<PAGE> 1
Diversified Investors
Variable Funds and Strategic Variable Funds
Semi-Annual Report
June 30, 1997
Aggressive Strategic Allocation Variable Fund
Moderate Strategic Allocation Variable Fund
Conservative Strategic Allocation Variable Fund
Calvert Series
International Equity Series
High Yield Bond Series
Aggressive Equity Series
Special Equity Series
Equity Growth Series
Growth & Income Series
Equity Value Series
Equity Income Series
Balanced Series
Government/Corporate Bond Series
Intermediate Government Bond Series
High Quality Bond Series
Money market Series
[Diversified Investment Advisors Logo]
<PAGE> 2
This report is not to be construed as an offering for sale of any contracts
participating in the Subaccounts (Series) of Diversified Investors Variable
Funds or the Diversified Investors Strategic Variable Funds, or as a
solicitation as an offer to buy any contracts unless preceded by or accompanied
by a current prospectus which contain the complete information of charges and
expenses.
This is a combined semi-annual report for the subaccounts of the Diversified
Investors Variable Funds and the Diversified Investors Strategic Variable
Funds.
<PAGE> 3
THE DIVERSIFIED INVESTORS VARIABLE FUNDS
AND STRATEGIC VARIABLE FUNDS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
DIVERSIFIED INVESTORS VARIABLE GROUP:
Statements of Assets and Liabilities............................................ 2-3
Statements of Operations........................................................ 4-5
Statements of Changes in Net Assets............................................. 6-7
Statements of Changes in Net Assets -- December 31, 1996........................ 8-9
Notes to Financial Statements................................................... 10-12
Financial Highlights............................................................ 14-15
DIVERSIFIED INVESTORS PORTFOLIOS:
Economic and Market Review...................................................... 17-24
Statements of Assets and Liabilities............................................ 26-27
Statements of Operations........................................................ 28-29
Statements of Changes in Net Assets............................................. 30-31
Statements of Changes in Net Assets -- December 31, 1996........................ 32-33
PORTFOLIO OF INVESTMENTS:
Money Market Portfolio.......................................................... 34-35
High Quality Bond Portfolio..................................................... 36-38
Intermediate Government Bond Portfolio.......................................... 39-40
Government/Corporate Bond Portfolio............................................. 41-43
Balanced Portfolio.............................................................. 44-45
Equity Income Portfolio......................................................... 46-48
Equity Value Portfolio.......................................................... 49-50
Growth & Income Portfolio....................................................... 51-53
Equity Growth Portfolio......................................................... 54-55
Special Equity Portfolio........................................................ 56-60
Aggressive Equity Portfolio..................................................... 61
High Yield Bond Portfolio....................................................... 62-64
International Equity Portfolio.................................................. 65-68
Notes to Financial Statements................................................... 69-77
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS:
Statements of Assets and Liabilities............................................ 78
Statements of Operations........................................................ 79
Statements of Changes in Net Assets............................................. 80
PORTFOLIO OF INVESTMENTS:
Conservative Variable Allocation Fund........................................... 81
Moderate Variable Allocation Fund............................................... 82
Aggressive Variable Allocation Fund............................................. 83
Notes to Financial Statements................................................... 84-85
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO SEMI-ANNUAL REPORT.............. 86-100
</TABLE>
<PAGE> 4
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
-----------------------------------------------------------------------------------------------------
MONEY HIGH INTERMEDIATE GOVERNMENT/ EQUITY
MARKET QUALITY BOND GOVERNMENT BOND CORPORATE BOND BALANCED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ------------ --------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in the
Funds, at value
(Notes 1 and 2)...... $22,202,431 $592,552 $18,892,524 $ 16,612,848 $105,084,872 $308,442,174
Reimbursement from
AUSA................. 82,527 -- -- -- -- 109,657
----------- -------- ----------- ----------- ------------ ------------
Total assets...... 22,284,958 592,552 18,892,524 16,612,848 105,084,872 308,551,831
----------- -------- ----------- ----------- ------------ ------------
LIABILITIES:
Accrued expenses....... 95,941 400 14,421 12,619 79,250 342,652
----------- -------- ----------- ----------- ------------ ------------
NET ASSETS
ATTRIBUTABLE TO
ANNUITY
CONTRACTHOLDERS... $22,189,017 $592,152 $18,878,103 $ 16,600,229 $105,005,622 $308,209,179
=========== ======== =========== =========== ============ ============
Accumulation units... 1,445,561 55,988 1,296,722 806,317 3,820,675 9,762,109
=========== ======== =========== =========== ============ ============
Unit value........... $ 15.35 $ 10.58 $ 14.56 $ 20.59 $ 27.48 $ 31.57
=========== ======== =========== =========== ============ ============
</TABLE>
See notes to financial statements.
2
<PAGE> 5
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
---------------------------------------------------------------------------------------------------------
EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH INTERNATIONAL
VALUE INCOME GROWTH EQUITY EQUITY YIELD BOND EQUITY CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ------------ ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,623,651 $35,852,399 $174,046,664 $57,099,982 $1,750,598 $156,664 $23,233,454 $25,937,624
-- -- 556,111 -- -- -- -- --
---------- ----------- ------------ ----------- ---------- -------- ----------- -----------
1,623,651 35,852,399 174,602,775 57,099,982 1,750,598 156,664 23,233,454 25,937,624
---------- ----------- ------------ ----------- ---------- -------- ----------- -----------
1,127 26,427 666,037 42,226 1,225 114 17,938 19,572
---------- ----------- ------------ ----------- ---------- -------- ----------- -----------
$1,622,524 $35,825,972 $173,936,738 $57,057,756 $1,749,373 $156,550 $23,215,516 $25,918,052
========== =========== ============ =========== ========== ======== =========== ===========
130,802 1,877,877 5,140,057 2,787,227 161,076 14,080 1,654,488 1,251,607
========== =========== ============ =========== ========== ======== =========== ===========
$ 12.40 $ 19.08 $ 33.84 $ 20.47 $ 10.86 $ 11.12 $ 14.03 $ 20.71
========== =========== ============ =========== ========== ======== =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE> 6
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
----------------------------------------------------------------------------------------------------
HIGH GOVERNMENT/
MONEY QUALITY INTERMEDIATE CORPORATE EQUITY EQUITY
MARKET BOND GOVERNMENT BOND BOND BALANCED INCOME VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ------------ --------------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Allocated net investment
income (loss) from
Diversified Investors
Portfolios (Note 2)..... $566,046 $ 10,360 $ 523,521 $ 527,406 $ 1,749,559 $ 3,250,070 $ 7,076
-------- ------- -------- -------- ----------- ----------- --------
EXPENSES (NOTE 3)
Mortality and expense
risk.................. 96,655 1,534 84,014 71,868 435,966 1,239,827 3,772
Less expenses reimbursed
by AUSA............... (20,607) -- -- -- -- -- --
-------- ------- -------- -------- ----------- ----------- --------
Net expenses............ 76,048 1,534 84,014 71,868 435,966 1,239,827 3,772
-------- ------- -------- -------- ----------- ----------- --------
Net investment income
(loss).................. 489,998 8,826 439,507 455,538 1,313,593 2,010,243 3,304
-------- ------- -------- -------- ----------- ----------- --------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS (NOTE 2)
Net realized gains
(losses) on
investments........... (177) (581) 9,593 5,128 7,402,758 11,787,704 30,376
Net realized gain on
foreign currency
transactions.......... -- -- -- -- -- -- --
Net change in unrealized
appreciation
(depreciation) on
investments........... -- 934 8,481 (64,927) 2,268,569 36,757,426 96,933
Net change in unrealized
depreciation in
translation of assets
and liabilities in
foreign currency...... -- -- -- -- -- -- --
-------- ------- -------- -------- ----------- ----------- --------
Net realized and
unrealized gains
(losses) on
investments........... (177) 353 18,074 (59,799) 9,671,327 48,545,130 127,309
-------- ------- -------- -------- ----------- ----------- --------
Net increase in net assets
resulting from
operations.............. $489,821 $ 9,179 $ 457,581 $ 395,739 $10,984,920 $50,555,373 $130,613
======== ======= ======== ======== =========== =========== ========
</TABLE>
See notes to financial statements.
4
<PAGE> 7
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
--------------------------------------------------------------------------------------
HIGH
GROWTH & EQUITY SPECIAL AGGRESSIVE YIELD INTERNATIONAL
INCOME GROWTH EQUITY EQUITY BOND EQUITY CALVERT
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 108,219 $ 407,282 $ 62,893 $ (2,493) $3,591 $ 140,494 $ --
---------- ----------- ---------- -------- ------ ---------- ----------
124,228 608,294 217,421 6,050 380 83,683 106,122
-- -- -- -- -- -- --
---------- ----------- ---------- -------- ------ ---------- ----------
124,228 608,294 217,421 6,050 380 83,683 106,122
---------- ----------- ---------- -------- ------ ---------- ----------
(16,009) (201,012) (154,528) (8,543) 3,211 56,811 (106,122)
---------- ----------- ---------- -------- ------ ---------- ----------
1,504,857 (3,272,812) 626,654 (35,745) 516 455,951 134,621
-- -- -- -- -- 80,054 --
3,453,713 23,358,140 4,581,261 221,357 1,483 2,603,457 2,297,757
-- -- -- -- -- (33,098) --
---------- ----------- ---------- -------- ------ ---------- ----------
4,958,570 20,085,328 5,207,915 185,612 1,999 3,106,364 2,432,378
---------- ----------- ---------- -------- ------ ---------- ----------
$4,942,561 $19,884,316 $5,053,387 $177,069 $5,210 $3,163,175 $2,326,256
========== =========== ========== ======== ====== ========== ==========
</TABLE>
See notes to financial statements.
5
<PAGE> 8
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
--------------------------------------------------------------------------------
MONEY HIGH INTERMEDIATE GOVERNMENT/
MARKET QUALITY BOND GOVERNMENT BOND CORPORATE BOND BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ --------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss).... $ 489,998 $ 8,826 $ 439,507 $ 455,538 $ 1,313,593
Net realized gains (losses) on
investments.................. (177) (581) 9,593 5,128 7,402,758
Net realized gains on foreign
currency transactions........ -- -- -- -- --
Net change in unrealized
appreciation (depreciation)
on investments............... -- 934 8,481 (64,927) 2,268,569
Net change in unrealized
depreciation in translation
of assets and liabilities in
foreign currency............. -- -- -- -- --
----------- -------- ----------- ----------- ------------
Net increase in net assets
resulting from operations.... 489,821 9,179 457,581 395,739 10,984,920
----------- -------- ----------- ----------- ------------
FROM UNIT TRANSACTIONS (NOTE 4):
Net proceeds from the issuance
of units..................... 11,732,293 415,230 1,611,119 2,970,433 16,966,392
Net asset value of units
redeemed..................... (12,066,988) (40,010) (2,408,741) (3,122,890) (18,723,829)
----------- -------- ----------- ----------- ------------
Net increase in net assets from
unit transactions............ (334,695) 375,220 (797,622) (152,457) (1,757,437)
----------- -------- ----------- ----------- ------------
Net increase in net assets........ 155,126 384,399 (340,041) 243,282 9,227,483
NET ASSETS:
Beginning of period............. 22,033,891 207,753 19,218,144 16,356,947 95,778,139
----------- -------- ----------- ----------- ------------
End of period................... $ 22,189,017 $ 592,152 $18,878,103 $ 16,600,229 $105,005,622
=========== ======== =========== =========== ============
Units outstanding beginning of
period.......................... 1,468,262 20,094 1,352,706 813,757 3,889,984
Units issued during period........ 773,214 39,722 112,472 143,514 658,520
Units redeemed during period...... (795,915) (3,828) (168,456) (150,954) (727,830)
----------- -------- ----------- ----------- ------------
Units outstanding end of period... 1,445,561 55,988 1,296,722 806,317 3,820,675
=========== ======== =========== =========== ============
</TABLE>
See notes to financial statements.
6
<PAGE> 9
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
- ---------------------------------------------------------------------------------------------------------------------
EQUITY EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH
INCOME VALUE INCOME GROWTH EQUITY EQUITY YIELD BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,010,243 $ 3,304 $ (16,009) $ (201,012) $ (154,528) $ (8,543) $ 3,211
11,787,704 30,376 1,504,857 (3,272,812) 626,654 (35,745) 516
-- -- -- -- -- -- --
36,757,426 96,933 3,453,713 23,358,140 4,581,261 221,357 1,483
-- -- -- -- -- -- --
------------ ---------- ----------- ------------ ----------- ---------- --------
50,555,373 130,613 4,942,561 19,884,316 5,053,387 177,069 5,210
------------ ---------- ----------- ------------ ----------- ---------- --------
29,381,692 1,571,678 13,520,355 19,871,446 16,007,755 2,877,315 177,774
(30,236,370) (280,593) (4,229,340) (28,857,106) (8,806,326) (2,116,443) (29,088)
------------ ---------- ----------- ------------ ----------- ---------- --------
(854,678) 1,291,085 9,291,015 (8,985,660) 7,201,429 760,872 148,686
------------ ---------- ----------- ------------ ----------- ---------- --------
49,700,695 1,421,698 14,233,576 10,898,656 12,254,816 937,941 153,896
258,508,484 200,826 21,592,396 163,038,082 44,802,940 811,432 2,654
------------ ---------- ----------- ------------ ----------- ---------- --------
$308,209,179 $1,622,524 $35,825,972 $173,936,738 $57,057,756 $ 1,749,373 $ 156,550
============ ========== =========== ============ =========== ========== ========
9,797,859 18,336 1,341,567 5,425,276 2,403,076 81,079 251
1,024,756 136,830 780,845 638,195 863,650 285,484 16,524
(1,060,506) (24,364) (244,535) (923,414) (479,499) (205,487) (2,695)
------------ ---------- ----------- ------------ ----------- ---------- --------
9,762,109 130,802 1,877,877 5,140,057 2,787,227 161,076 14,080
============ ========== =========== ============ =========== ========== ========
<CAPTION>
- ----
INTERNATIONAL
EQUITY CALVERT
SUBACCOUNT SUBACCOUNT
----------- -----------
<S> <<C> <C>
$ 56,811 $ (106,122)
455,951 134,621
80,054 --
2,603,457 2,297,757
(33,098) --
----------- -----------
3,163,175 2,326,256
----------- -----------
7,077,684 4,677,032
(3,721,434) (3,904,600)
----------- -----------
3,356,250 772,432
----------- -----------
6,519,425 3,098,688
16,696,091 22,819,364
----------- -----------
$23,215,516 $25,918,052
=========== ===========
1,392,586 1,212,176
563,475 241,905
(301,572) (202,474)
----------- -----------
1,654,488 1,251,607
=========== ===========
</TABLE>
See notes to financial statements.
7
<PAGE> 10
DIVERSIFIED INVESTORS VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
------------------------------------------------------------------------------
MONEY HIGH INTERMEDIATE GOVERNMENT/
MARKET QUALITY BOND(a) GOVERNMENT BOND CORPORATE BOND BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- --------------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss)...... $786,606.... $ 1,753 $ 888,695 $ 774,202 $ 1,983,807
Net realized gains (losses) on
investments.................... (967) (28) (121,220) (28,454) 8,670,042
Net realized gains on foreign
currency transactions.......... -- -- -- -- --
Net change in unrealized
appreciation (depreciation) on
investments.................... -- (114) (263,124) (349,848) 1,420,970
Net change in unrealized
appreciation in translation of
assets and liabilities in
foreign currency............... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations...... 785,639 1,611 504,351 395,900 12,074,819
----------- ----------- ----------- ----------- -----------
FROM UNIT TRANSACTIONS (NOTE 4):
Net proceeds from the issuance of
units.......................... 18,705,523 207,031 3,541,470 6,036,854 31,385,404
Net asset value of units
redeemed....................... (12,143,061) (889) (2,994,353) (2,610,511) (11,693,397)
----------- ----------- ----------- ----------- -----------
Net increase in net assets from
unit transactions.............. 6,562,462 206,142 547,117 3,426,343 19,692,007
----------- ----------- ----------- ----------- -----------
Net increase in net assets.......... 7,348,101 207,753 1,051,468 3,822,243 31,766,826
NET ASSETS:
Beginning of year................. 14,685,790 -- 18,166,676 12,534,704 64,011,313
----------- ----------- ----------- ----------- -----------
End of year....................... $22,033,891 $ 207,753 $19,218,144 $ 16,356,947 $95,778,139
=========== =========== =========== =========== ===========
Units outstanding beginning of
year.............................. 1,023,590 -- 1,313,065 638,648 3,011,719
Units issued during year............ 1,273,481 20,182 255,494 309,553 1,395,566
Units redeemed during year.......... (828,809) (88) (215,853) (134,444) (517,301)
----------- ----------- ----------- ----------- -----------
Units outstanding end of year....... 1,468,262 20,094 1,352,706 813,757 3,889,984
=========== =========== =========== =========== ===========
</TABLE>
- ---------------
(a) Commencement of operations August 20, 1996
(b) Commencement of operations May 10, 1996
(c) Commencement of operations October 18, 1996
See notes to financial statements.
8
<PAGE> 11
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIOS
-------------------------------------------------------------------------------------------------------------------------------
EQUITY EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH INTERNATIONAL
INCOME VALUE(b) INCOME GROWTH EQUITY EQUITY(b) YIELD BOND(a) EQUITY(c)
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------ ---------- ----------- ------------ ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 4,647,248 $ 325 $ 11,628 $ (1,216,048) $ (180,574) $ (2,437) $ 36 $ 6,840
10,312,373 3,638 1,383,983 37,735,857 3,824,321 20,659 (3) 58,468
-- -- -- -- -- -- -- 670
21,307,344 7,981 1,044,969 (14,536,275) 1,991,372 20,953 52 541,093
-- -- -- -- -- -- -- 26,241
------------ ---------- ------------ ----------- ----------- ---------- ---------- ----------
36,266,965 11,944 2,440,580 21,983,534 5,635,119 39,175 85 633,312
------------ ---------- ------------ ----------- ----------- ---------- ---------- ----------
59,161,388 192,774 16,612,548 46,898,876 32,279,680 1,048,582 2,569 16,825,207
(27,323,483) (3,892) (2,628,407) (19,938,284) (3,986,502) (276,325) -- (762,428)
------------ ---------- ------------ ----------- ----------- ---------- ---------- ----------
31,837,905 188,882 13,984,141 26,960,592 28,293,178 772,257 2,569 16,062,779
------------ ---------- ------------ ----------- ----------- ---------- ---------- ----------
68,104,870 200,826 16,424,721 48,944,126 33,928,297 811,432 2,654 16,696,091
190,403,614 -- 5,167,675 114,093,956 10,874,643 -- -- --
------------ ---------- ------------ ----------- ----------- ---------- ---------- ----------
$258,508,484 $200,826 $21,592,396 $163,038,082 $44,802,940 $ 811,432 $ 2,654 $ 16,696,091
============ ========== ============ =========== =========== ========== ========== ==========
8,469,952 -- 388,800 4,460,273 730,748 -- -- --
2,460,954 18,687 1,128,246 1,685,093 1,910,970 109,239 251 1,457,266
(1,133,047) (351) (175,479) (720,090) (238,642) (28,160) -- (64,680)
------------ ---------- ------------ ----------- ----------- ---------- ---------- ----------
9,797,859 18,336 1,341,567 5,425,276 2,403,076 81,079 251 1,392,586
============ ========== ============ =========== =========== ========== ========== ==========
<CAPTION>
CALVERT
SUBACCOUNT
-----------
<S> <C> <C>
$ 312,329
1,401,094
--
542,684
--
----------
2,256,107
----------
6,114,947
(3,297,471)
----------
2,817,476
----------
5,073,583
17,745,781
----------
$22,819,364
==========
1,052,208
347,620
(187,652)
----------
1,212,176
==========
</TABLE>
See notes to financial statements.
9
<PAGE> 12
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Diversified Investors Variable Funds ("DIVF") is a separate investment
account established on November 30, 1993, by AUSA Life Insurance Company, Inc.
("AUSA") under the laws of the State of New York.
DIVF operates as a unit investment trust under the Investment Company Act
of 1940, as amended (the "1940 Act"). DIVF holds assets that are segregated from
all of AUSA's other assets and, at present, is used as an investment vehicle
under certain tax-deferred annuity contracts issued by AUSA to fund retirement
plans maintained by certain not-for-profit and other organizations ("Group
Plans"). AUSA is the legal holder of the assets in DIVF.
DIVF had no assets or operations until August 18, 1994 (commencement of
operations). There are currently fourteen subaccounts within DIVF which are
available to contractholders of Group Plans, and each invests only in a
corresponding portfolio of Diversified Investors Portfolios (the "Portfolios")
or the Calvert Responsibly Invested Balanced Portfolio, a Series of Acacia
Capital Corporation ("Calvert"). The respective financial statements of the
Portfolios and Calvert are contained elsewhere in this report. At June 30, 1997,
each of DIVF Subaccount's investment in the corresponding Portfolios was as
follows:
<TABLE>
<CAPTION>
PERCENTAGE INVESTMENT IN
SUBACCOUNT PORTFOLIO
---------- ------------------------
<S> <C>
Money Market............................. 9.79%
High Quality............................. 0.29
Intermediate Government Bond............. 21.97
Government/Corporate Bond................ 5.28
Balanced................................. 30.52
Equity Income............................ 26.53
Equity Value............................. 1.13
Growth & Income.......................... 13.22
Equity Growth............................ 44.15
Special Equity........................... 9.45
Aggressive Equity........................ 11.17
High Yield Bond.......................... 0.46
International Equity..................... 10.88
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
A. Investments:
The investment by DIVF in the Portfolios reflects DIVF's proportionate
interest in the net assets of the Portfolios. The investment in shares of
Calvert is stated at net asset value. The DIVF subaccount that invests in
Calvert records its security transactions at the prior day's ending net asset
value per share. Valuation of securities held in each of the Portfolios is
discussed in Note 2A of the Portfolios' Notes to Financial Statements which are
included elsewhere in this report. A description of portfolio valuation policy
for Calvert can be found in Note A of its financial statements contained
elsewhere in this report.
B. Investment Income:
Each DIVF subaccount earns income, net of expenses, daily on its investment
in the corresponding Portfolio. All of the net investment income and realized
and unrealized gains and losses from the security transactions of the
corresponding Portfolios are allocated pro rata among the investors at the time
of such
10
<PAGE> 13
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
determination. Dividend income is recorded on the ex-dividend date. Realized
gains and losses from the sale of investments are determined on the basis of
identified cost.
C. Federal Income Taxes:
The operations of DIVF form a part of, and are taxed with, the operations
of AUSA. AUSA does not expect, based upon current tax law, to incur any income
tax upon the earnings or realized capital gains attributed to DIVF. Based upon
this expectation, no charges are currently being deducted from DIVF for federal
income tax purposes.
D. Other:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. FEES AND TRANSACTIONS WITH AFFILIATES
Because certain subaccounts of DIVF purchase interests in the Portfolios,
the net assets of those DIVF Subaccounts reflect the investment management fee
charged by Diversified Investment Advisors, Inc. (an affiliate of AUSA), the
investment advisor, which provides investment advice and related services to the
Portfolios.
Daily charges to DIVF for mortality and expense risks assumed by AUSA are
computed at an annual rate of 0.90%; however, AUSA reserves the right to charge
maximum fees of 1.25% upon written notice.
AUSA has voluntarily undertaken to reimburse fees of the Money Market and
Equity Growth Subaccounts to the extent necessary, to limit all expenses (other
than mortality and expense risk charges) to 0.10% and 0.50%, respectively, of
average net assets. Ausa reserves the right to raise these limits upon written
notice.
4. GROUP PLAN ASSUMPTIONS
On December 31, 1993, AUSA entered into an agreement with The Mutual Life
Insurance Company of New York ("MONY") pursuant to which certain contracts
issued by MONY to Group Plans may be transferred through assumption reinsurance
to AUSA subject to receipt of any necessary state insurance department approvals
and authorizations. The assumption reinsurance of any Group Plan to AUSA will
result in the transfer of the applicable assets out of a corresponding MONY
separate account and into DIVF. Assets
11
<PAGE> 14
DIVERSIFIED INVESTORS VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. GROUP PLAN ASSUMPTIONS (CONTINUED)
transferred from MONY pursuant to this assumption reinsurance transaction for
the periods ended December 31, 1996 and June 30, 1997, were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS JUNE 30, 1997 DECEMBER 31, 1996
----------- ------------- -----------------
<S> <C> <C>
Money Market..................................... $ 91 $ 216,407
Intermediate Government Bond..................... 0 10,488
Government/Corporate Bond........................ 0 18,592
Balanced......................................... 0 14,962
Equity Income.................................... 125,438 2,378,391
Equity Growth.................................... 0 136,247
Calvert.......................................... 0 4,201
-------- ----------
$ 125,529 $ 2,779,288
======== ==========
</TABLE>
The amounts related to these assumptions are reflected as proceeds from the
issuance of units on the Statements of Changes in Net Assets.
5. DIVERSIFIED INVESTORS INTERNATIONAL EQUITY PORTFOLIO
On October 18, 1996, the DIVF Scudder International Equity Subaccount fully
redeemed its shares in the Scudder Variable Life Fund, valued at $14,141,959,
and invested the proceeds in the Diversified's Investors
Portfolio -- International Equity Portfolio Subaccount.
12
<PAGE> 15
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13
<PAGE> 16
6. FINANCIAL HIGHLIGHTS
For one accumulation unit outstanding throughout the period:
<TABLE>
<CAPTION>
HIGH
MONEY MARKET QUALITY BOND
SUBACCOUNT(a) SUBACCOUNT(c)
-------------------------------------- --------------------
FOR THE FOR THE FOR THE
PERIOD FOR THE YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED
-------- -------------------------- -------- --------
6/30/97 1996 1995 1994 6/30/97 1996
-------- ------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period.................................. $15.01 $14.35 $13.65 $13.44 $10.34 $10.00
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)+++.................................. 0.34 0.66 0.69 0.22 0.23 0.19
Net gains (losses) on investments (both realized and
unrealized)+++.................................................. -- -- 0.01 (0.01) 0.01 0.15
------- ------- ------- ------- ------- -------
Total from investment operations................................. 0.34 0.66 0.70 0.21 0.24 0.34
------- ------- ------- ------- ------- -------
Unit value, end of period........................................ $15.35 $15.01 $14.35 $13.65 $10.58 $10.34
======= ======= ======= ======= ======= =======
Ratio of net investment income to average net assets............. 4.37%+ 4.19% 4.84% 4.42%+ 5.13%+ 4.99%+
Ratio of net investment income to average net assets (net of
reimbursements)................................................. 4.56%+ 4.50% 5.05% 4.65%+ 5.13%+ 5.01%+
Ratio of expenses to average net assets, including expenses of
the Portfolio++................................................. 1.19%+ 1.32% 1.22% 1.27%+ 1.29%+ 1.29%+
Ratio of expenses to average net assets, including expenses of
the Portfolio (net of reimbursement)++.......................... 1.00%+ 1.00% 1.01% 1.05%+ 1.29%+ 1.28%+
<CAPTION>
INTERMEDIATE
GOVERNMENT BOND
SUBACCOUNT(a)
--------------------------------------
FOR THE
PERIOD FOR THE YEAR
ENDED ENDED
-------- --------------------------
6/30/97 1996 1995 1994
-------- ------ ------ ------
<S> <C> <C> <C> <C>
Unit value, beginning of period.................................. $14.21 $13.84 $12.24 $12.33
------- ------- ------- -------
Income from investment operations:
Net investment income (loss)+++.................................. 0.34 0.66 0.61 0.24
Net gains (losses) on investments (both realized and
unrealized)+++.................................................. 0.01 (0.29) 0.99 (0.33)
------- ------- ------- -------
Total from investment operations................................. 0.35 0.37 1.60 (0.09)
------- ------- ------- -------
Unit value, end of period........................................ $14.56 $14.21 $13.84 $12.24
======= ======= ======= =======
Ratio of net investment income to average net assets............. 4.68%+ 4.70% 4.77% 5.64%+
Ratio of net investment income to average net assets (net of
reimbursements)................................................. 4.71%+ 4.73% 4.81% 5.64%+
Ratio of expenses to average net assets, including expenses of
the Portfolio++................................................. 1.33%+ 1.33% 1.38% 1.42%+
Ratio of expenses to average net assets, including expenses of
the Portfolio (net of reimbursement)++.......................... 1.30%+ 1.30% 1.33% 1.42%+
</TABLE>
<TABLE>
<CAPTION>
EQUITY VALUE GROWTH & INCOME
SUBACCOUNT(d) SUBACCOUNT(b)
-------------------- --------------------------------------
FOR THE FOR THE FOR THE
PERIOD YEAR PERIOD FOR THE YEAR
ENDED ENDED ENDED ENDED
-------- -------- -------- --------------------------
6/30/97 1996+ 6/30/97 1996 1995 1994
-------- -------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period.................................. $10.95 $10.00 $16.09 $13.29 $10.14 $10.31
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)+++.................................. 0.04 0.04 (0.01) 0.01 0.05 0.03
Net gains (losses) on investments (both realized and
unrealized)+++.................................................. 1.41 0.91 3.00 2.79 3.10 (0.20)
------- ------- ------- ------- ------- -------
Total from investment operations................................. 1.45 0.95 2.99 2.80 3.15 (0.17)
------- ------- ------- ------- ------- -------
Unit value, end of period........................................ $12.40 $10.95 $19.08 $16.09 $13.29 $10.14
======= ======= ======= ======= ======= =======
Ratio of net investment income to average net assets............. 0.71%+ 0.11%+ (0.13)%+ 0.07% 0.47% 0.85%+
Ratio of net investment income to average net assets (net of
reimbursements)................................................. 0.78%+ 0.71%+ (0.12)%+ 0.09% 0.47% 0.85%+
Ratio of expenses to average net assets, including expenses of
the Portfolio++................................................. 1.56%+ 2.07%+ 1.56%+ 1.57% 1.55% 1.40%+
Ratio of expenses to average net assets, including expenses of
the Portfolio (net of reimbursement)++.......................... 1.49%+ 1.47%+ 1.55%+ 1.55% 1.55% 1.40%+
<CAPTION>
EQUITY GROWTH
SUBACCOUNT(a)
--------------------------------------
FOR THE
PERIOD FOR THE YEAR
ENDED ENDED
-------- --------------------------
6/30/97 1996 1995 1994
-------- ------ ------ ------
<S> <C> <C> <C> <C>
Unit value, beginning of period.................................. $30.05 $25.58 $21.65 $20.67
------- ------- ------- -------
Income from investment operations:
Net investment income (loss)+++.................................. (0.04) (0.24) (0.03) (0.02)
Net gains (losses) on investments (both realized and
unrealized)+++.................................................. 3.83 4.71 3.96 1.00
------- ------- ------- -------
Total from investment operations................................. 3.79 4.47 3.93 0.98
------- ------- ------- -------
Unit value, end of period........................................ $33.84 $30.05 $25.58 $21.65
======= ======= ======= =======
Ratio of net investment income to average net assets............. (0.25)%+ (1.26)% (0.36)% (0.57)%+
Ratio of net investment income to average net assets (net of
reimbursements)................................................. (0.25)%+ (0.87)% (0.11)% 0.27%+
Ratio of expenses to average net assets, including expenses of
the Portfolio++................................................. 1.40%+ 1.87% 1.66% 1.75%+
Ratio of expenses to average net assets, including expenses of
the Portfolio (net of reimbursement)++.......................... 1.40%+ 1.48% 1.41% 1.45%+
</TABLE>
- ---------------
(a) Commencement of operations, August 18, 1994
(b) Commencement of operations, August 24, 1996
(c) Commencement of operations, August 20, 1996
(d) Commencement of operations, May 10, 1996
(e) Commencement of operations, October 18, 1996
+ Annualized
++ These ratios have been restated for the years ended 1995 and 1994 to reflect
the expenses and reimbursement of expenses allocated from the Portfolios.
+++ These amounts have been restated for the year ended 1995 to reflect average
units outstanding
14
<PAGE> 17
<TABLE>
<CAPTION>
GOVERNMENT/
CORPORATE BOND BALANCED EQUITY INCOME
SUBACCOUNT(a) SUBACCOUNT(a) SUBACCOUNT(a)
----------------------------------------- ----------------------------------------- ------------------------------
FOR THE FOR THE FOR THE
PERIOD FOR THE YEAR PERIOD FOR THE YEAR PERIOD FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
-------- ---------------------------- -------- ---------------------------- -------- -----------------
6/30/97 1996 1995 1994 6/30/97 1996 1995 1994 6/30/97 1996 1995
-------- ------ ------ ------ -------- ------ ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$20.10 $19.63 $16.70 $16.76 $24.62 $21.25 $16.66 $16.85 $26.38 $22.48 $16.86
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
0.56 1.06 0.97 0.32 0.34 0.56 0.59 0.20 0.21 0.50 0.50
(0.07) (0.59) 1.96 (0.38) 2.52 2.81 4.00 (0.39) 4.98 3.40 5.12
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
0.49 0.47 2.93 (0.06) 2.86 3.37 4.59 (0.19) 5.19 3.90 5.62
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$20.59 $20.10 $19.63 $16.70 $27.48 $24.62 $21.25 $16.66 $31.57 $26.38 $22.48
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
5.70%+ 5.42% 5.41% 5.64%+ 2.71%+ 2.49% 3.07% 3.42%+ 1.46%+ 2.06% 2.50%
5.70%+ 5.42% 5.42% 5.66%+ 2.71%+ 2.49% 3.09% 3.47%+ 1.46%+ 2.07% 2.55%
1.29%+ 1.29% 1.30% 1.34%+ 1.39%+ 1.40% 1.42% 1.52%+ 1.38%+ 1.39% 1.39%
1.29%+ 1.29% 1.30% 1.36%+ 1.39%+ 1.40% 1.40% 1.47%+ 1.38%+ 1.38% 1.34%
<CAPTION>
1994
------
<S> <C>
$17.21
-------
0.18
(0.53)
-------
(0.35)
-------
$16.86
=======
3.07%+
3.09%+
1.46%+
1.44%+
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE HIGH INTERNATIONAL
SPECIAL EQUITY EQUITY YIELD BOND EQUITY
SUBACCOUNT(b) SUBACCOUNT(e) SUBACCOUNT(c) SUBACCOUNT(e)
----------------------------------------- --------------------- --------------------- ---------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
PERIOD FOR THE YEAR PERIOD YEAR PERIOD YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
-------- ---------------------------- -------- -------- -------- -------- -------- --------
6/30/97 1996 1995 1994 6/30/97 1996+ 6/30/97 1996+ 6/30/97 1996+
-------- ------ ------ ------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$18.64 $14.88 $10.63 $10.47 $10.01 $10.00 $10.58 $10.00 $11.99 $10.53
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.06) (0.11) (0.07) -- (0.04) (0.10) 0.33 0.28 0.04 0.01
1.89 3.87 4.32 0.16 0.89 0.11 0.21 0.30 2.00 1.45
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
1.83 3.76 4.25 0.16 0.85 0.01 0.54 0.58 2.04 1.46
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$20.47 $18.64 $14.88 $10.63 $10.86 $10.01 $11.12 $10.58 $14.03 $11.99
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
(0.64)%+ (0.66)% (0.61)% 0.03%+ (1.67)%+ (2.16)%+ 7.35%+ 6.96%+ 0.61%+ (0.72)%+
(0.64)%+ (0.65)% (0.59)% 0.05%+ (1.26)%+ (1.55)%+ 7.53%+ 7.43%+ 0.61%+ 0.22%+
1.75%+ 1.76% 1.71% 1.59%+ 2.30%+ 2.50%+ 1.68%+ 2.11%+ 1.79%+ 2.72%+
1.75%+ 1.75% 1.68% 1.57%+ 1.90%+ 1.89%+ 1.49%+ 1.65%+ 1.79%+ 1.78%+
<CAPTION>
CALVERT SERIES SUBACCOUNT(a)
-----------------------------------------
FOR THE
PERIOD FOR THE YEAR
ENDED ENDED
-------- ----------------------------
6/30/97 1996 1995 1994
-------- ------ ------ ------
<S> <C> <C> <C> <C>
$18.83 $16.87 $13.11 $13.28
------- ------- ------- -------
(0.09) 0.27 1.04 0.66
1.97 1.69 2.72 (0.83)
------- ------- ------- -------
1.88 1.96 3.76 (0.17)
------- ------- ------- -------
$20.71 $18.83 $16.87 $13.11
======= ======= ======= =======
(0.90)%+ 1.55% 7.00% 11.76%+
(0.90)%+ 1.55% 7.00% 11.76%+
0.90%+ 0.90% 0.88% 0.76%+
0.90%+ 0.90% 0.88% 0.76%+
</TABLE>
15
<PAGE> 18
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16
<PAGE> 19
ECONOMIC AND MARKET REVIEW
REVIEW:
Economy The economy appears to have slowed dramatically in the second
quarter after a very strong first quarter. Gross Domestic Product probably
increased about 2% in the second quarter after a 5.9% advance in the first
quarter. Retail sales and housing starts have slumped. The tight labor market
slackened in June as the unemployment rate rose to 5%. Inflation remains
subdued. The Federal Reserve after tightening in March, held steady at its early
July meeting. Talk has shifted from further Fed tightening to the possibility of
the Fed cutting interest rates.
