VARIABLE INVESTORS SERIES TRUST
FUND PROFILE
May 1, 1999
VARIABLE INVESTORS SERIES TRUST ("Trust") achieves different investment
objectives through eight separate Portfolios. Each Portfolio has distinct
investment objectives and policies. The eight Portfolios offered by the Trust
are as follows:
Growth Portfolio
Growth & Income Portfolio
High Income Bond Portfolio
Matrix Equity Portfolio
Multiple Strategies Portfolio
Small Cap Growth Portfolio
U.S. Government Bond Portfolio
World Equity Portfolio
This profile summarizes key information about a Fund that is included in the
Fund's prospectus. The Fund's prospectus includes additional information about
the Fund, including a more detailed description of the risks associated with
investing in the Fund that you may want to consider before you invest. You may
obtain the prospectus and other information about the Fund at no cost by calling
1-800-887-8671.
FUND'S INVESTMENT OBJECTIVES/GOALS
The Portfolios offered in this Prospectus fall into three general investment
categories: growth, growth and income and income.
Growth Category
The goal of a Portfolio in the growth category is to increase the value of your
investment over the long term by investing mostly in stocks. Stocks are a type
of investment that can increase in value over a period of years. Companies sell
stock to get the money they need to grow. These companies often keep some of
their profits to reinvest in their business. As they grow, the value of their
stock may increase. This is how the value of your investment may increase.
The Trust's Growth Category includes:
* Small Cap Growth Portfolio
* World Equity Portfolio
* Growth Portfolio
The Growth Portfolio seeks current income as a secondary goal when consistent
with its primary goal of capital growth.
Growth and Income Category
The goal of a Portfolio in the growth and income category is to increase the
value of your investment over the long term and to provide income. Portfolios in
the growth and income category seek to conserve the value of your initial
investment and promote long-term growth and income by investing in equity
securities and income producing securities.
The Trust's Growth and Income Category includes:
* Growth and Income Portfolio
* Matrix Equity Portfolio
* Multiple Strategies Portfolio
Income Category
Unlike Portfolios in the growth category, where the objective is to make the
Portfolio's investments increase in value, Portfolios in the income category try
to keep the value of their investments from falling, while providing an increase
in the value of your investment through the income earned on the Portfolio's
investments. To meet this objective, a Portfolio in the income category buys
investments that are expected to pay interest to the Portfolio on a regular
basis.
The Trust's Income Category includes:
* U.S. Government Bond Portfolio
* High Income Bond Portfolio
PRINCIPAL INVESTMENT STRATEGIES
Growth Portfolio:
The Portfolio invests primarily in a diversified portfolio of:
* common stocks
* securities convertible into or exchangeable for common stocks
including convertible preferred stock, convertible debentures,
warrants and options
The investment emphasis of the Portfolio is on equities, primarily common stocks
and, to a lesser extent, securities convertible into common stocks, and rights
to subscribe for common stocks.
Securities are selected on the basis of their issuers':
* long-term potential for expanding their earnings
* profitability
* size
* potential increases in market recognition of their securities
The Portfolio focuses on the long-range view of a company's prospects through
analysis of its management, financial structure, product development, marketing
ability and other relevant factors. Types of securities held by the Portfolio
will vary depending on the Sub-Adviser's analysis of those industries offering
the best possibilities for long-term growth. In addition, the Sub-Adviser will
consider general economic factors to determine whether, under present business
conditions, a portfolio of common stocks with capital growth potential or a more
conservative portfolio including preferred stocks and defensive common stocks
would be more appropriate.
Primary Investments Percent of Total Assets*
- -----------------------------------------------------------
Equity securities At least 80%
- -----------------------------------------------------------
* At time of purchase
The principal risk of investing in the Growth Portfolio is market risk as
described more fully under "Principal Risks of Investing in the Fund."
Growth & Income Portfolio:
The Portfolio seeks to achieve its growth objective by investing in equity
securities which include:
* common stocks
* securities convertible into common stocks and readily marketable
securities, such as rights and warrants, which derive their value from
common stock.
The Portfolio seeks to achieve its income objective by investing in various
income producing securities including fixed income securities and money market
instruments.
