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[ATLAS ANNUITIES LOGO
APPEARS HERE]
From the office of Marion O. Sandler
President and Chief Executive Officer
Dear Valued Policyholder,
We are pleased to report that the Balanced Growth Portfolio in
your Atlas Portfolio Builder Variable Annuity generated an
annual total return of 12.70% in 1998./1/ This "fund of funds,"
which seeks long-term growth of capital and moderate current
income, provides investors with convenient diversification by
allocating assets in as many as eight Atlas stock, bond, and
money market funds.
Under normal market conditions, the investment strategy is to
maintain a fairly conservative stock, bond, and cash ratio of
approximately 60%, 30%, and 10%, respectively. As of December
31, 1998, the portfolio held 63% stocks, 28% bonds and 9% cash,
and assets were allocated to the underlying Atlas Funds as
follows:
<TABLE>
<CAPTION>
Atlas Funds % of Investments
----------- ----------------
<S> <C>
Balanced 28.2%
Emerging Growth 5.0
Global Growth 7.6
Growth and Income 36.9
Strategic Growth 4.7
Strategic Income 8.7
U.S. Government and
Mortgage Securities 8.9
-----
Total 100.0%
</TABLE>
/1/ Annual total return includes price change, plus income and
capital gains distributions. It does not reflect either
insurance company or surrender charges imposed in connection
with the variable annuity. As of 12/31/98, the annual total
return since inception on 9/30/97 was 8.89%.
<PAGE>
The Economy and the Markets
The Balanced Growth Portfolio attained its 12.70% total return
during a year in which the U.S. investment markets and economy
continued to perform well, despite financial problems overseas.
The American economy did experience a slowdown in corporate
earnings, but this was offset by robust personal spending due to
high consumer confidence as:
.Nearly 3 million new jobs were created,
.Unemployment remained low and fell to 4.3% by the end of the
year, and
.Inflation was almost non-existent at a mere 1.6%.
The Federal Reserve provided an additional stimulus to the
economy by lowering interest rates three times within a seven
week period between the end of September and the middle of
November.
The strength of the American economy fueled the U.S. stock
market, particularly the large-capitalization sector, which
continued its ascent in 1998, despite increased volatility. The
Dow Jones Industrial Average (the "Dow"), the nation's most
widely followed stock index, soared to an unprecedented high of
9338 in July before plunging almost 20% to 7539 in August. The
Dow, however, didn't stay at that level for long and trended
upward throughout the remainder of the year to close at 9181.
This represented an increase - including reinvested dividends -
over the previous year-end of 18.13%, and was the fourth
consecutive year of double-digit increases for the Dow. While
the large-capitalization sector of the equities market continued
to climb, the performance of small- and mid-capitalization
stocks was less impressive. As the year progressed, the Balanced
Growth Portfolio's manager shifted assets out of the Atlas
Emerging Growth and Strategic Growth Funds, comprised largely of
small- and mid-capitalization stocks, respectively, and
emphasized the Atlas Growth and Income and Balanced Funds, both
of which favored large-capitalization stocks. As previously
mentioned, there was turbulence in the foreign equity markets,
and this uncertainty caused the Atlas Balanced Growth
Portfolio's manager to limit investment in the Atlas Global
Growth Fund.
In the bond market, U.S. Treasury securities were in high
demand as investors, especially those overseas, sought a safe
haven from global financial turmoil. However, the increased
demand caused by this "flight to quality" was faced with a
shrinking supply, as the U.S. Government issued fewer securities
because of a growing budget surplus. With the demand for
Treasuries exceeding supply, prices rose dramatically. The Atlas
Balanced Fund maintained a significant investment in Treasury
securities, which was another reason the Balanced Growth
Portfolio's manager favored this investment. The Atlas U.S.
Government and Mortgage Securities Fund invested primarily in
mortgage-backed securities, which did not fully participate in
the Treasury sector rally. As a result, the Balanced Growth
Portfolio's manager maintained only a moderate level of
investment in this fund. Likewise, with the instability of many
foreign markets, the portfolio's manager limited holdings in the
Atlas Strategic Income Fund, which had a large foreign bond
component.
2
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The Investments You Want From The People You Trust
As a sister company of World Savings and a member of the $40
billion-strong Golden West Financial Corporation, Atlas is
dedicated to giving you the quality products, personal service
and caring professional advice you've come to expect from World.
Your Atlas Representative will be happy to answer any questions
you have about your annuity, provide you with information about
Atlas Funds, or prepare a complimentary review of your
investment portfolio. For an appointment, simply call 1-800-933-
ATLAS (1-800-933-2852).
