Liberty Variable Investment Trust
Colonial Growth and Income Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Colonial Strategic Income Fund, Variable Series
Colonial U.S. Stock Fund, Variable Series
Newport Tiger Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
SteinRoe Variable Investment Trust
Stein Roe Special Venture Fund, Variable Series
Stein Roe Growth Stock Fund, Variable Series
Stein Roe Balanced Fund, Variable Series
Stein Roe Mortgage Securities Fund, Variable Series
Stein Roe Money Market Fund, Variable Series
Annual Report
December 31, 1998
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENTS' LETTER
Liberty Variable Investment Trust
Stein Roe Variable Investment Trust
- --------------------------------------------------------------------------------
Dear Contract Owner:
Since our last report, Richard Christensen has retired as president of Liberty
Variable Investment Trust and Stein Roe Variable Investment Trust. We would like
to take this opportunity to thank him for his guidance over the past years and
wish him well. As his successors, we are pleased to present this annual report
for the Liberty Variable Investment Trust -- Colonial Growth and Income Fund,
Variable Series; Stein Roe Global Utilities Fund, Variable Series; Colonial
International Fund for Growth, Variable Series; Colonial Strategic Income Fund,
Variable Series; Colonial U.S. Stock Fund, Variable Series; Newport Tiger Fund,
Variable Series; Liberty All-Star Equity Fund, Variable Series; Colonial Small
Cap Value Fund, Variable Series; and Colonial High Yield Securities Fund,
Variable Series -- and the Stein Roe Variable Investment Trust -- Stein Roe
Special Venture Fund, Variable Series; Stein Roe Growth Stock Fund, Variable
Series; Stein Roe Balanced Fund, Variable Series; Stein Roe Mortgage Securities
Fund, Variable Series; and Stein Roe Money Market Fund, Variable Series.
In the following pages, you will find an overview of economic and market events
during the past 12 months, an explanation of investment strategies employed by
each fund during the period and your portfolio managers' outlook for the months
ahead.
Market Volatility Dominated 1998
The past year was marked by significant volatility. Early on, concern with
deteriorating Asian economies restrained financial market performance worldwide.
However, the U.S. and select European countries continued to have well-balanced
growth with few signs of inflation, driving some stock market indices to record
highs. Nevertheless, in July, the U.S. economy slowed down, stocks dropped and
concerns about a global slowdown resurfaced. In August, markets became further
disorganized when Russia experienced a major monetary and political crisis.
Investors feared that other emerging markets might also have problems waiting to
surface. Volatility increased sharply, creating a global flight to quality as
investors sought the safe havens of U.S. Treasury securities and the household
names of large-cap U.S. stocks. During the last part of the period, the U.S.
Federal Reserve Board announced three successive interest rate cuts. Investors
were convinced that lower rates would stimulate the world's economies and many
market sectors recovered.
U.S. Equity Markets Fluctuated
Volatility in economic and financial markets abroad caused the U.S. stock market
to fluctuate widely. After the Dow Jones Industrial Average closed above 9000
for the first time in April, all of its year-to-date returns were erased by the
end of August. However, the U.S. economy continued to grow, buoyed by low
interest rates, insignificant inflation and strong employment. After the Federal
Reserve Board lowered short-term interest rates in September, October and
November, U.S. equity markets rebounded sharply. By the final day of the year,
the Dow once again closed above 9000, generating a double-digit gain for a
record-setting fourth year in a row.
European Markets Benefited from Upcoming Monetary Union
On January 1, 1999, the European Monetary Union took place and 11 countries
began to act as a single market with a single currency. Anticipation of this
event had a positive effect on many European markets. Companies began cutting
costs and restructuring their operations in order to become more competitive
within an integrated marketplace. In addition, many European economies continued
to enjoy good growth, declining interest rates and low inflation -- conditions
positive for corporate earnings and stock prices. Although European markets
suffered steep declines in response to Russia's economic collapse, by December
31, 1998, the 653 stocks that make up the pan-European Dow Jones Stoxx Index
rose 18.4% for the year.
Asian Market Turmoil Continued
Volatility reigned in Asian economies and financial markets. The crisis, which
began almost 18 months ago when Thailand devalued its currency, continued to
dominate headlines. Currencies remained weak, and fear that the region's woes
would cause a global economic slowdown spread to other markets.
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENTS' LETTER
Liberty Variable Investment Trust
Stein Roe Variable Investment Trust
- --------------------------------------------------------------------------------
Investors abandoned investments in Asian stocks in favor of other, relatively
stable investments in more-developed economies. However, the region has made
progress towards recovery. A number of countries, including Thailand and Korea,
have become serious about meeting the International Monetary Fund (IMF) targets,
including restructuring their banking systems and implementing new monetary and
fiscal policies. While the worst may be over in this region, recovery is likely
to be a long process, particularly in those countries that have yet to address
their fundamental economic problems. In the interim, a number of well-managed
companies present what we consider attractively priced investment opportunities
for investors who can tolerate higher levels of volatility and who have a
long-term investment horizon.
Conditions for Fixed-Income Investments Varied During the Year
While the environment for fixed-income investments generally was positive during
the period, they varied significantly throughout the year as expectations about
the economy's direction shifted. Bond yields fell and prices rose early on, as
conditions in Asia led investors to believe that a global recession was
possible. Although yields rose temporarily in the late spring based on
stronger-than-expected economic reports, events in Russia and other emerging
countries caused a surge in demand for government securities. This, in turn,
sent the yield on the 30-year U.S. Treasury to an all-time low by early October.
The Federal Reserve Board's move to lower key interest rates further supported
the fixed-income sector and bond prices ended the year strongly.
Summary
Volatile market conditions throughout the world in 1998 reinforced an important
principle for successful investing -- maintaining a disciplined, long-term
investment outlook, particularly during periods of volatility. Because no
investor can predict exactly when a market sector will recover, patient
investors who can accept market swings can be positioned for favorable long-term
results.
We hope you find the information in this report useful and we thank you for
giving us the opportunity to help you achieve your investment goals.
Sincerely,
/s/ Stephen E. Gibson /s/ Thomas W. Butch
- --------------------- -------------------
Stephen E. Gibson Thomas W. Butch
President, Liberty Variable President, Stein Roe Variable
Investment Trust Investment Trust
February 26, 1999 February 26, 1999
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Liberty Variable Investment Trust
<TABLE>
<S> <C>
Portfolio Managers' Discussions:
Colonial Growth and Income Fund, Variable Series ................ 1
Stein Roe Global Utilities Fund, Variable Series ................ 3
Colonial International Fund for Growth, Variable Series ......... 5
Colonial Strategic Income Fund, Variable Series ................. 7
Colonial U.S. Stock Fund, Variable Series ....................... 9
Newport Tiger Fund, Variable Series ............................. 11
Liberty All-Star Equity Fund, Variable Series ................... 13
Colonial Small Cap Value Fund, Variable Series .................. 17
Colonial High Yield Securities Fund, Variable Series ............ 19
Report of Independent Accountants ............................... 21
Financial Statements:
Colonial Growth and Income Fund, Variable Series ................ 22
Stein Roe Global Utilities Fund, Variable Series ................ 28
Colonial International Fund for Growth, Variable Series ......... 33
Colonial Strategic Income Fund, Variable Series ................. 40
Colonial U.S. Stock Fund, Variable Series ....................... 48
Newport Tiger Fund, Variable Series ............................. 54
Liberty All-Star Equity Fund, Variable Series ................... 59
Colonial Small Cap Value Fund, Variable Series .................. 65
Colonial High Yield Securities Fund, Variable Series ............ 71
Notes to Financial Statements ..................................... 76
</TABLE>
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial Growth and Income Fund, Variable Series seeks primarily income and
long-term capital growth, and secondarily, preservation of capital.
Fund Performance (as of December 31, 1998)
<TABLE>
<S> <C>
Inception date ................................ 7/1/93
Assuming reinvestment of all distributions
12-month total return ....................... 11.13%
Net asset value per share on 12/31/98 ......... $16.39
Net asset value per share on 12/31/97 ......... $15.34
</TABLE>
Portfolio Managers' Discussion
John Lennon and Gordon Johnson are portfolio co-managers for Colonial
Growth and Income Fund, Variable Series and vice presidents of Colonial
Management Associates, Inc.
What was the investment environment like over the past 12 months?
Financial and economic turmoil in the developing regions of Southeast Asia,
Latin America and Russia had a ripple effect in the U.S. This led to uncertainty
about the sustainability of economic growth and created volatility in our
financial markets. Fearing a global economic slowdown, equity investors
worldwide sought refuge in high-quality U.S. equities. This scenario helped push
large-capitalization stocks, and the market in general, to record highs in July
1998. The prolonged rally in the stock market was interrupted by a severe
correction after Russia experienced serious political and financial problems.
U.S. stock prices staged a dramatic recovery in the fourth-quarter, however,
after a series of short-term rate cuts by the Federal Reserve helped to reduce
concerns about a U.S. recession.
What was the Fund's strategy during the period?
The Fund focuses its investments on mid-cap stocks. Unfortunately, over the
past 12 months mid-cap stocks have been out of favor compared to large-cap
stocks. During the period, mid-cap stocks, as measured by the S&P 400 Index,
increased 19.1%, while large caps, as measured by the S&P 500 Index, increased
28.6%. We continue to believe there is value in the mid-cap area, and have
recently seen some evidence that the market may be starting to recognize this
value. For example, in the final two months of the period, the S&P 400 increased
17.7%, while the S&P 500 increased 12.2%.(1)
The sectors that made the largest contributions to the Fund's performance
in 1998 were technology and healthcare. In the technology sector, Sun
Microsystems (2.66% of net assets) and EMC Corp (1.14% of net assets) had the
most significant impact, while Bristol-Myers Squibb (2.04% of net assets) and
Merck & Co., Inc. (1.60% of net assets) had a strong impact in the health care
sector.
What is your outlook for the period ahead?
We remain optimistic about the stock market, given our expectations of low
inflation, a stable interest rate environment, and continued economic growth,
albeit a slower pace than last year. Notwithstanding this positive economic
outlook, uncertainties that have created volatility in the equity markets
continue to exist. The turmoil in developing nations appears to be subsiding,
however, further devaluations and economic slowdowns continue to be lingering
concerns for investors. In addition, doubt still remains as to the readiness of
companies with regard to Year 2000 (Y2K) issues. By mid-year, a clearer picture
should develop as to the status of Y2K initiatives throughout the economy.
Despite these uncertainties, we believe the economy should create a positive
underpinning for further stock market advances. Within this environment we will
strive to identify stocks that offer superior value, while remaining diversified
across a variety of economic sectors in an effort to reduce risk.
(1)The Standard & Poor's 500 Index and the Standard & Poor's Midcap 400 Index
are broad-based, unmanaged indexes that track the performance of large- and
mid-cap stocks, respectively. Unlike mutual funds, an index does not incur fees
or charges. It is not possible to invest directly in an index.
1
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series
- --------------------------------------------------------------------------------
Colonial Growth and Income Funds, Variable Series vs. S&P 500 Index
Change in value of $10,000 from 7/1/93-12/31/98
- --------------------------------------------------------------------------------
Average Annual Total Returns on December 31, 1998
<TABLE>
<CAPTION>
Life 1 Year 3 Years 5 Years
<S> <C> <C> <C>
16.23% 11.13% 19.11% 16.87%
- --------------------------------------------------------------------------------
</TABLE>
[Plot Points for Colonial Growth and Income Fund]
<TABLE>
<CAPTION>
S&P 500 Colonial Growth and Income Fund,
Variable Series
<S> <C> <C>
7/1/93 10000 10000
9960 10070
10337 10530
10258 10560
10470 10680
10370 10410
12/31/93 10495 10501
10852 10856
10557 10704
10098 10339
10227 10420
10394 10339
6/30/94 10140 10116
10473 10400
10901 10785
10635 10582
10873 10572
10478 10217
12/31/94 10633 10422
10909 10536
11333 10941
11667 11180
12010 11461
12490 11793
6/30/95 12779 12115
13203 12458
13236 12645
13794 12874
13745 12884
14348 13477
12/31/95 14624 13551
15121 14078
15262 14239
15409 14229
15636 14476
16038 14748
6/30/96 16099 14715
15389 14026
15714 14468
16597 14952
17055 15275
18343 15975
12/31/96 17979 15976
19102 16502
19252 16686
18463 15907
19564 16617
20760 17681
6/30/97 21683 18540
23408 19558
22097 19135
23307 20027
22529 19432
23571 19947
12/31/97 23976 20604
24241 20658
25988 22041
27318 22592
27598 22780
27124 22323
6/30/98 28225 22659
27927 22081
23892 18846
25424 19585
27488 20807
29154 21841
12/31/98 30833 22898
</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.
2
<PAGE>
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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, 1998)
<TABLE>
<S> <C>
Inception date ................................ 7/1/93
Assuming reinvestment of all distributions
12-month total return ....................... 18.33%
Net asset value per share on 12/31/98 ......... $13.76
Net asset value per share on 12/31/97 ......... $11.92
</TABLE>
Portfolio Managers' Discussion
Ophelia Barsketis and Deborah Jansen, senior vice presidents of Stein Roe
and Farnham Incorporated, are portfolio co-managers of Stein Roe Global
Utilities Fund, Variable Series.
What was the investment environment like over the past 12 months?
The past 12 months presented investors with a number of challenges. First,
lingering concern about Asia's weakening economies and the possibility of slower
economic growth around the world created a negative effect on global stock
markets. However, economies in the U.S. and other well-established markets,
particularly in Europe, continued to have well-balanced growth with few signs of
inflation. European markets also benefited from the impending European Monetary
Union (EMU). After stock market indices in the U.S. and Europe reached high
levels in July, stock prices tumbled in August, when a monetary and political
crisis in Russia emerged. Financial markets worldwide worried that this crisis,
along with continued weakness in Asia, would result in a global economic
slowdown. Investors quickly sold emerging market securities based on fears of
underlying economic problems. Other stock and bond markets around the world
declined as investors sought safe havens in strong currencies such as the U.S.
dollar and relatively stable investments such as U.S. Treasury securities and
blue-chip stocks. This flight to quality increased demand for U.S. government
bonds, and long-term interest rates fell sharply. In the utility sector,
investors' desire for quality led them to "plain vanilla" utility stocks with
little or no exposure to the weak economies of Asia, Russia, Eastern Europe and
Latin America. As concerns about the world's economies continued, the Federal
Reserve Board announced a series of interest rate cuts during the Fall that were
intended to reduce the likelihood of a recession. Global markets reacted
positively and were further encouraged by the Group of Seven industrial nations
and the International Monetary Fund's commitment to promote global liquidity.
What was the Fund's strategy during the period?
We maintained our emphasis on a globally diversified portfolio of
high-quality utilities, but we reduced our investments in Asian and emerging
market utility stocks throughout the period. While we believed that many
companies in these countries had attractive long-term investment
characteristics, we were more concerned with economic, political and monetary
instability. We concentrated our activity on companies that provide basic
electric, gas, water and telephone service to territories with attractive
demographics. For example, in the U.S. we had good performance from FPL Group
(2.6% of net assets), a Florida-based electric utility whose diversification
activities have been limited to the United States. FPL serves a high-growth
service area in the Southeast. Overseas, COLT Telecom (2.9% of net assets) of
the United Kingdom generated strong returns. COLT is a London-based
telecommunications company that provides service only in Europe. The company's
stock price increased about 292% during the period, reflecting its prospects for
healthy earnings growth.
What is your outlook for the period ahead?
We believe that we will see interest rates decline further in both the U.S.
and Europe -- a positive scenerio for utility stocks. Looking ahead, we will
maintain our conservative focus on a broadly diversified portfolio of quality
utilities. Our strategy will be to concentrate on domestic and European stocks.
We plan to avoid utilities in Asia and emerging markets until we see signs of
political and economic stability. Despite increased volatility the past year,
many of our core top-quality holdings in the U.S. and Europe performed well.
While we intend to continue emphasizing these types of holdings, we believe that
deregulation, privatization and the European Monetary Union will provide
additional opportunities to seek attractive returns.
3
<PAGE>
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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 $10,000 from 7/1/93-12/31/98
- --------------------------------------------------------------------------------
Average Annual Total Returns on December 31, 1998
<TABLE>
<CAPTION>
Life 1 Year 3 Years 5 Years
<S> <C> <C> <C>
12.73% 18.33% 17.52% 14.50%
- --------------------------------------------------------------------------------
</TABLE>
[Plot Points for Stein Roe Global Utilities Fund]
<TABLE>
<CAPTION>
Stein Roe Global Utilities Fund,
S&P Utilities MSCI World ND Variable Series
<S> <C> <C> <C>
7/1/93 10000 10000 10000
10232 10203 10110
10727 10669 10350
10700 10469 10260
10681 10755 10120
10143 10144 9670
12/31/93 10090 10638 9830
10156 11337 9667
9582 11188 9219
9257 10703 8954
9489 11031 9148
9232 11057 8761
6/30/94 9255 11024 8577
9566 11231 8883
9536 11567 8913
9299 11260 8699
9371 11578 8812
9237 11073 8771
12/31/94 9289 11178 8820
10012 11007 9353
9993 11165 9418
9930 11701 9364
10301 12106 9560
10622 12207 9995
6/30/95 10667 12200 10060
10941 12808 10136
11164 12520 10376
11864 12882 10930
12116 12676 11180
12248 13113 11387
12/31/95 13109 13494 11921
13281 13735 12148
12761 13816 11864
12486 14043 11751
12635 14371 11660
12606 14380 11682
6/30/96 13115 14450 12125
12266 13936 11682
12552 14094 11739
12673 14642 11785
13303 14742 12239
13601 15565 12625
12/31/96 13518 15313 12699
13585 15494 12984
13471 15670 13150
13063 15357 12699
12843 15856 12794
13416 16832 13233
6/30/97 13830 17668 13625
14132 18479 13850
13896 17240 13542
14494 18174 14183
14620 17214 14373
15674 17516 15619
12/31/97 16851 17727 16350
16158 18218 16076
16730 19447 16872
17798 20265 17983
17440 20460 17955
17372 20201 17695
6/30/98 18013 20677 18024
17098 20641 18353
17397 17885 16052
18847 18198 16896
18515 19841 17630
18778 21017 18059
12/31/98 19339 22041 19348
</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 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.
4
<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 seeks long-term
capital appreciation by investing primarily in non-U.S. equity securities. The
Fund is non-diversified and 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.
Fund Performance (as of December 31, 1998)
<TABLE>
<S> <C>
Inception date ................................ 5/2/94
Assuming reinvestment of all distributions
12-month total return ....................... 12.96%
Net asset value per share on 12/31/98 ......... $2.00
Net asset value per share on 12/31/97 ......... $1.78
</TABLE>
Portfolio Manager's Discussion
Gita Rao is portfolio manager of Colonial International Fund for Growth,
Variable Series and is vice president of Colonial Management Associates, Inc.
What was the investment environment like over the past 12 months?
Conditions within foreign investment markets varied considerably during the
period. Early in the year, financial and economic problems in Asia, and the
potential for recession to spread throughout the world, had a negative effect on
international markets. Despite this uncertainty, markets in the U.S. and Europe
performed strongly during the second quarter, achieving record high levels. In
August, however, Russia devalued its currency and experienced a major political
crisis. These events helped trigger a dramatic correction in many of the world's
investment markets. As fears of a global economic slowdown resurfaced,
international equity markets became increasingly volatile. In the ensuing flight
to quality, investors worldwide sought safe havens in strong currencies and
relatively stable investments such as U.S. Treasury securities and blue-chip
stocks. In the fall, the U.S. Federal Reserve Board cut short-term interest
rates three times -- in September, October and November. The Fed's intervention
appeared to have a global impact, as investors generally concluded that lower
rates would reduce the potential for a global recession. In the fourth quarter,
many global markets began to recover. By year end, low interest rates, low
inflation and cooperative global central banks contributed to strong recoveries
in a number of well-established investments, particularly in Europe.
What was the Fund's strategy during the period?
The Fund had a large exposure to Europe during the period -- a strategy
implemented for two important reasons. First, a number of countries within
Europe appear to offer promising growth prospects. Second, we believe that the
relatively stable governments and economies in Europe can promote a degree of
stability amid the higher volatility present in other, less-developed foreign
markets. The European Monetary Union (EMU) could be the driving force behind
future growth in Europe. Taking place on January 1, 1999, this historic event
marks the beginning of a period where 11 European countries and financial
markets began to act as a single economy with a common currency -- the Euro.
Under the EMU, companies have added incentive to become more efficient global
competitors through corporate restructuring and consolidation. As local
governments also continue to focus on maintaining strong fiscal control, we
believe this union should offer investors attractive opportunities for future
growth.
What is your outlook for the period ahead?
We expect the market volatility witnessed in 1998 to continue -- a scenario
that we believe should provide the Fund with opportunities to purchase quality
stocks at attractive prices. We anticipate the EMU to have a positive effect on
stock prices in Europe. Companies that fail to make proper adjustments will
likely struggle, while others will adapt more favorably to a barrier-free
marketplace and develop competent global business strategies that will
strengthen their competitive positions. In Asia and other emerging markets, we
believe the worst has passed and that, while economies still appear weak, the
process of recovery appears to have begun. We are encouraged by the recent
commitment by the Group of Seven (G7) and the International Monetary Fund to
promote global liquidity. We believe these efforts may provide less-developed
foreign economies with a degree of relative stability during challenging
economic times, and may also help reduce some of the market volatility we have
witnessed over the past year.
5
<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 $10,000 from 5/2/94-12/31/98
- --------------------------------------------------------------------------------
Average Annual Total Returns on December 31, 1998
<TABLE>
<CAPTION>
Life 1 Year 3 Years
<S> <C> <C>
3.00% 12.96% 4.89%
- --------------------------------------------------------------------------------
</TABLE>
[Plot Points for Colonial International Fund for Growth]
<TABLE>
<CAPTION>
Colonial International Fund for Growth,
Variable Series MSCI EAFE
<S> <C> <C>
5/1/94 10000 10000
9900 9943
6/30/94 9700 10083
9950 10180
10250 10421
9950 10093
10000 10429
9550 9928
12/31/94 9400 9990
8850 9606
8700 9579
8850 10176
9100 10559
9100 10433
6/30/95 9050 10250
9550 10888
9550 10473
9700 10677
9550 10390
9700 10679
12/31/95 9950 11110
9899.49 11155
9899.49 11193
10101.5 11431
10657.1 11763
10556.1 11546
6/30/96 10606.6 11611
10202.5 11272
10354.1 11297
10455.1 11597
10202.5 11478
10606.6 11935
12/31/96 10508.7 11781
10562.3 11369
10669.5 11555
10669.5 11597
10615.9 11658
11420.2 12417
6/30/97 12009.9 13102
12063.5 13314
11225.7 12319
11655.3 13010
10634.8 12010
10312.6 11887
12/31/97 10164.9 11991
10507.5 12539
11021.4 13344
11706.7 13755
11935.1 13864
11935.1 13796
6/30/98 11649.6 13901
11992 14042
10238 12302
9781 11925
10524 13168
11096 13842
12/31/98 11482 14389
</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.
6
<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,
by diversifying investments primarily in U.S. and foreign government and
lower-rated corporate debt securities. The Fund may invest a substantial portion
of its assets in lower-rated bonds (commonly referred to as "junk bonds"), and
therefore, may not be suitable for all investors. Purchasers should carefully
assess the risks associated with an investment in the Fund.
Fund Performance (as of December 31, 1998)
<TABLE>
<S> <C>
Inception date ................................ 7/5/94
Assuming reinvestment of all distributions
12-month total return ....................... 6.03%
Net asset value per share on 12/31/98 ......... $11.08
Net asset value per share on 12/31/97 ......... $11.15
</TABLE>
Portfolio Manager's Discussion
Carl Ericson is 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 like over the past 12 months?
The past 12 months presented investors with a number of challenges. First,
lingering concern about Asia's weakening economies and the possibility of slower
economic growth around the world had a negative effect on global securities.
However, economies in the U.S. and other well-established markets, particularly
in Europe, continued to have well-balanced growth with few signs of inflation.
European markets also benefited from anticipation of the European Monetary Union
(EMU) that took place on January 1, 1999. In July, the U.S. economy slowed down
and concerns about unstable conditions in Asia resurfaced. Markets became
increasingly volatile in August, when Russia experienced a major monetary and
political crisis. Financial markets worldwide worried that this crisis, along
with continued weakness in Asia, would result in a global economic slowdown.
Volatility increased sharply and there was a full-fledged flight to quality as
investors sought relatively stable investments such as U.S. Treasury securities.
However, the Federal Reserve Board's announcement of interest rate cuts in
September, October and November convinced investors that the economy would
continue to grow and many market sectors began to recover.
What was the Fund's strategy during the period?
High-Yield Corporate Bonds
High-yield corporate bonds had good performance during the first part of
the year. Uncertainty in the economy's ability to grow created a flight to
quality that favored high-quality U.S. Treasury bonds. However, as the period
closed, high-yield bonds were showing strong signs of recovery. Asset and cash
flow protection are critical factors in the high-yield sector. High-yield
corporate bonds represented approximately 37% of the Fund's assets. While this
sector performed well early in the year, we were selective in our investments.
We favored non-cyclical companies with strong asset or cash flow protection that
could provide a financial cushion during periods of slower growth. This strategy
worked well during the autumn months, when prices of more-cyclical bonds fell
dramatically. For example, EchoStar Satellite Broadcasting Corp. (1.09% of net
assets) generated good performance during the period. EchoStar is the
established market leader in direct satellite broadcasting, with a higher growth
rate and larger channel capacity than any of its competitors. In addition, the
company recently announced that it would refinance its debt, taking advantage of
the higher credit quality afforded it by the increasing value of its satellites.
U.S. Government Bonds
Treasury securities accounted for almost 30% of the portfolio, although we
did increase their weight during the late summer months. These holdings
benefited the Fund when the Treasury market rallied during May and June, and
again, during August and September, when investors around the world demanded the
high credit quality and strong liquidity of U.S. government securities. Prices
rose dramatically as yields were pushed down to their lowest levels in almost 30
years.
Foreign Bonds
Foreign government bonds rounded out the portfolio's holdings, representing
approximately 24% of net assets. Early in the year, emerging market bonds had
good performance. However, they quickly fell out of favor after the Russian
economic crisis in August. Throughout the year, the majority of the portfolio's
foreign bond assets were invested in European governments. During this period,
interest rates of the 11 countries that became economically unified on January
1, 1999, began to move towards a common rate. As a result, bonds of these
governments began to offer limited future price appreciation potential. We
sought value in countries not participating in the EMU, but whose interest rates
might still fall towards the EMU standard, and thus generate bond price
increases. For example, we made an investment in Greece,
7
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series
- --------------------------------------------------------------------------------
which has demonstrated a commitment to fiscal control as it hopes to qualify for
inclusion in the economic union by 2002. As these efforts gain credibility, we
expect that interest rates in Greece will fall to approach those of the EU -- a
scenario offering the potential for good price increases for their government
securities.
What is your outlook for the period ahead?
We expect moderate economic growth, continued low inflation and potentially
lower interest rates in the U.S. These conditions all increase the likelihood
that high-yield companies will be able to generate enough cash flow to meet
their debt obligations, setting the stage for bond prices to continue their
recovery. U.S. Treasury bonds would also benefit from this environment, although
we don't expect price gains to be as dramatic as they were during the second
half of 1998. Overseas, we believe that European bonds should continue to
benefit from economic unity. In emerging markets, the worst may be over and we
will look for select opportunities in countries that are making progress towards
fiscal and monetary responsibility. We will continue to actively manage the
portfolio's asset mix in order to achieve the most attractive combination of
long-term price appreciation, current income and manageable risk.
Colonial Strategic Income Fund, Variable Series vs. Lehman Brothers
Government/Corporate Bond Index
Change in value of $10,000 from 7/31/94-12/31/98
- --------------------------------------------------------------------------------
Average Annual Total Returns on December 31, 1998
<TABLE>
<CAPTION>
Life 1 Year 3 Years
<S> <C> <C>
9.75% 6.03% 8.31%
- --------------------------------------------------------------------------------
</TABLE>
[Plot Points for Colonial Strategic Income Fund]
<TABLE>
<CAPTION>
Colonial Strategic Income Fund, Lehman Government/
Variable Series Corporate Bond Index
<S> <C> <C>
7/94 10000 10000
10050 10004
9/94 10010 9853
10050 9842
9940 9824
12/94 10029 9889
10163 10079
10408 10312
10593 10382
10788 10526
11085 10968
6/95 11136 11055
11238 11013
11238 11154
11433 11267
11587 11432
11699 11620
12/95 11865 11792
12038 11865
11940 11613
11886 11516
11940 11437
11951 11418
6/96 12027 11570
12124 11597
12264 11568
12513 11774
12707 12049
13009 12271
12/96 13031 12134
12995 12148
13090 12174
12901 12029
13066 12205
13279 12319
6/97 13468 12467
13786 12848
13692 12704
13987 12904
14011 13111
14081 13180
12/97 14218 13318
14448 13506
14486 13478
14588 13520
14652 13588
14715 13734
6/98 14741 13873
14868 13885
14319 14156
14638 14561
14664 14458
15085 14544
12/98 15075 14580
</TABLE>
[End Plot Points]
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 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.
8
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial U.S. Stock Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial U.S. Stock Fund, Variable Series seeks long-term capital growth by
investing primarily in large capitalization equity securities.
Fund Performance (as of December 31, 1998)
<TABLE>
<S> <C>
Inception date ................................ 7/5/94
Assuming reinvestment of all distributions
12-month total return ....................... 20.15%
Net asset value per share on 12/31/98 ......... $18.79
Net asset value per share on 12/31/97 ......... $16.29
</TABLE>
Portfolio Manager's Discussion
Mark Stoeckle is portfolio manager of Colonial U.S. Stock Fund, Variable
Series and is a vice president of Colonial Management Associates, Inc.
What was the investment environment like over the past 12 months?
The 12-month period continued a theme that has now defined the market for
several years -- large-cap stocks outperformed small- and medium-cap stocks, and
the largest of the large performed the best. In fact, much of the 28.6% climb in
the S&P 500 Index, a proxy for large-company U.S. stocks, can be attributed to
the success of the 20 largest companies. Fourteen of these companies are either
not owned or are underweighted in the portfolio because several appear
overpriced, and thus, do not meet our value-driven criteria. While this
environment created a challenge to outperforming the index, the Fund did perform
well during the period, achieving success within the parameters of its value
orientation.
We see three reasons for the dominance of large-company stocks. First, amid
an uncertain global economic environment, investors have preferred the stability
and liquidity of large-company stocks. Second, consumers have invested heavily
in index-weighted portfolios, skewing demand to the larger companies. And third,
foreign investors, who now hold a fairly significant share of the U.S. market,
favor the large-company names they recognize.
What was the Fund's strategy during the period?
The Fund's strategy is to be well diversified among sectors much more so
than traditional large-cap value funds, which often concentrate on a narrow
selection of undervalued industries. The Fund looks at the value of a stock
relative to its industry sector, not the market as a whole. One of the many
value measures we consider is a company's price-to-earnings ratio (P/E ratio),
which looks at a company's stock price relative to its annualized earnings per
share. In general, the lower a stock's P/E ratio is relative to its peers, the
"less expensive" the stock is to buy. As a value fund, the portfolio has an
average P/E ratio of 23.8 (as of 12/31/98), compared to 28.6 for the S&P 500
Index.
At first glance, some of the holdings in this portfolio may appear to be
growth stocks. However, these stocks are "values" because of the price at which
they were available relative to other stocks in the same industry and also
because of their track record of delivering consistent earnings. Technology
holdings such as Microsoft (2.8% of net assets) are consistent with fund
objectives, notwithstanding their popularity among investors.
What is your outlook for the period ahead?
We remain optimistic about the outlook for large-company stocks. While
economic growth may slow in the coming year, the Federal Reserve Board has
proven itself willing to adjust interest rates in response to threats of
recession. Because the Fund holds only domestic companies, its direct exposure
to the economic woes of foreign countries is limited (though these problems may
affect the large multinationals to some degree).
Corporate management teams are optimistic about the first half of 1999.
They have pulled back from businesses outside their proven strengths and
installed new technologies to obtain management information on a more timely
basis. Strict cost control is also improving the bottom line.
9
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Variable Investment Trust Colonial U.S. Stock Fund, Variable Series
- --------------------------------------------------------------------------------
Colonial U.S. Stock Fund, Variable Series vs. S&P 500 Index
Change in value of $10,000 from 7/31/94-12/31/98
- --------------------------------------------------------------------------------
Average Annual Total Returns on December 31, 1998
<TABLE>
<CAPTION>
Life 1 Year 3 Years
<S> <C> <C>
23.90% 20.15% 24.63%
- --------------------------------------------------------------------------------
</TABLE>
[Plot Points for Colonial U.S. Stock Fund]
<TABLE>
<CAPTION>
Colonial U.S. Stock Fund,
Variable Series S&P 500
<S> <C> <C>
7/31/94 10000 10000
10400 10409
10195 10155
10361 10383
9990 10005
12/31/94 10175 10153
10433 10416
10849 10822
11136 11140
11364 11468
11770 11926
6/30/95 12028 12202
12444 12607
12394 12638
12810 13171
12761 13124
13246 13700
12/31/95 13197 13964
13549 14439
13816 14573
13891 14713
14403 14930
14745 15314
6/30/96 14425 15373
13731 14694
14190 15004
14884 15848
15257 16285
16346 17515
12/31/96 16079 17168
17255 18240
17243 18383
16554 17629
17436 18681
18431 19823
6/30/97 19132 20704
20658 22351
19946 21100
20975 22255
20014 21512
20828 22507
12/31/97 21261 22893
21496 23146
22984 24815
24146 26085
24133 26352
23532 25899
6/30/98 24433 26951
23950 26666
20047 22813
20974 24276
22762 26248
24146 27838
12/31/98 25544 29441
</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.
10
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Newport Tiger Fund, Variable Series seeks 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).
Fund Performance (as of December 31, 1998)
<TABLE>
<S> <C>
Inception date ................................ 5/1/95
Assuming reinvestment of all distributions
12-month total return ....................... (6.43)%
Net asset value per share on 12/31/98 ......... $1.57
Net asset value per share on 12/31/97 ......... $1.71
</TABLE>
Portfolio Managers' Discussion
Jack Mussey is president and chief executive officer of Newport Fund
Management, Inc. and portfolio co-manager of Newport Tiger Fund, Variable
Series. Tim Tuttle is managing director of Newport Fund Management and portfolio
co-manager of Newport Tiger Fund, Variable Series.(1)
What was the investment environment like over the past 12 months?
During the first nine months of 1998, the economies of most Asian countries
remained weak. The financial and economic problems that began in 1997 remained
mostly unresolved in 1998, encouraging global investors to avoid Asian equity
markets. During the second and third quarters of 1998, the devaluation of
Russia's currency and increasing concerns about Latin America's economic
stability renewed fears of a worldwide economic crisis. In the fourth quarter,
however, the genuine negative sentiment that existed throughout most of 1998
began to change. As global central bankers made concerted efforts to reduce
fears of a global economic slowdown, Asian markets staged an impressive
fourth-quarter rally. Investor confidence received an added boost when the U.S.
Federal Reserve Board lowered short-term rates three times in the fall of 1998.
What was the Fund's strategy during the period?
In managing the Fund, we continue to take a conservative approach by
focusing on countries with relatively stable economies and banking systems, and
well-financed corporations. Hong Kong, China, Singapore and, to some extent, the
Philippines, offer a variety of high-quality companies with strong balance
sheets. We believe these companies have a better chance of weathering a global
recession, should that scenario continue to build. Within the financially and
fundamentally weaker Tiger countries, including Indonesia, Thailand, South Korea
and Malaysia, economic numbers remained negative in 1998. While the extent of
recession in these countries is showing some degree of improvement, many still
have high debt levels that have been compounded by deflation (the general
decline in the prices for goods and services). Moreover, the banking systems in
these countries remain virtually bankrupt.
What is your outlook for the period ahead?
Many variables will affect future economic growth across Asia. The ability
of Asian companies to grow depends somewhat on the economies of Japan, the U.S.
and Europe. We believe that U.S. and Europe will continue to grow moderately in
1999, providing enough demand for Asian exporters to survive. However, it is too
early to predict when the turnaround in Japan will begin. We believe that China
still holds the key to long-term growth opportunities in Asia, and we remain
optimistic about its potential. The Chinese government is projecting 7% growth
for 1999, down slightly from 1998. Current growth is coming mostly from
government spending on infrastructure projects that employ a lot of people.
While exports did not grow in 1998 and consumption slowed, China finished 1998
with a $40 billion surplus in their current account -- a clear sign of financial
strength. Other positive factors include $45 billion in additional capital from
direct foreign investment in 1998, and no inflation. The Fund is not investing
directly in China. We believe the best quality Chinese companies are listed on
the Hong Kong exchange.
(1)Investing in Newport Tiger Fund, Variable Series offers long-term growth
potential. However, the value 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 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.
11
<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 $10,000 from 5/1/95-12/31/98
- --------------------------------------------------------------------------------
Average Annual Total Returns on December 31, 1998
<TABLE>
<CAPTION>
Life 1 Year 3 Years
<S> <C> <C>
(5.01)% (6.43)% (10.38)%
- --------------------------------------------------------------------------------
</TABLE>
[Plot Points for Newport Tiger Fund]
<TABLE>
<CAPTION>
Newport Tiger Fund,
Variable Series MSCI EAFE GDP
<S> <C> <C>
5/1/95 10000 10000
11100 9903
6/30/95 10900 9793
11200 10433
10850 9997
9/30/95 11050 10116
11000 9823
11050 10030
12/31/95 11500 10459
12661 10592
12560 10623
3/31/96 12560 10764
12509 11099
12459 10935
6/30/96 12207 11021
11551 10705
11954 10699
9/30/96 12307 10993
12207 10873
12812 11337
12/31/96 12850 11257
12748 11045
12748 11121
3/31/97 11983 11333
11779 11306
12850 11895
6/30/97 13462 12603
13666 12881
11321 11956
9/30/97 11678 12724
9026 11784
8873 11736
12/31/97 8848 11906
7554 12525
9210 13245
3/31/98 9158 13966
8382 14176
7244 14377
6/30/98 6520 14511
6002 14700
5123 12763
9/30/98 6002 12407
7761 13788
8279 14503
12/31/98 8279 15086
</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
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.
12
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Liberty All-Star Equity Fund, Variable Series seeks total investment
return, comprised of long-term capital appreciation and current income, through
investment primarily in a diversified portfolio of equity securities. Liberty
Asset Management Company ("LAMCO") is the manager of the Fund.
Portfolio Managers' Discussion
The stock market, as measured by the S&P 500, surprised strategists with a
fourth consecutive year of gains in excess of 20%. It was not a year without
drama, though, as volatility increased significantly when news of global
instability again made the headlines. The flight to quality that ensued
benefited a narrow group of large-capitalization growth stocks, as investors
were willing to pay high premiums for their earnings visibility. That narrow
leadership was evident when one looks at the performance of the largest stocks
in the S&P 500. The twenty largest growth stocks in that index accounted for
more than half its gain in 1998. Those same stocks now comprise more than a
third of its capitalization, a level not seen since the early 1970s.
Liberty All-Star Equity Fund, Variable Series had an 18.67% return for the
year, compared to 16.54% for the Lipper Growth & Income Variable Annuity
Average(1). Growth considerably outperformed value as an investment style during
the year, particularly in the larger-capitalization stocks. LAMCO's blending of
both value and growth styles means your Fund always participates, regardless of
which style is in vogue. It also means the Fund is always positioned for that
inevitable rotation in style leadership, regardless of when it occurs. Over the
long term, we believe that translates into less volatile and more predictable
results.
Fund Performance (as of December 31, 1998)
<TABLE>
<S> <C>
Inception date ................................ 11/17/97
Assuming reinvestment of all distributions
12-month total return ....................... 18.67%
Lipper Growth & Income variable annuity
average ..................................... 16.54%
Net asset value per share on 12/31/98 ......... $11.90
Net asset value per share on 12/31/97 ......... $10.07
</TABLE>
What is your investment strategy?
The Fund's investment program is based upon LAMCO's 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.
In LAMCO's opinion, the multi-manager concept provides advantages over the
use of a single manager because of the following primary factors:
(i) Most equity investment management firms consistently employ a distinct
investment "style" which causes them to emphasize stocks with particular
characteristics.
(ii) Because of changing investor preferences, any given investment style
will move into and out of market favor and will result in better investment
performance under certain market conditions, but less successful performance
under other conditions.
(iii) Consequently, by allocating the Fund's portfolio on an approximately
equal basis among Portfolio Managers employing different styles, the impact of
any one such style on investment performance will be diluted, and the investment
performance of the total portfolio will be more consistent and less volatile
over the long term than if a single style were employed throughout the entire
period.
(iv) More consistent performance at a given annual rate of return over time
produces a higher rate of return for the long term than more volatile
performance having the same average annual rate of return.
