc. 12,000 324,480 --------------- FOOD PRODUCTS--2.7% Dean Foods Co. (a) 28,300 932,485 Hormel Foods Corp. 6,900 216,315 --------------- 1,148,800 --------------- TOBACCO--0.8% UST, Inc. 7,100 341,581 --------------- ENERGY--6.8% ENERGY EQUIPMENT & SERVICES -- 3.0% BJ Services Co. 5,400 251,316 Noble Corp. (a) 8,200 407,868 Transocean, Inc. (a) 9,650 409,063 Weatherford International Ltd. (a) 4,400 225,720 --------------- 1,293,967 --------------- OIL & GAS--3.8% Amerada Hess Corp. 7,100 584,898 Williams Companies, Inc. 15,400 250,866 XTO Energy, Inc. 21,791 770,966 --------------- 1,606,730 --------------- FINANCIALS--24.2% CAPITAL MARKETS--2.7% Bear Stearns Companies, Inc. 4,200 $ 429,702 Janus Capital Group, Inc. 25,800 433,698 Lehman Brothers Holdings, Inc. 3,500 306,180 --------------- 1,169,580 --------------- COMMERCIAL BANKS--5.3% Banknorth Group, Inc. 12,800 468,480 City National Corp. 6,300 445,095 Cullen/Frost Bankers, Inc. 3,800 184,680 North Fork Bancorporation, Inc. 28,639 826,235 UnionBanCal Corp. 4,900 315,952 --------------- 2,240,442 --------------- DIVERSIFIED FINANCIAL SERVICES--1.1% CIT Group, Inc. 9,700 444,454 --------------- INSURANCE--5.6% Ambac Financial Group, Inc. 5,150 422,970 Cincinnati Financial Corp. 5,565 246,307 Endurance Specialty Holdings Ltd. 6,000 205,200 Hartford Financial Services Group, Inc. 4,800 332,688 Loews Corp. 4,300 302,290 Nationwide Financial Services, Inc., Class A 7,400 282,902 Old Republic International Corp. 12,800 323,840 St. Paul Travelers Companies, Inc. 7,900 292,853 --------------- 2,409,050 --------------- REAL ESTATE--1.8% Equity Office Properties Trust, REIT 10,600 308,672 Host Marriott Corp., REIT 27,200 470,560 --------------- 779,232 --------------- THRIFTS & MORTGAGE FINANCE--7.7% Golden West Financial Corp. 19,200 1,179,264 PMI Group, Inc. 12,300 513,525 Radian Group, Inc. 9,900 527,076 Sovereign Bancorp, Inc. 26,500 597,575 Webster Financial Corp. 9,100 460,824 --------------- 3,278,264 --------------- HEALTH CARE--4.2% HEALTH CARE EQUIPMENT & SUPPLIES--1.4% Millipore Corp. (a) 6,900 343,689 Varian, Inc. (a) 6,700 274,767 --------------- 618,456 --------------- HEALTH CARE PROVIDERS & SERVICES--2.8% HCA, Inc. 6,800 271,728 Medco Health Solutions, Inc. (a) 5,400 224,640 WellPoint, Inc. (a) 5,900 678,500 --------------- 1,174,868 --------------- </Table> See Accompanying Notes to Financial Statements. 145 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- INDUSTRIAL--15.8% AEROSPACE & DEFENSE--2.0% Alliant Techsystems, Inc. (a) 4,300 $ 281,134 Goodrich Corp. 13,100 427,584 Northrop Grumman Corp. 2,400 130,464 --------------- 839,182 --------------- COMMERCIAL SERVICES & SUPPLIES--5.0% Adesa, Inc. 6,700 142,174 Brink's Co. 20,000 790,400 Cendant Corp. 24,400 570,472 Manpower, Inc. 6,700 323,610 Waste Management, Inc. 10,500 314,370 --------------- 2,141,026 --------------- CONSTRUCTION & ENGINEERING--0.4% Fluor Corp. 2,900 158,079 --------------- ELECTRICAL EQUIPMENT--1.1% AMETEK, Inc. 8,000 285,360 Hubbell, Inc., Class B 3,900 203,970 --------------- 489,330 --------------- INDUSTRIAL CONGLOMERATES--1.1% Carlisle Companies, Inc. 7,100 460,932 --------------- MACHINERY--4.4% AGCO Corp. (a) 9,700 212,333 Dover Corp. 5,800 243,252 Ingersoll-Rand Co., Class A 6,200 497,860 Navistar International Corp. (a) 14,300 628,914 Parker Hannifin Corp. 4,000 302,960 --------------- 1,885,319 --------------- ROAD & RAIL--1.8% Burlington Northern Santa Fe Corp. 9,500 449,445 CNF, Inc. 6,500 325,650 --------------- 775,095 --------------- INFORMATION TECHNOLOGY--6.6% COMMUNICATIONS EQUIPMENT--1.0% Andrew Corp. (a) 31,900 434,797 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--3.8% Amphenol Corp., Class A (a) 20,000 734,800 Arrow Electronics, Inc. (a) 10,400 252,720 AVX Corp. 13,600 171,360 Littelfuse, Inc. (a) 10,000 341,600 Vishay Intertechnology, Inc. (a) 9,450 141,939 --------------- 1,642,419 --------------- IT SERVICES--1.8% Affiliated Computer Services, Inc., Class A (a) 6,900 415,311 DST Systems, Inc. (a) 6,500 338,780 --------------- 754,091 --------------- MATERIALS--13.8% CHEMICALS--8.5% Air Products & Chemicals, Inc. 6,800 394,196 Eastman Chemical Co. 9,100 525,343 Engelhard Corp. 11,200 343,504 International Flavors & Fragrances, Inc. 10,400 445,536 Lubrizol Corp. 14,400 530,784 Nalco Holding Co. (a) 14,600 $ 284,992 OM Group, Inc. (a) 4,700 152,374 PPG Industries, Inc. 6,700 456,672 Praxair, Inc. 10,600 467,990 --------------- 3,601,391 --------------- CONTAINERS & PACKAGING--2.9% Bemis Co., Inc. 7,200 209,448 Crown Holdings, Inc. (a) 25,000 343,500 Packaging Corp. of America 17,300 407,415 Pactiv Corp. (a) 11,000 278,190 --------------- 1,238,553 --------------- PAPER & FOREST PRODUCTS--2.4% Georgia-Pacific Corp. 15,000 562,200 MeadWestvaco Corp. 13,634 462,056 --------------- 1,024,256 --------------- TELECOMMUNICATION SERVICES--1.5% WIRELESS TELECOMMUNICATION SERVICES--1.5% Telephone and Data Systems, Inc. 8,500 654,075 --------------- UTILITIES--7.4% ELECTRIC UTILITIES--5.8% ALLETE, Inc. 2,233 82,063 Edison International 10,500 336,315 Entergy Corp. 5,400 364,986 Exelon Corp. 15,700 691,899 PPL Corp. 5,700 303,696 Progress Energy, Inc. 10,800 488,592 Reliant Energy, Inc. (a) 14,900 203,385 --------------- 2,470,936 --------------- MULTI-UTILITIES & UNREGULATED POWER--1.6% Constellation Energy Group 9,100 397,761 Energy East Corp. 11,300 301,484 --------------- 699,245 --------------- TOTAL COMMON STOCKS (cost of $31,345,967) 42,270,996 --------------- <Caption> PAR --------------- SHORT-TERM OBLIGATION - 1.3% Repurchase agreement with State Street Bank & Trust Co., dated 12/31/04, due 01/03/05 at 1.500%, collateralized by a U.S. Treasury Bond maturing 11/15/27, market value of $585,532 (repurchase proceeds $570,071) $ 570,000 570,000 --------------- TOTAL SHORT-TERM OBLIGATION (cost of $570,000) 570,000 --------------- TOTAL INVESTMENTS -- 100.2% (cost of $31,915,967) (b) 42,840,996 --------------- OTHER ASSETS & LIABILITIES, NET -- (0.2)% (104,184) --------------- NET ASSETS -- 100.0% $ 42,736,812 =============== </Table> See Accompanying Notes to Financial Statements. 146 <Page> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $31,964,501. At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> SECTOR (UNAUDITED) % OF NET ASSETS - ------------------ --------------- Financials 24.2% Industrial 15.8 Consumer Discretionary 14.4 Materials 13.8 Utilities 7.4 Energy 6.8 Information Technology 6.6 Consumer Staples 4.2 Health Care 4.2 Telecommunication Services 1.5 Short-Term Obligation 1.3 Other Assets & Liabilities, Net (0.2) ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 147 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty Select Value Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 31,915,967 --------------- Investments, at value $ 42,840,996 Cash 852 Receivable for: Fund shares sold 147 Interest 24 Dividends 38,946 Deferred Trustees' compensation plan 3,072 --------------- TOTAL ASSETS 42,884,037 --------------- LIABILITIES: Expense reimbursement due to the Distributor 12,875 Payable for: Fund shares repurchased 76,785 Investment advisory fee 24,457 Transfer agent fee 625 Pricing and bookkeeping fees 1,044 Trustees' fees 388 Audit fee 13,910 Custody fee 199 Distribution fee--Class B 8,745 Deferred Trustees' fees 3,072 Other liabilities 5,125 --------------- TOTAL LIABILITIES 147,225 --------------- NET ASSETS $ 42,736,812 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 31,891,761 Overdistributed net investment income (2,641) Accumulated net realized loss (77,337) Net unrealized appreciation on investments 10,925,029 --------------- NET ASSETS $ 42,736,812 =============== CLASS A: Net assets $ 1,612,032 Shares outstanding 91,273 =============== Net asset value per share $ 17.66 =============== CLASS B: Net assets $ 41,124,780 Shares outstanding 2,331,697 =============== Net asset value per share $ 17.64 =============== </Table> See Accompanying Notes to Financial Statements. 148 <Page> STATEMENT OF OPERATIONS Liberty Select Value Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Dividends $ 508,610 Interest 21,212 --------------- Total Investment Income 529,822 --------------- EXPENSES: Investment advisory fee 279,887 Distribution fee--Class B 96,410 Transfer agent fee 7,500 Pricing and bookkeeping fees 11,606 Trustees' fee 7,185 Custody fee 5,135 Non-recurring costs (See Note 6) 2,005 Other expenses 32,661 --------------- Total Expenses 442,389 Fees reimbursed by the Distributor--Class B (3,786) Non-recurring costs assumed by Investment Advisor (See Note 6) (2,005) Custody earnings credit (26) --------------- Net Expenses 436,572 --------------- Net Investment Income 93,250 --------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments 895,509 Net change in unrealized appreciation/depreciation on investments 4,793,118 --------------- Net Gain 5,688,627 --------------- Net Increase in Net Assets from Operations $ 5,781,877 =============== </Table> See Accompanying Notes to Financial Statements. 