[Aetna Retirement Services logo)
Laurie M. LeBlanc
President
Portfolio Partners, Inc.
Good News about Portfolio Partners Funds!
Dear Portfolio Partners Shareholders,
Portfolio Partners, Inc. (PPI) funds, available through variable life and
variable annuity products, are off and running! For the first half of 1998, PPI
MFS Emerging Equities Portfolio, PPI MFS Research Growth Portfolio, PPI MFS
Value Equity Portfolio, and PPI Scudder International Growth Portfolio all
exceeded their market benchmarks. PPI T. Rowe Price Growth Equity Portfolio
slightly underperformed its market benchmark, the S&P 500, but was right in line
with its Lipper VA Growth Fund universe.
The second quarter, in particular, was a difficult one for most fund managers,
as the Asian markets continued to contribute to market volatility and investors
were willing to pay lofty premiums for the relative "safety" and liquidity of
very large capitalized stocks. In addition, disappointments in earnings, and
general concern for valuation levels, contributed to market uncertainty.
Despite this activity in the marketplace, the PPI series of funds are adhering
to their stated investment guidelines and are tracking very well against similar
funds in their competitive universes. Asset growth has also been strong since
inception in November, 1997.
We are very pleased with the third party subadvisor managers and invite you to
read their comments on the following pages. *
Thank you for the confidence you've placed in us. We value your trust and your
business.
Sincerely,
/s/ Laurie M. LeBlanc
Laurie M. LeBlanc
_____________________
* The views expressed are those of the three PPI subadvisers as of June 30, 1998
and are subject to change based on market and other conditions. Information
about a fund's portfolio, asset allocation, or country diversification is
historical, and is no indication of future portfolio composition, which will
vary. Past performance is no indication of future results. The portfolios'
returns shown do not reflect the impact of the variable annuity or variable life
insurance contract charges. If these charges were reflected, the returns would
be lower.
<PAGE>
PPI MFS Emerging Equities Portfolio --
June 30, 1998 Commentary
_____________________
For the six months ended June 30, 1998, the PPI MFS Emerging Equities Portfolio
provided a return of 20.12%. This compares to a 5.46% return for the Russell
2000 Growth Index(1), the Fund's benchmark.
Low inflation, low interest rates, and a robust U.S. economy created a positive
backdrop for emerging growth stocks in the first half of 1998. It was, however,
a volatile period. The economic problems in Asia were probably the most
important factors affecting the U.S. market during this period. Concerns
relating to Asia meant that investors were willing to pay much higher prices for
the relative liquidity offered by bigger capitalization stocks. Consequently,
the mid-cap and larger-cap growth stocks in our Portfolio tended to outperform
the smaller stocks during this period. Also, many companies with significant
exposure to Asia, such as technology stocks, experienced a roller coaster ride.
Fortunately, the Portfolio's technology holdings were primarily in computer
software and networking, rather than the more volatile semiconductor companies.
The Portfolio continued to benefit from the solid performance of its technology
holdings, where earnings were surprisingly strong despite issues relating to
Asia. Stocks which contributed to performance included Cisco, Microsoft, SAP,
BMC Software and Compuware - all companies whose products were in strong demand.
Consolidation in the telecommunications industry increased value in holdings
such as WorldCom and MCI. Better than expected earnings and industry
consolidation also helped other companies such as Tyco International. One stock
which did not do as well as we would have liked was Cendant, the merger of HFS
and CUC International. The company encountered difficulties because of
accounting problems at CUC. We believe the stock will recover as those issues
are resolved and the company starts to surprise positively on the earnings
front.
Looking ahead, the potential for interest rates to rise from currently very low
levels is something we're on the lookout for, given the continued strength of
the U.S. economy and the tight labor market. If rates rise, interest-sensitive
stocks such as financials, and TV and radio broadcasters, could see their
valuations come under pressure. As a precaution, we've trimmed back on some of
our holdings in these areas.
We also believe we are at the beginning of an ongoing slowdown in profit growth
for the economy and the S&P 500. We've already seen the early manifestations of
this in the first half of 1998, with earnings disappointments for quite a few
companies. We think
_____________________
(1) The Russell 2000 Growth Index (a small cap index) consists of the smallest
2,000 companies in the Russell 3000 Index and represents approximately 10% of
the Russell 3000 total market capitalization. The Russell 2000 returns assume
reinvestment of all dividends. Please note that indexes are unmanaged and do not
take into account any fees and expenses of the individual securities that they
track. Individuals cannot invest directly in any index.
<PAGE>
this bodes well for emerging growth stocks since many of them are expected to
generate earnings growth far superior to that of the broader market. As a
result, technology continues to be an area of emphasis since selected software
and networking companies are generating some of the strongest, most consistent
earnings growth that we have been able to identify. Other areas we believe offer
great potential are the business and computer services markets, particularly
information technology and outsourcing firms, and telecommunications, where many
opportunities exist due to the increased competition and consolidation which is
taking place globally. In our view, the companies which can grow the fastest
and, at the same time, sustain and consistently deliver high growth, will be
well-rewarded by the marketplace. Thus, we believe that our strategy of
searching out rapidly-growing companies early in their development, and growth
stocks at reasonable prices, should be a favorable one for investors in 1998.
Respectfully submitted,
John W. Ballen, Portfolio Manager
<PAGE>
PPI MFS Research Growth Portfolio --
June 30, 1998 Commentary
_____________________
For the six months ended June 30, 1998, the PPI MFS Research Growth Portfolio
provided a total return of 18.0%. This compared to a return of 17.71% for the
S&P 500 Index(1), the benchmark. The Portfolio's outperformance in relation to
the six month S&P 500 Index can be attributed to relative overweighting in the
technology sector, where stocks have rebounded very nicely from a tumultuous
fourth quarter in 1997. Positive performance contributions came from retailing
and business services sectors of the economy, where fundamental research
continued to uncover exceptional performers. The Portfolio was also overweighted
in financial services, which continued to be an attractive sector.
During the second quarter of 1998, the sector weightings in the Portfolio did
not shift a great deal, as positions in stocks that we felt could be good
long-term achievers were maintained. The only significant changes came in the
consumer staples and energy sectors of the portfolio. In consumer staples, we
decreased our position by over 4% as positions in Coca Cola and Philip Morris
were sold. In the energy sector, we increased the Portfolio's weighting by 3%
over the past six months, as our research analysts noticed a compelling trend in
oil sensitive stocks.
Weightings were increased in healthcare, which was regarded as a good, steady
growth sector of the economy. The Portfolio was overweighted in medical services
and managed care companies such as United Healthcare, HBO & Co., and Tenet
Healthcare, as well as in pharmaceutical companies. In the managed care industry
our analysts believe that after years of poor pricing the cycle has finally
turned. This should translate into substantial margin expansion for these
companies over the next 2 to 3 years. Our pharmaceutical analyst continued to
look for companies focused on new product development, such as Bristol Myers
Squibb and American Home Products. Both companies continue to generate new
products and have quite strong growth rates. All of these healthcare companies
performed very well over the first six months of 1998 and positively contributed
to performance.
The Portfolio also remained significantly overweighted in the technology sector.
The concentration in this sector shifted toward those companies that
participated in the high-end product market, where demand remained strong, and
where we found strong growth opportunities. The Portfolio trimmed positions in
more commodity-type companies that are more likely to be impacted by the
continuing turmoil in Southeast Asia. Microsoft continued to be the top holding
in the Portfolio, and performed exceptionally well over the first two quarters
of 1998. Other substantial holdings such as Compuware, BMC Software, and Cisco
Systems performed exceptionally for this time period, as well.
The Portfolio also remained overweighted in retailing, where companies such as
Rite Aid, Home Depot, and Safeway enhanced returns, and in the financial
services sector, where companies continued to benefit from corporate cost
cutting, consolidation, slow growth, and low inflation.
_____________________
(1) The Standard & Poor's (S&P) 500 Index is considered to be representative of
the stock market in general. The S&P returns assume reinvestment of all
dividends. Please note that indexes are unmanaged and do not take into account
any fees and expenses of the individual securities that they track. Individuals
cannot invest directly in any index.
<PAGE>
Conversely, the Portfolio remained underweighted in utilities and communications
relative to the S&P 500.
In addition, the Portfolio continued to be underweighted in autos and housing,
industrial goods and services, and leisure. The major story in leisure has been
Cendant Corp, which performed miserably during the second quarter of 1998 due
to discoveries of accounting fraud on behalf of one of the company's recent
acquisitions. The stock's precipitous decline had a negative impact on the
Portfolio and the entire investment community. A continued focus on acquisitions
and strong core businesses should return much of the value to Cendant's stock
price over the long term.
We will continue to seek fundamentally strong companies to add in the year
ahead. Our strategy continues to be based upon the research analysts' "best
ideas" within his or her industries. The stocks are selected after careful,
in-depth fundamental analysis of the earnings outlook of the companies. These
companies have typically demonstrated: dominant and/or growing market share,
quality new/existing products, superior management teams, and strong financial
statements.