LAMCO, based on the foregoing principals and on its analysis and evaluation
of information regarding the personnel and investment styles and performance of
a universe of several hundred professional investment management firms, has
selected for appointment by the Fund a group of Portfolio Managers representing
a blending of different styles which, in its opinion, is appropriate to the
Fund's investment objective.
LAMCO continuously monitors the performance and investment styles of the
Fund's Portfolio Managers and, from time to time, may recommend changes of
Portfolio Managers based on factors such as changes in a Portfolio Manager's
investment style or departure by a Portfolio Manager from the investment style
for which it had been selected, a deterioration in a Portfolio Manager's
performance relative to that of other investment management firms practicing a
similar style, or adverse changes in its ownership or personnel.
(1)Lipper, Inc. a widely respected data provider in the industry, calculates an
average total return for funds with similar investment objectives as the Fund.
The average total return calculated for the Lipper Growth & Income --Variable
Annuities peer group of 155 funds was 16.54% for the 12-months ended December
31, 1998. The Fund had a total return of 18.67% and was ranked 66 out of the 155
funds.
13
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
The Fund's current Portfolio Managers are:
(1) Boston Partners Asset Management, L.P. (2) J.P. Morgan Investment Management
Inc. (3) Oppenheimer Capital (4) Westwood Management Corporation (5)
Wilke/Thompson Capital Management, Inc.
Manager Roundtable
Depending on which part of it you are talking about, the stock market in
1998 was either very, very good or very, very mediocre. As All-Star's portfolio
managers point out in this Roundtable, the disparity in returns based on
investment style, market capitalization and industrial sector reached an
all-time high. It was also the most volatile year since 1987.
How do All-Star's portfolio managers interpret the year? For answers, we
talk with All-Star's five managers in this 1998 Annual Report Roundtable. The
Fund Sub-Advisor, Liberty Asset Management Company (LAMCO), serves as the
moderator of the Roundtable. The participating portfolio managers and their
investment styles are:
Boston Partners Asset Management, L.P.
Portfolio Manager/Mark E. Donovan,
Chairman, Equity Strategy Committee
Value Investment Style -- Boston Partners is a value style manager
investing in undervalued companies that have sound business fundamentals and
positive business momentum. The firm searches for companies with low
price-to-earnings and price-to-book value ratios where a catalyst for positive
change has been identified. Boston Partners is the newest of All-Star's five
portfolio management firms, having been named to the All-Star team in May 1998.
J.P. Morgan Investment Management Inc.
Portfolio Manager/Henry D. Cavanna,
Managing Director
Value Investment Style -- J.P. Morgan Investment Management invests
primarily in the stocks of medium to large-size companies that are undervalued
relative to their projected growth rates. The firm focuses on individual stock
selection, rather than sector rotation, style/theme investing or market timing.
Portfolios are characterized by above-market earnings and dividend growth, but
price-to-book and price-to-earnings ratios that are below or in line with the
market.
Oppenheimer Capital
Portfolio Manager/John G. Lindenthal,
Managing Director
Value Investment Style -- Oppenheimer invests in the stocks of quality
companies with sound business prospects that are considered undervalued because
they are currently disliked or are being overlooked by investors. Research
focuses on cash flow analysis. Purchase candidates exhibit a high return on
equity, large undedicated cash flow, and reasonable prices in relation to book
value.
Westwood Management Corporation
Portfolio Manager/Susan M. Byrne,
President and Chief Investment Officer
Growth Investment Style -- Westwood's investment strategy is growth at a
reasonable price. The firm employs internally generated, bottom-up, fundamental
research and seeks to identify stocks with misperceived growth expectations.
Proprietary income and balance sheet projections are utilized to identify
companies whose securities are typically characterized by higher return on
equity, higher forecasted 12-month growth rates, and lower forecasted
price/earnings ratios than the market.
Wilke/Thompson Capital Management, Inc.
Portfolio Manager/Mark A. Thompson,
Chief Investment Officer
Growth Investment Style -- Wilke/Thompson concentrates on high-quality
growth stocks with sustainable earnings over a spectrum of market
capitalizations and emphasizes bottom-up stock picking and fundamental research.
The firm utilizes a team approach to stock selection and ongoing portfolio
management.
LAMCO: Let's begin by looking at 1998, with emphasis on the fourth quarter. At
the same time, perhaps you could also focus on the time period between July and
November, when the market went through an entire cycle in five months. What
lessons do investors take away from this "time compression?" Susan Byrne, why
don't you get us started?
Byrne (Westwood -- Growth): Westwood's style leads us to growth companies that
are selling at reasonable valuations. Market leadership within the S&P 500 has
narrowed to a handful of companies that are selling at anything but reasonable
valuations. For example, the top five companies in the S&P 500 are selling at 50
times 1999 earnings, while the remaining 495 are selling at 18 times 1999
earnings. These same five companies as a group had a 50% return in 1998, while
the bottom 495 returned only 5% as a group. The lesson here is that such a
disparity cannot persist for an infinite amount of time. The top companies are
priced for perfection and there is very little margin for error. Remember that
trees don't grow to the sky. Westwood is finding much more compelling growth
company valuations in the bottom 450 of the S&P 500.
LAMCO: Good thoughts to start off with. Mark Thompson, let's hear from another
growth manager.
14
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
Thompson (Wilke/Thompson -- Growth): We are happy to report that 1998 was strong
for Wilke/Thompson. The year began with concerns over the economic health of the
Far East and ended with a military confrontation with Iraq. In addition, the
President was investigated and ultimately impeached by the House of
Representatives. A major hedge fund required a bail-out after facing the
prospect of insolvency. In the face of these uncertainties, noted experts
advised investors to be cautious. Yet, the S&P 500 Index posted its fourth
consecutive year of 20% plus returns. The positive forces that drove the market
were declining interest rates and low levels of inflation. Internet stocks
continued to capture the attention of investors, and 1998 was a record year for
merger and acquisition activity. What may be most remarkable about the year was
the resiliency of the S&P 500. After the market closed on October 8, the S&P 500
was actually down -1.8% for the year. Yet it closed the year with a 28.6% gain.
Our disciplined approach keeps us fully invested and focused on the long-term
fundamentals of the companies in which we invest. Since headlines and
controversy are seldom relevant to long-term investors, being fully invested
allowed our portfolios to enjoy strong returns for the year, despite the fact
that the stock market was driven by larger-cap stocks.
LAMCO: Thank you. Turning to the value perspective, Henry Cavanna, what's the
view from J.P. Morgan?
Cavanna (J.P. Morgan -- Value): Overall, 1998 was a remarkable year in which
returns were strong for large-cap stocks and performance trends of the prior
years became extreme. The market did well even though earnings growth for the
overall economy slowed. Growth, high quality and size -- meaning the largest
companies -- led the market again, but to a greater extent than in prior years.
Industrial companies, whose earnings came under pressure due to global economic
forces, did poorly. In hindsight, the ability of companies to produce earnings
growth in this volatile year appeared to be the key factor supporting investment
success.
We follow a valuation discipline that makes some of these market leaders look
expensive. Earnings momentum and a higher certainty of near-term earnings are
catalysts for owning a stock only if we are able to make a longer-term valuation
case for the holding. Nevertheless, we were able to keep pace with the market in
the fourth quarter, helped by a diversification approach that keeps us invested
in all major market sectors, including technology, which exploded on the upside
in the fourth quarter.
The July through November period was unusually volatile, triggered by global
events that included a Russian default and a subsequent credit crisis that
threatened the survival of a number of high-profile hedge funds along with the
stability of the global economic expansion. The intervention of and easing by
central bankers around the world stabilized markets and helped to restore
investor confidence, producing the stunning rally in the U.S. stock market over
the past several months.
LAMCO: John Lindenthal, share Oppenheimer's thoughts about the year, please.
Lindenthal (Oppenheimer -- Value): Our value style of investing definitely
lagged during 1998, especially during the recovery phase from the market lows of
early October. The equity market has been primarily momentum driven with a high
degree of emphasis on large-capitalization technology stocks. Although the two
technology companies we own (Intel and Nokia) performed well, it is not an area
of concentration for us. Additionally, the large-capitalization consumer
non-durables, especially pharmaceutical companies, performed well, also an area
of underweighting for us. The obvious lesson from the very volatile period of
the fall of 1998 is patience and not giving into emotional decisions. The key is
fundamental analysis of individual companies and acting as an investor and not a
near-term trader. Also, from an overview perspective, markets are primarily
liquidity driven, and the Federal Reserve Board has added an enormous amount of
funds to the financial system since early October.
LAMCO: Mark Donovan, as Boston Partners is All-Star's newest portfolio manager
for All-Star, this is your first Roundtable. Maybe you can wrap up the
discussion about 1998 by sharing your perspective.
Mark Donovan (Boston Partners -- Value): The S&P 500 finished 1998 with a flurry
of activity in the fourth quarter, ending a year of volatility not experienced
since 1987. The quarter's 21.3% gain for the S&P brought the full-year return to
over 28%. This year was not only the most volatile since the 1987 crash, it also
saw the most dramatic divergence in performance between various styles of
investing, as the large-cap growth style beat out all other styles by an
unprecedented margin. Perhaps the lesson to be learned through this period is
that one must be committed to one's investment style, yet be nimble in terms of
one's decision-making process.
The difference in performance between capitalization sectors was perhaps the
biggest single hurdle faced by active managers in 1998. For large-cap value
managers, any deviation in average weighted market capitalization relative to
the S&P 500 was a sure cause of underperformance. As most of the top-performing
stocks in this index were large-cap growth names, it's no wonder that 98% of the
large-cap value funds, as tracked by Lipper Analytical Services, underperformed
the S&P 500. One way to understand the influence that mega-cap stocks have on
performance of the index is to look at the annual return of the average stock in
the S&P 500, which rose only 13%.
15
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' DISCUSSION
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
Liberty All-Star Equity Fund, Variable Series vs. Russell 3000 Index
Change in value of $10,000 from 11/30/97-12/31/98
- --------------------------------------------------------------------------------
Average Annual Total Returns on December 31, 1998
<TABLE>
<CAPTION>
Life 1 Year 3 Years
<S> <C> <C>
17.99% 18.67% N/A
- --------------------------------------------------------------------------------
</TABLE>
[Plot Points for Liberty All-Star Equity Fund]
<TABLE>
<CAPTION>
Liberty All-Star Equity Fund,
Variable Series Russell 3000 Index
<S> <C> <C>
11/97 10000 10000
12/97 10080 10200
1/98 10030 10253
2/98 10901 10987
3/98 11421 11531
4/98 11521 11645
5/98 11211 11357
6/98 11461 11741
7/98 11221 11528
8/98 9469 9762
9/98 10080 10428
10/98 10821 11220
11/98 11351 11906
12/98 11962 12663
</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 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.
16
<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 seeks long-term growth by
investing primarily in smaller-capitalization equities.
Fund Performance (as of December 31, 1998)
<TABLE>
<S> <C>
Inception date ..................................... 05/19/98
Assuming reinvestment of all distributions
Cumulative total return since inception .......... (13.25)%
Net asset value per share on 12/31/98 .............. $8.59
</TABLE>
Portfolio Managers' Discussion
James Haynie and Michael Rega are portfolio co-managers of Colonial Small
Cap Value Fund, Variable Series and are vice presidents of Colonial Management
Associates, Inc.
What was the investment environment like during the period?
Stock prices were volatile throughout the period. After stock prices peaked
in mid-July, a third-quarter market correction hit bottom on October 8. From
that point, stock prices rebounded nicely through year end. Stocks of small
companies experienced more dramatic price swings than those of larger companies,
falling further than the market as a whole. Large companies have dominated the
market since 1994, but the vigor of small-company stock performance at the end
of 1998 was encouraging.
Ironically, while earnings disappointments from larger companies have
alarmed investors, enthusiasm for small-company stocks was also dampened. During
uncertain global economic times, investors have continued their flight to
quality, preferring the liquidity and perceived stability of large-company
stocks.
What was the Fund's strategy during the period?
Technology stocks clearly led the charge since the Fund began. The NASDAQ
Composite Index, a technology bellwether, soared 15.7% over the last six months.
In contrast, the S&P 500 Index, a proxy for the broader market, rose 8.4%.
Internet-related stocks were the strongest element in this upswing. We
maintain that the current bidding up of electronic commerce stocks is excessive,
based more on speculation than fundamentals. We believe the extent of their rise
is unwarranted by the facts. While the Internet is here to stay, it is too early
to determine which companies will have staying power. And while online
transactions are growing exponentially in number, it's important to consider the
minuscule numbers from which they are multiplying.
With its value orientation and commitment to broad sector diversification,
Colonial Small Cap Value Fund, Variable Series could not fully take part in the
outsized gains in the technology sector, causing it to lag its benchmarks. The
underperformance of financial and retail stocks also negatively impacted
performance, as credit-quality issues took center stage. Since inception the
Fund generated a total return of negative 13.25% based on net asset value.
Despite the Fund's underperformance, we believe our diversified strategy makes
the most sense for the long term.
What is your outlook for the period ahead?
Whether U.S. companies will be able to grow their earnings in 1999 remains
to be seen. However, the economy appears to have the ability to continue on its
pace of slow, steady growth. In an environment of low interest rates, low
inflation and low unemployment, the stock prices of well-managed companies have
the potential to move upward. With a broadly diversified portfolio and a focus
on attractively valued holdings -- many with little or no international exposure
- -- we continue to believe Colonial Small Cap Value Fund, Variable Series makes
sense for a long-term investment portfolio.
17
<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 $10,000 from 5/31/98-12/31/98
- --------------------------------------------------------------------------------
Average Annual Total Returns on December 31, 1998
<TABLE>
<CAPTION>
Life 1 Year 3 Years
<S> <C> <C>
(13.25)% N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
[Plot Points for Colonial Small Cap Value Fund]
<TABLE>
<CAPTION>
Colonial Small Cap Value Fund,
Variable Series Russell 2000 Index
<S> <C> <C>
5/98 10020 10000
6/98 10050 10021
7/98 9120 9210
8/98 7200 7421
9/98 7460 8002
10/98 7880 8329
11/98 8400 8765
12/98 8657 9307
</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 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.
18
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Investment Trust Colonial High Yield Securities Fund, Variable Series
- --------------------------------------------------------------------------------
Dear Contract Owner:
Colonial High Yield Securities Fund, Variable Series seeks high current
income and total return by investing primarily in lower-rated corporate debt
securities.
Fund Performance (as of December 31, 1998)
<TABLE>
<S> <C>
Inception date .................................... 05/19/98
Assuming reinvestment of all distributions
Cumulative total return from inception .......... (2.57)%
Net asset value per share on 12/31/98 ............. $9.31
</TABLE>
Portfolio Manager's Discussion
Carl Ericson is portfolio manager of Colonial High Yield Securities Fund,
Variable Series. Mr. Ericson is senior vice president of Colonial Management
Associates, Inc. and is a chartered financial analyst.(1)
What was the investment environment like during the period?
The investment environment for high-yield bonds was mixed during the year.
Companies continued to generate strong revenue, earnings and cash flow growth,
helping both bond and stock markets. Furthermore, market demand for high-yield
bonds was strong, with broad market support for all types of new issues.
However, during July and August, the economy slowed down, stocks dropped and
concerns about unstable conditions in Asia resurfaced. Market conditions became
increasingly disorganized as Russia experienced a major economic and political
crisis. Investors feared that other emerging and high-yielding market sectors
might also have serious problems waiting to surface. Volatility increased
sharply with a full-fledged flight to quality, as investors sought relatively
stable investments such as U.S. Treasury securities and the household names of
large-cap stocks. High-yield bond prices fell and market liquidity declined,
producing one of the weakest high-yield markets in almost a decade. However,
three successive interest rate cuts by the Federal Reserve Board in September,
October and November convinced investors that the economy would continue to
grow. Based on a belief that high-yield companies would still be able to
generate sufficient cash flows to pay off their debt obligations, the high-yield
market recovered nicely, posting its largest one-month gain in history during
November.
What was the Fund's strategy during the period?
A significant proportion of the Fund's assets continued to be invested in
cable and telecommunication companies (11.25% and 11.69% of net assets,
respectively). Diamond Cable (3.04% of net assets) and Telewest Communications
(3.53% of net assets) own cable systems in England where cable penetration and
cash flows continue to improve. In the telecommunications sector, Loral Space &
Communications (4.18% of net assets) owns satellites and sells capacity to an
increasing list of customers needing transmission access.
What is your outlook for the period ahead?
We have a favorable outlook for improving conditions in the high-yield bond
market in the months ahead. We expect moderate economic growth, low interest
rates and low inflation to continue. These conditions all increase the
likelihood that high-yield companies will be able to generate strong cash flows,
setting the stage for further improvement in high-yield bond prices. However,
even in an environment that offers little price appreciation, such as we
experienced during the second and third quarters of 1998, the relatively high
income levels offered by high-yield bonds may provide shareholders with
attractive total returns.
(1)Effective January 26, 1999 Andrea Feingold no longer manages Colonial High
Yield Securities Fund, Variable Series. Carl Ericson, the director of Colonial's
Taxable Fixed Income Department, is now managing the Fund. The Fund has been,
and will continue to be, managed by a team with more than 10 years of investment
experience on average. We do not anticipate any changes in the investment style
of the Fund.
19
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S DISCUSSION
Liberty Investment Trust Colonial High Yield Securities Fund, Variable Series
- --------------------------------------------------------------------------------
Colonial High Yield Securities Fund, Variable Series vs. CS First Boston High
Yield Index
Change in value of $10,000 from 5/31/98-12/31/98
- --------------------------------------------------------------------------------
Average Annual Total Returns on December 31, 1998
<TABLE>
<CAPTION>
Life 1 Year 3 Years
<S> <C> <C>
(2.57)% N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
[Plot Points for Colonial High Yield Securities Fund]
<TABLE>
<CAPTION>
Colonial High Yield Securities Fund,
Variable Series First Boston High Yield Index
<S> <C> <C>
5/31/98 10020 10000
6/30/98 10050 10021
7/31/98 10170 10091
8/31/98 9510 9406
9/30/98 9470 9405
10/31/98 9320 9218
11/31/98 9940 9685
12/31/98 9743 9663
</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 or certain expenses reimbursed by the Manager. 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 in an index.
20
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of
Liberty Variable Investment Trust
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, 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 each of the nine series
constituting Liberty Variable Investment Trust (the "Trust"), formerly Keyport
Variable Investment Trust, at December 31, 1998, the results of their
operations, the changes in their net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Trust'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 generally accepted auditing standards 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 securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 1999
21
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- -------------- -----------------
<S> <C> <C> <C>
COMMON STOCKS--90.5%
Construction--2.2%
Building Construction
Centex Corp. ....................................................... 49,200 $ 2,217,075
Hollandsche Beton Groep
NV ............................................................... Ne 68,500 845,409
Volker Wessels Stevin NV ........................................... Ne 12,000 234,280
-----------
3,296,764
-----------
Finance, Insurance & Real Estate--14.7%
Depository Institutions--5.0%
Astoria Financial Corp. ............................................ 31,000 1,418,250
Bank of Montreal ................................................... Ca 17,300 696,970
First Union Corp. .................................................. 6,202 377,159
Greenpoint Financial Corp. ......................................... 85,000 2,985,625
M & T Bank Corporation ............................................. 300 155,681
National Australia Bank Ltd. ....................................... Au 38,800 584,619
Toronto-Dominion Bank .............................................. Ca 34,100 1,197,897
-----------
7,416,201
-----------
Insurance Carriers--6.8%
Allstate Corp. ..................................................... 26,200 1,011,975
American Bankers Insurance
Group, Inc. ...................................................... 34,400 1,664,100
CIGNA Corp. ........................................................ 30,000 2,319,375
Citigroup Corp. .................................................... 31,300 1,549,350
Old Republic International
Corp. ............................................................ 38,100 857,250
Orion Capital Corp. ................................................ 2,500 99,531
St. Paul Cos., Inc. ................................................ 18,000 625,500
Sunamerica, Inc. ................................................... 21,600 1,752,300
United Healthcare Corp. ............................................ 5,700 245,456
-----------
10,124,837
-----------
Nondepository Credit Institution--0.6%
Associates First Capital Corp. ..................................... 8,124 344,255
Metris Companies, Inc. ............................................. 12,734 640,679
-----------
984,934
-----------
Security Brokers & Dealers--2.3%
A.G. Edwards, Inc. ................................................. 51,300 1,910,925
Merrill Lynch & Co., Inc. .......................................... 22,500 1,501,875
-----------
3,412,800
-----------
Manufacturing--40.1%
Apparel--0.6%
VF Corp. ........................................................... 20,000 937,500
-----------
Chemicals & Allied Products--9.0%
Akzo Nobel NV ADR .................................................. 28,148 1,256,105
Allergan, Inc. ..................................................... 11,700 757,575
Bristol-Myers Squibb Co. ........................................... 22,800 3,050,925
Dow Chemical Co. ................................................... 15,700 1,427,719
Eli Lilly & Co. .................................................... 10,000 888,750
International Specialty
Products, Inc. (a) ............................................... 15,000 203,438
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- -------------- -----------------
<S> <C> <C> <C>
Johnson & Johnson .................................................. 22,800 $ 1,912,350
Merck & Co., Inc. .................................................. 16,200 2,392,538
Norsk Hydro A.S. ................................................... 7,100 242,731
Rexall Sundown, Inc. (a) ........................................... 27,500 385,000
Warner-Lambert Co. ................................................. 13,500 1,015,031
-----------
13,532,162
-----------
Communications Equipment--0.1%
Ericsson SPA ....................................................... It 3,000 123,769
-----------
Electronic Components--0.6%
SCI Systems, Inc. (a) .............................................. 14,600 843,150
-----------
Fabricated Metal--0.5%
Danaher Corp. ...................................................... 14,600 792,962
-----------
Food & Kindred Products--2.3%
Anheuser Busch Cos., Inc. .......................................... 15,000 984,375
Interstate Bakeries Corp. .......................................... 35,900 949,106
Philip Morris Companies,
Inc. ............................................................. 27,500 1,471,250
-----------
3,404,731
-----------
Furniture & Fixtures--1.5%
Herman Miller, Inc. ................................................ 31,000 833,125
Masco Corp. ........................................................ 51,000 1,466,250
-----------
2,299,375
-----------
Household Appliances--0.8%
Maytag Corp. ....................................................... 20,000 1,245,000
-----------
Machinery & Computer Equipment--13.6%
Apple Computer, Inc. ............................................... 35,000 1,432,812
Applied Materials, Inc. (a) ........................................ 48,000 2,049,000
Black & Decker Corp. ............................................... 19,800 1,110,037
Caterpillar, Inc. .................................................. 18,200 837,200
Compaq Computer Corp. .............................................. 80,000 3,355,000
EMC Corp. (a) ...................................................... 20,000 1,700,000
International Business
Machines Corp. ................................................... 6,500 1,200,875
Lexmark International
Group, Inc. (a) .................................................. 4,500 452,250
Storage Technology Corp. (a) ....................................... 31,000 1,102,437
Sun Microsystems, Inc. (a) ......................................... 46,500 3,981,562
Tyco International Ltd. ............................................ 5,800 437,537
Unisys Corp. (a) ................................................... 65,000 2,238,437
Varco International, Inc. (a) ...................................... 68,000 527,000
-----------
20,424,147
-----------
Measuring & Analyzing Instruments--1.3%
Eastman Kodak Co. .................................................. 20,000 1,440,000
Tektronix, Inc. .................................................... 17,500 526,094
-----------
1,966,094
-----------
Petroleum Refining--2.6%
Exxon Corp. ........................................................ 8,800 643,500
Mobil Corp. ........................................................ 13,000 1,132,625
Phillips Petroleum Co. ............................................. 34,100 1,453,513
Sunoco, Inc. ....................................................... 18,000 649,125
-----------
3,878,763
-----------
</TABLE>
See Notes to Investment Portfolio.
22
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- -------------- -----------------
<S> <C> <C> <C>
Primary Metal--0.1%
Bethlehem Steel Corp. (a) .......................................... 12,000 $ 100,500
----------
Primary Smelting--0.6%
Phelps Dodge Corp. ................................................. 17,400 885,225
----------
Printing & Publishing--0.2%
Wallace Computer Services,
Inc. ............................................................. 12,000 316,500
----------
Rubber & Plastic--1.3%
Goodyear Tire & Rubber Co. ......................................... 6,000 302,625
Premark International, Inc. ........................................ 33,000 1,142,625
Wynn's International, Inc. ......................................... 20,000 442,500
----------
1,887,750
----------
Tobacco Products--0.5%
Gallaher Group PLC ADR ............................................. 28,000 761,250
----------
Transportation Equipment--4.5%
Cordant Technologies, Inc. ......................................... 20,000 750,000
Equipements et Composants
pour l'Industrie
Automobile ....................................................... Fr 2,050 274,690
Fleetwood Enterprises, Inc. ........................................ 13,900 483,025
Ford Motor Co. ..................................................... 23,500 1,379,156
General Dynamics Corp. ............................................. 24,400 1,430,450
General Motors Corp. ............................................... 8,300 593,969
Textron, Inc. ...................................................... 24,400 1,852,875
----------
6,764,165
----------
Mining & Energy--1.6%
Metal Mining--0.2%
Cleveland-Cliffs, Inc. ............................................. 6,700 270,094
----------
Oil & Gas Field Services--1.4%
Enron Corp. ........................................................ 37,500 2,139,844
----------
Retail Trade--9.7%
Food Stores--2.7%
Albertson's, Inc. .................................................. 23,000 1,464,813
Kroger Corp. (a) ................................................... 18,500 1,119,250
Laurus NV .......................................................... Ne 15,890 400,673
Vedior NV .......................................................... Ne 22,400 440,898
Vendex International NV ............................................ Ne 25,395 616,029
----------
4,041,663
----------
General Merchandise Stores--2.7%
Family Dollar Stores, Inc. ......................................... 64,000 1,408,000
Kmart Corp. ........................................................ 100,000 1,531,250
Sears, Roebuck & Co. ............................................... 25,000 1,062,500
----------
4,001,750
----------
Home Furnishings & Equipment--1.3%
CompUSA, Inc. (a) .................................................. 16,500 215,531
Pier 1 Imports, Inc. ............................................... 58,500 566,719
Tandy Corp. ........................................................ 28,000 1,153,250
----------
1,935,500
----------
Miscellaneous Retail--2.0%
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- -------------- -----------------
<S> <C> <C> <C>
Fingerhut Companies, Inc. .......................................... 40,000 $ 617,500
Office Depot, Inc. (a) ............................................. 65,000 2,400,938
----------
3,018,438
----------
Restaurants--1.0%
Brinker International, Inc. (a) .................................... 50,000 1,443,750
----------
Services--12.9%
Restaurants--1.5%
Omnicom Group, Inc. ................................................ 38,800 2,250,400
----------
Computer Related Services--3.4%
Cadence Design Systems,
Inc. (a) ......................................................... 66,000 1,963,500
HBO & Co. .......................................................... 28,800 826,200
Teradyne, Inc. (a) ................................................. 54,000 2,288,250
----------
5,077,950
----------
Computer Software--2.4%
BMC Software, Inc. (a) ............................................. 18,000 802,125
J.D. Edwards & Co. (a) ............................................. 28,000 794,500
Sterling Software, Inc. (a) ........................................ 36,000 974,250
Symantec Corp. (a) ................................................. 50,000 1,087,500
----------
3,658,375
----------
Engineering, Accounting, Research &
Management--1.5%
Dun & Bradstreet Corp. ............................................. 25,000 789,063
EG&G, Inc. ......................................................... 35,000 973,438
International-Muller NV ............................................ Ne 18,400 455,155
----------
2,217,656
----------
Health Services--4.1%
Health South Corp. (a) ............................................. 105,000 1,620,938
Lincare Holdings, Inc. (a) ......................................... 18,600 754,463
Tenet Healthcare Corp. (a) ......................................... 54,700 1,435,875
Universal Health Services,
Inc., Class B (a) ................................................ 45,000 2,334,375
----------
6,145,651
----------
Transportation, Communication,
Electric, Gas & Sanitary Services--8.3%
Air Transportaton--0.8%
Continental Airlines, Inc.,
Class B (a) ...................................................... 15,000 502,500
US Airways Group, Inc. (a) ......................................... 12,700 660,400
----------
1,162,900
----------
Electric Services--2.7%
BEC Energy ......................................................... 19,000 782,563
Edison International ............................................... 40,000 1,115,000
Energy East Corp. .................................................. 10,000 565,000
NIPSCO Industries, Inc. ............................................ 32,800 998,350
Public Service Enterprise
Group, Inc. ...................................................... 16,000 640,000
----------
4,100,913
----------
</TABLE>
See Notes to Investment Portfolio.
23
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- -------- --------------
<S> <C> <C> <C>
Gas Services--0.3%
Gas y Electricidad SA ........... Sp 4,550 $ 455,208
------------
Telecommunication--4.5%
AT&T Corp. ...................... 24,000 1,806,000
Ameritech Corp. ................. 39,400 2,496,975
Bell Atlantic Corp. ............. 10,000 568,125
BellSouth Corp. ................. 18,000 897,750
US West Communications
Group ......................... 16,000 1,034,000
------------
6,802,850
------------
Wholesale Trade--1.0%
Durable Goods
Arrow Electronics, Inc. (a) ..... 27,000 720,563
Beers NV ........................ Ne 7,235 377,184
CHS Electronics, Inc. (a) ....... 13,000 220,188
Marshall Industries (a) ......... 10,300 252,350
------------
1,570,285
------------
Total Common Stocks
(cost of $101,223,168) ......................... 135,691,806
------------
</TABLE>
<TABLE>
<CAPTION>
Par
-------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS--3.2%
Federal Home Loan Mortgage
Corp., 6.500% 01/01/2026 ... $1,339,195 1,348,811
----------
Federal National Mortgage
Association:
6.000% 12/01/2008 .......... 1,409,383 1,412,906
6.500% 12/01/2023 .......... 1,974,604 1,987,558
----------
3,400,464
----------
</TABLE>
<TABLE>
<CAPTION>
Value
---------------
<S> <C> <C>
Total U.S. Government Obligations
(cost of $4,633,960) .............................. $ 4,749,275
------------
Total Investments--93.7%
(cost of $105,857,128)(b) ......................... 140,441,081
------------
Par
-----------
SHORT-TERM OBLIGATIONS--7.2%
Repurchase agreement with ABN
AMRO Chicago Corp., dated 12/31/98, due 01/04/99 at 4.750%, collateralized by
U.S. Treasury notes with various maturities to 2015, market value $10,922,781
(repurchase
proceeds $10,739,665) ............... $10,734,000 10,734,000
------------
Other Assets & Liabilities, Net--(0.9%) (1,355,012)
------------
Net Assets--100.0% .................................. $149,820,069
============
</TABLE>
Notes to investment portfolio:
(a) Non-income producing.
(b) The cost for federal income tax purposes is identical. Gross unrealized
appreciation and depreciation at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $40,257,606
Gross unrealized depreciation (5,673,653)
-----------
Net unrealized appreciation $34,583,953
===========
</TABLE>
<TABLE>
<CAPTION>
% of Total
Country Securities
Summary of Securities by Country Abbrev. Value at Value
- -------------------------------- ------- ----- --------
<S> <C> <C> <C>
United States .................. $133,738,300 95.2%
Netherlands .................... Ne 3,369,628 2.4
Canada ......................... Ca 1,894,867 1.4
Australia ...................... Au 584,619 0.4
Spain .......................... Sp 455,208 0.3
France ......................... Fr 274,690 0.2
Italy .......................... It 123,769 0.1
------------ -----
$140,441,081 100.0%
============ =====
</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.
24
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $105,857,128) .................. $140,441,081
Short-term obligations ....................................................... 10,734,000
Cash (including foreign currencies) .......................................... 4,702
Receivable for investments sold .............................................. 446,806
Dividends, tax reclaims and interest receivable .............................. 189,160
Receivable for fund shares sold .............................................. 147,257
Other assets ................................................................. 3,411
------------
Total assets ............................................................. 151,966,417
------------
Liabilities:
Payable for investments purchased ............................................ 1,937,878
Payable for fund shares repurchased .......................................... 98,637
Management fee payable ....................................................... 77,722
Bookkeeping fee payable ...................................................... 4,906
Transfer agent fee payable ................................................... 625
Accrued expenses payable ..................................................... 26,580
------------
Total liabilities ........................................................ 2,146,348
------------
Net assets ................................................................... $149,820,069
============
Net assets represented by:
Paid-in capital ............................................................ $115,312,182
Accumulated overdistributed net investment income .......................... (38,657)
Accumulated net realized losses on investments ............................. (37,931)
Net unrealized appreciation on investments and foreign currency transactions 34,584,475
------------
Total net assets applicable to outstanding shares of beneficial interest ..... $149,820,069
============
Shares of beneficial interest outstanding .................................... 9,139,742
============
Net asset value per share .................................................... $16.39
======
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends (net of nonrebatable foreign taxes withheld at source of $50,482) ............ $ 1,590,330
Interest income ........................................................................ 889,693
-----------
Total investment income ............................................................ 2,480,023
-----------
Expenses:
Management fee ....................................................................... 805,967
Bookkeeping fee ...................................................................... 53,025
Transfer agent fee ................................................................... 7,500
Audit fee ............................................................................ 22,551
Printing expense ..................................................................... 10,388
Trustees' expense .................................................................... 6,965
Custodian fee ........................................................................ 11,126
Legal fee ............................................................................ 274
Amortization of organization expense .................................................. 2,663
Miscellaneous expense ................................................................. 19,942
-----------
Total expenses ..................................................................... 940,401
-----------
Net investment income .................................................................. 1,539,622
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized gains on investments .................................................... 4,073,761
Net realized losses on foreign currency transactions ................................. (3,098)
Change in net unrealized appreciation on investments and foreign currency transactions 7,754,026
-----------
Increase in net assets resulting from operations ....................................... $13,364,311
===========
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ............................................................ $ 1,539,622 $ 1,653,377
Net realized gains on investments ................................................ 4,073,761 14,229,486
Net realized losses on foreign currency transactions ............................. (3,098) (5,695)
Unrealized appreciation on investments and foreign currency transactions ......... 7,754,026 7,164,338
------------ ------------
Net increase in net assets resulting from operations ............................... 13,364,311 23,041,506
------------ ------------
Distributions declared from:
Net investment income ............................................................ (1,536,000) (1,645,577)
In excess of net investment income ............................................... (38,486) (30,753)
Net realized gains ............................................................... (4,110,459) (14,188,931)
In excess of net realized gains .................................................. (10,275) --
------------ ------------
Total distributions ................................................................ (5,695,220) (15,865,261)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold ................................................... 86,125,469 30,092,306
Cost of fund shares repurchased .................................................. (56,579,053) (39,471,310)
Distributions reinvested ......................................................... 5,695,220 15,865,261
------------ ------------
Net increase in net assets resulting from fund share transactions .................. 35,241,636 6,486,257
------------ ------------
Total increase in net assets ....................................................... 42,910,727 13,662,502
Net assets:
Beginning of year ................................................................ 106,909,342 93,246,840
------------ ------------
End of year ...................................................................... $149,820,069 $106,909,342
============ ============
Accumulated overdistributed net investment income included in ending net assets $ (38,657) $ (31,448)
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold ...................................................................... 13,975,007 1,875,504
Shares repurchased ............................................................... (12,155,226) (2,624,840)
Distributions reinvested ......................................................... 350,922 1,039,663
------------ ------------
Net increase ....................................................................... 2,170,703 290,327
============ ============
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial Growth and Income Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period ......... $ 15.34 $ 13.96 $ 12.60 $ 10.03 $ 10.36
-------- -------- ------- ------- -------
Net investment income (a) .................... 0.20 0.28 0.28 0.29 0.26
Net realized and unrealized gains (losses)
on investments and foreign currency
transactions ............................... 1.50 3.75 1.98 2.72 (0.34)
-------- -------- ------- ------- -------
Total from investment operations ............. 1.70 4.03 2.26 3.01 (0.08)
-------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.18) (0.27) (0.28) (0.25) (0.25)
In excess of net investment income ......... (0.00) (0.01) -- -- --
Dividends from net realized gains .......... (0.47) (2.37) (0.62) (0.19) --
In excess of net realized gains ............ (0.00) -- -- -- --
-------- -------- ------- ------- -------
Total distributions .......................... (0.65) (2.65) (0.90) (0.44) (0.25)
-------- -------- ------- ------- -------
Net asset value, end of year ................. $ 16.39 $ 15.34 $ 13.96 $ 12.60 $ 10.03
======== ======== ======= ======= =======
Total return:
Total investment return (b) ................ 11.13% 28.97% 17.89% 30.03% (0.76)%
Ratios/supplemental data:
Net assets, end of year (000) ................ $149,820 $106,909 $93,247 $71,070 $48,052
Ratio of net expenses to average net
assets ..................................... 0.76%(c) 0.79%(c) 0.79%(c) 0.81%(c) 0.87%
Ratio of net investment income to
average net assets ......................... 1.24%(c) 1.77%(c) 2.02%(c) 2.51%(c) 2.82%
Portfolio turnover ratio ..................... 28% 60% 24% 79% 55%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any. Federal Income tax footnote (unaudited) None of the gains
recorded in August 1998 were derived from long term gains. 89.94% of the
gain distribution recorded in December 1998 and paid in January 1999 was
derived from long term gains.
Federal Income tax footnote (unaudited)
None of the gains recorded in August 1998 were derived from long term gains.
84.94% of the gain distribution recorded in December 1998 and paid in
January 1999 was derived from long term gains.
See Notes to Financial Statements.
27
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------- --------------
<S> <C> <C> <C>
COMMON STOCKS--94.2%
Construction--3.0%
Heavy Construction--
Non-Building Construction
Vivendi ................................ Fr 8,200 $ 2,127,108
-----------
Finance, Insurance & Real Estate--1.5%
Real Estate Investment Trusts
Liberty Property Trust ................. 44,800 1,103,200
-----------
Manufacturing--10.7%
Communications Equipment--9.3%
Lucent Technologies, Inc. .............. 14,900 1,639,000
Nokia Corp. ADR ........................ Fi 18,200 2,191,962
Portugal Telecom SA .................... Pt 19,500 870,187
Tellabs, Inc. (a) ...................... 28,200 1,933,463
-----------
6,634,612
-----------
Machinery & Computer Equipment--1.4%
Prologis Trust ......................... 47,800 991,850
-----------
Transportation, Communication, Electric,
Gas & Sanitary Services--78.2%
Electric Services--31.0%
AES Corp. (a) .......................... 38,400 1,819,200
British Energy PLC ..................... UK 188,000 2,148,358
CMS Energy Corp. ....................... 26,800 1,298,125
Edison International ................... 39,800 1,109,425
Electricidade de Portugal
SA ADR ............................... Pt 12,100 539,206
FPL Group, Inc. ........................ 30,500 1,879,562
Iberdrola SA ........................... Sp 124,900 2,336,348
NIPSCO Industries, Inc. ................ 66,700 2,030,181
National Power PLC ADR ................. UK 15,100 554,925
New Century Energies, Inc. ............. 25,300 1,233,375
Peco Energy Co. ........................ 46,500 1,935,562
Pinnacle West Capital Corp. ............ 42,600 1,805,175
Scottish Power PLC ADR ................. UK 35,900 1,483,119
Sierra Pacific Resources ............... 16,000 608,000
Texas Utilities Co. .................... 27,500 1,283,906
-----------
22,064,467
-----------
Gas Services--8.4%
Columbia Energy Group .................. 21,250 1,227,188
Kinder Morgan Energy
Partners, L.P. ....................... 29,600 1,073,000
KN Energy, Inc. ........................ 37,900 1,378,612
Questar Corp. .......................... 31,000 600,625
Williams Companies, Inc. ............... 53,900 1,681,006
-----------
5,960,431
-----------
Sanitary Services--4.2%
American Water Works
Co., Inc. ............................ 40,300 1,360,125
Waste Management, Inc. ................. 34,400 1,603,900
-----------
2,964,025
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------- --------------
<S> <C> <C> <C>
Telecommunication--34.6%
AirTouch Communications,
Inc. (a) ............................. 31,200 $ 2,250,300
Ameritech Corp. ........................ 12,300 779,512
AT&T Corp. ............................. 28,100 2,114,525
COLT Telecom Group
ADR (a) .............................. UK 34,000 2,035,750
France Telecom SA ...................... Fr 18,400 1,461,532
MCI WorldCom, Inc. (a) ................. 39,900 2,862,825
SBC Communications,
Inc., Class A ........................ 31,200 1,673,100
Sonera Group Oyj (a) ................... Fi 80,700 1,440,238
Sprint Corp. ........................... 24,200 2,035,825
Sprint PCS (a) ......................... 12,100 279,813
Swisscom AG (a) ........................ Sz 6,950 2,908,479
Telecom Corporation of
New Zealand .......................... NZ 44,000 1,570,250
Telecom Italia SPA ..................... It 236,800 1,485,725
Telefonica de Espana ADR Sp 12,900 1,746,338
-----------
24,644,212
-----------
Wholesale Trade--0.8%
Nondurable Goods
VEBA AG ................................ G 9,200 551,044
-----------
Total Common Stocks
(cost of $50,318,329) ........................................ 67,040,949
-----------
PREFERRED STOCK--2.1%
Transportation, Communication, Electric,
Gas & Sanitary Services--2.1%
Communications Equipment
Ericsson LM, 4.250%
(cost of $1,255,716) ................. Sw 232,200 1,480,275
-----------
Par
-------
CORPORATE FIXED-INCOME BONDS--1.9%
Transportation, Communication, Electric,
Gas & Sanitary Services--1.9%
Electric Services
Hydro-Quebec,
8.050% 7/7/2024
(cost of $1,362,761) ................. Ca $1,150,000 1,388,775
-----------
Total Investments
(cost of $52,936,806)(b) ..................................... 69,909,999
-----------
SHORT-TERM OBLIGATIONS--1.6%
Repurchase agreement with ABN
AMRO Chicago Corp., dated 12/31/98, due 01/04/99 at 4.750%, collateralized by
U.S. Treasury notes with various maturities to 2015, market value of
$1,188,542 (repurchase proceeds $1,168,616) 1,168,000 1,168,000
-----------
Forward Currency Contracts--0.0%(c) ........................... 611
-----------
Other Assets & Liabilities, Net--0.2% .......................... 107,535
-----------
Net Assets--100% ............................................... $71,186,145
===========
</TABLE>
See Notes to Investment Portfolio.
