<PAGE>
SEMIANNUAL REPORT, June 30, 1998
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
1 East Liberty, Third Floor
Reno, NV 89501
(800) 887-8671
- --------------------------------------------------------------------------------
July 31, 1998
Dear Shareholder:
The first half of 1998 was a turbulent period for the market. First quarter
returns for virtually all sectors of the market were very strong. Then in the
second quarter the markets began to sag and posted relatively disappointing
returns in spite of a brief rally during the last part of June. The S&P 500
refused to take a breather from its long upward climb and posted a return of
17.63% for the first six months of 1998. The same can not be said about the
broader market indices such as the Russell 2000, which was up a scant 4.93%. Mid
cap stocks fared slightly better with the S&P Mid Cap Index returning 8.80%.
Overall the
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
<S> <C> <C> <C>
Growth Portfolio Russell 2000 NASDAQ Composite
2/28/98 $10,000 $10,000 $10,000
Mar-98 $10,500 $10,412 $10,368
Apr-98 $10,520 $10,469 $10,553
May-98 $10,140 $9,905 $10,047
Jun-98 $10,440 $9,926 $10,701
</TABLE>
The above chart indicates the return of $10,000 invested in the Growth Portfolio
on February 27, 1998. As the shows by June 30, 1998, the value of the investment
would have grown to $10,440, a 4.40% increase. For comparison purposes, look at
how the NASDAQ Composite and the Russell 2000 performed over the same period. An
investment of $10,000 in the NASDAQ Composite over the same period would have
grown to 10,701, a 7.01% increase. Similarly an investment of $10,000 in the
Russell 2000 over the same period would have shrank to $9,926, a (0.74)%
decrease.
The above chart and performance numbers assume reinvestment of all
distributions.
Please be aware that past performance is no indication of future performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
Original Cost.
<PAGE>
international markets fared surprisingly well with the Morgan Stanley EAFE
(Europe, Australia and Far East) returning 15.10%. Naturally, the big economic
news during the period was the Asian currency problems and the unknown impact of
these devaluations on our own markets.
The first half of 1998 was very favorable to U.S. large cap investors. Two
contributing factors to the superior performance of the S&P 500 were, stronger
than expected earnings reports and the continued inflow of capital from domestic
investors. These investors have tended to invest in well-recognized companies
such as those in the S&P 500. Growth strategies were clearly in favor during the
period as evidenced by the Russell 1000 Growth Index return of 20.38% versus the
Russell 1000 Value Index return of 12.16%.
The first half of 1998 has been highlighted by the continued
under-performance of the small-cap sector. Despite superior fundamental
valuations and stronger relative price to earnings (p/e) ratios, the small cap
sector continues to be plagued by a serious lack of liquidity. Without the
required liquidity and rising trading volume to drive these stocks higher,
investors continue to turn towards large cap stocks and index funds with their
investment dollars. The period was characterized by very narrow market
leadership, which of course, consisted of primarily the mega-cap stocks.
According to Ned Davis Research, there has not been a period (going back to
1980) where so few stocks (only 29%) have outperformed the S&P 500. Relative
valuation levels have only been this low on two occasions over the past 20
years; 1987 and 1990. On both occasions, these sectors of the market rallied
strongly. Earnings strength also favors small and mid cap stocks. These sectors
of the market have exhibited stronger earnings growth than the large cap stocks
for six consecutive quarters. This combination of historic low relative
valuations and relative earnings strength has led to dramatic gains in the past,
and this cycle should prove to be no different.
The recent U.S. economic slowdown to 1.4% annual growth in the second
quarter down from 5.5% annual growth in the first quarter caught many economists
by surprise. However, the slowdown is not as bad as it may appear, since the
first quarter's economic growth was unquestionably artificially distorted upward
by the mild winter weather that bolstered housing and consumer spending patterns
relative to the same period one year earlier. Furthermore, much of the slowdown
in the second quarter is attributable to inventory reduction, which reduced
second quarter growth by 2.3%. In other words, had inventories held steady, the
U.S. economy would have had 3.7% annual growth in the second quarter. The
consumer continues to carry the entire U.S. economy. Although consumer spending
slowed down in June, it reaccelerated in July, which is a very good omen for
economic growth in the third quarter. As long as retail sales and housing sales
remain strong, the U.S. economy will continue to experience healthy economic
growth.