The portion of the Portfolio invested from time to time in equity securities,
fixed income securities and money market securities will vary depending on
market conditions and there may be extended periods when the Portfolio is
primarily invested in one of them. In addition, the amount of income generated
from the Portfolio will fluctuate depending, among other things, on the
composition of the Portfolio's holdings and the level of interest and dividend
income paid on those holdings. The Portfolio may also purchase without
limitation dollar- denominated ADRs. ADRs are issued by domestic banks and
evidence ownership of underlying foreign securities. The Portfolio may also
invest in Global Depository Receipts ("GDRs"), which are securities convertible
into equity securities of foreign issuers.
Primary Investments Percent of Total Assets*
- ------------------------------------------------------------------
Equity securities, including common No minimum or maximum
stock, preferred stock, convertible
securities, rights and warrants
- ------------------------------------------------------------------
Fixed income securities, including No minimum or maximum
intermediate to long term invest-
ment grade corporate debt, mortgage-
backed securities and U.S.
Government securities
- ------------------------------------------------------------------
Cash and money market instruments, No minimum or maximum
including U.S. Government
securities, certificates of deposit,
short-term investment grade
corporate bonds, short term
securities and repurchase agreements
- -------------------------------------------------------------------
* At time of purchase
The principal risks of investing in the Growth & Income Portfolio, as described
more fully under "Principal Risks of Investing in the Fund" are:
* market risk
* credit risk
* interest rate risk
* prepayment risk
High Income Bond Portfolio:
The Portfolio invests primarily in fixed income securities which include:
* corporate bonds and notes
* discount bonds
* zero-coupon bonds
* convertible securities
* preferred stocks
* bonds issued with warrants
The Portfolio invests primarily in high yield, higher-risk securities commonly
known as "junk bonds."
As part of its securities selection process, the Sub-Adviser continuously
analyzes individual issuers, general business conditions and other factors which
may be too time consuming or too costly for the average investor. The analysis
of issuers may include, among other things:
* historic and current financial conditions
* current and anticipated cash flow and borrowing requirements
* value of assets in relation to historical cost
* strength of management
* responsiveness to business conditions
* credit standing
* current and anticipated results of operations
Analysis of general business conditions and other factors may include
anticipated changes in economic activity and interest rates, the availability of
new investment opportunities, and the economic outlook for specific industries.
The Sub-Adviser will not rely solely on the ratings assigned by the rating
services. The Portfolio may invest, without limit, in unrated securities if such
securities offer, in the Sub-Adviser's opinion, a relatively high yield without
undue risk.
Changing economic conditions and other factors may cause the yield difference
between lower-rated and higher-rated securities to narrow. When this occurs, the
Portfolio may purchase higher-rated securities if the Sub-Adviser believes that
the risk of loss of income and principal may be substantially reduced with only
a relatively small reduction in yield.
Primary Investments Percent of Total Assets*
- -----------------------------------------------------------------
Fixed income securities, including At least 80%
convertible and non-convertible
debt securities and, to a lesser
extent, preferred stock.
- ------------------------------------------------------------------
Cash or cash equivalents Up to 20%
- ------------------------------------------------------------------
* At time of purchase
The principal risks of investing in the High Income Bond Portfolio, as described
more fully under "Principal Risks of Investing in the Fund" are:
* market risk
* interest rate risk
* credit risk
The lower ratings of certain securities held by the Portfolio may enhance the
risks described above. Lower rated instruments, especially so called "junk
bonds," involve greater risks due to the financial health of the issuer and the
economy generally and their market prices can be more volatile.
Matrix Equity Portfolio:
Investment Strategy
The Portfolio will invest in a diversified portfolio of equity securities that
is selected by the Sub-Adviser on the basis of its proprietary analytical model.
Each security is ranked according to two separate and uncorrelated measures:
value and the momentum of Wall Street sentiment. The value measure compares a
company's assets, projected earnings growth and cash flow growth with its stock
price within the context of its historical valuation. The measure of Wall Street
sentiment examines changes in Wall Street analysts' earnings estimates and ranks
stocks by the strength and consistency of those changes. These two measures are
combined to create a single composite score of each stock's attractiveness. The
scores are then plotted on a matrix according to their relative attractiveness.
Sector weights are maintained at a similar level to the S&P 500 Index to avoid
unintended exposure to factors such as the direction of the economy, interest
rates, energy prices and inflation.