28
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
Notes to Investment Portfolio:
(a) Non-income producing.
(b) The cost for federal income tax purposes is $52,939,149. Gross unrealized
appreciation and depreciation at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $18,142,446
Gross unrealized depreciation (1,171,596)
-----------
Net unrealized appreciation $16,970,850
===========
</TABLE>
(c) As of December 31, 1998, the Fund had entered into the following forward
currency exchange contracts:
<TABLE>
<CAPTION>
Contracts In Exchange Settlement Net Unrealized
to Deliver For Date Appreciation ($)
- ------------ ---------------- ---------- ----------------
<S> <C> <C> <C>
US$176,574 IL 292,144,039 01/05/1999 $309
US$124,784 FF 699,244 01/29/1999 302
----
$611
====
</TABLE>
<TABLE>
<CAPTION>
% of Total
Country Securities
Summary of Securities by Country Abbrev. Value at Value
- -------------------------------- --------- -------------- -----------
<S> <C> <C> <C>
United States .................. $41,590,380 59.6
United Kingdom ................. UK 6,222,152 8.9
Spain .......................... Sp 4,082,686 5.8
Finland ........................ Fi 3,632,200 5.2
France ......................... Fr 3,588,640 5.1
Switzerland .................... Sz 2,908,479 4.2
New Zealand .................... NZ 1,570,250 2.2
Italy .......................... It 1,485,725 2.1
Sweden ......................... Sw 1,480,275 2.1
Portugal ....................... Pt 1,409,393 2.0
Canada ......................... Ca 1,388,775 2.0
Germany ........................ G 551,044 0.8
----------- ----
$69,909,999 100%
=========== ====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<S> <C>
Acronym Name
------- ----
ADR American Depositary Receipt
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $52,936,806) .......................... $69,909,999
Short-term obligations .............................................................. 1,168,000
Cash (including foreign currencies) ................................................. 404,424
Dividends, tax reclaims and interest receivable ..................................... 150,346
Receivable for fund shares sold ..................................................... 17,030
Unrealized appreciation on forward currency exchange contracts ...................... 611
Other assets ........................................................................ 2,182
-----------
Total assets .................................................................... 71,652,592
-----------
Liabilities:
Payable for investments purchased ................................................... 301,970
Payable for fund shares repurchased ................................................. 100,178
Management fee payable .............................................................. 37,337
Bookkeeping fee payable ............................................................. 2,768
Transfer agent fee payable .......................................................... 625
Accrued expenses payable ............................................................ 23,569
-----------
Total liabilities ............................................................... 466,447
-----------
Net assets .......................................................................... $71,186,145
===========
Net assets represented by:
Paid-in capital ................................................................... $55,267,584
Accumulated overdistributed net investment income ................................. (103,918)
Accumulated net realized losses on investments and foreign currency transactions .. (950,698)
Net unrealized appreciation on investments and foreign currency transactions ...... 16,973,177
-----------
Total net assets applicable to outstanding shares of beneficial interest ............ $71,186,145
===========
Shares of beneficial interest outstanding ........................................... 5,174,353
===========
Net asset value per share ........................................................... $13.76
======
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends (net of nonrebatable foreign taxes withheld at source of $59,350) ............ $ 1,236,587
Interest income ........................................................................ 401,230
-----------
Total investment income ............................................................ 1,637,817
-----------
Expenses:
Management fee ....................................................................... 390,383
Bookkeeping fee ...................................................................... 30,524
Transfer agent fee ................................................................... 7,500
Audit fee ............................................................................ 20,551
Printing expense ..................................................................... 6,087
Trustees' expense .................................................................... 4,703
Custodian fees ....................................................................... 13,890
Legal fees ........................................................................... 1,643
Amortization of organization expense ................................................. 2,733
Miscellaneous expense ................................................................ 17,807
-----------
Total expenses ..................................................................... 495,821
-----------
Net investment income .................................................................. 1,141,996
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized losses on investments ................................................... (944,622)
Net realized losses on foreign currency transactions ................................. (81,907)
Change in net unrealized appreciation on investments and foreign currency transactions 10,344,797
-----------
Net increase in net assets resulting from operations ................................... $10,460,264
===========
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ....................................................... $ 1,141,996 $ 1,894,428
Net realized gains (losses) on investments .................................. (944,622) 10,703,205
Net realized losses on foreign currency transactions ........................ (81,907) (42,539)
Unrealized appreciation (depreciation) on investments and foreign currency
transactions .............................................................. 10,344,797 (100,383)
------------ ------------
Net increase in net assets resulting from operations .......................... 10,460,264 12,454,711
------------ ------------
Distributions declared from:
Net investment income ....................................................... (1,093,286) (1,882,751)
In excess of net investment income .......................................... (27,116) --
Net realized gains .......................................................... (526,699) (5,469,889)
------------ ------------
Total distributions ........................................................... (1,647,101) (7,352,640)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold .............................................. 27,814,816 6,189,301
Cost of fund shares repurchased ............................................. (21,691,948) (11,947,796)
Distributions reinvested .................................................... 1,647,101 7,352,640
------------ ------------
Net increase in net assets resulting from fund share transactions ............. 7,769,969 1,594,145
------------ ------------
Total increase in net assets .................................................. 16,583,132 6,696,216
Net assets:
Beginning of year ........................................................... 54,603,013 47,906,797
------------ ------------
End of year ................................................................. $ 71,186,145 $ 54,603,013
============ ============
Accumulated overdistributed net investment income included in
ending net assets ........................................................... $ (103,918) $ (47,338)
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold ................................................................. 2,124,940 528,994
Shares repurchased .......................................................... (1,654,612) (1,042,449)
Distributions reinvested .................................................... 124,015 617,350
------------ ------------
Net increase .................................................................. 594,343 103,895
============ ============
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Stein Roe Global Utilities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1998 1997
------- -------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of year .................. $ 11.92 $ 10.70
------- -------
Net investment income (a) ........................... 0.24 0.46
Net realized and unrealized gains (losses) on
investments ....................................... 1.93 2.62
------- -------
Total from investment operations .................... 2.17 3.08
------- -------
Less distributions:
Dividends from net investment income .............. (0.21) (0.48)
In excess of net investment income ................ (0.01) --
Dividends from net realized gains ................. (0.11) (1.38)
------- -------
Total distributions ................................. (0.33) (1.86)
------- -------
Net asset value, end of year ........................ $ 13.76 $ 11.92
======= =======
Total return:
Total investment return (b) ....................... 18.33% 28.75%
Ratios/supplemental data:
Net assets, end of year (000) ....................... $71,186 $54,603
Ratio of net expenses to average net assets ......... 0.82%(c) 0.83%(c)
Ratio of net investment income to average net assets 1.90%(c) 3.96%(c)
Portfolio turnover ratio ............................ 53% 89%
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year .................. $ 10.50 $ 8.11 $ 9.65
------- ------- -------
Net investment income (a) ........................... 0.46 0.46 0.54
Net realized and unrealized gains (losses) on
investments ....................................... 0.23 2.39 (1.53)
------- ------- -------
Total from investment operations .................... 0.69 2.85 (0.99)
------- ------- -------
Less distributions:
Dividends from net investment income .............. (0.49) (0.46) (0.55)
In excess of net investment income ................ -- -- --
Dividends from net realized gains ................. -- -- --
------- ------- -------
Total distributions ................................. (0.49) (0.46) (0.55)
------- ------- -------
Net asset value, end of year ........................ $ 10.70 $10.50 $ 8.11
======= ======= =======
Total return:
Total investment return (b) ....................... 6.53% 35.15% (10.27)%
Ratios/supplemental data:
Net assets, end of year (000) ....................... $47,907 $51,597 $38,156
Ratio of net expenses to average net assets ......... 0.81%(c) 0.83%(c) 0.86%
Ratio of net investment income to average net assets 4.36%(c) 4.98%(c) 5.80%
Portfolio turnover ratio ............................ 14% 18% 16%
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any. Federal Income Tax footnote (unaudited) 99.81% of the gain
distribution recorded and paid in August 1998 was derived from long term
gains.
Federal Income Tax footnote (unaudited)
99.81% of the gain distribution recorded and paid in August 1998 was derived
from long term gains.
See Notes to Financial Statements.
32
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------- --------------
<S> <C> <C> <C>
COMMON STOCKS--88.9%
Agriculture, Forestry & Fishing--0.6%
Agricultural Services--0.0%
PT Chareon Pokphand
Indonesia ..................... In 162,500 $ 3,047
-----------
Agriculture--Crops--0.6%
Tabacalera SA ................... Sp 11,700 299,641
-----------
Construction--2.4%
Heavy Construction--
Non-Building Construction
Kaneshita Construction .......... Ja 21,000 114,967
Vivendi ......................... Fr 4,446 1,153,307
-----------
1,268,274
-----------
Finance, Insurance & Real Estate--23.1%
Depository Institutions--13.0%
Allied Irish Banks PLC .......... Ir 29,500 520,321
Banco Latinoamericano de
Exportaciones, SA ............. Pn 16,000 266,000
Banco Popolare di Milano
(BPM) ......................... It 158,600 1,440,342
Banque Nationale de Paris ....... Fr 19,100 1,572,489
Corporacion Bancaria de
Espana SA ..................... Sp 12,300 318,473
Deutsche Bank AG ................ G 22,200 1,307,687
Generale Banque, VVPR
STRIP (a) ..................... Be 105 3
HSBC Holdings PLC (b) ........... HK 201 5,007
Merita Ltd., Class A ............ Fi 220,500 1,392,463
-----------
6,822,785
-----------
Financial Services--0.1%
Industrial Finance Corp. of
Thailand ...................... Th 170,700 70,440
-----------
Holding & Other Investment Offices--2.3%
Fortis AG ....................... Be 3,245 1,174,068
Fortis AG-CVG (a) ............... Be 3,395 15,293
Fortis AG-STRIP VVPR (a) ........ Be 3,395 197
-----------
1,189,558
-----------
Holding Companies--2.3%
Fortis Amev NV .................. Ne 14,802 1,225,232
-----------
Insurance Carriers--0.4%
Reinsurance Australia Corp. ..... Au 136,808 209,571
-----------
Investment Companies--1.6%
Irish Investment Fund, Inc. ..... Ir 25,500 519,562
Japan OTC Equity Fund,
Inc. (a) ...................... Ja 250 82,500
World Equity Benchmark
Share--Japan .................. Ja 24,800 254,200
-----------
856,262
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------- --------------
<S> <C> <C> <C>
Nondepository Credit Institutions--1.6%
Promise Co., Ltd. ............... Ja 16,500 $ 856,689
-----------
Real Estate--1.8%
Asticus AB (a) .................. Sw 35,350 346,654
Diligentia AB ................... Sw 70,200 493,573
IOI Properties Berhad ........... Ma 62,000 74,400
-----------
914,627
-----------
Manufacturing--38.7%
Apparel--0.9%
Tokyo Style ..................... Ja 48,000 484,874
-----------
Chemicals & Allied Products--5.6%
Henkel KGAA ..................... G 1,067 85,896
Indian Petrochemicals Corp.,
Ltd. GDR ...................... Id 15,800 65,965
Kemira Oy ....................... Fi 66,000 472,450
Norsk Hydro AS .................. No 14,800 495,434
Novartis ........................ Sz 417 819,432
Reliance Industries Ltd. GDR .... Id 12,000 69,900
SmithKline Beecham PLC .......... UK 67,326 936,616
-----------
2,945,693
-----------
Communications Equipment--5.0%
Koor Industries Ltd. ............ Is 13,000 226,687
Matsushite Electric Industrial
Co. ........................... Ja 57,000 1,006,119
Portugal Telecom SA ............. Pt 9,500 423,937
Racal Electronics PLC ........... UK 163,300 941,164
-----------
2,597,907
-----------
Electronic Components--5.1%
Alcatel Alsthom ................. Fr 6,755 826,588
Murata Manufacturing Co.,
Ltd. .......................... Ja 19,000 786,843
Royal Philips Electronics NV .... Ne 13,500 913,781
Samsung Electronics ............. Ko 1,249 84,006
Samsung Electronics GDS ......... Ko 1,960 75,950
-----------
2,687,168
-----------
Food & Kindred Products--0.6%
Perdigao SA ..................... Bz 70,000,000 85,744
Vitasoy International
Holdings Ltd. ................. HK 583,750 212,866
-----------
298,610
-----------
Household Appliances--0.6%
Moulinex (a) .................... Fr 18,300 281,551
-----------
Machinery & Computer Equipment--4.2%
Bucher Holding .................. Sz 602 481,951
Canon, Inc. ..................... Ja 16,000 341,192
Mannesmann AG ................... G 12,000 1,376,949
-----------
2,200,092
-----------
</TABLE>
See Notes to Investment Portfolio.
33
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ --------------
<S> <C> <C> <C>
Measuring & Analyzing Instruments--0.8%
Celsis International PLC (a) ..... UK 203,670 $ 75,894
Orbotech, Ltd. (a) ............... Is 7,600 360,050
-----------
435,944
-----------
Paper Products--6.0%
Enso Oy, Series R ................ Fi 90,500 915,836
Metro Pacific Corp. .............. Ph 2,992,340 109,232
Metsa-Serla Oy, B Shares ......... Fi 101,600 806,990
Royal Koninklijke PTT
Nederland NV ................... Ne 16,130 806,586
TNT Post Group NV ................ Ne 15,154 487,721
-----------
3,126,365
-----------
Petroleum Refining--3.4%
Compagnie Francaise de
Petroleum, Total B Shares ...... Fr 8,989 910,197
YPF Sociedad Anonima ADR ......... Ar 31,900 891,206
-----------
1,801,403
-----------
Primary Metals--2.5%
Avesta Sheffield AB .............. Sw 83,900 235,959
Billiton PLC ..................... UK 346,800 689,223
Svenska Stal AB (SSAB),
Series B ...................... Sw 38,263 365,781
-----------
1,290,963
-----------
Rubber & Plastic--1.5%
Michelin, Class B ................ Fr 20,100 803,676
-----------
Stone, Clay, Glass & Concrete--1.1%
Companion Building
Materials, Ltd. ................ HK 1,911,840 23,938
CRH PLC .......................... Ir 27,000 456,104
N.V. Koninklijke Sphinx
Gustavsberg .................... Ne 16,846 107,539
-----------
587,581
-----------
Textile Mill Products--0.0%
PT Evershine Textile
Industry ....................... In 427,396 16,027
-----------
Tobacco Products--1.4%
Allied Zurich PLC (a) ............ UK 17,000 255,080
B.A.T. Industries PLC ............ UK 28,000 245,773
Grupo Carso SA, Series A-1 ....... Mx 69,900 237,117
-----------
737,970
-----------
Mining & Energy--1.8%
Coal Mining--0.5%
Samchully Co. .................... Ko 11,273 280,884
-----------
Crude Petroleum & Natural Gas--0.8%
Saga Petroleum ASA ............... No 47,200 429,794
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------ --------------
<S> <C> <C> <C>
Miscellaneous Metal Ores--0.5%
Southern Peru Copper ............. Pe 25,500 $ 240,656
-----------
Retail Trade--4.3%
Auto Dealers & Gas Stations--1.2%
Inchcape PLC ..................... UK 296,988 634,495
-----------
Food Stores--0.5%
Tesco PLC ........................ UK 87,000 252,149
-----------
General Merchandise
Stores--1.4%
Globex Utilidades SA ............. Bz 15,600 54,227
Ito-Yokado Co., Ltd. ............. Ja 9,000 627,814
PT Matahari Putra Prima .......... In 858,000 21,450
-----------
703,491
-----------
Miscellaneous Retail--0.6%
Centros Comerciales (a) .......... Sp 9,650 327,027
-----------
Restaurants--0.6%
TelePizza SA (a) ................. Sp 33,300 315,556
-----------
Services--2.9%
Computer Software ................
Ing C. Olivetti & SPA ............ It 432,380 1,509,163
-----------
Transportation, Communication, Electric,
Gas & Sanitary Services--13.4%
Air Transportation--0.3%
Helikopter Service Group
ASA ............................ No 37,600 177,347
-----------
Communications--0.5%
Vodafone Group PLC ............... UK 16,000 259,154
-----------
Gas Services--3.0%
BG PLC ........................... UK 172,076 1,102,887
Centrica PLC (a) ................. UK 232,000 474,520
-----------
1,577,407
-----------
Sanitary Services--0.3%
Companhia de Saneamento
Basico do Estado de Sao
Paulo .......................... Bz 1,902,000 144,037
-----------
Telecommunications--7.1%
Embratel Participacoes SA
ADR (a) ........................ Bz 12,400 172,825
Nippon Telegraph &
Telephone Corp. ................ Ja 108 831,576
SK Telecom Co., Ltd. ............. Ko 133 98,206
Tele Celular Sul
Participacoes SA ADR (a) ....... Bz 1,240 21,623
Tele Centro Oeste Celular
Participacoes ADR (a) .......... Bz 4,133 12,141
Tele Centro Sul Participacoes
SA ADR (a) ..................... Bz 2,480 103,695
</TABLE>
See Notes to Investment Portfolio.
34
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------- -----------------
<S> <C> <C> <C>
Tele Leste Celular
Participacoes SA ADR (a) ............. Bz 248 $ 7,037
Tele Nordeste Celular
Participacoes SA ADR (a) ............. Bz 620 11,470
Tele Norte Celular
Participacoes SA ADR (a) ............. Bz 248 5,596
Tele Norte Leste
Participacoes SA ADR (a) ............. Bz 12,400 154,225
Tele Sudeste Celular
Participacoes SA ADR (a) ............. Bz 2,480 51,305
Telecom Argentina Stet--
France Telecom SA .................... Ar 11,500 316,250
Telecom Italia SPA (RISP) .............. It 96,775 607,183
Telecom Italia SPA ..................... It 75,000 638,845
Telefonica de Espana ADR ............... Sp 2,250 304,594
Telemig Celular
Participacoes SA ADR (a) ............. Bz 620 13,175
Telesp Celular Participacoes
SA ADR (a) ........................... Bz 4,960 86,800
Telesp Participacoes SA
ADR (a) .............................. Bz 12,400 274,350
-----------
3,710,896
-----------
Water Transportation--2.2%
Danzas Holding AG ...................... Sz 2,175 918,122
Hong Kong Ferry Holdings
Co. .................................. HK 203,000 235,830
-----------
1,153,952
-----------
Wholesale Trade--1.7%
Durable Goods
Biora AB ADR (a) ....................... Sw 9,900 128,700
Brierley Investments Ltd. .............. NZ 903,000 204,318
Powerscreen International
PLC .................................. UK 171,190 320,373
Yamazen Corp. .......................... Ja 151,000 248,000
-----------
901,391
-----------
Total Common Stocks
(cost of $44,094,018) ...................................... 46,629,349
-----------
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------------- -----------------
<S> <C> <C> <C>
PREFERRED STOCKS--4.0%
Manufacturing--4.0%
Chemicals & Allied Products--2.6%
Henkel KGAA ............................ G 15,433 $ 1,381,465
-----------
Electronic Components--1.4%
Samsung Electronics NV ................. Ko 21,300 702,897
-----------
Total Preferred Stocks
cost of $1,216,720) ........................................ 2,084,362
-----------
WARRANTS--0.0% (a)
Construction--0.0%
Non-Building Construction
Vivendi ................................ Fr 2,755 7,147
-----------
Finance, Insurance & Real Estate--0.0%
Depository Institutions
Siam Commercial Bank (b) ............... Th 12,000 (c)
-----------
Total Warrants
cost of $1,864) ............................................ 7,147
-----------
Total Investments--92.9%
(cost of $45,312,602) (d) .................................. 48,720,858
-----------
Par
-------
SHORT-TERM OBLIGATIONS--7.6%
Repurchase agreement with ABN
AMRO Chicago Corp., dated 12/31/98 due 01/04/99 at 4.750%, collateralized by
U.S. Treasury notes with various maturities to 2015, market value $4,064,243
(repurchase proceeds $3,996,108) ............... $3,994,000 3,994,000
-----------
Other Assets & Liabilities, Net--(0.5%) ...................... (246,548)
-----------
Net Assets--100% ............................................. $52,468,310
===========
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) The value of this security represents fair 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 $45,374,010. Gross unrealized
appreciation and depreciation at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $11,476,665
Gross unrealized depreciation (8,129,817)
-----------
Net unrealized appreciation $ 3,346,848
===========
</TABLE>
See Notes to Investment Portfolio.
35
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Total
Country Securities
Summary of Securities by Country Abbrev. Value at Value
- -------------------------------- --------- ------------- -----------
<S> <C> <C> <C>
United Kingdom ................. UK $ 6,187,328 12.7
Japan .......................... Ja 5,634,774 11.6
France ......................... Fr 5,554,955 11.4
Italy .......................... It 4,195,533 8.6
Germany ........................ G 4,151,997 8.5
Finland ........................ Fi 3,587,739 7.4
Netherlands .................... Ne 3,540,859 7.3
Switzerland .................... Sz 2,219,505 4.6
Sweden ......................... Sw 1,570,667 3.2
Spain .......................... Sp 1,565,291 3.2
Ireland ........................ Ir 1,495,987 3.1
Korea .......................... Ko 1,241,943 2.5
Argentina ...................... Ar 1,207,456 2.4
Brazil ......................... Bz 1,198,250 2.5
Belgium ........................ Be 1,189,561 2.4
Norway ......................... No 1,102,575 2.3
Israel ......................... Is 586,737 1.2
Hong Kong ...................... HK 477,641 1.0
Portugal ....................... Pt 423,937 0.9
Panama ......................... Pn 266,000 0.5
Peru ........................... Pe 240,656 0.5
Mexico ......................... Mx 237,117 0.5
Australia ...................... Au 209,571 0.4
New Zealand .................... NZ 204,318 0.4
India .......................... Id 135,865 0.3
Philippines .................... Ph 109,232 0.2
Malaysia ....................... Ma 74,400 0.2
Thailand ....................... Th 70,440 0.1
Indonesia ...................... In 40,524 0.1
----------- -----
$48,720,858 100.0
=========== =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<S> <C>
Acronym Name
------- ----
ADR American Depositary Receipt
GDR Global Depositary Receipt
GDS Global Depositary Shares
STRIP Separately Traded Receipt of Interest and
Principal
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $45,312,602) ....................... $48,720,858
Short-term obligations ........................................................... 3,994,000
Cash (including foreign currencies) .............................................. 2,020,339
Dividends, tax reclaims, and interest receivable ................................. 44,814
Receivable for investments sold .................................................. 18,662
Receivable for fund shares sold .................................................. 3,044
Unamortized organization expense ................................................. 1,432
Other assets ..................................................................... 3,119
-----------
Total assets ................................................................. 54,806,268
-----------
Liabilities:
Payable for investments purchased ................................................ 1,997,458
Payable for fund shares repurchased .............................................. 267,141
Management fee payable ........................................................... 38,333
Bookkeeping fee payable .......................................................... 2,258
Transfer agent fee payable ....................................................... 625
Accrued expenses payable ......................................................... 32,143
-----------
Total liabilities ............................................................ 2,337,958
-----------
Net assets ....................................................................... $52,468,310
===========
Net assets represented by:
Paid-in capital ................................................................ $51,137,273
Accumulated overdistributed net investment income .............................. (105,144)
Accumulated net realized losses on investments and foreign currency transactions (1,968,739)
Net unrealized appreciation on investments and foreign currency transactions ... 3,404,920
-----------
Total net assets applicable to outstanding shares of beneficial interest ......... $52,468,310
===========
Shares of beneficial interest outstanding ........................................ 26,267,123
===========
Net asset value per share ........................................................ $2.00
=====
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends (net of nonrebatable foreign taxes withheld at source of $81,148) ............ $ 651,453
Interest income ........................................................................ 178,103
-----------
Total investment income ............................................................ 829,556
-----------
Expenses:
Management fee ....................................................................... 369,574
Bookkeeping fee ...................................................................... 27,008
Transfer agent fee ................................................................... 7,500
Audit fee ............................................................................ 22,451
Printing expense ..................................................................... 2,918
Trustees' expense .................................................................... 4,247
Custodian fee ........................................................................ 54,793
Legal fees ........................................................................... 635
Amortization of organization expense ................................................. 4,318
Miscellaneous expense ................................................................ 17,964
-----------
Total expenses ..................................................................... 511,408
-----------
Net investment income .................................................................. 318,148
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized losses on investments ................................................... (1,623,553)
Net realized gains on foreign currency transactions .................................. 11,753
Change in net unrealized appreciation on investments and foreign currency transactions 5,220,545
-----------
Net increase in net assets resulting from operations ................................... $ 3,926,893
===========
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ......................................................... $ 318,148 $ 247,637
Net realized gains (losses) on investments .................................... (1,623,553) 1,240,608
Net realized gains (losses) on foreign currency transactions .................. 11,753 (60,375)
Change in unrealized appreciation (depreciation) on investments and foreign
currency transactions ........................................................ 5,220,545 (2,415,992)
------------ ------------
Net increase (decrease) in net assets resulting from operations ................ 3,926,893 (988,122)
------------ ------------
Distributions declared from:
Net investment income ......................................................... (121,681) (247,637)
In excess of net investment income ............................................ (145,244) (352,525)
Net realized gains ............................................................ -- (1,215,847)
------------ ------------
Total distributions ............................................................ (266,925) (1,816,009)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold ................................................ 57,088,376 20,868,051
Cost of fund shares repurchased ............................................... (39,146,772) (15,873,163)
Distributions reinvested ...................................................... 266,925 1,816,009
------------ ------------
Net increase in net assets resulting from fund share transactions .............. 18,208,529 6,810,897
------------ ------------
Total increase in net assets ................................................... 21,868,497 4,006,766
Net assets:
Beginning of year ............................................................. 30,599,813 26,593,047
------------ ------------
End of year ................................................................... $ 52,468,310 $ 30,599,813
============ ============
Accumulated overdistributed net investment income included in
ending net assets ............................................................. $ (105,144) $ (171,584)
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold ................................................................... 29,337,610 10,248,160
Shares repurchased ............................................................ (20,432,403) (7,607,101)
Distributions reinvested ...................................................... 135,980 987,446
------------ ------------
Net increase ................................................................... 9,041,187 3,628,505
============ ============
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial International Fund for Growth,
Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1998 1997
------- -------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of year ........................... $ 1.78 $ 1.96
------- -------
Net investment income (a) .................................... 0.02 0.02
Net realized and unrealized gains (losses) on
investments and foreign currency transactions .............. 0.21 (0.08)
------- -------
Total from investment operations ............................. 0.23 (0.06)
------- -------
Less distributions:
Dividends from net investment income ....................... (0.00) (0.02)
In excess of net investment income ......................... (0.01) (0.02)
Dividends from net realized gains .......................... -- (0.08)
------- -------
Total distributions .......................................... (0.01) (0.12)
------- -------
Net asset value, end of year ................................. $ 2.00 $ 1.78
======= =======
Total return:
Total investment return (b) ................................ 12.96% (3.27)%
Ratios/supplemental data:
Net assets, end of period (000) .............................. $52,468 $30,600
Ratio of net expenses to average net assets .................. 1.24%(c) 1.34%(c)
Ratio of net investment income to average net assets ......... 0.77%(c) 0.82%(c)
Portfolio turnover ratio ..................................... 28% 28%
<CAPTION>
Period
Ended
Year Ended December 31, December 31,
------------------------ ----------------
1996 1995 1994***
------- ------- ----------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ........................... $ 1.97 $ 1.88 $ 2.00
------- ------- -------
Net investment income (a) .................................... 0.02 0.01 --
Net realized and unrealized gains (losses) on
investments and foreign currency transactions .............. 0.09 0.10 (0.12)
------- ------- -------
Total from investment operations ............................. 0.11 0.11 (0.12)
------- ------- -------
Less distributions:
Dividends from net investment income ....................... -- (0.02) --
In excess of net investment income ......................... -- -- --
Dividends from net realized gains .......................... (0.12) -- --
------- ------- -------
Total distributions .......................................... (0.12) (0.02) --
------- ------- -------
Net asset value, end of year ................................. $ 1.96 $ 1.97 $ 1.88
======= ======= =======
Total return:
Total investment return (b) ................................ 5.61% 5.85% (6.00)%**
Ratios/supplemental data:
Net assets, end of period (000) .............................. $26,593 $22,764 $19,146
Ratio of net expenses to average net assets .................. 1.40%(c) 1.40%(c) 1.74%*
Ratio of net investment income to average net assets ......... 0.84%(c) 0.75%(c) 0.13%*
Portfolio turnover ratio ..................................... 115% 40% 31%**
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations May 2, 1994 to December
31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
See Notes to Financial Statements.
39
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------------------- ------------------
<S> <C> <C>
BONDS & NOTES--92.7%
CORPORATE FIXED-INCOME BONDS & NOTES--37.1%
Construction--0.9%
Building Construction
Falcon Building Products, Inc.
stepped coupon, (10.500%
06/15/02) (a) 06/15/07 ......... $ 500,000 $ 295,000
Nortek, Inc., 9.875% 03/01/04..... 500,000 521,250
USG Corp., 9.250% 09/15/01 ....... 250,000 268,488
------------
1,084,738
------------
Manufacturing--15.1%
Chemicals & Allied Products--2.2%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 ............... 200,000 201,000
LaRoche Industries, Inc.,
9.500% 09/15/07 ................ 500,000 400,000
Revlon Consumer Products
Corp., 9.000% 11/01/06 ......... 1,000,000 990,000
Sterling Chemicals, Inc.,
11.250% 04/01/07 ............... 600,000 504,000
Trans Resources, Inc., 10.750%
03/15/08 ....................... 500,000 497,500
------------
2,592,500
------------
Electronic & Electrical Equipment--0.4%
TransDigm, Inc., 10.375%
12/01/08 (b) ................... 500,000 500,000
------------
Fabricated Metals--1.3%
Earle M. Jorgensen & Co.,
9.500% 04/01/05 ................ 250,000 230,000
Euramax International, PLC,
11.250% 10/01/06 (d) ........... 250,000 248,750
Renco Metals, Inc., 11.500%
07/01/03 ....................... 500,000 520,000
US Can Corp., 10.125%
10/15/06 ....................... 500,000 526,250
------------
1,525,000
------------
Food & Kindred Products--0.9%
Special Devices, Inc., 11.375%
12/15/08 (b) ................... 1,000,000 1,017,500
------------
Machinery & Computer Equipment--0.8%
IMO Industries, Inc., 11.750%
05/01/06 ....................... 500,000 505,000
Numatics, Inc., 9.625%
04/01/08 ....................... 650,000 611,000
------------
1,116,000
------------
Miscellaneous Manufacturing--2.8%
AEI Resources, Inc., 10.500%
12/15/05 (b) ................... 500,000 490,000
</TABLE>
<TABLE>
<CAPTION>
Par Value
-------------------- ------------------
<S> <C> <C>
Building Materials Corp. of
America, 8.000% 12/01/08
(b) ............................ $ 500,000 $ 498,750
Compass Aerospace Corp.,
10.125% 04/15/05 (b) ........... 750,000 727,500
Huntsman Corp., 9.500%
07/01/07 ....................... 500,000 497,500
ISG Resources, Inc., 10.000%
04/15/08 ....................... 580,000 574,200
Polymer Group, Inc., 9.000%
07/01/07 ....................... 500,000 495,000
------------
3,282,950
------------
Paper Products--1.9%
Repap New Brunswick, Inc.,
10.625% 04/15/05 ............... 1,170,000 795,600
Riverwood International Corp:
10.625% 08/01/07 ............... 500,000 495,000
10.875% 04/01/08 ............... 500,000 452,500
Stone Container Corp.,
10.750% 10/01/02 ............... 500,000 517,500
------------
2,260,600
------------
Primary Metals--2.5%
Bayou Steel Corp., 9.500%
05/15/08 ....................... 500,000 470,000
Kaiser Aluminum & Chemical
Corp., 10.875% 10/15/06 ........ 1,000,000 1,025,000
Keystone Consolidated
Industries, Inc., 9.625%
08/01/07 ....................... 500,000 477,500
WCI Steel, Inc., 10.000%
12/01/04 ....................... 500,000 500,000
WHX Corp. 10.500% 04/15/05........ 500,000 460,000
------------
2,932,500
------------
Printing & Publishing--0.9%
American Lawyer Media, Inc.,
9.750% 12/15/07 ................ 500,000 517,500
Hollinger International
Publishing, Inc., 9.250%
03/15/07 ....................... 500,000 527,500
------------
1,045,000
------------
Transportation Equipment--1.4%
Collins & Aikman Products
Co., 11.500% 04/15/06 .......... 500,000 517,500
Johnstown America Industries,
Inc. 11.750% 08/15/05 .......... 500,000 527,500
LDM Technologies, Inc.,
10.750% 01/15/07 ............... 600,000 600,000
------------
1,645,000
------------
</TABLE>
See Notes to Investment Portfolio.
40
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------------------- ------------------
<S> <C> <C>
Mining & Energy--1.3%
Oil & Gas Extraction
Belden & Blake Corp. 9.875%
06/15/07 ............................ $ 500,000 $ 405,000
Magnum Hunter Resources,
Inc. 10.000% 06/01/07 ............... 1,000,000 840,000
Nevo Energy Co., 9.500%
04/15/06 ............................ 250,000 247,500
------------
1,492,500
------------
Retail Trade--0.8%
Food Stores
Pathmark Stores, Inc.:
stepped coupon, (10.750%,
11/01/99) (a) 11/01/03 .............. 500,000 410,000
9.625% 05/01/03 ...................... 500,000 490,000
------------
900,000
------------
Services--3.8%
Amusement & Recreation--1.0%
Hollywood Casino Corp.
12.750% 11/01/03 .................... 600,000 639,000
Regal Cinemas, Inc., 9.500%
06/01/08 ............................ 500,000 515,000
------------
1,154,000
------------
Business Services--0.5%
Unisys Corp., 11.750%
10/15/04 ............................ 500,000 580,000
------------
Hotels, Camps & Lodging--1.4%
Eldorado Resorts LLC, 10.500%
08/15/06 ............................ 500,000 520,000
Horseshoe Gaming, LLC,
9.375% 06/15/07 ..................... 600,000 621,000
Station Casinos, Inc., 8.875%
12/01/08 (b) ........................ 500,000 500,000
------------
1,641,000
------------
Motion Pictures--0.4%
Loews Cineplex Entertainment
Corp., 8.875% 08/01/08 .............. 500,000 516,250
------------
Other Services--0.5%
Borg-Warner Security Corp.,
9.625% 03/15/07 ..................... 600,000 651,000
------------
Transportation, Communication,
Electric, Gas & Sanitary Services--15.2%
Air Transportation--0.7%
U.S. Air, Inc., 10.375%
03/01/13 ............................ 500,000 552,500
United Airlines, Inc., 9.200%
03/22/08 ............................ 256,856 296,613
------------
849,113
------------
</TABLE>
<TABLE>
<CAPTION>
Par Value
-------------------- ------------------
<S> <C> <C>
Broadcasting--2.8%
Allbritton Communications
Co., 9.750% 11/30/07 ................ $ 500,000 $ 530,000
Fox Family Worldwide, Inc.:
stepped coupon, (10.250%
11/01/02)
(a) 11/01/07 ...................... 500,000 312,500
9.250% 11/01/07 ..................... 750,000 740,625
LIN Holding Corp., stepped
coupon, (10.000% 03/01/03)
(a) 03/01/08 ........................ 500,000 351,250
NWCG Holding Corp., (c)
06/15/99 ............................ 425,000 412,645
Renaissance Media Group,
stepped coupon, (10.000%
04/15/03) (a) 04/15/08 .............. 500,000 335,000
Young Broadcasting Corp.,
11.750% 11/15/04 .................... 650,000 695,500
------------
3,377,520
------------
Cable--3.4%
Comcast UK Cable Partners
Ltd., stepped coupon,
(11.200% 11/15/00) (a)
11/15/07 ............................ 500,000 425,000
Diamond Cable Co., stepped
coupon, (10.750% 02/15/02)
(a) 02/15/07 ........................ 500,000 360,000
EchoStar Satellite Broadcasting Corp.:
stepped coupon, (13.125%,
03/15/00) (a) 03/15/04 .............. 500,000 498,750
stepped coupon, (12.875%,
06/01/99) (a) 06/01/04 .............. 500,000 511,250
12.500% 07/01/02 .................... 250,000 288,750
Marcus Cable Co., L.P.,
stepped coupon, (14.250%,
06/15/00) (a) 12/15/05 .............. 600,000 576,000
Northland Cable Television,
Inc. 10.250% 11/15/07 ............... 500,000 526,250
Telewest Communication PLC,
stepped coupon, (11.000%,
10/01/00) (a) 10/01/07 (d) .......... 1,000,000 835,000
------------
4,021,000
------------
Communications--1.2%
Century Communications
Corp., (c) 01/15/08 ................. 1,000,000 515,000
Classic Cable, Inc., 9.875%
08/01/08 (b) ........................ 500,000 520,000
FrontierVision Holdings L.P.,
stepped coupon, (11.875%,
09/15/01) (a) 09/15/07 .............. 500,000 418,750
------------
1,453,750
------------
</TABLE>
See Notes to Investment Portfolio.
41
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Electric Services--0.1%
California Energy Co., Inc.,
9.500% 09/15/06 ........................................................ $ 150,000 $ 166,500
-----------
Pipelines--0.3%
Falcon Holding Group L.P.,
stepped coupon, (9.285%,
04/15/03) (a) 04/15/10 ................................................. 500,000 340,000
-----------
Telecommunications--6.7%
Adelphia Communications
Corp., 9.875% 03/01/07 ................................................. 500,000 553,750
Clearnet Communications,
Inc., stepped coupon,
(14.750%, 12/15/00) (a)
12/15/05 ............................................................... 500,000 430,000
Comcast Cellular
Communications, Inc.
