LPT VARIABLE INSURANCE SERIES TRUST
1755 CREEKSIDE OAKS DRIVE
SACRAMENTO, CALIFORNIA 95833
ROBERTSON STEPHENS DIVERSIFIED GROWTH PORTFOLIO
BERKELEY U.S. QUALITY BOND PORTFOLIO
BERKELEY MONEY MARKET PORTFOLIO
HARRIS ASSOCIATES VALUE PORTFOLIO
LEXINGTON CORPORATE LEADERS PORTFOLIO
STRONG GROWTH PORTFOLIO
MFS TOTAL RETURN PORTFOLIO
SAI GLOBAL LEADERS PORTFOLIO
The Securities and Exchange Commission
has not approved or disapproved these
securities nor has it determined that
this prospectus is accurate or complete.
It is a criminal
offense to state otherwise.
The date of this Prospectus is May 1, 1999
TABLE OF CONTENTS
Page
SUMMARY.................................................... 1
The Trust and the Portfolios............................. 1
Performance.............................................. 5
DESCRIPTION OF THE PORTFOLIOS.............................. 8
MANAGEMENT OF THE PORTFOLIOS............................... 18
PERFORMANCE OF THE PORTFOLIOS.............................. 22
COMPARABLE PERFORMANCE..................................... 23
PORTFOLIO SHARES........................................... 24
DISTRIBUTION OF SHARES..................................... 26
FINANCIAL HIGHLIGHTS....................................... 26
SUMMARY
THE TRUST AND THE PORTFOLIOS
All of the Portfolios described in this document are series of LPT Variable
Insurance Series Trust ("Trust"), an open-end management investment company.
Investment companies (or "mutual funds") pool the money of a number of different
investors and buy many different securities. Pooling allows the investors to
spread the risk of loss of their investments over more securities than they
could if they invested their money alone.
Although the Portfolios are structured the same as mutual funds, they are not
offered or sold directly to the public. Unless you are an insurance company, you
may only invest in the Portfolios through a variable annuity contract
("Contract"), which you purchase from an insurance company. The insurance
company becomes the legal shareholder in the Portfolio. You (the holder of the
Contract) are not a shareholder in the Trust, but have a beneficial interest in
it. Although you do not have the same rights as if you were a direct
shareholder, you are given many similar rights, such as voting rights under
rules of the Securities and Exchange Commission that apply to registered
investment companies.
Within limitations described in the Contract, owners may allocate the amounts
under the Contracts for ultimate investment in the various Portfolios of the
Trust. See the prospectus which is attached at the front of this Prospectus for
a description of:
o the Contract,
o the Portfolios of the Trust that are available under that Contract, and
o the relationship between increases or decreases in the net asset value of
Trust shares (and any dividends and distributions on such shares) and the
benefits provided under that Contract.
The Contracts may be sold by banks. An investment in a Portfolio of the Trust
through a Contract is not a deposit of a bank and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Robertson Stephens Diversified Growth Portfolio
Investment Goal
Robertson Stephens Diversified Growth Portfolio seeks long-term capital growth.
Principal Investment Strategies and Risks
Robertson Stephens Diversified Growth Portfolio
The Portfolio will invest at least 65% of its total assets in stocks and
warrants of companies that have a market capitalization of $3 billion or less.
The Subadviser looks for companies that it believes have a potential for growth
that other investors have not recognized. The Subadviser may invest a larger
percentage of the assets of the Portfolio in a single company than do other
investment advisers.
The principal risks of investing in the Portfolio are:
o Investments in small to medium sized companies may produce higher returns
than investments in companies with larger capitalizations; however, companies
with smaller capitalizations may have a higher risk of failure than larger
companies.
o There is no assurance that the Subadviser will find securities that meet
the goals of the Portfolio or that the companies the Subadviser selects will
reach their potential value. The value of the securities purchased by the
Portfolio may decline as a result of economic, political or market conditions or
an issuer's financial circumstances.
o The portfolio manager's judgment that a particular security is
undervalued in relation to the company's fundamental economic values may prove
incorrect. Stocks of undervalued companies may never achieve their potential
value.
o Investing larger amounts in a single company can increase the potential
risk to the Portfolio if one of those companies is not successful.
o Engaging in short sales of stock can increase the losses of the
Portfolio.
o All securities fluctuate in value. The value of your investment in a
Portfolio at any given time may be less than the purchase payments you (the
owner of the Contract) originally invested in the Portfolio. If you liquidate
your investment in a Portfolio when the value is low, you have a greater risk of
receiving less than the amount you originally invested.
Berkeley U.S. Quality Bond Portfolio
Investment Goal
Berkeley U.S. Quality Bond Portfolio seeks to obtain a high level of current
income.
Principal Investment Strategies and Risks
Berkeley U.S. Quality Bond Portfolio (Shares of this Portfolio are no longer
offered for sale.)
The Portfolio will invest at least 65% of its total assets in higher quality
bonds or securities that represent an interest in pools of higher quality debt
obligations such as mortgages.
The principal risks of investing in the Portfolio are:
o 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.
o The risk that an issuer of a fixed income security owned by the Portfolio
may be unable to make interest or principal payments.
o The risk that fluctuations in interest rates may affect the value of the
Portfolio's interest-paying fixed income securities.
o 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.
o All securities fluctuate in value. The value of your investment in a
Portfolio at any given time may be less than the purchase payments you (the
owner of the Contract) originally invested in the Portfolio. If you liquidate
your investment in a Portfolio when the value is low, you have a greater risk of
receiving less than the amount you originally invested.
Berkeley Money Market Portfolio
Investment Goal
Berkeley Money Market Portfolio seeks as high a level of current income as is
possible while maintaining a high level of liquidity and stability of principal.
Principal Investment Strategies and Risks
Berkeley Money Market Portfolio (Shares of this Portfolio are no longer offered
for sale.)
The Portfolio will invest in high quality instruments that meet the requirements
for money market securities as defined by the Securities and Exchange
Commission.
The short-term money market securities the Portfolio invests in are high-quality
investments posing low credit and interest rate risk. Because the risk to the
money you invest is low, the potential for profit is also low.
The principal risks of investing in the Portfolio are:
o The rate of income varies daily depending on short-term interest rates.
o A significant change in interest rates or a default on a security held by
the Portfolio could cause the value of your investment to decline.
o An investment in the Portfolio is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
o Although the Portfolio seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Portfolio.
o All securities fluctuate in value. The value of your investment in a
Portfolio at any given time may be less than the purchase payments you (the
owner of the Contract) originally invested in the Portfolio. If you liquidate
your investment in a Portfolio when the value is low, you have a greater risk of
receiving less than the amount you originally invested.
Harris Associates Value Portfolio
Investment Goal
Harris Associates Value Portfolio seeks long-term capital appreciation.
Principal Investment Strategies and Risks
Harris Associates Value Portfolio
The Portfolio will invest at least 65% of its total assets in stocks or
securities that can be converted into stocks. The Subadviser may invest up to
25% of the assets in securities of non-U.S. companies and may invest up to 25%
of the assets in lower quality, higher-yielding, bonds (junk bonds).
The principal risks of investing in the Portfolio are:
o The value of the securities purchased by the Portfolio may decline as a
result of economic, political or market conditions or an issuer's financial
circumstances.
o Investments in small to medium sized companies may produce higher returns
than investments in companies with larger capitalizations; however, companies
with small capitalizations may have a higher risk of failure than larger
companies.
o The portfolio manager's judgment that a particular security is
under-valued in relation to the company's fundamental economic values may prove
incorrect. Stocks of undervalued companies may never achieve their potential
value.
o Securities of non-U.S. companies are subject to risks in addition to the
normal risks of investments, such as changes in value related to changes in
currency exchange rates, additional transaction costs and more difficulty in
selling the securities.
o Lower quality, higher-yielding, bonds (junk bonds) may have a greater
potential return than higher quality bonds but also have a higher risk of
default.
o Engaging in short sales of stock can increase the losses of the Portfolio.
o All securities fluctuate in value. The value of your investment in a
Portfolio at any given time may be less than the purchase payment you (the owner
of the Contract) originally invested in the Portfolio. If you liquidate your
investment in a Portfolio when the value is low, you have a greater risk of
receiving less than the amount you originally invested.
Lexington Corporate Leaders Portfolio
Investment Goal
Lexington Corporate Leaders Portfolio seeks long-term capital growth and income.
Principal Investment Strategies and Risks
Lexington Corporate Leaders Portfolio
The Portfolio will invest in the stocks of large, well-established companies
that have a market capitalization greater than $1 billion. The stocks that the
Portfolio will own will be substantially selected from among the stocks of
companies represented in the Dow Jones Industrial Average (DJIA), but the
Portfolio is not limited in its investment to companies in the DJIA and will
purchase shares of other companies that meet its investment criteria.
The principal risks of investing in the Portfolio are:
o The value of the securities purchased by the Portfolio may decline as a
result of economic, political or market conditions or an issuer's financial
circumstances.
o Larger more established companies may be unable to respond quickly to new
competitive challenges such as changes in technology and consumer tastes. Many
larger companies also may not be able to attain the high growth rate of
successful smaller companies, especially during extended periods of economic
expansion.
o Although the Subadviser expects to invest in the stocks of companies
listed in the DJIA, the Subadviser does not expect the Portfolio to have the
same return as the Dow Jones Industrial Average.
o The Portfolio is not required to be diversified and therefore the
Subadviser may invest in a small number of companies. Investing in a small
number of companies can increase the potential risk to the Portfolio if one of
those companies is not successful.
o All securities fluctuate in value. The value of your investment in a
Portfolio at any given time may be less than the purchase payments you (the
owner of the Contract) originally invested in the Portfolio. If you liquidate
your investment in a Portfolio when the value is low, you have a greater risk of
receiving less than the amount you originally invested.
Strong Growth Portfolio
Investment Goal
Strong Growth Portfolio seeks capital growth.
Principal Investment Strategies and Risks
Strong Growth Portfolio
The Portfolio will invest at least 65% of its assets in stocks and securities
that can be converted into stocks, which may include a substantial amount of
stocks of companies that have a market capitalization of $3 billion or less. The
Subadviser may also invest up to 25% of the assets in foreign securities,
including up to 15% of the assets directly in securities of non-U.S. Companies
and the rest in depository receipts.
The principal risks of investing in the Portfolio are:
o Investments in small- to medium-sized companies may produce higher returns
than investments in companies with larger capitalizations; however, companies
with smaller capitalizations may have a higher risk of failure than larger
companies.
o Securities of non-U.S. companies are subject to risks in addition to the
normal risks of investments, such as changes in value related to changes in
currency exchange rates, higher transaction costs and more difficulty in selling
the securities.
o General stock risks: The major risk of the Portfolio is that of investing
in the stock market. That means the Portfolio may experience sudden,
unpredictable declines in value, as well as periods of poor performance. Because
stock values go up and down, the value of your Portfolio's shares may go up and
down. Therefore, when you sell your investment, you may receive more or less
money than you originally invested.
o Growth-style investing: Different types of stocks tend to shift into and
out of favor with stock market investors depending on market and economic
conditions. Because the Portfolio focuses on growth-style stocks, the
Portfolio's performance may at times be better or worse than the performance of
stock funds that focus on other types of stocks, or that have a broader
investment style.
o All securities fluctuate in value. The value of your investment in a
Portfolio at any given time may be less than the purchase payments you (the
owner of the Contract) originally invested in the Portfolio. If you liquidate
your investment in a Portfolio when the value is low, you have a greater risk of
receiving less than the amount you originally invested.
MFS Total Return Portfolio
Investment Goal
MFS Total Return Portfolio seeks total return.
Principal Investment Strategies and Risks
MFS Total Return Portfolio
The Portfolio seeks to meet its goal by investing between 40% and 75% of its
assets in stocks and securities that can be converted into stocks and at least
25% of its assets in debt obligations, including up to 20% in lower-quality,
higher-yielding bonds (junk bonds).
The principal risks of investing in the Portfolio are:
o The value of the securities purchased by the Portfolio may decline as a
result of economic, political or market conditions or on issuer's financial
circumstances.
o The issuer of a fixed income security owned by the Portfolio may be unable
to make interest or principal payments.
o Fluctuations in interest rates may affect the value of the Portfolio's
interest-paying fixed income securities.
o Lower quality, higher-yielding, bonds (junk bonds) may have a greater
potential return than higher quality bonds but also have a higher risk of
default.
o All securities fluctuate in value. The value of your investment in a
Portfolio at any given time may be less than the purchase payments you (the
owner of the Contract) originally invested in the Portfolio. If you liquidate
your investment in a Portfolio when the value is low, you have a greater risk of
receiving less than the amount you originally invested.
SAI Global Leaders Portfolio
Investment Goal
SAI Global Leaders Portfolio seeks long-term capital growth.
