<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: 12/31/05 ------------------- Date of reporting period: 06/30/05 ------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. <Page> ITEM 1. REPORTS TO STOCKHOLDERS. <Page> SEMIANNUAL REPORT - CLASS B SHARES JUNE 30, 2005 [GRAPHIC] LIBERTY VARIABLE INVESTMENT TRUST 2005 SEMIANNUAL REPORT - CLASS B SHARES Liberty Variable Investment Trust SHC-44/88220-0705 (08/05) 05/7110 <Page> PRESIDENT'S MESSAGE Liberty Variable Investment Trust Dear Shareholder: Columbia Management, the asset management division of Bank of America, is in the final stages of a significant business integration effort. Over the last year, we have been integrating various components of our various fund families, including Liberty and SteinRoe, which will result in a single fund family that covers a wide range of markets, sectors and asset classes. Our team of talented, seasoned investment professionals will continue to strive to achieve strong results within their investment categories. Our objective is not only to provide our shareholders with the best products but also to enhance the breadth and availability of our services. Given our ability to now leverage the size and scale of the Columbia Management business, I am pleased that these efforts will also result in substantial cost savings to the funds. Our goal is to create a more simplified, clearly delineated product line. Through thoughtful project planning and execution, we will initially reduce the number of retail mutual funds from over 140 to fewer than 90. Earlier this year several fund mergers and liquidations were successfully completed. As we work to complete the remaining product and service provider consolidations in the coming months, we remain committed to building a mutual fund business that meets, and hopefully exceeds, your desire for personal financial solutions. We will continue to strive for the highest standards of performance and service excellence. The asset management business is in a time of transformation and we are committed to being progressive and innovative in our approach to the business. We value the confidence you have placed in us to assist you in managing your funds during these changing times. As with all businesses within Bank of America, we understand that your trust must be continuously earned and will remain focused on producing results for you. In the pages that follow, you'll find a discussion of the economic environment during the period followed by a detailed report from the fund's manager or managers on key factors that influenced performance. We encourage you to read the manager reports carefully and discuss any questions you have with your financial advisor. As always, we thank you for choosing Columbia Management. We look forward to helping you keep your long-term financial goals on target in the years to come. Sincerely, /s/ Christopher L. Wilson Christopher L. Wilson President, Columbia Funds Christopher L. Wilson is Head of Mutual Funds for Columbia Management, responsible for the day-to-day delivery of mutual fund services to the firm's investors. With the exception of distribution, Chris oversees all aspects of the mutual fund services operation, including treasury, investment accounting and shareholder and broker services. Chris serves as Columbia Funds President, Nations Funds President and CEO and Galaxy Funds President and is the primary liaison to the Fund Boards of Trustees. Chris joined Bank of America in August 2004. Columbia Management Advisors, Inc. will combine with Banc of America Capital Management, LLC on or about September 30, 2005. At that time, the newly combined advisor will undergo a name change to Columbia Management Advisors, LLC and will continue to operate as a SEC-registered investment advisor, wholly owned subsidiary of Bank of America, N.A. and part of Columbia Management. The views expressed in the President's Letter and Portfolio Commentary reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Columbia Fund. References to specific company securities should not be construed as a recommendation or investment advice. Not FDIC May Lose Value ----------------- Insured No Bank Guarantee <Page> PERFORMANCE AT A GLANCE Liberty Variable Investment Trust <Table> <Caption> AVERAGE ANNUAL TOTAL RETURN AS OF 06/30/05 (%) 6-MONTH INCEPTION (CUMULATIVE) 1-YEAR 5-YEAR 10-YEAR LIFE - ----------------------------------------------------------------------------------------------------------------------------- LIBERTY VARIABLE INVESTMENT TRUST Colonial Small Cap Value Fund, Variable Series -- Class B(1) 06/01/00 -1.06 11.12 14.40 -- 9.43 Colonial Strategic Income Fund, Variable Series -- Class B(1) 06/01/00 0.30 10.41 7.88 7.25 7.70 Columbia High Yield Fund, Variable Series -- Class B(1) 04/14/03 1.15 8.03 6.41 -- 5.85 Columbia International Fund, Variable Series -- Class B(1) 06/01/00 -2.63 7.94 -2.41 3.57 2.28 Liberty Growth & Income Fund, Variable Series -- Class B(1) 06/01/00 0.51 9.54 2.12 10.03 11.19 Liberty S&P 500 Index Fund, Variable Series -- Class B 05/30/00 -1.15 5.55 -2.82 -- -2.18 Liberty Select Value Fund, Variable Series -- Class B 05/30/00 3.46 10.76 9.10 -- 9.08 </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 17 Columbia High Yield Fund, Variable Series 39 Columbia International Fund, Variable Series 56 Liberty Growth & Income Fund, Variable Series 72 Liberty S&P 500 Index Fund, Variable Series 86 Liberty Select Value Fund, Variable Series 104 FINANCIAL STATEMENTS Colonial Small Cap Value Fund, Variable Series 5 Colonial Strategic Income Fund, Variable Series 20 Columbia High Yield Fund, Variable Series 42 Columbia International Fund, Variable Series 59 Liberty Growth & Income Fund, Variable Series 75 Liberty S&P 500 Index Fund, Variable Series 89 Liberty Select Value Fund, Variable Series 107 </Table> Must be preceded or accompanied by a prospectus. Columbia Funds Distributor, Inc. 05/2005 FUNDS ARE DISTRIBUTED BY COLUMBIA FUNDS DISTRIBUTOR, INC. UNTIL ON OR ABOUT AUGUST 22, 2005, WHEN BACAP DISTRIBUTORS, LLC AND COLUMBIA FUNDS DISTRIBUTOR, INC., MEMBERS NASD, SIPC, WILL MERGE TO FORM COLUMBIA MANAGEMENT DISTRIBUTORS, INC. COLUMBIA FUNDS AND NATIONS FUNDS WILL THEN BE DISTRIBUTED BY COLUMBIA MANAGEMENT DISTRIBUTORS, INC., WHICH WILL BE PART OF COLUMBIA MANAGEMENT AND AN AFFILIATE OF BANK OF AMERICA CORPORATION. COLUMBIA MANAGEMENT IS THE PRIMARY INVESTMENT MANAGEMENT DIVISION OF BANK OF AMERICA CORPORATION. COLUMBIA MANAGEMENT ENTITIES FURNISH INVESTMENT MANAGEMENT SERVICES AND ADVISE INSTITUTIONAL AND MUTUAL FUND PORTFOLIOS. <Page> LIBERTY VARIABLE INVESTMENT TRUST <Page> PORTFOLIO MANAGER'S DISCUSSION Colonial Small Cap Value Fund, Variable Series / June 30, 2005 Colonial Small Cap Value Fund, Variable Series seeks long-term growth by investing primarily in smaller capitalization (small-cap) equities. Stephen D. Barbaro has managed the fund since June 2002. Small-cap stocks made little headway during the first half of 2005. Within the sector, value stocks modestly outpaced growth stocks. The fund fell slightly short of both the S&P Small Cap 600/ Barra Value Index and Russell 2000 Value Index ("Russell")(1). It also trailed the average return of the Lipper Small-Cap Value Funds Category(2). We continued to focus on companies with strong competitive and financial positions, good earnings growth prospects and reasonable valuations. However, the fund lost some ground relative to the Russell because the fund did not own highly leveraged companies. These companies were among the period's best performers, as investors rewarded companies that stretched for incremental returns by adding debt to their balance sheets. In addition, the fund owned more stocks than the index at the smaller end of the small-cap universe, a market capitalization range from $100 million to $2 billion. Relatively larger-cap stocks within the index outperformed small-cap stocks as the valuation gap between them narrowed. ENERGY AND UTILITIES DELIVERED MIXED RESULTS Although the market was flat, energy and utilities stocks posted strong gains. The fund's energy stocks were up nicely, even though they did not keep pace with the sector's return in the index. Leveraged refiners were among the index's best performers along with more expensive exploration and production stocks. We missed out on these gains because neither industry met the standards of our strategy. In utilities, where the fund had a below-average stake, the fund's returns were positive but also lagged the sector return for the index. The fund underperformed in this sector because we avoided owning the lower quality, alternative energy companies that led the sector. However, we continue to believe that it is prudent to focus on higher quality companies. WEAK RETURNS FROM INDUSTRIALS Although the industrials sector's overall return was flat for the period, the fund's industrial stocks declined modestly. The fund did not keep pace as it did not own the highly leveraged, lower quality industrial companies that led the sector. A few smaller-cap industrial stocks in the portfolio also suffered steep downturns, the result of moderately disappointing earnings. Financials, which was the fund's largest sector weight, were also flat. The fund had investments in banks, insurers and specialty finance companies, as well as a small stake in real estate investments trusts. The fund's technology stocks declined during the period, which was in line with the sector's return in the index. POSITIVE STOCK SELECTION IN MATERIALS AND CONSUMER DISCRETIONARY The fund's materials stocks declined, but far less than those in the Russell. The fund emphasized coal, titanium, and building materials stocks, all of which benefited from strong global demand and improved pricing. We reduced the fund's stake in steel stocks--a fortunate move, because steel commodity prices softened during the period. In the consumer discretionary sector, the fund generated positive returns that beat the sector average. Specialty retailers did especially well, including one company that was bought out at a substantial premium and another that purchased a major competitor. The fund also owned a tire retailer and building materials retailer that benefited from attractive valuations and good earnings. MORE NEUTRAL POSITIONING To prepare for more moderate economic growth, we pared back on economically sensitive sectors, including industrials and materials. In their place, we added to our stakes in consumer staples and health care. We thought stocks in these sectors offered relatively attractive valuations along with more predictable earnings outlooks. In the spring, we also brought the fund's median market cap in line with the index's, believing that smaller-cap stocks no longer offer much of an advantage over larger size small-cap stocks. Going forward, we plan to maintain our focus on companies with strong balance sheets, which we believe have the potential to be long-term winners. Stephen D. Barbaro has managed the Colonial Small Cap Value Fund, Variable Series since June 2002 and has been with advisor or its predecessors since 1976. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. The opinions expressed here are strictly those of Columbia Management and are subject to change without notice. Other divisions of Bank of America and/or affiliates of Columbia Management may have opinions that are inconsistent with these opinions. Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. Investments in small-cap stocks may be subject to greater volatility and price fluctuations because they may be thinly traded and less liquid than investments in larger companies. Value stocks are stocks 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 and, in the advisor's opinion, undervalued. If the advisor's assessment of a company's prospects is wrong, the price of the company's stock may fall or may not approach the value the advisor has placed on it. (1) The S&P Small Cap 600/Barra Value Index is an unmanaged index that tracks the performance of value stocks, as determined by low price-to-book ratios included in the S&P Small Cap 600 Index. 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. (2) 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. 2 <Page> PERFORMANCE INFORMATION Colonial Small Cap Value Fund, Variable Series / June 30, 2005 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR LIFE - --------------------------------------------------------------------------- Class B (06/01/00) -1.06 11.12 14.40 9.43 Russell 2000 Value Index(1) 0.90 14.39 16.12 9.60 S&P Small Cap 600/Barra Value Index(2) 1.63 14.17 14.38 9.25 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/04 06/30/05 - --------------------------------------------------------------- Class B 16.92 16.74 </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. [CHART] VALUE OF A $10,000 INVESTMENT, 05/19/98(3) - 06/30/05 <Table> <Caption> RUSSELL 2000 S&P SMALL CAP 600/BARRA CLASS B SHARES VALUE INDEX VALUE INDEX 5/19/1998 $ 10,000 $ 10,000 5/31/1998 $ 10,020 $ 9,794 $ 10,000 6/30/1998 $ 10,050 $ 9,739 $ 9,995 7/31/1998 $ 9,120 $ 8,977 $ 9,070 8/31/1998 $ 7,201 $ 7,571 $ 7,434 9/30/1998 $ 7,461 $ 7,999 $ 7,829 10/31/1998 $ 7,881 $ 8,236 $ 8,171 11/30/1998 $ 8,401 $ 8,459 $ 8,520 12/31/1998 $ 8,675 $ 8,725 $ 8,855 1/31/1999 $ 8,464 $ 8,527 $ 8,753 2/28/1999 $ 7,626 $ 7,945 $ 8,040 3/31/1999 $ 7,525 $ 7,879 $ 8,009 4/30/1999 $ 8,030 $ 8,599 $ 8,707 5/31/1999 $ 8,354 $ 8,863 $ 9,055 6/30/1999 $ 8,788 $ 9,184 $ 9,604 7/31/1999 $ 8,778 $ 8,966 $ 9,454 8/31/1999 $ 8,324 $ 8,638 $ 9,057 9/30/1999 $ 8,273 $ 8,465 $ 8,891 10/31/1999 $ 8,313 $ 8,296 $ 8,685 11/30/1999 $ 8,545 $ 8,339 $ 8,879 12/31/1999 $ 9,226 $ 8,595 $ 9,123 1/31/2000 $ 8,640 $ 8,370 $ 8,656 2/29/2000 $ 9,216 $ 8,881 $ 9,047 3/31/2000 $ 9,358 $ 8,923 $ 9,381 4/30/2000 $ 9,459 $ 8,975 $ 9,446 5/31/2000 $ 9,317 $ 8,838 $ 9,292 6/30/2000 $ 9,692 $ 9,096 $ 9,559 7/31/2000 $ 9,783 $ 9,399 $ 9,747 8/31/2000 $ 10,582 $ 9,819 $ 10,317 9/30/2000 $ 10,582 $ 9,763 $ 10,296 10/31/2000 $ 10,633 $ 9,728 $ 10,346 11/30/2000 $ 9,864 $ 9,530 $ 9,662 12/31/2000 $ 10,969 $ 10,553 $ 11,026 1/31/2001 $ 11,061 $ 10,844 $ 11,899 2/28/2001 $ 10,743 $ 10,829 $ 11,397 3/31/2001 $ 10,569 $ 10,656 $ 10,923 4/30/2001 $ 11,346 $ 11,149 $ 11,581 5/31/2001 $ 11,683 $ 11,436 $ 11,877 6/30/2001 $ 11,765 $ 11,896 $ 12,332 7/31/2001 $ 11,847 $ 11,629 $ 12,216 8/31/2001 $ 11,613 $ 11,588 $ 12,019 9/30/2001 $ 10,215 $ 10,309 $ 10,298 10/31/2001 $ 10,460 $ 10,578 $ 10,769 11/30/2001 $ 11,165 $ 11,339 $ 11,630 12/31/2001 $ 11,978 $ 12,033 $ 12,470 1/31/2002 $ 12,071 $ 12,193 $ 12,703 2/28/2002 $ 12,310 $ 12,267 $ 12,648 3/31/2002 $ 13,181 $ 13,185 $ 13,747 4/30/2002 $ 13,410 $ 13,649 $ 14,310 5/31/2002 $ 12,995 $ 13,197 $ 13,767 6/30/2002 $ 12,591 $ 12,905 $ 13,152 7/31/2002 $ 11,046 $ 10,988 $ 11,013 8/31/2002 $ 11,295 $ 10,939 $ 10,999 9/30/2002 $ 10,531 $ 10,158 $ 10,190 10/31/2002 $ 10,749 $ 10,311 $ 10,394 11/30/2002 $ 11,581 $ 11,133 $ 10,956 12/31/2002 $ 11,243 $ 10,658 $ 10,665 1/31/2003 $ 10,910 $ 10,357 $ 10,225 2/28/2003 $ 10,352 $ 10,009 $ 9,847 3/31/2003 $ 10,373 $ 10,116 $ 9,816 4/30/2003 $ 11,190 $ 11,078 $ 10,704 5/31/2003 $ 12,113 $ 12,209 $ 11,702 6/30/2003 $ 12,382 $ 12,415 $ 12,050 7/31/2003 $ 13,037 $ 13,034 $ 12,639 8/31/2003 $ 13,617 $ 13,530 $ 13,247 9/30/2003 $ 13,496 $ 13,374 $ 12,812 10/31/2003 $ 14,583 $ 14,464 $ 13,954 11/30/2003 $ 15,161 $ 15,020 $ 14,530 12/31/2003 $ 15,667 $ 15,563 $ 14,937 1/31/2004 $ 16,230 $ 16,102 $ 15,294 2/29/2004 $ 16,483 $ 16,414 $ 15,656 3/31/2004 $ 16,814 $ 16,641 $ 15,930 4/30/2004 $ 16,120 $ 15,780 $ 15,344 5/31/2004 $ 16,220 $ 15,971 $ 15,536 6/30/2004 $ 17,091 $ 16,783 $ 16,387 7/31/2004 $ 16,308 $ 16,011 $ 15,609 8/31/2004 $ 16,231 $ 16,167 $ 15,659 9/30/2004 $ 16,887 $ 16,808 $ 16,431 10/31/2004 $ 17,132 $ 17,068 $ 16,572 11/30/2004 $ 18,686 $ 18,582 $ 18,080 12/31/2004 $ 19,198 $ 19,026 $ 18,409 1/31/2005 $ 18,528 $ 18,290 $ 17,765 2/28/2005 $ 18,935 $ 18,654 $ 18,314 3/31/2005 $ 18,617 $ 18,270 $ 17,970 4/30/2005 $ 17,528 $ 17,327 $ 16,983 5/31/2005 $ 18,243 $ 18,384 $ 18,002 6/30/2005 $ 18,983 $ 19,201 $ 18,714 </Table> The graph compares the results of a hypothetical $10,000 investment in the fund with the indexes. The Indexes are unmanaged and returns for the indexes and the fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Investment earnings, if any, are income tax-deferred until distribution, at which time taxes will become due. 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 Small Cap 600/Barra Value Index is an unmanaged index that tracks the performance of value stocks, as determined by low price-to-book ratios included in the S&P Small Cap 600 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 / June 30, 2005 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 ongoing 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 ongoing 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 $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 01/01/05 - 06/30/05 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - -------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - -------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 989.39 1,019.34 5.43 5.51 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 365. 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 funds 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 / June 30, 2005 (Unaudited) <Table> <Caption> SHARES VALUE ------------- ------------- COMMON STOCKS--99.1% CONSUMER DISCRETIONARY--13.8% AUTO COMPONENTS--0.9% BorgWarner, Inc. 37,700 $ 2,023,359 Modine Manufacturing Co. 28,450 926,332 ------------- 2,949,691 ------------- DISTRIBUTORS--0.8% Building Material Holding Corp. 37,600 2,605,304 ------------- HOTELS, RESTAURANTS & LEISURE--3.5% Bob Evans Farms, Inc. 35,590 829,959 Dave & Buster's, Inc. (a) 76,400 1,408,816 Landry's Restaurants, Inc. 62,750 1,888,148 Lone Star Steakhouse & Saloon, Inc. 83,950 2,552,919 Marcus Corp. 78,700 1,670,014 Scientific Games Corp., Class A (a) 114,000 3,070,020 Vail Resorts, Inc. (a) 24,900 699,690 ------------- 12,119,566 ------------- HOUSEHOLD DURABLES--1.7% American Greetings Corp., Class A 136,200 3,609,300 CSS Industries, Inc. 39,100 1,323,144 Kimball International, Inc., Class B 84,200 1,111,440 ------------- 6,043,884 ------------- MEDIA--2.3% 4Kids Entertainment, Inc. (a) 74,500 1,481,060 Journal Communications, Inc., Class A 68,670 1,153,656 Liberty Corp. 35,800 1,317,798 Media General, Inc., Class A 21,600 1,398,816 Reader's Digest Association, Inc. 52,000 858,000 Scholastic Corp. (a) 45,800 1,765,590 ------------- 7,974,920 ------------- SPECIALTY RETAIL--2.5% GameStop Corp., Class A (a) 90,700 2,966,797 Monro Muffler, Inc. (a) 82,475 2,433,837 Movie Gallery, Inc. 57,200 1,511,796 Pier 1 Imports, Inc. 61,700 875,523 Rent-A-Center, Inc. (a) 11,771 274,147 TBC Corp. (a) 23,450 636,198 Zale Corp. (a) 3,716 117,760 ------------- 8,816,058 ------------- TEXTILES, APPAREL & LUXURY GOODS--2.1% Delta Apparel, Inc. 47,100 609,003 Hampshire Group Ltd. (a) 87,600 1,717,836 Kellwood Co. 56,350 1,515,815 Russell Corp. 61,700 1,261,765 Stride Rite Corp. 77,600 1,070,104 Tandy Brands Accessories, Inc. 3,967 43,240 Wolverine World Wide, Inc. 45,880 1,101,579 ------------- 7,319,342 ------------- CONSUMER STAPLES--3.7% FOOD & STAPLES RETAILING--1.4% BJ's Wholesale Club, Inc. (a) 33,900 $ 1,101,411 Performance Food Group Co. (a) 30,600 924,426 Weis Markets, Inc. 75,530 2,929,809 ------------- 4,955,646 ------------- FOOD PRODUCTS--2.3% Central Garden & Pet Co. (a) 18,100 889,072 Corn Products International, Inc. 94,060 2,234,866 Flowers Foods, Inc. 56,307 1,991,015 J&J Snack Foods Corp. 20,874 1,092,754 Lancaster Colony Corp. 13,866 595,129 Lance, Inc. 61,100 1,051,531 ------------- 7,854,367 ------------- ENERGY--6.4% ENERGY EQUIPMENT & SERVICES--1.5% Gulf Island Fabrication, Inc. 795 15,805 Lufkin Industries, Inc. 100,900 3,630,382 Universal Compression Holdings, Inc. (a) 44,150 1,599,996 ------------- 5,246,183 ------------- OIL, GAS & CONSUMABLE FUELS--4.9% Bill Barrett Corp. (a) 14,807 437,991 Bois d'Arc Energy, Inc. (a) 52,087 768,283 Cimarex Energy Co. (a) 65,091 2,532,691 Energy Partners Ltd. (a) 74,400 1,950,024 Harvest Natural Resources, Inc. (a) 109,250 1,194,102 Houston Exploration Co. (a) 22,560 1,196,808 InterOil Corp. (a) 31,800 864,324 Peabody Energy Corp. 32,920 1,713,157 Range Resources Corp. 77,100 2,073,990 Stone Energy Corp. (a) 43,800 2,141,820 Western Gas Resources, Inc. 63,600 2,219,640 ------------- 17,092,830 ------------- FINANCIALS--26.9% CAPITAL MARKETS--0.3% Piper Jaffray Companies, Inc. (a) 36,320 1,105,218 ------------- COMMERCIAL BANKS--11.7% BancFirst Corp. 10,199 887,211 BancorpSouth, Inc. 75,770 1,788,172 BancTrust Financial Group, Inc. 39,800 777,294 Bank of Granite Corp. 56,100 1,073,754 Bryn Mawr Bank Corp. 62,797 1,200,051 Capitol Bancorp Ltd. 59,400 1,996,434 Chemical Financial Corp. 58,415 1,934,121 Chittenden Corp. 79,475 2,161,720 Citizens Banking Corp. 32,720 988,798 City Holding Co. 21,060 769,111 Columbia Banking System, Inc. 44,100 1,085,742 Community Trust Bancorp, Inc. 37,742 1,234,918 </Table> See Accompanying Notes to Financial Statements. 5 <Page> <Table> <Caption> SHARES VALUE ------------- ------------- Corus Bankshares, Inc. 52,200 $ 2,896,578 First Citizens BancShares, Inc., Class A 8,500 1,228,675 First Financial Bankshares, Inc. 37,700 1,275,768 First Financial Corp. 40,200 1,154,946 Greater Bay Bancorp 57,440 1,514,693 Hancock Holding Co. 29,459 1,013,390 ITLA Capital Corp. (a) 27,500 1,482,250 MASSBANK Corp. 11,400 395,010 Merchants Bancshares, Inc. 45,400 1,191,205 Mid-State Bancshares 80,050 2,222,988 Northrim BanCorp, Inc. 41,500 974,420 Sterling Bancshares, Inc. 134,300 2,089,708 TriCo Bancshares 97,014 2,167,293 TrustCo Bank Corp. 101,130 1,320,758 UMB Financial Corp. 36,200 2,064,486 Whitney Holding Corp. 60,600 1,977,378 ------------- 40,866,872 ------------- CONSUMER FINANCE--0.6% Cash America International, Inc. 104,140 2,095,297 ------------- DIVERSIFIED FINANCIAL SERVICES--1.9% Advance America Cash Advance Centers, Inc. 98,900 1,582,400 Metris Companies, Inc. (a) 170,300 2,462,538 MFC Bancorp Ltd. (a) 137,600 2,563,488 ------------- 6,608,426 ------------- INSURANCE--6.0% AmerUs Group Co. 30,600 1,470,330 Argonaut Group, Inc. (a) 16,504 381,077 Baldwin & Lyons, Inc., Class B 47,320 1,140,412 CNA Surety Corp. (a) 88,400 1,312,740 Commerce Group, Inc. 15,900 987,549 Delphi Financial Group, Inc., Class A 50,586 2,233,372 Harleysville Group, Inc. 68,700 1,435,143 Horace Mann Educators Corp. 67,400 1,268,468 Navigators Group, Inc. (a) 61,577 2,128,717 Phoenix Companies, Inc. 142,350 1,693,965 ProCentury Corp. 104,100 1,044,123 Quanta Capital Holdings Ltd. (a) 146,290 911,387 RLI Corp. 37,207 1,659,432 UICI 59,650 1,775,780 United America Indemnity Ltd., Class A (a) 77,700 1,335,663 ------------- 20,778,158 ------------- REAL ESTATE--6.4% Alexandria Real Estate Equities, Inc., REIT 21,340 1,567,423 BioMed Realty Trust, Inc., REIT 46,550 1,110,218 Brandywine Realty Trust, REIT 55,160 1,690,654 Cousins Properties, Inc., REIT 44,620 1,319,860 EastGroup Properties, Inc., REIT 51,750 2,179,192 Equity One, Inc., REIT 67,000 $ 1,520,900 Getty Realty Corp., REIT 54,160 1,500,232 Mid-America Apartment Communities, Inc., REIT 57,060 2,591,665 Nationwide Health Properties, Inc., REIT 88,650 2,093,026 PS Business Parks, Inc., REIT 58,900 2,618,105 Tanger Factory Outlet Centers, Inc., REIT 61,800 1,664,274 Universal Health Realty Income Trust, REIT 30,000 1,143,300 Urstadt Biddle Properties, Inc., Class A, REIT 65,500 1,134,460 ------------- 22,133,309 ------------- HEALTH CARE--9.5% HEALTH CARE EQUIPMENT & SUPPLIES--3.2% Bio-Rad Laboratories, Inc., Class A (a) 19,148 1,133,753 Greatbatch, Inc. (a) 60,500 1,445,950 Haemonetics Corp. (a) 38,570 1,567,485 Invacare Corp. 38,300 1,698,988 STERIS Corp. 77,100 1,986,867 Sybron Dental Specialties, Inc. (a) 43,620 1,640,984 Varian, Inc. (a) 22,610 854,432 Viasys Healthcare, Inc. (a) 36,700 829,053 ------------- 11,157,512 ------------- HEALTH CARE PROVIDERS & SERVICES--5.9% Cross Country Healthcare, Inc. (a) 64,600 1,098,200 Genesis HealthCare Corp. (a) 50,300 2,327,884 Gentiva Health Services, Inc. (a) 88,600 1,582,396 Hooper Holmes, Inc. 168,500 699,275 Kindred Healthcare, Inc. (a) 90,600 3,588,666 OCA, Inc. (a) 132,500 249,100 Owens & Minor, Inc. 45,500 1,471,925 PAREXEL International Corp. (a) 83,000 1,647,550 Pediatrix Medical Group, Inc. (a) 41,600 3,059,264 RehabCare Group, Inc. (a) 39,400 1,053,162 Res-Care, Inc. (a) 45,900 622,404 Symbion, Inc. (a) 57,900 1,380,915 United Surgical Partners International, Inc. (a) 30,300 1,578,024 ------------- 20,358,765 ------------- PHARMACEUTICALS--0.4% Perrigo Co. 97,800 1,363,332 ------------- INDUSTRIALS--15.7% AEROSPACE & DEFENSE--2.7% AAR Corp. (a) 94,723 1,488,098 Esterline Technologies Corp. (a) 65,200 2,613,216 Kaman Corp., Class A 79,900 1,441,396 </Table> See Accompanying Notes to Financial Statements. 6 <Page> <Table> <Caption> SHARES VALUE ------------- ------------- Ladish Co., Inc. (a) 65,004 $ 653,496 Precision Castparts Corp. 38,700 3,014,730 ------------- 9,210,936 ------------- AIR FREIGHT & LOGISTICS--0.3% Ryder System, Inc. 30,300 1,108,980 ------------- AIRLINES--0.5% MAIR Holdings, Inc. (a) 45,968 406,357 Skywest, Inc. 70,900 1,288,962 ------------- 1,695,319 ------------- BUILDING PRODUCTS--0.5% NCI Building Systems, Inc. (a) 51,700 1,695,760 ------------- COMMERCIAL SERVICES & SUPPLIES--4.4% ABM Industries, Inc. 70,600 1,376,700 Angelica Corp. 36,800 901,968 Casella Waste Systems, Inc., Class A (a) 148,400 1,780,800 Century Business Services, Inc. (a) 89,474 362,370 Consolidated Graphics, Inc. (a) 66,350 2,705,089 Healthcare Services Group, Inc. 127,250 2,555,180 Imagistics International, Inc. (a) 73,450 2,056,600 NCO Group, Inc. (a) 45,300 979,839 Sourcecorp, Inc. (a) 45,200 895,864 TeleTech Holdings, Inc. (a) 110,000 896,500 United Stationers, Inc. (a) 15,310 751,721 ------------- 15,262,631 ------------- CONSTRUCTION & ENGINEERING--1.3% Comfort Systems USA, Inc. (a) 2,684 17,661 Dycom Industries, Inc. (a) 66,200 1,311,422 EMCOR Group, Inc. (a) 22,100 1,080,690 Washington Group International, Inc. (a) 42,400 2,167,488 ------------- 4,577,261 ------------- ELECTRICAL EQUIPMENT--1.3% Genlyte Group, Inc. (a) 50,600 2,466,244 Woodward Governor Co. 24,900 2,092,347 ------------- 4,558,591 ------------- MACHINERY--2.3% Briggs & Stratton Corp. 47,300 1,637,526 EnPro Industries, Inc. (a) 71,400 2,061,318 Harsco Corp. 50,900 2,776,595 Kadant, Inc. (a) 30,133 660,817 Robbins & Myers, Inc. 36,733 790,127 ------------- 7,926,383 ------------- ROAD & RAIL--0.9% Dollar Thrifty Automotive Group, Inc. (a) 44,900 1,705,302 Werner Enterprises, Inc. 75,300 1,478,892 ------------- 3,184,194 ------------- TRADING COMPANIES & DISTRIBUTORS--1.5% Hughes Supply, Inc. 70,422 1,978,858 Watsco, Inc. 78,350 3,337,710 ------------- 5,316,568 ------------- INFORMATION TECHNOLOGY--11.3% COMMUNICATIONS EQUIPMENT--1.1% Anaren, Inc. (a) 90,200 $ 1,186,130 Belden CDT, Inc. 43,200 915,840 Black Box Corp. 27,300 966,420 Tollgrade Communications, Inc. (a) 71,850 538,875 ------------- 3,607,265 ------------- COMPUTERS & PERIPHERALS--0.8% Electronics for Imaging, Inc. (a) 23,300 490,232 Imation Corp. 35,400 1,373,166 Intergraph Corp. (a) 26,466 912,018 ------------- 2,775,416 ------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--2.6% Agilysys, Inc. 55,450 870,565 Anixter International, Inc. (a) 27,650 1,027,750 Benchmark Electronics, Inc. (a) 48,450 1,473,849 Brightpoint, Inc. (a) 104,000 2,307,760 MTS Systems Corp. 50,050 1,680,679 Vishay Intertechnology, Inc. (a) 149,900 1,779,313 ------------- 9,139,916 ------------- INTERNET SOFTWARE & SERVICES--0.5% Digitas, Inc. (a) 56,890 649,115 Keynote Systems, Inc. (a) 86,800 1,012,956 ------------- 1,662,071 ------------- IT SERVICES--1.4% Acxiom Corp. 66,400 1,386,432 MAXIMUS, Inc. 30,320 1,069,993 MPS Group, Inc. (a) 247,000 2,326,740 ------------- 4,783,165 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.9% ATMI, Inc. (a) 30,600 887,706 Exar Corp. (a) 85,300 1,270,117 Fairchild Semiconductor Corp., Class A (a) 45,230 667,143 Integrated Device Technology, Inc. (a) 39,160 420,970 MEMC Electronic Materials, Inc. (a) 106,960 1,686,759 Standard Microsystems Corp. (a) 76,000 1,776,880 ------------- 6,709,575 ------------- SOFTWARE--3.0% Captaris, Inc. (a) 175,100 724,914 Internet Security Systems, Inc. (a) 64,500 1,308,705 Lawson Software, Inc. (a) 85,900 442,385 MSC.Software Corp. (a) 111,700 1,535,875 PLATO Learning, Inc. (a) 107,062 790,118 SeaChange International, Inc. (a) 35,100 246,402 Sybase, Inc. (a) 71,700 1,315,695 Take-Two Interactive Software, Inc. (a) 45,550 1,159,247 THQ, Inc. (a) 30,300 886,881 </Table> See Accompanying Notes to Financial Statements. 7 <Page> <Table> <Caption> SHARES VALUE ------------- ------------- Transaction Systems Architects, Inc., Class A (a) 83,400 $ 2,054,142 ------------- 10,464,364 ------------- MATERIALS--7.2% CHEMICALS--2.5% Cytec Industries, Inc. 39,800 1,584,040 H.B. Fuller Co. 58,900 2,006,134 Minerals Technologies, Inc. 30,100 1,854,160 Schulman (A.), Inc. 79,150 1,415,993 Sensient Technologies Corp. 51,100 1,053,171 Stepan Co. 42,700 943,670 ------------- 8,857,168 ------------- CONSTRUCTION MATERIALS--0.9% Eagle Materials, Inc. 32,700 3,027,693 ------------- CONTAINERS & PACKAGING--1.3% AptarGroup, Inc. 29,800 1,513,840 Greif, Inc., Class A 49,350 3,015,285 ------------- 4,529,125 ------------- METALS & MINING--1.8% Alpha Natural Resources, Inc. (a) 56,240 1,343,011 AMCOL International Corp. 46,400 871,856 Carpenter Technology Corp. 17,700 916,860 Metal Management, Inc. 49,200 952,020 RTI International Metals, Inc. (a) 44,430 1,395,547 Worthington Industries, Inc. 45,430 717,794 ------------- 6,197,088 ------------- PAPER & FOREST PRODUCTS--0.7% Mercer International, Inc. (a) 152,500 1,111,725 P.H. Glatfelter Co. 107,100 1,328,040 ------------- 2,439,765 ------------- TELECOMMUNICATION SERVICES--0.6% DIVERSIFIED TELECOMMUNICATION SERVICES--0.3% North Pittsburgh Systems, Inc. 53,100 1,038,636 ------------- WIRELESS TELECOMMUNICATION SERVICES--0.3% Price Communications Corp. (a) 68,075 1,177,698 ------------- UTILITIES--4.0% ELECTRIC UTILITIES--3.3% ALLETE, Inc. 30,600 1,526,940 Central Vermont Public Service Corp. 74,600 1,380,100 CH Energy Group, Inc. 50,300 2,446,089 El Paso Electric Co. (a) 84,400 1,725,980 Maine & Maritimes Corp. 16,900 414,050 MGE Energy, Inc. 29,400 1,069,572 Otter Tail Corp. 42,800 1,169,724 Puget Energy, Inc. 72,800 1,702,064 ------------- 11,434,519 ------------- GAS UTILITIES--0.7% Cascade Natural Gas Corp. 32,100 $ 658,050 Northwest Natural Gas Co. 24,300 929,232 WGL Holdings, Inc. 25,800 867,912 ------------- 2,455,194 ------------- TOTAL COMMON STOCKS (cost of $305,415,474) 344,279,961 ------------- <Caption> PAR ------------- SHORT-TERM OBLIGATION--0.6% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/05, due 07/01/05 at 2.700%, collateralized by a U.S. Treasury Note maturing 11/15/12, market value of $2,245,913 (repurchase proceeds $2,198,165) $ 2,198,000 2,198,000 ------------- TOTAL SHORT-TERM OBLIGATION (cost of $2,198,000) 2,198,000 ------------- TOTAL INVESTMENTS--99.7% (cost of $307,613,474) (b) 346,477,961 ------------- OTHER ASSETS & LIABILITIES, NET--0.3% 1,139,960 ------------- NET ASSETS--100.0% $ 347,617,921 ============= </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $307,613,474. At June 30, 2005, the Fund held investments in the following sectors: <Table> <Caption> SECTOR % OF NET ASSETS - ------ --------------- Financials 26.9% Industrials 15.7 Consumer Discretionary 13.8 Information Technology 11.3 Health Care 9.5 Materials 7.2 Energy 6.4 Utilities 4.0 Consumer Staples 3.7 Telecommunication Services 0.6 Short-Term Obligation 0.6 Other Assets & Liabilities, Net 0.3 ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 8 <Page> STATEMENT OF ASSETS & LIABILITIES Colonial Small Cap Value Fund, Variable Series / June 30, 2005 (Unaudited) <Table> ASSETS: Investments, at cost $ 307,613,474 -------------- Investments, at value $ 346,477,961 Cash 497 Receivable for: Investments sold 1,283,697 Fund shares sold 1,163,393 Interest 165 Dividends 324,061 Expense reimbursement due from Distributor 12,085 Deferred Trustees' compensation plan 6,163 -------------- TOTAL ASSETS 349,268,022 -------------- LIABILITIES: Payable for: Investments purchased 1,254,416 Fund shares repurchased 56,157 Investment advisory fee 221,203 Transfer agent fee 595 Pricing and bookkeeping fees 7,602 Trustees' fees 646 Custody fee 13,714 Distribution fee--Class B 66,432 Deferred Trustees' fees 6,163 Other liabilities 23,173 -------------- TOTAL LIABILITIES 1,650,101 -------------- NET ASSETS $ 347,617,921 ============== COMPOSITION OF NET ASSETS: Paid-in capital $ 306,560,463 Undistributed net investment income 853,661 Accumulated net realized gain 1,339,310 Net unrealized appreciation on investments 38,864,487 -------------- NET ASSETS $ 347,617,921 ============== CLASS A: Net assets $ 13,281,033 Shares outstanding 791,581 ============== Net asset value per share $ 16.78 ============== CLASS B: Net assets $ 334,336,888 Shares outstanding 19,966,627 ============== Net asset value per share $ 16.74 ============== </Table> See Accompanying Notes to Financial Statements. 