The latest report from your
Fund's management team
SEMIANNUAL REPORT
Declaration Trust
Growth V.A. Financial Industries Fund
V.A. 500 Index Fund
V.A. International Fund
V.A. Large Cap Growth Fund
(formerly V.A. Growth Fund)
V.A. Mid Cap Growth Fund
(formerly V.A. Special Opportunities Fund)
V.A. Regional Bank Fund
V.A. Small Cap Growth Fund
(formerly V.A. Emerging Growth Fund)
- ------------------------------------------------------
Growth V.A. Core Equity Fund
& Income (formerly V.A. Independence Equity Fund)
V.A. Large Cap Value Fund
(formerly V.A. Growth & Income Fund)
V.A. Sovereign Investors Fund
- ------------------------------------------------------
Income V.A. Bond Fund
V.A. High Yield Bond Fund
V.A. Money Market Fund
V.A. Strategic Income Fund
JUNE 30, 1999
A 7/16" x 7/16" John Hancock Funds logo at the bottom of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."
Table of Contents
Page
1) Chairman's Message 3
2) Portfolio Manager Commentary
This commentary reflects the views of the portfolio managers or portfolio
management teams through the end of the Fund's period discussed in this
report. Of course, the managers' or team's views are subject to change as
market and other conditions warrant.
Growth
V.A. Financial Industries Fund 4
V.A. 500 Index Fund 7
V.A. International Fund 10
V.A. Large Cap Growth Fund 13
V.A. Mid Cap Growth Fund 16
V.A. Regional Bank Fund 19
V.A. Small Cap Growth Fund 22
Growth & Income
V.A. Core Equity Fund 25
V.A. Large Cap Value Fund 28
V.A. Sovereign Investors Fund 31
Income
V.A. Bond Fund 34
V.A. High Yield Bond Fund 37
V.A. Money Market Fund 40
V.A. Strategic Income Fund 42
3) Financial Statements 45
4) Notes To Financial Statements 115
TRUSTEES
Edward J. Boudreau, Jr.
Stephen L. Brown
Dennis S. Aronowitz *
Richard P. Chapman, Jr. *
William J. Cosgrove
Douglas M. Costle
Leland O. Erdahl
Richard A. Farrell
Gail D. Fosler
William F. Glavin
Anne C. Hodsdon
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt *
Richard S. Scipione
* Members of the Audit Committee
OFFICERS
Edward J. Boudreau, Jr.
Chairman and Chief Executive Officer
Anne C. Hodsdon
President, Chief Investment Officer and
Chief Operating Officer
Osbert M. Hood
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIANS
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
V.A. Bond Fund
V.A. Core Equity Fund
V.A. Financial Industries Fund
V.A. High Yield Bond Fund
V.A. Large Cap Growth Fund
V.A. Large Cap Value Fund
V.A. Mid Cap Growth Fund
V.A. Regional Bank Fund
V.A. Small Cap Growth Fund
V.A. Sovereign Investors Fund
V.A. Strategic Income Fund
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
V.A. 500 Index Fund
V.A. International Fund
V.A. Money Market Fund
TRANSFER AGENT
John Hancock Servicing Center
P.O. Box 9298
Boston, Massachusetts 02205-9298
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUB-INVESTMENT ADVISERS
John Hancock Advisers International Limited
34 Dover Street
London, England W1X3RA
V.A. International Fund
Independence Investment Associates, Inc.
53 State Street
Boston, Massachusetts 02109
V.A. Core Equity Fund
ISSUER
John Hancock Mutual
Life Insurance Company
John Hancock Variable
Life Insurance Company*
200 Clarendon Street
Boston, Massachusetts 02117
*Not Licensed in New York
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
CHAIRMAN'S MESSAGE
[A 1" x 1-1/2" photo of Edward J. Boudreau, Jr., Chairman and Chief
Executive Officer, flush right next to first paragraph.]
DEAR FELLOW SHAREHOLDERS:
The Year 2000 is fast approaching and people around the world are getting
ready to celebrate this historic transition to a new millennium. At John
Hancock Funds, we share the excitement, but we aren't popping the
champagne corks just yet. Rather, we are staying on the course that we set
more than two years ago to ensure that the transition to a new millennium
is a smooth one for our shareholders.
As many already know, the Year 2000 has created more than the prospect of
New Year's festivities of epic proportions. It has also presented the
world with a challenge: making sure that older computers, and any
equipment powered by computer chips, can properly read and process the
date "00" as 2000, not 1900. Much has been written about how the world
will weather the change. Some view it as a non-event, while others see the
potential for disruptions. How much disruption, and for how long, depends
on whom you talk to.
As a company, we recognize that the Year 2000 ("Y2K") phenomenon is an
important issue to be dealt with and we have made it a top priority. Two
years ago, John Hancock Funds put a full-time team of experts on the case
and established a company-wide program to evaluate all computer
applications and to modify or replace those that needed changing.
These modifications and replacements for all mission-critical systems are
done and successfully compliance tested. The rest of 1999 will be spent
completing the few remaining non mission-critical systems, testing with
our business partners and continuing to participate in industry testing.
We have also established additional contingency plans beyond our regular
ones to prepare for any challenges that the Year 2000 might present. In
the end, John Hancock will spend approximately $90-$95 million to ensure
we make a successful transition to the Year 2000.
Throughout 1999, each of our quarterly "Fundamentals" newsletters is
featuring articles with more detailed information on Y2K matters of
importance to our shareholders. I encourage you to read them, or contact
one of our Customer Service Representatives at 1-800-225-5291 for another
copy. For your own peace of mind, we also recommend that you save your
1999 statements, especially those you receive between October and
December, so that you are able to check them against the first one you
receive in 2000. It's a measure of prudence, not panic. Good record
keeping is part of good planning.
No one knows how the dawning of the new millennium will unfold. Although
we cannot make any ironclad assurances, we are confident that the steps we
have taken will provide shareholders with as smooth a transition as
possible. Once that occurs, we will happily raise our glasses to toast the
New Year, future prosperity and our hopes to serve you well into the
2000's.
Sincerely,
/S/ EDWARD J. BOUDREAU, JR.
EDWARD J. BOUDREAU, JR., CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
THOMAS FINUCANE AND THOMAS GOGGINS, PORTFOLIO MANAGERS
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Financial Industries Fund. Caption below reads "Fund management team
members. Standing (l-r): Jay McKelvey, Tom Goggins and Tom Finucane.
Sitting (l-r): Lisa Welch, Jim Schmidt and Patricia Ouimet."]
John Hancock V.A. Financial Industries Fund
Inflation fears spark rising interest rates
Over the last six months, the stock market continued its late-1998
rebound, lifted by the stronger-than-expected U.S. economy and solid
corporate earnings growth. Large-company growth stocks led the charge
again until April, when investor sentiment shifted toward segments that
began to look attractive after having languished for so long. Cyclical
stocks -- those most sensitive to changes in the economy -- reaped the
biggest rewards through the end of June.
Financial stocks followed the market's trends, with the largest companies
driving the sector's rebound, including money-center banks and investment
bankers. Smaller and mid-sized banks and brokers did not fare as well,
despite solid earnings. However, as fears grew that the economy's robust
growth would awake inflation, interest rates rose steadily, cutting short
the rebound of interest-sensitive financial stocks.
"There were
several
high-profile
mergers
in the
insurance
group..."
Fund performance review
For the six months ended June 30, 1999, John Hancock V.A. Financial
Industries Fund posted a total return of 4.57% at net asset value. That
compared to the 7.20% return of the average open-end financial services
fund and the 13.33% return of the average variable annuity specialty fund,
according to Lipper, Inc. Historical performance information can be found
on page 6.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is American Express 4.6%, the second is Legg Mason 4.1%,
the third Fiserv 3.6%, the fourth Berkshire Hathaway 3.4% and the fifth
Wells Fargo 3.1%. A note below the table reads "As a percentage of net
assets on June 30, 1999."]
Large beats small; REITs rebound
The Fund benefited from its holdings in the best-performing money-center,
investment banking and large brokerage stocks, such as Chase Manhattan,
American Express and Morgan Stanley Dean Witter. Real estate investment
trusts (REITs), which had lagged the market for at least the last year and
held the Fund back, staged a rebound in April with a surge in cyclical
stocks and with the recent REIT acquisitions by Warren Buffett, a
respected value investor.
Europe lags
The weakness of the new European currency, the euro, caused many of our
foreign banks in EMU-member countries to post disappointing results in
dollar terms. Nonetheless, we increased our holdings in European banks and
insurers slightly, because we believe the positive trends of consolidation
and new focus on shareholder value remain in place.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 15% at the top. The first bar represents the 4.57% total
return for John Hancock V.A. Financial Industries Fund. The second bar
represents the 7.20% total return for Average open-end financial
services fund. The third bar represents the 13.33% total return for
Average variable annuity specialty fund. A note below the chart reads
"The total return for John Hancock V.A. Financial Industries Fund is at
net asset value with all distributions reinvested. The average open-end
financial services fund and variable annuity specialty fund are tracked
by Lipper, Inc. See the following page for historical performance
information."]
Banks: lackluster stocks, consolidation pickup
Small and mid-sized U.S. banks, which represented 16% of the Fund's net
assets, stayed in the doldrums during the period, despite solid earnings.
The last two quarters saw bank earnings continue the 12% to 14% growth
rate that we saw throughout 1998. The strong economy helped banks produce
better-than-expected domestic loan growth.
The pace of merger activity slowed early in the year, as banks grew
reluctant to enter into mergers with the computer changeover to the Year
2000 looming. It began to pick up in May, however, as Year 2000 issues
subsided, since by then, any merger wouldn't actually get implemented
until next year. Furthermore, a proposed change in the method of
accounting for mergers could be enacted possibly as early as next year. We
believe banks are taking advantage of the current, and preferred,
"pooling" accounting method before it is eliminated. The major transaction
of the period was the March announcement that Boston's Fleet Bank would
acquire BankBoston. We think the merger is a good one that should provide
the banks with cost savings and increased future earnings.
Insurance mixed
There were several high-profile mergers in the insurance group, involving
foreign insurers buying American counterparts. Chief among them were
Transamerica, which was acquired by Aegon, and American Bankers Insurance,
which was acquired by Fortis. We took profits and sold out of our stakes
in Transamerica and American Bankers Insurance on the good news. Beyond
that, the insurance group -- the Fund's top sector at 30% of net assets --
produced mixed results. During the period, we rebalanced our insurance
holdings by paring our stake in poor-performing property and casualty
names and adding to our life and annuity companies, such as ReliaStar
Financial, Fortis and Equitable Cos., because we believe the fundamentals
and growth prospects for their businesses are better.
"After
their recent
struggles,
many
financial-stock
valuations are
compelling..."
Regulatory reform progress
Landmark financial reform legislation aimed at repealing restrictive and
obsolete regulations is quickly moving ahead, with both the House and
Senate banking committees having approved different versions of the bill.
Although there are still some significant issues to be resolved, we
believe it is inevitable that some form of financial deregulation will be
enacted, possibly this year. This will set the stage for a new round of
consolidation that will produce cross-ownership between financial services
companies previously separated by product specialization, such as banks,
brokerage firms and insurance companies.
A look ahead
After their recent struggles, many financial-stock valuations are
compelling, selling at a large discount to the market, even as earnings
growth remains equal to, or better than, the S&P 500 Index. We will
continue to apply in-depth fundamental company analysis and our extensive
knowledge of the financial industry to maintain a portfolio of quality
financial stocks that have the potential to provide superior results over
time.
- ---------------------------------------------------------------------------
Sector investing is subject to greater risks than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (4/30/97)
------- -------
Cumulative Total Returns 1.05% 53.32%
Average Annual Total
Returns(1) 1.05% 21.83%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 1.05% and 21.72%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Financial Industries Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is often
used as a measure of stock market performance.
Line chart with the heading John Hancock V.A. Financial Industries Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Stock Index and is equal to $17,711
as of June 30, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Financial
Industries Fund on April 30, 1997 and is equal to $15,327 as of June 30,
1999.
BY ROGER HAMILTON, CFA, PORTFOLIO MANAGER
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
500 Index Fund. Caption below reads "Fund management team members Barry
Evans (l) and Roger Hamilton (r)."]
John Hancock V.A. 500 Index Fund
S&P 500 Index posts double-digit returns in first six months of 1999
Despite some serious ups and downs, the four-year bull market in large
capitalization Standard & Poor's 500 Index stocks continued in the first
six months of 1999. Against an environment characterized by low interest
rates, modest inflation and strong economic growth, investors increasingly
gravitated toward an ever-smaller handful of stocks with strong earnings
growth from January through March. The tide turned in the second quarter,
however, on fears that inflation and interest rates would move higher in
response to stronger-than-expected economic growth. Rising interest rates
make investors less willing to pay high prices for future earnings. Value
stocks -- which are priced on the basis of their assets, rather than
earnings growth -- and long-overlooked small-company stocks took over
market leadership.
Fund outperforms Index
For the six-month period ended June 30, 1999, John Hancock V.A. 500 Index
Fund had a total return of 12.42% at net asset value. By comparison, the
S&P 500 Index returned 12.38% and the average variable annuity S&P 500
Index objective fund had a total return of 12.10%, according to Lipper,
Inc. Historical performance information can be found on page 9.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is Microsoft 3.9%, the second is General Electric 3.2%,
the third IBM 2.0%, the fourth Wal-Mart Stores 1.8% and the fifth Cisco
Systems 1.7%. A note below the table reads "As a percentage of net
assets on June 30, 1999."]
Our goal is to have the Fund's holdings closely track those of the S&P 500
Index, while minimizing the costs associated with buying and selling
shares of stocks. Although there are frequent changes in the composition
of the Index, we re-balance the Fund's holdings less frequently to keep
our transaction costs at a minimum. When we get new money that cannot
immediately be deployed into Index components, we buy S&P 500 Stock Index
futures. They allow us to participate in the Index's performance without
incurring the transaction costs of buying stocks.
"Software
giant
Microsoft
made the
biggest
contribution
to the S&P
500 Index's
return..."
Tech leads pack again
Technology stocks continued to dominate the market in the first half, with
the tech sector of the S&P 500 returning almost 25% through the first six
months of 1999. Fueling tech stocks' climb was enthusiasm about the growth
of the Internet and its potentially significant impact on the growth of
hardware and software companies. Software giant Microsoft made the biggest
contribution to the S&P 500 Index's return, in part because it's the
Index's largest company. On this capitalization-weighted basis, IBM came
in second. Cisco Systems, a leading equipment supplier to Internet
companies, made the third-largest contribution. Cisco's year-to-date
gains made it the fifth largest in the stock market, with a market value
of over $200 billion, having appreciated more than 400-fold since its
initial public offering in 1990. America Online, a new addition to the S&P
500 Index this year, also posted strong gains on subscriber and
advertising growth. Tech cousins Hewlett-Packard and Lucent Technologies
also were among the Index's top performers.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 15% at the top. The first bar represents the 12.42% total
return for John Hancock V.A. 500 Index Fund. The second bar represents
the 12.10% total return for Average variable annuity S&P 500 Index
objective fund. A note below the chart reads "The total return for John
Hancock V.A. 500 Index Fund is at net asset value with all distributions
reinvested. The average variable annuity S&P 500 Index objective fund is
tracked by Lipper, Inc. See the following page for historical
performance information."]
"In light of
the strong
U.S. economy,
we believe
that corporate
earnings
will remain
strong."
Other leaders
Several non-technology companies were significant contributors to the S&P
500 Index's six-month performance. Citigroup, the nation's second-largest
bank, beat earnings estimates with strong results, thanks in large part to
the turnaround of its Salomon Smith Barney brokerage unit. General
Electric was fueled by strength in most of its diverse business lines,
including GE Capital and NBC. Wal-Mart Stores, the world's largest
retailer, got a lift from historically high consumer spending, while Royal
Dutch Petroleum got a boost from rising oil prices.
S&P laggards
The biggest detractors from the Index's performance came from several
different industry sectors. Philip Morris sank in response to dwindling
sales in economically troubled Eastern Europe and parts of Asia and Latin
America. In addition, the stock was stung by two courtroom defeats, one
which awarded record damages of $80 million to an individual smoker who
brought suit against the company. Drug giant Pfizer suffered a number of
pitfalls, including slower sales of its impotence-treatment drug Viagra
and arthritis drug Celebrex, as well as severe restrictions on the use of
its new antibiotic, Trovan. First Union tumbled as it continued to revise
profit estimates downward due to problems it had digesting the bank's
acquisitions. After stumbling in 1998, Compaq never regained its footing,
because it was plagued by doubts about the company's direction and
leadership.
Outlook
Whether or not large-company growth stocks regain their advantage over
small-company and value stocks during the remainder of the year depends on
whether investors focus on earnings growth or inexpensive stock prices. As
for stocks in general, we remain optimistic for the balance of 1999. In
light of the strong U.S. economy, we believe that corporate earnings will
remain strong. In addition, we think that interest rates will remain
relatively stable or fall. Either scenario provides a reasonably favorable
backdrop for stocks. We're likely to view any temporary uptick in
inflation as a cyclical blip since, in our view, productivity growth
should keep a lid on inflation.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 22.80% 108.58%
Average Annual Total
Returns(1) 22.80% 29.60%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's other expenses to 0.25% and
management fee to 0.10% of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 22.45% and 29.25%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. 500 Index Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is often
used as a measure of stock market performance.
Line chart with the heading John Hancock V.A. 500 Index Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Stock Index and is equal to $22,516
as of June 30, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. 500 Index
Fund on August 29, 1996 and is equal to $20,858 as of June 30, 1999.
BY MIREN ETCHEVERRY, JOHN L.F. WILLS AND GERARDO J. ESPINOZA,
PORTFOLIO MANAGERS
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
International Fund. Caption below reads "Fund portfolio managers (l-r):
Gerardo Espinoza, Miren Etcheverry and John Wills."]
John Hancock V.A. International Fund
Asia and emerging markets come roaring back
Leadership in overseas markets changed dramatically over the last six
months, as last summer's global economic turmoil began to subside. Perhaps
the biggest story was the resurgence of Japan and the recession-ravaged
emerging Asian and Latin American markets. In Japan, foreign investors
long underweighted in the second-largest market began pouring money in as
signs of life re-appeared in the economy, a bank rescue program was
implemented and several large corporate restructurings were announced.
"Our stake
in Japan
doubled over
the period..."
Latin American markets began to soar after Brazil demonstrated its ability
to control the effects of its currency devaluation in January. A strong
U.S. economy and stock market, a rebound in cyclical stocks and rising
commodity prices also helped these commodity-dependent emerging markets.
Offsetting those strong advances were the markets of Europe which, after
leading foreign markets in 1998, took a breather because of a slowdown in
economic growth and the unexpected decline of the new euro currency. Its
nearly 15% drop took investors by surprise especially given their original
expectation that it would strengthen after its January 1 launch.
[Pie chart at bottom left hand column with heading "Portfolio
Diversification". The chart is divided into seven sections (from top to
left): Canada 5%, U.K. Ireland 18%, Short-Term Investments & Other 5%,
Continental Europe 40%, Latin America 2%, Japan 22% and Pacific Rim ex-
Japan 8%. A note below the chart reads "As a percentage of net assets on
June 30, 1999."]
Stability holds Fund back
For the six months ended June 30, 1999, John Hancock V.A. International
Fund posted a total return of 0.82%. By comparison, the Morgan Stanley
Capital International (MSCI) All Country World Free Ex-U.S. Index returned
6.22% and the average variable annuity international fund returned 8.12%.
Historical performance information can be found on page 12.
Given the uncertainty that reigned in world markets for the first several
months of this year, we sought to maintain a portfolio that represented
stability in a volatile world through both our country and stock
selections. This emphasis on stability, which had helped us last year,
held us back versus our peers this year, since it meant we had an
overweighting in Europe as it lagged, and underweighted stakes in Asia,
the emerging markets and cyclical stocks as they began their sharp
rebounds.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 2% with 0% at
the bottom and 10% at the top. The first bar represents the 0.82% total
return for John Hancock V.A. International Fund. The second bar
represents the 8.12% total return for Average variable annuity
international fund. A note below the chart reads "The total return for
John Hancock V.A. International Fund is at net asset value with all
distributions reinvested. The average international fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]
Shifting assets to Asia, emerging markets
Because we try to manage the Fund's risk by focusing on stability, we tend
not to be the first ones back into markets on the verge of recovery. This
means we may miss the first part of a move up, but it also means we are
aiming to fall less when there are sharp declines. Starting in April,
however, once we saw more stability and improved prospects for recoveries
in Japan and emerging markets, we repositioned the portfolio to up our
stakes in those regions. In particular, we re-introduced small stakes in
Hong Kong, Singapore, South Korea, Thailand, Indonesia, Taiwan, China and
Brazil.
Japan doubles
Our stake in Japan doubled over the period, from 11% to 22%, through a
combination of strong performance and additional names, so that we ended
the period in line with our peers. There, we are targeting companies
involved with corporate restructurings, such as those recently announced
by Fund holdings Sony and NTT Data. We also see opportunities in the
housing and construction sectors that stand to benefit from the
government's fiscal stimulus program. We are also paying attention to
exporters, since the government is re-committed to preventing the yen from
strengthening too much.
Europe: cut back but still important
Although we moved to a more average weighting in Europe to take advantage
of opportunities elsewhere, we nonetheless are maintaining an important
stake. We still believe in the long-term opportunities stemming from
corporate restructurings, mergers and industry consolidation.
Restructurings benefited Vodafone Group and Royal Philips Electronics,
while industry consolidation boosted Italy's Banca Popolare di Brescia and
France's oil companies Total and Elf Aquitaine. The fast growth in
cellular communications caused our top holding Nokia to remain our best
performer.
In addition, Asia's recovery has helped the outlook for growth in Germany
- -- Europe's largest economy -- given the importance of its manufacturing
and export sector. This has contributed to a sense that European recovery
is underway, although some countries, such as Italy, still lag. While we
like France, we slightly reduced our overweighting there and moved out of
Belgium's more defensive utility companies.
"Our optimism
is growing
about the
prospects for
international
equities."
A look ahead
Our optimism is growing about the prospects for international equities.
Stronger-than-expected world economic growth, due to the re-emergence of
Asia and the emerging markets, and a further recovery in European growth,
are bolstering our enthusiasm.
At the corporate level, restructuring is becoming a global theme, moving
from the U.S. to Europe and now Asia, as we have seen recently in Japan.
We will continue to emphasize those companies actively pursuing
restructurings, and will rotate among industry sectors, selling on
strength and buying sectors that are more attractively valued. We will
also keep monitoring U.S. interest rates to see whether the recent hike by
the Federal Reserve was an isolated event or the first in a series of
moves, since rising rates could put the brakes on our expectations for
growth.
- ---------------------------------------------------------------------------
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 1.64% 31.98%
Average Annual Total
Returns(1) 1.64% 10.28%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 0.16% and 8.87%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. International Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Morgan Stanley Capital International (MSCI) All
Country World Free Ex-U.S. Index, which measures the performance of a
broad range of developed and emerging stock markets. The index represents
securities that are freely traded on a variety of equity exchanges around
the world.
Line chart with the heading John Hancock V.A. International Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the MSCI All Country World Free Ex-U.S. Index and is equal to
$16,853 as of June 30, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A.
International Fund on August 29, 1996 and is equal to $13,198 as of June
30, 1999.
BY DAVID L. EISENBERG, CFA AND GEOFFREY PLUME, CFA, PORTFOLIO MANAGERS
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Large Cap Growth Fund. Caption below reads "Fund management team members
(l-r): John Golden, David Eisenberg and Geoffrey Plume."]
John Hancock V.A. Large Cap Growth Fund
Rapidly changing market for growth stocks
Effective May 1, 1999, John Hancock V.A. Growth Fund was renamed John
Hancock V.A. Large Cap Growth Fund to better describe how the Fund
invests.
Recently, David Eisenberg, senior vice president and chief equity
strategist for John Hancock Funds, assumed leadership of the Fund's
management team on an interim basis, joining fund management team members
Geoffrey Plume and John Golden.
In the first half of 1999, the stock market continued to shake off the
effects of last year's global financial market turmoil. As growth
expectations for the economy were raised, rather than lowered, the narrow
band of large-cap growth stocks that had led the market for the past few
years powered to new heights by the end of March.
Beginning in April, however, leadership moved away from large-cap growth
stocks toward previously out-of-favor areas, including more economically
sensitive value stocks, small-cap and energy stocks. At the same time,
fears that this robust economy could spark inflation sent interest rates
up in expectation of a pre-emptive move by the Federal Reserve to raise
short-term interest rates, which it did on June 30. This put a damper on
stocks with already lofty valuations, such as technology, pharmaceutical
and retail stocks, and also hurt interest-rate-sensitive financial stocks
for most of the second quarter.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is Microsoft 4.1%, the second is Tyco International 3.2%,
the third Wal-Mart Stores 3.0%, the fourth Intel 2.9% and the fifth
Kroger 2.9%. A note below the table reads "As a percentage of net assets
on June 30, 1999."]
Mixed six-month performance
John Hancock V.A. Large Cap Growth Fund's strong weightings in technology,
retail and financial stocks helped us handily outperform our peers in the
first three months of the year, but held us back in the last three, so
that our relative performance lagged overall. For the six months ended
June 30, 1999, the Fund posted a total return of 10.55% at net asset
value, compared to the 12.69% return of the average variable annuity
growth fund, according to Lipper, Inc. Historical performance information
can be found on page 15.
"...technology
sector,
including
telecommunications,
remains a
fertile ground
for growth..."
Capitalizing on market changes
Early in the period, we began to shift focus slightly from companies with
resilient earnings growth to those demonstrating accelerating growth
potential, given the economy's current strength. As value and cyclical
stocks recovered, we also looked selectively for growth companies that,
while showing the potential for accelerated earnings, may have come under
pressure for any number of reasons. Consequently, their accelerated
earnings growth potential may be slightly further out on the horizon.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 15% at the top. The first bar represents the 10.55% total
return for John Hancock V.A. Large Cap Growth Fund. The second bar
represents the 12.69% total return for Average variable annuity growth
fund. A note below the chart reads "The total return for John Hancock
V.A. Large Cap Growth Fund is at net asset value with all distributions
reinvested. The average variable annuity growth fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]
For example, we've recently added small positions in software companies,
including BMC Software and Oracle, that have posted earnings
disappointments because corporate preparations for the year 2000 had
caused a slowdown in orders. Yet, we believe the market will soon look
beyond their current uncertainties and recognize these companies' strong
growth potential. We also re-established a position in supermarket company
Kroger and bought household-products company Clorox, both of which have
solid earnings prospects but fell out of investor favor in the spring.
"The
fundamentals
of the U.S.
economy
remain
strong..."
Portfolio broadens
We further adapted to the market's turnabout by expanding the Fund's
industry exposure to include companies that are now benefiting from the
resiliency of the U.S. economy and investors' general sense of economic
well being. The areas included:
Diversified industrials. Over the period, we purchased several large
growth conglomerates, including Textron, AlliedSignal and United
Technologies. All look attractive on a risk/reward basis given their
proven ability to adapt to changing market environments.
Energy-related. A depressed energy sector in 1998 produced highly
attractive valuations in many energy-related companies. We invested in
Schlumberger, Baker Hughes, and Halliburton, three oil field service
companies that are now riding the wave of rising oil prices.
Economically sensitive stocks. Pitney Bowes, Gannett, Chancellor Media and
Outdoor Systems are examples of several new holdings that are reaping
profits from the current economy.
Large weighting in technology-related stocks
The broad technology sector, including telecommunications, remains a
fertile ground for growth opportunities, although we cut back the Fund's
weighting in late May by selling AT&T and reducing our position in MCI
WorldCom. We also emphasized computer hardware companies, including EMC
Corp. Within the telecommunications part of the sector, we favored
companies such as Lucent Technologies and Sprint.
Financials: key focus in the first quarter
After getting hit hard in 1998, financial stock prices became compelling.
We bolstered the Fund's stake in such companies as Providian Financial,
Citigroup and Bank of America. All significantly contributed to the Fund's
performance in the first quarter. However, as the specter of rising
interest rates became a reality, these holdings took the brunt of
investors' disinterest. We slightly trimmed our financial exposure and
redeployed assets into the attractively valued pharmaceutical arena, which
now stands poised to once again deliver solid results.
A look ahead
Despite investors' recent preference for economically sensitive value
stocks, we find good reason to be optimistic. The fundamentals of the U.S.
economy remain strong and the Fed's commitment to keeping inflation at bay
should lend further support to the profit potential of corporate America.
In this type of environment, we will not stray from our large-cap growth
focus, but will remain flexible to take advantage of varying opportunities
as they arise.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 22.45% 47.80%
Average Annual Total
Returns(1) 22.45% 14.77%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 22.26% and 13.71%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Large Cap Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is often
used as a measure of stock market performance.
Line chart with the heading John Hancock V.A. Large Cap Growth Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Stock Index and is equal to $22,516
as of June 30, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Large Cap
Growth Fund on August 29, 1996 and is equal to $14,780 as of June 30,
1999.
BY BARBARA C. FRIEDMAN, CFA, PORTFOLIO MANAGER
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Mid Cap Growth Fund. Caption below reads "Mid Cap Growth Fund management
team members (l-r)" Barbara Friedman, Lisa Welch and John Golden."]
John Hancock V.A. Mid Cap Growth Fund
Investor interest broadens; mid-cap stocks take off
Effective May 1, 1999, John Hancock V.A. Special Opportunities Fund was
renamed John Hancock V.A. Mid Cap Growth Fund to better describe how the
Fund invests.
Despite continued volatility, the U.S. stock market reached new heights
during the first half of 1999. The U.S. economy remained strong with few
signs of rising inflation. And corporate earnings continued to grow, even
as U.S. interest rates climbed higher. Most important, the market's gains
- -- which had been dominated by a select number of large-company growth
stocks -- broadened to include a wide variety of sectors. This shift in
investor interest led to strong performance by medium-sized companies. For
the first six months of 1999, the Russell Midcap Growth Index returned
14.19%, outdistancing the 12.38% return for the Standard & Poor's 500
Index.
"Our 35%
stake in
technology
focused on
telecommunications
services..."
Fund rebounds
John Hancock V.A. Mid Cap Growth Fund returned 12.78% at net asset value
during the first half of the year. By comparison, the average variable
annuity mid-cap fund returned 13.39% over the same period, according to
Lipper, Inc. Historical performance information appears on page 18. The
Fund's stakes in top-performing sectors like telecommunications and energy
helped performance. Unlike many of our peers, we maintained our strategy
of focusing on the stocks of pure mid-size companies with market
capitalizations between $1 billion and $10 billion throughout the period.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is Corning Corp. 1.2%, the second is Frontier Corp. 1.2%,
the third Northern Trust Corp. 1.2%, the fourth Guidant Corp. 1.2% and
the fifth Outdoor Systems 1.1%. A note below the table reads "As a
percentage of net assets on June 30, 1999."]
Telecommunications boosts returns
Our 35% stake in technology focused on telecommunications services, which
is benefiting from the build-out of long distance and local fiber-optic
networks. Among our biggest gainers were companies like NEXTLINK
Communications and McLeodUSA, both of which build fiber optic networks in
the United States. Another investment, Global Crossing, a company laying
fiber lines across the Atlantic, announced its intention to acquire
Frontier Corp., a U.S. telecommunications company. With that announcement
in March, we sold Global Crossing at a substantial gain and redeployed the
assets into Frontier, whose share price has since climbed even higher.
Other new purchases included Corning, one of two companies manufacturing
fiber for these networks, and Conexant Systems, a leading supplier of
semiconductors to the high-growth communications industry. Both
contributed heavily to performance.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 15% at the top. The first bar represents the 12.78% total
return for John Hancock V.A. Mid Cap Growth Fund. The second bar
represents the 13.39% total return for Average variable annuity mid-cap
fund. A note below the chart reads "The total return for John Hancock
V.A. Mid Cap Growth Fund is at net asset value with all distributions
reinvested. The average variable annuity mid-cap fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]
Energy is new
During the winter when oil prices dropped to $10-$11 per barrel, we
started buying energy stocks with the expectation that prices would rise
and exploration would pick up. Among our purchases were BJ Services and
Baker Hughes, which provide services and equipment used on oil drilling
rigs, and Burlington Resources, a company that focuses on gas production.
Our energy stocks did well as oil and gas prices recovered, economic
activity improved worldwide and demand increased.
Cyclicals offer potential
We also built our stake in cyclical stocks that tend to move in tandem
with the economy. In particular, we increased our investment in media
companies by buying stocks such as Hispanic Broadcasting, which is
building a network of Spanish radio stations. We also added to our
position in Outdoor Systems, a billboard company that Infinity
Broadcasting has subsequently announced plans to acquire. These stocks are
benefiting as consumer companies look for more targeted and cost-effective
ways to advertise. We also purchased stocks with a cyclical aspect. New
additions included Sealed Air, which makes a variety of packaging
materials and Avery Dennison, which manufactures name tags and labels. We
expect continued strong product demand as well as corporate cost cutting
to help both companies do well.
Health care and finance cut
Ongoing concern over government reimbursement for Medicare hurt many
health-care services companies, including Omnicare, which distributes
drugs to nursing homes. We pared back in this area, expecting these
concerns to continue to put pressure on these stocks. We also trimmed our
stake in finance, where many stocks suffered from rising interest rates.
Our focus remained on companies like Charles Schwab, a discount broker
benefiting from the increase in on-line trading, and Northern Trust, a
company with significant fee-based businesses including trust services and
back-office processing for mutual fund companies.
"...many areas
- including
mid-cap
stocks - still
offer strong
earnings
growth
prospects..."
A look ahead
During the second half of 1999, we expect the stock market to remain
volatile but continue climbing -- although at a somewhat slower pace. The
recent hike in U.S. interest rates points to a cooling off of the domestic
economy in the coming months. Any slowdown here, however, may be somewhat
offset by a pickup in Europe's and Asia's economic growth. The broader
sector participation that we saw in the first half should continue, given
that many areas -- including mid-cap stocks -- still offer strong earnings
growth prospects and attractive valuations relative to large-company
names. This bodes well for investors with a long-term investment horizon
who are willing to ride out near-term volatility.
- ---------------------------------------------------------------------------
Sector investing is subject to greater risks than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (1/7/98)
------- -------
Cumulative Total Returns 9.17% 24.45%
Average Annual Total
Returns(1) 9.17% 15.97%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 6.68% and 13.25%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Mid Cap Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in both the Standard & Poor's 500 Stock Index and the
Russell Midcap Growth Index. The Standard & Poor's 500 Stock Index is an
unmanaged index that includes 500 widely traded common stocks and is a
commonly used measure of stock market performance. The Russell Midcap
Growth Index is an unmanaged index that contains those securities from the
Russell Midcap Index with a greater-than-average growth orientation.
Line chart with the heading John Hancock V.A. Mid Cap Growth Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are three lines. The first line
represents the Standard & Poor's 500 Stock Index and is equal to $14,452
as of June 30, 1999. The second line represents the Russell Midcap
Growth Index and is equal to $13,459 as of June 30, 1999. The third line
represents the value of the hypothetical $10,000 investment made in the
John Hancock V.A. Mid Cap Growth Fund on January 7, 1998 and is equal to
$12,445 as of June 30, 1999.
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
THOMAS FINUCANE AND THOMAS GOGGINS, PORTFOLIO MANAGERS
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Regional Bank Fund. Caption below reads "Fund management team members.
Standing (l-r): Jay McKelvey, Tom Goggins and Tom Finucane. Sitting (l-
r): Lisa Welch, Jim Schmidt and Patricia Ouimet."]
John Hancock V.A. Regional Bank Fund
Interest rates rise, small regional banks lag
Buoyed by a surprisingly strong U.S. economy, solid corporate earnings
growth and less turbulence overseas, the stock market continued to advance
over the last six months. In the first quarter, the move up continued to
be dominated by an increasingly narrow group of large-company growth
stocks. As confidence in the economy's strength grew, investors branched
out in April to previously overlooked sectors of the market, particularly
cyclical stocks, whose fortunes are most closely tied to moves in the
economy.
As with the overall market, financial stocks rebounded from last year's
economic turmoil; however, the largest financial stocks, including the
money-center banks, dominated the sector's advance. The smaller regional
banks and thrifts that are the Fund's focus stayed in the doldrums despite
solid earnings growth. Early in the year, investors shunned them in
pursuit of the hot Internet and technology stocks. Later, this
interest-rate-sensitive group fell prey to concerns that the Federal
Reserve would raise interest rates, which it did at the end of June.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is Comerica, Inc. 4.1%, the second is Mid-State Bancshares
3.6%, the third M&T Bank Corp. 3.4%, the fourth Commerce Bancshares 3.0%
and the fifth FirstMerit Corp. 2.9%. A note below the table reads "As a
percentage of net assets on June 30, 1999."]
Performance review
John Hancock V.A. Regional Bank Fund's emphasis on smaller regional banks
caused us to post more modest returns than our peers for the six months
ended June 30, 1999. Other financial services funds tend to have much
heavier concentrations in the largest banks and also own the large
non-bank financial companies that have dominated the sector's performance.
For the six months ended June 30, 1999, the Fund posted a total return of
4.20% at net asset value. In the same period, the average open-end
financial services fund returned 7.20% and the average variable annuity
specialty fund returned 13.33%, according to Lipper, Inc. Historical
performance information can be found on page 21.
"...underlying
trends that
have made
investing in
bank stocks
so successful
....have
remained
firmly in
place."
Reasons for optimism
Despite short-term market fluctuations, the underlying trends that have
made investing in bank stocks so successful over the years have remained
firmly in place. Catalysts include:
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 15% at the top. The first bar represents the 4.20% total
return for John Hancock V.A. Regional Bank Fund. The second bar
represents the 7.20% total return for Average open-end financial
services fund. The third bar represents the 13.33% total return for
Average variable annuity specialty fund. A note below the chart reads
"The total return for John Hancock V.A. Regional Bank Fund is at net
asset value with all distributions reinvested. The average open-end
financial services fund and variable annuity specialty fund are tracked
by Lipper, Inc. See the following page for historical performance
information."]
Industry consolidation: One of the founding principles behind V.A.
Regional Bank Fund was to capitalize on ongoing consolidation in the
banking industry. The opportunities continue to abound, since the enduring
reason for these mergers -- excess capacity in the U.S. banking system --
endures.
"A quickened
merger
pace and
momentum
for financial
reform also
bode well
for bank
stocks."
Earlier this year, the number of bank deals abated, but the pace began to
pick up during the last two months of the period. Year 2000 issues are
subsiding, since by now any mergers won't actually get implemented until
next year. What's more, a proposed change in the method of accounting for
mergers could be enacted, possibly as early as next year. We believe banks
are taking advantage of the current, and preferred, "pooling" accounting
method before it is eliminated. To date in 1999, three of the Fund's
holdings announced mergers.
Solid fundamentals: The stock market lately has overlooked one very
positive ingredient in the bank equation: earnings growth. In the last two
quarters, bank earnings have been very solid, continuing the 12% to 14%
growth rate we saw in 1998, as the strong economy helped banks produce
better-than-expected domestic loan growth and created a pickup in capital
markets activity.
Regulatory reform: Financial reform legislation aimed at repealing
restrictive and obsolete regulations is quickly moving ahead, with both
the House and Senate banking committees having approved different versions
of the bill. Although there are still some significant issues to be
resolved, we believe it is inevitable that some form of financial
deregulation will be enacted, possibly this year. This will set the stage
for a new round of consolidation that will produce cross-ownership between
financial services companies previously separated by product
specialization, such as banks, brokerage firms and insurance companies.
Compelling valuations: The recent disruption has had a silver lining: it
made attractive bank stocks inexpensive. Currently, bank stocks are
selling at 16 times 1999 earnings, while the average S&P 500 Index stock
is selling at 26 times 1999 earnings. That means bank stocks are selling
at 60% of the S&P 500's earnings level. This is cheap from a historical
perspective, even though bank earnings growth is at least as good as, if
not better than, the S&P. As value investors, we'd rather buy good
companies with solid fundamentals and prospects at bargain prices and hold
on to them, waiting for the inevitable rebound. During this period, we
pared our stakes in some of the larger money-center banks and
superregionals that had moved up strongly, including Bank of America and
Wells Fargo. In their place, we added to our positions in Comerica and
Cascade Bancorp, where we see real value.
Going forward
With robust U.S. growth, an improving climate overseas and low inflation,
the economic environment remains ripe for further stock market advances. A
quickened merger pace and momentum for financial reform legislation also
bode well for bank stocks. Regardless of market swings, we will continue
to apply in-depth fundamental company analysis and our extensive knowledge
of the financial industry to maintain a portfolio of quality regional bank
and thrift stocks that have the potential to provide superior results over
time.
- ---------------------------------------------------------------------------
Sector investing is subject to greater risks than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (5/1/98)
------- -------
Cumulative Total Returns 1.70% (2.50%)
Average Annual Total
Returns(1) 1.70% (2.15%)
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 1.65% and (2.21%),
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Regional Bank Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is often
used as a measure of stock market performance.
Line chart with the heading John Hancock V.A. Regional Bank Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Stock Index and is equal to $12,555
as of June 30, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Regional
Bank Fund on May 1, 1998 and is equal to $9,750 as of June 30, 1999.
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
LAURA ALLEN, CFA, AND ANURAG PANDIT, CFA, PORTFOLIO MANAGERS
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Small Cap Growth Fund. Caption below reads "Fund management team members
(l-r): Anurag Pandit, Bernice Behar and Laura Allen."]
John Hancock V.A. Small Cap Growth Fund
Fund outpaces peers in changing small-cap environment
On May 1, 1999, John Hancock V.A. Emerging Growth Fund's name was changed
to John Hancock V.A. Small Cap Growth Fund to better describe how the Fund
invests.
The stock market continued to advance during the first six months of 1999,
but the period was marked by a significant shift in leadership. For the
first three months, growth stocks, especially larger companies, remained
the dominant force, as investors favored more visible earnings growth and
liquidity in the face of a potential economic slowdown.
"...strong out
performance
stemmed
largely
from our
strategic
moves
within the
technology
sector."
In April, however, as the U.S. economy maintained its robust level of
growth and the global economy began to stabilize after last year's
turmoil, investors finally branched out. They turned their attention
toward parts of the market that had been long overlooked, including
cyclical stocks -- those most impacted by changes in the economy's
strength -- and value stocks -- those that seem bargain-priced relative to
the company's worth. Small-cap stocks, whose prices were also attractive
after several years of lagging their larger brethren, also staged a
rebound. The latest move was propelled mostly by small-cap value stocks,
however, rather than the small-cap growth stocks that are the Fund's
focus.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is Allegiance Telecom 1.3%, the second is RF Micro Devices
1.2%, the third PLX Technology 1.2%, the fourth Coinstar 1.2% and the
fifth Whittman-Hart 1.1%. A note below the table reads "As a percentage
of net assets on June 30, 1999."]
Fund outperformance
For the six-month period ended June 30, 1999, John Hancock V.A. Small Cap
Growth Fund posted a total return of 14.83% at net asset value, compared
to the average variable annuity small-cap fund's return of 9.90%,
according to Lipper, Inc. Historical performance information can be found
on page 24.
Internet strategy pays off
The Fund's strong outperformance stemmed largely from our strategic moves
within the technology sector. We began the year with a neutral position in
Internet stocks relative to our benchmark Russell 2000 Growth Index,
having taking profits after riding the stocks up in a very strong run late
last year. By mid-February, however, our weighting grew substantially
higher through a combination of continuing strong performance from our
core Internet holdings and some further additions. Throughout the sector's
ascent, we were also locking in gains on the belief that the Internet
sector would retrace some of its recent gains. By the end of April we were
back to a neutral stake. We have kept our focus on infrastructure-type
companies such as Exodus Communications, AboveNet Communications and
Verio, all of which build and maintain company websites.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 15% at the top. The first bar represents the 14.83% total
return for John Hancock V.A. Small Cap Growth Fund. The second bar
represents the 9.90% total return for Average variable annuity small-cap
fund. A note below the chart reads "The total return for John Hancock
V.A. Small Cap Growth Fund is at net asset value with all distributions
reinvested. The average variable annuity small-cap fund is tracked by
Lipper, Inc. See the following page for historical performance
information."]
Standout Internet performers during the period included RealNetworks,
which provides audio and video technology for the Internet, and on-line
broker E*TRADE Group. As their stocks posted double-digit gains and they
grew too large for our small-cap portfolio, we sold them both. Another top
holding, Abacus Direct, a leading provider of mailing lists and consumer
data to catalog retailers, saw its stock rise after announcing that it
would be bought by the premier on-line advertiser Double Click.
Focus on telecommunications
In the semiconductor sub-sector, we like companies that are focused on the
fast-growing telecommunications sector. These stocks have done well in the
last six months, including RF Micro Devices and QLogic. Telecom service
companies such as NEXTLINK Communications and top holding Allegiance
Telecom, which both provide enhanced communications services to small and
mid-sized markets, also posted strong results as they benefited from
industry deregulation.
