<PAGE>
File No. 33-14954
Rule 497(e)
STEINROE VARIABLE
INVESTMENT TRUST
PROSPECTUS
May 1, 1999
* Stein Roe Balanced Fund, Variable Series
* Stein Roe Growth Stock Fund, Variable Series
* Stein Roe Mortgage Securities Fund, Variable Series
* Stein Roe Money Market Fund, Variable Series
* * * *
Trust shares available only through variable annuity contracts and
variable life insurance policies of participating insurance
companies.
* * * *
This prospectus must be accompanied by a prospectus for your
variable annuity contract or variable life insurance policy.
Retain both prospectuses for future reference.
* * * *
Although trust shares have been registered with the Securities and
Exchange Commission, the Commission has not approved any shares
offered in this prospectus or determined whether this prospectus
is accurate or complete. Any representation to the contrary is a
criminal offense.
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
<PAGE>
THE TRUST......................................................3
THE FUNDS......................................................4
Each Fund section contains the following information
specific to that Fund: investment goals, primary
investment strategies, primary investment risks,
and performance history
Stein Roe Balanced Fund, Variable Series...................4
Stein Roe Growth Stock Fund, Variable Series...............6
Stein Roe Mortgage Securities Fund, Variable Series........8
Stein Roe Money Market Fund, Variable Series..............11
OTHER INVESTMENTS AND RISKS...................................13
TRUST MANAGEMENT ORGANIZATIONS................................14
The Trustees..............................................14
The Adviser: Stein Roe & Farnham Incorporated.............14
Portfolio Managers........................................14
Year 2000 Compliance......................................15
FINANCIAL HIGHLIGHTS..........................................16
SHAREHOLDER INFORMATION.......................................20
<PAGE>
THE TRUST
SteinRoe Variable Investment Trust (Trust) includes five separate
mutual funds (Funds), each with its own investment goal and
strategies. This prospectus contains information about the
following Funds in the Trust:
* Stein Roe Balanced Fund, Variable Series
* Stein Roe Growth Stock Fund, Variable Series
* Stein Roe Mortgage Securities Fund, Variable Series
* Stein Roe Money Market Fund, Variable Series
Other Funds may be added or deleted from time to time.
The Trust's Funds are investment options under variable annuity
contracts (VA contracts) and variable life insurance policies (VLI
policies) issued by life insurance companies (Participating
Insurance Companies). Some (but not all) Participating Insurance
Companies are affiliated with the investment adviser to the Funds.
Participating Insurance Companies invest in the Funds through
separate accounts that they set up for that purpose. Owners of VA
contracts and VLI policies invest in sub-accounts of those
separate accounts through instructions they give to their
insurance company.
The prospectuses of the Participating Insurance Companies'
separate accounts describe which Funds are available to the
purchasers of their own VA contracts and VLI policies.
<PAGE>
INVESTMENT GOALS-STEIN ROE BALANCED FUND, VARIABLE SERIES
- -----------------------------------------------------------------
Stein Roe Balanced Fund, Variable Series, seeks high total
investment return.
PRIMARY INVESTMENT STRATEGIES
- ----------------------------------------------------------------
The Fund allocates its investments among common stocks and
securities convertible into common stocks, bonds and cash. The
Fund invests primarily in well-established companies that have
large market capitalizations. The portfolio manager may invest in
a company because it has a history of steady to improving sales or
earnings growth that the portfolio manager believes can be
sustained. He also may invest in a company because he believes
its stock is priced attractively compared to the value of its
assets. The Fund may invest up to 25 percent of its assets in
foreign stocks.
The Fund also invests at least 25 percent of its assets in bonds.
The Fund purchases bonds that are "investment grade"-that is,
within the four highest investment grades assigned by a nationally
recognized statistical rating organization. The Fund may invest
in unrated bonds if the portfolio manager believes that the
securities are investment grade quality. To select debt
securities for the Fund, the portfolio manager considers a bond's
expected income together with its potential for price gains or
losses.
The portfolio manager sets the Fund's asset allocation between
stocks, bonds and cash based upon recommendations of Stein Roe's
investment committee. The committee makes its recommendations
based upon economic, market and other factors that affect
investment opportunities.
PRIMARY INVESTMENT RISKS
- -----------------------------------------------------------------
The primary risks of investing in the Fund are described below.
There are many circumstances (including additional risks that are
not described here) which could cause you to lose money by
investing in the Fund or prevent the Fund from achieving its
goals.
Market risk is the risk that the price of a security held by the
Fund will fall due to changing economic, political or market
conditions, or due to the financial condition of the company which
has issued the security.
Because the Fund invests in stocks and bonds, the price of the
Fund's shares-its net asset value per share (NAV)-fluctuates daily
in response to changes in the market value of the stocks and
bonds. In addition, the risks associated with the Fund's
investment strategy may cause the Fund's total return or yield to
decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Fund may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
Debt Securities
The Fund's investments in debt securities, generally bonds, expose
the Fund to interest rate risk. Interest rate risk is the risk of
a decline in the price of a bond when interest rates increase. In
general, if interest rates rise, bond prices fall; and if interest
rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the Fund receives
from them but will affect the value of the Fund's shares.
Interest rate risk is generally greater for bonds having longer
maturities.
Because the Fund may invest in fixed-income securities issued by
private entities, including corporate bonds, the Fund is subject
to issuer risk. Issuer risk is the possibility that changes in
the financial condition of the issuer of a security, changes in
general economic conditions, or changes in economic conditions
that affect the issuer's industry may impact the issuer's ability
to make timely payment of interest or principal This could result
in decreases in the price of the security.
PERFORMANCE HISTORY
- -----------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from
year to year by illustrating the Fund's total calendar-year
returns. The performance table following the bar chart shows how
the Fund's average annual returns compare with those of a broad
measure of market performance for one year, five years and 10
years. We compare the Fund to the S&P 500 Index, a broad-based
measure of market performance. The chart and table are intended
to illustrate some of the risks of investing in the Fund by
showing the changes in the Fund's performance. All returns
include the reinvestment of dividends and distributions. As with
all mutual funds, past performance does not predict the Fund's
future performance. Performance results include any expense
reduction arrangements. If these arrangements were not in place,
then the performance results would have been lower. Any reduction
arrangements may be discontinued at any time. The Fund's
performance results do not reflect the cost of insurance and
separate account charges which are imposed under your VA contract
or VLI policy.
Calendar-Year Total Returns
YEAR-BY-YEAR TOTAL RETURNS
30.00
25.00 27.93 25.43
20.00 22.38
15.00 15.63 16.82 12.54
10.00
5.00 7.53 9.29
0.00
- -5.00 -0.69 -3.19
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Balanced Fund
Best quarter: 4th quarter 1998, +12.39%
Worst quarter: 3rd quarter 1990, -10.04%
1 Year 5 Years 10 Years
Stein Roe Balanced Fund, Variable
Series 12.54% 13.05% 12.94%
S&P 500 Index* 28.60% 24.05% 19.19%
________
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
<PAGE>
INVESTMENT GOALS-STEIN ROE GROWTH STOCK FUND, VARIABLE SERIES
- -----------------------------------------------------------------
Stein Roe Growth Stock Fund, Variable Series, seeks long-term
growth of capital.