9 <Page> STATEMENT OF OPERATIONS Colonial Small Cap Value Fund, Variable Series For the Six Months Ended June 30, 2005 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 2,671,660 Interest 48,784 -------------- Total Investment Income 2,720,444 -------------- EXPENSES: Investment advisory fee 1,227,630 Distribution fee--Class B 367,143 Transfer agent fee 3,719 Pricing and bookkeeping fees 43,083 Trustees' fees 6,091 Custody fee 55,135 Non-recurring costs (See Note 6) 3,699 Other expenses 44,582 -------------- Total Expenses 1,751,082 Fees reimbursed by Distributor--Class B (72,476) Non-recurring costs assumed by Investment Advisor (See Note 6) (3,699) Custody earnings credit (93) -------------- Net Expenses 1,674,814 -------------- Net Investment Income 1,045,630 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 599,519 Net change in unrealized appreciation (depreciation) on investments (2,575,850) -------------- Net Loss (1,976,331) -------------- Net Decrease in Net Assets from Operations $ (930,701) ============== </Table> See Accompanying Notes to Financial Statements. 10 <Page> STATEMENT OF CHANGES IN NET ASSETS Colonial Small Cap Value Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2005 2004 - ---------------------------------- -------------- -------------- OPERATIONS: Net investment income $ 1,045,630 $ 717,153 Net realized gain on investments and foreign currency transactions 599,519 6,089,366 Net change in unrealized appreciation (depreciation) on investments (2,575,850) 32,496,427 -------------- -------------- Net Increase (Decrease) from Operations (930,701) 39,302,946 -------------- -------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (59,647) Class B -- (777,348) From net realized gains: Class A -- (363,580) Class B -- (6,319,347) -------------- -------------- Total Distributions Declared to Shareholders -- (7,519,922) -------------- -------------- SHARE TRANSACTIONS: Class A: Subscriptions 1,096,584 3,893,180 Distributions reinvested -- 423,227 Redemptions (2,186,327) (2,651,167) -------------- -------------- Net Increase (Decrease) (1,089,743) 1,665,240 -------------- -------------- Class B: Subscriptions 78,655,294 175,158,904 Distributions reinvested -- 7,096,695 Redemptions (8,061,454) (6,127,471) -------------- -------------- Net Increase 70,593,840 176,128,128 -------------- -------------- Net Increase from Share Transactions 69,504,097 177,793,368 -------------- -------------- Total Increase in Net Assets 68,573,396 209,576,392 NET ASSETS: Beginning of period 279,044,525 69,468,133 -------------- -------------- End of period (including undistributed (overdistributed) net investment income of $853,661 and $(191,969), respectively) $ 347,617,921 $ 279,044,525 ============== ============== CHANGES IN SHARES: Class A: Subscriptions 67,033 254,063 Issued for distributions reinvested -- 25,530 Redemptions (134,741) (174,777) -------------- -------------- Net Increase (Decrease) (67,708) 104,816 -------------- -------------- Class B: Subscriptions 4,830,958 11,470,781 Issued for distributions reinvested -- 427,336 Redemptions (492,010) (399,816) -------------- -------------- Net Increase 4,338,948 11,498,301 -------------- -------------- </Table> See Accompanying Notes to Financial Statements. 11 <Page> NOTES TO FINANCIAL STATEMENTS Colonial Small Cap Value Fund, Variable Series / June 30, 2005 (Unaudited) NOTE 1. ORGANIZATION Colonial Small Cap Value Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust"), is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks long-term growth by investing primarily in smaller capitalization (small-cap) equities. 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 have 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. 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. 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. 12 <Page> FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2004 was as follows: <Table> <Caption> DECEMBER 31, 2004 ------------ Distributions paid from: Ordinary income* $ 5,382,821 Long-term capital gains 2,137,101 </Table> * For tax purposes short-term capital gains distributions are considered ordinary income distributions. Unrealized appreciation and depreciation at June 30, 2005, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 51,199,125 Unrealized depreciation (12,334,638) ------------- Net unrealized appreciation $ 38,864,487 ============= </Table> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE--Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and provides administrative and other services to the Fund. Columbia receives a monthly investment advisory 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 $500 million 0.80% $500 million to $1 billion 0.75% Over $1 billion 0.70% </Table> For the six months ended June 30, 2005, the Fund's annualized effective investment advisory fee rate was 0.80%. PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2005, the annualized 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 six months ended June 30, 2005, the Fund's annualized effective transfer agent fee rate was less than 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia 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) will 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 13 <Page> 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. 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 for the Office of the Chief Compliance Officer 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 six months ended June 30, 2005, the Fund paid $889 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $133,255,838 and $64,402,443, 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 Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as 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 funds 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. At this time, the distribution plan is still under development. As such, any gain to the Fund or its shareholders can not currently be determined. 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 is 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 events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities have been 14 <Page> transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has conditionally ordered its transfer to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, can not currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds 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. In 2004, certain Columbia funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Fund 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 Fund. For the six months ended June 30, 2005, Columbia has assumed $3,699 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 15 <Page> FINANCIAL HIGHLIGHTS Colonial Small Cap Value Fund, Variable Series--Class B Shares Selected data for a share outstanding throughout each period is as follows: <Table> <Caption> (UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED DECEMBER 31, ENDED JUNE 30, ------------------------------------------------ DECEMBER 31, 2005 2004 2003 2002 2001 2000 (a) ------------ ---------- --------- ---------- --------- ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 16.92 $ 14.22 $ 10.47 $ 11.55 $ 10.73 $ 9.21 ------------ ---------- --------- ---------- --------- ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.05 0.07 0.07 0.02 0.02 0.06 Net realized and unrealized gain (loss) on investments and foreign currency (0.23) 3.12 4.03 (0.73) 0.97 1.57 ------------ ---------- --------- ---------- --------- ------------ Total from Investment Operations (0.18) 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 $ 16.74 $ 16.92 $ 14.22 $ 10.47 $ 11.55 $ 10.73 ============ ========== ========= ========== ========= ============ Total return (c)(d)(e) (1.06)%(f) 22.51% 39.34% (6.14)% 9.20% 17.72%(f) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (g) 1.10%(h) 1.10% 1.10% 1.10% 1.10% 1.10%(h) Net investment income (g) 0.67%(h) 0.43% 0.54% 0.18% 0.22% 1.01%(h) Waiver/reimbursement 0.05%(h) 0.12% 0.36% 0.29% 0.47% 1.07%(h) Portfolio turnover rate 21%(f) 30% 55% 125% 56% 54% Net assets, end of period (000's) $ 334,337 $ 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. 16 <Page> PORTFOLIO MANAGERS' DISCUSSION Colonial Strategic Income Fund, Variable Series / June 30, 2005 Colonial Strategic Income Fund, Variable Series seeks current income consistent with prudent risk. The Fund also seeks maximum total return. Laura A. Ostrander has managed or co-managed the fund since September 2000. Kevin L. Cronk has co-managed the fund since May 2005. Thomas A. LaPointe has co-managed the fund since May 2005. The fund posted a slight gain for the first six months of 2005. However, this gain was below the fund's peer group, the Lipper Variable Series General Bond Category(1) average and its benchmark return during the same period. Adverse results from the high-yield and currency markets were responsible for most of the shortfall in performance. A SHIFT IN HIGH-YIELD PREFERENCE The high-yield market started the period on a strong note, essentially continuing the positive momentum of 2004. However, this momentum was disrupted in early May by the credit downgrades at Ford Motor and General Motors (0.1% and 0.1% of net assets, respectively). The bonds of both companies were reduced to junk-bond status for the first time in their respective histories, and the high-yield market responded by becoming more risk-averse. This shift in market sentiment hurt the fund, because our high-yield investments emphasized low-quality (CCC) companies while underweighting BB credits. And with high-yield securities as a group underperforming the broader bond market, our 40% commitment to this asset class was a drag on the fund's overall results. MIXED RESULTS OVERSEAS The fund's overseas investments are divided into two categories: developed-market bonds (19.3% of net assets) and emerging-market bonds (15.1% of net assets). Although developed-market bonds in their local currencies performed as well or better than comparable US Treasury securities, these gains were eliminated by the weakness in foreign currencies versus the US dollar. Stalled economic growth in Europe and concern over the direction of the political union caused the euro to backtrack after a prolonged period of market leadership. The fund experienced better results from its positions in emerging market bonds, which were the single best-performing asset class during the period. Higher commodity prices, steady global growth, and low interest rates produced an environment in which many countries were able to grow their economies and improve their fiscal profiles. The fund's investments in Russia, Panama, Colombia, Mexico, and Brazil all made positive contributions to overall performance. REPOSITIONING THE PORTFOLIO Although we didn't make any meaningful shifts to our asset allocations during the period, we reduced the fund's overall currency exposure as the dollar strengthened. In the near term, US interest rates and the trend toward a tighter monetary policy could give support to the dollar, but we are mindful that America's high budget and current account deficits represent a longer-term concern. We expect growth in the US to be steady or slightly lower in the second half of the year. All indications are that the Federal Reserve will continue to lift short-term rates gradually as conditions permit. Long-term rates actually declined slightly over the past six months, enabling the fund's holdings in US government bonds to contribute positively to performance. With stable growth and little evidence of inflation outside the commodities markets, we are maintaining our commitment to the domestic bond market at around 24% of the overall portfolio. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. The opinions expressed here are strictly those of Columbia Management and are subject to change without notice. Other divisions of Bank of America and/or affiliates of Columbia Management may have opinions that are inconsistent with these opinions. 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. Investing in fixed-income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yield and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice versa. 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 or "junk bonds" offers the potential for higher current income and attractive total return, but involves certain risks. Changes in economic conditions or other circumstances may adversely affect a high-yield bond issuer's ability to make timely principal and interest payments. High yield bonds issued by foreign entities have greater potential risks, including foreign taxation, currency fluctuations, risks associated with possible differences in financial standards and other monetary and political risks. Holdings are disclosed as of June 30, 2005, 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. 17 <Page> PERFORMANCE INFORMATION Colonial Strategic Income Fund, Variable Series / June 30, 2005 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005(%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR 10-YEAR - ----------------------------------------------------------------------------------- Class B (06/01/00) 0.30 10.41 7.88 7.25 Lehman Brothers Government/Credit Bond Index 2.75 7.26 7.71 6.90 </Table> Inception date of share class is in parenthesis. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/04 06/30/05 - ----------------------------------------------------------------- Class B 9.95 9.98 </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. [CHART] VALUE OF A $10,000 INVESTMENT, 07/01/1995 - 06/30/05 <Table> <Caption> LEHMAN BROTHERS GOVERNMENT/ CLASS B SHARES CREDIT BOND INDEX 7/1/1995 $ 10,000 $ 10,000 7/31/1995 $ 10,092 $ 9,961 8/31/1995 $ 10,092 $ 10,089 9/30/1995 $ 10,267 $ 10,191 10/31/1995 $ 10,404 $ 10,341 11/30/1995 $ 10,505 $ 10,512 12/31/1995 $ 10,654 $ 10,666 1/31/1996 $ 10,810 $ 10,733 2/29/1996 $ 10,722 $ 10,505 3/31/1996 $ 10,674 $ 10,417 4/30/1996 $ 10,722 $ 10,345 5/31/1996 $ 10,732 $ 10,327 6/30/1996 $ 10,799 $ 10,465 7/31/1996 $ 10,887 $ 10,489 8/31/1996 $ 11,013 $ 10,462 9/30/1996 $ 11,236 $ 10,649 10/31/1996 $ 11,410 $ 10,897 11/30/1996 $ 11,681 $ 11,097 12/31/1996 $ 11,701 $ 10,974 1/31/1997 $ 11,669 $ 10,987 2/28/1997 $ 11,755 $ 11,010 3/31/1997 $ 11,585 $ 10,879 4/30/1997 $ 11,734 $ 11,038 5/31/1997 $ 11,925 $ 11,141 6/30/1997 $ 12,094 $ 11,275 7/31/1997 $ 12,381 $ 11,620 8/31/1997 $ 12,297 $ 11,489 9/30/1997 $ 12,562 $ 11,670 10/31/1997 $ 12,584 $ 11,857 11/30/1997 $ 12,648 $ 11,919 12/31/1997 $ 12,771 $ 12,044 1/31/1998 $ 12,976 $ 12,214 2/28/1998 $ 13,010 $ 12,190 3/31/1998 $ 13,101 $ 12,228 4/30/1998 $ 13,159 $ 12,289 5/31/1998 $ 13,217 $ 12,420 6/30/1998 $ 13,239 $ 12,547 7/31/1998 $ 13,354 $ 12,557 8/31/1998 $ 12,860 $ 12,802 9/30/1998 $ 13,147 $ 13,168 10/31/1998 $ 13,169 $ 13,075 11/30/1998 $ 13,547 $ 13,153 12/31/1998 $ 13,539 $ 13,186 1/31/1999 $ 13,649 $ 13,279 2/28/1999 $ 13,490 $ 12,963 3/31/1999 $ 13,674 $ 13,028 4/30/1999 $ 13,857 $ 13,061 5/31/1999 $ 13,576 $ 12,926 6/30/1999 $ 13,588 $ 12,886 7/31/1999 $ 13,576 $ 12,850 8/31/1999 $ 13,527 $ 12,840 9/30/1999 $ 13,600 $ 12,955 10/31/1999 $ 13,600 $ 12,989 11/30/1999 $ 13,686 $ 12,981 12/31/1999 $ 13,780 $ 12,902 1/31/2000 $ 13,648 $ 12,898 2/29/2000 $ 13,820 $ 13,059 3/31/2000 $ 13,767 $ 13,249 4/30/2000 $ 13,649 $ 13,184 5/31/2000 $ 13,530 $ 13,172 6/30/2000 $ 13,782 $ 13,441 7/31/2000 $ 13,888 $ 13,583 8/31/2000 $ 14,020 $ 13,775 9/30/2000 $ 13,867 $ 13,827 10/31/2000 $ 13,602 $ 13,914 11/30/2000 $ 13,378 $ 14,152 12/31/2000 $ 13,790 $ 14,431 1/31/2001 $ 14,361 $ 14,673 2/28/2001 $ 14,405 $ 14,825 3/31/2001 $ 14,082 $ 14,893 4/30/2001 $ 13,922 $ 14,781 5/31/2001 $ 14,025 $ 14,867 6/30/2001 $ 13,864 $ 14,938 7/31/2001 $ 13,922 $ 15,310 8/31/2001 $ 14,171 $ 15,506 9/30/2001 $ 13,760 $ 15,649 10/31/2001 $ 14,141 $ 16,046 11/30/2001 $ 14,332 $ 15,783 12/31/2001 $ 14,279 $ 15,658 1/31/2002 $ 14,328 $ 15,773 2/28/2002 $ 14,359 $ 15,907 3/31/2002 $ 14,407 $ 15,584 4/30/2002 $ 14,679 $ 15,886 5/31/2002 $ 14,743 $ 16,032 6/30/2002 $ 14,536 $ 16,169 7/31/2002 $ 14,392 $ 16,363 8/31/2002 $ 14,632 $ 16,729 9/30/2002 $ 14,712 $ 17,089 10/31/2002 $ 14,761 $ 16,925 11/30/2002 $ 15,065 $ 16,935 12/31/2002 $ 15,434 $ 17,384 1/31/2003 $ 15,626 $ 17,384 2/28/2003 $ 15,938 $ 17,693 3/31/2003 $ 16,094 $ 17,670 4/30/2003 $ 16,667 $ 17,859 5/31/2003 $ 17,136 $ 18,366 6/30/2003 $ 17,257 $ 18,293 7/31/2003 $ 16,841 $ 17,526 8/31/2003 $ 16,910 $ 17,642 9/30/2003 $ 17,484 $ 18,201 10/31/2003 $ 17,536 $ 17,970 11/30/2003 $ 17,813 $ 18,019 12/31/2003 $ 18,278 $ 18,197 1/31/2004 $ 18,390 $ 18,363 2/29/2004 $ 18,502 $ 18,587 3/31/2004 $ 18,652 $ 18,758 4/30/2004 $ 18,167 $ 18,182 5/31/2004 $ 18,074 $ 18,089 6/30/2004 $ 18,242 $ 18,163 7/31/2004 $ 18,446 $ 18,356 8/31/2004 $ 18,838 $ 18,745 9/30/2004 $ 19,099 $ 18,811 10/31/2004 $ 19,455 $ 18,974 11/30/2004 $ 19,772 $ 18,764 12/31/2004 $ 20,080 $ 18,962 1/31/2005 $ 20,000 $ 19,095 2/28/2005 $ 20,122 $ 18,969 3/31/2005 $ 19,738 $ 18,836 4/30/2005 $ 19,799 $ 19,119 5/31/2005 $ 19,939 $ 19,358 6/30/2005 $ 20,135 $ 19,486 </Table> The graph compares the results of a hypothetical $10,000 investment in the fund with the index. The Index is unmanaged and returns for the index and the fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Investment earnings, if any, are income tax-deferred until distribution, at which time taxes will become due. 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. 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. 18 <Page> UNDERSTANDING YOUR EXPENSES Colonial Strategic Income Fund, Variable Series / June 30, 2005 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 ongoing 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 ongoing 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 $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 01/01/05 - 06/30/05 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ---------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ---------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,002.98 1,019.98 4.82 4.86 0.97 </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 365. 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 funds 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. 19 <Page> INVESTMENT PORTFOLIO Colonial Strategic Income Fund, Variable Series / June 30, 2005 (Unaudited) <Table> <Caption> PAR VALUE ---------------- ------------ GOVERNMENT AGENCIES & OBLIGATIONS--53.8% FOREIGN GOVERNMENT BONDS--32.9% Aries Vermoegensverwaltungs GmbH 7.750% 10/25/09 (a) EUR 250,000 $ 351,337 Corp. Andina de Fomento 6.375% 06/18/09 510,000 696,580 European Investment Bank 7.625% 12/07/07 GBP 455,000 876,909 Federal Republic of Brazil 4.250% 04/15/24 (b) USD 1,415,000 1,335,477 8.750% 02/04/25 315,000 320,513 11.500% 04/02/09 EUR 480,000 705,785 14.500% 10/15/09 USD 1,200,000 1,558,200 Federal Republic of Germany 4.250% 07/04/14 EUR 1,450,000 1,919,002 5.000% 07/04/12 555,000 763,963 6.000% 07/04/07 1,210,000 1,574,984 Government of Canada 5.250% 06/01/13 CAD 920,000 827,303 10.000% 06/01/08 2,611,000 2,539,582 Government of New Zealand 6.000% 11/15/11 NZD 2,395,000 1,688,447 6.500% 04/15/13 815,000 593,821 Kingdom of Norway 5.500% 05/15/09 NOK 5,200,000 873,098 6.000% 05/16/11 3,450,000 607,832 Kingdom of Spain 5.500% 07/30/17 EUR 1,580,000 2,326,307 Kingdom of Sweden 5.000% 01/28/09 SEK 17,725,000 2,489,586 6.750% 05/05/14 11,070,000 1,841,646 Republic of Bulgaria 8.250% 01/15/15 USD 860,000 1,082,826 Republic of Colombia 9.750% 04/09/11 574,030 656,116 11.500% 05/31/11 EUR 335,000 519,389 11.750% 02/25/20 USD 580,000 758,350 Republic of France 4.000% 04/25/14 EUR 945,000 1,227,578 Republic of Italy 5.000% 02/01/12 1,340,000 1,826,903 Republic of Panama 8.875% 09/30/27 USD 795,000 946,050 Republic of Peru 7.500% 10/14/14 EUR 315,000 428,404 9.875% 02/06/15 USD 660,000 811,800 Republic of Philippines 10.625% 03/16/25 375,000 422,438 Republic of Poland 8.500% 05/12/07 PLN 1,679,000 537,127 Republic of South Africa 5.250% 05/16/13 EUR 660,000 875,827 6.500% 06/02/14 USD 780,000 866,580 Republic of Venezuela 9.250% 09/15/27 868,000 910,532 Russian Federation 5.000% 03/31/30 USD 645,000 $ 720,078 8.750% 07/24/05 640,000 641,408 11.000% 07/24/18 655,000 977,063 12.750% 06/24/28 955,000 1,727,213 United Kingdom Treasury 5.000% 03/07/12 GBP 368,000 692,961 7.500% 12/07/06 840,000 1,575,590 9.000% 07/12/11 615,000 1,388,216 United Mexican States 7.500% 03/08/10 USD 1,210,000 1,381,215 7.500% 04/08/33 EUR 605,000 858,865 11.375% 09/15/16 USD 930,000 1,377,795 Victoria Treasury Corp. 7.500% 08/15/08 AUD 2,120,000 1,711,375 Western Australia Treasury Corp. 8.000% 10/15/07 1,570,000 1,262,242 ------------ 50,074,313 ------------ U.S. GOVERNMENT AGENCIES & OBLIGATIONS--20.9% Federal Farm Credit Bank 5.000% 08/25/10 USD 500,000 501,061 U.S. Treasury Bonds 7.500% 11/15/24 1,310,000 1,861,223 8.750% 05/15/17 4,911,000 7,051,312 8.875% 02/15/19 300,000 445,981 10.375% 11/15/12 3,800,000 4,370,741 12.500% 08/15/14 9,012,000 11,990,538 U.S. Treasury Notes 5.625% 05/15/08 2,900,000 3,052,929 6.500% 10/15/06 2,350,000 2,435,279 ------------ 31,709,064 ------------ TOTAL GOVERNMENT AGENCIES & OBLIGATIONS (cost of $75,532,918) 81,783,377 ------------ CORPORATE FIXED-INCOME BONDS & NOTES--40.3% BASIC MATERIALS--4.2% CHEMICALS--1.7% AGRICULTURAL CHEMICALS--0.6% IMC Global, Inc. 10.875% 08/01/13 205,000 240,875 Terra Capital, Inc. 12.875% 10/15/08 310,000 366,575 UAP Holding Corp. (c) 07/15/12 (10.750% 01/15/08) 190,000 155,800 United Agri Products 8.250% 12/15/11 177,000 183,195 ------------ 946,445 ------------ CHEMICALS - DIVERSIFIED--0.9% BCP Crystal US Holdings Corp. 9.625% 06/15/14 91,000 101,920 EquiStar Chemicals LP 10.625% 05/01/11 220,000 244,200 </Table> See Accompanying Notes to Financial Statements. 20 <Page> <Table> <Caption> PAR VALUE ---------------- ------------ Huntsman International LLC 7.375% 01/01/15 (a) $ 140,000 $ 136,500 Huntsman LLC 11.500% 07/15/12 210,000 244,125 Innophos Investments Holdings, Inc., PIK 11.268% 02/15/15 (a)(b) 118,302 107,134 Lyondell Chemical Co. 9.625% 05/01/07 145,000 154,787 10.875% 05/01/09 5,000 5,200 NOVA Chemicals Corp. 6.500% 01/15/12 270,000 262,575 ------------ 1,256,441 ------------ CHEMICALS - SPECIALTY--0.2% Rhodia SA 8.875% 06/01/11 350,000 336,000 ------------ FOREST PRODUCTS & PAPER--1.5% FORESTRY--0.2% Millar Western Forest Products Ltd. 7.750% 11/15/13 145,000 135,938 Tembec Industries, Inc. 8.500% 02/01/11 180,000 138,150 ------------ 274,088 ------------ PAPER & RELATED PRODUCTS--1.3% Abitibi-Consolidated, Inc. 8.375% 04/01/15 155,000 158,294 Boise Cascade LLC 6.016% 10/15/12 (a)(b) 105,000 105,262 7.125% 10/15/14 (a) 120,000 117,900 Buckeye Technologies, Inc. 8.500% 10/01/13 145,000 148,444 Caraustar Industries, Inc. 9.875% 04/01/11 145,000 146,450 Fraser Papers, Inc. 8.750% 03/15/15 (a) 170,000 155,125 Georgia-Pacific Corp. 8.000% 01/15/24 210,000 243,075 Neenah Paper, Inc. 7.375% 11/15/14 (a) 85,000 82,450 Newark Group, Inc. 9.750% 03/15/14 290,000 266,075 NewPage Corp. 10.000% 05/01/12 (a) 105,000 105,787 12.000% 05/01/13 (a) 130,000 129,350 Norske Skog Canada Ltd. 7.375% 03/01/14 185,000 181,300 8.625% 06/15/11 90,000 92,700 ------------ 1,932,212 ------------ IRON/STEEL--0.4% METAL - IRON--0.1% Wise Metals Group LLC 10.250% 05/15/12 270,000 226,125 ------------ STEEL - PRODUCERS--0.1% Steel Dynamics, Inc. 9.500% 03/15/09 105,000 111,825 ------------ STEEL - SPECIALTY--0.2% UCAR Finance, Inc. 10.250% 02/15/12 $ 250,000 $ 263,750 ------------ METALS & MINING--0.6% METAL - ALUMINUM--0.1% Kaiser Aluminum & Chemical Corp. 10.875% 10/15/06 (d) 165,000 143,963 ------------ METAL - DIVERSIFIED--0.0% HudBay Mining & Smelting Co., Ltd. 9.625% 01/15/12 (a) 65,000 64,025 ------------ NON-FERROUS METALS--0.5% Codelco, Inc. 5.500% 10/15/13 730,000 760,003 ------------ COMMUNICATIONS--9.1% MEDIA--4.1% BROADCAST SERVICES/PROGRAMS--0.2% Fisher Communications, Inc. 8.625% 09/15/14 180,000 191,025 XM Satellite Radio Holdings, Inc. 8.710% 05/01/09 (b) 160,000 161,000 ------------ 352,025 ------------ CABLE TV--1.7% Atlantic Broadband Finance LLC 9.375% 01/15/14 (a) 235,000 221,487 Charter Communications Holdings II LLC 10.250% 09/15/10 210,000 212,625 Charter Communications Holdings LLC 9.920% 04/01/11 910,000 668,850 CSC Holdings, Inc. 6.750% 04/15/12 (a) 105,000 98,438 7.625% 04/01/11 290,000 288,550 EchoStar DBS Corp. 6.625% 10/01/14 345,000 340,687 Insight Midwest LP 9.750% 10/01/09 115,000 119,313 Northland Cable Television, Inc. 10.250% 11/15/07 245,000 240,712 Pegasus Satellite Communications, Inc. 11.250% 01/15/10 (a)(d) 270,000 147,825 Telenet Group Holding NV (c) 06/15/14 (11.500% 06/15/08) (a) 315,000 239,400 ------------ 2,577,887 ------------ MULTIMEDIA--0.7% Advanstar Communications, Inc. 12.000% 02/15/11 195,000 207,675 (c) 10/15/11 (15.000% 10/15/05) 185,000 183,150 </Table> See Accompanying Notes to Financial Statements. 21 <Page> <Table> <Caption> PAR VALUE ---------------- ------------ Haights Cross Communications, Inc. (c) 08/15/11 (12.500% 02/15/09) $ 205,000 $ 125,306 Haights Cross Operating Co. 11.750% 08/15/11 280,000 306,600 Quebecor Media, Inc. 11.125% 07/15/11 205,000 227,550 ------------ 1,050,281 ------------ PUBLISHING - NEWSPAPERS--0.1% Hollinger, Inc. 11.875% 03/01/11 (a) 81,000 82,620 12.875% 03/01/11 (a) 117,000 127,530 ------------ 210,150 ------------ PUBLISHING - PERIODICALS--0.9% CBD Media Holdings LLC & Finance, Inc. 9.250% 07/15/12 145,000 146,088 Dex Media West LLC 9.875% 08/15/13 436,000 499,220 Dex Media, Inc. (c) 11/15/13 (9.000% 11/15/08) 160,000 128,800 Primedia, Inc. 8.875% 05/15/11 315,000 330,750 WDAC Subsidiary Corp. 8.375% 12/01/14 (a) 180,000 172,350 ------------ 1,277,208 ------------ TELEVISION--0.5% Paxson Communications Corp. 10.750% 07/15/08 250,000 246,250 (c) 01/15/09 (12.250% 01/15/06) 220,000 205,700 Sinclair Broadcast Group, Inc. 8.750% 12/15/11 250,000 262,500 ------------ 714,450 ------------ TELECOMMUNICATIONS--5.0% CELLULAR TELECOMMUNICATIONS--2.0% American Cellular Corp. 10.000% 08/01/11 180,000 183,150 Dobson Cellular Systems, Inc. 8.375% 11/01/11 (a) 55,000 57,888 Dobson Communications Corp. 8.875% 10/01/13 175,000 160,125 Horizon PCS, Inc. 11.375% 07/15/12 120,000 133,800 iPCS, Inc. 11.500% 05/01/12 105,000 117,862 Nextel Communications, Inc. 7.375% 08/01/15 390,000 421,200 Nextel Partners, Inc. 8.125% 07/01/11 255,000 277,312 Rogers Cantel, Inc. 9.750% 06/01/16 230,000 282,900 Rogers Wireless, Inc. 8.000% 12/15/12 $ 140,000 $ 150,500 Rural Cellular Corp. 8.250% 03/15/12 150,000 156,750 9.750% 01/15/10 180,000 166,050 UbiquiTel Operating Co. 9.875% 03/01/11 260,000 282,750 US Unwired, Inc. 10.000% 06/15/12 300,000 333,000 Western Wireless Corp. 9.250% 07/15/13 270,000 308,475 ------------ 3,031,762 ------------ SATELLITE TELECOMMUNICATIONS--0.7% Inmarsat Finance II PLC (c) 11/15/12 (10.375% 11/15/08) 255,000 200,813 Intelsat Bermuda Ltd. 8.250% 01/15/13 (a) 275,000 283,937 PanAmSat Corp. 9.000% 08/15/14 373,000 406,570 Zeus Special Subsidiary Ltd. (c) 02/01/15 (9.250% 02/01/10) (a) 200,000 133,000 ------------ 1,024,320 ------------ TELECOMMUNICATION EQUIPMENT--0.1% Lucent Technologies, Inc. 6.450% 03/15/29 220,000 196,900 ------------ TELECOMMUNICATION SERVICES--0.4% Axtel SA de CV 11.000% 12/15/13 270,000 294,300 Time Warner Telecom Holdings, Inc. 9.250% 02/15/14 (a) 90,000 87,300 Time Warner Telecom, Inc. 9.750% 07/15/08 15,000 15,075 10.125% 02/01/11 280,000 280,700 ------------ 677,375 ------------ TELEPHONE - INTEGRATED--1.5% Cincinnati Bell, Inc. 8.375% 01/15/14 330,000 338,250 Citizens Communications Co. 9.000% 08/15/31 95,000 97,613 Qwest Capital Funding, Inc. 7.250% 02/15/11 530,000 506,150 7.750% 02/15/31 150,000 127,500 Qwest Communications International, Inc. 7.500% 02/15/14 (a) 265,000 249,100 Qwest Services Corp. 13.500% 12/15/10 680,000 785,400 US LEC Corp. 11.890% 10/01/09 (b) 130,000 131,625 ------------ 2,235,638 ------------ </Table> See Accompanying Notes to Financial Statements. 22 <Page> <Table> <Caption> PAR VALUE ---------------- ------------ WIRELESS EQUIPMENT--0.3% American Towers, Inc. 7.250% 12/01/11 $ 180,000 $ 189,900 SBA Telecommunications, Inc. (c) 12/15/11 (9.750% 12/15/07) 327,000 300,023 ------------ 489,923 ------------ CONSUMER CYCLICAL--7.5% AIRLINES--0.3% AIRLINES--0.3% Continental Airlines, Inc. 7.568% 12/01/06 335,000 288,100 Northwest Airlines, Inc. 9.875% 03/15/07 360,000 189,900 ------------ 478,000 ------------ APPAREL--0.6% APPAREL MANUFACTURERS--0.6% Broder Brothers Co. 11.250% 10/15/10 180,000 181,800 Levi Strauss & Co. 9.750% 01/15/15 475,000 471,437 Phillips-Van Heusen Corp. 7.250% 02/15/11 95,000 97,850 8.125% 05/01/13 115,000 122,188 ------------ 873,275 ------------ AUTO MANUFACTURERS--0.2% AUTO - CARS/LIGHT TRUCKS--0.2% Ford Motor Co. 7.450% 07/16/31 195,000 161,850 General Motors Corp. 8.375% 07/15/33 255,000 213,563 ------------ 375,413 ------------ AUTO PARTS & EQUIPMENT--1.0% AUTO - MEDIUM & HEAVY DUTY TRUCKS--0.1% Navistar International Corp. 7.500% 06/15/11 180,000 183,600 ------------ AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL--0.4% Cooper-Standard Automotive, Inc. 8.375% 12/15/14 370,000 296,000 Delco Remy International, Inc. 9.375% 04/15/12 195,000 159,900 Dura Operating Corp. 8.625% 04/15/12 165,000 149,325 ------------ 605,225 ------------ AUTO/TRUCK PARTS & EQUIPMENT - REPLACEMENT--0.2% Commercial Vehicle Group 8.000% 07/01/13 (a) 135,000 137,363 Rexnord Corp. 10.125% 12/15/12 150,000 164,250 ------------ 301,613 ------------ RUBBER - TIRES--0.3% Goodyear Tire & Rubber Co. 7.857% 08/15/11 $ 85,000 $ 82,450 9.000% 07/01/15 (a) 330,000 322,575 12.250% 03/01/11 75,000 83,812 ------------ 488,837 ------------ DISTRIBUTION/WHOLESALE--0.1% DISTRIBUTION/WHOLESALE--0.1% Buhrmann US, Inc. 7.875% 03/01/15 (a) 100,000 97,000 ------------ ENTERTAINMENT--1.0% GAMBLING (NON-HOTEL)--0.2% Global Cash Access LLC 8.750% 03/15/12 265,000 288,188 ------------ MUSIC--0.3% Steinway Musical Instruments, Inc. 8.750% 04/15/11 155,000 162,362 Warner Music Group 7.375% 04/15/14 240,000 243,000 ------------ 405,362 ------------ RESORTS/THEME PARKS--0.2% Six Flags, Inc. 9.625% 06/01/14 300,000 278,250 ------------ THEATERS--0.3% AMC Entertainment, Inc. 9.875% 02/01/12 300,000 297,750 LCE Acquisition Corp. 9.000% 08/01/14 (a) 225,000 218,250 ------------ 516,000 ------------ HOME BUILDERS--0.5% BUILDING - RESIDENTIAL/COMMERCIAL--0.5% D.R. Horton, Inc. 9.750% 09/15/10 250,000 292,500 K. Hovnanian Enterprises, Inc. 8.875% 04/01/12 45,000 48,600 10.500% 10/01/07 250,000 276,250 Standard-Pacific Corp. 9.250% 04/15/12 185,000 205,813 ------------ 823,163 ------------ HOME FURNISHINGS--0.3% APPLIANCES--0.1% ALH Finance LLC 8.500% 01/15/13 195,000 179,400 ------------ HOME FURNISHINGS--0.2% WII Components, Inc. 10.000% 02/15/12 200,000 196,500 ------------ LEISURE TIME--0.5% LEISURE & RECREATIONAL PRODUCTS--0.1% K2, Inc. 7.375% 07/01/14 120,000 126,000 ------------ RECREATIONAL CENTERS--0.4% AMF Bowling Worldwide, Inc. 10.000% 03/01/10 225,000 227,250 </Table> See Accompanying Notes to Financial Statements. 23 <Page> <Table> <Caption> PAR VALUE ---------------- ------------ Equinox Holdings, Inc. 9.000% 12/15/09 $ 240,000 $ 247,800 Town Sports International, Inc. (c) 02/01/14 (11.000% 02/01/09) 280,000 165,200 ------------ 640,250 ------------ LODGING--2.0% CASINO HOTELS--2.0% Circus & Eldorado/Silver Legacy Capital Corp. 10.125% 03/01/12 220,000 230,450 Hard Rock Hotel, Inc. 8.875% 06/01/13 260,000 282,750 Hollywood Casino Shreveport 13.000% 08/01/06 (e) 600,000 489,000 Inn of the Mountain Gods Resort & Casino 12.000% 11/15/10 205,000 234,212 Las Vegas Sands Corp. 6.375% 02/15/15 (a) 55,000 53,763 MGM Mirage 6.750% 09/01/12 210,000 215,775 Mohegan Tribal Gaming Authority 6.125% 02/15/13 (a) 125,000 126,250 Penn National Gaming, Inc. 6.750% 03/01/15 (a) 340,000 338,300 Pinnacle Entertainment, Inc. 8.750% 10/01/13 140,000 148,400 River Rock Entertainment 9.750% 11/01/11 145,000 159,862 Seneca Gaming Corp. 7.250% 05/01/12 180,000 186,075 Station Casinos, Inc. 6.875% 03/01/16 65,000 66,950 Virgin River Casino Corp. (c) 01/15/13 (12.750% 01/15/09) (a) 150,000 103,500 9.000% 01/15/12 (a) 83,000 86,528 Wynn Las Vegas LLC 6.625% 12/01/14 270,000 262,575 ------------ 2,984,390 ------------ RETAIL--0.9% RETAIL - AUTOMOBILES--0.1% Asbury Automotive Group, Inc. 8.000% 03/15/14 200,000 193,000 ------------ RETAIL - DRUG STORES--0.2% Jean Coutu Group, Inc. (PJC) 8.500% 08/01/14 145,000 142,462 Rite Aid Corp. 7.500% 01/15/15 70,000 67,200 9.250% 06/01/13 110,000 106,700 ------------ 316,362 ------------ RETAIL - HOME FURNISHINGS--0.1% Tempur-Pedic, Inc. 10.250% 08/15/10 173,000 192,030 ------------ RETAIL - JEWELRY--0.1% Finlay Fine Jewelry Corp. 8.375% 06/01/12 $ 185,000 $ 164,650 ------------ RETAIL - PROPANE DISTRIBUTORS--0.2% Ferrellgas Partners LP 8.750% 06/15/12 180,000 180,000 Suburban Propane Partners LP 6.875% 12/15/13 (a) 100,000 95,000 ------------ 275,000 ------------ RETAIL - RESTAURANTS--0.1% Landry's Restaurants, Inc. 7.500% 12/15/14 175,000 169,750 ------------ RETAIL - VIDEO RENTAL--0.1% Movie Gallery, Inc. 11.000% 05/01/12 (a) 90,000 94,500 ------------ TEXTILES--0.1% TEXTILE - PRODUCTS--0.1% INVISTA 9.250% 05/01/12 (a) 135,000 147,656 ------------ CONSUMER NON-CYCLICAL--5.5% AGRICULTURE--0.1% TOBACCO--0.1% Alliance One International, Inc. 11.000% 05/15/12 (a) 140,000 143,850 ------------ BEVERAGES--0.1% BEVERAGES - WINE/SPIRITS--0.1% Constellation Brands, Inc. 8.125% 01/15/12 145,000 154,788 ------------ BIOTECHNOLOGY--0.2% MEDICAL - BIOMEDICAL/GENE--0.2% Bio-Rad Laboratories, Inc. 7.500% 08/15/13 220,000 237,600 ------------ COMMERCIAL SERVICES--1.7% COMMERCIAL SERVICES--0.3% Iron Mountain, Inc. 7.750% 01/15/15 225,000 227,250 Language Line Holdings, Inc. 11.125% 06/15/12 275,000 247,500 ------------ 474,750 ------------ COMMERCIAL SERVICES - FINANCE--0.2% Dollar Financial Group, Inc. 9.750% 11/15/11 290,000 298,700 ------------ FUNERAL SERVICES & RELATED ITEMS--0.2% Service Corp. International 7.700% 04/15/09 275,000 294,938 ------------ PRINTING - COMMERCIAL - 0.3% Sheridan Group 10.250% 08/15/11 155,000 161,200 Vertis, Inc. 13.500% 12/07/09 (a) 285,000 209,475 ------------ 370,675 ------------ </Table> See Accompanying Notes to Financial Statements. 