<PAGE> 1
VIST
ANNUAL
REPORT
DECEMBER 31, 1997
[FIRST VARIABLE LIFE LOGO]
<PAGE> 2
TABLE
OF
CONTENTS
<TABLE>
<S> <C>
Report of the President 1
Management's Discussion & Analysis
Small Cap Growth 3
World Equity 5
Growth 7
Matrix Equity 9
Growth & Income 11
Multiple Strategies 13
High Income Bond 15
U.S. Government Bond 17
Report of Independent Accountants 19
Schedule of Investments 20
Statements of Assets and Liabilities 60
Statements of Operations 62
Statements of Changes in Net Assets 64
Financial Highlights 68
Notes to the Financial Statements 76
Federated Prime Money Fund II F-1
</TABLE>
Financial products together with financial information.
<PAGE> 3
[FIRST VARIABLE LIFE LETTERHEAD]
February 20, 1998
Dear First Variable Contract Holder,
I am pleased to present the annual report for the Variable Investors Series
Trust (VIST). These portfolios are the investments within your First Variable
contract.
We've designed a new look for the report that makes it easier for you to find
important information on the portfolios. Inside, you'll find a short list of the
top ten holdings and key information. Each and every holding of the portfolio
and other financial information is shown later in the report. Take a moment to
familiarize yourself with the new format. I think you'll like it as much as I
do.
Again in 1997, the stock market performed well. The S&P 500, one of the most
popular market measures, was up 33.4% over the course of the year. Despite the
exuberance of this market indicator, many other investment categories did not
fare as well. In fact, the top 50 performing stocks of the S&P 500 Index
accounted for nearly two-thirds of its return. These 50 companies are quite
large and make up only a small portion of the total market. Most of our
portfolios seek investment results from several other types of investments, such
as small to mid-sized companies.
The bond market, as measured by the Salomon Broad Investment Grade Bond Index,
returned 9.6% during 1997. The high yield market did particularly well this year
and returned 12.63%, as measured by the First Boston High Yield Index. While
these returns are less than the stock market, they are very good for the bond
markets.
While the markets performed well this year, this may not always be the case in
the future. I ask you to remember that your investment in First Variable's
products is part of your long-term plan. Your financial adviser can help you
adjust your plan as your life situations and financial goals change.
Your investment choices are very important as you build, enjoy and preserve your
wealth. At First Variable, we are committed to offering you the products,
services and information you need to shape your financial future.
Regards,
/s/ John M. Soukup
------------------
John M. Soukup
President
<PAGE> 4
Small Cap Growth Portfolio
Objective
Seeks capital appreciation by investing primarily in common stocks of emerging
companies with the potential for significant capital appreciation and strong
earnings growth with attendant risk. The Portfolio normally invests at least 65%
of assets in common stocks and convertible securities issued by companies with
market capitalization or annual revenues not exceeding $1 billion at the time of
purchase.
Management's
Discussion & Analysis
The past year will go down in the record books as rather moody and certainly
volatile. Small and mid-cap growth stocks suffered substantial underperformance
in 1997, as the rally from late April through early October was preceded and
followed by severe corrections. For the year, the Portfolio returned 0.73%,
compared to the Russell 2000 Index which returned 22.37%.
PERFORMANCE
In the first quarter, fears of excessive economic strength and higher interest
rates caused stock prices to weaken and precipitated a correction in the market.
Small cap stocks with high earnings growth rates and high P/E ratios were
hardest hit, as investor favor turned toward the perceived safety of larger,
more liquid names. This investment climate was particularly difficult for our
disciplined approach because we invest in companies with the highest sustainable
earnings growth.
By the end of April, the market tide and investor sentiment had shifted, causing
growth and small cap shares to climb once again. The tone changed again from
July through September. Equity results were mixed as inflation fears and worry
over a Fed rate hike resurfaced. Large cap stocks gave back a portion of their
earlier gains, but small cap issues and technology stocks barely broke stride.
In October, Asia roiled the world's markets with a currency crisis. The Asian
turmoil sparked the year's second correction in smaller cap growth stocks.
Although the crisis is likely to have a more pronounced long term impact on the
Pilgrim Baxter & Associates, Ltd.
PILGRIM BAXTER & ASSOCIATES, LTD.
--------------------
INVESTMENT COUNSEL
Small
Cap Growth
Performance
<TABLE>
<CAPTION>
Returns 12/31/97
<S> <C>
4th Quarter (11.05)%
1 Year 0.73%
5 Year N/A
Since Inception 21.22%*
</TABLE>
*May 4, 1995
Top 10 Holdings
<TABLE>
<CAPTION>
% of % of
Holdings Portfolio Top 10
<S> <C> <C>
Computer Task Group Inc. 2.75% 12.31%
Amresco Inc. 2.45% 10.97%
Computer Horizons Corp. 2.33% 10.43%
Vistana Inc. 2.27% 10.17%
Applied Graphics Technologies 2.26% 10.12%
Medicis Pharmaceutical Corp. 2.17% 9.72%
National Surgery Centers Inc. 2.13% 9.54%
Waters Corp. 2.11% 9.45%
Rural/Metro Corp. 2.02% 9.05%
Pediatrix Medical Group 1.84% 8.24%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
% of
Sector Portfolio
------ ---------
<S> <C>
Systems Integrator 8.1%
Environmental 4.5%
Special Outpatient Facilities 3.8%
Drugs/Pharmaceuticals 3.7%
Hotels/Resorts 3.6%
</TABLE>
Special risks due to small size such as limited markets and financial resources
should be considered when investing in small cap stocks.
3
<PAGE> 5
Management's
Discussion & Analysis (CONTINUED)
bottom line of global, large cap companies than small cap shares, investors
shunned the less liquid small caps and prices dropped sharply.
OUTLOOK
In our opinion, the revised outlook for slower corporate earnings growth due to
the financial crisis in Asia actually improves the outlook for small cap stocks,
which generally derive a smaller proportion of their revenues from abroad. The
gains can be spectacular over time, but owing to the limited liquidity of small
cap growth stocks, moves are often powerful, brief and irregular.
The backdrop for our style of investing is very favorable in our view: low
relative valuations, a slowing trend in profit growth for many large cap names,
a favorable tax rate on capital gains, and a benign interest rate environment.
Many of the stocks we own have solid fundamentals but have been indiscriminately
punished as investor fear has driven investors to more liquid stocks and
alternative financial assets.
Looking ahead, we are prepared for continued volatility in 1998. We have
confidence in the companies we own and in the investment strategies that have
proven successful for us over the years.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP GROWTH
PORTFOLIO AND THE RUSSELL 2000 INDEX*
<TABLE>
<CAPTION>
VIST SMALL CAP GROWTH RUSSELL 2000 INDEX
--------------------- ------------------
<S> <C> <C>
May 4, 1995 10,000 10,000
June 30, 1995 10,939 10,676
September 30, 1995 12,593 11,731
December 31, 1995 13,008 11,985
March 31, 1996 14,439 12,600
June 30, 1996 16,705 13,230
December 31, 1996 16,582 13,965
March 31, 1997 13,401 13,242
June 30, 1997 16,540 15,655
September 30, 1997 18,778 17,984
December 31, 1997 16,703 17,382
</TABLE>
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED DECEMBER 31, 1997
Past 1 Life of
Year Portfolio***
---- ------------
Small Cap Growth Portfolio 0.73% 21.22%
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Small Cap Growth
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of
all operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
*** From commencement of operations (May 4, 1995)
4
<PAGE> 6
World Equity Portfolio
Objective
The investment objective of the World Equity Portfolio is to seek maximum
long-term total return by investing primarily in common stocks, and securities
convertible into common stocks, traded in securities markets located around the
world, including the United States. This objective per First Variable's
instruction, is to be obtained via international "blue chips" and domestic U.S.
small cap stocks.
Management's
Discussion & Analysis
Volatility was the major theme of the third and fourth quarters in 1997. The
currency, stock market and economic problems that began in Thailand and
Indonesia this summer, spread concern and uncertainty throughout the remainder
of Asia and caused tremors in all global markets.
PORTFOLIO PERFORMANCE
Fortunately for the international component of this portfolio, our exposure to
the problems in Asia was kept to a minimum due to our underweight position in
the region throughout the year. European markets provided the best investment
environment. Three of our top four performing markets were our European stocks
in Italy (37.1%), the Netherlands (29.8%), and the United Kingdom (15.6%).
Disappointing performers for us were our selections in Australia, Brazil,
Finland, and Japan. Additionally, a strengthening U.S. dollar worked to dilute
local performance. Our proactive currency management enabled us to partially
protect local returns versus a strong U.S. dollar. We partially hedged our
currency exposure with the use of forward contracts. For the year, the Portfolio
returned 9.98% compared to 15.76% for the MSCI World Index.
On the domestic side, an overweight position in U.S. technology stocks and a
generally poor market for most U.S. small cap stocks hurt the performance in the
first quarter of 1997 and proved to be a drag on the overall performance of this
portion of the portfolio for the year. The significant event in the fourth
quarter was the turmoil in many Asian countries. Many of the
Keystone Investment
[Keystone logo]
world equity
Performance
<TABLE>
<CAPTION>
Returns 12/31/97
<S> <C>
4th Quarter (6.78)%
1 Year 9.98%
5 Year 14.68%
Since Inception 8.25%*
</TABLE>
*June 10,1988
Top 10 Holdings
<TABLE>
<CAPTION>
% of % of
Holdings Portfolio Top 10
<S> <C> <C>
Nestle SA 2.97% 15.22%
Diageo Plc 2.28% 11.69%
Astra AB 2.24% 11.48%
Novartis AG 2.03% 10.40%
Telecom Italia Spa 1.92% 9.84%
Falcon Drilling Inc. 1.70% 8.71%
Sony Corp. 1.69% 8.66%
AXA UAP 1.63% 8.35%
Karstadt AG 1.59% 8.15%
Vodafone Group 1.46% 7.48%
</TABLE>
Top 5 Countries
<TABLE>
<CAPTION>
% of
Sector Portfolio
<S> <C>
United States 39.5%
United Kingdom 15.3%
France 8.8%
Switzerland 6.8%
Sweden 4.6%
</TABLE>
Special risks such as currency fluctuations and political changes should be
considered when investing internationally.
5
<PAGE> 7
Management's
Discussion & Analysis (Continued)
U.S. companies in the portfolio do manufacture and market overseas.
Semiconductor stocks and electronic technology, the sector with the most Asian
exposure, significantly underperformed losing nearly 25%. We believe the market
is cutting the valuations of these companies indiscriminately; therefore we
believe there are good opportunities in the higher quality companies. The
financial sector continued its strong performance in the fourth quarter, and
telecommunications service stocks also provided above average returns.
OUTLOOK
On the international side, we continue to be most optimistic about Europe. Most
European markets continue to benefit from low inflation, low relative interest
rates, slow but improving growth, strong bond markets, cost cutting and
corporate restructuring as the continent moves toward the European Monetary
Union in 1999. Asia is being watched very closely. We expect volatility in these
markets to continue as they come to grips with the implications of the massive
devaluations their currencies have suffered and the restructuring their
economies have to undergo. We are additionally monitoring Japan as its financial
system is restructured and it awaits the outcome facing the rest of Asia.
Domestically, we believe economic conditions of moderate growth with flat to
declining interest rates are favorable for small cap companies. The volatility
provides us the opportunity to take positions in high quality companies at
attractive valuation levels. Small cap stocks tend to move significantly in
short periods of time. Our focus is on areas with little cyclical sensitivities
and sustainable earnings growth.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE WORLD EQUITY
PORTFOLIO AND THE MSCI WORLD INDEX*
<TABLE>
<CAPTION>
VIST WORLD EQUITY MSCI WORLD INDEX
----------------- ------------------
<S> <C> <C>
April 1, 1994 10,000 10,000
June 30, 1994 9,830 10,301
September 30, 1994 10,523 10,522
December 31, 1994 10,707 10,447
March 31, 1995 10,921 10,957
June 30, 1995 11,806 11,375
September 30, 1995 13,312 11,849
December 31, 1995 13,310 12,329
March 31, 1996 13,721 12,772
June 30, 1996 14,646 13,131
September 30, 1996 14,263 13,187
December 31, 1996 14,956 13,666
March 31, 1997 14,544 13,749
June 30, 1997 16,506 15,728
September 30, 1997 17,645 16,022
December 31, 1997 16,449 15,392
</TABLE>
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Past 1 Past 5 Life of
Year Years Portfolio***
------ ------ ------------
<S> <C> <C> <C>
World Equity Portfolio 9.98% 14.68% 8.25%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the World Equity
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but do not include any insurance charges imposed
in connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
***From commencement of operations (June 10, 1988)
6
<PAGE> 8
Growth Portfolio
Objective
Seeks capital growth by investing primarily in common stocks and securities
convertible into common stock. Also seeks current income when consistent with
the primary objective. Securities are selected on the basis of their issuers'
long-term potential for expanding their earnings, profitability, and size and on
the basis of potential increases in market recognition of their securities.
Management's
Discussion & Analysis
With continued strength in the U.S. economy, benign inflation, better than
expected corporate profit growth, and strong cash flows into equities and equity
products, 1997 was again a profitable year for the stock market, with the S&P
500 up 33.4% on a total return basis. This marked the third straight year in
which the market had advanced more than 20%, an occurrence never before seen.
However, the year ended on a sour note as the confluence of political, economic
and currency woes in Southeast Asia during the fourth quarter reverberated
throughout the world with repercussions that are still unknown. The economies of
the former Asian tigers have slowed dramatically and their equity markets have
been pummeled. The U.S. market dropped 554 points on one day in late October and
has been chained to an Asian-driven roller coaster ever since. In a dramatic
flight to quality, investors have poured money into U.S. Treasuries and the
yield on the long bond plunged to a recent low of 5.7% from about 6.6% in
October. Investors fear that Asia will attempt to export its deflation to the
U.S. The Federal Reserve decided to leave monetary policy unchanged at the
November and December Federal Open Market Committee meetings. We do not believe
the Fed will run the risk of potentially exacerbating a global economic crisis
by raising interest rates. In fact, the Fed may be shifting to a bias of
lowering interest rates.
PORTFOLIO PERFORMANCE
The Growth Portfolio had a total return (including dividends and income) for
1997 of 23.6% as compared to 33.4% for the S&P 500 Index. Stock selection is
guided by the Value Line Timeliness Ranking which focuses on
Value Line, Inc.
[PICTURE OF BUILDING INSIDE A VEE]
growth
Performance
Returns 12/31/97
<TABLE>
<S> <C>
4th Quarter (2.60)%
1 Year 23.62%
5 Year 18.21%
10 Year 15.87%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
% of % of
Holdings Portfolio Top 10
<S> <C> <C>
BMC Software Inc. 4.23% 14.85%
Travelers Inc. 3.90% 13.69%
Transocean Offshore Inc. 3.53% 12.39%
Pfizer Inc. 2.62% 9.20%
Cisco Systems Inc. 2.57% 9.02%
Helmerichand Payne Inc. 2.48% 8.70%
Smith International Inc. 2.43% 8.53%
AES Corp. 2.32% 8.14%
Microsoft Corp. 2.27% 7.97%
Bankamerica Corp. 2.14% 7.51%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
% of
Sector Portfolio
<S> <C>
Software 8.3%
Financial Services 7.4%
Drugs 6.7%
Oil & Gas 6.7%
Banks 6.2%
</TABLE>
7
<PAGE> 9
Management's
Discussion & Analysis (CONTINUED)
stocks with superior earnings growth and price momentum. The Ranking System is
heavily weighted in mid-cap and small-cap stocks which lagged the large
capitalization stocks such as those in the S&P 500 for the year. In addition,
the portfolio was overweighted in both the technology and energy sectors, both
of which suffered retrenchment at the end of the year due to concerns about
their exposure to the Asian meltdown. Growth stocks, in general, ended 1997
poorly as investors feared the Asian crisis would severely impact earnings
growth. The third area of overweighting, financial services, proved beneficial,
as these stocks benefited from the decline in interest rates at the end of the
year.
OUTLOOK
For 1998 we have a cautious outlook for the stock market, although we do believe
a high single digit or low double digit return is possible from current levels.
However, we would expect ongoing volatility as news from Asia alternates between
good and bad. We expect to remain overweighted in technology, a true growth
area, with a primary focus on software stocks with limited exposure to Asia.
Financials will also continue to see heavy overweighting as will health care.
Both sectors are primarily U.S. based and not expected to suffer significantly
from problems in Asia. Utilities and consumer staples will remain underweighted,
due to poor earnings growth and a lack of pricing power.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GROWTH PORTFOLIO
AND THE S&P 500 INDEX *
<TABLE>
<CAPTION>
VIST GROWTH S&P 500 INDEX
----------- -------------
<S> <C> <C>
April 1, 1994 10,000 10,000
June 30, 1994 9,393 9,966
September 30, 1994 10,141 10,380
December 31, 1994 10,264 10,303
March 31, 1995 10,834 11,305
June 30, 1995 12,461 12,383
September 30, 1995 14,180 13,365
December 31, 1995 14,075 14,169
March 31, 1996 15,209 14,930
June 30, 1996 15,970 15,599
September 30, 1996 16,924 16,081
December 31, 1996 17,708 17,420
March 31, 1997 16,850 17,889
June 30, 1997 19,920 21,009
September 30, 1997 22,475 22,582
December 31, 1997 21,891 23,231
</TABLE>
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
------ -------- -------
<S> <C> <C> <C>
Growth Portfolio 23.62% 18.21% 15.87%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Growth Portfolio and
the return on the investment both will fluctuate and redemption proceeds may be
higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
8
<PAGE> 10
Matrix Equity Portfolio
Objective
Seeks capital appreciation and current income by investing in a diversified
portfolio of equity securities that is selected on the basis of a proprietary
analytical model.
Management's
Discussion & Analysis
Most of the Matrix and market performance came in the second and third quarters
of the year, which combined to produce a return of 30%. For the balance of the
year the Portfolio benefited greatly from its consistent overweight to the
technology and consumer retail sectors, as several core holdings performed
extremely well. These included computer makers Dell Computer (200% for the year)
and Compaq Computer (90%), and software firms Compuware Corp. (140%) and
Computer Associates (60%). In addition the fund had a significant stake in
well-known firms such as drug company Bristol-Myers Squibb (70%), BankAmerica
Corp. (50%), and department store retailer Dayton-Hudson Corp. (70%). Our
successful concentration on those stocks that offer both good value as well as
improving earnings growth was important, as many of these firms demonstrated
consistently positive earnings surprises, causing investors to re-value these
stocks at significantly higher prices. For the year, the Portfolio returned
22.05%, compared to 33.4% for the S&P 500 Index.
Consistent with the theme of growth versus value investing, the Matrix growth
model outperformed our value model for most of the year. Until the final two
months, when neither model performed particularly well, our estimate revision
model had been remarkably consistent in separating the winners from losers
during each month of 1997. Much of the Matrix outperformance during the year was
therefore attributable to our growth model - though our value model was
instrumental during our strong third quarter when many of the
largest-capitalization stocks (e.g. most over-valued) corrected sharply. Also,
as is often overlooked, the measure of a good valuation process is found in
keeping a portfolio away from those stocks that are most at risk, as well as in
finding attractive candidates for
State Street
Global Advisors
[SSGA LOGO]
matrix
equity
<TABLE>
<CAPTION>
Performance
Returns 12/31/97
<S> <C>
4th Quarter (0.01)%
1 Year 22.05%
5 Year 14.73%
Since Inception 13.56%*
</TABLE>
*June 16,1988
Top 10 Holdings
<TABLE>
<CAPTION>
% of % of
Holdings Portfolio Top 10
<S> <C> <C>
Bristol Myers Squibb Co. 2.75% 11.88%
Bell Atlantic Corp. 2.72% 11.75%
General Electric Co. 2.60% 11.23%
Allstate Corp. 2.38% 10.28%
Federal Natl Mortgage Assn 2.34% 10.11%
Intel Corp. 2.19% 9.46%
Bankamerica Corp. 2.07% 8.94%
Schering Plough Corp. 2.07% 8.94%
American Express Co. 2.02% 8.73%
Microsoft Corp. 2.01% 8.68%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
% of
Sector Portfolio
<S> <C>
Telecommunications 8.5%
Drugs 7.5%
Financial Services 7.1%
Banks 6.5%
Food & Beverages 5.6%
</TABLE>
9
<PAGE> 11
Management's
Discussion & Analysis (Continued)
buying. By this measure our value model also acquitted itself reasonably well in
1997.
The Portfolio is currently somewhat overweight in financial and consumer retail
shares, where several firms remain under-valued relative to their strong
earnings expectations. The Portfolio is no longer heavily weighted towards
technology stocks, though since many computer stocks have now corrected sharply
we may yet see a few compelling valuations in this sector. The Portfolio
continues to be underweight to the basic materials sector (chemicals, paper, and
metal stocks), as depressed commodity prices are weakening the profit outlooks
of many of these firms. In addition, several of the very largest consumer
staples stocks such as Coca-Cola, PepsiCo., and Walt Disney remain unattractive
due to their high price multiples (30-40 times 1998 earnings forecasts) and
unspectacular rates of profit growth. The Portfolio has remained consistently
underweight to the consumer staples sector as a result.
The Matrix strategy will continue to invest in those stocks that appear
undervalued relative to improving earnings prospects, and stay well-diversified
and balanced with respect to the S&P 500 Index. As the U.S. market will not
continue to return 20% indefinitely, it is now especially important to remain
well diversified and mindful of valuations. The American economy is expected to
continue to grow real GDP at a commendable rate of 2.5-3.0% in 1998, with
continued low inflation. However, much of the economic performance will depend
on the recent Asian weakness remaining contained, and not spreading to the
western economies. If European and North American economies can continue to
generate steady economic performance while Japanese and Asian banks sort out
their capital troubles, then financial asset performance can remain reasonably
positive over the next 12 months. If not, then the threat of price deflation
and/or recession may become real, with obvious consequences for corporate
profits and financial asset prices.
Most expectations for 1998 now place S&P 500 earnings growth at 6-8%, or
one-half of the average of the past 6 years. This is an important reason why
many expect only modest returns for the stock market, rather than another large
rise. This includes the possibility of a correction of 10+%, which could take
some of the excesses and high valuations out of the market, and be positive for
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MATRIX EQUITY
PORTFOLIO, THE S&P UTILITY INDEX* AND SINCE MAY 1, 1997 THE S&P 500 INDEX*
<TABLE>
<CAPTION>
VIST MATRIX EQUITY S&P UTILITY INDEX
------------------ -----------------
<S> <C> <C>
April 1, 1994 10,000 10,000
June 30, 1994 9,940 9,987
December 31, 1994 10,009 9,821
March 31, 1995 10,604 10,484
September 30, 1995 12,369 12,521
December 31, 1995 13,357 13,923
June 30, 1996 13,446 13,974
September 30, 1996 12,835 13,503
March 31, 1997 13,767 14,026
September 30, 1997 15,248 15,366
December 31, 1997 17,055 16,990
</TABLE>
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Past 1 Past 5 Life of
Year Years Portfolio***
------ ------ ------------
<S> <C> <C> <C>
Matrix Equity Portfolio 22.05% 14.73% 13.56%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Matrix Equity
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
Portfolio operating expenses, but do not include any insurance charges imposed
in connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
*** From commencement of operations (June 16, 1988)
the market's longer-term performance. So long as profit growth is reasonable and
inflation remains low, there is little reason to expect a "crash" or prolonged
bear-market in the U.S. On the contrary, the extremely favorable fundamentals in
the U.S., continued improvement in Europe, and gradual improvement elsewhere,
give many investors optimism regarding the long-term health of an investment in
the equity markets. In general, we share this view.
10
<PAGE> 12
Growth & Income Portfolio
Objective
Seeks long-term growth of capital and income and a reasonable current return by
investing primarily in dividend-paying common stocks, convertibles, and readily
marketable securities that derive their value from common stocks, as well as
fixed income securities. The Portfolio does not strive to maintain a specific
balance of stocks, bonds, and money market instruments. Instead the manager
selects the industry sectors and individual securities he believes have the
highest potential for attractive total returns.
Management's
Discussion & Analysis
During 1997, Brian Posner became the manager of this portfolio. The initiatives
of the Portfolio's new manager were most apparent during the first quarter. In
the first five weeks under Brian Posner's management, almost every security in
the Portfolio was replaced. These changes reflected his disciplined,
value-oriented investment approach. The management transition was accomplished
with an eye on dual goals; avoiding lapses in performance, and minimizing
shareholder exposure to capital gains.
PERFORMANCE
The Variable Investors Series Trust Growth & Income Portfolio had a strong
showing for 1997 closing the calendar year with a gain of 28.20% compared to
33.4% for the S&P 500 Index. During the third quarter, the fund gained almost
10.50%, outperforming the S&P by a significant margin.
One significant change to the Portfolio's composition was made within the energy
and oil & oil-services sectors. The manager believed that these stocks, which
were strong performers during 1996, had already responded earlier in 1997 to
pressures stemming from fears of declining energy prices. In these companies he
believed that the market's pessimism was extreme, particularly given their
lengthy and potentially lucrative contracts for projects in the Gulf of Mexico
and the North Sea.
Against the backdrop of the third quarter's high market volatility, the
Portfolio's value bias and focus on risk-adjusted total return met with good
Warburg Pincus Asset
Management, Inc.
[Warburg Pincus]
growth &
income
Performance
<TABLE>
<S> <C>
Returns 12/31/97
4th Quarter 0.73%
1 Year 28.20%
5 Year N/A
Since Inception 20.65%*
</TABLE>
*May 31,1995
Top 10 Holdings
<TABLE>
<CAPTION>
% of % of
Holdings Portfolio Top 10
<S> <C> <C>
British Petroleum Plc 3.02% 13.67%
Chrysler Corp. 2.74% 12.42%
Allstate Corp. 2.38% 10.78%
Citicorp 2.18% 9.88%
Intl Business Machines 2.17% 9.83%
Philip Morris Cos Inc. 2.14% 9.70%
Exxon Corp. 2.01% 9.11%
Bell Atlantic Corp. 1.84% 8.34%
Merck & Co., Inc. 1.80% 8.16%
USG Corporation 1.79% 8.11%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
% of
Sector Portfolio
<S> <C>
Financial Services 9.7%
Aerospace & Defense 6.1%
Retail Trade 5.7%
Telecommunications 4.9%
Oil 4.4%
</TABLE>
11
<PAGE> 13
Management's
Discussion & Analysis (Continued)
results. Few changes were made during this period to the Portfolio's sector
weightings, and it remained well-diversified by industry. This reflected the
narrow valuations across sectors, which the manager viewed as leaving little
incentive to heavily overweight sectors. An exception to this view was the
Portfolio's overweighting in the financial sector where stocks had continued to
benefit from stable interest rates and ongoing deregulation and consolidation
within the industry. Notable performers for the quarter included Citicorp and
Equitable of Iowa. Provident Companies, a new financial company added during the
period, also contributed to the Portfolio's positive return.
