LIBERTY VARIABLE INVESTMENT TRUST, 497, 1999-06-04

LIBERTY VARIABLE INVESTMENT TRUST
497, 1999-06-04

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LIBERTY VARIABLE INVESTMENT TRUST

PROSPECTUS DATED JUNE 1, 1999

Stein Roe Global Utilities Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial U.S. Growth & Income Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial International Horizons Fund, Variable Series
Crabbe Huson Real Estate Investment Fund, Variable Series

Trust shares available only through variable annuity contracts and variable life
insurance policies of participating insurance companies.

* * * *

This Prospectus must be accompanied by a prospectus for your variable annuity
contract or variable life insurance policy. Retain both prospectuses for future
reference.

* * * *

Although trust shares have been registered with the Securities and Exchange
Commission (SEC), the SEC has not approved any shares offered in this prospectus
or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.

NOT FDIC
INSURED

MAY LOSE VALUE
NO BANK GUARANTEE

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S> <C>
THE TRUST 3

THE FUNDS 4

Each of these sections discusses the following
topics: Investment Goals, Primary Investment Strategies,
Primary Investment Risks and Performance History
Stein Roe Global Utilities Fund, Variable Series ............................. 4
Colonial Small Cap Value Fund, Variable Series ............................... 6
Colonial U.S. Growth & Income Fund, Variable Series .......................... 7
Colonial High Yield Securities Fund, Variable Series ......................... 9
Liberty All-Star Equity Fund, Variable Series ................................11
Colonial International Horizons Fund, Variable Series ........................14
Crabbe Huson Real Estate Investment Fund, Variable Series ....................15

TRUST MANAGEMENT ORGANIZATIONS 16

The Trustees .................................................................16
Investment Advisor: Liberty Advisory Services Corp ...........................16
Investment Sub-Advisors and Portfolio Managers ...............................17
Rule 12b-1 Plan ..............................................................19

OTHER INVESTMENT STRATEGIES AND RISKS 20

Temporary Defensive Measures .................................................20
Zero Coupon Bonds ............................................................20
Derivatives ..................................................................20
Year 2000 Compliance .........................................................20

FINANCIAL HIGHLIGHTS 21

SHAREHOLDER INFORMATION 26

Purchases and Redemptions ....................................................26
How the Funds Calculate Net Asset Value ......................................26
Dividends and Distributions ..................................................26
Tax Consequences .............................................................26
</TABLE>

<PAGE>
THE TRUST

Liberty Variable Investment Trust (Trust) includes twelve separate mutual funds,
each with its own investment goal and strategies. This Prospectus contains
information about seven of the Funds (Funds) in the Trust. Liberty Advisory
Services Corp. (LASC) is the investment advisor to each Fund. LASC has appointed
a Sub-Advisor for each Fund, all of which are affiliates of LASC. Each Fund is
sub-advised by the following Sub-Advisor:

<TABLE>
<CAPTION>
FUND SUB-ADVISOR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Colonial U.S. Growth & Income Fund, Variable Series Colonial Management Associates, Inc. (Colonial)
(formerly U.S. Stock Fund, Variable Series) (U.S. Growth Fund)
Colonial Small Cap Value Fund, Variable Series (Small Cap Fund)
Colonial High Yield Securities Fund, Variable Series (High Yield Fund)
Colonial International Horizons Fund, Variable Series (International Fund)
- -----------------------------------------------------------------------------------------------------------------------------------
Stein Roe Global Utilities Fund, Variable Series (Global Utilities Fund) Stein Roe & Farnham Incorporated (Stein Roe)
- -----------------------------------------------------------------------------------------------------------------------------------
Liberty All-Star Equity Fund, Variable Series (All-Star Equity Fund) Liberty Asset Management Company (LAMCO)
- -----------------------------------------------------------------------------------------------------------------------------------
Crabbe Huson Real Estate Investment Fund, Variable Series (Real Estate Fund) Crabbe Huson Group, Inc. (Crabbe Huson)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

The Trust's Funds are investment options under variable annuity contracts (VA
contracts) and variable life insurance policies (VLI policies) issued by life
insurance companies (Participating Insurance Companies). Some (but not all)
Participating Insurance Companies are affiliated with the investment advisor to
the Funds. Participating Insurance Companies invest in the Funds through
separate accounts that they set up for that purpose. Owners of VA contracts and
of VLI policies invest in sub-accounts of those separate accounts through
instructions they give to their insurance company. The principal underwriters of
the Fund are Keyport Financial Services Corp. (KFSC) and Liberty Funds
Distributor, Inc. (LFD). KFSC serves as principal underwriter of the shares of
the portfolios of the Trust with respect to the sale of shares to Participating
Insurance Companies that are affiliated with LASC and LFD serves as principal
underwriter with respect to the sale of shares to Participating Insurance
Companies that are not affiliated with LASC. KFSC and LFD are affiliates of
LASC.

The prospectuses of the Participating Insurance Companies' separate accounts
describe which Funds are available to the purchasers of their VA contracts and
VLI policies. The Trust assumes no responsibility for those prospectuses.

<PAGE>
THE FUNDS

STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES

INVESTMENT GOALS
The Fund seeks current income and long-term growth of capital and income.

PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in U.S. and foreign
securities of utility companies. Stein Roe diversifies the Fund's investments
among a number of developed countries and market sectors and will have exposure
to at least three countries, including the U.S. In selecting investments for the
Fund, Stein Roe looks primarily for stocks of larger utility companies with
established records.

Utility companies in which the Fund may invest include 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. They also include companies engaged in telecommunications, including
telephone, telegraph, satellite, microwave and other communications media (but
excluding companies primarily engaged in public broadcasting, print media, cable
television or the internet).

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goals.

Utility company securities are subject to special risks. These securities are
especially affected by changes in prevailing interest rates (as interest rates
increase, the value of securities of utility companies tend to decrease, and
vice versa), as well as by general competitive and market forces in the
industry. In addition, utility companies are affected by changes in government
regulation. In particular, the profitability of utilities may in the future be
adversely affected by increased competition resulting from deregulation.

Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions. Credit risk is the
risk that the price of a security will fall due to unfavorable changes in the
financial condition of the company which issued the security.

Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may at times be unable to sell
foreign securities at desirable prices. Fluctuations in currency exchange rates
may impact the value of foreign securities. Brokerage commissions, custodial
fees and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.

<PAGE>
THE FUNDS Stein Roe Global Utilities Fund, Variable Series

PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year, 5 years
and the life of the Fund. We compare the Fund to the Standard & Poor's Utilities
Index (S&P Index), Lipper Utilities - Annuities peer group average return
(Lipper Average) and Morgan Stanley Capital International World Index ND (MSCI
World Index). The S&P Index is an unmanaged index that tracks the performance of
domestic utilities stocks. The Lipper Average which is calculated by Lipper,
Inc. is composed of funds with similar investment objectives as the Fund. MSCI
World Index is an unmanaged index that tracks the performance of global stocks.
Unlike the Fund, indices are not investments, do not incur fees or expenses and
are not professionally managed. It is not possible to invest directly in an
index. The chart and table are intended to illustrate some of the risks of
investing in the Fund by showing the changes in the Fund's performance. All
returns include the reinvestment of dividends and distributions. As with all
mutual funds, past performance does not predict the Fund's future performance.
Performance results include the effect of any expense reduction arrangements. If
these arrangements were not in place, then the performance results would have
been lower. We may cease any reduction arrangements at any time. The Fund's
performance results do not reflect the cost of insurance and separate account
charges which are imposed under your VA contract or VLI policy.

CALENDAR-YEAR TOTAL RETURNS

The Fund's year to date total return through March 31, 1999 was - 0.58%.

Best Quarter: 4th quarter 1997, +15.29%

Worst Quarter: 1st quarter 1994, -8.91%

AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
1 YEAR 5 YEARS SINCE
INCEPTION
ON 7/1/93
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund (%) 18.33 14.50 12.73
- --------------------------------------------------------------------------------------
MSCI World Index (%) 24.34 15.68 N/A
- --------------------------------------------------------------------------------------
S&P Index (%) 14.77 13.90 N/A
- --------------------------------------------------------------------------------------
Lipper Average (%) 18.61 14.76 N/A
- --------------------------------------------------------------------------------------
</TABLE>

<PAGE>
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES

INVESTMENT GOAL
The Fund seeks long-term growth.

PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in small
capitalization stocks. These are stocks with market capitalizations of less than
the market capitalization of the stock in the Russell 2000 Index that has the
largest capitalization at the time of purchase. The remainder of the Fund's
assets may be invested in other stocks, or in bonds that are rated or considered
by the advisor to be investment grade. In managing the Fund, Colonial uses a
value investing strategy that focuses on buying stocks cheaply when they are
under valued or "out of favor." Colonial buys stocks that have attractive
current prices, consistent operating performance and/or favorable future growth
prospects. Colonial's strategy uses fact-based quantitative analysis supported
by fundamental business and financial analysis.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

Smaller companies are more likely than larger companies to have limited product
lines, markets or financial resources, and to depend on a small, inexperienced
management team. They are more likely to fail or prove unable to grow. Stocks of
smaller companies may trade less frequently and in limited volume and their
prices may fluctuate more than stocks of other companies. In addition, they may
not be widely followed by the investment community, which can lower the demand
for their stock. Stocks of smaller companies may, therefore, be more vulnerable
to adverse developments than those of larger companies.

PERFORMANCE HISTORY
We compare the Fund to the Russell 2000 Index, an unmanaged index that tracks
the performance of small capitalization stocks and the Lipper Small Cap -
Annuities peer group average return (Lipper Average). This Lipper Average which
is calculated by Lipper, Inc. is composed of funds with similar investment
objectives as the Fund. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. The Fund commenced investment operations on May 19,
1998, and therefore does not have a full calendar year of investment
performance.

<PAGE>
COLONIAL U.S. GROWTH & INCOME FUND, VARIABLE SERIES

INVESTMENT GOALS
The Fund seeks long-term growth and income.

PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in large
capitalization stocks. These are stocks with market capitalizations of greater
than $3 billion at the time of purchase. Up to 10% of the Fund's assets may be
invested in debt securities.

In selecting debt securities for the Fund, Colonial may invest in:

- debt securities that are convertible into common stock

- corporate debt securities noted investment grade by at least
two nationally recognized rating organizations; and

- debt securities issued or guaranteed by the U.S. Government

In managing the Fund, Colonial uses a value investing strategy that focuses on
buying stocks cheaply when they are under valued or "out of favor." Colonial
buys stocks that have attractive current prices, consistent operating
performance and/or favorable future growth prospects. Colonial's strategy uses
quantitative analysis supported by fundamental business and financial analyses.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS
The primary risk of investing in the Fund is described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goal.

Because the Fund may invest in fixed income securities issued by private
entities, including certain types of mortgage-backed securities and corporate
bonds, the Fund is subject to issuer risk. Issuer risk is the possibility that
changes in the financial condition of the issuer of a security, changes in
general economic conditions or changes in economic conditions that affect the
issuer's industry may impact the issuer's ability to make timely payment of
interest or principal. This could result in decreases in the price of the
security.

Interest rate risk is the risk of a decline or increase in the price of a bond
when interest rates increase or decline. In general, if interest rates rise,
bond prices fall, and if interest rates fall, bond prices rise. Changes in the
values of bonds usually will not affect the amount of income the Fund receives
from them but will affect the value of the Fund's shares. Interest rate risk is
generally greater for bonds with longer maturities.

<PAGE>
THE FUNDS Colonial U.S. Growth & Income Fund, Variable Series

PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year and the
life of the Fund. We compare the Fund to the Standard & Poor's 500 Index (S&P
Index), an unmanaged index that tracks the performance of a selection of widely
held common stocks and the Lipper Growth & Income - Annuities peer group average
return (Lipper Average). This Lipper Average which is calculated by Lipper, Inc.
is composed of funds with similar investment objectives as the Fund. Unlike the
Fund, indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index. The
chart and table are intended to illustrate some of the risks of investing in the
Fund by showing the changes in the Fund's performance. All returns include the
reinvestment of dividends and distributions. As with all mutual funds, past
performance does not predict the Fund's future performance. Performance results
include the effect of any expense reduction arrangements. If these arrangements
were not in place, then the performance results would have been lower. We may
cease any reduction arrangements at any time. The Fund's performance results do
not reflect the cost of insurance and separate account charges which are imposed
under your VA contract or VLI policy.

CALENDAR-YEAR TOTAL RETURNS

<TABLE>

The Fund's year to date total return through March 31, 1999 was +1.70%.

Best Quarter: 4th quarter 1998, +21.79%

Worst Quarter: 3rd quarter 1998, -14.16%

AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
1 YEAR SINCE
INCEPTION ON
7/5/94
- ------------------------------------------------------------------------
<S> <C> <C>
Fund (%) 20.15 23.90
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S&P Index (%) 28.60 N/A
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Lipper Average (%) 16.37 N/A
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</TABLE>

<PAGE>
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES

INVESTMENT GOALS
The Fund seeks current income and total return.

PRIMARY INVESTMENT STRATEGIES
The Fund pursues its investment goal by investing primarily in lower rated
corporate debt securities. These securities have the following ratings:

- BBB through C by Standard & Poor's Corporation;

- Baa through D by Moody's Investor Services, Inc.;

- a comparable rating by another nationally recognized rating
service; or

- the security is unrated and Colonial believes it to be
comparable in quality to securities having such ratings as
noted above.

Although the Fund will invest primarily in debt securities, the Fund may invest
in equity securities to seek capital appreciation. Equity securities include
common stocks, preferred stocks, warrants and debt securities convertible into
common stocks. Additionally, the Fund may invest in securities issued or
guaranteed by foreign governments or foreign companies, including securities
issued in emerging market countries.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

Lower rated debt securities are commonly referred to as "junk bonds" and are
considered speculative. Lower quality debt securities involve greater risk of
loss and are less liquid, especially during periods of economic uncertainty or
change, than higher quality debt securities.

Because the Fund may invest in fixed income securities issued by private
entities, including corporate bonds, the Fund is subject to issuer risk. Issuer
risk is the possibility that changes in the financial condition of the issuer of
a security, changes in general economic conditions, or changes in economic
conditions that affect the issuer's industry may impact the issuer's ability to
make timely payment of interest or principal. This could result in decreases in
the price of the security.

<PAGE>
THE FUNDS Colonial High Yield Securities Fund, Variable Series

Emerging markets are also subject to special risks. The risks of foreign
investments are typically increased in less developed and developing countries.
For example, political and economic structures in these countries may be new and
developing rapidly, which may cause instability. These countries are also more
likely to experience high levels of inflation, deflation or currency
devaluations, which could hurt their economies and securities markets.

PERFORMANCE HISTORY
We compare the Fund to the CS First Boston High Yield Index, an unmanaged index
that tracks the performance of high yield bond funds and the Lipper High Yield -
Annuities peer group average return (Lipper Average). This Lipper Average which
is calculated by Lipper, Inc. is composed of funds with similar investment
objectives as the Fund. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. The Fund commenced investment operations on May 19,
1998, and therefore does not have a full calendar year of investment
performance.

<PAGE>
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES

INVESTMENT GOALS
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.

PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in equity and equity
related securities, which include common stocks, bonds convertible into stocks,
warrants and other rights to purchase stocks.

The Fund's sub-advisor, LAMCO, utilizes a 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). There are
five Portfolio Managers as of the date of this prospectus each of which employs
a different investment style. LAMCO attempts to rebalance 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 for the following reasons:

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

- 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;

- Consequently, by allocating the Fund's portfolio on an
approximately equal basis among Portfolio Managers employing
different styles, the impact of any one 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

- 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.