Principal Investment Strategies and Risks
SAI Global Leaders Portfolio
The Portfolio seeks to meet its goals by investing primarily in equity
securities of foreign and domestic companies with large market capitalizations
($3 billion or more).
The Portfolio may invest up to 80% of its assets in foreign equity securities,
including depository receipts or shares. The Portfolio usually invests in
companies from at least three different countries.
The Portfolio may invest up to 35% of its assets in intermediate- to long-term
debt securities. The Portfolio may invest up to 20% of its assets in
non-investment grade debt securities.
The principal risks of investing in the Portfolio are:
o Securities of non-U.S. companies are subject to risks in addition to the
normal risks of investments, such as changes in value related to changes in
currency exchange rates, additional transaction costs and more difficulty in
selling the securities.
o Lower quality, higher-yielding, bonds (junk bonds) may have a greater
potential return than higher quality bonds but also have a higher risk of
default.
o The value of the securities purchased by the Portfolio may decline as a
result of economic, political or market conditions or an issuer's financial
circumstances.
o Larger more established companies may be unable to respond quickly to new
competitive challenges such as changes in technology and consumer tastes. Many
larger companies also may not be able to obtain the high growth rates of
successful smaller companies, especially during extended periods of economic
expansion.
o The issuer of a fixed income security owned by the Portfolio may be unable
to make interest or principal payments.
o Fluctuations in interest rates may affect the value of the Portfolio's
interest-paying fixed income securities.
o All securities fluctuate in value. The value of your investment in a
Portfolio at any given time may be less than the purchase payments you (the
owner of the Contract) originally invested in the Portfolio. If you liquidate
your investment in a Portfolio when the value is low, you have a greater risk of
receiving less than the amount you originally invested.
PERFORMANCE
The following charts provide information about the performance of each of the
Portfolios. The SAI Global Leaders Portfolio has not yet commenced investment
operations. Unless noted otherwise, information is shown from February 9, 1996
(the date the Portfolios were first offered for investment) through December 31,
1998. The bar charts show you how much the performance of each Portfolio has
varied for each calendar year since it began operations. The amount of variation
between years can show you how much risk there is in investing in a particular
Portfolio. The tables compare the performance of each Portfolio to the
performance of one or more broad market indexes. This comparison can show you
how well the Portfolio performed against the market.
You should note, however, that since the Portfolios only started their
operations in 1996, there is only a limited performance history described below.
A longer history might give a clearer indication of the risks involved in
investing in the Portfolios.
The performance described below will give you an indication of how the
Portfolios have performed in the past. Of course, past performance is not
necessarily an indication of how the Portfolios will perform in the future. In
addition, the fees and expenses related to your Contract have not been included
in the calculations of performance shown below. Therefore, the actual
performance you would have received through your Contract would have been less
than the results shown below.
Robertson Stephens Diversified Growth Portfolio
(The following table will be depicted as a bar chart in the printed material.)
1997 19.12%
1998 17.42%
Best Quarter: Q4 `98, up 31.87% Worst Quarter: Q1 `97, down 20.40%
Average Annual Total Return
One Year Since Inception
Ended 12/31/98 (February 9, 1996)*
-------------- -------------------
Robertson Stephens
Diversified Growth Portfolio 17.42% 13.23%
Standard & Poor's
Stock Index 28.58% 26.49%
Russell 2000 Small
Company Index (2.55)% 10.03%
* The date the Portfolio was first available for sale. The current subadviser
has been managing the Portfolio since May 1, 1997.
The Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") is an
unmanaged index of 500 leading stocks.
The Russell 2000 Small Company Index is an unmanaged index of 2000 small company
stocks.
Berkeley U.S. Quality Bond Portfolio
(The following will be depicted as a bar chart in the printed material.)
1997 9.45%
1998 7.87%
Best Quarter: Q3 `98, up 4.08 Worst Quarter: Q1 `97, down 0.71%
Average Annual Total Return
One Year Since Inception
Ended 12/31/98 (February 9, 1996)*
-------------- -------------------
Berkeley U.S. Quality
Bond Portfolio 7.87% 6.73%
Lipper Government
Intermediate Bond Index 8.17% 6.48%
* The date the Portfolio was first available for sale. The current Subadviser
has been managing the Portfolio since November 3, 1997.
The Lipper Government Intermediate Bond Index is a nonweighted index of 139
funds investing in government bonds.
Berkeley Money Market Portfolio
(The following table will be depicted as a bar chart in the printed material.)
1997 4.58%
1998 4.55%
Best Quarter: Q2 `97, up 1.20% Worst Quarter: Q4 `98, up 1.06%
Average Annual Total Return
One Year Since Inception
Ended 12/31/98 (February 9, 1996)*
-------------- -------------------
Berkeley Money Market
Portfolio 4.55% 4.57%
7 Day yield as of December 31, 1998 - 4.22%
* The date the Portfolio was first available for sale. The current Subadviser
has been managing the Portfolio since November 3, 1997.
Harris Associates Value Portfolio
(The following table will be depicted as a bar chart in the printed material.)
1997 25.56%
1998 4.31%
Best Quarter: Q4 `98, up 14.91% Worst Quarter: Q3 `98, down 15.09%
Average Annual Total Return
One Year Since Inception
Ended 12/31/98 (February 9, 1996)*
-------------- -------------------
Harris Associates Value
Portfolio 4.31% 17.17%
Standard & Poor's 500
Stock Index 28.58% 26.49%
Lipper Growth &
Income Index 13.58% 19.00%
* The date the Portfolio was first available for sale. The current Subadviser
has been managing the Portfolio since May 1, 1997.
The Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") is an
unmanaged index of 500 leading stocks.
The Lipper Growth & Income Index is a nonweighted index of 139 funds investing
in stocks and corporate and government bonds.
Lexington Corporate Leaders Portfolio
(The following table will be depicted as a bar chart in the printed material.)
1997 24.71%
1998 12.04%
Best Quarter: Q2 `97, up 14.71% Worst Quarter: Q3 `98, down 10.75%
Average Annual Total Return
One Year Since Inception
Ended 12/31/98 (February 9, 1996)*
-------------- -------------------
Lexington Corporate
Leaders Portfolio 12.04% 17.07%
Standard & Poor's 500
Stock Index 28.58% 26.49%
Lipper Growth &
Income Index 13.58% 19.00%
* The date the Portfolio was first available for sale.
The Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") is an
unmanaged index of 500 leading stocks.
The Lipper Growth & Income Index is a nonweighted index of 139 funds investing
in stocks and corporate and government bonds.
Strong Growth Portfolio
(The following table will be depicted as a bar chart in the printed material.)
1997 25.56%
1998 30.43%
Best Quarter: Q4 `98, up 26.04% Worst Quarter: Q3 `98, down 11.16%
Average Annual Total Return
One Year Since Inception
Ended 12/31/98 (February 9, 1996)*
-------------- -------------------
Strong Growth Portfolio 30.43% 26.47%
Standard & Poor's 500
Stock Index 28.58% 26.49%
Russell 2000 Small
Company Index (2.55)% 10.03%
* The date the Portfolio was first available for sale.
The Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") is an
unmanaged index of 500 leading stocks.
The Russell 2000 Small Company Index is an unmanaged index of 2000 small company
stocks.
MFS Total Return Portfolio
(The following table will be depicted as a bar chart in the printed material.)
1997 21.81%
1998 11.98%
Best Quarter: Q2 `97, up 10.46% Worst Quarter: Q3 `98, down 4.11%
Average Annual Total Return
One Year Since Inception
Ended 12/31/98 (February 9, 1996)*
-------------- -------------------
MFS Total Return
Portfolio 11.98% 14.76%
Standard & Poor's 500
Stock Index 28.58% 26.49%
Lehman Brothers
Aggregate Bond Index 8.69% 7.35%
Lipper Balanced Fund
Index 15.37% 15.45%
* The date the Portfolio was first available for sale.
The Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") is an
unmanaged index of 500 leading stocks.
The Lehman Brother Aggregate Bond Index is an unmanaged index of average yield
U.S. investment grade bonds.
The Lipper Balanced Fund Index is a nonweighted index of 210 funds investing in
stocks and corporate and government bonds.
DESCRIPTION OF THE PORTFOLIOS
Fundamental Policies. This Prospectus and the Statement of Additional
Information for the Trust describe certain investment policies of the Portfolios
as fundamental. The consent of the shareholders of a Portfolio (determined under
the rules of the Securities and Exchange Commission) is required to change a
fundamental policy. The Board of Trustees may change all other policies,
percentage limits and investment goals of the Portfolios without the consent of
shareholders or the holders of the Contracts who have assets invested in the
Portfolios.
Robertson Stephens Diversified Growth Portfolio
Before May 1, 1997, the Portfolio was called the Berkeley Smaller Companies
Portfolio and it had a different investment goal and a different subadviser.
Investment Goal
Robertson Stephens Diversified Growth Portfolio seeks long-term capital growth.
Implementation of Goal
The Subadviser of the Robertson Stephens Diversified Growth Portfolio seeks to
meet the goal of the Portfolio by investing the total assets of the Portfolio:
o at least 65% in common and preferred stocks and warrants (collectively
called stocks or equity securities) of small- to medium-sized companies, that is
companies which have market capitalizations of $3 billion or less (warrants are
securities that give the purchaser the right to buy common or preferred stock in
the future at a price that is fixed when the purchaser buys the warrant);
o in stocks and warrants of companies with market capitalizations greater
than $3 billion;
o in stocks and warrants of non-U.S. companies or stocks that trade in
non-U.S. markets; and
o in debt securities such as bonds, including lower-quality,
higher-yielding bonds (junk bonds).
Principal Strategies
The Subadviser seeks aggressively to find investment opportunities that other
investors and investment advisers may not find. The Subadviser will buy stocks
based on the Subadviser's evaluation of the company issuing the stock, the
economic climate, the sector of the market in which the company's operations are
involved and other investment factors that the Subadviser believes will mean the
stock will increase in value. The Subadviser may buy and sell securities at
different times than other investors or investment advisers. The Subadviser may
invest a larger percentage of the assets of the Portfolio in a single stock than
would many other investment advisers.
The Subadviser may engage in short sales of stock when the Subadviser expects
that the purchase price of the stock is going to go down. A short sale means
that the Subadviser agrees to sell the stock at a fixed price, but does not
deliver the stock until the sale date. A short sale protects the Portfolio from
a loss if the price goes down, or allows the Portfolio to realize a profit on
the stock. The Portfolio will not sell securities short if, immediately after
and as a result of the sale, the value of the securities sold short by the
Portfolio exceeds 25% of its total assets. The Portfolio will limit short sales
of any one issuer's securities to 2% of the Portfolio's total assets and to 2%
of any one class of the issuer's securities.
Portfolio Turnover Rate
The Subadviser may actively trade the securities held by the Portfolio if the
Subadviser decides that the trades will help the Portfolio meet its investment
goal. Active trading can increase the portfolio turnover rate for the Portfolio.
The portfolio turnover rate for the Portfolio was 381.64% in 1998. The rate may
vary from year to year depending on markets and redemption requests.
Specific Risks of the Portfolio
Stocks tend to go up and down in value more than bonds or other debt (fixed
income) securities.
Smaller companies may have a greater risk of failing than more established
companies.
Stocks of undervalued companies may never achieve their potential value.
Investing large amounts in one security can increase losses.
Lower quality bonds have a greater risk of default than higher quality bonds.
Engaging in short sales of stock can increase the losses of the Portfolio.
Frequent trades of securities can increase costs of the Portfolio.
Investments in non-U.S. securities are subject to risks in addition to the
normal risks of investments.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the discussion below in
the Section called Investment Strategies and Risks of Portfolios. That section
discusses the above risks and some additional strategies and risks that could
affect the return you receive from an investment in the Portfolio.
Subadviser: RS Investment Management Company, L.P.
Portfolio Manager: John L. Wallace of RS Investment Management Company, L.P.
Berkeley U.S. Quality Bond Portfolio
Prior to November 3, 1997, the Portfolio was called the Salomon U.S. Quality
Bond Portfolio and it had a different subadviser. Shares of this Portfolio are
no longer available for sale.
Investment Goal
Berkeley U.S. Quality Bond Portfolio seeks to obtain a high level of current
income.
Implementation of Goal
The Subadviser of the Berkeley U.S. Quality Bond Portfolio seeks to meet the
goal of the Portfolio by investing at least 65% of the total assets of the
Portfolio in a combination of:
o U.S. Treasury obligations;
o debt obligations (such as bonds) issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
o debt obligations that represent an interest in a pool of mortgages
(mortgage-backed securities) which mortgages are issued or guaranteed by
the U.S. Government, its agencies or instrumentalities; and
o debt obligations that represent an interest in a pool of mortgages, which
are collateralized (collateralized mortgage obligations) by debt
obligations or mortgage-backed securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
The Subadviser also expects to invest:
o in investment grade bonds, that is debt obligations rated BBB or higher by
Standard & Poor's or rated Baa or higher by Moody's Investor Services;
o in mortgage-backed securities issued by private issuers that are not backed
by the U.S. Government or its agencies or instrumentalities
o in debt obligations of non-U.S. companies or governments or their agencies
or instrumentalities.