Prior to May 1, 1997, the Matrix Equity Portfolio was known as the "Tilt Utility
Portfolio" and sought to achieve its investment objective by investing in a
diversified portfolio of common stocks and income securities issued by companies
engaged in the utilities industry.
Primary Investments Percent of Total Assets*
- -----------------------------------------------------
Equity securities At least 65%
- -----------------------------------------------------
* At time of purchase
The principal risk of investing in the Matrix Equity Portfolio is market risk
described more fully under "Principal Risks of Investing in the Fund."
Multiple Strategies Portfolio:
The Portfolio invests in equity securities, bonds, and money market instruments
in varying proportions, depending upon the Portfolio's Sub-Adviser's assessment
of prevailing economic conditions and conditions in the financial markets. The
Portfolio's Sub-Adviser will from time to time adjust the mix of investments
among the three market sectors to attempt to capitalize on perceived variations
in return potential produced by changing financial markets and economic
conditions. Major changes in investment mix may occur over several years or
during a single year depending upon market and economic conditions.
The Portfolio's investment policies for its stock component are substantially
identical to those which have been established for the Growth Portfolio. The
Portfolio's investment policies for its bond component are substantially
identical to those which have been established for the U.S. Government Bond
Portfolio with one exception. The Portfolio, unlike the U.S. Government Bond
Portfolio, may invest in bonds rated at least BBB by Standard & Poor's or Baa by
Moody's or unrated bonds judged by the Portfolio's Sub-Adviser to be of
comparable quality.
The Portfolio will not hold the same securities as the Growth Portfolio and the
U.S. Government Bond Portfolio.
Primary Investments Percent of Total Assets*
- ---------------------------------------------------------------
Equity securities, including common No minimum or maximum
stock, preferred stock, convertible
securities, rights and warrants
- ---------------------------------------------------------------
Fixed income securities, including No minimum or maximum
intermediate to long term
investment grade corporate debt,
mortgage-backed securities and U.S.
Government securities
- ---------------------------------------------------------------
Cash and money market instruments, No minimum or maximum
including U.S. Government
securities, certificates of
deposit, short-term investment
grade corporate bonds, short
term securities and repurchase
agreements
- -----------------------------------------------------------
Foreign securities and in up to 25%
securities traded in foreign
securities markets
- -----------------------------------------------------------
* At time of purchase
The principal risks of investing in the Multiple Strategies Portfolio, as
described more fully under "Principal Risks of Investing in the Fund" are:
* market risk
* credit risk
* interest rate risk
* prepayment risk
* foreign securities risks
Small Cap Growth Portfolio:
The Portfolio invests primarily in equity securities of companies with small
capitalizations (market capitalizations or annual revenues under $1 billion at
time of purchase.)
The Sub-Adviser believes that generally at least 50% of the Portfolio's assets
will be invested in common stocks and convertible securities traded in the over-
the-counter market. Convertible securities have characteristics similar to both
fixed income and equity securities. At certain times that percentage may be
substantially higher. The Portfolio will seek to achieve its objective by
investing in companies which the Sub-Adviser believes have an outlook for strong
growth in earnings and the potential for significant capital appreciation.
The Portfolio will sell securities when the Sub-Adviser believes that:
* anticipated appreciation is no longer probable
* alternative investments offer superior appreciation prospects or
* the risk of a decline in market price is too great.
The Portfolio may invest up to 15% of its total assets in foreign issuers.
Primary Investments Percentage of Total Assets*
- ---------------------------------------------------------------
Securities of companies with At least 65%
small capitalizations (market
capitalizations or annual
revenues under $1 billion at
time of purchase)
- ----------------------------------------------------------------
* At time of purchase
The principal risks of investing in the Small Cap Growth Portfolio, as described
more fully under "Principal Risks of Investing in the Fund" are:
* market risk
* small capitalization company risk
* liquidity risk
* credit risk
* interest rate risk
U.S. Government Bond Portfolio:
The Portfolio will invest primarily in U.S. Government securities. The
securities purchased by the Portfolio generally will be intermediate-term bonds
with remaining terms to maturity of five to ten years. A significant portion of
the securities held by the Portfolio may consist of mortgage- backed
certificates and other securities representing ownership interests in mortgage
pools. These include collateralized mortgage obligations. Some of the
mortgage-backed securities may be backed by agencies or instrumentalities of the
U.S. Government
Primary Investments Percent of Total Assets*
- --------------------------------------------------------------
U.S. Government Securities At least 80%
- --------------------------------------------------------------
Other debt securities rated at Up to 20%
least BBB by Standard & Poor's
or Baa by Moody's, or of
comparable quality; and in
cash and money market instruments.
