KEYPORT VARIABLE INVESTMENT TRUST, 497, 1998-05-01

KEYPORT VARIABLE INVESTMENT TRUST
497, 1998-05-01

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NEWPORT TIGER FUND, VARIABLE SERIES
a series of
Liberty Variable Investment Trust
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210

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Newport Tiger Fund, Variable Series ("Fund") is a series of Liberty Variable
Investment Trust ("Trust"), an open-end management investment company. The Fund
seeks long-term capital growth by investing primarily in equity securities of
companies located in the nine Tigers of Asia (Hong Kong, Singapore,
South Korea, Taiwan, Malaysia, Thailand, Indonesia, China and the Philippines).

There is no assurance that the objective of the Fund will be realized.

- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------

This Prospectus contains information about the Fund that a prospective investor
should know before applying for certain variable annuity contracts and variable
life insurance policies offered by separate accounts of insurance companies
investing in the Fund. Please read it carefully and retain it for future
reference.

Additional facts about the Fund are included in a Statement of Additional
Information dated May 1, 1998, incorporated herein by reference, which has been
filed with the Securities and Exchange Commission. For a free copy write to
Liberty Financial Investments, Inc. at One Financial Center, Boston,
Massachusetts 02111 or other broker-dealers offering the variable annuity
contracts and variable life insurance policies of Participating Insurance
Companies (as such term is defined in this Prospectus).

- --------------------------------------------------------------------------------

SHARES OF THE FUND ARE AVAILABLE AND ARE BEING MARKETED EXCLUSIVELY AS A POOLED
FUNDING VEHICLE FOR VARIABLE ANNUITY CONTRACTS ("VA CONTRACTS") AND VARIABLE
LIFE INSURANCE POLICIES ("VLI POLICIES") OF PARTICIPATING INSURANCE COMPANIES.

- --------------------------------------------------------------------------------

THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE APPROPRIATE
VA CONTRACTS OR VLI POLICIES OF THE APPLICABLE PARTICIPATING INSURANCE COMPANY.
BOTH PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.

- --------------------------------------------------------------------------------
The date of this Prospectus is May 1, 1998

<TABLE>
<S> <C>
NOT
May lose value
FDIC-
No bank guarantee
INSURED
</TABLE>

<PAGE>

TABLE OF CONTENTS

</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Return ...................................... 7
Net Asset Value ........................................ 7
Distributions .......................................... 7
Taxes .................................................. 7
Shareholder Communications ............................. 8
Organization, Meetings, and Voting Rights .............. 8
Additional Information ................................. 9
OTHER INVESTMENT PRACTICES, RISK
CONSIDERATIONS AND POLICIES OF THE FUND ................ 9
Foreign Securities ..................................... 9
Short-Term Trading ..................................... 10
Cash Reserves and Repurchase Agreements ................ 10
Leverage Risks Associated with Certain Investment
Techniques ......................................... 11
Certain Policies to Reduce Risk ........................ 11
CHANGES TO INVESTMENT OBJECTIVE AND
NON-FUNDAMENTAL POLICIES ............................. 11
</TABLE>

<PAGE>

THE FUND

The Fund is one of a series of separate portfolios of the Trust. The Trust is an
open-end management investment company currently consisting of nine series. The
Fund is a diversified Fund. The Trust issues shares of beneficial interest in
the Fund that represent interests in a separate portfolio of securities and
other assets. The Trust may add or delete series from time to time.

The Trust is a funding vehicle for variable annuity contracts ("VA contracts")
and variable life insurance policies ("VLI policies") offered by the separate
accounts of life insurance companies ("Participating Insurance Companies").
Certain Participating Insurance Companies are affiliated with the adviser to the
Fund ("Affiliated Participating Insurance Companies"). Shares of the Fund from
time to time may be sold to other unaffiliated Participating Insurance
Companies.

The Participating Insurance Companies and their separate accounts are the
shareholders or investors ("shareholders") of the Fund. Owners of VA contracts
and owners of VLI policies invest in sub-accounts of separate accounts of the
Participating Insurance Companies that, in turn, invest in the Fund.

The prospectuses of the separate accounts of the Participating Insurance
Companies describe which funds are available to the separate accounts offering
the VA contracts and VLI policies. The Fund assumes no responsibility for those
prospectuses. However, Liberty Advisory Services Corp. (formerly named "Keyport
Advisory Services Corp.") ("LASC") and the Board of Trustees of the Trust
("Board of Trustees") monitor events to identify any material conflicts that may
arise between the interests of the Participating Insurance Companies or between
the interests of owners of VA contracts and VLI policies. The Fund currently
does not foresee any disadvantages to the owners of VA contracts and VLI
policies arising from the fact that certain interests of the owners may differ.
The Statement of Additional Information contains additional information
regarding such differing interests and related risks.

LASC provides investment management and advisory services to the Fund pursuant
to its Management Agreement with the Fund.

Newport Fund Management, Inc. ("Newport") sub-advises the Fund pursuant to a
Sub-Advisory Agreement (the "Newport Sub-Advisory Agreement") with the Fund and
LASC.

LASC has delegated various administrative matters to Colonial Management
Associates, Inc. ("Colonial"). Colonial also provides transfer agency and
pricing and record keeping services to the Trust. Liberty Financial
Investments, Inc. ("LFII") serves as the principal underwriter of the Trust
with respect to sales of shares to Participating Insurance Companies which are
not affiliated with LASC.

LASC, Newport and LFII are wholly-owned indirect subsidiaries of Liberty
Financial Companies, Inc. ("LFC"). As of March 31, 1998, approximately 72.3% of
the combined voting power of LFC's issued and outstanding voting stock was held,
indirectly, by Liberty Mutual Insurance Company ("Liberty Mutual").
Liberty Life is a subsidiary of Liberty Mutual.

<PAGE>

FINANCIAL HIGHLIGHTS

The table below presents certain financial information for the Fund for the
period beginning with the Fund's commencement of operations May 1, 1995 and
ended December 31, 1997. The information through the fiscal year ended December
31, 1997 has been audited and reported on by the Fund's independent accountants,
Price Waterhouse LLP, whose report thereon appears in the Fund's annual report
to shareholders for the fiscal year ended December 31, 1997 (which may be
obtained without charge from LFII or from the Participating Insurance Company
issuing the applicable VA contract or VLI policy) and is incorporated by
reference into the Statement of Additional Information. The Fund's total return
presented below does not reflect the cost of insurance and other insurance
company separate account charges which vary with the VA contracts and VLI
policies offered through the separate accounts of Participating Insurance
Companies.

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997 1996 1995**
------------- ----------- -----------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ............................. $ 2.52 $ 2.28 $ 2.00
------- ------- -------
Net investment income (a) ........................................ 0.03 0.03 0.01
Net realized and unrealized gains (losses) on investments and
foreign currency transactions ................................... (0.81) 0.24 0.29
-------- ------- -------
Total from investment operations ................................. (0.78) 0.27 0.30
-------- ------- -------
Less distributions from:
Dividends from net investment income ............................ (0.02) (0.02) (0.01)
In excess of net investment income .............................. (0.01) -- (0.01)
Dividends from net realized gains on investments ................ -- (0.01) --
-------- ------- -------
Total distributions .............................................. (0.03) (0.03) (0.02)
-------- ------- -------
Net asset value, end of period ................................... $ 1.71 $ 2.52 $ 2.28
======== ======= =======
Total return:
Total investment return (b) ...................................... (31.14)% 11.73% 15.00%***
Ratios/supplemental data:
Net assets, end of period (000) .................................. $24,934 $34,642 $18,977
Ratio of net expenses to average net assets (c) .................. 1.25% 1.27% 1.75%*
Ratio of net investment income to average net assets (c) ......... 1.14% 1.20% 0.89%*
Portfolio turnover ratio ......................................... 27% 7% 12%***
Average commission rate (d) ...................................... $0.0083 $0.0172 --
</TABLE>

* Annualized
** For the period from the commencement of operations (May 1, 1995) to
December 31, 1995.
*** Not Annualized
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions
reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.

Further information about the performance of the Fund is contained in the Fund's
annual report to shareholders for the period ended December 31, 1997, which may
be obtained without charge from LFII or from the Participating Insurance Company
issuing the applicable VA contract or VLI policy.

<PAGE>

HOW THE FUND INVESTS

All investments, including mutual funds, have risks, and no one mutual fund is
suitable for all investors. No one Fund by itself constitutes a complete
investment program. The net asset value of the shares of the Fund will vary with
market conditions and there can be no guarantee that the Fund will achieve its
investment objective.

The Fund and its investment objective and policies are described below. Certain
additional investment policies and techniques of the Fund are described under
"OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUND"
below.

More information about the portfolio securities in which the Fund invests,
including certain risks and investment limitations, is provided in the Statement
of Additional Information.

Investment Objective. The Fund seeks long-term capital growth.

Investment Program. The Fund invests primarily in equity securities of companies
located in the nine Tigers of East Asia (Hong Kong, Singapore, South Korea,
Taiwan, Malaysia, Thailand, Indonesia, China and the Philippines). These nine
countries are referenced to herein as the "Tiger countries." Normally, the Fund
will seek to be fully invested in equity securities of larger, well established
companies located in the Tiger countries.

Equity securities in which the Fund invests include common and preferred stock,
warrants (rights) to purchase such stock, debt securities convertible into
stock, ADRs, Global Depositary Receipts (receipts issued by foreign banks or
trust companies) and shares of other investment companies that invest primarily
in the foregoing securities.

The Fund may invest up to 10% of its total assets in other investment companies
commonly referred to as "country funds." Such investments will involve the
payment of duplicative fees through the indirect payment of a portion of the
expenses, including advisory fees, of such other investment companies.

For a discussion of certain special risks and other considerations pertaining to
investments in foreign securities applicable to the Fund, see "OTHER INVESTMENT
PRACTICES, RISK CONSIDERATIONS, AND POLICIES OF THE FUND: Foreign Securities."
Such special risks are particularly relevant to investments in equity securities
issued by companies located in the Tiger countries.

Although the securities markets of the Tiger countries, especially China, have
grown and evolved rapidly over the last several years, political, legal,
economic and regulatory systems continue to lag behind those of more developed
countries. Accordingly, the risk that restrictions on repatriation of Fund
investments may be imposed unexpectedly or other limitations on the Fund's
ability to realize on its investments may be instituted are greater with respect
to investments in the Tiger countries.

Hong Kong. A substantial amount of the Fund's investments have been and may
continue to be in companies located in Hong Kong. Although Hong Kong has the
most developed securities markets of the Tiger countries, a substantial portion
of its economy is dependent on investments in or trade with China and other
less-developed Asian countries. Political and economic developments in those
countries could adversely impact the Fund's Hong Kong investments.

On July 1, 1997, sovereignty over Hong Kong was transferred from Great Britain
to China and Hong Kong became a Special Administrative Region of China. In
connection with this transfer, China has agreed to maintain for 50 years Hong
Kong's current economic and social systems, as well as most of the personal
freedoms currently enjoyed by Hong Kong residents. Nevertheless, it is
impossible to predict with certainty the ultimate effect Chinese sovereignty
will have on Hong Kong's business environment. Further, uncertainty surrounding
the transfer could hurt the value of the Fund's investments or make them more
volatile in the short-run.

FUND MANAGEMENT ORGANIZATIONS

The Trustees

The business of the Trust and the Fund is supervised by the Trust's Board of
Trustees. The Statement of Additional Informa-tion contains the names of and
biographical information on the Trustees.

The Manager: Liberty Advisory Services Corp. (LASC)

LASC, 125 High Street, Boston Massachusetts 02110, is the manager of the Trust.
LASC was incorporated on January 8, 1993 under the laws of the Commonwealth of
Massachusetts.

<PAGE>

Fund by others. In accordance with its Management Agreement with the Fund, LASC
may, at its own expense, delegate the performance of certain of its
administrative responsibilities to its affiliate LFC, or any of LFC's
majority-owned subsidiaries. LASC has delegated its administrative
responsibilities to Colonial in accordance with this authority. LASC, or its
affiliates, pay all compensation of the Fund's directors and officers who are
employees of LASC or its affiliates.

The Trust may add funds that utilize the investment advisory services of more
than one portfolio adviser, whereby each portfolio adviser is responsible for
specified portions of the Funds' investments. LASC will be responsible for the
selection and supervision of such advisers and the allocation of the portions of
the assets among such advisers.

The Trust pays LASC a management fee, accrued daily and paid monthly, at a
maximum annual rate of 0.90% of the average daily net assets of the Fund.

LASC's Sub-Adviser

Newport is the Sub-Adviser of the Fund. Newport, whose principal address is 580
California Street, Suite 1960, San Francisco, California 94104, is an indirect
wholly owned subsidiary of LFC.

LASC, out of the management fee it receives from the Fund, pays Newport a
sub-advisory fee at the annual rate of 0.70% of the average daily net assets of
the Fund.

Under the Newport Sub-Advisory Agreement, Newport manages the assets of the Fund
in accordance with its investment objective, investment program, policies, and
restrictions under the supervision of LASC and the Board of Trustees. Newport
determines which securities and other instruments are purchased and sold for the
Fund.

John M. Mussey and Thomas R. Tuttle, President and Senior Vice President,
respectively, of Newport, co-manage the Fund. Mr. Mussey has managed the
Colonial Newport Tiger Fund since 1989. (The Colonial Newport Tiger Fund is the
successor by merger to the Newport Tiger Fund, which commenced operations in
1989.) Mr. Tuttle has co-managed the Colonial Newport Tiger Fund since
November, 1995. Messrs. Mussey and Tuttle have been officers of Newport since
1984.