The Fund's current Portfolio Managers and investment styles are:

- J. P. Morgan Investment Management Inc. uses a value approach
by investing in companies that are diversified across all
sectors and that are undervalued relative to the firm's
projected growth rates.

- Oppenheimer Capital uses a value approach by investing in
companies that exhibit the ability to generate excess cash
flow while earning high returns on invested capital.

- Boston Partners Asset Management, L.P. uses a value approach
by investing in companies with low price-to-earnings and
price-to-book ratios where a catalyst for positive change has
been identified.

- Westwood Management Corporation uses a growth approach by
investing in growth companies selling at reasonable valuations
based on the firm's earnings projections which are not yet
reflected in consensus estimates.

- Wilke/Thompson Capital Management, Inc. uses a growth approach
by investing in companies that demonstrate the ability to
sustain strong secular growth across a broad range of market
capitalizations.

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.

<PAGE>
THE FUNDS Liberty All-Star Equity Fund, Variable Series

LAMCO also may recommend Portfolio Manager changes to change the mix of
investment styles employed by the Fund's Portfolio Managers. The Board of
Trustees must approve all Portfolio Manager changes. LAMCO is also the manager
of Liberty All-Star Equity Fund, a multi-managed, closed-end fund. This 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.

The Fund will 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.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

<PAGE>
THE FUNDS Liberty All-Star Equity Fund, Variable Series

PERFORMANCE HISTORY
The bar chart below shows the Fund's performance by illustrating the Fund's
total calendar-year return. The performance table following the bar chart shows
how the Fund's average annual total returns compare with those of a broad
measure of market performance for one year and the life of the Fund. We compare
the Fund to the Standard & Poor's 500 Index (S&P Index), an unmanaged index that
tracks the performance of a selection of widely held common stocks and the
Lipper Growth & Income - Annuities peer group average return (Lipper Average).
This Lipper Average which is calculated by Lipper, Inc. is composed of funds
with similar investment objectives as the Fund. Unlike the Fund, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index. The chart and table are
intended to illustrate some of the risks of investing in the Fund by showing the
changes in the Fund's performance. All returns include the reinvestment of
dividends and distributions. As with all mutual funds, past performance does not
predict the Fund's future performance. Performance results include the effect of
any expense reduction arrangements. If these arrangements were not in place,
then the performance results would have been lower. We may cease any reduction
arrangements at any time. The Fund's performance results do not reflect the cost
of insurance and separate account charges which are imposed under your VA
contract or VLI policy.

CALENDAR-YEAR TOTAL RETURNS

The Fund's year to date total return through March 31, 1999 was 0.00%.

Best Quarter: 4th quarter 1998, +18.67%

Worst Quarter: 3rd quarter 1998, -12.05%

AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
1 YEAR SINCE
INCEPTION ON
11/17/97
- ------------------------------------------------------------------------
<S> <C> <C>
Fund (%) 18.67 17.29
- ------------------------------------------------------------------------
S&P Index (%) 28.60 N/A
- ------------------------------------------------------------------------
Lipper Average (%) 16.37 N/A
- ------------------------------------------------------------------------
</TABLE>

<PAGE>
COLONIAL INTERNATIONAL HORIZONS FUND, VARIABLE SERIES

INVESTMENT GOALS
The Fund seeks long-term growth and preservation of capital purchasing power.

PRIMARY INVESTMENT STRATEGIES
The Fund invests primarily in non-U.S. equity securities which Colonial believes
will provide superior long-term growth. Colonial generally selects stocks of
companies in industries and markets that it believes will react favorably to
inflation in the U.S. economy. Inflation sensitive companies in which the Fund
may invest include:

- companies engaged in the development and processing of natural
resources, and

- companies engaged in consumer oriented businesses.

The Fund is a non-diversified mutual fund and, although it generally will not,
it may invest more than 5% of its total assets in the securities of one company.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

Additionally, as a non-diversified mutual fund, the Fund is allowed to invest a
greater percentage of its total net assets in the securities of a single
company. Therefore, the Fund may have an increased risk of loss compared to a
similar diversified mutual fund.

<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND, VARIABLE SERIES

INVESTMENT GOALS
The Fund seeks to provide growth of capital and current income.

PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 75% of its total
assets in equity securities of real estate investment trusts (REITs) and other
real estate industry companies. In managing the Fund, the sub-advisor follows a
basic value contrarian approach in selecting securities for its portfolio.

The contrarian approach puts primary emphasis on security price, balance sheet
and cash flow analysis and on the relationship between the market price of a
security and its estimated intrinsic value as a share of an ongoing business.
The basic value contrarian approach is based on Crabbe Huson's belief that the
securities of many companies often sell at a discount from the securities'
estimated intrinsic value. The Fund attempts to identify and invest in such
undervalued securities in the hope that their market price will rise to their
estimated intrinsic value.

REITs are pooled investment vehicles that invest primarily in income producing
real estate or real estate related loans or interest. The Fund's REIT
investments will consist primarily of equity REITs which invest the majority of
their assets directly in real estate and derive income primarily from rents.

Other real estate industry companies in which the Fund may invest are companies
that derive at least 50% of their revenues or profits from either (a) the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or (b) products or services
related to the real estate industry, such as building supplies or mortgage
servicing.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

Investing in REITs involves certain unique risks in addition to those risks
associated with the real estate industry in general. The prices of equity REITs
are affected by changes in the value of the underlying property owned by the
REITs. REITs are subject to heavy cash flow dependency and default by borrowers.
A REIT must distribute 95% of its taxable income to qualify for beneficial
federal tax treatment. If a REIT is unable to qualify, then it would be taxed as
a corporation and distributions to shareholders would be reduced. In addition,
although the Fund does not invest directly in real estate, an investment in the
Fund is subject to certain of the risks associated with the ownership of real
estate. These risks include possible declines in the value of real estate, risks
related to general and local economic conditions, possible lack of availability
of mortgage funds, and changes in interest rates.

<PAGE>
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 Information (SAI) contains names of and
biographical information on the Trustees.

INVESTMENT ADVISOR: LIBERTY ADVISORY SERVICES CORP.

LASC, located at 125 High Street, Boston Massachusetts 02110, is the investment
advisor to the Trust. LASC is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. (LFC). LASC has been an investment advisor since 1993.
As of March 31, 1999, LASC managed over $727 million in assets. LASC designates
the Trust's Sub-Advisors, evaluates and monitors Sub-Advisors' performance and
investment programs and recommends to the Board of Trustees whether
Sub-Advisors' contracts should be continued or modified and the addition or
deletion of Sub-Advisors. LASC also has the responsibility of administering the
Trust's operations, which it may delegate, at its own expense, to certain
affiliates. LASC has delegated its administrative responsibilities to Colonial
in accordance with this authority.

For the 1998 fiscal year, the Trust paid LASC management fees at the following
annual rates of the average daily net assets of each specified Fund:

<TABLE>
<CAPTION>
<S> <C>
Stein Roe Global Utilities Fund, Variable Series 0.65%
Colonial Small Cap Value Fund, Variable Series 0.80% (1)
Colonial U.S. Growth & Income Fund, Variable Series 0.80%
Colonial High Yield Securities Fund, Variable Series 0.60% (2)
Liberty All-Star Equity Fund, Variable Series 0.80% (3)
</TABLE>

(1) The Small Cap Fund's advisor has voluntarily agreed to waive its
management fee so that total expenses of the Fund do not exceed 1.00%.
As a result the actual management fee paid to the advisor for the 1998
fiscal year was 0.00%
(2) The High Yield Fund's advisor has voluntarily agreed to waive its
management fee so that total expenses of the Fund do not exceed 0.80%.
As a result the actual management fee paid to the advisor for the 1998
fiscal year was 0.00%
(3) The All-Star Equity Fund's advisor has voluntarily agreed to waive a
portion of its management fee. As a result the actual management fee
paid to the advisor for the 1998 fiscal year was 0.76%

For its services as investment advisor, the Trust will pay LASC a management fee
at the following annual rates of the average daily net assets of each specified
Fund:

<TABLE>
<CAPTION>
<S> <C>
Colonial International Horizons Fund, Variable Series 0.95%(4)
Crabbe Huson Real Estate Investment Fund, Variable Series 1.00%(5)
</TABLE>

(4) The International Fund's advisor has voluntarily agreed to waive a
portion of its management fee so that total expenses of the Fund do not
exceed 1.15%.
(5) The Real Estate Fund's advisor has voluntarily agreed to waive a
portion of its management fee so that total expenses of the Fund do not
exceed 1.20%.

<PAGE>
TRUST MANAGEMENT ORGANIZATIONS

INVESTMENT SUB-ADVISORS AND PORTFOLIO MANAGERS

The Sub-Advisors manage the assets of the Funds under the supervision of LASC
and the Board of Trustees. Each Sub-Advisor determines which securities and
other instruments are purchased and sold for the Fund(s) it sub-advises. Each
Sub-Advisor is an indirect wholly-owned subsidiary of LFC.

COLONIAL
Colonial, an investment advisor since 1931, is the Sub-Advisor of each of the
Small Cap Fund, U.S. Growth Fund, High Yield Fund and International Fund.
Colonial's principal business address is One Financial Center, Boston,
Massachusetts 02111. As of March 31, 1999, Colonial managed over $16.7 billion
in assets.

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 each specified Fund:

<TABLE>
<CAPTION>
<S> <C>
Colonial Small Cap Value Fund, Variable Series 0.60%
Colonial U.S. Growth & Income Fund, Variable Series 0.60%
Colonial High Yield Securities Fund, Variable Series 0.40%
Colonial International Horizons Fund, Variable Series 0.95%
</TABLE>

Colonial also provides transfer agency, pricing and record keeping services for
the Funds under separate agreements.

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

Mark Stoeckle has managed the U.S. Growth Fund since December, 1996. Mr.
Stoeckle is a Senior Vice President of Colonial. 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.

James P. Haynie, Senior Vice President of Colonial, has co-managed the Colonial
Small Cap Fund since 1993.

Michael Rega, Vice President of Colonial, has co-managed the Colonial Small Cap
Fund since 1996. He was an analyst at Colonial from 1993 to 1996.

Gita Rao, a Senior Vice President of Colonial, manages the International Fund.
Ms. Rao has managed various other Colonial funds since 1995. Prior to joining
Colonial, she was a global equity analyst at Fidelity Management & Research
Company from 1994 to 1995 and a Vice President in the domestic equity research
group at Kidder, Peabody and Company from 1991 to 1994.

STEIN ROE
Stein Roe, an investment advisor since 1932, is the Sub-Advisor of the Global
Utilities Fund. Stein Roe's principal address is One South Wacker Drive,
Chicago, Illinois 60606. As of March 31, 1999, Stein Roe managed over $30.1
billion in assets.

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.

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, which include managing other Stein Roe and Colonial funds.
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.

<PAGE>
TRUST MANAGEMENT ORGANIZATIONS

The mutual funds and institutional investment advisory business of both Stein
Roe and Colonial are managed together by a combined management team of employees
from both companies. Colonial also shares personnel, facilities and systems with
Stein Roe that may be used in providing administrative services to the Fund.

LAMCO AND LAMCO'S PORTFOLIO MANAGERS
LAMCO, an investment advisor since 1985, is the Sub-Advisor of the All-Star
Equity Fund. LAMCO's principal address is 600 Atlantic Avenue, 23rd Floor,
Boston, Massachusetts 02210. As of March 31, 1999, LAMCO managed over $1.6
billion in assets.

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 Equity Fund.

LAMCO is a manager of other investment managers which LAMCO recommends to the
Board of Trustees for appointment pursuant to a portfolio management agreement
among the Trust, LAMCO and the Portfolio Manager. That management agreement
permits each Portfolio Manager to have full investment discretion and authority
over investment of a portion of the Fund's assets.

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

No one individual at LAMCO is responsible for LAMCO's investment management of
the All-Star Equity Fund. The following individuals who work for the indicated
Portfolio Managers manage a portion of All-Star Equity Fund's assets:

- - Henry D. Cavanna, Managing Director of J.P. Morgan Investment
Management, Inc.

- - John Lindenthal, Managing Director of Oppenheimer Capital

- - Mark Donovan, Chairman, Equity Strategy Committee, of Boston Partners
Asset Management, L.P.

- - Susan M. Byrne, President and Chief Executive Officer of Westwood
Management Corp.

- - Mark A. Thompson, Chairman and Chief Investment Officer of
Wilke/Thompson Capital Management, Inc.

A more complete description of each Portfolio Manager is included in the SAI.
The Trust and LAMCO have received an exemptive order from the SEC that permits
the All-Star Equity Fund to change Portfolio Managers without a vote of the
shareholders. Information regarding any new Portfolio Manager is sent to holders
of VA contracts and VLI policies within 90 days following the effective date of
the change.

CRABBE HUSON
Crabbe Huson, an investment advisor since 1980, is the Sub-Advisor of the Real
Estate Fund. Crabbe Huson's principal address is 121 S.W. Morrison, Suite 1400,
Portland, Oregon 97204. Crabbe Huson as of March 31, 1999, Crabbe Huson managed
over $434 million in assets.

LASC, out of the management fees it receives from the Trust, pays Crabbe Huson a
sub-advisory fee at the annual rate of 0.80% of the average daily net assets of
the Real Estate Fund.

John E. Maack has co-managed the Real Estate Fund since its inception. Mr. Maack
has been employed by Crabbe Huson as a portfolio manager and securities analyst
since 1988.

Michael B. Stokes has co-managed the Real Estate Fund since its inception. Mr.
Stokes joined Crabbe Huson in August, 1996. Prior to joining Crabbe Huson, he
was a financial analyst for Salomon Brothers from July, 1994 to June, 1996.

<PAGE>
TRUST MANAGEMENT ORGANIZATIONS

AFFILIATED BROKER/DEALER
Stein Roe and Colonial can use the services of AlphaTrade Inc., an affiliated
broker-dealer, when buying or selling equity securities for a fund's portfolio,
pursuant to procedures adopted by the Board of Trustees.

RULE 12B-1 PLAN
The Trust has adopted a plan for and on behalf of the International Fund and
Real Estate Fund in accordance with Rule 12b-1 (Plan) under the Investment
Company Act of 1940. Under the plan, the Trust pays the distributor a service
fee of 0.25% of the average daily net assets attributable to these Funds'
shares. Because these fees are an ongoing expense, over time they increase the
cost of an investment and the shares may cost more than shares that are not
subject to a service fee.

<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS

Each Fund's primary investments and its risks are described above in its
individual description. This section describes other investments a Fund may make
and the risks associated with them. In seeking to achieve its goal, each Fund
may invest in various types of securities and engage in various investment
techniques which are not the principle focus of the Fund and therefore are not
described in this prospectus. These types of securities and investment practices
are identified and discussed in the Funds' SAI, which you may obtain free of
charge (see back cover). Approval by the Funds' shareholders is not required to
modify or change any of the Funds' investment goals or investment strategies.

TEMPORARY DEFENSIVE MEASURES
With the exception of the All-Star Equity Fund, each Fund's Sub-Advisor may
determine that adverse market conditions make it desirable to temporarily
suspend the Fund's normal investment activities. During such times, as a
temporary defensive strategy, a Fund may, but is not required to, invest in cash
or high quality, short-term debt securities, without limit.