- -------------------------------------------------------------
* At time of purchase
The principal risks of investing in the U.S. Government Bond Portfolio, as
described more fully under "Principal Risks of Investing in the Fund" are:
* market risk
* credit risk
* interest rate risk
* prepayment risk
World Equity Portfolio:
The Portfolio will invest primarily in common stocks, and securities convertible
into common stocks, traded in securities markets located around the world,
including the United States. At times, the Portfolio may invest up to 100% of
its assets in securities principally traded in markets outside the United
States. The Portfolio may invest 100% of its assets in the United States in
unusual market circumstances where the Sub-Adviser believes that foreign
investing may involve undue risks. At times the Portfolio will invest the common
stock portion of the Portfolio primarily in securities of issuers with small
market capitalizations (market capitalizations or annual revenues under $1
billion at time of purchase.) The Sub-Adviser intends to invest portfolio assets
in small capitalization companies that have strong balance sheets and which its
research indicates should exceed informed consensus of earnings expectations.
Based on its analysis of the prevailing global economic and investment
environment, the Sub-Adviser will seek to identify those countries and
industrial sectors it expects to benefit in that environment. Within those
countries and industrial sectors, the Sub-Adviser will seek to invest the
Portfolio's assets:
* in securities of companies likely to show earnings growth from improving
profit margins, new products and/or increased market shares and
* in securities of companies whose potential for growth is not fully
reflected in the prices of the companies' stock.
Under normal circumstances, the Portfolio will seek to have represented among
its investments issuers located in at least five different countries (one of
which may be the United States).
The Portfolio may engage in a variety of foreign currency exchange transactions
to protect against uncertainty in the levels of future currency exchange rates.
These transactions may include the purchase and sale of foreign currencies and
options on foreign currencies and the purchase and sale of currency forward
contracts and currency futures contracts and related options.
Primary Investments Percent of Total Assets*
- -----------------------------------------------------------
*Common stocks, convertible At least 65%
securities and warrants to
purchase common stocks and
convertible securities
* Securities of the U.S. up to 35%
Government or of any foreign
government or any supra-
national entity. Examples of
supranational entities include
the International Bank for
Reconstruction and Development,
the European Steel and Coal
Community, the Asian
Development Bank, and the
InterAmerican Development Bank.
* Debt securities of any issuer
rated A or better at the time of
purchase by Standard & Poor's
or Moody's or of comparable
quality as determined by the
Sub-Adviser.
* Cash and money market
instruments.
*Common stocks and related up to 20%
securities of issuers head-
quartered in emerging market
countries. Emerging market
countries generally include
countries in the initial
stage of their
industrialization with low
per capita income.
- --------------------------------------------------------
*At time of purchase
The principal risks of investing in the World Equity Portfolio, as described
more fully under "Principal Risks of Investing in the Fund" are:
* market risk
* small capitalization company risk
* foreign securities risks
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the last fiscal year. You
may obtain either or both of these reports at no cost by calling 1-800-887-8671.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Market Risk: the risk that the value of the securities purchased by the
Portfolio will decline as a result of economic, political or market conditions
or an issuer's financial circumstances.
Small Capitalization Company Risk: the risk that small companies may be
generally subject to more abrupt or erratic market movements than securities of
larger, more established companies.
Liquidity Risk: the risk that the degree of market liquidity of some stocks in
which the Portfolio invests may be relatively limited in that the Portfolio
invests primarily in over-the-counter stocks.
Credit Risk: the risk that an issuer of a fixed income security owned by the
Portfolio may be unable to make interest or principal payments.
Interest Rate Risk: the risk that fluctuations in interest rates may affect the
value of the Portfolio's interest-paying fixed income securities. This risk is
enhanced with respect to zero coupon securities which tend to respond more to
changes in interest rates than do otherwise comparable debt obligations that
provide for periodic payment of interest.