Respectfully submitted,
Kevin R. Parke, Portfolio Manager
<PAGE>
PPI MFS Value Equity Portfolio --
June 30, 1998 Commentary
_____________________
For the six months ending June 30, 1998, the PPI MFS Value Equity Portfolio
posted a return of 18.76%. This compared to a 17.71% return for the Portfolio's
benchmark, the S&P 500(1) Composite Index.
A combination of good sector selection and individual stock performance resulted
in the outperformance of the Portfolio relative to the S&P 500 over the past six
months. The top three performing sectors of the benchmark year-to-date were
Retailing, Autos and Housing, and Technology. The Portfolio was significantly
overweighted in Retailing, slightly underweighted in Autos and Housing, and
underweighted in Technology. The three worst performing sectors of the S&P 500
were Transportation, Energy, and Basic Materials. The Portfolio was
significantly underweighted in Energy and Basic Materials, and slightly
overweighted in Transportation.
Retailing and Healthcare, two of the Portfolio's top four sectors, significantly
outperformed the S&P 500. Seven of the Portfolio's top 10 holdings also
outperformed the S&P 500, with particularly strong performance from Cellular
Communications International (+65%), Tyco International (+43%), Safeway (+34%),
Rite Aid (+26%), and Harrah's Entertainment (+25%). The international exposure
of 14.3% of the Portfolio also contributed significantly to the strong relative
performance during the past six months. TelecomItalia, Banco Totta, Alcatel,
Henkel, and Wella were all strong performers.
Although the economic outlook is excellent, valuation levels continue to be
stretched. Our main concerns are the potential spread of the Asian crisis and
the buildup of inflationary pressures.
Respectfully submitted,
John R. Brennan, Jr., Portfolio Manager
_____________________
(1) The Standard & Poor's (S&P) 500 Index is considered to be representative of
the stock market in general. The S&P returns assume reinvestment of all
dividends. Please note that indexes are unmanaged and do not take into account
any fees and expenses of the individual securities that they track. Individuals
cannot invest directly in any index.
<PAGE>
PPI T. Rowe Price Growth Equity Portfolio
June 30, 1998 Commentary
_____________________
The U.S. market continued to advance strongly despite a slowdown in earnings, as
interest rates remained low and investors remained confident with the prospect
of solid market returns. Portfolio Partners T. Rowe Price Growth Equity
Portfolio returned 16.53% for the year-to-date ending June 30, 1998. This
compared to 17.71% for the S&P 500(1) benchmark. However, the Portfolio slightly
outperformed the Lipper VA Growth Fund average at 16.23%.
The primary driver behind the Portfolio's returns was the performance of
large-capitalization, consistent growth companies, including Wal-Mart, GE,
Pfizer, and Microsoft. While we benefited a great deal from these holdings, we
have underweighted S&P 500 stocks because of high valuations. In our view, many
of them are still great companies, but their shares offered limited prospects
for future growth at their current prices.
Performance was also a result of strong returns from, Bristol Myers Squibb,
WorldCom, Tyco International, and Home Depot. Among international shares,
Portfolio results were helped by Fairfax Financial, Mannesman, and Rentokil
Group. On a negative note, we were hurt by our holdings in lagging real estate
investment trusts, and in several technology stocks, including Maxim Integrated
Products, Oracle, and Analog Devices. In addition, we were negatively affected
by accounting problems at Cendant, where we had a fairly substantial position.
Our purchases and sales over the past six months reflected our usual investment
criteria of focusing on companies with strong management that gained market
share, and generated and reinvested solid free cash flow. We initiated positions
in CBS, which had strong cash flow from its radio and TV stations; Omnicom,
which gained share and generated strong, free cash flow in a consolidating
advertising market; Airtouch, which has a tremendous portfolio of cellular
properties around the world, and Tellabs, whose products gained increased market
share in the telecommunications equipment world.
While finding new ideas is exciting, it has become more difficult in a market
where the valuations of great companies have reached lofty levels. Nevertheless,
we will continue to seek opportunities to invest in stocks with good long-term
prospects for growth.
Respectfully submitted,
Robert W. Smith
Portfolio Manager
_____________________
(1) The Standard & Poor's S&P 500 Index is considered to be representative of
the stock market in general. The S&P returns assume reinvestment of all
dividends. Please note that indexes are unmanaged and do not take into account
any fees and expenses of the individual securities that they track. Individuals
cannot invest directly in any index.
<PAGE>
PPI Scudder International Growth Portfolio
June 30, 1998 Commentary
_____________________
Through June 30, 1998, Portfolio Partners Scudder International Growth Portfolio
gained 20.8%, while its benchmark, the Morgan Stanley Europe Australia Far East
Index (EAFE)(1) registered 15.9%. The comparable Lipper average for
International Funds for the 6 month period was up 15.5%.
The Portfolio's performance during the second quarter can be attributed mainly
to its overweighting in Europe, where 85% of its holdings reside. Local market
performance was particularly strong in Finland and Germany, each up 16%,
followed by France up 8% and the Netherlands up 7%. The Portfolio was
significantly overweighted in most of these markets. In addition, some
strengthening in European currencies further boosted dollar-based returns. While
this overweight exposure to Europe was helpful to fund performance, good
individual stock selection gave the Portfolio its biggest performance boost. Top
picks during the quarter included Orange (UK cellular telephone) up 67%, SAP
(German business software) up 56%, and Aegon (Dutch insurance) up 40%. These
strong equity contributions from European holdings were slightly offset by the
weak performance of many Japanese and other minor Asian equity positions.
Overall, for the first half of 1998, the performance story for the Portfolio was
very similar. A heavy exposure to the European markets and solid individual
stock picks contributed to most of the Portfolio's performance. While the top
market gainers were the smaller peripheral markets of mainly southern Europe,
performance from heavyweights like France and Germany were very positive as
well. The European currencies weakened only marginally against the dollar, and
had little effect on fund performance. Top stock picks during the six months
included Nokia (Finnish cellular infrastructure), Mannesmann (German telephone),
SAP, Banca di Roma (Italian banking), and Orange, each up over 100%.
Disappointments occurred in Japan, Hong Kong/China and the small positions in
the emerging markets.
Respectfully submitted,
Nicholas Bratt, Portfolio Manager Carol L. Franklin, Portfolio Manager
Irene T. Cheng, Portfolio Manager Joan R. Gregory, Portfolio Manager
_____________________
(1) Morgan Stanley Capital International Europe, Australia, Far East index is a
market value-weighted average of the performance of more than 900 securities
listed on the stock exchanges of countries in Europe, Australia and the Far
East. Please note that indexes are unmanaged and do not take into account any
fees and expenses of the individual securities they track. Individuals cannot
invest directly in any index.
<PAGE>
Portfolio Partners, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding for the period:
<TABLE>
<CAPTION>
MFS Emerging
Equities Portfolio
Six Months Ended
June 30, 1998
(Unaudited)
--------------------
<S> <C>
Net asset value, beginning of period ......... $ 42.91
--------
Income from investment operations:
Net investment income ....................... (0.07)
Net realized and change in
unrealized gain (loss) on
investments, futures, foreign
currency and forward foreign
currency exchange contracts ................ 8.70
--------
Total income from
investment operations .................... 8.63
--------
Net asset value, end of period ............... $ 51.54
========
Total return (1)* ............................ 20.12%
Net assets, end of period (000's) ............ $ 981,852
Ratio of total expenses to average net
assets (2) .................................. 0.81%
Ratio of net investment income to
average net assets (2) ...................... (0.29)%
Portfolio turnover rate (1) .................. 1.99%
<CAPTION>
MFS Emerging MFS Research
Equities Portfolio Growth Portfolio
Period from MFS Research Period from
November 28, 1997 Growth Portfolio November 28, 1997
(commencement Six Months Ended (commencement
of operations) June 30, 1998 of operations)
to December 31, 1997 (Unaudited) to December 31, 1997
---------------------- ------------------ ---------------------
<S> <C> <C> <C>
Net asset value, beginning of period ......... $ 43.39 $ 9.71 $ 9.89
-------- -------- --------
Income from investment operations:
Net investment income ....................... 0.09 0.01 --
Net realized and change in
unrealized gain (loss) on
investments, futures, foreign
currency and forward foreign
currency exchange contracts ................ (0.57) 1.74 (0.18)
-------- -------- --------
Total income from
investment operations .................... (0.48) 1.75 (0.18)
-------- -------- --------
Net asset value, end of period ............... $ 42.91 $ 11.46 $ 9.71
======== ======== ========
Total return (1)* ............................ (1.13)% 18.02% (1.82)%
Net assets, end of period (000's) ............ $ 768,108 $ 473,173 $ 399,548
Ratio of total expenses to average net
assets (2) .................................. 0.81% 0.85% 0.85%
Ratio of net investment income to
average net assets (2) ...................... 2.31% 0.22% 0.22%
Portfolio turnover rate (1) .................. 0.07% 48.69% 57.88%
</TABLE>
(1) Not annualized.
(2) Annualized.
* The total return percentage does not reflect any separate account charges
under variable annuity contracts or variable life policies.