Principal Strategies
The Subadviser seeks investments that will provide a high level of income but
will not provide high risk to the Portfolio. The Subadviser seeks investments
that provide less volatility than securities considered high risk. The
Subadviser may use one or more of the following strategies in managing the
assets of the Portfolio:
o investing up to 33% of the assets in transactions where the Subadviser
sells mortgage backed securities at a current date and simultaneously
contracts to purchase substantially similar securities at a future date
(mortgage dollar roll transactions);
o lending up to 25% of its assets to third parties;
o borrowing against up to 25% of the total assets, including using
o repurchase agreements (which are transactions where the Portfolio buys a
debt instrument for a relatively short time and the seller of the debt
instrument agrees to repurchase the instrument and the Portfolio agrees to
sell the instrument at a fixed price and time);
o reverse repurchase agreements, (which is the opposite side of a repurchase
agreement); and
o uncovered dollar roll transactions where the Portfolio does not currently
own the securities to cover the mortgage dollar roll transaction which it
has contracted to complete
o purchasing securities on a firm commitment basis, including agreeing to buy
securities that have not been issued at the time when they are issued
(when-issued securities).
Portfolio Turnover Rate
In 1998, the portfolio turnover rate for the Portfolio was 5.21%. The Subadviser
expects the rate to remain at approximately the same level during 1999.
Specific Risks of the Portfolio
Although the securities that the Portfolio purchases may be guaranteed by the
U.S. Government or one of its agencies or instrumentalities, neither the shares
of the Portfolio nor your beneficial interest in the Portfolio is guaranteed or
insured by any one.
The value of bonds and other debt obligations will change when interest rates
change.
Mortgage dollar roll transactions, repurchase agreements and reverse repurchase
agreements are subject to market risks and prepayment risks which can reduce the
return they pay.
Mortgage-backed securities can lose value if the borrowers whose loans back the
securities prepay those loans or default on the loans.
Borrowing money or securities can exaggerate the amount of losses of a Portfolio
if there is a downturn in the market.
Lending Portfolio securities may result in losses if the borrower fails to repay
the securities loaned.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the discussion below in
the Section called Investment Strategies and Risks of the Portfolios. That
section discusses the above risks and some additional strategies and risks that
could affect the return you receive from an investment in the Portfolio.
Subadviser: Berkeley Capital Management.
Portfolio Manager: William F. Cox, CFA, of Berkeley Capital Management.
Berkeley Money Market Portfolio
Prior to November 3, 1997, the Portfolio was called the Salomon Money Market
Portfolio and it had a different subadviser. Shares of this Portfolio are no
longer available for sale.
Investment Goal
Berkeley Money Market Portfolio seeks as high a level of current income as is
possible while maintaining a high level of liquidity and stability of principal.
Implementation of Goal
The Subadviser of the Berkeley Money Market Portfolio seeks to meet the goal of
the Portfolio by using the amounts you invest in the Portfolio to purchase high
quality, short-term securities that are sold in U.S. dollars and that meet the
requirements for money market securities under the 1940 Act. These securities
include the following:
o obligations of the U.S. Government, its agencies or instrumentalities;
o obligations of U.S. or foreign banks;
o obligations guaranteed by the U.S. Government, its agencies or
instrumentalities;
o obligations guaranteed by U.S. or foreign banks;
o commercial paper;
o corporate debt obligations including variable rate obligations;
o short-term credit facilities; and
o asset-backed securities.
Principal Strategies
The Subadviser will purchase obligations for the Portfolio that the Subadviser
determines has a very small amount of risk of loss to the Portfolio. To
determine the credit risk to the Portfolio, the Subadviser will follow credit
guidelines established by the Board of Trustees for the Portfolio. Under those
guidelines, the Subadviser will only purchase obligations for the Portfolio if,
immediately after the purchase:
o the Portfolio has 95% of its assets invested in obligations that are rated
in the highest rating category by specified rating organizations or in
obligations that have not been rated but that the Subadviser considers
comparable to the rated obligations (First Tier Obligations);
o any remaining assets, but no more than 5% of the total assets of the
Portfolio, are invested in obligations that are rated in the second highest
rating category by specified rating organizations and/or in comparable
unrated obligations (Second Tier Obligations); and
o no more than 1% of the total assets of the Portfolio that are invested in
Second Tier Obligations (or $1 million if greater)are invested in the
securities of any one issuer, excluding the U.S. Government or its agencies
or instrumentalities.
The Subadviser will only purchase obligations that mature in 13 months or less.
The Subadviser will manage the Portfolio so that the average weighted maturity
of the Portfolio will not exceed 90 days.
Specific Risks of the Portfolio
Interests in the Portfolio are not guaranteed or insured by the U.S. Government
or any other entity.
Repurchase agreements are subject to market risks and prepayment risks which can
reduce the return they pay.
Asset-backed securities can lose value if the borrowers whose loans back the
securities prepay those loans or default on the loans.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the discussion below in
the Section called Investment Strategies and Risks of the Portfolios. That
section discusses the above risks and some additional strategies and risks that
could affect the return you receive from an investment in the Portfolio.
Subadviser: Berkeley Capital Management
Portfolio Manager: William F. Cox, CFA, of Berkeley Capital Management
Harris Associates Value Portfolio
Before May 1, 1997, the Portfolio had different investment goals, policies and
restrictions and a different Subadviser.
Investment Goal
Harris Associates Value Portfolio seeks long-term capital appreciation.
Implementation of Goals
The Subadviser of the Harris Associates Value Portfolio seeks to meet the goal
of the Portfolio by investing the total assets of the Portfolio:
o at least 65% in common and preferred stocks and securities that can be
converted into stocks such as convertible bonds and warrants (collectively
called stocks or equity securities), including in stocks of smaller
companies, that is companies with market capitalizations of less than $1
billion;
o up to 25% in stocks or warrants of non-U.S. companies or stocks traded in
non- U.S. markets;
o in debt securities such as bonds issued by governments or corporations,
including up to 25% of its total assets in lower-quality, higher-yielding
bonds (junk bonds); and
o up to 10% in other investment companies, such as mutual funds.
Principal Strategies
The Subadviser tries to find stocks for the Portfolio that the Portfolio can buy
at a price that is significantly less than what the Subadviser believes the
stock is worth. The Subadviser believes that the Portfolio will benefit if the
Portfolio holds these undervalued stocks until they reach their potential value.
The Subadviser uses several methods to evaluate the companies whose stock the
Subadviser is considering for the Portfolio. The Subadviser relies primarily,
however on how well the Subadviser believes the company can produce cash for its
shareholders.
The Subadviser may engage in short sales of stock when the Subadviser expects
that the purchase price of the stock is going to go down. A short sale means
that the Subadviser agrees to sell the stock at a fixed price, but does not
deliver the stock until the sale date. The Portfolio may already own the stock,
but a short sale protects the Portfolio from a loss if the price goes down, or
allows the Portfolio to realize a profit on the stock. The Subadviser may use up
to 20% of the total assets of the Portfolio for short sales of securities. The
Subadviser will only sell stock short that it owns or that it has the right to
purchase and for which it has already paid.
Portfolio Turnover Rate
The portfolio turnover rate for the Portfolio for 1998 was 49.83%. The rate may
vary from year to year depending on markets and redemption requests.
Specific Risks of the Portfolio
Stocks tend to go up and down in value more than bonds or other debt (fixed
income) securities.
Stocks of undervalued companies may never achieve their potential value.
Smaller companies may have a greater risk of failing than more established
companies.
Investments in non-U.S. securities are subject to risks in addition to the
normal risks of investments.
Lower quality bonds have a greater risk of default than higher quality bonds.
Engaging in short sales of stock can increase the losses of the Portfolio.
Purchasing shares of other investment companies may result in the Portfolio
paying for some administrative costs both through the investment company it
purchases and directly.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the discussion below in
the Section called Investment Strategies and Risks of the Portfolios. That
section discusses the above risks and some additional strategies and risks that
could affect the return you receive from an investment in the Portfolio.
Subadviser: Harris Associates L.P.
Portfolio Managers: Robert Sanborn and Floyd Bellman of Harris Associates L.P.
Lexington Corporate Leaders Portfolio
Investment Goal
Lexington Corporate Leaders Portfolio seeks long-term capital growth and income.
Implementation of Goal
The Subadviser of the Lexington Corporate Leaders Portfolio seeks to meet the
goal of the Portfolio by investing the assets of the Portfolio in the common
stocks of large, well-established companies. These are companies that have a
market capitalization greater than $1 billion, an established history of
earnings and dividend payments and a large number of publicly held shares with
high trading volume and a high degree of liquidity.
Principal Strategies
The stocks that the Subadviser will select for the Portfolio will be
substantially selected from among the stocks of companies represented in the Dow
Jones Industrial Average. The stocks will be selected from a list of the stocks
of approximately 100 companies that the Subadviser considers "corporate
leaders." These are companies that meet the standards listed above, which the
Subadviser has set for the investments of the Portfolio. Under normal
circumstances, the Subadviser will invest the assets of the Portfolio equally
among all of those stocks. The Subadviser does not have to invest in the stocks
of all of the companies listed on the Dow Jones Industrial Average and may
invest in stocks of companies not listed on the Dow Industrial Average if the
Subadviser believes that those companies meet the high standards it applies in
selecting stocks for the Portfolio.
The Subadviser is not required to diversify the assets of the Portfolio. The
Subadviser can invest one-half of the assets of the Portfolio in as few as two
companies by investing up to 25% of the total assets in the stocks of each
company. The Subadviser can invest the other half of the assets in as few as ten
companies by investing up to 5% of the total assets in the stocks of each
company.
The Dow Jones Industrial Average is a list put together by Dow Jones & Company
of companies that meet certain high standards and that represent dominant firms
in their respective industries. The return of the stocks on the Dow Jones
Industrial Average is used to measure the daily performance of the stock
markets. The Portfolio is not sponsored by Dow Jones & Company nor is it an
affiliate of Dow Jones & Company. The term "Dow Jones Industrial Average" and
the abbreviation "DJIA" are trademarks of Dow Jones & Company.
Portfolio Turnover Rate
The portfolio turnover rate for the Portfolio for 1998 was 7.08%. The rate may
vary from year to year depending on markets and redemption requests.
Specific Risks of the Portfolio
Although the Subadviser expects to invest in the stocks of companies listed in
the Dow Jones Industrial Average, the Subadviser does not expect the Portfolio
to have the same return as the Dow Jones Industrial Average.
Stocks tend to go up and down in value more than bonds or other debt (fixed
income) securities.
Since the Portfolio is not diversified, it can invest a large percentage of the
assets in a small number of different companies, which means there is a larger
risk to the Portfolio if one of those companies is not successful.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the discussion below in
the Section called Investment Strategies and Risks of the Portfolios. That
section discusses the above risks and some additional strategies and risks that
could affect the return you receive from an investment in the Portfolio.
Subadviser: Lexington Management Corporation.
Portfolio Manager: An investment management team from the Subadviser is
responsible for the day to day management of the Portfolio. Lawrence Kantor, an
Executive Vice President of Lexington Management Corporation, is the lead
manager.
Strong Growth Portfolio
Investment Goal
Strong Growth Portfolio seeks capital growth.
Implementation of Goals
The Subadviser of the Strong Growth Portfolio seeks to meet the goal of the
Portfolio by investing the total assets of the Portfolio:
o at least 65% in common and preferred stocks and securities that can be
converted into stocks, such as warrants and convertible bonds (collectively
called stocks or equity securities); the stocks may include a substantial
amount of stocks of small to medium sized companies, that is companies with
market capitalizations of $3 billion or less;
o up to 35% in debt obligations, such as bonds, issued by governments or
corporations, including up to 5% in debt which is considered below
investment grade, which may be lower-quality, higher-yielding bonds (junk
bonds);
o up to 15% in securities of non-U.S. companies or traded in non-U.S.
markets; and
o an unlimited amount of depository receipts which are securities traded in
U.S. dollars in U.S. markets, but which represent an indirect interest in
non-U.S. companies. The Subadviser has agreed, however, to limit the total
amount of its foreign investments, both direct and indirect through
depository receipts, to no more than 25% of the total assets of the
Portfolio.
Principal Strategies
The Strong Growth Portfolio focuses on stocks of companies that its manager
believes are reasonably priced and has above-average growth potential. The
Portfolio can include stocks of any size. The manager may decide to sell a stock
when the company's growth prospects become less attractive. The Portfolio's
active trading approach may increase the Portfolio's costs.