FUND SERVICE ORGANIZATIONS

Custodian

The Chase Manhattan Bank, 4 Chase Metro Tech Center, Brooklyn, New York 11245 is
the custodian for the Fund. Foreign securities are maintained in the custody of
foreign branches of U.S. banks, foreign banks and foreign trust companies that
are members of the custodian's global custody network or foreign depositories
used by such members.

Independent Accountants: Price Waterhouse LLP

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110 are the
Fund's independent accountants.

OTHER CONSIDERATIONS

Expenses of the Fund

The Fund generally will pay all its expenses, other than those borne by LASC and
Newport. LASC has agreed to reimburse all expenses, including management fees,
but excluding interest, taxes, brokerage, and other expenses which are
capitalized in accordance with accepted accounting procedures, and extraordinary
expenses, incurred by the Fund in excess of 1.75% of average net asset value per
annum for the period beginning May 1, 1998 until April 30, 1999.

The expenses payable by the Fund include, among other things, the management fee
payable to LASC, described above; fees for services of independent accountants;
consultant fees; legal fees; transfer agent, custodian and portfolio record
keeping and tax information services fees; fees for pricing and record keeping
services, and of equipment for communication among the Fund's custodian, LASC,
Newport and others; taxes and fees for the preparation of the Fund's tax
returns; brokerage fees and commissions; interest; costs of Board of Trustees
and shareholder meetings; cost of updates and printing of prospectuses and
reports to shareholders; fees for filing reports with regulatory bodies and the
maintenance of the Fund's existence; membership dues for industry trade
associations; fees to federal authorities for the registration of the shares of
the Fund; fees and expenses of Trustees who are not directors, officers,
employees or stockholders of LASC, Newport or their affiliates; insurance and
fidelity bond premiums; and other extraordinary expenses of a non-recurring
nature.

It is the policy of the Trust that expenses directly charged or attributable to
the Fund will be paid from the assets of the Fund. General expenses of the Trust
will be allocated among and charged to the assets of each series of the Trust,
including the Fund, on a basis that the Board of Trustees deems fair and
equitable, which may be based on the relative assets of each series or the
nature of the services performed and their relative applicability to each
series.

<PAGE>

Purchases and Redemptions

The Participating Insurance Companies place daily orders to purchase and redeem
shares of the Fund based on, among other things, the net amount of purchase
payments to be invested and surrender and transfer requests to be effected on
that day pursuant to the VA contracts and VLI policies, including deductions for
fees and charges by the applicable insurance company separate account. The Fund
continuously offers and redeems shares at net asset value without the addition
of any selling commission, sales load or redemption charge. Shares are sold and
redeemed at their net asset value as next determined after receipt of purchase
payments or redemption requests, respectively, by the separate accounts.
Similarly, shares are sold or redeemed as a result of such other transactions
under the VA contracts and VLI policies at the net asset value computed for the
day on which such transactions are effected by the separate accounts. The right
of redemption may be suspended or payments postponed whenever permitted by
applicable law and regulations.

Investment Return

Average annual total return for the Fund is calculated in accordance with the
Securities and Exchange Commission's formula and assumes reinvestment of all
distributions. Other total return differs from average annual total return only
in that it may relate to a different time period and may represent aggregate as
opposed to average annual total return. The Fund's average annual total return
is determined by computing the annual percentage change in value of a $1,000
investment in the Fund for a specified period, assuming reinvestment of all
dividends and distributions.

Performance information describes the Fund's performance for the period shown
and does not predict future performance. Comparison of the Fund's yield or total
return with those of alternative investments should consider differences between
the Fund and the alternative investments. The Fund's investment performance
figures do not reflect the cost of insurance and the separate account fees and
charges which vary with the VA contracts and VLI policies offered through the
separate accounts of the Participating Insurance Companies, and which will
decrease the return realized by a contract or policyholder.

Net Asset Value

The initial net asset value of the Fund at the commencement of operations was
established at $2.00. The net asset value per share of the Fund is determined as
of the close of regular trading on the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time). Net asset value per share is calculated
for the Fund by dividing the current market value of total portfolio assets,
less all liabilities (including accrued expenses), by the total number of shares
outstanding. Net asset value is determined on each day when the NYSE is open,
except on such days in which no order to purchase or redeem shares is received.
The NYSE is scheduled to be open Monday through Friday throughout the year
except for certain federal and other holidays.

All assets denominated in foreign currencies are converted to U.S. dollars. The
books and records of the Fund are recorded in U.S. dollars.

Fund securities are valued based on market quotations or, if such quotations are
not available, at fair market value determined in good faith under procedures
established by the Board of Trustees. Investments maturing in 60 days or less
are valued at amortized cost.

Distributions

The Fund intends to declare and distribute, as dividends or capital gains
distributions, at least annually, substantially all of its net investment income
and net profits realized from the sale of portfolio securities, if any, to its
shareholders (Participating Insurance Companies' separate accounts). The net
investment income of the Fund consists of all dividends or interest received by
the Fund, less estimated expenses (including the advisory and administrative
fees). The Fund will declare and distribute income dividends annually. All net
short-term and long-term capital gains of each Fund, net of carry-forward
losses, if any, realized during the fiscal year, are declared and distributed
periodically, no less frequently than annually. All dividends and distributions
are reinvested in additional shares of the Fund at net asset value, as of the
record date for the distributions.

Taxes

The Fund intends to elect to be treated and to qualify as a "regulated
investment company" under Subchapter M of the Code. As a result of such
election, for any tax year in which the Fund meets the investment limitations
and the distribution, diversification and other requirements referred to below,
to the extent the Fund distributes its taxable net investment income and its net
realized long-term and short-term capital gains, the Fund will not be subject to
federal income tax, and the income of the Fund will be treated as the income of
its shareholders. Under current law, since the shareholders are life insurance
company "segregated asset accounts," they will not be subject to income tax
currently on this income to the extent such income is applied to increase the
values of VA contracts and VLI policies.

<PAGE>

affect the investments made by the Fund. Any of the applicable diversification
requirements could require a sale of assets of the Fund that would affect the
net asset value of the Fund.

In addition, the Tax Reform Act of 1986 made certain changes to the tax
treatment of regulated investment companies, including the imposition of a
nondeductible 4% excise tax on certain undistributed amounts. To avoid this tax,
the Fund must declare and distribute to its shareholders by the end of each
calendar year at least 98% of ordinary income earned during that calendar year
and at least 98% of capital gain net income, net of carry-forward losses, if
any, realized for the twelve-month period ending October 31 of that year, plus
any remaining undistributed income from the prior year.

Pursuant to the requirements of Section 817(h) of the Code, the only
shareholders of the Fund will be Participating Insurance Companies and their
separate accounts that fund VA contracts, VLI policies and other variable
insurance contracts and retirement plans. The prospectus that describes a
particular VA contract or VLI policy discusses the taxation of both separate
accounts and the owner of such contract or policy.

The Fund intends to comply with the requirements of Section 817(h) of the Code
and the related regulations issued thereunder by the Treasury Department. These
provisions impose certain diversification requirements affecting the securities
in which the Fund may invest and other limitations. The diversification
requirements of Section 817(h) of the Code are in addition to the
diversification requirements under Subchapter M and the Investment Company Act
of 1940. The consequences of failure to meet the requirements of Section 817(h)
could result in taxation of the Participating Insurance Company offering the VA
contracts and VLI policies and immediate taxation of all owners of the contracts
and policies to the extent of appreciation on investment under the contracts.
The Fund believes it is in compliance with these requirements.

The Secretary of the Treasury may issue additional rulings or regulations that
will prescribe the circumstances in which a variable insurance contract owner's
control of the investments of a segregated asset account may cause such owner,
rather than the insurance company, to be treated as an owner of the assets of a
segregated asset account. It is expected that such regulations would have
prospective application. However, if a ruling or regulation were not considered
to set forth a new position, the ruling or regulation could have retroactive
effect.

The Fund therefore may find it necessary, and reserves the right to take action
to assure, that a VA contract or VLI policy continues to qualify as an annuity
or insurance contract under federal tax laws. The Fund, for example, may be
required to alter its investment objective or substitute its shares for those of
another fund. No such change of investment objective or substitution of
securities will take place without notice to the contract and policy owners with
interests invested in the Fund and without prior approval of the Securities and
Exchange Commission, or the approval of a majority of such owners, to the extent
legally required.

To the extent the Fund invests in foreign securities, investment income received
by the Fund from sources within foreign countries may be subject to foreign
income taxes withheld at the source. The United States has entered into tax
treaties with many foreign countries which entitle the Fund to a reduced tax or
exemption from tax on such income.

Gains and losses from foreign currency dispositions, foreign-currency
denominated debt securities and payables or receivables, and foreign currency
forward contracts are subject to special tax rules that generally cause them to
be recharacterized as ordinary income and losses, and may affect the timing and
amount of the Fund's recognition of income, gain or loss.

It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets, if any, to be invested within various countries
will fluctuate and the extent to which tax refunds will be recovered is
uncertain. The Fund intends to operate so as to qualify for treaty-reduced tax
rates where applicable.

The preceding is a brief summary of some relevant tax considerations. This
discussion is not intended as a complete explanation or a substitute for careful
tax planning and consultation with individual tax advisers.

Shareholder Communications

Owners of VA contracts and VLI policies, issued by the Participating Insurance
Companies or for which shares of the Fund are the investment vehicle, receive
from the Participating Insurance Company unaudited semi-annual financial
statements and audited year-end financial statements of the Fund certified by
the Fund's independent auditors. Each report shows the investments owned by the
Fund and provides other information about the Fund and its operations. Copies of
such reports may be obtained from the Participating Insurance Company or the
Secretary of the Fund.

Organization, Meetings, and Voting Rights

The Fund is a separate series of the Trust. The Trust is organized as a
Massachusetts business trust under an Agreement and Declaration of Trust
("Declaration of Trust") dated March 4, 1993. The Declaration of Trust may be
amended by a vote of either the Trust's shareholders or the Board of Trustees.
The Trust is authorized to issue an unlimited number of shares of beneficial
interest without par value, in one or more series as the Board of Trustees may
authorize.

<PAGE>

Each share of the Fund is entitled to participate pro rata in any dividends and
other distributions declared by the Board of Trustees with respect to the Fund,
and all shares of the Fund have equal rights in the event of liquidation of the
Fund.

The Fund is not required to hold annual meetings and does not intend to do so.
However, special meetings may be called for purposes such as electing Trustees
or approving an amendment to an advisory contract. Shareholders receive one vote
for each Fund share. Shares of the Trust vote together except when required to
vote separately by Fund. Shareholders have the power to remove Trustees and to
call meetings to consider removal.

Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims liability of the
shareholders, the Trustees, or officers of the Trust for acts or obligations of
the Trust, which are binding only on the assets and property of the Trust (or
the Fund) and requires that notice of such disclaimer be given in each
agreement, obligation, or contract entered into or executed by the Trust or the
Board. The Declaration of Trust provides for indemnification out of the Trust's
(or the Fund's) assets for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
believed to be remote because it is limited to circumstances in which the
disclaimer is inoperative and the Trust itself is unable to meet its
obligations. The risk to the Fund of sustaining a loss on account of liabilities
incurred by another fund also is believed to be remote.

Additional Information

This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Trust with the Securities and
Exchange Commission under the Securities Act of 1933. Copies of the Registration
Statement may be obtained from the Commission or may be examined at the office
of the Commission in Washington, D.C.

OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUND

A number of the investment policies and techniques referred to below are subject
to certain additional risks described more fully in the Statement of Additional
Information.

Foreign Securities

The Fund normally will remain fully invested in equity securities of companies
located in the Tiger countries. Investments in foreign securities include
sovereign risks and risks pertaining to the local economy in the country or
countries in which the foreign issuer conducts business. Investments in foreign
securities also involve certain risks that are not typically associated with
investing in domestic issuers, including: (i) foreign securities traded for
foreign currencies and/or denominated in foreign currencies may be affected
favorably or unfavorably by changes in currency exchange rates and exchange
control regulations, and the Fund may incur costs in connection with conversions
between various currencies; (ii) less publicly available information about the
securities and about the foreign company or government issuing them; (iii) less
comprehensive accounting, auditing, and financial reporting standards,
practices, and requirements; (iv) securities markets outside the United States
may be less developed or efficient than those in the United States and
government supervision and regulation of those securities markets and brokers
and the issuers in those markets is less comprehensive than that in the United
States; (v) the securities of some foreign issuers may be less liquid and more
volatile than securities of comparable domestic issuers; (vi) settlement of
transactions with respect to foreign securities may sometimes be delayed beyond
periods customary in the United States; (vii) fixed brokerage commissions on
certain foreign securities exchanges and custodial costs with respect to
securities of foreign issuers generally exceed domestic costs; and (viii) with
respect to some countries, there is the possibility of unfavorable changes in
investment or exchange control regulations, expropriation, or confiscatory
taxation, taxation at the source of the income payment or dividend distribution,
difficulties in enforcing judgments, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic
developments that could adversely affect United States investments in those
countries.

The Fund's investments in foreign securities may include investments in
securities issued or guaranteed by companies or governments located in countries
whose economies or securities markets are not yet highly developed. Special
risks associated with these investments (in addition to the considerations
regarding foreign investments generally) may include, among others, greater
political uncertainties, an economy's dependence on revenues from particular
commodities or on international aid or development assistance, volatile debt
burdens or inflation rates, currency transfer restrictions, limited numbers of
potential buyers for such securities, restrictions or repatriation of capital
and delays and disruptions in securities settlement procedures.