PRIMARY INVESTMENT STRATEGIES
- -----------------------------------------------------------------
The Fund invests primarily in the common stocks of companies with
large market capitalizations. The Fund emphasizes the technology,
financial services, health care, and global consumer franchise
sectors. The Fund may invest up to 25 percent of its assets in
foreign stocks. To select investments for the Fund, the portfolio
manager considers companies that he believes will generate
earnings growth over the long term regardless of the economic
environment.
PRIMARY INVESTMENT RISKS
- -----------------------------------------------------------------
The primary risks of investing in the Fund are described below.
There are many circumstances (including additional risks that are
not described here) which could cause you to lose money by
investing in the Fund or prevent the Fund from achieving its
goals.
Market risk is the risk that the price of a security held by the
Fund will fall due to changing economic, political or market
conditions, or due to the financial condition of the company which
has issued the security.
Because the Fund invests in stocks, the price of its shares-its
net asset value per share (NAV)-fluctuates daily in response to
changes in the market value of the stocks. In addition, the risks
associated with the Fund's investment strategy may cause the
Fund's total return or yield to decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Fund may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
PERFORMANCE HISTORY
- -----------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from
year to year by illustrating the Fund's total calendar-year
returns. The performance table following the bar chart shows how
the Fund's average annual returns compare with those of a broad
measure of market performance for one year, five years and 10
years. We compare the Fund to the S&P 500 Index, a broad-based
measure of market performance. The chart and table are intended
to illustrate some of the risks of investing in the Fund by
showing the changes in the Fund's performance. All returns
include the reinvestment of dividends and distributions. As with
all mutual funds, past performance does not predict the Fund's
future performance. Performance results include any expense
reduction arrangements. If these arrangements were not in place,
then the performance results would have been lower. Any reduction
arrangements may be discontinued at any time. The Fund's
performance results do not reflect the cost of insurance and
separate account charges which are imposed under your VA contract
or VLI policy.
Calendar-Year Total Returns
YEAR-BY-YEAR TOTAL RETURNS
60.00
50.00
40.00 48.03
30.00 31.30 37.73 32.28
20.00 21.28 27.91
10.00
0.00 6.63 4.97
- -10.00 -1.65 -6.35
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Growth Stock Fund
Best quarter: 4th quarter 1998, +26.43%
Worst quarter: 3rd quarter 1990, -17.42%
1 Year 5 years 10 Years
Stein Roe Growth Stock Fund,
Variable Series 27.91% 21.49% 18.94%
S&P 500 Index* 28.60% 24.05% 19.19%
________
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
<PAGE>
INVESTMENT GOALS-STEIN ROE MORTGAGE SECURITIES FUND, VARIABLE
SERIES
- -----------------------------------------------------------------
Stein Roe Mortgage Securities Fund, Variable Series, seeks the
highest possible level of current income, consistent with safety
of principal and maintenance of liquidity.
PRIMARY INVESTMENT STRATEGIES
- -----------------------------------------------------------------
Stein Roe Mortgage Securities Fund, Variable Series, normally
invests at least 65% of its assets in the following types of
mortgage securities:
* agency pass-throughs,
* agency and whole-loan collateralized mortgage obligations
(CMOs),
* mortgage-related (home equity, home improvement and manufactured
housing) asset-backed securities and
* commercial mortgage-backed securities.
To select investments for the Fund, the portfolio manager looks
for securities within these sectors that balance the potential for
the highest yield and relative value with the prospects for
incremental capital appreciation. The portfolio manager usually
focuses on securities rated AA or higher. However, the portfolio
manager may invest in securities rated investment grade (BBB) or
higher. The portfolio manager may also buy unrated securities if
Stein Roe believes the security is comparable in quality to a
security that is rated at least investment grade.
Types of Mortgage Securities
Mortgage securities represent ownership interest in large,
diversified pools of individual home mortgage loans. Sponsors pool
together mortgages of similar rates and terms and offer them as a
security to investors. The monthly payments of principal and
interest made by homeowners are in turn passed through to the
mortgage investor.
The Fund invests in three major sectors of the mortgage securities
universe. Most mortgage securities are pooled together and
structured as pass-throughs. Monthly payments of principal and
interest from the underlying mortgage loans backing the pool are
collected by a service and "passed through" regularly to the
investor. Pass-throughs can have a fixed or an adjustable rate.
The majority of pass-through securities are issued by three
agencies: Ginnie Mae, Fannie Mae, and Freddie Mac.
Collateralized mortgage obligations (CMOs) are backed by either
agency or whole loan pass-throughs, which carry either fixed or
adjustable rate interest rates. Tailored to meet investor demand,
CMOs redirect principal and interest flows, thereby shifting
prepayment risk to investors that are most suited to bear such
risk. Typically, principal prepayments are paid sequentially to
separate "tranches," which create mortgage securities of short-,
medium- and long-term maturities. The Fund may buy CMOs of any
maturity tranch, depending upon the portfolio manager's judgment
regarding which tranch at the time offers the best relative value.
Asset-backed securities are securities backed by various types of
loans such as credit card, auto and home-equity loans. The Fund
generally invests in "mortgage-related" asset-backed securities,
which are backed by residential first and second lien home equity,
home improvement and manufactured housing loans.
Commercial mortgage-backed securities are secured by loans to
office buildings, multi-family apartment buildings and shopping
centers. These loans usually contain prepayment penalties which
provide protection from refinancing in a declining interest rate
environment.
PRIMARY INVESTMENT RISKS
- -----------------------------------------------------------------
The primary risks of investing in the Fund are described below.
There are many circumstances (that are not described here) which
could cause you to lose money by investing in the Fund or prevent
the Fund from achieving its goals.
Interest rate risk is the risk of a decline in the price of a
mortgage security when interest rates rise. In general, if
interest rates rise, mortgage security prices fall; and if
interest rates fall, mortgage security prices rise. Interest rate
risk is generally greater for securities with longer maturities.
Changes in the values of securities will not affect the amount of
income the Fund receives but will affect the value of the Fund's
shares.
Prepayment risk is the possibility that, as interest rates fall,
homeowners are more likely to refinance their home mortgages. When
mortgages are refinanced, the principal on mortgage-backed
securities is paid earlier than expected. In an environment of
declining interest rates, early return of principal from
prepayments must be reinvested at lower interest rates, reducing
the expected total rate of return for mortgage securities. During
periods of rising interest rates, mortgage securities have a high
risk of declining in price. This is because higher rates lead to
slower prepayments, effectively extending the expected maturity of
the bond at a time when interest rates are rising. Prepayment
risk applies to generally all mortgage securities, regardless of
whether they represent interests in pools of fixed or adjustable
interest rate loans. The potential impact of prepayment on the
price of a mortgage-backed security may be difficult to predict
and result in greater volatility than other types of fixed income
securities.
