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, 1996
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TABLE OF CONTENTS
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PRESIDENT'S LETTER............................................... 1
PORTFOLIO MANAGER'S DISCUSSION:
Capital Appreciation Fund................................... 3
Managed Growth Stock Fund................................... 5
Managed Assets Fund......................................... 6
Mortgage Securities Income Fund............................. 8
Cash Income Fund............................................ 9
INDEPENDENT AUDITORS' REPORT ................................... 10
FINANCIAL STATEMENTS:
Capital Appreciation Fund................................... 11
Managed Growth Stock Fund................................... 16
Managed Assets Fund......................................... 21
Mortgage Securities Income Fund............................. 27
Cash Income Fund............................................ 32
NOTES TO FINANCIAL STATEMENTS.................................. 36
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PRESIDENT'S LETTER
SteinRoe Variable Investment Trust
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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.
ANOTHER VINTAGE YEAR FOR STOCKS
Despite increased volatility and some confusion about the strength of the
economy, 1996 was by virtually all measures another stellar year for the U.S.
stock market. A seemingly picture-perfect backdrop, characterized by moderate
economic growth, low unemployment, minimal inflation, stable interest rates,
surging exports and strong corporate profits, helped the stock market --
particularly large-cap, blue-chip stocks -- post record-breaking gains.
MIXED SIGNALS FOR FIXED INCOME INVESTORS
It was a much tougher year for bond investors, however. Long considered a
haven of stability, bonds proved to be, for the most part, far more volatile
investments than stocks this past year.
The greatest single contributor to the bond market's uninspiring
performance over the past year was probably concern about the direction of
interest rates. Despite the fact that most of the rise in long-term interest
rates actually took place in the first quarter of 1996 -- with rates rising
quite dramatically in February and March -- investors were never able to
overcome their uneasiness about which direction interest rates were actually
headed. Adding to this anxiety was the release of several
stronger-than-expected economic reports, which raised fears that the economy
was overheating. In fact, many investors believed these reports signaled that
the Federal Reserve would have to raise short-term interest rates in order to
stave off inflation. As a result, most of the bond market was stung early in
the year and never really came back.
LESS OF THE SAME
Most signals now point to an economic slowdown, which should help to resolve
many of the conflicts that plagued investors this past year. Going forward, we
expect moderate economic growth and continued stock market gains. In fact, our
outlook for 1997 is that things should stay about the same -- albeit not as
strong as last year.
There are some clouds on the horizon, however. For example, although
earnings are still coming in strong, concern about narrowing profit margins
remains. That's because corporate profitability appears to have reached a
plateau. For the past several years, companies haven't had to raise prices to
make money because unit labor costs were so low. With wages increasing and
unemployment hovering near a seven-year low, however, unit labor costs are
starting to increase. This means many companies will probably either have to
raise prices or watch their profit margins slip. Moreover, a stronger dollar
and higher interest rates also could begin to eat away at corporate profits.
Consequently, although we think earnings will remain generally positive, we
expect some companies may have problems meeting their earnings estimates.
<PAGE>
Nonetheless, as long as the economy continues to grow and inflation
remains subdued, we believe the stock market still has room to run -- although
probably not at the same pace as this past year. And if we are indeed seeing a
real moderation in economic activity, we think the next move by the Federal
Reserve will be a rate cut, probably some time next spring. Given this
environment, we believe fixed income securities also could perform well in the
months to come.
THE BASICS
We think last year's volatility should serve as a reminder to investors that
the markets can be strongly influenced by any number of factors, and can, at
times, react abruptly to these events. That's why we think it's important for
you to try to understand the factors affecting the markets -- not just to
profit from them, but to gain the patience to ride out the volatility in your
investments. No matter what direction you think the economy is heading, it's
important to remember the basics: Think long term and periodically re-evaluate
your portfolio to make sure it continues to match your goals, risk tolerance
and time horizon.
As always, we thank you for investing in the SteinRoe Variable
Investment Trust. We look forward to serving your investment needs.
Sincerely,
/s/ Richard R. Christensen
Richard R. Christensen
President
SteinRoe Variable Investment Trust
February 10, 1997
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PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Capital Appreciation Fund
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DEAR CONTRACT OWNER:
With a 26.9 percent return for the year ended December 31, 1996, Capital
Appreciation Fund topped the S&P 500 return of 23.0 percent. Moreover, the
Fund outpaced the Russell 2000 Index, an index measuring small-cap
performance, by 10.4 percentage points. According to Lipper Analytical
Services, Inc., Capital Appreciation Fund ranked in the top 8 percent of
capital appreciation funds included in its variable annuity fund peer group
(#3 of 41 funds). Capital Appreciation Fund ranked in the top 25 percent (#5
of 19 funds) for the five-year period and in the top 23 percent (#4 of 17
funds) since its inception on January 1, 1989.
While returns were generated across a broad range of industry groups in the
past year, the consumer cyclical and business services sectors have been among
the Fund's strongest performers, with many of our largest holdings making
significant contributions to total return. A standout in the first six months
of the year was AmeriSource Distribution Corporation, a distributor of
pharmaceuticals (5.5 percent of total net assets).
More recently, the Fund's technology, outsourcing and energy stocks have
experienced strong gains. During the last six months, Capital Appreciation was
overweighted in energy stocks -- these represented over 13 percent of total
net assets on December 31, 1996, versus a 4 percent weighting in the Russell
2000. We continue to find attractive investment opportunities within the
energy sector, particularly companies that have shown the ability to grow
their reserves economically over time. We believe that, given a favorable
energy price backdrop, these companies should continue to provide solid
returns going forward.
The gains in these sectors were partially offset by disappointments in
several holdings, including: Sunglass Hut International Inc., which continues
to be affected by negative trends in the sunglass industry (0.9 percent of
total net assets); and Respironics, a medical device manufacturer that
experienced a substantial drop in sales to one of its largest customers. We
have since eliminated Respironics from the portfolio in anticipation of
increased price competition in its industry.
<PAGE>
A newer holding in the Fund is CB Commercial Real Estate Services Group
Inc. (2.0 percent of total net assets), the former commercial real estate arm
of Coldwell Banker. CB Commercial Real Estate is the largest vertically
integrated full-service commercial real estate services company in the United
States and provides a unique "one-stop" shopping advantage to its commercial
clients. Another relatively new position is The Rouse Company (2.5 percent of
total net assets), a well-managed real estate investment trust focused
primarily on the shopping mall and office building markets. We believe limited
supply and growing demand are beginning to boost rents, which should lead to
strong cash flow growth for our office building real estate holdings.
We also purchased Xomed Surgical Products Inc. (2.0 percent of total net
assets), a leading manufacturer of surgical instruments used for less-invasive
surgery of the ears, nose and throat. While less-invasive procedures for other
areas of the body have had spectacular success to date, we believe such
procedures currently are underused in the ears, nose and throat market and,
therefore, present an excellent opportunity for growth.
In addition, we recently established a position in Sola International, Inc.
(2.0 percent of total net assets), which focuses on manufacturing eyeglass
lenses. We think this company stands to benefit from continued strong demand
<TABLE>
<CAPTION>
SteinRoe Variable Investment Trust
Capital Appreciation Fund, S&P 500 and Russell 2000
Performance of a hypothetical $10,000 investment January 1, 1989, to
December 31, 1996
Capital S&P 500 Russell 2000
Appreciation Index Index
<S> <C> <C> <C>
1/89 10000 10000 10000
12/89 13084 13163 11626
12/90 11918 12754 9361
12/91 16357 16631 13672
12/92 18725 17896 16189
12/93 25406 19697 19245
12/94 25708 19955 18894
12/95 28729 27444 24270
12/96 36469 33756 28274
Average Annual Total Return at December 31, 1996
1-Year 5-Year Inception
26.9% 17.4% 17.6%
</TABLE>
<PAGE>
for specialty lenses among the aging population domestically, as well as from
rising incomes abroad. Finally, our continued interest in outsourcing led us
to invest in MetroNetworks Inc. (2.3 percent of total net assets), the largest
provider of customized traffic and news reports for radio and television
stations.
Going forward, we believe the earnings outlook for the companies in the
portfolio seems considerably better than for the market as a whole, while the
portfolio's price to earnings ratio is just a modest premium to that of the
market. This leads us to believe that well-selected small company stocks are
still relatively inexpensive. As such, we continue to believe the Fund's
prospects are bright.
E. Bruce Dunn, Richard B. Peterson, Portfolio Managers
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY, SO YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of December 31, 1996, and are subject to change.
Total return performance includes changes in share price and
reinvestment of income and capital gains distributions. The Russell 2000
and the S&P 500 are unmanaged groups of stocks that differ from the
composition of Capital Appreciation Fund; they are not available for
direct investment. According to Lipper Analytical Services, Inc., an
independent monitor of mutual fund performance, the median returns for the
Fund's variable annuity capital appreciation fund peer group for the
one-year, five-year and since inception periods ended December 31, 1996,
were 16.34 PERCENT, 13.78 PERCENT and 16.06 PERCENT, respectively. Because
benchmark returns are calculated on a monthly basis, those marked "since
inception" are from the month-end date that fell closest to the Fund's
inception date. The Fund's Adviser currently limits expenses to 0.80 percent
of average net assets. Absent past limits, total return would have been less.
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 effect of these additional amounts, it
would be lower.
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PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Managed Growth Stock Fund
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DEAR CONTRACT OWNER:
For the one-year period ended December 31, 1996, Managed Growth Stock Fund
posted a return of 21.3 percent, which outpaced the 19.8 percent return of its
Lipper VA growth fund peer group, but narrowly underperformed the 23.0 percent
return of the S&P 500.
There were two primary reasons for the Fund's strong performance. First,
despite a marked increase in volatility, growth stocks in general performed
well this year. This was due in large part to a favorable environment in which
low interest rates, mild inflation and a slow but steadily improving economy
worked together to provide a perfect backdrop for the kind of large-cap,
high-quality growth stocks in which we invest. Additionally, many of the
Fund's specific holdings performed well. Standouts included Microsoft Corp.,
Intel Corporation, The Coca-Cola Company, The Gillette Company and The Procter
& Gamble Company (3.1 percent, 4.0 percent, 3.3 percent, 3.6 percent and 3.0
percent of total net assets, respectively).
Although we outperformed our Lipper peer group, our performance relative to
the S&P was somewhat dampened by our underexposure to the energy sector,
which, due to increased drilling activity and a rapid rise in oil prices, did
exceedingly well this year. Although we own two oil and gas drillers,
Schlumberger Ltd. and Renaissance Energy Ltd. (2.5 percent and 2.1 percent of
total net assets), we chose to underweight this sector because energy
companies, in general, usually do not fit our long-term growth parameters.
