Liberty Variable Investment Trust
Colonial Global Equity Fund, Variable Series
Colonial Growth and Income Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Colonial International Horizons Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Colonial U.S. Growth & Income Fund, Variable Series
Crabbe Huson Real Estate Investment Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Newport Tiger Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
SteinRoe Variable Investment Trust
Stein Roe Balanced Fund, Variable Series
Stein Roe Growth Stock Fund, Variable Series
Stein Roe Money Market Fund, Variable Series
Stein Roe Mortgage Securities Fund, Variable Series
Stein Roe Small Company Growth Fund, Variable Series
Annual Report
December 31, 1999
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Liberty Variable Investment Trust
<S> <C>
Portfolio Managers' Discussions:
Colonial Global Equity Fund, Variable Series ...................... 1
Colonial Growth and Income Fund, Variable Series .................. 13
Colonial High Yield Securities Fund, Variable Series .............. 23
Colonial International Fund for Growth, Variable Series ........... 35
Colonial International Horizons Fund, Variable Series ............. 47
Colonial Small Cap Value Fund, Variable Series .................... 59
Colonial Strategic Income Fund, Variable Series ................... 71
Colonial U.S. Growth and Income Fund, Variable Series ............. 85
Crabbe Huson Real Estate Investment Fund, Variable Series ......... 96
Liberty All-Star Equity Fund, Variable Series ..................... 105
Newport Tiger Fund, Variable Series ............................... 116
Stein Roe Global Utilities Fund, Variable Series .................. 126
Financial Statements:
Colonial Global Equity Fund, Variable Series ...................... 3
Colonial Growth and Income Fund, Variable Series .................. 15
Colonial High Yield Securities Fund, Variable Series .............. 25
Colonial International Fund for Growth, Variable Series ........... 37
Colonial International Horizons Fund, Variable Series ............. 49
Colonial Small Cap Value Fund, Variable Series .................... 61
Colonial Strategic Income Fund, Variable Series ................... 73
Colonial U.S. Growth & Income Fund, Variable Series ............... 87
Crabbe Huson Real Estate Investment Fund, Variable Series ......... 98
Liberty All-Star Equity Fund, Variable Series ..................... 107
Newport Tiger Fund, Variable Series ............................... 118
Stein Roe Global Utilities Fund, Variable Series .................. 128
</TABLE>
<PAGE>
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SteinRoe Variable Investment Trust
<S> <C>
Portfolio Managers' Discussions:
Stein Roe Balanced Fund, Variable Series ..................... 137
Stein Roe Growth Stock Fund, Variable Series ................. 149
Stein Roe Money Market Fund, Variable Series ................. 158
Stein Roe Mortgage Securities Fund, Variable Series .......... 166
Stein Roe Small Company Growth Fund, Variable Series ......... 176
Financial Statements:
Stein Roe Balanced Fund, Variable Series ..................... 139
Stein Roe Growth Stock Fund, Variable Series ................. 151
Stein Roe Money Market Fund, Variable Series ................. 159
Stein Roe Mortgage Securities Fund, Variable Series .......... 168
Stein Roe Small Company Growth Fund, Variable Series ......... 178
</TABLE>
Must be preceded or accompanied by a prospectus.
Liberty Funds Distributor, Inc. 2/00
<PAGE>
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PRESIDENT'S LETTER
Liberty Variable Investment Trust
SteinRoe Variable Investment Trust
- --------------------------------------------------------------------------------
Dear Contract Owner:
I am pleased to present the 1999 annual report of Liberty Variable Investment
Trust and Stein Roe Variable Investment Trust.
On the pages that follow, you will find portfolio managers' discussions of fund
performance, investment strategy and market conditions for each of the 17
series of the two trusts. We encourage you to review how your funds fared.
A Time to Cherish
Recently, the current United States economic expansion set a record for
longevity. We have experienced nine years of economic growth, inflation has
risen barely one point and national productivity gains continue.
If we have entered a new era, a new economic order, our substantial investment
in technology is certainly one main reason. The first control on our inflation
rate was the flood of competitive imports from the recession-burdened economies
of Pacific Rim nations. Finally, the sensitive monetary policies of the Federal
Reserve System have helped to keep our economy in order.
Consumer confidence is high, reflecting growth in real income and a strong job
market. Consumer spending is strong, and business capital spending remains
high. The real Gross Domestic Product of the United States is growing at
approximately 4% year-over-year.
It is indeed a wonderful time to be making a living and investing for the
future.
The Stock Market
As 1999 came to a close, there were records, rewards, and regrets for
investors. The four major U.S. stock market benchmarks reached record highs.
Initial public offerings also set standards for extravagance ($69 billion in
new money raised), e-commerce envy (a 733% increase in one first-day offering
price), and the largest U.S. public offering (by United Parcel Service).
The regrets of trading were reflected in the narrow scope of the market's
advance. About half of the stocks in the S&P 500 declined in 1999. Although the
Russell 2000 small-cap index set a record, its gain trailed other stock market
averages for the sixth straight year.
The Bond Market
During the 12-month period ended December 31, 1999, most bonds succumbed to the
pressure of inflation worries and rising interest rates. Stronger-than-expected
U.S. economic growth, combined with the rebound of the Japanese, European and
emerging market economies, prompted the Federal Reserve Board to raise interest
rates in preemptive strikes against potential inflation. Bond prices, which
move in the opposite direction of their yields, posted significant losses as a
result.
Investing for Your Future
Whether you focus on the United States or the world economies, I encourage you
to look at your annuity investment as you would your own business or property.
Your investment is a long-term affair, measured not by a year, but by decades.
On behalf of Liberty and Stein Roe, thank you for that commitment to us.
Sincerely,
/s/ Stephen E. Gibson
- ---------------------
Stephen E. Gibson
President
February 16, 2000
Because market and economic conditions change frequently, there can be no
assurance that the trends described here will continue.
<PAGE>
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PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial Global Equity Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial Global Equity Fund, Variable Series(1), seeks long-term growth by
investing primarily in global equity securities.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date .................................. 6/1/99
Assuming reinvestment of all distributions
Cumulative total return since inception ......... 12.57%
Net asset value per share on 12/31/99 ........... $11.21
Net asset value per share on 6/1/99 ............. $10.00
</TABLE>
Portfolio Manager's Discussion
Nicolas Ghajar is the portfolio manager of Colonial Global Equity Fund,
Variable Series and an assistant vice president of Colonial Management
Associates, Inc. Prior to managing the Fund, Mr. Ghajar was an equity analyst
of various equity funds since 1992.
What was the investing environment like?
Conditions for the global markets changed dramatically during 1999. At the
very beginning of the year, most observers were calling for weak global
economic growth, with many predicting deflationary conditions. Almost
immediately, however, that view changed as the U.S. economy strengthened and
the previously troubled Japanese, European and emerging market economies showed
signs of being on the mend. Japan recovered at a much faster-than-expected
rate, primarily because of falling interest rates, tax cuts and other
government-sponsored programs designed to stimulate the economy. In addition,
the benefits of corporate restructuring began to show in better corporate
earnings. Higher than expected GDP growth helped strengthen demand, pushing
commodity prices higher during the first half of the year, helping to firm many
commodity-based emerging market economies. Europe, although weak throughout
much of 1999, picked up somewhat in the final quarter of the year.
What was the Fund's strategy during the period?
The Fund was well positioned in technology and telecommunications stocks
from across the world. The strong performance of these stocks dominated world
markets in 1999. In the U.S., for example, EMC (1.5% of net assets) and
Microsoft (1.0% of net assets) were among our best performers. In Japan,
we saw good gains from Canon (0.5% of net assets), Sony (1.6% of net assets)
and others. Beyond our technology and telecom holdings, we remained broadly
diversified in Japan, investing in export-oriented stocks that could benefit
from a weak yen as well as domestically-oriented stocks that benefited from the
economy's recovery. Our emerging market investments were diversified among
paper, steel, energy and other cyclical stocks from Brazil, Mexico and
Thailand.
What is your outlook?
We anticipate continued strong economic recovery worldwide. In our view,
Japan will continue to strengthen and corporate restructuring will result in
better profitability for companies. Furthermore, Japan's strength will likely
translate to better economic trends in Asia. Europe is poised to be one of this
year's best performers because of lower interest rates, restructuring a weaker
currency that helps export-oriented markets and M&A activities. In addition, we
believe that telecommunications and technology stocks still have a lot of
momentum left. We also think that better economic worldwide growth should
translate into higher commodity prices. The Fund's diversified structure
between telecommunications, technology and commodity-related stocks may enable
it to benefit from those trends.
(1) Global investing offers significant long-term growth potential, but also
involves certain risks. The Fund may be affected by political, business and
economic conditions, as well as by currency fluctuations.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
1
<PAGE>
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PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial Global Equity Fund, Variable Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Colonial Global Equity Fund, Variable Series vs.
Morgan Stanley Capital International (MSCI) World (GDP)
Change in value of a $10,000 investment from 6/01/99-12/31/99
- ---------------------------------------------------
<TABLE>
<CAPTION>
Cumulative Total Returns on December 31, 1999
Life 1 Year 3 Years
<S> <C> <C>
12.57% N/A N/A
</TABLE>
- ---------------------------------------------------
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Colonial Global MSCI
Equity Fund, World
Variable Series GDP
<S> <C> <C> <C>
$14,000 6/99 10000 10000
$13,000 7/99 9856 10064
$12,000 8/99 9732 10069
$11,000 9/99 9579 10073
$10,000 10/99 9809 10521
$ 9,000 11/99 10058 10838
$ 8,000 12/99 11257 12380
</TABLE>
[END PLOT POINTS]
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The Morgan Stanley Capital International (MSCI)
World (GDP) Index is an unmanaged price index that tracks the performance of
global stocks. Indexes are not investments, do not incur fees or expenses and
are not professionally managed. It is not possible to invest directly in an
index.
- -------------------------------------------------------------------------------
2
<PAGE>
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INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Colonial Global Equity Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- -------------- ----------
<S> <C> <C> <C>
COMMON STOCKS--78.3%
Construction--0.9%
Building Construction--0.5%
Centex Corp. ........................................................ 1,400 $ 34,563
----------
Special Trade Contractors--0.4%
Tomkins PLC (a) ..................................................... UK 8,000 25,848
----------
Finance, Insurance & Real Estate--14.6%
Depository Institutions--5.9%
AmSouth Bancorporation .............................................. 1,871 36,134
Argentaria, Caja Postal y
Banco Hipotecario de
Espana SA ........................................................ Sp 1,300 30,522
Banque Nationale de Paris ........................................... Fr 377 34,753
Banque Nationale de Paris-
CVG .............................................................. Fr 169 779
Chase Manhattan Corp. ............................................... 700 54,381
Cie Financiere de Paribas ........................................... Fr 10 1,116
HSBC Holdings PLC (b) ............................................... UK 3,000 41,825
Lloyds TSB Group PLC ................................................ UK 2,000 24,846
Standard Chartered PLC .............................................. UK 2,000 31,018
Svenska Handelsbanken ............................................... Sw 2,400 30,175
The Bank of Tokyo
Mitsubishi ....................................................... Ja 4,000 55,718
Union Bank of Switzerland ........................................... Sz 100 27,039
UniCredito Italiano SPA ............................................. It 6,500 31,948
Washington Mutual, Inc. ............................................. 1,200 31,200
----------
431,454
----------
Holding & Other Investment Offices--0.4%
Zurich Allied AG .................................................... Sz 50 28,548
----------
Insurance Carriers--2.4%
Allstate Corp. ...................................................... 1,700 40,800
American International
Group, Inc. ...................................................... 500 54,063
AXA ................................................................. Fr 260 36,213
International Nederlanden
Groep ............................................................ Ne 700 42,225
----------
173,301
----------
Investment Companies--2.3%
Irish Investment Fund, Inc. ......................................... Ir 1,800 27,563
Korea Fund, Inc. .................................................... Ko 3,100 52,700
Taiwan Fund, Inc. ................................................... Tw 3,000 61,125
Thai Fund ........................................................... Th 3,200 25,000
----------
166,388
----------
Nondepository Credit Institutions--1.3%
Associates First Capital Corp. 1,400 38,413
Nichiei Co., Ltd. ................................................... Ja 400 8,686
Promise Co., Ltd. ................................................... Ja 1,000 50,866
----------
97,965
----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- -------------- ----------
<S> <C> <C> <C>
Real Estate--2.3%
Cheung Kong Holdings Ltd. HK 8,000 $ 101,627
New World Development
Co., Ltd. ........................................................ HK 28,000 63,035
----------
164,662
----------
Manufacturing--35.6%
Chemicals and Allied Products--6.5%
Akzo Nobel NV ....................................................... Ne 700 35,082
Aventis SA .......................................................... Fr 660 38,324
BASF AG ............................................................. G 750 38,493
Clorox Co. .......................................................... 1,000 50,375
E.I. DuPont De Nemours &
Co. .............................................................. 467 30,764
Kao Corp. ........................................................... Ja 2,000 57,028
Merck & Co., Inc. ................................................... 600 40,238
Novartis ............................................................ Sz 25 36,754
Pharmacia & Upjohn, Inc. ............................................ 1,000 45,000
Schering-Plough Corp. ............................................... 1,100 46,406
Warner-Lambert Co. .................................................. 700 57,356
----------
475,820
----------
Communications Equipment--4.3%
Lucent Technologies, Inc. ........................................... 800 59,850
Racal Electronics PLC ............................................... UK 7,000 62,762
Sony Corp. .......................................................... Ja 390 115,592
Telefonakteibolaget LM
Ericsson ......................................................... Sw 1,100 72,256
----------
310,460
----------
Electrical Industrial Equipment--1.1%
General Electric Co. ................................................ 500 77,375
----------
Electronic Components--0.7%
Royal Philips Electronics NV
NY Shares ........................................................ 400 54,000
----------
Food & Kindred Products--2.5%
Bass PLC ............................................................ UK 3,000 37,754
Diageo PLC .......................................................... UK 3,000 24,235
Groupe Danone ....................................................... Fr 130 30,613
Kellogg Co. ......................................................... 1,500 46,219
PepsiCo, Inc. ....................................................... 1,200 42,300
----------
181,121
----------
Furniture & Fixtures--0.7%
Furniture Brands
International, Inc. (a) .......................................... 2,300 50,600
----------
Household Appliances--0.5%
Electrolux AB, Series B ............................................. Sw 1,500 37,718
----------
Machinary & Computer Equipment--5.1%
Canon, Inc. ......................................................... Ja 1,000 39,715
EMC Corp. (a) ....................................................... 1,000 109,250
</TABLE>
See Notes to Investment Portfolio.
3
<PAGE>
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INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Global Equity Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev Shares Value
--------- -------------- ----------
<S> <C> <C> <C>
Hewlett-Packard Co. ................................................. 400 $ 45,575
International Business
Machines Corp. ................................................... 400 43,200
Invensys PLC ........................................................ UK 9,000 47,690
Mannesmann AG ....................................................... G 350 84,357
----------
369,787
----------
Measuring & Analyzing Instruments--0.5%
Fuji Photo Film Co., Ltd. ........................................... Ja 1,000 36,487
----------
Paper Products--1.5%
Aracruz Celulose SA, ADR ............................................ Bz 2,000 52,500
Royal Koninklijke PTT
Nederland NV ..................................................... Ne 600 58,509
----------
111,009
----------
Petroleum Refining--3.0%
Amerada Hess Corp. .................................................. 1,000 56,750
BP Amoco PLC, ADR ................................................... UK 600 35,588
Compagnie Francaise de
Petroleum, Total B ............................................... Fr 250 33,336
ENI SPA ............................................................. It 5,000 27,388
Royal Dutch Petroleum Co. ........................................... Ne 500 30,618
Texaco, Inc. ........................................................ 700 38,019
----------
221,699
----------
Primary Metal--1.6%
Acerinox SA ......................................................... Sp 1,200 47,822
Pirelli SPA ......................................................... It 11,000 29,856
Pohang Iron & Steel Co.,
Ltd., ADR ........................................................ Ko 1,100 38,500
----------
116,178
----------
Rubber & Plastic--1.1%
Illinois Tool Works, Inc. ........................................... 1,212 81,886
----------
Stone, Clay, Glass, & Concrete--1.9%
Cemex SA ............................................................ Mx 7,500 41,953
Hanson PLC .......................................................... UK 3,000 25,154
Holderbank Financiere
Glaris AG ........................................................ Sz 25 34,270
Lafarge SA .......................................................... Fr 310 36,064
----------
137,441
----------
Transportation Equipment--4.6%
DaimlerChrysler AG .................................................. G 500 38,845
Dana Corp. .......................................................... 600 17,963
Ford Motor Co. ...................................................... 900 48,094
GKN PLC ............................................................. UK 3,000 46,720
General Dynamics Corp. .............................................. 500 26,375
Honda Motor Co. Ltd. ................................................ Ja 1,000 37,171
MAN AG .............................................................. G 1,300 48,798
Textron, Inc. ....................................................... 300 23,006
United Technologies Corp. ........................................... 700 45,500
----------
332,472
----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ -----------
<S> <C> <C> <C>
Mining & Energy--2.3%
Crude Petroleum & Natural Gas--0.3%
Conoco, Inc., Class B ............................................... 982 $ 24,427
----------
Nonmetallic, Except Fuels--0.7%
Potash Corp. of
Saskatchewan, Inc. ............................................... Ca 1,100 53,006
----------
Oil & Gas Extraction--0.1%
Transocean Sedco Forex,
Inc. ............................................................. 194 6,522
----------
Oil & Gas Field Services--1.2%
Petroleum Geo-Services (a) .......................................... No 1,900 33,827
Schlumberger Ltd. ................................................... 1,000 56,250
----------
90,077
----------
Retail Trade--4.1%
Apparel & Accessory Stores--1.0%
Hennes & Mauritz AB,
Class B (a) ...................................................... Sw 2,200 73,674
----------
Food Stores--1.3%
Safeway, Inc. (a) ................................................... 900 32,006
Tesco PLC ........................................................... UK 12,000 36,446
Vendex International NV ............................................. Ne 1,000 26,568
----------
95,020
----------
General Merchandise Stores--1.1%
Wal-Mart Stores, Inc. ............................................... 1,200 82,950
----------
Miscellaneous Retail--0.7%
Imasco Ltd. ......................................................... Ca 1,300 35,884
Rite Aid Corp. ...................................................... 1,100 12,306
----------
48,190
----------
Services--4.8%
Amusement & Recreation--0.3%
Hilton Group PLC .................................................... UK 7,000 22,730
----------
Computer Related Services--0.8%
Cap Gemini SA ....................................................... Fr 230 58,328
----------
Computer Software--3.7%
Compuware Corp. (a) ................................................. 1,500 55,875
Microsoft Corp. ..................................................... 600 70,050
Misys PLC ........................................................... UK 3,000 46,575
SAP AG .............................................................. G 150 73,816
SunGard Data Systems,
Inc. (a) ......................................................... 1,100 26,125
----------
272,441
----------
Transportation, Communications, Electric,
Gas & Sanitary Services--16.0%
Communications--1.9%
Carlton Communications
PLC .............................................................. UK 4,000 38,869
Viacom, Inc. Class A (a) ............................................ 800 48,350
Vodafone AirTouch PLC ............................................... UK 10,000 49,278
----------
136,497
----------
</TABLE>
See Notes to Investment Portfolio.
4
<PAGE>
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INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Global Equity Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- -------- ----------
<S> <C> <C> <C>
Electric Services--1.7%
Endesa SA ............................................................. Sp 1,400 $ 27,769
Korea Electric Power Corp.,
ADR ................................................................ Ko 3,200 53,600
Texas Utilities Co. ................................................... 1,200 42,675
----------
124,044
----------
Gas Services--1.0%
BG PLC ................................................................ UK 4,444 28,397
NICOR, Inc. ........................................................... 1,300 42,250
----------
70,647
----------
Motor Freight & Warehousing--0.5%
CNF Transportation, Inc. .............................................. 1,100 37,950
----------
Telecommunications--10.9%
Bell Atlantic Corp. ................................................... 900 55,406
British Telecommunications
PLC ................................................................ UK 2,000 47,876
COLT Telecom Group
PLC (a) ............................................................ UK 2,000 102,423
Cable & Wireless HKT Ltd. ............................................. HK 13,000 37,944
France Telecom SA ..................................................... Fr 390 51,532
MCI WorldCom, Inc. (a) ................................................ 1,050 55,716
Nippon Telegraph &
Telephone Corp. .................................................... Ja 4 68,473
Nokia Oyj ............................................................. Fi 700 126,800
Philippine Long Distance
Telephone Co. ADR .................................................. Ph 1,800 46,575
Telecel-Comunicacaoes
Pessoais, SA ....................................................... Pt 2,000 34,840
Telecom Italia SPA .................................................... It 3,000 42,116
Telecomunicacoes Brasileiras
SA ................................................................. Bz 450 57,825
Telefonos de Mexico SA ................................................ Mx 11,100 62,090
----------
789,616
----------
Total Common Stocks
(cost of $4,972,015) (c) ................................................................ 5,702,901
----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Par Value
--------- ------------ -----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--21.1%
Federal Home Loan Bank Discount
Note, 1.500% 1/3/00 (d) ..................... $ 500,000 $ 499,938
Repurchase agreement with SBC
Warburg Ltd., dated 12/31/99, due
1/3/00 at 2.500%, collateralized by
Treasury bonds and/or notes with
various maturities to 2021, market
value $1,057,414 (repurchase
proceeds $1,036,216) ........................ 1,036,000 1,036,000
----------
Total Short-Term Obligations .................................. 1,535,938
----------
Other Assets & Liabilities, Net--0.6% ......................... 44,678
----------
Net Assets--100.0% ............................................ $7,283,517
==========
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing
(b) The value of this security represents fair market value as determined in
good faith under the direction of the Trustees
(c) Cost for federal income tax purposes is the same.
(d) Rate represents yield at date of purchase.
See Notes to Investment Portfolio.
5
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Global Equity Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
Summary of Securities by Country
<TABLE>
<CAPTION>
% of Total
Country Securities
Country Abbrev. Value at Value
- --------------------------------- --------- ------------- -----------
<S> <C> <C> <C>
United States ................. $2,074,513 36.4
United Kingdom ................ UK 776,034 13.6
Japan ......................... Ja 469,736 8.2
France ........................ Fr 321,058 5.6
Germany ....................... G 284,309 5.0
Sweden ........................ Sw 213,823 3.8
Hong Kong ..................... HK 202,606 3.6
Netherlands ................... Ne 193,002 3.4
Korea ......................... Ko 144,800 2.5
Italy ......................... It 131,308 2.3
Finland ....................... Fi 126,800 2.2
Switzerland ................... Sz 126,611 2.2
Brazil ........................ Bz 110,325 1.9
Spain ......................... Sp 106,113 1.9
Mexico ........................ Mx 104,043 1.8
Canada ........................ Ca 88,890 1.6
Taiwan ........................ Tw 61,125 1.1
Philippines ................... Ph 46,575 0.8
Portugal ...................... Pt 34,840 0.6
Norway ........................ No 33,827 0.6
Ireland ....................... Ir 27,563 0.5
Thailand ...................... Th 25,000 0.4
---------- -----
$5,702,901 100.0
========== =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
- ----------- ----------------------------
<S> <C>
ADR American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial Global Equity Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $4,972,015) ........................ $5,702,901
Short-term obligations ........................................................... 1,535,938
Cash (including foreign currencies) .............................................. 524
Receivable for fund shares sold .................................................. 46,200
Dividends, tax reclaims and interest receivable .................................. 13,860
----------
Total assets ................................................................... 7,299,423
----------
Liabilities:
Payable to Manager ............................................................... 2,977
Payable for fund shares repurchased .............................................. 7
Management fee payable ........................................................... 331
Service fee payable .............................................................. 1,378
Accrued expenses payable ......................................................... 9,406
Other liabilities ................................................................ 1,807
----------
Total liabilities .............................................................. 15,906
----------
Net assets ....................................................................... $7,283,517
==========
Net assets represented by:
Paid-in capital ................................................................. $6,562,051
Accumulated overdistributed net investment income ............................... (9,302)
Accumulated net realized losses on investments and foreign currency transactions (1)
Net unrealized appreciation on investments and foreign currency transactions .... 730,769
----------
Total net assets applicable to outstanding shares of beneficial interest ......... $7,283,517
==========
Shares of beneficial interest outstanding ........................................ 649,541
==========
Net asset value per share ........................................................ $ 11.21
==========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1999*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ................................................................................ $ 44,848
Interest ................................................................................. 19,068
---------
Total investment income (net of nonrebatable foreign taxes withheld at source which
amounted to $2,982) ................................................................... 63,916
---------
Expenses:
Management fee .......................................................................... 31,164
Bookkeeping fee ......................................................................... 15,750
Service fee ............................................................................. 7,044
Transfer agent fee ...................................................................... 4,375
Audit fee ............................................................................... 8,003
Printing expense ........................................................................ 620
Trustees' expense ....................................................................... 2,248
Custodian fee ........................................................................... 2,311
Legal fee ............................................................................... 150
Miscellaneous expense ................................................................... 243
---------
Total expenses ......................................................................... 71,908
---------
Less:
Expenses reimbursable by Manager ........................................................ (27,096)
---------
Net expenses ............................................................................. 44,812
---------
Net investment income .................................................................... 19,104
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized gains on investments ....................................................... 893
Net realized losses on foreign currency transactions .................................... (3,287)
Net change in unrealized appreciation/depreciation on investments and foreign currency 730,769
transactions ---------
Net increase in net assets resulting from operations ..................................... $ 747,479
=========
</TABLE>
* For the period from the commencement of operations June 1, 1999 to December
31, 1999.
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial Global Equity Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Ended
December 31,
1999*
-------------
<S> <C>
Operations:
Net investment income ................................................................... $ 19,104
Net realized gains on investments ....................................................... 893
Net realized losses on foreign currency transactions .................................... (3,287)
Net change in unrealized appreciation/depreciation on investments and foreign currency
transactions ........................................................................... 730,769
----------
Net increase in net assets resulting from operations ..................................... 747,479
----------
Distributions declared from:
Net investment income ................................................................... (27,304)
Net realized gains on investments ....................................................... (894)
----------
Total distributions ...................................................................... (28,198)
----------
Fund share transactions:
Proceeds from fund shares sold .......................................................... 6,617,664
Cost of fund shares repurchased ......................................................... (81,626)
Distributions reinvested ................................................................ 28,198
----------
Net increase in net assets resulting from fund share transactions ........................ 6,564,236
----------
Total increase in net assets ............................................................. 7,283,517
Net assets:
Beginning of period ..................................................................... --
----------
End of period ........................................................................... $7,283,517
==========
Accumulated overdistributed net investment income included in ending net assets .......... $ (9,302)
==========
Analysis of changes in shares of beneficial interest:
Shares sold ............................................................................. 654,515
Shares repurchased ...................................................................... (7,575)
Distributions reinvested ................................................................ 2,601
----------
Net increase ............................................................................. 649,541
==========
</TABLE>
* For period from the commencement of operations, June 1, 1999 to December 31,
1999.
See Notes to Financial Statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Colonial Global Equity Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a non-diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek long-term growth by investing
primarily in global equities. The Fund's capitalization consists of an unlimited
number of shares of beneficial interest without par value that represents a
separate series of the Trust. Each share of the Fund represents an equal
proportionate beneficial interest in the Fund and, when issued and outstanding,
is fully paid and nonassessable. Shareholders would be entitled to share
proportionally in the net assets of the Fund available for distribution to
shareholders upon liquidation of the Fund. 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")
offered by the separate accounts of the life insurance companies ("Participating
Insurance Companies"). Certain Participating Insurance Companies are affiliated
with the Investment Advisor and sub-advisors to the Fund ("Affiliated
Participating Insurance Companies"). Such Affiliated Participating Insurance
Companies are Keyport Life Insurance Company ("Keyport"), Independence Life &
Annuity Company ("Independence") and Liberty Life Assurance Company of Boston
("Liberty Life"). The Participating Insurance Companies and their separate
accounts own all the shares of the Fund. Liberty Advisory Services Corp. (the
"Manager") ("LASC"), provides investment management and advisory services to the
Fund pursuant to its Management Agreements with the Trust. Colonial Management
Associates, Inc. ("Colonial") provides sub-advisory services. LASC has delegated
various administrative matters to Colonial. Keyport Financial Services Corp.
("KFSC") serves as the principal underwriter of the Trust with respect to sales
of shares to Affiliated Participating Insurance Companies. The Manager,
Colonial, KFSC, Keyport and Independence are wholly-owned indirect subsidiaries
of Liberty Financial Companies, Inc. ("LFC"). As of December 31, 1999, Liberty
Mutual Insurance Companies ("Liberty Mutual") owned approximately 71% of the
outstanding voting shares of LFC. Liberty Life is a subsidiary of Liberty
Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions: Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Foreign currency transactions--Net realized and unrealized gains (losses)
on foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency,
and currency gains (losses) between the accrual and payment dates on dividends
and interest income and foreign withholding taxes.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
Forward currency contracts--The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined exchange rates
in connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While the maximum potential loss from such contracts is the
aggregate face value in U.S. dollars at the time the contract was opened,
exposure is typically limited to the change in value of the contract (in U.S.
dollars) over the period it remains open. Risks may also arise if counterparties
fail to perform their obligations under the contracts.
Other--Corporate actions are recorded on ex-date (except for certain
foreign securities which are recorded as soon after ex-date as the Fund becomes
aware of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of all
tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal
to 0.95% annually of the Fund's average daily net assets. The Manager, out of
the management fee it receives, pays Colonial a monthly sub-advisory fee equal
to 0.75% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for
$27,000 annually plus 0.035% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Service fee--Effective July 1, 1999, the Fund has adopted a 12b-1 plan
which requires it to pay Liberty Funds Distributor, Inc. ("LFDI") and KFSC a
service fee totaling 0.25% annually of the Fund's net assets as of the 20th of
each month.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (excluding
service fee) exceed 1.15% annually of the Fund's average daily net assets.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the period ended December 31, 1999, purchases
and sales of investments, other than short term obligations, were $5,002,873 and
$31,751, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $1,072,689
Gross unrealized depreciation (341,803)
----------
Net unrealized appreciation $ 730,886
----------
</TABLE>
Other--There are certain additional risks involved when investing in
foreign securities that are not inherent with investments in domestic
securities. These risks may involve foreign currency exchange rate fluctuations,
adverse political and economic developments and the possible prevention of
foreign currency exchange or the imposition of other foreign governmental laws
or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
10
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial Global Equity Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Ended
December 31,
1999***
-------------
<S> <C>
Per share operating performance:
Net asset value, beginning of period ............................. $ 10.00
-------
Net investment income (a) ........................................ 0.04
Net realized and unrealized gains on investments ................. 1.22
-------
Total from investment operations ................................. 1.26
-------
Less distributions:
Dividends from net investment income ............................ (0.05)
Dividends from net realized gains ............................... (0.00)
-------
Total distributions .............................................. (0.05)
-------
Net asset value, end of period ................................... $ 11.21
=======
Total return:
Total investment return (b)(c) .................................. 12.57%**
Ratios/supplemental data:
Net assets, end of period (000's) ................................ $ 7,284
Ratio of expenses to average net assets (d)(e) ................... 1.40%*
Ratio of net investment income to average net assets (d) ......... 0.55%*
Portfolio turnover ratio ......................................... 1%**
</TABLE>
* Annualized.
** Not annualized.
*** For period from the commencement of operations, June 1, 1999 to December
31, 1999.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 2.23%
(annualized).
- --------------------------------------------------------------------------------
1999 Federal Tax information (unaudited)
68% of the ordinary income distributed by the Fund in the year ended December
31, 1999 qualifies for the corporate dividends received deduction.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Colonial Global Equity Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Global Equity Fund,
Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at
December 31, 1999, the results of its operations, the changes in its net assets
and the financial highlights for the period from June 1, 1999 (commencement of
operations) through December 31, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements and the
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
portfolio positions at December 31, 1999 by correspondence with the custodian,
provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
12
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial Growth and Income Fund, Variable Series(1), seeks primarily income
and long-term capital growth, and secondarily, preservation of capital.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 7/1/93
Assuming reinvestment of all distributions
12-month total return ...................... 5.55%
Net asset value per share on 12/31/99 ......... $13.18
Net asset value per share on 12/31/98 ......... $16.39
</TABLE>
Portfolio Manager's Discussion
Scott Schermerhorn is the portfolio manager of Colonial Growth and Income
Fund, Variable Series and is a senior vice president of Colonial Management
Associates, Inc.
What was the investment environment like over the past 12 months?
Once again, the stock market was sharply divided with large-cap growth
stocks and technology stocks performing exceptionally well. Most other stocks,
value stocks included, experienced lackluster performance. In this environment,
we remained true to our disciplined management approach. We sought companies
with solid management and good business plans that are currently out of favor
with the market. Should these companies return to favor, we believe that
long-term investors may benefit from our commitment to this investment style.
What was the Fund's strategy during the period?
We acquired energy stocks in early 1999 when market action had severely
depressed prices. The prices of these stocks recovered in the spring due to the
concerted effort of the Organization of Petroleum Exporting Companies (OPEC) to
get oil supply in-line with demand. This, in turn, helped oil prices and energy
stock prices return to more normal levels. The Fund's performance benefited
from these holdings.
Concerned about rising inflation fears, we pared down our exposure to
financial services companies beginning in the second quarter of 1999. One
catalyst of earnings growth for financial companies is declining interest
rates. As the Fed switched from a bias toward lowering rates to a bias of
raising rates, we felt that these stocks would be less attractive to the
market. This decision proved prudent as many financial services stocks lost
ground.
Rising interest rates imply strong economic growth, and the performance of
many stocks over the past several months bears that out. Traditional cyclical
stocks like steel and paper should have benefited from this type of growth
environment, but did not. We bought several quality cyclical names during the
period and are currently overweighted in this sector. We believe these stocks
will benefit as investors realize their strength and earning potential.
What is your outlook for the period ahead?
With economic growth still strong, many analysts look for further hikes in
interest rates early in the year 2000. While significant rises could hurt the
stock market, smaller ones could slow growth to a more favorable rate. This
could benefit many value-oriented sectors the Fund emphasizes, like energy,
steel and paper. We believe these factors present a compelling argument for
investors to stay diversified with a portion of their portfolio devoted to
value stock investing.
(1) An investment in the Fund offers significant long-term growth potential,
but also involves certain risks. The Fund may be affected by stock market
fluctuations that occur in response to economic and business developments.
Changes in interest rates, changes in the financial strength of issuers of
lower rated bonds, foreign, political and economic developments, may affect
Fund performance.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
13
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Colonial Growth and Income Fund, Variable Series vs. S&P 500 Index
Change in value of a $10,000 investment from 7/1/93-12/31/99
- ------------------------------------------------
Average Annual Total Return on December 31, 1999
<TABLE>
<CAPTION>
Life 1 Year 5 Years
<S> <C> <C>
14.52% 5.55% 18.32%
- ------------------------------------------------
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Colonial Growth
and Income Fund, S&P
Variable Series 500
<S> <C> <C> <C>
$40,000 7/93 10000 10000
$30,000 10457 10379
$20,000 10466 10299
$10,000 10606 10512
$ 0 10337 10412
12/93 10428 10538
10781 10897
10630 10601
10267 10140
10347 10270
10267 10437
6/94 10045 10182
10327 10516
10709 10946
10508 10679
10497 10918
10145 10520
12/94 10348 10676
10461 10953
10864 11379
11101 11714
11380 12059
11710 12540
6/95 12029 12831
12370 13256
12555 13289
12783 13850
12793 13800
13381 14404
12/95 13455 14682
13978 15181
14139 15322
14128 15470
14374 15697
14642 16100
6/96 14610 16162
13926 15447
14365 15773
14846 16660
15167 17119
15862 18412
12/96 15863 18047
16387 19174
16569 19325
15797 18533
16501 19637
17557 20837
6/97 18409 21764
19419 23495
18998 22179
19885 23392
19294 22611
19806 23658
12/97 20457 24065
20511 24329
21885 26083
22432 27419
22618 27699
22166 27222
6/98 22498 28327
21925 28027
18713 23977
19446 25514
20660 27586
21686 29258
12/98 22736 30943
23166 32236
22139 31234
22680 32483
23428 33740
23344 32944
6/99 24565 34772
23982 33687
23594 33519
23179 32600
24358 34664
24013 35368
12/99 24168 37298
</TABLE>
[END PLOT POINTS]
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The Standard & Poor's 500 Index is an unmanaged
index that tracks the performance of a selection of widely held common stocks.
Indexes are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
- -------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- --------- ------------
<S> <C> <C> <C>
COMMON STOCKS--99.7%
Finance, Insurance & Real Estate--15.6%
Depository Institutions--3.1%
First Union Corp. .............. 62,800 $ 2,060,625
J.P. Morgan & Co., Inc. ........ 14,800 1,874,050
Washington Mutual, Inc. ........ 84,500 2,197,000
------------
6,131,675
------------
Insurance Agents & Brokers--1.1%
Marsh & McLennan
Companies, Inc. ............. 22,800 2,181,675
------------
Insurance Carriers--9.3%
Allstate Corp. ................. 107,200 2,572,800
MBIA, Inc. ..................... 38,000 2,006,875
Travelers Property Casualty
Corp. ....................... 104,200 3,568,850
United Healthcare Corp. ........ 99,300 5,275,312
UnumProvident Corp. ............ 74,600 2,391,862
XL Capital Ltd. Class A ........ 49,800 2,583,375
------------
18,399,074
------------
Nondepository Credit Institutions--2.1%
Associates First Capital Corp. 52,424 1,438,383
Freddie Mac .................... 56,200 2,644,912
------------
4,083,295
------------
Manufacturing--55.5%
Apparel--0.9%
Liz Claiborne, Inc. ............ 47,300 1,779,662
------------
Chemicals & Allied Products--8.1%
Abbott Laboratories ............ 138,100 5,014,756
Merck & Co., Inc. .............. 42,200 2,830,037
Monsanto Co. ................... 65,500 2,333,437
Mylan Laboratories ............. 104,200 2,624,537
Sherwin-Williams Co. ........... 147,000 3,087,000
------------
15,889,767
------------
Communications Equipment--2.1%
Motorola, Inc. ................. 27,700 4,078,825
------------
Electrical Industrial Equipment--1.2%
Emerson Electric Co. ........... 40,700 2,335,162
------------
Fabricated Metal--1.3%
Newell Rubbermaid, Inc. ........ 88,300 2,560,700
------------
Food & Kindred Products--10.0%
Bestfoods ...................... 80,300 4,220,768
Conagra, Inc. .................. 126,700 2,858,669
Corn Products International,
Inc. ........................ 66,700 2,184,425
Nabisco Holdings Corp. ......... 73,500 2,324,438
PepsiCo, Inc. .................. 95,900 3,380,475
Philip Morris Companies,
Inc. ........................ 125,100 2,900,756
Tyson Foods, Inc. .............. 114,200 1,855,750
------------
19,725,281
------------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ----------- ------------
<S> <C> <C> <C>
Household Appliances--1.4%
Whirlpool Corp. ................ 42,700 $ 2,778,169
------------
Machinery & Computer Equipment--2.3%
Compaq Computer Corp. .......... 98,400 2,662,950
Hewlett-Packard Co. ............ 16,500 1,879,969
------------
4,542,919
------------
Measuring & Analyzing Instruments--2.8%
Eastman Kodak Co. .............. 49,400 3,272,750
Raytheon Co. Class A ........... 90,400 2,243,050
------------
5,515,800
------------
Miscellaneous Manufacturing--1.5%
Mattel, Inc. ................... 224,300 2,943,938
------------
Paper Products--6.1%
International Paper Co. ........ 76,500 4,317,469
Kimberly Clark Corp. ........... 57,500 3,751,875
Temple-Inland, Inc. ............ 59,100 3,896,906
------------
11,966,250
------------
Petroleum Refining--7.0%
Chevron Corp. .................. 27,300 2,364,863
Repsol SA ...................... 139,400 3,241,050
Royal Dutch Petroleum Co. ...... 76,200 4,605,338
USX-Marathon Group ............. 148,400 3,663,625
------------
13,874,876
------------
Primary Metal--2.2%
Nucor Corp. .................... 78,200 4,286,338
------------
Stone, Clay, Glass & Concrete--2.1%
Minnesota Mining &
Manufacturing Co. ........... 41,800 4,091,175
------------
Transportation Equipment--6.5%
Boeing Co. ..................... 101,800 4,231,063
Delphi Automotive Systems
Corp. ....................... 180,278 2,839,379
General Motors Corp. ........... 45,200 3,285,475
Lockheed Martin Corp. .......... 109,400 2,393,125
------------
12,749,042
------------
Mining & Energy--4.3%
Crude Petroleum & Natural Gas--1.9%
Burlington Resources, Inc. ..... 116,000 3,835,250
------------
Gold & Silver Mining--1.2%
Barrick Gold Corp. ............. 136,000 2,405,500
------------
Oil & Gas Field Services--1.2%
Diamond Offshore Drilling,
Inc. ........................ 78,600 2,402,213
------------
Retail Trade--7.9%
Apparel & Accessory Stores--1.3%
Nordstrom, Inc. ................ 101,000 2,644,938
------------
Food Stores--1.0%
Albertson's, Inc. .............. 63,800 2,057,550
------------
</TABLE>
See Notes to Investment Portfolio.
15
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ---------- ------------
<S> <C> <C> <C>
General Merchandise Stores--2.3%
Federated Department
Stores, Inc.(a) ........................... 46,600 $ 2,356,213
Kmart Corp. .................................. 215,500 2,168,469
------------
4,524,682
------------
Miscellaneous Retail--3.3%
Office Depot, Inc.(a) ........................ 247,100 2,702,656
Toys R Us, Inc.(a) ........................... 272,100 3,894,431
------------
6,597,087
------------
Services--8.1%
Business Services--1.8%
Manpower, Inc. ............................... 95,100 3,578,138
------------
Computer Related Services--4.3%
Electronic Data Systems
Corp. ..................................... 65,100 4,357,631
First Data Corp. ............................. 83,200 4,102,800
------------
8,460,431
------------
Health Services--1.0%
Columbia/HCA Healthcare
Corp. ..................................... 68,600 2,010,838
------------
Motion Pictures--1.0%
The Walt Disney Co. .......................... 70,200 2,053,350
------------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- --------- ------------
<S> <C> <C> <C>
Transportation, Communication, Electric, Gas &
Sanitary Services--8.2%
Electric Services--2.8%
Entergy Corp. ................................ 80,600 $ 2,075,450
PG&E Corp. ................................... 46,500 953,250
Southern Co. ................................. 107,500 2,526,250
------------
5,554,950
------------
Gas Services--1.7%
Coastal Corp. ................................ 92,900 3,292,144
------------
Telecommunication--2.5%
AT&T Corp. ................................... 87,900 4,460,925
US West Communications
Group ..................................... 6,800 489,600
------------
4,950,525
------------
Water Transportation--1.2%
Tidewater, Inc. .............................. 65,100 2,343,600
------------
Wholesale Trade--0.1%
Durable Goods
Beers NV ..................................... Ne 6,835 247,622
------------
Total Common Stocks
(cost of $198,654,771) (b) ....................................... 196,872,441
------------
Other Assets & Liabilities, Net--0.3% ............................... 650,112
------------
Net Assets--100.0% .................................................. $197,522,553
============
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $199,860,126.
Summary of Securities by Country
<TABLE>
<CAPTION>
% of Total
Country Securities
Country Abbrev. Value at Value
- -------------------------------- --------- --------------- -----------
<S> <C> <C> <C>
United States ................ $196,624,819 99.9
Netherlands .................. Ne 247,622 0.1
------------ -----
$196,872,441 100.0
============ =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $198,654,771) ...................... $196,872,441
Receivable for investments sold .................................................. 745,435
Receivable for fund shares sold .................................................. 616,692
Dividends, tax reclaims and interest receivable .................................. 351,623
Other assets ..................................................................... 3,411
------------
Total assets ................................................................... 198,589,602
------------
Liabilities:
Payable to custodian bank ........................................................ 825,141
Payable for fund shares repurchased .............................................. 200,241
Management fee payable ........................................................... 62
Accrued expenses payable ......................................................... 41,461
Deferred Trustees expense ........................................................ 144
------------
Total liabilities .............................................................. 1,067,049
------------
Net assets ....................................................................... $197,522,553
============
Net assets represented by:
Paid-in capital ................................................................. $200,097,604
Accumulated overdistributed net investment income ............................... (2,922)
Accumulated net realized losses on investments and foreign currency transactions (788,946)
Net unrealized depreciation on investments and foreign currency transactions .... (1,783,183)
------------
Total net assets applicable to outstanding shares of beneficial interest ......... $197,522,553
============
Shares of beneficial interest outstanding ........................................ 14,983,566
============
Net asset value per share ........................................................ $ 13.18
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends .............................................................................. $ 2,405,368
Interest ............................................................................... 666,240
-------------
Total investment income (net of nonrebatable foreign taxes withheld at source which
amounted to $20,861) ................................................................. 3,071,608
-------------
Expenses:
Management fee ........................................................................ 1,157,822
Bookkeeping fee ....................................................................... 74,390
Transfer agent fee .................................................................... 7,500
Audit fee ............................................................................. 24,903
Printing expense ...................................................................... 8,066
Legal fee ............................................................................. 1,890
Trustees' expense ..................................................................... 13,507
Custodian fee ......................................................................... 10,926
Miscellaneous expense ................................................................. 8,733
-------------
Total expenses ....................................................................... 1,307,737
-------------
Net investment income .................................................................. 1,763,871
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized gains on investments ..................................................... 43,889,093
Net realized gains on foreign currency transactions ................................... 1,335
Net change in unrealized appreciation/depreciation on investments and foreign currency
transactions ......................................................................... (36,367,658)
-------------
Net increase in net assets resulting from operations ................................... $ 9,286,641
=============
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ............................................................. $ 1,763,871 $ 1,539,622
Net realized gains on investments ................................................. 43,889,093 4,073,761
Net realized gains (losses) on foreign currency transactions ...................... 1,335 (3,098)
Net change in unrealized appreciation/depreciation on investments and foreign
currency transactions ............................................................ (36,367,658) 7,754,026
------------- -------------
Net increase in net assets resulting from operations ............................... 9,286,641 13,364,311
------------- -------------
Distributions declared from:
Net investment income ............................................................. (1,741,134) (1,536,000)
In excess of net investment income ................................................ -- (38,486)
Net realized gains ................................................................ (43,890,430) (4,110,459)
In excess of net realized gains ................................................... (738,015) (10,275)
------------- -------------
Total distributions ................................................................ (46,369,579) (5,695,220)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold .................................................... 60,866,970 86,125,469
Cost of fund shares repurchased ................................................... (22,451,127) (56,579,053)
Distributions reinvested .......................................................... 46,369,579 5,695,220
------------- -------------
Net increase in net assets resulting from fund share transactions .................. 84,785,422 35,241,636
------------- -------------
Total increase in net assets ....................................................... 47,702,484 42,910,727
Net assets:
Beginning of year ................................................................. 149,820,069 106,909,342
------------- -------------
End of year ....................................................................... $ 197,522,553 $ 149,820,069
============= =============
Accumulated overdistributed net investment income included in ending net assets $ (2,922) $ (38,657)
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ....................................................................... 3,638,111 13,975,007
Shares repurchased ................................................................ (1,355,698) (12,155,226)
Distributions reinvested .......................................................... 3,561,411 350,922
------------- -------------
Net increase ....................................................................... 5,843,824 2,170,703
============= =============
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Colonial Growth and Income Fund, Variable Series, (the
"Fund") a series of Liberty Variable Investment Trust (the "Trust"), is a
non-diversified portfolio of a Massachusetts business trust, registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund's investment objective is to seek primarily income
and long-term capital growth and secondarily, preservation of capital. The
Fund's capitalization consists of an unlimited number of shares of beneficial
interest without par value that represents a separate series of the Trust. Each
share of the Fund represents an equal proportionate beneficial interest in the
Fund and, when issued and outstanding, is fully paid and nonassessable.
Shareholders would be entitled to share proportionally in the net assets of the
Fund available for distribution to shareholders upon liquidation of the Fund.
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") offered by the separate accounts of the
life insurance companies ("Participating Insurance Companies"). Certain
Participating Insurance Companies are affiliated with the Investment Advisor and
sub-advisors to the Fund ("Affiliated Participating Insurance Companies"). Such
Affiliated Participating Insurance Companies are Keyport Life Insurance Company
("Keyport"), Independence Life & Annuity Company ("Independence") and Liberty
Life Assurance Company of Boston ("Liberty Life"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund. Liberty
Advisory Services Corp. (the "Manager") ("LASC"), provides investment management
and advisory services to the Fund pursuant to its Management Agreements with the
Trust. Colonial Management Associates, Inc. ("Colonial") provides sub-advisory
services. LASC has delegated various administrative matters to Colonial. Keyport
Financial Services Corp. ("KFSC") serves as the principal underwriter of the
Trust with respect to sales of shares to Affiliated Participating Insurance
Companies. The Manager, Colonial, KFSC, Keyport and Independence are
wholly-owned indirect subsidiaries of Liberty Financial Companies, Inc. ("LFC").
As of December 31, 1999, Liberty Mutual Insurance Companies ("Liberty Mutual")
owned approximately 71% of the outstanding voting shares of LFC. Liberty Life is
a subsidiary of Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued
at the last sale price or, in the case of unlisted or listed securities for
which there were no sales during the day, at current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on
the accrual basis. Original issue discount is accreted to interest income over
the life of a security with a corresponding increase in the cost basis; premium
and market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Foreign currency transactions--Net realized and unrealized gains (losses)
on foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency,
and currency gains (losses) between the accrual and payment dates on dividends
and interest income and foreign withholding taxes.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
Forward currency contracts--The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined exchange rates
in connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While the maximum potential loss from such contracts is the
aggregate face value in U.S. dollars at the time the contract was opened,
exposure is typically limited to the change in value of the contract (in U.S.
dollars) over the period it remains open. Risks may also arise if counterparties
fail to perform their obligations under the contracts.
Other--Corporate actions are recorded on ex-date (except for certain
foreign securities which are recorded as soon after ex-date as the Fund becomes
aware of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of all
tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal
to 0.65% annually of the Fund's average daily net assets. The Manager, out of
the management fee it receives, pays Colonial a monthly sub-advisory fee equal
to 0.45% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for a
monthly fee equal to $27,000 annually plus 0.035% annually of the Fund's average
net assets over $50 million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (including the
management fee) exceed 1.00% annually of the Fund's average daily net assets.
For the year ended December 31, 1999, the Fund's operating expenses, as defined
above, did not exceed the 1.00% expense limit.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $340,577,591 and
$291,668,527, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $10,180,582
Gross unrealized depreciation (13,168,267)
------------
Net unrealized depreciation $(2,987,685)
------------
</TABLE>
Other--There are certain additional risks involved when investing in
foreign securities that are not inherent with investments in domestic
securities. These risks may involve foreign currency exchange rate fluctuations,
adverse political and economic developments and the possible prevention of
foreign currency exchange or the imposition of other foreign governmental laws
or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
Note 4. Other Related Party Transactions
During the year ended December 31, 1999, the Fund used Alphatrade, a wholly
owned subsidiary of Colonial Management Associates, Inc., as a broker. Total
commissions paid to Alphatrade during the year were $210,205.
20
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ......... $ 16.39 $ 15.34 $ 13.96 $ 12.60 $ 10.03
------- ------- ------- ------- -------
Net investment income (a) .................. 0.17 0.20 0.28 0.28 0.29
Net realized and unrealized gains on
investments ............................... 0.69 1.50 3.75 1.98 2.72
------- ------- ------- ------- -------
Total from investment operations ........... 0.86 1.70 4.03 2.26 3.01
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ...... (0.15) (0.18) (0.27) (0.28) (0.25)
In excess of net investment income ........ -- -- (0.01) -- --
Distributions from net realized gains ..... (3.85) (0.47) (2.37) (0.62) (0.19)
In excess of net realized gains ........... (0.07) -- -- -- --
-------- -------- -------- ------- -------
Total distributions ........................ (4.07) (0.65) (2.65) (0.90) (0.44)
-------- -------- -------- ------- -------
Net asset value, end of year ............... $ 13.18 $ 16.39 $ 15.34 $ 13.96 $ 12.60
======== ======== ======== ======= =======
Total return:
Total investment return (b) ................ 5.55% 11.13% 28.97% 17.89% 30.03%
Ratios/supplemental data:
Net assets, end of year (000's) ............ $197,523 $149,820 $106,909 $93,247 $71,070
Ratio of expenses to average net assets (c) 0.73% 0.76% 0.79% 0.79% 0.81%
Ratio of net investment income to average
net assets (c) ............................ 0.99% 1.24% 1.77% 2.02% 2.51%
Portfolio turnover ratio ................... 172% 28% 60% 24% 79%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
- --------------------------------------------------------------------------------
1999 Federal Tax information (unaudited)
14% of the ordinary income distributed by the Fund in the year ended December
31, 1999 qualifies for the corporate dividends received deduction.
For the fiscal year ended December 31, 1999, the Fund earned $32,229,685 of
long-term capital gains.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Colonial Growth & Income Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Growth & Income Fund,
Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at
December 31, 1999, the results of its operations, the changes in its net assets
and the financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States. These financial
statements and the financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
22
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial High Yield Securities Fund, Variable Series(1), seeks current
income and total return.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 5/19/98
Assuming reinvestment of all distributions
12-month total return ...................... 1.65%
Net asset value per share on 12/31/99 ......... $8.85
Net asset value per share on 12/31/98 ......... $9.31
</TABLE>
Portfolio Managers' Discussion
Carl C. Ericson and Scott B. Richards are portfolio co-managers of Colonial
High Yield Securities Fund, Variable Series. Mr. Ericson is a senior vice
president of Colonial Management Associates, Inc. (CMA) and director of the
Taxable Fixed Income Department. Mr. Richards is a senior vice president of
CMA.
What was the investment environment like during the past 12 months?
The strength of the U.S. economy, coupled with improvement in many of the
most-troubled foreign economies, helped set the stage for better-performing
paper and other select commodity-related companies. Container board producer
Gaylord (0.6% of net assets), for instance, gathered steam when it was able to
push through an increase in its prices. But even though oil prices rose in the
spring, it was a case of too little, too late and the Fund's holdings in oil
companies generally proved to be a disappointment during the period.
What was the Fund's strategy during the period?
We maintained significant holdings in well-managed cable, broadcast and
media companies (21.7% of net assets), which generally performed well during
the past six months. For example, U.K. cable company NTL (1.7% of net assets)
posted strong gains. The company reported continued rapid growth in the number
of subscribers to its cable television and telephone services and its plans to
roll out Internet access services across the country. The Fund also benefited
from overweighted positions in the steel and paper sectors which rebounded
strongly during the year. On the telecommunications side, Nextel (3.1% of net
assets) also benefited from strong subscriber growth.