9.500% 05/01/07 ........................................................ 500,000 533,750
GST USA, Inc., stepped
coupon, (13.875%,
12/15/00) (a) 12/15/05 ................................................. 500,000 366,250
Hyperion Telecommunications,
Inc., stepped coupon,
(13.000%, 04/15/01) (a)
04/15/03 (b) ........................................................... 500,000 357,500
ICG Holding, Inc., stepped
coupon, (13.500%,
09/15/00) (a) 09/15/05 ................................................. 500,000 408,355
Intermedia Communications,
Inc., stepped coupon,
(11.250%, 07/15/02) (a)
07/15/07 ............................................................... 500,000 345,000
Level 3 Communications, Inc.,
9.125% 05/01/08 ........................................................ 500,000 496,250
Loral Space &
Communications Ltd.,
11.250% 01/15/07 ....................................................... 500,000 495,000
McLeodUSA, Inc., 8.375%
03/15/08 ............................................................... 500,000 502,500
Metrocall, Inc., 10.375%
10/01/07 ............................................................... 500,000 490,000
NTL, Inc.:
stepped coupon, (9.750%,
04/01/03)
(a) 04/01/08 (b) ....................................................... 1,000,000 616,250
11.500% 10/01/08 (b) ................................................... 500,000 545,000
Nextel Communications, Inc.,
stepped coupon, (9.750%,
10/31/02) (a) 10/31/07 ................................................. 500,000 305,000
Nextlink Communications, Inc.,
stepped coupon, (9.450%,
04/15/03) (a) 04/15/08 ................................................. 500,000 287,500
</TABLE>
<TABLE>
<CAPTION>
Par Value
--- -----
<S> <C> <C>
Price Communications
Wireless, Inc., 9.125%
12/15/06 (b) ........................................................... $ 500,000 $ 505,000
Sprint Spectrum L.P., stepped
coupon, (12.500%,
08/15/01) (a) 08/15/06 ................................................. 850,000 777,750
-----------
8,014,855
-----------
Total Corporate Fixed-Income
Bonds & Notes
(cost of $45,350,569)............................................................... 44,159,276
-----------
U.S. Government & Agency Obligations--31.3%
Federal Home Loan Mortgage
Corp., 8.000% 10/01/26 ................................................. 1,582,973 1,638,868
Government National
Mortgage
Association, 8.000% 04/15/17 .......................................... 1,096,808 1,150,310
U.S. Treasury Bonds:
8.750% 05/15/17 ........................................................ 6,231,000 8,667,882
11.625% 11/15/04 (e) ................................................... 5,704,000 7,682,546
12.000% 08/15/13 ....................................................... 4,072,000 6,216,804
U.S. Treasury Notes, 11.875%
11/15/03 (e) ........................................................... 9,109,000 11,888,702
-----------
Total U.S. Government & Agency Obligations
(cost of $35,897,779).......................................................................... 37,245,112
-----------
</TABLE>
<TABLE>
<CAPTION>
Currency
--------
<S> <C> <C> <C>
Foreign Government & Agency Obligations--23.7%
Government of Canada,
10.000% 06/01/08 .............. C$ 426,000 383,442
Government of France,
8.500% 04/25/03 ............... FF 11,730,000 2,519,650
Government of Mexico,
11.375% 09/15/16 (f) .......... 2,315,000 2,385,897
Hellenic Republic:
8.600% 03/26/08 ............... GD 460,500,000 1,824,423
8.900% 03/21/04 ............... GD 493,000,000 1,881,071
Province of Ontario,
8.250% 12/01/05 ............... C$ 2,232,000 1,721,766
Republic of Argentina:
11.250% 04/10/06 (g) .......... DM 975,000 644,318
11.375% 01/30/17 (h) .......... 1,830,000 1,824,281
Republic of Brazil, 10.125%
05/15/27 (i) .................. 1,710,000 1,138,219
Republic of Bulgaria,
Floating Rate, 6.688%
07/28/11 (j) .................. 1,750,000 1,172,500
Republic of Panama,
8.875% 09/30/27 (k) ........... 970,000 907,556
Russian Federation,
11.000% 07/24/18 (l) .......... 394,000 94,806
Swedish Government Bonds,
10.250% 05/05/03 .............. SK 9,400,000 1,455,533
</TABLE>
See Notes to Investment Portfolio.
42
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Currency Par Value
-------- --- -----
<S> <C> <C> <C>
Treasury Corp. of Victoria:
10.250% 11/15/06 .......................... A$ 1,585,000 $ 1,274,764
12.500% 10/15/03 .......................... A$ 1,380,000 1,107,920
United Kingdom Treasury:
9.000% 07/12/11 ........................... KB 899,000 2,132,119
10.000% 02/26/01 .......................... KB 1,160,000 2,116,129
10.000% 09/08/03 .......................... KB 1,518,000 3,091,007
United Mexican States,
10.375% 01/29/03 (m)....................... DM 720,000 460,665
-----------
Total Foreign Government & Agency Obligations
(cost of $28,349,609)........................................... 28,136,066
-----------
Corporate Convertible Bond--0.6%
Mining & Energy--0.6%
Oil & Gas Extraction
HS Resources, Inc.,
9.250% 11/15/06 (cost of
$762,656) ....................................... 775,000 740,125
-----------
Total Bonds & Notes
(cost of $110,360,613).......................................... 110,280,579
-----------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCKS--1.0%
<S> <C> <C>
Transportation, Communication, Electric,
Gas & Sanitary Services--1.0%
Shares
----
Cable
CSC Holdings Limited
PIK:
11.125% ............................ 6,628 742,336
11.750% ............................ 3,816 435,012
-----------
Total Preferred Stocks
(cost of $1,149,223)........................ 1,177,348
-----------
Total Investments--93.7%
(cost of $111,509,836) (n).................. 111,457,927
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
-------------
<S> <C> <C>
Short-Term Obligations--5.2%
Repurchase agreement with ABN AMRO
Chicago Corp., dated 12/31/98,
due 01/04/99
at 4.750%, collateralized by U.S.
Treasury notes with various maturities
to 2015, market value
$6,349,744 (repurchase
proceeds $6,243,293)................ $6,240,000 6,240,000
------------
Forward Currency Contracts--0.1% (o) ............... 105,484
------------
Other Assets and Liabilities, Net--1.0% ............ 1,181,884
------------
Net Assets--100.0% ................................. $118,985,295
============
</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,
1998, the value of these securities amounted to $6,277,500 or 5.3% of net
assets.
(c) Zero coupon bond.
(d) This is a British security. Par amount is stated in U.S. dollars. (e) These
securities, or a portion thereof, with a total market value of $15,197,035
are being used to collateralize the forward currency contracts shown below.
(f) This is a Mexican security. Par amount is stated in U.S. dollars.
(g) This is an Argentinean security. Par amount is stated in German
Deutschemarks.
(h) This is an Argentinian security. Par amount is stated in U.S. dollars.
(i) This is a Brazilian security. Par amount is stated in U.S. dollars.
(j) This is a Bulgarian security. Par amount is stated in U.S. dollars.
(k) This is a Panamanian 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) Cost for federal income tax purposes is $111,537,026. Gross unrealized
appreciation (depreciation) at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 3,088,359
Gross unrealized depreciation (3,167,458)
-----------
Net unrealized depreciation $ (79,099)
===========
</TABLE>
(o) As of December 31, 1998, 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$)
- ------------------- -------------------- ------------ ---------------
<S> <C> <C> <C>
FF 7,280,000 US$ 1,273,303 01/13/1999 $(29,844)
C$ 3,250,000 US$ 2,115,885 01/14/1999 (6,273)
A$ 3,711,000 US$ 2,315.736 01/21/1999 42,257
KB 3,853,000 US$ 6,462,345 01/19/1999 85,246
SK 12,182,000 US$ 1,519,838 02/16/1999 14,098
--------
$105,484
========
</TABLE>
See Notes to Investment Portfolio.
43
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
Summary of Securities by Country
<TABLE>
<CAPTION>
% of Total
Securities
Country Currency Value at Value
- ------- -------- ------------ ----------
<S> <C> <C> <C>
United States ................. $ 82,486,861 74.0
United Kingdom ................ KB 8,174,255 7.3
Greece ........................ GD 3,705,494 3.3
Mexico ........................ 2,846,562 2.6
France ........................ FF 2,519,650 2.3
Argentina ..................... 2,468,599 2.2
Australia ..................... A$ 2,382,684 2.1
Canada ........................ C$ 2,105,208 1.9
Sweden ........................ SK 1,455,533 1.3
Bulgaria ...................... 1,172,500 1.1
Brazil ........................ 1,138,219 1.0
Panama ........................ 907,556 0.8
Russia ........................ 94,806 0.1
------------ -----
$111,457,927 100.0
============ =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
<TABLE>
<S> <C>
Acronym Name
------- ----
PIK Payment-In-Kind
DM Deutschemarks
</TABLE>
See Notes to Financial Statements.
44
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $111,509,836).......................... $111,457,927
Short-term obligations .............................................................. 6,240,000
Cash ................................................................................ 1,543,251
Dividends and interest receivable ................................................... 2,341,309
Receivable for fund shares sold ..................................................... 663,367
Unrealized appreciation on forward currency exchange contracts ...................... 141,601
Expense reimbursement due from Advisor .............................................. 5,218
Unamortized organization expenses ................................................... 2,016
Other assets ........................................................................ 2,987
------------
Total assets .................................................................... 122,397,676
------------
Liabilities:
Payable for investments purchased ................................................... 3,188,840
Payable for fund shares repurchased ................................................. 107,983
Unrealized depreciation on forward currency exchange contracts ...................... 36,117
Management fee payable .............................................................. 62,667
Bookkeeping fee payable ............................................................. 4,107
Transfer agent fee payable .......................................................... 625
Accrued expenses payable ............................................................ 12,042
------------
Total liabilities ............................................................... 3,412,381
------------
Net assets .......................................................................... $118,985,295
============
Net assets represented by:
Paid-in capital ................................................................... $119,342,728
Accumulated overdistributed net investment income ................................. (105,456)
Accumulated net realized losses on investments and foreign currency transactions .. (312,839)
Net unrealized appreciation on investments and foreign currency transactions ...... 60,862
------------
Total net assets applicable to outstanding shares of beneficial interest ............ $118,985,295
============
Shares of beneficial interest outstanding ........................................... 10,733,969
============
Net asset value per share ........................................................... $11.08
======
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Interest income ........................................................................ $ 7,789,181
Dividends .............................................................................. 135,036
-----------
Total investment income ............................................................ 7,924,217
-----------
Expenses:
Management fee ....................................................................... 590,688
Bookkeeping fee ...................................................................... 41,331
Transfer agent fee ................................................................... 7,500
Audit fee ............................................................................ 22,854
Printing expense ..................................................................... 4,980
Trustees' expense .................................................................... 4,650
Custodian fee ........................................................................ 15,513
Legal fees ........................................................................... 2,109
Amortization of organization expense ................................................. 3,971
Miscellaneous expense ................................................................ 19,043
-----------
Total expenses ..................................................................... 712,639
-----------
Net investment income .................................................................. 7,211,578
-----------
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized losses on investments ................................................... (279,638)
Net realized gains on foreign currency transactions .................................. 148,693
Change in net unrealized depreciation on investments and foreign currency transactions (1,654,357)
-----------
Net increase in net assets resulting from operations ................................... $ 5,426,276
===========
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Net investment income ........................................................ $ 7,211,578 $ 4,834,642
Net realized losses on investments ........................................... (279,638) (557,481)
Net realized gains on foreign currency transactions .......................... 148,693 1,104,281
Change in unrealized appreciation (depreciation) on investments and foreign
currency transactions ...................................................... (1,654,357) 101,719
------------ ------------
Net increase in net assets resulting from operations ........................... 5,426,276 5,483,161
------------ ------------
Distributions declared from:
Net investment income ........................................................ (7,211,578) (4,834,643)
In excess of net investment income ........................................... (185,797) (296,671)
------------ ------------
Net realized gains on investments ............................................ -- (328,008)
In excess of net realized gains .............................................. -- (7,971)
Total distributions ............................................................ (7,397,375) (5,467,293)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold ............................................... 95,188,698 29,075,205
Cost of fund shares repurchased .............................................. (54,804,696) (14,776,214)
Distributions reinvested ..................................................... 7,397,375 5,467,293
------------ ------------
Net increase in net assets resulting from fund share transactions .............. 47,781,377 19,766,214
------------ ------------
Total increase in net assets ................................................... 45,810,278 19,782,082
Net assets:
Beginning of year ............................................................ 73,175,017 53,392,935
------------ ------------
End of year .................................................................. $118,985,295 $ 73,175,017
============ ============
Accumulated overdistributed net investment income included in
ending net assets ............................................................ $ (105,456) $ (23,401)
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold .................................................................. 17,374,862 2,534,934
Shares repurchased ........................................................... (13,873,330) (1,299,060)
Distributions reinvested ..................................................... 667,431 490,780
------------ ------------
Net increase ................................................................... 4,168,963 1,726,654
============ ============
</TABLE>
See Notes to Financial Statements.
46
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial Strategic Income Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1998 1997
-------- -------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of year .............. $ 11.15 $ 11.04
-------- -------
Net investment income (a) ....................... 0.91 0.90
Net realized and unrealized gains (losses)
on investments ................................ (0.24) 0.11
-------- -------
Total from investment operations ................ 0.67 1.01
-------- -------
Less distributions:
Dividends from net investment income .......... (0.72) (0.79)
In excess of net investment income ............ (0.02) (0.05)
Dividends from net realized gains ............. -- (0.05)
In excess of net realized gains ............... -- (0.01)
-------- -------
Total distributions ............................. (0.74) (0.90)
-------- -------
Net asset value, end of year .................... $ 11.08 $ 11.15
======== =======
Total return:
Total investment return (b) ..................... 6.03% 9.11%(c)
Ratios/supplemental data:
Net assets, end of year (000) ................... $118,985 $73,175
Ratio of net expenses to average net assets ..... 0.78%(e) 0.80%(d)(e)
Ratio of net investment income to average
net assets .................................... 7.92%(e) 7.86%(c)(e)
Portfolio turnover ratio ........................ 50% 94%
<CAPTION>
Period
Ended
Year Ended December 31, December
------------------------------ --------
1996 1995 1994***
------- ------- --------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year .............. $ 10.99 $ 9.79 $ 10.00
------- ------- -------
Net investment income (a) ....................... 0.92 0.55 0.30
Net realized and unrealized gains (losses)
on investments ................................. 0.16 1.24 (0.19)
------- ------- -------
Total from investment operations ................ 1.08 1.79 0.11
------- ------- -------
Less distributions:
Dividends from net investment income ........... (0.96) (0.56) (0.31)
In excess of net investment income ............. -- -- --
Dividends from net realized gains .............. (0.07) (0.03) (0.01)
In excess of net realized gains ................ -- -- --
------- ------- -------
Total distributions ............................. (1.03) (0.59) (0.32)
------- ------- -------
Net asset value, end of year .................... $ 11.04 $ 10.99 $ 9.79
======= ======= ========
Total return:
Total investment return (b) ..................... 9.83%(c) 18.30%(c) 1.10%(c)**
Ratios/supplemental data:
Net assets, end of year (000) ................... $53,393 $48,334 $13,342
Ratio of net expenses to average net assets ..... 0.80%(d)(e) 0.84%(d)(e) 1.00%(d)*
Ratio of net investment income to average
net assets ..................................... 8.13%(c)(e) 8.08%(c)(e) 7.33%(c)*
Portfolio turnover ratio ........................ 114% 281% 94%**
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations July 5, 1994 to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no reimbursement
from the Manager, these ratios would have been 0.82%, 0.86%, 0.94% and 1.60%
(annualized), respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
See Notes to Financial Statements.
47
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Liberty Variable Investment Trust Colonial U.S. Stock Fund, Variable Series /
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS--111.1%
Finance, Insurance & Real Estate--24.6%
Depository Institutions--5.1%
BankAmerica Corp. ..................... 3,669 $ 220,599
Chase Manhattan Corp. ................. 50,180 3,415,376
Comerica, Inc. ........................ 18,790 1,281,243
Dime Bancorp, Inc. .................... 25,825 682,748
Fleet Financial Group, Inc. ........... 6,000 268,125
Wells Fargo & Co. ..................... 39,445 1,575,335
----------
7,443,426
----------
Insurance Carriers--13.2%
Allstate Corp. ........................ 33,590 1,297,414
Ambac Financial Group, Inc. ........... 26,600 1,600,988
American General Corp. ................ 23,355 1,821,690
American International Group, Inc. 15,970 1,543,101
CIGNA Corp. ........................... 31,580 2,441,529
Citigroup Corp. ....................... 51,209 2,534,846
Conseco, Inc. ......................... 24,720 755,505
Loews Corp. ........................... 16,100 1,581,825
Progressive Corp. ..................... 13,640 2,310,275
United Healthcare Corp. ............... 30,380 1,308,239
Wellpoint Health Networks, Inc.,
Class A ............................. 24,070 2,094,090
----------
19,289,502
----------
Nondepository Credit Institutions--5.0%
American Express Co. .................. 15,860 1,621,685
Capital One Financial Corp. ........... 7,200 828,000
Fannie Mae ............................ 35,570 2,632,180
Freddie Mac ........................... 33,700 2,171,544
----------
7,253,409
----------
Security Brokers & Dealers--1.3%
Bear Stearns Cos, Inc. ................ 13,945 521,194
Morgan Stanley Dean Witter & Co. ...... 19,900 1,412,900
----------
1,934,094
----------
Manufacturing--51.6%
Apparel--1.0%
VF Corp. .............................. 30,385 1,424,297
----------
Chemicals & Allied Products--11.3%
American Home Products Corp. .......... 14,525 817,939
Amgen, Inc. ........................... 5,100 533,269
Dow Chemical Co. ...................... 16,010 1,455,909
Eli Lilly & Co. ....................... 14,240 1,265,580
Goodrich (B.F.) Co. ................... 14,560 522,340
Johnson & Johnson ..................... 8,435 707,486
Merck & Co., Inc. ..................... 11,150 1,646,716
Mylan Laboratories .................... 12,135 382,253
Pfizer, Inc. .......................... 20,635 2,588,403
Pharmacia & Upjohn, Inc. .............. 15,000 849,375
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Procter & Gamble Co. .................. 9,785 $ 893,493
Rohm and Haas Co. ..................... 30,905 931,013
Schering-Plough Corp. ................. 36,580 2,021,044
Warner-Lambert Co. .................... 25,680 1,930,815
-----------
16,545,635
-----------
Communications Equipment--2.3%
Lucent Technologies, Inc. ............. 22,484 2,473,240
Tellabs, Inc. (a) ..................... 13,250 908,453
-----------
3,381,693
-----------
Electrical Industrial Equipment--2.4%
General Electric Co. .................. 34,575 3,528,811
-----------
Electronic Components--4.0%
Intel Corp. ........................... 38,005 4,505,968
Texas Instruments, Inc. ............... 16,200 1,386,113
-----------
5,892,081
-----------
Fabricated Metal--0.8%
Crown Cork & Seal Co., Inc. ........... 23,100 711,769
Danaher Corp. ......................... 9,760 530,090
-----------
1,241,859
-----------
Food & Kindred Products--4.3%
Heinz (H.J.) Co. ...................... 14,800 838,050
Philip Morris Companies, Inc. ......... 78,225 4,185,038
Quaker Oats Co. ....................... 14,340 853,230
Tyson Foods, Inc. ..................... 18,600 395,250
-----------
6,271,568
-----------
Furniture & Fixtures--2.5%
Herman Miller, Inc. ................... 36,785 988,597
Hillenbrand Industries, Inc. .......... 10,500 597,188
Johnson Controls, Inc. ................ 11,900 702,100
Masco Corp. ........................... 49,995 1,437,356
-----------
3,725,241
-----------
Household Appliances--0.4%
Maytag Corp. .......................... 10,045 625,301
-----------
Machinery & Computer Equipment--10.6%
Applied Materials, Inc. (a) ........... 32,865 1,402,925
Baker Hughes, Inc. .................... 39,885 705,465
Caterpillar, Inc. ..................... 1,630 74,980
Compaq Computer Corp. ................. 53,349 2,237,324
EMC Corp. (a) ......................... 11,920 1,013,200
Ingersoll Rand Co. .................... 37,740 1,771,421
International Business Machines
Corp. ............................... 12,375 2,286,281
Sun Microsystems, Inc. (a) ............ 20,270 1,735,619
Tyco International Ltd. ............... 26,840 2,024,743
Unisys Corp. (a) ...................... 56,860 1,958,116
Varco International, Inc. (a) ......... 28,450 220,488
-----------
15,430,562
-----------
</TABLE>
See Notes to Investment Portfolio.
48
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial U.S. Stock Fund, Variable Series /
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Measuring & Analyzing Instruments--0.9%
Eastman Kodak Co. .................... 5,500 $ 396,000
Honeywell, Inc. ...................... 11,930 898,478
----------
1,294,478
----------
Petroleum Refining--3.9%
Chevron Corp. ........................ 3,455 286,549
Exxon Corp. .......................... 24,985 1,827,028
Mobil Corp. .......................... 20,655 1,799,567
Texaco, Inc. ......................... 21,570 1,140,513
USX-Marathon Group ................... 22,600 680,824
----------
5,734,481
----------
Primary Metal--0.6%
Aluminum Company of America .......... 12,000 894,750
----------
Tobacco Products--0.6%
Fortune Brands, Inc. ................. 26,700 844,388
----------
Transportation Equipment--6.0%
DaimlerChrysler AG (a) ............... 11,809 1,134,401
Ford Motor Co. ....................... 30,225 1,773,830
General Dynamics Corp. ............... 22,795 1,336,357
General Motors Corp. ................. 11,300 808,656
Lockheed Martin Corp. ................ 17,830 1,511,093
United Technologies Corp. ............ 20,525 2,232,094
----------
8,796,431
----------
Mining & Energy--2.0%
Crude Petroleum & Natural Gas--0.3%
Burlington Resources, Inc. ........... 11,000 393,938
----------
Nonmetallic, Except Fuels--0.5%
Vulcan Materials Co. ................. 5,065 666,364
----------
Oil & Gas Extraction--0.5%
Sonat Offshore Drilling Co. .......... 29,230 783,729
----------
Oil & Gas Field Services--0.7%
Schlumberger Ltd. .................... 23,460 1,082,093
----------
Retail Trade--10.8%
Apparel & Accessory Stores--1.3%
TJX Companies, Inc. .................. 64,205 1,861,945
----------
Food Stores--3.1%
Albertson's, Inc. .................... 30,515 1,943,424
Kroger Corp. (a) ..................... 14,705 889,653
Safeway, Inc. (a) .................... 27,995 1,705,945
----------
4,539,022
----------
General Merchandise Stores--5.1%
Dayton Hudson Corp. .................. 34,900 1,893,325
Dillard Department Stores, Inc. ...... 19,365 549,481
Family Dollar Stores, Inc. ........... 21,645 476,190
Federated Department Stores,
Inc. (a) ........................... 26,290 1,145,257
Kmart Corp. .......................... 52,565 804,901
Wal-Mart Stores, Inc. ................ 31,355 2,553,472
----------
7,422,626
----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Miscellaneous Retail--1.3%
Office Depot, Inc. (a) ............... 24,845 $ 917,712
Rite Aid Corp. ....................... 18,800 931,775
-----------
1,849,487
-----------
Services--6.4%
Business Services--0.4%
Omnicom Group, Inc. .................. 9,610 557,380
-----------
Computer Related Services--1.7%
Cadence Design Systems, Inc. (a) ..... 24,125 717,719
HBO & Co. ............................ 23,590 676,738
Teradyne, Inc. (a) ................... 24,900 1,055,138
-----------
2,449,595
-----------
Computer Software--4.3%
Compuware Corp. (a) .................. 11,700 914,063
Microsoft Corp. (a) .................. 38,270 5,307,571
-----------
6,221,634
-----------
Transportation, Communication, Electric, Gas &
Sanitary Services--14.1%
Air Transportation--1.2%
AMR Corp. (a) ........................ 4,500 267,188
Continental Airlines, Inc., Class
B (a) .............................. 19,465 652,078
Delta Air Lines, Inc. ................ 12,430 646,360
US Airways Group, Inc. (a) ........... 4,940 256,880
-----------
1,822,506
-----------
Electric Services--4.3%
Consolidated Edison Co. of
New York ........................... 15,530 821,149
Edison International ................. 42,420 1,182,458
FPL Group, Inc. ...................... 18,100 1,115,413
GPU, Inc. ............................ 36,970 1,633,612
NIPSCO Industries, Inc. .............. 26,985 821,356
PG&E Corp. ........................... 24,170 761,354
-----------
6,335,342
-----------
Telecommunication--8.2%
Ameritech Corp. ...................... 30,005 1,901,567
Bell Atlantic Corp. .................. 17,661 1,003,366
BellSouth Corp. ...................... 40,150 2,002,481
GTE Corp. ............................ 26,405 1,780,687
MCI WorldCom, Inc. (a) ............... 49,793 3,572,647
US West Communications Group ......... 27,045 1,747,783
-----------
12,008,531
-----------
Water Transportation--0.4%
Carnival Corp. ....................... 11,890 570,720
-----------
Wholesale Trade--1.6%
Nondurable Goods
Bergen Brunswig Corp., Class A ....... 31,730 1,106,584
Cardinal Health, Inc. ................ 16,345 1,240,176
-----------
2,346,760
-----------
</TABLE>
See Notes to Investment Portfolio.
49
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial U.S. Stock Fund, Variable Series /
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----
<S> <C> <C>
Total Common Stocks
(cost of $125,825,613) .......................... $162,463,679
------------
Par
----------
CORPORATE FIXED INCOME BONDS--2.5%
Finance, Insurance & Real Estate--1.4%
Depository Institutions--0.4%
Fleet/Norstar Financial Group,
Inc. 8.125% 07/01/04 .............. $ 500,000 552,640
------------
Nondepository Credit Institutions--1.0%
Ford Motor Credit Co. 8.000%
06/15/02 .......................... 1,000,000 1,075,070
Household Finance Co., 8.250%
02/15/05 .......................... 400,000 445,568
------------
1,520,638
------------
Manufacturing--0.7%
Transportation Equipment
General Motors Corp. 9.125%
07/15/01 .......................... 1,000,000 1,084,230
------------
Retail Trade--0.4%
General Merchandise Stores
Wal-Mart Stores, Inc. 8.625%
04/01/01 .......................... 500,000 535,840
------------
Total Corporate Fixed Income Bonds
(cost of $3,674,015) ............................ 3,693,348
------------
Total Investments--113.6%
(cost of $129,499,628)(b) ....................... 166,157,027
------------
SHORT-TERM OBLIGATIONS--3.7%
Repurchase agreement with ABN
AMRO Chicago Corp., dated
12/31/98, due 01/04/99 at
4.750%, collateralized by U.S.
Treasury notes with various
maturities to 2015, market
value $5,472,584 (repurchase
proceeds $5,380,838) .............. 5,378,000 5,378,000
------------
Other Assets & Liabilities, Net--(17.3%) .......... (25,295,612)
------------
Net Assets--100% .................................. $146,239,415
============
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) The cost for federal income tax purposes is $129,686,933. Gross unrealized
appreciation and depreciation at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $40,623,886
Gross unrealized depreciation (4,153,792)
-----------
Net unrealized appreciation $36,470,094
===========
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial U.S Stock Fund, Variable Series /
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $129,499,628) ............. $166,157,027
Short-term obligations .................................................. 5,378,000
Cash .................................................................... 53,312
Dividends and interest receivable ....................................... 248,758
Receivable for fund shares sold ......................................... 923
Unamortized organization expenses ....................................... 2,016
Other assets ............................................................ 1,029
------------
Total assets ........................................................ 171,841,065
------------
Liabilities:
Payable for fund shares repurchased ..................................... 25,258,717
Payable for investments purchased ....................................... 203,066
Management fee payable .................................................. 111,317
Bookkeeping fee payable ................................................. 5,548
Transfer agent fee payable .............................................. 625
Accrued expenses payable ................................................ 22,377
------------
Total liabilities ................................................... 25,601,650
------------
Net assets .............................................................. $146,239,415
============
Net assets represented by:
Paid-in capital ....................................................... $109,861,981
Accumulated overdistributed net investment income ..................... (71,141)
Accumulated net realized losses on investments ........................ (208,824)
Net unrealized appreciation on investments ............................ 36,657,399
------------
Total net assets applicable to outstanding shares of beneficial interest $146,239,415
============
Shares of beneficial interest outstanding ............................... 7,784,284
============
Net asset value per share ............................................... $18.79
======
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ..................................................... $ 1,643,415
Interest income ............................................... 642,197
-----------
Total investment income ................................... 2,285,612
-----------
Expenses:
Management fee .............................................. 1,027,590
Bookkeeping fee ............................................. 54,453
Transfer agent fee .......................................... 7,500
Audit fee ................................................... 21,051
Printing expense ............................................ 10,199
Trustees' expense ........................................... 8,186
Custodian fee ............................................... 6,045
Legal fee ................................................... 1,836
Amortization of organization expense ........................ 3,971
Miscellaneous expense ....................................... 17,624
-----------
Total expenses ............................................ 1,158,455
-----------
Net investment income ......................................... 1,127,157
Realized and unrealized gains on investments:
Net realized gains on investments ........................... 5,562,100
Change in net unrealized appreciation on investments ........ 17,472,679
-----------
Net increase in net assets resulting from operations .......... $24,161,936
===========
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial U.S Stock Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
---------------- ----------------
<S> <C> <C>
Operations:
Net investment income ............................................................ $ 1,127,157 $ 932,129
Net realized gains on investments ................................................ 5,562,100 11,726,262
Change in unrealized appreciation on investments ................................. 17,472,679 8,137,807
------------ ------------
Net increase in net assets resulting from operations ............................... 24,161,936 20,796,198
------------ ------------
Distributions declared from:
Net investment income ............................................................ (1,100,944) (932,130)
In excess of net investment income ............................................... -- (47,965)
Net realized gains on investments ................................................ (5,562,100) (11,726,262)
In excess of net realized gains .................................................. (206,845) (34,889)
------------ ------------
Total distributions ................................................................ (6,869,889) (12,741,246)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold ................................................... 119,757,416 29,081,474
Cost of fund shares repurchased .................................................. (94,395,078) (14,017,158)
Distributions reinvested ......................................................... 6,869,889 12,741,246
------------ ------------
Net increase in net assets resulting from fund share transactions .................. 32,232,227 27,805,562
------------ ------------
Total increase in net assets ....................................................... 49,524,274 35,860,514
Net assets:
Beginning of year ................................................................ 96,715,141 60,854,627
------------ ------------
End of year ...................................................................... $146,239,415 $ 96,715,141
============ ============
Accumulated overdistributed net investment income included in ending net assets..... $ (71,141) $ (47,967)
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold ...................................................................... 13,606,763 1,713,649
Shares redeemed .................................................................. (12,124,830) (842,285)
Distributions reinvested ......................................................... 366,394 785,527
------------ ------------
Net increase ....................................................................... 1,848,327 1,656,891
============ ============
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial U.S. Stock Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1998 1997 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year .............. $ 16.29 $ 14.22 $ 12.36 $ 10.27
-------- ------- ------- -------
Net investment income (a) ....................... 0.16 0.20 0.19 0.21
Net realized and unrealized gains on
investments ................................... 3.12 4.37 2.52 2.84
-------- ------- ------- -------
Total from investment operations ................ 3.28 4.57 2.71 3.05
-------- ------- ------- -------
Less distributions:
Dividends from net investment income .......... (0.12) (0.18) (0.17) (0.16)
In excess of net investment income ............ -- (0.01) -- --
Dividends from net realized gains ............. (0.64) (2.30) (0.68) (0.80)
In excess of net realized gains ............... (0.02) (0.01) -- --
-------- ------- ------- -------
Total distributions ............................. (0.78) (2.50) (0.85) (0.96)
-------- ------- ------- -------
Net asset value, end of year .................... $ 18.79 $ 16.29 $ 14.22 $ 12.36
======== ======= ======= =======
Total return:
Total investment return (b) ................... 20.15% 32.23% 21.84% 29.70%(c)
Ratios/supplemental data:
Net assets, end of period (000) ................. $146,239 $96,715 $60,855 $43,017
Ratio of net expenses to average net assets ..... 0.90%(e) 0.94%(e) 0.95%(e) 1.00%(d)(e)
Ratio of net investment income to average
net assets .................................... 0.88%(e) 1.19%(e) 1.39%(e) 1.72%(c)(e)
Portfolio turnover ratio ........................ 64% 63% 77% 115%
<CAPTION>
Period
Ended
December 31,
------------
1994***
------------
<S> <C>
Per share operating performance:
Net asset value, beginning of year .............. $ 10.00
-------
Net investment income (a) ....................... 0.09
Net realized and unrealized gains on
investments ................................... 0.35
-------
Total from investment operations ................ 0.44
-------
Less distributions:
Dividends from net investment income .......... (0.11)
In excess of net investment income ............ --
Dividends from net realized gains ............. (0.06)
In excess of net realized gains ............... --
-------
Total distributions ............................. (0.17)
-------
Net asset value, end of year .................... $ 10.27
=======
Total return:
Total investment return (b) ................... 4.40%(c)**
Ratios/supplemental data:
Net assets, end of period (000) ................. $15,373
Ratio of net expenses to average net assets ..... 1.00%(d)*
Ratio of net investment income to average
net assets .................................... 2.16%(c)*
Portfolio turnover ratio ........................ 52%**
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations July 5, 1994 to
December 31, 1994.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no reimbursement
from the Manager, these ratios would have been 1.07% and 1.64% (annualized),
respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
Federal Income Tax footnote (unaudited)
100% of the gain distribution recorded in December 1998 and paid in January 1999
was derived from long term gains.
See Notes to Financial Statements.
53
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series /
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------ -----------------
<S> <C> <C> <C>
COMMON STOCKS--96.9%
Finance, Insurance & Real Estate--69.1%
Depository Institutions--26.3%
Development Bank of
Singapore Ltd. ................................................... Si 200,200 $1,806,772
HSBC Holdings PLC .................................................. HK 48,400 1,205,767
Hang Seng Bank ..................................................... HK 133,600 1,194,228
Oversea-Chinese Banking
Corp. Ltd ........................................................ Si 211,696 1,436,096
United Overseas Bank ............................................... Si 90,000 577,831
----------
6,220,694
----------
Holding Companies--16.8%
Cheung Kong Holdings Ltd. HK 168,000 1,208,969
Citic Pacific Ltd. ................................................. HK 298,000 642,382
Hutchison Whampoa Ltd. ............................................. HK 195,000 1,378,096
Singapore Technologies
Engineering Ltd .................................................. Si 805,000 750,878
----------
3,980,325
----------
Insurance Carriers--0.9%
National Mutual Asia Ltd. .......................................... HK 290,000 217,113
----------
Real Estate--25.1%
Ayala Land, Inc. ................................................... Ph 178,500 50,476
China Resources Enterprises
Ltd. ............................................................. HK 522,000 815,299
City Developments Ltd. ............................................. Si 246,000 1,065,354
Henderson Land
Development Co., Ltd. ............................................ HK 105,000 543,494
New World Development
Co., Ltd. ........................................................ HK 287,000 722,399
SM Prime Holdings, Inc. ............................................ Ph 2,510,000 477,481
Sun Hung Kai Properties
Ltd. ............................................................. HK 203,000 1,480,489
Swire Pacific Ltd., Series A ....................................... HK 173,000 774,884
----------
5,929,876
----------
Manufacturing--5.3%
Measuring & Analyzing Instruments--0.2%
China Hong Kong Photo
Products Holdings, Ltd. .......................................... HK 460,000 44,533
----------
Printing & Publishing--5.1%
Singapore Press Holdings
Ltd. ............................................................. Si 111,164 1,211,964
----------
Retail Trade--0.3%
Apparel & Accessory Stores
Giordano International Ltd. ........................................ HK 354,000 66,257
-----------
Transportation, Communication, Electric, Gas &
Sanitary Services--15.5%
Electric Services--6.1%
China Light & Power Co.,
Ltd. ............................................................. HK 154,000 767,306
</TABLE>
<TABLE>
<CAPTION>
Country
Abbrev. Shares Value
--------- ------ -----------
<S> <C> <C> <C>
Hong Kong Electric
Holdings Ltd. .................................................... HK 222,000 $ 673,413
-----------
1,440,719
-----------
Gas Services--2.8%
Hong Kong and China Gas
Co., Ltd. ........................................................ HK 529,229 672,885
-----------
Telecommunication--6.6%
China Telecom Ltd. (a) ............................................. HK 500,000 868,712
Hong Kong
Telecommunications Ltd. .......................................... HK 391,769 688,002
-----------
1,556,714
-----------
Wholesale Trade--6.7%
Durable Goods
Johnson Electric Holdings
Ltd. ............................................................. HK 144,500 371,178
Li & Fung Ltd. ..................................................... HK 588,000 1,218,185
-----------
1,589,363
-----------
Total Common Stocks
(cost of $24,795,520) .................................................................... 22,930,443
-----------
Warrants (a)--0.0%
Transportation, Communication, Electric, Gas and
Sanitary Services--0.0%
Gas Services
Hong Kong & China Gas
9/3/99 (cost of $0) .............................................. HK 24,146 1,590
-----------
Total Investments
(cost of $24,795,520)(b) ................................................................. 22,932,033
-----------
</TABLE>
<TABLE>
<CAPTION>
Par
--------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--1.9%
Repurchase agreement with ABN
AMRO Chicago Corp. dated
12/31/98 due 01/04/99 at
4.750%, collateralized by U.S.
Treasury notes with various
maturities to 2015, market
value $450,791(repurchase
proceeds $443,234) ............ $443,000 443,000
-----------
Other Assets and Liabilities, Net--1.2% .... 280,436
-----------
Net Assets--100.0% ......................... $23,655,469
===========
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) The cost for federal income tax purposes is identical. Gross unrealized
appreciation and depreciation at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 3,007,772
Gross unrealized depreciation (4,871,259)
-----------
Net unrealized depreciation $(1,863,487)
===========
</TABLE>
See Notes to Investment Portfolio.
54
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series /
December 31, 1998
- --------------------------------------------------------------------------------
Summary of Securities by Country
<TABLE>
<CAPTION>
% of Total
Country Securities
Country Abbrev. Value at Value
- ------- --------- -------------- -----------
<S> <C> <C> <C>
Hong Kong .................. HK $15,555,181 67.8
Singapore .................. Si 6,848,895 29.9
Philippines ................ Ph 527,957 2.3
----------- -----
$22,932,033 100.0
=========== =====
</TABLE>
Certain securities are listed by country of underlying exposure but may
trade predominantly on other exchanges.
See Notes to Financial Statements.
55
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series /
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $24,795,520) ....................... $ 22,932,033
Short-term obligations ........................................................... 443,000
Cash (including foreign currencies) .............................................. 541,230
Dividends, tax reclaims and interest receivable .................................. 37,401
Receivable for fund shares sold .................................................. 8,765
Other assets ..................................................................... 215
------------
Total assets ................................................................... 23,962,644
------------
Liabilities:
Cash (including foreign currencies) .............................................. 209,000
Payable for fund shares repurchased .............................................. 59,418
Management fee payable ........................................................... 18,034
Bookkeeping fee payable .......................................................... 2,250
Transfer agent fee payable ....................................................... 625
Accrued expenses payable ......................................................... 17,848
------------
Total liabilities .............................................................. 307,175
------------
Net assets ....................................................................... $ 23,655,469
============
Net assets represented by:
Paid-in capital ................................................................. $ 33,965,770
Accumulated overdistributed net investment income ............................... (241,117)
Accumulated net realized losses on investments and foreign currency transactions (8,203,794)
Net unrealized depreciation on investments and foreign currency transactions .... (1,865,390)
------------
Total net assets applicable to outstanding shares of beneficial interest ......... $ 23,655,469
============
Shares of beneficial interest outstanding ........................................ 15,061,742
============
Net asset value per share ........................................................ $ 1.57
============
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends (net of nonrebatable foreign taxes withheld at source of $46,774) ............ $ 680,247
Interest income ........................................................................ 62,486
------------
Total investment income .............................................................. 742,733
------------
Expenses:
Management fee ........................................................................ 192,901
Bookkeeping fee ....................................................................... 27,000
Transfer agent fee .................................................................... 7,500
Audit fee ............................................................................. 24,051
Printing expense ...................................................................... 688
Trustees' expense ..................................................................... 3,661
Custodian fee ......................................................................... 15,673
Legal expense ......................................................................... 263
Miscellaneous expense ................................................................. 7,356
------------
Total expenses ....................................................................... 279,093
------------
Net investment income .................................................................. 463,640
Realized and unrealized gains (losses) on investments and foreign currency transactions:
Net realized losses on investments .................................................... (4,917,789)
Net realized losses on foreign currency transactions .................................. (198,076)
Change in net unrealized appreciation on investments and foreign currency transactions 2,753,112
------------
Decrease in net assets resulting from operations ....................................... $ (1,899,113)
============
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Operations:
Net investment income ............................................................. $ 463,640 $ 385,359
Net realized losses on investments ................................................ (4,917,789) (3,259,158)
Net realized losses on foreign currency ........................................... (198,076) (86,529)
Unrealized appreciation (depreciation) on investments and foreign currency
transactions ..................................................................... 2,753,112 (8,619,923)
------------- -------------
Net decrease in net assets resulting from operations .............................. (1,899,113) (11,580,251)
------------- -------------
Distributions declared from:
Net investment income ............................................................. (444,100) (312,640)
In excess of net investment income ................................................ -- (49,487)
Net realized gains ................................................................ -- --
In excess of net realized gains ................................................... -- (749)
------------- -------------
Total distributions ................................................................ (444,100) (362,876)
------------- -------------
Fund share transactions:
Proceeds from fund shares sold .................................................... 10,873,853 12,286,867
Cost of fund shares repurchased ................................................... (10,253,195) (10,415,067)
Distributions reinvested .......................................................... 444,100 362,876
------------- -------------
Net increase in net assets resulting from fund share transactions .................. 1,064,758 2,234,676
------------- -------------
Total decrease in net assets ....................................................... (1,278,455) (9,708,451)
Net assets:
Beginning of year ................................................................. 24,933,924 34,642,375
------------- -------------
End of year ....................................................................... 23,655,469 $ 24,933,924
============= =============
Accumulated overdistributed net investment income included in ending net assets $ (241,117) $ (62,383)
============= =============
Analysis of changes in shares of beneficial interest:
Shares sold ....................................................................... 16,203,162 5,307,469
Shares repurchased ................................................................ (15,994,192) (4,695,322)
Distributions reinvested .......................................................... 282,866 211,357
------------- -------------
Net increase ....................................................................... 491,836 823,504
============= =============
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Newport Tiger Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
Year Ended December 31, December 31,
------------------------------------------ -------------
1998 1997 1996 1995***
------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ............................... $ 1.71 $ 2.52 $ 2.28 $ 2.00
------- -------- ------ -------
Net investment income (a) ........................................ 0.03 0.03 0.03 0.01
Net realized and unrealized gains (losses) on investments
and foreign currency transactions ............................... (0.14) ( 0.81) 0.24 0.29
------- -------- ------ -------
Total from investment operations ................................. (0.11) ( 0.78) 0.27 0.30
------- -------- ------ -------
Less distributions:
Dividends from net investment income ............................ (0.03) ( 0.02) (0.02) (0.01)
In excess of net investment income .............................. -- ( 0.01) -- (0.01)
Dividends from net realized gains ............................... -- -- (0.01) --
--------
In excess of net realized gains ................................. -- ( 0.00) -- --
------- -------- ------ --------
Total distributions .............................................. (0.03) ( 0.03) (0.03) (0.02)
------- -------- ------ --------
Net asset value, end of year ..................................... $ 1.57 $ 1.71 $ 2.52 $ 2.28
======= ======== ====== ========
Total return:
Total investment return (b) ..................................... (6.43)% (31.14)% 11.73% 15.00%**
Ratios/supplemental data:
Net assets, end of period (000) .................................. $23,655 $ 24,934 $34,642 $ 18,977
Ratio of net expenses to average net assets (c) .................. 1.30% 1.25% 1.27% 1.75%*
Ratio of net investment income to average net assets (c) ......... 2.16% 1.14% 1.20% 0.89%*
Portfolio turnover ratio ......................................... 16% 27% 7% 12%**
</TABLE>
* Annualized
** Not Annualized.
*** For the period from the commencement of operations May 1, 1995 to December
31, 1995.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
See Notes to Financial Statements.