We appreciate the trust you've placed in Atlas, and we look
forward to serving your financial needs for many years in the
future.
Sincerely,
/s/ Marion O. Sandler
-----------------------------------------
(Mrs.) Marion O. Sandler
President and Chief Executive Officer
3
<PAGE>
Atlas Balanced Growth Portfolio
Performance Compared to the Market
- -------------------------------------------------------------------------------
The following chart compares the growth of a hypothetical $10,000 investment
in the Atlas Balanced Growth Portfolio to two representative total return
indexes for the markets in which the portfolio invests. Index performance does
not include management expenses and the mix, quality and maturity of
securities in an index may vary widely from those in the underlying funds in
the Balanced Growth Portfolio. All returns reflect the reinvestment of
dividends and capital gains. It does not reflect either insurance company or
surrender charges imposed in connection with the variable annuity. As always,
past performance is no guarantee of future results.
ATLAS BALANCED GROWTH PORTFOLIO
As of Dec. 31, 1998
<TABLE>
Standard & Poor's
Mo. End Atlas Balanced Composite Index Lehman Brothers
Date Growth Portfolio of 500 Stocks Aggregate Bond Index
- ------- ---------------- ----------------- --------------------
<S> <C> <C> <C>
Sept 97 10,000 10,000 10,000
Oct 97 9,710 9,666 10,145
Nov 97 9,810 10,114 10,192
Dec 97 9,872 10,287 10,295
Jan 98 9,957 10,401 10,424
Feb 98 10,422 11,151 10,418
Mar 98 10,772 11,721 10,453
Apr 98 10,898 11,840 10,508
May 98 10,750 11,636 10,608
June 98 10,856 12,109 10,698
July 98 10,729 11,980 10,720
Aug 98 9,565 10,250 10,895
Sept 98 9,840 10,907 11,150
Oct 98 10,200 11,794 11,091
Nov 98 10,592 12,509 11,154
Dec 98 11,126 13,229 11,188
</TABLE>
4
<PAGE>
Atlas Balanced Growth Portfolio
Statement of Net Assets December 31, 1998
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<TABLE>
<S> <C> <C> <C>
Investments: (96.05%)
Investment in Atlas Funds, at identified cost......... $11,217,366
===========
Percent of
Shares Net Assets
------- ----------
Investment in Atlas Funds, at value:
U.S. Government and Mortgage Securities Fund......... 105,359 8.53% $ 1,071,501
Strategic Income Fund................................ 211,725 8.40 1,054,391
Balanced Fund........................................ 235,327 27.11 3,405,175
Growth and Income Fund............................... 201,347 35.40 4,445,739
Strategic Growth Fund................................ 33,070 4.51 565,821
Global Growth Fund................................... 63,180 7.32 919,900
Emerging Growth Fund................................. 43,708 4.78 600,979
U.S. Treasury Money Fund............................. 0 0.00 0
-----------
12,063,506
-----------
Other Assets and Liabilities: (3.95%)
Other assets......................................... 539,809
Liabilities.......................................... (43,661)
-----------
Total Other Assets and Liabilities................... 496,148
-----------
Net Assets (100.00%)................................... $12,559,654
===========
Net Assets Consist Of:
Unrealized appreciation............................... $ 846,140
Accumulated net realized loss......................... (786,539)
Undistributed net investment income................... 308,811
Paid in capital....................................... 12,191,242
-----------
Net Assets............................................. $12,559,654
===========
Net Asset Value Per Share:
Net assets............................................ $12,559,654
Beneficial interest shares outstanding................ 1,224,607
===========
Net asset value per share............................. $ 10.26
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Atlas Balanced Growth Portfolio
Statement of Operations for the year ended December 31, 1998
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<TABLE>
<S> <C>
Investment Income:
Income:
Interest......................................................... $ 1,804
Distribution income from Atlas Funds............................. 657,476
-----------
Total income....................................................... 659,280
-----------
Expenses:
Transfer agency fees and expenses................................ 28,992
Custodian fees and expenses...................................... 28,601
Printing and postage............................................. 25,818
Management fees (Note 5)......................................... 22,791
Accounting fees.................................................. 10,336
Amortization of organization costs (Note 2)...................... 5,031
Directors' fees.................................................. 602
Other............................................................ 224
-----------
Gross expenses..................................................... 122,395
Waiver of management fees........................................ (22,791)
Expense reimbursement............................................ (54,037)
-----------
Net expenses....................................................... 45,567
-----------
Net investment income.............................................. 613,713
-----------
Realized Loss and Unrealized Appreciation on Investments:
Realized loss:
Proceeds from sales.............................................. 10,232,328
Cost of securities sold.......................................... 11,017,510