Because the Fund may invest in securities issued by private
entities, it can at times be exposed to default risk. To protect
against these risks, the securities generally have some type of
credit enhancement, usually a senior/subordinated structure. The
portfolio manager attempts to provide that the amount of credit
enhancement in each holding subject to default is commensurate
with the credit rating assigned from the rating agencies. There
can be no assurance that the amount of credit support will be
sufficient to fully cover losses stemming from defaults of the
underlying loans.
Management risk, which exists in varying amounts in all mutual
funds, refers to the possibility that the portfolio manager may
fail to anticipate these movements or risks, or effectively
execute the Fund's strategy.
PERFORMANCE HISTORY
- -----------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from
year to year by illustrating the Fund's total calendar-year
returns. The performance table following the bar chart shows how
the Fund's average annual returns compare with those of a broad
measure of market performance for one year, five years and 10
years. We compare the Fund to the Lehman Mortgage-Backed
Securities Index, a broad-based measure of market performance.
The chart and table are intended to illustrate some of the risks
of investing in the Fund by showing the changes in the Fund's
performance. All returns include the reinvestment of dividends
and distributions. As with all mutual funds, past performance
does not predict the Fund's future performance. Performance
results include any expense reduction arrangements. If these
arrangements were not in place, then the performance results would
have been lower. Any reduction arrangements may be discontinued
at any time. The Fund's performance results do not reflect the
cost of insurance and separate account charges which are imposed
under your VA contract or VLI policy.
Calendar-Year Total Returns
YEAR-BY-YEAR TOTAL RETURNS
20.00
15.00 15.74
10.00 12.84 14.48
5.00 9.10 5.95 6.26 9.04 6.80
0.00 4.70
- -5.00 -1.57
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Mortgage Securities Fund
Best quarter: 2nd quarter 1989, +6.53%
Worst quarter: 1st quarter 1994, -1.77%
1 Year 5 Years 10 Years
Stein Roe Mortgage Securities
Fund, Variable Series 6.80% 6.79% 8.23%
Lehman Mortgage-Backed
Securities Index* 6.96% 7.23% 9.13%
________
*The Lehman Mortgage-Backed Securities Index is an unmanaged group
of securities that differs from the Fund's composition; it is not
available for direct investment.
<PAGE>
INVESTMENT GOALS-STEIN ROE MONEY MARKET FUND, VARIABLE SERIES
- -----------------------------------------------------------------
Stein Roe Money Market Fund, Variable Series, seeks high current
income, consistent with capital preservation and the maintenance
of liquidity.
PRIMARY INVESTMENT STRATEGIES
- -----------------------------------------------------------------
The Fund invests in a diversified portfolio of high-quality money
market securities. Money market funds are subject to strict rules
that require them to buy individual securities that have remaining
maturities of 13 months or less, maintain an average dollar
weighted portfolio maturity of 90 days or less, and buy only high-
quality dollar-denominated obligations. The Fund invests in the
following types of money market securities:
* Securities issued or guaranteed by the U.S. government or by its
agencies.
* Securities issued or guaranteed by the government of any foreign
country that have a long-term rating at time of purchase of A or
better (or equivalent rating) by at least one nationally
recognized bond rating agency.
* Certificates of deposit, bankers' acceptances, time deposits and
other short-term securities issued by domestic or foreign banks
or their subsidiaries or branches.
* Commercial paper of domestic or foreign issuers, including
variable rate demand notes.
* Short-term debt securities having a long-term rating at time of
purchase of A or better (or equivalent rating) by at least one
nationally recognized bond rating agency.
* Repurchase agreements.
* Other high-quality short-term obligations.
Under normal market conditions the Fund invests at least 25
percent of its total assets in securities of issuers in the
financial services industry.
PRIMARY INVESTMENT RISKS
- -----------------------------------------------------------------
The primary risks of investing in the Fund are described below.
There are many circumstances (including additional risks that are
not described here) which could cause you to lose money by
investing in the Fund or prevent the Fund from achieving its
goals.
Market risk is the risk that the price of a security held by the
Fund will fall due to changing economic, political or market
conditions, or due to the financial condition of the company which
has issued the security.
The Fund has maintained its NAV at $1.00 per share since inception
and will continue to try to do so. There can be no assurance that
the Fund will succeed.
An investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by
investing in the Fund. Additionally, the Fund's yield will vary
as the short-term securities in its portfolio mature and the
proceeds are reinvested in securities with different interest
rates.
Market risk includes interest rate risk, which is the risk of a
decline or increase in the price of a money market security when
interest rates increase or decline. In general, if interest rates
rise, prices fall; and if interest rates fall, prices rise.
Interest rate risk is generally greater for securities with longer
maturities. In addition, the Fund is subject to credit risk. If
a security's credit rating is downgraded, the Fund's income level
or share price could be reduced. Foreign securities held by the
Fund are also subject to the risks associated with foreign
investments, such as economic and political developments, seizure
or nationalization of deposits, imposition of taxes, or other
restrictions on the payment of principal and interest.
Because of the Fund's policy of investing at least 25 percent of
its assets in securities of issuers in the financial services
industry, the Fund may be affected more adversely than competing
funds by changes affecting that industry.
PERFORMANCE HISTORY
- -----------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from
year to year by illustrating the Fund's total calendar-year
returns. The chart is intended to illustrate some of the risks of
investing in the Fund by showing the changes in the Fund's
performance. All returns include the reinvestment of dividends
and distributions. As with all mutual funds, past performance
does not predict the Fund's future performance. Performance
results include any expense reduction arrangements. If these
arrangements were not in place, then the performance results would
have been lower. Any reduction arrangements may be discontinued
at any time. The Fund's performance results do not reflect the
cost of insurance and separate account charges which are imposed
under your VA contract or VLI policy.
Calendar-Year Total Returns
YEAR-BY-YEAR TOTAL RETURNS
10.00
8.00 9.07
6.00 7.89
4.00 5.79 5.62 5.01 5.18 5.17
2.00 3.48 2.70 3.81
0.00
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Money Market Fund
Best quarter: 2nd quarter 1989, +2.36%
Worst quarter: 3rd quarter 1993, +0.67%
The seven-day current yield for Money Market Fund for the period
ended Dec. 31, 1998 was 4.72%.
<PAGE>
OTHER INVESTMENTS AND RISKS
Each Fund's primary investment strategies and risks are described
above in its individual description. This section describes other
investments a Fund may make and the risks associated with them.