58
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
/ December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS--96.2%
Aerospace & Defense--2.2%
Boeing Co. .................................. 9,800 $ 319,725
Lockheed Martin Corp. ....................... 7,900 669,525
----------
989,250
----------
Autos, Tires & Accessories--1.9%
DaimlerChrysler AG (a) ...................... 2,505 240,637
Eaton Corp. ................................. 500 35,344
Ford Motor Corp. ............................ 4,900 287,569
General Motors Corp. ........................ 2,300 164,594
Lear Corp. (a) .............................. 2,700 103,950
----------
832,094
----------
Banks--4.1%
ABN AMRO Holding NV ADR ..................... 4,992 108,577
Astoria Financial Corp. ..................... 1,560 71,370
BankAmerica Corp. ........................... 3,731 224,326
Bankers Trust Co. ........................... 1,800 153,788
First Union Corp. ........................... 8,900 541,231
Fleet Financial Group, Inc. ................. 7,800 348,563
Washington Mutual, Inc. ..................... 2,950 112,653
Wells Fargo & Co. ........................... 7,800 311,512
----------
1,872,020
----------
Broadcasting & Cable--0.3%
Chancellor Media Corp. (a) .................. 2,800 134,050
----------
Business & Consumer
Services--3.9%
America Online, Inc. (a) .................... 1,400 217,175
Apollo Group, Inc. (a) ...................... 4,400 149,050
Catalina Marketing Corp. (a) ................ 1,700 116,238
Cendant Corp. ............................... 8,700 165,844
Cintas Corp. ................................ 4,700 331,056
IMS Health, Inc. ............................ 3,900 294,206
Quintiles Transnational Corp. (a) ........... 2,200 117,425
Robert Half International, Inc. (a) ......... 4,300 192,156
Service Corp. International ................. 4,100 156,056
----------
1,739,206
----------
Chemicals--1.6%
Monsanto Co. ................................ 12,400 589,000
Rohm & Haas Co. ............................. 2,900 87,363
Union Carbide Corp. ......................... 900 38,250
----------
714,613
----------
Communications Equipment--3.3%
Black Box Corp. (a) ......................... 3,000 113,625
Cisco Systems, Inc. (a) ..................... 4,200 389,813
CommScope, Inc. (a) ......................... 4,700 79,019
Lucent Technologies, Inc. ................... 2,400 264,000
Nokia Corp. ADR ............................. 3,000 361,313
Northern Telecom Limited .................... 5,100 255,638
----------
1,463,408
----------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Computer & Business Equipment--4.2%
Compaq Computer Corp. ....................... 11,300 $ 473,894
EMC Corp. (a) ............................... 2,300 195,500
Hewlett-Packard Co. ......................... 4,000 273,250
Ingram Micro, Inc., Class A (a) ............. 2,400 83,700
International Business Machines
Corp. .................................... 2,700 498,825
Solectron Corp. (a) ......................... 700 65,056
Sun Microsystems, Inc. (a) .................. 1,700 145,563
Tech Data Corp. (a) ......................... 3,400 136,850
----------
1,872,638
----------
Computer Services & Software--6.4%
Acxiom Corp. (a) ............................ 6,750 209,250
Automatic Data Processing, Inc. ............. 3,200 256,600
Best Software, Inc. (a) ..................... 5,400 128,250
Electronic Arts, Inc. (a) ................... 3,800 213,275
Fiserv, Inc. (a) ............................ 5,025 258,473
HBO & Co. ................................... 5,000 143,438
J. D. Edwards & Co. (a) ..................... 5,500 156,062
Microsoft Corp. (a) ......................... 3,900 540,881
Oracle Corp. (a) ............................ 3,800 163,875
Policy Management Systems (a) ............... 6,000 303,000
Sterling Commerce, Inc. (a) ................. 2,300 103,500
Sterling Software, Inc. (a) ................. 10,100 273,331
Wang Laboratories, Inc. (a) ................. 4,500 124,875
----------
2,874,810
----------
Consumer Products--2.6%
Avon Products, Inc. ......................... 7,000 309,750
Hasbro, Inc. ................................ 2,300 83,087
Kimberly Clark Corp. ........................ 1,600 87,200
Philip Morris Companies, Inc. ............... 8,500 454,750
Procter & Gamble Co. ........................ 1,800 164,363
Ralston Purina Co. .......................... 2,500 80,938
----------
1,180,088
----------
Diversified 2.5%
Allied Signal, Inc. ......................... 1,800 79,762
Cooper Industries, Inc. ..................... 400 19,075
General Electric Co. ........................ 2,000 204,125
Loews Corp. ................................. 2,100 206,325
Minnesota Mining & Manufacturing
Co. ...................................... 4,000 284,500
The Seagram Co., Ltd. ....................... 2,100 79,800
Tyco International Ltd. ..................... 3,400 256,488
----------
1,130,075
----------
Drugs & Health Care--7.9%
Abbott Laboratories ......................... 3,300 161,700
Alza Corp. (a) .............................. 2,400 125,400
American Home Products Corp. ................ 6,200 349,138
Bristol-Myers Squibb Co. .................... 1,600 214,100
</TABLE>
See Notes to Investment Portfolio.
59
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Cardinal Health, Inc. .................. 3,800 $ 288,325
Crescendo Pharmaceuticals Corp. ........ 100 1,363
Elan Corp., ADR (a) .................... 3,850 267,816
Eli Lilly & Co. ........................ 3,900 346,612
Forest Laboratories, Inc. (a) .......... 800 42,550
Genzyme Corp. (a) ...................... 3,600 179,100
HEALTHSOUTH Corp. (a) .................. 4,600 71,013
Humana, Inc. ........................... 4,100 73,031
Merck & Co., Inc. ...................... 1,200 177,225
Omnicare, Inc. ......................... 3,700 128,575
Pfizer, Inc. ........................... 2,200 275,963
Pharmacia & Upjohn, Inc. ............... 4,700 266,138
Quorum Health Group, Inc. (a) .......... 5,500 71,156
SmithKline Beecham PLC ADR ............. 3,300 229,350
Steris Corp. (a) ....................... 7,400 210,438
Warner-Lambert Co. ..................... 700 52,630
---------
3,531,623
---------
Electric & Gas Utilities--2.9%
Central & South West Corp. ............. 1,200 32,925
Columbia Energy Group .................. 1,450 83,738
Florida Progress Corp. ................. 4,400 197,175
Houston Industries, Inc. ............... 7,600 244,150
Northern States Power Co. .............. 2,500 69,375
P G & E Corp. .......................... 6,800 214,200
PP & L Resources, Inc. ................. 4,100 114,288
Peco Energy Co. ........................ 6,100 253,912
Texas Utilities Co. .................... 1,600 74,700
---------
1,284,463
---------
Electronics & Electrical
Equipment--2.9%
General Semiconductor, Inc. ............ 400 3,275
Intel Corp. ............................ 3,600 426,825
International Game Technology .......... 3,200 77,800
Linear Technology Corp. ................ 3,400 304,513
Maxim Intergrated Products, Inc. (a) 3,600 157,275
Molex, Inc. ............................ 4,800 183,000
Perkin-Elmer Corp. ..................... 1,000 97,563
Sensormatic Electronics Corp. .......... 500 3,469
Texas Instruments ...................... 600 51,338
---------
1,305,058
---------
Financial Services--6.3%
American Express Co. ................... 400 40,900
Citigroup Corp. ........................ 17,850 883,575
The CIT Group, Inc. .................... 2,800 89,075
Countrywide Credit Industries, Inc. 7,000 351,313
Fannie Mae ............................. 800 59,200
Freddie Mac ............................ 11,200 721,700
Morgan Stanley Dean Witter & Co......... 5,000 355,000
Paychex, Inc. .......................... 6,125 315,055
---------
2,815,818
---------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Food, Beverage & Restaurants--4.3%
Agribrands International, Inc. ......... 50 $ 1,500
Anheuser-Busch Companies, Inc. ......... 4,600 301,875
Campbell Soup Co. ...................... 3,700 203,500
Diageo PLC ADR ......................... 6,000 277,500
Dole Food Company ...................... 6,000 180,000
Dreyers Grand Ice Cream ................ 7,250 109,656
General Mills, Inc. .................... 1,000 77,750
International Home Foods, Inc. (a) 5,800 97,875
Nabisco Holdings Corp. ................. 5,000 207,500
PepsiCo, Inc. .......................... 4,100 167,844
Starbucks Corp. (a) .................... 5,400 303,075
---------
1,928,075
---------
Hotel & Entertainment / Leisure--0.7%
Marriott International, Inc.,
Class A ............................. 5,000 145,000
Mirage Resorts, Inc. (a) ............... 3,200 47,800
Time Warner, Inc. ...................... 2,200 136,538
---------
329,338
---------
Industrial Equipment--2.8%
Caterpillar, Inc. ...................... 6,000 276,000
Deere & Co. ............................ 3,100 102,688
Dover Corp. ............................ 10,000 366,250
Ingersoll Rand Co. ..................... 6,100 286,319
MSC Industrial Direct Co., Inc. (a)..... 9,200 208,150
---------
1,239,407
---------
Insurance-- 7.7%
ACE Limited ............................ 8,400 289,275
Aetna, Inc. ............................ 2,200 172,975
AFLAC, Inc. ............................ 8,000 352,000
Allmerica Financial Corp. .............. 4,200 243,075
Allstate Corp. ......................... 5,900 227,888
Ambac Financial Group, Inc. ............ 700 42,131
American International Group, Inc. 900 86,963
CIGNA Corp. ............................ 6,100 471,606
Conseco, Inc. .......................... 17,000 519,563
EXEL Limited ........................... 5,000 375,000
Marsh & McLennan Companies,
Inc. ................................ 1,150 67,203
Progressive Corp. ...................... 1,500 254,063
Transamerica Corp. ..................... 2,000 231,000
UNUM Corp. ............................. 2,400 140,100
---------
3,472,842
---------
Metals & Mining--0.8%
Allegheny Teledyne, Inc. ............... 5,000 102,188
Aluminum Company of America ............ 3,400 253,513
---------
355,701
---------
Oil & Gas--5.0%
Apache Corp. ........................... 4,300 108,844
Atlantic Richfield Co. ................. 5,400 352,350
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- ----------
<S> <C> <C>
Burlington Resources, Inc. ................ 3,600 $ 128,925
Conoco Inc. (a) ........................... 10,300 215,012
Cooper Cameron Corp. ...................... 1,600 39,200
ELF Aquitaine ADR ......................... 4,700 266,138
Halliburton Co. ........................... 1,000 29,625
-----------
Mobil Corp. ............................... 2,700 235,237
PennzEnergy Co. (a) ....................... 7,900 128,869
Pennzoil Quaker State Co. (a) ............. 7,400 109,150
Phillips Petroleum Co. .................... 1,800 76,725
Royal Dutch Petroleum Co. ................. 1,900 90,963
Texaco, Inc. .............................. 4,900 259,088
Tosco Corp. ............................... 7,000 181,125
-----------
2,221,251
-----------
Paper--0.9%
Georgia-Pacific Corp. ..................... 2,100 122,981
Temple-Inland, Inc. ....................... 5,100 302,494
-----------
425,475
-----------
Pollution Control--1.2%
Waste Management, Inc. .................... 11,875 553,672
-----------
Publishing--0.7%
R. R. Donnelley & Sons Co. ................ 7,000 306,688
-----------
Real Estate Investment Trusts--0.7%
Crescent Real Estate Equities Co. ......... 4,000 92,000
Starwood Hotels & Resorts ................. 6,600 149,738
Vornado Realty Trust ...................... 2,800 94,500
-----------
336,238
-----------
Retail Trade--10.1%
Albertson's, Inc. ......................... 5,000 318,437
American Stores Co. ....................... 2,000 73,875
AnnTaylor Stores Corp. (a) ................ 3,900 153,806
CDW Computer Centers, Inc. (a) ............ 1,800 172,688
Circuit City Stores, Inc. ................. 3,700 184,769
CVS Corp. ................................. 9,868 542,740
Dayton Hudson Corp. ....................... 1,900 103,075
Family Dollar Stores, Inc. ................ 6,900 151,800
Federated Department Stores, Inc.
(a) .................................... 8,700 378,994
Fred Meyer, Inc. (a) ...................... 4,200 253,050
Harcourt General, Inc. .................... 2,800 148,925
Home Depot, Inc. .......................... 4,900 299,819
Kohl's Corp. (a) .......................... 4,400 270,325
May Department Stores Co. ................. 4,000 241,500
Rite Aid Corp. ............................ 3,100 153,644
Safeway, Inc. (a) ......................... 4,500 274,219
Staples, Inc. (a) ......................... 9,850 430,322
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Toys R Us Inc. (a) ........................ 2,200 $ 37,125
Walgreen Co. .............................. 4,700 275,244
Wal-Mart Stores, Inc. ..................... 600 48,863
-----------
4,513,220
-----------
Telecommunications--6.8%
AT&T Corp. ................................ 9,000 677,250
Bell Atlantic Corp. ....................... 5,300 301,106
GTE Corp. ................................. 6,200 418,113
SBC Communications, Inc. .................. 6,500 348,563
Sprint Corp. .............................. 4,000 336,500
Sprint Corp. (PCS Group) (a) .............. 2,000 46,250
MCI WorldCom, Inc. (a) .................... 12,626 905,900
-----------
3,033,682
-----------
Transportation--1.5%
AMR Corp. (a) ............................. 6,000 356,250
Delta Air Lines, Inc. ..................... 2,300 119,600
Union Pacific Corp. ....................... 4,900 220,806
-----------
696,656
-----------
Total Common Stocks
(Cost of $34,639,932) .................................... 43,151,459
-----------
PREFERRED STOCK--0.3%
Electrical Utilities--0.3%
Houston Industries 7% Convertible
(cost of $2,877,586) ................... 1,300 138,288
-----------
Total Investments--96.5%
(cost of $37,517,518) (b) ................................ 43,289,747
-----------
Par
------
SHORT-TERM OBLIGATIONS--4.3%
Repurchase agreement with ABN AMRO
Chicago Corp., dated 12/31/98, due 01/04/99 at 4.75%, collateralized by U.S.
Treasury notes with various maturities to 2015, market value $1,983,277
(repurchase
proceeds $1,950,029) ..................... $1,949,000 1,949,000
-----------
Other Assets & Liabilities, Net--(0.8)% ...................... (368,562)
-----------
Net Assets--100.0% ........................................... $44,870,185
===========
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) The cost for federal income tax purposes is $37,607,109. Gross unrealized
appreciation and depreciation at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 7,791,964
Gross unrealized depreciation (2,109,326)
------------
Net unrealized appreciation $ 5,682,638
============
</TABLE>
See Notes to Financial Statements.
61
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $37,517,518) .............. $43,289,747
Short-term obligations .................................................. 1,949,000
Cash .................................................................... 1,657
Receivable for investments sold ......................................... 275,095
Dividends and interest receivable ....................................... 38,412
Expense reimbursement due from Advisor .................................. 5,075
-----------
Total assets .......................................................... 45,558,986
-----------
Liabilities:
Payable for investments purchased ....................................... 515,485
Payable for fund shares repurchased ..................................... 121,105
Management fee payable .................................................. 28,633
Bookkeeping fee payable ................................................. 2,250
Transfer agent fee payable .............................................. 625
Accrued expenses payable ................................................ 20,703
-----------
Total liabilities ..................................................... 688,801
-----------
Net assets .............................................................. $44,870,185
===========
Net assets represented by:
Paid-in capital ........................................................ $39,304,948
Accumulated overdistributed net investment income ...................... (17,651)
Accumulated net realized losses on investments ......................... (189,341)
Net unrealized appreciation on investments ............................. 5,772,229
-----------
Total net assets applicable to outstanding shares of beneficial interest $44,870,185
===========
Shares of beneficial interest outstanding ............................... 3,771,063
===========
Net asset value per share ............................................... $ 11.90
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends ............................................................... $ 408,439
Interest income ......................................................... 77,053
----------
Total investment income ............................................... 485,492
----------
Expenses:
Management fee ......................................................... 255,783
Bookkeeping fee ........................................................ 27,000
Transfer agent fee ..................................................... 7,500
Audit fee .............................................................. 18,051
Printing expense ....................................................... 6,988
Trustees' expense ...................................................... 3,231
Custodian fee .......................................................... 5,844
Legal fee .............................................................. 969
Miscellaneous expense .................................................. 2,869
----------
Total expenses ........................................................ 328,235
----------
Less:
Expenses reimbursable by Manager ....................................... (12,713)
----------
Net expenses ............................................................ 315,522
----------
Net investment income ................................................... 169,970
Realized and unrealized gains (losses) on investments:
Net realized losses on investments ........................... (185,131)
Change in net unrealized appreciation on investments ......... 5,629,887
----------
Net increase in net assets resulting from operations .......... $5,614,726
==========
</TABLE>
See Notes to Financial Statements.
62
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Period ended
December 31, December 31,
1998 1997
-------------- --------------
<S> <C> <C>
Operations:
Net investment income ............................................................. $ 169,970 $ 21,046
Net realized losses on investments ................................................ (185,131) (4,218)
Change in unrealized appreciation on investments .................................. 5,629,887 142,342
------------ -----------
Net increase in net assets resulting from operations ............................... 5,614,726 159,170
------------ -----------
Distributions declared from:
Net investment income ............................................................. (169,969) (21,113)
------------ -----------
In excess of net investment income ................................................ (17,577) --
------------ -----------
Total distributions ................................................................ (187,546) (21,113)
Fund share transactions:
Proceeds from fund shares sold .................................................... 18,011,285 22,104,982
Cost of fund shares repurchased ................................................... (983,417) (36,561)
Distributions reinvested .......................................................... 187,546 21,113
------------ -----------
Net increase in net assets resulting from fund share transactions .................. 17,215,414 22,089,534
------------ -----------
Total increase in net assets ....................................................... 22,642,594 22,227,591
Net assets:
Beginning of year ................................................................. 22,227,591 --
------------ -----------
End of year ....................................................................... 44,870,185 $22,227,591
============ ===========
Accumulated overdistributed net investment income included in ending net assets..... $ (17,651) $ (67)
============ ===========
Analysis of changes in shares of beneficial interest:
Shares sold ....................................................................... 3,274,810 2,209,591
Shares repurchased ................................................................ (1,727,650) (3,658)
Distributions reinvested .......................................................... 15,867 2,103
------------ -----------
Net increase ....................................................................... 1,563,027 2,208,036
============ ===========
</TABLE>
See Notes to Financial Statements.
63
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Liberty All-Star Equity Fund, Variable Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1998 1997***
-------------- --------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of year .................................. $ 10.07 $ 10.00
------- -------
Net investment income (a) ........................................... 0.06 0.01
Net realized and unrealized gains on investments .................... 1.82 0.07
------- -------
Total from investment operations .................................... 1.88 0.08
------- -------
Less distributions:
Dividends from net investment income ............................... (0.05) (0.01)
------- --------
In excess of net investment income ................................. (0.00) --
------- --------
Total distributions ................................................. (0.05) (0.01)
------- --------
Net asset value, end of year ........................................ $ 11.90 $ 10.07
======= ========
Total return:
Total investment return (b)(c) ..................................... 18.67% 0.80%**
Ratios/supplemental data:
Net assets, end of period (000) ..................................... $44,870 $22,228
Ratio of net expenses to average net assets (d)(e) .................. 1.00% 1.00%*
Ratio of net investment income to average net assets (c)(e) ......... 0.54% 0.83%*
Portfolio turnover ratio ............................................ 70% 1%**
</TABLE>
* Annualized
** Not Annualized.
*** For the period from the commencement of operations November 17, 1997 to
December 31, 1997.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no
reimbursement from the Manager, this ratio would have been 1.04% and 1.45%
(annualized), respectively.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
See Notes to Financial Statements.
64
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ ------
<S> <C> <C>
COMMON STOCKS--94.8%
Construction--2.6%
Building Construction--1.3%
NVR, Inc. (a) ........................... 300 $ 14,306
Toll Brothers, Inc. (a) ................. 400 9,025
---------
23,331
---------
Heavy Construction--
Non Building Construction--1.3%
Granite Construction, Inc. .............. 700 23,494
---------
Finance, Insurance & Real Estate--14.6%
Depository Institutions--2.5%
Charter One Financial, Inc. ............. 400 11,100
Downey Financial Corp. .................. 500 12,719
FirstFed Financial Corp. (a) ............ 400 7,150
Peoples Heritage Financial Group,
Inc. ................................. 500 10,000
Silicon Valley Bancshares (a) ........... 200 3,406
---------
44,375
---------
Insurance Carriers--9.2%
American Bankers Insurance
Group, Inc. .......................... 200 9,675
Arm Financial Group, Inc. ............... 700 15,531
CMAC Investment Corp. ................... 100 4,594
Capital RE Corp. ........................ 400 8,025
Conseco, Inc. ........................... 100 3,056
Delphi Financial Group, Inc. (a) ........ 306 16,046
Enhance Financial Services Group,
Inc. ................................. 400 12,000
Executive Risk, Inc. .................... 200 10,987
Fidelity National Finance, Inc. ......... 440 13,420
Fremont General Corp. ................... 1,100 27,225
Horace Mann Educators Corp. ............. 200 5,700
LandAmerica Financial Group, Inc. 300 16,744
NAC RE Corp. ............................ 200 9,388
Orion Capital Corp. ..................... 300 11,944
---------
164,335
---------
Nondepository Credit Institutions--1.3%
Consumer Portfolio Services, Inc.
(a) .................................. 300 1,162
Imperial Credit Industries, Inc. (a)..... 300 2,512
Metris Cos., Inc. ....................... 86 4,327
Resource Bancshares Mortgage
Group, Inc. .......................... 900 14,906
---------
22,907
---------
Real Estate Investment Trusts--0.3%
Imperial Credit Mortgage Holdings 1,000 4,563
---------
Security Brokers & Dealers--1.3%
Jefferies Group, Inc. ................... 300 14,888
<CAPTION>
Shares Value
------ ------
<S> <C> <C>
Raymond James Financial, Inc. ........... 400 $ 8,450
---------
23,338
---------
Manufacturing--35.9%
Apparel--0.8%
Kellwood Co. ............................ 200 5,000
Nautica Enterprises, Inc. (a) ........... 600 9,000
---------
14,000
---------
Chemicals & Allied Products--4.2%
Barr Laboratories, Inc. (a) ............. 100 4,800
Dexter Corp. ............................ 300 9,431
Ferro Corp. ............................. 200 5,200
Goodrich (B.F.) Co. ..................... 200 7,175
Jones Medical Industries, Inc. .......... 200 7,300
Medicis Pharmaceutical Corp. (a) ........ 400 23,850
NBTY, Inc. (a) .......................... 600 4,275
Rexall Sundown, Inc. (a) ................ 300 4,200
Serologicals Corp. (a) .................. 300 9,000
---------
75,231
---------
Communications Equipment--1.2%
Comverse Technology, Inc. (a) ........... 200 14,200
Premisys Communications, Inc. (a)........ 700 6,431
---------
20,631
---------
Electrical Industrial Equipment--0.1%
Artesyn Technologies, Inc. (a) .......... 100 1,400
---------
Electronic Components--6.1%
Innovex, Inc. ........................... 600 8,231
Park Electrochemical Corp. .............. 600 17,175
Plexus Corp. (a) ........................ 400 13,550
Qlogic Corp. (a) ........................ 200 26,175
Sanmina Corp. (a) ....................... 300 18,750
SemTech Corp. (a) ....................... 700 25,113
---------
108,994
---------
Fabricated Metals-- 1.1%
Barnes Group, Inc. ...................... 500 14,687
Hexcel Corp. (a) ........................ 500 4,187
---------
18,874
---------
Food & Kindred Products--1.8%
Canandaigua Brands, Inc., Class A
(a) .................................. 300 17,344
Michael Foods, Inc. ..................... 500 15,000
---------
32,344
---------
Furniture & Fixtures--2.8%
Ethan Allen Interiors, Inc. ............. 400 16,400
Furniture Brands International, Inc.
(a) .................................. 1,200 32,700
---------
49,100
---------
Lighting Equipment--0.7%
Technitrol, Inc. ........................ 400 12,750
---------
</TABLE>
See Notes to Investment Portfolio.
65
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- ------
<S> <C> <C>
Lumber & Wood Products--0.3%
Oakwood Homes Corp. ................... 400 $ 6,075
-------
Machinery & Computer Equipment--5.3%
Applied Power, Inc., Class A .......... 400 15,100
Asyst Technology, Inc. (a) ............ 500 10,187
Gehl Co. (a) .......................... 400 6,150
Kaydon Corp. .......................... 300 12,019
Manitowoc, Inc. ....................... 300 13,313
Milacron, Inc. ........................ 300 5,775
Nacco Industries, Inc. ................ 100 9,200
Terex Corp. (a) ....................... 500 14,281
Xircom, Inc. (a) ...................... 100 3,400
Zebra Technologies Corp., Class A
(a) ................................ 200 5,750
-------
95,175
-------
Measuring & Analyzing Instruments--2.6%
Adac Laboratories ..................... 800 15,975
Esc Medical Systems Ltd. (a) .......... 400 4,200
Esterline Technologies Corp. (a) ...... 400 8,700
Fossil, Inc. (a) ...................... 600 17,250
-------
46,125
-------
Miscellaneous Manufacturing--0.4%
Russ Berrie & Co., Inc. ............... 300 7,050
-------
Paper Products--0.3%
Wausau-Mosinee Paper Corp. ............ 300 5,306
-------
Petroleum Refining--0.3%
Tesoro Petroleum Corp. (a) ............ 400 4,850
-------
Primary Metals--2.6%
Encore Wire Corp. (a) ................. 400 3,700
Inland Steel Industries, Inc. ......... 148 2,498
Mueller Industries, Inc. (a) .......... 300 6,094
Precision Castparts Corp. ............. 300 13,275
RTI International Metals (a) .......... 600 8,400
Texas Industries, Inc. ................ 200 5,388
Tredegar Industries, Inc. ............. 300 6,750
-------
46,105
-------
Printing & Publishing--1.7%
Bowne & Co., Inc. ..................... 300 5,362
Valassis Communications, Inc. (a) ..... 500 25,813
-------
31,175
-------
Rubber & Plastic--0.6%
Carlisle Cos., Inc. ................... 200 10,325
-------
Stone, Clay, Glass & Concrete--1.0%
Libbey, Inc. .......................... 100 2,894
Lone Star Industries, Inc. ............ 400 14,725
-------
17,619
-------
Textile Mill Products--0.3%
Interface, Inc. ....................... 600 5,569
-------
<CAPTION>
Shares Value
------ ------
<S> <C> <C>
Transportation Equipment--1.7%
AAR Corp. ............................. 100 $ 2,387
Arvin Industries, Inc. ................ 400 16,675
Varlen Corp. .......................... 500 11,531
-------
30,593
-------
Mining & Energy--2.0%
Oil & Gas Extraction--0.7%
Devon Energy Corp. .................... 200 6,137
Patterson Energy, Inc. (a) ............ 700 2,844
Pride International, Inc. (a) ......... 400 2,825
-------
11,806
-------
Oil & Gas Field Services--1.3%
Marine Drilling Companies, Inc.
(a) ................................ 600 4,613
Pool Energy Services Co. .............. 600 6,488
Schlumberger Ltd. ..................... 100 4,613
Veritas DGC, Inc. (a) ................. 600 7,800
-------
23,514
-------
Retail Trade--11.6%
Apparel & Accessory Stores--3.0%
Claire's Stores, Inc. ................. 700 14,350
Dress Barn, Inc. (a) .................. 800 12,150
Finish Line, Inc., Class A (a) ........ 600 4,800
Genesco, Inc. (a) ..................... 700 3,981
Paul Harris Stores, Inc. (a) .......... 300 2,438
Ross Stores, Inc. ..................... 400 15,750
-------
53,469
-------
General Merchandise Stores--4.0%
Ames Department Stores, Inc. (a) ...... 1,500 40,500
Fred Meyer, Inc. (a) .................. 300 18,075
Shopko Stores, Inc. ................... 400 13,300
-------
71,875
-------
Home Furnishings & Equipment--0.1%
CompUSA, Inc. (a) ..................... 200 2,612
-------
Miscellaneous Retail--1.3%
Fingerhut Companies, Inc. ............. 400 6,175
Tiffany & Co. ......................... 200 10,375
Zale Corp. ............................ 200 6,450
-------
23,000
-------
Restaurants--3.2%
CEC Entertainment Inc. (a) ............ 1,000 27,750
CKE Restaurants, Inc. ................. 220 6,476
Foodmaker, Inc. (a) ................... 1,000 22,062
-------
56,288
-------
Services--16.6%
Amusement & Recreation--0.3%
Anchor Gaming (a) ..................... 100 5,638
-------
</TABLE>
See Notes to Investment Portfolio.
66
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Business Services--2.3%
Advo, Inc. ............................. 600 $ 15,825
Interim Services, Inc. (a) ............. 200 4,675
Norrell Corp. .......................... 500 7,375
Ogden Corp. ............................ 500 12,531
----------
40,406
----------
Computer Related Services--4.4%
DSP Group, Inc. (a) .................... 700 14,612
Inacom Corp. (a) ....................... 800 11,900
Jack Henry & Associates ................ 200 9,950
Rent-Way, Inc. (a) ..................... 600 14,588
StaffMark, Inc. (a) .................... 700 15,663
Systems & Computer Technology
Corp. (a) ........................... 900 12,375
----------
79,088
----------
Computer Software--2.6%
Data Dimensions, Inc. (a) .............. 1,000 8,563
Hyperion Solutions Corp. (a) ........... 850 15,300
Pri Automation, Inc. (a) ............... 200 5,200
Progress Software Corp. (a) ............ 200 6,750
Symantec Corp. (a) ..................... 500 10,875
----------
46,688
----------
Engineering, Accounting,
Research & Management--0.7%
Jacobs Engineering Group, Inc. (a) 300 12,225
----------
Health Services--5.6%
Curative Health Services, Inc. (a) ..... 500 16,750
Hooper Holmes, Inc. .................... 200 5,800
Integrated Health Services, Inc. ....... 400 5,650
Lincare Holdings, Inc. (a) ............. 100 4,056
NovaCare, Inc. (a) ..................... 400 1,000
Osteotech, Inc. (a) .................... 500 23,250
Pediatrix Medical Group, Inc. (a) ...... 100 5,994
Rehabcare Group, Inc. (a) .............. 400 7,475
Total Renal Care Holdings, Inc. (a) 500 14,781
Universal Health Services, Inc.,
Class B (a) ......................... 300 15,563
----------
100,319
----------
Hotels, Camps & Lodging--0.7%
Signature Resorts, Inc. ................ 800 12,000
----------
Transportation, Communication, Electric, Gas &
Sanitary Services--5.4%
Air Transportation--1.6%
Airborne Freight Corp. ................. 500 18,031
Comair Holdings, Inc. .................. 300 10,125
----------
28,156
----------
Electric Services--1.3%
Public Service Co. of New Mexico........ 500 10,219
Sierra Pacific Resources ............... 200 7,600
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
The United Illuminating Co. ............ 100 $ 5,150
----------
22,969
----------
Gas Services--0.9%
Atmos Energy Corp. ..................... 200 6,450
UGI Corp. .............................. 400 9,500
----------
15,950
----------
Motor Freight & Warehousing--0.9%
CNF Transportation ..................... 100 3,756
US Freightways Corp. ................... 400 11,650
----------
15,406
----------
Sanitary Services--0.4%
Piedmont Natural Gas Co. ............... 200 7,225
----------
Transportation Services--0.3%
Circle International Group, Inc. ....... 300 6,150
----------
Wholesale Trade--6.1%
Durable Goods--2.5%
Brightpoint, Inc. (a) .................. 400 5,500
Healthsource, Inc. ..................... 1,100 18,631
Owens & Minor, Inc. .................... 500 7,875
Patterson Dental Co. (a) ............... 300 13,050
----------
45,056
----------
Nondurable Goods--3.6%
Fleming Co., Inc. ...................... 800 8,300
Richfood Holdings, Inc. ................ 600 12,450
United Stationers, Inc. (a) ............ 600 15,600
Universal Corp. ........................ 800 28,100
----------
64,450
----------
Total Common Stocks
(cost of $1,810,218) (b) .......................... 1,689,923
----------
Par
-----------
SHORT-TERM OBLIGATIONS--5.8%
Repurchase agreement with ABN
AMRO Chicago Corp., dated
12/31/98, due 01/04/99 at
4.750%, collateralized by U.S.
Treasury notes with various
maturities to 2015, market value
$105,829 (repurchase proceeds
$104,055) ........................... $104,000 104,000
----------
Other Assets & Liabilities, Net--(0.6)% ............. (11,899)
----------
Net Assets--100.0% .................................. $1,782,024
==========
</TABLE>
Notes to Investment Portfolio:
(a) Non-income producing.
(b) Cost for federal income tax purposes is identical. Gross unrealized
appreciation and depreciation at December 31, 1998 is as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 142,725
Gross unrealized depreciation (263,020)
----------
Net unrealized depreciation $ (120,295)
==========
</TABLE>
See Notes to Financial Statements.
67
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (Identified cost $1,810,218) ............... $1,689,923
Short-term obligations .................................................. 104,000
Cash .................................................................... 401
Dividends and interest receivable ....................................... 1,495
Receivable for fund shares sold ......................................... 138
----------
Total assets .......................................................... 1,795,957
----------
Liabilities:
Payable for fund shares repurchased ..................................... 37
Expense reimbursement due to Advisor .................................... 4,669
Management fee payable .................................................. 1,158
Bookkeeping fee payable ................................................. 2,250
Transfer agent fee payable .............................................. 625
Accrued expenses payable ................................................ 5,194
----------
Total liabilities ..................................................... 13,933
----------
Net assets .............................................................. $1,782,024
==========
Net assets represented by:
Paid-in capital ........................................................ $2,059,684
Accumulated overdistributed net investment income ...................... (1,681)
Accumulated net realized losses on investments ......................... (155,684)
Net unrealized depreciation on investments ............................. (120,295)
----------
Total net assets applicable to outstanding shares of beneficial interest $1,782,024
==========
Shares of beneficial interest outstanding ............................... 207,520
==========
Net asset value per share ............................................... $ 8.59
==========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends .............................................................. $ 6,226
Interest income ........................................................ 19,894
----------
Total investment income .............................................. 26,120
----------
Expenses:
Management fee ........................................................ 8,641
Bookkeeping fee ....................................................... 16,694
Transfer agent fee .................................................... 4,637
Audit fee ............................................................. 12,000
Printing expense ...................................................... 3,823
Trustees' expense ..................................................... 806
Custodian fee ......................................................... 40
Legal fee ............................................................. 4
Miscellaneous expense ................................................. 276
----------
Total expenses ....................................................... 46,921
----------
Less:
Expenses reimbursable by Manager ...................................... (36,072)
----------
Total expenses ....................................................... 10,849
----------
Net investment income .................................................. 15,271
Realized and unrealized losses on investments:
Net realized losses on investments .................................... (155,684)
Change in net unrealized depreciation on investments .................. (120,295)
----------
Net decrease in net assets resulting from operations ................... $ (260,708)
==========
</TABLE>
*For the period from the commencement of operations May 19, 1998 to December 31,
1998.
See Notes to Financial Statements.
68
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
December 31,
1998*
-------------
<S> <C>
Operations:
Net investment income .............................................................. $ 15,271
Net realized losses on investments ................................................. (155,684)
Change in unrealized depreciation on investments ................................... (120,295)
----------
Net decrease in net assets resulting from operations ................................ (260,708)
----------
Distributions declared from:
Net investment income .............................................................. (15,271)
In excess of net investment income ................................................. (1,681)
----------
Total distributions ................................................................. (16,952)
----------
Fund share transactions:
Proceeds from fund shares sold ..................................................... 2,048,369
Cost of fund shares repurchased .................................................... (5,637)
Distributions reinvested ........................................................... 16,952
----------
Net increase in net assets resulting from fund share transactions ................... 2,059,684
----------
Total increase in net assets ........................................................ 1,782,024
Net assets:
Beginning of period ................................................................ --
----------
End of period ...................................................................... $1,782,024
==========
Accumulated overdistributed net investment income included in ending net assets ..... $ (1,681)
==========
Analysis of changes in shares of beneficial interest:
Shares sold ........................................................................ 206,231
Shares repurchased ................................................................. (739)
Distributions reinvested ........................................................... 2,028
----------
Net increase ........................................................................ 207,520
==========
</TABLE>
*For the period from the commencement of operations May 19, 1998 to December 31,
1998.
See Notes to Financial Statements.
69
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial Small Cap Value Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
December 31,
1998***
-----------------
<S> <C>
Per share operating performance:
Net asset value, beginning of period ................................ $ 10.00
-------
Net investment income (a) ........................................... 0.08
Net realized and unrealized losses on investments ................... (1.41)
-------
Total from investment operations .................................... (1.33)
-------
Less distributions:
Dividends from net investment income ............................... (0.07)
In excess of net investment income ................................. (0.01)
-------
Total distributions ................................................. (0.08)
-------
Net asset value, end of period ...................................... $ 8.59
=======
Total return ........................................................
Total investment return (b)(c) ...................................... (13.25)%**
Ratios/supplemental data:
Net assets, end of period (000's) ................................... $ 1,782
Ratio of expenses to average net assets (d)(e) ...................... 1.00%*
Ratio of net investment income to average net assets (c)(e) ......... 1.41%*
Portfolio turnover ratio ............................................ 51%**
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations May 19, 1998 to December
31, 1998.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no reimbursement
from the Manager, this ratio would have been 4.32% (annualized).
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
See Notes to Financial Statements.