149 <Page> STATEMENT OF CHANGES IN NET ASSETS Liberty Select Value Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, --------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 93,250 $ 59,485 Net realized gain (loss) on investments 895,509 (705,613) Net change in unrealized appreciation/depreciation on investments 4,793,118 8,564,493 --------------- --------------- Net Increase from Operations 5,781,877 7,918,365 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (7,134) (4,195) Class B (107,354) (55,597) From net realized gains: Class A (7,660) -- Class B (196,158) -- --------------- --------------- Total Distributions Declared to Shareholders (318,306) (59,792) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 321,105 578,918 Distributions reinvested 14,794 4,195 Redemptions (337,200) (93,140) --------------- --------------- Net Increase (Decrease) (1,301) 489,973 --------------- --------------- Class B: Subscriptions 3,272,086 7,832,430 Distributions reinvested 303,512 55,597 Redemptions (4,501,454) (3,283,568) --------------- --------------- Net Increase (Decrease) (925,856) 4,604,459 --------------- --------------- Net Increase (Decrease) from Share Transactions (927,157) 5,094,432 --------------- --------------- Total Increase in Net Assets 4,536,414 12,953,005 NET ASSETS: Beginning of period 38,200,398 25,247,393 --------------- --------------- End of period (including overdistributed net investment income of $(2,641) and $(1,403), respectively) $ 42,736,812 $ 38,200,398 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 19,659 46,620 Issued for distributions reinvested 837 272 Redemptions (21,172) (7,103) --------------- --------------- Net Increase (Decrease) (676) 39,789 --------------- --------------- Class B: Subscriptions 203,481 601,441 Issued for distributions reinvested 17,196 3,606 Redemptions (276,030) (251,382) --------------- --------------- Net Increase (Decrease) (55,353) 353,665 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 150 <Page> NOTES TO FINANCIAL STATEMENTS Liberty Select Value Fund, Variable Series / December 31, 2004 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. 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. If the Fund no longer owns the applicable securities, any distributions received in excess of income are recorded as realized gains. 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. 151 <Page> NOTE 3. FEDERAL TAX INFORMATION The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for distributions in excess and REIT adjustments were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED ACCUMULATED PAID-IN NET INVESTMENT INCOME NET REALIZED LOSS CAPITAL --------------------- ----------------- --------- $ 20,000 $ 5,733 $ (25,733) </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 ------------ ------------ Distributions paid from: Ordinary income $ 119,464 $ 59,792 Long-term capital gains 198,842 -- </Table> As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- -------------- -------------- $ -- $ -- $ 10,876,495 </Table> * The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales. Unrealized appreciation and depreciation at December 31, 2004, based on cost of investments for federal income tax purposes, was: <Table> Unrealized appreciation $ 11,470,405 Unrealized depreciation (593,910) ------------ Net unrealized appreciation $ 10,876,495 ============ </Table> Capital loss carryforwards of $726,227 were utilized during the year ended December 31, 2004 for the Fund. Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of December 31, 2004, post-October capital losses of $28,801 attributed to security transactions were deferred to January 1, 2005. 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 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 year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.029%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the year ended December 31, 2004, the Fund's effective transfer agent fee rate was 0.02%. 152 <Page> 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. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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 year ended December 31, 2004, the Fund paid $1,339 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $7,001,980 and $6,587,584, 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--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 153 <Page> 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $2,005 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 154 <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> PERIOD YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------- 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) 0.04 0.03 0.01 0.05 0.09 Net realized and unrealized gain (loss) on investments 2.32 3.29 (1.54) 0.41 1.28 ---------- ---------- ---------- ---------- ---------- Total from Investment Operations 2.36 3.32 (1.53) 0.46 1.37 ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.05) (0.02) (0.01) (0.03) (0.07) From net realized gains (0.08) -- -- (0.02) --(c) Return of capital -- -- -- -- (0.06) ---------- ---------- ---------- ---------- ---------- Total Distributions Declared to Shareholders (0.13) (0.02) (0.01) (0.05) (0.13) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 17.64 $ 15.41 $ 12.11 $ 13.65 $ 13.24 ========== ========== ========== ========== ========== Total return (d)(e)(f) 15.32% 27.44% (11.21)% 3.47% 11.38%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 1.10% 1.10% 1.10% 1.10% 1.10%(i) Net investment income (h) 0.23% 0.20% 0.09% 0.34% 1.13%(i) Waiver/reimbursement 0.01% 0.10% 0.08% 0.73% 1.56%(i) Portfolio turnover rate 17% 12% 21% 15% 26%(g) Net assets, end of period (000's) $ 41,125 $ 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. 155 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Liberty Select Value Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Liberty Select Value Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 156 <Page> UNAUDITED INFORMATION Liberty Select Value Fund, Variable Series FEDERAL INCOME TAX INFORMATION For the fiscal year ended December 31, 2004, the Fund designates long-term capital gains of $198,842. 100% of the ordinary income distributed by the Fund for the year ended December 31, 2004, qualifies for the corporate dividends received deduction. 157 <Page> PORTFOLIO MANAGER'S DISCUSSION Newport Tiger Fund, Variable Series / December 31, 2004 Newport Tiger Fund, Variable Series seeks capital appreciation. Eric R.L. Sandlund has managed or co-managed the fund since August 2002. Good economic growth and an influx of foreign investment drove strong performance for most Asian equity markets in 2004. The markets of Thailand and China were the exceptions, posting negative results for the year. An overweight in Thailand was the main reason the portfolio underperformed its benchmark, the MSCI All Country Asia ex Japan Index. An underweight in China, which started the year strongly but then pulled back, aided results. An overweight in India also helped performance. THAILAND AND INDIA HAD SHORT-TERM PROBLEMS BUT REMAINED ATTRACTIVE Thailand and India were a major focus for the fund during 2004. Both countries had improving economic growth and rising consumer and business spending. In addition, they suffered what we consider to be temporary setbacks in their stock markets. In Thailand, the market declined on profit-taking, after making extraordinary gains in 2003. Thailand was also affected by an uprising of rebels in the southern part of the country and by outbreaks of Avian Flu. We used the market sell-off to purchase new companies and add to positions that we believe have attractive prospects. Therefore, we have positioned the portfolio to take advantage of positive internal factors, such as increasing domestic spending and business expansion, rather than on companies that rely heavily on exports for their earnings growth. The Indian market did poorly during the first half of 2004, when the Congress Party, which was perceived by some to be anti-business, was elected. Later in the period, however, the Indian market rebounded, as interest rates declined and investors were attracted to the country's strong economic backdrop. Investor sentiment regarding the business policies of the new government also turned more positive. At the beginning of 2004, the fund had an overweight in China. When the government instituted policies designed to slow economic growth, we reduced exposure to the country. Despite China's underperformance, individual stocks did well. China Merchants Holdings, the