24 <Page> <Table> <Caption> PAR VALUE ---------------- ------------ PRIVATE CORRECTIONS--0.3% Corrections Corp. of America 6.250% 03/15/13 $ 190,000 $ 188,575 GEO Group, Inc. 8.250% 07/15/13 245,000 237,037 ------------ 425,612 ------------ RENTAL AUTO/EQUIPMENT--0.4% NationsRent, Inc. 9.500% 10/15/10 175,000 189,000 9.500% 05/01/15 (a) 160,000 157,600 Neff Rent LLC/Neff Finance Corp. 11.250% 06/15/12 (a) 155,000 158,100 Williams Scotsman, Inc. 9.875% 06/01/07 155,000 153,450 ------------ 658,150 ------------ COSMETICS/PERSONAL CARE--0.4% COSMETICS & TOILETRIES--0.4% DEL Laboratories, Inc. 8.000% 02/01/12 215,000 182,750 Elizabeth Arden, Inc. 7.750% 01/15/14 175,000 182,000 Revlon Consumer Products Corp. 8.625% 02/01/08 60,000 57,000 9.500% 04/01/11 170,000 161,500 ------------ 583,250 ------------ FOOD--0.8% FOOD - CONFECTIONERY--0.2% Merisant Co. 10.500% 07/15/13 (a) 160,000 117,200 Tabletop Holdings, Inc. (c) 05/15/14 (12.250% 11/15/08) (a) 480,000 182,400 ------------ 299,600 ------------ FOOD - MISCELLANEOUS/DIVERSIFIED--0.4% Dole Food Co., Inc. 8.625% 05/01/09 218,000 231,625 Pinnacle Foods Holding Corp. 8.250% 12/01/13 365,000 326,675 Reddy Ice Holdings, Inc. (c) 11/01/12 (10.500% 11/01/08) (a) 140,000 100,800 ------------ 659,100 ------------ FOOD - RETAIL--0.2% Stater Brothers Holdings, Inc. 8.125% 06/15/12 330,000 322,575 ------------ HEALTHCARE SERVICES--1.4% DIALYSIS CENTERS--0.1% DaVita, Inc. 7.250% 03/15/15 (a) 215,000 220,912 ------------ MEDICAL - HMO--0.2% Coventry Health Care, Inc. 8.125% 02/15/12 220,000 237,050 ------------ MEDICAL - HOSPITALS--0.3% Tenet Healthcare Corp. 9.875% 07/01/14 $ 475,000 $ 510,625 ------------ MEDICAL - OUTPATIENT/HOME MEDICAL--0.1% Select Medical Corp. 7.625% 02/01/15 (a) 125,000 123,125 ------------ MRI/MEDICAL DIAGNOSTIC IMAGING--0.5% InSight Health Services Corp. 9.875% 11/01/11 305,000 239,425 MedQuest, Inc. 11.875% 08/15/12 280,000 264,600 MQ Associates, Inc. (c) 08/15/12 (12.250% 08/15/08) 480,000 256,800 ------------ 760,825 ------------ PHYSICIAN PRACTICE MANAGEMENT - 0.2% US Oncology Holdings, Inc. 8.620% 03/15/15 (a)(b) 110,000 102,575 US Oncology, Inc. 9.000% 08/15/12 235,000 251,450 ------------ 354,025 ------------ HOUSEHOLD PRODUCTS/WARES--0.4% CONSUMER PRODUCTS - MISCELLANEOUS--0.4% Amscan Holdings, Inc. 8.750% 05/01/14 270,000 248,400 Jostens IH Corp. 7.625% 10/01/12 145,000 142,100 Playtex Products, Inc. 9.375% 06/01/11 245,000 259,087 ------------ 649,587 ------------ PHARMACEUTICALS--0.4% MEDICAL - DRUGS--0.3% Elan Finance PLC 7.750% 11/15/11 (a) 320,000 271,200 Warner Chilcott Corp. 8.750% 02/01/15 (a) 125,000 121,563 ------------ 392,763 ------------ MEDICAL - WHOLESALE DRUG DISTRIBUTION--0.1% Nycomed A/S 11.750% 09/15/13 (a) 175,000 196,056 ------------ ENERGY--3.6% OIL & GAS SERVICES--0.6% OIL - FIELD SERVICES--0.6% Gazprom 9.625% 03/01/13 630,000 771,120 Newpark Resources, Inc. 8.625% 12/15/07 185,000 185,231 ------------ 956,351 ------------ OIL & GAS--1.5% OIL & GAS DRILLING--0.1% Pride International, Inc. 7.375% 07/15/14 130,000 142,188 ------------ </Table> See Accompanying Notes to Financial Statements. 25 <Page> <Table> <Caption> PAR VALUE ---------------- ------------ OIL COMPANIES - EXPLORATION & PRODUCTION--1.3% Chesapeake Energy Corp. 6.375% 06/15/15 (a) $ 55,000 $ 56,238 7.500% 06/15/14 190,000 204,725 Compton Petroleum Corp. 9.900% 05/15/09 275,000 288,750 Delta Petroleum Corp. 7.000% 04/01/15 (a) 110,000 100,925 Energy Partners Ltd. 8.750% 08/01/10 125,000 131,250 Magnum Hunter Resources, Inc. 9.600% 03/15/12 101,000 112,110 Pemex Finance Ltd. 9.150% 11/15/18 310,000 394,252 10.610% 08/15/17 215,000 292,808 Petroquest Energy, Inc. 10.375% 05/15/12 (a) 130,000 128,375 Whiting Petroleum Corp. 7.250% 05/01/12 270,000 276,750 ------------ 1,986,183 ------------ OIL REFINING & MARKETING--0.1% Premcor Refining Group, Inc. 7.500% 06/15/15 165,000 179,437 ------------ PIPELINES--1.5% PIPELINES--1.5% Coastal Corp. 7.625% 09/01/08 135,000 138,375 7.750% 06/15/10 300,000 306,375 Dynegy Holdings, Inc. 6.875% 04/01/11 300,000 296,250 9.875% 07/15/10 (a) 110,000 121,000 Northwest Pipeline Corp. 8.125% 03/01/10 85,000 92,225 Sonat, Inc. 7.625% 07/15/11 645,000 651,450 Southern Natural Gas Co. 8.875% 03/15/10 130,000 142,675 Williams Companies, Inc. 8.125% 03/15/12 430,000 492,350 ------------ 2,240,700 ------------ FINANCIALS--1.4% DIVERSIFIED FINANCIAL SERVICES--1.2% FINANCE - AUTO LOANS--0.1% General Motors Acceptance Corp. 6.875% 09/15/11 150,000 138,551 6.875% 08/28/12 65,000 59,188 ------------ 197,739 ------------ FINANCE - CONSUMER LOANS--0.5% SLM Corp. 6.500% 06/15/10 NZD 1,100,000 760,686 ------------ FINANCE - INVESTMENT BANKER/BROKER--0.5% E*Trade Financial Corp. 8.000% 06/15/11 $ 135,000 $ 142,425 LaBranche & Co., Inc. 11.000% 05/15/12 490,000 529,200 ------------ 671,625 ------------ FINANCE - MORTGAGE LOAN/BANKER--0.1% Residential Capital Corp. 6.375% 06/30/10 (a) 50,000 50,427 6.875% 06/30/15 (a) 50,000 51,316 ------------ 101,743 ------------ REAL ESTATE INVESTMENT TRUSTS--0.1% REITS - HOTELS--0.0% La Quinta Properties, Inc. 7.000% 08/15/12 60,000 61,650 ------------ REITS - MORTGAGE--0.1% Thornburg Mortgage, Inc. 8.000% 05/15/13 145,000 147,900 ------------ SAVINGS & LOANS--0.1% SAVINGS & LOANS/THRIFTS - WESTERN US--0.1% Western Financial Bank 9.625% 05/15/12 150,000 162,750 ------------ INDUSTRIALS--6.5% AEROSPACE & DEFENSE--0.7% AEROSPACE/DEFENSE - EQUIPMENT--0.7% Argo-Tech Corp. 9.250% 06/01/11 165,000 179,231 BE Aerospace, Inc. 8.875% 05/01/11 270,000 281,475 Sequa Corp. 8.875% 04/01/08 105,000 112,875 9.000% 08/01/09 90,000 99,000 Standard Aero Holdings, Inc. 8.250% 09/01/14 (a) 175,000 183,750 TransDigm, Inc. 8.375% 07/15/11 155,000 163,138 ------------ 1,019,469 ------------ BUILDING MATERIALS--0.5% BUILDING & CONSTRUCTION PRODUCTS - MISCELLANEOUS--0.1% Associated Materials, Inc. (c) 03/01/14 (11.250% 03/01/09) 175,000 112,000 Nortek, Inc. 8.500% 09/01/14 120,000 111,000 ------------ 223,000 ------------ BUILDING PRODUCTS - CEMENT/AGGREGATION--0.3% RMCC Acquisition Co. 9.500% 11/01/12 (a) 225,000 218,250 U.S. Concrete, Inc. 8.375% 04/01/14 195,000 183,300 ------------ 401,550 ------------ </Table> See Accompanying Notes to Financial Statements. 26 <Page> <Table> <Caption> PAR VALUE ---------------- ------------ BUILDING PRODUCTS - DOORS & WINDOWS--0.1% ACIH, Inc. (c) 12/15/12 (11.500% 12/15/07) (a) $ 235,000 $ 138,650 ------------ ELECTRICAL COMPONENTS & EQUIPMENT--0.1% WIRE & CABLE PRODUCTS--0.1% Coleman Cable, Inc. 9.875% 10/01/12 (a) 220,000 196,350 ------------ ELECTRONICS--0.2% ELECTRONIC COMPONENTS - MISCELLANEOUS--0.2% Flextronics International Ltd. 6.250% 11/15/14 185,000 185,000 Sanmina-SCI Corp. 6.750% 03/01/13 (a) 215,000 205,325 ------------ 390,325 ------------ ENGINEERING & CONSTRUCTION - 0.2% BUILDING & CONSTRUCTION - MISCELLANEOUS--0.2% J. Ray McDermott SA 11.500% 12/15/13 (a) 260,000 291,200 ------------ ENVIRONMENTAL CONTROL--0.7% NON-HAZARDOUS WASTE DISPOSAL--0.6% Allied Waste North America, Inc. 7.250% 03/15/15 (a) 80,000 77,000 7.875% 04/15/13 390,000 396,825 8.500% 12/01/08 150,000 157,875 Waste Services, Inc. 9.500% 04/15/14 (a) 335,000 329,137 ------------ 960,837 ------------ RECYCLING--0.1% Aleris International, Inc. 9.000% 11/15/14 70,000 72,800 ------------ MACHINERY - DIVERSIFIED--0.1% MACHINERY - GENERAL INDUSTRY--0.1% Douglas Dynamics LLC 7.750% 01/15/12 (a) 225,000 220,500 ------------ METAL FABRICATE/HARDWARE--0.7% METAL PROCESSORS & FABRICATION--0.5% Altra Industrial Motion, Inc. 9.000% 12/01/11 (a) 150,000 141,750 Mueller Group, Inc. 10.000% 05/01/12 200,000 210,000 Mueller Holdings, Inc. (c) 04/15/14 (14.750% 04/15/09) 175,000 126,438 TriMas Corp. 9.875% 06/15/12 270,000 226,800 ------------ 704,988 ------------ METAL PRODUCTS - FASTENERS--0.2% FastenTech, Inc. 11.500% 05/01/11 280,000 303,800 ------------ MISCELLANEOUS MANUFACTURING--0.8% DIVERSIFIED MANUFACTURING OPERATORS--0.6% Bombardier, Inc. 6.300% 05/01/14 (a) 340,000 303,450 J.B. Poindexter & Co. 8.750% 03/15/14 $ 215,000 $ 195,650 Koppers Industries, Inc. 9.875% 10/15/13 210,000 227,850 Trinity Industries, Inc. 6.500% 03/15/14 105,000 104,475 ------------ 831,425 ------------ FILTRATION/SEPARATE PRODUCTS--0.1% Polypore International, Inc. (c) 10/01/12 (10.500% 10/01/08) (a) 295,000 156,719 ------------ MISCELLANEOUS MANUFACTURING--0.1% Samsonite Corp. 8.875% 06/01/11 175,000 186,375 ------------ PACKAGING & CONTAINERS--1.2% CONTAINERS - METAL/GLASS--0.6% Crown European Holdings SA 10.875% 03/01/13 250,000 295,000 Owens-Brockway Glass Container 6.750% 12/01/14 160,000 162,600 8.250% 05/15/13 370,000 400,525 Owens-Illinois, Inc. 7.500% 05/15/10 80,000 84,000 ------------ 942,125 ------------ CONTAINERS - PAPER/PLASTIC--0.6% Consolidated Container Co. LLC (c) 06/15/09 (10.750% 06/15/07) 175,000 136,500 Jefferson Smurfit Corp. 8.250% 10/01/12 165,000 166,238 11.500% 10/01/15 239,358 223,488 MDP Acquisitions PLC 9.625% 10/01/12 220,000 218,900 Portola Packaging, Inc. 8.250% 02/01/12 190,000 129,675 ------------ 874,801 ------------ TRANSPORTATION--1.3% TRANSPORTATION - MARINE--0.6% Ship Finance International Ltd. 8.500% 12/15/13 445,000 426,087 Stena AB 7.500% 11/01/13 235,000 231,475 9.625% 12/01/12 170,000 184,025 ------------ 841,587 ------------ TRANSPORTATION - RAILROAD--0.2% TFM SA de CV 9.375% 05/01/12 (a) 220,000 229,900 12.500% 06/15/12 60,000 70,200 ------------ 300,100 ------------ TRANSPORTATION - SERVICES--0.4% CHC Helicopter Corp. 7.375% 05/01/14 (a) 135,000 134,663 7.375% 05/01/14 165,000 164,587 Petroleum Helicopters, Inc. 9.375% 05/01/09 325,000 342,875 ------------ 642,125 ------------ </Table> See Accompanying Notes to Financial Statements. 27 <Page> <Table> <Caption> PAR VALUE ---------------- ------------ TRANSPORTATION - TRUCKS--0.1% QDI LLC 9.000% 11/15/10 $ 240,000 $ 221,400 ------------ TECHNOLOGY--0.1% SEMICONDUCTORS--0.1% ELECTRONIC COMPONENTS - SEMICONDUCTORS--0.1% Amkor Technology, Inc. 9.250% 02/15/08 180,000 171,000 ------------ UTILITIES--2.4% ELECTRIC--2.4% ELECTRIC - GENERATION--0.6% AES Corp. 9.000% 05/15/15 (a) 70,000 78,400 9.500% 06/01/09 262,000 290,820 Edison Mission Energy 9.875% 04/15/11 290,000 339,300 Texas Genco LLC 6.875% 12/15/14 (a) 150,000 157,875 ------------ 866,395 ------------ ELECTRIC - INTEGRATED--0.7% CMS Energy Corp. 8.900% 07/15/08 225,000 244,125 Nevada Power Co. 9.000% 08/15/13 125,000 140,312 10.875% 10/15/09 215,000 240,531 PSEG Energy Holdings LLC 8.625% 02/15/08 275,000 291,500 TNP Enterprises, Inc. 10.250% 04/01/10 195,000 204,994 ------------ 1,121,462 ------------ INDEPENDENT POWER PRODUCER--1.1% Caithness Coso Funding Corp. 9.050% 12/15/09 240,366 257,192 Calpine Corp. 8.500% 07/15/10 (a) 180,000 138,600 Calpine Generating Co. LLC 11.500% 04/01/11 160,000 143,200 12.390% 04/01/11 (b) 360,000 328,500 MSW Energy Holdings LLC 7.375% 09/01/10 90,000 92,250 8.500% 09/01/10 270,000 286,200 Orion Power Holdings, Inc. 12.000% 05/01/10 300,000 359,250 ------------ 1,605,192 ------------ TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (cost of $60,673,711) 61,207,893 ------------ MORTGAGE-BACKED SECURITIES--2.0% MORTGAGE-BACKED SECURITIES--2.0% Federal Home Loan Mortgage Corp. 8.000% 10/01/26 180,641 194,903 Federal National Mortgage Association TBA 6.500% 12/01/35 (f) $ 2,795,000 $ 2,891,953 ------------ TOTAL MORTGAGE-BACKED SECURITIES (cost of $3,087,005) 3,086,856 ------------ ASSET-BACKED SECURITIES - 0.8% Equity One ABS, Inc. 4.205% 04/25/34 625,000 615,587 GMAC Mortgage Corp. 4.865% 09/25/34 (b) 520,000 522,574 ------------ TOTAL ASSET-BACKED SECURITIES (cost of $1,140,508) 1,138,161 ------------ CONVERTIBLE BONDS--0.3% COMMUNICATIONS--0.2% TELECOMMUNICATIONS--0.2% TELECOMMUNICATIONS EQUIPMENT--0.2% Nortel Networks Corp. 4.250% 09/01/08 385,000 359,975 ------------ UTILITIES--0.1% ELECTRIC--0.1% INDEPENDENT POWER PRODUCERS--0.1% Mirant Corp. 2.500% 06/15/21 (d) 185,000 146,150 ------------ TOTAL CONVERTIBLE BONDS (cost of $469,094) 506,125 ------------ MUNICIPAL BOND (TAXABLE)--0.3% CALIFORNIA--0.3% CA Cabazon Band Mission Indians 13.000% 10/01/11 (g) 350,000 363,972 ------------ TOTAL MUNICIPAL BOND (TAXABLE) (cost of $350,000) 363,972 ------------ <Caption> UNITS ---------------- WARRANTS (i)--0.0% COMMUNICATIONS--0.0% TELECOMMUNICATIONS--0.0% CELLULAR TELECOMMUNICATIONS--0.0% UbiquiTel, Inc. Expires 04/15/10 (a) 225 2 ------------ TELECOMMUNICATION SERVICES--0.0% Jazztel PLC Expires 07/15/10 (h)(j) 95 -- ------------ INDUSTRIALS--0.0% TRANSPORTATION--0.0% TRANSPORTATION - TRUCKS--0.0% QDI LLC Expires 01/15/0 7 (a)(j) 1,020 3,927 ------------ TOTAL WARRANTS (cost of $11,587) 3,929 ------------ </Table> See Accompanying Notes to Financial Statements. 28 <Page> <Table> <Caption> UNITS VALUE ---------------- ------------- COMMON STOCK--0.0% INDUSTRIALS--0.0% COMMERCIAL SERVICES & SUPPLIES--0.0% Fairlane Management Corp. (h)(i) 2,000 $ -- ------------- TOTAL COMMON STOCK (cost of $0) -- ------------- <Caption> PAR ---------------- SHORT-TERM OBLIGATION--3.1% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/05, due 07/01/05 at 2.700%, collateralized by a U.S. Treasury Bond maturing 02/15/19, market value of $4,794,975 (repurchase proceeds $4,694,352) $ 4,694,000 4,694,000 ------------- TOTAL SHORT-TERM OBLIGATION (cost of $4,694,000) 4,694,000 ------------- TOTAL INVESTMENTS--100.6% (cost of $145,958,823) (k) 152,784,313 ------------- OTHER ASSETS & LIABILITIES, NET--(0.6)% (849,382) ------------- NET ASSETS--100.0% $ 151,934,931 ============= </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2005, the liquid portion of these Rule 144A securities amounted to $10,684,865, which represents 7.0% of net assets. At June 30, 2005, the illiquid Rule 144A security amounted to $210,150, which represents 0.1% of net assets. Additional information on this security is as follows: <Table> <Caption> SECURITY ACQUISITION DATE ACQUISITION COST -------- ---------------- ---------------- Hollinger, Inc. 11.875% 03/01/11 09/30/04 $ 81,000 12.875% 03/01/11 09/30/04 116,271 ---------- $ 197,271 ========== </Table> (b) The interest rate shown on floating rate or variable rate securities reflect the rate at June 30, 2005. (c) Step bond. This security is currently not paying coupon. Shown parenthetically is the next interest rate to be paid and the date the Fund will begin accruing at this rate. (d) The issuer has filed for bankruptcy protection under Chapter 11, and is in default of certain debt covenants. Income is not being accrued. At June 30, 2005, the value of these securities amounted to $437,938, which represents 0.3% of net assets. (e) The issuer is in default of certain debt covenants. Income is not being accrued. At June 30, 2005, the value of this security represents 0.3% of net assets. (f) Security purchased on a delayed delivery basis. (g) Illiquid security. (h) Security has no value. (i) Non-income producing security. (j) Represents fair value as determined in good faith under procedures approved by the Board of Trustees. (k) Cost for federal income tax purposes is $147,825,267. As of June 30, 2005, 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 1,050,000 $ 1,269,981 1,264,284 07/15/05 $ (5,696) EUR 880,000 1,064,365 1,060,470 07/15/05 (3,895) EUR 119,000 143,956 146,822 07/20/05 2,866 EUR 2,300,000 2,780,471 2,775,318 07/18/05 (5,153) EUR 468,250 566,445 577,572 07/20/05 11,127 EUR 1,190,000 1,439,888 1,433,950 07/27/05 (5,938) GBP 892,000 1,598,019 1,609,168 07/18/05 11,149 GBP 410,000 733,960 752,350 07/20/05 18,390 NOK 4,875,000 745,631 759,985 07/20/05 14,354 SEK 8,750,000 1,120,835 1,134,890 07/15/05 14,055 SEK 8,750,000 1,120,835 1,134,890 07/15/05 14,055 SEK 8,500,000 1,088,811 1,102,192 07/15/05 13,381 -------------- $ 78,695 ============== </Table> At June 30, 2005, the asset allocation of the Fund is as follows: <Table> <Caption> % OF ASSET ALLOCATION NET ASSETS - ---------------- ---------- Government Agencies & Obligations 53.8% Corporate Fixed-Income Bonds & Notes 40.3 Mortgage-Backed Securities 2.0 Asset-Backed Securities 0.8 Convertible Bonds 0.3 Municipal Bond (Taxable) 0.3 Warrants 0.0 Common Stock 0.0 Short-Term Obligation 3.1 Other Assets & Liabilities, Net (0.6) ----- 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 PIK Payment-In-Kind PLN Polish Zloty REIT Real Estate Investment Trust SEK Swedish Krona TBA To Be Announced USD United States Dollar </Table> See Accompanying Notes to Financial Statements. 29 <Page> STATEMENT OF ASSETS & LIABILITIES Colonial Strategic Income Fund, Variable Series / June 30, 2005 (Unaudited) <Table> ASSETS: Investments, at cost $ 145,958,823 --------------- Investments, at value $ 152,784,313 Cash 2,022 Net unrealized appreciation on foreign forward currency contracts 99,377 Receivable for: Investments sold 99,575 Fund shares sold 7,344 Interest 2,913,349 Dollar roll fee income 2,510 Deferred Trustees' compensation plan 10,110 --------------- TOTAL ASSETS 155,918,600 --------------- LIABILITIES: Net unrealized depreciation on foreign forward currency contracts 20,682 Payable for: Investments purchased 681,595 Investments purchased on a delayed delivery basis 2,906,264 Fund shares repurchased 236,695 Investment advisory fee 75,105 Transfer agent fee 594 Pricing and bookkeeping fees 7,341 Trustees' fees 508 Audit fee 18,352 Custody fee 7,348 Distribution fee--Class B 12,954 Deferred dollar roll fee income 1,004 Deferred Trustees' fees 10,110 Other liabilities 5,117 --------------- TOTAL LIABILITIES 3,983,669 --------------- NET ASSETS $ 151,934,931 =============== COMPOSITION OF NET ASSETS: Paid-in capital $ 165,145,961 Undistributed net investment income 3,227,173 Accumulated net realized loss (23,307,826) Net unrealized appreciation on: Investments 6,825,490 Foreign currency translations 44,133 --------------- NET ASSETS $ 151,934,931 =============== CLASS A: Net assets $ 93,479,755 Shares outstanding 9,348,558 =============== Net asset value per share $ 10.00 =============== CLASS B: Net assets $ 58,455,176 Shares outstanding 5,858,723 =============== Net asset value per share $ 9.98 =============== </Table> See Accompanying Notes to Financial Statements. 30 <Page> STATEMENT OF OPERATIONS Colonial Strategic Income Fund, Variable Series For the Six Months Ended June 30, 2005 (Unaudited) <Table> INVESTMENT INCOME: Interest $ 5,276,549 Dollar roll fee income 23,566 --------------- Total Investment Income 5,300,115 --------------- EXPENSES: Investment advisory fee 459,935 Distribution fee--Class B 73,742 Transfer agent fee 3,720 Pricing and bookkeeping fees 46,050 Trustees' fees 4,033 Custody fee 20,748 Non-recurring costs (See Note 6) 1,939 Other expenses 34,018 --------------- Total Expenses 644,185 Non-recurring costs assumed by Investment Advisor (See Note 6) (1,939) Custody earnings credit (382) --------------- Net Expenses 641,864 --------------- Net Investment Income 4,658,251 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on: Investments 1,425,878 Foreign currency transactions 989,027 --------------- Net realized gain 2,414,905 --------------- Net change in unrealized appreciation (depreciation) on: Investments (6,667,737) Foreign currency translations 110,369 --------------- Net change in unrealized appreciation (depreciation) (6,557,368) --------------- Net Loss (4,142,463) --------------- Net Increase in Net Assets from Operations $ 515,788 =============== </Table> See Accompanying Notes to Financial Statements. 31 <Page> STATEMENT OF CHANGES IN NET ASSETS Colonial Strategic Income Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2005 2004 - ---------------------------------- --------------- --------------- OPERATIONS: Net investment income $ 4,658,251 $ 9,642,011 Net realized gain on investments and foreign currency transactions 2,414,905 6,247,432 Net change in unrealized appreciation (depreciation) on investments and foreign currency translations (6,557,368) (733,434) --------------- --------------- Net Increase from Operations 515,788 15,156,009 --------------- --------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (7,965,743) Class B -- (4,548,504) --------------- --------------- Total Distributions Declared to Shareholders -- (12,514,247) --------------- --------------- SHARE TRANSACTIONS: Class A: Subscriptions 2,122,165 4,779,974 Distributions reinvested -- 7,965,743 Redemptions (11,611,295) (21,801,483) --------------- --------------- Net Decrease (9,489,130) (9,055,766) --------------- --------------- Class B: Subscriptions 2,077,701 8,617,658 Distributions reinvested -- 4,548,504 Redemptions (3,991,787) (9,649,517) --------------- --------------- Net Increase (Decrease) (1,914,086) 3,516,645 --------------- --------------- Net Decrease from Share Transactions (11,403,216) (5,539,121) --------------- --------------- Total Decrease in Net Assets (10,887,428) (2,897,359) NET ASSETS: Beginning of period 162,822,359 165,719,718 --------------- --------------- End of period (including undistributed (overdistributed) net investment income of $3,227,173 and $(1,431,078), respectively) $ 151,934,931 $ 162,822,359 =============== =============== CHANGES IN SHARES: Class A: Subscriptions 213,865 471,285 Issued for distributions reinvested -- 799,774 Redemptions (1,172,220) (2,175,844) --------------- --------------- Net Decrease (958,355) (904,785) --------------- --------------- Class B: Subscriptions 209,776 862,989 Issued for distributions reinvested -- 457,136 Redemptions (404,650) (965,905) --------------- --------------- Net Increase (Decrease) (194,874) 354,220 --------------- --------------- </Table> See Accompanying Notes to Financial Statements. 32 <Page> NOTES TO FINANCIAL STATEMENTS Colonial Strategic Income Fund, Variable Series / June 30, 2005 (Unaudited) NOTE 1. ORGANIZATION Colonial Strategic Income Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks current income consistent with prudent risk. The Fund also seeks 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 have 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. 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. 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 33 <Page> 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 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 34 <Page> to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2004 was as follows: <Table> <Caption> DECEMBER 31, 2004 -------------- Distributions paid from: Ordinary income $ 12,514,247 Long-term capital gains -- </Table> Unrealized appreciation and depreciation at June 30, 2005, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 9,345,946 Unrealized depreciation (4,386,900) -------------- Net unrealized appreciation $ 4,959,046 ============== </Table> The following capital loss carryforwards, determined as of December 31, 2004, 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> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE--Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and provides administrative and other services to the Fund. Columbia receives a monthly investment advisory 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 $500 million 0.60% $500 million to $1 billion 0.55% $1 billion to $1.5 billion 0.52% Over $1.5 billion 0.49% </Table> For the six months ended June 30, 2005, as a result of the settlement with the New York Attorney General discussed in Note 6, the Fund's annualized effective investment advisory fee rate was 0.59%. PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2005, the annualized effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.059%. 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 six months ended June 30, 2005, the Fund's annualized effective transfer agent fee rate was less than 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia 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) will 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 35 <Page> 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. 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 for the Office of the Chief Compliance Officer 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 six months ended June 30, 2005, the Fund paid $831 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $28,102,128 and $33,374,307 of which $51,187 was U.S. Government securities. NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES FOREIGN SECURITIES--There are certain additional risks involved when investing in foreign securities that are not inherent with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. Investments in emerging market countries are subject to additional risk. The risk of foreign investments is typically increased in less developed countries. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could hurt their economies and securities markets. HIGH-YIELD SECURITIES--Investing in high-yield securities may involve greater credit risk and considerations not typically associated with investing in U.S. government bonds and other higher quality fixed income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high yield market and impair the ability of issuers to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high-yield securities may be less liquid to the extent 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 Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as 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 funds 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 36 <Page> 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. At this time, the distribution plan is still under development. As such, any gain to the Fund or its shareholders can not currently be determined. 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 is 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 events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has conditionally ordered its transfer to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, can not currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds 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. In 2004, certain Columbia funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Fund 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 Fund. For the six months ended June 30, 2005, Columbia has assumed $1,939 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 37 <Page> FINANCIAL HIGHLIGHTS Colonial Strategic Income Fund, Variable Series--Class B Shares Selected data for a share outstanding throughout each period is as follows: <Table> <Caption> (UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED DECEMBER 31, ENDED JUNE 30, ------------------------------------------------- DECEMBER 31, 2005 2004 2003 2002 2001 2000 (a) ---------- ---------- ---------- ---------- ---------- ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 9.95 $ 9.80 $ 8.89 $ 8.91 $ 9.41 $ 10.24 ---------- ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.29 0.59 0.60 0.63 0.79(c) 0.56 Net realized and unrealized gain (loss) on investments and foreign currency (0.26) 0.38 1.04 0.09 (0.46)(c) (0.37) ---------- ---------- ---------- ---------- ---------- ---------- Total from Investment Operations 0.03 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 $ 9.98 $ 9.95 $ 9.80 $ 8.89 $ 8.91 $ 9.41 ========== ========== ========== ========== ========== ========== Total return (d)(e)(f) 0.30%(g) 9.85% 18.43% 8.08% 3.54% 1.92%(g) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (h) 0.97%(i) 1.00% 1.00% 1.00% 1.00% 1.00%(i) Net investment income (h) 5.78%(i) 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 19%(g) 103% 61% 62% 62% 31% Net assets, end of period (000's) $ 58,455 $ 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. 38 <Page> PORTFOLIO MANAGERS' DISCUSSION Columbia High Yield Fund, Variable Series / June 30, 2005 Columbia High Yield Fund, Variable Series seeks a high level of current income by investing primarily in lower-rated fixed income securities. Capital appreciation is a secondary goal when consistent with the goal of high current income. 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 March 1998. Mr. Havnaer has co-managed the fund and its predecessor since September 2000. During the six-month period ended June 30, 2005, the bond market remained relatively stable though there were some slight gains to be seen. Even though the Federal Reserve increased the federal funds rate by one percentage point to 3.25% during this period, long-term interest rates dropped by about three-tenths of one percentage point. The high-yield sector showed modest gains, with higher quality securities slightly outperforming lower quality credits. This pattern strengthened during the second quarter and was favorable to the fund, which finished the first half of the year roughly in line with its benchmark, the Merrill Lynch US High Yield, Cash Pay Only Index(1). MIXED RESULTS FROM SECTOR ALLOCATIONS The fund's performance relative to its benchmark was dependent not only on specific securities held during the period, but also on what sectors were underweighted. Some of these underweight sectors posted weak returns and therefore the fund wasn't affected as much by their poor performance. For instance, the fund had no exposure to air transportation, which underperformed during the six-month period. Record high fuel prices continue to plague the airlines. The fund was also underweight in the auto sector. While auto sales have held reasonably firm despite the high cost of oil, the deteriorating finances at Ford Motor and General Motors caused both companies to suffer credit downgrades in May and accelerated a flight to quality within the high-yield market. The fund had no exposure to either Ford Motor or General Motors. The fund's underweight position in the telecommunications sector, on the other hand, represented a missed opportunity. Many telecom companies have made demonstrable improvements to their balance sheets, and investors have responded by bidding up the prices for their bonds. FOCUS ON INDIVIDUAL HOLDINGS Individual companies from many different industries aided the fund with their strong performance over the past six months. Bonds of HCA (Hospital Corporation of America) performed well as the company's efforts to pay down its debt surpassed market expectations (1.4% of net assets). TECO Energy (a diversified holding company that includes Tampa Electric) performed well due in part to its success in divesting merchant power assets and returning to its core utility business (1.0% of net assets). Rogers Wireless advanced upon entering into an attractive merger (1.0% of net assets). Leading drill pipe supplier Grant Prideco benefited from the strong upturn in the energy sector (0.7% of net assets). As a result, Grant Prideco called one of its two bonds that the fund owned, at favorable terms. The portfolio also contained some disappointments. Cinemark USA, one of the country's largest movie exhibitors, suffered from reduced theater attendance (1.1% of net assets). Finlay Enterprises, which operates jewelry departments for several major retail chains, has been viewed cautiously by investors following the announcement that one of its larger clients is being acquired. More than 50% of Finlay's sales derive from its relationship with this retail chain, and the fate of that business once the retailer has been acquired is uncertain. We eliminated our position in Finlay by the end of the period. Finally, containers sector declined amid sluggish demand for corrugated boxes and declining prices for containerboards (1.4% of net assets). ENCOURAGED BY CURRENT ECONOMIC CLIMATE The fund did not make any fundamental changes to its portfolio structure during the period. We continue to believe that the current economic environment of stable growth and relatively low interest rates is favorable for the high-yield market. Steady growth has enabled many companies to improve their balance sheets and credit ratings. Within the high-yield market, the recent leadership of higher quality issues is an encouraging sign, because the average credit quality of our holdings is high relative to our peer group. While this stance caused our performance to lag somewhat in 2004, we are encouraged by the increasing number of portfolio holdings drawing closer to investment-grade status. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. The opinions expressed here are strictly those of Columbia Management and are subject to change without notice. Other divisions of Bank of America and/or affiliates of Columbia Management may have opinions that are inconsistent with these opinions. An investment in the Columbia High Yield Fund, Variable Series may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yield and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, and vice versa. Investing in high yield securities or "junk bonds" offers the potential for higher current income and attractive total return but involves certain risks. Changes in economic conditions or other circumstances may adversely affect a high-yield bond issuer's ability to make timely principal and interest payments. Holdings are disclosed as of June 30, 2005, and are subject to change. (1) The Merrill Lynch US High Yield, Cash Pay Only Index is an unmanaged index that tracks the performance of non-investment-grade corporate bonds. 