Outside of the U.S. things are not so bright. There is no doubt that many
economies, such as in Canada, have slowed down due to the Asian crisis. The
bottom line is that when Asia got sick, many other economies caught a cold. The
manufacturing sector within the U.S. has also slowed precipitously, especially
for those companies that export internationally. Over 40% of U.S. manufacturers
that export recently reported that demand is declining, compared to less than
10% that reported declining export demand several months ago. Despite the
slowdown in the U.S. manufacturing sector, the primary reason that the U.S.
economy appears largely immune to the Asian crisis is that the U.S. consumer is
too busy spending money to worry about the Asian crisis. In fact, now that the
prices of many popular Asian
2
<PAGE>
imported goods are cheaper, U.S. consumers will likely continue spending!
Overall, we expect that the consumer will continue to carry the U.S. economy and
that predominately consumer-related stocks will prosper.
With interest rates still remaining extremely favorable, and signs of
inflation non-existent, the long-term market outlook remains positive. The
short-term picture is not quite as clear. For the second half of the year, we
should continue to see a volatile equity environment. With the effect of any
future Asian currency devaluations on the U.S. economy unknown, the stocks of
large multi-national companies will struggle to post any further gains. The
fundamental picture still favors small and mid-cap stocks outperforming the
general market. As the fourth quarter nears, many vacationers will return to the
equity markets and inject the needed liquidity into the mid-cap and small-cap
sectors, driving valuations back in line towards historic norms.
Please call our new Navellier Marketline for the latest fund prices and
weekly market commentary at (800) 730-9005 and look for our new website at
www.navellier.com.
Once again, thank you for allowing us to manage some of your assets. We are
strongly committed to our shareholders and promise to make every effort to
maintain our high performance standards. As always, please feel free to contact
us if you have any questions or if we can help you in any way.
Sincerely,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
LOUIS G. NAVELLIER ALAN ALPERS
</TABLE>
THIS MATERIAL HAS BEEN PRECEDED BY A NAVELLIER VARIABLE INSURANCE SERIES
FUND PROSPECTUS.
* THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX CONSISTING OF THE SMALLEST
2000 STOCKS IN THE RUSSELL 3000 INDEX. THE S&P 500 IS AN UNMANAGED INDEX
CONSISTING OF 500 LARGE CAP STOCKS. IT IS CONSIDERED REPRESENTATIVE OF THE
STOCK MARKET AS A WHOLE. THE RUSSELL 1000 GROWTH INDEX CONSISTS OF THE
1000 LARGEST GROWTH STOCKS AND THE RUSSELL 1000 VALUE INDEX CONSISTS OF
THE 1000 LARGEST VALUE STOCKS. THE S&P MID CAP INDEX CONSISTS OF 400 MID
CAP STOCKS. THESE INDEXES ARE CONSIDERED REPRESENTATIVE OF PERTINENT
MARKET SECTORS IN GENERAL. NONE ARE INVESTMENT PRODUCTS AVAILABLE FOR
SALE.
3
<PAGE>
NAVELLIER VARIABLE INSURANCE SERIES FUND
- ------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 81.7%
ADVERTISING -- 1.0%
30 Valassis Communications, Inc.* $1,157
------------
AEROSPACE -- 1.6%
40 Cordant Technologies, Inc. 1,845
------------
AIR FREIGHT AND DELIVERY SERVICES -- 3.4%
110 Airborne Freight Corp. 3,843
------------
AIRLINES -- 4.9%
30 Alaska Air Goup, Inc.* 1,638
50 US Airways Group, Inc.* 3,962
------------
5,600
------------
BUILDING MATERIALS -- 4.4%
40 Martin Marietta Materials, Inc. 1,800
30 Southdown, Inc. 2,141
10 Vulcan Materials Co. 1,067
------------
5,008
------------
CASINO AND GAMBLING -- 0.6%
40 Radica Games Ltd.* 675
------------
CATALOG AND SPECIALTY DISTRIBUTION -- 1.2%
40 Fingerhut Companies, Inc. 1,320
------------
COMMERCIAL SERVICES -- 0.7%
30 Computer Learning Centers* 747
------------
COMPUTER AND VIDEO CHAINS -- 2.5%
80 Best Buy, Inc.* 2,890
------------
COMPUTERS -- 3.2%
40 Dell Computer Corp.* 3,713
------------
COMPUTER SOFTWARE -- 2.7%
60 Compuware Corp.* 3,067
------------
CONSTRUCTION/AGRICULTURAL EQUIPMENT -- 3.1%
70 Navistar International Corp.* 2,021
30 PACCAR, Inc. 1,567
------------
3,588
------------
<CAPTION>
- ----------------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------
<C> <S> <C>
DISCOUNT STORES -- 1.6%
70 Ames Department Stores* $1,842
------------
EDP SERVICES -- 4.8%
60 Keane, Inc.* 3,360
80 Systems & Computer Tech.* 2,160
------------
5,520
------------
ELECTRIC UTILITIES -- 1.7%
50 Western Resources, Inc. 1,941
------------
ELECTRICAL PRODUCTS -- 0.7%
20 Kuhlman Corp. 791
------------
FLUID CONTROLS -- 1.7%
50 Parker Hannifin Corp. 1,906
------------
FOOD AND VITAMIN SUPPLEMENTS -- 3.9%
30 Dean Foods Co. 1,648
90 General Nutrition Co., Inc.* 2,801
------------
4,449
------------
HEALTHCARE -- 7.5%