Health-care services lag
Weaker performance came from the Fund's health-care service companies,
which were hammered by fears of further government regulation and changes
in Medicare reimbursement levels. This weighed heavily on nursing homes
and assisted-living centers, which we sold during the period. The sector's
taint hurt even companies like Renal Care Group, which are relatively
insulated from such changes. We maintained our position in Renal Care
Group because we like the company, its management and its franchise and we
were rewarded as the stock regained its previous price levels.
Recent moves
A significant underweighting in financial stocks and cyclical companies
helped the Fund earlier in the year, but hurt in April when these groups
rebounded. More recently, we added some financial and cyclical exposure
when we could find companies that fit our investment criteria of strong
and sustainable earnings growth, a dominant market share and proven
management. Lately, we've found interesting opportunities among retailers
that serve the teenage market, such as Pacific Sunwear of California,
since this fast-growing segment of the population has disposable income
and tends to spend it. We have also added several radio-broadcasting
stocks because of industry consolidation potential and a favorable
backdrop for advertising spending.
"...we will
continue
to run the
Fund in a
diversified,
risk-managed
fashion..."
A look ahead
Our outlook for small-cap growth stocks is tinged with caution in the near
term, given the market's recent preference for more economically sensitive
value stocks. What's more, a rising interest-rate environment such as we
have seen since February tends to hit small companies particularly hard,
since they don't have the same clout as larger companies in negotiating
favorable borrowing terms. That said, small-cap growth stocks remain close
to their cheapest valuation levels in years, and should, therefore, be
overdue for a more sustained move. Regardless of the market's moves, we
will continue to run the Fund in a diversified, risk-managed fashion, an
approach that has helped sustain the Fund in the past and should continue
to serve us well.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 21.95% 38.07%
Average Annual Total
Returns(1) 21.95% 12.05%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 21.40% and 10.64%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Small Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Russell 2000 Index and the Russell
2000 Growth Index. The Russell 2000 Index is an unmanaged small-cap
index that is comprised of 2,000 U.S. stocks. The Russell 2000 Growth
Index is an unmanaged index that contains Russell 2000 Index stocks
with a greater-than-average growth orientation.
Line chart with the heading John Hancock V.A. Small Cap Growth Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are three lines. The first line
represents the Russell 2000 Index and is equal to $15,073 as of June 30,
1999. The second line represents the Russell 2000 Growth Index and is
equal to $14,606 as of June 30, 1999. The third line represents the
value of the hypothetical $10,000 investment made in the John Hancock
V.A. Small Cap Growth Fund on August 29, 1996 and is equal to $13,807 as
of June 30, 1999.
BY STEPHEN LANZENDORF, FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Core Equity Fund. Caption below reads "Fund management team members (l-
r): Coreen Kraysler, David Canavan, Jane Shigley, Jeff Saef and Stephen
Lanzendorf."]
John Hancock V.A. Core Equity Fund
Stocks advance, but market leadership shifts away from growth stocks
Effective May 1, 1999, John Hancock V.A. Independence Equity Fund's name
was changed to John Hancock V.A. Core Equity Fund to better describe how
the Fund invests.
During the first half of 1999, the U.S. economy continued to offer
investors the unbeatable combination of strong growth, low interest rates
and negligible inflation. There were a few clouds on the horizon, though.
Interest rates edged up a little, with yields on the 30-year bond hovering
around 6%. Moreover, on the final day of the period, the Federal Reserve
Board raised the federal funds rate by a quarter percentage point as a
pre-emptive strike against inflation. Since the move was widely expected
and accompanied by a shift back to a neutral bias, however, its immediate
effect on the stock market was actually positive. Overall, the economic
news during the period was good enough to maintain the market's upward
momentum.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is Microsoft 4.6%, the second is Citigroup 3.0%, the third
General Electric 2.9%, the fourth Intel 2.7% and the fifth Tyco
International 2.1%. A note below the table reads "As a percentage of net
assets on June 30, 1999."]
Market shift
During the first quarter of 1999, market leadership continued to be
concentrated in a relatively small group of well-known growth stocks. In
that difficult environment, the Fund, which stresses diversification and
targets undervalued stocks of companies with improving fundamentals, fell
behind both its benchmark Standard & Poor's 500 Index and its peers.
That's because the Fund's value criteria prevented it from owning such
market leaders as Gillette and Sprint PCS Group.
"...energy
stocks were
one source of
strength for
the Fund..."
The second quarter brought several changes that benefited the Fund. On the
one hand, investors became more optimistic about prospects for the
recovery of the depressed economies of Asia and South America. Another
positive influence was a surge in the price of crude oil. These
developments, together with ongoing strength in the U.S. economy,
triggered renewed interest in cyclical stocks -- those that are
particularly sensitive to fluctuations in economic conditions. Cyclical
shares typically do best in the latter stages of an expansion, when the
economy is hitting on all cylinders. Examples of cyclical businesses
include those engaged in manufacturing steel, chemicals, paper or
industrial equipment.
Fund performance
Investor interest also broadened out in the second quarter to include a
number of relatively undervalued mid- and small-cap stocks. This return to
more "normal" market conditions enabled the Fund to gain some ground on
its benchmarks. For the first six months of 1999, the John Hancock V.A.
Core Equity Fund posted a total return of 10.55% at net asset value. In
comparison, the average variable annuity growth and income fund returned
11.70%, according to Lipper, Inc., while the S&P 500 Index returned
12.38%. Longer-term performance information can be found on page 27.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 15% at the top. The first bar represents the 10.55% total
return for John Hancock V.A. Core Equity Fund. The second bar represents
the 11.70% total return for Average variable annuity growth and income
fund. A note below the chart reads "The total return for John Hancock
V.A. Core Equity Fund is at net asset value with all distributions
reinvested. The average variable annuity growth and income fund is
tracked by Lipper, Inc. See the following page for historical
performance information."]
"...corporate
earnings...
look to be
strong in the
second half
of 1999..."
Energy, industrial equipment, conglomerates strong
In keeping with a background of rising oil prices, energy stocks were one
source of strength for the Fund. The shares of integrated oil companies
such as BP Amoco and Royal Dutch Petroleum did well. Ingersoll-Rand, an
industrial equipment stock, also contributed positively to performance
and participated in the rally in cyclical shares. Two of the Fund's
conglomerates, Tyco International and United Technologies, also turned in
strong performances. In Tyco's case, the company was engaged in a number
of acquisitions that investors considered beneficial. United Technologies'
stock responded to the company's recent cost-cutting initiatives, as well
as renewed optimism about its jet-engine business.
Select technology and health care stocks weak
Among the Fund's disappointments were select technology stocks, some of
which revised their earnings estimates downward as a result of customers'
deferring purchases until after the new year. J.D. Edwards and Compaq were
two issues that were weak and we eliminated the Fund's positions in both.
Health-care services companies Cardinal Health and Omnicare also performed
poorly, as many investors sold health-care holdings to make way for
purchases of cyclical stocks. Those holdings also suffered from concerns
about the companies' ability to price their services profitably, as well
as worries about Medicare reimbursement.
Outlook
There are several things to watch in the second half of the year. Stocks
have shrugged off the rise in interest rates so far, but any further
increase might limit the market's upward potential. On the other hand,
corporate earnings, another important piece of the puzzle, look to be
strong in the second half of 1999 compared to last year's figures.
We'll also be watching the recent strength in cyclical stocks to see
whether it looks to be a short-term phenomenon or something more lasting.
And finally, the Year 2000 (Y2K) problem will loom larger as we get closer
to the end of the year. We suspect that any Y2K-related problems
experienced by the stock market will be due more to investor uncertainty
than actual technological glitches. Nonetheless, we are factoring Y2K
considerations into our earnings forecasts, and we will adjust the Fund's
portfolio appropriately if the prospects for any of our holdings change
materially.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 18.44% 107.38%
Average Annual Total
Returns(1) 18.44% 29.33%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 18.44% and 28.71%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Core Equity Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is often
used as a measure of stock market performance.
Line chart with the heading John Hancock V.A. Core Equity Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Stock Index and is equal to $22,516
as of June 30, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Core
Equity Fund on August 29, 1996 and is equal to $20,738 as of June 30,
1999.
BY TIMOTHY F. KEEFE, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
TIMOTHY E. QUINLISK, CFA, PORTFOLIO MANAGER
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Large Cap Value Fund. Caption below reads "Fund management team members
(l-r): Tim Keefe, Tim Quinlisk and Lisa Welch."]
John Hancock V.A. Large Cap Value Fund
Out-of-favor sectors bounce back as investor confidence grows
Effective May 1, 1999, John Hancock V.A. Growth and Income Fund was
renamed John Hancock V.A. Large Cap Value Fund to better describe how the
Fund invests.
"Our
willingness
to own less
well-known
technology
names helped
considerably."
The U.S. stock market remained volatile, but pressed forward during the
first half of 1999. As the new year began, a small group of large-company
growth stocks continued to dominate the market's returns. Early in the
second quarter, however, market sentiment changed as investors regained
confidence in U.S. economic growth and overseas economies showed signs of
bottoming. Rising interest rates, combined with high valuations on the top
100 names in the Standard & Poor's 500 Index, made long-overlooked sectors
appear increasingly attractive. Small and medium-sized company stocks,
cyclical stocks that move in tandem with the economy and value stocks with
beaten-down prices all benefited. The S&P 500 ended the first half with a
12.38% return.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is Ace, Ltd. 8.5%, the second is Total Renal Care Holdings
6.1%, the third QUALCOMM 5.5%, the fourth MediaOne Group 4.6% and the
fifth Computer Associates International 4.0%. A note below the table
reads "As a percentage of net assets on June 30, 1999."]
Fund beats competition
Our strategy is to invest in good businesses selling at cheap prices where
there is a catalyst -- such as a spin-off, new product release or business
reorganization -- that could unlock the stock's full value. As market
sentiment shifted, many of the stocks we owned took off.
Fund performance
For the six months ended June 30, 1999, John Hancock V.A. Large Cap Value
Fund returned 17.20% at net asset value. By comparison, the average
variable annuity growth and income fund returned 11.74% during the same
period, according to Lipper, Inc. Historical performance information can
be found on page 30.
Technology drives performance
Our willingness to own less well-known technology names helped
considerably. During the period, we built substantial stakes in QUALCOMM
and Conexant Systems, a wireless semiconductor company. QUALCOMM's share
price rose roughly 100% between the time we purchased it and the end of
June, while Conexant's climbed about 200%. In the software sector, we
nearly doubled our investment in Computer Associates International when
fears mounted that its business would suffer with the end of Year 2000
problems. When it became apparent that these concerns were overblown, the
stock rebounded nicely.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 20% at the top. The first bar represents the 17.20% total
return for John Hancock V.A. Large Cap Value Fund. The second bar
represents the 11.74% total return for Average variable annuity growth
and income fund. A note below the chart reads "The total return for John
Hancock V.A. Large Cap Value Fund is at net asset value with all
distributions reinvested. The average variable annuity growth and income
fund is tracked by Lipper, Inc. See the following page for historical
performance information."]
We also had sizable stakes in top-performing telecommunications companies.
Among them were MediaOne Group, a fast growing cable company that will
soon be acquired by AT&T, and AT&T's Liberty Media Group, a holding
company with interests in numerous globally branded entertainment
networks, video distribution businesses and wireless plants and equipment
manufacturers.
Finance results are mixed
The Fund did well owning banks whose outlooks depend on economic
improvement overseas. We continued to collect a high dividend yield from
our preferred stock in Fuji Bank, while also watching its share price
appreciate nicely, as the bank began taking steps to become a major
financial player in Japan's restructured financial system. And Citigroup,
with its worldwide franchise, began making a comeback after being hit hard
by the Asian debacle last fall.
By contrast, our investment in insurance stocks hurt performance. Pricing
pressure and industry consolidation caused even the stocks of companies
like Ace, Ltd., a property and casualty insurer with consistent earnings
growth, to suffer. We held on, believing that Ace's recent merger with
Cigna is an excellent move and that insurance pricing will soon improve.
Buying opportunities emerge
One of our largest new additions was Dollar General, a leading discount
retailer that specializes in putting everyday, low-priced merchandise
within easy access of urban customers. The stock tumbled in the fourth
quarter as the company opened a fourth distribution center and investors
worried that it might be expanding too quickly. We disagreed, believing
that the company has a strong concept with good execution. From the time
we bought it in the first quarter until the end of June, the share price
rose about 50%. We also tripled our investment in Total Renal Care
Holdings, a leading provider of kidney dialysis treatment, when short-term
problems sank the stock in the first quarter. As soon as it became clear
these problems were fixable, the stock resumed its climb.
"...continued
market
volatility
spells
opportunity
for bargain-
hunting funds
like ours."
Outlook
Many factors seem to be working in our favor. First, the U.S. economy
remains strong and overseas economies seem poised to improve. Second,
continued market volatility spells opportunity for bargain-hunting funds
like ours. Third, the broadening of the market that began in the second
quarter seems likely to continue. If it does, investors will be rewarded
for owning businesses that represent good value. Potential risks are the
overall high valuation levels of the market and a possible rise in
inflation, both of which we will watch closely.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (1/6/98)
------- -------
Cumulative Total Returns 23.63% 42.27%
Average Annual Total
Returns(1) 23.63% 26.91%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 23.54% and 26.79%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Large Cap Value Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is often
used as a measure of stock market performance.
Line chart with the heading John Hancock V.A. Large Cap Value Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Stock Index and is equal to $14,452
as of June 30, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Large Cap
Value Fund on January 6, 1998 and is equal to $14,227 as of June 30,
1999.
BY JOHN F. SNYDER III, PORTFOLIO MANAGEMENT TEAM LEADER,
BARRY H. EVANS, CFA, AND PETER M. SCHOFIELD, CFA, PORTFOLIO MANAGERS
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Sovereign Investors Fund. Caption below reads "Fund portfolio managers
John Snyder (l) and Barry Evans (r)."]
John Hancock V.A. Sovereign Investors Fund
Market shifts from growth stocks to value stocks
The first half of 1999 was marked by two distinct periods of stock market
performance. During the first quarter of the year, we saw a continuation
of 1998 -- where a narrow group of stocks fueled the market's performance.
The common theme among the market's bigger winners was extremely high
valuations. Technology stocks, once again, topped the list of the market's
strongest performers, driven by a few names such as Microsoft and America
Online. Value stocks with more reasonable prices and solid fundamentals,
for the most part, lagged during the market's first-quarter rally.
In the second quarter, however, the market began to broaden. With evidence
of stronger earnings growth and improvement in other sectors of the
economy, investors started to migrate from the high-valuation stocks into
more value-oriented stocks. As a result, stocks in other sectors -- such
as basic materials and capital goods -- began to participate in the market
rally.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is Merck 3.4%, the second is Dayton Hudson 3.0%, the third
Citigroup 2.8%, the fourth Bristol-Myers Squibb 2.4% and the fifth
SunTrust Banks 2.4%. A note below the table reads "As a percentage of
net assets on June 30, 1999."]
Performance explained
While the Fund owned many strong performers during the period, what
impacted performance most was the stocks that we didn't own, namely
technology stocks. As discussed in past reports, most technology stocks
simply don't meet our investment criteria. We focus on what we call
"dividend performers" -- namely, companies that have increased their
dividends consistently for at least the past 10 years. Most technology
stocks don't fall into this category. Admittedly, our approach is
cautious, but it is in keeping with our goal of risk-averse growth.
"...what
impacted
performance
most was the
stocks that
we didn't
own, namely
technology
stocks."
Fund performance
For the six months ended June 30, 1999, John Hancock V.A. Sovereign
Investors Fund returned 5.88% at net asset value. By comparison, the
average variable annuity equity income fund returned 10.80% for the same
period, according to Lipper, Inc. Historical performance information can
be found on page 33.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 15% at the top. The first bar represents the 5.88% total
return for John Hancock V.A. Sovereign Investors Fund. The second bar
represents the 10.80% total return for Average variable annuity equity
income fund. A note below the chart reads "The total return for John
Hancock V.A. Sovereign Investors Fund is at net asset value with all
distributions reinvested. The average variable annuity equity income
fund is tracked by Lipper, Inc. See the following page for historical
performance information."]
Capital goods, basic materials, retailers
Our sizable holdings in capital goods and basic materials stocks benefited
from the market shift in the second quarter. After being significantly
undervalued, stocks in these sectors became much more appealing to
investors. With the turnaround in the global economy, particularly
Southeast Asia, our multinational holdings -- such as Honeywell, Minnesota
Mining & Manufacturing and Emerson Electric -- rebounded strongly.
"We expect
to see
the global
economy
continue on
the road to
recovery..."
Retail stocks continued their winning streak from 1998 in the first
quarter of 1999, thanks to high employment levels, solid wage growth and
strong consumer spending. Once again, Dayton Hudson stood out as a stellar
performer among our retail stocks. With the aggressive expansion of its
mass merchandise chain, Target, throughout the Northeast and Mid-Atlantic
states, the company has successfully gained market share from competitors.
Paring back overvalued stocks
Throughout the first half of the year, we took advantage of strength in
the market to take profits in some of our higher-valuation stocks.
Examples include fast-food chain McDonald's, advertising agency
Interpublic and mass merchandise giant Wal-Mart Stores. Although these
companies' fundamentals remain extremely solid, their valuations had just
gotten too lofty. So we decided to pare back holdings in favor of stocks
that offered better relative value.
Beefing up financial stocks
One of the most attractive areas of opportunity has been financial stocks.
One favorite new holding is Fannie Mae, the largest originator of
mortgages in the country. Fears of increased competition caused the stock
to drop sharply at the start of the year. In our view, those fears were
overblown and we took advantage of that decline to add a substantial
position to the portfolio. Barriers to entry are extremely high in this
industry, and Fannie Mae's top-notch services and costs would be difficult
for competitors to match.
Looking ahead
We expect to see the global economy continue on the road to recovery in
the second half of the year. The worst appears to be over in Southeast
Asia and Japan -- and we're starting to see signs of life emerge in those
economies. As economic recovery takes hold around the world, multinational
companies are likely to be the biggest beneficiaries. However, there are
still challenges facing investors. For one, we don't expect the global
economy to make a quick recovery, but rather a slow uptick. Second,
consumer spending is likely to slow due to increasing debt levels. And
finally, pricing power will likely remain limited, given the outlook for
tame inflation.
In this environment, corporate earnings still can improve. However, stock
selectivity will be critical, especially given the market's high
valuations. Our universe of "dividend performers" is currently
undervalued. And as the market continues to broaden out in the second half
of the year, we believe that investors will likely recognize their
potential.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 14.13% 72.12%
Average Annual Total
Returns(1) 14.13% 21.11%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 14.13% and 20.64%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Sovereign Investors Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Stock Index -- an
unmanaged index that includes 500 widely traded common stocks and is often
used as a measure of stock market performance.
Line chart with the heading John Hancock V.A. Sovereign Investors Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Standard & Poor's 500 Stock Index and is equal to $22,516
as of June 30, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Sovereign
Investors Fund on August 29, 1996 and is equal to $17,212 as of June 30,
1999.
BY JAMES K. HO, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
ANTHONY A. GOODCHILD AND BENJAMIN MATTHEWS, PORTFOLIO MANAGERS
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Bond Fund. Caption below reads "Fund management team members (l-r): Ben
Matthews, Lee Crocket, Jim Ho, Tony Goodchild and Beverly Cleathero."]
John Hancock V.A. Bond Fund
Early bond-market recovery takes a backseat
to current inflation and interest-rate concerns
For John Hancock V.A. Bond Fund, the early months of the semiannual period
proved to be the most favorable for the majority of bond sectors in which
the Fund invests. Investors' renewed appetite for credit risk helped
several fixed-income sectors -- such as investment-grade corporate and
high-yield bonds, mortgage-backed and asset-backed issues and emerging-
market debt -- post impressive gains. The rebound, however, came to an
abrupt halt in May, as fears of an overheating economy brought inflation
concerns to the fore. The bond market's downturn prevailed throughout the
remainder of the period in anticipation of a Federal Reserve Board
interest-rate hike, which did occur on June 30.
[Pie chart at bottom left hand column with heading "Portfolio
Diversification". The chart is divided into three sections (from top to
left): U.S. Government & Agencies 43%, Short-Term Investments & Other 6%
and Corporate Bonds 51%. A note below the chart reads "As a percentage
of net assets on June 30, 1999."]
"Treasury
bond prices
came under
pressure for
most of the
period."
Fund performance
Although the Fund participated fully in the rally of credit-sensitive
issues, the late period downturn hindered its performance. The Fund
produced a total return of -1.29% at net asset value for the six months
ended June 30, 1999. This compares favorably with the -2.20% return
produced by the average variable annuity corporate debt A-rated fund,
according to Lipper, Inc. Historical performance information can be found
on page 36.
Corporate bond exposure boosted
Because of the strategies we had begun to initiate coming into the fiscal
year, the Fund hit the ground running when the recovery in the credit
sectors took hold. In late 1998, we were attracted to the compelling
valuations within the corporate arena -- both in investment-grade and
high-yield securities. After intense credit research, we selectively
increased the Fund's weighting in corporate issues through early February.
In particular, we shifted focus a bit from the higher-quality A-rated
names to BBB-rated names, those at the lowest end of the investment-grade
spectrum. This strategy proved beneficial as the prices of lower-rated
bonds, particularly high-yield prices, rallied early on and then held
their own during the market's recent turmoil.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 1% with -3%
at the bottom and 0% at the top. The first bar represents the -1.29%
total return for John Hancock V.A. Bond Fund. The second bar represents
the -2.20% total return for Average variable annuity corporate debt A-
rated fund. A note below the chart reads "The total return for John
Hancock V.A. Bond Fund is at net asset value with all distributions
reinvested. The average variable annuity corporate debt A-rated fund is
tracked by Lipper, Inc. See the following page for historical
performance information."]
Telecom, media, utilities and finance key areas
Our strategy has been to favor industries that either exhibit strong
growth characteristics or enjoy steady demand throughout market cycles. To
that end, we have emphasized bonds in the telecommunications, media,
utility and finance industries. Holdings such as Global Crossing Holdings,
NEXTLINK Communications, Nextel Communications, Qwest Communications
International, Continental Cablevision, CSC Holdings, Adelphia
Communications, Merrill Lynch and Household Finance have all proven their
potential.
Increase REITs, energy and paper issues
With the economy's strength, many commodity and cyclical issues began to
recover. The rebound in oil prices also helped lift the energy sector.
Through in-depth credit research, we selectively added to bonds issued by
real estate investment trusts (REITs), energy and paper companies.
ProLogis, Occidental Petroleum, Union Pacific and Packaging Corp. of
America were all holdings that helped performance.
Treasury market under pressure
Treasury bond prices came under pressure for most of the period. While we
maintained a stake in Treasury securities, we trimmed it very early on to
redeploy assets into the corporate sector, thereby avoiding much of the
decline. Another good move we made was a bond swap in late 1998 in which
we sold some 30-year Treasuries and reinvested the monies into similarly
rated 30-year municipal issues whose prices were historically cheap. This
trade contributed to performance because we were able to sell the
municipal bonds for a profit in late January.
Duration pulled in a bit
Used to gauge a fund's sensitivity to interest rate changes, duration is a
mathematical measure that can play a key role in a portfolio's
performance. When interest rates decline, a longer duration offers greater
potential for price appreciation; the opposite holds true with a longer
duration when rates rise. Throughout the period, we kept the Fund's
duration relatively short to protect the Fund as we anticipated the
likelihood of rising interest rates.
"...there
seem to
be several
crosscurrents
at work
in the
fixed-income
market."
Near-term uncertainty seems likely
As we enter the second half of fiscal 1999, there seem to be several
crosscurrents at work in the fixed-income market. While the Fed has
already raised rates by 0.25%, there are no clear-cut indications whether
it will do so again. A number of upcoming economic reports could send
conflicting signals to fixed-income investors. These we shall study
closely. For defensive purposes, we plan on keeping the portfolio's
duration relatively short. For opportunistic reasons, we will maintain the
Fund's current weighting in corporate issues, confident that once
uncertainties subside our holdings stand to perform well.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 3.67% 23.28%
Average Annual Total
Returns(1) 3.67% 7.66%
YIELD
As of June 30, 1999
SEC 30-DAY
YIELD
-------
John Hancock V.A. Bond Fund 6.29%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 3.23% and 6.36%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Bond Fund would be worth, assuming all distributions were reinvested
for the period indicated. For comparison, we've shown the same $10,000
investment in the Lehman Brothers Corporate Bond Index -- an unmanaged
index that mirrors the investment objectives and characteristics of the
Fund.
Line chart with the heading John Hancock V.A. Bond Fund, representing
the growth of a hypothetical $10,000 investment over the life of the
fund. Within the chart are two lines. The first line represents the
Lehman Brothers Corporate Bond Index and is equal to $12,328 as of June
30, 1999. The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Bond Fund on August 29,
1996 and is equal to $12,183 as of June 30, 1999.
BY ARTHUR N. CALAVRITINOS, CFA, PORTFOLIO MANAGEMENT TEAM LEADER,
FREDERICK L. CAVANAUGH, JR. AND JANET L. CLAY, CFA, PORTFOLIO MANAGERS
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
High Yield Bond Fund. Caption below reads "Fund management team members
(l-r): Janet Clay, Dan Janis, Arthur Calavritinos and Fred Cavanaugh."]
John Hancock V.A. High Yield Bond Fund
High-yield bonds rebound from global turmoil
High-yield bonds spent the first half of 1999 coming back from last year's
worldwide economic turmoil and liquidity crunch that had sent their prices
down to their lowest level in almost a decade. With liquidity returning to
the market, global economies beginning to stabilize and the U.S. economy
showing no signs of slowing, investors grew more comfortable taking on
higher levels of risk. They also branched out into previously overlooked
parts of the market, including cyclical companies that are most sensitive
to swings in the economy.
The high-yield bond advance stalled several times in the period, however,
due to both a strong supply of new high-yield issues that was met with
lackluster demand and a rise in interest rates, as investors grew worried
about an overheating economy and a potential inflation spike. As a result,
even high-yield bonds were not able to gain back all of last year's lost
ground, although they still outperformed all other types of bonds.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is Packaging Corp. of America 3.9%, the second is Stone
Container 2.3%, the third Waste Systems International 2.3%, the fourth
P&L Coal Holdings 2.1% and the fifth Nextel Communications 1.9%. A note
below the table reads "As a percentage of net assets on June 30, 1999."]
Performance explained
For the six months ended June 30, 1999, John Hancock V.A. High Yield Bond
Fund posted a total return of 8.89% at net asset value. That compared to
the 2.90% return of the average variable annuity high current yield fund,
according to Lipper, Inc. Historical performance information can be found
on page 39.
"The Fund's
investments
in industrial
cyclical
companies
contributed
the most
to our
outperformance..."
The Fund's investments in industrial cyclical companies contributed the
most to our outperformance, as did our focus on lower-quality high-yield
bonds rated B and CCC+. These groups, which suffered the most in last
year's turmoil, had the biggest rebound this year. Their recent rally is a
testament to why we stick to a consistent investment strategy, rather than
trying to follow the market's latest vogues. We held on to our core
positions in the belief that they represented great values, and we
continued to collect their very attractive yields while waiting for prices
to inevitably come back.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 5% with 0% at
the bottom and 10% at the top. The first bar represents the 8.89% total
return for John Hancock V.A. High Yield Bond Fund. The second bar
represents the 2.90% total return for Average variable annuity high
current yield fund. A note below the chart reads "The total return for
John Hancock V.A. High Yield Bond Fund is at net asset value with all
distributions reinvested. The average variable annuity high current
yield fund is tracked by Lipper, Inc. See the following page for
historical performance information."]
Paper: strong cyclical group
Cyclical companies in the paper industry benefited in particular this
period from signs of life in the Asian economies, since that region has
been the growth area for the paper industry. Our holdings in Packaging
Corp. of America, the Fund's top position, serves as a good example of our
value-based buy-and-hold strategy. We bought our stake late last year when
the securities were attractively priced because the market was still leery
of cyclical companies' prospects. The company has since benefited from
improved linerboard pricing. What's more, its strong management team and
saleable timber assets make it a good long-term holding. Another top
holding, Waste Systems International, also posted solid performance as it
is a dominant force in consolidating the solid waste business.
"After their
downturn,
high-yield
bonds
are still
attractively
valued..."
Energy bottoms
Rising oil prices sparked a rally in our energy holdings, including Key
Energy Group. We were rewarded for starting to increase our stake in oil
service companies when prices were still depressed, believing they had
bottomed. We added to our positions in Key Energy and Grey Wolf, a
domestic land drilling company with solid assets that is predominately
involved in the growing area of natural gas production, and we have since
been rewarded.
Equities up; company-specific downs
The Fund's investment policies allow us to own a limited amount of stock,
which we do selectively depending on our company and industry analysis.
During this period, our equities served us well, including Northwest
Airlines, which took off, as Wall Street finally began to value the
company's strategic alliance with Continental Airlines, a move we were
early to recognize. Japanese bank Fuji had its securities lifted in
response to its positive initiatives to be more open in its financial
disclosure.
We had some company-specific issues and earnings disappointments that
detracted from performance, such as Steel Heddle Group, which makes loom
components for the textile business. It was hurt by Asian textile dumping
that caused a slowdown in U.S. loom manufacturing. Several of our Latin
American names were also jarred by some recent currency problems in
Argentina.
Cautious optimism; high-yield risk
Emerging from the difficult conditions high-yield bonds encountered last
year, we remain cautiously optimistic about their prospects. After their
downturn, high-yield bonds are still attractively valued, while providing
strong current income, and that means opportunities exist for discerning
investors. That said, last year's turmoil could still take its toll on
some weaker high-yield companies, with the potential for an increase in
the number missing their earnings targets or defaulting on loan payments.
We encourage investors to use the past year's gyrations as a reminder of
the fact that the higher level of income provided by high-yield bonds is
generally accompanied by a greater risk/reward profile than the
higher-quality portions of the bond market. By definition, companies rated
below investment grade are subject to a greater risk of default and they
are also more volatile than other bonds. We will continue to consistently
apply solid fundamental analysis to find companies that are worth the
extra risk we take to own them, in our effort to provide the Fund with
strong current income and the potential for price gains.
- ---------------------------------------------------------------------------
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (1/6/98)
------- -------
Cumulative Total Returns (3.65%) (1.77%)
Average Annual Total
Returns(1) (3.65%) (1.20%)
YIELD
As of June 30, 1999
SEC 30-DAY
YIELD
-------
John Hancock V.A. High Yield
Bond Fund 11.06%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been (3.86%) and (1.44%),
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. High Yield Bond Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Lehman Brothers High Yield Bond Index -- an
unmanaged index of fixed-income securities that are similar, but not
identical, to the bonds in the Fund's portfolio.
Line chart with the heading John Hancock V.A. High Yield Bond Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the Lehman Brothers High Yield Bond Index and is equal to
$10,411 as of June 30, 1999. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. High Yield
Bond Fund on January 6, 1998 and is equal to $9,822 as of June 30, 1999.
BY DAWN BAILLIE FOR THE PORTFOLIO MANAGEMENT TEAM
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Money Market Fund. Caption below reads "Fund management team members
Barry Evans and Dawn Baillie."]
John Hancock V.A. Money Market Fund
Federal Reserve raises short-term interest rates
for the first time in two years
Money-market yields reversed course and began to rise over the last six
months. There were several factors responsible for the turnaround.
Overseas markets began to stabilize in the wake of late-year interest-rate
cuts by central banks and the Federal Reserve. Asian economies, although
not altogether out of the woods, also began to show signs of life. With
the potential for a dreaded global recession evaporating, the U.S. economy
never derailed from its robust growth track, and the Fed indicated that
its three rate cuts between September and November last year may have been
too much. That sent bond prices tumbling and interest rates -- which move
in the opposite direction to prices -- climbing.
"...inflation
fears grew
and it
appeared all
but certain
that the Fed
would raise
interest
rates..."
With the economy showing no signs of slowing, inflation fears grew and it
appeared all but certain that the Fed would raise interest rates to cool
down the economy, which it did on June 30 for the first time in two years.
It was a much-anticipated move that brought the federal funds rate -- that
which banks charge each other for overnight loans -- back up to 5.00%,
essentially reversing one of the Fed's rate cuts. Money-market yields also
moved up in response, since the federal funds rate is a key pricing
benchmark for money-market securities.
Performance explained
On June 30, 1999, John Hancock V.A. Money Market Fund had a 7-day
effective yield of 4.49%. By comparison, the average taxable money-market
fund had a 7-day effective yield of 3.75%, according to Lipper, Inc.
Becoming defensive
In the first three months of 1999, we kept the Fund's maturity slightly
longer than average, in the mid-50-day range. This was based on our belief
that the Fed, which had returned to a neutral bias after its three
"easing" moves last year, was not prepared to raise interest rates, since
the potential for an economic slowdown remained real.
In April, however, as signs of economic strength grew and the market
became increasingly jittery in anticipation of a rate hike, we began to
scale back our days to approximately five days shorter than the average by
the time the Fed met on June 30. This defensive move put the Fund in a
more flexible position to move quickly to take advantage of
higher-yielding opportunities following the rate hike.
Going forward
Even though the Fed has suggested with its post-June 30 return to a
neutral rate stance that there is no clear case for a further rate
increase to keep inflation at bay, we are not ruling out the possibility.
The Fed's vigilance in preventing an inflation spike through pre-emptive
moves will keep it focused on the monthly economic data. For now, the
economy continues to chug along with no signs of letting up. Until we
start to see a slowdown in manufacturing and consumer demand -- as
evidenced by consumer confidence and housing statistics -- we believe the
Fed will remain solidly in the picture.
[Bar chart at the top of left hand column with heading "7-Day Effective
Yield". Under the heading is a note that reads "As of June 30, 1999."
The chart is scaled in increments of 2% with 0% at the bottom and 6% at
the top. The first bar represents the 4.49% total return for John
Hancock V.A. Money Market Fund. The second bar represents the 3.75%
total return for Average taxable money-market fund. A note below the
chart reads "The average taxable money-market fund is tracked by Lipper,
Inc. Past performance is no guarantee of future results."]
In this environment, we are taking a more cautious approach, keeping our
average maturity in line with our peer group until we are more confident
that the Fed is done raising rates. As always, we'll stay focused on
providing the Fund with a competitive level of current income, while
preserving stability of principal.
"...we believe
the Fed
will remain
solidly in
the picture."
- ---------------------------------------------------------------------------
The Fund is neither insured nor guaranteed by the U.S. government.
Although the Fund seeks to maintain a net asset value of $1.00 per share,
it is possible to lose money by investing in the Fund.
BY FREDERICK L. CAVANAUGH, JR., PORTFOLIO MANAGEMENT TEAM LEADER, AND
ARTHUR N. CALAVRITINOS, CFA, PORTFOLIO MANAGER
[A 3" x 2-1/2" photo at bottom right side of page of John Hancock V.A.
Strategic Income Fund. Caption below reads "Fund management team members
(l-r): Dan Janis, Arthur Calavritinos and Fred Cavanaugh."]
John Hancock V.A. Strategic Income Fund
Bonds struggle, interest rates rise on inflation fears
Bonds from around the world charted fairly tough terrain during the first
six months of 1999. Stronger-than-expected economic growth in the U.S. and
the recovery of some emerging-market economies translated into fears that
global inflation would rear its head. In response, investors sent bond
prices tumbling and yields, which move in the opposite direction to
prices, higher. Among the hardest hit were U.S. Treasury securities, which
posted sizable losses. High-yield corporate bonds were hurt by rising
yields as well, but fared better than Treasuries with news that the strong
economy would boost corporate profitability. Most Western European bonds,
with the exception of those issued by the United Kingdom, were troubled by
the weak performance of the Continent's new unified currency, the euro.
Emerging-market bonds performed best, on evidence that many developing
economies were on the verge of an economic turnaround.
"Our main
disappoint
ment...was
the poor
performance
of U.S.
Treasury
securities."
High-yield sector boosts performance
For the six-month period ended June 30, 1999, John Hancock V.A. Strategic
Income Fund posted a total return of 1.98% at net asset value, compared
with the -0.50% return of the average variable annuity general bond fund,
according to Lipper, Inc. Historical performance information can be found
on page 44.
[Table at bottom left hand column entitled "Top Five Holdings". The
first listing is U.S. Government & Agencies 26%, the second is
Telecommunications 26%, the third Foreign Governments 9%, the fourth
Media 8% and the fifth Leisure 5%. A note below the table reads "As a
percentage of net assets on June 30, 1999."]
Performance explained
The main reason for the Fund's outperformance compared with its peers was
our relatively large weighting in high-yield corporate bonds in general,
and our emphasis on high-yielding bonds issued by telecommunications
companies in particular. For example, Canadian phone service provider
MetroNet Communications surged when it announced its intention to merge
with AT&T Canada, while Esprit Telecom Group rallied on news of its
acquisition by Global Telesystems Group. Nextel Communications, a
combination cellular/paging/dispatch company, posted strong gains thanks
to continued subscriber growth and persistent rumors that the company was
a takeover target. Beyond telecommunications, one of our best performers
was the Mexican electric utility Monterrey Power, which got a boost from
the emerging-market rallies.
[Bar chart at the top of left hand column with heading "Fund
Performance". Under the heading is a note that reads "For the six months
ended June 30, 1999." The chart is scaled in increments of 1% with -1%
at the bottom and 2% at the top. The first bar represents the 1.98%
total return for John Hancock V.A. Strategic Income Fund. The second bar
represents the -0.50% total return for Average variable annuity general
bond fund. A note below the chart reads "The total return for John
Hancock V.A. Strategic Income Fund is at net asset value with all
distributions reinvested. The average variable annuity general bond fund
is tracked by Lipper, Inc. See the following page for historical
performance information."]
Treasury holdings disappointing
Our main disappointment over the past six months was the poor performance
of U.S. Treasury securities. We increased our stake in Treasuries last
fall to protect against widening global turmoil. While that strategy
worked in our favor, our view changed in November. We began to plan for
the sale of some of our Treasury holdings in what we believed would be
fairly favorable conditions characterized by stable global markets, low
inflation and moderate economic growth. But when interest rates moved
higher and Treasury prices weakened, we postponed our sale of them until
we could do so under more advantageous conditions.
Foreign changes
Throughout the period, we avoided government debt of most Western European
countries because it offered yields significantly below those of U.S.
Treasuries. We did, however, maintain our focus on higher-yielding
government bonds from the United Kingdom -- at 11% of net assets -- and
Canada -- at 5%. Both performed reasonably well in response to lower
interest rates in those countries.
Emerging-market holdings performed better than our developed-market
holdings. Our Mexican, Colombian and Panamanian investments generally
posted gains as investor confidence in Latin America's fiscal and economic
policies was restored, at least on a temporary basis.
We slightly increased our stake in foreign bonds through new investments
in government debt issued by France and Spain, which we bought in March in
anticipation of interest rates' moving lower in those countries. Instead,
rates moved higher and the bonds' short-term performance has been
disappointing, although we continue to believe that rates in those
countries will fall.
"...we're
most
optimistic
about
high-yield
corporate
bonds."
Outlook
Of all the markets in which we invest, we're most optimistic about
high-yield corporate bonds. Even though they have recently made up some of
the ground they lost last fall, we don't believe high-yield bonds have yet
realized all their potential value. In contrast, emerging-market bonds may
have overstretched what we believe to be their fair value, so we plan to
keep our stake in them relatively light. We don't see any compelling value
coming out of Europe, except for the United Kingdom over the long term,
and France and Spain over the near term. We're likely to use the proceeds
from our sale of foreign bonds to buy additional high-yield corporate
bonds. As for U.S. Treasuries, we think better performance is on the
horizon. That's because we believe there's a good chance that U.S.
economic growth could slow in the second half of 1999, which should keep
inflation in check, drive interest rates lower and boost U.S. Treasuries.
- ---------------------------------------------------------------------------
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting.
A LOOK AT PERFORMANCE
For the period ended June 30, 1999
SINCE
ONE INCEPTION
YEAR (8/29/96)
------- -------
Cumulative Total Returns 2.30% 27.31%
Average Annual Total
Returns(1) 2.30% 8.89%
YIELD
As of June 30, 1999
SEC 30-DAY
YIELD
-------
John Hancock V.A. Strategic
Income Fund 7.64%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Notes to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25% (not
including management fee) of the Fund's daily average net assets. Without
the limitation of expenses, the average annual total return for the
one-year period and since inception would have been 2.25% and 8.50%,
respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT...
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Strategic Income Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Lehman Brothers Government/Corporate Bond Index
- -- an unmanaged index that measures the performance of U.S. government
bonds, U.S. corporate bonds and Yankee bonds.
Line chart with the heading John Hancock V.A. Strategic Income Fund,
representing the growth of a hypothetical $10,000 investment over the
life of the fund. Within the chart are two lines. The first line
represents the value of the hypothetical $10,000 investment made in the
John Hancock V.A. Strategic Income Fund on August 29, 1996 and is equal
to $12,732 as of June 30, 1999. The second line represents the Lehman
Brothers Government/Corporate Bond Index and is equal to $12,286 as of
June 30, 1999.
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A. V.A. V.A. V.A.
FINANCIAL 500 INDEX INTERNATIONAL LARGE CAP MID CAP REGIONAL SMALL CAP
INDUSTRIES FUND FUND FUND GROWTH FUND GROWTH FUND BANK FUND GROWTH FUND
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments at value - Note D:
Common stocks and rights (cost -
$46,587,179, $24,687,917,
$5,988,913, $14,762,716,
$1,991,182, $22,688,151 and
$7,064,526, respectively) $52,529,831 $33,259,916 $6,788,406 $17,260,744 $2,312,383 $23,065,239 $9,873,615
Joint repurchase agreements (cost -
$665,000, $1,367,000, $288,000,
$58,000, $280,000, $616,000 and
$215,000, respectively) 665,000 1,367,000 288,000 58,000 280,000 616,000 215,000
Corporate savings account 502 -- -- 507 183 377 17
----------- ----------- ----------- ----------- ----------- ----------- -----------
53,195,333 34,626,916 7,076,406 17,319,251 2,592,566 23,681,616 10,088,632
Cash -- 75,904 -- -- -- -- --
Foreign currency, at value (cost -
none, none, $2,119, none, none,
none and none, respectively) -- -- 1,842 -- -- -- --
Receivable for investments sold 2,952 -- 251,399 315,012 33,866 75,247 50,888
Receivable for open forward foreign
currency exchange contracts
purchased - Note B -- -- 23 -- -- -- --
Receivable for open forward foreign
currency exchange contracts sold
- - Note B -- -- 268 -- -- -- --
Receivable for futures variation
margin - Note B -- 25,000 -- -- -- -- --
Dividends and interest receivable 90,601 28,963 8,606 5,461 1,183 39,863 337
Foreign tax receivable 2,812 103 9,718 -- -- -- --
Receivable from John Hancock
Advisers, Inc. and affiliates -
Note C -- -- 2,363 -- 2,614 -- --
Deferred organization expenses -
Note B -- 4,631 4,631 4,631 -- -- 4,631
Other assets 5,270 4,723 629 773 3 46 871
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets 53,296,968 34,766,240 7,355,885 17,645,128 2,630,232 23,796,772 10,145,359
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,400 -- 171,589 -- 93,328 137,031 97,113
Payable to John Hancock Advisers,
Inc. and affiliates - Note C 38,946 172 -- 7,725 -- 17,001 1,136
Accounts payable and accrued
expenses 15,006 20,582 20,894 8,894 8,613 15,740 9,963
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities 55,352 20,754 232,904 16,619 101,941 169,772 108,212
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 48,386,878 25,948,875 6,437,079 14,347,542 2,123,981 23,124,712 7,611,110
Accumulated net realized gain
(loss) on investments, financial
futures contracts and foreign
currency transactions (1,334,062) 168,809 (85,245) 804,447 86,537 125,301 (347,590)
Net unrealized appreciation of
investments, financial futures
contracts and foreign currency
transactions 5,942,480 8,627,125 797,682 2,498,028 321,201 377,088 2,809,089
Undistributed net investment income
(distributions in excess of net
investment income) 246,320 677 13,886 (21,508) (3,428) (101) (35,462)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Assets $53,241,616 $34,745,486 $7,163,402 $17,628,509 $2,528,291 $23,627,000 $10,037,147
===============================================================================================================================
Net Asset Value Per Share:
(Based on 3,523,515, 2,040,587,
583,127, 1,192,960, 203,287,
2,457,729 and 728,481 shares,
respectively, of beneficial
interest outstanding - unlimited
number of shares authorized with
no par value) $15.11 $17.03 $12.28 $14.78 $12.44 $9.61 $13.78
===============================================================================================================================
The Statement of Assets and Liabilities is each Fund's balance sheet and shows the value of what the Fund owns, is due and
owes on June 30, 1999. You'll also find the net asset value per share as of that date.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities (continued)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------------
V.A. V.A. V.A.