-----------
Net realized loss.................................................. (785,182)
-----------
Unrealized appreciation (depreciation):
Beginning of year................................................ (178,383)
End of year...................................................... 846,140
-----------
Unrealized appreciation............................................ 1,024,523
-----------
Net realized loss and unrealized appreciation of investments....... 239,341
-----------
Net increase in net assets resulting from operations............... $ 853,054
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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Atlas Balanced Growth Portfolio
Statements of Changes in Net Assets
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<TABLE>
<S> <C> <C>
1998/2/ 1997/3/
Operations:
Net investment income................................ $ 613,713 $ 193,025
Net realized loss on investments..................... (785,182) (1,357)
Net unrealized appreciation (depreciation) on
investments......................................... 1,024,523 (178,383)
----------- ----------
Net increase in net assets resulting from
operations.......................................... 853,054 13,285
----------- ----------
Distributions Paid to Shareholders:
Distibutions from net investment income.............. (304,807) (193,120)
----------- ----------
Beneficial Interest Share Transactions:/1/
Proceeds from shares sold............................ 9,315,457 3,407,177
Proceeds from shares issued in reinvestment of
distributions....................................... 304,807 193,120
Cost of shares repurchased........................... (1,121,054) (8,265)
----------- ----------
Net increase in net assets resulting from beneficial
interest share transactions......................... 8,499,210 3,592,032
----------- ----------
Net increase in net assets........................... 9,047,457 3,412,197
Net Assets:
Beginning of period.................................. 3,512,197 100,000
----------- ----------
End of period........................................ $12,559,654 $3,512,197
=========== ==========
/1/ Share Transactions:
Sold.............................................. 931,984 346,590
Issued in reinvestment of dividends............... 29,708 20,699
Redeemed.......................................... (113,515) (859)
----------- ----------
Net increase in shares outstanding................ 848,177 366,430
=========== ==========
</TABLE>
/2/ For the year ended December 31, 1998.
/3/ For the period September 30, 1997 (inception of operations) to December 31,
1997.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Atlas Balanced Growth Portfolio selected data for a share outstanding
Financial Highlights throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1998/1/ 1997/2/
Net asset value, beginning of period....................... $ 9.33 $ 10.00
------- -------
Income From Investment Operations:
Net investment income..................................... 0.58 0.55
Net realized and unrealized gain (loss) on investments.... 0.61 (0.68)
------- -------
Total from investment operations.......................... 1.19 (0.13)
------- -------
Less Distributions:
Distributions from net investment income.................. (0.26) (0.54)
------- -------
Net asset value, end of period............................. $ 10.26 $ 9.33
======= =======
Total return, aggregate/3/................................. 12.70% -1.28%
Ratios/Supplemental Data:
Net assets, end of period (000's)......................... $12,560 $ 3,512
Ratio of expenses to average net assets/4/................ 0.50% 0.50%/5/
Ratio of net investment income to average net assets...... 6.73% 38.25%/5/
Portfolio turnover rate (Note 4).......................... 114.79% 1.49%
</TABLE>
/1/ For the year ended December 31, 1998.
/2/ For the period September 30, 1997 (inception of operations) to December 31,
1997.
/3/ Total return assumes purchase at net asset value at the beginning of the
period.
/4/ The Adviser for Balanced Growth Portfolio has agreed to temporarily cap (or
waive) its management fee and to absorb other operating expenses. Had such
action not been taken, the ratio of expenses to average net assets
(annualized) would have been 1.34% and 2.82%, respectively, for the year
ended December 31, 1998 and the period from September 30, 1997 (inception
of operations) to December 31, 1997.
/5/ Annualized.
The accompanying notes are an integral part of these financial statements.
8
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Atlas Balanced Growth Portfolio
Notes to Financial Statements December 31, 1998
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1. Significant Accounting Policies
Atlas Insurance Trust (the "Trust") is registered under the Investment
Company Act of 1940 ("1940 Act"), as amended, as an open-end management
investment company. The Trust offers a choice of investment portfolios to
investors through the purchase of variable annuity and variable life policies
which fund insurance company separate accounts. The Trust is a series company
currently offering only the Atlas Balanced Growth Portfolio (the "Portfolio").
The Portfolio, which has as its investment objective long-term growth of
capital and moderate income, invests among eight diversified Atlas mutual
funds (Class A shares) including the U.S. Treasury Money Fund, the U.S.