In seeking to achieve its goal, each Fund may invest in various
types of securities and engage in various investment techniques
that are not the principal focus of the Fund and, therefore, are
not described in this prospectus. These types of securities and
investment practices are discussed in the Funds' Statement of
Additional Information (SAI), which you may obtain free of charge
(see back cover).
The Funds' portfolio managers generally make decisions on buying
and selling portfolio investments based upon their judgment that
the decision will improve a Fund's investment return and further
its investment goal. The portfolio managers may also be required
to sell portfolio investments to fund redemptions.
Portfolio Turnover
The Funds do not have limits on portfolio turnover. Turnover may
vary significantly from year to year. Stein Roe does not expect
it to exceed 100 percent under normal conditions. Portfolio
turnover increases transaction expenses, which reduce a Fund's
return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, a Fund may invest, without limit, in high-quality debt
securities or hold assets in cash and cash equivalents. Stein Roe
is not required to take a temporary defensive position, and market
conditions may prevent such an action. A Fund may not achieve its
investment objective if it takes a defensive position.
Market Capitalization
In this prospectus, for the Funds that invest in stocks, we refer
to market capitalization as a means to distinguish among companies
based on their size. A company's market capitalization is simply
its stock price multiplied by the number of shares of stock it has
issued and outstanding. In the financial markets, companies
generally are sorted into one of three capitalization-based
categories: large capitalization (large cap); medium
capitalization (midcap); or small capitalization (small cap). We
follow this convention in this prospectus.
To sort companies in this manner, we compare a company's
capitalization with the capitalization of an appropriate index.
(An index is a statistical composite that measures a group of
stocks.) We utilize two indices in grouping stocks: the S&P Mid-
Cap 400 Index and the S&P Small-Cap 600 Index.
We consider a company to be large cap if its market capitalization
is at least 90 percent of the weighted market capitalization of
the S&P Mid-Cap 400 Index.
We consider a company to be midcap if its market capitalization is
less than 90 percent of the weighted market capitalization of the
S&P Mid-Cap 400 Index and at least 90 percent of the weighted
market capitalization of the S&P Small-Cap 600 Index.
We consider a company to be small cap if its market capitalization
is less than 90 percent of the weighted market capitalization of
the S&P Small-Cap 600 Index.
As of Dec. 31, 1998, large-cap companies had market
capitalizations greater than $6.6 billion, midcap companies had
market capitalizations between $1.8 and $6.6 billion and small-cap
companies had market capitalizations less than $1.8 billion.
These amounts will change as the S&P Mid-Cap 400 and S&P Small-Cap
600 indices change.
<PAGE>
TRUST MANAGEMENT ORGANIZATIONS
The Trustees
The business of the Trust and the Funds is supervised by the
Trust's Board of Trustees. The SAI contains names of and
biographical information on the Trustees.
The Adviser: Stein Roe & Farnham Incorporated
Stein Roe & Farnham Incorporated, One South Wacker Drive, Chicago,
IL 60606, manages the day-to-day operations of the Funds. Stein
Roe has advised and managed mutual funds since 1949. As of
December 31, 1998, Stein Roe managed more than $29.7 billion in
assets. For the 1998 fiscal year, the Trust paid Stein Roe
management fees, at the following annual rates of the average
daily net assets of the specified Fund:
Stein Roe Balanced Fund, Variable Series 0.60%
Stein Roe Growth Stock Fund, Variable Series 0.65%
Stein Roe Mortgage Securities Fund, Variable Series 0.55%
Stein Roe Money Market Fund, Variable Series 0.50%
Stein Roe's mutual funds and institutional investment advisory
businesses are managed together with that of its affiliate,
Colonial Management Associates, Inc. (CMA), by a combined
management team of employees from both companies. CMA also shares
personnel, facilities, and systems with Stein Roe that may be used
in providing administrative or operational services to the Funds.
CMA is a registered investment adviser. Both Stein Roe and CMA
are subsidiaries of Liberty Financial Companies, Inc.
Stein Roe can use the services of AlphaTrade Inc., an affiliated
broker-dealer, when buying or selling equity securities for a
Fund's portfolio, pursuant to procedures adopted by the Board of
Trustees.
Portfolio Managers
Stein Roe Balanced Fund, Variable Series. Harvey B. Hirschhorn
has been portfolio manager of Balanced Fund since 1996. He joined
Stein Roe in 1973 and is executive vice president and chief
economist and investment strategist.
Stein Roe Growth Stock Fund, Variable Series. Erik P. Gustafson
is portfolio manager of Growth Stock Fund and has managed Stein
Roe Growth Stock Fund and Stein Roe Young Investor Fund since
1994. Mr. Gustafson joined Stein Roe in 1992 as a portfolio
manager for privately managed accounts and is a senior vice
president.
Stein Roe Mortgage Securities Fund, Variable Series. William M.
Wadden IV has been portfolio manager of the Mortgage Securities
Fund since March 1998. Mr. Wadden has been a senior vice president
of Stein Roe since 1995. From 1993 to 1995, he was an executive
vice president of CSZ Asset Management, Inc.
Stein Roe Money Market Fund, Variable Series. Jane M. Naeseth has
been portfolio manager of Money Market Fund since its inception.
She has managed Stein Roe Cash Reserves Fund since 1980. Ms.
Naeseth is a senior vice president of Stein Roe, which she joined
in 1977.
YEAR 2000 COMPLIANCE
- -----------------------------------------------------------------
Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be
adversely affected if the computer systems used by Stein Roe and
other service providers do not properly process and calculate
date-related information and data from and after Jan. 1, 2000.
This is commonly known as the "Year 2000 Problem." The Funds'
service providers are taking steps that they believe are
reasonably designed to address the Year 2000 problem, including
communicating with vendors who furnish services, software and
systems to the Funds, to provide that date-related information and
data can be properly processed after Jan. 1, 2000. Many Fund
service providers and vendors, including the Funds' service
providers, are in the process of making Year 2000 modifications to
their software and systems and believe that such modifications
will be completed on a timely basis prior to Jan. 1, 2000.
However, no assurances can be given that all modifications
required to ensure proper data processing and calculation on and
after Jan. 1, 2000, will be made on a timely basis or that
services to the Funds will not be adversely affected.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables that follow are intended to help
you understand the Funds' financial information for the last five
fiscal years. The total returns in the table represent the return
that investors earned assuming that they reinvested all dividends
and distributions. Certain information in the tables reflects the
financial results for a single Fund share. The information has
been audited by KPMG LLP, whose report appears in the Trust's
annual report which is available upon request. The Funds' total
returns presented below do not reflect the cost of insurance and
other company separate account charges which vary with the VA
contracts or VLI policies.