Going forward, we plan to focus on many of the same investment themes. For
instance, we tend to favor technology and consumer-related companies that we
think can prove themselves to be fierce competitors in the global marketplace.
We also plan to focus on financial services companies, particularly those
which offer products and services that can help baby boomers prepare for a
financially secure retirement.
We remain somewhat cautious near term, since we think the market's
increased volatility has left some investors skittish. Still, we're certainly
not bearish. There are several reasons for this. First, earnings are still
coming in strong, with positive reports beating negative surprises by about
two to one. Furthermore, the economy is still solid -- wages are moving up and
employment growth is strong, yet inflation remains modest. Finally, as more
baby boomers start to save for retirement, we think it should help provide a
steady flow of capital into the stock market for years to come. Given this
environment, we are encouraged about the prospects for the stock market, in
general -- and growth stocks in particular.
Erik P. Gustafson, Portfolio Manager
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL
SHARES. Portfolio holdings are as of December 31, 1996, and are subject to
change. Total return performance includes changes in share price and
reinvestment of income and capital gains distributions. 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. Lipper
Analytical Services, Inc., is an independent monitor of mutual fund
performance. For the one-year, five-year and since inception periods ended
December 31, 1996, the median average annual returns for the Fund's variable
annuity growth fund peer group were 20.19 PERCENT, 13.21 PERCENT and 15.75
PERCENT, respectively. Because benchmark returns are calculated on a monthly
basis, those marked "since inception" are from the month-end date that fell
closest to the Fund's inception date. 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 effect
of these additional amounts, it would be lower.
<TABLE>
<CAPTION>
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, 1996
Managed Growth S&P 500
Stock Fund Index
<S> <C> <C>
1/89 10000 10000
12/89 13130 13163
12/90 12913 12754
12/91 19115 16631
12/92 20382 17896
12/93 21395 19697
12/94 20036 19955
12/95 27596 27444
12/96 33468 33756
Average Annual Total Return at December 31, 1996
1-Year 5-Year Inception
21.3% 11.9% 16.3%
</TABLE>
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PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Managed Assets Fund
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DEAR CONTRACT OWNER:
For the one-year period ended December 31, 1996, Managed Assets Fund posted a
15.6 percent return, which outpaced the 13.9 percent median return of its
Lipper VA Flexible Portfolio Fund peer group, but underperformed the 23.0
percent return of the S&P 500. The Fund, as a flexible portfolio fund, is
composed of both stocks and bonds. Consequently, it tends to underperform the
S&P 500 when the stock market has solid gains. The Fund's objective is not to
outperform the S&P, however. Instead, its goal is to pursue high total
investment return through a changing mix of securities. We think our efforts
to refocus the portfolio have helped us achieve that goal this year.
The equity portion of the portfolio performed well this year, aided by the
strong performance of our technology, financial services and REIT holdings.
Our oil producer stocks also fared well as oil prices surged. Likewise, our
decision to underweight certain areas that did not perform well -- in
particular, both electric and telephone utility stocks -- worked to our
advantage, particularly since our peer group tends to be overweighted in these
areas. In general, our non-U.S. holdings also performed well this year,
although a stronger dollar and concern about how U.S. monetary policy might
affect certain markets dampened their performance somewhat. Nonetheless, we
think an improving world climate -- in which the economies of many countries
are beginning to gain momentum, interest rates are generally falling and
corporate profits are strengthening -- bodes well for many of our non-U.S.
holdings.
On the flip side, the fixed income portion of the portfolio didn't fare as
well. With the exception of the high yield and emerging market sectors, bonds
in general performed poorly this year. This was due in large part to the
release of stronger-than-expected economic reports which, in turn, caused
long-term interest rates to drift higher. Most of the interest rate rise took
place in the first half of 1996, however, and by year end the fixed income
market had improved modestly, which helped the Fund's performance in the
second half of the year.
Throughout the year, we continued to make adjustments to the Fund's
portfolio. In doing so, we eliminated several holdings that no longer met our
expectations, including Xerox and Tenneco. Recent additions to the portfolio
included Motorola Inc., which we think has favorable long-term prospects;
United Meridian Corporation, which we think could benefit from higher crude
oil prices; and Controladora Comercial Mexicana SA, a Mexican retailer that we
think should profit from better retail sales as wages increase in Mexico (1.0
percent, 0.4 percent and 0.4 percent of total net assets, respectively).
As 1997 unfolds, we think economic growth will slow and inflation will
remain moderate. This combination of slower economic growth and modest
inflation should produce the fuel on which fixed income investments move --
lower interest rates. Although lower interest rates should also help equities,
we think a less robust economy could hurt corporate earnings somewhat. That's
because many companies already have expanded their profit margins as much as
possible through productivity gains and, despite increasing labor costs, may
be reluctant to raise prices in the face of increased global competition.
Consequently, we think fixed income investments have the potential to
<TABLE>
<CAPTION>
SteinRoe Variable Investment Trust
Managed Assets fund and S&P 500
Performance of a hypothetical $10,000 investment January 1, 1989, to
December 31, 1996
Managed Assets S&P 500
Fund Index
<S> <C> <C>
1/89 10000 10000
12/89 12238 13163
12/90 12154 12754
12/91 15549 16631
12/92 16720 17896
12/93 18273 19697
12/94 17690 19955
12/95 22189 27444
12/96 25657 33756
Average Annual Total Return at December 31, 1996
1-Year 5-Year Inception
15.6% 10.5% 12.5%
</TABLE>
<PAGE>
outperform U.S. equities for the first time since 1993. As a result, we intend
to keep a healthy weighting of fixed income securities and extend maturities
over the coming months.
Harvey B. Hirschhorn, Portfolio Manager
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of December 31, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. 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. Lipper Analytical Services, Inc., is an
independent monitor of mutual fund performance. For the one-year, five-year
and since inception periods ended December 31, 1996, the median average annual
returns for the Fund's variable annuity flexible portfolio fund peer group
were 14.20 PERCENT, 10.76 PERCENT and 12.61 PERCENT, respectively. Because
benchmark returns are calculated on a monthly basis, those marked "since
inception" are from the month-end date that fell closest to the Fund's
inception date. 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 effect of these additional
amounts, it would be lower.
Foreign investments involve market, currency and other risks not generally
associated with U.S. investments.
<PAGE>
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PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Mortgage Securities Income Fund
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DEAR CONTRACT OWNER:
For the one-year period ended December 31, 1996, Mortgage Securities Income
Fund's 4.7 percent total return surpassed the 4.2 percent median return posted
by its Lipper U.S. Mortgage Fund peer group, but trailed the 5.4 percent total
return of the Lehman Mortgage-Backed Securities Index. The Lehman Index posted
better performance than the Fund principally because it is composed entirely
of mortgage-backed securities, while the Fund has the latitude to invest in
other fixed income securities.
As the year began, inflationary threats, stronger-than-expected economic
activity and rising interest rates cast a bearish shadow over the bond market.
The one bright spot, however, was in mortgage-backed securities. These
investments performed well when, early in the year, rising interest rates led
to a dramatic slowdown in refinancing activity. The heavy weighting in
mortgage-backed securities that we maintained throughout the first half of the
year boosted the Fund's performance. As the prepayment risks associated with
refinancing activity dissipated, our holdings of mortgages with slight premium
coupons soundly outperformed U.S. Treasuries.
Entering the second half of the year we anticipated a stable-to-declining
interest rate environment. As a result, we lengthened the Fund's duration and
began to pare back on our mortgage-backed securities holdings. While mortgages
continued to perform well, we reduced our weighting from 93.4 percent of the
Fund's total net assets on June 30, to 85.2 percent on December 31. We
eliminated a few premium coupon mortgages because we believed these issues
faced the most prepayment exposure if rates fell. This move was well-timed as
lower interest rates in the fourth quarter led to an increase in
refinancing activity.
While the economy continues to send mixed signals, we believe growth
eventually will moderate, leading to a modest decline in interest rates. Under
this scenario, we believe certain mortgage-backed sectors will outperform
Treasuries in the months ahead. We plan to add discount coupon mortgage-backed
securities to the portfolio, as well as commercial mortgage-backed securities.
We believe these issues can offer good prepayment protection in a declining
interest rate environment. If rates begin to rise, however, we will seek
opportunities to purchase slight premium mortgage-backed securities at
attractive yields.
Michael T. Kennedy, Portfolio Manager
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of December 31, 1996, and are subject to change.
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 Mortgage Securities Income Fund; it is not
available for direct investment. According to Lipper Analytical Services,
Inc., an independent monitor of mutual fund performance, the median returns
for the variable annuity U.S. mortgage fund peer group for the one-year,
five-year and since inception periods ended December 31, 1996, were 4.20
PERCENT, 6.38 PERCENT and 9.15 PERCENT, respectively. Because benchmark
returns are calculated on a monthly basis, those marked "since inception" are
from the month-end date that fell closest to the Fund's inception date. The
Fund's Adviser currently limits expenses to 0.70 percent of average net
assets. Absent past limits, total return would have been less. 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 effect of these additional amounts, it would be
lower.
<TABLE>
<CAPTION>
SteinRoe Variable Investment Trust
Mortgage Securities Income Fund and Lehman Mortgage-Backed securities Index
Performance of a hypothetical $10,000 investment January 1, 1989, to
December 31, 1996
Mortgage Lehman Mortgage-
Securities Backed securities
Income Fund Index
<S> <C> <C>
1/89 10000 10000
12/89 11284 11535
12/90 12311 12772
12/91 14094 14779
12/92 14933 15808
12/93 15868 16889
12/94 15619 16617
12/95 18077 19409
12/96 18924 20447
Average Annual Total return at december 31, 1996
1-Year 5-Year Inception
4.7% 6.1% 8.3%
</TABLE>
<PAGE>
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PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Cash Income Fund
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DEAR CONTRACT OWNER:
For the one-year period ended December 31, 1996, Cash Income Fund's total
return of 5.01 percent slightly exceeded the 5.00 percent median return of its
Lipper variable annuity money market fund peer group.
It was a year of uncertainty regarding the strength of the economy and what
the Federal Reserve's next move with interest rates might be. In January 1996,
the Federal Reserve made the last of three one-quarter point interest rate
reductions designed to bring the economy to a "soft landing." Since then,
conflicting economic reports left investors guessing -- sometimes incorrectly
- -- at what the Federal Reserve would do next. Most notable was a March
employment report showing that the economy had added an astonishing 705,000
jobs in February. This led investors to believe that the Federal Reserve would
subsequently raise interest rates to rein in growth.
