SteinRoe Variable Investment Trust
Capital Appreciation Fund
Managed Growth Stock Fund
Managed Assets Fund
Mortgage Securities Income Fund
Cash Income Fund
Annual Report
December 31, 1995
<PAGE>
TABLE OF CONTENTS
President's Letter 1
Portfolio Manager's Discussion:
Capital Appreciation Fund 3
Managed Growth Stock Fund 5
Managed Assets Fund 7
Mortgage Securities Income Fund 9
Cash Income Fund 11
Independent Auditors' Report 12
Financial Statements:
Capital Appreciation Fund 13
Managed Growth Stock Fund 18
Managed Assets Fund 23
Mortgage Securities Income Fund 29
Cash Income Fund 34
Notes to Financial Statements 38
<PAGE>
PRESIDENT'S LETTER
SteinRoe Variable Investment Trust
Dear Fellow Contract Owner:
We are pleased to present this annual report for the SteinRoe Variable
Investment
Trust--Capital Appreciation Fund, Managed Growth Stock Fund, Managed Assets
Fund, Mortgage Securities Income Fund and Cash Income Fund.
All of these funds have a fiscal year that ends December 31, so I'd like to
recap how the markets performed since December 31, 1994, and share with you
some of our expectations of what's ahead for the economy and the markets in
the near future.
What a Difference a Year Makes
A year ago, almost no one expected 1995 would turn into one of the biggest
runups in the history of the U.S. stock market. The Dow Jones Industrial
Average vaulted past 5,000 and the S&P 500 Index was up more than 30 percent
for the year. And while the stock market rally attracted most of the attention
of investors during 1995, fixed income funds certainly weren't wallflowers.
Fueled largely by falling interest rates, bond funds roared back in 1995,
helping to make 1994's losses a distant memory. Indeed, fixed income funds had
one of their best years on record. At year end, the yield on the benchmark
30-year Treasury bond hit 6 percent--compared with more than 8 percent at this
time last year. Money market funds also fared well, as assets silently swelled
more than $133 billion in 1995 to total more than $771 billion, their highest
level in 10 years and an increase of more than 18 percent over 1994.(1)
A Tough Act to Follow?
Given the seemingly picture-perfect economic backdrop--tumbling interest
rates, no recession in sight, a possible solution to the nagging budget
deficit and investors who keep pouring cash into mutual funds--a market
correction might seem unlikely. But as 1996 unfolds, predictions are flying
over whether the stock and bond market rallies can repeat themselves. Opinions
vary from the doomsayers who believe a major correction is inevitable, to
others who see 1995 as the start of a new economic era bound to bring further
record-breaking gains. We, however, don't predict either of those extremes.
We think there is some truth in the cautionary notes being sounded. Most of
the positive economic developments already have been factored into the market,
making prices relatively expensive and leaving virtually no room for error.
Meanwhile, some of the forces that propelled the market skyward are waning.
Long-term interest rates, for example, surprised everyone by tumbling two
percentage points in 1995, and while they may fall a bit more in 1996, another
such drop in the span of a year would be unprecedented. If anything goes
wrong, such as a surprising uptick in interest rates, the market could be
snagged by a long-overdue correction.
<PAGE>
Our belief is that moderate economic growth, mild inflation and lower interest
rates could help the stock market hold 1995 gains and move upward in 1996,
albeit not at the same pace as last year. Disappointing corporate earnings or
an unresolved budget bill could contribute to stock market volatility early in
the year. But if you can resist the temptation to flee the stock market at
the first sign of trouble, we think you can look forward to a year of
reasonable--but not blockbuster--returns. And while back-to-back boom years in
the fixed income markets are also rare, we believe there may still be some
steam left in the rally. Growing investor sentiment that the equity market
can't sustain its current level of growth, or a deficit-cutting budget deal,
for example, could pave the way for further bond market gains.
The Basics
While no one can predict what might happen to the markets in the future, we
believe investors should understand the factors that move the markets--not
just to profit from them, but to gain the patience to ride out short-term
volatility in their investments. As always, no matter what direction you think
the economy is heading, we think it's important to remember the basics. Think
long term and re-evaluate your investment portfolio from time to time to make
sure it continues to match your goals, risk tolerance and time horizon.
As always, we thank you for investing in SteinRoe Variable Investment Trust,
and we look forward to serving your investment needs.
Sincerely,
Richard R. Christensen
President
SteinRoe Variable Investment Trust
February 1, 1996
(1) Source: Strategic Insight
<PAGE>
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Capital Appreciation Fund
Dear Contract Owner:
For the year ended December 31, 1995, the Fund's total return lagged the
general market indices, increasing 11.8 percent, compared to a 28.5 percent
gain for the Russell 2000, the most comprehensive small company stock index, a
31.0 percent gain for the S&P MidCap Index and a 37.5 percent gain for the S&P
500.*
Much of the Fund's underperformance can be traced to early 1995 when the Fund
held a sizable stake--between 19 percent and 21 percent of equities--in
non-U.S. holdings at a time when the spread between domestic and international
stock market returns was significant. In addition, the Fund's small- and
mid-cap holdings posted lackluster returns until the third quarter of 1995.
After a difficult first half, the Fund's relative performance steadily
improved throughout the last half of 1995. For the six-month period ended
December 31, 1995, the Fund posted a total return of 13.2 percent, which
underperformed the S&P 500's six-month return of 14.4 percent, but exceeded
the 12.3 percent return of the Russell 2000 Index and the 11.3 percent return
of the S&P MidCap Index for the same period.
The Fund, which invests primarily in small and medium-sized companies, had 61
percent in stocks with market caps of less than $500 million, 12 percent in
stocks between $500 million and $1 billion and 27 percent in stocks with
market caps of more than $1 billion. The median market cap of the stocks in
the portfolio was $297 million. Although smaller stocks tend to be more
volatile, over the long term we believe a well-chosen group of small- and
mid-cap companies can generally achieve a greater rate of return. As a result,
we believe the Fund is best suited for investors with long-term time horizons
of three years or more. For the three-year period ended December 31, 1995, the
Fund had an annualized return of 15.3 percent, which outpaced the three-year
total returns of 14.5 percent for the Russell 2000, 12.9 percent for the S&P
MidCap and matched 15.3 percent for the S&P 500.
The Fund's ten largest holdings totaled 40 percent of equities at year end.
This group, which remains broadly diversified, has performed well over the
past year, led by Triad Guaranty (+108 percent), Interim Services (+41
percent) and Amerisource (+57 percent). At December 31, 1995, the prior three
holdings made up 3.9 percent, 4.1 percent and 4.6 percent of total net assets,
respectively. The Fund's top ten holdings performed particularly well during
the most recent quarter ended December 31, 1995, increasing on average 10
percent, which is higher than both the Fund's total return for the quarter of
2.1 percent and the 2.2 percent return of the Russell 2000.
<PAGE>
On average, we believe the companies the Fund owns are growing quite
satisfactorily and, after lagging the domestic stock market, they have become
relatively inexpensive. As of December 31, 1995, the Fund's portfolio is
selling around 17x earnings, which is in-line with the general market.
We will continue to focus our direct research efforts on evaluating company
management and identifying what we believe are large market opportunities.
E. Bruce Dunn, Richard B. Peterson, Portfolio Managers
* Total return performance includes changes in share price and reinvestment
of income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The S&P 500, the S&P MidCap and the
Russell 2000 are unmanaged groups of stocks that differ from the composition
of Capital Appreciation Fund; they are not available for direct investment.
<PAGE>
<TABLE>
Line Chart:
SteinRoe Variable Investment Trust
Capital Appreciation Fund and S&P 500
Performance of a Hypothetical $10,000 Investment January 1, 1989 to December
31, 1995
<CAPTION>
Average Annual Total Return at December 31, 1995
1 Year 5 year Inception
<S> <C> <C>
11.8% 19.2% 16.1%
<CAPTION>
Date Capital Appreciation Fund S&P 500 Index
<S> <C> <C>
1/89 10,000 10,000
12/89 13,083 13,163
12/90 11,917 12,754
12/91 16,357 16,631
12/92 18,725 17,896
12/93 25,406 19,697
12/94 25,708 19,955
12/95 28,729 27,444
Performance numbers reflect all Fund net expenses, but do not include any
insurance charges imposed by your insurance company's separate accounts. If
performance information included the effect of these additional amounts, it
would be lower.
</TABLE>
<PAGE>
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Managed Growth Stock Fund
Dear Contract Owner:
For the year ended December 31, 1995, the Fund's total return of 37.7%
outpaced both the 33.1 percent median return of its Lipper growth fund peer
group and the 37.5 percent return of the S&P 500.*
The Fund's solid performance was due in large part to the strength of its
health care holdings. Rebounding from 1994's threat of a nationalized health
care program, the health care sector performed well all year, particularly in
the last six months. Standout performers for the Fund include Johnson &
Johnson (2.8 percent of total net assets), Eli Lilly (2.2 percent) and Roche
(2.2 percent). We believe the outlook for health care stocks remains positive
for 1996, particularly for those companies with strong research and
development pipelines.
Interest rate sensitive stocks, such as Federal National Mortgage Association
(3.0 percent), Travelers (2.4 percent) and American International Group (2.5
percent) also performed well for the Fund. As a group, the S&P's financial
services sector is up more than 50 percent this year--quite an impressive
change from 1994 when high interest rates and the derivative scare hurt many
financial services firms. The current low interest rate, low inflation
environment is ideal for financial firms, and 1996 should continue to be a
good year for many of the stocks in this sector. Insurance stocks should also
perform well. The upswing in mergers and acquisitions is consolidating the
insurance industry into fewer and stronger hands--that should bring costs down
and profits up, sending insurance stocks higher. Finally, as the nation's
first "baby boomers" start to turn 50 this year, watch for the savings rate to
increase. As people reach this milestone, they tend to become savers, rather
than consumers. This should help contribute to the relative strength of the
financial services sector.
We are starting to increase our exposure to foreign markets, buying Sandoz
(1.9 percent), a Swiss drug company; Telefonica de Argentina (1.3 percent), an
Argentinean-based phone company and the Royal Bank of Scotland (1.3 percent).
We see numerous opportunities abroad, and we plan to continue increasing our
international exposure as 1996 unfolds.
Many economic factors contributed to the Fund's solid performance in 1995. The
nation's GDP (up close to 3 percent for the year) was strong, particularly
compared to many other industrialized nations. A huge surge in productivity,
combined with a tidal wave of exports, helped many manufacturers--who only a
few years ago were symbols of industrial decline--gain a measure of success
unseen for the last 30 years. Long-term interest rates (down two percentage
points in the past 12 months) have also been a major force in driving stock
prices higher. Short-term interest rates, however, remain too high at 5.5
percent, and we expect they will drop further in 1996.
<PAGE>
Outlook
With soft economic growth, lower interest rates, continued weak inflation and
the distinct possibility of a capital gains tax cut, we continue to find
high-quality, large-cap growth stocks attractive. That is not to say, however,
that 1996 will be a repeat of 1995. Many growth companies are at high
valuations, but if the economy continues its sluggishness, we believe that
companies with consistent, growing earnings will outperform.
Erik P. Gustafson, Harvey B. Hirschhorn, Portfolio Managers
* Total return performance includes changes in share price and reinvestment
of income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The S&P 500 is an unmanaged group of
stocks that differs from the composition of Managed Growth Stock Fund; it is
not available for direct investment. The Fund's growth fund peer group, as
defined by Lipper Analytical Services, Inc., an independent monitor of mutual
fund performance, includes funds that normally invest in companies whose
long-term earnings are expected to grow significantly faster than the earnings
of the stocks represented in the major unmanaged stock indices. According to
Lipper Analytical Services, Inc., the median returns for the growth fund peer
group for the one- and five- year periods ended December 31, 1995, were 33.1
percent and 16.4 percent, respectively. For the one- and five-year periods
ended December 31, 1995, the Fund ranked 21st out of 98 funds and 25th out of
48 funds, respectively, in its Lipper growth fund peer group.
