** The Adviser and Sub-Adviser have contractually agreed to jointly waive its management fee and sub-advisory fee, respectively, and/or reimburse expenses so that total annual fund operating expenses (“gross expense ratio”) excluding acquired fund fees and expenses and extraordinary expenses, do not exceed a maximum of 0.73% of Class II shares average daily net assets through April 30, 2009. The addition of excluded expenses may cause the gross expense ratio to exceed 0.73%.

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted.

Conservative Portfolio:

During the fourth quarter, U.S. stocks lost 3.3 percent with greater losses in small cap and value style equities. Domestic growth stocks outperformed value by an average of 4.8 percent across the capitalization spectrum in the fourth quarter. For the U.S. bond market, longer maturity government bonds did well, returning 5.6 percent. Shorter maturity government bonds experienced large inflows, potentially due to investor uncertainty about the direction of the markets. U.S. corporate bonds are suffering from the ongoing credit crunch that was brought on by lax mortgage lending standards and poorly justified credit ratings on mortgage backed securities. High yield bonds posted a -1.3 percent loss for the fourth quarter, while spreads climbed higher. This may be indicative of an investor flight to quality and fear of higher future default rates. 

Against this backdrop, the Conservative Portfolio returned 1.66 percent. The portfolio’s primary benchmark, DJ Conservative U.S. Relative Risk Portfolio, returned 1.37 percent during the quarter. The portfolio’s secondary benchmark, a blended 20 percent S&P 500 Index and 80 percent Lehman Aggregate Bond Index, returned 1.74 percent during the quarter. Ibbotson employs a dynamic asset allocation overlay for this portfolio. The dynamic overlay seeks to add value through deviations from the long-term strategic asset allocation policy in order to capitalize on the current market environment and other shorter-term inefficiencies and trends. Late in the fourth quarter, Ibbotson removed our short-term bond overweight and allocated in accordance with the strategic allocations for TIPS and aggregate U.S. bonds. This move helped the dynamic overlay achieve 0.09 percent in excess of the strategic asset class model return for the quarter. The dynamic overlay has added 0.12 percent in excess of the strategic asset class model return since inception. 

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Income and Growth Portfolio:

During the fourth quarter, U.S. stocks lost 3.3 percent with greater losses in small cap and value style equities. Domestic growth stocks outperformed value by an average of 4.8 percent across the capitalization spectrum in the fourth quarter. For the U.S. bond market, longer maturity government bonds did well, returning 5.6 percent. Shorter maturity government bonds experienced large inflows, potentially due to investor uncertainty about the direction of the markets. U.S. corporate bonds are suffering from the ongoing credit crunch that was brought on by lax mortgage lending standards and poorly justified credit ratings on mortgage backed securities. High yield bonds posted a -1.3 percent loss for the fourth quarter, while spreads climbed higher. This may be indicative of an investor flight to quality and fear of higher future default rates.  

Against this backdrop, the Income and Growth Portfolio returned 0.20 percent. The portfolio’s primary benchmark, DJ Moderately Conservative U.S. Relative Risk Portfolio, returned 0.12 percent during the quarter. The portfolio’s secondary benchmark, a blended 40 percent S&P 500 Index and 60 percent Lehman Aggregate Bond Index, returned 0.47 percent during the quarter. Ibbotson employs a dynamic asset allocation overlay for this portfolio. The dynamic overlay seeks to add value through deviations from the long-term strategic asset allocation policy in order to capitalize on the current market environment and other shorter-term inefficiencies and trends. Late in the fourth quarter, Ibbotson removed our short-term bond overweight and allocated in accordance with the strategic allocations for TIPS and aggregate U.S. bonds.

The dynamic overlay added 0.38 percent in excess of the strategic asset class model return for the quarter. An overweight in large cap from small cap and REITs had a positive impact on performance relative to the strategic asset class model weights. The dynamic overlay has added 0.56 percent in excess of the strategic asset class model return since inception. 

