KEYPORT VARIABLE INVESTMENT TRUST, 485APOS, 1998-03-04

KEYPORT VARIABLE INVESTMENT TRUST
485APOS, 1998-03-04

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File No. 33-59216
File No. 811-7556

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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]

PRE-EFFECTIVE AMENDMENT NO. __ [ ]
POST-EFFECTIVE AMENDMENT NO. 11 [X]

and/or

REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 12 [X]

(check appropriate box or boxes)

LIBERTY VARIABLE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)

Federal Reserve Plaza, 600 Atlantic Avenue,
Boston, Massachusetts 02210

Registrant's Telephone Number Including Area Code: (617) 722-6000

JOHN A. BENNING, ESQ.
Senior Vice President and General Counsel
Liberty Financial Companies, Inc.
Federal Reserve Plaza, 600 Atlantic Avenue
(Name and Address of Agent for Service)

<PAGE>

Approximate Date of Proposed Public Offering:

It is proposed that this filing become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485

[ ] on November 15, 1997 pursuant to paragraph (b) of Rule 485

[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485

[ ] on _____ pursuant to paragraph (a)(i) of Rule 485

[X] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485

[ ] on _____ pursuant to paragraph (a)(ii) of Rule 485

An indefinite number of shares of beneficial interest of all existing and
subsequently created series of the Trust under the Securities Act of 1933 were
registered by the Registration Statement filed on March 8, 1993 under the
Securities Act of 1933 pursuant to Rule 24f-2. A Rule 24f-2 Notice with respect
to the fiscal year ended December 31, 1997 was filed on or about February 27,
1998.

<PAGE>

LIBERTY VARIABLE INVESTMENT TRUST (to
CROSS REFERENCE SHEET
(as required by Rule 481(a))

<TABLE>
<S> <C>
PART A

FORM N-1A LOCATION

1. Cover Page Cover Page

2. Synopsis The Trust

3. Condensed Financial Information Financial Highlights; Investment Return

4. General Description of Registrant Cover Page; The Trust

5. Management of the Fund Trust Management Organizations

5A. Management's Discussion of Fund Information required by Item 5A is
Performance included in the Registrant's Annual Report for the
year ended December 31, 1996 and the Registrant's
Semi-Annual Report for the six months ended June
30, 1997. As required by said Item 5, the
Registrant undertakes under "Financial Highlights"
in the Prospectus to provide a copy of said Annual
Report and Semi-Annual Report free of charge to
persons requesting the same.

6. Capital Stock and Other Securities The Trust; Other Considerations: Purchases and Redemptions,
Net Asset Value, Distributions, Taxes, Shareholder
Communications, Organization, Meetings and Voting Rights

7. Purchase of Securities Being Offered Other Considerations: Purchases and Redemptions, Net Asset
Value

8. Redemption or Repurchase Other Considerations: Purchases and Redemptions

9. Pending Legal Proceedings Not Applicable

3
<PAGE>

PART B

FORM N-1A LOCATION

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information and History More Facts About the Trust: Mixed and Shared Funding,
Organization

13. Investment Objectives and Policies Investment Restrictions; Description of Certain Investments

14. Management of the Fund Investment Management and Other Services; More Facts About
the Trust: Trustees and Officers

15. Control Persons and Principal More Facts About the Trust: Principal
Holders of Securities Holders of Securities

16. Investment Advisory and Other Investment Management and Other Services;
Services More Facts About the Trust: Custodian, Independent
Accountants and Financial Statements

17. Brokers Allocation and Other Other Considerations:
Practices Portfolio Transactions

18. Capital Stock and Other Securities Other Considerations: Expenses of the Funds, Purchases
and Redemptions, Net Asset Value (Part A)

19. Purchase, Redemption and Pricing Other Considerations:
of Securities Being Offered Purchases and Redemptions, Net Asset Value (Part A)

20. Tax Status Other Considerations: Taxes
(Part A)

4
<PAGE>

21. Underwriters Other Considerations: Purchases and Redemptions (Part A)

22. Calculation of Performance Data Investment Performance

23. Financial Statements The financial statements required by item 23 are
incorporated by reference from (i) the Registrant's
Annual Report for the year ended December 31, 1996
and (ii) the Registrant's Semi-Annual Report
for the six months ended June 30, 1997.

</TABLE>

PART C

Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.

<PAGE>

LIBERTY VARIABLE INVESTMENT TRUST
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210

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Liberty Variable Investment Trust (formerly named "Keyport Variable Investment
Trust") ("Trust") is an open-end management investment company that currently
includes nine separate Funds, each with its own investment objective and
policies. This Prospectus contains information about seven of the Funds in the
Trust. The seven Funds and their investment objectives are:

[bullet] Colonial Growth and Income Fund, Variable Series seeks primarily
income and long-term capital growth and, secondarily, preservation of
capital.

[bullet] Stein Roe Global Utilities Fund, Variable Series seeks current income
and long-term growth of capital and income.

[bullet] Colonial Small Cap Value Fund, Variable Series seeks long-term growth,
by investing primarily in smaller capitalization equity securities.

[bullet] Colonial U.S. Stock Fund, Variable Series seeks long-term capital
growth by investing primarily in large capitalization equity
securities.

[bullet] Colonial Strategic Income Fund, Variable Series 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 bonds
(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.

[bullet] Colonial High Yield Securities Fund, Variable Series seeks high
current income and total return by investing primarily in lower rated
corporate debt securities. The Fund may invest up to 100% 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 and therefore the Fund may not be suitable for all investors.
Purchasers should carefully assess the risks associated with an
investment in the Fund.

[bullet] Liberty All-Star Equity Fund, Variable Series seeks total investment
return, comprised of long-term capital appreciation and current
income, through investment primarily in a diversified portfolio of
equity securities.

There is no assurance that the objectives of the Funds will be realized.

Other Funds may be added or deleted from time to time.

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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.

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This Prospectus contains information about the Funds 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 Trust. Please read it carefully and retain it for
future reference.

Additional facts about the Funds are included in a Statement of Additional
Information dated May 19, 1998, incorporated herein by reference, which has
been filed with the Securities and Exchange Commission. For a free copy write
to Keyport Financial Services Corp. at 125 High Street, Boston, Massachusetts
02110 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).

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SHARES OF THE TRUST 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 June 1, 1998

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
THE TRUST .................................................. 3
FINANCIAL HIGHLIGHTS ....................................... 4
THE FUNDS .................................................. 9
Colonial Growth and Income Fund, Variable Series .......... 9
Stein Roe Global Utilities Fund, Variable Series .......... 9
Colonial Small Cap Value Fund, Variable Series ............ 10
Colonial U.S. Stock Fund, Variable Series ................. 10
Colonial Strategic Income Fund, Variable Series ........... 11
Colonial High Yield Securities Fund, Variable Series ...... 11
Liberty All-Star Equity Fund, Variable Series ............. 12
TRUST MANAGEMENT ORGANIZATIONS ............................. 13
The Trustees .............................................. 13
The Manager: Liberty Advisory Services Corp.
(LASC) ................................................. 13
LASC's Sub-Advisers ....................................... 13
TRUST SERVICE ORGANIZATIONS ................................ 15
Custodians ................................................ 15
Independent Accountants: Price Waterhouse LLP ............. 15
OTHER CONSIDERATIONS ....................................... 15
Expenses of the Funds ..................................... 15
Purchases and Redemptions ................................. 16
Investment Return ......................................... 16
Net Asset Value ........................................... 16
Distributions ............................................. 16
Taxes ..................................................... 16
Shareholder Communications ................................ 17

</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Organization, Meetings, and Voting Rights ................. 17
Additional Information .................................... 18
OTHER INVESTMENT PRACTICES, RISK
CONSIDERATIONS AND POLICIES OF THE FUNDS................. 18
Short-Term Trading ........................................ 18
Certain Investment Considerations Pertaining to
Government Debt Securities ............................. 19
Cash Reserves and Repurchase Agreements ................... 19
Forward Commitments and When-Issued Securities;
Dollar Roll Transactions ............................... 19
Securities Lending ........................................ 19
Foreign Securities ........................................ 19
Mortgage-Backed Securities ................................ 21
Collateralized Mortgage Obligations (CMOs) and
Real Estate Mortgage Investment Conduits
(REMICs) ............................................... 21
Certain Derivative Investments ............................ 21
Zero-Coupon Bonds; Pay-in-Kind Securities ................. 22
Lower Rated Bonds ......................................... 22
Leverage Risks Associated with Certain Investment
Techniques ............................................ 23
Certain Policies to Reduce Risk ........................... 23
CHANGES TO INVESTMENT OBJECTIVES AND
NON-FUNDAMENTAL POLICIES ................................ 23
APPENDIX A: Description of Bond Ratings .................... A-1
APPENDIX B: Colonial Strategic Income Fund, Variable
Series -- Schedule of Portfolio Asset Composition by
Rating for 1996 ......................................... B-1
</TABLE>

<PAGE>

THE TRUST

The Trust is an open-end management investment company currently consisting of
nine series, seven of which are offered by this Prospectus: Colonial Growth and
Income Fund, Variable Series ("Growth and Income Fund"), Stein Roe Global
Utilities Fund, Variable Series ("Global Utilities Fund"), Colonial U.S. Stock
Fund, Variable Series ("U.S. Stock Fund"), Colonial Strategic Income Fund,
Variable Series ("Strategic Income Fund"), Colonial Small Cap Value Fund,
Variable Series ("Small Cap Value Fund"), Colonial High Yield Securities,
Variable Series ("High Yield Securities Fund") and Liberty All-Star Equity
Fund, Variable Series ("All-Star Fund") (individually referred to as a "Fund"
or by the abbreviated name indicated, or collectively as the "Funds"). Each
Fund is a diversified fund. The Trust issues shares of beneficial interest in
each Fund that represent interests in a separate portfolio of securities and
other assets. The Trust may add or delete Funds from time to time.

The Trust is the 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 Funds ("Affiliated Participating Insurance Companies"). As of
the date of this Prospectus, such Affiliated Participating Insurance Companies
are Keyport Life Insurance Company ("Keyport"), Independence Life & Annuity
Company ("Independence") and Liberty Life Assurance Company of Boston ("Liberty
Life"). Shares of the Funds 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 Funds. 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 Funds.

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 Trust
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 Funds pursuant
to its Management Agreements with the Trust.

Colonial Management Associates, Inc. ("Colonial") sub-advises five Funds:
Growth and Income Fund, U.S. Stock Fund, Small Cap Value Fund, High Yield
Securities Fund and Strategic Income Fund pursuant to separate Sub-Advisory
Agreements (the "Colonial Sub-Advisory Agreements") with each such Fund and
LASC.

Stein Roe & Farnham Incorporated ("Stein Roe") sub-advises Global Utilities
Fund pursuant to a Sub-Advisory Agreement (the "Stein Roe Sub-Advisory
Agreement") with such Fund and LASC.

Liberty Asset Management Company ("LAMCO") sub-advises All-Star Fund pursuant
to LASC's Management Agreement for such Fund (to which LAMCO is a party).

LASC has delegated various administrative matters to Colonial. Colonial also
provides transfer agency and pricing and record keeping services to the Trust.
Keyport Financial Services Corp. ("KFSC") serves as the principal underwriter
of the Trust with respect to sales of shares to Affiliated Participating
Insurance Companies.

LASC, Colonial, Stein Roe, KFSC, Keyport and Independence are wholly-owned
indirect subsidiaries of Liberty Financial Companies, Inc. ("LFC"). As of March
1, 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.

3
<PAGE>

FINANCIAL HIGHLIGHTS

The tables below present certain financial information for five of the seven
Funds in the Trust which are the subject of this Prospectus (the Small Cap
Value Fund and High Yield Securities Fund commenced operations on or about the
date of this Prospectus) for the period beginning with such Fund's commencement
of operations (July 1, 1993 for each of Growth and Income Fund and Global
Utilities Fund; July 5, 1994 for each of U.S. Stock Fund and Strategic
Income Fund and November 17, 1997 for All-Star Fund) and ended December 31,
1997. The information through the fiscal year ended December 31, 1997 has been
audited and reported on by the Trust's independent accountants, Price
Waterhouse LLP, whose report thereon appears in the Trust's annual report to
shareholders for the fiscal year ended December 31, 1997 (which may be obtained
without charge from KFSC 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 Funds' total returns presented
below do 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.

Colonial Growth and Income Fund, Variable Series

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993***
--------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period .................. $13.96 $12.60 $10.03 $10.36 $10.00
------ ------ ------ ------ ------
Net investment income (a) ............................. 0.28 0.28 0.29 0.26 0.09
Net realized and unrealized gains (losses) on
investments and foreign currency transactions (a) .... 3.75 1.98 2.72 (0.34) 0.41
------ ------ ------ ------ ------
Total from investment operations ...................... 4.03 2.26 3.01 (0.08) 0.50
------ ------ ------ ------ ------
Less distributions from:
Dividends from net investment income ................. (0.27) (0.28) (0.25) (0.25) (0.11)
In excess of net investment income ................... (0.01) -- -- -- --
Dividends from net realized gains on investments ..... (2.37) (0.62) (0.19) -- (0.03)
------- ------- ------ ------ -------
Total distributions ................................... (2.65) (0.90) (0.44) (0.25) (0.14)
------- ------- ------ ------ -------
Net asset value, end of period ........................ $15.34 $13.96 $12.60 $10.03 $10.36
======= ======= ====== ====== =======
Total return:
Total investment return (b) ........................... 28.97% 17.89% 30.03% (0.76)% 5.01%**(d)
Ratios/supplemental data:
Net assets, end of period (000) ....................... $106,909 $93,247 $71,070 $48,052 $29,298
Ratio of net expenses to average net assets ........... 0.79%(e) 0.79%(e) 0.81%(e) 0.87% 1.00%*(c)
Ratio of net investment income to average net assets .. 1.77%(e) 2.02%(e) 2.51%(e) 2.82% 2.32%*(d)
Portfolio turnover ratio .............................. 60% 24% 79% 55% 8%**
Average commission rate (f) ........................... $0.0401 $0.0383 -- -- --
</TABLE>

- ----------------
* Annualized
** Not Annualized
*** For the period from the commencement of operations (July 1, 1993) to
December 31, 1993.
(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) If the Fund had paid all of its expenses and there had been no
reimbursement from LASC, this ratio would have been 1.23% (annualized) for
the period ended December 31, 1993.
(d) Computed giving effect to LASC's expense limitation undertaking.
(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.

4
<PAGE>

Stein Roe Global Utilities Fund, Variable Series

Year Ended December 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993***
------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period .................... $10.70 $10.50 $8.11 $ 9.65 $10.00
------ ------- ------ ------ ------
Net investment income (a) ............................... 0.46 0.46 0.46 0.54 0.18
Net realized and unrealized gains (losses) on
investments (a) ........................................ 2.62 0.23 2.39 (1.53) (0.35)
------ ------ ------ ------- -------
Total from investment operations ........................ 3.08 0.69 2.85 (0.99) (0.17)
------ ------ ------ ------- -------
Less distributions from:
Dividends from net investment income ................... (0.48) (0.49) (0.46) (0.55) (0.18)
Dividends from net realized gains ...................... (1.38) -- -- -- --
------ ------ ------ ------ -------
Total distributions ..................................... (1.86) (0.49) (0.46) (0.55) (0.18)
------ ------ ------ ------ -------
Net asset value, end of period .......................... $11.92 $10.70 $10.50 $8.11 $ 9.65
====== ====== ====== ====== =======
Total return:
Total investment return (b) ............................. 28.75% 6.53% 35.15% (10.27)% (1.70)%**(c)
Ratios/supplemental data:
Net assets, end of period (000) ......................... $54,603 $47,907 $51,597 $38,156 $54,441
Ratio of net expenses to average net assets ............. 0.83%(d) 0.81%(d) 0.83%(d) 0.86% 1.00%*(e)
Ratio of net investment income to average net assets .... 3.96%(d) 4.36%(d) 4.98%(d) 5.80% 5.10%*(c)
Portfolio turnover ratio ................................ 89% 14% 18% 16% 2%**
Average commission rate (f) ............................. $0.0041 $0.0468 -- -- --
</TABLE>

- ----------------
* Annualized
** Not Annualized
*** For the period from the commencement of operations (July 1, 1993) to
December 31, 1993.
(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, this ratio would have been 1.09% (annualized) for
the period ended December 31, 1993.
(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.

5
<PAGE>

Colonial U.S. Stock Fund, Variable Series

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1997 1996 1995 1994***
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ......................... $14.22 $12.36 $10.27 $10.00
------ ------ ------ ------
Net investment income (a) .................................... 0.20 0.19 0.21 0.09
Net realized and unrealized gains on investments (a) ......... 4.37 2.52 2.84 0.35
------ ------ ------ ------
Total from investment operations ............................. 4.57 2.71 3.05 0.44
------ ------ ------ ------
Less distributions from:
Dividends from net investment income ........................ (0.18) (0.17) (0.16) (0.11)
In excess of net investment income .......................... (0.01) -- -- --
Dividends from net realized gains on investments ............ (2.30) (0.68) (0.80) (0.06)
In excess of net realized gains ............................. (0.01) -- -- --
------ ------ ------ ------
Total distributions .......................................... (2.50) (0.85) (0.96) (0.17)
------ ------ ------ ------
Net asset value, end of period ............................... $16.29 $14.22 $12.36 $10.27
====== ====== ====== ======
Total return:
Total investment return (c) .................................. 32.23% 21.84% 29.70%(b) 4.40%(b)**
Ratios/supplemental data:
Net assets, end of period (000) .............................. $96,715 $60,855 $43,017 $15,373
Ratio of net expenses to average net assets .................. 0.94%(e) 0.95%(e) 1.00%(d)(e) 1.00%(d)*
Ratio of net investment income to average net assets ......... 1.19%(e) 1.39%(e) 1.72%(b)(e) 2.16%(b)*
Portfolio turnover ratio ..................................... 63% 77% 115% 52%**
Average commission rate (f) .................................. $0.0400 $0.0395 -- --
</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.
(c) Total return at net asset value assuming all distributions reinvested.
(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.

6
<PAGE>

Colonial Strategic Income Fund, Variable Series

<TABLE>
<CAPTION>
Year Ended
December 31, Year Ended December 31,
------------ -------------------------------------
1997 1996 1995 1994***
------------ -------- ------ -------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ............................. $11.04 $10.99 $9.79 $10.00
------ ------ ------ ------
Net investment income (a) ........................................ 0.90 0.92 0.55 0.30
Net realized and unrealized gains (losses) on investments and
foreign currency transactions (a) ............................... 0.11 0.16 1.24 (0.19)
------ ------ ------ ------
Total from investment operations ................................. 1.01 1.08 1.79 0.11
------ ------ ------ ------
Less distributions from:
Dividends from net investment income ............................ (0.79) (0.96) (0.56) (0.31)
In excess of net investment income .............................. (0.05) -- -- --
Dividends from net realized gains on investments ................ (0.05) (0.07) (0.03) (0.01)
In excess of net realized gains ................................. (0.01) -- -- --
------ ------ ------ ------
Total distributions .............................................. (0.90) (1.03) (0.59) (0.32)
------ ------ ------ ------
Net asset value, end of period ................................... $11.15 $11.04 $10.99 $9.79
====== ====== ====== ======
Total return:
Total investment return (b) (c) .................................. 9.11% 9.83% 18.30% 1.10%**
Ratios/supplemental data:
Net assets, end of period (000) .................................. $73,175 $53,393 $48,334 $13,342
Ratio of net expenses to average net assets (e) .................. 0.80%(d) 0.80%(d) 0.84%(d) 1.00%*
Ratio of net investment income to average net assets (c) ......... 7.86%(d) 8.13%(d) 8.08%(d) 7.33%*
Portfolio turnover ratio ......................................... 94% 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.

7
<PAGE>

Liberty All-Star Equity Fund, Variable Series

<TABLE>
<CAPTION>
Period Ended
December 31,
------------
1997***
---------
<S> <C>
Per share operating performance:
Net asset value, beginning of period ................................ $10.00
-------
Net investment income (a) ........................................... 0.01
Net realized and unrealized gains on investments (a) ................ 0.07
-------
Total from investment operations .................................... 0.08
-------
Less distributions from:
Dividends from net investment income ............................... (0.01)
-------
Net asset value, end of period ...................................... $10.07
=======
Total return:
Total investment return (b)(c) ..................................... 0.80%**
Ratios/supplemental data:
Net assets, end of period (000) ..................................... $22,228
Ratio of net expenses to average net assets (d)(e) .................. 1.00%*
Ratio of net investment income to average net assets (c)(e) ......... 0.83%*
Portfolio turnover ratio ............................................ 1%**
Average commission rate ............................................. $0.0475
</TABLE>

- ----------------
* Annualized
** Not Annualized.
*** For the period from the commencement of operations November 17, 1997 to
December 31, 1997.
(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 Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.45%
(annualized).
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.

<PAGE>

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

THE FUNDS

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 Funds will vary
with market conditions and there can be no guarantee that any Fund will achieve
its investment objective.

Each Fund and its investment objectives and policies are described below.
Certain additional investment policies and techniques common to some or all of
the Funds are described under "OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS
AND POLICIES OF THE FUNDS" below.

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

Colonial Growth and Income Fund, Variable Series

Investment Objective. The Fund seeks primarily income and long-term capital
growth and, secondarily, preservation of capital.

Investment Program. The Fund may invest without limit in U.S. stock exchange or
Nasdaq National Market System listed common stocks and foreign common stocks
which, when purchased, meet quantitative standards which in Colonial's judgment
indicate above average financial soundness and high intrinsic value relative to
price. Companies in which the Fund invests will fall into one of the following
three categories:

1. Companies whose current business activities provide earnings, dividends or
assets that represent above average value for each dollar invested; or

2. Companies whose business activities are concentrated in industries or
business strategies which are expected to provide above average stability
or value in turbulent markets; or

3. Companies with anticipated business growth prospects that represent above
average value for each dollar invested.

For this purpose, "average" will not be pegged to a specific index but rather
determined in Colonial's judgment based on an eligible universe of securities
of appropriate market capitalization for which sufficient data is available.
Such average may also be qualified by industry group or sector.

Up to 5% of the Fund's net assets may be invested in common stocks not meeting
any of the foregoing conditions at the time of purchase.

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 will not invest in residual classes of CMOs. The Fund may invest in
U.S. Government Securities of any maturity that pay fixed, floating or
adjustable interest rates.

The Fund may invest without limit in securities traded outside of the U.S. and
may purchase foreign currencies on a spot or forward basis in conjunction with
its investments in foreign securities and to hedge against fluctuations in
foreign currencies.

Stein Roe Global Utilities Fund, Variable Series

Investment Objective. The Fund seeks current income and long-term growth of
capital and income.

Investment Program. The Fund normally invests at least 65% of its total assets
in U.S. and foreign equity and debt securities of companies engaged in the
manufacture, production, generation, transmission, sale or distribution of
electricity, natural gas or other types of energy, or water or other sanitary
services, and companies engaged in telecommunications, including telephone,
telegraph, satellite, microwave and other communications media (but not
companies primarily engaged in public broadcasting, print media or cable
television) ("Utility Companies"). The Fund will invest primarily in securities
of large, established Utility Companies located in developed countries,
including the U.S. The Fund may invest without limit in foreign securities. See
"OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS:
Foreign Securities." The Fund normally will invest in securities issued by
companies located in at least three countries includ-

9
<PAGE>

ing the U.S. Up to 35% of the Fund's total assets may be invested in equity
securities of any type and investment grade debt securities that are not issued
by Utility Companies. Because the Fund concentrates its investments in
securities of Utility Companies, an investment in the Fund may entail more risk
than an investment in a more diversified portfolio.

Equity securities purchased by the Fund generally include common and preferred
stock, warrants (rights) to purchase such stock, debt securities convertible
into such stock, and structured and unstructured American Depositary Receipts
(receipts issued in the U.S. by banks or trust companies evidencing ownership
of underlying foreign securities (ADRs)). At least 20% of the Fund's total
assets will be invested in equity securities of Utility Companies.

Debt securities purchased by the Fund generally include securities of any
maturity that pay fixed, floating or adjustable interest rates. The Fund may
invest in zero-coupon bonds and pay-in-kind securities. See "OTHER INVESTMENT
PRACTICES, RISK CONSIDERATIONS AND OTHER POLICIES OF THE FUNDS: Zero-Coupon
Bonds; Pay-in-Kind Securities."

The debt securities in which the Fund invests will be rated at the time of
investment at least Baa by Moody's Investors Service ("Moody's") or BBB by
Standard & Poor's Corporation ("S&P") or will be unrated but considered by
Stein Roe to be of comparable credit quality. Such securities will not
necessarily be sold if the rating is subsequently reduced unless any such
downgrade would cause the Fund to hold more than 5% of its total assets in debt
securities rated below investment grade. Debt securities rated BBB or Baa have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of the issuers of
such securities to make principal and interest payments than would likely be
the case with investments in securities with higher credit ratings.

The values of debt securities generally fluctuate inversely with changes in
interest rates. This is less likely to be true for adjustable or floating rate
securities, since interest rate changes are more likely to be reflected in
changes in the rates paid on the securities. However, reductions in interest
rates may also translate into lower return.

The values of securities issued by Utility Companies are especially affected by
changes in prevailing interest rate levels (as interest rates increase, the
values of Utility Company securities tend to decrease, and vice versa), as well
as by general competitive and market forces in the utility industries, changes
in federal and state regulation, energy conservation efforts and other
environmental concerns and, particularly with respect to nuclear facilities,
shortened economic life and cost overruns. Certain utilities, especially gas
and telephone utilities, have in recent years been affected by increased
competition, which could adversely affect the profitability of such utilities.
Similarly, the profitability of certain electric utilities may in the future be
adversely affected by increased competition resulting from partial
deregulation.

The Fund may purchase and sell (i) U.S. and foreign stock and bond index futures
contracts, (ii) U.S. and foreign interest rate futures contracts and (iii)
options on any of the foregoing. Such transactions will be entered into (x) for
hedging purposes or (y) to gain exposure to a particular market pending
investment in individual securities. The Fund also may purchase and sell options
on individual securities for hedging purposes. See "OTHER INVESTMENT PRACTICES,
RISK CONSIDERATIONS AND POLICIES OF THE FUNDS: Certain Derivative Investments."
The Fund will purchase and sell such derivative securities only with respect to
securities it may otherwise purchase or indices composed of such securities.

Colonial Small Cap Value Fund, Variable Series

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

Investment Program. The Fund normally invests at least 65% of its total assets
in U.S. common stocks selected from the universe of stocks traded on the New
York Stock Exchange, American Stock Exchange and the Nasdaq Stock Market with
market values at the time of purchase between $20 million and $1 billion (Small
Stocks). In selecting investments, Colonial uses a disciplined process intended
to create a diversified portfolio whose performance (before expenses) will
exceed the Small Stock universe's while maintaining risk characteristics that
are generally consistent with the universe. However, there is no assurance that
the portfolio's performance will match that of the universe, or that the Fund
will achieve its objective. Equity securities purchased by the Fund include
U.S. common and preferred stock, warrants (rights) to purchase such stock, debt
securities convertible into such stock, and structured and unstructured ADRs.

The Fund may purchase and sell U.S. stock index futures contracts. See "OTHER
INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS: Certain
Derivative Investments." The Fund will purchase and sell such derivative
securities only with respect to securities it may otherwise purchase or indices
composed of such securities.

Small Stocks may offer greater opportunities for capital appreciation than the
securities of larger, better established companies, but may also involve
certain special risks related to limited product lines, markets or financial
resources and dependence on a small management group. Small Stocks may trade
less frequently, in smaller volumes, and fluctuate more sharply in value than
securities of larger companies.