40 Bindley Western Industries, Inc. 1,320
30 Cooper Companies* 1,093
30 Guidant Corp. 2,139
80 Lincare Holdings, Inc.* 3,365
40 Osteotech, Inc.* 710
------------
8,627
------------
HOMEBUILDING -- 1.0%
40 Lennar Corp. 1,180
------------
HOTELS AND RESORTS -- 2.1%
30 Royal Caribbean Cruises Ltd. 2,385
------------
</TABLE>
4
<PAGE>
NAVELLIER VARIABLE INSURANCE SERIES FUND
- ------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED) (CONTINUED)
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSURANCE -- 8.6%
90 Ace Ltd. $3,510
60 Cincinnati Financial Corp. 2,302
20 Exel Ltd. 1,556
30 Fidelity National Financial, Inc. 1,194
30 Harleysville Group, Inc. 623
40 Presidential Life Corp. 855
------------
10,040
------------
OFFICE EQUIPMENT AND SUPPLIES -- 3.0%
140 Herman Miller, Inc. 3,404
------------
PUBLISHING -- 5.7%
40 Gannett, Inc. 2,843
20 McGraw Hill Companies, Inc. 1,631
30 Tribune Co. 2,065
------------
6,539
------------
SAVINGS AND LOAN ASSOCIATIONS -- 3.3%
100 Greenpoint Financial Corp. 3,763
------------
<CAPTION>
- ----------------------------------------------------------------
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------
<C> <S> <C>
SEMICONDUCTOR AND EQUIPMENT -- 1.5%
40 Dallas Semiconductor $ 1,240
40 Reliability, Inc.* 460
------------
1,700
------------
SOFT DRINK -- 1.1%
20 Cadbury Schweppes PLC 1,232
------------
TELECOMMUNICATIONS -- 4.2%
45 Century Telephone Enterprises 2,064
60 Tekelec* 2,685
------------
4,749
------------
TOTAL COMMON STOCK
(COST $89,066) 93,521
------------
MONEY MARKET FUND -- 18.3%
20,879 Fund for Government Investors
(Cost $20,879) 20,879
------------
TOTAL INVESTMENTS -- 100.00%
(COST $109,945) $ 114,400
------------
------------
</TABLE>
- --------------------------
(*) NON-INCOME PRODUCING
5
<PAGE>
NAVELLIER VARIABLE INSURANCE SERIES FUND
- ------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH
PORTFOLIO
---------
<S> <C>
ASSETS
Securities at Value (Note 1) (Cost $109,945)......................................................... $ 114,400
Dividends Receivable................................................................................. 63
Interest Receivable.................................................................................. 75
Unamortized Organizational Costs (Note 1)............................................................ 16,352
---------
Total Assets....................................................................................... 130,890
---------
LIABILITIES
Investment Advisory Fee Payable (Note 2)............................................................. 78
Administrative Fee Payable (Note 2).................................................................. 24
Other Payables and Accrued Expenses.................................................................. 36
Organizational Expenses Payable to Adviser (Note 1).................................................. 16,352
---------
Total Liabilities.................................................................................. 16,490
---------
NET ASSETS............................................................................................. $ 114,400
---------
---------
SHARES OUTSTANDING..................................................................................... 10,959
---------
---------
NET ASSET VALUE PER SHARE.............................................................................. $10.44
---------
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
NAVELLIER VARIABLE INSURANCE SERIES FUND
- ------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1998* (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH
PORTFOLIO
-----------
<S> <C>
INVESTMENT INCOME
Interest (Note 1).................................................................................... $ 236
Dividends (Note 1)................................................................................... 236
-----------
Total Investment Income............................................................................ 472
-----------
EXPENSES
Investment Advisory Fee (Note 2)..................................................................... 298
Administrative Fee (Note 2).......................................................................... 89
Transfer Agent and Custodian Fee (Note 3)............................................................ 1,690
Directors' Fees...................................................................................... 4,500
Organizational Expense (Note 1)...................................................................... 1,168
-----------
Total Expenses..................................................................................... 7,745
Less Expenses Reimbursed by Investment Adviser (Note 2)............................................ (7,219)
-----------