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MFS Value
Equity Portfolio
MFS Value Period from Scudder International
Equity Portfolio November 28, 1997 Growth Portfolio
Six Months Ended (commencement Six Months Ended
June 30, 1998 of operations) June 30, 1998
(Unaudited) to December 31, 1997 (Unaudited)
- ------------------ ---------------------- -----------------------
<S> <C> <C>
$ 29.91 $ 29.49 $ 14.10
---------- -------- --------
0.06 0.05 0.12
5.56 0.37 2.82
----------- -------- --------
5.62 0.42 2.94
----------- -------- --------
$ 35.53 $ 29.91 $ 17.04
=========== ======== ========
18.76% 1.43% 20.85%
$ 179,210 $ 134,508 $ 444,877
0.90% 0.90% 1.00%
0.39% 1.98% 1.49%
60.88% 12.06% 27.15%
<CAPTION>
Scudder International T. Rowe Price Growth
Growth Portfolio Equity Portfolio
Period from T. Rowe Price Growth Period from
November 28, 1997 Equity Portfolio November 28, 1997
(commencement Six Months Ended (commencement
of operations) June 30, 1998 of operations)
to December 31, 1997 (Unaudited) to December 31, 1997
- --------------------- ---------------------- ---------------------
<C> <C> <C>
$ 13.88 $ 43.61 $ 42.74
-------- -------- --------
-- 0.17 0.06
0.22 7.04 0.81
--------- -------- --------
0.22 7.21 0.87
--------- -------- --------
$ 14.10 $ 50.82 $ 43.61
========= ======== ========
1.58% 16.53% 2.03%
$378,200 $468,859 $371,194
1.00% 0.75% 0.75%
0.12% 0.76% 1.58%
3.01% 28.20% 2.94%
</TABLE>
11
<PAGE>
MFS Emerging Equities Portfolio
Schedule of Investments
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -------------
<S> <C> <C>
COMMON STOCKS (96.0%)
Advertising (0.3%)
Mail-Well, Inc.* ..................................... 130,000 $ 2,819,375
Young & Rubicam Inc.* ................................ 5,800 185,600
------------
3,004,975
------------
Aerospace (0.2%)
Gulfstream Aerospace Corp.* .......................... 38,100 1,771,650
Ladish Co., Inc.* .................................... 7,900 98,750
Newport News Shipbuilding ............................ 8,600 230,050
------------
2,100,450
------------
Airlines (0.1%)
Atlas Air, Inc.* ..................................... 31,500 1,065,094
Carey International, Inc.* ........................... 5,000 140,000
------------
1,205,094
------------
Automotive (0.2%)
Federal-Mogul Corp. .................................. 30,700 2,072,250
------------
Banks and Credit Companies (0.0%)
U.S. Trust Corp. ..................................... 500 38,125
------------
Biotechnology (0.0%)
Guidant Corp. ........................................ 6,700 477,794
Icon PLC ADR (Great Britain)* ........................ 300 7,575
------------
485,369
------------
Business Machines (0.6%)
Compaq Computer Corp. ................................ 74,800 2,122,450
SCI Systems, Inc.* ................................... 4,400 165,550
Sun Microsystems, Inc.* .............................. 77,800 3,379,438
------------
5,667,438
------------
Business Machines--Peripherals (0.4%)
CHS Electronics, Inc.* ............................... 235,000 4,200,625
------------
Business Services (8.6%)
Accustaff, Inc.* ..................................... 879,500 27,484,375
ACSYS, Inc.* ......................................... 3,400 46,750
Affiliated Computer Services, Inc., Class A* ......... 3,900 150,150
American Dental Partners, Inc.* ...................... 1,500 21,000
AnswerThink Consulting Group, Inc.* .................. 2,700 58,050
BISYS Group, Inc.* ................................... 23,100 947,100
Bright Horizons, Inc.* ............................... 100 2,800
Career Education Corp.* .............................. 2,900 71,050
Ceridian Corp.* ...................................... 57,400 3,372,250
Compass International Services Corp.* ................ 17,400 165,300
Computer Sciences Corp. .............................. 100,000 6,400,000
Cornell Corrections, Inc.* ........................... 10,000 210,000
Cotelligent Group, Inc.* ............................. 19,200 448,800
Danka Business Systems PLC ADR
(Great Britian) .................................... 353,800 4,179,263
Diamond Technology Partners, Inc.* ................... 5,400 163,350
DST Systems, Inc.* ................................... 1,100 61,600
Dynamex, Inc.* ....................................... 7,400 89,725
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -------------
<S> <C> <C>
Business Services (continued)
Fine Host Corp.* ..................................... 1,100 $ 2,406
First Consulting Group, Inc.* ........................ 1,900 49,875
First Data Corp. ..................................... 494,800 16,483,025
Galileo International, Inc. .......................... 700 31,544
Hawk Corp., Class A* ................................. 3,800 66,975
Ikon Office Solutions, Inc. .......................... 208,100 3,030,456
Interim Services, Inc.* .............................. 50,000 1,606,250
Learning Tree International, Inc.* ................... 14,200 285,775
Loewen Group, Inc. ................................... 197,500 5,332,500
Metamor Worldwide, Inc.* ............................. 41,300 1,453,244
Navigant International, Inc.* ........................ 51,339 436,382
NOVA Corp.* .......................................... 25,000 893,750
Personnel Group of America, Inc. ..................... 32,100 642,000
PMT Services, Inc.* .................................. 10,000 254,375
Professional Detailing, Inc.* ........................ 1,900 47,263
Provant, Inc.* ....................................... 1,200 22,050
PRT Group, Inc.* ..................................... 148,600 1,569,588
RCM Technologies, Inc.* .............................. 21,100 428,594
Renaissance Worldwide, Inc.* ......................... 111,700 2,429,475
Snyder Communications, Inc.* ......................... 15,700 690,800
Staff Leasing, Inc.* ................................. 45,000 1,327,500
Syntel, Inc.* ........................................ 15,000 468,750
Technology Solutions Co.* ............................ 13,400 424,613
United Road Services, Inc.* .......................... 2,700 51,638
Verio, Inc.* ......................................... 3,200 79,600
Vestcom International, Inc.* ......................... 10,000 92,500
Wesley Jessen VisionCare, Inc.* ...................... 100,000 2,312,500
------------
84,384,991
------------
Chemicals (0.0%)
Sigma-Aldrich Corp ................................... 8,500 298,563
------------
Communications Services (5.2%)
Amdocs Ltd.* ......................................... 6,000 90,750
Global TeleSystems Group, Inc.* ...................... 3,500 170,625
Hyperion Telecommunications, Inc., Class A* .......... 8,000 125,500
Intermedia Communications, Inc.* ..................... 16,400 687,775
MCI Communications Corp. ............................. 525,400 30,538,875
NEXTLINK Communications, Inc., Class A* .............. 1,800 68,175
Qwest Communications International, Inc.* ............ 7,047 245,780
SCC Communications Corp.* ............................ 22,600 276,850
Tel-Save Holdings, Inc.* ............................. 627,000 9,248,250
Worldcom, Inc.* ...................................... 194,295 9,411,164
------------
50,863,744
------------
Computer Software (0.9%)
Aspec Technology, Inc.* .............................. 1,800 11,700
DA Consulting Group, Inc.* ........................... 800 11,500
Fundtech Ltd.* ....................................... 600 11,325
F.Y.I., Inc.* ........................................ 72,000 2,052,000
International Integration, Inc.* ..................... 2,300 39,675
Manhattan Associates, Inc.* .......................... 1,500 31,219
</TABLE>
12 See Notes to Schedule of Investments.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -------------
<S> <C> <C>
Computer Software (continued)
Mobius Management Systems, Inc.* .................. 1,900 $ 28,500
SAP AG (Germany) .................................. 10,000 6,074,390
Transaction Systems Architects, Inc., Class A* 500 19,250
Unigraphics Solutions, Inc.* ...................... 11,700 163,800
------------
8,443,359
------------
Computer Software--PC (6.7%)
Autodesk, Inc. .................................... 33,900 1,309,388
Microsoft Corp. ................................... 598,400 64,851,600
PC Connection, Inc.* .............................. 1,500 22,875
------------
66,183,863
------------
Computer Software--Systems (21.5%)
Adobe Systems, Inc. ............................... 300 12,731
Aspen Technologies, Inc. .......................... 3,900 196,950
BMC Software, Inc. ................................ 807,400 41,934,338
Cadence Design Systems, Inc.* ..................... 873,100 27,284,375
Computer Associates International, Inc. ........... 863,800 47,994,888
Computer Learning Centers, Inc.* .................. 4,600 114,425
Compuware Corp.* .................................. 677,800 34,652,525
Dassault Systems SA ADR (France) .................. 400 19,050