Government and Mortgage Securities Fund, the Strategic Income Fund, the
Balanced Fund, the Growth and Income Fund, the Strategic Growth Fund, the
Global Growth Fund, and the Emerging Growth Fund (the "Atlas Funds"). Since
the Portfolio invests in shares of a limited number of mutual funds, it is a
"nondiversified" investment company under the 1940 Act. The Portfolio,
however, intends to qualify as a diversified investment company under
provisions of the Internal Revenue Code. Additional diversification
requirements under Internal Revenue Code Section 817(h) are imposed on the
Portfolio because the Trust is an investment medium for variable annuity
contracts.
The following is a summary of significant accounting policies consistently
used by the Portfolio in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Investment Valuation: Investments are valued at the net asset value of
each underlying Atlas Fund determined as of the close of the New York
Stock Exchange (generally 4:00 p.m. eastern time) on each day the Exchange
is open for trading.
b. Federal Income Taxes: It is the Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its net investment income,
including any net realized gain on investments, to its shareholders.
Accordingly, no provision for federal income or excise tax is required.
c. Security Transactions: As is common in the industry, security transactions
are accounted for on the date securities are purchased or sold (trade
date). Realized gains and losses on security transactions are determined
on the basis of specific identification for both financial statement and
federal income tax purposes.
d. Investment Income, Expenses and Distributions: Interest income and
estimated expenses are accrued daily. Dividends, representing
distributions from Atlas Funds, are recorded on the ex-dividend date.
Distributions of capital gains, if any, will normally be declared and paid
once a year.
e. Use of Estimates: 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 reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
9
<PAGE>
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2. Unamortized Organization Costs
The Trust was organized by Golden West Financial Corporation ("Golden West
Financial"). On July 30, 1997, the Trust sold and issued to Golden West
Financial 10,000 shares of beneficial interest ("Initial Shares").
Organization costs of $25,156 incurred by the Trust have been deferred and are
being amortized on a straight line basis over a period of five years from
October 1997. If any of the Initial Shares are redeemed during the
amortization period, the redemption proceeds will be reduced by any
unamortized organization expenses in the same proportion as the number of
Initial Shares being redeemed bears to the number of Initial Shares
outstanding at the time of the redemption.
3. Unrealized Appreciation/Depreciation -- Tax Basis
As of December 31, 1998, unrealized appreciation of investment securities for
federal income tax purposes was $368,891, consisting of unrealized gains of
$887,228 and unrealized losses of $518,337. Cost of securities for federal
income tax purposes was $11,694,615.
4. Purchases and Sales of Securities
During the year ended December 31, 1998, the Portfolio purchased $18,562,880
of investment securities and sold $10,232,328 of investment securities.
5. Transactions With Affiliates and Related Parties
Atlas Advisers, Inc. (the "Adviser") provides portfolio management services
to the Portfolio, the Atlas U.S. Treasury Money Fund and the Atlas U.S.
Government and Mortgage Securities Fund and, with respect to the other
underlying Atlas Funds, supervises the provision of similar services by
OppenheimerFunds, Inc. (the "Subadviser"). The Adviser is responsible for
providing or overseeing all aspects of the Portfolio's day-to-day operations
and implementing the Portfolio's investment programs. The Portfolio pays a fee
for management and administrative services to the Adviser. The management fee
is based on an annual rate of .25% of the Portfolio's average daily net
assets. The Adviser has agreed to reduce its fee and assume expenses of the
Portfolio to the extent necessary to limit the Portfolio's total direct
operating expenses to .50%. Due to the voluntary expense waiver in effect
during the year ended December 31, 1998, the management fees due the Adviser
were reduced by $22,791. The Adviser also absorbed $54,037 of other Fund
expenses during the period.
Atlas Securities, Inc. (the "Distributor") acts as principal underwriter of
the Portfolio's shares. The Adviser and Distributor are wholly owned
subsidiaries of Golden West Financial. Certain officers and trustees of the
Trust are also officers and/or directors of the Adviser, the Distributor and
the Atlas Funds.
At December 31, 1998 Golden West Financial owned 116,324 Class A shares of
Emerging Growth Fund.
10
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Atlas Balanced Growth Portfolio
Independent Auditors' Report
- -------------------------------------------------------------------------------
The Board of Trustees and Shareholders
Atlas Insurance Trust:
We have audited the accompanying statement of net assets of the Atlas
Insurance Trust (Balanced Growth Portfolio) (the "Fund") as of December 31,
1998, the related statement of operations for the year ended December 31,
1998, and the statements of changes in net assets and the financial highlights
for the year ended December 31, 1998 and for the period from September 30,
1997 (inception of operations) to December 31, 1997. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at December 31, 1998 by corresponding with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund at
December 31, 1998 and the results of its operations, the changes in its net
assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Oakland, California
February 12, 1999
11
