diff --git a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/kotlinSignature/TypeTransformingVisitor.java b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/kotlinSignature/TypeTransformingVisitor.java
index 9dceb8119c8..6f79c65a2d0 100644
--- a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/kotlinSignature/TypeTransformingVisitor.java
+++ b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/kotlinSignature/TypeTransformingVisitor.java
@@ -124,9 +124,9 @@ class TypeTransformingVisitor extends JetVisitor<JetType, Void> {
             TypeProjection argument = arguments.get(i);
             JetType alternativeType = computeType(argumentAlternativeTypeElement, argument.getType(), originalToAltTypeParameters);
             Variance variance = argument.getProjectionKind();
+            Variance altVariance;
             if (type instanceof JetUserType) {
                 JetTypeProjection typeProjection = ((JetUserType) type).getTypeArguments().get(i);
-                Variance altVariance = Variance.INVARIANT;
                 switch (typeProjection.getProjectionKind()) {
                     case IN:
                         altVariance = Variance.IN_VARIANCE;
@@ -137,12 +137,16 @@ class TypeTransformingVisitor extends JetVisitor<JetType, Void> {
                     case STAR:
                         throw new AlternativeSignatureMismatchException("Star projection is not available in alternative signatures");
                     default:
+                        altVariance = Variance.INVARIANT;
                 }
                 if (altVariance != variance && variance != Variance.INVARIANT) {
                     throw new AlternativeSignatureMismatchException("Variance mismatch, actual: %s, in alternative signature: %s", variance, altVariance);
                 }
             }
-            altArguments.add(new TypeProjection(variance, alternativeType));
+            else {
+                altVariance = variance;
+            }
+            altArguments.add(new TypeProjection(altVariance, alternativeType));
         }
 
         TypeConstructor typeConstructor;
diff --git a/compiler/testData/loadJava/kotlinSignature/CustomVariance.java b/compiler/testData/loadJava/kotlinSignature/CustomVariance.java
new file mode 100644
index 00000000000..b8b012c3d99
--- /dev/null
+++ b/compiler/testData/loadJava/kotlinSignature/CustomVariance.java
@@ -0,0 +1,12 @@
+package test;
+
+import java.util.*;
+
+import jet.runtime.typeinfo.KotlinSignature;
+
+public class CustomVariance {
+    @KotlinSignature("fun foo(): MutableList<out Number>")
+    public List<Number> foo() {
+        throw new UnsupportedOperationException();
+    }
+}
diff --git a/compiler/testData/loadJava/kotlinSignature/CustomVariance.kt b/compiler/testData/loadJava/kotlinSignature/CustomVariance.kt
new file mode 100644
index 00000000000..2f3cc20a793
--- /dev/null
+++ b/compiler/testData/loadJava/kotlinSignature/CustomVariance.kt
@@ -0,0 +1,7 @@
+package test
+
+import java.util.*
+
+public open class CustomVariance : Object() {
+    public open fun foo() : MutableList<out Number> = throw UnsupportedOperationException()
+}
diff --git a/compiler/testData/loadJava/kotlinSignature/CustomVariance.txt b/compiler/testData/loadJava/kotlinSignature/CustomVariance.txt
new file mode 100644
index 00000000000..cf20c023d60
--- /dev/null
+++ b/compiler/testData/loadJava/kotlinSignature/CustomVariance.txt
@@ -0,0 +1,6 @@
+namespace test
+
+public open class test.CustomVariance : java.lang.Object {
+    public final /*constructor*/ fun <init>(): test.CustomVariance
+    public open fun foo(): jet.MutableList<out jet.Number>
+}
diff --git a/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaTestGenerated.java b/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaTestGenerated.java
index 728494a5e0c..af5cd7756c0 100644
--- a/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaTestGenerated.java
+++ b/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaTestGenerated.java
@@ -260,6 +260,11 @@ public class LoadJavaTestGenerated extends AbstractLoadJavaTest {
             doTest("compiler/testData/loadJava/kotlinSignature/ConstructorWithoutParams.java");
         }
         
+        @TestMetadata("CustomVariance.java")
+        public void testCustomVariance() throws Exception {
+            doTest("compiler/testData/loadJava/kotlinSignature/CustomVariance.java");
+        }
+        
         @TestMetadata("MethodWithFunctionTypes.java")
         public void testMethodWithFunctionTypes() throws Exception {
             doTest("compiler/testData/loadJava/kotlinSignature/MethodWithFunctionTypes.java");
diff --git a/compiler/tests/org/jetbrains/jet/lang/resolve/lazy/LazyResolveNamespaceComparingTestGenerated.java b/compiler/tests/org/jetbrains/jet/lang/resolve/lazy/LazyResolveNamespaceComparingTestGenerated.java
index b528574b5e5..fc8e842384d 100644
--- a/compiler/tests/org/jetbrains/jet/lang/resolve/lazy/LazyResolveNamespaceComparingTestGenerated.java
+++ b/compiler/tests/org/jetbrains/jet/lang/resolve/lazy/LazyResolveNamespaceComparingTestGenerated.java
@@ -1155,6 +1155,11 @@ public class LazyResolveNamespaceComparingTestGenerated extends AbstractLazyReso
                 doTestSinglePackage("compiler/testData/loadJava/kotlinSignature/ConstructorWithoutParams.kt");
             }
             
+            @TestMetadata("CustomVariance.kt")
+            public void testCustomVariance() throws Exception {
+                doTestSinglePackage("compiler/testData/loadJava/kotlinSignature/CustomVariance.kt");
+            }
+            
             @TestMetadata("MethodWithFunctionTypes.kt")
             public void testMethodWithFunctionTypes() throws Exception {
                 doTestSinglePackage("compiler/testData/loadJava/kotlinSignature/MethodWithFunctionTypes.kt");