(High Yield Fund) If necessary, the Fund has the ability to invest 100% of its
assets in higher rated securities, if, in Colonial's opinion, economic
conditions create a situation where yield spreads narrow between lower and
higher rated securities.

Taking a temporary defensive position may prevent a Fund from achieving its
investment objective.

ZERO COUPON BONDS
(Global Utilities Fund, High Yield Fund) Zero coupon bonds are issued at less
than their fair value and do not make any payments of interest. As a result,
these bonds involve greater credit risk and are subject to greater volatility
than bonds that pay cash interest on a current basis.

DERIVATIVES
Each Fund may enter into a number of hedging strategies, including those that
employ futures and options, to gain or reduce exposure to particular securities
or markets. These strategies may involve the use of financial instruments,
commonly referred to as derivatives, whose values depend on, or are derived
from, the value of an underlying security, an index or a currency. A Fund may
use derivatives for hedging purposes (attempting to offset a potential loss in
one position by establishing an interest in an opposite position). Derivatives
involve the risk that they may exaggerate a loss, potentially losing more money
than the actual cost of the security, or limit a potential gain. Also, with some
derivatives there is the risk that the other party to the transaction may fail
to honor its contract terms, causing a loss to a Fund.

YEAR 2000 COMPLIANCE
Like other investment companies, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by LASC, the Sub-Advisors and other service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Problem." LASC,
the Sub-Advisors, the Funds' distributors and transfer agent (Liberty Companies)
are taking steps that they believe are reasonably designed to address the Year
2000 Problem, including communicating with vendors who furnish services,
software and systems to the Funds, to provide that date-related information and
data can be properly processed after January 1, 2000. Many Fund service
providers and vendors, including the Liberty Companies, are in the process of
making Year 2000 modifications to their software and systems and believe that
such modifications will be completed on a timely basis prior to January 1, 2000.
However, no assurances can be given that all modifications required to ensure
proper data processing and calculation on and after January 1, 2000 will be
timely made or that services to the Fund will not be adversely affected. Some of
the Funds invest in emerging markets in developing countries and some reports
indicate that developing countries may be behind other countries with respect to
Year 2000 Compliance.

<PAGE>
FINANCIAL HIGHLIGHTS

The financial highlights tables that follow are intended to help you understand
the Funds' financial performance. Information is shown for the Funds' last five
fiscal years, (or shorter period if a Fund commenced operations less than five
years ago) which run from January 1 to December 31. Certain information reflects
financial results for a single fund share. This information has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report, along with
the Funds' financial statements, is included in the Trust's annual report. 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. You can request a free annual report by writing
Keyport Financial Services Corp. (see back cover for address) or by calling or
writing the Participating Insurance Company which issued your VA contract or VLI
policy.

STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES

<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 11.92 10.70 10.50 8.11 9.65
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.24 0.46 0.46 0.46 0.54
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
on investments 1.93 2.62 0.23 2.39 (1.53)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.17 3.08 0.69 2.85 (0.99)
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.21) (0.48) (0.49) (0.46) (0.55)
- -------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (0.01) --- --- --- ---
- -------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains (0.11) (1.38) --- --- ---
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (0.33) (1.86) (0.49) (0.46) (0.55)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 13.76 11.92 10.70 10.50 8.11
- -------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%)(b) 18.33 28.75 6.53 35.15 (10.27)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 71,186 54,603 47,907 51,597 38,156
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) 0.82(c) 0.83(c) 0.81(c) 0.83(c) 0.86
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to 1.90(c) 3.96(c) 4.36(c) 4.98(c) 5.80
average net assets (%)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 53 89 14 18 16
</TABLE>

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

(b) Total return at net asset value assuming all distributions reinvested.

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

<PAGE>
FINANCIAL HIGHLIGHTS

COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES

<TABLE>
<CAPTION>
Year Ended December 31,
1998***
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ($) 10.00
- --------------------------------------------------------------------------------------------
Net investment income (a) 0.08
- --------------------------------------------------------------------------------------------
Net realized and unrealized losses on investments (1.41)
- --------------------------------------------------------------------------------------------
Total from investment operations (1.33)
- --------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------
Dividends from net investment income (0.07)
- --------------------------------------------------------------------------------------------
In excess of net investment income (0.01)
- --------------------------------------------------------------------------------------------
Total distributions (0.08)
- --------------------------------------------------------------------------------------------
Net asset value, end of period 8.59
- --------------------------------------------------------------------------------------------
TOTAL RETURN
Total investment return (%)(b)(c) (13.25)**
- --------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 1,782
- --------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d)(e) 1.00*
- --------------------------------------------------------------------------------------------
Ratio of net investment income to 1.41*
average net assets (%) (c)(e)
- --------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 51**
</TABLE>

* Annualized.

** Not Annualized.

*** For the period from the commencement of operations May 19, 1998 to
December 31, 1998.

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

(b) 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 the Manager, this ratio would have been 4.34%
(annualized).

(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.

<PAGE>
FINANCIAL HIGHLIGHTS

COLONIAL U.S. GROWTH & INCOME FUND, VARIABLE SERIES

<TABLE>
<CAPTION>
Period Ended
Years Ended December 31, December 31,
1998 1997 1996 1995 1994***
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 16.29 14.22 12.36 10.27 10.00
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.16 0.20 0.19 0.21 0.09
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments 3.12 4.37 2.52 2.84 0.35
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.28 4.57 2.71 3.05 0.44
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.12) (0.18) (0.17) (0.16) (0.11)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income --- (0.01) --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gains (0.64) (2.30) (0.68) (0.80) (0.06)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains (0.02) (0.01) --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.78) (2.50) (0.85) (0.96) (0.17)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 18.79 16.29 14.22 12.36 10.27
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b) 20.15 32.23 21.84 29.70(c) 4.40(c)**
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 146,239 96,715 60,855 43,017 15,373
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) 0.90(e) 0.94(e) 0.95(e) 1.00(d)(e) 1.00(d)*
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 0.88(e) 1.19(e) 1.39(e) 1.72(c)(e) 2.16(c)*
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 64 63 77 115 52**
</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.

(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, 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.

<PAGE>
FINANCIAL HIGHLIGHTS

COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES

<TABLE>
<CAPTION>
Period Ended
December 31,
1998***
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ($) 10.00
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) 0.48
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized losses on investments (0.74)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.26)
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.43)
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income (0.00)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.43)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($) 9.31
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%) (b)(c) (2.57)**
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 5,915
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (d)(e) 0.80*
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) (c)(e) 7.93*
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 23**
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Annualized.

** Not Annualized.

*** For the period from the commencement of operations May 19, 1998 to
December 31, 1998.

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

(b) 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 the Manager, this ratio would have been 1.84%
(annualized).

(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.

<PAGE>
FINANCIAL HIGHLIGHTS

LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES

<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1998 1997***
---- -------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 10.07 10.00
- -----------------------------------------------------------------------------------------------------
Net investment income (a) 0.06 0.01
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments 1.82 0.07
- -----------------------------------------------------------------------------------------------------
Total from investment operations 1.88 0.08
- -----------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------
Dividends from net investment income (0.05) (0.01)
- -----------------------------------------------------------------------------------------------------
In excess of net investment income (0.00) ---
- -----------------------------------------------------------------------------------------------------
Total distributions (0.05) (0.01)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 11.90 10.07
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN:
Total investment return (%)(b)(c) 18.67 0.80**
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 44,870 22,228
- -----------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets (%) (d)(e) 1.00 1.00*
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%)(c)(e) 0.54 0.83*
- -----------------------------------------------------------------------------------------------------
Portfolio turnover ratio (%) 70 1**
</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.

(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.04% and 1.45%
(annualized), respectively.

(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.

<PAGE>
SHAREHOLDER INFORMATION

PURCHASE AND REDEMPTIONS The Participating Insurance Companies place daily
orders to purchase and redeem shares of the Funds. These orders generally
reflect the net effect of instructions they receive from holders of their VA
contracts and VLI policies and certain other terms of those contracts and
policies. The Trust issues and redeems shares at NAV without imposing any
selling commissions, sales charge or redemption charge. Shares generally are
sold and redeemed at their NAV next determined after receipt of purchase or
redemption requests from Participating Insurance Companies. The right of
redemption may be suspended or payment postponed whenever permitted by
applicable law and regulations.

HOW THE FUNDS CALCULATE NET ASSET VALUE NAV is the difference between the value
of a fund's assets and liabilities divided by the number of shares outstanding.
The NAV is determined at the close of the New York Stock Exchange (NYSE),
usually 4:00 p.m. Eastern time, on each business day that the NYSE is open
(typically Monday through Friday).

To calculate NAV on a given day, we value each stock listed or traded on a stock
exchange at its latest sale price on that day. If there are no sales on that
day, we value the security at the most recent quoted bid price. We value each
over-the-counter security or National Association of Securities Dealers
Automated Quotation (Nasdaq) security as of the last sales price of that day. We
value other over-the-counter securities that have reliable quotes at the latest
quoted bid price.

We value long-term debt obligations and securities convertible into common stock
at fair value. Pricing services provide the Funds with the value of the
securities. When the price of a security is not available, including days when
we determine that the sale or bid price of the security does not reflect that
security's market value, we will value the security at a fair value determined
in good faith under procedures established by the Board of Trustees.

We value a security at fair value when events have occurred after the last
available market price and before the close of the NYSE that materially affect
the security's price. In the case of foreign securities, this could include
events occurring after the close of the foreign market and before the close of
the NYSE.

A Fund's foreign securities may trade on days when the NYSE is closed for
trading and Participating Insurance Companies may not purchase or redeem shares.

DIVIDENDS AND DISTRIBUTIONS Each Fund intends to declare and distribute, as
dividends or capital gain 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
investment advisory and administrative fees). Income dividends will be declared
and distributed annually. All net short-term and long-term capital gains of each
Fund 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 NAV, as of the record date for the
distributions.

TAX CONSEQUENCES Each Fund is treated as a separate entity for federal income
tax purposes and has elected or intends to elect to be treated, and intends to
qualify each year as a "regulated investment company" under Subchapter M of the
Internal Revenue Code (the Code). Each Fund must satisfy certain requirements
relating to the sources of its income, diversification of its assets and
distribution of its income to shareholders to qualify as a regulated investment
company. As a regulated investment company, a Fund will not be subject to
federal income tax on any net investment income and net realized capital gains
that are distributed to its shareholders as required under the Code.

In addition, each Fund follows certain portfolio diversification requirements
imposed by the Code on separate accounts of insurance companies relating to the
tax-deferred status of VA contracts and VLI policies. More specific information
on these diversification requirements is contained in the prospectus that
describes a particular VA contract or VLI policy.

<PAGE>
FOR MORE INFORMATION
You can get more information about the Funds' investments in the Funds'
semi-annual and annual reports to shareholders. The annual report contains a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance over their last fiscal year.

You may wish to read the SAI for more information on the Funds and the
securities in which they invest. The SAI is incorporated into this prospectus by
reference, which means that it is considered to be part of this prospectus.

You can get free copies of reports and the SAI, request other information and
discuss your questions about the Funds by writing or calling:

Keyport Financial Services Corp.
125 High Street
Boston, MA 02111
1-800-437-4466

or by calling or writing the Participating Insurance Company which issued your
VA contract or VLI policy.

Text-only versions of all Fund documents can be viewed online or downloaded from
the SEC at www.sec.gov.

You can review and copy information about the Funds by visiting the following
location, and you can obtain copies upon payment of a duplicating fee, by
writing the:

Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009

Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.

INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Variable Investment Trust: 811-07556

<PAGE>

LIBERTY VARIABLE INVESTMENT TRUST

PROSPECTUS DATED JUNE 1, 1999

Stein Roe Global Utilities Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial U.S. Growth & Income Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Newport Tiger Fund, Variable Series
Colonial International Horizons Fund, Variable Series
Colonial Global Equity Fund, Variable Series
Crabbe Huson Real Estate Investment Fund, Variable Series

Trust shares available only through variable annuity contracts and variable life
insurance policies of participating insurance companies.

* * * *

This Prospectus must be accompanied by a prospectus for your variable annuity
contract or variable life insurance policy. Retain both prospectuses for future
reference.

* * * *

Although trust shares have been registered with the Securities and Exchange
Commission (SEC), the SEC has not approved any shares offered in this prospectus
or determined whether this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.

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

NOT FDIC MAY LOSE VALUE
INSURED NO BANK GUARANTEE

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

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
THE TRUST 3
- ------------------------------------------------------------------------------------

THE FUNDS 4
- ------------------------------------------------------------------------------------
Each of these sections discusses the following
topics: Investment Goals, Primary Investment Strategies,
Primary Investment Risks and Performance History
Stein Roe Global Utilities Fund, Variable Series................................ 4
Colonial Small Cap Value Fund, Variable Series.................................. 6
Colonial U.S. Growth & Income Fund, Variable Series............................. 7
Colonial Strategic Income Fund, Variable Series................................. 9
Colonial High Yield Securities Fund, Variable Series............................ 12
Liberty All-Star Equity Fund, Variable Series................................... 14
Newport Tiger Fund, Variable Series............................................. 17
Colonial International Horizons Fund, Variable Series........................... 19
Colonial Global Equity Fund, Variable Series.................................... 20
Crabbe Huson Real Estate Investment Fund, Variable Series....................... 21

TRUST MANAGEMENT ORGANIZATIONS 22
- ------------------------------------------------------------------------------------
The Trustees.................................................................... 22
Investment Advisor: Liberty Advisory Services Corp.............................. 22
Investment Sub-Advisors and Portfolio Managers.................................. 23
Rule 12b-1 Plan................................................................. 25

OTHER INVESTMENT STRATEGIES AND RISKS 26
- ------------------------------------------------------------------------------------
Temporary Defensive Measures.................................................... 26
U.S. Government Securities...................................................... 26
Structure Risk.................................................................. 26
Zero Coupon Bonds............................................................... 26
Derivatives..................................................................... 27
Year 2000 Compliance............................................................ 27

FINANCIAL HIGHLIGHTS 28
- ------------------------------------------------------------------------------------

SHAREHOLDER INFORMATION 35
- ------------------------------------------------------------------------------------
Purchases and Redemptions....................................................... 35
How the Funds Calculate Net Asset Value......................................... 35
Dividends and Distributions..................................................... 35
Tax Consequences................................................................ 35
</TABLE>

<PAGE>
THE TRUST

Liberty Variable Investment Trust (Trust) includes twelve separate mutual funds,
each with its own investment goal and strategies. This Prospectus contains
information about ten of the Funds (Funds) in the Trust. Liberty Advisory
Services Corp. (LASC) is the investment advisor to each Fund. LASC has appointed
a Sub-Advisor for each Fund, all of which are affiliates of LASC. Each Fund is
sub-advised by the following Sub-Advisor:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FUND SUB-ADVISOR

- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Colonial U.S. Growth & Income Fund, Variable Series Colonial Management Associates, Inc. (Colonial)
(formerly U.S. Stock Fund, Variable Series) (U.S. Growth Fund)
Colonial Small Cap Value Fund, Variable Series (Small Cap Fund)
Colonial Strategic Income Fund, Variable Series (Strategic Income Fund)
Colonial High Yield Securities Fund, Variable Series (High Yield Fund)
Colonial International Horizons Fund, Variable Series (International Fund)
Colonial Global Equity Fund, Variable Series (Global Equity Fund)

- -----------------------------------------------------------------------------------------------------------------------------------
Stein Roe Global Utilities Fund, Variable Series (Global Utilities Fund) Stein Roe & Farnham Incorporated (Stein Roe)

- -----------------------------------------------------------------------------------------------------------------------------------
Liberty All-Star Equity Fund, Variable Series (All-Star Equity Fund) Liberty Asset Management Company (LAMCO)

- -----------------------------------------------------------------------------------------------------------------------------------
Newport Tiger Fund, Variable Series (Tiger Fund) Newport Fund Management, Inc. (Newport)

- -----------------------------------------------------------------------------------------------------------------------------------
Crabbe Huson Real Estate Investment Fund, Variable Series (Real Estate Fund) Crabbe Huson Group, Inc. (Crabbe Huson)

- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

<PAGE>
THE FUNDS

STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES

INVESTMENT GOALS

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

PRIMARY INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests primarily in U.S. and foreign
securities of utility companies. Stein Roe diversifies the Fund's investments
among a number of developed countries and market sectors and will have exposure
to at least three countries, including the U.S. In selecting investments for the
Fund, Stein Roe looks primarily for stocks of larger utility companies with
established records.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goals.