<PAGE>
<TABLE>
Line Chart:
SteinRoe Variable Investment Trust
Managed Growth Stock Fund and S&P 500
Performance of a Hypothetical $10,000 Investment January 1, 1989 to December
31, 1995
<CAPTION>
Average Annual Total Return at December 31, 1995
1 Year 5 year Inception
<S> <C> <C>
37.7% 16.4% 15.6%
<CAPTION>
Date Managed Growth Stock Fund S&P 500 Index
<S> <C> <C>
1/89 10,000 10,000
12/89 13,130 13,163
12/90 12,913 12,754
12/91 19,116 16,631
12/92 20,381 17,896
12/93 21,394 19,697
12/94 20,036 19,955
12/95 27,595 27,444
Performance numbers reflect all Fund net expenses, but do not include any
insurance charges imposed by your insurance company's separate accounts. If
performance information included the effect of these additional amounts, it
would be lower.
</TABLE>
<PAGE>
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Managed Assets Fund
Dear Contract Owner:
For the year ended December 31, 1995, Managed Assets Fund's 25.4 percent total
return trailed the 37.5 percent return of the S&P 500, but modestly
outperformed the 24.2 percent median return of its flexible portfolio peer
group. The principal reason the Fund underperformed the S&P 500 during the
fourth quarter was its low equity ratio. We held only 59 percent of the
portfolio in equities as of December 31, 1995, with 6 percent of that total
held for its yield potential.
In particular, three defensive areas hindered the Fund's performance: fixed
income, real estate investment trusts (REITs) and natural gas. Fixed income,
which comprised 30 percent to 45 percent of the portfolio throughout the year,
performed better than expected (the Lehman Government/Corporate Index was up
more than 15 percent), but still lagged the S&P 500. REITs performed as
expected (NAREIT, the leading REIT index was up 15 percent), but still lagged
woefully behind the S&P. Natural gas stocks were negatively affected by one of
the warmest winters in 40 years and never recovered. Additionally, our low
price-earnings multiple strategy inhibited our participation in two of the
strongest sectors of the stock market--biotechnology and technology.
During the quarter, we initiated stakes in Canadian National Railway, a major
North American railroad that we purchased during its initial public offering;
Sandoz ADR, a worldwide drug company headquartered in Switzerland; Applied
Materials, a major supplier to the semi-conductor industry; and Crown Cork &
Seal, a leading manufacturer of cans, closures and the machinery to produce
them. All companies are large cap (over $1 billion market capitalization) and
meet our low P/E profile.
We continue to reduce modestly the number of issues in the portfolio. We
eliminated the Fund's positions in Service Corp. Int'l, which no longer met
our low P/E profile; as well as Rite Aid and BHC Financial, which met our
price targets. To fund new purchases, we also sold Coastal Corp., Georgia
Pacific, J.C. Penney and UGI Corp.
<PAGE>
The sectors that hindered our performance for most of 1995 suddenly look more
promising. Following the warmest winter in more than 40 years, the 1996 winter
is shaping up to be colder than average, which should benefit our natural gas
holdings. REIT stocks have been outperforming the S&P in recent weeks, while
technology stocks have been highly volatile and mostly down. We believe
strongly that 1996 will not offer the same high stock market returns as 1995,
and our more defensive posture should serve us well. Additionally, we are in
the fortunate position of having adequate cash reserves with which to buy
stocks if the market weakens.
Robert A. Christensen, Portfolio Manager
* Total return performance includes changes in share price and reinvestment
of income and capital gains distributions. Past performance is no guarantee of
future results. Share price and investment return will vary, so you may have a
gain or a loss when you sell shares. The S&P 500 is an unmanaged group of
stocks that differs from the composition of Managed Assets Fund; it is not
available for direct investment. The Lehman Government/Corporate Bond Index is
an unmanaged group of bonds that differs from the composition of Managed
Assets Fund; it is not available for direct investment. The NAREIT Index is an
unmanaged group of REITs that differs from the composition of Managed Assets
Fund; it is not available for direct investment. The Fund's flexible portfolio
fund peer group, as defined by Lipper Analytical Services, Inc., an
independent monitor of mutual fund performance, includes funds that allocate
their investments across various asset classes, including common stocks, bonds
and money market instruments, with a focus on total return. According to
Lipper Analytical Services, Inc., the median returns for the flexible
portfolio peer group for the one- and five-year periods ended December 31,
1995, were 24.2 percent and 12.7 percent , respectively. For the one- and
five-year periods ended December 31, 1995, the Fund ranked 28th out of 68
funds and 22nd out of 53 funds, respectively, in its Lipper flexible portfolio
fund peer group.
<PAGE>
<TABLE>
Line Chart:
SteinRoe Variable Investment Trust
Managed Assets Fund and S&P 500
Performance of a Hypothetical $10,000 Investment January 1, 1989 to December
31, 1995
<CAPTION>
Average Annual Total Return at December 31, 1995
1 Year 5 year Inception
<S> <C> <C>
25.4% 12.8% 12.1%
<CAPTION>
Date Strategic Managed Assets Fund S&P 500 Index
<S> <C> <C>
1/89 10,000 10,000
12/89 12,238 13,163
12/90 12,154 12,754
12/91 15,548 16,631
12/92 16,717 17,896
12/93 18,270 19,697
12/94 17,687 19.955
12/95 22,185 27,444
Performance numbers reflect all Fund net expenses, but do not include any
insurance charges imposed by your insurance company's separate accounts. If
performance information included the effect of these additional amounts, it
would be lower.
</TABLE>
<PAGE>
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Mortgage Securities Income Fund
Dear Contract Owner:
For the one-year period ended December 31, 1995, Mortgage Securities Income
Fund's 15.7 percent total return lagged the 16.0 percent median return of its
Lipper U.S. Mortgage Fund and the 16.8 percent total return of the Lehman
Mortgage-Backed Securities Index.* Performance primarily was a result of the
peer group's slightly longer duration. In addition, the Fund maintained a
marginally higher weighting in slight premium coupons than did the peer group.
As rates declined, the slight premium coupon sector suffered the most due to
increased prepayment risk.
The Fund's sector weighting remained stable during the first half of 1995. For
the first time, we added GNMA adjustable rate mortgages (ARMs) to our
holdings--the sharp rise in volatility during the second quarter made these
securities attractive. Our current holdings in these securities represent
roughly 2.8 percent of the holdings, and we will add to that position if
appropriate.
During the second half of 1995, falling interest rates sparked refinancing
fears in the mortgage market, causing mortgage-backed securities to lag
Treasuries. To take advantage of current attractive prices, during the fourth
quarter we increased slightly the Fund's mortgage position, which, as of
December 31, 1995, represented approximately 78.4 percent of holdings. This
was a tactical move designed to position the Fund well for the First Quarter
Effect, a cyclical pattern when mortgages typically outperform Treasuries
early in the year.
Going forward, we believe interest rates will continue to decline. We expect
to maintain our weighting in mortgage-backed securities, which will allow us
to take fullest advantage of favorable price movements stemming from the First
Quarter Effect. As the First Quarter Effect abates, we expect to begin
shifting assets, on a strategic basis, from corporates and mortgage-backed
bonds into Treasuries. While sharply falling interest rates have created a
significant level of concern over mortgage prepayment, the mortgage market's
long-term outlook is good. As a result, we expect to hold a core position of
mortgages in the portfolio.
Michael T. Kennedy, Portfolio Manager
* Performance numbers reflect all Fund expenses, but do not include any
insurance charges imposed by your insurance company's separate accounts. If
performance information included the effort of these additional amounts, it
would be lower. Total return performance includes changes in share price and
reinvestment of income and capital gains distributions. The Fund is neither
insured nor guaranteed by the U.S. government. Up to 20 percent of the Fund's
assets may be invested in other types of securities. The Lehman
Mortgage-Backed Securities Index represents an unmanaged group of government
securities that differs from the composition of each Stein Roe Fund; it is not
available for direct investment. Past performance is no guarantee of future
results. Share price and investment return will vary, so you may have a gain
or a loss when you sell shares. According to Lipper Analytical Services, Inc.,
an independent monitor of mutual fund performance, the median returns for the
U.S. mortgage peer group for the one- and five-year periods ended December 31,
1995, were 16.0 percent and 8.0 percent, respectively. For the one- and
five-year periods ended December 31, 1995, the Fund ranked 5th out of 8 funds
and 3rd out of 5 funds, respectively, in its Lipper U.S. mortgage peer group.
<PAGE>
<TABLE>
Line Chart:
Stein Roe Variable Investment Fund
Mortgage Securities Income Fund and Lehman Mortgage-Backed Securities Index
Performance of a Hypothetical $10,000 Investment January 1, 1989 to December
31, 1995
<CAPTION>
Average Annual Total Return at December 31, 1995
1 Year 5 year Inception
<S> <C> <C>
15.7% 8.0% 8.8%
<CAPTION>
Date Mortgage Securities Income Fund Lehman Mortgage-Backed
Securities Index
<S> <C> <C>
1/89 10,000 10,000
12/89 11,284 11,535
12/90 12,311 12,772
12/91 14,093 14,779
12/92 14,932 15,808
12/93 15,867 16,889
12/94 15,618 16,617
12/95 18,076 19,409
Performance numbers reflect all Fund net expenses, but do not include any
insurance charges imposed by your insurance company's separate accounts. If
performance information included the effect of these additional amounts, it
would be lower.
</TABLE>
<PAGE>
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Cash Income Fund
Dear Contract Owner:
For the one-year period ended December 31, 1995, Cash Income Fund's total
return of 5.6 percent outperformed its Lipper money market variable annuity
peer group, which posted a return of 5.5 percent. This performance ranked the
Fund 26th out of 91 funds in the peer group, placing it well above the peer
group median.
Any movement in short-term interest rates will have a roughly corresponding
effect on a money market investment's yield. A year of Federal Reserve
tightening, aimed at cooling the torrid economic growth of 1994, culminated
with one final increase in rates in February 1995. Interest rates subsequently
began to drift lower during the first half of 1995 as growth slowed and
investors began to assume that the Federal Reserve would begin easing interest
rates. The Federal Reserve did in fact ease in the second half of 1995--once
in early July and again in late December--and rates fell sharply.
Consequently, 7-day yield on the Fund fell from 5.76 percent on December 31,
1994, to 5.33 on December 31, 1995.
Performance for the year was driven primarily by a strategic lengthening of
the Fund's maturity during the first six months of 1995. When interest rates
began to drift down early in the first quarter, we sought to lock in the
previous, higher rates by purchasing fixed-rate notes and extending maturity
slightly.
At year end, foreign issues--particularly Japanese and other non-European
issues--typically are avoided by investors and dealers. As a result, supply
exceeds demand and prices are low, creating a buying opportunity for those who
are comfortable with foreign credits. Because of year-end "window dressing,"
even some buyers usually comfortable with foreign names may avoid holding them
and then repurchase after the reporting period. While Japanese banks have had
a volatile year, our research indicates that these credits are a good
risk--the government has shown support for these banks, and current data on
the Japanese economy suggest that it has turned the corner. As a result, we
recently shifted some assets into Japanese letter of credit-backed commercial
paper (9 percent of the portfolio), a higher-yielding security backed by
Japanese banks.