leading public port operator, and People's Food Holdings Ltd., a maker of pork products, helped drive performance (1.3% and 0.9% of net assets, respectively). INFRASTRUCTURE DEVELOPMENT AND DOMESTIC CONSUMPTION WERE CONTINUING THEMES For more than a year we have emphasized companies that have the potential to benefit from the build-out of the infrastructure and the rise of domestic consumption. We view financial stocks as an integral part of these trends and expect certain financial institutions and real estate companies to profit from rising consumer and capital spending. As a result, financials accounted for the biggest sector weight in the portfolio. In virtually every market, we found attractive financial institutions. Hong Kong's Sun Hung Kai Properties Ltd. was the largest holding in the sector and provided the biggest return (5.0% of net assets). In Taiwan, Chinatrust Financial Holding Co., Ltd. and Cathay Financial Holding Co., Ltd. aided results (2.1% and 1.8% of net assets, respectively). We added to the fund's position in Kookmin Bank in Korea, which significantly underperformed its peers, but which we believe has the potential to add value to the portfolio (2.6% of net assets). An emphasis on consumer discretionary stocks reflected our optimistic outlook for consumer spending. Hong Kong retailer Esprit Holdings Ltd., India's scooter manufacturer Bajaj Auto Ltd. and Singapore Press Holdings Ltd., the leading newspaper publisher in Singapore, had a positive impact on performance (2.0%, 0.3% and 2.5% of net assets, respectively). INTERNAL FACTORS SHOULD DRIVE PERFORMANCE While a tragedy, the tsunami is expected to have only a marginal effect on Asian economic activity and financial markets. Instead, we expect local economies to continue to grow in 2005, positively impacting their equity markets. A strong euro would also benefit exports, as Asian goods would become more affordable in Europe. Yet, a downturn in consumer spending in the United States could hurt exports. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. An investment in the Newport Tiger Fund, Variable Series offers long-term growth potential; however, the net asset value of the fund will fluctuate due to economic and political developments and currency exchange rate fluctuations. Many of the Asian countries are considered emerging economies, which means there may be greater risks associated with investing there than in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. Holdings are disclosed as of December 31, 2004, and are subject to change. On October 13, 2004, the Board of Trustees of the fund voted to liquidate the fund. The fund was liquidated on February 18, 2005. 158 <Page> PERFORMANCE INFORMATION Newport Tiger Fund, Variable Series / December 31, 2004 AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 2004 (%) <Table> <Caption> 1-YEAR 5-YEAR LIFE - ------------------------------------------------------------- Class B (6/1/00) 15.74 -0.47 3.22 MSCI All Country Asia ex Japan Index(1) 17.72 -0.24 0.70 </Table> Inception date of share class is in parentheses. [CHART] VALUE OF A $10,000 INVESTMENT, 5/1/95(2) - 12/31/04 Class B: $13,583 <Table> <Caption> CLASS B SHARES MSCI ALL COUNTRY ASIA EX JAPAN INDEX 5/1/1995 $ 10,000 $ 10,000 5/31/1995 $ 11,100 $ 11,125 6/30/1995 $ 10,900 $ 10,951 7/31/1995 $ 11,200 $ 11,157 8/31/1995 $ 10,851 $ 10,643 9/30/1995 $ 11,050 $ 10,770 10/31/1995 $ 11,000 $ 10,584 11/30/1995 $ 11,050 $ 10,344 12/31/1995 $ 11,501 $ 10,855 1/31/1996 $ 12,661 $ 11,699 2/29/1996 $ 12,560 $ 11,826 3/31/1996 $ 12,560 $ 11,912 4/30/1996 $ 12,510 $ 12,341 5/31/1996 $ 12,460 $ 12,203 6/30/1996 $ 12,208 $ 12,021 7/31/1996 $ 11,552 $ 11,134 8/31/1996 $ 11,956 $ 11,470 9/30/1996 $ 12,308 $ 11,668 10/31/1996 $ 12,207 $ 11,446 11/30/1996 $ 12,813 $ 11,986 12/31/1996 $ 12,851 $ 11,944 1/31/1997 $ 12,750 $ 12,191 2/28/1997 $ 12,750 $ 12,295 3/31/1997 $ 11,985 $ 11,600 4/30/1997 $ 11,781 $ 11,428 5/31/1997 $ 12,852 $ 11,944 6/30/1997 $ 13,464 $ 12,381 7/31/1997 $ 13,668 $ 12,485 8/31/1997 $ 11,324 $ 10,272 9/30/1997 $ 11,681 $ 10,225 10/31/1997 $ 9,028 $ 7,952 11/30/1997 $ 8,876 $ 7,407 12/31/1997 $ 8,850 $ 7,130 1/31/1998 $ 7,556 $ 6,514 2/28/1998 $ 9,212 $ 7,895 3/31/1998 $ 9,161 $ 7,779 4/30/1998 $ 8,385 $ 7,097 5/31/1998 $ 7,246 $ 6,014 6/30/1998 $ 6,522 $ 5,339 7/31/1998 $ 6,004 $ 5,204 8/31/1998 $ 5,124 $ 4,454 9/30/1998 $ 6,003 $ 4,896 10/31/1998 $ 7,763 $ 5,961 11/30/1998 $ 8,281 $ 6,442 12/31/1998 $ 8,281 $ 6,576 1/31/1999 $ 7,806 $ 6,471 2/28/1999 $ 7,806 $ 6,345 3/31/1999 $ 8,492 $ 7,106 4/30/1999 $ 10,338 $ 8,405 5/31/1999 $ 9,652 $ 8,223 6/30/1999 $ 10,707 $ 9,508 7/31/1999 $ 10,707 $ 9,299 8/31/1999 $ 10,760 $ 9,529 9/30/1999 $ 10,338 $ 8,862 10/31/1999 $ 11,023 $ 9,147 11/30/1999 $ 12,342 $ 10,017 12/31/1999 $ 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 $ 11,185 $ 8,873 7/31/2004 $ 10,963 $ 8,696 8/31/2004 $ 11,406 $ 9,120 9/30/2004 $ 11,794 $ 9,471 10/31/2004 $ 12,071 $ 9,532 11/30/2004 $ 13,178 $ 10,379 12/31/2004 $ 13,583 $ 10,698 </Table> <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/03 12/31/04 - ------------------------------------------------------------- Class B 2.12 2.43 </Table> PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. FOR CURRENT MONTH-END PERFORMANCE INFORMATION, PLEASE CONTACT YOUR INSURANCE COMPANY. 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. 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. 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) is May 1, 1995. 159 <Page> UNDERSTANDING YOUR EXPENSES Newport Tiger Fund, Variable Series / December 31, 2004 As a fund shareholder, you incur two types of costs. There are transaction costs, which generally include sales charges on purchases and may include redemption or exchange fees. There are also continuing costs, which generally include investment advisory, Rule 12b-1 fees, and other fund expenses. The information on this page is intended to help you understand your ongoing costs of investing in the fund and to compare this cost with the continuing costs of investing in other mutual funds. ANALYZING YOUR FUND'S EXPENSES To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors in the fund during the reporting period. The information in the following table is based on an initial investment of $1,000.00, which is invested at the beginning of the reporting period and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the "actual" column is calculated using actual operating expenses and total return for the period. The amount listed in the "hypothetical" column assumes that the return each year is 5% before expenses and includes the actual expense ratio. You should not use the hypothetical account value and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during this reporting period. ESTIMATING YOUR ACTUAL EXPENSES To estimate the expenses that you paid over the period, first you will need your account balance at the end of the period: 1. Divide your ending account balance by $1,000.00. For example, if an account balance was $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 07/01/04 - 12/31/04 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ---------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ---------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,214.72 1,015.94 10.19 9.27 1.83 </Table> Expenses paid during the period are equal to the annualized expense ratio for the share class, multiplied by the average account value over the period, then multiplied by the number of days in the fund's most recent fiscal half-year and divided by 366. It is important to note that the expense amounts shown in the table are meant to highlight only ongoing costs of investing in the share class of the fund. As a shareholder of the fund, you do not incur any transaction costs, such as sales charges, redemption or exchange fees. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. The hypothetical examples provided are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs. COMPARE WITH OTHER FUNDS Since all mutual fund companies are required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the fund with other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are meant to highlight the continuing cost of investing in a fund and do not reflect any transactional costs, such as sales charges, redemption or exchange fees, that may be incurred by shareholders of other funds. Expenses paid during the period do not include any insurance charges imposed by your insurance company's separate accounts. 