Colonial U.S. Stock Fund, Variable Series

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

10
<PAGE>

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, CMOs and 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.

Colonial Strategic Income Fund, Variable Series

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 objectives 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 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 those
described as eligible for investment by Growth and Income Fund. 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 FUNDS: 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 FUNDS: Foreign Securities."

The Fund may purchase lower rated bonds (commonly referred to as junk bonds),
which are not considered investment grade, 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. Below investment
grade 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 FUNDS: Lower Rated
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 FUNDS: 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.

Colonial High Yield Securities Fund, Variable Series

Investment Objective. The Fund seeks high current income and total return by
investing primarily in lower rated corporate debt securities.

Investment Program. The Fund normally invests at least 80% of its total assets
(other than cash and government securities) in lower rated debt securities.
However, the Fund may invest up to 100% of its assets in higher rated securities
if, in Colonial's judgment, economic conditions narrow yield spreads between
lower and higher rated securities to levels at which such action is determined
to be advisable. The Fund may invest in debt securities of any maturity. The
Fund will not invest more than 25% of its total assets in a single industry or
in securities issued or guaranteed by a foreign government or a foreign company.

The Fund may invest in debt securities of any maturity that pay fixed, floating
or adjustable interest rates. The values of debt securities generally fluctuate
inversely with changes in interest rates. This is less likely to be true for
adjustable or floating rate securities, since interest rate changes are more
likely to be reflected in changes in the rates paid on the securities. However,
reductions in interest rates also may translate into lower distributions paid
by the Fund.

11
<PAGE>

interest at predetermined rates that increase over time (referred to as step
coupon bonds). Because zero coupon securities, pay- in-kind securities and step
coupon bonds may not pay interest but the Fund nevertheless must accrue and
distribute to investors the income deemed to be earned on a current basis, the
Fund may have to sell other investments to raise the cash needed to make income
distributions.

The Fund may invest up to 20% of its total assets in common stocks, usually as
a result of warrants associated with debt instruments purchased by the Fund,
but also under certain circumstances to seek capital appreciation.

The Fund will purchase lower rated bonds (commonly referred to as junk bonds),
which are not considered to be investment grade, 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 purchase the debt securities of a single issuer rated
Ca by Moody's or CC by S&P or lower or comparable unrated securities only if
Colonial believes the quality of such securities is higher than indicated by
the rating. Below investment grade 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
FUNDS: Lower Rated Bonds." Appendix A to this Prospectus provides a description
of bond ratings.

The Fund may invest any portion of its assets in securities issued or
guaranteed by foreign governments and 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 FUNDS; Foreign Securities."

Liberty All-Star Equity Fund, Variable Series

Investment Objective. The Fund seeks total investment return, comprised of
long-term capital appreciation and current income, through investment primarily
in a diversified portfolio of equity securities.

Investment Program. The Fund invests primarily in equity securities, defined as
common stocks and securities convertible into common stocks (such as bonds and
preferred stocks) and securities having common stock characteristics (such as
warrants and rights to purchase equity securities.) The Fund also may invest in
ADRs. The Fund may lend its portfolio securities.

The Fund's investment program is based upon LAMCO's multi-manager concept.
LAMCO allocates the Fund's portfolio assets on an approximately equal basis
among a number of independent investment management organizations ("Portfolio
Managers")--currently five in number--each of which employs a different
investment style, and from time to time rebalances the portfolio among the
Portfolio Managers so as to maintain an approximately equal allocation of the
portfolio among them throughout all market cycles.

In LAMCO's opinion, the multi-manager concept provides advantages over the use
of a single manager because of the following primary factors:

(i) Most equity investment management firms consistently employ a distinct
investment "style" which causes them to emphasize stocks with particular
characteristics;

(ii) because of changing investor preferences, any given investment style
will move into and out of market favor and will result in better investment
performance under certain market conditions but less successful performance
under other conditions;

(iii) consequently, by allocating the Fund's portfolio on an approximately
equal basis among Portfolio Managers employing different styles, the impact of
any one such style on investment performance will be diluted, and the
investment performance of the total portfolio will be more consistent and less
volatile over the long term than if a single style were employed throughout the
entire period; and

(iv) more consistent performance at a given annual rate of return over time
produces a higher rate of return for the long term than more volatile
performance having the same average annual rate of return.

LAMCO, based on the foregoing principles and on its analysis and evaluation of
information regarding the personnel and investment styles and performance of a
universe of several hundred professional investment management firms, has
selected for appointment by the Fund a group of Portfolio Managers representing
a blending of different investment styles which, in its opinion, is appropriate
to the Fund's investment objective.

LAMCO continuously monitors the performance and investment styles of the Fund's
Portfolio Managers and from time to time may recommend changes of Portfolio
Managers based on factors such as changes in a Portfolio Manager's investment
style or a departure by a Portfolio Manager from the investment style for which
it had been selected, a deterioration in a Portfolio Manager's performance
relative to that of other investment management firms practicing a similar
style, or adverse changes in its ownership or personnel.

The Fund's current Portfolio Managers are:

J. P. Morgan Investment Management Inc.
Oppenheimer Capital
Palley-Needelman Asset Management, Inc.
Westwood Management Corp.
Wilke/Thompson Capital Management, Inc.

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<PAGE>

LAMCO also is the manager of Liberty All-Star Equity Fund, a multi-managed
closed-end fund. This other fund has the same investment objective and
investment program as the Fund, and currently has the same Portfolio Managers.
LAMCO expects that both funds will make corresponding changes if and when
Portfolio Managers are changed in the future.

Although under normal circumstances the Fund will remain substantially fully
invested in equity securities, up to 35% of the value of the Fund's total
assets may be invested in U.S. dollar denominated money market instruments of
the type described under "OTHER INVESTMENT PRACTICES, RISK CONSIDERATIONS AND
POLICIES OF THE FUNDS: Cash Reserves and Repurchase Agreements."

The Fund may purchase and sell U.S. stock futures contracts and options
thereon. Such transactions will be entered into (i) for hedging purposes or
(ii) to maintain market exposure in connection with (A) LAMCO's rebalancing the
Funds' Portfolio among Portfolio Managers or (B) changes in Portfolio Managers.
The Fund also may purchase and sell options on individual securities (i) for
hedging purposes or (ii) to increase investment return. See "OTHER INVESTMENT
PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS: Certain Derivative
Investments." The Fund will purchase and sell such derivative securities only
with respect to securities it may otherwise purchase or indices composed of
such securities.

The Fund may remain substantially fully invested during periods when stock
prices generally rise and also during periods when they generally decline. The
Fund is intended to be a long-term investment vehicle and is not designed to
provide a means of speculating on short-term stock market movements.

TRUST MANAGEMENT ORGANIZATIONS

The Trustees

The business of the Trust and the Funds 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.

In accordance with its Management Agreements with the Trust, LASC designs and
supervises a continuous investment program for the Trust, evaluates,
recommends, and monitors its Sub-Advisers' performance, investment programs,
and compliance with applicable laws and regulations, and recommends to the
Board of Trustees whether its Sub-Advisers' respective contracts 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
Trust's operations, including the provision of office space and equipment in
connection with the maintenance of the Trust's headquarters, preparation and
filing of required reports, arrangements for Trustees' and shareholders'
meetings, maintenance of the Trust's corporate books and records,
communications with shareholders, and oversight of custodial, accounting and
other services provided to the Funds by others. In accordance with its
Management Agreements with the Trust, 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 Trust'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 management fees, accrued daily and paid monthly, at the
following maximum annual rates of the average daily net assets of the specified
Fund.

Growth and Income Fund 0.65%
Global Utilities Fund 0.65%
Small Cap Value Fund 0.80%
U.S. Stock Fund 0.80%
Strategic Income Fund 0.65%
High Yield Securities Fund 0.60%
All-Star Fund 0.80%

LASC's Sub-Advisers

Colonial

Colonial, an investment adviser since 1931, is the Sub-Adviser of each of Growth
and Income Fund, Small Cap Value Fund, High Yield Securities Fund, U.S. Stock
Fund and Strategic Income Fund. Colonial, whose principal business address is
One Financial Center, Boston, Massachusetts 02111, is an indirect wholly owned
subsidiary of LFC.

LASC, out of the management fees it receives from the Trust, pays Colonial
sub-advisory fees at the following annual rates of the average daily net assets
of the specified Fund:

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<PAGE>

Growth and Income Fund 0.45%
Small Cap Value Fund 0.60%
High Yield Securities Fund 0.40%

U.S. Stock Fund 0.60%
Strategic Income Fund 0.45%

Under the Colonial Sub-Advisory Agreements, Colonial manages the assets of the
respective Funds in accordance with their investment objectives, 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 each Fund. Colonial also provides transfer agency
and certain pricing and record keeping services for the Funds under separate
agreements.

John E. Lennon, Vice President of Colonial, has co-managed the Growth and
Income Fund since 1997 and has managed various other Colonial equity funds
since 1982.

Gordon A. Johnson, Vice President of Colonial, has co-managed the Growth and
Income Fund since 1997. From 1993 to 1995, Mr. Johnson served as a senior
equity analyst with Colonial. Prior to joining the Adviser in 1993, Mr. Johnson
was a Doctoral candidate in Finance at the University of Massachusetts.

Mark Stoeckle has managed the U.S. Stock 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.

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.

Andrea S. Feingold, Vice President and head of the Corporate Group of Colonial,
has managed the Colonial High Yield Securities Fund since 1993. Ms. Feingold
joined Colonial in 1991 as an investment analyst.

James P. Haynie, Vice President of Colonial, has managed or co-managed the
Colonial Small Cap Value Fund since 1993. Prior to joining Colonial in 1993, Mr.
Haynie was a Vice President at Massachusetts Financial Services Company and a
portfolio manager at Trinity Investment Management.

Michael Rega, Vice President of Colonial, has been an analyst at Colonial since
1993 and has co-managed the Colonial Small Cap Value Fund since 1996. Prior to
joining Colonial in 1993, Mr. Rega was a project manager at the Massachusetts
Institute of Technology's Lincoln Laboratory.

Stein Roe

Stein Roe is the Sub-Adviser of the Global Utilities Fund. Stein Roe, whose
principal address is One South Wacker Drive, Chicago, Illinois 60606, is an
indirect wholly owned subsidiary of LFC.

LASC, out of the management fees it receives from the Trust, pays Stein Roe a
sub-advisory fee at the annual rate of 0.45% of the average daily net assets of
the Global Utilities Fund.

Under the Stein Roe Sub-Advisory Agreement, Stein Roe 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. Stein
Roe determines which securities and other instruments are purchased and sold
for the Fund.

Ophelia Barsketis, Senior Vice President of Stein Roe, co-manages the Global
Utilities Fund. Ms. Barsketis joined Stein Roe in 1983 and progressed through a
variety of equity analyst positions before assuming her current
responsibilities.

Deborah A. Jansen, Vice President and Senior Research Analyst for global and
domestic equities and global economic forecasting for Stein Roe, co-manages the
Global Utilities Fund. Ms. Jansen joined Stein Roe in 1987 and served as an
associate economist and senior economist before assuming her current
responsibilities. Ms. Jansen left Stein Roe in January, 1995 and returned to
her position as Vice President in March, 1996. From June 5, 1995 through June
30, 1995, Ms. Jansen was a Senior Equity Research Analyst for BancOne
Investment Advisers Corporation.

LAMCO and LAMCO's Portfolio Managers

LAMCO is the Sub-Adviser of the All-Star Fund. LAMCO, whose principal address
is 600 Atlantic Avenue, 23rd Floor, Boston, Massachusetts 02210, is an indirect
wholly owned subsidiary of LFC.

LASC, out of the management fees it receives from the Trust, pays LAMCO a
sub-advisory fee at the annual rate of 0.60% of the average daily net assets of
the All-Star Fund.

LAMCO is party to LASC's Management Agreement with the Trust for the All-Star
Fund. Under the Management Agreement, LASC delegates investment management of
the Fund to LAMCO, in accordance with the Fund's investment objective,
investment program, policies and restrictions under the supervision of LASC and
the Board of Trustees. The Management Agreement further authorizes LAMCO to
recommend for appointment one or more Portfolio Managers pursuant to a
portfolio management agreement among the Trust, LAMCO and the applicable
Portfolio Manager. The Management Agreement provides that each Portfolio
Manager shall have full investment discretion and authority to make all
determinations with respect to the investment of the portion of the Fund's
assets assigned to such Portfolio Manager by LAMCO, in accordance with LAMCO's
multi-manager concept.

Pursuant to a separate portfolio management agreement with each Portfolio
Manager, LAMCO, out of the management fees it receives from LASC, pays each
such Portfolio Manager a fee at the annual rate of 0.30% of the average daily
net assets of that portion of the Fund's assets assigned to such Portfolio
Manager.

No one individual at LAMCO is responsible for LAMCO's investment management of
All-Star Fund.

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<PAGE>

Henry D. Cavanna, Managing Director of J.P. Morgan Investment Management, Inc.,
manages that portion of All-Star Fund's portfolio assigned to that firm.

John Lindenthal, Managing Director of Oppenheimer Capital, manages that portion
of All-Star Fund's portfolio assigned to that firm.

Roger B. Palley, President and Senior Investment Officer of Palley-Needelman
Asset Management, Inc., manages that portion of All-Star Fund's portfolio
assigned to that firm.

Susan M. Byrne, President and Chief Executive Officer of Westwood Management
Corp., manages that portion of All-Star Fund's portfolio assigned to that firm.

Mark A. Thompson, Chairman and Chief Investment Officer of Wilke/Thompson
Capital Management, Inc., manages that portion of All-Star Fund's portfolio
assigned to that firm.

The Trust and LAMCO have applied to the Securities and Exchange Commission for
an exemptive order that would permit LAMCO to enter into a new portfolio
management agreement with a new Portfolio Manager (whether or not in connection
with the replacement of an existing Portfolio Manager) and with an existing
Portfolio Manager (or its successor) following a transaction resulting in a
change of control of such Portfolio Manager without a vote of the shareholders
of the All-Star Fund. The application seeks an exemptive order permitting such
a new agreement, provided that the new agreement is at a fee no higher than
that provided in, and is on other terms and conditions substantially similar
to, the Fund's agreements with its other Portfolio Managers. Information
regarding the new Portfolio Manager will be sent to holders of VA contracts and
VLI policies within 90 days following the effective date of the change or
addition.

TRUST SERVICE ORGANIZATIONS

Custodian

The Chase Manhattan Bank ("Chase"), 3 Chase Metro Tech Center, 8th Floor,
Brooklyn, New York 11245 is the custodian for each of the Funds. 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.

OTHER CONSIDERATIONS

Expenses of the Funds

The Funds generally will pay all their expenses, other than those borne by LASC,
Colonial and Stein Roe, LAMCO and LAMCO's Portfolio Managers. 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 (i)
Growth and Income Fund, Global Utilities Fund, Small Cap Value Fund, U.S. Stock
Fund and All-Star Fund in excess of 1.00% of average net asset value per annum,
and (ii) Strategic Income Fund and High Yield Securities Fund in excess of 0.80%
of average net asset value per annum, in each case for the period beginning May
1, 1998 through April 30, 1999.

The expenses payable by the Funds include, among other things, the management
fees 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, Stein Roe, LAMCO, LAMCO's Portfolio Managers
and others; taxes and fees for the preparation of the Funds' 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 Trust'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, 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
any particular Fund will be paid from the assets of that Fund. General expenses
of the Trust will be allocated among and charged to the assets of each of the
Funds on a basis that the Board of Trustees deems fair and equitable, which may
be based on the relative assets of each Fund or the nature of the services
performed and their relative applicability to each Fund.

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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

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

Performance information describes a Fund's performance for the period shown and
does not predict future performance. Comparison of a Fund's yield or total
return with those of alternative investments should consider differences
between the Fund and the alternative investments. A 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 each Fund at the commencement of operations was
established at $10.00. The net asset value per share of each 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 each 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 Trust 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

Each 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 each Fund consists of all dividends or interest
received by such Fund, less estimated expenses (including the advisory and
administrative fees). Income dividends will be declared and distributed
annually in the case of each Fund. 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

Each 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 a Fund meets the investment limitations and
the distribution, diversification and other requirements referred to below, to
the extent a Fund distributes its taxable net investment income and its net
realized long-term and short-term capital gains, that 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 cur-

16
<PAGE>

rently 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 each Fund. Any
of the applicable diversification requirements could require a sale of assets
of a 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, each 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 Trust and its Funds 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.

Each 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 Funds 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 Trust 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 Trust 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 Trust, for example,
may be required to alter the investment objectives of any Fund or substitute
the shares of one Fund for those of another. No such change of investment
objectives or substitution of securities will take place without notice to the
contract and policy owners with interests invested in the affected 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 a 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 a 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 a 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 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 one or more Funds are the investment vehicles,
receive from the Participating Insurance Company unaudited semi-annual
financial statements and audited year-end financial statements of such Funds
certified by the Trust's independent auditors. Each report shows the
investments owned by each Fund and provides other information about the Trust
and its operations. Copies of such reports may be obtained from the
Participating Insurance Company or the Secretary of the Trust.

Organization, Meetings, and Voting Rights

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. Each Fund is a separate
series of the Trust.

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<PAGE>

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

The Trust 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 applicable Fund thereof) 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 assets (or the applicable Fund) 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 any one 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

In seeking each Fund's objective, the applicable portfolio manager will buy or
sell portfolio securities whenever it believes it is appropriate. Their
decisions will not generally be influenced by how long the Fund may have owned
the security. A 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 a 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.

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 Sub-Advisor and its affiliates. In recognition of the
research and brokerage services provided, the Portfolio Manager may cause a Fund
to pay the selected broker-dealer a higher commission than would have been
charged by another broker-dealer not providing such services. For Small Cap
Value Fund and U.S. Stock Fund, Colonial may use the services of AlphaTrade,
Inc., a registered broker-dealer affiliate, when buying or selling equity
securities, pursuant to procedures adopted under Investment Company Act Rule
17e-1. Subject to seeking best execution, a Sub-Advisor may consider sales of
shares of a Fund (and of other mutual funds advised by it and its affiliates) in
selecting broker-dealers for portfolio security transactions.

As a result of a Fund's investment policies, under certain market conditions, a
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 Funds cannot predict portfolio turnover rate, it is
estimated that, under normal circumstances, the annual rate for each Fund will
be no greater than 100%. Global Utilities Fund may have a higher rate of
turnover than the other Funds or alternative investment funds because of the
flexibility of its investment policies permitting shifts between different
types of investments and the use of aggressive strategies and investments.
Changes in All-Star Fund's Portfolio Managers and rebalancings of its portfolio
among the Portfolio Managers may result in higher portfolio turnover than would
otherwise be the case. The portfolio turnover rates of the Funds for the period
ended December 31, 1997 are shown under "FINANCIAL HIGHLIGHTS" above. A Fund's
portfolio turnover rate is not a limiting factor when the portfolio manager
considers a change in the Fund's portfolio.

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<PAGE>

Certain Investment Considerations Pertaining to Government Debt Securities

Each of Growth and Income Fund, Small Cap Value Fund, High Yield Securities
Fund, Strategic Income Fund and U.S. Stock Fund may, as part of its normal
investment program, invest in U.S. Government Securities. Similarly, High Yield
Securities Fund and Strategic Income Fund may, as part of its normal investment
program, invest in 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

Each of the Funds may invest temporarily available cash in certificates of
deposit, bankers' acceptances, high quality commercial paper, Treasury bills,
U.S. government securities and repurchase agreements with a securities dealer or
bank. Some or all of the Fund's assets may be invested in such instruments
during periods of unusual market conditions. In repurchase transactions, the
underlying security, which is held by the custodian through the federal
book-entry system for a Fund as collateral, will be marked to market on a daily
basis to ensure full collateralization of the repurchase agreement. Additional
collateral will be added so that the obligation will at all times be fully
collateralized. In the event of a bankruptcy or default of certain sellers of
repurchase agreements, a 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% (10% in the case of High Yield
Securities Fund) of a 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

Each of Growth and Income Fund, Global Utilities Fund, Strategic Income Fund
and High Yield Securities 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 will place at a future
date beyond customary settlement time. 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. The Funds will not enter into such transactions for leverage (borrowing)
purposes.

Strategic Income 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.

Securities Lending

Each of Global Utilities Fund, Small Cap Value Fund, Growth and Income Fund,
U.S. Stock Fund and All-Star Fund may lend portfolio securities to certain
institutions (principally broker-dealers) that the applicable 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

Global Utilities Fund may invest without limit in foreign securities.
Similarly, Strategic Income Fund may invest any portion of its assets in
securities issued or guaranteed by foreign governments. Growth and Income Fund
and High Yield Securities Fund also may invest in foreign securities.
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

<PAGE>

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.

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, limited numbers of potential buyers for such securities,
restrictions on repatriation of capital and delays and disruptions in securities
settlement procedures. See "DESCRIPTION OF CERTAIN INVESTMENTS: Investments in
Less Developed Countries" in the Statement of Additional Information for a list
of the countries whose economies or securities markets currently are considered
by Colonial not to be highly developed.

Foreign Currency Transactions. Transactions in foreign securities include
currency conversion costs. Global Utilities Fund, Strategic Income Fund, High
Yield Securities Fund and Growth and Income Fund may engage in currency
exchange transactions to convert currencies to or from U.S. dollars. These
Funds 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.

High Yield Securities Fund, Global Utilities Fund and Strategic Income Fund
also may buy and sell currency futures contracts and options thereon for such
hedging purposes. High Yield Securities Fund, Global Utilities Fund and
Strategic Income Fund also may buy or sell options on currencies for such
hedging purposes. Over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies are considered illiquid by the SEC
staff.

The Funds will not attempt, nor would they 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, each of Small Cap Value Fund, Global
Utilities Fund, Growth and Income Fund, U.S. Stock Fund and All-Star 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;" "Forward Currency and Futures
Contracts;" "Currency Options;" "Settlement Procedures;" "Foreign Currency
Conversion;" and "Passive Foreign Investment Companies" in the Statement of
Additional Information for more information about foreign investments.

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Mortgage-Backed Securities

Strategic Income Fund, Growth and Income Fund and U.S. Stock 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 GNMA), or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the FNMA or 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 Funds will only invest in mortgage-backed
securities that are issued or guaranteed by governmental entities, except that
Strategic Income Fund also may invest in other mortgage-backed securities if the
underlying mortgages are guaranteed by a governmental agency.

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 Funds to a lower rate of return upon reinvestment of
principal. The Funds 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).

Strategic Income 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)

Strategic Income Fund, Growth and Income Fund and U.S. Stock Fund may invest in
CMOs and REMICs of investment grade or considered by Colonial to be of
comparable quality. U.S. Stock Fund may invest only 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 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 Funds 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 "THE FUNDS," certain Funds may invest in derivative
securities for certain specified purposes. These derivative securities include
U.S. and foreign stock and bond index futures contracts, U.S. and foreign
interest rate

<PAGE>

futures contracts, options on stock, bond and interest rate futures contracts,
and options on individual securities.

A financial 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 index (based on
stocks, bonds, or interest rates) 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 specified security or 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. A Fund will pay a premium to
purchase an option, which will become a loss if the option expires unexercised.
A Fund will receive a premium from writing an option, which increases its
return if the option expires unexercised or is closed out at a profit. When a
Fund writes a call option, it may become obligated to sell the underlying
security at a below market price. Similarly, if a Fund writes a put option, it
may become obligated to buy the underlying security at an above market price.

With respect to each futures contract or call option 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. A
Fund will write only "covered" options, meaning that, so long as the Fund is
obligated under the option, it must own the underlying security subject to the
option (or comparable securities satisfying the cover requirements of the
Securities and Exchange Commission) in the case of a call option written by the
Fund, or maintain in a segregated account with the Fund's custodian cash or
liquid securities with a value sufficient at all times to cover its obligations
under put options written by it.

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.

Zero-Coupon Bonds; Pay-In-Kind Securities and Step Coupon Bonds

Zero-Coupon Bonds. Global Utilities Fund, High Yield Securities Fund and
Strategic Income 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.

Pay-In-Kind Securities. Global Utilities Fund and High Yield Securities Fund
also may invest in pay-in-kind securities. Such securities pay interest,
typically at the issuer's option, in additional securities instead of cash.
Similar to zero-coupon bonds, the Fund accrues interest paid in kind and may
have to sell other investments to raise the cash needed to make income
distributions. These securities are generally lower rated securities and in
addition to the other risks associated with investing in lower rated securities
are subject to the risks that the interest payments which consist of additional
securities are also subject to the risks of lower rated securities.

Step Coupon Bonds. High Yield Securities Fund may invest in debt securities
which do not pay interest for a stated period of time and then pay interest at
a series of diffferent rates for a series of periods. In addition to the risks
associated with the credit rating of the issuers, these securities are subject
to the volatility risk of zero coupon bonds for the period when no interest is
paid.

Lower Rated Bonds

Strategic Income Fund may, and High Yield Securities does, 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;

22
<PAGE>

b. the secondary market may at times become less liquid or respond to
adverse publicity or investor perceptions, in-creasing 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 bonds 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 bonds is more dependent on Colonial's credit
analysis.

3. Lower rated bonds 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 Funds 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 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

Each Fund has adopted certain fundamental investment policies in managing its
portfolio that are designed to maintain the portfolio's diversity and reduce
risk. Each Fund will not: (i) with respect to 75% of its total assets, invest
in more than 10% of its 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 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 each Fund's total assets. While borrowings exceed 5% of net assets, the Funds
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 for a Fund only by approval of
that Fund's shareholders.

It is the policy of each Fund that when its portfolio manager(s) deem 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 such portfolio managers believe 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 Funds may not always achieve their investment objectives. The Funds'
investment objectives 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 a Fund's investment
objective. A Fund's fundamental investment policies listed in the Statement of
Additional Information cannot be changed without shareholder majority approval.

23
<PAGE>

APPENDIX A

Description of Bond Ratings

The ratings of certain debt instruments in which one or more of the Funds 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>

<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% 0.4% 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>

COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
a series of

Liberty Variable Investment Trust
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210

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

Colonial Small Cap Value Fund, Variable Series ("Fund") is a series of Liberty
Variable Investment Trust ("Trust"). The Trust is an open-end management
investment company. The Fund
seeks long-term growth by investing primarily in smaller capitalization equity
securities.

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

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

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 19, 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 19, 1998

-------------------------------------
NOT
FDIC- May lose value
INSURED No bank guarantee
-------------------------------------

<PAGE>

TABLE OF CONTENTS

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

</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Taxes .................................................. 6
Shareholder Communications ............................. 7
Organization, Meetings, and Voting Rights .............. 7
Additional Information ................................. 7
OTHER INVESTMENT PRACTICES, RISK
CONSIDERATIONS AND POLICIES OF THE FUND .............. 8
Short-Term Trading ..................................... 8
Certain Investment Considerations Pertaining to
Government Debt Securities .......................... 8
Cash Reserves and Repurchase Agreements ................ 8
Securities Lending ..................................... 8
Foreign Securities ..................................... 8
Certain Derivative Investments ......................... 9
Certain Policies to Reduce Risk ........................ 9
CHANGES TO INVESTMENT OBJECTIVE AND
NON-FUNDAMENTAL POLICIES ............................. 9
</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 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 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").

3
<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 growth by investing primarily in
smaller capitalization equity securities.