The fourth quarter saw a modest gain in the Portfolio. Again in this quarter,
the pattern of relatively narrow valuations across industries was a significant
factor in the manager's decision not to initiate large changes in the sector
weightings. The energy and computer stocks weighed on the Portfolio's
performance, while it was helped by holdings in financial-services,
pharmaceuticals, retail and telecommunications.
Financial services remain a sizable sector in the Portfolio's holdings and are
modestly overweighted. While we continue to see good value among industry
leaders in the computer area, overall exposure was pared due largely to
Asia-related risk considerations. In the health-care sector (including
pharmaceuticals) changes were made -- among them the addition of Merck. This
stock helped the Portfolio's performance during the period, due in part to the
FDA's approval of the company's hair-growth product in December.
OUTLOOK
Looking to the first quarter of 1998 and beyond, Warburg Pincus believes the
considerable market volatility seen over the last several months is unlikely to
recede, due in part to Asia-related uncertainties. In this context, individual
security selection remains critical. The manager will continue to evaluate
stocks on a risk-adjusted total return basis, holding those he deems to have the
brightest longer-term prospects.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GROWTH & INCOME
PORTFOLIO AND THE S&P 500 INDEX*
<TABLE>
<CAPTION>
DATE VIST GROWTH & INCOME S&P 500 INDEX
- ---- -------------------- -------------
<S> <C> <C>
May 31, 1995 10,000 10,000
June 30, 1995 10,152 10,232
September 30, 1995 11,145 11,043
March 31, 1996 12,747 12,337
June 30, 1996 12,907 12,890
September 30, 1996 12,162 13,288
December 31, 1996 12,680 14,395
March 31, 1997 12,833 14,782
September 30, 1997 16,139 18,660
December 31, 1997 16,257 19,196
</TABLE>
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Past 1 Life of
Year Portfolio***
---- ------------
<S> <C> <C>
Growth & Income Portfolio 28.20% 20.65%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Growth & Income
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
*** From commencement of operations (May 31, 1995)
12
<PAGE> 14
Multiple Strategies Portfolio
Objective
Seeks as high a level of total return over an extended period of time as is
consistent with prudent investment risk by investing in equity securities, bonds
and money market instruments in varying proportions, depending upon prevailing
economic and financial market conditions.
Management's
Discussion & Analysis
On December 31, 1997 the portfolio was 72.8% invested in common stocks, 13.1% in
bonds with a mixture of high grade corporates, government, and government
agencies, and approximately 14% in short term securities. This mixture (more
weighted in stocks than a typical 60% equities/ 40% bonds balanced portfolio)
was beneficial as the S&P 500 Index posted a 33.4% return for the year. The
portfolio had a total return of 21.8% for the year, compared to 24.0% for a 60%
S&P 500 / 40% Lehman Brothers Government / Corporate Bond Index mixture, as the
equity holdings were unable to keep pace with the S&P 500.
OUTLOOK
The equity holdings in the portfolio mirror those of the Growth Portfolio and
will continue to do so. We anticipate a more conservative equity position in the
portfolio going forward, with a focus on companies whose revenues are primarily
derived from the United States economy.
We look for continued moderate economic growth of around 2.5% in 1998, as the
Asian crisis takes a point or so out of U.S. GDP growth. The outlook for
inflation remains very positive with the strong dollar and the weakening
economies in Southeast Asia. As such, we believe the long bond yield could trade
down to the 5.25-5.50% range. The real unknown at this point in time is the
extent to which the "Asian Flu" will impact corporate earnings growth.
Obviously, some industries will suffer from Asia while others will be relatively
unaffected. We believe that corporate profit growth will slow in 1998 to a mid
single digit level. We should
Value Line, Inc.
[Picture of V with building]
multiple
strategies
Performance
<TABLE>
<S> <C>
Returns 12/31/97
4th Quarter (0.73)%
1 Year 21.79%
5 Year 15.15%
10 Year 13.47%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
% of % of
Holdings Portfolio Top 10
<S> <C> <C>
United States Treasury Bds 3.22% 14.05%
United States Treasury Nts 2.98% 13.00%
Transocean Offshore Inc. 2.82% 12.30%
BMC Software Inc. 2.67% 11.65%
Travelers Inc. 2.19% 9.55%
Pfizer Inc. 1.96% 8.55%
AES Corp. 1.89% 8.25%
Computer Associates Intl Inc. 1.79% 7.81%
Helmerichand Payne Inc. 1.70% 7.42%
Fifth Third Bancorp 1.70% 7.42%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
% of
Sector Portfolio
<S> <C>
Drugs 5.2%
Financial Services 4.9%
Banks 4.7%
Insurance 4.6%
Oil & Gas 4.4%
</TABLE>
13
<PAGE> 15
Management's
Discussion & Analysis (Continued)
expect the stock market to stay in a trading range as sentiment about Asia sways
from fear to relief and back again. We would focus on solid growth companies
whose revenues are primarily derived from the U.S., including health care,
financials, retail, and some technology.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MULTIPLE STRATEGIES
PORTFOLIO, THE S&P 500 INDEX* AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX*
<TABLE>
<CAPTION>
VIST LEHMAN BROS.
MULTIPLE S&P 500 GOV'T/CORP
DATE STRATEGIES INDEX BOND INDEX
- ---- ---------- ------- ------------
<S> <C> <C> <C>
April 1, 1994 10,000 10,000 10,000
June 30, 1994 9,364 9,966 9,876
December 31, 1994 9,974 10,303 9,962
March 31, 1995 10,475 11,305 10,458
September 30, 1995 13,154 13,365 11,343
December 31, 1995 13,189 14,169 11,872
June 30, 1996 14,351 15,599 11,648
September 30, 1996 15,053 16,081 11,854
March 31, 1997 15,008 17,889 11,875
June 30, 1997 17,212 21,009 12,525
December 31, 1997 19,011 23,231 13,991
</TABLE>
* These Indices are unmanaged indices in which investors cannot invest. Results
for the Indices do not reflect the expenses and investment management fees
incurred by the Portfolio. Past performance is not predictive of future
performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
---- ----- -----
<S> <C> <C> <C>
World Equity Portfolio 21.79% 15.15% 13.47%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Multiple Strategies
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
fund operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
14
<PAGE> 16
High Income Bond Portfolio
Objective
Seeks a high level of current income while secondarily seeking capital
appreciation by investing primarily in fixed-income securities, including
corporate bonds and notes, discount bonds, zero-coupon bonds, convertible
securities, and preferred stocks and bonds issued with warrants, which are rated
Baa or below by Moody's or BBB or below by Standard & Poor's or in unrated
securities determined to be of comparable quality.
Management's
Discussion & Analysis
The major factor for the superior relative performance of high yield bonds was
the almost ideal economic environment which existed for all of 1997. Strong
steady economic growth coupled with low inflation resulted in good operating
performance for most high yield issuers. Declining interest rates (the interest
rate on 10 year U.S. Treasury securities declined approximately 70 basis points)
and strong equity markets provided an attractive financial market environment
for high yield issuers. Finally, the high yield market benefited from strong
demand for high yield securities as investors were attracted to the historically
strong total return performance of the marketplace and the attractive yields
offered by high yield securities in a falling interest rate environment. For the
year, the Portfolio returned 13.54%, compared to 12.70% for the Lehman Brothers
Single "B" Index.
PERFORMANCE
Several factors benefited the Portfolio versus the benchmarks. The Portfolio's
largest industry exposures have been (and continue to be) telecommunications,
cable and broadcasting. These three sectors generated very strong performance
versus the market during the year. The Portfolio was generally underweight basic
industries such as steel, forest products and commodity chemicals. These sectors
underperformed especially in the fourth quarter as economic concerns about 1998
began to increase. The portfolio also had no exposure to
Federated Investment
Counseling, Inc.
[Federal Investors Logo]
high
income
bond
Performance
<TABLE>
<S> <C>
Returns 12/31/97
4th Quarter 1.90%
1 Year 13.54%
5 Year 10.50%
10 Year 11.15%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
% of % of
Holdings Portfolio Top 10
<S> <C> <C>
United States Treasury Notes 3.06% 20.14%
Viacom Inc. 1.87% 12.30%
TeleWest plc 1.66% 10.92%
WestPoint Stevens Inc. 1.50% 9.87%
Affiliated Newspaper Invts Inc. 1.35% 8.88%
Ameriserve Food Inc. 1.20% 7.89%
Brooks Fiber Properties Inc. 1.19% 7.83%
Sinclair Broadcast Group Inc. 1.14% 7.50%
Ralphs Grocery Co. New 1.12% 7.37%
First Nationwide Holdings Inc. 1.11% 7.30%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
% of
Sector Portfolio
<S> <C>
Telecommunications & Cellular 11.7%
Cable Television 11.2%
Broadcast Radio & Television 9.8%
Oil & Gas 4.6%
Industrial Products & Equipment 4.5%
</TABLE>
High yield bonds are subject to greater risk of principal and income than higher
quality bonds.
15
<PAGE> 17
Management's
Discussion & Analysis (Continued)
emerging Asian markets which were negatively impacted in the fourth quarter by
finance activities such as mergers, initial public offerings (IPO's) and tenders
which proved beneficial to bondholders. AMF, Mettler Toledo and International
Home Foods did initial stock offerings and Owens Illinois and Monarch Marking
tendered for their outstanding debt. Finally, the portfolio benefited from
outstanding individual security selection avoiding major deteriorating
situations while holding numerous strong performers.
OUTLOOK
As we look out into 1998, the main area of uncertainty is what impact the
developing problems in Asia will have on U.S. economic growth, inflation and
equity markets. It would appear that the problems in Asia will serve to slow the
U.S. economy and reduce inflation much like a Federal Reserve tightening. This
could serve to head off inflationary fears, reduce the likelihood of a Fed
tightening and extend the economic expansion. An extended economic expansion
would be a long term positive for high yield bonds. The risk is that Asia's
problems have a greater impact on the U.S. economy and push the domestic economy
into recession. Superior credit selection will be essential in 1998 as the
odds-on-bet is for slower economic activity which could lead to negative credit
surprises. From a portfolio perspective, we continue to like companies that are
benefiting from secular growth like telecommunications and companies in
consolidating businesses like cable and broadcasting.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HIGH INCOME BOND
PORTFOLIO AND THE LEHMAN BROTHERS SINGLE "B" INDEX*
<TABLE>
<CAPTION>
VIST FIRST BOSTON LEHMAN BROTHERS
INCOME HIGH YIELD SINGLE "B"
DATE BOND INDEX INDEX
- ---- ------ ------------ --------------
<S> <C> <C> <C>
April 1, 1994 10,000 10,000 10,000
June 30,1994 9,906 9,856 10,010
September 30, 1994 9,879 10,014 10,198
December 31, 1994 9,655 10,010 10,215
March 31, 1995 10,167 10,481 10,745
June 30, 1995 10,729 11,089 11,299
September 30, 1995 11,102 11,423 11,641
December 31, 1995 11,487 11,752 11,907
March 31, 1996 11,795 12,006 12,213
June 30, 1996 11,948 12,195 12,464
September 30, 1996 12,635 12,653 13,053
December 31, 1996 13,123 13,211 13,523
March 31, 1997 13,269 13,405 13,694
June 30, 1997 13,931 13,984 14,259
September 30, 1997 14,621 14,641 14,919
December 31, 1997 14,899 14,878 15,159
</TABLE>
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
---- ----- -----
<S> <C> <C> <C>
High Income Bond Portfolio 13.54% 10.50% 11.15%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the High Income Bond
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
16
<PAGE> 18
U.S. Government Bond Portfolio
Objective
Seeks current income and preservation of capital. Under normal circumstances, at
least 80% of the Portfolio's assets will be invested in U.S. Government
Securities; the remainder may be invested in investment grade corporate
securities and in cash and money market instruments.
Management's
Discussion & Analysis
After a shaky start punctuated by a Federal Reserve rate hike in early March,
the bond market powered ahead for the balance of the year. Yields were pushed
lower by a continual stream of economic reports showing that inflation was, if
not dead, at least in hibernation, despite strong economic growth. Benchmark
Treasury yields declined across all maturities beyond one year but fell most in
the longer maturities. Mortgage-backed securities outperformed Treasuries in the
first half of the year but underperformed in the second half as their durations
fell sharply amid increased refinancing activity.
In the most recent quarter, continued good news on the inflation front and the
potential slowing effects of the Asian financial meltdown contributed to a very
strong domestic bond market. Long-term yields declined by almost 50 basis points
over the period, and the yield curve flattened substantially. The quarter was
characterized by a flight to quality in the fixed income markets and a general
widening of risk premiums in all financial assets. Treasuries outperformed the
corporate market, with the Yankee portion of the corporate market
underperforming dramatically due to the Asian events.
PORTFOLIO PERFORMANCE
With the exception of a brief period in early spring of last year, we maintained
the portfolio at a neutral-with-benchmark duration of approximately 4.6 years.
The portfolio benefited from yield curve flattening (the convergence of
long-term and short-term yields) as a result of a slight barbell yield curve
posture. After keeping pace with its benchmark through September, the
Strong Capital
Management
[Strong Logo]
u.s.
government
bond
Performance
<TABLE>
<S> <C>
Returns 12/31/97
4th Quarter 2.71%
1 Year 9.37%
5 Year 7.44%
10 Year 8.55%
</TABLE>
Top 10 Holdings
<TABLE>
<CAPTION>
% of % of
Holdings Portfolio Top 10
<S> <C> <C>
United States Treasury Nts 6.31% 14.11%
Federal Natl Mortgage Assn 5.40% 12.08%
Govt Natl Mortgage Assn 5.39% 12.06%
United States Treasury Nts 5.33% 11.92%
Federal Natl Mortgage Assn 5.10% 11.41%
United States Treasury Bds 4.36% 9.75%
FHA Project Loan 3.61% 8.07%
Time Warner Inc. 3.33% 7.45%
Govt Natl Mortgage Assn 2.96% 6.62%
Govt Natl Mortgage Assn 2.92% 6.53%
</TABLE>
Top 5 Sector Weightings
<TABLE>
<CAPTION>
% of
Sector Portfolio
<S> <C>
Mortgage Backed Securities 47.0%
U.S. Government Securities 33.5%
Corporate Bonds 5.6%
Municipal Bonds 4.8%
Non-Agency MBS 2.7%
</TABLE>
Investment in the U.S. Government Bond Portfolio is not guaranteed by the U.S.
Government.
17
<PAGE> 19
Management's
Discussion & Analysis (Continued)
portfolio underperformed slightly during the fourth quarter due to its
underweighting in Treasuries and overweighting in mortgage-backed securities.
The VIST U.S. Government Bond Portfolio returned 2.71% for the fourth quarter
and 9.37% for the year, compared to a 1 year return of 9.58% for the Lehman
Brothers Government Bond Index.
OUTLOOK
We expect the U.S. bond market will continue to be supported by good news on
consumer price inflation, although upside potential will be limited by sustained
high money market rates and little prospect for Federal Reserve easing any time
soon. The problems in Asia could ultimately lead to lower short-term interest
rates in the U.S., but such prospects are not apparent at this time as recent
policy responses appear to be reducing the prospects for additional downside
moves.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE U.S. GOVERNMENT
BOND PORTFOLIO AND THE LEHMAN BROTHERS GOVERNMENT BOND INDEX*
<TABLE>
<CAPTION>
VIST U.S. LEHMAN BROS.
DATE GOV'T BOND GOV'T BOND INDEX
- ---- ---------- ----------------
<S> <C> <C>
April 1, 1994 10,000 10,000
September 30, 1994 9,960 9,927
December 31, 1994 9,959 9,962
June 30, 1996 11,162 11,078
September 30, 1996 11,403 11,273
March 31, 1996 11,663 11,522
September 30, 1996 11,839 11,772
December 31, 1996 12,217 12,115
June 30, 1997 12,578 12,385
September 30, 1997 13,010 12,800
</TABLE>
* This Index is an unmanaged index in which investors cannot invest. Results for
the Index do not reflect the expenses and investment management fees incurred by
the Portfolio. Past performance is not predictive of future performance.
AVERAGE ANNUAL TOTAL RETURNS**
PERIODS ENDED DECEMBER 13, 1997
<TABLE>
<CAPTION>
Past 1 Past 5 Past 10
Year Years Years
---- ----- -----
<S> <C> <C> <C>
U.S. Government Bond Portfolio 9.37% 10.40% 8.55%
</TABLE>
"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the U.S. Government Bond
Portfolio and the return on the investment both will fluctuate and redemption
proceeds may be higher or lower than an investor's original cost.
** Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Performance numbers are net of all
operating expenses, but do not include any insurance charges imposed in
connection with your variable insurance contract. If this performance
information included the effect of the insurance charges, performance numbers
would be lower.
18
<PAGE> 20
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Contract Owners of
Variable Investors Series Trust
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Variable Investors Series Trust (the
Trust) (comprising, respectively, the Small Cap Growth, World Equity, Growth,
Matrix Equity, Growth & Income, Multiple Strategies, High Income Bond, and U.S.
Government Bond Portfolios) as of December 31, 1997, the related statements of
operations for the year then ended, and the statements of changes in net assets
for each of the two years in the period then ended and financial highlights for
each of the three years in the period then ended. These financial statements and
financial highlights are the responsibility of Variable Investors Series
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
financial highlights for each of the two years in the period ended December 31,
1994 were audited by other auditors whose report dated February 14, 1995
expressed an unqualified opinion on those financial highlights.
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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. 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 each
of the respective portfolios constituting Variable Investors Series Trust at
December 31, 1997, the results of their operations for the year then ended, and
the changes in their net assets for each of the two years in the period then
ended and financial highlights for each of the periods in the three years then
ended, in conformity with generally accepted accounting principles.
[ERNST & YOUNG LLP]
Boston, Massachusetts
February 9, 1998
19
<PAGE> 21
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
ADVERTISING -- (1.4%)
Lamar Advertising Company (a) .......... 6,500 $258,375
--------
ASSISTED LIVING -- (1.4%)
Alternative Living Services, Inc.(a) ... 8,700 257,194
--------
CLIENT-SERVER HELP DESK -- (1.6%)
Pegasystems, Inc. (a) .................. 10,300 207,931
Remedy Corporation (a) ................. 3,900 81,900
--------
289,831
COMMERCIAL SERVICES -- (3.5%)
Caribiner International, Inc. (a) ...... 3,900 173,550
Central Parking Corporation ............ 4,200 190,313
Pre-Paid Legal Services, Inc. (a) ...... 8,200 280,337
--------
644,200
COMMUNICATION SERVICES -- (2.3%)
Pacific Gateway Exchange, Inc. ......... 6,100 328,256
Telephone Save Holdings, Inc. (a) ...... 4,400 86,900
--------
415,156
CONSUMER PRODUCTS-MISCELLANEOUS -- (1.0%)
Blyth Industries, Inc. (a) ............. 6,150 184,116
--------
CONTRACT DRILLING -- (2.4%)
Cliffs Drilling Company (a) ............ 3,000 149,625
Patterson Energy, Inc. (a) ............. 4,500 174,094
UTI Energy Corporation (a) ............. 4,300 111,262
--------
434,981
DATA STORAGE -- (1.7%)
Network Appliance, Inc. (a) ............ 9,000 319,500
--------
DESIGN AUTOMATION SOFTWARE -- (0.5%)
Summit Design, Inc. (a) ................ 9,200 95,450
--------
DIVERSIFIED FINANCIAL SERVICES -- (2.5%)
Amresco, Inc. .......................... 14,900 450,725
--------
DRUGS/PHARMACEUTICALS -- (3.7%)
Dura Pharmaceuticals, Inc. (a) ......... 4,600 211,025
Jones Medical Industries, Inc. ......... 1,900 72,675
Medicis Pharmaceutical Corporation(a) .. 7,800 398,775
--------
682,475
ELECTRONIC COMMERCE -- (1.8%)
Transaction Systems Architects, Inc. (a) 8,500 323,000
--------
EMBEDDED SOFTWARE -- (1.2%)
Wind River Systems, Inc. (a) ........... 5,450 216,297
--------
</TABLE>
20
<PAGE> 22
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C>
COMMON STOCKS
EMPLOYMENT SERVICE -- (1.5%)
Corestaff, Inc. (a) ..................... 10,350 $274,275
--------
ENTERTAINMENT/MOVIES -- (1.7%)
Regal Cinemas, Inc. (a) ................. 11,075 308,716
--------
ENVIRONMENTAL -- (4.5%)
American Disposal Services, Inc.(a) ..... 8,300 302,950
Eastern Environmental Services, Inc. (a) 12,000 264,000
Tetra Tech, Inc. (a) .................... 12,468 249,360
--------
816,310
HEALTH CARE MANAGEMENT SERVICES -- (1.2%)
Concentra Managed Care, Inc. (a) ........ 6,600 222,750
--------
HEALTH CARE-SERVICES -- (2.0%)
Rural/Metro Corporation (a) ............. 11,100 370,463
--------
HOTELS/RESORTS -- (3.6%)
American Skiing Company (a) ............. 10,100 150,237
Prime Hospitality Corporation (a) ....... 4,700 95,763
Vistana, Inc. (a) ....................... 18,100 416,300
--------
662,300
INFORMATION SYSTEMS -- (1.2%)
Incyte Pharmaceuticals, Inc. (a) ........ 4,900 220,500
--------
INVESTMENT FIRMS -- (1.3%)
Sirrom Capital Corporation .............. 4,700 244,988
--------
MARINE CONSTRUCTION -- (0.6%)
Gulf Islands Fabrication, Inc. (a) ...... 5,100 102,000
--------
MARINE SERVICE/EQUIPMENT -- (0.7%)
Gulfmark Offshore, Inc. (a) ............. 3,900 128,700
--------
MORTGAGE RELATED -- (0.6%)
Franchise Mortgage Acceptance Company (a) 5,800 106,575
--------
NETWORKING HARDWARE -- (1.2%)
Apex PC Solutions, Inc. (a) ............. 5,500 121,688
Yurie Systems, Inc. (a) ................. 4,700 94,881
--------
216,569
NETWORKING SECURITY -- (1.4%)
Security Dynamics Technology, Inc.(a) ... 7,200 257,400
--------
NETWORKING SOFTWARE -- (1.7%)
Veritas Software Company (a) ............ 6,200 316,200
--------
</TABLE>
See notes to financial statements.
21
<PAGE> 23
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
PACKAGED GOODS/COSMETICS -- (0.3%)
United Natural Foods, Inc. (a) ....... 2,300 $ 59,800
--------
PHARMACEUTICAL SERVICE -- (0.3%)
Pharmerica, Inc. (a) ................. 4,400 46,200
--------
PHYSICIAN PRACTICE MANAGEMENT -- (3.1%)
FPA Medical Management, Inc. (a) ..... 11,800 219,775
Pediatrix Medical Group (a) .......... 7,900 337,725
--------
557,500
PRECISION INSTRUMENTS -- (2.7%)
Remec, Inc. (a) ...................... 4,900 110,250
Waters Corporation (a) ............... 10,300 387,537
--------
497,787
PRINTING SERVICES/FORMS -- (2.3%)
Applied Graphics Technologies (a) .... 7,800 415,350
--------
RAILROAD -- (0.5%)
MotivePower Industries, Inc. (a) ..... 4,000 93,000
--------
RETAIL-APPARREL -- (2.1%)
North Face, Inc. (a) ................. 9,100 200,200
Stage Stores, Inc. (a) ............... 5,100 190,613
--------
390,813
RETAIL-CATALOG -- (1.8%)
Insight Enterprises, Inc. (a) ........ 8,700 319,725
--------
RETAIL-SPECIALTY -- (1.0%)
Guitar Center, Inc. (a) .............. 7,600 174,800
--------
SEMICONDUCTOR MANUFACTURING -- (2.8%)
DSP Communications, Inc. (a) ......... 6,900 82,800
Semtech Corporation (a) .............. 3,700 144,763
Vitesse Semiconductor Corporation(a) . 7,450 281,237
--------
508,800
SEMICONDUCTOR PRODUCT EQUIPMENT -- (0.8%)
Helix Technology Corporation ......... 7,200 140,400
--------
SHOE MANUFACTURING -- (1.8%)
Wolverine World Wide, Inc. ........... 14,575 329,759
--------
SOFTWARE-CLIENT/SERVER -- (2.5%)
Bea Systems, Inc. (a) ................ 13,500 233,719
HNC Software, Inc. (a) ............... 5,300 227,900
--------
461,619
SOFTWARE-DESKTOP -- (1.2%)
Visio Corporation (a) ................ 5,600 214,900
--------
</TABLE>
See notes to financial statements.
22
<PAGE> 24
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----------
<S> <C> <C>
COMMON STOCKS
SOFTWARE-OTHER -- (2.4%)
JDA Software Group, Inc. (a) ............... 6,500 $ 227,500
Viasoft, Inc. (a) .......................... 5,200 219,700
-----------
447,200
SPECIAL OUTPATIENT FACILITY -- (3.8%)
National Surgery Centers, Inc. (a) ......... 14,900 391,125
Renal Treatment Centers, Inc. (a) .......... 4,000 144,500
Total Renal Care Holdings, Inc. (a) ........ 5,700 156,750
-----------
692,375
SPECIALTY FINANCE -- (0.9%)
HealthCare Financial Partners, Inc.(a) ..... 4,400 156,200
-----------
SPECIALTY FOOD/CANDY -- (1.6%)
Suiza Foods Corporation (a) ................ 4,790 285,304
-----------
SYSTEMS INTEGRATOR -- (8.1%)
Computer Horizons Corporation (a) .......... 9,400 427,700
Computer Task Group, Inc. .................. 14,200 504,987
Sapient Corporation (a) .................... 4,700 287,875
Technology Solutions Company (a) ........... 9,850 259,794
-----------
1,480,356
TELECOMMUNICATION COMPONENTS -- (3.4%)
P Common, Inc. (a) ......................... 13,400 231,150
Sawtek, Inc. (a) ........................... 4,600 121,325
Uniphase Corporation (a) ................... 6,700 277,212
-----------
629,687
TELECOMMUNICATION EQUIPMENT -- (2.4%)
Digital Lightwave, Inc. (a) ................ 6,300 82,687
Inter-Tel, Inc. ............................ 8,600 166,625
Tekelec, Inc. (a) .......................... 6,200 189,100
-----------
438,412
TELEMARKETING -- (0.7%)
Sykes Enterprises, Inc. (a) ................ 6,850 133,575
-----------
VESSEL & RIG CONSTRUCTION -- (0.7%)
Halter Marine Group, Inc. (a) .............. 4,450 128,494
-----------
VOICE-CALL TRANSACTION PROCESSING -- (1.6%)
Comverse Technology, Inc. (a) .............. 7,400 288,600
-----------
WORKOVER SERVICES -- (0.6%)
Pool Energy Services Company (a) ........... 4,800 106,800
-----------
TOTAL COMMON STOCKS -- (Cost $15,579,410) 97.6% 17,816,502
-----------
</TABLE>
See notes to financial statements.