Foreign Currency Transactions. Transactions in foreign securities include
currency conversion costs. The Fund may engage in currency exchange transactions
to convert currencies to or from U.S. dollars. The Fund may purchase or sell
foreign currencies on a spot or forward basis. Such transactions will be entered
into (i) to lock in a particular foreign exchange rate pending settlement of a
purchase or sale of a foreign security or pending the receipt of interest,
principal or dividend pay-

<PAGE>

ments on a foreign security held by the Fund, or (ii) to hedge against a decline
in the value, in U.S. dollars or in another currency, of a foreign currency in
which securities held by the Fund are denominated.

The Fund will not attempt, nor would it be able, to eliminate all foreign
currency risk. The precise matching of foreign currency exchange transactions
and the portfolio securities generally will not be possible since the future
value of such securities in foreign currencies will change as a consequence of
market movements which cannot be precisely forecast. Currency hedging does not
eliminate fluctuations in the underlying prices of securities, but rather
establishes a rate of exchange at some future point in time. Although hedging
may lessen the risk of loss due to a decline in the value of the hedged
currency, it tends to limit potential gain from increases in currency values.

ADRs. With respect to equity securities, the Fund may purchase structured and
unstructured ADRs. ADRs are U.S. dollar-denominated certificates issued by a
United States bank or trust company representing the right to receive securities
of a foreign issuer deposited in a domestic bank or foreign branch of that bank
or a corresponding bank and traded on a United States exchange or in an
over-the-counter market. Generally, ADRs are in registered form. There are no
fees imposed on the purchase or sale of ADRs when purchased from the issuing
bank or trust company in the initial underwriting, although the issuing bank or
trust company may impose charges for the collection of dividends and the
conversion of ADRs into the underlying securities. Investment in ADRs has
certain advantages over direct investment in the underlying foreign securities
since: (i) ADRs are U.S. dollar-denominated investments that are registered
domestically, easily transferable and for which market quotations are readily
available; and (ii) issuers whose securities are represented by ADRs are subject
to the same auditing, accounting, and financial reporting standards as domestic
issuers. Investments in ADRs, however, are otherwise subject to the same general
considerations and risks pertaining to foreign securities described above.

See "DESCRIPTION OF CERTAIN INVESTMENTS: Investments in Less Developed
Countries;" "Foreign Currency Transactions;" "Currency Forward and Futures
Contracts;" "Settlement Procedures;" "Foreign Currency Conversion;" and "Passive
Foreign Investment Companies" in the Statement of Additional Information for
more information about foreign investments.

Short-Term Trading

In selecting broker-dealers for the purchase and sale of portfolio securities,
the portfolio manager may consider research and brokerage services furnished by
such broker-dealers to the portfolio manager and its affiliates. In recognition
of the research and brokerage services provided, the portfolio manager may cause
the Fund to pay the selected broker-dealer a higher commission than would have
been charged by another broker-dealer not providing such services.

As a result of the Fund's investment policies, under certain market conditions,
the Fund's portfolio turnover rate may be higher than that of other mutual
funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of
purchases or sales of portfolio securities to the monthly average of the value
of portfolio securities, excluding securities whose maturities at acquisition
were one year or less. A 100% turnover rate would occur if all of the securities
in the portfolio were sold and either repurchased or replaced within one year.
Although the Fund cannot predict portfolio turnover rate, it is estimated that,
under normal circumstances, the annual rate for the Fund will be no greater than
100%. The portfolio turnover rate of the Fund for the period ended December 31,
1997 is shown under "FINANCIAL HIGHLIGHTS" above. The Fund's portfolio turnover
rate is not a limiting factor when the portfolio manager considers a change in
the Fund's portfolio.

Cash Reserves and Repurchase Agreements

The Fund may invest temporarily available cash in U.S. dollar denominated money
market instruments. Such money market instruments will be limited to
high-quality securities rated within the two highest credit categories by any
nationally recognized securities rating organization or, if not rated, of
comparable investment quality as determined by the portfolio manager. Such
domestic money market instruments may include: U.S. Government securities;
certificates of deposit; bankers' acceptances; bank time deposits; commercial
paper; short-term corporate debt securities; and repurchase agreements with a
securities dealer or bank. In these repurchase transactions, the underlying
security, which is held by the custodian through the federal book-entry system
for the Fund as collateral, will be marked to market on a daily basis to ensure
full collateralization of the repurchase agreement. In the event of a bankruptcy
or default of certain sellers of repurchase agreements, the Fund could
experience costs and delays in liquidating the underlying security and might
incur a loss if such collateral held declines in value during this period. Not
more than 15% of the Fund's total assets will be invested in repurchase
agreements maturing in more than seven days and other illiquid assets.

<PAGE>

Leverage Risks Associated with Certain Investment Techniques

The purchase and sale of foreign currency on a forward basis may present
additional risks associated with the use of leverage. Leverage may magnify the
effect on Fund shares of fluctuations in the values of the securities underlying
these transactions. In accordance with Securities and Exchange Commission
pronouncements, to reduce (but not necessarily eliminate) leverage, the Fund
will either "cover" its obligations under such transactions by holding the
securities or other commodities (or rights to acquire the securities or such
commodities) it is obligated to deliver under such transactions, or deposit and
maintain in a segregated account with its custodian cash, liquid securities, or
securities denominated in the particular foreign currency, equal in value to the
Fund's obligations under such transactions.

Certain Policies to Reduce Risk

The Fund has adopted certain fundamental investment policies in managing its
portfolio that are designed to maintain the portfolio's diversity and reduce
risk. The Fund will not: (i) with respect to 75% of its total assets, invest in
more than 10% of the outstanding voting securities of any one issuer or invest
more than 5% of its total assets in the securities of any one issuer; or (ii)
borrow money except temporarily from banks for temporary or emergency purposes,
for example, to facilitate redemption requests that might otherwise require
untimely disposition of portfolio securities and in amounts not exceeding 10% of
the Fund's total assets. While borrowings exceed 5% of net assets, the Fund will
not purchase additional portfolio securities. Limitation (i) does not apply to
U.S. Government Securities. The investment policies described above in this
paragraph are fundamental and may be changed only by approval of the Fund's
shareholders.

It is the Fund's policy that when its portfolio manager deems a temporary
defensive position advisable, the Fund may invest, without limitation (i.e., up
to 100% of its assets), in higher rated securities, or hold assets in cash or
cash equivalents, to the extent the portfolio manager believes such alternative
investments to be less risky than those securities in which the Fund normally
invests.

Additional investment restrictions are set forth in the Statement of Additional
Information.

CHANGES TO INVESTMENT OBJECTIVES AND NON-FUNDAMENTAL POLICIES

The Fund may not always achieve its investment objective. The Fund's investment
objective and non-fundamental policies may be changed without shareholder
approval. The holders of VA Contracts and VLI Policies will be notified in
connection with any material change in the Fund's investment objective. The
Fund's fundamental investment policies listed in the Statement of Additional
Information cannot be changed without shareholder majority approval.

11
<PAGE>

Distributed by:
Liberty Financial Investments, Inc.
One Financial Center, Boston, MA 02111-2621

<PAGE>

COLONIAL U.S. STOCK FUND, VARIABLE SERIES
a series of
Liberty Variable Investment Trust
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210

- --------------------------------------------------------------------------------

Colonial U.S. Stock Fund, Variable Series ("Fund") is a series of Liberty
Variable Investment Trust ("Trust"), an open-end management investment company.
The Fund seeks long-term capital growth by investing primarily in large
capitalization equity securities.

There is no assurance that the objective of the Fund will be realized.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
The date of this Prospectus is May 1, 1998

<TABLE>
<S> <C>
NOT
May lose value
FDIC-
No bank guarantee
INSURED
</TABLE>

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
THE FUND ................................................ 3
FINANCIAL HIGHLIGHTS .................................... 4
HOW THE FUND INVESTS .................................... 5
FUND MANAGEMENT ORGANIZATIONS ........................... 5
The Trustees ........................................... 5
The Manager: Liberty Advisory Services Corp.
(LASC) .............................................. 5
LASC's Sub-Adviser ..................................... 5
FUND SERVICE ORGANIZATIONS .............................. 6
Custodians ............................................. 6
Independent Accountants: Price Waterhouse LLP .......... 6
OTHER CONSIDERATIONS .................................... 6
Expenses of the Fund ................................... 6
Purchases and Redemptions .............................. 6
Investment Return ...................................... 6
Net Asset Value ........................................ 7
Distributions .......................................... 7

</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Taxes .................................................. 7
Shareholder Communications ............................. 8
Organization, Meetings, and Voting Rights .............. 8
Additional Information ................................. 8
OTHER INVESTMENT PRACTICES, RISK
CONSIDERATIONS AND POLICIES OF THE FUND ................ 9
Short-Term Trading ..................................... 9
Certain Investment Considerations Pertaining to
Government Debt Securities ........................... 9
Cash Reserves and Repurchase Agreements ................ 9
Securities Lending ..................................... 9
Foreign Securities ..................................... 9
Mortgage-Backed Securities ............................. 10
Collateralized Mortgage Obligations (CMOs) and
Real Estate Mortgage Investment Conduits
(REMICs) ............................................ 10
Certain Policies to Reduce Risk ........................ 11
CHANGES TO INVESTMENT OBJECTIVE AND
NON-FUNDAMENTAL POLICIES ............................. 11
</TABLE>

<PAGE>

THE FUND

The Fund is one of a series of separate portfolios of the Trust. The Trust is
an open-end management investment company currently consisting of nine series.
The Fund is a diversified fund. The Trust issues shares of beneficial interest
in the Fund that represent interests in a separate portfolio of securities and
other assets. The Trust may add or delete series from time to time.

The Fund is a funding vehicle for variable annuity contracts ("VA contracts")
and variable life insurance policies ("VLI policies") offered by the separate
accounts of life insurance companies ("Participating Insurance Companies").
Certain Participating Insurance Companies are affiliated with the adviser to
the Fund.

The prospectuses of the separate accounts of the Participating Insurance
Companies describe which Funds are available to the separate accounts offering
the VA contracts and VLI policies. The Trust assumes no responsibility for
those prospectuses. However, Liberty Advisory Services Corp. ("LASC") and the
Board of Trustees of the Trust ("Board of Trustees") monitor events to identify
any material conflicts that may arise between the interests of the
Participating Insurance Companies or between the interests of owners of VA
contracts and VLI policies. The Fund currently does not foresee any
disadvantages to the owners of VA contracts and VLI policies arising from the
fact that certain interests of the owners may differ. The Statement of
Additional Information contains additional information regarding such differing
interests and related risks.

LASC provides investment management and advisory services to the Fund pursuant
to its Management Agreements with the Trust.

Colonial Management Associates, Inc. ("Colonial") sub-advises the Fund pursuant
to a separate Sub-Advisory Agreement (the "Colonial Sub-Advisory Agreement")
with the Fund and LASC.

LASC has delegated various administrative matters to Colonial. Colonial also
provides transfer agency and pricing and record keeping services to the Fund.
Liberty Financial Investments, Inc. ("LFII") serves as the principal
underwriter of the Fund with respect to sales of Fund shares to separate
accounts of Participating Insurance Companies which are not affiliated with
LASC.

LASC, Colonial and LFII are wholly-owned indirect subsidiaries of Liberty
Financial Companies, Inc. ("LFC"). As of March 31, 1998, approximately 72.3% of
the combined voting power of LFC's issued and outstanding voting stock was
held, indirectly, by Liberty Mutual Insurance Company ("Liberty Mutual").
Liberty Life is a subsidiary of Liberty Mutual.

<PAGE>

FINANCIAL HIGHLIGHTS

The table below presents certain financial information for the Fund for the
period beginning with the Fund's commencement of operations July 5, 1994 and
ended December 31, 1997. The information through the fiscal year ended December
31, 1997 has been audited and reported on by the Fund's independent
accountants, Price Waterhouse LLP, whose report thereon appears in the Fund's
annual report to shareholders for the fiscal year ended December 31, 1997
(which may be obtained without charge from LFII or from the Participating
Insurance Company issuing the applicable VA contract or VLI policy) and is
incorporated by reference into the Statement of Additional Information. The
Fund's total return presented below does not reflect the cost of insurance and
other insurance company separate account charges which vary with the VA
contracts and VLI policies offered through the separate accounts of
Participating Insurance Companies.

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of period ......................... $ 14.22 $ 12.36
------- -------
Net investment income (a) .................................... 0.20 0.19
Net realized and unrealized gains on investments ............. 4.37 2.52
------- -------
Total from investment operations ............................. 4.57 2.71
------- -------
Less distributions from:
Dividends from net investment income ........................ (0.18) (0.17)
In excess of net investment income .......................... (0.01) --
Dividends from net realized gains on investments ............ 2.30 (0.68)
In excess of net realized gains ............................. (0.01) --
--------- -------
Total distributions .......................................... (2.50) (0.85)
--------- -------
Net asset value, end of period ............................... $ 16.29 $ 14.22
========= =======
Total return:
Total investment return (c) .................................. 32.23% 21.84%
Ratios/supplemental data:
Net assets, end of period (000) .............................. $96,715 $60,855
Ratio of net expenses to average net assets .................. 0.94%(e) 0.95%(e)
Ratio of net investment income to average net assets ......... 1.19%(e) 1.39%(e)
Portfolio turnover ratio ..................................... 63% 77%
Average commission rate (f) .................................. $0.0400 $0.0395

<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1994***
---------------------- --------------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of period ......................... $ 10.27 $ 10.00
------- -------
Net investment income (a) .................................... 0.21 0.09
Net realized and unrealized gains on investments ............. 2.84 0.35
------- -------
Total from investment operations ............................. 3.05 0.44
------- -------
Less distributions from:
Dividends from net investment income ........................ (0.16) (0.11)
In excess of net investment income .......................... -- --
Dividends from net realized gains on investments ............ (0.80) (0.06)
In excess of net realized gains ............................. -- --
------- -------
Total distributions .......................................... (0.96) (0.17)
------- -------
Net asset value, end of period ............................... $ 12.36 $ 10.27
======= =======
Total return:
Total investment return (c) .................................. 29.70%(b) 4.40%(b)**
Ratios/supplemental data:
Net assets, end of period (000) .............................. $43,017 $15,373
Ratio of net expenses to average net assets .................. 1.00%(d)(e) 1.00%(d)*
Ratio of net investment income to average net assets ......... 1.72%(b)(e) 2.16%(b)*
Portfolio turnover ratio ..................................... 115% 52%**
Average commission rate (f) .................................. -- --
</TABLE>

- --------------------------------
* Annualized

** Not Annualized

*** For the period from the commencement of operations (July 5, 1994) to
December 31, 1994.

(a) Per share data was calculated using average shares outstanding during the
period.