70
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
-------- ----------
<S> <C> <C>
CORPORATE FIXED-INCOME
BONDS & NOTES--85.6%
Manufacturing--45.4%
Chemicals & Allied Products--1.5%
Sterling Chemicals, Inc., 11.750%
08/15/06 ........................... $100,000 $ 86,000
----------
Food & Kindred Products--4.3%
Chattem, Inc., 8.875% 04/01/08 ........ 250,000 256,250
----------
Measuring & Analyzing Instruments--3.1%
Envirosource, Inc., 9.750%
06/15/03 ........................... 200,000 184,000
----------
Miscellaneous Manufacturing--5.5%
Eagle-Picher Industries, Inc.,
9.375% 03/01/08 .................... 200,000 189,000
Thermadyne Holdings Corp.,
9.875% 06/01/08 .................... 150,000 139,500
----------
328,500
----------
Paper Products--5.4%
Repap New Brunswick, Inc.,
10.625% 04/15/05 ................... 200,000 136,000
Riverwood International Corp.,
10.875% 04/01/08 ................... 200,000 181,000
----------
317,000
----------
Primary Metal--10.6%
Keystone Consolidated Industries,
Inc., 9.625% 08/01/07 .............. 200,000 191,000
WCI Steel, Inc., 10.000% 12/01/04 ..... 200,000 200,000
Wheeling-Pittsburgh Corp., 9.250%
11/15/07 ........................... 250,000 235,000
----------
626,000
----------
Printing & Publishing--3.5%
American Lawyer Media Holdings,
Inc., 9.750% 12/15/07 .............. 200,000 207,000
----------
Rubber & Plastic--3.3%
Burke Industries, Inc., 10.000%
08/15/07 ........................... 200,000 194,000
----------
Transportation Equipment--8.2%
Johnstown America Industries,
Inc., 11.750% 08/15/05 ............. $225,000 $ 237,375
LDM Technologies, Inc., 10.750%
01/15/07 ........................... 250,000 250,000
----------
487,375
----------
Mining & Energy--5.3%
Oil & Gas Extraction--1.9%
Petsec Energy, Inc., 9.500%
06/15/07 ........................... 200,000 112,000
----------
<CAPTION>
Par Value
--------- ----------
<S> <C> <C>
Oil & Gas Field Services--3.4%
Chile Offshore, LLC, 10.000%
05/01/08 ........................... $250,000 $ 200,000
----------
Retail Trade--3.3%
Food Stores
Pathmark Stores, Inc., 9.625%
05/01/03 ........................... 200,000 196,000
----------
Services--3.5%
Amusement & Recreation
Regal Cinemas, Inc., 9.500%
06/01/08 ........................... 200,000 206,000
----------
Transportation, Communication, Electric,
Gas & Sanitary Services--28.1%
Broadcasting--1.7%
Fox Family Worldwide, Inc.,
9.250% 11/01/07 .................... 100,000 98,750
----------
Cable--11.2%
Adelphia Communications Corp.,
9.875% 03/01/07 .................... 250,000 276,875
Diamond Cable Communication,
PLC, stepped coupon, (10.750%
02/01/02)(a) 02/15/07(b) ........... 250,000 180,000
Telewest Communication, PLC,
stepped coupon, (11.000%
10/01/00)(a) 10/01/07(b) ........... 250,000 208,750
----------
665,625
----------
Communications--3.5%
FrontierVision Holdings, L.P.,
stepped coupon, (11.875%
09/15/07)(a) 09/15/07(b) ........... 250,000 209,375
----------
Telecommunication--11.7%
Loral Space & Communications
Ltd., 11.250% 01/15/07 ............. 250,000 247,500
McLeod USA, Inc., stepped
coupon, (10.500% 03/01/02)(a)
03/01/07 ........................... 250,000 188,750
Metrocall, Inc., 9.750% 11/01/07 ...... 100,000 96,000
Nextel Communications, Inc.,
stepped coupon, (9.750%
10/31/02)(a) 10/31/07 .............. 100,000 61,000
Verio, Inc., 10.375% 04/01/05 ......... 100,000 98,000
----------
691,250
----------
Total Corporate Fixed Income Bonds &
Notes (cost of $5,383,559) (c) ......................... 5,065,125
----------
</TABLE>
See Notes to Investment Portfolio.
71
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (Continued)
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
----------- -------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--12.6%
Repurchase agreement with ABN AMRO Chicago Corp., dated 12/31/98, due 01/04/99
at 4.750%, collateralized by U.S. Treasury notes with various maturities to
2015, market value $756,067 (repurchase proceeds
$743,392).................................... $743,000 $ 743,000
----------
Other Assets & Liabilities, Net--1.8% ...................... 106,951
----------
Net Assets--100.0% ......................................... $5,915,076
==========
</TABLE>
Notes to Investment Portfolio:
(a) Currently zero coupon. Shown parenthetically is the interest rate to be and
the date the Fund will begin accruing this rate.
(b) This is a British security. Par amount is stated in U.S. dollars.
(c) The cost for federal income tax purposes is identical. Gross unrealized
appreciation and depreciation of investments at December 31, 1998 is as
follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 54,860
Gross unrealized depreciation (373,294)
----------
Net unrealized depreciation $ (318,434)
==========
</TABLE>
See Notes to Financial Statements.
72
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at market value (identified cost $5,383,559) ............... $5,065,125
Short-term obligations .................................................. 743,000
Cash .................................................................... 781
Dividends receivable .................................................... 111,434
Receivable for fund shares sold ......................................... 16,629
----------
Total assets .......................................................... 5,936,969
----------
Liabilities:
Expense reimbursement due to Advisor .................................... 4,322
Management fee payable .................................................. 2,942
Bookkeeping fee payable ................................................. 2,250
Transfer agent fee payable .............................................. 625
Accrued expenses payable ................................................ 11,754
----------
Total liabilities ..................................................... 21,893
----------
Net assets .............................................................. $5,915,076
==========
Net assets represented by:
Paid-in capital ........................................................ $6,296,771
Accumulated overdistributed net investment income ...................... (4,026)
Accumulated net realized losses on investments ......................... (59,235)
Net unrealized depreciation on investments ............................. (318,434)
----------
Total net assets applicable to outstanding shares of beneficial interest $5,915,076
==========
Shares of beneficial interest outstanding ............................... 635,345
==========
Net asset value per share ............................................... $ 9.31
==========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Interest income ............................................... $ 283,806
Expenses:
Management fee ............................................... 19,394
Bookkeeping fee .............................................. 16,694
Transfer agent fee ........................................... 4,637
Audit fee .................................................... 12,000
Printing expense ............................................. 486
Trustees' expense ............................................ 808
Custodian fee ................................................ 70
Legal fees ................................................... 83
Miscellaneous expense ........................................ 5,751
----------
Total expenses .............................................. 59,923
----------
Less:
Expenses reimbursable by Manager ............................. (33,929)
----------
Net expenses .................................................. 25,994
----------
Net investment income ......................................... 257,812
Realized and unrealized losses on investments:
Net realized losses on investments ........................... (59,235)
Change in net unrealized depreciation on investments ......... (318,434)
----------
Net decrease in net assets resulting from operations .......... $ (119,857)
==========
</TABLE>
*For the period from the commencement of operations May 19, 1998 to December 31,
1998.
See Notes to Financial Statements.
73
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
December 31,
1998*
-------------
<S> <C>
Operations:
Net investment income .............................................................. $ 257,812
Net realized losses on investments ................................................. (59,235)
Change in unrealized depreciation on investments ................................... (318,434)
----------
Net decrease in net assets resulting from operations ................................ (119,857)
----------
Distributions declared from:
Net investment income .............................................................. (257,812)
In excess of net investment income ................................................. (4,026)
----------
Total distributions ................................................................. (261,838)
----------
Fund share transactions:
Proceeds from fund shares sold ..................................................... 6,073,053
Cost of fund shares repurchased .................................................... (38,120)
Distributions reinvested ........................................................... 261,838
----------
Net increase in net assets resulting from fund share transactions ................... 6,296,771
----------
Total increase in net assets ........................................................ 5,915,076
Net assets:
Beginning of period ................................................................ --
----------
End of period ...................................................................... $5,915,076
==========
Accumulated overdistributed net investment income included in ending net assets ..... $ (4,026)
==========
Analysis of changes in shares of beneficial interest:
Shares sold ........................................................................ 700,987
Shares repurchased ................................................................. (93,796)
Distributions reinvested ........................................................... 28,154
----------
Net increase ........................................................................ 635,345
==========
</TABLE>
*For the period from the commencement of operations May 19, 1998 to December 31,
1998.
See Notes to Financial Statements.
74
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Liberty Variable Investment Trust Colonial High Yield Securities Fund, Variable
Series
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
December 31,
1998***
----------------
<S> <C>
Per share operating performance:
Net asset value, beginning of period ................................ $ 10.00
-------
Net investment income (a) ........................................... 0.48
Net realized and unrealized losses on investments ................... (0.74)
--------
Total from investment operations .................................... (0.26)
--------
Less distributions:
Dividends from net investment income ............................... (0.43)
In excess of net investment income ................................. (0.00)
--------
Total distributions ................................................. (0.43)
--------
Net asset value, end of period ...................................... $ 9.31
========
Total return:
Total investment return (b)(c) ...................................... (2.57)%**
Ratios/supplemental data:
Net assets, end of year (000's) ..................................... $ 5,915
Ratio of expenses to average net assets (d)(e) ...................... 0.80%*
Ratio of net investment income to average net assets (c)(e) ......... 7.93%*
Portfolio turnover ratio ............................................ 23%**
</TABLE>
* Annualized
** Not Annualized
*** For the period from the commencement of operations May 19, 1998 to December
31, 1998.
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Total return at net asset value assuming all distributions reinvested.
(c) Computed giving effect to Manager's expense limitation undertaking.
(d) If the Fund had paid all of its expenses and there had been no reimbursement
from the Manager, this ratio would have been 1.84% (annualized).
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
See Notes to Financial Statements.
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
Liberty Variable Investment Trust (the "Trust"), an open-end management
investment company, was organized as a Massachusetts business trust on March 4,
1993. At December 31, 1998 the Trust consisted of nine series of Funds, each
with its own investment objective, policies and restrictions: Colonial Growth
and Income Fund, Variable Series ("Growth and Income Fund"), Stein Roe Global
Utilities Fund, Variable Series ("Global Utilities Fund"), Colonial
International Fund for Growth, Variable Series ("International Fund for
Growth"), Colonial Strategic Income Fund, Variable Series ("Strategic Income
Fund"), Colonial U.S. Stock Fund, Variable Series ("U.S. Stock Fund"), Newport
Tiger Fund, Variable Series ("Tiger Fund") and Liberty All-Star Equity Fund,
Variable Series ("All-Star Equity Fund"). Effective May 19, 1998, the Trust
began offering Colonial Small Cap Value Fund, Variable Series ("Small Cap Value
Fund") and Colonial High Yield Securities Fund, Variable Series ("High Yield
Securities Fund") (individually referred to as a "Fund", or collectively
referred to as the "Funds"). Each Fund's objective is as follows:
Growth and Income Fund seeks primarily income and long-term capital growth and,
secondarily, preservation of capital.
Global Utilities Fund seeks current income and long-term growth of capital and
income.
International Fund for Growth seeks long-term capital appreciation, by investing
primarily in non-U.S. equity securities. The Fund is non-diversified and 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.
Strategic Income Fund seeks a high level of current income, as is consistent
with prudent risk and maximizing total return, by diversifying investments
primarily in U.S. and foreign government and lower rated corporate debt
securities.
U.S. Stock Fund seeks long-term capital growth by investing primarily in large
capitalization equity securities.
Tiger Fund seeks 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).
All-Star Equity Fund seeks total investment return, comprised of long-term
capital appreciation and current income, through investment primarily in a
diversified portfolio of equity securities.
Small Cap Value Fund seeks long term growth by investing primarily in smaller
capitalization equities.
High Yield Securities Fund seeks high current income and total return by
investing primarily in lower-rate corporate debt securities.
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
life insurance companies ("Participating Insurance Companies"). Certain
Participating Insurance Companies are affiliated with the Investment Adviser and
sub-advisers to the Funds ("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 Funds. Liberty
Advisory Services Corp. (the Manager) ("LASC"), provides investment management
and advisory services to the Funds pursuant to its Management Agreements with
the Trust. Colonial Management Associates, Inc. ("Colonial") provides
sub-advisory services to six Funds: Growth and Income Fund, International Fund
for Growth, U.S. Stock Fund, Strategic Income Fund, Small Cap Value Fund and
High Yield Securities Fund. Stein Roe & Farnham Incorporated ("Stein Roe")
provides sub-advisory services to Global Utilities Fund. Newport Fund
Management, Inc. ("Newport") provides sub-advisory services to Tiger Fund.
Liberty Asset Management Company ("LAMCO") provides sub-advisory services to the
All-Star Equity Fund. LASC has delegated various administrative matters to
Colonial. Colonial also provides transfer agency and pricing and record keeping
services to 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, Colonial, Stein Roe, Newport,
LAMCO, KFSC, Keyport and Independence are wholly-owned indirect subsidiaries of
Liberty Financial Companies, Inc. ("LFC"). As of December 31, 1998, Liberty
Mutual Insurance Companies ("Liberty Mutual") owned approximately 72% of the
outstanding voting shares of LFC. Liberty Life is a subsidiary of Liberty
Mutual.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. 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.
Valuation of Investments--Portfolio securities listed on an exchange and
over-the-counter securities quoted on the NASDAQ system generally are valued on
the basis of the last sale on the date as of which the valuation is made, or,
lacking any sales, at the current bid prices. Over-the-counter securities not
quoted on the NASDAQ system generally are valued at the latest bid quotation.
Long-term debt securities generally are valued on the basis of dealer-supplied
quotations or valuations furnished by a pricing service which may employ elec-
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
tronic data processing techniques, including a "matrix" system to determine the
valuations. Foreign debt securities are valued at the current bid price
furnished by market makers. Foreign equity securities listed on an exchange are
valued on the basis of last sale on the date as of which the valuation is made,
or lacking any sales, at the current bid prices. Forward currency contracts are
valued based on the weighted value of the exchange traded contracts with similar
durations. In certain countries, the Fund may hold foreign designated shares. If
the foreign share price is not readily available as a result of limited share
activity, the securities are valued at the last sale price of the local shares
in the principal market in which such securities are normally traded. Korean
equity securities that have reached the limit for aggregate foreign ownership
and for which premiums to the local exchange prices may be paid by foreign
investors are valued by applying a broker quoted premium to the local share
price. Securities for which reliable quotations are not readily available are
valued at fair value, as determined in good faith and pursuant to procedures
established by the Trustees. Short-term instruments with remaining maturities of
60 days or less are valued at amortized cost unless the Trustees determine this
does not represent fair value.
Federal Income Taxes--The Funds intend to qualify as "regulated investment
companies" and as such (and by complying with the applicable provisions of the
Internal Revenue Code) will not be subject to Federal income tax on taxable
income (including realized capital gains) distributed to shareholders. By making
the distributions required under the Internal Revenue Code, the Funds intend to
avoid excise tax liability.
Organization Expenses--Costs incurred in connection with the organization and
offering of the Funds are being deferred and amortized over 60 months from the
date those Funds commenced business.
Delayed Delivery Transactions--Growth and Income Fund and Strategic Income Fund
may purchase or sell securities on a when-issued or forward commitment basis.
Payment and delivery may take place a month or more after the date of the
transaction. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the transaction
is negotiated. This may increase the risk if the other party involved in the
transaction fails to deliver and causes the Funds to subsequently invest at less
advantageous prices. The Funds identify securities as segregated in their
custodial records with a value at least equal to the amount of the purchase
commitment.
Expenses--Most expenses of the Trust can be attributed to a Fund. Expenses
which cannot be directly attributed are apportioned among the Funds in the
Trust.
Other--Security transactions are accounted for on trade date. Interest income
is recorded on the accrual basis. Original issue discount is accreted to
interest income over the life of the 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 payment is recorded as
income and as the cost basis of such securities. Dividend income is recorded on
the ex-dividend date. Net realized and unrealized gains (losses) on foreign
currency transactions include gains (losses) arising from the fluctuation in
exchange rates between trade and settlement dates on security transactions,
gains (losses) arising from the disposition of foreign currency, and currency
gains (losses) between the accrual and payment dates on dividend and interest
income and foreign withholding taxes. The Funds do not isolate that portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gains (losses) from investments. The Funds 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 contracts are used to minimize the exposure to foreign exchange
rate fluctuations during the period between trade and settlement date of the
contracts. The Funds may also enter into forward currency contracts to hedge
certain other foreign currency denominated assets. 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 Funds'
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.
Note 2. Fund Share Transactions
Each Fund's capitalization consists of an unlimited number of shares of
beneficial interest without par value that represent a separate series of the
Trust. Each share of a Fund represents an equal proportionate beneficial
interest in that Fund and, when issued and outstanding, is fully paid and
nonassessable. Shareholders would be entitled to share proportionally in the net
assets of a Fund available for distribution to shareholders upon liquidation of
a Fund.
Note 3. Security Transactions
Realized gains (losses) are computed on the identified cost basis for both
financial reporting and Federal income tax purposes.
The cost of investments purchased and proceeds from investments sold excluding
short-term investments for the period ended December 31, 1998, for the Funds
were as follows:
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Growth Global International
and Income Utilities Fund for
Fund Fund Growth
-------------- -------------- ---------------
<S> <C> <C> <C>
Cost of investments
purchased ................ $33,397,930 $37,808,485 $31,004,936
Proceeds from
investments sold ......... 28,822,845 29,818,622 10,462,966
</TABLE>
<TABLE>
<CAPTION>
Strategic All-Star
Income U.S. Stock Tiger Equity
Fund Fund Fund Fund
-------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Cost of investments
purchased ................ $85,070,191 $128,044,784 $4,798,563 $38,323,690
Proceeds from
investments sold ......... 41,458,669 77,921,467 3,311,828 21,245,413
</TABLE>
<TABLE>
<CAPTION>
Small Cap High Yield
Value Fund Securities Fund
------------ ----------------
<S> <C> <C>
Cost of investments purchased .......... $2,582,971 $6,195,938
Proceeds from investments sold ......... 617,069 798,938
</TABLE>
For Growth and Income Fund and Strategic Income Fund, none and $2,769,555 and
$15,732,865 and $729,830, respectively, represent the purchase cost and proceeds
of sales of U.S. Government securities, respectively.
At December 31, 1998, the following funds had capital loss carryforwards:
<TABLE>
<CAPTION>
Global International Strategic
Utilities Fund for Income Tiger
Fund Growth Fund Fund
----------- --------------- ---------- -------------
<S> <C> <C> <C> <C>
Capital loss
Carryforward .......... $918,500 $1,939,337 $101,588 $8,162,376
Expiring in or before if
not utilized .......... 2006 2006 2006 2006
</TABLE>
<TABLE>
<CAPTION>
All-Star Small Cap High Yield
Equity Value Securities
Fund Fund Fund
---------- ----------- -----------
<S> <C> <C> <C>
Capital loss
Carryforward ......... $99,749 $13,547 $48,985
Expiring in or before if
not utilized ......... 2006 2006 2006
</TABLE>
Note 4. Distributions to Shareholders
The Funds intend to distribute as dividends or capital gain distributions, at
least annually, substantially all of their net investment income and net profits
realized from the sale of investments. All dividends and distributions are
reinvested in additional shares of the Funds 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, which may differ from
generally accepted accounting principles. The 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. Accordingly, amounts as of December 31, 1998 have been reclassified
as follows:
<TABLE>
<CAPTION>
International
Growth and Global Fund for
Income Fund Utilities Fund Growth
------------- ---------------- --------------
<S> <C> <C> <C>
Accumulated net
investment income ......... $27,656 $ (78,174) $ 15,217
Accumulated net
realized gains (losses) (27,656) 78,174 (11,753)
Paid in capital ............. -- -- (3,464)
</TABLE>
<TABLE>
<CAPTION>
Strategic U.S. All-Star
Income Stock Tiger Equity
Fund Fund Fund Fund
------------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
Accumulated net
investment income ......... $103,742 $(49,387) $(198,274) $ (8)
Accumulated net
realized gains (losses) (103,742) 49,387 198,274 8
Paid in capital ............. -- -- -- --
</TABLE>
In all cases net assets were not affected by these changes.
Note 5. Fees and Compensation Paid to Affiliates
Management and Sub-Advisory Fees--The Funds have management and sub-advisory
agreements with the Manager, Colonial, Stein Roe, Newport and LAMCO,
respectively. For all the Funds, the management fee to be paid to the Manager is
computed daily and paid monthly based upon the average daily net assets of the
Funds at annual rates as follows:
<TABLE>
<CAPTION>
Annual Rate
as a Percent
of Average
Daily
Fund Net Assets
- --------------------------------------- -------------
<S> <C>
Growth and Income Fund ................ 0.65 of 1%
Global Utilities Fund ................. 0.65 of 1%
International Fund for Growth ......... 0.90 of 1%
Strategic Income Fund ................. 0.65 of 1%
U.S. Stock Fund ....................... 0.80 of 1%
Tiger Fund ............................ 0.90 of 1%
All-Star Equity Fund .................. 0.80 of 1%
Small Cap Value Fund .................. 0.80 of 1%
High Yield Securities Fund ............ 0.60 of 1%
</TABLE>
The Manager, out of the management fee it receives from the Funds, pays
Colonial, Stein Roe, Newport and LAMCO a sub-advisory fee based upon the average
daily net assets of the Funds at annual rates as follows:
<TABLE>
<CAPTION>
Annual Rate
as a Percent
of Average
Daily
Fund Net Assets
- --------------------------------------- -------------
<S> <C>
Growth and Income Fund ................ 0.45 of 1%
Global Utilities Fund ................. 0.45 of 1%
International Fund for Growth ......... 0.70 of 1%
Strategic Income Fund ................. 0.45 of 1%
U.S. Stock Fund ....................... 0.60 of 1%
Tiger Fund ............................ 0.70 of 1%
All-Star Equity Fund .................. 0.60 of 1%
Small Cap Value Fund .................. 0.60 of 1%
High Yield Securities Fund ............ 0.40 of 1%
</TABLE>
78
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Bookkeeping Fee--Colonial provides bookkeeping and pricing services to each
Fund for $27,000 per year plus 0.035% of the Fund's average daily net assets
over $50 million.
Transfer Agent Fee--Each of the Funds pays Liberty Funds Services, Inc.,
formerly Colonial Investors Service Center, Inc., an affiliate of Colonial, for
transfer agent services rendered at an annual rate of $7,500.
Expense Reimbursement--Through April 30, 1999, the Manager has agreed to
reimburse all expenses, including management fees, in excess of 1.00% of average
daily net assets for Growth and Income Fund, Global Utilities Fund, U.S. Stock
Fund, All-Star Equity Fund, and Small Cap Value Fund in excess of 0.80% of
average daily net assets for Strategic Income Fund and High Yield Securities
Fund and in excess of 1.75% of average daily net assets for International Fund
for Growth and Tiger Fund.
The Funds had an agreement with its custodian bank under which custodian fees
were reduced by balance credits during the year ended December 31, 1998. The
Funds could have invested a portion of the assets utilized in connection with
the expense offset arrangement in an income producing asset if it had not
entered into such an agreement. The dollar amounts, where applicable, are as
follows:
<TABLE>
<S> <C>
Growth and Income Fund $ 50
International Fund for Growth $217
Strategic Income Fund $639
U.S. Stock Fund $ 34
</TABLE>
Note 6. Investment in Repurchase Agreements
Each Fund may enter into repurchase agreements, which require the seller of the
instrument to maintain on deposit with the Funds' custodian bank or in the
Federal Reserve Book-Entry System securities in the amount at all times equal to
or in excess of the value of the repurchase agreement plus accrued interest. The
Funds may experience costs and delays in liquidating the collateral if the
issuer defaults or enters bankruptcy.
79
<PAGE>
Liberty Variable Investment Trust
Adviser
Liberty Advisory Services Corp.
125 High Street
Boston, Massachusetts 02110
Sub-Investment Advisers
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
Robert J. Birnbaum
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.
<PAGE>
Keyport Life Insurance Co.
125 High Street
Boston, MA 02110-2712
<PAGE>
Steinroe Variable Investment Trust
Stein Roe Special Venture Fund, Variable Series
Stein Roe Growth Stock Fund, Variable Series
Stein Roe Balanced Fund, Variable Series
Stein Roe Mortgage Securities Fund, Variable Series
Stein Roe Money Market Fund, Variable Series
Annual Report
Dec. 31, 1998
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<S> <C>
Portfolio Manager Discussion:
Stein Roe Special Venture Fund, Variable Series.............. 1
Stein Roe Growth Stock Fund, Variable Series................. 3
Stein Roe Balanced Fund, Variable Series..................... 5
Stein Roe Mortgage Securities Fund, Variable Series.......... 7
Stein Roe Money Market Fund, Variable Series................. 9
Independent Auditors' Report................................... 10
Financial Statements:
Stein Roe Special Venture Fund, Variable Series.............. 11
Stein Roe Growth Stock Fund, Variable Series................. 17
Stein Roe Balanced Fund, Variable Series..................... 21
Stein Roe Mortgage Securities Fund, Variable Series.......... 27
Stein Roe Money Market Fund, Variable Series................. 32
Notes to Financial Statements.................................. 36
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO MANAGER DISCUSSION
Stein Roe Special Venture Fund, Variable Series
- -------------------------------------------------------------------------------
Q&A with William M. Garrison and Steven M. Salopek,
Portfolio Managers of Special Venture Fund, Variable Series
Steven M. Salopek and William M. Garrison were named portfolio managers of
Stein Roe Special Venture Fund, Variable Series effective Oct. 8, 1998.
Q: How did the Fund perform?
A: The Fund's total return was -17.30% for the year ended December 31, 1998.
This was substantially less than the average fund in the Lipper variable
annuity small-cap fund peer group, which gained 1.48% in value.
Q: Why did the value of the Fund's holdings decline so much more than the
average of its peers?
A: We held a limited number stocks in the portfolio (about 40 for most of the
period), and many stocks did not perform as we expected. A concentrated
strategy can allow a fund to take greater advantage of market upswings, but
it can work against it when the holdings don't participate in a market rally
or drop more than the market as a whole during a correction. We faced both
problems in 1998. In addition, small-company stocks were generally
out-of-favor compared to stocks of large companies this past year.
To further diversify the Fund, we began to increase the number of holdings
substantially this past autumn. As of year's end, we had increased the number
of holdings to 101. We also invested in slightly larger, more liquid stocks
that we believed had a more attractive risk/reward profile than certain very
small companies whose stocks traded less frequently. By doing this, we
believe we have reduced the risk that price declines--in any one stock--will
adversely affect the Fund's overall performance.
Q: Have there been other major adjustments to the portfolio?
A: We further diversified the Fund by adding technology stocks that appeared
to offer attractive growth potential. As of Dec. 31, 1998,
technology-oriented businesses in several industries represented 27% of the
Fund's assets. We had been stock analysts for several years prior to our
assuming leadership of the Fund and we attempted to make the most of this
experience as we restructured the portfolio. Several purchases were made
during the market's weakness last fall. In late October, we purchased Mercury
Interactive (1.3% of net assets), a developer of software troubleshooting
products and Vitesse (1.6% of net assets), a semiconductor maker. Since we
purchased them, both companies' shares have doubled in value. To help reduce
risk, we invest in a combination of companies that either have strong
immediate growth prospects or stable growth characteristics. An example of a
stable growth company, in our view, is ADVO (0.6% of net assets). This
company sends direct mail to 61 million households a year, is the largest
client of the U.S. Postal Service, and has many corporate and non-profit
customers. ADVO has an established business model that we believe can
generate steady earnings growth.
Q: Why did the small-cap market have such a weak year?
A: As international currency and economic problems mounted, investors
generally fled higher-risk stocks in favor of more liquid large-company
stocks. We believe the extent of these declines was not warranted given the
fundamental soundness of many small companies' earnings and balance sheets.
1
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER DISCUSSION
Stein Roe Special Venture Fund, Variable Series (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stein Roe Special Venture Fund, Variable Series, and Russell 2000 Index
Growth of a hypothetical $10,000 investment Jan. 1, 1989 to Dec. 31, 1998
<TABLE>
<CAPTION>
-----------------------------------------
Average Annual Total Returns
at December 31, 1998
1-Year 5-Year Since Inception
<S> <C> <C>
-17.30% 5.06% 12.52%
-----------------------------------------
</TABLE>
[Begin Plot Points]
<TABLE>
<CAPTION>
Special Russell
Venture Fund 2000 Index
<S> <C> <C>
1/89 10,000 10,000
12/89 13,084 11,626
12/90 11,918 93,610
12/91 16,357 13,672
12/92 18,725 16,189
12/93 25,406 19,246
12/94 25,708 18,895
12/95 28,729 24,271
12/96 36,469 28,274
12/97 39,317 34,597
12/98 32,515 33,716
</TABLE>
- --------------------------------------------------------------------------------
[End Plot Points]
Q: What do you look for from new holdings?
A: We look to invest in small-cap companies that possess strong growth
prospects and are at reasonable values, or are priced attractively for the
growth potential they offer. Companies we consider usually have high
profitability and the opportunity to serve large and growing markets. In
addition, we look for companies with strong management teams that participate
in the ownership of the company, and companies that have proven success in
executing their business plans.
Q: What's your outlook for the small-cap market?
A: Our research shows that many small-cap stocks are selling at the lowest
prices relative to their earnings-per-share growth potential in 20 years.
Investors who have been weary of smaller-cap names may require more stock
price stability before diversifying their portfolios, but eventually we think
investors will see that many small-company stocks offer better-than-average
growth prospects at rock-bottom prices. Because small-company
stocks currently make up less than 20% of the overall U.S. equity market
capitalization, if investors allocate even a small amount of their investment
dollars to small-cap stocks, it could potentially give the group a big boost.
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 Dec. 31, 1998, and are subject to change. Total return
performance includes changes in share price and reinvestment of income and
capital gains distributions. The Russell 2000 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 small-cap fund
peer group for the one-, five-year and life of fund periods ended Dec. 31,
1998 was 1.48%, 12.63% and 14.72%, respectively.
Funds that emphasize investments in smaller companies may experience greater
volatility than investments in large companies.
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.
2
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER DISCUSSION
Stein Roe Growth Stock Fund, Variable Series
- --------------------------------------------------------------------------------
Q&A with Eric Gustafson, Portfolio Manager of Growth Stock Fund, Variable Series
Q: How did the Fund perform in 1998?
A: Growth Stock Fund, Variable Series, posted a total return of 27.91% for
the 12 months ended Dec. 31, 1998. In comparison, the average growth fund in
the variable annuity growth fund peer group rose 24.94%, according to Lipper,
Inc.
Q: What kind of market environment did investors see this past year, and how
did that affect the Fund's results?
A: The U.S. economic backdrop of low rates, fears of a slowdown in economic
growth and negligible inflation led to an outstanding environment for
high-quality stocks of large, rapidly growing companies. The unmanaged
Standard & Poor's 500 Index rose 28.6%, for an unprecedented fourth
consecutive year of returns in excess of 20%.
More specifically, it was a narrow market led by large-cap technology, health
care and select retail stocks. Funds, like ours, that held these names,
provided strong results.
Q: What events affected stock selection?
A: Going into this year, the investing environment seemed too good to be true.
The stock market was supported by low inflation, falling interest rates,
increased merger activity and robust business capital spending. Still, overseas
events made many investors skeptical, and some grew worried that recession along
the Pacific Rim would drag down corporate earnings and stock prices. Although
U.S. exports weakened and profit margins on domestic goods declined amid
increased competition from imports, the U.S. economy proved resilient. To reduce
risk, investors focused on companies like Microsoft, Cisco Systems and MCI
Worldcom (4.6%, 5.8% and 4.6% of net assets, respectively), that appeared to
have superior earnings growth potential. Technology companies did especially
well, particularly anything internet-related, as more consumers shopped online.
Pharmaceutical companies were another stock group that provided investors
with exceptional returns. The Fund's positioning in Pfizer and Eli Lilly
(3.7% and 3.3% of net assets, respectively) helped lift total return. New
product launches served as the main catalyst for investor enthusiasm.
Q: Another sector you've traditionally favored has been financial services.
How did holdings in this sector fare throughout the year?
A: Financial services stocks did well during the first half of calendar 1998.
However, Russia's default on its debt and the subsequent collapse of a major
hedge fund this past summer generated substantial losses for several
money-center banks and insurance companies. Some financial services stocks
plunged more than 50 percent after forecasts of lower earnings. We focus our
investments in larger more stable companies, and our holdings were generally
unaffected by sour emerging market loans - companies such as American
International Group and Fannie Mae (3.6% and 3.8% of net assets,
respectively). These stocks held up relatively well during 1998's remarkable
market volatility.
3
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER DISCUSSION
Stein Roe Growth Stock Fund, Variable Series (continued)
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
Stein Roe Growth Stock Fund, Variable Series, and S&P 500 Index
Growth of a hypothetical $10,000 investment Jan. 1, 1989 to Dec. 31, 1998
<TABLE>
<CAPTION>
----------------------------------------
Average Annual Total Returns
at December 31, 1998
1-Year 5-Year Since Inception
<S> <C> <C>
27.91% 21.49% 18.94%
----------------------------------------
</TABLE>
[Begin Plot Points]
<TABLE>
<CAPTION>
Growth S&P
Stock Fund 500 Index
<S> <C> <C>
1/89 10,000 10,000
12/89 13,130 13,163
12/90 12,913 12,754
12/91 19,114 16,631
12/92 20,382 17,896
12/93 21,394 19,696
12/94 20,035 19,955
12/95 27,595 27,445
12/96 33,467 33,742
12/97 44,269 44,995
12/98 56,623 57,864
</TABLE>
- --------------------------------------------------------------------------------
[End Plot Points]
Q: Did you sell any large positions?
A: We sold PeopleSoft, a provider of corporate technology systems, as the
corporate trend toward streamlining technologies were put on hold somewhat
until after year 2000 computer problems have safely passed. We also sold
American Home Products because the company's stock surpassed our price target
and, in our view, became overvalued.
Q: What do you expect going forward?
A: In our view, companies who can meet analysts' earnings growth expectations
at a time when profit margins appear to be contracting should do well in
1999. Clearly, Asia's continuing recession could have a further impact on
many U.S. companies. Through careful research, we will strive to identify
businesses with above-average prospects and try to avoid those who could
offer negative surprises.
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 Dec. 31, 1998, and are subject to change. Total return
performance includes changes in share price and reinvestment of income and
capital gains distributions. The S&P 500 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
growth fund peer group for the one-, five-year and life of fund periods ended
Dec. 31, 1998 was 24.94%, 20.25% and 17.92%, 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.
4
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER DISCUSSION
Stein Roe Balanced Fund, Variable Series
- --------------------------------------------------------------------------------
Q&A with Harvey Hirschhorn, Portfolio Manager of Balanced Fund, Variable Series
Q: How did the Fund perform in calendar year 1998?
A: The Fund's balanced mix of domestic and international stocks and domestic
bonds provided a total return of 12.54% for the 12 months ended Dec. 31,
1998. This was below its peers, as measured by the Lipper flexible portfolio
average, which rose 14.79% for the period.
Q: What affected the markets and the Fund's capital appreciation and income
potential in 1998?
A: Throughout the year, Asia's recession and emerging market debt problems
led to both favorable and unfavorable developments in the United States. On
the positive side, the dollar was strong and energy prices and inflation were
low. On the negative side, the U.S. trade balance deteriorated as exports
diminished while imports remained firm. The combined result was that the U.S.
consumer benefited from solid economic growth, with employment gains and with
real wages showing the sharpest increase in over 20 years. The Fund benefited
from strong consumer spending, and retail stock holdings Wal-Mart Stores and
Home Depot, (1.6% and 1.6% of net assets, respectively) were among the
best-performing investments.
Q: Did any one sector stand out in terms of performance?
A: Pharmaceutical companies provided strong results for much of the year.
Successful drug launches by several Fund holdings such as Eli Lilly and
Pfizer (1.4% and 1.2% of net assets, respectively) helped lift our results.
The pharmaceutical sector offered strong earnings prospects at a time when
equity markets were turbulent and earnings in cyclical sectors waned. While
we believe the sector offers further capital appreciation potential, we doubt
returns will be as robust in 1999. We trimmed our weighting since June in
that sector.
Q: Were there other areas of significance as far as performance? Any major
changes in positioning?
A: Our stock selections in technology, communications and financial services
did well this past year. To further diversify the Fund, we added Cisco
Systems in the technology sector, MCI WorldCom in the telecommunications
area, and Freddie Mac in the financial services area (1.7%, 1.5% and 1.3% of
net assets, respectively).
Q: Were there any disappointments this past year?
A: Our investments in Real Estate Investment Trusts (REITs) did not meet
expectations. Investors reduced their commitment to REITs in 1998 even though
earnings have been solid and dividend yields high. Efforts in Washington to
end tax breaks for certain REITs cast a shadow from January through
mid-summer. In addition, a start to new construction in some markets and
greater use of debt among REITs raised concerns that the industry would
suffer in a slowing economy. We plan to maintain an exposure to REITs,
because we believe they are excellent value investments that possess strong
total return potential over the long term. We think investors will reward
REITs with healthy balance sheets that can expand their earnings.
We also were disappointed by the performance of our holdings in the energy
sector. As oil prices declined throughout the year, so did oil stock prices.
We reduced the portfolio's position in energy stocks early in the year, so
the negative impact was contained.
5
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER DISCUSSION
Stein Roe Balanced Fund, Variable Series (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stein Roe Balanced Fund, Variable Series, and Standard & Poor's 500,
Morgan Stanley Capital International Europe, Australia and Far East (EAFE), and
Lehman Brothers Government/Corporate Bond Indexes
Growth of a hypothetical $10,000 investment Jan. 1, 1989 to Dec. 31, 1998
<TABLE>
<CAPTION>
- -----------------------------------------
Average Annual Total Returns
at December 31, 1998
1-Year 5-Year Since Inception
<S> <C> <C>
12.54% 13.05% 12.94%
- -----------------------------------------
</TABLE>
[Begin Plot Points]
<TABLE>
<CAPTION>
Lehman Brothers
Balanced Government/Corporate Standard & Poor's MSCI EAFE
Fund Bond Index 500 Index Index
<S> <C> <C> <C> <C>
1/89 10,000 10,000 10,000 10,000
12/89 12,238 11,276 13,163 11,054
12/90 12,155 12,309 12,754 8,462
12/91 15,550 14,109 16,631 9,488
12/92 16,721 15,121 17,896 8,333
12/93 18,274 16,449 19,696 11,046
12/94 17,691 16,132 19,955 11,906
12/95 22,197 18,606 27,445 13,240
12/96 25,665 19,359 33,742 14,041
12/97 29,982 20,882 44,995 14,290
12/98 33,741 22,644 57,864 17,147
</TABLE>
- --------------------------------------------------------------------------------
[End Plot Points]
Q: How did the Fund's international equities perform?
A: Performance of international holdings was mixed. We scaled back our
exposure to foreign stocks around August, when we believed the Federal
Reserve would begin lowering interest rates. We aptly expected the U.S.
equity market would perform better than many foreign markets in a lower
interest rate environment. However, investments in countries such as the
United Kingdom and Spain remained firm.
Q: How did the portfolio's fixed income securities perform?
A: Early in the year we focused on high-quality bonds, with a significant
overweight position in Treasury bonds compared to our benchmark. Beginning in
the summer, the income potential of high-quality corporate and mortgage bonds
increased significantly as investors grew concerned about the effects of
emerging market debt defaults, a slowing U.S. economy and homeowner
refinancing activity. We saw this period as an opportunity to add value and
yield to the portfolio. As the non-Treasury bond market recovered this past
autumn, our positioning enhanced the Fund's total return. We've maintained a
longer-than-average duration and maturity.
Q: What's your outlook for 1999?
A: We anticipate a moderate expansion, with real economic growth (as measured
by Gross Domestic Product) of around 2.5.% versus the near 4% we saw in 1998.
We also expect inflation to be contained, and in this environment we are
looking for the Fed to make modest further cuts in U.S. interest rates later
in 1999. This should be favorable for the fixed-income market.
With respect to the stock market, we expect corporate profits to be under
pressure. That may make investors less willing to accept high price/earnings
ratios. Challenges may come from negative affects of strong wage increases on
profit margins. And competition from overseas should continue to be intense,
as Asia and Latin America will look to exports to abate domestic problems.
They may be exporting goods that are cheaper than those offered by U.S.
companies, and that stiff competition could be tough for U.S. companies. A
number of the foreign economies also continue to be in recession and U.S.
companies that do a lot of selling overseas may experience less-favorable
sales than they had in the past.
As a result, investors will have to be very selective in their equity
holdings. We'll continue to focus on companies we believe can maintain or
expand profits.
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
Dec. 31, 1998, and are subject to change. Total return performance includes
changes in share price and reinvestment of income and capital gains
distributions. The S&P 500, MSCI EAFE, and Lehman Government/Corporate Bond
Indexes are unmanaged groups of stocks that differ from the composition of each
Stein Roe Fund; they are not available for direct investment. According to
Lipper, Inc., a monitor of mutual fund performance, the median returns for the
Fund's balanced fund peer group for the one-, five-year and life of fund periods
ended Dec. 31, 1998 was 14.79%, 13.73% and 12.21%, respectively.
Foreign investments involve market, political and currency risks not
associated with investing the United States.
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.
6
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER DISCUSSION
Stein Roe Mortgage Securities Fund, Variable Series
- --------------------------------------------------------------------------------
Q&A with William Wadden, Portfolio Manager of Stein Roe Mortgage Securities
Fund, Variable Series
Q: How did the Fund perform in 1998?
A: Stein Roe Mortgage Securities Fund, Variable Series, returned 6.80% for
the 12-month period ended Dec. 31, 1998. In comparison, the average variable
annuity mortgage securities fund had a total return of 7.17% for the year,
according to Lipper, Inc.
Q: What happened in the market over the year?
A: This past year offered two dramatically different investment environments.
During the first six months of 1998, the yield difference, or spread, between
mortgage securities versus Treasuries, slowly increased in response to Asian
economic turmoil and its perceived effects on the U.S. economy. A record
amount of new mortgage bonds were also issued, modestly depressing prices.