23
<PAGE> 25
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY MATURITY
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (3.0%)
State Street Bank and Trust Company (b) ......... 4.500% 01/02/1998 $ 546,137 $ 546,000
----------
TOTAL SHORT TERM INVESTMENT -- (Cost $546,000) 3.0% 546,000
----------
TOTAL INVESTMENTS -- (Cost $16,125,410) ............... 100.6% 18,362,502
OTHER ASSETS LESS LIABILITIES -- ...................... (0.6)% (108,975)
----- ----------
NET ASSETS -- ......................................... 100.0% $18,253,527
===== ===========
</TABLE>
(a) Non-income producing security.
(b) The agreement with State Street Bank & Trust Company, dated 12/31/97,
bearing 4.50% interest, to be repurchased at $546,137 on 01/02/98, is
fully collateralized by a United States Treasury Note, 6.375%,
01/15/00, with a value of $557,183.
See notes to financial statements.
24
<PAGE> 26
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ----------
<S> <C> <C>
COMMON STOCKS
AUSTRALIA -- (1.5%)
Evans Deakin Industries Ltd. ..................... 18,200 $ 48,633
National Australia Bank .......................... 11,754 164,168
QBE Insurance Group .............................. 4,375 19,695
Rio Tinto Ltd. ................................... 2,580 30,104
Sonic Healthcare Ltd. ............................ 111,000 115,751
----------
378,351
CANADA -- (3.3%)
National Bank of Canada .......................... 8,800 145,327
Onex Corporation ................................. 5,000 100,067
Potash Corporation of Saskatchewan, Inc. ......... 1,120 93,304
Quebecor ......................................... 12,539 225,501
Toronto Dominion Bank Ontario .................... 6,700 255,051
----------
819,250
FRANCE -- (8.8%)
Axa-UAP .......................................... 5,200 402,366
Axime Ex Segin ................................... 2,150 277,212
Carbone Lorraine ................................. 200 62,474
Credit Commerce France ........................... 1,301 89,169
Lafarge .......................................... 2,000 131,229
Michelin ......................................... 1,327 66,807
Pernod Ricard .................................... 4,450 261,743
Rhone Poulenc SA ................................. 5,500 246,373
Societe Eurafrance SA ............................ 665 270,707
Society Elf Aquitaine ............................ 2,517 292,747
Zodiac SA ........................................ 300 69,835
----------
2,170,662
GERMANY -- (4.5%)
Bayer AG ......................................... 2,700 100,859
Berliner Kraft-und Licht(Beway)-Aktiengesellschaft 11,600 350,782
Daimler Benz AG .................................. 1,300 91,197
Karstadt AG ...................................... 1,150 392,571
Springer Axel Verl ............................... 263 173,974
----------
1,109,383
HONG KONG -- (0.0%)
HSBC Holdings .................................... 227 5,595
----------
ITALY -- (2.8%)
Arnoldo Mondadori Editore ........................ 26,300 206,653
Telecom Italia Mobilaire (a) .................... 74,333 474,824
----------
681,477
</TABLE>
See notes to financial statements.
25
<PAGE> 27
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----------
<S> <C> <C>
COMMON STOCKS
JAPAN -- (4.2%)
Dai-Tokyo Fire & Marine ..... 56,000 $ 192,142
Fujitsu ..................... 14,000 150,111
Nichiei Company ............. 2,000 212,912
Sony Corporation ............ 4,700 417,554
Taisho Pharmaceutical Company 3,000 76,511
----------
1,049,230
MEXICO -- (0.7%)
Panamerican Beverages, Inc. . 5,700 185,963
----------
NETHERLANDS -- (2.9%)
Fugro N.V ................... 3,480 106,066
Philips Electronic .......... 2,550 152,926
Unilever N.V ................ 4,400 271,250
Van Ommeren Kon ............. 5,400 181,096
----------
711,338
SPAIN -- (1.7%)
Argentaria SA ............... 1,700 103,439
BCO Santander SA ............ 4,890 163,375
Repsol SA ................... 3,770 160,847
----------
427,661
SWEDEN -- (4.6%)
Astra AB .................... 32,070 555,375
Electrolux AB ............... 2,000 138,793
Getinge Industrier AB ....... 6,600 104,737
Granges AB (a) ............. 1,000 15,680
Pharmacia & Upjohn, Inc. .... 2,655 97,641
Volvo AB .................... 8,100 217,295
----------
1,129,521
SWITZERLAND -- (6.8%)
Edipresse SA ................ 750 217,630
Lindt & Spruengli ........... 130 226,868
Nestle SA ................... 490 734,061
Novartis AG ................. 310 502,806
----------
1,681,365
</TABLE>
See notes to financial statements.
26
<PAGE> 28
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ----------
<S> <C> <C>
COMMON STOCKS
UNITED KINGDOM -- (14.9%)
B.A.T. Industries ..................... 27,900 $ 254,425
British Airways Plc ................... 10,000 91,980
British Telecommunications Plc ........ 30,700 241,903
Compass Group ......................... 17,300 212,830
Cordiant Commerce ..................... 58,700 106,056
Diageo plc ............................ 61,700 564,476
Glaxo Wellcome plc .................... 11,421 272,283
Lloyds TSB Group ...................... 21,902 284,936
London International Group ............ 124,300 326,660
Lonrho ................................ 57,500 88,777
Pearson ............................... 15,265 198,326
Pilkington ............................ 94,000 196,854
Saatchi & Saatchi (a) ................ 58,700 105,092
Smithkline Beecham .................... 24,454 252,040
Vardon ................................ 62,100 139,229
Vodafone Group ........................ 50,137 362,340
----------
3,698,207
UNITED STATES -- (39.5%)
ACC Corporation (a) .................. 4,000 202,000
Action Performance Companies, Inc. (a) 8,900 337,087
Amylin Pharmaceuticals, Inc. (a) ..... 18,500 100,594
Applied Power, Inc. ................... 3,000 207,000
Astoria Financial Corporation ......... 3,000 167,250
Basin Exploration, Inc. (a) .......... 13,700 243,175
BioReliance Corporation (a) .......... 9,700 223,100
BJ Services Company (a) .............. 2,500 179,844
Brylane, Inc. (a) .................... 2,100 103,425
Cendant Corporation (a) .............. 7,209 247,820
Central Garden & Pet Company (a) ..... 5,000 131,250
Cognex Corporation (a) ............... 4,600 125,350
Core Laboratories N.V. (a) ........... 10,000 180,625
CorporateFamily Solutions, Inc. (a) .. 3,600 77,400
Corsair Communications, Inc. (a) ..... 5,600 91,000
Credence Systems Corporation (a) ..... 2,000 59,250
Cytyc Corporation (a) ................ 7,000 174,125
Discreet Logic, Inc. (a) ............. 9,500 208,406
Dura Pharmaceuticals, Inc. (a) ....... 5,000 229,375
Falcon Drilling Company, Inc. ......... 12,000 420,750
First Alliance Company (a) ........... 7,500 137,813
Fritz Company, Inc. (a) .............. 12,000 167,250
Frontier Insurance Group, Inc. ........ 4,800 109,800
G & K Services Class A ................ 1,100 46,200
General Cable Corporation ............. 5,000 180,937
Health Management Associates (a) ..... 11,000 277,750
</TABLE>
See notes to financial statements.
27
<PAGE> 29
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----------
<S> <C> <C> <C>
COMMON STOCKS
UNITED STATES -- (CONTINUED)
Helen Troy Ltd. (a) ................................ 10,000 $ 161,250
Hybrid Networks, Inc. (a) .......................... 1,200 13,350
ICG Communications, Inc. (a) ....................... 7,000 190,750
IDEXX Laboratories, Inc. (a) ....................... 8,000 127,500
Incyte Pharmaceuticals, Inc. (a) ................... 3,000 135,000
International Telecommunication Data Systems, Inc.(a) 3,200 102,400
KCS Energy, Inc. .................................... 8,600 178,450
Lifecore Biomedical, Inc. (a) ...................... 8,500 185,937
Market Facts, Inc. .................................. 5,900 98,825
McLeod USA, Inc. (a) ............................... 6,600 211,200
Michaels Stores, Inc. (a) .......................... 5,500 160,875
Natural Microsystems Corporation (a) ............... 4,500 209,250
Newpark Resource, Inc. (a) ......................... 20,200 353,500
Norrell Corporation Georgia ......................... 10,100 200,737
Ocean Energy, Inc. (a) ............................. 3,300 162,731
OM Group, Inc. ...................................... 4,700 172,137
Omniquip International, Inc. ........................ 10,000 199,375
Ortel Corporation (a) .............................. 8,300 130,725
Peoplesoft, Inc. (a) ............................... 4,000 156,000
PRI Automation, Inc. (a) ........................... 3,500 101,063
Project Software & Development, Inc. (a) ........... 3,000 70,500
Rental Service Corporation (a) ..................... 7,000 171,937
Roper Industries, Inc. .............................. 6,000 169,500
SmarTalk Teleservices, Inc. (a) .................... 4,000 91,000
Splash Technology Holdings, Inc. (a) ............... 4,400 99,000
Stage Stores, Inc. (a) ............................. 5,000 186,875
TCF Financial Corporation ........................... 4,000 135,750
Total Renal Care Holdings, Inc. (a) ................ 5,833 160,408
Trimas Corporation .................................. 6,200 213,125
USA Waste Services, Inc. (a) ....................... 3,500 137,375
Vantive Corporation (a) ............................ 6,500 164,125
Wesley Jessen VisionCare, Inc. (a) ................. 7,000 273,000
Worthington Foods, Inc. ............................. 2,400 33,600
-----------
9,785,826
TOTAL COMMON STOCKS -- (Cost $19,963,115) ........ 96.2% 23,833,829
-----------
DEPOSITARY RECEIPTS
BRAZIL -- (0.4%)
Telecomunicacoes Brasileras ............................ 900 104,794
-----------
</TABLE>
See notes to financial statements.
28
<PAGE> 30
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ----------
<S> <C> <C> <C>
UNITED KINGDOM -- (0.4%)
Smithkline Beecham Plc (Parent Co.) ........... 2,000 $ 102,875
---------
TOTAL DEPOSITORY RECEIPTS-(Cost $101,850) 0.8% 207,669
---------
PREFERRED STOCK
BRAZIL -- (0.2%)
Cia Riograndense de Telecomunicacoes .......... 6,767 8,337
COFAP ......................................... 18,000 51,611
---------
TOTAL PREFERRED STOCK -- (Cost $180,828) 0.2% 59,948
---------
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL
RATE DATE AMOUNT
------- ---------- ---------
<S> <C> <C> <C> <C>
CORPORATE BOND
BRAZIL -- (0.0%)
Vale Rio Doce Cia (b)...................... 0.000% 12/31/1999 $ 9,500 0
------------
TOTAL CORPORATE BOND -- (Cost $0) 0.0% 0
------------
SHORT TERM INVESTMENT
UNITED STATES -- (2.5%)
Federal Home Loan Bank
Consolidated Discount Note.............. 4.750% 01/02/1998 607,000 606,920
------------
TOTAL SHORT TERM INVESTMENT -- (Cost $606,920) 2.5% 606,920
------------
TOTAL INVESTMENTS -- (Cost $20,852,713) 99.7% 24,708,366
OTHER ASSETS LESS LIABILITIES -- 0.3% 63,185
----- ------------
NET ASSETS -- 100.0% $ 24,771,551
===== ============
</TABLE>
(a) Non-income producing security.
(b) Zero coupon security.
See notes to financial statements.
29
<PAGE> 31
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
ANALYSIS OF INDUSTRY CLASSIFICATIONS
December 31, 1997
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS VALUE
-------- ---------- ----------
<S> <C> <C>
Airlines ................................... 0.4% $ 91,980
Apparel & Textiles ......................... 0.2 46,200
Appliances ................................. 2.9 709,272
Automated Data Collection .................. 1.7 412,500
Automobiles ................................ 1.2 308,492
Automotive Parts ........................... 0.5 118,418
Banking .................................... 4.9 1,211,060
Beer ....................................... 2.3 564,476
Broadcasting/Publishing .................... 1.7 423,827
Building Materials & Construction .......... 0.5 131,229
Business/Public Services ................... 1.4 338,112
Business Services .......................... 0.3 77,400
Cables/Fiberoptics ......................... 0.7 180,937
Chemicals .................................. 2.1 519,370
Client-Server Software ..................... 0.4 100,594
Commercial Services ........................ 2.2 554,137
Computers & Business Equipment ............. 0.3 70,500
Computer Related ........................... 0.4 99,000
Computer Services .......................... 0.8 208,406
Consumer Products .......................... 0.5 131,250
Cosmetics & Toiletries ..................... 0.7 161,250
Distributed System-Hardware & Peripherals .. 2.5 606,920
Diversified ................................ 1.9 460,094
Drugs ...................................... 1.8 452,556
Drugs & Health Care ........................ 2.3 579,317
Drugs/Pharmaceuticals ...................... 0.9 229,375
Electric Utilities ......................... 1.4 350,782
Electrical Equipment ....................... 0.3 62,474
Electronics ................................ 3.4 839,627
Energy Sources ............................. 2.5 616,325
Engineering & Construction ................. 0.4 106,066
Fertilizer ................................. 0.4 93,304
Financial Services ......................... 2.6 653,725
Food & Beverages ........................... 5.7 1,408,635
Food Products .............................. 0.1 33,600
Health & Personal Care ..................... 4.0 992,444
Health Care Management Services ............ 2.4 597,337
Hotels, Leisure & Tourism .................. 2.8 689,147
Insurance .................................. 2.9 724,003
Investment Companies ....................... 1.1 270,707
Leisure .................................... 0.7 178,450
Machinery Engineering ...................... 0.7 171,938
Manufacturing .............................. 2.3 560,968
</TABLE>
See notes to financial statements.
30
<PAGE> 32
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
ANALYSIS OF INDUSTRY CLASSIFICATIONS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY NET ASSETS VALUE
-------- ---------- ----------
<S> <C> <C>
Medical Equipment .......................... 1.7 $ 418,174
Medical Services ........................... 0.9 223,100
Metals ..................................... 0.2 45,784
Miscellaneous-Health ....................... 0.5 135,000
Oil & Gas .................................. 0.7 179,844
Oil Services ............................... 4.6 1,135,971
Pharmaceuticals ............................ 2.2 555,375
Publishing ................................. 2.8 704,313
Retail ..................................... 1.6 392,571
Retail-Apparel ............................. 0.8 86,875
Retail-Catalog ............................. 1.4 346,600
Retail Trade ............................... 0.6 160,875
Special Outpatient Facility ................ 0.6 160,408
Surface Transportation ..................... 0.7 167,250
Systems Integrated Value Added Resellers ... 0.7 174,125
Telecommunication Equipment ................ 1.8 444,325
Telecommunications ......................... 7.6 1,887,147
Tobacco .................................... 1.0 254,425
---- -----------
TOTAL ..................................... 99.7% $24,708,366
==== ==========
</TABLE>
See notes to financial statements.
31
<PAGE> 33
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ -------- ---------
<S> <C> <C>
COMMON STOCKS
AEROSPACE -- (2.7%)
Precision Castparts Corporation .................. 17,500 $1,055,469
United Technologies Corporation .................. 10,000 728,125
----------
1,783,594
AIR TRANSPORTATION -- (1.5%)
Air Express International Corporation ............ 12,800 390,400
Airbourne Freight Corporation .................... 10,000 621,250
----------
1,011,650
BANKS -- (6.2%)
BankAmerica Corporation .......................... 20,000 1,460,000
Fifth Third Bancorp .............................. 15,750 1,287,562
Norwest Corporation .............................. 18,000 684,589
State Street Corporation ......................... 10,000 584,248
----------
4,016,399
BROADCASTING -- (1.2%)
Clear Channel Communications (a) ................. 10,000 794,375
----------
COMPUTERS -- (1.0%)
Compaq Computer Corporation ...................... 12,000 677,250
----------
COMPUTER RELATED -- (4.0%)
Cisco Systems, Inc. (a) .......................... 31,500 1,756,125
EMC Corporation (a) .............................. 30,000 823,125
----------
2,579,250
COMPUTER SOFTWARE -- (2.1%)
Computer Associates International, Inc. .......... 25,875 1,368,141
----------
COSMETICS & TOILETRIES -- (2.0%)
Gillette Company ................................. 13,000 1,305,687
----------
DIVERSIFIED -- (0.6%)
General Electric Company ......................... 5,000 366,875
----------
DRUGS -- (6.7%)
Cardinal Health, Inc. ............................ 16,200 1,217,025
Eli Lilly & Company .............................. 20,000 1,392,500
Pfizer, Inc. ..................................... 24,000 1,789,500
----------
4,399,025
DRUGS/PHARMACEUTICALS -- (2.1%)
Dura Pharmaceuticals, Inc. (a) ................... 14,000 642,250
Warner Lambert Company ........................... 6,000 744,000
----------
1,386,250
ELECTRIC UTILITIES -- (2.4%)
AES Corporation (a) .............................. 34,000 1,585,250
----------
</TABLE>
See notes to financial statements.
32
<PAGE> 34
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ -------- ---------
<S> <C> <C>
COMMON STOCKS
ELECTRONICS -- (2.5%)
Adaptec, Inc. (a) ................................ 26,000 $ 965,250
Maxim Integrated Products, Inc. (a) .............. 20,000 690,000
----------
1,655,250
FINANCIAL SERVICES -- (7.4%)
FINOVA Group, Inc. ............................... 21,000 1,043,438
Sunamerica, Inc. ................................. 25,500 1,090,125
Travelers, Inc. .................................. 49,500 2,666,812
----------
4,800,375
FOOD & BEVERAGES -- (1.8%)
Campbell Soup Company ............................ 20,000 1,162,500
----------
INSURANCE -- (5.0%)
Allstate Corporation ............................. 10,000 908,750
American International Group, Inc. ............... 12,000 1,305,000
Conseco, Inc. .................................... 10,000 454,375
Progressive Corporation .......................... 5,000 599,375
----------
3,267,500
MEDICAL EQUIPMENT -- (1.4%)
Guidant Corporation .............................. 15,000 933,750
----------
METALS -- (0.8%)
Wyman-Gordon Company (a) ......................... 25,000 490,625
----------
OFFICE FURNISHINGS -- (0.9%)
HON Industries, Inc. ............................. 10,000 590,000
----------
OFFICE SUPPLIES & EQUIPMENT -- (0.8%)
U.S. Office Products Company (a) ................. 25,000 490,625
----------
OIL & GAS -- (6.7%)
BJ Services Company (a) .......................... 10,000 719,375
ENSCO International, Inc. ........................ 20,000 670,000
Global Marine, Inc. (a) .......................... 20,000 490,000
Helmerich & Payne, Inc. .......................... 25,000 1,696,875
Parker Drilling Company (a) ...................... 25,000 304,687
USX Marathon Group ............................... 15,000 506,250
----------
4,387,187
OIL SERVICES -- (3.7%)
Transocean Offshore, Inc. ........................ 50,000 2,409,375
----------
PACKAGING -- (1.5%)
Sealed Air Corporation (a) ....................... 16,000 988,000
----------
</TABLE>
See notes to financial statements.
33
<PAGE> 35
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ -------- ---------
<S> <C> <C> <C>
COMMON STOCKS
PETROLEUM SERVICES -- (5.8%)
Baker Hughes, Inc. ............................... 25,000 $1,090,625
Rowan Companies, Inc. (a) ........................ 35,000 1,067,500
Smith International, Inc. (a) .................... 27,000 1,657,125
----------
3,815,250
PRINTING & PUBLISHING -- (1.7%)
Omnicom Group .................................... 26,000 1,101,750
----------
RETAIL -- (2.5%)
Dayton Hudson Corporation ........................ 15,000 1,012,500
Federated Department Stores, Inc. (a) ............ 12,000 516,750
ShopKo Stores, Inc. .............................. 3,700 80,475
----------
1,609,725
RETAIL-SPECIALTY -- (2.1%)
CompUSA, Inc. (a) ................................ 10,000 310,000
Consolidated Stores Corporation (a) .............. 23,437 1,029,763
----------
1,339,763
SOFTWARE -- (8.3%)
BMC Software, Inc. (a) ........................... 44,000 2,887,500
Compuware Corporation (a) ........................ 30,000 960,000
Microsoft Corporation (a) ........................ 12,000 1,551,000
----------
5,398,500
TELECOMMUNICATION EQUIPMENT -- (1.6%)
Bay Networks, Inc. (a) ........................... 25,000 639,063
Newbridge Networks Corporation (a) ............... 12,000 418,500
----------
1,057,563
TELECOMMUNICATIONS -- (5.2%)
ADC Telecommunications, Inc. (a) ................. 20,000 835,000
PairGain Technologies, Inc. (a) .................. 30,000 581,250
Tellabs, Inc. (a) ................................ 26,000 1,374,750
Worldcom, Inc. (a) ............................... 20,000 605,000
----------
3,396,000
TELEPHONE -- (1.1%)
AirTouch Communications, Inc. (a) ................ 17,000 706,563
----------
TOTAL COMMON STOCKS -- (Cost $38,188,449) 93.3% 60,874,047
----------
</TABLE>
See notes to financial statements.
34
<PAGE> 36
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY MATURITY
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (10.5%)
State Street Bank and Trust Company(b) 4.500% 01/02/1998 $6,874,718 $ 6,873,000
TOTAL SHORT TERM INVESTMENT -- (Cost $6,873,000) 10.5% 6,873,000
TOTAL INVESTMENTS -- (Cost $45,061,449) 103.8% 67,747,047
OTHER ASSETS LESS LIABILITIES -- (3.8)% (2,474,428)
NET ASSETS -- 100.0% $65,272,619
===== ===========
</TABLE>
(a) Non-income producing security.
(b) The agreement with State Street Bank & Trust Company, dated 12/31/97,
bearing 4.50% interest, to be repurchased at $6,874,718 on 01/02/98, is
fully collateralized by a United States Treasury Note, 6.375%, 01/15/00,
with a value of $7,014,260.
See notes to financial statements.
35
<PAGE> 37
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
AEROSPACE & DEFENSE -- (3.9%)
Aeroquip Vickers, Inc. ........................... 800 $ 39,250
General Dynamics Corporation ..................... 1,500 129,656
Litton Industries, Inc. (a) ...................... 800 46,000
Newport News Shipbuilding, Inc. .................. 1,900 48,331
Parker Hannifin Corporation ...................... 2,700 123,863
Raytheon Company ................................. 166 8,176
United Technologies Corporation .................. 2,400 174,750
----------
570,026
AUTOMOTIVE -- (2.8%)
Chrysler Corporation ............................. 2,100 73,894
Ford Motor Company ............................... 3,700 180,143
General Motors Corporation ....................... 2,600 157,625
----------
411,662
BANKS -- (6.5%)
AmSouth Bancorporation ........................... 1,100 59,744
BankAmerica Corporation .......................... 4,000 292,000
Bankers Trust New York Corporation ............... 2,000 224,875
Chase Manhattan Corporation ...................... 900 98,550
Comerica, Inc. ................................... 1,800 162,450
Republic New York Corporation .................... 900 102,768
----------
940,387
BROADCASTING/PUBLISHING -- (1.1%)
Gannett Company, Inc. ............................ 2,600 160,713
----------
BUILDING MATERIALS & CONSTRUCTION -- (0.5%)
Lowe's Companies, Inc. ........................... 1,400 66,763
----------
BUSINESS SERVICES -- (0.5%)
Accustaff, Inc. (a) .............................. 3,100 71,300
----------
CAPITAL EQUIPMENT -- (1.0%)
Deere & Company .................................. 2,400 139,950
----------
CHEMICALS -- (0.4%)
Lubrizol Corporation ............................. 1,700 62,688
----------
CHEMICALS & PLASTICS -- (2.6%)
Dow Chemical Company ............................. 2,000 203,000
Lyondell Petrochemical Company ................... 6,500 172,250
----------
375,250
COMMERCIAL SERVICES -- (0.4%)
Dunn & Bradstreet Corporation .................... 1,700 52,594
----------
COMPUTERS -- (1.5%)
Compaq Computer Corporation ...................... 3,750 211,641
----------
</TABLE>
See notes to financial statements.
36
<PAGE> 38
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
COMPUTERS & BUSINESS EQUIPMENT -- (2.2%)
Honeywell, Inc. .................................. 1,400 $ 95,900
International Business Machines Corporation ...... 2,200 230,037
----------
325,937
COMPUTER RELATED -- (4.1%)
Intel Corporation ................................ 4,400 309,100
Lexmark International Group, Inc.(a) ............. 1,400 53,200
Quantum Corporation (a) .......................... 2,600 52,162
Storage Technology Corporation (a) ............... 2,800 173,425
----------
587,887
COMPUTER SOFTWARE -- (2.0%)
Computer Associates International, Inc. .......... 4,800 253,800
Networks Associates, Inc. (a) .................... 800 42,300
----------
296,100
DIVERSIFIED -- (3.1%)
General Electric Company ......................... 5,000 366,875
Trinity Industries, Inc. ......................... 1,700 75,862
----------
442,737
DRUGS -- (7.5%)
American Home Products Corporation ............... 900 68,850
Bristol Myers Squibb Company ..................... 4,100 387,962
Cardinal Health, Inc. ............................ 1,200 90,150
Merck & Company, Inc. ............................ 2,400 255,000
Schering Plough Corporation ...................... 4,700 291,988
----------
1,093,950
ELECTRIC UTILITIES -- (0.2%)
Entergy Corporation .............................. 1,200 35,925
----------
ELECTRONICS -- (1.0%)
Applied Materials, Inc. (a) ...................... 500 15,063
AVX Corporation (New) ............................ 600 11,063
National Semiconductor Corporation(a) ............ 2,600 67,437
Tektronix, Inc. .................................. 1,350 53,578
----------
147,141
EXPLORATION & PRODUCTION -- (0.2%)
Chesapeake Energy Corporation .................... 3,900 29,494
----------
FINANCIAL SERVICES -- (7.1%)
American Express Company ......................... 3,200 285,600
Citicorp ......................................... 1,800 227,588
Federal National Mortgage Association ............ 5,800 330,962
First Union Corporation .......................... 300 15,375
Money Store, Inc. ................................ 1,400 29,400
National City Corporation ........................ 100 6,575
SLM Holding Corporation .......................... 1,000 139,125
----------
1,034,625
</TABLE>
See notes to financial statements.