39 <Page> PERFORMANCE INFORMATION Columbia High Yield Fund, Variable Series / June 30, 2005 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%) <Table> <Caption> 6-MONTH (CUMULATIVE) 1-YEAR 5-YEAR LIFE - ------------------------------------------------------------------- Class B (04/14/03) 1.15 8.03 6.41 5.85 Merrill Lynch US High Yield, Cash Pay Only Index(1) 1.22 10.64 7.83 5.62 </Table> Inception date of share class is in parentheses. <Table> <Caption> NET ASSET VALUE PER SHARE($) 12/31/04 06/30/05 - ------------------------------------------------------------- Class B 9.56 9.67 </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. [CHART] VALUE OF A $10,000 INVESTMENT, 03/03/98(2) - 06/30/05 <Table> <Caption> MERRILL LYNCH US HIGH YIELD, CLASS B SHARES CASH PAY ONLY 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 $ 14,995 $ 14,749 1/31/2005 $ 14,963 $ 14,737 2/28/2005 $ 15,152 $ 14,945 3/31/2005 $ 14,728 $ 14,538 4/30/2005 $ 14,697 $ 14,387 5/31/2005 $ 14,963 $ 14,652 6/30/2005 $ 15,168 $ 14,930 </Table> The graph compares the results of a hypothetical $10,000 investment in the fund with the index. The Index is unmanaged and returns for the index and the fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Investment earnings, if any, are income tax-deferred until distribution, at which time taxes will become due. Total return performance includes changes in share price and reinvestment of all distributions. The Merrill Lynch US High Yield, Cash Pay Only Index is an unmanaged index 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. 40 <Page> UNDERSTANDING YOUR EXPENSES Columbia High Yield Fund, Variable Series / June 30, 2005 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 ongoing 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 ongoing 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 $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 01/01/05 - 06/30/05 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,011.50 1,021.52 3.29 3.31 0.66 </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 365. 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 funds 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. 41 <Page> INVESTMENT PORTFOLIO Columbia High Yield Fund, Variable Series / June 30, 2005 (Unaudited) <Table> <Caption> PAR VALUE ------------- ------------- CORPORATE FIXED-INCOME BONDS & NOTES--90.4% BASIC MATERIALS--4.1% CHEMICALS--1.8% CHEMICALS - DIVERSIFIED--0.3% EquiStar Chemicals LP 10.125% 09/01/08 $ 155,000 $ 167,788 10.625% 05/01/11 180,000 199,800 ------------- 367,588 ------------- CHEMICALS - SPECIALTY--0.5% Nalco Co. 7.750% 11/15/11 625,000 664,844 ------------- INDUSTRIAL - GASES--1.0% Airgas, Inc. 6.250% 07/15/14 785,000 800,700 9.125% 10/01/11 350,000 378,437 ------------- 1,179,137 ------------- FOREST PRODUCTS & PAPER--1.2% PAPER & RELATED PRODUCTS--1.2% Boise Cascade LLC 7.125% 10/15/14 (a) 1,445,000 1,419,713 ------------- IRON/STEEL--1.1% STEEL - PRODUCERS--1.1% Russel Metals, Inc. 6.375% 03/01/14 850,000 813,875 United States Steel Corp. 9.750% 05/15/10 500,000 538,750 ------------- 1,352,625 ------------- COMMUNICATIONS--12.8% ADVERTISING--1.8% ADVERTISING SALES--1.8% Lamar Media Corp. 7.250% 01/01/13 2,050,000 2,173,000 ------------- MEDIA--8.6% CABLE TV--4.3% DirecTV Holdings LLC 6.375% 06/15/15 (a) 115,000 114,281 8.375% 03/15/13 1,476,000 1,630,980 EchoStar DBS Corp. 5.750% 10/01/08 605,000 603,488 6.625% 10/01/14 1,075,000 1,061,562 Rogers Cable, Inc. 6.250% 06/15/13 625,000 623,438 7.875% 05/01/12 1,110,000 1,207,125 ------------- 5,240,874 ------------- MULTIMEDIA--0.5% Emmis Operating Co. 6.875% 05/15/12 675,000 669,938 ------------- PUBLISHING - PERIODICALS--2.9% Dex Media West LLC 5.875% 11/15/11 $ 1,730,000 $ 1,704,050 R.H. Donnelley Finance Corp. 10.875% 12/15/12 (a) 510,000 594,150 10.875% 12/15/12 1,100,000 1,281,500 ------------- 3,579,700 ------------- TELEVISION--0.9% LIN Television Corp. 6.500% 05/15/13 1,125,000 1,071,562 ------------- TELECOMMUNICATIONS--2.4% CELLULAR TELECOMMUNICATIONS--2.4% Nextel Communications, Inc. 5.950% 03/15/14 960,000 997,200 6.875% 10/31/13 60,000 64,200 7.375% 08/01/15 625,000 675,000 Rogers Wireless, Inc. 7.500% 03/15/15 210,000 227,850 8.000% 12/15/12 940,000 1,010,500 ------------- 2,974,750 ------------- CONSUMER CYCLICAL--21.1% AUTO PARTS & EQUIPMENT--0.5% AUTO/TRUCK PARTS & EQUIPMENT - ORIGINAL--0.5% Accuride Corp. 8.500% 02/01/15 275,000 268,813 TRW Automotive, Inc. 9.375% 02/15/13 320,000 355,200 ------------- 624,013 ------------- ENTERTAINMENT--2.7% MUSIC--0.6% Warner Music Group 7.375% 04/15/14 775,000 784,688 ------------- RACETRACKS--1.0% Speedway Motorsports, Inc. 6.750% 06/01/13 1,190,000 1,234,625 ------------- THEATERS--1.1% Cinemark USA, Inc. 9.000% 02/01/13 1,285,000 1,329,975 ------------- HOME BUILDERS--2.6% BUILDING - RESIDENTIAL/COMMERCIAL--2.6% K. Hovnanian Enterprises, Inc. 6.000% 01/15/10 315,000 309,488 6.375% 12/15/14 270,000 266,625 6.500% 01/15/14 400,000 400,000 KB Home 5.875% 01/15/15 750,000 740,625 7.750% 02/01/10 250,000 261,875 8.625% 12/15/08 250,000 273,125 Toll Corp. 8.250% 02/01/11 325,000 344,500 8.250% 12/01/11 600,000 646,500 ------------- 3,242,738 ------------- </Table> See Accompanying Notes to Financial Statements. 42 <Page> <Table> <Caption> PAR VALUE ------------- ------------- LEISURE TIME--3.0% CRUISE LINES--1.9% Royal Caribbean Cruises Ltd. 6.750% 03/15/08 $ 145,000 $ 151,162 6.875% 12/01/13 550,000 585,750 8.750% 02/02/11 1,390,000 1,601,975 ------------- 2,338,887 ------------- LEISURE & RECREATIONAL PRODUCTS--1.1% K2, Inc. 7.375% 07/01/14 410,000 430,500 Leslie's Poolmart 7.750% 02/01/13 850,000 858,500 ------------- 1,289,000 ------------- LODGING--8.7% CASINO HOTELS--7.8% Caesars Entertainment, Inc. 7.875% 03/15/10 1,080,000 1,196,100 8.875% 09/15/08 960,000 1,060,800 9.375% 02/15/07 100,000 107,500 Kerzner International Ltd. 8.875% 08/15/11 1,365,000 1,460,550 MGM Mirage 6.000% 10/01/09 1,450,000 1,459,062 8.500% 09/15/10 815,000 900,575 Station Casinos, Inc. 6.500% 02/01/14 1,795,000 1,837,631 6.875% 03/01/16 570,000 587,100 Wynn Las Vegas LLC 6.625% 12/01/14 965,000 938,463 ------------- 9,547,781 ------------- HOTELS & MOTELS--0.9% Starwood Hotels & Resorts Worldwide, Inc. 7.375% 05/01/07 200,000 209,000 7.875% 05/01/12 810,000 913,275 ------------- 1,122,275 ------------- RETAIL--3.6% RETAIL - AUTOMOBILES--1.6% AutoNation, Inc. 9.000% 08/01/08 1,420,000 1,554,900 Group 1 Automotive, Inc. 8.250% 08/15/13 450,000 454,500 ------------- 2,009,400 ------------- RETAIL - CONVENIENCE STORE--1.1% Couche-Tard 7.500% 12/15/13 1,235,000 1,306,012 ------------- RETAIL - PROPANE DISTRIBUTORS--0.3% Suburban Propane Partners LP 6.875% 12/15/13 415,000 394,250 ------------- RETAIL - RESTAURANTS--0.6% Domino's, Inc. 8.250% 07/01/11 650,000 698,750 ------------- CONSUMER NON-CYCLICAL--17.1% BEVERAGES--3.0% BEVERAGES - NON-ALCOHOLIC--1.8% Cott Beverages, Inc. 8.000% 12/15/11 $ 2,010,000 $ 2,140,650 ------------- BEVERAGES - WINE/SPIRITS--1.2% Constellation Brands, Inc. 8.000% 02/15/08 575,000 613,813 8.125% 01/15/12 825,000 880,687 8.625% 08/01/06 25,000 26,500 ------------- 1,521,000 ------------- COMMERCIAL SERVICES--4.4% COMMERCIAL SERVICES--1.6% Iron Mountain, Inc. 7.750% 01/15/15 530,000 535,300 8.625% 04/01/13 1,420,000 1,469,700 ------------- 2,005,000 ------------- FUNERAL SERVICES & RELATED ITEMS--0.6% Stewart Enterprises, Inc. 6.250% 02/15/13 (a) 785,000 779,113 ------------- PRIVATE CORRECTIONS--1.4% Corrections Corp. of America 6.250% 03/15/13 700,000 694,750 7.500% 05/01/11 950,000 988,000 ------------- 1,682,750 ------------- RENTAL AUTO/EQUIPMENT--0.8% United Rentals, Inc. 7.000% 02/15/14 125,000 119,375 7.750% 11/15/13 835,000 818,300 ------------- 937,675 ------------- FOOD--0.7% FOOD - MISCELLANEOUS/DIVERSIFIED--0.7% Del Monte Corp. 6.750% 02/15/15 (a) 860,000 872,900 ------------- HEALTHCARE SERVICES--6.3% MEDICAL - HMO--1.2% Coventry Health Care, Inc. 5.875% 01/15/12 1,445,000 1,470,287 ------------- MEDICAL - HOSPITALS--2.8% HCA, Inc. 6.950% 05/01/12 1,660,000 1,766,887 Triad Hospitals, Inc. 7.000% 05/15/12 525,000 551,250 7.000% 11/15/13 1,100,000 1,133,000 ------------- 3,451,137 ------------- MEDICAL - NURSING HOMES--0.5% Extendicare Health Services, Inc. 6.875% 05/01/14 640,000 635,200 9.500% 07/01/10 45,000 48,713 ------------- 683,913 ------------- MEDICAL - OUTPATIENT/HOME MEDICAL--0.7% Select Medical Corp. 7.625% 02/01/15 (a) 820,000 807,700 ------------- </Table> See Accompanying Notes to Financial Statements. 43 <Page> <Table> <Caption> PAR VALUE ------------- ------------- MEDICAL PRODUCTS--1.1% Fisher Scientific International, Inc. 6.750% 08/15/14 $ 1,310,000 $ 1,372,225 ------------- HOUSEHOLD PRODUCTS/WARES--1.2% CONSUMER PRODUCTS - MISCELLANEOUS--1.2% Scotts Co. 6.625% 11/15/13 1,375,000 1,430,000 ------------- PHARMACEUTICALS--1.5% MEDICAL - WHOLESALE DRUG DISTRIBUTION--0.4% AmerisourceBergen Corp. 8.125% 09/01/08 505,000 548,556 ------------- PHARMACY SERVICES--1.1% Omnicare, Inc. 6.125% 06/01/13 945,000 935,550 8.125% 03/15/11 370,000 390,813 ------------- 1,326,363 ------------- ENERGY--14.6% COAL--3.5% COAL--3.5% Arch Western Finance LLC 6.750% 07/01/13 1,900,000 1,961,750 Peabody Energy Corp. 5.875% 04/15/16 375,000 375,000 6.875% 03/15/13 1,905,000 2,028,825 ------------- 4,365,575 ------------- OIL & GAS SERVICES--2.4% OIL - FIELD SERVICES--1.7% Hornbeck Offshore Services, Inc. 6.125% 12/01/14 875,000 881,563 Universal Compression, Inc. 7.250% 05/15/10 1,195,000 1,245,787 ------------- 2,127,350 ------------- OIL FIELD MACHINERY & EQUIPMENT--0.7% Grant Prideco, Inc. 9.000% 12/15/09 725,000 793,875 ------------- OIL & GAS--6.8% OIL & GAS DRILLING--0.9% Pride International, Inc. 7.375% 07/15/14 1,025,000 1,121,094 ------------- OIL COMPANIES - EXPLORATION & PRODUCTION--5.9% Chesapeake Energy Corp. 6.375% 06/15/15 (a) 815,000 833,337 7.500% 09/15/13 735,000 790,125 7.750% 01/15/15 550,000 594,000 Newfield Exploration Co. 6.625% 09/01/14 1,800,000 1,881,000 Plains Exploration & Production Co. 7.125% 06/15/14 1,020,000 1,091,400 Pogo Producing Co. 6.625% 03/15/15 (a) 345,000 355,350 8.250% 04/15/11 455,000 483,438 Vintage Petroleum, Inc. 7.875% 05/15/11 $ 650,000 $ 685,750 8.250% 05/01/12 465,000 502,200 ------------- 7,216,600 ------------- PIPELINES--1.9% PIPELINES--1.9% MarkWest Energy Partners LP 6.875% 11/01/14 (a) 545,000 539,550 Williams Companies, Inc. 7.125% 09/01/11 565,000 611,612 8.125% 03/15/12 1,060,000 1,213,700 ------------- 2,364,862 ------------- FINANCIALS--1.5% REAL ESTATE INVESTMENT TRUSTS--1.5% REITS - DIVERSIFIED--0.9% iStar Financial, Inc. 5.125% 04/01/11 965,000 965,531 7.000% 03/15/08 85,000 89,863 ------------- 1,055,394 ------------- REITs - HOTELS--0.6% Host Marriott LP 6.375% 03/15/15 (a) 745,000 737,550 ------------- INDUSTRIALS--14.3% AEROSPACE & DEFENSE--2.2% AEROSPACE/DEFENSE - EQUIPMENT--0.9% TransDigm, Inc. 8.375% 07/15/11 1,025,000 1,078,812 ------------- ELECTRONICS - MILITARY--1.3% L-3 Communications Corp. 6.125% 07/15/13 655,000 658,275 7.625% 06/15/12 960,000 1,022,400 ------------- 1,680,675 ------------- ENVIRONMENTAL CONTROL--1.2% NON-HAZARDOUS WASTE DISPOSAL--1.2% Allied Waste North America, Inc. 6.375% 04/15/11 825,000 787,875 6.500% 11/15/10 560,000 551,600 Series B, 9.250% 09/01/12 67,000 72,025 ------------- 1,411,500 ------------- HAND/MACHINE TOOLS--0.5% MACHINE TOOLS & RELATED PRODUCTS--0.5% Kennametal, Inc. 7.200% 06/15/12 490,000 546,727 ------------- MACHINERY - DIVERSIFIED--1.3% MACHINERY - GENERAL INDUSTRY--1.3% Manitowoc Co., Inc. 7.125% 11/01/13 435,000 451,856 Westinghouse Air Brake Technologies Corp. 6.875% 07/31/13 1,135,000 1,160,538 ------------- 1,612,394 ------------- </Table> See Accompanying Notes to Financial Statements. 44 <Page> <Table> <Caption> PAR VALUE ------------- ------------- PACKAGING & CONTAINERS--6.1% CONTAINERS - METAL/GLASS--4.7% Ball Corp. 6.875% 12/15/12 $ 2,030,000 $ 2,136,575 7.750% 08/01/06 100,000 103,625 Owens-Brockway Glass Container 6.750% 12/01/14 125,000 127,031 8.875% 02/15/09 290,000 309,575 Owens-Illinois, Inc. 7.500% 05/15/10 1,275,000 1,338,750 Silgan Holdings, Inc. 6.750% 11/15/13 1,735,000 1,774,038 ------------- 5,789,594 ------------- CONTAINERS - PAPER/PLASTIC--1.4% Jefferson Smurfit Corp. 8.250% 10/01/12 400,000 403,000 Smurfit-Stone Container Corp. 8.375% 07/01/12 535,000 540,350 Stone Container Finance 7.375% 07/15/14 875,000 822,500 ------------- 1,765,850 ------------- TRANSPORTATION--3.0% TRANSPORTATION - MARINE--2.2% Overseas Shipholding Group 8.250% 03/15/13 590,000 616,550 Teekay Shipping Corp. 8.875% 07/15/11 1,835,000 2,087,312 ------------- 2,703,862 ------------- TRANSPORTATION - SERVICES--0.8% Offshore Logistics, Inc. 6.125% 06/15/13 1,070,000 1,031,213 ------------- TECHNOLOGY--1.0% SEMICONDUCTORS--1.0% ELECTRONIC COMPONENTS - SEMICONDUCTORS--1.0% Freescale Semiconductor, Inc. 6.875% 07/15/11 1,165,000 1,237,812 ------------- UTILITIES--3.9% ELECTRIC--3.9% ELECTRIC - GENERATION--2.5% AES Corp. 7.750% 03/01/14 1,680,000 1,818,600 Texas Genco LLC 6.875% 12/15/14 (a) 1,200,000 1,263,000 ------------- 3,081,600 ------------- ELECTRIC - INTEGRATED--1.4% Nevada Power Co. 5.875% 01/15/15 (a) 275,000 275,000 6.500% 04/15/12 200,000 208,000 NorthWestern Corp. 5.875% 11/01/14 (a) 50,000 50,750 TECO Energy, Inc. 6.750% 05/01/15 (a) $ 575,000 $ 608,063 7.000% 05/01/12 595,000 641,112 ------------- 1,782,925 ------------- TOTAL CORPORATE FIXED-INCOME BONDS & NOTES (cost of $110,912,670) 111,150,658 ------------- <Caption> UNITS ------------- WARRANTS (b)--0.0% COMMUNICATIONS--0.0% TELECOMMUNICATIONS--0.0% CELLULAR TELECOMMUNICATIONS--0.0% UbiquiTel, Inc. Expires 04/15/10(a) 50 1 ------------- INDUSTRIALS--0.0% TRANSPORTATION--0.0% TRANSPORTATION - TRUCKS--0.0% QDI LLC Expires 01/15/07 (a)(c) 153 588 ------------- TOTAL WARRANTS (cost of $2,500) 589 ------------- <Caption> PAR ------------- SHORT-TERM OBLIGATION--8.4% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/05, due 07/01/05 at 2.700%, collateralized by a U.S. Treasury Bond maturing 04/15/10, market value of $10,511,100 (repurchase proceeds $10,303,773) $ 10,303,000 10,303,000 ------------- TOTAL SHORT-TERM OBLIGATION (cost of $10,303,000) 10,303,000 ------------- TOTAL INVESTMENTS--98.8% (cost of $121,218,170) (d) 121,454,247 ------------- OTHER ASSETS & LIABILITIES, NET--1.2% 1,533,259 ------------- NET ASSETS--100.0% $ 122,987,506 ============= </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2005, these securities, which do not include illiquid securities, amounted to $9,251,046, which represents 7.5% of net assets. (b) Non-income producing security. (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 $121,634,235. See Accompanying Notes to Financial Statements. 45 <Page> At June 30, 2005, the asset allocation of the Fund is as follows: <Table> <Caption> % OF ASSET ALLOCATION NET ASSETS - ---------------- ---------- Corporate Fixed-Income Bonds & Notes 90.4% Warrants 0.0 Short-Term Obligation 8.4 Other Assets & Liabilities, Net 1.2 ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 46 <Page> STATEMENT OF ASSETS & LIABILITIES Columbia High Yield Fund, Variable Series / June 30, 2005 (Unaudited) <Table> ASSETS: Investments, at cost $ 121,218,170 -------------- Investments, at value $ 121,454,247 Cash 435 Receivable for: Fund shares sold 159,636 Interest 2,040,803 Expense reimbursement/waiver due from Investment Advisor/Distributor 20,989 Deferred Trustees' compensation plan 3,368 -------------- TOTAL ASSETS 123,679,478 -------------- LIABILITIES: Payable for: Investments purchased 527,787 Fund shares repurchased 83,678 Investment advisory fee 56,645 Transfer agent fee 396 Pricing and bookkeeping fees 2,773 Audit fee 11,377 Custody fee 976 Deferred Trustees' fees 3,368 Other liabilities 4,972 -------------- TOTAL LIABILITIES 691,972 -------------- NET ASSETS $ 122,987,506 ============== COMPOSITION OF NET ASSETS: Paid-in capital $ 129,379,452 Undistributed net investment income 2,412,870 Accumulated net realized loss (9,040,893) Net unrealized appreciation on investments 236,077 -------------- NET ASSETS $ 122,987,506 ============== CLASS A: Net assets $ 8,571,566 Shares outstanding 887,322 ============== Net asset value per share $ 9.66 ============== CLASS B: Net assets $ 114,415,940 Shares outstanding 11,835,758 ============== Net asset value per share $ 9.67 ============== </Table> See Accompanying Notes to Financial Statements. 47 <Page> STATEMENT OF OPERATIONS Columbia High Yield Fund, Variable Series For the Six Months Ended June 30, 2005 (Unaudited) <Table> INVESTMENT INCOME: Interest $ 3,068,705 -------------- EXPENSES: Investment advisory fee 294,839 Distribution fee--Class B 111,645 Transfer agent fee 2,480 Pricing and bookkeeping fees 17,356 Trustees' fees 3,533 Custody fee 4,854 Non-recurring costs (See Note 6) 1,155 Other expenses 25,964 -------------- Total Expenses 461,826 Fees and expenses waived or reimbursed by Investment Advisor (53,329) Fee waived by Distributor--Class B (84,850) Non-recurring costs assumed by Investment Advisor (See Note 6) (1,155) Custody earnings credit (858) -------------- Net Expenses 321,634 -------------- Net Investment Income 2,747,071 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 210,688 Net change in unrealized appreciation (depreciation) on investments (1,474,954) -------------- Net Loss (1,264,266) -------------- Net Increase in Net Assets from Operations $ 1,482,805 ============== </Table> See Accompanying Notes to Financial Statements. 48 <Page> STATEMENT OF CHANGES IN NET ASSETS Columbia High Yield Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2005 2004 - ---------------------------------- -------------- -------------- OPERATIONS: Net investment income $ 2,747,071 $ 3,093,238 Net realized gain on investments and foreign currency transactions 210,688 375,783 Net change in unrealized appreciation (depreciation) on investments and foreign currency translations (1,474,954) 698,623 -------------- -------------- Net Increase from Operations 1,482,805 4,167,644 -------------- -------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (566,446) Class B -- (2,926,406) -------------- -------------- Total Distributions Declared to Shareholders -- (3,492,852) -------------- -------------- SHARE TRANSACTIONS: Class A: Subscriptions 335,694 3,321,916 Distributions reinvested -- 566,446 Redemptions (1,574,232) (6,454,849) -------------- -------------- Net Decrease (1,238,538) (2,566,487) -------------- -------------- Class B: Subscriptions 44,718,336 48,472,376 Distributions reinvested -- 2,926,406 Redemptions (3,459,291) (8,511,450) -------------- -------------- Net Increase 41,259,045 42,887,332 -------------- -------------- Net Increase from Share Transactions 40,020,507 40,320,845 -------------- -------------- Total Increase in Net Assets 41,503,312 40,995,637 NET ASSETS: Beginning of period 81,484,194 40,488,557 -------------- -------------- End of period (including undistributed (overdistributed) net investment income of $2,412,870 and $(334,201), respectively) $ 122,987,506 $ 81,484,194 ============== ============== CHANGES IN SHARES: Class A: Subscriptions 35,169 352,089 Issued for distributions reinvested -- 59,622 Redemptions (165,486) (682,101) -------------- -------------- Net Decrease (130,317) (270,390) -------------- -------------- Class B: Subscriptions 4,694,965 5,089,040 Issued for distributions reinvested -- 306,985 Redemptions (362,834) (902,982) -------------- -------------- Net Increase 4,332,131 4,493,043 -------------- -------------- </Table> See Accompanying Notes to Financial Statements. 49 <Page> NOTES TO FINANCIAL STATEMENTS Columbia High Yield Fund, Variable Series / June 30, 2005 (Unaudited) NOTE 1. ORGANIZATION Columbia High Yield Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks a high level of current income by investing primarily in lower-rated fixed income securities. Capital appreciation is a secondary goal when consistent with the goal of high 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--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. 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. 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 have 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. 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. 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 50 <Page> 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 translated into U.S. dollars at that day's exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes. For financial statement purposes, the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments. DETERMINATION OF CLASS NET ASSET VALUES--All income, expenses (other than class-specific expenses, as shown on the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis for purposes of determining the net asset value of each class. Income and expenses are allocated to each class based on the settled shares method, while realized and unrealized gains (losses) are allocated based on the relative net assets of each class. FEDERAL INCOME TAX STATUS--The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2004 was as follows: <Table> <Caption> DECEMBER 31, 2004 ------------ Distributions paid from: Ordinary income $ 3,492,852 Long-term capital gains -- </Table> Unrealized appreciation at June 30, 2005, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 1,245,901 Unrealized depreciation (1,425,889) ------------ Net unrealized depreciation $ (179,988) ============ </Table> The following capital loss carryforwards, determined as of December 31, 2004, 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> 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. Utilization of these losses could be subject to limitations imposed by the Internal Revenue Code. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE--Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and provides administrative and other services to the Fund. Columbia receives a monthly investment advisory 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 0.60% Next $500 million 0.55% Over $1.5 billion 0.50% </Table> 51 <Page> For the six months ended June 30, 2005, the Fund's annualized effective investment advisory fee rate was 0.60%. 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 $50 million to $200 million $ 35,000 $200 million to $500 million $ 50,000 $500 million to $1 billion $ 85,000 Over $1 billion $ 125,000 </Table> The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2005, the annualized effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.035%. 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 six months ended June 30, 2005, the Fund's annualized effective transfer agent fee rate was 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Effective January 1, 2005, Columbia has voluntarily agreed to waive fees and reimburse the Fund for certain expenses so that total expenses (exclusive of distribution fees, brokerage commissions, interest, taxes and extraordinary expenses, if any) will not exceed 0.60% annually of the Fund's average daily net assets. Prior to January 1, 2005, Columbia voluntarily reimbursed certain fees of the Fund at an annual rate up to 0.27% of the Fund's average daily net assets. For the six months ended June 30, 2005, fees reimbursed by Columbia amounted to 0.11% of the Fund's average daily net assets. In addition, the Distributor has voluntarily agreed to waive Class B distribution fees at an annual rate of 0.19% of the Class B average daily net assets. 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. 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 for the Office of the Chief Compliance Officer 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 six months ended June 30, 2005, the Fund paid $790 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $51,641,599 and $13,414,041, 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 52 <Page> 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 Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as 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 funds 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. At this time, the distribution plan is still under development. As such, any gain to the Fund or its shareholders can not currently be determined. 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 is 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 events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has conditionally ordered its transfer to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, can not currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds and Columbia. The lawsuit alleges that defendants violated common law duties to fund shareholders as well as 53 <Page> 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. In 2004, certain Columbia funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Fund 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 Fund. For the six months ended June 30, 2005, Columbia has assumed $1,155 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 54 <Page> FINANCIAL HIGHLIGHTS Columbia High Yield Fund, Variable Series--Class B Shares Selected data for a share outstanding throughout each period is as follows: <Table> <Caption> (UNAUDITED) SIX MONTHS YEAR PERIOD ENDED ENDED ENDED JUNE 30, DECEMBER 31, DECEMBER 31, 2005 2004 2003 (a) ------------ ------------ ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 9.56 $ 9.42 $ 9.12 ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.26 0.53 0.41 Net realized and unrealized gain (loss) on investments and foreign currency (0.15) 0.13 0.34 ------------ ------------ ------------ Total from Investment Operations 0.11 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 $ 9.67 $ 9.56 $ 9.42 ============ ============ ============ Total return (c)(d)(e) 1.15%(f) 7.11% 8.44%(f) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (g) 0.66%(h) 0.66% 0.76%(h) Net investment income (g) 5.57%(h) 5.56% 6.21%(h) Waiver/reimbursement 0.30%(h) 0.35% 0.46%(h) Portfolio turnover rate 15%(f) 38% 112%(f) Net assets, end of period (000's) $ 114,416 $ 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) Total return figure does not include any insurance company charges associated with a variable annuity. If included, total return would be reduced. (e) Had the Investment Advisor and/or Distributor not waived or reimbursed a portion of expenses, total return would have been reduced. (f) Not annualized. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (h) Annualized. 55 <Page> PORTFOLIO MANAGERS' DISCUSSION Columbia International Fund, Variable Series / June 30, 2005 Columbia International Fund, Variable Series seeks long-term growth. 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. International equity markets produced mixed returns during the first half of 2005, as investors came to terms with rising oil prices and the potential for a slowdown in global economic growth. In this environment, the portfolio had relatively strong returns in Europe, Singapore and Hong Kong. The portfolio suffered, however, from investments in Japan, a market that performed poorly. Underexposure to Australia also held back results. In addition, the portfolio had no exposure to Royal Dutch and missed out on the stock's strong returns, the result of higher oil prices. Performance was also negatively affected by the appreciation of the US dollar, which eroded investment returns that were denominated in local currencies and then converted to the dollar. ENERGY STOCKS DROVE PERFORMANCE Oil prices rose 35% during this six-month period, and the portfolio's overweight position in the energy sector made a positive contribution to performance. Returns were enhanced by OMV AG, an Austria-based oil and gas producer that is gaining access to central and Eastern Europe through acquisitions (0.4% of net assets). The portfolio also benefited from Canada's EnCana Corp., one of the largest oil and gas exploration companies in North America (0.9% of net assets). EnCana's reported annual production growth and operating margins are significantly above its industry peers. TWO PRIMARY THEMES INFLUENCED STOCK SELECTION We emphasized companies that we believed were likely to raise their dividend payouts and/or benefit from increased capital expenditures. As a result, we were overweight in the industrials sector, and the fund's investment in Vinci SA, a French construction company, was one of the top stocks in the portfolio (1.3% of net assets). We also added investments in health care, favoring beaten down pharmaceuticals that were selling at attractive valuations and that had solid prospects for growth. We added to AstraZeneca (United Kingdom), which had been an underperformer, and invested in Sanofi-Aventis (France) (1.6% and 1.2% of net assets, respectively). Both companies rose in value. We sold some long-term holdings that had been leaders for more than a year. We eliminated Alpha Bank, a financial services company located in Greece, due to slower lending growth and rising costs. We also sold Erste Bank, an Austrian bank facing increased competition from western European banks. We were concerned that Erste Bank would not be able to sustain its high level of earnings growth in a softening economy. A BIGGER PRESENCE IN ASIA ADDED TO RETURNS We significantly boosted the weight in Singapore from 0.3% of net assets at the end of December 2004 to 2.6% of net assets at the end of June 2005. We favored Singapore because its economy appeared to be more resilient than other Asian economies. We felt that consumers were poised to increase their spending and believed that many Singaporean companies had the potential to increase their earnings and dividend payouts. In addition, valuations were attractive, with many stocks selling at significant discounts to their peers. The fund's companies in Singapore were some of the best performers. We also raised exposure to Hong Kong, an area that benefited from a stronger economy and a particularly vibrant real estate sector. EUROPE AND JAPAN REMAIN ATTRACTIVE Moving into the second half of 2005, we plan to continue seeking large companies that have the potential to increase their dividend payouts. We will also maintain our emphasis on companies that we believe will benefit from capital spending. Despite the forecasts for a slower economy in Europe, we believe there are opportunities in several markets. We are also fairly optimistic about Japan. Economic data, such as rising consumer confidence and higher bank loan demand, we believe favors Japan. We intend to keep at least a benchmark weight in the country. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. The opinions expressed here are strictly those of Columbia Management and are subject to change without notice. Other divisions of Bank of America and/or affiliates of Columbia Management may have opinions that are inconsistent with these opinions. 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. International investing may involve certain risks, including foreign taxation, currency fluctuations, risks associated with possible differences in financial standards and other monetary and political risks. Since the fund may invest a greater percentage of its total assets in a single issuer, it may have increased risk compared to a similar diversified fund. Holdings are disclosed as of June 30, 2005 and are subject to change. 56 <Page> PERFORMANCE INFORMATION Columbia International Fund, Variable Series / June 30, 2005 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR 10-YEAR - ------------------------------------------------------------------ Class B (06/01/00) -2.63 7.94 -2.41 3.57 MSCI EAFE Index -1.17 13.65 -0.55 5.22 MSCI All Country World ex US Index 0.32 16.95 0.76 5.82 </Table> Inception date of share class is in parenthesis. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/04 06/30/05 - ----------------------------------------------------- Class B 1.90 1.85 </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. [CHART] VALUE OF A $10,000 INVESTMENT, 07/01/95(1) - 06/30/05 <Table> <Caption> MSCI ALL COUNTRY CLASS B SHARES WORLD EX US INDEX MSCI EAFE INDEX 7/1/1995 $ 10,000 $ 10,000 $ 10,000 7/31/1995 $ 10,552 $ 10,568 $ 10,623 8/31/1995 $ 10,552 $ 10,201 $ 10,218 9/30/1995 $ 10,718 $ 10,376 $ 10,418 10/31/1995 $ 10,552 $ 10,099 $ 10,137 11/30/1995 $ 10,717 $ 10,336 $ 10,419 12/31/1995 $ 10,994 $ 10,744 $ 10,839 1/31/1996 $ 10,938 $ 10,891 $ 10,883 2/29/1996 $ 10,938 $ 10,891 $ 10,920 3/31/1996 $ 11,161 $ 11,094 $ 11,152 4/30/1996 $ 11,775 $ 11,430 $ 11,476 5/31/1996 $ 11,663 $ 11,259 $ 11,265 6/30/1996 $ 11,719 $ 11,316 $ 11,328 7/31/1996 $ 11,272 $ 10,940 $ 10,998 8/31/1996 $ 11,440 $ 11,005 $ 11,022 9/30/1996 $ 11,552 $ 11,278 $ 11,315 10/31/1996 $ 11,273 $ 11,165 $ 11,200 11/30/1996 $ 11,719 $ 11,596 $ 11,645 12/31/1996 $ 11,611 $ 11,462 $ 11,495 1/31/1997 $ 11,671 $ 11,251 $ 11,093 2/28/1997 $ 11,790 $ 11,457 $ 11,275 3/31/1997 $ 11,790 $ 11,433 $ 11,315 4/30/1997 $ 11,731 $ 11,529 $ 11,375 5/31/1997 $ 12,620 $ 12,241 $ 12,116 6/30/1997 $ 13,271 $ 12,917 $ 12,783 7/31/1997 $ 13,331 $ 13,178 $ 12,990 8/31/1997 $ 12,404 $ 12,141 $ 12,020 9/30/1997 $ 12,879 $ 12,797 $ 12,693 10/31/1997 $ 11,751 $ 11,708 $ 11,717 11/30/1997 $ 11,395 $ 11,562 $ 11,598 12/31/1997 $ 11,232 $ 11,695 $ 11,698 1/31/1998 $ 11,611 $ 12,045 $ 12,233 2/28/1998 $ 12,178 $ 12,848 $ 13,018 3/31/1998 $ 12,936 $ 13,293 $ 13,419 4/30/1998 $ 13,188 $ 13,388 $ 13,525 5/31/1998 $ 13,188 $ 13,146 $ 13,459 6/30/1998 $ 12,873 $ 13,096 $ 13,561 7/31/1998 $ 13,251 $ 13,220 $ 13,698 8/31/1998 $ 11,313 $ 11,356 $ 12,001 9/30/1998 $ 10,807 $ 11,117 $ 11,633 10/31/1998 $ 11,628 $ 12,282 $ 12,845 11/30/1998 $ 12,260 $ 12,941 $ 13,503 12/31/1998 $ 12,686 $ 13,388 $ 14,035 1/31/1999 $ 12,686 $ 13,373 $ 13,992 2/28/1999 $ 12,433 $ 13,073 $ 13,659 3/31/1999 $ 12,877 $ 13,705 $ 14,229 4/30/1999 $ 13,638 $ 14,390 $ 14,805 5/31/1999 $ 13,003 $ 13,714 $ 14,043 6/30/1999 $ 13,764 $ 14,345 $ 14,590 7/31/1999 $ 14,272 $ 14,682 $ 15,024 8/31/1999 $ 14,399 $ 14,733 $ 15,079 9/30/1999 $ 14,462 $ 14,833 $ 15,232 10/31/1999 $ 14,843 $ 15,385 $ 15,803 11/30/1999 $ 15,794 $ 16,001 $ 16,351 12/31/1999 $ 17,833 $ 17,527 $ 17,820 1/31/2000 $ 16,747 $ 16,575 $ 16,688 2/29/2000 $ 17,387 $ 17,023 $ 17,137 3/31/2000 $ 17,642 $ 17,663 $ 17,802 4/30/2000 $ 16,300 $ 16,677 $ 16,865 5/31/2000 $ 15,980 $ 16,250 $ 16,454 6/30/2000 $ 16,044 $ 16,943 $ 17,097 7/31/2000 $ 15,533 $ 16,273 $ 16,381 8/31/2000 $ 15,724 $ 16,475 $ 16,523 9/30/2000 $ 15,224 $ 15,561 $ 15,719 10/31/2000 $ 14,640 $ 15,066 $ 15,348 11/30/2000 $ 14,253 $ 14,389 $ 14,772 12/31/2000 $ 14,540 $ 14,880 $ 15,297 1/31/2001 $ 14,088 $ 15,103 $ 15,289 2/28/2001 $ 13,033 $ 13,907 $ 14,142 3/31/2001 $ 11,979 $ 12,924 $ 13,199 4/30/2001 $ 12,581 $ 13,803 $ 14,116 5/31/2001 $ 12,205 $ 13,422 $ 13,618 6/30/2001 $ 11,979 $ 12,906 $ 13,061 7/31/2001 $ 11,603 $ 12,620 $ 12,823 8/31/2001 $ 11,528 $ 12,307 $ 12,499 9/30/2001 $ 10,774 $ 11,001 $ 11,233 10/31/2001 $ 10,774 $ 11,309 $ 11,520 11/30/2001 $ 10,925 $ 11,826 $ 11,945 12/31/2001 $ 11,000 $ 11,979 $ 12,016 1/31/2002 $ 10,473 $ 11,466 $ 11,378 2/28/2002 $ 10,548 $ 11,548 $ 11,458 3/31/2002 $ 10,850 $ 12,224 $ 12,132 4/30/2002 $ 11,001 $ 12,255 $ 12,157 5/31/2002 $ 10,926 $ 12,388 $ 12,311 6/30/2002 $ 10,775 $ 11,853 $ 11,821 7/31/2002 $ 9,796 $ 10,697 $ 10,654 8/31/2002 $ 9,871 $ 10,698 $ 10,630 9/30/2002 $ 9,193 $ 9,564 $ 9,488 10/31/2002 $ 9,419 $ 10,077 $ 9,998 11/30/2002 $ 9,570 $ 10,562 $ 10,452 12/31/2002 $ 9,510 $ 10,221 $ 10,100 1/31/2003 $ 9,057 $ 9,862 $ 9,679 2/28/2003 $ 9,132 $ 9,662 $ 9,458 3/31/2003 $ 9,132 $ 9,474 $ 9,272 4/30/2003 $ 9,736 $ 10,388 $ 10,181 5/31/2003 $ 10,415 $ 11,049 $ 10,798 6/30/2003 $ 10,490 $ 11,355 $ 11,059 7/31/2003 $ 10,641 $ 11,657 $ 11,327 8/31/2003 $ 10,793 $ 12,005 $ 11,600 9/30/2003 $ 11,172 $ 12,341 $ 11,957 10/31/2003 $ 11,852 $ 13,141 $ 12,702 11/30/2003 $ 12,002 $ 13,427 $ 12,984 12/31/2003 $ 12,857 $ 14,451 $ 13,998 1/31/2004 $ 13,086 $ 14,684 $ 14,195 2/29/2004 $ 13,313 $ 15,057 $ 14,523 3/31/2004 $ 13,465 $ 15,150 $ 14,605 4/30/2004 $ 13,009 $ 14,679 $ 14,275 5/31/2004 $ 12,856 $ 14,726 $ 14,323 6/30/2004 $ 13,161 $ 15,046 $ 14,637 7/31/2004 $ 12,553 $ 14,608 $ 14,161 8/31/2004 $ 12,553 $ 14,725 $ 14,223 9/30/2004 $ 12,799 $ 15,199 $ 14,595 10/31/2004 $ 13,181 $ 15,728 $ 15,092 11/30/2004 $ 14,019 $ 16,819 $ 16,123 12/31/2004 $ 14,591 $ 17,541 $ 16,831 1/31/2005 $ 14,207 $ 17,239 $ 16,523 2/28/2005 $ 14,821 $ 18,089 $ 17,237 3/31/2005 $ 14,437 $ 17,599 $ 16,804 4/30/2005 $ 14,206 $ 17,164 $ 16,409 5/31/2005 $ 14,129 $ 17,272 $ 16,417 6/30/2005 $ 14,206 $ 17,599 $ 16,637 </Table> The graph compares the results of a hypothetical $10,000 investment in the fund with the indexes. The Indexes are unmanaged and returns for the indexes and the fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Investment earnings, if any, are income tax-deferred until distribution, at which time taxes will become due. Total return performance includes changes in share price and reinvestment of all distributions. Beginning in 2005, the Fund's benchmark was changed to MSCI EAFE Index. The Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the US and Canada. The 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. 57 <Page> UNDERSTANDING YOUR EXPENSES Columbia International Fund, Variable Series / June 30, 2005 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 ongoing 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 ongoing 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 $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 01/01/05 - 06/30/05 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 973.72 1,018.84 5.87 6.01 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 365. 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 funds 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. 58 <Page> INVESTMENT PORTFOLIO Columbia International Fund, Variable Series / June 30, 2005 (Unaudited) <Table> <Caption> SHARES VALUE ---------- ------------- COMMON STOCKS--97.2% CONSUMER DISCRETIONARY--13.2% AUTO COMPONENTS--1.1% Continental AG 6,500 $ 466,795 Denso Corp. 13,700 311,521 ------------- 778,316 ------------- AUTOMOBILES--2.5% Nissan Motor Co., Ltd. 26,000 255,998 Renault SA 6,300 553,070 Toyota Motor Corp. 24,800 886,819 ------------- 1,695,887 ------------- HOTELS, RESTAURANTS & LEISURE--1.1% Accor SA 3,600 167,978 Carnival Corp. 4,700 256,385 City Development Ltd. 36,000 159,603 Compass Group PLC 31,500 132,132 ------------- 716,098 ------------- HOUSEHOLD DURABLES--3.2% Daiwa House Industry Co., Ltd. 20,000 228,078 Koninklijke (Royal) Phillips Electronics NV 23,900 600,375 Matsushita Electric Industrial Co., Ltd. 35,000 531,166 Pioneer Corp. 12,100 181,936 Sekisui Chemical Co., Ltd. 29,000 198,952 Sharp Corp. 19,000 295,808 Sony Corp. 3,700 127,440 ------------- 2,163,755 ------------- LEISURE EQUIPMENT & PRODUCTS--0.9% Fuji Photo Film Co., Ltd. 14,000 455,542 Sega Sammy Holdings, Inc. 3,100 189,350 ------------- 644,892 ------------- MEDIA--3.1% British Sky Broadcasting Group PLC 35,600 335,462 JC Decaux SA (a) 8,800 222,498 News Corp., Class B 22,650 381,879 Pearson PLC 61,200 717,866 Reed Elsevier PLC 14,200 135,558 Vivendi Universal SA 9,700 303,453 ------------- 2,096,716 ------------- SPECIALTY RETAIL--0.4% Kingfisher PLC 22,700 99,494 Yamada Denki Co., Ltd. 3,300 188,857 ------------- 288,351 ------------- TEXTILES, APPAREL & LUXURY GOODS--0.9% Burberry Group PLC 47,300 340,468 Swatch Group AG, Registered Shares 8,500 242,093 ------------- 582,561 ------------- CONSUMER STAPLES--10.6% BEVERAGES--2.0% Diageo PLC 67,143 986,512 SABMiller PLC 9,166 142,604 Scottish & Newcastle PLC 27,909 $ 230,984 ------------- 1,360,100 ------------- FOOD & STAPLES RETAILING--0.9% FamilyMart Co., Ltd. 3,500 100,196 Lawson, Inc. 2,800 97,589 Tesco PLC 72,602 413,491 ------------- 611,276 ------------- FOOD PRODUCTS--3.7% Cadbury Schweppes PLC 17,400 165,619 Nestle SA, Registered Shares 5,811 1,483,044 Royal Numico NV (a) 8,712 347,086 Unilever PLC 55,840 536,631 ------------- 2,532,380 ------------- HOUSEHOLD PRODUCTS--1.9% Kao Corp. 19,000 447,736 Reckitt Benckiser PLC 27,627 811,642 ------------- 1,259,378 ------------- TOBACCO--2.1% British American Tobacco PLC 21,460 414,471 Imperial Tobacco Group PLC 21,689 582,419 Japan Tobacco, Inc. 34 453,212 ------------- 1,450,102 ------------- ENERGY--9.4% ENERGY EQUIPMENT & SERVICES--0.7% Saipem S.p.A 17,100 229,623 Stolt Offshore SA (a) 27,400 247,683 ------------- 477,306 ------------- OIL, GAS & CONSUMABLE FUELS--8.7% BG Group PLC 54,771 448,811 BP PLC 153,300 1,593,946 EnCana Corp. 15,800 622,190 ENI S.p.A. 40,300 1,033,581 OMV AG 700 304,163 Shell Transport & Trading Co., PLC 77,100 746,803 Total SA 5,100 1,193,095 ------------- 5,942,589 ------------- FINANCIALS--22.8% CAPITAL MARKETS--1.3% Credit Suisse Group, Registered Shares 7,000 274,256 Deutsche Bank AG, Registered Shares 4,369 340,301 Nomura Holdings, Inc. 22,000 261,266 ------------- 875,823 ------------- COMMERCIAL BANKS--15.3% ABN AMRO Holding NV 17,023 417,565 Anglo Irish Bank Corp., PLC 28,800 356,727 Australia & New Zealand Banking Group Ltd. 29,200 481,534 Banco Bilbao Vizcaya Argentaria SA 26,700 410,395 Banco de Sabadell SA 15,762 405,537 Banco Popolare di Verona e Novara 23,100 392,864 </Table> See Accompanying Notes to Financial Statements. 59 <Page> <Table> <Caption> SHARES VALUE ---------- ------------- Banco Popular Espanol SA 40,850 $ 492,125 Bank of Ireland 22,949 368,569 Barclays PLC 88,170 874,758 BNP Paribas SA 6,591 450,155 DNB NOR ASA 46,600 482,879 HBOS PLC 19,100 293,899 HSBC Holdings PLC 66,900 1,066,136 KBC Group NV 2,159 169,969 Mitsubishi Tokyo Financial Group, Inc. 49 413,700 Mitsui Trust Holdings, Inc. 10,000 102,038 Mizuho Financial Group, Inc. 103 463,933 National Bank of Greece SA 8,155 277,884 Resona Holdings, Inc. (a) 71,000 131,897 Royal Bank of Scotland Group PLC 33,420 1,006,296 Skandinaviska Enskilda Banken AB, Class A 16,800 278,587 Sumitomo Mitsui Financial Group, Inc. 71 478,431 UFJ Holdings, Inc. (a) 26 134,825 United Overseas Bank Ltd. 56,000 471,397 ------------- 10,422,100 ------------- CONSUMER FINANCE--0.9% Aiful Corp. 3,200 237,659 ORIX Corp. 1,400 209,377 Takefuji Corp. 2,600 175,561 ------------- 622,597 ------------- DIVERSIFIED FINANCIAL SERVICES--1.3% Fortis 7,747 214,122 ING Groep NV 15,557 437,221 Suncorp-Metway Ltd. 12,500 190,825 ------------- 842,168 ------------- INSURANCE--2.5% Aegon NV 11,271 145,152 Allianz AG, Registered Shares 2,452 280,383 AXA 11,300 280,735 Irish Life & Permanent PLC 12,109 211,652 Mitsui Sumitomo Insurance Co., Ltd. 42,000 376,557 QBE Insurance Group Ltd. 15,500 188,578 Sampo Oyj, Class A 15,500 241,280 ------------- 1,724,337 ------------- REAL ESTATE--1.5% Sun Hung Kai Properties Ltd. 33,000 324,588 Swire Pacific Ltd., Class A 52,000 457,957 United Overseas Land Ltd. 5,600 7,571 Wharf Holdings Ltd. 57,000 198,987 ------------- 989,103 ------------- HEALTH CARE--10.8% HEALTH CARE EQUIPMENT & SUPPLIES--1.7% GN Store Nord A/S 18,000 203,131 Smith & Nephew PLC 58,866 579,334 Synthes, Inc. 1,800 196,984 Terumo Corp. 5,600 160,884 ------------- 1,140,333 ------------- PHARMACEUTICALS--9.1% Astellas Pharma, Inc. 5,000 $ 170,662 AstraZeneca PLC 25,855 1,068,293 Eisai Co., Ltd. 6,200 207,692 GlaxoSmithKline PLC 60,889 1,468,945 Novartis AG, Registered Shares 17,620 835,755 Roche Holding AG, Genusschein 3,519 443,174 Sanofi-Aventis 9,990 817,023 Schering AG 2,200 134,593 Shire Pharmaceuticals Group PLC 23,200 253,987 Takeda Pharmaceutical Co., Ltd. 9,600 474,729 Teva Pharmaceutical Industries Ltd., ADR 11,200 348,768 ------------- 6,223,621 ------------- INDUSTRIALS--11.2% AEROSPACE & DEFENSE--0.3% Singapore Technologies Engineering Ltd. 152,000 218,061 ------------- AIR FREIGHT & LOGISTICS--0.3% Deutsche Post AG, Registered Shares 8,600 200,598 ------------- BUILDING PRODUCTS--0.9% Nippon Sheet Glass Co., Ltd. 49,000 191,067 Wienerberger AG 9,591 444,458 ------------- 635,525 ------------- COMMERCIAL SERVICES & SUPPLIES--0.8% Randstad Holding NV 10,000 343,779 Securitas AB, Class B 10,400 173,101 ------------- 516,880 ------------- CONSTRUCTION & ENGINEERING--1.9% Shimizu Corp. 95,000 440,142 Vinci SA 10,580 879,205 ------------- 1,319,347 ------------- ELECTRICAL EQUIPMENT--0.9% ABB Ltd. (a) 39,200 255,080 Mitsubishi Electric Corp. 62,000 326,983 ------------- 582,063 ------------- INDUSTRIAL CONGLOMERATES--2.2% Hutchison Whampoa Ltd. 46,000 413,411 Keppel Corp., Ltd. 24,000 177,632 SembCorp Industries Ltd. 123,140 194,715 Siemens AG, Registered Shares 3,349 243,213 Smiths Group PLC 28,491 468,488 ------------- 1,497,459 ------------- MACHINERY--1.0% Atlas Copco AB, Class B 19,800 284,089 Komatsu Ltd. 55,000 424,701 ------------- 708,790 ------------- MARINE--0.3% Kawasaki Kisen Kaisha Ltd. 39,000 229,782 ------------- ROAD & RAIL--1.8% Canadian National Railway Co. 6,173 355,502 Canadian Pacific Railway Ltd. 8,400 290,130 </Table> See Accompanying Notes to Financial Statements. 60 <Page> <Table> <Caption> SHARES VALUE ---------- ------------- ComfortDelGro Corp., Ltd. 263,000 $ 262,890 East Japan Railway Co. 54 276,881 ------------- 1,185,403 ------------- TRADING COMPANIES & DISTRIBUTORS--0.8% Mitsubishi Corp. 41,000 554,706 ------------- INFORMATION TECHNOLOGY--6.2% COMMUNICATIONS EQUIPMENT--1.6% Nokia Oyj 32,400 538,638 Tandberg ASA 13,800 147,207 Telefonaktiebolaget LM Ericsson, ADR 12,100 386,595 ------------- 1,072,440 ------------- COMPUTERS & PERIPHERALS--0.4% Toshiba Corp. 73,000 289,327 ------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.6% HOYA Corp. 1,800 206,818 TDK Corp. 3,100 210,396 ------------- 417,214 ------------- INTERNET SOFTWARE & SERVICES--0.3% NIWS Co., Ltd. (a) 132 172,982 ------------- OFFICE ELECTRONICS--0.7% Canon, Inc. 9,000 471,499 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.3% ARM Holdings PLC 90,700 183,255 Marvell Technology Group Ltd. (a) 5,200 197,808 Samsung Electronics Co., Ltd., Registered Shares, GDR 1,443 343,154 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 21,000 191,520 ------------- 915,737 ------------- SOFTWARE--1.3% Sage Group PLC 100,300 400,356 SAP AG 2,912 505,288 ------------- 905,644 ------------- MATERIALS--2.9% CHEMICALS--2.9% BASF AG 3,084 204,197 Novozymes A/S, Class B 4,150 205,038 Shin-Etsu Chemical Co., Ltd. 7,900 298,612 Solvay SA 1,800 184,606 Sumitomo Chemical Co., Ltd. 101,000 462,428 Syngenta AG (a) 4,100 419,375 Teijin Ltd. 45,000 208,465 ------------- 1,982,721 ------------- TELECOMMUNICATION SERVICES--5.2% DIVERSIFIED TELECOMMUNICATION SERVICES--2.9% BT Group PLC 65,529 268,861 Deutsche Telekom AG, Registered Shares 24,548 453,195 France Telecom SA 13,949 $ 404,825 Koninklijke (Royal) KPN NV 17,078 142,894 Nippon Telegraph & Telephone Corp. 50 214,342 Portugal Telecom, SGPS, SA, Registered Shares 22,000 209,384 Singapore Telecommunications Ltd. 146,000 240,170 ------------- 1,933,671 ------------- WIRELESS TELECOMMUNICATION SERVICES--2.3% China Mobile Hong Kong Ltd. 100,000 369,738 NTT DoCoMo, Inc. 130 191,140 Vodafone Group PLC 418,800 1,017,530 ------------- 1,578,408 ------------- UTILITIES--4.9% ELECTRIC UTILITIES--2.9% E.ON AG 4,474 396,792 Enel S.p.A. 61,675 535,499 Fortum Oyj 25,400 406,894 Scottish & Southern Energy PLC 9,900 178,986 Tokyo Electric Power Co., Inc. 18,700 446,445 ------------- 1,964,616 ------------- GAS UTILITIES--0.4% Tokyo Gas Co., Ltd. 78,000 291,278 ------------- MULTI-UTILITIES--1.6% National Grid Transco PLC 40,350 390,141 Veolia Environnement 17,800 665,676 ------------- 1,055,817 ------------- TOTAL COMMON STOCKS (cost of $57,331,683) 66,139,757 ------------- INVESTMENT COMPANIES--0.8% iShares MSCI Malaysia Index Fund 24,800 171,616 iShares MSCI Taiwan Index Fund 30,200 365,420 ------------- TOTAL INVESTMENT COMPANIES (cost of $538,158) 537,036 ------------- PREFERRED STOCK--0.6% CONSUMER DISCRETIONARY--0.6% AUTOMOBILES--0.6% Porsche AG 526 393,912 ------------- TOTAL PREFERRED STOCK (cost of $335,521) 393,912 ------------- </Table> See Accompanying Notes to Financial Statements. 61 <Page> <Table> <Caption> PAR VALUE ------------- ------------- SHORT-TERM OBLIGATION--1.0% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/05, due 07/01/05 at 2.700%, collateralized by a U.S. Treasury Bond maturing 05/15/17, market value of $699,613 (repurchase proceeds $685,051) $ 685,000 $ 685,000 ------------- TOTAL SHORT-TERM OBLIGATION (cost of $685,000) 685,000 ------------- TOTAL INVESTMENTS--99.6% (cost of $58,890,362) (b) 67,755,705 ------------- OTHER ASSETS & LIABILITIES, NET--0.4% 296,845 ------------- NET ASSETS--100.0% $ 68,052,550 ============= </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $58,890,362. The Fund was invested in the following countries at June 30, 2005: <Table> <Caption> SUMMARY OF SECURITIES % OF TOTAL BY COUNTRY VALUE INVESTMENTS - --------------------- ------------- ------------- United Kingdom $ 18,354,179 27.1% Japan 14,857,404 21.9 France 5,937,713 8.8 Switzerland 3,952,777 5.8 Germany 3,619,267 5.3 Netherlands 2,434,072 3.6 Italy 2,191,567 3.2 United States* 1,998,707 3.0 Hong Kong 1,764,681 2.6 Singapore 1,732,039 2.6 Spain 1,308,057 1.9 Canada 1,267,822 1.9 Finland 1,186,812 1.7 Sweden 1,122,372 1.7 Ireland 936,948 1.4 Australia 860,937 1.3 Austria 748,621 1.1 Norway 630,086 0.9 Belgium 568,697 0.8 Denmark 408,169 0.6 Israel 348,768 0.5 South Korea 343,154 0.5 Greece 277,884 0.4 Panama 256,385 0.4 Luxembourg 247,683 0.4 Portugal 209,384 0.3 Taiwan 191,520 0.3 ------------- ----- $ 67,755,705 100.0% ============= ===== </Table> * Includes Short-Term Obligation. Certain securities are listed by country of underlying exposure but may trade predominately on other exchanges. At June 30, 2005, the Fund held investments in the following sectors: <Table> <Caption> % OF SECTOR NET ASSETS - ------ ---------- Financials 22.8% Consumer Discretionary 13.8 Industrials 11.2 Health Care 10.8 Consumer Staples 10.6 Energy 9.4 Information Technology 6.2 Telecommunication Services 5.2 Utilities 4.9 Materials 2.9 Investment Companies 0.8 Short-Term Obligation 1.0 Other Assets & Liabilities, Net 0.4 ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- ADR American Depositary Receipt GDR Global Depositary Receipt </Table> See Accompanying Notes to Financial Statements. 62 <Page> STATEMENT OF ASSETS & LIABILITIES Columbia International Fund, Variable Series / June 30, 2005 (Unaudited) <Table> ASSETS: Investments, at cost $ 58,890,362 -------------- Investments, at value $ 67,755,705 Cash 804 Foreign currency (cost of $244,607) 244,187 Receivable for: Investments sold 42,158 Fund shares sold 118,096 Interest 51 Dividends 104,321 Foreign tax reclaim 43,829 Expense reimbursement due from Investment Advisor 10,251 Deferred Trustees' compensation plan 6,543 -------------- TOTAL ASSETS 68,325,945 -------------- LIABILITIES: Payable for: Investments purchased 169,675 Fund shares repurchased 16,703 Investment advisory fee 49,579 Transfer agent fee 363 Pricing and bookkeeping fees 1,659 Trustees' fees 583 Audit fee 9,939 Custody fee 11,346 Distribution fee--Class B 1,641 Deferred Trustees' fees 6,543 Other liabilities 5,364 -------------- TOTAL LIABILITIES 273,395 -------------- NET ASSETS $ 68,052,550 ============== COMPOSITION OF NET ASSETS: Paid-in capital $ 66,155,158 Undistributed net investment income 814,929 Accumulated net realized loss (7,778,472) Net unrealized appreciation (depreciation) on: Investments 8,865,343 Foreign currency translations (4,408) -------------- NET ASSETS $ 68,052,550 ============== CLASS A: Net assets $ 62,163,820 Shares outstanding 33,360,892 ============== Net asset value per share $ 1.86 ============== CLASS B: Net assets $ 5,888,730 Shares outstanding 3,174,740 ============== Net asset value per share $ 1.85 ============== </Table> See Accompanying Notes to Financial Statements. 63 <Page> STATEMENT OF OPERATIONS Columbia International Fund, Variable Series For the Six Months Ended June 30, 2005 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 1,158,856 Interest 14,495 -------------- Total Investment Income (net of foreign taxes withheld of $125,812) 1,173,351 -------------- EXPENSES: Investment advisory fee 310,456 Distribution fee--Class B 7,642 Transfer agent fee 3,507 Pricing and bookkeeping fees 19,024 Trustees' fees 4,282 Custody fee 39,228 Non-recurring costs (See Note 6) 902 Other expenses 24,438 -------------- Total Expenses 409,479 Fees and expenses waived or reimbursed by Investment Advisor (57,674) Non-recurring costs assumed by Investment Advisor (See Note 6) (902) Custody earnings credit (149) -------------- Net Expenses 350,754 -------------- Net Investment Income 822,597 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments 4,607,997 Foreign currency transactions (92,770) -------------- Net realized gain 4,515,227 -------------- Net change in unrealized appreciation (depreciation) on: Investments (6,840,388) Foreign currency translations (7,846) -------------- Net change in unrealized appreciation (depreciation) (6,848,234) -------------- Net Loss (2,333,007) -------------- Net Decrease in Net Assets from Operations $ (1,510,410) ============== </Table> See Accompanying Notes to Financial Statements. 64 <Page> STATEMENT OF CHANGES IN NET ASSETS Columbia International Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2005 2004 - ---------------------------------- -------------- -------------- OPERATIONS: Net investment income $ 822,597 $ 736,608 Net realized gain on investments, foreign currency transactions and foreign capital gains tax 4,515,227 12,851,838 Net change in unrealized appreciation (depreciation) on investments, foreign currency translations and foreign capital gains tax (6,848,234) (3,993,415) -------------- -------------- Net Increase (Decrease) from Operations (1,510,410) 9,595,031 -------------- -------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (812,607) Class B -- (62,958) -------------- -------------- Total Distributions Declared to Shareholders -- (875,565) -------------- -------------- SHARE TRANSACTIONS: Class A: Subscriptions 1,547,895 2,715,897 Distributions reinvested -- 812,607 Redemptions (8,408,946) (16,270,373) -------------- -------------- Net Decrease (6,861,051) (12,741,869) -------------- -------------- Class B: Subscriptions 201,420 504,785 Distributions reinvested -- 62,958 Redemptions (961,221) (1,363,336) -------------- -------------- Net Decrease (759,801) (795,593) -------------- -------------- Net Decrease from Share Transactions (7,620,852) (13,537,462) -------------- -------------- Total Decrease in Net Assets (9,131,262) (4,817,996) NET ASSETS: Beginning of period 77,183,812 82,001,808 -------------- -------------- End of period (including undistributed (overdistributed) net investment income of $814,929 and $(7,668), respectively) $ 68,052,550 $ 77,183,812 ============== ============== CHANGES IN SHARES: Class A: Subscriptions 823,549 1,543,162 Issued for distributions reinvested -- 432,171 Redemptions (4,464,656) (9,365,532) -------------- -------------- Net Decrease (3,641,107) (7,390,199) -------------- -------------- Class B: Subscriptions 107,487 302,309 Issued for distributions reinvested -- 33,751 Redemptions (514,847) (790,682) -------------- -------------- Net Decrease (407,360) (454,622) -------------- -------------- </Table> See Accompanying Notes to Financial Statements. 65 <Page> NOTES TO FINANCIAL STATEMENTS Columbia International Fund, Variable Series / June 30, 2005 (Unaudited) NOTE 1. ORGANIZATION Columbia International Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a non-diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks long-term growth. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available exclusively as a pooled funding vehicle for variable annuity contracts ("VA Contracts") and Variable Life Insurance Policies ("VLI Policies") offered by the separate accounts of certain life insurance companies ("Participating Insurance Companies"). The Participating Insurance Companies and their separate accounts own all the shares of the Fund. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION--Equity securities and securities of 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. 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 have 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. 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 such contracts is the aggregate face value in U.S. dollars at the time the contract was opened, exposure is typically limited to 66 <Page> 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. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2004 was as follows: <Table> <Caption> DECEMBER 31, 2004 ------------ Distributions paid from: Ordinary income $ 875,565 Long-term capital gains -- </Table> Unrealized appreciation and depreciation at June 30, 2005, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 10,446,002 Unrealized depreciation (1,580,659) ------------ Net unrealized appreciation $ 8,865,343 ============ </Table> The following capital loss carryforwards, determined as of December 31, 2004, 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. Utilization of these losses could be subject to limitations imposed by the Internal Revenue Code. 67 <Page> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE--Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and provides administrative and other services to the Fund. Columbia receives a monthly investment advisory 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 $500 million 0.87% $500 million to $1 billion 0.82% $1 billion to $1.5 billion 0.77% $1.5 billion to $3 billion 0.72% $3 billion to $6 billion 0.70% Over $6 billion 0.68% </Table> For the six months ended June 30, 2005, as a result of the settlement with the New York Attorney General discussed in Note 6, the Fund's annualized effective investment advisory fee rate was 0.86%. PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2005, the annualized effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.053%. 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 six months ended June 30, 2005, the Fund's annualized effective transfer agent fee rate was 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Effective February 1, 2005, Columbia has voluntarily agreed to waive fees and reimburse the Fund for certain expenses so that total expenses (exclusive of service and distribution fees, brokerage commissions, interest, and extraordinary expenses, if any) will not exceed 0.95%. 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. 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 for the Office of the Chief Compliance Officer 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 six months ended June 30, 2005, the Fund paid $779 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $22,712,504 and $29,572,568, respectively. 68 <Page> NOTE 6. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES FOREIGN SECURITIES--There are certain additional risks involved when investing in foreign securities that are not inherent with investments in domestic securities. These risks may involve foreign currency exchange rate fluctuations, adverse political and economic developments and the possible prevention of currency exchange or other foreign governmental laws or restrictions. In addition, the liquidity of foreign securities may be more limited than that of domestic securities. Investments in emerging market countries are subject to additional risk. The risk of foreign investments is typically increased in less developed countries. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation which could hurt their economies and securities markets. INDUSTRY FOCUS--The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. 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 Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as 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 funds 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. At this time, the distribution plan is still under development. As such, any gain to the Fund or its shareholders can not currently be determined. 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 is 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 events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has been removed to 69 <Page> federal court in Massachusetts and the federal Judicial Panel has conditionally ordered its transfer to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, can not currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds 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. In 2004, certain Columbia funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Fund 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 Fund. For the six months ended June 30, 2005, Columbia has assumed $902 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 70 <Page> FINANCIAL HIGHLIGHTS Columbia International Fund, Variable Series--Class B Shares Selected data for a share outstanding throughout each period is as follows: <Table> <Caption> (UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED DECEMBER 31, ENDED JUNE 30, --------------------------------------------------------- DECEMBER 31, 2005 2004 2003 2002 2001 2000 (a) ----------- -------- -------- -------- -------- ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 1.90 $ 1.69 $ 1.26 $ 1.46 $ 1.93 $ 2.50 -------- -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (b) 0.02 0.01 0.03 0.01 --(c) (0.01) Net realized and unrealized gain (loss) on investments, foreign currency and foreign capital gains tax (0.07) 0.22 0.41 (0.21) (0.47) (0.22) -------- -------- -------- -------- -------- -------- Total from Investment Operations (0.05) 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 $ 1.85 $ 1.90 $ 1.69 $ 1.26 $ 1.46 $ 1.93 ======== ======== ======== ======== ======== ======== Total return (d)(e) (2.63)%(f)(g) 13.48%(g)(h) 35.21%(g) (13.56)% (24.35)% (9.01)%(f) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (i) 1.20%(j) 1.20% 1.22% 1.38% 1.48% 1.33%(j) Net investment income (loss) (i) 2.05%(j) 0.72% 1.71% 0.37% 0.16% (0.43)%(j) Waiver/reimbursement 0.16%(j) 0.21% 0.18% -- -- -- Portfolio turnover rate 32%(f) 101% 104% 39% 34% 76% Net assets, end of period (000's) $ 5,889 $ 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) Not annualized. (g) Had the Investment Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (h) 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. (i) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (j) Annualized. 71 <Page> PORTFOLIO MANAGERS' DISCUSSION Liberty Growth & Income Fund, Variable Series / June 30, 2005 Liberty Growth & Income Fund, Variable Series seeks long-term growth and income. During the six-month period ended June 30, 2005, the fund was co-managed by Brian Cunningham, Gregory M. Miller and Richard Dahlberg. As of June 30, 2005, the fund's lead manager is Lori J. Ensinger and co-managers are David I. Hoffman, Noah J. Petrucci and Diane L. Sobin. Ms. Ensinger has been with Columbia Management Advisors, Inc. ("Columbia") or its affiliates since 2001. Mr. Hoffman has been with Columbia or its affiliates since August 2001. Mr. Petrucci has been with Columbia or its affiliates since February 2002. Ms. Sobin has been with Columbia or its affiliates since August 2001. The fund delivered a modest but positive return for the first half of the year, reflecting a market that was generally directionless but one in which value stocks outpaced growth. Corporate profits continued their vigorous expansion. Yet, stock market returns were muted because of indications that the economy might be slowing under the weight of high energy prices and repeated interest rate hikes. Beginning in 2005, the fund's benchmark was changed from the S&P 500 Index to the Russell 1000 Value Index ("Russell")(1). We believe that the Russell, with its greater emphasis on companies with lower price-to-book ratios and lower forecasted growth rates, more accurately reflects the type of securities in which the fund invests. UTILITIES, ENERGY AND HEALTH CARE WERE OUT FRONT Rising prices for natural gas and continued progress in restructuring put further impetus behind the shares of TXU, the portfolio's best-performing utility (0.8% of net assets). TXU also sold off certain assets, allaying fears of dividend cuts and boosting its stock further. Five of the fund's energy holdings ranked among the fund's top ten performers during the period. Soaring prices for crude oil boosted shares of ConocoPhillips, Exxon Mobil, BP PLC, and Marathon Oil (3.2%, 4.4%, 2.0% and 0.7% of net assets, respectively). Halliburton, a leading provider of products and services to the energy industry, benefited from increased activity on the global energy market (0.5% of net assets). Health care stocks benefited as investors sought sectors that might do well in a slower growth environment. The fund enjoyed good results in Aetna and CIGNA, two leading health maintenance organizations (1.2% and 0.6% of net assets, respectively). Bausch & Lomb, maker of a broad line of eye care products and a recent addition to the portfolio, moved higher (0.3% of net assets). Health care giant Johnson & Johnson, which markets products for consumers and medical professionals, also rode renewed interest in the segment (0.8% of net assets). TECHNOLOGY, FINANCIALS AND MATERIALS DECLINED Technology stocks delivered some of the period's worst returns. International Business Machines saw shares fall sharply in April after earnings fell shy of investor expectations (0.9% of net assets). Printer maker Lexmark International suffered from slow sales of supplies (0.8% of net assets). Lexmark International and its competitors rely on continued revenue from ink cartridge sales to compensate for the narrow margins earned on printers. In addition, Hewlett Packard (not in the portfolio) is regaining market share it had lost to Lexmark. Technology has suffered primarily for two reasons. First, businesses seem to lack confidence in the durability of the current expansion and, second, a slowing of growth overseas. Consequently, firms that might otherwise be investing in technology have been holding back on capital expenditures, preferring to build up cash as they watch developments unfold. Financials also underperformed as capital markets and commercial lending remained relatively quiet. Dramatic growth in 2004 from China and India had created shortages and pushed up prices of materials and metals that year. Global demand has now eased, prices have slumped, and stocks of producers have followed. MeadWestvaco fell amid concerns that a slowing economy would shrink demand for its containerboard and cardboard boxes (1.2% of net assets). Weakness in the automotive industry hurt results at PPG Industries, a new holding for the fund, as sales of auto glass and paint pigments sank (0.4% of net assets). FOCUSING ON VALUE AND RISING PROFITS The fund is positioned to focus on attractively valued companies that offer earnings growth through margin expansion and revenue growth. We continue to seek out companies that produce rising returns on capital, and that return capital to shareholders through rising dividends and share repurchases. Economic and market conditions frequently change. There is no assurance that the trends described here will continue or commence. The opinions expressed here are strictly those of Columbia Management and are subject to change without notice. Other divisions of Bank of America and/or affiliates of Columbia Management may have opinions that are inconsistent with these opinions. Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. Value stocks are stocks 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 and, in the advisor's opinion, undervalued. If the advisor's assessment of a company's prospects is wrong, the price of the company's stock may fall or may not approach the value the advisor has placed on it. Holdings are disclosed as of June 30, 2005, and are subject to change. (1) The Standard & Poor's (S&P) 500 Index is an unmanaged index that tracks the performance of 500 widely held, large-capitalization US stocks. The Russell 1000 Value Index is an unmanaged index that measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. 