What is your outlook for the period ahead?
We have a reasonably favorable outlook for the high-yield bond market.
Although we expect the Federal Reserve to raise short-term interest rates early
in the year 2000, we don't believe it will be enough to derail the high-yield
market's progress. Barring dramatically higher interest rates or a significant
stock market correction, we believe that relatively low interest rates and
inflation, coupled with slow but steady economic growth, will continue to favor
high-yield bonds. Looking ahead, we'll be as selective as ever, generally
avoiding less liquid securities that could experience trouble if the market
reverses course.
(1) High yield investing offers the potential for high income and attractive
total return, but also involves certain risks. These include credit risks
associated with lower-rated bonds, changes in interest rates, and certain
risks associated with foreign investments.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
23
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Colonial High Yield Securities Fund, Variable Series
vs. First Boston High Yield Index
Change in value of a $10,000 investment from 5/31/98-12/31/99
- -------------------------------------------------
Average Annual Total Returns on December 31, 1999
<TABLE>
<CAPTION>
Life 1 Year 3 Years
<S> <C> <C>
(0.59)% 1.65% N/A
- -------------------------------------------------
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Colonial
High Yield First
Securities Fund, Boston High
Variable Series Yield Index
<S> <C> <C> <C>
$12,000 5/98 10000 10000
$11,000 6/98 10030 10021
$10,000 10149 10091
$ 9,000 9491 9406
$ 8,000 9/98 9451 9405
9301 9218
9920 9685
12/98 9723 9663
9868 9754
9858 9733
3/99 10024 9822
10087 10039
9910 9930
6/99 9910 9935
9951 9940
9816 9852
9/99 9722 9776
9638 9728
9805 9860
12/99 9884 9983
</TABLE>
[END PLOT POINTS]
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The CS First Boston High Yield Index is an
unmanaged index that tracks the performance of high-yield bonds. Unlike mutual
funds, indexes are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
- -------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------------ -----------
<S> <C> <C>
CORPORATE FIXED-INCOME
BONDS & NOTES--85.0%
Finance, Insurance & Real Estate--0.5%
Financial Services
Ameriserve Finance Trust,
12.000% 9/15/06 (a) ................................................... $ 100,000 $ 82,000
-----------
Manufacturing--31.6%
Chemicals & Allied Products--5.6%
Agricultural Minerals Co., L.P.,
10.750% 9/30/03 ....................................................... 25,000 18,000
Allied Waste North America,
Inc., 10.000% 8/1/09 (a) .............................................. 250,000 222,500
Lyondell Chemical Co.,
10.875% 5/1/09 ........................................................ 50,000 52,750
PCI Chemicals Canada, Inc.,
9.250% 10/15/07 ....................................................... 50,000 38,500
Sterling Chemicals, Inc.,
11.750% 8/15/06 ....................................................... 190,000 142,500
Terra Industries, Inc., 10.500%
6/15/05 ............................................................... 110,000 79,200
Texas Petrochemical Corp.,
11.125% 7/1/06 ........................................................ 100,000 87,000
Trans Resources, Inc., 10.750%
3/15/08 ............................................................... 250,000 222,500
-----------
862,950
-----------
Electronic & Electrical Equipment--0.6%
TransDigm, Inc., 10.375%
12/1/08 ............................................................... 100,000 88,000
-----------
Food & Kindred Products--4.6%
Chattem, Inc., 8.875% 4/1/08 ............................................. 250,000 233,750
Di Giorgio Corp., 10.000%
6/15/07 ............................................................... 250,000 230,625
Premier International Foods
PLC, 12.000% 9/1/09 (a) ............................................... 250,000 248,750
-----------
713,125
-----------
Machinery & Computer Equipment--0.4%
Tritel PCS, Inc.,
stepped coupon (12.750%
05/11/04) (b) 5/15/09 (a) ............................................. 100,000 63,000
-----------
Measuring & Analyzing Instruments--1.3%
Envirosource, Inc., 9.750%
6/15/03 ............................................................... 300,000 192,000
-----------
Miscellaneous Manufacturing--6.5%
Blount, Inc., 13.000% 8/1/09 (a) 150,000 158,250
Eagle-Picher Industries, Inc.,
9.375% 3/1/08 ......................................................... 75,000 65,625
Koppers Industries, Inc.,
9.875% 12/1/07 ........................................................ 100,000 92,000
Moll Industries, Inc., 10.500%
7/1/08 ................................................................ 250,000 100,000
</TABLE>
<TABLE>
<CAPTION>
Par Value
------------ -----------
<S> <C> <C>
Owens-Illinois, Inc., 7.500%
5/15/10 ............................................................... $ 250,000 $ 223,573
Simmons Co., 10.250% 3/15/09 40,000 37,900
Special Devices, Inc., 11.375%
12/15/08 .............................................................. 100,000 77,000
Thermadyne Holdings Corp.,
9.875% 6/1/08 ......................................................... 120,000 102,000
Tokheim Corp., 11.375% 8/1/08 215,000 146,200
-----------
1,002,548
-----------
Paper Products--2.8%
Gaylord Container Corp.,
9.375% 6/15/07 ........................................................ 100,000 93,000
Georgia Gulf Corp., 10.375%
11/1/07 (a) ........................................................... 50,000 52,187
Repap New Brunswick, Inc.,
10.625% 4/15/05 ....................................................... 125,000 116,250
Riverwood International Corp.,
10.875% 4/1/08 ........................................................ 175,000 173,250
-----------
434,687
-----------
Primary Metal--4.0%
Keystone Consolidated
Industries, Inc., 9.625%
8/1/07 ................................................................ 200,000 176,000
WCI Steel Inc., 10.000%
12/1/04 ............................................................... 200,000 204,000
Wheeling-Pittsburgh Corp.,
9.250% 11/15/07 ....................................................... 250,000 237,500
-----------
617,500
-----------
Printing & Publishing--1.3%
American Lawyer Media, Inc.,
9.750% 12/15/07 ....................................................... 200,000 194,000
-----------
Rubber & Plastic--1.5%
Burke Industries, Inc., 10.000%
8/15/07 ............................................................... 200,000 82,000
Metromedia Fiber Network,
Inc., 10.000% 12/15/09 ................................................ 150,000 153,000
-----------
235,000
-----------
Stone, Clay, Glass & Concrete--0.3%
Owens-Illinois, Inc., 7.350%
5/15/08 ............................................................... 50,000 45,232
-----------
Transportation Equipment--2.7%
Johnstown America Industries,
Inc., 11.750% 8/15/05 ................................................. 225,000 228,937
LDM Technologies, Inc.,
10.750% 1/15/07 ....................................................... 150,000 136,500
Venture Holdings Trust, Series
B, 9.500% 7/1/05 ...................................................... 50,000 45,500
-----------
410,937
-----------
</TABLE>
See Notes to Investment Portfolio.
25
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
----------- -----------
<S> <C> <C>
Mining & Energy--5.1%
Coal Mining--0.5%
AEI Resources, Inc., 10.500%
12/15/05 (a) .......................................................... $ 100,000 $ 75,000
-----------
Oil & Gas Extraction--4.6%
HS Resources, Inc., 9.250%
11/15/06 .............................................................. 100,000 99,000
Magnum Hunter Resources,
Inc., 10.000% 6/1/07 .................................................. 100,000 91,000
Mariner Energy, Inc., 10.500%
8/1/06 ................................................................ 250,000 235,625
Ocean Energy, Inc., 8.875%
7/15/07 ............................................................... 100,000 99,250
Petsec Energy, Inc., 9.500%
6/15/07 (c) ........................................................... 200,000 84,000
Vintage Petroleum, Inc., 9.750%
6/30/09 ............................................................... 100,000 102,500
-----------
711,375
-----------
Retail Trade--1.1%
Food Stores
Pathmark Stores, Inc., 9.625%
5/1/03 ................................................................ 225,000 168,750
-----------
Services--9.2%
Amusement & Recreation--5.7%
Boyd Gaming Corp., 9.500%
7/15/07 ............................................................... 75,000 74,250
Hollywood Casino Corp.,
11.250% 5/1/07 ........................................................ 100,000 103,500
Hollywood Park, Inc., 9.250%
2/15/07 ............................................................... 250,000 248,125
Horseshoe Gaming, L.L.C.,
9.375% 6/15/07 ........................................................ 250,000 248,750
Mohegan Tribal Gaming
Authority, 8.750% 1/1/09 .............................................. 45,000 44,662
Regal Cinemas, Inc., 9.500%
6/1/08 ................................................................ 200,000 155,000
-----------
874,287
-----------
Health Services--1.9%
Hanger Orthopedic Group,
Inc., 11.250% 6/15/09 ................................................. 50,000 51,375
Tenet Healthcare Corp., 8.625%
1/15/07 ............................................................... 250,000 240,625
-----------
292,000
-----------
Hotels, Camps & Lodging--1.0%
CapRock Communications
Corp., 11.500% 5/1/09 ................................................. 150,000 152,250
-----------
Other Services--0.6%
Intertek Finance, PLC., 10.250%
11/1/06 (d) ........................................................... 100,000 92,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Par Value
----------- -----------
<S> <C> <C>
Transportation, Communication, Electric, Gas &
Sanitary Services--37.4%
Broadcasting--3.4%
Allbritton Communications Co.,
9.750% 11/30/07 ....................................................... $ 100,000 $ 100,000
Cumulua Media, Inc., 10.375%
7/1/08 ................................................................ 45,000 47,025
Fox Family Worldwide, Inc.,
9.250% 11/1/07 ........................................................ 150,000 139,500
LIN Holding Corp., stepped
coupon (10.000% 03/01/03)
(b) 3/1/08 ............................................................ 100,000 67,500
Sinclair Broadcast Group, Inc.:
9.000% 7/15/07 ........................................................ 100,000 94,000
10.000% 9/30/05 ....................................................... 75,000 74,625
-----------
522,650
-----------
Cable--13.6%
Adelphia Communications Corp.:
8.375% 2/1/08 ......................................................... 100,000 93,250
9.875% 3/1/07 ......................................................... 250,000 253,750
Bresnan Communications
Group L.L.C., stepped
coupon (9.250% 02/01/04)
(b) 2/1/09 ............................................................ 700,000 484,750
Charter Communications
Holding L.L.C., stepped
coupon (9.920% 04/02/04)
(b) 4/1/11 ............................................................ 325,000 190,531
Diamond Cable
Communications PLC,
stepped coupon (10.750%
02/15/02) (b) 2/15/07 (d) ............................................. 250,000 205,000
EchoStar DBS Corp., 9.250%
2/1/06 ................................................................ 150,000 151,125
FrontierVision Holdings L.P.,
stepped coupon (11.875%
09/15/01) (b) 9/15/07 ................................................. 250,000 222,500
NTL, Inc., 10.000% 2/15/07 ............................................... 250,000 259,375
Telewest Communication PLC,
stepped coupon (11.000%
10/01/00) (b) 10/1/07 (d) ............................................. 250,000 233,750
-----------
2,094,031
-----------
Communications--6.6%
Centennial Cellular Corp.,
10.750% 12/15/08 ...................................................... 100,000 107,250
Exodus Communications, Inc.,
10.750% 12/15/09 (a) .................................................. 55,000 55,962
Loral Space & Communications
Ltd., 11.250% 1/15/07 ................................................. 65,000 48,750
</TABLE>
See Notes to Investment Portfolio.
26
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
----------- -----------
<S> <C> <C>
Metrocall, Inc.:
9.750% 11/1/07 ........................................................ $ 100,000 $ 60,000
11.000% 9/15/08 ....................................................... 150,000 94,500
PSINet, Inc., 11.000% 8/1/09 ............................................. 100,000 102,500
Spectrasite Holdings, Inc.,
stepped coupon (11.250%
04/15/04) (b) 4/15/09 ................................................. 250,000 133,750
Verio, Inc., 11.250% 12/1/08 ............................................. 395,000 414,750
-----------
1,017,462
-----------
Electric Services--1.1%
AES Corp., 9.500% 6/1/09 ................................................. 160,000 162,200
-----------
Motor Freight & Warehousing--0.3%
MTL, Inc., 10.000% 6/15/06 ............................................... 50,000 44,000
-----------
Telecommunication--12.4%
AirGate PCS, Inc., stepped
coupon (13.500% 10/01/04)
(b) 10/1/09 ........................................................... 50,000 27,750
Carrier1 International SA,
13.250% 2/15/09 ....................................................... 250,000 255,000
Crown Castle International
Corp., stepped coupon
(10.375% 05/15/04) (b)
5/15/11 ............................................................... 100,000 62,500
Global Crossing Holding Ltd.,
9.125% 11/15/06 ....................................................... 100,000 98,875
Jazztel PLC, 13.250%
12/15/09 Eu ........................................................... 50,000 50,569
KMC Telecom Holdings Inc.,
13.500% 5/15/09 ....................................................... 250,000 250,000
Level 3 Communications, Inc.,
9.125% 5/1/08 ......................................................... 130,000 123,012
McLeodUSA, Inc., stepped
coupon (10.500% 03/01/02)
(b) 3/1/07 ............................................................ 250,000 205,000
Microcell Telecommunications,
Inc., stepped coupon
(14.000% 12/01/01) (b)
6/1/06 ................................................................ 250,000 221,250
Nextlink Communications, Inc.,
10.750% 6/1/09 ........................................................ 250,000 259,375
Nextel Communications, Inc.:
stepped coupon (9.750%
10/31/02) (b) 10/31/07 ................................................ 100,000 72,250
9.375% 11/15/09 ......................................................... 100,000 98,250
Williams Communications
Group, Inc., 10.875% 10/1/09 130,000 136,175
Worldwide Fiber, Inc., 12.000%
8/1/09 (a) ............................................................ 45,000 46,463
-----------
1,906,469
-----------
</TABLE>
<TABLE>
<CAPTION>
Par Value
----------- ------------
<S> <C> <C>
Wholesale Trade-- 0.1%
Nondurable Goods
Revlon Consumer Products
Corp., 9.000% 11/1/06 ................................................. $ 15,000 $ 11,250
-----------
Total Corporate Fixed Income Bonds & Notes,
(cost of $14,090,961) ......................................................................... 13,064,703
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares
-------
<S> <C> <C>
PREFERRED STOCKS--4.8%
Transportation, Communication, Electric,
Gas & Sanitary Services--4.8 %
Broadcasting--1.5%
Granite Broadcasting Corp.,
PIK, 12.750% (e) .................... 25 25,500
PriMedia, Inc., 10.000% ................ 2,000 196,500
-------
222,000
-------
Cable--0.7%
CSC Holdings Limited, PIK,
11.125% ............................. 1,028 112,289
-------
Communications--0.7%
Dobson Communication Corp.,
PIK, 12.250% ........................ 100 104,600
-------
Telecommunication--1.9%
Nextel Communications, Inc.,
PIK, 11.125% ........................ 295 297,932
-------
Total Preferred Stocks
(cost of $750,428) .......................... 736,821
-------
WARRANTS (e)--0.1%
Transportation, Communication,
Electric, Gas & Sanitary Services
Telecommunication
AirGate PCS, Inc. expires
10/01/09 ............................ 50 5,800
Carrier 1 International S.A.,
expires 02/19/09 .................... 250 5,000
-------
Total Warrants
(cost of $9,050) ............................ 10,800
-------
Total Investments--89.9%
(cost of $14,850,439) (f) ................... 13,812,324
----------
</TABLE>
<TABLE>
<CAPTION>
Par
-----------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--9.1%
Repurchase agreement with
SBC Warburg, Ltd., dated
12/31/99, due 1/3/00 at
2.500%, collateralized by U.S.
Treasury bonds and/or notes
with various maturities to
2021, market value
$1,426,897 (repurchase
proceeds $1,398,291) ........... $1,398,000 1,398,000
---------
</TABLE>
See Notes to Investment Portfolio.
27
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
----- --------------
<S> <C> <C>
Other Assets & Liabilities, Net--1.0% ...... $ 147,022
-----------
Forward Currency Contracts--0.0%(g) ........ 785
-----------
Net Assets--100.0% $15,358,131
===========
</TABLE>
Notes to Investment Portfolio:
(a) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
December 31, 1999, the value of these securities amounted to $1,004,112 or
6.5% of net assets.
(b) Currently zero coupon. Shown parenthetically is the interest to be paid and
the date the Fund will begin accruing this rate.
(c) This issuer is in default of certain debt covenants. Income is not being
accrued.
(d) This is a British security. Par amount is stated in U.S. dollars.
(e) Non-income producing.
(f) Cost for federal income tax purposes is the same.
(g) As of December 31, 1999, the Fund had entered into the following forward
currency exchange contract:
<TABLE>
<CAPTION>
Net Unrealized
Contracts In Exchange Settlement Appreciation
to Deliver For Date (U.S.$)
- -------------- -------------- ------------ ---------------
<S> <C> <C> <C>
Eu 50,000 US$ 51,385 03/14/00 $785
</TABLE>
<TABLE>
<CAPTION>
Acronym Name
- ----------------- ----------------
<S> <C>
Eu Euro
PIK Payment-In-Kind
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $14,850,439) ...................... $ 13,812,324
Short-term obligations .......................................................... 1,398,000
Cash ............................................................................ 658
Unrealized appreciation on forward currency exchange contracts .................. 785
Receivable for fund shares sold ................................................. 126,187
Dividends and interest receivable ............................................... 293,483
Expense reimbursement due from Manager .......................................... 24,317
------------
Total assets .................................................................. 15,655,754
------------
Liabilities:
Payable for investments purchased ............................................... 280,099
Accrued expenses payable ........................................................ 17,524
------------
Total liabilities ............................................................. 297,623
------------
Net assets ...................................................................... $ 15,358,131
============
Net assets represented by:
Paid-in capital ................................................................ $ 16,584,505
Accumulated undistributed net investment income ................................ 17,646
Accumulated net realized loss on investments ................................... (206,689)
Net unrealized depreciation on investments and foreign currency transactions ... (1,037,331)
------------
Total net assets applicable to outstanding shares of beneficial interest ........ $ 15,358,131
============
Shares of beneficial interest outstanding ....................................... 1,734,962
============
Net asset value per share ....................................................... $ 8.85
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Interest ................................................................................. $1,023,483
Dividend ................................................................................. 18,731
----------
Total investment income ................................................................ 1,042,214
----------
Expenses:
Management fee .......................................................................... 61,532
Bookkeeping fee ......................................................................... 27,000
Transfer agent fee ...................................................................... 7,500
Audit fee ............................................................................... 23,903
Printing expense ........................................................................ 1,346
Trustees' expense ....................................................................... 6,842
Custodian fee ........................................................................... 1,329
Legal fees .............................................................................. 1,132
Miscellaneous expense ................................................................... 1,007
----------
Total expenses ......................................................................... 131,591
----------
Less:
Expenses reimbursable by Manager ........................................................ (49,549)
----------
Net expenses ............................................................................. 82,042
----------
Net investment income .................................................................... 960,172
Realized and unrealized losses on investments and foreign currency transactions:
Net realized losses on investments ...................................................... (147,441)
Net change in unrealized appreciation/depreciation on investments and foreign currency (718,897)
transactions ----------
Net increase in net assets resulting from operations ..................................... $ 93,834
==========
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1999 1998*
--------------- --------------
<S> <C> <C>
Operations:
Net investment income ........................................................... $ 960,172 $ 257,812
Net realized losses on investments .............................................. (147,441) (59,235)
Net change in unrealized appreciation/depreciation on investments and foreign
currency transactions .......................................................... (718,897) (318,434)
----------- ----------
Net increase (decrease) in net assets resulting from operations .................. 93,834 (119,857)
----------- ----------
Distributions declared from:
From net investment income ...................................................... (938,513) (257,812)
In excess of net investment income .............................................. -- (4,026)
----------- ----------
Total distributions .............................................................. (938,513) (261,838)
----------- ----------
Fund share transactions:
Proceeds from fund shares sold .................................................. 10,124,281 6,073,053
Cost of fund shares repurchased ................................................. (775,060) (38,120)
Distributions reinvested ........................................................ 938,513 261,838
----------- ----------
Net increase in net assets resulting from fund share transactions ................ 10,287,734 6,296,771
----------- ----------
Total increase in net assets ..................................................... 9,443,055 5,915,076
----------- ----------
Net assets:
Beginning of year ............................................................... 5,915,076 --
----------- ----------
End of year ..................................................................... $15,358,131 $5,915,076
=========== ==========
Accumulated undistributed (overdistributed) net investment income
included in ending net assets ................................................... $ 17,646 $ (4,026)
=========== ==========
Analysis of changes in shares of beneficial interest:
Shares sold ..................................................................... 1,075,551 700,987
Shares repurchased .............................................................. (81,741) (93,796)
Distributions reinvested ........................................................ 105,807 28,154
----------- ----------
Net increase ..................................................................... 1,099,617 635,345
=========== ==========
</TABLE>
*For the period from the commencement of operations May 19, 1998 to December
31, 1998.
See Notes to Financial Statements.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Colonial High Yield Securities Fund, Variable Series (the
"Fund"), a series of Liberty Variable Investment Trust, is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek high current income and total return
by investing primarily in lower-rate corporate debt securities. The Fund's
capitalization consists of an unlimited number of shares of beneficial interest
without par value that represents a separate series of the Trust. Each share of
the Fund represents an equal proportionate beneficial interest in the Fund and,
when issued and outstanding, is fully paid and nonassessable. Shareholders would
be entitled to share proportionally in the net assets of the Fund available for
distribution to shareholders upon liquidation of the Fund. 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") offered by the separate accounts of the life insurance
companies ("Participating Insurance Companies"). Certain Participating Insurance
Companies are affiliated with the Investment Advisor and sub-advisers to the
Fund ("Affiliated Participating Insurance Companies"). Such Affiliated
Participating Insurance Companies are Keyport Life Insurance Company
("Keyport"), Independence Life & Annuity Company ("Independence") and Liberty
Life Assurance Company of Boston ("Liberty Life"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund. Liberty
Advisory Services Corp. (the "Manager") ("LASC"), provides investment management
and advisory services to the Fund pursuant to its Management Agreements with the
Trust. Colonial Management Associates, Inc. ("Colonial") provides sub-advisory
services. LASC had delegated various administrative matters to Colonial. Keyport
Financial Services Corp. ("KFSC") serves as the principal underwriter of the
Trust with respect to sales of shares to Affiliated Participating Insurance
Companies. The Manager, Colonial, KFSC, Keyport and Independence are
wholly-owned indirect subsidiaries of Liberty Financial Companies, Inc. ("LFC").
As of December 31, 1999, Liberty Mutual Insurance Companies ("Liberty Mutual")
owned approximately 71% of the outstanding voting shares of LFC. Liberty Life is
a subsidiary of Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Debt securities generally are valued
by a pricing service based upon market transactions for normal,
institutional-size trading units of similar securities. When management deems it
appropriate, an over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case
of unlisted or listed securities for which there were no sales during the day,
at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on
the accrual basis. Original issue discount is accreted to interest income over
the life of a security with a corresponding increase in the cost basis; premium
and market discount are not amortized or accreted.
The value of additional securities received as an interest or dividend payment
is recorded as income and as the cost basis of such securities.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
accounts to reflect income and gains available for distribution (or available
capital loss carryforwards) under income tax regulations.
Foreign currency transactions--Net realized and unrealized gains (losses)
on foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency,
and currency gains (losses) between the accrual and payment dates on dividends
and interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
Forward currency contracts--The Fund may enter into forward currency
contracts to purchase or sell foreign currencies at predetermined exchange rates
in connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While the maximum potential losses from such contracts is the
aggregate face value in U.S. dollars at the time the contract was opened,
exposure is typically limited to the change in value of the contract (in U.S.
dollars) over the period it remains open. Risks may also arise if counterparties
fail to perform their obligations under the contracts.
Other--Corporate actions are recorded on ex-date (except for certain
foreign securities which are recorded as soon after ex-date as the Fund becomes
aware of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of all
tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal
to 0.60% annually of the Fund's average daily net assets. The Manager, out of
the management fee it receives, pays Colonial a monthly sub-advisory fee equal
to 0.40% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for
$27,000 annually plus 0.035% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (including
management fee) exceed 0.80% annually of the Fund's average daily net assets.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $10,884,513 and
$1,438,466, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 117,995
Gross unrealized depreciation (1,156,110)
-----------
Net unrealized depreciation $(1,038,115)
-----------
</TABLE>
Capital loss carryforwards--At December 31, 1999, capital loss
carryforwards available (to the extent provided in regulations) to offset future
realized gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
- ------------- -------------
<S> <C>
2006 $ 49,000
2007 53,000
--------
$102,000
--------
</TABLE>
Other--There are certain additional risks involved when investing in
foreign securities that are not inherent with investments in domestic
securities. These risks may involve foreign currency exchange rate fluctuations,
adverse political and economic developments and the possible prevention of
foreign currency exchange or the imposition of other foreign governmental laws
or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
32
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1999 1998***
-------------- ----------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of year .............................. $ 9.31 $ 10.00
------ -------
Net investment income (a) ....................................... 0.88 0.48
Net realized and unrealized losses .............................. (0.72) (0.74)
------ -------
Total from investment operations ................................ 0.16 (0.26)
------ -------
Less distributions:
Dividends from net investment income ........................... (0.62) (0.43)
In excess of net investment income ............................. -- (0.00)
------ -------
Total distributions ............................................. (0.62) (0.43)
------ --------
Net asset value, end of year .................................... $ 8.85 $ 9.31
====== ========
Total return:
Total investment return (b)(c) .................................. 1.65% (2.57)%**
Ratios/supplemental data:
Net assets, end of year (000's) ................................. $15,358 $ 5,915
Ratio of expenses to average net assets (d)(e) .................. 0.80% 0.80%*
Ratio of net investment income to average net assets (c)(d) ..... 9.36% 7.93%*
Portfolio turnover ratio ........................................ 16% 23%**
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations May 19, 1998 to
December 31, 1998
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.28% and 1.84%
(annualized), respectively.
33
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and the
Shareholders of Colonial High Yield Securities Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial High Yield Securities
Fund, Variable Series (the "Fund") (a series of Liberty Variable Investment
Trust) at December 31, 1999, the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
34
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial International Fund for Growth, Variable Series(1), seeks long-term
capital growth.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 5/2/94
Assuming reinvestment of all distributions
12-month total return ...................... 40.58%
Net asset value per share on 12/31/98 ......... $ 2.00
Net asset value per share on 12/31/99 ......... $ 2.79
</TABLE>
Portfolio Manager's Discussion
Nicolas Ghajar is the portfolio manager of Colonial International Fund for
Growth, Variable Series and an assistant vice president of Colonial Management
Associates, Inc. Prior to managing the Fund, Mr. Ghajar had been an equity
analyst of various equity funds since 1992.
What was the investment environment like for the Fund?
Conditions for the global markets changed dramatically during 1999. At the
very beginning of the year, most observers were calling for weak global economic
growth, with many predicting deflationary conditions. Almost immediately,
however, that view changed as the U.S. economy strengthened and the previously
troubled Japanese, European and emerging market economies showed signs of being
on the mend. Japan recovered at a much faster-than-expected rate, primarily
because of falling interest rates, tax cuts and other government-sponsored
programs designed to stimulate the economy. In addition, the benefits of
corporate restructuring began to show in better corporate earnings. Higher than
expected GDP growth helped strengthen demand pushing commodity prices higher
during the first half of the year, helping to firm the commodity-based emerging
market economies. Europe, although weak throughout much of 1999, picked up
somewhat in the final quarter of the year.
What was the Fund's strategy during the period?
Based on the shift in investor sentiment and the strength exhibited by
select markets, we increased our weightings in cyclical industries, which
performed extremely well in the first half of the year and boosted the Fund's
performance.
In the second half of the year, however, commodity stocks fell out of
favor when investors turned their focus toward telecommunications and
technology stocks. Our increased holdings in Japanese stocks aided performance
during this part of the year. We remained broadly diversified in Japan,
investing in export-oriented stocks that could benefit from a weak yen as well
as domestically-oriented stocks that benefited from the economy's recovery.
Despite their disappointing performance in the first half of 1999 in response
to a weak continental currency, our patience for holding European stocks was
rewarded by year-end. Our emerging market investments were diversified among
paper, steel, energy and other cyclical stocks from Indonesia, Brazil, Mexico
and Malaysia. Best of all, our exposure to the South Korean market, which was
up more than 80% for 1999, made up roughly 3% of the Fund's net assets. In that
country some of our best performers were consumer electronic companies and
semiconductor companies.
Across the globe, we benefited from our exposure to technology and
telecommunications stocks, whose performance dominated world markets. In Japan,
for example, we saw good gains from NTT Data Communications Systems (0.8% of
net assets), Canon (0.8% of net assets), Hitachi (1.4% of net assets), Sony
(1.8% of net assets) and others.
What is your outlook?
We anticipate continued strong economic recovery on a worldwide basis. In
our view, Japan will continue to strengthen and corporate restructuring will
result in better profitability for companies. Furthermore, Japan's strength
will likely translate to better economic trends in Asia. Europe is poised to be
one of this year's best performers because of lower interest rates,
restructuring a weaker currency that helps export-oriented markets and M&A
activities. In addition, we believe that telecommunications and technology
stocks still have a lot of momentum left. We also think that better economic
worldwide growth will translate into higher commodity prices. The Fund's
diversified structure between telecommunications, technology and
commodity-related stocks should enable it to benefit from those trends.
(1) International investing offers significant long-term growth potential, but
also involves certain risks. The Fund may be affected by political,
business and economic conditions in the countries in which it invests.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
35
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Colonial International Fund for Growth, Variable Series
vs. Morgan Stanley Capital International EAFE Index
Change in value of a $10,000 investment from 5/31/94-12/31/99
- -------------------------------------------------
Average Annual Total Returns on December 31, 1999
<TABLE>
<CAPTION>
Life 1 Year 5 Years
<S> <C> <C>
8.81% 40.58% 11.42%
</TABLE>
- -------------------------------------------------
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Colonial
International
Fund for
Growth, MSCI
Variable Series EAFE
<S> <C> <C> <C>
$19,000 5/94 10000 10000
$18,000 6/94 9798 10141
$17,000 10051 10238
$16,000 10354 10481
$15,000 10051 10151
$14,000 10101 10489
$13,000 9647 9984
$12,000 12/94 9495 10047
$11,000 8940 9661
$10,000 8789 9633
$ 9,000 8940 10235
$ 8,000 9192 10619
9192 10403
6/95 9141 10309
9646 10952
9646 10534
9797 10740
9646 10451
9797 10741
12/95 10050 11174
9998 11220
9998 11258
10202 11497
10764 11832
10661 11614
6/96 10713 11679
10304 11338
10458 11363
10560 11665
10305 11546
10713 12006
12/96 10614 11851
10668 11436
10777 11623
10777 11665
10723 11727
11536 12491
6/97 12131 13179
12186 13392
11339 12392
11773 13086
10742 12080
10417 11956
12/97 10268 12060
10614 12612
11133 13421
11825 13835
12056 13944
12056 13876
6/98 11768 13981
12114 14122
10341 12372
9879 11993
10630 13242
11207 13920
12/98 11597 14469
11597 14425
11365 14082
11771 14669
12467 15263
11887 14477
6/99 12582 15042
13047 15489
13163 15546
13221 15703
13568 16292
14438 16857
12/99 16305 18374
</TABLE>
[END PLOT POINTS]
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The Morgan Stanley Capital International EAFE
ND Index is a widely recognized index that tracks the performance of
international stocks by market capitalization. Indexes are not investments, do
not incur fees or expenses and are not professionally managed. It is not
possible to invest directly in an index.
- --------------------------------------------------------------------------------
36
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ---------- --------------
<S> <C> <C> <C>
COMMON STOCKS--94.2%
Agriculture, Forestry & Fishing--0.2%
Agriculture--Crops--0.2%
Altadis SA ....................... Sp 11,700 $ 167,195
-----------
Construction--2.4%
Heavy Construction--
Non-Building Constructions--1.9%
Hyder PLC ........................ UK 49,000 228,771
Kaneshita Construction Co.,
Ltd. .......................... Ja 21,000 123,457
Vivendi .......................... Fr 13,338 1,203,345
-----------
1,555,573
-----------
Special Trade Contractors--0.5%
Tomkins PLC ...................... UK 136,392 440,683
-----------
Finance, Insurance & Real Estate--14.5%
Depository Institutions--9.2%
Allied Irish Banks PLC ........... Ir 29,500 335,467
Argentaria Caja Postal ........... Sp 12,300 288,781
Banco Popolare di Milano
(BPM) ......................... It 127,100 987,954
Banque Nationale de Paris ........ Fr 12,620 1,163,333
Deutsche Bank AG ................. G 16,750 1,413,406
Generale Banque STRIP (a) ........ Be 105 2
HSBC Holdings PLC (b) ............ HK 7,803 108,788
Lloyds TSB Group PLC ............. UK 37,000 459,658
Merita Nordbanken Oyj ............ Fi 146,500 862,467
Standard Chartered PLC ........... UK 41,000 635,861
Svenska Handelsbanken ............ Sw 32,600 409,870
The Bank of Tokyo
Mitsubishi .................... Ja 37,000 515,387
Westpac Banking Corp. ............ Au 50,300 347,226
-----------
7,528,200
-----------
Financial Services--0.6%
Halifax PLC ...................... UK 42,087 459,623
-----------
Holding & Other Investment Offices--0.0%
Fortis AG-STRIP (a) .............. Be 30,555 307
Fortis--CVG (a) .................. Be 3,395 11,719
-----------
12,026
-----------
Holding Companies--1.3%
Fortis (NL) NV (a) ............... Ne 29,604 1,065,063
-----------
Insurance Carriers--0.8%
Assurances Generales de
France ........................ Fr 11,060 598,806
-----------
Investment Companies--1.4%
Irish Investment Fund, Inc. ...... Ir 25,500 390,469
Japan OTC Equity Fund (a) ........ Ja 250 760,000
-----------
1,150,469
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ---------- --------------
<S> <C> <C> <C>
Nondepository Credit Institution--1.0%
Promise Co., Ltd. ................ Ja 16,500 $ 839,284
-----------
Real Estate--0.2%
IOI Properties Berhad ............ Ma 62,000 139,502
-----------
Manufacturing--51.6%
Apparel--0.5%
Tokyo Style ...................... Ja 48,000 394,405
-----------
Chemicals & Allied Products--4.0%
Glaxo Holdings PLC ............... UK 17,000 482,259
Kao Corp. ........................ Ja 21,000 598,797
Norsk Hydro AS ................... No 13,533 564,437
Novartis ......................... Sz 417 613,058
Reliance Industries Ltd. GDR ..... Id 12,000 174,000
SmithKline Beecham PLC ........... UK 67,400 859,100
-----------
3,291,651
-----------
Communications Equipment--7.4%
Matsushaita Electric
Industrial Co. ................ Ja 57,000 1,577,912
Portugal Telecom SA .............. Pt 47,500 516,563
Racal Electronics PLC ............ UK 163,300 1,464,152
Sony Corp. ....................... Ja 5,000 1,481,952
Telefonaktiebolaget LM
Ericsson, Class B ............. Sw 15,700 1,009,095
-----------
6,049,674
-----------
Electronic & Electrical Equipment--1.3%
Siemens AG ....................... G 8,600 1,099,135
-----------
Electronic Components--11.7%
Alcatel Alsthom (Cie Gen El) Fr 6,755 1,549,920
Murata Manufacturing Co.,
Ltd. .......................... Ja 19,000 4,460,528
Royal Philips Electronics NV
NY Shares ..................... Ne 12,420 1,676,700
Samsung Electronics .............. Ko 11,030 1,720,102
Samsung Electronics GDS .......... Ko 1,958 239,366
-----------
9,646,616
-----------
Fabricated Metal--0.4%
Amcor Ltd. ....................... Au 75,500 353,871
-----------
Food & Kindred Products--0.6%
Groupe Danone .................... Fr 2,010 473,327
-----------
Household Appliances--0.9%
Electrolux AB, Series B .......... Sw 28,900 726,702
-----------
Machinery & Computer Equipment--5.0%
Canon, Inc. ...................... Ja 16,000 635,430
Equant NV (a) .................... Ne 7,500 850,617
Hitachi Ltd. ..................... Ja 72,000 1,155,042
Mannesmann AG .................... G 5,950 1,434,074
-----------
4,075,163
-----------
</TABLE>
See Notes to Investment Portfolio.
37
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ---------- --------------
<S> <C> <C> <C>
Measuring & Analyzing Instruments--1.1%
Orbotech Ltd. (a) ............. Is 11,400 $ 883,500
-----------
Paper Products--5.2%
Mo och Domsjo AB, Class B ..... Sw 19,300 696,211
Royal Koninklijke PTT
Nederland NV ............... Ne 16,130 1,572,922
Stora Enso Oyj, Class R ....... Fi 90,500 1,576,503
TNT Post Group NV ............. Ne 15,154 433,869
-----------
4,279,505
-----------
Petroleum Refining--3.2%
BP Amoco PLC ADR .............. UK 12,000 711,750
Compagnie Francaise de
Petroleum, B Shares ........ Fr 8,989 1,198,606
Royal Dutch Petroleum Co.
NY ......................... Ne 11,500 695,030
-----------
2,605,386
-----------
Primary Metal--2.6%
Acerinox SA ................... Sp 20,200 804,999
Billiton PLC .................. UK 153,000 907,119
Svenskt Stal AB (SSAB),
Series B ................... Sw 26,063 382,806
-----------
2,094,924
-----------
Rubber & Plastic--1.4%
Bridgestone Corp. ............. Ja 18,000 396,165
Michelin, Class B ............. Fr 20,100 788,878
-----------
1,185,043
-----------
Stone, Clay, Glass & Concrete--2.5%
CRH PLC ....................... Ir 27,000 580,110
Holderbank Financiere
Glaris AG .................. Sz 425 582,593
Lafarge SA .................... Fr 5,690 661,941
N.V. Koninklijke Sphinx
Gustavsberg ................ Ne 16,846 218,693
-----------
2,043,337
-----------
Tobacco Products--1.1%
Allied Zurich PLC ............. UK 37,000 435,494
British American Tobacco
PLC ........................ UK 28,000 158,319
Grupo Carso S.A. Series A-1 Mx 69,900 348,209
-----------
942,022
-----------
Transportation Equipment--2.7%
DaimlerChrysler AG ............ G 6,300 489,448
GKN PLC ....................... UK 38,000 591,790
Honda Motor Co. Ltd. .......... Ja 11,000 408,882
MAN AG ........................ G 8,100 304,049
Volvo AB ...................... Sw 15,900 411,022
-----------
2,205,191
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ---------- --------------
<S> <C> <C> <C>
Retail Services--3.3%
Food Stores--0.3%
Jardine Matheson Holdings
Ltd. (a) ................... Si 1 $ 4
Tesco PLC ..................... UK 87,000 264,231
-----------
264,235
-----------
General Merchandise Stores--1.3%
Ito-Yokado Co., Ltd. .......... Ja 9,000 977,208
PT Matahari Putra Prima ....... In 858,000 144,276
-----------
1,121,484
-----------
Miscellaneous Retail--1.5%
Centros Comerciales
Continente S.A. ............ Sp 9,650 193,254
Pinault-Printemps SA .......... Fr 3,900 1,028,288
-----------
1,221,542
-----------
Restaurants--0.2%
TelePizza S.A. (a) ............ Sp 33,300 140,748
-----------
Services--5.4%
Computer Related Services--2.1%
Cap Gemini S.A. ............... Fr 4,100 1,039,761
Dixons Group PLC .............. UK 28,800 693,243
-----------
1,733,004
-----------
Computer Software--3.3%
Misys PLC ..................... UK 54,000 838,348
Olivetti SPA (a) .............. It 295,880 859,630
SAP AG ........................ G 2,000 984,210
-----------
2,682,188
-----------
Transportation, Communication, Electric, Gas &
Sanitary Services --16.3%
Communications--0.9%
Vodafone AirTouch PLC ......... UK 155,000 763,804
-----------
Gas Services--1.9%
BG Group PLC .................. UK 152,956 977,285
Centrica PLC .................. UK 208,800 606,326
-----------
1,583,611
-----------
Telecommunication--13.5%
COLT Telecom Group
PLC (a) .................... UK 28,000 1,433,918
Cable & Wireless HKT Ltd. (b) HK 276,000 805,575
Embratel Participacoes S.A.
ADR ........................ Bz 12,400 337,900
Nippon Telegraph &
Telephone Corp. ............ Ja 108 1,848,772
Nokia Oyj ..................... Fi 5,600 1,014,401
NTT Data Communications
Systems Co. ................ Ja 30 689,621
SK Telecom Co. Ltd. ........... Ko 136 487,684
</TABLE>
See Notes to Investment Portfolio.
38
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ---------- -------------
<S> <C> <C> <C>
Sonera Group Oyj .................. Fi 19,600 $ 1,342,250
Telecom Argentina Stet--
France Telecom SA .............. Ar 11,500 393,875
Telecom Italia SPA ................ It 75,000 1,052,894
Telecomunicacoes Brasileiras
ADR (a) ........................ Bz 12,400 303,025
Telecomunicacoes Brasileiras
SA ............................. Bz 6,000 771,000
Telecomunicacoes Brasileiras
SA ADR ......................... Bz 12,400 194
Telefonica de Espana .............. Sp 7,162 564,491
-----------
11,045,600
-----------
Wholesale Trades--0.5%
Durable Goods--0.5%
Bil Finance Limited ............... NZ 496,375 189,056
Brierley Investments Ltd. ......... NZ 500 105
Yamazen Corp. ..................... Ja 151,000 228,944
-----------
418,105
-----------
Total Common Stocks
(cost of $51,034,231).............................. 77,280,197
-----------
PREFERRED STOCK--0.9%
Manufacturing--0.9%
Chemicals & Allied Products
Henkel KGaA ....................... G 11,483 756,913
-----------
Total Preferred Stock
(cost of $568,757)................................. 756,913
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Par Value
--------- ------------ ----------------
<S> <C> <C> <C>
CORPORATE BONDS, FIXED--0.1%
Mining & Energy--0.1%
Oil & Gas Extraction
Bg Transco holding PLC:
4.188% 12/14/22 ....................... UK $ 21,000 $ 33,610
7.000% 12/16/24 ....................... UK 21,000 32,843
7.057% 12/14/09 ....................... UK 21,000 34,020
------------
100,473
------------
Total Corporate Bonds, Fixed
(cost of $102,771) ......................................... 100,473
------------
WARRANTS--0.0%
Construction--0.0%
Non-Building Constructions
WTS Vivendi (a) ..................... Fr 2,755 9,343
------------
Finance, Insurance & Real Estate--0.0%
Depository Institutions
Siam Commercial Bank
Public Co., Ltd. (a)(b) ............. Th 12,000 (c)
-------------
Total Warrants
(cost of $1,864) ........................................... 9,343
------------
Total Investments
(cost of $51,707,623) (d) .................................. 78,146,926
------------
SHORT TERM OBLIGATIONS--6.7%
Repurchase agreement with SBC
Warburg Ltd., dated 12/31/99, due
1/3/00 at 2.500%, collateralized by
U.S Treasury bonds and/or notes
with various maturities to 2021,
market value $5,591,232
(repurchase proceeds $5,479,141) .......... 5,478,000 5,478,000
------------
Other Assets & Liabilities, Net--(1.9%) ....................... (1,554,214)
------------
Net Assets--100.0% ............................................ $82,070,712
============
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) Represents fair market value as determined in good faith under the
direction of the Trustees.
(c) Rounds to less than one.
(d) Cost for federal income tax purposes is $52,361,800.
See Notes to Investment Portfolio.
39
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
Summary of Securities by Country
<TABLE>
<CAPTION>
% of Total
Country Securities
Country Abbrev. Value at Value
- --------------------------------- --------- ----------------- -----------
<S> <C> <C> <C>
Japan ......................... Ja $17,091,786 21.9
United Kingdom ................ UK 13,512,207 17.3
France ........................ Fr 9,715,548 12.4
Netherlands ................... Ne 6,512,894 8.4
Germany ....................... G 6,481,235 8.3
Finland ....................... Fi 4,795,621 6.1
Sweden ........................ Sw 3,635,706 4.7
Italy ......................... It 2,900,478 3.7
Korea ......................... Ko 2,447,152 3.1
Spain ......................... Sp 2,159,468 2.8
Brazil ........................ Bz 1,412,119 1.8
Ireland ....................... Ir 1,306,046 1.7
Switzerland ................... Sz 1,195,651 1.5
Hong Kong ..................... HK 914,363 1.2
Israel ........................ Is 883,500 1.1
Australia ..................... Au 701,097 0.9
Norway ........................ No 564,437 0.7
Portugal ...................... Pt 516,563 0.7
Argentina ..................... Ar 393,875 0.5
Mexico ........................ Mx 348,209 0.4
New Zealand ................... NZ 189,161 0.2
India ......................... Id 174,000 0.2
Indonesia ..................... In 144,276 0.2
Malaysia ...................... Ma 139,502 0.2
Belgium ....................... Be 12,028 0.0
Singapore ..................... Si 4 0.0
Thailand ...................... Th (a) 0.0
------------- -----
$78,146,926 100.0
=========== =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
- ----------- ----------------------------------------------------
<S> <C>
ADR American Depositary Receipt
GDR Global Depositary Receipt
GDS Global Depositary Shares
STRIP Separately Traded Receipt of Interest and Principal
</TABLE>
(a) Rounds to less than one.
See Notes to Financial Statements.
40
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $51,707,623) ....................... $ 78,146,926
Short-term obligations ........................................................... 5,478,000
Dividends, tax reclaims and interest receivable .................................. 183,001
Receivable for investments sold .................................................. 13,078
Cash (including foreign currencies) .............................................. 2,197
Other assets ..................................................................... 1,317
------------
Total assets ................................................................... 83,824,519
------------
Liabilities:
Payable for investments purchased ................................................ 1,559,128
Accrued expenses payable ......................................................... 33,992
Management fee payable ........................................................... 90
Other liabilities ................................................................ 160,597
------------
Total liabilities .............................................................. 1,753,807
------------
Net assets ....................................................................... $ 82,070,712
============
Net assets represented by:
Paid-in capital ................................................................. $ 57,336,388
Accumulated undistributed net investment income ................................. 188,194
Accumulated net realized losses on investments and foreign currency transactions (1,889,974)
Net unrealized appreciation on investments and foreign currency transactions .... 26,436,104
------------
Total net assets applicable to outstanding shares of beneficial interest ......... $ 82,070,712
============
Shares of beneficial interest outstanding ........................................ 29,374,608
============
Net asset value per share ........................................................ $ 2.79
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ................................................................................ $ 1,153,313
Interest ................................................................................. 266,069
-----------
Total investment income (net of nonrebatable foreign taxes withheld at source which
amounted to $119,655) ................................................................. 1,419,382
-----------
Expenses:
Management fee .......................................................................... 569,988
Bookkeeping fee ......................................................................... 31,946
Transfer agent fee ...................................................................... 7,500
Audit fee ............................................................................... 23,300
Printing expense ........................................................................ 2,913
Trustees' expense ....................................................................... 8,955
Custodian fee ........................................................................... 46,067
Legal fees .............................................................................. 1,158
Amortization of organization expense .................................................... 1,432
Miscellaneous expense ................................................................... 3,345
-----------
Total expenses ......................................................................... 696,604
-----------
Net investment income .................................................................... 722,778
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized gains on investments ....................................................... 251,951
Net realized losses on foreign currency transactions .................................... (8,578)
Net change in unrealized appreciation/depreciation on investments and foreign currency 23,031,184
-----------
transactions
Net increase in net assets resulting from operations ..................................... $23,997,335
===========
</TABLE>
See Notes to Financial Statements.
41
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ........................................................... $ 722,778 $ 318,148
Net realized gains (losses) on investments ...................................... 251,951 (1,623,553)
Net realized gains (losses) on foreign currency transactions .................... (8,578) 11,753
Net change in unrealized appreciation/depreciation on investments and foreign
currency transactions .......................................................... 23,031,184 5,220,545
------------- -------------
Net increase in net assets resulting from operations ............................. 23,997,335 3,926,893
------------- -------------
Distributions declared from:
Net investment income ........................................................... (594,044) (121,681)
In excess of net investment income .............................................. -- (145,244)
------------- -------------
Total distributions .............................................................. (594,044) (266,925)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold .................................................. 65,519,084 57,088,376
Cost of fund shares repurchased ................................................. (59,914,017) (39,146,772)
Distributions reinvested ........................................................ 594,044 266,925
------------- -------------
Net increase in net assets resulting from fund share transactions ................ 6,199,111 18,208,529
------------- -------------
Total increase in net assets ..................................................... 29,602,402 21,868,497
Net assets:
Beginning of year ............................................................... 52,468,310 30,599,813
------------- -------------
End of year ..................................................................... $ 82,070,712 $ 52,468,310
============= =============
Accumulated undistributed (overdistributed) net investment income included in
ending net assets ............................................................... $ 188,194 $ (105,144)
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ..................................................................... 33,091,632 29,337,610
Shares repurchased .............................................................. (30,213,507) (20,432,403)
Distributions reinvested ........................................................ 229,360 135,980
------------- -------------
Net increase ..................................................................... 3,107,485 9,041,187
============= =============
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Colonial International Fund for Growth, Variable Series, (the
"Fund"), a series of Liberty Variable Investment Trust (the "Trust"), is a
non-diversified portfolio of a Massachusetts business trust, registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund's investment objective is to seek long-term
capital appreciation, by investing primarily in non-U.S. equity securities. The
Fund may invest more than 5% of its total assets in the securities of a single
issuer, thereby increasing the risk of loss compared to a diversified fund. The
Fund's capitalization consists of an unlimited number of shares of beneficial
interest without par value that represents a separate series of the Trust. Each
share of the Fund represents an equal proportionate beneficial interest in the
Fund and, when issued and outstanding, is fully paid and nonassessable.
Shareholders would be entitled to share proportionally in the net assets of the
Fund available for distribution to shareholders upon liquidation of the Fund.
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") offered by the separate
accounts of the life insurance companies ("Participating Insurance Companies").
Certain Participating Insurance Companies are affiliated with the Investment
Advisor and sub-advisors to the Fund ("Affiliated Participating Insurance
Companies"). Such Affiliated Participating Insurance Companies are Keyport Life
Insurance Company ("Keyport"), Independence Life & Annuity Company
("Independence") and Liberty Life Assurance Company of Boston ("Liberty Life").
The Participating Insurance Companies and their separate accounts own all the
shares of the Fund. Liberty Advisory Services Corp. (the "Manager") ("LASC"),
provides investment management and advisory services to the Fund pursuant to
its Management Agreements with the Trust. Colonial Management Associates, Inc.
("Colonial") provides sub-advisory services. LASC has delegated various
administrative matters to Colonial. Keyport Financial Services Corp. ("KFSC")
serves as the principal underwriter of the Trust with respect to sales of
shares to Affiliated Participating Insurance Companies. The Manager, Colonial,
KFSC, Keyport and Independence are wholly-owned indirect subsidiaries of
Liberty Financial Companies, Inc. ("LFC"). As of December 31, 1999, Liberty
Mutual Insurance Companies ("Liberty Mutual") owned approximately 71% of the
outstanding voting shares of LFC. Liberty Life is a subsidiary of Liberty
Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Foreign currency transactions--Net realized and unrealized gains (losses) on
foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency,
and currency gains (losses) between the accrual and payment dates on dividends
and interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
Forward currency contracts--The Fund may enter into forward currency contracts
to purchase or sell foreign currencies at predetermined exchange rates in
connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While the maximum potential loss from such contracts is the
aggregate face value in U.S. dollars at the time the contract was opened,
exposure is typically limited to the change in value of the contract (in U.S.
dollars) over the period it remains open. Risks may also arise if
counterparties fail to perform their obligations under the contracts.
Other--Corporate actions are recorded on ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of
all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal to
0.90% annually of the Fund's average daily net assets. The Manager, out of the
management fee it receives, pays Colonial a monthly sub-advisory fee equal to
0.70% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for
$27,000 annually plus 0.035% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent") an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $26,606,155 and
$20,388,869, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $29,709,867
Gross unrealized depreciation (3,924,741)
-----------
Net unrealized appreciation $25,785,126
-----------
</TABLE>
Other--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse
political and economic developments and the possible prevention of foreign
currency exchange or the imposition of other foreign governmental laws or
restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
Note 4. Other Related Party Transactions
During the year ended December 31, 1999, the Fund used Alphatrade, a wholly
owned subsidiary of Colonial Management Associates, Inc., as a broker. Total
commissions paid to Alphatrade during the year were $180.
44
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year .................. $ 2.00 $ 1.78 $ 1.96 $ 1.97 $ 1.88
------ ------ ------- ------ -------
Net investment income (a) ........................... 0.03 0.02 0.02 0.02 0.01
Net realized and unrealized gains (losses) on
investments ........................................ 0.78 0.21 (0.08) 0.09 0.10
------ ------ ------- ------ -------
Total from investment operations .................... 0.81 0.23 (0.06) 0.11 0.11
------ ------ ------- ------ -------
Less distributions:
Dividends from net investment income ............... (0.02) (0.00) (0.02) -- (0.02)
In excess of net investment income ................. -- (0.01) (0.02) -- --
Dividends from net realized gains .................. -- -- (0.08) (0.12) --
------- ------- ------- ------- -------
Total distributions ................................. (0.02) (0.01) (0.12) (0.12) (0.02)
------- ------- ------- ------- -------
Net asset value, end of year ........................ $ 2.79 2.00 $ 1.78 $ 1.96 $ 1.97
======= ======= ======= ======= =======
Total return:
Total investment return (b) ......................... 40.58% 12.96% (3.27)% 5.61% 5.85%
Ratios/supplemental data:
Net assets, end of year (000's) ..................... $82,071 $52,468 $30,600 $26,593 $22,764
Ratio of expenses to average net assets (c) ......... 1.10% 1.24% 1.34% 1.40% 1.40%
Ratio of net investment income to average net
assets (c) ......................................... 1.14% 0.77% 0.82% 0.84% 0.75%
Portfolio turnover ratio ............................ 35% 28% 28% 115% 40%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
- --------------------------------------------------------------------------------
1999 Federal Tax information (unaudited)
For the fiscal year ended December 31, 1999, the Fund earned $45,707 of
long-term capital gains.
- --------------------------------------------------------------------------------
45
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Colonial International Fund for Growth, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial International Fund for
Growth, Variable Series (the "Fund") (a series of Liberty Variable Investment
Trust) at December 31, 1999, the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
46
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial International Horizons Fund,
Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial International Horizons Fund, Variable Series(1), seeks long-term
growth and preservation of capital purchasing power.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date .................................. 6/1/99
Assuming reinvestment of all distributions
Cumulative total return since inception ......... 24.24%
Net asset value per share on 12/31/99 ........... $12.31
Net asset value per share on 6/1/99 ............. $10.00
</TABLE>
Portfolio Manager's Discussion
Nicolas Ghajar is the portfolio manager of Colonial International Horizons
Fund, Variable Series and an assistant vice president of Colonial Management
Associates, Inc. Prior to managing the Fund, Mr. Ghajar was an equity analyst
of various equity funds since 1992.