Bonds After selling off in the first quarter on strong economic growth
numbers, the bond market has rallied. Long term interest rates declined from
over 7% earlier in the year to about 6.6% on June 30th. Interest rates are now
at their lowest for the year. Long term bonds underperformed short term bonds in
the first quarter, rallied strongly in the second quarter and are now ahead for
the year.
Stocks Stocks started 1997 on a positive note. Small cap stocks peaked in
late January while large cap stocks continued to rise through February. The
subsequent selloffs ended in April and were followed by strong rebounds. The
rally broadened somewhat in the second quarter as smaller stocks began to
perform better, but for the year large cap stocks are well ahead of small cap
stocks. International equities have also lagged behind large cap domestic
stocks.
OUTLOOK:
Economy Economic growth may again surge after the unexpectedly slow second
quarter. Lower interest rates should help. Low unemployment has consumer
confidence high, and spending is expected to pick up after the weather related
plunge in retail sales in the recent quarter. New orders for manufacturing are
at historically high levels and continue to exceed production. Real GDP growth
could be 3% to 4% in the second half of the year. The second quarter slowdown
and low inflation has extended the economic expansion possibly into 1998.
Inflation may pick up later this year with growth accelerating. Also,
international economies are beginning to recover, which will also put added
pressure on inflation and interest rates.
Bonds Interest rates could drift lower in the very near term with no
indication that inflation is about to accelerate. Later, stronger economic
growth may raise concerns about inflation and potential Fed tightening. Stronger
economic growth will cause labor costs, raw material prices, and eventually
inflation to rise. This in turn will lead to higher interest rates. 6.5% could
be the near term low for interest rates with a rebound to over 7% possible later
this year.
Stocks The current rally should continue in the near term. The stock
market is somewhat overvalued, but steady economic growth with low inflation
bodes well for continued growth in profits. Later, tight labor markets may put
pressure on labor costs. Any pick up in inflation and interest rates will also
increase costs and eventually squeeze profits. Rising interest rates and the
anticipation of a profit decline next year may trigger a market correction later
this year. Economically sensitive stocks will be most vulnerable.
MONEY MARKET PORTFOLIO
Over the course of the second quarter of 1997, concerns subsided among bond
market participants over a further move by the Federal Reserve Board to tighten
monetary policy via another boost in the overnight Fed Funds interest rate. A
major reason for the lessened concerns was that retail sales, a key indicator of
economic vitality, slowed markedly in the second quarter. These sales fell at an
annualized rate of 5.3% from February to May, hinting at a much quieter economic
pace than that exhibited in the first quarter. Still, right up to the May
meeting, many market participants thought the Fed would again tighten monetary
policy due to low unemployment conditions. However, the Fed held its policy
steady in May. It has been vindicated in the face of a quiescent inflationary
backdrop, moderating economic growth, and recent easing of labor market
pressures.
17
<PAGE> 20
The yield curve remains relatively flat. Investors responded to the
moderating economic conditions in the second quarter and the Fed's restraint
against additional tightening of monetary policy by staging a strong rally.
Interest rates declined by 32 basis points in the second quarter, from a yield
of 7.10% at the end of the first quarter to 6.78% at the end of the second
quarter. The prevailing sentiment is that the Fed is on hold in terms of an
interest rate move absent a significant re-igniting of economic growth in the
third quarter. Thus, the average maturity of the Portfolio will be modestly
extended to capitalize on what is seen as a bullish interest rate environment in
the near term. At June 30, 1997, the average maturity of the Portfolio was 30.0
days.
The Portfolio continues to be invested in high quality, short-term
instruments, principally commercial paper. The manager's investment strategy is
to emphasize purchases of 30-90 day maturities to provide flexibility to respond
to any changes in the marketplace without sacrificing current income. The 30-day
and 7-day current yields of the Portfolio as of June 30, 1997 were 5.42% and
5.38%, respectively, after charges imposed by the Portfolio. Of course, past
performance does not guarantee future investment results.
Investments made in the Money Market Portfolio are not insured or
guaranteed by the U.S. government. There is no assurance that the Portfolio will
maintain a steady net asset value.
HIGH QUALITY BOND PORTFOLIO
Interest rates on the bellwether 30 year Treasury bond hovered around 7%
for the first two months of the quarter before June's rally sent yields south,
ending the quarter at 6.79%. Slow economic growth coupled with little
inflationary pressure increased bond prices along the maturity spectrum, with
the benchmark Merrill Lynch 1-3 Year Treasury Index advancing .69% during the
quarter. The High Quality Bond Portfolio slightly outperformed the Index.
Economic indicators released during April proved somewhat uneventful,
providing a calming effect following the Federal Reserve's decision to raise
rates at the end of March. Subdued inflation numbers in the form of the Producer
Price Index and Consumer Price Index soothed the jittery bond market. The
Employment Cost Index affirmed that the tight labor market has not spurred
higher costs. As the broadest measure of wages, salaries, and benefits, the
Index is a key indicator to Fed Chairman Alan Greenspan. Higher employment costs
typically ignite inflation.
May's focus clearly centered on the Fed's May 20th meeting. Would the Fed
follow its 1994 pattern, in which interest rates were raised at six different
Federal Open Market Committee meetings? The first quarter's 5.9% Gross Domestic
Product -- the highest in a decade -- a resilient housing market, and heightened
consumer confidence were not enough to justify a second consecutive raise in
rates, as the Fed placed greater emphasis on reports of continued benign
inflation.
June ushered in the lowest unemployment rate in a generation, at a scant
4.8%. Combined with the highest consumer confidence level in 28 years, the
unemployment rate continued to generate inflation concerns for bond investors.
But it was the absence of inflation that ultimately led to higher bond prices by
the end of the quarter. The Producer Price Index released in June reported that
prices actually fell .3% in May. The fifth consecutive monthly decline in
producer prices supported the lower inflation environment, the driving force in
the run up of bond prices.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
Bonds in the Lehman Intermediate Government Index gained 2.8% for the three
month period ending June 30, erasing the negative returns these issues
experienced in the first quarter of this year. Falling interest rates over the
most current period resulted in strong gains for fixed income funds.
Diversified's Intermediate Government Bond Portfolio participated fully in the
upward movement in bond prices, and outperformed the Lipper Short/Intermediate
Government Bond Index for the quarter.
The second quarter began with many bond investors concerned that the
Federal Reserve would continue to boost short-term interest rates as it had done
in March, resulting in losses for the quarter ending March 31. Interest rates
remained steady during most of April, but some very positive news on employment
costs ignited
18
<PAGE> 21
a rally on the final two days of the month. April returns were the strongest of
any month so far this year. May was not a particularly strong month for fixed
income securities. The unemployment rate dropped to 4.9%, a level not seen in 20
years, and consumer confidence levels continued to soar. Bond investors feared
that these, and other indicators of a very strong economy would prompt the
Federal Reserve to once again raise interest rates. Fed Chairman Greenspan has
warned more than once of his intent to keep inflation from becoming a problem.
Fears of an increase in rates were alleviated when the Federal Reserve decided
to leave monetary policy unchanged at its meeting in late May. With the threat
of intervention lessened for the near term, bonds were poised for solid gains in
June. Although economic indicators remained strong, inflation readings were
reported well below analysts' expectations. June's returns ranked second only to
April's for the first six months of this year.
The Portfolio maintained a duration slightly shorter than that of its
benchmark, the Lehman Intermediate Government Bond Index, throughout the second
quarter of this year. It is expected to be managed to a duration close to that
of its benchmark over the near term. An overweighting in Government mortgages
relative to the Index added value during the quarter, as these bonds generally
outperformed both Treasury and agency issues. The Portfolio invests exclusively
in AAA rated Government issues, eliminating the credit risks associated with
bonds in the corporate sector.
GOVERNMENT/CORPORATE BOND PORTFOLIO
In contrast to the first quarter of this year, interest rates ended the
period lower than where they started. This translated into solid returns for
bond funds. As measured by the Lehman Government/Corporate Index, bonds gained
2.7% during the second quarter. This was the highest calendar quarter return
since the three month period ending December, 1995. Diversified's
Government/Corporate Bond Portfolio performed well, doing better than the
average fund in the Lipper Intermediate Investment Grade Bond universe.
The 25 basis point increase the Federal Reserve enacted in late March was
intended to start the process of slowing economic growth by making it more
expensive for corporations and individuals to borrow money. As this quarter
began, bond investors were concerned that the Fed might again raise rates at its
next scheduled meeting in May. For this reason, fixed income securities were not
expected to perform well in the second quarter. Indeed, according to the
indicators released throughout this period, the pace of economic activity did
not appear to be slowing significantly. However, the bond market breathed a sigh
of relief when on May 20th the Federal Reserve decided to leave rates unchanged.
Explaining its reason for taking no action, the Fed noted the lack of any
inflation that usually accompanies periods of strong economic growth. Even in a
period of strong growth, very high employment and record levels of consumer
confidence, consumers are not paying more for goods and services.
The question bond holders must ask themselves now is whether the trend of
above average growth and below average inflation can continue. So far, gains in
productivity have been able to offset higher wages paid to workers. If this were
to continue, bonds would remain an attractive investment. However, even moderate
price increases passed on to the consumer could ultimately translate into lower
bond prices.
The Portfolio maintained a longer duration than that of the Lehman
Government/Corporate benchmark during the quarter, and thus benefited from the
decline in interest rates over the period. Also, an overweighting in corporate
issues relative to the benchmark added value as government bonds generally could
not match the returns of corporate issues. Looking forward, the Portfolio will
be managed to a duration close to that of its Index over the near term while the
market digests some of its recent gains. As always, the manager's emphasis will
be to seek fixed income securities which are believed to be undervalued by the
marketplace for addition to the Portfolio.
BALANCED PORTFOLIO
Portfolios invested in a mix of stocks and bonds generated an attractive
return in the three month period ending June 30. The average fund in the Lipper
Balanced universe gained 10.2%, driven by a 17.5% gain in the S&P 500 Index.
Bonds also had a strong quarter, with the Lehman Government/Corporate Index
gaining 3.6%.
19
<PAGE> 22
The return of the Diversified Balanced Portfolio trailed the average balanced
fund slightly for the quarter. However, over the first six months of this year,
the Portfolio is outperforming 80% of the funds in this universe.
The return for this quarter was most impacted by asset allocation. The
Portfolio reduced its equity weighting throughout the period, which detracted
from overall performance in a period of very strong equity returns. This more
conservative stock/bond mix, which enabled the Portfolio to outperform in the
first quarter of this year, would not allow it to keep pace with those balanced
funds with heavier equity orientations. As of quarter end, the Portfolio had a
45% weighting in stocks, and 49% in bonds.
Although the overall return on the Portfolio lagged for the quarter, the
return on the equity portion continues to be outstanding, beating the S&P 500
Index by over 1%. The highest returning stock in the Portfolio was Philips
Electronics, up 63%. Philips, Europe's largest electronics maker, announced that
it would merge its consumer communications product business with U.S. based
Lucent Technologies. The new company is expected to generate $2.5 billion in
sales. American Home Products (31%) was another strong performer for the
quarter. The company, producers of Advil, Centrum and Robitussin, also makes the
most widely prescribed drug in the U.S., estrogen replacing Premarin. The stock
surged when it was announced that the Food and Drug Administration would not
allow rivals Duramed or Barr Labs. to market a generic version of this drug,
shutting them out of this $1 billion-a-year market. IBM (37%) was another stock
in the Portfolio that performed well. During the quarter, the company received
"buy" recommendations from the major brokerage houses and declared a 14%
increase in its quarterly dividend payout. The company also made two favorable
announcements. First, shareholders overwhelmingly approved a 2-for-1 stock
split, and second, IBM plans to buy back $3.5 billion of its own stock.
EQUITY INCOME PORTFOLIO
Equity income investors experienced exceptional returns for the three month
period ending June 30, with the average fund in the Lipper Equity Income
universe gaining 12.9%. Diversified's Equity Income Portfolio was able to
generate a return superior to most of the funds in this universe, placing it in
the top 20% of all funds. When combined with the strong performance in the first
quarter, the Portfolio now ranks 10th out of the 185 equity income funds tracked
by Lipper over the first six months of this year.
The performance of the Equity Income Portfolio in the second quarter was
most influenced by the consumer non-cyclical and industrial sectors. Superior
stock selection in these areas contributed greatly to the overall outstanding
return. The Portfolio will typically have large weightings in consumer
non-cyclical and industrial issues. These are generally large, well known
companies with stable growth rates which tend to distribute above average
dividends to shareholders.
Warner-Lambert (44%), Bristol-Myers (38%), and Colgate-Palmolive (31.5%)
were three of the stocks in the consumer non-cyclical sector that helped this
area to an overall 26% gain. Warner-Lambert, makers of Listerine, Benadryl and
Rolaids, and Bristol-Myers, which produces Bufferin and Excedrin, are also
heavily involved in the development of prescription pharmaceuticals.
Warner-Lambert announced a new diabetes-fighting drug, Rezulin, which is
expected to develop into a $1 billion market. Bristol-Myers stock surged when
the company received a patent on its new cancer drug Taxol. The patent allows
the company to keep rival drugs off the market for at least two years.
Bristol-Myers expects sales to top $1 billion this year alone.
Colgate-Palmolive, the world's top seller of toothpaste, was rewarded by
investors when it announced that earnings in the first quarter were higher than
analysts had expected.
In the industrial sector, General Electric gained over 30% in the three
month period ending June 30. GE, the largest holding in the Portfolio, was
positively impacted by strong advertising revenue gains from its affiliate NBC.
Also, the healthy economy and high levels of employment and consumer confidence
has benefited GE's consumer appliance division. Additionally, Timken, an
international manufacturer of highly engineered bearings and alloy steels,
returned 34% during the period due to stronger than expected first quarter
earnings. In a milestone only 200 other public companies have reached, June
marked the 300th consecutive quarter the company has distributed a dividend to
its shareholders.
20
<PAGE> 23
EQUITY VALUE PORTFOLIO
Value investing, as measured by the Russell 1000 Value Index, enjoyed
healthy returns of 14.7% during the second quarter. The average value manager,
however, lagged the Russell 1000 Value Index by approximately 70 basis points.
Diversified's Equity Value Portfolio manager, Ark Asset Management,
underperformed the Index as well. Asset allocation was the key detractor from
performance.
The Federal Reserve's decision to raise interest rates at the end of the
first quarter sparked interest rate fears throughout the investment community.
Would the Federal Reserve follow its 1994 pattern, in which interest rates were
raised on six different occasions? The lowest unemployment rate in a
generation -- a scant 4.8% -- coupled with the highest consumer confidence
reports in 28 years pressured interest rates, and the interest rate sensitive
financial sector. The Portfolio decreased exposure to financial related stocks
in anticipation of a second interest rate hike. However, continued reports of
subdued inflation rallied the financial sector, and the Russell 1000 Value
Index. The Equity Value Portfolio did not fully participate in the rally,
detracting from performance.
Although the Portfolio did not have a large exposure to the financial
sector's rally, it did participate fully in the technology sector's gains, the
best performing sector in the Russell 1000 Value Index. High-end computer
companies such as IBM and Hewlett Packard realized greater profit margins than
low-end PC manufacturers. IBM is also generating additional revenue from its
Services Group. The unit assists companies in the initial setup and ongoing
maintenance of computer systems and networks. The Portfolio's technology
holdings returned 29.3% for the period, outpacing the technology holdings in the
Russell 1000 Value Index by approximately 850 basis points.
The Portfolio also realized superior stock selection in the consumer
cyclical sector. Lower interest rates and a strong job market encouraged
consumer spending. Portfolio holding Ford Motor Company, the world's largest
truck manufacturer, introduced the Expedition, a sport utility truck. Ford
boosted production of the vehicle in order to satisfy demand. The sport utility
truck generates approximately $10,000 in profits for each unit sold, which
helped Ford advance 21.7% during the period.
GROWTH & INCOME PORTFOLIO
Investors in the Growth & Income Portfolio enjoyed superior results in the
second quarter. While the S&P 500 Index advanced 17.5%, the largest calendar
quarter gain in a decade, most managers underperformed the benchmark. The Lipper
Growth & Income Average, comprised of the 30 largest growth & income managers,
returned only 14.0%. However, the Growth & Income Portfolio, managed by Putnam
Investments, submitted stellar performance in topping the S&P 500 benchmark.
Putnam's asset allocation was exceptionally good. The manager held a larger
position than the S&P 500 Index for the top five performing sectors. Superior
stock selection in the technology and consumer non-cyclical sectors helped the
Portfolio outperform 95% of all growth & income managers tracked by Lipper
Analytical Services.
Software makers accounted for large gains in the technology sector.
Companies that manufacture software used in computer networks advanced sharply
higher. Microsoft's Office 97 and Windows NT products helped propel the
company's stock 38% during the quarter. Computer Associates, the world's third
largest software maker, is increasing business lines in Asia, a relatively
untapped market for business software. Portfolio holding Motorola, the world's
top supplier of cellular telephones, is also going global. In China, where
wireless communications are cheaper to set up than wired systems, cellular
phones are referred to as "Motorolas" because of Motorola's market dominance.
The company climbed 26% in the second quarter.
Health care related securities flourished in the consumer non-cyclical
sector. The Portfolio benefited from a 16% weighting in the
pharmaceutical/health care industries, the Portfolio's largest industry
allocation. Drug makers continue to rally, as aging baby boomers become more
reliant on relatively inexpensive drugs in an effort to avoid costly surgical
procedures. Pfizer and Warner Lambert were each up in excess of 40% for the
period. Merck & Co., the nation's largest drugmaker, has increased spending on
research and development in an effort to satisfy surging demand. Merck's Vasotec
is the number one cardiovascular medication in the world, while Merck's Zocor
outsells all other drugs used to lower cholesterol levels. In addition to a
strong
21
<PAGE> 24
product lineup, the company also brokers drug purchases for employer health
plans. The strategy generates about 33% of Merck's total sales.
EQUITY GROWTH PORTFOLIO
Growth oriented portfolios, as measured by the Lipper Growth Fund Index,
moved sharply higher with a total return of 15.8% in the second quarter. The
average manager fell short of the Russell 1000 Growth Index performance
benchmark by 18.9%. However, Chancellor LGT Asset Management, Diversified's
Equity Growth Portfolio manager, submitted stellar performance in topping the
benchmark. Chancellor's performance was better than 82% of all growth fund
managers during the quarter, according to Lipper Analytical Services. The
Portfolio benefited most from the consumer non-cyclical and financial sectors.
In the wake of the Federal Reserve's decision to raise interest rates at
the end of the first quarter, Chancellor allocated 30% of the Portfolio to the
consumer non-cyclical sector. The manager did this with an eye on
history -- only once has the Fed stopped at a single rate hike. The consumer
non-cyclical sector is considered a safe haven in times of rising rates.
Exceptional stock selection within the sector drove performance sharply higher.
Eli-Lilly is one drugmaker that advanced on the increased use of medicines to
treat and prevent illnesses. For example, Evista, a drug developed by Lilly,
prevents bone loss in the spine and hip, greatly reducing the risk of fractures.
The number of Americans suffering from osteoporosis is expected to increase from
25 million today to 200 million by the year 2000 due to the aging baby boomers,
opening a $3 billion market. Other drug manufacturers in the Portfolio that
advanced 28% on average included Schering Plough, Merck and Pfizer.
The Portfolio also realized large gains in the financial sector. Asset
allocation played a key role. The Portfolio held a position in the sector that
was three times the Index weighting. The overweighted position paid off, since
the financial sector was the best performing sector in the Russell 1000 Growth
Index. Economic indicators released throughout the quarter displayed stable
economic conditions that helped power the financial sector. Portfolio holding
BankAmerica advanced 28.8% over the period. Continued low unemployment and
declining interest rates increased the loan application rate for cars and houses
by approximately 9 percent. The economic environment for banks was ideal. The
economy was not hot enough to trigger higher interest rates, while the jobs
market continued to be strong enough to support outstanding loans. Other
financial companies that helped the Portfolio's performance during the quarter
included NationsBank and Travelers.
SPECIAL EQUITY PORTFOLIO
Small capitalization stocks, as measured by the Russell 2000 Index,
continued to underperform their brethren large company stocks, as measured by
the S&P 500 Index, by returning 16.2% versus 17.4%, respectively, for the second
quarter. Year-to-date, the S&P 500 Index is exceeding the Russell 2000 Index by
a margin of 10.3%. The reasons for the relative underperformance can be
attributable to investor preference for liquidity and safety, reinforced by the
well-publicized inability of active managers to shine, and to large companies in
general operating more efficiently than was the case five to ten years ago.
Large companies are posting earnings gains equal to the small company universe.
The Portfolio's strong result in the second quarter was primarily due to
sector selection in the basic industry sector and to strong stock selection from
the industrial and consumer cyclical sectors.
The Portfolio's significant underweighting in the basic industry sector
enhanced the Portfolio's relative performance as this sector lagged for the
quarter. The relative weakness was associated with metal and mining stocks, as
the price of gold has fallen to a twelve year low. In addition, the inability of
companies to raise prices also weighed heavily on this group.
The largest contributing sector for the Portfolio was the industrial
sector, which accounted for approximately 25% of the Portfolio's performance,
and outperformed for the quarter. The primary catalysts were strong earnings
reports from the companies held in the Portfolio, and investors' belief that
economic growth will continue, due to low inflation and interest rates. These
catalysts are providing the fundamentals for
22
<PAGE> 25
these companies to sustain profit margins. Stocks which led the way were
Cambridge Technology Partners, Inc., a computer services company, and Concord
EFS, Inc., which provides authorization for electronic transactions, primarily
for card services. Both companies' stocks gained approximately 38%. In addition,
National Data Corporation, which provides information systems and services for
the health care and payment systems markets, rose approximately 22%.
The strong economy, attributed primarily to a very confident consumer, also
aided in the performance of the consumer cyclical sector. This sector was led by
specialty retailers including Consolidated Stores Co., U.S. Office Products Co.
and Dollar Trees Stores, Inc. These companies returned approximately 23% as a
group. In addition, strong performances from commercial freight forwarding
stocks enhanced this sector's returns. Rising volume and a firm pricing
environment coupled with decreasing fuel costs resulted in favorable profits for
these stocks. Airborne Freight Corp., Air Express International Corp., and Sea
Containers Ltd. were the primary contributors to this group's outperformance.
AGGRESSIVE EQUITY PORTFOLIO
Aggressive Equity investors enjoyed exceptional performance during the
second quarter. The benchmark Russell 2000 Growth Index advanced 17.56%, while
the Aggressive Equity Portfolio soundly outperformed the Index by approximately
275 basis points. Asset allocation was the driving force behind the fine
performance. McKinley Capital Management, the Portfolio manager, held a position
in the technology sector that was three times the Index weighting. With
technology being the best performing sector of the Russell 2000 Growth Index,
returning 23.6%, technology holdings clearly propelled the Portfolio as it
outperformed 90% of all mid-cap equity funds for the quarter, according to
Lipper Analytical Services.
Computer manufacturers led the technology rally. A surge in second quarter
revenue spiked stock prices sharply higher, as corporations upgraded networks
and purchased machines with Intel's latest generation of processors. Dell
Computer Corporation, with more than 90% of sales to corporate customers, was
clearly the star performer in the quarter, advancing 74%. Dell's strength lies
in its direct-marketing approach. Instead of producing standardized PCs based on
sales predictions, the company custom builds computers as they are ordered. The
strategy allows Dell to provide the latest technology without large investments
in inventory that could quickly become obsolete in the rapidly changing computer
industry. Such foresight has increased Dell's stock price an astounding 393% for
the one year period ending June 30, 1997.
Other computer makers included in the Portfolio are Compaq and Sun
Microsystems. Compaq, the world's leading PC maker with a 10% global market
share, benefited from an increased presence in the network server and low-end
workstation markets. Sun Microsystems continued its stronghold on the high-
performance workstation models, used mainly by engineers and graphic artists.
But it was Sun's sensational Java programming package, enabling users to add
animation and real-time video to web pages, that powered the company to a 28%
gain in the quarter.
In addition to the gains generated in the technology sector, the Portfolio
experienced strong performance in the health care industry due to superior stock
selection. Bristol-Myers Squibb and Warner-Lambert were among the Portfolio's
holdings that profited from a health insurers' belief, namely, that it is less
expensive to pay for drugs as a preventative measure than for costly surgical
procedures and hospital stays. For example, Warner-Lambert's newly released
Lipitor should help the 50 million Americans with high cholesterol, of which
only 3.5 million are receiving treatment today. With America's aging population,
look for the Aggressive Equity Portfolio to capitalize on increased earnings in
the pharmaceutical industry.
HIGH YIELD BOND PORTFOLIO
As measured by the Salomon Brothers Cash Pay Index, the high yield bond
market returned 4.4% during the second quarter of 1997, outperforming most
investment grade fixed income indices. BB rated issues were positively impacted
by the decline in interest rates over the period, and B rated issues advanced
due in part to the large gain in the stock market. Generally, the lower rated B
tier outperformed BB rated issues.
23
<PAGE> 26
Diversified's High Yield Bond Portfolio was overweighted in B rated bonds and
was able to generate a return higher than that of the Salomon Index.
Issuance in the high yield market continues at a record setting pace. Over
$30 billion of new high yield securities came to market in the second quarter.
This exceeded the previous record quarter, set in the first three months of this
year. Importantly, the demand for these new issues was even greater than
overwhelming supply. Consequently, the return on high yield bonds came from a
combination of both coupon income and price appreciation.
Investor uncertainty over lofty stock valuations and direction of interest
rates continues to benefit the high yield bond market. While individuals in need
of high income remain the market's core constituency, both retail and
institutional investors are increasingly embracing high yield as an attractive
option for addition to their portfolios. These bonds offer equity-like returns,
but have risk characteristics closer to investment grade bond issues. Thus, high
yield issues are swelling within income-oriented equity mutual funds as well as
investment grade debt funds in search of a bit more yield. Also, the low
correlation to the broad stock and bond markets serves as an effective
diversification tool, especially important to investors concerned with
preservation of capital.
The outlook for the high yield market remains positive, particularly
relative to other fixed income investments. Investor demand for these securities
is likely to remain strong, especially in light of the current low level of
interest rates and the concerns associated with what many believe to be an
overvalued stock market. The Portfolio remains defensively positioned with
respect to industry exposure, and will continue to seek quality corporations
which both dominate within their industries and who can also generate steady,
assured cashflows.
INTERNATIONAL EQUITY PORTFOLIO
Developed markets all over the world were extremely strong during the
second quarter, with a number of European equity markets hitting record highs in
June. The benchmark Morgan Stanley Capital International Gross Domestic Product
Europe, Australia, and Far East (MSCI GDP EAFE) Index returned 11.3% for the
quarter. Diversified's International Equity Portfolio both outperformed the
benchmark and 97% of the funds in the Lipper International Funds universe.
The US dollar showed mixed strength over the quarter, declining against the
yen, the Swiss franc and the British pound, but gaining against the German mark
and the French franc. The dollar's relative weakness against the yen helped
boost Japanese local market returns over the quarter by an average of 9.5
percentage points in US dollar terms. Asian markets as a group outpaced markets
in the U.S. and Europe, with the Japanese equity market in particular up 23.7%
in US dollar terms. The International Equity Portfolio manager holds its largest
position in Japan, at over 25%. Individual stock selection had an especially
positive impact on returns.
Although its markets in general did well, Europe continues to be
preoccupied with issues swirling around the European Monetary Union (EMU).
Tensions between Germany, the region's largest economy, and France over EMU's
terms increased during the quarter. The recently elected Socialist coalition in
France is refusing to commit to strict adherence to EMU treaty criteria, a
commitment which Germany insists on for each member country's participation.
France is demanding that European Union members put a higher priority on job
growth.
In addition, internal dissension in Germany over EMU increased. Local
economists doubt Germany can meet the treaty's 3.0% deficit target by the close
of 1997, and local politicians are calling for a delay of EMU if the strict
requirements cannot be met on time. Meanwhile, joblessness in Germany is rising,
as is inflation. France and Germany both lagged the MSCI GDP EAFE over the
quarter, returning 3.2% and 5.0% in US dollar terms, respectively. The manager's
underweightings in these two larger European markets helped performance.
24
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25
<PAGE> 28
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE EQUITY
MARKET QUALITY BOND BOND BOND BALANCED INCOME
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Securities, at cost.......... $226,884,750 $210,667,375 $ 85,868,745 $306,376,400 $391,555,042 $ 819,729,126
============ ============ =========== ============ ============ =============
Securities, at market........ $226,884,750 $210,576,933 $ 85,525,656 $310,017,400 $417,104,108 $1,185,281,591
Repurchase agreement,
at value.................... -- 257,173 -- -- 25,481,743 --
Cash......................... 19,096 -- -- 82,016 -- 82,298
Foreign currency holdings, at
value (cost $114,442)....... -- -- -- -- -- --
Receivable for securities
sold........................ -- 84,997 -- -- 765,082 3,837,576
Receivable for foreign
currency forward
contracts................... -- -- -- -- -- --
Interest receivable.......... 10,750 1,998,439 843,658 4,930,851 3,115,704 477,243
Variance margin receivable... -- -- -- -- -- --
Dividends receivable......... -- -- -- -- 359,684 1,639,922
Receivable from securities
lending..................... -- 510 4,521 -- -- --
Reimbursement from advisor... -- -- 2,354 -- 14,531 1,087
------------ ------------ ----------- ------------ ------------ -------------
Total assets........ 226,914,596 212,918,052 86,376,189 315,030,267 446,840,852 1,191,319,717
------------ ------------ ----------- ------------ ------------ -------------
LIABILITIES:
Deposit for securities
loaned...................... -- 5,118,750 -- -- 95,892,493 28,062,880
Payable for securities
loaned...................... -- -- -- 20,591 3,357 11,715
Payable for securities
purchased................... -- -- -- -- 6,404,902 --
Bank overdraft............... -- -- 314,757 -- -- --
Payable for foreign currency
forward contracts........... -- -- -- -- -- --
Payable to advisor........... 8,581 12,209 -- 2,904 -- --
Accrued expenses:
Investment advisory fees.... 47,320 59,805 27,775 97,900 131,467 441,300
Custody fees................ 8,925 6,531 7,180 41,198 19,339 95,648
Professional fees........... 16,258 16,144 13,581 15,666 16,558 35,797
Reports to shareholders..... 1,279 1,316 644 2,004 1,955 6,832
Miscellaneous fees.......... 1,610 1,813 2,441 2,654 3,215 12,350
------------ ------------ ----------- ------------ ------------ -------------
Total liabilities... 83,973 5,216,568 366,378 182,917 102,473,286 28,666,522
------------ ------------ ----------- ------------ ------------ -------------
NET ASSETS.......... $226,830,623 $207,701,484 $ 86,009,811 $314,847,350 $344,367,566 $1,162,653,195
============ ============ =========== ============ ============ =============
NET ASSETS CONSIST OF:
Paid-in capital............. $226,830,623 $207,791,926 $ 86,352,900 $311,206,350 $318,818,500 $ 797,100,730
Net unrealized appreciation
(depreciation) on
securities................ -- (90,442) (343,089) 3,641,000 25,549,066 365,552,465
Net unrealized appreciation
on translation of assets
and liabilities in foreign
currencies................ -- -- -- -- -- --
------------ ------------ ----------- ------------ ------------ -------------
NET ASSETS.......... $226,830,623 $207,701,484 $ 86,009,811 $314,847,350 $344,367,566 $1,162,653,195
============ ============ =========== ============ ============ =============
</TABLE>
See notes to financial statements.
26
<PAGE> 29
<TABLE>
<CAPTION>
EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE INCOME GROWTH EQUITY EQUITY BOND EQUITY
------------ ------------ ------------ ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$125,062,773 $234,507,727 $363,522,954 $524,498,596 $12,561,051 $29,466,654 $ 169,882,218
=========== ============ ============ ============ =========== =========== ============
$136,295,118 $284,347,518 $427,067,994 $650,042,620 $14,841,603 $30,043,513 $ 206,831,212
13,356,092 11,690,138 12,503,702 44,839,798 1,319,166 3,217,465 15,143,791
-- -- -- -- -- 2,040 --
-- -- -- -- -- -- 114,401
539,255 94,497 1,695,743 7,436,184 591,393 -- 267,916
-- -- -- -- -- -- 141,686
2,045 1,793 2,009 6,793 202 648,417 13,214
-- -- -- -- -- -- 2,823
257,928 253,318 233,635 341,537 1,200 -- 569,529
604 5,926 12,508 14,550 -- -- 1,142
3,027 -- -- -- 4,764 1,319 2,635
----------- ------------ ------------ ------------ ----------- ----------- ------------
150,454,069 296,393,190 441,515,591 702,681,482 16,758,328 33,912,754 223,088,349
----------- ------------ ------------ ------------ ----------- ----------- ------------
5,747,160 23,374,400 44,196,500 90,144,329 -- -- 7,761,300
-- -- -- -- -- -- --
919,776 1,574,833 2,891,723 7,874,761 1,033,562 -- 1,544,761
-- -- -- -- -- -- --
-- -- -- -- -- -- 107,548
-- 7,108 12,246 29,278 -- -- --
64,378 135,348 205,654 401,314 12,301 15,263 132,077
18,773 33,349 14,730 56,849 16,192 -- 12,835
11,423 14,099 15,985 17,932 10,816 16,134 21,902
419 1,571 2,116 5,823 104 160 810
7,509 2,403 2,953 6,397 7,002 6,416 6,742
----------- ------------ ------------ ------------ ----------- ----------- ------------
6,769,438 25,143,111 47,341,907 98,536,683 1,079,977 37,973 9,587,975
----------- ------------ ------------ ------------ ----------- ----------- ------------
$143,684,631 $271,250,079 $394,173,684 $604,144,799 $15,678,351 $33,874,781 $ 213,500,374
=========== ============ ============ ============ =========== =========== ============
$132,452,286 $221,410,288 $330,628,644 $478,600,775 $13,397,799 $33,297,922 $ 176,514,470
11,232,345 49,839,791 63,545,040 125,544,024 2,280,552 576,859 36,948,994
-- -- -- -- -- -- 36,910
----------- ------------ ------------ ------------ ----------- ----------- ------------
$143,684,631 $271,250,079 $394,173,684 $604,144,799 $15,678,351 $33,874,781 $ 213,500,374
=========== ============ ============ ============ =========== =========== ============
</TABLE>
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<PAGE> 30
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE EQUITY
MARKET QUALITY BOND BOND BOND BALANCED INCOME
---------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................... $5,626,717 $6,340,638 $2,713,934 $11,411,752 $ 4,869,806 $ 1,627,105
Dividend income................... -- -- -- -- 1,442,177 13,047,592
Withholding tax................... -- -- -- -- -- (9,000)
---------- ---------- ---------- ----------- ----------- ------------
Total income............... 5,626,717 6,340,638 2,713,934 11,411,752 6,311,983 14,665,697
---------- ---------- ---------- ----------- ----------- ------------
EXPENSES:
Investment advisory fees.......... 252,547 336,820 158,307 570,491 687,990 2,327,303
Custody fees...................... 25,365 27,358 22,988 53,938 41,894 113,581
Professional fees................. 11,062 11,603 10,345 11,332 11,949 22,796
Reports to shareholders........... 928 956 476 1,606 1,526 5,210
Miscellaneous fees................ 4,613 4,759 4,144 5,989 5,764 12,901
---------- ---------- ---------- ----------- ----------- ------------
Total expenses............. 294,515 381,496 196,260 643,356 749,123 2,481,791
Expenses reimbursed by the
advisor........................... -- -- (14,889) -- (359) --
---------- ---------- ---------- ----------- ----------- ------------
Net expenses............... 294,515 381,496 181,371 643,356 748,764 2,481,791
---------- ---------- ---------- ----------- ----------- ------------
Net investment income (loss)........ 5,332,202 5,959,142 2,532,563 10,768,396 5,563,219 12,183,906
---------- ---------- ---------- ----------- ----------- ------------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON SECURITIES AND FOREIGN
CURRENCIES:
Net realized gains (losses) on
securities...................... (1,529) (555,947) 46,967 88,896 23,062,178 44,596,471
Net realized gains on foreign
currency transactions........... -- -- -- -- -- --
Net change in unrealized
appreciation (depreciation) on
securities...................... -- (122,635) (16,068) (1,356,597) 7,230,238 136,920,388
Net change in unrealized
depreciation on translation of
assets and liabilities in
foreign currencies.............. -- -- -- -- -- --
---------- ---------- ---------- ----------- ----------- ------------
Net realized and unrealized gains
(losses) on securities and foreign
currencies........................ (1,529) (678,582) 30,899 (1,267,701) 30,292,416 181,516,859
---------- ---------- ---------- ----------- ----------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................... $5,330,673 $5,280,560 $2,563,462 $ 9,500,695 $35,855,635 $193,700,765
========== ========== ========== =========== =========== ============
</TABLE>
See notes to financial statements.