<PAGE>
THE FUND Stein Roe Global Utilities Fund, Variable Series

PERFORMANCE HISTORY

The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year, 5 years
and the life of the Fund. We compare the Fund to the Standard & Poor's Utilities
Index (S&P Index), Lipper Utilities - Annuities peer group average return
(Lipper Average) and Morgan Stanley Capital International World Index ND (MSCI
World Index). The S&P Index is an unmanaged index that tracks the performance of
domestic utilities stocks. The Lipper Average which is calculated by Lipper,
Inc. is composed of funds with similar investment objectives as the Fund. MSCI
World Index is an unmanaged index that tracks the performance of global stocks.
Unlike the Fund, indices are not investments, do not incur fees or expenses and
are not professionally managed. It is not possible to invest directly in an
index. The chart and table are intended to illustrate some of the risks of
investing in the Fund by showing the changes in the Fund's performance. All
returns include the reinvestment of dividends and distributions. As with all
mutual funds, past performance does not predict the Fund's future performance.
Performance results include the effect of any expense reduction arrangements. If
these arrangements were not in place, then the performance results would have
been lower. We may cease any reduction arrangements at any time. The Fund's
performance results do not reflect the cost of insurance and separate account
charges which are imposed under your VA contract or VLI policy.

CALENDAR-YEAR TOTAL RETURNS

The Fund's year to date total return through March 31, 1999 was - 0.58%.

Best Quarter: 4th quarter 1997, +15.29%

Worst Quarter: 1st quarter 1994, -8.91%

AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98

<PAGE>
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES

INVESTMENT GOAL

The Fund seeks long-term growth.

PRIMARY INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests primarily in small
capitalization stocks. These are stocks with market capitalizations of less than
the market capitalization of the stock in the Russell 2000 Index that has the
largest capitalization at the time of purchase. The remainder of the Fund's
assets may be invested in other stocks, or in bonds that are rated or considered
by the advisor to be investment grade. In managing the Fund, Colonial uses a
value investing strategy that focuses on buying stocks cheaply when they are
under valued or "out of favor." Colonial buys stocks that have attractive
current prices, consistent operating performance and/or favorable future growth
prospects. Colonial's strategy uses fact-based quantitative analysis supported
by fundamental business and financial analysis.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

PERFORMANCE HISTORY

We compare the Fund to the Russell 2000 Index, an unmanaged index that tracks
the performance of small capitalization stocks and the Lipper Small Cap --
Annuities peer group average return (Lipper Average). This Lipper Average which
is calculated by Lipper, Inc. is composed of funds with similar investment
objectives as the Fund. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. The Fund commenced investment operations on May 19,
1998, and therefore does not have a full calendar year of investment
performance.

<PAGE>
COLONIAL U.S. GROWTH & INCOME FUND, VARIABLE SERIES

INVESTMENT GOALS

The Fund seeks long-term growth and income.

PRIMARY INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests primarily in large
capitalization stocks. These are stocks with market capitalizations of greater
than $3 billion at the time of purchase. Up to 10% of the Fund's assets may be
invested in debt securities.

In selecting debt securities for the Fund, Colonial may invest in:

- debt securities that are convertible into common stock

- corporate debt securities noted investment grade by at least two
nationally recognized rating organizations; and

- debt securities issued or guaranteed by the U.S. Government

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

The primary risk of investing in the Fund is described below. There are many
circumstances (including additional risks that are not described here) which
could cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goal.

<PAGE>
THE FUNDS Colonial U.S. Growth & Income Fund, Variable Series

PERFORMANCE HISTORY

The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year and the
life of the Fund. We compare the Fund to the Standard & Poor's 500 Index (S&P
Index), an unmanaged index that tracks the performance of a selection of widely
held common stocks and the Lipper Growth & Income -- Annuities peer group
average return (Lipper Average). This Lipper Average which is calculated by
Lipper, Inc. is composed of funds with similar investment objectives as the
Fund. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. It is not possible to invest
directly in an index. The chart and table are intended to illustrate some of the
risks of investing in the Fund by showing the changes in the Fund's performance.
All returns include the reinvestment of dividends and distributions. As with all
mutual funds, past performance does not predict the Fund's future performance.
Performance results include the effect of any expense reduction arrangements. If
these arrangements were not in place, then the performance results would have
been lower. We may cease any reduction arrangements at any time. The Fund's
performance results do not reflect the cost of insurance and separate account
charges which are imposed under your VA contract or VLI policy.

CALENDAR-YEAR TOTAL RETURNS

The Fund's year to date total return through March 31, 1999 was +1.70%.

Best Quarter: 4th quarter 1998, +21.79%

Worst Quarter: 3rd quarter 1998, -14.16%

AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98

<PAGE>
COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES

INVESTMENT GOALS

The Fund seeks as high a level of current income as is consistent with prudent
risk and maximizing total return.

PRIMARY INVESTMENT STRATEGIES

The Fund seeks to achieve its investment goal by investing in:

- - debt securities issued by the U.S. government;

- - debt securities issued by foreign governments; and

- - lower rated corporate debt securities.

Colonial allocates the Fund's investments among these types of securities at any
given time based on its estimate of the expected performance and risk of each
type of investment.

The Fund pursues its investment goal by investing a portion of its assets in
lower rated corporate debt securities. These securities have the following
ratings:

- - BBB through C by Standard & Poor's Corporation;

- - Baa through D by Moody's Investor Services, Inc.;

- - a comparable rating by another nationally recognized rating service; or

- - the security is unrated and Colonial believes it to be comparable in
quality to securities having such ratings as noted above.

The Fund may invest in securities issued or guaranteed by foreign governments or
foreign companies, including securities issued in emerging market countries.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

Because the Fund may invest in fixed income securities issued by private
entities, including certain types of mortgage-backed securities and corporate
bonds, the Fund is subject to issuer risk. Issuer risk is the possibility that
changes in the financial condition of the issuer of a security, changes in
general economic conditions, or changes in economic conditions that affect the
issuer's industry may impact the issuer's ability to make timely payment of
interest or principal. This could result in decreases in the price of the
security.

<PAGE>
THE FUNDS Colonial Strategic Income Fund, Variable Series

PERFORMANCE HISTORY

The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year and the
life of the Fund. We compare the Fund to the Lehman Brothers
Government/Corporate Bond Index (Lehman Index), an unmanaged index that tracks
the performance of a selection of U.S. government agency, treasury and
investment grade corporate bonds and the Lipper Corporate Bonds - Annuities peer
group average return (Lipper Average). This Lipper Average which is calculated
by Lipper, Inc. is composed of funds with similar investment objectives as the
Fund. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. It is not possible to invest
directly in an index. The chart and table are intended to illustrate some of the
risks of investing in the Fund by showing the changes in the Fund's performance.
All returns include the reinvestment of dividends and distributions. As with all
mutual funds, past performance does not predict the Fund's future performance.
Performance results include the effect of any expense reduction arrangements. If
these arrangements were not in place, then the performance results would have
been lower. We may cease any reduction arrangements at any time. The Fund's
performance results do not reflect the cost of insurance and separate account
charges which are imposed under your VA contract or VLI policy.

CALENDAR-YEAR TOTAL RETURNS

The Fund's year to date total return through March 31, 1999 was +0.99%.

Best Quarter: 1st quarter 1995, +5.62%

Worst Quarter: 1st quarter 1997, -1.00%

AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
1 YEAR SINCE
INCEPTION ON
7/5/94
- ------------------------------------------------------------------------
<S> <C> <C>
Fund (%) 6.03 9.75
- ------------------------------------------------------------------------
Lehman Index (%) 9.47 N/A
- ------------------------------------------------------------------------
Lipper Average (%) 4.82 N/A
- ------------------------------------------------------------------------
</TABLE>

<PAGE>
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES

INVESTMENT GOALS

The Fund seeks current income and total return.

PRIMARY INVESTMENT STRATEGIES

The Fund pursues its investment goal by investing primarily in lower rated
corporate debt securities. These securities have the following ratings:

- - BBB through C by Standard & Poor's Corporation;

- - Baa through D by Moody's Investor Services, Inc.;

- - a comparable rating by another nationally recognized rating service; or

- - the security is unrated and Colonial believes it to be comparable in
quality to securities having such ratings as noted above.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

<PAGE>
THE FUNDS Colonial High Yield Securities Fund, Variable Series

PERFORMANCE HISTORY

We compare the Fund to the CS First Boston High Yield Index, an unmanaged index
that tracks the performance of high yield bond funds and the Lipper High Yield -
Annuities peer group average return (Lipper Average). This Lipper Average which
is calculated by Lipper, Inc. is composed of funds with similar investment
objectives as the Fund. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. The Fund commenced investment operations on May 19,
1998, and therefore does not have a full calendar year of investment
performance.

<PAGE>
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES

INVESTMENT GOALS

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.

PRIMARY INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests primarily in equity and equity
related securities, which include common stocks, bonds convertible into stocks,
warrants and other rights to purchase stocks.

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

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

- 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;

- Consequently, by allocating the Fund's portfolio on an approximately
equal basis among Portfolio Managers employing different styles, the
impact of any one 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

- 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.

The Fund's current Portfolio Managers and investment styles are:

- J. P. Morgan Investment Management Inc. uses a value approach by
investing in companies that are diversified across all sectors and
that are undervalued relative to the firm's projected growth rates.

- Oppenheimer Capital uses a value approach by investing in companies
that exhibit the ability to generate excess cash flow while earning
high returns on invested capital.

- Boston Partners Asset Management, L.P. uses a value approach by
investing in companies with low price-to-earnings and price-to-book
ratios where a catalyst for positive change has been identified.

- Westwood Management Corporation uses a growth approach by investing
in growth companies selling at reasonable valuations based on the
firm's earnings projections which are not yet reflected in consensus
estimates.

- Wilke/Thompson Capital Management, Inc. uses a growth approach by
investing in companies that demonstrate the ability to sustain
strong secular growth across a broad range of market
capitalizations.

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.

<PAGE>
THE FUNDS Liberty All-Star Equity Fund, Variable Series

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

<PAGE>
THE FUNDS Liberty All-Star Equity Fund, Variable Series

PERFORMANCE HISTORY

The bar chart below shows the Fund's performance by illustrating the Fund's
total calendar-year return. The performance table following the bar chart shows
how the Fund's average annual total returns compare with those of a broad
measure of market performance for one year and the life of the Fund. We compare
the Fund to the Standard & Poor's 500 Index (S&P Index), an unmanaged index that
tracks the performance of a selection of widely held common stocks and the
Lipper Growth & Income - Annuities peer group average return (Lipper Average).
This Lipper Average which is calculated by Lipper, Inc. is composed of funds
with similar investment objectives as the Fund. Unlike the Fund, indices are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index. The chart and table are
intended to illustrate some of the risks of investing in the Fund by showing the
changes in the Fund's performance. All returns include the reinvestment of
dividends and distributions. As with all mutual funds, past performance does not
predict the Fund's future performance. Performance results include the effect of
any expense reduction arrangements. If these arrangements were not in place,
then the performance results would have been lower. We may cease any reduction
arrangements at any time. The Fund's performance results do not reflect the cost
of insurance and separate account charges which are imposed under your VA
contract or VLI policy.

CALENDAR-YEAR TOTAL RETURNS

The Fund's year to date total return through March 31, 1999 was 0.00%.

Best Quarter: 4th quarter 1998, +18.67%

Worst Quarter: 3rd quarter 1998, -12.05%

AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98

<PAGE>
NEWPORT TIGER FUND, VARIABLE SERIES

INVESTMENT GOAL

The Fund seeks long-term capital appreciation.

PRIMARY INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests primarily in stocks of
companies located in the nine Tiger countries of Asia. The Tigers of Asia are
Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, The
People's Republic of China and the Philippines. In selecting investments for the
Fund, Newport typically purchases stocks of larger, well-established companies.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

Because the Fund's investments are concentrated in the nine Tiger countries of
Asia, the Fund is particularly susceptible to regional risks. Events in any one
Tiger country may impact the other countries in the Southeast Asian region as a
whole. As a result events in the region will generally have a greater effect on
the Fund than if it were more geographically diversified, which may result in
greater losses and volatility.

<PAGE>
THE FUNDS Newport Tiger Fund, Variable Series

PERFORMANCE HISTORY

The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's total calendar-year returns. The performance table
following the bar chart shows how the Fund's average annual total returns
compare with those of a broad measure of market performance for 1 year and the
life of the Fund. We compare the Fund to the Morgan Stanley Capital
International EAFE Index GDP (Morgan Stanley Index), an unmanaged index that
tracks the performance of foreign stocks and the Lipper Pacific Region -
Annuities peer group average return (Lipper Average). This Lipper Average which
is calculated by Lipper, Inc. is composed of funds with similar investment
objectives as the Fund. Unlike the Fund, indices are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index. The chart and table are intended to illustrate some
of the risks of investing in the Fund by showing the changes in the Fund's
performance. All returns include the reinvestment of dividends and
distributions. As with all mutual funds, past performance does not predict the
Fund's future performance. Performance results include the effect of any expense
reduction arrangements. If these arrangements were not in place, then the
performance results would have been lower. We may cease any reduction
arrangements at any time. The Fund's performance results do not reflect the cost
of insurance and separate account charges which are imposed under your VA
contract or VLI policy.

CALENDAR-YEAR TOTAL RETURNS

The Fund's year to date total return through March 31, 1999 was +2.55%.

Best Quarter: 4th quarter 1998, +37.93%

Worst Quarter: 2nd quarter 1998, -28.81%

AVERAGE ANNUAL TOTAL RETURN - FOR PERIODS ENDED 12/31/98

<TABLE>
<CAPTION>
1 YEAR SINCE
INCEPTION ON
5/1/95
- ------------------------------------------------------------------------
<S> <C> <C>
Fund (%) -6.43 -5.01
- ------------------------------------------------------------------------
Morgan Stanley Index (%) 26.71 N/A
- ------------------------------------------------------------------------
Lipper Average (%) -6.46 N/A
- ------------------------------------------------------------------------
</TABLE>

<PAGE>
COLONIAL INTERNATIONAL HORIZONS FUND, VARIABLE SERIES

INVESTMENT GOALS

The Fund seeks long-term growth and preservation of capital purchasing power.

PRIMARY INVESTMENT STRATEGIES

The Fund invests primarily in non-U.S. equity securities which Colonial believes
will provide superior long-term growth. Colonial generally selects stocks of
companies in industries and markets that it believes will react favorably to
inflation in the U.S. economy. Inflation sensitive companies in which the Fund
may invest include:

- - companies engaged in the development and processing of natural resources,
and

- - companies engaged in consumer oriented businesses.