Learning Co., Inc.* ............................... 6,000 177,750
Oracle Systems Corp. .............................. 1,854,100 45,541,331
PeopleSoft, Inc.* ................................. 3,400 159,800
Rational Software Corp.* .......................... 15,800 240,950
Security Dynamics Technologies, Inc.* ............. 20,500 379,250
Siebel Systems, Inc. .............................. 70,771 2,282,365
Synopsys, Inc.* ................................... 230,000 10,522,500
Veritas Software Corp.* ........................... 600 24,825
Xionics Document Technologies, Inc.* .............. 1,000 4,938
------------
211,542,991
------------
Conglomerates (5.5%)
Tyco International Ltd. ........................... 854,500 53,833,500
------------
Consumer Goods and Services (0.0%)
Carson, Inc.* ..................................... 8,800 69,300
CompX International, Inc.* ........................ 3,800 82,175
Ocular Sciences, Inc.* ............................ 9,800 318,500
------------
469,975
------------
Containers (0.0%)
Ivex Packaging Corp.* ............................. 300 6,975
------------
Electrical Equipment (0.2%)
AFC Cable Systems, Inc.* .......................... 9,000 319,500
Cable Design Technologies* ........................ 82,500 1,701,563
------------
2,021,063
------------
Electronics (2.1%)
Altera Corp.* ..................................... 367,400 10,861,263
Amkor Technology, Inc.* ........................... 12,900 120,534
Analog Devices, Inc.* ............................. 59,500 1,461,469
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Electronics (continued)
Berg Electronics Corp.* ........................... 38,100 $ 745,331
Intel Corp. ....................................... 70,000 5,188,750
Teradyne, Inc.* ................................... 50,800 1,358,900
Xilinx, Inc.* ..................................... 26,500 901,000
------------
20,637,247
------------
Entertainment (5.4%)
American Tower Systems Corp., Class A* ............ 4,000 99,750
CBS Corp. ......................................... 54,500 1,730,375
Chancellor Media Corp.* ........................... 28,000 1,390,374
Citadel Communications Corp.* ..................... 8,900 177,444
Clear Channel Communications, Inc.* ............... 61,800 6,743,925
Cox Radio, Inc., Class A* ......................... 18,900 817,425
Emmis Broadcasting Corp., Class A* ................ 2,300 109,969
GameTech International, Inc.* ..................... 50,000 193,750
Gemstar International Group Ltd.* ................. 1,700 63,644
Harrah's Entertainment, Inc.* ..................... 41,400 962,550
Hearst-Argyle Television, Inc.* ................... 5,200 208,000
Heftel Broadcasting Corp.* ........................ 24,000 1,074,000
Jacor Communications, Inc.* ....................... 68,900 4,065,100
Mirage Resorts, Inc.* ............................. 67,800 1,444,988
Premier Parks, Inc.* .............................. 53,900 3,591,088
SFX Entertainment, Inc., Class A* ................. 3,000 137,625
Time Warner, Inc. ................................. 161,600 13,806,700
Univision Communications, Inc., Class A* .......... 434,000 16,166,500
------------
52,783,207
------------
Financial Institutions (2.6%)
ARM Financial Group, Inc., Class A ................ 29,900 661,538
Associates First Capital Corp. .................... 33,400 2,567,625
Charter One Financial, Inc. ....................... 4,000 134,750
Conning Corp. ..................................... 1,900 37,050
Consolidated Capital Corp.* ....................... 240,000 5,396,232
Donaldson Lufkin & Jenrette, Inc. ................. 2,200 111,788
Federated Investors, Inc., Class B* ............... 8,600 159,100
Franklin Resources, Inc. .......................... 264,200 14,266,800
Friedman, Billings, Ramsey Group, Inc.,
Class A* ........................................ 6,200 89,513
Green Tree Financial Corp. ........................ 20,000 856,250
Healthcare Financial Partners, Inc.* .............. 5,800 355,613
Heller Financial, Inc.* ........................... 14,000 420,000
Lehman Brothers Holdings .......................... 1,200 93,075
Morgan Stanley Dean Witter Discover & Co. ......... 2,700 246,713
T Rowe Price Associates, Inc. ..................... 5,400 202,838
Waddell & Reed Financial, Inc., Class A ........... 6,000 143,625
------------
25,742,510
------------
Food and Beverage Products (0.0%)
Keebler Foods Co.* ................................ 200 5,500
Tootsie Roll Inds, Inc. ........................... 412 31,621
------------
37,121
------------
</TABLE>
13
<PAGE>
MFS Emerging Equities Portfolio
Schedule of Investments
June 30, 1998 (continued) (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Insurance (0.9%)
Ace, Ltd. (Bermuda) ............................... 82,300 $ 3,209,700
Annuity and Life Re Holdings, Ltd.* ............... 3,500 77,438
Conseco, Inc. ..................................... 84,500 3,950,375
ESG Re Ltd. ....................................... 5,300 114,613
Hartford Life, Inc., Class A ...................... 200 11,388
Inspire Insurance Solutions, Inc.* ................ 4,000 133,000
Life Re Corp. ..................................... 13,100 1,074,200
------------
8,570,714
------------
Machinery (0.0%)
Halter Marine Group, Inc.* ........................ 1,600 24,100
Munters AB (Sweden) ............................... 200 2,183
------------
26,283
------------
Medical and Health Products (0.8%)
Arterial Vascular Engineering Co.* ................ 6,800 243,100
Boston Scientific Corp.* .......................... 100,000 7,162,500
King Pharmaceuticals, Inc.* ....................... 28,200 394,800
McKesson Corp. .................................... 1,600 130,000
Mentor Corp. ...................................... 700 16,975
Renex Corp.* ...................................... 20,000 117,500
Safeskin Corp.* ................................... 1,400 57,575
------------
8,122,450
------------
Medical and Health Technology Services (6.5%)
AmeriSource Health Corp., Class A* ................ 1,000 65,688
Balanced Care Corp.* .............................. 30,300 219,675
Capital Senior Living Corp.* ...................... 89,800 1,077,600
Columbia/HCA Healthcare Corp ...................... 3,000 87,375
Foundation Health Systems* ........................ 100 2,638
Health Management Associates, Inc., Class A* 900 30,094
Healthsouth Corp. ................................. 364,100 9,716,896
Integrated Health Services, Inc. .................. 4,700 176,250
Mariner Health Group, Inc.* ....................... 1,900 31,588
MedPartners, Inc.* ................................ 10,000 80,000
Medtronic, Inc. ................................... 1,000 63,750
Orthodontic Centers of America, Inc.* ............. 213,100 4,461,781
Oxford Health Plans, Inc.* ........................ 39,100 598,719
PacifiCare Health Systems, Inc., Class A* ......... 10,000 845,000
PacifiCare Health Systems, Inc., Class B* ......... 3,900 344,663
Province Healthcare Co.* .......................... 1,900 52,606
PSS World Medical, Inc.* .......................... 60,000 877,500
Rural/Metro Corp.* ................................ 23,900 310,700
St. Jude Medical, Inc.* ........................... 70 2,577
Total Renal Care Holdings, Inc.* .................. 11,506 396,957
United Healthcare Corp. ........................... 643,700 40,874,950
Wellpoint Health Networks, Inc.* .................. 43,200 3,196,800
------------
63,513,807
------------
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Oil Services (0.2%)
BJ Services Co.* .................................. 4,000 $ 116,250
Camco International, Inc. ......................... 2,900 225,838
Cooper Cameron Corp. .............................. 4,400 224,400
Diamond Offshore Drilling, Inc. ................... 2,400 96,000
EVI Weatherford, Inc.* ............................ 3,705 137,548
Global Industries Ltd.* ........................... 6,700 113,063
Input/Output, Inc.* ............................... 900 16,031
National-Oilwell, Inc.* ........................... 1,200 32,175
Noble Drilling Corp.* ............................. 8,200 197,313
NS Group, Inc.* ................................... 50,000 506,250
Precision Drilling Corp. (Canada)* ................ 800 15,700
Rowan Companies, Inc.* ............................ 700 13,606
------------
1,694,174
------------
Oils (0.0%)
Veritas DGC, Inc.* ................................ 500 24,969
------------
Pollution Control (0.5%)
Allied Waste Industries, Inc.* .................... 2,600 62,400
Philip Services Corp. (Canada)* ................... 72,000 297,000
Republic Services, Inc., Class A .................. 88,100 2,246,550
USA Waste Services, Inc.* ......................... 50,000 2,468,750
U.S. Filter Corp.* ................................ 2,700 75,769
Waste Management, Inc. ............................ 6,500 227,500
------------
5,377,969
------------
Printing and Publishing (0.1%)
Applied Graphics Technologies, Inc.* .............. 700 32,025