The manager may invest without limitation in cash or cash-type securities
(high-quality, short-term debt securities issued by corporations, financial
institutions, or the U.S. government) as a temporary defensive position to avoid
losses during adverse market conditions. Taking a temporary defensive position
could reduce the benefit to the Portfolio if the market goes up. In this case,
the Portfolio may not achieve its investment goals.
Portfolio Turnover Rate
The Subadviser may actively trade the securities held by the Portfolio if the
Subadviser decides that the trades will help the Portfolio meet its investment
goal. Active trading can increase the portfolio turnover rate for the Portfolio.
The portfolio turnover rate for the Portfolio was 275.16% in 1998. The rate may
vary from year to year depending on markets and redemption requests.
Specific Risks of the Portfolio
Stocks tend to go up and down in value more than bonds or other debt (fixed
income) securities.
Smaller companies may have a greater risk of failing than more established
companies.
Stocks of undervalued companies may never achieve their potential value.
Investments in non-U.S. securities are subject to risks in addition to the
normal risks of investments.
There is a risk in using derivative transactions that the security may not go up
or down as the Subadviser anticipates, resulting in a loss to the Portfolio.
Frequent trades of securities can increase costs of the Portfolio.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the discussion below in
the Section called Investment Strategies and Risks of the Portfolios. That
section discusses the above risks and some additional strategies and risks that
could affect the return you receive from an investment in the Portfolio.
Subadviser: Strong Capital Management, Inc.
Portfolio Manager: Mr. Ronald C. Ognar of Strong Capital Management, Inc.
MFS Total Return Portfolio
Investment Goal
MFS Total Return Portfolio seeks total return.
Implementation of Goal
The Subadviser of the MFS Total Return Portfolio seeks to meet the goal of the
Portfolio by investing the total assets of the Portfolio:
o at least 40% and no more than 75% in common and preferred stocks and
securities that can be converted into stocks, such as warrants and
convertible bonds (collectively called stock or equity securities);
o at least 25% in debt obligations, such as bonds, that produce income (fixed
income securities), including short-term obligations and including up to
20% of the assets in lower-quality, higher-yielding bonds (junk bonds).
Principal Strategies
The Subadviser selects investments for the Portfolio that it believes will
provide the Portfolio with a return that includes both above average income from
its investments (that is more income than you would receive from investing only
in stocks) and growth of capital from its investments.
The Subadviser will select investments for the Portfolio from a broad list of
securities that may be diversified among different types of companies and
different industries. The Subadviser will divide the assets between equity and
fixed income securities based on the Subadviser's evaluation of the then current
economic and market conditions and which securities will best help the Portfolio
meet its investment goal under those conditions.
Portfolio Turnover Rate
The Subadviser may actively trade the securities held by the Portfolio if the
Subadviser decides that the trades will help the Portfolio meet its investment
goal. Active trading can increase the portfolio turnover rate for the Portfolio.
The portfolio turnover rate for the Portfolio was 126.29% in 1998. The rate may
vary from year to year depending on markets and redemption requests.
Specific Risks of the Portfolio
Stocks tend to go up and down in value more than bonds or other debt (fixed
income) securities.
Lower quality bonds have a greater risk of default than higher quality bonds.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the discussion below in
the Section called Investment Strategies and Risks of the Portfolios. That
section discusses the above risks and some additional strategies and risks that
could affect the return you receive from an investment in the Portfolio.
Subadviser: Massachusetts Financial Services Company.
Portfolio Manager: David M. Calabro of Massachusetts Financial Services Company
is the head of a team of Portfolio managers responsible for the Portfolio.
Geoffrey L. Kurinsky, also of Massachusetts Financial Services Company, is
responsible for the management of the fixed income portion of the assets.
SAI Global Leaders Portfolio
Investment Goal
SAI Global Leaders Portfolio seeks long-term capital growth.
Implementation of Goal
The Portfolio may invest up to 80% of its net assets in foreign equity
securities, either directly or through depository shares.
The Portfolio will invest primarily in the equity securities of foreign and
domestic companies with large capitalizations (in excess of $3.0 billion). These
companies will also generally have a high degree of liquidity and will have
exhibited dominance in their respective industries on a global basis.
The Portfolio usually invests in issuers from at least three different
countries, although it may at times invest in fewer than three countries.
Outside the U.S., the Portfolio will invest primarily in Europe, Japan and
Australia.
The Portfolio may also invest up to 35% of its assets in intermediate- to
long-term debt securities including U.S. Government, U.S. Government Agency,
corporate and foreign debt obligations such as Brady Bonds.
The Portfolio may invest up to 20% of its assets in debt which is considered
below investment grade.
Principal Strategies
The Portfolio will primarily invest in common stocks, but may also invest in
other securities including preferred stocks, warrants, convertible bonds and
debt securities when the Subadviser perceives these other securities offer
attractive growth potential or to receive a return on idle cash.
The Portfolio will generally invest in companies that have the following
characteristics in the opinion of the Subadviser:
o Large capitalization with strong overall financial strength and sound
financing policies.
o High profitability as measured by an adjusted return on capital
calculation.
o A worldwide market for the company's products or services.
o High quality management with a history of providing attractive returns to
shareholders.
o A relatively narrow industry focus with exhibited dominance in that
industry.
o Strong earnings growth prospects and attractive valuation measures.
The Subadviser may use derivatives, including derivatives related to foreign
securities or currencies, for hedging or managing risk, and to a limited extent,
to seek an enhanced return. Derivatives are securities or agreements whose value
is derived from or comes from the value of some underlying asset, such as
futures and options.
Portfolio Turnover Rate
The Portfolio has not yet commenced investment operations. The portfolio
turnover rate for the Portfolio may vary from year to year depending on market
and redemption requests, but is not expected to exceed 50% during 1999.
Specific Risks of the Portfolio
Stocks tend to go up and down in value more than bonds or other debt (fixed
income) securities.
Investments in non-U.S. securities are subject to risks in addition to the
normal risks of investments.
There is a risk in using derivative transactions that the security may not go up
or down as the Subadviser anticipates, resulting in a loss to the Portfolio.
Lower quality bonds have a greater risk of default than higher quality bonds.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the discussion below in
the Section called Investment Strategies and Risks of the Portfolios. That
section discusses the above risks and some additional strategies and risks that
could affect the return you receive from an investment in the Portfolio.
Subadviser: Select Advisors, Inc.
Portfolio Manager: David L. Ruff, CFA and Jack Waymire of Select Advisors, Inc.
Investment Strategies and Risks of the Portfolios
The following strategies will be used by some or all of the Portfolios. Unless
otherwise noted, the strategies and risks apply to all Portfolios. These
strategies can affect the return you receive from your investment in a
Portfolio.
Investment Goals. The above discussion lists investment goals for each of the
Portfolios described in this document. There is no assurance that the
Subadvisers will achieve the investment goals described above or any other
investment goals for the Portfolios. Furthermore, the Board of Trustees of the
Trust may change the investment goals of any of the Portfolios at any time,
without the consent of the shareholders or the holders of the Contracts who have
assets invested in the Portfolios.
Market Risks. All securities have market risk. The Subadvisers invest in
different types of securities and investment techniques all of which involve
varying amounts of risk. The value of bonds and other fixed income securities
will go up and down in response to changes in interest rates charged by the
Federal Reserve Bank and the lending banks. Stocks may be affected by the
overall domestic and international economies and by changes in demand for
certain products or in certain parts of the market.
Investments in Stocks. The investment strategies of all Portfolios, except the
Berkeley U.S. Quality Bond Portfolio and the Berkeley Money Market Portfolio,
involve investing in stocks. Stocks tend to go up and down in value more than do
bonds or other debt obligations (fixed income securities), making them more
volatile. Volatile securities have a greater potential return than do fixed
income securities, but have more risk of loss. Although, in the past, stocks
that have been held for a long period of time have provided higher returns than
less volatile securities, there is no assurance that they will do so in the
future.
Investment in Bonds. The value of bonds and other debt obligations (fixed income
securities) will change when interest rates change. If interest rates go down,
the market value of bonds held by the Portfolio that pay higher interest rates
increases; however if interest rates go up, the market value of bonds held by
the Portfolio that pay lower interest rates goes down.
Smaller Companies. The Strong Growth Portfolio and the Robertson Stephens
Diversified Growth Portfolio will invest in the stocks of smaller companies. The
Harris Associates Value Portfolio may also invest in such stocks. Investment in
the stocks of smaller companies has risks in addition to the risk of investing
in any stocks. Smaller companies have less capitalization than larger companies
and a greater risk of failing. Smaller companies may be less diversified than
larger companies and therefore may be more at risk from economic changes that
affect only specific industries or markets.
Investing in Larger Companies. Larger more established companies may be unable
to respond quickly to new competitive challenges such as changes in technology
and consumer tastes. Many larger companies also may not be able to attain the
high growth rates of successful smaller companies, especially during an extended
period of economic expansion.
Purchasing for Value. When a Subadviser purchases stocks of companies that other
investors have not recognized as having value, there is a risk that those stocks
will never be recognized by other investors and therefore may not achieve their
potential value. This is an investment risk of the Harris Associates Value
Portfolio and the Robertson Stephens Diversified Growth Portfolio.
Limited Diversification. Each of the Portfolios, except the Lexington Corporate
Leaders Portfolio, is diversified as described in the Investment Company Act of
1940. Although the Lexington Corporate Leaders Portfolio is not diversified as
defined by the Investment Company Act of 1940, it will invest its assets so that
it meets the diversification requirements necessary to qualify it as a regulated
investment company under Subchapter M of the Internal Revenue Code. Investing
larger amounts in the securities of only a few companies can increase the
potential losses of the Portfolio, since a loss on that stock would have a
larger effect on the Portfolio than a loss on a stock in which the Portfolio has
a smaller interest. There is potentially a larger risk to the Portfolio if one
of its investments is not successful, or if there is a downturn in the industry
in which one of its investments is involved.
Derivatives. Derivatives can be volatile investments and involve certain risks.
A Portfolio may be unable to limit its losses by closing a position due to lack
of a liquid market or similar factors. Losses may also occur if there is not a
perfect correlation between the value of futures or forward contracts and the
related securities. The use of futures may involve a high degree of leverage
because of low margin requirements. As a result, small price movements in
futures contracts may result in immediate and potentially unlimited gains or
losses to a Portfolio. Leverage may exaggerate losses of principal. The amount
of gains or losses on investments in futures contracts depends on the investment
adviser's ability to predict correctly the direction of stock prices, interest
rates and other economic factors. This risk applies to all Portfolios except the
Money Market Portfolio.
Foreign Securities. Investments in non-U.S. securities are subject to risks in
addition to the normal risks of investments. The value of non-U.S. securities
will change as the exchange rates for the currency in the countries where the
companies are located change. Some countries do not have the same kinds of laws
that protect the purchasers of securities, as do countries with more established
markets such as the United States.
Therefore, there is more risk in purchasing securities issued by companies
located in those countries. In addition, there may be less information available
about non-U.S. issuers, delays in settling sales of foreign securities and
governmental restrictions or controls that can adversely affect the value of
securities of foreign companies. Securities of foreign companies may not be as
easy to sell as securities of U.S. companies. The Portfolio may incur additional
costs in handling foreign securities, such as increased sales costs and custody
costs. This risk is not applicable to the Money Market Portfolio.
Mortgage-Backed Securities. The Berkeley Quality Bond Portfolio and the Money
Market Portfolio may invest in such securities. There is a risk for a Portfolio
when it purchases mortgage-backed securities. Under these arrangements, the
Portfolio acquires an interest in a pool of loans and the mortgages securing
those loans. As the borrowers make principal and interest payments on the loans,
the Portfolio receives a share of those payments. The value of the interests in
these pools will go up and down as interest rates go up and down in the same
manner as bonds. In addition, however, the value is reduced if the borrowers
repay the loans earlier than predicted, particularly when the interest rates on
the repaid loans are higher than current interest rates being paid for new loans
that would replace the repaid loans. The value of the interests is also reduced
if the borrowers default on the loans and the mortgaged property, collateral
and/or other guarantees securing the loans are not sufficient to cover the
amounts in default.
Repurchase Agreements. Under a repurchase agreement the purchaser acquires a
debt instrument for a relatively short time. The seller of the debt instrument
agrees to repurchase the instrument and the purchaser agrees to resell the
instrument at a fixed price and time. Repurchase agreements give the Portfolio
the potential for increased returns, but also have similar market risks to those
of investing in mortgage dollar roll transactions described below. If the value
of the security that will be repurchased increases above the repurchase price,
the Portfolio will benefit. However, if the value goes down, the Portfolio will
be purchasing a security at a price higher than its value. In addition in a
repurchase agreement, there is a risk that the other party will refuse to resell
the security at the end of the transaction period. The purchaser receives
collateral from the seller to back up the seller's agreement to repurchase;
however, there is a risk that the collateral may not be worth the amount paid by
the purchaser for the instrument. The purchaser may also have difficulty selling
the collateral.