28
<PAGE> 31
<TABLE>
<CAPTION>
EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
VALUE INCOME GROWTH EQUITY EQUITY BOND EQUITY
----------- ----------- ----------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 152,364 $ 292,490 $ 315,799 $ 1,141,828 $ 31,932 $1,219,272 $ 286,745
806,113 1,344,716 1,759,423 1,834,321 15,577 -- 2,026,986
-- (4,379) -- (2,367) -- -- (250,047)
----------- ----------- ----------- ----------- ---------- ---------- -----------
958,477 1,632,827 2,075,222 2,973,782 47,509 1,219,272 2,063,684
----------- ----------- ----------- ----------- ---------- ---------- -----------
240,206 684,776 1,107,677 2,146,024 75,180 74,055 629,967
38,262 52,997 41,144 115,597 23,643 22,400 88,639
9,216 10,895 11,698 13,174 8,768 9,293 13,084
369 1,195 1,705 4,081 81 128 770
3,360 5,132 6,097 7,677 2,865 3,110 3,958
----------- ----------- ----------- ----------- ---------- ---------- -----------
291,413 754,995 1,168,321 2,286,553 110,537 108,986 736,418
(38,262) (13,669) (6,628) (7,068) (32,730) (27,746) --
----------- ----------- ----------- ----------- ---------- ---------- -----------
253,151 741,326 1,161,693 2,279,485 77,807 81,240 736,418
----------- ----------- ----------- ----------- ---------- ---------- -----------
705,326 891,501 913,529 694,297 (30,298) 1,138,032 1,327,266
----------- ----------- ----------- ----------- ---------- ---------- -----------
3,283,815 12,312,511 (7,733,475) 6,824,477 (713,422) 133,583 4,075,017
-- -- -- -- -- -- 692,720
9,664,513 27,803,121 49,825,706 47,885,241 2,045,093 204,529 24,877,159
-- -- -- -- -- -- (313,080)
----------- ----------- ----------- ----------- ---------- ---------- -----------
12,948,328 40,115,632 42,092,231 54,709,718 1,331,671 338,112 29,331,816
----------- ----------- ----------- ----------- ---------- ---------- -----------
$13,653,654 $41,007,133 $43,005,760 $55,404,015 $1,301,373 $1,476,144 $ 30,659,082
=========== =========== =========== =========== ========== ========== ===========
</TABLE>
29
<PAGE> 32
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE
MARKET QUALITY BOND BOND BOND BALANCED
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss)................. $ 5,332,202 $ 5,959,142 $ 2,532,563 $ 10,768,396 $ 5,563,219
Net realized gains (losses) on securities.... (1,529) (555,947) 46,967 88,896 23,062,178
Net realized gains on foreign currency
transactions............................... -- -- -- -- --
Net change in unrealized appreciation
(depreciation) on securities............... -- (122,635) (16,068) (1,356,597) 7,230,238
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies......................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations................................. 5,330,673 5,280,560 2,563,462 9,500,695 35,855,635
------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from capital invested............... 376,777,106 44,061,033 12,856,024 39,560,660 93,590,723
Value of capital withdrawn................... (340,289,410) (38,934,772) (32,469,555) (56,890,022) (49,988,631)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from capital transactions.................... 36,487,696 5,126,261 (19,613,531) (17,329,362) 43,602,092
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets.......... 41,818,369 10,406,821 (17,050,069) (7,828,667) 79,457,727
NET ASSETS:
Beginning of period.......................... 185,012,254 197,294,663 103,059,880 322,676,017 264,909,839
------------ ------------ ------------ ------------ ------------
End of period................................ $226,830,623 $207,701,484 $ 86,009,811 $314,847,350 $344,367,566
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
30
<PAGE> 33
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME VALUE INCOME GROWTH EQUITY EQUITY BOND EQUITY
-------------- ------------ ------------ ------------ ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 12,183,906 $ 705,326 $ 891,501 $ 913,529 $ 694,297 $ (30,298) $ 1,138,032 $ 1,327,266
44,596,471 3,283,815 12,312,511 (7,733,475) 6,824,477 (713,422) 133,583 4,075,017
-- -- -- -- -- -- -- 692,720
136,920,388 9,664,513 27,803,121 49,825,706 47,885,241 2,045,093 204,529 24,877,159
-- -- -- -- -- -- -- (313,080)
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
193,700,765 13,653,654 41,007,133 43,005,760 55,404,015 1,301,373 1,476,144 30,659,082
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
170,461,943 120,098,118 80,310,688 136,012,073 138,182,649 14,032,689 22,901,827 76,256,259
(158,330,182) (19,100,654) (57,680,168) (83,971,835) (96,706,108) (15,134,841) (5,875,876) (41,599,864)
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
12,131,761 100,997,464 22,630,520 52,040,238 41,476,541 (1,102,152) 17,025,951 34,656,395
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
205,832,526 114,651,118 63,637,653 95,045,998 96,880,556 199,221 18,502,095 65,315,477
956,820,669 29,033,513 207,612,426 299,127,686 507,264,243 15,479,130 15,372,686 148,184,897
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
$1,162,653,195 $143,684,631 $271,250,079 $394,173,684 $604,144,799 $15,678,351 $33,874,781 $ 213,500,374
============ ============ =========== ============ ============ =========== ============ ============
</TABLE>
31
<PAGE> 34
DIVERSIFIED INVESTORS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT/
MONEY HIGH GOVERNMENT CORPORATE
MARKET QUALITY BOND BOND BOND BALANCED
------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss).............. $ 9,228,477 $ 10,943,369 $ 5,459,079 $ 22,081,097 $ 7,487,630
Net realized gains (losses) on
securities.............................. (8,786) (34,374) (586,993) (913,114) 23,946,320
Net realized gains on foreign currency
transactions............................ -- -- -- -- --
Net change in unrealized appreciation
(depreciation) on securities............ -- (1,571,971) (1,394,326) (11,013,287) 3,998,704
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies...................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations.............................. 9,219,691 9,337,024 3,477,760 10,154,696 35,432,654
------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from capital invested............ 574,726,828 132,353,083 50,100,883 107,972,231 106,232,881
Value of capital withdrawn................ (540,572,513) (116,921,547) (36,510,377) (131,990,320) (43,788,651)
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting from
capital transactions...................... 34,154,315 15,431,536 13,590,506 (24,018,089) 62,444,230
------------ ------------ ------------ ------------ ------------
Net increase in net assets.................. 43,374,006 24,768,560 17,068,266 (13,863,393) 97,876,884
NET ASSETS:
Beginning of year......................... 141,638,248 172,526,103 85,991,614 336,539,410 167,032,955
------------ ------------ ------------ ------------ ------------
End of year............................... $ 185,012,254 $ 197,294,663 $103,059,880 $ 322,676,017 $264,909,839
============ ============ ============ ============ ============
</TABLE>
- ---------------
* Commencement of operations, April 19, 1996
See notes to financial statements.
32
<PAGE> 35
<TABLE>
<CAPTION>
EQUITY EQUITY GROWTH & EQUITY SPECIAL AGGRESSIVE HIGH YIELD INTERNATIONAL
INCOME VALUE* INCOME GROWTH EQUITY EQUITY* BOND EQUITY
------------- ----------- ------------ ------------ ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 25,571,730 $ 240,724 $ 1,776,479 $ (432,797) $ 960,323 $ (70,782) $ 918,330 $ 1,201,575
39,593,303 910,307 16,329,122 64,682,669 55,282,281 594,156 (43,340) 2,640,559
-- -- -- -- -- -- -- 478,445
83,552,175 1,567,832 13,845,816 (25,830,434) 32,173,450 235,459 210,284 10,896,919
-- -- -- -- -- -- -- 190,167
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
148,717,208 2,718,863 31,951,417 38,419,438 88,416,054 758,833 1,085,274 15,407,665
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
293,027,464 28,849,346 146,312,325 136,832,312 247,735,078 20,875,494 7,896,234 77,505,278
(249,226,533) (2,534,696) (95,463,047) (98,486,454) (144,345,114) (6,155,197) (2,606,417) (28,174,361)
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
43,800,931 26,314,650 50,849,278 38,345,858 103,389,964 14,720,297 5,289,817 49,330,917
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
192,518,139 29,033,513 82,800,695 76,765,296 191,806,018 15,479,130 6,375,091 64,738,582
764,302,530 -- 124,811,731 222,362,390 315,458,225 -- 8,997,595 83,446,315
------------ ------------ ----------- ------------ ------------ ----------- ------------ ------------
$ 956,820,669 $29,033,513 $207,612,426 $299,127,686 $ 507,264,243 $15,479,130 $15,372,686 $ 148,184,897
============ ============ =========== ============ ============ =========== ============ ============
</TABLE>
33
<PAGE> 36
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
COMMERCIAL PAPER -- 85.41%
$3,430,000 American Express Credit Corp.,
5.54%, 07/21/97............... $ 3,419,443
3,500,000 Associates Corp of N.A, 5.53%,
07/11/97...................... 3,494,624
2,000,000 Avco Financial Services, Inc. --
Canada, 5.65%, 07/21/97....... 1,993,722
5,500,000 Avco Financial Services, Inc. --
Canada, 5.60%, 08/18/97....... 5,458,933
5,000,000 Banco Real S.A., 5.57%,
10/02/97...................... 4,928,054
7,000,000 Bank Of New York, 5.52%,
07/10/97...................... 6,990,340
4,000,000 Bank Of New York, 5.54%,
08/29/97...................... 3,963,682
5,000,000 Chevron Transport Corp., 5.54%,
07/25/97...................... 4,981,533
400,000 CIT Group Holdings, Inc., 5.53%,
07/28/97...................... 398,341
2,300,000 CIT Group Holdings, Inc., 5.55%,
08/26/97...................... 2,280,143
2,100,000 Commercial Credit Corp., 5.62%,
07/09/97...................... 2,097,377
2,000,000 Commercial Credit Corp., 5.55%,
08/29/97...................... 1,981,808
2,000,000 Conagra, Inc., 5.72%,
07/25/97...................... 1,992,373
9,000,000 Copley Financing Corp., 5.55%,
07/02/97...................... 8,998,613
6,300,000 Dow Chemical Company, 5.50%,
07/11/97...................... 6,290,375
2,500,000 Enterprise Funding Corp., 5.54%,
07/11/97...................... 2,496,153
1,064,000 Enterprise Funding Corp., 5.64%,
08/01/97...................... 1,058,832
9,000,000 First National Bank of Chicago,
5.66%, 09/03/97............... 9,038,458
3,045,000 Ford Motor Credit Corp., 5.56%,
07/21/97...................... 3,035,594
5,000,000 Ford Motor Credit
Corp. -- Canada, 5.65%,
08/05/97...................... 4,972,535
1,000,000 Ford Motor Credit
Corp. -- Canada, 5.58%,
09/23/97...................... 986,980
3,000,000 General Electric Capital Corp.,
5.56%, 07/17/97............... 2,992,587
1,800,000 General Electric Capital Corp.,
5.52%, 07/25/97............... 1,793,376
4,280,000 General Electric Capital Corp.,
5.66%, 08/18/97............... 4,247,700
7,325,000 Goldman Sachs Group, L.P.,
5.55%, 07/02/97............... 7,323,871
COMMERCIAL PAPER (CONTINUED)
$6,000,000 Heller Financial, Inc., 5.68%,
07/21/97...................... $ 5,981,067
3,000,000 Heller Financial, Inc., 5.64%,
07/22/97...................... 2,990,130
4,300,000 JHM Funding, Inc., 5.60%,
08/12/97...................... 4,271,907
3,300,000 Lehman Brothers, Inc., 5.57%,
07/18/97...................... 3,291,320
4,800,000 Lucent Technologies, Inc.,
5.57%, 08/04/97............... 4,774,750
10,600,000 Merrill Lynch and Company, Inc.,
5.64%, 08/04/97............... 10,543,537
2,000,000 National Westminister Bank,
5.61%, 07/08/97............... 1,997,819
7,000,000 National Westminister Bank,
5.58%, 07/15/97............... 6,984,810
5,825,000 NYNEX Corp., 5.54%, 07/03/97.... 5,823,207
2,800,000 NYNEX Corp., 5.55%, 07/24/97.... 2,790,072
4,775,000 Paccar Financial Group, 5.57%,
07/02/97...................... 4,774,261
3,300,000 Philip Morris Companies, Inc.,
5.57%, 08/25/97............... 3,271,918
350,000 Prudential Funding Corp., 5.51%,
07/21/97...................... 348,929
6,500,000 Prudential Funding Corp., 5.55%,
07/28/97...................... 6,472,944
3,500,000 Quebec Province, 5.65%,
07/08/97...................... 3,496,155
6,000,000 Quebec Province, 5.63%,
07/17/97...................... 5,984,986
2,000,000 Sanwa Business Credit, 5.63%,
07/25/97...................... 1,992,493
1,200,000 Sears, Roebuck Acceptance Corp.,
5.56%, 07/08/97............... 1,198,703
4,500,000 Sears, Roebuck Acceptance Corp.,
5.52%, 07/10/97............... 4,493,790
1,800,000 Sears, Roebuck Acceptance Corp.,
5.57%, 08/28/97............... 1,783,847
7,300,000 Sony Capital Corp., 5.54%,
07/14/97...................... 7,285,396
2,000,000 Textron Financial Corp., 5.80%,
08/06/97...................... 1,988,400
2,000,000 Wyerhauser Company, 5.57%,
07/18/97...................... 1,994,739
2,000,000 Xerox Corp., 5.52%, 08/11/97.... 1,987,427
------------
TOTAL COMMERCIAL PAPER
(Cost $193,738,054)............. 193,738,054
------------
</TABLE>
See notes to financial statements.
34
<PAGE> 37
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT -- 6.81%
$3,000,000 Banc One, Floating Rate, 5.63%,
07/03/97+..................... $ 3,002,312
5,500,000 Barclays US Funding, 5.63%,
07/07/97...................... 5,547,341
5,825,000 Capital One Funding Corp.,
Floating Rate, 5.63%,
07/03/97+..................... 5,850,295
1,000,000 Morgan Guaranty, 5.50%,
08/05/97...................... 1,052,422
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $15,452,370).............. 15,452,370
------------
US GOVERNMENT AGENCY SECURITIES -- 4.26%
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 0.17%
400,000 5.37%, 07/25/97................. 398,568
------------
FEDERAL HOME LOAN BANK -- 4.09%
6,000,000 5.85%, 11/06/97................. 6,229,125
3,000,000 5.91%, 03/24/98................. 3,047,773
------------
TOTAL FEDERAL HOME LOAN BANK.... 9,276,898
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost $9,675,466).... 9,675,466
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 3.54%
$8,000,000 Asset Backed Securities
Investment Trust, Series
1997-C, Class N, Floating
Rate, 5.69%, 07/15/97 (Cost
$8,018,860)................... $ 8,018,860
------------
Total Investments -- 100.02%
(Cost $226,884,750)............. 226,884,750
Other assets less liabilities --
(0.02)%......................... (54,127)
------------
NET ASSETS -- 100.00%........... $226,830,623
============
The aggregate cost of investments for federal income tax
purposes at June 30, 1997, is $226,884,750.
</TABLE>
- ---------------
+ This interest rate is subject to change weekly based on the greater of the 30
day or 90 day Federal composite rate. The rate shown was in effect as of June
30, 1997.
See notes to financial statements.
35
<PAGE> 38
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 73.49%
BANKS -- 17.23%
$5,000,000 Banc One Auto Grantor Trust,
6.27%, 11/20/03............... $ 4,999,973
3,500,000 Banque Nationale de Paris,
9.875% 5/25/98................ 3,600,594
8,000,000 First Omni Bank, Series 96-A ,
6.65%, 09/15/03............... 8,042,400
770,092 Fleet Finance, Series 90-1,
6.70%, 01/15/06............... 771,168
565,763 Fleet Finance, Series 91-A,
8.45%, 04/15/06............... 570,243
2,000,000 Korea Development Bank, 9.29%,
03/13/98...................... 2,043,484
3,025,000 Korea Development Bank, 9.25%,
06/15/98...................... 3,105,299
1,360,000 Korea Development Bank, 7.90%,
02/01/02...................... 1,410,880
7,897,892 Union Acceptance Corp., 6.40%,
10/10/02...................... 7,927,194
1,305,973 Western Finance Grantor Trust,
4.60%, 04/01/99............... 1,300,448
2,012,025 Western Finance Grantor Trust,
5.875%, 03/01/02.............. 2,009,047
------------
TOTAL BANKS..................... 35,780,730
------------
BROKERAGE -- 6.82%
5,500,000 Bear Stearns & Company, 6.50%,
06/15/00...................... 5,475,509
725,000 Lehman Brothers, Inc., Medium-
Term Note, 6.08%, 07/08/98.... 723,746
5,000,000 Lehman Brothers, Inc., 7.625%,
08/01/98...................... 5,069,015
2,695,000 Morgan Stanley, 8.875%,
10/15/01...................... 2,899,483
------------
TOTAL BROKERAGE................. 14,167,753
------------
FINANCE -- 27.00%
4,000,000 Associates Corp. of North
America, 5.99%, 12/15/00...... 3,908,196
2,000,000 Associates Corp. of North
America, 6.15%, 01/13/03...... 1,928,782
3,170,000 Associates Corp. of North
America, 6.01%, 02/07/03...... 3,035,002
1,000,000 British Gas Finance, Inc.,
8.75%, 09/15/98............... 1,017,626
5,000,000 CARCO, Auto Loan Series 94-3,
8.125%, 10/15/99.............. 5,028,125
3,763,036 Chase Manhattan Grantor Trust,
6.61%, 09/15/02............... 3,792,011
FINANCE (CONTINUED)
$1,964,207 Chemical Financial Acceptance
Corp., 9.25%, 05/15/98........ $ 2,024,245
1,000,000 Ford Motor Credit Corp., 7.15%,
01/26/00...................... 1,013,611
3,500,000 Ford Motor Credit Corp., 5.99%,
02/27/01...................... 3,412,749
4,000,000 Ford Motor Credit Corp., 7.06%,
06/06/01...................... 4,034,140
365,562 General Motors Acceptance Corp.
Grantor Trust, Series 95-A,
Class A, 7.15%, 3/15/00....... 368,523
5,250,000 General Motors Acceptance Corp.,
9.375%, 04/01/00.............. 5,613,531
600,000 Government Export Trust, 4.61%,
09/01/98...................... 591,747
5,000,000 International Lease Finance,
7.05%, 05/01/01............... 5,040,900
7,500,000 John Deere Capital, 6.30%,
06/01/99...................... 7,500,900
1,702,758 Navistar Finance, 6.55%,
11/20/01...................... 1,714,048
1,000,000 Norwest Financial, 6.00%,
08/15/97...................... 1,000,194
4,000,000 Norwest Corp., 6.75%,
05/12/00...................... 4,020,860
1,016,604 Pemex Exp Grantor Trust, 7.66%,
08/15/01...................... 1,041,963
------------
TOTAL FINANCE................... 56,087,153
------------
PRIVATE ASSET BACKED: CONSTRUCTION -- 2.03%
4,150,571 Case Equipment Loan Trust,
Series 1994-C, Class A2,
8.10%, 06/15/01............... 4,222,832
------------
PRIVATE ASSET BACKED: CREDIT CARDS -- 4.64%
5,000,000 Discover Card Master Trust I,
Series 93-2A, 5.40%,
11/16/01...................... 4,960,850
1,693,333 First Chicago Master Trust,
6.25%, 08/15/99............... 1,694,315
1,000,000 Household Affinity Credit Card
Master Trust Fund, 7.00%,
12/15/99...................... 1,004,150
1,000,000 MBNA Master Credit Card, 5.40%,
09/15/00...................... 991,770
1,000,000 Signet Credit Card Master Trust,
5.20%, 02/15/02............... 990,740
------------
TOTAL PRIVATE ASSET BACKED:
CREDIT CARDS.................... 9,641,825
------------
</TABLE>
See notes to financial statements.
36
<PAGE> 39
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
PRIVATE ASSET BACKED: RECEIVABLES -- 10.32%
$5,000,000 Capital Equipment Receivable
Trust, Series 96-1, 6.28%,
06/15/00...................... $ 4,995,700
3,414,938 Chevy Chase Auto Receivable
Trust, 6.00%, 12/15/01........ 3,423,065
3,340,940 Chevy Chase Auto Receivable
Trust, 6.60%, 12/15/02........ 3,366,432
4,605,021 First Sierra Receivables II,
6.85%, 06/10/03............... 4,651,255
1,749,484 IBM Credit Receivable Lease
Asset Master Trust, Series
93-1A, 4.55%, 11/15/00........ 1,742,941
628,221 IBM Credit Receivable Lease
Asset Master Trust, 6.55%,
07/16/01...................... 631,651
2,611,871 Toyota Auto Receivable Trust,
Series 96-AA, 6.30%,
07/20/01...................... 2,623,964
------------
TOTAL PRIVATE ASSET BACKED:
RECEIVABLES..................... 21,435,008
------------
REAL ESTATE -- 5.45%
401,754 Daiwa Home Equity Loans, 7.875%,
11/25/19...................... 400,312
385,669 Fleet Financial Home Equity,
5.45%, 03/20/23............... 385,661
3,818,569 GE Home Equity Loan, Series 91-1
A, 7.20%, 09/15/11............ 3,851,180
1,041,545 Merrill Lynch Mortgage
Investors, Inc., 10.10%,
11/15/07...................... 1,093,809
750,109 Merrill Lynch Mortgage
Investors, Inc., 10.35%,
05/15/09...................... 811,525
463,302 Merrill Lynch Mortgage
Investors, Inc., 9.40%,
09/15/09...................... 493,104
680,513 Merrill Lynch Mortgage
Investors, Inc., Series 91-DA,
9.00%, 07/15/11............... 689,081
2,945,815 Travelers Mortgage, 12.00%,
03/01/14...................... 3,373,238
11,507 US Home Equity Loan, 9.25%,
01/15/21...................... 11,483
194,844 US Home Equity Loan, 8.50%,
04/15/21...................... 195,265
------------
TOTAL REAL ESTATE............... 11,304,658
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $152,341,178)............. 152,639,959
------------
US TREASURY NOTES -- 4.82%
$5,000,000 6.25%, 05/31/99(a).............. $ 5,014,060
5,000,000 6.00%, 06/30/99................. 4,992,190
------------
TOTAL US TREASURY NOTES (Cost
$10,001,896).................... 10,006,250
------------
US GOVERNMENT AGENCY SECURITIES -- 5.76%
FEDERAL HOME LOAN MORTGAGE CORP. -- 1.98%
1,913,910 PL# 850082, 9.00%, 10/01/05..... 1,974,374
416,019 REMIC, Series MH-1, 10.15%,
04/15/06...................... 416,019
988,462 PL# D0677, 7.50%, 03/01/08...... 1,005,048
123,545 PL# 273991, 6.50%, 03/01/13..... 122,802
595,633 PL# 306816, 7.00%, 01/01/18..... 594,673
------------
TOTAL FEDERAL HOME LOAN MORTGAGE
CORP. .......................... 4,112,916
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 0.24%
64,482 8.00%, 07/25/97................. 64,244
217,001 PL# 6346, 6.75%, 02/01/03....... 216,823
211,085 PL# 137455, 7.00%, 04/01/04..... 211,993
------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION..................... 493,060
------------
OTHER AGENCIES -- 1.44%
1,700,000 Midstate Trust II, Series A3,
9.35%, 04/01/98............... 1,723,392
1,278,721 Guaranteed Export Certificates,
4.813%, 12/15/98.............. 1,262,530
------------
TOTAL OTHER AGENCIES............ 2,985,922
------------
RESOLUTION TRUST CORP. -- 2.10%
2,825,490 Resolution Trust Corp., 7.56%,
08/25/21...................... 2,863,493
1,518,582 Resolution Trust Corp., Floating
Rate, 6.67%, 07/25/27......... 1,515,530
------------
TOTAL RESOLUTION TRUST CORP..... 4,379,023
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost $12,085,629)... 11,970,921
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 3.34%
5,000,000 Hydro Quebec, 6.36%, 01/15/02... 4,892,290
2,000,000 Province of Ontario, 7.375%,
01/27/03...................... 2,054,178
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost $7,225,337)... 6,946,468
------------
</TABLE>
See notes to financial statements.
37
<PAGE> 40
HIGH QUALITY BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
REGULATED INVESTMENT COMPANY -- 0.62%
1,286,635 Merrimac Cash Fund -- Premium Class
(Cost $1,286,635)(b)............ $ 1,286,635
------------
PRINCIPAL
---------
COMMERCIAL PAPER -- 7.65%
$4,425,000 Emerson Electric Company, 5.65%,
07/07/97...................... 4,420,833
6,473,000 Northern States Power, 5.70%,
07/07/97...................... 6,466,851
5,000,000 UBS Finance Delaware Inc.,
6.20%, 07/01/97............... 5,000,000
------------
TOTAL COMMERCIAL PAPER (Cost
$15,887,684).................... 15,887,684
------------
CERTIFICATE OF DEPOSIT -- 3.85%
8,000,000 Sanwa Bank -- New York, 5.65%,
07/07/97 (Cost $8,006,119).... 8,006,119
------------
TIME DEPOSITS -- 1.85%
340,912 Harris Trust & Savings Bank,
6.25%, 07/01/97(b)............ 340,982
3,491,203 First National Bank of Boston,
6.35%, 07/01/97(b)............ 3,491,915
------------
TOTAL TIME DEPOSITS (Cost
$3,832,897)..................... 3,832,897
------------
TOTAL SECURITIES (Cost
$210,667,375)................... 210,576,933
------------
REPURCHASE AGREEMENT -- 0.13%
$ 257,173 With Investors Bank & Trust,
dated 06/30/97, 5.32%,
repurchase proceeds at
maturity $257,211, 07/01/97
(Collateralized by US Treasury
Bills, due 12/11/97 with a
value of $263,715) (Cost
$257,173)..................... $ 257,173
------------
Total Investments -- 101.51%
(Cost $210,924,548)............. 210,834,106
Other assets less liabilities --
(1.51%)......................... (3,132,622)
------------
NET ASSETS -- 100.00%........... $207,701,484
===========
</TABLE>
The aggregate cost of investments for federal income tax purposes at June 30,
1997, is $210,924,548.
The following amount is based on costs for federal income tax purposes:
<TABLE>
<S> <C>
Gross unrealized appreciation......... $ 739,681
Gross unrealized depreciation......... (830,123)
------------
Gross unrealized depreciation......... $ (90,442)
===========
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
See notes to financial statements.
38
<PAGE> 41
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
US TREASURY NOTES -- 39.34%
$9,000,000 5.25%, 07/31/98................. $ 8,943,750
3,000,000 6.375%, 05/15/99................ 3,015,000
5,000,000 6.00%, 08/15/99................. 4,987,500
7,000,000 7.75%, 12/31/99................. 7,249,375
2,500,000 8.875%, 05/15/00................ 2,674,218
7,000,000 6.25%, 10/31/01................. 6,969,375
------------
TOTAL US TREASURY NOTES
(Cost $34,044,909).............. 33,839,218
------------
US GOVERNMENT AGENCY SECURITIES -- 50.12%
FEDERAL HOME LOAN BANK -- 11.76%
5,000,000 6.34%, 03/19/01................. 4,952,030
5,000,000 7.39%, 08/22/01................. 5,157,035
------------
TOTAL FEDERAL HOME LOAN BANK.... 10,109,065
------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 13.05%
3,000,000 REMIC, Series 1574, 6.50%,
02/15/21...................... 2,940,510
5,300,000 REMIC, Series 1500, 7.00%,
06/15/22...................... 5,294,435
1,258,403 REMIC, Series 31 Floating Rate,
6.15%, 08/25/23............... 1,252,463
1,729,311 REMIC, Series 1710, 6.18%,
02/15/24...................... 1,738,152
------------
TOTAL FEDERAL HOME LOAN MORTGAGE
CORP............................ 11,225,560
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 11.54%
2,000,000 REMIC, Series 94-75, 7.00%,
01/25/03...................... 2,017,240
3,000,000 6.44%, 06/21/05................. 2,950,365
5,000,000 Series 96-M7, 6.85%, 06/17/11... 4,955,273
------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION..................... 9,922,878
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 8.62%
7,514 PL# 209631, 7.50%, 04/15/02..... 7,648
32,053 PL# 328000, 7.50%, 06/15/07..... 32,623
11,903 PL# 328084, 7.50%, 07/15/07..... 12,115
15,219 PL# 335542, 7.50%, 08/15/07..... 15,490
286,675 PL# 335995, 7.50%, 08/15/07..... 291,781
94,765 PL# 322072, 7.50%, 08/15/07..... 96,453
501,778 PL# 323189, 7.50%, 08/15/07..... 510,716
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 274,314 PL# 328188, 7.50%, 08/15/07..... $ 279,200
467,257 PL# 328192, 7.50%, 08/15/07..... 475,579
120,256 PL# 328200, 7.50%, 08/15/07..... 122,398
499,025 PL# 329060, 7.50%, 08/15/07..... 507,913
422,919 PL# 332267, 7.50%, 08/15/07..... 430,452
428,161 PL# 297619, 7.50%, 09/15/07..... 435,787
431,290 PL# 332704, 7.50%, 09/15/07..... 438,973
84,501 PL# 333320, 7.50%, 09/15/07..... 86,006
438,995 PL# 333709, 7.50%, 09/15/07..... 446,814
199,765 PL# 369749, 6.50%, 09/15/07..... 196,644
284,982 PL# 345975, 6.50%, 10/15/08..... 280,529
756,864 PL# 374726, 6.50%, 10/15/08..... 745,038
337,233 PL# 345973, 6.50%, 11/15/08..... 331,963
141,204 PL# 363874, 6.50%, 11/15/08..... 138,998
559,190 PL# 370448, 6.50%, 11/15/08..... 550,453
340,766 PL# 366531, 7.00%, 11/15/08..... 335,441
653,749 PL# 371094, 6.50%, 11/15/08..... 643,534
------------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION............ 7,412,548
------------
STUDENT LOAN MARKETING ASSOCIATION -- 2.31%
2,000,000 6.52%, 09/26/00................. 1,986,472
------------
TENNESSEE VALLEY AUTHORITY -- 2.84%
2,500,000 6.375%, 06/15/05................ 2,445,920
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost $43,239,841)... 43,102,443
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 9.98%
FEDERAL HOME LOAN MORTGAGE CORP. -- 5.57%
100,000 5.41%, 07/02/97................. 99,985
4,700,000 5.40%, 07/14/97................. 4,690,835
------------
TOTAL FEDERAL HOME LOAN MORTGAGE
CORP............................ 4,790,820
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 4.41%
100,000 5.41%, 07/03/97................. 99,970
2,300,000 5.39%, 07/07/97................. 2,297,934
600,000 5.39%, 07/21/97................. 598,203
100,000 5.40%, 07/21/97................. 99,700
500,000 5.38%, 07/25/97................. 498,207
</TABLE>
See notes to financial statements.
39
<PAGE> 42
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(CONTINUED)
$ 100,000 5.37%, 07/28/97................. $ 99,597
100,000 5.41%, 07/30/97................. 99,564
------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION..................... 3,793,175
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY (Cost $8,583,995)........ 8,583,995
------------
Total Investments -- 99.44%
(Cost $85,868,745).............. $ 85,525,656
Other assets less
liabilities -- 0.56%............ 484,155
------------
NET ASSETS -- 100%.............. $ 86,009,811
============
The aggregate cost of securities for federal
income tax purposes at June 30, 1997, is
$85,868,745.
The following amount is based on costs for
federal income tax purposes:
Gross unrealized
appreciation.................. $ 167,716
Gross unrealized
depreciation.................. (510,805)
------------
Net unrealized depreciation... $ (343,089)
============
</TABLE>
See notes to financial statements.
40
<PAGE> 43
GOVERNMENT/CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
US TREASURY NOTES -- 3.11%
$5,000,000 5.625%, 11/30/00................ $ 4,898,435
5,000,000 3.375%, 01/15/07................ 4,884,375
------------
TOTAL US GOVERNMENT SECURITIES
(Cost $9,959,270)............... 9,782,810
------------
US GOVERNMENT AGENCY SECURITIES -- 11.41%
FEDERAL HOME LOAN BANK -- 1.52%
5,000,000 6.64%, 12/13/16................. 4,784,525
------------
FEDERAL HOME LOAN MORTGAGE CORP. -- 5.52%
3,334,410 Series 1377, 6.188%, 09/15/07... 3,338,711
5,000,000 Series 1666, Class E, 6.00%,
12/15/19...................... 4,863,330
3,775,209 Series 31, 6.15%, 08/25/23...... 3,757,390
5,380,844 Series 1710, 6.188%, 02/15/24... 5,408,351
------------
TOTAL FEDERAL HOME LOAN MORTGAGE
CORP............................ 17,367,782
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 0.35%
1,007,440 REMIC Series 1993-219, Class A,
08/25/23...................... 985,963
114,785 PL#250510, 7.00%, 12/01/25...... 112,490
------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION..................... 1,098,453
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 1.48%
917,762 PL#413611, 7.00%, 01/15/26...... 900,842
966,500 PL#292340, 7.00%, 02/15/26...... 948,682
942,290 PL#373622, 7.00%, 03/15/26...... 924,918
969,005 PL#373637, 7.00%, 03/15/26...... 951,140
967,352 PL#428420, 7.00%, 04/15/26...... 949,518
------------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION............ 4,675,100
------------
STUDENT LOAN MARKETING ASSOCIATION -- 2.54%
3,000,000 6.52%, 09/26/00................. 2,979,708
5,000,000 Series 1996-2 A2, 5.941%,
07/27/09...................... 5,012,891
------------
TOTAL STUDENT LOAN MARKETING
ASSOCIATION..................... 7,992,599
------------
TOTAL US GOVERNMENT AGENCY
SECURITIES (Cost $35,588,900)... 35,918,459
------------
CORPORATE BONDS & NOTES -- 82.14%
AEROSPACE -- 5.00%
5,000,000 Boeing Company, 8.625%,
11/15/31...................... 5,761,600
CORPORATE BONDS & NOTES (CONTINUED)
$5,000,000 Lockheed Martin, 6.85%,
05/15/01...................... $ 5,012,030
5,000,000 McDonnell Douglas, 6.875%,
11/01/06...................... 4,960,610
------------
TOTAL AEROSPACE................. 15,734,240
------------
AUTOMOTIVE PRODUCTS -- 6.60%
4,000,000 BF Goodrich, 8.65%, 04/15/25.... 4,409,328
5,000,000 Ford Holdings, 9.375%,
03/01/20...................... 5,962,050
5,000,000 General Motors Corp., 8.80%,
03/01/21...................... 5,701,785
5,000,000 Universal Corp., 6.50%,
02/15/06...................... 4,716,005
------------
TOTAL AUTOMOTIVE PRODUCTS....... 20,789,168
------------
BANKS -- 15.34%
4,000,000 Bank of New York Company, 6.50%,
12/01/03...................... 3,899,964
5,000,000 BankAmerica Corp., 6.625%,
05/30/01...................... 4,980,135
10,000,000 Bankers Trust of New York,
6.75%, 10/03/01............... 9,971,010
5,000,000 BT Institutional Capital
Trust -- B, 7.75%, 12/01/26... 4,698,400
5,000,000 Chase Manhattan Corp., 8.00%,
05/01/05...................... 5,054,925
5,000,000 Credit Suisse-London, 7.90%,
04/29/49...................... 5,154,000
5,000,000 Korea Development Bank, 7.25%,
05/15/06...................... 4,973,610
5,000,000 Midland Bank PLC, Floating Rate,
6.125%, 06/29/49.............. 4,450,000
5,000,000 Swiss Bank Corp., 7.75%,
09/01/26...................... 5,095,730
------------
TOTAL BANKS..................... 48,277,774
------------
CONSUMER GOODS AND SERVICES -- 3.61%
5,200,000 Proctor & Gamble, 9.36%,
01/01/21...................... 6,284,559
5,000,000 RJR Nabisco, 8.75%, 04/15/04.... 5,090,805
------------
TOTAL CONSUMER GOODS AND
SERVICES........................ 11,375,364
------------
FINANCE -- 24.91%
10,000,000 Associates Corp. N.A., 6.75%,
07/15/01...................... 10,014,170
5,000,000 Capital Equipment Receivables
Trust 96-1 Class B, 6.57%,
03/15/01...................... 4,992,400
</TABLE>
See notes to financial statements.