What was the investment environment like for the Fund? Conditions for the
global markets changed dramatically during 1999. At the very beginning of the
year, most observers were calling for weak global economic growth, with many
predicting deflationary conditions. Almost immediately, however, that view
changed as the U.S. economy strengthened and the previously troubled Japanese,
European and emerging market economies showed signs of being on the mend. Japan
recovered at a much faster-than-expected rate, primarily because of falling
interest rates, tax cuts and other government-sponsored programs designed to
stimulate the economy. In addition, the benefits of corporate restructuring
began to show in better corporate earnings. Higher than expected GDP growth
helped strengthen demand, pushing commodity prices higher during the first half
of the year, helping to firm commodity-based emerging market economies. Europe,
although weak throughout much of 1999, picked up somewhat in the final quarter
of the year.
What was the Fund's strategy during the period?
The Fund was well positioned in technology and telecommunications stocks.
This benefited the Fund as the performance of these stocks dominated world
markets. In Japan, we saw good gains from Canon (1.0% of net assets), Hitachi
(0.8% of net assets), Sony (1.2% of net assets) and others. We remained broadly
diversified in Japan, investing in export-oriented stocks that could benefit
from a weak yen as well as domestically oriented stocks that benefited from the
economy's recovery. In anticipation of potential market volatility resulting
from Y2K concerns, the Fund's cash position was unusually high at year end. Our
emerging market investments were diversified among paper, steel, energy and
other cyclical stocks from Brazil, Mexico and Finland. Best of all, our
exposure to the South Korean market, which was up more than 80% for 1999, made
up roughly 5% of the Fund's investments. In that country, some of our best
performers were consumer electronic companies and semiconductor companies.
What is your outlook?
We anticipate continued strong economic recovery on a worldwide basis. In
our view, Japan will continue to strengthen and corporate restructuring will
result in better profitability for companies. Furthermore, Japan's strength
will likely translate to better economic trends in Asia. Europe is poised to be
one of this year's best performers because of lower interest rates,
restructuring a weaker currency that helps export-oriented markets and M&A
activities. In addition, we believe that telecommunications and technology
stocks still have a lot of momentum left. We also think that better economic
worldwide growth will translate into higher commodity prices. The Fund's
diversified structure between telecommunications, technology and
commodity-related stocks should enable it to benefit from those trends.
(1) International investing offers significant long-term growth potential, but
also involves certain risks. The Fund may be affected by political, business
and economic conditions in the countries in which it invests.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
47
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial International Horizons Fund,
Variable Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Colonial International Horizons Fund, Variable Series vs. Morgan Stanley Capital
International (MSCI) EAFE (GDP)
Change in value of a $10,000 investment from 6/01/99--12/31/99
<TABLE>
<CAPTION>
Cumulative Total Returns on December 31, 1999
Life 1 Year 3 Years
<S> <C> <C>
24.24% N/A N/A
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Colonial Variable Series
International vs. Morgan
Horizons Stanley Capital
Fund International (MSCI)
Variable Series EAFE (GDP)
<S> <C> <C> <C>
$19,000 6/99 10000 10000
$18,000
$17,000 7/99 10230 10064
$16,000
$15,000 8/99 10239 10069
$14,000
$13,000 9/99 10162 10073
$12,000
$11,000 10/99 10441 10521
$10,000
$ 9,000 11/99 10949 10838
$ 8,000
12/99 12424 11795
</TABLE>
[END PLOT POINTS]
____ Colonial International Horizons Fund, Variable Series ---- MSCI EAFE GDP
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The Morgan Stanley Capital International (MSCI)
EAFE (GDP) Index is an unmanaged index that tracks the performance of equity
securities of developed countries outside North America. Indexes are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
48
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Colonial International Horizons Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------ ----------
<S> <C> <C> <C>
COMMON STOCKS--65.7%
Agriculture, Forestry & Fishing--0.2%
Agriculture--Crops
Tabacalera S.A. ..................................................... Sp 1,200 $ 17,148
----------
Construction--1.4%
Building Construction--0.4%
Daiwa House Industry Co.,
Ltd. ............................................................. Ja 4,000 29,737
----------
Heavy Construction--
Non Building Construction--0.7%
Compagnie Generale des
Eaux ............................................................. Fr 450 40,599
Hyder PLC ........................................................... UK 2,000 9,338
----------
49,937
----------
Special Trade Contractors--0.3%
Tomkins PLC ......................................................... UK 8,000 25,848
----------
Finance, Insurance & Real Estate--14.2%
Depository Institutions--5.7%
Banco Pinto & Sotto Mayor,
SA ............................................................... Pt 1,800 38,547
Banque Nationale de Paris ........................................... Fr 838 77,248
Banque Nationale de Paris-
CVG (a) .......................................................... Fr 156 719
Cie Financiere de Paribas ........................................... Fr 10 1,116
Credito Italiano .................................................... It 7,000 34,405
Deutsche Bank AG .................................................... G 550 46,410
Lloyds Bank PLC ..................................................... UK 3,000 37,270
Merita Ltd., Class A ................................................ Fi 6,400 37,678
Standard Chartered PLC .............................................. UK 2,000 31,018
Svenska Handelsbanken ............................................... Sw 2,700 33,946
The Bank of Tokyo
Mitsubishi ....................................................... Ja 3,000 41,788
UBS AG .............................................................. Sz 100 27,039
Westpac Banking Corp. ............................................... Au 5,000 34,516
----------
441,700
----------
Holding & Other Investment Offices--0.4%
Zurich Allied AG .................................................... Sz 50 28,548
----------
Holding Companies--2.2%
CGU PLC ............................................................. UK 2,000 32,294
Cheung Kong (Holdings)
Ltd. ............................................................. HK 8,000 101,627
Fortis Amev NV ...................................................... Ne 1,000 35,977
----------
169,898
----------
Insurance Carriers--0.9%
Assurances Generales de
France ........................................................... Fr 640 34,651
AXA ................................................................. Fr 270 37,605
----------
72,256
----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------ ----------
<S> <C> <C> <C>
Investment Companies--3.5%
Henderson Japanese Smaller
Companies Trust (a) .............................................. UK 49,000 $ 61,744
Irish Investment Fund, Inc. ......................................... Ir 2,100 32,156
Korea Fund, Inc. .................................................... Ko 2,600 44,200
Morgan Stanley Emerging
Markets (a) ...................................................... 2,400 39,150
Scudder New Asia Fund,
Inc. (a) ......................................................... 2,100 41,606
Templeton Emerging
Markets Fund, Inc. ............................................... 1,900 25,769
World Equity Benchmark
Share--Japan ..................................................... Ja 1,400 22,838
----------
267,463
----------
Nondepository Credit Institutions--0.8%
Nichiei Co., Ltd. ................................................... Ja 400 8,686
Promise Co., Ltd. ................................................... Ja 1,000 50,866
----------
59,552
----------
Real Estate--0.7%
New World Development
Co., Ltd. ........................................................ HK 24,000 54,030
----------
Manufacturing--32.0%
Chemicals & Allied
Products--4.2%
Akzo Nobel NV ....................................................... Ne 600 30,070
BASF AG ............................................................. G 600 30,794
E.I. DuPont De Nemours &
Co. .............................................................. 176 11,594
Henkel KGAA ......................................................... G 400 26,366
Kao Corp. ........................................................... Ja 2,000 57,028
Norsk Hydro AS ...................................................... No 400 16,683
Novartis ............................................................ Sz 25 36,754
Rhone Poulenc, Class A .............................................. Fr 700 40,647
SmithKline Beecham PLC .............................................. UK 3,000 38,239
Yamanouchi Pharmaceutical
Co. .............................................................. Ja 1,000 34,921
----------
323,096
----------
Communications Equipment--3.8%
Alcatel Alsthom (Cie Gen El) Fr 270 61,951
Racal Electronics PLC ............................................... UK 8,000 71,728
Sony Corp. .......................................................... Ja 310 91,881
Telefonaktiebolaget LM
Ericsson, Class B ................................................ Sw 1,000 64,274
----------
289,834
----------
Electronic & Electrical Equipment--1.0%
Bowthorpe PLC ....................................................... UK 4,000 70,307
----------
Electronic Components--4.8%
Koninklijke Philips
Electronics NV ADR (a) ........................................... Ne 300 40,500
</TABLE>
See Notes to Investment Portfolio.
49
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial International Horizons Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------ ----------
<S> <C> <C> <C>
Murata Manufacturing Co.,
Ltd. ............................................................. Ja 1,000 $ 234,765
Samsung Electronics ................................................. Ko 800 97,800
----------
373,065
----------
Fabricated Metal--0.4%
Amcor Ltd. .......................................................... Au 6,900 32,341
----------
Food & Kindred Products--1.1%
Bass PLC ............................................................ UK 2,000 25,170
Carlton Communications
PLC .............................................................. UK 3,000 29,152
Groupe Danone ....................................................... Fr 130 30,613
----------
84,935
----------
Household Appliances--0.4%
Electrolux AB, Series B ............................................. Sw 1,200 30,174
----------
Machinery & Computer Equipment--3.9%
Canon, Inc. ......................................................... Ja 2,000 79,429
Equant NV (a) ....................................................... Ne 300 34,025
Hitachi Ltd. ........................................................ Ja 4,000 64,169
Invensys PLC ........................................................ UK 5,000 26,494
Mannesmann AG ....................................................... G 200 48,204
Sumitomo Heavy Industries,
Ltd. ............................................................. Ja 17,000 46,562
----------
298,883
----------
Paper Products--2.8%
Aracruz Celulose S.A., ADR .......................................... Bz 1,000 26,250
Jefferson Smurfit Group PLC.......................................... Ir 5,400 16,182
Mo Och Domsjo AB, Class B Sw 800 28,858
Royal Koninklijke PTT
Nederland NV ..................................................... Ne 800 78,012
Stora Enso Oyj, Class R ............................................. Fi 3,800 66,196
----------
215,498
----------
Petroleum Refining--2.4%
BP Amoco PLC ADR .................................................... UK 800 47,450
Chevron Corp. ....................................................... 300 25,988
Compagnie Francaise de
Petroleum, Total B Shares Fr 250 33,335
Mobil Corp. ......................................................... 396 31,903
Repsol SA ........................................................... Sp 1,100 25,483
Royal Dutch Petroleum Co. ........................................... Ne 400 24,175
----------
188,334
----------
Primary Metal--1.2%
Acerinox S.A. ....................................................... Sp 850 33,874
Billiton PLC ........................................................ UK 10,000 59,289
----------
93,163
----------
Printing & Publishing--0.6%
Arnoldo Mondadori Editore
S.P.A. ........................................................... It 1,500 46,373
----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------ ----------
<S> <C> <C> <C>
Rubber & Plastic--0.6%
Bridgestone Corp. ................................................... Ja 1,000 $ 22,009
Michelin, Class B ................................................... Fr 700 27,473
----------
49,482
----------
Stone, Clay, Glass & Concrete--2.4%
Cemex S.A. .......................................................... Mx 5,400 30,206
Cimentos de Portugal S.A. ........................................... Pt 1,300 21,586
CRH PLC ............................................................. UK 1,600 34,377
Hanson PLC .......................................................... UK 3,000 25,153
Holderbank Financiere
Glaris AG ........................................................ Sz 25 34,270
Lafarge S.A. ........................................................ Fr 310 36,064
----------
181,656
----------
Transportation Equipment--2.4%
DaimlerChrysler AG .................................................. G 250 19,423
GKN PLC ............................................................. UK 3,000 46,720
Honda Motor Co. Ltd. ................................................ Ja 1,000 37,171
MAN AG .............................................................. G 1,300 48,798
Volvo AB ............................................................ Sw 1,300 33,606
----------
185,718
----------
Mining & Energy--0.7%
Crude Petroleum & Natural Gas--0.1%
Conoco, Inc., Class B ............................................... 365 9,079
----------
Oil & Gas Field Services--0.6%
Petroleum Geo-Services (a) .......................................... No 2,400 42,729
----------
Retail Trade--2.1%
Apparel & Accessory Stores--0.9%
Hennes & Mauritz AB (a) ............................................. Sw 2,000 66,976
----------
Food Stores--0.3%
Vendex International NV ............................................. Ne 1,000 26,568
----------
General Merchandise Stores--0.3%
Metro AG ............................................................ G 450 24,183
----------
Miscellaneous Retail--0.6%
Pinault-Printemps S.A. .............................................. Fr 180 47,459
----------
Services--3.0%
Amusement & Recreation--0.3%
Hilton Group PLC .................................................... UK 8,000 25,977
----------
Computer Related Services--1.4%
Cap Gemini S.A. ..................................................... Fr 230 58,238
Dixons Group PLC .................................................... UK 2,000 48,142
----------
106,380
----------
Computer Software--0.9%
Olivetti & C. S.P.A. (a) ............................................ It 8,000 23,243
SAP AG .............................................................. G 100 49,211
----------
72,454
----------
Hotels, Camps & Lodging--0.4%
Accor S.A. .......................................................... Fr 600 28,965
----------
</TABLE>
See Notes to Investment Portfolio.
50
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial International Horizons Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------ -----------
<S> <C> <C> <C>
Transportation, Communications, Electric,
Gas & Sanitary Services--11.8%
Communications--0.6%
Vodafone Group PLC .................................................. UK 10,000 $ 49,278
-----------
Electric Services--0.6%
Empresa Nacional de
Electricidad ..................................................... Sp 1,050 20,827
Korea Eletric Power Corp.,
ADR .............................................................. Ko 1,400 23,450
-----------
44,277
-----------
Gas Services--0.9%
BG PLC (a) .......................................................... UK 5,333 34,076
Centrica PLC ........................................................ UK 13,000 37,750
-----------
71,826
-----------
Telecommunications--9.7%
British Telecommunications
PLC .............................................................. UK 2,000 47,875
COLT Telecom Group
PLC (a) .......................................................... UK 2,000 102,423
France Telecom S.A. ................................................. Fr 480 63,424
Hong Kong
Telecommunications Ltd. .......................................... HK 7,000 20,431
Nippon Telegraph &
Telephone Corp. .................................................. Ja 5 85,591
Nokia Oyj ........................................................... Fi 600 108,773
Philippine Long Distance
Telephone Co. ADR ................................................ Ph 1,400 36,225
SK Telecom Co. Ltd. ADR ............................................. Ko 2,266 86,958
Telecel-Comunicacaoes
Pessoais S.A. (a) ................................................ Pt 3,000 52,260
Telecom Argentina Stet--
France Telecom S.A. .............................................. Ar 700 23,975
Telecom Italia S.P.A. ............................................... It 6,000 36,555
Telecomunicacoes Brasileiras
S.A. ADR ......................................................... Bz 427 54,870
Telefonos de Mexico S.A. ............................................ Mx 5,100 28,528
-----------
747,888
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------ -----------
<S> <C> <C> <C>
Wholesale Trade--0.3%
Nondurable Goods
Imasco Ltd. ......................................................... Ca 700 $ 19,322
-----------
Total Common Stocks
(cost of $3,860,655) .......................................................................... 5,062,337
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
-----------
<S> <C> <C> <C>
CORPORATE BONDS, FIXED--0.0%
Mining & Energy--0.0%
Oil & Gas Extraction
BG Transco Holdings PLC,
4.188% 12/14/22 .................................................. UK $765 1,224
BG Transco Holdings PLC,
7.000% 12/16/24 .................................................. UK 765 1,196
BG Transco Holdings PLC,
7.057% 12/14/09 .................................................. UK 765 1,239
-----
3,659
-----
Total Corporate Bonds
(cost of $3,744) .............................................................................. 3,659
-----
Total Investments
(cost of $3,864,399) (b) ...................................................................... 5,065,996
---------
SHORT-TERM OBLIGATIONS--33.3%
Federal Home Loan
Bank Discount Note
1.500%, 1/3/00 (c) ............................................... 1,200,000 1,199,850
Repurchase agreement with SBC
Warburg Ltd., dated 12/31/99,
due 1/3/00 at 2.500%,
collateralized by U.S. Treasury
bonds and/or notes with
various maturities to 2021,
market value $1,396,277
(repurchase proceeds
$1,368,285) ...................................................... 1,368,000 1,368,000
---------
Total Short-Term Obligations
(cost of $2,567,850) .......................................................................... 2,567,850
---------
Other Assets & Liabilities, Net--1.0% ............................................................ 73,142
---------
Net Assets--100% ................................................................................. $7,706,988
==========
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $3,888,861.
(c) Rate represents yield at date of purchase.
See Notes to Investment Portfolio.
51
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial International Horizons Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
Summary of Securities by Country
<TABLE>
<CAPTION>
% of Total
Country Securities
Country Abbrev. Value at Value
- --------------------------------- --------- ------------- -----------
<S> <C> <C> <C>
United Kingdom ................ UK $1,020,771 20.1
Japan ......................... Ja 907,441 17.9
France ........................ Fr 620,107 12.2
Germany ....................... G 293,389 5.8
Netherlands ................... Ne 269,327 5.3
Sweeden ....................... Sw 257,834 5.1
Korea ......................... Ko 252,408 5.0
Finland ....................... Fi 212,647 4.2
United States ................. 185,089 3.7
Hong Kong ..................... HK 176,088 3.5
Italy ......................... It 140,576 2.8
Switzerland ................... Sz 126,611 2.5
Portugal ...................... Pt 112,393 2.2
Spain ......................... Sp 97,332 1.9
Brazil ........................ Bz 81,120 1.6
Australia ..................... Au 66,857 1.3
Mexico ........................ Mx 58,734 1.2
Norway ........................ No 59,412 1.2
Ireland ....................... Ir 48,338 1.0
Philippines ................... Ph 36,225 0.7
Argentina ..................... Ar 23,975 0.5
Canada ........................ Ca 19,322 0.3
---------- -----
$5,065,996 100.0
========== =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
- ----------- ----------------------------
<S> <C>
ADR American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial International Horizons Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $3,864,399) ........................ $5,065,996
Short-term obligations ........................................................... 2,567,850
Cash (including foreign currencies) .............................................. 14,750
Receivable for fund shares sold .................................................. 93,058
Dividends and interest receivable ................................................ 7,267
Expense reimbursement due from Manager ........................................... 4,245
Other assets ..................................................................... 87
----------
Total assets ................................................................... 7,753,253
----------
Liabilities:
Payable for fund shares repurchased .............................................. 232
Management fee payable ........................................................... 278
Bookkeeping fee payable .......................................................... 300
Service fee payable .............................................................. 1,155
Accrued other expenses ........................................................... 9,683
Other liabilities ................................................................ 34,617
----------
Total liabilities .............................................................. 46,265
----------
Net assets ....................................................................... $7,706,988
==========
Net assets represented by:
Paid-in capital ................................................................. $6,536,595
Accumulated overdistributed net investment income ............................... (25,334)
Accumulated net realized losses on investments and foreign currency transactions (5,244)
Net unrealized appreciation on investments and foreign currency transactions .... 1,200,971
----------
Total net assets applicable to outstanding shares of beneficial interest ......... $7,706,988
==========
Shares of beneficial interest outstanding ........................................ 625,975
==========
Net asset value per share ........................................................ $ 12.31
==========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1999*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ........................................................................ $ 36,440
Interest ......................................................................... 29,787
----------
Total investment income (net of nonrebatable foreign taxes withheld at source
which amounted to $3,230) ..................................................... 66,227
----------
Expenses:
Management fee .................................................................. 27,964
Bookkeeping fee ................................................................. 15,750
Transfer agent fee .............................................................. 4,375
Service fee ..................................................................... 6,601
Audit fee ....................................................................... 8,003
Printing expense ................................................................ 620
Trustees' expense ............................................................... 2,242
Custodian fee ................................................................... 2,767
Legal fee ....................................................................... 150
Miscellaneous expense ........................................................... 231
----------
Total expenses ................................................................. 68,703
----------
Less:
Expense reimbursable by Manager ................................................. (28,328)
----------
Net expenses ..................................................................... 40,375
----------
Net investment income ............................................................\ 25,852
Realized and unrealized gains (losses) on investments and foreign
currency transactions:
Net realized losses on investments .............................................. (5,245)
Net realized gains on foreign currency transactions ............................. 9,298
Net change in unrealized appreciation/depreciation on investments and foreign
currency transactions............................................................ 1,200,971
----------
Net increase in net assets resulting from operations ............................. $1,230,876
==========
</TABLE>
* For the period from the commencement of operations June 1, 1999 to December
31, 1999.
See Notes to Financial Statements.
53
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial International Horizons Fund,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Ended
December 31,
1999*
-------------
<S> <C>
Operations:
Net investment income ................................................................... $ 25,852
Net realized losses on investments ...................................................... (5,245)
Net realized gains on foreign currency transactions ..................................... 9,298
Net change in unrealized appreciation/depreciation on investments and foreign currency
transactions ........................................................................... 1,200,971
----------
Net increase in net assets resulting from operations ..................................... 1,230,876
----------
Distributions declared from:
Net investment income ................................................................... (25,852)
In excess of net investment income ...................................................... (36,446)
----------
Total distributions ...................................................................... (62,298)
----------
Fund share transactions:
Proceeds from fund shares sold .......................................................... 6,730,094
Cost of fund shares repurchased ......................................................... (253,982)
Distributions reinvested ................................................................ 62,298
----------
Net increase in net assets resulting from fund share transactions ........................ 6,538,410
----------
Total increase in net assets ............................................................. 7,706,988
Net assets:
Beginning of period ..................................................................... --
----------
End of period ........................................................................... $7,706,988
==========
Accumulated overdistributed net investment income included in ending net assets .......... $ (25,334)
==========
Analysis of changes in shares of beneficial interest:
Shares sold ............................................................................. 643,267
Shares repurchased ...................................................................... (22,594)
Distributions reinvested ................................................................ 5,302
----------
625,975
==========
</TABLE>
* For the period from the commencement of operations June 1, 1999 to December
31, 1999.
See Notes to Financial Statements.
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Colonial International Horizons Fund, Variable Series (the
"Fund"), a series of Liberty Variable Investment Trust (the "Trust"), is a
non-diversified portfolio of a Massachusetts business trust, registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund's investment objective is to seek preservation of
capital, purchasing power and long-term growth. The Fund's capitalization
consists of an unlimited number of shares of beneficial interest without par
value that represents a separate series of the Trust. Each share of the Fund
represents an equal proportionate beneficial interest in the Fund and, when
issued and outstanding, is fully paid and nonassessable. Shareholders would be
entitled to share proportionally in the net assets of the Fund available for
distribution to shareholders upon liquidation of the Fund. 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") offered by the separate accounts of the life
insurance companies ("Participating Insurance Companies"). Certain
Participating Insurance Companies are affiliated with the Investment Advisor
and sub-advisers to the Fund ("Affiliated Participating Insurance Companies").
Such Affiliated Participating Insurance Companies are Keyport Life Insurance
Company ("Keyport"), Independence Life & Annuity Company ("Independence") and
Liberty Life Assurance Company of Boston ("Liberty Life"). The Participating
Insurance Companies and their separate accounts own all the shares of the Fund.
Liberty Advisory Services Corp. (the "Manager") ("LASC"), provides investment
management and advisory services to the Fund pursuant to its Management
Agreements with the Trust. Colonial Management Associates, Inc. ("Colonial")
provides sub-advisory services. LASC had delegated various administrative
matters to Colonial. Keyport Financial Services Corp. ("KFSC") serves as the
principal underwriter of the Trust with respect to sales of shares to
Affiliated Participating Insurance Companies. The Manager, Colonial, KFSC,
Keyport, and Independence are wholly-owned indirect subsidiaries of Liberty
Financial Companies, Inc. ("LFC"). For the period ended December 31, 1999,
Liberty Mutual Insurance Companies ("Liberty Mutual") owned approximately 71%
of the outstanding voting shares of LFC. Liberty Life is a subsidiary of
Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Foreign currency transactions--Net realized and unrealized gains (losses) on
foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency,
and currency gains (losses) between the accrual and payment dates on dividends
and interest income and foreign withholding taxes.
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) on investments.
Forward currency contracts--The Fund may enter into forward currency contracts
to purchase or sell foreign currencies at predetermined exchange rates in
connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While the maximum potential loss from such contracts is the
aggregate face value in U.S. dollars at the time the contract was opened,
exposure is typically limited to the change in value of the contract (in U.S.
dollars) over the period it remains open. Risks may also arise if
counterparties fail to perform their obligations under the contracts.
Other--Corporate actions are recorded on ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of
all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal to
0.95% annually of the Fund's average daily net assets. The Manager, out of the
management fee it receives, pays Colonial a monthly sub-advisory fee equal to
0.75% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for
$27,000 annually plus 0.035% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Service Fee--Effective July 1, 1999, the Fund has adopted a 12b-1 plan which
requires it to pay Liberty Funds Distributor, Inc. ("LFDI") and KFSC a service
fee totaling 0.25% annually of the Fund's net assets as of the 20th of each
month.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (excluding
service fee) exceed 1.15% annually of the Fund's average daily net assets.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the period ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $3,921,636 and
$51,992, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $1,337,781
Gross unrealized depreciation (160,646)
----------
Net unrealized appreciation $1,177,135
----------
</TABLE>
Capital loss carryforwards--At December 31, 1999, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
- ------------- -------------
<S> <C>
2007 $5,000
</TABLE>
Other--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse
political and economic developments and the possible prevention of foreign
currency exchange or the imposition of other foreign governmental laws or
restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
56
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial International Horizons Fund,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Ended
December 31,
1999***
-------------
<S> <C>
Per share operating performance:
Net asset value, beginning of period ............................................. $ 10.00
-------
Net investment income (a) ........................................................ 0.06
Net realized and unrealized gain on investments and foreign currency transactions 2.36
-------
Total from investment operations ................................................. 2.42
-------
Less distributions:
Dividends from net investment income ............................................ (0.05)
In excess of net investment income .............................................. (0.06)
-------
Total distributions .............................................................. (0.11)
-------
Net asset value, end of period ................................................... $ 12.31
=======
Total return:
Total investment return (b)(c) ................................................... 24.24%**
Ratios/supplemental data:
Net assets, end of period (000's) ................................................ $ 7,707
Ratio of expenses to average net assets (d)(e) ................................... 1.40%
Ratio of net investment income to average net assets (d) ......................... 0.85%*
Portfolio turnover ratio ......................................................... 1%**
</TABLE>
* Annualized.
** Not annualized.
*** For the period from commencement of operations June 1, 1999 to December
31, 1999.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 2.36%
(annualized).
57
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Colonial International Horizons Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial International Horizons
Fund, Variable Series (the "Fund"), (a series of Liberty Variable Investment
Trust) at December 31, 1999, the results of its operations, the changes in its
net assets and the financial highlights for the period from June 1, 1999
(commencement of operations) through December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements and the financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the Unites States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
58
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial Small Cap Value Fund, Variable Series(1), seeks long-term growth.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 5/19/98
Assuming reinvestment of all distributions
12-month total return ...................... 6.34%
Net asset value per share on 12/31/99 ......... $ 9.12
Net asset value per share on 12/31/98 ......... $ 8.59
</TABLE>
Portfolio Managers' Discussion
James P. Haynie and Michael Rega are portfolio co-managers of Colonial Small
Cap Value Fund, Variable Series. Mr. Haynie is a senior vice president of
Colonial Management Associates, Inc. (CMA). Mr. Rega is a vice president of
CMA.
What was the investment environment like during the period?
The stock market's growth was heavily influenced by the growth sector in
1999. In the small-cap world this was evident by the Russell 2000 broad market
index returning 19.6%, while the Russell 2000 Growth Index returned 43.1%
compared to the Russell 2000 Value return of (1.5)%.
What was the Fund's strategy during the period?
We maintained our approach of seeking high-quality, value companies. In
selecting stocks, we look at a company's financials to see if it is managing
its debt and handling its growth. We also look for revenue growth and market
share penetration to see how well the firm is competing in its industry.
Finally, we look at the stock price in relation to the above quality and
momentum measures to determine value relative to its peers.
What is your outlook for the period ahead?
Most economic analysts are forecasting that short-term interest rates will
rise by one-half to one percentage point over the next six to 12 months, which
could affect the stock market in a significant way. The global economy is also
expected to continue growing, which could put pressure on commodity prices but
would also help value-oriented sectors such as basic industries and energy. Any
manufacturing company that exports its products, which covers a range of
industries, should benefit from stronger economic growth overseas. Finally, the
rise in energy prices is very helpful for companies in this sector--especially
oil and natural gas service companies. After several years of surging prices
for growth stocks, we believe smaller capitalization, value stocks may benefit
from the market environment.
(1) Investing in smaller company stocks may present special risks, including
possible illiquidity and greater price volatility than stocks of larger,
more established companies.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
59
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Colonial Small Cap Value Fund, Variable Series vs. Russell 2000 Index
Change in value of a $10,000 investment from 5/31/98--12/31/99
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
Life 1 Year 3 Years
<S> <C> <C>
(4.85)% 6.34% N/A
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Colonial
Small Cap Value
Fund Russell
Variable Series 2000 Index
<S> <C> <C> <C>
$12,000 5/98 10000 10000
$11,000 6/98 10030 10021
$10,000 9102 9209
$ 9,000 7186 7421
$ 8,000 9/98 7446 8002
$ 7,000 7865 8328
$ 6,000 8384 8765
12/98 8658 9307
8447 9431
7611 8667
3/99 7510 8802
8014 9591
8337 9731
6/99 8771 10171
8761 9892
8307 9526
9/99 8256 9528
8297 9566
8528 10137
12/99 9206 11283
</TABLE>
[END PLOT POINTS]
____ Colonial Small Cap Value Fund, Variable Series ---- Russell 2000 Index
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts or certain expenses reimbursed by the Manager. If performance
information included the effect of these additional amounts, returns would be
lower. The Russell 2000 Index is an unmanaged index that tracks the performance
of small-capitalization stocks traded on the New York Stock Exchange, the
American Stock Exchange and the NASDAQ. Unlike mutual funds, indexes are not
investments, do not incur fees or charges and are not professionally managed.
It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
60
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------------------ -----------------
<S> <C> <C>
COMMON STOCKS--89.9%
Construction--1.6%
Building Construction--1.3%
Dycom Industries, Inc. (a) ............ 500 $ 22,031
NVR, Inc. (a) ......................... 500 23,875
Toll Brothers, Inc. (a) ............... 5,588
----------
51,494
----------
Heavy Construction--
Non Building Construction--0.3%
Granite Construction, Inc. ............ 600 11,062
----------
Finance, Insurance & Real Estate--13.4%
Depository Institutions--7.5%
BancWest Corp. (a) .................... 400 7,800
Bank United Corp., Class A ............ 600 16,350
Capitol Federal Financial ............. 1,200 11,700
Crestar Financial Corp. ............... 625 11,953
Cullen/Frost Bankers, Inc. ............ 1,000 25,750
Downey Finan cial Corp. ............... 1,100 22,206
FirstFed Financial Corp. (a) .......... 1,300 18,281
First Midwest Bancorp, Inc. ........... 500 13,250
Greater Bay Bancorp ................... 300 12,862
Hudson United Bancorp ................. 509 13,011
Independence Community Bank
Corp. .............................. 500 6,250
MAF Bancorp, Inc. ..................... 1,200 25,125
Peoples Heritage Financial
Group, Inc. ........................ 1,100 16,569
Provident Bankshares Corp. ............ 900 15,581
Staten Island Bancorp, Inc. ........... 500 9,000
Susquehanna Bancshares, Inc. .......... 700 11,113
Washington Federal, Inc. .............. 400 7,900
Webster Financial Corp. ............... 800 18,850
Whitney Holding Corp. ................. 600 22,238
----------
285,789
----------
Financial Services--1.0%
Community Bank System, Inc. ........... 500 11,562
First Federal Capital Corp. ........... 1,100 16,087
Profit Recovery Group
International, Inc. (a) ............ 100 2,656
Walter Industries, Inc. ............... 800 8,650
----------
38,955
----------
Holding Companies--0.3%
Commerce Bancorp, Inc. ................ 300 12,131
----------
Insurance Carriers--2.3%
Arthur J. Gallagher & Co. ............. 300 19,425
Delphi Financial Group, Inc.,
Class A (a) ........................ 724 21,727
Enhance Financial Services
Group, Inc. ........................ 1,400 22,750
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------------ -----------------
<S> <C> <C>
Fidelity National Financial, Inc. ..... 940 $ 13,512
LandAmerica Financial Group, Inc. 600 11,025
----------
88,439
----------
Nondepository Credit Institutions--0.4%
AmeriCredit Corp. ..................... 700 12,950
----------
Real Estate--1.1%
Chicago Title Corp. ................... 300 13,875
Radian Group, Inc. .................... 600 28,650
----------
42,525
----------
Security Brokers & Dealers--0.8%
Advest Group, Inc. (a) ................ 500 9,187
Raymond James Financial, Inc. ......... 1,100 20,556
----------
29,743
----------
Manufacturing--33.9%
Apparel--0.7%
Kellwood Co. .......................... 500 9,719
Nautica Enterprises, Inc. (a) ......... 1,400 15,838
----------
25,557
----------
Chemicals & Allied Products--5.3%
Alpharma, Inc., Class A ............... 500 15,375
Barr Laboratories, Inc. (a) ........... 300 9,412
Church & Dwight Co., Inc. ............. 500 13,344
Dexter Corp. .......................... 600 23,850
Geon Co. .............................. 400 13,000
Goodrich (B.F.) Co. ................... 500 13,750
IDEC Pharmaceuticals Corp. (a) ........ 300 29,475
Jones Pharma, Inc. .................... 600 26,062
Liposome Co., Inc. (a) ................ 900 10,983
Medicis Pharmaceutical Corp.,
Class A (a) ........................ 700 29,794
Shire Pharmaceuticals Group PLC
ADR (a) ............................ 626 18,221
----------
203,266
----------
Communications Equipment--1.2%
Aspect Communications Corp. (a) ....... 500 19,562
Comverse Technology, Inc. (a) ......... 200 28,950
----------
48,512
----------
Electronic & Electrical Equipment--1.9%
Applied Micro Circuits Corp. (a) ...... 200 25,450
CTS Corp. ............................. 300 22,612
Lattice Semiconductor Corp. (a) ....... 300 14,137
PSC, Inc. (a) ......................... 1,200 8,850
----------
71,049
----------
Electronic Components--4.5%
Audiovox Corp., Class A (a) ........... 200 6,075
Burr-Brown Corp. (a) .................. 200 7,225
Micrel, Inc. (a) ...................... 300 17,081
Optical Coating Laboratory, Inc. ...... 100 29,600
</TABLE>
See Notes to Investment Portfolio.
61
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------------------ -----------------
<S> <C> <C>
Park Electrochemical Corp. ............. 600 $ 15,938
Plexus Corp. (a) ....................... 500 22,000
Power Integrations, Inc. (a) ........... 300 14,381
QLogic Corp. (a) ....................... 100 15,988
Sanmina Corp. (a) ...................... 200 19,975
SemTech Corp. (a) ...................... 300 15,638
ZixIt Corp. (a) ........................ 200 7,925
----------
171,826
----------
Fabricated Metal--1.0%
Alliant Techsystems Inc. (a) ........... 100 6,231
Barnes Group, Inc. ..................... 700 11,419
Nortek, Inc. (a) ....................... 400 11,200
Tower Automotive, Inc. (a) ............. 500 7,719
----------
36,569
----------
Food & Kindred Products--2.4%
Canandaigua Brands, Inc.,
Class A (a) ......................... 800 40,800
Corn Products International, Inc. ...... 400 13,100
Michael Foods, Inc. .................... 400 9,850
Ralcorp Holdings, Inc. (a) ............. 600 11,963
Smithfield Foods, Inc. (a) ............. 700 16,800
----------
92,513
----------
Furniture & Fixtures--2.0%
Ethan Allen Interiors, Inc. ............ 1,250 40,078
Furniture Brands International,
Inc. (a) ............................ 1,600 35,200
----------
75,278
----------
Leather--0.1%
K-Swiss, Inc. .......................... 300 5,573
----------
Machinery & Computer Equipment--6.3%
Asyst Technology, Inc. (a) ............. 300 19,669
Bell & Howell Co. ...................... 300 9,544
C-Cube Microsystems, Inc. (a) .......... 100 6,225
Gehl Co. (a) ........................... 800 14,400
Manitowoc, Inc. ........................ 1,000 34,000
Milacron, Inc. ......................... 600 9,225
NACCO Industries, Inc. ................. 200 11,113
Novellus Systems, Inc. (a) ............. 200 24,506
Pentair, Inc. .......................... 300 11,550
SPS Technologies, Inc. (a) ............. 200 6,388
Terex Corp. (a) ........................ 800 22,200
Toro Co. ............................... 300 11,194
Xircom, Inc. (a) ....................... 500 37,500
Zebra Technologies Corp.,
Class A (a) ......................... 400 23,400
----------
240,914
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------------ -----------------
<S> <C> <C>
Measuring & Analyzing Instruments--2.3%
ADAC Laboratories ...................... 1,100 $ 11,825
Colorado MEDtech, Inc. (a) ............. 1,100 8,800
Esterline Technologies Corp. (a) ....... 600 6,937
Fossil, Inc. (a) ....................... 1,650 38,156
Imation Corp. (a) ...................... 400 13,425
VISX, Inc. (a) ......................... 200 10,350
----------
89,493
----------
Miscellaneous Manufacturing--0.6%
Russ Berrie & Co., Inc. ................ 900 23,625
----------
Petroleum Refining--0.3%
Tesoro Petroleum Corp. (a) ............. 1,000 11,563
----------
Primary Metal--2.7%
CommScope, Inc. (a) .................... 500 20,156
Encore Wire Corp. (a) .................. 800 6,100
Mueller Industries, Inc. (a) ........... 600 21,750
Quanex Corp. ........................... 600 15,300
Ryerson Tull, Inc. ..................... 448 8,708
Tredegar Industries, Inc. .............. 700 14,481
Worthington Industries, Inc. ........... 900 14,906
----------
101,401
----------
Printing & Publishing--1.2%
Valassis Communications, Inc. (a) ...... 1,050 44,363
----------
Rubber & Plastic--0.6%
Carlisle Cos., Inc. .................... 400 14,400
Tupperware Corp. (a) ................... 600 10,163
----------
24,563
----------
Stone, Clay, Glass & Concrete--0.1%
Centex Construction Products, Inc. ..... 100 3,900
----------
Transportation Equipment--0.7%
Arvin Industries, Inc. ................. 200 5,675
Oshkosh Truck Corp. .................... 200 5,863
Superior Industries International,
Inc. ................................ 300 8,044
Winnebago Industries, Inc. ............. 300 6,019
----------
25,601
----------
Mining & Energy--2.8%
Miscellaneous Metal Ores--0.3%
AMCOL International Corp. .............. 800 12,900
----------
Oil & Gas Extration--1.0%
HS Resources, Inc. (a) ................. 500 8,625
Nabors Industries, Inc. (a) ............ 408 12,607
Stolt Comex Seaway, S.A. (a) ........... 1,600 17,700
----------
38,932
----------
</TABLE>
See Notes to Investment Portfolio.
62
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------------------ -----------------
<S> <C> <C>
Oil & Gas Field Services--1.5%
Indiana Energy, Inc. ................... 400 $ 7,100
Pride Petroleum International,
Inc. (a) ............................ 2,100 30,713
Veritas DGC, Inc. (a) .................. 1,300 18,200
----------
56,013
----------
Retail Trade--6.3%
Apparel & Accessory Stores--1.4%
AnnTaylor Stores Corp. (a) ............. 400 13,775
Genesco, Inc. (a) ...................... 900 11,700
Ross Stores, Inc. ...................... 1,600 28,700
----------
54,175
----------
Auto Dealers & Gas Stations--0.4%
Lithia Motors, Inc., Class A (a) ....... 100 1,787
United Auto Group, Inc. (a) ............ 1,300 11,619
----------
13,406
----------
Food Stores--0.2%
Sonic Corp. (a) ........................ 300 8,550
----------
General Merchandise Stores--0.9%
Ames Department Stores, Inc. (a) ....... 1,200 34,575
----------
Miscellaneous Retail--1.3%
Musicland Stores Corp. (a) ............. 1,100 9,281
Zale Corp. (a) ......................... 800 38,700
----------
47,981
----------
Restaurants--2.1%
CEC Entertainment, Inc. (a) ............ 1,850 52,494
Jack in the Box, Inc. (a) .............. 1,400 28,962
----------
81,456
----------
Services--18.7%
Amusement & Recreation--0.5%
Anchor Gaming (a) ...................... 400 17,375
----------
Auto Repair, Rental & Parking--0.5%
Midas, Inc. ............................ 300 6,563
XTRA Corp. ............................. 300 12,788
----------
19,351
----------
Business Services--1.5%
Advo, Inc. ............................. 900 21,375
Interim Services Inc. (a) .............. 1,000 24,750
SEI Investment Co. ..................... 100 11,902
----------
58,027
----------
Computer Related Services--5.3%
DSP Group, Inc. (a) .................... 300 27,900
Health Management Systems,
Inc. (a) ............................ 1,200 7,575
Jack Henry & Associates ................ 200 10,737
Kronos, Inc. (a) ....................... 200 12,000
MICROS Systems, Inc. ................... 200 14,800
Macromedia, Inc. (a) ................... 300 21,938
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------------ -----------------
<S> <C> <C>
Mercury Interactive Corp. (a) .......... 400 $ 43,175
National Computer Systems, Inc. ........ 500 18,813
RSA Security, Inc. (a) ................. 100 7,750
Sybase, Inc. (a) ....................... 700 11,900
Systems & Computer Technology
Corp. (a) ........................... 700 11,375
TALK.com, Inc. (a) ..................... 700 12,425
----------
200,388
----------
Computer Software--3.3%
Acclaim Entertainment, Inc. (a) ........ 700 3,587
Hyperion Solutions Corp. (a) ........... 750 32,625
PRI Automation, Inc. (a) ............... 400 26,850
Progress Software Corp. (a) ............ 700 39,725
Symantec Corp. (a) ..................... 400 23,450
----------
126,237
----------
Engineering, Accounting, Research &
Management--2.7%
Core Laboratories N.V. (a) ............. 600 12,038
Jacobs Engineering Group, Inc. (a) 700 22,750
PerkinElmer, Inc. ...................... 400 16,675
Quest Diagnostic, Inc. (a) ............. 300 9,169
URS Corporation (a) .................... 500 10,844
Whittman-Hart, Inc. (a) ................ 600 32,175
----------
103,651
----------
Health Services--4.2%
Coventry Health Care Inc. (a) .......... 700 4,725
Curative Health Services, Inc. (a) ..... 1,300 10,075
Dendrite International, Inc. (a) ....... 800 27,100
Express Scripts, Inc. Class A (a) ...... 100 6,400
Hooper Holmes, Inc. .................... 1,100 28,325
IDEXX Laboratories, Inc. (a) ........... 400 6,450
Lincare Holdings, Inc. (a) ............. 200 6,937
NeoPharm, Inc. (a) ..................... 300 6,469
Osteotech, Inc. (a) .................... 1,200 16,050
RehabCare Group, Inc. (a) .............. 1,000 21,125
Universal Health Services, Inc.,
Class B (a) ......................... 300 10,800
Wesley Jessen VisionCare, Inc. (a) ..... 400 15,150
----------
159,606
----------
Hotels, Camps & Lodging--0.4%
Isle of Capri Casinos, Inc. (a) ........ 1,200 15,825
----------
Membership Organizations--0.3%
MemberWorks, Inc. (a) .................. 400 13,275
----------
Transportation, Communication, Electric, Gas &
Sanitary Services--9.7%
Air Transportation--0.7%
Airborne Freight Corp. ................. 600 13,200
SkyWest, Inc. .......................... 500 14,000
----------
27,200
----------
</TABLE>
See Notes to Investment Portfolio.
63
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------------------ -----------------
<S> <C> <C>
Communications--0.8%
Arch Communications Group,
Inc. (a) .......................... 1,000 $ 6,594
True North Communications, Inc. ...... 500 22,344
----------
28,938
----------
Electric Services --2.1%
CMP Group, Inc. ...................... 1,000 27,562
IDACORP, Inc. ........................ 500 13,406
Public Service Co. of New Mexico ..... 1,000 16,250
Sierra Pacific Resources ............. 832 14,404
United Illuminating Co. .............. 200 10,275
----------
81,897
----------
Gas Services--1.1%
Energen Corp. ........................ 600 10,837
Northwest Natural Gas Co., ........... 500 10,969
ONEOK, Inc. .......................... 300 7,538
UGI Corp. ............................ 600 12,263
----------
41,607
----------
Motor Freight & Warehousing--1.2%
Arkansas Best Corp. (a) .............. 600 7,200
CNF Transportation, Inc. ............. 200 6,900
USFreightways Corp. .................. 700 33,513
----------
47,613
----------
Sanitary Services--0.6%
Piedmont Natural Gas Co. ............. 700 21,175
----------
Telecommunication--2.0%
Alpha Industries, Inc. (a) ........... 200 11,462
InterDigital Communications
Corp. (a) ......................... 700 52,500
Powerwave Technologies, Inc. (a) ..... 200 11,675
----------
75,637
----------
Transportation Services--1.2%
Avis Rent A Car, Inc. (a) ............ 1,000 25,562
Circle International Group, Inc. ..... 500 11,125
Expeditors International
Washington, Inc. .................. 200 8,762
----------
45,449
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------------ -----------------
<S> <C> <C>
Wholesale Trade--3.5%
Durable Goods--2.1%
Anixter International, Inc. (a) ...... 400 $ 8,250
Brightpoint, Inc. (a) ................ 1,200 15,750
Handleman Co. ........................ 500 6,687
Owens & Minor, Inc. Holding Co. ...... 1,100 9,831
Patterson Dental Co. (a) ............. 700 29,838
U.S. Can Corp. (a) ................... 500 9,938
----------
80,294
----------
Nondurable Goods--1.4%
Bindley Western Industries, Inc. ..... 566 8,525
United Stationers, Inc. (a) .......... 900 25,706
Universal Corp. ...................... 800 18,250
----------
52,481
----------
Total Common Stocks
(cost of $3,183,440) ................................... 3,432,668
----------
</TABLE>
<TABLE>
<CAPTION>
Par
----------
<S> <C> <C>
Corporate Bonds--0.1%
Finance, Insurance & Real Estate--0.1%
Financial Services--0.1%
Impac Mortgage Holdings, Inc.,
11.000% 2/15/04 ................... $ 5,700 4,560
----------
Total Corporate Bonds
(cost of $5,195) ....................................... 4,560
-----
Total Investments
(cost of $3,188,635) (b) ............................... 3,437,228
---------
SHORT-TERM OBLIGATIONS--9.7%
Repurchase agreement with SBC
Warburg Ltd., dated 12/31/99,
due 1/3/00 at 2.500%,
collateralized by U.S. Treasury
bonds and/or notes with various
maturities to 2021, market value
$376,627 (repurchase proceeds
$369,077) ......................... 369,000 369,000
---------
Other Assets & Liabilities, Net--0.3% ..................... 10,322
---------
Net Assets--100.0% ........................................ $3,816,550
==========
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $3,205,816.
See Notes to Financial Statements.
64
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $3,188,635) ............... $3,437,228
Short-term obligations .................................................. 369,000
Receivable for fund shares sold ......................................... 5,556
Dividends and interest receivable ....................................... 1,925
Expense reimbursement due from Manager .................................. 20,044
Cash .................................................................... 594
----------
Total assets .......................................................... 3,834,347
----------
Liabilities:
Other liabilities ....................................................... 17,797
----------
Total liabilities ..................................................... 17,797
----------
Net assets .............................................................. $3,816,550
==========
Net assets represented by:
Paid-in capital ........................................................ $3,829,243
Accumulated overdistributed net investment income ...................... (1,444)
Accumulated net realized losses on investments ......................... (259,842)
Net unrealized appreciation on investments ............................. 248,593
----------
Total net assets applicable to outstanding shares of beneficial interest $3,816,550
==========
Shares of beneficial interest outstanding ............................... 418,618
==========
Net asset value per share ............................................... $ 9.12
==========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Interest income ......................................................... $ 14,014
Dividends ............................................................... 15,213
----------
Total investment income ............................................... 29,227
----------
Expenses:
Management fee ......................................................... 18,928
Bookkeeping fee ........................................................ 27,000
Transfer agent fee ..................................................... 7,500
Audit fee .............................................................. 19,028
Legal fees ............................................................. 1,162
Trustees' expense ...................................................... 6,650
Custodian fee .......................................................... 5,089
Reports to shareholders ................................................ 544
Other .................................................................. 1,060
----------
Total expenses ........................................................ 86,961
----------
Less:
Expense reimbursable by Manager ........................................ (63,222)
----------
Net expenses ............................................................ 23,739
----------
Net investment income ................................................... 5,488
Realized and unrealized gains (losses) on investments:
Net realized losses on investments ..................................... (104,297)
Net change in unrealized appreciation/depreciation on investments ...... 368,888
----------
Net increase in net assets resulting from operations .................... $ 270,079
==========
</TABLE>
See Notes to Financial Statements.
65
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1999 1998*
-------------- --------------
<S> <C> <C>
Operations:
Net investment income ............................................................. $ 5,488 $ 15,271
Net realized losses on investments ................................................ (104,297) (155,684)
Net change in unrealized appreciation/depreciation on investments ................. 368,888 (120,295)
---------- ----------
Net increase (decrease) in net assets resulting from operations .................... 270,079 (260,708)
---------- ----------
Distributions declared from:
Net investment income ............................................................. (5,317) (15,271)
In excess of net investment income ................................................ -- (1,681)
---------- ----------
Total distributions ................................................................ (5,317) (16,952)
---------- ----------
Fund share transactions:
Proceeds from fund shares sold .................................................... 1,874,756 2,048,369
Cost of fund shares repurchased ................................................... (110,309) (5,637)
Distributions reinvested .......................................................... 5,317 16,952
---------- ----------
Net increase in net assets resulting from fund share transactions .................. 1,769,764 2,059,684
---------- ----------
Total increase in net assets ....................................................... 2,034,526 1,782,024
Net assets:
Beginning of year ................................................................. 1,782,024 --
---------- ----------
End of year ....................................................................... $3,816,550 $1,782,024
========== ==========
Accumulated overdistributed net investment income included in ending net assets $ (1,444) $ (1,681)
========== ==========
Analysis of changes in shares of beneficial interest:
Shares sold ....................................................................... 223,556 206,231
Shares repurchased ................................................................ (13,079) (739)
Distributions reinvested .......................................................... 621 2,028
---------- ----------
Net increase ....................................................................... 211,098 207,520
========== ==========
</TABLE>
* For the period from the commencement of operations May 19, 1998 to December
31, 1998.
See Notes to Financial Statements.
66
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Colonial Small Cap Value Fund, Variable Series, (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a non-diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended as an open-end management investment company.
The Fund's investment objective is to seek long-term growth by investing
primarily in smaller capitalization equities. The Fund's capitalization
consists of an unlimited number of shares of beneficial interest without par
value that represents a separate series of the Trust. Each share of the Fund
represents an equal proportionate beneficial interest in the Fund and, when
issued and outstanding, is fully paid and nonassessable. Shareholders would be
entitled to share proportionally in the net assets of the Fund available for
distribution to shareholders upon liquidation of the Fund. 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") offered by the separate accounts of the life
insurance companies ("Participating Insurance Companies"). Certain
Participating Insurance Companies are affiliated with the Investment Advisor
and sub-advisers to the Fund ("Affiliated Participating Insurance Companies").
Such Affiliated Participating Insurance Companies are Keyport Life Insurance
Company ("Keyport"), Independence Life & Annuity Company ("Independence") and
Liberty Life Assurance Company of Boston ("Liberty Life"). The Participating
Insurance Companies and their separate accounts own all the shares of the Fund.
Liberty Advisory Services Corp. (the "Manager") ("LASC"), provides investment
management and advisory services to the Fund pursuant to its Management
Agreements with the Trust. Colonial Management Associates, Inc. ("Colonial")
provides sub-advisory services. LASC has delegated various administrative
matters to Colonial. Keyport Financial Services Corp. ("KFSC") serves as the
principal underwriter of the Trust with respect to sales of shares to
Affiliated Participating Insurance Companies. The Manager, Colonial, KFSC,
Keyport and Independence are wholly-owned indirect subsidiaries of Liberty
Financial Companies, Inc. ("LFC"). As of December 31, 1999, Liberty Mutual
Insurance Companies ("Liberty Mutual") owned approximately 71% of the
outstanding voting shares of LFC. Liberty Life is a subsidiary of Liberty
Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Other--Corporate actions are recorded on the ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
67
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 2. Fees and Compensation Paid to Affiliates:
Management and Sub-Advisory fees--The Manager receives a monthly fee equal to
0.80% annually of the Fund's average daily net assets. The Manager, out of the
management fee it receives, pays Colonial a monthly sub-advisory fee equal to
0.60% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for
$27,000 annually plus 0.035% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent") an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (including
management fee) exceed 1.00% annually of the Fund's average daily net assets.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $3,088,017 and
$1,605,368, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $564,125
Gross unrealized depreciation (332,713)
--------
Net unrealized appreciation $231,412
--------
</TABLE>
Capital loss carryforwards--At December 31, 1999, capital loss carryforwards
(to the extent provided in regulations) to offset future realized gains were
approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
- ------------- -------------
<S> <C>
2006 $ 14,000
2007 229,000
--------
$243,000
--------
</TABLE>
Other--The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
68
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Year Ended Ended
December 31, December 31,
1999 1998***
-------------- --------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of year ................................ $ 8.59 $ 10.00
------ -------
Net investment income (a) ......................................... 0.02 0.08
Net realized and unrealized gains (losses) on investments ......... 0.52 (1.41)
------ -------
Total from investment operations .................................. 0.54 (1.33)
------ -------
Less distributions:
Dividends from net investment income ............................. (0.01) (0.07)
In excess of net investment income ............................... -- (0.01)
------- -------
Total distributions ............................................... (0.01) (0.08)
------- ---------
Net asset value, end of year ...................................... $ 9.12 $ 8.59
======= =========
Total return:
Total investment return (b)(c) .................................... 6.34% (13.25)%**
Ratios/supplemental data:
Net assets, end of year (000's) ................................... $ 3,817 $ 1,782
Ratio of expenses to average net assets (d)(e) .................... 1.00% 1.00%*
Ratio of net investment income to average net assets (d) .......... 0.23% 1.41%*
Portfolio turnover ratio .......................................... 74% 51%**
</TABLE>
* Annualized.
** Not annualized.
*** For the period from the commencement of operations May 19, 1998 to
December 31, 1998.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 3.66% and 4.32%
(annualized), respectively.