Prepayment Risk: the risk that the holder of a mortgage underlying a
mortgage-backed security owned by the Portfolio will prepay principal,
particularly during periods of declining interest rates.
Foreign Securities Risks
Political Risk: the risk that a change in a foreign government will occur and
that the assets of a company in which the Portfolio has invested will be
affected.
Currency Risk: the risk that a foreign currency will decline in value. The
Portfolio may trade in currencies other than the U.S. dollar. An increase in the
value of the U.S. dollar relative to a foreign currency will adversely affect
the value of the Portfolio.
Limited Information Risk: the risk that foreign companies may not be subject to
accounting standards or governmental supervision comparable to U.S. companies
and that less public information about their operations may exist.
Emerging Market Country Risk: the risks associated with investment in foreign
securities are heightened in connection with investments in the securities of
issuers in emerging markets, as these markets are generally more volatile than
the markets of developed countries.
Settlement and Clearance Risk: the risks associated with the clearance and
settlement procedures in non-U.S. markets, which may be unable to keep pace with
the volume of securities transactions and may cause delays.
Liquidity Risk: foreign markets may be less liquid and more volatile than U.S.
markets and offer less protection to investors.
The following illustrations provide information concerning the variability of
the Fund's returns. The data indicates the potential risks of investing by
showing changes in performance and average annual returns. The Fund's past
performance is not necessarily an indication of the Fund's future performance.
BAR CHART
TABLE
MANAGEMENT OF THE FUND
The Adviser, a Massachusetts corporation, has been in the investment advisory
business since 1994. The Adviser's address is 2122 York Road, Suite 300, Oak
Brook, Illinois 60523. The Adviser has been the investment adviser for the Small
Cap Growth and Growth & Income Portfolios since their inception and for the
other Portfolios since April 1, 1994.
The Adviser is a wholly-owned subsidiary of First Variable Life, the ultimate
parent of which is Irish Life & Permanent plc., a leading insurance and
financial services group in Ireland with total assets of $________ at
__________, 1999.
The Adviser oversees the Portfolio's day-to-day operations and supervises the
purchase and sale of Portfolio investments. The Adviser employs Sub-Advisers to
make investment decisions for each of the Portfolios.
The Adviser serves in its capacity as investment adviser through an investment
advisory agreement it enters into with the Trust. The Investment Advisory
Agreement provides for the Trust to pay all expenses not specifically assumed by
the Adviser. Examples of expenses paid by the Trust include custodial fees, and
the fees of outside legal and auditing firms. The Trust allocates these expenses
to each Portfolio in a manner approved by the Trustees. The Investment Advisory
Agreement is renewed each year by the Trustees.
For all of the Portfolios, the Adviser works with Sub-Advisers, financial
service companies that specialize in certain types of investing. However, the
Adviser still retains ultimate responsibility for managing the Portfolios. The
Sub-Adviser's role is to make investment decisions for the Portfolios according
to each Portfolio's investment objectives and restrictions.
The following organizations act as Sub-Advisers to the Portfolio:
FEDERATED INVESTMENT COUNSELING ("FEDERATED"), Federated Investors Tower,
Pittsburgh, PA 15222, is the Sub-Adviser for the High Income Bond Portfolio.
Federated, organized as a Delaware business trust on April 11, 1989, is
registered as an investment adviser under the Advisers Act. Federated acts as
investment adviser to corporate clients, as well as sub-adviser to separate
accounts of variable annuity and life insurance products. As of December 31,
1998, Federated had $___ billion in assets under management and administration.
Federated is a wholly-owned subsidiary of FII Holdings, Inc., which is a
wholly-owned subsidiary of Federated Investors, Inc., which in turn is a
wholly-owned subsidiary of Federated Investors.
Mr. Mark E. Durbiano is the portfolio manager for Federated for the High Income
Bond Portfolio. Mr. Durbiano joined Federated Investors in 1982 and is a Senior
Vice President of advisory affiliates of Federated. Mr. Durbiano is a Chartered
Financial Analyst and received his MBA in Finance from the University of
Pittsburgh.
VALUE LINE, INC. ("VALUE LINE"), 220 East 42nd Street, New York, NY 10017-5891,
is the Sub-Adviser for the Growth Portfolio and the Multiple Strategies
Portfolio.