Investment Program. The Fund normally invests at least 65% of its total assets
in U.S. common stocks selected from the universe of stocks traded on the New
York Stock Exchange, American Stock Exchange and the Nasdaq Stock Market with
market values at the time of purchase between $20 million and $1 billion (Small
Stocks). In selecting investments, the Adviser uses a disciplined process
intended to create a diversified portfolio whose performance (before expenses)
will exceed the Small Stock universe's while maintaining risk characteristics
that are generally consistent with the universe. However, there is no assurance
that the portfolio's performance will match that of the universe, or that the
Fund will achieve its objective. Equity securities purchased by the Fund include
U.S. common and preferred stock, warrants (rights) to purchase such stock, debt
securities convertible into such stock, and structured and unstructured American
Depositary Receipts (receipts issued in the U.S. by banks or trust companies
evidencing ownership of underlying foreign securities (ADRs).

The Fund may purchase and sell U.S. stock index futures contracts. See "OTHER
INVESTMENT PRACTICES, RISK CONSIDERATIONS AND POLICIES OF THE FUNDS: Certain
Derivative Instruments." The Fund will purchase and sell such derivative
securities 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 Information 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.

4
<PAGE>

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 separate agreements.

James P. Haynie, Vice President of Colonial, has managed or co-managed the
Colonial Small Cap Value Fund since 1993. Prior to joining Colonial in 1993,
Mr. Haynie was a Vice President at Massachusetts Financial Services Company and
a Portfolio Manager at Trinity Investment Management.

Michael Rega, Vice President of Colonial, has been employed by Colonial as an
analyst since 1993 and has co-managed the Colonial Small Cap Value Fund since
1996. Prior to joining Colonial in 1993, Mr. Rega was a Project Manager at the
Massachusetts Institute of Technology's Lincoln Laboratory.

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
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, in each case for the period beginning May 1, 1998 through 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.

5
<PAGE>

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 $10.00. 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.

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.

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.

6
<PAGE>

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.

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.

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

7
<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.

In selecting broker-dealers for the purchase and sale of portfolio
securities, Colonial may consider research and brokerage services furnished by
such broker-dealers to it and its affiliates. In recognition of the research and
brokerage services provided, Colonial 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. Colonial may use the services of
AlphaTrade, Inc., a registered broker-dealer affiliate, when buying or selling
equity securities for the Fund's portfolio, pursuant to procedures adopted under
Investment Company Act Rule 17e-1. Subject to seeking best execution, Colonial
may consider sales of shares of the Fund (and 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
101%. 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.

Cash Reserves and Repurchase Agreements

The Fund may invest temporarily available cash in certificates of deposit;
bankers' acceptances; high quality commercial paper, Treasury bills; U.S.
government securities and repurchase agreements with a securities dealer or
bank. Some or all of the Fund's assets may be invested in such instruments
during periods of unusual market conditions. In 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.
Additional collateral will be added so that the obligation will at all times be
fully collateralized. 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.

Foreign Securities

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
including: (i) less publicly available infor-

8
<PAGE>

mation 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 judgements, 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.

Certain Derivative Investments

The Fund may invest in U.S. stock index futures contracts. Such transactions
will be entered into to invest cash temporarily in anticipation of a market
advance, but not to hedge against market declines. A futures contract creates an
obligation by the seller to deliver and the buyer to take delivery of a type of
instrument at the time and in the amount specified in the contract. A U.S. stock
index futures contract is a type of instrument akin to a group of securities
representative of the underlying U.S. stock index. A sale of a futures contract
can be terminated in advance of the specified delivery date by subsequently
purchasing a similar contract; a purchase of a futures contract can be
terminated by a subsequent sale. Gain or loss on a contract generally is
realized upon such termination. Transactions in futures may not precisely
achieve the goal of gaining market exposure to the extent there is an imperfect
correlation between price movements of the contracts and of the underlying
securities. In addition, if the Sub-Adviser's prediction on stock market
movements is inaccurate, the Fund may be worse off than if it had not purchased
the futures contract.

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

Leverage Risks Associated with Certain Investment Techniques

Certain investment techniques used by the Fund and described above, such as the
purchase and sale of U.S. stock index futures contracts, 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 rights to acquire the securities) it is obligated to deliver
under such transactions, or deposit and maintain in a segregated account with
its custodian cash or liquid securities, equal in value to the Fund's obligation
under the contract less than applicable margin deposits.

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 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 each 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
shareholders.

It is the policy of the Fund 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 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

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.

9
<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

<PAGE>

COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
a series of

Liberty Variable Investment Trust
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02210

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

Colonial High Yield Securities Fund, Variable Series ("Fund") is a series of
Liberty Variable Investment Trust ("Trust"). The Trust is an open-end management
investment company. The Fund seeks high current income and total return by
investing primarily in lower rated corporate debt securities. The Fund may
invest up to 100% 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 and therefore, the Fund may not be suitable for all investors. These
securities are subject to greater risks, including the risk of default, than
higher rated bonds. 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 19, 1998

-----------------------------
NOT May lose value
FDIC- No bank guarantee
INSURED
-----------------------------

<PAGE>

TABLE OF CONTENTS

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

</TABLE>
<TABLE>
<CAPTION>
Page
------
<S> <C>
OTHER INVESTMENT PRACTICES, RISK
CONSIDERATIONS AND POLICIES OF THE FUND .............. 8
Short-Term Trading ..................................... 8
Certain Investment Considerations Pertaining to
Government Debt Securities .......................... 9
Cash Reserves and Repurchase Agreements ................ 9
Forward Commitments and When-Issued Securities;
Dollar Roll Transactions ............................ 9
Foreign Securities ..................................... 9
Certain Derivative Investments ......................... 10
Zero-Coupon Bonds, Pay-in-Kind Securities and Step
Coupon Bonds ........................................ 10
Lower Rated Bonds ...................................... 11
Leverage Risks Associated with Certain Investment
Techniques ......................................... 11
Certain Policies to Reduce Risk ........................ 11
CHANGES TO INVESTMENT OBJECTIVE AND
NON-FUNDAMENTAL POLICIES ............................. 11
APPENDIX A: Description of Bond Ratings ................. A-1
</TABLE>

<PAGE>

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 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, 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").

3
<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 high current income and total return by
investing primarily in lower rated corporate debt securities.

Investment Program. The Fund normally invests at least 80% of its total assets
(other than cash and government securities) in lower rated debt securities.
However, the Fund may invest up to 100% of its assets in higher rated securities
if, in the Portfolio Manager's judgment, economic conditions narrow yield
spreads between lower and higher rated securities to levels at which such action
is determined to be advisable. The Fund may invest in debt securities of any
maturity. The Fund will not invest more than 25% of its total assets in a single
industry or in securities issued or guaranteed by a foreign government or
foreign company.

The Fund also may invest in debt securities (i) that do not pay interest but
instead are issued at a significant discount to their maturity values (referred
to as zero coupon securities), (ii) that pay interest, at the issuer's option,
in additional securities instead of cash (referred to as pay-in-kind
securities) or (iii) pay interest at predetermined rates that increase over
time (referred to as step coupon bonds). Because zero coupon securities, pay-
in-kind securities and step coupon bonds may not pay interest but the Fund
nevertheless must accrue and distribute to investors the income deemed to be
earned on a current basis, the Fund may have to sell other investments to raise
the cash needed to make income distributions.

The Fund will purchase lower rated bonds (commonly referred to as junk bonds),
which are not considered to be investment grade, 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 purchase the debt securities of a single issuer rated Ca
by Moody's or CC by S&P or lower or comparable unrated securities only if
Colonial believes the quality of such securities is higher than indicated by the
rating. Below investment grade 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:
Lower Rated 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.

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-

4
<PAGE>

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 0.60% 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 0.40% 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 separate
agreements.

FUND SERVICE ORGANIZATIONS

Custodian

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
Board of Trustees has approved the appointment of The Chase Manhattan Bank, 4
Chase Metro Tech Center, Brooklyn, New York 11245 to become the custodian for
the Fund. This change is expected to be completed not later than during the
second quarter of 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.

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, in each case for the period beginning May 1, 1998 through April 31, 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

5
<PAGE>

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.

Purchases and Redemptions

Investment Return

Net Asset Value

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.

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.

6
<PAGE>

Taxes

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.

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.

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.

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.

7
<PAGE>
Organization, Meetings, and Voting Rights

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

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

In selecting broker-dealers, Colonial may consider research and brokerage
services furnished by such broker-dealers to it and its affiliates. In
recognition of the research and brokerage services provided, Colonial 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. Subject to
seeking best execution, Colonial may consider sales of shares of the Fund (and
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 Fund's portfolio turnover rate is not a limiting factor when the
portfolio manager considers a change in the Fund's portfolio.

8
<PAGE>

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.

Cash Reserves and Repurchase Agreements

The Fund may invest temporarily available cash in certificates of deposit;
bankers' acceptances; high quality commercial paper; Treasury bills; U.S.
government securities and repurchase agreements with a securities dealer or
bank. Some or all of the Fund's assets may be invested in such instruments
during periods of unusual market conditions. In 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.
Additional collateral will be added so that the obligation will at all times be
fully collateralized. 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 10% 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

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 will take place at a future date beyond customary settlement
time. 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. The Funds will not enter into
such transactions for leverage (borrowing) purposes.

Foreign Securities

The Fund may invest in foreign securities. 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.

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, limited numbers of potential buyers for such securities,
restrictions or repatriation of capital and delays and disruptions in securities
settlement procedures. See "DESCRIPTION OF CERTAIN INVESTMENTS: Investments in
Less Developed Countries" in the Statement of Additional Information for a list
of the coun-

9
<PAGE>

tries whose economies or securities markets currently are considered by Colonial
not to be highly developed.

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. Over-the-counter call and put
options on foreign currency futures contracts and on foreign currencies are
considered illiquid by the SEC staff.

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.

Emerging Markets. The Fund may invest in foreign securities issued or
guaranteed by companies or governments located in countries whose economies or
securities markets are not yet highly developed. In addition to the risks
associated with foreign securities generally, emerging markets present risks of
greater political uncertainties, dependence on revenues from a particular
commodities or international aid or development assistance, volatile debt
burdens or inflation rates, limited numbers of securities purchasers,
restrictions or repatriation of capital and delays and disruptions in
securities settlement procedures.

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. The total market value of securities to be
delivered or acquired pursuant to such contracts will not exceed 5% of the
Fund's net assets.

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 on an interest rate futures contract 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 or option 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 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" in the Statement of
Additional Information.

Zero-Coupon Bonds, Pay-in-Kind Securities and Step Coupon Bonds

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.

<PAGE>

Pay-in-Kind Securities. The Fund may invest in securities which pay interest,
typically at the issuer's option, in additional securities instead of cash.
Similar to zero coupon bonds, the Fund accrues interest paid in kind and may
have to sell other investments to raise the cash needed to make income
distributions. These securities are generally lower rated securities and in
addition to the other risks associated with investing in lower rated securities
are subject to the risks that the interest payments which consist of additional
securities are also subject to the risks of lower rated securities.

Step Coupon Bonds. The Fund may invest in debt securities which do not pay
interest for a stated period of time and then pay interest at a series of
different rates for a series of periods. In addition to the risks associated
with the credit rating of the issuers, these securities are subject to the
volatility risk of zero coupon bonds for the period when no interest is paid.

Lower Rated Bonds

The Fund invests 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

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

3. Lower rated bonds 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 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 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.

11
<PAGE>

CHANGES TO INVESTMENT OBJECTIVE AND NON-FUNDAMENTAL POLICIES

<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.

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

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>

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

<PAGE>

LIBERTY VARIABLE INVESTMENT TRUST

Federal Reserve Plaza, 600 Atlantic Avenue
Boston, Massachusetts 02210

STATEMENT OF ADDITIONAL INFORMATION

Dated May 19, 1998

The Statement of Additional Information ("SAI") is not a Prospectus, but
should be read in conjunction with the Trust's Prospectus, dated May 19, 1998
and any supplement thereto, which may be obtained at no charge by calling
Keyport Financial Services Corp. at (800) 437-4466, or by contacting the
applicable Participating Insurance Company, or the broker-dealers offering
certain variable annuity contracts or variable life insurance policies issued by
the Participating Insurance Company.

The date of this SAI is May 19, 1998.

<PAGE>

TABLE OF CONTENTS

ITEM PAGE

INVESTMENT MANAGEMENT AND OTHER SERVICES................................ S-3
General............................................................... S-3
Trust Charges and Expenses............................................ S-6

INVESTMENT RESTRICTIONS ............................................. S-7
Growth and Income Fund............................................... S-7
Global Utilities Fund................................................. S-8
International Fund For Growth......................................... S-9
U.S. Stock Fund .................................................... S-10
Strategic Income Fund................................................. S-11
Tiger Fund............................................................ S-12
All-Star Fund... .................................................... S-14

Small Cap Value ....................................................
High Yield Securities.................................................

MORE FACTS ABOUT TRUST ............................................. S-16
Mixed and Shared Funding.............................................. S-16
Organization ......................................................... S-16
Trustees and Officers ................................................ S-17
Principal Holders of Securities....................................... S-20
Custodians............................................................ S-21

OTHER CONSIDERATIONS ............................................. S-21
Portfolio Turnover ........................................... S-21
Suspension of Redemptions............................................. S-21
Valuation of Securities ........................................... S-21
Portfolio Transactions ........................................... S-23

DESCRIPTION OF CERTAIN INVESTMENTS...................................... S-26
Money Market Instruments.............................................. S-26
Investments in Less Developed Countries............................... S-29
Foreign Currency Transactions......................................... S-29
Options on Securities ........................................... S-33
Futures Contracts and Related Options................................. S-36
Passive Foreign Investment Companies.................................. S-40
Securities Loans .................................................... S-40

INVESTMENT PERFORMANCE ............................................. S-41

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS........................ S-42

S-2
<PAGE>

Liberty Variable Investment Trust (the "Trust"), a Massachusetts business
trust, is registered with the Securities and Exchange Commission ("SEC") as an
open-end management investment company. The Trust currently offers nine Funds:
Colonial Growth and Income Fund, Variable Series ("Growth and Income Fund");
Stein Roe Global Utilities Fund, Variable Series ("Global Utilities Fund");
Colonial International Fund For Growth, Variable Series ("International Fund For
Growth"); Colonial U.S. Stock Fund, Variable Series ("U.S. Stock Fund");
Colonial Strategic Income Fund, Variable Series ("Strategic Income Fund");
Newport Tiger Fund, Variable Series ("Tiger Fund"); Liberty All-Star Equity
Fund, Variable Series ("All-Star Fund") Colonial Small Cap Value Fund, Variable
Series ("Small Cap Value Fund") and Colonial High Yield Securities Fund,
Variable Series ("High Yield Securities Fund"). The Trust may add or delete
Funds from time to time. The Trust commenced operations on July 1, 1993.

INVESTMENT MANAGEMENT AND OTHER SERVICES
General

Liberty Advisory Services Corp. ("LASC") serves as Manager pursuant to
five investment advisory agreements between the Trust on behalf of one or more
of the Funds and LASC (the "Management Agreements"). LASC is a direct wholly
owned subsidiary of Keyport Life Insurance Company ("Keyport"), which is an
indirect wholly owned subsidiary of Liberty Financial Companies, Inc. ("LFC").
As of October 31, 1997, approximately 74.7% of the combined voting power of
LFC's outstanding voting stock was owned, indirectly, by Liberty Mutual
Insurance Company ("Liberty Mutual").

LASC and the Trust, on behalf of each of Growth and Income Fund,
International Fund For Growth, U.S. Stock Fund, Strategic Income Fund, Small Cap
Value Fund and High Yield Securities Fund, have entered into separate
Sub-Advisory Agreements ("Colonial Sub-Advisory Agreements") with Colonial
Management Associates, Inc. ("Colonial"). Colonial is an indirect wholly owned
subsidiary of LFC.

LASC and the Trust, on behalf of the Global Utilities Fund, have entered
into a separate Sub-Advisory Agreement (the "Stein Roe Sub-Advisory Agreement")
with Stein Roe & Farnham Incorporated ("Stein Roe"). Stein Roe is an indirect
wholly owned subsidiary of LFC.

LASC and the Trust, on behalf of the Tiger Fund, have entered into a
separate Sub-Advisory Agreement (the "Newport Sub-Advisory Agreement;"
collectively, with the Colonial Sub-Advisory Agreements and the Stein Roe
Sub-Advisory Agreement, the "Sub-Advisory Agreements") with Newport Fund
Management, Inc. ("Newport"). Newport is an indirect wholly owned subsidiary of
LFC.

Liberty Asset Management Company ("LAMCO") sub-advises All-Star Fund
pursuant to the Management Agreement for such Fund (to which LAMCO is a party).
All-Star Fund's investment program is based upon LAMCO's multi-manager concept.
LAMCO allocates the Fund's portfolio assets on an equal basis among a number of
independent investment management

S-3
<PAGE>

organizations ("Portfolio Managers") -- currently five in number -- each of
which employs a different investment style, and periodically rebalances the
Fund's portfolio among the Portfolio Managers so as to maintain an approximately
equal allocation of the portfolio among them throughout all market cycles. Each
Portfolio Manager provides these services under a Portfolio Management Agreement
(the "Portfolio Management Agreements") among the Trust, on behalf of All-Star
Fund, LAMCO and such Portfolio Manager.

All-Star Fund's current Portfolio Managers are:

J.P. Morgan Investment Management Inc.
Oppenheimer Capital
Palley-Needelman Asset Management, Inc.
Westwood Management Corp.
Wilke/Thompson Capital Management, Inc.

Liberty Advisory Services Corp. Keyport owns all of the outstanding common
stock of LASC. LASC's address is 125 High Street, Boston, Massachusetts 02110.
The directors and principal executive officer of LASC are: John W. Rosensteel
(principal executive officer); John E. Arant, III; James J. Klopper; and Paul H.
LeFevre, Jr. Mr. Rosensteel also is a director of Keyport Financial Services
Corp. ("KFSC"), the principal underwriter for shares of the Funds sold to
Affiliated Participating Insurance Companies (as such term is defined in the
Prospectus).

Colonial Management Associates, Inc. The Colonial Group, Inc., One
Financial Center, Boston, Massachusetts 02111, owns all of the outstanding
common stock of Colonial. LFC owns all of the outstanding common stock of The
Colonial Group, Inc. The directors and principal executive officer of Colonial
are Bonny E. Boatman, Sheila A. Carroll, Harold W. Cogger, Stephen Gibson
(principal executive officer), Carl C. Ericson, C. Frazier Evans, Donald S.
MacKinnon, Helen Frame Peters, Daniel Rie, Davey S. Scoon and Michael H. Koonce.

Stein Roe & Farnham Incorporated. Stein Roe, One South Wacker Drive,
Chicago, Illinois, 60606, is an indirect wholly owned subsidiary of LFC. The
directors and principal executive officer of Stein Roe are Kenneth R. Leibler,
C. Allen Merritt, Jr., Hans P. Ziegler (principal executive officer), Timothy K.
Armour, and Harold W. Cogger.

Newport. Newport Pacific Management, Inc. ("Newport Pacific"), 580
California Street, San Francisco, California 94104, owns all of the outstanding
common stock of Newport. Liberty Newport Holdings, Ltd. ("LNH") owns all of the
outstanding common stock of Newport Pacific. LFC owns all of the outstanding
stock of LNH. The directors and principal executive officer of Newport are John
M. Mussey (principal executive officer), Sabino Marinella, Kenneth R. Leibler,
Lindsay Cook, Thomas R. Tuttle, Pamela Frantz and Linda Couch.

Liberty Asset Management Company; LAMCO's Portfolio Managers. LAMCO, 600
Atlantic Avenue, 23rd Floor, Boston, Massachusetts 02210, is an indirect wholly
owned subsidiary of LFC. The directors and principal executive officer of LAMCO
are: Kenneth R. Leibler, Richard

S-4
<PAGE>

R. Christensen (principal executive officer), Lindsay Cook and C. Allen Merritt,
Jr. Mr. Christensen is Chairman of the Board of Trustees of the Trust.

As of the date of this Statement of Additional Information, the following
entities serve as LAMCO's Portfolio Managers for All-Star Fund:

o J.P. Morgan Investment Management, Inc. J.P. Morgan Investment
Management Inc. ("J.P. Morgan"), 522 Fifth Avenue, New York, New
York 10036, is a wholly-owned subsidiary of J.P. Morgan & Co.
Incorporated, a New York Stock Exchange listed bank holding company
the principal banking subsidiary of which is Morgan Guaranty Trust
Company of New York. J.P. Morgan's principal executive officer is
Keith M. Schappert, and its directors are Mr. Schappert and Messrs.
William L. Cobb, Jr., C. Nicolas Potter, Michael R. Granito, John R.
Thomas, Thomas M. Luddy, Michael E. Patterson, Jean Louis Pierre
Brunel, Robert A. Anselmi, Milan Steven Soltis and K. Warren
Anderson.

o Oppenheimer Capital. Oppenheimer Capital, Oppenheimer Tower, World
Financial Center, New York, New York 10281, also is a wholly-owned
subsidiary of PIMCO Advisors L.P. Oppenheimer Capital's principal
executive officer is George Long, and its directors are Mr. Long and
Frank LaCates.

o Palley-Needelman Asset Management, Inc. Palley-Needelman Asset
Management, Inc.'s address is 800 Newport Center Drive, Suite 450,
Newport Beach, California 92660. The firm is owned by Roger B.
Palley, President, and Chester J. Needelman, chief executive
officer. Messrs. Palley and Needelman are its directors.

o Westwood Management Corp. Westwood Management Corp., 300 Crescent
Court, Suite 1320, Dallas, Texas 75201, is a wholly owned subsidiary
of Southwest Securities Group, Inc. Its principal executive officer
is Susan M. Byne. Its directors are Ms. Byrne, Raymond E.
Wooldridge, Don A. Buchhotz, David M. Glatstein, and Patricia R.
Fraze.

o Wilke/Thompson Capital Management, Inc. Wilke/Thompson Capital
Management, Inc. ("Wilke/Thompson"), 3800 Norwest Center, 90 South
Seventh Street, Minneapolis, Minnesota 55402, is a corporation of
which Anthony L. Ventura, its President, owns 23%, and Mark A.
Thompson, its Chairman and Chief Investment Officer, owns 56%, of
its outstanding shares. (The balance of such shares are owned by
other employees). Messrs. Thompson and Ventura comprise its Board of
Directors.

The Management Agreements, the Sub-Advisory Agreements and the Portfolio
Management Agreements provide that none of LASC, Colonial, Stein Roe, Newport,
LAMCO or LAMCO's Portfolio Managers (collectively, the "Advisers"), nor any of
their respective directors, officers, stockholders (or partners of
stockholders), agents, or employees shall have any liability to

S-5
<PAGE>

the Trust or any shareholder of any Fund for any error of judgment, mistake of
law or any loss arising out of any investment, or for any other act or omission
in the performance by such Adviser of its respective duties under such
agreements, except for liability resulting from willful misfeasance, bad faith
or gross negligence on the part of such Adviser, in the performance of its
respective duties or from reckless disregard by such Adviser of its respective
obligations and duties thereunder.

Trust Charges and Expenses

Growth and Income Fund and Global Utilities Fund commenced operations on
July 1, 1993. International Fund For Growth commenced operations on May 2, 1994.
U.S. Stock Fund and Strategic Income Fund commenced operations on July 5, 1994.
Tiger Fund commenced operations on May 1, 1995. All-Star Fund commenced
operations on November 15, 1997. Small Cap Value Fund and High Yield Securities
Fund commenced operations on or about the date of this SAI.

Management Fees. Each Fund listed below paid LASC management fees as
follows during each year in the three-year period ended December 31, 1997
pursuant to the Management Agreements described in the Prospectus:

1995 1996 1997
-------- -------- --------
Growth and Income Fund: $384,179 $538,173 $605,151
Global Utilities Fund: $284,469 $315,944 $310,458
International Fund For Growth: $183,697 $224,146 $270,532
U.S. Stock Fund: $237,547 $418,745 $623,484
Strategic Income Fund: $181,811 $322,142 $399,569
Tiger Fund: $ 86,228 $258,891 $303,701
Liberty All-Star Equity: -- -- $ 20,337
Small Cap Value: -- -- --
High Yield Securities: -- -- --

Certain Administrative Expenses. During each year in the three-year period
ended December 31, 1997 each Fund listed below made payments as follows to
Colonial or an affiliate thereof for pricing and bookkeeping services.

1995 1996 1997
------- ------- -------
Growth and Income Fund: $30,524 $40,025 $43,653
Global Utilities Fund: $27,000 $27,000 $27,071
International Fund For Growth: $27,000 $27,000 $27,000
U.S. Stock Fund: $27,000 $27,000 $39,024
Strategic Income Fund: $27,000 $27,000 $31,551
Tiger Fund: $18,000 $27,000 $27,000
Liberty All-Star Equity: -- -- $ 3,225
Small Cap Value: -- -- --
High Yield Securities: -- -- --

S-6
<PAGE>

In addition, during each year in the three-year period ended December 31,
1997 each Fund listed below made payments as follows to Colonial or an affiliate
thereof for transfer agent services:

1995 1996 1997
------ ------ ------
Growth and Income Fund: $7,500 $7,500 $7,500
Global Utilities Fund: $7,500 $7,500 $7,500
International Fund For Growth: $7,500 $7,500 $7,500
U.S. Stock Fund: $7,500 $7,500 $7,500
Strategic Income Fund: $7,500 $7,500 $7,500
Tiger Fund: $5,000 $7,500 $7,500
Liberty All-Star Equity: -- -- $ 896
Small Cap Value: -- -- --
High Yield Securities: -- -- --

Expense Limitations. LASC has agreed to reimburse all expenses, including
management fees, but excluding interest, taxes, brokerage, and other expenses
which are capitalized in accordance with generally accepted accounting
procedures, and extraordinary expenses, incurred by (i) each of Growth and
Income Fund, Global Utilities Fund, U.S. Stock Fund, All-Star Fund, Small Cap
Value Fund and High Yield Securities Fund in excess of 1.00% of average net
asset value per annum, (ii) each of International Fund For Growth and Tiger Fund
in excess of 1.75% of average daily net asset value per annum, and (iii)
Strategic Income Fund in excess of 0.80% of average daily net asset value per
annum.

INVESTMENT RESTRICTIONS

In addition to the restrictions set forth in the Prospectus with respect
to each Fund which are described as fundamental investment policies, the
investment restrictions specified below with respect to each Fund as
"Fundamental Investment Policies" have been adopted as fundamental investment
policies of each Fund. Such fundamental investment policies may be changed only
with the consent of a "majority of the outstanding voting securities" of the
particular Fund. As used in the Prospectus and in this SAI, the term "majority
of the outstanding voting securities" means the lesser of (i) 67% of the voting
securities of a Fund present at a meeting where the holders of more than 50% of
the outstanding voting securities of a Fund are present in person or by proxy,
or (ii) more than 50% of the outstanding voting securities of a Fund. Shares of
each Fund will be voted separately on matters affecting only that Fund,
including approval of changes in the fundamental objectives, policies, or
restrictions of that Fund.

S-7
<PAGE>

Total assets and net assets are determined at current value for purposes
of compliance with investment restrictions and policies. All percentage
limitations will apply at the time of investment and are not violated unless an
excess or deficiency occurs as a result of such investment. For purposes of the
diversification requirement of the Investment Company Act of 1940, as amended
(the "1940 Act"), the issuer with respect to a security is the entity whose
revenues support the security.