Mortgage Dollar Roll Transactions. The Berkeley U.S. Quality Bond Portfolio may
engage in mortgage dollar roll transactions. Mortgage dollar roll transactions
have risks that are similar to those of reverse repurchase agreements. These
transactions can increase the return of a Portfolio if the market value of the
security sold by the Portfolio goes up to a price higher than the price at which
the Portfolio can repurchase the security. However, if the market value goes
down, the Portfolio will be purchasing a security at a price that is higher than
its market value.
Borrowing. All of the Portfolios may borrow money for temporary or emergency
purposes. Most of the Portfolios can engage in borrowing by investing in dollar
roll transactions, repurchase agreements or similar securities. Some Portfolios
can borrow money or securities to increase the return on a Portfolio. Borrowing
money or securities increases the assets that a Portfolio has available to
invest. If the investments are profitable, the return for the Portfolio is
enhanced. However, if the investments lose value, the losses are exaggerated.
Lending Securities. Lending securities means that the Portfolio lends securities
that the Portfolio owns to a third party for a fee. The Portfolio holds other
assets of the borrower as collateral to insure the repayment of the securities
loaned. Lending Portfolio securities may result in losses to the Portfolio if
the borrower does not repay the securities loaned and the Portfolio is unable to
sell the collateral for an amount equal to the value of the loaned securities.
Below Investment Grade Bonds or Junk Bonds. The investment strategies of the MFS
Total Return Portfolio, Harris Associates Value Portfolio and the SAI Global
Leaders Portfolio involve investing in lower quality bonds. Investing in below
investment grade bonds, such as the lower quality, higher yielding bonds called
junk bonds, can increase the risks of loss for a Portfolio. Junk bonds are bonds
that are issued by small companies or companies with limited assets or short
operating histories. These companies are more likely than more established or
larger companies to default on the bonds and not pay interest or pay back the
full principal amount. Third parties may not be willing to purchase the bonds
from the Portfolios, which means they may be difficult to sell and some may be
considered illiquid. Because of these risks, the companies issuing the junk
bonds pay higher interest rates than companies issuing higher-grade bonds. The
higher interest rates can give investors a higher return on their investment.
Short Sales. The Robertson Stephens Diversified Growth Portfolio and the Harris
Associates Value Portfolio may engage in short sales. Engaging in short sales of
stock can increase the losses of the Portfolio if the value of the stock
increases before the Portfolio buys the stock to cover the short sale.
Illiquid and Restricted Securities. The Berkeley Money Market Portfolio may
invest up to 10% of its assets in securities which it cannot easily sell or
which it cannot sell quickly (within seven days) without taking a reduced price
for them (illiquid securities). All other Portfolios may invest up to 15% of
their assets in illiquid securities. Any Portfolio may invest in securities that
the Portfolio cannot sell unless it meets certain restrictions (restricted
securities). The restrictions usually relate to the initial sale of the
security, such as securities purchased in a private transaction or securities
sold only to qualified purchasers. It may take the Subadvisers more time to sell
illiquid or restricted securities than it would take them to sell other
securities. The Portfolio might be forced to sell the securities at a discount
or be unable to sell securities at all that are losing value.
Cash Investments. In addition to the investments described above for each
Portfolio, each Subadviser may keep a portion of a Portfolio's assets in cash or
in investments that are as liquid as cash such as money market mutual funds. The
Subadvisers keep the cash available to meet unexpected expenditures such as
redemptions. Investments in cash or similar liquid securities (cash equivalents)
generally do not provide as high a return as would assets invested in other
types of securities.
Defensive Positions. The Subadvisers have described their strategies for
investing the assets of each Portfolio under normal market conditions. Under
extraordinary market, economic, political or other conditions, the Subadvisers
may not follow their normal strategies, but instead may take certain temporary,
defensive actions. These actions may include moving all assets to cash or cash
equivalent investments or taking extraordinary steps to limit losses in response
to adverse conditions. Defensive actions may prevent a Portfolio from achieving
its investment goal.
Portfolio Turnover. Some of the Subadvisers may buy and sell securities for the
Portfolios frequently, which increases a Portfolio's portfolio turnover rate.
That rate is the percentage of all the net assets of a Portfolio that are bought
and sold during a year. The higher the portfolio turnover rate, the higher will
be the related transaction costs, such as brokerage costs, charged to the
Portfolio. The Subadvisers that actively trade Portfolio assets expect that the
potentially improved performance from frequent transactions will offset the
higher costs; however, higher transaction costs can reduce the return of the
Portfolio.
Year 2000 (Y2K). Like other mutual funds, as well as other financial and
business organizations around the world, the Trust could be adversely affected
if the computer systems used by the Adviser, the Subadvisers and other service
providers in performing their administrative functions do not properly process
and calculate date-related information and data as of and after January 1, 2000.
This is commonly known as the "Year 2000 issue." When the Year 2000 arrives, the
Trust's operations could be adversely affected if the computer systems used by
its managers, its service providers and other third parties it does business
with are not Year 2000 ready. For example, the Trust's portfolio and operational
areas could be impacted, including securities trade processing, securities
pricing, reporting, custody functions and others. The Trust could experience
difficulties in effecting transactions if any of its foreign subcustodians, or
foreign broker/dealers or foreign markets is not ready for Year 2000.
When evaluating current and potential portfolio positions, Year 2000 is one of
the factors that a Portfolio's Subadviser may consider. Subadvisers may rely
upon public filings and other statements made by companies regarding their Year
2000 readiness. Issuers in countries outside of the U.S. may be more susceptible
to Year 2000 problems and may not be required to make the same level of
disclosure regarding Year 2000 readiness as is required in the U.S. The
Subadvisers, of course, cannot audit any company or their major suppliers to
verify their Year 2000 readiness. If a company in which any Portfolio is
invested is adversely affected by Year 2000 problems, it is likely that the
price of its security will also be adversely affected. A decrease in the value
of one or more of a Portfolio's holdings will have a similar impact on the
Portfolio's performance.
The Adviser and Subadvisers are taking steps that they believe are reasonably
designed to address the Year 2000 issue with respect to computer systems that
they use and to obtain reasonable assurances that comparable steps are being
taken by the Trust's other major service providers. At this time, however, there
can be no assurance that these steps will be sufficient to avoid any adverse
impact to the Trust.
MANAGEMENT OF THE PORTFOLIOS
Investment Adviser
Background. LPIMC Insurance Marketing Services has been the investment adviser
for each Portfolio since its inception. The day-to-day decisions about the
investment of assets are made by one or more Portfolio Managers who work for a
Subadviser appointed by the investment adviser for each Portfolio. The
investment adviser maintains its principal office at 1755 Creekside Oaks Drive,
Sacramento, California 95833. The investment adviser is a wholly-owned
subsidiary of London Pacific Life and Annuity Company, which is a wholly-owned
subsidiary of London Pacific Group Limited, a corporation listed on the London
Stock Exchange and the NASDAQ market system. As of December 31, 1998, London
Pacific Group Limited had a market capitalization of over $210 million and,
either directly or through its subsidiaries, managed or administered funds
having total assets in excess of $7.3 billion. London Pacific Life and Annuity
Company issues the Contracts through which you may invest in the Portfolios. The
investment adviser has been registered as an investment adviser with the
Securities and Exchange Commission since 1995.
Investment Advisory Agreement. The Board of Trustees oversees the investment of
the assets of each Portfolio. The Board, on behalf of the Trust and its
Portfolios, has entered into an Investment Advisory Agreement with the
investment adviser. The agreement authorizes the investment adviser to manage
the investment of the assets of each Portfolio, based on the investment goals
and policies of each Portfolio. The investment adviser must develop a program
for investing the assets of each Portfolio that is consistent with the
investment goal of each Portfolio and that follows the policies and restrictions
that the Board of Trustees has set for the Portfolios. This Prospectus and the
Statement of Additional Information describe these policies. (See the back cover
of this prospectus to find out how to get a free copy of the Statement of
Additional Information.) The investment adviser is responsible for determining
the securities to be bought, sold, held or lent by each Portfolio and for
carrying out those transactions.
Compensation. The investment adviser receives a fee, monthly, from each
Portfolio for management of the net assets of the Portfolio. The investment
adviser calculates the fee based on the average daily net assets of each
Portfolio. During 1998, the last fiscal year of the Portfolio, each of the
Portfolios paid the investment adviser the following percentage of its average
daily net assets as compensation for its services as investment adviser to the
Portfolios:
Robertson Stephens Diversified Growth .......................... .95%
Berkeley U.S. Quality Bond ...................................... .55%
Berkeley Money Market ........................................... .45%
Harris Associates Value ........................................ 1.00%
Lexington Corporate Leaders ................................... .65%
Strong Growth .............. .................................. .75%
MFS Total Return ............................................... .75%
The percentage of net assets paid to the investment adviser as an investment
advisory fee for each Portfolio changes with the amount of net assets in the
Portfolio. Generally the larger the net assets, the lower the fees as a
percentage of net assets.
Under the Investment Advisory Agreement, the Trust is obligated to pay the
Adviser a monthly fee at the following annual rates based on the average daily
net assets of a Portfolio:
ADVISORY FEE
PORTFOLIO (as a % of average daily net assets)
--------- ------------------------------------
Robertson Stephens .95% of first $10 million
Diversified Growth .90% of the next $25 million
.85% of the next $165 million
.80% over and above $200 million
Berkeley U.S. Quality
Bond .55% of first $50 million
.525% of next $100 million
.50% of next $150 million
.45% of next $200 million
.425% over and above $500 million
Berkeley Money Market .45% of first $50 million
.425% of next $100 million
.40% of next $150 million
.35% of next $200 million
.325% over and above $500 million
Harris Associates Value 1.00% of first $25 million
.85% of next $75 million
.75% over and above $100 million
Lexington Corporate
Leaders .65% of first $10 million
.60% of next $90 million
.55% over and above $100 million
Strong Growth .75% of first $150 million
.70% of next $350 million
.65% over and above $500 million
MFS Total Return .75% of first $200 million
.70% of the next $1.1 billion
.65% over and above $1.3 billion
SAI Global Leaders .75% of first $25 million
.70% of next $75 million
.65% over and above $100 million
Other Services and Expenses. The investment adviser is also responsible for the
operation of each Portfolio and the supervision of others who provide services
to the Portfolios such as custodians, accountants and transfer agents. The
investment adviser must provide office space and the services of personnel to
carry out the operations of the Portfolios. The investment adviser pays all
ordinary office expenses for the Trust and the Portfolios. The investment
adviser also pays the salaries and costs of persons employed by the investment
adviser who serve as officers or Trustees of the Trust. The Portfolios are
responsible for all their own direct expenses such as fees of custodians,
accountants, transfer agents and unaffiliated trustees. London Pacific Life and
Annuity Company has voluntarily agreed to reimburse each of the Portfolios,
except the Berkeley U.S. Quality Bond and Berkeley Money Market Portfolios,
through December 31, 1999 for their expenses (other than brokerage commissions)
that exceed the following annual percentages of average daily net assets:
Robertson Stephens Diversified Growth .......................... 1.39%
Harris Associates Value........... ............................ 1.29%
Strong Growth .................................................. 1.29%
Lexington Corporate Leaders..................................... 1.29%
MFS Total Return................................................ 1.29%
SAI Global Leaders.............................................. 1.29%
London Pacific Life and Annuity Company may withdraw or modify this policy of
expense reimbursement in the future.
Subadvisers and Portfolio Management
Subadvisory Agreements. The investment advisory agreement allows the investment
adviser to contract with third parties to provide some or all of its duties to
the Portfolios under the Investment Advisory Agreement. The investment adviser
has contracted with the Subadvisers listed below to provide day to day
management of the assets of each of the Portfolios. Under the terms of the
agreements between each Subadviser and the investment adviser, the Subadviser
will develop a plan for investing the assets of each Portfolio, select the
assets to be purchased and sold by each Portfolio, select the broker-dealer or
broker-dealers through which the Portfolio will buy and sell its assets, and
negotiate the payment of commissions, if any, to those broker-dealers. Each
Subadviser follows the policies set by the investment adviser and the Board of
Trustees for each of the Portfolios.