Value Line was organized in 1982 and is the successor to substantially all of
the operations of Arnold Bernhard & Co., Inc. ("AB&Co."). Value Line was formed
as part of a reorganization of AB&Co., a sole proprietorship formed in 1931
which became a New York corporation in 1946. AB&Co. currently owns approximately
81% of the outstanding shares of Value Line's stock. Jean Bernhard Buttner,
Chairman, Chief Executive Officer and President of Value Line, owns
substantially all of the voting stock of AB&Co. All of the non-voting stock is
owned by or for the benefit of the Bernhard family. Value Line currently acts as
investment adviser to the other Value Line mutual funds and furnishes investment
counseling services to private and institutional accounts with combined assets
in excess of $___ billion.
Nancy L. Bendig is the portfolio manager for Value Line, Inc. for the Growth and
Multiple Strategies Portfolios. Ms. Bendig has been a portfolio manager for
Value Line, Inc. since 1994. She received her B.A. from Queens College and her
MBA from St. John's University.
STRONG CAPITAL MANAGEMENT, INC. ("STRONG"), One Hundred Heritage Reserve, P.O.
Box 2936, Milwaukee, WI 53201, is the Sub-Adviser for the U.S. Government Bond
Portfolio.
Strong began conducting business in 1974. Since then, its principal business has
been providing continuous investment supervision for individuals, and
institutional accounts, such as pension funds and profit-sharing plans as well
as mutual funds. As of February 1, 1999, Strong had over $___ billion under
management. Mr. Richard S. Strong is the controlling shareholder of Strong.
Strong also acts as investment adviser for each of the mutual funds comprising
the Strong Family of Funds.
Mr. Bradley C. Tank is the portfolio manager for Strong for the U.S. Government
Bond Portfolio. Before joining the Advisor in June, 1990, Mr. Tank spent eight
years at Salomon Brothers, Inc., where he was a vice president and fixed income
specialist. Mr. Tank received his B.A. in 1980 from the University of
Wisconsin-Eau Claire and his M.B.A. in 1982 from the University of
Wisconsin-Madison, where he also completed the Applied Securities Analysis
Program. He has managed or co-managed the Strong Short-Term Bond and Government
Securities Funds since he joined Strong. In addition, Mr. Tank chairs the Fixed
Income Investment Committee.
Mr. John T. Bender also manages the U.S. Government Bond Portfolio for Strong.
Mr. Bender began his career with Strong in 1987 and after receiving his
bachelor's degree from Marquette University in 1988, he became an accountant in
Strong's shareholder and accounting compliance department. He subsequently
joined Strong's investment team as an equity trader, and later became a fixed
income research analyst and trader. He is both a Chartered Financial Analyst and
a Certified Public Accountant. He has co-managed Strong's Corporate Bond Fund
since January 1996 and Strong's Government Securities Fund since March 1997.
STATE STREET BANK AND TRUST COMPANY ("STATE STREET"), through its investment
management division State Street Global Advisors, Two International Place,
Boston, MA 02110, is the Sub-Adviser for the Matrix Equity Portfolio.
State Street Global Advisors provides the investment management for the
Portfolio. State Street Global Advisors is the investment management division of
State Street and had over $___ billion under management as of December 31, 1998.
State Street Global Advisors uses a team approach in managing the Portfolio. The
team of managers responsible for the Portfolio includes: Peter Stonberg, Richard
B. Weed, Ben J. Salm, David Hanna, Peter Wiley, Jennifer Bardsley and Jeff
Adams.
EVERGREEN INVESTMENT MANAGEMENT COMPANY ("EVERGREEN INVESTMENT"), 200 Berkeley
Street, Boston, MA 02116-5034, is the Sub-Adviser for the World Equity
Portfolio.
Evergreen Investment (formerly known as Keystone Investment Management Company)
was organized in 1932 as a Delaware corporation. First Union Keystone, Inc.
("Keystone") is the corporate parent of wholly-owned operating subsidiaries,
which include Evergreen Investment. Keystone is a wholly-owned subsidiary of
FUNB-NC which, in turn, is owned by First Union Corporation ("First Union").
First Union is a publicly owned multibank holding company registered under the
federal Bank Holding Company Act of 1956, as amended. First Union and its
subsidiaries provide a broad range of financial services.