Workflow Management, Inc.* ........................ 68,452 551,895
------------
583,920
------------
Railroad (0.0%)
Kansas City Southern Industries ................... 7,400 367,225
------------
Real Estate (0.1%)
Capital Automotive REIT ........................... 23,000 326,313
ResortQuest International, Inc.* .................. 5,700 92,981
Starwood Lodging Trust REIT ....................... 3,255 157,257
------------
576,551
------------
Restaurants and Lodging (7.6%)
Applebee's International, Inc. .................... 236,000 5,280,500
Avis Rent A Car, Inc.* ............................ 11,600 287,100
Buffetts, Inc.* ................................... 81,700 1,281,669
CapStar Hotel Co.* ................................ 70,000 1,960,000
Cavanaughs Hospitality Corp.* ..................... 3,400 44,413
Cendant Corp.* .................................... 2,298,242 47,975,802
CKE Restaurants, Inc. ............................. 8,000 330,000
Dollar Thrifty Automotive Group, Inc.* ............ 44,300 586,975
Four Seasons Hotels, Inc. (Canada) ................ 4,800 169,200
Friendly Ice Cream Corp.* ......................... 50,000 843,750
Hilton Hotels Corp. ............................... 5,900 168,150
Promus Hotel Corp.* ............................... 284,765 10,963,453
</TABLE>
14 See Notes to Schedule of Investments.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Restaurants and Lodging (continued)
Royal Caribbean Cruises Ltd. ..................... 15,600 $ 1,240,200
Schlotzsky's, Inc.* .............................. 125,000 2,000,000
Showbiz Pizza Time, Inc.* ........................ 25,000 1,007,813
Signature Resorts, Inc.* ......................... 15,000 247,500
United Rentals, Inc.* ............................ 5,800 243,600
U.S. Franchise Systems, Inc., Class A* ........... 45,700 371,313
-------------
75,001,438
-------------
Special Products and Services (0.7%)
American Disposal Services, Inc.* ................ 7,800 365,625
Aztec Technology Partners, Inc.* ................. 102,678 782,921
Central Parking Corp. ............................ 9,700 441,350
Championship Auto Racing Teams, Inc.* ............ 2,400 43,800
Coach USA, Inc.* ................................. 6,400 292,000
Cunningham Graphics International, Inc.* ......... 1,300 22,425
EduTrek International, Inc.* ..................... 100 2,450
Ritchie Brothers Auctioneers, Inc.* .............. 3,000 79,688
School Specialty, Inc.* .......................... 57,043 934,086
Staff Mark, Inc.* ................................ 28,500 1,043,813
U.S. Office Products Co.* ........................ 128,348 2,502,781
-------------
6,510,939
-------------
Steel (0.0%)
Steelcase, Inc., Class A ......................... 4,400 114,400
-------------
Stores (9.9%)
CompUSA, Inc.* ................................... 35,000 632,188
Consolidated Stores Corp.* ....................... 115,100 4,172,375
Corporate Express, Inc.* ......................... 373,900 4,743,856
CSK Auto Corp.* .................................. 5,300 133,825
CVS Corp. ........................................ 36,800 1,432,900
Duane Reade, Inc.* ............................... 2,500 75,000
General Nutrition Co., Inc.* ..................... 67,300 2,094,713
Global DirectMail Corp.* ......................... 1,800 22,725
Home Depot, Inc. ................................. 8,400 697,725
Micro Warehouse, Inc.* ........................... 249,200 3,862,600
Office Depot, Inc.* .............................. 392,100 12,375,656
Regis Corp. ...................................... 1,500 44,344
Republic Industries, Inc.* ....................... 1,654,100 41,352,500
Rite Aid Corp. ................................... 634,800 23,844,675
Staples, Inc.* ................................... 9,600 277,800
Viking Office Products, Inc.* .................... 4,500 141,188
-------------
95,904,070
-------------
Supermarkets (1.7%)
Fred Myer, Inc.* ................................. 59,100 2,511,750
Safeway, Inc. .................................... 351,000 14,281,313
-------------
16,793,063
-------------
Telecommunications (6.4%)
Allegiance Telecom, Inc.* ........................ 46,500 639,375
Ascend Communications, Inc.* ..................... 55,300 2,740,806
Aspect Telecommunications Corp.* ................. 1,300 35,588
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Telecommunications (continued)
Cisco Systems, Inc. .............................. 632,100 $ 58,192,706
International Network Services* .................. 10,000 410,000
Inter-Tel, Inc. .................................. 2,000 32,000
Lucent Technologies, Inc. ........................ 8,000 665,500
Premisys Communications, Inc.* ................... 1,000 24,875
Scandinavian Broadcasting System SA* ............. 3,100 93,581
US LEC Corp., Class A* ........................... 2,500 52,188
-------------
62,886,619
-------------
Utilities--Electric (0.1%)
Calenergy, Inc.* ................................. 25,000 751,563
-------------
Total Common Stocks (Cost $808,742,137) 942,843,589
-------------
PREFERRED STOCKS (0.2%)
SAP AG-Vorzug (Germany) .......................... 2,900 1,970,709
-------------
Total Preferred Stocks (Cost $882,995) 1,970,709
-------------
TOTAL INVESTMENTS (96.2%) (Cost $809,625,132(a)) 944,814,298
Other assets less liabilities (3.8%) 37,037,625
-------------
Total Net Assets (100.0%) $981,851,923
=============
Notes to Schedule of Investments
(a) The cost of investments for federal income tax purposes
amounts to $809,625,132. Unrealized gains and losses, based
on identified tax cost at June 30, 1998, are as follows:
Unrealized gains ........................................ $186,786,658
Unrealized losses ...................................... (51,597,492)
-------------
Net unrealized gain ............................. $135,189,166
=============
</TABLE>
* Non-income producing security.
Category percentages are based on total net assets.
See Notes to Financial Statements. 15
<PAGE>
MFS Research Growth Portfolio
Schedule of Investments
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
COMMON STOCKS (95.7%)
Aerospace (2.7%)
Lockheed Martin Corp. ........................... 34,600 $ 3,663,275
Newport News Shipbuilding ....................... 7,600 203,300
United Technologies ............................. 93,700 8,667,250
------------
12,533,825
------------
Airlines (0.6%)
AMR Corp.* ...................................... 19,000 1,581,750
U.S. Airways Group, Inc.* ....................... 18,400 1,458,200
------------
3,039,950
------------
Apparel and Textiles (0.7%)
Nordstrom, Inc. ................................. 40,300 3,113,175
------------
Automotive (0.4%)
Ford Motor Co. .................................. 6,100 359,900
Lear Corp.* ..................................... 32,100 1,647,131
------------
2,007,031
------------
Banks and Credit Companies (6.5%)
BankBoston Corp. ................................ 56,600 3,148,375
Chase Manhattan Bank ............................ 78,800 5,949,400
Comerica, Inc. .................................. 69,300 4,591,125
Fleet Financial Group, Inc. ..................... 61,700 5,151,950
ING Groep N.V. (Netherlands) .................... 78,065 5,116,997
National City Corp. ............................. 53,000 3,763,000
PNC Bank Corp. .................................. 55,000 2,959,688
------------
30,680,535
------------
Business Machines (1.0%)
Sun Microsystems, Inc.* ......................... 112,800 4,899,750
------------
Business Services (0.7%)
Accustaff, Inc.* ................................ 68,900 2,153,125
Eaton Corp. ..................................... 12,500 971,875
------------
3,125,000
------------
Chemicals (2.5%)
Air Products & Chemicals, Inc. .................. 87,800 3,512,000
Akzo Nobel N.V. (Netherlands) ................... 6,900 1,535,446
Cambrex Corp. ................................... 36,200 950,250
Cytec Industries, Inc.* ......................... 54,200 2,398,350
DuPont (E I) de Nemours ......................... 14,900 1,111,913
Sigma-Aldrich Corp. ............................. 71,100 2,497,388
------------
12,005,347
------------
Communications Services (2.8%)
Intermedia Communications, Inc.* ................ 52,800 2,214,300
MCI Communications Corp. ........................ 54,100 3,144,563
Sprint Corp. .................................... 48,200 3,398,100
Worldcom, Inc.* ................................. 91,495 4,431,789
------------
13,188,752
------------
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Computer Software--PC (4.8%)
Electronic Arts, Inc.* .......................... 72,100 $ 3,893,400
Microsoft Corp. ................................. 174,800 18,943,950
------------
22,837,350
------------
Computer Software--Systems (8.3%)
Adobe Systems, Inc. ............................. 28,500 1,209,469
Alcatel Alsthom Compagnie Generale
d'electricite ADR (France) .................... 156,000 6,347,250