<PAGE>
Going forward, we expect rates to continue to drop. We see an even chance of
another Federal Reserve easing move in the first quarter--and because the
December easing move was smaller than that expected (and factored in) by the
market, our strategy will be dictated by the degree to which the Federal
Reserve eases. As a result, we'll remain cautious.
Jane M. Naeseth, Portfolio Manager
Performance numbers reflect all Fund net expenses, but do not include any
insurance charges imposed by your insurance company's separate accounts. If
performance information included the effect of these additional amounts, it
would be lower. Total return performance includes changes in share price and
reinvestment of income and capital gains distributions. Past performance is no
guarantee of future results. Share price and investment return will vary, so
you may have a gain or a loss when you sell shares. According to Lipper
Analytical Services, Inc., an independent monitor of mutual fund performance,
there were 91 funds in this money market variable annuity peer group for the
six months ended December 31, 1995. An investment in the Fund is neither
insured nor guaranteed by the U.S. government, and there is no assurance that
the Fund will be able to maintain its stable net asset value of $1 per share.
The Treasury yield curve does not represent any particular SteinRoe fund; you
can find it in the Wall Street Journal.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stein Roe Variable Investment Trust Cash Income Fund
The Board of Trustees and Shareholders
of SteinRoe Variable Investment Trust
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Capital Appreciation Fund, Managed
Growth Stock Fund, Managed Assets Fund, Mortgage Securities Income Fund, and
Cash Income Fund, all constituent funds of SteinRoe Variable Investment Trust,
as of December 31, 1995, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the years
presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
funds constituting the SteinRoe Variable Investment Trust as of December 31,
1995, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and the
financial highlights for each of the years in the presented, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 12, 1996
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Capital Appreciation Fund / December 31,
1995
<CAPTION>
Market
Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCKS--(93.5%)
Aerospace - (1.9%)
Hexel Corporation 125,000 $ 1,406,250
Power Control Technologies, Inc. 155,000 1,259,375
-----------
2,665,625
-----------
Banks/Savings and Loans--(2.2%)
Rancho Santa Fe National Bank (a) 110,000 385,000
Southern National Corporation 105,000 2,756,250
-----------
3,141,250
-----------
Broadcasting--(3.0%)
Central European Media Enterprises 141,900 2,908,950
Grupo Radio Centro ADS 186,000 1,371,750
-----------
4,280,700
-----------
Business Services--(17.0%)
Danka Business Systems Plc ADR 106,000 3,922,000
Fiserv Inc. (a) 95,000 2,850,000
G & K Services Cl. A 256,000 6,528,000
Interim Services, Inc. (a) 170,000 5,907,500
Unitog Company 213,000 5,138,625
-----------
24,346,125
-----------
Chemicals--(0.7%)
CFC International, Inc. (a) 115,000 991,875
-----------
Computers/Business Equipment--(1.2%)
Daktronics, Inc. (a) 85,300 383,850
Zytec Corp. (a) 110,000 1,265,000
-----------
1,648,850
-----------
Computer Services--(3.2%)
Keane, Inc. (a) 209,800 4,641,825
-----------
Consumer Products--(2.3%)
Kimberly-Clark de Mexico 105,000 1,587,667
Thomas Nelson, Inc. 135,000 1,755,000
-----------
3,342,667
-----------
Electronics--(5.4%)
AVX Corp. 87,400 2,316,100
C.P. Clare Corporation 110,000 2,255,000
Harris Corp 40,000 2,185,000
Littelfuse, Inc. (a) 25,000 918,750
-----------
7,674,850
-----------
Energy Services--(2.5%)
Weatherford Enterra Inc. (a) 125,000 3,609,375
-----------
<PAGE>
<CAPTION>
Market
Shares Value
--------- ----------
<S> <C> <C>
Financial--(2.7%)
BHI Corp. 163,516 $ 2,575,377
Grupo Financiero Inbursa (a) 460,000 1,343,336
-----------
3,918,713
-----------
Health Care--(7.1%)
AmeriSource Distribution
Corporation (a) 199,700 6,590,100
Henry Schein (a) 115,200 3,398,400
PACE Health Management Systems,
Inc. (a) 75,000 196,875
-----------
10,185,375
-----------
Insurance--(13.6%)
Meadowbrook Insurance Group, Inc. (a) 74,200 2,485,700
National Mutual of Asia 4,493,000 4,067,694
Protective Life Corporation (a) 85,000 2,656,250
Triad Guaranty, Inc. (a) 213,800 5,665,700
20th Century Industries, Inc. 234,000 4,650,750
-----------
19,526,094
-----------
Media/Broadcasting--(1.4%)
Valuevision International, Inc. (a) 350,000 1,946,875
-----------
Medical Equipment--(2.5%)
Stryker Corporation 69,400 3,643,500
-----------
Miscellaneous--(0.8%)
Barefoot Inc. 110,000 1,155,000
-----------
Miscellaneous Transportation--(1.2%)
Ek Chor China Motorcycle Co. Ltd. 150,000 1,743,750
-----------
Packaging--(1.6%)
Crown Cork & Seal, Inc. (a) 55,000 2,296,250
-----------
Oil/Gas--(6.5%)
Alexander Energy Corp. (a) 355,000 1,619,687
Barrett Resources Corp. (a) 120,000 3,525,000
St. Mary Land & Exploration Co. 49,000 686,000
Renaissance Energy Ltd. 116,400 2,901,892
Vintage Petroleum, Inc. 25,000 562,500
-----------
9,295,079
-----------
Retail Trade--(3.1%)
Proffitts, Inc. (a) 59,000 1,548,750
Quality Food Centers, Inc. 130,000 2,860,000
-----------
4,408,750
-----------
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS (Continued)
SteinRoe Variable Investment Trust Capital Appreciation Fund / December 31, 1995
Market
Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCKS (Continued)
Specialty Chemicals--(8.1%)
Cambrex Corp. 98,300 $ 4,067,163
OM Group, Inc. 173,500 5,747,187
PENWEST Ltd. 73,700 1,824,075
------------
11,638,425
------------
Telecommunications--(4.0%)
ABC Communication Holdings Ltd. 3,199,000 579,237
Plantronics, Inc. (a) 125,000 4,515,625
Shanghai Post &
Telecommunications (a) 1,659,000 660,282
------------
5,755,144
------------
Water Filtration--(1.5%)
Culligan 87,400 2,119,450
------------
Total Common Stocks (Cost $119,676,471) 133,975,547
------------
Market
SHORT-TERM INVESTMENTS--(8.6%) Par Value
----------- ------------
Goldman Sachs Group, 6.050%, due
01/02/96 $ 4,000,000 $ 3,997,983
ITT Hartford, 5.800%, due 1/03/96 6,000,000 5,996,133
Lehman Brothers Holdings, 6.100%,
due 1/02/96 2,265,000 2,263,849
------------
Total Short-Term Investments
(Cost $12,257,965) 12,257,965
------------
Total Investments--(102.1%)
(Cost $131,934,436)(b) 146,233,512
Other Assets, Less Liabilities--(-2.1%) (2,985,383)
------------
Net Assets (100%) $143,248,129
=============
<FN>
(a)Non-income producing security.
(b)The cost of investments for federal income tax purposes is $131,958,186.
Gross unrealized appreciation and depreciation on investments at
December 31, 1995 is as follows:
Gross unrealized appreciation: $22,380,839
Gross unrealized depreciation: (8,105,513)
------------
Net unrealized appreciation: $14,275,326
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Capital Appreciation Fund / December 31, 1995
<S> <C>
Assets:
Investments, at market value (identified cost $131,934,436) $146,233,512
Receivable for investments sold 1,142,078
Receivable for fund shares sold 86,950
Dividends and interest receivable 21,718
Other assets 14,955
------------
Total assets 147,499,213
------------
Liabilities:
Payable for investments purchased 3,736,360
Payable for fund shares repurchased 356,742
Management fee payable 55,422
Administrative fee payable 16,644
Accrued expenses payable 36,486
Payable to custodian bank 49,430
------------
Total liabilities 4,251,084
------------
Net assets $143,248,129
============
Net assets represented by:
Paid-in capital $129,235,823
Accumulated overdistributed net investment income (77,716)
Accumulated distributions in excess of net realized gains on
investments (209,696)
Net unrealized appreciation on investments and foreign currencies 14,299,718
------------
Total net assets applicable to outstanding shares of
beneficial interest $143,248,129
=============
Shares of beneficial interest outstanding 8,773,334
=============
Net asset value per share $16.33
=======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<S> <C>
Investment income:
Dividends (net of foreign taxes withheld) $ 734,892
Interest income 681,999
-------------
Total investment income 1,416,891
-------------
Expenses:
Management fee 686,978
Administrative fee 206,085
Custodian fee 60,122
Accounting fee 27,202
Printing expense 24,171
Audit and legal fees 18,797
Trustees' expense 9,696
Transfer agent fee 7,460
Miscellaneous expense 9,183
-------------
Total expenses 1,049,694
-------------
Net investment income 367,197
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 1,051,804
Net realized losses on foreign currency transactions (20,399)
Change in unrealized appreciation or depreciation on investments 13,894,884
-------------
Net increase in net assets resulting from operations $ 15,293,486
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Capital Appreciation Fund
Years Ended December 31,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Operations:
Net investment income $ 367,197 $ 517,097
Net realized gains on investments 1,051,804 13,548,855
Net realized losses on foreign currency transactions (20,399) (231)
Change in unrealized appreciation or
depreciation on investments 13,894,884 (12,211,045)
------------ ------------
Net increase in net assets resulting from operations 15,293,486 1,854,676
------------ ------------
Distributions declared from:
Net investment income (346,798) (516,866)
Distributions in excess of net investment income (28,200) (47,983)
Net realized gains on investments (849,985) (14,465,741)
Distributions in excess of net realized gains
on investments -- (411,514)
------------ ------------
Total distributions (1,224,983) (15,442,104)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold 43,757,834 68,416,999
Cost of fund shares repurchased (49,881,536) (32,737,534)
Distributions reinvested 1,224,983 15,442,104
------------ ------------
Net increase (decrease) in net assets resulting
from fund share transactions (4,898,719) 51,121,569
------------ ------------
Total increase in net assets 9,169,784 37,534,141
Net assets:
Beginning of year 134,078,345 96,544,204
------------ ------------
End of year $143,248,129 $134,078,345
============ ============
Accumulated overdistributed net investment income
included in ending net assets $ (77,716) $ (49,516)
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold 2,916,477 4,230,792
Shares repurchased (3,317,111) (2,037,606)
Distributions reinvested 75,757 1,065,237
------------ ------------
Net increase (decrease) (324,877) 3,258,423
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Capital Appreciation Fund
Years Ended December 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $ 14.74 $ 16.53 $ 15.34 $ 15.32 $ 12.07
--------- --------- -------- -------- --------
Net investment income 0.04 0.06 0.03 -- 0.21
Net realized and unrealized gains
on investments and foreign currency transactions 1.69 0.09 5.22 2.17 4.19
--------- --------- -------- -------- --------
Total from investment operations 1.73 0.15 5.25 2.17 4.40
--------- --------- -------- -------- --------
Less distributions:
Distributions from and in excess of net investment income (0.04) (0.07) (0.02) -- (0.15)
Distributions from and in excess of net realized gains
on investments (0.10) (1.87) (4.04) (2.15) (1.00)
--------- --------- -------- -------- --------
Total distributions (0.14) (1.94) (4.06) (2.15) (1.15)
--------- --------- -------- -------- --------
Net asset value, end of year $ 16.33 $ 14.74 $ 16.53 $ 15.34 $ 15.32
======== ======== ======= ======= =======
Total return:
Total investment return 11.75% 1.19%(b) 35.68%(b) 14.48% 37.25%
Ratios/supplemental data:
Net assets, end of period (000s) $143,248 $134,078 $96,544 $52,135 $41,179
Ratio of expenses to average net assets 0.76% 0.80%(a) 0.84%(a) 1.01% 1.03%
Ratio of net investment income to average net assets 0.26% 0.44%(b) 0.13%(b) (0.01)% 1.35%
Portfolio turnover ratio 132% 144% 112% 85% 36%
<FN>
(a) These ratios were not materially affected by the reimbursement
of certain expenses by the Investment Adviser and Administrator.