41
<PAGE> 44
GOVERNMENT/CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
CORPORATE BONDS & NOTES (CONTINUED)
$8,000,000 Chase Capital III Series C,
Floating Rate, 6.363%,
03/01/27...................... $ 7,803,296
7,040,000 Discover Card Master Trust I,
Series 1994-2 Class A,
Floating Rate, 6.03%,
10/16/04...................... 7,107,443
6,000,000 Dow Capital BV, 9.20%,
06/01/10...................... 6,934,884
5,000,000 General Electric Capital Corp.,
8.50%, 07/24/08............... 5,591,970
5,000,000 General Motors Acceptance Corp.,
Putable Asset Trust, 6.375%,
09/30/98...................... 5,007,010
5,000,000 General Motors Acceptance Corp.,
8.40%, 10/15/99............... 5,201,070
5,880,000 Structured Asset Securities
Corp., Series 1996-CFL, Class
A-IC, 5.944%, 02/25/28........ 5,743,778
10,000,000 World Financial Network Credit
Card Master Trust, Series
96-A, Class A, 6.70%,
05/15/06...................... 10,067,800
10,000,000 Xerox Credit Corp., 6.78%,
05/21/01...................... 9,957,860
------------
TOTAL FINANCE................... 78,421,681
------------
FOOD AND BEVERAGE -- 1.93%
5,000,000 Seagrams (Joseph) & Sons, 9.65%,
08/15/18...................... 6,065,650
------------
INDUSTRIAL -- 1.55%
5,000,000 Celulosa Arauco Y Constitucion,
6.75%, 12/15/03............... 4,875,225
------------
INSURANCE -- 3.17%
5,000,000 Aetna Services Inc., 7.625%,
08/15/26...................... 4,969,690
5,000,000 Prudential Insurance Company,
8.10%, 07/15/15............... 5,013,870
------------
TOTAL INSURANCE................. 9,983,560
------------
LEISURE AND RECREATION -- 2.30%
7,000,000 Marriott International, Inc.,
7.875%, 04/15/05.............. 7,256,158
------------
OIL AND GAS -- 3.54%
5,000,000 Occidental Petroleum, 10.125%,
09/15/09...................... 6,139,790
4,000,000 Texaco Capital, 9.75%,
03/15/20...................... 4,995,152
------------
TOTAL OIL AND GAS............... 11,134,942
------------
PAPER AND FOREST PRODUCTS -- 4.34%
$5,000,000 Republic New York Corp., 7.00%,
03/22/11...................... $ 4,899,990
8,000,000 Westvaco, 10.125%, 06/01/19..... 8,751,368
------------
TOTAL PAPER AND FOREST
PRODUCTS........................ 13,651,358
------------
PHARMACEUTICALS -- 0.29%
1,000,000 Eli Lilly, 6.77%, 01/01/36...... 922,781
------------
TELECOMMUNICATION -- 1.54%
5,000,000 GTE South, 7.50%, 03/15/26...... 4,859,165
------------
UTILITIES -- 8.02%
10,000,000 Commonwealth Edison, 8.125%,
01/15/07...................... 10,024,110
5,000,000 Commonwealth Edison, 8.50%,
07/15/22...................... 5,144,455
5,000,000 Long Island Lighting Company,
9.625%, 07/01/24.............. 5,138,895
5,000,000 Philadelphia Electric Company,
5.375%, 08/15/98.............. 4,954,910
------------
TOTAL UTILITIES................. 25,262,370
------------
TOTAL CORPORATE BONDS & NOTES
(Cost $255,121,535)............. 258,609,436
------------
COMMERCIAL PAPER -- 0.98%
100,000 American Express Credit Company,
5.52%, 07/10/97............... 99,862
300,000 Associates Corp. Of N.A., 5.53%,
07/11/97...................... 299,539
800,000 Chevron Oil Finance Company,
5.40%, 07/18/97............... 797,960
100,000 First National Bank Chicago,
5.66%, 09/03/97............... 100,428
1,000,000 Goldman Sachs, 5.52%,
08/08/97...................... 994,173
100,000 Prudential Funding, 5.51%,
07/21/97...................... 99,694
700,000 Sears Roebuck Acceptance Corp.,
5.57%, 07/28/97............... 697,076
------------
TOTAL COMMERCIAL PAPER
(Cost $3,088,732)............... 3,088,732
------------
SHORT TERM CORPORATE NOTE -- 0.64%
1,975,000 Capital One Funding Corp.,
5.63%, 04/01/11 (Cost
$2,019,403)................... 2,019,403
------------
SHORT TERM US GOVERNMENT AGENCY SECURITIES --
0.19%
FEDERAL HOME LOAN BANK -- 0.03%
100,000 5.38%, 07/28/97................. 99,596
------------
</TABLE>
See notes to financial statements.
42
<PAGE> 45
GOVERNMENT/CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
SHORT TERM US GOVERNMENT AGENCY SECURITIES
(CONTINUED)
FEDERAL HOME LOAN MORTGAGE CORP. -- 0.10%
$ 300,000 5.40%, 07/14/97................. $ 299,415
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 0.06%
100,000 5.36%, 07/02/97................. 99,985
100,000 5.41%, 07/30/97................. 99,564
------------
TOTAL FEDERAL NATIONAL MORTGAGE
ASSOCIATION..................... 199,549
------------
TOTAL SHORT TERM US GOVERNMENT
AGENCY SECURITIES (Cost
$598,560)....................... 598,560
------------
Total Investments -- 98.47%
(Cost $306,376,400)............. 310,017,400
Other assets less
liabilities -- 1.53%............ 4,829,950
------------
NET ASSETS -- 100.00%........... $314,847,350
===========
The aggregate cost of securities for federal income tax
purposes at June 30, 1997, is $306,376,400.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $ 5,760,405
Gross unrealized depreciation.......... (2,119,405)
------------
Net unrealized appreciation............ $ 3,641,000
============
</TABLE>
See notes to financial statements.
43
<PAGE> 46
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK -- 44.33%
AEROSPACE -- 2.63%
88,900 Boeing Company................. $ 4,717,257
49,400 Northrop Grumman Corp.......... 4,337,937
------------
TOTAL AEROSPACE................ 9,055,194
------------
AUTOMOBILES -- 2.79%
133,400 Ford Motor Company............. 5,035,850
82,050 General Motors Corp............ 4,569,159
------------
TOTAL AUTOMOBILES.............. 9,605,009
------------
BANKS -- 2.34%
87,600 Banc One Corp.(a).............. 4,243,125
14,100 Wells Fargo & Company.......... 3,799,950
------------
TOTAL BANKS.................... 8,043,075
------------
CHEMICALS -- 3.74%
57,400 Akzo N.V. (ADR)................ 3,967,775
65,400 Du Pont (E.I.) De Nemours...... 4,112,025
115,400 Rhone Poulenc SA (ADR)(a)...... 4,803,525
------------
TOTAL CHEMICALS................ 12,883,325
------------
COMPUTERS AND OFFICE EQUIPMENT -- 2.98%
64,800 First Data Corp................ 2,847,150
49,050 International Business
Machines..................... 4,423,697
80,200 Sun Microsystems, Inc.(a)(c)... 2,984,940
------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT...................... 10,255,787
------------
DEFENSE -- 1.52%
102,300 Raytheon Company(a)............ 5,217,300
------------
ELECTRONICS -- 0.90%
32,400 Advanced Micro Devices(c)...... 1,166,400
24,000 SGS-Thompson
Microelectric(c)............. 1,920,000
------------
TOTAL ELECTRONICS.............. 3,086,400
------------
FINANCE -- 0.55%
43,600 Morgan Stanley Dean Witter..... 1,877,525
------------
FOOD AND BEVERAGE -- 1.05%
92,600 Grand Metropolitan PLC
(ADR)(a)..................... 3,628,763
------------
INSURANCE -- 2.48%
36,600 Aetna, Inc..................... 3,746,925
65,550 Allstate Corp.................. 4,785,150
------------
TOTAL INSURANCE................ 8,532,075
------------
LEISURE AND RECREATION -- 1.82%
15,100 HFS, Inc.(a)(c)................ 875,800
52,700 ITT Corp.(c)................... 3,217,994
121,800 Host Marriott Corp.(c)......... 2,169,562
------------
TOTAL LEISURE AND RECREATION... 6,263,356
------------
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
MACHINERY -- 1.06%
52,950 Case Corp...................... $ 3,646,932
------------
MANUFACTURING -- 4.88%
89,725 Hasbro, Inc.................... 2,545,947
45,035 Mattel, Inc.................... 1,525,561
130,637 Peninsular & Oriental-SP
(ADR)(a)..................... 2,609,030
95,100 Philips Electronics N.V.
(ADR)(a)..................... 6,835,313
46,850 Reynolds Metals Company........ 3,338,062
------------
TOTAL MANUFACTURING............ 16,853,913
------------
MEDIA -- 1.10%
117,900 Dun & Bradstreet Corp.(a)...... 3,094,875
14,450 Tribune Company................ 694,503
------------
TOTAL MEDIA.................... 3,789,378
------------
MEDICAL AND OTHER HEALTH SERVICES -- 1.72%
52,200 American Home Products Corp.... 3,993,300
65,800 Tenet Healthcare Corp.(c)...... 1,945,213
------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES....................... 5,938,513
------------
OIL AND GAS -- 0.99%
23,500 Ashland, Inc................... 1,089,812
3,150 Elf Aquitaine (ADR)(a)......... 171,478
86,400 Union Pacific Resources
Group........................ 2,149,200
------------
TOTAL OIL AND GAS.............. 3,410,490
------------
PHARMACEUTICALS -- 1.22%
52,619 Novartis AD (ADR).............. 4,212,114
------------
RETAIL -- 1.47%
41,400 Dillards, Inc.................. 1,433,475
82,950 Federated Department
Stores(a)(c)................. 2,882,512
37,700 Office Depot(c)................ 732,794
------------
TOTAL RETAIL................... 5,048,781
------------
TELECOMMUNICATIONS -- 4.77%
121,200 MCI Communications Corp........ 4,639,681
90,800 NYNEX Corp..................... 5,232,350
72,900 Sprint Corp.................... 3,836,362
135,650 US West Media Group(a)(c)...... 2,746,913
------------
TOTAL TELECOMMUNICATIONS....... 16,455,306
------------
</TABLE>
See notes to financial statements.
44
<PAGE> 47
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
TRANSPORTATION -- 4.32%
37,400 AMR Corp.(c)................... $ 3,459,500
50,150 Burlington Northern Santa Fe... 4,507,231
90,400 Canadian Pacific............... 2,570,750
28,700 Continental Airlines -- Class
B(a)(c)...................... 1,002,706
47,250 Union Pacific Corp............. 3,331,125
------------
TOTAL TRANSPORTATION........... 14,871,312
------------
TOTAL COMMON STOCK (Cost
$127,766,717).................. 152,674,548
------------
REGULATED INVESTMENT COMPANIES -- 3.15%
5,251,271 Janus Money Market Fund........ 5,251,271
5,600,000 Merrimac Cash Fund -- Premium
Class........................ 5,600,000
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost $10,851,271)... 10,851,271
------------
PRINCIPAL
- -----------
US GOVERNMENT SECURITIES -- 48.94%
US TREASURY NOTE -- 43.28%
$11,230,000 7.125%, 10/15/98............... 11,394,935
24,825,000 8.50%, 02/15/00(a)............. 26,182,605
31,480,000 7.50%, 05/15/02(a)............. 32,935,950
46,235,000 5.75%, 08/15/03(a)............. 44,645,672
17,150,000 6.50%, 05/15/05................ 17,123,195
16,300,000 7.00%, 07/15/06................ 16,768,625
------------
TOTAL US TREASURY NOTE......... 149,050,982
------------
US TREASURY BOND -- 5.66%
18,050,000 7.875%, 11/15/04............... 19,471,438
------------
TOTAL US GOVERNMENT SECURITIES
(Cost $167,881,184)............ 168,522,420
------------
COMMERCIAL PAPER -- 2.90%
10,000,000 Lehman Brothers, 5.73%,
11/21/97 (Cost
$10,000,000)................. 10,000,000
------------
CERTIFICATE OF
DEPOSITS -- 9.59%
20,000,000 Goldman Sachs & Company,
6.375%, 07/01/97(b).......... 20,003,904
13,000,000 JP Morgan, 6.375%,
07/01/97(b).................. 13,002,537
------------
TOTAL CERTIFICATE OF DEPOSITS
(Cost $33,006,441)............. 33,006,441
------------
TIME DEPOSITS -- 3.64%
4,272,499 First National Bank of Boston,
6.35%, 07/01/97(b)........... 4,273,332
8,255,495 Harris Trust & Savings Bank,
6.25%, 07/01/97(b)........... 8,257,106
------------
TOTAL TIME DEPOSITS (Cost
$12,530,438)................... 12,530,438
------------
<CAPTION>
PRINCIPAL VALUE
- ----------- ------------
<C> <S> <C>
US GOVERNMENT SECURITIES (CONTINUED)
SHORT TERM CORPORATE NOTES -- 8.57%
$ 4,513,229 First Union, 5.59%,
05/02/98(b).................. $ 4,514,110
10,000,000 First USA, 5.72%,
08/06/97(b).................. 10,001,952
15,000,000 Republic New York Securities
Corp., 6.40%, 07/15/97(b).... 15,002,928
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $29,518,990)....... 29,518,990
------------
TOTAL SECURITIES (Cost
$391,555,042).................. 417,104,108
------------
REPURCHASE AGREEMENT -- 7.40%
25,481,743 With Investors Bank & Trust
dated 06/30/97, 5.51%,
repurchase proceeds at
maturity $25,485,643,
(Collateralized by various
Government National Mortgage
Association obligations,
6.00%-7.125%, maturity dated
08/20/23 to 06/20/26, with a
value of $26,756,018) (Cost
$25,481,743)................. 25,481,743
------------
Total Investments -- 128.52%
(Cost $417,036,785)............ 442,585,851
Other assets less
liabilities -- (28.52)%........ (98,218,285)
------------
NET ASSETS -- 100.00%.......... $344,367,566
============
The aggregate cost of securities for federal income tax
purposes at June 30, 1997, is $417,036,785.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $ 25,897,798
Gross unrealized depreciation.......... (348,732)
------------
Net unrealized appreciation............ $ 25,549,066
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
(ADR) -- American Depository Receipt.
See notes to financial statements.
45
<PAGE> 48
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- --------------
<C> <S> <C>
COMMON STOCK -- 93.48%
AEROSPACE -- 3.42%
120,000 Northrop Grumman Corp. ...... $ 10,537,500
240,000 Textron, Inc. ............... 15,930,000
160,000 United Technologies.......... 13,280,000
------------
TOTAL AEROSPACE.............. 39,747,500
------------
AUTOMOBILES -- 1.06%
150,000 Ford Motor Company........... 5,662,500
120,000 General Motors Corp. ........ 6,682,500
------------
TOTAL AUTOMOBILES............ 12,345,000
------------
BANKS -- 9.16%
220,000 Bank of New York(a).......... 9,570,000
220,000 BankAmerica Corp. ........... 14,203,750
100,000 Bankers Trust New York
Corp. ..................... 8,700,000
130,000 Chase Manhattan Corp. ....... 12,618,125
135,000 First Union Corp., (N.E.).... 12,487,500
300,000 Great Western Financial...... 16,125,000
310,000 H. F. Ahmanson & Company..... 13,330,000
220,000 NationsBank Corp. ........... 14,190,000
20,000 Wells Fargo & Company........ 5,390,000
------------
TOTAL BANKS.................. 106,614,375
------------
CHEMICALS -- 4.59%
300,000 Du Pont (E.I.) de Nemours.... 18,862,500
120,000 Merck & Company, Inc. ....... 12,420,000
285,000 Monsanto Company............. 12,272,813
250,000 Olin Corp.(a)................ 9,765,625
------------
TOTAL CHEMICALS.............. 53,320,938
------------
COMPUTERS AND OFFICE EQUIPMENT -- 5.84%
250,000 General Signal............... 10,906,250
170,000 Harris Corp., Inc. .......... 14,280,000
120,000 Honeywell, Inc. ............. 9,105,000
200,000 Pitney Bowes, Inc. .......... 13,900,000
250,000 Xerox Corp. ................. 19,718,750
------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT.................... 67,910,000
------------
CONSUMER GOODS AND SERVICES -- 7.97%
190,000 Avon Products, Inc. ......... 13,406,875
260,000 Colgate-Palmolive Company.... 16,965,000
270,000 Dana Corp. .................. 10,260,000
140,000 Eastman Kodak Company........ 10,745,000
160,000 Fortune Brands, Inc. ........ 5,970,000
540,000 General Electric Company..... 35,302,500
------------
TOTAL CONSUMER GOODS AND
SERVICES..................... 92,649,375
------------
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
ELECTRONICS -- 4.54%
310,000 AMP, Inc. ................... $ 12,942,500
135,000 Eaton Corp. ................. 11,787,187
300,000 Emerson Electric............. 16,518,750
220,000 Thomas & Betts Corp. ........ 11,563,750
------------
TOTAL ELECTRONICS............ 52,812,187
------------
FINANCE -- 2.24%
180,000 American Express Company..... 13,410,000
290,000 Federal National Mortgage
Association................ 12,651,250
------------
TOTAL FINANCE................ 26,061,250
------------
INDUSTRIAL -- 1.32%
140,000 Carpenter Technology......... 6,405,000
220,000 Harsco Corp. ................ 8,910,000
------------
TOTAL INDUSTRIAL............. 15,315,000
------------
INSURANCE -- 4.37%
95,000 Aetna, Inc. ................. 9,725,625
90,000 CIGNA Corp. ................. 15,975,000
200,000 Lincoln National Corp. ...... 12,875,000
160,000 St. Paul Company............. 12,200,000
------------
TOTAL INSURANCE.............. 50,775,625
------------
MACHINERY -- 1.93%
210,000 Deere & Company.............. 11,523,750
220,000 Cooper Industries, Inc. ..... 10,945,000
------------
TOTAL MACHINERY.............. 22,468,750
------------
MANUFACTURING -- 1.23%
140,000 Minnesota Mining &
Manufacturing.............. 14,280,000
------------
MEDICAL AND OTHER HEALTH SERVICES -- 0.99%
220,000 Baxter International,
Inc. ...................... 11,495,000
------------
METALS AND MINING -- 3.71%
190,000 Freeport McMoran Copper &
Gold -- Class A............ 5,557,500
140,000 Phelps Dodge Corp. .......... 11,926,250
190,000 Reynolds Metals Company...... 13,537,500
340,000 Timken Company............... 12,091,250
------------
TOTAL METALS AND MINING...... 43,112,500
------------
OIL AND GAS -- 13.39%
120,000 Amoco Corp. ................. 10,432,500
120,000 Atlantic Richfield Company... 8,460,000
150,000 British Petroleum PLC
(ADR)...................... 11,231,250
150,000 Chevron Corp. ............... 11,090,625
140,000 Consolidated Natural Gas..... 7,533,750
320,000 Dresser Industries, Inc. .... 11,920,000
</TABLE>
See notes to financial statements.
46
<PAGE> 49
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
170,000 El Paso Natural Gas
Company.................... $ 9,350,000
240,000 Exxon Corp. ................. 14,760,000
15,000 MCN Energy Group, Inc. ...... 459,375
180,000 Mobil Corp. ................. 12,577,500
180,000 Questar Corp. ............... 7,267,500
280,000 Royal Dutch Petroleum (ADR).. 15,225,000
180,000 Sonat, Inc. ................. 9,225,000
120,000 Texaco, Inc. ................ 13,050,000
300,000 Williams Companies, Inc. .... 13,125,000
------------
TOTAL OIL AND GAS............ 155,707,500
------------
PAPER AND FOREST PRODUCTS -- 3.89%
130,000 Georgia-Pacific Corp. ....... 11,098,750
240,000 International Paper
Company(a)................. 11,655,000
220,000 Union Camp Corp. ............ 11,000,000
220,000 Weyerhaeuser Company(a)...... 11,440,000
------------
TOTAL PAPER AND FOREST
PRODUCTS..................... 45,193,750
------------
PHARMACEUTICALS -- 7.51%
200,000 American Home Products
Corp. ..................... 15,300,000
190,000 Bristol-Myers Squibb
Company.................... 15,390,000
140,000 Eli Lilly & Company.......... 15,303,750
160,000 Schering-Plough Corp.(a)..... 7,660,000
150,000 Smithkline Beecham PLC
(ADR)...................... 13,743,750
160,000 Warner-Lambert Company....... 19,880,000
------------
TOTAL PHARMACEUTICALS........ 87,277,500
------------
PUBLISHING -- 1.21%
240,000 McGraw-Hill Companies,
Inc. ...................... 14,115,000
------------
REAL ESTATE INVESTMENT TRUST -- 3.07%
110,000 Bay Apartment Communities.... 4,070,000
160,000 Crescent Real Estate Equity
Company.................... 5,080,000
16,000 Crescent Operating,
Inc.(c).................... 192,000
100,000 Developers Diversified Realty
Corp. ..................... 4,000,000
80,000 Equity Residential
Properties................. 3,800,000
115,000 FelCor Suite Hotels Inc. .... 4,283,750
200,000 Health Care Property
Investment, Inc. .......... 7,050,000
125,000 Irvine Apartment
Communities................ 3,671,875
120,000 Public Storage, Inc. ........ 3,510,000
------------
TOTAL REAL ESTATE INVESTMENT
TRUST........................ 35,657,625
------------
TELECOMMUNICATIONS -- 7.22%
200,000 Ameritech Corp. ............. 13,587,500
190,000 Bell Atlantic Corp.(a)....... 14,416,250
SHARES VALUE
- ----------- ------------
COMMON STOCK (CONTINUED)
240,000 Bellsouth Corp. ............. $ 11,130,000
220,000 GTE Corp. ................... 9,652,500
80,000 NYNEX Corp. ................. 4,610,000
250,000 SBC Communications, Inc. .... 15,468,750
180,000 Sprint Corp. ................ 9,472,500
150,000 US West, Inc. ............... 5,653,125
------------
TOTAL TELECOMMUNICATIONS..... 83,990,625
------------
TOBACCO -- 1.34%
160,000 Gallaher Group PLC (ADR)(c).. 2,950,000
285,000 Philip Morris Companies,
Inc. ...................... 12,646,875
------------
TOTAL TOBACCO................ 15,596,875
------------
TRANSPORTATION -- 1.89%
120,000 Norfolk Southern Corp. ...... 12,090,000
140,000 Union Pacific Corp. ......... 9,870,000
------------
TOTAL TRANSPORTATION......... 21,960,000
------------
UTILITIES: ELECTRIC -- 1.59%
150,000 American Electric Power,
Inc. ...................... 6,300,000
160,000 Carolina Power & Light(a).... 5,740,000
140,000 FPL Group, Inc. ............. 6,448,750
------------
TOTAL UTILITIES: ELECTRIC.... 18,488,750
------------
TOTAL COMMON STOCK
(Cost 722,330,761)........... 1,086,895,125
------------
PRINCIPAL
- -----------
CONVERTIBLE BONDS -- 0.33%
COMMUNICATIONS EQUIPMENT -- 0.24%
$ 2,000,000 Motorola, Inc., 0.00%,
09/07/09(a)................ 2,762,500
------------
COMPUTERS & OFFICE EQUIPMENT -- 0.09%
1,000,000 Micron Technology, 7.00%,
07/01/04................... 1,000,000
------------
TOTAL CONVERTIBLE BONDS
(Cost $2,774,399)............ 3,762,500
------------
CERTIFICATES OF DEPOSIT -- 1.14%
3,500,000 First National Bank Chicago,
5.66%, 09/03/97............ 3,514,956
9,700,000 Morgan Guaranty, 5.50%,
08/05/97................... 9,712,974
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $13,227,930)........... 13,227,930
------------
COMMERCIAL PAPER -- 5.41%
200,000 Avco Financial Services --
Canada, 5.56%, 07/10/97.... 199,722
7,000,000 Avco Financial Services,
Inc., 5.57%, 07/09/97...... 6,991,336
</TABLE>
See notes to financial statements.
47
<PAGE> 50
EQUITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ----------- ------------
<C> <S> <C>
COMMERCIAL PAPER (CONTINUED)
$ 1,100,000 Chevron Oil Finance Company,
5.40%, 07/18/97............ $ 1,097,195
1,100,000 CIT Group Holdings, Inc.,
5.58%, 07/07/97............ 1,098,977
1,000,000 Commercial Credit Company,
5.62%, 07/09/97............ 998,751
5,000,000 Commercial Credit Company,
5.55%, 08/29/97............ 4,954,521
4,000,000 Exxon Corp., 6.10%,
07/01/97................... 4,000,000
3,300,000 Ford Motor Credit, 5.56%,
07/21/97................... 3,289,807
2,000,000 Goldman Sachs, 5.52%,
08/08/97................... 1,988,347
6,200,000 Heller Financial, Inc.,
5.67%, 07/07/97............ 6,194,141
10,000,000 Lehman Brothers, 5.74%,
11/21/97(b)................ 10,001,526
4,300,000 Merrill Lynch and Company,
Inc., 5.59%, 08/11/97...... 4,272,624
2,300,000 NYNEX Corp., 5.53%,
07/24/97................... 2,291,874
8,300,000 Philip Morris Companies,
Inc., 6.15%, 07/01/97...... 8,300,000
4,900,000 Philip Morris Companies,
Inc., 5.57%, 08/25/97...... 4,858,302
1,000,000 Quebec Province Canada,
5.63%, 07/17/97............ 997,498
150,000 Prudential Funding, 5.51%,
07/21/97................... 149,541
1,000,000 Sears Roebuck Acceptance
Corp., 5.56%, 07/08/97..... 998,919
200,000 Sears Roebuck Acceptance
Corp., 5.57%, 07/28/97..... 199,164
------------
TOTAL COMMERCIAL PAPER
(Cost $62,882,245)........... 62,882,245
------------
TIME DEPOSIT -- 0.09%
1,062,880 First National Bank of
Boston, 6.35%, 07/01/97(b)
(Cost $1,063,042).......... 1,063,042
------------
PRINCIPAL VALUE
- ----------- --------------
SHORT TERM CORPORATE NOTES -- 1.46%
$ 5,000,000 Republic New York Securities
Corp., 6.40%,
07/15/97(b)................ $ 5,000,764
2,000,000 JP Morgan, 6.375%,
07/01/97(b)................ 2,000,305
10,000,000 First USA, 5.72%,
08/06/97(b)................ 10,001,526
------------
TOTAL SHORT TERM CORPORATE
NOTES (Cost $17,002,595)..... 17,002,595
------------
SHORT TERM US GOVERNMENT AGENCY
SECURITIES -- 0.04%
350,000 Federal National Mortgage
Association, 5.37%,
07/28/97................... 348,590
100,000 Federal National Mortgage
Association, 5.41%,
07/30/97................... 99,564
------------
TOTAL SHORT TERM US
GOVERNMENT AGENCY SECURITIES
(Cost $448,154).............. 448,154
------------
Total Investments -- 101.95%
(Cost $819,729,126).......... 1,185,281,591
------------
Other assets less
liabilities -- (1.95)%....... (22,628,396)
------------
NET ASSETS -- 100.00%........ $1,162,653,195
============
The aggregate cost of securities for federal income tax
purposes at June 30, 1997, is $819,729,126.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $366,012,563
Gross unrealized depreciation.......... (460,098)
------------
Net unrealized appreciation............ $365,552,465
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
(ADR) -- American Depository Receipts.
See notes to financial statements.
48
<PAGE> 51
EQUITY VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK -- 90.85%
AEROSPACE -- 2.49%
25,100 Lockheed Martin Corp. ......... $ 2,599,419
16,700 Rockwell International
Corp. ....................... 985,300
------------
TOTAL AEROSPACE................ 3,584,719
------------
APPAREL -- 1.17%
43,400 Gap Stores..................... 1,687,175
------------
AUTOMOBILES -- 3.82%
81,100 Chrysler Corp. ................ 2,661,094
75,000 Ford Motor Company............. 2,831,250
------------
TOTAL AUTOMOBILES.............. 5,492,344
------------
BANKS -- 2.14%
12,100 Bankers Trust New York
Corp. ....................... 1,052,700
10,800 Chase Manhattan Corp. ......... 1,048,275
16,200 First Chicago National Bank
Corp. ....................... 980,100
------------
TOTAL BANKS.................... 3,081,075
------------
CHEMICALS -- 3.63%
35,900 Du Pont (E.I.) de Nemours...... 2,257,213
2,200 Grace W.R. .................... 121,275
14,100 Hercules, Inc. ................ 675,038
37,300 PPG Industries, Inc. .......... 2,168,062
------------
TOTAL CHEMICALS................ 5,221,588
------------
COMPUTERS AND OFFICE EQUIPMENT -- 6.68%
20,600 Digital Equipment Corp. (c).... 730,012
47,000 International Business
Machines..................... 4,238,813
18,400 Hewlett-Packard Company........ 1,030,400
29,400 Seagate Technology,
Inc.(c)(a)................... 1,034,513
32,500 Xerox Corp. ................... 2,563,438
------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT...................... 9,597,176
------------
CONSTRUCTION -- 1.76%
14,300 Fluor Corp. ................... 789,181
41,500 Masco Corp. (a)................ 1,732,625
------------
TOTAL CONSTRUCTION............. 2,521,806
------------
CONSUMER GOODS AND SERVICES -- 2.59%
29,800 Eastman Kodak Company.......... 2,287,150
28,900 Kimberly-Clark Corp. .......... 1,437,775
------------
TOTAL CONSUMER GOODS AND
SERVICES....................... 3,724,925
------------
DEFENSE -- 1.13%
31,900 Raytheon Company............... 1,626,900
------------
ELECTRONICS -- 1.56%
53,600 AMP, Inc. ..................... 2,237,800
------------
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
ENVIRONMENTAL MANAGEMENT -- 1.00%
44,700 Waste Management, Inc. ........ $ 1,435,988
------------
FINANCE -- 4.48%
34,300 American General Corp. ........ 1,637,825
20,500 Loews Corp. ................... 2,052,562
30,500 Morgan Stanley Dean Witter..... 1,313,406
5,300 Wells Fargo & Company.......... 1,428,350
------------
TOTAL FINANCE.................. 6,432,143
------------
FOOD AND BEVERAGE -- 4.17%
57,200 Anheuser Busch Companies,
Inc. ........................ 2,398,825
129,380 Archer Daniels Midland......... 3,040,430
6,000 CPC International, Inc. ....... 553,875
------------
TOTAL FOOD AND BEVERAGE........ 5,993,130
------------
INSURANCE -- 8.42%
22,900 Aetna, Inc. ................... 2,344,387
37,200 Allstate Corp. ................ 2,715,600
36,600 Chubb Corp. ................... 2,447,625
18,000 General Re Corp. .............. 3,276,000
13,900 United Healthcare Corp. ....... 722,800
14,200 UNUM Corp. .................... 596,400
------------
TOTAL INSURANCE................ 12,102,812
------------
MEDIA -- 1.11%
53,100 Viacom, Inc. Class B(c)........ 1,593,000
------------
MEDICAL AND OTHER HEALTH SERVICES -- 3.45%
95,900 Columbia/HCA Healthcare
Corp. ....................... 3,770,069
51,400 Humana, Inc. (c)............... 1,188,625
------------
TOTAL MEDICAL AND OTHER HEATH
SERVICES....................... 4,958,694
------------
METALS AND MINING -- 3.12%
26,400 Aluminum Company of America.... 1,989,900
63,800 Newmont Mining................. 2,488,200
------------
TOTAL METALS AND MINING........ 4,478,100
------------
OIL AND GAS -- 12.12%
31,600 Amerada Hess Corp.(a).......... 1,755,775
16,300 Atlantic Richfield Company..... 1,149,150
39,200 Baker Hughes, Inc. ............ 1,516,550
24,000 Burlington Resources, Inc. .... 1,059,000
55,500 Dresser Industries, Inc. ...... 2,067,375
59,900 Enron Corp. ................... 2,444,669
105,700 Occidental Petroleum........... 2,649,106
11,000 Tenneco, Inc. ................. 497,062
</TABLE>
See notes to financial statements.
49
<PAGE> 52
EQUITY VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
5,600 Texaco, Inc. .................. $ 609,000
55,100 Union Pacific Resources
Group........................ 1,370,612
59,100 Unocal Corp. .................. 2,293,819
------------
TOTAL OIL AND GAS.............. 17,412,118
------------
PAPER AND FOREST PRODUCTS --
2.55%
28,100 Champion International......... 1,552,525
9,100 Georgia-Pacific Corp. ......... 776,913
36,000 James River Corporation of
Virginia (a)................. 1,332,000
------------
TOTAL PAPER AND FOREST
PRODUCTS....................... 3,661,438
------------
PHARMACEUTICALS -- 1.54%
17,300 American Home Products
Corp. ....................... 1,323,450
10,900 Bristol-Myers Squibb Company... 882,900
------------
TOTAL PHARMACEUTICALS.......... 2,206,350
------------
PUBLISHING -- 0.34%
4,900 Gannett Company, Inc. ......... 483,875
------------
RETAIL -- 6.98%
49,900 Albertson's, Inc. ............. 1,821,350
63,800 Dillards Inc. Class A.......... 2,209,075
52,600 Federated Department Stores
(c).......................... 1,827,850
36,500 May Department Stores.......... 1,724,625
45,600 Sears Roebuck.................. 2,451,000
------------
TOTAL RETAIL................... 10,033,900
------------
TELECOMMUNICATIONS -- 7.87%
49,000 American Telephone & Telegraph
Corp. ....................... 1,718,062
61,200 GTE Corp. ..................... 2,685,150
46,100 NYNEX Corp. ................... 2,656,512
23,800 SBC Communications, Inc. ...... 1,472,625
137,100 Tele-Communications, Inc.