160 <Page> INVESTMENT PORTFOLIO Newport Tiger Fund, Variable Series / December 31, 2004 <Table> <Caption> SHARES VALUE --------------- --------------- COMMON STOCKS--100.1% CONSUMER DISCRETIONARY--15.8% AUTO COMPONENTS--0.7% Tong Yang Industry Co., Ltd. 138,000 $ 212,274 --------------- AUTOMOBILES--5.7% Bajaj Auto Ltd. 3,611 94,466 Hyundai Motor Co. (a) 13,330 713,879 Maruti Udyog Ltd. 31,558 336,558 PT Astra International, Inc. 467,500 483,399 --------------- 1,628,302 --------------- DISTRIBUTORS--3.1% Li & Fung Ltd. 532,000 896,591 --------------- HOTELS, RESTAURANTS & LEISURE--0.8% Genting Berhad 43,600 218,000 --------------- MEDIA--3.5% Astro All Asia Networks PLC (a) 209,800 298,137 Singapore Press Holdings Ltd. 250,197 704,867 --------------- 1,003,004 --------------- SPECIALTY RETAIL--2.0% Esprit Holdings Ltd. 95,000 574,424 --------------- CONSUMER STAPLES--1.6% FOOD PRODUCTS--1.6% People's Food Holdings Ltd. 286,000 262,739 Thai Union Frozen Products Public Co., Ltd. 303,000 206,667 --------------- 469,406 --------------- FINANCIALS--38.8% COMMERCIAL BANKS--19.5% Bangkok Bank Public Co., Ltd., NVDR 257,900 689,962 Bank Rakyat Indonesia 945,000 292,773 Chinatrust Financial Holding Co., Ltd. 506,158 603,441 Dah Sing Financial Group 19,200 148,823 Hong Leong Bank Berhad 609,800 882,605 Kasikornbank Public Co., Ltd., NVDR (a) 390,300 527,107 Kookmin Bank (a) 19,403 756,491 Oversea-Chinese Banking Corp., Ltd. 36,000 297,648 Public Bank Berhad 146,093 292,186 Standard Chartered PLC 21,413 397,474 United Overseas Bank Ltd. 82,000 693,043 --------------- 5,581,553 --------------- DIVERSIFIED FINANCIAL SERVICES--3.1% Housing Development Finance Corp., Ltd. 50,169 888,658 --------------- INSURANCE--3.5% Cathay Financial Holding Co., Ltd. 250,000 511,167 Samsung Fire & Marine Insurance Co., Ltd. 6,470 510,476 --------------- 1,021,643 --------------- REAL ESTATE--12.7% City Developments Ltd. 117,000 $ 508,758 Henderson Land Development Co., Ltd. 119,000 620,031 Land & Houses Public Co., Ltd., NVDR 1,118,100 290,498 SM Prime Holdings, Inc. 2,377,000 325,922 Sun Hung Kai Properties Ltd. 142,000 1,420,365 Swire Pacific Ltd., Class A 56,500 472,469 --------------- 3,638,043 --------------- HEALTH CARE--3.0% HEALTH CARE EQUIPMENT & SUPPLIES--0.5% Pihsiang Machinery Manufacturing Co., Ltd. 77,054 152,702 --------------- PHARMACEUTICALS--2.5% Dr. Reddy's Laboratories Ltd., ADR 17,400 345,042 Ranbaxy Laboratories Ltd. 12,426 359,535 --------------- 704,577 --------------- INDUSTRIAL--3.7% INDUSTRIAL CONGLOMERATES--2.5% China Merchants Holdings International Co., Ltd. 191,000 359,983 Hutchison Whampoa Ltd. 37,500 350,975 --------------- 710,958 --------------- MACHINERY--0.5% Bharat Forge Ltd. 6,138 152,329 --------------- TRANSPORTATION INFRASTRUCTURE--0.7% Zhejiang Expressway Co., Ltd., Class H 284,000 195,471 --------------- INFORMATION TECHNOLOGY--23.2% COMPUTERS & PERIPHERALS--2.5% Acer, Inc. 185,442 306,250 Lite-On Technology Corp. 376,700 401,703 --------------- 707,953 --------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--5.9% Hon Hai Precision Industry Co., Ltd. 165,147 763,656 Interflex Co., Ltd. (a) 9,297 155,639 MFS Technology Ltd. 262,500 148,709 Synnex Technology International Corp. 124,000 182,938 Venture Corp., Ltd. 46,000 447,942 --------------- 1,698,884 --------------- INTERNET SOFTWARE & SERVICES--1.2% NCSoft Corp. (a) 4,460 361,846 --------------- IT SERVICES--2.1% Infosys Technologies Ltd. 12,436 600,666 --------------- </Table> See Accompanying Notes to Financial Statements. 161 <Page> <Table> <Caption> SHARES VALUE --------------- --------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--11.5% MediaTek, Inc. 18,895 $ 128,384 Samsung Electronics Co., Ltd. 4,950 2,160,195 Taiwan Semiconductor Manufacturing Co., Ltd. 630,108 1,000,958 --------------- 3,289,537 --------------- MATERIALS--3.3% CONSTRUCTION MATERIALS--3.3% Siam Cement Public Co., Ltd., NVDR 150,050 941,817 --------------- TELECOMMUNICATION SERVICES--6.6% DIVERSIFIED TELECOMMUNICATION SERVICES--1.3% PT Telekomunikasi Indonesia 725,200 378,100 --------------- WIRELESS TELECOMMUNICATION SERVICES--5.3% China Mobile Hong Kong Ltd. 254,500 862,740 Taiwan Cellular Corp. 572,000 638,754 --------------- 1,501,494 --------------- UTILITIES--4.1% ELECTRIC UTILITIES--1.5% Datang International Power Generation Co., Ltd., Class H 242,000 182,130 Huaneng Power International, Inc., Class H 310,000 231,314 --------------- 413,444 --------------- GAS UTILITIES--2.6% Hong Kong & China Gas Co., Ltd. 254,002 526,107 Xinao Gas Holdings Ltd. (a) 392,000 226,940 --------------- 753,047 --------------- TOTAL COMMON STOCKS (cost of $19,102,977) 28,694,723 --------------- <Caption> UNITS --------------- WARRANT--0.0% INDUSTRIAL--0.0% MACHINERY--0.0% Bharat Forge Ltd. (a)(b)(c) 155 -- --------------- TOTAL WARRANT (cost of $0) -- --------------- TOTAL INVESTMENTS--100.1% (cost of $19,102,977)(d) 28,694,723 --------------- OTHER ASSETS & LIABILITIES, NET--(0.1)% (16,650) --------------- NET ASSETS--100.0% $ 28,678,073 =============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Security has no value. (c) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (d) Cost for federal income tax purposes is $19,127,115. The Fund was invested in the following countries as of December 31, 2004: <Table> <Caption> SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY (UNAUDITED) VALUE INVESTMENTS - ---------------------- ------------ ----------- Hong Kong $ 6,459,448 22.5% Taiwan 4,902,227 17.1 Korea, Republic of 4,658,526 16.2 Singapore 3,063,706 10.7 India 2,777,254 9.7 Thailand 2,656,051 9.3 Malaysia 1,392,791 4.9 Indonesia 1,154,272 4.0 United Kingdom 695,611 2.4 China 608,915 2.1 Philippines 325,922 1.1 ------------ ----- $ 28,694,723 100.0% ============ ===== </Table> Certain securities are listed by country of underlying exposure but may trade predominantly on other exchanges. At December 31, 2004, the Fund held investments in the following sectors: <Table> <Caption> SECTOR (UNAUDITED) % OF NET ASSETS - ------------------ --------------- Financials 38.8% Information Technology 23.2 Consumer Discretionary 15.8 Telecommunication Services 6.6 Utilities 4.1 Industrial 3.7 Materials 3.3 Health Care 3.0 Consumer Staples 1.6 Other Assets & Liabilities, Net (0.1) ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- ADR American Depositary Receipt NVDR Non-Voting Depositary Receipt </Table> See Accompanying Notes to Financial Statements. 162 <Page> STATEMENT OF ASSETS & LIABILITIES Newport Tiger Fund, Variable Series / December 31, 2004 <Table> ASSETS: Investments, at cost $ 19,102,977 --------------- Investments, at value $ 28,694,723 Foreign currency (cost of $98,150) 98,517 Receivable for: Investments sold 1,047,290 Dividends 472 Deferred Trustees' compensation plan 6,031 --------------- TOTAL ASSETS 29,847,033 --------------- LIABILITIES: Payable to custodian bank 718,675 Payable for: Fund shares repurchased 215,674 Investment advisory fee 22,322 Transfer agent fee 625 Pricing and bookkeeping fees 2,719 Trustees' fees 125 Audit fee 22,789 Custody fee 9,147 Distribution fee--Class B 824 Deferred Trustees' fees 6,031 Deferred foreign capital gains tax payable 157,506 Other liabilities 12,523 --------------- TOTAL LIABILITIES 1,168,960 --------------- NET ASSETS $ 28,678,073 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 27,264,185 Overdistributed net investment income (5,262) Accumulated net realized loss (8,014,759) Net unrealized appreciation (depreciation) on: Investments 9,591,746 Foreign currency translations (331) Foreign capital gains tax (157,506) --------------- NET ASSETS $ 28,678,073 =============== CLASS A: Net assets $ 25,429,803 Shares outstanding 10,652,761 =============== Net asset value per share $ 2.39 =============== CLASS B: Net assets $ 3,248,270 Shares outstanding 1,337,384 =============== Net asset value per share $ 2.43 =============== </Table> See Accompanying Notes to Financial Statements. 163 <Page> STATEMENT OF OPERATIONS Newport Tiger Fund, Variable Series For the Year Ended December 31, 2004 <Table> INVESTMENT INCOME: Dividends $ 800,920 Interest 5,481 --------------- Total Investment Income (net of foreign taxes withheld of $103,016) 806,401 --------------- EXPENSES: Investment advisory fee 251,565 Distribution fee--Class B 8,123 Transfer agent fee 7,500 Pricing and bookkeeping fees 16,991 Trustees' fees 6,488 Custody fee 82,660 Audit fee 24,529 Non-recurring costs (See Note 6) 1,368 Other expenses 23,010 --------------- Total Expenses 422,234 Non-recurring costs assumed by Investment Advisor (See Note 6) (1,368) Custody earnings credit (36) --------------- Net Expenses 420,830 --------------- Net Investment Income 385,571 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FOREIGN CAPITAL GAINS TAX: Net realized gain (loss) on: Investments 4,019,603 Foreign currency transactions (10,137) Foreign capital gains tax (85,710) --------------- Net realized gain 3,923,756 --------------- Net change in unrealized appreciation/depreciation on: Investments (401,760) Foreign currency translations (504) Foreign capital gains tax 269,276 --------------- Net change in unrealized appreciation/depreciation (132,988) --------------- Net Gain 3,790,768 --------------- Net Increase in Net Assets from Operations $ 4,176,339 =============== </Table> See Accompanying Notes to Financial Statements. 