The release of stronger-than-expected economic reports during the summer
and into the third quarter convinced many investors that the Federal Reserve's
next interest rate move would be a tightening. As a result, about a half-point
increase was factored into market yields just before the Federal Reserve's
September meeting. The Federal Reserve, however, chose to leave rates
unchanged. Upon hearing that news, investors quickly discounted the increase
that previously had been priced into yields, and since then yields have traded
in a narrow range. Given continued mixed economic data, the Federal Reserve
maintained a "wait-and-see" attitude at its last two meetings of 1996.
In the face of interest rate uncertainty, we maintained a relatively
neutral position throughout the year. This is evidenced by the modest change
in the Fund's seven-day yield which moved from 5.33 percent on December 31,
1995, to 5.13 percent on December 31, 1996.
The Fund's performance benefited in the first half of 1996 when commercial
paper backed by Japanese banks carried yield advantages further into the new
year than usual. As a result, we maintained a position in these securities
throughout the first half of the year. We also held a higher weighting of
Yankee certificates of deposits through mid-year, as some of these offered
attractive yield spreads as well.
As the year drew to a close, we made several strategic portfolio
adjustments designed to enhance the Fund's yield. We've found that securities
dealers typically offer higher yields on short-term instruments at year end in
order to reduce the amount of inventory they carry into the new year. We
shortened maturity accordingly to take advantage of this trend. We also
shifted assets among foreign sectors. We've found that direct obligations of
foreign banks -- certificates of deposit and banker's acceptances -- tend to
offer higher yields than letters of credit commercial paper at year end.
Finally, we purchased a federal agency note at an attractive rate.
Looking ahead, we believe the Federal Reserve will hold steady on interest
rates until the economy reveals its true direction. As year-end pressures
subside, we think rates will drift lower, then remain in a narrow band until
investors begin to factor in the Federal Reserve's next rate move. We plan to
purchase longer issues when they offer attractive yields, but will not
lengthen maturity greatly.
Jane M. Naeseth, Portfolio Manager
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN WILL VARY AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES.
Portfolio holdings are as of December 31, 1996, and are subject to change.
Total return performance includes changes in share price and reinvestment of
income and capital gains distributions. Lipper Analytical Services, Inc., is
an independent monitor of mutual fund performance. For the one-year, five-year
and since inception periods ended December 31, 1996, the median average total
returns for the Fund's variable annuity money market fund peer group were 5.00
PERCENT, 4.07 PERCENT and 5.32 PERCENT, respectively. 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. 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 effect of these additional
amounts, it would be lower.
<PAGE>
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INDEPENDENT AUDITORS' REPORT
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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, 1996, 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 periods
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, 1996, 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
SteinRoe Variable Investment Trust as of December 31, 1996, 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 periods presented, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 14, 1997
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Capital Appreciation Fund / December 31, 1996
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS--(91.0%)
AUTO PARTS--(3.7%)
Quanex Corporation 141,000 $ 3,859,875
Superior Industries International, Inc. 150,000 3,468,750
-----------
7,328,625
-----------
BANKS/SAVINGS AND LOANS--(1.9%)
Grupo Financiero Inbursa 670,000 2,289,507
Rancho Santa Fe National Bank (a) 111,900 867,225
Southtrust Corporation 17,000 592,875
-----------
3,749,607
-----------
BROADCASTING--(9.1%)
Central European Media Enterprises (a) 214,900 6,823,075
Grupo Radio Centro ADS (a) 331,000 2,275,625
MetroNetworks, Inc. (a) 180,700 4,562,675
United Video Satellite Group, Inc. (a) 120,000 2,100,000
Valuevision International, Inc. (a) 388,000 2,085,500
-----------
17,846,875
-----------
BUSINESS SERVICES--(11.6%)
Alternative Resources Corporation (a) 100,000 1,737,500
Fiserv Inc. (a) 109,000 4,005,750
G & K Services Cl. A 251,000 9,475,250
National Processing, Inc. (a) 191,000 3,056,000
Unitog Company 120,500 3,283,625
USCS International, Inc. (a) 68,800 1,161,000
-----------
22,719,125
-----------
CHEMICALS--(1.0%)
CFC International, Inc. (a) 180,000 2,025,000
-----------
COMPUTER HARDWARE AND SOFTWARE--(3.8%)
Dr. Solomon's Group Plc ADR (a) 107,200 1,835,800
Microware Systems Corporation (a) 85,600 1,219,800
Storm Technology, Inc. (a) 194,700 924,825
Zebra Technologies Corporation (a) 145,000 3,389,375
-----------
7,369,800
-----------
CONSUMER RELATED--(2.0%)
Sola International, Inc. (a) 105,000 3,990,000
-----------
EDUCATION--(1.0%)
Firearms Training Systems, Inc. (a) 170,800 2,006,900
-----------
ELECTRONICS--(5.2%)
AVX Corp. 217,400 4,674,100
Ballantyne of Omaha, Inc. (a) 140,000 2,782,500
Kent Electronics Corporation (a) 106,000 2,729,500
-----------
10,186,100
-----------
<PAGE>
<CAPTION>
MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
INSURANCE--(10.5%)
Meadowbrook Insurance Group, Inc. 264,200 $ 5,548,200
Mutual Risk Management Ltd. 126,666 4,686,642
National Mutual of Asia 2,093,000 1,988,849
Protective Life Corporation 70,000 2,791,250
20th Century Industries, Inc. 328,000 5,535,000
-----------
20,549,941
-----------
MEDICAL DRUGS--(1.1%)
Ligand Pharmaceuticals, Inc. (a) 140,000 2,082,500
-----------
MEDICAL EQUIPMENT--(4.5%)
InControl, Inc. (a) 190,500 1,524,000
Urologix, Inc. (a) 119,900 1,948,375
Uroquest Medical Corporation (a) 205,000 1,383,750
Xomed Surgical Products Inc. (a) 195,400 3,908,000
-----------
8,764,125
-----------
METALS MANUFACTURING/DISTRIBUTION--(1.6%)
Wolverine Tube, Inc. (a) 89,000 3,137,250
-----------
PUBLISHING--(1.8%)
Hollinger International, Inc. 305,000 3,507,500
-----------
OIL/GAS--(13.5%)
Barrett Resources Corp. (a) 149,000 6,351,125
Cross Timbers Oil Company 89,000 2,236,125
Devon Energy Corporation 140,000 4,865,000
Diamond Offshore Drilling, Inc. (a) 65,000 3,705,000
Renaissance Energy Ltd. (a) 124,400 4,234,093
United Meridian Corporation (a) 99,000 5,123,250
-----------
26,514,593
-----------
REAL ESTATE DEVELOPMENT/MANAGEMENT--(4.5%)
CB Commercial Real Estate Services
Group, Inc. (a) 198,200 3,964,000
The Rouse Company 150,000 4,762,500
-----------
8,726,500
-----------
RETAIL--(3.4%)
Garden Botanika, Inc. (a) 236,700 2,840,400
Sunglass Hut International, Inc. (a) 252,000 1,827,000
Video Update, Inc. (a) 517,000 2,035,688
-----------
6,703,088
-----------
SPECIALTY CHEMICALS--(3.3%)
OM Group, Inc. 241,250 6,513,750
-----------
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS MARKET
(CONTINUED) SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS--(1.9%)
Western Wireless Corporation (a) 270,200$ 3,749,025
------------
WHOLESALE DISTRIBUTION--(5.6%)
AmeriSource Distribution
Corporation (a) 223,700 10,793,525
Thompson PBE, Inc. (a) 35,000 218,750
------------
11,012,275
------------
TOTAL COMMON STOCKS (Cost $162,200,731) 178,482,579
------------
<PAGE>
<CAPTION>
MARKET
PAR VALUE
--------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS--(8.6%)
Countrywide Home Loans
Mortgage Corp. 6.050% 1/06/97 $5,000,000 $ 4,995,799
Goldman Sachs Group Ltd.
8.250% 1/02/97 9,895,000 9,892,732
Lockheed Martin Corp. 7.250% 1/02/97 2,000,000 1,999,597
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $16,888,128) 16,888,128
------------
TOTAL INVESTMENTS--(99.6%)
(Cost $179,088,859) (b) 195,370,707
OTHER ASSETS, LESS LIABILITIES--(0.4%) 848,312
------------
NET ASSETS (100%) $196,219,019
============
<FN>
(a) Non-income producing security.
(b) The cost of investments for federal income tax purposes is identical.