Growth and Income Fund

Fundamental Investment Policies. Growth and Income Fund may:

1. Issue senior securities only through borrowing money from banks for
temporary or emergency purposes up to 10% of its net assets;
however, the Fund will not purchase additional portfolio securities
while borrowings exceed 5% of net assets;

2. Invest up to 15% of its net assets in illiquid assets;

3. Underwrite securities issued by others only when disposing of
portfolio securities;

4. Make loans through lending of securities not exceeding 30% of total
assets, through the purchase of debt instruments and similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements;

5. Not concentrate more than 25% of its total assets in any one
industry;

6. With respect to 75% of total assets not purchase any security (other
than obligations of the U.S. Government and cash items including
receivables) if as a result more than 5% of its total assets would
then be invested in securities of a single issuer or purchase the
voting securities of an issuer if, as a result of such purchase, the
Fund would own more than 10% of the outstanding voting shares of
such issuer; and

7. Own real estate if it is acquired as the result of owning securities
and not more than 5% of total assets.

Other Investment Policies. As non-fundamental investment policies of
Growth and Income Fund which may be changed without a shareholder vote, the Fund
may not:

1. Purchase securities on margin, but it may receive short-term credit
to clear securities transactions and may make initial or maintenance
margin deposits in connection with futures transactions;

2. Purchase and sell futures contracts and related options if the total
initial margin and premiums required to establish non-hedging
positions exceed 5% of its total assets; or

S-8
<PAGE>

3. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount of
such securities.

Global Utilities Fund

Fundamental Investment Policies. Global Utilities Fund may:

2. Invest up to 15% of its net assets in illiquid assets;

3. Underwrite securities issued by others only when disposing of
portfolio securities;

5. With respect to 75% of total assets not purchase any security (other
than obligations of the U.S. Government and cash items including
receivables) if as a result more than 5% of its total assets would
then be invested in securities of a single issuer or purchase the
voting securities of an issuer if, as a result of such purchase, the
Fund would own more than 10% of the outstanding voting shares of
such issuer; and

6. Own real estate if it is acquired as the result of owning securities
and not more than 5% of total assets.

Other Investment Policies. As non-fundamental investment policies of
Global Utilities Fund which may be changed without a shareholder vote, the Fund
may not:

1. Purchase securities on margin, but it may receive short-term credit
to clear securities transactions (this restriction does not apply to
securities purchased on a when-issued basis or to margin deposits in
connection with futures or options transactions);

2. Purchase and sell futures contracts and related options if the total
initial margin and premiums required to establish non-hedging
positions exceed 5% of its total assets; and

3. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount of
such securities.

S-9
<PAGE>

International Fund For Growth

Fundamental Investment Policies. International Fund For Growth may:

2. Underwrite securities issued by others only when disposing of
portfolio securities;

3. Make loans through lending of securities not exceeding 30% of total
assets, through the purchase of debt instruments and similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements;

4. Not concentrate more than 25% of its total assets in any one
industry;

5. Only own real estate acquired as the result of owning securities and
not more than 5% of total assets;

6. Purchase and sell futures contracts and related options so long as
the total initial margin and premiums on the contracts do not exceed
5% of its total assets; and

7. Not purchase any security issued by another investment company if
immediately after such purchase the Fund would own in the aggregate
(i) more than 3% of the total outstanding voting securities of such
other investment company, (ii) securities issued by such other
investment company having an aggregate value in excess of 5% of the
Fund's total assets, or (iii) securities issued by investment
companies having an aggregate value in excess of 10% of the Fund's
total assets.

Other Investment Policies. As non-fundamental investment policies of
International Fund For Growth which may be changed without a shareholder vote,
the Fund may not:

1. Purchase securities on margin, but it may receive short-term credit
to clear securities transactions and may make initial or maintenance
margin deposits in connection with futures transactions;

2. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount of
such securities;

3. Invest more than 15% of its net assets in illiquid assets;

4. With respect to 75% of total assets, purchase any voting security of
an issuer if, as a result of such purchase, the Fund would own more
than 10% of the outstanding voting securities of such issuer;

S-10
<PAGE>

5. Purchase puts, calls, straddles, spreads, or any combination thereof
if, as a result of such purchase, the Fund's aggregate investment in
such securities would exceed 5% of total assets;

6. Acquire any security issued by a person that, in its most recent
fiscal year, derived 15% or less of its gross revenues from
securities related activities (within the meaning of Rule 12d3-1
under the Investment Company Act of 1940 (the "1940 Act")) if the
Fund would control such person after such acquisition; or

7. Acquire any security issued by a person that, in its most recent
fiscal year, derived more than 15% of its gross revenues from
securities related activities (as so defined) unless (i) immediately
after such acquisition of any equity security, the Fund owns 5% or
less of the outstanding securities of that class of the issuer's
equity securities, (ii) immediately after such acquisition of a debt
security, the Fund owns 10% or less of the outstanding principal
amount of the issuer's debt securities, and (iii) immediately after
such acquisition, the Fund has invested not more than 5% of its
total assets in the securities of the issuer.

U.S. Stock Fund

Fundamental Investment Policies. U.S. Stock Fund may:

2. Underwrite securities issued by others only when disposing of
portfolio securities;

4. Not concentrate more than 25% of its total assets in any one
industry; and

6. Only own real estate acquired as the result of owning securities and
not more than 5% of total assets; and

S-11
<PAGE>

7. Purchase and sell futures contracts and related options so long as
the total initial margin and premiums on the contracts do not exceed
5% of its total assets.

Other Investment Policies. As non-fundamental investment policies of U.S.
Stock Fund which may be changed without a shareholder vote, the Fund may not:

1. Purchase securities on margin, but it may receive short-term credit
to clear securities transactions and may make initial or maintenance
margin deposits in connection with futures transactions;

2. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount of
such securities;

3. Invest more than 15% of its net assets in illiquid assets; or

4. Purchase or sell commodity contracts if the total initial margin and
premiums on the contracts would exceed 5% of its total assets.

Strategic Income Fund

Fundamental Investment Policies. Strategic Income Fund may:

2. Underwrite securities issued by others only when disposing of
portfolio securities;

4. Not concentrate more than 25% of its total assets in any one
industry;

6. Only own real estate acquired as the result of owning securities and
not more than 5% of total assets; and

S-12
<PAGE>

7. Purchase and sell futures contracts and related options so long as
the total initial margin and premiums on the contracts do not exceed
5% of its total assets.

Other Investment Policies. As non-fundamental investment policies of
Strategic Income Fund which may be changed without a shareholder vote, the Fund
may not:

1. Purchase securities on margin, but it may receive short-term credit
to clear securities transactions and may make initial or maintenance
margin deposits in connection with futures transactions;

2. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount of
such securities; or

3. Invest more than 15% of its net assets in illiquid assets.

S-13
<PAGE>

Tiger Fund

Fundamental Investment Policies. Tiger Fund may not:

1. With respect to 75% of total assets purchase any security (other
than obligations of the U.S. Government and cash items including
receivables) if as a result more than 5% of its total assets would
then be invested in securities of a single issuer or purchase the
voting securities of an issuer if, as a result of such purchase, the
Fund would own more than 10% of the outstanding voting shares of
such issuer;

2. Underwrite securities issued by others except when disposing of
portfolio securities;

3. Buy or sell commodities or commodity contracts (other than currency
forward contracts);

4. Borrow amounts in excess of 5% of the Fund's net asset value, and
only from banks as a temporary measure for extraordinary or
emergency purposes and not for investment in securities. To avoid
the untimely disposition of assets to meet redemptions it may borrow
up to 20% of the net value of its assets to meet redemptions. The
Fund will not make other investments while such borrowings referred
to above in this item are outstanding. The Fund will not mortgage,
pledge or in any other manner transfer, as security for
indebtedness, any of its assets. (Short-term credits necessary for
the clearance of purchases or sales of securities will not be deemed
to be borrowings by the Fund.);

5. Make loans, except that the Fund may: (a) acquire for investment a
portion of an issue of bonds, debentures, notes or other evidences
of indebtedness of a corporation or government; (b) enter into
repurchase agreements, secured by obligations of the United States
or any agency or instrumentality thereof;

6. Issue senior securities (except in accordance with 4 above);

7. Concentrate more than 25% of its total assets in any one of its
industry;

8. Purchase or sell real estate, provided that securities of companies
which deal in real estate or interests therein will not be deemed to
be investments in real estate.

S-14
<PAGE>

Other Investment Policies. As non-fundamental investment policies of Tiger
Fund which may be changed without a shareholder vote, the Fund may not:

1. Invest in companies for the purpose of exercising control;

2. Invest in securities of other investment companies except by
purchase in the open market involving only customary broker's
commissions, or as part of a merger, consolidation, or acquisition
of assets;

3. Participate on a joint and several basis in any securities trading
account;

4. Write or trade in put or call options;

5. Purchase securities on margin, but the Fund may utilize such
short-term credits as may be necessary for clearance of purchases or
sales of securities; or

6. Engage in short sales of securities.

All-Star Fund

Fundamental Investment Policies. All-Star Fund may not:

1. Issue senior securities, except as permitted by (2) below;

2. Borrow money, except that it may borrow in an amount not exceeding
7% of its total assets (including the amount borrowed) taken at
market value at the time of such borrowing, and except that it may
make borrowings in amounts up to an additional 5% of its total
assets (including the amount borrowed) taken at market value at the
time of such borrowing, to obtain such short-term credits as are
necessary for the clearance of securities transactions, or for
temporary or emergency purposes, and may maintain and renew any of
the foregoing borrowings, provided that the Fund maintains asset
coverage of 300% with respect to all such borrowings;

3. Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph (2) above and then only if such
pledging, mortgaging or hypothecating does not exceed 12% of the
Fund's total assets taken at market value at the time of such
pledge, mortgage or hypothecation. The deposit in escrow of
securities in connection with the writing of put and call options
and collateral arrangements with respect to margin for future
contracts are not deemed to be pledges or hypothecation for this
purpose;

S-15
<PAGE>

4. Act as an underwriter of securities of other issuers, except when
disposing of securities;

5. Purchase or sell real estate or any interest therein, except that
the Fund may invest in securities issued or guaranteed by corporate
or governmental entities secured by real estate or interests
therein, such as mortgage pass-through and collateralized mortgage
obligations, or issued by companies that invest in real estate or
interests therein;

6. Make loans to other persons except for loans of portfolio securities
(up to 30% of total assets) and except through the use of repurchase
agreements, the purchase of commercial paper or the purchase of all
or a portion of an issue of debt securities in accordance with its
investment objective, policies and restrictions, and provided that
not more than 10% of the Fund's assets will be invested in
repurchase agreements maturing in more than seven days;

7. Invested in commodities or in commodity contracts (except stock
index futures and options);

8. Purchase securities on margin (except to the extent that the
purchase of options and futures may involve margin and except that
it may obtain such short-term credits as may be necessary for the
clearance of purchases or sales of securities), or make short sales
of securities;

9. Purchase the securities of issuers conducting their principal
business activity in the same industry (other than securities issued
or guaranteed by the United States, its agencies and
instrumentalities) if, immediately after such purchase, the value of
its investments in such industry would comprise 25% or more of the
value of its total assets taken at market value at the time of each
investment;

10. Purchase securities of any one issuer, if

(a) more than 5% of the Fund's total assets taken at market
value would at the time be invested in the securities of such
issuer, except that such restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities or corporations sponsored thereby, and except that
up to 25% of the Fund's total assets may be invested without regard
to this limitation; or

(b) such purchase would at the time result in more than 10% of
the outstanding voting securities of such issuer being held by the
Fund, except that up to 25% of the Fund's total assets may be
invested without regard to this limitation;

11. Invest in securities of another registered investment company,
except (i) as permitted by the Investment Company Act of 1940, as
amended from time to time,

S-16
<PAGE>

or any rule or order thereunder, or (ii) in connection with a
merger, consolidation, acquisition or reorganization;

12. Purchase any security, including any repurchase agreement maturing
in more than seven days, which is subject to legal or contractual
delays in or restrictions on resale, or which is not readily
marketable, if more than 10% of the net assets of the Fund, taken at
market value, would be invested in such securities;

13. Invest for the purpose of exercising control over or management of
any company; or

14. Purchase securities unless the issuer thereof or any company on
whose credit the purchase was based, together with its predecessors,
has a record of at least three years' continuous operations prior to
the purchase, except for investments which, in the aggregate, taken
at cost do not exceed 5% of the Fund's total assets.

Other Investment Policies. As non-fundamental investment policies of
All-Star Fund which may be changed without a shareholder vote, the Fund may not
borrow in an amount in excess of 5% of its total assets (including the amount
borrowed).

Small Cap Value Fund

Fundamental Investment Policies. Small Cap Value Fund may:

1. Issue senior securities only through borrowing money from banks for
temporary or emergency purposes up to 10% of its net assets;
however, it will not purchase additional portfolio securities while
borrowings exceed 5% of net assets;

2. Only own real estate acquired as the result of owning securities and
not more than 5% of total assets;

3. Purchase and sell futures contracts and related options so long as
the total initial margin and premiums on the contracts does not
exceed 5% of its total assets;

4. Underwrite securities issued by others only when disposing of
portfolio securities;

5. Make loans through lending of securities not exceeding 30% of total
assets, through the purchase of debt instruments or similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements; and

6. Not concentrate more than 25% of its total assets in any one
industry or with respect to 75% of total assets purchase any
security (other than obligations of the U.S. government and cash
items including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer, or purchase voting securities of an issuer if, as a result
of purchase, the Fund would own more than 10% of the outstanding
voting shares of such issuer.

Other Investment Policies. As non-fundamental investment policies of Small
Cap Value Fund which may be changed, the Fund may not:

S-17
<PAGE>

1. Purchase securities on margin, but it may receive short-term credit
to clear securities transactions and may make initial or maintenance
margin deposits in connection with futures transactions;

2. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount of
such securities;

3. Purchase or sell commodity contracts if the total initial margin and
premiums on the contracts would exceed 5% of its total assets; and

4. Invest more than 15% of its net assets in illiquid assets.

High Yield Securities Fund

Fundamental Investment Policies. High Yield Securities Fund may:

2. Only own real estate acquired as the result of owning securities and
not more than 5% of total assets;

3. Invest up to 10% of its net assets in illiquid assets;

4. Purchase and sell futures contracts and related options so long as
the total initial margin and premiums on the contracts do not exceed
5% of its total assets;

5. Underwrite securities issued by others only when disposing of
portfolio securities;

6. Make loans through lending of securities not exceeding 30% of total
assets, through the purchase of debt instruments or similar
evidences of indebtedness typically sold privately to financial
institutions and through repurchase agreements; and

7. Not concentrate more than 25% of its total assets in any one
industry or with respect to 75% of total assets purchase any
security (other than obligations of the U.S. Government and cash
items including receivables) if as a result more than 5% of its
total assets would then be invested in securities of a single
issuer, or purchase voting securities of an issuer if, as a result
of such purchase, the Fund would own more than 10% of the
outstanding voting shares of such issuer.

Other Investment Policies. As non-fundamental investment policies of High
Yield Securities fund which may be changed, the Fund may not:

1. Purchase securities on margin, but the Fund may receive short-term
credit to clear securities transactions and may make initial or
maintenance margin deposits in connection with futures transactions;
and

2. Have a short securities position, unless the Fund owns, or owns
rights (exercisable without payment) to acquire, an equal amount of
such securities.

S-18
<PAGE>

MORE FACTS ABOUT THE TRUST

Mixed and Shared Funding

As described in the Prospectus, the Trust serves as the funding medium for
VA contracts and VLI policies of Participating Insurance Companies (as such term
is defined therein), including those of Keyport, Independence Life & Annuity
Company ("Independence"), a wholly owned subsidiary of Keyport, and Liberty Life
Assurance Company of Boston ("Liberty Life"), 90%-owned subsidiary of Liberty
Mutual. This is referred to as "mixed and shared funding." The interests of
owners of VA contracts and VLI policies could diverge based on differences in
state regulatory requirements, changes in the tax laws or other unanticipated
developments. The Trust does not foresee any such differences or disadvantages
at this time. However, the Board of Trustees monitors for such developments to
identify any material irreconcilable conflicts and to determine what action, if
any, should be taken in response to such conflicts. If such a conflict were to
occur, one or more separate accounts of Participating Insurance Companies might
be required to withdraw its investments in one or more Funds or shares of
another Fund may be substituted. This might force a Fund to sell securities at
disadvantageous prices.

At this time the Trust does not offer its shares to separate accounts of
insurance companies that are unaffiliated with Keyport or Liberty Mutual, but
anticipates doing so in the future.

Organization

The Trust is required to hold a shareholders' meeting to elect Trustees to
fill vacancies in the event that less than a majority of Trustees were elected
by shareholders. Trustees may also be removed by the vote of two-thirds of the
outstanding shares at a meeting called at the request of shareholders whose
interests represent 10% or more of the outstanding shares.

The shares do not have cumulative voting rights, which means that the
holders of more than 50% of the shares of the Funds voting for the election of
Trustees can elect all of the Trustees, and, in such event, the holders of the
remaining shares will not be able to elect any Trustees.

The Funds are not required by law to hold regular annual meetings of their
shareholders and do not intend to do so. However, special meetings may be called
for purposes such as electing or removing Trustees or changing fundamental
policies.

Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable for the obligations of the
Trust. The Trust's shareholders are the separate accounts of Participating
Insurance Companies, and, in certain cases, the general account of Keyport.
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 applicable Fund thereof) 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 of Trustees. The Declaration of Trust provides for

S-19
<PAGE>

indemnification out of the Trust's assets (or the applicable Fund) 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 any one Fund of sustaining
a loss on account of liabilities incurred by another Fund is also believed to be
remote.

Trustees and Officers

The Trustees and officers of the Trust, together with information as to
their principal addresses and business occupations during the last five years,
are shown below. An asterisk next to a name indicates that a Trustee is
considered an "interested person" of the Trust (as defined in the 1940 Act).

S-20
<PAGE>

==============================================================================================================
Positions(s) held Principal occupations
Name and Address with the Trust during past five years
==============================================================================================================
<S> <C> <C>
Salvatore Macera Trustee Private Investor; formerly Executive Vice
20 Rowes Wharf President of Itek Corp. and President of
Boston, MA 02109 Itek Optical & Electronic Industries, Inc.
- --------------------------------------------------------------------------------------------------------------
Dr. Thomas E. Stitzel Trustee Professor of Finance, College of Business,
2208 Tawny Woods Place Boise State University; Business Consultant
Boise, ID 83706 and Author
- --------------------------------------------------------------------------------------------------------------
Timothy J. Jacoby Treasurer and Chief Treasurer and Chief Financial Officer of
One Financial Center Financial Officer the Colonial Funds; Senior Vice President
Boston, MA 02111 and Chief Financial Officer of Colonial
Management Associates, Inc.; formerly
Senior Vice President, Fidelity Accounting
and Custody Services, Inc. and Assistant
Treasurer to the Fidelity Group of Funds
- --------------------------------------------------------------------------------------------------------------
John E. Lennon Vice President Vice President, Colonial
One Financial Center Management Associates, Inc.
Boston, MA 02111
- --------------------------------------------------------------------------------------------------------------
Michael H. Koonce Vice President Senior Vice President and General Counsel,
One Financial Center Colonial Management Associates, Inc.
Boston, MA 02111 (August, 1997 to present); Vice President
and Counsel (prior thereto)
- --------------------------------------------------------------------------------------------------------------
Andrea Feingold Vice President Vice President, Colonial Management
One Financial Center Associates, Inc.
Boston, MA 02111
- --------------------------------------------------------------------------------------------------------------
James P. Haynie Vice President Vice President, Colonial Management
One Financial Center Associates, Inc.
Boston, MA 02111
- --------------------------------------------------------------------------------------------------------------
Michael Rega Vice President Vice President, Colonial Management
One Financial Center Associates, Inc.
Boston, MA 02111
- --------------------------------------------------------------------------------------------------------------

S-21
<PAGE>

S-22
<PAGE>

==============================================================================================================
Positions(s) held Principal occupations
Name and Address with the Trust during past five years
==============================================================================================================
Deborah A. Jansen Vice President Vice President and Senior Research Analyst,
One South Wacker Drive Stein Roe (March 1996 to present and 1987
Chicago, Illinois 60606 to January, 1995); from June 5, 1995 to
June 30, 1995, Senior Equity Research
Analyst, BankOne Investment Advisers
Corporation
- --------------------------------------------------------------------------------------------------------------
William R. Parmentier, Jr. Vice President Chief Investment Officer, LAMCO (April,
600 Atlantic Avenue 1995 to present); Chief Investment Officer
Boston, Massachusetts 02210 of Grumman Corporation, 1979-1994
- --------------------------------------------------------------------------------------------------------------
Christopher S. Carabell Vice President Vice President, Investments, LAMCO (March,
600 Atlantic Avenue 1996 to present); Associate Director, U.S.
Boston, Massachusetts 02210 Equity Research, Rogers Casey & Associates,
January, 1995 to March, 1996; Director of
Investments, Boy Scouts of America, Inc.,
June, 1990 to January, 1995
- --------------------------------------------------------------------------------------------------------------
John A. Benning Assistant Secretary Senior Vice President and General Counsel,
Federal Reserve Plaza Liberty Financial Companies, Inc.
600 Atlantic Avenue
Boston, MA 02210
- --------------------------------------------------------------------------------------------------------------
Kevin M. Carome Secretary Since August 1993, Associate General
Federal Reserve Plaza Counsel and Vice President (since February
600 Atlantic Avenue 1995), Liberty Financial Companies, Inc.;
Boston, MA 02210 Associate, Ropes & Gray, prior thereto
- --------------------------------------------------------------------------------------------------------------
</TABLE>

As indicated in the above table, certain Trustees and officers of the
Trust also hold positions with LFC, Keyport, LASC, KFSC, Colonial, Stein Roe,
Newport, LAMCO and/or certain of their affiliates. Certain of the Trustees and
officers of the Trust hold comparable positions with certain other investment
companies.

S-23
<PAGE>

Compensation of Trustees

The table set forth below presents certain information regarding the fees
paid to the Trustees for their services in such capacity and total fees paid to
them by all other investment companies affiliated with the Trust. Trustees do
not receive any pension or retirement benefits from the Trust. No officers of
the Trust or other individuals who are affiliated with the Trust receive any
compensation from the Trust for services provided to it.

Compensation Table
- --------------------------------------------------------------------------------
Total Compensation
From the Trust and
Affiliated Investment
Name of Trustee Aggregate 1997 Compensation* Companies in 1997**
- --------------- --------------------------- ---------------------
Richard R. Christensen -- --
John A. Bacon Jr. $10,500 $31,500
Salvatore Macera 10,500 31,500
Dr. Thomas E. Stitzel 10,500 31,500

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

* Consists of Trustee fees in the amount of (i) a $5,000 annual retainer,
(ii) a $1,500 meeting fee for each meeting attended in person and (iii) a
$500 meeting fee for each telephone meeting.

** Includes Trustee fees paid by the Trust and Trustee fees paid by SteinRoe
Variable Investment Trust.

Principal Holders of Securities

All the shares of the Funds are held of record by sub-accounts of separate
accounts of Participating Insurance Companies on behalf of the owners of VA
contracts and VLI policies or by the general account of Keyport. At December 31,
1997 the general account of Keyport owned of record 90.6% of Liberty All-Star
Equity Fund, Variable Series and 35.5% of Tiger Fund. As of that date, Keyport's
general account owned of record less than 25% of the outstanding shares of the
other Funds. At all meetings of shareholders of the Funds, Participating
Insurance Companies will vote the shares held of record by sub-accounts of their
respective separate accounts as to which instructions are received from the VA
contract and VLI policy owners on behalf of whom such shares are held only in
accordance with such instructions. All such shares as to which no instructions
are received (as well as, in the case of Keyport, all shares held by its general
account) will be voted in the same proportion as shares as to which instructions
are received (with Keyport's general account shares being voted in the
proportions determined by instructing owners of Keyport VA contracts and VLI
policies). There is no requirement as to the minimum level of instructions

S-24
<PAGE>

which must be received from policy and contract owners. Accordingly, each
Participating Insurance Company and Keyport disclaims beneficial ownership of
the shares of the Funds held of record by the sub-accounts of their respective
separate accounts (or, in the case of Keyport, its general account). No
Participating Insurance Company has informed the Trust that it knows of any
owner of a VA contract or VLI policy issued by it which on December 31, 1997
owned beneficially 5% or more of the outstanding shares of any Fund.

Custodians

As of the date of this SAI, (i) Boston Safe Deposit and Trust Company, One
Boston Place, Boston, Massachusetts 02108, is custodian of the securities and
cash owned by each Fund other than Tiger Fund and (ii) UMB, n.a., 928 Grand
Avenue, Kansas City, Missouri 64141 is custodian for Tiger Fund. The Board of
Trustee has approved the appointment of The Chase Manhattan Bank, 3 MetroTech
Center, 8th Floor, Brooklyn, New York 11245, to become custodian of all the
Funds. This change is expected to be effected not later than during the second
quarter of 1998. The custodians are responsible for holding all securities and
cash of each Fund they serve, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Fund, and performing
other administrative duties, all as directed by persons authorized by the Trust.
The custodians do not exercise any supervisory function in such matters as the
purchase and sale of portfolio securities, payment of dividends, or payment of
expenses of the Funds or the Trust. Portfolio securities of the Funds purchased
in the U.S. are maintained in the custody of the custodians and may be entered
into the Federal Reserve Book Entry system, or the security depository system of
the Depository Trust Company or other securities depository systems. Portfolio
securities purchased outside the U.S. are maintained in the custody of various
foreign branches of the custodians and/or third party subcustodians, including
foreign banks and foreign securities depositories.

OTHER CONSIDERATIONS

Portfolio Turnover

Although no Fund purchases securities with a view to rapid turnover, there
are no limitations on the length of time that securities must be held by any
Fund and a Fund's annual portfolio turnover rate may vary significantly from
year to year. 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 Funds cannot predict portfolio turnover rate, it is estimated that, under
normal circumstances, the annual rate for each Fund will be no greater than
100%. The portfolio turnover rates of the Funds are shown under "Financial
Highlights" in the Prospectus.

If a Fund writes a substantial number of call or put options (on
securities or indexes) or engages in the use of futures contracts or options on
futures contracts (all referred to as "Collateralized Transactions"), and the
market prices of the securities underlying the Collateralized Transactions move
inversely to the Collateralized Transaction, there may be a very substantial

S-25
<PAGE>

turnover of the portfolios. The Funds pay brokerage commissions in connection
with options and futures transactions and effecting closing purchase or sale
transactions, as well as for the purchases and sales of other portfolio
securities other than fixed income securities.

International Fund For Growth may be expected to experience higher
portfolio turnover rates if such Fund makes a change in its investments from one
geographic sector (e.g., Europe; Japan; emerging Asian markets; etc.) to another
geographic sector. Costs will be greater if the change is from the sector in
which the greatest proportion of its assets are invested.

Suspension of Redemptions

The right to redeem shares or to receive payment with respect to any
redemption of shares of the Funds may only be suspended (i) for any period
during which trading on the New York Stock Exchange ("NYSE") is restricted or
the NYSE is closed, other than customary weekend and holiday closing, (ii) for
any period during which an emergency exists as a result of which disposal of
securities or determination of the net asset value of the Funds is not
reasonably practicable, or (iii) for such other periods as the SEC may by order
permit for protection of shareholders of the Funds.

Valuation of Securities

The assets of the Funds are valued as follows:

Debt securities generally are valued by a pricing service which determines
valuations based upon market transactions for normal, institutional-size trading
units of similar securities. However, in circumstances where such prices are not
available or where Colonial (the Trust's pricing and bookkeeping agent) deems it
appropriate to do so, an over-the-counter or exchange bid quotation is used.
Securities listed on an exchange or on Nasdaq are valued at the last sale price.
Listed securities for which there were no sales during the day and unlisted
securities are valued at the last quoted bid prices. Short-term obligations with
a maturity of 60 days or less are valued at amortized cost when such cost
approximates market value pursuant to procedures approved by the Trustees. The
values of foreign securities quoted in foreign currencies are translated into
U.S. dollars at the exchange rate as of 3:00 p.m. Eastern time. Portfolio
positions for which there are no such valuations and other assets are valued at
fair value as determined in good faith under the direction of the Trustees.