164 <Page> STATEMENT OF CHANGES IN NET ASSETS Newport Tiger Fund, Variable Series <Table> <Caption> YEAR ENDED DECEMBER 31, --------------------------------- INCREASE (DECREASE) IN NET ASSETS: 2004 2003 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 385,571 $ 242,310 Net realized gain on investments, foreign currency transactions and foreign capital gains tax 3,923,756 38,348 Net change in unrealized appreciation/depreciation on investments, foreign currency translations and foreign capital gains tax (132,988) 8,428,501 --------------- --------------- Net Increase from Operations 4,176,339 8,709,159 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (303,930) (238,610) Class B (32,522) (19,194) --------------- --------------- Total Distributions Declared to Shareholders (336,452) (257,804) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 1,850,359 4,595,945 Distributions reinvested 303,930 238,610 Redemptions (5,792,173) (9,993,129) --------------- --------------- Net Decrease (3,637,884) (5,158,574) --------------- --------------- Class B: Subscriptions 783,384 1,441,440 Distributions reinvested 32,522 19,194 Redemptions (1,023,453) (242,928) --------------- --------------- Net Increase (Decrease) (207,547) 1,217,706 --------------- --------------- Net Decrease from Share Transactions (3,845,431) (3,940,868) --------------- --------------- Total Increase (Decrease) in Net Assets (5,544) 4,510,487 NET ASSETS: Beginning of period 28,683,617 24,173,130 --------------- --------------- End of period (including overdistributed net investment income of $(5,262) and $(5,343), respectively) $ 28,678,073 $ 28,683,617 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 868,459 2,997,732 Issued for distributions reinvested 128,241 115,267 Redemptions (2,684,388) (6,743,620) --------------- --------------- Net Decrease (1,687,688) (3,630,621) --------------- --------------- Class B: Subscriptions 360,640 802,770 Issued for distributions reinvested 13,495 9,140 Redemptions (452,582) (134,468) --------------- --------------- Net Increase (Decrease) (78,447) 677,442 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 165 <Page> NOTES TO FINANCIAL STATEMENTS Newport Tiger Fund, Variable Series / December 31, 2004 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. The Fund may use a systematic fair valuation model provided by an independent third party to value securities principally traded in foreign markets in order to adjust for possible stale pricing that may occur between the close of the foreign exchanges and the time for valuation. If a security is valued at a "fair value", such value is likely to be different from the last quoted market price for the security. 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. 166 <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. In late September, India's Ministry of Finance confirmed that, effective October 1, 2004, the tax on long-term capital gains was eliminated and the short-term capital gains tax rate was reduced from 33.66% to 11.22%. The impact of the change resulted in a reduction in the deferred foreign capital gains tax payable and a corresponding increase in the net asset value of the Fund of $79,643 ($0.006 per share). Additionally, effective October 1, 2004, India's Ministry of Finance charges a securities transactions tax, levied at the rate of 0.075% on the value of all equity security transactions traded on a recognized Indian stock exchange. The transaction tax will be included in the net amount of purchases and sales of securities. 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 timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Reclassifications are made to the Fund's capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended December 31, 2004, permanent book and tax basis differences resulting primarily from differing treatments for distributions in excess, foreign currency transactions and foreign capital gains tax were identified and reclassified among the components of the Fund's net assets as follows: <Table> <Caption> OVERDISTRIBUTED NET INVESTMENT ACCUMULATED PAID-IN INCOME NET REALIZED LOSS CAPITAL --------------- ----------------- ---------- $ (49,038) $ 95,846 $ (46,808) </Table> Net investment income and net realized gains (losses), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification. The tax character of distributions paid during the years ended December 31, 2004 and December 31, 2003 was as follows: <Table> <Caption> DECEMBER 31, DECEMBER 31, 2004 2003 ------------ ------------ Distributions paid from: Ordinary income $ 336,452 $ 257,804 Long-term capital gains -- -- </Table> As of December 31, 2004, the components of distributable earnings on a tax basis were as follows: <Table> <Caption> UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM NET UNREALIZED INCOME CAPITAL GAINS APPRECIATION* ------------- ------------- -------------- $ -- $ -- $ 9,567,277 </Table> *The differences between book-basis and tax-basis net unrealized appreciation are primarily due to deferral of losses from wash sales and foreign capital gains tax. Unrealized appreciation and depreciation at December 31, 2004, based on cost of investments for federal income tax purposes, was: <Table> Unrealized appreciation $ 9,870,719 Unrealized depreciation (303,111) ----------- Net unrealized appreciation $ 9,567,608 =========== </Table> The following capital loss carryforwards 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 $ 3,898,632 2007 1,050,865 2009 2,161,521 2010 879,602 ----------- $ 7,990,620 =========== </Table> 167 <Page> Capital loss carryforwards of $3,949,680 were utilized during the year ended December 31, 2004 for the Fund. 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 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 year ended December 31, 2004, the effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.061%. TRANSFER AGENT FEE--Columbia Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services to the Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. For such services, the Transfer Agent receives a monthly fee, at the annual rate of $7,500. For the year ended December 31, 2004, the Fund's 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. These credits are recorded as a reduction of total expenses on the Statement of Operations. 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--With the exception of one officer, all officers of the Fund are employees of Columbia or its affiliates and receive no compensation from the Fund. Effective August 23, 2004, the Board of Trustees appointed a Chief Compliance Officer to the Fund in accordance with federal securities regulations. The Fund, along with other affiliated funds, will pay its pro-rata share of the expenses associated with the Office of the Chief Compliance Officer. The Fund's fee will not exceed $15,000 per year. 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 year ended December 31, 2004, the Fund paid $1,326 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 year ended December 31, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $8,766,415 and $12,532,319, 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. 168 <Page> 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--On February 9, 2005, Columbia and the Distributor (collectively the "Columbia Group") entered into an Assurance of Discontinuance with the New York Attorney General ("NYAG") (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle which Columbia Group entered into with the SEC and NYAG in March 2004. Under the terms of the SEC Order, the Columbia Group has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review the Columbia Group's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Columbia Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce certain Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the $140 million in settlement amounts described above will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant, who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with the Columbia Group and the Fund's independent trustees and not unacceptable to the staff of the SEC. 