CORE EQUITY LARGE CAP SOVEREIGN
FUND VALUE FUND INVESTORS FUND
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investments at value - Note D:
Common stocks and rights (cost -
$33,144,694, $20,864,544 and
$31,445,672, respectively) $39,437,400 $25,445,860 $37,954,577
Preferred stocks (cost - none,
$855,243 and none, respectively) -- 1,109,850 --
U.S. government obligations (cost -
none, none and $2,446,719,
respectively) -- -- 2,368,211
Joint repurchase agreements (cost -
$548,000, $524,000 and $4,231,000,
respectively) 548,000 524,000 4,231,000
Corporate savings account 265 961 895
----------- ----------- -----------
39,985,665 27,080,671 44,554,683
Receivable for investments sold -- 565,929 --
Receivable for open forward foreign
currency exchange contracts sold -
Note B -- 1,010 --
Dividends and interest receivable 36,201 64,881 112,414
Foreign tax receivable 65 67 --
Deferred organization expenses -
Note B 4,631 -- 4,631
Other assets 2,229 34 3,151
----------- ----------- -----------
Total Assets 40,028,791 27,712,592 44,674,879
- --------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 53,660 1,977,816 689,342
Payable to John Hancock Advisers,
Inc. and affiliates - Note C 23,499 12,912 23,774
Accounts payable and accrued
expenses 11,205 12,887 7,657
----------- ----------- -----------
Total Liabilities 88,364 2,003,615 720,773
- --------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 32,340,135 20,366,083 37,522,243
Accumulated net realized gain on
investments, financial futures
contracts and foreign currency
transactions 1,305,743 506,060 1,572
Net unrealized appreciation of
investments, financial futures
contracts and foreign currency
transactions 6,292,706 4,836,929 6,430,397
Undistributed net investment income
(distributions in excess of net
investment income) 1,843 (95) (106)
----------- ----------- -----------
Net Assets $39,940,427 $25,708,977 $43,954,106
======================================================================================
Net Asset Value Per Share:
(Based on 2,040,386, 1,831,682 and
2,679,516 shares, respectively, of
beneficial interest outstanding -
unlimited number of shares
authorized with no par value) $19.57 $14.04 $16.40
======================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Assets and Liabilities (continued)
June 30, 1999 (Unaudited)
- ---------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
BOND HIGH YIELD MONEY MARKET STRATEGIC
FUND BOND FUND FUND INCOME FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets:
Investments at value - Note D:
Bonds (cost - $11,501,819,
$8,278,059, none and $19,906,316,
respectively) $11,216,776 $7,325,972 $ -- $19,238,643
Common stocks (cost - none,
$793,406, none and $127,714,
respectively) -- 783,128 -- 177,155
Preferred stocks and warrants (cost
- - $51, $688,010, none and
$188,194, respectively) 525 687,094 -- 190,547
Short-term investments (cost -
none, none, $19,234,839 and none,
respectively) -- -- 19,234,839 --
Joint repurchase agreements (cost -
$639,000, $447,000, $3,231,000 and
$747,000, respectively) 639,000 447,000 3,231,000 747,000
Corporate savings account 453 967 -- 781
----------- ----------- ----------- -----------
11,856,754 9,244,161 22,465,839 20,354,126
Cash -- -- 427 --
Foreign currency, at value (cost -
none, none, none and $207,200,
respectively) -- -- -- 203,837
Receivable for investments sold 272,170 50,263 -- 5,000
Receivable for open forward foreign
currency exchange contracts sold -
Note B -- 16,209 -- 40,885
Receivable for futures variation
margin - Note B -- -- -- 5,125
Dividends and interest receivable 205,289 221,993 334,553 376,216
Foreign tax receivable -- 114 -- --
Deferred organization expenses -
Note B 4,631 -- 4,631 4,631
Other assets 837 19 2,527 1,302
----------- ----------- ----------- -----------
Total Assets 12,339,681 9,532,759 22,807,977 20,991,122
- ---------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 590,282 126,020 -- 510,343
Dividend payable 2,085 2,584 2,736 4,341
Payable to John Hancock Advisers,
Inc. and affiliates - Note C 593 3,350 8,285 13,436
Accounts payable and accrued
expenses 11,894 8,643 10,675 9,529
----------- ----------- ----------- -----------
Total Liabilities 604,854 140,597 21,696 537,649
- ---------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 12,114,934 10,450,903 22,786,259 21,226,818
Accumulated net realized gain
(loss) on investments, financial
futures contracts and foreign
currency transactions (95,528) (109,375) 19 31,464
Net unrealized depreciation of
investments, financial futures
contracts and foreign currency
transactions (284,569) (947,974) -- (795,865)
Undistributed net investment income
(distributions in excess of net
investment income) (10) (1,392) 3 (8,944)
----------- ----------- ----------- -----------
Net Assets $11,734,827 $9,392,162 $22,786,281 $20,453,473
===================================================================================================
Net Asset Value Per Share:
(Based on 1,166,636, 1,104,582,
22,786,281 and 2,063,556 shares,
respectively, of beneficial
interest outstanding - unlimited
number of shares authorized with
no par value) $10.06 $8.50 $1.00 $9.91
===================================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Six months ended June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A. V.A. V.A. V.A.
FINANCIAL 500 INDEX INTERNATIONAL LARGE CAP MID CAP REGIONAL SMALL CAP
INDUSTRIES FUND FUND FUND GROWTH FUND GROWTH FUND BANK FUND GROWTH FUND
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends (net of foreign
withholding tax of $10,744,
$3,076, $11,662, none, none, none
and none, respectively) $455,843 $223,605 $82,694 $34,226 $3,573 $217,269 $2,507
Interest 29,076 -- 2,668 10,857 3,314 27,971 5,090
----------- ----------- ----------- ----------- ----------- ----------- -----------
484,919 223,605 85,362 45,083 6,887 245,240 7,597
----------- ----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Investment management fee - Note C 207,528 52,190 31,685 49,923 7,734 85,154 32,277
Custodian fee 12,903 37,933 34,977 12,074 11,873 12,146 19,609
Auditing fee 7,578 5,430 5,430 5,430 5,837 7,118 5,232
Accounting and legal services fees
- - Note C 3,738 2,635 507 959 149 1,534 620
Printing 2,477 2,694 2,287 1,325 2,311 3,168 3,385
Trustees' fees 1,634 650 169 295 39 701 190
Legal fees 867 445 114 216 42 827 119
Miscellaneous 563 5,070 119 174 57 384 133
Registration and filing fees 3 3 3 44 19 13 19
Organization expense - Note B -- 1,059 1,059 1,059 -- -- 1,059
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses 237,291 108,109 76,350 71,499 28,061 111,045 62,643
- -------------------------------------------------------------------------------------------------------------------------------
Less Expense Reductions - Note C -- (55,881) (35,854) (4,920) (17,746) -- (19,596)
- -------------------------------------------------------------------------------------------------------------------------------
Net Expenses 237,291 52,228 40,496 66,579 10,315 111,045 43,047
- -------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 247,628 171,377 44,866 (21,496) (3,428) 134,195 (35,450)
- -------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments, Financial Futures
Contracts and Foreign Currency
Transactions:
Net realized gain (loss) on
investments sold (812,153) 68,130 189,624 995,727 197,152 90,276 306,966
Net realized loss on financial
futures contracts -- (5,004) -- -- -- -- --
Net realized loss on foreign
currency transactions (1,394) -- (84,534) -- -- -- --
Change in net unrealized
appreciation/depreciation of
investments 2,785,881 3,243,088 (87,285) 354,385 91,372 771,359 1,005,816
Change in net unrealized
appreciation/depreciation of
financial futures contracts -- 20,461 -- -- -- -- --
Change in net unrealized
appreciation/depreciation of
foreign currency transactions (176) -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Realized and Unrealized Gain on
Investments, Financial Futures
Contracts and Foreign Currency
Transactions 1,972,158 3,326,675 17,805 1,350,112 288,524 861,635 1,312,782
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $2,219,786 $3,498,052 $62,671 $1,328,616 $285,096 $995,830 $1,277,332
===============================================================================================================================
The Statement of Operations summarizes for each of the Funds the investment income earned and expenses incurred in operating
the Fund. It also shows net gains (losses) for the period stated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations (continued)
Six months ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------------
V.A. V.A. V.A.
CORE EQUITY LARGE CAP SOVEREIGN
FUND VALUE FUND INVESTORS FUND
----------- ----------- -----------
<S> <C> <C> <C>
Investment Income:
Dividends (net of foreign
withholding tax of $1,124, $129
and none, respectively) $185,248 $65,332 $268,401
Interest 24,795 108,715 166,208
----------- ----------- -----------
210,043 174,047 434,609
----------- ----------- -----------
Expenses:
Investment management fee - Note C 111,225 60,127 111,686
Custodian fee 11,050 12,760 6,127
Auditing fee 6,354 6,102 5,454
Accounting and legal services fees
- - Note C 2,290 1,444 2,682
Printing 2,174 3,653 2,462
Trustees' fees 768 464 839
Legal fees 456 318 527
Miscellaneous 349 312 568
Registration and filing fees 22 22 2
Organization expense - Note B 1,059 -- 1,059
----------- ----------- -----------
Total Expenses 135,747 85,202 131,406
- --------------------------------------------------------------------------------------
Less Expense Reductions - Note C (1,059) -- --
- --------------------------------------------------------------------------------------
Net Expenses 134,688 85,202 131,406
- --------------------------------------------------------------------------------------
Net Investment Income 75,355 88,845 303,203
- --------------------------------------------------------------------------------------
Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions:
Net realized gain on investments
sold 1,374,295 522,690 159,449
Net realized gain on foreign
currency transactions -- 1,015 --
Change in net unrealized
appreciation/depreciation of
investments 1,844,577 2,966,289 1,819,241
Change in net unrealized
appreciation/depreciation of
foreign currency transactions -- 2,013 --
----------- ----------- -----------
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 3,218,872 3,492,007 1,978,690
- --------------------------------------------------------------------------------------
Net Increase in Net Assets
Resulting from Operations $3,294,227 $3,580,852 $2,281,893
======================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations (continued)
Six months ended June 30, 1999 (Unaudited)
- ---------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
BOND HIGH YIELD MONEY MARKET STRATEGIC
FUND BOND FUND FUND INCOME FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Interest $384,110 $478,306 $477,030 $757,862
Dividends (net of foreign
withholding tax of none, $340,
none and none, respectively) 17 15,182 -- 10,432
----------- ----------- ----------- -----------
384,127 493,488 477,030 768,294
----------- ----------- ----------- -----------
Expenses:
Investment management fee - Note C 27,564 26,171 47,546 53,380
Custodian fee 18,539 7,552 4,346 11,128
Auditing fee 5,430 5,620 5,569 5,249
Accounting and legal services fees
- - Note C 794 629 1,370 1,282
Printing 3,368 1,935 2,010 3,598
Trustees' fees 273 196 400 441
Legal fees 239 184 418 265
Miscellaneous 110 84 86 201
Registration and filing fees 3 19 2 101
Organization expense - Note B 1,059 -- 1,059 1,059
----------- ----------- ----------- -----------
Total Expenses 57,379 42,390 62,806 76,704
- ---------------------------------------------------------------------------------------------------
Less Expense Reductions - Note C (16,016) (5,302) -- (1,059)
- ---------------------------------------------------------------------------------------------------
Net Expenses 41,363 37,088 62,806 75,645
- ---------------------------------------------------------------------------------------------------
Net Investment Income 342,764 456,400 414,224 692,649
- ---------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments, Financial Futures
Contracts and Foreign Currency
Transactions:
Net realized gain (loss) on
investments sold (93,403) 11,046 -- 25,704
Net realized loss on financial
futures contracts -- -- -- (28,949)
Net realized gain on foreign
currency transactions -- 30,523 -- 72,675
Change in net unrealized
appreciation/depreciation of
investments (403,869) 241,279 -- (497,690)
Change in net unrealized
appreciation/depreciation of
financial futures contracts -- -- -- 5,101
Change in net unrealized
appreciation/depreciation of
foreign currency transactions -- 16,209 -- 29,938
----------- ----------- ----------- -----------
Net Realized and Unrealized Gain
(Loss) on Investments, Financial
Futures Contracts and Foreign
Currency Transactions (497,272) 299,057 -- (393,221)
- ---------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations ($154,508) $755,457 $414,224 $299,428
===================================================================================================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------
V.A. FINANCIAL INDUSTRIES FUND V.A. 500 INDEX FUND V.A. INTERNATIONAL FUND
------------------------------ ------------------------- ------------------------
YEAR SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999
1998 (UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $506,912 $247,628 $291,272 $171,377 $32,354 $44,866
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions (508,505) (813,547) 1,119,454 63,126 (142,171) 105,090
Change in net unrealized
appreciation/depreciation of
investments, financial futures
contracts and foreign currency
transactions 1,601,203 2,785,705 4,459,671 3,263,549 899,109 (87,285)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase in Net Assets
Resulting from Operations 1,599,610 2,219,786 5,870,397 3,498,052 789,292 62,671
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income (510,853) -- (292,838) (171,025) (32,354) --
Dividends in excess of net
investment income -- -- -- -- (13,953) --
Distributions from net realized
gain on investments sold,
financial futures contracts and
foreign currency transactions (11,398) -- (1,211,700) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions to Shareholders (522,251) -- (1,504,538) (171,025) (46,307) --
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions: **
Shares sold 41,125,976 4,392,796 15,705,605 8,829,438 3,453,932 513,352
Shares issued to shareholders in
reinvestment of distributions 522,251 -- 1,504,538 171,025 46,307 --
----------- ----------- ----------- ----------- ----------- -----------
41,648,227 4,392,796 17,210,143 9,000,463 3,500,239 513,352
Less shares repurchased (6,622,052) (7,939,941) (15,126,656) (4,039,167) (834,714) (613,135)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) 35,026,175 (3,547,145) 2,083,487 4,961,296 2,665,525 (99,783)
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 18,465,441 54,568,975 20,007,817 26,457,163 3,792,004 7,200,514
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
($1,308), $246,320, $325, $677,
($30,980) and $13,886,
respectively) $54,568,975 $53,241,616 $26,457,163 $34,745,486 $7,200,514 $7,163,402
=========== =========== =========== =========== =========== ===========
* Distributions to Shareholders:
Per share dividends from net
investment income $0.1354 -- $0.1980 $0.0885 $0.0674 --
----------- ----------- ----------- ----------- ----------- -----------
Per share dividends in excess of
net investment income -- -- -- -- $0.0118 --
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold,
financial futures contracts and
foreign currency transactions $0.0030 -- $0.7583 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 2,866,051 298,281 1,100,338 546,047 300,316 42,182
Shares issued to shareholders in
reinvestment of distributions 37,039 -- 99,865 10,578 3,843 --
----------- ----------- ----------- ----------- ----------- -----------
2,903,090 298,281 1,200,203 556,625 304,159 42,182
Less shares repurchased (501,775) (550,168) (1,048,754) (252,660) (74,252) (50,052)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) 2,401,315 (251,887) 151,449 303,965 229,907 (7,870)
=========== =========== =========== =========== =========== ===========
The Statement of Changes in Net Assets shows how the value of each Fund's
net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment and foreign
currency gains and losses, distributions paid to shareholders, if any, and
any increase or decrease in money shareholders invested in each Fund. The
footnotes illustrate the number of Fund shares sold, reinvested and
repurchased during the last two periods, along with the per share amount
of distributions made to shareholders of each Fund for the period
indicated.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------------------------------------------------------------------
V.A. LARGE CAP GROWTH FUND V.A. MID CAP GROWTH FUND V.A. REGIONAL BANK FUND
-------------------------- ------------------------- -------------------------
YEAR SIX MONTHS PERIOD SIX MONTHS PERIOD SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999
1998 (UNAUDITED) 1998 (UNAUDITED) 1998(2) (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) ($48) ($21,496) $627 ($3,428) $126,597 $134,195
Net realized gain (loss) on
investments sold and foreign
currency transactions 17,279 995,727 (110,615) 197,152 42,921 90,276
Change in net unrealized
appreciation/depreciation of
investments and foreign currency
transactions 1,630,671 354,385 229,829 91,372 (394,271) 771,359
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations 1,647,902 1,328,616 119,841 285,096 (224,753) 995,830
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income -- -- (627) -- (123,559) (137,334)
Distributions from net realized
gain on investments sold and
foreign currency transactions -- -- -- -- (7,896) --
Tax return of capital -- -- (125) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions to Shareholders -- -- (752) -- (131,455) (137,334)
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions: **
Shares sold 5,891,440 6,661,481 1,858,855 818,287 23,505,925 5,095,910
Shares issued to shareholders in
reinvestment of distributions -- -- 752 -- 131,455 137,334
----------- ----------- ----------- ----------- ----------- -----------
5,891,440 6,661,481 1,859,607 818,287 23,637,380 5,233,244
Less shares repurchased (900,237) (733,405) (199,625) (354,163) (3,024,755) (2,721,157)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase 4,991,203 5,928,076 1,659,982 464,124 20,612,625 2,512,087
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 3,732,712 10,371,817 -- 1,779,071 -- 20,256,417
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
($12), ($21,508), none, ($3,428),
$3,038 and ($101), respectively) $10,371,817 $17,628,509 $1,779,071 $2,528,291 $20,256,417 $23,627,000
=========== =========== =========== =========== =========== ===========
* Distributions to Shareholders:
Per share dividends from net
investment income -- -- $0.0040 -- $0.0694 $0.0573
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions -- -- -- -- $0.0036 --
----------- ----------- ----------- ----------- ----------- -----------
Tax return of capital -- -- $0.0008 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 505,076 468,943 180,723 73,148 2,519,857 554,433
Shares issued to shareholders in
reinvestment of distributions -- -- 72 -- 14,871 14,955
----------- ----------- ----------- ----------- ----------- -----------
505,076 468,943 180,795 73,148 2,534,728 569,388
Less shares repurchased (76,970) (51,904) (19,519) (31,137) (351,377) (295,010)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase 428,106 417,039 161,276 42,011 2,183,351 274,378
=========== =========== =========== =========== =========== ===========
(1) Commenced operations on January 7, 1998.
(2) Commenced operations on May 1, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------------------------------------------------------------------
V.A. SMALL CAP GROWTH FUND V.A. CORE EQUITY FUND V.A. LARGE CAP VALUE FUND
-------------------------- ------------------------- -------------------------
YEAR SIX MONTHS YEAR SIX MONTHS PERIOD SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999
1998 (UNAUDITED) 1998 (UNAUDITED) 1998(1) (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) ($33,890) ($35,450) $103,965 $75,355 $88,381 $88,845
Net realized gain (loss) on
investments sold and foreign
currency transactions (402,192) 306,966 292,353 1,374,295 (21,183) 523,705
Change in net unrealized
appreciation/depreciation of
investments and foreign currency
transactions 1,479,880 1,005,816 3,818,765 1,844,577 1,868,627 2,968,302
----------- ----------- ----------- ----------- ----------- -----------
Net Increase in Net Assets
Resulting from Operations 1,043,798 1,277,332 4,215,083 3,294,227 1,935,825 3,580,852
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income -- -- (102,677) (75,091) (81,327) (92,456)
Distributions from net realized
gain on investments sold and
foreign currency transactions -- -- (388,348) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions to Shareholders -- -- (491,025) (75,091) (81,327) (92,456)
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions: **
Shares sold 4,538,788 1,364,647 16,435,328 13,092,696 16,705,530 5,835,298
Shares issued to shareholders in
reinvestment of distributions -- -- 491,025 75,091 81,327 92,456
----------- ----------- ----------- ----------- ----------- -----------
4,538,788 1,364,647 16,926,353 13,167,787 16,786,857 5,927,754
Less shares repurchased (1,191,507) (836,721) (2,678,249) (3,137,750) (1,273,103) (1,075,425)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase 3,347,281 527,926 14,248,104 10,030,037 15,513,754 4,852,329
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 3,840,810 8,231,889 8,719,092 26,691,254 -- 17,368,252
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
($12), ($35,462), $1,579, $1,843,
$3,516 and ($95), respectively) $8,231,889 $10,037,147 $26,691,254 $39,940,427 $17,368,252 $25,708,977
=========== =========== =========== =========== =========== ===========
* Distributions to Shareholders:
Per share dividends from net
investment income -- -- $0.0967 $0.0402 $0.0962 $0.0548
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions -- -- $0.2702 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 430,241 110,190 1,023,938 701,970 1,560,370 470,034
Shares issued to shareholders in
reinvestment of distributions -- -- 28,311 4,041 7,693 7,302
----------- ----------- ----------- ----------- ----------- -----------
430,241 110,190 1,052,249 706,011 1,568,063 477,336
Less shares repurchased (115,191) (67,957) (165,911) (169,928) (124,862) (88,855)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase 315,050 42,233 886,338 536,083 1,443,201 388,481
=========== =========== =========== =========== =========== ===========
(1) Commenced operations on January 6, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------------------------------------------------------------------
V.A. SOVEREIGN INVESTORS FUND V.A. BOND FUND V.A. HIGH YIELD BOND FUND
-------------------------- ------------------------- -------------------------
YEAR SIX MONTHS YEAR SIX MONTHS PERIOD SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999
1998 (UNAUDITED) 1998 (UNAUDITED) 1998(1) (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $436,382 $303,203 $421,763 $342,764 $532,172 $456,400
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions (157,903) 159,449 155,311 (93,403) (164,756) 41,569
Change in net unrealized
appreciation/depreciation of
investments, financial futures
contracts and foreign currency
transactions 3,493,431 1,819,241 72,362 (403,869) (1,205,462) 257,488
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations 3,771,910 2,281,893 649,436 (154,508) (838,046) 755,457
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income (454,539) (303,804) (421,762) (342,785) (518,660) (457,492)
Distributions from net realized
gain on investments sold,
financial futures contracts and
foreign currency transactions -- -- (170,439) -- -- --
Tax return of capital -- -- -- -- (8,794) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions to Shareholders (454,539) (303,804) (592,201) (342,785) (527,454) (457,492)
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions: **
Shares sold 21,913,811 9,296,130 8,832,995 2,937,916 10,161,830 1,352,791
Shares issued to shareholders in
reinvestment of distributions 454,539 303,804 592,175 340,699 527,454 454,908
----------- ----------- ----------- ----------- ----------- -----------
22,368,350 9,599,934 9,425,170 3,278,615 10,689,284 1,807,699
Less shares repurchased (3,703,040) (1,793,537) (2,495,458) (1,715,923) (1,204,237) (833,049)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase 18,665,310 7,806,397 6,929,712 1,562,692 9,485,047 974,650
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 12,186,939 34,169,620 3,682,481 10,669,428 -- 8,119,547
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of $495,
($106), $11, ($10), ($300) and
($1,392), respectively) $34,169,620 $43,954,106 $10,669,428 $11,734,827 $8,119,547 $9,392,162
=========== =========== =========== =========== =========== ===========
* Distributions to Shareholders:
Per share dividends from net
investment income $0.2548 $0.1224 $0.6266 $0.3152 $0.8426 $0.4342
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions -- -- $0.1710 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Tax return of capital -- -- -- -- $0.0143 --
----------- ----------- ----------- ----------- ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 1,514,230 585,728 838,775 284,377 1,069,122 160,997
Shares issued to shareholders in
reinvestment of distributions 30,975 19,335 56,408 33,209 59,435 54,073
----------- ----------- ----------- ----------- ----------- -----------
1,545,205 605,063 895,183 317,586 1,128,557 215,070
Less shares repurchased (253,627) (113,843) (235,975) (165,703) (140,657) (98,388)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase 1,291,578 491,220 659,208 151,883 987,900 116,682
=========== =========== =========== =========== =========== ===========
(1) Commenced operations on January 6, 1998.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (continued)
- -------------------------------------------------------------------------------------------------------
V.A. MONEY MARKET FUND V.A. STRATEGIC INCOME FUND
-------------------------- -------------------------
YEAR SIX MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999
1998 (UNAUDITED) 1998 (UNAUDITED)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $577,123 $414,224 $859,114 $692,649
Net realized gain (loss) on
investments sold, financial
futures contracts and foreign
currency transactions -- -- (8,657) 69,430
Change in net unrealized
appreciation/depreciation of
investments, financial futures
contracts and foreign currency
transactions -- -- (397,587) (462,651)
----------- ----------- ----------- -----------
Net Increase in Net Assets
Resulting from Operations 577,123 414,224 452,870 299,428
----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income (577,123) (414,224) (859,114) (692,664)
Distributions from net realized
gain on investments sold,
financial futures contracts and
foreign currency transactions -- -- (33,336) --
----------- ----------- ----------- -----------
Total Distributions to Shareholders (577,123) (414,224) (892,450) (692,664)
----------- ----------- ----------- -----------
From Fund Share Transactions: **
Shares sold 33,372,181 19,191,009 10,522,329 4,195,548
Shares issued in reorganization -
Note E -- -- -- 2,569,836
Shares issued to shareholders in
reinvestment of distributions 578,296 411,467 892,895 688,325
----------- ----------- ----------- -----------
33,950,477 19,602,476 11,415,224 7,453,709
Less shares repurchased (25,808,161) (13,335,569) (1,495,808) (1,626,397)
----------- ----------- ----------- -----------
Net Increase 8,142,316 6,266,907 9,919,416 5,827,312
----------- ----------- ----------- -----------
Net Assets:
Beginning of period 8,377,058 16,519,374 5,539,561 15,019,397
----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of $3,
$3, ($8,929) and ($8,944),
respectively) $16,519,374 $22,786,281 $15,019,397 $20,453,473
=========== =========== =========== ===========
* Distributions to Shareholders:
Per share dividends from net
investment income $0.0478 $0.0215 $0.8496 $0.3888
----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions -- -- $0.0229 --
----------- ----------- ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 33,372,181 19,191,009 1,015,843 415,173
Shares issued in reorganization -
Note E -- -- -- 253,313
Shares issued to shareholders in
reinvestment of distributions 578,296 411,467 86,949 68,266
----------- ----------- ----------- -----------
33,950,477 19,602,476 1,102,792 736,752
Less shares repurchased (25,808,161) (13,335,569) (144,814) (160,292)
----------- ----------- ----------- -----------
Net Increase 8,142,316 6,266,907 957,978 576,460
=========== =========== =========== ===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ---------------------------------------------------------------------------------------------------
V.A. FINANCIAL INDUSTRIES FUND
--------------------------------------------
PERIOD YEAR SIX MONTHS
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30, 1999
1997(1) 1998 (UNAUDITED)
----------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $13.44 $14.45
-------- -------- --------
Net Investment Income (2) 0.11 0.18 0.07
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 3.39 0.97 0.59
-------- -------- --------
Total from Investment Operations 3.50 1.15 0.66
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.05) (0.14) --
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions (0.01) (0.00)(8) --
-------- -------- --------
Total Distributions (0.06) (0.14) --
-------- -------- --------
Net Asset Value, End of Period $13.44 $14.45 $15.11
======== ======== ========
Total Investment Return at Net Asset Value (3) 35.05%(5) 8.55% 4.57%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) 34.71%(5) -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $18,465 $54,569 $53,242
Ratio of Expenses to Average Net Assets 1.05%(6) 0.92% 0.91%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 1.39%(6) -- --
Ratio of Net Investment Income to Average
Net Assets 1.32%(6) 1.25% 0.95%(6)
Ratio of Adjusted Net Investment Income to
Average Net Assets (7) 0.98%(6) -- --
Portfolio Turnover Rate 11% 38% 24%
Fee Reduction Per Share (2) $0.03 -- --
(1) Commenced operations on April 30, 1997.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
The Financial Highlights summarizes the impact of the following factors on a single share for each period indicated:
net investment income, gains (losses), distributions and total investment return of each Fund. It shows how the Fund's
net asset value for a share has changed since the end of the previous period. Additionally, important relationships
between some items presented in the financial statements are expressed in ratio form.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
V.A. 500 INDEX FUND
-----------------------------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------------ JUNE 30, 1999
1996(1) 1997 1998 (UNAUDITED)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.44 $12.62 $15.23
-------- -------- -------- --------
Net Investment Income (2) 0.17 0.30 0.20 0.09
Net Realized and Unrealized Gain on
Investments and Financial Futures Contracts 0.98 2.72 3.37 1.80
-------- -------- -------- --------
Total from Investment Operations 1.15 3.02 3.57 1.89
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.16) (0.30) (0.20) (0.09)
Distributions from Net Realized Gain on
Investments Sold and Financial Futures
Contracts (0.55) (0.54) (0.76) --
-------- -------- -------- --------
Total Distributions (0.71) (0.84) (0.96) (0.09)
-------- -------- -------- --------
Net Asset Value, End of Period $10.44 $12.62 $15.23 $17.03
======== ======== ======== ========
Total Investment Return at Net Asset Value (3) 11.49%(5) 29.51% 28.44% 12.42%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) 11.25%(5) 29.04% 27.87% 12.23%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $4,049 $20,008 $26,457 $34,745
Ratio of Expenses to Average Net Assets 0.60%(6) 0.36% 0.35% 0.35%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 1.31%(6) 0.83% 0.92% 0.72%(6)
Ratio of Net Investment Income to Average
Net Assets 4.57%(6) 2.45% 1.44% 1.15%(6)
Ratio of Adjusted Net Investment Income to
Average Net Assets (7) 3.86%(6) 1.98% 0.87% 0.78%(6)
Portfolio Turnover Rate -- 9% 47% 1%
Fee Reduction Per Share (2) $0.03 $0.06 $0.07 $0.03
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
V.A. INTERNATIONAL FUND
-----------------------------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------------ JUNE 30, 1999
1996(1) 1997 1998 (UNAUDITED)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $11.23 $10.50 $12.18
-------- -------- -------- --------
Net Investment Income (2) 0.07 0.05 0.07 0.08
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions 1.20 (0.13) 1.69 0.02
-------- -------- -------- --------
Total from Investment Operations 1.27 (0.08) 1.76 0.10
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.04) (0.01) (0.07) --
Dividends in Excess of Net Investment Income -- -- (0.01) --
Distributions from Net Realized Gain on
Investments Sold and Foreign Currency
Transactions -- (0.64) -- --
-------- -------- -------- --------
Total Distributions (0.04) (0.65) (0.08) --
-------- -------- -------- --------
Net Asset Value, End of Period $11.23 $10.50 $12.18 $12.28
======== ======== ======== ========
Total Investment Return at Net Asset Value (3) 12.75%(5) (0.54%) 16.75% 0.82%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) 12.07%(5) (1.43%) 14.77% 0.31%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $2,267 $3,792 $7,201 $7,163
Ratio of Expenses to Average Net Assets 1.15%(6) 1.15% 1.15% 1.15%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 3.13%(6) 2.04% 3.13% 2.17%(6)
Ratio of Net Investment Income to Average
Net Assets 2.03%(6) 0.43% 0.59% 1.27%(6)
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (7) 0.05%(6) (0.46%) (1.39%) 0.25%(6)
Portfolio Turnover Rate 14% 273% 89% 48%
Fee Reduction Per Share (2) $0.07 $0.10 $0.22 $0.06
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
V.A. LARGE CAP GROWTH FUND
-----------------------------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------------ JUNE 30, 1999
1996(1) 1997 1998 (UNAUDITED)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $9.39 $10.73 $13.37
-------- -------- -------- --------
Net Investment Loss (2) (0.01) (0.04) (0.00)(8) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments (0.60) 1.38 2.64 1.43
-------- -------- -------- --------
Total from Investment Operations (0.61) 1.34 2.64 1.41
-------- -------- -------- --------
Net Asset Value, End of Period $9.39 $10.73 $13.37 $14.78
======== ======== ======== ========
Total Investment Return at Net Asset Value (3) (6.10%)(5) 14.27% 24.60% 10.55%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) (7.39%)(5) 12.90% 24.27% 10.51%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $994 $3,733 $10,372 $17,629
Ratio of Expenses to Average Net Assets 1.00%(6) 1.00% 1.00% 1.00%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 4.76%(6) 2.37% 1.33% 1.07%(6)
Ratio of Net Investment Loss to Average Net
Assets (0.23%)(6) (0.39%) (0.00%) (0.32%)(6)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (7) (3.99%)(6) (1.76%) (0.33%) (0.39%)(6)
Portfolio Turnover Rate 68% 136% 176% 119%
Fee Reduction Per Share (2) $0.13 $0.13 $0.04 $0.01
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ---------------------------------------------------------------------------------
V.A. MID CAP GROWTH FUND
-------------------------
PERIOD SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30, 1999
1998(1) (UNAUDITED)
-------- --------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $11.03
-------- --------
Net Investment Income (Loss)(2) 0.01 (0.02)
Net Realized and Unrealized Gain on
Investments 1.03 1.43
-------- --------
Total from Investment Operations 1.04 1.41
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.01) --
Tax Return of Capital (0.00)(8) --
-------- --------
Total Distributions (0.01) --
-------- --------
Net Asset Value, End of Period $11.03 $12.44
======== ========
Total Investment Return at Net Asset Value (3) 10.35%(5) 12.78%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) 7.17%(5) 11.93%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,779 $2,528
Ratio of Expenses to Average Net Assets 1.00%(6) 1.00%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 4.23%(6) 2.72%(6)
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.06%(6) (0.33%)(6)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (7) (3.17%)(6) (2.05%)(6)
Portfolio Turnover Rate 103% 94%
Fee Reduction Per Share (2) $0.33 $0.10
(1) Commenced operations on January 7, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ---------------------------------------------------------------------------------
V.A. REGIONAL BANK FUND
-------------------------
PERIOD SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30, 1999
1998(1) (UNAUDITED)
-------- --------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $9.28
-------- --------
Net Investment Income (2) 0.09 0.06
Net Realized and Unrealized Gain (Loss) on
Investments (0.74) 0.33
-------- --------
Total from Investment Operations (0.65) 0.39
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.07) (0.06)
Distributions from Net Realized Gain on
Investments Sold (0.00)(8) --
-------- --------
Total Distributions (0.07) (0.06)
-------- --------
Net Asset Value, End of Period $9.28 $9.61
======== ========
Total Investment Return at Net Asset Value (3) (6.43%)(5) 4.20%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) (6.49%)(5) --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $20,256 $23,627
Ratio of Expenses to Average Net Assets 1.05%(6) 1.04%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 1.14%(6) --
Ratio of Net Investment Income to Average
Net Assets 1.39%(6) 1.26%(6)
Ratio of Adjusted Net Investment Income to
Average Net Assets (7) 1.30%(6) --
Portfolio Turnover Rate 28% 22%
Fee Reduction Per Share (2) $0.01 --
(1) Commenced operations on May 1, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
V.A. SMALL CAP GROWTH FUND
-----------------------------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------------ JUNE 30, 1999
1996(1) 1997 1998 (UNAUDITED)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $9.32 $10.35 $12.00
-------- -------- -------- --------
Net Investment Income (Loss)(2) 0.02 (0.02) (0.06) (0.05)
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions (0.68) 1.05 1.71 1.83
-------- -------- -------- --------
Total from Investment Operations (0.66) 1.03 1.65 1.78
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.02) (0.00)(3) -- --
-------- -------- -------- --------
Net Asset Value, End of Period $9.32 $10.35 $12.00 $13.78
======== ======== ======== ========
Total Investment Return at Net Asset Value (4) (6.62%)(6) 11.06% 15.94% 14.83%(6)
Total Adjusted Investment Return at Net
Asset Value (4,5) (8.05%)(6) 9.34% 15.31% 14.60%(6)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $975 $3,841 $8,232 $10,037
Ratio of Expenses to Average Net Assets 1.00%(7) 1.00% 1.00% 1.00%(7)
Ratio of Adjusted Expenses to Average Net
Assets (8) 5.19%(7) 2.72% 1.63% 1.46%(7)
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.62%(7) (0.16%) (0.59%) (0.82%)(7)
Ratio of Adjusted Net Investment Loss to
Average Net Assets (8) (3.57%)(7) (1.88%) (1.22%) (1.28%)(7)
Portfolio Turnover Rate 31% 79% 93% 62%
Fee Reduction Per Share (2) $0.14 $0.17 $0.07 $0.03
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
V.A. CORE EQUITY FUND
-----------------------------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------------ JUNE 30, 1999
1996(1) 1997 1998 (UNAUDITED)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Peformance
Net Asset Value, Beginning of Period $10.00 $11.11 $14.11 $17.74
-------- -------- -------- --------
Net Investment Income (2) 0.06 0.16 0.10 0.04
Net Realized and Unrealized Gain on
Investments 1.12 3.23 3.90 1.83
-------- -------- -------- --------
Total from Investment Operations 1.18 3.39 4.00 1.87
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.06) (0.14) (0.10) (0.04)
Distributions from Net Realized Gain on
Investments Sold (0.01) (0.25) (0.27) --
-------- -------- -------- --------
Total Distributions (0.07) (0.39) (0.37) (0.04)
-------- -------- -------- --------
Net Asset Value, End of Period $11.11 $14.11 $17.74 $19.57
======== ======== ======== ========
Total Investment Return at Net Asset Value (3) 11.78%(5) 30.68% 28.42% 10.55%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) 10.66%(5) 30.04% -- 10.55%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,149 $8,719 $26,691 $39,940
Ratio of Expenses to Average Net Assets 0.95%(6) 0.95% 0.95% 0.85%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 4.23%(6) 1.59% -- 0.86%(6)
Ratio of Net Investment Income to Average
Net Assets 1.60%(6) 1.24% 0.65% 0.47%(6)
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (7) (1.68%)(6) 0.60% -- 0.46%(6)
Portfolio Turnover Rate 24% 53% 55% 39%
Fee Reduction Per Share (2) $0.12 $0.08 -- $0.00(8)
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ---------------------------------------------------------------------------------
V.A. LARGE CAP VALUE FUND
-------------------------
PERIOD SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30, 1999
1998(1) (UNAUDITED)
-------- --------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $12.03
-------- --------
Net Investment Income (2) 0.11 0.05
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions 2.02 2.01
-------- --------
Total from Investment Operations 2.13 2.06
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.10) (0.05)
-------- --------
Net Asset Value, End of Period $12.03 $14.04
======== ========
Total Investment Return at Net Asset Value (3) 21.39%(5) 17.20%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) 21.21%(5) --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $17,368 $25,709
Ratio of Expenses to Average Net Assets 0.85%(6) 0.85%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 1.03%(6) --
Ratio of Net Investment Income to Average
Net Assets 1.17%(6) 0.89%(6)
Ratio of Adjusted Net Investment Income to
Average Net Assets (7) 0.99%(6) --
Portfolio Turnover Rate 242% 95%
Fee Reduction Per Share (2) $0.02 --
(1) Commenced operations on January 6, 1998
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
V.A. SOVEREIGN INVESTORS FUND
-----------------------------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------------ JUNE 30, 1999
1996(1) 1997 1998 (UNAUDITED)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Peformance
Net Asset Value, Beginning of Period $10.00 $10.74 $13.59 $15.61
-------- -------- -------- --------
Net Investment Income (2) 0.07 0.22 0.27 0.12
Net Realized and Unrealized Gain on
Investments 0.76 2.82 2.00 0.79
-------- -------- -------- --------
Total from Investment Operations 0.83 3.04 2.27 0.91
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.07) (0.18) (0.25) (0.12)
Distributions from Net Realized Gain on
Investments Sold (0.02) (0.01) -- --
-------- -------- -------- --------
Total Distributions (0.09) (0.19) (0.25) (0.12)
-------- -------- -------- --------
Net Asset Value, End of Period $10.74 $13.59 $15.61 $16.40
======== ======== ======== ========
Total Investment Return at Net Asset Value (3) 8.30%(5) 28.43% 16.88% 5.88%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) 7.30%(5) 28.12% -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,111 $12,187 $34,170 $43,954
Ratio of Expenses to Average Net Assets 0.85%(6) 0.85% 0.74% 0.71%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 3.78%(6) 1.16% -- --
Ratio of Net Investment Income to Average
Net Assets 1.90%(6) 1.81% 1.88% 1.63%(6)
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (7) (1.03%)(6) 1.50% -- --
Portfolio Turnover Rate 17% 11% 19% 16%
Fee Reduction Per Share (2) $0.11 $0.04 -- --
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
V.A. BOND FUND
-----------------------------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------------ JUNE 30, 1999
1996(1) 1997 1998 (UNAUDITED)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.19 $10.36 $10.51
-------- -------- -------- --------
Net Investment Income (2) 0.23 0.68 0.63 0.32
Net Realized and Unrealized Gain (Loss) on
Investments 0.21 0.24 0.32 (0.45)
-------- -------- -------- --------
Total from Investment Operations 0.44 0.92 0.95 (0.13)
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.23) (0.68) (0.63) (0.32)
Distributions from Net Realized Gain on
Investments Sold (0.02) (0.07) (0.17) --
-------- -------- -------- --------
Total Distributions (0.25) (0.75) (0.80) (0.32)
-------- -------- -------- --------
Net Asset Value, End of Period $10.19 $10.36 $10.51 $10.06
======== ======== ======== ========
Total Investment Return at Net Asset Value (3) 4.42%(5) 9.30% 9.41% (1.29%)(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) 3.25%(5) 7.52% 8.82% (1.43%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,056 $3,682 $10,669 $11,735
Ratio of Expenses to Average Net Assets 0.75%(6) 0.75% 0.75% 0.75%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 4.15%(6) 2.53% 1.34% 1.04%(6)
Ratio of Net Investment Income to Average
Net Assets 6.69%(6) 6.57% 5.93% 6.22%(6)
Ratio of Adjusted Net Investment Income to
Average Net Assets (7) 3.29%(6) 4.79% 5.34% 5.93%(6)
Portfolio Turnover Rate 45% 193% 367% 187%
Fee Reduction Per Share (2) $0.12 $0.18 $0.06 $0.01
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ---------------------------------------------------------------------------------
V.A. HIGH YIELD BOND FUND
-------------------------
PERIOD SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30, 1999
1998(1) (UNAUDITED)
-------- --------
<S> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $8.22
-------- --------
Net Investment Income (2) 0.90 0.43
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions (1.82) 0.28
-------- --------
Total from Investment Operations (0.92) 0.71
-------- --------
Less Distributions:
Dividends from Net Investment Income (0.84) (0.43)
Tax Return of Capital (0.02) --
-------- --------
Total Distributions (0.86) (0.43)
-------- --------
Net Asset Value, End of Period $8.22 $8.50
======== ========
Total Investment Return at Net Asset Value (3) (9.80%)(5) 8.89%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) (10.10%)(5) 8.83%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $8,120 $9,392
Ratio of Expenses to Average Net Assets 0.85%(6) 0.85%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 1.15%(6) 0.97%(6)
Ratio of Net Investment Income to Average
Net Assets 9.85%(6) 10.46%(6)
Ratio of Adjusted Net Investment Income to
Average Net Assets (7) 9.55%(6) 10.34%(6)
Portfolio Turnover Rate 102% 82%
Fee Reduction Per Share (2) $0.03 $0.01
(1) Commenced operations on January 6, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
V.A. MONEY MARKET FUND
-----------------------------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------------ JUNE 30, 1999
1996(1) 1997 1998 (UNAUDITED)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00
-------- -------- -------- --------
Net Investment Income (2) 0.02 0.05 0.05 0.02
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.02) (0.05) (0.05) (0.02)
-------- -------- -------- --------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00
======== ======== ======== ========
Total Investment Return at Net Asset Value (3) 1.61%(5) 4.88% 4.87% 2.15%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) (7.55%)(5) 4.36% -- --
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $207 $8,377 $16,519 $22,786
Ratio of Expenses to Average Net Assets 0.75%(6) 0.75% 0.74% 0.66%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 27.48%(6) 1.27% -- --
Ratio of Net Investment Income to Average
Net Assets 4.68%(6) 4.86% 4.70% 4.36%(6)
Ratio of Adjusted Net Investment Income
(Loss) to Average Net Assets (7) (22.05%)(6) 4.34% -- --
Fee Reduction Per Share (2) $0.08 $0.00(8) -- --
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------
V.A. STRATEGIC INCOME FUND
-----------------------------------------------------------
PERIOD SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------------ JUNE 30, 1999
1996(1) 1997 1998 (UNAUDITED)
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.30 $10.47 $10.10
-------- -------- -------- --------
Net Investment Income (2) 0.27 0.91 0.85 0.39
Net Realized and Unrealized Gain (Loss) on
Investments and Financial Futures Contracts 0.36 0.26 (0.35) (0.19)
-------- -------- -------- --------
Total from Investment Operations 0.63 1.17 0.50 0.20
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income (0.27) (0.91) (0.85) (0.39)
Distributions from Net Realized Gain on
Investments Sold and Financial Futures
Contracts (0.06) (0.09) (0.02) --
-------- -------- -------- --------
Total Distributions (0.33) (1.00) (0.87) (0.39)
-------- -------- -------- --------
Net Asset Value, End of Period $10.30 $10.47 $10.10 $9.91
======== ======== ======== ========
Total Investment Return at Net Asset Value (3) 6.45%(5) 11.77% 4.92% 1.98%(5)
Total Adjusted Investment Return at Net
Asset Value (3,4) 5.96%(5) 11.25% 4.84% 1.97%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $2,131 $5,540 $15,019 $20,453
Ratio of Expenses to Average Net Assets 0.85%(6) 0.85% 0.85% 0.85%(6)
Ratio of Adjusted Expenses to Average Net
Assets (7) 2.28%(6) 1.37% 0.93% 0.86%(6)
Ratio of Net Investment Income to Average
Net Assets 7.89%(6) 8.77% 8.19% 7.79%(6)
Ratio of Adjusted Net Investment Income to
Average Net Assets (7) 6.46%(6) 8.25% 8.11% 7.78%(6)
Portfolio Turnover Rate 73% 110% 92% 30%(8)
Fee Reduction Per Share (2) $0.05 $0.05 $0.01 $0.00(9)
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) An estimated total return calculation which does not take into
consideration fee reductions by the Adviser during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Unreimbursed, without fee reduction.