69
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Colonial Small Cap Value Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Small Cap Value Fund,
Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at
December 31, 1999, the results of its operations, the changes in its net assets
and the financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States. These financial
statements and the financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
70
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial Strategic Income Fund, Variable Series, seeks as high a level of
current income as is consistent with prudent risk and maximizing total return.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 7/5/94
Assuming reinvestment of all distributions
12-month total return ...................... 1.78%
Net asset value per share on 12/31/99 ......... $10.44
Net asset value per share on 12/31/98 ......... $11.08
</TABLE>
Portfolio Manager's Discussion
Carl C. Ericson is the portfolio manager of Colonial Strategic Income
Fund, Variable Series. Mr. Ericson is a senior vice president of Colonial
Management Associates, Inc. and director of the Taxable Fixed Income
Department.
What was the investment environment during 1999?
Across the globe bonds succumbed to the pressure of inflation worries,
rising interest rates and Y2K concerns. Stronger-than-expected U.S. economic
growth, combined with the rebound of the Japanese, European and emerging market
economies, prompted the Federal Reserve to raise interest rates by
three-quarters of a percentage point in what were deemed preemptive strikes
against potential inflation. As interest rates rose, Treasury bond yields
soared to 6.49% by year-end, up from 5.11% at the beginning of 1999. Bond
prices, which move in the opposite direction of their yields, posted
significant losses as a result.
Although Treasuries were hit hardest by rising interest rates, their
troubles spilled over into the high-yield corporate market and muted returns
there.
The performance of foreign bonds was mixed. European bond yields marched
higher and bond prices dropped in response to strengthening economic conditions
on that continent. Emerging market bonds, meanwhile, posted double-digit gains
as those regions stabilized and investor sentiment turned more favorable.
What was the Fund's strategy during the year?
The Fund remained committed to its strategy of diversifying among a broad
range of U.S. government, high-yield corporate and foreign bonds. While our
adherence to this approach meant that the Fund lost some ground in its Treasury
and foreign government holdings, it benefited from the rebound of emerging
market and high-yield bonds.
High-Yield Corporate Bonds
The Fund kept its largest weighting in high-yield corporate bonds (about
40% of total net assets), which helped performance. After posting relatively
weak performance in the first half of 1999, high-yield corporate bonds gathered
strength as the year wore on. The main drivers of their late-year comeback were
the strong economy--which translated into good financial performance for many
high-yield issuers--and a slowdown in supply. In the summer and early fall,
companies rushed to issue new debt in order to avoid any potential market
disruptions caused by Y2K concerns. By late fall, supply dwindled, demand
increased and the high-yield market firmed.
Thanks to the ongoing strength of the economy and improving commodity
prices, the Fund's cyclical holdings in paper, metal, chemical and auto
companies performed especially well. Paper companies Riverwood (0.6% of net
asset) and Repap (0.3% of net assets), as well as Kaiser Aluminum (0.3% of net
assets) each posted strong gains. We also enjoyed good, but more moderate,
gains from many cable holdings. Ongoing industry consolidation and the
convergence of broadcast and Internet services helped boost holdings such as
Charter Communications (0.5% of net assets), Avalon (0.4% of net assets) and
U.K.-based NTL (1.1% of net assets).
Foreign bonds
Foreign bonds represented 27.0% of net assets at year end. Emerging market
government bonds as a group posted gains in excess of 20% for 1999, and the
Fund's increased holdings in them benefited performance. Rising commodity
prices, stabilizing economic conditions and more enthusiastic investor
sentiment were the main reasons why our emerging markets holdings in Venezuela,
Russia, and Mexico were among our top winners in 1999.
To make way for more emerging market bonds, we sold some U.K. government
bonds. Although they posted decent performance for the first half, we sold them
when it appeared that the U.K. economy was on the mend and interest rates might
move higher in response. In contrast, we added Turkish bonds, in large part
because of its government's commitment to fight inflation and bring down
interest rates.
71
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series
- --------------------------------------------------------------------------------
U.S. Government Bonds
To adhere to our diversified approach, we maintained holdings in U.S.
Treasury bonds despite their disappointing 1999 performance. Eventually, the
Treasury market may become more favorable, and the Fund should benefit should
that occur.
What is your outlook for the year ahead?
We believe that current strong economic conditions could continue to put
upward pressure on interest rates in the United States. Given that, we wouldn't
be surprised if the Federal Reserve has another interest rate hike or so up its
sleeve. Beyond that, however, we think that higher interest rates will
eventually slow the economy. Slower economic growth could, in turn, set the
stage for a more favorable interest rate environment and better U.S. Treasury
bond performance. We also believe that high-yield corporate bonds can perform
well. Having never fully recovered from the near financial market meltdown of
1998, high-yield bonds are attractively priced and offer a yield advantage over
Treasuries not usually enjoyed in periods when the economy is so strong. As for
foreign government bonds, we think selected emerging markets offer good
higher-yielding opportunities, although most developed, higher-quality markets
remain unattractive. But no matter what the investing environment, we'll focus
on keeping the fund well diversified.
Strategic investing offers attractive income and total return opportunities,
but also involves certain risks. The value and return of your investment may
fluctuate as a result of changes in interest rates, the financial strength of
issuers of lower-rated bonds, foreign, political and economic developments, and
changes in currency exchange rates.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
- --------------------------------------------------------------------------------
Colonial Strategic Income Fund, Variable Series vs. Lehman Brothers Government/
Corporate Bond Index
Change in value of a $10,000 investment from 7/31/94--12/31/99
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
Life 1 Year 5 Years
<S> <C> <C>
8.26% 1.78% 8.88%
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Colonial Lehman
Strategic Brothers
Income Fund, Government/
Variable Corporate
Series Bond Index
<S> <C> <C> <C>
$17,000 7/94 10000 10000
$16,000 10050 10004
$15,000 10011 9853
$14,000 10051 9842
$13,000 9941 9824
$12,000 12/94 10030 9889
$11,000 10163 10079
$10,000 10409 10313
$ 9,000 10593 10382
10788 10527
11085 10968
6/95 11136 11056
11238 11013
11238 11154
11433 11268
11586 11433
11698 11622
12/95 11865 11793
12038 11866
11940 11615
11887 11517
11940 11438
11951 11418
6/96 12026 11570
12123 11597
12264 11568
12512 11773
12706 12048
13008 12269
12/96 13030 12133
12995 12148
13090 12173
12901 12028
13067 12204
13280 12318
6/97 13468 12465
13787 12847
13694 12703
13989 12902
14013 13109
14085 13178
12/97 14221 13317
14450 13504
14488 13477
14589 13519
14653 13587
14718 13732
6/98 14743 13872
14871 13883
14321 14154
14640 14559
14665 14456
15086 14542
12/98 15077 14579
15199 14682
15023 14333
15227 14404
15431 14440
15118 14292
6/99 15131 14247
15118 14207
15063 14196
15145 14324
15145 14361
15240 14352
12/99 15344 14264
</TABLE>
[END PLOT POINTS]
____ Colonial Strategic Income Fund, Variable Series
- ---- Lehman Governement/Corporate Bond Index
Past performance is no guarantee of future results. The Lehman Brothers
Government/Corporate Bond Index is an unmanaged index that tracks the
performance of a selection of U.S. government agency, Treasury and investment-
grade corporate bonds. Indexes are not investments, do not incur fees or
expenses and it is not possible to invest directly in an index. Performance
numbers reflect all Fund expenses, net of any voluntary waiver of expenses by
the Manager, but do not include insurance charges imposed by your insurance
company's separate accounts. If performance information included the effect of
these additional amounts, returns would be lower.
- --------------------------------------------------------------------------------
72
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------------------- ------------------
<S> <C> <C>
BONDS & NOTES--90.7%
Corporate Fixed Income Bonds & Notes--39.8%
Construction--0.2%
Building Construction
Falcon Building Products, Inc.
stepped coupon, (10.500%
06/15/02) (a) 6/15/07 ............................................... $ 500,000 $ 375,000
------------
Finance, Insurance & Real Estate--0.9%
Financial Services
Ameriserve Finance Trust,
12.000% 9/15/06 (b) ................................................. 375,000 307,500
Dresdner Funding Trust II,
5.790% 6/30/11 (b) .................................................. 500,000 458,392
PDVSA Finance Ltd., Series
1999 I, 9.750% 2/15/10 (b) .......................................... 810,000 775,575
------------
1,541,467
------------
Manufacturing--13.4%
Chemicals & Allied Products--2.6%
Agricultural Minerals Co., L.P.,
10.750% 9/30/03 ..................................................... 275,000 198,000
Allied Waste North America,
Inc., 10.000% 8/1/09 (b) ............................................ 1,250,000 1,112,500
Huntsman Corp., 9.500%
07/01/07 (b) ........................................................ 500,000 475,000
LaRoche Industries, Inc.,
9.500% 9/15/07 ...................................................... 500,000 135,000
Lyondell Chemical Co.,
10.875% 5/1/09 ...................................................... 325,000 342,875
PCI Chemicals Canada, Inc.,
9.250% 10/15/07 ..................................................... 250,000 192,500
Sterling Chemicals, Inc.:
11.250% 4/1/07 ...................................................... 600,000 438,000
11.750% 8/15/06 ....................................................... 225,000 168,750
Terra Industries, Inc., 10.500%
6/15/05 ............................................................. 410,000 295,200
Texas Petrochemical Corp.,
11.125% 7/1/06 ...................................................... 755,000 656,850
Trans Resources, Inc., 10.750%
3/15/08 ............................................................. 500,000 445,000
------------
4,459,675
------------
Electronic & Electrical Equipment--0.8%
Gentek, Inc., 11.000%
08/01/09 (b) ........................................................ 500,000 520,000
TransDigm, Inc., 10.375%
12/1/08 ............................................................. 1,000,000 880,000
------------
1,400,000
------------
</TABLE>
<TABLE>
<CAPTION>
Par Value
------------------- ------------------
<S> <C> <C>
Fabricated Metal--0.6%
Earle M. Jorgensen & Co.,
9.500% 4/1/05 ....................................................... $ 250,000 $ 240,000
Euramax International, PLC,
11.250% 10/01/06 (c) ................................................ 250,000 256,250
US Can Corp., 10.125%
10/15/06 ............................................................ 500,000 510,000
------------
1,006,250
------------
Food & Kindred Products--1.3%
Chattem, Inc., 8.875% 4/1/08 ........................................... 750,000 701,250
Di Giorgio Corp., 10.000%
6/15/07 ............................................................. 750,000 691,875
Premier International Foods
PLC, 12.000% 09/01/09 (b) ........................................... 750,000 746,250
------------
2,139,375
------------
Machinery & Computer Equipment--0.5%
IMO Industries, Inc., 11.750%
5/1/06 .............................................................. 425,000 425,000
Numatics, Inc., 9.625% 4/1/08 .......................................... 650,000 487,500
------------
912,500
------------
Measuring & Analyzing Instruments--0.2%
Envirosource, Inc. 9.750%
6/15/03 ............................................................. 500,000 320,000
------------
Miscellaneous Manufacturing--2.6%
Blount, Inc., 13.000%
8/1/09 (b) .......................................................... 250,000 263,750
Compass Aerospace Corp.,
10.125% 4/15/05 ..................................................... 750,000 412,500
ISG Resources, Inc., 10.000%
4/15/08 ............................................................. 580,000 493,000
Koppers Industries, Inc. 9.875%
12/1/07 ............................................................. 500,000 460,000
Moll Industries, Inc., 10.500%
7/1/08 .............................................................. 750,000 300,000
Owens-Illinois, Inc., 7.500%
5/15/10 ............................................................. 750,000 670,718
Simmons Co., 10.250% 3/15/09 750,000 710,625
Special Devices, Inc., 11.375%
12/15/08 ............................................................ 1,000,000 770,000
Tokheim Corp., 11.375% 8/1/08 435,000 295,800
------------
4,376,393
------------
Paper Products--1.3%
Georgia Gulf Corp., 10.375%
11/1/07 (b) ......................................................... 125,000 130,468
Repap New Brunswick, Inc.,
10.625% 4/15/05 ..................................................... 620,000 576,600
Riverwood International Corp.
10.625% 8/1/07 ...................................................... 500,000 517,500
10.875% 4/1/08 ...................................................... 500,000 495,000
</TABLE>
See Notes to Investment Portfolio.
73
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------------------- ------------------
<S> <C> <C>
Stone Container Corp., 10.750%
10/1/02 ............................................................... $ 500,000 $ 514,375
------------
2,233,943
------------
Primary Metal--1.7%
Bayou Steel Corp., 9.500%
5/15/08 ............................................................... 500,000 466,250
Kaiser Aluminum & Chemical
Corp., 10.875% 10/15/06 ............................................... 500,000 501,250
Keystone Consolidated
Industries, Inc., 9.625%
8/1/07 ................................................................ 500,000 440,000
Renco Metals, Inc., 11.500%
7/1/03 ................................................................ 500,000 410,000
WCI Steel Inc., 10.000% 12/1/04 500,000 510,000
WHX Corp. 10.500% 4/15/05 ................................................ 500,000 490,000
------------
2,817,500
------------
Printing & Publishing--0.3%
American Lawyer Media, Inc.,
9.750% 12/15/07 ....................................................... 500,000 485,000
------------
Rubber & Plastic--0.4%
Metromedia Fiber Network,
Inc., 10.000% 12/15/09 ................................................ 700,000 714,000
------------
Stone, Clay, Glass & Concrete--0.0%
Owens-Illinois, Inc., 8.100%
5/15/07 ............................................................... 75,000 71,625
------------
Transportation Equipment--1.1%
Collins & Aikman Products Co.,
11.500% 4/15/06 ....................................................... 500,000 495,000
Johnstown America Industries,
Inc. 11.750% 8/15/05 .................................................. 500,000 508,750
LDM Technologies, Inc.,
10.750% 1/15/07 ....................................................... 600,000 546,000
Venture Holdings Trust,
Series B, 9.500% 7/1/05 ............................................... 275,000 250,250
------------
1,800,000
------------
Mining & Energy--2.0%
Coal Mining--0.2%
AEI Resources, Inc., 10.500%
12/15/05 (b) .......................................................... 500,000 375,000
------------
Oil & Gas Extraction--1.8%
Belden & Blake Corp. 9.875%
6/15/07 ............................................................... 305,000 149,450
HS Resources, Inc., 9.250%
11/15/06 .............................................................. 775,000 767,250
Magnum Hunter Resources,
Inc. 10.000% 6/1/07 ................................................... 775,000 705,250
Mariner Energy, Inc. 10.500%
8/1/06 ................................................................ 500,000 471,250
Ocean Energy, Inc., 8.875%
7/15/07 ............................................................... 500,000 496,250
</TABLE>
<TABLE>
<CAPTION>
Par Value
------------------- ------------------
<S> <C> <C>
Vintage Petroleum, Inc., 9.750%
6/30/09 ............................................................... $ 500,000 $ 512,500
------------
3,101,950
------------
Retail Trade--0.3%
Food Stores
Pathmark Stores, Inc.:
9.625% 5/1/03 ......................................................... 650,000 487,500
10.750% 11/1/03 ....................................................... 500,000 55,000
------------
542,500
------------
Services--4.0%
Amusement & Recreation--2.1%
Boyd Gaming Corp., 9.500%
7/15/07 ............................................................... 375,000 371,250
Coast Hotels & Casinos, Inc.,
9.500% 4/1/09 ......................................................... 550,000 533,500
Hollywood Casino Corp.,
11.250% 5/1/07 ........................................................ 600,000 621,000
Hollywood Park, Inc. 9.250%
2/15/07 ............................................................... 750,000 744,375
Horseshoe Gaming, L.L.C.
9.375% 6/15/07 ........................................................ 600,000 597,000
Mohegan Tribal Gaming
Authority, 8.750% 1/1/09 .............................................. 275,000 272,938
Regal Cinemas, Inc., 9.500%
6/1/08 ................................................................ 620,000 480,500
------------
3,620,563
------------
Business Services--0.3%
Unisys Corp., 11.750% 10/15/04 500,000 547,500
------------
Health Services--0.7%
Hanger Orthopedic Group,
Inc., 11.250% 6/15/09 ................................................. 500,000 513,750
Tenet Healthcare Corp., 8.625%
1/15/07 ............................................................... 750,000 721,875
------------
1,235,625
------------
Hotels, Camps & Lodging--0.8%
CapRock Communications
Corp., 11.500% 5/1/09 ................................................. 750,000 761,250
Eldorado Resorts L.L.C.
10.500% 8/15/06 ....................................................... 500,000 511,875
------------
1,273,125
------------
Other Services--0.1%
Intertek Finance, PLC, 10.250%
11/1/06 ............................................................... 250,000 230,000
------------
Transportation, Communication, Electric, Gas &
Sanitary Services--18.8%
Air Transportation--0.3%
U.S. Air, Inc., 10.375% 3/1/13 ........................................... 500,000 481,250
------------
</TABLE>
See Notes to Investment Portfolio.
74
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------------------- ------------------
<S> <C> <C>
Broadcasting--1.7%
Allbritton Communications Co.,
9.750% 11/30/07 ..................................................... $ 500,000 $ 500,000
Cumulus Media, Inc., 10.375%
7/1/08 .............................................................. 250,000 261,250
Fox Family Worldwide, Inc.,
9.250% 11/1/07 ...................................................... 750,000 697,500
LIN Holding Corp. stepped
coupon, (10.000% 03/01/03)
(a) 3/1/08 .......................................................... 500,000 337,500
Sinclair Broadcast Group, Inc.,
9.000% 7/15/07 ...................................................... 500,000 470,000
Young Broadcasting Corp.,
11.750% 11/15/04 .................................................... 650,000 678,438
------------
2,944,688
------------
Cable--5.8%
Adelphia Communications
Corp., 9.875% 3/1/07 ................................................ 500,000 507,500
Avalon Cable Holdings, 9.375%
12/1/08 ............................................................. 750,000 757,500
Bresnan Communications
Group L.L.C., stepped
coupon, (9.250% 02/01/04)
(a) 2/1/09 .......................................................... 3,000,000 2,077,500
Charter Communications
Holding L.L.C., stepped
coupon, (9.920% 04/01/04)
(a) 4/1/11 .......................................................... 1,500,000 879,375
Comcast UK Cable Partners
Ltd., stepped coupon,
(11.200% 11/15/00) (a)
11/15/07 ............................................................ 500,000 476,250
Diamond Cable Co., stepped
coupon, (10.750% 02/15/02)
(a) 2/15/07 ......................................................... 500,000 410,000
EchoStar DBS Corp., 9.250%
2/1/06 .............................................................. 1,000,000 1,007,500
FrontierVision Holdings L.P.
stepped coupon, (11.875%
09/15/01) (a) 9/15/07 ............................................... 500,000 445,000
NTL, Inc.:
stepped coupon:
(11.000% 10/01/00) (a)
10/1/07 ............................................................ 250,000 175,625
(9.750% 04/15/04) (a)
4/15/09 ............................................................ 1,250,000 1,156,092
11.500% 10/1/08 ....................................................... 500,000 542,500
Northland Cable Television,
Inc. 10.250% 11/15/07 ............................................... 500,000 501,250
</TABLE>
<TABLE>
<CAPTION>
Par Value
------------------- ------------------
<S> <C> <C>
Telewest Communication PLC,
stepped coupon, (11.000%
10/01/00) (a) 10/1/07 (c) ........................................... $1,000,000 $ 935,000
------------
9,871,092
------------
Communications--1.7%
Call-Net Enterprises, Inc.,
stepped coupon, (10.800%
05/15/04) (a) 5/15/09 ............................................... 500,000 240,000
Centennial Cellular Corp.,
10.750% 12/15/08 .................................................... 375,000 402,188
Exodus Communications, Inc.,
10.750% 12/15/09 (b) ................................................ 260,000 264,550
Loral Space & Communications
Ltd., 11.250% 1/15/07 ............................................... 110,000 82,500
PSINet, Inc., 11.000% 8/1/09 ........................................... 500,000 512,500
Spectrasite Holdings, Inc.,
stepped coupon, (11.250%
04/15/04) (a) 4/15/09 ............................................... 1,250,000 668,750
Verio, Inc.,11.250% 12/1/08 ............................................ 750,000 787,500
------------
2,957,988
------------
Electric Services--0.5%
The AES Corp., 9.500% 6/1/09 ........................................... 780,000 790,725
------------
Motor Freight & Warehousing--0.3%
MTL, Inc., 10.000% 6/15/06 ............................................. 500,000 440,000
------------
Pipelines--0.2%
Falcon Holding Group L.P.,
stepped coupon, (9.285%
04/15/03) (a) 4/15/10 ............................................... 500,000 361,875
------------
Telecommunications--8.2%
AirGate PCS, Inc., stepped
coupon, (13.500% 10/01/04)
(a) 10/1/09 ......................................................... 350,000 194,250
Carrier1 International SA,
13.250% 2/15/09 ..................................................... 500,000 510,000
Clearnet Communications, Inc.,
stepped coupon, (14.750%
12/15/00) (a) 12/15/05 .............................................. 500,000 492,500
Global Crossing Holding Ltd.,
9.125% 11/15/06 (b) ................................................. 580,000 573,475
Hyperion Telecommunications,
Inc., stepped coupon,
(13.000% 04/15/01) (a)
4/15/03 ............................................................. 150,000 135,000
ICG Holding, Inc., stepped
coupon, (13.500% 09/15/00)
(a) 9/15/05 ......................................................... 500,000 437,930
</TABLE>
See Notes to Investment Portfolio.
75
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------------- ---------------
<S> <C> <C>
Intermedia Communications,
Inc., stepped coupon,
(11.250% 07/15/02) (a)
7/15/07 ........................... $ 500,000 $ 370,000
Jazztel PLC, 13.250% 12/15/09 (e)..... 250,000 252,845
KMC Telecom Holdings Inc.,
13.500% 5/15/09 (b) ............... 750,000 750,000
Level 3 Communications, Inc.,
9.125% 5/1/08 ..................... 1,405,000 1,329,481
McLeodUSA, Inc. stepped
coupon, (10.500% 03/01/02)
(a) 3/1/07 ........................ 500,000 410,000
Metrocall, Inc., 10.375%
10/01/07 .......................... 500,000 300,000
Microcell Telecommunications,
Inc., stepped coupon,
(14.000% 12/01/01) (a)
6/1/06 ............................ 500,000 442,500
Nextlink Communications, Inc.:
10.750% 11/15/08 .................. 500,000 517,500
10.750% 6/1/09 .................... 1,000,000 1,037,500
Nextel Communications, Inc.:
stepped coupon, (9.750%
10/31/02) (a) 10/31/07 ............ 1,000,000 722,500
9.375% 11/15/09 (b) ............... 1,000,000 982,500
Ono Finance PLC, 13.000%
5/1/09 (b) ........................ 500,000 570,000
RCN Corp., stepped coupon,
(11.125% 10/15/02) (a)
10/15/07 .......................... 1,000,000 710,000
Sprint Spectrum L.P., stepped
coupon, (12.500% 08/15/01)
(a) 8/15/06 ....................... 850,000 792,625
TeleCorp PCS, Inc., stepped
coupon, (11.625% 04/15/04)
(a) 4/15/09 ....................... 1,500,000 945,000
Viatel, Inc., 11.500% 3/15/09 ........ 500,000 507,500
Williams Communications
Group, Inc., 10.875% 10/1/09 750,000 785,625
Worldwide Fiber, Inc., 12.000%
8/1/09 (b) ........................ 250,000 258,125
------------
14,026,856
------------
Wholesale Trade--0.3%
Durable Goods--0.2%
Holmes Products Corp., 9.875%
11/15/07 .......................... 500,000 365,000
------------
Nondurable Goods--0.1%
Revlon Consumer Products
Corp., 9.000% 11/1/06 ............. 180,000 135,000
------------
Total Corporate Fixed Income Bonds & Notes
(cost of $70,311,442) .............................. 67,953,465
------------
</TABLE>
<TABLE>
<CAPTION>
Currency Par Value
---------- ---------------- -------------
<S> <C> <C> <C>
Foreign Government & Agency Obligations--27.0%
French O.A.T. 8.500%
4/25/03 ................... FF $ 295,000 $ 330,803
Government of France,
8.500% 10/25/08 ........... FF 1,472,400 1,807,987
Government of Mexico,
11.375% 09/15/16 (d) ...... 3,925,000 4,441,530
Government of New
Zealand, 8.000%
11/15/06 .................. NZ 4,478,000 2,442,366
Hellenic Republic:
8.600% 3/26/08 ............ GD 460,500,000 1,591,293
8.800% 6/19/07 ............ GD 145,000,000 501,280
8.900% 3/21/04 ............ GD 1,058,000,000 3,515,695
Norwegian Government
Bonds:
6.750% 1/15/07 ............ NK 4,070,000 525,472
9.500% 10/31/02 ............. NK 23,025,000 3,123,224
Poland Non-US GLB
Bearer PDI,
5.000% 10/27/14 ........... PZ 350,000 309,750
Republic of Argentina
Global,
11.000% 10/9/06 (e) ....... 350,000 347,375
Republic of Argentina:
11.250% 4/10/06 (f) ....... DM 1,375,000 735,786
11.375% 01/30/17 (e) ...... 2,205,000 2,199,488
Republic of Brazil:
10.125% 05/15/27 (g) ...... 4,086,000 3,505,788
14.500% 10/15/09 (g) ...... 1,195,000 1,320,475
Republic of Bulgaria,
6.500% 7/28/11 (h) ........ 3,250,000 2,563,438
Republic of Panama,
8.875% 09/30/27 (i) ....... 2,028,000 1,703,520
Republic of Turkey:
11.875% 11/5/04 (j) ....... 1,060,000 1,097,100
12.375% 6/15/09 (j) ....... 1,185,000 1,270,913
Republic of Venezuela,
9.250% 9/15/27 (k) ........ 3,320,000 2,191,200
Russian Federation,
11.000% 07/24/18 (l) ...... 1,949,000 1,179,145
Swedish Government
Bonds, 10.250% 5/5/03 ..... SK 9,200,000 1,240,165
Treasury Corp. of Victoria:
12.000% 9/22/01 ........... A$ 1,590,000 1,136,432
12.500% 10/15/03 .......... A$ 888,000 690,613
United Kingdom Treasury:
10.000% 2/26/01 ........... KB 1,295,000 2,175,546
10.000% 9/8/03 ............ KB 1,418,000 2,559,946
United Mexican States,
10.375% 01/29/03 (m) ...... DM 1,550,000 867,314
</TABLE>
See Notes to Investment Portfolio.
76
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Currency Par Value
---------- ------------- --------------
<S> <C> <C> <C>
Western Australia Treasury
Corp., 8.000% 10/15/07..... A$ $ 999,000 $ 682,721
-----------
Total Foreign Government & Agency Obligations
(cost of $49,523,114) ............................ 46,056,365
-----------
US Government & Agency Obligations--23.0%
Federal Home Loan
Mortgage Float 3/00
5.556% 3/1/00 ............. 1,600,000 1,600,000
Federal Home Loan
Mortgage Corporation,
Gold 30 Yr. 8.000%
10/1/26 ................... 1,070,647 1,081,011
Government National
Mortgage Association
Seasoned 30 Yr., 8.000%
4/15/17 ................... 836,416 854,499
U.S. Treasury Bonds:
8.750% 5/15/17 ............ 5,231,000 6,247,749
11.625% 11/15/04 .......... 8,119,000 9,806,209
12.000% 8/15/13 ........... 7,088,000 9,464,677
U.S. Treasury Notes,
11.875% 11/15/03 .......... 8,694,000 10,261,615
-----------
Total U.S. Government & Agency Obligations
(cost of $41,815,899) ............................ 39,315,760
-----------
COLLATERALIZED MORTGAGE--0.2%
Air Transportation--0.2%
United Airlines, Inc.,
(cost of $270,490)
9.200% 3/22/08 ............ 248,215 260,127
-------
MUNICIPAL BONDS--0.7%
Education--0.7%
Student Loan Marketing
Association,
(cost of $1,198,727)
5.286% 1/20/00 ............ 1,200,000 1,200,000
-----------
Total Bonds & Notes
(cost of $163,119,672) ........................... 154,785,717
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------------ ------------------
<S> <C> <C>
PREFERRED STOCKS--1.0%
Transportation, Communication, Electric,
Gas & Sanitary Services--1.0%
Broadcasting--0.1%
Granite Broadcasting Corp.
12.75% PIK ............................................................ 130 $ 132,600
------------
Cable--0.8%
CSC Holdings Limited:
11.125% PIK ........................................................... 7,601 830,386
11.750% PIK ........................................................... 4,408 484,879
------------
1,315,265
------------
Communications--0.1%
Dobson Communication Corp.
12.250% PIK ........................................................... 170 177,875
------------
Total Preferred Stocks
(cost of $1,633,995) ..................................................................... 1,625,740
------------
COMMON STOCKS (n)--0.2%
Services--0.0%
Health Services--0.0%
AirGate PCS, Inc. ........................................................ 350 40,600
------------
Transportation, Communication, Electric,
Gas & Sanitary Services--0.2%
Telecommunication
Carrier 1 International .................................................. 500 10,000
Price Communications Corp. ............................................... 11,833 329,091
------------
339,091
------------
Total Common Stocks
(cost of $149,835) ....................................................................... 379,691
------------
WARRANTS (n)--0.0%
Retail Trades--0.0%
Food Stores
Ono Finance PLC
(cost of $84,475) ..................................................... 500 (o)
--------------
Total Investments--91.9%
(cost of $164,987,977) (p) ............................................................... 156,791,148
------------
</TABLE>
<TABLE>
<CAPTION>
Par
-----
<S> <C> <C>
SHORT-TERM OBLIGATIONS--5.4%
Repurchase agreement with
SBC Warburg Ltd., dated
12/31/99, due 1/3/00 at
2.500%, collateralized by U.S.
Treasury bonds and/or notes
with various maturities to
2021, market value
$9,481,007 (repurchase
proceeds $9,290,935) .................................................. $9,289,000 9,289,000
------------
</TABLE>
See Notes to Investment Portfolio.
77
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
---------------
<S> <C>
Forward Currency Contracts (q)--0.0% $ 30,494
------------
Other Asset & Liabilities, Net--2.7% 4,590,900
------------
Net Assets--100.0% ................ $170,701,542
============
</TABLE>
Notes to Investment Portfolio:
(a) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1999, the value of these securities amounted to $8,563,085 or 5.0% of net
assets.
(c) This is a British security. Par amount is stated in U.S. dollars.
(d) This is a Mexican security. Par amount is stated in U.S. dollars.
(e) This is an Argentinean security. Par amount is stated in U.S. dollars.
(f) This is an Argentinean security. Par amount is stated in German
Deutschemarks.
(g) This is a Brazilian security. Par amount is stated in U.S. dollars.
(h) This is a Bulgarian security. Par amount is stated in U.S. dollars.
(i) This is a Panamanian security. Par amount is stated in U.S. dollars.
(j) This is a Turkish security. Par amount is stated in U.S. dollars.
(k) This is a Venezuelan security. Par amount is stated in U.S. dollars.
(l) This is a Russian security. Par amount is stated in U.S. dollars.
(m) This is a Mexican security. Par amount is stated in German
Deutschemarks.
(n) Non-income producing.
(o) Rounds to less than one.
(p) Cost for federal income tax purposes is $165,233,332.
(q) As of December 31, 1999, the Fund had entered into the following forward
currency exchange contracts:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (U.S$)
- ---------------- --------------- ------------ ---------------
<S> <C> <C> <C>
SK 6,800,000 US$ 837,181 02/07/2000 $ 36,463
NZ 4,752,000 US$ 2,432,140 02/07/2000 (58,266)
KB 2,015,000 US$ 3,310,321 02/07/2000 54,679
---------
$ 32,876
=========
</TABLE>
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Receive For Date (U.S$)
- ---------------- ------------- ------------ ---------------
<S> <C> <C> <C>
SK 1,470,000 US$ 173,940 02/07/2000 $ (843)
KB 173,000 US$ 281,056 02/07/2000 (1,539)
--------
$ (2,382)
========
</TABLE>
Summary of Securities by Country
<TABLE>
<CAPTION>
% of Total
Country Securities
Country Abbrev. Value at Value
- --------------------------------- --------- ---------------- -----------
<S> <C> <C> <C>
United States ................. $ 110,734,783 70.6
Greece ........................ Gr 5,608,268 3.6
Mexico ........................ Mx 5,308,844 3.4
Brazil ........................ Bz 4,826,263 3.1
United Kingdom ................ UK 4,735,492 3.0
Norway ........................ No 3,648,696 2.3
Argentina ..................... Ar 3,282,649 2.1
Bulgaria ...................... Bu 2,563,438 1.6
Australia ..................... Au 2,509,766 1.6
New Zealand ................... NZ 2,442,366 1.6
Turkey ........................ Tu 2,368,013 1.5
Venezuela ..................... Ve 2,191,200 1.4
France ........................ Fr 2,138,790 1.4
Panama ........................ Pa 1,703,520 1.1
Sweden ........................ Sw 1,240,165 0.8
Russia ........................ Ru 1,179,145 0.7
Poland ........................ Po 309,750 0.2
------------- -----
$ 156,791,148 100.0
============= =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
- ----------- --------------------
<S> <C>
PIK Payment-In-Kind
SK Swedish Krona
NZ New Zealand Dollars
KB British Pounds
</TABLE>
See Notes to Financial Statements.
78
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $164,987,977) ......................... $156,791,148
Short-term obligations .............................................................. 9,289,000
Unrealized appreciation on forward currency exchange contracts ...................... 91,142
Receivable for fund shares sold ..................................................... 1,048,426
Interest and tax reclaims receivable ................................................ 3,676,743
Other assets ........................................................................ 3,123
------------
Total assets ...................................................................... 170,899,582
------------
Liabilities:
Unrealized depreciation on forward currency exchange contracts ...................... 60,648
Cash (including foreign currencies) ................................................. 11,236
Payable for fund shares repurchased ................................................. 68,388
Management fee payable .............................................................. 5
Accrued expenses payable ............................................................ 34,883
Other liabilities ................................................................... 22,880
------------
Total liabilities ................................................................. 198,040
------------
Net assets .......................................................................... $170,701,542
============
Net assets represented by:
Paid-in capital .................................................................... $180,986,498
Accumulated overdistributed net investment income .................................. (130,069)
Accumulated net realized losses on investments and foreign currency transactions ... (1,960,417)
Net unrealized depreciation on investments and foreign currency transactions ....... (8,194,470)
------------
Total net assets applicable to outstanding shares of beneficial interest ............ $170,701,542
============
Shares of beneficial interest outstanding ........................................... 16,349,902
============
Net asset value per share ........................................................... $ 10.44
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Interest ................................................................................. $ 13,796,249
Dividends ................................................................................ 149,306
------------
Total investment income (net of nonrebatable foreign taxes withheld at source which
amounted to $1,528) ................................................................... 13,945,555
------------
Expenses:
Management fee .......................................................................... 971,490
Bookkeeping fee ......................................................................... 63,800
Transfer agent fee ...................................................................... 7,500
Audit fee ............................................................................... 25,852
Printing expense ........................................................................ 2,773
Legal fee ............................................................................... 1,050
Trustees' expense ....................................................................... 12,178
Custodian fee ........................................................................... 24,832
Amortization of organization expense .................................................... 2,016
Miscellaneous expense ................................................................... 6,380
------------
Total expenses ......................................................................... 1,117,871
------------
Net investment income .................................................................... 12,827,684
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized losses on investments ...................................................... (1,977,990)
Net realized gains on foreign currency transactions ..................................... 59,109
Net change in unrealized appreciation/depreciation on investments and foreign currency (8,255,332)
transactions ------------
Net increase in net assets resulting from operations ..................................... $ 2,653,471
============
</TABLE>
See Notes to Financial Statements.
79
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ............................................................. $ 12,827,684 $ 7,211,578
Net realized losses on investments ................................................ (1,977,990) (279,638)
Net realized gains on foreign currency transactions ............................... 59,109 148,693
Net change in unrealized appreciation/depreciation on investments and foreign
currency transactions ............................................................ (8,255,332) (1,654,357)
------------- -------------
Net increase in net assets resulting from operations ............................... 2,653,471 5,426,276
------------- -------------
Distributions declared from:
Net investment income ............................................................. (12,580,994) (7,211,578)
In excess of net investment income ................................................ -- (185,797)
------------- -------------
Total distributions ................................................................ (12,580,994) (7,397,375)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold .................................................... 68,528,972 95,188,698
Cost of fund shares repurchased ................................................... (19,466,196) (54,804,696)
Distributions reinvested .......................................................... 12,580,994 7,397,375
------------- -------------
Net increase in net assets resulting from fund share transactions .................. 61,643,770 47,781,377
------------- -------------
Total increase in net assets ....................................................... 51,716,247 45,810,278
Net assets:
Beginning of year ................................................................. 118,985,295 73,175,017
------------- -------------
End of year ....................................................................... $ 170,701,542 $ 118,985,295
============= =============
Accumulated overdistributed net investment income included in ending net assets $ (130,069) $ (105,456)
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ....................................................................... 6,168,168 17,374,862
Shares repurchased ................................................................ (1,753,858) (13,873,330)
Distributions reinvested .......................................................... 1,201,623 667,431
------------- -------------
Net increase ....................................................................... 5,615,933 4,168,963
============= =============
</TABLE>
See Notes to Financial Statements.
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Colonial Strategic Income Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek a high level of current income, as
is consistent with prudent risk and maximizing total return, by investing
primarily in U.S. and foreign government and lower-rated corporate debt
securities. The Fund's capitalization consists of an unlimited number of shares
of beneficial interest without par value that represents a separate series of
the Trust. Each share of the Fund represents an equal proportionate beneficial
interest in the Fund and, when issued and outstanding, is fully paid and
nonassessable. Shareholders would be entitled to share proportionally in the
net assets of the Fund available for distribution to shareholders upon
liquidation of the Fund. 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") offered
by the separate accounts of the life insurance companies ("Participating
Insurance Companies"). Certain Participating Insurance Companies are affiliated
with the Investment Advisor and sub-advisors to the Fund ("Affiliated
Participating Insurance Companies"). Such Affiliated Participating Insurance
Companies are Keyport Life Insurance Company ("Keyport"), Independence Life &
Annuity Company ("Independence") and Liberty Life Assurance Company of Boston
("Liberty Life"). The Participating Insurance Companies and their separate
accounts own all the shares of the Fund. Liberty Advisory Services Corp. (the
"Manager") ("LASC"), provides investment management and advisory services to
the Fund pursuant to its Management Agreements with the Trust. Colonial
Management Associates, Inc. ("Colonial") provides sub-advisory services. LASC
has delegated various administrative matters to Colonial. Keyport Financial
Services Corp. ("KFSC") serves as the principal underwriter of the Trust with
respect to sales of shares to Affiliated Participating Insurance Companies. The
Manager, Colonial, KFSC, Keyport and Independence are wholly-owned indirect
subsidiaries of Liberty Financial Companies, Inc. ("LFC"). As of December 31,
1999, Liberty Mutual Insurance Companies ("Liberty Mutual") owned approximately
71% of the outstanding voting shares of LFC. Liberty Life is a subsidiary of
Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case
of unlisted or listed securities for which there were no sales during the day,
at current quoted bid prices.
Foreign currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
The value of additional securities received as an interest or dividend payment
is recorded as income and as the cost basis of such securities.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to
81
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
reflect income and gains available for distribution (or available capital loss
carryforwards) under income tax regulations.
Foreign currency transactions--Net realized and unrealized gains (losses) on
foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency,
and currency gains (losses) between the accrual and payment dates on dividends
and interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
Forward currency contracts--The Fund may enter into forward currency contracts
to purchase or sell foreign currencies at predetermined exchange rates in
connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While the maximum potential loss from such contracts is the
aggregate face value in U.S. dollars at the time the contract was opened,
exposure is typically limited to the change in value of the contract (in U.S.
dollars) over the period it remains open. Risks may also arise if
counterparties fail to perform their obligations under the contracts.
Other--Corporate actions are recorded on ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of
all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 3. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal to
0.65% annually of the Fund's average daily net assets. The Manager, out of the
management fee it receives, pays Colonial a monthly sub-advisory fee equal to
0.45% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for
$27,000 annually plus 0.035% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent") an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (including
management fee) exceed 0.80% annually of the Fund's average daily net assets.
For the year ended December 31, 1999, the Fund's operating expenses, as defined
above, did not exceed the 0.80% expense limit.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 4. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $104,281,541 and
$50,471,809, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 2,639,064
Gross unrealized depreciation (11,081,248)
-----------
Net unrealized depreciation $(8,442,184)
-----------
</TABLE>
Capital loss carryforwards--At December 31, 1999, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
- ------------- -------------
<S> <C>
2006 $102,000
2007 845,000
--------
$947,000
--------
</TABLE>
Other--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse
political and economic developments and the possible prevention of foreign
currency exchange or the imposition of other foreign governmental laws or
restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
82
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ............... $ 11.08 $ 11.15 $ 11.04 $ 10.99 $ 9.79
------- ------- -------- -------- --------
Net investment income (a) ........................ 0.95 0.91 0.90 0.92 0.55
Net realized and unrealized gains (losses)
on investments and foreign currency
transactions .................................... (0.75) (0.24) 0.11 0.16 1.24
-------- -------- -------- -------- --------
Total from investment operations ................. 0.20 0.67 1.01 1.08 1.79
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ............ (0.84) (0.72) (0.79) (0.96) (0.56)
In excess of net investment income .............. -- (0.02) (0.05) -- --
Distributions from net realized gains ........... -- -- (0.05) (0.07) (0.03)
In excess of net realized gains ................. -- -- (0.01) -- --
-------- -------- -------- -------- --------
Total distributions .............................. (0.84) (0.74) (0.90) (1.03) (0.59)
-------- -------- -------- -------- --------
Net asset value, end of year ..................... $ 10.44 $ 11.08 $ 11.15 $ 11.04 $ 10.99
======== ======== ======== ======== ========
Total return:
Total investment return (b) ...................... 1.78% 6.03% 9.11%(c) 9.83%(c) 18.30%(c)
Ratios/supplemental data:
Net assets, end of year (000's) .................. $170,702 $118,985 $ 73,175 $ 53,393 $ 48,334
Ratio of expenses to average net assets (e) 0.75% 0.78% 0.80%(d) 0.80%(d) 0.84%(d)
Ratio of net investment income to average
net assets (e) .................................. 8.57% 7.92% 7.86%(c) 8.13%(c) 8.08%(c)
Portfolio turnover ratio ......................... 35% 50% 94% 114% 281%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, these ratios would have been 0.82%, 0.86%
and 0.94%, respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
83
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Colonial Strategic Income Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Strategic Income Fund,
Variable Series (the "Fund") (a series of Liberty Variable Investment Trust)
at December 31, 1999, the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with accounting principles generally accepted in the United States. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
84
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial U.S. Growth & Income Fund, Variable
Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial U.S. Growth & Income Fund, Variable Series(1), seeks long-term
growth and income.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 7/5/94
Assuming reinvestment of all distributions
12-month total return ...................... 12.00%
Net asset value per share on 12/31/99 ......... $ 19.85
Net asset value per share on 12/31/98 ......... $ 18.79
</TABLE>
Portfolio Manager's Discussion
Mark Stoeckle is portfolio manager of Colonial U.S. Growth & Income Fund,
Variable Series and is a senior vice president of Colonial Management
Associates, Inc.
What was the investment environment like over the past 12 months?
U.S. equity markets continued their upward trend in 1999, despite a
significant rise in interest rates. The stock market was sharply divided,
however, between the performance of growth stocks versus value stocks, with
growth stocks continuing their strong performance and value stocks continuing
to struggle.
What was the Fund's strategy during the period?
The portfolio was underweighted in technology and consumer cyclicals--both
of which performed very well in the final quarter of the year. Our technology
holdings had about the same return as the technology sector in the S&P 500
Index, but the Fund's percentage of technology holdings was less than the
percentage in the S&P 500. We reduced our technology stocks at the beginning of
the fourth quarter because we have been very concerned about the extremely high
valuation levels that many of these stocks had reached.
What is your outlook for the period ahead?
The economic and stock market outlook for the coming year will depend in
large part on what happens with interest rates, which most analysts agree will
increase in the first six months of the year. If the Federal Reserve Board
raises short-term rates dramatically, it could have a significant impact on
stock prices. However, corporate profits for the fourth quarter of 1999, as
well as for the year as a whole, are expected to be very strong. This should
help keep the economy growing at a solid rate, which would be good for the
stock market. Whatever happens, we will continue to monitor the market and the
economy and make adjustments where appropriate.
(1) An investment in the Fund offers significant long-term growth potential, but
also involves certain risks. The Fund may be affected by stock market
fluctuations that occur in response to economic and business developments.
Changes in interest rates, changes in the financial strength of issuers of
lower rated bonds, foreign, political and economic developments also may
affect Fund performance.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
85
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial U.S. Growth & Income Fund, Variable
Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Colonial U.S. Growth & Income Fund, Variable Series vs. S&P 500 Index
Change in value of a $10,000 investment from 7/31/94--12/31/99
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
Life 1 Year 5 Years
<S> <C> <C>
21.64% 12.00% 22.97%
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Colonial U.S.
Growth & Income
Fund, Variable S&P 500
Series Index
<S> <C> <C> <C>
$40,000 7/94 10000 10000
$30,000 10400 10409
$20,000 10195 10155
$10,000 10361 10382
$ 0 9991 10005
12/94 10176 10153
10434 10416
10850 10821
11138 11140
11366 11467
11772 11925
6/95 12029 12202
12446 12606
12396 12637
12812 13170
12762 13123
13247 13698
12/95 13198 13962
13551 14437
13818 14571
13892 14711
14405 14927
14746 15311
6/96 14426 15369
13732 14690
14191 15000
14885 15843
15259 16280
16348 17509
12/96 16080 17162
17255 18233
17243 18377
16554 17624
17436 18674
18432 19185
6/97 19132 20697
20659 22342
19946 21091
20975 22245
20014 21502
20829 22498
12/97 21262 22884
21496 23136
22984 24804
24144 26074
24132 26340
23531 25887
6/98 24433 26938
23949 26653
20048 22801
20974 24263
22763 26233
24147 27823
12/98 25550 29425
26217 30655
25171 29702
25986 30890
26706 32086
26353 31328
6/99 27890 33067
27195 32035
26896 31875
25971 31002
27005 32964
27358 33633
12/99 28610 35610
</TABLE>
[END PLOT POINTS]
____ Colonial U.S. Growth & Income Stock Fund, Variable Series ---- S&P 500
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The Standard & Poor's 500 Index is an unmanaged
index that tracks the performance of a selection of widely held common stocks.
Indexes are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
86
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Colonial U.S. Growth and Income Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------------------- --------------
<S> <C> <C>
COMMON STOCKS--92.0%
Agriculture, Forestry & Fishing--0.2%
Forestry
Canadian National Railway Co. 19,300 $ 507,831
------------
Finance, Insurance & Real Estate--16.7%
Depository Institutions--5.1%
BankAmerica Corp. ...................................................... 34,800 1,746,525
Chase Manhattan Corp. .................................................. 30,700 2,385,006
City National Corp. .................................................... 18,300 602,756
First Union Corp. ...................................................... 7,000 229,688
FleetBoston Financial Corp. ............................................ 23,200 807,650
Golden West Financial Corp. ............................................ 13,500 452,250
J.P. Morgan & Co., Inc. ................................................ 4,600 582,475
MBNA Corp. ............................................................. 23,100 629,475
PNC Bank Corp. ......................................................... 21,700 965,650
Sovereign Bancorp, Inc. ................................................ 73,200 545,569
UnionBanCal Corp. ...................................................... 22,500 887,344
Washington Mutual, Inc. ................................................ 31,300 813,800
Wells Fargo & Co. ...................................................... 4,800 194,100
------------
10,842,288
------------
Financial Services--0.4%
Financial Security Assurance
Holdings Ltd. ....................................................... 17,500 912,188
------------
Insurance Carriers--6.6%
Allstate Corp. ......................................................... 17,800 427,200
Ambac Financial Group, Inc. ............................................ 26,100 1,362,094
American International Group,
Inc. ................................................................ 13,400 1,448,875
Citigroup, Inc. ........................................................ 61,450 3,414,316
Loews Corp. ............................................................ 6,400 388,400
MGIC Investment Corp. .................................................. 9,500 571,781
Nationwide Financial Services,
Class A ............................................................. 34,000 949,875
PMI Group, Inc. ........................................................ 14,900 727,306
St. Paul Cos., Inc. .................................................... 5,800 195,388
Travelers Property Casualty
Corp. ............................................................... 36,700 1,256,975
United Healthcare Corp. ................................................ 30,700 1,630,938
Wellpoint Health Networks,
Inc., Class A ....................................................... 23,600 1,556,125
------------
13,929,273
------------
Nondepository Credit Institutions--2.7%
American Express Co. ................................................... 7,200 1,197,000
Associates First Capital Corp. ......................................... 55,800 1,531,012
Fannie Mae ............................................................. 17,000 1,061,437
Freddie Mac ............................................................ 15,700 738,881
Household International, Inc. .......................................... 21,700 808,325
Providian Financial Corp. .............................................. 4,400 400,675
------------
5,737,330
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------------------- --------------
<S> <C> <C>
Security Brokers & Dealers--1.9%
Bear Stearns Cos., Inc. ................................................ 15,015 $ 641,891
Morgan Stanley Dean
Witter & Co. ........................................................ 19,400 2,769,350
Paine Webber Group, Inc. ............................................... 14,300 555,019
------------
3,966,260
------------
Manufacturing--44.7%
Chemicals & Allied Products--8.4%
Allergan, Inc. ......................................................... 13,600 676,600
Amgen, Inc. ............................................................ 24,800 1,489,550
Biogen, Inc. (a) ....................................................... 5,100 430,950
Bristol-Myers Squibb Co. ............................................... 33,300 2,137,444
Dow Chemical Co. ....................................................... 14,600 1,950,925
Eli Lilly & Co. ........................................................ 14,600 970,900
Goodrich (B.F.) Co. .................................................... 14,800 407,000
Johnson & Johnson ...................................................... 8,600 800,875
Merck & Co., Inc. ...................................................... 22,600 1,515,613
Mylan Laboratories ..................................................... 24,400 614,575
Pfizer, Inc. ........................................................... 48,900 1,586,194
Procter & Gamble Co. ................................................... 25,000 2,739,063
Schering-Plough Corp. .................................................. 20,900 881,719
Warner-Lambert Co. ..................................................... 19,900 1,630,556
------------
17,831,964
------------
Communications Equipment--1.7%
Lucent Technologies, Inc. .............................................. 24,000 1,795,500
Tellabs, Inc. (a) ...................................................... 28,600 1,835,763
------------
3,631,263
------------
Electrical Industrial Equipment--3.6%
General Electric Co. ................................................... 49,800 7,706,550
------------
Electronic & Electrical Equipment--0.4%
Qualcomm, Inc. (a) ..................................................... 5,200 916,500
------------
Electronic Components--2.0%
Intel Corp. ............................................................ 35,300 2,905,631
Microchip Technology, Inc. (a) ......................................... 19,000 1,300,313
------------
4,205,944
------------
Food & Kindred Products--4.9%
Anheuser Busch Cos., Inc. .............................................. 25,400 1,800,225
Bestfoods .............................................................. 28,700 1,508,544
Coca Cola Co. .......................................................... 7,500 436,875
General Mills, Inc. .................................................... 16,800 600,600
PepsiCo, Inc. .......................................................... 31,000 1,092,750
Philip Morris Companies, Inc. .......................................... 40,700 943,731
Quaker Oats Co. ........................................................ 21,600 1,417,500
Sara Lee Corp. ......................................................... 61,700 1,361,256
The Pepsi Bottling Group, Inc. ......................................... 79,800 1,321,688
------------
10,483,169
------------
Furniture & Fixtures--0.3%
Johnson Controls, Inc. ................................................. 11,800 671,125
------------
</TABLE>
See Notes to Investment Portfolio.
87
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial U.S. Growth and Income Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------------------- --------------
<S> <C> <C>
Lumber & Wood Products--0.3%
Weyerhaeuser Co. ......................................................... 7,400 $ 531,413
------------
Machinery & Computer Equipment--10.0%
Adaptec, Inc. (a) ........................................................ 22,500 1,122,188
Apple Computer, Inc. ..................................................... 10,300 1,058,969
Applied Materials, Inc. (a) .............................................. 9,700 1,228,869
Brunswick Corp. .......................................................... 34,200 760,950
Cisco Systems, Inc. (a) .................................................. 50,800 5,441,950
Dell Computer Corp. (a) .................................................. 28,200 1,438,200
EMC Corp. (a) ............................................................ 8,200 895,850
Gateway, Inc. (a) ........................................................ 7,700 554,881
Ingersoll Rand Co. ....................................................... 19,800 1,090,238
International Business
Machines Corp. ........................................................ 36,400 3,931,200
Sun Microsystems, Inc. (a) ............................................... 18,900 1,463,569
Tyco International Ltd. .................................................. 15,000 583,125
Unisys Corp. (a) ......................................................... 53,400 1,705,463
------------
21,275,452
------------
Measuring & Analyzing Instruments--0.6%
Beckman Coulter, Inc. .................................................... 4,400 223,850
Honeywell, Inc. .......................................................... 11,625 670,617
St. Jude Medical, Inc. ................................................... 14,300 438,831
------------
1,333,298
------------
Paper Products--1.3%
International Paper Co. .................................................. 26,300 1,484,306
Kimberly Clark Corp. ..................................................... 9,600 626,400
Westvaco Corp. ........................................................... 22,200 724,275
------------
2,834,981
------------
Petroleum Refining--4.5%
BP Amoco PLC ADR ......................................................... 21,200 1,257,425
Chevron Corp. ............................................................ 17,300 1,498,612
Exxon Mobil Corp. ........................................................ 51,035 4,111,507
Lyondell Petrochemical Co. ............................................... 32,200 410,550
Royal Dutch Petroleum Co. ................................................ 36,300 2,193,881
------------
9,471,975
------------
Primary Metal--0.9%
Alcoa, Inc. .............................................................. 21,800 1,809,400
------------
Printing & Publishing--0.4%
Tribune Co. .............................................................. 17,200 947,075
------------
Rubber & Plastic--0.5%
Weatherford International,
Inc. (a) .............................................................. 24,000 958,500
------------
Stone, Clay, Glass & Concrete--0.2%
USG Corp. ................................................................ 9,200 433,550
------------
Textile Mill Products--0.3%
Shaw Industries, Inc. .................................................... 44,300 683,881
------------
Transportation Equipment--4.4%
Boeing Co. ............................................................... 50,100 2,082,281
Ford Motor Co. ........................................................... 43,900 2,345,906
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------------------- --------------
<S> <C> <C>
Lear Corp. (a) ........................................................... 22,800 $ 729,600
Lockheed Martin Corp. .................................................... 69,900 1,529,063
PACCAR, Inc. ............................................................. 19,900 881,819
United Technologies Corp. ................................................ 28,000 1,820,000
------------
9,388,669
------------
Mining & Energy--1.8%
Crude Petroleum & Natural Gas--0.2%
Burlington Resources, Inc. ............................................... 10,700 353,769
------------
Oil & Gas Extraction--0.6%
Falcon Drilling Co., Inc. (a) ............................................ 79,600 1,054,700
Transocean Sedco Forex, Inc. ............................................. 4,384 147,699
------------
1,202,399
------------
Oil & Gas Field Services--1.0%
Coflexip SA ADR .......................................................... 3,430 130,340
Petroleum Geo-Services
ADR (a) ............................................................... 34,800 619,875
Schlumberger Ltd. ........................................................ 22,600 1,271,250
------------
2,021,465
------------
Retail Trade--6.4%
Apparel & Accessory Stores--0.6%
Abercrombie & Fitch Co. (a) .............................................. 19,700 525,744
TJX Companies, Inc. ...................................................... 41,500 848,156
------------
1,373,900
------------
Building, Hardware & Garden Supply--0.4%
Home Depot, Inc. ......................................................... 9,150 627,347
Lowe's Companies, Inc. ................................................... 3,100 185,225
------------
812,572
------------
Food Stores--0.3%
Kroger Corp. (a) ......................................................... 12,000 226,500
Safeway, Inc. (a) ........................................................ 13,500 480,094
------------
706,594
------------
General Merchandise Stores--3.1%
Dayton Hudson Corp. ...................................................... 21,000 1,542,187
Federated Department Stores,
Inc. (a) .............................................................. 26,600 1,344,962
Wal-Mart Stores, Inc. .................................................... 53,100 3,670,538
------------
6,557,687
------------
Home Furnishings & Equipment--0.8%
Best Buy Co., Inc. (a) ................................................... 18,700 938,506
Tandy Corp. .............................................................. 14,300 703,381
------------
1,641,887
------------
Miscellaneous Retail--0.6%
CVS Corp. ................................................................ 23,100 922,556
Office Depot, Inc. (a) ................................................... 30,300 331,406
------------
1,253,962
------------
Restaurants--0.6%
Darden Restaurants, Inc. ................................................. 69,400 1,257,875
------------
</TABLE>
See Notes to Investment Portfolio.
