Compensation

The principal business of First Citizens Investor Services (“FCIS”) is that of a registered broker-dealer and licensed insurance agency offering general brokerage of investment and insurance products and services including, but not limited to, individual equity and fixed income securities, mutual funds, unit investment trusts, variable insurance contracts, and fixed rate annuities. FCIS and its Financial Consultants receive commissions, fees, and other compensation in connection with these activities.

In addition to the fees disclosed in the prospectus fee table, FCIS receives additional cash compensation from mutual fund families and insurance company underwriters. These payments may be used to pay for education initiatives, training conferences and meetings for our Financial Consultants and employees, or other initiatives held in the normal course of business. The additional cash compensation payments FCIS receives also provide marketing support, which is typically calculated as a percentage of sales or assets under management.

• Our Financial Consultants do not receive any portion of, or any additional compensation as a result of, these payments; FCIS does not offer any proprietary products, Financial Consultants are not pressured to sell a particular mutual fund, family of mutual funds or product of an insurance company underwriter, and we believe that these financial arrangements do not compromise the advice your Financial Consultant offers you.

• These arrangements do not affect the sales charge you pay, which is disclosed in the applicable prospectus.

• These payments are not made from fund assets, but instead are paid from the assets of a fund’s investment adviser or other affiliate.

• Brokerage commissions paid for portfolio trades are typically not used to offset any portion of these payments.

The policies of each mutual fund can be found in the mutual fund’s Statement of Additional Information (SAI), which is available on request directly from the mutual fund company. The mutual fund families and insurance company underwriters from whom FCIS received such additional compensation in 2007 are listed below in descending order based on the total amount.

• AIG SunAmerica
• Hartford
• Federated
• Van Kampen Investments
• AXA Equitable
• Accessor Capital Management
• Franklin/Templeton
• MFS
• Pacific Life