Gross unrealized appreciation and depreciation on investments at December
31, 1996 is as follows:
Gross unrealized appreciation: $31,331,843
Gross unrealized depreciation: (15,049,995)
-----------
$16,281,848
===========
</FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Capital Appreciation Fund / December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at market value (identified cost $179,088,859)..................................................... $195,370,707
Cash ........................................................................................................... 53,364
Receivable for investments sold................................................................................. 2,645,785
Receivable for fund shares sold................................................................................. 56,245
Dividends and interest receivable............................................................................... 126,870
Other assets.................................................................................................... 14,955
-------------
TOTAL ASSETS............................................................................................... 198,267,926
-------------
LIABILITIES:
Payable for investments purchased............................................................................... 111,250
Payable for fund shares repurchased............................................................................. 1,793,905
Payable to adviser.............................................................................................. 98,966
Accrued expenses payable........................................................................................ 44,786
------------
TOTAL LIABILITIES.......................................................................................... 2,048,907
------------
NET ASSETS...................................................................................................... $196,219,019
============
NET ASSETS REPRESENTED BY:
Paid-in capital.............................................................................................. $142,777,288
Accumulated undistributed net investment income.............................................................. 263,066
Accumulated undistributed net realized gains on investments and foreign currency transactions................ 36,896,871
Net unrealized appreciation on investments and foreign currencies............................................ 16,281,794
------------
TOTAL NET ASSETS APPLICABLE TO OUTSTANDING SHARES OF BENEFICIAL INTEREST........................................ $196,219,019
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING....................................................................... 9,463,629
============
NET ASSET VALUE PER SHARE....................................................................................... $20.73
========
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest income.............................................................................................. $ 805,168
Dividends (net of foreign taxes withheld).................................................................... 796,609
-----------
Total investment income.................................................................................... 1,601,777
-----------
EXPENSES:
Management fee............................................................................................... 850,612
Administrative fee........................................................................................... 255,184
Custodian fee................................................................................................ 46,972
Accounting fee............................................................................................... 28,258
Printing expense............................................................................................. 19,905
Audit and legal fees......................................................................................... 18,956
Trustees' expense............................................................................................ 11,532
Transfer agent fee........................................................................................... 7,500
Miscellaneous expense........................................................................................ 22,076
-----------
Total expenses............................................................................................. 1,260,995
-----------
Net investment income........................................................................................... 340,782
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains on investments............................................................................ 37,125,858
Net realized losses on foreign currency transactions......................................................... (19,291)
Change in unrealized appreciation or depreciation on investments............................................. 1,982,076
-------------
Net increase in net assets resulting from operations............................................................ $ 39,429,425
============
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Capital Appreciation Fund
- -----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1996 1995
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 340,782 $ 367,197
Net realized gains on investments 37,125,858 1,051,804
Net realized losses on foreign currency transactions (19,291) (20,399)
Change in unrealized appreciation or depreciation on investments 1,982,076 13,894,884
------------ ------------
Net increase in net assets resulting from operations 39,429,425 15,293,486
------------ ------------
DISTRIBUTIONS DECLARED FROM:
Net investment income -- (346,798)
Distributions in excess of net investment income -- (28,200)
Net realized gains on investments -- (849,985)
------------ ------------
Total distributions -- (1,224,983)
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from fund shares sold 59,130,137 43,757,834
Cost of fund shares repurchased (45,588,672) (49,881,536)
Distributions reinvested -- 1,224,983
------------ ------------
Net increase (decrease) in net assets resulting from fund share transactions 13,541,465 (4,898,719)
------------ ------------
Total increase in net assets 52,970,890 9,169,784
NET ASSETS:
Beginning of year 143,248,129 134,078,345
------------ ------------
End of year $196,219,019 $143,248,129
============ ============
Accumulated undistributed (overdistributed) net investment income
included in ending net assets $ 263,066 $ (77,716)
============ ============
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST:
Shares sold 3,135,974 2,916,477
Shares repurchased (2,445,679) (3,317,111)
Distributions reinvested -- 75,757
------------ ------------
Net increase (decrease) 690,295 (324,877)
============ ============
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Capital Appreciation Fund
- -----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 16.33 $ 14.74 $ 16.53 $ 15.34 $ 15.32
--------- --------- -------- -------- --------
Net investment income 0.04 0.04 0.06 0.03 --
Net realized and unrealized gains
on investments and foreign currency transactions 4.36 1.69 0.09 5.22 2.17
--------- --------- -------- -------- --------
Total from investment operations 4.40 1.73 0.15 5.25 2.17
--------- --------- -------- -------- --------
Less distributions:
Dividends from and in excess of net investment income -- (0.04) (0.07) (0.02) --
Distributions from and in excess of net realized gains
on investments -- (0.10) (1.87) (4.04) (2.15)
--------- --------- -------- -------- --------
Total distributions -- (0.14) (1.94) (4.06) (2.15)
--------- --------- -------- -------- --------
Net asset value, end of year $ 20.73 $ 16.33 $ 14.74 $ 16.53 $ 15.34
======== ======== ======= ======= =======
TOTAL RETURN:
Total investment return 26.94% 11.75% 1.19%(b) 35.68%(b) 14.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $196,219 $143,248 $134,078 $96,544 $52,135
Ratio of expenses to average net assets 0.75% 0.76% 0.80%(a) 0.84%(a) 1.01%
Ratio of net investment income to average net assets 0.20% 0.26% 0.44%(b) 0.13%(b) (0.01)%
Portfolio turnover ratio 100% 132% 144% 112% 85%
Average commissions (per share) $0.0251 -- -- -- --
<FN>
(a) These ratios were not materially affected by the reimbursement of certain
expenses by the Adviser and Administrator.
(b) Computed giving effect to the Investment Adviser's and the Administrator's
expense limitation undertaking.
</FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Managed Growth Stock Fund / December 31, 1996
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS--(97.8%)
BANKS--(4.6%)
Citicorp 40,000 $ 4,120,000
MBNA Corp. 82,500 3,423,750
-----------
7,543,750
-----------
BUSINESS SERVICES--(2.3%)
First Data Corporation 100,000 3,650,000
-----------
COMPUTERS AND COMPUTER SOFTWARE--(12.1%)
Cisco Systems, Inc. (a) 40,000 2,545,000
Electronic Data Systems Corporation 60,000 2,595,000
Intel Corporation 50,000 6,546,875
Microsoft Corp. (a) 60,000 4,957,500
Parametric Technology (a) 40,000 2,055,000
Sterling Commerce, Inc. (a) 25,000 881,250
-----------
19,580,625
-----------
CONSTRUCTION--(1.7%)
Fluor Corporation 45,000 2,823,750
-----------
CONSUMER RELATED--(9.0%)
CUC International, Inc. (a) 165,000 3,918,750
The Gillette Company 75,000 5,831,250
The Proctor & Gamble Co. 45,000 4,837,500
-----------
14,587,500
-----------
DRUGS--(6.6%)
Eli Lilly & Co. 50,000 3,650,000
Merck & Co. 55,000 4,358,750
SmithKline Beecham Plc ADRs 40,000 2,720,000
-----------
10,728,750
-----------
ELECTRICAL EQUIPMENT--(3.1%)
General Electric Company 50,000 4,943,750
-----------
ENERGY--(4.6%)
Renaissance Energy Ltd. (a) 100,000 3,403,612
Schlumberger Ltd. 40,000 3,995,000
-----------
7,398,612
-----------
FINANCIAL SERVICES--(3.2%)
Federal National Mortgage Association 140,000 5,215,000
-----------
FOOD/BEVERAGE/TOBACCO--(6.5%)
The Coca Cola Company 100,000 5,262,500
Nabisco Holdings Corp. 50,000 1,943,750
Phillip Morris Companies, Inc. 30,000 3,378,750
-----------
10,585,000
-----------
<PAGE>
<CAPTION>
MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
HEALTH CARE--(4.1%)
Johnson & Johnson 80,000 $ 3,980,000
United Healthcare Corp. 60,000 2,700,000
------------
6,680,000
------------
HOTEL--(5.3%)
HFS, Inc. (a) 100,000 5,975,000
Sun International Hotels Ltd. (a) 70,000 2,555,000
------------
8,530,000
------------
INSURANCE--(5.7%)
American International Group, Inc. 37,500 4,059,375
The Travelers, Inc. 115,000 5,218,125
------------
9,277,500
------------
LEISURE & ENTERTAINMENT--(2.2%)
Disney (Walt) Co. 50,000 3,481,250
------------
MEDICAL SUPPLIES--(3.4%)
Baxter International Inc. 50,000 2,050,000
Medtronic, Inc. 50,000 3,400,000
------------
5,450,000
------------
RETAIL--(5.7%)
Corporate Express Inc. (a) 75,000 2,207,813
The Home Depot, Inc. 70,000 3,508,750
Kohl's Corp. (a) 90,000 3,532,500
------------
9,249,063
------------
RESTAURANTS--(2.0%)
McDonald's Corporation 70,000 3,167,500
------------
RUBBER, PLASTIC & RELATED--(2.5%)
Illinois Tool Works Inc. 50,000 3,993,750
------------
TECHNOLOGY SERVICES--(4.4%)
Tellabs Inc. (a) 90,000 3,386,250
Thermo Electron Corp. (a) 90,000 3,712,500
------------
7,098,750
------------
TELECOMMUNICATIONS--(8.8%)
Airtouch Communications (a) 85,000 2,146,250
LM Ericsson Telecommunications Co.
ADRs Class B 150,000 4,528,125
Lucent Technologies Inc. 50,000 2,312,500
Motorola, Inc. 40,000 2,455,000
WorldCom Inc. (a) 110,000 2,866,875
------------
14,308,750
------------
TOTAL COMMON STOCKS
(Cost $99,032,926) 158,293,300
------------
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS MARKET
(CONTINUED) PAR VALUE
---------- -----------
SHORT-TERM INVESTMENTS--(2.1%)
Goldman Sachs Group Ltd.
8.250% 1/02/97
(Cost $3,454,208) $3,455,000 $ 3,454,208
------------
TOTAL INVESTMENTS--(99.9%)
(Cost $102,487,134) (b) 161,747,508
OTHER ASSETS, LESS LIABILITIES--(0.1%) 131,466
------------
NET ASSETS (100%) $161,878,974
============
<FN>
(a) Non-income producing security.
(b) The cost of investments for federal income tax purposes is $102,488,374.
Gross unrealized appreciation and depreciation at December 31, 1996 is as
follows:
Gross unrealized appreciation: $60,028,220
Gross unrealized depreciation: (769,086)
-----------
Net unrealized appreciation: $59,259,134
===========
</FN>
See Notes to Financial Statements.