Series A(c)(a)............... 2,039,362
36,500 US West Media Group(c)(a)...... 739,125
------------
TOTAL TELECOMMUNICATIONS....... 11,310,836
------------
TIRE AND RUBBER -- 0.35%
8,000 Goodyear Tire & Rubber Co. .... 506,500
------------
TRANSPORTATION -- 4.90%
21,700 Allied Signal, Inc. ........... 1,822,800
26,000 Burlington Northern Santa Fe... 2,336,750
51,800 CSX Corp. ..................... 2,874,900
------------
TOTAL TRANSPORTATION........... 7,034,450
------------
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
UTILITIES: ELECTRIC -- 1.48%
61,800 Texas Utilities Company........ 2,128,238
------------
TOTAL COMMON STOCK
(Cost $119,314,735)............ 130,547,080
REGULATED INVESTMENT COMPANIES -- 2.63%
182,449 Janus Money Market Fund(b)..... $ 182,449
3,603,365 Merrimac Cash Fund -- Premuim
Class(b)..................... 3,603,365
------------
TOTAL REGULATED INVESTMENT
COMPANIES ($3,785,814)......... 3,785,814
------------
PRINCIPAL
- -----------
TIME DEPOSITS -- 1.37%
$ 1,578,583 First National Bank of Boston,
6.35%, 07/01/97(b)........... 1,579,290
382,763 Harris Trust & Savings Bank,
6.25%, 07/01/97(b)........... 382,934
------------
TOTAL TIME DEPOSITS
(Cost $1,962,224).............. 1,962,224
------------
TOTAL SECURITIES
(Cost $125,062,773)............ 136,295,118
------------
REPURCHASE AGREEMENT -- 9.30%
13,356,092 With Investors Bank & Trust
dated 06/30/97, 5.51%,
repurchase proceeds at
maturity $13,358,137,
07/01/97 (Collateralized by
various Government National
Mortgage Association
obligations, 6.875% -- 7.00%,
due 12/20/22 to 01/20/26,
with a total value of
$14,024,189) (Cost
$13,356,092)................. 13,356,092
------------
Total Investments -- 104.15%
(Cost $138,418,865)............ 149,651,210
Other assets less
liabilities -- (4.15)%......... (5,966,579)
------------
NET ASSETS -- 100.00%.......... $143,684,631
============
The aggregate cost of securities for federal income tax
purposes at June 30, 1997, is $138,418,865.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $ 11,999,765
Gross unrealized depreciation.......... (767,420)
------------
Net unrealized appreciation............ $ 11,232,345
============
</TABLE>
- ---------------
(a) All or part of this security is on loan
(b) Collateral for securities on loan
(c) Non-income producing security
See notes to financial statements.
50
<PAGE> 53
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK -- 96.21%
AEROSPACE -- 3.76%
47,800 Boeing Company................. $ 2,536,387
66,400 Textron, Inc................... 4,407,300
39,100 United Technologies............ 3,245,300
------------
TOTAL AEROSPACE................ 10,188,987
------------
APPAREL -- 2.67%
99,385 CVS Corp....................... 5,093,481
45,900 Liz Claiborne.................. 2,140,088
------------
TOTAL APPAREL.................. 7,233,569
------------
BANKS -- 9.04%
4,900 BankBoston Corp................ 353,106
56,400 Banc One Corp.(a).............. 2,731,875
94,000 BankAmerica Corp............... 6,068,875
73,100 Barnett Banks, Inc.(a)......... 3,837,750
43,700 Citicorp....................... 5,268,581
30,300 Comerica....................... 2,060,400
114,525 MBNA Corp...................... 4,194,478
------------
TOTAL BANKS.................... 24,515,065
------------
CHEMICALS -- 5.30%
54,400 Du Pont (E.I.) de Nemours...... 3,420,400
55,600 Merck & Company, Inc........... 5,754,600
68,400 Praxair, Inc................... 3,830,400
44,600 Sherwin Williams Company....... 1,377,025
------------
TOTAL CHEMICALS................ 14,382,425
------------
COMPUTER AND OFFICE EQUIPMENT -- 4.19%
26,400 Compaq Computer(c)............. 2,620,200
11,200 Dell Computer Corp.(c)......... 1,315,300
63,300 EMC Corp.(c)................... 2,468,700
65,400 Honeywell, Inc................. 4,962,225
------------
TOTAL COMPUTER AND OFFICE
EQUIPMENT...................... 11,366,425
------------
COMPUTER SOFTWARE AND SERVICES -- 8.80%
61,300 BMC Software, Inc.(a)(c)....... 3,394,487
71,250 Computer Associates
International, Inc........... 3,967,734
42,200 HBO & Company.................. 2,906,525
61,800 Microsoft Corp.(c)............. 7,809,975
50,500 Parametric Technology
Corp.(c)..................... 2,149,406
69,100 Peoplesoft(a)(c)............... 3,645,025
------------
TOTAL COMPUTER SOFTWARE AND
SERVICES....................... 23,873,152
------------
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
CONSUMER GOODS AND SERVICES -- 8.62%
31,100 Avon Products, Inc............. $ 2,194,494
15,900 Clorox Company................. 2,098,800
128,700 General Electric Company....... 8,413,763
35,300 Gillette Company............... 3,344,675
43,700 Proctor & Gamble Company....... 6,172,625
35,400 Service Corporation
International................ 1,163,775
------------
TOTAL CONSUMER GOODS AND
SERVICES....................... 23,388,132
------------
ELECTRONICS -- 0.76%
89,600 Westinghouse Electric(c)....... 2,072,000
------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 0.35%
38,200 Republic Industries, Inc.(c)... 950,225
------------
FINANCE -- 3.02%
79,900 American Express Company....... 5,952,550
30,900 Franklin Resources, Inc........ 2,242,181
------------
TOTAL FINANCE.................. 8,194,731
------------
FOOD AND BEVERAGE -- 4.75%
41,700 Campbell Soup Company.......... 2,085,000
47,300 Coca-Cola Company.............. 3,192,750
43,700 Conagra, Inc................... 2,802,263
54,300 Safeway, Inc.(c)............... 2,504,588
55,000 Sara Lee Corp.................. 2,289,375
------------
TOTAL FOOD AND BEVERAGE........ 12,873,976
------------
INSURANCE -- 7.54%
29,100 American International Group... 4,346,812
81,400 Conseco, Inc.(a)............... 3,011,800
29,400 MGIC Investment Corp........... 1,409,363
88,131 Travelers, Inc................. 5,557,761
102,500 Washington Mutual,
Inc.(a)(c)................... 6,124,375
------------
TOTAL INSURANCE................ 20,450,111
------------
LEISURE AND RECREATION -- 2.95%
22,100 Carnival Corp.................. 911,625
52,900 Marriott International, Inc.... 3,246,738
47,900 The Walt Disney Company........ 3,843,975
------------
TOTAL LEISURE AND RECREATION... 8,002,338
------------
MACHINERY -- 0.44%
30,600 Baker Hughes, Inc.............. 1,183,837
------------
</TABLE>
See notes to financial statements.
51
<PAGE> 54
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
MANUFACTURING -- 1.27%
31,600 American Standard
Companies(c)................. $ 1,414,100
28,700 Applied Materials, Inc.(c)..... 2,032,319
------------
TOTAL MANUFACTURING............ 3,446,419
------------
MEDIA -- 2.22%
61,100 Gannett Company, Inc........... 6,033,625
------------
MEDICAL AND OTHER HEALTH SERVICES -- 5.57%
55,050 Cardinal Health, Inc........... 3,151,612
121,700 Healthsouth Corp.(a)(c)........ 3,034,894
28,500 Oxford Health Plans, Inc.(c)... 2,044,875
60,400 Tyco Lab(a).................... 4,201,575
71,900 U.S. Surgical Corp............. 2,678,275
------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES....................... 15,111,231
------------
OIL AND GAS -- 5.62%
44,100 Exxon Corp..................... 2,712,150
51,600 Halliburton Company............ 4,089,300
36,000 Mobil Corp..................... 2,515,500
33,000 Schlumberger Ltd............... 4,125,000
35,300 Sonat, Inc..................... 1,809,125
------------
TOTAL OIL AND GAS.............. 15,251,075
------------
PHARMACEUTICALS -- 8.04%
76,600 Abbott Laboratories............ 5,113,050
70,300 Bristol-Myers Squibb Company... 5,694,300
30,400 Eli Lilly & Company............ 3,323,100
37,900 Pfizer, Inc.................... 4,529,050
25,300 Warner Lambert Company......... 3,143,525
------------
TOTAL PHARMACEUTICALS.......... 21,803,025
------------
RETAIL -- 4.97%
60,375 Consolidated Stores Corp.(c)... 2,098,031
90,700 Costco Companies, Inc.(c)...... 2,981,763
62,200 Dayton-Hudson Corp............. 3,308,263
90,200 TJX Companies, Inc............. 2,379,025
50,600 Walgreen Company............... 2,713,425
------------
TOTAL RETAIL................... 13,480,507
------------
SHARES VALUE
- ----------- ------------
COMMON STOCK (CONTINUED)
SEMICONDUCTERS -- 0.96%
18,400 Intel Corp..................... $ 2,609,350
------------
TELECOMMUNICATIONS -- 5.37%
31,700 Ascend Communications,
Inc.(a)(c)................... 1,248,187
19,400 Lucent Technologies............ 1,398,013
62,800 Motorola, Inc.................. 4,772,800
94,700 Sprint Corp.................... 4,983,588
38,600 Tellabs, Inc.(c)............... 2,156,775
------------
TOTAL TELECOMMUNICATIONS....... 14,559,363
------------
TOTAL COMMON STOCK
(Cost $211,129,777)............ 260,969,568
------------
REGULATED INVESTMENT COMPANIES -- 4.33%
8,500,000 Janus Institutional Money
Market Fund(b)............... 8,500,000
3,240,000 Merrimac Cash Fund -- Premium
Class(b)..................... 3,240,000
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost $11,740,000)... 301,828,294
------------
PRINCIPAL
- -----------
COMMERCIAL PAPER -- 3.69%
$10,000,000 Republic New York Securities
Corp., 6.40%, 07/15/97
(Cost $10,003,051)(b)........ 10,003,051
TIME DEPOSIT -- 0.60%
77,652 First National Bank of Boston,
6.35%, 07/01/97(b)........... 77,676
1,556,748 Harris Trust & Savings Bank,
6.25%, 01/07/97(b)........... 1,557,223
------------
TOTAL TIME DEPOSITS
(Cost $1,634,899).............. 1,634,899
------------
TOTAL SECURITIES
(Cost $234,507,727)............ 574,435,812
------------
</TABLE>
See notes to financial statements.
52
<PAGE> 55
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ----------- ------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 4.31%
$11,690,138 With Investors Bank & Trust,
dated 6/30/97, 5.51%,
repurchase proceeds at
maturity $11,691,927,
07/01/97 (Collateralized by
Government National Mortgage
Association, 6.875%, due
10/20/22 with a value of
$9,456,914 and Government
National Mortgage
Association, 7.00%, due
05/20/25 with a value of
$2,817,963) (Cost
$11,690,138)................. $ 11,690,138
------------
Total Investments -- 109.14%
(Cost $246,197,865)............ 586,125,950
Other assets less
liabilities -- (9.14)%......... (24,787,577)
------------
NET ASSETS -- 100.00%.......... $561,338,373
===========
The aggregate cost of investments for federal income tax
purposes at June 30, 1997, is $246,197,865.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $ 50,911,314
Gross unrealized depreciation.......... (1,071,523)
------------
Net unrealized appreciation............ $ 49,839,791
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
See notes to financial statements.
53
<PAGE> 56
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK -- 97.13%
AEROSPACE -- 3.76%
87,900 Sundstrand Corp. .............. $ 4,746,600
121,400 United Technologies............ 10,076,200
------------
TOTAL AEROSPACE................ 14,822,800
------------
BANKS -- 5.88%
111,600 BankAmerica Corp. ............. 7,205,175
70,700 Citicorp ...................... 8,523,769
115,600 Nationsbank Corp. ............. 7,456,200
------------
TOTAL BANKS.................... 23,185,144
------------
CHEMICALS -- 4.42%
192,900 Monsanto Company............... 8,306,756
163,100 Praxair, Inc. ................. 9,133,600
------------
TOTAL CHEMICALS................ 17,440,356
------------
COMPUTER SOFTWARE AND SERVICES -- 2.38%
136,400 HBO & Company(a)............... 9,394,550
------------
COMPUTERS AND OFFICE EQUIPMENT -- 14.21%
88,800 Compaq Computer(a)(c).......... 8,813,400
299,125 CUC International,
Inc.(a)(c)................... 7,721,164
61,700 Honeywell, Inc. ............... 4,681,487
104,900 Microsoft Corp.(c)............. 13,256,738
206,300 PeopleSoft, Inc.(a)(c)......... 10,882,325
160,600 Textron, Inc. ................. 10,659,825
------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT...................... 56,014,939
------------
CONSUMER GOODS AND SERVICES -- 11.72%
128,100 Avon Products, Inc. ........... 9,039,056
116,100 Colgate-Palmolive Company...... 7,575,525
172,300 General Electric Company....... 11,264,112
108,900 Gillette Company............... 10,318,275
243,100 Service Corporate
International................ 7,991,913
------------
TOTAL CONSUMER GOODS AND
SERVICES....................... 46,188,881
------------
ENVIRONMENTAL MANAGEMENT -- 0.60%
73,145 Waste Management, Inc. ........ 2,349,783
------------
FINANCE -- 2.26%
70,100 Student Loan Marketing
Association.................. 8,902,700
------------
INSURANCE -- 5.08%
179,000 Conseco, Inc. ................. 6,623,000
212,729 Travelers, Inc. ............... 13,415,222
------------
TOTAL INSURANCE................ 20,038,222
------------
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
LEISURE AND RECREATION -- 5.53%
161,100 HFS, Inc.(a)(c)................ $ 9,343,800
283,900 Hilton Hotels.................. 7,541,094
194,100 Mirage Resorts, Inc.(c)........ 4,901,025
------------
TOTAL LEISURE AND RECREATION... 21,785,919
------------
MACHINERY -- 2.24%
124,800 Applied Materials, Inc.(c)..... 8,837,400
------------
MEDIA -- 1.87%
152,800 Time Warner, Inc. ............. 7,372,600
------------
MEDICAL AND OTHER HEALTH SERVICES -- 7.75%
123,900 Boston Scientific Corp.(c)..... 7,612,106
121,300 Guidant Corp. ................. 10,310,500
76,500 KLA-Tencor Corp.(c)............ 3,729,375
109,800 Medtronic, Inc. ............... 8,893,800
------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES....................... 30,545,781
------------
PHARMACEUTICALS -- 12.22%
13,900 American Home Products
Corp. ....................... 1,063,350
96,900 Eli Lilly & Company............ 10,592,381
150,500 Merck & Company, Inc. ......... 15,576,750
67,500 Pfizer, Inc. .................. 8,066,250
268,200 Schering-Plough Corp. ......... 12,840,075
------------
TOTAL PHARMACEUTICALS.......... 48,138,806
------------
RETAIL -- 6.44%
222,000 Dayton-Hudson Corp. ........... 11,807,625
135,200 Home Depot, Inc. .............. 9,320,350
80,700 Kohls Corp.(c)................. 4,272,056
------------
TOTAL RETAIL................... 25,400,031
------------
SEMICONDUCTORS -- 7.14%
82,000 Intel Corp. ................... 11,628,625
333,600 National Semiconductor
Corp.(c)..................... 10,216,500
75,000 Texas Instruments.............. 6,304,688
------------
TOTAL SEMICONDUCTORS........... 28,149,813
------------
TELECOMMUNICATIONS -- 1.43%
143,000 Ascend Communications,
Inc.(a)(c)................... 5,630,625
------------
</TABLE>
See notes to financial statements.
54
<PAGE> 57
EQUITY GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
TOBACCO -- 2.20%
195,300 Philip Morris Companies,
Inc. ........................ $ 8,666,437
------------
TOTAL COMMON STOCK
(Cost $319,319,747)............ 382,864,787
------------
PRINCIPAL
- -----------
REGULATED INVESTMENT COMPANIES -- 6.38%
$ 5,753,793 Janus Institutional Money
Market Fund.................. 5,753,793
19,400,000 Merrimac Cash Fund -- Premium
Class........................ 19,400,000
------------
TOTAL REGULATED INVESTMENT
COMPANIES
(Cost $25,153,793)............. 25,153,793
------------
SHORT TERM CORPORATE NOTE -- 1.53%
6,000,000 JP Morgan Floating Rate,
6.375%, 07/01/97(b)
(Cost $6,002,114)............ 6,002,114
------------
TIME DEPOSITS -- 3.31%
10,099,195 First National Bank of Boston,
6.35%, 07/01/97(b)........... 10,102,751
2,943,512 Harris Trust & Savings Bank,
6.25%, 07/01/97(b)........... 2,944,549
------------
TOTAL TIME DEPOSITS
(Cost $13,047,300)............. 13,047,300
------------
TOTAL SECURITIES
(Cost $363,522,954)............ 427,067,994
------------
<CAPTION>
PRINCIPAL VALUE
- ----------- ------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 3.17%
$12,503,702 With Investors Bank & Trust,
dated 06/30/97, 5.32%,
repurchase proceeds at
maturity $12,505,550,
07/01/97 (Collaterized by US
Treasury Bills, due 12/11/97
with a value of $12,755,976)
(Cost $12,503,702)........... $ 12,503,702
------------
Total Investments -- 111.52%
(Cost $376,026,656)............ 439,571,696
Other assets less
liabilities -- (11.52)%........ (45,398,012)
------------
NET ASSETS -- 100.00%.......... $394,173,684
============
The aggregate cost of securities for federal income tax
purposes at June 30, 1997, is $376,026,656.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $ 69,186,646
Gross unrealized depreciation.......... (5,641,606)
------------
Net unrealized appreciation............ $ 63,545,040
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
See notes to financial statements.
55
<PAGE> 58
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK -- 92.67%
ADVERTISING -- 0.19%
41,500 Snyder Communications,
Inc.(c)...................... $ 1,117,906
------------
AEROSPACE -- 0.78%
146,600 AAR Corp....................... 4,737,012
------------
APPAREL -- 0.12%
43,300 Catherines Stores Corp.(c)..... 162,375
9,100 Gucci Group(a)................. 585,813
------------
TOTAL APPAREL.................. 748,188
------------
AUTOMOBILE PRODUCTS -- 0.12%
44,125 Donnelly Corp.................. 739,094
------------
BANKS -- 6.83%
144,000 American Federal Bank.......... 4,644,000
106,470 Charter One Financials,
Inc.(a)...................... 5,736,071
14,200 Citicorp....................... 1,711,987
49,276 First Republic BanCorp,
Inc.(c)...................... 1,145,667
125,600 First Savings Bank of
Washington................... 2,794,600
71,535 First Union Corp............... 6,616,987
158,330 HUBCO, Inc..................... 4,591,570
116,400 Norwalk Savings Society........ 3,521,100
165,000 Peoples Bank................... 4,269,375
160,000 Roosevelt Financial Group,
Inc.......................... 3,520,000
145,400 Sterling Financial Corp.(c).... 2,708,075
------------
TOTAL BANKS.................... 41,259,432
------------
BUSINESS SERVICES -- 2.78%
97,600 ABM Industries, Inc............ 1,884,900
64,800 Accustaff, Inc.(a)(c).......... 1,534,950
64,600 Alternative Resources
Corp.(c)..................... 1,316,225
46,100 American Business
Information(c)............... 1,002,675
38,000 F.Y.I., Inc.(c)................ 912,000
50,900 Iron Mountain, Inc.(c)......... 1,527,000
37,900 Labor Ready, Inc.(c)........... 383,738
51,600 Manpower, Inc.................. 2,296,200
17,000 MARC, Inc...................... 331,500
65,900 Precision Response
Corp.(a)(c).................. 1,087,350
174,700 Protection One, Inc.(a)(c)..... 2,358,450
83,500 Teletech Holdings,
Inc.(a)(c)................... 2,176,219
------------
TOTAL BUSINESS SERVICES........ 16,811,207
------------
CHEMICALS -- 0.31%
50,300 Chemed Corp.................... 1,883,106
------------
COMMERCIAL SERVICES -- 0.34%
70,000 Greenwich Air Services -- Class
B............................ 2,034,375
------------
COMMUNICATIONS -- 1.47%
74,400 Davox Corp.(a)................. 2,659,800
55,000 Gray Communications System..... 1,234,063
149,100 Jones Intercable, Inc. -- Class
A(c)......................... 1,901,025
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
91,900 PMT Services(c)................ $ 1,401,475
144,000 ProNet, Inc.(c)................ 576,000
58,875 Saga Communications, Inc.(c)... 1,089,188
------------
TOTAL COMMUNICATIONS........... 8,861,551
------------
COMPUTERS AND OFFICE EQUIPMENT -- 5.08%
41,700 Affiliated Computer Services --
Class A(c)................... 1,167,600
30,400 Bay Networks(c)................ 807,500
71,400 CIBER, Inc.(c)................. 2,440,987
113,500 Cisco Systems, Inc.(c)......... 7,618,687
65,100 Comverse Technology,
Inc.(a)(c)................... 3,385,200
135,488 Concord EFS, Inc.(c)........... 3,505,739
76,200 Encad, Inc.(a)(c).............. 3,162,300
89,100 National Data Corp............. 3,859,144
75,200 Neomagic Corp.(a)(c)........... 1,682,600
100,400 US Office Products
Company(c)................... 3,068,475
------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT...................... 30,698,232
------------
COMPUTERS AND SOFTWARE SERVICES -- 10.75%
48,600 3 Com Corp.(c)................. 2,187,000
67,900 America Online, Inc.(a)(c)..... 3,776,937
103,640 Aspen Technologies, Inc.(c).... 3,899,455
161,300 Cambridge Technology
Partners(c).................. 5,161,600
40,100 Computer Horizons Corp......... 1,373,425
36,100 Data Transmission Network(c)... 1,146,175
65,800 Documentum, Inc.(a)(c)......... 1,636,775
87,100 HBO & Company(a)............... 5,999,013
45,300 HNC Software, Inc.(a)(c)....... 1,727,063
59,900 IDX Systems Corp.(a)(c)........ 2,066,550
74,200 JDA Software Group, Inc.(c).... 2,532,075
41,300 National Computer System,
Inc.......................... 1,099,613
86,000 Network Appliance,
Inc.(a)(c)................... 3,268,000
21,300 Oracle Corp.(c)................ 1,072,988
54,300 Pegasystems, Inc.(a) (c)....... 1,703,662
48,600 PeopleSoft, Inc.(a)(c)......... 2,563,650
59,600 Remedy Corp.(a)(c)............. 2,384,000
52,500 Renaissance Solutions,
Inc.(c)...................... 1,942,500
90,500 Scopus Technology, Inc.(c)..... 2,024,938
166,100 Sterling Commerce, Inc.(c)..... 5,460,538
62,000 Technology Solutions
Company(c)................... 2,449,000
33,500 Veritas Software Corp.(a)(c)... 1,683,375
29,500 VIASOFT, Inc.(a)(c)............ 1,497,125
57,500 Whittman-Hart, Inc.(c)......... 1,617,188
</TABLE>
See notes to financial statements.
56
<PAGE> 59
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
122,750 Wind River Systems(c).......... $ 4,695,188
------------
TOTAL COMPUTER SOFTWARE AND
SERVICES....................... 64,967,833
------------
CONSTRUCTION -- 0.17%
107,400 Michael Baker Corp.(c)......... 745,087
15,200 Rexel, Inc.(c)................. 281,200
------------
TOTAL CONSTRUCTION............. 1,026,287
------------
CONSUMER GOODS AND SERVICES -- 0.57%
62,300 Carriage Services, Inc.(c)..... 1,355,025
27,600 Glacier Water Services,
Inc.(c)...................... 703,800
42,000 LSI LTG Systems, Inc........... 567,000
59,700 National Sanitary Supply....... 820,875
------------
TOTAL CONSUMER GOODS AND
SERVICES....................... 3,446,700
------------
EDUCATION -- 1.10%
174,825 ITT Educational Services,
Inc.(c)...................... 4,337,845
32,700 Landauer, Inc.................. 758,231
34,250 Learning Tree
International(c)............. 1,519,844
------------
TOTAL EDUCATION................ 6,615,920
------------
ELECTRONICS -- 6.19%
25,300 Altera Corp.(c)................ 1,277,650
222,700 Charter Power Systems.......... 8,351,250
83,300 Helen of Troy Ltd.(c).......... 2,134,562
25,900 Hughes Supply, Inc............. 1,036,000
141,400 ILC Technology, Inc.(c)........ 1,520,050
97,500 Inter-Tel, Inc.(c)............. 2,071,875
56,550 Remec, Inc.(c)................. 1,328,925
39,230 Richardson Electronics......... 326,099
105,000 Rogers Corp.(c)................ 3,701,250
51,500 Sanmina Corp.(a)(c)............ 3,270,250
78,600 Sawtek, Inc.(c)................ 2,652,750
309,300 Sensormatic Electronics
Corp.(a)..................... 3,982,237
31,800 Sipex Corp..................... 1,152,750
70,130 Sterling Electronics(c)........ 894,158
13,300 Uniphase Corp.(c).............. 774,725
89,600 Vitesse Semiconductor
Corp.(c)..................... 2,928,800
------------
TOTAL ELECTRONICS.............. 37,403,331
------------
ENGINEERING -- 0.24%
111,500 URS Corp.(c)................... 1,463,438
------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 2.11%
94,900 Allied Waste Industries,
Inc.(c)...................... 1,648,887
74,700 American Disposal
Services(a)(c)............... 1,680,750
37,730 BHA Group, Inc................. 698,005
75,500 Superior Services, Inc.(c)..... 1,793,125
145,576 TETRA Tech, Inc.(c)............ 3,512,021
SHARES VALUE
- ----------- ------------
COMMON STOCK (CONTINUED)
83,700 United Waste Systems,
Inc.(c)...................... $ 3,431,700
------------
TOTAL ENVIRONMENTAL MANAGEMENT
SERVICES..................... 12,764,488
------------
EQUIPMENT RENTAL AND LEASING -- 1.52%
88,000 Aaron Rents, Inc. -- Class B... 1,177,000
90,000 Alrenco, Inc.(c)............... 1,192,500
70,000 Amplicon, Inc.................. 1,680,000
67,500 Electro Rent Corp.(c).......... 1,670,625
79,000 XTRA Corp...................... 3,471,063
------------
TOTAL EQUIPMENT RENTAL AND
LEASING........................ 9,191,188
------------
FINANCE -- 3.96%
209,800 Allied Capital Advisers,
Inc.(c)...................... 983,437
101,600 Allied Capital Commercial
Corp......................... 2,438,400
71,000 Allied Capital Corp............ 1,136,000
102,292 Allied Capital Lending
Company...................... 1,508,807
72,700 CACI International, Inc.(c).... 1,108,675
134,400 Cash American Investments,
Inc.......................... 1,411,200
86,100 ContiFinancial Corp.(a)(c)..... 3,142,650
40,700 Dollar Tree Stores, Inc.(c).... 2,050,262
14,200 Franklin Resources, Inc........ 1,030,387
29,700 Sirrom Capital Corp............ 1,024,650
157,000 The Money Store, Inc.(a)....... 4,503,938
60,000 Washington Mutual, Inc.(a)..... 3,585,000
------------
TOTAL FINANCE.................. 23,923,406
------------
FOOD AND BEVERAGE -- 2.04%
74,700 Benihana, Inc.(c).............. 672,300
80,250 CKE Restaurants, Inc........... 2,537,906
103,800 Landry's Seafood
Restaurants(c)............... 2,387,400
238,300 Ruby Tuesday, Inc.(c).......... 5,346,856
14,300 ShowBiz Pizza Time(c).......... 377,163
92,200 Sylvan, Inc.(c)................ 979,625
------------
TOTAL FOOD AND BEVERAGE........ 12,301,250
------------
FORESTRY PRODUCTS -- 0.25%
27,400 Fibreboard Corp.(c)............ 1,498,437
------------
INSURANCE -- 1.93%
119,900 HCC Insurance Holdings, Inc.... 3,199,831
38,600 National Western Life
Insurance -- Class A(c)...... 3,445,050
36,900 Penn Treaty American Corp...... 1,130,062
24,000 Penn-America Group, Inc........ 351,000
44,800 Western National Corp.......... 1,201,200
208,800 Willis Corroon Group (ADR)(a).. 2,335,950
------------
TOTAL INSURANCE................ 11,663,093
------------
</TABLE>
See notes to financial statements.
57
<PAGE> 60
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
LEISURE AND RECREATION -- 1.91%
50,800 CapStar Hotel Company(c)....... $ 1,625,600
64,800 Dover Downs Entertainment...... 1,166,400
88,300 Harveys Casinos Resorts........ 1,550,769
67,900 HFS, Inc.(a)(c)................ 3,938,200
24,000 Platinum Entertainment(c)...... 162,000
44,500 Signature Resorts,
Inc.(a)(c)................... 1,538,031
60,200 West Marine, Inc.(a)(c)........ 1,550,150
------------
TOTAL LEISURE AND RECREATION... 11,531,150
------------
MACHINERY -- 0.19%
76,000 K-Tron International,
Inc.(c)...................... 1,140,000
------------
MANUFACTURING -- 4.63%
200,600 Alpha Industries, Inc.(c)...... 1,667,487
13,200 Applied Materials, Inc.(c)..... 934,725
153,900 Blyth Industries, Inc.(a)(c)... 5,194,125
97,450 Cable Design Technologies(c)... 2,868,684
57,600 Chase Industries, Inc.(c)...... 1,404,000
60,800 DT Industries, Inc............. 2,173,600
38,000 Edelbrock Corp.(c)............. 817,000
39,200 Fusion Systems Corp.(c)........ 1,550,850
139,800 Lydall, Inc.(c)................ 2,953,275
118,100 Mail-Well, Inc.(c)............. 3,365,850
42,500 Photronics, Inc.(c)............ 2,029,375
26,700 Scotsman Industries, Inc....... 760,950
24,800 Speedfam International,
Inc.(c)...................... 889,700
55,150 Watsco, Inc.................... 1,378,750
------------
TOTAL MANUFACTURING............ 27,988,371
------------
MEDIA -- 2.38%
63,000 Consolidated Graphics,
Inc.(c)...................... 2,630,250
138,400 Granite Broadcasting
Corp.(a)(c).................. 1,418,600
85,500 Houghton Mifflin Company....... 5,707,125
340,700 Steck Vaughn Publishing
Corp.(c)..................... 4,599,450
------------
TOTAL MEDIA.................... 14,355,425
------------
MEDICAL AND OTHER HEALTH SERVICES -- 6.86%
62,500 Acuson Corp.(c)................ 1,437,500
133,200 Advocat, Inc.(c)............... 1,515,150
173,300 Daniel Industries.............. 2,675,319
82,200 Gulf South Medical Supply,
Inc.(c)...................... 1,602,900
60,000 Horizon Mental Health
Management(c)................ 1,350,000
42,500 KLA-Tencor Corp.(c)............ 2,071,875
62,900 Lifeline Systems, Inc.(c)...... 1,210,825
138,000 Morrison Health Care, Inc...... 2,199,375
51,200 National Dentex Corp.(c)....... 972,800
SHARES VALUE
- ----------- ------------
COMMON STOCK (CONTINUED)
71,600 Orthodontic Centers Of
America(a)(c)................ $ 1,302,225
285,000 Owens & Minor Holding Company.. 4,257,188
107,300 Prime Medical Service,
Inc.(c)...................... 1,160,181
19,200 Quintiles Transnational
Corp.(c)..................... 1,336,800
46,800 Quorum Health Group, Inc.(c)... 1,673,100
60,200 Retirement Care
Associates(c)................ 744,975
129,300 Renal Treatment Centers,
Inc.(c)...................... 3,474,938
50,700 Res-Care, Inc.(c).............. 969,638
32,500 Summit Care Corp.(c)........... 438,750
67,900 Sunrise Assisted Living,
Inc.(c)...................... 2,376,500
225,700 Universal Health Services --
Class B(c)................... 8,689,450
------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES....................... 41,459,489
------------
METALS AND MINING -- 0.81%
40,500 Furon Company.................. 1,270,688
6,500 Maverick Tube Corp.(c)......... 243,750
93,600 RMI Titanium Company(a)(c)..... 2,550,600
30,300 Wolverine Tube, Inc.(c)........ 844,613
------------
TOTAL METALS AND MINING........ 4,909,651
------------
OIL AND GAS -- 4.60%
95,600 Berry Petroleum................ 1,816,400
36,000 Evi, Inc.(c)................... 1,512,000
53,800 Forcenergy Gas Exploration
(a)(c)....................... 1,634,175
42,700 Global Industries Ltd(c)....... 997,442
13,200 Halliburton Company............ 1,046,100
122,400 Newpark Resources,
Inc.(a)(c)................... 4,131,000
64,100 Pool Energy Services(c)........ 1,161,813
50,500 Pride Petroleum Services,
Inc.(a)...................... 1,212,000
26,500 SEACOR Smit, Inc.(c)........... 1,386,281
236,700 Tosco Corp..................... 7,086,206
61,000 Trico Marine Services, Inc.
(a)(c)....................... 1,330,563
104,600 Varco International, Inc.(c)... 3,373,350
50,700 World Fuel Services Corp....... 1,109,063
------------
TOTAL OIL AND GAS.............. 27,796,393
------------
PHARMACEUTICALS -- 4.07%
58,800 Agouron Pharmaceuticals,
Inc.(a)(c)................... 4,755,450
78,800 Applied Analytical Industries,
Inc.(c)...................... 1,595,700
38,500 BioChem Pharmaceuticals,
Inc.(c)...................... 856,625
42,500 Centocor, Inc.(c).............. 1,320,156
99,100 Dura Pharmaceuticals,
Inc.(c)...................... 3,951,612
82,400 Jones Medical Industries,
Inc.(a)...................... 3,914,000
</TABLE>
See notes to financial statements.