<TABLE>
<CAPTION>
Stein Roe Balanced Fund, Variable Series
Years Ended December 31,
-----------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $16.81 $16.28 $14.08 $12.18 $13.11
------ ------ ------ ----- ------
Net investment income 0.48 0.53 0.57 0.48 0.51
Net realized and unrealized gains
(losses) on investments 1.48 1.96 1.63 2.61 (0.93)
------ ------ ------ ----- ------
Total from investment operations 1.96 2.49 2.20 3.09 (0.42)
------ ------ ------ ----- ------
Less distributions:
Dividends from net investment income (0.51) (0.56) - (0.48) (0.51)
Distributions from net realized gains
on investments (1.12) (1.40) - (0.71) -
------ ------ ------ ----- ------
Total distributions (1.63) (1.96) - (1.19) (0.51)
Net asset value, end of year $17.14 $16.81 $16.28 $14.08 $12.18
====== ====== ====== ====== ======
Total return:
Total investment return 12.54% 16.82% 15.63% 25.43% (3.19)%
Ratios/supplemental data
Net assets, end of year (000s) $361,823 $325,033 $299,184 $277,014 $196,278
Ratio of expenses to average net assets 0.65% 0.66% 0.67% 0.66% 0.68%
Ratio of net investment income to
average net assets 3.00% 3.18% 3.68% 3.12% 4.01%
Portfolio turnover ratio (a) 61% 44% 76% 66% 71%
<FN>
______
(a) Portfolio turnover includes dollar roll transactions.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Growth Stock Fund, Variable Series
Years Ended December 31,
-----------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $36.13 $28.61 $23.59 $18.11 $20.65
------ ------ ------ ----- ------
Net investment income 0.08 0.10 0.13 0.15 0.15
Net realized and unrealized gains
(losses) on investments 9.54 8.84 4.89 6.68 (1.46)
------ ------ ------ ----- ------
Total from investment operations 9.62 8.94 5.02 6.83 (1.31)
------ ------ ------ ----- ------
Less distributions:
Dividends from net investment income (0.10) (0.12) - (0.15) (0.17)
Distributions from net realized gains
on investments (2.12) (1.30) - (1.20) (1.06)
------ ------ ------ ----- ------
Total distributions (2.22) (1.42) - (1.35) (1.23)
------ ------ ------ ----- ------
Net asset value, end of year $43.53 $36.13 $28.61 $23.59 $18.11
====== ====== ====== ====== ======
Total return:
Total investment return 27.91% 32.28% 21.28% 37.73% (6.35)%
Ratios/supplemental data
Net assets, end of year (000s) $271,584 $213,399 $161,879 $136,834 $98,733
Ratio of expenses to average net assets 0.70% 0.71% 0.73% 0.74% 0.77%
Ratio of net investment income to
average net assets 0.21% 0.32% 0.49% 0.72% 0.75%
Portfolio turnover ratio 40% 28% 35% 41% 72%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Mortgage Securities Fund, Variable Series
Years Ended December 31,
-----------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $10.73 $9.84 $10.16 $9.28 $10.17
------ ------ ------ ------ ------
Net investment income 0.55 0.68 0.78 0.57 0.73
Net realized and unrealized gains
(losses) on investments 0.14 0.21 (0.30) 0.89 (0.89)
------ ------ ------ ------ ------
Total from investment operations 0.69 0.89 0.48 1.46 (0.16)
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.63) - (0.80) (0.58) (0.73)
Distributions from net realized gains
on investments - - - - -
Total distributions (0.63) - (0.80) (0.58) (0.73)
------ ------ ------ ------ ------
Net asset value, end of year $10.79 $10.73 $9.84 $10.16 $9.28
====== ====== ===== ====== =====
Total return:
Total investment return 6.80% 9.04% 4.70% 15.74% (1.57)%(b)
Ratios/supplemental data
Net assets, end of year (000s) $96,693 $77,173 $76,009 $101,778 $72,420
Ratio of expenses to average net assets 0.70% 0.70% 0.70%(a) 0.69% 0.70%(a)
Ratio of net investment income to
average net assets 5.91% 6.59% 6.71%(b) 6.76% 6.71%(b)
Portfolio turnover ratio (c) 8% 29% 72% 112% 241%
<FN>
________
(a) If the Fund had paid all of its expenses and there had been
no reimbursement from Stein Roe, this ratio would have been 0.72%
and 0.71% for the years ended Dec. 31, 1996 and 1994,
respectively.
(b) Computed giving effect to Stein Roe's expense limitation
undertaking.
(c) Portfolio turnover includes dollar roll transactions.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Money Market Fund, Variable Series
Years Ended December 31,
-----------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ----- ------
Net investment income 0.050 0.050 0.049 0.055 0.037
------ ------ ------ ----- ------
Less distributions:
Distributions from net investment income (0.050) (0.050) (0.049) (0.055) (0.037)
------ ------ ------ ----- ------
Net asset value, end of year $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
Total return:
Total investment return 5.17% 5.18% 5.01% 5.62% 3.81%
Ratios/supplemental data
Net assets, end of period (000s) $101,340 $67,137 $65,461 $64,992 $78,698
Ratio of net expenses to average net
assets 0.62% 0.65% 0.65% 0.63% 0.62%
Ratio of net investment income to
average net assets 4.99% 5.05% 4.90% 5.48% 3.73%
</TABLE>
<PAGE>
SHAREHOLDER INFORMATION
Purchases and Redemptions
The Participating Insurance Companies place daily orders to
purchase and redeem shares of the Funds. These orders generally
reflect the net effect of instructions they receive from holders
of their VA contracts and VLI policies and certain other terms of
those contracts and policies. The Trust issues and redeems shares
at NAV without imposing any selling commission, sales load or
redemption charge. Shares generally are sold and redeemed at
their NAV next determined after receipt of purchase or redemption
requests from Participating Insurance Companies. The right of
redemption may be suspended or payment postponed whenever
permitted by applicable law and regulations.
How a Fund's Share Price is Determined
Each Fund's share price is its NAV next determined. NAV is the
difference between the values of a Fund's assets and liabilities
divided by the number of shares outstanding. We determine NAV at
the close of regular trading on the New York Stock Exchange
(NYSE)-normally 4 p.m. New York time.
Money Market Fund. The valuation of the Money Market Fund's
securities is based on their amortized cost, which does not take
into account unrealized gains or losses, in an attempt to maintain
its NAV at $1.00 per share. The extent of any deviation between
the Fund's NAV based upon market quotations or equivalents and
$1.00 per share based on amortized cost will be examined by the
Board. If such deviation were to exceed 1/2 of 1%, the Board
would consider what action, if any, should be taken, including
selling portfolio securities, increasing, reducing, or suspending
distributions or redeeming shares in kind. Assets and securities
of the Fund for which this valuation method does not produce a
fair value are valued at a fair value determined in good faith by
the Board.