</TABLE>
<TABLE>
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Managed Growth Stock Fund / December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at market value (identified cost $102,487,134)..................................................... $161,747,508
Cash ........................................................................................................... 52,169
Receivable for fund shares sold................................................................................. 15,936
Dividends receivable............................................................................................ 176,359
Other assets.................................................................................................... 11,532
-------------
TOTAL ASSETS............................................................................................... 162,003,504
-------------
LIABILITIES:
Payable for fund shares repurchased............................................................................. 9,465
Management fee payable.......................................................................................... 64,641
Administrative fee payable...................................................................................... 19,409
Accrued expenses payable........................................................................................ 29,957
Other liabilities............................................................................................... 1,058
-------------
TOTAL LIABILITIES.......................................................................................... 124,530
-------------
NET ASSETS...................................................................................................... $161,878,974
============
NET ASSETS REPRESENTED BY:
Paid-in capital.............................................................................................. $ 94,453,766
Accumulated undistributed net investment income.............................................................. 688,694
Accumulated undistributed net realized gains on investments.................................................. 7,475,788
Net unrealized appreciation on investments and foreign currencies............................................ 59,260,726
-------------
TOTAL NET ASSETS APPLICABLE TO OUTSTANDING SHARES OF BENEFICIAL INTEREST........................................ $161,878,974
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING....................................................................... 5,658,471
============
NET ASSET VALUE PER SHARE....................................................................................... $28.61
======
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld).................................................................... $ 1,387,148
Interest Income.............................................................................................. 424,260
-------------
Total investment income.................................................................................... 1,811,408
-------------
EXPENSES:
Management fee............................................................................................... 743,602
Administrative fee........................................................................................... 223,081
Accounting fee............................................................................................... 27,448
Printing expense............................................................................................. 19,800
Custodian fee................................................................................................ 17,476
Audit and legal fees......................................................................................... 16,843
Trustees' expense............................................................................................ 10,626
Transfer agent fee........................................................................................... 7,500
Miscellaneous expense........................................................................................ 16,107
-------------
Total expenses............................................................................................. 1,082,483
-------------
Net investment income........................................................................................... 728,925
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investments............................................................................ 7,580,172
Change in unrealized appreciation or depreciation on investments............................................. 20,202,757
-------------
Net increase in net assets resulting from operations............................................................ $ 28,511,854
============
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,
1996 1995
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 728,925 $ 848,442
Net realized gains on investments 7,580,172 6,765,437
Change in unrealized appreciation or depreciation on investments 20,202,757 29,815,844
------------ ------------
Net increase in net assets resulting from operations 28,511,854 37,429,723
------------ ------------
DISTRIBUTIONS DECLARED FROM:
Net investment income -- (799,977)
Net realized gains on investments -- (6,557,064)
Distributions in excess of net realized gains on investments -- (42,937)
------------ ------------
Total distributions -- (7,399,978)
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from fund shares sold 22,263,141 23,896,709
Cost of fund shares repurchased (25,729,831) (23,225,761)
Distributions reinvested -- 7,399,978
------------ ------------
Net increase (decrease) in net assets resulting from fund share transactions (3,466,690) 8,070,926
------------ ------------
Total increase in net assets 25,045,164 38,100,671
NET ASSETS:
Beginning of year 136,833,810 98,733,139
------------ ------------
End of year $161,878,974 $136,833,810
============ ============
Accumulated undistributed (overdistributed) net investment income
included in ending net assets $ 688,694 $ (40,231)
============ ============
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST:
Shares sold 854,357 1,121,091
Shares repurchased (997,588) (1,086,399)
Distributions reinvested -- 314,893
------------ ------------
Net increase (decrease) (143,231) 349,585
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Managed Growth Stock Fund
- -----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 23.59 $ 18.11 $ 20.65 $ 20.10 $ 19.47
--------- --------- -------- --------- --------
Net investment income 0.13 0.15 0.15 0.13 0.11
Net realized and unrealized gains (losses)
on investments............................................ 4.89 6.68 (1.46) 0.86 1.18
--------- --------- -------- --------- --------
Total from investment operations............................. 5.02 6.83 (1.31) 0.99 1.29
--------- --------- -------- --------- --------
Less distributions:
Dividends from and in excess of net investment income..... -- (0.15) (0.17) (0.12) (0.10)
Distributions from and in excess of net realized gains
on investments.......................................... -- (1.20) (1.06) (0.32) (0.56)
--------- --------- -------- --------- --------
Total distributions.......................................... -- (1.35) (1.23) (0.44) ( 0.66)
--------- --------- -------- --------- --------
Net asset value, end of year................................. $28.61 $ 23.59 $ 18.11 $ 20.65 $ 20.10
======== ======== ======= ======== =======
TOTAL RETURN:
Total investment return...................................... 21.28% 37.73% (6.35)% 4.97% 6.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............................ $161,879 $136,834 $98,733 $111,561 $64,402
Ratio of expenses to average net assets...................... 0.73% 0.74% 0.77% 0.83% 0.97%
Ratio of net investment income to average net assets......... 0.49% 0.72% 0.75% 0.77% 0.63%
Portfolio turnover ratio..................................... 35% 41% 72% 77% 20%
Average commissions (per share).............................. $0.0534 -- -- -- --
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Managed Assets Fund / December 31, 1996
- -------------------------------------------------------------------------------
MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCKS--(54.1%)
BANKS--(5.6%)
BankAmerica Corporation 31,000 $ 3,092,250
Bank of Boston Corp. 40,000 2,570,000
Citicorp 30,000 3,090,000
NationsBank Corp. 29,000 2,834,750
Royal Bank of Scotland Group Plc 290,000 2,789,320
Westpac Banking Corporation Ltd. 415,000 2,360,127
-----------
16,736,447
-----------
BUILDING AND CONSTRUCTION--(1.1%)
Fluor Corporation 52,000 3,263,000
-----------
CHEMICALS--(1.0%)
Praxair, Inc. 65,000 2,998,125
-----------
COMPUTERS--(0.8%)
International Business Machines 15,000 2,265,000
-----------
COMPUTER SOFTWARE AND SERVICES--(0.9%)
Electronic Data Systems Corporation 60,000 2,595,000
-----------
CONSUMER PRODUCTS--(0.8%)
First Brands Corp. 80,000 2,270,000
-----------
DATA PRODUCTS & REPRODUCTION--(0.9%)
Canon, Inc. 120,000 2,646,679
-----------
DRUGS/HEALTH CARE--(5.0%)
American Home Products Corp. 38,000 2,227,750
Elan Corporation Plc ADRs (a) 90,000 2,992,500
Eli Lilly & Company 46,000 3,358,000
Novartis ADRs (a) 55,000 3,139,697
SmithKline Beecham Plc ADRs 50,000 3,400,000
-----------
15,117,947
-----------
ELECTRICAL EQUIPMENT--(3.3%)
Emerson Electric Co. 31,000 2,999,250
General Electric Company 31,000 3,065,125
Hubbell Inc., Class B 86,000 3,719,500
-----------
9,783,875
-----------
ELECTRONICS--(3.1%)
Harris Corp. 40,000 2,745,000
Intel Corporation 27,000 3,535,313
Motorola, Inc. 50,000 3,068,750
-----------
9,349,063
-----------
<PAGE>
<CAPTION>
MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
ENVIRONMENTAL SERVICES--(1.0%)
WMX Technologies Inc. 90,000 $ 2,936,250
-----------
FABRICATED METAL PRODUCTS--(0.9%)
Crown Cork & Seal, Inc. 50,000 2,718,750
-----------
FERTILIZERS--(0.7%)
Potash Corp. of Saskatchewan Inc. 23,000 1,955,000
-----------
FINANCIAL SERVICES--(0.8%)
Federal National Mortgage Association 67,000 2,495,750
-----------
FOOD/BEVERAGE/TOBACCO--(2.6%)
PepsiCo, Inc. 96,000 2,808,000
Philip Morris Companies, Inc. 25,000 2,815,625
Sara Lee Corporation 60,000 2,235,000
-----------
7,858,625
-----------
HOLDING--(1.0%)
Swire Pacific Ltd. Class A 300,000 2,860,412
-----------
HOUSEWARES--(1.0%)
Newell Co. 95,000 2,992,500
-----------
INSURANCE--(1.9%)
American States Financial Corporation 110,000 2,915,000
TIG Holdings Inc. 83,000 2,811,625
-----------
5,726,625
-----------
MEDICAL SUPPLIES--(1.1%)
Allegiance Corporation 13,600 375,700
Baxter International Inc. 68,000 2,788,000
-----------
3,163,700
-----------
OIL/GAS--(5.6%)
Baker Hughes Inc. 85,000 2,932,500
British Petroleum Company Plc ADRs 18,000 2,544,750
Enron Corp. 72,000 3,105,000
Mobil Corporation 24,000 2,934,000
Schlumberger Ltd. 25,000 2,496,875
Sonat, Inc. 32,000 1,648,000
United Meridian Corporation (a) 22,000 1,138,500
-----------
16,799,625
-----------
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS MARKET
(CONTINUED) SHARES VALUE
-------- ------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
PAPER & FOREST PRODUCTS--(0.8%)
Plum Creek Timber Company 94,000 $ 2,444,000
-------------
PUBLISHING & BROADCASTING--(0.7%)
World Color Press, Inc. (a) 115,000 2,213,750
-------------
REAL ESTATE--(2.2%)
Avalon Properties, Inc. 76,000 2,185,000
The Rouse Company 70,587 2,241,137
Security Capital Industrial Trust 100,000 2,137,500
-------------
6,563,637
-------------
RETAIL--(3.6%)
Credit Saison Co. Ltd. 97,000 2,164,470
Controladora Comercial Mexicana
SA GDRs (a) 66,400 1,186,900
Home Depot, Inc. 55,000 2,756,875
Jusco Co. 80,000 2,708,710
Nine West Group, Inc. (a) 45,000 2,086,875
-------------
10,903,830
-------------
TELECOMMUNICATIONS--(4.0%)
Airtouch Communications, Inc. (a) 95,000 2,398,750
Frontier Corp. 90,000 2,036,250
LM Ericsson Telecommunications Co.
ADRs Class B 105,000 3,169,687
Lucent Technologies, Inc. 40,000 1,850,000
Telefonica de Argentina S.A. ADRs 100,000 2,587,500
-------------
12,042,187
-------------
TRANSPORTATION--(1.0%)
Canadian National Railway 75,000 2,850,000
-------------
UTILITIES--(1.9%)
Empresa Nacional De Electricidad
ADRs 47,000 3,290,000
Enron Global Power & Pipelines 90,000 2,430,000
-------------
5,720,000
-------------
WATER TREATMENT SYSTEMS--(0.8%)
U.S. Filter Corporation (a) 75,000 2,381,250
-------------
TOTAL COMMON STOCKS (Cost $121,588,099) 161,651,027
-------------
MISCELLANEOUS--(0.8%)
World Equity Benchmark
Shares-Japan (Cost $3,118,736) 190,000 2,481,875
-----------
<PAGE>
<CAPTION>
MARKET
PAR VALUE
-------- ------------
<S> <C> <C>
LONG-TERM OBLIGATIONS--(41.8%)
AIR TRANSPORTATION--(0.9%)
Federal Express Corporation 1994
Pass-Through Certificates Series
A310-A1 7.530% 9/23/06 $2,063,406 $ 2,096,111
United Airline Corporation Series
1991-A-1 9.200% 3/22/08 691,474 755,339
-----------
2,851,450
----------
ASSET-BACKED SECURITIES--(1.7%)
ALPS Pass-Through Trust Series 1994-1
Class C2 9.350% 9/15/04 1,989,855 2,039,462
American Mortgage Trust Series 1993-3
Class 3B 8.190% 9/27/22 2,130,207 2,018,009
Greentree Home Improvement Loan
Trust Series 1994-A Class A
7.050% 3/15/14 1,009,250 1,014,074
----------
5,071,545
----------
BANKS--(1.2%)
Den Danske Bank 6.550% 9/15/03 2,250,000 2,200,028
First Chicago NBD 6.125% 2/15/06 1,500,000 1,403,925
----------
3,603,953
----------
DRUGS/HEALTHCARE--(1.2%)
Nationwide Health Property Inc.
Conv. Deb. 6.250% 1/01/99 3,400,000 3,565,750
----------
FOREIGN GOVERNMENT REGIONAL BOND--(1.0%)
Corporacion Andina de Fomento
6.625% 10/14/98 (c) 2,900,000 2,904,727
----------
FINANCIAL--(1.4%)
Associates Corporation of North America
7.500% 4/15/02 4,000,000 4,139,560
----------
MORTGAGE-BACKED SECURITIES--(0.9%)
Lennar Central Partners Limited
Partnership Series 1994-1 Class C
8.120% 9/15/02 (c) 2,500,000 2,504,175
MDC Mortgage Funding Corporation
Series Q Class 5 8.850% 3/20/18 231,136 235,646
----------
2,739,821
----------
OIL/GAS--(1.5%)
Consolidated Natural Gas Conv. Deb.