(8) Portfolio turnover rate excludes merger activity.
(9) Less than $0.01 per share.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Financial Industries Fund on June 30, 1999. It's divided into two
main categories: common stocks and short-term investments. Common stocks
are further broken down by industry groups. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Banks - Foreign (7.34%)
Allied Irish Banks Plc, (American Depositary
Receipt), (ADR) (Ireland) 8,568 $233,478
Anglo Irish Bank Corp. Plc
(Ireland) 106,565 265,410
Argentaria, Caja Postal y Banco Hipotecario de
Espana, S.A. (ADR) (Spain) 12,930 594,780
Banca Popolare di Brescia SpA
(Italy) 9,000 385,645
ING Groep NV (ADR) (Netherlands) 15,176 834,680
MeritaNordbanken OY (Finland) 101,000 573,912
Nordbanken Holding AB (Sweden) 60,200 351,923
Royal Bank of Canada (Canada) 5,000 221,875
UBS AG (Switzerland) 1,500 447,707
------------
3,909,410
------------
Banks - Midwest (1.32%)
Commerce Bancshares, Inc. 7,000 281,750
FirstMerit Corp. 10,500 294,656
Marshall & Ilsley Corp. 2,000 128,750
------------
705,156
------------
Banks - Money Center (2.81%)
Chase Manhattan Corp. 9,040 783,090
Citigroup, Inc. 15,000 712,500
------------
1,495,590
------------
Banks - Northeast (1.27%)
M&T Bank Corp. 500 275,000
Wilmington Trust Corp. 7,000 401,625
------------
676,625
------------
Banks - Southeast (2.71%)
CCB Financial Corp. 4,500 237,938
Centura Banks, Inc. 4,500 253,688
First Tennessee National Corp. 18,800 720,275
National Commerce Bancorp. 10,500 229,688
------------
1,441,589
------------
Banks - Southwest (0.52%)
Cullen/Frost Bankers., Inc. 10,000 275,625
------------
Banks - Super Regional (6.02%)
BankBoston Corp. 19,450 994,381
KeyCorp. 16,871 541,981
Wells Fargo Co. 39,000 1,667,250
------------
3,203,612
------------
Banks - West (1.56%)
City National Corp. 6,400 239,600
Westamerica Bancorp. 16,200 591,300
------------
830,900
------------
Broker Services (12.46%)
Edwards (A.G.) Inc. 44,725 1,442,381
Freedom Securities Corp. 22,000 376,750
Goldman Sachs Group, Inc.* 1,900 137,275
Legg Mason, Inc. 56,832 2,188,032
Morgan Keegan, Inc. 35,000 662,813
Morgan Stanley Dean Witter & Co. 12,000 1,230,000
Raymond James Financial, Inc. 25,000 598,438
------------
6,635,689
------------
Computer - Services (5.27%)
BISYS Group, Inc. (The)* 9,000 526,500
First Data Corp. 7,000 342,563
Fiserv, Inc.* 61,855 1,936,835
------------
2,805,898
------------
Finance - Consumer Loans (7.44%)
American Express Co. 18,990 2,471,074
MBNA Corp. 48,650 1,489,906
------------
3,960,980
------------
Finance - Investment Management (8.88%)
Federated Investors, Inc. (Class B) 18,500 331,844
Franklin Resources, Inc. 28,990 1,177,719
John Nuveen Co. (The) (Class A) 11,500 490,906
Price (T. Rowe) Associates, Inc. 41,000 1,573,375
Waddell & Reed Financial, Inc.
(Class A) 42,081 1,154,597
------------
4,728,441
------------
Finance - Savings & Loan (0.75%)
Astoria Financial Corp. 5,000 219,688
Dime Bancorp., Inc. 9,000 181,125
------------
400,813
------------
Finance - SBIC & Commercial (2.72%)
CIT Group, Inc. (The) (Class A) 25,725 742,809
FINOVA Group, Inc. (The) 7,600 399,950
Heller Financial, Inc. 11,000 305,938
------------
1,448,697
------------
Insurance (1.85%)
Enhance Financial Services Group, Inc. 9,500 187,625
Financial Security Assurance
Holdings Ltd. 6,000 312,000
MBIA, Inc. 7,500 485,624
------------
985,249
------------
Insurance - Accident & Health (3.72%)
AFLAC, Inc. 10,000 478,750
American Heritage Life Investment Corp. 11,000 269,500
Provident Cos., Inc. 19,500 780,000
StanCorp Financial Group, Inc.* 15,000 450,000
------------
1,978,250
------------
Insurance - Brokers (3.57%)
Aon Corp. 15,000 618,750
Marsh & McLennan Cos., Inc. 17,000 1,283,500
------------
1,902,250
------------
Insurance - Diversified (1.53%)
Aetna, Inc. 3,500 313,030
Equitable Cos., Inc. (The) 7,500 502,500
------------
815,530
------------
Insurance - Life (4.99%)
American General Corp. 2,700 203,512
Hartford Life, Inc. (Class A) 5,000 263,125
Lincoln National Corp. 6,400 334,800
Presidential Life Corp. 12,000 235,500
Protective Life Corp. 12,000 396,000
Reinsurance Group of America, Inc. 19,500 687,375
ReliaStar Financial Corp. 6,000 262,500
Torchmark Corp. 8,000 273,000
------------
2,655,812
------------
Insurance - Multi Line (2.40%)
Allmerica Financial Corp. 11,100 675,018
Companhia de Seguros Mundial Confianca,
SA* (Portugal) 10,000 394,565
Fortis (B) (Netherlands) 6,627 204,686
------------
1,274,269
------------
Insurance - Property & Casualty (12.17%)
Ace, Ltd. (Bermuda) 30,000 847,500
American International Group, Inc. 7,000 819,437
Berkshire Hathaway, Inc. (Class A)* 260 1,791,400
Cincinnati Financial Corp. 13,000 488,313
Horace Mann Educators Corp. 10,000 271,875
Philadelphia Consolidated Holding Corp.* 11,500 281,750
Progressive Corp. 6,000 870,000
Travelers Property Casualty Corp.
(Class A) 13,900 543,838
XL Capital, Ltd. (Class A) 10,000 565,000
------------
6,479,113
------------
Mortgage & Real Estate Services (1.28%)
Fannie Mae 10,000 683,750
------------
Real Estate Investment Trust - Equity Trust (6.08%)
Apartment Investment & Management
Co. (Class A) 13,000 555,750
Brandywine Realty Trust 35,225 697,895
General Growth Properties, Inc. 24,000 852,000
SL Green Realty Corp. 23,000 470,063
Spieker Properties, Inc. 17,000 660,875
------------
3,236,583
------------
TOTAL COMMON STOCKS
(Cost $46,587,179) (98.66%) 52,529,831
------ ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.25%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
9.875% and 11.250% due
02-15-15 and 11-15-15) - Note B 4.80% $665 $665,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 502
------------
TOTAL SHORT-TERM INVESTMENTS (1.25%) 665,502
------- ------------
TOTAL INVESTMENTS (99.91%) 53,195,333
------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.09%) 46,283
------- ------------
TOTAL NET ASSETS (100.00%) $53,241,616
======= ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. 500 Index Fund on June 30, 1999. It is divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Advertising (0.22%)
Interpublic Group of Companies,
Inc. (The) 412 $35,689
Omnicom Group, Inc. 500 40,000
-----------
75,689
-----------
Aerospace (1.10%)
Boeing Co. (The) 2,780 122,841
General Dynamics Corp. 376 25,756
Goodrich (B.F.) Co. (The) 220 9,350
Lockheed Martin Corp. 1,163 43,322
Northrop Grumman Corp. 204 13,528
Raytheon Co. (Class B) 999 70,305
United Technologies Corp. 1,338 95,918
-----------
381,020
-----------
Agricultural Operations (0.08%)
Pioneer Hi-Bred International, Inc. 710 27,646
-----------
Automobile/Trucks (1.22%)
Cummins Engine Co., Inc. 124 7,083
Dana Corp. 492 22,663
Delphi Automotive Systems Corp. 1,355 25,152
Eaton Corp. 212 19,504
Ford Motor Co. 3,586 202,385
General Motors Corp. 1,940 128,040
PACCAR, Inc. 232 12,383
Ryder System, Inc. 212 5,512
-----------
422,722
-----------
Banks - United States (6.48%)
AmSouth Bancorp. 528 12,243
BB&T Corp. 921 33,789
Bank of New York Co., Inc. 2,254 82,694
Bank One Corp. 3,485 207,575
BankAmerica Corp. 5,129 376,020
BankBoston Corp. 879 44,939
Chase Manhattan Corp. 2,506 217,082
Comerica, Inc. 461 27,401
Fifth Third Bancorp 788 52,451
First Union Corp. 2,936 137,992
Firstar Corp. 2,045 57,260
Fleet Financial Group, Inc. 1,684 74,727
Huntington Bancshares, Inc. 625 21,875
KeyCorp. 1,349 43,337
Mellon Bank Corp. 1,548 56,308
Mercantile Bancorp., Inc. 466 26,620
Morgan (J.P.) & Co., Inc. 518 72,779
National City Corp. 967 63,339
Northern Trust Corp. 329 31,913
PNC Bank Corp. 892 51,402
Regions Financial Corp. 655 25,177
Republic New York Corp. 318 21,684
SouthTrust Corp. 490 18,804
State Street Corp. 476 40,639
Summit Bancorp. 514 21,492
SunTrust Banks, Inc. 950 65,966
Synovus Financial Corp. 792 15,741
U.S. Bancorp. 2,160 73,440
Union Planters Corp. 407 18,188
Wachovia Corp. 601 51,423
Wells Fargo Co. 4,872 208,278
-----------
2,252,578
-----------
Beverages (2.42%)
Anheuser-Busch Cos., Inc. 1,416 100,447
Brown-Forman Corp. 203 13,233
Coca-Cola Enterprises, Inc. 1,258 37,425
Coca-Cola Co. (The) 7,305 456,563
Coors (Adolph) Co. (Class B) 108 5,346
PepsiCo, Inc. 4,348 168,213
Seagram Co. Ltd. (The) (Canada) 1,182 59,543
-----------
840,770
-----------
Broker Services (1.23%)
Bear Stearns Cos., Inc. 330 15,427
Lehman Brothers Holdings, Inc. 337 20,978
Merrill Lynch & Co., Inc. 1,051 84,014
Morgan Stanley Dean Witter & Co. 1,712 175,480
Schwab (Charles) Corp. 1,188 130,532
-----------
426,431
-----------
Building (0.64%)
Armstrong World Industries, Inc. 119 6,880
Black & Decker Corp. 260 16,412
Centex Corp. 176 6,611
Danaher Corp. 396 23,017
Fleetwood Enterprises, Inc. 103 2,723
Fluor Corp. 224 9,072
Georgia-Pacific Corp. 522 24,730
Kaufman & Broad Home Corp. 142 3,532
Louisiana-Pacific Corp. 322 7,647
Masco Corp. 1,005 29,019
Owens Corning 161 5,534
Pulte Corp. 128 2,952
Sherwin-Williams Co. 510 14,153
Snap-on, Inc. 194 7,020
Stanley Works (The) 263 8,465
Weyerhauser Co. 590 40,563
Willamette Industries, Inc. 329 15,155
-----------
223,485
-----------
Business Services - Misc. (0.34%)
Block, H & R, Inc. 289 14,450
Cendant Corp.* 2,276 46,658
Dun & Bradstreet Corp. 490 17,364
Equifax, Inc. 437 15,595
Paychex, Inc. 707 22,536
-----------
116,603
-----------
Chemicals (0.81%)
Air Products & Chemicals, Inc. 680 27,370
Dow Chemical Co. 656 83,230
Eastman Chemical Co. 235 12,161
Engelhard Corp. 371 8,394
FMC Corp.* 98 6,695
Grace (W. R.) & Co. 218 4,006
Great Lakes Chemical Corp. 175 8,061
Hercules, Inc. 298 11,715
Nalco Chemical Co. 194 10,064
PPG Industries, Inc. 522 30,831
Praxair, Inc. 468 22,903
Rohm & Haas Co. 629 26,968
Sigma-Aldrich Corp. 298 10,262
Union Carbide Corp. 394 19,208
-----------
281,868
-----------
Computers (13.97%)
3Com Corp.* 1,063 28,369
Adobe Systems, Inc. 180 14,788
America Online, Inc.* 3,045 336,472
Apple Computer, Inc.* 404 18,710
Autodesk, Inc. 176 5,203
Automatic Data Processing, Inc. 1,826 80,344
BMC Software, Inc.* 699 37,746
Cabletron Systems, Inc.* 510 6,630
Ceridian Corp.* 424 13,859
Cisco Systems, Inc.* 9,360 603,720
Compaq Computer Corp. 4,999 118,414
Computer Associates International, Inc. 1,597 87,835
Computer Sciences Corp.* 471 32,587
Compuware Corp.* 1,089 34,644
Data General Corp.* 149 2,170
Dell Computer Corp.* 7,541 279,017
EMC Corp.* 2,974 163,570
Electronic Data Systems Corp. 1,460 82,581
First Data Corp. 1,312 64,206
Gateway 2000, Inc.* 463 27,317
Hewlett-Packard Co. 3,008 302,304
IMS Health, Inc. 945 29,531
International Business Machines Corp. 5,470 706,997
Microsoft Corp.* 14,957 1,348,934
Novell, Inc.* 1,000 26,500
Oracle Corp.* 4,266 158,375
Parametric Technology Corp.* 792 10,989
PeopleSoft, Inc.* 691 11,920
Seagate Technology, Inc.* 723 18,527
Shared Medical System Corp. 79 5,155
Silicon Graphics, Inc.* 556 9,105
Sun Microsystems, Inc.* 2,283 157,242
Unisys Corp.* 772 30,060
-----------
4,853,821
-----------
Consumer Products - Misc. (0.02%)
American Greetings Corp. (Class A) 207 6,236
Jostens, Inc. 105 2,211
-----------
8,447
-----------
Containers (0.15%)
Ball Corp. 91 3,845
Bemis Co., Inc. 155 6,161
Crown Cork & Seal Co., Inc. 363 10,345
Owens-Illinois, Inc.* 460 15,036
Sealed Air Corp.* 247 16,024
-----------
51,411
-----------
Cosmetics & Personal Care (0.57%)
Alberto Culver Co. (Class B) 169 4,500
Avon Products, Inc. 778 43,179
Gillette Co. 3,287 134,767
International Flavors & Fragrances, Inc. 314 13,934
-----------
196,380
-----------
Diversified Operations (2.62%)
Allied Signal, Inc. 1,651 104,013
Crane Co. 203 6,382
Du Pont (E.I.) De Nemours & Co. 3,336 227,890
Fortune Brands, Inc. 507 20,977
IKON Office Solutions, Inc. 438 6,570
ITT Industries, Inc. 270 10,294
Johnson Controls, Inc. 252 17,467
Laidlaw, Inc. (Canada) 978 7,213
Loews Corp. 337 26,665
Minnesota Mining & Manufacturing
Co. 1,191 103,543
Monsanto Co. 1,857 73,235
NACCO Industries, Inc., (Class A) 24 1,764
National Service Industries, Inc. 122 4,392
TRW, Inc. 355 19,481
Tenneco, Inc. 504 12,033
Textron, Inc. 470 38,687
Tyco International Ltd. 2,419 229,200
-----------
909,806
-----------
Electronics (7.09%)
Advanced Micro Devices, Inc.* 429 7,749
Applied Materials, Inc.* 1,093 80,745
Emerson Electric Co. 1,296 81,486
General Electric Co. 9,711 1,097,343
Grainger (W.W.), Inc. 281 15,121
Honeywell, Inc. 373 43,221
Intel Corp. 9,880 587,860
KLA-Tencor Corp.* 260 16,867
LSI Logic Corp.* 419 19,326
Micron Technology, Inc. 734 29,589
Motorola, Inc. 1,779 168,560
National Semiconductor Corp.* 495 12,530
PE Corp.-PE Biosystems Group 148 16,983
Parker-Hannifin Corp. 321 14,686
Raychem Corp. 229 8,473
Rockwell International Corp. 562 34,142
Solectron Corp.* 745 49,682
Tektronix, Inc. 139 4,196
Texas Instruments, Inc. 1,156 167,620
Thomas & Betts Corp. 168 7,938
-----------
2,464,117
-----------
Finance (3.14%)
American Express Co. 1,341 174,498
Associates First Capital Corp.
(Class A) 2,157 95,582
Capital One Financial Corp. 582 32,410
Citigroup, Inc. 10,038 476,805
Franklin Resources, Inc. 749 30,428
Golden West Financial Corp. 169 16,562
Household International, Inc. 1,431 67,794
MBNA Corp. 2,376 72,765
Providian Financial Corp. 420 39,270
SLM Holding Corp. 491 22,494
Washington Mutual, Inc. 1,758 62,189
-----------
1,090,797
-----------
Food (1.75%)
Archer-Daniels-Midland Co. 1,755 27,093
Bestfoods 847 41,926
Campbell Soup Co. 1,318 61,122
ConAgra, Inc. 1,450 38,606
General Mills, Inc. 454 36,490
Heinz (H.J.) Co. 1,072 53,734
Hershey Foods Corp. 424 25,175
Kellogg Co. 1,201 39,633
Nabisco Group Holdings Corp. 963 18,839
Quaker Oats Co. 404 26,816
Ralston Purina Group 973 29,616
Sara Lee Corp. 2,703 61,324
Unilever NV (Netherlands) 1,694 118,157
Wrigley (WM) Jr. Co. 344 30,960
-----------
609,491
-----------
Funeral Services & Related (0.05%)
Service Corporation International 810 15,593
-----------
Household (0.23%)
Maytag Corp. 267 18,607
Newell Rubbermaid, Inc. 832 38,688
Springs Industries, Inc. 53 2,312
Tupperware Corp. 171 4,361
Whirlpool Corp. 225 16,650
-----------
80,618
-----------
Instruments - Scientific (0.06%)
EG & G, Inc. 132 4,702
Millipore Corp. 130 5,273
Thermo Electron Corp.* 471 9,449
-----------
19,424
-----------
Insurance (3.20%)
Aetna, Inc. 424 37,921
Allstate Corp. (The) 2,432 87,248
American General Corp. 747 56,305
American International Group, Inc. 3,639 425,990
Aon Corp. 756 31,185
CIGNA Corp. 612 54,468
Chubb Corp. (The) 483 33,568
Cincinnati Financial Corp. 495 18,593
Conseco, Inc. 949 28,885
Hartford Financial Services Group,
Inc. (The) 692 40,352
Jefferson Pilot Corp 314 20,783
Lincoln National Corp. 598 31,283
MBIA, Inc. 294 19,036
MGIC Investment Corp. 325 15,803
Marsh & McLennan Cos., Inc. 763 57,606
Progressive Corp. 215 31,175
Provident Cos., Inc. 401 16,040
SAFECO Corp. 404 17,827
St. Paul Cos., Inc. 699 22,237
Torchmark Corp. 416 14,196
Transamerica Corp. 370 27,750
Triad Hospitals, Inc.* 92 1,242
UNUM Corp. 410 22,448
-----------
1,111,941
-----------
Leisure (1.34%)
Brunswick Corp. 272 7,582
Carnival Corp. (Class A) 1,816 88,076
Disney (Walt) Co., (The) 6,092 187,710
Eastman Kodak Co. 960 65,040
Harrah's Entertainment, Inc.* 374 8,228
Hasbro, Inc. 582 16,260
Hilton Hotels Corp. 773 10,967
King World Productions, Inc.* 212 7,380
Marriott International, Inc. (Class A) 719 26,873
Mattel, Inc. 1,235 32,650
Mirage Resorts, Inc.* 583 9,765
Polaroid Corp. 130 3,591
-----------
464,122
-----------
Machinery (0.52%)
Briggs & Stratton Corp. 70 4,042
Case Corp. 219 10,539
Caterpiller Tractor, Inc. 1,063 63,780
Cooper Industries, Inc. 280 14,560
Deere & Co. 707 28,015
Dover Corp. 661 23,135
Foster Wheeler Corp. 121 1,709
Harnischfeger Industries, Inc. 140 280
Ingersoll-Rand Co. 487 31,472
Milacron, Inc. 114 2,109
-----------
179,641
-----------
Media (2.29%)
CBS Corp. 2,093 90,915
Clear Channel Communications, Inc.* 958 66,042
Comcast Corp. 2,192 84,255
Dow Jones & Co., Inc. 278 14,751
Gannett Co., Inc. 835 59,598
Harcourt General, Inc. 210 10,828
Knight-Ridder, Inc. 233 12,800
McGraw-Hill Cos., Inc. (The) 583 31,446
Meredith Corp. 154 5,332
New York Times Co. (Class A) 540 19,879
Time Warner, Inc. 3,636 267,246
Times Mirror Co. (Class A) 214 12,680
Tribune Co. 352 30,668
Viacom, Inc. (Class B)* 2,062 90,728
-----------
797,168
-----------
Medical (10.39%)
ALZA Corp.* 296 15,059
Abbott Laboratories 4,497 204,613
Allergan, Inc. 196 21,756
American Home Products Corp. 3,906 224,595
Amgen, Inc.* 1,508 91,799
Bard (C.R.), Inc. 159 7,602
Bausch & Lomb, Inc. 166 12,699
Baxter International, Inc. 848 51,410
Becton, Dickinson & Co. 738 22,140
Biomet, Inc. 333 13,237
Boston Scientific Corp.* 1,164 51,143
Bristol-Myers Squibb Co. 5,889 414,806
Cardinal Health, Inc. 806 51,685
Columbia/HCA Healthcare Corp. 1,913 43,640
Guidant Corp. 893 45,934
HCR Manor Care, Inc.* 328 7,933
HEALTHSOUTH Corp.* 1,254 18,732
Humana, Inc.* 496 6,417
Johnson & Johnson 3,985 390,530
LifePoint Hospitals, Inc.* 92 1,236
Lilly (Eli) & Co. 3,259 233,426
Mallinckrodt, Inc. 211 7,675
McKesson HBOC, Inc. 821 26,375
Medtronic, Inc. 1,731 134,802
Merck & Co., Inc. 7,059 522,366
PE Corp.-Celera Genomics Group* 68 1,101
Pall Corp. 369 8,187
Pfizer Inc. 3,846 422,099
Pharmacia & Upjohn, Inc. 1,506 85,560
Schering-Plough Corp. 4,355 230,815
St. Jude Medical, Inc.* 249 8,871
Tenet Healthcare Corp.* 919 17,059
United Healthcare Corp. 552 34,569
Warner-Lambert Co. 2,434 168,859
Watson Pharmaceutical, Inc.* 282 9,888
-----------
3,608,618
-----------
Metal (0.74%)
ASARCO, Inc. 118 2,220
Alcan Aluminium Ltd. (Canada) 675 21,558
Alcoa Inc. 1,088 67,320
Barrick Gold Corp. (Canada) 1,105 21,409
Battle Mountain Gold Co. 681 1,660
Bethlehem Steel Corp.* 385 2,960
Cyprus Amax Minerals Co. 270 4,101
Freeport-McMoran Copper & Gold, Inc. 491 8,807
Homestake Mining Co. 771 6,312
Illinois Tool Works, Inc. 741 60,762
Inco, Ltd. (Canada) 537 9,666
Newmont Mining Corp. 496 9,858
Phelps Dodge Corp. 172 10,653
Placer Dome, Inc. (Canada) 741 8,753
Reynolds Metals Co. 191 11,269
Timken Co. (The) 184 3,588
Worthington Industries, Inc. 274 4,504
-----------
255,400
-----------
Mortgage Banking (0.98%)
Countrywide Credit Industries, Inc. 334 14,278
Fannie Mae 3,073 210,116
Freddie Mac 2,011 116,638
-----------
341,032
-----------
Office (0.57%)
Avery Dennison Corp. 345 20,829
Deluxe Corp. 238 9,267
Moore Corp., Ltd. (Canada) 262 2,194
Pitney Bowes, Inc. 808 51,914
Xerox Corp. 1,944 114,818
-----------
199,022
-----------
Oil & Gas (6.04%)
Amerada Hess Corp. 268 15,946
Anadarko Petroleum Corp. 375 13,805
Apache Corp. 328 12,792
Ashland, Inc. 220 8,827
Atlantic Richfield Co. 966 80,721
Baker Hughes, Inc. 969 32,461
Burlington Resources, Inc. 526 22,749
Chevron Corp. 1,934 184,093
Coastal Corp. (The) 630 25,200
Columbia Energy Group 247 15,484
Enron Corp. 1,040 85,020
Exxon Corp. 7,205 555,686
Halliburton Co. 1,303 58,961
Helmerich & Payne, Inc. 146 3,477
Kerr-McGee Corp. 256 12,848
McDermott International, Inc. 175 4,944
Mobil Corp. 2,311 228,789
Occidental Petroleum Corp. 1,025 21,653
Phillips Petroleum Co. 755 37,986
Rowan Cos., Inc.* 248 4,573
Royal Dutch Petroleum Co.
(Netherlands) 6,355 382,889
Schlumberger, Ltd. 1,618 103,046
Sonat, Inc. 326 10,799
Sunoco, Inc. 277 8,362
Texaco, Inc. 1,584 99,000
USX - Marathon Group 912 29,697
Union Pacific Resources Group 744 12,137
Unocal Corp. 715 28,332
-----------
2,100,277
-----------
Paper & Paper Products (0.68%)
Boise Cascade Corp. 167 7,160
Champion International Corp. 283 13,549
Fort James Corp. 653 24,732
International Paper Co. 1,215 61,357
Kimberly-Clark Corp. 1,606 91,542
Mead Corp. (The) 302 12,608
Potlatch Corp. 86 3,779
Temple-Inland, Inc. 165 11,261
Westvaco Corp. 297 8,613
-----------
234,601
-----------
Pollution Control (0.33%)
Browning-Ferris Industries, Inc. 469 20,167
Waste Management, Inc. 1,774 95,353
-----------
115,520
-----------
Printing - Commercial (0.04%)
Donnelley (R.R.) & Sons 398 14,751
-----------
Retail (6.84%)
Albertson's, Inc. 1,241 63,989
AutoZone, Inc.* 445 13,406
CVS Corp. 1,156 58,667
Circuit City Stores, Inc. 298 27,714
Consolidated Stores Corp.* 324 8,748
Costco Cos., Inc.* 647 51,800
Darden Restaurants, Inc. 408 8,899
Dayton Hudson Corp. 1,306 84,890
Dillards, Inc. 317 11,135
Dollar General Corp. 655 18,995
Federated Department Stores, Inc.* 621 32,874
Gap, Inc. (The) 2,533 127,600
Genuine Parts Co. 533 18,655
Great Atlantic & Pacific Tea Co., Inc. 113 3,821
Home Depot, Inc. (The) 4,369 281,527
Kmart Corp.* 1,461 24,015
Kohl's Corp.* 469 36,201
Kroger Co.* 2,438 68,112
Limited, Inc. (The) 671 30,447
Longs Drug Stores Corp. 115 3,975
Lowe's Cos., Inc. 1,100 62,356
May Department Stores 1,038 42,428
McDonald's Corp. 4,010 165,663
Nordstrom, Inc. 421 14,104
Penney (J. C.) Co., Inc. 781 37,927
Pep Boys - Manny, Moe & Jack (The) 156 3,374
Reebok International Ltd.* 167 3,110
Rite Aid Corp. 767 18,887
SUPERVALU, INC. 356 9,145
Safeway, Inc.* 1,441 71,330
Sears, Roebuck & Co. 1,135 50,578
Staples, Inc.* 1,366 42,261
Sysco Corp. 987 29,425
TJX Cos., Inc. 958 31,913
Tandy Corp. 586 28,641
Toys R Us, Inc.* 744 15,392
Tricon Global Restaurants, Inc.* 452 24,465
Wal-Mart Stores, Inc. 13,178 635,839
Walgreen Co. 2,959 86,921
Wendy's International, Inc. 369 10,447
Winn-Dixie Stores, Inc. 440 16,253
-----------
2,375,929
-----------
Rubber - Tires & Misc. (0.09%)
Cooper Tire & Rubber Co. 225 5,316
Goodyear Tire & Rubber Co. (The) 462 27,171
-----------
32,487
-----------
Shoes & Related Apparel (0.15%)
Nike, Inc. (Class B) 837 52,993
-----------
Soap & Cleaning Preparations (1.41%)
Clorox Co. 347 37,064
Colgate-Palmolive Co. 868 85,715
Ecolab, Inc. 383 16,708
Procter & Gamble Co. (The) 3,935 351,199
-----------
490,686
-----------
Steel (0.09%)
Allegheny Teledyne Inc. 581 13,145
Nucor Corp. 260 12,334
USX-U.S. Steel Group, Inc. 262 7,074
-----------
32,553
-----------
Telecommunications (8.40%)
AT&T Corp. 9,326 520,507
Andrew Corp.* 246 4,659
Bell Atlantic Corp. 4,600 300,725
CenturyTel, Inc. 409 16,258
Corning, Inc. 688 48,246
Frontier Corp. 509 30,031
General Instrument Corp.* 496 21,080
Harris Corp. 234 9,170
Lucent Technologies, Inc. 8,893 599,722
MCI WorldCom, Inc.* 5,433 467,577
MediaOne Group, Inc.* 1,799 133,801
Nextel Communications, Inc. (Class A)* 852 42,760
Nortel Networks Corp. (Canada) 1,967 170,760
Scientific-Atlanta, Inc. 224 8,064
Sprint Corp. 2,648 139,848
Sprint PCS* 1,303 74,434
Tellabs, Inc.* 1,151 77,764
U S WEST, Inc. 1,491 87,596
Vodafone AirTouch Plc (United
Kingdom) 847 166,859
-----------
2,919,861
-----------
Textile (0.08%)
Fruit of the Loom, Inc. (Class A)* 214 2,087
Liz Claiborne, Inc. 191 6,971
Russell Corp. 107 2,087
VF Corp. 355 15,176
-----------
26,321
-----------
Tobacco (0.91%)
Philip Morris Cos., Inc. 7,215 289,953
R.J. Reynolds Tobacco Holdings,Inc.* 321 10,112
UST, Inc. 551 16,117
-----------
316,182
-----------
Transport (0.95%)
AMR Corp.* 540 36,855
Burlington Northern Santa Fe Corp. 1,390 43,090
CSX Corp. 643 29,136
Delta Air Lines, Inc. 420 24,202
FDX Corp.* 877 47,577
Kansas City Southern Industries, Inc. 325 20,739
Navistar International Corp.* 196 9,800
Norfolk Southern Corp. 1,124 33,861
Southwest Airlines Co. 997 31,032
Union Pacific Corp. 733 42,743
US Airways Group, Inc.* 259 11,283
-----------
330,318
-----------
Utilities (5.50%)
AES Corp. 564 32,782
ALLTEL Corp. 815 58,272
Ameren Corp. 407 15,619
American Electric Power Co., Inc. 567 21,298
Ameritech Corp. 3,257 239,390
BellSouth Corp. 5,779 270,891
CMS Energy Corp. 348 14,572
Carolina Power & Light Co. 448 19,180
Central & South West Corp. 630 14,726
Cinergy Corp. 470 15,040
Consolidated Edison, Inc. 691 31,268
Consolidated Natural Gas Co. 284 17,253
Constellation Energy Group, Inc. 442 13,094
DTE Energy Co. 430 17,200
Dominion Resources, Inc. 579 25,078
Duke Energy Corp. 1,073 58,344
Eastern Enterprises 67 2,663
Edison International 1,045 27,954
Entergy Corp. 731 22,844
FPL Group, Inc. 536 29,279
FirstEnergy Corp.* 703 21,793
GPU, Inc. 379 15,989
GTE Corp. 2,860 216,645
New Century Energies, Inc. 339 13,157
Niagara Mohawk Power Corp.* 555 8,915
NICOR, Inc. 141 5,367
Northern States Power Co. 452 10,933
ONEOK, Inc. 93 2,953
PECO Energy Co. 664 27,805
PG&E Corp. 1,134 36,855
PP&L Resources, Inc. 448 13,776
PacifiCorp 881 16,188
People's Energy Corp. 105 3,957
Public Service Enterprise Group, Inc. 661 27,018
Reliant Energy, Inc. 843 23,288
SBC Communications, Inc. 5,797 336,226
Sempra Energy 711 16,086
Southern Co. 2,066 54,749
Texas Utilities Co. 837 34,526
Unicom Corp. 644 24,834
Williams Cos., Inc. 1,268 53,969
-----------
1,911,776
-----------
TOTAL COMMON STOCKS
(Cost $24,687,917) (95.73%) 33,259,916
------ -----------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.93%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
8.875% and 11.250% due
02-15-15 and 08-15-17) - Note B 4.80% $1,367 $1,367,000
------------
TOTAL SHORT-TERM INVESTMENTS (3.93%) 1,367,000
------- ------------
TOTAL INVESTMENTS (99.66%) 34,626,916
------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.34%) 118,570
------- ------------
TOTAL NET ASSETS (100.00%) $34,745,486
======= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer; however, security is U.S. dollar
denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. International Fund on June 30, 1999. It's divided into three main
categories: common stocks, rights and short-term investments. Common stocks
and rights are further broken down by country. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Australia (1.98%)
Australia & New Zealand Banking Group Ltd.,
American Depositary Receipt
(ADR) (Banks - Foreign) 2 $ 74
Macquarie Bank Ltd. (Banks -
Foreign) 1,686 22,736
National Australia Bank, Ltd.
(Banks - Foreign) 935 15,452
National Foods, Ltd. (Food) 5,740 10,158
News Corp., Ltd. (The) (Media) 2,002 17,059
News Corp., Ltd. (The) (ADR)
(Media) 1,051 37,113
Normandy Mining Ltd. (Metal) 16,286 10,830
Telstra Corp., Ltd.
(Telecommunications) 5,008 28,659
-----------
142,081
-----------
Belgium (0.90%)
Fortis AG (Insurance) 1,134 35,596
Fortis AG (Certificate De Valeur Garantie)
(Insurance)* 42 239
Fortis AG (New shares) (Insurance)* 378 4
Tractebel SA (Utilities) 202 28,320
-----------
64,159
-----------
Brazil (1.34%)
Telecomunicacoes Brasileiras SA
(Telecommunications) 1,060 95,599
Telecomunicacoes Brasileiras SA (ADR)
(Telecommunications) 696 43
-----------
95,642
-----------
Canada (4.64%)
BCE, Inc. (Telecommunications) 315 15,349
Bombardier, Inc. (Diversified
Operations) 6,833 104,409
Canadian Imperial Bank of Commerce
(Banks - Foreign) 945 22,680
Nortel Networks Corp.
(Telecommunications) 1,445 123,647
Royal Bank of Canada (Banks -
Foreign) 656 29,110
Toronto-Dominion Bank (Banks -
Foreign) 824 37,353
-----------
332,548
-----------
China (0.35%)
Yanzhou Coal Mining Co. Ltd.
(Metal) 69,000 24,679
-----------
Denmark (0.79%)
Novo Nordisk A/S (Medical) 210 22,624
Tele Danmark A/S
(Telecommunications) 687 33,720
-----------
56,344
-----------
Finland (2.35%)
Nokia AB (Telecommunications) 1,920 168,235
-----------
France (10.65%)
Accor SA (Leisure) 134 33,636
Axa SA (Insurance) 516 62,926
Banque Nationale de Paris (Banks -
Foreign) 598 49,809
Carrefour SA (Retail) 132 19,390
Castorama Dubois (Retail) 72 17,071
Danone SA (Food) 431 111,074
Elf Aquitaine SA (Oil & Gas) 336 49,288
France Telecom SA
(Telecommunications) 1,119 84,495
L'Oreal SA (Cosmetics & Personal
Care) 137 92,574
Legrand SA (Electronics) 65 13,227
Pinault-Printemps-Redoute SA
(Retail) 400 68,613
Sanofi-Synthelabo SA (Medical)* 384 16,289
Suez Lyonnaise des Eaux SA
(Diversified Operations) 280 50,483
Total SA (Oil & Gas) 279 35,980
Vivendi SA (Diversified Operations) 714 57,815
-----------
762,670
-----------
Germany (7.42%)
Allianz AG (Insurance) 147 40,763
BASF AG (Chemicals) 1,053 46,513
Bayerische Hypo- und Vereinsbank AG
(Banks - Foreign) 627 40,720
DaimlerChrysler AG
(Automobile/Trucks) 1,117 96,723
Degussa-Huels AG (Chemicals)* 651 26,843
Deutsche Telekom AG
(Telecommunications) 636 26,684
Fresenius AG (Medical) 33 5,001
Linde AG (Engineering/R&D Services) 45 26,952
Mannesmann AG (Machinery) 610 90,990
Metro AG (Retail) 278 17,252
Preussag AG (Diversified
Operations) 305 16,381
SAP AG (Computers) 80 27,050
Siemens AG (Diversified Operations) 435 33,542
VEBA AG (Diversified Operations) 493 28,968
Viag AG (Diversified Operations) 15 7,082
-----------
531,464
-----------
Hong Kong (1.76%)
Amoy Properties, Ltd. (Real Estate
Operations) 22,000 20,700
Cheung Kong Holdings Ltd. (Real
Estate Operations) 3,000 26,680
HSBC Holdings Plc (Banks - Foreign) 407 14,846
Hutchison Whampoa Ltd. (Diversified
Operations) 1,000 9,054
Sun Hung Kai Properties Ltd.
(Real Estate Operations) 6,000 54,713
-----------
125,993
-----------
Indonesia (0.36%)
PT Bank International Indonesia
(Banks - Foreign) 882,000 25,473
-----------
Ireland (2.85%)
Allied Irish Banks Plc (ADR) (Banks
- - Foreign) 3,391 92,405
Anglo Irish Bank Corp. Plc (Banks -
Foreign) 15,711 39,128
CRH Plc (Building) 3,452 61,150
Irish Life & Permanent Plc
(Insurance) 1,119 11,553
-----------
204,236
-----------
Italy (2.77%)
Alleanza Assicurazioni (Insurance) 1,444 16,597
Assicurazioni Generali SpA
(Insurance) 397 13,751
Banca Popolare di Brescia SpA
(Banks - Foreign) 1,159 49,642
Istituto Nazionale delle
Assicurazioni SpA (Insurance) 6,043 14,016
Telecom Italia Mobile SpA
(Telecommunications) 10,606 63,303
Telecom Italia SpA
(Telecommunications) 2,808 29,178
Unicredito Italiano SpA (Banks -
Foreign) 1,571 6,899
Unione Immobiliare SpA (Real Estate
Operations) 11,876 5,264
-----------
198,650
-----------
Japan (21.97%)
Bank of Tokyo-Mitsubishi, Ltd.
(Banks - Foreign) 9,000 128,189
Credit Saison Co., Ltd. (Finance) 600 12,549
Daiwa House Industry Co., Ltd.
(Building) 3,000 31,570
Denso Corp. (Automobile/Trucks) 2,000 40,671
Fuji Photo Film Co., Ltd. (Leisure) 2,000 75,721
Fujitsu Ltd. (Computers) 4,000 80,516
Ito-Yokado Co., Ltd. (Retail) 1,000 66,959
Marui Co., Ltd. (Retail) 2,000 33,066
Matsushita Electric Industrial Co.,
Ltd. (Electronics) 4,000 77,705
Mitsukoshi, Ltd. (Retail) 6,000 26,089
NIDEC Corp. (Machinery) 400 60,213
NTT Data Corp. (Telecommunications) 4 31,810
NTT Mobile Communication Network, Inc.
(Telecommunications) 1 13,557
NTT Mobile Communication Network, Inc.
(New Shares) (Telecommunications)* 4 53,567
Nippon Telegraph & Telephone Corp.
(Telecommunications) 10 116,558
Nomura Securities Co., Ltd. (Broker
Services) 10,000 117,136
Orix Corp. (Leasing Companies) 1,000 89,278
Sakura Bank, Ltd. (Banks - Foreign) 7,000 26,560
Sankyo Co., Ltd. (Medical) 1,000 25,213
Secom Co., Ltd. (Protection -
Safety Equip. & Svc.) 1,000 104,158
Sekisui House, Ltd. (Building) 6,000 64,776
Shin-Etsu Chemical Co., Ltd.
(Chemicals) 1,000 33,479
Sony Corp. (Electronics) 1,000 107,878
Sumitomo Trust & Banking Co., Ltd.
(Banks - Foreign) 9,000 43,300
Takeda Chemical Industries, Ltd.
(Medical) 2,000 92,750
Takefuji Corp. (Finance) 200 20,683
-----------
1,573,951
-----------
Mexico (1.03%)
Carso Global Telecom
(Telecommunications) 5,745 36,367
Cifra SA de CV (Retail) 9,801 19,538
Grupo Televisa SA, Global Depositary
Receipt (GDR) (Media) 399 17,880
-----------
73,785
-----------
Netherlands (3.99%)
ABN AMRO Holding NV (ADR) (Banks -
Foreign) 4 88
AEGON NV (Insurance) 433 31,401
ING Groep NV (ADR) (Banks -
Foreign) 2,663 146,465
KPN NV (Telecommunications) 500 23,452
Royal Philips Electronics NV
(Electronics) 737 72,669
TNT Post Group NV (Transport) 500 11,932
-----------
286,007
-----------
Norway (0.55%)
Orkla ASA (Diversified Operations) 2,550 39,639
-----------
Portugal (0.54%)
Electricidade de Portugal SA
(Utilities) 234 4,212
Portugal Telecom SA
(Telecommunications) 842 34,242
-----------
38,454
-----------
Singapore (1.09%)
First Capital Corp., Ltd. (Real
Estate Operations) 14,000 21,798
Keppel TatLee Bank, Ltd. (Banks -
Foreign) 10,000 22,209
Overseas-Chinese Banking Corp., Ltd.
(Banks - Foreign) 3,050 25,447
Singapore Telecommunications, Ltd.
(Telecommunications) 5,000 8,578
-----------
78,032
-----------
South Korea (0.99%)
Housing & Commercial Bank (Banks -
Foreign) 200 6,307
Kookmin Bank (Banks - Foreign) 1,500 30,454
Korea Line Co. (Transport) 800 10,125
Korea Telecom Corp. (ADR)
(Telecommunications)* 170 6,354
Shinhan Bank (Banks - Foreign) 1,600 17,970
-----------
71,210
-----------
Spain (4.26%)
Argentaria SA (Banks - Foreign) 1,764 40,096
Banco Bilbao Vizcaya SA (Banks -
Foreign) 986 14,240
Banco Santander Central Hispano, SA
(Banks - Foreign) 64 666
Endesa SA (Utilities) 1,688 35,985
Grupo Ferrovial, SA (Building)* 187 4,530
Iberdrola SA (Utilities) 1,823 27,738
Repsol SA (Oil & Gas) 2,694 55,403
Telefonica SA (Telecommunications)* 2,019 97,467
TelePizza SA (Retail)* 5,660 29,290
-----------
305,415
-----------
Sweden (1.98%)
Ericsson (LM) Telefonaktiebolaget
(Telecommunications) 1,232 39,548
Investor AB (Diversified
Operations) 5,056 56,581
Nordbanken Holding AB (Banks -
Foreign) 7,412 43,395
Saab AB (Aerospace) 278 2,161
-----------
141,685
-----------
Switzerland (4.28%)
Adecco SA (Business Services -
Misc.) 114 61,065
Barry Callebaut AG (Food) 27 4,132
Credit Suisse Group (Banks -
Foreign) 91 15,741
Nestle SA (Food) 19 34,222
Novartis AG (Medical) 14 20,436
Roche Holding AG (Medical) 2 20,552
UBS AG (Banks - Foreign) 212 63,255
Zurich Allied AG (Insurance) 153 86,973
-----------
306,376
-----------
Taiwan (0.30%)
China Steel Corp. (GDR) (Steel) 1,423 21,772
-----------
Thailand (0.68%)
Golden Land Property Development Plc
(Real Estate Operations)* 60,000 35,390
Land & House Public Co., Ltd.