The net asset value of shares of each Fund is normally calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m., Eastern time, on
every day the NYSE is open for trading, except on days where both (i) the degree
of trading in a Fund's portfolio securities would not materially affect the net
asset value of that Fund's shares and (ii) no shares of a Fund were tendered for
redemption and no purchase order was received. The NYSE is open Monday through
Friday, except on the following holidays: New Year's Day, Martin Luther King
Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.

S-26
<PAGE>

Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
NYSE. The values of these securities used in determining the net asset value are
computed as of such times. Also, because of the amount of time required to
collect and process trading information as to large numbers of securities
issues, the values of certain securities (such as convertible bonds and U.S.
government securities) are determined based on market quotations collected
earlier in the day at the latest practicable time prior to the close of the
NYSE. Occasionally, events affecting the value of such securities may occur
between such times and the close of the NYSE which will not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value following procedures approved by the Trustees.

Portfolio Transactions

The Trust has no obligation to do business with any broker-dealer or group
of broker-dealers in executing transactions in securities with respect to the
Funds, and the Funds have no intention to deal exclusively with any particular
broker-dealer or group of broker-dealers.

Each of Colonial, Stein Roe, Newport and each of LAMCO's Portfolio
Managers (each an "Adviser") places the transactions of the Funds with
broker-dealers selected by it and, if applicable, negotiates commissions.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including the purchase and writing of options, the effecting of closing purchase
and sale transactions, and the purchase and sale of underlying securities upon
the exercise of options and the purchase or sale of other instruments. The Funds
from time to time may also execute portfolio transactions with such
broker-dealers acting as principals.

Except as described below in connection with commissions paid to a
clearing agent on sales of securities, it is each Fund's policy and the policy
of its Adviser always to seek best execution, which is to place the Fund's
transactions where the Fund can obtain the most favorable combination of price
and execution services in particular transactions or provided on a continuing
basis by a broker-dealer, and to deal directly with a principal market maker in
connection with over-the-counter transactions, except when the Adviser believes
that best execution is obtainable elsewhere. In evaluating the execution
services of, including the overall reasonableness of brokerage commissions paid
to, a broker-dealer, consideration is given to, among other things, the firm's
general execution and operational capabilities, and to its reliability,
integrity and financial condition.

Subject to such policy of always seeking best execution, and subject to
the additional matters described below regarding each of International Fund For
Growth and All-Star Fund, securities transactions of the Funds may be executed
by broker-dealers who also provide research services (as defined below) to an
Adviser, the Funds or other accounts as to which such Adviser exercises
investment discretion. Such Adviser may use all, some or none of such research
services in providing investment advisory services to each of its clients,
including the Fund(s) it advises. To

S-27
<PAGE>

the extent that such services are used by the Advisers, they tend to reduce
their expenses. It is not possible to assign an exact dollar value for such
services.

Subject to such policies as the Board of Trustees may determine, each of
the Advisers may cause a Fund to pay a broker-dealer that provides brokerage and
research services to it an amount of commission for effecting a securities
transaction, including the sale of an option or a closing purchase transaction,
for a Fund in excess of the amount of commission that another broker-dealer
would have charged for effecting that transaction. As provided in Section 28(e)
of the Securities Exchange Act of 1934, "brokerage and research services"
include advice as to the value of securities, the advisability of investing in,
purchasing or selling securities and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends and portfolio
strategy and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement). An
Adviser placing a brokerage transaction must determine in good faith that such
greater commission is reasonable in relation to the value of the brokerage and
research services provided to it by the executing broker-dealer viewed in terms
of that particular transaction or its overall responsibilities to the applicable
Fund and all its other clients.

Certain of the other accounts of any of the Advisers may have investment
objectives and programs that are similar to those of the Funds. Accordingly,
occasions may arise when each of the Advisers engages in simultaneous purchase
and sale transactions of securities that are consistent with the investment
objectives and programs of a Fund and such other accounts. On those occasions,
the Adviser will allocate purchase and sale transactions in an equitable manner
according to written procedures as approved by the Board of Trustees. Such
procedures may, in particular instances, be either advantageous or
disadvantageous to a Fund.

Consistent with applicable rules of the National Association of Securities
Dealers, Inc., and subject to seeking best execution and such other policies as
the Board of Trustees may determine, each of the Advisers may consider sales of
VA contracts and VLI policies as a factor in the selection of broker-dealers to
execute securities transactions for the Funds.

Additional Matters Pertaining to International Fund For Growth. The
portfolio managers for the International Fund For Growth are Bruno Bertocci and
David Harris, each of whom is jointly employed by Colonial and Stein Roe (each
of which is an indirect wholly owned subsidiary of LFC). Messrs. Bertocci and
Harris also are the portfolio managers for the Colonial International Fund For
Growth, an open-end investment company sponsored by Colonial, and various
investment company and non-investment company clients of Stein Roe. Colonial
utilizes the trading facilities of Stein Roe to place all orders on behalf of
the International Fund For Growth and the Colonial International Fund For Growth
for the purchase and sale of portfolio securities, futures contracts and foreign
currencies. The International Fund For Growth and the other accounts advised by
Messrs. Bertocci and Harris sometimes invest in the same securities and
sometimes enter into similar transactions utilizing futures contracts and
foreign currencies. In certain cases, purchases and sales on behalf of the Fund
and such other accounts will be bunched and executed on an aggregate basis. In
such cases, each participating account (including the International Fund For

S-28
<PAGE>

Growth) will receive the average price at which the trade is executed. Where
less than the desired aggregate amount is able to be purchased or sold, the
actual amount purchased or sold will be allocated among the participating
accounts (including the International Fund For Growth) in proportion to the
amounts desired to be purchased or sold by each. Although in some cases these
practices could have a detrimental effect on the price or volume of the
securities, futures or currencies as far as the International Fund For Growth is
concerned, Colonial believes that in most cases these practices should produce
better executions. It is the opinion of Colonial that the advantages of these
practices outweigh the disadvantages, if any, which might result from them.

Portfolio transactions on behalf of the International Fund For Growth may
be executed by broker-dealers who provide research services to Colonial or Stein
Roe which are used in the investment management of such Fund or other accounts
over which Colonial or Stein Roe exercise investment discretion. Such
transactions will be effected in accordance with the policies described above.
No portfolio transactions on behalf of the Fund will be directed to a
broker-dealer in consideration of the broker-dealer's provision of research
services to Colonial, or to Colonial and Stein Roe, unless a determination is
made that such research assists Colonial in its investment management of the
International Fund For Growth or other accounts over which Colonial exercises
investment discretion (including, without limitation, the Colonial International
Fund For Growth).

Additional Matters Pertaining to All-Star Fund. The Portfolio Management
Agreements with LAMCO's Portfolio Managers provide that LAMCO has the right to
request that transactions giving rise to brokerage commissions, in amounts to be
agreed upon from time to time between LAMCO and the Portfolio Manager, be
executed by brokers and dealers (to be agreed upon from time to time between
LAMCO and the Portfolio Manager) which provide research products and services to
LAMCO or to All-Star Fund or other accounts managed by LAMCO (collectively with
All-Star Fund, "LAMCO Clients"). The commissions paid on such transactions may
exceed the amount of commissions another broker would have charged for effecting
that transaction. Research products and services made available to LAMCO through
brokers and dealers executing transactions for LAMCO Clients involving brokerage
commissions include performance and other qualitative and quantitative data
relating to investment managers in general and the Portfolio Managers in
particular; data relating to the historic performance of categories of
securities associated with particular investment styles; mutual fund portfolio
and performance data; data relating to portfolio manager changes by pension plan
fiduciaries; quotation equipment; and related computer hardware and software,
all of which research products and services are used by LAMCO in connection with
its selection and monitoring of portfolio managers (including the Portfolio
Managers) for LAMCO Clients, the assembly of a mix of investment styles
appropriate to LAMCO's Clients' investment objectives, and the determination of
overall portfolio strategies.

LAMCO from time to time reaches understandings with each of the Portfolio
Managers as to the amount of the All-Star Fund portfolio transactions initiated
by such Portfolio Manager that are to be directed to brokers and dealers which
provide research products and services to LAMCO. These amounts may differ among
the Portfolio Managers based on the nature of the markets for the types of
securities managed by them and other factors.

S-29
<PAGE>

These research products and services are used by LAMCO in connection with
its management of LAMCO Clients' portfolios, regardless of the source of the
brokerage commissions. In instances where LAMCO receives from broker-dealers
products or services which are used both for research purposes and for
administrative or other non-research purposes, LAMCO makes a good faith effort
to determine the relative proportions of such products or services which may be
considered as investment research, based primarily on anticipated usage, and
pays for the costs attributable to the non-research usage in cash.

The table below shows information on brokerage commissions paid by each
Fund during the periods indicated. (Strategic Income Fund did not pay
commissions on any of its transactions; All-Star Fund commenced operations on or
about November 17, 1997; Small Cap Value Fund and High Yield Securities Fund
commenced operations on or about May 19, 1998.)

- -----------------------------------------------------------------------------------------------------------------------------
Growth and Global International All-Star Equity
Income Fund Utilities Fund Fund For Growth U.S. Stock Fund Tiger Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total amount of
brokerage commissions
paid during 1997 $76,021 $108,414 $59,920 $80,839 $110,960 $18,207
- -----------------------------------------------------------------------------------------------------------------------------
Amount of such
commissions paid to
brokers or dealers who
supplied research
services $22,718 $3,394 $0 $3,640 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------
Amount of commissions
paid to brokers or
dealers that were
allocated to such
brokers or dealers
because of research
services provided to
the Fund $22,718 $3,394 $0 $3,640 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------
Total amount of
brokerage commissions
paid during 1996 $35,863 $22,345 $92,485 $75,253 $109,515 $0
- -----------------------------------------------------------------------------------------------------------------------------
Total amount of
brokerage commissions
paid during 1995 $110,453 $24,902 $52,394 $81,150 $129,019 $0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

S-30
<PAGE>

DESCRIPTION OF CERTAIN INVESTMENTS

The following is a description of certain types of investments which may
be made by one or more of the Funds.

Money Market Instruments

As stated in the Prospectus, each Fund may invest in a variety of
high-quality money market instruments. The money market instruments that may be
used by each Fund may include:

United States Government Obligations. These consist of various types of
marketable securities issued by the U.S. Treasury, i.e., bills, notes and bonds.
Such securities are direct obligations of the U.S. Government and differ mainly
in the length of their maturity. Treasury bills, the most frequently issued
marketable government security, have a maturity of up to one year and are issued
on a discount basis.

United States Government Agency Securities. These consist of debt
securities issued by agencies and instrumentalities of the U.S. Government,
including the various types of instruments currently outstanding or which may be
offered in the future. Agencies include, among others, the Federal Housing
Administration, Government National Mortgage Association, Farmer's Home
Administration, Export-Import Bank of the United States, Maritime
Administration, and General Services Administration. Instrumentalities include,
for example, each of the Federal Home Loan Banks, the National Bank for
Cooperatives, the Federal Home Loan Mortgage Corporation, the Farm Credit Banks,
the Federal National Mortgage Association, and the United States Postal Service.
These securities are either: (i) backed by the full faith and credit of the U.S.
Government (e.g., U.S. Treasury Bills); (ii) guaranteed by the U.S. Treasury
(e.g., Government National Mortgage Association mortgage-backed securities);
(iii) supported by the issuing agency's or instrumentality's right to borrow
from the U.S. Treasury (e.g., Federal National Mortgage Association Discount
Notes); or (iv) supported only by the issuing agency's or instrumentality's own
credit (e.g., securities issued by the Farmer's Home Administration).

Bank and Savings and Loan Obligations. These include certificates of
deposit, bankers' acceptances, and time deposits. Certificates of deposit
generally are short-term, interest-bearing negotiable certificates issued by
commercial banks or savings and loan associations against funds deposited in the
issuing institution. Bankers' acceptances are time drafts drawn on a commercial
bank by a borrower, usually in connection with an international commercial
transaction (e.g., to finance the import, export, transfer, or storage of
goods). With a bankers' acceptance, the borrower is liable for payment as is the
bank, which unconditionally guarantees to pay the draft at its face amount on
the maturity date. Most bankers' acceptances have maturities of six months or
less and are traded in secondary markets prior to maturity. Time deposits are
generally short-term, interest-bearing negotiable obligations issued by
commercial banks against funds deposited in the issuing institutions. The Funds
will not invest in any security issued by a commercial bank or a savings and
loan association unless the bank or savings and loan association is organized
and operating in the United States, has total assets of at least one billion
dollars, and is a member of the Federal Deposit

S-31
<PAGE>

Insurance Corporation ("FDIC"), in the case of banks, or insured by the FDIC in
the case of savings and loan associations; provided, however, that such
limitation will not prohibit investments in foreign branches of domestic banks
which meet the foregoing requirements. The Funds will not invest in
time-deposits maturing in more than seven days.

Short-Term Corporate Debt Instruments. These include commercial paper
(i.e., short-term, unsecured promissory notes issued by corporations to finance
short-term credit needs). Commercial paper is usually sold on a discount basis
and has a maturity at the time of issuance not exceeding nine months. Also
included are non-convertible corporate debt securities (e.g., bonds and
debentures). Corporate debt securities with a remaining maturity of less than 13
months are liquid (and tend to become more liquid as their maturities lessen)
and are traded as money market securities. Each Fund may purchase corporate debt
securities having greater maturities.

Repurchase Agreements. The Funds may invest in repurchase agreements. A
repurchase agreement is an instrument under which the investor (such as a Fund)
acquires ownership of a security (known as the "underlying security") and the
seller (i.e., a bank or primary dealer) agrees, at the time of the sale, to
repurchase the underlying security at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results in
a fixed rate of return insulated from market fluctuations during such period,
unless the seller defaults on its repurchase obligations. The underlying
securities will consist only of securities issued by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Securities"). Repurchase
agreements are, in effect, collateralized by such underlying securities, and,
during the term of a repurchase agreement, the seller will be required to
mark-to-market such securities every business day and to provide such additional
collateral as is necessary to maintain the value of all collateral at a level at
least equal to the repurchase price. Repurchase agreements usually are for short
periods, often under one week, and will not be entered into by a Fund for a
duration of more than seven days if, as a result, more than 15% of the value of
that Fund's total assets would be invested in such agreements or other
securities which are illiquid.

The Funds will seek to assure that the amount of collateral with respect
to any repurchase agreement is adequate. As with any extension of credit,
however, there is risk of delay in recovery or the possibility of inadequacy of
the collateral should the seller of the repurchase agreement fail financially.
In addition, a Fund could incur costs in connection with disposition of the
collateral if the seller were to default. The Funds will enter into repurchase
agreements only with sellers deemed to be creditworthy under creditworthiness
standards approved by the Board of Trustees and only when the economic benefit
to the Funds is believed to justify the attendant risks. The Board of Trustees
believes these standards are designed to reasonably assure that such sellers
present no serious risk of becoming involved in bankruptcy proceedings within
the time frame contemplated by the repurchase agreement. The Funds may enter
into repurchase agreements only with commercial banks or registered
broker-dealers.

Adjustable Rate and Floating Rate Securities. Adjustable rate securities
(i.e., variable rate and floating rate instruments) are securities that have
interest rates that are adjusted

S-32
<PAGE>

periodically, according to a set formula. The maturity of some adjustable rate
securities may be shortened under certain special conditions described more
fully below.

Variable rate instruments are obligations (usually certificates of
deposit) that provide for the adjustment of their interest rates on
predetermined dates or whenever a specific interest rate changes. A variable
rate instrument subject to a demand feature is considered to have a maturity
equal to the longer of the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand.

Floating rate instruments (generally corporate notes, bank notes or
Eurodollar certificates of deposit) have interest rate reset provisions similar
to those for variable rate instruments and may be subject to demand features
like those for variable rate instruments. The interest rate is adjusted,
periodically (e.g. daily, monthly, semi-annually), to the prevailing interest
rate in the marketplace. The interest rate on floating rate securities is
ordinarily determined by reference to, or is a percentage of, a bank's prime
rate, the 90-day U.S. Treasury bill rate, the rate of return on commercial paper
or bank certificates of deposit, an index of short-term interest rates or some
other objective measure. The maturity of a floating rate instrument is
considered to be the period remaining until the principal amount can be
recovered through demand.

Investments in Less Developed Countries

International Fund For Growth's investments in foreign securities may
include investments in countries whose economies or securities markets are
considered by Colonial not to be highly developed (referred to as "emerging
market countries"). Normally no more than 40% of the Fund's assets will be
invested in such emerging market countries. As of May 1, 1997, the following
countries were considered by Colonial to be emerging market countries:

- --------------------------------------------------------------------------------
Europe and
Asia Latin America the Middle East Africa
- --------------------------------------------------------------------------------
India Argentina Czech Republic South Africa
- --------------------------------------------------------------------------------
Indonesia Brazil Egypt
- --------------------------------------------------------------------------------
Korea Chile Greece
- --------------------------------------------------------------------------------
Pakistan Colombia Hungary
- --------------------------------------------------------------------------------
Philippines Mexico Israel
- --------------------------------------------------------------------------------
Sri Lanka Peru Jordan
- --------------------------------------------------------------------------------
Taiwan Venezuela Portugal
- --------------------------------------------------------------------------------
Thailand Russia
- --------------------------------------------------------------------------------
Turkey
- --------------------------------------------------------------------------------

S-33
<PAGE>

Tiger Fund invests primarily in companies located in the Tiger countries
of East Asia, which include Indonesia, Korea, the Philippines, Taiwan and
Thailand.

Foreign Currency Transactions

Each of International Fund For Growth, Tiger Fund, Global Utilities Fund,
Strategic Income Fund and Growth and Income Fund may engage in currency exchange
transactions to protect against uncertainty in the level of future currency
exchange rates. These Funds may purchase foreign currencies on a spot or forward
basis in conjunction with their investments in foreign securities and to hedge
against fluctuations in foreign currencies. International Fund For Growth,
Global Utilities Fund, and Strategic Income Fund also may buy and sell currency
futures contracts and options thereon for such hedging purposes. Global
Utilities Fund and Strategic Income Fund also may buy options on currencies for
hedging purposes.

A Fund may engage in both "transaction hedging" and "position hedging."
When it engages in transaction hedging, a Fund enters into foreign currency
transactions with respect to specific receivables or payables of the Fund
generally arising in connection with purchases or sales of its portfolio
securities. A Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging a Fund attempts to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payments is declared, and the date on which such payments are made or
received.

A Fund may purchase or sell a foreign currency on a spot (or cash) basis
at the prevailing spot rate in connection with the settlement of transactions in
portfolio securities denominated in that foreign currency. A Fund may also enter
into contracts to purchase or sell foreign currencies at a future date ("forward
contracts") and (if the Fund is so authorized) purchase and sell foreign
currency futures contracts.

For transaction hedging purposes a Fund which is so authorized may also
purchase exchange-listed and over-the-counter call and put options on foreign
currency futures contracts and on foreign currencies. Over-the-counter options
are considered to be illiquid by the SEC staff. A put option on a futures
contract gives the Fund the right to assume a short position in the futures
contract until expiration of the option. A put option on a currency gives the
Fund the right to sell a currency at an exercise price until the expiration of
the option. A call option on a futures contract gives the Fund the right to
assume a long position in the futures contract until the expiration of the
option. A call option on a currency gives the Fund the right to purchase a
currency at the exercise price until the expiration of the option.

When it engages in position hedging, a Fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which its portfolio

S-34
<PAGE>

securities are denominated (or an increase in the value of currency for
securities which the Fund expects to purchase, when the Fund holds cash or
short-term investments). In connection with position hedging, a Fund which is so
authorized may purchase put or call options on foreign currency and foreign
currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. A Fund may enter into short sales of a foreign
currency to hedge a position in a security denominated in that currency. In such
circumstances, the Fund will maintain in a segregated account with its Custodian
an amount of cash or liquid debt securities equal to the excess of (i) the
amount of foreign currency required to cover such short sale position over (ii)
the amount of such foreign currency which could then be realized through the
sale of the foreign securities denominated in the currency subject to the hedge.

The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.

It is impossible to forecast with precision the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for a Fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security or securities being hedged is less than the amount
of foreign currency the Fund is obligated to deliver and if a decision is made
to sell the security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security or securities if the
market value of such security or securities exceeds the amount of foreign
currency the Fund is obligated to deliver.

Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which the Fund can achieve at
some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
value of such currency.

Currency Forward and Futures Contracts

Each of International Fund For Growth, Global Utilities Fund, Strategic
Income Fund and Tiger Fund will enter into such contracts only when cash or
equivalents equal in value to either (i) the commodity value (less any
applicable margin deposits) or (ii) the difference between the commodity value
(less any applicable margin deposits) and the aggregate market value of all
equity securities denominated in the particular currency held by the Fund have
been deposited in a segregated account of the Fund's custodian. A forward
currency contract involves an obligation to purchase or sell specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable contract, the holder has the unilateral right to
cancel the contract at maturity by paying a

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specified fee. The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A contract generally has no deposit requirement, and no commissions
are charged at any stage for trades. A currency futures contract is a
standardized contract for the future delivery of a specified amount of a foreign
currency at a future date at a price set at the time of the contract. Currency
futures contracts traded in the United States are designed and traded on
exchanges regulated by the Commodities Futures Trading Commission ("CFTC"), such
as the New York Mercantile Exchange. (Tiger Fund may not invest in currency
futures contracts.)

Forward currency contracts differ from currency futures contracts in
certain respects. For example, the maturity date of a forward contract may be
any fixed number of days from the date of the contract agreed upon the parties,
rather than a predetermined date in a given month. Forward contracts may be in
any amounts agreed upon by the parties rather than predetermined amounts. Also,
forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.

At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.

Positions in currency futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market in such contracts.
Although the Funds intend to purchase or sell currency futures contracts only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time. In such
event, it may not be possible to close a futures position and, in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments or variation margin.

Currency Options

In general, options on currencies operate similarly to options on
securities and are subject to many risks similar to those applicable to currency
futures and forward contracts. Currency options are traded primarily in the
over-the-counter market, although options on currencies have recently been
listed on several exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit ("ECU"). The ECU is
composed of amounts of a number of currencies, and is the official medium of
exchange of the European Economic Community's European Monetary System.

Global Utilities Fund and Strategic Income Fund will only purchase or
write currency options when Stein Roe or Colonial believes that a liquid
secondary market exists for such options.

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There can be no assurance that a liquid secondary market will exist for a
particular option at any specified time. Currency options are affected by all of
those factors which influence exchange rates and investments generally. To the
extent that these options are traded over the counter, they are considered to be
illiquid by the SEC staff.

The value of any currency, including the U.S. dollar, may be affected by
complex political and economic factors applicable to the issuing country. In
addition, the exchange rates of currencies (and therefore the value of currency
options) may be significantly affected, fixed, or supported directly or
indirectly by government actions. Government intervention may increase risks
involved in purchasing or selling currency options, since exchange rates may not
be free to fluctuate in respect to other market forces.

The value of a currency option reflects the value of an exchange rate
which in turn reflects relative values of two currencies, the U.S. dollar and
the foreign currency in question. Because currency transactions occurring in the
interbank market involve substantially larger amounts than those that may be
involved in the exercise of currency options, investors may be disadvantaged by
having to deal in an odd-lot market for the underlying currencies in connection
with options at prices that are less favorable than for round-lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.

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Valuations

There is no systematic reporting of last sale information for currencies
and there is no regulatory requirement that quotations available through dealers
or other market sources be firm or revised on a timely basis. Available
quotation information is generally representative of very large round-lot
transactions in the interbank market and thus may not reflect exchange rates for
smaller odd-lot transactions (less than $1 million) where rates may be less
favorable. The interbank market in currencies is a global, around-the-clock
market. To the extent that options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.

Settlement Procedures

Settlement procedures relating to the Funds' investments in foreign
securities and to their foreign currency exchange transactions may be more
complex than settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not present in such
Funds' domestic investments, including foreign currency risks and local custom
and usage. Foreign currency transactions may also involve the risk that an
entity involved in the settlement may not meet its obligations.

Foreign Currency Conversion

Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based on the difference (the "spread")
between prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Funds at one rate, while
offering a lesser rate of exchange should the Funds desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligations.

Options on Securities

Each of Global Utilities Fund, International Fund For Growth and All-Star
Fund may purchase and sell options on individual securities.

Writing covered options.

A Fund may write covered call options and covered put options on
securities held in its portfolio when, in the opinion of the Adviser, such
transactions are consistent with the Fund's investment objective and policies.
Call options written by the Fund give the purchaser the right to buy the
underlying securities from the Fund at a stated exercise price; put options give
the purchaser the right to sell the underlying securities to the Fund at a
stated price.

A Fund may write only covered options, which means that, so long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or

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comparable securities satisfying the cover requirements of securities
exchanges). In the case of put options, the Fund will hold cash and/or
high-grade short-term debt obligations equal to the price to be paid if the
option is exercised. In addition, the Fund will be considered to have covered a
put or call option if and to the extent that it holds an option that offsets
some or all of the risk of the option it has written. The Fund may write
combinations of covered puts and calls on the same underlying security.

A Fund will receive a premium from writing a put or call option, which
increases the Fund's return on the underlying security if the option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
the Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.

A Fund may terminate an option that it has written prior to its expiration
by entering into a closing purchase transaction in which it purchases an
offsetting option. The Fund realizes a profit or loss from a closing transaction
if the cost of the transaction (option premium plus transaction costs) is less
or more than the premium received from writing the option. Because increases in
the market price of a call option generally reflect increases in the market
price of the security underlying the option, any loss resulting from a closing
purchase transaction may be offset in whole or in part by unrealized
appreciation of the underlying security.

If a Fund writes a call option but does not own the underlying security,
and then it writes a put option, the Fund may be required to deposit cash or
securities with its broker as "margin" or collateral for its obligation to buy
or sell the underlying security. As the value of the underlying security varies,
the Fund may have to deposit additional margin with the broker. Margin
requirements are complex and are fixed by individual brokers, subject to minimum
requirements currently imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.

Purchasing put options.

A Fund may purchase put options to protect its portfolio holdings in an
underlying security against a decline in market value. Such hedge protection is
provided during the life of the put option since the Fund, as holder of the put
option, is able to sell the underlying security at the put exercise price
regardless of any decline in the underlying security's market price. For a put
option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, the

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Fund will reduce any profit it might otherwise have realized from appreciation
of the underlying security by the premium paid for the put option and by
transaction costs.

Purchasing call options.

A Fund may purchase call options to hedge against an increase in the price
of securities that the Fund wants ultimately to buy. Such hedge protection is
provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.

Over-the-Counter (OTC) options.

The Staff of the Division of Investment Management of the Securities and
Exchange Commission has taken the position that OTC options purchased by a Fund
and assets held to cover OTC options written by the Fund are illiquid
securities. Although the Staff has indicated that it is continuing to evaluate
this issue, pending further developments, a Fund will enter into OTC options
transactions only with primary dealers in U.S. Government Securities and, in the
case of OTC options written by the Fund, only pursuant to agreements that will
assure that the Fund will at all times have the right to repurchase the option
written by it from the dealer at a specified formula price. The Fund will treat
the amount by which such formula price exceeds the amount, if any, by which the
option may be "in the money" as an illiquid investment. It is the present policy
of the Fund not to enter into any OTC option transaction if, as a result, more
than 15% of the Fund's net assets would be invested in (i) illiquid investments
(determined under the foregoing formula) relating to OTC options written by the
Fund, (ii) OTC options purchased by the Fund, (iii) securities which are not
readily marketable and (iv) repurchase agreements maturing in more than seven
days.