37
<PAGE> 39
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
FOOD & BEVERAGES -- (5.6%)
Campbell Soup Company ............................ 3,700 $ 215,062
Coca-Cola Company ................................ 1,600 106,600
ConAgra, Inc. .................................... 2,700 88,594
Dean Foods Company ............................... 700 41,650
Interstate Bakeries Corporation .................. 6,400 239,200
Quaker Oats Company .............................. 2,200 116,050
----------
807,156
HEALTH CARE -- (0.9%)
Allegiance Corporation ........................... 1,300 46,069
Wellpoint Health Networks, Inc. (a) .............. 2,000 84,500
----------
130,569
HOUSEHOLD PRODUCTS -- (0.5%)
Premark International, Inc. ...................... 1,000 29,000
Procter & Gamble Company ......................... 600 47,888
----------
76,888
INSURANCE -- (3.3%)
Allstate Corporation ............................. 3,700 336,237
Equitable Companies, Inc. ........................ 2,900 144,275
----------
480,512
INVESTMENT COMPANIES -- (1.9%)
Bear Stearns Companies, Inc. ..................... 200 9,500
Donaldson Lufkin & Jenrette, Inc. ................ 2,300 182,850
Lehman Brothers Holdings, Inc. ................... 1,700 86,700
----------
279,050
LEISURE & ENTERTAINMENT -- (0.8%)
King World Productions, Inc. ..................... 1,200 69,300
The Walt Disney Company .......................... 500 49,531
----------
118,831
MACHINERY & EQUIPMENT -- (2.0%)
Case Corporation ................................. 1,500 90,656
Caterpillar, Inc. ................................ 3,800 184,538
Cooper Industries, Inc. .......................... 400 19,600
----------
294,794
MEDICAL SUPPLIES & SERVICES -- (0.6%)
Abbott Laboratories .............................. 100 6,556
McKesson Corporation ............................. 200 21,638
Shared Medical System Corporation ................ 800 52,800
----------
80,994
METALS -- (0.1%)
Timken Company ................................... 300 10,313
----------
</TABLE>
See notes to financial statements.
38
<PAGE> 40
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
OIL & GAS -- (3.5%)
Apache Corporation ............................... 900 $ 31,556
Burlington Resources, Inc. ....................... 800 35,850
Exxon Corporation ................................ 4,100 250,869
Mobil Corporation ................................ 2,700 194,906
----------
513,181
PETROLEUM SERVICES -- (3.4%)
Amoco Corporation ................................ 2,400 204,300
Occidental Petroleum Corporation ................. 6,000 175,875
Phillips Petroleum Company ....................... 200 9,725
Texaco, Inc. ..................................... 100 5,438
Tidewater, Inc. .................................. 1,700 93,712
----------
489,050
POLLUTION CONTROL -- (0.3%)
Browning Ferris Industries, Inc. ................. 1,300 48,100
----------
PRINTING & PUBLISHING -- (3.0%)
A.H. Belo Corporation ............................ 1,900 106,637
Valassis Communications, Inc. (a) ................ 3,500 129,500
Washington Post Company .......................... 400 194,600
----------
430,737
RETAIL -- (1.5%)
Dayton Hudson Corporation ........................ 1,700 114,750
Federated Department Stores, Inc.(a) ............. 2,300 99,044
----------
213,794
RETAIL-GROCERY -- (0.6%)
Albertson's, Inc. ................................ 1,700 80,538
----------
RETAIL-SPECIALTY -- (5.4%)
Costco Companies, Inc. (a) ....................... 4,900 218,662
Dillards, Inc. ................................... 900 31,725
Intimate Brands, Inc. ............................ 2,800 67,375
Kroger Company (a) ............................... 1,800 66,488
Ross Stores, Inc. ................................ 1,800 65,475
TJX Companies, Inc. .............................. 5,700 195,937
Toys "R" Us, Inc. (a) ............................ 4,500 141,469
----------
787,131
SOFTWARE -- (2.6%)
BMC Software, Inc. (a) ........................... 800 52,500
Cadence Design Systems, Inc. (a) ................. 200 4,900
Compuware Corporation (a) ........................ 1,000 32,000
Microsoft Corporation (a) ........................ 2,200 284,350
----------
373,750
</TABLE>
See notes to financial statements.
39
<PAGE> 41
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C> <C>
COMMON STOCKS
STEEL -- (0.9%)
Bethlehem Steel Corporation (a) .................. 4,300 $ 37,088
USX-US Steel Group, Inc. ......................... 3,200 100,000
----------
137,088
TELECOMMUNICATIONS -- (8.5%)
Ameritech Corporation ............................ 2,900 233,450
AT&T Corporation ................................. 2,000 122,500
Bell Atlantic Corporation ........................ 4,212 383,292
BellSouth Corporation ............................ 2,100 118,256
GTE Corporation .................................. 1,500 78,375
SBC Communications, Inc. ......................... 1,700 124,525
U.S. West, Inc. .................................. 4,000 180,500
----------
1,240,898
TOBACCO -- (1.2%)
Philip Morris Companies, Inc. .................... 3,700 167,656
----------
UTILITIES -- (2.0%)
Columbia Gas Systems, Inc. ....................... 500 39,281
Firstenergy Corporation (a) ...................... 1,900 55,100
PP&L Resources, Inc. ............................. 1,900 45,481
Public Service Enterprise Group .................. 4,900 155,269
----------
295,131
----------
TOTAL COMMON STOCKS -- (Cost $12,448,383) 97.2% 14,112,931
----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST
RATE
--------
<S> <C> <C> <C> <C>
SHORT TERM INVESTMENTS -- (2.1%)
Dreyfus Cash Management Plus (b) ....................... 5.60% 303,048 303,048
-----------
TOTAL SHORT TERM INVESTMENTS -- (Cost $303,048) 2.1% 303,048
-----------
TOTAL INVESTMENTS -- (Cost $12,751,431) 99.3% 14,415,979
OTHER ASSETS LESS LIABILITIES -- 0.7% 105,226
----- -----------
NET ASSETS -- 100.0% $14,521,205
===== ===========
</TABLE>
(a) Non-income producing security.
(b) Interest rate shown is the 7 day yield as of December 31, 1997.
See notes to financial statements.
40
<PAGE> 42
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
AEROSPACE & DEFENSE -- (6.1%)
Gulfstream Aerospace Corporation(a) .............. 9,200 $ 269,100
Litton Industries, Inc. (a) ...................... 4,000 230,000
Lockheed Martin Corporation ...................... 2,500 246,250
Raytheon Company ................................. 4,700 231,769
United Technologies Corporation .................. 4,250 309,453
----------
1,286,572
ALUMINUM -- (2.0%)
Alumax, Inc. (a) ................................. 7,900 268,600
Aluminum Company of America ...................... 2,200 154,825
----------
423,425
AUTOMOTIVE -- (4.1%)
Chrysler Corporation ............................. 16,500 580,594
Ford Motor Company ............................... 5,900 287,256
----------
867,850
BANKS -- (0.7%)
Bank of New York Company, Inc. ................... 2,700 156,094
----------
BUILDING MATERIALS & CONSTRUCTION -- (2.8%)
American Standard Companies, Inc.(a) ............. 5,200 199,225
USG Corporation (a) .............................. 7,750 379,750
----------
578,975
BUSINESS SERVICES -- (1.5%)
Automatic Data Processing, Inc. .................. 2,350 144,231
Block (H & R), Inc. .............................. 1,900 85,144
Deluxe Corporation ............................... 2,600 89,700
----------
319,075
CAPITAL EQUIPMENT -- (1.9%)
Emerson Electric Company ......................... 2,800 158,025
ITT Industries, Inc. ............................. 8,000 251,000
----------
409,025
CHEMICALS -- (3.3%)
Ferro Corporation ................................ 4,500 109,406
IMC Fertilizer Group, Inc. ....................... 3,100 101,525
Rhone Poulenc S.A. ............................... 4,750 210,781
Union Carbide Corporation ........................ 6,100 261,919
----------
683,631
COMPUTERS & BUSINESS EQUIPMENT -- (3.4%)
Hewlett Packard Company .......................... 2,200 137,500
International Business Machines Corporation ...... 4,400 460,075
Pitney Bowes, Inc. ............................... 1,300 116,919
----------
714,494
COMPUTER RELATED -- (1.6%)
Allied Signal, Inc. .............................. 4,800 186,900
Sun Microsystems, Inc. (a) ....................... 4,000 159,500
----------
346,400
</TABLE>
See notes to financial statements.
41
<PAGE> 43
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
CONSTRUCTION MATERIALS -- (1.1%)
Harsco Corporation ............................... 5,400 $ 232,875
----------
CONSUMER DURABLES -- (0.7%)
Cummins Engine, Inc. ............................. 2,500 147,656
----------
CONSUMER NON-DURABLES -- (0.4%)
Newell Company ................................... 1,900 80,750
----------
DRUGS -- (4.2%)
American Home Products Corporation ............... 3,600 275,400
Baxter International, Inc. ....................... 4,300 216,881
Merck & Company, Inc. ............................ 3,600 382,500
----------
874,781
ELECTRIC UTILITIES -- (2.1%)
Allegheny Energy, Inc. ........................... 2,700 87,750
American Electric Power Company, Inc. ............ 3,100 160,037
DQE, Inc. ........................................ 1,000 35,125
Entergy Corporation .............................. 2,800 83,825
Illinova Corporation ............................. 2,900 78,119
----------
444,856
FINANCIAL SERVICES -- (7.3%)
American Express Company ......................... 1,200 107,100
Citicorp ......................................... 3,650 461,497
Federal Home Loan Mortgage Corporation ........... 3,800 159,362
Federal National Mortgage Association ............ 4,400 251,075
FINOVA Group, Inc. ............................... 4,500 223,594
Household International, Inc. .................... 650 82,916
MBIA, Inc. ....................................... 3,700 247,206
----------
1,532,750
FOOD & BEVERAGES -- (2.4%)
Ralston Purina Company ........................... 1,200 111,525
Sara Lee Corporation ............................. 2,800 157,675
Unilever N.V. .................................... 3,800 237,262
----------
506,462
HEALTH CARE -- (2.9%)
Foundation Health Systems, Inc. (a) .............. 2,220 49,673
Tenet Healthcare Corporation (a) ................. 6,000 198,750
Trigon Healthcare, Inc. (a) ...................... 8,250 215,531
Wellpoint Health Networks, Inc. (a) .............. 3,500 147,875
----------
611,829
HOUSEHOLD APPLIANCES & HOME FURNISHINGS -- (0.5%)
Maytag Company ................................... 2,935 109,512
----------
HOUSEHOLD PRODUCTS -- (0.9%)
Premark International, Inc. ...................... 6,600 191,400
----------
</TABLE>
See notes to financial statements.
42
<PAGE> 44
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
INDUSTRIAL MACHINERY -- (0.6%)
Ingersoll Rand Ltd. .............................. 3,300 $ 133,650
----------
INDUSTRIAL MANUFACTURING & PROCESSING -- (0.6%)
UNOVA, Inc. (a) .................................. 8,100 133,144
----------
INSURANCE -- (2.8%)
Berkley (W.R.) Corporation ....................... 3,400 149,175
Provident Companies, Inc. ........................ 4,600 177,675
Terra Nova (Bermuda) Holdings, Ltd. .............. 3,600 94,500
Travelers Property Casualty Corporation .......... 4,000 176,000
----------
597,350
INVESTMENT COMPANIES -- (0.6%)
Lehman Brothers Holdings, Inc. ................... 2,600 132,600
----------
LIQUOR -- (1.6%)
Anheuser-Busch Companies, Inc. ................... 7,500 330,000
----------
LODGING & RESTAURANTS -- (1.4%)
La Quinta Inns, Inc. ............................. 14,900 287,756
----------
MACHINERY & EQUIPMENT -- (0.5%)
Caterpillar, Inc. ................................ 2,000 97,125
----------
MANUFACTURING -- (0.8%)
Olin Corporation ................................. 3,500 164,063
----------
OIL & GAS -- (3.7%)
Exxon Corporation ................................ 6,950 425,253
Mobil Corporation ................................ 5,000 360,938
----------
786,191
OIL SERVICES -- (2.5%)
Noble Drilling Corporation (a) ................... 6,300 192,937
Reading & Bates Corporation ...................... 4,300 180,063
Transocean Offshore, Inc. ........................ 3,300 159,019
----------
532,019
PHOTOGRAPHY -- (1.1%)
Polaroid Corporation ............................. 4,800 233,700
----------
RETAIL TRADE -- (5.2%)
Carson Pirie Scott & Company Illinois (a) ........ 1,600 80,200
Federated Department Stores, Inc.(a) ............. 7,600 327,275
May Department Stores Company .................... 3,050 160,697
Neiman Marcus Group, Inc. (a) .................... 3,100 93,775
Payless Shoesource, Inc. (a) ..................... 2,800 187,950
Wal Mart Stores, Inc. ............................ 6,300 248,456
----------
1,098,353
</TABLE>
See notes to financial statements.
43
<PAGE> 45
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C> <C>
COMMON STOCKS
TELECOMMUNICATIONS -- (4.9%)
Alltel Corporation ............................... 2,000 $ 82,125
Ameritech Corporation ............................ 2,700 217,350
Bell Atlantic Corporation ........................ 4,290 390,390
BellSouth Corporation ............................ 3,400 191,462
SBC Communications, Inc. ......................... 2,000 146,500
-----------
1,027,827
TOBACCO -- (3.1%)
Philip Morris Companies, Inc. .................... 10,000 453,125
RJR Nabisco Holdings Corporation ................. 5,050 189,375
-----------
642,500
TRANSPORTATION -- (1.3%)
Burlington Northern Santa Fe Corporation ......... 1,200 111,525
CSX Corporation .................................. 2,800 151,200
-----------
262,725
TOTAL COMMON STOCKS -- (Cost $14,872,479) 80.6% 16,977,415
-----------
DEPOSITARY RECEIPTS
OIL -- (4.4%)
British Petroleum Plc ............................ 8,036 640,369
Total S.A. ....................................... 5,200 288,600
-----------
928,969
TOBACCO -- (0.5%)
Swedish Match Company AB ......................... 2,900 96,425
-----------
TOTAL DEPOSITARY RECEIPTS -- (Cost $903,875) 4.9% 1,025,394
-----------
PREFERRED STOCKS
FINANCIAL SERVICES -- (2.4%)
Allstate Corporation, Convertible ................ 8,400 504,000
-----------
REAL ESTATE -- (0.9%)
Equity Residential Properties Trust, Convertible . 7,100 181,937
-----------
TELEPHONE -- (0.6%)
Airtouch Communications, Inc., Class B, Convertible 3,700 131,813
-----------
TOTAL PREFERRED STOCKS -- (Cost $701,339) 3.9% 817,750
-----------
WARRANT
CHEMICALS -- (0.0%)
Rhone Poulenc S.A. ............................... 900 2,925
-----------
TOTAL WARRANT -- (Cost $1) 0.0% 2,925
-----------
</TABLE>
See notes to financial statements.
44
<PAGE> 46
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ -------- -------- ---------- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS
COMPUTER SERVICES -- (0.4%)
Micron Technology, Inc. ........... 7.000% 07/01/2004 $ 90,000 $ 82,800
----------
RETAIL-SPECIALTY -- (0.3%)
Costco Companies, Inc. (b), (c) ... 3.398% 08/19/2017 100,000 57,500
----------
RETAIL TRADE -- (0.5%)
Rite Aid Corporation (b) .......... 5.250% 09/15/2002 100,000 108,000
----------
TOTAL CORPORATE BONDS -- (Cost $245,614) 1.2% 248,300
----------
</TABLE>
<TABLE>
<CAPTION>
MATURITY
AMOUNT
--------
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (10.1%)
State Street Bank and Trust Company (d) 5.750% 01/02/1998 $2,132,681 2,132,000
-----------
TOTAL SHORT TERM INVESTMENT --
(Cost $2,132,000) 10.1% 2,132,000
-----------
TOTAL INVESTMENTS -- (Cost $18,855,308) 100.7% 21,203,784
OTHER ASSETS LESS LIABILITIES -- (0.7)% (142,317)
---- -----------
NET ASSETS -- 100.0% $21,061,467
===== ===========
</TABLE>
(a) Non-income producing security.
(b) Pursuant to Rule 144A under the Securities Act of 1933, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 1997, these securities
aggregated $165,500 or 0.79% of the net assets of the Portfolio.
(c) Variable rate instrument. Interest rate is the rate in effect at December
31, 1997.
(d) The agreement with State Street Bank and Trust Company, dated 12/31/97,
bearing 5.75% interest, to be repurchased at $2,132,681 on 01/02/98, is
fully collateralized by a United States Treasury Bond, 8.75%, 05/15/17,
with a value of $2,178,953.
See notes to financial statements.
45
<PAGE> 47
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
AEROSPACE -- (2.1%)
Precision Castparts Corporation .................. 7,500 $ 452,344
United Technologies Corporation .................. 4,000 291,250
----------
743,594
AIR TRANSPORTATION -- (1.3%)
Air Express International Corporation ............ 5,100 155,550
Airbourne Freight Corporation .................... 5,000 310,625
----------
466,175
BANKS -- (4.7%)
Bank America Corporation ......................... 7,500 547,500
Fifth Third Bancorp .............................. 7,440 608,220
Norwest Corporation .............................. 7,000 266,229
State Street Corporation ......................... 4,000 233,699
----------
1,655,648
BROADCASTING -- (1.1%)
Clear Channel Communications (a) ................. 4,800 381,300
----------
COMPUTERS -- (0.8%)
Compaq Computer Corporation ...................... 4,800 270,900
----------
COMPUTER RELATED -- (2.6%)
Cisco Systems, Inc. (a) .......................... 10,500 585,375
EMC Corporation (a) .............................. 12,000 329,250
----------
914,625
COMPUTER SOFTWARE -- (1.8%)
Computer Associates International, Inc. .......... 12,150 642,431
----------
COSMETICS & TOILETRIES -- (1.6%)
Gillette Company ................................. 5,520 554,415
----------
DIVERSIFIED -- (1.0%)
General Electric Company ......................... 5,000 366,875
----------
DRUGS -- (5.2%)
Cardinal Health, Inc. ............................ 7,410 556,676
Eli Lilly & Company .............................. 8,000 557,000
Pfizer, Inc. ..................................... 9,420 702,379
----------
1,816,055
DRUGS/PHARMACEUTICALS -- (2.0%)
Crescendo Pharmaceuticals Corporation (a) ........ 182 2,101
Dura Pharmaceuticals, Inc. (a) ................... 8,500 389,938
Warner Lambert Company ........................... 2,500 310,000
----------
702,039
ELECTRIC UTILITIES -- (1.9%)
AES Corporation (a) .............................. 14,500 676,063
----------
</TABLE>
See notes to financial statements.
46
<PAGE> 48
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C>
COMMON STOCKS
ELECTRONICS -- (1.9%)
Adaptec, Inc. (a) ................................ 9,300 $ 345,262
Maxim Integrated Products, Inc. (a) .............. 9,600 331,200
----------
676,462
ENVIRONMENTAL -- (0.4%)
Thermo Electron Corporation (a) .................. 3,150 140,175
----------
FINANCIAL SERVICES -- (4.9%)
FINOVA Group, Inc. ............................... 7,520 373,650
Sunamerica, Inc. ................................. 13,300 568,575
Travelers, Inc. .................................. 14,580 785,497
----------
1,727,722
FOOD & BEVERAGES -- (1.6%)
Campbell Soup Company ............................ 9,500 552,188
----------
INSURANCE -- (4.6%)
Allstate Corporation ............................. 6,000 545,250
American International Group, Inc. ............... 4,690 510,037
Conseco, Inc. .................................... 7,400 336,238
Progressive Corporation .......................... 2,000 239,750
----------
1,631,275
MEDICAL EQUIPMENT -- (1.6%)
Guidant Corporation .............................. 9,000 560,250
----------
METALS -- (0.5%)
Wyman-Gordon Company (a) ......................... 8,500 166,813
----------
OFFICE FURNISHINGS -- (0.7%)
HON Industries, Inc. ............................. 4,000 236,000
----------
OFFICE SUPPLIES & EQUIPMENT -- (0.6%)
U.S. Office Products Company (a) ................. 10,000 196,250
----------
OIL & GAS -- (4.4%)
BJ Services Company (a) .......................... 3,000 215,812
ENSCO International, Inc. ........................ 8,000 268,000
Global Marine, Inc. (a) .......................... 8,000 196,000
Helmerich & Payne, Inc. .......................... 9,000 610,875
USX Marathon Group ............................... 7,000 236,250
----------
1,526,937
OIL SERVICES -- (2.9%)
Transocean Offshore, Inc. ........................ 21,000 1,011,937
----------
PACKAGING -- (1.2%)
Sealed Air Corporation (a) ....................... 6,820 421,135
----------
</TABLE>
See notes to financial statements.
47
<PAGE> 49
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ ---------
<S> <C> <C> <C>
COMMON STOCKS
PETROLEUM SERVICES -- (4.3%)
Baker Hughes, Inc. ............................... 9,300 $ 405,713
Rowan Companies, Inc. (a) ........................ 17,000 518,500
Smith International, Inc. (a) .................... 9,500 583,062
----------
1,507,275
PRINTING & PUBLISHING -- (1.3%)
Omnicom Group .................................... 10,800 457,650
----------
RETAIL -- (1.8%)
Dayton Hudson Corporation ........................ 5,800 391,500
Federated Department Stores, Inc. (a) ............ 5,000 215,313
ShopKo Stores, Inc. .............................. 1,500 32,625
----------
639,438
RETAIL-SPECIALTY -- (3.5%)
CompUSA, Inc. (a) ................................ 6,000 186,000
Consolidated Stores Corporation (a) .............. 12,218 536,828
Costco Companies, Inc. (a) ....................... 11,093 495,025
----------
1,217,853
SOFTWARE -- (4.4%)
BMC Software, Inc. (a) ........................... 14,580 956,812
Microsoft Corporation (a) ........................ 4,480 579,040
----------
1,535,852
TELECOMMUNICATION EQUIPMENT -- (1.2%)
Bay Networks, Inc. (a) ........................... 10,000 255,625
Newbridge Networks Corporation (a) ............... 5,000 174,375
----------
430,000
TELECOMMUNICATIONS -- (4.1%)
ADC Telecommunications, Inc. (a) ................. 10,000 417,500
PairGain Technologies, Inc. (a) .................. 14,000 271,250
Tellabs, Inc. (a) ................................ 10,000 528,750
Worldcom, Inc. (a) ............................... 7,600 229,900
----------
1,447,400
TELEPHONE -- (0.8%)
AirTouch Communications, Inc. (a) ................ 7,000 290,938
----------
TOTAL COMMON STOCKS -- (Cost $17,199,734) 72.8% 25,563,670
----------
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL
RATE DATE AMOUNT VALUE
--------- --------- --------- --------
<S> <C> <C> <C> <C>
GOVERNMENT AND AGENCY SECURITIES
FEDERAL AGENCY -- (0.9%)
Government National Mortgage Association 6.000% 11/15/2008 $ 106,757 106,156
6.500% 10/15/2008 108,563 109,648
7.000% 10/15/2008 107,414 109,898
--------
325,702
</TABLE>
See notes to financial statements.
48
<PAGE> 50
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
GOVERNMENT AND AGENCY SECURITIES
U.S. GOVERNMENT SECURITIES -- (10.7%)
United States Treasury Bond ....... 7.250% 08/15/2022 $1,000,000 $1,155,160
United States Treasury Note ....... 5.375% 05/31/1998 500,000 499,610
.............. 6.375% 08/15/2002 500,000 512,890
.............. 6.500% 05/31/2001 500,000 511,875
.............. 6.875% 05/15/2006 1,000,000 1,070,000
----------
3,749,535
----------
TOTAL GOVERNMENT AND AGENCY SECURITIES -- (Cost $3,835,417) 11.6% 4,075,237
----------
CORPORATE BOND
INDUSTRIALS -- (0.8%)
BP America, Inc. .................. 8.500% 04/15/2001 250,000 267,930
----------
TOTAL CORPORATE BOND -- (Cost $251,611) 0.8% 267,930
----------
CONVERTIBLE BOND
MEDICAL SUPPLIES & SERVICES -- (0.7%)
Alza Corporation .................. 5.000% 05/01/2006 249,999 259,687
----------
TOTAL CONVERTIBLE BOND -- (Cost $239,163) 0.7% 259,687
----------
</TABLE>
<TABLE>
<CAPTION>
MATURITY
AMOUNT
--------
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (16.2%)
State Street Bank and Trust Company (b) 4.500% 01/02/1998 $ 5,698,424 5,697,000
-----------
TOTAL SHORT TERM INVESTMENT -- (Cost $5,697,000) 16.2% 5,697,000
-----------
TOTAL INVESTMENTS -- (Cost $27,222,925) 102.1% 35,863,524
OTHER ASSETS LESS LIABILITIES -- (2.1)% (744,837)
----- -----------
NET ASSETS -- 100.0% $35,118,687
===== ===========
</TABLE>
(a) Non-income producing security.
(b) The agreement with State Street Bank & Trust Company, dated 12/31/97,
bearing 4.50% interest to be repurchased at $5,698,424 on 01/02/98 is
fully collateralized by a United States Treasury Note, 6.375%, 01/15/00,
with a value of $5,811,369.
See notes to financial statements.