The Fund is a non-diversified mutual fund and, although it generally will not,
it may invest more than 5% of its total assets in the securities of one company.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

<PAGE>
COLONIAL GLOBAL EQUITY FUND, VARIABLE SERIES

INVESTMENT GOAL

The Fund seeks long-term growth by investing primarily in global equity
securities.

PRIMARY INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests primarily in both U.S. and
foreign equity securities. The Fund may invest in companies of any size,
including small capitalization stocks. The Fund may also invest in high quality
U.S. and foreign government debt securities. The Fund generally diversifies its
holdings across several different countries and regions.

The Fund may invest up to 10% of its assets in shares of other investment
companies. Investing in investment companies may involve payment of duplicate
fees because the Fund, as a shareholder, will indirectly pay a portion of the
other investment company's expenses.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

Interest rate risk is the risk of a decline or increase in the price of a bond
when interest rates increase or decline. In general, if interest rates rise,
bond prices fall; and if interest rates fall, bond prices rise. Changes in the
values of bonds usually will not affect the amount of income the Fund receives
from them but will affect the value of the Fund's shares. Interest rate risk is
generally greater for bonds with longer maturities.

<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND, VARIABLE SERIES

INVESTMENT GOALS

The Fund seeks to provide growth of capital and current income.

PRIMARY INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests at least 75% of its total
assets in equity securities of real estate investment trusts (REITs) and other
real estate industry companies. In managing the Fund, the sub-advisor follows a
basic value contrarian approach in selecting securities for its portfolio.

Additional strategies that are not primary investment strategies and the risks
associated with them are described below under "Other Investment Strategies and
Risks."

PRIMARY INVESTMENT RISKS

<PAGE>
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 Information (SAI) contains names of and
biographical information on the Trustees.

INVESTMENT ADVISOR: LIBERTY ADVISORY SERVICES CORP.

For the 1998 fiscal year, the Trust paid LASC management fees at the following
annual rates of the average daily net assets of each specified Fund:

<TABLE>
<S> <C>
Stein Roe Global Utilities Fund, Variable Series 0.65%
Colonial Small Cap Value Fund, Variable Series 0.80%(1)
Colonial U.S. Growth & Income Fund, Variable Series 0.80%
Colonial Strategic Income Fund, Variable Series 0.65%
Colonial High Yield Securities Fund, Variable Series 0.60%(2)
Liberty All-Star Equity Fund, Variable Series 0.80%(3)
Newport Tiger Fund, Variable Series 0.90%
</TABLE>

(2) The High Yield Fund's advisor has voluntarily agreed to waive its
management fee so that total expenses of the Fund do not exceed 0.80%. As
a result the actual management fee paid to the advisor for the 1998 fiscal
year was 0.00%

(3) The All-Star Equity Fund's advisor has voluntarily agreed to waive a
portion of its management fee. As a result the actual management fee paid
to the advisor for the 1998 fiscal year was 0.76%

For its services as investment advisor, the Trust will pay LASC a management fee
at the following annual rates of the average daily net assets of each specified
Fund:

<TABLE>
<S> <C>
Colonial International Horizons Fund, Variable Series 0.95%(4)
Colonial Global Equity Fund, Variable Series 0.95%(4)
Crabbe Huson Real Estate Investment Fund, Variable Series 1.00%(5)
</TABLE>

(4) The International Fund and Global Equity Fund's advisor has voluntarily
agreed to waive a portion of its management fee so that total expenses of
the Fund do not exceed 1.15%.

(5) The Real Estate Fund's advisor has voluntarily agreed to waive a portion
of its management fee so that total expenses of the Fund do not exceed
1.20%.

<PAGE>
TRUST MANAGEMENT ORGANIZATIONS

INVESTMENT SUB-ADVISORS AND PORTFOLIO MANAGERS

COLONIAL

Colonial, an investment advisor since 1931, is the Sub-Advisor of each of the
Small Cap Fund, U.S. Growth Fund, Strategic Income Fund, High Yield Fund,
International Fund and Global Equity Fund. Colonial's principal business address
is One Financial Center, Boston, Massachusetts 02111. As of March 31, 1999,
Colonial managed over $16.7 billion in assets.

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 each specified Fund:

<TABLE>
<S> <C>
Colonial Small Cap Value Fund, Variable Series 0.60%
Colonial U.S. Growth & Income Fund, Variable Series 0.60%
Colonial Strategic Income Fund, Variable Series 0.45%
Colonial High Yield Securities Fund, Variable Series 0.40%
Colonial International Horizons Fund, Variable Series 0.95%
Colonial Global Equity Fund, Variable Series 0.95%
</TABLE>

Colonial also provides transfer agency, pricing and record keeping services for
the Funds under separate agreements.

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

Mark Stoeckle has managed the U.S. Growth Fund since December, 1996. Mr.
Stoeckle is a Senior Vice President of Colonial. 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. He
also has managed the High Yield Fund since January, 1999. Mr. Ericson, a Senior
Vice President of Colonial and director of Colonial's Taxable Fixed Income
Group, has managed various Colonial taxable income funds since 1985.

James P. Haynie, Senior Vice President of Colonial, has co-managed the Colonial
Small Cap Fund since 1993.

Michael Rega, Vice President of Colonial, has co-managed the Colonial Small Cap
Fund since 1996. He was an analyst at Colonial from 1993 to 1996.

Gita Rao, a Senior Vice President of Colonial, manages both the International
Fund and Global Equity Fund. Ms. Rao has managed various other Colonial funds
since 1995. Prior to joining Colonial, she was a global equity analyst at
Fidelity Management & Research Company from 1994 to 1995 and a Vice President in
the domestic equity research group at Kidder, Peabody and Company from 1991 to
1994.

STEIN ROE

Stein Roe, an investment advisor since 1932, is the Sub-Advisor of the Global
Utilities Fund. Stein Roe's principal address is One South Wacker Drive,
Chicago, Illinois 60606. As of March 31, 1999, Stein Roe managed over $30.1
billion in assets.

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.

<PAGE>
TRUST MANAGEMENT ORGANIZATIONS

other Stein Roe and Colonial funds.

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, an investment advisor since 1985, is the Sub-Advisor of the All-Star
Equity Fund. LAMCO's principal address is 600 Atlantic Avenue, 23rd Floor,
Boston, Massachusetts 02210. As of March 31, 1999, LAMCO managed over $1.6
billion in assets.

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 Equity Fund.

- - Henry D. Cavanna, Managing Director of J.P. Morgan Investment Management,
Inc.

- - John Lindenthal, Managing Director of Oppenheimer Capital

- - Mark Donovan, Chairman, Equity Strategy Committee, of Boston Partners
Asset Management, L.P.

- - Susan M. Byrne, President and Chief Executive Officer of Westwood
Management Corp.

- - Mark A. Thompson, Chairman and Chief Investment Officer of Wilke/Thompson
Capital Management, Inc.

NEWPORT

Newport, an investment advisor since 1987, is the Sub-Advisor of the Tiger Fund.
Newport's principal address is 580 California Street, Suite 1960, San Francisco,
California 94104. As of March 31, 1999, Newport managed over $843.1 million in
assets.

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

Thomas R. Tuttle and Lynda Couch, Senior Vice President and Vice President,
respectively, of Newport, co-manage the Fund. Mr. Tuttle has co-managed
other Newport Funds since November, 1995. Mr. Tuttle has been an officer of
Newport since 1984. Ms.

<PAGE>
TRUST MANAGEMENT ORGANIZATIONS

Couch has managed other Newport Funds since April, 1995. Ms. Couch has been an
officer of Newport since 1994.

CRABBE HUSON

Crabbe Huson, an investment advisor since 1980, is the Sub-Advisor of the Real
Estate Fund. Crabbe Huson's principal address is 121 S.W. Morrison, Suite 1400,
Portland, Oregon 97204. Crabbe Huson as of March 31, 1999, Crabbe Huson managed
over $434 million in assets.

LASC, out of the management fees it receives from the Trust, pays Crabbe Huson a
sub-advisory fee at the annual rate of 0.80% of the average daily net assets of
the Real Estate Fund.

John E. Maack has co-managed the Real Estate Fund since its inception. Mr.
Maack has been employed by Crabbe Huson as a portfolio manager and securities
analyst since 1988.

Michael B. Stokes has co-managed the Real Estate Fund since its inception.
Mr. Stokes joined Crabbe Huson in August, 1996. Prior to joining Crabbe
Huson, he was a financial analyst for Salomon Brothers from July, 1994 to
June, 1996.

AFFILIATED BROKER/DEALER

Stein Roe and Colonial can use the services of AlphaTrade Inc., an affiliated
broker-dealer, when buying or selling equity securities for a fund's portfolio,
pursuant to procedures adopted by the Board of Trustees.

RULE 12B-1 PLAN

The Trust has adopted a plan for and on behalf of the International Fund, Global
Equity Fund and Real Estate Fund in accordance with Rule 12b-1 (Plan) under the
Investment Company Act of 1940. Under the plan, the Trust pays the distributor a
service fee of 0.25% of the average daily net assets attributable to these
Funds' shares. Because these fees are an ongoing expense, over time they
increase the cost of an investment and the shares may cost more than shares that
are not subject to a service fee.

<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS

TEMPORARY DEFENSIVE MEASURES

With the exception of the All-Star Equity Fund, each Fund's Sub-Advisor may
determine that adverse market conditions make it desirable to temporarily
suspend the Fund's normal investment activities. During such times, as a
temporary defensive strategy, a Fund may, but is not required to, invest in cash
or high quality, short-term debt securities, without limit.

Taking a temporary defensive position may prevent a Fund from achieving its
investment objective.

U.S. GOVERNMENT SECURITIES

(Strategic Income Fund) The Fund will invest in U.S. Government securities,
including U.S. Treasuries and securities of various U.S. government agencies.
Agency securities include mortgage-backed securities, which represent interests
in pools of mortgages. The Fund has flexibility to vary its allocation among
different types of U.S. Government securities based upon the Sub-Advisor's
judgement of which types of securities will outperform others. In selecting
investments for the Fund, the Sub-Advisor considers a security's expected
income, together with its potential to rise or fall in price.

STRUCTURE RISK

(Strategic Income Fund) Structure risk is the risk that an event will occur
(such as a security being prepaid or called) that alters the security's cash
flows. Prepayment risk is a particular type of risk that involves both
mortgage-backed securities (which are guaranteed by a U.S. Government agency)
and asset-backed securities (which are interests in pools of debt securities).
Prepayment risk is the possibility that asset-backed securities may be prepaid
if the underlying debt securities are prepaid. Prepayment risk for
mortgage-backed securities is the possibility that, as interest rates fall,
homeowners are more likely to refinance their home mortgages. When mortgages are
refinanced, the principal on mortgage-backed securities is paid earlier than
expected. In an environment of declining interest rates, asset-backed securities
and mortgage-backed securities may offer less potential for gain than other debt
securities. During periods of rising interest rates, these securities have a
high risk of declining in price because the declining prepayment rates
effectively increase the maturity of the securities. In addition, the potential
impact of prepayment on the price of a security may be difficult to predict and
result in greater volatility.

ZERO COUPON BONDS

(Global Utilities Fund, Strategic Income Fund, High Yield Fund) Zero coupon
bonds are issued at less than their fair value and do not make any payments of
interest. As a result, these bonds involve greater credit risk and are subject
to greater volatility than bonds that pay cash interest on a current basis.

<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS

DERIVATIVES

Each Fund may enter into a number of hedging strategies, including those that
employ futures and options, to gain or reduce exposure to particular securities
or markets. These strategies may involve the use of financial instruments,
commonly referred to as derivatives, whose values depend on, or are derived
from, the value of an underlying security, an index or a currency. A Fund may
use derivatives for hedging purposes (attempting to offset a potential loss in
one position by establishing an interest in an opposite position). Derivatives
involve the risk that they may exaggerate a loss, potentially losing more money
than the actual cost of the security, or limit a potential gain. Also, with some
derivatives there is the risk that the other party to the transaction may fail
to honor its contract terms, causing a loss to a Fund.

YEAR 2000 COMPLIANCE

Like other investment companies, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by LASC, the Sub-Advisors and other service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Problem." LASC,
the Sub-Advisors, the Funds' distributors and transfer agent (Liberty Companies)
are taking steps that they believe are reasonably designed to address the Year
2000 Problem, including communicating with vendors who furnish services,
software and systems to the Funds, to provide that date-related information and
data can be properly processed after January 1, 2000. Many Fund service
providers and vendors, including the Liberty Companies, are in the process of
making Year 2000 modifications to their software and systems and believe that
such modifications will be completed on a timely basis prior to January 1, 2000.
However, no assurances can be given that all modifications required to ensure
proper data processing and calculation on and after January 1, 2000 will be
timely made or that services to the Fund will not be adversely affected. Some of
the Funds invest in emerging markets in developing countries and some reports
indicate that developing countries may be behind other countries with respect to
Year 2000 Compliance.

<PAGE>
FINANCIAL HIGHLIGHTS

STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 11.92 10.70 10.50

Net investment income (a) 0.24 0.46 0.46
Net realized and unrealized gains (losses) 1.93 2.62 0.23
on investments
Total from investment operations 2.17 3.08 0.69
Less distributions:
Dividends from net investment income (0.21) (0.48) (0.49)
In excess of net investment income (0.01) -- --
Dividends from net realized gains (0.11) (1.38) --
Total distributions (0.33) (1.86) (0.49)
Net asset value, end of year ($) 13.76 11.92 10.70

TOTAL RETURN:
Total investment return (%)(b) 18.33 28.75 6.53
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 71,186 54,603 47,907
Ratio of net expenses to average net assets (%) 0.82(c) 0.83(c) 0.81(c)
Ratio of net investment income to 1.90(c) 3.96(c) 4.36(c)
average net assets (%)
Portfolio turnover ratio (%) 53 89 14

<CAPTION>
1995 1994
---- ----
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 8.11 9.65

Net investment income (a) 0.46 0.54
Net realized and unrealized gains (losses) 2.39 (1.53)
on investments
Total from investment operations 2.85 (0.99)
Less distributions:
Dividends from net investment income (0.46) (0.55)
In excess of net investment income -- --
Dividends from net realized gains -- --
Total distributions (0.46) (0.55)
Net asset value, end of year ($) 10.50 8.11

TOTAL RETURN:
Total investment return (%)(b) 35.15 (10.27)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 51,597 38,156
Ratio of net expenses to average net assets (%) 0.83(c) 0.86
Ratio of net investment income to 4.98(c) 5.80
average net assets (%)
Portfolio turnover ratio (%) 18 16
</TABLE>

(a) Per share data was calculated using average shares outstanding during
the period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.

<PAGE>
FINANCIAL HIGHLIGHTS
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
1998***
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ($) 10.00
Net investment income (a) 0.08
Net realized and unrealized losses on investments (1.41)
Total from investment operations (1.33)
Less distributions:
Dividends from net investment income (0.07)
In excess of net investment income (0.01)
Total distributions (0.08)
Net asset value, end of period 8.59
TOTAL RETURN
Total investment return (%)(b)(c) (13.25)**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 1,782
Ratio of expenses to average net assets (%) (d)(e) 1.00*
Ratio of net investment income to 1.41*
average net assets (%) (c)(e)
Portfolio turnover ratio (%) 51**
</TABLE>

* Annualized.
** Not Annualized.
*** For the period from the commencement of operations May 19, 1998 to
December 31, 1998.
(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 4.34%
(annualized).
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.