Compensation. Under the Subadvisory Agreements, the investment adviser has
agreed to pay each Subadviser a fee for its services out of the fees the
investment adviser receives from the Portfolios. During 1998, the last fiscal
year of the Portfolios, the investment adviser paid each of the Subadvisers fees
based on the following percentage of each Portfolio's average daily net assets:
Robertson Stephens Diversified Growth Portfolio................ .70%
Berkeley U.S. Quality Bond Portfolio........................... .30%
Berkeley Money Market Portfolio................................ .20%
Harris Associates Value Portfolio.............................. .75%
Lexington Corporate Leaders Portfolio ......................... .40%
Strong Growth Portfolio........................................ .50%
MFS Total Return Portfolio..................................... .50%
The percentage of net assets paid to the Subadvisers as fees for their services
to each Portfolio changes with the amount of net assets in the Portfolio.
Generally the larger the net assets, the lower the fees as a percentage of net
assets.
Under the terms of each Sub-Advisory Agreement, the Adviser shall pay to each
Sub-Adviser, as full compensation for services rendered under the Sub-Advisory
Agreement with respect to each Portfolio, monthly fees at the following annual
rates based on the average daily net assets of each Portfolio:
SUB-ADVISORY FEE
PORTFOLIO (as a % of average daily net assets)
--------- ------------------------------------
Robertson Stephens
Diversified Growth .70% of first $10 million
.65% of the next $25 million
.60% of the next $165 million
.55% over and above $200 million
Berkeley U.S. Quality
Bond .30% of first $50 million
.275% of next $100 million
.25% of next $150 million
.20% of next $200 million
.175% over and above $500 million
Berkeley Money Market .20% of first $50 million
.175% of next $100 million
.15% of next $150 million
.10% of next $200 million
.075% over and above $500 million
Harris Associates Value .75% of first $25 million
.60% of next $75 million
.50% over and above $100 million
Lexington Corporate .40% of first $10 million
Leaders .35% of the next $90 million
.30% over and above $100 million
Strong Growth .50% of first $150 million
.45% of the next $350 million
.40% over and above $500 million
MFS Total Return .50% of first $200 million
.45% of the next $1.1 billion
.40% over and above $1.3 billion
SAI Global Leaders .50% of first $25 million
.45% of next $75 million
.40% over and above $100 million
Robertson Stephens Diversified Growth Portfolio
Subadviser. RS Investment Management Company, L.P. (formerly Robertson, Stephens
& Company Investment Management, L.P.) has been the Subadviser of the Robertson
Stephens Diversified Growth Portfolio since May 1, 1997. The Subadviser was
formed in 1993 and has been registered as an investment adviser with the
Securities and Exchange Commission since 1993. It maintains its principal office
at 555 California Street, San Francisco, California 94104. The Subadviser is
principally owned by senior managers and portfolio managers of RS Investment
Management Company, LLC. As of December 31, 1998, the Subadviser and its
investment advisory affiliates were managing in excess of $3.5 billion for
public and private investment funds.
Portfolio Manager. John L. Wallace is responsible for the day to day management
of the assets of the Portfolio. Mr. Wallace has been a portfolio manager with
the Subadviser since July 1995. From 1990 until joining Robertson, Stephens &
Company, Mr. Wallace was a Vice President of Oppenheimer Funds, Inc. From 1991
through June 1995, he was the portfolio manager of the Oppenheimer Main Street
Income and Growth Fund and from 1990 through June 1995, he was the manager of
the Oppenheimer Total Return Fund. Mr. Wallace received his B.A. from the
University of Idaho and his M.B.A. from Pace University.
Berkeley U.S. Quality Bond Portfolio and Berkeley Money Market Portfolio
Subadviser. Berkeley Capital Management has been the Subadviser of the Berkeley
U.S. Quality Bond Portfolio and Berkeley Money Market Portfolio since November
3, 1997. The Subadviser has been managing assets as an investment adviser since
1972. As of December 31, 1998, it was managing approximately $2.0 billion in
assets for both institutional and retail clients. The Subadviser maintains its
principal office at 650 California Street, Suite 2800, San Francisco, California
94108. Berkeley Capital Management is a wholly- owned subsidiary of London
Pacific Group, Inc. and is an affiliate of the investment adviser and London
Pacific Life and Annuity Company, the life insurance company issuing the
Contracts.
Portfolio Manager. William F. Cox, CFA has been responsible for the day to day
management of the assets of both the Berkeley Quality Bond Portfolio and
Berkeley Money Market Portfolio since November 3, 1997. Mr. Cox has been a
Portfolio manager for the Subadviser since 1992 and has over 14 years experience
in the investment business. Mr. Cox received his B.S. from the University of
California at Berkeley and his M.B.A. from the University of California at Los
Angeles.
Harris Associates Value Portfolio
Subadviser. Harris Associates L.P. has been the Subadviser of the Harris
Associates Value Portfolio since May 1, 1997. The Subadviser has been in
business as an investment adviser since 1976. It maintains its principal office
at 2 North LaSalle Street, Chicago, Illinois 60602. The Subadviser is a wholly
owned subsidiary of New England Investment Companies, L.P., which is a publicly
traded limited partnership that owns investment management firms. A majority of
the limited partnership interests in New England Investment Companies, L.P. are
owned by Metropolitan Life Insurance Company. As of December 31, 1998, the
Subadviser was managing in excess of $17 billion for its clients.
Portfolio Manager. Robert Sanborn and Floyd Bellman are primarily responsible
for the day-to-day management of the Portfolio. Mr. Sanborn has been employed by
Harris Associates L.P. since 1988 and has managed The Oakmark Fund of the Harris
Associates Investment Trust since its inception in 1991.Mr. Bellman joined
Harris Associates L.P. in 1995. From 1989 to 1995, Mr. Bellman was a Vice
President and Senior Portfolio Manager at Harris Trust and Savings Bank
Lexington Corporate Leaders Portfolio
Subadviser. Lexington Management Corporation has been the Subadviser of the
Lexington Corporate Leaders Portfolio since February 9, 1996, the date the
Portfolio was first available for sale. The Subadviser and its predecessor
companies, registered investment advisers under the Investment Advisers Act of
1940, as amended, were established in 1938. It maintains its principal office at
Park 80 West Plaza Two, Post Office Box 1515, Saddle Brook, and New Jersey
07663. The Subadviser is a wholly owned subsidiary of Lexington Global Asset
Managers, Inc., which is privately owned. As of December 31, 1998, the
Subadviser was managing in excess of $3.5 billion in assets for its clients. The
service marks "Lexington" and "Corporate Leaders" are owned by Lexington
Management Corporation. The Portfolio has a sublicense to use the service marks
as long as Lexington Management Corporation or its affiliates manage the assets
of the Portfolio.
Portfolio Manager. The Lexington Corporate Leaders Portfolio is managed by an
investment management team. Lawrence Kantor, who has over 28 years investment
experience, is the lead manager. Mr. Kantor is a Managing Director and Executive
Vice President of Lexington Management Corporation. He is also a
Director/Trustee of the Lexington Funds and an Executive Vice President of
Lexington Global Asset Managers, Inc. Mr. Kantor joined the Subadviser in 1984.
Mr. Kantor received his B.S. From Long Island University and attended its
Graduate School of Business.
Strong Growth Portfolio
Subadviser. Strong Capital Management, Inc. ("Strong") is the subadviser for the
Strong Growth Portfolio. Strong began conducting business in 1974. Since then,
its principal business has been providing investment advice for individuals and
institutional accounts, such as pension and profit-sharing plans, as well as
mutual funds, several of which are available through variable insurance
products. Strong provides investment management services for mutual funds and
other investment portfolios representing assets of over $32 billion as of
December 31, 1998. Strong's address is P.O. Box 2936, Milwaukee, Wisconsin
53201.
Portfolio Manager. Ronald C. Ognar, a Chartered Financial Analyst with more than
30 years of investment experience, is primarily responsible for the Strong
Growth Portfolio. He joined Strong in April 1993, after two years as a principal
and portfolio manager with RCM Capital Management. For approximately three years
prior to that, he was a portfolio manager at Kemper Financial Services in
Chicago. In addition to his duties as portfolio manager of the Strong Growth
Portfolio, Mr. Ognar has managed the Strong Growth Fund, the Strong Growth Fund
II and the Strong Growth 20 Fund since their inception on December 1993, June
1995 and June 1997, respectively. In addition, he has co-managed the Strong
Total Return Fund since December 1994 and the Strong Mid Cap Growth Fund since
January 1999.
MFS Total Return Portfolio
Subadviser. Massachusetts Financial Services Company has been the Subadviser of
the MFS Total Return Portfolio since February 9, 1996, the date the Portfolio
was first made available to the public. The Subadviser is the oldest mutual fund
organization in the United States. The Subadviser and its predecessor
organizations have a history of money management dating from 1924. It maintains
its principal office at 500 Boylston Street, Boston, Massachusetts 02116. The
Subadviser is an indirect subsidiary of Sun Life Assurance Company of Canada,
which is one of the largest international life insurance companies. As of
December 31, 1998, the Subadviser was managing approximately $100 billion in
assets for approximately 3.7 million investors.
Portfolio Manager. A team of investment professionals is responsible for the
day-to-day management of the MFS Total Return Portfolio. David M. Calabro, a
Senior Vice President of the Subadviser, is the head of the management team and
a manager of the common stock portion of the assets of the Portfolio. Mr.
Calabro, a Senior Vice President of MFS, has been employed by the Subadviser as
a portfolio manager since 1992. Mr. Calabro is the head of this portfolio
management team and a manager of the common stock portion of the Portfolio.
Geoffrey L. Kurinsky, a Senior Vice President of MFS, has been employed by the
Subadviser as a portfolio manager since 1987. Mr. Kurinsky is the manager of the
Portfolio's fixed income securities. Constantinos G. Mokas, a Vice President of
MFS, has been a portfolio manager of the Portfolio since April 1, 1998, and has
been employed by the Sub-Adviser as a portfolio manager since 1990. Mr. Mokas is
the manager of the Portfolio's convertible securities. Lisa B. Nurme, a Senior
Vice President of MFS, has been employed by the Subadviser as a portfolio
manager since 1987. Ms. Nurme is a manager of the common stock portion of the
Portfolio. Each individual became a portfolio manager of the Portfolio on July
19, 1995. Kenneth J. Enright, a Senior Vice President of MFS, has been employed
by the Subadviser as a portfolio manager since 1986. Mr. Enright became a
manager of the common stock portion of the Portfolio on January 15, 1999.
SAI Global Leaders Portfolio
Subadviser. Select Advisors, Inc. (SAI) is an affiliate of London Pacific Life
and Annuity Company and of the investment adviser. SAI began operations in 1983
through its predecessor company, and is a registered investment adviser located
at 1755 Creekside Oaks Drive, Suite 290, Sacramento, CA 95833. SAI and
affiliated companies provide financial services for clients with assets in
excess of $2 billion. SAI is a wholly-owned subsidiary of the London Pacific
Group Limited, a corporation listed on the London Stock Exchange and the NASDAQ
market system with a market valuation of approximately $237 million. The London
Pacific Group Limited, which manages or administers funds valued at
approximately $3.9 billion (including the assets managed by the Sub-Adviser) as
of December 31, 1998, maintains offices in Jersey (Channel Islands), Sacramento,
Raleigh and San Francisco.
Portfolio Manager. The investment professionals primarily responsible for the
daily management of the Portfolio are David L. Ruff, CFA and Jack Waymire. Jack
Waymire founded the SAI predecessor company in 1983 and has 26 years of
investment experience. David Ruff has 12 years of investment experience, and
began with the SAI predecessor company in 1987.
PERFORMANCE OF THE PORTFOLIOS
Performance information for the Portfolios of the Trust, including a bar chart
and average annual total return information since the inception of the
Portfolios, is contained in this Prospectus under the heading "Performance."
COMPARABLE PERFORMANCE
Public Fund Performance
Each of the Robertson Stephens Diversified Growth Portfolio, the Harris
Associates Value Portfolio, the Strong Growth Portfolio and the MFS Total Return
Portfolio has a substantially similar investment objective and follows
substantially the same investment strategies as certain mutual funds whose
shares are sold to the public. Each of these public mutual funds is managed by
the same Subadviser which manages each of the corresponding Portfolios.
The historical performance of each of these public mutual funds is shown below.
This performance data should not be considered as an indication of future
performance of the Portfolios. The public mutual fund performance figures shown
below:
o reflect the deduction of the historical fees and expenses paid by the
public mutual funds and not those to be paid by the Portfolios;
o do not reflect Contract fees or charges imposed by London Pacific Life and
Annuity Company. Investors should refer to the separate account prospectus
for information describing the Contract fees and charges. These fees and
charges will have a detrimental effect on Portfolio performance.
The Portfolios and their corresponding public mutual fund series are expected to
hold similar securities. However, their investment results are expected to
differ for the following reasons:
o differences in asset size and cash flow resulting from purchases and
redemptions of Portfolio shares may result in different security
selections;
o differences in the relative weightings of securities;
o differences in the price paid for particular portfolio holdings;
o differences relating to certain tax matters.