Net Expenses..................................................................................... 526
-----------
NET INVESTMENT LOSS.................................................................................... (54)
-----------
Net Change in Unrealized Appreciation of Investments................................................... 4,455
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................... $4,401
-----------
-----------
</TABLE>
*FROM COMMENCEMENT OF OPERATIONS FEBRUARY 27, 1998
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
NAVELLIER VARIABLE INSURANCE SERIES FUND
- ------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1998* (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH
PORTFOLIO
-------------
<S> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Loss................... $ (54)
Net Change in Unrealized Appreciation
(Depreciation) of Investments....... 4,455
-------------
Net Increase in Net Assets Resulting
from Operations..................... 4,401
-------------
DISTRIBUTIONS TO SHAREHOLDERS
Total Distributions to Shareholders... --
-------------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares..... 109,999
-------------
TOTAL INCREASE IN NET ASSETS........ 114,400
NET ASSETS -- Beginning of Period....... --
-------------
NET ASSETS -- End of Period............. $ 114,400
-------------
-------------
SHARES
Sold.................................. 10,959
-------------
-------------
</TABLE>
*FROM COMMENCEMENT OF OPERATIONS FEBRUARY 27, 1998
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
NAVELLIER VARIABLE INSURANCE SERIES FUND
- ------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED JUNE 30, 1998* (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH
PORTFOLIO
----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value -- Beginning of
Period.............................. $ 10.00
------
Income from Investment Operations:
Net Realized and Unrealized Gains on
Investments........................ 0.44
------
Distributions to Shareholders:
Total Distributions to
Shareholders....................... --
------
Net Increase in Net Asset Value....... 0.44
------
Net Asset Value -- End of Period...... $ 10.44
------
------
TOTAL INVESTMENT RETURN(A).............. 4.40%
RATIOS TO AVERAGE NET ASSETS:
Expenses After Reimbursement (Note
2).................................. 1.50%(B)
Expenses Before Reimbursement (Note
2).................................. 22.07%(B)
Net Investment Loss................... (0.15)%(B)
SUPPLEMENTARY DATA:
Portfolio Turnover Rate............... --
Net Assets at End of Period (000's
omitted)............................ $114
Number of Shares Outstanding at End of
Period (000's omitted).............. 11
</TABLE>
- --------------------------------------------------------------------------------
(A) Total returns for periods of less than one year are not annualized.
(B) Annualized
* FROM COMMENCEMENT OF OPERATIONS FEBRUARY 27, 1998
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
NAVELLIER VARIABLE INSURANCE SERIES FUND
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
1. Significant Accounting Policies
The Navellier Variable Insurance Series Fund, Inc. (the "Fund") is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, (the "Act") as an open-end management
investment company authorized to issue multiple series of shares, each
representing a portfolio of investments. The Fund currently has authorized one
series, the Navellier Growth Portfolio (the "Growth Portfolio"), a diversified
open-end management investment company. The Fund was established as a Maryland
corporation organized on February 28, 1997. The Fund is authorized to issue
500,000,000 shares of capital stock with no stated par value of the Growth
Portfolio. The Fund's shares are offered only to (a) insurance companies to fund
benefits under their variable annuity contracts and variable life insurance
policies and (b) tax-qualified pension and retirement plans ("Qualified Plans"),
including participant-directed Qualified Plans which elect to make the Fund
available as investment options for Qualified Plan participants. The financial
statements have been prepared in conformity with generally accepted accounting
principles which permit management to make certain estimates and assumptions at
the date of the financial statements. The following is a summary of significant
accounting policies which the Fund follows:
(a) Listed securities are valued at the last sales price of the New York
Stock Exchange and other major exchanges. Over-the-Counter securities are
valued at the last sales price. If market quotations are not readily
available, the Board of Directors will value the Fund's securities in good
faith. The Directors will periodically review this method of valuation and
recommend changes which may be necessary to assure that the Fund's instruments
are valued at fair value.