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Balanced Portfolio:

During the fourth quarter, U.S. stocks lost 3.3 percent with greater losses in small cap and value style equities. Domestic growth stocks outperformed value by an average of 4.8 percent across the capitalization spectrum in the fourth quarter. For the U.S. bond market, longer maturity government bonds did well, returning 5.6 percent. Shorter maturity government bonds experienced large inflows, potentially due to investor uncertainty about the direction of the markets. U.S. corporate bonds are suffering from the ongoing credit crunch that was brought on by lax mortgage lending standards and poorly justified credit ratings on mortgage backed securities. High yield bonds posted a -1.3 percent loss for the fourth quarter, while spreads climbed higher. This may be indicative of an investor flight to quality and fear of higher future default rates.  

Against this backdrop, the Balanced Portfolio returned -0.88 percent. The portfolio’s primary benchmark, DJ Moderate U.S. Relative Risk Portfolio, returned -1.44 percent during the quarter. The portfolio’s secondary benchmark, a blended 60 percent S&P 500 Index and 40 percent Lehman Aggregate Bond Index, returned -0.80 percent during the quarter. Ibbotson employs a dynamic asset allocation overlay for this portfolio. The dynamic overlay seeks to add value through deviations from the long-term strategic asset allocation policy in order to capitalize on the current market environment and other shorter-term inefficiencies and trends. Late in the fourth quarter, Ibbotson removed our short-term bond overweight and allocated in accordance with the strategic allocations for TIPS and aggregate U.S. bonds.

The dynamic overlay added 0.49 percent in excess of the strategic asset class model return for the quarter. An overweight in large cap from small cap and REITs had a positive impact on performance relative to the strategic asset class model weights. The dynamic overlay has added 0.81 percent in excess of the strategic asset class model return since inception. 

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Growth Portfolio:

During the fourth quarter, U.S. stocks lost 3.3 percent with greater losses in small cap and value style equities. Domestic growth stocks outperformed value by an average of 4.8 percent across the capitalization spectrum in the fourth quarter. For the U.S. bond market, longer maturity government bonds did well, returning 5.6 percent. Shorter maturity government bonds experienced large inflows, potentially due to investor uncertainty about the direction of the markets. U.S. corporate bonds are suffering from the ongoing credit crunch that was brought on by lax mortgage lending standards and poorly justified credit ratings on mortgage backed securities. High yield bonds posted a -1.3 percent loss for the fourth quarter, while spreads climbed higher. This may be indicative of an investor flight to quality and fear of higher future default rates.  

Against this backdrop, the Growth Portfolio returned -2.51 percent. The portfolio’s primary benchmark, DJ Moderately Aggressive U.S. Relative Risk Portfolio, returned          -2.87 percent during the quarter. The portfolio’s secondary benchmark, a blended 80 percent S&P 500 Index and 20 percent Lehman Aggregate Bond Index, returned -2.07 percent during the quarter. Ibbotson employs a dynamic asset allocation overlay for this portfolio. The dynamic overlay seeks to add value through deviations from the long-term strategic asset allocation policy in order to capitalize on the current market environment and other shorter-term inefficiencies and trends. Late in the fourth quarter, Ibbotson removed our short-term bond overweight and allocated in accordance with the strategic allocations for TIPS and aggregate U.S. bonds.

The dynamic overlay added 0.61 percent in excess of the strategic asset class model return for the quarter. An overweight in large cap from small cap and REITs had a positive impact on performance relative to the strategic asset class model weights. The dynamic overlay has added 0.98 percent in excess of the strategic asset class model return since inception. 

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Aggressive Growth Portfolio:

During the fourth quarter, U.S. stocks lost 3.3 percent with greater losses in small cap and value style equities. Domestic growth stocks outperformed value by an average of 4.8 percent across the capitalization spectrum in the fourth quarter. For the U.S. bond market, longer maturity government bonds did well, returning 5.6 percent. Shorter maturity government bonds experienced large inflows, potentially due to investor uncertainty about the direction of the markets. U.S. corporate bonds are suffering from the ongoing credit crunch that was brought on by lax mortgage lending standards and poorly justified credit ratings on mortgage backed securities. High yield bonds posted a -1.3 percent loss for the fourth quarter, while spreads climbed higher. This may be indicative of an investor flight to quality and fear of higher future default rates.  