58
<PAGE> 61
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCK (CONTINUED)
81,700 NCS HealthCare, Inc. -- Class
A(c)......................... $ 2,481,638
95,500 Parexel International
Corp.(a)(c).................. 3,032,125
86,600 Vitalink Pharmacy
Services(c).................. 1,656,225
8,100 Warner-Lambert Company......... 1,006,425
------------
TOTAL PHARMACEUTICALS.......... 24,569,956
------------
REAL ESTATE INVESTMENT TRUST -- 1.34%
55,369 Chateau Communities, Inc....... 1,584,938
115,900 Equity Inns, Inc............... 1,550,162
36,600 Health Care Property
Investments, Inc............. 1,290,150
65,500 RFS Hotel Investors, Inc....... 1,179,000
44,200 Sovran Self Storage............ 1,292,850
35,000 Sun Communities, Inc........... 1,174,688
------------
TOTAL REAL ESTATE INVESTMENT
TRUST.......................... 8,071,788
------------
RETAIL -- 2.65%
64,600 ACC Corp.(c)................... 1,994,525
63,200 American Safety Razor
Company(c)................... 1,145,500
173,750 Consolidated Stores Corp....... 6,037,812
77,200 Fred's, Inc.................... 1,158,000
175,000 MacFrugals Bargains Close-
Outs(c)...................... 4,768,750
156,800 Michael Anthony Jewelers,
Inc.(c)...................... 627,200
61,000 Uni-Marts, Inc................. 305,000
------------
TOTAL RETAIL................... 16,036,787
------------
SECURITY -- 1.07%
215,000 Pittston Brink's Group......... 6,450,000
------------
SEMICONDUCTORS -- 1.23%
88,100 Texas Instruments.............. 7,405,906
------------
TELECOMMUNICATIONS -- 5.54%
44,200 Advanced Fibre
Communication(a)(c).......... 2,668,575
115,500 Arch Communications Group,
Inc.(c)...................... 880,687
69,800 Aspect Telecommunication
Corp.(c)..................... 1,553,050
30,950 Associated Group, Inc. -- Class
B(c)......................... 1,199,312
140,375 Centennial Cellular Corp. --
Class A(c)................... 2,228,453
47,800 CFW Communications Company..... 878,325
35,500 CIENA Corp.(a)(c).............. 1,672,937
42,900 CommNet Cellular, Inc.(c)...... 1,490,775
142,500 Communications Central,
Inc.(c)...................... 1,567,500
SHARES VALUE
- ----------- ------------
COMMON STOCK (CONTINUED)
90,900 Davel Communications Group(c).. $ 1,636,200
57,800 LCI International, Inc.(c)..... 1,264,375
5,100 MasTec, Inc.(a)(c)............. 241,294
81,500 MIDCOM Communications,
Inc.(a)(c)................... 432,969
56,700 Motorola, Inc.................. 4,309,200
52,700 Nokia Corp. (ADR).............. 3,886,625
87,100 Omnipoint Corp.(c)............. 1,448,038
86,800 P-COM, Inc.(c)................. 2,864,400
51,400 SITEL Corp.(a)(c).............. 1,060,125
41,600 Tekelec(c)..................... 1,471,600
64,700 Wireless Telecom Group, Inc.... 715,744
------------
TOTAL TELECOMMUNICATIONS....... 33,470,184
------------
TRANSPORTATION:
FREIGHT -- 5.84%
108,400 Air Express International
Corp......................... 4,308,900
215,000 Airborne Freight Corp.......... 9,003,125
237,100 Circle International Group,
Inc.......................... 6,253,512
198,700 CNF Transportation, Inc.(a).... 6,408,075
105,474 Fritz Companies, Inc.(a)(c).... 1,021,779
8,300 Intercargo, Inc................ 97,525
239,750 Pittston Burlington Group...... 6,742,969
65,000 Sea Containers Ltd............. 1,470,625
------------
TOTAL TRANSPORTATION:
FREIGHT...................... 35,306,510
------------
UTILITIES: ELECTRIC -- 0.70%
600,000 El Paso Electric Company(c).... 4,237,500
------------
TOTAL COMMON STOCK (Cost
$434,340,560).................. 559,884,584
------------
REGULATED INVESTMENT COMPANIES -- 5.52%
5,166,353 Janus Institutional Money
Market Fund(b)............... 5,166,353
28,170,000 Merrimac Cash Fund -- Premium
Class(b)..................... 28,170,000
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost $33,336,353)... 33,336,353
------------
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C>
TIME DEPOSITS -- 9.41%
$ 317,542 First National Bank of Boston,
6.35%, 07/01/97(b)........... 317,619
20,486,771 First Union Bank, 5.59%,
05/02/98(b).................. 20,491,714
6,003,663 Harris Trust & Savings Bank,
6.25%, 07/01/97(b)........... 6,005,112
15,000,000 JP Morgan, 6.37%,
07/01/97(b).................. 15,003,619
</TABLE>
See notes to financial statements.
59
<PAGE> 62
SPECIAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ----------- ------------
<C> <S> <C>
TIME DEPOSITS (CONTINUED)
$15,000,000 Republic New York Securities
Corp., 6.40%, 07/15/97(b).... $ 15,003,619
------------
TOTAL TIME DEPOSITS (Cost
$56,821,683)................... 56,821,683
------------
TOTAL SECURITIES (Cost
$524,498,596).................. 650,042,620
------------
REPURCHASE AGREEMENTS -- 7.42%
18,666,680 With Investors Bank & Trust
dated 06/30/97, 5.51%,
repurchase proceeds at
maturity $18,669,537,
07/01/97 (Collateralized by
various United States
Government Agency
Obligations, 6.875%-7.125%,
due 05/20/25 to 11/20/25,
with a total value of
$19,600,351) (Cost
$18,666,680)................. 18,666,680
10,543,738 With Investors Bank & Trust
dated 06/30/97, 5.51%,
repurchase proceeds at
maturity $10,545,352,
07/01/97 (Collateralized by
Government National Mortgage
Association, 6.875%, due
12/20/22 with a value of
$1,723,939 and Government
National Mortgage
Association, 7.00%, due
06/20/26, with a value of
$9,347,548) (Cost
$10,543,738)................. 10,543,738
2,509,496 With Investors Bank & Trust
dated 06/30/97, 5.51%,
repurchase proceeds at
maturity $2,509,880, 07/01/97
(Collateralized by Government
National Mortgage
Association, 7.125%, due
05/20/22, with a value of
2,635,219) (Cost
$2,509,496).................. 2,509,496
<CAPTION>
PRINCIPAL VALUE
- ----------- ------------
<C> <S> <C>
REPURCHASE AGREEMENTS (CONTINUED)
$13,119,884 With Morgan Stanley, dated
06/30/97, 5.32%, repurchase
proceeds at maturity
$13,121,822, 07/1/97
(Collateralized by US
Treasury Bill, 5.12%, due
12/11/97, with a value of
$13,390,845) (Cost
$13,119,884)................. $ 13,119,884
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $44,839,798)............. 44,839,798
------------
Total Investments -- 115.02%
(Cost $569,338,394)............ 694,882,418
Other assets less
liabilities -- (15.02)%........ (90,737,619)
------------
NET ASSETS -- 100.00%.......... $604,144,799
============
The aggregate cost of securities for federal income tax
purposes at June 30, 1997, is $569,338,394.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $139,015,825
Gross unrealized depreciation.......... (13,471,801)
------------
Net unrealized appreciation............ $125,544,024
============
</TABLE>
- ---------------
(a) All or part of this security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing security.
(ADR) -- American Depository Receipt
See notes to financial statements.
60
<PAGE> 63
AGGRESSIVE EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCK -- 94.66%
COMPUTERS AND OFFICE EQUIPMENT -- 9.10%
5,000 Compaq Computer(c)............... $ 496,250
3,000 Dell Computer Corp.(c)........... 352,313
7,100 Sun Microsystems, Inc.(c)........ 264,253
4,000 Xerox Corp. ..................... 315,500
------------
TOTAL COMPUTERS AND OFFICE
EQUIPMENT........................ 1,428,316
------------
COMPUTER SOFTWARE AND SERVICES -- 13.54%
7,500 BMC Software, Inc.(c)............ 415,312
5,100 Compuware Corp.(c)............... 243,525
6,000 McAfee Associates, Inc.(c)....... 378,750
4,500 Microsoft Corp.(c)............... 568,688
16,000 Siebel Systems, Inc.(c).......... 516,000
------------
TOTAL COMPUTER SOFTWARE AND
SERVICES......................... 2,122,275
------------
CONSUMER GOODS AND SERVICES -- 2.71%
6,600 Johnson & Johnson................ 424,875
------------
ELECTRONICS -- 15.56%
8,700 Altera Corp.(c).................. 439,350
17,000 Cellstar Corp.(c)................ 520,625
6,000 Philips Electronics N.V. (ADR)... 431,250
8,000 Sanmina Corp.(c)................. 508,000
13,800 Teradyne, Inc.(c)................ 541,650
------------
TOTAL ELECTRONICS................ 2,440,875
------------
FINANCE -- 2.19%
4,600 American Express Company......... 342,700
------------
INSURANCE -- 5.36%
14,400 Healthsouth Corp.(c)............. 359,100
6,700 Oxford Health Plans, Inc.(c)..... 480,725
------------
TOTAL INSURANCE.................. 839,825
------------
MANUFACTURING -- 4.76%
6,000 Applied Materials, Inc.(c)....... 424,875
5,500 ASM Lithography Holding N.V.(c).. 321,750
------------
TOTAL MANUFACTURING.............. 746,625
------------
MEDICAL AND OTHER HEALTH SERVICES -- 6.51%
6,500 Guidant Corp. ................... 552,500
9,600 KLA-Tencor Corp.(c).............. 468,000
------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES......................... 1,020,500
------------
OIL AND GAS -- 5.91%
4,000 Diamond Offshore Drilling,
Inc.(c)........................ 312,500
12,000 Global Marine, Inc.(c)........... 279,000
17,100 Marine Drilling Company,
Inc.(c)........................ 335,587
------------
TOTAL OIL AND GAS................ 927,087
------------
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCK (CONTINUED)
PHARMACEUTICALS -- 5.77%
6,100 Bristol-Myers Squibb Company..... $ 494,100
3,300 Warner-Lambert Company........... 410,025
------------
TOTAL PHARMACEUTICALS............ 904,125
------------
RETAIL -- 1.51%
7,200 Costco Companies, Inc.(c)........ 236,700
------------
SEMICONDUCTOR -- 2.63%
4,900 Texas Instruments................ 411,906
------------
TELECOMMUNICATIONS -- 19.11%
12,100 Brightpoint, Inc.(c)............. 394,006
5,000 Lucent Technologies.............. 360,313
6,000 Motorola, Inc. .................. 456,000
7,500 Nokia Corp. (ADR)................ 553,125
2,900 Telecomunicacoes Brasileiras
(ADR).......................... 440,075
8,050 Telefonos De Mexico (ADR)........ 384,388
7,300 Tellabs, Inc. ................... 407,887
------------
TOTAL TELECOMMUNICATIONS......... 2,995,794
------------
TOTAL SECURITIES
(Cost $12,561,051)............... 14,841,603
------------
PRINCIPAL
- ----------
REPURCHASE AGREEMENT -- 8.42%
$1,319,166 With Investors Bank & Trust,
dated 06/30/97, 5.51%,
repurchase proceeds at maturity
$1,319,368, 07/01/97
(Collateralized by Government
National Mortgage Association,
7.125%, due 05/20/22 with a
value of $1,385,479) (Cost
$1,319,166).................... 1,319,166
------------
Total Investments -- 103.08%
(Cost $13,880,217)............... 16,160,769
Other assets less
liabilities -- (3.08)%........... (482,418)
------------
NET ASSETS -- 100.00%............ $15,678,351
============
The aggregate cost of securities for federal income tax
purposes at June 30, 1997, is $13,880,217.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation........... $ 2,343,536
Gross unrealized depreciation........... (62,984)
-----------
Net unrealized appreciation............. $ 2,280,552
===========
</TABLE>
- ---------------
(c) Non-income producing security
(ADR) -- American Depository Receipt
See notes to financial statements.
61
<PAGE> 64
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- -----------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 88.69%
ADVERTISING -- 3.07%
$ 500,000 Lamar Advertising, 9.625%,
12/01/06....................... $ 512,500
525,000 Outdoor Systems, Inc., 9.375%,
10/15/06....................... 526,313
------------
TOTAL ADVERTISING................ 1,038,813
------------
AEROSPACE -- 0.77%
250,000 BE Aerospace, 9.75%, 03/01/03.... 260,000
------------
APPAREL -- 0.93%
300,000 William Carter, 10.375%,
12/01/06....................... 314,250
------------
AUTOMOTIVE PRODUCTS -- 3.99%
525,000 Ryder Trucks, Inc., 10.00%,
12/01/06....................... 540,750
420,000 Blue Bird Body, 10.75%,
11/15/06....................... 446,250
350,000 Jordan Industries, 10.375%,
08/01/03....................... 365,750
------------
TOTAL AUTOMOTIVE PRODUCTS........ 1,352,750
------------
BUSINESS SERVICES -- 2.65%
350,000 Atrium Companies, Inc., 10.50%,
11/15/06....................... 364,000
500,000 Iron Mountain, 10.125%,
10/01/06....................... 532,500
------------
TOTAL BUSINESS SERVICES.......... 896,500
------------
CHEMICALS -- 4.52%
535,000 General Chemical, Inc., 9.25%,
08/15/03....................... 548,375
450,000 Koppers Industries, Inc., 8.50%,
02/01/04....................... 443,250
500,000 Sterling Chemicals, Inc., 11.75%,
08/15/06....................... 540,000
------------
TOTAL CHEMICALS.................. 1,531,625
------------
CONSTRUCTION -- 0.33%
100,000 Johns Manville International
Group, 10.875%, 12/15/04....... 111,500
------------
CONSUMER GOODS AND SERVICES -- 1.55%
500,000 Purina Mills, 10.25%, 09/01/03... 526,250
------------
ENVIRONMENTAL MANAGEMENT -- 1.58%
500,000 Allied Waste North America,
10.25%, 12/01/06............... 535,000
------------
FINANCE -- 5.41%
300,000 Hawk Corp., 10.25%, 12/01/03..... 309,000
500,000 Imperial Credit Industries, Inc.,
9.875%, 01/15/07............... 495,000
130,000 ISP Holdings, Inc., 9.75%,
02/15/02....................... 137,800
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
$ 400,000 Mesa Operating, 11.625%,
07/01/06....................... $ 308,000
460,000 Muzak LP/Capital, 10.00%,
10/01/03....................... 480,700
100,000 Primark Corp., 8.75%, 10/15/00... 101,250
------------
TOTAL FINANCE.................... 1,831,750
------------
FOOD AND BEVERAGE -- 7.29%
500,000 Ameriking, Inc., 10.75%,
12/01/06....................... 521,250
300,000 Cott Corp., 8.50%, 05/07/07...... 298,500
100,000 Cott Corp., 9.375%, 07/01/05..... 104,000
325,000 Delta Beverage Group, 9.75%,
12/15/03....................... 338,000
400,000 Gorges/Quik To Fix Food, 11.50%,
12/01/06....................... 412,000
355,000 International Home Foods,
10.375%, 11/01/06.............. 365,650
400,000 Ralphs Grocery, 10.45%,
06/15/04....................... 429,500
------------
TOTAL FOOD AND BEVERAGE.......... 2,468,900
------------
FOREST AND PAPER
PRODUCTS -- 0.47%
150,000 Scotts Company, 9.875%,
08/01/04....................... 160,500
------------
FREIGHT AND CARGO -- 0.61%
200,000 Sea Containers, 9.50%,
07/01/03....................... 207,500
------------
INDUSTRIAL -- 4.53%
200,000 Bell & Howell Company, 0.00%,
03/01/05....................... 161,000
300,000 Clark Materials, 10.75%,
11/15/06....................... 317,250
175,000 Portola Packaging, 10.75%,
10/01/05....................... 180,250
350,000 Rayovac Corp., 10.25%.
11/01/06....................... 365,750
500,000 Synthetic Industries, 9.25%,
02/15/07....................... 510,000
------------
TOTAL INDUSTRIAL................. 1,534,250
------------
LEISURE AND RECREATION -- 7.91%
200,000 Act III Theatres, 11.875%,
02/01/03....................... 217,500
525,000 Cinemark USA, 9.625%, 08/01/08... 532,875
900,000 Riddell Sports, Inc., 10.50%,
07/15/07....................... 920,250
500,000 Host Marriot Travel Plaza, 9.50%,
05/15/05....................... 522,500
500,000 Trump Atlantic City, 11.25%,
05/01/06....................... 487,500
------------
TOTAL LEISURE AND RECREATION..... 2,680,625
------------
</TABLE>
See notes to financial statements.
62
<PAGE> 65
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
MACHINERY -- 5.21%
$ 130,000 Carrols Corp., 11.50%,
08/15/03....................... $ 138,450
875,000 Central Tractor, 10.625%,
04/01/07....................... 905,625
530,000 Clark USA, Inc., 10.875%,
12/01/05....................... 561,800
150,000 Mettler Toledo, 9.75%,
10/01/06....................... 157,500
------------
TOTAL MACHINERY.................. 1,763,375
------------
MANUFACTURING -- 9.14%
150,000 American Standard Senior Notes,
10.875%, 05/15/99.............. 160,500
175,000 Buckeye Cellulose Corp., 8.50%,
12/05/05....................... 175,000
450,000 DVI, Inc., 9.875%, 02/01/04...... 450,000
200,000 Essex Group, 10.00%, 05/01/03.... 211,000
75,000 IDEX Corp., 9.75%, 09/15/02...... 78,188
500,000 Owens & Minor, 10.875%,
06/01/06....................... 546,250
500,000 Safelite Glass, 9.875%,
12/15/06....................... 525,000
500,000 Unisys Corp., 12.00%, 04/15/03... 541,250
400,000 Westinghouse Air, 9.375%,
06/15/05....................... 412,000
------------
TOTAL MANUFACTURING.............. 3,099,188
------------
MEDIA -- 4.32%
100,000 ARA Group, 8.50%, 06/01/03....... 103,920
320,000 Comcast Corp., 9.125%,
10/15/06....................... 334,000
50,000 Jones Intercable, 9.625%,
03/15/02....................... 52,375
350,000 LDM Technologies, 10.75%,
01/15/07....................... 367,500
250,000 Rogers Cablesystems, Ltd.,
10.00%, 12/01/07............... 267,500
125,000 Rogers Cablesystems, Ltd.,
11.00%, 12/01/15............... 136,250
190,000 Rogers Cantel, 9.375%,
06/01/08....................... 200,213
------------
TOTAL MEDIA...................... 1,461,758
------------
MEDICAL AND OTHER HEALTH SERVICES -- 2.23%
625,000 Leiner Health, 9.625%,
07/10/07....................... 632,030
120,000 Quorum Health, 8.75%, 11/01/05... 123,300
------------
TOTAL MEDICAL AND OTHER HEALTH
SERVICES......................... 755,330
------------
METALS AND MINING -- 4.04%
180,000 Oregon Steel Mills, 11.00%,
06/15/03....................... 193,950
500,000 Renco Metals Senior Notes,
11.50%, 07/01/03............... 535,000
600,000 Weirton Steel Corp., 11.375%,
07/01/04....................... 639,000
------------
TOTAL METALS AND MINING.......... 1,367,950
------------
PRINCIPAL VALUE
- ---------- ------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL AND GAS -- 1.98%
$ 420,000 Costilla Energy, 10.25%,
10/01/06....................... $ 436,800
230,000 Vintage Petroleum Senior
Subordinated Notes, 9.00%,
12/15/05....................... 232,300
------------
TOTAL OIL AND GAS................ 669,100
------------
PUBLISHING -- 0.84%
280,000 Hollinger International
Publishing, 9.25%, 02/01/06.... 284,900
------------
RETAIL -- 0.55%
175,000 Finlay Fine Jewelry, 10.625%,
05/01/03....................... 185,500
------------
TELECOMMUNICATIONS -- 7.88%
525,000 Adelphia Communications, 9.875%,
03/01/05....................... 515,812
200,000 Allbritton Communications,
11.50%, 08/15/04............... 210,000
350,000 Century Communications, 9.75%,
02/15/02....................... 362,250
500,000 Gray Communication System, Inc.,
10.625%, 10/01/06.............. 527,500
500,000 Jacor Communications, 9.75%,
12/15/06....................... 522,500
100,000 Lenfest Communications, 8.375%,
11/01/05....................... 98,375
400,000 Lenfest Communications, 10.50%,
06/15/06....................... 435,000
------------
TOTAL TELECOMMUNICATIONS......... 2,671,437
------------
TEXTILES -- 2.42%
525,000 CMI Industries, 9.50%,
10/01/03....................... 528,937
280,000 Westpoint Stevens, 9.375%,
12/15/05....................... 291,200
------------
TOTAL TEXTILES................... 820,137
------------
</TABLE>
See notes to financial statements.
63
<PAGE> 66
HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
- ---------- ------------
<C> <S> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
TRANSPORTATION -- 2.56%
$ 500,000 Loomis Fargo & Company, 10.00%,
01/15/04....................... $ 505,000
100,000 Teekay Shipping, 8.32%,
02/01/08....................... 99,750
250,000 Viking Star Shipping, 9.625%,
07/15/03....................... 263,750
------------
TOTAL TRANSPORTATION............. 868,500
------------
UTILITIES: ELECTRIC -- 1.91%
200,000 California Energy Company, Inc.,
9.875%, 06/30/03............... 212,000
100,000 Calpine Corp., 9.25%, 02/01/04... 101,500
200,000 El Paso Electric Company, 8.90%,
02/01/06....................... 213,000
110,000 El Paso Electric Company, 9.40%,
05/01/11....................... 119,625
------------
TOTAL UTILITIES: ELECTRIC........ 646,125
------------
TOTAL SECURITIES
(Cost $29,466,654)............... 30,043,513
------------
PRINCIPAL VALUE
- ---------- -----------
REPURCHASE AGREEMENT -- 9.50%
$3,217,465 With Investors Bank & Trust,
dated 06/30/97, 5.51%,
repurchase proceeds at maturity
$3,217,957, 07/01/97
(Collaterized by Government
National Mortgage Association,
7.00%, due 02/20/26 with a
value of $3,379,149) (Cost
$3,217,465).................... $ 3,217,465
Total Investments -- 98.19%
(Cost $32,684,119)............... 33,260,978
Other assets less
liabilities -- 1.81%............. 613,803
------------
NET ASSETS -- 100.00%............ $33,874,781
============
The aggregate cost of securities for federal income tax
purposes at June 30, 1997, is $32,684,119.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation.......... $ 631,898
Gross unrealized depreciation.......... (55,039)
------------
Net unrealized appreciation............ $ 576,859
============
</TABLE>
See notes to financial statements.
64
<PAGE> 67
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
- ----------- ------------ -------
<C> <S> <C> <C>
COMMON STOCKS -- 91.16%
APPAREL -- 0.46%
15,000 Gucci Group N.V.(c)....... $ 979,931 NET
------------
AUTOMOBILE -- 4.99%
12,000 Daimler Benz.............. 974,442 GER
50,000 Honda Motor Company,
Ltd. .................... 1,507,470 JPN
67,000 Mitsubishi Motor
Corp.(a)................. 480,115 JPN
18,000 Peugeot SA................ 1,741,459 FRA
151,000 Suzuki Motor Corp. ....... 1,913,380 JPN
32,000 Toyota Motor Company...... 945,206 JPN
20,063 Valeo..................... 1,247,329 FRA
2,400 Volkswagen AG............. 1,841,456 GER
------------
TOTAL AUTOMOBILE.......... 10,650,857
------------
BANKS -- 8.92%
137,900 Allied Irish Banks PLC.... 1,051,129 UK
185,000 Australia & New Zealand
Bank Group, Ltd. ........ 1,372,053 AUS
2,000 Banco Popular Espanola.... 490,922 SPA
19,000 Bangkok Bank Company,
Ltd. .................... 137,200 THA
435,000 Bank of Scotland.......... 2,794,484 UK
11,000 Credit Suisse Group....... 1,414,754 SWI
1,860 Holderbank Financial
Glaris -- Class B........ 1,759,399 SWI
125,515 National Westminster
Bank..................... 1,686,821 UK
33,000 Overseas Chinese Banking
Corp. ................... 341,573 SIN
100,000 Royal Bank of Scotland
Group PLC................ 935,330 UK
130,000 Sumitomo Bank............. 2,135,796 JPN
167,200 Thai Farmers Bank Alien
Market................... 746,126 THA
108,000 The Bank of Tokyo
Mitsubishi............... 2,170,757 JPN
336,000 Westpac Banking Corp. .... 2,006,122 AUS
------------
TOTAL BANKS............... 19,042,466
------------
CHEMICALS -- 1.46%
370,000 Mitsubishi Chemical
Corp. ................... 1,209,271 JPN
35,000 Norsk Hydro............... 1,907,577 NOR
------------
TOTAL CHEMICALS........... 3,116,848
------------
COMPUTER SOFTWARE AND SERVICES -- 0.42%
14,100 Softbank Corp.(a)......... 903,198 JPN
------------
CONSTRUCTION -- 1.77%
163,000 Okumura................... 864,634 JPN
13,000 Rohm Company.............. 1,340,556 JPN
156,000 Sekisui House, Ltd. ...... 1,581,388 JPN
------------
TOTAL CONSTRUCTION........ 3,786,578
------------
CONSUMER GOODS AND SERVICES -- 7.95%
8,300 Electrolux................ 598,960 SWE
22,000 Fuji Photo Film........... 886,305 JPN
43,500 Hennes & Mauritz.......... 1,558,314 SWE
<CAPTION>
SHARES VALUE COUNTRY
- ----------- ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
40,000 Hoya Corp. ............... $ 1,782,748 JPN
24,000 Izumi..................... 352,354 JPN
50,000 Loewen Group, Inc. ....... 1,737,500 USA
221,000 Nikon Corp. .............. 3,727,430 JPN
13,700 Nintendo Corp., Ltd. ..... 1,149,348 JPN
12,000 Orkla Asa -- Class B...... 814,664 NOR
113,203 Reckitt and Colman PLC.... 1,689,974 UK
106,000 Shiseido Company.......... 1,750,760 JPN
10,700 Sony Corp. ............... 934,134 JPN
------------
TOTAL CONSUMER GOODS AND
SERVICES.................. 16,982,491
------------
ELECTRONICS -- 4.94%
750 ABB AG.................... 1,136,948 SWI
100,200 Caradon PLC............... 335,189 UK
80,000 Electrocomponents PLC..... 595,152 UK
50,000 Hitachi, Ltd. ............ 559,290 JPN
30,000 Kyocera Corp. ............ 2,385,735 JPN
27,000 Murata Manufacturing
Company, Ltd. ........... 1,075,939 JPN
114,000 NEC Corp. ................ 1,593,982 JPN
60,000 Tokyo Electron, Ltd. ..... 2,873,370 JPN
------------
TOTAL ELECTRONICS......... 10,555,605
------------
ENGINEERING -- 0.23%
18,700 Chudenko Corp. ........... 501,695 JPN
------------
ENVIRONMENTAL MANAGEMENT SERVICES -- 0.01%
900 Kurita Water Industries... 23,988 JPN
------------
FINANCE -- 3.34%
39,400 HSBC Holdings PLC......... 1,212,120 UK
55,953 Lend Lease Corp., Ltd. ... 1,173,670 AUS
63,000 Lloyds TSB Group PLC...... 646,928 UK
157,500 PT Hm Sampoerna
International Finance
Company.................. 601,157 IDN
6,000 Shohkoh Fund.............. 1,819,452 JPN
2,900 Soc. Gen Belgique Parts De
Res. NPV................. 271,043 BEL
23,200 Sparbanken Sverige --
Class A.................. 516,063 SWE
181,000 Wako Securities Company,
Ltd.(c).................. 893,688 JPN
------------
TOTAL FINANCE............. 7,134,121
------------
FOOD AND BEVERAGE -- 5.81%
116,200 Amatil, Ltd., Coca Cola... 1,497,260 AUS
111,000 Asahi Breweries,
Ltd.(a).................. 1,658,740 JPN
150,000 Fraser And Neave, Ltd. ... 1,070,040 SIN
6,300 Heineken N.V. ............ 1,077,158 NET
45,000 Jusco Company............. 1,521,887 JPN
20,000 Lion Nathan............... 50,558 NZE
1,150 Nestle.................... 1,519,292 SWI
</TABLE>
See notes to financial statements.
65
<PAGE> 68
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
- ----------- ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
55,000 Panamerican Beverages,
Inc. -- Class A.......... $ 1,808,125 MEX
16,000 Seagrams Company, Ltd. ... 644,000 CDA
210,000 Tate & Lyle PLC........... 1,560,510 UK
------------
TOTAL FOOD AND BEVERAGE... 12,407,570
------------
INDUSTRIAL -- 4.05%
34,320 Advantest Corp. .......... 2,639,304 JPN
43,000 Alcan Aluminum, Ltd. ..... 1,491,563 CDA
160,000 Reed International,
Ltd. .................... 1,544,464 UK
15,600 Sidel..................... 1,209,006 FRA
280,000 Western Mining Corp.
Holding, Ltd. ........... 1,751,484 AUS
------------
TOTAL INDUSTRIAL.......... 8,635,821
------------
INSURANCE -- 2.33%
161,210 Alleanza Assicuraz........ 814,804 ITA
277,072 GIO Australian Holdings,
Ltd. .................... 850,999 AUS
12,000 Mapfre Vida Seguros....... 779,220 SPA
78,000 Siebe PLC................. 1,321,515 UK
178,000 Yasuda Fire and Marine
Insurance................ 1,197,762 JPN
------------
TOTAL INSURANCE........... 4,964,300
------------
INVESTMENT HOLDING COMPANIES -- 1.95%
395 Baloise Holdings.......... 942,895 SWI
124,000 Hutchison Whampoa......... 1,072,364 HNG
465,000 Sime Darby Berhad......... 1,547,520 MAL
350,000 Technology Resources
Industries(c)............ 601,790 MAL
------------
TOTAL INVESTMENT HOLDING
COMPANIES................. 4,164,569
------------
LEISURE AND RECREATION -- 0.99%
10,000 Accor..................... 1,498,909 FRA
147,800 Euro Disneyland SCA(c).... 230,346 FRA
142,120 San Miquel Corp. -- Class
B........................ 374,472 PHI
------------
TOTAL LEISURE AND
RECREATION................ 2,103,727
------------
MACHINERY -- 0.77%
200,000 BPB Industries............ 1,081,260 UK
24,000 Komori Corp. ............. 570,478 JPN
------------
TOTAL MACHINERY........... 1,651,738
------------
MANUFACTURING -- 6.79%
39,600 ASM Lithography Holding
N.V.(c).................. 2,316,600 NET
166,000 ABB AB -- Class A......... 2,329,295 SWE
5,500 Granges AB(c)............. 73,974 SWE
7,400 Mannesmann AG............. 3,299,676 GER
92,000 Mitsubishi Heavy.......... 706,698 JPN
99,000 Morgan Crucible Company
PLC...................... 734,847 UK
<CAPTION>
SHARES VALUE COUNTRY
- ----------- ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
14,600 Philips Electronics N.V.
(ADR).................... $ 1,049,375 NET
30,800 Philips Electronics
N.V. .................... 2,210,193 NET
7,500 Thyssen AG................ 1,777,583 GER
------------
TOTAL MANUFACTURING....... 14,498,241
------------
MEDIA -- 3.49%
29,200 British Sky Broadcasting
PLC...................... 212,856 UK
2,037 Canal Plus................ 396,926 FRA
17,100 Grupo Televisa
(GDR)(a)(c).............. 519,413 MEX
30,000 News Corp., Ltd.
(ADR)(a)................. 577,500 AUS
69,638 News Corp., Ltd.(a)(c).... 331,268 AUS
53,000 Rogers Communications --
Class B(c)............... 332,315 CDA
89,000 Singapore Press Holdings,
Ltd. .................... 1,792,629 SIN
111,000 Thomson Corp. ............ 2,578,869 CDA
35,000 Tokyo Broadcasting........ 718,778 JPN
------------
TOTAL MEDIA............... 7,460,554
------------
MEDICAL AND OTHER HEALTH
SERVICES -- 0.45%
7,400 Synthelabo................ 964,241 FRA
------------
METALS AND MINING -- 2.44%
46,000 Inco, Ltd.(a)............. 1,382,875 CDA
475,000 Nippon Steel Corp. ....... 1,519,240 JPN
29,863 Pechiney SA -- Class A.... 1,177,543 FRA
65,000 Rio Tinto PLC............. 1,132,092 UK
------------
TOTAL METALS AND MINING... 5,211,750
------------
OIL AND GAS -- 3.10%
10,200 Societe National Elf-
Aquitaine................ 1,101,493 FRA
40,000 Suncor, Inc. ............. 1,072,500 CDA
48,000 Talisman Energy,
Inc.(c).................. 1,476,994 CDA
15,000 Total S.A. -- Series B.... 1,517,645 FRA
115,900 Woodside Petroleum,
Ltd.(c).................. 989,809 AUS
15,000 YPF Sociedad Anonima
(ADR)(a)................. 461,250 ARG
------------
TOTAL OIL AND GAS......... 6,619,691
------------
PAPER AND FOREST PRODUCTS -- 0.58%
54,000 UPM-Kymmeme............... 1,247,530 FIN
------------
PHARMACEUTICALS -- 6.81%
21,333 Astra AB -- Class A
(ADR).................... 405,327 SWE
178,667 Astra AB.................. 3,327,291 SWE
52,000 Banyu Pharmaceutical
Company.................. 913,396 JPN
80,200 BOC Group................. 1,392,825 UK
30,000 Hoechst AG................ 1,273,662 GER
3,600 Hoechst AG -- Warrants
(expires 3/19/99)........ 267,748 GER
</TABLE>
See notes to financial statements.
66
<PAGE> 69
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE COUNTRY
- ----------- ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
1,675 Novartis AG............... $ 2,681,654 SWI
46,000 Sankyo Company, Ltd. ..... 1,547,670 JPN
600 Zeneca Group PLC (ADR).... 59,475 UK
80,800 Zeneca Group PLC.......... 2,670,674 UK
------------
TOTAL PHARMACEUTICALS..... 14,539,722
------------
REAL ESTATE -- 1.33%
62,000 City Developments......... 607,054 SIN
103,000 Mitsui Fudosan............ 1,422,173 JPN
91,000 Sumitomo Realty &
Development.............. 803,193 JPN
------------
TOTAL REAL ESTATE......... 2,832,420
------------
TELECOMMUNICATIONS -- 11.52%
86,000 Cable & Wireless.......... 787,210 UK
204 DDI Corp. ................ 1,508,205 JPN
20,000 Ericsson LM Telephone
(ADR).................... 787,500 SWE
50,000 Ericsson AB -- Class B
Free..................... 1,968,990 SWE
800 Hong Kong
Telecommunications, Ltd.
(ADR).................... 18,700 HNG
940,000 Hong Kong
Telecommunications....... 2,244,626 HNG
49 Nippon Telegraph and
Telephone Corp. ......... 471,030 JPN
8,300 Nokia AB.................. 618,394 FIN
15,000 Northern Telecom, Ltd. ... 1,365,000 CDA
22,300 Portugal Telecom S.A.
(ADR).................... 894,788 POR
300,000 Stet D Risp............... 1,040,250 ITA
34,600 Tele Danmark A/S (ADR).... 903,925 DEN
286,000 Telecom Italia Mobile..... 924,466 ITA
253,000 Telecom Italia Mobile
DRNC..................... 452,010 ITA
18,500 Telecomunicacoes
Brasileiras (ADR)........ 2,809,673 BRA
89,000 Telefonica................ 2,577,947 SPA
51,400 Telefonos De Mexico
(ADR)(a)................. 2,454,350 MEX
550,000 Telicom Italia Spa........ 1,645,270 ITA
23,000 Vodafone Group PLC
(ADR)(a)................. 1,114,063 UK
------------
TOTAL
TELECOMMUNICATIONS........ 24,586,397
------------
TEXTILES -- 0.22%
74,000 Italcenenti Fabbriche
Riunit................... 460,998 ITA
------------
TIRE AND RUBBER -- 0.63%
58,000 Bridgestone Corp. ........ 1,348,245 JPN
------------
TOBACCO -- 1.01%
88,000 B.A.T. Industries......... 787,213 UK
47,000 Imasco, Ltd. ............. 1,362,751 CDA
------------
TOTAL TOBACCO............. 2,149,964
------------
<CAPTION>
SHARES VALUE COUNTRY
- ----------- ------------ -------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
TRANSPORTATION -- 1.77%
50,000 Brambles Industries,
Ltd. .................... $ 981,040 AUS
189,000 Citic Pacific, Ltd. ...... 1,180,740 HNG
122,000 Kawasaki Kisen(c)......... 246,280 JPN
143,000 Malaysian Airline System
BHD...................... 356,928 MAL
900 Sairgroup(c).............. 1,009,980 SWI
------------
TOTAL TRANSPORTATION...... 3,774,968
------------
UTILITIES -- 0.63%
328,000 Hong Kong Electric........ 1,320,922 HNG
300 Tele Danmark-Class B...... 15,609 DEN
------------
TOTAL UTILITIES........... 1,336,531
------------
TOTAL COMMON STOCK
(Cost $158,496,536)....... 194,636,755
------------
PREFERRED STOCK -- 1.08%
AUTOMOBILES -- 0.01%
176 Daimler-Benz, 5.75%,
06/14/02................. 14,828 GER
------------
COMPUTER SOFTWARE AND SERVICES -- 0.64%
6,600 Sap AG Vorzug............. 1,371,106 GER
------------
MEDIA -- 0.37%
200,000 News Corp., Ltd. ......... 782,100 AUS
------------
PHARMACEUTICALS -- 0.06%
200 Wella AG.................. 136,582 GER
------------
TOTAL PREFERRED STOCK
(Cost $1,990,216)......... 2,304,616
------------
<CAPTION>
PRINCIPAL
- -----------
<C> <S> <C> <C>
NON-CONVERTIBLE BONDS AND NOTES -- 0.34%
$15,000,000 Sekisui House, 2.50%,
01/31/02................. 163,845 JPN
50,000,000 Sumitomo Bank
International Fin. N.V.,
0.75%, 05/31/01 ......... 558,700 JPN
------------
TOTAL NON-CONVERTIBLE
BONDS AND NOTES (Cost
$593,596)................. 722,545
------------
CONVERTIBLE BONDS AND NOTES -- 0.66%
BANKS -- 0.42%
15,000,000 Fujitsu Ltd., Series 8,
1.90%, 03/29/02.......... 209,595 JPN
29,000,000 Fujitsu Ltd., Series 9,
1.95%, 03/31/03.......... 398,373 JPN
21,000,000 Fujitsu Ltd., Series 10,
2.00%, 03/31/04.......... 289,947 JPN
------------
TOTAL BANKS............... 897,915
------------
</TABLE>
See notes to financial statements.