(Real Estate Operations) 7,500 13,627
-----------
49,017
-----------
United Kingdom (14.95%)
Allied Zurich Plc (Insurance)* 833 10,471
Anglian Water Plc (B shares)
(Utilities) 2,000 1,450
BP Amoco Plc (Oil & Gas) 2,375 42,527
British Aerospace Plc (Aerospace) 5,255 34,210
British American Tobacco Plc
(Tobacco) 833 7,858
British Telecommunications Plc
(Telecommunications) 4,571 76,518
Cadbury Schweppes Plc (Food) 4,300 27,443
Diageo Plc (Beverages) 3,833 40,268
General Electric Co. Plc
(Diversified Operations) 2,412 24,503
Glaxo Wellcome Plc (Medical) 1,739 48,326
Granada Group Plc (Diversified
Operations) 32 593
Hanson Plc (Building) 3,625 32,569
Kingfisher Plc (Retail) 3,535 41,250
Lloyds TSB Group Plc (Banks -
Foreign) 7,058 95,843
Misys Plc (Computers) 1,848 15,817
Orange Plc (Telecommunications)* 2,447 35,909
Pearson Plc (Media) 1,584 32,184
Pennon Group Plc (Utilities) 261 4,377
Prudential Corp. Plc (Insurance) 1,329 19,587
Royal & Sun Alliance Insurance Group Plc
(Insurance) 4,020 36,023
Royal Bank of Scotland Group Plc
(Banks - Foreign) 2,365 48,462
SEMA Group Plc (Computers) 4,334 41,706
Scottish & Southern Energy Plc
(Utilities) 3,000 30,642
SmithKline Beecham Plc (Medical) 7,077 92,030
Tesco Plc (Retail) 7,675 19,901
Thames Water Plc (Utilities) 830 13,161
Unilever Plc (Food) 8,660 76,851
Vodafone Group Plc
(Telecommunications) 3,367 66,234
WPP Group Plc (Advertising) 6,397 54,157
-----------
1,070,870
-----------
TOTAL COMMON STOCKS
(Cost $5,988,913) (94.77%) 6,788,387
------ -----------
RIGHTS
Portugal (0.00%)
Portugal Telecom SA
(Telecommunications)* 1,841 19
-----------
TOTAL RIGHTS
(Cost $0) (0.00%) 19
------ -----------
TOTAL COMMON STOCKS AND RIGHTS
(Cost $5,988,913) (94.77%) 6,788,406
------ -----------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (4.02%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds
8.875% and 11.250% due
02-15-15 and 08-15-17) - Note B 4.80% $288 288,000
-----------
TOTAL SHORT-TERM INVESTMENTS (4.02%) 288,000
------- -----------
TOTAL INVESTMENTS (98.79%) 7,076,406
------- -----------
OTHER ASSETS AND LIABILITIES, NET (1.21%) 86,996
------- -----------
TOTAL NET ASSETS (100.00%) $7,163,402
======= ===========
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
Industry Diversification (Unaudited)
- -------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other
countries. The performance of the Fund is closely tied to the economic
conditions within the countries in which it invests. The concentration of
investments by country for individual securities held by the Fund is shown
in the schedule of investments. In addition, the concentration of
investments can be aggregated by various industry groups. The table below
shows the percentages of the Fund's investments at June 30, 1999 assigned
to the various investment categories.
MARKET VALUE AS A %
INVESTMENT CATEGORIES OF FUND NET ASSETS
- --------------------- ------------------
Advertising 0.76%
Aerospace 0.51
Automobile/Trucks 1.92
Banks-Foreign 16.96
Beverages 0.56
Broker Services 1.64
Building 2.72
Business Services - Misc. 0.85
Chemicals 1.49
Computers 2.30
Cosmetics & Personal Care 1.29
Diversified Operations 4.86
Electronics 4.13
Engineering/R&D Services 0.38
Finance 1.25
Food 3.68
Insurance 5.30
Leasing Companies 1.25
Leisure 1.53
Machinery 2.11
Media 1.46
Medical 4.79
Metal 0.50
Oil & Gas 2.56
Protection - Safety Equip. & Svc. 1.45
Real Estate Operations 2.49
Retail 5.00
Steel 0.30
Telecommunications 18.27
Tobacco 0.11
Transport 0.31
Utilities 2.04
Short-Term Investments 4.02
-----
TOTAL INVESTMENTS 98.79%
=====
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Large Cap Growth Fund on June 30, 1999. It's divided into two
main categories: common stocks and short-term investments. Common stocks
are further broken down by industry groups. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Advertising (1.66%)
Outdoor Systems, Inc.* 8,000 $292,000
-----------
Aerospace (1.38%)
United Technologies Corp. 3,400 243,738
-----------
Banks - United States (4.26%)
Bank of America Corp. 5,000 366,562
Wells Fargo Co. 9,000 384,750
-----------
751,312
-----------
Computers (20.45%)
America Online, Inc.* 3,100 342,550
BMC Software, Inc.* 1,000 54,000
Cisco Systems, Inc.* 7,600 488,775
CMGI, Inc.* 500 57,031
Computer Associates International, Inc. 5,000 275,000
EMC Corp.* 8,000 440,000
International Business Machines Corp. 3,400 439,450
Microsoft Corp.* 8,000 721,500
Novell, Inc.* 10,000 265,000
Oracle Corp.* 2,500 92,813
Unisys Corp.* 11,000 428,312
-----------
3,604,431
-----------
Diversified Operations (5.73%)
AlliedSignal, Inc. 7,000 441,000
Tyco International Ltd. 6,000 568,500
-----------
1,009,500
-----------
Electronics (8.18%)
Applied Materials, Inc.* 5,000 369,375
General Electric Co. 3,000 339,000
Intel Corp. 8,500 505,750
Motorola, Inc. 2,400 227,400
-----------
1,441,525
-----------
Finance (6.34%)
Associates First Capital Corp.
(Class A) 8,500 376,656
Capital One Financial Corp. 3,600 200,475
Citigroup, Inc. 5,850 277,875
Providian Financial Corp. 2,800 261,800
-----------
1,116,806
-----------
Media (6.87%)
Chancellor Media Corp.* 7,000 385,875
Gannett Co., Inc. 5,500 392,562
Time Warner, Inc. 5,900 433,650
-----------
1,212,087
-----------
Medical (12.97%)
Cardinal Health, Inc. 6,500 416,813
Guidant Corp. 5,000 257,188
Johnson & Johnson 3,000 294,000
Merck & Co., Inc. 6,000 444,000
Schering-Plough Corp. 8,000 424,000
Warner-Lambert Co. 6,500 450,937
-----------
2,286,938
-----------
Office (2.19%)
Pitney Bowes, Inc. 6,000 385,500
-----------
Oil & Gas (7.38%)
Baker Hughes, Inc. 8,000 268,000
Burlington Resources, Inc. 3,500 151,375
Halliburton Co. 8,000 362,000
Phillips Petroleum Co. 4,000 201,250
Schlumberger Ltd. 5,000 318,438
-----------
1,301,063
-----------
Retail (10.38%)
Home Depot, Inc. (The) 5,500 354,406
Kroger Co.* 18,000 502,875
Office Depot, Inc.* 20,000 441,250
Wal-Mart Stores, Inc. 11,000 530,750
-----------
1,829,281
-----------
Soap & Cleaning Preparations (2.42%)
Clorox Co. (The) 4,000 427,250
-----------
Telecommunications (7.71%)
Bell Atlantic Corp. 5,000 326,875
Frontier Corp. 3,000 177,000
Lucent Technologies, Inc. 7,000 472,063
MCI WorldCom, Inc.* 2,000 172,125
Sprint Corp. 4,000 211,250
-----------
1,359,313
-----------
TOTAL COMMON STOCKS
(Cost $14,762,716) (97.92%) 17,260,744
------ ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.33%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
9.875% and 11.250% due
02-15-15 and 11-15-15) - Note B 4.80% $58 58,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 507
------------
TOTAL SHORT-TERM INVESTMENTS (0.33%) 58,507
------- ------------
TOTAL INVESTMENTS (98.25%) 17,319,251
------- ------------
OTHER ASSETS AND LIABILITIES, NET (1.75%) 309,258
------- ------------
TOTAL NET ASSETS (100.00%) $17,628,509
======= ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Mid Cap Growth Fund on June 30, 1999. It's divided into three
main categories: common stocks, rights, and short-term investments. Common
stocks and rights are further broken down by industry groups. Short-term
investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Advertising (2.16%)
DoubleClick, Inc.* 110 $10,092
Omnicom Group, Inc. 200 16,000
Outdoor Systems, Inc.* 780 28,470
-----------
54,562
-----------
Banks - Foreign (0.22%)
Toronto-Dominion Bank (Canada) 120 5,460
-----------
Banks - United States (4.07%)
Comerica, Inc. 170 10,104
First Tennessee National Corp. 445 17,049
Firstar Corp. 180 5,040
FirstMerit Corp. 510 14,312
Northern Trust Corp. 300 29,100
Wilmington Trust Corp. 320 18,360
Zions Bancorp. 140 8,890
-----------
102,855
-----------
Broker Services (2.17%)
E*TRADE Group, Inc.* 350 13,978
Merrill Lynch & Co., Inc. 190 15,188
Schwab (Charles) Corp. 200 21,975
TD Waterhouse Group, Inc.* 150 3,759
-----------
54,900
-----------
Building (1.17%)
Georgia-Pacific Group 340 16,108
USG Corp. 240 13,440
-----------
29,548
-----------
Business Services - Misc. (1.83%)
Metzler Group, Inc. (The)* 300 8,287
Modis Professional Services, Inc.* 950 13,063
Snyder Communications, Inc.* 760 24,890
-----------
46,240
-----------
Computers (12.24%)
BMC Software, Inc.* 250 13,500
Citrix Systems, Inc.* 220 12,430
CMGI Inc.* 130 14,828
Computer Sciences Corp.* 360 24,908
Compuware Corp.* 680 21,633
DST Systems, Inc.* 290 18,234
EMC Corp.* 200 11,000
Fiserv, Inc.* 585 18,318
i2 Technologies, Inc.* 290 12,470
Inktomi Corp.* 80 10,520
Intuit, Inc.* 135 12,167
Juniper Networks, Inc.* 20 2,980
Lexmark International Group, Inc.
(Class A)* 410 27,086
MindSpring Enterprises, Inc.* 190 8,419
Network Appliance, Inc.* 150 8,381
Networks Associates, Inc.* 450 6,609
Novell, Inc.* 700 18,550
RealNetworks, Inc.* 70 4,821
Rhythms NetConnections, Inc.* 110 6,421
Sapient Corp.* 80 4,530
SunGard Data Systems, Inc.* 600 20,700
Synopsys, Inc.* 120 6,623
Unisys Corp.* 405 15,770
VERITAS Software Corp.* 90 8,544
-----------
309,442
-----------
Containers (1.16%)
Owens-Illinois, Inc.* 460 15,036
Sealed Air Corp.* 220 14,273
-----------
29,309
-----------
Electronics (10.02%)
Altera Corp.* 440 16,197
Analog Devices, Inc.* 130 6,524
Applied Materials, Inc.* 285 21,054
ASM Lithography Holding N.V.
(Netherlands)* 240 14,250
Conexant Systems, Inc.* 260 15,096
Flextronics International, Ltd.* 210 11,655
Jabil Circuit, Inc.* 420 18,952
KLA-Tencor Corp.* 260 16,867
Linear Technology Corp. 190 12,777
Maxim Integrated Products, Inc.* 100 6,650
Novellus Systems, Inc.* 270 18,428
Sanmina Corp.* 175 13,278
Solectron Corp.* 170 11,337
Teradyne, Inc.* 260 18,655
Vitesse Semiconductor Corp.* 150 10,116
Waters Corp.* 510 27,094
Xilinx, Inc.* 250 14,313
-----------
253,243
-----------
Finance (1.98%)
Charter One Financial, Inc. 609 16,938
Concord EFS, Inc.* 460 19,464
Ingram Micro, Inc. (Class A)* 530 13,647
-----------
50,049
-----------
Insurance (3.15%)
Ace, Ltd. (Bermuda) 715 20,199
Horace Mann Educators Corp. 160 4,350
Mutual Risk Management, Ltd. 275 9,178
Progressive Corp. (The) 75 10,875
Provident Cos., Inc. 280 11,200
Reinsurance Group of America, Inc. 600 20,100
UNUM Corp. 70 3,833
-----------
79,735
-----------
Leisure (0.91%)
Mirage Resorts, Inc.* 250 4,188
Polaroid Corp. 680 18,785
-----------
22,973
-----------
Linen Supply & Related (0.29%)
Cintas Corp. 110 7,391
-----------
Machinery (0.69%)
SPX Corp.* 210 17,535
-----------
Media (4.54%)
Adelphia Communications Corp.
(Class A)* 290 18,451
Chancellor Media Corp.* 500 27,562
Cox Radio, Inc. (Class A)* 150 8,137
Harcourt General, Inc. 280 14,438
Hispanic Broadcasting Corp.* 240 18,210
Reader's Digest Association, Inc.
(The) (Class A) 390 15,502
Univision Communications, Inc.
(Class A)* 190 12,540
-----------
114,840
-----------
Medical (7.91%)
AmeriSource Health Corp. (Class A)* 230 5,865
Becton, Dickinson & Co. 260 7,800
Biogen, Inc.* 320 20,580
Cardinal Health, Inc. 361 23,149
Forest Laboratories, Inc.* 290 13,412
Genzyme Corp.* 295 14,307
Genzyme Molecular Oncology* 59 162
Guidant Corp. 565 29,062
HEALTHSOUTH Corp.* 1,820 27,186
Mylan Laboratories, Inc. 775 20,538
Omnicare, Inc. 845 10,668
Total Renal Care Holdings, Inc.* 1,070 16,652
Watson Pharmaceutical, Inc.* 300 10,519
-----------
199,900
-----------
Metal (0.94%)
Reynolds Metals Co. 405 23,895
-----------
Office (0.64%)
Avery Dennison Corp. 270 16,301
-----------
Oil & Gas (6.20%)
Anadarko Petroleum Corp. 310 11,412
Apache Corp. 540 21,060
Baker Hughes, Inc. 510 17,085
BJ Services Co.* 900 26,494
Burlington Resources, Inc. 280 12,110
Cooper Cameron Corp.* 360 13,342
Diamond Offshore Drilling, Inc. 270 7,661
Halliburton Co. 470 21,267
Noble Affiliates, Inc. 270 7,611
Santa Fe International Corp. 310 7,130
Tidewater, Inc. 170 5,185
Veritas DGC, Inc.* 350 6,409
-----------
156,766
-----------
Paper & Paper Products (0.82%)
Bowater, Inc. 260 12,285
Fort James Corp. 220 8,332
-----------
20,617
-----------
Printing - Commercial (0.35%)
Valassis Communications, Inc.* 240 8,790
-----------
Retail (7.25%)
Ethan Allen Interiors, Inc. 315 11,891
Hannaford Brothers Co. 445 23,807
Kohl's Corp.* 330 25,472
Kroger Co.* 680 18,998
Lowe's Cos., Inc. 430 24,376
Office Depot, Inc.* 1,200 26,475
Saks, Inc.* 570 16,459
SYSCO Corp. 250 7,453
TJX Cos., Inc. 570 18,988
U.S. Foodservice* 220 9,378
-----------
183,297
-----------
Soap & Cleaning Preparations (1.54%)
Clorox Co. (The) 135 14,420
Dial Corp. (The) 660 24,544
-----------
38,964
-----------
Steel (0.53%)
Nucor Corp. 280 13,283
-----------
Telecommunications (12.97%)
Allegiance Telecom, Inc.* 410 22,499
American Tower Corp. (Class A)* 695 16,680
COLT Telecom Group Plc American Depositary
Receipts (United Kingdom)* 60 5,182
Comverse Technology, Inc.* 330 24,915
Corning, Inc. 440 30,855
Crown Castle International Corp.* 960 19,980
Frontier Corp. 515 30,385
Global TeleSystems Group, Inc.* 150 12,150
ICG Communications, Inc.* 625 13,359
Intermedia Communications, Inc.* 370 11,100
McLeodUSA, Inc. (Class A)* 405 22,275
Metromedia Fiber Network, Inc.
(Class A)* 220 7,906
Nextel Communications, Inc. (Class A)* 250 12,547
NEXTLINK Communications, Inc.
(Class A)* 245 18,222
Omnipoint Corp.* 600 17,363
QUALCOMM, Inc.* 100 14,350
Qwest Communications International,Inc.* 220 7,274
TALK.com, Inc.* 780 8,775
Teligent, Inc. (Class A)* 120 7,178
Time Warner Telecom, Inc. (Class A)* 200 5,800
VoiceStream Wireless Corp.* 420 11,944
WinStar Communications, Inc.* 150 7,313
-----------
328,052
-----------
Textile (1.74%)
Jones Apparel Group, Inc.* 530 18,186
WestPoint Stevens, Inc.* 870 25,937
-----------
44,123
-----------
Transport (0.43%)
Expeditors International of
Washington, Inc. 400 10,900
-----------
Utilities (1.79%)
Conectiv, Inc. 300 7,331
MCN Energy Group, Inc. 450 9,337
Montana Power Co. 175 12,338
Potomac Electric Power Co. 550 16,191
-----------
45,197
-----------
Waste Disposal Service & Equip (1.75%)
Republic Services, Inc. (Class A)* 1,135 28,091
Waste Management, Inc. 300 16,125
-----------
44,216
-----------
TOTAL COMMON STOCKS
(Cost $1,991,182) (91.46%) 2,312,383
------- ------------
RIGHTS
Telecommunications (0.00%)
TALK.com, Inc.* 33 0
------------
TOTAL RIGHTS
(Cost $0) (0.00%) 0
------- ------------
TOTAL COMMON STOCKS AND RIGHTS
(Cost $1,991,182) (91.46%) 2,312,383
------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (11.07%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 6-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds
9.875% and 11.250% due 02-15-15
and 11-15-15) - Note B 4.80% $280 280,000
------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 183
------------
TOTAL SHORT-TERM INVESTMENTS (11.08%) 280,183
------- ------------
TOTAL INVESTMENTS (102.54%) 2,592,566
------- ------------
OTHER ASSETS AND LIABILITIES, NET (2.54%) (64,275)
------- ------------
TOTAL NET ASSETS (100.00%) $2,528,291
======= ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
Portfolio Concentration
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------
The V.A. Mid Cap Growth Fund invests primarily in common stocks of U.S.
and foreign issuers. The performance of the Fund is closely tied to the
economic and financial conditions within the countries in which it
invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the schedule of
investments.
In addition, concentration of investments can be aggregated by various
countries. The table below shows the percentages of the Fund's investments
at June 30, 1999 assigned to country categories.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- ----------------------- ------------------
Bermuda 0.80%
Canada 0.22
Netherlands 0.56
United Kingdom 0.20
United States 100.76
-----
TOTAL INVESTMENTS 102.54%
=====
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Regional Bank Fund on June 30, 1999. It's divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry groups. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Superregional Banks (6.76%)
Bank of America Corp. (NC) 2,000 $146,625
KeyCorp. (OH) 9,875 317,234
Mellon Bank Corp. (PA) 10,000 363,750
SunTrust Banks, Inc. (GA) 7,080 491,617
Wells Fargo Co. (CA) 6,500 277,875
-----------
1,597,101
-----------
Regional Banks - United States (84.17%)
Associated Banc-Corp. (WI) 11,243 466,584
BancFirst Corp. (OK) 9,400 321,950
BancorpSouth, Inc. (MS) 12,450 225,656
BancWest Corp. (HI) 14,650 543,881
Bank of the Ozarks, Inc. (AR) 14,350 260,094
Cascade Bancorp (OR) 25,100 404,737
CCB Financial Corp. (NC) 6,200 327,825
Centennial Bancorp.* (OR) 17,500 241,719
Centura Banks, Inc. (NC) 7,325 412,947
Chittenden Corp. (VT) 10,000 312,500
City National Corp. (CA) 14,700 550,331
CNB Bancshares, Inc. (IN) 6,680 380,760
Colonial BancGroup, Inc. (AL) 14,200 197,913
Columbia Bancorp. (OR) 8,500 67,469
Comerica, Inc. (MI) 16,400 974,775
Commerce Bancshares, Inc. (MO) 17,750 714,437
Community First Bankshares, Inc.
(ND) 10,450 249,494
Compass Bancshares, Inc. (AL) 11,050 301,113
Cullen/Frost Bankers., Inc. (TX) 24,400 672,525
Eldorado Bancshares, Inc.* (CA) 35,000 385,000
F & M Bancorp., Inc. (WI) 7,000 264,250
Financial Institutions, Inc.* (NY) 25,000 375,000
First Security Corp. (UT) 18,550 505,487
First Tennessee National Corp. (TN) 6,800 260,525
First Virginia Banks, Inc. (VA) 2,750 135,094
First Western Bancorp., Inc. (PA) 11,125 372,688
FirstMerit Corp. (OH) 24,800 695,950
Imperial Bancorp.* (CA) 13,100 259,544
Lamar Capital Corp. (MS) 16,000 152,000
M & T Bank Corp. (NY) 1,450 797,500
Marshall & Ilsley Corp. (WI) 7,900 508,562
Mercantile Bankshares Corp. (MD) 14,000 495,250
Mid-State Bancshares (CA) 25,000 843,750
Mississippi Valley Bancshares, Inc.
(MO) 8,850 293,156
National Commerce Bancorp. (TN) 18,000 393,750
North Fork Bancorp., Inc. (NY) 8,750 186,484
Northrim Bank (AK) 19,300 212,300
Pacific Capital Bancorp. (CA) 17,125 539,437
Prosperity Banchares, Inc. (TX) 32,250 471,656
Regions Financial Corp. (AL) 8,000 307,500
Security Bank Holding Co. (OR) 12,250 101,063
Southwest Bancorp. of Texas, Inc.*
(TX) 15,500 279,000
Sterling Bancshares, Inc. (TX) 18,300 244,763
Summit Bancshares, Inc. (TX) 13,800 239,775
Sun Bancorp., Inc.* (NJ) 10,500 183,750
TCF Financial Corp. (MN) 9,500 264,813
Texas Regional Bancshares, Inc.
(Class A) (TX) 9,600 261,000
UnionBanCal Corp. (CA) 10,000 361,250
UST Corp. (MA) 15,125 457,531
Vail Banks, Inc.* (CO) 18,000 186,750
West Coast Bancorp. (OR) 8,380 146,650
Whitney Holding Corp. (LA) 4,800 190,800
Wilmington Trust Corp. (DE) 7,500 430,313
Yardville National Bancorp. (NJ) 25,000 312,500
Zions Bancorp. (UT) 2,300 146,050
-----------
19,887,601
-----------
Thrifts (6.69%)
Charter One Financial, Inc. (OH) 15,004 417,299
First Financial Holdings, Inc. (SC) 16,300 305,625
InterWest Bancorp., Inc. (WA) 7,387 184,675
Mutual Savings Bank.* (MI) 12,500 164,063
Reliance Bancorp, Inc. (NY) 12,000 331,500
Warren Bancorp., Inc. (MA) 21,500 177,375
-----------
1,580,537
-----------
TOTAL COMMON STOCKS
(Cost $22,688,151) (97.62%) 23,065,239
------- -----------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.61%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99 (Secured
by U.S. Treasury Bonds 9.875%
and 11.250% due 02-15-15 and
11-15-15) - Note B 4.80% $616 616,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 377
------------
TOTAL SHORT-TERM INVESTMENTS (2.61%) 616,377
------- ------------
TOTAL INVESTMENTS (100.23%) 23,681,616
------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.23%) (54,616)
------- ------------
TOTAL NET ASSETS (100.00%) $23,627,000
======= ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Small Cap Growth Fund on June 30, 1999. It's divided into two
main categories: common stocks and short-term investments. Common stocks
are further broken down by industry groups. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Advertising (1.32%)
Catalina Marketing Corp.* 800 $73,600
Getty Images, Inc.* 3,100 58,513
-----------
132,113
-----------
Automobile/Trucks (1.98%)
Avis Rent A Car, Inc.* 800 23,300
Dollar Thrifty Automotive Group,Inc.* 2,000 46,500
Gentex Corp.* 2,300 64,400
United Rentals, Inc.* 2,200 64,900
-----------
199,100
-----------
Banks - United States (0.40%)
Greater Bay Bancorp. 1,200 39,900
-----------
Beverages (0.54%)
Beringer Wine Estates Holdings,
Inc. (Class B)* 1,300 54,316
-----------
Building (0.52%)
Crossmann Communities, Inc.* 1,800 52,313
-----------
Business Services - Misc. (11.48%)
Abacus Direct Corp.* 1,100 100,650
AHL Services, Inc.* 1,550 38,653
Charles River Associates, Inc.* 1,100 27,569
Coinstar, Inc.* 4,100 117,619
Corporate Executive Board Co.
(The)* 1,200 42,675
Forrester Research, Inc.* 2,600 65,000
INSpire Insurance Solutions, Inc.* 3,650 52,925
Interim Services, Inc.* 2,600 53,625
internet.com Corp.* 150 1,884
MedQuist, Inc.* 1,900 83,125
Metro Networks, Inc.* 1,500 80,062
Metzler Group, Inc. (The)* 1,700 46,962
Modem Media.Poppe Tyson, Inc.* 750 17,156
Nielsen Media Research, Inc.* 2,900 84,825
On Assignment, Inc.* 2,200 57,475
ProBusiness Services, Inc.* 1,000 35,875
Professional Detailing, Inc.* 1,500 35,250
Profit Recovery Group
International, Inc. (The)* 1,800 85,162
Quanta Services, Inc.* 2,200 96,800
Superior Consultant Holdings Corp.* 800 19,750
Viant Corp.* 250 8,750
-----------
1,151,792
-----------
Chemicals (0.52%)
OM Group, Inc. 1,500 51,750
-----------
Computers (16.71%)
AboveNet Communications, Inc.* 1,150 46,431
Advent Software, Inc.* 1,200 80,400
Apex, Inc.* 3,050 62,525
Ariba, Inc.* 150 14,588
Aspect Development, Inc.* 3,500 64,750
BackWeb Technologies Ltd. (Israel)* 50 1,369
BindView Development Corp.* 2,550 60,562
Bottomline Technologies, Inc.* 650 34,450
Cognizant Technology Solutions Corp.* 2,750 71,672
Critical Path, Inc.* 100 5,531
Dendrite International, Inc.* 1,450 52,381
drkoop.com, Inc.* 100 1,594
Exodus Communications, Inc.* 450 53,972
F5 Networks, Inc.* 1,300 53,300
Fundtech Ltd. (Israel)* 3,000 77,812
IMRglobal Corp.* 2,475 47,644
International Network Services,
Inc.* 1,300 52,487
Intraware, Inc.* 900 21,600
Marimba, Inc.* 250 13,172
Media Metrix, Inc.* 800 42,600
Micromuse, Inc.* 1,800 89,775
Mpath Interactive, Inc.* 850 18,700
Multex.com, Inc.* 1,850 48,331
National Computer Systems, Inc. 2,700 91,125
National Instruments Corp.* 1,300 52,487
NEON Systems, Inc.* 100 3,338
Network Appliance, Inc.* 1,650 92,194
ONYX Software Corp.* 100 2,163
Orckit Communications Ltd.
(Israel)* 2,200 54,450
Persistance Software, Inc.* 50 681
Phone.com, Inc.* 50 2,800
Prodigy Communications Corp.* 1,350 34,931
PSINet, Inc.* 950 41,562
Sagent Technology, Inc.* 2,850 24,581
Scient Corp.* 100 4,756
Silknet Software, Inc.* 50 2,025
Software.com, Inc.* 950 22,028
TenFold Corp.* 300 9,525
Verio, Inc.* 1,000 69,500
Vignette Corp.* 150 11,250
Whittman-Hart, Inc.* 3,600 114,300
Wind River Systems, Inc.* 1,750 28,109
-----------
1,677,451
-----------
Containers (0.24%)
Ivex Packaging Corp.* 1,100 24,200
-----------
Electronics (11.53%)
Alpha Industries, Inc.* 1,350 64,294
ATMI, Inc.* 2,500 74,375
Credence Systems Corp.* 2,100 77,963
DuPont Photomasks, Inc.* 1,300 62,238
Flextronics International Ltd.* 1,450 80,475
GlobeSpan, Inc.* 100 3,975
L-3 Communications Holdings, Inc.* 200 9,662
Level One Communications, Inc.* 750 36,703
Micrel, Inc.* 800 59,200
Microwave Power Devices, Inc.* 4,300 66,112
Novellus Systems, Inc.* 700 47,775
PLX Technology, Inc.* 2,500 118,438
PMC-Sierra, Inc. (Canada)* 800 47,150
Powerwave Technologies, Inc.* 2,450 79,012
PRI Automation, Inc.* 1,550 56,188
QLogic Corp.* 750 99,000
Semtech Corp.* 1,400 72,975
SLI, Inc.* 1,600 43,200
Terayon Communication Systems,Inc.* 1,050 58,669
-----------
1,157,404
-----------
Finance (4.34%)
Affiliated Managers Group, Inc.* 2,050 61,884
AmeriCredit Corp.* 3,150 50,400
DVI, Inc.* 2,950 50,519
Hambrecht & Quist Group* 1,450 53,831
Medallion Financial Corp. 3,500 66,719
Metris Cos., Inc. 2,400 97,800
NextCard, Inc.* 100 3,394
Raymond James Financial, Inc. 2,150 51,466
-----------
436,013
-----------
Food (0.82%)
American Italian Pasta Co. (Class A)* 2,700 82,012
-----------
Insurance (0.42%)
Medical Assurance, Inc.* 1,500 42,375
-----------
Leisure (3.13%)
Cinar Films, Inc. (Class B)
(Canada)* 3,300 80,850
Imax Corp. (Canada)* 2,700 60,750
Premier Parks, Inc.* 2,500 91,875
Steiner Leisure, Ltd.* 2,650 80,328
-----------
313,803
-----------
Linen Supply & Related (0.52%)
G & K Services, Inc. (Class A) 1,000 52,375
-----------
Machinery (1.69%)
JLG Industries, Inc. 2,400 48,900
Rental Service Corp.* 2,200 62,975
Terex Corp.* 1,900 57,831
-----------
169,706
-----------
Media (6.20%)
Adelphia Communications Corp.
(Class A)* 1,250 79,531
Citadel Communications Corp.* 2,400 86,850
Cumulus Media, Inc. (Class A)* 2,800 61,250
Entercom Communications Corp.* 800 34,200
Hispanic Broadcasting Corp.* 1,100 83,462
Network Event Theater, Inc.* 4,400 73,700
Pegasus Communications Corp.* 2,200 86,762
Radio One, Inc.* 1,300 60,450
Wiley (John) & Sons, Inc. (Class A) 3,200 56,400
-----------
622,605
-----------
Medical (8.16%)
Alkermes, Inc.* 2,100 48,562
Alpharma, Inc. (Class A) 1,500 53,344
Andrx Corp.* 1,350 104,119
Gilead Sciences, Inc.* 1,100 57,475
Human Genome Sciences, Inc.* 800 31,600
IDEC Pharmaceuticals Corp.* 1,400 107,887
Inhale Therapeutic Systems, Inc.* 2,100 50,006
Millennium Pharmaceuticals, Inc.* 1,100 39,600
MiniMed, Inc.* 1,000 76,938
Perclose, Inc.* 1,500 72,094
Pharmacyclics, Inc.* 2,300 64,400
Renal Care Group, Inc.* 2,500 64,687
Xomed Surgical Products, Inc.* 1,000 48,688
-----------
819,400
-----------
Metal (0.54%)
Maverick Tube Corp.* 3,900 54,356
-----------
Oil & Gas (1.86%)
Dril-Quip, Inc.* 1,900 43,581
Friede Goldman International, Inc.* 1,350 18,731
Newfield Exploration Co.* 2,100 59,719
Stone Energy Corp.* 1,100 46,613
Veritas DGC, Inc.* 1,000 18,313
-----------
186,957
-----------
Pollution Control (0.58%)
Newpark Resources, Inc.* 3,500 31,062
Tetra Tech, Inc.* 1,625 26,813
-----------
57,875
-----------
Printing - Commercial (0.40%)
Mail-Well, Inc.* 2,500 40,469
-----------
Retail (12.00%)
99 Cents Only Stores* 1,493 74,557
Abercrombie & Fitch Co. (Class A)* 1,400 67,200
Applebee's International, Inc. 2,300 69,288
bebe stores, inc.* 2,200 74,800
Buca, Inc.* 350 5,775
CSK Auto Corp.* 2,800 75,600
David's Bridal, Inc.* 950 14,784
Duane Reade, Inc.* 1,100 33,688
Ethan Allen Interiors, Inc. 1,800 67,950
Garden Fresh Restaurant Corp.* 3,100 58,125
GoTo.com, Inc.* 200 5,600
Insight Enterprises, Inc.* 2,000 49,500
Linens 'N Things, Inc.* 1,700 74,375
Lowe's Cos., Inc. 796 45,123
Noodle Kidoodle, Inc.* 400 2,125
O'Reilly Automotive, Inc.* 1,400 70,525
P.F. Chang's China Bistro, Inc.* 1,600 34,600
Pacific Sunwear of California, Inc.* 2,925 71,297
RARE Hospitality International, Inc.* 1,800 45,900
Sunglass Hut International, Inc.* 2,800 48,125
Wet Seal, Inc. (The) (Class A)* 1,850 52,956
Whole Foods Market, Inc.* 1,400 67,288
Wild Oats Markets, Inc.* 2,700 81,928
Zany Brainy, Inc.* 1,400 13,563
-----------
1,204,672
-----------
Schools/Education (1.16%)
ITT Educational Services, Inc.* 2,800 72,975
Strayer Education, Inc. 1,400 42,963
-----------
115,938
-----------
Telecommunications (7.34%)
Allegiance Telecom, Inc.* 2,300 126,213
Copper Mountain Networks, Inc.* 100 7,725
Crown Castle International Corp.* 4,100 85,331
Global TeleSystems Group, Inc.* 700 56,700
Intermedia Communications, Inc.* 2,250 67,500
Latitude Communications, Inc.* 1,600 20,800
Launch Media, Inc.* 2,250 40,219
Metromedia Fiber Network, Inc.
(Class A)* 1,500 53,906
NEXTLINK Communications, Inc.
(Class A)* 1,400 104,125
Powertel, Inc.* 700 20,913
RF Micro Devices, Inc.* 1,600 119,400
WinStar Communications, Inc.* 700 34,125
-----------
736,957
-----------
Textile (0.61%)
Cutter & Buck, Inc.* 3,600 60,750
-----------
Transport (2.57%)
Eagle USA Airfreight, Inc.* 2,000 84,875
Expeditors International of
Washington, Inc. 2,400 65,400
Forward Air Corp.* 1,900 53,438
MotivePower Industries, Inc.* 3,000 54,000
-----------
257,713
-----------
Waste Disposal Service & Equip (0.79%)
Waste Connections, Inc.* 2,600 79,300
-----------
TOTAL COMMON STOCKS
(Cost $7,064,526) (98.37%) 9,873,615
------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.14%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
9.875% and 11.250%
due 02-15-15 and 11-15-15) - Note B 4.80% $215 $215,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 17
------------
TOTAL SHORT-TERM INVESTMENTS (2.14%) 215,017
------- ------------
TOTAL INVESTMENTS (100.51%) 10,088,632
------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.51%) (51,485)
------- ------------
TOTAL NET ASSETS (100.00%) $10,037,147
======= ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Core Equity Fund on June 30, 1999. It is divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Aerospace (3.44%)
General Dynamics Corp. 5,200 $356,200
Goodrich (B.F.) Co. (The) 8,300 352,750
United Technologies Corp. 9,300 666,694
-----------
1,375,644
-----------
Automobile/Trucks (2.48%)
Borg-Warner Automotive, Inc. 2,900 159,500
Ford Motor Co. 8,500 479,719
Lear Corp.* 4,000 199,000
Meritor Automotive, Inc. 6,000 153,000
-----------
991,219
-----------
Banks - United States (5.54%)
Bank of America Corp. 6,800 498,525
Chase Manhattan Corp. 6,500 563,062
Comerica, Inc. 3,400 202,088
First Tennessee National Corp. 5,100 195,394
First Union Corp. 1,700 79,900
Fleet Financial Group, Inc. 2,900 128,688
Mellon Bank Corp. 6,800 247,350
Wells Fargo Co. 7,000 299,250
-----------
2,214,257
-----------
Beverages (1.05%)
Anheuser-Busch Cos., Inc. 5,900 418,531
-----------
Building (2.73%)
Black & Decker Corp. (The) 8,500 536,563
Centex Corp. 5,500 206,594
Clayton Homes, Inc. 13,200 150,975
Masco Corp. 2,600 75,075
Webb (Del E.) Corp. 5,000 119,375
-----------
1,088,582
-----------
Chemicals (0.29%)
Grace (W. R.) & Co.* 6,400 117,600
-----------
Computers (11.89%)
America Online, Inc.* 3,200 353,600
Cadence Design Systems, Inc.* 20,900 266,475
Cisco Systems, Inc.* 11,800 758,888
Dell Computer Corp.* 10,600 392,200
Hewlett-Packard Co. 2,700 271,350
International Business Machines Corp. 6,000 775,500
Microsoft Corp.* 20,400 1,839,825
Network Appliance, Inc.* 1,600 89,400
-----------
4,747,238
-----------
Consumer Products - Misc. (0.13%)
American Greetings Corp. (Class A) 1,700 51,213
-----------
Cosmetics & Personal Care (0.58%)
Avon Products, Inc. 2,500 138,750
Dial Corp. (The) 2,500 92,969
-----------
231,719
-----------
Diversified Operations (2.73%)
National Service Industries, Inc. 3,100 111,600
Ogden Corp. 2,600 70,037
Textron, Inc. 800 65,850
Tyco International Ltd. 8,900 843,275
-----------
1,090,762
-----------
Electronics (7.69%)
Analog Devices, Inc.* 1,200 60,225
Applied Materials, Inc.* 1,400 103,425
General Electric Co. 10,100 1,141,300
Honeywell, Inc. 3,200 370,800
Intel Corp. 17,800 1,059,100
Teradyne, Inc.* 2,400 172,200
Texas Instruments, Inc. 600 87,000
Thomas & Betts Corp. 1,600 75,600
-----------
3,069,650
-----------
Finance (4.82%)
Associates First Capital Corp.
(Class A) 4,800 212,700
Citigroup, Inc. 25,200 1,197,000
Golden West Financial Corp. 800 78,400
MBNA Corp. 9,600 294,000
Morgan Stanley Dean Witter & Co. 1,400 143,500
-----------
1,925,600
-----------
Food (1.84%)
Flowers Industries, Inc. 5,900 127,956
General Mills, Inc. 1,900 152,713
Heinz (H.J.) Co. 7,500 375,937
Quaker Oats Co. 1,200 79,650
-----------
736,256
-----------
Household (0.65%)
Premark International, Inc. 4,700 176,250
WestPoint Stevens, Inc. 2,800 83,475
-----------
259,725
-----------
Instruments - Scientific (0.17%)
PE Corp.-PE Biosystems Group 600 68,850
-----------
Insurance (4.78%)
Allstate Corp. (The) 4,900 175,787
American International Group, Inc. 4,400 515,075
Equitable Companies, Inc. (The) 2,900 194,300
Hartford Financial Services Group,
Inc. (The) 3,400 198,262
Hartford Life, Inc. (Class A) 1,500 78,938
Lincoln National Corp. 2,600 136,012
Marsh & McLennan Cos., Inc. 6,100 460,550
Travelers Property Casualty Corp.
(Class A) 2,300 89,988
XL Capital Ltd. (Class A) 1,100 62,150
-----------
1,911,062
-----------
Machinery (1.05%)
Ingersoll-Rand Co. 6,500 420,063
-----------
Media (4.62%)
CBS Corp.* 17,400 755,812
Clear Channel Communications, Inc.* 5,900 406,731
Time Warner, Inc. 4,800 352,800
Viacom, Inc. (Class B)* 7,500 330,000
-----------
1,845,343
-----------
Medical (9.89%)
Abbott Laboratories 3,600 163,800
Bristol-Myers Squibb Co. 4,800 338,100
Cardinal Health, Inc. 11,800 756,675
Glaxo Wellcome Plc, American Depositary Receipts
(ADR) (United Kingdom) 3,600 203,850
Guidant Corp. 1,900 97,731
HEALTHSOUTH Corp.* 18,000 268,875
Johnson & Johnson 3,800 372,400
Lilly (Eli) & Co. 2,900 207,712
Lincare Holdings, Inc.* 4,400 110,000
Merck & Co., Inc. 6,400 473,600
Omnicare, Inc. 7,600 95,950
Pfizer, Inc. 2,200 241,450
Pharmacia & Upjohn, Inc.* 1,200 68,175
Schering-Plough Corp. 6,900 365,700
Warner-Lambert Co. 2,700 187,312
-----------
3,951,330
-----------
Metal (0.23%)
Illinois Tool Works, Inc. 1,100 90,200
-----------
Mortgage Banking (1.42%)
Fannie Mae 8,300 567,512
-----------
Office (0.59%)
Avery Dennison Corp. 1,000 60,375
Reynolds & Reynolds Co. (The)
(Class A) 7,600 177,175
-----------
237,550
-----------
Oil & Gas (3.86%)
BP Amoco Plc ADR (United Kingdom) 1,500 162,750
Chevron Corp. 1,000 95,188
El Paso Energy Corp. 3,300 116,119
Exxon Corp. 5,100 393,337
Mobil Corp. 1,600 158,400
Royal Dutch Petroleum Co.