The following table shows average annualized total returns for each comparable
public mutual fund for their fiscal 1998 years (ended December 31, 1998, except
September 30, 1998 for the MFS Total Return Fund). Also shown are performance
comparisons between these public mutual funds and comparable indices.
Since Inception
Fund 1 Year Inception Date
- ----- ------ --------- ----
Robertson Stephens Diversified
Growth Fund 16.42% 29.62% 8/1/96
Standard & Poor's 500
Stock Index 28.58% 33.42% 8/1/96
Russell 2000 Small Company
Index (2.55)% 14.27% 8/1/96
Since Inception
Fund 1 Year 5 Year Inception Date
----- ------ ------ --------- ----
Oakmark Fund of
the Harris Associates
Investment Trust 3.74% 17.28% 26.22% 8/5/91
Standard & Poor's 500
Stock Index 28.58% 24.05% 19.73% 7/31/91
Lipper Growth &
Income Index 13.58% 17.83% 15.97% 7/31/91
Since Inception
Fund 1 Year Inception Date
- ----- ------ --------- ----
Strong Growth Fund 26.98% 24.47% 12-31-93
Standard & Poor's
500 Stock Index 28.58% 24.06% From 1-1-94
Russell 2000 Small
Company Index (2.55)% 11.87% From 1-1-94
Since Inception
Fund 1 Year 5 Year 10 Year Inception Date
- ------ ------ ------ ------- --------- ----
MFS Total
Return Fund 11.91% 13.84% 13.48% 12.22% 10-6-70
Standard &
Poor's 500
Stock Index 28.58% 24.09% 19.22% 14.12% 9-30-70
Lehman Brothers
Aggregate Bond
Index 8.69% 7.27% 9.26% 9.69% 1-1-70
Lipper Balanced
Fund Index 15.37% 13.87% 13.32% 11.80% 9-30-70
Description of Indices Used
Standard & Poor's 500 Composite Stock Price Index
An unmanaged index generally considered to be representative of the stock
market.
Russell 2000 Small Company Index
An unmanaged index of 2000 small company stocks.
Lipper Growth & Income Index
A nonweighted index of 139 funds investing in stocks and corporate and
government bonds.
Lehman Brothers Aggregate Bond Index
An unmanaged index of average yield U.S. investment grade bonds.
Lipper Balanced Fund Index
A nonweighted index of 210 funds investing in stocks and corporate and
government bonds.
Private Account Performance
The SAI Global Leaders Portfolio, which is subadvised by Select Advisors, Inc.
(SAI), is commencing the sale of its shares as of the date of this Prospectus.
This Portfolio has an investment objective, policies and strategies which are
substantially similar to those employed by SAI with respect to certain Private
Accounts. Thus the performance information derived from these Private Accounts
may be deemed relevant to the investor. The performance of the Portfolio will
vary from the Private Account composite information because
o the Portfolio will be actively managed and its investments will from time
to time and will not be identical to the past portfolio investments of the
Private Accounts
o the Private Accounts are not subject to certain investment limitations,
diversification requirements and other restrictions imposed under federal
tax and securities laws which, if applicable, may have adversely affected
the performance results of the Private Account composites.
The chart below shows performance information derived from historical composite
performance of the Private Accounts. The performance figures shown below
represent the performance results of the composites of comparable Private
Accounts, adjusted to reflect the deduction of the fees and expenses paid or
anticipated to be paid by the Portfolio. The Private Account composites are not
substitutes for the performance history of the Portfolio. The Private Account
composite performance figures are time-weighted rates of return which include
all income and accrued income and realized and unrealized gains or losses, but
do not reflect the deduction of investment advisory fees actually charged to the
Private Accounts.
Investors should not consider the performance data of these Private Accounts as
an indication of the future performance of the Portfolio. The figures also do
not reflect the deduction of any insurance fees or charges which are imposed by
London Pacific Life and Annuity Company in connection with the Contracts.
Investors should refer to the separate account prospectus describing the
Contracts for information pertaining to these insurance fees and charges. Any
fees and charges will have a detrimental effect on the performance of the
Portfolio.
Private Account Composite Performance
Reduced by Portfolio Fees and Expenses
For the periods ended 12/31/98
Average Annual Total Return
Since
Inception Date
Private Account 1 Year (January 1, 1998)
- --------------- - ---- -----------------
SAI Global Leaders Equity 39.22% 39.22%
Standard & Poor's 500 Stock Index 28.58% 28.58%
65% Standard & Poor's 500 Stock
Index/35% Morgan Stanley Capital
International Europe, Asia, and Far
East (EAFE) Index* 27.00% 27.00%
* The Morgan Stanley Capital International Europe, Asia and Far East (EAFE)
Index is an unmanaged index of leading international stocks.
Legal Proceedings
Neither the Trust nor any Portfolio is involved in any material legal
proceedings. Neither the investment adviser nor any Subadviser is involved in
any legal proceedings that if decided against any such party would materially
affect the ability of the party to carry out its duties to the Portfolios. None
of such persons is aware of any litigation that has been threatened.
PORTFOLIO SHARES
Price of Shares
The Portfolios are available as investment options under the Contracts. The
insurance companies offering the Contracts will purchase and sell shares for you
when you direct them to do so under the terms of your Contract. The Portfolios
will buy or sell shares at the price determined at the end of each day during
which the New York Stock Exchange is open for trading (see Net Asset Value,
below). The Portfolio must receive your order by 4:00 p.m. eastern time for you
to receive the price for that day. The Portfolio will buy or sell shares for
orders it receives after 4:00 p.m. at the price calculated for the next day on
which the New York Stock Exchange is open.
Placing Orders for Shares
The prospectus for your Contract describes the procedures for investing your
purchase payments in shares of the Portfolios. You may obtain a copy of that
prospectus, free of charge, from your insurance company or from the person who
sold you the Contract. The investment adviser and the life insurance company
will not consider an order to buy or sell shares in the Portfolios as received
until the order meets the requirements for documentation or signatures described
in the prospectus for your Contract. The Portfolios do not charge any fees for
selling (redeeming) shares. You should review the prospectus for your Contract
to see if the insurance company charges any fees for redeeming your interest in
the Contract or for moving your assets from one Portfolio to another.
Payment for Redemptions
Payment for orders to sell (redeem) shares will be made within seven days after
the investment adviser receives the order.
Suspension or Rejection of Purchases and Redemptions
The Portfolios may suspend the offer of shares, or reject any specific request
to purchase shares from a Portfolio at any time. The Portfolios may suspend
their obligation to redeem shares or postpone payment for redemptions when the
New York Stock Exchange is closed or when trading is restricted on the Exchange
for any reason, including emergency circumstances established by the Securities
and Exchange Commission.
Net Asset Value
The investment adviser calculates the value or price of each share of each
Portfolio (net asset value per share) at the close of business, usually 4:00
p.m., of the New York Stock Exchange, every day that the New York Stock Exchange
is open for business. The investment adviser determines the value of all assets
held by each Portfolio at the end of the day, subtracts all liabilities and
divides the total by the total number of shares outstanding. The investment
adviser provides this value to the insurance company, which uses it to calculate
the value of your interest in your Contract. It is also the price at which the
investment adviser will buy or sell shares in the Portfolios for orders it
receives that day. The investment adviser determines the value of the net assets
of the Portfolio by obtaining market quotations, where available, Short-term
debt instruments maturing in less than 60 days are valued at amortized cost.
Securities for which market quotations are not available are valued at their
fair value as determined, in good faith, by the investment adviser based on
policies adopted by the Board of Trustees.
Some of the Portfolios trade securities on foreign markets or in foreign
currencies. Those markets are open at different times and occasionally on
different days than securities traded on the New York Stock Exchange. Exchange
rates for foreign currencies are usually determined at 1:00 p.m. rather than
4:00 p.m. These factors may mean that the value of the securities held by these
Portfolios may change after the close of business of the New York Stock
Exchange.
Dividends and Distributions
Each Portfolio will declare and distribute dividends from net ordinary income
and will distribute its net realized capital gains, if any, at least annually.
The insurance companies generally direct that all dividends and distributions of
the Portfolios be reinvested in the Portfolios under the terms of the Contracts.
Tax Matters
The Trust intends to qualify as a regulated investment company under the tax law
and, as such distributes substantially all of each Portfolio's ordinary net
income and capital gains each calendar year as a dividend to the separate
accounts funding the Contracts to avoid an excise tax on certain undistributed
amounts. The Trust expects to pay no income tax. Dividends are reinvested in
additional full and partial shares of the Portfolio as of the dividend payment
date.
The Trust and its Portfolios intend to comply with special diversification and
other tax law requirements that apply to investments under the Contracts. Under
these rules, shares of the Trust will generally only be available through the
purchase of a variable life insurance or annuity contract. Income tax
consequences to Contract owners who allocate premiums to Trust shares are
discussed in the prospectus for the Contracts that is attached at the front of
this Prospectus.
DISTRIBUTION OF SHARES
Sales Charges
You will not have to pay any fees or sales charges for investing in a Portfolio
or for withdrawing money from a Portfolio. You may have to pay sales charges on
payments you make to your Contract or on amounts you withdraw from the Contract.
The prospectus for the Contract you have purchased describes those charges.
Classes of Shares
The Trust has the authority to issue two classes of shares - Class A and Class
B. the shares offered by this prospectus are Class A Shares. As of the date of
this prospectus, the Trust has not offered or sold any Class B shares.
Additional Information
This Prospectus sets forth concisely the information about the Trust and each
Portfolio that you should know before you invest money in a Portfolio. Please
read this prospectus carefully and keep it for future reference. The Trust has
prepared and filed with the Securities and Exchange Commission (Commission) a
Statement of Additional Information that contains more information about the
Trust and the Portfolios. You may obtain a free copy of the Statement of
Additional Information from your registered representative who offers you the
Contract. You may also obtain copies by calling the Trust at 1-800-852-3152 or
by writing to the Trust at the following address: 1755 Creekside Oaks Drive,
Sacramento, CA 95833.
FINANCIAL HIGHLIGHTS
Financial Information
The following information is intended to help you understand the financial
performance of the Portfolios since the time they were first offered to the
public. The total returns in the table represent the rate that an investor would
have earned or lost on an investment in the Portfolios, assuming reinvestment of
all dividends and distributions. The information applies to a single share
throughout each year indicated. This information has been audited by
PricewaterhouseCoopers LLP, Independent Accountants, whose unqualified report
thereon is included in the Annual Report for the Trust. The annual report is
incorporated by reference into the Statement of Additional Information for the
Trust. You will find information about how to get a free copy of the annual
report and Statement of Additional Information on the back cover of this
prospectus.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LPT Variable Insurance Series Trust
Financial Highlights
For a Share Outstanding throughout the Period
Robertson Stephens Diversified Growth
Portfolio (4)
--------------------------------------
Year Ended Year Ended Period Ended
December 31, 1998 December 31, 1997 December 31, 1996*
----------------- ----------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.22 $8.58 $10.00
Income from investment operations:
Net investment income (a) (0.08) (0.07) 2.10
Net realized and unrealized gain
(loss) on investments 1.86 1.71 (1.69)
---- ---- -----
Total from investment operations 1.78 1.64 0.41
---- ---- ----
Less distributions:
Dividends from net investment income 0.00 0.00 (1.83)
Distributions from net realized capital gains 0.00 0.00 (0.00)
---- ---- -----
Total distributions 0.00 0.00 (1.83)
---- ---- -----
Net asset value, end of period $12.00 $10.22 $8.58
====== ====== =====
Total return ++ 17.42% 19.12% 2.42%
===== ===== ====
Ratios to average net assets/supplemental
data
Net assets, end of period (in 000's) $6,257 $3,452 $1,441
Ratio of operating expenses to average
net assets 1.39% 1.39% 1.36%+
Ratio of net investment income/loss to
average net assets (0.73%) (0.72%) 20.30%+
Portfolio turnover rate 381.64% 234.54% 2,242.85%
Ratio of operating expenses to average net
assets before expense reimbursements 2.37% 4.53% 7.02%+
Net investment income (loss) per share before
expense reimbursements (a) ($0.18) ($0.35) $1.51
<FN>
+ Annualized
++ Total returns represent aggregate total return for the years
ended December 1998 and 1997 and for the period February 9, 1996 (effective
date) to December 31, 1996, respectively. The total return would have been lower
if certain expenses had not been reimbursed by London Pacific.
(a) Based on the average of the daily shares outstanding throughout the year.