<PAGE>
FINANCIAL HIGHLIGHTS

COLONIAL U.S. GROWTH & INCOME FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Period Ended
Years Ended December 31, December 31,
1998 1997 1996 1995 1994***
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 16.29 14.22 12.36 10.27 10.00
Net investment income (a) 0.16 0.20 0.19 0.21 0.09
Net realized and unrealized gains on investments 3.12 4.37 2.52 2.84 0.35
Total from investment operations 3.28 4.57 2.71 3.05 0.44
Less distributions:
Dividends from net investment income (0.12) (0.18) (0.17) (0.16) (0.11)
In excess of net investment income -- (0.01) -- -- --
Dividends from net realized gains (0.64) (2.30) (0.68) (0.80) (0.06)
In excess of net realized gains (0.02) (0.01) -- -- --
Total distributions (0.78) (2.50) (0.85) (0.96) (0.17)
Net asset value, end of year ($) 18.79 16.29 14.22 12.36 10.27
TOTAL RETURN:
Total investment return (%) (b) 20.15 32.23 21.84 29.70(c) 4.40(c)**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 146,239 96,715 60,855 43,017 15,373
Ratio of net expenses to average net assets (%) 0.90(e) 0.94(e) 0.95(e) 1.00(d)(e) 1.00(d)*
Ratio of net investment income to 0.88(e) 1.19(e) 1.39(e) 1.72(c)(e) 2.16(c)*
average net assets (%)
Portfolio turnover ratio (%) 64 63 77 115 52**
</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 Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, 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.

<PAGE>
FINANCIAL HIGHLIGHTS

COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES

Years Ended December 31,
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 11.15 11.04 10.99 9.79
Net investment income (a) 0.91 0.90 0.92 0.55
Net realized and unrealized
gains (losses) on investments (0.24) 0.11 0.16 1.24

Total from investment operations 0.67 1.01 1.08 1.79
Less distributions:
Dividends from net investment income (0.72) (0.79) (0.96) (0.56)
In excess of net investment income (0.02) (0.05) -- --
Dividends from net realized gains -- (0.05) (0.07) (0.03)
In excess of net realized gains -- (0.01) -- --
Total distributions (0.74) (0.90) (1.03) (0.59)
Net asset value, end of year ($) 11.08 11.15 11.04 10.99
TOTAL RETURN:
Total investment return (%)(b) 6.03 9.11(c) 9.83(c) 18.30(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 118,985 73,175 53,393 48,334
Ratio of net expenses to average
net assets (%) 0.78(e) 0.80(d)(e) 0.80(d)(e) 0.84(d)(e)
Ratio of net investment income to 7.92(e) 7.86(c)(e) 8.13(c)(e) 8.08(c)(e)
average net assets (%)
Portfolio turnover ratio (%) 50 94 114 281

<CAPTION>
Period Ended
December 31,
1994***
-------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 10.00
Net investment income (a) 0.30
Net realized and unrealized
gains (losses) on investments (0.19)

Total from investment operations 0.11
Less distributions:
Dividends from net investment income (0.31)
In excess of net investment income --
Dividends from net realized gains (0.01)
In excess of net realized gains --
Total distributions (0.32)
Net asset value, end of year ($) 9.79
TOTAL RETURN:
Total investment return (%)(b) 1.10(c)**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 13,342
Ratio of net expenses to average
net assets (%) 1.00(d)*
Ratio of net investment income to 7.33(c)*
average net assets (%)
Portfolio turnover ratio (%) 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 Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 0.82%,
0.86%, 0.94% and 1.60% (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.

<PAGE>
FINANCIAL HIGHLIGHTS

COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Period Ended
December 31,
1998***
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ($) 10.00
Net investment income (a) 0.48
Net realized and unrealized losses on investments (0.74)
Total from investment operations (0.26)
Less distributions:
Dividends from net investment income (0.43)
In excess of net investment income (0.00)
Total distributions (0.43)
Net asset value, end of period ($) 9.31
TOTAL RETURN:
Total investment return (%) (b)(c) (2.57)**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ($) 5,915
Ratio of expenses to average net assets (%) (d)(e) 0.80*
Ratio of net investment income to average net assets (%) (c)(e) 7.93*
Portfolio turnover ratio (%) 23**
</TABLE>

* Annualized.
** Not Annualized.
*** For the period from the commencement of operations May 19, 1998 to
December 31, 1998.
(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 1.84%
(annualized).
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.

<PAGE>
FINANCIAL HIGHLIGHTS

LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES

<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1998 1997***
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 10.07 10.00
Net investment income (a) 0.06 0.01
Net realized and unrealized gains on investments 1.82 0.07
Total from investment operations 1.88 0.08
Less distributions:
Dividends from net investment income (0.05) (0.01)
In excess of net investment income (0.00) --
Total distributions (0.05) (0.01)
Net asset value, end of year ($) 11.90 10.07
TOTAL RETURN:
Total investment return (%)(b)(c) 18.67 0.80**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 44,870 22,228
Ratio of net expenses to average net assets (%) (d)(e) 1.00 1.00*
Ratio of net investment income to 0.54 0.83*
average net assets (%)(c)(e)
Portfolio turnover ratio (%) 70 1**
</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 1.04% and
1.45% (annualized), respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.

<PAGE>
FINANCIAL HIGHLIGHTS

NEWPORT TIGER FUND, VARIABLE SERIES
<TABLE>
<CAPTION>
Years Ended December 31, Period Ended
December 31,
1998 1997 1996 1995***
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ($) 1.71 2.52 2.28 2.00
Net investment income (a) 0.03 0.03 0.03 0.01
Net realized and unrealized gains (losses) on investments (0.14) (0.81) 0.24 0.29
and foreign currency transactions
Total from investment operations (0.11) (0.78) 0.27 0.30
Less distributions:
Distributions from net investment income (0.03) (0.02) (0.02) (0.01)
In excess of net investment income --- (0.01) --- (0.01)
Dividends from net realized gains --- --- (0.01) ---
In excess of net realized gains --- (0.00) --- ---
Total distributions (0.03) (0.03) (0.03) (0.02)
Net asset value, end of year ($) 1.57 1.71 2.52 2.28
TOTAL RETURN:
Total investment return (%)(b) (6.43) (31.14) 11.73 15.00**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ($) 23,655 24,934 34,642 18,977
Ratio of net expenses to average net assets (%)(c) 1.30 1.25 1.27 1.75*
Ratio of net investment income to average net assets (%)(c) 2.16 1.14 1.20 0.89*
Portfolio turnover ratio (%) 16 27 7 12**
</TABLE>

* Annualized.

** Not Annualized.

*** For the period from the commencement of operations May 1, 1995 to
December 31, 1995.

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

(b) Total return at net asset value assuming all distributions reinvested.

<PAGE>
SHAREHOLDER INFORMATION

A Fund's foreign securities may trade on days when the NYSE is closed for
trading and Participating Insurance Companies may not purchase or redeem shares.

<PAGE>
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
You can get more information about the Funds' investments in the Funds'
semi-annual and annual reports to shareholders. The annual report contains a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance over their last fiscal year.

You can get free copies of reports and the SAI, request other information and
discuss your questions about the Funds by writing or calling:

Keyport Financial Services Corp.
125 High Street
Boston, MA 02111
1-800-437-4466

or by calling or writing the Participating Insurance Company which issued your
VA contract or VLI policy.

Text-only versions of all Fund documents can be viewed online or downloaded from
the SEC at www.sec.gov.

You can review and copy information about the Funds by visiting the following
location, and you can obtain copies upon payment of a duplicating fee, by
writing the:

Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009

Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.

INVESTMENT COMPANY ACT FILE NUMBER:

Liberty Variable Investment Trust: 811-07556

Stein Roe Global Utilities Fund, Variable Series

Colonial Small Cap Value Fund, Variable Series

Colonial U.S. Growth & Income Fund, Variable Series

Colonial Strategic Income Fund, Variable Series

Colonial High Yield Securities Fund, Variable Series

Liberty All-Star Equity Fund, Variable Series

Newport Tiger Fund, Variable Series

Colonial International Horizons Fund, Variable Series

Colonial Global Equity Fund, Variable Series

Crabbe Huson Real Estate Investment Fund, Variable Series

LIBERTY VARIABLE INVESTMENT TRUST

One Financial Center
Boston, Massachusetts 02111

Colonial Growth and Income Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Colonial U.S. Growth & Income Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Newport Tiger Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Colonial International Horizons Fund, Variable Series
Colonial Global Equity Fund, Variable Series
Crabbe Huson Real Estate Investment Fund, Variable Series

STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1999, Revised June 1, 1999

The Statement of Additional Information ("SAI") is not a Prospectus,
but should be read in conjunction with the Trust's Prospectuses, dated May 1,
1999 and June 1, 1999 and any supplements thereto, which may be obtained at no
charge by calling Keyport Financial Services Corp. ("KFSC") 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 1, 1999, Revised June 1, 1999.

<PAGE>

TABLE OF CONTENTS
ITEM PAGE

ORGANIZATION AND HISTORY.............................................. 3

INVESTMENT MANAGEMENT AND OTHER SERVICES............................... 4
General....................................................... 4
Trust Charges and Expenses.................................... 7

INVESTMENT RESTRICTIONS ..............................................10
Colonial Growth and Income Fund, Variable Series............. 10
Stein Roe Global Utilities Fund, Variable Series............. 11
Colonial International Fund for Growth, Variable Series...... 12
Colonial U.S. Growth & Income Fund, Variable Series.......... 13
Colonial Strategic Income Fund, Variable Series.............. 14
Newport Tiger Fund, Variable Series.......................... 15
Liberty All-Star Equity Fund, Variable Series................ 17
Colonial Small Cap Value Fund, Variable Series............... 19
Colonial High Yield Securities Fund, Variable Series......... 20
Colonial International Horizons Fund, Variable Series........ 21
Colonial Global Equity Fund, Variable Series................. 21
Crabbe Huson Real Estate Investment Fund, Variable Series.... 22

MORE FACTS ABOUT THE TRUST ..............................................23
Mixed and Shared Funding..................................... 23
Organization................................................. 24
Trustees and Officers........................................ 24
Principal Holders of Securities.............................. 30
Custodians................................................... 30

OTHER CONSIDERATIONS ..............................................31
Portfolio Turnover........................................... 31
Suspension of Redemptions.................................... 31
Valuation of Securities...................................... 32
Portfolio Transactions....................................... 32

DESCRIPTION OF CERTAIN INVESTMENTS.................................... 36
Money Market Instruments..................................... 36
Investments in Less Developed Countries...................... 39
Foreign Currency Transactions................................ 40
Options on Securities........................................ 44
Futures Contracts and Related Options........................ 47
Securities Loans ..............................................51

INVESTMENT PERFORMANCE ..............................................52

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS.........................53

<PAGE>

ORGANIZATION AND HISTORY

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
twelve 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"); Colonial U.S. Growth & Income Fund, Variable Series
("U.S. Growth 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 Equity Fund"); Colonial
Small Cap Value Fund, Variable Series ("Small Cap Fund"), Colonial High Yield
Securities Fund, Variable Series ("High Yield Fund"), Colonial International
Horizons Fund, Variable Series, ("International Horizons Fund"), Colonial Global
Equity Fund, Variable Series ("Global Equity Fund") and Crabbe Huson Real Estate
Investment Fund, Variable Series ("Real Estate Fund"). The Trust may add or
delete Funds from time to time. The Trust commenced operations on July 1, 1993.

Effective November 15, 1997, the Trust changed its name from "Keyport Variable
Investment Trust" to its current name. Effective November 15, 1997, the Growth
and Income Fund changed its name from "Colonial-Keyport Growth and Income Fund"
to its current name. Effective November 15, 1997, the Global Utilities Fund
changed its name from "Colonial-Keyport Utilities Fund" to its current name.
Effective November 15, 1997, the International Fund changed its name from
"Colonial-Keyport International Fund for Growth" to its current name. Effective
May 1, 1997, the U.S. Growth Fund changed its name from "Colonial-Keyport U.S.
Fund for Growth" to Colonial-Keyport U.S. Stock Fund. Effective November 15,
1997, the U.S. Growth Fund changed its name from "Colonial-Keyport U.S. Stock
Fund" to Colonial U.S. Stock Fund, Variable Series. Effective June 1, 1999, the
U.S. Growth Fund changed its name from "Colonial U.S. Stock Fund, Variable
Series " to its current name. Effective November 15, 1997 the Strategic Income
Fund changed its name from "Colonial Keyport Strategic Income Fund" to its
current name. Effective November 15, 1997 the Tiger Fund changed its name from
"Newport-Keyport Tiger Fund" to its current name.

The 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
owners may differ. Additional information regarding such differing interests and
related risks are described below under "MORE FACTS ABOUT THE TRUST--Mixed and
Shared Funding."

<PAGE>

INVESTMENT MANAGEMENT AND OTHER SERVICES
General

Liberty Advisory Services Corp. ("LASC") serves as Manager pursuant to
investment advisory agreements between the Trust on behalf 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 December 31,
1998, approximately 71.95% 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, U.S. Growth Fund, Strategic Income Fund, Small Cap Fund,
High Yield Fund, International Horizons Fund and Global Equity 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") with
Newport Fund Management, Inc. ("Newport"). Newport is an indirect wholly owned
subsidiary of LFC.

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

Liberty Asset Management Company ("LAMCO") sub-advises All-Star Equity
Fund pursuant to the Management Agreement for such Fund (to which LAMCO is a
party). All-Star Equity 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 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 Equity Fund,
LAMCO and such Portfolio Manager.

<PAGE>

All-Star Equity Fund's current Portfolio Managers are:

J.P. Morgan Investment Management Inc.
Oppenheimer Capital
Boston Partners Asset Management, L.P.
Westwood Management Corp.
Wilke/Thompson Capital Management, Inc.

LASC. 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: Paul H. LeFevre, Jr. (principal
executive officer), Stewart R. Morrison, and Mark R. Tully. Mr. LeFevre
also is a director of KFSC, the principal underwriter for shares of the
Funds sold to Participating Insurance Companies (as such term is defined in the
Prospectus) that are affiliated with Keyport.

Colonial. Liberty Funds Group LLC ("LFG"), One Financial Center,
Boston, Massachusetts 02111, owns all of the outstanding common stock of
Colonial. LFG is an indirect wholly-owned subsidiary of LFC. The directors
and principal executive officer of Colonial are Nancy L. Conlin, Stephen E.
Gibson (principal executive officer) and Joseph R. Palombo.

Stein Roe. 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. and Thomas W. Butch (principal executive officer).

Newport. Newport Pacific Management, Inc. ("Newport Pacific"), 580
California Street, San Francisco, California 94104, owns 75.1% of the
outstanding common stock of Newport. LFC owns the balance. 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), Kenneth R. Leibler, and Lindsay Cook.

Crabbe Huson. Crabbe Huson, 121 S.W. Morrison, Suite 1400,
Portland, Oregon 97204, is a wholly owned subsidiary of LFC. The directors and
principal executive officer of Crabbe Huson are Kenneth R. Leibler, James E.
Crabbe (principal executive officer) and Lindsay Cook.

LAMCO and 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 R. Christensen, Lindsay Cook, C. Allen
Merritt, Jr. and William R. Parmentier (principal executive officer).