Risk factors in options transactions.

The successful use of a Fund's options strategies depends on the ability
of its Adviser to forecast interest rate and market movements correctly.

When it purchases an option, the Fund runs the risk that it will lose its
entire investment in the option in a relatively short period of time, unless the
Fund exercises the option or enters into a closing sale transaction with respect
to the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and transaction costs, the Fund
will lose part or all of its investment in the option. This contrasts with an
investment by the Fund in the underlying securities, since the Fund may continue
to hold its investment in those securities notwithstanding the lack of a change
in price of those securities.

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<PAGE>

The effective use of options also depends on a Fund's ability to terminate
option positions at times when its Adviser deems it desirable to do so. Although
the Fund will take an option position only if the Adviser believes there is a
liquid secondary market for the option, there is no assurance that the Fund will
be able to effect closing transactions at any particular time or at an
acceptable price.

If a secondary trading market in options were to become unavailable, a
Fund could no longer engage in closing transactions. Lack of investor interest
might adversely affect the liquidity of the market for particular options or
series of options. A marketplace may discontinue trading of a particular option
or options generally. In addition, a market could become temporarily unavailable
if unusual events -- such as volume in excess of trading or clearing capability
- -- were to interrupt normal market operations.

A marketplace may at times find it necessary to impose restrictions on
particular types of options transactions, which may limit a Fund's ability to
realize its profits or limit its losses.

Disruptions in the markets for the securities underlying options purchased
or sold by a Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
("OCC") or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the Fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by the Fund has
expired, the Fund could lose the entire value of its option.

Special risks are presented by internationally-traded options. Because of
time differences between the United States and various foreign countries, and
because different holidays are observed in different countries, foreign options
markets may be open for trading during hours or on days when U.S. markets are
closed. As a result, option premiums may not reflect the current prices of the
underlying interest in the United States.

Futures Contracts and Related Options

Each of Global Utilities Fund, International Fund For Growth, Strategic
Income Fund and All-Star Fund may buy and sell certain future contracts (and in
certain cases related options), to the extent and for the purposes specified in
the Prospectus.

A futures contract sale creates an obligation by the seller to deliver the
type of financial instrument called for in the contract in a specified delivery
month for a stated price. A futures contract purchase creates an obligation by
the purchaser to take delivery of the type of financial instrument called for in
the contract in a specified delivery month at a stated price. The specific

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instruments delivered or taken at settlement date are not determined until on or
near that date. The determination is made in accordance with the rules of the
exchanges on which the futures contract was made. Futures contracts are traded
in the United States only on a commodity exchange or boards of trade -- known as
"contract markets" -- approved for such trading by the CFTC, and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant contract market.

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying financial instruments, the contracts usually are
closed out before the settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a futures contract
for the same aggregate amount of the specific type of financial instrument with
the same delivery date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid the difference
and realizes a gain. Conversely, if the price of the offsetting purchase exceeds
the price of the initial sale, the seller realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the purchaser's
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, the purchaser realizes a loss.

Unlike when a Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract, although
the Fund is required to deposit with its custodian in a segregated account in
the name of the futures broker an amount of cash and/or U.S. Government
Securities. This amount is known as "initial margin." The nature of initial
margin in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the Fund to finance the transactions. Rather, initial margin is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts also involve
brokerage costs.

Subsequent payments, called "variation margin," to and from the broker (or
the custodian) are made on a daily basis as the price of the underlying security
or commodity fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to market."

A Fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to reduce
or eliminate the hedge position then currently held by the Fund. The Fund may
close its positions by taking opposite positions which will operate to terminate
the Fund's position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or gain. Such closing transactions
involve additional commission costs.

A Fund will enter into futures contracts only when, in compliance with the
SEC's requirements, cash or high quality liquid debt securities equal in value
to the commodity value (less

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any applicable margin deposits) have been deposited in a segregated account of
the Fund's custodian.

Options on futures contracts

A Fund may purchase and write call and put options on futures contracts it
may buy or sell and enter into closing transactions with respect to such options
to terminate existing positions. The Fund may use such options on futures
contracts in lieu of purchasing and selling the underlying futures contracts.
Such options generally operate in the same manner as options purchased or
written directly on the underlying investments.

As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an offsetting option. There is
no guarantee that such closing transactions can be effected.

A Fund will be required to deposit initial margin and maintenance margin
with respect to put and call options on futures contracts written by it pursuant
to brokers' requirements similar to those described above. The Fund will enter
into written options on futures contracts only when, in compliance with the
SEC's requirements, cash or equivalents equal in value to the commodity value
(less any applicable margin deposits) have been deposited in a segregated
account of the Fund's custodian.

Risks of transactions in futures contracts and related options

Successful use of futures contracts by a Fund is subject its Adviser's
ability to predict correctly movements in the direction of interest rates and
other factors affecting securities markets.

Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to a Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those relating to the sale of futures
contracts.

There is no assurance that higher than anticipated trading activity or
other unforeseen events might not at times render certain market clearing
facilities inadequate, and thereby result in the institution by exchanges of
special procedures which may interfere with the timely execution of customer
orders.

To reduce or eliminate a hedge position held by a Fund, the Fund may seek
to close out a position. The ability to establish and close out positions will
be subject to the development and maintenance of a liquid secondary market. It
is not certain that this market will develop or continue to exist for a
particular futures contract. Reasons for the absence of a liquid secondary
market on an

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exchange include the following: (i) there may be insufficient trading interest
in certain contracts or options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of contracts or options, or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange (or in the class or series of contacts or options), would cease to
exist, although outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.

Index futures contracts and related options; associated risks

An index futures contract is a contract to buy or sell units of an index
at a specified future date at a price agreed upon when the contract is made.
Entering into a contract to buy units of an index is commonly referred to as
buying or purchasing a contract or holding a long position in the index.
Entering into a contract to sell units of an index is commonly referred to as
selling a contract or holding a short position. A unit is the current value of
the index. A Fund may enter into stock index future contracts, debt index
futures contracts, or other index futures contracts (e.g., an interest rate
futures contract), as specified in the Prospectus. A Fund may also purchase and
sell options on index futures contracts, to the extent specified in the
Prospectus.

There are several risks in connection with the use by a Fund of index
futures as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the index futures and movements
in the prices of securities which are the subject of the hedge. The Fund's
Adviser will attempt to reduce this risk by selling, to the extent possible,
futures on indices the movements of which will, in its judgment, have a
significant correlation with movements in the prices of the Fund's portfolio
securities sought to be hedged.

Successful use of index futures by a Fund for hedging purposes is also
subject to its Adviser's ability to predict correctly movements in the direction
of the market. It is possible that, where the Fund has sold futures to hedge its
portfolio against a decline in the market, the index on which the futures are
written may advance and the value of securities subject to the hedge held in the
Fund's portfolio may decline. If this occurs, the Fund would lose money on the
futures and also experience a decline in the value in its portfolio securities.
However, while this could occur to a certain degree, over time the value of the
Fund's portfolio should tend to move in the same direction as the market indices
which are intended to correlate to the price movements of the portfolio
securities sought to be hedged. It is also possible that, if the Fund has hedged
against the possibility of a decline in the market adversely affecting
securities held in its portfolio and securities prices increase instead, the
Fund will lose part or all of the benefit of the increased values of those
securities that it has hedged because it will have offsetting losses in its
futures positions. In

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addition, in such situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily variation margin requirements.

In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the index futures and the
securities of the portfolio being hedged, the prices of index futures may not
correlate perfectly with movements in the underlying index due to certain market
distortions. First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which would distort the normal relationship between the
index and futures markets. Second, margin requirements in the futures markets
are less onerous than margin requirements in the securities markets, and as a
result the futures markets may attract more speculators than the securities
markets. Increased participation by speculators in the futures markets may also
cause temporary price distortions. Due to the possibility of price distortions
in the futures markets and also because of the imperfect correlation between
movements in the index and movements in the prices of index futures, even a
correct forecast of general market trends by a Fund's Adviser may still not
result in a successful hedging transaction.

Options on index futures are similar to options on securities except that
options on index futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long position if the
option is a call and a short position if the option is a put), at a specified
exercise price at any time during the period of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option will be accompanied by delivery of the accumulated balance
in the writer's futures margin account which represents the amount by which the
market price of the index futures contract, at exercise, exceeds (in the case of
a call) or is less than (in the case of a put) the exercise price of the option
on the index future. If an option is exercised on the last trading day prior to
the expiration date of the option, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the closing
level of the index on which the future is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.

Securities Loans

Each of Global Utilities Fund, U.S. Stock Fund and All-Star Fund may make
loans of its portfolio securities amounting to not more than 30% of its total
assets. The risks in lending portfolio securities, as with other extensions of
credit, consist of possible delay in recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially. As a matter of
policy, securities loans are made to broker-dealers pursuant to agreements
requiring that loans be continuously secured by collateral in cash or short-term
debt obligations at least equal at all times to the value of the securities on
loan. This collateral is deposited with the Trust's custodian which segregates
and identifies these assets on its books as security for the loan. The borrower
pays to the Fund an amount equal to any dividends, interest or other
distributions received on securities lent. The borrower is obligated to return
identical securities on termination of the loan. The Fund retains

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all or a portion of the interest received on investment of the cash collateral
or receives a fee from the borrower. Although voting rights or rights to consent
with respect to the loaned securities pass to the borrower, the Fund retains the
right to call the loans at any time on reasonable notice, and it will do so in
order that the securities may be voted by the Fund if the holders of such
securities are asked to vote upon or consent to matters materially affecting the
investment. The Fund may also call such loans in order to sell the securities
involved. The Trust has adopted these policies, in part, so that interest,
dividends and other distributions received on the loaned securities, the
interest or fees paid by the borrower to the Fund for the loan, and the
investment income from the collateral will qualify under certain investment
limitations under Subchapter M of the Internal Revenue Code.

INVESTMENT PERFORMANCE

Each of the Funds may quote total return figures from time to time. Total
return on a per share basis is the amount of dividends received per share plus
or minus the change in the net asset value per share for a given period. Total
return percentages may be calculated by dividing the value of a share at the end
of a given period by the value of the share at the beginning of the period and
subtracting one.

Average Annual Total Return is computed as follows:

ERV = P(1+T)n

Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period
(or fractional portion thereof).

For example, for a $1,000 investment in the Funds, the "Total Return", the
"Total Return Percentage" and (where applicable) the "Average Annual Total
Return" for the life of each Fund listed below (the period from July 1, 1993 in
the case of Growth and Income Fund and Global Utilities Fund; May 1, 1994, in
the case of International Fund For Growth; July 5, 1994 in the case of U.S.
Stock Fund and Strategic Income Fund; May 1, 1995, in the case of Tiger Fund;
and November 17, 1997 in the case of All-Star Equity Fund) through December 31,
1997 were:

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- -------------------------------------------------------------------------------
Total Return Average Annual
Fund Total Return Percentage Total Return
- --------------------------------------------------------------------------------
Growth and Income Fund $2,060 106.04% 17.40%
- --------------------------------------------------------------------------------
Global Utilities Fund $1,635 63.50% 11.53%
- --------------------------------------------------------------------------------
International Fund For Growth $1,017 1.65% 0.45%
- --------------------------------------------------------------------------------
U.S. Stock Fund $2,181 118.14% 25.00%
- --------------------------------------------------------------------------------
Strategic Income Fund $1,433 43.32% 10.84%
- --------------------------------------------------------------------------------
Tiger Fund $885 (11.52)% (4.47)%
- --------------------------------------------------------------------------------
All-Star Equity Fund $1,008 0.80% N/A
- --------------------------------------------------------------------------------

The figures contained in this "Investment Performance" section assume
reinvestment of all dividends and distributions. They are not necessarily
indicative of future results. The performance of a Fund is a result of
conditions in the securities markets, portfolio management, and operating
expenses. Although information such as that shown above is useful in reviewing a
Fund's performance and in providing some basis for comparison with other
investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods. The Funds'
total returns do 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 the Participating Insurance Companies.

S-47
<PAGE>

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

Price Waterhouse LLP are the Trust's independent accountants. The
financial statements as of December 31, 1997 or for the fiscal years or periods
ended December 31, 1997 and December 31, 1996 incorporated by reference in this
SAI have been so incorporated, and the schedule of financial highlights for the
periods ended December 31, 1997 has been included in the Prospectus, in reliance
upon the report of Price Waterhouse LLP given on the authority of said firm as
experts in accounting and auditing.

The financial statements of the Trust and Report of Independent
Accountants appearing in the December 31, 1997 Annual Report of the Trust are
incorporated in this SAI by reference.

S-48

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements.

The following financial statements for each of the Funds in the Trust
(other than Liberty All-Star Equity Fund, Variable Series ("All-Star Fund");
Colonial Small Cap Value Fund, Variable Series ("Small Cap Value Fund"); and
Colonial High Yield Securities Fund, Variable Series ("High Yield Securities
Fund")) are incorporated by reference into Part B of this filing from the
Registrant's December 31, 1997 Annual Report:

Independent Accountants' Report
Schedule of Investments as of December 31, 1997
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the year or period ended December 31, 1997
Statement of Changes in Net Assets for the years or periods ended
December 31, 1997 and 1996
Financial Highlights for the years or periods ended December 31, 1997
and 1996

(b) Exhibits.

1. Agreement and Declaration of Trust (1)

2. By-Laws (1)

3. Not Applicable

4. Not Applicable

5(a)(i). Management Agreement between the Trust, on behalf of each
of Colonial Growth and Income Fund, Variable Series
("GIF") (under its former name "Colonial-Keyport Growth
and Income Fund") and Stein Roe Global Utilities Fund,
Variable Series ("GUF") (under its former name
"Colonial-Keyport Utilities Fund"), and Liberty Advisory
Services Corp. ("LASC") (2)(8)

C-1
<PAGE>

5(a)(ii). Management Agreement between the Trust, on behalf of each
of Colonial International Fund For Growth, Variable Series
("IFFG") (under its former name "Colonial-Keyport
International Fund For Growth"), Colonial U.S. Stock Fund,
Variable Series ("USSF") (under its former name
"Colonial-Keyport U.S. Fund For Growth") and Colonial
Strategic Income Fund, Variable Series ("SIF") (under its
former name "Colonial-Keyport Strategic Income Fund"), and
LASC. (3)(8)

5(a)(iii). Amendment No. 1 to Management Agreements listed as
Exhibits 5(a)(i) and 5(a)(ii). (5)(8)

5(a)(iv). Management Agreement between the Trust, on behalf of
Newport Tiger Fund, Variable Series ("NTF") (under its
former name "Newport-Keyport Tiger Fund"), and LASC.
(5)(8)

5(a)(v). Management and Sub-Advisory Agreement between the Trust,
on behalf of All-Star Fund, LASC and Liberty Asset
Management Company ("LAMCO").(9)

5(a)(vi). Form of Management Agreement between the Trust, on behalf of
each of Colonial Small Cap Value Fund, Variable Series,
("SCV") and Colonial High Yield Securities Fund, Variable
Series, ("HYS"), and LASC.

5(b)(i). [deleted]

5(b)(ii). Sub-Advisory Agreement among the Trust, on behalf of the
GIF, LASC and Colonial Management Associates, Inc.
("Colonial"). (2)(8)

5(b)(iii). Sub-Advisory Agreement among the Trust, on behalf of GUF,
LASC and Stein Roe & Farnham Incorporated ("Stein Roe"). (9)

5(b)(iv). Sub-Advisory Agreement among the Trust, on behalf of IFFG,
LASC and Colonial. (3)(8)

5(b)(v). [deleted]

5(b)(vi). Sub-Advisory Agreement among the Trust, on behalf of USSF,
LASC and Colonial. (4)(8)

5(b)(vii). [deleted]

5(b)(viii).Sub-Advisory Agreement among the Trust, on behalf of SIF,
LASC and Colonial. (4)(8)

5(b)(ix). Sub-Advisory Agreement among the Trust, on behalf of NTF,
LASC and Newport Fund Management, Inc. ("Newport"). (5)(8)

5(b)(x) Form of Portfolio Management Agreement among the Trust, on
behalf of All-Star Fund, LAMCO and LAMCO's Portfolio
Managers. (9)

5(b)(xi). Form of Sub-Advisory Agreement among the Trust, on behalf of
SCV, LASC and Colonial.

5(b)(xii). Form of Sub-Advisory Agreement among the Trust, on behalf of
HYS, LASC and Colonial.

C-2
<PAGE>

6(a). Underwriting Agreement between the Trust and Keyport
Financial Services Corp. ("KFSC") (2)

6(b) Amendment No. One to KFSC Underwriting Agreement. (9)

6(c) Underwriting Agreement between the Trust and Colonial
Investment Services Inc. ("CISI"). (9)

7. Not Applicable

8. Form of Custody Agreement between the Trust and The Boston
Safe Deposit and Trust Company (1)(8)

9(a)(i). Joinder and Release Agreement with Respect to Transfer
Agency Agreement dated as of January 3, 1995 among the
Trust, Liberty Investment Services, Inc. and Colonial
Investors Service Center, Inc. (including form of Transfer
Agency Agreement and Amendment No. One thereto) (5)(8)

9(a)(ii). Amendment No. Two to Transfer Agency Agreement (5)(8)

9(a)(iii). Amendment No. Three to Transfer Agency Agreement (9)

9(b). Participation Agreement among the Trust, Keyport Financial
Services Corp., Keyport Life Insurance Company, and
Liberty Life Assurance Company of Boston (2)(8)

9(c)(i). Pricing and Bookkeeping Agreement between the Trust and
Colonial (2)(8)

9(c)(ii). Amendment No. One to Pricing and Bookkeeping Agreement
(3)(8)

9(c)(iii). Amendment No. Two to Pricing and Bookkeeping Agreement
(5)(8)

9(c)(iv) Amendment No. Three to Pricing and Bookkeeping Agreement (9)

10. Opinion and consent of counsel as to the legality of the
securities being registered (included with annual Rule
24f-2 Notices)

11. Consent of Independent Accountants

12. Not Applicable

13. Not Applicable

14. Not applicable

C-3
<PAGE>

15. Not applicable

16. Calculation of Total Returns (7)

17. Financial Data Schedules

18. Not applicable

19(a). Power of Attorney executed by each Trustee of the Trust
pertaining to this Registration Statement (6)

19(b). [deleted]

(1) Incorporated by reference to Keyport Variable Investment Trust,
Registration Statement on Form N-1A (33-59216) (the "Registration
Statement"), as filed with the SEC on March 8, 1993.

(2) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement, as filed with the SEC on June 11, 1993.

(3) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement, as filed with the SEC on April 27, 1994.

(4) Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement, as filed with the SEC on May 4, 1994.

(5) Incorporated by reference to Post-Effective Amendment No. 6 to the
Registration Statement, as filed on April 27, 1995.

(6) Contained on Signature Pages to Post-Effective Amendment No. 3 to
the Registration Statement, as filed with the SEC on April 27, 1994
(and incorporated therefrom by reference).

(7) Incorporated by reference to Post-Effective Amendment No. 8 to this
Registration Statement filed April, 1997.

(8) Note: The name of the Trust changed to "Liberty Variable Investment
Trust" as of November 15, 1997. Agreements designated by this note (8)
were entered into under the Trust's original name "Keyport Variable
Investment Trust". In addition, the name of Liberty Advisory Services
Corp. ("LASC") also changed as of that date. LASC's former name was
"Keyport Advisory Services Corp.".

(9) Incorporated by reference to Post-Effective Amendment No. 9 to this
Registration Statement filed August 29, 1997.

C-4
<PAGE>

Item 25. Persons Controlled by or Under Common Control with Registrant.

Shares of the Trust registered pursuant to this Registration Statement
will be offered and sold to Keyport Life Insurance Company ("Keyport"), a stock
life insurance company organized under the laws of Rhode Island, and to certain
of its separate investment accounts and certain of the respective separate
investment accounts of Liberty Life Assurance Company of Boston ("Liberty
Life"), a stock life insurance company organized as a Massachusetts corporation,
and Independence Life & Annuity Company, a stock life insurance company
organized under the laws of Rhode Island (formerly known as "Crown America Life
Insurance Company" and thereafter formerly known as "Keyport America Life
Insurance Company") ("Independence"). Shares of the Registrant may in the future
be sold to other separate accounts of Keyport, Liberty Life, Independence or
other life insurance companies as the funding medium for other insurance
contracts and policies in addition to the currently offered contracts and
policies. The purchasers of insurance contracts and policies issued in
connection with such accounts will have the right to instruct Keyport, Liberty
Life and Independence with respect to the voting of the Registrant's shares held
by their respective separate accounts. Subject to such voting instruction
rights, Keyport, Liberty Life, Independence and their respective separate
accounts directly control the Registrant.

KFSC and CISC, the Trust's principal underwriters, LASC, the Trust's
investment manager, Colonial, LASC's sub-adviser with respect to GIF, IFFG, USSF
and SIF, Stein Roe, LASC's sub-adviser with respect to GUF, Newport, LASC's
sub-adviser with respect to NTF, LAMCO, LASC's sub-adviser with respect to
All-Star, Keyport and Independence are each wholly owned indirect subsidiaries
of Liberty Financial Companies, Inc. ("Liberty Financial"), Boston,
Massachusetts. Liberty Mutual Insurance Company ("Liberty Mutual"), Boston,
Massachusetts, as of March 1, 1998 owned, indirectly, approximately 72.3% of the
combined voting power of the outstanding voting stock of Liberty Financial (with
the balance being publicly-held). Liberty Life is a 90%-owned subsidiary of
Liberty Mutual.

Item 26. Number of Holders of Securities.

As of December 31, 1998, the number of holders of shares of beneficial
interest of each Fund of the Trust was as follows:

Title of Class Number of Record Holders
-------------- ------------------------

Colonial Growth and Income Fund, Variable Series 4
Colonial Utilities Fund, Variable Series 4
Colonial International Fund For Growth,
Variable Series 5
Colonial U.S. Stock Fund, Variable Series 6
Colonial Strategic Income Fund, Variable Series 5
Newport Tiger Fund, Variable Series 6
Liberty All-Star Equity Fund, Variable Series 3
Colonial Small Cap Value Fund, Variable Series N/A
Colonial High Yield Securities Fund, Variable Series N/A

C-5
<PAGE>

Item 27. Indemnification.

Article Tenth of the Agreement and Declaration of Trust of Registrant
(Exhibit 1), which Article is incorporated herein by reference, provides that
Registrant shall provide indemnification of its trustees and officers (including
each person who serves or has served at Registration's request as a director,
officer, or trustee of another organization in which Registrant has any interest
as a shareholder, creditor or otherwise) ("Covered Persons") under specified
circumstances.

Section 17(h) of the 1940 Act provides that neither the Agreement and
Declaration of Trust nor the By-Laws of Registrant, nor any other instrument
pursuant to which Registrant is organized or administered, shall contain any
provision which protects or purports to protect any trustee or officer of
Registrant against any liability to Registrant or its shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. In accordance with Section 17(h) of the 1940 Act, Article Tenth shall
not protect any person against any liability to Registrant or its shareholders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office.

To the extent required under the 1940 Act:

(i) Article Tenth does not protect any person against any liability to
Registrant or to its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office;

(ii) in the absence of a final decision on the merits by a court or
other body before whom a proceeding was brought that a Covered Person was not
liable by reason of willful misfeasance, bad, faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office, no
indemnification is permitted under Article Tenth unless a determination that
such person was not so liable is made on behalf of Registrant by (a) the vote of
a majority of the trustees who are neither "interested persons" of Registrant,
as defined in Section 2(a)(19) of the 1940 Act, nor parties to the proceeding
("disinterested, non-party trustees"), or (b) an independent legal counsel as
expressed in a written opinion; and

(iii) Registrant will not advance attorney's fees or other expenses
incurred by a Covered Person in connection with a civil or criminal action, suit
or proceeding unless Registrant receives an undertaking by or on behalf of the
Covered Person to repay the advance (unless it is ultimately determined that he
is entitled to indemnification) and (a) the Covered Person provides security for
his undertaking, or (b) Registrant is insured against losses arising by reason
of any lawful advances, or (c) a majority of the disinterested, non-party
trustees of Registrant or an independent legal counsel as expressed in a written
opinion, determine, based on a review of readily-available facts (as opposed to
a full trail-type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.

C-6
<PAGE>

Any approval of indemnification pursuant to Article Tenth does not
prevent the recovery from any Covered Person of any amount paid to such Covered
Person in accordance with Article Tenth as indemnification if such Covered
Person is subsequently adjudicated by a court of competent jurisdiction not to
have acted in good faith in the reasonable belief that such Covered Person's
action was in, or not opposed to, the best interests of Registrant or to have
been liable to Registrant or its shareholders by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of such Covered Person's office.

Article Tenth also provides that its indemnification provisions are not
exclusive.

Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

Registrant, its trustees and officers, its investment manager, and
persons affiliated with them are insured against certain expenses in connection
with the defense of actions, suits, or proceedings, and certain liabilities that
might be imposed as a result of such actions, suits, or proceedings. Registrant
will not pay any portion of the premiums for coverage under such insurance that
would (1) protect any trustee or officer against any liability to Registrant or
its shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office or (2) protect its investment manager or
principal underwriter, if any, against any liability to Registrant or its
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence, in the performance of its
duties, or by reason of its reckless disregard of its duties and obligations
under its contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by the insurance
company.

In addition, LASC, Registrant's investment manager, maintains
investment advisory professional liability insurance to insure it, for the
benefit of the Trust and its non-interested trustees, against loss arising out
of any error, omission, or breach of any duty owed to the Trust or any Fund by
the investment manager.

C-7
<PAGE>

Item 28. Business and Other Connections of Investment Advisers

Certain information pertaining to business and other connections of the
Registrant's investment manager, LASC, Colonial, the sub-adviser to each of GIF,
IFFG, USSF, SIF, SCV and HYV, Stein Roe, the sub-adviser to GUF, Newport, the
sub-adviser to NTF, and LAMCO, the sub-adviser to All-Star, and each of J.P.
Morgan Investment Management, Inc., Oppenheimer Capital, Palley-Needlemen Asset
Management, Inc., Westwood Management Corp. and Wilke-Thompson Capital
Management, Inc., each of which five firms will serve as a Portfolio Manager to
LAMCO, is incorporated herein by reference to the section of the Prospectus
captioned "TRUST MANAGEMENT ORGANIZATIONS" and to the section of the Statement
of Additional Information captioned "INVESTMENT MANAGEMENT AND OTHER SERVICES."

Set forth below is a list of each director and officer of LASC, and
each director and certain officers of Colonial, Newport, LAMCO, and each of
LAMCO's Portfolio Managers indicating each business, profession, vocation, or
employment of a substantial nature in which each such person has been, at any
time during the past two fiscal years, engaged for his or her own account or in
the capacity of director, officer, partner, or trustee.

LASC

LASC is a direct wholly owned subsidiary of Keyport. Keyport is a
direct wholly owed subsidiary of SteinRoe Services, Inc. ("SSI"). SSI is a
direct wholly owned subsidiary of Liberty Financial. As stated above, Liberty
Financial is an indirect majority owned subsidiary of Liberty Mutual.