(b) Computed giving effect to the Investment Adviser's and the
Administrator's expense limitation undertaking.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Managed Growth Stock Fund / December 31,
1995
Market
Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCKS--(96.2%)
Banks; Savings & Loans--(7.0%)
Citicorp 50,000 $ 3,362,500
Fleet Financial Group Inc. 50,000 2,037,500
MBNA Corp. 70,000 2,581,250
Royal Bank of Scotland Plc 182,000 1,656,087
-----------
9,637,337
-----------
Business Services--(2.4%)
First Data Corporation 50,000 3,343,750
-----------
Computers and Computer Software--(3.4%)
Hewlett-Packard 25,000 2,093,750
Microsoft Corp. (a) 30,000 2,632,500
-----------
4,726,250
-----------
Construction--(1.9%)
Fluor Inc. 40,000 2,640,000
-----------
Consumer-Related--(7.8%)
CUC International, Inc. (a) 75,000 2,559,375
The Gillette Company 75,000 3,909,375
The Proctor & Gamble Co. 50,000 4,150,000
-----------
10,618,750
-----------
Distribution--Wholesale--(1.8%)
Sysco Corporation 75,000 2,437,500
-----------
Drugs--(3.7%)
Eli Lilly & Co. 50,000 2,812,500
Sandoz ADRs 50,000 2,293,750
-----------
5,106,250
-----------
Electrical Equipment--(3.2%)
General Electric Company 60,000 4,320,000
-----------
Electronics--(1.4%)
Tellabs 50,000 1,850,000
-----------
Energy--(3.4%)
Renaissance Energy Ltd. (a) 75,000 1,869,776
Schlumberger Ltd. 40,000 2,770,000
-----------
4,639,776
-----------
<PAGE>
<CAPTION>
Market
Shares Value
--------- -----------
<S> <C> <C>
Financial Services--(3.2%)
Federal National Mortgage
Association 35,000 $ 4,344,375
-----------
Food/Beverage/Tobacco--(5.1%)
The Coca Cola Company 50,000 3,712,500
Nabisco Holdings Corp. 100,000 3,262,500
-----------
6,975,000
-----------
Health Care--(10.2%)
Abbott Laboratories 65,000 2,713,750
Johnson & Johnson 40,000 3,425,000
Roche Holdings Ltd. ADSs (c) 40,000 3,172,116
United Healthcare 70,000 4,585,000
-----------
13,895,866
-----------
Hotel--(3.0%)
HFS, Inc. 50,000 4,087,500
------------
Insurance--(5.5%)
American International Group, Inc. 37,500 3,468,750
The Travelers, Inc. 65,000 4,086,875
-----------
7,555,625
-----------
Leisure & Entertainment--(2.6%)
Disney (Walt) Co. 60,000 3,540,000
-----------
Media--(1.7%)
Viacom International Incorporated
Class B (a) 50,000 2,368,750
-----------
Medical Supplies--(2.9%)
Medtronic, Inc. 70,000 3,911,250
-----------
Retail--(4.5%)
The Home Depot, Inc. 75,000 3,590,625
Kohl's Corp. (a) 50,000 2,625,000
-----------
6,215,625
-----------
Restaurants--(2.6%)
McDonalds Corporation
80,000 3,610,000
-----------
Rubber, Plastic & Related--(2.6%)
Illinois Tool Works Inc. 60,000 3,540,000
-----------
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS Market
(Continued) Shares Value
---------- -----------
<S> <C> <C>
Technology Services--(7.0%)
Cisco Systems, Inc. 50,000 $ 3,731,250
General Motors Corp. Series E-1 60,000 3,120,000
Sun Microsystems 60,000 2,737,500
------------
9,588,750
------------
Telecommunications--(9.3%)
AT&T Corporation 45,000 2,913,750
Airtouch Communications (a) 85,000 2,401,250
LM Ericsson Telecommunications
ADRs Class B 150,000 2,925,000
Motorola, Inc. 50,000 2,850,000
Telefonica De Argentina ADRs 60,000 1,635,000
------------
12,725,000
------------
Total Common Stocks (Cost $92,619,727) 131,677,354
------------
Par
----------
SHORT-TERM INVESTMENTS--(3.8%)
Lehman Brothers Holdings, Inc.,
6.800% 1/02/96
(Cost $5,162,374) $5,165,000 5,162,374
------------
Total Investments--(100.0%)
(Cost $97,782,101) (b) 136,839,728
Other Assets, Less Liabilities (0.0%) (5,918)
------------
Net Assets (100%) $136,833,810
=============
<FN>
(a) Non-income producing security.
(b) The cost of investments for federal income tax purposes is
$97,783,341. Gross unrealized appreciation and depreciation at
December 31, 1995 is as follows:
Gross unrealized appreciation: $39,457,809
Gross unrealized depreciation: (401,422)
------------
Net unrealized appreciation: $39,056,387
============
(c) Private placement security. These securities generally are issued to
institutional investors, such as the Fund who agree that they
are purchasing the securities for investment and not with a view
to public distribution. Any resale by the Fund must be in an
exempt transaction, normally to other institutional investors.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Managed Growth Stock Fund / December 31, 1995
<S> <C>
Assets:
Investments, at market value (identified cost $97,782,101) $136,839,728
Cash 54,057
Receivable for fund shares sold 121,310
Dividends and interest receivable 191,617
Other assets 11,534
-------------
Total assets 137,218,246
-------------
Liabilities:
Payable for fund shares repurchased 283,459
Management fee payable 53,822
Administrative fee payable 16,164
Accrued expenses payable 24,905
Other liabilities 6,086
-------------
Total liabilities 384,436
-------------
Net assets $136,833,810
============
Net assets represented by:
Paid-in capital $ 97,920,456
Accumulated overdistributed net investment income (40,231)
Accumulated distributions in excess of net realized
gains on investments (104,384)
Net unrealized appreciation on investments and foreign currencies 39,057,969
-------------
Total net assets applicable to outstanding shares of
beneficial interest $136,833,810
============
Shares of beneficial interest outstanding 5,801,702
============
Net asset value per share $23.59
======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<S> <C>
Investment income:
Dividends (net of foreign taxes withheld) $ 1,253,041
Interest income 459,993
-------------
Total investment income 1,713,034
-------------
Expenses:
Management fee 582,541
Administrative fee 174,762
Accounting fee 26,683
Audit fee 18,823
Custodian fee 18,654
Printing expense 12,075
Trustees' expense 8,371
Transfer agent fee 7,459
Miscellaneous expense 15,224
-------------
Total expenses 864,592
-------------
Net investment income 848,442
Realized and unrealized gains (losses) on investments:
Net realized gains on investments 6,765,437
Change in unrealized appreciation or depreciation on investments 29,815,844
-------------
Net increase in net assets resulting from operations $ 37,429,723
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Managed Growth Stock Fund
Years Ended December 31,
-------------------------------
1995 1994
------------ -------------
<S> <C> <C>
Operations:
Net investment income $ 848,442 $ 784,118
Net realized gains on investments 6,765,437 5,159,272
Change in unrealized appreciation or
depreciation on investments 29,815,844 (13,153,444)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 37,429,723 (7,210,054)
------------ ------------
Distributions declared from:
Net investment income (799,977) (784,118)
Distributions in excess of net investment income -- (84,035)
Net realized gains on investments (6,557,064) (5,159,272)
Distributions in excess of net realized gains
on investments (42,937) (253,915)
------------ ------------
Total distributions (7,399,978) (6,281,340)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold 23,896,709 18,043,118
Cost of fund shares repurchased (23,225,761) (23,661,234)
Distributions reinvested 7,399,978 6,281,340
------------ ------------
Net increase in net assets resulting from fund
share transactions 8,070,926 663,224
------------ ------------
Total increase (decrease) in net assets 38,100,671 (12,828,170)
Net assets:
Beginning of year 98,733,139 111,561,309
------------ ------------
End of year $136,833,810 $ 98,733,139
============ ============
Accumulated overdistributed net investment income
included in ending net assets $ (40,231) $ (88,697)
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold 1,121,091 913,688
Shares repurchased (1,086,399) (1,211,396)
Distributions reinvested 314,893 346,270
------------ ------------
Net increase 349,585 48,562
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Managed Growth Stock Fund
Years Ended December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $ 18.11 $ 20.65 $ 20.10 $ 19.47 $ 13.44
--------- -------- --------- -------- --------
Net investment income 0.15 0.15 0.13 0.11 0.17
Net realized and unrealized gains (losses)
on investments 6.68 (1.46) 0.86 1.18 6.25
--------- -------- --------- -------- --------
Total from investment operations 6.83 (1.31) 0.99 1.29 6.42
--------- -------- --------- -------- --------
Less distributions:
Distributions from and in excess of net investment income (0.15) (0.17) (0.12) (0.10) (0.18)
Distributions from and in excess of net realized gains
on investments (1.20) (1.06) (0.32) (0.56) (0.21)
--------- -------- --------- -------- --------
Total distributions (1.35) (1.23) (0.44) (0.66) (0.39)
--------- -------- --------- -------- --------
Net asset value, end of year $ 23.59 $ 18.11 $ 20.65 $ 20.10 $19.47
======== ======= ======== ======= =======
Total return:
Total investment return 37.73% (6.35)% 4.97% 6.63% 48.03%
Ratios/supplemental data:
Net assets, end of period (000s) 136,834 $98,733 $111,561 $64,402 $38,481
Ratio of expenses to average net assets 0.74% 0.77% 0.83% 0.97% 1.15%
Ratio of net investment income to average net assets 0.72% 0.75% 0.77% 0.63% 1.15%
Portfolio turnover ratio 41% 72% 77% 20% 40%
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Managed Assets Fund / December 31, 1995
Market
Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCKS--(54.2%)
Banks--(5.5%)
Bank America Corporation 58,000 $ 3,755,500
Bank of Boston Corp. 40,000 1,850,000
Citicorp 66,500 4,472,125
Mercantile Bancorp Inc. 36,000 1,656,000
NationsBank Corp. 51,500 3,585,688
-----------
15,319,313
-----------
Building and Construction--(1.0%)
Masco Corporation 90,000 2,823,750
-----------
Chemicals--(2.2%)
Praxair, Inc. 143,000 4,808,375
Rexene Corporation 120,000 1,290,000
-----------
6,098,375
-----------
Computers--(1.1%)
International Business Machine 33,000 3,027,750
-----------
Consumer Products--(1.4%)
First Brands Corp. 80,000 3,810,000
-----------
Data Products & Reproduction--(1.0%)
Xerox 20,000 2,740,000
-----------
Drugs/Health Care--(7.1%)
American Home Products Corp. 35,000 3,395,000
Bristol-Meyers Squibb Company 44,000 3,778,500
Elan Corporation Plc ADRs (a) 77,000 3,744,125
Integrated Healthcare Services 90,000 2,250,000
Eli Lilly & Company 56,000 3,150,000
Sandoz ADRs 75,000 3,440,625
-----------
19,758,250
-----------
Electrical Equipment--(3.3%)
Emerson Electric Co. 45,500 3,719,625
General Electric Company 73,500 5,292,000
-----------
9,011,625
-----------
Electronics--(3.2%)
Harris Corp. 66,000 3,605,250
Intel Corporation 59,000 3,348,250
Phillips Electronics N.V. 50,000 1,793,750
-----------
8,747,250
-----------
Environmental Services--(1.5%)
WMX Technologies 138,000 4,122,750
-----------
Fabricated Metal Products--(1.4%)
Crown Cork & Seal Co., Inc. (a) 92,000 3,841,000
-----------
<PAGE>
<CAPTION>
Market
Shares Value
--------- -----------
<S> <C> <C>
Financial Services--(3.0%)
Federal National Mortgage Association 41,000 $ 5,089,125
Green Tree Financial Corp. 126,000 3,323,250
-----------
8,412,375
-----------
Food/Beverage/Tobacco--(2.0%)
PepsiCo, Inc. 37,000 2,067,375
Sara Lee Corporation 113,000 3,601,875
-----------
5,669,250
-----------
Holding--(1.6%)
Security Capital Industrial Trust 256,000 4,480,000
-----------
Housewares--(1.0%)
Newell 105,000 2,716,875
-----------
Insurance--(1.2%)
TIG Holdings 119,000 3,391,500
-----------
Machinery--(1.1%)
Applied Materials, Inc. (a) 41,000 1,614,375
Helix Technology Corp. 35,000 1,382,500
-----------
2,996,875
-----------
Oil/Gas--(2.7%)
Amoco Corp. 50,000 3,593,750