Mr. Gilman C. Gunn, III is the portfolio manager for Evergreen Investment for
the foreign equity component of the World Equity Portfolio. Mr. J. Gary Craven
is the senior portfolio manager for Evergreen Investment for the U.S. equity
component of the World Equity Portfolio.
Prior to joining Evergreen Investment, Mr. Gunn spent 7 years in London as head
of Investment Research for Paribas Capital Markets. He spent two years in Kuwait
as Advisor to the Kuwait International Investment Company and also one year in
Thailand. Before going overseas, Mr. Gunn managed an $800 million bond portfolio
for The Chubb Corporation in New York. Mr. Gunn received his M.B.A. from N.Y.U.
and has been quoted extensively in The Wall Street Journal, Barrons, Business
Week, Forbes and international publications.
Mr. J. Gary Craven is a Senior Vice President, Senior Portfolio Manager and Head
of Keystone's Small Cap Growth Team. His broad career experience includes public
accounting, small business management and retail brokerage. At Invista Capital
Management, Gary served as an equity Analyst and Portfolio Manager on both
emerging growth and growth portfolios. He is a graduate of the University of
Iowa, has 13 years investment experience and is both a Certified Public
Accountant and a Chartered Financial Analyst.
WARBURG PINCUS ASSET MANAGEMENT, INC., ("WPAM") 466 Lexington Avenue, New York,
New York 10017-3147, is the Sub-Adviser for the Growth & Income Portfolio. WPAM
is a professional investment advisory firm which provides investment services to
investment companies, employee benefit plans, endowment funds, foundations and
other institutions and individuals. As of January 31, 1999, WPAM managed
approximately $____ billion of assets, including approximately $____ billion of
investment company assets. Incorporated in 1970, WPAM is indirectly controlled
by Warburg, Pincus & Co. ("WP&Co."), which has no business other than being a
holding company of WPAM and its affiliates. Lionel I. Pincus, the managing
partner of WP&Co., may be deemed to control both WP&Co. and WPAM.
On February 15, 1999, WP & Co. and Credit Suisse Asset Management ("Credit
Suisse") announced an agreement under which Credit Suisse will acquire WPAM.
Subject to regulatory approvals, the acquisition is expected to be completed by
mid-1999.
Credit Suisse is the institutional asset management and mutual fund arm of
Credit Suisse Group. Credit Suisse employs about 1,600 people worldwide and has
global assets under management of approximately $210 billion as of December 31,
1998.
Credit Suisse Group is a global financial services company, providing a
comprehensive range of banking and insurance products. Active on every continent
and in all major financial centers, Credit Suisse Group comprises five business
units, each geared to the requirements of specific customer groups and markets.
The Group has about $680 billion of assets under management and employs about
62,000 staff.
Brian Posner, a managing director of WPAM, is responsible for the day-to-day
management of the Growth & Income Portfolio's investments. Prior to joining WPAM
in January 1997, Mr. Posner was an employee of Fidelity Investments ("Fidelity")
from 1987 until December, 1996. He was the vice president and portfolio manager
of the Fidelity Equity-Income II Fund (1992-December 1996).
PILGRIM BAXTER & ASSOCIATES, LTD. ("PILGRIM BAXTER"), 825 Duportail Road, Wayne,
Pennsylvania 19087, is the Sub-Adviser for the Small Cap Growth Portfolio.
Pilgrim Baxter is a professional investment management firm and registered
investment adviser that, along with its predecessors, has been in business since
1982. On April 28, 1995, Pilgrim Baxter became affiliated with United Asset
Management, a public company which currently manages over $___ billion through
investment management affiliates. As of December 31, 1998, Pilgrim Baxter had
discretionary management authority with respect to approximately $__ billion in
assets. In addition to advising the Portfolio, Pilgrim Baxter provides advisory
services to pension plans, profit sharing plans and other investment companies.
Peter J. Niedland, CFA is responsible for the day-to-day management and Gary L.
Pilgrim, CFA is responsible for oversight management of the Small Cap Growth
Portfolio's investments. Mr. Niedland worked on the development of Pilgrim
Baxter's proprietary research program, QRS. He received his B.A. from the
University of Richmond and is a candidate for Chartered Financial Analyst. Mr.
Pilgrim has been the Chief Investment Officer of Pilgrim Baxter since 1985.