(Netherlands) 9,200 554,300
Sunoco, Inc. 2,000 60,375
-----------
1,540,469
-----------
Paper & Paper Products (0.54%)
Kimberly-Clark Corp. 1,900 108,300
Smurfit-Stone Container Corp.* 5,300 108,981
-----------
217,281
-----------
Pollution Control (0.42%)
Waste Management, Inc. 3,100 166,625
-----------
Retail (5.25%)
Albertson's, Inc. 1,500 77,344
Consolidated Stores Corp.* 3,700 99,900
Dayton Hudson Corp. 2,400 156,000
Home Depot, Inc. (The) 6,300 405,956
Lowe's Cos., Inc. 4,300 243,756
Outback Steakhouse, Inc.* 3,600 141,525
Tandy Corp. 2,400 117,300
Tricon Global Restaurants, Inc.* 3,200 173,200
Wal-Mart Stores, Inc. 14,100 680,325
-----------
2,095,306
-----------
Soap & Cleaning Preparations (1.35%)
Clorox Co. (The) 2,200 234,987
Procter & Gamble Co. (The) 3,400 303,450
-----------
538,437
-----------
Steel (0.31%)
AK Steel Holding Corp. 5,400 121,500
-----------
Telecommunications (7.33%)
AT&T Corp. 7,100 396,269
Bell Atlantic Corp. 3,100 202,662
Lucent Technologies, Inc. 12,500 842,969
MCI WorldCom, Inc.* 8,700 748,744
Nortel Networks Corp. (Canada) 2,600 225,712
Sprint Corp. 3,800 200,688
Tellabs, Inc.* 3,400 229,712
U S WEST, Inc. 1,400 82,250
-----------
2,929,006
-----------
Textile (0.46%)
Tommy Hilfiger Corp.* 2,500 183,750
-----------
Tobacco (1.30%)
Philip Morris Cos., Inc. 12,900 518,419
-----------
Transport (2.21%)
Alaska Air Group, Inc.* 3,300 137,775
Burlington Northern Santa Fe Corp. 5,400 167,400
Kansas City Southern Industries, Inc. 4,900 312,681
UAL Corp.* 3,000 195,000
US Airways Group, Inc.* 1,600 69,700
-----------
882,556
-----------
Utilities (7.10%)
Ameren Corp. 6,800 260,950
Ameritech Corp. 6,900 507,150
BellSouth Corp. 11,900 557,813
Dominion Resources, Inc. 2,000 86,625
Florida Progress Corp. 6,900 285,056
GTE Corp. 4,700 356,025
PECO Energy Co. 5,700 238,688
Reliant Energy, Inc. 3,900 107,738
SBC Communications, Inc. 5,200 301,600
Southern Co. (The) 5,000 132,500
-----------
2,834,145
-----------
TOTAL COMMON STOCKS
(Cost $33,144,694) (98.74%) 39,437,400
------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.37%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
9.875% and 11.250% due 02-15-15
and 11-15-15) - Note B 4.80% $548 $548,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 265
------------
TOTAL SHORT-TERM INVESTMENTS (1.37%) 548,265
------- ------------
TOTAL INVESTMENTS (100.11%) 39,985,665
------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.11%) (45,238)
------- ------------
TOTAL NET ASSETS (100.00%) $39,940,427
======= ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Large Cap Value Fund on June 30, 1999. It's divided into three
main categories: common stocks, preferred stocks and short-term
investments. Common stocks and preferred stocks are further broken down by
industry groups. Short-term investments, which represent the Fund's "cash"
position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------ -----
<S> <C> <C>
COMMON STOCKS
Aerospace (1.84%)
Cordant Technologies, Inc. 10,000 $451,875
United Technologies Corp. 304 21,793
-----------
473,668
-----------
Banks - United States (4.09%)
Citigroup, Inc. 7,381 350,597
PNC Bank Corp. 5,000 288,125
TCF Financial Corp. 7,150 199,306
Wells Fargo Co. 5,000 213,750
-----------
1,051,778
-----------
Beverages (0.30%)
PepsiCo, Inc. 2,000 77,375
-----------
Broker Services (0.11%)
Morgan Stanley Dean Witter & Co. 286 29,315
-----------
Building (1.68%)
Masco Corp. 15,000 433,125
-----------
Business Services - Misc. (1.90%)
Nielsen Media Research, Inc. 16,666 487,480
-----------
Computers (13.79%)
Cadence Design Systems, Inc.* 4,000 51,000
Cisco Systems, Inc.* 2,000 128,625
Comdisco, Inc. 9,000 230,625
Computer Associates International, Inc. 18,500 1,017,500
Etec Systems, Inc.* 9,000 299,250
IMRglobal Corp.* 27,700 533,225
International Business Machines Corp. 4,510 582,917
Oracle Corp.* 2,500 92,812
Synopsys, Inc.* 8,650 477,372
Wind River Systems, Inc.* 8,250 132,516
-----------
3,545,842
-----------
Cosmetics & Personal Care (0.67%)
Nu Skin Enterprises, Inc.* 8,600 171,462
-----------
Diversified Operations (0.81%)
Monsanto Co. 5,300 209,019
-----------
Electronics (7.10%)
Arrow Electronics, Inc. 12,000 228,000
Conexant Systems, Inc.* 15,000 870,937
Oak Industries, Inc. 10,000 436,875
SCI Systems, Inc.* 6,070 288,325
-----------
1,824,137
-----------
Energy (1.30%)
Citizens Utilities Co. (Class B) 30,000 333,750
-----------
Finance (4.47%)
Ambac Financial Group, Inc. 5,200 297,050
Astoria Financial Corp. 10,000 439,375
Federated Investors, Inc. (Class B) 23,000 412,563
-----------
1,148,988
-----------
Food (0.30%)
Nabisco Group Holdings Corp. 4,000 78,250
-----------
Instruments - Scientific (1.58%)
Millipore Corp. 10,000 405,625
-----------
Insurance (16.47%)
Ace, Ltd. (Bermuda) 76,900 2,172,425
Financial Security Assurance
Holdings Ltd. 7,860 408,720
Mitsui Marine and Fire Insurance
Co., Ltd., (Japan) 6,500 31,953
Progressive Corp. 705 102,225
Radian Group, Inc. 10,000 488,125
Reinsurance Group of America, Inc. 10,000 335,000
UNUM Corp. 6,500 355,875
XL Capital, Ltd., (Class A) 6,032 340,808
-----------
4,235,131
-----------
Leisure (2.05%)
Galileo International, Inc. 3,885 207,605
Hasbro, Inc. 11,450 319,884
-----------
527,489
-----------
Media (5.74%)
AT & T Corp. - Liberty Media Group* 21,872 803,796
Central Newspapers, Inc. (Class A) 4,600 173,075
Harcourt General, Inc. 2,349 121,120
Washington Post Co. (The) (Class B) 700 376,425
-----------
1,474,416
-----------
Medical (9.13%)
American Home Products Corp. 10,022 576,265
Johnson & Johnson 186 18,228
Lilly (Eli) & Co. 318 22,777
Shire Pharmaceuticals Group Plc
(United Kingdom)* 4,000 33,354
Total Renal Care Holdings, Inc.* 100,000 1,556,250
Warner-Lambert Co. 778 53,974
Wellpoint Health Networks, Inc.* 1,020 86,573
-----------
2,347,421
-----------
Mortgage Banking (1.14%)
Fannie Mae 3,201 218,868
Freddie Mac 1,267 73,486
-----------
292,354
-----------
Office (1.86%)
Danka Business Systems Plc, American Depositary
Receipt (ADR) (United Kingdom) 85,000 478,125
-----------
Oil & Gas (1.83%)
Alberta Energy Co. Ltd. (Canada)# 1,389 44,390
Alberta Energy Co. Ltd. (Canada) 392 12,667
Schlumberger, Ltd. 3,000 191,063
Triton Energy, Ltd. 20,800 223,600
-----------
471,720
-----------
Retail (3.62%)
Dollar General Corp. 30,000 870,000
SYSCO Corp. 2,044 60,937
-----------
930,937
-----------
Telecommunications (16.04%)
Boston Communications Group, Inc.* 6,600 88,688
Com21, Inc.* 15,000 255,938
Commonwealth Telephone Enterprises, Inc. 20,000 808,750
Frontier Corp. 2,500 147,500
Intermedia Communications, Inc.* 3,850 115,500
MCI WorldCom, Inc.* 505 43,462
MediaOne Group, Inc.* 16,000 1,190,000
QUALCOMM, Inc.* 9,800 1,406,300
Time Warner Telecom, Inc.* 2,300 66,700
-----------
4,122,838
-----------
Tobacco (0.16%)
R.J. Reynolds Tobacco Holdings, Inc.* 1,333 41,990
-----------
Transport (0.45%)
CNF Transportation, Inc. 3,000 115,125
-----------
Utilities (0.54%)
MidAmerican Energy Holdings Co. 4,000 138,500
-----------
TOTAL COMMON STOCKS
(Cost $20,864,544) (98.97%) 25,445,860
------- ------------
PREFERRED STOCKS
Banks - Foreign (3.21%)
Fuji JGB Investment LLC, 9.87%,
Ser. A (Japan) (R) 940 824,850
------------
Office Equipment & Automation (1.11%)
Danka Business Systems Plc 500 285,000
------------
TOTAL PREFERRED STOCKS
(Cost $855,243) (4.32%) 1,109,850
------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (2.04%)
Investment in a joint repurchase
agreement with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
9.875% and 11.25% due 02-15-15
and 11-15-15) - Note B 4.80% $524 524,000
------------
Corporate Savings Account (0.00%)
Investor's Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 961
------------
TOTAL SHORT-TERM INVESTMENTS (2.04%) 524,961
------- ------------
TOTAL INVESTMENTS (105.33%) 27,080,671
------- ------------
OTHER ASSETS AND LIABILITIES, NET (5.33%) (1,371,694)
------- ------------
TOTAL NET ASSETS (100.00%) $25,708,977
======= ============
* Non-income producing security.
# Shares outstanding of common stock is expressed in local currency, as
shown parenthetically in security description.
(R) This security is exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $824,850 or 3.21% of net assets as of
June 30, 1999.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer; however, the security is U.S.
dollar denominated.
The percentage shown for each investment category is the total of that
category as a percentage of the nest assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
Per share earnings and dividends and their compound growth rates are shown for the most recently
reported ten year periods on common stocks, as well as price/earnings ratios.
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Sovereign Investors Fund on June 30, 1999. It is divided into
three main categories: common stocks, U.S. government and agencies
obligations and short-term investments. Common stocks are further broken
down by industry group. Short-term investments, which represent the Fund's
"cash" position, are listed last.
COMPOUND
NUMBER GROWTH MARKET
OF SHARES RATE VALUE
- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS (86.35%)
Advertising (2.29%)
11,600 Interpublic Group of Companies, Inc.
(The) @ 86 5/8 $1,004,850
One of the largest advertising agencies in the world -------------
Earnings P/S .70, .79, .82, .95, .99, 1.19, 1.36, 1.34, 1.81, 2.18 13.5%
Dividends P/S .21, .25, .27, .30, .33, .36, .40, .44, .50, .58 11.9%
Price/Earnings Ratio 33.5
Banks (6.78%)
10,763 Bank of America Corp. @ 73 5/16 789,062
Holding company for Bank of America
and NationsBank
Earnings P/S 1.45, 2.31, 1.67, .38, 2.26, 2.47, 3.03, 3.53, 4.07, 4.16 12.4%
Dividends P/S .55, .71, .74, .76, .82, .94, 1.04, 1.20, 1.37, 1.59 12.5%
Price/Earnings Ratio 15.7
8,860 Banc One Corp. @ 59 9/16 527,724
Ohio-based bank holding company
Earnings P/S .98, 1.10, 1.50, 1.88, 2.21, 2.49, 2.07, 2.60, 2.03, 3.13 4.9%
Dividends P/S .52, .57, .63, .73, .89, 1.02, 1.12, 1.24, 1.38, 1.52 13.0%
Price/Earnings Ratio 15.5
9,000 First Tennessee National Corp. @ 38 5/16 344,812
Tennessee-based bank holding company
Earnings P/S .57, .61, .63, .88, .76, 1.01, 1.12, 1.27, 1.49, 1.70 12.9%
Dividends P/S .24, .27, .29, .32, .38, .43, .49, .55, .62, .69 12.5%
Price/Earnings Ratio 19.9
15,000 SunTrust Banks, Inc. @ 69 7/16 1,041,563
Holding company for SunTrust Banks operating
through 700 offices in Florida, Georgia,
Tennessee and Alabama
Earnings P/S 1.31, 1.38, 1.45, 1.64, 1.89, 2.19, 2.47, 2.77, 3.13, 3.50 11.5%
Dividends P/S .39, .43, .47, .52, .58, .66, .74, .83, .93, 1.00 11.0%
Price/Earnings Ratio 17.9
6,500 Wells Fargo Co. @ 42 3/4 277,875
Diversified financial services company
providing banking, insurance, investments
and consumer finance
Earnings P/S .57, .63, .68, .73, .86, 1.05, 1.21, 1.37, 1.55, 1.75 13.3%
Dividends P/S .19, .21, .24, .27, .32, .38, .45, .53, .62, .70 15.6%
Price/Earnings Ratio 19.8
-------------
2,981,036
-------------
Beverages (1.50%)
17,000 PepsiCo, Inc. @ 38 11/16 657,687
Second largest soft drink company -------------
Earnings P/S .57, .68, .68, .82, .87, 1.07, 1.21, .74, .81, 1.40 10.5%
Dividends P/S .16, .19, .23, .26, .31, .35, .39, .45, .49, .52 14.0%
Price/Earnings Ratio 31.4
Building (2.22%)
33,800 Masco Corp. @ 28 7/8 975,975
Manufactures building, home improvement -------------
and consumer products
Earnings P/S .71, .46, .14, .37, .68, .79, .55, .70, 1.14, 1.39 7.8%
Dividends P/S .25, .27, .29, .31, .33, .35, .37, .39, .41, .43 6.2%
Price/Earnings Ratio 18.8
Chemicals (1.96%)
5,000 Air Products & Chemicals, Inc. @ 40 1/4 201,250
Producer of industrial gases
Earnings P/S .99, 1.04, 1.11, 1.23, .88, 1.03, 1.65, 1.87, 1.95, 2.54 11.0%
Dividends P/S .32, .35, .38, .42, .45, .48, .51, .54, .59, .66 8.4%
Price/Earnings Ratio 19.1
27,000 RPM, Inc. @ 14 3/16 383,063
Manufacturer of specialty chemicals
and coatings to waterproof and rustproof
structures
Earnings P/S .31, .34, .36, .43, .46, .64, .69, .65, .84, .91 12.7%
Dividends P/S .22, .24, .27, .29, .31, .34, .36, .39, .42, .45 8.3%
Price/Earnings Ratio 15.9
8,000 Sigma - Aldrich Corp. @ 34 7/16 275,500
Manufacturer of biochemical and organic
products used for research and diagnostics
Earnings P/S .65, .72, .62, .93, 1.04, 1.11, 1.26, 1.44, 1.61, 1.68 11.1%
Dividends P/S .09, .10, .11, .13, .15, .17, .19, .23, .26, .28 13.4%
Price/Earnings Ratio 19.3
-------------
859,813
-------------
Computers (1.71%)
8,000 Automatic Data Processing, Inc. @ 44 352,000
Largest independent computing services firm
in the U.S.
Earnings P/S .31, .36, .41, .46, .52, .59, .68, .77, .93, .99 12.1%
Dividends P/S .07, .08, .10, .11, .13, .15, .18, .21, .24, .28 14.2%
Price/Earnings Ratio 39.5
4,000 Hewlett-Packard Co. @ 100 1/2 402,000
Manufactures and services electronic
measurement, analysis and computation instruments
Earnings P/S .88, .77, .76, .87, 1.16, 1.54, 2.32, 2.46, 3.00, 2.84 13.9%
Dividends P/S .10, .11, .13, .20, .24, .29, .38, .46, .54, .62 22.5%
Price/Earnings Ratio 28.4
-------------
754,000
-------------
Containers (0.97%)
10,700 Bemis Co., Inc. @ 39 3/4 425,325
Producer of a broad range of flexible -------------
packaging and equipment and pressure sensitive materials
Earnings P/S .90, .99, .98, 1.14, .84, 1.33, 1.55, 1.84, 1.95, 2.15 10.2%
Dividends P/S .30, .36, .42, .46, .50, .54, .64, .72, .80, .88 12.7%
Price/Earnings Ratio 18.3
Diversified Operations (3.91%)
7,300 DuPont (E.I.) De Nemours & Co. @ 68 5/16 498,681
Nation's largest chemical manufacturer
Earnings P/S 1.77, 1.70, 1.57, .66, .12, 1.70, 2.72, 3.05, 2.43, 1.38 NMF
Dividends P/S .73, .81, .84, .87, .88, .91, 1.02, 1.12, 1.23, 1.37 7.2%
Price/Earnings Ratio 27.2
9,800 Johnson Controls, Inc. @ 695/16 679,262
Manufactures automotive systems and building controls
Earnings P/S 1.21, 1.07, 1.10, 1.43, 1.58, 1.90, 2.27, 2.55, 2.52, 3.89 13.9%
Dividends P/S .59, .61, .63, .65, .69, .74, .79, .83, .88, .94 5.3%
Price/Earnings Ratio 16.9
6,200 Minnesota Mining & Manufacturing Co. @ 86 15/16 539,013
Manufactures industrial, commercial and health care products
Earnings P/S 2.83, 2.94, 2.71, 2.76, 2.91, 2.81, 3.18, 3.36, 5.15, 3.28 1.7%
Dividends P/S 1.30, 1.46, 1.56, 1.60, 1.66, 1.76, 1.88, 1.92, 2.12, 2.20 6.0%
Price/Earnings Ratio 22.3
-------------
1,716,956
-------------
Electronics (4.37%)
7,700 Emerson Electric Co. @ 62 7/8 484,138
Produces and sells electrical/electronic products and systems
Earnings P/S 1.32, 1.38, 1.42, 1.48, 1.58, 2.02, 1.95, 2.28, 2.52, 2.80 8.7%
Dividends P/S .58, .64, .67, .70, .74, .80, .92, 1.01, 1.11, 1.21 8.5%
Price/Earnings Ratio 22.3
600 General Electric Co. @ 113 67,800
Dominant force in home appliances, electrical
power and financial services
Earnings P/S 1.09, 1.22, 1.27, 1.27, 1.16, 1.66, 1.89, 2.14, 2.42, 2.75 10.8%
Dividends P/S .43, .48, .52, .58, .65, .75, .85, .95, 1.08, 1.25 12.6%
Price/Earnings Ratio 35.2
8,200 Grainger (W.W.), Inc. @ 53 13/16 441,262
Leading distributor of electrical equipment
Earnings P/S 1.10, 1.16, 1.18, 1.28, 1.38, 1.64, 1.34, 1.99, 2.21, 2.42 9.2%
Dividends P/S .25, .28, .31, .33, .35, .39, .45, .49, .53, .59 10.0%
Price/Earnings Ratio 21.1
8,000 Honeywell, Inc. @ 115 7/8 927,000
Makes automation and control systems
Earnings P/S 3.55, 2.52, 2.37, 3.41, 1.78, 2.19, 2.44, 2.96, 3.51, 4.32 2.2%
Dividends P/S .57, .70, .77, .84, .91, .97, 1.01, 1.06, 1.09, 1.13 7.9%
Price/Earnings Ratio 23.1
-------------
1,920,200
-------------
Finance (5.16%)
26,125 Citigroup, Inc. @ 47 1/2 1,240,937
Diversified global financial services company
offering commercial/consumer banking,
investment banking, brokerage services and
insurance to consumer and corporate customers
around the world
Earnings P/S .32, .36, .48, .59, .86, .86, 1.09, 1.70, 2.12, 1.77 20.9%
Dividends P/S .03, .04, .05, .08, .11, .14, .18, .20, .27, .37 32.1%
Price/Earnings Ratio 18.5
15,000 Fannie Mae @ 68 3/8 1,025,625
Largest U.S. investor in home mortgage loans
providing funds to the mortgage market by
purchasing mortgage loans from various
nationwide lenders
Earnings P/S .78, 1.12, 1.25, 1.48, 1.71, 1.94, 2.16, 2.50, 2.83, 3.25 17.1%
Dividends P/S .11, .18, .26, .35, .46, .60, .68, .76, .84, .96 21.2%
Price/Earnings Ratio 18.7
-------------
2,266,562
-------------
Food (2.18%)
15,000 Bestfoods, Inc. @ 49 1/2 742,500
Manufactures consumer food and baking products
in 62 countries
Earnings P/S 1.06, 1.20, 1.30, 1.39, 1.48, 1.58, 1.84, 1.85, 2.12, 2.22 8.6%
Dividends P/S .44, .49, .54, .60, .64, .69, .74, .79, .86, .94 8.8%
Price/Earnings Ratio 20.5
10,000 Flowers Industries, Inc. @ 21 11/16 216,875
Produces and markets a full line of baked
foods in the United States
Earnings P/S .37, .31, .36, .35, .46, .45, .42, .44, .62, .83 9.4%
Dividends P/S .24, .28, .30, .32, .34, .35, .37, .40, .43, .48 8.0%
Price/Earnings Ratio 22.2
-------------
959,375
-------------
Furniture (1.83%)
29,000 Leggett & Platt, Inc. @ 27 13/16 806,562
Produces intermediate products for the home furnishings industry -------------
Earnings P/S .33, .33, .16, .38, .49, .65, .78, .81, 1.05, 1.23 15.7%
Dividends P/S .09, .105, .108, .12, .14, .16, .19, .23, .27, .32 15.1%
Price/Earnings Ratio 18.8
Insurance (6.13%)
7,400 AFLAC Corp. @ 47 7/8 354,275
Global specialty insurer
Earnings P/S .27, .38, .46, .57, .72, .90, 1.14, 1.21, 2.28, 1.74 23.0%
Dividends P/S .08, .09, .10, .11, .13, .15, .17, .19, .22, .25 13.5%
Price/Earnings Ratio 24.1
6,450 American International Group, Inc. @ 117 1/16 755,053
Broadly based property-casualty insurance organization
Earnings P/S 1.31, 1.36, 1.42, 1.46, 1.74, 1.97, 2.27, 2.64, 3.04, 3.48 11.5%
Dividends P/S .07, .08, .09, .10, .11, 13, .14, .16, .19, .21 13.0%
Price/Earnings Ratio 30.5
15,000 ReliaStar Financial Corp. @ 43 3/4 656,250
Financial services company engaged
in life/health insurance and consumer finance
Earnings P/S .68, .79, .86, .96, 1.26, 1.53, 2.08, 2.46, 2.61, 2.89 17.4%
Dividends P/S .30, .32, .35, .37, .39, .44, .49, .55, .61, .71 10.0%
Price/Earnings Ratio 13.8
17,000 UNUM Corp. @ 54 3/4 930,750
Holding company for Unum Life Insurance
Company of America
Earnings P/S .97, 1.35, 1.51, 1.78, 1.89, 1.20, 1.88, 1.72, 2.43, 2.69 12.0%
Dividends P/S .14, .19, .25, .31, .38, .46, .52, .55, .57, .59 17.3%
Price/Earnings Ratio 16.9
-------------
2,696,328
-------------
Leisure (0.86%)
13,500 Hasbro, Inc. @ 27 15/16 377,156
Designs, manufactures and markets toys, games -------------
and interactive software
Earnings P/S .46, .46, .42, .89, .96, .84, .86, .98, 1.13, 1.07 9.8%
Dividends P/S .04, .05, .07, .08, .10, .12, .13, .17, .20, .21 20.2%
Price/Earnings Ratio 19.2
Machinery (2.53%)
10,500 Dover Corp. @ 35 367,500
Manufactures a variety of specialized
industrial products
Earnings P/S .57, .64, .56, .54, .66, .83, 1.17, 1.67, 1.72, 1.72 13.1%
Dividends P/S .18, .19, .21, .22, .23, .25, .28, .32, .36, .40 9.3%
Price/Earnings Ratio 23.0
16,300 Pentair, Inc. @ 453/4 745,725
Manufactures enclosures for electrical,
electronic, woodworking and power tool equipment
Earnings P/S .93, .96, 1.01, 1.06, 1.19, 1.20, 1.40, 1.73, 2.11, 2.57 12.0%
Dividends P/S .27, .29, .31, .33, .34, .36, .40, .50, .54, .60 9.3%
Price/Earnings Ratio 15.6
-------------
1,113,225
-------------
Media (2.73%)
11,400 Gannett Co., Inc. @ 71 3/8 813,675
Publishes 81 daily/50 nondaily newspapers,
operates 10 TV, 8 FM and 7 AM stations
Earnings P/S 1.23, 1.17, 1.04, 1.13, 1.32, 1.53, 1.67, 1.69, 2.73, 3.42 12.0%
Dividends P/S .56, .61, .62, .63, .65, .67, .69, .71, .74, .78 3.8%
Price/Earnings Ratio 23.2
7,200 McGraw-Hill Cos., Inc. @ 53 15/16 388,350
Provides informational products and services
for business and industry
Earnings P/S .21, .88, .76, .78, .06, 1.03, 1.14, 1.25, 1.46, 1.68 25.9%
Dividends P/S .50, .54, .55, .56, .57, .58, .60, .66, .72, .78 5.1%
Price/Earnings Ratio 28.0
-------------
1,202,025
-------------
Medical (13.46%)
18,000 Abbott Laboratories @ 45 1/2 819,000
Major pharmaceutical and health care firm
Earnings P/S .49, .56, .61, .71, .82, .91, 1.03, 1.17, 1.32, 1.49 13.2%
Dividends P/S .17, .20, .24, .29, .33, .37, .41, .53, .59 14.8%
Price/Earnings Ratio 27.2
4,000 American Home Products Corp. @ 57 1/2 230,000
Pharmaceutical and health care company
Earnings P/S .88, 1.52, 1.03, .92, 1.65, 1.23, 1.62, 1.15, 1.54, 2.06 9.9%
Dividends P/S .49, .54, .59, .67, .72, .74, .76, .78, .83, .87 6.6%
Price/Earnings Ratio 32.8
11,100 Baxter International, Inc. @ 60 5/8 672,938
The company operates four divisions: renal,
biotech, cardiovascular and intravenous
systems, and international distribution
Earnings P/S 1.49, (.05), 2.10, 1.80, 1.69, (.62), 1.41, 2.07, .99, 1.03 NMF
Dividends P/S .56, .64, .74, .86, 1.00, 1.03, 1.11, 1.17, 1.14, 1.16 8.4%
Price/Earnings Ratio 20.7
15,000 Bristol-Myers Squibb Co. @ 7 7/16 1,056,563
Produces pharmaceuticals, medical devices,
non-prescription health products
Earnings P/S .72, 1.67, 1.89, 2.00, 1.61, 1.97, 2.02, 1.98, 3.13, 3.55 19.4%
Dividends P/S 1.02, 1.10, 1.25, 1.40, 1.45, 1.47, 1.49, 1.51, 1.53, 1.60 5.1%
Price/Earnings Ratio 35.0
6,000 Johnson & Johnson @ 98 588,000
Major producer of prescription
and non-prescription drugs, toiletries,
medical instruments and supplies
Earnings P/S .80, .85, 1.07, 1.20, 1.35, 1.53, 1.80, 2.11, 2.42, 2.68 14.4%
Dividends P/S .28, .33, .39, .45, .51, .57, .64, .74, .85, .97 14.8%
Price/Earnings Ratio 32.6
20,000 Merck & Co., Inc. @ 74 1,480,000
World's largest ethical drug manufacturer
Earnings P/S .63, .76, .92, 1.1, .94, 1.2, 1.4, 1.6, 1.9, 2.2 14.9%
Dividends P/S .29, .34, .40, .48, .53, .58, .64, .71, .86, .95 14.2%
Price/Earnings Ratio 30.7
11,000 Schering-Plough Corp. @ 53 583,000
Discovers, develops, manufactures and markets
pharmaceutical and health care products worldwide
Earnings P/S .27, .32, .36, .43, .51, .59, .69, .80, .94, 1.15 17.5%
Dividends P/S .11, .13, .16, .19, .22, .25, .28, .32, .37, .43 16.4%
Price/Earnings Ratio 38.9
7,000 Warner-Lambert Co. @ 69 3/8 485,625
Major producer of consumer health care,
pharmaceutical and confectionery products
Earnings P/S .51, .60, .69, .80, .80, .86, .81, .90, 1.05, 1.48 12.5%
Dividends P/S .21, .25, .29, .34, .38, .41, .43, .46, .51, .64 13.1%
Price/Earnings Ratio 35.7
-------------
5,915,126
-------------
Office (1.61%)
11,000 Pitney Bowes, Inc. @ 64 1/4 706,750
Manufactures office automation equipment -------------
Earnings P/S .60, .67, .88, .94, .95, 1.12, 1.28, 1.51, 1.73, 2.01 14.4%
Dividends P/S .26, .30, .34, .39, .45, .52, .60, .69, .80, .90 14.8%
Price/Earnings Ratio 28.8
Oil & Gas (3.76%)
5,200 Chevron Corp. @ 95 3/16 494,975
One of the largest integrated, international
oil companies with interest in petrochemicals
Earnings P/S .37, 3.05, 2.69, 1.69, 3.14, 2.09, 3.03, 2.64, 4.35, 3.68 29.1%
Dividends P/S 1.40, 1.48, 1.63, 1.65, 1.75, 1.85, 1.93, 2.08, 2.28, 2.44 6.4%
Price/Earnings Ratio 31.7
6,200 Mobil Corp. @ 99 613,800
One of the largest integrated, international
oil companies with interest in petrochemicals
Earnings P/S 2.20, 2.05, 2.63, 1.43, 2.74, 1.92, 2.61, 3.83, 4.05, 3.21 4.3%
Dividends P/S 1.28, 1.41, 1.56, 1.60, 1.63, 1.70, 1.81, 1.96, 2.12, 2.28 6.6%
Price/Earnings Ratio 33.2
9,000 Royal Dutch Petroleum Co., American Depository
Receipt (Netherlands) @ 60 1/4 542,250
Owns 60% of the Royal Dutch/Shell Group of
companies. Operations include production,
transportation, refining and sales of oil/natural gas
Earnings P/S 2.06, 2.07, 1.34, 1.53, 1.63, 1.67, 2.2, 2.48, 2.40, 1.44 NMF
Dividends P/S .841, 1.063, 1.043, 1.217, 1.183, 1.211, 1.367, 1.449, 1.456, 1.587 7.3%
Price/Earnings Ratio 33.0
-------------
1,651,025
-------------
Retail (11.69%)
20,000 Albertson's, Inc. @ 519/16 1,031,250
One of the largest retail food-drug chains
in the United States
Earnings P/S .74, .83, .94, .95, 1.24, 1.58, 1.80, 1.96, 1.99, 2.24 13.1%
Dividends P/S .19, .23, .27, .31, .35, .42, .50, .58, .63, .67 15.0%
Price/Earnings Ratio 19.8
20,000 Dayton Hudson Corp. @ 65 1,300,000
General merchandiser selling through Target
and Marvyn stores
Earnings P/S .89, .92, .75, .71, .76, .96, .80, 1.07, 1.48, 1.94 9.0%
Dividends P/S .19, .22, .24, .25, .27, .28, .29, .31, .33, .36 7.4%
Price/Earnings Ratio 29.6
6,000 Home Depot, Inc. (The) @ 64 7/16 386,625
Operates a chain of retail building supply/
home improvement warehouse stores
Earnings P/S .11, .14, .19, .25, .33, .42, .49, .61, .77, 1.03 28.2%
Dividends P/S .008, .012, .02, .03, .04, .05, .06, .08, .10, .12 35.1%
Price/Earnings Ratio 46.4
13,000 Lowe's Cos., Inc. @ 56 11/16 736,938
Retail distributes building materials
and supplies through stores in the United States
Earnings P/S .25, .24, .18, .29, .45, .70, .68, .86, 1.03, 1.37 20.8%
Dividends P/S .06, .065, .068, .07, .08, .09, .093, .10, .11, .12 8.0%
Price/Earnings Ratio 32.7
14,000 McDonald's Corp. @ 4 15/16 578,375
Develops, operates, franchises and services a
worldwide system of restaurants
Earnings P/S .48, .54, .57, .63, .71, .82,, .97, 1.08, 1.15, 1.26 11.3%
Dividends P/S .07, .08, .09, .10, .11, .12, .13, .15, .16, .18 11.1%
Price/Earnings Ratio 29.1
33,200 SYSCO Corp. @ 29 13/16 989,775
Largest distributor of food service products
Earnings P/S .37, .38, .43, .47, .55, .62, .71, .68, .87, .98 11.4%
Dividends P/S .046, .05, .07, .11, .14, .18, .22, .26, .30,.36 25.7%
Price/Earnings Ratio 29.0
2,400 Wal-Mart Stores, Inc. @ 48 1/4 115,800
Operates chain of discount department stores
Earnings P/S .19, .24, .29, .35, .44, .51, .59, .60, .67, .78 16.9%
Dividends P/S .03, .04, .05, .06, .07, .09, .10. .11, .13, .15 19.5%
Price/Earnings Ratio 41.3
-------------
5,138,763
-------------
Tobacco (1.37%)
15,000 Philip Morris Cos., Inc. @ 40 3/16 602,813
Global tobacco, brewing and food company -------------
Earnings P/S 1.05, 1.27, 1.45, 1.65, 1.67, 1.52, 2.08, 2.47, 2.68, 2.64 10.8%
Dividends P/S .42, .52, .64, .78, .87, 1.01, 1.22, 1.47, 1.60, 1.68 16.7%
Price/Earnings Ratio 12.3
Utilities (7.33%)
6,000 ALLTEL Corp. @ 71 1/2 429,000
Provides wireline and wireless communications
and information services
Earnings P/S 1.13, 1.20, 1.18, 1.18, 1.35, 1.56, 1.61, 1.50, 2.53, 2.24 7.9%
Dividends P/S .59, .66, .71, .76, .82, .90, .98, 1.06, 1.12, 1.18 8.0%
Price/Earnings Ratio 27.1
9,000 Ameritech Corp. @ 73 1/2 661,500
One of the world's largest communications companies
Earnings P/S 1.15, 1.18, 1.19, 1.13, 1.33, 1.04, 1.83, 1.78, 2.06, 3.14 11.8%
Dividends P/S .75, .81, .86, .89, .93, .97, 1.02, 1.08, 1.15, 1.22 5.6%
Price/Earnings Ratio 26.5
11,000 Bell Atlantic Corp. @ 65 3/8 719,125
Telecommunications company providing voice
and data services in the Mid-Atlantic region
Earnings P/S 1.36, 1.69, 1.09, 1.69, 1.63, 1.63, 2.04, 2.00, 1.45, 1.83 3.4%
Dividends P/S 1.10, 1.18, 1.26, 1.30, 1.34, 1.38, 1.40, 1.44, 1.51, 1.54 3.8%
Price/Earnings Ratio 20.7
15,000 CenturyTel, Inc. @ 39 3/4 596,250
Louisiana-based telecommunications company
Earnings P/S .40, .42, .48, .72, .93, 1.06, 1.41, 1.43, 2.08, 3.02 25.2%
Dividends P/S .18, .19, .191, .196, .21, .213, .22, .24, .25, .26 4.2%
Price/Earnings Ratio 24.1
12,400 Questar Corp. @ 19 1/8 237,150
Diversified holding company for Utah, Wyoming
and Colorado natural gas transmission,
distribution and storage
Earnings P/S .82, .78, .85, .80, 1.12, .99, .60, 1.15, 1.27, 1.21 4.4%
Dividends P/S .47, .49, .51, .52, .55, .57, .58, .60, .62, .65 3.7%
Price/Earnings Ratio 14.9
10,000 SBC Communications, Inc. @ 58 580,000
Provides telephone service throughout
the United States and internationally
Earnings P/S .91, .92, .90, 1.09, (1.37), 1.53, (1.66), 1.74, .88, 2.01 9.2%
Dividends P/S .64, .68, .71, .73, .75, .78, .82, .85, .89, .93 4.2%
Price/Earnings Ratio 23.6
-------------
3,223,025
-------------
TOTAL COMMON STOCKS
(Cost $31,445,672) 37,954,577
-------------
UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS (5.39%)
$1,500 United States Treasury, Bond 10.750%,
08-15-05 @ 140.406 1,864,680
100 United States Treasury, Note 7.875%,
11-15-99 @ 89.844 101,031
400 United States Treasury, Note 5.875%,
09-30-02 @ 104.344 402,500
-------------
TOTAL UNITED STATES GOVERNMENT
AND AGENCIES OBLIGATIONS
(Cost $2,446,719) 2,368,211
-------------
INTEREST
RATE
--------
SHORT-TERM INVESTMENTS (9.63%)
4,231 Joint Repurchase Agreement (9.63%)
Investment in a joint repurchase
agreement transaction with
SBC Warburg, Inc. - Dated 06-30-99,
due 07-01-99 (Secured by U.S. Treasury
Bonds 9.875% and 11.250%
due 02-15-15 and 11-15-15) - Note B 4.80% 4,231,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 895
------------
TOTAL SHORT-TERM INVESTMENTS (9.63%) 4,231,895
------- ------------
TOTAL INVESTMENTS (101.37%) 44,554,683
------- ------------
OTHER ASSETS AND LIABILITIES, NET (1.37%) (600,577)
------- ------------
TOTAL NET ASSETS (100.00%) $43,954,106
======= ============
NMF = No Meaningful Figure
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Bond Fund on June 30, 1999. It is divided into three main
categories: bonds, warrants and short-term investments. Bonds and warrants
are further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- --------- ------- -------------- ---------
<S> <C> <C> <C> <C>
BONDS
Apparel Manufacturers (3.36%)
St John Knits International, Inc.,
Sr Sub Notes 07-01-09 (R) 12.500% B- $400 $394,464
---------
Automobile/Trucks (1.53%)
ERAC USA Finance Co.,
Gtd Med Term Note 06-15-00 (R) 7.000 BBB+ 35 35,287
Note 02-15-05 (R) 6.625 BBB+ 49 47,417
Chrysler Financial Co. LLC,
Medium Term Note
Ser S 11-15-01 5.690 A+ 30 29,597
Ford Motor Co.,
Deb 02-01-29 6.375 A 55 47,745
United Rentals, Inc.,
Note 04-01-09 (R) 9.000 BB- 20 19,600
---------
179,646
---------
Banks - Foreign (0.46%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom)
10-15-04 (Y) 8.200 AA- 30 31,713
Scotland International Finance
No. 2, B.V., Gtd Sub Note
(Netherlands) 11-01-06 (R) (Y) 8.850 A+ 20 21,875
---------
53,588
---------
Banks - United States (2.04%)
Banc One Corp.,
Sub Deb 10-15-26 7.625 A 30 30,040
BankBoston Corp.,
Sub Note 12-01-05 6.625 BBB+ 30 29,335
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 40 39,060
First Union National Bank,
Sub Note 12-01-28 6.500 A 30 26,038
NB Capital Trust IV,
Gtd Cap Security 04-15-27 8.250 A- 20 20,371
National Westminster Bank Plc -
New York Branch,
Sub Note 05-01-01 9.450 AA- 5 5,282
Norwest Corp.,
Med Term Sr Note
Ser G 09-15-02 6.375 A+ 30 30,020
RBSG Capital Corp.,
Gtd Cap Note 03-01-04 10.125 A 15 16,786
Security Pacific Corp.,
Sub Note 03-01-01 11.000 A 40 42,964
---------
239,896
---------
Beverages (0.25%)
Canadaigua Brands, Inc.,
Sr Sub Notes Ser C 12-15-03 8.750 B+ 30 29,475
---------
Broker Services (0.68%)
Merrill Lynch & Co., Inc.,
Note 11-15-18 6.875 AA- 75 70,336
Salomon Smith Barney Holdings, Inc.,
Note 10-15-02 6.500 A 10 9,997
---------
80,333
---------
Building (0.41%)
Oakwood Homes Corp.,
Sr Note 03-01-04 7.875 BBB- 20 19,419
Owens Corning,
Note 03-15-09 7.000 BBB- 30 28,276
---------
47,695
---------
Chemicals (0.61%)
Akzo Nobel, Inc.,
Bond 11-15-03 (R) 6.000 A 15 14,550
Equistar Chemicals, L.P.,
Sr Note 02-15-04 (R) 8.500 BBB- 30 30,000
Monsanto Co.,
Deb 12-01-28 (R) 6.600 A 30 27,018
---------
71,568
---------
Computers (1.19%)
Ceridian Corp.,
Sr Note 06-01-04 (R) 7.250 BBB 30 30,025
International Business Machines Corp.,
Med Term Note 09-22-03 5.370 A+ 35 33,862
PSINet, Inc.,
Sr Note 11-01-08 11.500 B- 25 26,250
Primark Corp.,
Sr Sub Note 12-15-08 9.250 B+ 20 19,000
Verio, Inc.,
Sr Note 04-01-05 10.375 B- 30 30,300
---------
139,437
---------
Energy (0.52%)
AES Corp.,
Sr Sub Note 07-15-06 10.250 B+ 10 10,300
Midamerican Energy Holdings
Sr Bond 09-15-28 8.480 BBB- 20 21,344
P & L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 30 29,850
---------
61,494
---------
Finance (6.33%)
Associates Corp. of North America,
Sr Note 04-15-03 6.000 AA- 75 73,949
Bombardier Capital, Inc.,
Note 01-15-02 (R) 6.000 BBB+ 30 29,355
CIT Group Holdings, Inc.,
Med Term Note 06-17-02 7.125 A+ 35 35,660
Note 10-15-01 5.500 A+ 35 34,401
Commercial Credit Co.,
Note 07-01-02 6.450 A+ 45 45,094
Constitution Capital Trust I,
Gtd Cap Security 04-15-27 (R) 9.150 BBB 28 28,172
EES Coke Battery Co., Inc.,
Sr Sec Note 04-15-02 (R) 7.125 BBB 6 6,267
Finova Capital Corp.,
Note 11-01-02 6.250 A- 25 24,630
Ford Capital B.V.,
Gtd Deb (Netherlands)
05-15-02 (Y) 9.875 A 50 54,232
Ford Motor Credit Co.,
Note 04-28-03 6.125 A 35 34,508
General Motors Acceptance Corp.,
Med Term Note 04-17-01 6.850 A 45 45,429
Note 12-01-01 6.375 A 35 34,989
Household Finance Corp.,
Note 11-01-02 5.875 A 40 38,948
Sr Note 09-25-04 5.875 A 40 38,492
Sr Note 02-01-09 5.875 A 20 18,171
JCP Master Credit Card Trust,
Pass Thru Ctf Ser C Class A
06-15-00 9.625 AA+ 95 97,620
Marlin Water Trust & Marlin Water
Capital Corp., Sr Sec Note
12-15-01 (R) 7.090 BBB 35 35,087
WMC Finance (USA) Ltd.,
Gtd Note (Australia) 11-15-03 (Y) 6.500 A 65 63,748
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A
06-15-04 (R) 8.400 BBB- 4 3,367
---------
742,119
---------
Food (0.17%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B 20 20,600
---------
Government - Foreign (0.19%)
Nova Scotia, Province of,
Deb (Canada) 11-15-19 (Y) 8.250 A- 20 22,461
---------
Government - U.S. (33.36%)
United States Treasury,
Bond 08-15-17 8.875 AAA 622 794,605
Bond 02-15-23 7.125 AAA 700 775,796
Note 05-15-02 7.500 AAA 459 481,519
Note 08-15-03 5.750 AAA 335 335,208
Note 02-15-05 7.500 AAA 645 694,381
Note 07-15-06 7.000 AAA 787 833,606
---------
3,915,115
---------
Government - U.S. Agencies (9.65%)
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 12-01-12 6.500 AAA 39 38,839
30 Yr Pass Thru Ctf 06-01-29 6.000 AAA 20 18,787
Note 04-15-03 5.750 AAA 310 306,562
Pass Thru Ctf Ser 1997-M8
Class A-1 01-25-22 6.940 AAA 3 2,828
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 02-15-28 to
04-15-29 6.500 AAA 98 94,441
30 Yr Pass Thru Ctf 06-15-28 to
08-15-28 7.000 AAA 334 329,565
30 Yr Pass thru Ctf 07-15-26 8.000 AAA 27 28,116
30 Yr Pass Thru Ctf 12-15-28 6.500 AAA 35 33,426
30 Yr Pass Thru Ctf 11-15-28 to
04-15-29 7.000 AAA 253 249,433
30 Yr Pass Thru Ctf 02-01-2 7.500 AAA 30 30,281
---------
1,132,278
---------
Insurance (1.48%)
Conseco, Inc.,
Note 06-15-05 6.800 BBB 15 14,166
Equitable Life Assurance Society of
the United States,
Surplus Note 12-01-05 (R) 6.950 A 15 14,971
Fairfax Financial Holdings Ltd.,
Note (Canada) 04-15-26 (Y) 8.300 BBB+ 15 14,401
Liberty Mutual Insurance Co.,
Surplus Note 05-04-07 (R) 8.200 A+ 30 31,940
Surplus Note 10-15-26 (R) 7.875 A+ 10 9,932
Massachusetts Mutual Life
Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 5 5,157
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) 7.500 AA- 5 4,872
Phoenix Home Life Mutual
Insurance Co.,
Surplus Note 12-01-06 (R) 6.950 A+ 15 14,500
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 6.625 AA 20 19,250
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 A- 25 25,420
Willis Corroon Group Plc,
Sr Sub Note 02-01-09 (R) 9.000 B+ 20 19,325
---------
173,934
---------
Leisure (1.34%)
HMH Properties, Inc.,
Sr Gtd Sec Note Ser A 08-01-05 7.875 BB 20 18,850
Harrah's Operating Co., Inc.,
Sr Note 01-15-09 7.500 BBB- 30 29,074
Sr Sub Note 12-15-05 7.875 BB+ 10 9,650
Marvel Enterprises, Inc.,
Sr Note 06-15-09 (R) 12.000 B- 25 25,812
Premier Parks, Inc.,
Sr Note 06-15-07 9.750 B- 20 20,200
SC International Services, Inc.,
Sr Sub Note Ser B 09-01-07 9.250 B 20 20,600
Sun International Hotels Ltd.,
Gtd Sr Sub Note (Bahamas)
03-15-07 (Y) 9.000 B+ 8 8,000
Gtd Sr Sub Note (Bahamas)
12-15-07 (Y) 8.625 B+ 5 4,900
Trump Hotels & Casino Resorts
Funding, Inc./Holdings, L.P.,
Sr Note 06-15-05 15.500 B- 5 5,100
Waterford Gaming LLC,
Sr Note 03-15-10 (R) 9.500 B+ 15 15,000
---------
157,186
---------
Manufacturing (0.03%)
Globe Manufacturing Corp.,
Gtd Sr Sub Note 08-01-08 10.000 B- 5 3,750
---------
Media (4.24%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02 9.250 B+ 17 17,212
Sr Note Ser B 07-15-03 8.125 B 10 9,700
CSC Holdings, Inc.,
Sr Note 07-15-08 7.250 BB+ 20 19,054
Sr Sub Deb 05-15-16 10.500 BB- 20 23,000
Comcast Cellular Holdings, Inc.,
Sr Note Ser B 05-01-07 9.500 BBB- 55 61,325
Continental Cablevision, Inc.,
Sr Note 05-15-06 8.300 BBB 25 26,560
Falcon Holdings Group L.P.,
Sr Deb Ser B 04-15-10 8.375 B 20 19,750
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 (R) 8.625 B+ 45 42,300
Sr Sub Note Ser B 10-01-09 8.750 B+ 7 6,843
Jones Intercable, Inc.,
Sr Note 04-15-08 7.625 BB+ 35 35,000
Liberty Media Group,
Note 07-15-29 (R) 8.500 BBB- 40 39,891
Mediacom LLC/Mediacom
Capital Corp.,
Sr Note Ser B 04-15-08 8.500 B+ 20 19,200
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 23 23,703
Rogers Cablesystems Ltd.,
Sec 2nd Priority Note (Canada)
08-01-02 (Y) 9.625 BB+ 21 21,997
TCI Communications, Inc.,
Sr Deb 02-15-26 7.875 AA- 30 31,615
TKR Cable I, Inc.,
Sr Deb 10-30-07 10.500 AA- 8 8,525
TV Guide, Inc.,
Sr Sub Note 03-01-09 (R) 8.125 B+ 35 33,162
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB 28 31,698
Deb 05-15-29 6.625 BBB 30 26,466
---------
497,001
---------
Medical (1.20%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06 (Y) 10.750 B+ 7 7,070
Sr Note (Canada) 01-15-06 (R) (Y) 10.750 B+ 30 30,300
Fresenius Medical Care Capital
Trust II, Gtd Trust Preferred
Security 02-01-08 7.875 B+ 10 9,300
Guidant Corp.,
Note 02-15-06 6.150 A- 25 23,438
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 10.750 B+ 23 26,220
Sr Sub Note 07-01-09 (R) 9.875 B+ 30 30,450
Sola International, Inc.,
Note 03-15-08 6.875 BBB- 10 8,760
Watson Pharmaceuticals, Inc.,
Sr Note 05-15-08 7.125 BBB- 5 4,775
---------
140,313
---------
Metal (0.56%)
Golden Northwest Aluminium, Inc.,
1st Mtg Note 12-15-06 12.000 BB- 15 15,488
National Steel Corp.,
1st Mtg Bond Ser D 03-01-09 9.875 B+ 20 20,400
Rohm & Haas Co.,
Deb 07-15-29 (R) 7.850 A- 30 29,978
---------
65,866
---------
Mortgage Banking (2.76%)
Citibank Credit Card Master Trust I,
Pass Thru Ctf Ser 1997-7
Class A 08-15-02 6.350 AAA 45 45,306
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2
Class A-5 08-15-25 8.100 AAA 10 10,250
Credit Suisse First Boston Mortgage
Securities Corp., Commercial Mtg
Pass Thru Ctf Ser 1998-C1
Class A-1A 12-17-07 6.260 AAA 23 22,912
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3
Class A-9 02-15-29 6.570 AAA 25 24,281
First Union-Lehman Brothers-Bank of
America, Pass Thru Ctf Ser 1998-C2
Class A-1 06-18-07 6.280 AAA 33 32,641
GMAC Commercial Mortgage
Securities, Inc., Pass Thru Ctf
Ser 1997-C2 Class A-3 11-15-07 6.566 Aaa 25 24,281
Homeside Lending, Inc.,
Medium Term Sr Note 05-15-03 6.200 A+ 25 24,570
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1
Class A-4 03-20-25 6.600 AAA 15 14,801
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D
Class AF-7 12-15-38 6.485 AAA 16 15,868
Morgan Stanley Capital I Inc.,
Pass Thru Ctf Ser 1997-WF1
Class A-1 10-15-06 (R) 6.830 AAA 95 92,514
Salomon Brothers Mortgage
Securities VII, Inc., Mtg Pass Thru
Ctf Ser 1997-HUD2 Class A-2
07-25-24 6.750 Aaa 6 5,974
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1
Class A-8 06-15-28 7.220 AAA 10 10,128
---------
323,526
---------
Oil & Gas (1.92%)
Burlington Resources, Inc.,
Deb 03-01-29 7.375 A- 30 29,619
CMS Panhandle Holding Co.,
Sr Note 07-15-29 (R) 7.000 BBB- 20 18,300
Camuzzi Gas Pampeana S.A.,
Bond (Argentina) 12-15-01 (Y) 9.250 BBB- 10 9,800
Conoco, Inc.,
Sr Note 04-15-29 6.950 A- 35 32,768
El Paso Energy Corp.,
Sr Note 05-15-09 6.750 BBB- 25 23,875
Petroleos Mexicanos Finance Ltd.,
Note (Cayman Islands)
02-15-08 (R) (Y) 6.550 Baa1 30 28,950
Petroleos Mexicanos,
Gtd Sr Note (Mexico)
12-02-08 (R) (Y) 9.375 BB 10 9,800
Petroleum Geo-Services, Inc.