Other Funds. To calculate the NAV on a given day, we value each
stock listed or traded on a stock exchange at its latest sale
price on that day. If there are no sales that day, we value the
security at the most recently quoted bid price. We value each
over-the-counter security or National Association of Securities
Dealers Automated Quotation (Nasdaq) security as of the last sale
price for that day. We value all other over-the-counter
securities that have reliable quotes at the latest quoted bid
price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Funds with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
A Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading and Participating Insurance Companies may not purchase
or redeem shares.
Dividends and Distributions
Each Fund intends to declare and distribute, as dividends or
capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the
sale of portfolio securities, if any, to its shareholders
(Participating Insurance Companies' separate accounts). The net
investment income of each Fund consists of all dividends or
interest received by such Fund, less expenses (including the
investment advisory and administrative fees). Income dividends
will be declared and distributed annually in the case of each Fund
other than Money Market Fund. With respect to Money Market Fund,
the dividends are declared daily and are reinvested monthly in
shares of Money Market Fund at the NAV per share of $1.00. All
net short-term and long-term capital gains of each Fund, net of
carry-forward losses, if any, realized during the fiscal year, are
declared and distributed periodically, no less frequently than
annually. All dividends and distributions are reinvested in
additional shares of the Fund at NAV, as of the record date for
the distributions.
Taxes
For information regarding applicable taxes, please see the
prospectus relating to your Participating Insurance Company's
separate account.
<PAGE>
FOR MORE INFORMATION
Adviser: Stein Roe & Farnham Incorporated
You can get more information about the Funds' investments in the
Funds' semiannual and annual reports to shareholders. The annual
report contains a discussion of the market conditions and
investment strategies that significantly affected the Funds'
performance over the last fiscal year.
You may wish to read the Funds' Statement of Additional
Information (SAI) for more information on a Fund and the
securities in which it invests. The SAI is incorporated into this
prospectus by reference, which means that it is considered to be
part of this prospectus.
You can get free copies of the annual report and the SAI, request
other information and discuss your questions about the Funds by
writing:
Keyport Financial Services Corp.
125 High Street
Boston, MA 02110
or by calling or writing the Participating Insurance Company which
issued your variable annuity contract or variable life insurance
policy.
Text-only versions of all Fund documents can be viewed online or
downloaded from the SEC at www.sec.gov.
You can review and copy information about the Funds by visiting
the following location, and you can obtain copies upon payment of
a duplicating fee, by writing or calling the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
1-800-SEC-0330
Investment Company Act file number: 811-05199
<PAGE> 1
STEINROE VARIABLE
INVESTMENT TRUST
PROSPECTUS
May 1, 1999
* Stein Roe Balanced Fund, Variable Series
* * * *
Trust shares available only through variable annuity contracts and
variable life insurance policies of participating insurance
companies.
* * * *
This prospectus must be accompanied by a prospectus for your
variable annuity contract or variable life insurance policy.
Retain both prospectuses for future reference.
* * * *
Although trust shares have been registered with the Securities and
Exchange Commission, the Commission has not approved any shares
offered in this prospectus or determined whether this prospectus
is accurate or complete. Any representation to the contrary is a
criminal offense.
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
<PAGE>
TABLE OF CONTENTS
THE TRUST...........................................2
THE FUND............................................3
Investment Goals................................3
Primary Investment Strategies...................3
Primary Investment Risks........................3
Performance History.............................4
OTHER INVESTMENTS AND RISKS.........................5
TRUST MANAGEMENT ORGANIZATIONS......................6
The Trustees....................................6
The Adviser: Stein Roe & Farnham Incorporated...6
Portfolio Manager...............................6
Year 2000 Compliance............................6
FINANCIAL HIGHLIGHTS................................7
SHAREHOLDER INFORMATION.............................8
THE TRUST
SteinRoe Variable Investment Trust (Trust) includes five separate
mutual funds (Funds), each with its own investment goal and
strategies. This prospectus contains information about Stein Roe
Balanced Fund, Variable Series. Other Funds may be added or
deleted from time to time.
The Trust's Funds are investment options under variable annuity
contracts (VA contracts) and variable life insurance policies (VLI
policies) issued by life insurance companies (Participating
Insurance Companies). Some (but not all) Participating Insurance
Companies are affiliated with the investment adviser to the Funds.
Participating Insurance Companies invest in the Funds through
separate accounts that they set up for that purpose. Owners of VA
contracts and VLI policies invest in sub-accounts of those
separate accounts through instructions they give to their
insurance company.
The prospectuses of the Participating Insurance Companies'
separate accounts describe which Funds are available to the
purchasers of their own VA contracts and VLI policies.
<PAGE>
INVESTMENT GOALS-STEIN ROE BALANCED FUND, VARIABLE SERIES
- -----------------------------------------------------------------
Stein Roe Balanced Fund, Variable Series, seeks high total
investment return.
PRIMARY INVESTMENT STRATEGIES
- -----------------------------------------------------------------
The Fund allocates its investments among common stocks and
securities convertible into common stocks, bonds and cash. The
Fund invests primarily in well-established companies that have
large market capitalizations. The portfolio manager may invest in
a company because it has a history of steady to improving sales or
earnings growth that the portfolio manager believes can be
sustained. He also may invest in a company because he believes
its stock is priced attractively compared to the value of its
assets. The Fund may invest up to 25 percent of its assets in
foreign stocks.
The Fund also invests at least 25 percent of its assets in bonds.
The Fund purchases bonds that are "investment grade"-that is,
within the four highest investment grades assigned by a nationally
recognized statistical rating organization. The Fund may invest
in unrated bonds if the portfolio manager believes that the
securities are investment grade quality. To select debt
securities for the Fund, the portfolio manager considers a bond's
expected income together with its potential for price gains or
losses.
The portfolio manager sets the Fund's asset allocation between
stocks, bonds and cash based upon recommendations of Stein Roe's
investment committee. The committee makes its recommendations
based upon economic, market and other factors that affect
investment opportunities.
PRIMARY INVESTMENT RISKS
- -----------------------------------------------------------------
The primary risks of investing in the Fund are described below.
There are many circumstances (including additional risks that are
not described here) which could cause you to lose money by
investing in the Fund or prevent the Fund from achieving its
goals.
Market risk is the risk that the price of a security held by the
Fund will fall due to changing economic, political or market
conditions, or due to the financial condition of the company which
has issued the security.
Because the Fund invests in stocks and bonds, the price of the
Fund's shares-its net asset value per share (NAV)-fluctuates daily
in response to changes in the market value of the stocks and
bonds. In addition, the risks associated with the Fund's
investment strategy may cause the Fund's total return or yield to
decrease.
Foreign Securities
Foreign securities are subject to special risks. Foreign stock
markets, especially in countries with developing stock markets,
can be extremely volatile. The liquidity of foreign securities
may be more limited than domestic securities, which means that the
Fund may at times be unable to sell them at desirable prices.