<PAGE>

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

o J.P. Morgan Investment Management, Inc. J.P. Morgan Investment
Management Inc. ("J.P. Morgan"), an investment advisor since
1984, is located at 522 Fifth Avenue, New York, New York
10036, is a wholly-owned subsidiary of J.P. Morgan & Co.
Incorporated, a New York Stock Exchange ("NYSE") 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.
Kenneth W. Anderson, Jeff M. Garrity, John W. Schmidlin,
Gilbert Van Hassel and Hendrick Van Riel and Ms. Isabel H.
Sloane. As of March 31, 1999, J.P. Morgan managed over
$316 billion in assets.

o Oppenheimer Capital. Oppenheimer Capital, an investment
advisor since 1969, is located at Oppenheimer Tower, 1 World
Financial Center, New York, New York 10281, is a Delaware
partnership and an indirect wholly-owned subsidiary of PIMCO
Advisors L.P. Oppenheimer Capital's Chief Operating Officer
(principal executive officer) is James McCaughan. As of
December 31, 1998, Oppenheimer Capital managed over $62
billion in assets.

o Boston Partners Asset Management, L.P. Boston Partners Asset
Management, L.P. ("Boston Partners"), an investment advisor
since 1995, is located at 28 State Street, 21st Floor, Boston,
Massachusetts 02109. The firm is owned by its partners.
Desmond J. Heathwood is the sole General Partner. As of March
31, 1999, Boston Partners managed over $15.2 billion in
assets.

o Westwood Management Corp. Westwood Management Corp.
("Westwood"), an investment advisor since 1983, is located at
300 Crescent Court, Suite 1300, Dallas, Texas 75201, is a
wholly owned subsidiary of Southwest Securities Group, Inc.
Its principal executive officer is Susan M. Byrne. Its
directors are Ms. Byrne, Raymond E. Wooldridge, Don A.
Buchhotz, David Glatstein, and Patricia R. Fraze. Westwood
manages over $2.4 billion in assets.

o Wilke/Thompson Capital Management, Inc. Wilke/Thompson Capital
Management, Inc. ("Wilke/Thompson"), an investment advisor
since 1987, is located at 2950 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. As of March 31, 1999,
Wilke/Thompson managed over $1.1 billion in assets.

<PAGE>

The Management Agreements, the Sub-Advisory Agreements and the
Portfolio Management Agreements provide that none of LASC, Colonial, Stein Roe,
Newport, Crabbe Huson, LAMCO or LAMCO's Portfolio Managers (collectively, the
"Advisors"), nor any of their respective directors, officers, stockholders (or
partners of stockholders), agents, or employees shall have any liability to 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 LASC or such Advisor of its respective duties under such
agreements, except for liability resulting from willful misfeasance, bad faith
or gross negligence on the part of LASC or such Advisor, in the performance of
its respective duties or from reckless disregard by such Advisor 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 commenced operations on May 2, 1994. U.S.
Growth Fund and Strategic Income Fund commenced operations on July 5, 1994.
Tiger Fund commenced operations on May 1, 1995. All-Star Equity Fund commenced
operations on November 15, 1997. Small Cap Fund and High Yield Fund commenced
operations on May 19, 1998. International Horizons Fund, Global Equity Fund and
Real Estate Fund commenced operations on June 1, 1999.

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

<PAGE>

1998 1997 1996
<S> <C> <C> <C>
Growth and Income Fund: $805,967 $605,151 $538,173
Global Utilities Fund: $390,383 $310,458 $315,944
International Fund: $369,574 $270,532 $224,146
U.S. Growth Fund: $1,027,590 $623,484 $418,745
Strategic Income Fund: $590,688 $384,347(1) $322,142
Tiger Fund: $192,901 $303,701 $258,891
All-Star Equity Fund: $243,070(2) $8,804(1) ----
Small Cap Fund: $0(2) ---- ----
High Yield Fund: $0(2) ---- ----
International Horizons Fund(3): ---- ---- ----
Global Equity Fund(3): ---- ---- ----
Real Estate Fund(3): ---- ---- ----
- ---------
</TABLE>
(1) Reduced to reflect applicable expense limitations. If the limitations had
not been in effect, Strategic Income Fund and All-Star Equity Fund would have
paid fees of $399,569 and $20,337, respectively.
(2) Reduced to reflect applicable expense limitations. If the limitations
had not been in effect, All-Star Equity Fund, Small Cap Fund and High Yield
Fund would have paid fees of $255,783, $8,641 and $19,394, respectively.
(3) International Horizons Fund, Global Equity Fund and Real Estate Fund did
not commence investment operations until June 1, 1999.

Certain Administrative Expenses. During each year in the three-year period ended
December 31, 1998 each Fund listed below made payments as follows to Colonial or
an affiliate thereof for pricing and bookkeeping services.

<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Growth and Income Fund: $53,025 $43,653 $40,025
Global Utilities Fund: $30,524 $27,071 $27,000
International Fund: $27,008 $27,000 $27,000
U.S. Growth Fund: $54,453 $39,024 $27,000
Strategic Income Fund: $41,331 $31,551 $27,000
Tiger Fund: $27,000 $27,000 $27,000
All-Star Equity Fund: $27,000 $3,225 ----
Small Cap Fund: $16,694 ---- ----
High Yield Fund: $16,694 ---- ----
International Horizons Fund(4): ---- ---- ----
Global Equity Fund(4): ---- ---- ----
Real Estate Fund(4): ---- ---- ----
- ---------
</TABLE>
(4) International Horizons Fund, Global Equity Fund and Real Estate Fund did
not commence investment operations until June 1, 1999.

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

<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Growth and Income Fund: $7,500 $7,500 $7,500
Global Utilities Fund: $7,500 $7,500 $7,500
International Fund: $7,500 $7,500 $7,500
U.S. Growth Fund: $7,500 $7,500 $7,500
Strategic Income Fund: $7,500 $7,500 $7,500
Tiger Fund: $7,500 $896 $7,500
All-Star Equity Fund: $7,500 ---- ----
Small Cap Fund: $4,637 ---- ----
High Yield Fund: $4,637 ---- ----
International Horizons Fund(5): ---- ---- ----
Global Equity Fund(5): ---- ---- ----
Real Estate Fund(5): ---- ---- ----
- ---------
</TABLE>
(5) International Horizons Fund, Global Equity Fund and Real Estate Fund did
not commence investment operations until June 1, 1999.

Principal Underwriters
KFSC, 125 High Street, Boston, Massachusetts 02110, serves as the principal
underwriter of the shares of the portfolios of the Trust with respect to the
sale of shares to Participating Insurance Companies that are affiliated with
LASC.

Liberty Funds Distributor, Inc. (LFD), One Financial Center, Boston, MA 02111,
serves as the principal underwriter with respect to the sale of shares to
Participating Insurance Companies that are not affiliated with LASC. KFSC and
LFD are affiliates of LASC.

The Trustees have approved a Distribution Plan and Agreement (Plan) pursuant to
Rule 12b-1 under the 1940 Act for the International Horizons Fund, Global Equity
Fund and Real Estate Fund. Under the Plan, these Funds will pay the distributor
a monthly service fee at the aggregate annual rate of 0.25% of each Fund's
average daily net assets. The distributor may use the entire amount of such fees
to defray the cost of commissions and service fees paid to financial service
firms (FSFs) and for certain other purposes. Since the service fees are payable
regardless of the amount of the distributor's expenses, the distributor may
realize a profit from the fees.

The Plan authorizes any other payments by these Funds to the distributor and its
affiliates (including the Advisor) to the extent that such payments might be
construed to be indirect financing of the distribution of fund shares.

The Trustees believe the Plan could be a significant factor in the growth and
retention of Fund assets resulting in a more advantageous expense ratio and
increased investment flexibility which could benefit each Fund's shareholders.
The Plan will continue in effect from year to year so long as continuance is
specifically approved at least annually by a vote of the Trustees, including the
Trustees who are not interested persons of the Trust and have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan (Independent Trustees), cast in person at a meeting called
for the purpose of voting on the Plan. The Plan may not be amended to increase
the fee materially without approval by vote of a majority of the outstanding
voting securities of the relevant class of shares and all material amendments of
the Plan must be approved by the Trustees in the manner provided in the
foregoing sentence. The Plan may be terminated at any time by vote of a majority
of the Independent Trustees or by vote of a majority of the outstanding voting
securities of the relevant Fund's shares, on 60 days' written notice to the
distributor. The continuance of the Plan will only be effective if the selection
and nomination of the Trustees who are not interested persons of the Trust is
effected by such disinterested Trustees.

Expense Limitations. LASC has agreed to reimburse all expenses,
including management fees, but excluding interest, taxes, 12b-1, brokerage, and
other expenses which are capitalized in accordance with generally accepted
accounting principles, and extraordinary expenses, incurred by (i) each of
Growth and Income Fund, Global Utilities Fund, U.S. Growth Fund, All-Star Equity
Fund and Small Cap Fund in excess of 1.00% of average daily net asset value per
annum, (ii) each of International Fund and Tiger Fund in excess of 1.75% of
average daily net asset value per annum, (iii) each of Strategic Income Fund and
High Yield Fund in excess of 0.80% of average daily net asset value per annum,
(iv) each of International Horizons Fund and Global Equity Fund in excess of
1.15% of average daily net asset value per annum, and (v) Real Estate Fund in
excess of 1.20% of average daily net asset value per annum, in each case for the
period from May 1, 1999 until April 30, 2000.

<PAGE>

INVESTMENT RESTRICTIONS

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 Prospectuses 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.

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. 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. 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 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;

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

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

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

Global Utilities Fund

Fundamental Investment Policies. Global Utilities Fund may:

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

4. 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; and

5. 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;

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

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

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

International Fund

Fundamental Investment Policies. International 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;

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

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

Other Investment Policies. As non-fundamental investment policies
of International 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;

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;

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

7. 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 1940 Act) if the Fund would control such
person after such acquisition; or

8. 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. Growth Fund

Fundamental Investment Policies. U.S. Growth 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

<PAGE>

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

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. Growth 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;

<PAGE>

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

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

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

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

Tiger Fund

Fundamental Investment Policies. Tiger Fund may not:

1. Concentrate more than 25% of the Funds total assets in any
industry (other than obligations issued or guaranteed as to
principal and interest by the Government of the United States
or any agency or instrumentality thereof) or with respect to
75% of the Fund's assets purchase the securities of any
issuer, if, as a result of such purchase, more than 5% of the
Fund's total assets would be invested in the securities of
such issuer;

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

3. Purchase and sell futures contracts and related options if
the total initial margin and premiums exceed 5% of its
total assets;

<PAGE>

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);
and

7. Own real estate unless such real estate is acquired as the
result of owning securities and does not constitute more than
5% of total assets.

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 or sell commodities contracts if the total initial
margin and premiums on the contracts would exceed 5% of
its total assets;

6. 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

7. Engage in short sales of securities.

<PAGE>

All-Star Equity Fund

Fundamental Investment Policies. All-Star Equity 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;

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. Invest 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, 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 Equity 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).

<PAGE>

Small Cap Fund

Fundamental Investment Policies. Small Cap 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
do 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 Fund which may be changed, 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. 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.

<PAGE>

High Yield Fund

Fundamental Investment Policies. High Yield Fund may:

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
do 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 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 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;

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

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

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

<PAGE>

International Horizons Fund

Fundamental Investment Policies. International Horizons 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;

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

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

Other Investment Policies. As non-fundamental investment policies
of International Horizons 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; and

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

Global Equity Fund

Fundamental Investment Policies. The Global Equity 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;

Other Investment Policies. As non-fundamental investment policies of
the Global Equity 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;

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

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

Real Estate Fund

Fundamental Investment Policies. The Real Estate Fund may:

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

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

6. Own real estate if it is acquired as the result of owning
securities and not more than 5% of total assets; provided that
the Fund may invest in securities that are secured by real
estate or interest therein and may purchase and sell
mortgage-related securities and may hold and sell real estate
acquired by the Fund as a result of the ownership of
securities.

Other Investment Policies. As non-fundamental investment policies
of the Real Estate 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;

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

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

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") and Keyport Benefit Life Insurance Company
("Keyport Benefit"), each of which is a wholly owned subsidiary of Keyport, and
Liberty Life Assurance Company of Boston ("Liberty Life"), a 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.

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 investment 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
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, ages 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). In
this SAI, the "Liberty Funds" means Liberty Funds Trust I, Liberty Funds Trust
II, Liberty Funds Trust III, Liberty Funds Trust IV, Liberty Funds Trust V,
Liberty Funds Trust VI, Liberty Funds Trust VII, Liberty Funds Trust VIII,
Liberty Variable Investment Trust, Colonial High Income Municipal Trust,
Colonial InterMarket Income Trust I, Colonial Intermediate High Income Fund,
Colonial Investment Grade Municipal Trust and Colonial Municipal Income Trust.

<PAGE>

<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Robert J. Birnbaum (71) Trustee Consultant (formerly Special Counsel,
313 Bedford Road Dechert Price & Rhoads (law) from
Ridgewood, NJ 07450 September, 1988 to December, 1993).
Director or Trustee: Liberty Funds,
Liberty All-Star Equity Fund,
Liberty All-Star Growth Fund, Inc.,
The Emerging Germany Fund, Liberty
Funds Trust IX.

Tom Bleasdale (68) Trustee Retired (formerly Chairman of the Board and
11 Carriage Way Chief Executive Officer, Shore Bank & Trust
Danvers, MA 01923 Company (banking) from 1992 to 1993). Director
or Trustee: Liberty
</TABLE>

S-20

<PAGE>

<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
John V. Carberry* (51) Trustee Senior Vice President of LFC 1998-present
56 Woodcliff Road (formerly Managing Director, Salomon
Wellesley Hills, MA 02481 Brothers Inc.(investment banking)).
Director or Trustee: Liberty Funds, Liberty
All-Star Equity Fund, Liberty All-Star Growth
Fund, Inc., Liberty Funds Trust IX.

Lora S. Collins (63) Trustee Attorney (formerly Attorney with Kramer,
1175 Hill Road Levin, Naftalis & Frankel (law) from
Southold, NY 11971 September, 1986 to November, 1996).
Trustee: Liberty Funds.

James E. Grinnell (69) Trustee Private Investor since November, 1988.
22 Harbor Avenue Director or Trustee: Liberty Funds, Liberty
Marblehead, MA 01945 All-Star Equity Fund, Liberty All-Star
Growth Fund, Inc., Liberty Funds Trust IX.

Richard W. Lowry (62) Trustee Private Investor since August, 1987.
10701 Charleston Drive Director or Trustee: Liberty Funds, Liberty
Vero Beach, FL 32963 All-Star Equity Fund, Liberty All-Star
Growth Fund, Inc., Liberty Funds Trust IX.

Salvatore Macera (67) Trustee Private Investor (formerly Executive Vice
26 Little Neck Lane President of Itek Corp. and President of
New Seabury, MA 02649 Itek Optical & Electronic Industries, Inc.
(electronics)). Trustee: Liberty Funds.

William E. Mayer (58) Trustee Partner, Development Capital, LLC
500 Park Avenue, 5th Floor (investments); formerly Dean of the College
New York, NY 10022 of Business and Management, University of
</TABLE>

S-21

<PAGE>

<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Maryland (higher education) from October,
1992 to November, 1996. Director or Trustee:
LibertyFunds, Liberty All-Star Equity Fund,
Liberty All-Star Growth Fund, Inc., Liberty
Funds Trust IX, Hambrecht & Quist
Incorporated, Chart House Enterprises,
Johns Manville.
</TABLE>

S-22

<PAGE>

<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
James L. Moody, Jr. (67) Trustee Retired (formerly Chairman of the Board,
16 Running Tide Road Hannaford Bros. Co. from May, 1984 to May,
Cape Elizabeth, ME 04407 1997). Director or Trustee: Liberty Funds,
Penobscot Shoe Co., Staples, Inc., UNUM
Corporation, IDEXX Laboratories, Inc.,
Empire Company Limited.