(b) Computed giving effect to LASC's expense limitation undertaking.

(d) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, these ratios would have been 1.07% and 1.64%
(annualized), respectively.

(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.

(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.

Further information about the performance of the Fund is contained in the
Fund's annual report to shareholders for the period ended December 31, 1997,
which may be obtained without charge from LFII or from the Participating
Insurance Company issuing the applicable VA contract or VLI policy.

<PAGE>

HOW THE FUND INVESTS

All investments, including mutual funds, have risks, and no one mutual fund is
suitable for all investors. No one Fund by itself constitutes a complete
investment program. The net asset value of the shares of the Fund will vary
with market conditions and there can be no guarantee that the Fund will achieve
its investment objective.

More information about the portfolio securities in which the Fund invests,
including certain risks and investment limitations, is provided in the
Statement of Additional Information.

Investment Objective. The Fund seeks long-term capital growth by investing
primarily in large capitalization equity securities.

Investment Program. The Fund normally invests at least 65% of its total assets
in common stock of U.S. companies with equity market capitalizations at the time
of purchase in excess of $3 billion. Up to 35% of total assets may be invested
in common stock of U.S. companies with equity market capitalizations at the time
of purchase between $1 billion and $3 billion. Up to 10% of total assets may be
invested in ADRs. Up to 10% of total assets may be invested in any combination
of (i) convertible debt securities (i.e., debt securities that are convertible
into common stock at the holder's option), (ii) investment grade corporate debt
securities (i.e., rated investment grade by at least two nationally recognized
rating agencies), and (iii) debt securities issued or guaranteed by the U.S.
Government or its agencies (including mortgage-backed securities, collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"). The Fund will purchase equity securities that Colonial believes have
superior earnings and value characteristics selected from a universe which meets
certain guidelines for liquidity and available investment information.
Quantitative standards, designed to identify above average intrinsic value
relative to price and favorable earnings trends, are used as the core of the
process. Fundamental company analysis is then used to select securities. The
Fund will not concentrate more than 25% of its total assets in any one industry.

FUND MANAGEMENT ORGANIZATIONS

The Trustees

The business of the Trust and the Fund is supervised by the Trust's Board of
Trustees. The Statement of Additional Informa-tion contains the names of and
biographical information on the Trustees.

The Manager: Liberty Advisory Services Corp. (LASC)

LASC, 125 High Street, Boston Massachusetts 02110, is the manager of the Fund.
LASC was incorporated on January 8, 1993 under the laws of the Commonwealth of
Massachusetts.

In accordance with its Management Agreement with the Fund, LASC designs and
supervises a continuous investment program for the Fund, evaluates, recommends,
and monitors its Sub-Advisor's performance, investment program, and compliance
with applicable laws and regulations, and recommends to the Board of Trustees
whether its Sub-Advisor's contract should be continued or modified and whether
a new sub-adviser or multiple sub-advisers should be added or deleted. LASC is
also responsible for administering the Fund's operations, including the
provision of office space and equipment in connection with the maintenance of
the Fund's headquarters, preparation and filing of required reports,
arrangements for Trustees' and shareholders' meetings, maintenance of the
Fund's corporate books and records, communications with shareholders, and
oversight of custodial, accounting and other services provided to the Fund by
others. In accordance with its Management Agreement with the Fund, LASC may, at
its own expense, delegate the performance of certain of its administrative
responsibilities to its affiliate LFC, or any of LFC's majority-owned
subsidiaries. LASC has delegated its administrative responsibilities to
Colonial in accordance with this authority. LASC, or its affiliates, pay all
compensation of the Fund's directors and officers who are employees of LASC or
its affiliates.

The Trust pays LASC a management fee, accrued daily and paid monthly, at a
maximum annual rate of 0.80% of the average daily net assets of the Fund.

LASC's Sub-Adviser

Colonial

Colonial, an investment adviser since 1931, is the Sub-Adviser of the Fund.
Colonial, whose principal business address is One Financial Center, Boston,
Massachusetts 02111, is a wholly-owned indirect subsidiary of LFC.

LASC, out of the management fee it receives from the Fund, pays Colonial
sub-advisory fees at the annual rate of 0.60% of the average daily net assets
of the specified Fund.

Under the Colonial Sub-Advisory Agreements, Colonial manages the assets of the
Fund in accordance with its investment objective, investment programs,
policies, and restrictions under the supervision of LASC and the Board of
Trustees. Colonial determines which securities and other instruments are
purchased and sold for the Fund. Colonial also provides transfer agency and
certain pricing and record keeping services for the Fund under a separate
agreement.

<PAGE>

Mark Stoeckle has managed the Fund since December, 1996. Mr. Stoeckle is a Vice
President of Colonial. He also manages the Colonial U.S. Stock Fund. Prior to
joining Colonial in 1996, Mr. Stoeckle was a portfolio manager at Massachusetts
Financial Services Company and an investment banker at Bear, Stearns & Co.,
Inc.

FUND SERVICE ORGANIZATIONS

Custodians

As of the date of this Prospectus, Boston Safe Deposit and Trust Company, One
Boston Place, Boston Massachusetts 02109 is the custodian for the Fund. The
Chase Manhattan Bank, 3 Chase Metro Tech Center, Brooklyn, New York 11245 is
expected to become the custodian on or about May 15, 1998. Foreign securities
are maintained in the custody of foreign branches of U.S. banks, foreign banks
and foreign trust companies that are members of the custodian's global custody
network or foreign depositories used by such members.

Independent Accountants: Price Waterhouse LLP

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110 are the
Fund's independent accountants.

OTHER CONSIDERATIONS

Expenses of the Fund

The Fund generally will pay all its expenses, other than those borne by LASC
and Colonial. LASC has agreed to reimburse all expenses, including management
fees, but excluding interest, taxes, brokerage, and other expenses which are
capitalized in accordance with accepted accounting procedures, and
extraordinary expenses, incurred by the Fund in excess of 1.00% of average net
asset value per annum, for the period beginning May 1, 1998 until April 30,
1999.

The expenses payable by the Fund include, among other things, the management
fee payable to LASC, described above; fees for services of independent
accountants; consultant fees; legal fees; transfer agent, custodian and
portfolio record keeping and tax information services fees; fees for pricing
and record keeping services, and of equipment for communication among the
Fund's custodian, LASC, Colonial and others; taxes and fees for the preparation
of the Fund's tax returns; brokerage fees and commissions; interest; costs of
Board of Trustees and shareholder meetings; cost of updates and printing of
prospectuses and reports to shareholders; fees for filing reports with
regulatory bodies and the maintenance of the Fund's existence; membership dues
for industry trade associations; fees to federal authorities for the
registration of the shares of the Fund; fees and expenses of Trustees who are
not directors, officers, employees or stockholders of LASC, Colonial or their
affiliates; insurance and fidelity bond premiums; and other extraordinary
expenses of a non-recurring nature.

It is the policy of the Trust that expenses directly charged or attributable to
the Fund will be paid from the assets of the Fund. General expenses of the
Trust will be allocated among and charged to the assets of each series of the
Trust, including the Fund, on a basis that the Board of Trustees deems fair and
equitable, which may be based on the relative assets of each series or the
nature of the services performed and their relative applicability to each
series.

Purchases and Redemptions

The Participating Insurance Companies place daily orders to purchase and redeem
shares of the Fund based on, among other things, the net amount of purchase
payments to be invested and surrender and transfer requests to be effected on
that day pursuant to the VA contracts and VLI policies, including deductions
for fees and charges by the applicable insurance company separate account. The
Fund continuously offers and redeems shares at net asset value without the
addition of any selling commission, sales load or redemption charge. Shares are
sold and redeemed at their net asset value as next determined after receipt of
purchase payments or redemption requests, respectively, by the separate
accounts. Similarly, shares are sold or redeemed as a result of such other
transactions under the VA contracts and VLI policies at the net asset value
computed for the day on which such transactions are effected by the separate
accounts. The right of redemption may be suspended or payments postponed
whenever permitted by applicable law and regulations.

Investment Return

<PAGE>

Performance information describes the Fund's performance for the period shown
and does not predict future performance. Comparison of the Fund's yield or
total return with those of alternative investments should consider differences
between the Fund and the alternative investments. The Fund's investment
performance figures do not reflect the cost of insurance and the separate
account fees and charges which vary with the VA contracts and VLI policies
offered through the separate accounts of the Participating Insurance Companies,
and which will decrease the return realized by a contract or policyholder.

Net Asset Value

The net asset value per share of the Fund is determined as of the close of
regular trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m.,
New York time). Net asset value per share is calculated for the Fund by
dividing the current market value of total portfolio assets, less all
liabilities (including accrued expenses), by the total number of shares
outstanding. Net asset value is determined on each day when the NYSE is open,
except on such days in which no order to purchase or redeem shares is received.
The NYSE is scheduled to be open Monday through Friday throughout the year
except for certain federal and other holidays.

Fund securities are valued based on market quotations or, if such quotations
are not available, at fair market value determined in good faith under
procedures established by the Board of Trustees. Investments maturing in 60
days or less are valued at amortized cost.

Distributions

The Fund intends to declare and distribute, as dividends or capital gains
distributions, at least annually, substantially all of its net investment
income and net profits realized from the sale of portfolio securities, if any,
to its shareholders (Participating Insurance Companies' separate accounts). The
net investment income of the Fund consists of all dividends or interest
received by the Fund, less estimated expenses (including the advisory and
administrative fees). The Fund will declare and distribute income dividends
annually. All net short-term and long-term capital gains of the Fund, net of
carry-forward losses, if any, realized during the fiscal year, are declared and
distributed periodically, no less frequently than annually. All dividends and
distributions are reinvested in additional shares of the Fund at net asset
value, as of the record date for the distributions.

Taxes

The Fund intends to elect to be treated and to qualify as a "regulated
investment company" under Subchapter M of the Code. As a result of such
election, for any tax year in which the Fund meets the investment limitations
and the distribution, diversification and other requirements referred to below,
to the extent the Fund distributes its taxable net investment income and its
net realized long-term and short-term capital gains, the Fund will not be
subject to federal income tax, and the income of the Fund will be treated as
the income of its shareholders. Under current law, since the shareholders are
life insurance company "segregated asset accounts," they will not be subject to
income tax currently on this income to the extent such income is applied to
increase the values of VA contracts and VLI policies.

Among the conditions for qualification and avoidance of taxation at the Trust
level, Subchapter M imposes investment limitations, distribution requirements,
and requirements relating to the diversification of investments. The
requirements of Subchapter M may affect the investments made by the Fund. Any
of the applicable diversification requirements could require a sale of assets
of the Fund that would affect the net asset value of the Fund.

In addition, the Tax Reform Act of 1986 made certain changes to the tax
treatment of regulated investment companies, including the imposition of a
nondeductible 4% excise tax on certain undistributed amounts. To avoid this
tax, the Fund must declare and distribute to its shareholders by the end of
each calendar year at least 98% of ordinary income earned during that calendar
year and at least 98% of capital gain net income, net of carry-forward losses,
if any, realized for the twelve-month period ending October 31 of that year,
plus any remaining undistributed income from the prior year.

The Fund intends to comply with the requirements of Section 817(h) of the Code
and the related regulations issued thereunder by the Treasury Department. These
provisions impose certain diversification requirements affecting the securities
in which the Fund may invest and other limitations. The diversification
requirements of Section 817(h) of the Code are in addition to the
diversification requirements under Subchapter M and the Investment Company Act
of 1940. The consequences of failure to meet the requirements of Section 817(h)
could result in taxation of the Participating Insurance Company offering the VA
contracts and VLI policies and immediate taxation of all owners of the
contracts and policies to the extent of appreciation on investment under the
contracts. The Fund believes it is in compliance with these requirements.

<PAGE>

The Fund therefore may find it necessary, and reserves the right to take action
to assure, that a VA contract or VLI policy continues to qualify as an annuity
or insurance contract under federal tax laws. The Fund, for example, may be
required to alter its investment objective or substitute its shares for those
of another fund. No such change of investment objective or substitution of
securities will take place without notice to the contract and policy owners
with interests invested in the Fund and without prior approval of the
Securities and Exchange Commission, or the approval of a majority of such
owners, to the extent legally required.

The preceding is a brief summary of some relevant tax considerations. This
discussion is not intended as a complete explanation or a substitute for
careful tax planning and consultation with individual tax advisers.

Shareholder Communications

Owners of VA contracts and VLI policies, issued by the Participating Insurance
Companies or for which shares of the Fund are the investment vehicle, receive
from the Participating Insurance Company unaudited semi-annual financial
statements and audited year-end financial statements of the Fund certified by
the Fund's independent auditors. Each report shows the investments owned by the
Fund and provides other information about the Fund and its operations. Copies
of such reports may be obtained from the Participating Insurance Company or the
Secretary of the Fund.