BMC Software, Inc. .............................. 123,800 6,429,863
Cadence Design Systems, Inc.* ................... 157,200 4,912,500
Computer Associates International, Inc. ......... 72,950 4,053,284
Compuware Corp.* ................................ 103,900 5,311,888
EMC Corp. ....................................... 54,500 2,442,281
Oracle Systems Corp. ............................ 224,500 5,514,281
Synopsys, Inc.* ................................. 70,100 3,207,075
------------
39,427,891
------------
Conglomerates (3.3%)
Hutchison Whampoa Ltd. (Hong Kong) .............. 330,000 1,741,971
Tyco International Ltd. ......................... 217,200 13,683,587
------------
15,425,558
------------
Consumer Goods and Services (8.1%)
Black & Decker Corp. ............................ 63,200 3,855,200
Clorox Co. ...................................... 41,400 3,948,525
Colgate-Palmolive Co. ........................... 81,600 7,180,800
Dial Corp. ...................................... 82,600 2,142,438
Gillette Co. .................................... 132,500 7,511,094
Kimberly-Clark Corp. ............................ 127,100 5,830,713
Proctor & Gamble Co. ............................ 52,600 4,789,888
Revlon, Inc., Class A* .......................... 55,000 2,825,625
------------
38,084,283
------------
Containers (0.7%)
Stone Container Corp.* .......................... 223,200 3,487,500
------------
Electrical Equipment (2.0%)
American Standard Co., Inc.* .................... 53,600 2,395,250
Cooper Industries, Inc. ......................... 11,800 648,263
General Electric Co. ............................ 71,300 6,488,300
------------
9,531,813
------------
Electronics (2.4%)
Analog Devices, Inc.* ........................... 124,100 3,048,206
Sony Corp. (Japan) .............................. 44,400 3,839,774
Teradyne, Inc.* ................................. 97,500 2,608,125
Xerox Corp. ..................................... 18,800 1,910,550
------------
11,406,655
------------
Entertainment (1.2%)
CBS Corp. ....................................... 89,200 2,832,100
Jacor Communications, Inc.* ..................... 48,300 2,849,700
------------
5,681,800
------------
</TABLE>
16 See Notes to Schedule of Investments.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Financial Institutions (4.0%)
Associates First Capital Corp. .................... 13,652 $ 1,049,498
CIT Group, Inc., Class A .......................... 15,100 566,250
Federal National Mortgage Association ............. 65,200 3,960,900
First Union Corp. ................................. 78,408 4,567,266
Green Tree Financial Corp. ........................ 7,900 338,219
Merrill Lynch & Co. ............................... 18,500 1,706,625
Morgan Stanley Dean Witter Discover & Co. ......... 52,000 4,751,500
Union Planters Corp. .............................. 34,800 2,046,675
------------
18,986,933
------------
Food and Beverage Products (1.9%)
Archer-Daniels-Midland Co. ........................ 114,500 2,218,438
Companhia Cervejaria Brahma ADR (Brazil) .......... 72,900 911,250
Corn Products International, Inc.* ................ 70,400 2,384,800
McCormick & Co, Inc. .............................. 83,900 2,996,799
Nabisco Holdings Corp., Class A ................... 15,100 544,544
------------
9,055,831
------------
Insurance (9.5%)
Ace, Ltd. (Bermuda) ............................... 57,500 2,242,500
Allstate Corp. .................................... 34,200 3,131,438
Chubb Corp. ....................................... 43,700 3,512,388
CIGNA Corp. ....................................... 66,300 4,574,700
Conseco, Inc. ..................................... 146,900 6,867,575
EXEL Ltd. (Bermuda) ............................... 13,900 1,081,594
FPIC Insurance Group, Inc.* ....................... 800 26,900
Hartford Financial Services Group ................. 39,600 4,529,250
Life Re Corp. ..................................... 12,000 984,000
Lincoln National Corp. ............................ 63,900 5,838,863
Mid Ocean Ltd. .................................... 700 54,950
Nationwide Financial Services, Inc., Class A ...... 29,500 1,504,500
Reliastar Financial Corp. ......................... 76,900 3,691,200
Skandia Forsakrings AB (Sweden) ................... 320,500 4,583,150
Travelers Property Casualty Corp. ................. 38,050 2,306,781
------------
44,929,789
------------
Medical and Health Products (5.2%)
American Home Products Corp. ...................... 146,800 7,596,900
Boston Scientific Corp.* .......................... 49,500 3,545,438
Bristol-Myers Squibb Co. .......................... 115,500 13,275,281
------------
24,417,619
------------
Medical and Health Technology Services (6.6%)
Cardinal Health, Inc. ............................. 24,400 2,287,500
Columbia/HCA Healthcare Corp. ..................... 139,100 4,051,288
HBO & Co. ......................................... 304,800 10,744,200
Healthsouth Corp. ................................. 185,900 4,961,206
United Healthcare Corp. ........................... 142,300 9,036,050
------------
31,080,244
------------
Metals and Minerals (0.4%)
Minerals Technologies, Inc. ....................... 33,100 1,683,963
------------
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Oil Services (1.9%)
Chevron Corp. ..................................... 37,100 $ 3,081,619
Cooper Cameron Corp. .............................. 35,000 1,785,000
Diamond Offshore Drilling, Inc. ................... 46,900 1,876,000
EVI Weatherford, Inc.* ............................ 63,270 2,348,899
------------
9,091,518
------------
Oils (4.7%)
British Petroleum Co. PLC ADR (Great Britain) ..... 85,615 7,555,524
Mobil Corp. ....................................... 29,800 2,283,425
Texaco, Inc. ...................................... 115,200 6,876,000
USX--Marathon Group ............................... 162,500 5,575,781
------------
22,290,730
------------
PC's and Peripherals (0.0%)
Canon, Inc. (Japan) ............................... 900 20,517
------------
Pollution Control (1.0%)
Browning-Ferris Industries, Inc. .................. 110,500 3,839,875
Waste Management, Inc. ............................ 21,500 752,500
------------
4,592,375
------------
Railroad (0.5%)
Wisconsin Central Transport* ...................... 110,700 2,421,563
------------
Restaurants and Lodging (1.5%)
Cendant Corp.* .................................... 198,100 4,135,338
CKE Restaurants, Inc. ............................. 52,500 2,165,625
Promus Hotel Corp.* ............................... 18,985 730,923
------------
7,031,886
------------
Special Products and Services (0.5%)
McDonald's Corp. .................................. 37,100 2,559,900
------------
Stores (4.3%)
CVS Corp. ......................................... 118,400 4,610,200
Home Depot, Inc. .................................. 64,000 5,316,000
Office Depot, Inc.* ............................... 88,200 2,783,813
Rite Aid Corp. .................................... 204,000 7,662,750
------------
20,372,763
------------
Supermarkets (2.0%)
Fred Myer, Inc.* .................................. 71,100 3,021,750
Safeway, Inc. ..................................... 157,800 6,420,488
------------
9,442,238
------------
Telecommunications (1.6%)
Aspect Telecommunications Corp.* .................. 24,300 665,213
Cisco Systems, Inc. ............................... 74,400 6,849,450
------------
7,514,663
------------
Utilities--Electric (0.5%)
Calenergy, Inc.* .................................. 76,300 2,293,769
------------
Utilities--Gas (0.9%)
Columbia Energy Group ............................. 19,550 1,087,469
KN Energy, Inc. ................................... 60,900 3,300,019
------------
4,387,488
------------
</TABLE>
17
<PAGE>
MFS Research Growth Portfolio
Schedule of Investments
June 30, 1998 (continued) (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
---------- ----------------
<S> <C> <C>
Total Common Stocks (Cost $389,012,319) 452,650,004
------------
PREFERRED STOCKS (0.2%)
Henkel KGAA (Germany) .................................................... 10,900 $ 1,079,327
------------
Total Preferred Stocks (Cost $735,643) 1,079,327
------------
TOTAL INVESTMENTS (95.9%) (Cost $389,747,962(a)) 453,729,331
Other assets less liabilities (4.1%) 19,444,009
------------
Total Net Assets (100.0%) $473,173,340
============
Notes to Schedule of Investments
(a) The cost of investments for federal income tax purposes amounts to
$389,747,962. Unrealized gains and losses, based on identified tax cost at
June 30, 1998, are as follows:
Unrealized gains ......................................................... $75,235,938
Unrealized losses ........................................................ (11,254,569)
------------
Net unrealized gain ..................................................... $63,981,369
============
</TABLE>
* Non-income producing security.
Category percentages are based on total net assets.