============================================= ===============================================================
Name and Current Position with
Adviser Other Positions During Past Two Fiscal Years
- ---------------------- -------------------- ---------------------------------------------------------------
<S> <C> <C>
John W. Rosensteel President and Director and President and Chief Executive Officer of Keyport
Chairman of the and Chairman of the Board of KFSC
Board of Directors
- ---------------------- -------------------- ---------------------------------------------------------------
Paul H. LeFevre, Jr. Senior Vice Senior Vice President-Chief Financial Officer of Keyport
President and
Director
- ---------------------- -------------------- ---------------------------------------------------------------
William L. Dixon Vice President Vice President-Compliance of Keyport and KFSC
- ---------------------- -------------------- ---------------------------------------------------------------
Stewart R. Morrison Vice President Vice President-Investments of Keyport
- ---------------------- -------------------- ---------------------------------------------------------------
Francis E. Reinhart Senior Vice Senior Vice President-Chief Administrative Officer of Keyport
President and Vice President-Administration of KFSC
- ---------------------- -------------------- ---------------------------------------------------------------

C-8
<PAGE>

- ---------------------- -------------------- ---------------------------------------------------------------
James J. Klopper Vice President and Vice President, Counsel and Assistant Secretary of Keyport;
Director Clerk of KFSC
- ---------------------- -------------------- ---------------------------------------------------------------

</TABLE>

The business address of KASC and each individual listed in the
foregoing table is c/o Keyport Life Insurance Company, 125 High Street, Boston,
Massachusetts 02110.

Colonial

Colonial is a direct wholly owned subsidiary of The Colonial Group,
Inc. ("TCG"). TCG is a direct wholly owned subsidiary of Liberty Financial.

======================================================================================== =============================
Name and Current Position with Colonial Other Positions
During Past Two
Fiscal Years
- ---------------------------------------------------------------------------------------- -----------------------------
<S> <C> <C>

Bonny E. Boatman Director, Senior Vice President and Head of Tax-Exempt Vice President
Group
- -------------------------- -------------------------------------------------------- -----------------------------
Sheila A. Carroll Director and Senior Vice President Same
- -------------------------- -------------------------------------------------------- -----------------------------
Harold W. Cogger Chairman of the Board President and Chief
Executive Officer
- -------------------------- -------------------------------------------------------- -----------------------------
Carl C. Ericson Director, Senior Vice President, Director and Manager Vice President
of Taxable Fixed Income Group
- -------------------------- -------------------------------------------------------- -----------------------------
Stephen E. Gibson Director, President and Chief Executive Officer Managing Director/Marketing
of Putnam Mutual Funds, Inc.
- -------------------------- -------------------------------------------------------- -----------------------------
Timothy J. Jacoby Senior Vice President Senior Vice President,
Fidelity Accounting and
Custody Services, Inc.
- -------------------------- -------------------------------------------------------- -----------------------------
Michael H. Koonce Senior Vice President, General Counsel and Clerk Vice President and Counsel
- -------------------------- -------------------------------------------------------- -----------------------------
Donald S. MacKinnon Director, Senior Vice President Same
- -------------------------- -------------------------------------------------------- -----------------------------

C-9
<PAGE>

- -------------------------- -------------------------------------------------------- -----------------------------
Helen Frame Peters Director, Senior Vice President and Chief Investment Director of Taxable Fixed
Officer Income Investments
- -------------------------- -------------------------------------------------------- -----------------------------
Davey S. Scoon Director, Executive Vice President Same
- -------------------------- -------------------------------------------------------- -----------------------------
Arthur O. Stern Director and Executive Vice President General Counsel and Clerk
- -------------------------- -------------------------------------------------------- -----------------------------
Stephen T. Welsh Treasurer Same
========================== ======================================================== =============================
</TABLE>

The business address of Colonial and each individual listed in the
foregoing table is c/o Colonial Management Associates, Inc., One Financial
Place, Boston, Massachusetts 02111.

Newport

Newport is a direct wholly owned subsidiary of Newport Pacific
Management, Inc. ("Newport Pacific"). Newport Pacific is a direct wholly owned
subsidiary of Liberty Newport Holdings, Ltd. ("LNH"). LNH is a direct wholly
owned subsidiary of Liberty Financial.

====================== =========================== ==============================================================
Positions and Offices Other Positions During Past Two Fiscal Years
Name with Newport
====================== =========================== ==============================================================
<S> <C> <C>
John M. Mussey President and Director Similar positions with Newport Pacific
- ---------------------- --------------------------- --------------------------------------------------------------
Kenneth R. Leibler Director President and Chief Executive Officer and Director of
Liberty Financial
- ---------------------- --------------------------- --------------------------------------------------------------
Lindsay Cook Director and Senior Vice Executive Vice President of Liberty Financial since
President February, 1997; Senior Vice President of Liberty Financial
prior thereto
- ---------------------- --------------------------- --------------------------------------------------------------
Thomas R. Tuttle Senior Vice President Similar position with Newport Pacific
- ---------------------- --------------------------- --------------------------------------------------------------
Pamela Frantz Executive Vice President, Similar positions with Newport Pacific
Treasurer and Secretary
- ---------------------- --------------------------- --------------------------------------------------------------
Linda Couch Vice President Similar position with Newport Pacific
====================== =========================== ==============================================================

</TABLE>

The principal business address of Newport and Messrs. Mussey and Tuttle
and Mss. Frantz and Couch is 580 California Street, Suite 1960, San Francisco,
California 94104. The principal address of each other person listed in the
preceding table is 600 Atlantic Avenue, Suite 2400, Boston, Massachusetts 02210.

C-10
<PAGE>

J.P. Morgan Investment Management, Inc.

J.P. Morgan Investment Management, Inc. is a wholly-owned subsidiary of
J.P. Morgan & Co., Incorporated.

- --------------------------------------------------------------------- ------------------------------------
Other Positions During Past
Name and Current Position with Adviser Two Fiscal Years
- --------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
Frederick A. Nelson, III Managing Director --
- -------------------------------- --------------------------------- ------------------------------------
Henry D. Cavanna Managing Director --
- -------------------------------- --------------------------------- ------------------------------------
William B. Peterson Managing Director --
- -------------------------------- --------------------------------- ------------------------------------
William M. Riegel Managing Director --
- -------------------------------- --------------------------------- ------------------------------------
Timothy J. Devlin Vice President Vice President, Mitchell
Hutchins Asset Management,
Inc.
- -------------------------------- --------------------------------- ------------------------------------
Patrick Jakobson Vice President --
- -------------------------------- --------------------------------- ------------------------------------

</TABLE>

The principal business address of such firm and each such person is 552
Fifth Avenue, New York, New York 10036.

Oppenheimer Capital

Oppenheimer Capital is a wholly-owned subsidiary of PIMCO Advisers L.P.

</TABLE>

C-11
<PAGE>

- ------------------------------------------------------------------------- -------------------------------
Other Positions During Past
Name and Current Position with Adviser Two Fiscal Years
- ------------------------------------------------------------------------- -------------------------------
<S> <C> <C>
Eugene Vesell Managing Director --
- ------------------------------------- ---------------------------------- ------------------------------
Dick Glasebrook Managing Director --
- ------------------------------------- ---------------------------------- ------------------------------
Eileen P. Rominger Managing Director --
- ------------------------------------- ---------------------------------- ------------------------------
Linda Ferrante Managing Director --
- ------------------------------------- ---------------------------------- ------------------------------
Tom Rackley Managing Director --
- ------------------------------------- ---------------------------------- ------------------------------
Johnathan K. Greenburg Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Jeffrey Tarnoff Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Colin Glinsman Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
David Santry Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Thomas Scerbo Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Jeff Whittington Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Irv Rotkowitz Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Sandra Birnbaum Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Mary Ann Schreiber Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Paul Doane Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Geoff Mullen Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Brad Goldman Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Michael Borkan Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Malcolm Bishop Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------
Evan Weston Senior Vice President --
- ------------------------------------- ---------------------------------- ------------------------------

</TABLE>

The business address of such firm and each such person is Oppenheimer
Tower, World Financial Center, New York, New York 10281.

Palley-Needleman Asset Management, Inc.

The firm is owned by Mr. Palley and Mr. Needlemen (see below).

</TABLE>

The business address of such firm and each such person is 800 Newport
Center Drive, Suite 450, Newport Beach, Newport Beach, California 92660.

C-12
<PAGE>

Westwood Management Corp.

The firm is owned by Southwest Securities Group, Inc.

- ----------------------------------------------------------------------------- -------------------------------
Other Positions During Past
Name and Current Position with Adviser Two Fiscal Years
- ----------------------------------------------------------------------------- -------------------------------
<S> <C> <C>
Susan M. Byrne Director, President, Chief Director of each of Southwest
Executive Officer and Securities Group, Inc. and
Treasurer Westwood Trust
- ----------------------------------------- ---------------------------------- --------------------------------
Jacquiline L. Finney Secretary and Assistant --
Treasurer
- ----------------------------------------- ---------------------------------- --------------------------------

</TABLE>

The address of such firm and each such person is 300 Crescent Court,
Suite 1320, Dallas, Texas 75201.

Wilke/Thompson Capital Management, Inc.

The firm is employee owned. Mr. Thompson (see below) owns the controlling
interest.

- ----------------------------------------------------------------------------- -----------------------------------
Other Positions During Past
Name and Current Position with Adviser Two Fiscal Years
- ----------------------------------------------------------------------------- -----------------------------------
<S> <C> <C>
Mark A. Thompson Director, Chairman --
and Principal Investment
Officer
- ----------------------------------------- ---------------------------------- -----------------------------------
Anthony L. Ventura Director, President and Partner of Wessels, Arnold &
Chief Executive Officer Henderson
- ----------------------------------------- ---------------------------------- -----------------------------------
Dona L. Feick Portfolio Manager --
- ----------------------------------------- ---------------------------------- -----------------------------------
Stephen M. Kensinger Portfolio Manager --
- ----------------------------------------- ---------------------------------- -----------------------------------

</TABLE>

The business address of such firm and each such person is 3800 Norwest
Center, 90 South Seventh M. Street, Minneapolis, Minnesota 55402.

Item 29. Principal Underwriters

(a) KFSC and CISI act as principal underwriters of the Registrant's
shares on a best-efforts basis.

KFSC also acts as principal underwriter for the following investment
companies:

SteinRoe Variable Investment Trust
Capital Appreciation Fund
Managed Growth Stock Fund
Managed Assets Fund
Mortgage Securities Income Fund
Cash Income Fund

C-13
<PAGE>

CISI also acts as principal underwriter for the following investment
companies:

Colonial Trust I
Colonial High Yield Securities Fund
Colonial Income fund
Colonial Strategic Income Fund
Colonial Tax-Managed Growth Fund

Colonial Trust II
Colonial Government Money Market Fund
Colonial Intermediate U.S. Government Fund
Colonial Short Duration U.S. Government Fund
Colonial Newport Japan Fund
Colonial Newport Tiger Cub Fund
Newport Greater China Fund

Colonial Trust III
Colonial Select Value Fund
The Colonial Fund
Colonial Federal Securities Fund
Colonial Global Equity Fund
Colonial International Horizons Fund
Colonial Strategic Balanced Fund
Colonial International Fund For Growth

Colonial Trust IV
Colonial Tax-Exempt Fund
Colonial Tax-Exempt Insured Fund
Colonial High Yield Municipal Fund
Colonial Utilities Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Municipal Money Market Fund

Colonial Trust V
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial Massachusetts Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund

C-14
<PAGE>

Colonial Trust VI
Colonial U.S. Stock Fund
Colonial Small Cap Value Fund
Colonial Equity Income Fund
Colonial International Equity Fund
Colonial Aggressive Growth Fund

Colonial Trust VII
Colonial Newport Tiger Fund
Colonial Intermediate High Income Fund
Colonial InterMarket Income Trust I
Colonial Municipal Income Trust
Colonial High Income Municipal Trust
Colonial Investment Grade Municipal Trust
LFC Utilities Trust
Colonial Global Utilities Fund

Liberty Newport World Portfolio
Global Opportunity Fund
Newport Tiger Fund
Newport Pacific Fund
Stein Roe Latin America Fund

(b) Set forth below is information concerning each director and officer
of KFSC.

- ---------------------------- ------------------------------------------ ------------------------------
Name and Principal Positions and Offices Positions and Offices with
Business Address* with Underwriter the Registrant
- ---------------------------- ------------------------------------------ ------------------------------
<S> <C> <C>
John W. Rosensteel Chairman and President None

- ---------------------------- ------------------------------------------ ------------------------------
William L. Dixon Vice President - Compliance None
- ---------------------------- ------------------------------------------ ------------------------------
Francis E. Reinhart Vice President - Administration None
and Director
- ---------------------------- ------------------------------------------ ------------------------------
John E. Arant, III Vice President -- Chief Sales Officer None
and Director
- ---------------------------- ------------------------------------------ ------------------------------
James J. Klopper Clerk None
- ---------------------------- ------------------------------------------ ------------------------------
Donald A. Truman Assistant Clerk None
- ---------------------------- ------------------------------------------ ------------------------------

</TABLE>

- ------------------
* The principal business address of KFSC and each person listed in the table is
c/o Keyport Life Insurance Company, 125 High Street, Boston, Massachusetts
02110.

C-15
<PAGE>

Set forth below is information concerning each director and officer of
CISI.

- --------------------------------------- -------------------------------------- --------------------------------------
Name and Principal Business Positions and Officers with the
Address* Positions with Underwriter Registrant
- --------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Stephen E. Gibson Chairman of the Board None
- --------------------------------------- -------------------------------------- --------------------------------------
James Tambone Chief Executive Officer None
- --------------------------------------- -------------------------------------- --------------------------------------
Lou Tasiopoulos President None
- --------------------------------------- -------------------------------------- --------------------------------------
Kevin O'Shea Managing Director None
- --------------------------------------- -------------------------------------- --------------------------------------
C. Frazier Evans Managing Director None
- --------------------------------------- -------------------------------------- --------------------------------------
John Bartlett Managing Director None
- --------------------------------------- -------------------------------------- --------------------------------------
Marilyn Karagiannis Managing Director None
- --------------------------------------- -------------------------------------- --------------------------------------
Elizabeth Clapp Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Bryan Eckelman Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
David Feldman Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Stephen A. Gerolkoulis Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Keith H. VanEtten Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Cynthia Erickson Zarker Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Cynthia Davey Regional Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Thomas Harrington Regional Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Joseph Hodgkins Regional Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
David W. Kelson Regional Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Gregory McCombs Regional Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Ann R. Moberly Regional Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Christopher Reed Regional Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Michael W. Scott Regional Senior Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Judith Anderson Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Debra Babbitt Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Beth Brown Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Stacy Burtman Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Patrick Campbell Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Marian Desilets Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Steve DiMaio Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Christopher Downey Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Cynthia Jones Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Mary McKenzie Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Catherne Menchin Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Patrick Morner Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Kevin Nolin Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Frank Quirk Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Rebecca Scarlott Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Lou Sideropoulos Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Deborah Young Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Rick Ballou Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------

C-16
<PAGE>

- --------------------------------------- -------------------------------------- --------------------------------------
Gregory Carroll Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Daniel Chrzanowski Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Andrew Crossfield Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
James Devaney Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
John Donovan Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Kim P. Emerson Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Robert Fifield Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Matthew Goldberg Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Brian Guenard Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Terry M. Kelley Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Andrew Nerney Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Tracy Predmore Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
David Schulman Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Darren Smith Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Eric Studer Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
R. Andrew Sutton Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Brian Tuttle Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Paul Villanova Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Valerie Wess Regional Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Linda Brandon Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Diana Castagna Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Donna Donovan Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Thomas Gariepy Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Douglas Geer Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Leslie Moon Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Linda Raftery Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Peter Tufts Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
John Vaccaro Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
John Ziolkowski Assistant Vice President None
- --------------------------------------- -------------------------------------- --------------------------------------
Philip J. Iudice, Jr. Treasurer and Chief Financial Officer None
- --------------------------------------- -------------------------------------- --------------------------------------
Michael H. Koonce Clerk and Director Vice President
- --------------------------------------- -------------------------------------- --------------------------------------
Nancy L. Conlin Assistant Clerk None
- --------------------------------------- -------------------------------------- --------------------------------------
Kevin S. Jacobs Assistant Clerk None
- --------------------------------------- -------------------------------------- --------------------------------------
John W. Reading Assistant Clerk None
- --------------------------------------- -------------------------------------- --------------------------------------
Davey S. Scoon Director None
- --------------------------------------- -------------------------------------- --------------------------------------

</TABLE>

- -------------
* CISI's address is One Financial Center, Boston, MA 02111.

C-17
<PAGE>

Item 30. Location of Accounts and Records

The following entities prepare, maintain, and preserve the records
required by Section 31(a) of the Investment Company Act of 1940 (the "1940 Act")
for the Registrant. These services are provided to the Registrant through
written agreements between the parties to the effect that such services will be
provided to the Registrant for such periods prescribed by the rules and
regulations of the Securities and Exchange Commission under the 1940 Act and
such records are the property of the entity required to maintain and preserve
such records and will be surrendered promptly on request.

Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA
02108, serves as custodian for the Registrant with respect to each Fund other
than the Newport-Keyport Tiger Fund; UMB, n.a., 928 Grand Ave., Kansas City,
Missouri 64141, serves as custodian for the Newport-Keyport Tiger Fund; and in
such respective capacities, such custodian banks keep records regarding
securities and other assets in custody and in transfer, bank statements,
canceled checks, financial books and records, and other records relating to
their duties in their respective capacities as custodians. Colonial Investors
Service Center, Inc., One Financial Center, Boston, MA 02111, serves as the
transfer agent and dividend disbursing agent for the Registrant, and in such
capacities is responsible for records regarding each shareholder's account and
all disbursements made to shareholders. In addition, LASC, pursuant to its Fund
Management Agreements with the Registrant with respect to the Trust, has
delegated to (i) Colonial, One Financial Center, Boston, Massachusetts 02111,
and (ii) Liberty Financial Companies, Inc., 600 Atlantic Avenue, Boston,
Massachusetts 02210, the obligation to maintain the records required pursuant to
such agreements. Colonial also maintains all records pursuant to its Pricing and
Bookkeeping Agreement with the Trust. KFSC, 125 High Street, Boston,
Massachusetts 02110, and LFII, One Financial Center, Boston, MA 02111, serve as
principal underwriters for the Trust, and in such capacity each such firm
maintains all records required pursuant to its Underwriting Agreement with the
Registrant.

Item 31. Management Services

LASC, pursuant to its Fund Managed Agreements with the Trust, has
delegated its duties thereunder to provide certain administrative services to
the Trust to Colonial and Liberty Financial.

Item 32. Undertakings

(a) Not applicable.

(b) Reference is made to Item 32 of Pre-Effective Amendment No. 1 to
this Registration Statement filed on June 11, 1993, incorporated herein by
reference.

(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

C-18
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Boston, and Commonwealth of Massachusetts on the
23rd day of February, 1998.

LIBERTY VARIABLE INVESTMENT TRUST
(Registrant)

By: /s/ RICHARD R. CHRISTENSEN*
-----------------------------
Richard R. Christensen
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the dates indicated.

Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ RICHARD R. CHRISTENSEN* President and Trustee March 3, 1998
- -------------------------------------------- (Principal Executive
Richard R. Christensen Officer)

/s/ TIMOTHY J. JACOBY Treasurer (Principal March 3, 1998
- -------------------------------------------- Financial and Accounting Officer)
Timothy J. Jacoby

/s/ JOHN A. BACON, JR.* Trustee March 3, 1998
- --------------------------------------------
John A. Bacon, Jr.

/s/ SALVATORE MACERA* Trustee March 3, 1998
- --------------------------------------------
Salvatore Macera

/s/ THOMAS E. STITZEL* Trustee March 3, 1998
- --------------------------------------------
Thomas E. Stitzel
</TABLE>

By: /s/ NANCY L. CONLIN
-------------------------
Attorney-in-Fact

C-19

LIBERTY VARIABLE INVESTMENT TRUST

COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES

MANAGEMENT AGREEMENT

MANAGEMENT AGREEMENT ("Agreement"), made this XX day of XXXXX, 1998,
between LIBERTY VARIABLE INVESTMENT TRUST, a business trust organized under the
laws of The Commonwealth of Massachusetts (the "Trust"), on its own behalf and
on behalf of Colonial Small Cap Value Fund, Variable Series and Colonial High
Yield Securities Fund, Variable Series (each and collectively, "Fund"), and
LIBERTY ADVISORY SERVICES CORP., a corporation organized under the laws of The
Commonwealth of Massachusetts (the "Manager").

WHEREAS, the Trust has been organized as an open-end management investment
company registered as such under the Investment Company Act of 1940, as amended
("Investment Company Act"), and is authorized to issue shares of beneficial
interest in one or more separate series (each representing interests in a
separate portfolio of securities and other assets), including the Fund, which
shares are to be issued and sold to and held by various separate accounts of
Keyport Life Insurance Company ("Keyport"), Keyport America Life Insurance
Company ("Keyport America") and Liberty Life Assurance Company of Boston
("Liberty Life") or separate accounts of other insurance companies that are
affiliated or are not affiliated with Keyport (collectively, "Participating
Insurance Companies");

WHEREAS, the Trust heretofore has created (i) three other separate funds
which are covered by the Management Agreement dated June 7, 1993 among the
Trust, on its own behalf and on behalf of such other three series funds, and the
Manager, (ii) three other separate funds which are covered by the Management
Agreement dated as of May 2, 1994 among the Trust, on its own behalf and on
behalf of such other three series funds, and the Manager, and (iii) one other
separate fund which is covered by the Management Agreement dated as of May 1,
1995 among the Trust, on its own behalf and on behalf of such other series fund,
and the Manager; and the Trust may in the future create additional fund(s) that
may be covered by other separate agreements;

WHEREAS, the Trust desires the Manager to render certain administrative
services and to render total investment management services to the Trust and the
Fund, all in the manner and on the terms and conditions hereinafter set forth;

WHEREAS, the Trust authorizes the Manager to enter into sub-advisory
agreements with one or more firms registered as investment advisers under the
Investment Advisors Act of 1940, as amended (the "Investment Adviser's Act"), or
qualifying as a "bank" within the meaning of the Investment Adviser's Act and
thereby exempted from the requirement to be so registered, to manage all or a
portion of a Fund's assets, as determined by the Manager from time to time (a
"Sub-Adviser"); and

1
<PAGE>

WHEREAS, the Manager is registered as an investment adviser under the
Investment Adviser's Act, and desires to provide services to the Trust and the
Fund in consideration of and on the terms and conditions hereinafter set forth;

NOW, THEREFORE, the Trust, on its own behalf and on behalf of the Fund,
and the Manager hereby agree as follows:

1. Employment of the Investment Adviser.
------------------------------------

The Trust hereby employs the Manager (i) to provide certain administrative
and limited oversight services and (ii) to provide investment management and
related services to the Trust and the Fund, all in the manner set forth in
Section 2 of this Agreement, subject to the direction of the Trustees, and for
the period, in the manner, and on the terms set forth hereinafter. The Manager
hereby accepts such employment and agrees during such period to render the
services and to assume the obligations herein set forth. The Manager shall for
all purposes herein be deemed to be an independent contractor and, except as
expressly provided or authorized (whether herein or otherwise), shall have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.

2. Obligations of, and Services to be Provided by, the Manager.
------------------------------------------------------------

The Manager undertakes to provide the services hereinafter set forth and
to assume the following obligations:

A. Administrative Services.

(a) The Manager will provide general administrative services as
hereinafter set forth ("Administrative Services"), all subject to the overall
direction and control of the Board of Trustees of the Trust (the "Board").

(b) Such Administrative Services shall not include investment
advisory, custodian, underwriting and distribution, transfer agency or pricing
and bookkeeping services, but shall include; (i) provision of office space,
equipment and facilities necessary in connection with the services to be
performed hereunder and the maintenance of the headquarters of the Trust; (ii)
maintenance of the corporate books and records of the Trust (other than those of
its records maintained by the Sub-Advisers referred to in paragraph 2(B)(c)
below, the transfer agent, the custodian and the pricing and bookkeeping agent);
(iii) administration of all dealings and relationships with the Trustees for
meetings of the Board, the scheduling of such meetings and the conduct thereof;
(iv) preparation and filing of proxy materials and administration of
arrangements for meetings of shareholders or beneficial owners of the Funds; (v)
preparation and filing of all required reports and all updating and other
amendments to the Trust's Registration Statement under the Investment Company
Act, the Securities Act of 1933, as amended (the

2
<PAGE>

"Securities Act"), and the rules and regulations thereunder; (vi) calculation of
distributions required or advisable under the Investment Company Act and the
Internal Revenue Code of 1986, as amended (the "Code"); (vii) periodic
computation and reporting to the Trustees of each Fund's compliance with
diversification and other portfolio requirements of the Investment Company Act
and the Code; (viii) development and implementation of general shareholder and
beneficial owner correspondence and communications relating to the Funds,
including the preparation and filing of shareholder and beneficial owner reports
as are required or deemed advisable; and (ix) general oversight of the
custodial, net asset value computation, portfolio accounting, financial
statement preparation, legal, tax and accounting services performed for the
Trust or the Funds by others.

It is understood that the Manager may, in its discretion and at its
expense, delegate some or all of its administrative duties and responsibilities
under this subsection 2A to its affiliate, Liberty Financial Companies, Inc.
("LFC"), or any majority or greater owned subsidiaries of LFC.

B. Investment Advisory Services.

(a) The Manager shall have responsibility for the management and
investment of the assets of the Fund, subject to and in accordance with the
separate investment objectives, policies and limitations of the Fund, as
provided in the Trust's Prospectus and Statement of Additional Information and
governing instruments, as amended from time to time, and any directions and
policies which the Trustees may issue to the Manager from time to time.

(b) The Manager shall provide a continuous investment program for
the Fund, shall revise each such program as necessary, and shall monitor
implementation of the program.

(c) The Manager may delegate its investment responsibilities under
paragraph 2B(a) with respect to the Fund to one or more persons or companies
registered as investment advisers under the Investment Adviser's Act or
qualifying as a "bank" within the meaning of the Investment Adviser's Act and
thereby exempted from the requirement to be so registered ("Sub-Advisers")
pursuant to an agreement among the Trust, such Fund and each Sub-Adviser
("Sub-Advisory Agreement"). Each Sub-Advisory Agreement may provide that the
Sub-Adviser, subject to the control and supervision of the Trustees and the
Manager, shall have full investment discretion for the Fund and shall make all
determinations with respect to the investment of the Fund's assets or any
portion thereof specified by the Manager. Any delegation of duties pursuant to
this paragraph shall comply with any applicable provisions of Section 15 of the
Investment Company Act, except to the extent permitted by any exemptive order of
the Securities and Exchange Commission or similar relief.

(d) The Manager shall be solely responsible for paying the fees of
each Sub-Adviser from the fees it collects as provided in paragraph 6 below.

(e) The Manager shall evaluate possible Sub-Advisers and shall
advise the Trustees of the candidates which the Manager believes are best suited
to invest the assets of each

3
<PAGE>

Fund; shall monitor and evaluate the investment performance of each Sub-Adviser;
shall recommend changes of or additions of Sub-Advisers when appropriate; and
shall coordinate the investment activities of the Sub-Advisers.

(f) It is understood that the Manager may seek advice with respect
to the performance of any or all of its duties under paragraphs 2B(b) and (c)
from a person or company ("Consultant") pursuant to an agreement among the
Manager, the Trust and the Consultant (a "Fund Consulting Agreement"). A Fund
Consulting Agreement may provide that the Consultant, subject to the control and
supervision of the Trustees and the Manager, shall provide assistance to the
Manager with respect to each Fund's investment program, the selection,
monitoring and evaluation of Sub-Advisers and the allocation of each Fund's
assets to the Sub-Advisers.

(g) The Funds shall be solely responsible for paying the fees of any
Consultant.

(h) The Manager shall render regular reports to the Trustees
relating to the performance of its duties specified in paragraphs 2B(a), (b) and
(c).