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. A copy of the SEC Order will be available on the SEC website at http://www.sec.gov. A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005. In connection with the events described in detail above, various parties have filed suit against certain funds, their Boards and/or Bank of America (and affiliated entities). More than 300 cases (including those filed against entities unaffiliated with the funds, their Boards and/or FleetBoston and its affiliated entities) have been consolidated in a multi-district proceeding and transferred to the Federal District Court in Maryland. Recently, certain Columbia funds and affiliated entities have been named as defendants in several direct and derivative actions under various sections of the Investment Company Act of 1940, as amended, alleging, among other things, that the fees and expenses paid by those funds are excessive. On January 11, 2005 a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Fund and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as sections of the Investment Company Act of 1940, by failing to ensure that the Fund and other affiliated funds participated in securities class action settlements for which the funds were eligible. Specifically, plaintiffs allege that defendants failed to submit proof of claims in connection with settlements of securities class action lawsuits filed against companies in which the funds held positions. The funds and the other defendants to these actions, including Columbia and various of its affiliates, certain other mutual funds advised by Columbia and its affiliates, and various directors of such funds, have denied these allegations and are contesting the plaintiffs' claims. These proceedings are ongoing, however, based on currently available information, Columbia believes that these lawsuits are without merit, that the likelihood they will have a material adverse impact on any fund is remote, and that the lawsuits are not likely to materially affect its ability to provide investment management services to its clients, including the funds. For the year ended December 31, 2004, Columbia has assumed $1,368 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. NOTE 7. PLAN OF LIQUIDATION On October 13, 2004, the Board of Trustees of the Fund voted to liquidate the Fund. The Fund was liquidated on February 18, 2005. 169 <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> PERIOD YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------- 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) 0.03 0.01 0.01 0.01 --(c) Net realized and unrealized gain (loss) on investments, foreign currency and foreign capital gains tax 0.30 0.65 (0.33) (0.37) (0.14) ---------- ---------- ---------- ---------- ---------- Total from Investment Operations 0.33 0.66 (0.32) (0.36) (0.14) ---------- ---------- ---------- ---------- ---------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.02) (0.01) (0.02) (0.02) (0.02) Return of capital -- -- --(c) -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions Declared to Shareholders (0.02) (0.01) (0.02) (0.02) (0.02) ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 2.43 $ 2.12 $ 1.47 $ 1.81 $ 2.19 ========== ========== ========== ========== ========== Total return (d)(e) 15.74% 45.19% (17.70)% (16.66)% (5.94)%(f) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (g) 1.73% 1.77% 1.52% 1.56% 1.47%(h) Net investment income (g) 1.18% 0.53% 0.71% 0.74% 0.11%(h) Portfolio turnover rate 32% 28% 28% 24% 22% Net assets, end of period (000's) $ 3,248 $ 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. (e) 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. 170 <Page> REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of Liberty Variable Investment Trust and the Class B Shareholders of Newport Tiger Fund, Variable Series In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the Class B financial highlights present fairly, in all material respects, the financial position of Newport Tiger Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at December 31, 2004, and the results of its operations, the changes in its net assets and the Class B financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the Class B financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The Trustees of the Fund approved a plan of liquidation for the Fund as described in Note 7. PricewaterhouseCoopers LLP Boston, Massachusetts February 17, 2005 171 <Page> TRUSTEES AND OFFICERS Liberty Variable Investment Trust The Trustees/Directors serve terms of indefinite duration. The names, addresses and ages of the Trustees/Directors and officers of the Funds in the Columbia Funds Complex, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee/Director and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex. <Table> <Caption> NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD DISINTERESTED TRUSTEES DOUGLAS A. HACKER (age 49) Executive Vice President-Strategy of United Airlines (airline) since December P.O. Box 66100 2002 (formerly President of UAL Loyalty Services (airline) from September 2001 Chicago, IL 60666 to December 2002; Executive Vice President and Chief Financial Officer of United Trustee (since 1996) Airlines from March 1999 to September 2001; Senior Vice President-Finance from March 1993 to July 1999). Oversees 104, None JANET LANGFORD KELLY (age 47) Adjunct Professor of Law, Northwestern University, since September 2004; Private 9534 W. Gull Lake Drive Investor since March 2004 (formerly Chief Administrative Officer and Senior Vice Richland, MI 49083-8530 President, Kmart Holding Corporation (consumer goods), from September 2003 to Trustee (since 1996) March 2004; Executive Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September 1999 to August 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January 1995 to September 1999). Oversees 104, None RICHARD W. LOWRY (age 68) Private Investor since August 1987 (formerly Chairman and Chief Executive 10701 Charleston Drive Officer, U. S. Plywood Corporation (building products manufacturer)). Oversees Vero Beach, FL 32963 106(3), None Trustee (since 1995) CHARLES R. NELSON (age 62) Professor of Economics, University of Washington, since January 1976; Ford and Department of Economics Louisa Van Voorhis Professor of Political Economy, University of Washington, University of Washington since September 1993 (formerly Director, Institute for Economic Research, Seattle, WA 98195 University of Washington from September 2001 to June 2003) Adjunct Professor of Trustee (since 1981) Statistics, University of Washington, since September 1980; Associate Editor, Journal of Money Credit and Banking, since September 1993; consultant on econometric and statistical matters. Oversees 104, None JOHN J. NEUHAUSER (age 61) Academic Vice President and Dean of Faculties since August 1999, Boston College 84 College Road (formerly Dean, Boston College School of Management from September 1977 to Chestnut Hill, MA 02467-3838 September 1999). Oversees 107(3),(4), Saucony, Inc. (athletic footwear) Trustee (since 1985) PATRICK J. SIMPSON (age 60) Partner, Perkins Coie LLP (law firm). Oversees 104, None 1120 N.W. Couch Street Tenth Floor Portland, OR 97209-4128 Trustee (since 2000) </Table> 172 <Page> <Table> <Caption> NAME, ADDRESS AND AGE, POSITION WITH FUNDS, PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS, NUMBER OF PORTFOLIOS IN COLUMBIA YEAR FIRST ELECTED OR APPOINTED TO OFFICE(1) FUNDS COMPLEX OVERSEEN BY TRUSTEE/DIRECTOR, OTHER DIRECTORSHIPS HELD DISINTERESTED TRUSTEES THOMAS E. STITZEL (age 68) Business Consultant since 1999 (formerly Professor of Finance from 1975 to 1999, 2208 Tawny Woods Place College of Business, Boise State University); Chartered Financial Analyst. Boise, ID 83706 Oversees 104, None. Trustee (since 1998) THOMAS C. THEOBALD (age 67) Partner and Senior Advisor, Chicago Growth Partners (private equity investing) 303 W. Madison since September 2004 (formerly Managing Director, William Blair Capital Partners Suite 2500 (private equity investing) from September 1994 to September 2004). Oversees 104, Chicago, IL 60606 Anixter International (network support equipment distributor); Ventas, Inc. Trustee and Chairman of the Board(5) (real estate investment trust); Jones Lang LaSalle (real estate management (since 1996) services) and Ambac Financial Group (financial guaranty insurance) ANNE-LEE VERVILLE (age 59) Retired since 1997 (formerly General Manager, Global Education Industry, IBM 359 Stickney Hill Road Corporation (computer and technology) from 1994 to 1997). Oversees 105(4), Hopkinton, NH 03229 Chairman of the Board of Directors, Enesco Group, Inc. (designer, importer and Trustee (since 1998) distributor of giftware and collectibles) RICHARD L. WOOLWORTH (age 63) Retired since December 2003 (formerly Chairman and Chief Executive Officer, The 100 S.W. Market Street #1500 Regence Group (regional health insurer); Chairman and Chief Executive Officer, Portland, OR 97207 BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young & Trustee (since 1991) Company). Oversees 104, Northwest Natural Gas Co. (natural gas service provider) INTERESTED TRUSTEE WILLIAM E. MAYER(2) (age 64) Partner, Park Avenue Equity Partners (private equity) since February 1999 399 Park Avenue (formerly Partner, Development Capital LLC from November 1996 to February 1999). Suite 3204 Oversees 106(3), Lee Enterprises (print media), WR Hambrecht + Co. (financial New York, NY 10022 service provider); First Health (healthcare); Reader's Digest (publishing); Trustee (since 1994) OPENFIELD Solutions (retail industry technology provider) </Table> (1) In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Fund Trust (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds Complex. (2) Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. (3) Messrs. Lowry, Neuhauser and Mayer also serve as directors/trustees of the Liberty All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. (4) Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. (5) Mr. Theobald was appointed as Chairman of the Board effective December 10, 2003. The Statement of Additional Information includes additional information about the Trustees of the Funds and is available, without change, upon request by calling 800-426-3750. 