72 <Page> PERFORMANCE INFORMATION Liberty Growth & Income Fund, Variable Series / June 30, 2005 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR 10-YEAR - ----------------------------------------------------------------------- Class B (06/01/00) 0.51 9.54 2.12 10.03 Russell 1000 Value Index 1.76 14.06 6.56 12.03 S&P 500 Index -0.81 6.32 -2.37 9.94 </Table> Inception date of share class is in parenthesis. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/04 06/30/05 - ------------------------------------------------------------ Class B 15.80 15.88 </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 CHARGES, IT WOULD BE LOWER. [CHART] VALUE OF A $10,000 INVESTMENT, 07/01/95(1) - 06/30/05 <Table> <Caption> CLASS B SHARES S&P 500 INDEX RUSSELL 1000 VALUE INDEX 7/1/1995 $ 10,000 $ 10,000 $ 10,000 7/31/1995 $ 10,346 $ 10,332 $ 10,348 8/31/1995 $ 10,305 $ 10,358 $ 10,494 9/30/1995 $ 10,651 $ 10,795 $ 10,874 10/31/1995 $ 10,609 $ 10,756 $ 10,766 11/30/1995 $ 11,012 $ 11,228 $ 11,311 12/31/1995 $ 10,972 $ 11,445 $ 11,595 1/31/1996 $ 11,265 $ 11,834 $ 11,957 2/29/1996 $ 11,487 $ 11,944 $ 12,047 3/31/1996 $ 11,549 $ 12,059 $ 12,252 4/30/1996 $ 11,975 $ 12,236 $ 12,299 5/31/1996 $ 12,259 $ 12,552 $ 12,453 6/30/1996 $ 11,993 $ 12,599 $ 12,462 7/31/1996 $ 11,416 $ 12,043 $ 11,991 8/31/1996 $ 11,797 $ 12,297 $ 12,334 9/30/1996 $ 12,374 $ 12,989 $ 12,825 10/31/1996 $ 12,684 $ 13,347 $ 13,322 11/30/1996 $ 13,590 $ 14,357 $ 14,287 12/31/1996 $ 13,367 $ 14,072 $ 14,105 1/31/1997 $ 14,344 $ 14,952 $ 14,789 2/28/1997 $ 14,334 $ 15,068 $ 15,006 3/31/1997 $ 13,761 $ 14,449 $ 14,466 4/30/1997 $ 14,494 $ 15,312 $ 15,073 5/31/1997 $ 15,322 $ 16,244 $ 15,916 6/30/1997 $ 15,904 $ 16,972 $ 16,599 7/31/1997 $ 17,173 $ 18,323 $ 17,847 8/31/1997 $ 16,581 $ 17,297 $ 17,212 9/30/1997 $ 17,437 $ 18,245 $ 18,251 10/31/1997 $ 16,638 $ 17,635 $ 17,742 11/30/1997 $ 17,315 $ 18,452 $ 18,526 12/31/1997 $ 17,675 $ 18,769 $ 19,067 1/31/1998 $ 17,870 $ 18,978 $ 18,796 2/28/1998 $ 19,106 $ 20,346 $ 20,061 3/31/1998 $ 20,071 $ 21,388 $ 21,289 4/30/1998 $ 20,061 $ 21,604 $ 21,432 5/31/1998 $ 19,562 $ 21,232 $ 21,115 6/30/1998 $ 20,311 $ 22,094 $ 21,385 7/31/1998 $ 19,909 $ 21,860 $ 21,009 8/31/1998 $ 16,666 $ 18,699 $ 17,882 9/30/1998 $ 17,435 $ 19,897 $ 18,909 10/31/1998 $ 18,923 $ 21,515 $ 20,374 11/30/1998 $ 20,073 $ 22,819 $ 21,324 12/31/1998 $ 21,235 $ 24,133 $ 22,049 1/31/1999 $ 21,790 $ 25,142 $ 22,225 2/28/1999 $ 20,920 $ 24,360 $ 21,912 3/31/1999 $ 21,598 $ 25,335 $ 22,365 4/30/1999 $ 22,196 $ 26,315 $ 24,454 5/31/1999 $ 21,903 $ 25,694 $ 24,185 6/30/1999 $ 23,180 $ 27,120 $ 24,887 7/31/1999 $ 22,603 $ 26,274 $ 24,158 8/31/1999 $ 22,355 $ 26,145 $ 23,261 9/30/1999 $ 21,586 $ 25,429 $ 22,449 10/31/1999 $ 22,445 $ 27,038 $ 23,743 11/30/1999 $ 22,739 $ 27,587 $ 23,557 12/31/1999 $ 23,785 $ 29,212 $ 23,670 1/31/2000 $ 22,503 $ 27,746 $ 22,899 2/29/2000 $ 21,735 $ 27,221 $ 21,197 3/31/2000 $ 23,881 $ 29,884 $ 23,783 4/30/2000 $ 23,857 $ 28,984 $ 23,508 5/31/2000 $ 23,737 $ 28,390 $ 23,754 6/30/2000 $ 23,403 $ 29,091 $ 22,669 7/31/2000 $ 23,571 $ 28,637 $ 22,952 8/31/2000 $ 25,080 $ 30,416 $ 24,228 9/30/2000 $ 24,495 $ 28,810 $ 24,451 10/31/2000 $ 24,669 $ 28,689 $ 25,053 11/30/2000 $ 23,465 $ 26,428 $ 24,123 12/31/2000 $ 24,604 $ 26,558 $ 25,332 1/31/2001 $ 24,441 $ 27,500 $ 25,428 2/28/2001 $ 24,265 $ 24,992 $ 24,721 3/31/2001 $ 23,336 $ 23,408 $ 23,849 4/30/2001 $ 23,740 $ 25,227 $ 25,017 5/31/2001 $ 24,183 $ 25,396 $ 25,580 6/30/2001 $ 23,618 $ 24,778 $ 25,012 7/31/2001 $ 24,305 $ 24,536 $ 24,960 8/31/2001 $ 24,157 $ 23,000 $ 23,959 9/30/2001 $ 23,186 $ 21,141 $ 22,272 10/31/2001 $ 23,304 $ 21,545 $ 22,080 11/30/2001 $ 24,243 $ 23,198 $ 23,363 12/31/2001 $ 24,444 $ 23,402 $ 23,915 1/31/2002 $ 24,036 $ 23,060 $ 23,731 2/28/2002 $ 23,784 $ 22,615 $ 23,769 3/31/2002 $ 24,870 $ 23,465 $ 24,893 4/30/2002 $ 23,973 $ 22,043 $ 24,039 5/31/2002 $ 23,941 $ 21,880 $ 24,159 6/30/2002 $ 21,392 $ 20,322 $ 22,772 7/31/2002 $ 19,629 $ 18,739 $ 20,655 8/31/2002 $ 19,880 $ 18,861 $ 20,812 9/30/2002 $ 17,031 $ 16,811 $ 18,497 10/31/2002 $ 18,479 $ 18,290 $ 19,868 11/30/2002 $ 19,896 $ 19,368 $ 21,120 12/31/2002 $ 19,053 $ 18,231 $ 20,203 1/31/2003 $ 18,367 $ 17,753 $ 19,714 2/28/2003 $ 17,331 $ 17,487 $ 19,188 3/31/2003 $ 17,282 $ 17,656 $ 19,220 4/30/2003 $ 18,542 $ 19,111 $ 20,912 5/31/2003 $ 20,072 $ 20,118 $ 22,263 6/30/2003 $ 20,534 $ 20,376 $ 22,541 7/31/2003 $ 20,454 $ 20,735 $ 22,877 8/31/2003 $ 20,789 $ 21,139 $ 23,234 9/30/2003 $ 20,390 $ 20,915 $ 23,006 10/31/2003 $ 21,124 $ 22,099 $ 24,414 11/30/2003 $ 21,331 $ 22,293 $ 24,746 12/31/2003 $ 22,797 $ 23,461 $ 26,270 1/31/2004 $ 23,118 $ 23,893 $ 26,733 2/29/2004 $ 23,747 $ 24,225 $ 27,305 3/31/2004 $ 23,649 $ 23,859 $ 27,065 4/30/2004 $ 23,084 $ 23,485 $ 26,404 5/31/2004 $ 23,100 $ 23,806 $ 26,674 6/30/2004 $ 23,729 $ 24,268 $ 27,303 7/31/2004 $ 23,294 $ 23,465 $ 26,918 8/31/2004 $ 23,553 $ 23,559 $ 27,300 9/30/2004 $ 23,918 $ 23,813 $ 27,723 10/31/2004 $ 24,143 $ 24,178 $ 28,184 11/30/2004 $ 25,159 $ 25,157 $ 29,610 12/31/2004 $ 25,861 $ 26,012 $ 30,602 1/31/2005 $ 25,419 $ 25,377 $ 30,057 2/28/2005 $ 26,222 $ 25,910 $ 31,052 3/31/2005 $ 25,829 $ 25,452 $ 30,626 4/30/2005 $ 25,470 $ 24,968 $ 30,078 5/31/2005 $ 25,880 $ 25,762 $ 30,803 6/30/2005 $ 25,997 $ 25,792 $ 31,138 </Table> The graph compares the results of a hypothetical $10,000 investment in the fund with the indexes. The Indexes are unmanaged and returns for the indexes and the fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Investment earnings, if any, are income tax-deferred until distribution, at which time taxes will become due. Total return performance includes changes in share price and reinvestment of all distributions. The fund's primary benchmark was changed to the Russell 1000 Value Index. Previously, the fund's returns were compared to the S&P 500 Index. The Russell 1000 Value Index is an unmanaged index that measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Standard & Poor's (S&P) 500 Index is an unmanaged index that tracks the performance of 500 widely held, large-capitalization U.S. stocks. Indices are not investments, do not incur fees 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. 73 <Page> UNDERSTANDING YOUR EXPENSES Liberty Growth & Income Fund, Variable Series / June 30, 2005 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 ongoing 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 ongoing 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 $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 01/01/05 - 06/30/05 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ----------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ----------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,005.11 1,019.69 5.12 5.16 1.03 </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 365. 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 funds 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. 74 <Page> INVESTMENT PORTFOLIO Liberty Growth & Income Fund, Variable Series / June 30, 2005 (Unaudited) <Table> <Caption> SHARES VALUE ------------- ------------- COMMON STOCKS--99.6% CONSUMER DISCRETIONARY--9.0% HOTELS, RESTAURANTS & LEISURE--1.4% Harrah's Entertainment, Inc. 12,778 $ 920,910 McDonald's Corp. 82,621 2,292,733 ------------- 3,213,643 ------------- MEDIA--3.4% Clear Channel Communications, Inc. 18,172 562,060 Comcast Corp., Class A (a) 35,767 1,098,047 McGraw-Hill Companies, Inc. 63,796 2,822,973 Time Warner, Inc. (a) 152,211 2,543,446 Viacom, Inc., Class A 28,751 926,357 ------------- 7,952,883 ------------- MULTILINE RETAIL--2.1% Federated Department Stores, Inc. 43,204 3,165,989 J.C. Penney Co., Inc. 32,613 1,714,792 ------------- 4,880,781 ------------- SPECIALTY RETAIL--2.1% Home Depot, Inc. 71,708 2,789,441 Limited Brands, Inc. 56,485 1,209,909 Sherwin-Williams Co. 19,700 927,673 ------------- 4,927,023 ------------- CONSUMER STAPLES--10.1% BEVERAGES--2.4% Diageo PLC, ADR 25,857 1,533,320 PepsiCo, Inc. 74,602 4,023,286 ------------- 5,556,606 ------------- FOOD PRODUCTS--1.8% Hershey Co. 32,980 2,048,058 Kraft Foods, Inc., Class A 63,925 2,033,454 ------------- 4,081,512 ------------- HOUSEHOLD PRODUCTS--2.4% Clorox Co. 41,167 2,293,825 Kimberly-Clark Corp. 35,658 2,231,834 Procter & Gamble Co. 21,394 1,128,534 ------------- 5,654,193 ------------- PERSONAL PRODUCTS--1.2% Gillette Co. 54,482 2,758,424 ------------- TOBACCO--2.3% Altria Group, Inc. 65,416 4,229,798 UST, Inc. 22,530 1,028,720 ------------- 5,258,518 ------------- ENERGY--12.8% ENERGY EQUIPMENT & SERVICES--1.1% Halliburton Co. 25,724 1,230,122 Schlumberger Ltd. 16,930 1,285,664 ------------- 2,515,786 ------------- OIL, GAS & CONSUMABLE FUELS--11.7% BP PLC, ADR 74,682 $ 4,658,663 ChevronTexaco Corp. 36,120 2,019,831 ConocoPhillips 126,886 7,294,676 Exxon Mobil Corp. 176,894 10,166,098 Marathon Oil Corp. 31,333 1,672,242 Royal Dutch Petroleum Co., N.Y. Registered Shares 19,271 1,250,688 ------------- 27,062,198 ------------- FINANCIALS--29.0% CAPITAL MARKETS--5.0% A.G. Edwards, Inc. 13,642 615,936 Bank of New York Co., Inc. 100,491 2,892,131 Franklin Resources, Inc. 16,830 1,295,573 Goldman Sachs Group, Inc. 27,451 2,800,551 Janus Capital Group, Inc. 74,250 1,116,720 Merrill Lynch & Co., Inc. 30,064 1,653,821 Morgan Stanley 21,950 1,151,717 ------------- 11,526,449 ------------- COMMERCIAL BANKS--7.6% Marshall & Ilsley Corp. 14,681 652,570 National City Corp. 34,401 1,173,762 North Fork Bancorporation, Inc. 20,761 583,177 PNC Financial Services Group, Inc. 21,090 1,148,561 U.S. Bancorp 161,209 4,707,303 Wachovia Corp. 89,105 4,419,608 Wells Fargo & Co. 79,305 4,883,601 ------------- 17,568,582 ------------- CONSUMER FINANCE--0.8% MBNA Corp. 72,263 1,890,400 ------------- DIVERSIFIED FINANCIAL SERVICES--6.3% Citigroup, Inc. 213,755 9,881,894 JPMorgan Chase & Co. 133,792 4,725,533 ------------- 14,607,427 ------------- INSURANCE--6.6% Allstate Corp. 23,517 1,405,141 Ambac Financial Group, Inc. 24,176 1,686,518 American International Group, Inc. 30,996 1,800,867 Chubb Corp. 17,000 1,455,370 Hartford Financial Services Group, Inc. 30,065 2,248,261 Lincoln National Corp. 63,436 2,976,417 Willis Group Holdings Ltd. 32,795 1,073,052 XL Capital Ltd., Class A 35,233 2,622,040 ------------- 15,267,666 ------------- REAL ESTATE--2.1% Archstone-Smith Trust, REIT 42,408 1,637,797 AvalonBay Communities, Inc., REIT 19,585 1,582,468 Kimco Realty Corp., REIT 28,873 1,700,908 ------------- 4,921,173 ------------- </Table> See Accompanying Notes to Financial Statements. 75 <Page> <Table> <Caption> SHARES VALUE ------------- ------------- THRIFTS & MORTGAGE FINANCE--0.6% Countrywide Financial Corp. 33,342 $ 1,287,335 ------------- HEALTH CARE--6.2% HEALTH CARE EQUIPMENT & SUPPLIES--0.3% Bausch & Lomb, Inc. 8,312 689,896 ------------- HEALTH CARE PROVIDERS & SERVICES--1.8% Aetna, Inc. 32,588 2,698,938 CIGNA Corp. 13,911 1,488,894 ------------- 4,187,832 ------------- PHARMACEUTICALS--4.1% GlaxoSmithKline PLC, ADR 24,323 1,179,909 Johnson & Johnson 28,668 1,863,420 Merck & Co., Inc. 62,340 1,920,072 Novartis AG, ADR 29,243 1,387,288 Pfizer, Inc. 110,005 3,033,938 ------------- 9,384,627 ------------- INDUSTRIALS--12.8% AEROSPACE & DEFENSE--3.4% General Dynamics Corp. 29,522 3,233,840 United Technologies Corp. 88,380 4,538,313 ------------- 7,772,153 ------------- COMMERCIAL SERVICES & SUPPLIES--1.9% Cendant Corp. 53,697 1,201,202 Republic Services, Inc. 20,959 754,734 Waste Management, Inc. 87,837 2,489,300 ------------- 4,445,236 ------------- INDUSTRIAL CONGLOMERATES--6.1% General Electric Co. 275,788 9,556,054 Textron, Inc. 58,913 4,468,551 ------------- 14,024,605 ------------- MACHINERY--1.4% Deere & Co. 25,050 1,640,524 Eaton Corp. 27,314 1,636,109 ------------- 3,276,633 ------------- INFORMATION TECHNOLOGY--5.9% COMMUNICATIONS EQUIPMENT--0.8% Cisco Systems, Inc. (a) 33,501 640,204 Nokia Oyj, ADR 77,644 1,291,996 ------------- 1,932,200 ------------- COMPUTERS & PERIPHERALS--1.7% International Business Machines Corp. 26,851 1,992,344 Lexmark International, Inc., Class A (a) 28,863 1,871,189 ------------- 3,863,533 ------------- IT SERVICES--1.6% Accenture Ltd., Class A (a) 115,183 2,611,198 Automatic Data Processing, Inc. 27,377 1,149,013 ------------- 3,760,211 ------------- OFFICE ELECTRONICS--0.7% Xerox Corp. (a) 110,678 $ 1,526,250 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.3% Intel Corp. 25,675 669,091 ------------- SOFTWARE--0.8% Microsoft Corp. 72,372 1,797,720 ------------- MATERIALS--4.2% CHEMICALS--2.2% Air Products & Chemicals, Inc. 69,327 4,180,418 PPG Industries, Inc. 13,597 853,348 ------------- 5,033,766 ------------- PAPER & FOREST PRODUCTS--2.0% MeadWestvaco Corp. 94,931 2,661,865 Weyerhaeuser Co. 31,155 1,983,016 ------------- 4,644,881 ------------- TELECOMMUNICATION SERVICES--4.5% DIVERSIFIED TELECOMMUNICATION SERVICES--4.5% BellSouth Corp. 69,709 1,852,168 SBC Communications, Inc. 202,285 4,804,269 Verizon Communications, Inc. 108,845 3,760,595 ------------- 10,417,032 ------------- UTILITIES--5.1% ELECTRIC UTILITIES--3.8% American Electric Power Co., Inc. 34,677 1,278,541 Entergy Corp. 34,619 2,615,466 Exelon Corp. 42,758 2,194,768 FPL Group, Inc. 31,570 1,327,834 PG&E Corp. 38,830 1,457,678 ------------- 8,874,287 ------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--0.8% TXU Corp. 20,853 1,732,676 ------------- MULTI-UTILITIES--0.5% Dominion Resources, Inc. 16,301 1,196,330 ------------- TOTAL COMMON STOCKS (cost of $196,299,151) 230,159,558 ------------- INVESTMENT COMPANY--0.3% iShares Russell 1000 Value Index Fund 10,917 727,509 ------------- TOTAL INVESTMENT COMPANY (cost of $709,929) 727,509 ------------- </Table> See Accompanying Notes to Financial Statements. 76 <Page> <Table> <Caption> PAR VALUE ------------- ------------- SHORT-TERM OBLIGATION--0.1% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/05, due 07/01/05 at 2.700%, collateralized by a U.S. Treasury Bond maturing 05/15/17, market value of $173,100 (repurchase proceeds $169,013) $ 169,000 $ 169,000 ------------- TOTAL SHORT-TERM OBLIGATION (cost of $169,000) 169,000 ------------- TOTAL INVESTMENTS--100.0% (cost of $197,178,080) (b) 231,056,067 ------------- OTHER ASSETS & LIABILITIES, NET--0.0% 11,885 ------------- NET ASSETS--100.0% $ 231,067,952 ============= </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $197,178,080. At June 30, 2005, the Fund held investments in the following sectors: <Table> <Caption> % OF SECTOR NET ASSETS - ------ ---------- Financials 29.0% Energy 12.8 Industrials 12.8 Consumer Staples 10.1 Consumer Discretionary 9.0 Health Care 6.2 Information Technology 5.9 Utilities 5.1 Telecommunication Services 4.5 Materials 4.2 Investment Company 0.3 Short-Term Obligation 0.1 Other Assets & Liabilities, Net 0.0 ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- ADR American Depositary Receipt REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 77 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty Growth & Income Fund, Variable Series / June 30, 2005 (Unaudited) <Table> ASSETS: Investments, at cost $ 197,178,080 -------------- Investments, at value $ 231,056,067 Cash 49 Receivable for: Fund shares sold 23,423 Interest 13 Dividends 396,882 Expense reimbursement due from Investment Advisor/Distributor 9,381 Deferred Trustees' compensation plan 19,719 -------------- TOTAL ASSETS 231,505,534 -------------- LIABILITIES: Payable for: Fund shares repurchased 212,160 Investment advisory fee 149,353 Transfer agent fee 595 Pricing and bookkeeping fees 5,409 Distribution fee--Class B 9,945 Deferred Trustees' fees 19,719 Other liabilities 40,401 -------------- TOTAL LIABILITIES 437,582 -------------- NET ASSETS $ 231,067,952 ============== COMPOSITION OF NET ASSETS: Paid-in capital $ 238,582,700 Undistributed net investment income 1,934,808 Accumulated net realized loss (43,327,543) Net unrealized appreciation on investments 33,877,987 -------------- NET ASSETS $ 231,067,952 ============== CLASS A: Net assets $ 187,141,158 Shares outstanding 11,755,869 ============== Net asset value per share $ 15.92 ============== CLASS B: Net assets $ 43,926,794 Shares outstanding 2,765,523 ============== Net asset value per share $ 15.88 ============== </Table> See Accompanying Notes to Financial Statements. 78 <Page> STATEMENT OF OPERATIONS Liberty Growth & Income Fund, Variable Series For the Six Months Ended June 30, 2005 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 2,959,771 Interest 2,378 -------------- Total Investment Income (net of foreign taxes withheld of $26,195) 2,962,149 -------------- EXPENSES: Investment advisory fee 910,752 Distribution fee--Class B 56,035 Transfer agent fee 3,720 Pricing and bookkeeping fees 33,899 Trustees' fees 5,391 Custody fee 11,254 Non-recurring costs (See Note 6) 2,981 Other expenses 41,802 -------------- Total Expenses 1,065,834 Fees and expenses waived or reimbursed by Investment Advisor (47,751) Fees waived by Distributor--Class B (4,483) Non-recurring costs assumed by Investment Advisor (See Note 6) (2,981) -------------- Net Expenses 1,010,619 -------------- Net Investment Income 1,951,530 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 15,748,919 Net change in unrealized appreciation (deprecation) on investments (16,357,186) -------------- Net Loss (608,267) -------------- Net Increase in Net Assets from Operations $ 1,343,263 ============== </Table> See Accompanying Notes to Financial Statements. 79 <Page> STATEMENT OF CHANGES IN NET ASSETS Liberty Growth & Income Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2005 2004 - ---------------------------------- -------------- -------------- OPERATIONS: Net investment income $ 1,951,530 $ 4,158,446 Net realized gain on investments 15,748,919 15,629,602 Net change in unrealized appreciation (depreciation) on investments (16,357,186) 12,488,990 -------------- -------------- Net Increase from Operations 1,343,263 32,277,038 -------------- -------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (3,575,650) Class B -- (703,626) -------------- -------------- Total Distributions Declared to Shareholders -- (4,279,276) -------------- -------------- SHARE TRANSACTIONS: Class A: Subscriptions 1,911,167 4,999,188 Distributions reinvested -- 3,575,650 Redemptions (22,589,900) (41,791,870) -------------- -------------- Net Decrease (20,678,733) (33,217,032) -------------- -------------- Class B: Subscriptions 1,096,590 2,762,038 Distributions reinvested -- 703,626 Redemptions (3,784,421) (6,672,090) -------------- -------------- Net Decrease (2,687,831) (3,206,426) -------------- -------------- Net Decrease from Share Transactions (23,366,564) (36,423,458) -------------- -------------- Total Decrease in Net Assets (22,023,301) (8,425,696) NET ASSETS: Beginning of period 253,091,253 261,516,949 -------------- -------------- End of period (including undistributed (overdistributed) net investment income of $1,934,808 and $(16,722), respectively) $ 231,067,952 $ 253,091,253 ============== ============== CHANGES IN SHARES: Class A: Subscriptions 121,047 341,822 Issued for distributions reinvested -- 226,127 Redemptions (1,430,346) (2,834,667) -------------- -------------- Net Decrease (1,309,299) (2,266,718) -------------- -------------- Class B: Subscriptions 69,312 189,109 Issued for distributions reinvested -- 44,566 Redemptions (239,617) (452,411) -------------- -------------- Net Decrease (170,305) (218,736) -------------- -------------- </Table> See Accompanying Notes to Financial Statements. 80 <Page> NOTES TO FINANCIAL STATEMENTS Liberty Growth & Income Fund, Variable Series / June 30, 2005 (Unaudited) NOTE 1. ORGANIZATION Liberty Growth & Income Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks long-term growth and income. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available exclusively as a pooled funding vehicle for variable annuity contracts ("VA Contracts") and Variable Life Insurance Policies ("VLI Policies") offered by the separate accounts of certain life insurance companies ("Participating Insurance Companies"). The Participating Insurance Companies and their separate accounts own all the shares of the Fund. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION--Equity securities and securities of 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 have 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. 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. 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. 81 <Page> NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2004 was as follows: <Table> <Caption> DECEMBER 31, 2004 ------------ Distributions paid from: Ordinary income $ 4,279,276 Long-term capital gains -- </Table> Unrealized appreciation and depreciation at June 30, 2005, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 39,917,559 Unrealized depreciation (6,039,572) ------------- Net unrealized appreciation $ 33,877,987 ============= </Table> The following capital loss carryforwards, determined as of December 31, 2004, 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. Utilization of these losses could be subject to limitations imposed by the Internal Revenue Code. NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE--Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and provides administrative and other services to the Fund. Columbia receives a monthly investment advisory 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 $500 million 0.77% $500 million to $1 billion 0.72% $1 billion to $1.5 billion 0.67% $1.5 billion to $3 billion 0.62% $3 billion to $6 billion 0.60% Over $6 billion 0.58% </Table> For the six months ended June 30, 2005, as a result of the settlement with the New York Attorney General discussed in Note 6, the Fund's annualized effective investment advisory fee rate was 0.76%. PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2005, the annualized 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 six months ended June 30, 2005, the Fund's annualized effective transfer agent fee rate was less than 0.01% DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Effective January 1, 2005, Columbia has voluntarily agreed to waive fees and reimburse the Fund for certain expenses so that total expenses (exclusive of distribution fees, brokerage commissions, interest, taxes and extraordinary expenses, if any) will not exceed 0.80% annually of the Fund's average daily net assets. Prior to January 1, 2005, Columbia voluntarily reimbursed 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 voluntarily agreed to waive Class B distribution fees at the annual rate of 0.02% of the Class B average daily net assets. Columbia or the Distributor, at their discretion, may revise or discontinue these arrangements any time. 82 <Page> 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 six months ended on June 30, 2005, 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. 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 for the Office of the Chief Compliance Officer 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 six months ended June 30, 2005, the Fund paid $876 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $50,537,904 and $72,506,949, 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 Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as 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 funds 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. At this time, the distribution plan is still under development. As such, any gain to the Fund or its shareholders can not currently be determined. 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 is 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 events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). 83 <Page> The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has conditionally ordered its transfer to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, can not currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds 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. In 2004, certain Columbia funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Fund 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 Fund. For the six months ended June 30, 2005, Columbia has assumed $2,981 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 84 <Page> FINANCIAL HIGHLIGHTS Liberty Growth & Income Fund, Variable Series--Class B Shares Selected data for a share outstanding throughout each period is as follows: <Table> <Caption> (UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED DECEMBER 31, ENDED JUNE 30, ------------------------------------------ DECEMBER 31, 2005 2004 2003 2002 2001 2000 (a) ------------ -------- -------- -------- -------- ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 15.80 $ 14.14 $ 11.95 $ 15.53 $ 18.26 $ 19.82 ------------ -------- -------- -------- -------- ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.11 0.21 0.18 0.13 0.15 0.08 Net realized and unrealized gain (loss) on investments (0.03) 1.69 2.17 (3.56) (0.35) 0.65 ------------ -------- -------- -------- -------- ------------ Total from Investment Operations 0.08 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 $ 15.88 $ 15.80 $ 14.14 $ 11.95 $ 15.53 $ 18.26 ============ ======== ======== ======== ======== ============ Total return (d)(e)(f) 0.51%(g) 13.46% 19.66% (22.06)% (0.65)% 3.64%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Expenses (h) 1.03%(i) 0.99% 1.00% 1.00% 1.00% 1.00%(i) Net investment income (h) 1.44%(i) 1.45% 1.46% 0.96% 0.88% 0.71%(i) Waiver/reimbursement 0.06%(i) 0.13% 0.14% 0.13% 0.21% 0.13%(i) Portfolio turnover rate 21%(g) 37% 73% 69% 53% 120% Net assets, end of period (000's) $ 43,927 $ 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. 85 <Page> PORTFOLIO MANAGER'S DISCUSSION Liberty S&P 500 Index Fund, Variable Series / June 30, 2005 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(SSgA), is the portfolio manager of the fund. Effective August 22, 2005, Vikram J. Kurian, PhD, will begin managing the fund, replacing James May, a principal of SSgA. Dr. Kurian is a portfolio manager of Columbia Management and has been associated with Columbia Management or its predecessors since January 2000. Large-company stocks ended the first half of 2005 in negative territory. Despite a strong second quarter, US stocks were driven down by investor concern over historically high oil prices and rising interest rates. The S&P 500 Index(1) returned negative 0.81% for the six-month period ended June 30, 2005, and the fund's performance was comparable to the index for the period. Mid-cap stocks outperformed both large- and small-cap stocks during the first half of the year as measured by the Russell indices. Value stocks gained ground relative to growth as the six-month period wore on. The S&P 500/Barra Value Index rose 0.09% while the S&P 500/Barra Growth Index returned negative 1.73%(2). ENERGY AND UTILITY SECTORS WERE TOP PERFORMERS Sector performance within the S&P 500 was mixed during this reporting period. Energy and utilities were the top performing sectors. Energy companies enjoyed ample pricing power. Utility stocks attracted investors because of their increasing income potential. Most sectors in the index turned in negative performances for the first half of the year. Materials and consumer discretionary stocks were the most disappointing. Higher energy costs and a challenging pricing environment adversely affected many companies in the materials sector. Aluminum giant Alcoa and steelmaker Nucor (0.2% and 0.1% of net assets, respectively) both slipped at the end of the period. Downturns in Time Warner (0.7% of net assets) and the major auto stocks were the primary cause of the decline in consumer discretionary sector. Technology and industrial stocks also fell during the period. Declines in Microsoft and International Business Machines (2.2% and 1.1% of net assets, respectively) hurt the technology sector. Among the industrials, General Electric (3.3% of net assets) was a notable loser, stumbling on a disappointing profits forecast. Several transportation companies also fell as a result of their inability to pass on higher energy costs to customers. 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 opinions expressed here are strictly those of Columbia Management and are subject to change without notice. Other divisions of Bank of America and/or affiliates of Columbia Management may have opinions that are inconsistent with these opinions. Equity funds are subject to stock market fluctuations that occur in response to economic and business developments. The primary risks involved with investing in the fund include equity risk, market risk and tracking error risk. Unlike the S&P 500 Index, the fund incurs administrative expenses and transaction costs in trading stocks. The composition of the S&P 500 Index and the stocks held by the fund may occasionally diverge. Holdings are disclosed as of June 30, 2005, and are subject to change. (1) The Standard & Poor's (S&P) 500 Index is an unmanaged index that tracks the performance of 500 widely held, large-capitalization US stocks. (2) The S&P 500/Barra Value Index is an unmanaged index that tracks the performance of companies in the S&P 500 Index with lower price-to-book ratios. The S&P 500/Barra Growth Index is an unmanaged index that tracks the performance of companies in the S&P 500 Index with higher price-to-book ratios. 86 <Page> PERFORMANCE INFORMATION Liberty S&P 500 Index Fund, Variable Series / June 30, 2005 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR LIFE - ---------------------------------------------------------------------------- Class B (05/30/00) -1.15 5.55 -2.82 -2.18 S&P 500 Index(1) -0.81 6.32 -2.37 -1.27 </Table> Inception date of share class is in parenthesis. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/04 06/30/05 - ------------------------------------------------------------------ Class B 10.43 10.31 </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. [CHART] VALUE OF A $10,000 INVESTMENT, 05/30/00 - 06/30/05 <Table> <Caption> CLASS B SHARES S&P 500 INDEX 5/30/2000 $ 10,000 $ 10,000 5/31/2000 $ 10,008 $ 10,312 6/30/2000 $ 10,316 $ 10,567 7/31/2000 $ 10,167 $ 10,402 8/31/2000 $ 10,784 $ 11,048 9/30/2000 $ 10,225 $ 10,464 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 $ 9,046 $ 9,448 1/31/2005 $ 8,821 $ 9,218 2/28/2005 $ 9,002 $ 9,411 3/31/2005 $ 8,838 $ 9,245 4/30/2005 $ 8,664 $ 9,069 5/31/2005 $ 8,933 $ 9,358 6/30/2005 $ 8,940 $ 9,370 </Table> The graph compares the results of a hypothetical $10,000 investment in the fund with the index. The Index is unmanaged and returns for the index and the fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Investment earnings, if any, are income tax-deferred until distribution, at which time taxes will become due. Total return performance includes changes in share price and reinvestment of all distributions. The Standard & Poor's (S&P) 500 Index is an unmanaged index that tracks the performance of 500 widely held, large capitalization US stocks. Indices are not investments, do not incur fees or expenses and are not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in an index. Performance numbers reflect all fund expenses, but do not include any insurance charges imposed by your insurance company's separate accounts. If performance included the effect of these additional charges, it would be lower. (1) Index performance for the life of the fund is from May 30, 2000. 87 <Page> UNDERSTANDING YOUR EXPENSES Liberty S&P 500 Index Fund, Variable Series / June 30, 2005 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 ongoing 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 ongoing 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 $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 01/01/05 - 06/30/05 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ----------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ----------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 988.50 1,021.57 3.20 3.26 0.65 </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 365. 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 funds 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. 