7.250% 12/15/15 2,500,000 2,628,125
SFP Pipeline Holdings, Inc. Conv. Deb.
11.160% 8/15/10 1,400,000 1,736,000
----------
4,364,125
----------
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS MARKET
(CONTINUED) SHARES VALUE
-------- ------------
<S> <C> <C>
LONG-TERM OBLIGATIONS (CONTINUED)
UTILITIES--(0.8%)
Niagara Mohawk Power Corp.
8.000% 6/01/04 $2,500,000 $ 2,401,275
------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS--(31.2%)
Federal Home Loan Mortgage
Corporation
6.500% 12/01/10 Gold 972,512 956,981
6.500% 5/01/11 Gold 955,090 939,837
6.500% 6/01/11 Gold 5,839,363 5,733,554
12.000% 7/01/20 Gold 1,581,729 1,809,102
6.500% 3/01/26 Gold 3,954,551 3,786,087
6.500% 6/01/26 Gold 2,483,332 2,377,542
Federal National Mortgage Association
8.000% 4/13/05 1,500,000 1,527,795
Government National Mortgage
Association
7.125% 7/20/25 ARM 1,337,824 1,368,233
8.000% 3/15/26 4,914,073 5,017,241
U.S. Treasury Bonds
7.250% 5/15/16 7,000,000 7,390,950
7.875% 2/15/21 4,500,000 5,084,325
7.125% 2/15/23 4,000,000 4,174,000
U.S. Treasury Notes
6.375% 1/15/99 7,500,000 7,572,525
6.875% 8/31/99 7,500,000 7,658,925
7.875% 8/15/01 3,000,000 3,198,900
6.250% 2/15/03 7,750,000 7,738,375
5.750% 8/15/03 6,000,000 5,814,300
7.500% 2/15/05 8,000,000 8,549,520
6.500% 5/15/05 3,500,000 3,521,455
6.500% 8/15/05 6,750,000 6,790,635
6.500% 7/15/06 2,250,000 2,337,322
------------
93,347,604
------------
TOTAL LONG-TERM OBLIGATIONS
(Cost $123,974,040) 124,989,810
------------
<CAPTION>
MARKET
PAR VALUE
-------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENTS--(2.3%)
Goldman Sachs Group 8.250% 1/02/97
(Cost $6,998,396) $7,000,000 $ 6,998,396
------------
TOTAL INVESTMENTS (99.0%)
(Cost $255,679,271) (b) 296,121,108
OTHER ASSETS, LESS LIABILITIES--(1.0%) 3,063,112
------------
NET ASSETS (100%) $299,184,220
============
<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, 1996 is as
follows:
Gross unrealized appreciation: $43,150,108
Gross unrealized depreciation: (2,708,271)
------------
Net unrealized appreciation: $40,441,837
============
(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.
</FN>
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Managed Assets Fund / December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at market value (identified cost $255,679,271)..................................................... $296,121,108
Cash ........................................................................................................... 94,613
Receivable for investments sold................................................................................. 763,962
Receivable for fund shares sold................................................................................. 642
Dividends and interest receivable............................................................................... 2,647,106
Other assets.................................................................................................... 29,910
------------
TOTAL ASSETS............................................................................................... 299,657,341
------------
LIABILITIES:
Payable for fund shares repurchased............................................................................. 256,027
Management fee payable.......................................................................................... 107,387
Administrative fee payable...................................................................................... 35,834
Accrued expenses payable........................................................................................ 38,033
Other liabilities............................................................................................... 35,840
------------
TOTAL LIABILITIES.......................................................................................... 473,121
------------
NET ASSETS...................................................................................................... $299,184,220
============
NET ASSETS REPRESENTED BY:
Paid-in capital.............................................................................................. $223,300,752
Accumulated undistributed net investment income.............................................................. 10,358,564
Accumulated undistributed net realized gains on investments.................................................. 25,080,750
Net unrealized appreciation on investments and foreign currencies............................................ 40,444,154
------------
TOTAL NET ASSETS APPLICABLE TO OUTSTANDING SHARES OF BENEFICIAL INTEREST........................................ $299,184,220
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING....................................................................... 18,379,437
============
NET ASSET VALUE PER SHARE....................................................................................... $16.28
======
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest income..............................................................................................$ 8,967,749
Dividends (net of foreign taxes withheld).................................................................... 3,452,126
-----------
Total investment income.................................................................................... 12,419,875
-----------
EXPENSES:
Management fee............................................................................................... 1,293,967
Administrative fee........................................................................................... 431,322
Printing expense............................................................................................. 37,310
Accounting fee............................................................................................... 30,900
Custodian fee................................................................................................ 27,814
Audit and legal fees......................................................................................... 26,796
Trustees' expense............................................................................................ 17,301
Transfer agent fee........................................................................................... 7,500
Miscellaneous expense........................................................................................ 34,560
-----------
Total expenses............................................................................................. 1,907,470
-----------
Net investment income...........................................................................................10,512,405
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investments and foreign currency....................................................... 25,179,094
Change in unrealized appreciation or depreciation on investments............................................. 5,972,813
-----------
Net increase in net assets resulting from operations............................................................$41,664,312
===========
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,
1996 1995
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 10,512,405 $ 8,566,666
Net realized gains on investments and foreign currency 25,179,094 779,937
Change in unrealized appreciation or depreciation on investments 5,972,813 28,886,194
------------ ------------
Net increase in net assets resulting from operations 41,664,312 50,232,797
------------ ------------
DISTRIBUTIONS DECLARED FROM:
Net investment income -- (8,589,529)
Distributions in excess of net investment income -- (192,094)
Net realized losses on investments -- (12,796,378)
Distributions in excess of net realized gains on investments -- (135,229)
------------ ------------
Total distributions -- (21,713,230)
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from fund shares sold 23,322,625 21,591,908
Cost of fund shares repurchased (42,816,350) (40,012,684)
Distributions reinvested -- 21,713,230
Strategic Managed Assets Fund Substitution -- 48,923,531
------------ ------------
Net increase (decrease) in net assets resulting from fund share transactions (19,493,725) 52,215,985
------------ ------------
Total increase in net assets 22,170,587 80,735,552
NET ASSETS:
Beginning of year 277,013,633 196,278,081
------------ ------------
End of year 299,184,220 277,013,633
============ ============
Accumulated undistributed (overdistributed) net investment income
included in ending net assets $ 10,358,564 $ (192,094)
============ ============
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST:
Shares sold 1,550,496 1,590,395
Shares repurchased (2,845,909) (2,911,681)
Distributions reinvested -- 1,549,182
Strategic Managed Assets Fund Substitution -- 3,333,520
------------ ------------
Net increase (decrease) (1,295,413) 3,561,416
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Managed Assets Fund
- -----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 14.08 $ 12.18 $ 13.11 $ 12.54 $ 12.54
--------- --------- --------- --------- ---------
Net investment income........................................ 0.57 0.48 0.51 0.38 0.45
Net realized and unrealized gains (losses)
on investments............................................ 1.63 2.61 (0.93) 0.78 0.49
--------- --------- --------- --------- ----------
Total from investment operations............................. 2.20 3.09 (0.42) 1.16 0.94
--------- --------- --------- --------- ---------
Less distributions:
Dividends from and in excess of net investment income..... -- (0.48) (0.51) (0.36) (0.46)
Distributions from and in excess of net realized gains
on investments.......................................... -- (0.71) -- (0.23) (0.48)
--------- --------- --------- --------- ---------
Total distributions.......................................... -- (1.19) (0.51) (0.59) (0.94)
--------- --------- --------- --------- ---------
Net asset value, end of year................................. $ 16.28 $ 14.08 $ 12.18 $ 13.11 $ 12.54
======== ======== ======== ======== ========
TOTAL RETURN:
Total investment return...................................... 15.63% 25.43% (3.19)% 9.29% 7.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............................ $299,184 $277,014 $196,278 $197,132 $113,572
Ratio of expenses to average net assets...................... 0.67% 0.66% 0.68% 0.69% 0.66%
Ratio of net investment income to average net assets......... 3.68% 3.12% 4.01% 3.55% 3.98%
Portfolio turnover ratio (a)................................. 76% 66% 71% 47% 70%
Average Commissions (per share).............................. $0.0547 -- -- -- --
<FN>
(a) The portfolio turnover ratio includes dollar roll transactions.
</FN>
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Mortgage Securities Income Fund /
December 31, 1996
- -------------------------------------------------------------------------------
MARKET
PAR VALUE
--------- -----------
<S> <C> <C>
ASSET-BACKED SECURITIES--(4.5%)
ALPS Pass-Through Trust Series 1994-1
Class C2 9.350% 9/15/04 $ 994,927 $1,019,761
First Boston Home Equity Loan Pass-
Through Certificates Series 1993-H1,
Class A-IO (effective yield 12.820%)
9/28/13 6,652,285 258,641
Greentree Home Improvement Loan
Trust Series 1994-A Class A
7.050% 3/15/14 756,937 760,556
Green Tree Financial Corporation
Series 1996-9 Class B1
7.650% 1/15/28 1,350,000 1,360,328
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $3,343,062) 3,399,286
----------
MORTGAGE-BACKED SECURITIES--(11.7%)
American Mortgage Trust Series 1993-3
Class 3B 8.190% 9/27/22 804,745 762,359
Citicorp Mortgage Securities, Inc.
Series 1987-10 10.000% 7/01/17 169,209 176,308
Comfed Savings Bank Adjustable Rate
Mortgage Series 1987-1A
7.642% 1/01/18 161,800 137,530
Glendale Federal Savings & Loan
Series 1978-A 9.125% 1/25/08 32,177 33,616
Imperial Savings & Loan Adjustable
Rate Mortgage Series 1987-4A
10.169% 7/25/17 33,070 35,601
Kidder Peabody Acceptance Corp
Series 1987-1 Class A
8.750% 7/25/17 42,038 41,653
MDC Mortgage Funding Corporation
Series Q Class 5 8.850% 3/20/18 346,704 353,469
Merrill Lynch Mortgage Investments Inc.
8.000% 12/20/18 Series 20-D 1,554,035 1,569,902
7.088% 12/26/25 Series 1995-C3
Class A3 ARM 2,000,000 1,986,880
5.880% 11/15/26 Series 1987-A ARM 104,672 104,175
Nomura Asset Securities Corporation
MBS Series 1996-MD5 Class A1B
7.120% 4/13/36 1,000,000 1,006,560
PS CMO Trust Series 1994-C1-A2
7.920% 8/15/02 722,486 741,545
Republic Federal Savings & Loan
Association Series 1987-1
7.500% 2/28/17 7,662 7,572
Sears Mortgage Securities Corp.