18 See Notes to Financial Statements.
<PAGE>
MFS Value Equity Portfolio
Schedule of Investments
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
---------------- -----------------
<S> <C> <C>
COMMON STOCKS (91.7%)
Aerospace (0.6%)
Newport News Shipbuilding ............................ 7,700 $ 205,975
Raytheon Co., Class A ................................ 15,700 904,713
------------
1,110,688
------------
Airlines (0.2%)
Southwest Airlines Co. ............................... 15,000 444,375
------------
Automotive (1.1%)
Hayes Lemmerz International, Inc.* ................... 4,400 174,900
Hertz Corp., Class A* ................................ 9,300 412,106
Lear Corp.* .......................................... 11,500 590,094
LucasVarity PLC (Great Britain) ...................... 202,000 802,708
------------
1,979,808
------------
Banks and Credit Companies (5.1%)
Banco Totta & Acores (Portugal) ...................... 39,700 1,204,117
Dah Sing Financial Group (Hong Kong) ................. 152,400 177,013
Fleet Financial Group, Inc. .......................... 21,600 1,803,600
Liu Chong Hing Bank Ltd. (Hong Kong) ................. 222,000 189,100
National City Corp. .................................. 25,800 1,831,800
Overseas Union Bank Ltd. (Singapore) ................. 69,000 151,600
PNC Bank Corp. ....................................... 30,600 1,646,663
Wells Fargo & Co. .................................... 5,300 1,955,700
Wing Hang Bank Ltd. (Hong Kong) ...................... 159,800 213,461
------------
9,173,054
------------
Business Services (3.1%)
Affiliated Computer Services, Inc., Class A* ......... 37,300 1,436,050
Ceridian Corp.* ...................................... 16,700 981,125
Computer Sciences Corp. .............................. 33,000 2,112,000
Galileo International, Inc. .......................... 21,000 946,313
------------
5,475,488
------------
Cellular Phones (0.9%)
Century Telephone Enterprises, Inc. .................. 35,950 1,649,206
------------
Chemicals (2.1%)
Akzo Nobel N.V. (Netherlands) ........................ 11,800 2,625,835
Cambrex Corp. ........................................ 46,200 1,212,750
------------
3,838,585
------------
Communications Services (7.2%)
Cellular Communications International, Inc.* ......... 145,050 7,234,369
Global TeleSystems Group, Inc.* ...................... 36,700 1,789,125
Intermedia Communications, Inc.* ..................... 23,400 981,338
SK Telecom Co. Ltd. ADR (South Korea) ................ 36,984 205,724
Sprint Corp. ......................................... 37,600 2,650,800
------------
12,861,356
------------
Computer Software (0.4%)
GTECH Holdings Corp.* ................................ 23,200 781,550
------------
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Computer Software--Systems (4.5%)
Computer Associates International, Inc. .............. 75,200 $ 4,178,300
Oracle Systems Corp. ................................. 76,600 1,881,488
Synopsys, Inc.* ...................................... 42,064 1,924,428
------------
7,984,216
------------
Conglomerates (5.9%)
Tyco International Ltd. .............................. 166,700 10,502,089
------------
Construction Services (0.9%)
Martin Marietta Materials, Inc. ...................... 34,400 1,548,000
------------
Consumer Goods and Services (1.6%)
Black & Decker Corp. ................................. 23,600 1,439,600
Philip Morris Co., Inc. .............................. 34,900 1,374,188
------------
2,813,788
------------
Containers (1.0%)
Stone Container Corp.* ............................... 117,600 1,837,500
------------
Drugs (2.1%)
Sanofi SA (France) ................................... 31,300 3,683,572
------------
Electrical Equipment (1.7%)
Cooper Industries, Inc. .............................. 28,000 1,538,250
Elsag Bailey Process Automation N.V.
(Netherlands)* ..................................... 62,100 1,494,281
------------
3,032,531
------------
Electronics (1.2%)
Analog Devices, Inc.* ................................ 49,900 1,225,669
Lattice Semiconductor Corp.* ......................... 29,600 840,824
------------
2,066,493
------------
Entertainment (5.5%)
American Tower Systems Corp., Class A* ............... 65,000 1,620,938
Casino America, Inc.* ................................ 500 1,750
Citadel Communications Corp.* ........................ 1,600 31,900
E.W. Scripps Co. ..................................... 6,600 361,763
Gemstar International Group Ltd.* .................... 8,100 303,244
Harrah's Entertainment, Inc.* ........................ 181,800 4,226,850
Jacor Communications, Inc.* .......................... 17,500 1,032,500
MediaOne Group, Inc.* ................................ 19,000 834,813
News Corp. Ltd. ADR (Australia) ...................... 32,800 1,053,700
Telemundo Group, Inc., Class A* ...................... 9,400 400,088
------------
9,867,546
------------
Financial Institutions (2.1%)
Federal Home Loan Mortgage Corp. ..................... 77,200 3,633,225
Hong Leong Finance Ltd. (Singapore) .................. 187,700 153,801
------------
3,787,026
------------
Food and Agriculture (0.4%)
Booker PLC (Great Britain) ........................... 168,900 690,919
------------
</TABLE>
19
<PAGE>
MFS Value Equity Portfolio
Schedule of Investments
June 30, 1998 (continued) (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------
<S> <C> <C>
Food and Beverage Products (3.9%)
Archer-Daniels-Midland Co. ........................ 43,700 $ 846,688
Bestfoods ......................................... 29,600 1,718,650
Giant Food, Inc., Class A ......................... 47,800 2,058,388
McCormick & Co, Inc. .............................. 17,300 617,934
Nabisco Holdings Corp., Class A ................... 24,300 876,319
Whitman Corp. ..................................... 35,600 816,575
------------
6,934,554
------------
Gaming (0.0%)
Tanjong PLC (Malaysia) ............................ 30,000 41,562
------------
Household and Personal Care (0.6%)
Benckiser N.V. (Netherlands)* ..................... 18,270 1,124,736
------------
Insurance (9.3%)
Ace, Ltd. (Bermuda) ............................... 47,400 1,848,600
Annuity and Life Re Holdings, Ltd.* ............... 57,000 1,261,125
CIGNA Corp. ....................................... 26,800 1,849,200
ESG Re Ltd. ....................................... 70,400 1,522,400
EXEL Ltd. (Bermuda) ............................... 24,000 1,867,500
Hartford Financial Services Group ................. 8,100 926,438
LaSalle Re Holdings Ltd. .......................... 21,700 821,888
Life Re Corp. ..................................... 11,500 943,000
Lincoln National Corp. ............................ 10,000 913,750
Nationwide Financial Services, Inc., Class A ...... 37,300 1,902,300
Reliastar Financial Corp. ......................... 41,200 1,977,600
Travelers Property Casualty Corp. ................. 14,300 866,938
------------
16,700,739
------------
Medical and Health Technology Services (7.9%)
Beverly Enterprises, Inc.* ........................ 109,100 1,506,944
Columbia/HCA Healthcare Corp. ..................... 98,700 2,874,638
Datascope Corp.* .................................. 16,800 446,250
MedPartners, Inc.* ................................ 171,800 1,374,400
Mid Atlantic Medical Services, Inc.* .............. 79,700 916,550
Tenet Healthcare Corp.* ........................... 58,400 1,825,000
United Healthcare Corp. ........................... 53,300 3,384,550
Wellpoint Health Networks, Inc.* .................. 25,500 1,887,000
------------
14,215,332
------------
Newspaper (0.1%)
New Straits Times Press (Malaysia) ................ 251,000 93,121
------------
Oil Services (1.4%)
BJ Services Co.* .................................. 30,900 898,031
EVI Weatherford, Inc.* ............................ 41,875 1,554,609
------------
2,452,640
------------
Oils (2.2%)
British Petroleum Co. PLC ADR (Great Britain) ..... 21,134 1,865,076
Enron Oil and Gas Co. ............................. 105,200 2,130,300
------------
3,995,376
------------
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -------------
<S> <C> <C>
Pollution Control (1.3%)
Republic Services, Inc., Class A .................. 15,900 $ 405,450
Waste Management, Inc. ............................ 54,900 1,921,500
------------
2,326,950
------------
Railroad (1.2%)
Canadian National Railway Co. (Canada) ............ 24,700 1,312,188
Wisconsin Central Transport* ...................... 38,800 848,750
------------
2,160,938
------------
Restaurants and Lodging (3.5%)
Cafe De Coral Holdings (Hong Kong) ................ 684,600 234,133
Outback Steakhouse, Inc.* ......................... 9,300 362,700
Promus Hotel Corp.* ............................... 147,980 5,697,230
------------
6,294,063
------------
Special Products and Services (0.4%)
Cordant Technologies, Inc. ........................ 16,400 756,450
------------
Stores (4.0%)
Office Depot, Inc.* ............................... 13,500 426,094
Rite Aid Corp. .................................... 111,300 4,180,706
Sears, Roebuck and Co. ............................ 43,300 2,644,006
------------
7,250,806
------------
Supermarkets (6.1%)
Fred Myer, Inc.* .................................. 159,700 6,787,250
Safeway, Inc. ..................................... 101,200 4,117,575
------------
10,904,825
------------
Telecommunications (2.2%)
Alcatel Alsthom (France) .......................... 11,800 2,404,336
L-3 Communications Holdings, Inc.* ................ 300 9,806
Telecom Italia SpA (Italy) ........................ 322,600 1,563,062
------------
3,977,204
------------
Total Common Stocks (Cost $146,703,043) 164,357,086
------------
PREFERRED STOCKS (0.7%)
Henkel KGAA (Germany) ............................. 5,300 524,810
Wella Aktiengesellschaft (Germany) ................ 710 795,606
------------
1,320,416
------------
Total Preferred Stocks (Cost $867,200) 1,320,416
------------
TOTAL INVESTMENTS (92.4%) (Cost $147,570,243(a)) 165,677,502
Other assets less liabilities (7.6%) 13,532,715
------------
Total Net Assets (100.0%) $179,210,217
============
Notes to Schedule of Investments
(a) The cost of investments for federal income tax purposes amounts
to $147,570,243. Unrealized gains and losses, based on identified
tax cost at June 30, 1998, are as follows:
Unrealized gains .................................. $22,492,777
Unrealized losses ................................. (4,385,518)
------------
Net unrealized gain .............................. $18,107,259
============
</TABLE>
* Non-income producing security.
Category percentages are based on total net assets.