Organization, Meetings, and Voting Rights

The Fund is not required to hold annual meetings and does not intend to do so.
However, special meetings may be called for purposes such as electing Trustees
or approving an amendment to an advisory contract. Shareholders receive one
vote for each Fund share. Shares of the Trust vote together except when
required to vote separately by Fund. Shareholders have the power to remove
Trustees and to call meetings to consider removal.

Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims liability of the
shareholders, the Trustees, or officers of the Trust for acts or obligations of
the Trust, which are binding only on the assets and property of the Trust (or
the Fund) and requires that notice of such disclaimer be given in each
agreement, obligation, or contract entered into or executed by the Trust or the
Board. The Declaration of Trust provides for indemnification out of the Trust's
(or the Fund's) assets for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
believed to be remote because it is limited to circumstances in which the
disclaimer is inoperative and the Trust itself is unable to meet its
obligations. The risk to the Fund of sustaining a loss on account of
liabilities incurred by another fund also is believed to be remote.

Additional Information

This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Trust with the Securities and
Exchange Commission under the Securities Act of 1933. Copies of the
Registration Statement may be obtained from the Commission or may be examined
at the office of the Commission in Washington, D.C.

<PAGE>

OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUND

A number of the investment policies and techniques referred to below are
subject to certain additional risks described more fully in the Statement of
Additional Information.

Short-Term Trading

In seeking the Fund's objective, the portfolio manager will buy or sell
portfolio securities whenever it believes it is appropriate. The portfolio
manager's decisions will not generally be influenced by how long the Fund may
have owned the security. The Fund may buy securities intending to seek
short-term trading profits, subject to limitations imposed by the Code. A
change in the securities held by the Fund is known as "portfolio turnover" and
generally involves some expense to the Fund. These expenses may include
brokerage commissions or dealer mark-ups, custodian fees and other transaction
costs on both the sale of securities and the reinvestment of the proceeds in
other securities. Colonial may use the services of AlphaTrade, Inc., a
registered broker-dealer affiliate, when buying or selling equity securities
for the Fund, pursuant to procedures adopted under Investment Company Act Rule
17e-1. Subject to seeking best execution, a portfolio manager may consider
sales of contracts of Participating Insurance Companies (and of shares of other
mutual funds advised by it and its affiliates), in selecting broker-dealers for
portfolio security transactions.

As a result of the Fund's investment policies, under certain market conditions,
the Fund's portfolio turnover rate may be higher than that of other mutual
funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of
purchases or sales of portfolio securities to the monthly average of the value
of portfolio securities, excluding securities whose maturities at acquisition
were one year or less. A 100% turnover rate would occur if all of the
securities in the portfolio were sold and either repurchased or replaced within
one year. Although the Fund cannot predict portfolio turnover rate, it is
estimated that, under normal circumstances, the annual rate for the Fund will
be no greater than 100%. The portfolio turnover rate of the Fund for the period
ended December 31, 1997 is shown under "FINANCIAL HIGHLIGHTS" above. The Fund's
portfolio turnover rate is not a limiting factor when the portfolio manager
considers a change in the Fund's portfolio.

Certain Investment Considerations Pertaining to Government Debt Securities

The Fund may, as part of its normal investment program, invest in U.S.
Government securities. While U.S. Government securities are considered
virtually free of default risk, their values nevertheless generally fluctuate
inversely with changes in interest rates. See also "Mortgage-Backed Securities"
and "Collateralized Mortgage Obligations (CMOs) and Real Estate Mortgage
Investment Conduits (REMICs)" below.

Cash Reserves and Repurchase Agreements

The Fund may invest temporarily available cash in U.S. dollar denominated money
market instruments. Such money market instruments will be limited to
high-quality securities rated within the two highest credit categories by any
nationally recognized securities rating organization or, if not rated, of
comparable investment quality as determined by the portfolio manager. Such
domestic money market instruments may include: U.S. Government securities;
certificates of deposit; bankers' acceptances; bank time deposits; commercial
paper; short-term corporate debt securities; and repurchase agreements with a
securities dealer or bank. In these repurchase transactions, the underlying
security, which is held by the custodian through the federal book-entry system
for the Fund as collateral, will be marked to market on a daily basis to ensure
full collateralization of the repurchase agreement. In the event of a
bankruptcy or default of certain sellers of repurchase agreements, the Fund
could experience costs and delays in liquidating the underlying security and
might incur a loss if such collateral held declines in value during this
period. Not more than 15% of the Fund's total assets will be invested in
repurchase agreements maturing in more than seven days and other illiquid
assets.

Securities Lending

The Fund may lend portfolio securities to certain institutions (principally
broker-dealers) that the portfolio manager considers qualified in order to
increase income. The loans will not exceed 30% of total assets. Securities
lending involves the risk of loss to the Fund if the borrower defaults.

Foreign Securities

<PAGE>

exchange or in an over-the-counter market. Generally, ADRs are in registered
form. There are no fees imposed on the purchase or sale of ADRs when purchased
from the issuing bank or trust company in the initial underwriting, although
the issuing bank or trust company may impose charges for the collection of
dividends and the conversion of ADRs into the underlying securities. Investment
in ADRs has certain advantages over direct investment in the underlying foreign
securities since: (i) ADRs are U.S. dollar-denominated investments that are
registered domestically, easily transferable and for which market quotations
are readily available; and (ii) issuers whose securities are represented by
ADRs are subject to the same auditing, accounting, and financial reporting
standards as domestic issuers. Investments in ADRs, however, are otherwise
subject to the same general considerations and risks pertaining to foreign
securities including: (i) less publicly available information about the
securities and about the foreign company or government issuing them; (ii) less
comprehensive accounting, auditing, and financial reporting standards,
practices, and requirements; (iii) government supervision and regulation of
foreign issuers is less comprehensive than that in the United States; (iv) the
securities of some foreign issuers may be less liquid and more volatile than
securities of comparable domestic issuers; and (v) with respect to some
countries, there is the possibility of unfavorable changes in investment or
exchange control regulations, expropriation, or confiscatory taxation, taxation
at the source of the income payment or dividend distribution, difficulties in
enforcing judgments, limitations on the removal of funds or other assets of the
Fund, political or social instability, or diplomatic developments that could
adversely affect United States investments in those countries.

Mortgage-Backed Securities

The Fund may invest in mortgage-backed securities, which are securities
representing interests in pools of mortgages. Principal and interest payments
made on the mortgages in the pools are passed through to the holder of such
securities. Payment of principal and interest on some mortgage-backed
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case of
securities guaranteed by Government National Mortgage Association ("GNMA")), or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the Federal National Mortgage Association ("FNMA")
or Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-backed securities
created by non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers, and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit, which may be issued by governmental entities, private
issuers, or the mortgage poolers. The Fund will only invest in mortgage-backed
securities that are issued or guaranteed by governmental entities.

Unscheduled or early repayment of principal on mortgage-backed securities
(arising from prepayment of principal due to the sale of the underlying
property, refinancing, or foreclosure, net of fees and costs which may be
incurred) may expose the Fund to a lower rate of return upon reinvestment of
principal. The Fund may only be able to invest prepaid principal at lower
yields. The prepayment of securities purchased at a premium may result in
losses equal to the premium. Like other fixed-income securities, when interest
rates rise, the value of a mortgage-related security generally will decline;
however, when interest rates are declining, the value of mortgage-related
securities with prepayment features may not increase as much as other
fixed-income securities. This is because the mortgages underlying the
securities can be prepaid, and prepayment rates tend to increase as interest
rates decline (effectively shortening the mortgage-backed security's maturity)
and decrease as interest rates rise (effectively lengthening the
mortgage-backed security's maturity).

Collateralized Mortgage Obligations (CMOs) and Real Estate Mortgage Investment
Conduits (REMICs)

The Fund may invest in CMOs and REMICs which are issued or guaranteed by the
U.S. government or its agencies. CMOs and REMICs are debt securities issued by
special-purpose trusts collateralized by underlying mortgage loans or pools of
mortgage-backed securities guaranteed by GNMA, FHLMC, or FNMA. CMOs and REMICs
are not, however, "mortgage pass-through" securities, such as those described
above under "Mortgage-Backed Securities." Rather they are pay-through
securities-- i.e., securities backed by the cash flow from the underlying
mortgages. Investors in CMOs and REMICs are not owners of the underlying
mortgages, which serve as collateral for such debt securities, but are simply
owners of a fixed-income security backed by such pledged assets. CMOs and
REMICs typically are structured into multiple classes, with each class bearing
a different stated maturity and having different payment streams. One class
(the Residual) is in the nature of equity. The Fund will not invest in the
Residual class. Although the structures of CMOs and REMICs vary greatly,
monthly payments of principal, including prepayments, typically are first
returned to the investors holding the shortest maturity class; investors
holding longer maturity classes typically receive principal payments only after
the shorter class or classes have been retired. The Fund may experience costs
and delays in liquidating the collateral if the issuer defaults or enters
bankruptcy and may incur a loss. Principal on a REMIC, CMO or other
mortgage-backed security may be prepaid if the underlying mortgages are
prepaid. Because of the prepayment feature these investments may not increase
in value when interest rates fall. The Fund may be able to invest prepaid
principal only at lower yields. The prepayment of REMICs, CMOs or other
mortgage-backed securities purchased at a premium may result in losses equal to
the premium.

<PAGE>

Certain Policies to Reduce Risk

The Fund has adopted certain fundamental investment policies in managing its
portfolio that are designed to maintain the portfolio's diversity and reduce
risk. The Fund will not: (i) with respect to 75% of its total assets, invest in
more than 10% of the outstanding voting securities of any one issuer or invest
more than 5% of its total assets in the securities of any one issuer; or (ii)
borrow money except temporarily from banks to facilitate redemption requests
that might otherwise require untimely disposition of portfolio securities and
in amounts not exceeding 10% of each Fund's total assets. Limitation (i) does
not apply to U.S. Government Securities. The investment policies described
above in this paragraph are fundamental and may be changed only by approval of
shareholders.

It is the Fund's policy that when its portfolio manager deems a temporary
defensive position advisable, the Fund may invest, without limitation (i.e., up
to 100% of its assets), in high-quality fixed-income securities, or hold assets
in cash or cash equivalents, to the extent the portfolio manager believes such
alternative investments to be less risky than those securities in which the
Fund normally invests.

Additional investment restrictions are set forth in the Statement of Additional
Information.

CHANGES TO INVESTMENT OBJECTIVE AND NON-FUNDAMENTAL POLICIES

<PAGE>

Distributed by:
Liberty Financial Investments, Inc.
One Financial Center, Boston, MA 02111-2621

<PAGE>

COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES
a series of
Liberty Variable Investment Trust
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210

- --------------------------------------------------------------------------------

Colonial Strategic Income Fund, Variable Series ("Fund") is a series of Liberty
Variable Investment Trust ("Trust"), an open-end management investment company.
The Fund seeks a high level of current income, as is consistent with prudent
risk and maximizing total return, by diversifying investments primarily in U.S.
and foreign government and lower rated corporate debt securities. The Fund may
invest a substantial portion of its assets in lower rated debt securities
(commonly referred to as "junk bonds") and therefore may not be suitable for
all investors. Purchasers should carefully assess the risks associated with an
investment in the Fund.

There is no assurance that the objective of the Fund will be realized.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
The date of this Prospectus is May 1, 1998

<TABLE>
<S> <C>
NOT
May lose value
FDIC-
No bank guarantee
INSURED
</TABLE>

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
THE FUND ................................................ 3
FINANCIAL HIGHLIGHTS .................................... 4
HOW THE FUND INVESTS .................................... 5
FUND MANAGEMENT ORGANIZATIONS ........................... 5
The Trustees ........................................... 5
The Manager: Liberty Advisory Services Corp.
(LASC) .............................................. 6
LASC's Sub-Adviser ..................................... 6
FUND SERVICE ORGANIZATIONS .............................. 6
Custodians ............................................. 6
Independent Accountants: Price Waterhouse LLP .......... 6
OTHER CONSIDERATIONS .................................... 7
Expenses of the Fund ................................... 7
Purchases and Redemptions .............................. 7
Investment Return ...................................... 7
Net Asset Value ........................................ 7
Distributions .......................................... 8
Taxes .................................................. 8
Shareholder Communications ............................. 9
Organization, Meetings, and Voting Rights .............. 9
Additional Information ................................. 9

</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
OTHER INVESTMENT PRACTICES, RISK
CONSIDERATIONS AND POLICIES OF THE FUND ................ 9
Short-Term Trading ..................................... 9
Certain Investment Considerations Pertaining to
Government Debt Securities .......................... 10
Cash Reserves and Repurchase Agreements ................ 10
Forward Commitments and When-Issued Securities;
Dollar Roll Transactions ............................ 10
Foreign Securities ..................................... 11
Mortgage-Backed Securities ............................. 11
Collateralized Mortgage Obligations (CMOs) and
Real Estate Mortgage Investment Conduits
(REMICs) ............................................ 12
Certain Derivative Investments ......................... 12
Zero-Coupon Bonds ...................................... 13
Lower Rated Debt Securities ............................ 13
Leverage Risks Associated with Certain Investment
Techniques ........................................... 13
Certain Policies to Reduce Risk ........................ 13
CHANGES TO INVESTMENT OBJECTIVE AND
NON-FUNDAMENTAL POLICIES ............................. 14
APPENDIX A: Description of Bond Ratings ................. A-1
APPENDIX B: Schedule of Portfolio Asset Composition
by Rating for 1997 ................................... B-1
</TABLE>

<PAGE>

THE FUND

The Fund is one of a series of separate portfolios of the Trust. The Trust is
an open-end management investment company currently consisting of nine series.
The Fund is a diversified fund. The Trust issues shares of beneficial interest
in the Fund that represent interests in a separate portfolio of securities and
other assets. The Trust may add or delete series from time to time.