49
<PAGE> 51
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ -------- -------- --------- ---------
<S> <C> <C> <C> <C>
CORPORATE BONDS
AEROSPACE & DEFENSE -- (0.6%)
Tracor, Inc. ...................................... 8.500% 03/01/2007 $ 100,000 $ 102,000
----------
AUTOMOTIVE -- (2.2%)
Aftermarket Technology Company .................... 12.000% 08/01/2004 56,000 62,440
Collins & Aikman Products Company ................. 11.500% 04/15/2006 150,000 169,313
Delco Remy International, Inc. .................... 8.625% 12/15/2007 50,000 50,875
Lear Corporation .................................. 9.500% 07/15/2006 100,000 110,500
----------
393,128
BANKING -- (1.1%)
First Nationwide Escrow Corporation, Inc. ......... 10.625% 10/01/2003 175,000 196,438
----------
BEVERAGE & TOBACCO -- (0.6%)
Dimon, Inc. ....................................... 8.875% 06/01/2006 100,000 106,875
----------
BROADCAST RADIO & TELEVISION -- (5.9%)
Acme Television LLC (b),(c) . ..................... 11.053% 09/30/2004 100,000 74,125
Capstar Radio BroadcastingPartners, Inc. .......... 9.250% 07/01/2007 50,000 51,625
Chancellor Media Corporation ...................... 8.750% 06/15/2007 50,000 50,875
Fox/Liberty Networks, LLC (b) ..................... 8.875% 08/15/2007 50,000 50,125
(b),(c) . ..................... 9.751% 08/15/2007 225,000 145,125
Katz Media Corporation ............................ 10.500% 01/15/2007 100,000 110,500
Outdoor Systems, Inc. ............................. 8.875% 06/15/2007 150,000 157,500
SCI Television, Inc. .............................. 11.000% 06/30/2005 50,000 51,879
Sinclair Broadcast Group, Inc. .................... 8.750% 12/15/2007 200,000 200,500
Sullivan Broadcasting Holdings, Inc. .............. 10.250% 12/15/2005 100,000 107,500
Young Broadcasting, Inc. .......................... 9.000% 01/15/2006 50,000 50,250
----------
1,050,004
BUILDING MATERIALS & CONSTRUCTION -- (1.1%)
American Architecture Products (b) ................ 11.750% 12/01/2007 50,000 50,625
American Builders & Contractors
Supply Company .................................. 10.625% 05/15/2007 50,000 52,125
Building Materials Corporation of
America (b) ..................................... 8.000% 10/15/2007 50,000 50,125
..................................... 8.625% 12/15/2006 50,000 51,750
----------
204,625
</TABLE>
See notes to financial statements.
50
<PAGE> 52
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTERES MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ------- -------- ---------- ---------
<S> <C> <C> <C> <C>
CORPORATE BONDS
BUSINESS EQUIPMENT & SERVICES -- (1.9%)
Dialog Corporation (b) ........................... 11.000% 11/15/2007 $ 75,000 $ 78,188
Electronic Retailing Systems
International, Inc. (c) ........................ 15.994% 02/01/2004 50,000 33,500
Knoll, Inc. ...................................... 10.875% 03/15/2006 49,000 55,615
Outsourcing Solutions, Inc. . .................... 11.000% 11/01/2006 100,000 111,250
United Stationers Supply Company ................. 12.750% 05/01/2005 50,000 57,125
----------
335,678
CABLE TELEVISION -- (11.2%)
Cablevision Systems Corporation .................. 7.875% 12/15/2007 100,000 102,625
...................................... 9.250% 11/01/2005 25,000 26,625
...................................... 9.875% 02/15/2013 150,000 166,500
Charter Communications Holdings,
Inc., LP (c) ................................... 11.310% 03/15/2007 150,000 117,750
Charter Communications Southeast, LP ............. 11.250% 03/15/2006 50,000 55,750
Comcast Corporation .............................. 9.375% 05/15/2005 150,000 160,125
...................................... 10.625% 07/15/2012 50,000 62,750
Diamond Cable Communications (c) ................. 10.081% 02/15/2007 250,000 171,250
Echostar Satellite Broadcasting
Corporation (c) ................................ 10.978% 03/15/2004 225,000 190,125
Frontiervision Holding LP (c) .................... 10.268% 09/15/2007 75,000 55,500
International CableTel, Inc. (c) ................. 10.029% 10/15/2003 125,000 119,687
(c) .......................... 10.964% 04/15/2005 125,000 104,688
Pegasus Media & Communications, Inc. ............. 12.500% 07/01/2005 50,000 57,250
Rogers Cablesystems Ltd. ......................... 10.000% 12/01/2007 150,000 165,750
Rogers Communications, Inc. . .................... 8.875% 07/15/2007 75,000 75,375
TeleWest Plc (c) ................................. 10.360% 10/01/2007 375,000 293,437
UIH Australia / Pacific, Inc. (c) ................ 23.877% 05/15/2006 125,000 83,125
----------
2,008,312
CHEMICALS & PLASTICS -- (2.0%)
Buckeye Cellulose Corporation .................... 9.250% 09/15/2008 125,000 130,625
ISP Holdings, Inc. ............................... 9.750% 02/15/2002 100,000 106,125
Sterling Chemicals, Inc. (c) ..................... 13.904% 08/15/2008 75,000 45,375
Uniroyal Technology Corporation .................. 11.750% 06/01/2003 75,000 78,375
----------
360,500
CLOTHING & TEXTILES -- (3.8%)
Collins & Aikman Floorcoverings, Inc. ............ 10.000% 01/15/2007 50,000 52,750
Dyersburg Corporation ............................ 9.750% 09/01/2007 50,000 52,125
GFSI, Inc. ....................................... 9.625% 03/01/2007 50,000 51,500
Glenoit Corporation (b) .......................... 11.000% 04/15/2007 100,000 108,000
Pillowtex Corporation (b) ........................ 9.000% 12/15/2007 50,000 51,500
............................ 10.000% 11/15/2006 100,000 107,500
WestPoint Stevens, Inc. .......................... 9.375% 12/15/2005 250,000 263,750
---------
687,125
</TABLE>
See notes to financial statements.
51
<PAGE> 53
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ -------- --------- ---------- -----
<S> <C> <C> <C> <C>
CORPORATE BONDS
CONGLOMERATES -- (0.4%)
ClimaChem, Inc. (b) .............................. 10.750% 12/01/2007 $ 75,000 $ 77,625
--------
CONSUMER PRODUCTS -- (3.5%)
American Safety Razor Company .................... 9.875% 08/01/2005 50,000 53,750
Amscan Holdings (b) .............................. 9.875% 12/15/2007 50,000 51,375
Hosiery Corporation of America, Inc. ............. 13.750% 08/01/2002 50,000 54,250
ICON Fitness Corporation (c) ..................... 14.203% 11/15/2006 100,000 58,500
Playtex Family Products Corporation .............. 8.875% 07/15/2004 50,000 51,250
..................................... 9.000% 12/15/2003 100,000 102,000
Renaissance Cosmetics ............................ 11.750% 02/15/2004 75,000 69,375
Sealy Corporation (b) ............................ 9.875% 12/15/2007 50,000 51,500
Simmons Company .................................. 10.750% 04/15/2006 75,000 79,687
Syratech Corporation ............................. 11.000% 04/15/2007 50,000 46,750
--------
618,437
ECOLOGICAL SERVICES & EQUIPMENT -- (1.4%)
Allied Waste Industries, Inc. (b),(c) ............ 9.570% 06/01/2007 125,000 88,438
Allied Waste North America, Inc. ................. 10.250% 12/01/2006 150,000 165,375
--------
253,813
ELECTRONICS -- (0.3%)
Fairchild Semiconductor Corporation .............. 10.125% 03/15/2007 50,000 53,125
--------
FINANCIAL SERVICES -- (0.4%)
Contifinancial Corporation .. .................... 8.375% 08/15/2003 75,000 78,300
--------
FOOD & DRUG RETAILERS -- (2.3%)
Carr Gottstein Foods Company ..................... 12.000% 11/15/2005 50,000 55,500
Di Giorgio Corporation ........................... 10.000% 06/15/2007 50,000 49,375
Jitney Jungle Stores America, Inc. ............... 10.375% 09/15/2007 100,000 105,000
Ralph's Grocery Company .......................... 10.450% 06/15/2004 175,000 197,531
--------
407,406
FOOD PRODUCTS -- (1.5%)
Aurora Foods, Inc. ............................... 9.875% 02/15/2007 50,000 53,000
Curtice-Burns Foods, Inc. ........................ 12.250% 02/01/2005 50,000 55,375
International Home Foods, Inc. ................... 10.375% 11/01/2006 100,000 110,500
Van De Kamp's, Inc. .............................. 12.000% 09/15/2005 50,000 56,000
--------
274,875
FOOD SERVICES -- (1.2%)
Ameriserve Food Distribution, Inc. ............... 10.125% 07/15/2007 200,000 211,000
--------
</TABLE>
See notes to financial statements.
52
<PAGE> 54
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ -------- ---------- ---------- -------
<S> <C> <C> <C> <C>
CORPORATE BONDS
FOREST PRODUCTS -- (1.8%)
Four M Corporation ............................... 12.000% 06/01/2006 $ 75,000 $ 79,875
S.D. Warren Company .............................. 12.000% 12/15/2004 75,000 84,000
Stone Container Corporation . .................... 11.500% 10/01/2004 75,000 80,063
..................... 12.580% 08/01/2016 75,000 82,875
--------
326,813
HEALTH CARE -- (3.6%)
Alliance Imaging, Inc. ........................... 9.625% 12/15/2005 50,000 51,000
Dade International, Inc. ......................... 11.125% 05/01/2006 150,000 166,500
Genesis Health Ventures, Inc. .................... 9.250% 10/01/2006 50,000 51,187
Tenet Healthcare Corporation ..................... 8.000% 01/15/2005 100,000 102,000
............................. 8.625% 01/15/2007 100,000 103,500
............................. 10.125% 03/01/2005 150,000 164,250
--------
638,437
HOME PRODUCTS & FURNISHINGS -- (0.3%)
Werner Enterprises, Inc. (b) ..................... 10.000% 11/15/2007 50,000 51,625
--------
HOTELS, MOTELS, INNS & CASINOS -- (0.3%)
Courtyard by Marriott II LP . .................... 10.750% 02/01/2008 50,000 54,750
--------
INDUSTRIAL PRODUCTS & EQUIPMENT -- (4.5%)
Amphenol Corporation ............................. 9.875% 05/15/2007 100,000 107,000
Cabot Safety Acquisition Corporation ............. 12.500% 07/15/2005 100,000 112,500
Continental Global Group, Inc. ................... 11.000% 04/01/2007 100,000 107,000
Euramax International Plc. ....................... 11.250% 10/01/2006 75,000 81,562
Hawk Corporation ................................. 10.250% 12/01/2003 50,000 53,500
International Knife & Saw, Inc. .................. 11.375% 11/15/2006 50,000 54,250
Johnstown America Industries, Inc. ............... 11.750% 08/15/2005 75,000 82,500
MMI Products, Inc. ............................... 11.250% 04/15/2007 100,000 109,500
Neenah Corporation ............................... 11.125% 05/01/2007 50,000 55,125
Unifrax Investment Corporation ................... 10.500% 11/01/2003 50,000 51,750
---------
814,687
LEISURE & ENTERTAINMENT -- (4.5%)
AMF Group, Inc. (c) .............................. 10.088% 03/15/2006 122,000 96,532
Cobblestone Golf Group, Inc. ..................... 11.500% 06/01/2003 75,000 81,750
Livent, Inc. (b) ................................. 9.375% 10/15/2004 50,000 50,250
Premier Parks, Inc. .............................. 12.000% 08/15/2003 50,000 55,750
Six Flags Theme Parks, Inc. (c) .................. 9.906% 06/15/2005 175,000 187,250
Viacom, Inc. ..................................... 8.000% 07/07/2006 325,000 329,875
--------
801,407
</TABLE>
See notes to financial statements.
53
<PAGE> 55
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ -------- ---------- ---------- -----
<S> <C> <C> <C> <C>
CORPORATE BONDS
MACHINERY & EQUIPMENT -- (1.7%)
Alvey Systems, Inc. .............................. 11.375% 01/31/2003 $ 75,000 $ 80,063
Clark Material Handling Corporation .............. 10.750% 11/15/2006 75,000 80,625
National Equipment Services, Inc.(b) ............. 10.000% 11/30/2004 50,000 49,750
Tokheim Corporation .............................. 11.500% 08/01/2006 75,000 85,500
--------
295,938
MANUFACTURING -- (1.0%)
Polymer Group, Inc. .............................. 9.000% 07/01/2007 175,000 175,875
--------
OIL & GAS -- (4.6%)
Abraxas Petroleum Corporation .................... 11.500% 11/01/2004 125,000 137,500
DI Industries, Inc. .............................. 8.875% 07/01/2007 50,000 52,250
Falcon Drilling Company, Inc. .................... 12.500% 03/15/2005 100,000 114,500
Forcenergy Gas Exploration, Inc. ................. 8.500% 02/15/2007 50,000 50,500
........................... 9.500% 11/01/2006 150,000 160,125
Pride Petroleum Services, Inc. ................... 9.375% 05/01/2007 150,000 162,000
United Meridian Corporation . 10.375% ............ 10/15/2005 75,000 83,250
XCL Ltd. (b) ..................................... 13.500% 05/01/2004 50,000 60,250
--------
820,375
PRINTING & PUBLISHING -- (1.8%)
Affiliated Newspaper Investments, Inc. (c) ....... 10.829% 07/01/2006 250,000 238,750
Hollinger International Publishing, Inc. ......... 9.250% 03/15/2007 75,000 79,500
--------
318,250
RETAILERS -- (0.7%)
Brylane Capital Corporation . 10.000% ............ 10.000% 09/01/2003 75,000 79,969
Leslies Poolmart, Inc. ........................... 10.375% 07/15/2004 50,000 52,000
--------
131,969
SERVICES -- (0.6%)
Coinmach Corporation ............................. 11.750% 11/15/2005 50,000 55,750
DecisionOne Corporation .......................... 9.750% 08/01/2007 50,000 51,750
--------
107,500
STEEL -- (1.2%)
EnviroSource, Inc. ............................... 9.750% 06/15/2003 50,000 51,063
GS Technologies Operating Company, Inc. .......... 12.000% 09/01/2004 150,000 164,812
--------
215,875
SURFACE TRANSPORTATION -- (3.1%)
Chemical Leaman Corporation . 10.375% ............ 10.375% 06/15/2005 50,000 53,250
Gearbulk Holdings Ltd. ........................... 11.250% 12/01/2004 100,000 110,250
Statia Terminals International N.V ............... 11.750% 11/15/2003 100,000 105,000
Stena AB ......................................... 8.750% 06/15/2007 50,000 50,625
............................. 10.500% 12/15/2005 100,000 109,250
Trism, Inc. ...................................... 10.750% 12/15/2000 125,000 123,125
--------
551,500
</TABLE>
See notes to financial statements.
54
<PAGE> 56
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS
TELECOMMUNICATIONS -- (3.0%)
Call-Net Enterprises, Inc. (c) ......................... 8.890% 08/15/2007 $ 150,000 $ 102,000
Esprit Telecommunication Group Plc. .................... 11.500% 12/15/2007 100,000 103,500
Highwaymaster Communications ........................... 13.750% 09/15/2005 50,000 50,750
Qwest Communications International,
Inc. (b),(c) ......................................... 8.811% 10/15/2007 50,000 34,000
............................... 10.875% 04/01/2007 100,000 113,500
RCN Corporation (b),(c) ............................... 10.291% 10/15/2007 100,000 63,250
Teligent, Inc. ........................................ 11.500% 12/01/2007 75,000 75,562
-----------
542,562
TELECOMMUNICATIONS & CELLULAR -- (11.2%)
American Communications Services, Inc. ................ 13.750% 07/15/2007 50,000 59,750
Brooks Fiber Properties, Inc. (c) ..................... 8.540% 03/01/2006 250,000 210,000
Cellular Communications International,
Inc. (c) ............................................ 8.007% 08/15/2000 100,000 81,500
Hermes Europe Railtel B.V. (b) ........................ 11.500% 08/15/2007 100,000 111,500
Intermedia Communications of Florida,
Inc. (c) ............................................ 9.150% 07/15/2007 50,000 36,125
(c) .............................................. 10.006% 05/15/2006 200,000 158,000
McLeodUSA, Inc. (c) ................................... 9.133% 03/01/2007 150,000 109,125
(b) ...................................... 9.250% 07/15/2007 50,000 52,375
Metronet Communications Corporation (b) ............... 12.000% 08/15/2007 100,000 115,750
Millicom International Cellular S.A. (c) .............. 11.493% 06/01/2006 200,000 147,000
NEXTEL Communications, Inc. (c) ....................... 9.912% 08/15/2004 125,000 111,562
(b),(c) .......................... 10.330% 09/15/2007 50,000 31,563
Nextlink Communications, Inc. ......................... 9.625% 10/01/2007 50,000 51,625
Paging Network, Inc. .................................. 10.000% 10/15/2008 125,000 130,313
Sygnet Wireless, Inc. ................................. 11.500% 10/01/2006 50,000 54,250
Teleport Communications Group, Inc. (c) ............... 8.696% 07/01/2007 225,000 185,906
Telesystem International Wireless,
Inc. (b),(c) ........................................ 11.540% 11/01/2007 50,000 28,000
(b),(c) .......................................... 11.807% 06/30/2007 125,000 78,750
USA Mobile Communications, Inc. ....................... 9.500% 02/01/2004 125,000 123,125
Vanguard Cellular Systems, Inc. ....................... 9.375% 04/15/2006 125,000 130,625
-----------
2,006,844
UTILITIES -- (0.9%)
California Energy Company, Inc. ....................... 10.250% 01/15/2004 100,000 108,000
El Paso Electric Company .............................. 9.400% 05/01/2011 50,000 56,540
-----------
164,540
TOTAL CORPORATE BONDS -- (Cost $14,298,700) 86.2% 15,438,213
-----------
</TABLE>
See notes to financial statements.
55
<PAGE> 57
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ---- ---- ------ -----
<S> <C> <C> <C> <C> <C>
GOVERNMENT AND AGENCY SECURITY
U.S. GOVERNMENT SECURITIES -- (3.0%)
United States Treasury Note . .................. 7.250% 05/15/2004 $500,000 $ 539,870
----------
TOTAL GOVERNMENT AND AGENCY SECURITY -- (Cost $539,967) 3.0% 539,870
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCKS SHARES
--------
<S> <C> <C> <C>
BANKING -- (0.1%)
California Federal Preferred Capital Corporation, 9.125% ....... 1,000 26,250
BROADCAST RADIO & TELEVISION -- (3.9%)
American Radio Systems Corporation, PIK, 11.375% . ............. 940 109,040
Capstar Broadcasting Partners, Inc., Sr., 12.00% . ............. 500 57,625
Chancellor Media Corporation, Exch., 12.00% .................... 1,058 121,141
Chancellor Media Corporation, PIK, 12.25% ...................... 500 65,250
Pegasus Communications Corporation, PIK, Series A, 12.75% ...... 129 139,965
SFX Broadcasting, Inc., Exch., Series E, 12.625% . ............. 1,063 123,057
Sinclair Broadcast Group, Inc., 11.625% ........................ 800 87,600
---------
703,678
METALS & MINING -- (0.5%)
Fairfield Manufacturing Company, Inc., Exch., 11.25% ........... 75 80,625
PRINTING & PUBLISHING -- (0.9%)
Primedia, Inc., Exch., Series D, 10.00% ........................ 750 78,937
Primedia, Inc., Exch., Series E, 9.20% (b) ..................... 850 85,000
---------
163,937
TELECOMMUNICATIONS & CELLULAR -- (0.3%)
NEXTEL Communications, Inc.,13.00% ............................. 51 58,395
---------
UTILITIES -- (0.4%)
El Paso Electric Company, PIK, Series A, 11.40% .. ............. 604 67,044
---------
TOTAL PREFERRED STOCKS -- (Cost $965,452) .................... 6.1% 1,099,929
---------
COMMON STOCKS
CABLE TELEVISION -- (0.0%)
CS Wireless Systems, Inc. (a),(b) .............................. 13 0
Pegasus Communications Corporation (a) ......................... 112 2,324
---------
2,324
CONSUMER PRODUCTS -- (0.0%)
Hosiery Corporation of America, Inc. (a) ....................... 50 350
---------
PRINTING & PUBLISHING -- (0.2%)
Affiliated Newspaper Investments, Inc. (a) ..................... 250 27,625
---------
TELECOMMUNICATIONS & CELLULAR -- (0.0%)
NEXTEL Communications, Inc. (a) ................................ 154 4,004
---------
TOTAL COMMON STOCKS -- (Cost $2,834) 0.2% 34,303
---------
</TABLE>
See notes to financial statements.
56
<PAGE> 58
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
------------------ ------ -----
<S> <C> <C> <C>
WARRANTS
BUSINESS EQUIPMENT & SERVICES -- (0.0%)
Electronic Retailing Systems International, Inc. (b) ...... 50 $1,000
CABLE TELEVISION -- (0.0%)
Australis Holdings Pty. Ltd. .............................. 50 0
Pegasus Communications Corporation ........................ 75 2,475
UIH Australia / Pacific, Inc. ............................. 125 0
Wireless One, Inc. ........................................ 150 0
------
2,475
CONSUMER PRODUCTS -- (0.1%)
IHF Capital, Inc. (b) ..................................... 100 5,050
------
ECOLOGICAL SERVICES & EQUIPMENT -- (0.0%)
ICF Kaiser International, Inc. ............................ 240 60
------
STEEL -- (0.0%)
Bar Technologies, Inc. (b) ................................ 25 1,500
------
TELECOMMUNICATIONS -- (0.0%)
Highway Master Communications ............................. 50 38
------
TELECOMMUNICATIONS & CELLULAR -- (0.0%)
Cellular Communications International, Inc. ............... 100 2,000
NEXTEL Communications, Inc. ............................... 100 100
------
2,100
TOTAL WARRANTS -- (Cost $1,558) 0.1% 12,223
------
</TABLE>
<TABLE>
<CAPTION>
INTEREST MATURITY MATURITY
RATE DATE AMOUNT
---- ---- ------
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT -- (2.8%)
State Street Bank and Trust Company (d) 4.500% 01/02/1998 $ 508,127 508,000
----------
TOTAL SHORT TERM INVESTMENT -- (Cost $508,000) 2.8% 508,000
----------
TOTAL INVESTMENTS -- (Cost $16,316,511) 98.4% 17,632,538
OTHER ASSETS LESS LIABILITIES -- 1.6% 283,288
----- -----------
NET ASSETS -- 100.0% $17,915,826
===== ===========
</TABLE>
(a) Non-income producing security.
(b) Pursuant to Rule 144A under the Securities Act of 1933, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 1997, these securities
aggregated $1,696,364 or 9.47% of the net assets of the Portfolio.
(c) Step bond. Interest rate shown represents yield to maturity.
(d) The agreement with State Street Bank & Trust Company, dated 12/31/97,
bearing 4.50% interest, to be repurchased at $508,127 on 01/02/98 is fully
collateralized by a United States Treasury Bond, 8.75%, 05/15/17, with a
value of $520,052.
See notes to financial statements.
57
<PAGE> 59
VARIABLE INVESTORS SERIES TRUST
U.S. GOVERNMENT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 199
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ ------ ----------- ------------ ---- -----
<S> <C> <C> <C> <C> <C>
GOVERNMENT AND AGENCY SECURITIES
MORTGAGE BACKED SECURITIES -- (47.0%)
FHA Insured Project Loan ...................... 3.025% 11/01/2006 $ 387,354 $ 345,443
...................... 7.500% 11/15/2030 272,155 278,959
FHLMC Participation Certificates (a) .......... 8.057% 08/01/2025 244,880 253,451
......................... 8.500% 01/01/2003 114,701 117,827
.......................... 9.000% 06/01/2016 165,983 178,997
.......................... 9.500% 04/01/2007 96,000 100,886
.......................... 10.000% 10/01/2005 88,829 95,273
FNMA Guaranteed Real Estate
Mortgage Investment Pass-Thru
Certificates ................................ 6.000% 09/01/2012 181,325 178,644
(a) ................................ 6.154% 11/01/2035 488,151 488,116
................................... 6.740% 08/25/2007 250,000 258,335
(a) ................................ 6.931% 04/01/2020 135,832 141,613
(a) ................................ 7.299% 08/17/2018 235,000 247,044
................................... 7.778% 07/01/2001 225,000 235,406
................................... 9.500% 03/25/2019 454,141 517,012
................................... 10.000% 04/01/2020 110,429 120,862
GNMA Guaranteed Pass-Thru
Certificates (a) ............................ 7.000% 03/20/2018 275,794 283,442
............................... 7.500% 04/15/2024 230,534 236,370
............................... 9.000% 12/15/2006 185,184 194,825
............................... 9.000% 01/15/2008 265,766 279,912
----------
4,552,417
U.S. GOVERNMENT SECURITIES -- (33.5%)
U.S. Treasury Bonds ........................... 6.000% 02/15/2026 200,000 199,812
............................... 6.125% 11/15/2027 150,000 154,172
............................... 6.875% 08/15/2025 185,000 206,275
............................... 7.500% 11/15/2024 115,000 137,569
............................... 11.625% 11/15/2004 315,000 417,966
U.S. Treasury Notes ........................... 5.875% 11/30/2001 110,000 110,550
............................... 6.000% 08/15/2000 600,000 604,501
............................... 6.250% 08/31/2002 500,000 510,469
............................... 6.500% 04/30/1999 150,000 151,688
............................... 6.625% 06/30/2001 240,000 246,825
............................... 6.875% 07/31/1999 245,000 249,364
............................... 8.000% 08/15/1999 240,000 248,625
----------
3,237,816
----------
GOVERNMENT AND AGENCY SECURITIES -- (Cost $7,642,281) 80.5% 7,790,233
----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
CORPORATE BONDS
ENTERTAINMENT -- (3.3%)
Time Warner, Inc. ........................... 7.750% 06/15/2005 300,000 318,802
----------
</TABLE>
See notes to financial statements.
58
<PAGE> 60
VARIABLE INVESTORS SERIES TRUST
U.S. GOVERNMENT BOND PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
------------------ -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS
FINANCIAL SERVICES -- (2.3%)
Contifinancial Corporation ....... 8.375% 08/15/2003 $215,000 $ 224,138
----------
TOTAL CORPORATE BONDS -- (Cost $527,671) 5.6% 542,940
----------
MUNICIPAL BONDS -- (4.8%)
New Jersey Economic Development
Authority (b)................... 0.000% 02/15/2023 1,165,000 228,517
(b).................... 0.000% 02/15/2024 700,000 128,686
..................... 7.425% 02/15/2029 100,000 111,053
----------
TOTAL MUNICIPAL BONDS -- (Cost $376,537) 4.8% 468,256
----------
NON-AGENCY MORTGAGES AND ASSET BACKED -- (2.7%)
Community Program Loan .......... 4.500% 04/01/2029 340,000 260,525
----------
TOTAL NON-AGENCY MORTGAGES AND ASSET BACKED
-- (Cost $254,043) 2.7% 260,525
----------
TOTAL INVESTMENTS -- (Cost $8,800,532) 93.6% 9,061,954
OTHER ASSETS LESS LIABILITIES -- 6.4% 617,153
----- ----------
NET ASSETS -- 100.0% $9,679,107
===== ==========
</TABLE>
See notes to financial statements.
(a) Variable rate instrument. Interest rate is the rate in effect at December
31, 1997.