Enron Corp. 103,600 3,949,750
-----------
7,543,500
-----------
Paper & Forest Products--(1.9%)
Kimberly Clark Corporation 28,000 2,317,000
Sonoco Products 110,000 2,887,500
-----------
5,204,500
-----------
Publishing & Broadcasting--(1.3%)
Hubbell Inc., Class B 55,000 3,616,250
-----------
Real Estate--(2.5%)
Avalon Properties, Inc. 158,000 3,397,000
Southwestern Properties Trust 267,000 3,604,500
-----------
7,001,500
-----------
Retail--(0.8%)
TOYS "R" US, Inc. (a) 108,000 2,349,000
-----------
Telecommunications--(2.2%)
Frontier Corp. 124,000 3,720,000
Telefonos De Mexico S.A. de C.V.,
Class A ADRs 75,000 2,390,625
-----------
6,110,625
-----------
<PAGE>
<CAPTION>
Market
Shares Value
-------- ------------
<S> <C> <C>
COMMON STOCKS (Continued)
Transportation--(1.8%)
CSX Corp. 74,000 $ 3,376,250
Canadian National Railway (a) 100,000 1,500,000
-----------
4,876,250
-----------
Utilities--(2.4%)
Empressa Nacional De Electricidad
ADRs 54,000 3,091,500
Enron Global Power & Pipe 140,000 3,482,500
-----------
6,574,000
-----------
Total Common Stocks (Cost $118,373,995) 150,242,563
-----------
PREFERRED STOCKS (0.9%)
Gas Exploration--(0.9%)
Occidental Petroleum Corporation (c)
(Cost $2,360,750) 45,000 2,452,500
-----------
<CAPTION>
Par
----------
<S> <C> <C>
LONG-TERM OBLIGATIONS--(31.5%)
Air Transportation--(1.2%)
Federal Express Corporation 1994
Pass-Through Certificates Series
A310-A1 7.530% 9/23/06 $2,360,190 2,497,789
United Airline Corporation Series
1991-A-1 9.200% 3/22/08 711,197 795,140
-----------
3,292,929
-----------
Asset-Backed Securities--(2.4%)
ALPS Pass-Through Trust Series 1994-1
Class C2 9.350% 9/15/04 1,989,855 2,112,350
American Mortgage Trust Series 1993-3
Class 3B 8.190% 9/27/22 (c) 2,205,796 2,211,840
Greentree Home Improvement Loan
Trust Series 1994-A Class A
7.050% 3/15/14 1,346,069 1,366,892
Greentree Financial Securitized Net
Interest Margin Series 1994-A
6.900% 2/15/04 937,975 945,300
-----------
6,636,382
-----------
Banks--(5.0%)
Den Danske Bank 6.550% 9/15/03 2,250,000 2,261,363
Bangkok Bank Public Ltd.
7.250% 9/15/05 (c) 3,000,000 3,110,490
Kansallis Osake Panki 10.000% 5/1/02 3,500,000 4,179,700
Santander Financial Issuances
7.750% 5/15/05 4,000,000 4,377,760
-----------
13,929,313
-----------
<PAGE>
<CAPTION>
Market
Par Value
-------- ------------
<S> <C> <C>
Drugs/Healthcare--(2.4%)
Nationwide Health Property Inc.
Conv. Deb., 6.250% 1/01/99 $3,400,000 $3,395,750
Sandoz Corporation 6.625% 7/28/05 3,000,000 3,102,300
----------
6,498,050
----------
Foreign Government Regional Bond--(1.0%)
Corporacion Andina de Fomento
6.625% 10/14/98 (c) 2,900,000 2,890,894
----------
Financial (2.8%)
American Residential Mtg. Corp.
Medium-Term Note 6.110% 2/03/99 2,000,000 2,023,140
Associates Corporation of North
America 7.500% 4/15/02 4,000,000 4,309,240
General Motors Acceptance Corp.
9.625% 12/15/01 1,300,000 1,527,510
----------
7,859,893
----------
Hotels--(0.6%)
Renaissance Hotel Group
8.875% 10/01/05 1,600,000 1,685,152
----------
Major Chemicals--(1.4%)
Hanson Overseas 7.375% 1/15/03 3,500,000 3,751,475
----------
Media--(0.6%)
TimeWarner, Inc. Conv. Deb.
8.750% 1/10/15 1,699,750 1,750,743
----------
Mortgage-Backed Securities--(1.0%)
Lennar Central Partners Limited
Partnership Series 1994-1 Class C
8.120% 9/15/02 (c) 2,500,000 2,547,375
MDC Mortgage Funding Corporation
Series Q Class 5, 8.850% 3/20/18 311,983 324,731
----------
2,872,106
----------
Oil/Gas--(2.4%)
Consolidated Natural Gas
Conv. Deb. 7.250% 12/15/15 2,500,000 2,581,250
SFP Pipeline Holdings, Inc.
Conv. Deb. 10.410% 8/15/10 1,400,000 1,767,500
Exxon Capital Corp. (Effective Yield
6.590%) 11/15/04 4,000,000 2,381,400
----------
6,730,150
----------
Telecommunications--(1.6%)
Telecommunications Inc.
8.250% 1/15/03 4,000,000 4,321,360
----------
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS Market
(Continued) Par Value
---------- -----------
<S> <C> <C>
LONG-TERM OBLIGATIONS (Continued)
Utilities--(0.9%)
Niagara Mohawk Power Corp.
8.000% 6/01/04 $2,500,000 $ 2,435,475
------------
U.S. Government and Agency Obligations--(8.2%)
Federal Home Loan Bank
7.360% 7/01/04 7,500,000 8,230,650
Federal Home Loan Mortgage
Corporation
8.065% 1/27/05 4,000,000 4,610,480
12.000% 7/01/20 Gold 2,015,513 2,265,557
Federal National Mortgage Association
8.000% 4/13/05 1,500,000 1,566,720
Government National Mortgage
Association 6.500% 7/20/25 ARM 1,512,670 1,540,942
U.S. Treasury Note 6.250% 2/15/03 4,250,000 4,435,853
------------
22,650,201
------------
Total Long-Term Obligations
(Cost $84,793,100) 87,304,123
------------
SHORT-TERM INVESTMENTS--(12.8%)
Lehman Brothers Holding Inc.
6.100% 1/02/96 11,445,000 11,439,182
Goldman Sachs Group
6.050% 1/03/96 12,445,000 12,436,634
Raytheon Co. 5.950% 1/04/96 11,490,000 11,480,505
------------
Total Short-Term Investments
(Cost $35,356,321) 35,356,321
------------
Total Investments--(99.4%)
(Cost $240,884,166) (b) 275,355,507
Other Assets Less Liabilities (0.6%) 1,658,126
------------
Net Assets (100%) $277,013,633
=============
<FN>
(a)Non-income producing security.
(b) The cost of investments for federal income tax purposes is
identical.
Gross unrealized appreciation and depreciation at December 31,
1995 is as follows:
Gross unrealized appreciation: 36,860,988
Gross unrealized depreciation: (2,389,647)
------------
Net unrealized appreciation: 34,471,341
============
(c) Private placement security. These securities generally are issued to
institutional investors, such as the Fund who agree that they are purchasing
the securities for investment and not with a view to public distribution. Any
resale by the Fund must be in an exempt transaction, normally to other
institutional investors.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Managed Assets Fund / December 31, 1995
<S> <C>
Assets:
Investments, at market value (identified cost $240,884,166) $275,355,507
Cash 58,284
Receivable for fund shares sold 236,603
Dividends and interest receivable 1,810,940
Other assets 29,911
------------
Total assets 277,491,245
------------
Liabilities:
Payable for fund shares repurchased 320,646
Management fee payable 97,798
Administrative fee payable 32,637
Accrued expenses payable 26,531
------------
Total liabilities 477,612
------------
Net assets $277,013,633
============
Net assets represented by:
Paid-in capital $242,794,477
Accumulated overdistributed net investment income (153,841)
Accumulated distributions in excess of net realized
gains on investments (98,344)
Net unrealized appreciation on investments 34,471,341
------------
Total net assets applicable to outstanding shares of
beneficial interest $277,013,633
============
Shares of beneficial interest outstanding 19,674,850
============
Net asset value per share $14.08
=======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<S> <C>
Investment income:
Interest income $ 6,328,644
Dividends (net of foreign taxes) 3,728,769
-----------
Total investment income 10,057,413
-----------
Expenses:
Management fee 1,002,185
Administrative fee 334,062
Custodian fee 30,682
Accounting fee 29,356
Audit and legal fees 25,450
Printing expense 17,135
Trustees' expense 13,450
Transfer agent fee 7,460
Miscellaneous expense 30,967
-----------
Total expenses 1,490,747
-----------
Net investment income 8,566,666
Realized and unrealized gains on investments:
Net realized gains on investments 12,779,937
Change in unrealized appreciation or depreciation on investments 28,886,194
-----------
Net increase in net assets resulting from operations $50,232,797
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Managed Assets Fund
Years Ended December 31,
-------------------------------
1995 1994
------------ -------------
<S> <C> <C>
Operations:
Net investment income $ 8,566,666 $ 8,128,114
Net realized gains on investments 12,779,937 48,913
Change in unrealized appreciation or
depreciation on investments 28,886,194 (14,923,481)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 50,232,797 (6,746,454)
------------ ------------
Distributions declared from:
Net investment income (8,589,529) (7,905,230)
Distributions in excess of net investment income (192,094) --
Net realized gains on investments (12,796,378) --
Distributions in excess of net realized gains
in investments (135,229) --
------------ ------------
Total distributions (21,713,230) (7,905,230)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold 21,591,908 44,215,554
Cost of fund shares repurchased (40,012,684) (38,323,460)
Distributions reinvested 21,713,230 7,905,230
Strategic Managed Assets Fund Substitution 48,923,531 --
------------ ------------
Net increase in net assets resulting from fund
share transactions 52,215,985 13,797,324
------------ ------------
Total increase (decrease) in net assets 80,735,552 (854,360)
Net assets:
Beginning of year 196,278,081 197,132,441
------------ ------------
End of year $277,013,633 $196,278,081
============ ============
Accumulated undistributed (overdistributed) net
investment income included in
ending net assets $ (192,094) $ 22,863
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold 1,590,395 3,411,405
Shares repurchased (2,911,681) (2,987,381)
Distributions reinvested 1,549,182 651,172
Strategic Managed Assets Fund Substitution 3,333,520 --
------------ ------------
Net increase 3,561,416 1,075,196
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Managed Assets Fund
Years Ended December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $ 12.18 $ 13.11 $ 12.54 $ 12.54 $ 10.26
--------- --------- --------- --------- --------
Net investment income 0.48 0.51 0.38 0.45 0.52
Net realized and unrealized gains (losses)
on investments 2.61 (0.93) 0.78 0.49 2.31
--------- --------- --------- --------- --------
Total from investment operations 3.09 (0.42) 1.16 0.94 2.83
--------- --------- --------- --------- --------
Less distributions:
Distributions from and in excess of net investment income (0.48) (0.51) (0.36) (0.46) (0.44)
Distributions from and in excess of net realized gains
on investments (0.71) -- (0.23) (0.48) (0.11)
--------- --------- --------- --------- --------
Total distributions (1.19) (0.51) (0.59) (0.94) (0.55)
--------- --------- --------- --------- --------
Net asset value, end of year $ 14.08 $ 12.18 $ 13.11 $ 12.54 $ 12.54
======== ======== ======== ======== =======
Total return:
Total investment return 25.43% (3.19)% 9.29% 7.53% 27.93%
Ratios/supplemental data:
Net assets, end of year (000s) $277,014 $196,278 $197,132 $113,572 $82,710
Ratio of expenses to average net assets 0.66% 0.68% 0.69% 0.66% 0.71%
Ratio of net investment income to average net assets 3.12% 4.01% 3.55% 3.98% 4.57%
Portfolio turnover ratio 66% 71% 47% 70% 82%
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Mortgage Securities Income Fund / December
31, 1995
Par Market
Value Value
--------- -----------
<S> <C> <C>
ASSET-BACKED SECURITIES--(3.0%)
ALPS Pass-Through Trust Series 1994-1
Class C2 9.350% 9/15/04 $ 994,927 $1,056,175
First Boston Home Equity Loan Pass-
Through Certificates Series 1993-H1,
Class A-IO (effective yield 12.820%) 9/28/13 9,202,754 310,777
Greentree Home Improvement Loan
Trust Series 1994-A Class A
7.050% 3/15/14 1,009,552 1,025,169
Green Tree Securitized Net Interest
Margin Series 1994-A
6.900% 2/15/04 703,481 708,975
----------
Total Asset-Backed Securities
(Cost $3,027,487) 3,101,096
----------
MORTGAGE-BACKED SECURITIES--(10.3%)
American Mortgage Trust Series
1993-3 Class 3B 8.190% 9/27/22 833,301 835,584
Bank of America, N.A. Series
1979-3 9.500% 11/01/08 91,515 93,689
Citicorp Mortgage Securities, Inc.