Fluctuations in currency exchange rates impact the value of
foreign securities. Brokerage commissions, custodial fees, and
other fees are generally higher for foreign investments. In
addition, foreign governments may impose withholding taxes which
would reduce the amount of income available to distribute to
shareholders. Other risks include: possible delays in settlement
of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events;
and possible seizure, expropriation or nationalization of the
company or its assets.
Debt Securities
The Fund's investments in debt securities, generally bonds, expose
the Fund to interest rate risk. Interest rate risk is the risk of
a decline in the price of a bond when interest rates increase. In
general, if interest rates rise, bond prices fall; and if interest
rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the Fund receives
from them but will affect the value of the Fund's shares.
Interest rate risk is generally greater for bonds having longer
maturities.
Because the Fund may invest in fixed-income securities issued by
private entities, including corporate bonds, the Fund is subject
to issuer risk. Issuer risk is the possibility that changes in
the financial condition of the issuer of a security, changes in
general economic conditions, or changes in economic conditions
that affect the issuer's industry may impact the issuer's ability
to make timely payment of interest or principal This could result
in decreases in the price of the security.
PERFORMANCE HISTORY
- -----------------------------------------------------------------
The bar chart below shows changes in the Fund's performance from
year to year by illustrating the Fund's total calendar-year
returns. The performance table following the bar chart shows how
the Fund's average annual returns compare with those of a broad
measure of market performance for one year, five years and 10
years. We compare the Fund to the S&P 500 Index, a broad-based
measure of market performance. The chart and table are intended
to illustrate some of the risks of investing in the Fund by
showing the changes in the Fund's performance. All returns
include the reinvestment of dividends and distributions. As with
all mutual funds, past performance does not predict the Fund's
future performance. Performance results include any expense
reduction arrangements. If these arrangements were not in place,
then the performance results would have been lower. Any reduction
arrangements may be discontinued at any time. The Fund's
performance results do not reflect the cost of insurance and
separate account charges which are imposed under your VA contract
or VLI policy.
Calendar-Year Total Returns
YEAR-BY-YEAR TOTAL RETURNS
30.00
25.00 27.93 25.43
20.00 22.38
15.00 15.63 16.82 12.54
10.00
5.00 7.53 9.29
0.00
- -5.00 -0.69 -3.19
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
[ ] Balanced Fund
Best quarter: 4th quarter 1998, +12.39%
Worst quarter: 3rd quarter 1990, -10.04%
<PAGE>
1 Year 5 Years 10 Years
Stein Roe Balanced Fund, Variable
Series 12.54% 13.05% 12.94%
S&P 500 Index* 28.60% 24.05% 19.19%
- --------
*The S&P 500 Index is an unmanaged group of stocks that differs
from the Fund's composition; it is not available for direct
investment.
OTHER INVESTMENTS AND RISKS
The Fund's primary investment strategies and risks are described
above. This section describes other investments the Fund may make
and the risks associated with them. In seeking to achieve its
goal, the Fund may invest in various types of securities and
engage in various investment techniques that are not the principal
focus of the Fund and, therefore, are not described in this
prospectus. These types of securities and investment practices
are discussed in the Fund's Statement of Additional Information
(SAI), which you may obtain free of charge (see back cover).
The Fund's portfolio manager generally makes decisions on buying
and selling portfolio investments based upon his judgment that the
decision will improve the Fund's investment return and further its
investment goal. The portfolio manager may also be required to
sell portfolio investments to fund redemptions.
Portfolio Turnover
The Fund does not have limits on portfolio turnover. Turnover may
vary significantly from year to year. Stein Roe does not expect
it to exceed 100 percent under normal conditions. Portfolio
turnover increases transaction expenses, which reduce the Fund's
return.
Temporary Defensive Positions
When Stein Roe believes that a temporary defensive position is
necessary, the Fund may invest, without limit, in high-quality
debt securities or hold assets in cash and cash equivalents.
Stein Roe is not required to take a temporary defensive position,
and market conditions may prevent such an action. The Fund may
not achieve its investment objective if it takes a defensive
position.
Market Capitalization
In this prospectus we refer to market capitalization as a means to
distinguish among companies based on their size. A company's
market capitalization is simply its stock price multiplied by the
number of shares of stock it has issued and outstanding. In the
financial markets, companies generally are sorted into one of
three capitalization-based categories: large capitalization
(large cap); medium capitalization (midcap); or small
capitalization (small cap). We follow this convention in this
prospectus.
To sort companies in this manner, we compare a company's
capitalization with the capitalization of an appropriate index.
(An index is a statistical composite that measures a group of
stocks.) We utilize two indices in grouping stocks: the S&P Mid-
Cap 400 Index and the S&P Small-Cap 600 Index.
We consider a company to be large cap if its market capitalization
is at least 90 percent of the weighted market capitalization of
the S&P Mid-Cap 400 Index.
We consider a company to be midcap if its market capitalization is
less than 90 percent of the weighted market capitalization of the
S&P Mid-Cap 400 Index and at least 90 percent of the weighted
market capitalization of the S&P Small-Cap 600 Index.
We consider a company to be small cap if its market capitalization
is less than 90 percent of the weighted market capitalization of
the S&P Small-Cap 600 Index.
As of Dec. 31, 1998, large-cap companies had market
capitalizations greater than $6.6 billion, midcap companies had
market capitalizations between $1.8 and $6.6 billion and small-cap
companies had market capitalizations less than $1.8 billion.
These amounts will change as the S&P Mid-Cap 400 and S&P Small-Cap
600 indices change.
TRUST MANAGEMENT ORGANIZATIONS
The Trustees
The business of the Trust and the Fund is supervised by the
Trust's Board of Trustees. The SAI contains names of and
biographical information on the Trustees.
The Adviser: Stein Roe & Farnham Incorporated
Stein Roe & Farnham Incorporated, One South Wacker Drive, Chicago,
IL 60606, manages the day-to-day operations of the Fund. Stein
Roe has advised and managed mutual funds since 1949. As of
December 31, 1998, Stein Roe managed more than $29.7 billion in
assets. For the 1998 fiscal year, the Trust paid Stein Roe
management fees of 0.60 percent of the average daily net assets of
the Fund.
Stein Roe's mutual funds and institutional investment advisory
businesses are managed together with that of its affiliate,
Colonial Management Associates, Inc. (CMA), by a combined
management team of employees from both companies. CMA also shares
personnel, facilities, and systems with Stein Roe that may be used
in providing administrative or operational services to the Fund.
CMA is a registered investment adviser. Both Stein Roe and CMA
are subsidiaries of Liberty Financial Companies, Inc.
Stein Roe can use the services of AlphaTrade Inc., an affiliated
broker-dealer, when buying or selling equity securities for the
Fund's portfolio, pursuant to procedures adopted by the Board of
Trustees.