The prospectuses of the separate accounts of the Participating Insurance
Companies describe which Funds are available to the separate accounts offering
the VA contracts and VLI policies. The Trust assumes no responsibility for
those prospectuses. However, Liberty Advisory Services Corp. (formerly named
"Keyport Advisory Services Corp.") ("LASC") and the Board of Trustees of the
Trust ("Board of Trustees") monitor events to identify any material conflicts
that may arise between the interests of the Participating Insurance Companies
or between the interests of owners of VA contracts and VLI policies. The Fund
currently does not foresee any disadvantages to the owners of VA contracts and
VLI policies arising from the fact that certain interests of the owners may
differ. The Statement of Additional Information contains additional information
regarding such differing interests and related risks.

LASC provides investment management and advisory services to the Fund pursuant
to its Management Agreement with the Trust.

Colonial Management Associates, Inc. ("Colonial") sub-advises the Fund pursuant
to a separate Sub-Advisory Agreement (the "Colonial Sub-Advisory Agreement")
with the Fund and LASC.

LASC, Colonial and LFII are wholly-owned indirect subsidiaries of Liberty
Financial Companies, Inc. ("LFC"). As of March 31, 1997, approximately 72.3% of
the combined voting power of LFC's issued and outstanding voting stock was
held, indirectly, by Liberty Mutual Insurance Company ("Liberty Mutual").
Liberty Life is a subsidiary of Liberty Mutual.

<PAGE>

FINANCIAL HIGHLIGHTS

The table below presents certain financial information for the Fund for the
period beginning with the Fund's commencement of operations July 5, 1994 and
ended December 31, 1997. This information through the fiscal year ended
December 31, 1997 has been audited and reported on by the Fund's independent
accountants, Price Waterhouse LLP, whose report thereon appears in the Fund's
annual report to shareholders for the fiscal year ended December 31, 1997
(which may be obtained without charge from LFII or from the Participating
Insurance Company issuing the applicable VA contract or VLI policy) and is
incorporated by reference into the Statement of Additional Information. The
Fund's total return presented below does not reflect the cost of insurance and
other insurance company separate account charges which vary with the VA
contracts and VLI policies offered through the separate accounts of
Participating Insurance Companies.

<TABLE>
<CAPTION>
Year Ended
December 31,
----------------
1997
----------------
<S> <C>
Per share operating performance:
Net asset value, beginning of period ............................. $ 11.04
-------
Net investment income (a) ........................................ 0.90
Net realized and unrealized gains (losses) on investments and
foreign currency transactions ................................... 0.11
-------
Total from investment operations ................................. 1.01
-------
Less distributions from:
Dividends from net investment income ............................ (0.79)
In excess of net investment income .............................. (0.05)
Dividends from net realized gains on investments ................ (0.05)
In excess of net realized gains ................................. (0.01)
-------
Total distributions .............................................. (0.90)
-------
Net asset value, end of period ................................... $ 11.15
=======
Total return:
Total investment return (b) (c) .................................. 9.11%
Ratios/supplemental data:
Net assets, end of period (000) .................................. $73,715
Ratio of net expenses to average net assets (e) .................. 0.80%(d)
Ratio of net investment income to average net assets (c) ......... 7.86%(d)
Portfolio turnover ratio ......................................... 94%

<CAPTION>
Year Ended December 31,
------------------------------------------------
1996 1995 1994***
---------------- ---------------- --------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ............................. $ 10.99 $ 9.79 $ 10.00
------- ------- -------
Net investment income (a) ........................................ 0.92 0.55 0.30
Net realized and unrealized gains (losses) on investments and
foreign currency transactions ................................... 0.16 1.24 (0.19)
------- ------- -------
Total from investment operations ................................. 1.08 1.79 0.11
------- ------- -------
Less distributions from:
Dividends from net investment income ............................ (0.96) (0.56) (0.31)
In excess of net investment income .............................. -- -- --
Dividends from net realized gains on investments ................ (0.07) (0.03) (0.01)
In excess of net realized gains ................................. -- -- --
------- ------- -------
Total distributions .............................................. (1.03) (0.59) (0.32)
------- ------- -------
Net asset value, end of period ................................... $ 11.04 $ 10.99 $ 9.79
======= ======= =======
Total return:
Total investment return (b) (c) .................................. 9.83% 18.30% 1.10%**
Ratios/supplemental data:
Net assets, end of period (000) .................................. $53,393 $48,334 $13,342
Ratio of net expenses to average net assets (e) .................. 0.80%(d) 0.84%(d) 1.00%*
Ratio of net investment income to average net assets (c) ......... 8.13%(d) 8.08%(d) 7.33%*
Portfolio turnover ratio ......................................... 114% 281% 94%**
</TABLE>

- --------------------------------
* Annualized
** Not Annualized
*** For the period from the commencement of operations (July 5, 1994) to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to LASC's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, these ratios would have been 0.82%, 0.86%, 0.94%
and 1.60% (annualized), respectively.

Further information about the performance of the Fund is contained in the
Trust's annual report to shareholders for the period ended December 31, 1997,
which may be obtained without charge from LFII or from the Participating
Insurance Company issuing the applicable VA contract or VLI policy.

4
<PAGE>

HOW THE FUND INVESTS

All investments, including mutual funds, have risks, and no one mutual fund is
suitable for all investors. No one Fund by itself constitutes a complete
investment program. The net asset value of the shares of the Fund will vary
with market conditions and there can be no guarantee that the Fund will achieve
its investment objective.

More information about the portfolio securities in which the Fund invests,
including certain risks and investment limitations, is provided in the
Statement of Additional Information.

Investment Objective. The Fund seeks a high level of current income, as is
consistent with prudent risk and maximizing total return, by diversifying
investments primarily in U.S. and foreign government and lower rated corporate
debt securities.

Investment Program. The Fund will seek to achieve its objective by investing
its assets in each of the following sectors of the debt securities markets: (i)
U.S. Government securities; (ii) debt securities issued by foreign governments
and their political subdivisions; and (iii) lower rated corporate debt
securities, some of which may involve equity features. The Fund may invest in
debt securities of any maturity. The allocation of investments among these
types of securities at any given time is based on Colonial's estimate of
expected performance and risk of each type of investment. The value of debt
securities (and thus of Fund shares) usually will fluctuate inversely to
changes in interest rates.

The U.S. Government securities in which the Fund invests include (1) U.S.
Treasury obligations; (2) obligations issued or guaranteed by U.S. Government
agencies and instrumentalities ("Agencies") which are supported by (a) the full
faith and credit of the U.S. Government, (b) the right of the issuer or
guarantor to borrow an amount limited to a line of credit with the U.S.
Treasury, (c) discretionary power of the U.S. Government to purchase
obligations of the Agencies, or (d) the credit of the Agencies; (3) real estate
mortgage investment conduits ("REMICs"), and collateralized mortgage
obligations ("CMOs"), including privately issued asset-backed securities and
privately issued mortgage-backed securities guaranteed by an Agency; (4)
"when-issued" commitments relating to the foregoing; and (5) certain high
quality U.S. Government money market instruments, including repurchase
agreements ("REPOs") collateralized by U.S. Government Securities. The Fund may
invest in U.S. Government Securities of any maturity and in zero coupon
securities. The Fund also may invest in certificates representing undivided
interests in the interest or principal of mortgage-backed securities (interest
only/principal only), which tend to be more volatile than other types of
securities. See "OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES
OF THE FUND: Mortgage-Backed Securities."

The Fund may invest any portion of its assets in securities issued or
guaranteed by foreign governments. For a discussion of certain special risks
and other considerations pertaining to investments in foreign securities
applicable to the Fund, see "OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS
AND POLICIES OF THE FUND: Foreign Securities."

The Fund may purchase lower rated debt securities (commonly referred to as junk
bonds), including bonds in the lowest rating categories (C for Moody's and D
for S&P) and unrated bonds. The lowest rating categories include bonds which
are in default. Because these securities are regarded as predominantly
speculative as to payment of principal and interest, the Fund will not purchase
the debt securities of a single issuer rated Ca by Moody's or CC by S&P or
lower or comparable unrated securities if, as a result, holdings of that issuer
exceed 0.5% of the Fund's net assets. Lower rated bonds are those rated lower
than Baa by Moody's or BBB by S&P, or comparable unrated securities. For a
discussion of certain risks and other considerations pertaining to investments
in lower rated bonds, see "OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND
POLICIES OF THE FUND: High Yield, High Risk Bonds." Appendix A to this
Prospectus provides a description of bond ratings.

The Fund may purchase and sell U.S. and foreign interest rate futures contracts
and options thereon to hedge against changes in interest rates. See "OTHER
INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUND: Certain
Derivative Investments." The Fund will engage in such activities only with
respect to securities it may otherwise purchase or indices composed of such
securities.

FUND MANAGEMENT ORGANIZATIONS

The Trustees

The business of the Trust and the Fund is supervised by the Trust's Board of
Trustees. The Statement of Additional Informa-tion contains the names of and
biographical information on the Trustees.

<PAGE>

The Manager: Liberty Advisory Services Corp. (LASC)

LASC, 125 High Street, Boston Massachusetts 02110, is the manager of the Trust.
LASC was incorporated on January 8, 1993 under the laws of the Commonwealth of
Massachusetts.

In accordance with its Management Agreement with the Fund, LASC designs and
supervises a continuous investment program for the Fund, evaluates, recommends,
and monitors its Sub-Adviser's performance, investment program, and compliance
with applicable laws and regulations, and recommends to the Board of Trustees
whether its Sub-Adviser's contract should be continued or modified and whether
a new sub-adviser or multiple sub-advisers should be added or deleted. LASC is
also responsible for administering the Fund's operations, including the
provision of office space and equipment in connection with the maintenance of
the Fund's headquarters, preparation and filing of required reports,
arrangements for Trustees' and shareholders' meetings, maintenance of the
Fund's corporate books and records, communications with shareholders, and
oversight of custodial, accounting and other services provided to the Fund by
others. In accordance with its Management Agreement with the Fund, LASC may, at
its own expense, delegate the performance of certain of its administrative
responsibilities to its affiliate LFC, or any of LFC's majority-owned
subsidiaries. LASC has delegated its administrative responsibilities to
Colonial in accordance with this authority. LASC, or its affiliates, pay all
compensation of the Fund's directors and officers who are employees of LASC or
its affiliates.

The Trust pays LASC a management fee, accrued daily and paid monthly, at a
maximum annual rate of 0.65% of the average daily net assets of the Fund.

LASC's Sub-Adviser

Colonial

LASC, out of the management fee it receives from the Fund, pays Colonial
sub-advisory fees at the annual rate of 0.45% of the average daily net assets
of the Fund.

Under the Colonial Sub-Advisory Agreements, Colonial manages the assets of the
Fund in accordance with the Fund's investment objective, investment program,
policies, and restrictions under the supervision of LASC and the Board of
Trustees. Colonial determines which securities and other instruments are
purchased and sold for the Fund. Colonial also provides transfer agency and
certain pricing and record keeping services for the Fund under a separate
agreement.

Carl C. Ericson has managed the Strategic Income Fund since its inception. Mr.
Ericson, a Senior Vice President of Colonial and director of Colonial's Taxable
Fixed Income Group, has managed the Colonial Strategic Income Fund since 1991
and various other Colonial taxable income funds since 1985.

FUND SERVICE ORGANIZATIONS

Custodians

At the date of this Prospectus, Boston Safe Deposit and Trust Company, One
Boston Place, Boston Massachusetts is the custodian for the Fund. The Chase
Manhattan Bank, 3 Chase Metro Tech Center, Brooklyn, New York 11245 is expected
to become the custodian for the Fund on or about May 15, 1998. Foreign
securities are maintained in the custody of foreign branches of U.S. banks,
foreign banks and foreign trust companies that are members of the custodian's
global custody network or foreign depositories used by such members.

Independent Accountants: Price Waterhouse LLP

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110 are the
Trust's independent accountants.

<PAGE>

OTHER CONSIDERATIONS

Expenses of the Fund

The Fund generally will pay all its expenses, other than those borne by LASC
and Colonial. LASC has agreed to reimburse all expenses, including management
fees, but excluding interest, taxes, brokerage, and other expenses which are
capitalized in accordance with accepted accounting procedures, and
extraordinary expenses, incurred by the Fund in excess of 0.80% of average net
asset value per annum, for the period beginning May 1, 1998 until April 30,
1999.

The expenses payable by the Fund include, among other things, the management
fee payable to LASC, described above; fees for services of independent
accountants; consultant fees; legal fees; transfer agent, custodian and
portfolio record keeping and tax information services fees; fees for pricing
and record keeping services, and of equipment for communication among the
Fund's custodians, LASC, Colonial and others; taxes and fees for the
preparation of the Fund's tax returns; brokerage fees and commissions;
interest; costs of Board of Trustees and shareholder meetings; cost of updates
and printing of prospectuses and reports to shareholders; fees for filing
reports with regulatory bodies and the maintenance of the Fund's existence;
membership dues for industry trade associations; fees to federal authorities
for the registration of the shares of the Funds; fees and expenses of Trustees
who are not directors, officers, employees or stockholders of LASC, Colonial,
Stein Roe, Newport, LAMCO, LAMCO's Portfolio Managers or their affiliates;
insurance and fidelity bond premiums; and other extraordinary expenses of a
non-recurring nature.

It is the policy of the Trust that expenses directly charged or attributable to
the Fund will be paid from the assets of the Fund. General expenses of the
Trust will be allocated among and charged to the assets of each series of the
Trust, including the Fund, on a basis that the Board of Trustees deems fair and
equitable, which may be based on the relative assets of each series or the
nature of the services performed and their relative applicability to the
series.