Series 1987-10 10.000% 7/01/17 204,798 218,505
Comfed Savings Bank Adjustable Rate
Mortgage Series 1987-1A
9.245% 1/01/08 193,853 164,775
Countrywide Mortgage Backed
Securities Inc. Series 1994-F
Class A4 6.000% 4/25/09 2,000,000 1,965,180
Excel Credit Corporation Commercial
Mortgage Pass-Through Certificate
Series 1994-1 Class A 6.432%
3/01/04 Floating Rate 675,519 681,234
Glendale Federal Savings & Loan
Series 1978-A 9.125% 1/25/08 38,245 39,524
Home Savings of America Series
1979-4 10.000% 7/01/09 68,111 70,729
Imperial Savings & Loan Adjustable
Rate Mortgage Series 1987-4A
9.800% 7/25/17 44,215 47,656
Kidder Peabody Acceptance Corp.
Series 1993-C1 6.800%
7/25/17 62,805 63,522
MDC Mortgage Funding Corporation
Series Q Class 5 8.850% 3/20/18 467,975 487,096
Merrill Lynch
8.000% 12/20/18 Series 20-D 2,133,245 2,191,717
8.227% 4/25/23 Series 1994-M1
Class C 421,000 443,835
7.090% 12/26/25 Series 1995-C3
Class A3 2,000,000 2,050,000
4.870% 11/15/26 Series 1987-A 112,880 111,363
<PAGE>
<CAPTION>
Par Market
Value Value
--------- -----------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (Continued)
PS CMO Trust Series 1994-C1-A2
7.920% 8/15/02 $ 750,000 $ 791,850
Republic Federal Savings & Loan
Association Series 1987-1
7.500% 2/28/17 14,958 15,290
Residential Funding Corp. Series
1987-S-9 10.500% 9/01/17 55,911 58,797
Sears Mortgage Securities Corp.
Series 1987-A 6.500%
3/25/17 37,555 37,885
Security Pacific National Bank
Series 1987-B 8.500%
9/01/16 67,986 69,763
-----------
Total Mortgage-Backed Securities
(Cost $10,094,127) 10,437,994
-----------
CORPORATE BONDS--(2.4%)
Utilities--(0.4%)
Commonwealth Edison Company
7.375% 9/15/02 350,000 369,380
-----------
Telecommunications--(2.0%)
Telecom New Zealand
6.500% 10/11/01 2,000,000 2,055,660
-----------
Total Corporate Bonds
(Cost $2,390,008) 2,425,040
-----------
FEDERAL HOME LOAN MORTGAGE
CORPORATE CERTIFICATES--(18.4%)
8.500% 5/01/06 214,956 224,160
6.500% various due dates to 6/01/09 2,159,326 2,171,545
8.000% 6/01/09 191,401 198,638
10.750% 11/01/09 333,165 366,692
12.250% 4/01/12 62,796 70,293
11.250% various due dates to 1/01/16 177,586 195,871
11.500%various due dates to 2/01/16 87,233 96,638
9.250% 5/01/16 105,910 111,173
10.500% various due dates to 2/01/19 494,431 540,784
12.000% various due dates to 7/01/20 1,571,138 1,765,079
9.000% various due dates to 1/01/22 130,079 136,664
7.500% various due dates to 5/01/24 10,007,775 10,284,866
7.000% 10/15/25 (b) 2,500,000 2,522,650
-----------
Total Federal Home Loan Mortgage
Corporate Certificates
(Cost $18,119,915) 18,685,053
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION CERTIFICATES--(35.1%)
10.500% 2/01/01 231,008 244,363
10.000% various due dates to 9/01/01 200,332 211,037
7.000% 11/01/08 (b) 4,650,000 4,734,258
9.000% various due dates to 5/01/20 486,503 514,095
<PAGE>
<CAPTION>
Par Market
Value Value
--------- -----------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE
ASSOCIATION CERTIFICATES (Continued)
12.250% 9/01/12
FHA/VA Guaranteed $ 87,707 $ 99,520
10.250% 2/01/16 250,614 275,911
7.500% 3/01/16
FHA/VA Guaranteed 374,315 404,261
9.500% various due dates to 5/01/20 60,004 64,261
6.500% various due dates to 12/01/16 1,708,587 1,698,555
8.500% various due dates to 12/01/24 3,792,654 3,960,003
6.000% various due dates to 2/01/25 14,884,293 14,680,556
7.000% 8/01/25 1,235,907 1,245,943
8.000% various due dates to 8/01/25 2,128,613 2,203,871
6.500% 8/15/25 (b) 3,600,000 3,558,384
7.500% various due dates to 12/01/25 1,794,831 1,841,637
-----------
Total Federal National Mortgage
Association Certificates
(Cost $34,925,419) 35,736,655
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION CERTIFICATES--(16.8%)
10.500% 4/15/01 40,155 43,054
13.000% 5/15/11 76,586 88,696
11.500% various due dates to 5/15/13 570,491 644,479
11.750% 7/15/13 31,025 34,505
11.000% various due dates to 12/15/15 90,717 101,802
8.500% 2/15/17 319,420 337,790
9.000% various due dates to 1/15/20 2,518,551 2,692,822
10.000% various due dates to 11/15/19 927,957 1,020,352
9.500% various due dates to 8/15/22 2,989,629 3,230,899
8.000% various due dates to 9/15/22 4,024,144 4,202,314
7.000% 4/15/23 578,147 586,461
7.500% 10/01/23 28,372 29,188
6.500% various due dates to 7/15/24 988,619 981,140
6.500% 7/20/25 ARM 3,025,340 3,081,883
-----------
Total Government National Mortgage
Association Certificates
(Cost $16,896,400) 17,075,385
-----------
REAL ESTATE MORTGAGE INVESTMENT
CONDUITS--(5.7%)
Federal Home Loan Mortgage
Corporation Series 11-C
9.500% 4/15/19 134,189 138,977
Federal National Mortgage
Association REMIC Trust Series
1992-37PE 7.000% 1/25/18 1,750,000 1,766,730
<PAGE>
<CAPTION>
Par Market
Value Value
--------- -----------
<S> <C> <C>
Federal National Mortgage
Association Trust Series
1988-4Z 9.250% 3/25/18 $1,672,092 $ 1,779,440
Federal National Mortgage
Association Trust Series
1991-91SA (effective yield 14.400%)
7/25/98 14,091 107,003
Prudential Home Mortgage
Trust Series 1992-A-B2-2
7.900% 11/25/22 2,000,000 2,012,080
------------
Total Real Estate Mortgage
Investment Conduits
(Cost $5,673,580) 5,804,230
------------
U.S. GOVERNMENT SECURITIES AND
AGENCY OBLIGATIONS--(4.6%)
Federal National Mortgage
Association 8.000% 4/13/05 2,000,000 2,088,960
Student Loan Marketing Association
Medium Term Note
9.400% 6/01/11 410,000 539,056
U.S. Treasury Bonds
8.750% 5/15/17 750,000 993,060
7.125% 2/15/23 300,000 343,455
6.250% 8/15/23 750,000 772,463
------------
Total U.S. Government Securities and
Agency Obligations
(Cost $4,527,278) 4,736,994
------------
SHORT-TERM INVESTMENTS--(13.7%)
Finova Capital Corp. 5.950% 1/16/96 5,000,000 4,985,951
General Motors Acceptance Corp.
6.100% 1/02/96 3,955,000 3,952,990
Lehman Brothers Holdings Inc.