(b) Zero coupon security.
See notes to financial statements.
59
<PAGE> 61
VARIABLE INVESTORS SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
SMALL CAP WORLD
GROWTH EQUITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- -------------
<S> <C> <C> <C>
ASSETS .
Investments - securities, at value .................. $ 17,816,502 $ 24,708,366 $ 60,874,047
Investments - repurchase agreements . ............... 546,000 0 6,873,000
Foreign currency holdings, at value (cost $29,186) .. 0 29,005 0
Cash ................................................ 5,269 6,949 5,109
Income receivable ................................... 2,179 20,677 22,714
Receivable for securities sold ...................... 79,291 45,659 0
Unrealized appreciation on forward currency
contracts ........................................ 0 274,900 0
Receivable for trust shares sold .................... 52,837 39,273 65,209
Prepaid expenses .................................... 3,754 5,550 13,159
Foreign income tax reclaim receivable ............... 0 19,430 0
Due from adviser .................................... 14,664 12,896 0
------------ ------------ ------------
TOTAL ASSETS ...................................... 18,520,496 25,162,705 67,853,238
------------ ------------ ------------
LIABILITIES
Payable for securities purchased .................... 188,997 60,225 2,102,978
Unrealized depreciation on forward currency
contracts ........................................ 0 1,702 0
Advisory fee payable ................................ 12,604 14,742 38,612
Accounts payable and accrued expenses ............... 61,933 42,397 52,451
Payable for trust shares redeemed ................... 3,435 272,088 386,578
------------ ------------ ------------
TOTAL LIABILITIES ................................. 266,969 391,154 2,580,619
------------ ------------ ------------
TOTAL NET ASSETS .................................. $ 18,253,527 $ 24,771,551 $ 65,272,619
============ ============ ============
NET ASSETS
Capital paid - in ................................... $ 16,171,390 $ 20,800,316 $ 42,140,005
Undistributed (distributions in
excess of) net investment income . ............... 0 (28,529) 0
Accumulated net realized gain (loss) on
investments and foreign currency transactions .... (154,955) (128,578) 447,016
Net unrealized appreciation of:
Investments ...................................... 2,237,092 3,855,653 22,685,598
Foreign currency .............................. 0 272,689 0
------------ ------------ ------------
TOTAL NET ASSETS $ 18,253,527 $ 24,771,551 $ 65,272,619
============ ============ ============
NET ASSET VALUE PER SHARE
(based on shares of beneficial interest
outstanding, unlimited number of shares
authorized without par value) $ 15.578 $ 14.084 $ 34.702
Total shares outstanding at end of period 1,171,770 1,758,792 1,880,932
Cost of investment securities $ 16,125,410 $ 20,852,713 $ 45,061,449
</TABLE>
See notes to financial statements.
60
<PAGE> 62
<TABLE>
<CAPTION>
MATRIX GROWTH & MULTIPLE HIGH INCOME U.S. GOVERNMENT
EQUITY INCOME STRATEGIES BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$ 14,415,979 $ 19,071,784 $ 30,166,524 $ 17,124,538 $ 9,061,954
0 2,132,000 5,697,000 508,000 0
0 0 0 0 0
87,496 5,309 5,253 5,821 46,554
24,650 43,919 73,765 279,954 108,466
0 356,048 0 43,103 510,210
0 0 0 0 0
104,602 69,759 99,903 34,748 18,616
2,990 3,586 7,165 3,372 1,935
0 478 0 0 0
6,000 7,772 0 9,893 7,609
-------------- -------------- -------------- -------------- --------------
14,641,717 21,690,655 36,049,610 18,009,429 9,755,344
-------------- -------------- -------------- -------------- --------------
0 569,207 841,600 0 0
0 0 0 0 0
8,111 12,800 20,554 10,676 4,843
45,219 47,181 41,547 41,000 39,943
67,182 0 27,222 41,927 31,451
-------------- -------------- -------------- -------------- --------------
120,512 629,188 930,923 93,603 76,237
-------------- -------------- -------------- -------------- --------------
$ 14,521,205 $ 21,061,467 $ 35,118,687 $ 17,915,826 $ 9,679,107
============== ============== ============== ============== ==============
$ 12,522,319 $ 18,542,007 $ 26,391,052 $ 17,139,060 $ 9,418,485
50,309 763 0 (85,597) 4,929
284,029 170,221 87,036 (453,664) (5,729)
1,664,548 2,348,476 8,640,599 1,316,027 261,422
0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
$ 14,521,205 $ 21,061,467 $ 35,118,687 $ 17,915,826 $ 9,679,107
============== ============== ============== ============== ==============
$ 14.275 $ 14.567 $ 14.158 $ 9.720 $ 10.161
1,017,217 1,445,803 2,480,556 1,843,174 952,573
$ 12,751,431 $ 18,855,308 $ 27,222,925 $ 16,316,511 $ 8,800,532
</TABLE>
61
<PAGE> 63
VARIABLE INVESTORS SERIES TRUST
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
SMALL CAP WORLD
GROWTH EQUITY GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividend income......................................... $ 18,170 $ 345,507 $ 351,215
Interest income......................................... 29,860 64,959 173,211
Foreign taxes withheld.................................. 0 (39,245) (1,099)
-------------- -------------- --------------
TOTAL INCOME........................................ 48,030 371,221 523,327
EXPENSES
Investment management fee............................... 142,715 178,910 431,634
Administrative fee...................................... 39,853 54,986 130,256
Custodian fee........................................... 75,469 97,017 61,489
Audit fee and expenses.................................. 15,000 15,000 15,000
Legal fee............................................... 5,000 5,000 5,000
Printing expenses....................................... 5,556 5,556 5,556
Trustees fee and expenses............................... 7,000 7,000 7,000
Transfer agent fee...................................... 4,628 1,878 1,878
Insurance............................................... 4,283 7,571 17,154
Other................................................... 352 1,289 2,922
Expenses borne by the adviser........................... (72,994) (66,724) 0
Expense reductions...................................... (193) (771) (26)
-------------- -------------- --------------
TOTAL EXPENSES........................................ 226,669 306,712 677,863
-------------- -------------- --------------
NET INVESTMENT INCOME (LOSS).......................... (178,639) 64,509 (154,536)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY.....................
Net realized gain (loss) on investments................... 484,519 2,871,387 5,049,584
Net realized gain on foreign currency transactions........ 0 364,843 18
Change in unrealized appreciation (depreciation) of:
Investments............................................. 231,867 (1,085,449) 7,861,793
Foreign currency........................................ 0 210,514 0
-------------- -------------- --------------
NET REALIZED GAIN..................................... 716,386 2,361,295 12,911,395
-------------- -------------- --------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............................... $ 537,747 $ 2,425,804 $ 12,756,859
============== ============== ==============
</TABLE>
See notes to financial statements.
62
<PAGE> 64
<TABLE>
<CAPTION>
MATRIX GROWTH & MULTIPLE HIGH INCOME U.S. GOVERNMENT
EQUITY INCOME STRATEGIES BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$ 386,587 $ 290,543 $ 152,767 $ 29,863 $ 0
10,427 80,264 487,254 1,226,739 644,286
0 (3,481) (345) 0 0
-------------- -------------- -------------- -------------- --------------
397,014 367,326 639,676 1,256,602 644,286
92,883 119,612 237,374 105,244 57,609
34,053 36,174 73,168 33,603 24,502
53,615 58,921 52,698 69,851 45,612
15,000 15,000 15,000 15,000 15,000
5,000 5,000 5,000 5,000 5,000
5,556 5,556 5,556 5,556 5,556
7,000 7,000 7,000 7,000 7,000
1,878 4,626 1,878 1,409 1,878
4,393 3,233 9,957 3,956 3,200
1,033 301 1,703 427 734
(51,996) (55,786) (4,810) (66,595) (83,899)
(4,084) (33) (21) (33) (580)
-------------- -------------- -------------- -------------- --------------
164,331 199,604 404,503 180,418 81,612
-------------- -------------- -------------- -------------- --------------
232,683 167,722 235,173 1,076,184 562,674
3,205,511 1,907,739 2,477,484 (33,655) 39,088
0 0 7 0 0
(602,094) 1,748,714 3,813,895 888,853 238,876
0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
2,603,417 3,656,453 6,291,386 855,198 277,964
-------------- -------------- -------------- -------------- --------------
$ 2,836,100 $ 3,824,175 $ 6,526,559 $ 1,931,382 $ 840,638
============== ============== ============== ============== ==============
</TABLE>
63
<PAGE> 65
VARIABLE INVESTORS SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL CAP GROWTH PORTFOLIO
YEAR ENDED YEAR ENDED
12/31/97 12/31/96
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income (loss)..................................... $ (178,639) $ (78,272)
Net realized gain (loss) on investments.......................... 484,519 (1,760)
Net realized gain (loss) on foreign
currency transactions.......................................... 0 0
Change in unrealized appreciation (depreciation) of:
Investments.................................................... 231,867 1,590,340
Foreign currency............................................... 0 0
--------------- --------------
Net increase in net assets
resulting from operations...................................... 537,747 1,510,308
Dividends and distributions to Shareholders from:
Net investment income............................................ 0 0
Net realized gain on investments................................. (489,944) 0
Dividends and distributions to Shareholders in excess of:
Net investment income............................................ 0 0
Net realized gain on investments................................. (144,232) (40,086)
Trust share transactions........................................... 4,546,847 8,519,785
--------------- --------------
TOTAL INCREASE (DECREASE)...................................... 4,450,418 9,990,007
Net assets
Beginning of year................................................ 13,803,109 3,813,102
--------------- --------------
END OF YEAR (1).................................................. $ 18,253,527 $ 13,803,109
=============== ==============
(1) Including undistributed (distributions in excess of)
net investment income............................................ $ 0 $ 0
</TABLE>
See notes to financial statements.
64
<PAGE> 66
<TABLE>
<CAPTION>
WORLD EQUITY PORTFOLIO GROWTH PORTFOLIO MATRIX EQUITY PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 64,509 $ 21,021 $ (154,536) $ (112,724) $ 232,683 $ 589,737
2,871,387 878,643 5,049,584 3,885,594 3,205,511 587,821
364,843 (170,197) 18 4 0 0
(1,085,449) 1,675,486 7,861,793 7,359,129 (602,094) (546,460)
210,514 47,547 0 0 0 0
-------------- -------------- -------------- -------------- -------------- --------------
2,425,804 2,452,500 12,756,859 11,132,003 2,836,100 631,098
(247,476) (21,021) 0 0 (232,797) (589,737)
(3,143,419) (565,417) (5,388,137) (3,224,517) (3,143,585) (476,096)
(192,080) (81,014) 0 (2,498) 0 (100)
(145,806) 0 0 0 0 0
1,540,368 4,558,380 3,339,145 3,741,040 613,882 (1,135,870)
-------------- -------------- -------------- -------------- -------------- --------------
237,391 6,343,428 10,707,867 11,646,028 73,600 (1,570,705)
24,534,160 18,190,732 54,564,752 42,918,724 14,447,605 16,018,310
-------------- -------------- -------------- -------------- -------------- --------------
$ 24,771,551 $ 24,534,160 $ 65,272,619 $ 54,564,752 $ 14,521,205 $ 14,447,605
============== ============== ============== ============== ============== ==============
$ (28,529) $ 127,481 $ 0 $ 0 $ 50,309 $ 50,423
</TABLE>
65
<PAGE> 67
VARIABLE INVESTORS SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
-CONTINUED-
<TABLE>
<CAPTION>
GROWTH & INCOME PORTFOLIO
YEAR ENDED YEAR ENDED
12/31/97 12/31/96
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income............................................ $ 167,722 $ 58,118
Net realized gain (loss) on investments.......................... 1,907,739 (135,171)
Net realized gain on foreign
currency transactions.......................................... 0 0
Change in unrealized appreciation (depreciation) of:
Investments.................................................... 1,748,714 505,901
Foreign currency............................................... 0 0
--------------- --------------
Net increase in net assets
resulting from operations...................................... 3,824,175 428,848
Dividends and distributions to Shareholders from:
Net investment income............................................ (166,959) (58,118)
Net realized gain on investments................................. (1,588,279) (29,710)
Dividends and distributions to Shareholders in excess of:
Net investment income............................................ 0 (737)
Net realized gain on investments................................. 0 0
Trust share transactions........................................... 8,692,484 6,625,007
--------------- --------------
TOTAL INCREASE (DECREASE)...................................... 10,761,421 6,965,290
Net assets
Beginning of year................................................ 10,300,046 3,334,756
--------------- --------------
END OF YEAR (1).................................................. $ 21,061,467 $ 10,300,046
=============== ==============
(1) Including undistributed (distributions in excess of)
net investment income............................................ $ 763 $ 0
</TABLE>
See notes to financial statements.
66
<PAGE> 68
<TABLE>
<CAPTION>
MULTIPLE STRATEGIES PORTFOLIO HIGH INCOME BOND PORTFOLIO U.S. GOVERNMENT BOND PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 235,173 $ 321,490 $ 1,076,184 $ 763,269 $ 562,674 $ 637,006
2,477,484 3,291,193 (33,655) 284,309 39,088 115,107
7 17,576 0 0 0 0
3,813,895 1,125,428 888,853 287,545 238,876 (496,161)
0 0 0 0 0 0
-------------- -------------- -------------- -------------- -------------- --------------
6,526,559 4,755,687 1,931,382 1,335,123 840,638 255,952
(235,173) (321,490) (1,167,386) (763,269) (552,823) (617,580)
(2,650,474) (3,160,559) 0 0 (59,836) (211,853)
(22) (95) (17,411) (60,285) 0 0
0 0 0 0 (19,087) 0
(405,712) 4,230,258 4,334,730 3,559,102 (1,263,406) (310,953)
-------------- -------------- -------------- -------------- -------------- --------------
3,235,178 5,503,801 5,081,315 4,070,671 (1,054,514) (884,434)
31,883,509 26,379,708 12,834,511 8,763,840 10,733,621 11,618,055
-------------- -------------- -------------- -------------- -------------- --------------
$ 35,118,687 $ 31,883,509 $ 17,915,826 $ 12,834,511 $ 9,679,107 $ 10,733,621
============== ============== ============== ============== ============== ==============
$ 0 $ 9,919 $ (85,597) $ (44,464) $ 4,929 $ 21,757
</TABLE>
67
<PAGE> 69
VARIABLE INVESTORS SERIES TRUST
SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD ENDED
1997 1996 DECEMBER 31, 1995 (1)
---- ---- ---------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 16.050 $ 12.638 $ 10.000
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss.................... (0.152) (0.091) (0.042)
Net Realized and Unrealized Gain
on Investments...................... 0.243 3.560 3.047
----------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS............ 0.091 3.469 3.005
----------- ---------- ----------
LESS DISTRIBUTIONS:
From Net Investment Income............. (0.000) (0.000) (0.000)
From Net Realized Capital Gains........ (0.435) (0.057) (0.367)
In Excess of Net Realized Capital
Gains............................... (0.128) (0.000) (0.000)
----------- ---------- ----------
Total Distributions.................... (0.563) (0.057) (0.367)
----------- ---------- ----------
NET ASSET VALUE AT END OF PERIOD............ $ 15.578 $ 16.050 $ 12.638
=========== ========== ==========
TOTAL RETURN (2) (3)........................ 0.73% 27.39% 30.08% (4)
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's) $ 18,254 $ 13,803 $ 3,813
Ratio of Operating Expenses to
Average Net Assets (5).............. 1.35% 1.35% 1.35% (6)
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reductions.......................... 1.35% 1.35% 1.38% (6)
Ratio of Net Investment Income to
Average Net Assets ................. (1.06)% (0.90)% (0.79)% (6)
Portfolio Turnover Rate................ 104.72% 72.66% 73.76% (4)
Average Commission per Share (7)....... $ 0.05 $ 0.05 -
</TABLE>
(1) From commencement of operations May 4, 1995.
(2) Total returns would have been lower had certain expenses not been borne
by the adviser or its affiliates. (3) The performance of the Portfolio
shown on this page does not reflect expenses and charges of the
applicable separate accounts and variable products, all of which vary
to a considerable extent and are described in the product's prospectus.
(4) Not annualized.
(5) Net Investment Income is after payment or reimbursement of certain
expenses by affiliates in 1997, 1996 and 1995. (See Note C to the
Trust's financial statements.) Had affiliates not undertaken to waive
their fees and/or pay or reimburse expenses related to the Portfolio,
the Ratio of Operating Expenses to Average Net Assets would have been
as follows: 1997 - 1.79%; 1996 - 2.38%; 1995 - 9.00%.
(6) Annualized.
(7) For fiscal years beginning on or after September 1, 1995, the Portfolio
is required to disclose its average commission rate per share for
trades on which commissions are charged. This rate does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
68
<PAGE> 70
VARIABLE INVESTORS SERIES TRUST
WORLD EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996 1995 1994 (1) 1993
---- ---- ---- -------- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 15.062 $ 13.823 $ 11.752 $ 11.348 $ 10.177
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................. 0.068 0.016 0.014 0.013 0.086
Net Realized and Unrealized Gain
(Loss) on Investments............... 1.392 1.647 2.872 1.119 1.679
-------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS............ 1.460 1.663 2.886 1.132 1.765
-------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From Net Investment Income............. (0.161) (0.013) (0.000) (0.023) (0.091)
In Excess of Net Investment Income..... (0.126) (0.051) (0.000) (0.000) (0.007)
From Net Realized Capital Gains........ (2.056) (0.360) (0.815) (0.698) (0.496)
In Excess of Net Realized Capital Gains (0.095) (0.000) (0.000) (0.007) (0.000)
-------- -------- --------- --------- ---------
Total Distributions.................... (2.438) (0.424) (0.815) (0.728) (0.594)
-------- -------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD............ $ 14.084 $ 15.062 $ 13.823 $ 11.752 $ 11.348
========= ========= ========= ========= =========
TOTAL RETURN (2) (3)........................ 9.98% 12.33% 24.32% 10.02% 17.32%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's).... $ 24,772 $ 24,534 $ 18,191 $ 11,500 $ 12,230
Ratio of Operating Expenses to
Average Net Assets (4).............. 1.20% 1.20% 1.20% 1.20% 1.20%
Ratio of Operating Expenses to
Average Net Assets before Expense
Reductions (5) ..................... 1.20% 1.20% 1.20% -- --
Ratio of Net Investment Income to
Average Net Assets ................. 0.25% 0.10% 0.12% 0.16% 0.92%
Portfolio Turnover Rate................ 120.50% 61.14% 97.85% 110.12% 78.50%
Average Commission per Share (6)....... $ 0.00 $ 0.02 -- -- --
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne
by the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described
in the product's prospectus.
(4) Net Investment Income is after payment or reimbursement of certain
expenses by affiliates in 1997, 1996 and 1995 and waiver of business
management fee and payment or reimbursement of certain other expenses
by affiliates in 1994 and 1993. (See Note C to the Trust's financial
statements.) Had affiliates not undertaken to waive their fees and/or
pay or reimburse expenses related to the Portfolio, the Ratio of
Operating Expenses to Average Net Assets would have been as follows:
1997 -1.47%; 1996 - 1.50%; 1995 - 1.67%; 1994 - 2.22% and 1993 - 1.79%.
(5) For fiscal years ending after September 1, 1995, the Portfolio is
required to calculate an expense ratio without expense reductions.
(6) For fiscal years beginning on or after September 1, 1995, the Portfolio
is required to disclose its average commission rate per share for
trades on which commissions are charged. This rate does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
69
<PAGE> 71
VARIABLE INVESTORS SERIES TRUST
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 (1) 1993
---- ---- ---- -------- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 30.623 $ 25.866 $ 20.056 $ 20.390 $ 20.454
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss)........... (0.082) (0.063) 0.007 0.173 0.468
Net Realized and Unrealized Gain
(Loss) on Investments............... 7.226 6.736 7.419 (0.335) 1.401
-------- --------- -------- --------- --------
TOTAL FROM INVESTMENT OPERATIONS............ 7.144 6.673 7.426 (0.162) 1.869
-------- --------- --------- --------- --------
LESS DISTRIBUTIONS:
From Net Investment Income............. (0.000) (0.000) (0.173) (0.086) (0.436)
In Excess of Net Investment Income..... (0.000) (0.002) (0.000) (0.000) (0.373)
From Net Realized Capital Gains........ (3.065) (1.914) (1.443) (0.086) (1.124)
-------- --------- -------- -------- --------
Total Distributions.................... (3.065) (1.916) (1.616) (0.172) (1.933)
-------- --------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD............ $ 34.702 $ 30.623 $ 25.866 $ 20.056 $ 20.390
======== ========= ========= ======== =========
TOTAL RETURN (2) (3)....................... 23.62% 25.74% 37.12% (0.79)% 9.09%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's).... $ 65,273 $ 54,565 $ 42,919 $ 30,815 $ 42,530
Ratio of Operating Expenses to
Average Net Assets (4)............. 1.10% 1.17% 1.17% 1.20% 1.20%
Ratio of Operating Expenses to
Average Net Assets before Expense
Reductions (5) ..................... 1.10% 1.17% 1.17% -- --
Ratio of Net Investment Income to
Average Net Assets ................. (0.25)% (0.23)% 0.01% 0.78% 1.74%
Portfolio Turnover Rate................ 54.74% 67.82% 166.87% 155.12% 6.05%
Average Commission per Share (6)....... $ 0.05 $ 0.05 -- -- --
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne
by the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described
in the product's prospectus.
(4) Net Investment Income is after payment or reimbursement of certain
expenses by affiliates in 1995 and waiver of business management fee
and payment or reimbursement of certain other expenses by affiliates in
1994 and 1993. (See Note C to the Trust's financial statements.) Had
affiliates not undertaken to waive their fees and/or pay or reimburse
expenses related to the Portfolio, the Ratio of Operating Expenses to
Average Net Assets would have been as follows: 1995 - 1.17%; 1994 -
1.33% and 1993 - 1.21%.
(5) For fiscal years ending after September 1, 1995, the Portfolio is
required to calculate an expense ratio without expense reductions.
(6) For fiscal years beginning on or after September 1, 1995, the Portfolio
is required to disclose its average commission rate per share for
trades on which commissions are charged. This rate does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
70
<PAGE> 72
VARIABLE INVESTORS SERIES TRUST
MATRIX EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 (1) 1993
---- ---- ---- -------- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 15.254 $ 15.704 $ 12.372 $ 14.650 $ 13.891
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................. 0.287 0.659 0.559 0.521 0.314
Net Realized and Unrealized Gain
(Loss) on Investments............... 2.965 0.063 3.560 (0.651) 2.171
-------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS............ 3.252 0.722 4.119 (0.130) 2.485
-------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From Net Investment Income............. (0.291) (0.654) (0.494) (0.521) (0.296)
In Excess of Net Investment Income..... (0.000) (0.000) (0.000) (0.000) (0.170)
From Net Realized Capital Gains........ (3.940) (0.518) (0.293) (1.627) (1.260)
-------- -------- --------- --------- ---------
Total Distributions.................... (4.231) (1.172) (0.787) (2.148) (1.726)
-------- -------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD............ $ 14.275 $ 15.254 $ 15.704 $ 12.372 $ 14.650
======== ========= ========= ========= =========
TOTAL RETURN (2) (3)........................ 22.05% 4.62% 33.45% (1.05)% 17.87%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's).... $ 14,521 $ 14,448 $ 16,018 $ 12,312 $ 15,251
Ratio of Operating Expenses to
Average Net Assets (4).............. 1.15% 1.15% 1.15% 1.16% 1.20%
Ratio of Operating Expenses to
Average Net Assets before Expense
Reductions (5) ..................... 1.18% 1.15% 1.17% -- --
Ratio of Net Investment Income to
Average Net Assets ................. 1.63% 3.74% 3.89% 3.16% 1.85%
Portfolio Turnover Rate................ 169.75% 19.41% 48.20% 193.40% 109.57%
Average Commission per Share (6)....... $ 0.03 $ 0.03 -- -- --
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne
by the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described
in the product's prospectus.
(4) Net Investment Income is after payment or reimbursement of certain
expenses by affiliates in 1997, 1996 and 1995 and waiver of business
management fee and payment or reimbursement of certain other expenses
by affiliates in 1994 and 1993. (See Note C to the Trust's financial
statements.) Had affiliates not undertaken to waive their fees and/or
pay or reimburse expenses related to the Portfolio, the Ratio of
Operating Expenses to Average Net Assets would have been as follows:
1997- 1.54%; 1996 - 1.48%; 1995 - 1.51%; 1994 - 1.60% and 1993 - 1.59%.
(5) For fiscal years ending after September 1, 1995, the Portfolio is
required to calculate an expense ratio without expense reductions.
(6) For fiscal years beginning on or after September 1, 1995, the Portfolio
is required to disclose its average commission rate per share for
trades on which commissions are charged. This rate does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
71
<PAGE> 73
VARIABLE INVESTORS SERIES TRUST
GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------- PERIOD ENDED
1997 1996 DECEMBER 31, 1995 (1)
---- ---- ---------------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 12.421 $ 11.171 $ 10.000
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................. 0.127 0.070 0.045
Net Realized and Unrealized Gain
(Loss) on Investments............... 3.351 1.291 1.266
----------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS............ 3.478 1.361 1.311
----------- ---------- ----------
LESS DISTRIBUTIONS:
From Net Investment Income............. (0.127) (0.070) (0.045)
In Excess of Net Investment Income..... (0.000) (0.001) (0.000)
From Net Realized Capital Gains........ (1.205) (0.040) (0.095)
----------- ---------- ----------
Total Distributions.................... (1.332) (0.111) (0.140)
----------- ---------- ----------
NET ASSET VALUE AT END OF PERIOD............ $ 14.567 $ 12.421 $ 11.171
=========== ========== ==========
TOTAL RETURN (2) (3)........................ 28.20% 12.15% 13.09% (4)
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's).... $ 21,061 $ 10,300 $ 3,335
Ratio of Operating Expenses to
Average Net Assets (5).............. 1.25% 1.25% 1.25% (6)
Ratio of Operating Expenses to
Average Net Assets Before Expense
Reductions.......................... 1.25% 1.26% 1.49% (6)
Ratio of Net Investment Income to
Average Net Assets ................. 1.05% 0.82% 1.17% (6)
Portfolio Turnover Rate................ 162.94% 131.85% 33.49% (4)
Average Commission per Share (7)....... $ 0.06 $ 0.06 --
</TABLE>
(1) From commencement of operations May 31, 1995.
(2) Total returns would have been lower had certain expenses not been borne
by the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described
in the product's prospectus.
(4) Not annualized.