Still, interest rates were relatively stable, and this environment helped
mortgages outperform both corporate bonds and Treasuries from January through
June.
The second half of the year, and in particular the third quarter, was a tough
period for mortgages and all other sectors of the fixed-income and equity
markets other than Treasuries. This happened as threats of a global economic
slowdown caused investors to seek the safety that Treasury investments
provided. Then in autumn, the Federal Reserve acted decisively to reduce
interest rates, bringing them down by 0.75% in three consecutive
quarter-point cuts. During this period, the difference in yields between
mortgage bonds and Treasuries widened sharply.
Prices of mortgages fell sharply when certain hedge funds were forced to sell a
large amount of bonds to raise cash to pay off creditors. This selling of
mortgage-backed securities created a supply/demand imbalance. Your Fund took
advantage of this development and added high-quality mortgages to the portfolio
at what we considered to be discount prices.
Q: How did purchases throughout 1998 affect the Fund's overall asset mix?
A: At the beginning of 1998, the Fund was underweighted in mortgages and had
a larger than usual portion of its net assets in Treasuries and corporate
bonds. By Dec. 31, 1998, we had increased the portfolio's commitment to
mortgage securities to 89% of the Fund's net assets, from 72% at Dec. 31,
1997. Most of this increase occurred during the second half of 1998, and was
aided by investing new contributions into mortgages as the Fund grew in size.
We have retained a small portion of our corporate bond investments -- bonds
rated A and BBB that still have good total return prospects.
Q: Where did you focus purchases in the mortgage securities sector?
A: Early in the year, our best investment opportunities were in
longer-maturity, lower-coupon bonds that sold at slight discounts to their
face value. During June, we were able to purchase attractive home equity
loans. We like to add such holdings to the portfolio when opportunities arise
because they offer two forms of prepayment protection. First, mortgage
industry research has shown that home equity loans are less likely to be
refinanced than conventional mortgages when interest rates fall. Second, we
buy what are called non-accelerating senior bonds. These bonds have a
structural provision that restricts them from receiving prepayments for a
three-year period. This enables the bonds to maintain a stable stream of cash
flow for a longer period of time, potentially enhancing the bonds' value.
7
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER DISCUSSION
Stein Roe Mortgage Securities Fund, Variable Series (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stein Roe Mortgage Securities Fund, Variable Series, and
Lehman Brothers Mortgage-Backed Securities Index
Growth of a hypothetical $10,000 investment Jan. 1, 1989 to Dec. 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------
Average Annual Total Returns
at December 31, 1998
1-Year 5-Year Since Inception
<S> <C> <C>
6.80% 6.79% 8.23%
- ------------------------------------------
</TABLE>
[Begin Plot Points]
<TABLE>
<CAPTION>
Mortgage Securities Lehman Mortgage-Backed
Income Fund Securities Index
<S> <C> <C>
1/89 10,000 10,000
12/89 11,284 11,535
12/90 12,311 12,772
12/91 14,094 14,779
12/92 14,933 15,809
12/93 15,868 16,891
12/94 15,635 16,618
12/95 18,077 19,411
12/96 18,926 20,449
12/97 20,368 22,390
12/98 22,040 23,149
</TABLE>
- --------------------------------------------------------------------------------
[End Plot Points]
In October, we found a significant opportunity to make attractive purchases
in high-coupon 30-year mortgages and in the commercial mortgage-backed
sector. We increased the Fund's weighting in premium mortgages by 10
percentage points during the fourth quarter, from 7% of net assets at Sept.
30, 1998, to 17% of net assets as of Dec. 31, 1998.
Q: What do you foresee happening in the mortgage securities market in coming
months?
A: Mortgages have historically outperformed other investment-grade
fixed-income securities in a relatively stable interest rate environment. We
believe rates will fluctuate within a more narrow range in 1999, than they
did in 1998, and that should help the Fund do well. To participate in any
bond price rally that may occur in the coming months, we also have a small
position in long-term Treasury bonds.
Q: What kind of bonds do you plan to buy?
A: To enhance risk-adjusted returns, we plan to focus on shorter-duration bonds.
Many of the higher-coupon bonds we purchased in October have shorter durations,
and we think this is the place to be in what we believe may be a stable interest
rate environment. We also expect to increase the Fund's exposure to
credit-sensitive mortgages. These securities are exposed to credit defaults of
the underlying borrowers and are therefore attractively priced in the market.
The risk of principal loss in such bonds rated AA and A is remote and we expect
sustained economic growth to provide a favorable environment for mortgage
defaults.
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
Dec. 31, 1998 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 one-, five- and life of fund periods ended Dec. 31,
1998, were 7.17%, 6.80% and 8.84%, 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.
8
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER DISCUSSION
Stein Roe Money Market Fund, Variable Series
- --------------------------------------------------------------------------------
Q&A with Jane Naeseth, Portfolio Manager of Stein Roe Money Market Fund,
Variable Series
q: How did the Fund perform during calendar year 1998?
A: The Fund's total return was 5.17% for the year ended Dec. 31, 1998. Income
potential remained attractive because the supply of securities was plentiful
and prices were low. Institutional investors sought to "clean house" at
year's end by selling their excess inventory of money market securities such
as commercial paper. This provided a buying opportunity for the Fund.
For the period, the average money market fund provided a return of 5.10%,
according to Lipper, Inc. and the unmanaged 90-day Treasury Bill Index,
returned 4.88%.
Q: What transpired during the year?
A: Interest rates remained stagnant from January to June. The difference in
income potential between money market securities and long-term bonds was very
narrow, which means investors were not rewarded for taking on additional
interest rate risk. At June 30, 1998, the rate banks charge each other for
overnight loans stood at 5.5% while the average yield of 30-year U.S. bonds
was 5.6%.
This changed dramatically beginning in July. Russia's debt default, Asia's
recession and signs of weakness in the domestic economy prompted the Federal
Reserve to reduce short-term interest rates to 4.75%. Long rates, meanwhile,
fell to just over 5% by year's end.
Q: Did the rate reductions detract from the portfolio's return?
A: We structured the portfolio to take advantage of the anticipated interest
rate cuts in the latter part of the year by lengthening average maturity from
over 33 days at June 30, 1998, to 40 days by Dec. 31, 1998, and that
supported performance.
Q: If rates are reduced further, what impact will it have on the Fund in
coming months?
A: While returns were not affected in 1998, if rates are lowered, we
anticipate that will affect the portfolio's income potential in early 1999.
Given the fact that most economists expect inflation to remain under 2% in
1999, we believe the Fund's income potential is likely to remain attractive.
In 1998, consumer prices rose just 1.5%, the slowest pace in nearly 12 years,
and we believe this trend can continue.
Q: How did you position the Fund within sectors during the period?
A: We have invested more than half the Fund's net assets in regular
commercial paper, which appeared to offer the best risk/reward ratio. We
slightly increased the letter of credit commercial paper positions, taking
advantage of some value purchases in those sectors. When a portion of our
Yankee CD holdings matured, we did not replace them with holdings in this
sector. To try to ensure liquidity, we're steering away from anything with
potential international exposure.
During the year, our holdings in federal agency securities were refinanced by
the issuer. We would have liked to maintain the Fund's allocation to agency
securities. However, at the time our holdings were called, similar securities
were too expensive, in our view. We also looked to add floating rate notes
(variable rate corporate securities) to the portfolio during 1998. However,
we could not find any floating rate notes offered at prices we considered
attractive.
Q: What's your strategy for coming months?
A: We expect to maintain a maturity range similar to our current positioning
and invest primarily in U.S. commercial paper.
Past performance is no guarantee of future results. Total return performance
includes reinvestment of income. An investment in the Fund is neither insured
nor 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 $1.00 per share, it is possible to lose money by investing in
the Fund. According to Lipper, Inc., a monitor of mutual fund performance,
the median total returns for the Fund's money market fund peer group for the
one-, five-year, and life of fund periods ended Dec. 31, 1998, were 5.10%,
4.9 2% and 5.17%, 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.
9
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
of SteinRoe Variable Investment Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Stein Roe Special Venture Fund,
Variable Series; Stein Roe Growth, Stock Fund, Variable Series; Stein Roe
Balanced Fund, Variable Series; Stein Roe Mortgage Securities Fund, Variable
Series; Stein Roe Money Market Fund, Variable Series, all constituent funds
of SteinRoe Variable Investment Trust, as of December 31, 1998, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
SteinRoe Variable Investment Trust as of December 31, 1998, the results of
their operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles.
KPMG LLP
Chicago, Illinois
February 12, 1999
10
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Stein Roe Special Venture Fund, Variable Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
------- -----------
<S> <C> <C>
COMMON STOCKS--(91.1%)
Aerospace and Defense Equipment--(1.6%)
Alliant Techsystems (a) .......................... 13,000 $ 1,071,688
Orbital Sciences (a) ............................. 24,700 1,092,975
-----------
2,164,663
-----------
Apparel Manufacturers--(2.4%)
Columbia Sportswear (a) .......................... 185,700 3,133,687
-----------
Banks and Savings & Loans--(4.4%)
Centura Banks .................................... 18,100 1,346,187
Commerce Bancorp ................................. 19,200 1,008,000
Cullen/Frost Bankers ............................. 22,900 1,256,637
National Bancorp of Alaska ....................... 64,800 2,187,000
-----------
5,797,824
-----------
Beverages--(0.9%)
Canandaigua Brands, class A (a) .................. 20,000 1,156,250
-----------
Broadcasting and Media--(2.6%)
Metro Networks (a) ............................... 81,400 3,469,675
-----------
Building--(1.6%)
D.R. Horton ...................................... 53,500 1,230,500
Champion Enterprises (a) ......................... 33,700 922,537
-----------
2,153,037
-----------
Business Services--(5.8%)
HA-LO Industries (a) ............................. 37,100 1,395,887
Interim Services (a) ............................. 93,000 2,173,875
Metamor Worldwide (a) ............................ 136,000 3,400,000
Paychex .......................................... 12,700 653,256
-----------
7,623,018
-----------
Circuits--(1.6%)
Vitesse Semiconductor (a) ........................ 47,600 2,171,750
-----------
Commercial Services--(0.4%)
Iron Mountain (a) ................................ 15,300 551,756
-----------
Communications Equipment and Services--(1.5%)
Inter-Tel ........................................ 47,800 1,117,325
Uniphase (a) ..................................... 12,500 867,187
-----------
1,984,512
-----------
<CAPTION>
Market
Shares Value
------- ----------
<S> <C> <C>
Computer Hardware, Software and Services--(11.4%)
BARRA (a) ........................................ 127,700 $ 3,016,912
BISYS Group (a) .................................. 17,500 903,437
HNC Software (a) ................................. 12,200 493,337
Hyperion Solutions (a) ........................... 27,500 495,000
Jack Henry & Associates .......................... 17,000 845,750
Kronos (a) ....................................... 20,900 926,131
Mercury Interactive (a) .......................... 26,500 1,676,125
National Computer Systems ........................ 35,000 1,295,000
National Instruments (a) ......................... 14,800 505,050
Sapient (a) ...................................... 8,500 476,000
SPSS (a) ......................................... 34,900 658,738
Transacton Systems Architects,
class A (a) .................................... 18,400 920,000
VERITAS Software (a) ............................. 7,400 443,538
Verity (a) ....................................... 29,000 768,500
Whittman-Hart (a) ................................ 56,700 1,566,338
-----------
14,989,856
-----------
Consulting Services--(1.0%)
Comdisco ......................................... 32,200 543,375
Metzler Group (a) ................................ 15,000 730,313
-----------
1,273,688
-----------
Cosmetics--(3.1%)
Nu Skin Enterprises, class A (a) ................. 173,300 4,094,213
-----------
Data Processing and Management--(2.5%)
Acxiom (a) ....................................... 29,800 923,800
American Management Systems (a) .................. 40,800 1,632,000
SEI Investments .................................. 7,700 765,188
-----------
3,320,988
-----------
Diversified Operations--(2.2%)
SPS Technologies (a) ............................. 20,000 1,132,500
Triarc Companies (a) ............................. 114,000 1,824,000
-----------
2,956,500
-----------
Electronic Components--(3.7%)
Burr-Brown (a) ................................... 17,300 405,469
C-Cube Microsystems (a) .......................... 38,300 1,038,887
CTS .............................................. 22,900 996,150
Etec Systems (a) ................................. 9,500 380,000
Gentex (a) ....................................... 53,500 1,070,000
Novellus Systems (a) ............................. 19,200 950,400
-----------
4,840,906
-----------
Fertilizers--(0.5%)
Scotts Co., class A (a) .......................... 18,800 722,625
-----------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS Market
(Continued) Shares Value
------- ----------
<S> <C> <C>
Common Stocks (Continued)
Finance Services--(1.5%)
Heller Financial ................................. 28,100 $ 825,438
Jefferies Group .................................. 22,800 1,131,450
-----------
1,956,888
-----------
Food Products--(1.5%)
Smithfield Foods (a) ............................ 30,500 1,033,187
Whole Foods Market (a) .......................... 18,900 914,288
-----------
1,947,475
-----------
Health Services and Equipment--(5.5%)
Express Scripts, class A (a) .................... 23,200 1,557,300
Orthodontic Centers of America (a) .............. 68,000 1,321,750
Renal Care Group (a) ............................ 42,500 1,224,531
UroQuest Medical Corp. (a) ...................... 36,200 36,200
Xomed Surgical Products (a) ..................... 95,850 3,067,200
-----------
7,206,981
-----------
Home Furnishings--(0.6%)
Ethan Allen Interiors ............................ 18,800 770,800
-----------
Insurance--(1.1%)
Mutual Risk Management ........................... 36,200 1,416,325
-----------
Internet--(0.3%)
Inktomi (a) ..................................... 3,000 388,125
-----------
Machinery Tools and Products--(1.0%)
Applied Power, class A ........................... 17,200 649,300
MotivePower Industries (a) ...................... 21,600 695,250
-----------
1,344,550
-----------
Manufacturing Services--(0.8%)
Sanmina (a) ..................................... 17,100 1,068,750
-----------
Marketing Services--(2.7%)
ADVO (a) ........................................ 28,800 759,600
Catalina Marketing (a) .......................... 41,100 2,810,213
-----------
3,569,813
-----------
Medical-Biomedical Genetics--(0.4%)
Liposome Company (a) ............................ 30,800 475,475
-----------
Metals--(1.2%)
Stillwater Mining Company (a) ................... 700 1,545,700
-----------
Miscellaneous Manufacturing--(1.4%)
AptarGroup ....................................... 35,100 984,994
IDEXX Laboratories (a) .......................... 32,300 869,072
-----------
1,854,066
-----------
Networking--(0.6%)
Xircom (a) ...................................... 23,200 788,800
-----------
<CAPTION>
Market
Shares Value
------- ----------
<S> <C> <C>
Oil and Gas--(1.8%)
Barrett Resources (a) ........................... 42,600 $ 1,022,400
Petroleum Geo-Services ADRs (a) ................. 83,000 1,307,250
-----------
2,329,650
-----------
Pharmaceuticals--(2.3%)
Alpharma, class A ................................ 18,700 660,344
Barr Laboratories (a) ........................... 22,400 1,075,200
MedImmune (a) ................................... 13,600 1,352,350
-----------
3,087,894
-----------
Printing Services--(0.9%)
Consolidated Graphics (a) ....................... 18,100 1,222,881
-----------
Retail--(9.9%)
CEC Entertainment (a) ........................... 18,200 505,050
CKE Restaurants .................................. 27,060 796,579
Cheesecake Factory (a) .......................... 29,100 862,997
Fastenal ......................................... 75,000 3,300,000
Just For Feet (a) ............................... 54,400 945,200
K-Swiss, class A ................................. 31,900 857,312
Linens 'n Things (a) ............................ 38,600 1,529,525
Men's Wearhouse (a) ............................. 40,500 1,285,875
O'Reilly Automotive (a) ......................... 11,600 548,100
Ruby Tuesday ..................................... 41,700 886,125
Williams-Sonoma (a) ............................. 38,000 1,531,875
-----------
13,048,638
-----------
Research and Development--(0.4%)
PAREXEL International (a) ....................... 23,600 590,000
-----------
Schools--(1.2%)
DeVry (a) ....................................... 53,700 1,644,563
-----------
Scientific Instruments--(0.5%)
Dionex (a) ...................................... 17,500 640,938
-----------
Supply Services--(0.8%)
G & K Services, class A .......................... 20,000 1,065,000
-----------
Textiles--(0.8%)
Mohawk Industries (a) ........................... 24,100 1,013,706
-----------
Therapeutics--(0.9%)
Biomatrix (a) ................................... 20,900 1,217,425
-----------
Transportation--(1.1%)
COMAIR Holdings .................................. 20,900 705,375
Polaris Industries ............................... 17,200 674,025
-----------
1,379,400
-----------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS Market
(Continued) Shares Value
------- ----------
<S> <C> <C>
COMMON STOCKS (Continued)
Wholesale Distribution--(4.7%)
Brightpoint (a) .................................. 62,500 $ 859,375
Earthgrains ...................................... 38,100 1,178,719
Henry Schein (a) ................................. 24,800 1,109,800
School Specialty (a) ............................. 37,000 790,875
U.S.A. Floral Products (a) ....................... 200,000 2,300,000
------------
6,238,769
------------
Total Common Stocks
(Cost $106,270,683) .............................. 120,217,560
------------
<CAPTION>
Principal Market
Amount Value
---------- ------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--(9.3%)
Commercial Paper--(9.3%)
Associate Corp. of North America
5.08% 1/4/99 .................................. $7,250,000 $ 7,246,931
Enterprise Funding
6.00% 1/4/99 ................................... 5,000,000 4,997,500
------------
Total Short-term Obligations
(Cost $12,244,431) ............................................. 12,244,431
------------
Total Investments--(100.4%)
(Cost $118,515,114) (b) ........................................ 132,461,991
Other Assets, Less Liabilities--(-0.4%) ........................ (532,845)
------------
Total Net Assets--(100.0%) ..................................... $131,929,146
============
</TABLE>
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At December 31, 1998, the cost of investments for financial reporting and
federal income tax purposes was identical. Net unrealized appreciation was
$13,946,877, comprised of gross unrealized appreciation of $18,486,975 and
gross unrealized depreciation of $4,540,098.
See Notes to Financial Statements.
13
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Stein Roe Special Venture Fund, Variable Series / December 31, 1998
- ------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at market value (identified cost $118,515,114) .................... $132,461,991
Receivable for investments sold ................................................ 237,542
Cash ........................................................................... 53,334
Dividends receivable ........................................................... 14,898
Receivable for fund shares sold ................................................ 2,818
Other assets ................................................................... 14,955
------------
Total assets ............................................................... 132,787,538
------------
Liabilities:
Payable for investments purchased .............................................. 539,247
Payable for fund shares repurchased ............................................ 164,014
Payable to investment adviser .................................................. 61,181
Accrued expenses payable ....................................................... 93,950
------------
Total liabilities .......................................................... 858,392
------------
Net Assets ..................................................................... $131,929,146
============
Net assets represented by:
Paid-in capital .............................................................. $148,794,713
Net unrealized appreciation on investments ................................... 13,947,124
Accumulated undistributed net investment income .............................. --
Accumulated net realized losses on investments ............................... (30,812,691)
------------
Total net assets applicable to outstanding shares of beneficial interest ....... $131,929,146
============
Shares of beneficial interest outstanding ...................................... 9,688,006
============
Net asset value per share ...................................................... $ 13.62
============
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- ------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest income ................................................................ $ 528,919
Dividends (net of foreign taxes withheld of $5,979) ............................ 332,912
------------
Total investment income .................................................... 861,831
------------
Expenses:
Management fee ............................................................... 810,605
Administrative fee ........................................................... 243,182
Audit and legal fees ......................................................... 30,054
Printing expense ............................................................. 29,787
Accounting fee ............................................................... 27,878
Trustees' expense ............................................................ 10,906
Transfer agent fee ........................................................... 7,500
Miscellaneous expense ........................................................ 54,335
------------
Total expenses ............................................................. 1,214,247
------------
Net investment loss ............................................................ (352,416)
Realized and unrealized gains (losses) on investments:
Net realized loss on investments ............................................. (30,757,173)
Change in unrealized appreciation or depreciation on investments ............. 239,589
------------
Net decrease in net assets resulting from operations ........................... $(30,870,000)
============
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Stein Roe Special Venture Fund, Variable Series
- -----------------------------------------------------------------------------------------------------------------
Years Ended December 31,
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................................. $ (352,416) $ 84,501
Net realized gains (losses) on investments ................................... (30,757,173) 16,866,896
Change in unrealized appreciation or depreciation on investments ............. 239,589 (2,574,259)
------------ ------------
Net increase (decrease) in net assets resulting from operations ................ (30,870,000) 14,377,138
------------ ------------
Distributions declared from:
Net investment income ........................................................ (51,000) (265,000)
Net realized gains on investments ............................................ (16,912,000) (36,940,000)
------------ ------------
Total distributions ............................................................ (16,963,000) (37,205,000)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold ............................................... 24,033,730 56,760,177
Cost of fund shares repurchased .............................................. (61,824,339) (66,766,579)
Distributions reinvested ..................................................... 16,963,000 37,205,000
------------ ------------
Net increase (decrease) in net assets resulting from fund share transactions ... (20,827,609) 27,198,598
------------ ------------
Total increase (decrease) in net assets ........................................ (68,660,609) 4,370,736
Net assets:
Beginning of year ............................................................ 200,589,755 196,219,019
------------ ------------
End of year .................................................................. $131,929,146 $200,589,755
============ ============
Accumulated undistributed net investment income included in ending net assets .. $ -- $ 50,834
------------ ------------
Analysis of changes in shares of beneficial interest:
Shares sold .................................................................. 1,645,338 3,128,771
Shares repurchased ........................................................... (4,101,552) (3,703,394)
Distributions reinvested ..................................................... 998,996 2,256,218
------------ ------------
Net increase (decrease) ........................................................ (1,457,218) 1,681,595
============ ============
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Stein Roe Special Venture Fund, Variable Series
- -------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
-----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ......................... $ 18.00 $ 20.73 $ 16.33 $ 14.74 $ 16.53
-------- -------- -------- -------- --------
Net investment income (loss) ............................... (0.04) 0.01 0.04 0.04. 0.06
Net realized and unrealized gains (losses) on investments .. (2.77) 1.25 4.36 1.69 0.09
-------- -------- -------- -------- --------
Total from investment operations ........................... (2.81) 1.26 4.40 1.73 0.15
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ................... -- (0.03) -- (0.04) (0.07)
Distributions from net realized gains on investments ... (1.57) (3.96) -- (0.10) 1.87)
Total distributions ...................................... (1.57) (3.99) -- (0.14) (1.94)
-------- -------- -------- -------- --------
Net asset value, end of year ............................... $ 13.62 $ 18.00 $ 20.73 $ 16.33 $ 14.74
======== ======== ======== ======== ========
Total return:
Total investment return .................................... (17.30)% 7.81% 26.94% 11.75% 1.19%(b)
Ratios/supplemental data:
Net assets, end of year (000's) ............................ $131,929 $200,590 $196,219 $143,248 $134,078
Ratio of expenses to average net assets .................... 0.75% 0.73% 0.75% 0.76% 0.80%(a)
Ratio of net investment income (loss) to average net assets (0.22)% 0.04% 0.20% 0.26% 0.44%(b)
Portfolio turnover ratio ................................... 103% 93% 100% 132% 144%
</TABLE>
(a) These ratios were not materially affected by the reimbursement of certain
expenses by the investment adviser.
(b) Computed giving effect to the investment adviser's expense limitation
undertaking.
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Stein Roe Growth Stock Fund, Variable Series / December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
------- -----------
<S> <C> <C>
COMMON STOCKS--(95.6%)
Banks--(2.2%)
BankAmerica ....................................... 100,000 $ 6,012,500
------------
Business Services--(2.8%)
Paychex ........................................... 150,000 7,715,625
------------
Computers and Computer Software--(15.5%)
Cisco Systems (a) ................................. 170,000 15,778,125
EMC (a) ........................................... 110,000 9,350,000
Intel ............................................. 60,000 7,113,750
Microsoft (a) ..................................... 70,000 9,708,125
------------
41,950,000
------------
Consumer Related--(5.4%)
Gillette .......................................... 135,000 6,522,188
Procter & Gamble .................................. 90,000 8,218,125
------------
14,740,313
------------
Drugs--(9.7%)
Eli Lilly & Company ............................... 100,000 8,887,500
Merck & Company ................................... 50,000 7,384,375
Pfizer ............................................ 80,000 10,035,000
------------
26,306,875
------------
ELectrical Equipment--(3.8%)
General Electric .................................. 100,000 10,206,250
------------
Energy--(1.4%)
Schlumberger Limited .............................. 80,000 3,690,000
------------
Financial Services--(9.4%)
American Express .................................. 75,000 7,668,750
Citigroup ......................................... 150,000 7,425,000
Fannie Mae ........................................ 140,000 10,360,000
------------
25,453,750
------------
Food, Beverage and Tobacco--(2.2%)
Coca-Cola ......................................... 90,000 6,018,750
------------
Health Care--(2.8%)
Cardinal Health ................................... 100,000 7,587,500
------------
Insurance--(3.5%)
American International Group ...................... 100,000 9,662,500
------------
<CAPTION>
Market
Shares Value
------- ------------
<S> <C> <C>
Leisure and Entertainment--(6.2%)
Time Warner ....................................... 200,000 $ 12,412,500
Walt Disney ....................................... 150,000 4,500,000
------------
16,912,500
------------
Medical Supplies--(3.4%)
Medtronic ......................................... 125,000 9,281,250
------------
Retail--(9.2%)
Home Depot ........................................ 200,000 12,237,500
Kohl's (a) ........................................ 160,000 9,830,000
Walgreen Co. ...................................... 50,000 2,928,125
------------
24,995,625
------------
Rubber, Plastic and Related--(1.9%)
Illinois Tool Works ............................... 90,000 5,220,000
------------
Telecommunications--(16.2%)
LM Ericsson Telecommunications ADRs ............... 210,000 5,026,875
Lucent Technologies ............................... 90,000 9,900,000
Motorola .......................................... 125,000 7,632,812
Tellabs (a) ....................................... 130,000 8,913,125
MCI WorldCom (a) .................................. 175,000 12,556,250
------------
44,029,062
------------
Total Common Stocks
(Cost $111,082,021) ........................................... 259,782,500
------------
<CAPTION>
Principal
Amount
---------
<S> <C> <C>
Commercial Paper--(4.4%)
Associates Corp. of North America
5.080% 1/4/99
(Cost $11,934,945)............................ $11,940,000 11,934,945
------------
Total Investments--(100.0%)
(Cost $123,016,966) (b) ....................................... 271,717,445
Other Assets, Less Liabilities--(0.0%) ........................ (133,567)
------------
Total Net Assets (100.0%)...................................... $271,583,878
============
</TABLE>
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At December 31, 1998, the cost of investments for federal income tax
purposes was $123,018,206. Net unrealized appreciation was $148,699,239,
comprised of gross unrealized appreciation of $149,836,222 and gross
unrealized depreciation of $1,136,983.
See Notes to Financial Statements.
17
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Stein Roe Growth Stock Fund, Variable Series / December 31, 1998
- ------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at market value (identified cost $123,016,966) .................... $271,717,445
Dividends receivable ........................................................... 144,417
Receivable for fund shares sold ................................................ 65,824
Cash ........................................................................... 58,681
Other assets ................................................................... 12,599
------------
Total assets ............................................................... 271,998,966
------------
Liabilities:
Payable for fund shares repurchased ............................................ 244,520
Payable to investment adviser .................................................. 136,629
Accrued expenses payable ....................................................... 33,939
------------
Total liabilities .......................................................... 415,088
------------
Net assets ..................................................................... $271,583,878
============
Net assets represented by:
Paid-in capital .............................................................. $114,312,846
Net unrealized appreciation on investments ................................... 148,700,739
Accumulated net realized gains on investments ................................ 8,081,725
Accumulated undistributed net investment income .............................. 488,568
------------
Total net assets applicable to outstanding shares of beneficial interest ....... $271,583,878
============
Shares of beneficial interest outstanding ...................................... 6,238,558
============
Net asset value per share ...................................................... $ 43.53
============
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- ------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Dividends ...................................................................... $ 1,677,970
Interest income ................................................................ 449,624
------------
Total investment income .................................................... 2,127,594
------------
Expenses:
Management fee ............................................................. 1,177,442
Administrative fee ......................................................... 353,233
Accounting fee ............................................................. 29,708
Audit and legal fees ....................................................... 25,049
Printing expense ........................................................... 24,864
Trustees' expense .......................................................... 15,401
Transfer agent fee ......................................................... 7,500
Miscellaneous expense ...................................................... 5,177
------------
Total expenses ............................................................. 1,638,374
------------
Net investment income .......................................................... 489,220
Realized and Unrealized gains on investments:
Net realized gains on investments ............................................ 8,083,201
Change in unrealized appreciation or depreciation on investments ............. 50,182,311
------------
Net increase in net assets resulting from operations ........................... $ 58,754,732
============
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Stein Roe Growth Stock Fund, Variable Series
- -----------------------------------------------------------------------------------------------------------------
Years Ended December 31,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Net investment income ........................................................ $ 489,220 $ 610,654
Net realized gains on investments ............................................ 8,083,201 12,625,736
Change in unrealized appreciation or depreciation on investments ............. 50,182,311 39,257,702
------------ ------------
Net increase in net assets resulting from operations ........................... 58,754,732 52,494,092
------------ ------------
Distributions declared from:
Net investment income ........................................................ (590,000) (710,000)
Net realized gains on investments ............................................ (12,603,000) (7,500,000)
------------ ------------
Total distributions ............................................................ (13,193,000) (8,210,000)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold ............................................... 61,216,357 35,528,562
Cost of fund shares repurchased .............................................. (61,786,672) (36,502,167)
Distributions reinvested ..................................................... 13,193,000 8,210,000
------------ ------------
Net increase in net assets resulting from fund share transactions .............. 12,622,685 7,236,395
------------ ------------
Total increase in net assets ................................................... 58,184,418 51,520,487
Net assets:
Beginning of year ............................................................ 213,399,461 161,878,974
------------ ------------
End of year .................................................................. $271,583,878 $213,399,461
============ ============
Accumulated undistributed net investment income included in ending net assets .. $ 488,568 $ 589,348
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold .................................................................. 1,526,333 1,104,794
Shares repurchased ........................................................... (1,560,693) (1,131,238)
Distributions reinvested ..................................................... 366,676 274,215
------------ ------------
Net increase ................................................................... 332,316 247,771
============ ============
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Stein Roe Growth Stock Fund, Variable Series
- -------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ......................... $ 36.13 $ 28.61 $ 23.59 $ 18.11 $ 20.65
-------- -------- -------- -------- --------
Net investment income ...................................... 0.08 0.10 0.13 0.15 0.15
Net realized and unrealized gains (losses)
on investments ......................................... 9.54 8.84 4.89 6.68 (1.46)
-------- -------- -------- -------- --------
Total from investment operations ........................... 9.62 8.94 5.02 6.83 (1.31)
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ................... (0.10) (0.12) -- (0.15) (0.17)
Distributions from net realized gains on investments ... (2.12) (1.30) -- (1.20) (1.06)
-------- -------- -------- -------- -------
Total distributions ........................................ (2.22) (1.42) -- (1.35) (1.23)
-------- -------- -------- -------- -------
Net asset value, end of year ............................... $ 43.53 $ 36.13 $ 28.61 $ 23.59 $ 18.11
======== ======== ======== ======== =======
Total return:
Total investment return .................................... 27.91% 32.28% 21.28% 37.73% (6.35)%
Ratios/supplemental data:
Net assets, end of year (000's) ............................ $271,584 $213,399 $161,879 $136,834 $98,733
Ratio of expenses to average net assets .................... 0.70% 0.71% 0.73% 0.74% 0.77%
Ratio of net investment income to average net assets ....... 0.21% 0.32% 0.49% 0.72% 0.75%
Portfolio turnover ratio ................................... 40% 28% 35% 41% 72%
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
SCHEDULE OF INVESTMENTS
Stein Roe Balanced Fund, Variable Series / December 31, 1998
<TABLE>
<CAPTION>
Market
Shares Value
------- -----------
<S> <C> <C>
COMMON STOCKS--(57.6%)
Automotive--(1.1%)
Ford Motor Company ............................... 70,000 $ 4,108,125
-----------
Banks--(3.9%)
Banc One ......................................... 53,000 2,706,312
BankAmerica ...................................... 54,000 3,246,786
Bayerische Vereinsbank ........................... 33,000 2,585,672
Royal Bank of Scotland Group ..................... 225,000 3,620,012
U.S. Bancorp ..................................... 60,000 2,130,000
-----------
14,288,782
-----------
Building and Construction--(1.3%)
Masco ............................................ 80,000 2,300,000
Royal Group Technologies Limited (a) ............. 100,000 2,231,250
-----------
4,531,250
-----------
Chemicals--(1.5%)
E.I. du Pont de Nemours .......................... 48,000 2,547,000
Monsanto ......................................... 58,100 2,759,750
-----------
5,306,750
-----------
Commercial Services--(1.1%)
Unilever ......................................... 47,000 3,898,062
-----------
Computers--(1.3%)
Microsoft (a) .................................... 35,000 4,854,062
-----------
Drugs and Health Care--(7.6%)
Abbott Laboratories .............................. 85,000 4,165,000
ALZA (a) ......................................... 47,000 2,455,750
American Home Products ........................... 72,000 4,054,500
Bristol-Myers Squibb ............................. 34,000 4,549,625
Elan ADRs (a) .................................... 41,000 2,852,062
Eli Lilly & Company .............................. 55,000 4,888,125
Pfizer ........................................... 36,000 4,515,750
-----------
27,480,812
-----------
Electrical Equipment--(2.8%)
Emerson Electric ................................. 62,000 3,751,000
General Electric ................................. 50,000 5,103,125
Hubbell, class B ................................. 37,000 1,406,000
-----------
10,260,125
-----------
Electronics--(2.7%)
AMP .............................................. 52,000 2,707,250
Intel ............................................ 35,000 4,149,687
Motorola ......................................... 45,000 2,747,813
-----------
9,604,750
-----------
<CAPTION>
Market
Shares Value
------- -----------
<S> <C> <C>
Financial Services--(3.7%)
Citigroup ........................................ 72,500 $ 3,588,750
Freddie Mac ...................................... 73,000 4,703,938
Fannie Mae ....................................... 31,000 2,294,000
Heller Financial ................................. 101,000 2,966,875
-----------
13,553,563
-----------
Food, Beverage and Tobacco--(2.5%)
PepsiCo .......................................... 70,000 2,865,625
Philip Morris Companies .......................... 65,000 3,477,500
Sara Lee ......................................... 100,000 2,818,750
-----------
9,161,875
-----------
Funeral Services--(0.7%)
Service Corporation International ................ 70,000 2,664,375
-----------
Housewares--(0.3%)
Newell ........................................... 30,000 1,237,500
-----------
Index Depositary Receipts--(2.9%)
S&P 400 Depositary Receipts ...................... 50,000 3,646,875
S&P 500 Depositary Receipts ...................... 28,400 3,493,200
World Equity Benchmark Shares (WEBS)
Japan Index Series ............................. 310,000 3,177,500
-----------
10,317,575
-----------
Insurance--(0.8%)
American International Group ..................... 30,000 2,898,750
...........
Medical Technology--(1.7%)
IMS Health ....................................... 41,000 3,092,937
Medtronic ........................................ 41,000 3,044,250
-----------
6,137,187
-----------
Networking Products--(1.7%)
Cisco Systems (a) ................................ 67,000 6,218,438
-----------
Oil and Gas--(1.7%)
British Petroleum ADRs (a) ....................... 31,000 2,778,375
Conoco (a) ....................................... 35,600 743,150
Mobil ............................................ 30,000 2,613,750
-----------
6,135,275
-----------
Radio and Television--(2.0%)
Clear Channel Communications (a) ................. 50,000 2,725,000
Comcast .......................................... 55,000 3,227,812
Infinity Broadcasting (a) ........................ 43,300 1,185,338
-----------
7,138,150
-----------
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS Market
(Continued) Shares Value
----------- ------------
<S> <C> <C>
COMMON STOCKS (Continued)
Real Estate--(1.2%)
Equity Residential Properties Trust .............. 48,000 $ 1,941,000
Reckson Associates Realty Corporation ............ 103,800 2,303,063
--------------
4,244,063
--------------
Retail--(4.5%)
Home Depot ....................................... 95,000 5,812,813
Kohl's (a) ....................................... 52,000 3,194,750
Saks (a) ......................................... 54,000 1,704,375
Wal-Mart Stores .................................. 70,000 5,700,625
--------------
16,412,563
--------------
Telecommunications--(7.5%)
AirTouch Communications (a) ...................... 65,000 4,688,125
Ameritech ........................................ 86,000 5,450,250
Lucent Technologies .............................. 35,000 3,850,000
MCI WorldCom (a) ................................. 75,000 5,381,250
Telebras ADRs .................................... 25,000 1,817,187
Tele-Communications, Inc. (a) .................... 55,000 3,042,188
Tellabs (a) ...................................... 40,000 2,742,500
--------------
26,971,500
--------------
Utilities--(2.3%)
Endesa ADRs ...................................... 100,000 2,700,000
Enron ............................................ 42,000 2,396,625
Kinder Morgan Energy Partners, L.P. .............. 92,409 3,349,826
--------------
8,446,451
--------------
Water Treatment Systems--(0.8%)
U.S. Filter (a) .................................. 130,000 2,973,750
--------------
Total Common Stocks
(Cost $145,506,064) ........................................... 208,843,733
--------------
<CAPTION>
Par
Value
--------
<S> <C> <C>
LONG-TERM OBLIGATIONS--(36.8%)
Aerospace and Defense--(0.5%)
Raytheon
6.150% 11/1/08 ................................. $1,750,000 1,791,037
--------------
Air Transportation--(0.7%)
Federal Express 1994
Pass-Through Certificates
Series A1 7.530% 9/23/06 ....................... 1,575,000 1,677,343
United Airlines 1991
Pass-Through Certificates
Series A1 9.200% 3/22/08 .......................... 642,141 741,531
--------------
2,418,874
--------------
<CAPTION>
Par Market
Value Value
----------- ------------
<S> <C> <C>
Asset-backed Securities--(0.6%)
American Mortgage Trust Series 1993-3
Class 3B 8.190% 9/27/22........ $1,760,646 $ 1,746,156
Greentree Home Improvement
Loan Trust Series 1994-A Class A
7.050% 3/15/14................ 471,71 485,048
--------------
2,231,204
--------------
Banks--(1.9%)
Den Danske Bank
6.550% 9/15/03................. 2,250,000 2,327,850
Deutsche Ausgleichsbank
7.000% 9/24/01................. 2,250,000 2,345,895
First Chicago NBD
6.125% 2/15/06................. 2,250,000 2,288,228
--------------
6,961,973
--------------
Construction and Housing--(0.7%)
Hanson Overseas 6.750% 9/15/05..... 2,500,000 2,617,375
--------------
Extractive-energy--(0.8%)
BOC Group 5.875% 1/29/01........... 2,750,000 2,795,567
--------------
Financial--(3.5%)
Associates Corp. of North America
7.500% 4/15/02................. 4,000,000 4,240,280
6.950% 11/1/18................. 2,350,000 2,496,593
Lehman Brothers Commercial Conduit
Mortgage Trust Series 1998-C4
Class A1B
6.210% 10/15/08................ 1,250,000 1,271,100
Household Financ
5.875% 11/1/02................. 2,500,000 2,498,800
Transamerica Finance
6.125% 11/1/01................. 2,000,000 2,014,180
--------------
12,520,953
--------------
Industrial--(1.3%)
Safeway
5.750% 11/15/00................ 1,500,000 1,500,090
USX
6.850% 3/1/08.................. 3,000,000 3,027,660
--------------
4,527,750
--------------
Insurance--(0.8%)
Prudential Insurance
7.650% 7/1/07.................. 2,500,000 2,751,675
--------------
Telecommunications--(0.7%)
U.S. West Capital Funding
6.250% 7/15/05................. 2,500,000 2,589,075
--------------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS Par Market
(Continued) Value Value
----------- ------------
<S> <C> <C>
LONG-TERM OBLIGATIONS (Continued)
U.S. Government and Agency Obligations--(24.6%)
FHLMC Gold
6.500% 12/1/10................. $ 734,968 $ 745,993
6.500% 5/1/11.................. 674,857 684,980
6.500% 6/1/11.................. 4,634,480 4,703,384
12.000% 7/1/20................. 892,447 1,018,782
6.500% 3/1/26.................. 3,141,908 3,164,498
6.500% 6/1/26.................. 2,095,128 2,110,192
6.500% 2/1/27.................. 970,927 977,908
6.500% 3/1/27.................. 2,609,388 2,628,150
6.500% 4/1/27.................. 913,353 919,920
6.500% 9/15/28................. 2,583,484 2,601,258
7.000% 10/15/28................ 2,499,658 2,549,652
FNMA Medium-Term Note
5.980% 11/12/02................ 3,100,000 3,203,292
GNMA
6.625% 7/20/25................. 518,302 523,915
8.000% 3/15/26................. 3,376,995 3,509,981
6.000% 12/15/28................ 5,047,942 5,002,208
U.S. Treasury Bonds
6.500% 8/15/05................. 4,000,000 4,395,360
7.250% 5/15/16................. 5,500,000 6,662,810
7.875% 2/15/21................. 4,500,000 5,920,065
7.125% 2/15/23................. 4,150,000 5,114,585
U.S. Treasury Notes
6.750% 4/30/00................. 400,000 410,516
6.375% 5/15/00................. 8,200,000 8,384,172
7.875% 8/15/01................. 500,000 539,605
6.250% 2/15/03................. 5,250,000 5,553,923
5.750% 8/15/03................. 8,000,000 8,356,160
6.500% 10/15/06................ 8,100,000 8,985,087
------------
88,666,396
------------
Utilities--(0.7%)
National Rural Utilities
5.000% 10/1/02................. 2,750,000 2,709,822
------------
Total Long-term Obligations
(Cost $126,666,796)............................ 132,581,701
------------
<CAPTION>
Par Market
Value Value
----------- ------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS
Commercial Paper--(5.1%)
Countrywide Home Loans
5.100% 1/4/99
(Cost $18,572,104)........................ $18,580,000 $ 18,572,104
------------
Total Investments--(99.5%)
(Cost $290,744,964) (b)....................... 359,997,538
Other Assets, Less Liabilities--(0.5%)........ 1,825,594
------------
Total Net Assets--(100.0%).................... $361,823,132
============
</TABLE>
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) At December 31, 1998, the cost of investments for federal income tax
purposes was $290,975,842. Net unrealized appreciation was $69,021,696,
comprised of gross unrealized appreciation of $71,786,107 and gross
unrealized depreciation of $2,764,411.