John J. Neuhauser (55) Trustee Dean of the School of Management, Boston
140 Commonwealth Avenue College (higher education) since September,
Chestnut Hill, MA 02167 1977. Director or Trustee: Liberty Funds,
Liberty All-Star Equity Fund, Liberty
All-Star Growth Fund, Inc., Liberty Funds
Trust IX, Hyde Athletic Industries, Inc.

Thomas E. Stitzel (63) Trustee Professor of Finance, College of Business,
2208 Tawny Woods Place Boise State University (higher education);
Boise, ID 83706 Business consultant and author. Trustee:
Liberty Funds.

Robert L. Sullivan (70) Trustee Retired Partner, KPMG Peat Marwick LLP
45 Sankaty Avenue (management consulting). Trustee:
Siasconset, MA 02564 LibertyFunds.

Anne-Lee Verville (53) Trustee Consultant (formerly General Manager,
359 Stickney Hill Road Global Education Industry from 1994 to 1997
Hopkinton, NH 03229 (global education)). Trustee: Liberty Funds.
</TABLE>

S-23

<PAGE>

<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Stephen E. Gibson (45) President President of the Liberty Funds since June,
One Financial Center 1998, Chairman of the Board since July,
Boston, MA 02111 1998, Chief Executive Officer and President
since December 1996 and Director, since
July, 1996 of Colonial (formerly Executive
Vice President from July, 1996 to
December, 1996); Chairman of the Board
since July, 1998, Director, Chief
Executive Officer and President of Liberty
Funds Group LLC ("LFG") since December,
1998 (formerly Chairman of the Board,
Director, Chief Executive Officer and
President of The Colonial Group, Inc.
("TCG") from December, 1996 to December,
1998); Assistant Chairman of Stein Roe
since August, 1998 (formerly Managing
Director of Marketing of Putnam
Investments, June, 1992 to July, 1996.).

Timothy J. Jacoby (45) Treasurer and Chief Treasurer and Chief Financial Officer of
One Financial Center Financial Officer the Liberty Funds; Senior Vice President,
Boston, MA 02111 Treasurer and Chief Financial Officer of
Colonial; Chief Financial Officer,
Treasurer and Vice President of LFG since
December, 1998 (formerly Chief Financial
Officer, Treasurer and Vice President of
TCG from July, 1997 to December, 1998)
formerly Senior Vice President, Fidelity
Accounting and Custody Services, Inc. and
Assistant Treasurer to the Fidelity Group
of Funds.
</TABLE>

S-24

<PAGE>

<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
J. Kevin Connaughton (34) Controller and Chief Controller and Chief Accounting Officer of
One Financial Center Accounting Officer the Liberty Funds since February, 1998;
Boston, MA 02111 Vice President of Colonial since February,
1998 (formerly Senior Tax Manager, Coopers
& Lybrand, LLP from April, 1996 to
January, 1998; Vice President, 440
Financial Group/First Data Investor
Services Group from March, 1994 to April,
1996; Vice President, The Boston Company
(subsidiary of Mellon Bank) from December,
1993 to March, 1994; Assistant Vice
President and Tax Manager, The Boston
Company from March, 1992 to December, 1993).

Joseph R. Palombo (46) Vice President Vice President of the Liberty Funds since
One Financial Center April, 1999; Executive Vice President and
Boston, MA 02111 Director of Colonial since April, 1999;
Executive Vice President and Chief
Administrative Officer of LFG since April,
1999
</TABLE>

S-25

<PAGE>

S-26

<PAGE>

<TABLE>
<CAPTION>
Positions(s) held Principal occupations
Name, Age and Address with the Trust during past five years
- --------------------- ----------------- ----------------------
<S> <C> <C>
Nancy L. Conlin (45) Secretary Director, Senior Vice President and General
One Financial Center Counsel, Colonial (April, 1998 to present);
Boston, MA 02111 Vice President and Counsel (February, 1994
to April, 1998).
</TABLE>

* As Trustee who is an "interested person" (as defined in the Investment Company
Act of 1940 ("1940 Act")) of the Funds or the Advisor.

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, Crabbe Huson, LAMCO and/or certain of their affiliates. Certain of the
Trustees and officers of the Trust hold comparable positions with certain other
investment companies.

Compensation of Trustees

The table below sets forth (1) the aggregate compensation paid by the
Trust to the Trustees for 1998, and (ii) the amount of compensation paid to the
Trustees of the Trust in their capacities as Trustees of the Liberty Funds
Complex for service for 1998 (a):

Compensation Table

<TABLE>
<CAPTION>
Total Compensation From Liberty Funds Complex
Aggregate 1998 Compensation Paid to the Directors/Trustees For The
Trustee from the Trust(b) Calendar Year Ended December 31, 1998(c)
- ------- --------------------------- ---------------------------------------------
<S> <C> <C>
Robert J. Birnbaum $ 592 $124,429
Tom Bleasdale 592 115,000(e)
John V. Carberry 0(d) 0(d)
Lora S. Collins 592 97,429
James E. Grinnell 592 128,071
Richard W. Lowry 592 123,214
Salvatore Macera 10,393 25,250
William E. Mayer 296 113,286
James L. Moody, Jr. 592(f) 105,857(g)
John J. Neuhauser 599 130,323
Thomas E. Stitzel 10,393 25,250
Robert L. Sullivan 649 104,100
Anne-Lee Verville 592(f) 23,445(h)
</TABLE>

(a) The Liberty Funds Complex does not currently provide pension or retirement
plan benefits to the Trustees.
(b) Messrs. Birnbaum, Bleasdale, Carberry, Grinnell, Lowry, Mayer, Moody,
Neuhauser and Sullivan and Mmes. Collins and Verville joined the Board of
the Trustees of the Trust on December 17, 1998.
(c) At December 31, 1998, the Liberty Funds Complex consisted of 52 open-end
and 5 closed-end management investment company portfolios advised by the
Administrator or its affiliates, Newport, Crabbe Huson Group, Inc. and
Stein Roe, nine funds of the Trust and the closed-end Liberty All-Star
Equity and Liberty All-Star Growth Fund, Inc., Liberty Funds Trust IX
advised by LAMCO, another affiliate of the Administrator.
(d) Mr. Carberry does not receive compensation because he is an affiliated
Trustee and employee of LFC.
(e) Includes $52,000 payable in later years as deferred compensation.
(f) Total compensation of $592 is payable in later years as deferred
compensation.
(g) Total compensation of $105,857 is payable in later years as deferred
compensation.
(h) Total compensation of $23,445 is payable in later years as deferred
compensation.

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 March
31, 1999 the general account of Keyport owned of record 48% of All-Star Equity
Fund and 37% of Tiger Fund. At June 1, 1999 the general account of Keyport owned
of record 100% of International Horizons Fund, 100% of Global Equity Fund and
100% of Real Estate Fund. 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 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
March 31, 1999 owned beneficially 5% or more of the outstanding shares of any
Fund.

Custodians

The Chase Manhattan Bank, 270 Park Avenue Park Avenue, New York, NY
10017-2070, is custodian of the securities and cash owned by all of the Funds,
except the Real Estate Fund. State Street Bank & Trust Company, located at 225
Franklin Street, Boston, MA 02110, is custodian of the securities and cash owned
by the Real Estate Fund. The custodians are responsible for holding all
securities and cash of each Fund, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Funds, 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 Prospectuses.

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
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, International Horizons Fund and Global Equity Fund
may be expected to experience higher portfolio turnover rates if such Funds make
a change in its respective 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 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
Jr., Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.

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, Crabbe Huson and each of LAMCO's
Portfolio Managers (each an "Advisor") 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 Advisor 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 Advisor 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,
International Horizons Fund, Global Equity Fund and All-Star Equity Fund,
securities transactions of the Funds may be executed by broker-dealers who also
provide research services (as defined below) to an Advisor, the Funds or other
accounts as to which such Advisor exercises investment discretion. Such advisor
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
the extent that such services are used by the Advisors, 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 Advisors 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
Advisor 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 Advisors may have
investment objectives and programs that are similar to those of the Funds.
Accordingly, occasions may arise when each of the Advisors 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 Advisor 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 Advisors 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, International
Horizons Fund and Global Equity Fund. The portfolio manager for the
International Fund, International Horizons Fund and Global Equity Fund is Gita
Rao, who is jointly employed by Colonial and Stein Roe (each of which is an
indirect wholly owned subsidiary of LFC). The Funds and the other accounts
advised by Ms. Rao 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 Funds and such other
accounts will be bunched and executed on an aggregate basis. In such cases, each
participating account (including the International Fund, International Horizons
Fund and Global Equity Fund) 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, International
Horizons Fund and Global Equity Fund) 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, International Horizons Fund and
Global Equity are 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,
International Horizons Fund and Global Equity Fund may be executed by
broker-dealers who provide research services to Colonial or Stein Roe which are
used in the investment management of such Funds 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 Funds 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,
International Horizons Fund, Global Equity Fund or other accounts over which
Colonial exercises investment discretion.

Additional Matters Pertaining to All-Star Equity 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 Equity Fund or other accounts managed by LAMCO
(collectively with All-Star Equity Fund, "LAMCO Clients") or as to which an
ongoing relationship will be a value to the Fund in managing its assets. 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 Equity 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.

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.

<PAGE>

The table below shows information on brokerage commissions paid by each
Fund during the periods indicated. (All-Star Equity Fund commenced operations on
November 15, 1997; Small Cap Fund and High Yield Fund commenced operations on
May 19, 1998; International Horizons Fund, Global Equity Fund and Real Estate
Fund commenced operations on June 1, 1999.)

<TABLE>
<CAPTION>
Growth & Global International U.S. Tiger Fund All-Star High Yield Small Cap Strategic
Income Fund Utilities Fund GrowthFund Equity Fund Fund Income
Fund Fund Fund
----------- --------- ------------- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total amount of $86,453 $124,815 $66,549 $147,449 $ 36,508 $58,697 $0 $3,240 $0
brokerage commissions
paid during 1998

Total amount of $0 $0 $0 $0 $0 $84,729 $0 $0 $0
directed transactions
paid during 1998

Total amount of $0 $0 $0 $0 $0 $80 $0 $0 $0
commissions on directed
transactions paid
during 1998

Total amount of $17,178 $0 $0 $45,117 $0 $0 $0 $1,170 $0
brokerage commissions
paid during 1998 to (20%) (31%) (36%)
AlphaTrade Inc.
(% of total commission
paid)

Total amount of $76,021 $108,414 $59,920 $80,839 $110,960 $18,207 -- -- $0
brokerage commissions
paid during 1997

Total amount of $35,863 $22,345 $92,485 $75,253 $109,515 -- -- -- $0
brokerage commissions
paid during 1996
</TABLE>

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 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 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 and International Horizons Fund'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
International Fund's assets and up to 35% of the International Horizons Fund's
assets will be invested in such emerging market countries. As of May 1, 1999,
the following countries were considered by Colonial to be emerging market
countries:

<TABLE>
<CAPTION>
Europe and
Asia Latin America the Middle East Africa
- ---- ------------- --------------- ------
<S> <C> <C> <C>
China Argentina Czech Republic South Africa
Hong Kong Brazil Greece
India Chile Hungary
Indonesia Colombia Israel
South Korea Mexico Jordan
Malaysia Peru Poland
Pakistan Venezuela Russia
Philippines Turkey
</TABLE>

Under normal market conditions, the Tiger Fund invests primarily in
stocks of companies located in the nine Tiger countries of Asia. The Tigers of
Asia are Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand,
Indonesia, The People's Republic of China and the Philippines.

<PAGE>

Foreign Currency Transactions

Each of International Fund, Tiger Fund, Global Utilities Fund,
Strategic Income Fund, International Horizons Fund, Global Equity 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, Global Utilities Fund, International
Horizons Fund, Global Equity 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 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, Global Utilities Fund, Strategic Income
Fund, International Horizons Fund, Global Equity 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 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, International Horizons Fund, Global Equity 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. 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.

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.

<PAGE>

Options on Securities

Each of Global Utilities Fund, International Fund, International
Horizons Fund, Global Equity Fund, Real Estate Fund and All-Star Equity 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 sub-advisor, 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 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 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 SEC 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 sub-advisor 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.

The effective use of options also depends on a Fund's ability to
terminate option positions at times when its sub-advisor deems it desirable to
do so. Although the Fund will take an option position only if the sub-advisor
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, Strategic Income
Fund, International Horizons Fund, Global Equity Fund, Real Estate Fund and
All-Star Equity Fund may buy and sell certain future contracts (and in certain
cases related options), to the extent and for the purposes specified in the
Prospectuses.

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 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.

<PAGE>

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 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
sub-advisor'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 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
sub-advisor 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 sub-advisor'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 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
sub-advisor 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.

<PAGE>

Securities Loans

Each of Global Utilities Fund, U.S. Growth Fund, International Horizons
Fund, Global Equity Fund, Real Estate Fund and All-Star Equity 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 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 reinvested amount of dividends and
capital gains 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 (including distribution reinvestment shares) 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 a hypothetical Annual Rate of return
which if achieved annually would produce the same return as the cumulative total
return percentage calculated for the period.

It 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 "Ending
Redeemable Value," 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; July 5, 1994 in the case
of U.S. Growth Fund and Strategic Income Fund; May 1, 1995, in the case of Tiger
Fund; November 17, 1997 in the case of All-Star Equity Fund; and May 19,1998 in
the case of High Yield Fund and Small Cap Fund) through December 31, 1998 were:

<TABLE>
<CAPTION>
Fund Ending Cumulative Total Average Annual
Redeemable Value Return Percentage Total Return
- ---- ---------------- ----------------- --------------
<S> <C> <C> <C>
Colonial Growth and Income Fund, Variable Series $2,290 128.98% 16.23%
Stein Roe Global Utilities Fund, Variable Series 1,935 93.48 12.73
Colonial International Fund for Growth, Variable Series 1,148 14.82 3.00
Colonial U.S. Growth & Income Fund, Variable Series 2,621 162.09 23.90
Colonial Strategic Income Fund, Variable Series 1,520 51.96 9.75
Newport Tiger Fund, Variable Series 828 (17.21) (5.01)
Liberty All-Star Equity Fund, Variable Series 1,196 19.62 17.29
Colonial High Yield Securities Fund, Variable Series 974 (2.57) --
Colonial Small Cap Value Fund, Variable Series 868 (13.25) --
</TABLE>

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'
performance numbers reflect all Fund expenses, net of any voluntary waiver of
expenses by the advisor, sub-advisor or their affiliates, but 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. If performance information
included the effect of these additional amounts, returns would be lower.

<PAGE>

INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

PricewaterhouseCoopers LLP are the Trust's independent accountants. The
financial statements as of December 31, 1998 and for the fiscal years or periods
ended December 31, 1998 and December 31, 1997 incorporated by reference in this
SAI have been so incorporated, and the schedules of financial highlights for the
periods ended December 31, 1998 have been included in the Prospectus, in
reliance upon the report of PricewaterhouseCoopers 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, 1998 Annual Report of the Trust are
incorporated in this SAI by reference.