(5) Net Investment Income is after payment or reimbursement of certain
expenses by affiliates in 1997, 1996 and 1995. (See Note C to the
Trust's financial statements.) Had affiliates not undertaken to waive
their fees and/or pay or reimburse expenses related to the Portfolio,
the Ratio of Operating Expenses to Average Net Assets would have been
as follows: 1997 - 1.60%; 1996 - 2.63%; 1995 - 7.27%.
(6) Annualized.
(7) For fiscal years beginning on or after September 1, 1995, the Portfolio
is required to disclose its average commission rate per share for
trades on which commissions are charged. This rate does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
72
<PAGE> 74
VARIABLE INVESTORS SERIES TRUST
MULTIPLE STRATEGIES PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 (1) 1993
---- ---- ---- -------- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 12.699 $ 12.043 $10.022 $ 12.182 $ 11.785
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................. 0.103 0.143 0.137 0.236 0.424
Net Realized and Unrealized Gain
(Loss) on Investments............... 2.629 2.069 3.086 (0.711) 0.835
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS............ 2.732 2.212 3.223 (0.475) 1.259
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From Net Investment Income............. (0.103) (0.144) (0.136) (0.235) (0.424)
In Excess of Net Investment Income (7). (0.000) (0.000) (0.000) (0.008) (0.000)
From Net Realized Capital Gains........ (1.170) (1.412) (1.066) (1.418) (0.438)
In Excess of Net Realized Capital Gains (0.000) (0.000) (0.000) (0.024) (0.000)
--------- --------- --------- --------- ---------
Total Distributions.................... (1.273) (1.556) (1.202) (1.685) (0.862)
--------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD............ $ 14.158 $ 12.699 $ 12.043 $ 10.022 $ 12.182
======== ========= ========= ========= =========
TOTAL RETURN (2) (3)........................ 21.79% 18.29% 32.24% (3.91)% 10.52%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's).... $ 35,119 $ 31,884 $ 26,380 $ 21,150 $ 24,522
Ratio of Operating Expenses to
Average Net Assets (4).............. 1.19% 1.20% 1.20% 1.20% 1.20%
Ratio of Operating Expenses to
Average Net Assets before Expense
Reductions (5) ..................... 1.19% 1.20% 1.20% -- --
Ratio of Net Investment Income to
Average Net Assets ................. 0.69% 1.16% 1.14% 1.74% 3.20%
Portfolio Turnover Rate................ 45.87% 92.21% 161.10% 153.64% 25.57%
Average Commission per Share (6)....... $ 0.05 $ 0.05 -- -- --
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne
by the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described
in the product's prospectus.
(4) Net Investment Income is after payment or reimbursement of certain
expenses by affiliates in 1997, 1996 and 1995 and waiver of business
management fee and payment or reimbursement of certain other expenses
by affiliates in 1994 and 1993. (See Note C to the Trust's financial
statements.) Had affiliates not undertaken to waive their fees and/or
pay or reimburse expenses related to the Portfolio, the Ratio of
Operating Expenses to Average Net Assets would have been as follows:
1997 - 1.21%; 1996 - 1.32%; 1995 - 1.33%; 1994 - 1.48% and 1993 -
1.35%.
(5) For fiscal years ending after September 1, 1995, the Portfolio is
required to calculate an expense ratio without expense reductions.
(6) For fiscal years beginning on or after September 1, 1995, the Portfolio
is required to disclose its average commission rate per share for
trades on which commissions are charged. This rate does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
(7) For 1997 and 1996, amount was less than $0.001 per share.
73
<PAGE> 75
VARIABLE INVESTORS SERIES TRUST
HIGH INCOME BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 (1) 1993
---- ---- ---- -------- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 9.173 $ 8.589 $ 7.914 $ 9.704 $ 9.492
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................. 0.640 0.596 0.779 1.018 0.848
Net Realized and Unrealized Gain
(Loss) on Investments............... 0.598 0.624 0.717 (1.711) 0.567
-------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS............ 1.238 1.220 1.496 (0.693) 1.415
-------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From Net Investment Income............. (0.681) (0.596) (0.779) (1.005) (0.849)
In Excess of Net Investment Income..... (0.010) (0.040) (0.042) (0.006) (0.000)
From Net Realized Capital Gains........ (0.000) (0.000) (0.000) (0.075) (0.354)
In Excess of Net Realized Capital Gains (0.000) (0.000) (0.000) (0.011) (0.000)
-------- --------- -------- --------- ---------
Total Distributions.................... (0.691) (0.636) (0.821) (1.097) (1.203)
-------- --------- -------- --------- ---------
NET ASSET VALUE AT END OF PERIOD............ $ 9.720 $ 9.173 $ 8.589 $ 7.914 $ 9.704
======== ========= ========= ========= =========
TOTAL RETURN (2) (3)....................... 13.54% 14.20% 18.98% (7.08)% 14.91%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's).... $ 17,916 $ 12,835 $ 8,764 $ 7,771 $ 14,496
Ratio of Operating Expenses to
Average Net Assets (4).............. 1.20% 1.18% 1.20% 1.20% 1.20%
Ratio of Operating Expenses to
Average Net Assets before Expense
Reductions (5) ..................... 1.20% 1.20% 1.21% -- --
Ratio of Net Investment Income to
Average Net Assets 7.15% 7.96% 8.62% 8.70% 8.04%
Portfolio Turnover Rate................ 91.54% 105.48% 82.15% 200.19% 0.82%
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne
by the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described
in the product's prospectus.
(4) Net Investment Income is after payment or reimbursement of certain
expenses by affiliates in 1997, 1996 and 1995 and waiver of business
management fee and payment or reimbursement of certain other expenses
by affiliates in 1994 and 1993. (See Note C to the Trust's financial
statements.) Had affiliates not undertaken to waive their fees and/or
pay or reimburse expenses related to the Portfolio, the Ratio of
Operating Expenses to Average Net Assets would have been as follows:
1997 - 1.64%; 1996 - 1.99%; 1995 - 2.04%; 1994 - 2.03% and 1993 -
1.59%.
(5) For fiscal years ending after September 1, 1995, the Portfolio is
required to calculate an expense ratio without expense reductions.
74
<PAGE> 76
VARIABLE INVESTORS SERIES TRUST
U.S. GOVERNMENT BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
-CONTINUED-
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 (1) 1993
---- ---- ---- -------- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD...... $ 9.938 $ 10.510 $ 9.718 $ 10.923 $ 10.659
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................. 0.630 0.629 0.765 0.690 0.674
Net Realized and Unrealized Gain
(Loss) on Investments............... 0.299 (0.385) 1.191 (0.986) 0.328
-------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS............ 0.929 0.244 1.956 (0.296) 1.002
-------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From Net Investment Income............. (0.617) (0.610) (0.765) (0.690) (0.673)
In Excess of Net Investment Income..... (0.000) (0.000) (0.045) (0.000) (0.000)
From Net Realized Capital Gains........ (0.068) (0.206) (0.354) (0.105) (0.062)
In Excess of Net Realized Capital Gains (0.021) (0.000) (0.000) (0.112) (0.000)
Tax Return of Capital.................. (0.000) (0.000) (0.000) (0.002) (0.003)
-------- --------- --------- --------- ---------
Total Distributions.................... (0.706) (0.816) (1.164) (0.909) (0.738)
-------- --------- --------- --------- ---------
NET ASSET VALUE AT END OF PERIOD............ $ 10.161 $ 9.938 $ 10.510 $ 9.718 $ 10.923
======== ========= ========= ========= =========
TOTAL RETURN (2) (3)........................ 9.37% 2.36% 20.18% (2.72)% 9.38%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's).... $ 9,679 $ 10,734 $ 11,618 $ 14,444 $ 20,710
Ratio of Operating Expenses to
Average Net Assets (4).............. 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of Operating Expenses to
Average Net Assets before Expense
Reductions (5) ..................... 0.86% 0.85% 0.85% -- --
Ratio of Net Investment Income to
Average Net Assets ................. 5.86% 5.80% 6.18% 5.65% 5.20%
Portfolio Turnover Rate................ 124.75% 244.96% 252.94% 289.71% 27.84%
</TABLE>
(1) On April 1, 1994, FVAS became investment adviser. Prior to that date,
results were achieved by former investment advisers.
(2) Total returns would have been lower had certain expenses not been borne
by the adviser or its affiliates.
(3) The performance of the Portfolio shown on this page does not reflect
expenses and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described
in the product's prospectus.
(4) Net Investment Income is after payment or reimbursement of certain
expenses by affiliates in 1997, 1996 and 1995 and waiver of business
management fee and payment or reimbursement of certain other expenses
by affiliates in 1994 and 1993. (See Note C to the Trust's financial
statements.) Had affiliates not undertaken to waive their fees and/or
pay or reimburse expenses related to the Portfolio, the Ratio of
Operating Expenses to Average Net Assets would have been as follows:
1997 - 1.73%; 1996 - 1.66%; 1995 - 1.59%; 1994 - 1.45% and 1993 -
1.30%.
(5) For fiscal years ending after September 1, 1995, the Portfolio is
required to calculate an expense ratio without expense reductions.
75
<PAGE> 77
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE A -- ORGANIZATION
Variable Investors Series Trust (the "Trust") was established as a
Massachusetts business trust under the laws of Massachusetts by an Agreement and
Declaration of Trust dated December 23, 1986. The Trust is an open-end, series
management investment company which currently comprises eight series of shares
of beneficial interest (the "Portfolios") each of which represents the entire
interest in a separate portfolio of investments. The Portfolios are the Small
Cap Growth Portfolio (formerly the Small Cap Portfolio), the World Equity
Portfolio, the Growth Portfolio (formerly the Common Stock Portfolio), the
Matrix Equity Portfolio (formerly the Tilt Utility Portfolio), the Growth &
Income Portfolio, the Multiple Strategies Portfolio, the High Income Bond
Portfolio, and the U.S. Government Bond Portfolio.
Effective May 1, 1997, the names of the Small Cap Portfolio, the Common
Stock Portfolio and the Tilt Utility Portfolio were changed to the Small Cap
Growth Portfolio, the Growth Portfolio and the Matrix Equity Portfolio,
respectively.
The Cash Management Portfolio was liquidated on December 3, 1997 after
Monarch Life Insurance Company received permission from the SEC to redeem its
shares. First Variable Life Insurance Company liquidated its shares on January
3, 1997, amounting to $8,214,892, and the money was transferred to the Federated
Prime Money Fund II immediately following the Company's redemption.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements.
ESTIMATES: 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: The Trust's equity securities, including
American Depositary Receipts (ADR's) and other forms of depository receipts,
traded on a national securities exchange are valued at the last sales price, or,
if no closing price is available, at a bid price estimated by a broker or
dealer. Debt securities are generally valued on the basis of valuations
furnished by pricing services which determine valuations for normal
institutional size trading units of debt securities, without exclusive reliance
upon quoted prices. These valuations are believed to reflect with greater
accuracy the fair market value of such securities. Short-term securities
maturing in 60 days or less are valued at cost plus earned discount to maturity
(amortized cost), which approximates market value. Securities in other mutual
funds are valued at the net asset value of those funds. Securities for which
current market quotations are not readily available are stated at fair value as
determined in good faith under the direction of the Trustees.
FOREIGN SECURITIES: Foreign securities traded on a recognized securities
exchange are valued at the last sales price in the principal market where they
are traded, or, if closing prices are unavailable, at the last bid price
available prior to the time a Portfolio's net asset value is determined. Foreign
portfolio security prices are furnished by quotation services expressed in the
local currency's value and are translated into U.S. dollars at the current rate
of exchange. Foreign securities for which prices cannot be obtained by the
quotation services are valued using dealer supplied quotations.
76
<PAGE> 78
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
-CONTINUED-
REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Trust's custodian takes possession of the underlying collateral
securities, the value of which at least equals the principal amount, including
interest, of the repurchase transaction. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Portfolio has the
right to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral, or proceeds may be subject to legal proceedings.
INVESTMENT TRANSACTIONS: Investment security transactions are recorded on
the date of purchase, sale, or maturity. Dividend income is recorded on the
ex-dividend date, or, in the case of dividend income on foreign securities, on
the ex-dividend date or when the Trust becomes aware of its declaration.
Interest income is recorded on the accrual basis. Realized gains and losses from
security transactions are determined on the basis of identified cost.
FOREIGN CURRENCY TRANSLATIONS: The records of the Trust are maintained in
U.S. dollars. Foreign currency amounts are translated into U.S. dollars at a
current rate of exchange of such currency to determine the value of investments,
other assets and liabilities on the date of any determination of net asset value
of the Portfolios. Purchases and sales of securities and income and expenses are
converted at the prevailing rate of exchange on the respective dates of such
transactions. Net realized gain (loss) on foreign currency includes net realized
currency gains and losses recognized between accrual and payment dates. The
Portfolios do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
FORWARD FOREIGN CURRENCY CONTRACTS: Upon the purchase or sale of a
security denominated in foreign currency, the Trust may enter into a forward
currency exchange contract for the purchase or sale, for a fixed amount of U.S.
dollars, of an amount of the foreign currency required to settle the security
transaction in order to hedge against a change in the foreign currency exchange
rate. Accordingly, the Trust would not realize currency gains or losses between
the trade and settlement dates on such security transactions. A Portfolio may
engage in position hedging to protect against a decline in value relative to the
U.S. dollar of the currencies in which their portfolio securities are
denominated or quoted.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Trust on each day and the resulting net unrealized
appreciation (depreciation) and related net receivable (payable) amount are
determined by using foreign currency exchange rates supplied by a quotation
service.
Realized gain (loss) includes net gains or losses realized by the Trust on
contracts which have matured or which the Trust has terminated by entering into
an offsetting closing transaction.
FORWARD COMMITMENTS: To secure prices or yields deemed advantageous at a
particular time, each Portfolio of the Trust may enter into a forward commitment
in which a Portfolio agrees on trade date to either make or receive delivery
against payment for securities on a delayed delivery basis. The price and
interest rate of such securities are fixed at trade date. For forward commitment
purchases, the Portfolio does not earn interest on such security until
settlement date.
FEDERAL INCOME TAXES: Each Portfolio of the Trust is treated as a separate
entity for federal tax purposes. Each Portfolio of the Trust has qualified and
intends to continue to qualify each year as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, as amended. By so qualifying,
the Portfolios of the Trust will not be subject to federal income taxes to the
extent that they distribute all of their taxable income, including realized
capital gains, for the fiscal year. In addition, by distributing during each
calendar year substantially all of their net investment income, capital gains
and certain other amounts, if any, the Portfolios of the Trust will not be
subject to a federal excise tax.
77
<PAGE> 79
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
-CONTINUED-
As of December 31, 1997, the High Income Bond Portfolio had a realized
capital loss carryforward, for Federal income tax purposes, of $384,526
($291,888 expires on December 31, 2002, $52,592 expires on December 31, 2003,
and $40,046 expires on December 31, 2005), available to be used to offset future
realized capital gains.
Any net capital losses incurred after October 31, within a Portfolio's tax
year, are deemed to arise on the first day of a Portfolio's next tax year. The
Portfolios incurred and elected to defer net capital losses as follows, during
such period in fiscal 1997:
<TABLE>
<CAPTION>
PORTFOLIO AMOUNT
--------- ------
<S> <C>
Small Cap Growth Portfolio $ 113,121
World Equity Portfolio 90,854
Matrix Equity Portfolio 3,235
Growth & Income Portfolio 1,931
High Income Bond Portfolio 67,202
U.S. Government Bond Portfolio 957
</TABLE>
EXPENSES: Expenses directly attributable to a Portfolio are charged to
that Portfolio. Expenses not directly attributable to a Portfolio are split
evenly among the affected Portfolios, allocated on the basis of relative average
net assets, or otherwise allocated among the Portfolios as the Trustees may
direct or approve.
DIVIDENDS AND DISTRIBUTIONS: Each of the Portfolios declares and
distributes dividends from net investment income, if any, and distributes its
net realized capital gains, if any, at least annually. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to utilization of capital loss carryovers, differing treatments
for foreign currency transactions and differences in the timing of recognition
of certain capital losses for financial reporting and tax purposes. Both
dividends and capital gain distributions are made in shares of such Portfolios
unless an election is made on behalf of a Separate Account to receive dividends
and capital gain distributions in cash. The Trust made the following
reclassification as of December 31, 1997:
<TABLE>
<CAPTION>
Increase/(Decrease) Increase/(Decrease)
Decrease Undistributed Net Accumulated
Paid in Capital Investment Income Realized Gain/(Loss)
--------------- ----------------- --------------------
<S> <C> <C> <C>
Small Cap Growth Portfolio.............. $ (178,639) $ 178,639 $ 0
World Equity Portfolio.................. 0 219,037 (219,037)
Growth Portfolio........................ (154,518) 154,536 (18)
Multiple Strategies Portfolio........... 0 (9,897) 9,897
High Income Bond Portfolio.............. 0 67,480 (67,480)
U.S. Government Bond Portfolio.......... 0 (26,679) 26,679
</TABLE>
Net investment income, net realized gains and net assets were not affected by
these changes.
78
<PAGE> 80
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
-CONTINUED-
NOTE C -- INVESTMENT ADVISORY AND OTHER RELATED PARTY AGREEMENTS
INVESTMENT ADVISORY AGREEMENT
First Variable Advisory Services Corp. ("FVAS") is the investment adviser
to all Portfolios of the Trust under an investment advisory agreement with the
Trust dated September 22, 1994. FVAS retained the following sub-advisers at its
own cost and expense pursuant to sub-advisory agreements dated September 22,
1994: Value Line, Inc. as sub-adviser to the Growth and Multiple Strategies
Portfolios, State Street Bank and Trust Company, through its investment
management division State Street Global Advisors, as sub-adviser to the Matrix
Equity Portfolio, Federated Investment Counseling as sub-adviser to the High
Income Bond Portfolio and Strong Capital Management, Inc. as sub-adviser to the
U.S. Government Bond Portfolio. FVAS retained the following sub-advisers at its
own cost and expense pursuant to sub-advisory agreements dated May 1, 1995:
Pilgrim Baxter & Associates, Ltd. as sub-adviser to the Small Cap Growth
Portfolio and Warburg, Pincus Counsellors, Inc. as sub-adviser to the Growth &
Income Portfolio. FVAS retained the following sub-adviser at its own cost and
expense pursuant to a sub-advisory agreement dated December 9, 1996: Keystone
Investment Management Company as sub-adviser to the World Equity Portfolio.
FVAS is a Massachusetts corporation which was incorporated on October 8,
1993 and which is registered with the Securities and Exchange Commission as an
investment adviser under the Investment Advisers Act of 1940, as amended. FVAS
is a wholly-owned subsidiary of First Variable, which is a wholly-owned
subsidiary of Irish Life of North America, Inc. ("ILoNA"), which is a
wholly-owned subsidiary of Irish Life plc., of Dublin, Ireland.
As compensation for all services rendered, facilities provided and
expenses paid or assumed by FVAS under the advisory agreement, the Trust pays
compensation monthly to FVAS at the following annual rates based on the average
daily net assets of each Portfolio taken separately: 0.85% of average daily net
assets for the Small Cap Growth Portfolio; 0.70% of the first $200 million of
average daily net assets, 0.625% of the next $300 million of average daily net
assets, and 0.50% of average daily net assets in excess of $500 million for the
World Equity Portfolio; 0.70% of average daily net assets for the Growth and the
Multiple Strategies Portfolios; 0.65% of the first $100 million of average daily
net assets and 0.55% of average daily net assets in excess of $100 million for
the Matrix Equity Portfolio; 0.75% of average daily net assets for the Growth &
Income Portfolio; 0.70% of the first $40 million of average daily net assets,
0.65% of the next $20 million of average daily net assets, 0.55% of the next $15
million of average daily net assets, and 0.50% of average daily net assets in
excess of $75 million for the High Income Bond Portfolio; 0.60% of the first
$200 million of average daily net assets and 0.50% of average daily net assets
in excess of $200 million for the U.S. Government Bond Portfolio.
LIMITATIONS
First Variable has agreed to reduce its compensation for certain services
to the Trust (and, if necessary, bear certain expenses of each of the
Portfolios) through April 1, 1998 with respect to each of the Portfolios to the
extent that Portfolio expenses, other than FVAS's compensation, exceed the
annual rate of 0.50% of a Portfolio's average daily net assets (0.25% in the
case of the U.S. Government Bond Portfolio).
EXPENSE REDUCTIONS
State Street Bank and Trust Company, the Trust's custodian, has agreed to
compensate the Portfolios and decrease the Trust's custodian expenses for cash
balances left uninvested in each of the Portfolios. For the period ended
December 31, 1997, the Trust's expenses were reduced by $5,741.
79
<PAGE> 81
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
-CONTINUED-
TRUSTEES' COMPENSATION
Trustees' fees of $10,000 per year, plus $1,500 per meeting of the Board
of Trustees and $750 for each Audit Committee meeting attended (if held on a day
other than when a Board of Trustees meeting is held), are paid by the Trust to
each Trustee who is not an interested person of the Trust, First Variable, ILoNA
or FVAS. No remuneration is paid by the Trust to any Trustee or officer of the
Trust who is affiliated with First Variable, ILoNA or FVAS.
NOTE D -- INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities for each Portfolio for the year ended December 31, 1997
were as follows:
<TABLE>
<CAPTION>
NON- NON-
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT
PURCHASES PURCHASES SALES SALES
--------- --------- ----- -----
<S> <C> <C> <C> <C>
Small Cap Growth Portfolio............... $ 21,367,241 $ 0 $ 17,087,686 $ 0
World Equity Portfolio................... 30,434,460 0 32,710,614 0
Growth Portfolio......................... 31,910,175 0 37,274,007 0
Matrix Equity Portfolio.................. 24,474,874 0 27,169,643 0
Growth & Income Portfolio................ 30,094,956 477,690 24,441,564 0
Multiple Strategies Portfolio............ 13,784,036 0 17,606,074 500,000
High Income Bond Portfolio............... 16,275,784 1,984,480 12,142,265 1,956,855
U.S. Government Bond Portfolio........... 2,128,917 9,485,380 2,447,349 10,076,678
</TABLE>
The identified cost for federal income tax purposes of investments owned by each
Portfolio (including earned discount on corporate short-term notes and
commercial paper) and their respective gross unrealized appreciation and
depreciation at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED NET UNREALIZED
IDENTIFIED COST APPRECIATION (DEPRECIATION) APPRECIATION
--------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Small Cap Growth Portfolio............ $ 16,167,244 $ 3,154,530 $ (959,272) $ 2,195,258
World Equity Portfolio................ 20,892,376 4,846,586 (1,030,596) 3,815,990
Growth Portfolio...................... 45,061,449 23,347,566 (661,968) 22,685,598
Matrix Equity Portfolio............... 12,768,635 1,926,784 (279,440) 1,647,344
Growth & Income Portfolio............. 18,873,760 2,476,829 (146,805) 2,330,024
Multiple Strategies Portfolio......... 27,226,175 8,897,314 (259,965) 8,637,349
High Income Bond Portfolio............ 16,489,397 1,177,844 (34,703) 1,143,141
U.S. Government Bond Portfolio........ 8,805,769 264,297 (8,112) 256,185
</TABLE>
80
<PAGE> 82
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
-CONTINUED-
NOTE E -- TRUST SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
SMALL CAP GROWTH PORTFOLIO
Shares sold............................. 747,354 $ 11,425,373 848,253 $ 12,925,499
Shares issued to shareholders in
reinvestment.......................... 42,547 634,176 2,623 40,086
------------ -------------- ------------ --------------
789,901 12,059,549 850,876 12,965,585
Shares repurchased...................... (478,142) (7,512,702) (292,589) (4,445,800)
------------ -------------- ------------ --------------
Net increase............................ 311,759 $ 4,546,847 558,287 $ 8,519,785
============ ============== ============ ==============
WORLD EQUITY PORTFOLIO
Shares sold............................. 403,152 $ 6,457,778 872,836 $ 12,579,417
Shares issued to shareholders in
reinvestment.......................... 266,229 3,728,781 45,499 667,451
------------ -------------- ------------ --------------
669,381 10,186,559 918,335 13,246,868
Shares repurchased...................... (539,499) (8,646,191) (605,395) (8,688,488)
------------ -------------- ------------ --------------
Net increase............................ 129,882 $ 1,540,368 312,940 $ 4,558,380
============ ============== ============ ==============
GROWTH PORTFOLIO
Shares sold............................. 367,894 $ 12,611,360 424,439 $ 12,507,958
Shares issued to shareholders in
reinvestment.......................... 158,068 5,388,138 105,176 3,227,017
------------ -------------- ------------ --------------
525,962 17,999,498 529,615 15,734,975
Shares repurchased...................... (426,876) (14,660,353) (407,036) (11,993,935)
------------ -------------- ------------ --------------
Net increase............................ 99,086 $ 3,339,145 122,579 $ 3,741,040
============ ============== ============ ==============
MATRIX EQUITY PORTFOLIO
Shares sold............................. 104,446 $ 1,797,770 198,705 $ 3,085,526
Shares issued to shareholders in
reinvestment.......................... 237,431 3,376,382 69,597 1,065,932
------------ -------------- ------------ --------------
341,877 5,174,152 268,302 4,151,458
Shares repurchased...................... (271,817) (4,560,270) (341,137) (5,287,328)
------------ -------------- ------------ --------------
Net increase (decrease)................. 70,060 $ 613,882 (72,835) $ (1,135,870)
============ ============== ============ ==============
GROWTH & INCOME PORTFOLIO
Shares sold............................. 662,608 $ 9,350,713 648,884 $ 8,072,912
Shares issued to shareholders in
reinvestment.......................... 122,683 1,755,239 7,099 88,565
------------ -------------- ------------ --------------
785,291 11,105,952 655,983 8,161,477
Shares repurchased...................... (168,745) (2,413,468) (125,254) (1,536,470)
------------ -------------- ------------ --------------
Net increase............................ 616,546 $ 8,692,484 530,729 $ 6,625,007
============ ============== ============ ==============
</TABLE>
81
<PAGE> 83
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
-CONTINUED-
<TABLE>
<S> <C> <C> <C> <C>
MULTIPLE STRATEGIES PORTFOLIO
Shares sold............................. 655,204 $ 9,697,302 1,191,576 $ 16,014,171
Shares issued to shareholders in
reinvestment.......................... 207,591 2,885,670 272,676 3,482,144
------------ -------------- ------------ --------------
862,795 12,582,972 1,464,252 19,496,315
Shares repurchased...................... (892,919) (12,988,684) (1,144,091) (15,266,057)
------------ -------------- ------------ --------------
Net (decrease) increase................. (30,124) $ (405,712) 320,161 $ 4,230,258
============ ============== ============ ==============
HIGH INCOME BOND PORTFOLIO
Shares sold............................. 1,263,456 $ 12,288,479 980,079 $ 9,025,755
Shares issued to shareholders in
reinvestment.......................... 121,580 1,184,796 89,263 817,769
------------ -------------- ------------ --------------
1,385,036 13,473,275 1,069,342 9,843,524
Shares repurchased...................... (941,065) (9,138,545) (690,441) (6,284,422)
------------ -------------- ------------ --------------
Net increase............................ 443,971 $ 4,334,730 378,901 $ 3,559,102
============ ============== ============ ==============
U.S. GOVERNMENT BOND PORTFOLIO
Shares sold............................. 155,066 $ 1,631,131 241,930 $ 2,487,211
Shares issued to shareholders in
reinvestment.......................... 62,082 631,746 82,843 829,433
------------ -------------- ------------ --------------
217,148 2,262,877 324,773 3,316,644
Shares repurchased...................... (344,656) (3,526,283) (350,145) (3,627,597)
------------ -------------- ------------ --------------
Net decrease............................ (127,508) $ (1,263,406) (25,372) $ (310,953)
============ ============== ============ ==============
</TABLE>
NOTE F -- FORWARD FOREIGN CURRENCY CONTRACT
As of December 31, 1997 the World Equity Portfolio had open 10 forward
foreign currency contracts which contractually obligate the Portfolio to deliver
currencies at a specified date, as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
CURRENCY SOLD SETTLEMENT DATE COST VALUE APPRECIATION/(DEPRECIATION)
------------- --------------- ---- ----- ---------------------------
<S> <C> <C> <C> <C>
440,692 Australian Dollars 01/08/98 $ 319,700 $ 287,272 $ 32,428
9,129,918 French Francs 02/03/98 1,577,000 1,519,975 57,025
1,354,636 German Marks 02/18/98 779,000 755,177 23,823
155,453,717 Japanese Yen 01/28/98 1,272,000 1,195,415 76,585
1,248,676 Netherland Guilder 02/18/98 638,000 617,703 20,297
53,315,808 Spanish Pesetas 03/05/98 357,000 350,555 6,445
7,712,327 Swedish Krona 03/05/98 996,000 973,076 22,924
1,703,479 Swiss Francs 02/18/98 1,208,000 1,172,627 35,373
CURRENCY PURCHASED
------------------
80,000 French Francs 02/03/98 13,868 13,319 (549)
36,196,000 Japanese Yen 01/28/98 279,495 278,342 (1,153)
----------
$ 273,198
==========
</TABLE>
82
<PAGE> 84
VARIABLE INVESTORS SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
-CONTINUED-
NOTE G - TAX INFORMATION NOTICE - UNAUDITED
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Trust for its fiscal year ended December 31,
1997:
Small Cap Growth Portfolio, World Equity Portfolio, Growth Portfolio, Matrix
Equity Portfolio, Growth & Income Portfolio, Multiple Strategies Portfolio, and
U.S. Government Bond Portfolio designate $634,176, $2,827,717, $5,388,137,
$2,511,433, $144,275, $2,650,489, and $26,859, respectively, as long term
capital gains dividend paid.