Sr Note (Norway) 03-30-08 (Y) 6.625 BBB 30 28,240
Triton Energy Ltd.,
Sr Note 04-15-02 8.750 B+ 35 34,300
Valero Energy Corp.,
Note 03-15-06 7.375 BBB- 10 9,721
---------
225,373
---------
Paper & Paper Products (0.47%)
Fort James Corp.,
Sr Note 09-15-02 6.500 BBB- 5 5,002
Packaging Corp. of America,
Sr Sub Note 04-01-09 (R) 9.625 B 20 20,300
S.D. Warren Co.,
Sr Sub Note Ser B 12-15-04 12.000 B+ 28 29,890
---------
55,192
---------
Real Estate Investment Trust (0.94%)
American Health Properties, Inc.,
Note 01-15-07 7.500 BBB- 20 17,420
Cabot Industrial Properties, L.P.,
Note 05-01-04 7.125 BBB- 25 24,358
Camden Property Trust,
Sr Note 04-15-04 7.000 BBB 30 29,347
Liberty Property L.P.,
Medium Term Note 06-05-02 6.600 BBB- 10 9,700
ProLogis Trust,
Note 04-15-04 6.700 BBB+ 25 24,250
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 7.300 BBB- 5 4,957
---------
110,032
---------
Retail (1.32%)
Great Atlantic & Pacific Tea Co., Inc.
(The), Note 04-15-07 7.750 BBB- 50 48,416
Meyer (Fred), Inc.,
Note 03-01-08 7.450 BBB- 50 50,443
Pathmark Stores, Inc.,
Sub Note 06-15-02 11.625 CCC+ 40 40,800
Safeway, Inc.,
Sr Note 11-15-01 5.875 BBB 15 14,751
---------
154,410
---------
Telecommunications (6.72%)
AXIA, Inc.,
Sr Sub Note 07-15-08 10.750 B- 17 16,745
Clearnet Communications, Inc.,
Sr Disc Notes, Step Coupon
(10.125%, 05-01-04) (Canada)
05-01-09 (A) (Y) Zero B 25 14,250
Electric Lightwave, Inc.,
Note 05-15-04 (R) 6.050 AA- 15 14,569
GTE North, Inc.,
Deb Ser H 11-15-08 5.650 AA- 75 69,044
Global Crossing Holdings Ltd.,
Sr Note 05-15-08 9.625 BB 25 27,000
Hermes Europe Railtel B.V.,
Sr Note (Netherlands)
08-15-07 (Y) 11.500 B 15 15,713
Sr Note (Netherlands)
01-15-09 (Y) 10.375 B 10 10,125
Intermedia Communications, Inc.,
Sr Note Ser B 06-01-08 8.600 B 5 4,600
LCI International, Inc.,
Sr Note 06-15-07 7.250 BB+ 30 29,457
Lenfest Communications,
Sr Sub Note 06-15-06 10.500 BB- 40 46,000
McLeodUSA, Inc.,
Sr Note 11-01-08 9.500 B+ 20 20,100
Sr Note 02-15-09 (R) 8.125 B+ 20 18,600
Metromedia Fiber Network, Inc.,
Sr Note Ser B 11-15-08 10.000 B 45 46,238
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07 (Y) 12.000 B 15 17,456
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 10.750 B 25 25,688
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B- 35 38,325
Nextel Communications, Inc.,
Sr Disc Note 08-15-04 9.750 B- 19 19,285
Sr Disc Note, Step Coupon
(9.95%, 02-15-03) 02-15-08 (A) Zero B- 15 10,350
Orange Plc,
Sr Note (United Kingdom)
08-01-08 (Y) 8.000 BB- 30 28,425
Pegasus Communications Corp.,
Sr Note Ser B 10-15-05 9.625 B- 10 9,800
Qwest Communications
International, Inc.,
Sr Note Ser B 11-01-08 7.250 BB+ 30 28,950
RCN Corp.,
Sr Note 10-15-07 10.000 B- 20 20,100
Sprint Capital Corp.,
Gtd Note 05-01-04 5.875 BBB+ 60 57,500
Gtd Note 05-01-19 6.900 BBB+ 35 32,409
Viatel, Inc.,
Sr Sec Note 04-15-08 11.250 B- 30 30,450
WorldCom, Inc.,
Sr Note 08-15-01 6.125 BBB+ 60 59,810
Sr Note 08-15-28 6.950 BBB+ 50 47,398
Worldwide Fiber, Inc.,
Sr Note (Canada)
12-15-05 (R) (Y) 12.500 B- 30 30,150
---------
788,537
---------
Textile (0.30%)
Tropical Sportswear International Corp.,
Gtd Sr Sub Note Ser A 06-15-08 11.000 B- 10 10,375
WestPoint Stevens, Inc.,
Sr Note 06-15-05 7.875 BB 25 24,438
---------
34,813
---------
Tobacco (0.39%)
Philip Morris Companies, Inc.,
Note 09-15-01 7.250 A 35 35,589
Note 08-15-02 7.125 A 10 10,149
---------
45,738
---------
Transport (2.58%)
America West Airlines, Inc.,
Pass Thru Ctf Ser B 01-02-08 6.930 A- 4 3,951
Continental Airlines,
Pass Thru Ctf Ser 1997-2C
06-30-04 7.206 BBB- 19 18,856
Pass Thru Ctf Ser 1999-1A
08-02-20 6.545 AA+ 40 37,700
Note 12-15-05 8.000 BB- 25 24,438
Fine Air Services, Inc.,
Sr Note 06-01-08 9.875 B 15 13,500
NWA Trust,
Sr Note Ser A 12-21-12 9.250 AA 39 42,389
Northwest Airlines, Inc.,
Gtd Note 03-15-04 8.375 BB 25 24,062
Pass Thru Ctf Ser 1996-1D
01-02-15 8.970 BBB- 5 4,769
U.S. Airways, Inc.,
Pass Thru Ctf Ser 1990-A1
03-19-05 11.200 BB 39 41,628
Ucar Global Enterprises, Inc.,
Sr Sub Note Ser B 01-15-05 12.000 B 50 53,000
Union Pacific Corp.,
Deb 02-01-29 6.625 BBB- 35 30,692
Wisconsin Central Transportation
Corp., Note 04-15-08 6.625 BBB- 8 7,640
---------
302,625
---------
Utilities (8.59%)
AES Eastern Energy,
Pass Thru Ctf 01-02-17 (R) 9.000 BBB- 25 24,227
Avon Energy Partners Holdings,
Sr Note (United Kingdom)
12-11-02 (R) (Y) 6.730 A- 20 19,939
BVPS II Funding Corp.,
Collateralized Lease Bond
06-01-17 8.890 BB- 5 5,394
Beaver Valley Funding Corp.,
Deb 06-01-07 8.625 BB- 60 62,404
Sec Lease Oblig Bond 06-01-17 9.000 BB- 23 24,610
CMS Energy Corp.,
Sr Note 05-15-02 8.125 BB 25 25,460
Sr Note 01-15-04 (R) 6.750 BB 55 52,149
Sr Note 01-15-09 7.500 BB 35 32,200
Calpine Corp.,
Sr Note 04-01-08 7.875 BB 15 14,325
Sr Note 04-15-09 7.750 BB 25 23,750
Cinergy Corp.,
Deb 04-15-04 (R) 6.125 BBB+ 45 43,380
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BB+ 45 47,588
Sr Sec Note Ser D 11-01-17 7.880 BB+ 20 20,373
Connecticut Light & Power Co.,
1st Mtg Bond Ser C 06-01-02 7.750 BBB- 20 20,469
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 BB- 40 44,466
East Coast Power LLC,
Sr Sec Note 03-31-08 (R) 6.737 BBB- 50 48,297
Sr Sec Note 03-31-12 (R) 7.066 BBB- 35 32,058
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 26 25,218
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21 (Y) 9.400 A+ 30 36,781
Gtd Bond (Canada) 01-15-22 (Y) 8.400 A+ 20 22,352
Iberdrola International B.V.,
Note 10-01-02 7.500 AA- 36 37,173
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 40 41,700
Midland Cogeneration Venture, L.P.,
Sec Deb Ser C-91 07-23-02 10.330 BBB- 15 15,773
Midland Funding Corp. I,
Deb Ser C-94 07-23-02 10.330 BBB- 11 11,253
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB 40 45,600
Niagara Mohawk Power Corp.,
Deb 01-01-18 8.770 BBB 45 47,008
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02 9.050 BB- 8 8,225
Northeast Utilities,
Note Ser A 12-01-06 8.580 BB- 4 3,894
PECO Energy Transition Trust,
Pass Thru Ctf Ser 1999-A
Class A-6 03-01-09 6.050 AAA 35 33,523
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BB- 30 32,625
Philadelphia Electric Co.,
1st Ref Mtg 09-01-02 7.125 A 30 30,464
U.S. West Capital Funding, Inc.,
Gtd Bond 07-15-28 6.875 A- 10 9,139
Waterford 3 Funding Corp.,
Sec Lease Obligation Bond
01-02-17 8.090 BBB- 66 66,494
---------
1,008,311
---------
TOTAL BONDS
(Cost $11,501,819) (95.59%) 11,216,776
------- ------------
WARRANTS
Telecommunications (0.00%)
MetroNet Communications Corp.
(Canada) (R) (Y) 5 525
------------
TOTAL WARRANTS
(Cost $51) (0.00%) 525
------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.45%)
Investment in a joint repurchase
agreement with SBC Warburg, Inc. -
dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
9.875% and 11.250% due
02-15-15 and 11-15-15) - Note B 4.800% $639 639,000
------- ------------
Corporate Savings Account (0.00%)
Investor's Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 453
------- ------------
TOTAL SHORT-TERM INVESTMENTS (5.45%) 639,453
------- ------------
TOTAL INVESTMENTS (101.04%) 11,856,754
------- ------------
OTHER ASSETS AND LIABILITIES, NET (1.04%) (121,927)
------- ------------
TOTAL NET ASSETS (100.00%) $11,734,827
======= ============
* Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investors Service or John Hancock Advisers, Inc.,
where Standard & Poor's ratings are not available.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $1,607,562 or 13.70% of net assets as of
June 30, 1999.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. High Yield Bond Fund on June 30, 1999. It is divided into four
main categories: bonds, common stocks, preferred stocks and warrants, and
short-term investments. Bonds are further broken down by industry group.
Short-term investments, which represent the Fund's "cash" position, are
listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- --------- ------- -------------- ---------
<S> <C> <C> <C> <C>
BONDS
Agricultural Operations (0.09%)
Iowa Select Farms L.P./ISF
Finance, Inc., Sr Sub Note
12-01-05 (R) 10.750% CCC+ $10 $8,200
---------
Automobile/Trucks (0.25%)
J.B. Poindexter & Co., Inc.,
Sr Note 05-15-04 12.500 B- 25 23,750
---------
Building (0.78%)
Amatek Industries Property Ltd.,
Sr Sub Note (Australia)
02-15-08 (R) (Y) 12.000 B 25 24,000
Nortek, Inc.,
Sr Note 08-01-08 (R) 8.875 B+ 50 49,375
---------
73,375
---------
Business Services - Misc. (0.27%)
Coinstar, Inc., Sr Disc Note,
Step Coupon (13.00%,
10-01-99) 10-01-06 (A) Zero Caa1 25 25,750
---------
Chemicals (2.11%)
American Pacific Corp.,
Sr Note 03-01-05 9.250 BB- 50 51,000
General Chemical Industrial
Products, Inc., Sr Sub Note
05-01-09 (R) 10.625 B+ 50 50,375
Huntsman ICI Chemicals LLC,
Sr Sub Note 07-01-09 (R) 10.125 B+ 25 25,250
Trikem S.A.,
Bond (Brazil) 07-24-07 (R) (Y) 10.625 B+ 125 71,250
---------
197,875
---------
Computers (2.10%)
ENTEX Information Services, Inc.,
Gtd Sr Sub Note 08-01-06 12.500 B- 25 17,000
Exodus Communications, Inc.,
Sr Note 07-01-08 11.250 B- 24 24,660
PSINet, Inc.,
Sr Note 11-01-08 11.500 B- 25 26,250
Sr Note Ser B 02-15-05 10.000 B- 130 129,350
---------
197,260
---------
Consumer Products - Misc. (1.63%)
Diamond Brands Operating Corp.,
Gtd Sr Sub Note 04-15-08 10.125 CCC+ 100 80,000
Indesco International, Inc.,
Sr Sub Note 04-15-08 9.750 B- 100 73,000
---------
153,000
---------
Containers (3.16%)
Consolidated Container Co. LLC/
Consolidated Container Capital, Inc.,
Sr Sub Note 07-15-09 (R) 10.125 B 25 25,375
Gaylord Container Corp.,
Sr Note Ser B 06-15-07 9.375 B- 15 13,950
Sr Sub Note Ser B 02-15-08 9.875 CCC+ 100 87,500
Riverwood International Corp.,
Gtd Sr Sub Note 04-01-08 10.875 CCC+ 20 19,400
Stone Container Corp.,
Unit (Sr Sub Deb & Supplemental
Int Cert) 04-01-02 12.250 B- 150 150,375
---------
296,600
---------
Cosmetics & Personal Care (1.24%)
Carson, Inc.,
Gtd Sr Sub Note Ser B 11-01-07 10.375 CCC+ 65 50,700
Global Health Sciences, Inc.,
Gtd Sr Note 05-01-08 11.000 B+ 75 55,875
Styling Technology Corp.,
Gtd Sr Sub Note 07-01-08 10.875 B- 10 9,700
---------
116,275
---------
Diversified Operations (0.85%)
Diamond Holdings Plc,
Gtd Bond (United Kingdom)
02-01-08 # 10.000 B- 50 80,179
---------
Electronics (0.27%)
Pacific Aerospace & Electronics, Inc.,
Gtd Sr Sub Note 08-01-05 11.250 B- 25 18,250
SpinCycle, Inc.,
Sr Disc Note, Step Coupon
(12.75%, 05-01-01) 05-01-05 (A) Zero CCC+ 25 7,250
---------
25,500
---------
Energy (2.90%)
AEI Resources, Inc./AEI Resources
Holdings, Inc., Gtd Note
12-15-05 (R) 10.500 B 75 73,125
P & L Coal Holdings Corp.,
Gtd Sr Sub Note Ser B 05-15-08 9.625 B 200 199,000
---------
272,125
---------
Food (1.76%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B 50 51,500
Luigino's, Inc.,
Sr Sub Note 02-01-06 (R) 10.000 B- 25 24,625
Mastellone Hermanos S.A.,
Sr Note (Argentina) 04-01-08 (Y) 11.750 B+ 125 88,750
---------
164,875
---------
Insurance (0.51%)
Willis Corroon Group Plc,
Sr Sub Note 02-01-09 (R) 9.000 B+ 50 48,312
---------
Leisure (5.72%)
Argosy Gaming Co.,
Sub Note 06-01-01 12.000 B- 50 51,000
Claridge Hotel & Casino Corp.,
1st Mtg Note 02-01-02 11.750 CCC 50 30,000
Fitzgeralds Gaming Corp.,
Gtd Sr Sec Note Ser B 12-15-04 12.250 D 50 27,500
Hollywood Park, Inc.,
Sr Sub Note Ser B 08-01-07 9.500 B 25 24,875
Mohegan Tribal Gaming Authority,
Sr Sub Note 01-01-09 (R) 8.750 BB- 100 99,250
Premier Parks, Inc.,
Sr Note 06-15-07 9.750 B- 25 25,250
Production Resource Group LLC,
Sr Sub Note 01-15-08 11.500 B- 25 25,000
SC International Services, Inc.,
Gtd Sr Sub Note Ser B 09-01-07 9.250 B 30 30,900
SFX Entertainment, Inc.,
Gtd Sr Sub Note 02-01-08 9.125 B- 100 98,000
Six Flags Entertainment Corp.,
Gtd Sr Note 04-01-06 8.875 B- 100 99,500
William Hill Finance Plc,
Sr Sub Note (United Kingdom)
04-30-08 # 10.625 B- 16 26,225
---------
537,500
---------
Machinery (0.20%)
Glasstech, Inc.,
Sr Note Ser B 07-01-04 12.750 B 25 18,625
---------
Manufacturing (2.89%)
AP Holdings, Inc.,
Sr Disc Note, Step Coupon
(11.25%, 03-15-03) 03-15-08 (A) Zero B- 200 109,000
Coyne International Enterprises Corp.,
Sr Sub Note 06-01-08 11.250 B- 75 69,750
Globe Manufacturing Corp.,
Gtd Sr Sub Note 08-01-08 10.000 B- 80 60,000
Icon Health & Fitness, Inc.,
Sr Sub Note Ser B 07-15-02 13.000 C 50 32,500
---------
271,250
---------
Media (2.65%)
CD Radio, Inc.,
Sr Disc Note, Step Coupon (15.00%,
12-01-02) 12-01-07 (A) Zero CCC+ 10 4,750
Digital Television Services LLC,
Gtd Sr Sub Note 08-01-07 12.500 CCC 35 37,975
Regional Independent Media
Group Plc, Sr Disc Note,
Step Coupon (12.875%, 07-01-03)
(United Kingdom) 07-01-08 #
(A) (Y) Zero B- 20 18,754
Sr Note (United Kingdom)
07-01-08 (Y) 10.500 B- 5 4,900
Spectrasite Holdings, Inc.,
Sr Disc Note, Step Coupon
(11.25%, 04-15-04) 04-15-09
(A) (R) Zero B- 100 56,500
Supercanal Holdings S.A./
Supercanal S.A., Sr Note (Argentina)
05-15-05 (R) (Y) 11.500 D 24 12,720
TV Guide, Inc.,
Sr Sub Note 03-01-09 (R) 8.125 B+ 50 47,375
United International Holdings, Inc.,
Sr Disc Note, Step Coupon
(10.75%, 02-15-03) 02-15-08 (A) Zero B 100 66,000
---------
248,974
---------
Medical (2.28%)
Integrated Health Services, Inc.,
Sr Sub Note Ser A 01-15-08 9.250 CCC 100 71,750
Quest Diagnostics, Inc.,
Sr Sub Note 07-01-09 (R) 9.875 B+ 100 101,500
Total Renal Care Holdings, Inc.
Conv Sub Note 05-15-09 (R) 7.000 B 50 40,500
---------
213,750
---------
Metal (2.48%)
ALatief Freeport Finance Co. B.V.
(P.T.), Sr Note 04-15-01 9.750 CCC+ 50 42,250
Doe Run Resources Corp.,
Gtd Sr Note Ser B 03-15-03 11.696 B- 25 21,750
Gtd Sr Note Ser B 03-15-05 11.250 B- 10 8,900
Freeport-McMoRan Copper &
Gold, Inc., Sr Note 11-15-06 7.500 CCC 75 55,125
Golden Northwest Aluminium, Inc.,
1st Mtg Note 12-15-06 (R) 12.000 BB- 25 25,812
TVX Gold, Inc.,
Conv Sub Note (Canada)
03-28-02 (Y) 5.000 B- 100 79,000
---------
232,837
---------
Oil & Gas (7.97%)
Comstock Resources, Inc.,
Sr Note 05-01-07 (R) 11.250 B 25 25,375
Gothic Energy Corp.,
Sr Disc Note, Step Coupon
(14.125%, 05-01-02)
05-01-06 (A) Zero CCC- 10 3,500
Gothic Production Corp.,
Sr Sec Note Ser B 05-01-05 11.125 CCC+ 150 133,500
Great Lakes Acquisition Corp.,
Sr Disc Deb, Step Coupon
(13.125%, 05-15-03)
05-15-09 (A) Zero B- 200 108,000
Grey Wolf, Inc.,
Gtd Sr Note 07-01-07 8.875 B+ 105 91,350
Gtd Sr Note Ser C 07-01-07 8.875 B+ 25 21,750
Key Energy Group, Inc.,
Conv Sub Note 09-15-04 (R) 5.000 B 80 50,800
Conv Sub Note 09-15-04 5.000 B 143 90,805
Key Energy Services, Inc.,
Unit (Sr Sub Note & Warrant)
01-15-09 (R) 14.000 B- 100 104,000
Mariner Energy, Inc.,
Sr Sub Note Ser B 08-01-06 10.500 B- 10 8,725
Ocean Rig Norway A.S.,
Gtd Sr Sec Note (Norway)
06-01-08 (Y) 10.250 B- 55 44,000
PANACO, Inc.,
Gtd Sr Sub Note Ser B 10-01-04 10.625 CCC- 10 5,500
R&B Falcon Corp.,
Sr Note 12-15-03 (R) 9.125 B+ 60 55,200
Universal Compression, Inc.,
Sr Disc Note, Step Coupon
(9.875%, 02-15-03)
02-15-08 (A) Zero B 10 6,300
---------
748,805
---------
Paper & Paper Products (4.90%)
Advance Agro Capital B.V.,
Gtd Sr Note (Thailand)
11-15-07 (Y) 13.000 CC 50 38,500
APP Finance (VII) Mauritius Ltd.,
Gtd Note (Indonesia)
04-30-03 (R) (Y) 3.500 CCC+ 10 7,200
APP International Finance Co. B.V.,
Gtd Sec Note (Indonesia)
10-01-05 (Y) 11.750 CCC+ 150 118,500
Grupo Industrial Durango, S.A.,
Note (Mexico) 08-01-03 (Y) 12.625 BB- 50 47,500
Packaging Corp. of America,
Sr Sub Note 04-01-09 (R) 9.625 B 150 152,250
Repap New Brunswick, Inc.,
Sr Sec Note (Canada)
04-15-05 (Y) 10.625 CCC+ 100 79,500
Sappi BVI Finance Ltd.,
Gtd Conv Bond (South Africa)
08-01-02 (R) (Y) 7.500 BB- 20 17,100
---------
460,550
---------
Real Estate Operations (0.25%)
Signature Resorts, Inc.,
Conv Sub Note 01-15-07 5.750 B 35 23,887
---------
REIT (0.26%)
Host Marriott Corp.,
Sr Note Ser D 02-15-06 (R) 8.375 BB 25 24,063
---------
Retail (4.10%)
American Restaurant Group, Inc.,
Gtd Sr Sec Note 02-15-03 11.500 B 50 44,000
Ames Department Stores, Inc.,
Sr Note 04-15-06 (R) 10.000 B+ 50 49,000
Corporate Express, Inc.,
Conv Note 07-01-00 4.500 B- 100 93,000
Imperial Home Decor Group, Inc,
Gtd Sr Sub Note 03-15-08 11.000 CCC+ 125 90,000
Pathmark Stores, Inc.,
Sub Note 06-15-02 11.625 CCC+ 55 56,100
RAB Holdings, Inc.,
Sr Note 05-01-08 13.000 CCC 120 52,800
---------
384,900
---------
Steel (3.91%)
Acindar Industria Argentina
de Aceros S.A., Bond
(Argentina) 02-15-04 (Y) 11.250 B+ 25 17,750
Algoma Steel, Inc.,
1st Mtg Bond 07-15-05 12.375 B 50 49,250
Gulf States Steel, Inc. of Alabama,
1st Mtg Bond 04-15-03 13.500 D 100 23,000
Metallurg Holdings, Inc.,
Sr Disc Note, Step Coupon
(12.75%, 07-15-03)
07-15-08 (A) Zero CCC+ 50 19,000
Metallurg, Inc.,
Gtd Sr Note Ser B 12-01-07 11.000 B- 30 28,950
NSM Steel Inc./NSM Steel Ltd.,
Gtd Sr Sub Mtg Note Ser B
02-01-08 (R) 12.250 D 75 3,750
Oregon Steel CF&I,
Note 03-31-03 (r) 9.500 B 84 81,025
Renco Steel Holdings,
Sr Sec Note Ser B 02-01-05 10.875 B- 25 22,250
Weirton Steel Corp.,
Sr Note 07-01-04 11.375 B 125 122,500
---------
367,475
---------
Telecommunications (16.44%)
AMSC Acquisition Co., Inc./American
Mobile Corp., Gtd Sr Note
Ser B 04-01-08 12.250 B- 40 32,400
COLT Telecom Group Plc,
Sr Note (Germany) 07-31-08 # 7.625 B 200 105,267
Crown Castle International Corp.,
Sr Disc Note, Step Coupon
(10.625%, 11-15-02)
11-15-07 (A) Zero B 10 7,000
Sr Note 05-15-11 9.000 B 25 24,313
Dolphin Telecom Plc,
Sr Disc Note, Step Coupon
(11.50%, 06-01-03)
(United Kingdom)
06-01-08 (A) (Y) Zero B- 60 29,550
Sr Disc Note, Step Coupon
(14.00%, 05-15-04)
(United Kingdom)
05-15-09 (A) (R) (Y) Zero CCC+ 50 24,000
Esprit Telecom Group Plc,
Sr Note (United Kingdom)
06-15-08 (Y) 10.875 B- 40 41,200
Sr Note (Germany) 06-15-08 # 11.000 BB- 60 33,875
FaciliCom International,
Sr Note 01-15-08 10.500 B- 100 78,000
Global TeleSystmes Group, Inc.,
Sr Note 02-15-05 9.875 B- 50 49,000
Hermes Europe Railtel BV,
Sr Note (Netherlands)
01-15-09 (Y) 10.375 B 50 50,625
International Wireless
Communications, Inc.,
Sr Sec Disc Note 08-15-01 14.000 B- 50 5,000
ITC DeltaCom, Inc.,
Sr Note 11-15-08 9.750 B 100 102,500
KMC Telecom Holdings, Inc.,
Sr Note 05-15-09 (R) 13.500 B- 25 24,875
McLeodUSA Inc.,
Sr Disc Note, Step Coupon
(10.50%, 03-01-02) 03-01-07 (A) Zero B+ 20 15,350
Sr Note 03-15-08 8.375 B+ 35 32,813
Sr Note 11-01-08 9.500 B+ 100 100,500
National Communications Corp.,
Sr Note 10-01-08 (R) 11.500 B- 50 54,750
Nextel Partners, Inc.,
Sr Disc Note, Step Coupon
(14.00%, 02-01-04)
02-01-09 (A) (R) Zero CCC+ 25 14,250
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 (R) 10.750 B 75 77,063
NTL, Inc., Sr Note, Step Coupon
(12.375%, 10-01-03)
10-01-08 (A) (R) Zero B- 100 63,500
Omnipoint Corp.,
Sr Note Ser A 08-15-06 11.625 CCC+ 50 51,500
ONO Finance Plc,
Unit (Note & Equity Value
Cert) 05-01-09 (R) 13.000 CCC+ 50 51,750
Pac-West Telecomm, Inc.,
Sr Note 02-01-09 (R) 13.500 B 30 29,925
Qwest Communications
International, Inc.,
Sr Note 11-01-08 7.500 BB+ 25 24,997
Telewest Communications Plc,
Sr Disc Note, Step Coupon
(9.25%, 04-15-04)
(United Kingdom)
04-15-09 (A) (R) # 9.875 B+ 25 26,398
Teligent, Inc.,
Sr Note 12-01-07 11.500 CCC 16 15,760
VersaTel Telecom International N.V.,
Sr Note (Netherlands)
05-15-08 (Y) 13.250 B- 125 129,375
Viatel, Inc.,
Sr Note (Germany) 04-15-08 # 11.150 B- 170 91,719
Sr Sec Note 04-15-08 11.250 B- 75 76,125
WinStar Communications, Inc.,
Sr Sub Def Note 03-15-08 Zero CCC 34 30,260
Worldwide Fiber, Inc.,
Sr Note (Canada) 12-15-05 (R) (Y) 12.500 B- 50 50,250
---------
1,543,890
---------
Textile (1.01%)
Polymer Group, Inc.,
Gtd Sr Sub Note 03-01-08 8.750 B 35 32,900
Steel Heddle Group, Inc.,
Sr Disc Deb, Step Coupon (13.75%,
06-01-03) 06-01-09 (A) Zero CCC+ 200 34,000
Steel Heddle Manufacturing Co.,
Gtd Sr Sub Note Ser B 06-01-08 10.625 CCC+ 50 28,000
---------
94,900
---------
Transportation (3.32%)
Cenargo International Plc,
1st Mtg Note (United Kingdom)
06-15-08 (Y) 9.750 BB- 20 18,600
Fine Air Services, Corp.,
Gtd Sr Note 06-01-08 9.875 B 100 90,000
Northwest Airlines Corp.,
Gtd Note 03-15-07 8.700 BB 100 95,377
Pacer International, Inc.,
Sr Sub Note 06-01-07 (R) 11.750 B- 35 34,650
Pacific & Atlantic Holdings, Inc.,
1st Mtg Note (Greece)
05-30-08 (Y) 11.500 CCC+ 50 19,750
U.S. Airways Group, Inc.,
Gtd Pass Thru Ctf Ser
1993-A3 03-01-13 10.375 BB 50 53,075
---------
311,452
---------
Waste Disposal Service &
Equipment (1.70%)
Waste Systems International, Inc.,
Gtd Sr Note 01-15-06 (R) 11.500 B 15 14,962
Waste Systems International, Inc.,
Sub Note 05-13-05 (R) 7.000 CCC+ 159 145,076
---------
160,038
---------
TOTAL BONDS
(Cost $8,278,059) (78.00%) 7,325,972
------ ---------
NUMBER OF
SHARES OR WARRANTS
------------------
COMMON STOCKS
Abitibi-Consolidated, Inc. (Canada) 12,500 142,187
American Pacific Corp.** 5,000 42,187
Continental Airlines, Inc. (Class B)** 800 30,100
Gaylord Container Corp. (Class A)** 6,000 47,625
Grey Wolf, Inc.** 3,500 8,750
Key Energy Group, Inc.** 25,000 89,063
KLM Royal Dutch Airlines N.V.
(Netherlands) # 103 2,942
Northeast Utilities** 2,000 35,375
Northwest Airlines Corp. (Class A)** 3,250 105,625
Repap Enterprises Inc. (Canada) #** 150,000 9,630
Star Gas Partners, L.P. 3,300 56,719
Takefuji Corp. (Japan) # 1,000 103,358
Viatel, Inc.** 423 23,741
Waste Systems International, Inc.** 8,715 60,188
Weatherford International, Inc.** 700 25,638
------ -----------
TOTAL COMMON STOCKS
(Cost $793,406) (8.34%) 783,128
------ -----------
PREFERRED STOCKS AND WARRANTS
American Mobile Satellite Corp.,
Warrant (R) 40 --
CD Radio Inc., 10.50%, Ser C,
Preferred Stock 200 36,000
Cumulus Media Inc., 13.75%, Ser A,
Preferred Stock 31 34,100
Fuji JGB Inv LLC, 9.87% Ser A, Preferred Stock
(Japan) (R) (Y) 135 118,462
Gothic Energy Corp., Warrant 79 --
Hills Stores Co., Warrant** 35,000 --
Nakornthai Strip Mill Plc, Warrant
(Thailand) (R) (Y) 63,309 63
Nextel Communications, Inc., 11.125%, Ser E,
Payment-In-Kind, Preferred Stock 171 165,870
Packaging Corp. of America, 12.375%,
Payment-In-Kind, Preferred Stock (R) 2,000 212,000
R&B Falcon Corp., 13.875%, Unit (Pfd Stock &
Warrant), Preferred Stock (R) 50 51,200
SpinCycle, Inc., Warrant (R)** 25 --
Stone Container Corp., $1.75, Ser E,
Preferred Stock 3,000 63,000
VersaTel Telecom B.V., Warrant
(R)** 125 6,250
Waste Systems International, Inc.,
Warrant (R)** 225 149
-----------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $688,010) (7.31%) 687,094
------ -----------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (4.76%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
9.875% and 11.250% due
02-15-15 and 11-15-15) - Note B 4.80% 447 447,000
-----------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 967
-----------
TOTAL SHORT-TERM INVESTMENTS (4.77%) 447,967
------- -----------
TOTAL INVESTMENTS (98.42%) 9,244,161
------- -----------
OTHER ASSETS AND LIABILITIES, NET (1.58%) 148,001
------- -----------
TOTAL NET ASSETS (100.00%) $9,392,162
======= ===========
* Credit ratings are unaudited and rated by Moody's Investors Service or
John Hancock Advisers, Inc. where Standard and Poor's ratings are not
available.
** Non-income producing security.
*** Represents rate in effect on June 30, 1999.
# Par value of foreign bonds and common stocks is expressed in local
currency, as shown parenthetically in security description.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $2,271,855 or 24.19% of net assets as of
June 30, 1999.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar denominated.
(r) Direct placement securities are restricted as to resale. They have
been valued in accordance with procedures approved by the Trustees after
after consideration of restrictions as to resale, financial condition and
prospects of the issuer, general market conditions and pertinent
information in accordance with the Fund's By-Laws and the Investment
Company Act of 1940, as amended. The Fund has limited rights to
registration under the Securities Act of 1933 with respect to these
restricted securities.
Additional information on these securities is as follows:
MARKET MARKET
VALUE AS A VALUE AT
ACQUISITION ACQUISITION % OF FUND JUNE 30,
ISSUER, DESCRIPTION DATE COST NET ASSETS 1999
- ------------------- ----------- ----------- ---------- --------
Oregon Steel CF&I 05-14-98 $80,925 0.86% $81,025
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
Portfolio Concentration
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------
The V.A. High Yield Bond Fund invests primarily in securities issued
in the United States of America. The performance of this Fund is closely
tied to the economic and financial conditions of the countries within
which it invests. The concentration of investments by industry category
for individual securities held by the Fund is shown in the schedule of
investments.
In addition, concentration of investments can be aggregated by various
countries. The table below shows the percentages of the Fund's investments
at June 30, 1999 assigned to country categories.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- --------------------- ------------------
Argentina 1.27%
Australia 0.26
Brazil 0.76
Canada 3.84
Greece 0.21
Indonesia 1.34
Japan 2.36
Mexico 0.51
Netherlands 1.95
Norway 0.47
South Africa 0.18
Thailand 0.41
United Kingdom 4.91
United States 79.95
-----
TOTAL INVESTMENTS 98.42%
=====
Additionally, the concentration of investments can be aggregated
by the quality rating for each debt security.
QUALITY DISTRIBUTION
- ---------------------
BB 7.42%
B 58.57
CCC 11.56
CC 0.45
-----
TOTAL BONDS 78.00%
=====
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Money Market Fund on June 30, 1999.
INTEREST QUALITY PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- --------- ------- -------------- ----------
<S> <C> <C> <C> <C>
CORPORATE INTEREST BEARING OBLIGATIONS
Automotive (3.99%)
Ford Motor Credit Co.,
11-19-99 7.500% Tier 1 $900 $908,070
----------
Banking - Foreign (3.95%)
International Bank for Reconstruction
and Development,
09-15-99 5.100 Tier 1 900 900,092
----------
Banks - United States (2.20%)
Norwest Corp.,
08-25-99 7.200 Tier 1 500 501,635
----------
Broker Services (2.63%)
Merrill Lynch & Co., Inc.,
09-27-99 6.060 Tier 1 600 601,056
----------
Chemicals (3.98%)
DuPont (E.I.) de Nemours & Co.,
11-15-99 6.880 Tier 1 900 906,139
----------
Finance (10.03%)
Associates Corp. of North America,
09-01-99 7.250 Tier 1 380 380,966
11-12-99 6.125 Tier 1 500 501,503
Heller Financial, Inc.,
08-01-99 9.125 Tier 1 500 501,682
International Business Machines
Credit Corp.,
08-13-99 5.580 Tier 1 900 900,597
----------
2,284,748
----------
Retail (2.19%)
Sears Roebuck & Co.,
07-15-99 5.540 Tier 1 500 500,108
----------
Utilities (6.15%)
Duke Power Co.,
08-12-99 6.250 Tier 1 900 901,295
NYNEX Capital Funding Co.,
07-19-99 7.601 Tier 1 500 500,457
----------
1,401,752
----------
TOTAL CORPORATE INTEREST BEARING OBLIGATIONS
(Cost $8,003,600) (35.12%) 8,003,600
------- -----------
U.S.GOVERNMENT OBLIGATIONS
Governmental - U.S. Agencies (49.29%)
Federal Farm Credit Bank
08-03-99 5.500 Tier 1 3,000 3,001,329
Federal Home Loan Mortgage Corp,
07-09-99 4.980 Tier 1 4,000 3,995,573
Federal Home Loan Bank,
10-08-99 5.070 Tier 1 550 549,953
10-27-99 5.000 Tier 1 2,000 1,998,130
Israel, State of (U.S. Government Gtd.)
11-15-99 7.750 Tier 1 680 685,590
Student Loan Marketing Association,
08-11-99 5.583 Tier 1 1,000 1,000,664
----------
11,231,239
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $11,231,239) (49.29%) 11,231,239
------- -----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $19,234,839) (84.41%) 19,234,839
------- -----------
JOINT REPURCHASE AGREEMENT
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. -
Dated 06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
8.875% due 08-15-17 and 11.250%
due 02-15-15) - Note B 4.80% 3,231 3,231,000
-----------
TOTAL JOINT REPURCHASE AGREEMENT (14.18%) 3,231,000
------- -----------
TOTAL INVESTMENTS (98.59%) 22,465,839
------- -----------
OTHER ASSETS AND LIABILITIES, NET (1.41%) 320,442
------- -----------
TOTAL NET ASSETS (100.00%) $22,786,281
======= ===========
* Quality ratings indicate the categories of eligible securities, as
defined by Rule 2a-7 of the Investment Company Act of 1940, owned by the Fund.
The percentage shown for each investment category is the total value of
that category expressed as a percentage of the net assets of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
Schedule of Investments
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Strategic Income Fund on June 30, 1999. It is divided into four
main categories: bonds, common stocks, preferred stocks and warrants, and
short-term investments. Bonds are further broken down by industry group.
Short-term investments, which represent the Fund's "cash" position, are
listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- --------- ------- -------------- ---------
<S> <C> <C> <C> <C>
BONDS
Advertising (0.52%)
Outdoor Systems, Inc.,
Sr Sub Note 10-15-06 9.375 B $100 $106,500
---------
Beverages (0.97%)
Canandaigua Brands, Inc.,
Sr Sub Note 03-01-09 8.500 B+ 100 96,250
National Wine & Spirits, Inc.,
Sr Note 01-15-09 (R) 10.125 B 100 102,750
---------
199,000
---------
Building (0.46%)
Standard Pacific Corp.,
Sr Note 04-01-09 8.500 BB 100 94,500
---------
Business Services - Misc. (0.47%)
United Rentals, Inc.,
Sr Sub Note Ser B 08-15-08 8.800 BB- 100 96,250
---------
Chemicals (0.99%)
General Chemical Industrial
Products, Inc., Sr Sub Note
05-01-09 (R) 10.625 B+ 100 100,750
Huntsman ICI Chemicals LLC,
Sr Sub Note 07-01-09 (R) 10.125 B+ 100 101,000
---------
201,750
---------
Computers (2.18%)
PSINet, Inc.,
Sr Note 11-01-08 11.500 B- 100 105,000
Unisys Corp.,
Sr Note 10-15-04 11.750 BB- 25 27,750
Verio, Inc.,
Sr Note 12-01-08 (R) 11.250 B- 300 313,500
---------
446,250
---------
Containers (1.49%)
Berry Plastics Corp.,
Sr Sub Note 04-15-04 12.250 B- 100 103,000
Consolidated Container Co.