Against this backdrop, the Growth Portfolio returned -3.17 percent. The portfolio’s primary benchmark, DJ Aggressive U.S. Relative Risk Portfolio, returned -4.18 percent during the quarter. The portfolio’s secondary benchmark, a blended 90 percent S&P 500 Index and 10 percent Lehman Aggregate Bond Index, returned -2.70 percent during the quarter. Ibbotson employs a dynamic asset allocation overlay for this portfolio. The dynamic overlay seeks to add value through deviations from the long-term strategic asset allocation policy in order to capitalize on the current market environment and other shorter-term inefficiencies and trends. Late in the fourth quarter, Ibbotson removed our short-term bond overweight and allocated in accordance with the strategic allocations for TIPS and aggregate U.S. bonds.

The dynamic overlay added 0.79 percent in excess of the strategic asset class model return for the quarter. An overweight in large cap from small cap and REITs had a positive impact on performance relative to the strategic asset class model weights. The dynamic overlay has added 1.30 percent in excess of the strategic asset class model return since inception.

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Disclosure

Ibbotson ETF Allocation Series Portfolios are distributed by ALPS Distributors, Inc. 

An investment in the Funds involve risk, including loss of principal. 

Asset allocation cannot assure a profit nor protect against a loss. 

The Dow Jones Aggressive Benchmark consists of 100% stocks. The Dow Jones Moderately Aggressive Benchmark consists of 80% equities and 20% fixed income. The Dow Jones Moderate Benchmark consists of 60% equities and 40% fixed income. The Dow Jones Moderately Conservative Benchmark consists of 40% equities and 60% fixed income. The Dow Jones Conservative Benchmark consists of 20% equities and 80% fixed income. An investor cannot invest directly in an index. 

The Dow Jones Relative Risk Indexes measure the performance of conservative, moderate and aggressive portfolios based on incremental levels of potential risk. The indexes are designed to systematically measure various levels of risk relative to the risk of a U.S. all-stock index. Investors can identify an appropriate benchmark as the index that has the most similar historic risk characteristics. 

The Aggressive Growth Benchmark is a blended benchmark consisting of 90% S&P 500 Index/10% Lehman Aggregate Bond Index. The Growth Benchmark is a blended benchmark consisting of 80% S&P 500 Index/20% Lehman Aggregate Bond Index. The Balanced Benchmark is a blended benchmark consisting of 60% S&P 500 Index/40% Lehman Aggregate Bond Index. The Income and Growth Benchmark is a blended benchmark consisting of 40% S&P 500 Index/60% Lehman Aggregate Bond Index. The Conservative Benchmark is a blended benchmark consisting of 20% S&P 500 Index/80% Lehman Aggregate Bond Index. 

The performance shown here does not reflect the impact of costs associated with variable contracts, qualified pension and retirement plans or registered and unregistered separate accounts which when deducted will reduce the return figures shown. 

Shares of the Portfolios are offered only to participating insurance companies and their separate accounts to fund the benefits of Variable Contracts, and to qualified pension and retirement plans and registered and unregistered separate accounts. 

The Portfolio allocates investments among multiple ETF asset classes including: U.S. equity, fixed income, real estate and international ETFs.  Asset allocation does not assure a profit or protect against down markets.  The stocks of smaller companies may be subject to above-average market-price fluctuations. There are specific risks associated with international investing, such as currency fluctuations, foreign taxation, differences in financial reporting practices and rapid changes in political and economic conditions. Real estate investments may be subject to specific risks, such as risks related to general and local economic conditions and risks related to individual properties. Fixed income securities are subject to interest rate risk, prepayment risk and market risk. 

An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, which contains this and other information, please contact your investment professional. Read the prospectus carefully before investing. 

©2007 Ibbotson Associates. All rights reserved. Ibbotson Associates is a registered investment advisor and a wholly owned subsidiary of Morningstar, Inc. Ibbotson and the Ibbotson logo are either trademarks or service marks of Ibbotson Associates.

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