6.050% 1/18/96 2,000,000 1,993,614
Dai Ichi Kangyo 6.180% 1/16/96 3,000,000 3,000,200
------------
Total Short-Term Investments
(Cost $13,932,755) 13,932,755
------------
Total Investments--(110.0%)
(Cost $109,586,969) (a) 111,935,202
Other Assets, Less Liabilities--(-10.0%) (10,156,936)
------------
Net Assets (100%) $101,778,266
============
<FN>
(a) The cost of investments for federal income tax purposes
is $109,590,501 Gross unrealized appreciation and
depreciation at December 31, 1995 is as follows:
Gross unrealized appreciation: $2,492,560
Gross unrealized depreciation: (147,859)
-----------
Net unrealized appreciation: $2,344,701
===========
(b) Security purchased on a delay delivery basis; see notes to
the financial statements.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Mortgage Securities Income Fund /
December 31, 1995
<S> <C>
Assets:
Investments, at market value (identified cost $109,586,969) $111,935,202
Cash 51,017
Receivable for fund shares sold 11,533
Dividends and interest receivable 728,668
Other assets 17,544
------------
Total assets 112,743,964
------------
Liabilities:
Payable for investments purchased 10,710,600
Payable for fund shares repurchased 167,735
Management fee payable 45,606
Administrative fee payable 12,051
Accrued expenses payable 29,706
------------
Total liabilities 10,965,698
------------
Net assets $101,778,266
============
Net assets represented by:
Paid-in capital $102,491,007
Accumulated overdistributed net investment income (129,284)
Accumulated net realized losses on investments (2,931,689)
Net unrealized appreciation on investments 2,348,232
------------
Total net assets applicable to outstanding shares of
beneficial interest $101,778,266
============
Shares of beneficial interest outstanding 10,019,095
============
Net asset value per share $10.16
======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<S> <C>
Interest income $ 5,899,589
------------
Expenses:
Management fee 314,570
Administrative fee 117,959
Custodian fee 33,418
Accounting fee 25,725
Audit and legal fees 23,403
Transfer agent fee 7,449
Printing expense 6,588
Trustees' expense 6,327
Miscellaneous expense 9,549
------------
Total expenses 544,988
------------
Net investment income 5,354,601
Realized and unrealized gains on investments:
Net realized gains on investments 653,056
Change in unrealized appreciation or depreciation on investments 5,388,182
------------
Net increase in net assets resulting from operations $11,395,839
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Mortgage Securities Income Fund
Years Ended December 31,
---------------------------
1995 1994
------------ -------------
<S> <C> <C>
Operations:
Net investment income $ 5,354,601 $ 5,452,061
Net realized gains (losses) on investments 653,056 (3,503,695)
Change in unrealized appreciation or depreciation
on investments 5,388,182 (3,358,291)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 11,395,839 (1,409,925)
------------ ------------
Distributions declared from:
Net investment income (5,354,601) (5,285,435)
Distributions in excess of net investment income (145,396) --
------------ ------------
Total distributions (5,499,997) (5,285,435)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold 6,851,307 4,366,162
Cost of fund shares repurchased (14,865,209) (21,732,135)
Distributions reinvested 5,499,997 5,285,435
Colonial-Keyport Government Fund Substitution 25,976,819 --
------------ ------------
Net increase (decrease) in net assets resulting from
fund share transactions 23,462,914 (12,080,538)
------------ ------------
Total increase (decrease) in net assets 29,358,756 (18,775,898)
Net assets:
Beginning of period 72,419,510 91,195,408
------------ ------------
End of period $101,778,266 $72,419,510
============ =============
Accumulated overdistributed net investment income
included in ending net assets $ (129,284) $ (16,449)
============ =============
Analysis of changes in shares of beneficial interest:
Shares sold 680,330 435,739
Shares redeemed (1,486,896) (2,167,973)
Distributions reinvested 542,406 569,551
Colonial-Keyport Government Fund Substitution 2,477,593 --
------------ ------------
Net increase (decrease) 2,213,433 (1,162,683)
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Mortgage Securities Income Fund
Years Ended December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $ 9.28 $ 10.17 $ 10.26 $ 10.42 $ 9.74
--------- --------- --------- --------- --------
Net investment income 0.57 0.73 0.65 0.63 0.67
Net realized and unrealized gains (losses)
on investments 0.89 (0.89) (0.01) (0.01) 0.73
--------- --------- --------- --------- --------
Total from investment operations 1.46 (0.16) 0.64 0.62 1.40
--------- --------- --------- --------- --------
Less distributions:
Distributions from and in excess of net investment income (0.58) (0.73) (0.65) (0.62) (0.66)
Distributions from and in excess of net realized gains
on investments -- -- (0.08) (0.16) (0.06)
--------- --------- --------- --------- --------
Total distributions (0.58) (0.73) (0.73) (0.78) (0.72)
--------- --------- --------- --------- --------
Net asset value, end of year $ 10.16 $ 9.28 $ 10.17 $ 10.26 $ 10.42
========= ========= ========= ========= ========
Total return:
Total investment return 15.74% (1.57)%(b) 6.26%(b) 5.95% 14.48%
Ratios/supplemental data:
Net assets, end of year (000s) 101,778 $72,420 $91,195 $67,353 $48,559
Ratio of net expenses to average net assets 0.69% 0.70%(a) 0.76%(a) 0.90% 0.99%
Ratio of net investment income to average
net assets 6.76% 6.71%(b) 6.64%(b) 6.72% 7.26%
Portfolio turnover ratio (c) 112% 241% 187% 169% 133%
<FN>
(a) If the Fund had paid all of its expenses and there had been no
reimbursement from the Investment Adviser and the Administrator, as described
in Note 5, this ratio would have been 0.71%, and 0.76% for the years ended
December 31, 1994, and 1993, respectively.
(b) Computed giving effect to the Investment Adviser's and the
Administrator's expense limitation undertaking.
(c) The Portfolio turnover ratio includes dollar roll transactions.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Cash Income Fund / December 31, 1995
Par Market
(000) Value
--------- -----------
<S> <C> <C>
COMMERCIAL PAPER--(91.2%)
Business Credit Institution--(25.0%)
American Honda Finance Corp.
(gtd. by Honda Motor Co. Inc.)
5.865% 1/12/96 $3,000 $ 2,994,656
Beta Finance 5.808% 1/23/96 3,000 2,989,495
Finova Capital Corp. 6.009%
1/04/96 3,000 2,998,512
General Motors Acceptance Corp.
6.104% 1/02/96 1,310 1,309,778
Sears Roebuck Acceptance Corp.
5.809% 2/07/96 3,000 2,982,425
Whirlpool Financial Corp.
5.802% 1/31/96 3,000 2,985,700
-----------
16,260,566
-----------
Banking--(13.7%)
Banca CRT Financial Corp.
(gtd. by Cassa di Risparmio di Torino)
5.814% 4/08/96 3,000 2,953,858
Orix America Inc. 6.029% 3/27/96 3,000 2,957,717
Svenska Handlesbanken Inc.
(gtd. by Svenska Handlesbanken),
5.806% 2/09/96 3,000 2,981,345
-----------
8,892,920
-----------
Brokerage Services--(4.6%)
Lehman Brothers Holdings Inc.
6.125% 1/11/96 3,000 2,994,917
-----------
Computers--(4.6%)
CSC Enterprises 5.753% 2/16/96 3,000 2,978,150
-----------
Drugs--(9.5%)
A.H. Robbins Company
5.808% 2/02/96 3,000 2,984,667
American Home Food Products, Inc.
(gtd. by American Home Products
Corp.) 5.827% 1/09/96 3,200 3,195,876
-----------
6,180,543
-----------
Electronics--(4.9%)
General Signal Corp. 5.910% 1/08/96 3,225 3,221,319
-----------
Major Chemical--(5.2%)
DIC Americas Inc. 6.059% 1/26/96 3,390 3,375,875
-----------
<PAGE>
<CAPTION>
Par Market
(000) Value
--------- -----------
<S> <C> <C>
Lending Institutions--(14.3%)
Countrywide Funding Corp.
5.861% 1/24/96 $3,300 $ 3,287,729
Oak Funding Corp. 5.877% 1/18/96 3,000 2,991,713
Fleet Mortgage Group, Inc.
5.881% 1/05/96 3,000 2,998,050
----------
9,277,492
----------
Other Financial--(4.8%)
Hanson Finance Plc 5.834% 1/17/96 3,140 3,131,906
----------
Photography--(4.6%)
Seiko Corp. of America
6.145% 2/28/96 3,000 2,970,758
----------
Total Commercial Paper
(Cost $59,284,446) 59,284,446
-----------
YANKEE CERTIFICATES OF DEPOSIT--(9.2%)
Financial Services
Sanwa Bank Ltd. 5.900% 2/7/96 3,000 2,999,538
Sumitomo Bank Ltd 6.180% 1/02/96 3,000 3,000,006
-----------
Total Yankee Certificates of Deposit
(Cost $5,999,544) 5,999,544
-----------
Total Investments - (100.4%)
(Cost $65,283,990) (a) 65,283,990
Other Assets, Less Liabilities--(-0.4%) (291,939)
-----------
Net Assets (100%) $64,992,051
============
<FN>
(a) The cost of investments for federal income tax purposes is
identical. There is no unrealized appreciation or depreciation at
December 31, 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Cash Income Fund / December 31, 1995
<S> <C>
Assets:
Investments, at market value (identified cost $65,283,990) $65,283,990
Cash 51,520
Receivable for fund shares sold 1,780
Dividends and interest receivable 28,257
Other assets 9,432
-----------
Total assets 65,374,979
-----------
Liabilities:
Payable for fund shares repurchased 327,447
Management fee payable 19,614
Administrative fee payable 8,402
Accrued expenses payable 27,465
-----------
Total liabilities 382,928
-----------
Net assets $64,992,051
============
Net assets represented by:
Paid-in capital $64,992,051
-----------
Total net assets applicable to outstanding shares of beneficial interest
$64,992,051
===========
Shares of beneficial interest outstanding 64,992,051
===========
Net asset value per share $1.00
=====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<S> <C>
Interest income $4,212,168
----------
Expenses:
Management fee 241,148
Administrative fee 103,349
Accounting fee 25,473
Custodian fee 18,962
Audit and legal fees 18,066
Transfer agent fee 7,501
Trustees' expense 6,150
Printing expense 5,110
Miscellaneous expense 11,096
----------
Total expenses 436,855
----------
Net investment income $3,775,313
----------
Net increase in net assets resulting from operations $3,775,313
==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Cash Income Fund
Years Ended December 31,
----------------------------
1995 1994
------------ -------------
<S> <C> <C>
Operations:
Net investment income $ 3,775,313 $ 3,158,001
------------ ------------
Net increase (decrease) in net assets resulting
from operations 3,775,313 3,158,001
------------ ------------
Distributions declared from:
Net investment income (3,775,313) (3,158,001)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold 56,499,769 58,444,349
Cost of fund shares repurchased (73,981,455) (65,952,846)
Distributions reinvested 3,775,313 3,158,001
------------ ------------
Net decrease in net assets resulting from fund
share transactions (13,706,373) (4,350,496)
------------ ------------
Total decrease in net assets (13,706,373) (4,350,496)
Net assets:
Beginning of period 78,698,424 83,048,920
------------ ------------
End of period $ 64,992,051 $ 78,698,424
=========== ===========
Analysis of changes in shares of beneficial interest:
Shares sold 56,499,769 58,444,349
Shares redeemed (73,981,455) (65,952,846)
Distributions reinvested 3,775,313 3,158,001
------------ ------------
Net increase (decrease) (13,706,373) (4,350,496)
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Cash Income Fund
Years Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Net investment income 0.030 0.037 0.027 0.034 0.056
-------- -------- -------- -------- --------
Less distributions:
Distributions from net investment income (0.030) (0.037) (0.027) (0.034) (0.056)
-------- -------- -------- -------- --------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total return:
Total investment return 5.62% 3.81% 2.70% 3.48% 5.79%
Ratios/supplemental data:
Net assets, end of year (000) $64,992 $78,698 $83,049 $70,821 $77,676
Ratio of expenses to average net assets 0.63% 0.62% 0.65% 0.67% 0.67%
Ratio of net investment income to average
net assets 5.48% 3.73% 2.68% 3.42% 5.67%
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
SteinRoe Variable Investment Trust (the "Trust"), an open-end management
investment company, was organized as a Massachusetts business trust on June 9,
1987. At December 31, 1995, the Trust consisted of five diversified Funds
with differing investment objectives, policies, and restrictions (individually
referred to as a "Fund", or collectively referred to as the "Funds"):
Capital Appreciation Fund--achieve capital growth by investing in equity
securities
Managed Growth Stock Fund--achieve long-term growth of capital by investing
65% of total assets in growth companies
Managed Assets Fund--achieve high total investment return by investing in
equity and debt securities
Mortgage Securities Income Fund--achieve highest possible level of current
income by investing at least 65% of total assets in Mortgage Pass-Through
Certificates
Cash Income Fund--high current income while emphasizing capital
preservation from investment in short-term money market instruments
Shares of the Trust are available and are being marketed exclusively as a
pooled funding vehicle for variable annuity contracts ("VA contracts") and
Variable Life Insurance Policies ("VLI policies") of various affiliated and
non-afilliated insurance companies and, in the case of Capital Appreciation
Fund, also of Transamerica Occidental Life Insurance Company and First
Transamerica Life Insurance Company. SteinRoe and Farnham, Inc. (the
"Adviser") provides investment advisory services to the Funds as well as
management, and administrative services. SteinRoe Services, Inc. provides
transfer agent services. Keyport Financial Services Corp., subsidiary of
Keyport, serves as the underwriter of the Trust. Keyport, the Adviser and the
Transfer Agent are direct subsidiaries of Liberty Financial Companies, Inc.