173 <Page> <Table> <Caption> NAME, ADDRESS AND AGE, POSITION WITH COLUMBIA FUNDS, YEAR FIRST ELECTED OR APPOINTED TO OFFICE PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OFFICERS CHRISTOPHER L. WILSON (age 47) Head of Mutual Funds of the Advisor since August 2004; President of the One Financial Center Columbia Funds since October 2004 (formerly President and Chief Executive Boston, MA 02111 Officer, CDC IXIS Asset Management Services, Inc. from September 1998 to President (since 2004) August 2004). J. KEVIN CONNAUGHTON (age 40) Treasurer of the Columbia Funds and of the Liberty All-Star Funds since One Financial Center December 2000; Vice President of the Advisor since April 2003 (formerly Boston, MA 02111 President of the Columbia Funds from February 2004 to October 2004; Chief Treasurer (since 2000) Accounting Officer and Controller of the Liberty Funds and of the Liberty All-Star Funds from February 1998 to October 2000); Treasurer of the Galaxy Funds since September 2002; (formerly Treasurer from December 2002 to December 2004 and President from February 2004 to December 2004 of Columbia Management Multi-Strategy Hedge Fund, LLC; Vice President of Colonial Management Associates, Inc. from February 1998 to October 2000). MARY JOAN HOENE (age 55) Senior Vice President and Chief Compliance Officer of the Columbia Funds, 40 West 57th Street the Galaxy Fund, Nations Funds and of the Liberty All-Star Funds since New York, NY 10019 August 2004 and the BACAP Registered Hedge Fund since October 2004 Senior Vice President and Chief Compliance (formerly Partner, Carter, Ledyard & Milburn LLP from January 2001 to Officer (since 2004) August 2004; Counsel, Carter, Ledyard & Milburn LLP from November 1999 to December 2000; Vice President and Counsel, Equitable Life Assurance Society of the United States from April 1998 to November 1999). MICHAEL G. CLARKE (age 34) Chief Accounting Officer of the Columbia Funds and of the Liberty All-Star One Financial Center Funds since October 2004 (formerly Controller of the Columbia Funds and of Boston, MA 02111 the Liberty All-Star Funds from May 2004 to October 2004; Assistant Chief Accounting Officer (since 2004) Treasurer from June, 2002 to May 2004; Vice President, Product Strategy & Development of the Liberty Funds Group from February 2001 to June 2002; Assistant Treasurer of the Liberty Funds and of the Liberty All-Star Funds from August 1999 to February 2001; Audit Manager, Deloitte & Touche LLP from May 1997 to August 1999). JEFFREY R. COLEMAN (age 35) Controller of the Columbia Funds and of the Liberty All-Star Funds since One Financial Center October 2004 (formerly Vice President of CDC IXIS Asset Management Boston, MA 02111 Services, Inc. and Deputy Treasurer of the CDC Nvest Funds and Loomis Controller (since 2004) Sayles Funds from February 2003 to September 2004; Assistant Vice President of CDC IXIS Asset Management Services, Inc. and Assistant Treasurer of the CDC Nvest Funds from August 2000 to February 2003; Tax Manager of PFPC Inc. from November 1996 to August 2000). R. SCOTT HENDERSON (age 45) Secretary of the Columbia Funds since December 2004 (formerly Of Counsel, One Financial Center Bingham McCutchen from April 2001 to September 2004; Executive Director Boston, MA 02111 and General Counsel, Massachusetts Pension Reserves Investment Management Secretary (since 2004) Board from September 1997 to March 2001). </Table> 174 <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 funds' proxy voting policies and procedures is available (i) on the funds' website, www.columbiamanagement.com; (ii) on the Securities and Exchange Commission's website at www.sec.gov, and (iii) without charge, upon request, by calling 800-368-0346. Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the SEC's website. Information regarding how the funds voted proxies relating to portfolio securities is also available from the funds' website. The funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 175 <Page> SHR-02/095U-0105 (03/05) 05/4266 <Page> ITEM 2. CODE OF ETHICS. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that Douglas A. Hacker, Thomas E. Stitzel, Anne-Lee Verville and Richard L. Woolworth, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker, Mr. Stitzel, Ms. Verville and Mr. Woolworth are each independent trustees, as defined in paragraph (a)(2) of this item's instructions and collectively constitute the entire Audit Committee. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Fee information below is disclosed in aggregate for the series of the registrant whose reports to stockholders are included in this annual filing, as well as the series of the registrant whose reports to stockholders would have been included in this filing had they not been merged or liquidated during the period. (a) Aggregate Audit Fees billed by the principal accountant for professional services rendered during the fiscal years ended December 31, 2004 and December 31, 2003 are approximately as follows: <Page> 2004 2003 $ 192,500 $ 238,600 Audit Fees include amounts related to the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Aggregate Audit-Related Fees billed by the principal accountant for professional services rendered during the fiscal years ended December 31, 2004 and December 31, 2003 are approximately as follows: 2004 2003 $ 41,600 $ 67,800 Audit-Related Fees include amounts for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported in Audit Fees above. In both fiscal years 2004 and 2003, Audit-Related Fees include certain agreed-upon procedures performed for semi-annual shareholder reports. Audit-Related Fees in fiscal year 2003 also include agreed-upon procedures relating to fund mergers. (c) Aggregate Tax Fees billed by the principal accountant for professional services rendered during the fiscal years ended December 31, 2004 and December 31, 2003 are approximately as follows: 2004 2003 $ 30,000 $ 94,400 Tax Fees in both fiscal years 2004 and 2003 consist primarily of the review of annual tax returns and include amounts for professional services by the principal accountant for tax compliance, tax advice and tax planning. (d) Aggregate All Other Fees billed by the principal accountant for professional services rendered during the fiscal years ended December 31, 2004 and December 31, 2003 are as follows: 2004 2003 $ 0 $ 0 All Other Fees include amounts for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) above. None of the amounts described in paragraphs (a) through (d) above were approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. <Page> (e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES I. GENERAL OVERVIEW The Audit Committee of the registrant has adopted a formal policy (the "Policy") which sets forth the procedures and the conditions pursuant to which the Audit Committee will pre-approve (i) all audit and non-audit (including audit related, tax and all other) services provided by the registrant's independent auditor to the registrant and individual funds (collectively "Fund Services"), and (ii) all non-audit services provided by the registrant's independent auditor to the funds' adviser or a control affiliate of the adviser, that relate directly to the funds' operations and financial reporting (collectively "Fund-related Adviser Services"). A "control affiliate" is an entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the funds, and the term "adviser" is deemed to exclude any unaffiliated sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser. The adviser and control affiliates are collectively referred to as "Adviser Entities." The Audit Committee uses a combination of specific (on a case-by-case basis as potential services are contemplated) and general (pre-determined list of permitted services) pre-approvals. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent auditor. The Policy does not delegate the Audit Committee's responsibilities to pre-approve services performed by the independent auditor to management. II. GENERAL PROCEDURES On an annual basis, the Fund Treasurer and/or Director of Trustee Administration shall submit to the Audit Committee a schedule of the types of Fund Services and Fund-related Adviser Services that are subject to general pre-approval. These schedules will provide a description of each type of service that is subject to general pre-approval and, where possible, will provide estimated fees for each instance of providing each service. This general pre-approval and related fees (where provided) will generally cover a one-year period (for example, from June 1 through May 31 of the following year). The Audit Committee will review and approve the types of services and review the projected fees for the next one-year period and may add to, or subtract from, the list of general pre-approved services from time to time, based on subsequent determinations. This approval acknowledges that the Audit Committee is in agreement with the specific types of services that the independent auditor will be permitted to perform. The fee amounts will be updated to the extent necessary at other regularly scheduled meetings of the Audit Committee. <Page> In addition to the fees for each individual service, the Audit Committee has the authority to implement a fee cap on the aggregate amount of non-audit services provided to an individual fund. If, subsequent to general pre-approval, a fund, its investment adviser or a control affiliate determines that it would like to engage the independent auditor to perform a service that requires pre-approval and that is not included in the general pre-approval list, the specific pre-approval procedure shall be as follows: - A brief written request shall be prepared by management detailing the proposed engagement with explanation as to why the work is proposed to be performed by the independent auditor; - The request should be addressed to the Audit Committee with copies to the Fund Treasurer and/or Director of Trustee Administration; - The Fund Treasurer and/or Director of Trustee Administration will arrange for a discussion of the service to be included on the agenda for the next regularly scheduled Audit Committee meeting, when the Committee will discuss the proposed engagement and approve or deny the request. - If the timing of the project is critical and the project needs to commence before the next regularly scheduled meeting, the Chairperson of the Audit Committee may approve or deny the request on behalf of the Audit Committee, or, in the Chairperson's discretion, determine to call a special meeting of the Audit Committee for the purpose of considering the proposal. Should the Chairperson of the Audit Committee be unavailable, any other member of the Audit Committee may serve as an alternate for the purpose of approving or denying the request. Discussion with the Chairperson (or alternate, if necessary) will be arranged by the Fund Treasurer and/or Director of Trustee Administration. The independent auditor will not commence any such project unless and until specific approval has been given. III. CERTAIN OTHER SERVICES PROVIDED TO ADVISER ENTITIES The Audit Committee recognizes that there are cases where services proposed to be provided by the independent auditor to the adviser or control affiliates are not Fund-related Adviser Services within the meaning of the Policy, but nonetheless may be relevant to the Audit Committee's ongoing evaluation of the auditor's independence and objectivity with respect to its audit services to the funds. As a result, in all cases where an Adviser Entity engages the independent auditor to provide audit or non-audit services that are not Fund Services or Fund-related Adviser Services, were not subject to pre-approval by the Audit Committee, and the projected fees for any such engagement (or the aggregate of all such engagements during the period covered by the Policy) exceeds a pre-determined threshold established by the Audit Committee; the independent auditor, Fund Treasurer and/or Director of Trustee Administration will notify the Audit Committee not later than its next meeting. Such notification shall include a general description of the services provided, the entity that is to be the recipient of such services, the timing of the engagement, the entity's reasons for selecting the independent auditor, <Page> and the projected fees. Such information will allow the Audit Committee to consider whether non-audit services provided to the adviser and Adviser Entities, which were not subject to Audit Committee pre-approval, are compatible with maintaining the auditor's independence with respect to the Funds. IV. REPORTING TO THE AUDIT COMMITTEE The Fund Treasurer or Director of Trustee Administration shall report to the Audit Committee at each of its regular meetings regarding all Fund Services or Fund-related Adviser Services initiated since the last such report was rendered, including: - A general description of the services, and - Actual billed and projected fees, and - The means by which such Fund Services or Fund-related Adviser Services were pre-approved by the Audit Committee. In addition, the independent auditor shall report to the Audit Committee annually, and no more than 90 days prior to the filing of audit reports with the SEC, all non-audit services provided to entities in the funds' "investment company complex," as defined by SEC rules, that did not require pre-approval under the Policy. V. AMENDMENTS; ANNUAL APPROVAL BY AUDIT COMMITTEE The Policy may be amended from time to time by the Audit Committee. Prompt notice of any amendments will be provided to the independent auditor, Fund Treasurer and Director of Trustee Administration. The Policy shall be reviewed and approved at least annually by the Audit Committee. ***** (e)(2) The percentage of services described in paragraphs (b) through (d) of this Item approved pursuant to the "de minimis" exception under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X during both fiscal years ended December 31, 2004 and December 31, 2003 was zero. (f) Not applicable. (g) All non-audit fees billed by the registrant's accountant for services rendered to the registrant for the fiscal years ended December 31, 2004 and December 31, 2003 are disclosed in (b) through (d) of this Item. During the fiscal years ended December 31, 2004 and December 31, 2003, there were no Audit-Related Fees or Tax Fees that were approved for services to the investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services <Page> to the registrant under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. During the fiscal years ended December 31, 2004 and December 31, 2003, All Other Fees that were approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X were approximately $93,500 and $95,000, respectively. For both fiscal years, All Other Fees relate to internal controls reviews of the registrant's transfer agent. The percentage of Audit-Related Fees, Tax Fees and All Other Fees required to be approved under paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X that were approved under the "de minimis" exception during both fiscal years ended December 31, 2004 and December 31, 2003 was zero. (h) The registrant's Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant's adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence. The Audit Committee determined that the provision of such services is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS The registrant's "Schedule I - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. <Page> There have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, since those procedures were last disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officers, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH. (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/ Christopher L. Wilson ----------------------------------------------- Christopher L. Wilson, President Date March 1, 2005 ------------------------------------------------------------------- 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/ Christopher L. Wilson ----------------------------------------------- Christopher L. Wilson, President Date March 1, 2005 ------------------------------------------------------------------- By (Signature and Title) /S/ J. Kevin Connaughton ----------------------------------------------- J. Kevin Connaughton, Treasurer Date March 1, 2005 -------------------------------------------------------------------