(4) Formerly Berkeley Smaller Companies Portfolio
*For the period January 31, 1996 (Commencement of Operations) to December 31, 1996
</FN>
</TABLE>
<TABLE>
<CAPTION>
LPT Variable Insurance Series Trust
Financial Highlights
For a Share Outstanding throughout the Period
Berkeley U. S. Quality Bond Portfolio (2)
-----------------------------------------------------------
Year Ended Year Ended Period Ended
December 31,1998 December 31,1997 December 31, 1996*
---------------- ---------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.91 $9.81 $10.00
Income from investment operations:
Net investment income (a) 0.52 0.58 0.49
Net realized and unrealized gain (loss)
on investments 0.26 0.34 (0.25)
---- ---- -----
Total from investment operations 0.78 0.92 0.24
---- ---- ----
Less distributions:
Dividends from net investment income 0.00 (0.82) (0.43)
Distributions from net realized capital gains 0.00 (0.00) (0.00)
---- ----- -----
Total distributions 0.00 (0.82) (0.43)
Net asset value, end of period $10.69 $9.91 $9.81
====== ===== =====
Total return ++ 7.87% 9.45% 2.27%
==== ==== ====
Ratios to average net assets/supplemental
data
Net assets, end of period (in 000's) $1,978 $1,082 $1,553
Ratio of operating expenses to average net assets 0.99% 0.99% 0.97%+
Ratio of net investment income to average
net assets 4.97% 5.79% 5.41%+
Portfolio turnover rate 5.21% 431.63% 231.03%
Ratio of operating expenses to average net
assets before expense reimbursements 3.60% 5.09% 5.79%+
Net investment income (loss) per share
before expense reimbursements (a) $0.24 $0.17 $0.05
<FN>
+ Annualized
++ Total returns represent aggregate total return for the years
ended December 1998 and 1997 and for the period February 9, 1996 (effective
date) to December 31, 1996, respectively. The total return would have been lower
if certain expenses had not been reimbursed by London Pacific.
(a) Based on the average of the daily shares outstanding throughout the year.
(2) Formerly Salomon U.S. Quality Bond Portfolio
*For the period January 31, 1996 (Commencement of Operations) to December 31, 1996
</FN>
</TABLE>
<TABLE>
<CAPTION>
LPT Variable Insurance Series Trust
Financial Highlights
For a Share Outstanding throughout the Period
Berkeley Money Market Portfolio (3)
-----------------------------------------------------------
Year Ended Year Ended Period Ended
December 31,1998 December 31,1997 December 31, 1996*
---------------- ---------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00
Income from investment operations:
Net investment income (a) 0.04 0.05 0.04
Net realized and unrealized gain (loss)
on investments 0.00 0.00 0.00
---- ---- ----
Total from investment operations 0.04 0.05 0.04
---- ---- ----
Less distributions:
Dividends from net investment income (0.04) (0.05) (0.04)
Distributions from net realized capital gains (0.00) (0.00) (0.00)
----- ----- -----
Total distributions (0.04) (0.05) (0.04)
Net asset value, end of period $1.00 $1.00 $1.00
===== ===== =====
Total return ++ 4.55% 4.58% 3.93%
==== ==== ====
Ratios to average net assets/supplemental
data
Net assets, end of period (in 000's) $1,304 $1,373 $1,178
Ratio of operating expenses to average net assets 0.89% 0.89% 0.87%+
Ratio of net investment income to average
net assets 4.50% 4.58% 4.43%+
Portfolio turnover rate N/A N/A N/A
Ratio of operating expenses to average net
assets before expense reimbursements 3.14% 4.30% 6.67%+
Net investment income (loss) per share
before expense reimbursements (a) $0.02 $0.01 ($0.01)
<FN>
+ Annualized
++ Total returns represent aggregate total return for the years
ended December 1998 and 1997 and for the period February 9, 1996 (effective
date) to December 31, 1996, respectively. The total return would have been lower
if certain expenses had not been reimbursed by London Pacific.
(a) Based on the average of the daily shares outstanding throughout the year.
(3) Formerly Salomon Money Market Portfolio
*For the period January 31, 1996 (Commencement of Operations) to December 31, 1996
</FN>
</TABLE>
<TABLE>
<CAPTION>
LPT Variable Insurance Series Trust
Financial Highlights
For a Share Outstanding Throughout the Period
Harris Associates Value Portfolio (1)
--------------------------------------------------------
Year Ended Year Ended Period Ended
December 31, 1998 December 31,1997 December 31, 1996*
----------------- ---------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.45 $11.86 $10.00
Income from investment operations:
Net investment income (a) 0.10 0.08 0.10
Net realized and unrealized gain on
investments 0.48 2.94 2.13
---- ---- ----
Total from investment operations 0.58 3.02 2.23
---- ---- ----
Less distributions:
Dividends from net investment income 0.00 (0.05) (0.10)
Distributions from net realized capital gains 0.00 (1.38) (0.27)
---- ----- -----
Total distributions 0.00 (1.43) (0.37)
---- ----- -----
Net asset value, end of period $14.03 $13.45 $11.86
====== ====== ======
Total return ++ 4.31% 25.56% 20.39%
==== ===== =====
Ratios to average net assets/supplemental
data
Net assets, end of period (in 000's) $7,223 $3,523 $1,421
Ratio of operating expenses to average net assets 1.29% 1.29% 1.26%+
Ratio of net investment income to average net assets 0.75% 0.56% 1.01%+
Portfolio turnover rate 49.83% 84.94% 41.08%
Ratio of operating expenses to average net
assets before expense reimbursements 1.85% 4.22% 7.55%+
Net investment income (loss) per share
before expense reimbursements (a) $0.03 ($0.32) ($0.52)
<FN>
+ Annualized
++ Total returns represent aggregate total return for the years
ended December 1998 and 1997 and for the period February 9, 1996 (effective
date) to December 31, 1996, respectively. The total return would have been lower
if certain expenses had not been reimbursed by London Pacific.
(a) Based on the average of the daily shares outstanding throughout the year.
(1) Formerly MAS Value Portfolio
*For the period January 31, 1996 (Commencement of Operations) to December 31, 1996
</FN>
</TABLE>
<TABLE>
<CAPTION>
LPT Variable Insurance Series Trust
Financial Highlights
For a Share Outstanding Throughout the Period
Lexington Corporate Leaders Portfolio
-----------------------------------------------------------
Year Ended Year Ended Period Ended
December 31, 1998 December 31, 1997 December 31,1996*
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.39 $11.44 $10.00
Income from investment operations:
Net investment income (a) 0.12 0.13 0.14
Net realized and unrealized gain
(loss) on investments 1.49 2.70 1.42
---- ---- ----
Total from investment operations 1.61 2.83 1.56
---- ---- ----
Less distributions:
Dividends from net investment income 0.00 (0.08) (0.12)
Distributions from net realized capital gains (0.03) (0.80) (0.00)
----- ----- -----
Total distributions (0.03) (0.88) (0.12)
----- ----- -----
Net asset value, end of period $14.97 $13.39 $11.44
====== ====== ======
Total return ++ 12.04% 24.71% 12.84%
===== ===== =====
Ratios to average net assets/supplemental
data
Net assets, end of period (in 000's) $8,169 $3,453 $1,323
Ratio of operating expenses to average net
assets 1.29% 1.29% 1.26%+
Ratio of net investment income to average
net assets 0.87% 0.99% 1.40%+
Portfolio turnover rate 7.08% 35.69% 0.00%
Ratio of operating expenses to average net
assets before expense reimbursements 1.60% 4.08% 6.86%+
Net investment income (loss) per share
before expense reimbursements (a) $0.08 ($0.24) ($0.41)
<FN>
+ Annualized
++ Total returns represent aggregate total return for the years
ended December 1998 and 1997 and for the period February 9, 1996 (effective
date) to December 31, 1996, respectively. The total return would have been lower
if certain expenses had not been reimbursed by London Pacific.
(a) Based on the average of the daily shares outstanding throughout the year.
*For the period January 31, 1996 (Commencement of Operations) to December 31, 1996
</FN>
</TABLE>
<TABLE>
<CAPTION>
LPT Variable Insurance Series Trust
Financial Highlights
For a Share Outstanding throughout the Period
Strong Growth Portfolio
-----------------------------------------------------------
Year Ended Year Ended Period Ended
December 31, 1998 December 31, 1997 December 31, 1996*
----------------- ----------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.47 $11.92 $10.00
Income from investment operations:
Net investment income (a) (0.08) (0.04) 0.25
Net realized and unrealized gain
(loss) on investments 4.17 3.07 2.49
---- ---- ----
Total from investment operations 4.09 3.03 2.74
---- ---- ----
Less distributions:
Dividends from net investment income 0.00 0.00 (0.22)
Distributions from net realized capital gains (0.50) (1.48) (0.60)
----- ----- -----
Total distributions (0.50) (1.48) (0.82)
----- ----- -----
Net asset value, end of period $17.06 $13.47 $11.92
====== ====== ======
Total return ++ 30.43% 25.56% 20.27%
===== ===== =====
Ratios to average net assets/supplemental
data
Net assets, end of period (in 000's) $6,860 $2,912 $1,513
Ratio of operating expenses to average
net assets 1.29% 1.29% 1.26%+
Ratio of net investment income/loss to
average net assets (0.53%) (0.26%) 2.25%+
Portfolio turnover rate 275.16% 270.11% 422.67%
Ratio of operating expenses to average net
assets before expense reimbursements 2.39% 4.44% 7.09%+
Net investment income (loss) per share before
expense reimbursements (a) ($0.24) ($0.46) ($0.39)
<FN>
+ Annualized
++ Total returns represent aggregate total return for the years
ended December 1998 and 1997 and for the period February 9, 1996 (effective
date) to December 31, 1996, respectively. The total return would have been lower
if certain expenses had not been reimbursed by London Pacific.
(a) Based on the average of the daily shares outstanding throughout the year.
*For the period January 31, 1996 (Commencement of Operations) to December 31, 1996
</FN>
</TABLE>
<TABLE>
<CAPTION>
LPT Variable Insurance Series Trust
Financial Highlights
For a Share Outstanding Throughout the Period
MFS Total Return Portfolio
--------------------------------------------------------
Year Ended Year Ended Period Ended
December 31, 1998 December 31,1997 December 31, 1996*
----------------- ---------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period $12.80 $10.90 $10.00
Income from investment operations:
Net investment income (a) 0.37 0.35 0.25
Net realized and unrealized gain on
investments 1.16 1.95 0.85
---- ---- ----
Total from investment operations 1.53 2.30 1.10
---- ---- ----
Less distributions:
Dividends from net investment income 0.00 (0.19) (0.20)
Distributions from net realized capital gains (0.05) (0.21) (0.00)
----- ----- -----
Total distributions (0.05) (0.40) (0.20)
----- ----- -----
Net asset value, end of period $14.28 $12.80 $10.90
====== ====== ======
Total return ++ 11.98% 21.18% 9.81%
===== ===== ====
Ratios to average net assets/supplemental
data
Net assets, end of period (in 000's) $11,766 $5,973 $1,529
Ratio of operating expenses to average net assets 1.29% 1.29% 1.26%+
Ratio of net investment income to average net assets 2.72% 2.80% 2.59%+
Portfolio turnover rate 126.29% 103.75% 53.91%
Ratio of operating expenses to average net
assets before expense reimbursements 1.87% 3.88% 7.84%+
Net investment income (loss) per share
before expense reimbursements (a) $0.29 $0.03 ($0.38)
<FN>
+ Annualized
++ Total returns represent aggregate total return for the years
ended December 1998 and 1997 and for the period February 9, 1996 (effective
date) to December 31, 1996, respectively. The total return would have been lower
if certain expenses had not been reimbursed by London Pacific.
(a) Based on the average of the daily shares outstanding throughout the year.
*For the period January 31, 1996 (Commencement of Operations) to December 31, 1996
</FN>
</TABLE>
LPT VARIABLE INSURANCE SERIES TRUST
1755 Creekside Oaks Drive
Sacramento, California 95833
Additional information about the Trust and its Portfolios can be found in the
Statement of Additional Information. Additional information about the
Portfolios' investments is available in the Trust's annual and semi-annual
reports to shareholders. In the annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
performance of the Portfolios during their last fiscal year. The Statement of
Additional Information and the annual and semi-annual reports are available on
request without charge for any person having an interest in the Trust. Please
call 1-800-852-3152 or write to the Trust at the address listed above to request
copies of the Statement of Additional Information, the annual report, the
semi-annual report, or any additional information you would like about the
Portfolios or to ask questions about the Portfolios.
Information about the purchase and sale of the Trust shares and the related
costs is included in the prospectus for the Contracts that offer the Portfolios
as investments.
The Commission maintains a Web site (http://www.sec.gov) on the Internet that
contains the Statement of Additional Information, which is incorporated into
this Prospectus by reference, and other information about the Trust and this
offering. You can also review and copy those materials at the Public Reference
Room of the Securities and Exchange Commission in Washington, D.C. You may
obtain information on the operation of the public reference room by calling the
Commission at 1-800-SEC-0330 (1-800-732-0330).