Purchases and Redemptions

The Participating Insurance Companies place daily orders to purchase and redeem
shares of each Fund based on, among other things, the net amount of purchase
payments to be invested and surrender and transfer requests to be effected on
that day pursuant to the VA contracts and VLI policies, including deductions
for fees and charges by the applicable insurance company separate account. The
Trust continuously offers and redeems shares at net asset value without the
addition of any selling commission, sales load or redemption charge. Shares are
sold and redeemed at their net asset value as next determined after receipt of
purchase payments or redemption requests, respectively, by the separate
accounts. Similarly, shares are sold or redeemed as a result of such other
transactions under the VA contracts and VLI policies at the net asset value
computed for the day on which such transactions are effected by the separate
accounts. The right of redemption may be suspended or payments postponed
whenever permitted by applicable law and regulations.

Investment Return

Performance information describes the Fund's performance for the period shown
and does not predict future performance. Comparison of the Fund's yield or
total return with those of alternative investments should consider differences
between the Fund and the alternative investments. The Fund's investment
performance figures do not reflect the cost of insurance and the separate
account fees and charges which vary with the VA contracts and VLI policies
offered through the separate accounts of the Participating Insurance Companies,
and which will decrease the return realized by a contract or policyholder.

Net Asset Value

<PAGE>

All assets denominated in foreign currencies are converted to U.S. dollars. The
books and records of the Fund are recorded in U.S. dollars.

Fund securities are valued based on market quotations or, if such quotations
are not available, at fair market value determined in good faith under
procedures established by the Board of Trustees. Investments maturing in 60
days or less are valued at amortized cost.

Distributions

The Fund intends to declare and distribute, as dividends or capital gains
distributions, at least annually, substantially all of its net investment
income and net profits realized from the sale of portfolio securities, if any,
to its shareholders (Participating Insurance Companies' separate accounts). The
net investment income of the Fund consists of all dividends or interest
received by the Fund, less estimated expenses (including the advisory and
administrative fees). The Fund will declare and distribute income dividends
annually. All net short-term and long-term capital gains of each Fund, net of
carry-forward losses, if any, realized during the fiscal year, are declared and
distributed periodically, no less frequently than annually. All dividends and
distributions are reinvested in additional shares of the Fund at net asset
value, as of the record date for the distributions.

Taxes

The Fund intends to elect to be treated and to qualify as a "regulated
investment company" under Subchapter M of the Code. As a result of such
election, for any tax year in which the Fund meets the investment limitations
and the distribution, diversification and other requirements referred to below,
to the extent the Fund distributes its taxable net investment income and its
net realized long-term and short-term capital gains, the Fund will not be
subject to federal income tax, and the income of the Fund will be treated as
the income of its shareholders. Under current law, since the shareholders are
life insurance company "segregated asset accounts," they will not be subject to
income tax currently on this income to the extent such income is applied to
increase the values of VA contracts and VLI policies.

In addition, the Tax Reform Act of 1986 made certain changes to the tax
treatment of regulated investment companies, including the imposition of a
nondeductible 4% excise tax on certain undistributed amounts. To avoid this
tax, the Fund must declare and distribute to its shareholders by the end of
each calendar year at least 98% of ordinary income earned during that calendar
year and at least 98% of capital gain net income, net of carry-forward losses,
if any, realized for the twelve-month period ending October 31 of that year,
plus any remaining undistributed income from the prior year.

The Fund intends to comply with the requirements of Section 817(h) of the Code
and the related regulations issued thereunder by the Treasury Department. These
provisions impose certain diversification requirements affecting the securities
in which the Fund may invest and other limitations. The diversification
requirements of Section 817(h) of the Code are in addition to the
diversification requirements under Subchapter M and the Investment Company Act
of 1940. The consequences of failure to meet the requirements of Section 817(h)
could result in taxation of the Participating Insurance Company offering the VA
contracts and VLI policies and immediate taxation of all owners of the
contracts and policies to the extent of appreciation on investment under the
contracts. The Fund believes it is in compliance with these requirements.

The Fund therefore may find it necessary, and reserves the right to take action
to assure, that a VA contract or VLI policy continues to qualify as an annuity
or insurance contract under federal tax laws. The Fund, for example, may be
required to alter its investment objective or substitute its shares for those
of another fund. No such change of investment objective or substitution of
securities will take place without notice to the contract and policy owners
with interests invested in the Fund and without prior approval of the
Securities and Exchange Commission, or the approval of a majority of such
owners, to the extent legally required.

To the extent the Fund invests in foreign securities, investment income
received by the Fund from sources within foreign countries may be subject to
foreign income taxes withheld at the source. The United States has entered into
tax treaties with

<PAGE>

many foreign countries which entitle the Fund to a reduced tax or exemption
from tax on such income.

It is impossible to determine the effective rate of foreign tax in advance
since the amount of the Fund's assets, if any, to be invested within various
countries will fluctuate and the extent to which tax refunds will be recovered
is uncertain. The Fund intends to operate so as to qualify for treaty-reduced
tax rates where applicable.

The preceding is a brief summary of some relevant tax considerations. This
discussion is not intended as a complete explanation or a substitute for
careful tax planning and consultation with individual tax advisers.

Shareholder Communications

Owners of VA contracts and VLI policies, issued by the Participating Insurance
Companies or for which shares of the Fund are the investment vehicle, receive
from the Participating Insurance Company unaudited semi-annual financial
statements and audited year-end financial statements of the Fund certified by
the Fund's independent auditors. Each report shows the investments owned by the
Fund and provides other information about the Fund and its operations. Copies
of such reports may be obtained from the Participating Insurance Company or the
Secretary of the Fund.

Organization, Meetings, and Voting Rights

The Fund is not required to hold annual meetings and does not intend to do so.
However, special meetings may be called for purposes such as electing Trustees
or approving an amendment to an advisory contract. Shareholders receive one
vote for each Fund share. Shares of the Trust vote together except when
required to vote separately by Fund. Shareholders have the power to remove
Trustees and to call meetings to consider removal.

Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims liability of the
shareholders, the Trustees, or officers of the Trust for acts or obligations of
the Trust, which are binding only on the assets and property of the Trust (or
the Fund) and requires that notice of such disclaimer be given in each
agreement, obligation, or contract entered into or executed by the Trust or the
Board. The Declaration of Trust provides for indemnification out of the Trust's
(or the Fund's) assets for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
believed to be remote because it is limited to circumstances in which the
disclaimer is inoperative and the Trust itself is unable to meet its
obligations. The risk to the Fund of sustaining a loss on account of
liabilities incurred by another fund also is believed to be remote.

Additional Information

This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Trust with the Securities and
Exchange Commission under the Securities Act of 1933. Copies of the
Registration Statement may be obtained from the Commission or may be examined
at the office of the Commission in Washington, D.C.

OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS

A number of the investment policies and techniques referred to below are
subject to certain additional risks described more fully in the Statement of
Additional Information.

Short-Term Trading

<PAGE>

expenses may include brokerage commissions or dealer mark-ups, custodian fees
and other transaction costs on both the sale of securities and the reinvestment
of the proceeds in other securities.

As a result of the Fund's investment policies, under certain market conditions,
the Fund's portfolio turnover rate may be higher than that of other mutual
funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of
purchases or sales of portfolio securities to the monthly average of the value
of portfolio securities, excluding securities whose maturities at acquisition
were one year or less. A 100% turnover rate would occur if all of the
securities in the portfolio were sold and either repurchased or replaced within
one year. Although the Fund cannot predict portfolio turnover rate, it is
estimated that, under normal circumstances, the annual rate for the Fund will
be no greater than 100%. The portfolio turnover rate of the Fund for the period
ended December 31, 1997 is shown under "FINANCIAL HIGHLIGHTS" above. The Fund's
portfolio turnover rate is not a limiting factor when the portfolio manager
considers a change in the Fund's portfolio.

Certain Investment Considerations Pertaining to Government Debt Securities

The Fund may, as part of its normal investment program, invest in U.S.
Government Securities and foreign government debt securities.

While U.S. Government Securities are considered virtually free of default risk,
their values nevertheless generally fluctuate inversely with changes in
interest rates. Further, U.S. Government Securities consisting of
mortgage-backed securities, CMOs or REMICs may decline in value more
substantially than comparable maturity treasury securities given an interest
rate increase, but may not increase in value as much given an interest rate
decline. See "Mortgage-Backed Securities" and "Collateralized Mortgage
Obligations (CMOs) and Real Estate Mortgage Investment Conduits (REMICs)"
below.

The values of foreign government debt securities generally fluctuate inversely
with changes in interest rates in the countries where the securities are
issued. Foreign government debt securities are also subject generally to the
additional special risks and other considerations pertaining to investments in
foreign securities discussed below under "Foreign Securities."

Cash Reserves and Repurchase Agreements

The Fund may invest temporarily available cash in U.S. dollar denominated money
market instruments. Such money market instruments will be limited to
high-quality securities rated within the two highest credit categories by any
nationally recognized securities rating organization or, if not rated, of
comparable investment quality as determined by the portfolio manager. Such
domestic money market instruments may include: U.S. Government securities;
certificates of deposit; bankers' acceptances; bank time deposits; commercial
paper; short-term corporate debt securities; and repurchase agreements with a
securities dealer or bank. In these repurchase transactions, the underlying
security, which is held by the custodian through the federal book-entry system
for the Fund as collateral, will be marked to market on a daily basis to ensure
full collateralization of the repurchase agreement. In the event of a
bankruptcy or default of certain sellers of repurchase agreements, the Fund
could experience costs and delays in liquidating the underlying security and
might incur a loss if such collateral held declines in value during this
period. Not more than 15% of the Fund's total assets will be invested in
repurchase agreements maturing in more than seven days and other illiquid
assets.

Forward Commitments and When-Issued Securities; Dollar Roll Transactions

The Fund may purchase securities on a when-issued, delayed delivery, or forward
commitment basis. When such transactions are negotiated, the price of such
securities is fixed at the time of the commitment, but delivery and payment for
the securities may take place up to 120 days after the date of the commitment
to purchase. The securities so purchased are subject to market fluctuation, and
no interest accrues to the purchaser during this period. When-issued securities
or forward commitments involve a risk of loss if the value of the security to
be purchased declines prior to the settlement date. Colonial and Stein Roe do
not believe that the net asset value or income of the Funds will be adversely
affected by the purchase of securities on a when-issued or forward commitment
basis. The Funds will not enter into such transactions for leverage (borrowing)
purposes.

The Fund may enter into dollar roll transactions. A dollar roll transaction
involves a sale by the Fund of securities that it holds with an agreement by
the Fund to repurchase substantially similar securities at an agreed upon price
and date. During the period between the sale and repurchase, the Fund will not
be entitled to accrue interest and receive principal payments on the securities
sold. 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 securities under a 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.

<PAGE>

Foreign Securities

The Fund may invest any portion of its assets in securities issued or
guaranteed by foreign governments. Investments in foreign securities include
sovereign risks and risks pertaining to the local economy in the country or
countries in which the foreign issuer conducts business. Investments in foreign
securities also involve certain risks that are not typically associated with
investing in domestic issuers, including: (i) foreign securities traded for
foreign currencies and/or denominated in foreign currencies may be affected
favorably or unfavorably by changes in currency exchange rates and exchange
control regulations, and the Fund may incur costs in connection with
conversions between various currencies; (ii) less publicly available
information about the securities and about the foreign company or government
issuing them; (iii) less comprehensive accounting, auditing, and financial
reporting standards, practices, and requirements; (iv) securities markets
outside the United States may be less developed or efficient than those in the
United States and government supervision and regulation of those securities
markets and brokers and the issuers in those markets is less comprehensive than
that in the United States; (v) the securities of some foreign issuers may be
less liquid and more volatile than securities of comparable domestic issuers;
(vi) settlement of transactions with respect to foreign securities may
sometimes be delayed beyond periods customary in the United States; (vii) fixed
brokerage commissions on certain foreign securities exchanges and custodial
costs with respect to securities of foreign issuers generally exceed domestic
costs; and (viii) with respect to some countries, there is the possibility of
unfavorable changes in investment or exchange control regulations,
expropriation, or confiscatory taxation, taxation at the source of the income
payment or dividend distribution, difficulties in enforcing judgments,
limitations on the removal of funds or other assets of the Fund, political or
social instability, or diplomatic developments that could adversely affect
United States investments in those countries. The Fund's investments in foreign
securities may include investments in securities issued or guaranteed by
companies or governments located in countries whose economies or securities
markets are not yet highly developed. Special risks associated with these
investments (in addition to the considerations regarding foreign investments
generally) may include, among others, greater political uncertainties, an
economy's dependence on revenues from particular commodities or on
international aid or development assistance, volatile debt burdens or inflation
rates, currency transfer restrictions, limited numbers of potential buyers for
such securities, restrictions or repatriation of capital and delays and
disruptions in securities settlement procedures.

Foreign Currency Transactions. Transactions in foreign securities include
currency conversion costs. The Fund may engage in currency exchange
transactions to convert currencies to or from U.S. dollars. The Fund may
purchase or sell foreign currencies on a spot or forward basis. Such
transactions will be entered into (i) to lock in a particular foreign exchange
rate pending settlement of a purchase or sale of a foreign security or pending
the receipt of interest, principal or dividend payments on a foreign security
held by the Fund, or (ii) to hedge against a decline in the value, in U.S.
dollars or in another currency, of a foreign currency in which securities held
by the Fund are denominated.

The Fund also may buy and sell, for hedging purposes, currency options,
currency futures and options on currency futures.