C. Expenses Borne By Manager.

To the extent necessary to perform its obligations under this
Agreement, the Manager, at its own expense, shall furnish executive and other
personnel and office space, equipment and facilities, and shall pay any other
expenses incurred by it, in connection with the performance of its duties
hereunder, except that the Trust or the Fund, as appropriate, shall reimburse
the Manager for its out-of-pocket costs, including telephone, postage and
supplies, incurred by it in connection with communications with shareholders and
beneficial owners of the Fund. The Manager shall pay all salaries, fees and
expenses of Trustees or officers of the Trust who are employees of the Manager.
The Manager shall not be obligated to bear any other expenses incidental to the
operations and business of the Trust. The Manager shall not be required to pay
or provide any credit for services provided by the Trust's custodian, transfer
agent or other agents.

D. Provision of Information Necessary for Preparation of Registration
Statement Amendments and Other Materials.

The Manager will make available and provide such information as the
Trust may reasonably request for use in the preparation of its Registration
Statement, reports and other documents required by federal laws and any
securities and insurance laws of the other states and other jurisdictions in
which the Trust's shares are sold.

E. Code of Ethics.

The Manager has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the Investment Company Act and has provided the
Trust with a copy of the code of ethics and evidence of its adoption. Within
forty-five (45) days of the end of

4
<PAGE>

the last calendar quarter of each year while this Agreement is in effect, an
executive officer of the Manager shall verify to the Trustees that the Manager
has complied with the requirements of Rule 17j-1 during the previous year and
that there has been no violation of the Manager's code of ethics or, if such a
violation has occurred, that appropriate action was taken in response to such
violation. Upon the written request of the Trust, the Manager shall permit the
Trust to examine the reports required to be made to the Manager by Rule
17j-1(c)(1).

F. Disqualification.

The Manager shall immediately notify the Trustees of the occurrence
of any event which would disqualify the Manager from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the Investment
Company Act or any other applicable statute or regulation.

G. Other Obligations and Service.

The Manager shall make its officers and employees available to the
Trustees and officers of the Trust for consulting and discussions regarding the
management of the Trust and its investment activities.

3. Execution and Allocation of Portfolio Brokerage.
------------------------------------------------

A. The Manager, subject to the control and direction of the
Trustees, any Sub-Advisers, subject to the control and direction of the Trustees
and the Manager, shall have authority and discretion, as appropriate, to select
brokers and dealers to execute portfolio transactions for each Fund, and for the
selection of the markets on or in which the transactions will be executed.

B. In acting pursuant to paragraph 3A, the Manager and the
Sub-Advisers may place orders through such brokers and dealers in conformity
with the policy with respect to brokerage set forth in the Trust's then
effective Registration Statement.

C. It is understood that none of the Trust, the Manager or any
Sub-Advisers will adopt a formula for allocation of the Trust's brokerage,
except as may be provided for in the custody agreement with the Trust's
Custodian.

D. It is understood that the Manager or a Sub-Adviser may, to the
extent permitted by applicable laws and regulations, aggregate securities to be
sold or purchased for a Fund and for other clients in order to obtain the most
favorable price and efficient execution. In that event, allocation of the
securities purchased or sold, as well as expenses incurred in the transaction,
will be made by the Manager or Sub-Adviser, as the case may be, in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Trust and to its other clients, and in conformity with any applicable
policies adopted by the Board of Trustees.

5
<PAGE>

E. The Manager shall provide such reports as the Trustees may
reasonably request with respect to each Fund's total brokerage and the manner in
which that brokerage was allocated.

4. Expenses of the Trust.
----------------------

It is understood that the Trust (or each of its funds (including the
Fund), where applicable) will pay, or will enter into arrangements that require
third parties to pay, all of the expenses of the Trust or such funds, other than
those expressly assumed by the Manager herein, including without limitation:

A. Advisory, sub-advisory and administrative fees;

B. Fees for services of independent public accountants;

C. Legal and consulting fees;

D. Transfer agent, custodian and portfolio recordkeeping and tax
information services;

E. Expenses of periodic calculations of the funds' net asset
values and of equipment for communication among the funds'
custodian, transfer agent and others;

F. Taxes and the preparation of the funds' tax returns;

G. Brokerage fees and commissions;

H. Interest;

I. Costs of Board of Trustees and shareholder meetings;

J. Updates and printing of prospectuses and reports to
shareholders;

K. Fees for filing reports with regulatory bodies and the
maintenance of the Trust's existence;

L. Membership dues for industry trade associations;

M. Fees to federal authorities for the registration of the shares
of the funds;

N. Fees and expenses of Trustees who are not directors, officers,
employees or stockholders of the Manager of its affiliates;

O. Insurance and fidelity bond premiums; and

6
<PAGE>

P. Litigation and other extraordinary expenses of a non-recurring
nature.

5. Activities and Affiliates of the Manager.
-----------------------------------------

A. The Trust acknowledges that the Manager or one or more of its
affiliates may have investment or administrative responsibilities or render
investment advice to or perform other investment advisory services for other
individuals or entities, and that the Manager, its affiliates or any of its or
their directors, officers, agents or employees may buy, sell or trade in
securities for its or their respective accounts ("Affiliated Accounts"). Subject
to the provisions of paragraph 3, the Trust agrees that the Manager or its
affiliates may give advice or exercise investment responsibility and take such
other action with respect to Affiliated Accounts which may differ from the
advice given or the timing or nature of action with respect to the Fund,
provided that the Manager acts in good faith. The Trust acknowledges that one or
more of the Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Fund may have an interest. The Manager shall have no obligation to recommend
for the Fund a position in any investment which an Affiliated Account may
acquire, and the Trust shall have no first refusal, co-investment or other
rights in respect of any such investment, either for the Fund or otherwise.

B. Subject to and in accordance with the Declaration of Trust and
By-Laws of the Trust as currently in effect and the Investment Company Act and
the rules thereunder, it is understood that Trustees, officers and agents of the
Trust and shareholders of the Trust are or may be interested persons as defined
by the Investment Company Act ("Interested Persons") of the Manager or its
affiliates as directors, officers, agents and shareholders of the Manager or its
affiliates; that directors, officers, agents and shareholders of the Manager or
its affiliates are or may be Interested Persons of the Trust as Trustees,
officers, agents, shareholders or otherwise; that the Manager or its affiliates
may be Interested Persons of the Trust as shareholders or otherwise; and that
the effect of any such interests shall be governed by said Declaration of Trust,
By-Laws and the Investment Company Act and the rules thereunder.

6. Compensation of the Manager.
----------------------------

For all services to be rendered and payments made pursuant to this
Agreement, the Trust, on its own behalf and on behalf of Fund, will pay the
Manager monthly in arrears a fee at an annual rate equal to 0.90% of the net
asset value of the Fund. The fee shall be accrued for each calendar day and the
sum of the daily fee accruals shall be paid monthly on or before the tenth day
of the following calendar month. The daily accruals of the fee will be computed
by (i) multiplying the annual percentage rate referred to above by the fraction
the numerator of which is one and the denominator of which is the number of
calendar days in the year, and (ii) multiplying the product obtained pursuant to
clause (i) above by the net asset value of the Fund as determined in accordance
with the Trust's Prospectus as of the previous business day on which the Fund
was open for business. The foregoing fee shall be prorated for any month during
which this Agreement is in effect for only a portion of the month.

7
<PAGE>

7. Liabilities of the Manager.
---------------------------

A. Except as provided below, in the absence of willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Manager, the Manager shall not be subject to
liability to the Trust or to any shareholder of the Trust for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.

B. The Manager shall indemnify and hold harmless the Trust from any
loss, cost, expense or damage resulting from the failure of any Sub-Advisor to
comply with (i) any statement included in the Prospectus and Statement of
Additional Information of the Trust, or (ii) instructions given by the Manager
to any Sub-Advisor for the purpose of ensuring the Trust's compliance with
securities, tax and other requirements applicable to the Trust's business and
the investment activities of its Funds; provided, however, that the
indemnification provided in this paragraph 7B shall apply only to the extent
that a Sub-Adviser is liable to the Trust and, after demand by the Trust, is
unable or refuses to discharge its obligations to the Trust.

C. No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or the Manager, from liability in violation of
Sections 17(h) and (i) of the Investment Company Act.

8. Effective Date: Term.
---------------------

This Agreement shall become effective on the later of (i) the date
first written above or (ii) the date on which the offer and sale of shares of
the Fund has been registered under the Securities Act and the Investment Company
Act pursuant to an effective Registration Statement of the Trust on Form N-1A
and shall continue until June 7, 1996, and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually by a
vote of the Trustees, including the vote of a majority of the Trustees who are
not interested persons of the Trust, cast in person at a meeting called for the
purpose of voting on such approval, or by vote of a majority of the outstanding
voting securities. The aforesaid provision shall be construed in a manner
consistent with the Investment Company Act and the rules and regulations
thereunder.

9. Assignment.
-----------

No assignment of this Agreement shall be made by the Manager, and
this Agreement shall terminate automatically in the event of any such
assignment. The Manager shall notify the Trust in writing in advance of any
proposed change of control to enable the Trust to take the steps necessary to
enter into a new advisory contract.

10. Amendment
---------

This Agreement may be amended at any time, but only by written
Agreement between the Manager and the Trust, which is subject to the approval of
the Trustees of the Trust

8
<PAGE>

and the shareholders of any affected Fund in the manner required by the
Investment Company Act and the rules thereunder.

11. Termination.
------------

This Agreement:

(a) may at any time be terminated without payment of any penalty,
by the Trust (by the Board of Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of the
Fund) on sixty (60) days' written notice to the Manager;

(b) shall immediately terminate in the event of its assignment;
and

12. Definitions.
------------

As used in this Agreement, the terms "affiliated person," "assignment,"
"control," "interested person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act and
the rules and regulations thereunder, subject to any applicable orders of
exemption issued by the SEC.

13. Notice.
-------

Any notice under this Agreement shall be given in writing addressed and
delivered or mailed postpaid to the other party to this Agreement at its
principal place of business.

14. Severability.
-------------

If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.

15. Shareholder Liability.
----------------------

The Manager is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Declaration of Trust of the Trust and
agrees that obligations assumed by the Trust pursuant to this Agreement shall be
limited in all cases to the Trust and its assets, and if the liability relates
to one or more Funds, the obligations thereunder shall be limited to the
respective assets of such Funds. The Manager further agrees that it shall not
seek satisfaction of any such obligation from the shareholders of the Funds, nor
from the Trustees or any individual Trustee of the Trust.

9
<PAGE>

16. Governing Law.
--------------

This Agreement shall be interpreted under, and the performance of the
Manager under this Agreement shall be consistent with, the provisions of the
Agreement and Declaration of Trust and By-Laws of the Trust, the terms of the
Investment Company Act, applicable rules and regulations thereunder, the Code
and regulations thereunder, and the Trust's Prospectus and Statement of
Additional Information, in each case as from time to time in effect. The
provisions of this Agreement shall be construed and interpreted in accordance
with the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice or conflict of laws rules or provisions that would
result in the application of the domestic substantive laws of any other
jurisdiction; provided, however, that if such law or any of the provisions of
this Agreement conflict with the applicable provisions of the Investment Company
Act, the latter shall control.

17. Use of Manager's Name.
----------------------

The Trust may use the name "Keyport" or any other name derived from the
name "Keyport" only for so long as this Agreement (or another similar management
agreement pertaining to other series funds of the Trust) or any extension,
renewal, or amendment hereof (or thereof) remains in effect, including any
similar agreement with any organization that shall have succeeded to the
business of the Manager. At such time as this Agreement (and each other similar
agreement pertaining to such other series funds) or any extension, renewal or
amendment hereof (or thereof), or each such other similar successor organization
agreement shall no longer be in effect, the Trust will cease to use any name
derived from the name "Keyport," any name similar thereto, or any other name
indicating that it is managed by or otherwise connected with the Manager, or
with any organization which shall have succeeded to Manager's business as
investment advisor or manager.

This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.

10
<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly executed this agreement
on the date first above written.

ATTEST: LIBERTY VARIABLE INVESTMENT TRUST,
on its own behalf and on behalf of
Colonial Small Cap Value Fund, Variable Series and
Colonial High Yield Securities Fund, Variable Series

By:
- ------------------------- -----------------------------------
Title: Secretary Title:

ATTEST: LIBERTY ADVISORY SERVICES CORP.

By:
- ------------------------- -----------------------------------
Title: Secretary Title:

COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
COLONIAL MANAGEMENT SUB-ADVISORY AGREEMENT

AGREEMENT dated 1998 among LIBERTY VARIABLE INVESTMENT TRUST, a
Massachusetts business trust (the "Trust"), with respect to COLONIAL SMALL CAP
VALUE FUND, VARIABLE SERIES (the "Fund"), LIBERTY ADVISORY SERVICES CORP., a
Massachusetts corporation ("Adviser"), and COLONIAL MANAGEMENT ASSOCIATES, INC.,
a Massachusetts corporation (the "Sub-Adviser").

In consideration of the promises and covenants herein, the parties agree as
follows:

1. The Sub-Adviser will manage the investment of the assets of the Fund
in accordance with its investment objective, policies and limitations
set forth in the Trust's prospectus and statement of additional
information, as amended from time to time, and will perform the other
services herein set forth, subject to the supervision of the Adviser
and the Board of Trustees of the Trust.

2. In carrying out its investment management obligations, the Sub-Adviser
shall:

(a) evaluate such economic, statistical and financial information
and undertake such investment research as it shall believe advisable;

(b) purchase and sell securities and other investments for the
Fund in accordance with the procedures described in the Trust's
prospectus and statement of additional information; and

3. The Sub-Adviser may delegate its investment responsibilities under
paragraph 2(b) with respect to the Fund to one or more persons or
companies registered as investment advisers under the Investment
Adviser's Act of 1940, as amended, or qualifying as a "bank" within
the meaning of such Act and thereby exempted from the requirement to
be so registered ("Second-Tier Sub-Advisers"), pursuant to an
agreement among the Trust, such Fund, the Adviser, the Sub-Adviser and
such Second-Tier Sub-Adviser ("Second-Tier Sub-Advisory Agreement").
Each Second-Tier Sub-Advisory Agreement may provide that the
Second-Tier Sub-Adviser, subject to the control and supervision of the
Trustees, the Adviser and the Sub-Adviser, shall have full investment
discretion for the Fund and the Fund's assets or any portion thereof
specified by the Sub-Adviser. Any selection of duties pursuant to this
paragraph shall comply with any applicable provisions of Section 15 of
the Investment Company Act of 1940, as amended ("the "1940 Act"),
except to the extent permitted by any applicable exemptive order of
the Securities and Exchange Commission or similar relief. The
Sub-Adviser shall be solely responsible for paying the fees of each
Second-Tier Sub-Adviser from the fees it collects as provided in
paragraph 5 below.

4. The Sub-Adviser shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.

5. The Advisor shall pay the Sub-Adviser a monthly fee at the annual rate
of of the average daily net assets of the Fund for managing the
investment of the assets of the Fund provided in paragraph 1 above.
Such fee shall be paid in arrears on or before the 10th day of the
next following calendar month.

6. This Agreement shall become effective on the date first written above,
an (a) unless otherwise terminated, shall continue until and from year
to year thereafter so long as approved annually in accordance with the
1940 Act; (b) may be terminated without penalty on sixty days' written
notice to the Sub-Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting
securities of the Fund; (c) shall automatically terminate in the even
of its assignment; and (d) may be terminated without penalty by the
Sub-Adviser on sixty day's written notice to the Trust.

7. This Agreement may be amended in accordance with the 1940 Act.

8. For the purpose of the Agreement, the terms "vote of a majority of the
outstanding shares," "affiliated person" and "assignment" shall have
their respective meanings defined in the 1940 Act and exemptions and
interpretations issued by the Securities and Exchange Commission under
the 1940 Act.

9. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Sub-Adviser, or reckless disregard of its
obligations and duties hereunder, the Sub-Adviser shall not be subject
to any liability to the Trust or the Fund, to any shareholder of the
Trust or the Fund or to any person, firm or organization, for any act
or omission in the course of or connection with rendering services
hereunder.
<PAGE>

10. The Fund may use the name "Colonial," or any other name derived from
the name "Colonial," only for so long as this Agreement or any
extension, renewal, or amendment hereof remains in effect, including
any similar agreement with any organization that shall have succeeded
to the business of the Sub-Advisor. At such time as this Agreement or
any extension, renewal or amendment hereof, or each such other similar
successor organization agreement shall no longer be in effect, the
Fund will cease to use any name derived from the name "Colonial," any
name similar thereto, or any other name indicating that it is advised
by or otherwise connected with the Sub-Adviser, or with any
organization which shall have succeeded to the Sub-Adviser's business
as an investment adviser.

11. The Sub-Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Declaration of Trust of the
Trust and agrees that obligations assumed by the Trust pursuant to
this Agreement shall be limited in all cases to the assets of the
Fund. The Sub-Adviser further agrees that it shall not seek
satisfaction of any such obligation from the shareholders of the Fund,
nor from the Trustees or any individual Trustee of the Trust.

COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES

By: LIBERTY VARIABLE INVESTMENT TRUST

By:
-----------------------------------------
Its

COLONIAL MANAGEMENT ASSOCIATES, INC.

By:
-----------------------------------------
Its

LIBERTY ADVISORY SERVICES CORP.

By:
-----------------------------------------
Its

COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
COLONIAL MANAGEMENT SUB-ADVISORY AGREEMENT

AGREEMENT dated 1998 among LIBERTY VARIABLE INVESTMENT TRUST, a
Massachusetts business trust (the "Trust"), with respect to COLONIAL HIGH YIELD
SECURITIES FUND, VARIABLE SERIES (the "Fund"), LIBERTY ADVISORY SERVICES CORP.,
a Massachusetts corporation ("Adviser"), and COLONIAL MANAGEMENT ASSOCIATES,
INC., a Massachusetts corporation (the "Sub-Adviser").

In consideration of the promises and covenants herein, the parties agree
as follows:

1. The Sub-Adviser will manage the investment of the assets of the Fund
in accordance with its investment objective, policies and
limitations set forth in the Trust's prospectus and statement of
additional information, as amended from time to time, and will
perform the other services herein set forth, subject to the
supervision of the Adviser and the Board of Trustees of the Trust.

2. In carrying out its investment management obligations, the
Sub-Adviser shall:

(a) evaluate such economic, statistical and financial
information and undertake such investment research as it shall
believe advisable;

(b) purchase and sell securities and other investments for the
Fund in accordance with the procedures described in the Trust's
prospectus and statement of additional information; and

3. The Sub-Adviser may delegate its investment responsibilities under
paragraph 2(b) with respect to the Fund to one or more persons or
companies registered as investment advisers under the Investment
Adviser's Act of 1940, as amended, or qualifying as a "bank" within
the meaning of such Act and thereby exempted from the requirement to
be so registered ("Second-Tier Sub-Advisers"), pursuant to an
agreement among the Trust, such Fund, the Adviser, the Sub-Adviser
and such Second-Tier Sub-Adviser ("Second-Tier Sub-Advisory
Agreement"). Each Second-Tier Sub-Advisory Agreement may provide
that the Second-Tier Sub-Adviser, subject to the control and
supervision of the Trustees, the Adviser and the Sub-Adviser, shall
have full investment discretion for the Fund and the Fund's assets
or any portion thereof specified by the Sub-Adviser. Any selection
of duties pursuant to this paragraph shall comply with any
applicable provisions of Section 15 of the Investment Company Act of
1940, as amended ("the "1940 Act"), except to the extent permitted
by any applicable exemptive order of the Securities and Exchange
Commission or similar relief. The Sub-Adviser shall be solely
responsible for paying the fees of each Second-Tier Sub-Adviser from
the fees it collects as provided in paragraph 5 below.

4. The Sub-Adviser shall be free to render similar services to others
so long as its services hereunder are not impaired thereby.

5. The Advisor shall pay the Sub-Adviser a monthly fee at the annual
rate of of the average daily net assets of the Fund for managing the
investment of the assets of the Fund provided in paragraph 1 above.
Such fee shall be paid in arrears on or before the 10th day of the
next following calendar month.

6. This Agreement shall become effective on the date first written
above, an (a) unless otherwise terminated, shall continue until and
from year to year thereafter so long as approved annually in
accordance with the 1940 Act; (b) may be terminated without penalty
on sixty days' written notice to the Sub-Adviser either by vote of
the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund; (c) shall automatically
terminate in the even of its assignment; and (d) may be terminated
without penalty by the Sub-Adviser on sixty day's written notice to
the Trust.

7. This Agreement may be amended in accordance with the 1940 Act.

8. For the purpose of the Agreement, the terms "vote of a majority of
the outstanding shares," "affiliated person" and "assignment" shall
have their respective meanings defined in the 1940 Act and
exemptions and interpretations issued by the Securities and Exchange
Commission under the 1940 Act.

9. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Sub-Adviser, or reckless disregard of its
obligations and duties hereunder, the Sub-Adviser shall not be
subject to any liability to the Trust or the Fund, to any
shareholder of the Trust or the Fund or to any person, firm or
organization, for any act or omission in the course of or connection
with rendering services hereunder.

<PAGE>

10. The Fund may use the name "Colonial," or any other name derived from
the name "Colonial," only for so long as this Agreement or any
extension, renewal, or amendment hereof remains in effect, including
any similar agreement with any organization that shall have
succeeded to the business of the Sub-Advisor. At such time as this
Agreement or any extension, renewal or amendment hereof, or each
such other similar successor organization agreement shall no longer
be in effect, the Fund will cease to use any name derived from the
name "Colonial," any name similar thereto, or any other name
indicating that it is advised by or otherwise connected with the
Sub-Adviser, or with any organization which shall have succeeded to
the Sub-Adviser's business as an investment adviser.

11. The Sub-Adviser is hereby expressly put on notice of the limitation
of shareholder liability as set forth in the Declaration of Trust of
the Trust and agrees that obligations assumed by the Trust pursuant
to this Agreement shall be limited in all cases to the assets of the
Fund. The Sub-Adviser further agrees that it shall not seek
satisfaction of any such obligation from the shareholders of the
Fund, nor from the Trustees or any individual Trustee of the Trust.

COLONIAL HIGH YIELD SECURITIES FUND,
VARIABLE SERIES

By: LIBERTY VARIABLE INVESTMENT TRUST

By:
----------------------------------
Its

COLONIAL MANAGEMENT ASSOCIATES, INC.

By:
----------------------------------
Its

LIBERTY ADVISORY SERVICES CORP.

By:
----------------------------------
Its

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 11
to the registration statement on Form N-1A (the "Registration Statement") of our
report dated February 13, 1998, relating to the financial statements and
financial highlights appearing in the December 31, 1997 Annual Report to
Shareholders of Liberty Variable Investment Trust, which are also incorporated
by reference into the Registration Statement. We also consent to the references
to us under the headings "Financial Highlights" in the Prospectus and
"Independent Accountants and Financial Statements" in the Statement of
Additional Information.

/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
February 25, 1998

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<ARTICLE> 6
<CIK> 0000898445
<NAME> LIBERTY VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 2
<NAME> STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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<OTHER-ITEMS-LIABILITIES> 143
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<SHARES-COMMON-STOCK> 4580
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<ACCUMULATED-NET-GAINS> 524
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<ACCUM-APPREC-OR-DEPREC> 6628
<NET-ASSETS> 54603
<DIVIDEND-INCOME> 2117
<INTEREST-INCOME> 171
<OTHER-INCOME> 0
<EXPENSES-NET> (394)
<NET-INVESTMENT-INCOME> 1894
<REALIZED-GAINS-CURRENT> 10661
<APPREC-INCREASE-CURRENT> (100)
<NET-CHANGE-FROM-OPS> 12455
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1833)
<DISTRIBUTIONS-OF-GAINS> (5470)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 529
<NUMBER-OF-SHARES-REDEEMED> (1042)
<SHARES-REINVESTED> 617
<NET-CHANGE-IN-ASSETS> 6696
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (16)
<OVERDIST-NET-GAINS-PRIOR> (4709)
<GROSS-ADVISORY-FEES> 310
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 394
<AVERAGE-NET-ASSETS> 47785
<PER-SHARE-NAV-BEGIN> 10.700
<PER-SHARE-NII> 0.460
<PER-SHARE-GAIN-APPREC> 2.620
<PER-SHARE-DIVIDEND> (0.480)
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<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.920
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000898445
<NAME> LIBERTY VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 4
<NAME> COLONIAL INTERNATIONAL FUND FOR GROWTH, VARIABLE SERIES
<MULTIPLIER> 1,000

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<PERIOD-END> DEC-31-1997
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<OVERDISTRIBUTION-NII> (172)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (345)
<ACCUM-APPREC-OR-DEPREC> (1816)
<NET-ASSETS> 30600
<DIVIDEND-INCOME> 505
<INTEREST-INCOME> 146
<OTHER-INCOME> 0
<EXPENSES-NET> (406)
<NET-INVESTMENT-INCOME> 248
<REALIZED-GAINS-CURRENT> 1180
<APPREC-INCREASE-CURRENT> (2416)
<NET-CHANGE-FROM-OPS> (988)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (248)
<DISTRIBUTIONS-OF-GAINS> (1216)
<DISTRIBUTIONS-OTHER> (353)
<NUMBER-OF-SHARES-SOLD> 10248
<NUMBER-OF-SHARES-REDEEMED> (7607)
<SHARES-REINVESTED> 987
<NET-CHANGE-IN-ASSETS> 4007
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 43
<OVERDISTRIB-NII-PRIOR> (3)
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 403
<AVERAGE-NET-ASSETS> 30062
<PER-SHARE-NAV-BEGIN> 1.960
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> (0.080)
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<EXPENSE-RATIO> 1.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
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<NAME> LIBERTY VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 6
<NAME> COLONIAL US STOCK FUND, VARIABLE SERIES
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> DEC-31-1997
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<RECEIVABLES> 1153
<ASSETS-OTHER> 8
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<TOTAL-ASSETS> 96806
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 91
<TOTAL-LIABILITIES> 91
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77630
<SHARES-COMMON-STOCK> 5936
<SHARES-COMMON-PRIOR> 4279
<ACCUMULATED-NII-CURRENT> 400
<OVERDISTRIBUTION-NII> (48)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (51)
<ACCUM-APPREC-OR-DEPREC> 19185
<NET-ASSETS> 96715
<DIVIDEND-INCOME> 1304
<INTEREST-INCOME> 360
<OTHER-INCOME> 0
<EXPENSES-NET> (732)
<NET-INVESTMENT-INCOME> 932
<REALIZED-GAINS-CURRENT> 11726
<APPREC-INCREASE-CURRENT> 8138
<NET-CHANGE-FROM-OPS> 20796
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (932)
<DISTRIBUTIONS-OF-GAINS> (11726)
<DISTRIBUTIONS-OTHER> (83)
<NUMBER-OF-SHARES-SOLD> 1714
<NUMBER-OF-SHARES-REDEEMED> (824)
<SHARES-REINVESTED> 786
<NET-CHANGE-IN-ASSETS> 35861
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1)
<OVERDIST-NET-GAINS-PRIOR> (16)
<GROSS-ADVISORY-FEES> 623
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<GROSS-EXPENSE> 732
<AVERAGE-NET-ASSETS> 78051
<PER-SHARE-NAV-BEGIN> 14.220
<PER-SHARE-NII> 0.200
<PER-SHARE-GAIN-APPREC> 4.370
<PER-SHARE-DIVIDEND> (0.180)
<PER-SHARE-DISTRIBUTIONS> (2.320)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.290
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000898445
<NAME> LIBERTY VARIABLE INVESTMENT TRUST
<SERIES>
<NUMBER> 5
<NAME> COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 70912
<INVESTMENTS-AT-VALUE> 72514
<RECEIVABLES> 1469
<ASSETS-OTHER> 142
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74125
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<NAME> NEWPORT TIGER FUND, VARIABLE SERIES
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<NAME> LIBERTY VARIABLE INVESTMENT TRUST
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<NAME> LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES
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