LLC/Cons. Container Capital, Inc.,
Sr Sub Note 07-15-09 (R) + 10.125 B 100 101,500
Stone Container Corp.,
Unit (Sr Sub Deb & Supplemental
Int Cert) 04-01-02 12.250 B- 100 100,250
---------
304,750
---------
Diversified Operations (0.89%)
Diamond Holdings Plc,
Bond (United Kingdom)
02-01-08# 10.000 B- 50 80,179
Euramax International Plc,
Sr Sub Note (United Kingdom)
10-01-06 (Y) 11.250 B 100 101,500
---------
181,679
---------
Electronics (0.44%)
Communications Instruments, Inc.,
Sr Sub Note Ser B 09-15-04 10.000 B- 100 90,000
---------
Energy (1.45%)
AEI Resources, Inc./AEI Resources
Holdings, Inc.,
Gtd Note 12-15-05 (R) 10.500 B 100 97,500
P & L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 200 199,000
---------
296,500
---------
Finance (0.91%)
Ford Motor Credit Company,
Bond (Deutsche Mark)
06-16-08 # 5.250 A 350 185,233
---------
Food (0.50%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B 100 103,000
---------
Government - Foreign (9.07%)
Canada, Government of,
Government Bond (Canada)
03-01-01# 7.500 AAA 400 279,320
Government Bond (Canada)
09-01-02# 5.500 AAA 150 101,435
Government Bond (Canada)
12-01-05# 8.750 AAA 165 130,153
Costa Rica, Republic of,
Note (Costa Rica) 05-01-03 (R) (Y) 8.000 BB 25 24,125
France, Republic of,
Deb (France) 04-25-09 (E) 4.000 AAA 200 195,647
Germany, Federal Republic of,
Bond Ser 121 (Germany)
11-20-01 (E) 4.750 AAA 238 253,013
New Zealand, Government of,
Bond (New Zealand) 04-15-03# 5.500 AAA 175 91,130
Panama, Republic of,
Note (Panama) 02-13-02 (Y) 7.875 BB+ 50 48,625
Spain, Kingdom of, (Spain)
01-31-08 (E) 6.000 AA+ 100 112,591
United Kingdom of Great Britain
Treasury Gilts, (United Kingdom)
12-07-00# 8.000 AAA 100 163,920
Government Bond (United Kingdom)
11-06-01# 7.000 AAA 50 81,621
Government Bond (United Kingdom)
06-07-02# 7.000 AAA 70 114,998
Government Bond (United Kingdom)
06-10-03# 8.000 AAA 120 205,687
United Mexican States,
Global Bond (Mexico)
02-06-01 (Y) 9.750 BB 50 52,000
---------
1,854,265
---------
Government - U.S. (23.19%)
United States Treasury,
Bond 08-15-05 6.500 AAA 400 412,312
Bond 02-15-16 9.250 AAA 340 442,850
Bond 08-15-19 (Z) 8.125 AAA 1,140 1,376,903
Bond 08-15-23 6.250 AAA 800 803,752
Bond 02-15-27 6.625 AAA 400 422,436
Note 08-31-02 6.250 AAA 570 579,530
Note 08-15-04 7.250 AAA 340 361,675
Note 08-15-07 6.125 AAA 340 343,665
---------
4,743,123
---------
Government - U.S. Agencies (2.89%)
Federal Home Loan Bank,
Deb Ser S- 03 10-15-03 5.440 AAA 150 145,875
Deb Ser AQ07 3-26-07 6.945 AAA 100 102,406
Federal Home Loan Mortgage Corp.,
Giant Mtg Part Cert 07-01-12 7.000 AAA 89 89,003
Federal National Mortgage Assn.,
Note 02-13-04 5.125 AAA 264 253,110
---------
590,394
---------
Leisure (5.22%)
Cinemark USA, Inc.,
Sr Sub Note Ser D 08-01-08 9.625 B 100 98,500
Harrah's Operating Co., Inc.,
Sr Sub Note 12-15-05 7.875 BB+ 100 96,500
HMH Properties, Inc.,
Sr Note Ser B 08-01-08 7.875 BB 100 92,000
Isle of Capri Casinos, Inc.,
Sr Sub Note 04-15-09 (R) 8.750 B 100 94,000
Jupiters Ltd.,
Sr Note (Australia)
03-01-06 (R) (Y) 8.500 BB+ 150 146,250
Premier Parks, Inc.,
Sr Note 06-15-07 9.750 B- 150 151,500
Regal Cinemas, Inc.,
Sr Sub Note 12-15-10 8.875 B 100 92,000
SFX Entertainment, Inc.,
Sr Sub Note 02-01-08 9.125 B- 100 98,000
Sun International Hotels Ltd.,
Sr Sub Note (Bahamas)
12-15-07 (Y) 8.625 B+ 100 98,000
Waterford Gaming LLC,
Sr Note 03-15-10 (R) 9.500 B+ 100 100,000
---------
1,066,750
---------
Machinery (0.47%)
Columbus McKinnon Corp.,
Sr Sub Note 04-01-08 8.500 B 100 97,000
---------
Media (8.06%)
American Media Operations, Inc.,
Sr Sub Note 05-01-09 (R) 10.250 B- 150 151,500
Capstar Radio Broadcasting
Partners, Inc.,
Sr Sub Note 07-01-07 9.250 B- 100 103,375
Chancellor Media Corp.,
Sr Sub Note 01-15-07 10.500 B 100 109,000
Citadel Broadcasting Co.,
Sr Sub Note 11-15-08 9.250 B- 100 103,000
DIVA Systems Corp.,
Sr Disc Note Ser B, Step Coupon
(12.625%, 03-01-03)
03-01-08 (A) Zero B- 250 70,000
Emmis Communications Corp.,
Sr Sub Note 03-15-09 (R) 8.125 B- 125 118,750
Falcon Holdings Group L.P.,/
Falcon Funding Corp.,
Sr Deb Ser B 04-15-10 8.375 B 200 197,500
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 (R) 8.625 B+ 100 94,000
Intermedia Capital Partners,
Sr Note 08-01-06 11.250 B 100 113,500
ONO Finance Plc,
Unit (Note & Equity Value Cert)
(United Kingdom)
05-01-09 (R) (Y) 13.000 CCC+ 50 51,750
Unit (Note & Equity Value Cert)
(United Kingdom)
05-01-09 (E) (R) 13.000 CCC+ 50 53,406
Regional Independent Media
Group Plc, Sr Note (United
Kingdom) 07-01-08 (Y) 10.500 B- 175 171,500
Spectrasite Holdings, Inc.,
Sr Disc Note, Step Coupon
(11.25%, 04-15-04)
04-15-09 (A) (R) Zero B- 200 113,000
STC Broadcasting, Inc.,
Sr Sub Note 03-15-07 11.000 B- 100 103,500
TV Guide, Inc.,
Sr Sub Note 03-01-09 (R) 8.125 B+ 100 94,750
---------
1,648,531
---------
Medical (0.99%)
Hanger Orthopedic Group, Inc.,
Sr Sub Note 06-01-09 (R) 11.250 B- 100 101,500
Quest Diagnostics, Inc.,
Sr Sub Note 07-01-09 (R) + 9.875 B+ 100 101,500
---------
203,000
---------
Metal (0.48%)
Koppers Industries, Inc.,
Gtd Sr Sub Note 12-01-07 9.875 B- 100 98,000
---------
Oil & Gas (0.80%)
Comstock Resources, Inc.,
Sr Note 05-01-07 (R) 11.250 B 100 101,500
Universal Compression, Inc.,
Sr Disc Note, Step Coupon
(9.875%, 02-15-03) 02-15-08 (A) Zero B 100 63,000
---------
164,500
---------
Paper & Paper Products (0.99%)
Packaging Corp. of America,
Sr Sub Note 04-01-09 (R) 9.625 B 200 203,000
---------
Retail (0.70%)
United Stationers Supply Co.,
Sr Sub Note 04-15-08 8.375 B 150 142,875
---------
Steel (0.47%)
AK Steel Corp.,
Sr Note 02-15-09 (R) 7.875 BB- 100 96,000
---------
Telecommunications (25.87%)
Allegiance Telecom, Inc.,
Sr Disc Note, Ser B, Step Coupon
(11.75%, 02-15-03) 02-15-08 (A) Zero B- 250 155,000
AMSC Acquisition Co., Inc.,
Sr Note Ser B 04-01-08 12.250 B- 100 81,000
Call-Net Enterprises, Inc.,
Sr Note (Canada) 05-15-09 (Y) 9.375 BB- 150 142,500
CapRock Communications Corp.,
Sr Note 05-01-09 (R) 11.500 B 100 101,000
Centennial Cellular Operating Co.,
Sr Sub Note 12-15-08 (R) 10.750 CCC+ 100 103,500
Clearnet Communications Inc.,
Sr Disc Note, Step Coupon
(10.40%, 05-15-03) (Canada)
05-15-08 (A) # Zero B3 150 60,414
Sr Disc Note, Step Coupon
(10.125%, 05-01-04) (Canada)
05-01-09, (A) (Y) Zero B3 150 85,500
COLT Telecom Group Plc
(United Kingdom)
Sr Note (Deutche Mark)
07-31-08# 7.625 B 595 313,168
Comunicacion Celular S.A.,
Bond, Step Coupon (13.125%,
11-15-00) (Colombia)
11-15-03 (A) (R) (Y) Zero B+ 100 71,000
Crown Castle International Corp.,
Sr Disc Note, Step Coupon
(10.625%, 11-15-02)
11-15-07 (A) Zero B 150 105,000
Dolphin Telecom Plc,
Sr Disc Note, Step Coupon
(11.50%, 06-01-03) (United
Kingdom) 06-01-08, (A) (Y) Zero B- 200 98,500
Sr Disc Note, Step Coupon
(14.00%, 05-15-04) (United
Kingdom) 05-15-09 (A) (R) (Y) Zero CCC+ 200 96,000
DTI Holdings, Inc.,
Sr Disc Note, Step Coupon
(12.50%, 03-01-03) 03-01-08 (A) Zero B- 150 54,750
Energis Plc,
Sr Sub Deb (United Kingdom)
06-15-09# 9.500 B1 130 206,929
Esprit Telecom Group Plc,
Sr Note (United Kingdom)
12-15-07 (Y) 11.500 B- 100 105,000
Sr Note (Deutsche Mark)
06-15-08# 11.000 BB- 200 112,918
Global Crossing Holdings Ltd.,
Sr Note 05-15-08 9.625 BB 100 108,000
Hermes Europe Railtel BV,
Sr Note (Netherlands)
08-15-07 (Y) 11.500 B 100 104,750
Intercel, Inc.,
Unit (Sr Disc Note & Warrant),
Step Coupon (12.00%, 02-01-01)
02-01-06 (A) Zero B 200 162,000
Ionica Plc,
Sr Disc Note, Step Coupon
(15.00%, 05-01-02) (United
Kingdom) 05-01-07 (A) (Y) Zero Ca 200 6,000
Level 3 Communications, Inc.,
Sr Note 05-01-08 9.125 B 200 196,750
McLeodUSA, Inc.,
Sr Note 07-15-07 9.250 B+ 100 99,250
Sr Note 11-01-08 9.500 B+ 50 50,250
Metromedia Fiber Network, Inc.,
Sr Note Ser B 11-15-08 10.000 B 300 308,250
MetroNet Communications Corp.,
Sr Disc Note, Step Coupon
(10.75%, 11-01-02) (Canada)
11-01-07 (A) (Y) Zero B 200 156,500
Sr Note (Canada) 08-15-07 (Y) 12.000 B 50 58,188
Nextel Communications, Inc.,
Sr Disc Note 08-15-04 9.750 B- 75 76,125
Sr Disc Note, Step Coupon
(9.95%, 02-15-03) 02-15-08 (A) Zero B- 125 86,250
Nextel Partners Inc.,
Sr Disc Note, Step Coupon
(14.00%, 02-01-04)
02-01-09 (A) (R) Zero CCC+ 250 142,500
NEXTLINK Communications, Inc.,
Sr Note 11-15-08 10.750 B 100 102,750
NorthEast Optic Network, Inc.,
Sr Note 08-15-08 12.750 B- 100 103,000
NTL Communications Corp.,
Sr Note, Ser B 10-01-08 11.500 B- 100 109,500
Sr Note, Ser B Step Coupon
(12.375%, 10-01-03) 10-01-08 (A) Zero B- 150 95,250
Orange Plc,
Sr Note (United Kingdom)
08-01-08 (E) 7.625 BB- 25 26,316
Sr Note (United Kingdom)
08-01-08 (Y) 8.000 BB- 100 94,750
Orion Network Systems,
Sr Note 01-15-07 11.250 B+ 100 84,000
Qwest Communications
International, Inc.,
Sr Note Ser B 04-01-07 10.875 BB+ 65 73,673
RCN Corp.,
Sr Disc Note, Step Coupon
(11.125%, 10-15-02)
10-15-07 (A) Zero B- 200 133,500
Telecorp PCS, Inc.,
Sr Sub Disc Note, Step Coupon
(11.625%, 04-15-04)
04-15-09 (A) (R) Zero B3 175 98,000
Telewest Communications Plc,
Sr Disc Note, Step Coupon
(9.25%, 04-15-04) (United
Kingdom) 04-15-09 (A) (R) (Y) Zero B+ 100 105,592
Teligent, Inc.,
Sr Note 12-01-07 11.500 CCC 100 98,500
Time Warner Telecom LLC,
Sr Note 07-15-08 9.750 B- 100 102,000
Tritel PCS, Inc.,
Sr Disc Note, Step Coupon
(12.75%, 05-15-04)
05-15-09 (A) (R) Zero B3 100 54,500
VersaTel Telecom International N.V.,
Sr Note (Netherlands)
05-15-08 (Y) 13.250 B- 100 103,500
Viatel, Inc.,
Sr Note 04-15-08 11.250 B- 350 355,250
Winstar Equipment Corp.,
Sec Note 03-15-04 12.500 CCC+ 100 104,500
---------
5,291,573
---------
Transportation (1.41%)
Continental Airlines, Inc.,
Note 12-15-05 8.000 BB- 100 97,750
Fine Air Services Corp.,
Sr Sub Note 06-01-08 9.875 B 100 90,000
RailWorks Corp.,
Sr Sub Note 04-15-09 (R) 11.500 B 100 100,500
---------
288,250
---------
Utilities (2.18%)
Calpine Corp.,
Sr Note 04-01-08 7.875 BB 100 95,500
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB 100 114,000
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico)
11-15-09 (R) (Y) 9.625 BB 100 85,000
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 145 151,470
---------
445,970
---------
TOTAL BONDS
(Cost $19,906,316) (94.06%) 19,238,643
------- -----------
NUMBER OF
SHARES OR WARRANTS
------------------
COMMON STOCKS
KLM Royal Dutch Airlines N.V.,
(Netherlands) 517 14,767
Nextel Communications, Inc. (Class A)** 232 11,644
Northeast Utilities** 6,000 106,125
Viatel, Inc.** 795 44,619
-----------
TOTAL COMMON STOCK
(Cost $127,714) (0.87%) 177,155
------- -----------
PREFERRED STOCKS AND WARRANTS
Allegiance Telecom Inc., Warrant** 250 10,750
American Mobile Satellite Corp.,
Warrant (R)** 100 0
CapStar Communications, Inc., 12.00%,
Preferred Stock 599 70,083
Comunicacion Celular S.A., Warrant
(Colombia)** 1,000 5,000
DIVA Systems Corp., Warrant** 750 1,500
DTI Holdings Inc., Warrant** 750 8
Loral Space & Communications Ltd.,
Warrant** 100 1,000
NEXTLINK Communications Inc., 14.00%,
Preferred Stock 1,906 97,206
VersaTel Telecom B.V., Warrant (R)** 100 5,000
-----------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $188,194) (0.93%) 190,547
------- -----------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (3.65%)
Investment in a joint repurchase agreement
transaction with SBC Warburg, Inc. - Dated
06-30-99, due 07-01-99
(Secured by U.S. Treasury Bonds,
9.875% due 11-15-15 and 11.250%
due 02-15-15) - Note B 4.800% 747 747,000
-----------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company
Daily Interest Savings Account
Current Rate 4.00% 781
-----------
TOTAL SHORT-TERM INVESTMENTS (3.65%) 747,781
------- -----------
TOTAL INVESTMENTS (99.51%) 20,354,126
------- -----------
OTHER ASSETS AND LIABILITIES, NET (0.49%) 99,347
------- -----------
TOTAL NET ASSETS (100.00%) $20,453,473
======= ===========
* Credit ratings are unaudited and rated by Moody's Investors Service or
John Hancock Advisers, Inc. where Standard & Poor's ratings are not
available.
** Non-income producing security.
# Par value of foreign bonds is expressed in local currency, as shown
parenthetically in security description.
+ These securities having an aggregate value of $203,000 or 0.99% of the
Fund's net assets, have been purchased as a forward commitment; that is,
the Fund has agreed on trade date to take delivery of and make payment for
such securities on a delayed basis subsequent to the date of this
schedule. The purchase price and interest rate of such securities are
fixed at trade date, although the Fund does not earn any interest on such
securities until settlement date. The Fund has instructed its Custodian
Bank to segregate assets with a current value at least equal to the amount
of the forward commitment. Accordingly, the market value of $208,400 of
United States Treasury Bonds, 9.25%, 02-15-16 has been segregated to cover
the forward commitment.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(E) Parenthetical disclosure of a country in the security description
represents country of issuer; however, security is euro denominated.
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $3,424,623 or 16.74% of the Fund's net
assets as of June 30, 1999.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer; however, security is
U.S. dollar denominated.
(Z) A portion of this security has been deposited in a segregated account
to cover margin requirements on open financial futures contracts -- Note B.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
Portfolio Concentration
June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------
The V.A. Strategic Income Fund invests primarily in securities issued in
the United States of America. The performance of this Fund is closely tied
to the economic and financial conditions of the countries within which it
invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the schedule of
investments. In addition, concentration of investments can be aggregated
by various countries. The table below shows the percentages of the Fund's
investments at June 30, 1999 assigned to country categories.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- ----------------------- ------------------
Australia 0.72%
Canada 4.96
Colombia 0.37
Costa Rica 0.12
France 0.96
Germany 1.24
Mexico 0.67
Netherlands 1.09
New Zealand 0.45
Panama 0.24
Spain 0.55
United Kingdom 10.71
United States 77.43
-----
TOTAL INVESTMENTS 99.51%
=====
Additionally, the concentration of investments can be aggregated
by the quality rating for each debt security.
QUALITY DISTRIBUTION
- ---------------------
AAA 33.98
AA 0.55
A 0.91
BBB 0.74
BB 9.37
B 46.51
CCC 1.97
CC 0.03
-----
TOTAL BONDS 94.06%
=====
See notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -
ORGANIZATION
John Hancock V.A. Financial Industries Fund ("V.A. Financial Industries
Fund"), John Hancock V.A. 500 Index Fund ("V.A. 500 Index Fund"), John
Hancock V.A. International Fund ("V.A. International Fund"), John Hancock
V.A. Large Cap Growth Fund ("V.A. Large Cap Growth Fund"), John Hancock
V.A. Mid Cap Growth Fund ("V.A. Mid Cap Growth Fund"), John Hancock V.A.
Regional Bank Fund ("V.A. Regional Bank Fund"), John Hancock V.A. Small
Cap Growth Fund ("V.A. Small Cap Growth Fund"), John Hancock V.A. Core
Equity Fund ("V.A. Core Equity Fund"), John Hancock V.A. Large Cap Value
Fund ("V.A. Large Cap Value Fund"), John Hancock V.A. Sovereign Investors
Fund ("V.A. Sovereign Investors Fund"), John Hancock V.A. Bond Fund ("V.A.
Bond Fund"), John Hancock V.A. High Yield Bond Fund ("V.A. High Yield Bond
Fund), John Hancock V.A. Money Market Fund ("V.A. Money Market Fund") and
John Hancock V.A. Strategic Income Fund ("V.A. Strategic Income Fund"),
(each a "Fund," collectively, the "Funds") are separate series of John
Hancock Declaration Trust (the "Trust") an open-end management investment
company, registered under the Investment Company Act of 1940. Prior to
October 1, 1998, V.A. Bond Fund was known as John Hancock V.A. Sovereign
Bond Fund. Prior to May 1, 1999, V.A. Large Cap Growth Fund was known as
John Hancock V.A. Growth Fund, V.A. Mid Cap Growth Fund was known as John
Hancock V.A. Special Opportunities Fund, V.A. Small Cap Growth Fund was
known as John Hancock V.A. Emerging Growth Fund, V.A. Core Equity Fund was
known as John Hancock V.A. Independence Equity Fund and V.A. Large Cap
Value Fund was known as John Hancock Growth and Income Fund. The Trust,
organized as a Massachusetts business trust in 1995, consists of fourteen
different series at June 30, 1999. Each Fund currently has one class of
shares with equal rights as to voting, redemption, dividends and
liquidation within its respective Fund. The Trustees may authorize the
creation of additional series from time to time to satisfy various
investment objectives. An insurance company issuing a Variable Contract
that participates in the Trust will vote shares of the Funds held by the
insurance company's separate accounts as required by law. In accordance
with current law and interpretations thereof, participating insurance
companies are required to request voting instructions from policy owners
and must vote shares of the Funds in proportion to the voting instructions
received.
The investment objective of the V.A. Financial Industries Fund is to seek
capital appreciation by investing primarily in equity securities of
financial services companies throughout the world. The investment
objective of the V.A. 500 Index Fund is to provide investment results that
correspond to the total return performance of the Standard & Poor's 500
Stock Price Index (the "S&P 500 Index"). The investment objective of the
V.A. International Fund is to seek long-term growth of capital by
investing primarily in equity securities of foreign companies and
governments. The investment objective of the V.A. Large Cap Growth Fund is
to seek long-term capital appreciation by investing primarily in common
stocks of companies which the Fund's management believes offer outstanding
growth potential over both the intermediate and long term. The investment
objective of the V.A. Mid Cap Growth Fund is to seek long-term capital
appreciation by investing primarily in equity securities of domestic and
foreign issuers in various economic sectors. The investment objective of
the V.A. Regional Bank Fund is to seek long-term capital appreciation by
investing primarily in regional banks and lending institutions. The
investment objective of the V.A. Small Cap Growth Fund is to seek
long-term growth of capital by primarily investing in emerging growth
companies with market capitalizations of no more than $1 billion. The
investment objective of the V.A. Core Equity Fund is to seek above-average
total return, consisting of capital appreciation and income, by focusing
on stocks of companies that management believes are undervalued and have
improving fundamentals over both the intermediate and long-term. The
investment objective of the V.A. Large Cap Value Fund is to seek the
highest total return (capital appreciation plus current income) that is
consistent with reasonable safety of capital. The investment objective of
the V.A. Sovereign Investors Fund is to seek long-term growth of capital
and income without assuming undue market risks by investing primarily in
common stocks of seasoned companies in sound financial condition with a
long record of paying increasing dividends. The investment objective of
the V.A. Bond Fund is to seek a high level of current income consistent
with prudent investment risk by investing primarily in a diversified
portfolio of investment-grade fixed-income securities of U.S. and foreign
issuers, although the Fund may invest up to 25% of its total assets in
lower-rated, high-yield, high-risk, fixed-income securities. The
investment objective of the V.A. High Yield Bond Fund is to seek maximum
current income without assuming undue risk, investing primarily in
lower-rated, higher-yielding debt securities. The investment objective of
the V.A. Money Market Fund is to seek maximum current income consistent
with capital preservation and liquidity by investing only in high-quality
money market instruments. The investment objective of the V.A. Strategic
Income Fund is to seek a high level of current income by investing
primarily in foreign government and corporate fixed-income securities,
U.S. government securities and lower-rated, high-yield, high-risk,
fixed-income securities of U.S. issuers.
NOTE B -
ACCOUNTING POLICIES
VALUATION OF INVESTMENTS Securities in the Funds' portfolios (except for
the V.A. Money Market Fund) are valued on the basis of market quotations,
valuations provided by independent pricing services or at fair value as
determined in good faith in accordance with procedures approved by the
Trustees. Short-term debt investments maturing within 60 days are valued
at amortized cost, which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency
Translation." The Funds may invest in indexed securities whose value is
linked either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original investment.
The V.A. Money Market Fund's portfolio of securities is valued at
amortized cost, in accordance with Rule 2a-7 of the Investment Company Act
of 1940, which approximates market value. The amortized cost method
involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of the difference
between the principal amount due at maturity and the cost of the security
to the Fund. Interest income on certain portfolio securities such as
negotiable bank certificates of deposit and interest-bearing notes is
accrued daily and included in interest receivable.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other registered
investment companies having a management contract with John Hancock
Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley
Financial Group, Inc., may participate in joint repurchase agreement
transactions. Aggregate cash balances are invested in one or more large
repurchase agreements, whose underlying securities are obligations of the
U.S. government and/or its agencies. The Funds' custodian bank receives
delivery of the underlying securities for the joint account on the Funds'
behalf. The Adviser is responsible for ensuring that the agreement is
fully collateralized at all times.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on sales
of investments are determined on the identified cost basis. Capital gains
realized on some foreign securities are subject to foreign taxes and are
accrued, as applicable.
FEDERAL INCOME TAXES The Funds' policy is to comply with the requirements
of the Internal Revenue Code that are applicable to regulated investment
companies. They will not be subject to federal income tax on taxable
earnings which are distributed to shareholders. For federal income tax
purposes, net currency exchange gains and losses from sales of foreign
debt securities may be treated as ordinary income even though such items
are capital gains and losses for accounting purposes.
For federal income tax purposes, the following funds had capital loss
carryforwards available. These carryforwards are available to offset
future net realized capital gains to the extent provided by regulations.
Expired capital loss carryforwards are reclassified to capital paid-in, in
the year of expiration.
<TABLE>
<CAPTION>
CAPITAL LOSS CAPITAL LOSS CAPITAL LOSS
CARRYFORWARD CARRYFORWARD CARRYFORWARD
FUND EXPIRING 12/31/2004 EXPIRING 12/31/2005 EXPIRING 12/31/2006
- ---- ------------------- ------------------- -------------------
<S> <C> <C> <C>
V.A. Financial Industries Fund $ -- $ -- $ --
V.A. 500 Index Fund -- -- --
V.A. International Fund -- -- 187,201
V.A. Large Cap Growth Fund -- 189,103 --
V.A. Mid Cap Growth Fund -- -- 91,390
V.A. Regional Bank Fund -- -- --
V.A. Small Cap Growth Fund 18,937 167,088 467,575
V.A. Core Equity Fund -- -- --
V.A. Large Cap Value Fund -- -- --
V.A. Sovereign Investors Fund -- -- 157,877
V.A. Bond Fund -- -- --
V.A. High Yield Bond Fund -- -- 145,743
V.A. Money Market Fund -- -- --
V.A. Strategic Income Fund -- -- --
</TABLE>
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Funds are notified of
the dividend. Interest income on investment securities is recorded on the
accrual basis. Foreign income may be subject to foreign withholding taxes,
which are accrued as applicable.
The Funds record all distributions to shareholders from net investment
income and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ
from generally accepted accounting principles.
EXPENSES The majority of the expenses of the Trust are directly
identifiable to an individual Fund. Expenses which are not readily
identifiable to a specific Fund are allocated in such a manner as deemed
equitable, taking into consideration, among other things, the nature and
type of expense and the relative size of the Funds.
USE OF ESTIMATES The preparation of these financial statements in
accordance with generally accepted accounting principles incorporates
estimates made by management in determining the reported amounts of
assets, liabilities, revenues and expenses of the Funds. Actual results
could differ from these estimates.
ORGANIZATION EXPENSES Any expenses incurred in connection with the
organization of the Funds have been capitalized and are being charged to
the Funds' operations ratably over a five-year period that commenced with
the investment operations of each applicable Fund.
BANK BORROWINGS The Funds (except V.A. Money Market Fund) are permitted to
have bank borrowings for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. Effective March 12, 1999, the Funds entered
into a syndicated line of credit agreement with various banks and the
agreements previously in effect were terminated. This agreement enables
the Funds to participate with other funds managed by the Adviser in an
unsecured line of credit with banks which permit borrowings up to $500
million, collectively. Interest is charged to each fund, based on its
borrowings. In addition, a commitment fee is charged based on the average
daily unused portion of the line of credit and is allocated among the
participating funds. The Funds had no borrowing activity for the period
ended June 30, 1999.
FOREIGN CURRENCY TRANSLATION All assets and liabilities initially
expressed in terms of foreign currencies are translated into U.S. dollars
based on London currency exchange quotations as of 5:00 P.M., London time,
on the date of any determination of the net asset value of the Funds.
Transactions affecting statement of operations accounts and net realized
gain/(loss) on investments are translated at the rates prevailing at the
dates of the transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on
the Funds' books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains or losses arise
from changes in the value of assets and liabilities other than investments
in securities at fiscal year end, resulting from changes in the exchange
rate.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds (except for the V.A.
Core Equity Fund, V.A. 500 Index Fund, V.A. Sovereign Investors Fund and
V.A. Money Market Fund) may enter into forward foreign currency exchange
contracts as a hedge against the effect of fluctuations in currency
exchange rates. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date at a
set price. The aggregate principal amounts of the contracts are marked to
market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination of
each Fund's daily net assets. The Funds record realized gains and losses
at the time the forward foreign currency contract is closed out or offset
by a matching contract. Risks may arise upon entering these contracts from
potential inability of counterparties to meet the terms of the contract
and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. These contracts involve market or credit risk
in excess of the unrealized gain or loss reflected in the Funds'
Statements of Assets and Liabilities.
The Funds may also purchase and sell forward contracts to facilitate the
settlement of foreign currency denominated portfolio transactions, under
which they intend to take delivery of the foreign currency. Such contracts
normally involve no market risk if they are offset by the currency amount
of the underlying transaction.
Open forward foreign currency exchange contracts for the Trust at June 30,
1999, were as follows:
PRINCIPAL AMOUNT EXPIRATION UNREALIZED
CURRENCY COVERED BY CONTRACT MONTH APPRECIATION
- -------- ------------------- ---------- ------------
V.A. INTERNATIONAL FUND
Buys
Japanese Yen 2,580,432 JULY 99 $23
=======
Sells
Danish Krone 67,682 JULY 99 $9
Euro Currency 91,570 JULY 99 65
Pound Sterling 36,551 JULY 99 134
Swiss Franc 35,157 JULY 99 60
-------
$268
=======
V.A. LARGE CAP VALUE FUND
Sells
Japanese Yen 3,705,446 SEPT 99 $1,010
=======
V.A. HIGH YIELD BOND FUND
Sells
Euro Currency 202,604 JULY 99 $9,036
Euro Currency 33,209 SEPT 99 516
Japanese Yen 12,286,559 SEPT 99 3,152
Pound Sterling 44,285 JULY 99 1,648
Pound Sterling 55,500 AUG 99 1,857
-------
$16,209
=======
V.A. STRATEGIC INCOME FUND
Sells
Canadian Dollar 95,625 AUG 99 $1,040
Canadian Dollar 778,935 SEPT 99 2,459
Euro Currency 521,860 JULY 99 12,227
Euro Currency 79,802 AUG 99 1,616
Euro Currency 408,585 SEPT 99 4,901
Pound Sterling 61,758 JULY 99 1,720
Pound Sterling 108,500 AUG 99 4,291
Pound Sterling 447,411 SEPT 99 12,631
-------
$40,885
=======
FINANCIAL FUTURES CONTRACTS The Funds (except V.A. Money Market Fund) may
buy and sell financial futures contracts to hedge against the effects of
fluctuations in interest rates, currency exchange rates and other market
conditions. Buying futures tends to increase the Funds' exposure to the
underlying instrument. Selling futures tends to decrease the Funds'
exposure to the underlying instrument or hedge other Funds instruments. At
the time each Fund enters into a financial futures contract, it will be
required to deposit with its custodian a specified amount of cash or U.S.
government securities, known as "initial margin," equal to a certain
percentage of the value of the financial futures contract being traded.
Each day, the futures contract is valued at the official settlement price
on the board of trade or U.S. commodities exchange on which it trades.
Subsequent payments, known as "variation margin," to and from the broker
are made on a daily basis as the market price of the financial futures
contract fluctuates. Daily variation margin adjustments, arising from this
"mark to market," will be recorded by the Funds as unrealized gains or
losses.
When the contracts are closed, the Funds recognize a gain or loss. Risks
of entering into futures contracts include the possibility that there may
be an illiquid market and/or that a change in the value of the contracts
may not correlate with changes in the value of the underlying securities.
In addition, the Funds could be prevented from opening or realizing the
benefits of closing out futures positions because of position limits or
limits on daily price fluctuation imposed by an exchange.
For federal income tax purposes, the amount, character and timing of the
Funds' gains and/or losses can be affected as a result of futures
contracts.
Open financial futures contracts for the Trust at June 30, 1999 were as
follows:
<TABLE>
<CAPTION>
OPEN UNREALIZED
EXPIRATION CONTRACTS POSITION APPRECIATION
- ---------- --------------------- ---------- ------------
<S> <C> <C> <C>
V.A. 500 INDEX FUND
SEPT 99 4 S&P 500 Long $55,126
=======
V.A. STRATEGIC INCOME FUND
SEPT 99 4 U.S. Treasury Notes Long $8,097
=======
</TABLE>
At June 30, 1999, the V.A. 500 Index Fund had deposited $75,000 in a
segregated account to cover margin requirements on open financial futures
contracts. The V.A. Strategic Income Fund had deposited in a segregated
account, $10,000 par value of U.S. Treasury Bond, 8.125%, 08-15-19, to
cover margin requirements on open financial futures contracts.
OPTIONS The Funds (except V.A. Money Market Fund) may purchase options
contracts. Listed options are valued at the last quoted sales price on the
exchange on which they are primarily traded. Over-the-counter options are
valued at the mean between the last bid and asked prices. Upon the writing
of a call or put option, an amount equal to the premium received by the
Fund will be included in the Statement of Assets and Liabilities as an
asset and corresponding liability. The amount of the liability will be
subsequently marked to market to reflect the current market value of the
written option.
The Funds may use option contracts to manage their exposure to changing
security prices. Writing puts and buying calls will tend to increase the
Funds' exposure to the underlying instrument and buying puts and writing
calls will tend to decrease the Funds' exposure to the underlying
instrument, or hedge other Fund investments.
The maximum exposure to loss for any purchased options will be limited to
the premium initially paid for the option. In all other cases, the face
(or "notional") amount of each contract at value will reflect the maximum
exposure of the Funds in these contracts, but the actual exposure will be
limited to the change in value of the contract over the period the
contract remains open.
Risks may also arise if counterparties do not perform under the contract's
terms ("credit risk"), or if the Funds are unable to offset a contract
with a counterparty on a timely basis ("liquidity risk"). Exchange-traded
options have minimal credit risk as the exchanges act as counterparties to
each transaction, and only present liquidity risk in highly unusual market
conditions. To minimize credit and liquidity risks in over-the-counter
option contracts, the Funds will continuously monitor the creditworthiness
of all its counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Funds'
Statements of Assets and Liabilities.
There were no written option transactions for the period ended June 30,
1999, for the Funds.
NOTE C -
MANAGEMENT FEE AND TRANSACTIONS WITH
AFFILIATES AND OTHERS
Under the present investment management contract, each Fund pays a monthly
management fee to the Adviser, for a continuous investment program
equivalent, on an annual basis, as follows:
FUND RATE
- ---- ----
V.A. Financial Industries Fund 0.80% of average daily net assets
V.A. 500 Index Fund 0.35% of average daily net assets
V.A. International Fund 0.90% of average daily net assets
V.A. Large Cap Growth Fund 0.75% of average daily net assets
V.A. Mid Cap Growth Fund 0.75% of average daily net assets
V.A. Regional Bank Fund 0.80% of average daily net assets
V.A. Small Cap Growth Fund 0.75% of average daily net assets
V.A. Core Equity Fund 0.70% of average daily net assets
V.A. Large Cap Value Fund 0.60% of average daily net assets
V.A. Sovereign Investors Fund 0.60% of average daily net assets
V.A. Bond Fund 0.50% of average daily net assets
V.A. High Yield Bond Fund 0.60% of average daily net assets
V.A. Money Market Fund 0.50% of average daily net assets
V.A. Strategic Income Fund 0.60% of average daily net assets
John Hancock Advisers International Limited ("JHAI") serves as the
sub-adviser to the V.A. International Fund pursuant to a sub-advisory
agreement among the Fund, the Adviser, and JHAI. JHAI was formed in 1987
and is a wholly owned subsidiary of the Adviser. JHAI provides
international investment research and advisory services to investment
companies and institutional clients. The Adviser pays a portion of its
advisory fee from the V.A. International Fund to JHAI at the following
rate: 70% of the advisory fee payable by the Fund.
Independence Investment Associates, Inc. ("IIA") serves as the sub-adviser
to the V.A. Core Equity Fund pursuant to a separate sub-advisory agreement
among the Fund, the Adviser, and IIA. IIA was organized in 1982 and is a
wholly owned indirect subsidiary of John Hancock Mutual Life Insurance
Company ("JHMLICo"). IIA provides investment advice and advisory services
to investment companies and institutional accounts. The Adviser pays a
portion of its advisory fee from the V.A. Core Equity Fund to IIA at the
following rate: 55% of the advisory fee payable by the Fund.
The V.A. 500 Index Fund has an agreement with Standard & Poor's ("S & P")
to license certain trademarks and trade names of S & P and of the S & P
500 Index, which is determined, composed and calculated by S & P without
regard to the Adviser or the V.A. 500 Index Fund. (Requisite disclosure
regarding the use of the Standard & Poor's name is included in the Trust's
prospectus.)
Effective February 10, 1997, the Adviser agreed to limit its management
fee on the V.A. 500 Index Fund to 0.10% of the Fund's average daily net
assets. The Adviser may terminate this limitation in the future.
Accordingly for the period ended June 30, 1999, the reduction in the
Fund's management fee amounted to $37,279.
The Adviser has voluntarily agreed to limit each Fund's expenses,
excluding the management fee (except V.A. 500 Index Fund), to 0.25% of
each Fund's average daily net assets. Accordingly, the reductions in
expenses for the period ended June 30, 1999 due to this limitation were as
follows:
FUND FEE REDUCTION
- ---- -------------
V.A. Financial Industries Fund $ --
V.A. 500 Index Fund 18,602
V.A. International Fund 35,854
V.A. Large Cap Growth Fund 4,920
V.A. Mid Cap Growth Fund 17,746
V.A. Regional Bank Fund --
V.A. Small Cap Growth Fund 19,596
V.A. Core Equity Fund 1,059
V.A. Large Cap Value Fund --
V.A. Sovereign Investors Fund --
V.A. Bond Fund 16,016
V.A. High Yield Bond Fund 5,302
V.A. Money Market Fund --
V.A. Strategic Income Fund 1,059
The Adviser reserves the right to terminate this limitation in the future.
The Funds have an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Funds. The compensation for the year
was at an annual rate of less than 0.02% of the average net assets of the
Funds.
Mr. Edward J. Boudreau, Jr., Mr. Stephen L. Brown, Ms. Anne C. Hodsdon and
Mr. Richard S. Scipione are directors and/or officers of the Adviser
and/or its affiliates, as well as Trustees of the Funds. The compensation
of unaffiliated Trustees is borne by the Funds. The unaffiliated Trustees
may elect to defer, for tax purposes, their receipt of this compensation
under the John Hancock Group of Funds Deferred Compensation Plan. The
Funds make investments into other John Hancock funds, as applicable, to
cover their liability for the deferred compensation. Investments to cover
the Funds' deferred compensation liability are recorded on the Funds'
books as an other asset. The deferred compensation liability and the
related other asset are always equal and are marked to market on a
periodic basis to reflect any income earned by the investment as well as
any unrealized gains or losses. The investment had no impact on the
operations of the Funds.
The Adviser and other subsidiaries of John Hancock Mutual Life Insurance
Company owned the following shares of beneficial interest of the Funds as
of June 30, 1999:
FUND SHARES OF BENEFICIAL INTEREST
- ---- -----------------------------
V.A. Financial Industries Fund --
V.A. 500 Index Fund --
V.A. International Fund 215,007
V.A. Large Cap Growth Fund 100,000
V.A. Mid Cap Growth Fund 50,023
V.A. Regional Bank Fund 50,728
V.A. Small Cap Growth Fund 100,201
V.A. Core Equity Fund --
V.A. Large Cap Value Fund 50,671
V.A. Sovereign Investors Fund --
V.A. Bond Fund 121,823
V.A. High Yield Bond Fund 229,677
V.A. Money Market Fund 113,216
V.A. Strategic Income Fund 474,018
NOTE D -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities for the Funds, excluding
short-term securities, during the period ended June 30, 1999, were as
follows:
FUND PURCHASES SALES
- ---- ----------- -----------
V.A. Financial Industries Fund $12,411,167 $13,391,587
V.A. 500 Index Fund 5,374,870 247,839
V.A. International Fund 3,299,191 3,318,654
V.A. Large Cap Growth Fund 21,731,637 15,608,318
V.A. Mid Cap Growth Fund 2,163,989 1,825,649
V.A. Regional Bank Fund 7,417,239 4,509,362
V.A. Small Cap Growth Fund 5,037,240 4,643,898
V.A. Core Equity Fund 22,460,533 12,241,781
V.A. Large Cap Value Fund 26,358,915 18,918,665
V.A. Sovereign Investors Fund
U.S. Government Securities 1,028,614 --
Other Investments 10,347,734 5,552,676
V.A. Bond Fund
U.S. Government Securities 7,611,151 8,056,765
Other Investments 13,012,572 11,464,377
V.A. High Yield Bond Fund
U.S. Government Securities -- --
Other Investments 7,725,607 6,862,519
V.A. Strategic Income Fund
U.S. Government Securities 1,783,082 552,769
Other Investments 7,494,677 4,565,858
At June 30, 1999, the cost (excluding the corporate savings accounts) and
gross unrealized appreciation and depreciation in value of investments
owned by the Funds, as computed on a federal income tax basis, were as
follows:
<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION/
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
V.A. Financial Industries Fund $47,306,659 $7,706,954 $1,818,782 $5,888,172
V.A. 500 Index Fund 26,054,917 9,339,579 767,580 8,571,999
V.A. International Fund 6,301,029 1,071,240 295,863 775,377
V.A. Large Cap Growth Fund 14,821,043 2,591,547 93,846 2,497,701
V.A. Mid Cap Growth Fund 2,271,687 403,810 83,114 320,696
V.A. Regional Bank Fund 23,360,264 1,576,137 1,255,162 320,975
V.A. Small Cap Growth Fund 7,280,282 3,147,868 339,535 2,808,333
V.A. Core Equity Fund 33,693,794 7,246,313 954,707 6,291,606
V.A. Large Cap Value Fund 22,269,671 5,476,843 666,804 4,810,039
V.A. Sovereign Investors Fund 38,123,391 7,033,516 603,119 6,430,397
V.A. Bond Fund 12,142,882 29,845 316,426 (286,581)
V.A. High Yield Bond Fund 10,210,763 257,487 1,225,056 (967,569)
V.A. Money Market Fund 22,465,839 -- -- --
V.A. Strategic Income Fund 21,195,774 244,473 1,086,902 (842,429)
</TABLE>
NOTE E -
REORGANIZATION
On March 18, 1999, the shareholders of John Hancock V.A. World Bond Fund
(VAWBF) approved a plan of reorganization between VAWBF and V.A. Strategic
Income Fund, providing for the transfer of substantially all of the assets
and liabilities of VAWBF to V.A. Strategic Income Fund in exchange solely
for shares of V.A. Strategic Income Fund. The acquisition of VAWBF was
accounted for as a tax free exchange of shares of V.A. Strategic Income
(valued at $2,569,836) for the 253,313 shares of VAWBF, including $17,012
of unrealized depreciation, after the close of business on March 26, 1999.
Dividend Increases (Unaudited)
Listed below are the most recent dividend increases for the common stocks
held in the V.A. Sovereign Investors Fund as of June 30, 1999.
- -------------------------------------------------------------------------
PERCENT OF
COMPANY DIVIDEND INCREASE
- ------- -----------------
Abbott Laboratories 11.1%
AFLAC Corp. 13.0
Air Products & Chemicals, Inc. 13.3
Albertson's, Inc. 6.3
ALLTEL Corp. 5.2
American Home Products Corp. 4.7
American International Group, Inc. 12.0
Ameritech Corp. 5.8
Automatic Data Processing, Inc. 15.1
Bank of America Corp. 18.4
Banc One Corp. 10.0
Baxter International, Inc. 3.0
Bell Atlantic Corp. 4.1
Bemis Co., Inc. 10.0
Bestfoods, Inc. 9.1
Bristol-Myers Squibb Co. 10.3
CenturyTel, Inc. 5.4
Chevron Corp. 5.2
Citigroup, Inc. 44.0
Dayton Hudson Corp. 12.5
Dover Corp. 10.5
DuPont (E.I.) De Nemours & Co. 11.1
Emerson Electric Co. 10.2
Fannie Mae 8.7
First Tennessee National Corp. 15.2
Flowers Industries, Inc. 2.1
Gannett Co., Inc. 5.3
General Electric Co. 16.7
Grainger (W.W.), Inc. 11.1
Hasbro, Inc. 20.0
Hewlett-Packard Co. 14.3
Home Depot, Inc. (The) 20.0
Honeywell, Inc. 3.6
Interpublic Group of Companies, Inc. (The) 15.4
Johnson & Johnson 13.6
Johnson Controls, Inc. 8.7
Leggett & Platt, Inc. 6.7
Lowe's Cos., Inc. 9.1
Masco Corp. 4.8
McDonald's Corp. 9.1
McGraw-Hill Cos., Inc. 8.3
Merck & Co., Inc. 20.0
Minnesota Mining & Manufacturing Co. 3.8
Mobil Corp. 7.5
Pentair, Inc. 6.7
PepsiCo, Inc. 4.0
Philip Morris Cos., Inc. 10.0
Pitney Bowes, Inc. 12.5
Questar Corp. 4.8
ReliaStar Financial Corp. 19.4
Royal Dutch Petroleum Co. 9.2
RPM, Inc. 4.9
SBC Communications, Inc. 4.5
Schering-Plough Corp. 15.8
Sigma - Aldrich Corp. 3.6
SunTrust Banks, Inc. 9.3
SYSCO Corp. 11.1
UNUM Corp. 3.5
Wal-Mart Stores, Inc. 14.8
Warner-Lambert Co. 7.9
Wells Fargo Co. 12.1
----
The average dividend increase for this group was 10.3%
====
Historical Data (Unaudited)
The table below shows the record for the V.A. Sovereign Investors
Fund during the past periods.
- -----------------------------------------------------------------
PER SHARE
YEAR -----------------------------------------------------
ENDED SHARES DIVIDENDS NET ASSET CAPITAL GAINS
DEC. 31 OUTSTANDING FROM INCOME VALUE DISTRIBUTION
- ------- ----------- ----------- ------ -------------
1996(1) 103,482 $0.07 $10.74 $0.02
1997 896,718 0.18 13.59 0.01
1998 2,188,296 0.25 15.61 --
1999(2) 2,679,516 0.12 16.40 --
(1) For the period from commencement of operations on August 29, 1996 to
December 31, 1996.
(2) For the period ended June 30, 1999.
A 1/2" x 1/2" John Hancock Funds logo in upper left hand corner of the
page. A box sectioned in quadrants with a triangle in upper left, a
circle in upper right, a cube in lower left and a diamond in lower
right. A tag line below reads "A Global Investment Management Firm."
101 Huntington Avenue, Boston, MA 02199-7603
1-800-824-0335
This report is for the information of shareholders of the John Hancock
Declaration Trust. It may be used as sales literature when preceded or
accompanied by the current prospectus, which details charges, investment
objectives and operating policies.
A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."
DECSA 6/99
8/99