67
<PAGE> 70
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE COUNTRY
- ----------- ------------ -------
<C> <S> <C> <C>
FOOD AND BEVERAGE -- 0.23%
$11,000,000 Asahi Breweries -- CV,
1.00%, 12/26/03.......... 146,014 JPN
22,000,000 Asahi Breweries Series 8,
0.90%, 12/26/01.......... 284,526 JPN
5,000,000 Asahi Breweries Series 9,
0.95%, 12/26/02.......... 65,105 JPN
------------
TOTAL FOOD AND BEVERAGE... 495,645
------------
TELECOMMUNICATIONS -- 0.01%
2,000 Ericson L.M., 4.25%,
06/30/00................. 11,250 SWE
------------
TOTAL CONVERTIBLE BONDS
AND NOTES (Cost
$1,039,384)............... 1,404,810
------------
SHARES
- -----------
REGULATED INVESTMENT COMPANIES -- 3.07%
6,400,000 Janus Money Market
Fund(b).................. 6,400,000 USA
146,134 Merrimac Cash Fund(b)..... 146,134 USA
------------
TOTAL REGULATED INVESTMENT
COMPANIES (Cost
$6,546,134)............... 6,546,134
------------
PRINCIPAL
- -----------
TIME DEPOSITS -- 0.57%
$ 698,259 First National Bank of
Boston, 6.35%,
07/01/97(b).............. 698,940 USA
516,907 Harris Trust & Savings
Bank, 6.25%,
07/01/97(b).............. 517,412 USA
------------
TOTAL TIME DEPOSITS
(Cost $1,216,352)......... 1,216,352
------------
TOTAL SECURITIES
(Cost $169,882,218)....... 206,831,212
------------
REPURCHASE AGREEMENT -- 7.09%
15,143,791 With Investors Bank and
Trust, dated 06/30/97,
5.51%, repurchase
proceeds at maturity
$15,146,109, 07/01/97
(Collateralized by
various Government
National Mortgage
Association obligations,
7.00%-7.50%, due 12/20/10
to 02/20/26, with a total
market value of
$15,901,105) (Cost
$15,143,791)............. 15,143,791 USA
------------
<CAPTION>
PRINCIPAL VALUE COUNTRY
- ----------- ------------ -------
<C> <S> <C> <C>
Total Investments -- 103.97%
(Cost $185,028,327)....... $221,975,003
Other assets less
liabilities -- (3.97%).... (8,474,629)
------------
NET ASSETS -- 100.00%..... $213,500,374
============
The aggregate cost of securities for federal income tax
purposes at June 30, 1997, is $185,028,327.
The following amount is based on costs for federal income
tax purposes:
Gross unrealized appreciation........... $41,299,308
Gross unrealized depreciation........... (4,350,314)
-----------
Net unrealized appreciation............. $36,948,994
===========
</TABLE>
- ---------------
(a) All or part of the security is on loan.
(b) Collateral for securities on loan.
(c) Non-income producing securities.
(ADR) -- American Depository Receipt.
(GDR) -- Global Depository Receipt.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
COUNTRY COMPOSITION SECURITIES AT VALUE
- ------------------------------------- -------------------
<S> <C>
Argentina (ARG)...................... 0.23%
Australia (AUS)...................... 6.24%
Belgium (BEL)........................ 0.14%
Brazil (BRA)......................... 1.42%
Canada (CDA)......................... 5.93%
Denmark (DEN)........................ 0.47%
Finland (FIN)........................ 0.95%
France (FRA)......................... 5.62%
Germany (GER)........................ 5.55%
Hong Kong (HNG)...................... 2.96%
Indonesia (IDN)...................... 0.30%
Italy (ITA).......................... 2.70%
Japan (JPN).......................... 29.54%
Malaysia (MAL)....................... 1.27%
Mexico (MEX)......................... 2.42%
Netherlands (NET).................... 3.87%
New Zealand (NZE).................... 1.38%
Norway (NOR)......................... 0.03%
Philippines (PHI).................... 0.19%
Portugal (POR)....................... 0.45%
Singapore (SIN)...................... 1.93%
Spain (SPA).......................... 1.95%
Sweden (SWE)......................... 5.87%
Switzerland (SWI).................... 5.30%
Thailand (THA)....................... 0.45%
United Kingdom (UK).................. 12.84%
------
TOTAL PERCENTAGE..................... 100.00%
=================
</TABLE>
See notes to financial statements.
68
<PAGE> 71
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements
1. ORGANIZATION AND BUSINESS
Diversified Investors Portfolios (the "Series Portfolio"), a series trust
organized on September 1, 1993, under the laws of the State of New York, is
composed of thirteen different series that are, in effect, separate investment
funds: the Money Market Series, the High Quality Bond Series, the Intermediate
Government Bond Series, the Government/Corporate Bond Series, the Balanced
Series, the Equity Income Series, the Equity Value Series, the Growth & Income
Series, the Equity Growth Series, the Special Equity Series, the Aggressive
Equity Series, the High-Yield Bond Series, and the International Equity Series
(each a "Series"). The Declaration of Trust permits the Board of Trustees to
issue an unlimited number of beneficial interests in each Series. Investors in a
Series (e.g., investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
that Series (and of no other Series).
2. SIGNIFICANT ACCOUNTING POLICIES
A. SECURITY VALUATION
Short-term securities having remaining maturities of 60 days or less
are valued at amortized cost or original cost plus accrued interest, both
of which approximate value. The amortized cost of a security is determined
by valuing it at original cost and thereafter amortizing any discount or
premium at a constant rate until maturity. Securities traded on national
securities exchanges are valued at the last sales price as of the close of
business on each day or at the closing bid price for over-the-counter
securities. Equity securities are valued at the last sale price on the
exchange on which they are primarily traded or at the ask price on the
NASDAQ system for unlisted national market issues, or at the last quoted
bid price for securities not reported on the NASDAQ system. Bonds are
valued at the last available price provided by an independent pricing
service for securities traded on a national securities exchange. Bonds that
are listed on a national securities exchange but are not traded and bonds
that are regularly traded in the over-the-counter market are valued at the
mean of the last available bid and asked prices by an independent pricing
service. All other securities will be valued at their fair value as
determined by the Board of Trustees.
B. REPURCHASE AGREEMENTS
Each Series, along with other affiliated entities of the investment
advisor, may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Series investment advisor, subject to the
seller's agreement to repurchase and the Series agreement to resell such
securities at a mutually agreed upon price. Securities purchased subject to
repurchase agreements are segregated at the custodian, and pursuant to the
terms of the repurchase agreement must have an aggregate market value
greater than or equal to 102% and 105% of domestic and international
securities, respectively, of the repurchase price plus accrued interest at
all times. If the value of the underlying securities falls below the value
of the repurchase price plus accrued interest, the Series will require the
seller to deposit additional collateral by the next business day. If the
request for additional collateral is not met or the seller defaults on its
repurchase obligation, the Series maintains the right to sell the
underlying securities at market value and may claim any resulting loss
against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to
legal proceedings.
C. FOREIGN CURRENCY TRANSLATION
The accounting records of the International Equity Series are
maintained in U.S. dollars. The market values of foreign securities,
currency holdings and other assets and liabilities are translated to U.S.
dollars based on the prevailing exchange rates each business day. Income
and expenses denominated in
69
<PAGE> 72
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (continued)
C. FOREIGN CURRENCY TRANSLATION (CONTINUED)
foreign currencies are translated at prevailing exchange rates when accrued
or incurred. The Series does not isolate realized gains and losses
attributable to changes in exchange rates from gains and losses that arise
from changes in the market value of investments. Such fluctuations are
included with net realized and unrealized gains or losses on investments.
Net realized gains and losses on foreign currency transactions represent
net exchange gains and losses on disposition of foreign currencies, the
difference between the amount of investment income receivable and foreign
withholding taxes receivable recorded on the Series' books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end and
foreign currency forward contracts, resulting from changes in the exchange
rate.
D. FOREIGN CURRENCY FORWARD CONTRACTS
Each Series may enter into foreign currency forward contracts and
forward cross currency contracts in connection with settling planned
purchases or sales of securities or to hedge the currency exposure
associated with some or all of the Series' portfolio securities. A foreign
currency forward contract is an agreement between two parties to buy and
sell a currency at a set price on a future date. The market value of a
forward currency forward contract fluctuates with changes in forward
currency exchange rates. Foreign currency forward contracts are marked to
market daily and the change in value is recorded by the Series as an
unrealized gain or loss. When a foreign currency forward is extinguished,
through delivery or offset by entering into another foreign currency
forward contract, the Series records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value of the contract at the time it was extinguished or offset. These
contracts may involve market risk in excess of the unrealized gain or loss
reflected in the Series' Statement of Assets and Liabilities and the
Statement of Operations. In addition, the Series could be exposed to risk
if the counterparties are unable to meet the terms of the contracts or if
the value of the currency changes unfavorably to the U.S. dollar.
E. OPTIONS
Each Series, with the exception of the Money Market Series, may
purchase and write (sell) call and put options on securities indices for
the purpose of protecting against an anticipated decline in the value of
the securities held by that Series. Index options are marked to market
daily and the change in value is recorded by the Series as an unrealized
gain or loss in the "Statement of Assets and Liabilities". A realized gain
or loss equal to the difference between the exercise price and the value of
the index is recorded by the Series upon cash settlement of the option. The
use of index options may expose the Series to the risk that trading in such
options may be interrupted if trading in certain securities included in the
index is interrupted or the value of the securities in the index may not
move in direct correlation with the movements of the Series portfolio. In
addition, there is the risk the Series may not be able to enter into a
closing transaction because of an illiquid secondary market.
F. FEDERAL INCOME TAXES
It is the Series policy to comply with the applicable provisions of
the Internal Revenue Code. Therefore, no federal income tax provision is
required.
G. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on a trade date basis (the
date the order to buy or sell is executed). Dividend income is recorded on
the ex-dividend date. Interest income is recorded on the
70
<PAGE> 73
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (continued)
G. SECURITY TRANSACTIONS AND INVESTMENT INCOME (CONTINUED)
accrual basis and includes amortization of premium and discount on
investments. Realized gains and losses from securities transactions are
recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and
losses from security transactions are determined on each valuation day and
allocated pro rata among the investors in a Series at the time of such
determination.
H. OPERATING EXPENSES
The Series Portfolio accounts separately for the assets, liabilities
and operations of each Series. Expenses directly attributable to a Series
are charged to that Series, while expenses attributable to all Series are
allocated among them.
I. OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
3. FEES AND TRANSACTIONS WITH AFFILIATES
AUSA Life Insurance Company, Inc. ("AUSA") is an affiliate of Diversified
Investment Advisors, Inc. (the "Advisor"). AUSA has sub-accounts which invest in
the corresponding Portfolios as follows:
<TABLE>
<CAPTION>
PERCENTAGE INVESTMENT
AUSA SUBACCOUNT IN PORTFOLIO
------------------------------------------------------------------ -----------------------
<S> <C>
Money Market...................................................... 37.06
High Quality Bond................................................. 57.09
Intermediate Government Bond...................................... 59.89
Government/Corporate Bond......................................... 27.45
Balanced.......................................................... 75.38
Equity Income..................................................... 66.12
Equity Value...................................................... 14.52
Growth & Income................................................... 61.95
Equity Growth..................................................... 76.76
Special Equity.................................................... 55.51
Aggressive Equity................................................. 50.42
High Yield Bond................................................... 35.14
International Equity.............................................. 49.27
</TABLE>
The Advisor manages the assets of each Series of the Series Portfolio
pursuant to an Investment Advisory Agreement with the Series Portfolio. Subject
to such further policies as the Board of Trustees may determine, the Advisor
provides general investment advice to each Series. For its services, the Advisor
receives from each Series fees accrued daily and paid monthly at an annual rate
equal to the percentages specified in the table below of the corresponding
Series' average daily net assets. The Advisor is currently waiving a portion of
its investment advisory fee.
For each Series, the Advisor has entered into Investment Subadvisory
Agreements with the subadvisors listed in the table below (each a "Subadvisor",
collectively the "Subadvisors"). It is the responsibility of a Subadvisor to
make the day-to-day investment decisions of the Series and to place the purchase
and sales
71
<PAGE> 74
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (continued)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
orders for securities transactions of such series, subject in all cases to the
general supervision of the Advisor. For its services the Subadvisors receive a
fee from the Advisor at an annual rate equal to the percentages specified in the
table below of the corresponding Series' average daily net assets.
<TABLE>
<CAPTION>
DIVERSIFIED INVESTORS PORTFOLIO ADVISOR SUBADVISORS
SERIES PORTFOLIO SUBADVISORS FEE(%) FEE(%)
- ----------------------------------- ------------------------------------- ------- -----------
<S> <C> <C> <C>
Money Market Series................ Capital Management Group 0.25 0.05
High Quality Bond Series........... Merganser Capital Management
Corporation 0.35 (2)
Intermediate Government Bond
Series........................... Capital Management Group 0.35(1) 0.15
Government/Corporate Bond Series... Capital Management Group 0.35 0.15
Balanced Series.................... Institutional Capital Corporation 0.45(1) (3)
Equity Income Series............... Asset Management Group 0.45 0.25
Equity Value Series................ Ark Asset Management Company, Inc. 0.57(1) (4)
Growth & Income Series............. Putnam Advisory Company, Inc. 0.60(1) (5)
Equity Growth Series............... Chancellor LGT Asset Management, Inc. 0.62 (6)
Special Equity Series.............. (7) 0.80(1) 0.50
Aggressive Equity Series........... McKinley Capital Management 0.97(1) (8)
High-Yield Bond Series............. Delaware Investment Advisors 0.55(1) (9)
International Equity Series........ Capital Guardian Trust Company 0.75 (10)
</TABLE>
- ---------------
(1) The Advisor is currently waiving a portion of its fee.
(2) 0.50% on the first $10,000,000 in average daily net assets, 0.375% on the
next $15,000,000 in average daily net assets, 0.25% on the next $75,000,000
in average daily net assets and 0.1875% on all average daily net assets in
excess of $100,000,000.
(3) 0.55% on the first $25,000,000 in average daily net assets, 0.45% on the
next $25,000,000 in average daily net assets, and 0.35% on all average
daily net assets in excess of $50,000,000.
(4) 0.45% on the first $100,000,000 in average daily net assets, 0.40% on the
next $50,000,000 in average daily net assets, and 0.35% on the next
$50,000,000 in average daily net assets; when average daily net assets
reach $200,000,000, 0.40% on the first $200,000,000 in average daily net
assets, and 0.35% on all average daily net assets in excess of
$200,000,000.
(5) 0.30% on the first $100,000,000 in average daily net assets, and 0.20% on
all average daily net assets in excess of $100,000,000.
(6) 0.50% on the first $50,000,000 in average daily net assets, 0.30% on the
next $75,000,000 in average daily net assets, 0.25% on the next $75,000,000
in average daily net assets, and 0.20% on all average daily net assets in
excess of $200,000,000.
(7) The Special Equity Series has four Subadvisors: Pilgrim Baxter &
Associates, Ltd., Ark Asset Management Co., Inc.; Liberty Investment
Management, Inc.; and Westport Asset Management, Inc.
(8) 0.90% on the first $10,000,000 in average daily net assets, 0.80% on the
next $15,000,000 in average daily net assets, 0.60% on the next $25,000,000
in average daily net assets, 0.40% on the next $50,000,000 in average daily
net assets, and 0.35% on all average daily net assets in excess of
$100,000,000.
(9) 0.40% on the first $20,000,000 in average daily net assets, 0.30% on the
next $20,000,000 in average daily net assets, and 0.20% on all average
daily net assets in excess of $40,000,000.
72
<PAGE> 75
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (continued)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
(10) 0.75% on the first $25,000,000 in average daily net assets, 0.60% on the
next $25,000,000 in average daily net assets, 0.425% from $50,000,000 to
$250,000,000 in average daily net assets and 0.375% on all average daily
net assets in excess of $250,000,000.
For the period ended June 30, 1997 , the Advisor has voluntarily undertaken
to waive fees in accordance with the expense caps as follows:
<TABLE>
<CAPTION>
FUND EXPENSE CAP
--------------------------------------------------------------- ------------------------
<S> <C>
Money Market Series............................................ 30 basis points (b.p.)
High Quality Bond Series....................................... 40 b.p.
Intermediate Government Bond Series............................ 40 b.p.
Government/Corporate Bond Series............................... 40 b.p.
Balanced Series................................................ 50 b.p.
Equity Income Series........................................... 50 b.p.
Equity Value Series............................................ 60 b.p.
Growth & Income Series......................................... 65 b.p.
Equity Growth Series........................................... 65 b.p.
Special Equity Series.......................................... 85 b.p.
Aggressive Equity Series....................................... 100 b.p.
High-Yield Bond Series......................................... 60 b.p.
International Equity Series.................................... 90 b.p.
</TABLE>
Certain trustees and officers of the Series Portfolio are also directors,
officers or employees of the Advisor or its affiliates. None of the trustees so
affiliated receive compensation for services as trustees of the Series
Portfolio. Similarly, none of the Series Portfolio officers receive compensation
from the Series Portfolio.
4. SECURITIES LENDING
Each of the portfolios may lend its securities to brokers, dealers and
other financial organizations. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value of the
securities on loan. Any deficiencies or excess of collateral must be delivered
or transferred by the member firms no later than the close of business on the
next business day. As with other extensions of credit, the Series may bear the
risk of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. The Series receives compensation,
net of related expenses, for lending its securities which is included in
interest income on the Statement of Operations. At June 30, 1997, the Series
loaned securities having market values as follows:
<TABLE>
<CAPTION>
MARKET VALUE COLLATERAL
------------ -----------
<S> <C> <C>
High Quality Bond Series.......................................... $ 5,044,364 $ 5,118,750
Balanced Series................................................... 93,660,059 95,892,493
Equity Income Series.............................................. 27,158,203 28,062,880
Equity Value Fund................................................. 5,582,403 5,747,160
Growth & Income Series............................................ 22,667,175 23,374,400
Equity Growth..................................................... 42,538,281 44,196,500
Special Equity Series............................................. 87,898,131 90,144,329
International Equity.............................................. 7,489,666 7,761,300
</TABLE>
73
<PAGE> 76
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (continued)
5. PURCHASE AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from sales or
maturities (excluding short-term securities) for the period ended June 30, 1997
were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C> <C>
High Quality Bond Series............... Government Obligations $ 10,001,953 $ 44,398,879
Other 39,176,461 10,001,953
Intermediate Government Bond Series.... Government Obligations 8,928,594 27,854,098
Government/Corporate Bond Series....... Government Obligations 103,147,257 105,119,319
Other 57,907,300 43,813,076
Balanced Series........................ Government Obligations 84,352,581 12,732,536
Other 94,980,727 136,291,857
Equity Income Series................... Other 187,635,342 175,961,272
Equity Value Series.................... Other 122,527,373 33,456,362
Growth & Income Series................. Other 134,558,062 114,775,336
Equity Growth Series................... Other 191,356,612 140,783,591
Special Equity Series.................. Other 359,024,766 324,036,417
Aggressive Equity Series............... Other 16,619,775 17,908,393
High-Yield Bond Series................. Other 22,697,944 6,331,316
International Equity Series............ Other 55,605,497 23,885,058
</TABLE>
74
<PAGE> 77
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (continued)
6. FOREIGN CURRENCY FORWARD CONTRACTS
At June 30, 1997, the International Equity Series had entered into Foreign
Currency Forward contracts which contractually obligate the Series to
deliver/receive currency at specified future dates. The open contracts were as
follows:
<TABLE>
<CAPTION>
FOREIGN IN EXCHANGE SETTLEMENT NET UNREALIZED
CONTRACT CURRENCY FOR DATE VALUE APPRECIATION/DEPRECIATION
- -------------------------- ------------- ----------- ---------- ---------- -------------------------
<S> <C> <C> <C> <C> <C>
PURCHASES:
Japanese Yen.............. 7,009,050 $ 61,901 07/01/97 $ 61,235 $ (666)
Japanese Yen.............. 2,393,252 21,147 07/01/97 20,908 (239)
Japanese Yen.............. 2,307,553 20,121 07/02/97 20,163 42
Japanese Yen.............. 70,648,127 599,119 10/31/97 628,521 29,402
Japanese Yen.............. 70,648,000 598,763 10/31/97 628,520 29,757
Singapore Dollar.......... 31,147 21,810 07/01/97 21,793 (17)
Duetsche Mark............. 972,058 575,670 08/27/97 560,208 (15,462)
Duetsche Mark............. 719,641 421,434 09/09/97 415,125 (6,309)
Great British Pound....... 134,094 223,819 07/01/97 223,179 (640)
Great British Pound....... 99,589 165,948 07/02/97 165,746 (202)
Great British Pound....... 507,482 832,778 08/18/97 843,407 10,629
Malaysian Ringgit......... 120,717 47,917 07/02/97 47,831 (86)
Malaysian Ringgit......... 190,071 75,377 07/03/97 75,308 (69)
Malaysian Ringgit......... 196,274 77,834 07/03/97 77,766 (68)
Malaysian Ringgit......... 191,441 75,928 07/07/97 75,843 (85)
Malaysian Ringgit......... 210,371 83,415 07/08/97 83,342 (73)
Indonesian Rupiah......... 1,415,317,811 582,459 07/03/97 582,436 (23)
Norwegian Krone........... 635,934 87,084 07/02/97 86,862 (222)
--------
TOTAL................ $ 45,669
========
SELLS:
Japanese Yen.............. 5,723,725 $ 50,572 07/01/97 $ 50,005 $ 567
Japanese Yen.............. 2,841,193 24,774 07/02/97 24,826 (52)
Japanese Yen.............. 125,854,610 1,123,000 08/22/97 1,108,123 14,877
Japanese Yen.............. 141,296,127 1,299,000 10/31/97 1,257,041 41,959
Japanese Yen.............. 58,990,555 509,000 11/17/97 526,187 (17,187)
Hong Kong Dollar.......... 2,479,747 319,000 11/14/97 319,650 (650)
French Franc.............. 1,484,780 261,704 08/27/97 253,721 7,983
French Franc.............. 2,428,859 421,434 09/09/97 415,402 6,032
Great British Pound....... 1,246 2,071 07/01/97 2,074 (3)
Great British Pound....... 73,856 123,274 07/01/97 122,922 352
Great British Pound....... 41,587 69,296 07/03/97 69,211 85
Great British Pound....... 264,596 431,000 05/13/98 436,227 (5,227)
Great British Pound....... 150,381 242,000 05/13/98 247,926 (5,926)
Great British Pound....... 507,482 819,000 08/18/97 843,407 (24,407)
Great British Pound....... 589,168 964,144 08/20/97 979,103 (14,959)
Great British Pound....... 355,492 575,670 08/27/97 590,645 (14,975)
--------
TOTAL................ $ (11,531)
========
</TABLE>
75
<PAGE> 78
DIVERSIFIED INVESTORS PORTFOLIOS
Notes to Financial Statements (continued)
7. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET SERIES HIGH QUALITY BOND SERIES BOND SERIES
------------------------------------- -------------------------------------- --------------------------------------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
ENDED FOR THE YEAR ENDED ENDED FOR THE YEAR ENDED ENDED FOR THE YEAR ENDED
------- --------------------------- ------- ---------------------------- -------- ---------------------------
6/30/97* 1996 1995 1994 6/30/97* 1996 1995 1994 6/30/97* 1996 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of
expenses
to
average
net
assets... 0.29% 0.30% 0.31% 0.32% 0.40% 0.40% 0.41% 0.41% 0.43% 0.43% 0.45% 0.45%
Ratio of
expenses
to
average
net
assets
(net of
reimburse-
ments)... 0.29% 0.30% 0.30% 0.30% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of
net
investment
income
to
average
net
assets... 5.27% 5.19% 5.70% 4.05% 6.19% 6.14% 5.83% 5.77% 5.57% 5.63% 5.57% 5.71%
Ratio of
net
investment
income
to
average
net
assets
(net of
reimburse-
ments)... 5.27% 5.19% 5.69% 4.07% 6.19% 6.14% 5.82% 5.79% 5.61% 5.66% 5.52% 5.76%
Portfolio
turnover... N/A N/A N/A N/A 28% 66% 25% 37% 10% 60% 59% 21%
Average
commission
rate
per
share**... N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INCOME SERIES EQUITY GROWTH SERIES SPECIAL EQUITY SERIES
------------------------------------- -------------------------------------- --------------------------------------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
ENDED FOR THE YEAR ENDED ENDED FOR THE YEAR ENDED ENDED FOR THE YEAR ENDED
------- --------------------------- ------- ---------------------------- -------- ---------------------------
6/30/97* 1996 1995 1994 6/30/97* 1996 1995 1994 6/30/97* 1996 1995 1994
------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of
expenses
to
average
net
assets... 0.66% 0.67% 0.68% 0.67% 0.65% 0.73% 0.75% 0.76% 0.85% 0.86% 0.88% 0.88%
Ratio of
expenses
to
average
net
assets
(net of
reimburse-
ments)... 0.65% 0.65% 0.65% 0.65% 0.65% 0.73%(1) 0.75% 0.75% 0.85% 0.85% 0.85% 0.85%
Ratio of
net
investment
income
to
average
net
assets... 0.77% 1.02% 1.49% 1.35% 0.51% (0.17%) 0.41% 0.08% 0.26% 0.24% 0.33% 0.27%
Ratio of
net
investment
income
to
average
net
assets
(net of
reimburse-
ments)... 0.78% 1.04% 1.47% 1.37% 0.51% (0.17%) 0.41% 0.11% 0.26% 0.25% 0.30% 0.30%
Portfolio
turnover... 52% 142% 155% 21% 41% 133% 62% 75% 64% 140% 155% 90%
Average
commission
rate
per
share**... $0.0508 $0.0476 N/A N/A $0.0534 $0.0553 N/A N/A $0.0528 $0.0507 N/A N/A
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Annualized (except for Portfolio turnover and Average commission rate per share)
** For fiscal years beginning on or after September 1, 1995, the Portfolios are required to disclose their average commission
rate per share for trades on which a commission is charged.
+ Commencement of Operations, April 19, 1996.
++ Commencement of Operations, August 22, 1995.
+++ Commencement of Operations, September 29, 1995.
(1) For the period January 1, 1996 -- November 14, 1996, the expense cap was 75 bp.
For the period November 15, 1996 -- December 31, 1996, the expense cap was 65 bp.
</TABLE>
76
<PAGE> 79
<TABLE>
<CAPTION>
GOVERNMENT/CORPORATE BOND SERIES BALANCED SERIES
- ------------------------------------------- -------------------------------------------
FOR THE FOR THE
PERIOD PERIOD
ENDED FOR THE YEAR ENDED ENDED FOR THE YEAR ENDED
- ------- ------------------------------- ------- -------------------------------
6/30/97* 1996 1995 1994 6/30/97* 1996 1995 1994
- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
0.39% 0.39% 0.39% 0.40% 0.49% 0.50% 0.54% 0.53%
0.39% 0.39% 0.39% 0.40% 0.49% 0.50% 0.50% 0.50%
6.61% 6.30% 5.90% 5.71% 3.63% 3.39% 4.19% 3.57%
6.61% 6.30% 5.90% 5.72% 3.63% 3.39% 4.15% 3.61%
50% 146% 122% 122% 51% 113% 124% 118%
N/A N/A N/A N/A $0.0368 $0.0372 N/A N/A
<CAPTION>
EQUITY INCOME SERIES EQUITY VALUE SERIES+
-------------------------------- ---------------------
FOR THE
YEAR
FOR THE YEAR ENDED FOR THE PERIOD ENDED ENDED
-------------------------------- -------------------- --------
6/30/97* 1996 1995 1994 6/30/97* 1996*
-------- ------- ------- ------- -------- --------
<C> <C> <C> <C> <C> <C>
0.48% 0.48% 0.49% 0.49% 0.69% 1.06%
0.48% 0.48% 0.49% 0.49% 0.60% 0.60%
2.35% 2.97% 3.37% 3.43% 1.57% 1.60%
2.35% 2.97% 3.37% 3.43% 1.66% 2.07%
18% 26% 23% 30% 43% 65%
$0.0598 $0.0620 N/A N/A $0.0561 $0.0600
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE INTERNATIONAL EQUITY
EQUITY SERIES+ HIGH YIELD BOND SERIES++ SERIES+++
- ------------------ ------------------------ -------------------------
FOR THE FOR THE FOR THE FOR THE
PERIOD YEAR PERIOD FOR THE YEAR PERIOD FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
- -------- ------- -------- ------------- ------- ---------------
6/30/97* 1996* 6/30/97* 1996 1995* 6/30/97* 1996 1995*
- -------- ------- -------- ----- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1.43% 1.59% 0.81% 1.25% 1.32% 0.87% 0.96% 0.83%
1.00% 1.00% 0.60% 0.60% 0.60% 0.87% 0.90% 0.80%
(0.81%) (0.72%) 8.22% 8.34% 8.45% 1.58% 1.12% 0.53%
(0.39%) (0.13%) 8.42% 9.00% 7.73% 1.58% 1.18% 0.50%
115% 186% 27% 107% 21% 15% 29% 7%
$0.0543 $0.0540 N/A N/A N/A $0.0235 $0.0030 N/A
</TABLE>
77
<PAGE> 80
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
STRATEGIC VARIABLE STRATEGIC VARIABLE STRATEGIC VARIABLE
FUND FUND FUND
------------------ ------------------ ------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost $185,925,
$1,134,075 and $1,346,776,
respectively)............................. $191,049 $1,200,658 $1,437,046
-------- ---------- ----------
LIABILITIES:
Accrued expenses............................ 32 192 202
-------- ---------- ----------
NET ASSETS.................................. $191,017 $1,200,466 $1,436,844
======== ========== ==========
Accumulation units.......................... 18,357 111,581 129,343
======== ========== ==========
UNIT VALUE.................................. $ 10.41 $ 10.76 $ 11.11
======== ========== ==========
NET ASSETS CONSIST OF:
Cost of accumulation units................ $185,203 $1,132,388 $1,339,918
Accumulated net realized gains............ 819 2,054 7,259
Accumulated net investment loss........... (129) (559) (603)
Unrealized appreciation on investments.... 5,124 66,583 90,270
-------- ---------- ----------
Net Assets............................. $191,017 $1,200,466 $1,436,844
======== ========== ==========
</TABLE>
See notes to financial statements.
78
<PAGE> 81
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
STRATEGIC VARIABLE STRATEGIC VARIABLE STRATEGIC VARIABLE
FUND FUND FUND
------------------ ------------------ ------------------
<S> <C> <C> <C>
Investment advisory fees.............................. $ (129) $ (559) $ (603)
------- -------- --------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investments................... 819 2,054 7,259
Net change in unrealized appreciation on
investments...................................... 5,124 66,583 90,270
------- -------- --------
Net realized and unrealized gains on investments.... 5,943 68,637 97,529
------- -------- --------
Net increase in net assets resulting from
operations.......................................... $ 5,814 $ 68,078 $ 96,926
======= ======== ========
</TABLE>
See notes to financial statements.
79
<PAGE> 82
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
STRATEGIC VARIABLE STRATEGIC VARIABLE STRATEGIC VARIABLE
FUND FUND FUND
------------------ ------------------ ------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment loss....................... $ (129) $ (559) $ (603)
Net realized gains on investments......... 819 2,054 7,259
Net change in unrealized appreciation on
investments............................ 5,124 66,583 90,270
-------- ---------- ----------
Net increase in net assets resulting from
operations................................ 5,814 68,078 96,926
-------- ---------- ----------
FROM UNIT TRANSACTIONS:
Proceeds from issuance of units........... 185,203 1,291,324 1,617,362
Value of units redeemed................... -- (158,936) (277,444)
-------- ---------- ----------
Net increase in net assets from unit
transactions.............................. 185,203 1,132,388 1,339,918
-------- ---------- ----------
Net assets end of period.................... $191,017 $1,200,466 $1,436,844
======== ========== ==========
NET ASSETS:
Units outstanding beginning of period....... -- -- --
Units issued during period.................. 18,357 126,945 156,189
Units redeemed during period................ -- (15,364) (26,846)
-------- ---------- ----------
Units outstanding end of period............. 18,357 111,581 129,343
======== ========== ==========
</TABLE>
See notes to financial statements.
80
<PAGE> 83
CONSERVATIVE STRATEGIC ALLOCATION VARIABLE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENT OF
SHARES VALUE NET ASSETS
------ -------- ----------
<C> <S> <C> <C>
INVESTMENTS
595 Diversified Investors Variable Funds -- Equity Income
Fund.................................................... $ 18,779
2,759 Diversified Investors Variable
Funds -- Government/Corporate Bond Fund................. 56,783
4,483 Diversified Investors Variable Funds -- High Quality Bond
Fund.................................................... 47,416
2,552 Diversified Investors Variable Funds -- High Yield Bond
Fund.................................................... 28,370
1,041 Diversified Investors Variable Funds -- Intermediate
Government Bond Fund.................................... 15,159
1,599 Diversified Investors Variable Funds -- Money Market
Fund.................................................... 24,542
--------
Total investments (Cost $185,925)......................... 191,049 100.02%
Other assets less liabilities............................. (32) (0.02)%
-------- ------
NET ASSETS................................................ $191,017 100.00%
======== ======
</TABLE>
The aggregate cost of investments for federal income tax purposes at June
30, 1997, is $185,925.
The following amount is based on costs for federal income tax purposes:
<TABLE>
<C> <S> <C> <C>
Gross unrealized appreciation............................. $ 5,124
========
</TABLE>
See notes to financial statements.
81
<PAGE> 84
MODERATE STRATEGIC ALLOCATION VARIABLE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
OF NET
SHARES VALUE ASSETS
- ------ ---------- ------
<C> <S> <C> <C>
INVESTMENTS
2,232 Diversified Investors Variable Funds -- Aggressive Equity
Fund.......................................................... $ 24,246
3,461 Diversified Investors Variable Funds -- Equity Growth Fund...... 117,149
2,981 Diversified Investors Variable Funds -- Equity Income Fund...... 94,133
7,592 Diversified Investors Variable Funds -- Equity Value Fund....... 94,171
14,403 Diversified Investors Variable Funds -- Government/Corporate
Bond Fund..................................................... 296,479
3,110 Diversified Investors Variable Funds -- Growth and Income
Fund.......................................................... 59,334
6,741 Diversified Investors Variable Funds -- High Quality Bond
Fund.......................................................... 71,299
10,658 Diversified Investors Variable Funds -- High Yield Bond Fund.... 118,502
2,446 Diversified Investors Variable Funds -- Intermediate Government
Bond Fund..................................................... 35,617
7,725 Diversified Investors Variable Funds -- International Equity
Fund.......................................................... 108,400
5,526 Diversified Investors Variable Funds -- Money Market Fund....... 84,812
4,715 Diversified Investors Variable Funds -- Special Equity Fund..... 96,516
----------
Total investments (Cost $1,134,075)............................. 1,200,658 100.02%
Other assets less liabilities................................... (192) (0.02)%
---------- ------
NET ASSETS...................................................... $1,200,466 100.00%
========== ======
The aggregate cost of investments for federal income tax purposes at June 30,1997, is $1,134,075.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation................................... $ 66,583
==========
</TABLE>
See notes to financial statements.