(b) Security transactions are recorded on the trade date (the date the
order to buy or sell is executed). Interest income is accrued on a daily
basis. Dividend income is recorded on the ex-dividend date. Realized gains and
losses from securities transactions are computed on an identified cost basis.
(c) Dividends from net investment income are declared and paid annually.
Dividends are reinvested in additional shares unless shareholders request
payment in cash. Net capital gains, if any, are distributed annually.
(d) The Fund intends to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies and will distribute all net
investment income and net capital gains to its shareholders. Therefore, no
Federal income tax provision is required.
(e) Organizational expenses of the Growth Portfolio totaling $17,520 are
being deferred and amortized over 60 months beginning with public offering of
shares in the portfolios. Any redemption by an initial investor during the
amortization period will be reduced by a pro rata portion of any of the
unamortized organization expenses. Such proration is to be calculated by
dividing the number of initial shares redeemed by the number of initial shares
outstanding at the date of redemption. At June 30, 1998, unamortized
organization costs of the Growth Portfolio were $16,352.
2. Investment Advisory Fees and Other Transactions with Affiliates
Investment advisory services are provided by Navellier & Associates, Inc.
(the "Adviser"). Under an agreement with the Adviser, the Fund pays a fee at the
annual rate of 0.85% of the daily net assets of the Growth Portfolio. The
Adviser receives an annual fee equal to 0.25% of the Funds average daily net
assets in connection with the rendering of services under the administrative
services agreement and is reimbursed by the Fund for operating expenses incurred
on behalf of the Fund. An officer and director of the Fund is also an officer
and director of the Adviser.
10
<PAGE>
NAVELLIER VARIABLE INSURANCE SERIES FUND
- ------------------------------------------------------------------
Under an agreement between the Fund and the Adviser, the Adviser has agreed
to waive its advisory fee and, or reimburse expenses until the total portfolio
operating expenses are at or below 1.50%. This agreement is subject to
termination at any time without notice to shareholders after the expiration of
the twelve months from the date shares of the Growth Portfolio are first offered
to the public.
Navellier Securities Corp. (the "Distributor") acts as the Fund's
Distributor and is registered as a broker-dealer under the Securities and
Exchange Act of 1934. The Distributor, which is the principal underwriter of the
Fund's shares, renders its services to the Fund pursuant to a distribution
agreement. An officer and director of the Fund is also an officer and director
of the Distributor.
3. Transfer Agent and Custodian
Rushmore Trust and Savings, FSB ("Rushmore Trust"), provides transfer
agency, dividend disbursing and other shareholder services to the Fund. In
addition, Rushmore Trust serves as custodian of the Fund's assets. Fees paid to
Rushmore Trust are based upon a fee schedule approved by the Board of Directors.
4. Securities Transactions
For the six months ended June 30, 1998, purchases and sales (including
maturities) of securities (excluding short-term securities) were as follows:
<TABLE>
<CAPTION>
GROWTH
PORTFOLIO
-----------
<S> <C>
Purchases............................................................................................. $ 89,066
-----------
-----------
Sales................................................................................................. $ --
-----------
-----------
</TABLE>
5. Net Unrealized Appreciation/Depreciation of Investments
Unrealized appreciation as of June 30, 1998, based on the cost for Federal
income tax purposes is as follows:
<TABLE>
<CAPTION>
GROWTH
PORTFOLIO
---------
<S> <C>
Gross Unrealized Appreciation........................................................................ $ 9,522
Gross Unrealized Depreciation........................................................................ (5,067)
---------
Net Unrealized Appreciation.......................................................................... $ 4,455
---------
---------
Cost of Investments for Federal Income Tax Purposes.................................................. $ 109,945
---------
---------
</TABLE>
6. Net Assets
At June 30, 1998, net assets consisted of the following:
<TABLE>
<CAPTION>
GROWTH
PORTFOLIO
---------
<S> <C>
Paid-in-Capital...................................................................................... $ 109,999
Undistributed Net Investment Loss.................................................................... (54)
Net Unrealized Appreciation of Investments........................................................... 4,455
---------
NET ASSETS........................................................................................... $ 114,400
---------
---------
</TABLE>
11