88 <Page> INVESTMENT PORTFOLIO Liberty S&P 500 Index Fund, Variable Series / June 30, 2005 (Unaudited) <Table> <Caption> SHARES VALUE ------------- ------------- COMMON STOCKS--97.5% CONSUMER DISCRETIONARY--11.2% AUTO COMPONENTS--0.2% Cooper Tire & Rubber Co. 300 $ 5,571 Dana Corp. 657 9,862 Delphi Corp. 2,741 12,746 Goodyear Tire & Rubber Co. (a) 731 10,892 Johnson Controls, Inc. 932 52,499 Visteon Corp. (a) 646 3,895 ------------- 95,465 ------------- AUTOMOBILES--0.5% Ford Motor Co. 8,650 88,576 General Motors Corp. 2,729 92,786 Harley-Davidson, Inc. 1,396 69,241 ------------- 250,603 ------------- DISTRIBUTORS--0.1% Genuine Parts Co. 845 34,721 ------------- DIVERSIFIED CONSUMER SERVICES--0.2% Apollo Group, Inc., Class A (a) 768 60,073 H&R Block, Inc. 832 48,547 ------------- 108,620 ------------- HOTELS, RESTAURANTS & LEISURE--1.5% Carnival Corp. 2,524 137,684 Darden Restaurants, Inc. 671 22,130 Harrah's Entertainment, Inc. 819 59,025 Hilton Hotels Corp. 1,761 42,000 International Game Technology 1,597 44,955 Marriott International, Inc., Class A 926 63,172 McDonald's Corp. 6,091 169,025 Starbucks Corp. (a) 1,813 93,660 Starwood Hotels & Resorts Worldwide, Inc. 1,031 60,386 Wendy's International, Inc. 540 25,731 Yum! Brands, Inc. 1,363 70,985 ------------- 788,753 ------------- HOUSEHOLD DURABLES--0.6% Black & Decker Corp. 378 33,963 Centex Corp. 584 41,271 D.R. Horton, Inc. 100 3,761 Fortune Brands, Inc. 693 61,539 KB Home 380 28,967 Leggett & Platt, Inc. 916 24,347 Maytag Corp. 351 5,497 Newell Rubbermaid, Inc. 1,350 32,184 Pulte Homes, Inc. 540 45,495 Snap-On, Inc. 238 8,163 Stanley Works 381 17,351 Whirlpool Corp. 295 20,683 ------------- 323,221 ------------- INTERNET & CATALOG RETAIL--0.3% eBay, Inc. (a) 5,780 190,798 ------------- LEISURE EQUIPMENT & PRODUCTS--0.2% Brunswick Corp. 491 21,270 Eastman Kodak Co. 1,357 36,435 Hasbro, Inc. 772 $ 16,050 Mattel, Inc. 2,025 37,058 ------------- 110,813 ------------- MEDIA--3.6% Clear Channel Communications, Inc. 2,466 76,273 Comcast Corp., Class A (a) 10,594 325,236 Dow Jones & Co., Inc. 347 12,301 Gannett Co., Inc. 1,165 82,867 Interpublic Group of Companies, Inc. (a) 1,972 24,019 Knight-Ridder, Inc. 312 19,138 McGraw-Hill Companies, Inc. 1,822 80,624 Meredith Corp. 257 12,608 New York Times Co., Class A 707 22,023 News Corp., Class A 13,800 223,284 Omnicom Group, Inc. 915 73,072 Time Warner, Inc. (a) 22,338 373,268 Tribune Co. 1,451 51,046 Univision Communications, Inc., Class A (a) 1,445 39,810 Viacom, Inc., Class B 7,866 251,869 Walt Disney Co. 9,785 246,386 ------------- 1,913,824 ------------- MULTILINE RETAIL--1.3% Big Lots, Inc. (a) 501 6,633 Dillard's, Inc., Class A 322 7,541 Dollar General Corp. 1,464 29,807 Family Dollar Stores, Inc. 812 21,193 Federated Department Stores, Inc. 824 60,383 J.C. Penney Co., Inc. 1,276 67,092 Kohl's Corp. (a) 1,571 87,835 May Department Stores Co. 1,391 55,863 Nordstrom, Inc. 620 42,141 Sears Holdings Corp. (a) 515 77,183 Target Corp. 4,185 227,706 ------------- 683,377 ------------- SPECIALTY RETAIL--2.3% Autonation, Inc. (a) 1,104 22,654 AutoZone, Inc. (a) 288 26,628 Bed Bath & Beyond, Inc. (a) 1,377 57,531 Best Buy Co., Inc. 1,461 100,152 Circuit City Stores, Inc. 972 16,806 Gap, Inc. 3,536 69,836 Home Depot, Inc. 10,219 397,519 Limited Brands, Inc. 1,879 40,248 Lowe's Companies, Inc. 3,707 215,822 Office Depot, Inc. (a) 1,476 33,712 OfficeMax, Inc. 350 10,419 RadioShack Corp. 806 18,675 Sherwin-Williams Co. 618 29,102 Staples, Inc. 3,541 75,494 Tiffany & Co. 689 22,572 TJX Companies, Inc. 2,306 56,151 Toys "R" Us, Inc. (a) 1,046 27,698 ------------- 1,221,019 ------------- </Table> See Accompanying Notes to Financial Statements. 89 <Page> <Table> <Caption> SHARES VALUE ------------- ------------- TEXTILES, APPAREL & LUXURY GOODS--0.4% Coach, Inc. (a) 1,800 $ 60,426 Jones Apparel Group, Inc. 631 19,586 Liz Claiborne, Inc. 506 20,119 NIKE, Inc., Class B 1,081 93,615 Reebok International Ltd. 285 11,921 V.F. Corp. 453 25,921 ------------- 231,588 ------------- CONSUMER STAPLES--9.8% BEVERAGES--2.2% Anheuser-Busch Companies, Inc. 3,671 167,948 Brown-Forman Corp., Class B 462 27,932 Coca-Cola Co. 10,771 449,689 Coca-Cola Enterprises, Inc. 1,705 37,527 Molson Coors Brewing Co., Class B 329 20,398 Pepsi Bottling Group, Inc. 932 26,665 PepsiCo, Inc. 7,977 430,200 ------------- 1,160,359 ------------- FOOD & STAPLES RETAILING--2.8% Albertson's, Inc. 1,814 37,514 Costco Wholesale Corp. 2,272 101,831 CVS Corp. 3,790 110,175 Kroger Co. (a) 3,600 68,508 Safeway, Inc. 2,172 49,065 SUPERVALU, Inc. 629 20,512 Sysco Corp. 3,031 109,692 Wal-Mart Stores, Inc. 15,935 768,067 Walgreen Co. 4,861 223,557 ------------- 1,488,921 ------------- FOOD PRODUCTS--1.1% Archer-Daniels-Midland Co. 3,028 64,739 Campbell Soup Co. 1,541 47,416 ConAgra Foods, Inc. 2,406 55,723 General Mills, Inc. 1,691 79,122 H.J. Heinz Co. 1,714 60,710 Hershey Co. 1,056 65,578 Kellogg Co. 1,679 74,615 McCormick & Co., Inc. 613 20,033 Sara Lee Corp. 3,746 74,208 Wm. Wrigley Jr. Co. 884 60,854 ------------- 602,998 ------------- HOUSEHOLD PRODUCTS--1.7% Clorox Co. 726 40,453 Colgate-Palmolive Co. 2,474 123,477 Kimberly-Clark Corp. 2,236 139,951 Procter & Gamble Co. 11,810 622,978 ------------- 926,859 ------------- PERSONAL PRODUCTS--0.7% Alberto-Culver Co. 378 16,379 Avon Products, Inc. 2,296 86,904 Gillette Co. 4,721 239,024 ------------- 342,307 ------------- TOBACCO--1.3% Altria Group, Inc. 9,857 $ 637,353 Reynolds American, Inc. 500 39,400 UST, Inc. 824 37,624 ------------- 714,377 ------------- ENERGY--8.6% ENERGY EQUIPMENT & SERVICES--1.2% Baker Hughes, Inc. 1,562 79,912 BJ Services Co. 756 39,675 Halliburton Co. 2,411 115,294 Nabors Industries Ltd. (a) 634 38,433 National-Oilwell Varco, Inc. (a) 800 38,032 Noble Corp. 617 37,952 Rowan Companies, Inc. 540 16,043 Schlumberger Ltd. 2,846 216,125 Transocean, Inc. (a) 1,537 82,952 ------------- 664,418 ------------- OIL, GAS & CONSUMABLE FUELS--7.4% Amerada Hess Corp. 442 47,077 Anadarko Petroleum Corp. 1,155 94,883 Apache Corp. 1,544 99,742 Ashland, Inc. 276 19,836 Burlington Resources, Inc. 1,862 102,857 ChevronTexaco Corp. 9,998 559,088 ConocoPhillips 6,610 380,009 Devon Energy Corp. 2,286 115,855 El Paso Corp. 3,064 35,297 EOG Resources, Inc. 1,090 61,912 Exxon Mobil Corp. 30,380 1,745,939 Kerr-McGee Corp. 586 44,718 Kinder Morgan, Inc. 546 45,427 Marathon Oil Corp. 1,620 86,459 Occidental Petroleum Corp. 1,875 144,244 Sunoco, Inc. 339 38,538 Unocal Corp. 1,314 85,476 Valero Energy Corp. 1,200 94,932 Williams Companies, Inc. 2,658 50,502 XTO Energy, Inc. 1,700 57,783 ------------- 3,910,574 ------------- FINANCIALS--19.8% CAPITAL MARKETS--2.7% Bank of New York Co., Inc. 3,757 108,126 Bear Stearns Companies, Inc. 537 55,816 Charles Schwab Corp. 5,530 62,378 E*TRADE Financial Corp. (a) 1,700 23,783 Federated Investors, Inc., Class B 428 12,844 Franklin Resources, Inc. 933 71,822 Goldman Sachs Group, Inc. 2,152 219,547 Janus Capital Group, Inc. 1,108 16,664 Lehman Brothers Holdings, Inc. 1,291 128,171 Mellon Financial Corp. 1,986 56,978 Merrill Lynch & Co., Inc. 4,456 245,125 </Table> See Accompanying Notes to Financial Statements. 90 <Page> <Table> <Caption> SHARES VALUE ------------- ------------- Morgan Stanley 5,178 $ 271,690 Northern Trust Corp. 972 44,314 State Street Corp. 1,616 77,972 T. Rowe Price Group, Inc. 531 33,241 ------------- 1,428,471 ------------- COMMERCIAL BANKS--5.7% AmSouth Bancorp 1,645 42,770 Bank of America Corp. (b) 19,172 874,435 BB&T Corp. 2,620 104,721 Comerica, Inc. 788 45,546 Compass Bancshares, Inc. 600 27,000 Fifth Third Bancorp 2,487 102,489 First Horizon National Corp. 567 23,927 Huntington Bancshares, Inc. 1,061 25,613 KeyCorp 1,890 62,654 M&T Bank Corp. 500 52,580 Marshall & Ilsley Corp. 1,030 45,784 National City Corp. 2,849 97,208 North Fork Bancorporation, Inc. 2,268 63,708 PNC Financial Services Group, Inc. 1,306 71,125 Regions Financial Corp. 2,227 75,451 SunTrust Banks, Inc. 1,642 118,618 Synovus Financial Corp. 1,516 43,464 U.S. Bancorp 8,772 256,142 Wachovia Corp. 7,547 374,331 Wells Fargo & Co. 8,001 492,702 Zions Bancorporation 440 32,353 ------------- 3,032,621 ------------- CONSUMER FINANCE--1.3% American Express Co. 5,532 294,468 Capital One Financial Corp. 1,221 97,692 MBNA Corp. 6,117 160,021 Providian Financial Corp. (a) 1,446 25,493 SLM Corp. 1,967 99,924 ------------- 677,598 ------------- DIVERSIFIED FINANCIAL SERVICES--3.5% CIT Group, Inc. 1,000 42,970 Citigroup, Inc. 24,766 1,144,932 JPMorgan Chase & Co. 16,755 591,787 Moody's Corp. 1,212 54,491 Principal Financial Group, Inc. 1,448 60,671 ------------- 1,894,851 ------------- INSURANCE--4.3% Ace Ltd. 1,333 59,785 AFLAC, Inc. 2,415 104,521 Allstate Corp. 3,208 191,678 Ambac Financial Group, Inc. 536 37,391 American International Group, Inc. 12,386 719,627 Aon Corp. 1,531 38,336 Chubb Corp. 966 82,699 Cincinnati Financial Corp. 842 33,310 Hartford Financial Services Group, Inc. 1,395 104,318 Jefferson-Pilot Corp. 645 32,521 Lincoln National Corp. 817 38,334 Loews Corp. 763 $ 59,133 Marsh & McLennan Companies, Inc. 2,533 70,164 MBIA, Inc. 646 38,314 MetLife, Inc. 3,540 159,088 Progressive Corp. 940 92,881 Prudential Financial, Inc. 2,494 163,756 SAFECO Corp. 555 30,159 St. Paul Travelers Companies, Inc. 3,239 128,038 Torchmark Corp. 487 25,421 UnumProvident Corp. 1,414 25,904 XL Capital Ltd., Class A 678 50,457 ------------- 2,285,835 ------------- REAL ESTATE--0.6% Apartment Investment & Management Co., Class A, REIT 500 20,460 Archstone-Smith Trust, REIT 900 34,758 Equity Office Properties Trust, REIT 1,962 64,942 Equity Residential, REIT 1,381 50,849 Plum Creek Timber Co., Inc., REIT 881 31,980 ProLogis Trust, REIT 900 36,216 Simon Property Group, Inc., REIT 1,000 72,490 ------------- 311,695 ------------- THRIFTS & MORTGAGE FINANCE--1.7% Countrywide Financial Corp. 2,734 105,560 Fannie Mae 4,612 269,341 Freddie Mac 3,236 211,084 Golden West Financial Corp. 1,286 82,792 MGIC Investment Corp. 413 26,936 Sovereign Bancorp, Inc. 1,700 37,978 Washington Mutual, Inc. 4,194 170,654 ------------- 904,345 ------------- HEALTH CARE--13.1% BIOTECHNOLOGY--1.2% Amgen, Inc. (a) 5,909 357,258 Applera Corp. - Applied Biosystems Group 1,004 19,749 Biogen Idec, Inc. (a) 1,616 55,671 Chiron Corp. (a) 740 25,819 Genzyme Corp. (a) 1,142 68,623 Gilead Sciences, Inc. (a) 2,100 92,379 MedImmune, Inc. (a) 1,206 32,224 ------------- 651,723 ------------- HEALTH CARE EQUIPMENT & SUPPLIES--2.2% Bausch & Lomb, Inc. 279 23,157 Baxter International, Inc. 2,918 108,258 Becton, Dickinson & Co. 1,199 62,911 Biomet, Inc. 1,217 42,157 Boston Scientific Corp. (a) 3,654 98,658 C.R. Bard, Inc. 526 34,984 Fisher Scientific International, Inc. (a) 500 32,450 Guidant Corp. 1,526 102,700 Hospira, Inc. (a) 745 29,055 Medtronic, Inc. 5,798 300,278 </Table> See Accompanying Notes to Financial Statements. 91 <Page> <Table> <Caption> SHARES VALUE ------------- ------------- Millipore Corp. (a) 201 $ 11,403 PerkinElmer, Inc. 537 10,149 St. Jude Medical, Inc. (a) 1,692 73,788 Stryker Corp. 1,830 87,035 Thermo Electron Corp. (a) 777 20,878 Waters Corp. (a) 539 20,035 Zimmer Holdings, Inc. (a) 1,169 89,043 ------------- 1,146,939 ------------- HEALTH CARE PROVIDERS & SERVICES--2.7% Aetna, Inc. 1,412 116,942 AmerisourceBergen Corp. 451 31,187 Cardinal Health, Inc. 2,085 120,054 Caremark Rx, Inc. (a) 2,193 97,632 CIGNA Corp. 665 71,175 Express Scripts, Inc. (a) 800 39,984 HCA, Inc. 1,987 112,603 Health Management Associates, Inc., Class A 1,126 29,479 Humana, Inc. (a) 717 28,493 IMS Health, Inc. 1,167 28,907 Laboratory Corp. of America Holdings (a) 600 29,940 Manor Care, Inc. 458 18,196 McKesson Corp. 1,449 64,901 Medco Health Solutions, Inc. (a) 1,330 70,969 Quest Diagnostics, Inc. 942 50,180 Tenet Healthcare Corp. (a) 2,180 26,683 UnitedHealth Group, Inc. 6,064 316,177 WellPoint, Inc. (a) 2,862 199,310 ------------- 1,452,812 ------------- PHARMACEUTICALS--7.0% Abbott Laboratories 7,351 360,273 Allergan, Inc. 652 55,576 Bristol-Myers Squibb Co. 9,370 234,063 Eli Lilly & Co. 5,386 300,054 Forest Laboratories, Inc. (a) 1,624 63,092 Johnson & Johnson 14,117 917,605 King Pharmaceuticals, Inc. (a) 1,127 11,743 Merck & Co., Inc. 10,478 322,722 Mylan Laboratories, Inc. 1,300 25,012 Pfizer, Inc. 35,469 978,235 Schering-Plough Corp. 7,057 134,506 Watson Pharmaceuticals, Inc. (a) 562 16,613 Wyeth 6,339 282,086 ------------- 3,701,580 ------------- INDUSTRIALS--10.9% AEROSPACE & DEFENSE--2.2% Boeing Co. 3,928 259,248 General Dynamics Corp. 995 108,992 Goodrich Corp. 585 23,961 Honeywell International, Inc. 4,114 150,696 L-3 Communications Holdings, Inc. 500 38,290 Lockheed Martin Corp. 1,933 125,394 Northrop Grumman Corp. 1,680 92,820 Raytheon Co. 2,165 $ 84,695 Rockwell Collins, Inc. 873 41,625 United Technologies Corp. 4,800 246,480 ------------- 1,172,201 ------------- AIR FREIGHT & LOGISTICS--0.9% FedEx Corp. 1,395 113,009 Ryder System, Inc. 264 9,662 United Parcel Service, Inc., Class B 5,293 366,064 ------------- 488,735 ------------- AIRLINES--0.1% Delta Air Lines, Inc. (a) 600 2,256 Southwest Airlines Co. 3,539 49,298 ------------- 51,554 ------------- BUILDING PRODUCTS--0.2% American Standard Companies, Inc. 820 34,374 Masco Corp. 2,060 65,426 ------------- 99,800 ------------- COMMERCIAL SERVICES & SUPPLIES--0.8% Allied Waste Industries, Inc. (a) 1,470 11,657 Avery Dennison Corp. 481 25,474 Cendant Corp. 5,051 112,991 Cintas Corp. 682 26,325 Equifax, Inc. 696 24,854 Monster Worldwide, Inc. (a) 500 14,340 Pitney Bowes, Inc. 1,152 50,170 R.R. Donnelley & Sons Co. 1,081 37,305 Robert Half International, Inc. 800 19,976 Waste Management, Inc. 2,715 76,943 ------------- 400,035 ------------- CONSTRUCTION & ENGINEERING--0.0% Fluor Corp. 409 23,554 ------------- ELECTRICAL EQUIPMENT--0.4% American Power Conversion Corp. 893 21,066 Cooper Industries Ltd., Class A 399 25,496 Emerson Electric Co. 1,984 124,258 Rockwell Automation, Inc. 809 39,406 ------------- 210,226 ------------- INDUSTRIAL CONGLOMERATES--4.4% 3M Co. 3,634 262,738 General Electric Co. 50,539 1,751,177 Textron, Inc. 665 50,440 Tyco International Ltd. 9,629 281,167 ------------- 2,345,522 ------------- MACHINERY--1.4% Caterpillar, Inc. 1,592 151,734 Cummins, Inc. 180 13,430 Danaher Corp. 1,292 67,623 Deere & Co. 1,197 78,392 Dover Corp. 940 34,197 Eaton Corp. 766 45,883 Illinois Tool Works, Inc. 1,333 106,213 Ingersoll-Rand Co., Class A 778 55,510 ITT Industries, Inc. 481 46,960 Navistar International Corp. (a) 371 11,872 </Table> See Accompanying Notes to Financial Statements. 92 <Page> <Table> <Caption> SHARES VALUE ------------- ------------- Paccar, Inc. 819 $ 55,692 Pall Corp. 600 18,216 Parker Hannifin Corp. 556 34,478 ------------- 720,200 ------------- ROAD & RAIL--0.5% Burlington Northern Santa Fe Corp. 1,803 84,885 CSX Corp. 1,063 45,348 Norfolk Southern Corp. 1,862 57,648 Union Pacific Corp. 1,239 80,287 ------------- 268,168 ------------- TRADING COMPANIES & DISTRIBUTORS--0.0% W.W. Grainger, Inc. 425 23,286 ------------- INFORMATION TECHNOLOGY--14.8% COMMUNICATIONS EQUIPMENT--2.5% ADC Telecommunications, Inc. (a) 537 11,690 Andrew Corp. (a) 787 10,042 Avaya, Inc. (a) 2,298 19,119 CIENA Corp. (a) 2,719 5,683 Cisco Systems, Inc. (a) 30,435 581,613 Comverse Technology, Inc. (a) 921 21,782 Corning, Inc. (a) 6,609 109,842 JDS Uniphase Corp. (a) 6,993 10,629 Lucent Technologies, Inc. (a) 20,798 60,522 Motorola, Inc. 11,708 213,788 QUALCOMM, Inc. 7,790 257,148 Scientific-Atlanta, Inc. 705 23,455 Tellabs, Inc. (a) 1,991 17,322 ------------- 1,342,635 ------------- COMPUTERS & PERIPHERALS--3.5% Apple Computer, Inc. (a) 3,872 142,528 Dell, Inc. (a) 11,579 457,486 EMC Corp. (a) 11,392 156,184 Gateway, Inc. (a) 1,545 5,098 Hewlett-Packard Co. 13,709 322,299 International Business Machines Corp. 7,710 572,082 Lexmark International, Inc., Class A (a) 595 38,574 NCR Corp. (a) 860 30,203 Network Appliance, Inc. (a) 1,684 47,607 QLogic Corp. (a) 455 14,046 Sun Microsystems, Inc. (a) 15,975 59,587 ------------- 1,845,694 ------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--0.3% Agilent Technologies, Inc. (a) 2,073 47,720 Jabil Circuit, Inc. (a) 915 28,118 Molex, Inc. 815 21,223 Sanmina-SCI Corp. (a) 2,403 13,144 Solectron Corp. (a) 4,686 17,760 Symbol Technologies, Inc. 1,094 10,798 Tektronix, Inc. 387 9,006 ------------- 147,769 ------------- INTERNET SOFTWARE & SERVICES--0.4% Yahoo!, Inc. (a) 6,188 214,414 ------------- IT SERVICES--1.1% Affiliated Computer Services, Inc., Class A (a) 600 $ 30,660 Automatic Data Processing, Inc. 2,800 117,516 Computer Sciences Corp. (a) 841 36,752 Convergys Corp. (a) 680 9,670 Electronic Data Systems Corp. 2,391 46,027 First Data Corp. 3,679 147,675 Fiserv, Inc. (a) 964 41,404 Paychex, Inc. 1,759 57,238 Sabre Holdings Corp., Class A 708 14,124 SunGard Data Systems, Inc. (a) 1,423 50,047 Unisys Corp. (a) 1,537 9,729 ------------- 560,842 ------------- OFFICE ELECTRONICS--0.1% Xerox Corp. (a) 4,609 63,558 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.2% Advanced Micro Devices, Inc. (a) 1,837 31,854 Altera Corp. (a) 1,817 36,013 Analog Devices, Inc. 1,808 67,456 Applied Materials, Inc. 7,830 126,689 Applied Micro Circuits Corp. (a) 1,304 3,338 Broadcom Corp., Class A (a) 1,441 51,170 Freescale Semiconductor, Inc., Class B (a) 1,881 39,840 Intel Corp. 29,409 766,398 KLA-Tencor Corp. 913 39,898 Linear Technology Corp. 1,423 52,210 LSI Logic Corp. (a) 1,791 15,206 Maxim Integrated Products, Inc. 1,587 60,639 Micron Technology, Inc. (a) 2,915 29,762 National Semiconductor Corp. 1,690 37,231 Novellus Systems, Inc. (a) 642 15,864 NVIDIA Corp. (a) 780 20,842 PMC-Sierra, Inc. (a) 798 7,445 Teradyne, Inc. (a) 876 10,486 Texas Instruments, Inc. 7,963 223,521 Xilinx, Inc. 1,626 41,463 ------------- 1,677,325 ------------- SOFTWARE--3.7% Adobe Systems, Inc. 2,386 68,287 Autodesk, Inc. 1,100 37,807 BMC Software, Inc. (a) 1,062 19,063 Citrix Systems, Inc. (a) 793 17,176 Computer Associates International, Inc. 2,548 70,019 Compuware Corp. (a) 1,836 13,201 Electronic Arts, Inc. (a) 1,428 80,839 Intuit, Inc. (a) 913 41,185 Mercury Interactive Corp. (a) 407 15,613 Microsoft Corp. 47,939 1,190,805 Novell, Inc. (a) 1,736 10,763 Oracle Corp. (a) 21,042 277,754 Parametric Technology Corp. (a) 1,191 7,599 Siebel Systems, Inc. 2,348 20,897 </Table> See Accompanying Notes to Financial Statements. 93 <Page> <Table> <Caption> SHARES VALUE ------------- ------------- Symantec Corp. (a) 3,432 $ 74,612 VERITAS Software Corp. (a) 1,994 48,654 ------------- 1,994,274 ------------- MATERIALS--2.8% CHEMICALS--1.5% Air Products & Chemicals, Inc. 1,092 65,848 Dow Chemical Co. 4,510 200,830 E.I. du Pont de Nemours & Co. 4,724 203,179 Eastman Chemical Co. 367 20,240 Ecolab, Inc. 1,020 33,007 Engelhard Corp. 584 16,673 Great Lakes Chemical Corp. 255 8,025 Hercules, Inc. (a) 483 6,834 International Flavors & Fragrances, Inc. 416 15,068 Monsanto Co. 1,255 78,902 PPG Industries, Inc. 821 51,526 Praxair, Inc. 1,540 71,764 Rohm and Haas Co. 881 40,826 Sigma-Aldrich Corp. 301 16,868 ------------- 829,590 ------------- CONSTRUCTION MATERIALS--0.1% Vulcan Materials Co. 522 33,925 ------------- CONTAINERS & PACKAGING--0.2% Ball Corp. 480 17,261 Bemis Co., Inc. 496 13,164 Pactiv Corp. (a) 772 16,660 Sealed Air Corp. (a) 390 19,418 Temple-Inland, Inc. 526 19,541 ------------- 86,044 ------------- METALS & MINING--0.6% Alcoa, Inc. 4,182 109,276 Allegheny Technologies, Inc. 382 8,427 Freeport-McMoRan Copper & Gold, Inc., Class B 880 32,947 Newmont Mining Corp. 2,089 81,534 Nucor Corp. 788 35,948 Phelps Dodge Corp. 414 38,295 United States Steel Corp. 509 17,494 ------------- 323,921 ------------- PAPER & FOREST PRODUCTS--0.4% Georgia-Pacific Corp. 1,245 39,591 International Paper Co. 2,320 70,087 Louisiana-Pacific Corp. 570 14,011 MeadWestvaco Corp. 811 22,740 Weyerhaeuser Co. 1,157 73,643 ------------- 220,072 ------------- TELECOMMUNICATION SERVICES--3.1% DIVERSIFIED TELECOMMUNICATION SERVICES--2.8% ALLTEL Corp. 1,543 96,098 AT&T Corp. 3,820 72,733 BellSouth Corp. 8,782 233,338 CenturyTel, Inc. 689 23,860 Citizens Communications Co. 1,579 $ 21,222 Qwest Communications International, Inc. (a) 8,256 30,630 SBC Communications, Inc. 15,651 371,711 Sprint Corp. 7,018 176,081 Verizon Communications, Inc. 13,205 456,233 ------------- 1,481,906 ------------- WIRELESS TELECOMMUNICATION SERVICES--0.3% Nextel Communications, Inc., Class A (a) 5,409 174,765 ------------- UTILITIES--3.4% ELECTRIC UTILITIES--2.1% Allegheny Energy, Inc. (a) 767 19,344 Ameren Corp. 964 53,309 American Electric Power Co., Inc. 1,832 67,546 CenterPoint Energy, Inc. 1,393 18,402 Cinergy Corp. 878 39,352 Consolidated Edison, Inc. 1,160 54,334 DTE Energy Co. 804 37,603 Edison International 1,506 61,068 Entergy Corp. 1,028 77,665 Exelon Corp. 3,198 164,153 FirstEnergy Corp. 1,532 73,704 FPL Group, Inc. 1,850 77,811 PG&E Corp. 1,722 64,644 Pinnacle West Capital Corp. 412 18,313 PPL Corp. 857 50,889 Progress Energy, Inc. 1,229 55,600 Southern Co. 3,559 123,391 TECO Energy, Inc. 900 17,019 Xcel Energy, Inc. 1,857 36,249 ------------- 1,110,396 ------------- GAS UTILITIES--0.2% KeySpan Corp. 769 31,298 Nicor, Inc. 245 10,087 NiSource, Inc. 1,209 29,899 Peoples Energy Corp. 152 6,606 ------------- 77,890 ------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--0.6% AES Corp. (a) 3,026 49,566 Calpine Corp. (a) 1,926 6,548 Constellation Energy Group 887 51,171 Duke Energy Corp. 4,486 133,369 Dynegy Holdings, Inc., Class A (a) 1,600 7,776 TXU Corp. 1,128 93,726 ------------- 342,156 ------------- MULTI-UTILITIES--0.5% CMS Energy Corp. (a) 1,000 15,060 Dominion Resources, Inc. 1,645 120,726 Public Service Enterprise Group, Inc. 1,100 66,902 Sempra Energy 1,180 48,746 ------------- 251,434 ------------- TOTAL COMMON STOCKS (cost of $46,080,334) 51,833,976 ------------- </Table> See Accompanying Notes to Financial Statements. 94 <Page> <Table> <Caption> PAR VALUE ------------- ------------- SHORT-TERM OBLIGATIONS--2.4% U.S. GOVERNMENT AGENCY & OBLIGATION--0.1% United States Treasury Bill 2.940% 09/08/05 (c)(d) $ 80,000 $ 79,549 ------------- REPURCHASE AGREEMENT--2.3% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/05, due 07/01/05 at 2.700%, collateralized by a U.S. Treasury Note maturing 02/15/10, market value of $1,246,556 (repurchase proceeds $1,220,092) 1,220,000 1,220,000 ------------- TOTAL SHORT-TERM OBLIGATIONS (cost of $1,299,549) 1,299,549 ------------- TOTAL INVESTMENTS--99.9% (cost of $47,379,883) (e) 53,133,525 ------------- OTHER ASSETS & LIABILITIES, NET--0.1% 51,731 ------------- NET ASSETS--100.0% $ 53,185,256 ============= </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Investments in affiliates during the six months ended June 30, 2005: <Table> Security name: Bank of America Corp. Shares as of 12/31/04: 19,372 Shares purchased: 500 Shares sold: (700) Shares as of 06/30/05: 19,172 Net realized gain: $ 2,260 Dividend income earned: $ 17,300 Value at end of period: $ 874,435 </Table> (c) Security pledged as collateral for open futures contracts. (d) The rate shown represents the annualized yield at the date of purchase. (e) Cost for federal income tax purposes is $47,379,883. At June 30, 2005, the Fund held the following open long futures contracts: <Table> <Caption> NUMBER OF AGGREGATE EXPIRATION UNREALIZED TYPE CONTRACTS VALUE FACE VALUE DATE DEPRECATION ---- --------- ------------- ----------- ---------- ----------- S&P Mini 500 24 $ 1,434,600 $ 1,452,131 Sep-05 $ (17,531) </Table> At June 30, 2005, the Fund held investments in the following sectors: <Table> <Caption> % OF SECTOR NET ASSETS - ------ -------------- Financials 19.8% Information Technology 14.8 Health Care 13.1 Consumer Discretionary 11.2 Industrials 10.9 Consumer Staples 9.8 Energy 8.6 Utilities 3.4 Telecommunication Services 3.1 Materials 2.8 Short-Term Obligations 2.4 Other Assets & Liabilities, Net 0.1 ----- 100.0% ===== </Table> <Table> <Caption> ACRONYM NAME ------- ---- REIT Real Estate Investment Trust </Table> See Accompanying Notes to Financial Statements. 95 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty S&P 500 Index Fund, Variable Series / June 30, 2005 (Unaudited) <Table> ASSETS: Unaffiliated investments, at cost $ 46,792,066 Affiliated investments, at cost 587,817 -------------- Unaffiliated investments, at value $ 52,259,090 Affiliated investments, at value 874,435 Cash 914 Receivable for: Fund shares sold 47,957 Interest 92 Dividends 62,320 Expense reimbursement due from Investment Advisor 1,092 Deferred Trustees' compensation plan 3,886 Other assets 648 -------------- TOTAL ASSETS 53,250,434 -------------- LIABILITIES: Payable for: Investments purchased 3,772 Fund shares repurchased 185 Futures variation margin 8,880 Investment advisory fee 8,771 Transfer agent fee 595 Audit fee 16,985 Custody fee 1,858 Reports to shareholders 8,412 Distribution fee--Class B 11,834 Deferred Trustees' fees 3,886 -------------- TOTAL LIABILITIES 65,178 -------------- NET ASSETS $ 53,185,256 ============== COMPOSITION OF NET ASSETS: Paid-in capital $ 51,151,601 Undistributed net investment income 315,034 Accumulated net realized loss (4,017,490) Net unrealized appreciation (depreciation) on: Investments 5,753,642 Futures contracts (17,531) -------------- NET ASSETS $ 53,185,256 ============== CLASS A: Net assets $ 90,013 Shares outstanding 8,695 ============== Net asset value per share $ 10.35 ============== CLASS B: Net assets $ 53,095,243 Shares outstanding 5,149,120 ============== Net asset value per share $ 10.31 ============== </Table> See Accompanying Notes to Financial Statements. 96 <Page> STATEMENT OF OPERATIONS Liberty S&P 500 Index Fund, Variable Series For the Six Months Ended June 30, 2005 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 456,589 Dividends from affiliates 17,300 Interest 14,492 -------------- Total Investment Income 488,381 -------------- EXPENSES: Investment advisory fee 52,284 Distribution fee--Class B 66,121 Transfer agent fee 3,720 Pricing and bookkeeping fees 22,392 Trustees' fees 3,436 Custody fee 10,663 Audit fee 12,985 Non-recurring costs (See Note 6) 653 -------------- Total Expenses 172,254 Non-recurring costs assumed by Investment Advisor (See Note 6) (653) Custody earnings credit (14) -------------- Net Expenses 171,587 -------------- Net Investment Income 316,794 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURE CONTRACTS: Net realized gain (loss) on: Unaffiliated investments (359,152) Affiliated investments 2,260 Futures contracts 2,531 -------------- Net realized loss (354,361) -------------- Net change in unrealized appreciation (depreciation) on: Investments (541,211) Futures contracts (26,511) -------------- Net change in unrealized appreciation (depreciation) (567,722) -------------- Net Loss (922,083) -------------- Net Decrease in Net Assets from Operations $ (605,289) ============== </Table> See Accompanying Notes to Financial Statements. 97 <Page> STATEMENT OF CHANGES IN NET ASSETS Liberty S&P 500 Index Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2005 2004 - ---------------------------------- -------------- -------------- OPERATIONS: Net investment income $ 316,794 $ 659,754 Net realized loss on investments and futures contracts (354,361) (297,579) Net change in unrealized appreciation (depreciation) on investments and futures contracts (567,722) 4,701,061 -------------- -------------- Net Increase (Decrease) from Operations (605,289) 5,063,236 -------------- -------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (1,243) Class B -- (677,613) -------------- -------------- Total Distributions Declared to Shareholders -- (678,856) -------------- -------------- SHARE TRANSACTIONS: Class A: Distributions reinvested -- 1,243 -------------- -------------- Class B: Subscriptions 1,773,823 6,819,068 Distributions reinvested -- 677,613 Redemptions (2,720,054) (5,669,755) -------------- -------------- Net Increase (Decrease) (946,231) 1,826,926 -------------- -------------- Net Increase(Decrease) from Share Transactions (946,231) 1,828,169 -------------- -------------- Total Increase (Decrease) in Net Assets (1,551,520) 6,212,549 NET ASSETS: Beginning of period 54,736,776 48,524,227 -------------- -------------- End of period (including undistributed (overdistributed) net investment income of $315,034 and $(1,760), respectively) $ 53,185,256 $ 54,736,776 ============== ============== CHANGES IN SHARES Class A: Issued for distributions reinvested -- 119 -------------- -------------- Class B: Subscriptions 172,955 700,537 Issued for distributions reinvested -- 64,905 Redemptions (265,400) (573,226) -------------- -------------- Net Increase (Decrease) (92,445) 192,216 -------------- -------------- </Table> See Accompanying Notes to Financial Statements. 98 <Page> NOTES TO FINANCIAL STATEMENTS Liberty S&P 500 Index Fund, Variable Series / June 30, 2005 (Unaudited) NOTE 1. ORGANIZATION Liberty S&P 500 Index Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks capital appreciation by matching the performance of a benchmark index that measures the investment returns of stocks of large U.S. companies. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available exclusively as a pooled funding vehicle for variable annuity contracts ("VA Contracts") and Variable Life Insurance Policies ("VLI Policies") offered by the separate accounts of certain life insurance companies ("Participating Insurance Companies"). The Participating Insurance Companies and their separate accounts own all the shares of the Fund. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION--Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded. Investments for which market quotations are not readily available, or have 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 general supervision of the Board of Trustees. 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. SECURITY TRANSACTIONS--Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. FUTURES CONTRACTS--The Fund may invest in municipal and U.S. Treasury futures contracts. The Fund will invest in these instruments to hedge against the effects of changes in the value of portfolio securities due to anticipated changes in interest rates and/or market conditions, for duration management, or when the transactions are economically appropriate to the reduction of risk inherent in the management of the Fund and not for trading purposes. The use of futures contracts involves certain risks, which include: (1) imperfect correlation between the price movement of the instruments and the underlying securities, (2) inability to close out positions due to differing trading hours, or the temporary absence of a liquid market, for either the instrument or the underlying securities, or (3) an inaccurate prediction by Columbia Management Advisors, Inc. of the future direction of interest rates. Any of these risks may involve amounts exceeding the variation margin recorded in the Fund's Statement of Assets and Liabilities at any given time. Upon entering into a futures contract, the Fund deposits cash or securities with the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin 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 99 <Page> 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. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2004 was as follows: <Table> <Caption> DECEMBER 31, 2004 ------------ Distributions paid from: Ordinary income $ 678,856 Long-term capital gains -- </Table> Unrealized appreciation and depreciation at June 30, 2005, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 10,905,269 Unrealized depreciation (5,151,627) ------------- Net unrealized appreciation $ 5,753,642 ============= </Table> The following capital loss carryforwards, determined as of December 31, 2004, 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> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE--Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and provides administrative and other services to the Fund. Columbia receives a monthly investment advisory fee at the annual rate of 0.20%. For the six months ended June 30, 2005, the Fund's annualized effective investment advisory fee rate was 0.20%. 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> Effective August 22, 2005, SSgA will no longer sub-advise the Fund. Columbia will run the Fund's day to day business including placing orders for the purchase and sales of the Fund's portfolio securities. 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 100 <Page> of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2005, the annualized effective pricing and bookkeeping fee rate for the Fund, inclusive of out-of-pocket expenses, was 0.085%. 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 six months ended June 30, 2005, the Fund's annualized effective transfer agent fee rate was 0.01%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia and the Distributor have voluntarily agreed to waive fees and reimburse the Fund for certain expenses so that total expenses (exclusive of brokerage commissions, interest, taxes and extraordinary expenses, if any) will 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. 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 for the Office of the Chief Compliance Officer 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 six months ended June 30, 2005, the Fund paid $777 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $1,515,622 and $2,853,987, 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 Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as 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 101 <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 funds 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. At this time, the distribution plan is still under development. As such, any gain to the Fund or its shareholders can not currently be determined. 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 is 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 events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has conditionally ordered its transfer to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, can not currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds 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. In 2004, certain Columbia funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Fund 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 Fund. For the six months ended June 30, 2005, Columbia has assumed $653 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 102 <Page> FINANCIAL HIGHLIGHTS Liberty S&P 500 Index Fund, Variable Series--Class B Shares Selected data for a share outstanding throughout each period is as follows: <Table> <Caption> (UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED DECEMBER 31, ENDED JUNE 30, -------------------------------------------------- DECEMBER 31, 2005 2004 2003 2002 2001 2000 (a) ------------ -------- -------- -------- -------- ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 10.43 $ 9.59 $ 7.57 $ 9.89 $ 11.31 $ 12.00 ------------ -------- -------- -------- -------- ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.06 0.13(c) 0.09 0.08 0.07 0.07 Net realized and unrealized gain (loss) on investments and futures contracts (0.18) 0.84 2.01 (2.33) (1.43) (0.70) ------------ -------- -------- -------- -------- ------------ Total from Investment Operations (0.12) 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 $ 10.31 $ 10.43 $ 9.59 $ 7.57 $ 9.89 $ 11.31 ============ ======== ======== ======== ======== ============ Total return (d)(e) (1.15)%(f) 10.12%(g) 27.68%(g) (22.75)%(g) (12.07)%(g) (5.29)%(f)(g) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (h) 0.65%(i) 0.75% 0.75% 0.75% 0.75% 0.75%(i) Net investment income (h) 1.20%(i) 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 3%(f) 6% 3% 17% 7% 2%(f) Net assets, end of period (000's) $ 53,095 $ 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. The effect of this dividend amounted to $0.03 per share. (d) Total return at net asset value assuming all distributions reinvested. (e) Total return figure does not include any insurance company charges associated with a variable annuity. If included, total return would be reduced. (f) Not annualized. (g) Had the Investment Advisor and/or Distributor not waived or reimbursed a portion of expenses, total return would have been reduced. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. 103 <Page> PORTFOLIO MANAGERS' DISCUSSION Liberty Select Value Fund, Variable Series / June 30, 2005 Liberty Select Value Fund, Variable Series seeks long-term growth. Diane L. Sobin, the lead manager, along with David I. Hoffman, Lori J. Ensinger and Noah J. Petrucci co-manage the fund. Ms. Sobin, Mr. Hoffman and Ms. Ensinger have been with Columbia Management Advisors, Inc. or its predecessors or affiliate organizations since 2001. Mr. Petrucci has been affiliated with the advisor or its affiliates since 2002. Mid-cap value stocks were among the best-performing asset classes during the six-month period ended June 30, 2005. The fund's investments in energy, health care and utility stocks drove performance during the period. However, a lack of exposure to refiners in the energy sector detracted from performance relative to the fund's benchmark. The fund's position in stocks that are sensitive to economic activity, including industrial and materials stocks, also detracted from performance. Investor concerns that the economy was slowing translated into weak performance for both sectors. However, we remain confident in the global economy's potential to expand and the fund remains overweight in industrial and materials stocks relative to the index. POSITIVE RETURNS FROM ENERGY, UTILITIES, HEALTH CARE AND CONSUMER POSITIONS As the price of oil climbed above $60 during the period, energy stocks rose strongly. The fund's positions in XTO Energy (1.2% of net assets), a US-based natural gas company, and Amerada Hess (1.2% of net assets), an integrated oil company, were the fund's strongest performers. The defensive utilities sector, with its rising cash flow and excellent dividend growth during the period, was another stand-out and we added to the fund's utility positions. Constellation Energy Group (1.6% of net assets), advanced on the strength of its exposure to rising power prices. Exelon (1.4% of net assets), a nuclear power generator, also benefited from rising power prices as the company's cost structure was lower than competitive gas and coal electric generators and its share price reflected this advantage. Within health care, HCA (0.9% of net assets), a national hospital company, made a solid contribution to the fund's performance. The fund's position in Federated Department Stores ("Federated") (1.2% of net assets) also did well. Despite higher gasoline prices, which took a bite out of consumer pocketbooks, spending remained strong and Federated enjoyed sales growth that beat expectations. CYCLICAL INDUSTRIES TOOK A BREATHER The fund's exposure to cyclical companies detracted from performance as investors move away from sectors that rely on economic growth for their earnings. Georgia-Pacific (0.9% of net assets), a leading manufacturer of paper and building products, was hurt by rising energy prices, which increased the company's operating costs and lowered near term earnings prospects. In the industrial sector, industrial equipment manufacturers Parker Hannifin and Ingersoll-Rand (0.8% and 0.9% of net assets, respectively) reported weaker order trends for the first half of 2005, and both stocks lost some ground. We reduced the fund's exposure to industrials and to consumer cyclicals. However, the fund remains overweight in industrials relative to the index because we believe that they have the potential to do well if the global economy continues to expand. LOOKING AHEAD We believe that the fund is well positioned to take advantage of the opportunities in mid-cap stocks. We plan to continue to focus on attractively-valued companies that offer earnings growth potential through sales growth and profit margin expansion. In addition, we plan to seek companies that produce rising returns on capital and that return a portion of earnings to shareholders in the form of dividend payments. Companies that repurchase their own shares are also attractive candidates for the portfolio. Economic and market conditions frequently change. There is no assurance that the trends described here will continue. The opinions expressed here are strictly those of Columbia Management and are subject to change without notice. Other divisions of Bank of America and/or affiliates of Columbia Management may have opinions that are inconsistent with these opinions. Equity investments are affected by stock market fluctuations that occur in response to economic and business developments. Investing in mid-cap stocks may present special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Value stocks are stocks 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 and, in the advisor's opinion, undervalued. If the advisor's assessment of a company's prospects is wrong, the price of the company's stock may fall or may not approach the value the advisor has placed on it. Holdings are disclosed as of June 30, 2005, and are subject to change. 104 <Page> PERFORMANCE INFORMATION Liberty Select Value Fund, Variable Series / June 30, 2005 AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30, 2005 (%) <Table> <Caption> (CUMULATIVE) 6-MONTH 1-YEAR 5-YEAR LIFE - -------------------------------------------------------------------------------------- Class B (05/30/00) 3.46 10.76 9.10 9.08 Russell Midcap Value Index(1) 5.51 21.80 14.86 14.14 </Table> Inception date of share class is in parenthesis. <Table> <Caption> NET ASSET VALUE PER SHARE ($) 12/31/04 06/30/05 - ------------------------------------------------------------------------- Class B 17.64 18.25 </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. [CHART] VALUE OF A $10,000 INVESTMENT, 05/30/00 - 06/30/05 <Table> <Caption> RUSSELL MIDCAP CLASS B SHARES 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 1/31/2005 $ 14,758 $ 18,145 2/28/2005 $ 15,286 $ 18,778 3/31/2005 $ 15,175 $ 18,722 4/30/2005 $ 14,637 $ 18,227 5/31/2005 $ 15,123 $ 18,980 6/30/2005 $ 15,559 $ 19,602 </Table> The graph compares the results of a hypothetical $10,000 investment in the fund with the index. The Index is unmanaged and returns for the index and the fund include reinvested dividends and capital gains. It is not possible to invest directly in an index. Investment earnings, if any, are income tax-deferred until distribution, at which time taxes will become due. 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. 105 <Page> UNDERSTANDING YOUR EXPENSES Liberty Select Value Fund, Variable Series / June 30, 2005 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 ongoing 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 ongoing 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 $8,600.00 at the end of the period, the result would be 8.6 2. In the section of the table below titled "Expenses paid during the period," locate the amount in the column labeled "actual." Multiply this number by the result from step 1. Your answer is an estimate of the expenses you paid on your account during the period <Table> <Caption> ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID FUND'S ANNUALIZED 01/01/05 - 06/30/05 BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($) EXPENSE RATIO (%) - ---------------------------------------------------------------------------------------------------------------------------- ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL ACTUAL HYPOTHETICAL - ---------------------------------------------------------------------------------------------------------------------------- Class B 1,000.00 1,000.00 1,034.61 1,019.34 5.55 5.51 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 365. 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 funds 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. 106 <Page> INVESTMENT PORTFOLIO Liberty Select Value Fund, Variable Series / June 30, 2005 (Unaudited) <Table> <Caption> SHARES VALUE -------------- -------------- COMMON STOCKS--97.9% CONSUMER DISCRETIONARY--9.4% AUTO COMPONENTS--1.3% BorgWarner, Inc. 4,200 $ 225,414 Johnson Controls, Inc. 5,700 321,081 -------------- 546,495 -------------- HOTELS, RESTAURANTS & LEISURE--1.9% Brinker International, Inc. (a) 8,300 332,415 Harrah's Entertainment, Inc. 5,500 396,385 Outback Steakhouse, Inc. 2,400 108,576 -------------- 837,376 -------------- MEDIA--0.7% Dow Jones & Co., Inc. 1,819 64,483 Knight-Ridder, Inc. 2,279 139,794 New York Times Co., Class A 2,864 89,214 -------------- 293,491 -------------- MULTILINE RETAIL--3.4% Dollar General Corp. 14,500 295,220 Federated Department Stores, Inc. 6,800 498,304 J.C. Penney Co., Inc. 6,200 325,996 May Department Stores Co. 8,200 329,312 -------------- 1,448,832 -------------- SPECIALTY RETAIL--1.6% OfficeMax, Inc. 8,500 253,045 TJX Companies, Inc. 17,200 418,820 -------------- 671,865 -------------- TEXTILES, APPAREL & LUXURY GOODS--0.5% Reebok International Ltd. 4,900 204,967 -------------- CONSUMER STAPLES--5.0% BEVERAGES--0.8% Pepsi Bottling Group, Inc. 12,000 343,320 -------------- FOOD & STAPLES RETAILING--1.5% Kroger Co. (a) 17,300 329,219 SUPERVALU, Inc. 9,800 319,578 -------------- 648,797 -------------- FOOD PRODUCTS--1.7% Dean Foods Co. (a) 12,200 429,928 TreeHouse Foods, Inc. (a) 2,440 69,565 Tyson Foods, Inc., Class A 12,300 218,940 -------------- 718,433 -------------- TOBACCO--1.0% UST, Inc. 8,900 406,374 -------------- ENERGY--9.4% ENERGY EQUIPMENT & SERVICES--4.5% BJ Services Co. 4,800 251,904 National-Oilwell Varco, Inc. (a) 6,300 299,502 Noble Corp. 6,700 412,117 Technip SA, ADR 6,000 279,600 Transocean, Inc. (a) 7,650 412,871 Weatherford International Ltd. (a) 4,400 255,112 -------------- 1,911,106 -------------- OIL, GAS & CONSUMABLE FUELS--4.9% Amerada Hess Corp. 4,900 $ 521,899 Ashland, Inc. 5,000 359,350 EOG Resources, Inc. 3,800 215,840 Murphy Oil Corp. 2,400 125,352 Williams Companies, Inc. 18,400 349,600 XTO Energy, Inc. 14,788 502,644 -------------- 2,074,685 -------------- FINANCIALS--24.4% CAPITAL MARKETS--2.4% Bear Stearns Companies, Inc. 4,200 436,548 Janus Capital Group, Inc. 25,800 388,032 Lehman Brothers Holdings, Inc. 2,200 218,416 -------------- 1,042,996 -------------- COMMERCIAL BANKS--5.2% City National Corp. 4,500 322,695 Cullen/Frost Bankers, Inc. 7,200 343,080 Marshall & Ilsley Corp. 10,700 475,615 North Fork Bancorporation, Inc. 11,639 326,939 TD Banknorth, Inc. 6,272 186,906 UnionBanCal Corp. 4,900 327,908 Zions Bancorporation 2,900 213,237 -------------- 2,196,380 -------------- DIVERSIFIED FINANCIAL SERVICES--0.8% CIT Group, Inc. 8,200 352,354 -------------- INSURANCE--7.7% Ace Ltd. 6,700 300,495 Ambac Financial Group, Inc. 6,450 449,952 Cincinnati Financial Corp. 5,843 231,149 Endurance Specialty Holdings Ltd. 9,400 355,508 Genworth Financial, Inc., Class A 7,900 238,817 Hartford Financial Services Group, Inc. 4,800 358,944 Lincoln National Corp. 6,800 319,056 Loews Corp. 5,500 426,250 Nationwide Financial Services, Inc., Class A 7,400 280,756 Old Republic International Corp. 12,800 323,712 -------------- 3,284,639 -------------- REAL ESTATE--3.5% Archstone-Smith Trust, REIT 6,100 235,582 Boston Properties, Inc., REIT 3,100 217,000 Equity Office Properties Trust, REIT 10,600 350,860 Host Marriott Corp., REIT 27,200 476,000 ProLogis Trust, REIT 4,954 199,349 -------------- 1,478,791 -------------- THRIFTS & MORTGAGE FINANCE--4.8% Golden West Financial Corp. 10,000 643,800 PMI Group, Inc. 11,400 444,372 Sovereign Bancorp, Inc. 23,700 529,458 Webster Financial Corp. 9,100 424,879 -------------- 2,042,509 -------------- </Table> See Accompanying Notes to Financial Statements. 107 <Page> <Table> <Caption> SHARES VALUE -------------- -------------- HEALTH CARE--5.9% HEALTH CARE EQUIPMENT & SUPPLIES--1.5% Millipore Corp. (a) 6,900 $ 391,437 Varian, Inc. (a) 6,700 253,193 -------------- 644,630 -------------- HEALTH CARE PROVIDERS & SERVICES--3.4% CIGNA Corp. 3,000 321,090 Community Health Systems, Inc. (a) 7,100 268,309 HCA, Inc. 6,800 385,356 Medco Health Solutions, Inc. (a) 4,100 218,776 WellPoint, Inc. (a) 3,400 236,776 -------------- 1,430,307 -------------- PHARMACEUTICALS--1.0% IVAX Corp. (a) 11,000 236,500 Shire Pharmaceuticals Group PLC, ADR 6,500 213,200 -------------- 449,700 -------------- INDUSTRIALS--12.6% AEROSPACE & DEFENSE--1.7% Goodrich Corp. 10,000 409,600 Northrop Grumman Corp. 6,000 331,500 -------------- 741,100 -------------- BUILDING PRODUCTS--0.7% American Standard Companies, Inc. 7,100 297,632 -------------- COMMERCIAL SERVICES & SUPPLIES--2.4% Avery Dennison Corp. 5,300 280,688 Brink's Co. 1,711 61,596 Manpower, Inc. 5,000 198,900 Pitney Bowes, Inc. 4,900 213,395 Waste Management, Inc. 10,500 297,570 -------------- 1,052,149 -------------- CONSTRUCTION & ENGINEERING--0.7% Fluor Corp. 3,800 218,842 Jacobs Engineering Group, Inc. (a) 1,285 72,294 -------------- 291,136 -------------- ELECTRICAL EQUIPMENT--1.2% AMETEK, Inc. 8,000 334,800 Hubbell, Inc., Class B 3,900 171,990 -------------- 506,790 -------------- MACHINERY--3.7% AGCO Corp. (a) 11,400 217,968 Dover Corp. 5,800 211,004 Eaton Corp. 3,500 209,650 Ingersoll-Rand Co., Class A 5,200 371,020 Kennametal, Inc. 5,300 243,005 Parker Hannifin Corp. 5,200 322,452 -------------- 1,575,099 -------------- ROAD & RAIL--1.7% Burlington Northern Santa Fe Corp. 7,900 371,932 Norfolk Southern Corp. 11,000 340,560 -------------- 712,492 -------------- TRADING COMPANIES & DISTRIBUTORS--0.5% United Rentals, Inc. (a) 10,300 $ 208,163 -------------- INFORMATION TECHNOLOGY--8.0% COMMUNICATIONS EQUIPMENT--1.0% Andrew Corp. (a) 31,900 407,044 -------------- COMPUTERS & PERIPHERALS--0.3% ATI Technologies, Inc. (a) 10,800 127,980 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--5.4% Agilent Technologies, Inc. (a) 9,100 209,482 Amphenol Corp., Class A 9,900 397,683 Arrow Electronics, Inc. (a) 13,200 358,512 AVX Corp. 13,600 164,832 Flextronics International Ltd. (a) 16,100 212,681 Ingram Micro, Inc., Class A (a) 8,100 126,846 Littelfuse, Inc. (a) 10,000 278,500 Mettler-Toledo International, Inc. (a) 7,000 326,060 Tektronix, Inc. 9,500 221,065 -------------- 2,295,661 -------------- IT SERVICES--0.5% Affiliated Computer Services, Inc., Class A (a) 4,300 219,730 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.1% MEMC Electronic Materials, Inc. (a) 2,700 42,579 -------------- SOFTWARE--0.7% Activision, Inc. (a) 6,300 104,076 Cadence Design Systems, Inc. (a) 7,500 102,450 Electronic Arts, Inc. (a) 2,000 113,220 -------------- 319,746 -------------- MATERIALS--10.4% CHEMICALS--6.5% Agrium, Inc. 15,400 301,994 Air Products & Chemicals, Inc. 6,800 410,040 Celanese Corp., Series A (a) 11,300 179,557 Eastman Chemical Co. 3,600 198,540 Engelhard Corp. 7,300 208,415 Lubrizol Corp. 9,100 382,291 Nalco Holding Co. (a) 14,600 286,598 PPG Industries, Inc. 6,100 382,836 Rohm and Haas Co. 8,800 407,792 -------------- 2,758,063 -------------- CONSTRUCTION MATERIALS--0.9% Martin Marietta Materials, Inc. 5,800 400,896 -------------- CONTAINERS & PACKAGING--1.1% Bemis Co., Inc. 9,600 254,784 Crown Holdings, Inc. (a) 13,800 196,374 -------------- 451,158 -------------- METALS & MINING--0.5% Freeport-McMoRan Copper & Gold, Inc., Class B 5,600 209,664 -------------- </Table> See Accompanying Notes to Financial Statements. 108 <Page> <Table> <Caption> SHARES VALUE -------------- -------------- PAPER & FOREST PRODUCTS--1.4% Georgia-Pacific Corp. 12,400 $ 394,320 MeadWestvaco Corp. 7,534 211,253 -------------- 605,573 -------------- TELECOMMUNICATION SERVICES--1.6% WIRELESS TELECOMMUNICATION SERVICES--1.6% Telephone & Data Systems, Inc.-- Special Shares 8,500 325,890 Telephone & Data Systems, Inc. 8,500 346,885 -------------- 672,775 -------------- UTILITIES--11.2% ELECTRIC UTILITIES--7.2% Edison International 10,500 425,775 Entergy Corp. 9,000 679,950 Exelon Corp. 11,800 605,694 FPL Group, Inc. 5,300 222,918 PG&E Corp. 15,300 574,362 PPL Corp. (a) 5,700 338,466 Reliant Energy, Inc. (a) 17,500 216,650 -------------- 3,063,815 -------------- GAS UTILITIES--0.5% AGL Resources, Inc. 5,900 228,035 -------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS--2.2% AES Corp. (a) 14,400 235,872 Constellation Energy Group 12,100 698,049 -------------- 933,921 -------------- MULTI-UTILITIES--1.3% Energy East Corp. 11,300 327,474 Sempra Energy 5,400 223,074 -------------- 550,548 -------------- TOTAL COMMON STOCKS (cost of $33,335,820) 41,699,796 -------------- <Caption> PAR -------------- CONVERTIBLE BOND--0.4% COMMUNICATIONS--0.4% TELECOMMUNICATIONS--0.4% Lucent Technologies, Inc., Series B 2.750% 06/15/25 $ 153,600 177,552 -------------- TOTAL CONVERTIBLE BOND (cost of $175,599) 177,552 -------------- <Caption> SHARES VALUE -------------- -------------- CONVERTIBLE PREFERRED STOCK--0.1% BASIC MATERIALS--0.1% CHEMICALS--0.1% Celanese Corp. 1,600 $ 39,200 -------------- TOTAL CONVERTIBLE PREFERRED STOCK (cost of $40,000) 39,200 -------------- <Caption> PAR -------------- SHORT-TERM OBLIGATION--1.8% Repurchase agreement with State Street Bank & Trust Co., dated 06/30/05, due 07/01/05 at 2.700%, collateralized by a U.S. Treasury Bond maturing 05/15/17, market value of $778,950 (repurchase proceeds $757,057) $ 757,000 757,000 -------------- TOTAL SHORT-TERM OBLIGATION (cost of $757,000) 757,000 -------------- TOTAL INVESTMENTS--100.2% (cost of $34,308,419) (b) 42,673,548 -------------- OTHER ASSETS & LIABILITIES, NET--(0.2)% (90,506) -------------- NET ASSETS--100.0% $ 42,583,042 ============== </Table> NOTES TO INVESTMENT PORTFOLIO: (a) Non-income producing security. (b) Cost for federal income tax purposes is $34,309,259. At June 30,2004, the Fund held investments in the following sectors: <Table> <Caption> SECTOR % OF NET ASSETS - ------ --------------- Financials 24.4% Industrials 12.6 Utilities 11.2 Materials 10.5 Consumer Discretionary 9.4 Energy 9.4 Information Technology 8.0 Health Care 5.9 Consumer Staples 5.0 Telecommunication Services 2.0 Short-Term Obligation 1.8 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. 109 <Page> STATEMENT OF ASSETS & LIABILITIES Liberty Select Value Fund, Variable Series / June 30, 2005 (Unaudited) <Table> ASSETS: Investments, at cost $ 34,308,419 -------------- Investments, at value $ 42,673,548 Cash 176,297 Receivable for: Investments sold 760,266 Fund shares sold 139 Interest 245 Dividends 49,121 Foreign tax reclaim 21 Expense reimbursement due from Distributor 1,805 Deferred Trustees' compensation plan 3,648 -------------- TOTAL ASSETS 43,665,090 -------------- LIABILITIES: Payable for: Investments purchased 937,834 Fund shares repurchased 97,752 Investment advisory fee 23,950 Transfer agent fee 748 Pricing and bookkeeping fees 1,027 Trustees' fees 544 Audit fee 7,276 Distribution fee--Class B 8,536 Deferred Trustees' fees 3,648 Other liabilities 733 -------------- TOTAL LIABILITIES 1,082,048 -------------- NET ASSETS $ 42,583,042 ============== COMPOSITION OF NET ASSETS: Paid-in capital $ 30,298,891 Undistributed net investment income 96,392 Accumulated net realized gain 3,822,610 Net unrealized appreciation on: Investments 8,365,129 Foreign currency translations 20 -------------- NET ASSETS $ 42,583,042 ============== CLASS A: Net assets $ 1,821,952 Shares outstanding 99,582 ============== Net asset value per share $ 18.30 ============== CLASS B: Net assets $ 40,761,090 Shares outstanding 2,233,479 ============== Net asset value per share $ 18.25 ============== </Table> See Accompanying Notes to Financial Statements. 110 <Page> STATEMENT OF OPERATIONS Liberty Select Value Fund, Variable Series For the Six Months Ended June 30, 2005 (Unaudited) <Table> INVESTMENT INCOME: Dividends $ 315,982 Interest 11,352 -------------- Total Investment Income (net of foreign taxes withheld of $963) 327,334 -------------- EXPENSES: Investment advisory fee 146,564 Distribution fee--Class B 50,267 Transfer agent fee 3,873 Pricing and bookkeeping fees 5,840 Trustees' fees 3,721 Custody fee 3,725 Non-recurring costs (See Note 6) 517 Other expenses 18,332 -------------- Total Expenses 232,839 Fees reimbursed by the Distributor--Class B (3,889) Non-recurring costs assumed by Investment Advisor (See Note 6) (517) Custody earnings credit (132) -------------- Net Expenses 228,301 -------------- Net Investment Income 99,033 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments 3,899,984 Foreign currency transactions (37) -------------- Net realized gain 3,899,947 -------------- Net change in unrealized appreciation (depreciation) on: Investments (2,559,900) Foreign currency translations 20 -------------- Net change in unrealized appreciation (depreciation) (2,559,880) -------------- Net Gain 1,340,067 -------------- Net Increase in Net Assets from Operations $ 1,439,100 ============== </Table> See Accompanying Notes to Financial Statements. 111 <Page> STATEMENT OF CHANGES IN NET ASSETS Liberty Select Value Fund, Variable Series <Table> <Caption> (UNAUDITED) SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: 2005 2004 - ---------------------------------- ------------ ------------ OPERATIONS: Net investment income $ 99,033 $ 93,250 Net realized gain on investments 3,899,947 895,509 Net change in unrealized appreciation (depreciation) on investments (2,559,880) 4,793,118 ------------ ------------ Net Increase from Operations 1,439,100 5,781,877 ------------ ------------ DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A -- (7,134) Class B -- (107,354) From net realized gains: Class A -- (7,660) Class B -- (196,158) ------------ ------------ Total Distributions Declared to Shareholders -- (318,306) ------------ ------------ SHARE TRANSACTIONS: Class A: Subscriptions 253,098 321,105 Distributions reinvested -- 14,794 Redemptions (102,282) (337,200) ------------ ------------ Net Increase (Decrease) 150,816 (1,301) ------------ ------------ Class B: Subscriptions 1,201,984 3,272,086 Distributions reinvested -- 303,512 Redemptions (2,945,670) (4,501,454) ------------ ------------ Net Decrease (1,743,686) (925,856) ------------ ------------ Net Decrease from Share Transactions (1,592,870) (927,157) ------------ ------------ Total Increase (Decrease) in Net Assets (153,770) 4,536,414 NET ASSETS: Beginning of period 42,736,812 38,200,398 ------------ ------------ End of period (including undistributed (overdistributed) net investment income of $96,392 and $(2,641), respectively) $ 42,583,042 $ 42,736,812 ============ ============ CHANGES IN SHARES: Class A: Subscriptions 14,063 19,659 Issued for distributions reinvested -- 837 Redemptions (5,754) (21,172) ------------ ------------ Net Increase (Decrease) 8,309 (676) ------------ ------------ Class B: Subscriptions 68,225 203,481 Issued for distributions reinvested -- 17,196 Redemptions (166,443) (276,030) ------------ ------------ Net Decrease (98,218) (55,353) ------------ ------------ </Table> See Accompanying Notes to Financial Statements. 112 <Page> NOTES TO FINANCIAL STATEMENTS Liberty Select Value Fund, Variable Series / June 30, 2005 (Unaudited) NOTE 1. ORGANIZATION Liberty Select Value Fund, Variable Series (the "Fund"), a series of Liberty Variable Investment Trust (the "Trust") is a diversified portfolio. The Trust is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. INVESTMENT GOAL--The Fund seeks long-term growth. FUND SHARES--The Fund may issue an unlimited number of shares and offers two classes of shares: Class A and Class B. Each share class has its own expense structure. Shares of the Fund are available exclusively as a pooled funding vehicle for variable annuity contracts ("VA Contracts") and Variable Life Insurance Policies ("VLI Policies") offered by the separate accounts of certain life insurance companies ("Participating Insurance Companies"). The Participating Insurance Companies and their separate accounts own all the shares of the Fund. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION--Equity securities are valued at the last sale price on the principal exchange on which they trade, except for securities traded on the NASDAQ, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. Investments for which market quotations are not readily available, or have 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. 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. 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. 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 113 <Page> net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders are recorded on ex-date. Dividends from net investment income, if any, are declared and distributed at least annually. Net realized capital gains, if any, are distributed at least annually. All dividends and distributions are reinvested in additional shares of the Fund at net asset value as of the record date of the distribution. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended December 31, 2004 was as follows: <Table> <Caption> DECEMBER 31, 2004 ------------ Distributions paid from: Ordinary income $ 119,464 Long-term capital gains 198,842 </Table> Unrealized appreciation and depreciation at June 30, 2005, based on cost of investments for federal income tax purposes was: <Table> Unrealized appreciation $ 9,176,291 Unrealized depreciation (812,002) ----------- Net unrealized appreciation $ 8,364,289 =========== </Table> NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE--Columbia Management Advisors, Inc. ("Columbia"), an indirect wholly owned subsidiary of Bank of America Corporation ("BOA"), is the investment advisor to the Fund and provides administrative and other services to the Fund. Columbia receives a monthly investment advisory 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 $500 million 0.70% $500 million to $1 billion 0.65% Over $1 billion 0.60% </Table> For the six months ended June 30, 2005, the Fund's annualized effective investment advisory fee rate was 0.70%. PRICING AND BOOKKEEPING FEES--Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). As a result, Columbia pays the total fees received to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services based on the number of securities held by the Fund. For the six months ended June 30, 2005, the annualized 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 six months ended June 30, 2005, the Fund's annualized effective transfer agent fee rate was 0.02%. DISTRIBUTION FEES--Columbia Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the principal underwriter of the Fund. The Fund has adopted a 12b-1 plan which requires the payment of a monthly distribution fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class B shares. FEE WAIVERS--Columbia and the Distributor have voluntarily agreed to waive fees and reimburse the Fund for certain expenses so that total expenses (exclusive of brokerage commissions, interest, taxes and extraordinary expenses, if any) will 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. 114 <Page> 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. 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 for the Office of the Chief Compliance Officer 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 six months ended June 30, 2005, the Fund paid $771 to Columbia for such services. This amount is included in "Other expenses" on the Statement of Operations. NOTE 5. PURCHASES AND SALES OF SECURITIES For the six months ended June 30, 2005, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $14,883,152 and $16,420,592, 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 Securities and Exchange Commission ("SEC") (the "SEC Order"). The SEC Order and the NYAG Settlement are referred to collectively as 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 funds 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. At this time, the distribution plan is still under development. As such, any gain to the Fund or its shareholders can not currently be determined. 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 is 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 events described in detail above, various parties have filed suit against certain funds, the Trustees of the Columbia Funds, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities. More than 300 cases including those filed against entities unaffiliated with the funds, their Boards, FleetBoston Financial Corporation and its affiliated entities and/or Bank of America Corporation and its affiliated entities have been transferred to the Federal District Court in Maryland and consolidated in a multi-district proceeding (the "MDL"). The derivative cases purportedly brought on behalf of the Columbia Funds in the MDL have been consolidated under the lead case. The fund derivative plaintiffs allege that the funds were harmed by market timing and late trading activity and seek, among other things, removal of the trustees of the Columbia Funds, removal of the Columbia Group, disgorgement of all management fees and monetary damages. 115 <Page> On March 21, 2005 purported class action plaintiffs filed suit in Massachusetts state court alleging that the conduct, including market timing, entitles Class B shareholders in certain Columbia funds to an exemption from contingent deferred sales charges upon early redemption (the "CDSC Lawsuit"). The CDSC Lawsuit has been removed to federal court in Massachusetts and the federal Judicial Panel has conditionally ordered its transfer to the MDL. The MDL is ongoing. Accordingly, an estimate of the financial impact of this litigation on any fund, if any, can not currently be made. On January 11, 2005, a putative class action lawsuit was filed in federal district court in Massachusetts against, among others, the Trustees of the Columbia Funds 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. In 2004, certain Columbia funds, advisers and affiliated entities were named as defendants in certain purported shareholder class and derivative actions making claims, including claims under the Investment Company and the Investment Advisers Acts of 1940 and state law. The suits allege, inter alia, that the fees and expenses paid by the funds are excessive and that the advisers and their affiliates inappropriately used fund assets to distribute the funds and for other improper purpose. On March 2, 2005, the actions were consolidated in the Massachusetts federal court as IN RE COLUMBIA ENTITIES LITIGATION. The plaintiffs filed a consolidated amended complaint on June 9, 2005. The Fund 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 Fund. For the six months ended June 30, 2005, Columbia has assumed $517 of legal, consulting services and Trustees' fees incurred by the Fund in connection with these matters. 116 <Page> FINANCIAL HIGHLIGHTS Liberty Select Value Fund, Variable Series--Class B Shares Selected data for a share outstanding throughout each period is as follows: <Table> <Caption> (UNAUDITED) SIX MONTHS PERIOD ENDED YEAR ENDED DECEMBER 31, ENDED JUNE 30, ----------------------------------------------- DECEMBER 31, 2005 2004 2003 2002 2001 2000 (a) ----------- -------- -------- -------- -------- ------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 17.64 $ 15.41 $ 12.11 $ 13.65 $ 13.24 $ 12.00 ----------- -------- -------- -------- -------- ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.04 0.04 0.03 0.01 0.05 0.09 Net realized and unrealized gain (loss) on investments 0.57 2.32 3.29 (1.54) 0.41 1.28 ----------- -------- -------- -------- -------- ------------ Total from Investment Operations 0.61 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 $ 18.25 $ 17.64 $ 15.41 $ 12.11 $ 13.65 $ 13.24 =========== ======== ======== ======== ======== ============ Total return (d)(e)(f) 3.46%(g) 15.32% 27.44% (11.21)% 3.47% 11.38%(g) RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA: Expenses (h) 1.10%(i) 1.10% 1.10% 1.10% 1.10% 1.10%(i) Net investment income (h) 0.47%(i) 0.23% 0.20% 0.09% 0.34% 1.13%(i) Waiver/reimbursement 0.02%(i) 0.01% 0.10% 0.08% 0.73% 1.56%(i) Portfolio turnover rate 36%(g) 17% 12% 21% 15% 26%(g) Net assets, end of period (000's) $ 40,761 $ 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. 117 <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. 118 <Page> ITEM 2. CODE OF ETHICS. Not applicable at this time. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable at this time. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS 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. 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. <Page> 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: Not applicable at this time. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. <Page> SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Liberty Variable Investment Trust --------------------------------------------------------------- By (Signature and Title) /S/ Christopher L. Wilson --------------------------------------------------- Christopher L. Wilson, President Date August 29, 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 August 29, 2005 ----------------------------------------------------------------------- By (Signature and Title) /S/ J. Kevin Connaughton --------------------------------------------------- J. Kevin Connaughton, Treasurer Date August 29, 2005 -----------------------------------------------------------------------