See Notes to Financial Statements.
23
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Stein Roe Balanced Fund, Variable Series / December 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at market value (identified cost $290,744,964) .................................................. $359,997,538
Dividends and interest receivable ............................................................................ 2,347,698
Receivable for fund shares sold .............................................................................. 225,307
Other assets ................................................................................................. 29,043
------------
Total assets ............................................................................................. 362,599,586
------------
Liabilities:
Payable for fund shares repurchased .......................................................................... 509,295
Payable to investment adviser ................................................................................ 160,651
Accrued expenses payable ..................................................................................... 106,508
------------
Total liabilities ........................................................................................ 776,454
------------
Net assets ................................................................................................... $361,823,132
============
Net assets represented by:
Paid-in capital .......................................................................................... $263,669,853
Net unrealized appreciation on investments and foreign currencies ........................................ 69,251,883
Accumulated net realized gains on investments ............................................................ 18,823,070
Accumulated undistributed net investment income .......................................................... 10,078,326
------------
Total net assets applicable to outstanding shares of beneficial interest ..................................... $361,823,132
============
Shares of beneficial interest outstanding .................................................................... 21,108,511
============
Net asset value per share .................................................................................... $ 17.14
============
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INvestment income:
Interest income .............................................................................................. $ 9,592,416
Dividend income (net of foreign taxes withheld of $56,253) ................................................... 2,608,562
------------
Total investment income .................................................................................. 12,200,978
------------
Expenses:
Management fee ........................................................................................... 1,503,385
Administrative fee ....................................................................................... 495,128
Printing expense ......................................................................................... 33,098
Accounting fee ........................................................................................... 31,664
Audit and legal fees ..................................................................................... 22,861
Trustees' expense ........................................................................................ 20,730
Transfer agent fee ....................................................................................... 7,500
Miscellaneous expense .................................................................................... 72,347
------------
Total expenses ........................................................................................... 2,186,713
------------
Net investment income ........................................................................................ 10,014,265
Realized and unrealized gains on investments:
Net realized gains on investments ........................................................................ 18,531,725
Net realized gains on foreign currency transactions ...................................................... 65,350
Change in unrealized appreciation or depreciation on investments
and foreign currency translations ...................................................................... 11,666,861
------------
Net increase in net assets resulting from operations ......................................................... $ 40,278,201
============
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Stein Roe Balanced Fund, Variable Series
- ---------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Net investment income............................................................ $ 10,014,265 $ 10,232,534
Net realized gains on investments and foreign currency transactions.............. 18,597,075 21,484,426
Change in unrealized appreciation or depreciation on investments
and foreign currency translations.............................................. 11,666,861 17,140,868
------------ ------------
Net increase in net assets resulting from operations................................. 40,278,201 48,857,828
------------ ------------
Distributions declared from:
Net investment income............................................................ (9,760,000) (10,262,000)
Net realized gains on investments................................................ (21,501,000) (25,340,000)
------------ ------------
Total distributions.................................................................. (31,261,000) (35,602,000)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold................................................... 56,464,510 30,523,814
Cost of fund shares repurchased.................................................. (59,952,201) (53,533,240)
Distributions reinvested......................................................... 31,261,000 35,602,000
------------ ------------
Net increase in net assets resulting from fund share transactions.................... 27,773,309 12,592,574
------------ ------------
Total increase in net assets......................................................... 36,790,510 25,848,402
Net assets:
Beginning of year................................................................ 325,032,622 299,184,220
------------ ------------
End of year...................................................................... $361,823,132 $325,032,622
============ ============
Accumulated undistributed net investment income included in ending net assets........ $ 10,111,932 $ 9,886,114
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold...................................................................... 3,429,829 1,916,696
Shares repurchased............................................................... (3,644,905) (3,350,160)
Distributions reinvested......................................................... 1,989,880 2,387,734
------------ ------------
Net increase......................................................................... 1,774,804 954,270
============ ============
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Stein roe balanced fund, variable series
- ----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year ........................ $ 16.81 $ 16.28 $ 14.08 $ 12.18 $ 13.11
-------- -------- -------- -------- --------
Net investment income ..................................... 0.48 0.53 0.57 0.48 0.51
Net realized and unrealized gains (losses) on investments . 1.48 1.96 1.63 2.61 (0.93)
-------- -------- -------- -------- --------
Total from investment operations .......................... 1.96 2.49 2.20 3.09 (0.42)
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income .................. (0.51) (0.56) -- (0.48) (0.51)
Distributions from net realized gains on investments .. (1.12) (1.40) -- (0.71) --
-------- -------- -------- -------- --------
Total distributions ....................................... (1.63) (1.96) -- (1.19) (0.51)
-------- -------- -------- -------- --------
Net asset value, end of year .............................. $ 17.14 $ 16.81 $ 16.28 $ 14.08 $ 12.18
======== ======== ======== ======== ========
Total return:
Total investment return................................... 12.54% 16.82% 15.63% 25.43% (3.19)%
Ratios/supplemental data:
Net assets, end of year (000's) .......................... $361,823 $325,033 $299,184 $277,014 $196,278
Ratio of expenses to average net assets ................... 0.65% 0.66% 0.67% 0.66% 0.68%
Ratio of net investment income to average net assets ...... 3.00% 3.18% 3.68% 3.12% 4.01%
Portfolio turnover ratio (a) .............................. 61% 44% 76% 66% 71%
</TABLE>
(a) Portfolio turnover includes dollar roll transactions.
See Notes to Financial Statements.
26
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Stein Roe Mortgage Securities Fund, Variable Series / December 31, 1998
- ------------------------------------------------------------------------------------
Par Market
Value Value
---------- ----------
<S> <C> <C>
ASSET-BACKED SECURITIES--(16.1%)
Amresco Residential Securities Mortgage
Loan Trust Series 1996-3 Class A5
7.550% 2/25/23................. $1,135,000 $1,156,974
Asset Securitization Corporation
Series 1997-D5 Class A1C
6.750% 2/14/41................. 1,375,000 1,426,989
ContiMortgage Home Equity Loan
Trust Series 1997-1 Class M1
7.420% 3/15/28................. 1,250,000 1,290,463
Delta Funding Home Equity Loan Trust
Series 1998-2 Class A6F
6.370% 7/15/28................. 1,000,000 993,750
First Boston Home Equity Loan
Pass-Through Certificates Series
1993-H1, Class A-IO
(effective yield 12.820%) 9/28/13 2,692,909 105,185
First Plus Home Loan Trust Series 1996-3
Class A3 7.050% 11/20/08....... 1,000,000 1,000,860
Green Tree Financial Corporation
Series 1997-6 Class A8
7.070% 1/15/29................. 1,451,961 1,542,432
Green Tree Home Improvement Loan
Trust Series 1994-A Class A
7.050% 3/15/14................. 353,788 363,786
IMC Home Equity Loan Trust
Series 1997-3 Class M2
7.550% 8/20/28................. 1,000,000 1,006,390
Lehman Brothers Commercial
Conduit Mortgage Trust
Series 1998-C4 Class A1B
6.210% 10/15/08................ 1,800,000 1,830,384
Mego Mortgage Home Loan Trust
Series 1997-3 Class M1
7.500% 8/25/23................. 1,500,000 1,503,750
Mid-State Trust Series 6 Class A1
7.340% 7/01/35................. 1,992,715 2,038,369
UCFC Home Equity Loan
Series 1997-C Class A7
6.875% 1/15/29................. 1,275,000 1,302,923
----------
Total Asset-Backed Securities
(Cost $15,363,678)............................. 15,562,255
----------
MORTGAGE-BACKED SECURITIES--(8.8%)
American Mortgage Trust Series 1993-3
Class 3B 8.190% 9/27/22........ 665,134 659,659
Citicorp Mortgage Securities
Series 1987-10 Class A1
10.000% 7/1/17................. 98,745 103,317
<CAPTION>
Par Market
Value Value
---------- ----------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (Continued)
Comfed Savings Bank ARM
Series 1987-1 Class A
7.550% 1/1/18.................. 104,653 91,048
Glendale Federal Bank Series 1978-A
9.125% 1/25/08................. 17,949 19,126
Imperial Savings Association ARM
Series 1987-4 Class A
8.826% 7/25/17................. $ 20,143 $ 21,161
Merrill Lynch Mortgage Investors
Series 1995-C3 Class A3 ARM
7.088% 12/26/25........... 2,000,000 2,106,740
Series 1987-A ARM
5.890% 11/15/26........... 66,588 67,821
Merrill Lynch Trust Series 20 Class D
8.000% 12/20/18................ 829,520 847,554
Nomura Asset Securities Corporation
Series 1996-MD5 Class A1B
7.120% 4/13/36................. 1,000,000 1,064,470
Residential Funding Mortgage Securities
Series 1998-HI2 Class A3
6.330% 11/25/14................ 1,000,000 1,008,170
Residential Asset Securities Corporation
Series 1998-KS2 Class AI1
6.775% 7/25/29................. 762,797 761,958
Sears Mortgage Securities Series 1987-A
6.500% 3/25/17................. 4,755 4,797
Structured Asset Securities Corporation
Series 1996-CFL Class X1-IO
(effective yield 12.960%) 2/25/28 8,515,721 468,365
Series 1996-CFL Class C
6.525% 2/25/28............ 1,242,500 1,249,098
----------
Total Mortgage-Backed Securities
(Cost $8,227,551).............................. 8,473,284
----------
CORPORATE SECURITIES--(6.0%)
GMAC Euro 6.750% 7/10/02........... 1,000,000 1,030,430
National Power 7.125% 7/11/01...... 1,500,000 1,570,785
Noram Energy 6.500% 2/1/08......... 1,500,000 1,529,550
Zurich Capital Trust I 8.376% 6/1/37 (a) 1,450,000 1,662,643
----------
Total Corporate Securities
(Cost $5,450,765).............................. 5,793,408
----------
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS Par Market
(Continued) Value Value
---------- ----------
<S> <C> <C>
FHLMC CERTIFICATES--(10.2%)
8.500% 5/1/06 Gold................. 81,949 84,587
6.500% 6/1/08...................... 18,503 18,769
6.500% various due dates to
6/1/09 Gold.................... 1,486,243 1,507,616
10.750% 11/1/09.................... 165,059 179,812
12.000% 7/1/13..................... 54,966 62,060
11.250% various due dates to 11/1/15 58,794 65,712
10.500% various due dates to 2/1/19 166,757 183,745
12.000% 7/1/20 Gold................ 642,562 733,523
7.500% various due dates to
5/1/24 Gold.................... 5,091,070 5,233,956
7.000% 1/1/26...................... 1,783,247 1,819,465
-----------
Total FHLMC Certificates
(Cost $9,556,159).............................. 9,889,245
-----------
FNMA CERTIFICATES--(35.9%)
10.500% 2/1/01..................... $ 35,300 $ 35,984
12.250% 9/1/12 FHA/VA Guaranteed... 71,032 81,532
10.250% 2/1/16..................... 118,562 130,270
10.000% various due dates to 3/1/16 231,923 250,783
9.000% various due dates to 5/1/20. 116,873 124,020
6.000% various due dates to 2/1/25. 10,375,642 10,365,954
7.000% various due dates to 8/1/25. 3,881,959 3,963,365
6.500% various due dates to 1/1/26. 13,528,843 13,617,845
8.500% various due dates to 2/1/28. 5,998,222 6,175,085
-----------
Total FNMA Certificates
(Cost $34,185,362)............................. 34,744,838
-----------
GNMA CERTIFICATES--(16.9%)
8.000% various due dates to 7/15/08 4,744,349 4,925,877
11.500% various due dates to 5/15/13 397,410 451,307
8.500% 2/15/17..................... 169,234 181,292
10.000% various due dates to 11/15/19 453,947 96,931
9.000% various due dates to 1/15/20 1,291,964 1,390,595
9.500% various due dates to 8/15/22 1,257,035 1,359,676
7.000% 4/15/23..................... 438,506 448,645
6.625% 7/20/25..................... 1,036,604 1,047,830
6.500% various due dates to 3/15/28 5,924,731 5,983,225
-----------
Total GNMA Certificates
(Cost $16,112,702)............................. 16,285,378
-----------
<CAPTION>
Par Market
Value Value
---------- - ----------
<S> <C> <C>
REAL ESTATE MORTGAGE INVESTMENT
CONDUITS--(0.8%)
FHLMC Series 11 Class C
9.500% 4/15/19................. 22,099 22,263
FNMA Series 1988-4 Class Z
9.250% 3/25/18................. 729,747 776,510
-----------
Total Real Estate Mortgage
Investment Conduits
(Cost $788,523)................................ 798,773
-----------
U.S. GOVERNMENT SECURITIES--(2.2%)
U.S. Treasury Bonds
6.750% 8/15/26................. $ 800,000 $ 958,464
6.375% 8/15/27................. 1,000,000 1,149,600
-----------
Total U.S. Government Securities
(Cost $1,812,914)............................. 2,108,064
-----------
SHORT-TERM OBLIGATIONS--(2.0%)
Commercial Paper--(2.0%)
Associates Corp. of North America
5.080% 1/4/99
(Cost $1,929,183).............. 1,930,000 1,929,183
-----------
Total Investments--(98.9%)
(Cost $93,426,837) (b)...................... 95,584,428
Other Assets, Less Liabilities--(1.1%)....... 1,108,106
-----------
Total Net Assets--(100.0%).................... $96,692,534
===========
</TABLE>
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
(a) Private placement security. These securities generally are issued to
institutional investors, such as the Fund, who agree that they are
purchasing the securities for investment and not 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 $1,662,643 (cost of $1,450,000) which represented 1.7% of net assets.
This security is not deemed to be illiquid.
(b) At December 31, 1998, the cost of investments for financial reporting and
federal income tax purposes was identical. Net unrealized appreciation was
$2,157,591, comprised of gross unrealized appreciation of $2,418,644 and
gross unrealized depreciation of $261,053.
See Notes to Financial Statements.
28
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Stein Roe Mortgage Securities Fund, Variable Series / December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at market value (identified cost $93,426,837) ................................................... $95,584,428
Interest receivable .......................................................................................... 671,072
Receivable for fund shares sold .............................................................................. 602,857
Cash ......................................................................................................... 36,091
Other assets ................................................................................................. 8,576
-----------
Total assets ............................................................................................. 96,903,024
-----------
Liabilities:
Payable for fund shares repurchased .......................................................................... 94,610
Payable to investment adviser ................................................................................ 45,426
Accrued expenses payable ..................................................................................... 70,454
-----------
Total liabilities ........................................................................................ 210,490
-----------
Net assets ................................................................................................... $96,692,534
===========
Net assets represented by:
Paid-in capital .......................................................................................... $92,323,491
Accumulated undistributed net investment income .......................................................... 5,059,907
Net unrealized appreciation on investments ............................................................... 2,157,591
Accumulated net realized losses on investments ........................................................... (2,848,455)
-----------
Total net assets applicable to outstanding shares of beneficial interest ..................................... $96,692,534
===========
Shares of beneficial interest outstanding .................................................................... 8,963,610
===========
Net asset value per share .................................................................................... $ 10.79
===========
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest income .............................................................................................. $ 5,576,038
-----------
Expenses:
Management fee ........................................................................................... 337,593
Administrative fee ....................................................................................... 126,597
Audit and legal fees ..................................................................................... 28,458
Accounting fee ........................................................................................... 25,924
Printing expense ......................................................................................... 16,593
Trustees' expense ........................................................................................ 9,874
Transfer agent fee ....................................................................................... 7,500
Miscellaneous expense .................................................................................... 38,236
-----------
Total expenses ........................................................................................... 590,775
-----------
Net investment income ........................................................................................ 4,985,263
Realized and unrealized gains on investments:
Net realized gains on investments ........................................................................ 252,574
Change in unrealized appreciation or depreciation on investments ......................................... 272,011
-----------
Net increase in net assets resulting from operations ......................................................... $ 5,509,848
===========
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Stein Roe Mortgage Securities Fund, Variable Series
- --------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
1998 1997
----------- ------------
<S> <C> <C>
Operations:
Net investment income............................................................ $ 4,985,263 $ 4,890,904
Net realized gains on investments................................................ 252,574 3,468
Change in unrealized appreciation or depreciation on investments................. 272,011 1,494,843
----------- ------------
Net increase in net assets resulting from operations................................. 5,509,848 6,389,215
----------- ------------
Distributions declared from:
Net investment income............................................................ (4,580,000) --
----------- ------------
Fund share transactions:
Proceeds from fund shares sold................................................... 29,203,191 9,622,128
Cost of fund shares repurchased.................................................. (15,193,948) (14,847,051)
Distributions reinvested......................................................... 4,580,000 --
----------- ------------
Net increase (decrease) in net assets resulting from fund share transactions......... 18,589,243 (5,224,923)
----------- ------------
Total increase in net assets......................................................... 19,519,091 1,164,292
Net assets:
Beginning of year................................................................ 77,173,443 76,009,151
----------- ------------
End of year...................................................................... $96,692,534 $ 77,173,443
=========== ============
Accumulated undistributed net investment income included in ending net assets........ $ 5,059,907 $ 4,579,680
=========== ============
Analysis of changes in shares of beneficial interest:
Shares sold...................................................................... 2,745,216 929,462
Shares repurchased............................................................... (1,424,260) (1,459,037)
Distributions reinvested......................................................... 448,138 --
----------- ------------
Net increase (decrease).............................................................. 1,769,094 (529,575)
=========== ============
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Stein Roe Mortgage Securities Fund, Variable Series
- ------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ........................ $ 10.73 $ 9.84 $ 10.16 $ 9.28 $ 10.17
------- ------- ------- -------- -------
Net investment income ..................................... 0.55 0.68 0.78 0.57 0.73
Net realized and unrealized gains (losses)
on investments ........................................ 0.14 0.21 (0.30) 0.89 (0.89)
------- ------- ------- -------- -------
Total from investment operations ......................... 0.69 0.89 0.48 1.46 (0.16)
------- ------- ------- -------- -------
Less distributions:
Dividends from net investment income .................. (0.63) -- (0.80) (0.58) (0.73)
Distributions from net realized gains on investments .. -- -- -- -- --
------- ------- ------- -------- -------
Total distributions ....................................... (0.63) -- (0.80) (0.58) (0.73)
------- ------- ------- -------- -------
Net asset value, end of year .............................. $ 10.79 $ 10.73 $ 9.84 $ 10.16 $ 9.28
======= ======= ======= ======== =======
Total return:
Total investment return................................... 6.80% 9.04% 4.70% 15.74% (1.57)%(b)
Ratios/supplemental data:
Net assets, end of period (000's) ......................... $96,693 $77,173 $76,009 $101,778 $72,420
Ratio of expenses to average net assets ................... 0.70% 0.70% 0.70%(a) 0.69% 0.70%(a)
Ratio of net investment income to average net assets ...... 5.91% 6.59% 6.71%(b) 6.76% 6.71%(b)
Portfolio turnover ratio (c) .............................. 8% 29% 72% 112% 241%
</TABLE>
(a) If the Fund had paid all of its expenses and there had been no reimbursement
from the investment adviser, this ratio would have been 0.72% and 0.71% for
the years ended December 31, 1996 and 1994, respectively.
(b) Computed giving effect to the investment adviser's expense limitation
undertaking.
(c) Portfolio turnover includes dollar roll transactions.
See Notes to Financial Statements.
31
<PAGE>
- ----------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
Stein Roe Money Market Fund, Variable Series / December 31, 1998
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amortized
Value Cost
---------- ------------
<S> <C> <C>
COMMERCIAL PAPER--(92.4%)
Auto Lending--(3.9%)
American Honda Finance
5.334% 1/26/99................. $4,000,000 $ 3,985,278
------------
Consulting Services--(3.6%)
CSC Enterprises (gtd. by Computer
Sciences) 5.208% 2/9/99........ 3,700,000 3,679,357
------------
Diversified Financial Services--(11.8%)
Associates Corp. of North America
5.083% 1/4/99.................. 3,940,000 3,938,332
Finova Capital 5.539% 1/27/99...... 4,000,000 3,984,256
Merrill Lynch & Co. 5.512% 1/20/99. 4,000,000 3,988,452
------------
11,911,040
------------
Diversified Manufacturing Operations--(4.5%)
Eaton Corp. 5.403% 1/28/99 (b)..... 4,545,000 4,526,695
------------
Electric Integrated Utility--(3.0%)
Northern Indiana Public Service
5.450% 1/21/99................. 3,000,000 2,990,967
------------
Leasing--(3.6%)
Enterprise Funding 5.863% 1/4/99 (b) 3,618,000 3,616,236
------------
Miscellaneous Financial--(48.3%)
Asset Securitization Corp.
5.426% 2/18/99 (b)............. 4,000,000 3,971,467
BAT Capital (gtd. by BAT Industries)
5.719% 1/7/99.................. 4,000,000 3,996,200
CSN Overseas (LOC Barclays Bank)
5.580% 1/13/99................. 4,000,000 3,992,600
Caterpillar Financial 5.165% 1/6/99 3,668,000 3,665,387
Centric Capital 5.509% 1/27/99 (b). 3,542,000 3,528,058
International Securitization
5.577% 1/8/99 (b).............. 4,000,000 3,995,683
Pooled Accounts Receivable Capital
5.392% 1/29/99 (b)............. 4,000,000 3,983,356
Preferred Receivables Funding
5.532% 1/22/99 (b)............. 4,000,000 3,987,167
Receivables Capital
5.404% 1/14/99 (b)............. 4,000,000 3,992,258
Special Purpose Accounts Recievable
5.282% 1/15/99 (b)............. 3,500,000 3,492,922
TEB Funding II (LOC Societe Generale)
5.120% 5/28/99................. 4,000,000 3,918,333
Thames Asset Global Securitization
No. 1 5.822% 1/14/99 (b)....... 2,000,000 1,995,811
<CAPTION>
Par Amortized
Value Cost
---------- ------------
<S> <C> <C>
Miscellaneous Financial--(continued)
Windmill Funding
5.603% 1/12/99 (b).............. $4,446,000 $ 4,438,419
------------
48,957,661
------------
Mortgage Banking--(3.9%)
Countrywide Home Loans (gtd. by
Countrywide Credit Industries)
5.509% 1/19/99................. 4,000,000 3,989,100
------------
Natural Gas--(2.0%)
Trans de Gas Del Sur (LOC Dresdner
Bank) 5.299% 1/21/99........... 2,000,000 1,994,167
------------
Retail - Convenience Store--(3.9%)
Southland (gtd. By Ito-Yokado)
5.433% 1/11/99................. 4,000,000 3,994,000
------------
Sovereign Agency--(3.9%)
Province of Quebec 5.050% 3/2/99... 4,000,000 3,966,333
------------
Total Commercial Paper....................... 93,610,834
------------
CORPORATE NOTE--(4.0%)
Auto Lending--(4.0%)
GMAC
8.000% 10/1/99................. 4,000,000 4,086,815
------------
YANKEE CERTIFICATE OF DEPOSIT--(3.9%)
Banks--(3.9%)
Canadian Imperial Bank
5.250% 2/4/99.................. 4,000,000 4,000,000
------------
Total Investments--(100.3%) (a).............. 101,697,649
Other Assets, Less Liabilities--(-0.3%)...... (357,529)
------------
Total Net Assets--(100.0%)................... $101,340,120
============
</TABLE>
Notes to Portfolio of Investments
(a) At December 31, 1998, the cost of investments for financial reporting and
income tax purposes was identical.
(b) 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,
1998, the aggregate amortized cost of the Fund's private placement
securities was $41,528,072 which represented 41.0% of net assets. None of
these securities were deemed illiquid.
The interest rates listed above reflect the effective rate at the date of
purchase except for the corporate note and yankee certificate of deposit,
for which the interest rate represents the instrument's coupon rate.
See Notes to Financial Statements.
32
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
Stein Roe Money Market Fund, Variable Series / December 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at amortized cost ............................................................................... $101,697,649
Interest receivable .......................................................................................... 114,117
Receivable for fund shares sold .............................................................................. 9,435
Cash ......................................................................................................... 2,903
Other assets ................................................................................................. 9,431
------------
Total assets ............................................................................................. 101,833,535
------------
Liabilities:
Payable for fund shares repurchased .......................................................................... 380,975
Payable to investment adviser ................................................................................ 44,389
Accrued expenses payable ..................................................................................... 68,051
------------
Total liabilities ........................................................................................ 493,415
------------
Net assets ................................................................................................... $101,340,120
============
Net assets represented by:
Paid-in capital .......................................................................................... $101,340,120
------------
Total net assets applicable to outstanding shares of beneficial interest ..................................... $101,340,120
============
Shares of beneficial interest outstanding .................................................................... 101,340,120
============
Net asset value per share .................................................................................... $ 1.00
============
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Interest income .............................................................................................. $ 4,534,723
------------
Expenses:
Management fee ........................................................................................... 281,246
Administrative fee ....................................................................................... 121,428
Accounting fee ........................................................................................... 25,907
Audit and legal fees ..................................................................................... 21,954
Trustees' expense ........................................................................................ 9,446
Transfer agent fee ....................................................................................... 7,500
Printing expense ......................................................................................... 16,968
Miscellaneous expense .................................................................................... 18,402
------------
Total expenses ........................................................................................... 502,851
------------
Net investment income ........................................................................................ 4,031,872
------------
Net increase in net assets resulting from operations ......................................................... $ 4,031,872
============
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Stein Roe Money Market Fund, Variable Series
- ----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Net investment income............................................................ $ 4,031,872 $ 3,418,664
------------ ------------
Net increase in net assets resulting from operations................................. 4,031,872 3,418,664
------------ ------------
Distributions declared from:
Net investment income............................................................ (4,031,872) (3,418,664)
------------ ------------
Fund share transactions:
Proceeds from fund shares sold................................................... 89,315,213 67,656,312
Cost of fund shares repurchased.................................................. (59,143,689) (69,399,644)
Distributions reinvested......................................................... 4,031,872 3,418,664
------------ ------------
Net increase in net assets resulting from fund share transactions.................... 34,203,396 1,675,332
------------ ------------
Total increase in net assets......................................................... 34,203,396 1,675,332
Net assets:
Beginning of year................................................................ 67,136,724 65,461,392
------------ ------------
End of year...................................................................... $101,340,120 $ 67,136,724
============ ============
Analysis of changes in shares of beneficial interest:
Shares sold...................................................................... 89,315,213 67,656,312
Shares repurchased............................................................... (59,143,689) (69,399,644)
Distributions reinvested......................................................... 4,031,872 3,418,664
------------ ------------
Net increase......................................................................... 34,203,396 1,675,332
============ ============
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Stein Roe Money Market Fund, Variable Series
- --------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of year ........................ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ------- ------- ------- -------
Net investment income ..................................... 0.050 0.050 0.049 0.055 0.037
-------- ------- ------- ------- -------
Less distributions:
Distributions from net investment income .............. (0.050) (0.050) (0.049) (0.055) (0.037)
-------- ------- ------- ------- -------
Net asset value, end of year .............................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======= ======= ======= =======
Total return:
Total investment return................................... 5.17% 5.18% 5.01% 5.62% 3.81%
Ratios/supplemental data:
Net assets, end of year (000's) ........................... $101,340 $67,137 $65,461 $64,992 $78,698
Ratio of expenses to average net assets ................... 0.62% 0.65% 0.65% 0.63% 0.62%
Ratio of net investment income to average net assets ...... 4.99% 5.05% 4.90% 5.48% 3.73%
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Accounting Policies
SteinRoe Variable Investment Trust (the "Trust"), an open-end management
investment company, was organized as a Massachusetts business trust on June
9, 1987. At December 31, 1998, the Trust consisted of five diversified mutual
funds with differing investment objectives, policies and restrictions
(individually referred to as a "Fund," or collectively referred to as the
"Funds"):
Stein Roe Special Venture Fund, Variable Series--seeks capital growth by
investing in equity securities.
Stein Roe Growth Stock Fund, Variable Series--seeks long-term growth of
capital by investing at least 65% of total assets in growth companies.
Stein Roe Balanced Fund, Variable Series--seeks high total investment return
by investing in equity and debt securities.
Stein Roe Mortgage Securities Fund, Variable Series--seeks highest possible
level of current income by investing at least 65% of total assets in
mortgage pass-through certificates.
Stein Roe Money Market Fund, Variable Series--seeks high current income
while emphasizing capital preservation from investment in short-term money
market instruments.
Shares of the Trust are available and are being marketed exclusively as a pooled
funding vehicle for variable annuity contracts ("VA contracts") and variable
life insurance policies ("VLI policies") of various affiliated and
non-affiliated insurance companies. Stein Roe & Farnham Incorporated (the
"Adviser") provides investment advisory services to the Funds as well as
management and administrative services. Liberty Funds Services, Inc. (the
"Transfer Agent") provides transfer agent services. Prior to November 1, 1998,
transfer agent services were provided by SteinRoe Services, Inc. ("SSI").
Keyport Financial Services Corp., a subsidiary of Keyport Life Insurance Company
("Keyport"), serves as the underwriter of the Trust. Keyport, the Adviser,
Transfer Agent and SSI are direct subsidiaries of Liberty Financial Companies,
Inc. ("Liberty"). At December 31, 1998, various affiliated insurance companies
of Liberty owned substantially all of the outstanding shares of all Funds,
except for Stein Roe Special Venture Fund, Variable Series, of which Liberty
affiliates owned 93.0%, Great-West Life & Annuity Insurance Company owned 5.4%,
Transamerica Life Companies owned 1.5%, and Aegon Insurance Group owned 0.1%.
The following summarizes the significant accounting policies followed by the
Funds. These policies are in conformity with generally accepted accounting
principles, which require management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Valuation of Investments--Portfolio securities listed on domestic exchanges
and over-the-counter securities quoted on the Nasdaq system are valued on the
basis of the last sale on the date as of which the valuation is made, or,
lacking any sales, at the current bid prices. Over-the-counter securities not
quoted on the Nasdaq system are valued at the latest bid quotation. Foreign
security valuations are generally based upon market quotations which,
depending upon local convention or regulation, may be last sale price, last
bid or asked price, or the mean between last bid and asked prices as of, in
each case, the close of the appropriate exchange or other designated time.
Long-term debt securities are valued on the basis of dealer-supplied
quotations or valuations furnished by a pricing service. Securities for which
reliable quotations are not readily available are valued at fair value, as
determined in good faith and pursuant to procedures established by the
Trustees. Short-term securities with remaining maturities of 60 days or less
are valued at amortized cost unless the Trustees determine this does not
represent fair value. Stein Roe Money Market Fund, Variable Series, values
investments utilizing the amortized cost valuation technique permitted in
accordance with Rule 2a-7 under the Investment Company Act of 1940, which
requires the Fund to comply with certain conditions. This technique involves
valuing a portfolio security initially at its cost and, thereafter, assuming
a constant amortization to maturity of any discount or premium.
Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. Dividend income is
recorded on the ex-dividend date. Interest income, including discount
accretion and premium amortization, is recorded daily on the accrual basis.
Realized gains or losses from investment transactions are reported on an
identified cost basis.
The Funds may purchase or sell securities on a when-issued, delayed delivery
or forward commitment basis. Payment and delivery may take place a month or
more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. Stein Roe Balanced Fund,
Variable Series, and Stein Roe Mortgage Securities Fund, Variable Series, may
also enter into dollar roll transactions. In a dollar roll transaction, the
Fund sells securities for delivery in the current month and simultaneously
contracts to repurchase, typically in 30 days to 60 days, substantially
similar securities at an agreed upon price and date. These transactions may
increase risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous yields. The Funds
identify securities as segregated in their custodial records with a value at
least equal to the amount of the purchase commitment.
Foreign Currency Transactions--Certain of the Funds may enter into foreign
exchange contracts for the settlement of purchases and sales of securities
denominated in a foreign currency to reduce the risk to the Funds from
adverse changes in the relationship between the U.S. dollar and the foreign
currency. The
36
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
face or contract amount in U.S. dollars reflects the total exposure the Fund
has in that particular currency contract. In the event that the counterparty
in the foreign exchange contract fails to meet the terms of the contract, the
Fund could be exposed to the effects of changes in the relationship between
the U.S. dollar and the foreign currency.
Net realized and unrealized gains (losses) on foreign currency transactions
include the fluctuation in exchange rates on gains and losses between trade
and settlement dates on security transactions, gains and losses arising from
the disposition of foreign currency, and currency gains and losses between
the accrual and payment dates on dividend and interest income and foreign
withholding taxes. The Funds do not segregate foreign currency gains or
losses on securities held from fluctuations in the market prices of those
securities. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Investment in Repurchase Agreements--Each Fund may enter into repurchase
agreements with banks, broker-dealer firms and other recognized financial
institutions whereby such institutions sell an instrument to the Fund, and
the seller agrees, at the time of the sale, to repurchase that instrument at
a specified time and price. The Funds require the seller of the instrument to
maintain on deposit with the Funds' custodian bank or in the Federal Reserve
Book-Entry System securities in an amount at all times equal to or in excess
of the value of the repurchase agreement plus accrued interest. In the event
the seller of the instrument defaults on the repurchase obligation, a Fund
could receive less than the repurchase price on the sale of the securities to
another party or could be subject to delays in selling the securities.
Federal Income Taxes--The Funds now qualify and intend to continue qualifying
as "regulated investment companies" and, as such (and by complying with the
applicable provisions of the Internal Revenue Code), will not be subject to
federal income tax on taxable income (including realized capital gains)
distributed to shareholders.
The Funds intend to utilize provisions of federal income tax law which allow
them to carry a realized capital loss forward up to eight years following the
year of the loss, and offset such losses against any future realized gains.
At December 31, 1998, Special Venture Fund, Variable Series had a capital
loss carryforward of $30,812,691, which expires in 2006; Mortgage Securities
Fund, Variable Series had a capital loss carryforward of $2,848,455, of which
$2,510,580, $224,288 and $113,587 will expire in 2002, 2003 and 2004,
respectively.
During the year ended December 31, 1998, the following Funds distributed
long-term capital gains:
<TABLE>
<CAPTION>
Long-Term Capital
Fund Gains Distributions
- ---- --------------------
<S> <C>
Stein Roe Special Venture Fund, Variable Series $16,912,000
Stein Roe Growth Stock Fund, Variable Series 12,603,000
Stein Roe Balanced Fund, Variable Series 21,501,000
</TABLE>
Distributions to Shareholders--The Funds, with the exception of the Stein Roe
Money Market Fund, Variable Series, intend to distribute as dividends or capital
gain distributions, at least annually, substantially all of their net investment
income and net gains realized from the sale of portfolio securities. All
dividends and distributions are reinvested in additional shares of the Funds.
Stein Roe Money Market Fund, Variable Series, declares dividends daily and
reinvests all dividends declared monthly in additional shares at net asset
value. Income and capital gains distributions are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles, primarily relating to foreign currency gains or losses,
wash sales and other book-tax timing differences.
Reclassifications were made to the Funds' capital accounts in order to
properly reflect income and capital gains available for distribution (or
available for capital loss carryforward) under income tax regulations. Such
reclassifications were primarily related to foreign currency gains or losses,
paydown gains or losses on mortgage-backed securities, net operating losses
and/or investments in partnerships and REITs.
Note 2. Fund Share Transactions
Each Fund's capitalization consists of an unlimited number of shares of
beneficial interest without par value that represent a separate series of the
Trust. Each share of a Fund represents an equal proportionate beneficial
interest in that Fund and, when issued and outstanding, is fully paid and
nonassessable. Shareholders would be entitled to share proportionally in the
net assets of a Fund available for distribution to shareholders upon
liquidation of a Fund.
Note 3. Management and Administrative Fees
The Funds have advisory and administrative agreements with the Adviser. The
following investment advisory fee rates were in effect as of December 31,
1998:
<TABLE>
<CAPTION>
Annual rate as a
percent of average
Fund daily net assets
- ---- ------------------
<S> <C>
Stein Roe Special Venture Fund, Variable Series .50 of 1%
Stein Roe Growth Stock Fund, Variable Series .50 of 1%
Stein Roe Balanced Fund, Variable Series .45 of 1%
Stein Roe Mortgage Securities Fund, Variable Series .40 of 1%
Stein Roe Money Market Fund, Variable Series .35 of 1%
</TABLE>
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 1998, for all the Funds, the annual administrative fee was
.15% of average daily net assets. Both the investment advisory fees and the
administrative fees are computed daily and paid monthly.
The Adviser also provides fund accounting services. The fee is $25,000
annually plus .0025% of assets in excess of $50 million.
Transfer agent services are rendered at an annual rate of $7,500, computed on
the basis of $625 per month.
The Adviser has agreed to reimburse all expenses, including management fees,
incurred by the Funds on an annual basis as follows:
<TABLE>
<CAPTION>
Fund Expenses exceeding
- ---- ------------------
<S> <C>
Stein Roe Special Venture Fund, .80 of 1% of average daily net assets
Variable Series
Stein Roe Growth Stock Fund, .80 of 1% of average daily net assets
Variable Series
Stein Roe Balanced Fund, .75 of 1% of average daily net assets
Variable Series
Stein Roe Mortgage Securities Fund, .70 of 1% of average daily net assets
Variable Series
Stein Roe Money Market Fund, .65 of 1% of average daily net assets
Variable Series
</TABLE>
The expense limitations expire April 30, 1999.
Note 4. Security Transactions
The cost of investments purchased and proceeds from investments sold, excluding
short-term investments, for the year ended December 31, 1998, for the Funds,
excluding Stein Roe Money Market Fund, Variable Series, were as follows:
<TABLE>
<CAPTION>
Special Growth Balanced Mortgage
Venture Fund, Stock Fund, Fund, Securities Fund,
Variable Series Variable Series Variable Series Variable Series
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Cost of
investments
purchased $158,776,756 $89,683,187 $193,381,522 $40,536,526
Proceeds from
investments
sold 194,326,200 96,854,825 207,966,714 6,146,869
</TABLE>
38
<PAGE>
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
(Unaudited)
- -------------------------------------------------------------------------------
A shareholder vote was conducted at a special meeting on October 31, 1998 in
Boston, Massachusetts, for the purpose of electing a Board of Trustees for the
SteinRoe Variable Investment Trust. At the meeting, shareholders approved the
election of the following individuals: John A. Bacon Jr., William W. Boyd,
Thomas W. Butch, Lindsay Cook, Douglas A. Hacker, Janet Langford Kelly, Charles
R. Nelson and Thomas C. Theobald. Mr. Butch and Mr. Cook are considered
interested persons of the Trust, as defined in the Investment Company Act of
1940, based on their relationship with the investment adviser. Mr. Bacon has
previously served as a trustee for the SteinRoe Variable Investment Trust.
39
<PAGE>
40
<PAGE>
41
<PAGE>
Investment Adviser 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 Auditors
KPMG LLP
303 East Wacker Drive
Chicago, IL 60601
Legal Counsel
Bell, Boyd & Lloyd
Three First National Plaza
70 West Madison Street
Chicago, IL 60602
The Trustees
John A. Bacon Jr.
William W. Boyd
Thomas W. Butch
Lindsay Cook
Douglas A. Hacker
Janet Langford Kelly
Charles C. Nelson
Thomas C. Theobald