88
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Colonial U.S. Growth and Income Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
----------------- --------------
<S> <C> <C>
Services--9.9%
Amusement & Recreation--0.2%
Harrah's Entertainment, Inc. (a) 12,900 $ 341,044
------------
Business Services--0.3%
Manpower, Inc. ......................................................... 19,600 737,450
------------
Computer Related Services--2.2%
America Online, Inc. ................................................... 16,400 1,237,175
Electronic Data Systems Corp. .......................................... 20,600 1,378,912
Teradyne, Inc. (a) ..................................................... 31,200 2,059,200
------------
4,675,287
------------
Computer Software--6.4%
BMC Software, Inc. (a) ................................................. 28,000 2,238,250
Microsoft Corp. (a) .................................................... 77,600 9,059,800
Oracle Corp. ........................................................... 20,100 2,252,456
------------
13,550,506
------------
Health Services--0.7%
Columbia/HCA Healthcare
Corp. ............................................................... 50,300 1,474,419
------------
Motion Pictures--0.1%
Time Warner, Inc. ...................................................... 2,400 173,850
------------
Transportation, Communication, Electric,
Gas & Sanitary Services--11.8%
Air Transportation--0.6%
Delta Air Lines, Inc. .................................................. 11,600 577,825
UAL, Inc. (a) .......................................................... 8,100 628,256
------------
1,206,081
------------
Communications--0.2%
Telephone and Data Systems,
Inc. ................................................................ 3,700 466,200
------------
Electric Services--2.2%
Edison International ................................................... 34,200 895,612
Entergy Corp. .......................................................... 36,700 945,025
FPL Group, Inc. ........................................................ 17,700 757,781
NiSource, Inc. ......................................................... 26,400 471,900
Texas Utilities Co. .................................................... 23,900 849,944
Unicom Corp. ........................................................... 23,300 780,550
------------
4,700,812
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
----------------- --------------
<S> <C> <C>
Railroad--0.4%
Union Pacific Corp. .................................................... 21,000 $ 916,125
------------
Telecommunication--8.4%
AT&T Corp. ............................................................. 50,550 2,565,412
Bell Atlantic Corp. .................................................... 17,800 1,095,812
BellSouth Corp. ........................................................ 21,400 1,001,787
Chris-Craft Industries, Inc. (a) ....................................... 8,700 627,487
Comcast Corp., Special Class A 36,100 1,814,025
GTE Corp. .............................................................. 29,300 2,067,481
MCI WorldCom, Inc. (a) ................................................. 62,250 3,303,141
RF Micro Devices, Inc. (a) ............................................. 15,700 1,074,469
SBC Communications, Inc.,
Class A ............................................................. 59,519 2,901,551
US West Communications
Group ............................................................... 12,200 878,400
United States Cellular Corp. (a) 4,500 454,219
------------
17,783,784
------------
Wholesale Trade--0.5%
Nondurable Goods
Sysco Corp. ............................................................ 26,500 1,048,406
------------
Total Common Stocks
(cost of $156,748,166) (b) ............................................................. 195,265,953
------------
</TABLE>
<TABLE>
<CAPTION>
Par
-------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--7.1%
Repurchase agreement with
SBC Warburg Ltd., dated
12/31/99, due 1/3/00 at
2.500%, collateralized by U.S.
Treasury bonds and/or notes
with various maturities to
2021, market value
$ 15,398,853 (repurchase
proceeds $15,090,143) ............................................... $15,087,000 15,087,000
------------
Other Assets & Liabilities, Net--0.9% ..................................................... 2,001,824
------------
Net Assets--100.0% ........................................................................ $212,354,777
============
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) The cost for federal income tax purposes is $156,985,428.
See Notes to Financial Statements.
89
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial U.S. Growth and Income Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $156,748,166) ............. $ 195,265,953
Short-term obligations .................................................. 15,087,000
Cash .................................................................... 620
Receivable for investments sold ......................................... 1,856,173
Receivable for fund shares sold ......................................... 262,887
Dividends and interest receivable ....................................... 227,421
Other ................................................................... 905
-------------
Total assets .......................................................... 212,700,959
-------------
Liabilities:
Payable for fund shares repurchased ..................................... 247,907
Management fee payable .................................................. 105
Accrued expenses payable ................................................ 40,161
Other liabilities ....................................................... 58,009
-------------
Total liabilities ..................................................... 346,182
-------------
Net assets .............................................................. $ 212,354,777
=============
Net assets represented by:
Paid-in capital ........................................................ $ 166,510,822
Accumulated undistributed net investment income ........................ 28,259
Accumulated net realized gains on investments .......................... 7,297,909
Net unrealized appreciation on investments ............................. 38,517,787
-------------
Total net assets applicable to outstanding shares of beneficial interest $ 212,354,777
=============
Shares of beneficial interest outstanding ............................... 10,698,139
=============
Net asset value per share ............................................... $ 19.85
=============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends .................................................................. $ 2,017,030
Interest ................................................................... 799,726
-----------
Total investment income (net of nonrebatable foreign taxes withheld at
source which amounted to $5,341) ........................................ 2,816,756
-----------
Expenses:
Management fee ............................................................ 1,429,390
Bookkeeping fee ........................................................... 74,490
Transfer agent fee ........................................................ 7,500
Audit fee ................................................................. 24,903
Printing expense .......................................................... 8,673
Trustees' expense ......................................................... 13,641
Custodian fee ............................................................. 6,264
Legal fee ................................................................. 1,397
Amortization of organization expense ...................................... 2,016
Miscellaneous expense ..................................................... 10,307
-----------
Total expenses ........................................................... 1,578,581
-----------
Net investment income ...................................................... 1,238,175
Realized and unrealized gains on investments:
Net realized gains on investments ......................................... 17,850,614
Net change in unrealized appreciation/depreciation on investments ......... 1,860,388
-----------
Net increase in net assets resulting from operations ....................... $20,949,177
===========
</TABLE>
See Notes to Financial Statements.
90
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial U.S. Growth and Income Fund,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income .......................................................... $ 1,238,175 $ 1,127,157
Net realized gains on investments .............................................. 17,850,614 5,562,100
Net change in unrealized appreciation/depreciation on investments .............. 1,860,388 17,472,679
------------- -------------
Net increase in net assets resulting from operations ............................ 20,949,177 24,161,936
------------- -------------
Distributions declared from:
Net investment income .......................................................... (1,138,775) (1,100,944)
Net realized gains on investments .............................................. (10,343,881) (5,562,100)
In excess of net realized gains ................................................ -- (206,845)
------------- -------------
Total distributions ............................................................. (11,482,656) (6,869,889)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold ................................................. 68,912,506 119,757,416
Cost of fund shares repurchased ................................................ (23,746,321) (94,395,078)
Distributions reinvested ....................................................... 11,482,656 6,869,889
------------- -------------
Net increase in net assets resulting from fund share transactions ............... 56,648,841 32,232,227
------------- -------------
Total increase in net assets .................................................... 66,115,362 49,524,274
Net assets:
Beginning of year .............................................................. 146,239,415 96,715,141
------------- -------------
End of year .................................................................... $ 212,354,777 $ 146,239,415
============= =============
Accumulated undistributed (overdistributed) net investment income included in
ending net assets .............................................................. $ 28,259 $ (71,141)
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold .................................................................... 3,515,376 13,606,763
Shares repurchased ............................................................. (1,202,707) (12,124,830)
Distributions reinvested ....................................................... 601,186 366,394
------------- -------------
Net increase .................................................................... 2,913,855 1,848,327
============= =============
</TABLE>
See Notes to Financial Statements.
91
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Colonial U.S. Growth & Income Fund, Variable Series (the
"Fund"), formerly Colonial U.S. Stock Fund, Variable Series, a series of
Liberty Variable Investment Trust (the "Trust"), is a diversified portfolio of
a Massachusetts business trust, registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund's
investment objective is to seek long-term capital growth by investing primarily
in large capitalization equity securities. The 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 the Fund represents an
equal proportionate beneficial interest in the 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. 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") offered by the separate accounts of the life insurance companies
("Participating Insurance Companies"). Certain Participating Insurance
Companies are affiliated with the Investment Advisor and sub-advisers to the
Fund ("Affiliated Participating Insurance Companies"). Such Affiliated
Participating Insurance Companies are Keyport Life Insurance Company
("Keyport"), Independence Life & Annuity Company ("Independence") and Liberty
Life Assurance Company of Boston ("Liberty Life"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund. Liberty
Advisory Services Corp. (the "Manager") ("LASC"), provides investment
management and advisory services to the Fund pursuant to its Management
Agreements with the Trust. Colonial Management Associates, Inc. ("Colonial")
provides sub-advisory services. LASC has delegated various administrative
matters to Colonial. Keyport Financial Services Corp. ("KFSC") serves as the
principal underwriter of the Trust with respect to sales of shares to
Affiliated Participating Insurance Companies. The Manager, Colonial, KFSC,
Keyport and Independence are wholly-owned indirect subsidiaries of Liberty
Financial Companies, Inc. ("LFC"). As of December 31, 1999, Liberty Mutual
Insurance Companies ("Liberty Mutual") owned approximately 71% of the
outstanding voting shares of LFC. Liberty Life is a subsidiary of Liberty
Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar
securities. When management deems it appropriate, an over-the-counter or
exchange bid quotation is used.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Other--Corporate actions are recorded on ex-date.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
92
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 2. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal to
0.80% annually of the Fund's average daily net assets. The Manager, out of the
management fee it receives, pays Colonial a monthly sub-advisory fee equal to
0.60% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for
$27,000 annually plus 0.035% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent") an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $178,139,943 and
$168,742,018, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $47,595,750
Gross unrealized depreciation (9,315,225)
-----------
Net unrealized appreciation $38,280,525
-----------
</TABLE>
Other--The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
Note 4. Other Related Party Transactions
During the year ended December 31, 1999, the Fund used Alphatrade, a wholly
owned subsidiary of Colonial Management Associates, Inc., as a broker. Total
commissions paid to Alphatrade during the year were $95,068.
93
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial U.S. Growth and Income Fund,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year .................. $ 18.79 $ 16.29 $ 14.22 $ 12.36 $ 10.27
------- ------- ------- ------- --------
Net investment income (a) ........................... 0.14 0.16 0.20 0.19 0.21
Net realized and unrealized gains on
investments ........................................ 2.07 3.12 4.37 2.52 2.84
------- ------- ------- ------- --------
Total from investment operations .................... 2.21 3.28 4.57 2.71 3.05
------- ------- ------- ------- --------
Less distributions:
Dividends from net investment income ............... (0.11) (0.12) (0.18) (0.17) (0.16)
In excess of net investment income ................. -- -- (0.01) -- --
Distributions from net realized gains
on investments .................................... (1.04) (0.64) (2.30) (0.68) (0.80)
In excess of net realized gains .................... -- (0.02) (0.01) -- --
-------- -------- ------- ------- --------
Total distributions ................................. (1.15) (0.78) (2.50) (0.85) (0.96)
-------- -------- ------- ------- --------
Net asset value, end of year ........................ $ 19.85 $ 18.79 $ 16.29 $ 14.22 $ 12.36
======== ======== ======= ======= ========
Total return:
Total investment return (b) ......................... 12.00% 20.15% 32.23% 21.84% 29.70%(c)
Ratios/supplemental data:
Net assets, end of year (000's) ..................... $212,355 $146,239 $96,715 $60,855 $ 43,017
Ratio of expenses to average net assets (d) ......... 0.88% 0.90% 0.94% 0.95% 1.00%(e)
Ratio of net investment income to average net
assets (d) ......................................... 0.69% 0.88% 1.19% 1.39% 1.72%(c)
Portfolio turnover ratio ............................ 101% 64% 63% 77% 115%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.07%.
- --------------------------------------------------------------------------------
1999 Federal Tax information (unaudited)
59% of the ordinary income distributed by the Fund in the year ended December
31, 1999 qualifies for the corporate dividends received deduction.
For the fiscal year ended December 31, 1999, the Fund earned $11,548,427 of
long-term capital gains.
- --------------------------------------------------------------------------------
94
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Colonial U.S. Growth & Income Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial U.S. Growth & Income
Fund, Variable Series (the "Fund") (formerly Colonial U.S. Stock Fund, Variable
Series) (a series of Liberty Variable Investment Trust) at December 31, 1999,
the results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and the
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
portfolio positions at December 31, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2000
95
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Crabbe Huson Real Estate Investment Fund,
Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Crabbe Huson Real Estate Investment Fund, Variable Series, seeks to
provide growth of capital and current income.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date .................................. 6/1/99
Assuming reinvestment of all distributions
Cumulative total return since inception ......... (13.80)%
Net asset value per share on 12/31/99 ........... $ 8.34
Net asset value per share on 6/1/99 ............. $ 10.00
</TABLE>
Portfolio Managers' Discussion
Michael B. Stokes is the portfolio manager of the Crabbe Huson Real Estate
Investment Fund, Variable Series. Mr. Stokes has managed various funds for
Crabbe Huson Group, Inc. since August, 1996.
What was the investing environment like?
The past 12 months have been difficult for investors in real estate
investment trusts (REITs) and other real estate-related securities. Several
factors have contributed to the lack luster performance of real estate
securities. First, during the summer, stock market investors became jittery
about rising interest rates and moved from the small- and mid-cap issues
(including REITs) that had been favored in the spring back into
large-capitalization stocks. Real estate holdings then performed poorly in the
second and third quarters as a result. Second, institutional real estate
investors have experienced a steady outflow of funds for the past few years, as
investors have favored other sectors of the stock market. Paradoxically, the
fundamentals of property holdings have been strong, reflecting the continued
strength of the U.S. economy.
What was the Fund's strategy during the period?
Crabbe Huson's approach to real estate investing follows our overall
management style. We use diligent, bottom-up research on a company-by-company
basis to uncover overlooked, attractive companies at below-average valuations.
Whereas many of our competitors look for growth at any price, we focus on the
value of the assets and pay careful attention to catalysts that can cause price
appreciation.
Starting in June of 1999, the prices for REITS declined steadily through
December. This was in large part due to investor apathy coupled by steady
outflows from dedicated real estate investment funds during this period.
Furthermore, with fears of increasing interest rates, and strong performance
from other sectors, particularly technology, REIT stocks did not participate in
the general market strength witnessed over this period of time. Our strategy in
this type of environment has not changed. We continue to look to buy stocks
trading at significant discounts to asset or intrinsic value, that offer
prospects for positive upward revaluation.
An advantage of the Crabbe Huson Real Estate Investment Fund is that we
are not required to own only REITs, but may by prospectus own other types of
real estate holdings. A holding that we acquired in the second half of the year
is Sunrise Properties Assisted Living (3.5% of net assets), an assisted living
facility owner and manager. It is not a REIT, and therefore does not have to
pay out 95% of its taxable income in distributions. As a result, its total
return potential can be higher than that of REIT securities, which are
primarily income investments. The price of Sunrise's stock declined
dramatically due to an earnings shortfall, and we acquired the stock at a deep
discount to its estimated net asset value. Our acquisition of Sunrise
illustrates our strategy of increasing the Fund's non-REIT holdings to better
position it in an environment where REITs are underperforming.
What is your outlook for the period ahead?
After several years of underperforming, real estate investments are
currently trading at very attractive prices. It is difficult to predict what
will happen over the next several months, especially in a market that has
become so focused on short-term performance and ever-changing economic events
of dubious long-term relevance. However, we believe that real estate currently
offers very good long-term potential in comparison to its relatively low level
of risk.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
96
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Crabbe Huson Real Estate Investment Fund,
Variable Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Crabbe Huson Real Estate Investment Fund, Variable Series vs.
NAREIT Equity Index
Change in value of a $10,000 investment from 6/01/99--12/31/99
<TABLE>
<CAPTION>
Cumulative Total Returns on December 31, 1999
Life 1 Year 3 Years
<S> <C> <C>
(13.80)% N/A N/A
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Crabbe Huson
Real Estate
Investment Fund, NAREIT
Variable Series Equity Index
<S> <C> <C> <C>
$12,000 6/99 10000 10000
$11,000 7/99 9823 9682
$10,000 8/99 9531 9559
$ 9,000 9/99 9270 9196
$ 8,000 10/99 9103 8970
$ 7,000 11/99 8937 8823
$ 6,000 12/99 8620 8946
</TABLE>
[END PLOT POINTS]
____ Crabbe Huson Real Estate Investment Fund, Variable Series
- ---- NAREIT Equity Index
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The NAREIT Equity Index is an unmanaged index
that tracks the performance of all equity real estate investment trusts (REITs)
that trade on the New York Stock Exchange, the American Stock Exchange and the
NASDAQ. Indexes are not investments, do not incur fees or charges and are not
professionally managed. It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
97
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Crabbe Huson Real Estate Investment Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- -------------
<S> <C> <C>
COMMON STOCKS--90.2%
Finance, Insurance & Real Estate--90.2%
Apartments--8.5%
Archstone Communities Trust ............. 2,900 $ 59,450
Camden Property Trust ................... 1,700 46,537
Equity Residential Properties Trust ..... 1,000 42,688
Summit Properties, Inc. ................. 2,000 35,750
----------
184,425
----------
Diversified--15.1%
Castle & Cooke, Inc. (a) ................ 4,400 55,825
Catellus Development Corp. (a) .......... 4,100 52,531
Colonial Properties Trust ............... 1,800 41,738
Glenborough Realty Trust, Inc. .......... 3,000 40,125
Kennedy-Wilson, Inc. (a) ................ 7,000 56,000
Spieker Properties, Inc. ................ 2,300 83,806
----------
330,025
----------
Healthcare--8.1%
Brookdale Living Communities,
Inc. (a) ............................. 2,700 33,412
Healthcare Realty Trust, Inc. ........... 4,200 65,625
Sunrise Assisted Living, Inc. (a) ....... 5,600 77,000
----------
176,037
----------
Industrial--6.0%
AMB Property Corp. ...................... 3,800 75,763
Prologis Trust .......................... 2,900 55,825
----------
131,588
----------
Lodging--1.3%
Silverleaf Resorts, Inc. (a) ............ 4,000 28,500
----------
Manufactured Home--6.5%
Asset Investors Corp. ................... 9,000 100,125
Commercial Assets, Inc. ................. 9,500 41,563
----------
141,688
----------
Office--16.6%
Crescent Real Estate Equities Co. ....... 2,500 45,938
Equity Office Properties Trust .......... 6,700 164,988
Kilroy Realty Corporation ............... 1,800 39,600
Trammell Crow Co. (a) ................... 4,300 49,987
Trizec Hahn Corp. ....................... 3,600 60,750
----------
361,263
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------- -------------
<S> <C> <C>
Regional Malls--5.7%
Gilmcher Realty Trust ................... 2,900 $ 37,337
Simon Property Group, Inc. .............. 2,100 48,169
Taubman Centers, Inc. ................... 3,700 39,775
----------
125,281
----------
Shopping Centers--7.4%
Burnham Pacific Properties, Inc. ........ 4,000 37,500
Excel Legacy Corp. (a) .................. 10,500 34,781
Pan Pacific Retail Properties, Inc. ..... 3,700 60,356
Prime Retail, Inc. ...................... 5,100 28,688
----------
161,325
----------
Storage--7.0%
Public Storage, Inc. .................... 6,700 152,006
----------
Triple Net Lease--8.0%
Capital Automotive REIT ................. 3,100 37,781
Correctional Properties Trust ........... 5,800 71,050
Franchise Finance Corp. of
America .............................. 2,700 64,631
----------
173,462
----------
Total Common Stocks
(cost of $2,171,951)(b) ..................... 1,965,600
----------
</TABLE>
<TABLE>
<CAPTION>
Par
---------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--10.1%
Repurchase agreement with
SBC Warburg Ltd., dated
12/31/99, due 1/3/00 at
2.500%, collateralized by U.S.
Treasury bonds and/or notes
with a maturity of 2021,
market value $224,547
(repurchase proceeds
$220,046) ...........................$220,000 220,000
-------
Other Assets & Liabilities, Net--(0.3)% ........ (5,804)
-------
Net Assets--100.0% ............................. $2,179,796
==========
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $2,163,892.
See Notes to Financial Statements.
98
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Crabbe Huson Real Estate Investment Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $2,171,951) ............... $1,965,600
Short-term obligations .................................................. 220,000
Cash .................................................................... 590
Receivable for fund shares sold ......................................... 29,287
Dividends and interest receivable ....................................... 11,973
Expense reimbursement due from Manager .................................. 3,543
----------
Total assets .......................................................... 2,230,993
----------
Liabilities:
Payable for investments purchased ....................................... 40,055
Service fee payable ..................................................... 916
Management fee payable .................................................. 7
Accrued expenses payable ................................................ 10,219
----------
Total liabilities ..................................................... 51,197
----------
Net assets .............................................................. $2,179,796
==========
Net assets represented by:
Paid-in capital ........................................................ $2,510,192
Accumulated undistributed net investment income ........................ 7,636
Accumulated net realized losses on investments ......................... (131,681)
Net unrealized depreciation on investments ............................. (206,351)
----------
Total net assets applicable to outstanding shares of beneficial interest $2,179,796
==========
Shares of beneficial interest outstanding ............................... 261,226
==========
Net asset value per share ............................................... $ 8.34
==========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1999*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ................................................................ $ 74,550
Interest ................................................................. 8,258
----------
Total investment income ................................................ 82,808
----------
Expenses:
Management fee .......................................................... 11,210
Service fee ............................................................. 2,415
Bookkeeping fee ......................................................... 15,750
Transfer agent fee ...................................................... 4,375
Audit fee ............................................................... 8,903
Legal fee ............................................................... 100
Trustees' expense ....................................................... 2,203
Custodian fee ........................................................... 1,800
Reports to shareholders ................................................. 570
Other ................................................................... 272
----------
Total expenses ......................................................... 47,598
----------
Less:
Expense reimbursable by Manager ......................................... (31,663)
----------
Net expenses ............................................................. 15,935
----------
Net investment income .................................................... 66,873
Realized and unrealized losses on investments:
Net realized losses on investments ...................................... (138,707)
Net change in unrealized appreciation/depreciation on investments ....... (206,351)
----------
Net decrease in net assets resulting from operations ..................... $ (278,185)
==========
</TABLE>
* For the period from the commencement of operations June 1, 1999 to December
31, 1999.
See Notes to Financial Statements.
99
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Crabbe Huson Real Estate Investment Fund,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
December 31,
1999*
-------------
<S> <C>
Operations:
Net investment income ............................................................ $ 66,873
Net realized losses on investments ............................................... (138,707)
Net change in unrealized appreciation/depreciation on investments ................ (206,351)
----------
Net decrease in net assets resulting from operations .............................. (278,185)
----------
Distributions declared from:
Net investment income ............................................................ (52,211)
Return of capital ................................................................ (13,072)
----------
Total distributions ............................................................... (65,283)
----------
Fund share transactions:
Proceeds from fund shares sold ................................................... 2,467,973
Cost of fund shares repurchased .................................................. (9,992)
Distributions reinvested ......................................................... 65,283
----------
Net increase in net assets resulting from fund share transactions ................. 2,523,264
----------
Total increase in net assets ...................................................... 2,179,796
Net assets:
Beginning of period .............................................................. --
----------
End of period .................................................................... $2,179,796
==========
Accumulated undistributed net investment income included in ending net assets ..... $ 7,636
==========
Analysis of changes in shares of beneficial interest:
Shares sold ...................................................................... 254,258
Shares repurchased ............................................................... (1,141)
Distributions reinvested ......................................................... 8,109
----------
Net increase ...................................................................... 261,226
==========
</TABLE>
*For the period from the commencement of operations June 1, 1999 to December
31, 1999.
See Notes to Financial Statements.
100
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Crabbe Huson Real Estate Investment Fund (the "Fund"), a series of Liberty
Variable Investment Trust (the "Trust"), is a non-diversified portfolio of a
Massachusetts business trust, registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund's
primary investment objective is to seek income and long-term capital growth and
its secondary objective is the preservation of capital. The 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
the Fund represents an equal proportionate beneficial interest in the Fund and,
when issued and outstanding, is fully paid and nonassessable. Shareholders
would be entitled to share proportionally in the net assets of the Fund
available for distribution to shareholders upon liquidation of the Fund. 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") offered by the separate accounts of
the life insurance companies ("Participating Insurance Companies"). Certain
Participating Insurance Companies are affiliated with the Investment Advisor
and sub-advisors to the Fund ("Affiliated Participating Insurance Companies").
Such Affiliated Participating Insurance Companies are Keyport Life Insurance
Company ("Keyport"), Independence Life & Annuity Company ("Independence") and
Liberty Life Assurance Company of Boston ("Liberty Life"). The Participating
Insurance Companies and their separate accounts own all the shares of the Fund.
Liberty Advisory Services Corp. (the "Manager") ("LASC"), provides investment
management and advisory services to the Fund pursuant to its Management
Agreements with the Trust. LASC has appointed Crabbe Huson Group, Inc. ("Crabbe
Huson"), an affiliate of LASC, as Sub-Advisor to the Fund. LASC has delegated
various administrative matters to Colonial. Keyport Financial Services Corp.
("KFSC") serves as the principal underwriter of the Trust with respect to sales
of shares to Affiliated Participating Insurance Companies. The Manager,
Colonial, Crabbe Huson, KFSC, Keyport and Independence are wholly-owned
indirect subsidiaries of Liberty Financial Companies, Inc. ("LFC"). As of
December 31, 1999, Liberty Mutual Insurance Companies ("Liberty Mutual") owned
approximately 71% of the outstanding voting shares of LFC. Liberty Life is a
subsidiary of Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Other--Corporate actions are recorded on ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of
all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
101
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 2. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal to
1.00% annually of the Fund's average daily net assets. The Manager, out of the
management fee it receives, pays Crabbe Huson a monthly sub-advisory fee equal
to 0.80% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for a
monthly fee equal to $27,000 annually plus 0.035% annually of the Fund's
average net assets over $50 million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent") an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Service fee--Effective July 1, 1999, the Fund has adopted a 12b-1 plan which
requires it to pay Liberty Funds Distributor, Inc. ("LFDI") and KFSC a service
fee totaling 0.25% annually of the Fund's net assets as of the 20th of each
month.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (excluding
service fee) exceed 1.20% annually of the Fund's average daily net assets.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the period ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $3,163,356 and
$852,698, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 41,982
Gross unrealized depreciation (240,274)
---------
Net unrealized depreciation $(198,292)
---------
</TABLE>
Capital loss carryforwards--At December 31, 1999, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
- ------------- -------------
<S> <C>
2007 $93,000
</TABLE>
Other--The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
102
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Crabbe Huson Real Estate Investment Fund,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
December 31,
1999***
-----------------
<S> <C>
Per share operating performance:
Net asset value, beginning of period ............................. $ 10.00
-------
Net investment income (a) ........................................ 0.31
Net realized and unrealized losses on investments ................ (1.70)
---------
Total from investment operations ................................. (1.39)
---------
Less distributions:
Dividends from net investment income ............................ (0.22)
Return of capital ............................................... (0.05)
---------
Total distributions .............................................. (0.27)
---------
Net asset value, end of period ................................... $ 8.34
=========
Total return:
Total investment return (b)(c) ................................... (13.80)%**
Ratios/supplemental data:
Net assets, end of period (000's) ................................ $ 2,180
Ratio of expenses to average net assets (d)(e) ................... 1.45%*
Ratio of net investment income to average net assets (d) ......... 5.90%*
Portfolio turnover ratio ......................................... 57%**
</TABLE>
* Annualized.
** Not annualized.
*** For the period from the commencement of operations June 1, 1999 to December
31, 1999.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Had the Manager not waived or reimbursed a portion of expenses, total
return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 4.25%
(annualized).
103
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and the Shareholders of
Crabbe Huson Real Estate Investment Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Crabbe Huson Real Estate
Investment Fund, Variable Series (the "Fund") (a series of Liberty Variable
Investment Trust) at December 31, 1999, the results of its operations, the
changes in its net assets and the financial highlights for the period from June
1, 1999 (commencement of operations) through December 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
104
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Liberty All-Star Equity Fund, Variable Series(1), seeks total investment
return, comprised of long-term capital appreciation and current income, through
investment primarily in a diversified portfolio of equity securities.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 11/17/97
Assuming reinvestment of all distributions
12-month total return ...................... 8.47%
Net asset value per share on 12/31/99 ......... $ 12.47
Net asset value per share on 12/31/98 ......... $ 11.90
</TABLE>
Portfolio Managers' Discussion
The Fund's investment program is based upon Liberty Asset Management
Company's (LAMCO) multi-manager concept. LAMCO allocates the Fund's portfolio
assets on an approximately equal basis among a number of independent investment
management organizations ("Portfolio Managers") -- currently five in number --
each of which employs a different investment style. LAMCO, from time to time,
rebalances the portfolio among the Portfolio Managers so as to maintain an
approximately equal allocation of the portfolio among them throughout all
market cycles.
The Fund's current Portfolio Managers are:
(1) Boston Partners Asset Management, L.P.; Investment Style / Value
(2) J.P. Morgan Investment Management Inc.; Investment Style / Value
(3) Oppenheimer Capital; Investment Style / Value
(4) Westwood Management Corporation; Investment Style / Growth
(5) TCW Investment Management Company; Investment Style / Growth
What was the investment environment like over the past 12 months?
The year was characterized by a rotation in market leadership from
large-capitalization growth stocks to more cyclically-oriented companies and
back to growth stocks as the year came to a close. The catalyst for this shift
in preference to value stocks in the second quarter was an increased perception
of continued strong domestic growth, coupled with evidence of improved economic
conditions abroad. In addition, companies in many of the cyclical sectors of
the market were more attractive to investors due to their considerably lower
valuations when compared to growth stocks, whose premiums for their earnings
visibility had risen significantly. The improved performance in the cyclical
sector was short-lived however, as leadership again narrowed and shifted back
to technology, specifically Internet-related stocks during the second half of
the year. The attraction toward that sector was so significant that, by
year-end, approximately 70% of the gain in the S&P 500 index was attributable
to the technology sector. Also, the fact that more than two-thirds of the
stocks which comprised the S&P 500 underperformed the index as a whole during
1999 further emphasizes the narrowness of that leadership. A market with such
narrow leadership is challenging for diversified active portfolio managers,
particularly those that focus on more reasonably priced sectors of the market.
The Fund's diversified multi-managed approach, which blends three value with
two growth management styles, faced the same challenges.
In addition to these challenges created by such a narrow market, the
Fund's results were also negatively impacted by the performance of one of the
Fund's growth managers during the first three quarters of 1999. The Trustees
approved LAMCO's recommendation to replace Wilke/Thompson Capital Management
with TCW Investment Management Company during the fourth quarter. Although
Wilke/ Thompson was the Fund's best performer during 1998, the deterioration
in performance during 1999 coupled with other key factors, which LAMCO monitors
on an ongoing basis, resulted in that recommendation.
What is the Fund's strategy?
Liberty Asset Management Company's multi-managed approach seeks to provide
more consistent returns by combining both value and growth styles of investment
management. Each of the institutional investment managers in the Fund practices
a specific style of growth or value investment management. As a result, the
Fund seeks to participate in both growth and value style investment markets.
(1) The Fund is intended to be a long-term investment vehicle and is not
designed to provide a means of speculating on short-term stock market
movements. The Fund has adopted certain investment policies in managing its
portfolio that are designed to maintain the diversity of the Fund's
investment portfolio and reduce risk. Certain investment techniques that may
be used by the Fund may present additional risks associated with the use of
leverage. Leverage may magnify the effect on Fund shares of fluctuations in
the values of the securities underlying these transactions. The Fund may not
always achieve its investment objective. The Fund's investment objective and
non-fundamental investment policies may be changed without shareholder
approval.
105
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
- --------------------------------------------------------------------------------
Liberty All-Star Equity Fund, Variable Series vs. Russell 3000 Index
Change in value of a $10,000 investment from 11/30/97--12/31/99
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
Life 1 Year 3 Years
<S> <C> <C>
13.05% 8.47% N/A
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Liberty All-Star
Equity Fund, Russell 3000
Variable Series Index
<S> <C> <C> <C>
$16,000 11/97 10000 10000
$14,000 12/97 10080 10200
$12,000 10030 10253
$10,000 10900 10986
$ 8,000 3/98 11421 11531
11522 11644
11212 11356
6/98 11462 11740
11221 11527
9469 9761
9/98 10080 10426
10821 11218
11351 11904
12/98 11962 12661
11982 13092
11561 12628
3/99 11963 13092
12677 13682
12496 13422
6/99 12988 14100
12456 13673
12073 13517
9/99 11782 13171
12667 13997
12791 14389
12/99 12976 15297
</TABLE>
[END PLOT POINTS]
____ Liberty All-Star Equity Fund, Variable Series ---- Russell 3000 Index
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The Russell 3000 Index is a capitalization
weighted total return index which is comprised of 3000 of the largest
capitalized U.S. domiciled companies whose common stock traded in the United
States on the New York Stock Exchange, American Stock Exchange and NASDAQ. This
portfolio of securities represents approximately 98% of the investable U.S.
equity market. Indexes are not investments, do not incur fees or expenses and
are not professionally managed. It is not possible to invest directly in an
index.
- --------------------------------------------------------------------------------
106
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------------------ -------------
<S> <C> <C>
COMMON STOCKS--95.1%
Aerospace & Defense--1.2%
Boeing Co. ............................. 12,700 $ 527,844
Northrop Grumman Corp. ................. 7,700 416,281
-----------
944,125
-----------
Autos, Tires & Accessories--0.7%
Delphi Automotive Systems Corp. ........ 13,100 206,325
Ford Motor Co. ......................... 1,200 64,125
Lear Corp. (a) ......................... 9,600 307,200
-----------
577,650
-----------
Banks--4.6%
ABN AMRO Holding NV ADR ................ 9,099 230,318
Astoria Financial Corp. ................ 2,360 71,832
Bank of America Corp. .................. 1,931 96,912
Citigroup, Inc. ........................ 26,500 1,472,406
First Union Corp. ...................... 9,800 321,562
Fleet Boston Financial Group, Inc. ..... 12,200 424,712
PNC Bank Corp. ......................... 9,250 411,625
Washington Mutual, Inc. ................ 9,050 235,300
Wells Fargo & Co. ...................... 11,000 444,813
-----------
3,709,480
-----------
Broadcasting & Cable--2.6%
AMFM, Inc. (a) ......................... 15,100 1,181,575
AT&T Corp-Liberty Media Group,
Class A ............................. 4,400 249,700
Cox Communications, Inc.,
Class A (a) ......................... 8,700 448,050
The News Corp., Ltd. (ADR) ............. 4,500 172,125
-----------
2,051,450
-----------
Business & Consumer Services--0.5%
America Online, Inc. (a) ............... 3,000 226,313
Cendant Corp. .......................... 6,800 180,625
-----------
406,938
-----------
Chemicals--1.7%
Monsanto Co. ........................... 29,300 1,043,813
Rohm & Haas Co. ........................ 7,900 321,431
-----------
1,365,244
-----------
Communications Equipment--4.3%
Cisco Systems, Inc. (a) ................ 15,200 1,628,300
Cobalt Networks, Inc. (a) .............. 1,400 151,725
Lucent Technologies, Inc. .............. 9,700 725,681
Nokia Corp. ADR ........................ 5,000 950,000
-----------
3,455,706
-----------
Computer & Business Equipment--6.2%
Apple Computer, Inc. ................... 800 82,250
Compaq Computer Corp. .................. 26,800 725,275
Dell Computer Corp. (a) ................ 25,800 1,315,800
EMC Corp. (a) .......................... 2,000 218,500
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------------ -------------
<S> <C> <C>
Hewlett-Packard Co. .................... 6,900 $ 786,169
International Business Machines
Corp. ............................... 6,100 658,800
Seagate Technology, Inc. (a) ........... 7,600 353,875
Sun Microsystems, Inc. (a) ............. 5,600 433,650
3Com Corp. (a) ......................... 8,200 385,400
-----------
4,959,719
-----------
Computer Services & Software--8.2%
Citrix Systems, Inc. (a) ............... 500 61,500
Computer Associates International,
Inc. ................................ 17,000 1,188,937
Electronic Data Systems Corp. .......... 8,000 535,500
Intuit, Inc. (a) ....................... 4,400 263,725
Microsoft Corp. (a) .................... 13,550 1,581,963
Oracle Corp. (a) ....................... 5,750 644,359
Siebel Systems, Inc. ................... 14,600 1,226,400
Sterling Software, Inc. (a) ............ 32,900 1,036,350
-----------
6,538,734
-----------
Consumer Products--2.7%
Avon Products, Inc. .................... 14,000 462,000
Clorox Co. ............................. 1,400 70,525
Gillette Co. ........................... 2,500 102,969
Kimberly-Clark Corp. ................... 10,400 678,600
Philip Morris Companies, Inc. .......... 10,600 245,788
Procter & Gamble Co. ................... 5,700 624,506
-----------
2,184,388
-----------
Diversified--3.6%
Cooper Industries, Inc. ................ 1,200 48,525
General Electric Co. ................... 1,200 185,700
Honeywell International, Inc. .......... 12,500 721,094
Loews Corp. ............................ 7,250 439,984
Minnesota Mining &
Manufacturing Co. ................... 5,000 489,375
Textron, Inc. .......................... 4,000 306,750
The Seagram Co., Ltd. .................. 5,100 229,181
Tyco International Ltd. ................ 12,000 466,500
-----------
2,887,109
-----------
Drugs & Health Care--6.5%
Alza Corp. (a) ......................... 4,800 166,200
American Home Products Corp. ........... 2,100 82,819
Amgen, Inc. ............................ 10,500 630,656
Biogen, Inc. (a) ....................... 9,400 794,300
Bristol-Myers Squibb Co. ............... 4,300 276,006
Eli Lilly & Co. ........................ 1,600 106,400
Forest Laboratories, Inc. (a) .......... 4,200 258,037
Medtronic, Inc. ........................ 8,200 298,788
PE Corp PE Biosystems Group ............ 1,000 120,313
Pfizer, Inc. ........................... 16,500 535,219
Pharmacia & Upjohn, Inc. ............... 8,300 373,500
</TABLE>
See Notes to Investment Portfolio.
107
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------------------ -------------
<S> <C> <C>
SmithKline Beecham PLC ADR ........... 7,150 $ 460,728
Tenet Healthcare Corp. (a) ........... 6,900 162,150
Warner-Lambert Co. ................... 7,200 589,950
Wellpoint Health Network, Inc. ....... 5,400 356,063
-----------
5,211,129
-----------
Electric & Gas Utilities--2.2%
Allegheny Energy, Inc. ............... 1,800 48,488
Columbia Energy Group ................ 4,650 294,112
Florida Progress Corp. ............... 8,400 355,425
Northern States Power Co. ............ 3,900 76,050
Peco Energy Co. ...................... 15,350 533,413
P G & E Corp. ........................ 3,400 69,700
Reliant Energy, Inc. ................. 15,400 352,275
-----------
1,729,463
-----------
Electronics & Electrical Equipment--5.7%
Applied Materials, Inc. .............. 7,600 962,825
Emerson Electric Co. ................. 7,000 401,625
Intel Corp. .......................... 20,700 1,703,869
Maxim Integrated Products, Inc. (a) 19,400 915,437
Motorola, Inc. ....................... 1,700 250,325
Raytheon Co., Class A ................ 6,000 148,875
Sensormatic Electronics Corp. ........ 3,100 54,056
Texas Instruments, Inc. .............. 1,000 96,875
-----------
4,533,887
-----------
Financial Services--5.6%
The Charles Schwab Corp. ............. 17,200 660,050
The CIT Group, Inc. .................. 6,600 139,425
Countrywide Credit Industries, Inc. 20,500 517,625
Freddie Mac .......................... 20,600 969,487
The Goldman Sachs Group, Inc. (a) 1,900 178,956
KeyCorp .............................. 3,900 86,287
Morgan Stanley Dean Witter & Co. ..... 5,100 728,025
Paychex, Inc. ........................ 13,687 547,480
Providian Financial Corp. ............ 5,600 509,950
U.S. Bancorp ......................... 6,900 164,306
-----------
4,501,591
-----------
Food, Beverage & Restaurants--2.9%
Anheuser-Busch Companies, Inc. ....... 6,600 467,775
Bestfoods ............................ 1,400 73,587
Coca Cola Co. ........................ 700 40,775
Diageo PLC ADR ....................... 11,000 352,000
International Home Foods, Inc. (a) 12,650 219,794
McDonald's Corp. ..................... 10,000 403,125
Nabisco Holdings Corp. ............... 12,125 383,453
PepsiCo, Inc. ........................ 3,700 130,425
Sara Lee Corp. ....................... 11,700 258,131
-----------
2,329,065
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------------ -------------
<S> <C> <C>
Hotels & Entertainment/Leisure--2.6%
Mirage Resorts, Inc. (a) ............. 10,400 $ 159,250
Pixar, Inc. (a) ...................... 7,300 258,238
Starwood Hotels & Resorts
Worldwide, Inc. ................... 9,250 217,375
Time Warner, Inc. .................... 13,100 948,931
The Walt Disney Co. .................. 17,600 514,800
-----------
2,098,594
-----------
Industrial Equipment--2.2%
Caterpillar, Inc. .................... 8,000 376,500
Deere & Co. .......................... 12,600 546,525
Dover Corp. .......................... 10,000 453,750
Ingersoll-Rand Co. ................... 7,400 407,462
-----------
1,784,237
-----------
Insurance--5.9%
ACE Ltd. ............................. 25,700 428,869
AFLAC, Inc. .......................... 10,000 471,875
Allmerica Financial Corp. ............ 7,200 400,500
Ambac Financial Group, Inc. .......... 3,300 172,219
American International Group, Inc. 3,500 378,437
CIGNA Corp. .......................... 7,300 588,106
Conseco, Inc. ........................ 30,600 546,975
Marsh & McLennan Companies,
Inc. .............................. 3,450 330,122
The Progressive Corp. ................ 7,700 563,063
UNUM Corp. ........................... 3,800 121,838
XL Capital Ltd. ...................... 14,500 752,188
-----------
4,754,192
-----------
Metals & Mining--1.6%
Alcoa, Inc. .......................... 13,550 1,124,650
Allegheny Teledyne, Inc. ............. 3,800 85,262
Reynolds Metals Co. .................. 100 7,663
USX-US Steel Group ................... 2,800 92,400
-----------
1,309,975
-----------
Oil & Gas--6.5%
Apache Corp. ......................... 12,500 461,719
Burlington Resources, Inc. ........... 20,100 664,556
Conoco, Inc., Class A ................ 20,800 514,800
Conoco, Inc., Class B ................ 25,600 636,800
Cooper Cameron Corp. (a) ............. 2,700 132,131
Devon Energy Corp. ................... 7,227 237,588
El Paso Energy Corp. ................. 9,000 349,312
Exxon Mobil Corp. .................... 5,876 473,385
Halliburton Co. ...................... 15,500 623,875
Occidental Petroleum Corp. ........... 18,100 391,413
Royal Dutch Petroleum Co. ............ 2,200 132,963
Texaco, Inc. ......................... 6,800 369,325
Tosco Corp. .......................... 6,600 179,438
-----------
5,167,305
-----------
</TABLE>
See Notes to Investment Portfolio.
108
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------------------ -------------
<S> <C> <C>
Paper--1.1%
Smurfit-Stone Container Corp. (a) ....... 3,000 $ 73,500
Temple-Inland, Inc. ..................... 12,400 817,625
-----------
891,125
-----------
Pollution Control--0.4%
Waste Management, Inc. .................. 16,375 281,445
-----------
Publishing--0.8%
R. R. Donnelley & Sons Co. .............. 15,000 372,187
Tribune Co. ............................. 5,600 308,350
-----------
680,537
-----------
Real Estate Investment Trusts--0.5%
Kimco Realty Corp. ...................... 6,100 206,637
Vornado Realty Trust .................... 6,600 214,500
-----------
421,137
-----------
Retail Trade--6.6%
Abercrombie & Fitch Co. (a) ............. 3,500 93,406
AnnTaylor Stores Corp. (a) .............. 5,200 179,075
Circuit City Stores, Inc. ............... 8,600 387,537
Dayton Hudson Corp. ..................... 1,700 124,844
Family Dollar Stores, Inc. .............. 17,500 884,844
Harcourt General, Inc. .................. 8,800 354,200
The Home Depot, Inc. .................... 12,600 863,888
The Limited, Inc. ....................... 11,100 480,769
May Department Stores Co. ............... 12,000 387,000
Office Depot, Inc. (a) .................. 20,700 226,406
Safeway, Inc. (a) ....................... 20,000 711,250
Tiffany & Co. ........................... 3,600 321,300
The TJX Companies ....................... 3,600 73,575
Wal-Mart Stores, Inc. ................... 3,100 214,288
-----------
5,302,382
-----------
Telecommunications--4.5%
AT&T Corp. .............................. 4,300 218,225
Bell Atlantic Corp. ..................... 1,700 104,656
Global Crossing Ltd. (a) ................ 2,000 100,000
GTE Corp. (a) ........................... 9,200 649,175
Level 3 Communications, Inc. (a) ........ 400 32,750
MCI WorldCom, Inc. (a) .................. 13,425 712,364
SBC Communications, Inc. ................ 23,716 1,156,155
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------------ -------------
<S> <C> <C>
Sprint Corp. (FON Group) ................ 8,000 $ 538,500
Sprint Corp. (PCS Group) (a) ............ 500 51,250
-----------
3,563,075
-----------
Transportation--3.2%
AMR Corp. (a) ........................... 7,000 469,000
Burlington Northern Santa Fe Corp. 14,000 339,500
CSX Corp. ............................... 2,000 62,750
Kansas City Southern
Industries, Inc. ..................... 14,100 1,052,213
Union Pacific Corp. ..................... 4,900 213,763
United Parcel Service, Inc. Class B ..... 5,700 393,300
-----------
2,530,526
-----------
Total Common Stocks
(cost of $68,112,272) (b) ........................... 76,170,208
-----------
Preferred Stock--0.6%
The News Corp., Ltd. ADR
(cost of $466,853) ................... 15,000 501,563
-----------
Total Investments--95.7%
(cost of $68,579,125) ................................... 76,671,771
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--3.4%
Repurchase agreement with SBC
Warburg Ltd., dated 12/31/99,
due 1/3/00 at 2.500%,
collateralized by U.S. Treasury
bonds and/or notes with various
maturities to 2021, market value
$2,760,913 (Repurchase proceeds
$2,705,564) .......................... $2,705,000 2,705,000
-----------
Other Assets & Liabilities, Net--0.9% .................. 718,295
-----------
Net Assets--100.0% .................................... $80,095,066
===========
</TABLE>
Notes To Investment Portfolio:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $68,961,223.
<TABLE>
<CAPTION>
Acronym Name
- ----------- ----------------------------
<S> <C>
ADR American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
109
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $68,579,125) .............. $76,671,771
Short-term obligations .................................................. 2,705,000
Receivable for investments sold ......................................... 553,047
Receivable for fund shares sold ......................................... 172,917
Cash .................................................................... 38,835
Dividends, tax reclaims and interest receivable ......................... 71,708
-----------
Total assets .......................................................... 80,213,278
-----------
Liabilities:
Payable for investments purchased ....................................... 84,146
Accrued expenses payable ................................................ 25,981
Management fee payable .................................................. 273
Deferred Trustees fee payable ........................................... 96
Other liabilities ....................................................... 7,716
-----------
Total liabilities ..................................................... 118,212
-----------
Net assets .............................................................. $80,095,066
===========
Net assets represented by:
Paid-in capital ........................................................ $71,657,659
Accumulated overdistributed net investment income ...................... (1,908)
Accumulated net realized gains on investments .......................... 346,669
Net unrealized appreciation on investments ............................. 8,092,646
-----------
Total net assets applicable to outstanding shares of beneficial interest $80,095,066
===========
Shares of beneficial interest outstanding ............................... 6,420,464
===========
Net asset value per share ............................................... $ 12.47
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ................................................................ $ 758,469
Interest ................................................................. 115,788
----------
Total investment income (net of nonrebatable foreign taxes withheld at
source which amounted to $5,314) ...................................... 874,257
----------
Expenses:
Management fee .......................................................... 493,641
Bookkeeping fee ......................................................... 31,497
Transfer agent fee ...................................................... 7,500
Audit fee ............................................................... 19,903
Printing expense ........................................................ 1,173
Trustees' expense ....................................................... 8,924
Custodian fee ........................................................... 19,263
Legal fee ............................................................... 892
Miscellaneous expense ................................................... 4,240
----------
Total expenses ......................................................... 587,033
----------
Net investment income .................................................... 287,224
Realized and unrealized gains on investments:
Net realized gains on investments ....................................... 2,845,168
Net change in unrealized appreciation/depreciation on investments ....... 2,320,417
----------
Net increase in net assets resulting from operations ..................... $5,452,809
==========
</TABLE>
See Notes to Financial Statements.
110
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Operations:
Net investment income ......................................................... $ 287,224 $ 169,970
Net realized gains (losses) on investments .................................... 2,845,168 (185,131)
Net change in unrealized appreciation/depreciation on investments ............. 2,320,417 5,629,887
------------ ------------
Net increase in net assets resulting from operations ........................... 5,452,809 5,614,726
------------ ------------
Distributions declared from:
Net investment income ......................................................... (268,545) (169,969)
In excess of net investment income ............................................ (2,312,139) (17,577)
------------ ------------
Total distributions ............................................................ (2,580,684) (187,546)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold ................................................ 31,101,623 18,011,285
Cost of fund shares repurchased ............................................... (1,329,551) (983,417)
Distributions reinvested ...................................................... 2,580,684 187,546
------------ ------------
Net increase in net assets resulting from fund share transactions .............. 32,352,756 17,215,414
------------ ------------
Total increase in net assets ................................................... 35,224,881 22,642,594
Net assets:
Beginning of year ............................................................. 44,870,185 22,227,591
------------ ------------
End of year ................................................................... $ 80,095,066 $ 44,870,185
============ ============
Net of overdistributed net investment income included in ending net assets ..... $ (1,908) $ (17,651)
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold ................................................................... 2,543,081 3,274,810
Shares repurchased ............................................................ (108,558) (1,727,650)
Distributions reinvested ...................................................... 214,878 15,867
------------ ------------
Net increase ................................................................... 2,649,401 1,563,027
============ ============
</TABLE>
See Notes to Financial Statements.
111
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Liberty All-Star Equity Fund, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek total investment return, comprised
of long-term capital appreciation and current income, through investment
primarily in a diversified portfolio of equity securities. The Fund's
capitalization consists of an unlimited number of shares of beneficial interest
without par value that represents a separate series of the Trust. Each share of
the Fund represents an equal proportionate beneficial interest in the Fund and,
when issued and outstanding, is fully paid and nonassessable. Shareholders
would be entitled to share proportionally in the net assets of the Fund
available for distribution to shareholders upon liquidation of the Fund. 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") offered by the separate accounts of
the life insurance companies ("Participating Insurance Companies"). Certain
Participating Insurance Companies are affiliated with the Investment Advisor
and sub-advisors to the Fund ("Affiliated Participating Insurance Companies").
Such Affiliated Participating Insurance Companies are Keyport Life Insurance
Company ("Keyport"), Independence Life & Annuity Company ("Independence") and
Liberty Life Assurance Company of Boston ("Liberty Life"). The Participating
Insurance Companies and their separate accounts own all the shares of the Fund.
Liberty Advisory Services Corp. (the "Manager") ("LASC"), provides investment
management, and advisory services to the Fund pursuant to its Management
Agreements with the Trust. LASC has appointed Liberty Asset Management Co.
("LAMCO"), an affiliate of LASC, as Sub-Adviser to the Fund. LASC has delegated
various administrative matters to Colonial. Keyport Financial Services Corp.
("KFSC") serves as the principal underwriter of the Trust with respect to sales
of shares to Affiliated Participating Insurance Companies. The Manager,
Colonial, LAMCO, KFSC, Keyport and Independence are wholly-owned indirect
subsidiaries of Liberty Financial Companies, Inc. ("LFC"). As of December 31,
1999, Liberty Mutual Insurance Companies ("Liberty Mutual") owned approximately
71% of the outstanding voting shares of LFC. Liberty Life is a subsidiary of
Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Other--Corporate actions are recorded on the ex-date.
Interest income is recorded on the accrual basis.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees-- The Manager receives a monthly fee equal to
0.80% annually of the Fund's average daily net assets. The Manager, out of the
management fee it receives, pays LAMCO a monthly sub-advisory fee equal to
0.60% annually of the Fund's average daily net assets.
112
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Bookkeeping fee--Colonial provides bookkeeping and pricing services for
$27,000 annually plus 0.035% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent") an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (including
management fee) exceed 1.00% annually of the Fund's average daily net assets.