83
<PAGE> 85
PRINCIPAL OFFICERS AND TRUSTEES OF
VARIABLE INVESTORS SERIES TRUST
----------------
PAUL G. CHENAULT, TRUSTEE
NORMAN A. FAIR, TRUSTEE
WESLEY E. HORTON, TRUSTEE
W. LAWRENCE HOWE, TRUSTEE
LAIRD E. WIGGIN, TRUSTEE
JOHN M. SOUKUP, PRESIDENT AND TRUSTEE
ARNOLD R. BERGMAN, SECRETARY
JOHN V. EGAN, TREASURER
----------------
INVESTMENT ADVISER
FIRST VARIABLE ADVISORY SERVICES CORP.
----------------
THE INFORMATION CONTAINED IN THIS REPORT IS INTENDED FOR GENERAL INFORMATIONAL
PURPOSES ONLY. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY CURRENT TRUST AND SEPARATE ACCOUNT
PROSPECTUSES WHICH CONTAIN IMPORTANT INFORMATION CONCERNING THE TRUST, FIRST
VARIABLE LIFE INSURANCE COMPANY, AND ITS CURRENT PUBLIC OFFERING OF VARIABLE
ANNUITY AND VARIABLE LIFE INSURANCE CONTRACTS.
<PAGE> 86
- -------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Federated Prime
Money Fund II, a portfolio of Federated Insurance Series.
This report covers the 12-month period from January 1, 1997 through
December 31, 1997. It begins with a commentary by the fund's portfolio manager,
which is followed by a complete listing of the fund's money market holdings and
the fund's financial statements.
Over the reporting period, the fund kept shareholders' cash working -- and
accessible -- every day while maintaining a stable share price of $1.00.*
To provide a competitive daily yield, the fund invests in a diversified
portfolio of high-quality money market securities. Over the 12-month reporting
period, the fund paid a total of $0.05 per share in dividends to shareholders.
On December 31, 1997, net assets reached $60 million.
Thank you for choosing Federated Prime Money Fund II as a convenient,
professionally managed way to keep your ready cash working. We will continue to
keep you up-to-date on your investment, and welcome your comments and
suggestions.
Sincerely,
/s/ J. Christopher Donahue
- ---------------------------
J. Christopher Donahue
President
February 15, 1998
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no assurance that they will be able to do so. An investment
in the fund is not insured or guaranteed by the U.S. government.
F-1
<PAGE> 87
MANAGEMENT DISCUSSION AND ANALYSIS
Federated Prime Money Fund II invests in money market instruments maturing in
thirteen months or less. The average maturity of these securities, computed on
a dollar-weighted basis, is restricted to 90 days or less. Portfolio securities
must be rated in one of the two highest short-term rating categories by one or
more of the nationally recognized statistical rating organizations or be of
comparable quality to securities having such ratings. Typical security types
include, but are not limited to, commercial paper, certificates of deposit,
time deposits, variable rate instruments and repurchase agreements.
U.S. economic growth continued at an above average pace during early 1997, but
moderately slowed as the year progressed. The unemployment rate fell to a
quarter-century low of 4.6%. Consumer spending, which accounts for two-thirds
of the U.S. economy, is on the rise, fueled in part by gains in income. These
strong economic indicators on the domestic side are being offset by the turmoil
in Southeast Asia. The combination of the slowdown in Asia and slow steady
growth in the U.S. should keep inflation in check during 1998.
Thirty-day commercial paper started the reporting period at 5.37% on January 2,
1997, and then rose as high as 5.95% on December 29, 1997, reflecting year-end
technical pressures.
Rates fell in January 1997 and February 1997 with the 30-day commercial paper
rate reaching a low of 5.24% on February 21, 1997. Rates rose dramatically in
late March 1997 and early April 1997 to a 5.57%, reflecting the 0.25% hike in
the federal funds rate. Commercial paper rates continued to trade around 5.57%
through the remainder of the year.
The target average maturity range for the fund remained in the 35- to 45-day
target range for the entire reporting period, reflecting a neutral position
regarding Federal Reserve Board policy. In structuring the fund, there is
continued emphasis placed on positioning 30 - 35% of the fund's core assets in
variable rate demand notes and accomplishing a modest barbell structure.
During the reporting period ended December 31, 1997, the net assets of the fund
increased from $45.7 to $60 million while the 7-day net yield increased from
4.77% to 5.10%.* The effective average maturity of the fund on December 31,
1997, was 41 days.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary.
F-2
<PAGE> 88
PORTFOLIO OF INVESTMENTS
FEDERATED PRIME MONEY FUND II
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------------- ---------
<S> <C> <C>
SHORT-TERM NOTES--21.0%
- -------------------------------------------------------------------------------------
Banking--4.5%
- -------------------------------------------------------------------------------------
$ 1,000,000 BankBoston, N.A., 6.020%, 10/21/1998 $ 1,000,000
-----------------------------------------------------------------------
500,000 Bayerische Landesbank - NY, 6.250%, 4/15/1998 499,959
-----------------------------------------------------------------------
1,200,000 SALTS II Cayman Islands Corp., Series 1997-1b, 5.988%, 3/19/1998 1,200,000
----------------------------------------------------------------------- -----------
Total 2,699,959
----------------------------------------------------------------------- -----------
BROKERAGE--1.7%
- -------------------------------------------------------------------------------------
1,000,000 Goldman Sachs & Co., 5.781%, 1/26/1998 1,000,000
-----------------------------------------------------------------------
FINANCE - AUTOMOTIVE--5.9%
- -------------------------------------------------------------------------------------
182,174 Chase Manhattan Auto Owner Trust 1997-B, Class A-1, 5.744%, 7/10/1998 182,174
-----------------------------------------------------------------------
757,362 Ford Credit Auto Owner Trust 1997-B, Class A-1, 5.748%, 10/15/1998 757,362
-----------------------------------------------------------------------
2,500,000 Ford Motor Credit Corp., 6.420%, 2/4/1998 2,501,295
----------------------------------------------------------------------- -----------
Total 3,440,831
----------------------------------------------------------------------- -----------
FINANCE - COMMERCIAL--6.0%
- -------------------------------------------------------------------------------------
1,000,000 CIT Group Holdings, Inc., 6.125%, 9/1/1998 1,001,445
-----------------------------------------------------------------------
500,000 CIT Group Holdings, Inc., 6.200%, 4/15/1998 500,565
-----------------------------------------------------------------------
1,000,000 CIT Group Holdings, Inc., 6.500%, 7/13/1998 1,003,466
-----------------------------------------------------------------------
1,000,000 Triangle Funding Ltd., 5.750%, 11/16/1998 1,000,000
----------------------------------------------------------------------- -----------
Total 3,505,476
----------------------------------------------------------------------- -----------
FINANCE - EQUIPMENT--2.0%
- -------------------------------------------------------------------------------------
1,200,000 Caterpillar Financial Asset Trust 1997-B, Class A-1, 5.805%, 11/25/1998 1,200,000
----------------------------------------------------------------------- -----------
FINANCE - RETAIL--0.9%
- -------------------------------------------------------------------------------------
500,000 Associates Corp. of North America, 8.800%, 8/1/1998 507,916
----------------------------------------------------------------------- -----------
TOTAL SHORT-TERM NOTES 12,354,182
----------------------------------------------------------------------- -----------
CERTIFICATE OF DEPOSIT--11.7%
- -------------------------------------------------------------------------------------
BANKING--11.7%
- -------------------------------------------------------------------------------------
1,000,000 Bankers Trust Co., New York, 6.000%, 9/9/1998 999,671
-----------------------------------------------------------------------
1,000,000 Royal Bank of Canada, Montreal, 6.000%, 4/6/1998 1,000,339
-----------------------------------------------------------------------
1,000,000 Sanwa Bank Ltd., Osaka, 6.180%, 1/20/1998 1,000,005
-----------------------------------------------------------------------
1,000,000 Societe Generale, Paris, 5.920%, 8/6/1998 999,716
-----------------------------------------------------------------------
1,000,000 Sumitomo Bank Ltd., Osaka, 6.170%, 1/20/1998 1,000,005
-----------------------------------------------------------------------
2,000,000 Sumitomo Bank Ltd., Osaka, 6.450%, 1/23/1998 1,999,183
----------------------------------------------------------------------- -----------
TOTAL CERTIFICATES OF DEPOSIT 6,998,919
----------------------------------------------------------------------- -----------
ENERGY MINERALS--1.0%
- -------------------------------------------------------------------------------------
600,000 Occidental Petroleum Corp., 6.222%, 1/27/1998 597,326
----------------------------------------------------------------------- -----------
FINANCE - EQUIPMENT--1.0%
- -------------------------------------------------------------------------------------
600,000 Comdisco, Inc., 6.100%, 3/13/1998 592,900
----------------------------------------------------------------------- -----------
INDUSTRIAL PRODUCTS--0.8%
- -------------------------------------------------------------------------------------
500,000 Praxair, Inc., 5.969%, 2/27/1998 495,329
----------------------------------------------------------------------- -----------
INSURANCE--0.9%
- -------------------------------------------------------------------------------------
500,000 CNA Financial Corp., 6.021%, 3/19/1998 493,658
----------------------------------------------------------------------- -----------
TOTAL COMMERCIAL PAPER 2,179,213
----------------------------------------------------------------------- -----------
</TABLE>
F-3
<PAGE> 89
FEDERATED PRIME MONEY FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------- ---------
<S> <C>
(a)NOTES - VARIABLE -- 24.8%
- -------------------------------------------------------------------------------------------------------------
BANKING -- 18.2%
- -------------------------------------------------------------------------------------------------------------
$ 160,000 Alabama State IDA, (Wellborn Cabinet, Inc.), Tax Revenue Bonds, (Amsouth Bank N.A.,
Birmingham LOC), 6.030% 1/7/1998 $ 160,000
----------------------------------------------------------------------------------------------
188,000 Capital One Funding Corp., Series 1995-A, (Bank One, Indianapolis, N.A. LOC), 6.030%, 1/1/1998 188,000
----------------------------------------------------------------------------------------------
180,000 Denver Urban Renewal Authority, (Series 1992-B), (Banque Paribas, Paris LOC),
6.250%, 1/1/1998 180,000
----------------------------------------------------------------------------------------------
400,000 Edgefield County, SC, Series 1997 (Bondex Inc Project), (Marine Midland Bank N.A.,
Buffalo, NY LOC), 5.906%, 1/1/1998 400,000
----------------------------------------------------------------------------------------------
185,000 Franklin County, OH, Edison Wielding, Series 1995, (Huntington National Bank, Columbus,
OH LOC), 6.160%, 1/1/1998 185,000
----------------------------------------------------------------------------------------------
1,000,000 Kenny, Donald R. and Cheryl A., Series 1996-C, (Star Bank, N.A., Cincinnati LOC),
6.080%, 1/1/1998 1,000,000
----------------------------------------------------------------------------------------------
400,000 La-Man Corp., (SouthTrust Bank of Alabama, Birmingham LOC), 6.050%, 1/2/1998 400,000
----------------------------------------------------------------------------------------------
1,920,378 (b)Liquid Asset Backed Securities Trust, Series 1997-1, (Westdeutsche Landesbank
Girozentrale Swap Agreement), 5.688%, 1/15/1998 1,920,378
----------------------------------------------------------------------------------------------
1,000,000 Long Lane Master Trust III, Series 1997-C, 5.780%, 1/7/1998 1,000,000
----------------------------------------------------------------------------------------------
575,000 Madison, WI Community Development Authority, Series 1997-B Hamilton Point Apts.,
(Bank One, Wisconsin, N.A. LOC), 6.130%, 1/1/1998 575,000
----------------------------------------------------------------------------------------------
238,000 Maryland State IDFA, Human Genome, Series 1994, (First National Bank of Maryland,
Baltimore LOC), 5.900%, 1/5/1998 238,000
----------------------------------------------------------------------------------------------
330,000 Mississippi Business Finance Corp., Metalloy Project, (Comerica Bank, Detroit, MI LOC),
5.825%, 1/1/1998 330,000
----------------------------------------------------------------------------------------------
550,000 REAL I Funding Corp., Casto Realty Investments Series 1996, (Huntington National Bank,
Columbus, OH LOC), 6.030%, 1/1/1998 550,000
----------------------------------------------------------------------------------------------
935,433 (b)Rabobank Optional Redemption Trust, Series 1997-101, 5.754%, 1/15/1998 935,433
----------------------------------------------------------------------------------------------
370,000 Roby Company Ltd. Partnership, (Huntington National Bank, Columbus, OH LOC),
6.030%, 1/1/1998 370,000
----------------------------------------------------------------------------------------------
135,000 Southeast Regional Holdings, LLC, Series 1995-A, (Columbus Bank and Trust Co., GA LOC),
5.830%, 1/1/1998 135,000
----------------------------------------------------------------------------------------------
2,125,000 Trap Rock Industries, Inc., Series 1997, (Corestates Bank N.A., Philadelphia, PA LOC),
5.900%, 1/7/1998 2,125,000
----------------------------------------------------------------------------------------------
195,000 Vista Funding Corp., Series 1994-A, (Fifth Third Bank of Northwestern OH LOC),
6.030%, 1/1/1998 195,000
---------------------------------------------------------------------------------------------- -----------
Total 10,886,811
---------------------------------------------------------------------------------------------- -----------
INSURANCE -- 6.6%
- -------------------------------------------------------------------------------------------------------------
1,000,000 General American Life Insurance Co., 6.141%, 1/21/1998 1,000,000
----------------------------------------------------------------------------------------------
1,000,000 Jackson National Life Insurance Co., 5.820%, 1/25/1998 1,000,000
----------------------------------------------------------------------------------------------
915,294 (b)Liquid Asset Backed Securities Trust, Series 1997-3 Senior Notes, (Guaranteed by AMBAC),
5.906%, 3/27/1998 915,294
----------------------------------------------------------------------------------------------
1,000,000 Travelers Insurance Company, 5.837%, 2/20/1998 1,000,000
----------------------------------------------------------------------------------------------
Total 3,915,294
---------------------------------------------------------------------------------------------- -----------
TOTAL NOTES -- VARIABLE 14,802,105
---------------------------------------------------------------------------------------------- -----------
(c)REPURCHASE AGREEMENTS -- 39.2%
- -------------------------------------------------------------------------------------------------------------
6,505,000 Fuji Government Securities, Inc., 6.600%, dated 12/31/1997, due 1/2/1998 6,505,000
----------------------------------------------------------------------------------------------
856,000 Goldman Sachs Group, LP, 5.250%, dated 12/31/1997, due 1/2/1998 856,000
----------------------------------------------------------------------------------------------
2,500,000 HSBC Securities, Inc., 6.800%, dated 12/31/1997, due 1/2/1998 2,500,000
----------------------------------------------------------------------------------------------
6,000,000 PaineWebber Group, Inc., 6.600%, dated 12/31/1997, due 1/2/1998 6,000,000
----------------------------------------------------------------------------------------------
</TABLE>
F-4
<PAGE> 90
FEDERATED PRIME MONEY FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------- ---------
<S> <C>
(c)REPURCHASE AGREEMENTS -- CONTINUED
- -------------------------------------------------------------------------------------------------------------
$2,500,000 Societe Generale, New York, 6.600%, dated 12/31/1997, due 1/2/1998 $ 2,500,000
----------------------------------------------------------------------------------------------
2,500,000 Swiss Bank Capital Markets, 6.550%, dated 12/31/1997, due 1/2/1998 2,500,000
----------------------------------------------------------------------------------------------
2,500,000 UBS Securities, Inc., 6.800%, dated 12/31/1997, due 1/2/1998 2,500,000
---------------------------------------------------------------------------------------------- -----------
TOTAL REPURCHASE AGREEMENTS 23,361,000
---------------------------------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (AT AMORTIZED COST)(d) $59,695,419
---------------------------------------------------------------------------------------------- ===========
</TABLE>
(a) Floating rate note with current rate and next reset date shown.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At December 31, 1997, these securities
amounted to $3,771,105 which represents 6.3% of net assets.
(c) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($59,659,343) at December 31, 1997.
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
IDA -- Industrial Development Authority
IDB -- Industrial Development Bond
IDFA -- Industrial Development Finance Authority
LLC -- Limited Liability Corporation
LOC -- Letter of Credit
LP -- Limited Partnership
(See Notes which are an integral part of the Financial Statements)
F-5
<PAGE> 91
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED PRIME MONEY FUND II
DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $23,361,000
Investments in securities 36,334,419
-----------
Total investments in securities, at amortized cost and value $59,695,419
Income receivable 481,706
Receivable for investments sold 375,010
Receivable for shares sold 1,588,781
Deferred organizational costs 7,477
-----------
Total assets 62,148,393
LIABILITIES:
Payable for shares redeemed 745,573
Payable to bank 1,706,393
Income distribution payable 514
Accrued expenses 36,570
-----------
Total liabilities 2,489,050
-----------
NET ASSETS for 59,659,343 shares outstanding $59,659,343
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$59,659,343 divided by 59,659,343 shares outstanding $1.00
===========
</TABLE>
(See Notes which are an integral part of the Financial Statements)
F-6
<PAGE> 92
STATEMENT OF OPERATIONS
FEDERATED PRIME MONEY FUND II
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $3,464,429
EXPENSES:
Investment advisory fee $ 306,771
Administrative personnel and services fee 125,002
Custodian fees 23,110
Transfer and dividend disbursing agent fees and expenses 28,008
Trustees' fees 2,390
Auditing fees 12,794
Legal fees 4,953
Portfolio accounting fees 47,302
Share registration costs 5,283
Printing and postage 51,445
Insurance premiums 2,640
Miscellaneous 7,509
---------
Total expenses 617,207
Waiver--
Waiver of investment advisory fee (123,674)
---------
Net expenses 493,533
----------
Net investment income $2,970,896
==========
</TABLE>
(See Notes which are an integral part of the Financial Statements)
F-7
<PAGE> 93
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED PRIME MONEY FUND II
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------------
Net investment income $ 2,970,896 $ 1,446,378
- -------------------------------------------------------------------------------------- -------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------------------
Distributions from net investment income (2,970,896) (1,446,378)
- -------------------------------------------------------------------------------------- -------------- -------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------------------------
Proceeds from sale of shares 247,591,033 214,683,781
- --------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions declared 2,968,806 1,446,378
- --------------------------------------------------------------------------------------
Cost of shares redeemed (236,555,828) (188,312,731)
- -------------------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 14,004,011 27,817,428
- -------------------------------------------------------------------------------------- ------------- -------------
Change in net assets 14,004,011 27,817,428
- --------------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------------
Beginning of period 45,655,332 17,837,904
- -------------------------------------------------------------------------------------- ------------- -------------
End of period $ 59,659,343 $ 45,655,332
- -------------------------------------------------------------------------------------- ============= =============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
F-8
<PAGE> 94
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997 1996 1995 1994(a)
---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income 0.05 0.05 0.05 0.01
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Distributions from net investment income (0.05) (0.05) (0.05) (0.01)
- ---------------------------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------- ====== ====== ====== ======
TOTAL RETURN(b) 4.93% 4.75% 5.20% 0.50%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses 0.80% 0.80% 0.80% 0.80%*
- ----------------------------------------------------------------
Net investment income 4.84% 4.68% 5.12% 4.26%*
- ----------------------------------------------------------------
Expense waiver(c) 0.20% 0.57% 2.69% 71.84%*
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted) $59,659 $45,655 $17,838 $552
- ----------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from November 18, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 10,
1993 (start of business) to November 17, 1994, the Fund had no public
investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
F-9
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS
FEDERATED PRIME MONEY FUND II
DECEMBER 31, 1997
ORGANIZATION
Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated Prime Money Fund II (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The investment objective of the Fund is to provide current
income consistent with stability of principal and liquidity.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule 2a-7
under the Act.
Additional information on the restricted security held at December 31, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- -------- ---------------- ----------------
<S> <C> <C>
Liquid Asset Backed Securities
Trust, Series 1997-1 2/19/1997 $1,920,378
Liquid Asset Backed Securities
Trust, Series 1997-3 6/27/1997 915,294
Rabobank Optional Redemption
Trust, Series 1997-101 4/17/1997 935,433
</TABLE>
F-10
<PAGE> 96
FEDERATED PRIME MONEY FUND II
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
December 31, 1997, capital paid in aggregated $59,659,343.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
----------- ----------
<S> <C> <C>
Shares sold 247,591,033 214,683,781
- --------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 2,968,806 1,446,378
- --------------------------------------------------------------------
Shares redeemed (236,555,828) (188,312,731)
- -------------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions 14,004,011 27,817,428
- -------------------------------------------------------------------- ============ ============
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Advisers, the Fund's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver
at any time at its sole discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The
fee paid to FServ is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made
by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of $22,431 were borne initially by the Adviser. The
Fund has reimbursed the Adviser for these expenses. These expenses have been
deferred and are being amortized over the five-year period following the Fund's
effective date. For the period ended December 31, 1997, the Fund expensed
$5,981 of organizational expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
F-11
<PAGE> 97
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of the Federated Insurance Series
and Shareholders of FEDERATED PRIME MONEY FUND II:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Prime Money Fund II, (a portfolio of
the Federated Insurance Series) as of December 31, 1997, and the related
statement of operations for the year then ended, the statement of changes in
net assets for the years ended December 31, 1997 and 1996, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund'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 the securities owned as of
December 31, 1997, by correspondence with the custodian and brokers; where
replies were not received, we performed other auditing procedures. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Prime
Money Fund II as of December 31, 1997, the results of its operations, the
changes in its net assets and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
February 6, 1998
F-12
<PAGE> 98
TRUSTEES OFFICERS
John F. Donahue John F. Donahue
Chairman
Thomas G. Bigley
J. Christopher Donahue
John T. Conroy, Jr. President
William J. Copeland Edward C. Gonzales
Executive Vice President
J. Christopher Donahue
John W. McGonigle
James E. Dowd Executive Vice President, Treasurer,
and Secretary
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr. Vice President
Peter E. Madden Matthew S. Hardin
Assistant Secretary
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
Variable funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in variable funds involves investment risk,
including the possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
F-13
<PAGE> 99
[LOGO] FEDERATED INVESTORS
FEDERATED PRIME
MONEY FUND II
Federated Insurance Series
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
ANNUAL REPORT TO
SHAREHOLDERS
DECEMBER 31, 1997
Cusip 313916504
G00842-01 (2/98) [RECYCLE LOGO]
<PAGE> 100
First Variable Life Insurance Company Bulk Rate
10 Post Office Square U.S. Postage
Boston, MA 02109 PAID
800.228.1035 Permit No. 7
[email protected] Ashland, MA
This information must be preceded or accompanied by a currently effective
prospectus and performance sheet showing variable contract level returns.
Contact your investment professional or First Variable for a free prospectus.
Read it carefully before investing or sending money. Policies issued by the
company's former parent prior to the purchase of First Variable Life by Irish
Life of North America continue to be funded by VIST.
Variable annuities and variable life insurance contracts are not insured by the
FDIC, the Federal Reserve Board or any other agency and are not deposits or
obligations of, nor guaranteed or endorsed by, any bank or savings associations.
These products involve investment risk, including the possible loss of
principal.
First Variable Life is an affiliate of Irish Life of North America, Inc., the
holding company for Irish Life's U.S. companies. Irish Life, headquartered in
Dublin, Ireland, is a major international financial institution with assets in
excess of $11 billion, specializing in life insurance, pension plans and
investment management.
Securities are distributed through First Variable Capital Services, Inc. a
wholly owned subsidiary of First Variable Life and a member of the National
Association of Securities Dealers, Inc.
Products not available in all states.
#8010 (2/98)
[FIRST VARIABLE LIFE LOGO]