Series 1987-A 6.500% 3/25/17 25,083 24,437
<PAGE>
<CAPTION>
MARKET
PAR VALUE
--------- -----------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
Structured Asset Securities Corporation
Series 1996-CFL Class X1-IO
(effective yield 12.960%) 2/25/28 $13,138,526 $ 680,576
Series 1996-CFL Class C
6.525% 2/25/28 1,242,500 1,214,544
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $8,887,046) 8,876,727
-----------
UTILITY SECURITIES--(2.7%)
National Power Co. Plc 7.125% 7/11/01
(Cost $1,997,260) 2,000,000 2,027,240
-----------
FEDERAL HOME LOAN MORTGAGE
CORPORATION CERTIFICATES--(20.0%)
8.500% 5/01/06 Gold 160,471 167,340
6.500% various due dates to
6/01/09 Gold 1,942,551 1,907,352
10.750% 11/01/09 269,233 293,085
11.250% various due dates to 11/01/15 120,673 134,890
10.500% various due dates to 2/01/19 442,298 484,732
12.000% 7/01/13 91,925 104,478
12.000% 7/01/20 Gold 1,138,845 1,302,555
7.500% various due dates to
5/01/24 Gold 8,523,778 8,580,240
7.000% 1/01/26 2,258,541 2,216,622
-----------
TOTAL FEDERAL HOME LOAN MORTGAGE
CORPORATION CERTIFICATES
(Cost $14,984,617) 15,191,294
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION CERTIFICATES--(32.8%)
10.500% 2/01/01 136,242 143,310
12.250% 9/01/12 FHA/VA
Guaranteed 85,485 97,932
10.250% 2/01/16 161,290 177,343
10.000% various due dates to 3/01/16 392,493 423,916
9.000% various due dates to 5/01/20 299,215 318,204
8.500% various due dates to 12/01/24 890,810 929,490
6.000% various due dates to 2/01/25 13,597,779 12,994,139
7.000% various due dates to 8/01/25 5,735,886 5,701,769
6.500% various due dates to 1/01/26 4,326,663 4,128,119
-----------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION CERTIFICATES
(Cost $24,904,700) 24,914,222
-----------
<PAGE>
<CAPTION>
SCHEDULE OF INVESTMENTS MARKET
(CONTINUED) PAR VALUE
--------- -----------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION CERTIFICATES--(18.7%)
11.500% various due dates to 5/15/13 $ 512,320 $ 582,282
8.500% 2/15/17 213,841 225,470
10.000% various due dates to 11/15/19 741,110 812,442
9.000% various due dates to 1/15/20 2,132,742 2,279,990
8.000% various due dates to 8/15/22 3,448,662 3,558,532
9.500% various due dates to 8/15/22 2,408,989 2,615,059
7.000% 4/15/23 559,944 551,197
6.500% various due dates to 7/15/24 919,066 880,673
7.125% 7/20/25 ARM 2,675,648 2,736,466
-----------
TOTAL GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION CERTIFICATES
(Cost $14,162,923) 14,242,111
-----------
REAL ESTATE MORTGAGE INVESTMENT
CONDUITS--(2.0%)
Federal Home Loan Mortgage
Corporation Series 11-C
9.500% 4/15/19 90,601 93,718
Federal National Mortgage Association
Trust Series 1988-4Z
9.250% 3/25/18 1,342,097 1,397,781
Federal National Mortgage Association
Trust Series 1991-91SA-IO
(effective yield 14.400%) 7/25/98 10,705 59,784
-----------
TOTAL REAL ESTATE MORTGAGE
INVESTMENT CONDUITS
(Cost $1,546,694) 1,551,283
-----------
<CAPTION>
MARKET
PAR VALUE
--------- -----------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES--(5.8%)
U.S. Treasury Bonds
6.500% 8/15/05 $ 750,000 $ 754,515
6.750% 8/15/26 2,350,000 2,368,142
U.S. Treasury Note 7.000% 7/15/06 1,250,000 1,298,513
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $4,406,294) 4,421,170
-----------
SHORT-TERM INVESTMENTS--(0.9%)
Goldman Sachs Group Ltd. 8.250% 1/02/97
(Cost $689,842) 690,000 689,842
-----------
TOTAL INVESTMENTS--(99.1%)
(Cost $74,922,438) 75,313,175
OTHER ASSETS, LESS LIABILITIES (0.9%) 695,976
-----------
NET ASSETS (100%) $76,009,151
===========
<FN>
(a) The cost of investments for federal income tax purposes is identical.
Gross unrealized appreciation and depreciation at December 31, 1996 is as
follows:
Gross unrealized appreciation: $962,495
Gross unrealized depreciation: (571,758)
----------
Net unrealized appreciation: $390,737
==========
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Mortgage Securities Income Fund / December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at market value (identified cost $74,922,438)...................................................... $75,313,175
Cash ........................................................................................................... 52,560
Interest receivable............................................................................................. 681,400
Other assets.................................................................................................... 32,705
-----------
TOTAL ASSETS............................................................................................... 76,079,840
-----------
LIABILITIES:
Payable for fund shares repurchased............................................................................. 4,031
Management fee payable.......................................................................................... 24,181
Administrative fee payable...................................................................................... 9,063
Accrued expenses payable........................................................................................ 33,414
-----------
TOTAL LIABILITIES.......................................................................................... 70,689
-----------
NET ASSETS...................................................................................................... $76,009,151
===========
NET ASSETS REPRESENTED BY:
Paid-in capital.............................................................................................. $78,959,171
Accumulated overdistributed net investment income............................................................ (299,012)
Accumulated net realized losses on investments............................................................... (3,041,745)
Net unrealized appreciation on investments................................................................... 390,737
-----------
TOTAL NET ASSETS APPLICABLE TO OUTSTANDING SHARES OF BENEFICIAL INTEREST........................................ $76,009,151
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING....................................................................... 7,724,091
===========
NET ASSET VALUE PER SHARE....................................................................................... $9.84
=====
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INTEREST INCOME................................................................................................. $ 6,202,847
------------
EXPENSES:
Management fee............................................................................................... 334,914
Administrative fee........................................................................................... 125,593
Custodian fee................................................................................................ 27,650
Accounting fee............................................................................................... 25,829
Audit and legal fees......................................................................................... 23,449
Printing expense............................................................................................. 8,922
Trustees' expense............................................................................................ 7,787
Transfer agent fee........................................................................................... 7,500
Miscellaneous expense........................................................................................ 39,287
------------
Gross expenses............................................................................................. 600,931
Fee refund................................................................................................... (14,831)
------------
Net expenses............................................................................................... 586,100
------------
Net investment income........................................................................................... 5,616,747
REALIZED AND UNREALIZED LOSSES ON INVESTMENTS:
Net realized losses on investments........................................................................... (196,495)
Change in unrealized appreciation or depreciation on investments............................................. (1,957,496)
------------
Net increase in net assets resulting from operations............................................................ $ 3,462,756
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Mortgage Securities Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1996 1995
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,616,747 $ 5,354,601
Net realized gains (losses) on investments (196,495) 653,056
Change in unrealized appreciation or depreciation on investments (1,957,496) 5,388,182
------------ ------------
Net increase in net assets resulting from operations 3,462,756 11,395,839
------------ ------------
DISTRIBUTIONS DECLARED FROM:
Net investment income (5,616,747) (5,354,601)
Distributions in excess of net investment income (83,288) (145,396)
------------ ------------
Total distributions (5,700,035) (5,499,997)
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from fund shares sold 4,581,248 6,851,307
Cost of fund shares repurchased (33,813,119) (14,865,209)
Distributions reinvested 5,700,035 5,499,997
Colonial-Keyport Government Fund Substitution -- 25,976,819
------------ ------------
Net increase (decrease) in net assets resulting from fund share transactions (23,531,836) 23,462,914
------------ ------------
Total increase (decrease) in net assets (25,769,115) 29,358,756
NET ASSETS:
Beginning of year 101,778,266 72,419,510
------------ ------------
End of year 76,009,151 101,778,266
============ ============
Accumulated overdistributed net investment income included in ending net assets $ (299,012) $ (129,284)
============ ============
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST:
Shares sold 447,078 680,330
Shares redeemed (3,321,354) (1,486,896)
Distributions reinvested 579,272 542,406
Colonial-Keyport Government Fund Substitution -- 2,477,593
------------ ------------
Net increase (decrease) (2,295,004) 2,213,433
============ ============
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Mortgage Securities Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 10.16 $ 9.28 $ 10.17 $ 10.26 $ 10.42
-------- --------- -------- -------- --------
Net investment income........................................ 0.78 0.57 0.73 0.65 0.63
Net realized and unrealized gains (losses)
on investments............................................ (0.30) 0.89 (0.89) (0.01) (0.01)
-------- --------- -------- -------- --------
Total from investment operations............................. 0.48 1.46 (0.16) 0.64 0.62
-------- --------- -------- -------- --------
Less distributions:
Dividends from and in excess of net investment income..... (0.80) (0.58) (0.73) (0.65) (0.62)
Distributions from and in excess of net realized gains
on investments.......................................... -- -- -- (0.08) (0.16)
-------- --------- -------- -------- --------
Total distributions.......................................... (0.80) (0.58) (0.73) (0.73) (0.78)
-------- --------- -------- -------- --------
Net asset value, end of year................................. $ 9.84 $ 10.16 $ 9.28 $ 10.17 $ 10.26
======= ======== ======= ======= =======
TOTAL RETURN:
Total investment return...................................... 4.70% 15.74% (1.57)%(b) 6.26%(b) 5.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)............................ $76,009 $101,778 $72,420 $91,195 $67,353
Ratio of expenses to average net assets...................... 0.70%(a) 0.69% 0.70%(a) 0.76%(a) 0.90%
Ratio of net investment income to average net assets......... 6.71%(b) 6.76% 6.71%(b) 6.64%(b) 6.72%
Portfolio turnover ratio (c)................................. 72% 112% 241% 187% 169%
<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 0.72%, 0.71%, and 0.76%
for the years ended December 31, 1996, 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.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
SteinRoe Variable Investment Trust Cash Income Fund / December 31, 1996
- -------------------------------------------------------------------------------
MARKET
PAR VALUE
--------- -----------
<S> <C> <C>
COMMERCIAL PAPER--(79.3%)
BUSINESS CREDIT INSTITUTION--(18.2%)
Finova Capital Corp. 5.801% 1/13/97 $3,000,000 $2,994,300
General Motors Acceptance Corp.