For the year ended December 31, 1999, the Fund's operating expenses, as defined
above, did not exceed the 1.00% expense limit.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $72,806,164 and
$44,594,368, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $13,627,752
Gross unrealized depreciation (5,917,204)
-----------
Net unrealized appreciation $7,710,548
-----------
</TABLE>
Note 4. Other Related Party Transactions
During the year ended December 31, 1999, the Fund used Alphatrade, a wholly
owned subsidiary of Colonial Management Associates, Inc., as a broker. Total
commissions paid to Alphatrade during the year were $50.
113
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, Period Ended
------------------------------ December 31,
1999 1998 1997***
----------- ---------------- --------------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ............................... $ 11.90 $ 10.07 $ 10.00
------- -------- --------
Net investment income (a) ........................................ 0.06 0.06 0.01
Net realized and unrealized gains on investments ................. 0.94 1.82 0.07
------- -------- --------
Total from investment operations ................................. 1.00 1.88 0.08
------- -------- --------
Less distributions:
Dividends from net investment income ............................ (0.05) (0.05) (0.01)
Dividends from net realized gains on investments ................ (0.38) -- --
------- -------- ---------
Total distributions .............................................. (0.43) (0.05) (0.01)
------- -------- ---------
Net asset value, end of year ..................................... $ 12.47 $ 11.90 $ 10.07
======= ======== =========
Total return:
Total investment return (b) ...................................... 8.47% 18.67%(c) 0.80%**(c)
Ratios/supplemental data:
Net assets, end of year (000's) .................................. $80,095 $ 44,870 $22,228
Ratio of expenses to average net assets (d) ...................... 0.95% 1.00%(e) 1.00%*(e)
Ratio of net investment income to average net assets (d) ......... 0.47% 0.54%(c) 0.83%*(c)
Portfolio turnover ratio ......................................... 75% 70% 1%**
</TABLE>
* Annualized.
** Not annualized.
*** For the period from commencement of operations November 17, 1997 to
December 31, 1997.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.04% and 1.45%
(annualized), respectively.
- --------------------------------------------------------------------------------
1999 Federal Tax information (unaudited)
For the fiscal year ended December 31, 1999, the Fund earned $1,852,471 of
long-term capital gains.
48% of the ordinary income distributed by the Fund in the year ended December
31, 1999 qualifies for the corporate dividends received deduction.
- --------------------------------------------------------------------------------
114
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Liberty All-Star Equity Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Liberty All-Star Equity Fund,
Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at
December 31, 1999, the results of its operations, the changes in its net assets
and the financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States. These financial
statements and the financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian and broker, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
115
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Newport Tiger Fund, Variable Series(1), seeks long-term capital
appreciation.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 5/1/95
Assuming reinvestment of all distributions
12-month total return ...................... 68.01%
Net asset value per share on 12/31/99 ......... $ 2.62
Net asset value per share on 12/31/98 ......... $ 1.57
</TABLE>
Portfolio Manager's Discussion
Thomas R. Tuttle and Lynda Couch are portfolio co-managers of Newport Tiger
Fund, Variable Series. Mr. Tuttle is president of Newport Fund Management, Inc.
(Newport) and Ms. Couch is a senior vice president of Newport.
What was the investment environment like over the past 12 months?
As in the United States during 1999, investors in Asia have shown
tremendous excitement about the growth in the high-technology and
telecommunications industries. The surging use of the Internet by both business
and consumers has been no less a phenomenon in Asia than in the U.S., and both
of these industries have been direct beneficiaries. Moreover, many
entrepreneurs are building successful businesses in these industries, expanding
the base of growth to the small- and mid-size company level, contributing to
the phenomenal growth of private enterprise that we have seen.
The technology boom has allowed Asian countries to "leapfrog" stages of
technological development. For example, the wireless telecommunications
industry has seen tremendous growth because there are not nearly as many fixed
telephone lines per capita as there are in the U.S. Rather than build fixed
lines and then build a wireless network, countries such as China have moved
directly to wireless. This has allowed companies like China Telecom (7.0% of
net assets) and Korea Telecom (2.8% of net assets) to rapidly grow their
wireless businesses.
What was the Fund's strategy during the period?
Since its inception, Newport Tiger Fund has invested primarily in stocks on
the Hong Kong Stock Exchange. While we still believe this is a very good way to
benefit from the region's growth, we have begun diversifying into other Asian
economies to a greater extent. For example, we had been avoiding Korea because
we felt that Korean companies had too much debt. We have been pleasantly
surprised, however, at how quickly Korean companies have reduced their debt
levels. We will continue to increase our investments in Korea, while remaining
careful to select the highest quality companies we can find. We increased the
Fund's weightings in Singapore and Taiwan--both of which have experienced solid
economic growth. Singapore has a very strong financial sector, and Taiwan's
semiconductor manufacturing is among the best in the world. In the Philippines,
we believe the investment risk has increased, and we have substantially reduced
the Fund's weightings from a few years ago. While we are excited about
diversifying the portfolio, we will retain many of our core Hong Kong
investments, which we believe still represent one of the best ways to benefit
from Asia's growth.
What is your outlook for the period ahead?
We believe the year 2000 will bring continued economic growth to the Asian
region, as stronger domestic consumption and internally generated (non-export)
growth comprise a larger part of the economies in which the Fund is invested.
There may be some volatility in the global financial markets, which may spill
over into Asia--especially if the volatility originates in the highly
influential U.S. stock market. But the fundamental economic trends that have
been discussed are expected to continue.
(1) Investing in Newport Tiger Fund, Variable Series offers long-term growth
potential; however, the net asset value of the Fund will fluctuate due to
economic and political developments and currency fluctuations. Many of the
Asian countries are considered emerging, which means there may be greater
risks associated with investing there than in more-developed countries.
Because economic and market conditions change frequently, there can be no
assurance that the trends described herein will come to pass or affect the
performance of the Fund.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower. Funds that
emphasize investments in smaller companies may experience greater price
volatility.
116
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Newport Tiger Fund, Variable Series vs. Morgan Stanley Capital International
EAFE GDP
Change in value of a $10,000 investment from 5/1/95--12/31/99
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
Life 1 Year 3 Years
<S> <C> <C>
7.31% 68.01% 2.68%
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Morgan
Newport Stanley
Tiger Fund, Capital
Variable International
Series EAFE GDP
<S> <C> <C> <C>
$20,000 5/95 10000 10000
$18,000 6/95 9820 9888
$16,000 10090 10535
$14,000 9774 10094
$12,000 9/95 9954 10214
$10,000 9909 9918
$ 8,000 9954 10128
$ 6,000 12/95 10360 10561
$ 4,000 11405 10695
11314 10727
3/96 11314 10870
11269 11208
11224 11042
6/96 10997 11128
10406 10809
10770 10802
9/96 11087 11099
10996 10978
11542 11447
12/96 11577 11366
11485 11152
11485 11230
3/97 10796 11445
10612 11416
11577 12011
6/97 12128 12726
12313 13006
10201 12072
9/97 10522 12847
8133 11897
7995 11849
12/97 7972 12020
6807 12645
8298 13373
3/98 8252 14101
7553 14313
6527 14516
6/98 5875 14653
5408 14843
4615 12887
9/98 5408 12527
6993 13921
7459 14644
12/98 7459 15233
7032 15248
7032 14769
3/99 7649 15546
9312 16169
8695 15322
6/99 9645 16093
9645 16582
9692 16690
9/99 9312 16977
9930 17561
11117 18190
12/99 13909 19762
</TABLE>
[END PLOT POINTS]
____ Newport Tiger Fund, Variable Series ---- MSCI EAFE GDP
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The Morgan Stanley Capital International
Europe, Australia and Far East (MSCI EAFE) GDP Index is a broad-based, unmanaged
index that tracks the performance of foreign stocks. Indexes are not
investments, do not incur fees or expenses and are not professionally managed.
It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
117
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series /
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ --------------
<S> <C> <C> <C>
COMMON STOCKS--94.8%
Finance, Insurance & Real Estate--49.4%
Depository Institutions--18.2%
DBS Group Holdings Ltd. ...................... Si 188,638 $ 3,092,055
HSBC Holdings PLC (a) ........................ HK 146,794 2,046,567
Hang Seng Bank Ltd. .......................... HK 133,600 1,525,310
Overseas-Chinese Banking
Corp Ltd. ................................. Si 189,730 1,742,942
-----------
8,406,874
-----------
Holding Companies--12.6%
Citic Pacific Ltd. ........................... HK 298,000 1,121,310
Hutchison Whampoa Ltd. ....................... HK 195,000 2,834,630
Singapore Technologies
Engineering Ltd. .......................... Si 1,205,000 1,866,647
-----------
5,822,587
-----------
Real Estate--18.6%
Ayala Land, Inc. ............................. Ph 95,000 24,752
Cheung Kong (Holdings)
Ltd. ...................................... HK 168,000 2,134,174
China Resources
Enterprises Ltd. .......................... HK 522,000 836,033
City Developments Ltd. ....................... Si 246,000 1,440,108
HKR International Ltd. ....................... HK 788,800 553,028
SM Prime Holdings, Inc. ...................... Ph 2,510,000 473,350
Sun Hung Kai Properties
Ltd. ...................................... HK 203,000 2,115,263
Swire Pacific Ltd., Series A HK 173,000 1,021,509
-----------
8,598,217
-----------
Manufacturing--7.0%
Electronic Components--1.2%
Chartered Semiconductor
Manufacturing Ltd.
ADR (b) ................................... Tw 300 21,900
United Microelectronics
Corp., Ltd. ............................... Tw 150,000 535,287
-----------
557,187
-----------
Household Appliances--0.5%
Guangdong Kelon Electric
Holdings Class H .......................... HK 266,000 201,891
-----------
Measuring & Analyzing Instruments--0.1%
China Hong Kong Photo
Products Holdings, Ltd. ................... HK 460,000 59,176
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ --------------
<S> <C> <C> <C>
Printing & Publishing--5.2%
Singapore Press Holdings
Ltd. ...................................... Si 111,164 $ 2,409,499
-----------
Retail Trade--5.7%
Apparel & Accessory Stores--3.2%
Esprit Holdings Ltd. ......................... HK 456,000 492,751
Giordano International Ltd. HK 972,000 1,000,322
-----------
1,493,073
-----------
Food Stores--2.5%
President Chain Store Corp. Tw 256,920 1,133,771
-----------
Services--4.5%
Computer Related Services--2.1%
Datacraft Asia Ltd. .......................... Si 116,000 962,800
-----------
Computer Software--2.4%
Taiwan Semiconductor
Manufacturing Co., ADR Tw 210,310 1,119,062
-----------
Transportation, Communication, Electric, Gas &
Sanitary Services--19.8%
Electric Services--3.1%
CLP Holdings Ltd. ............................ HK 154,000 709,230
Hong Kong Electric
Holdings Ltd. ............................. HK 222,000 693,973
-----------
1,403,203
-----------
Gas Services--4.3%
Hong Kong & China Gas
Co., Ltd. ................................. HK 1,442,151 1,975,803
-----------
Telecommunication--12.4%
Cable & Wireless HKT
Ltd. (a) .................................. HK 391,769 1,143,476
China Telecom Ltd. (a)(b) .................... HK 500,000 3,218,750
Korea Telecom Corp., ADR Ko 17,000 1,270,750
PT Indonesian Satellite
Corp. ..................................... In 43,000 95,998
-----------
5,728,974
-----------
Wholesale Trade--8.4%
Durable Goods
Johnson Electric Holdings
Ltd. ...................................... HK 144,500 927,581
Li & Fung Ltd. ............................... HK 1,176,000 2,950,022
-----------
3,877,603
-----------
Total Common Stocks
(cost of $27,447,429) (c) ........................................ 43,749,720
-----------
</TABLE>
See Notes to Investment Portfolio.
118
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series /
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------------- -------------
<S> <C> <C>
SHORT-TERM OBLIGATION--5.2%
Repurchase agreement with SBC
Warburg Ltd., dated 12/31/99,
due 1/3/00 at 2.500%
collateralized by U.S. Treasury
bonds and/or notes with various
maturities to 2021, market value
$2,449,609 (repurchase proceeds
$2,400,500) .................. $2,400,000 $2,400,000
----------
</TABLE>
<TABLE>
<CAPTION>
Value
---------------
<S> <C>
Other Assets & Liabilities, Net--0.0% $ (24,963)
-----------
Net Assets--100.0% ................. $46,124,757
===========
</TABLE>
Notes to Investment Portfolio:
(a) The value of this security represents fair value as determined in good
faith under the direction of the Trustees.
(b) Non-income producing.
(c) The cost for federal income tax purposes is the same.
Summary of Securities by Country
<TABLE>
<CAPTION>
% of Total
Country Securities
Country Abbrev. Value at Value
- ------------------------------ --------- -------------- -----------
<S> <C> <C> <C>
Hong Kong .................. HK $27,560,799 63.0
Singapore .................. Si 11,514,051 26.3
Taiwan ..................... Tw 2,810,020 6.4
Korea ...................... Ko 1,270,750 3.0
Philippines ................ Ph 498,102 1.1
Indonesia .................. In 95,998 0.2
----------- -----
$43,749,720 100.0
=========== =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
- ----------- ----------------------------
<S> <C>
ADR American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
119
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series /
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $27,447,429) ....................... $ 43,749,720
Short-term obligations ........................................................... 2,400,000
Cash (including foreign currencies) .............................................. 19,156
Dividends and interest receivable ................................................ 5,553
Other assets ..................................................................... 51,840
------------
Total assets ................................................................... 46,226,269
------------
Liabilities:
Fund shares repurchased .......................................................... 75,273
Other liabilities ................................................................ 26,239
------------
Total liabilities .............................................................. 101,512
------------
Net assets ....................................................................... $ 46,124,757
============
Net assets represented by:
Paid-in capital ................................................................. $ 39,211,589
Accumulated overdistributed net investment income ............................... (2,534)
Accumulated net realized losses on investments and foreign currency transactions (9,386,907)
Net unrealized appreciation on investments and foreign currency transactions .... 16,302,609
------------
Total net assets applicable to outstanding shares of beneficial interest ......... $ 46,124,757
============
Shares of beneficial interest outstanding ........................................ 17,584,209
============
Net asset value per share ........................................................ $ 2.62
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ........................................................................ $ 804,545
Interest ......................................................................... 77,985
------------
Total investment income (net of nonrebatable foreign taxes withheld at source
which amounted to $41,034) .................................................... 882,530
------------
Expenses:
Management fee .................................................................. 277,720
Bookkeeping fee ................................................................. 27,000
Transfer agent fee .............................................................. 7,500
Audit fee ....................................................................... 21,703
Trustees' expense ............................................................... 7,635
Custodian fee ................................................................... 27,898
Legal fees ...................................................................... 1,082
Miscellaneous expense ........................................................... 2,942
------------
Total expenses ................................................................. 373,480
------------
Net investment income ............................................................ 509,050
------------
Realized and unrealized gains (losses) on investments and foreign currency
transactions:
Net realized losses on investments .............................................. (1,183,535)
Net realized losses on foreign currency transactions ............................ (2,826)
Net change in unrealized appreciation/depreciation on investments and
foreign currency transactions 18,167,999
------------
Net increase in net assets resulting from operations ............................. $ 17,490,688
============
</TABLE>
See Notes to Financial Statements.
120
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Operations:
Net investment income ................................................... $ 509,050 $ 463,640
Net realized losses on investments ...................................... (1,183,535) (4,917,789)
Net realized losses on foreign currency transactions .................... (2,826) (198,076)
Net change in unrealized appreciation/depreciation on investments and
foreign currency transactions .......................................... 18,167,999 2,753,112
------------- -------------
Net increase (decrease) in net assets resulting from operations .......... 17,490,688 (1,899,113)
------------- -------------
Distributions declared from:
Net investment income ................................................... (298,594) (444,100)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold .......................................... 17,247,955 10,873,853
Cost of fund shares repurchased ......................................... (12,269,355) (10,253,195)
Distributions reinvested ................................................ 298,594 444,100
------------- -------------
Net increase in net assets resulting from fund share transactions ........ 5,277,194 1,064,758
------------- -------------
Total increase (decrease) in net assets .................................. 22,469,288 (1,278,455)
Net assets:
Beginning of year ....................................................... 23,655,469 24,933,924
------------- -------------
End of year ............................................................. $ 46,124,757 $ 23,655,469
============= =============
Accumulated overdistributed net investment income included in
ending net assets ....................................................... $ (2,534) $ (241,117)
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ............................................................. 8,254,763 16,203,162
Shares repurchased ...................................................... (5,851,258) (15,994,192)
Distributions reinvested ................................................ 118,962 282,866
------------- -------------
Net increase ............................................................. 2,522,467 491,836
============= =============
</TABLE>
See Notes to Financial Statements.
121
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Newport Tiger Fund, Variable Series (the "Fund"), a series of
Liberty Variable Investment Trust (the "Trust"), is a non-diversified portfolio
of a Massachusetts business trust, registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Fund's
investment objective is to seek long-term capital growth by investing primarily
in equity securities of companies located in the nine Tigers of Asia (Hong
Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, China and
the Philippines). The 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 the Fund represents an equal proportionate
beneficial interest in the Fund and, when issued and outstanding, is fully paid
and nonassessable. Shareholders would be entitled to share proportionally in
the net assets of the Fund available for distribution to shareholders upon
liquidation of the Fund. 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") offered
by the separate accounts of the life insurance companies ("Participating
Insurance Companies"). Certain Participating Insurance Companies are affiliated
with the Investment Advisor and sub-advisors to the Fund ("Affiliated
Participating Insurance Companies"). Such Affiliated Participating Insurance
Companies are Keyport Life Insurance Company ("Keyport"), Independence Life &
Annuity Company ("Independence") and Liberty Life Assurance Company of Boston
("Liberty Life"). The Participating Insurance Companies and their separate
accounts own all the shares of the Fund. Liberty Advisory Services Corp. (the
"Manager") ("LASC"), provides investment management and advisory services to
the Fund pursuant to its Management Agreements with the Trust. LASC has
appointed Newport Fund Management ("Newport"), an affiliate of LASC, as
Sub-Advisor to the Fund. LASC has delegated various administrative matters to
Colonial Management Associates, Inc. ("Colonial"). Keyport Financial Services
Corp. ("KFSC") serves as the principal underwriter of the Trust with respect to
sales of shares to Affiliated Participating Insurance Companies. The Manager,
Colonial, Newport, KFSC, Keyport and Independence are wholly-owned indirect
subsidiaries of Liberty Financial Companies, Inc. ("LFC"). As of December 31,
1999, Liberty Mutual Insurance Companies ("Liberty Mutual") owned approximately
71% of the outstanding voting shares of LFC. Liberty Life is a subsidiary of
Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
contracts with similar maturities.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on
the accrual basis. Original issue discount is accreted to interest income over
the life of a security with a corresponding increase in the cost basis; premium
and market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Foreign currency transactions--Net realized and unrealized gains (losses) on
foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates
122
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
between trade and settlement dates on securities transactions, gains (losses)
arising from the disposition of foreign currency, and currency gains (losses)
between the accrual and payment dates on dividends and interest income and
foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
Forward currency contracts--The Fund may enter into forward currency contracts
to purchase or sell foreign currencies at predetermined exchange rates in
connection with the settlement of purchases and sales of securities. The Fund
may also enter into forward currency contracts to hedge certain other foreign
currency denominated assets. The contracts are used to minimize the exposure to
foreign exchange rate fluctuations during the period between trade and
settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While the maximum potential loss from such contracts is the
aggregate face value in U.S. dollars at the time the contract was opened,
exposure is typically limited to the change in value of the contract (in U.S.
dollars) over the period it remains open. Risks may also arise if
counterparties fail to perform their obligations under the contracts.
Other--Corporate actions are recorded on ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of
all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal to
0.90% annually of the Fund's average daily net assets. The Manager, out of the
management fee it receives, pays Newport a monthly sub-advisory fee equal to
0.70% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for a
monthly fee equal to $27,000 annually plus 0.035% of the Fund's average net
assets over $50 million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent") an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $7,416,399 and
$3,583,864, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $18,084,101
Gross unrealized depreciation (1,781,810)
-----------
Net unrealized appreciation $16,302,291
-----------
</TABLE>
Capital loss carryforwards--At December 31, 1999, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
- ------------ -------------
<S> <C>
2005 $2,436,000
2006 5,726,000
2007 1,051,000
----------
$9,213,000
----------
</TABLE>
Other--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse
political and economic developments and the possible prevention of foreign
currency exchange or the imposition of other foreign governmental laws or
restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
123
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
Years Ended December 31, December 31,
-------------------------------------------------------- -------------
1999 1998 1997 1996 1995***
----------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year .................. $ 1.57 $ 1.71 $ 2.52 $ 2.28 $ 2.00
------ ------- -------- ------ -------
Net investment income (a) ........................... 0.03 0.03 0.03 0.03 0.01
Net realized and unrealized gains (losses)
on investments ..................................... 1.04 (0.14) (0.81) 0.24 0.29
------ ------- -------- ------ -------
Total from investment operations .................... 1.07 (0.11) (0.78) 0.27 0.30
------ ------- -------- ------ -------
Less distributions:
Dividends from net investment income ............... (0.02) (0.03) (0.02) (0.02) (0.01)
In excess of net investment income ................. -- -- (0.01) -- (0.01)
Distributions from net realized gains .............. -- -- -- (0.01) --
------- ------- -------- ------- ------
Total distributions ................................. (0.02) (0.03) (0.03) (0.03) (0.02)
------- ------- -------- ------- -------
Net asset value, end of year ........................ $ 2.62 $ 1.57 $ 1.71 $ 2.52 $ 2.28
======= ======= ======== ======= =======
Total return:
Total investment return (b) ......................... 68.01% (6.43)% (31.14)% 11.73% 15.00%**
Ratios/supplemental data:
Net assets, end of year (000's) ..................... $46,125 $23,655 $ 24,934 $34,642 $18,977
Ratio of expenses to average net assets (c) ......... 1.21% 1.30% 1.25% 1.27% 1.75%*
Ratio of net investment income to
average net assets (c) ............................. 1.65% 2.16% 1.14% 1.20% 0.89%*
Portfolio turnover ratio ............................ 12% 16% 27% 7% 12%**
</TABLE>
* Annualized.
** Not annualized.
*** For the period from the commencement of operations May 1, 1995 to December
31, 1995.
(a) Per share data was calculated using average shares oustanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
124
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Newport Tiger Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Newport Tiger Fund, Variable
Series (the "Fund") (a series of Liberty Variable Investment Trust) at December
31, 1999, the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with accounting
principles generally accepted in the United States. These financial statements
and the financial highlights (hereafter referred to as "financial statements")
are the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2000
125
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Stein Roe Global Utilities Fund, Variable Series, seeks current income and
long-term growth of capital and income.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 7/1/93
Assuming reinvestment of all distributions
12-month total return ...................... 28.63%
Net asset value per share on 12/31/99 ......... $17.15
Net asset value per share on 12/31/98 ......... $13.76
</TABLE>
Portfolio Managers' Discussion
Ophelia Barsketis and Deborah A. Jansen, senior vice presidents of Stein
Roe & Farnham Incorporated, are portfolio co-managers of Stein Roe Global
Utilities Fund, Variable Series.
What was the investment environment over the past year?
For traditional electric and gas utility companies, it was a difficult
period. The telecommunications sector fared better, due to the growth of data
communications, the Internet and a healthy economic environment. After several
years of turmoil, financial markets in developing economies appreciated
significantly, their economies stabilized and gained momentum.
What was the Fund's strategy during the period?
We maintained our overweight in the telecommunications sector, which had
the best opportunity for growth in the utility universe. We also remained
invested in telecommunications equipment companies, such as Ericsson (5.1% of
net assets), Nokia (4.9% of net assets) and Tellabs (2.5% of net assets). To
take advantage of the turnaround in Latin American and Asian markets, we
invested in Korea, Mexico and Brazil.
On the electric utility services side, we have maintained our
underweighting due to the uncertainty brought about by deregulation and the
introduction of competition. We continue to focus our holdings in the electric
services area on high-quality companies like FPL Group (0.8% of net assets) and
AES Corp. (3.4% of net assets).
At year-end, the Fund was invested about 50% in U.S. stocks. The
international exposure was primarily in Europe, with UK, Finland and Sweden
accounting for the highest weights.
What is your outlook for the period ahead?
The Fund's global diversification and conservative investment style helps
to cushion investors from acute market or regional disruptions.
In the event of interest rate increases by the Federal Reserve Board,
foreign economies will be affected. However, we are least exposed to the most
interest-rate sensitive components of the utility universe. Our intentional
overweight is in the communications sector, which we believe will continue to
exhibit relatively better growth rates.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
126
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stein Roe Global Utilities Fund, Variable Series vs. MSCI World ND Index
and S&P Utilities Index
Change in value of a $10,000 investment from 7/01/93--12/31/99
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
Life 1 Year 5 Years
<S> <C> <C>
15.04% 28.63% 23.06%
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Stein Roe
Global Utilities
Fund, Variable MSCI World S&P
Series ND Utilities
<S> <C> <C> <C>
$28,000 10000 10000 10000
$26,000 10237 10456 10484
$24,000 10148 10260 10458
$22,000 10010 10541 10439
$20,000 9564 9942 9913
$18,000 9723 10426 9861
$16,000 9562 11111 9925
$14,000 9118 10964 9365
$12,000 8856 10490 9047
$10,000 9048 10812 9274
$ 8,000 8665 10837 9023
8484 10804 9045
8786 11007 9349
8816 11336 9321
8604 11036 9089
8715 11347 9160
8675 10852 9029
8725 10954 9080
9252 10787 9787
9316 10941 9768
9262 11466 9707
9456 11863 10070
9886 11961 10383
9950 11955 10428
10026 12551 10696
10263 12268 10914
10812 12623 11598
11059 12421 11844
11264 12849 11973
11792 13222 12815
12016 13459 12983
11735 13538 12474
11622 13760 12204
11533 14081 12350
11555 14091 12323
11993 14160 12820
11555 13657 11991
11612 13811 12270
11657 14349 12388
12106 14446 13004
12487 15252 13295
12561 15005 13214
12842 15184 13279
13006 15355 13167
12560 15048 12768
12655 15537 12554
13089 16493 13114
13476 17313 13519
13700 18107 13813
13394 16892 13583
14028 17808 14168
14216 16867 14291
15448 17163 15322
16173 17369 16473
15901 17850 15796
16688 19055 16355
17788 19857 17398
17761 20047 17048
17504 19793 16982
17829 20260 17609
18156 20223 16714
15879 17524 17007
16714 17830 18425
17439 19439 18101
17863 20591 18358
19139 21594 18907
19862 22065 18033
19111 21476 17389
19027 22367 17137
19904 23246 18633
20434 22393 19781
20781 23434 19126
20351 23361 18893
19781 23317 19131
19740 23089 18211
21076 24285 18480
21729 24965 17065
24888 27524 17621
</TABLE>
[END PLOT POINTS]
<TABLE>
<S> <C> <C>
____ Stein Roe Global Utilities Fund, Variable Series .... S&P Utilities ---- MSCI World ND
</TABLE>
Past performance is no guarantee of future results. Performance numbers reflect
all Fund expenses, net of any voluntary waiver of expenses by the Manager, but
do not include insurance charges imposed by your insurance company's separate
accounts. If performance information included the effect of these additional
amounts, returns would be lower. The Morgan Stanley Capital International World
Index ND is an unmanaged index that tracks the performance of global stocks. The
Standard & Poor's Utilities Index is an unmanaged index that tracks the
performance of domestic utility stocks. Indexes are not investments, do not
incur fees or expenses and are not professionally managed. It is not possible to
invest directly in an index.
- --------------------------------------------------------------------------------
127
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ ------------
<S> <C> <C> <C>
COMMON STOCKS--94.0%
Finance, Insurance & Real Estate--4.2%
Real Estate Investment Trusts
Liberty Property Trust ........................................ 112,500 $ 2,728,125
Prologis Trust ................................................ 95,500 1,838,375
-----------
4,566,500
-----------
Manufacturing--11.5%
Communications Equipment--9.9%
Lucent Technologies, Inc. ..................................... 37,600 2,812,950
Nokia Corp ADR ................................................ Fi 28,200 5,358,000
Tellabs, Inc. (a) ............................................. 43,000 2,760,062
-----------
10,931,012
-----------
Machinery & Computer Equipment--1.6%
Tyco International Ltd. ....................................... 45,000 1,749,375
-----------
Mining & Energy--2.7%
Oil & Gas Field Services
Enron Corp. ................................................... 68,200 3,026,375
-----------
Transportion,Communication, Electric,
Gas & Sanitary Services--75.6%
Broadcasting--4.2%
Grupo Televisa SA ADR (a) Mx 68,100 4,647,825
-----------
Communications--1.9%
Metromedia Fiber Network,
Inc., Class A (a) .......................................... 44,100 2,114,044
-----------
Electric, Gas & Sanitary Services--4.8%
American Water Works Co., Inc. 67,500 1,434,375
Calpine Corp. (a) ............................................. 31,200 1,996,800
Constellation Energy Group 62,000 1,798,000
-----------
5,229,175
-----------
Electric Services--13.0%
AES Corp. (a) ................................................. 49,800 3,722,550
CMS Energy Corp. .............................................. 55,800 1,740,262
FPL Group, Inc. ............................................... 20,700 886,219
National Grid Group PLC ....................................... UK 363,700 2,767,395
Pinnacle West Capital Corp. 52,400 1,601,475
Scottish Power PLC ADR ........................................ UK 66,900 1,873,200
Sierra Pacific Resources ...................................... 49,672 859,947
Texas Utilities Co. ........................................... 25,600 910,400
-----------
14,361,448
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ ------------
<S> <C> <C> <C>
Gas Services--9.4%
Coastal Corp. ................................................. 48,400 $ 1,715,175
Columbia Energy Group ......................................... 33,450 2,115,713
El Paso Energy Corp. .......................................... 48,200 1,870,762
Kinder Morgan Energy
Partners, L.P. ............................................. 71,500 2,962,781
Williams Companies, Inc. ...................................... 53,900 1,647,319
-----------
10,311,750
-----------
Telecommunication--42.3%
AT&T Corp. .................................................... 42,450 2,154,338
COLT Telecom Group
ADR (a) .................................................... UK 28,600 5,834,400
Korea Telecom Corp. ADR Kr 45,100 3,371,225
MCI WorldCom, Inc. (a) ........................................ 46,800 2,483,325
Portugal Telecom S.A. ADR Pt 102,500 1,114,687
SBC Communications, Inc.,
Class A .................................................... 51,539 2,512,526
Sonera Group Oyj .............................................. Fi 79,700 5,458,025
Sprint Corp. .................................................. 46,400 3,123,300
Sprint PCS (a) ................................................ 23,400 2,398,500
Telecom Corp. of New
Zealand ADR ................................................ NZ 76,300 2,937,550
Tele Danmark A/S ADR .......................................... Dk 87,000 3,284,250
Telefonica de Espana ADR Sp 54,012 4,256,825
Tele Norte Leste
Participacoes S.A. ADR ..................................... Bz 143,200 3,651,600
Telstra Corp., Ltd. ADR ....................................... Au 37,600 1,024,600
Vodafone AirTouch PLC
ADR ........................................................ UK 61,100 3,024,450
-----------
46,629,601
-----------
Total Common Stocks
(cost of $70,616,000) ........................................................ 103,567,105
-----------
PREFERRED STOCK--5.1%
Transportation, Communication, Electric, Gas &
Sanitary Services
Communications Equipment
Ericsson LM, 4.250% ...........................................
(cost of $1,777,256) .......................................... Sw 288,500 5,589,688
-----------
Total Investments
(cost of $72,393,256) (b) .................................................... 109,156,793
-----------
</TABLE>
See Notes to Investment Portfolio.
128
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------------- -------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--1.4%
Repurchase agreement with SBC
Warburg Ltd., dated 12/31/99,
due 1/3/00 at 2.500%,
collateralized by U.S. Treasury
bonds and/or notes with various
maturities to 2021, market value
of $1,648,383 (repurchase
proceeds $1,615,336) ......... $1,615,000 $1,615,000
----------
</TABLE>
<TABLE>
<CAPTION>
Value
--------------
<S> <C>
Other Assets & Liabilities, Net--(0.5)% $ (621,816)
------------
Net Assets--100.0% ................... $110,149,977
============
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $72,410,264.
Summary of Securities by Country
<TABLE>
<CAPTION>
% of Total
Country Securities
Country Abbrev. Value at Value
- --------------------------------- --------- -------------- -----------
<S> <C> <C> <C>
United States ................. $ 54,963,073 50.4
United Kingdom ................ UK 13,499,445 12.4
Finland ....................... Fi 10,816,025 9.9
Sweden ........................ Sw 5,589,688 5.1
Mexico ........................ Mx 4,647,825 4.3
Spain ......................... Sp 4,256,825 3.9
Brazil ........................ Bz 3,651,600 3.3
Korea ......................... Kr 3,371,225 3.1
Denmark ....................... Dk 3,284,250 3.0
New Zealand ................... NZ 2,937,550 2.7
Portugal ...................... Pt 1,114,687 1.0
Australia ..................... Au 1,024,600 0.9
------------ -----
$109,156,793 100.0
============ =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
- ----------- ----------------------------
<S> <C>
ADR American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
129
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $72,393,256) ....................... $ 109,156,793
Short-term obligations ........................................................... 1,615,000
Dividends, tax reclaims and interest receivable .................................. 277,843
Cash (including foreign currencies) .............................................. 460
Other assets ..................................................................... 2,793
-------------
Total assets ................................................................... 111,052,889
-------------
Liabilities:
Payable for fund shares repurchased .............................................. 855,267
Accrued expenses payable ......................................................... 30,250
Management fee payable ........................................................... 62
Other liabilities ................................................................ 17,333
-------------
Total liabilities .............................................................. 902,912
-------------
Net assets ....................................................................... $ 110,149,977
=============
Net assets represented by:
Paid-in capital ................................................................. $ 73,367,420
Accumulated undistributed net investment income ................................. 1,952
Accumulated net realized losses on investments and foreign currency transactions 19,911
Net unrealized appreciation on investments and foreign currency transactions .... 36,760,694
-------------
Total net assets applicable to outstanding shares of beneficial interest ......... $ 110,149,977
=============
Shares of beneficial interest outstanding ........................................ 6,421,000
=============
Net asset value per share ........................................................ $ 17.15
=============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ............................................................................. $ 2,086,814
Interest .............................................................................. 205,732
-----------
Total investment income (net of nonrebatable foreign taxes withheld at source
which amounted to $86,772) .................................................... 2,292,546
-----------
Expenses:
Management fee .................................................................. 554,892
Bookkeeping fee ................................................................. 40,059
Transfer agent fee .............................................................. 7,500
Audit fee ....................................................................... 25,503
Printing expense ................................................................ 4,223
Trustees' expense ............................................................... 9,914
Custodian fee ................................................................... 13,899
Miscellaneous expense ........................................................... 3,803
-----------
Total expenses ................................................................. 659,793
-----------
Net investment income ............................................................ 1,632,753
Realized and unrealized gains (losses) on investments and foreign currencies:
Net realized gains on investments ............................................... 2,747,822
Net realized losses on foreign currency transactions ............................ (80,192)
Net change in unrealized appreciation/depreciation on investments and foreign
currencies transactions ........................................................ 19,787,517
-----------
Net increase in net assets resulting from operations ............................. $24,087,900
===========
</TABLE>
See Notes to Financial Statements.
130
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ................................................... $ 1,632,753 $ 1,141,996
Net realized gains (losses) on investments .............................. 2,747,822 (944,622)
Net realized losses on foreign currency transactions .................... (80,192) (81,907)
Net change in unrealized appreciation/depreciation on investments
and foreign currency transactions ...................................... 19,787,517 10,344,797
------------- -------------
Net increase in net assets resulting from operations ..................... 24,087,900 10,460,264
------------- -------------
Distributions declared from:
Net investment income ................................................... (1,427,277) (1,093,286)
In excess of net investment income ...................................... -- (27,116)
Net realized gains ...................................................... (1,796,627) (526,699)
------------- -------------
Total distributions ...................................................... (3,223,904) (1,647,101)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold .......................................... 27,129,354 27,814,816
Cost of fund shares repurchased ......................................... (12,253,422) (21,691,948)
Distributions reinvested ................................................ 3,223,904 1,647,101
------------- -------------
Net increase in net assets resulting from fund share transactions ........ 18,099,836 7,769,969
------------- -------------
Total increase in net assets ............................................. 38,963,832 16,583,132
Net assets:
Beginning of year ....................................................... 71,186,145 54,603,013
------------- -------------
End of year ............................................................. $ 110,149,977 $ 71,186,145
============= =============
Accumulated undistributed (overdistributed) net investment income
included in ending net assets ........................................... $ 1,952 $ (103,918)
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ............................................................. 1,873,661 2,124,940
Shares repurchased ...................................................... (827,630) (1,654,612)
Distributions reinvested ................................................ 200,616 124,015
------------- -------------
Net increase ............................................................. 1,246,647 594,343
============= =============
</TABLE>
See Notes to Financial Statements.
131
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies.
Organization--Stein Roe Global Utilities, Variable Series (the "Fund"), a
series of Liberty Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek current income and long-term growth
of capital and income. The Fund's capitalization consists of an unlimited
number of shares of beneficial interest without par value that represents a
separate series of the Trust. Each share of the Fund represents an equal
proportionate beneficial interest in the Fund and, when issued and outstanding,
is fully paid and nonassessable. Shareholders would be entitled to share
proportionally in the net assets of the Fund available for distribution to
shareholders upon liquidation of the Fund. 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") offered by the separate accounts of the life insurance companies
("Participating Insurance Companies"). Certain Participating Insurance
Companies are affiliated with the Investment Advisor and sub-advisors to the
Fund ("Affiliated Participating Insurance Companies"). Such Affiliated
Participating Insurance Companies are Keyport Life Insurance Company
("Keyport"), Independence Life & Annuity Company ("Independence") and Liberty
Life Assurance Company of Boston ("Liberty Life"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund. Liberty
Advisory Services Corp. (the "Manager") ("LASC"), provides investment
management and advisory services to the Fund pursuant to its Management
Agreements with the Trust. Stein Roe & Farnham Incorporated ("Stein Roe")
provides sub-advisory services. LASC has delegated various administrative
matters to Colonial. Keyport Financial Services Corp. ("KFSC") serves as the
principal underwriter of the Trust with respect to sales of shares to
Affiliated Participating Insurance Companies. The Manager, Colonial, Stein Roe,
KFSC, Keyport and Independence are wholly-owned indirect subsidiaries of
Liberty Financial Companies, Inc. ("LFC"). As of December 31, 1999, Liberty
Mutual Insurance Companies ("Liberty Mutual") owned approximately 71% of the
outstanding voting shares of LFC. Liberty Life is a subsidiary of Liberty
Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium: Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Other--Corporate actions are recorded on the ex-date. The Fund's custodian
takes possession through the federal book-entry system of securities
collateralizing repurchase agreements. Collateral is marked-to-market daily to
ensure that the market value of the underlying assets remains sufficient to
protect the Fund. The Fund may experience costs and delays in liquidating the
collateral if the issuer defaults or enters bankruptcy.
132
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 2. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory fees--The Manager receives a monthly fee equal to
0.65% annually of the Fund's average daily net assets. The Manager, out of the
management fee it receives, pays Stein Roe a monthly sub-advisory fee equal to
0.45% annually of the Fund's average daily net assets.
Bookkeeping fee--Colonial provides bookkeeping and pricing services for
$27,000 annually plus 0.035% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $ 59,635,125 and
$ 42,992,382, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $40,337,698
Gross unrealized depreciation (3,591,169)
-----------
Net unrealized appreciation $36,746,529
-----------
</TABLE>
Other--The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
133
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year .......... $ 13.76 $ 11.92 $ 10.70 $ 10.50 $ 8.11
------- -------- -------- -------- --------
Net investment income (a) ................... 0.28 0.24 0.46 0.46 0.46
Net realized and unrealized gains (losses)
on investments ............................. 3.63 1.93 2.62 0.23 2.39
------- -------- -------- -------- --------
Total from investment operations ............ 3.91 2.17 3.08 0.69 2.85
------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ....... (0.23) (0.21) (0.48) (0.49) (0.46)
In excess of net investment income ......... -- (0.01) -- -- --
Dividends from net realized gains
on investments ............................ (0.29) (0.11) (1.38) -- --
-------- -------- -------- -------- --------
Total distributions ......................... (0.52) (0.33) (1.86) (0.49) (0.46)
-------- -------- -------- -------- --------
Net asset value, end of year ................ $ 17.15 $ 13.76 $ 11.92 $ 10.70 $ 10.50
======== ======== ======== ======== ========
Total return:
Total investment return(b) .................. 28.63% 18.33% 28.75% 6.53% 35.15%
Ratios/supplemental data:
Net assets, end of year (000's) ............. $110,150 $ 71,186 $ 54,603 $ 47,907 $ 51,597
Ratio of expenses to average net assets ..... 0.77% 0.82%(c) 0.83%(c) 0.81%(c) 0.83%(c)
Ratio of net investment income to average
net assets ................................. 1.91% 1.90%(c) 3.96%(c) 4.36%(c) 4.98%(c)
Portfolio turnover ratio .................... 52% 53% 89% 14% 18%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
- --------------------------------------------------------------------------------
1999 Federal Tax information (unaudited)
100% of the gain distribution was derived from long-term gains.
For the fiscal year ended December 31, 1999, the Fund earned $1,825,616 of
long-term capital gains.
- --------------------------------------------------------------------------------
134
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Liberty Variable Investment Trust and
the Shareholders of Stein Roe Global Utilities Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Stein Roe Global Utilities Fund,
Variable Series (the "Fund") (a series of Liberty Variable Investment Trust) at
December 31, 1999, the results of its operations, the changes in its net assets
and the financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States. These financial
statements and the financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
135
<PAGE>
Liberty Variable Investment Trust
Manager
Liberty Advisory Services Corp.
125 High Street
Boston, Massachusetts 02110
Sub-Investment Advisors
Colonial Management Associates, Inc.
One Financial Center
Boston, Massachusetts 02111-2365
Stein Roe & Farnham, Inc.
One South Wacker Drive
Chicago, Illinois 60606
Newport Fund Management
580 California Street
Suite 1960
San Francisco, California 94104
Liberty Asset Management Company
Federal Reserve Plaza
600 Atlantic Avenue
Boston, Massachusetts 02110
Transfer Agent
Liberty Funds Services, Inc.
245 Summer Street
Boston, Massachusetts 02111-2365
Distributors
Keyport Financial Services Corp.
125 High Street
Boston, Massachusetts 02110
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111
Client Services
Keyport Life Insurance Company
125 High Street
Boston, Massachusetts 02110
800-367-3653 (Press 3)
Custodian
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017-2070
Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110
The Trustees
Tom Bleasdale
John Carberry
Lora S. Collins
James E. Grinnell
Richard W. Lowry
Salvatore Macera
William E. Mayer
James L. Moody, Jr.
John J. Neuhauser
Thomas E. Stitzel
Robert L. Sullivan
Anne-Lee Verville
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 a participating insurance company.
136
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Stein Roe Balanced Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Stein Roe Balanced Fund, Variable Series, seeks high total investment
return, consistent with reasonable investment risk, by investing primarily in a
diversified portfolio of common stocks, bonds and cash.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 1/1/89
Assuming reinvestment of all distributions
12-month total return ...................... 12.53%
Net asset value per share on 12/31/99 ......... $17.80
Net asset value per share on 12/31/98 ......... $17.14
</TABLE>
Portfolio Manager's Discussion
Harvey B. Hirschhorn, executive vice president of Stein Roe & Farnham
Incorporated, is portfolio manager of Stein Roe Balanced Fund, Variable Series.
What was the investment environment over the past year?
The year began with continuing domestic economic expansion, rising
corporate earnings, low interest rates and no inflation. In the second quarter,
however, investors became concerned about earnings, and sentiments shifted from
large growth companies to small-company, value and cyclical businesses. From
July through October, stock markets experienced a material sell-off. Volatility
reigned for the remainder of the year, with large company stocks and the major
indices rebounding to record levels. The technology sector set the investment
pace, and international markets began to revive. The Federal Reserve raised
short-term interest rates in three one-quarter point moves which battered bond
markets.
What was the Fund's strategy during the period?
Since our report on June 30, we made some shifts in asset allocation. With
concerns about corporate earnings, we focused on those companies in which we
had the highest confidence. We sold some equity positions to achieve a higher
cash position in a volatile market. We reduced our fixed-income position in
anticipation of a more difficult environment for bonds. At year-end, the Fund's
asset mix was approximately 55% stocks, 31% bonds, and 14% cash.
On the equity side, we maintained a strong representation in technology
stocks with heavy exposure in telecommunications. Some of the best performers
were Oracle (1.7% of net assets), Sun Micro (1.4% of net assets), EMC (1.0% of
net assets), and Sprint PCS (0.5% of net assets). We sold or reduced
underperforming financial holdings, particularly bank stocks such as Bank One,
as well as Pfizer in the health care industry. We also diversified into mid-cap
stocks such as Safeway (0.7% of net assets). The Fund continues to hold real
estate investment trusts which have underperformed but provide an income
stream. Internationally, we sold some Canadian and European stocks and bought
into several Japanese companies as government policies improved.
What is your outlook for the period ahead?
We expect a more difficult investing climate in 2000, with equity
securities so fully valued. Short-term interest rates will probably rise
further, and the markets will become increasingly concerned about inflation. In
a riskier environment, the Fund plans to maintain its overweighted cash
position. The economy should continue to perform well, with inflation contained
and long-term interest rates moderating somewhat in the second half of the
year.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. The Fund's
manager currently limits expenses to 0.75% of average net assets. Absent this
limit, total returns would be less. Lipper, Inc. is a monitor of mutual fund
performance. The Lipper variable annuity flexible portfolio fund category
contained 64, 26 and 12 funds for the 1-, 5- and 10-year periods, respectively.
For these periods the returns for the Lipper peer group average were 8.99%,
16.08% and 11.79%, respectively.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
137
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Stein Roe Balanced Fund, Variable Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stein Roe Balanced Fund, Variable Series vs. Lipper Variable Annuity Balanced
Fund Average, S&P 500 Index and Lehman Brothers Government/Corporate Bond Index
Growth of a $10,000 Investment December 31, 1989 to December 31, 1999
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
1 Year 5 Years 10 Years
<S> <C> <C>
12.53% 16.50% 11.99%
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Lipper Lehman
Stein Roe Variable Brothers
Balanced Fund, Annuity Government/
Variable S&P 500 Balanced Corporate
Series Index Fund Average Bond Index
<S> <C> <C> <C> <C> <C>
$60,000 12/89 10000 10000 10000 10000
$50,000 12/90 9931 9689 10165 10828
$40,000 12/91 12705 12634 12402 12575
$30,000 12/92 13660 13596 13228 13528
$20,000 12/93 14929 14964 14668 15020
$10,000 12/94 14453 15160 14296 14493
$ 0 12/95 18128 20849 17742 17281
12/96 20962 25634 20000 17782
12/97 24487 34183 23823 19518
12/98 27558 43959 27310 21366
12/99 31024 53218 29667 20909
</TABLE>
[END PLOT POINTS]
____ Stein Roe Balanced Fund, Variable Series .... S&P 500 Index
- ---- Lipper Variable Annuity Balanced Fund Average
- - - - - Lehman Brothers Government/Corporate Bond Index
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. Total
return performance includes changes in share price and reinvestment of all
distributions. Chart assumes a $10,000 investment on 12/31/89. The S&P 500 Index
is an unmanaged group of stocks that differs from the composition of the Fund;
it is not avaiable for direct investment. The Lehman Brothers Government/
Corporate Bond Index is an unmanaged index that tracks the performance of a
selection of U.S. government and investment grade U.S. corporate bonds.
Performance numbers reflect all Fund expenses net of any voluntary waiver of
expenses by the Manager, but do not include any insurance charges imposed by
your insurance company's separate accounts or certain expenses reimbursed by
the Manager. If performance included the effect of these additional amounts, it
would be lower. It is not possible to invest directly in an index. Source:
Lipper, Inc., a monitor of mutual fund performance.
- --------------------------------------------------------------------------------
138
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
SteinRoe Variable Investment Trust Stein Roe Balanced Fund, Variable Series /
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ ---------------
<S> <C> <C> <C>
COMMON STOCKS--55.5%
Finance, Insurance & Real Estate--9.6%
Depository Institutions--2.5%
BankAmerica Corp. ............... 42,001 $ 2,107,905
Bayerische
HypoVereinsbank .............. G 18,400 1,255,442
Royal Bank of Scotland
Group PLC .................... UK 153,308 2,714,453
Standard and Poor's Mid-Cap
400 Depositary Receipts ...... 50,000 4,056,250
The Bank of Tokyo-
Mitsubishi Ltd. ADR .......... Ja 50,000 696,875
------------
10,830,925
------------
Financial Services--0.3%
The Goldman Sachs Group,
Inc. ......................... 12,400 1,167,925
------------
Insurance Carriers--2.8%
American International
Group, Inc. .................. 44,000 4,757,500
Citigroup, Inc. ................. 112,250 6,236,891
Tokio Marine & Fire
Insurance Co., Ltd. .......... Ja 90,000 1,052,039
------------
12,046,430
------------
Investment Companies--1.9%
Standard and Poor's
Depositary Receipts .......... 38,000 5,581,250
World Equity Benchmark
Shares--Japan ................ 140,000 2,283,750
------------
7,865,000
------------
Nondepository Credit Institution--1.3%
Capital One Financial Corp. ..... 39,000 1,879,313
Fannie Mae ...................... 19,000 1,186,313
Freddie Mac ..................... 50,000 2,353,125
------------
5,418,751
------------
Real Estate Investment Trusts--0.8%
Equity Residential Properties
Trust ........................ 44,000 1,878,250
Reckson Associates Realty
Corp. ........................ 81,800 1,676,900
------------
3,555,150
------------
Manufacturing--23.7%
Chemicals & Allied Products--4.1%
Alza Corp. (a) .................. 26,000 900,250
American Home Products
Corp. ........................ 55,000 2,169,063
Bristol-Myers Squibb Co. ........ 66,000 4,236,375
E.I. DuPont de Nemours &
Co. .......................... 33,848 2,229,737
Elan Corp. PLC ADR (a) .......... Ir 64,000 1,888,000
Eli Lilly & Co. ................. 35,000 2,327,500
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ ---------------
<S> <C> <C> <C>
Procter & Gamble Co. ............ 32,000 $ 3,506,000
------------
17,256,925
------------
Communications Equipment--2.7%
Lucent Technologies, Inc. ....... 56,000 4,189,500
Motorola, Inc. .................. 35,000 5,153,750
Tellabs, Inc. ................... 34,000 2,182,375
------------
11,525,625
------------
Electrical Industrial Equipment--2.7%
Emerson Electric Co. ............ 32,000 1,836,000
General Electric Co. ............ 61,000 9,439,750
------------
11,275,750
------------
Electronic Components--1.2%
Intel Corp. ..................... 63,000 5,185,688
------------
Food & Kindred Products--1.1%
PepsiCo, Inc. ................... 73,000 2,573,250
Philip Morris Companies, Inc. 55,000 1,275,313
Sara Lee Corp. .................. 40,000 882,500
------------
4,731,063
------------
Lumber & Wood Products--0.2%
Georgia Pacific Corp. ........... 17,000 862,750
------------
Machinery & Computer Equipment--
7.1%
Caterpillar, Inc. ............... 17,000 800,063
Cisco Systems, Inc. (a) ......... 91,000 9,748,375
EMC Corp. (a) ................... 39,000 4,260,750
Fujitsu Ltd. .................... Ja 35,000 1,595,421
International Business
Machines Corp. ............... 39,000 4,212,000
Sun Microsystems, Inc. (a) ...... 76,000 5,885,250
Tyco International Ltd. ......... 96,072 3,734,799
------------
30,236,658
------------
Measuring & Analyzing Instruments--1.2%
Agilent Technologies, Inc. (a) 54,000 4,174,875
Medtronic, Inc. ................. 30,000 1,093,125
------------
5,268,000
------------
Petroleum Refining--2.4%
BP Amoco PLC ADR ................ UK 62,496 3,706,794
Exxon Mobil Corp. ............... 80,086 6,451,928
------------
10,158,722
------------
Primary Metal--0.5%
Alcoa, Inc. ..................... 24,000 1,992,000
------------
Transportation Equipment--0.5%
Ford Motor Co. .................. 42,000 2,244,375
------------
Mining & Energy--1.9%
Crude Petroleum & Natural Gas--0.4%
Conoco, Inc., Class B ........... 71,249 1,772,307
------------
Gold & Silver Mining--0.2%
Barrick Gold Corp. .............. Ca 50,000 884,375
------------
</TABLE>
See Notes to Investment Portfolio.