82
<PAGE> 85
AGGRESSIVE STRATEGIC ALLOCATION VARIABLE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
OF NET
SHARES VALUE ASSETS
- ------ ---------- ------
<C> <S> <C> <C>
INVESTMENTS
5,305 Diversified Investors Variable Funds -- Aggressive Equity
Fund............................................................ $ 57,618
7,567 Diversified Investors Variable Funds -- Equity Growth Fund...... 256,137
6,339 Diversified Investors Variable Funds -- Equity Income Fund...... 200,143
13,827 Diversified Investors Variable Funds -- Equity Value Fund....... 171,522
7,507 Diversified Investors Variable Funds -- Growth and Income
Fund............................................................ 143,212
9,454 Diversified Investors Variable Funds -- High Quality Bond
Fund............................................................ 99,985
13,134 Diversified Investors Variable Funds -- International Equity
Fund............................................................ 184,289
9,739 Diversified Investors Variable Funds -- Money Market Fund....... 149,482
8,532 Diversified Investors Variable Funds -- Special Equity Fund..... 174,658
----------
Total investments (Cost $1,346,776)............................. 1,437,046 100.01%
Other assets less liabilities................................... (202) (0.01)%
---------- ------
NET ASSETS...................................................... $1,436,844 100.00%
========== ======
The aggregate cost of investments for federal income tax purposes at June 30, 1997, is $1,346,776.
The following amount is based on costs for federal income tax purposes:
Gross unrealized appreciation................................... $ 90,270
==========
</TABLE>
See notes to financial statements.
83
<PAGE> 86
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Diversified Investors Strategic Variable Funds (the "Trust"), a New
York business trust, is registered under the Investment Company Act of 1940 (the
"1940 Act"), as amended, as an open-end management investment company. The Trust
is composed of three different series that are, in effect, separate investment
funds: Conservative Strategic Variable Fund, Moderate Strategic Variable Fund,
and the Aggressive Strategic Variable Fund (collectively, the "Funds"). The
Trust established and designated each of the Funds as separate series on April
15, 1996. Each Fund seeks to achieve its investment objective by investing all
of its investable assets among the Diversified Investors Variable Funds
("DIVF"). DIVF is a separate investment account offering fourteen subaccounts,
each with a different investment objective. DIVF operates as a unit investment
trust under the Investment Company Act of 1940, as amended. The Funds had no
assets or operations until January 2, 1997 (commencement of operations).
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of its financial statements.
A. Investment Valuation:
The value of any Fund's investment in a corresponding subaccount of DIVF is
valued at the unit value per share of each subaccount determined as of the close
of the New York Stock Exchange on the valuation date.
B. Federal Income Taxes:
The operations of the Trust form a part of, and are taxed with, the
operations of AUSA. AUSA does not expect, based upon current tax law, to incur
any income tax upon the earnings or realized capital gains attributed to the
Trust. Based upon this expectation, no charges are currently being deducted from
the Trust for federal income tax purposes.
C. Operating Expenses:
The Trust accounts separately for the assets, liabilities and operations of
each Fund. Each Fund will indirectly bear its pro rata share of fees and
expenses incurred by DIVF.
D. Other:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
3. FEES AND TRANSACTIONS WITH AFFILIATES
The Trust has entered into an Administrative Services Agreement with the
Advisor, an indirect, wholly-owned subsidiary of AEGON USA, Inc., under which
the Advisor provides administration, transfer agency and shareholder services.
For providing these services, facilities and for bearing the related expenses,
the Advisor receives a monthly fee from each Fund at an annual rate equal to
0.20% of the average daily net assets of each Fund.
84
<PAGE> 87
DIVERSIFIED INVESTORS STRATEGIC VARIABLE FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FEES AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
Certain trustees and officers of the Trust are also directors, officers or
employees of the Advisor or its affiliates. None of the trustees so affiliated
receive compensation for services as trustees of the Trust. Similarly, none of
the Trust's officers receive compensation from the Funds.
4. PURCHASE AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and proceeds from the sales or
maturities for the period ended June 30, 1997, were as follows:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
<S> <C> <C>
Conservative Strategic Variable Fund... $ 478,641 $ 293,535
Moderate Strategic Variable Fund....... 3,396,586 2,264,565
Aggressive Equity Variable Fund........ 4,135,399 2,795,882
</TABLE>
5. FINANCIAL HIGHLIGHTS
For one accumulation unit outstanding throughout the period.
<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
STRATEGIC VARIABLE STRATEGIC VARIABLE STRATEGIC VARIABLE
FUND FUND FUND
------------------ ------------------ ------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
ENDED ENDED ENDED
6/30/97 6/30/97 6/30/97
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net asset value, beginning of period............ $ 10.00 $ 10.00 $ 10.00
-------- ---------- ----------
Income from investment operations:
Net investment income........................... (0.01) (0.01) (0.01)
Net gains (losses) on investments (both realized
and unrealized)............................... 0.42 0.77 1.12
-------- ---------- ----------
Total from investment operations................ 0.41 0.76 1.11
-------- ---------- ----------
Unit value, end of period....................... $ 10.41 $ 10.76 $ 11.11
======== ========== ==========
Total Return.................................... 4.10% 7.60% 11.10%
======== ========== ==========
Ratio/Supplemental data:
Net assets end of period........................ $191,017 $1,200,466 $ 1,436,844
Ratio of expenses to average net assets*........ 0.20% 0.20% 0.20%
Ratio of net investment income to average net
assets*....................................... (0.20)% (0.20)% (0.20)%
Portfolio turnover rate......................... 205% 340% 379%
Average Commission Rate Per Share............... NA NA NA
</TABLE>
- ---------------
* Annualized
85
<PAGE> 88
A SPECIAL NOTICE TO ALL
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED
CONTRACT HOLDERS
We're pleased to announce that on April 21, 1997, Barbara Krumsiek joined
Calvert Group as president and chief executive officer. Ms. Krumsiek comes to
Calvert Group from Alliance Capital Management, where she served as senior vice
president and managing director of their mutual funds division. She has 20 years
experience in mutual fund management and marketing.
Ms. Krumsiek replaces former Calvert Group president, Clifton S. Sorrell, who
stepped down earlier this year after nearly 10 years in the top post.
We look forward to Ms. Krumsiek leading the company into the next century and
bringing Calvert Group mutual funds to a growing number of new investors. We
welcome her to the Calvert Group family.
SEMI-ANNUAL REPORT (UNAUDITED) CRI BALANCED PORTFOLIO-1
86
<PAGE> 89
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
Managed by Calvert Asset Management Company, Inc. and NCM Capital Management,
Inc.
Dear Investor:
The Balanced Portfolio generated a return of 10.48% for the six months
ended June 30, 1997, which compares favorably to the 10.19% average return for
the 39 balanced funds tracked by Lipper Analytical Services.
REVIEW OF THE ECONOMY AND MARKETS
The economy expanded at a robust pace for the first quarter then appeared
to moderate in the second quarter. In an attempt to defuse inflationary
pressures, the Federal Reserve adopted a slightly more restrictive monetary
policy. The Fed nudged its target for key short-term rates higher in March, but
left rates unchanged during the second quarter.
In general, bond yields moved higher during the first part of the year then
backed down toward the close of this reporting period as investors revised their
expectations for the next Fed move--first thinking the Fed would take steps to
raise rates then expecting no change. Most measures of the broad stock market
advanced, with the Standard & Poor's 500 Stock Index returning 20.6% for the six
months.
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
Comparison of change in value of a
hypothetical $10,000 investment.
<TABLE>
<CAPTION>
6/30/97 6/30/96 6/30/95 6/30/94 6/30/93 6/30/92 6/30/91 6/30/90 6/30/89 6/30/88 7/1/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CRI BALANCED $26,975 $22,354 $19,603 $16,444 $16,542 $14,695 $13,496 $12,523 $11,343 $10,001 $10,000
S&P 500 REINV $39,174 $29,087 $23,088 $18,320 $18,067 $15,903 $14,025 $13,062 $11,217 $9,307 $10,000
LEHMAN AGGREGATE DB $23,283 $21,529 $20,500 $18,214 $16,454 $16,509 $14,476 $13,077 $12,125 $10,805 $10,000
90-DAY T-BILL $17,177 $16,335 $15,518 $14,723 $14,245 $13,820 $13,232 $12,402 $11,479 $10,609 $10,000
</TABLE>
Average Annual Total Return
(period ending 6/30/97)
1 Year 20.67% 5 Year 12.92%
10 Year 10.43% Life of Fund 10.90% (9/86)*
* New subadvisors assumed management of the
Portfolio effective February 1995.
Performance information is for the Portfolio only and
does not reflect charges and expenses of the variable annuity.
Past performance does not indicate future results.
PERFORMANCE AND STRATEGY
We maintained the Portfolio's target asset mix of roughly 60% stocks and
40% bonds and benefited from positive returns from both asset classes.
EQUITY INVESTMENTS--NCM CAPITAL MANAGEMENT, INC.
The Portfolio's strongest returns came from sectors where we have the
largest exposure: technology, financial services and consumer products.
2-CRI BALANCED PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED)
87
<PAGE> 90
Technology stocks bounced back after a dismal first quarter. We took
profits in this area on strength, but remain slightly overweighted relative to
our peers. Financial stocks benefited from the Federal Reserve's decision to
leave key short-term rates unchanged in the second quarter. Lower interest rates
improves the profit outlook for banks and other financial services companies.
Consumer staples companies were favorites because of their ability to maintain
stable earnings growth.
Strong stock selection was also a key factor. Good gains came from US
Robotics, Cisco Systems, Compaq Computer, Avon, Fort Howard, Bank America and
Aflac.
FIXED-INCOME INVESTMENTS--CALVERT ASSET MANAGEMENT COMPANY, INC.
Bond yields began to trend higher going into 1997 but retraced most of
their advance in a late second quarter rally. In anticipation of generally
higher rates, we kept the Portfolio's weighted average maturity near the short
end of its target range. (It was approximately 13 years at the close of this
reporting period). This helped to offset the negative effect of rising rates
during the first part of the year, but meant we did not participate as fully in
the late-stage rally as our more aggressive peers.
Since the beginning of the calendar year, we have implemented a more active
management strategy. We expect this strategy to improve the Fund's total return
over time. Higher portfolio trading activity will result in a higher turnover
ratio due to the Fund's current asset size. For the six months ended June 30,
1997, the turnover ratio was 590%.
OUTLOOK
The stock market has rewarded investors with spectacular total returns for
the past two and a half years. While our long-term outlook is positive, we could
experience a correction as stocks settle back in to a more typical return range,
which has historically been about 10% annually.
The bond market is also likely to continue to exhibit a high degree of
volatility. At some point during the next six months, we expect interest rates
will trend a bit higher. Accordingly, we will maintain our defensive strategy.
Thank you for your investment in the Balanced Portfolio.
Sincerely,
/s/ Barbara Krumsiek
- --------------------
Barbara Krumsiek
President
July 21, 1997
SEMI-ANNUAL REPORT (UNAUDITED) CRI BALANCED PORTFOLIO-3
88
<PAGE> 91
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
<TABLE>
<CAPTION>
EQUITY SECURITIES - 59.3% SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
AIRLINES - 0.3%
AMR Corp. * ................................. 5,600 $ 518,000
-----------
518,000
-----------
BIOTECHNOLOGY - 0.6%
Amgen, Inc. ................................. 20,200 1,174,125
-----------
1,174,125
-----------
BUSINESS EQUIPMENT AND SERVICES - 0.9%
Sun Microsystems, Inc. * .................... 46,340 1,724,717
-----------
1,724,717
-----------
CAPITAL GOODS - 0.6%
Illinois Tool Works, Inc. ................... 23,800 1,188,512
-----------
1,188,512
-----------
COMPUTER - HARDWARE - 0.9%
Compaq Computer Corp. * ..................... 16,700 1,657,475
-----------
1,657,475
-----------
COMPUTER - NETWORKS - 3.2%
3Com Corp. * ................................ 71,950 3,237,750
Cisco Systems, Inc. * ....................... 41,800 2,805,825
-----------
6,043,575
-----------
COMPUTER - SOFTWARE - 3.9%
BMC Software, Inc. * ........................ 27,500 1,522,812
Computer Associates International, Inc. ..... 40,577 2,259,632
Microsoft Corp. * ........................... 8,820 1,114,628
Oracle Corp. * .............................. 51,357 2,587,109
-----------
7,484,181
-----------
CONSUMER PRODUCTS AND SERVICES - 6.3%
Avon Products, Inc. ......................... 37,100 2,617,869
Colgate Palmolive Co. ....................... 37,000 2,414,250
CUC International, Inc. * ................... 58,050 1,498,416
Dial Corp. .................................. 68,200 1,065,625
Fort Howard Corp. * ......................... 25,200 1,275,750
Gillette Co. ................................ 33,800 3,202,550
-----------
12,074,460
-----------
ELECTRONICS - 1.7%
EMC Corp. * ................................. 40,450 1,577,550
Intel Corp. ................................. 12,300 1,744,294
-----------
3,321,844
-----------
</TABLE>
4-CRI BALANCED PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED)
89
<PAGE> 92
<TABLE>
<CAPTION>
EQUITY SECURITIES (CONT'D) SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT - 1.1%
Disney (Walt) Co. ........................ 26,205 $ 2,102,951
-----------
2,102,951
-----------
FINANCIAL SERVICES - 7.8%
Banc One Corp. ........................... 45,800 2,218,438
BankAmerica Corp. ........................ 36,800 2,375,900
BankBoston Corp. ......................... 20,315 1,463,950
Chase Manhattan Corp. .................... 20,100 1,950,956
Federal National Mortgage Assn ........... 44,900 1,958,762
Green Tree Financial Corp. ............... 50,942 1,814,809
Umbono Investment Corp., Ltd. * .......... 1,154,900 3,054,617
-----------
14,837,432
-----------
FOOD PRODUCTS - 4.4%
CPC International, Inc. .................. 29,500 2,723,219
Heinz (H.J.) Co. ......................... 49,700 2,292,412
Hershey Foods Corp. ...................... 38,000 2,101,875
Interstate Bakeries Corp. ................ 20,900 1,239,631
-----------
8,357,137
-----------
HEALTH CARE - 2.1%
Cardinal Health, Inc. .................... 16,100 921,725
Johnson & Johnson ........................ 48,237 3,105,257
-----------
4,026,982
-----------
INDUSTRIAL PRODUCTS - 1.0%
Praxair, Inc. ............................ 32,700 1,831,200
-----------
1,831,200
-----------
INSURANCE - 4.1%
AFLAC, Inc. .............................. 40,550 1,915,988
American International Group, Inc. ....... 15,950 2,382,531
MGIC Investment Corp. .................... 32,700 1,567,556
SunAmerica, Inc. ......................... 41,300 2,013,375
-----------
7,879,450
-----------
MANUFACTURING - 1.0%
Dover Corp. .............................. 31,145 1,915,418
-----------
1,915,418
-----------
MEDICAL - 2.9%
Boston Scientific Corp. * ................ 36,085 2,216,972
Guidant Corp. ............................ 14,700 1,249,500
Medtronic, Inc. .......................... 25,100 2,033,100
-----------
5,499,572
-----------
OFFICE EQUIPMENT AND SUPPLIES - 0.8%
Viking Office Products, Inc. * ........... 79,300 1,506,700
-----------
1,506,700
-----------
</TABLE>
SEMI-ANNUAL REPORT (UNAUDITED) CRI BALANCED PORTFOLIO-5
90
<PAGE> 93
<TABLE>
<CAPTION>
EQUITY SECURITIES (CONT'D) SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
OIL AND GAS - 1.9%
Baker Hughes, Inc. .............................. 54,300 $ 2,100,731
Seitel, Inc. * .................................. 38,000 1,444,000
------------
3,544,731
------------
PAPER AND PACKAGING - 2.0%
Avery Dennison Corp. ............................ 61,900 2,483,738
Sealed Air Corp. * .............................. 26,100 1,239,750
------------
3,723,488
------------
PHARMACEUTICAL - 2.7%
Merck & Co., Inc. ............................... 29,500 3,053,250
Schering Plough Corp. ........................... 45,500 2,178,312
------------
5,231,562
------------
RETAIL - 4.6%
Autozone, Inc. * ................................ 49,300 1,161,631
Barnes and Noble, Inc. * ........................ 30 1,290
Consolidated Stores Corp. * ..................... 42,515 1,477,396
Jones Apparel Group, Inc. * ..................... 32,200 1,537,550
Kroger Co. * .................................... 62,300 1,806,700
Penney (J.C.), Inc. ............................. 54,800 2,859,875
------------
8,844,442
------------
TELECOMMUNICATIONS - 4.5%
Ameritech Corp. ................................. 31,395 2,132,898
Century Telephone Enterprises, Inc. ............. 49,665 1,673,090
Ericsson (L. M.) Telephone, Co., Class B, ADR ... 63,205 2,488,697
SBC Communications, Inc. ........................ 37,800 2,338,875
------------
8,633,560
------------
Total Equity Securities (Cost $86,454,343) ... 113,121,514
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
CORPORATE OBLIGATIONS - 30.5% AMOUNT
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Advanta Corp., 6.785%, 7/27/98 .............................. $1,000,000 996,790
Advanta National Bank, 6.45%, 10/30/00 ...................... 1,000,000 965,930
AFC Capital Trust I, 8.207%, 2/3/27 ......................... 500,000 509,030
Alco Capital Resource, Inc., 6.58%, 3/29/99 ................. 2,000,000 2,005,300
American General Institutional Capital A, 7.57%, 12/1/45 ... 1,500,000 1,408,005
AMR Corp., 9.82%, 3/7/01 .................................... 25,000 27,134
Banc One Auto, 6.40%, 11/20/03 .............................. 6,000,000 5,977,790
Banc One Corp., 8.00%, 4/29/27 .............................. 4,500,000 4,642,605
BankBoston Capital Trust III, 6.5625%, 6/15/27 .............. 3,000,000 2,961,804
Comerica Bank, 7.25%, 6/15/07 ............................... 1,500,000 1,505,715
Conseco, Inc., 10.50%, 12/15/04 ............................. 1,000,000 1,174,120
Continental Valorem Corp. VRDN, 6.05%,
6/1/13, LOC: Tokai Bank Ltd. + ........................... 700,000 700,000
Countrywide Capital III, 8.05%, 6/15/27 ..................... 1,000,000 1,008,420
Dayton Hudson Corp., 6.80%, 10/1/01 ......................... 1,000,000 996,110
</TABLE>
6-CRI BALANCED PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED)
91
<PAGE> 94
<TABLE>
<CAPTION>
PRINCIPAL
CORPORATE OBLIGATIONS (CONT'D) AMOUNT VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
First USA Bank, 5.75%, 1/15/99 ............................... $1,725,000 $ 1,709,147
Goldman Sachs Group LP, 6.20%, 12/15/00 ...................... 2,000,000 1,970,500
Goldman Sachs Group LP, 6.75%, 2/15/06 ....................... 1,000,000 970,124
Household Finance Corp., 6.63%, 5/28/99 ...................... 1,000,000 1,003,380
Household Finance Corp., 7.65%, 5/15/07 ...................... 1,500,000 1,545,405
International Lease Finance Corp., 6.64%, 2/1/00 ............. 1,000,000 1,002,190
Life Re Capital Trust I, 8.72%, 6/15/27 ...................... 3,000,000 3,023,340
McKesson Corp., 6.875%, 3/1/02 ............................... 3,000,000 3,007,980
National City Bank, 7.25%, 7/15/10 ........................... 1,870,000 1,861,473
Penney (J.C.), Inc., 7.625%, 3/1/97 .......................... 2,000,000 1,968,620
Pitney Bowes Credit Corp., 6.305%, 9/23/98 ................... 1,000,000 1,003,430
PDR Finance LLC., VRDN, 5.53%, 4/1/27,
LOC: First America Bank + ................................. 900,000 900,000
Security Benefit Life Co., 8.75%, 5/15/16 .................... 2,000,000 2,102,374
St. George Bank, Ltd., 7.15%, 6/18/07 ........................ 1,500,000 1,480,665
Suntrust Capital I, 6.4825%, 5/15/27 ........................ 2,000,000 1,980,962
Summit Capital Trust I, 8.40%, 3/15/27 ....................... 1,000,000 1,015,740
Toronto Dominion Bank, 6.50%, 1/15/07 ........................ 3,000,000 2,962,548
Transamerica Corp., 9.375%, 3/1/08 ........................... 2,000,000 2,310,840
Xerox Capital Trust I, 8.00%, 2/1/27 ......................... 1,500,000 1,499,842
-----------
Total Corporate Obligations (Cost $58,129,287) .......... 58,197,313
-----------
REPURCHASE AGREEMENTS - 2.1%
- -------------------------------------------------------------------------------------------------
State Street Bank: 5.25%, dated 6/30/97, due 7/1/97
(Collateral: $4,154,909, FHLMC, 6.25%, 11/12/99 ........... 4,000,000 4,000,000
-----------
Total Repurchase Agreements (Cost $4,000,000) ........... 4,000,000
-----------
MUNICIPAL OBLIGATIONS - 2.0%
- -------------------------------------------------------------------------------------------------
Maryland State Economic Development Corp., 8.00%, 10/1/05 .... 1,000,000 1,006,030
Maryland State Economic Development Corp., 8.625%, 10/1/19 ... 750,000 775,335
New Jersey Economic Development Authority, 7.425%, 2/15/29 ... 1,500,000 1,495,275
Texas State, College Student Loan, 7.35%, 12/1/21 ............ 600,000 573,810
-----------
Total Municipal Obligations (Cost $3,846,540) ........... 3,850,450
-----------
U.S. TREASURY - 1.0%
- -------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.625%, 5/15/07 ......................... 2,000,000 2,017,220
-----------
Total U.S. Treasury (Cost $2,033,655) ................... 2,017,220
-----------
</TABLE>
SEMI-ANNUAL REPORT (UNAUDITED) CRI BALANCED PORTFOLIO-7
92
<PAGE> 95
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND PRINCIPAL
INSTRUMENTALITIES - 0.4% AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
WNH Ltd. Partnership, 9.40%, 10/1/99 .................... $ 705,000 $ 738,255
------------
Total U.S. Government Agencies and
Instrumentalities (Cost $725,588) ................ 738,255
------------
OTHER DEBT - 0.3%
- -----------------------------------------------------------------------------------------------
Chickasaw Nation, Oklahoma, 10.00%, 8/1/03 # ............ 1,000,000 600,000
------------
Total Other Debt (Cost $1,000,000) ................. 600,000
------------
TOTAL INVESTMENTS (Cost $156,189,413) - 95.6% ... 182,524,752
Other assets and liabilities, net - 4.4% ......... 8,327,842
------------
NET ASSETS - 100% ................................ $190,852,594
============
</TABLE>
+ Optional tender features give these securities a shorter effective maturity
date.
* Non-income producing.
# This security is in default.
Explanation of Guarantees:
LOC: Letter of Credit
Abbreviations:
VRDN: Variable Rate Demand Notes
8-CRI BALANCED PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED)
93
<PAGE> 96
BALANCED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------------
Investments in securities, at value .................................................... $182,524,752
Cash ................................................................................... 382,866
Receivable for securities sold ......................................................... 10,086,241
Interest and dividends receivable ...................................................... 971,063
Other assets ........................................................................... 18,905
------------
Total assets ........................................................................ 193,983,827
------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Payable for securities purchased ....................................................... 2,999,690
Payable to Calvert Asset Management Company, Inc. ...................................... 109,631
Payable to Calvert Shareholder Services, Inc. .......................................... 4,642
Accrued expenses and other liabilities ................................................. 17,270
------------
Total liabilities ................................................................... 3,131,233
------------
Net assets ........................................................................ $190,852,594
============
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------------
Par value and paid-in capital applicable to 97,358,335 shares of common
stock outstanding; $1 par value, 300,000,000 shares authorized ...................... $156,634,851
Undistributed net investment income (loss) ............................................. 2,847,502
Accumulated net realized gains (losses) on investments and foreign currencies .......... 5,034,902
Net unrealized appreciation (depreciation) on investments and assets and liabilities
in foreign currencies ............................................................... 26,335,339
------------
NET ASSETS ........................................................................ $190,852,594
============
NET ASSET VALUE PER SHARE ......................................................... $ 1.960
============
</TABLE>
See notes to financial statements.
SEMI-ANNUAL REPORT (UNAUDITED) CRI BALANCED PORTFOLIO-9
94
<PAGE> 97
BALANCED PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<S> <C>
NET INVESTMENT INCOME
- --------------------------------------------------------------------------------
Investment Income
Interest income ........................................ $ 2,588,726
Dividend income (net of foreign taxes of $1,481) ....... 508,689
------------
Total investment income .............................. 3,097,415
------------
Expenses
Investment advisory fee ................................ 581,598
Transfer agency fees and expenses ...................... 13,322
Directors' fees and expenses ........................... 7,457
Custodian fees ......................................... 27,851
Reports to shareholders ................................ 6,252
Professional fees ...................................... 16,055
Miscellaneous .......................................... 5,422
------------
Total expenses ....................................... 657,957
Fees paid indirectly ................................. (27,851)
------------
Net expenses ....................................... 630,106
------------
NET INVESTMENT INCOME ............................ 2,467,309
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Securities ............................................. 3,649,177
Foreign currencies ..................................... 60
------------
3,649,237
------------
Change in unrealized appreciation or depreciation on:
Securities ............................................. 11,723,422
Assets and liabilities in foreign currencies ........... --
------------
11,723,422
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 15,372,659
------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 17,839,968
============
</TABLE>
See notes to financial statements.
10-CRI BALANCED PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED)
95
<PAGE> 98
BALANCED PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS JUNE 30, 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income ................................ $ 2,467,309 $ 3,649,653
Net realized gain (loss) ............................. 3,649,237 9,057,850
Change in unrealized appreciation or depreciation .... 11,723,422 3,628,677
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... 17,839,968 16,336,180
------------- -------------
Distributions to shareholders from
Net investment income ................................ -- (3,502,338)
Net realized gain on investments ..................... -- (8,620,000)
------------- -------------
Total distributions ................................ -- (12,122,338)
------------- -------------
Capital share transactions
Shares sold .......................................... 17,926,798 38,725,037
Shares issued from merger (Note A) ................... -- 3,670,827
Reinvestment of distributions ........................ -- 12,122,338
Shares redeemed ...................................... (6,387,166) (7,496,263)
------------- -------------
Total capital share transactions ................... 11,539,632 47,021,939
------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS ........................................... 29,379,600 51,235,781
NET ASSETS
- --------------------------------------------------------------------------------------------------
Beginning of period ..................................... 161,472,994 110,237,213
------------- -------------
End of period (including undistributed net investment
income of $2,847,502 and $380,193, respectively) ..... $ 190,852,594 $ 161,472,994
============= =============
CAPITAL SHARE ACTIVITY
- --------------------------------------------------------------------------------------------------
Shares sold ............................................. 9,820,971 21,664,978
Shares issued from merger (Note A) ...................... -- 2,061,104
Reinvestment of distributions ........................... -- 6,833,336
Shares redeemed ......................................... (3,508,117) (4,241,957)
------------- -------------
Total capital share activity ......................... 6,312,854 26,317,461
============= =============
</TABLE>
See notes to financial statements.
SEMI-ANNUAL REPORT (UNAUDITED) CRI BALANCED PORTFOLIO-11
96
<PAGE> 99
NOTES TO FINANCIAL STATEMENTS
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
GENERAL: The Balanced Portfolio (the "Portfolio"), a series of Acacia Capital
Corporation's Calvert Responsibly Invested (CRI) Portfolios, is registered under
the Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The operations of each series are accounted for separately.
The shares of the Portfolio are sold to affiliated and unaffiliated insurance
companies for allocation to certain of their variable separate accounts.
On February 23, 1996, the net assets of CRI Bond Portfolio were merged into the
Portfolio. The acquisition was accomplished by a tax free exchange of 2,061,104
shares of the Portfolio (valued at $3,670,827) for the 230,738 shares of CRI
Bond Portfolio outstanding at February 23, 1996. CRI Bond Portfolio's net assets
at that date, including $1,419 of unrealized appreciation, were combined with
those of the Portfolio. The aggregate net assets of the Portfolio and CRI Bond
Portfolio immediately before the acquisition were $121,161,865 and $3,670,445,
respectively.
SECURITY VALUATION: Securities listed or traded on a national securities
exchange are valued at the last reported sale price. Foreign security prices,
furnished by quotation services in the security's local currency, are translated
using the current U.S. dollar exchange rate. Unlisted securities and listed
securities for which the last sale price is not available are valued at the most
recent bid price or based on a yield equivalent obtained from the securities'
market maker. Municipal securities are valued utilizing the average of bid
prices or at bid prices based on a matrix system (which considers such factors
as security prices, yields, maturities and ratings) furnished by dealers through
an independent pricing service. Other securities and assets for which market
quotations are not available or deemed inappropriate are valued in good faith
under the direction of the Board of Directors.
REPURCHASE AGREEMENTS: The Portfolio may enter into repurchase agreements with
recognized financial institutions or registered broker/dealers and, in all
instances, holds underlying securities with a value exceeding the total
repurchase price, including accrued interest.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are accounted
for on trade date. Realized gains and losses are recorded on an identified cost
basis. Dividend income is recorded on the ex-dividend date or, in the case of
dividends on certain foreign securities, as soon as the Portfolio is informed of
the ex-dividend date. Interest income, accretion of discount and amortization of
premium are recorded on an accrual basis.
FOREIGN CURRENCY TRANSACTIONS: The Portfolio's accounting records are maintained
in U. S. dollars. For valuation of assets and liabilities on each date of net
asset value determination, foreign denominations are translated into U. S.
dollars using the current exchange rate. Security transactions, income and
expenses are converted at the prevailing rate of exchange on the date of the
event. The effect of changes in foreign exchange rates on foreign denominated
securities is included with the net realized and unrealized gain or loss on
securities. Other foreign currency gains or losses are reported separately.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded by the
Portfolio on ex-dividend date. Dividends from net investment income and
distributions from net realized capital gains, if any, are paid at least
annually. Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles, accordingly,
periodic
12-CRI BALANCED PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED)
97
<PAGE> 100
reclassifications are made within the Portfolio's capital accounts to reflect
income and gains available for distribution under income tax regulations.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
EXPENSE OFFSET ARRANGEMENTS: The Portfolio has an arrangement with its custodian
bank whereby the custodian's fees are paid indirectly by credits earned on the
Portfolio's cash on deposit with the bank. Such deposit arrangement is an
alternative to overnight investments.
FEDERAL INCOME TAXES: No provision for federal income or excise tax is required
since the Portfolio intends to continue to qualify as a regulated investment
company under the Internal Revenue Code and to distribute substantially all of
its earnings.
NOTE B--RELATED PARTY TRANSACTIONS
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company. The Advisor provides investment advisory services
and pays the salaries and fees of officers and affiliated Directors of the
Portfolio. For its services, the Advisor receives a monthly fee based on an
annual rate of .70% of the Portfolio's average daily net assets. Effective July,
1996, the Portfolio began paying a monthly performance fee of plus or minus up
to .15%, on an annual basis, of average daily net assets of the performance
period depending on the Portfolio's performance compared to the Lipper Balanced
Funds Index.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as
transfer, dividend disbursing and shareholder servicing agent for the Portfolio.
Each Director who is not affiliated with the Advisor received a fee of $750 for
each Board meeting attended plus an annual fee of $3,000 for Directors not
serving on other Calvert Fund Boards. Director's fees are allocated to each of
the portfolios served.
NOTE C--INVESTMENT ACTIVITY
During the period, purchases and sales of investments, other than short-term
securities, were $327,850,850 and $280,812,538, respectively. U.S. government
security purchases were $596,160,485 and sales were $633,654,124.
The cost of investments owned at June 30, 1997 was substantially the same for
federal income tax purposes and financial reporting purposes. Net unrealized
appreciation aggregated $26,335,339, of which $27,640,020 related to appreciated
securities and $1,304,681 related to depreciated securities.
As a cash management practice, the Portfolio may sell or purchase short-term
variable rate notes from other Portfolios managed by the Advisor. All
transactions are executed at independently derived prices.
SEMI-ANNUAL REPORT (UNAUDITED) CRI BALANCED PORTFOLIO-13
98
<PAGE> 101
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PERIODS ENDED
----------------------------------------------
JUNE 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING ..................... $ 1.774 $ 1.703 $ 1.440
======== ======== ========
Income from investment operations
Net investment income ....................... .025 .040 .050
Net realized and unrealized gain (loss) ..... .161 .175 .380
-------- -------- --------
Total from investment operations .......... .186 .215 .430
-------- -------- --------
Distributions from
Net investment income ....................... -- (.042) (.040)
Net realized gains .......................... -- (.102) (.127)
-------- -------- --------
Total distributions ....................... -- (.144) (.167)
-------- -------- --------
Total increase (decrease) in net asset value ... .186 .071 .263
-------- -------- --------
NET ASSET VALUE, ENDING ........................ $ 1.960 $ 1.774 $ 1.703
======== ======== ========
Total return ................................... 10.48% 12.62% 29.87%
======== ======== ========
Ratios to average net assets:
Net investment income ....................... 2.89%(a) 2.71% 3.08%
======== ======== ========
Total expenses + ............................ .77%(a) .81% .83%
======== ======== ========
Net expenses ................................ .74%(a) .78% .81%
======== ======== ========
Portfolio turnover ............................. 590% 99% 163%
======== ======== ========
Average commission rate paid ................... $ .0500 $ .0481 --
======== ======== ========
NET ASSETS, ENDING (IN THOUSANDS) .............. $190,853 $161,473 $110,237
======== ======== ========
Number of shares outstanding,
ending (in thousands) ....................... 97,358 91,045 64,728
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING ..................... $ 1.537 $ 1.465 $ 1.403
======= ======= =======
Income from investment operations
Net investment income ....................... .046 .045 .044
Net realized and unrealized gain (loss) ..... (.097) .072 .062
------- ------- -------
Total from investment operations .......... (.051) .117 .106
------- ------- -------
Distributions from
Net investment income ....................... (.046) (.045) (.044)
Net realized gains .......................... -- -- --
------- ------- -------
Total distributions ....................... (.046) (.045) (.044)
------- ------- -------
Total increase (decrease) in net asset value ... (.097) .072 .062
------- ------- -------
NET ASSET VALUE, ENDING ........................ $ 1.440 $ 1.537 $ 1.465
======= ======= =======
Total return ................................... (3.30%) 8.00% 7.61%
======= ======= =======
Ratios to average net assets:
Net investment income ....................... 3.39% 3.69% 4.05%
======= ======= =======
Total expenses + ............................ -- -- --
======= ======= =======
Net expenses ................................ .80% .81% .85%
======= ======= =======
Portfolio turnover ............................. 43% 14% 15%
======= ======= =======
NET ASSETS, ENDING (IN THOUSANDS) .............. $66,593 $54,000 $28,471
======= ======= =======
Number of shares outstanding,
ending (in thousands) ....................... 46,244 35,142 19,433
======= ======= =======
</TABLE>
(a) Annualized
+ Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the
ratio of net expenses.
14-CRI BALANCED PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED)
99
<PAGE> 102
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO
Prospectus dated April 30, 1997
Date of Supplement: July 18, 1997
EFFECTIVE JULY 18, 1997, WENDELL MACKEY IS NO LONGER THE PORTFOLIO MANAGER FOR
THE EQUITY PORTION OF THE BALANCED PORTFOLIO. PLEASE REPLACE THE PARAGRAPH
REGARDING MR. MACKEY UNDER THE SECTION THE FUND AND ITS MANAGEMENT WITH THE
FOLLOWING:
The equity portion of the Balanced Portfolio, which is managed by the
subadvisor, NCM Capital Management Group Inc., will be managed by a committee of
the subadvisor, headed by its president, Maceo Sloan.
SEMI-ANNUAL REPORT (UNAUDITED) CRI BALANCED PORTFOLIO-15
100
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AUSA LIFE INSURANCE COMPANY, INC.
4 Manhattanville Road, Purchase, New York 10677
(914) 697-8000
DISTRIBUTOR
Diversified Investors Securities Corp. (DISC)
4 Manhattanville Road, Purchase, New York 10577
(914) 697-8000