Portfolio Manager
Harvey B. Hirschhorn has been portfolio manager of the Fund since
1996. He joined Stein Roe in 1973 and is executive vice president
and chief economist and investment strategist.
YEAR 2000 COMPLIANCE
- -----------------------------------------------------------------
Like other investment companies, financial and business
organizations and individuals around the world, the Fund could be
adversely affected if the computer systems used by Stein Roe and
other service providers do not properly process and calculate
date-related information and data from and after Jan. 1, 2000.
This is commonly known as the "Year 2000 Problem." The Fund's
service providers are taking steps that they believe are
reasonably designed to address the Year 2000 problem, including
communicating with vendors who furnish services, software and
systems to the Fund, to provide that date-related information and
data can be properly processed after Jan. 1, 2000. Many Fund
service providers and vendors, including the Fund's service
providers, are in the process of making Year 2000 modifications to
their software and systems and believe that such modifications
will be completed on a timely basis prior to Jan. 1, 2000.
However, no assurances can be given that all modifications
required to ensure proper data processing and calculation on and
after Jan. 1, 2000, will be made on a timely basis or that
services to the Fund will not be adversely affected.
FINANCIAL HIGHLIGHTS
The financial highlights table that follows is intended to help
you understand the Fund's financial information for the last five
fiscal years. The total returns in the table represent the return
that investors earned assuming that they reinvested all dividends
and distributions. Certain information in the table reflects the
financial results for a single Fund share. The information has
been audited by KPMG LLP, whose report appears in the Trust's
annual report which is available upon request. The Fund's total
returns presented below do not reflect the cost of insurance and
other company separate account charges which vary with the VA
contracts or VLI policies.
<TABLE>
<CAPTION>
Stein Roe Balanced Fund, Variable Series
Years Ended December 31,
-----------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year $16.81 $16.28 $14.08 $12.18 $13.11
------ ------ ------ ----- ------
Net investment income 0.48 0.53 0.57 0.48 0.51
Net realized and unrealized gains
(losses) on investments 1.48 1.96 1.63 2.61 (0.93)
------ ------ ------ ----- ------
Total from investment operations 1.96 2.49 2.20 3.09 (0.42)
------ ------ ------ ----- ------
Less distributions:
Dividends from net investment income (0.51) (0.56) - (0.48) (0.51)
Distributions from net realized gains
on investments (1.12) (1.40) - (0.71) -
------ ------ ------ ----- ------
Total distributions (1.63) (1.96) - (1.19) (0.51)
Net asset value, end of year $17.14 $16.81 $16.28 $14.08 $12.18
====== ====== ====== ====== ======
Total return:
Total investment return 12.54% 16.82% 15.63% 25.43% (3.19)%
Ratios/supplemental data
Net assets, end of year (000s) $361,823 $325,033 $299,184 $277,014 $196,278
Ratio of expenses to average net assets 0.65% 0.66% 0.67% 0.66% 0.68%
Ratio of net investment income to
average net assets 3.00% 3.18% 3.68% 3.12% 4.01%
Portfolio turnover ratio (a) 61% 44% 76% 66% 71%
<FN>
______
(a) Portfolio turnover includes dollar roll transactions.
</TABLE>
SHAREHOLDER INFORMATION
Purchases and Redemptions
The Participating Insurance Companies place daily orders to
purchase and redeem shares of the Fund. These orders generally
reflect the net effect of instructions they receive from holders
of their VA contracts and VLI policies and certain other terms of
those contracts and policies. The Trust issues and redeems shares
at NAV without imposing any selling commission, sales load or
redemption charge. Shares generally are sold and redeemed at
their NAV next determined after receipt of purchase or redemption
requests from Participating Insurance Companies. The right of
redemption may be suspended or payment postponed whenever
permitted by applicable law and regulations.
How the Fund's Share Price is Determined
The Fund's share price is its NAV next determined. NAV is the
difference between the values of the Fund's assets and liabilities
divided by the number of shares outstanding. We determine NAV at
the close of regular trading on the New York Stock Exchange
(NYSE)-normally 4 p.m. New York time.
To calculate the NAV on a given day, we value each stock listed or
traded on a stock exchange at its latest sale price on that day.
If there are no sales that day, we value the security at the most
recently quoted bid price. We value each over-the-counter
security or National Association of Securities Dealers Automated
Quotation (Nasdaq) security as of the last sale price for that
day. We value all other over-the-counter securities that have
reliable quotes at the latest quoted bid price.
We value long-term debt obligations and securities convertible
into common stock at fair value. Pricing services provide the
Fund with the value of the securities. When the price of a
security is not available, including days when we determine that
the sale or bid price of the security does not reflect that
security's market value, we value the security at a fair value
determined in good faith under procedures established by the Board
of Trustees.
We value a security at fair value when events have occurred after
the last available market price and before the close of the NYSE
that materially affect the security's price. In the case of
foreign securities, this could include events occurring after the
close of the foreign market and before the close of the NYSE.
The Fund's foreign securities may trade on days when the NYSE is
closed. We will not price shares on days that the NYSE is closed
for trading and Participating Insurance Companies may not purchase
or redeem shares.
Dividends and Distributions
The Fund intends to declare and distribute, as dividends or
capital gains distributions, at least annually, substantially all
of its net investment income and net profits realized from the
sale of portfolio securities, if any, to its shareholders
(Participating Insurance Companies' separate accounts). The net
investment income of the Fund consists of all dividends or
interest received by the Fund, less expenses (including the
investment advisory and administrative fees). Income dividends
will be declared and distributed annually. All net short-term and
long-term capital gains of the Fund, net of carry-forward losses,
if any, realized during the fiscal year, are declared and
distributed periodically, no less frequently than annually. All
dividends and distributions are reinvested in additional shares of
the Fund at NAV, as of the record date for the distributions.
Taxes
For information regarding applicable taxes, please see the
prospectus relating to your Participating Insurance Company's
separate account.
<PAGE>
FOR MORE INFORMATION
Adviser: Stein Roe & Farnham Incorporated
You can get more information about the Fund's investments in the
Fund's semiannual and annual reports to shareholders. The annual
report contains a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance over the last fiscal year.
You may wish to read the Fund's Statement of Additional
Information (SAI) for more information on the Fund and the
securities in which it invests. The SAI is incorporated into this
prospectus by reference, which means that it is considered to be
part of this prospectus.
You can get free copies of the annual report and the SAI, request
other information and discuss your questions about the Fund by
writing:
Keyport Financial Services Corp.
125 High Street
Boston, MA 02110
or by calling or writing the Participating Insurance Company which
issued your variable annuity contract or variable life insurance
policy.
Text-only versions of all Fund documents can be viewed online or
downloaded from the SEC at www.sec.gov.
You can review and copy information about the Fund by visiting the
following location, and you can obtain copies upon payment of a
duplicating fee, by writing or calling the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
1-800-SEC-0330
Investment Company Act file number: 811-05199