139
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
SteinRoe Variable Investment Trust Stein Roe Balanced Fund, Variable Series /
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ ---------------
<S> <C> <C> <C>
Oil & Gas Extraction--0.1%
Transocean Sedco Forex,
Inc. ......................... 6,389 $ 215,223
------------
Oil & Gas Field Services--1.2%
Enron Corp. ..................... 72,000 3,195,000
Schlumberger Ltd. ............... 33,000 1,856,250
------------
5,051,250
------------
Retail Trade--5.2%
Apparel & Accessory Stores--0.5%
Kohl's Corp. (a) ................ 27,000 1,949,063
------------
Building, Hardware & Garden Supplies--1.5%
Home Depot, Inc. ................ 91,500 6,273,469
------------
Food Stores--0.7%
Safeway, Inc. (a) ............... 80,000 2,845,000
------------
General Merchandise Stores--1.8%
Wal-Mart Stores, Inc. ........... 110,000 7,603,750
------------
Restaurants--0.7%
McDonald's Corp. ................ 69,000 2,781,563
------------
Services--5.8%
Business Services--0.6%
Concord EFS, Inc. ............... 76,000 1,957,000
Young & Rubicam, Inc. ........... 10,000 707,500
------------
2,664,500
------------
Computer Related Services--0.9%
IMS Health, Inc. ................ 89,000 2,419,688
Teradyne, Inc. (a) .............. 23,000 1,518,000
------------
3,937,688
------------
Computer Software--4.3%
Microsoft Corp. (a) ............. 94,000 10,974,500
Oracle Corp. (a) ................ 66,000 7,396,125
------------
18,370,625
------------
Transportation, Communication, Electric,
Gas & Sanitation Services--9.3%
Broadcasting--0.8%
Clear Channel
Communications, Inc. (a) ..... 36,000 3,213,000
------------
Communications--0.4%
Infonet Services Corp., Class
B (a) ........................ 68,000 1,785,000
------------
Electric Services--0.8%
AES Corp. (a) ................... 28,000 2,093,000
Endesa SA ADR ................... Sp 74,000 1,493,875
------------
3,586,875
------------
Gas Services--0.5%
Kinder Morgan Energy
Partners L.P. ................ 50,000 2,071,875
------------
Telecommunication--6.8%
AT&T Corp. ...................... 59,630 3,026,235
Bell Atlantic Corp. ............. 46,000 2,831,875
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ ---------------
<S> <C> <C> <C>
Charter Communications,
Inc. (a) ..................... 135,000 $ 2,953,125
Comcast Corp., Special
Class A ...................... 81,000 4,070,250
MCI WorldCom, Inc. (a) .......... 90,000 4,775,625
Nippon Telegraph &
Telephone Corp. .............. Ja 62 1,061,332
Nippon Telegraph &
Telephone Corp., ADR ......... Ja 700 60,288
SBC Communications, Inc.,
Class A ...................... 68,432 3,336,060
Sprint Corp. (PCS Group) (a) 21,000 2,152,500
Vodafone AirTouch ADR ........... UK 71,000 3,514,500
Williams Communications
Group, Inc. (a) .............. 48,200 1,394,788
------------
29,176,578
------------
Total Common Stocks
(cost of $145,338,046) ............................ 235,803,878
------------
</TABLE>
<TABLE>
<CAPTION>
Par
-----------
<S> <C> <C>
GOVERNMENT OBLIGATIONS--20.7%
US Government Agencies--6.7%
Collateralized Mortgage
Obligations
American Mortgage Trust
Series 1993-3 Class 3B
8.190% 9/27/22 ........... $1,125,071 1,094,007
---------
FHLMC Gold:
6.500% 12/1/10 ........... 4,915,532 4,768,067
12.000% 7/1/20 ........... 649,566 724,266
6.500% 3/1/26 ............ 10,278,993 9,691,138
7.000% 7/1/28 ............ 2,160,021 2,090,490
---------
17,273,961
----------
FNMA Medium-Term Note
5.125% 2/13/04 ........... 3,252,000 3,057,400
----------
GNMA:
6.000% 12/15/28 .......... 4,526,771 4,116,510
8.000% 3/15/26 ........... 2,566,056 2,607,369
----------
6,723,879
----------
GNMA--Adjustable Rate
6.625% 7/20/25 ........... 355,189 358,407
----------
US Government Bonds--14.0%
U.S. Treasury Bonds:
7.250% 5/15/16 (b) ....... 5,500,000 5,749,205
7.625% 2/15/25 ........... 3,750,000 4,156,050
7.875% 2/15/21 ........... 5,250,000 5,868,503
U.S. Treasury Notes:
5.000% 2/28/01 ........... 4,700,000 4,639,793
5.750% 8/15/03 ........... 10,500,000 10,285,065
6.250% 2/15/03 ........... 5,250,000 5,234,408
6.375% 5/15/00 ........... 900,000 902,106
6.500% 8/15/05 ........... 4,000,000 4,000,000
</TABLE>
See Notes to Investment Portfolio.
140
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
SteinRoe Variable Investment Trust Stein Roe Balanced Fund, Variable Series /
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Par Value
--------- -------------- -----------------
<S> <C> <C> <C>
6.500% 10/15/06 ........................ 8,100,000 8,078,454
6.625% 5/15/07 ......................... 3,200,000 3,212,512
7.875% 8/15/01 ......................... 500,000 512,500
7.875% 2/15/21 (b) ..................... 6,500,000 6,872,710
---------
59,511,306
----------
Total Government Obligations
(cost of $90,568,562) ........................................... 88,018,960
----------
CORPORATE BONDS, FIXED--9.4%
Finance, Insurance & Real Estate--5.1%
Depository Institutions--1.5%
Deutsche Ausgleichsbank, ..................
7.000% 9/24/01 ............................ G 2,250,000 2,244,735
Den Danske Bank, 6.550%
9/15/03 (c) ............................ De 2,250,000 2,181,533
First Chicago NBD Corp.,
6.130% 2/15/06 ......................... 2,250,000 2,095,200
----------
6,521,468
----------
Insurance Carriers--0.5%
Prudential Insurance Co. of
America, 7.650% 7/1/07 (c) 2,500,000 2,479,800
----------
Nondepository Credit Institutions--3.1%
Associates Corp. of North
America:
6.950% 11/1/18 ........................... 2,350,000 2,166,324
7.500% 4/15/02 ........................... 4,000,000 4,039,760
Household Finance Corp.,
5.875% 11/1/02 ......................... 2,500,000 2,415,475
National Rural Utilities,
5.000% 10/1/02 ......................... 2,750,000 2,610,988
Transamerica Finance
Corp., 6.125% 11/1/01 .................. 2,000,000 1,965,900
----------
13,198,447
----------
Manufacturing--2.3%
Chemicals & Allied Products--1.2%
BOC Group, 5.875% 1/29/01 2,750,000 2,729,953
Hanson Overseas, 6.750%
9/15/05 ................................ 2,500,000 2,393,500
----------
5,123,453
----------
Miscellaneous Manufacturing--0.4%
Raytheon Co., 6.750%
8/15/07 ................................ 1,750,000 1,632,120
----------
Petroleum Refining--0.7%
USX Corp., 6.850% 3/1/08 .................. 3,000,000 2,822,340
----------
Mining & Energy--0.5%
Oil & Gas Field Services
Baker Hughes, Inc., 6.250%
1/15/09 ................................ 2,500,000 2,266,500
----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Par Value
--------- -------------- -----------------
<S> <C> <C> <C>
Retail Trade--0.3%
Food Stores
Safeway, Inc., 5.750%
11/15/00 ............................... 1,500,000 1,485,960
----------
Services--0.4%
Business Services
FDX Corp., Series A1,
7.525% 9/23/06 ......................... 1,575,000 1,554,399
----------
Transportation, Communications, Electrical,
Gas & Sanitation Services--0.8%
Air Transportation--0.2%
United Airlines, Inc., Pass-
Through Certificates,
Series A1, 9.200% 3/22/08 620,538 650,317
----------
Communications--0.6%
U.S. West Capital Funding,
Inc., 6.250% 7/15/05 ................... 2,500,000 2,351,350
----------
Total Corporate Bonds, Fixed
(cost of $41,689,146) ......................................... 40,086,154
----------
Asset Backed Securities--0.4%
Green Tree Home
Improvement Loan Trust,
Series 1994-A, Class A,
7.050% 3/15/14 ......................... 322,908 318,721
LB Commercial Conduit
Mortgage Trust, Series
1998-C4, Class A1B,
6.210% 10/15/08 ........................ 1,250,000 1,143,750
----------
Total Asset Backed Securities
(cost of $1,581,523) .......................................... 1,462,471
----------
Total Investments--86.0%
(cost of $279,177,277) (d) .................................... 365,371,463
-----------
SHORT-TERM OBLIGATIONS--13.4%
Commercial Paper
Associates First Capital,
4.000% 1/3/00 (e) ...................... 20,645,000 20,640,413
BMW US Capital, 5.000%
1/5/00 (e) ............................. 20,000,000 19,986,444
Marriott International,
5.000% 1/5/00 (e) ...................... 10,000,000 9,982,000
Merrill Lynch & Co., 6.310%
1/19/00 (e) ............................ 6,500,000 6,481,735
-----------
Total Short-Term Obligations
(cost of $57,089,930) ......................................... 57,090,592
-----------
Other Assets & Liabilities, Net--0.6% ............................ 2,543,260
-----------
Net Assets--100.0% ............................................... $425,005,315
============
</TABLE>
See Notes to Investment Portfolio.
141
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
SteinRoe Variable Investment Trust Stein Roe Balanced Fund, Variable Series /
December 31, 1999
- --------------------------------------------------------------------------------
Notes to Investment Portfolio:
(a) Non-income producing.
(b) These securities, or a portion thereof, with a total market value of
$8,111,107 are being used to collateralize the open futures contracts.
(c) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1999, the value of these securities amounted to $4,661,333 or 1.1% of net
assets.
(d) Cost for federal income tax purposes is $279,164,013.
(e) Rate represents yield at date of purchase.
Long futures contracts open at December 31, 1999:
<TABLE>
<CAPTION>
Unrealized
Expiration appreciation
Type Contracts Month at 12/31/99
- ------------------------ ----------- ------------ -------------
<S> <C> <C> <C>
S&P Midcap 400 Index 30 March $101,250
</TABLE>
Summary of Securities by Country
<TABLE>
<CAPTION>
Country
Country Abbrev. Value % of Total
- --------------------------------- --------- --------------- -----------
<S> <C> <C> <C>
United States ................. $341,021,801 93.4
United Kingdom ................ UK 9,935,747 2.7
Japan ......................... Ja 4,465,955 1.2
Germany ....................... G 3,500,177 1.0
Denmark ....................... De 2,181,533 0.6
Ireland ....................... Ir 1,888,000 0.5
Spain ......................... Sp 1,493,875 0.4
Canada ........................ Ca 884,375 0.2
------------ -----
$365,371,463 100.0
============ =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<CAPTION>
Acronym Name
- ----------- ----------------------------
<S> <C>
ADR American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
142
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Stein Roe Balanced Fund, Variable Series /
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $279,177,277) .............................. $ 365,371,463
Short-term obligations (identified cost $57,089,930) ..................................... 57,090,592
Dividends, tax reclaims and interest receivable .......................................... 2,565,845
Receivable for investments sold .......................................................... 458,096
Receivable for fund shares sold .......................................................... 281,874
Receivable for futures margin ............................................................ 45,000
Cash ..................................................................................... 9,095
Other assets ............................................................................. 29,910
-------------
Total assets ........................................................................... 425,851,875
-------------
Liabilities:
Payable for fund shares repurchased ...................................................... 753,787
Accrued expenses payable ................................................................. 64,166
Other liabilities ........................................................................ 28,607
-------------
Total liabilities ...................................................................... 846,560
-------------
Net assets ............................................................................... $ 425,005,315
=============
Net assets represented by:
Paid-in capital ......................................................................... $ 308,931,863
Accumulated undistributed net investment income ......................................... 11,118,947
Accumulated net realized gains on investments, foreign currencies ....................... 18,659,063
Net unrealized appreciation on investments, foreign currencies and futures transactions . 86,295,442
-------------
Total net assets applicable to outstanding shares of beneficial interest ................. $ 425,005,315
=============
Shares of beneficial interest outstanding ................................................ 23,870,772
=============
Net asset value per share ................................................................ $ 17.80
=============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Interest ................................................................................. $10,840,073
Dividends ................................................................................ 2,607,609
-----------
Total investment income (net of nonrebatable foreign taxes withheld at source which
amounts to $34,310).................................................................... 13,447,682
-----------
Expenses:
Management fee .......................................................................... 1,749,012
Administrative fee ...................................................................... 588,899
Bookkeeping fee ......................................................................... 33,508
Transfer agent fee ...................................................................... 7,500
Audit fee ............................................................................... 11,675
Trustees' expense ....................................................................... 17,150
Custodian fee ........................................................................... 18,480
Printing expense ........................................................................ 22,830
Legal fee ............................................................................... 3,823
Miscellaneous expense, net .............................................................. (37,385)
-----------
Total expenses ......................................................................... 2,415,492
-----------
Net investment income .................................................................... 11,032,190
Realized and unrealized gains (losses) on investments, foreign currency and futures
transactions:
Net realized gains on investments ....................................................... 18,987,918
Net realized losses on foreign currency transactions .................................... (10,515)
Net change in unrealized appreciation/depreciation on investments, foreign currency and
futures transactions .................................................................... 17,043,558
-----------
Net increase in net assets resulting from operations ..................................... $47,053,151
===========
</TABLE>
See Notes to Financial Statements.
143
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Stein Roe Balanced Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1999 1998
----------------- -----------------
<S> <C> <C>
Operations:
Net investment income ............................................................ $ 11,032,190 $ 10,014,265
Net realized gains on investments and foreign currency transactions .............. 18,977,403 18,597,075
Net change in unrealized appreciation/depreciation on investments, foreign
currency and futures transactions ............................................... 17,043,558 11,666,861
------------- -------------
Net increase in net assets resulting from operations .............................. 47,053,151 40,278,201
------------- -------------
Distributions declared from:
Net investment income ............................................................ (10,014,113) (9,760,000)
Net realized gains ............................................................... (19,118,867) (21,501,000)
------------- -------------
Total distributions ............................................................... (29,132,980) (31,261,000)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold ................................................... 89,107,591 56,464,510
Cost of fund shares repurchased .................................................. (72,978,559) (59,952,201)
Distributions reinvested ......................................................... 29,132,980 31,261,000
------------- -------------
Net increase in net assets resulting from fund share transactions ................. 45,262,012 27,773,309
------------- -------------
Total increase in net assets ...................................................... 63,182,183 36,790,510
Net assets:
Beginning of year ................................................................ 361,823,132 325,032,622
------------- -------------
End of year ...................................................................... $ 425,005,315 $ 361,823,132
============= =============
Accumulated undistributed net investment income included in ending net assets ..... $ 11,118,947 $ 10,111,932
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ...................................................................... 5,348,548 3,429,829
Shares repurchased ............................................................... (4,382,402) (3,644,905)
Distributions reinvested ......................................................... 1,796,115 1,989,880
------------- -------------
Net increase ...................................................................... 2,762,261 1,774,804
============= =============
</TABLE>
See Notes to Financial Statements.
144
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Stein Roe Balanced Fund, Variable Series (the "Fund"), a series
of SteinRoe Variable Investment Trust (the "Trust"), is a diversified portfolio
of a Massachusetts business trust, registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Fund's
investment objective is to seek high total investment return by investing in
equity and debt securities. The Fund's capitalization consists of an unlimited
number of shares of beneficial interest without par value that represents a
separate series of the Trust. Each share of the Fund represents an equal
proportionate beneficial interest in the Fund and, when issued and outstanding,
is fully paid and nonassessable. Shareholders would be entitled to share
proportionally in the net assets of the Fund available for distribution to
shareholders upon liquidation of the Fund. 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") offered by the separate accounts of the life insurance companies
("Participating Insurance Companies"). Certain Participating Insurance
Companies are affiliated with the Investment Advisor and sub-advisors to the
Fund ("Affiliated Participating Insurance Companies"). Such Affiliated
Participating Insurance Companies are Keyport Life Insurance Company
("Keyport"), Independence Life & Annuity Company ("Independence") and Liberty
Life Assurance Company of Boston ("Liberty Life"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund. Stein Roe
& Farnham Inc. (the "Manager") ("Stein Roe"), provides investment management,
administrative and advisory services to the Fund pursuant to its Management
Agreements with the Trust. Keyport Financial Services Corp. ("KFSC") serves as
the principal underwriter of the Trust with respect to sales of shares to
Affiliated Participating Insurance Companies. The Manager, KFSC, Keyport and
Independence are wholly-owned indirect subsidiaries of Liberty Financial
Companies, Inc. ("LFC"). As of December 31, 1999, Liberty Mutual Insurance
Companies ("Liberty Mutual") owned approximately 71% of the outstanding voting
shares of LFC. Liberty Life is a subsidiary of Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Equity securities generally are valued at the last sale price or, in the case
of unlisted or listed securities for which there were no sales during the day,
at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Foreign currency transactions--Net realized and unrealized gains (losses) on
foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency,
and currency gains (losses) between the accrual and payment dates on dividends
and interest income and foreign withholding taxes.
145
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
Other--Corporate actions are recorded on ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of
all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Administrative fees-- The Manager receives a monthly fee equal
to 0.45% and 0.15% annually of the Fund's average daily net assets for the
management and administrative services, respectively.
Bookkeeping fee--The Manager provides bookkeeping and pricing services for
$25,000 annually 0.0025% annually of the Fund's average net assets over $50
million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (including
management fee) exceed 0.75% annually of the Fund's average daily net assets.
For the year ended December 31, 1999, the Fund's operating expenses, as defined
above, did not exceed the 0.75% expense limit.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $148,968,168 and
$161,047,232, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $93,445,693
Gross unrealized depreciation (7,238,243)
-----------
Net unrealized appreciation $86,207,450
-----------
</TABLE>
Other--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse
political and economic developments and the possible prevention of foreign
currency exchange or the imposition of other foreign governmental laws or
restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these
instruments to hedge against the effects of changes in the value of portfolio
securities due to anticipated changes in interest rates and/or market
conditions, for duration management, or when the transactions are economically
appropriate to the reduction of risk inherent in the management of the Fund and
not for trading purposes. The use of futures contracts and options involves
certain risks which include (1) imperfect correlation between the price
movement of the instruments and the underlying securities, (2) inability to
close out a position due to different trading hours, or the temporary absence
of a liquid market for either the instrument or the underlying securities or
(3) an inaccurate prediction by the Advisor of the future direction of interest
rates. Any of these risks may involve amounts exceeding the variation margin
recorded in the Fund's Statement of Assets and Liabilities at any given time.
Change in Independent Accountants--Based on the recommendation of the Audit
Committee of SteinRoe Variable Investment Trust, on August 3, 1999 the Board of
Trustees determined not to retain KPMG LLP as the Fund's independent accountant
and voted to appoint PricewaterhouseCoopers LLP as independent accountants for
the year ended December 31, 1999. During the two most recent fiscal years, KPMG
LLP's audit reports contained no adverse opinion or disclaimer of opinion, nor
were its reports qualified or modified as to uncertainty, audit scope, or
accounting principle. There were no disagreements in accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
if not resolved to the satisfaction of KPMG LLP would have caused it to make
reference to the disagreement in its report on the financial statements for
such years or through August 3, 1999.
146
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Stein Roe Balanced Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year............... $ 17.14 $ 16.81 $ 16.28 $ 14.08 $ 12.18
--------- ------- ------- ------- --------
Net investment income (a)........................ 0.28 0.48 0.53 0.57 0.48
Net realized and unrealized gains on
investments..................................... 1.74 1.48 1.96 1.63 2.61
--------- ------- ------- ------- --------
Total from investment operations................. 2.02 1.96 2.49 2.20 3.09
--------- ------- ------- ------- --------
Less distributions:
From net investment income...................... ( 0.47) (0.51) (0.56) -- (0.48)
From net realized gains......................... ( 0.89) (1.12) (1.40) -- (0.71)
--------- -------- -------- -------- --------
Total distributions.............................. ( 1.36) (1.63) (1.96) -- (1.19)
--------- -------- -------- -------- --------
Net asset value, end of year..................... $ 17.80 $ 17.14 $ 16.81 $ 16.28 $ 14.08
========= ======== ======== ======== ========
Total return:
Total investment return (b)...................... 12.53% 12.54% 16.82% 15.63% 25.43%
Ratios/supplemental data:
Net assets, end of year (000's).................. $ 425,005 $361,823 $325,033 $299,184 $277,014
Ratio of expenses to average net assets (c)...... 0.63%(d) 0.65% 0.66% 0.67% 0.66%
Ratio of net investment income to average
net assets (c).................................. 2.60%(d) 3.00% 3.18% 3.68% 3.12%
Portfolio turnover ratio......................... 43% 61% 44% 76% 66%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) During the year ended December 31, 1999, the Fund experienced a one-time
reduction in its expenses of 2 basis points as a result of expenses accrued
in a prior period. The Fund's ratios disclosed above reflect the actual rate
at which expenses were incurred throughout the current fiscal year without
the reduction.
- --------------------------------------------------------------------------------
1999 Federal Tax information (unaudited)
For the fiscal year ended December 31, 1999, the Fund earned $16,888,470 of
long-term capital gains.
- --------------------------------------------------------------------------------
147
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of SteinRoe Variable Investment Trust and
the Shareholders of Stein Roe Balanced Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Stein Roe Balanced Fund, Variable
Series (the "Fund") (a series of SteinRoe Variable Investment Trust) at
December 31, 1999, the results of its operations, the changes in its net assets
and the financial highlights for the period then ended, in conformity with
accounting principles generally accepted in the United States. These financial
statements and the financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above. The financial statements for the periods prior to January 1, 1999 were
audited by other independent accountants whose report dated February 12, 1999
expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
148
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Stein Roe Growth Stock Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Stein Roe Growth Stock Fund, Variable Series, seeks long-term growth by
investing in the common stocks of companies with large market capitalizations,
with an emphasis in the technology, financial services, health care and global
franchise sectors.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 1/1/89
Assuming reinvestment of all distributions
12-month total return ...................... 36.94%
Net asset value per share on 12/31/99 ......... $57.93
Net asset value per share on 12/31/98 ......... $43.53
</TABLE>
Portfolio Manager's Discussion
Erik P. Gustafson, senior vice president of Stein Roe & Farnham
Incorporated, is portfolio manager of Stein Roe Growth Stock Fund, Variable
Series.
What was the investment environment over the past year?
1999 was a phenomenal year in which many business leaders outperformed
their markets dramatically. It was an outstanding environment for growth stocks,
particularly during the second half: relatively stable interest rates, coupled
with strong earnings growth in the industries that we emphasized. Our
performance was driven by technology holdings which benefited from the U.S.
economy's transformation from an industrial to an information base.
Holdings that did not perform as well were health care stocks which
suffered from regulatory concerns and consumer non-durable products which were
hurt by international markets and rising interest rates.
What was the Fund's strategy during the period?
We focused on companies that facilitate the technology of information
transfer. In the information age, data becomes a key commodity. We owned
companies that build the data infrastructure: Cisco Systems (7.3% of net
assets), Motorola (3.6% of net assets), Texas Instruments (2.6% of net assets).
We owned others that carry the data, such as MCI WorldCom (3.6% of net assets).
And we owned those that store data, notably EMC (4.7% of net assets).
Media companies that support internet marketing also performed well. We
held Comcast (2.5% of net assets), a large cable company, and Omnicom Group
(2.5% of net assets), a large advertising agency.
What is your outlook for the period ahead?
We think the year 2000 will also be another good year for stock investing.
We remain committed to owning the best businesses we can find and concentrating
on the most productive industries. And we believe that rising interest rates
may subside later in the year, supporting stock markets in general and growth
stocks in particular.
Semiconductors appear to be entering a new product cycle of growth. As
examples, we own Texas Instruments (2.6% of net assets) and LSI Logic (1.7% of
net assets). Wireless communications should continue its explosive growth,
particularly in the United States which lags some foreign markets. We own Nokia
(2.4% of net assets), and Ericsson (2.4% of net assets), in addition to MCI
WorldCom (3.6% of net assets). And if interest rate pressures subside in the
future, we believe financial services stocks, such as Citigroup (4.1% of net
assets), and American International Group (3.3% of net assets), should show
improved performance.
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. Holdings
are disclosed as a percentage of the Fund's total net assets as of December 31,
1999, and are subject to change. Total return performance includes changes in
share price and reinvestment of all distributions. The Fund's manager currently
limits expenses to 0.80% of average net assets. Absent this limit, total
returns would be less. Lipper, Inc. is a monitor of mutual fund performance.
This variable annuity growth fund category contained 189, 92 and 41 funds for
the 1-, 5- and 10-year periods, respectively. For these periods the returns for
the Lipper peer group average were 32.26%, 26.55% and 17.82%, respectively.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
149
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Stein Roe Growth Stock Fund, Variable Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stein Roe Growth Stock Fund, Variable Series vs. Lipper Variable Annuity Growth
Fund Average and S&P 500 Index
Growth of a $10,000 Investment December 31, 1989 to December 31, 1999
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
1 Year 5 Years 10 Years
<S> <C> <C>
36.94% 31.08% 19.43%
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Stein Roe
Growth Stock Lipper Variable
Fund, Variable S&P 500 Annuity Growth
Series Index Fund Average
<S> <C> <C> <C> <C>
$60,000 12/89 10000 10000 10000
$50,000 12/90 9835 9689 9545
$40,000 12/91 14559 12634 13048
$30,000 12/92 15523 13596 14115
$20,000 12/93 16294 14964 15804
$10,000 12/94 15259 15160 15638
$ 0 12/95 21017 20849 20811
12/96 25489 25634 25079
12/97 33717 34183 31629
12/98 43127 43959 39489
12/99 59055 53218 51934
</TABLE>
[END PLOT POINTS]
____ Stein Roe Growth Stock Fund, Variable Series .... S&P 500 Index
- - - - - Lipper Variable Annuity Growth Fund Average
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. Total
return performance includes changes in share price and reinvestment of all
distributions. Chart assumes a $10,000 investment on 12/31/89. The S&P 500 Index
is an unmanaged group of stocks that differs from the composition of the Fund;
it is not avaiable for direct investment. Performance numbers reflect all Fund
expenses net of any voluntary waiver of expenses by the Manager, but do not
include any insurance charges imposed by your insurance company's separate
accounts or certain expenses reimbursed by the Manager. If performance included
the effect of these additional amounts, it would be lower. It is not possible to
invest directly in an index. Source: Lipper, Inc., a monitor of mutual fund
performance.
- --------------------------------------------------------------------------------
150
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
SteinRoe Variable Investment Trust Stein Roe Growth Stock Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------------------ --------------
<S> <C> <C>
COMMON STOCKS--93.5%
Finance, Insurance & Real Estate--9.0%
Insurance Carriers--7.5%
American International Group, Inc. 125,000 $13,515,625
Citigroup, Inc. ........................ 300,000 16,668,750
-----------
30,184,375
-----------
Nondepository Credit Institutions--1.5%
Fannie Mae ............................. 100,000 6,243,750
-----------
Manufacturing--49.7%
Chemicals & Allied Products--5.2%
Pfizer, Inc. ........................... 270,000 8,758,125
Procter & Gamble Co. ................... 75,000 8,217,187
Warner-Lambert Co. ..................... 50,000 4,096,875
-----------
21,072,187
-----------
Communications Equipment--11.4%
Lucent Technologies, Inc ............... 160,000 11,970,000
Motorola, Inc. ......................... 100,000 14,725,000
Nokia Corp., ADR ....................... 50,000 9,500,000
Telefon AB LM Ericsson ................. 150,000 9,853,125
-----------
46,048,125
-----------
Electrical Industrial Equipment--3.8%
General Electric Co. ................... 100,000 15,475,000
-----------
Electronic Components--4.3%
LSI Logic Corp. (a) .................... 100,000 6,750,000
Texas Instruments, Inc. ................ 110,000 10,656,250
-----------
17,406,250
-----------
Food & Kindred Products--1.4%
Coca Cola Co. .......................... 100,000 5,825,000
-----------
Machinery & Computer Equipment--18.1%
Applied Materials, Inc. (a) ............ 100,000 12,668,750
Cisco Systems, Inc. (a) ................ 275,000 29,459,375
EMC Corp. (a) .......................... 175,000 19,118,750
Tyco International Ltd. ................ 300,000 11,662,500
-----------
72,909,375
-----------
Measuring & Analyzing Instruments--2.3%
Medtronic, Inc. ........................ 250,000 9,109,375
-----------
Stone, Clay, Glass & Concrete--3.2%
Corning, Inc. .......................... 100,000 12,893,750
-----------
Mining & Energy--2.2%
Oil & Gas Field Services
Enron Corp. ............................ 200,000 8,875,000
-----------
Retail Trade--9.4%
Apparel & Accessory Stores--2.7%
Kohl's Corp. (a) ....................... 150,000 10,828,125
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------------ -----------------
<S> <C> <C>
Building, Hardware & Garden Supply-- 5.1%
Home Depot, Inc. ....................... 300,000 $20,568,750
-----------
Miscellaneous Retail--1.6%
Walgreen Co. ........................... 225,000 6,581,250
-----------
Services--12.1%
Business Services--2.5%
Omnicom Group, Inc. .................... 100,000 10,000,000
-----------
Computer Related Services--1.9%
America Online, Inc. (a) ............... 100,000 7,543,750
-----------
Computer Software--7.7%
Microsoft Corp. (a) .................... 140,000 16,345,000
Oracle Corp. (a) ....................... 100,000 11,206,250
Veritas Software Corp. (a) ............. 25,000 3,578,125
-----------
31,129,375
-----------
Transportation, Communication, Electric, Gas &
Sanitary Services--11.1%
Broadcasting--5.0%
AT&T Corp-Liberty Media Group,
Class A (a) ......................... 200,000 11,350,000
Clear Channel Communications,
Inc. (a) ............................ 100,000 8,925,000
-----------
20,275,000
-----------
Telecommunication--6.1%
Comcast Corp., Special Class A ......... 200,000 10,050,000
MCI WorldCom, Inc. (a) ................. 277,500 14,724,844
-----------
24,774,844
-----------
Total Common Stocks
(cost of $180,558,577) (b) ........................ 377,743,281
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--6.7%
Associates First Capital,
4.000% 1/3/00 (c) ................... $19,870,000 19,865,585
Limited, Inc., 5.000% 1/5/00 (c) ....... 7,000,000 6,996,111
----------
Total Short-Term Obligations
(cost of $26,861,724) ............................. 26,861,696
----------
Other Assets & Liabilities, Net--(0.2)% .............. (769,411)
----------
Net Assets--100.0% ................................... $403,835,566
============
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $180,734,503.
(c) Rate represents yield at date of purchase.
<TABLE>
<CAPTION>
Acronym Name
- ----------- ----------------------------
<S> <C>
ADR American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
151
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Stein Roe Growth Stock Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $180,558,577) .................. $ 377,743,281
Short-term obligations (identified cost $26,861,724) ......................... 26,861,696
Cash ......................................................................... 4,968
Dividends and tax reclaims receivable ........................................ 76,874
Other assets ................................................................. 11,533
-------------
Total assets ............................................................... 404,698,352
-------------
Liabilities:
Payable for fund shares repurchased .......................................... 831,340
Accrued expenses payable ..................................................... 31,446
-------------
Total liabilities .......................................................... 862,786
-------------
Net assets ................................................................... $ 403,835,566
=============
Net assets represented by:
Paid-in capital ............................................................. $ 149,020,393
Accumulated undistributed net investment income ............................. 1
Accumulated net realized gains on investments ............................... 57,630,329
Net unrealized appreciation on investments and foreign currency transactions 197,184,843
-------------
Total net assets applicable to outstanding shares of beneficial interest ..... $ 403,835,566
=============
Shares of beneficial interest outstanding .................................... 6,971,384
=============
Net asset value per share .................................................... $ 57.93
=============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends .................................................................... $ 1,457,901
Interest ..................................................................... 523,774
------------
Total investment income .................................................... 1,981,675
------------
Expenses:
Management fee .............................................................. 1,583,203
Administration fee .......................................................... 474,944
Bookkeeping fee ............................................................. 32,866
Transfer agent fee .......................................................... 7,500
Audit fee ................................................................... 23,050
Trustees' expense ........................................................... 17,150
Custodian fee ............................................................... 1,931
Legal fee ................................................................... 3,034
Miscellaneous expense ....................................................... 9,184
------------
Total expenses ............................................................. 2,152,862
------------
Net investment loss .......................................................... (171,187)
Realized and unrealized gains on investments and foreign currency
transactions:
Net realized gains on investments ........................................... 57,804,211
Net change in unrealized appreciation/depreciation on investments and
foreign currency transactions 48,484,104
------------
Net increase in net assets resulting from operations ......................... $106,117,128
============
</TABLE>
See Notes to Financial Statements.
152
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Stein Roe Growth Stock Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Operations:
Net investment income (loss) ..................................................... $ (171,187) $ 489,220
Net realized gains on investments ................................................ 57,804,211 8,083,201
Net change in unrealized appreciation/depreciation on investments ................ 48,484,104 50,182,311
------------- -------------
Net increase in net assets resulting from operations .............................. 106,117,128 58,754,732
------------- -------------
Distributions declared from:
Net investment income ............................................................ (488,567) (590,000)
Net realized gains ............................................................... (8,084,420) (12,603,000)
------------- -------------
Total distributions ............................................................... (8,572,987) (13,193,000)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold ................................................... 75,332,189 61,216,357
Cost of fund shares repurchased .................................................. (49,197,629) (61,786,672)
Distributions reinvested ......................................................... 8,572,987 13,193,000
------------- -------------
Net increase in net assets resulting from fund share transactions ................. 34,707,547 12,622,685
------------- -------------
Total increase in net assets ...................................................... 132,251,688 58,184,417
Net assets:
Beginning of year ................................................................ 271,583,878 213,399,461
------------- -------------
End of year ...................................................................... $ 403,835,566 $ 271,583,878
============= =============
Accumulated undistributed net investment income included in ending net assets ..... $ 1 $ 488,568
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ...................................................................... 1,573,831 1,526,333
Shares repurchased ............................................................... (1,023,682) (1,560,693)
Distributions reinvested ......................................................... 182,677 366,676
------------- -------------
Net increase ...................................................................... 732,826 332,316
============= =============
</TABLE>
See Notes to Financial Statements.
153
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Stein Roe Growth Stock Fund, Variable Series (the "Fund"), a
series of SteinRoe Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek long-term capital growth by
investing at least 65% of total net assets in growth companies. The Fund's
capitalization consists of an unlimited number of shares of beneficial interest
without par value that represents a separate series of the Trust. Each share of
the Fund represents an equal proportionate beneficial interest in the Fund and,
when issued and outstanding, is fully paid and nonassessable. Shareholders
would be entitled to share proportionally in the net assets of the Fund
available for distribution to shareholders upon liquidation of the Fund. 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") offered by the separate accounts of
the life insurance companies ("Participating Insurance Companies"). Certain
Participating Insurance Companies are affiliated with the Investment Advisor
and sub-advisors to the Fund ("Affiliated Participating Insurance Companies").
Such Affiliated Participating Insurance Companies are Keyport Life Insurance
Company ("Keyport"), Independence Life & Annuity Company ("Independence") and
Liberty Life Assurance Company of Boston ("Liberty Life"). The Participating
Insurance Companies and their separate accounts own all the shares of the Fund.
Stein Roe & Farnham Inc. (the "Manager") ("Stein Roe"), provides investment
management, administrative and advisory services to the Fund pursuant to its
Management Agreements with the Trust. Keyport Financial Services Corp. ("KFSC")
serves as the principal underwriter of the Trust with respect to sales of
shares to Affiliated Participating Insurance Companies. The Manager, KFSC,
Keyport and Independence are wholly-owned indirect subsidiaries of Liberty
Financial Companies, Inc. ("LFC"). As of December 31, 1999, Liberty Mutual
Insurance Companies ("Liberty Mutual") owned approximately 71% of the
outstanding voting shares of LFC. Liberty Life is a subsidiary of Liberty
Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Foreign currency transactions--Net realized and unrealized gains (losses) on
foreign currency transactions includes gains (losses) arising from the
fluctuations in exchange rates between trade and settlement dates on securities
transactions, gains (losses) arising from the disposition of foreign currency,
and currency gains (losses) between the accrual and payment dates on dividends
and interest income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange
154
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
rates from that which is due to changes in market prices of the investments.
Such fluctuations are included with the net realized and unrealized gains
(losses) on investments.
Other--Corporate actions are recorded on ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of
all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Administrative fees--The Manager receives a monthly fee equal
to 0.50% and 0.15% annually of the Fund's average daily net assets for the
management and administrative services, respectively.
Bookkeeping fee--The Manager provides bookkeeping and pricing services for
$25,000 annually plus 0.0025% annually of the Fund's average net assets over
$50 million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (including
management fee) exceed 0.80% annually of the Fund's average daily net assets.
For the year ended December 31, 1999, the Fund's operating expenses, as defined
above, did not exceed the 0.80% expense limit.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $223,365,742 and
$212,693,125, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $197,726,412
Gross unrealized depreciation (717,634)
------------
Net unrealized appreciation $197,008,778
------------
</TABLE>
Other--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse
political and economic developments and the possible prevention of foreign
currency exchange or the imposition of other foreign governmental laws or
restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
Change in Independent Accountants--Based on the recommendation of the Audit
Committee of SteinRoe Variable Investment Trust, on August 3, 1999 the Board of
Trustees determined not to retain KPMG LLP as the Fund's independent accountant
and voted to appoint PricewaterhouseCoopers LLP as independent accountants for
the year ended December 31, 1999. During the two most recent fiscal years, KPMG
LLP's audit reports contained no adverse opinion or disclaimer of opinion; nor
were its reports qualified or modified as to uncertainty, audit scope, or
accounting principle. There were no disagreements in accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
if not resolved to the satisfaction of KPMG LLP would have caused it to make
reference to the disagreement in its report on the financial statements for
such years or through August 3, 1999.
155
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Stein Roe Growth Stock Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ......... $ 43.53 $ 36.13 $ 28.61 $ 23.59 $ 18.11
-------- ------- ------- ------- --------
Net investment income (loss) (a) ........... (0.03) 0.08 0.10 0.13 0.15
Net realized and unrealized gains
on investments ............................ 15.79 9.54 8.84 4.89 6.68
-------- ------- ------- ------- --------
Total from investment operations ........... 15.76 9.62 8.94 5.02 6.83
-------- ------- ------- ------- --------
Less distributions:
From net investment income ................ (0.08) (0.10) (0.12) -- (0.15)
From net realized gains ................... (1.28) (2.12) (1.30) -- (1.20)
-------- -------- -------- -------- --------
Total distributions ........................ (1.36) (2.22) (1.42) -- (1.35)
-------- -------- -------- -------- --------
Net asset value, end of year ............... $ 57.93 $ 43.53 $ 36.13 $ 28.61 $ 23.59
======== ======== ======== ======== ========
Total return:
Total investment return (b) ................ 36.94% 27.91% 32.28% 21.28% 37.73%
Ratios/supplemental data:
Net assets, end of year (000's) ............ $403,836 $271,584 $213,399 $161,879 $136,834
Ratio of expenses to average
net assets (c) ............................ 0.67% 0.70% 0.71% 0.73% 0.74%
Ratio of net investment income (loss)
to average net assets (c) ................. (0.05)% 0.21% 0.32% 0.49% 0.72%
Portfolio turnover ratio ................... 70% 40% 28% 35% 41%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
- --------------------------------------------------------------------------------
1999 Federal Tax information (unaudited)
For the fiscal year ended December 31, 1999, the Fund earned $57,691,848 of
long-term capital gains.
- --------------------------------------------------------------------------------
156
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of SteinRoe Variable Investment Trust and
the Shareholders of Stein Roe Growth Stock Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Stein Roe Growth Stock Fund,
Variable Series (the "Fund") (a series of SteinRoe Variable Investment Trust)
at December 31, 1999, the results of its operations, the changes in its net
assets and the financial highlights for the period then ended, in conformity
with accounting principles generally accepted in the United States. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above. The
financial statements for the periods prior to January 1, 1999 were audited by
other independent accountants whose report dated February 12, 1999 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
157
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Stein Roe Money Market Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Stein Roe Money Market Fund, Variable Series, seeks maximum current income
consistent with capital preservation and maintenance of liquidity by investing
in high-quality money market securities, such as U.S. Treasuries, commercial
paper, bankers' acceptances and certificates of deposit.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 1/1/89
Assuming reinvestment of all distributions
12-month total return ...................... 4.79%
Net asset value per share on 12/31/99 ......... $1.00
Net asset value per share on 12/31/98 ......... $1.00
</TABLE>
Portfolio Manager's Discussion
Jane M. Naeseth, senior vice president of Stein Roe & Farnham
Incorporated, is portfolio manager of Stein Roe Money Market Fund, Variable
Series.
How did you manage the Fund in the past 12 months?
We shortened average weighted maturity of the portfolio from 40 days on
December 31, 1998 to 31 days on June 30, 1999, so that we could reinvest at
higher yields after the Federal Reserve raised rates. We then reversed that
direction by increasing maturity to 43 days on December 31, 1999.
The Federal Reserve raised short-term interest rates three times, each by
0.25%, starting in late June. This credit tightening has benefited contract
owners by enhancing the income of money market instruments, including corporate
notes which rates improved late in 1999.
What other portfolio changes were made over the year?
We increased holdings of commercial paper from 92.4% of assets to 95.2%.
Recently, we added a small amount of new federal discount notes to improve the
portfolio's liquidity at year-end.
As the Federal Reserve flooded markets with cash reserves in anticipation
of Year 2000 needs, we had to roll over commercial paper holdings as well to
maintain liquidity.
What is your outlook for money market securities?
We are anticipating that the Federal Reserve will raise interest in one or
two moves during the first half of 2000. Our current investment strategy
reflects that belief.
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. An
investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corp. (FDIC) or any other government agency. Although the Fund seeks
to preserve the value of your investment at $1 per share, it is possible to
lose money by investing in the Fund.
Lipper, Inc. is a monitor of mutual fund performance. The Lipper variable
annuity money market fund category contained 105, 82 and 59 funds for the 1-,
5- and 10-year periods, respectively. For these periods the returns for the
Lipper peer group average were 4.75%, 5.12% and 4.87%, respectively.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
158
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
SteinRoe Variable Investment Trust Stein Roe Money Market Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Par Cost
------------- ----------------
<S> <C> <C>
COMMERCIAL PAPER--95.2%
Asset Securitization Corp.,
6.060% 2/7/00 (a) ............... $7,000,000 $ 6,956,833
Associates First Capital,
4.000% 1/3/00 ................... 3,495,000 3,494,223
Banco Bradesco,
5.510% 2/16/00 .................. 5,500,000 5,462,612
BMW US Capital,
5.000% 1/5/00 ................... 6,600,000 6,596,334
Cardinal Health,
6.620% 1/11/00 (a) .............. 6,000,000 5,989,000
Centric Capital,
6.060% 1/18/00 (a) .............. 5,300,000 5,284,983
Citic Pacific Finance,
6.000% 1/14/00 .................. 6,000,000 5,987,108
Coca-Cola Co.,
6.050% 2/18/00 .................. 6,000,000 5,952,000
Countrywide Home Loans,
6.490% 1/27/00 .................. 6,000,000 5,972,050
Falcon Asset Securitization,
6.870% 1/7/00 (a) ............... 6,000,000 5,993,150
Federal Home Loan Mortgage,
5.690% 1/20/00 .................. 2,200,000 2,193,417
Finova Capital,
6.310% 1/19/00 .................. 6,000,000 5,981,250
Harley-Davidson Funding,
6.110% 2/24/00 (a) .............. 6,000,000 5,945,550
International Securitization,
6.550% 1/25/00 (a) .............. 6,000,000 5,974,000
MCI Worldcom,
6.650% 1/31/00 (a) .............. 6,000,000 5,967,000
Monsanto,
6.100% 3/22/00 (a) .............. 6,000,000 5,919,000
National Rural Utilities,
5.980% 3/21/00 .................. 6,000,000 5,921,600
Northern Industries Public
Service, 7.040% 1/12/00 ......... 7,000,000 6,985,945
Old Line Funding,
6.280% 1/13/00 (a) .............. 6,000,000 5,987,520
Preferred Receivables Funding,
6.530% 1/4/00 (a) ............... 6,000,000 5,996,750
Procter & Gamble Co.,
6.100% 2/8/00 ................... 7,000,000 6,955,297
Receivables Capital,
6.330% 1/10/00 (a) .............. 6,000,000 5,990,565
</TABLE>
<TABLE>
<CAPTION>
Amortized
Par Cost
------------- ----------------
<S> <C> <C>
7-Eleven,
6.180% 3/6/00 ................... $6,000,000 $ 5,933,917
Special Purpose Accounts
Receivable,
6.170% 2/9/00 (a) ............... 6,000,000 5,960,350
Superior Funding,
5.980% 1/26/00 (a) .............. 5,000,000 4,979,236
Thames Asset Global,
6.630% 1/18/00 (a) .............. 6,000,000 5,981,328
Wal Mart Stores Inc.,
6.560% 1/5/00 (a) ............... 6,000,000 5,995,633
Windmill Funding,
6.840% 1/20/00 (a) .............. 6,000,000 5,978,467
-------------
Total Commercial Paper
(cost of $162,335,118)......................... 162,335,118
-------------
CORPORATE FIXED INCOME BONDS--5.6%
Transportation, Communication, Electric,
Gas & Sanitary Services--5.6%
Electric, Gas & Sanitary Services--1.8%
Baltimore Gas & Electric Co.,
5.500% 7/15/00 .................. 3,000,000 2,991,637
-------------
Telecommunication--3.8%
GTE Corp., 6.390% 9/11/00 .......... 6,500,000 6,507,462
-------------
Total Corporate Fixed Income Bonds
(cost of $9,499,099)........................... 9,499,099
-------------
Total Investments--100.8%
(cost of $171,834,217)(b)...................... 171,834,217
-------------
Other Assets & Liabilities, Net--(0.8)% .......... (1,294,922)
-------------
Net Assets--100.0% ............................... $ 170,539,295
=============
</TABLE>
Notes to Investment Portfolio:
(a) Represents private placement securities exempt from registration by Section
4(2) of the Securities Act of 1933. These securities generally are issued
to investors who agree that they are purchasing the securities for
investment and not for public distribution. Any resale by the Fund must be
in an exempt transaction, normally to other institutional investors. At
December 31, 1999, the aggregate amortized cost of the Fund's private
placement securities was $94,899,395 which represented 55.6% of net
assets. None of these securities was deemed illiquid.
(b) Cost for federal income tax purposes is the same.
The interest rates listed above reflect the effective rate at the date of
purchase except for corporate notes, for which the interest rate
represents the instrument's coupon rate.
See Notes to Financial Statements.
159
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Stein Roe Money Market Fund, Variable Series
/ December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at amortized cost .......................................... $ 171,834,217
Cash .................................................................... 1,198
Interest receivable ..................................................... 248,924
Other assets ............................................................ 18,922
-------------
Total assets .......................................................... 172,103,261
-------------
Liabilities:
Payable for fund shares repurchased ..................................... 1,563,966
-------------
Total liabilities ..................................................... 1,563,966
-------------
Net assets .............................................................. $ 170,539,295
=============
Net assets represented by:
Paid-in capital ........................................................ $ 170,539,295
-------------
Total net assets applicable to outstanding shares of beneficial interest $ 170,539,295
=============
Shares of beneficial interest outstanding ............................... 170,541,822
=============
Net asset value per share ............................................... $ 1.00
=============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Interest ................................................................ $7,044,013
----------
Expenses:
Management fee ......................................................... 462,410
Administration fee ..................................................... 197,888
Bookkeeping fee ........................................................ 27,200
Transfer agent fee ..................................................... 7,500
Audit fee .............................................................. 18,325
Printing expense ....................................................... 7,303
Trustees' expense ...................................................... 13,700
Custodian fee .......................................................... --
Legal fee .............................................................. 2,910
Registration fee ....................................................... 7,413
Miscellaneous expense, net ............................................. (74,697)
----------
Total expenses ........................................................ 669,952
----------
Net investment income ................................................... 6,374,061
----------
Net increase in net assets resulting from operations .................... $6,374,061
==========
</TABLE>
See Notes to Financial Statements.
160
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Stein Roe Money Market Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ................................................... $ 6,374,061 $ 4,031,872
------------- -------------
Net increase in net assets resulting from operations ..................... 6,374,061 4,031,872
------------- -------------
Distributions declared from:
Net investment income ................................................... (6,374,061) (4,031,872)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold .......................................... 159,716,698 89,315,213
Cost of fund shares repurchased ......................................... (96,891,584) (59,143,689)
Distributions reinvested ................................................ 6,374,061 4,031,872
------------- -------------
Net increase in net assets resulting from fund share transactions ........ 69,199,175 34,203,396
------------- -------------
Total increase in net assets ............................................. 69,199,175 34,203,396
Net assets:
Beginning of year ....................................................... 101,340,120 67,136,724
------------- -------------
End of year ............................................................. $ 170,539,295 $ 101,340,120
============= =============
Undistributed net investment income included in ending net assets ........ $ -- $ --
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ............................................................. 159,716,698 89,315,213
Shares repurchased ...................................................... (96,891,584) (59,143,689)
Distributions reinvested ................................................ 6,374,061 4,031,872
------------- -------------
Net increase ............................................................. 69,199,175 34,203,396
============= =============
</TABLE>
See Notes to Financial Statements.
161
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Stein Roe Money Market Fund, Variable Series (the "Fund"), a
series of SteinRoe Variable Investment Trust (the "Trust"), is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek high current income while
emphasizing capital preservation from investment in short-term money market
instruments. The Fund's capitalization consists of an unlimited number of
shares of beneficial interest without par value that represents a separate
series of the Trust. Each share of the Fund represents an equal proportionate
beneficial interest in the Fund and, when issued and outstanding, is fully paid
and nonassessable. Shareholders would be entitled to share proportionally in
the net assets of the Fund available for distribution to shareholders upon
liquidation of the Fund. 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") offered
by the separate accounts of the life insurance companies ("Participating
Insurance Companies"). Certain Participating Insurance Companies are affiliated
with the Investment Advisor and sub-advisors to the Fund ("Affiliated
Participating Insurance Companies"). Such Affiliated Participating Insurance
Companies are Keyport Life Insurance Company ("Keyport"), Independence Life &
Annuity Company ("Independence") and Liberty Life Assurance Company of Boston
("Liberty Life"). The Participating Insurance Companies and their separate
accounts own all the shares of the Fund. Stein Roe & Farnham Inc. (the
"Manager") ("Stein Roe"), provides investment management, administrative and
advisory services to the Fund pursuant to its Management Agreements with the
Trust. Keyport Financial Services Corp. ("KFSC") serves as the principal
underwriter of the Trust with respect to sales of shares to Affiliated
Participating Insurance Companies. The Manager, KFSC, Keyport and Independence
are wholly-owned indirect subsidiaries of Liberty Financial Companies, Inc.
("LFC"). As of December 31, 1999, Liberty Mutual Insurance Companies ("Liberty
Mutual") owned approximately 71% of the outstanding voting shares of LFC.
Liberty Life is a subsidiary of Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--The Fund values securities 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--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income, including
discount accretion and premium amortization, is recorded daily on the accrual
basis.
Distributions to shareholders--The Fund declares dividends daily and reinvests
all dividends declared monthly in additional shares at net asset value. Income
and capital gain distributions are determined in accordance with federal income
tax regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Other--The Fund's custodian takes possession through the federal book-entry
system of securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Administrative fees--The Manager receives monthly fees equal to
0.35% and 0.15% annually of the Fund's average daily net assets for management
and administrative services, respectively.
Bookkeeping fee--The Manager provides bookkeeping and pricing services for
$25,000 annually plus 0.0025% annually of the Fund's average net assets over
$50 million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (including
management fee) exceed 0.65% annually of the Fund's average daily net assets.
For the year ended December 31, 1999, the Fund's operating expenses, as defined
above, did not exceed the 0.65% expense limit.
162
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Change in Independent Accountants--Based on the recommendation of the Audit
Committee of SteinRoe Variable Investment Trust, on August 3, 1999 the Board of
Trustees determined not to retain KPMG LLP as the Fund's independent accountant
and voted to appoint PricewaterhouseCoopers LLP as independent accountants for
the year ended December 31, 1999. During the two most recent fiscal years, KPMG
LLP's audit reports contained no adverse opinion or disclaimer of opinion; nor
were its reports qualified or modified as to uncertainty, audit scope, or
accounting principle. There were no disagreements in accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
if not resolved to the satisfaction of KPMG LLP would have caused it to make
reference to the disagreement in its report on the financial statements for
such years or through August 3, 1999.
163
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Stein Roe Money Market Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------- ------------- ------------- ------------- -------------
<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 (a) .................. 0.047 0.050 0.050 0.049 0.055
Net realized and unrealized gains
on investments ............................ -- -- -- -- --
---------- -------- -------- -------- --------
Total from investment operations ........... 0.047 0.050 0.050 0.049 0.055
---------- -------- -------- -------- --------
Less distributions:
From net investment income ................ (0.047) (0.050) (0.050) (0.049) (0.055)
---------- -------- -------- -------- --------
Net asset value, end of year ............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ======== ======== ======== ========
Total return:
Total investment return (b) ................ 4.79% 5.17% 5.18% 5.01% 5.62%
Ratios/supplemental data:
Net assets, end of year (000's) ............ $ 170,539 $101,340 $ 67,137 $ 65,461 $ 64,992
Ratio of expenses to average net
assets (c) ................................ 0.52%(d) 0.62% 0.65% 0.65% 0.63%
Ratio of net investment income to
average net assets (c) .................... 4.75%(d) 4.99% 5.05% 4.90% 5.48%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distribution reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) During the year ended December 31, 1999, the Fund experienced a one-time
reduction in its expenses of two basis points as a result of expenses
accrued in a prior period. The Fund's ratios disclosed above reflect the
actual rate at which expenses were incurred throughout the current fiscal
year without the reduction.
164
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of SteinRoe Variable Investment Trust and
the Shareholders of Stein Roe Money Market Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Stein Roe Money Market Fund,
Variable Series (the "Fund") (a series of SteinRoe Variable Investment Trust)
at December 31, 1999, the results of its operations, the changes in its net
assets and the financial highlights for the period then ended, in conformity
with accounting principles generally accepted in the United States. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above. The
financial statements for the periods prior to January 1, 1999 were audited by
other independent accountants whose report dated February 12, 1999 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
165
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Stein Roe Mortgage Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Stein Roe Mortgage Securities Fund, Variable Series, seeks the highest
possible level of current income, consistent with the safety of principal and
maintenance of liquidity.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 1/1/89
Assuming reinvestment of all distributions
12-month total return ...................... 1.08%
Net asset value per share on 12/31/99 ......... $10.35
Net asset value per share on 12/31/98 ......... $10.79
</TABLE>
Portfolio Managers' Discussion
William M. Wadden is senior vice president for Stein Roe & Farnham
Incorporated.
What was the investment environment like over the past 12 months?
The mortgage market performed well during the first half of 1999, but Y2K
jitters that developed during May and June carried over into the third quarter.
Y2K fears reached a crescendo during July and August as corporate issuers,
financial institutions and asset-backed securities all accelerated issuance
ordinarily reserved for the second half of 1999 into the beginning of the third
quarter. This surge in issuance caused mortgage spreads to widen dramatically
during July and August. During that two-month period, mortgages underperformed
Treasuries by 0.81%.
The mortgage sector finished the year on a strong note, outperforming U.S.
Treasuries during each of the final four months of the year. As the Y2K
issuance glut passed and market participants began to eye historically wide
yield spreads, portfolio managers purchased mortgages in lieu of other sectors.
From September through December, mortgages outperformed Treasuries by a
cumulative 1.66%, enabling the mortgage sector to post a return edge of 1.13%
for the full year 1999. Mortgages also outpaced corporate and asset-backed
securities during this time period.
What was the Fund's strategy during the period?
Three portfolio segments were strong contributors to the Fund's
performance during 1999. The first was our investment in premium mortgages.
There were times during the first half of 1999, when Treasury prices were
falling, that the prices of premium mortgages actually rose. Our position in
premium mortgages boosted returns during the second half of 1999 as well. As
yields rose further during the latter portion of the year, our premiums
experienced better relative valuations when they became more highly valued than
par or discount securities.
Another component of the portfolio that performed well was our investment
in asset-backed securities. The Fund can own asset-backed securities backed by
residential and commercial mortgages. These securities had come under undue
pressure last fall as certain hedge funds were forced to suddenly liquidate
their holdings. At that time, we increased our holdings at attractive prices.
Since the beginning of 1999, these securities have been the best performers
within the domestic fixed income universe.