5.526% 1/02/97 3,000,000 2,999,542
NS Finance Inc. (L.O.C. Industrial
Bank of Japan Ltd.) 5.761% 1/22/97 3,000,000 2,989,973
Orix America Inc. (L.O.C.
Norinchukin Bank) 5.754% 3/18/97 3,000,000 2,964,533
-----------
11,948,348
-----------
COSMETICS--(4.6%)
Cosmair Inc. (gtd. by L'Oreal SA)
6.028% 1/24/97 3,000,000 2,988,500
-----------
INDUSTRIAL--(9.2%)
CSC Enterprises 5.529% 1/14/97 3,100,000 3,093,843
Whirlpool Corp. 5.487% 3/20/97 3,000,000 2,964,900
-----------
6,058,743
-----------
INVESTING INSTITUTIONS--(4.6%)
Enterprise Funding Corp.
5.789% 1/09/97 3,000,000 2,996,153
-----------
LENDING INSTITUTIONS--(13.7%)
Oak Funding Corp. 5.520% 3/04/97 3,000,000 2,971,842
Old Line Funding Corp.
5.503% 1/13/97 3,000,000 2,994,530
Windmill Funding Corp.
6.016% 1/09/97 3,000,000 2,996,000
-----------
8,962,372
-----------
OTHER FINANCIAL--(25.3%)
Beta Finance Corp. 6.038% 1/30/97 1,000,000 995,167
Countrywide Home Loan (gtd. by
Countrywide Credit Industries)
5.706% 1/07/97 3,000,000 2,997,155
ITT Hartford Group Inc.
6.158% 1/08/97 1,955,000 1,952,662
McKenna Triangle National Corp.
6.460% 1/02/97 1,608,000 1,607,711
Thames Asset Global Securitization
5.577% 1/06/97 3,000,000 2,997,688
Tri-Lateral Capital USA
5.630% 1/15/97 3,000,000 2,993,466
Working Capital Management
5.748% 1/16/97 3,000,000 2,992,850
-----------
16,536,699
-----------
<PAGE>
<CAPTION>
MARKET
PAR VALUE
--------- -----------
<S> <C> <C>
RUBBER--(3.7%)
Bridgestone/Firestone, Inc.
(L.O.C. Fuji Bank Ltd.)
5.726% 1/15/97 $2,419,000 $ 2,413,638
-----------
TOTAL COMMERCIAL PAPER
(Cost $51,904,453) 51,904,453
-----------
SOVEREIGN--(4.3%)
Venantius AB (gtd. by Kingdom of Sweden)
5.514% 3/04/97
(Cost $2,823,250) 2,850,000 2,823,250
-----------
U.S. GOVERNMENT AGENCY OBLIGATION--(5.3%)
Federal Home Loan Banks 5.750%
Optional Call 4/09/97
(Cost $3,500,000) 3,500,000 3,500,000
-----------
YANKEE CERTIFICATES OF DEPOSIT--(13.8%)
Fuji Bank Chicago Ltd.
5.690% 1/14/97 3,000,000 3,000,011
Sanwa Bank Ltd. 5.740% 1/13/97 3,000,000 2,999,939
Sumitomo Bank Ltd 5.660% 1/13/97 3,000,000 3,000,010
-----------
TOTAL YANKEE CERTIFICATES OF DEPOSIT
(Cost $8,999,960) 8,999,960
-----------
TOTAL INVESTMENTS--(102.7%)
(Cost $67,227,663) (a) 67,227,663
OTHER ASSETS, LESS LIABILITIES (-2.7%) (1,766,271)
-----------
NET ASSETS (100%) $65,461,392
===========
<FN>
(a) The cost of investments for federal income tax purposes is
identical. There is no unrealized appreciation or depreciation
at December 31, 1996.
*The interest rate is the effective rate at the date of purchase.
</FN>
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Cash Income Fund / December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at market value (identified cost $67,227,663)...................................................... $67,227,663
Cash ........................................................................................................... 50,591
Receivable for fund shares sold................................................................................. 1,722,061
Dividends and interest receivable............................................................................... 28,414
Other assets.................................................................................................... 9,432
-----------
TOTAL ASSETS............................................................................................... 69,038,161
-----------
LIABILITIES:
Payable for investments purchased............................................................................... 3,500,000
Payable for fund shares repurchased............................................................................. 12,353
Management fee payable.......................................................................................... 17,886
Administrative fee payable...................................................................................... 7,953
Accrued expenses payable........................................................................................ 38,577
-----------
TOTAL LIABILITIES.......................................................................................... 3,576,769
-----------
NET ASSETS...................................................................................................... $65,461,392
===========
NET ASSETS REPRESENTED BY:
Paid-in capital.............................................................................................. $65,461,392
-----------
TOTAL NET ASSETS APPLICABLE TO OUTSTANDING SHARES OF BENEFICIAL INTEREST........................................ $65,461,392
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING....................................................................... 65,461,392
===========
NET ASSET VALUE PER SHARE....................................................................................... $1.00
=====
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INTEREST INCOME................................................................................................. $3,641,641
----------
EXPENSES:
Management fee............................................................................................... 229,758
Administrative fee........................................................................................... 98,468
Custodian fee................................................................................................ 20,564
Accounting fee............................................................................................... 25,463
Audit and legal fees......................................................................................... 18,466
Transfer agent fee........................................................................................... 7,500
Printing expense............................................................................................. 5,444
Trustees' expense............................................................................................ 6,755
Miscellaneous expense........................................................................................ 14,858
----------
Total expenses............................................................................................. 427,276
----------
Net investment income........................................................................................... 3,214,365
----------
Net increase in net assets resulting from operations............................................................ $3,214,365
==========
See Notes top Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Cash Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1996 1995
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $3,214,365 $3,775,313
------------ ------------
Net increase in net assets resulting from operations 3,214,365 3,775,313
------------ ------------
DISTRIBUTIONS DECLARED FROM:
Net investment income (3,214,365) (3,775,313)
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from fund shares sold 57,327,084 56,499,769
Cost of fund shares repurchased (60,072,108) (73,981,455)
Distributions reinvested 3,214,365 3,775,313
------------ ------------
Net increase (decrease) in net assets resulting from fund share transactions 469,341 (13,706,373)
------------ ------------
Total increase (decrease) in net assets 469,341 (13,706,373)
NET ASSETS:
Beginning of year 64,992,051 78,698,424
------------ ------------
End of year 65,461,392 64,992,051
=========== ===========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST:
Shares sold 57,327,084 56,499,769
Shares repurchased (60,072,108) (73,981,455)
Distributions reinvested 3,214,365 3,775,313
------------ ------------
Net increase (decrease) 469,341 (13,706,373)
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Cash Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<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 0.049 0.055 0.037 0.027 0.034
-------- -------- -------- -------- --------
Less distributions:
Distributions from net investment income (0.049) (0.055) (0.037) (0.027) (0.034)
-------- -------- -------- -------- --------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURN:
Total investment return 5.01% 5.62% 3.81% 2.70% 3.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $65,461 $64,992 $78,698 $83,049 $70,821
Ratio of expenses to average net assets 0.65% 0.63% 0.62% 0.65% 0.67%
Ratio of net investment income to average net assets 4.90% 5.48% 3.73% 2.68% 3.42%
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
SteinRoe Variable Investment Trust (the "Trust"), an open-end man age ment
investment company, was organized as a Massachusetts business trust on June 9,
1987. At December 31, 1996, 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--seeks capital growth by investing in
equity securities
Managed Growth Stock Fund--seeks long-term growth of capital by investing
65 percent of total assets in growth companies
Managed Assets Fund--seeks high total investment return by investing in
equity and debt securities
Mortgage Securities Income Fund--seeks highest possible level of current
income by investing at least 65 percent of total assets in mortgage
pass-through certificates
Cash Income Fund--seeks 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
insurance companies and, in the case of Capital Appreciation Fund, also of
Transamerica Life Companies and Great-West Life & Annuity Insurance Company.
Stein Roe 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., a subsidiary of Keyport Life Insurance Company ("Keyport"),
serves as the underwriter of the Trust. Keyport, the Adviser and the Transfer
Agent are direct subsidiaries of Liberty Financial Companies, Inc. At December
31, 1996, various affiliated insurance companies of Liberty Financial
Companies Inc. owned 100 percent of the outstanding shares of all Funds,
except for Capital Appreciation Fund, of which Liberty Financial Companies
Inc. affiliates owned 94.1 percent, Transamerica Life Companies owned 5.5
percent and Great-West Life & Annuity Insurance Company owned 0.4 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. 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.
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
delivery 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.
Managed Assets Fund and 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 days to 60 days, substantially similar
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
securities at an agreed upon price and date. 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--Mortgage Securities Income Fund has 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,
as of December 31, 1996, the Fund reclassified $86,439 reflecting a decrease
in accumulated net investment income and a decrease in accumulated net
realized losses on investments. Net investment income, net realized gains
(losses) on investments, and net assets were not affected by this change.
There were no reclassifications of distributions for any of the other funds.
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
nonassessable. Shareholders would be entitled to share proportionally in the
net assets of a Fund available for distribution to shareholders upon
liquidation of a Fund.
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, 1996,
Mortgage Securities Income Fund had a capital loss carryforward of $3,041,745,
which will expire between 2002 and 2004, if not utilized. The cost of
<PAGE>
investments purchased and proceeds from investments sold, excluding short-term
investments, for the year ended December 31, 1996, 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 $161,131,031 $49,254,886 $222,176,324 $58,722,319
Proceeds from
investments sold 156,425,956 50,420,471 202,590,094 67,957,054
</TABLE>
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. Cash Income Fund declares dividends daily and
reinvests all dividends declared monthly in additional shares at net asset
value. Income and capital gains 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 principal
paydowns.
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,
1996:
<TABLE>
<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, 1996, 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, 1996, Capital Appreciation Fund,
Managed Growth Stock Fund, Managed Assets Fund, Mortgage Securities Income
Fund and Cash Income Fund incurred charges of $28,258, $27,448, $30,900,
$25,829, and $25,463, 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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
</TABLE>
The expense limitations expire April 30, 1997.
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"), and (ii) shares of Mortgage
Securities Income Fund ("MSIF") for shares of Colonial-Keyport Government Fund
("CKGF"). CKGF is a 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; and $25,976,819 of MSIF, which were
substituted for shares of CKGF.
<PAGE>
INVESTMENT ADVISER AND 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, Independence Life
Insurance Company, or Liberty Life Assurance Company of Boston.
12/96 NIM 30m