Liberty Life is a subsidiary of Liberty Mutual Insurance Company and Liberty
Mutual Fire Insurance Company. At December 31, 1995, various affiliated
insurance companies of Liberty Financial Company owned 100 percent of the
outstanding shares of all Funds, except for Capital Appreciation Fund, of
which Liberty Financial Company affiliates owned 98.1 percent and Transamerica
Life Companies owned 1.9 percent.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
Valuation of Investments--Portfolio securities listed on domestic exchanges
and over-the-counter securities quoted on the NASDAQ system are valued on the
basis of the last sale on the date as of which the valuation is made, or,
lacking any sales, at the current bid prices. Over-the-counter securities not
quoted on the NASDAQ system are valued at the latest bid quotation. Foreign
security valuations are generally based upon market quotations which,
depending upon local convention or regulation, may be last sale price, last
bid or asked price, or the mean between last bid and asked prices as of, in
each case, the close of the appropriate exchange or other designated time.
Long-term debt securities are valued on the basis of dealer-supplied
quotations or valuations furnished by a pricing service. Securities for which
reliable quotations are not readily available are valued at fair value, as
determined in good faith and pursuant to procedures established by the
Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost unless the Trustees determine this does not
represent fair value. The Cash Income Fund values investments utilizing the
amortized cost valuation technique permitted in accordance with Rule 2a-7
under the Investment Company Act of 1940, which requires the Fund to comply
with certain conditions. This technique involves valuing a portfolio security
initially at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium.
Federal Income Taxes--The Funds now qualify and intend to continue qualifying
as "regulated investment companies" and as such (and by complying with the
applicable provisions of the Internal Revenue Code) will not be subject to
federal income tax on taxable income (including realized capital gains)
distributed to shareholders. By making the distributions required under the
Internal Revenue Code, the Funds intend to avoid excise tax liability.
Foreign Currency Transactions--Certain of the Funds have entered into foreign
exchange contracts for the settlement of purchases and sales of securities
denominated in a foreign currency to reduce the risk to the Funds from adverse
changes in the relationship between the U.S. dollar and the foreign currency.
The face or contract amount in U.S. dollars reflects the total exposure the
Fund has in that particular currency contract. In the event that the
counterparty in the foreign exchange contract fails to meet the terms of the
contract, the Fund could be exposed to the effects of changes in the
relationship between the U.S. dollar and the foreign currency.
Investment Transactions--The Funds may purchase or sell securities on a
when-issued, delayed delivery or forward commitment basis. Payment and deliver
may take place a month or more after the date of the transaction. The price of
the underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The Mortgage
Securities Income Fund may also enter into dollar roll transactions. In a
dollar roll transaction, the Fund sells securities for delivery in the current
month and simultaneously contracts to repurchase, typically in 30 to 60 days,
substantially similar securities at an agreed upon price and date.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
These transactions may increase the risk if the other party to the transaction
fails to deliver and causes the Fund to subsequently invest at less
advantageous yields. The Funds identify securities as segregated in their
custodial records with a value at least equal to the amount of the purchase
commitment.
Reclassification--Certain of the Funds have changed the classification of
distributions to shareholders to better disclose the differences between
financial statement amounts and distributions to shareholders in accordance
with Federal income tax regulations. Accordingly, amounts as of December 31,
1995 have been reclassified as follows:
<TABLE>
<CAPTION>
Mortgage
Capital Managed Securities
Appreciation Assets Income
Fund Fund Fund
------------ -------------- --------------
<S> <C> <C> <C>
Paid-in Capital $ -- $(75,138) $ --
Accumulated net
investment income (20,399) 38,253 32,561
Accumulated net
realized gains
(losses) on
investments 20,399 36,885 (32,561)
</TABLE>
There were no reclassifications of distributions for Managed Growth Stock Fund
or Cash Income Fund. In all cases, net investment income, net realized gains
(losses) on investments, and net assets were not affected by this change.
Other--Security transactions are accounted for on trade date. Interest income
is recorded on the accrual basis. Discounts on debt securities are amortized
in accordance with Internal Revenue Code requirements. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Net
realized and unrealized gains (losses) on foreign currency transactions
include the fluctuation in exchange rates on gains and losses between trade
and settlement dates on security transactions, gains and losses arising from
the disposition of foreign currency, and currency gains and losses between the
accrual and payment dates on dividend and interest income and foreign
withholding taxes. The Funds do not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investment from
the fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain or
loss from investments. Unrealized appreciation and depreciation and realized
gains and losses differ between financial statements and tax earnings due to
deferred losses from wash sales.
Note 2. Fund Share Transactions
Each Fund's capitalization consists of an unlimited number of shares of
beneficial interest without par value that represent a separate series of the
Trust. Each share of a Fund represents an equal proportionate beneficial
interest in that Fund and, when issued and outstanding, is fully paid and
non-assessable. Shareholders would be entitled to share proportionally in the
net assets of a Fund available for distribution to shareholders upon
liquidation of a Fund.
<PAGE>
Note 3. Security Transactions
Realized gains and losses are computed on the identified cost basis for both
financial reporting and federal income tax purposes. At December 31, 1995,
the Mortgage Securities Income Fund had a capital loss carryover of
$2,928,158, which will expire in 2002, if not utilized. The cost of
investments purchased and proceeds from investment sold excluding short-term
investments for the year ended December 31, 1995 for the Funds excluding Cash
Income Fund were as follows:
<TABLE>
<CAPTION>
Mortgage
Capital Managed Managed Securities
Appreciation Growth Assets Income
Fund Stock Fund Fund Fund
------------ ----------- -------------- --------------
<S> <C> <C> <C> <C>
Cost of investments
purchased $166,531,621 $47,836,216 $131,929,723 $93,171,641
Proceeds from
investments sold 171,663,693 44,488,696 143,375,891 94,963,162
Note 4. Distributions to shareholders
The Funds with the exception of the Cash Income Fund, intend to distribute as
dividends or capital gain distributions, at least annually, substantially all
of their net investment income and net gains realized from the sale of
portfolio securities. All dividends and distributions are reinvested in
additional shares of the Funds. The Cash Income Fund declares dividends daily
and reinvests all dividends declared monthly in additional shares at net asset
value. Income and capital gain distributions are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles primarily relating to gains and losses on foreign
currency and wash sale transactions.
Note 5. Management and Administrative Fees
The Funds have advisory and administrative agreements with the Adviser. The
following investment advisory fee rates were in effect as of December 31,
1995:
<CAPTION>
Annual rate(s) as a
percent of
Fund(s) average daily net assets
------- ----------------------
<S> <C>
Capital Appreciation Fund .50 of 1%
Managed Growth Stock Fund .50 of 1%
Managed Assets Fund .45 of 1%
Mortgage Securities Income Fund .40 of 1%
Cash Income Fund .35 of 1%
</TABLE>
As of December 31, 1995, for all the Funds, the administrative fee was .15 of
1 percent of average annual net assets. Both the investment advisory fees and
the administrative fees are computed daily and paid monthly.
The Adviser also provides the Funds with certain Fund accounting services. The
fee is $25,000 annually plus .0025 of 1 percent of assets in excess of $50
million. For the year ended December 31, 1995, Capital Appreciation Fund,
Managed Growth Stock Fund, Managed Assets Fund, Mortgage Securities Income
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Fund, and Cash Income Fund incurred charges of $27,202, $26,683, $29,356,
$25,725 and $25,473, respectively.
The Funds pay SteinRoe Services, Inc. for transfer agent services rendered at
an annual rate of $7,500 computed on the basis of $625 per month.
The Adviser has agreed to reimburse all expenses, including management fees,
incurred by the Funds as follows:
<TABLE>
<CAPTION>
Fund(s) Expenses exceeding
- ------- -------------------------
<S> <C>
Capital Appreciation Fund .80 of 1% of average daily net assets
Managed Growth Stock Fund .80 of 1% of average daily net assets
Managed Assets Fund .75 of 1% of average daily net assets
Mortgage Securities Income Fund .70 of 1% of average daily net assets
Cash Income Fund .65 of 1% of average daily net assets
The expense limitations expire April 30, 1996.
</TABLE>
Note 6. Investment in Repurchase Agreements
Each Fund may enter into repurchase agreements with banks, broker-dealer firms
and other recognized financial institutions whereby such institutions sell an
instrument in which a Fund may invest to that Fund, and the seller agrees, at
the time of the sale, to repurchase that instrument at a specified time and
price. The Funds require the seller of the instrument to maintain on deposit
with the Funds' custodian bank or in the Federal Reserve Book-Entry System
securities in an amount at all times equal to or in excess of the value of the
repurchase agreement plus accrued interest. In the event the seller of the
instrument defaults on the repurchase obligation, a Fund could receive less
than the repurchase price on the sale of the securities to another party or
could be subject to delays in selling the securities.
Note 7. Substitutions
In October, 1995, Keyport and Liberty Life, the Funds' only shareholders at
that time, received an order from the Securities and Exchange Commission
approving the substitution of (i) shares of Managed Assets Fund ("MAF") for
shares of Strategic Managed Assets Fund ("SMAF"), (ii) shares of the
Colonial-Keyport Strategic Income Fund ("CKSIF") for the shares of Managed
Income Fund ("MIF") and (iii) shares of Mortgage Securities Income Fund
("MSIF") for shares of Colonial-Keyport Government Fund ("CKGF"). CKSIF and
CKGF are series of the Keyport Variable Investment Trust ("KVIT"). KVIT also
is a funding vehicle for VA contracts and VLI policies of affiliated
participating insurance companies. The substitution occurred on October 13,
1995 at the net asset value of shares totaling $48,923,531 of MAF which were
substituted for shares of SMAF, $37,216,837 CKSIF which were substituted for
shares of MIF, and $25,976,819 of MSIF which were substituted for shares of
CKGF.
<PAGE>
Investment Adviser
Administrator
Stein Roe & Farnham Incorporated
One South Wacker Drive
Chicago, Illinois 60606
Transfer Agent
SteinRoe Services, Inc.
One South Wacker Drive
Chicago, Illinois 60606
Distributor
Keyport Financial Services Corp.
125 High Street
Boston, Massachusetts 02110
Client Services
Keyport Life Insurance Company
125 High Street
Boston, Massachusetts 02110
800-367-3653 (Press 3)
Custodian
State Street Bank & Trust Company
P.O. Box 366
Boston, Massachusetts 02101
Independent Auditors
KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
Legal Counsel
Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
The Trustees
John A. Bacon Jr.
Richard R. Christensen
Salvatore Macera
Dr. Thomas E. Stitzel
This report is authorized for use as sales literature only when accompanied by
a current prospectus of the Trust and a current prospectus for a variable
insurance product offered by Keyport Life Insurance Company, Keyport America
Life Insurance Company, or Liberty Life Assurance Company of Boston.
12/95 NIM 30m