The Fund's shorter duration versus the mortgage universe also helped
performance. The fund usually maintains an effective duration between 3.25 and
3.5 years. Over the long term, we think the Fund's duration positioning will
provide shareholders with attractive returns. Recently, however, we have
allowed the Fund's duration to lengthen to 3.9 years. This was in response to
the mortgage universe lengthening from 2.5 years at the beginning of 1999 to
4.2 years at year-end. The Fund remains slightly short versus the duration of
the mortgage universe. We may further extend the Fund's duration to equal the
mortgage universe if market conditions warrant.
The Fund preserved capital during a period of rising rates and outpaced
the average of its peers according to Lipper for the one-year period ended
December 31, 1999. Total return with reinvested dividends for the period was
1.08% compared to a 0.45% return for the average mortgage securities fund. The
unmanaged Lehman Brothers Mortgage-Backed Securities Index, which is not
available for direct investment, rose 1.86% for the period.
What is your outlook for the period ahead?
The mortgage sector should continue to perform well during the next
quarter. The narrowing of the yield difference between mortgages and U.S.
Treasuries that occurred during the latter portion of 1999 has left mortgage
spreads somewhat wider than the historical average, but not terrifically so.
Market implied opinions of future interest rate volatility, an important factor
driving yield spread differences, have fallen to below their historical
average. This suggests that the mortgage sector is currently fully valued.
Mortgage spreads may have some room to narrow further, but such potential
remains limited. Coupon pricing relationships within the traditional agency
mortgage sector now appear fairly valued. In the agency sector, we prefer
pass-throughs to CMOs. In the mortgage-related asset-backed sector, we prefer
home equity and home improvement loans. Corporate bond performance has recently
lagged the mortgage sector, presenting attractive buying opportunities.
Corporates are expected to perform better if interest rates stabilize or begin
to decline from present levels.
166
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Stein Roe Mortgage Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
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. Holdings
are disclosed as a percentage of total net assets. Portfolio holdings are as of
December 31, 1999 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% of the Fund's assets may be invested in other types of
securities. The Lehman Mortgage-Backed Securities Index is an unmanaged group
of stocks that differs from the composition of each Stein Roe Fund; it is not
available for direct investment. According to Lipper, Inc., a monitor of mutual
fund performance, the median returns for the Fund's variable annuity mortgage
fund peer group for the 1-, 5- and 10-year periods ended December 31, 1999,
were 0.45%, 7.28% and 7.40%, respectively.
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.
- --------------------------------------------------------------------------------
Stein Roe Mortgage Securities Fund, Variable Series vs. Lipper Variable Annuity
U.S. Mortgage Fund Average and Lehman Brothers Mortgage-Backed Securities Index
Growth of a $10,000 Investment December 31, 1989 to December 31, 1999
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
1 Year 5 Years 10 Years
<S> <C> <C>
1.08% 7.34% 7.04%
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Lehman Lipper
Stein Roe Brothers Variable
Mortgage Mortgage-Backed Annuity
Securities Fund, Securities U.S. Mortgage
Variable Series Index Fund Average
<S> <C> <C> <C> <C>
$30,000 12/89 10000 10000 10000
$25,000 12/90 10910 11073 10942
$20,000 12/91 12490 12813 12649
$15,000 12/92 13233 13704 13403
$10,000 12/93 14061 14642 14472
$ 5,000 12/94 13841 14406 14032
12/95 16019 16826 16244
12/96 16772 17726 16955
12/97 18288 19409 18525
12/98 19532 20759 19854
12/99 19744 21160 20015
</TABLE>
[END PLOT POINTS]
<TABLE>
<S> <C> <C>
____ Stein Roe Mortgage Securities Fund, ..... Lehman Brothers Mortgage-Backed - - - - Lipper Variable Annuity
Variable Series Securities Index U.S. Mortgage Fund Average
</TABLE>
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. Total
return performance includes changes in share price and reinvestment of all
distributions. Chart assumes a $10,000 investment on 12/31/89. The Lehman
Brothers Mortgage-Backed Securities Index is an unmanaged group of mortgage
securities that differs from the composition of the Fund; it is not available
for direct investment. Performance numbers reflect all Fund expenses net of any
voluntary waiver of expenses by the Manager, but do not include any insurance
charges imposed by your insurance company's separate accounts or certain
expenses reimbursed by the Manager. If performance included the effect of these
additional amounts, it would be lower. It is not possible to invest directly in
an index. Source: Lipper, Inc., a monitor of mutual fund performance.
- --------------------------------------------------------------------------------
167
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
SteinRoe Variable Investment Trust Stein Roe Mortgage Securities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturities
Coupon From/To Par Value
- ------------------- ----------------------- --------------------- ---------------
<S> <C> <C> <C>
GOVERNMENT OBLIGATIONS--70.4%
Government Agencies--62.5%
Collateralized Mortgage Obligations
American Mortgage Trust 1993-3
8.190% 2022 $ 415,052 $ 402,601
------------
Federal Home Loan Mortgage Corp.:
6.500% 2009 1,222,437 1,185,765
7.000% 2026 1,320,763 1,278,248
7.500% 2008-2024 3,534,498 3,518,469
8.500% 2006 50,727 52,185
10.500% 2013-2019 138,851 147,639
10.750% 2009 113,585 122,884
11.250% 2009 48,901 53,028
12.000% 2013-2020 503,997 561,077
------------
6,919,295
------------
Federal National Mortgage Association.:
6.000% 2008-2024 8,752,612 8,339,969
6.500% 2009-2024 12,388,818 11,673,221
7.000% 2011-2029 4,890,680 4,770,110
7.500% 2029 3,996,640 3,951,678
8.500% 2028(b) 9,465,740 9,728,982
9.000% 2005-2020 75,599 78,405
9.250% 2018 467,813 487,925
10.000% 2001-2016 173,648 185,662
10.250% 2016 115,993 123,895
10.500% 2001 17,087 18,064
12.250% 2012 54,795 60,822
------------
39,418,733
------------
Real Estate Mortgage Investment Conduits
FNR 1999-33 Class AE
6.000% 2026...... 4,806,565 4,440,305
------------
Government National Mortgage Association:
Fixed Rate Mortgage:
6.500% 2024 5,634,154 5,287,258
8.000% 2008-2028 3,951,881 3,997,027
9.000% 2016-2017 729,540 769,402
9.500% 2009 3,377,469 3,602,271
10.000% 2009 289,990 310,919
11.500% 2013 269,655 299,738
------------
14,266,615
------------
Adjustable Rate Mortgage:
6.625% 2025 710,379 716,815
------------
Total Government Agencies
(cost of $67,877,836)...... 66,164,364
------------
Government Obligations--7.9%
U.S. Treasury Notes
6.375% 2002(c) 8,325,000 8,343,232
------------
</TABLE>
<TABLE>
<CAPTION>
Maturities
Coupon From/To Par Value
- ------------------- ----------------------- --------------------- ---------------
<S> <C> <C> <C>
Total Government Obligations
(cost of $8,522,994)...... $ 8,343,232
------------
Total U.S. Government &
Agency Obligations
(cost of $76,400,830)...... 74,507,596
------------
</TABLE>
<TABLE>
<S> <C> <C>
NON-AGENCY MORTGAGE-BACKED SECURITIES &
ASSET-BACKED SECURITIES--20.8%
Non-Agency Mortgage-Backed Securities--5.8%
Citicorp Mortgage Securities,
Inc., Series 1987-10 Class A1,
10.000% 7/1/17 .................... $ 73,894 76,665
Comfed Savings Bank, Series
1987-1, Class A, 7.550% 1/1/18 73,343 63,808
Glendale Federal Bank, Series
78-A, Class A, 9.125% 1/25/08 11,833 11,833
Imperial Savings Assoc., Series
1987-4, Class A, 9.800%
7/25/17 ........................... 14,752 14,752
Merrill Lynch Mortgage
Investors, Inc., Series 1995-C3,
Class A3, 7.059% 12/26/25 ......... 2,000,000 1,958,750
Merrill Lynch Trust, Series 20,
Class D, 8.000% 12/20/18 .......... 530,409 529,592
Nomura Asset Securities Corp.,
Series 1996-MD5, Class A1B,
7.120% 4/13/36 .................... 1,000,000 966,560
Residential Funding Mortgage
Securities, Inc., Series
1998-HI2, Class A3, 6.330%
11/25/14 .......................... 1,000,000 972,790
Sears Mortgage Securities, Series
1987-A, Class 1, 6.500%
3/25/17 ........................... 1,493 1,493
Structured Asset Securities Corp.,
Series 1996-CFL:
Class C, 6.525% 2/25/28 ........... 1,242,500 1,233,181
Class X1, IO 1.525% 2/25/28 ......... 6,776,484 349,667
---------
Total Non-Agency Mortgage-Backed
Securities (cost of $6,324,179) ................... 6,179,091
---------
Asset-Backed Securities--15.0%
Advanta Mortgage Loan Trust,
Series 1997-2, Class M-1,
7.550% 6/25/27 .................... 900,000 876,447
Amresco Residential Securities
Mortgage Loan Trust Series
1996-3, Class A5, 7.550%
2/25/23 ........................... 949,306 948,774
Asset Securitization Corp., Series
1997-D5, Class A1C, 6.750%
2/14/41 ........................... 1,375,000 1,315,918
</TABLE>
See Notes to Investment Portfolio.
168
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
SteinRoe Variable Investment Trust Stein Roe Mortgage Securities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------------ ---------------
<S> <C> <C>
Delta Funding Home Equity
Loan Trust:
Series 1997-3, Class A6F,
6.860% 10/25/28 .................... $1,175,000 $ 1,124,328
Series 1998-2, Class A6F,
6.370% 7/15/28 ..................... 1,000,000 933,060
First Boston Mortgage Securities
Corp., Series 1993-H1, Class
IO, 1.844% 9/28/13 .................. 1,457,639 7,288
First Plus Home Loan Trust,
Series 1997-4, Class B1,
7.690% 9/11/23 ...................... 500,000 399,922
Green Tree Financial Corp.,
Series 1997-6, Class A8,
7.070% 1/15/29 ...................... 1,408,766 1,338,412
Green Tree Home Improvement
Loan Trust, Series 1994-A,
Class A, 7.050% 3/15/14 ............. 242,181 239,041
LB Commercial Conduit
Mortgage Trust, Series
1998-C4, Class A1B, 6.210%
10/15/08 ............................ 1,800,000 1,647,000
Master Financial Asset
Securitization Trust, Series
1998-2, Class A4, 7.070%
9/20/24 ............................. 1,000,000 901,580
Mego Mortgage Home Loan Trust:
Series 1997-3, Class M1,
7.500% 8/25/23 ...................... 1,500,000 1,435,965
Series 1997-3, Class CTFS,
8.010% 8/25/23 ..................... 500,000 403,750
Mid-State Trust, Series 6, Class
A1, 7.340% 7/1/35 ................... 1,765,811 1,716,192
Option One Mortgage Securities
Corp., Series 1999-B, Class 2A,
9.660% 3/26/29 ...................... 1,398,709 1,376,415
UCFC Home Equity Loan, Series
1997-C, Class A7, 6.845%
1/15/29 ............................. 1,275,000 1,243,610
------------
Total Asset-Backed Securities
(cost of $16,605,828) .................................. 15,907,702
------------
Total Non-Agency Mortgage-Backed
Securities & Asset-Backed Securities
(cost of $22,930,007) ................................... 22,086,793
------------
</TABLE>
<TABLE>
<CAPTION>
Par Value
-------------- ----------------
<S> <C> <C>
CORPORATE FIXED INCOME--5.0%
Finance, Insurance & Real Estate--2.3%
Financial Services--1.3%
Zurich Capital Trust, 8.376%
6/1/37 (a) .......................... $1,450,000 $ 1,383,605
------------
Holding & Other Investment Offices--1.0%
GMAC Euro 6.750% 7/10/02 ............... 1,000,000 985,000
------------
Transportation, Communication, Electric,
Gas & Sanitary Services--2.7%
Electric, Gas & Sanitary Services--1.3%
Noram Energy Corp., 6.500%
2/1/08 .............................. 1,500,000 1,385,160
------------
Electric Services--1.4%
National Power PLC, 7.125%
7/11/01 ............................. 1,500,000 1,506,525
------------
Total Corporate Fixed Income
(cost of $5,450,765) ................................... 5,260,290
------------
Total Investments (d)--96.2%
(cost of $104,781,602) (d) ............................. 101,854,679
------------
Short-term Obligations--8.0%
Commercial Paper--8.0%
Associates Corp. of North
America 4.000% 1/3/00 (e) ........... 5,070,000 5,068,873
Merrill Lynch & Co., 6.310%
1/19/00 (e) ......................... 3,400,000 3,390,480
------------
Total Short-term Obligations
(cost of $8,459,353) ................................... 8,459,353
------------
110,314,032
Other Assets & Liabilities--(4.2)% ......................... (4,416,230)
------------
Net Assets--100.0% ......................................... $105,897,802
============
</TABLE>
Notes to Investment Portfolio:
(a) Private Placement security. These securities generally are issued to the
institutional investors, such as the Fund, who agree that they are
purchasing the securities for investment and not for public distribution.
Any resale must be in an exempt transaction, normally to other
institutional investors.
At December 31, 1999, the value of the Fund's restricted security was
$1,383,605 which represented 1.3% of net assets. This security is not
deemed to be illiquid.
(b) This security, or a portion thereof, has been purchased on a delayed
delivery basis for settlement at a future date beyond the customary
settlement date.
(c) This security, or a portion thereof, with a total market value of
$6,915,111 is being used to collateralize the delayed delivery purchase
indicated in note (b) above.
(d) Cost for federal income tax purposes is the same.
(e) Rate represents yield at date of purchase.
<TABLE>
<CAPTION>
Acronym Name
- ----------------- --------------
<S> <C>
IO Interest Only
</TABLE>
See Notes to Financial Statements.
169
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Stein Roe Mortgage Securities Fund, Variable
Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $104,781,602) ............. $101,854,679
Short-term obligations (identified cost $8,459,353)...................... 8,459,353
Receivable for fund shares sold ......................................... 923,801
Interest receivable ..................................................... 872,164
Receivable for investments sold ......................................... 89,750
Cash .................................................................... 1,133
Other assets ............................................................ 8,576
------------
Total assets .......................................................... 112,209,456
------------
Liabilities:
Payable for investments purchased ....................................... 6,072,817
Payable for fund shares purchased ....................................... 136,698
Accrued expenses payable ................................................ 29,507
Other liabilities ....................................................... 72,632
------------
Total liabilities ..................................................... 6,311,654
------------
Net assets .............................................................. $105,897,802
============
Net assets represented by:
Paid-in capital ........................................................ $105,417,249
Accumulated undistributed net investment income ........................ 6,395,789
Accumulated net realized losses on investments ......................... (2,988,313)
Net unrealized depreciation on investments ............................. (2,926,923)
------------
Total net assets applicable to outstanding shares of beneficial interest $105,897,802
============
Shares of beneficial interest outstanding ............................... 10,228,724
============
Net asset value per share ............................................... $ 10.35
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Interest ................................................................. $ 7,086,265
------------
Expenses:
Management fee .......................................................... 405,687
Administrative fee ...................................................... 153,092
Bookkeeping fee ......................................................... 26,308
Transfer agent fee ...................................................... 7,500
Printing expense ........................................................ --
Audit fee ............................................................... 16,925
Trustees' expense ....................................................... 13,700
Custodian fee ........................................................... 12,041
Legal fee ............................................................... --
Miscellaneous expense, net .............................................. (9,715)
------------
Total expenses ........................................................... 625,538
------------
Net investment income .................................................... 6,460,727
Realized and unrealized losses on investments:
Net realized losses on investments ...................................... (204,777)
Net change in unrealized appreciation/depreciation on investments ....... (5,084,514)
------------
Net increase in net assets resulting from operations ..................... $ 1,171,436
============
</TABLE>
See Notes to Financial Statements.
170
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Stein Roe Mortgage Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ................................................... $ 6,460,727 $ 4,985,263
Net realized gains (losses) on investments .............................. (204,777) 252,574
Net change in unrealized appreciation/depreciation on investments ....... (5,084,514) 272,011
------------- -------------
Net increase in net assets resulting from operations ..................... 1,171,436 5,509,848
------------- -------------
Distributions declared from:
Net investment income ................................................... (5,059,928) (4,580,000)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold .......................................... 25,773,295 29,203,191
Cost of fund shares repurchased ......................................... (17,739,463) (15,193,948)
Distributions reinvested ................................................ 5,059,928 4,580,000
------------- -------------
Net increase in net assets resulting from fund share transactions ........ 13,093,760 18,589,243
------------- -------------
Total increase in net assets ............................................. 9,205,268 19,519,091
Net assets:
Beginning of year ....................................................... 96,692,534 77,173,443
------------- -------------
End of year ............................................................. $ 105,897,802 $ 96,692,534
============= =============
Accumulated undistributed net investment income included
in ending net assets .................................................... $ 6,395,789 $ 5,059,907
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ............................................................. 2,477,267 2,745,216
Shares repurchased ...................................................... (1,704,846) (1,424,260)
Distributions reinvested ................................................ 492,693 448,138
------------- -------------
Net increase ............................................................. 1,265,114 1,769,094
============= =============
</TABLE>
See Notes to Financial Statements.
171
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Stein Roe Mortgage Securities Fund, Variable Series (the
"Fund"), a series of SteinRoe Variable Investment Trust (the "Trust"), is a
diversified portfolio of a Massachusetts business trust, registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund's investment objective is to seek the highest
possible level of current income by investing at least 65% of total net assets
in mortgage pass through certificates. The Fund's capitalization consists of an
unlimited number of shares of beneficial interest without par value that
represents a separate series of the Trust. Each share of the Fund represents an
equal proportionate beneficial interest in the Fund and, when issued and
outstanding, is fully paid and nonassessable. Shareholders would be entitled to
share proportionally in the net assets of the Fund available for distribution
to shareholders upon liquidation of the Fund. 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") offered by the separate accounts of the life insurance companies
("Participating Insurance Companies"). Certain Participating Insurance
Companies are affiliated with the Investment Advisor and sub-advisors to the
Fund ("Affiliated Participating Insurance Companies"). Such Affiliated
Participating Insurance Companies are Keyport Life Insurance Company
("Keyport"), Independence Life & Annuity Company ("Independence") and Liberty
Life Assurance Company of Boston ("Liberty Life"). The Participating Insurance
Companies and their separate accounts own all the shares of the Fund. Stein Roe
& Farnham Inc. (the "Manager") ("Stein Roe"), provides investment management,
administrative and advisory services to the Fund pursuant to its Management
Agreements with the Trust. Keyport Financial Services Corp. ("KFSC") serves as
the principal underwriter of the Trust with respect to sales of shares to
Affiliated Participating Insurance Companies. The Manager, KFSC, Keyport and
Independence are wholly-owned indirect subsidiaries of Liberty Financial
Companies, Inc. ("LFC"). As of December 31, 1999, Liberty Mutual Insurance
Companies ("Liberty Mutual") owned approximately 71% of the outstanding voting
shares of LFC. Liberty Life is a subsidiary of Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may enter into mortgage dollar roll transactions. A mortgage dollar
roll transaction involves a sale by the Fund of securities that it holds with
an agreement by the Fund to repurchase substantially similar securities at an
agreed upon price and date. During the period between the sale and the
repurchase, the Fund will not be entitled to accrue interest and receive
principal payments on the securities sold. Mortgage dollar roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the repurchase price of those securities. In the event the buyer
of the securities under a mortgage dollar roll transaction files for bankruptcy
or becomes insolvent, the Fund's use of proceeds of the transaction may be
restricted pending a determination by or with respect to the other party.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to invest at less advantageous prices. The Fund maintains U.S.
government securities or other liquid high grade debt obligations as collateral
with respect to mortgage dollar roll transactions and securities traded on
other than normal settlement terms.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded daily
on the accrual basis. Fee income attributable to mortgage dollar roll
transactions is recorded on the accrual basis over the term of the transaction.
Original issue discount is accreted to interest income over the life of a
security with a corresponding increase in the cost basis. Premium and market
discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund
172
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
at net asset value as of the record date of the distribution. Income and
capital gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for mortgage backed securities for book and tax purposes
and expired capital loss carryforwards. Permanent book and tax basis
differences will result in reclassifications to capital accounts.
Other--The Fund's custodian takes possession through the federal book-entry
system of securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
Note 2. Fees and Compensation Paid to Affiliates
Management and Administrative fees--The Manager receives a monthly fee equal
to 0.40% and 0.15% annually of the Fund's average daily net assets for the
management and administrative fees, respectively.
Bookkeeping fee--The Manager provides bookkeeping and pricing services for a
monthly fee equal to $25,000 annually plus 0.0025% annually of the Fund's
average net assets over $50 million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Expense limits--The Manager has agreed, until further notice, to waive fees
and bear certain Fund expenses to the extent that total expenses (including
management fee) exceed 0.70% annually of the Fund's average daily net assets.
For the year ended December 31, 1999, the Fund's operating expenses, as defined
above, did not exceed the 0.70% expense limit.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment Activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $40,293,787 and
$27,083,889, respectively.
Unrealized appreciation (depreciation) at December 31, 1999 based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 402,082
Gross unrealized depreciation (3,329,005)
-----------
Net unrealized depreciation $(2,926,923)
-----------
</TABLE>
Capital loss carryforwards--At December 31, 1999, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
- ------------- -------------
<S> <C>
2002 $2,401,000
2003 224,000
2004 114,000
2007 132,000
----------
$2,871,000
----------
</TABLE>
Change in Independent Accountants--Based on the recommendation of the Audit
Committee of SteinRoe Variable Investment Trust, on August 3, 1999 the Board of
Trustees determined not to retain KPMG LLP as the Fund's independent accountant
and voted to appoint PricewaterhouseCoopers LLP as independent accountants for
the year ended December 31, 1999. During the two most recent fiscal years, KPMG
LLP's audit reports contained no adverse opinion; nor were its reports
qualified or modified as to uncertainty, audit scope, or accounting principle.
There were no disagreements in accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which if not resolved to
the satisfaction of KPMG LLP would have caused it to make reference to the
disagreement in its report on the financial statements for such years or
through August 3, 1999.
173
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Stein Roe Mortgage Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------ ----------- ----------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year .................. $ 10.79 $ 10.73 $ 9.84 $ 10.16 $ 9.28
--------- ------- ------- --------- -------
Net investment income (a) ........................... 0.66 0.55 0.68 0.78 0.57
Net realized and unrealized gains (losses)
on investments ..................................... (0.55) 0.14 0.21 (0.30) 0.89
--------- ------- ------- --------- -------
Total from investment operations .................... 0.11 0.69 0.89 0.48 1.46
--------- ------- ------- --------- -------
Less distributions:
Dividends from net investment income ............... (0.55) (0.63) -- (0.80) (0.58)
--------- ------- ------- --------- --------
Net asset value, end of year ........................ $ 10.35 $ 10.79 $ 10.73 $ 9.84 $ 10.16
========= ======= ======= ========= ========
Total return:
Total investment return (b) ......................... 1.08% 6.80% 9.04% 4.70% 15.74%
Ratios/supplemental data:
Net assets, end of year (000's) ..................... $ 105,898 $96,693 $77,173 $ 76,009 $101,778
Ratio of expenses to average net assets (c) ......... 0.64%(d) 0.70% 0.70% 0.70%(e) 0.69%
Ratio of net investment income to average
net assets (c) ..................................... 6.29%(d) 5.91% 6.59% 6.71%(f) 6.76%
Portfolio turnover ratio (g) ........................ 28% 8% 29% 72% 112%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) During the year ended December 31, 1999, the Fund experienced a one-time
reduction in its expenses of three basis points as a result of expenses
accrued in a prior period. The Fund's ratios disclosed above reflect the
actual rate at which expenses were incurred throughout the current fiscal
year without the reduction.
(e) If the Fund had paid all of its expenses and there had been no
reimbursement from the investment Manager, this ratio would have been 0.72%
for the year ended December 31, 1996.
(f) Computed giving effect to the investment Manager's expense limitation
undertaking.
(g) Portfolio turnover includes dollar roll transactions.
174
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of SteinRoe Variable Investment Trust and
the Shareholders of Stein Roe Mortgage Securities Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Stein Roe Mortgage Securities
Fund, Variable Series (the "Fund"), (a series of SteinRoe Variable Investment
Trust) at December 31, 1999, the results of its operations, the changes in its
net assets and the financial highlights for the period then ended, in
conformity with accounting principles generally accepted in the United States.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above. The financial statements for the periods prior to January 1, 1999 were
audited by other independent accountants whose report dated February 12, 1999
expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
175
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Stein Roe Small Company Growth Fund,
Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Stein Roe Small Company Growth Fund, Variable Series, invests at least 65%
of its assets in common stocks of small-cap companies. The Fund invests in
companies that compete in large and growing markets and possess ready access to
capital, leading market share, strong management teams with ownership
interests, and a business strategy designed to fully exploit future growth
opportunities.
Fund Performance (as of December 31, 1999)
<TABLE>
<S> <C>
Inception date ................................ 1/1/89
Assuming reinvestment of all distributions
12-month total return ...................... 48.02%
Net asset value per share on 12/31/99 ......... $20.16
Net asset value per share on 12/31/98 ......... $13.62
</TABLE>
Portfolio Manager's Discussion
On July 19, 1999 William Garrison assumed full portfolio management
responsibility for the Fund, formerly known as Special Venture Fund, Variable
Series. Mr. Garrison is a vice president of Stein Roe & Farnham Incorporated.
What was the investment environment over the past year?
The investment environment may be characterized by three factors: a very
positive sentiment towards growth stocks; the technology sector rally; and a
very favorable initial public offering market. These three factors greatly
benefited the Fund's performance, particularly in the fourth quarter when the
portfolio returned 35.39%. The past year represented a potential turning point
for small-cap growth stocks as they outperformed large-cap growth stocks for the
first year since 1993 (source: Russell 2000 Growth Index vs. Russell 1000 Growth
Index).
What was the Fund's strategy during the period?
Since taking over management in the fall of 1998, we broadened the Fund's
diversification in both the number of its holdings and the size of those
companies. At the end of the period, the median market capitalization of
companies we held increased to about $1.2 billion. Among the Fund's holdings,
10 stocks held for the entire year contributed slightly more than one-fifth
(about 21%) of the portfolio's appreciation; newly-public companies contributed
nearly one-third (approximately 30%) of the Fund's return. The majority of
these stocks were in the technology sector. Approximately one-half of this
amount (about 15% of the Fund's return) was due to short-term investments in
newly-public companies (investments sold within two weeks of purchase). Returns
attributable to investments in newly-issued public companies reflected the very
favorable initial public offering market and may not be sustainable.
The Fund experienced a somewhat higher turnover rate as part of its
repositioning process. At year end, the portfolio held 137 stocks. The single
largest stock, Independent Energy Holdings, represented 2.5% of total net
assets. We believe our fundamental and quantitative research and management
strategy will provide investors with attractive risk-adjusted returns over the
long term.
What is your outlook for the period ahead?
We see investors continuing to search for opportunities among small and
mid-sized growth companies, particularly in the high-growth technology sector.
The initial public offering market should also prove attractive. There is a
heightened awareness of small-company stocks among investors, and any marginal
increase in asset allocation towards small-cap stocks can have a very
significant impact on returns for the asset class. We continue to find many
interesting new stocks in the small-cap sector and believe the group remains
very attractively valued on a relative basis.
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. Holdings
are disclosed as a percentage of the portfolio's total net assets as of
December 31, 1999, and are subject to change. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment. Effective April, 1999, the Fund's Advisor currently limits expenses
to 0.80% of average net assets. Absent this limit, total returns would be less.
Lipper, Inc. is a monitor of mutual fund performance. The variable annuity
small-cap funds category contained 125, 31 and 8 funds for the 1-, 5- and
10-year periods, respectively. For these periods the returns for the Lipper
peer group average were 38.37%, 19.91% and 15.67%, respectively.
Performance numbers reflect all Fund expenses, but do not include any insurance
charges imposed by your insurance company's separate accounts. If performance
included the effect of these additional amounts, it would be lower.
176
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
SteinRoe Variable Investment Trust Stein Roe Small Company Growth Fund,
Variable Series
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stein Roe Small Company Growth Fund, Variable Series vs. Lipper Variable Annuity
Small-Cap Funds Average, S&P Small Cap 600 Index and Russell 2000 Index
Growth of a $10,000 Investment December 31, 1989 to December 31, 1999
<TABLE>
<CAPTION>
Average Annual Total Returns on December 31, 1999
1 Year 5 Years 10 Years
<S> <C> <C>
48.02% 13.36% 13.91%
</TABLE>
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Stein Roe Lipper
Small Company Variable Annuity
Growth Fund, S&P Small Cap Russell 2000 Small-Cap Funds
Variable Series 600 Index Index Average
<S> <C> <C> <C> <C> <C>
$60,000 12/89 10000 10000 10000 10000
$50,000 12/90 9109 7631 8052 9218
$40,000 12/91 12502 11331 11759 14892
$30,000 12/92 14312 13716 13924 17961
$20,000 12/93 19419 16293 16553 22083
$10,000 12/94 19650 15514 16252 21911
12/95 21959 20163 20875 28164
12/96 27875 24462 24320 33977
12/97 30052 30720 29757 40643
12/98 24853 30317 28999 41208
12/99 36785 34094 35178 57001
</TABLE>
[END PLOT POINTS]
<TABLE>
<S> <C> <C> <C>
____ Stein Roe Small Company .... S&P Small Cap - - - Lipper Variable Annuity Small-Cap ---- Russell 2000 Index
Growth Fund, Variable Series 600 Index Funds Average
</TABLE>
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. Chart
assumes a $10,000 investment on 12/31/89. Total return performance includes
changes in share price and reinvestment of all distributions. Each index
mentioned in the above discussion is an unmanaged group of stocks that differ
from the composition of the Fund; indices are not available for direct
investment. Performance numbers reflect all Fund expenses net of any voluntary
waiver of expenses by the Manager, but do not include any insurance charges
imposed by your insurance company's separate accounts or certain expenses
reimbursed by the Manager. If performance included the effect of these
additional amounts, it would be lower. Funds that emphasize investments in
smaller conpanies may experience greater price volatility. It is not possible to
invest directly in an index. Source: Lipper, Inc., a monitor of mutual fund
performance.
- --------------------------------------------------------------------------------
177
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
SteinRoe Variable Investment Trust Stein Roe Small Company Growth Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------------------- --------------
<S> <C> <C>
COMMON STOCKS--94.3%
Construction--0.7%
Building Construction
Astec Industries, Inc. (a) ............................................. 16,600 $ 312,287
Insituform Technologies, Inc.,
Class A (a) ......................................................... 23,000 649,750
------------
962,037
------------
Finance, Insurance & Real Estate--5.3%
Depository Institutions--1.6%
Cullen/Frost Bankers, Inc. ............................................. 45,600 1,174,200
Silicon Valley Bancshares (a) .......................................... 22,000 1,089,000
------------
2,263,200
------------
Financial Services--2.1%
eSpeed, Inc., Class A (a) .............................................. 7,800 277,387
The Profit Recovery Group
International, Inc. (a) ............................................. 11,400 302,813
U.S. Trust Corp. ....................................................... 30,400 2,437,700
------------
3,017,900
------------
Holding Companies--0.4%
Commerce Bancorp, Inc. ................................................. 12,300 497,380
------------
Insurance Carriers--0.3%
E.W. Blanch Holdings, Inc. ............................................. 7,400 453,250
------------
Security Brokers & Dealers--0.9%
Legg Mason, Inc. ....................................................... 33,600 1,218,000
------------
Manufacturing--31.2%
Chemicals & Allied Products--8.6%
Alkermes, Inc. (a) ..................................................... 15,200 746,700
Alpharma, Inc., Class A ................................................ 46,300 1,423,725
DUSA Pharmaceuticals, Inc. (a) 25,900 738,150
IDEC Pharmaceuticals Corp. (a) 11,900 1,169,175
Jones Pharma, Inc. ..................................................... 38,550 1,674,515
Maxygen, Inc. (a) ...................................................... 9,100 646,100
Medicis Pharmaceutical Corp.,
Class A (a) ......................................................... 30,400 1,293,900
MedImmune, Inc. (a) .................................................... 7,200 1,194,300
Shire Pharmaceuticals Group
ADR (a) ............................................................. 36,493 1,062,869
The Geon Co. ........................................................... 40,700 1,322,750
The Scotts Co., Class A (a) ............................................ 18,200 732,550
------------
12,004,734
------------
Communications Equipment--2.7%
Comverse Technology, Inc. (a) 11,350 1,642,913
El Sitio, Inc. (a) ..................................................... 7,800 286,650
Inter-Tel, Inc. ........................................................ 47,800 1,195,000
ITC DeltaCom, Inc. (a) ................................................. 25,500 704,437
------------
3,829,000
------------
Electric Machinery, Computer & Supplies--0.7%
Dionex Corp. (a) ....................................................... 24,500 1,009,093
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------------------- ---------------
<S> <C> <C>
Electronic & Electrical Equipment--3.5%
Alaska Communications
Systems Holding, Inc. (a) ........................................... 46,800 $ 579,150
CTS Corp. .............................................................. 18,200 1,371,825
Kemet Corp. (a) ........................................................ 18,000 811,125
Official Payments Corp. (a) ............................................ 19,800 1,029,600
QRS Corp. (a) .......................................................... 10,200 1,063,987
------------
4,855,687
------------
Electronic Components--4.6%
Burr-Brown Corp. (a) ................................................... 48,000 1,734,000
Concord Camera Corp. (a) ............................................... 19,300 439,075
LTX Corp. .............................................................. 38,800 868,150
Micrel, Inc. (a) ....................................................... 20,400 1,161,525
Plexus Corp. (a) ....................................................... 25,500 1,122,000
Rudolph Technologies, Inc. (a) 3,900 130,650
Vitesse Semiconductor Corp. (a) 19,800 1,038,262
------------
6,493,662
------------
Fabricated Metal--0.5%
Tower Automotive, Inc. (a) ............................................. 45,700 705,493
------------
Food & Kindred Products--1.1%
Canandaigua Brands, Inc.,
Class A (a) ......................................................... 20,000 1,020,000
Smithfield Foods, Inc. (a) ............................................. 21,100 506,400
------------
1,526,400
------------
Furniture & Fixtures--0.8%
Ethan Allen Interiors, Inc. ............................................ 33,800 1,083,712
------------
Machinery & Computer Equipment--3.5%
C-Cube Microsystems, Inc. (a) .......................................... 23,200 1,444,200
Lam Research Corp. (a) ................................................. 8,500 948,281
Novellus Systems, Inc. (a) ............................................. 8,400 1,029,262
Xircom, Inc. (a) ....................................................... 19,000 1,425,000
------------
4,846,743
------------
Measuring & Analyzing Instruments--2.3%
JDS Uniphase Corp. (a) ................................................. 7,200 1,161,450
MedQuist, Inc. (a) ..................................................... 16,500 425,905
Orbotech Ltd. (a) ...................................................... 21,750 1,685,625
------------
3,272,980
------------
Printing & Publishing--0.3%
Harte-Hanks, Inc. ...................................................... 21,000 456,750
------------
Rubber & Plastic--0.9%
AptarGroup, Inc. ....................................................... 50,600 1,271,325
------------
Stone, Clay, Glass & Concrete--0.7%
Gentex Corp. (a) ....................................................... 34,400 954,600
------------
Textile Mill Products--0.6%
Mohawk Industries, Inc. (a) ............................................ 32,100 846,638
------------
Transportation Equipment--0.4%
Westinghouse Air Brake Co. ............................................. 32,802 582,236
------------
</TABLE>
See Notes to Investment Portfolio.
178
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
SteinRoe Variable Investment Trust Stein Roe Small Company Growth Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------------------- --------------
<S> <C> <C>
Mining & Energy--2.4%
Metal Mining--0.5%
Stillwater Mining Co. (a) .............................................. 21,000 $ 669,375
------------
Oil & Gas Extraction--1.6%
Cal Dive International, Inc. (a) ....................................... 18,000 596,250
Pogo Producing Co. ..................................................... 50,600 1,037,300
Santa Fe Snyder Corp. (a) .............................................. 88,400 707,200
------------
2,340,750
------------
Oil & Gas Field Services--0.3%
UTI Energy Corp. (a) ................................................... 16,600 382,838
------------
Retail--5.5%
Apparel & Accessory Stores--0.4%
Ann Taylor Stores Corp. (a) ............................................ 16,100 554,444
------------
Auto Dealers & Gas Stations--0.8%
O'Reilly Automotive, Inc. (a) .......................................... 49,200 1,057,800
------------
General Merchandise Stores--1.3%
99 Cents Only Stores (a) ............................................... 13,300 508,725
Ames Department Stores, Inc. (a) 21,700 625,231
Tuesday Morning Corp. (a) .............................................. 33,600 619,500
------------
1,753,456
------------
Home Furnishings & Equipment--0.5%
Linens 'n Things, Inc. (a) ............................................. 23,000 681,375
------------
Miscellaneous Retail--0.9%
Zale Corp. (a) ......................................................... 25,500 1,233,563
------------
Restaurants--1.6%
Applebee's International, Inc. ......................................... 26,400 778,800
CEC Entertainment, Inc. (a) ............................................ 35,000 993,125
Ruby Tuesday, Inc. ..................................................... 28,900 525,619
------------
2,297,544
------------
Services--32.0%
Amusement & Recreation--1.2%
Westwood One, Inc. (a) ................................................. 22,350 1,698,600
------------
Business Services--1.8%
Iron Mountain, Inc. (a) ................................................ 25,000 982,813
SEI Investment Co. ..................................................... 10,900 1,297,270
Sensar Corp. (a) ....................................................... 4,300 255,850
------------
2,535,933
------------
Computer Related Services--19.2%
AVT Corp. (a) .......................................................... 12,300 578,100
Actuate Corp. (a) ...................................................... 56,400 2,418,150
American Management Systems,
Inc. (a) ............................................................ 25,800 809,475
Art Technology Group, Inc. (a) 13,900 1,807,000
CacheFlow, Inc. (a) .................................................... 4,000 522,750
Catalina Marketing Corp. (a) ........................................... 9,600 1,111,200
Entrust Technologies, Inc. (a) ......................................... 16,900 1,012,944
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------------------- --------------
<S> <C> <C>
Focal Communications
Corp. (a) ........................................................... 41,500 $ 1,001,188
InterVU, Inc. (a) ...................................................... 17,800 1,869,000
Interwoven, Inc. (a) ................................................... 3,800 462,175
ION Networks, Inc. (a) ................................................. 21,200 474,350
JNI Corp. (a) .......................................................... 9,200 607,200
Kronos, Inc. (a) ....................................................... 19,450 1,167,000
Lason, Inc. (a) ........................................................ 16,400 180,400
Macromedia, Inc. (a) ................................................... 28,400 2,076,750
Mercury Interactive Corp. (a) .......................................... 28,000 3,022,250
MRV Communications, Inc. (a) 46,100 2,898,538
National Computer
Systems, Inc. ....................................................... 36,100 1,358,263
National Instruments Corp. (a) ......................................... 32,550 1,245,038
SalesLogix Corp. (a) ................................................... 12,700 521,494
SonicWall, Inc. (a) .................................................... 7,800 313,950
The BISYS Group, Inc. (a) .............................................. 22,400 1,461,600
------------
26,918,815
------------
Computer Software--8.0%
Allscripts, Inc. (a) ................................................... 14,000 616,000
Bluestone Software, Inc. (a) ........................................... 8,900 1,023,500
BroadVision, Inc. (a) .................................................. 10,100 1,717,631
Clarus Corp. (a) ....................................................... 17,100 1,128,600
CyberSource Corp. (a) .................................................. 16,700 864,225
Integrated Systems, Inc. (a) ........................................... 31,100 1,043,794
Intraware, Inc. (a) .................................................... 9,500 750,500
SPSS, Inc. (a) ......................................................... 14,800 373,700
Symantec Corp. (a) ..................................................... 24,200 1,418,725
TSI International Software
Ltd. (a) ............................................................ 17,000 962,625
VERITAS Software Corp. (a) ............................................. 8,550 1,223,719
------------
11,123,019
------------
Education Services--0.4%
Devry, Inc. (a) ........................................................ 26,500 493,563
------------
Engineering, Accounting, Research &
Management--0.2%
Tetra Tech, Inc. (a) ................................................... 21,000 322,875
------------
Health Services--1.2%
ChromaVision Medical Systems,
Inc. (a) ............................................................ 38,900 593,225
IDEXX Laboratories, Inc. (a) ........................................... 14,800 238,650
Renal Care Group, Inc. (a) ............................................. 33,600 785,400
------------
1,617,275
------------
Transportation, Communication, Electric,
Gas & Sanitary Services--15.6%
Air Transportation--0.9%
SkyWest, Inc. .......................................................... 44,500 1,246,000
------------
</TABLE>
See Notes to Investment Portfolio.
179
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (Continued)
SteinRoe Variable Investment Trust Stein Roe Small Company Growth Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------------------- --------------
<S> <C> <C>
Broadcasting--2.6%
Cumulus Media, Inc., Class A (a) 25,200 $ 1,278,900
Radio One, Inc. (a) ...................................................... 11,900 1,094,800
Radio Unica Corp. (a) .................................................... 19,200 554,400
Salem Communications Corp.,
Class A (a) ........................................................... 29,200 660,650
------------
3,588,750
------------
Communications--2.4%
Acme Communications, Inc. (a) 7,900 262,675
InterVoice-Brite, Inc. (a) ............................................... 15,400 364,306
Jones Intercable, Inc., Class A (a) 15,200 1,053,550
TeleCorp PCS, Inc. (a) ................................................... 19,600 744,800
The Titan Corp. (a) ...................................................... 19,200 908,400
------------
3,333,731
------------
Electric, Gas & Sanitary Services--0.4%
Calpine Corp. (a) ........................................................ 8,400 537,600
------------
Electric Services--2.5%
Independent Energy Holdings
ADR (a) ............................................................... 106,500 3,547,781
------------
Motor, Freight & Warehousing--1.5%
American Freightways Corp. (a) 28,400 459,725
US Freightways Corp. ..................................................... 33,100 1,584,663
------------
2,044,388
------------
Telecommunications--3.6%
LightPath Technologies, Inc.,
Class A (a) ........................................................... 20,000 373,750
Media 100, Inc. (a) ...................................................... 22,500 594,844
Pinnacle Holdings, Inc. (a) .............................................. 48,900 2,072,138
Primus Telecommunications
Group, Inc. (a) ....................................................... 22,600 864,450
The Management Network
Group, Inc. (a) ....................................................... 11,700 381,713
TranSwitch Corp. (a) ..................................................... 10,800 783,675
------------
5,070,570
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
-------------------- --------------
<S> <C> <C>
Transportation Services--1.7%
Circle International Group, Inc. 37,500 $ 834,375
Expeditors International
Washington, Inc. ...................................................... 16,000 701,000
GetThere.com, Inc. (a) ................................................... 20,100 809,025
------------
2,344,400
------------
Wholesale Trade--1.6%
Durable Goods--0.8%
Cytyc Corp. (a) .......................................................... 18,500 1,129,656
------------
Nondurable Goods--0.8%
Barrett Resources Corp. (a) .............................................. 24,200 712,388
Priority Healthcare Corp.,
Class B (a) ........................................................... 14,700 425,381
------------
1,137,769
------------
Total Common Stocks
(cost of $90,711,173)(b) ............................................................... 131,812,690
------------
</TABLE>
<TABLE>
<CAPTION>
Par
-------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--5.0%
Commercial Paper
Associates First Capital, 4.000% (c)
1/3/00 ................................................................ $7,010,000 7,008,442
---------
Other Assets & Liabilities--0.7% .......................................................... 1,028,021
---------
Net Assets--100.0% ........................................................................ $139,849,153
============
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $90,828,341.
(c) The interest rate is the effective rate at the date of purchase.
<TABLE>
<CAPTION>
Acronym Name
- ----------- ----------------------------
<S> <C>
ADR American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
180
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SteinRoe Variable Investment Trust Stein Roe Small Company Growth Fund,
Variable Series / December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $90,711,173)............... $ 131,812,690
Short-term obligations .................................................. 7,008,442
Receivable for investments sold ......................................... 1,879,437
Receivable for fund shares sold ......................................... 442,578
Dividends receivable .................................................... 13,545
Cash .................................................................... 2,122
Other assets ............................................................ 14,956
-------------
Total assets .......................................................... 141,173,770
-------------
Liabilities:
Payable for investments purchased ....................................... 1,013,147
Payable for fund shares repurchased ..................................... 290,815
Accrued expenses payable ................................................ 20,655
-------------
Total liabilities ..................................................... 1,324,617
-------------
Net assets .............................................................. $ 139,849,153
=============
Net assets represented by:
Paid-in capital ........................................................ $ 110,802,555
Accumulated net realized losses on investments ......................... (12,054,919)
Net unrealized appreciation on investments ............................. 41,101,517
-------------
Total net assets applicable to outstanding shares of beneficial interest $ 139,849,153
=============
Shares of beneficial interest outstanding ............................... 6,935,289
=============
Net asset value per share ............................................... $ 20.16
=============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ................................................................ $ 257,282
Interest ................................................................. 251,588
-----------
Total investment income ................................................ 508,870
-----------
Expenses:
Management fee .......................................................... 569,580
Administration fee ...................................................... 170,856
Bookkeeping fee ......................................................... 26,588
Transfer agent fee ...................................................... 7,500
Audit fee ............................................................... 13,175
Trustees' expense ....................................................... 13,700
Legal fee ............................................................... 1,584
Miscellaneous expense, net .............................................. (42,563)
-----------
Total expenses ......................................................... 760,420
-----------
Net investment loss ...................................................... (251,550)
Realized and unrealized gains on investments:
Net realized gains on investments ....................................... 18,757,777
Net change in unrealized appreciation/depreciation on investments ....... 27,154,393
-----------
Net increase in net assets resulting from operations ..................... $45,660,620
===========
</TABLE>
See Notes to Financial Statements.
181
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SteinRoe Variable Investment Trust Stein Roe Small Company Growth Fund,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Operations:
Net investment losses ................................................... $ (251,550) $ (352,416)
Net realized gains (losses) on investments .............................. 18,757,777 (30,757,173)
Net change in unrealized appreciation/depreciation on investments ....... 27,154,393 239,589
------------- -------------
Net increase (decrease) in net assets resulting from operations .......... 45,660,620 (30,870,000)
------------- -------------
Distributions declared from:
Net investment income ................................................... -- (51,000)
Net realized gains ...................................................... -- (16,912,000)
------------- -------------
Total distributions ...................................................... -- (16,963,000)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold .......................................... 9,740,636 24,033,730
Cost of fund shares repurchased ......................................... (47,481,249) (61,824,339)
Distributions reinvested ................................................ -- 16,963,000
------------- -------------
Net decrease in net assets resulting from fund share transactions ........ (37,740,613) (20,827,609)
------------- -------------
Total increase (decrease) in net assets .................................. 7,920,007 (68,660,609)
Net assets:
Beginning of year ....................................................... 131,929,146 200,589,755
------------- -------------
End of year ............................................................. $ 139,849,153 131,929,146
============= =============
Accumulated net investment income included in ending net assets .......... $ -- $ --
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ............................................................. 665,991 1,645,338
Shares repurchased ...................................................... (3,418,708) (4,101,552)
Distributions reinvested ................................................ -- 998,996
------------- -------------
Net decrease ............................................................. (2,752,717) (1,457,218)
============= =============
</TABLE>
See Notes to Financial Statements.
182
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Organization--Stein Roe Small Company Growth Fund, Variable Series (the
"Fund"), formerly Stein Roe Special Venture Fund, Variable Series, a series of
SteinRoe Variable Investment Trust (the "Trust"), is a non-diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek capital growth by investing in
equity securities. The Fund's capitalization consists of an unlimited number of
shares of beneficial interest without par value that represents a separate
series of the Trust. Each share of the Fund represents an equal proportionate
beneficial interest in the Fund and, when issued and outstanding, is fully paid
and nonassessable. Shareholders would be entitled to share proportionally in
the net assets of the Fund available for distribution to shareholders upon
liquidation of the Fund. 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") offered
by the separate accounts of the life insurance companies ("Participating
Insurance Companies"). Certain Participating Insurance Companies are affiliated
with the Investment Advisor and sub-advisors to the Fund ("Affiliated
Participating Insurance Companies"). Such Affiliated Participating Insurance
Companies are Keyport Life Insurance Company ("Keyport"), Independence Life &
Annuity Company ("Independence") and Liberty Life Assurance Company of Boston
("Liberty Life"). The Participating Insurance Companies and their separate
accounts own all the shares of the Fund. Stein Roe & Farnham Inc. ("Stein
Roe"), (the "Manager") provides investment management, administrative and
advisory services to the Fund pursuant to its Management Agreements with the
Trust. Keyport Financial Services Corp. ("KFSC") serves as the principal
underwriter of the Trust with respect to sales of shares to Affiliated
Participating Insurance Companies. The Manager, KFSC, Keyport and Independence
are wholly-owned indirect subsidiaries of Liberty Financial Companies, Inc.
("LFC"). As of December 31, 1999, Liberty Mutual Insurance Companies ("Liberty
Mutual") owned approximately 71% of the outstanding voting shares of LFC.
Liberty Life is a subsidiary of Liberty Mutual.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions--Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
Federal income taxes--Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium--Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; premium and
market discount are not amortized or accreted.
Distributions to shareholders--The Fund intends to 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 investments. All
dividends and distributions are reinvested in additional shares of the Fund at
net asset value as of the record date of the distribution. Income and capital
gain distributions are determined in accordance with federal income tax
regulations.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
Other--Corporate actions are recorded on ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of
all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is
marked-to-market daily to ensure that the market value of the underlying assets
remains sufficient to protect the Fund. The Fund may experience costs and
delays in liquidating the collateral if the issuer defaults or enters
bankruptcy.
183
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 2. Fees and Compensation Paid to Affiliates
Management and Administrative fees--The Manager receives a monthly fee equal
to 0.50% and 0.15% annually of the Fund's average daily net assets for the
management and administrative services, respectively.
Bookkeeping fee--The Manager provides bookkeeping and pricing services for
$25,000 annually plus 0.0025% annually of the Fund's average net assets over
$50 million.
Transfer agent fee--Liberty Funds Services, Inc. (the "Transfer Agent"), an
affiliate of the Manager, provides shareholder services at an annual rate of
$7,500.
Other--The Fund pays no compensation to its officers, all of whom are
employees of the Manager.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
Note 3. Portfolio Information
Investment activity--During the year ended December 31, 1999, purchases and
sales of investments, other than short term obligations, were $120,311,205 and
$154,628,487, respectively.
Unrealized appreciation (depreciation) at December 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $45,094,119
Gross unrealized depreciation (4,109,770)
-----------
Net unrealized appreciation $40,984,349
-----------
</TABLE>
Capital loss carryforward--At December 31, 1999, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
- ------------ -------------
<S> <C>
2006 $11,938,000
</TABLE>
Other--There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse
political and economic developments and the possible prevention of foreign
currency exchange or the imposition of other foreign governmental laws or
restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
Change in Independent Accountants
Based on the recommendation of the Audit Committee of SteinRoe Variable
Investment Trust, on August 3, 1999 the Board of Trustees determined not to
retain KPMG LLP's as the Fund's independent accountant and voted to appoint
PricewaterhouseCoopers LLP as independent accountants for the year ended
December 31,1999. During the two most recent fiscal years, KPMG LLP's audit
reports contained no adverse opinion or disclaimer of opinion; nor were its
reports qualified or modified as to uncertainty, audit scope, or accounting
principle. There were no disagreements in accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which if not
resolved to the satisfaction of KPMG LLP would have caused it to make reference
to the disagreement in its report on the financial statements for such years or
through August 3, 1999.
184
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SteinRoe Variable Investment Trust Stein Roe Small Company Growth Fund,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------ ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year - $ 13.62 $ 18.00 $ 20.73 $ 16.33 $ 14.74
--------- -------- ------- ------- --------
Net investment income (loss) (a) - (0.03) (0.04) 0.01 0.04 0.04
Net realized and unrealized gains (losses) on
investments - 6.57 (2.77) 1.25 4.36 1.69
--------- -------- ------- ------- --------
Total from investment operations - 6.54 (2.81) 1.26 4.40 1.73
--------- -------- ------- ------- --------
Less distributions:
Dividends from net investment income - -- -- (0.03) -- (0.04)
Distributions from net realized gains on
investments - -- (1.57) (3.96) -- (0.10)
--------- -------- -------- -------- --------
Total distributions - -- (1.57) (3.99) -- (0.14)
--------- -------- -------- -------- --------
Net asset value, end of year - $ 20.16 $ 13.62 $ 18.00 $ 20.73 $ 16.33
========= ======== ======== ======== ========
Total return:
Total investment return (b) - 48.02% (17.30)% 7.81% 26.94% 11.75%
Ratios/supplemental data:
Net assets, end of year (000's) - $ 139,849 $131,929 $200,590 $196,216 $143,248
Ratio of expenses to average net assets (c) - 0.72%(d) 0.75% 0.73% 0.75% 0.76%
Ratio of net investment gain (loss) to average
net assets (c) - (0.27)%(d) (0.22)% 0.04% 0.20% 0.26%
Portfolio turnover ratio - 110% 103% 93% 100% 132%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(d) During the year ended December 31, 1999, the Fund experienced a one-time
reduction in its expenses of five basis points as a result of expenses
accrued in a prior period. The Fund's ratios disclosed above reflect the
actual rate at which expenses were incurred throughout the current fiscal
year without the reduction.
185
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of SteinRoe Variable Investment Trust and
the Shareholders of Stein Roe Small Company Growth Fund, Variable Series
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Stein Roe Small Company Growth
Fund, Variable Series (the "Fund"), formerly Stein Roe Special Venture Fund,
Variable Series, (a series of SteinRoe Variable Investment Trust) at December
31, 1999, the results of its operations, the changes in its net assets and the
financial highlights for the period indicated, in conformity with accounting
principles generally accepted in the United States. These financial statements
and the financial highlights (hereafter referred to as "financial statements")
are the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of portfolio positions at December 31, 1999 by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above. The
financial statements for the periods prior to January 1, 1999 were audited by
other independent accountants whose report dated February 12, 1999 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2000
186
<PAGE>
Investment Manager and Administrator
Stein Roe & Farnham Incorporated
One South Wacker Drive
Chicago, IL 60606
Transfer Agent
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105
Custodian
State Street Bank & Trust Company
P.O. Box 366
Boston, MA 02101
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
Legal Counsel
Bell, Boyd & Lloyd LLC
Three First National Plaza
70 West Madison Street
Chicago, IL 60602
The Trustees
John A. Bacon Jr.
William W. Boyd
Lindsay Cook
Douglas A. Hacker
Janet Langford Kelly
Charles R. Nelson
Thomas C. Theobald
2/00
<PAGE>
Keyport Life Insurance Co.
125 High Street
Boston, MA 02110-2712
ANN-02/228A-0100 (2/00) 00/122