Mortgage-Backed Securities

The Fund may invest in mortgage-backed securities, which are securities
representing interests in pools of mortgages. Principal and interest payments
made on the mortgages in the pools are passed through to the holder of such
securities. Payment of principal and interest on some mortgage-backed
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case of
securities guaranteed by Government National Mortgage Association ("GNMA")), or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the Federal National Mortgage Association ("FNMA")
or Federal Home Loan Mortgage Corporation ("FHLMC"). Mortgage-backed securities
created by non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers, and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit, which may be issued by governmental entities, private
insurers, or the mortgage poolers. The Fund will only invest in mortgage-backed
securities that are issued or guaranteed by governmental entities.

<PAGE>

mortgage-related security generally will decline; however, when interest rates
are declining, the value of mortgage-related securities with prepayment
features may not increase as much as other fixed-income securities. This is
because the mortgages underlying the securities can be prepaid, and prepayment
rates tend to increase as interest rates decline (effectively shortening the
mortgage-backed security's maturity) and decrease as interest rates rise
(effectively lengthening the mortgage-backed security's maturity).

The Fund also may invest in certificates representing undivided interests in
the interest or principal of mortgage-backed securities
(interest-only/principal-only securities). These securities tend to be more
volatile than other types of debt securities. The interest-only class involves
the risk of loss of the entire value of the investment if the underlying
mortgages are prepaid. In the case of principal-only class securities, the Fund
recognizes (accrues) as income for accounting purposes a portion of the
difference between purchase price and face value. Because the Fund includes
this accrued income in calculating its dividend even though it has not received
payment, the Fund may have to sell other investments to obtain cash needed to
make income distributions.

Collateralized Mortgage Obligations (CMOs) and Real Estate Mortgage Investment
Conduits (REMICs)

The Fund may invest in CMOs and REMICs of investment grade or considered by
Colonial to be of comparable quality. CMOs and REMICs are debt securities
issued by special-purpose trusts collateralized by underlying mortgage loans or
pools of mortgage-backed securities guaranteed by GNMA, FHLMC, or FNMA. CMOs
and REMICs may be issued by agencies or instrumentalities of the U.S.
Government, or by private originators of, or investors in mortgage loans,
including depository institutions, mortgage banks, investment banks and
special-purpose subsidiaries of the foregoing.

CMOs and REMICs are not, however, "mortgage pass-through" securities, such as
those described above under "Mortgage-Backed Securities." Rather they are
pay-through securities--i.e., securities backed by the cash flow from the
underlying mortgages. Investors in CMOs and REMICs are not owners of the
underlying mortgages, which serve as collateral for such debt securities, but
are simply owners of a fixed-income security backed by such pledged assets.
CMOs and REMICs typically are structured into multiple classes, with each class
bearing a different stated maturity and having different payment streams. One
class (the Residual) is in the nature of equity. The Fund will not invest in
the Residual class. Although the structures of CMOs and REMICs vary greatly,
monthly payments of principal, including prepayments, typically are first
returned to the investors holding the shortest maturity class; investors
holding longer maturity classes typically receive principal payments only after
the shorter class or classes have been retired. The Fund may experience costs
and delays in liquidating the collateral if the issuer defaults or enters
bankruptcy and may incur a loss. Principal on a REMIC, CMO or other
mortgage-backed security may be prepaid if the underlying mortgages are
prepaid. Because of the prepayment feature these investments may not increase
in value when interest rates fall. The Fund may be able to invest prepaid
principal only at lower yields. The prepayment of REMICs, CMOs or other
mortgage-backed securities purchased at a premium may result in losses equal to
the premium.

Certain Derivative Investments

As specified above under "HOW THE FUND INVESTS," the Fund may invest in U.S.
and foreign interest rate futures contracts and options thereon to hedge
against interest rate changes.

An interest rate futures contract creates an obligation by the seller to sell
and the purchaser to buy an amount of cash equal to a specified cash amount
multiplied by the difference between the value of a specified interest rate
index at the contract's settlement date and the benchmark index value at which
the contract is made. A sale of a futures contract can be terminated in advance
of the settlement date by subsequently purchasing a similar offsetting
(opposite way) contract. Similarly, a purchase of a futures contract can be
terminated by a similar offsetting sale. Gain or loss on a futures contract
generally is realized upon such termination.

An option generally gives the option holder the right, but not the obligation,
to purchase or sell a futures contract prior to the option's specified
expiration date. A call option gives the option purchaser the right to buy from
the option seller (writer); a put option gives the option purchaser the right
to sell to the option writer. The Fund will pay a premium to purchase an
option, which will become a loss if the option expires unexercised.

With respect to each futures contract purchased, the Fund will set aside in a
segregated account maintained with its custodian (or broker, if legally
permitted) cash or liquid securities in an amount equal to the market value of
the futures contract or option, less the initial margin deposit.

Transactions in futures and options may not precisely achieve the goals of
hedging, gaining or maintaining market exposure or increasing returns, as
applicable, to the extent there is an imperfect correlation between the price
movements of the futures contracts or options and of the underlying securities.
In addition, if the portfolio manager's prediction on stock or bond market
movements or changes in interest rates is inaccurate, the Fund may be worse off
than if it had not used such derivative investment techniques.

For more information on these derivative investments, see "DESCRIPTION OF
CERTAIN INVESTMENTS: Futures Contracts and Related Options" and "--Options on
Securities" in the Statement of Additional Information.

<PAGE>

Zero-Coupon Bonds

The Fund may invest in zero-coupon bonds. Such bonds may be issued directly by
agencies and instrumentalities of the U.S. Government or by private
corporations. Zero-coupon bonds may originate as such or may be created by
stripping an outstanding bond. Zero-coupon bonds do not make regular interest
payments. Instead, they are sold at a deep discount from their face value.
Because a zero-coupon bond does not pay current income, its price can be very
volatile when interest rates change. In calculating its dividend, the Fund
takes into account as income a portion of the difference between a zero-coupon
bond's purchase price and its face value. Thus, the Fund may have to sell other
investments to obtain cash needed to make income distributions.

Lower Rated Debt Securities

The Fund may invest a significant portion of its assets in lower rated bonds
(commonly referred to as "junk bonds") which are regarded as speculative as to
payment of principal and interest. Relative to comparable securities of higher
quality:

1. The market price is likely to be more volatile because:

a. an economic downturn or increased interest rates may have a more
significant effect on the yield, price and potential for default;

b. the secondary market may at times become less liquid or respond to
adverse publicity or investor perceptions, increasing the difficulty in
valuing or disposing of the bonds;

c. existing or future legislation limits and may further limit (i)
investment by certain institutions and (ii) tax deductibility of the
interest by the issuer, which may adversely affect value; and

d. certain lower rated debt securities do not pay interest in cash on a
current basis. However, the Fund will accrue and distribute this interest
on a current basis, and may have to sell securities to generate cash for
distributions.

2. The Fund's achievement of its investment objectives in respect of
investments in lower rated debt securities is more dependent on Colonial's
credit analysis.

3. Lower rated debt securities are less sensitive to interest rate changes but
are more sensitive to adverse economic developments.

Leverage Risks Associated with Certain Investment Techniques

Certain investment techniques used by the Fund and described above may present
additional risks associated with the use of leverage. These techniques are
forward commitments and the purchase of securities on a when-issued basis, the
purchase and sale of foreign currency on a forward basis, the purchase and sale
of certain futures contracts and options thereon, and the purchase and sale of
certain options. Leverage may magnify the effect on Fund shares of fluctuations
in the values of the securities underlying these transactions. In accordance
with Securities and Exchange Commission pronouncements, to reduce (but not
necessarily eliminate) leverage, the Fund will either "cover" its obligations
under such transactions by holding the securities or other commodities (or
rights to acquire the securities or such commodities) it is obligated to
deliver under such transactions, or deposit and maintain in segregated account
with its custodian cash, liquid securities, or securities denominated in the
particular foreign currency, equal in value to the Fund's obligations under
such transactions.

Certain Policies to Reduce Risk

The Fund has adopted certain fundamental investment policies in managing its
portfolio that are designed to maintain the portfolio's diversity and reduce
risk. The Fund will not: (i) with respect to 75% of its total assets, invest in
more than 10% of the outstanding voting securities of any one issuer or invest
more than 5% of its total assets in the securities of any one issuer; or (ii)
borrow money except temporarily from banks to facilitate redemption requests
that might otherwise require untimely disposition of portfolio securities and
in amounts not exceeding 10% of the Fund's total assets. Limitation (i) does
not apply to U.S. Government securities. The investment policies

described above in this paragraph are fundamental and may be changed only by
approval of the Fund's shareholders.

It is the Fund's policy that when its portfolio manager deems a temporary
defensive position advisable, the Fund may invest, without limitation (i.e., up
to 100% of its assets), in high-quality fixed-income securities, or hold assets
in cash or cash equivalents, to the extent such portfolio manager believes such
alternative investments to be less risky than those securities in which the
Fund normally invests.

Additional investment restrictions are set forth in the Statement of Additional
Information.

<PAGE>

CHANGES TO INVESTMENT OBJECTIVE AND NON-FUNDAMENTAL POLICIES

14
<PAGE>

APPENDIX A

Description of Bond Ratings

The ratings of certain debt instruments in which the Fund may invest are
described below:

Standard and Poor's Corporation--Bond Ratings

AAA bonds have the highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.

AA bonds have a very strong capacity to pay interest and repay principal, and
they differ from AAA only in small degree.

A bonds have a strong capacity to pay interest and repay principal, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB bonds are regarded as having an adequate capacity to pay interest and repay
principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal than for bonds in
the A category.

BB, B, CCC and CC bonds are regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation. BB indicates the lowest degree of speculation and
CC the highest degree. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
large exposures to adverse conditions.

C ratings are reserved for income bonds on which no interest is being paid.

D bonds are in default, and payment of interest and/or principal is in arrears.

Plus (+) or minus (-) are modifiers relative to the standing within the major
rating categories.

Moody's Investors Service, Inc.--Bond Ratings

Aaa bonds are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.

Aa bonds are judged to be of high quality by all standards. Together with Aaa
bonds they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. Those bonds in
the Aa through B groups which Moody's believes possess the strongest investment
attributes are designated by the symbol Aa1, A1 and Baa1.

A bonds possess many favorable investment attributes and are to be considered
as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.

Baa bonds are considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.

Ba bonds are judged to have speculative elements; their future cannot be
considered as well secured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.

B bonds generally lack characteristics of the desirable investment. Assurance
of interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.

Caa bonds are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.

Ca bonds represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings.

C bonds are the lowest rated class of bonds and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.

A-1
<PAGE>

APPENDIX B

Colonial Strategic Income Fund, Variable Series--Schedule of Portfolio Asset
Composition by Rating For 1997

<TABLE>
<CAPTION>
Month
-----------------------------------------------------
January February March April May
Rating --------- ---------- ---------- ---------- ----------
(percentage of portfolio)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aaa/AAA ..... 34.5% 37.7% 40.0% 43.0% 42.2%
Aa/AA ....... 18.2% 14.4% 12.3% 10.8% 12.5%
A/A ......... 0.0% 0.0% 0.0% 0.0% 0.0%
Baa/BBB ..... 1.1% 0.0% 0.0% 0.0% 3.1%
Ba/BB ....... 10.3% 11.9% 12.1% 10.3% 9.0%
B/B ......... 31.9% 32.5% 32.3% 31.1% 28.5%
Caa/CCC ..... 4.0% 3.6% 3.4% 1.9% 1.9%
Ca/CC ....... 0.0% 0.0% 0.0% 0.0% 0.0%
C ........... 0.0% 0.0% 0.0% 0.0% 0.0%
D ........... 0.0% 0.0% 0.0% 0.0% 0.0%
Unrated ..... 0.0% 0.0% 0.0% 2.9% 2.9%
----- ----- ----- ----- -----
Total ....... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====

<CAPTION>
Month
---------------------------------------------------------------------------
June July August September October November December
Rating ---------- ---------- ---------- ----------- --------- ---------- ---------
(percentage of portfolio)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aaa/AAA ..... 36.8% 38.6% 36.7% 40.9% 50.8% 44.9% 43.5%
Aa/AA ....... 12.5% 10.5% 10.2% 8.6% 5.6% 8.8% 8.2%
A/A ......... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Baa/BBB ..... 3.1% 2.4% 3.2% 3.1% 2.9% 3.0% 2.9%
Ba/BB ....... 11.9% 14.0% 15.4% 13.8% 11.1% 7.9% 7.3%
B/B ......... 31.4% 33.0% 33.0% 32.2% 28.9% 34.3% 36.6%
Caa/CCC ..... 2.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.8%
Ca/CC ....... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
C ........... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
D ........... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Unrated ..... 1.5% 1.4% 1.4% 1.4% 0.8% 0.8% 0.7%
----- ----- ----- ----- ----- ----- -----
Total ....... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== =====
</TABLE>

<TABLE>
<CAPTION>
1997
(percentage of portfolio)
Rating --------------------------
<S> <C>
Aaa/AAA ......... 40.8%
Aa/AA ........... 11.1%
A/A ............. 0.0%
Baa/BBB ......... 2.1%
Ba/BB ........... 11.3%
B/B ............. 32.1%
Caa/CCC ......... 1.6%
Ca/CC ........... 0.0%
C ............... 0.0%
D ............... 0.0%
Unrated ......... 1.1%
-----
Total ........... 100.0%
=====
</TABLE>

B-1
<PAGE>

Distributed by:
Liberty Financial Investments, Inc.
One Financial Center, Boston, MA 02111-2621

<PAGE>

Distributed by:
Liberty Financial Investments, Inc.
One Financial Center, Boston, MA 02111-2621

VA Contract and VLI Policy Service Hotline
800-367-3653 (Option 3)
Keyline 800-367-3654