20 See Notes to Financial Statements.
<PAGE>
Scudder International Growth Portfolio
Schedule of Investments
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- --------------
<S> <C> <C>
COMMON STOCKS (92.9%)
Argentina (0.5%)
YPF Sociedad Anonima ADR (Oil and Gas) ............ 79,900 $ 2,401,994
------------
Australia (0.3%)
Woodside Petroleum Ltd. (Oil and Gas) ............. 256,600 1,283,821
------------
Canada (1.2%)
Canadian National Railway Co. (Transportation) 105,000 5,579,070
------------
China (0.1%)
Jiangsu Expressway Co. Ltd. (Transportation) ...... 2,174,700 412,541
------------
Finland (2.7%)
Nokia Oyj A Shares (Communications) ............... 102,100 7,519,747
Pohjola Insurance Group., Class B (Insurance) ..... 90,000 4,484,763
------------
Total Finland 12,004,510
------------
France (19.3%)
Accor SA (Lodging) ................................ 21,418 5,998,385
Alcatel Alsthom (Communications) .................. 44,936 9,156,038
Axa UAP (Insurance) ............................... 43,366 4,881,051
Bouygues SA (Heavy Construction) .................. 14,168 2,574,933
Canal Plus (Media--Broadcasting and
Publishing) ..................................... 17,691 3,308,918
Carrefour SA (Food Retailers) ..................... 7,619 4,823,748
Christian Dior SA (Diversified) ................... 12,549 1,580,697
Compagnie de Saint Gobain (Heavy Machinery) 23,287 4,320,901
Credit Commercial de France (Financial
Services) ....................................... 31,858 2,684,056
Elf Aquitaine SA (Oil and Gas) .................... 44,942 6,323,047
France Telecom SA (Communications) ................ 76,234 5,261,861
Groupe Danone (Beverages, Food and
Tobacco) ........................................ 8,763 2,417,929
Lagardere S.C.A. (Financial Services) ............. 67,616 2,817,004
Moet Hennessy Louis Vuitton (Beverages, Food
and Tobacco) .................................... 16,069 3,218,320
Rhodia SA (Chemicals)* ............................ 34,135 952,602
Rhone-Polenc., Class A (Chemicals) ................ 98,238 5,544,838
Schneider SA (Electronics) ........................ 55,617 4,438,125
Societe Television Francaise 1 (Media--
Broadcasting and Publishing) .................... 19,752 3,063,415
Suez Lyonnaise des Eaux (Diversified) ............. 39,139 6,445,962
Thomson CSF (Electronics) ......................... 92,113 3,506,742
Usinor SA (Metals) ................................ 161,373 2,494,778
------------
Total France 85,813,350
------------
Germany (18.9%)
Allianz AG--New (Insurance)* ...................... 591 195,563
Allianz AG (Insurance) ............................ 20,100 6,706,876
BASF AG (Chemicals) ............................... 116,571 5,545,143
Bayerische Vereinsbank AG (Banking) ............... 101,957 8,653,600
BHF Bank AG (Banking) ............................. 75,270 2,868,577
Deutsche Telekom AG ADR (Communications) .......... 21,900 602,250
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- --------------
<S> <C> <C>
Germany (continued)
Deutsche Telekom AG (Communications) .............. 178,404 $ 4,888,983
Dresdner Bank AG (Banking) ........................ 92,700 5,013,865
Heidelberger Druckmaschinen AG (Heavy
Machinery) ...................................... 14,157 1,178,015
Hoechst AG (Chemicals) ............................ 181,592 9,141,795
Mannesmann AG (Heavy Machinery) ................... 77,541 7,979,279
Muenchener Rueckversicherungs-Gesellschaft
AG (Insurance) .................................. 14,800 7,356,281
RWE AG (Diversified) .............................. 98,100 5,812,042
Schering AG (Pharmaceuticals) ..................... 41,065 4,840,824
Siemens AG (Electronics) .......................... 35,218 2,151,975
Veba AG (Electric Utilities) ...................... 62,946 4,237,367
Viag AG (Industrial--Diversified) ................. 10,000 6,889,856
------------
Total Germany 84,062,291
------------
Great Britain (14.8%)
BOC Group PLC (Chemicals) ......................... 239,831 3,269,640
British Airways PLC (Airlines) .................... 203,820 2,206,963
Carlton Communications PLC (Communications) 374,710 3,347,209
General Electric PLC (Electronics) ................ 678,581 5,852,083
Glaxo Wellcome PLC (Pharmaceuticals) .............. 176,549 5,303,161
Imperial Chemical Industries PLC (Chemicals) ...... 122,251 1,963,657
Orange PLC (Communications)* ...................... 627,884 6,657,140
Pearson PLC (Communications) ...................... 270,250 4,954,574
Pilkington PLC (Building Materials) ............... 890,321 1,642,642
Powergen PLC (Electric Utilities) ................. 149,373 2,065,097
Reuters Group PLC (Financial Services) ............ 467,125 5,342,695
Rio Tinto PLC (Mining) ............................ 147,702 1,664,661
Shell Transport & Trading Co. PLC (Oil and Gas) 379,400 2,673,290
SmithKline Beecham PLC (Pharmaceuticals) .......... 328,272 4,009,449
WPP Group PLC (Communications) .................... 1,216,696 7,978,727
Zeneca Group PLC (Pharmaceuticals) ................ 158,922 6,824,842
------------
Total Great Britain 65,755,830
------------
Hong Kong (3.6%)
Anhui Expressway Co. Ltd. (Transportation) ........ 2,442,100 245,675
Cheung Kong Ltd. (Real Estate) .................... 453,300 2,229,012
China Telecom Ltd. (Communications)* .............. 226,500 393,181
Citic Pacific Ltd. (Diversified) .................. 878,800 1,553,806
Cosco Pacific Ltd. (Transportation) ............... 988,600 354,018
GZI Transportation Ltd. (Transportation) .......... 647,600 146,228
Hong Kong and China Gas Co. Ltd. (Oil and
Gas) ............................................ 440 500
HSBC Holdings PLC (Financial Services) ............ 171,600 4,196,976
Hutchison Whampoa Ltd. (Diversified) .............. 336,800 1,777,866
Kerry Properties Ltd. (Real Estate) ............... 946,100 695,951
New World Development Co. Ltd. (Real Estate) 858,337 1,661,655
New World Infrastructure Ltd. (Heavy
Machinery)* ..................................... 659,800 757,846
Shenzhen Expressway Co. Ltd. (Transportation) 2,172,600 400,845
Sichuan Expressway Co. (Transportation) ........... 2,696,000 257,468
</TABLE>
21
<PAGE>
Scudder International Growth Portfolio
Schedule of Investments
June 30, 1998 (continued) (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Hong Kong (continued)
Sun Hung Kai Properties Ltd. (Real Estate) ............. 226,000 $ 959,641
Zhejiang Expressway Co. Ltd. (Transportation) .......... 2,314,300 388,108
-----------
Total Hong Kong 16,018,776
-----------
Italy (4.9%)
Banca Commerciale Italiana (Banking) ................... 367,800 2,201,467
Banca Di Roma (Banking)* ............................... 1,085,400 2,261,214
Banca Intesa SpA (Commercial Services) ................. 231,100 1,294,114
Credito Italiano (Banking) ............................. 337,200 1,766,726
Fiat SpA (Automotive) .................................. 194,500 852,046
Istituto Bancario San Paolo di Torino (Banking) 107,900 1,558,389
Istituto Nazionale delle Assicurazioni
(Insurance) .......................................... 1,693,100 4,814,330
Telecom Italia Mobile SpA (Communications) ............. 442,200 2,706,529
Telecom Italia SpA (Communications) .................... 595,000 4,383,841
-----------
Total Italy 21,838,656
-----------
Japan (8.4%)
Bridgestone Corp. (Automotive) ......................... 132,000 3,133,297
Canon, Inc. (Electronics) .............................. 143,000 3,259,871
Daiwa Securities Co. Ltd. (Financial Services) ......... 477,000 2,060,831
Fujitsu Ltd. (Computers and Information) ............... 276,000 2,916,188
Keyence Corp. (Electronics) ............................ 15,200 1,661,021
Minebea Co. Ltd. (Heavy Machinery) ..................... 189,000 1,888,904
Nichiei (Financial Services) ........................... 34,200 2,336,428
Nintendo Corp. Ltd. (Entertainment and Leisure) 35,500 3,301,308
Nippon Telegraph & Telephone Corp.
(Communications) ..................................... 231 1,922,492
Nomura Securities Co. Ltd. (Financial Services) 210,000 2,454,396
SMC Corp. (Heavy Machinery) ............................ 25,800 1,969,820
Sony Corp. (Electronics) ............................... 36,700 3,173,867
Sumitomo Electric Industries (Electronics) ............. 127,000 1,289,482
Teijin Ltd. (Textiles, Clothing and Fabrics) ........... 557,000 1,693,002
Tokyo Electron Ltd. (Electronics) ...................... 78,000 2,399,038
Yamanouchi Pharmaceutical Co. Ltd.
(Pharmaceuticals) .................................... 88,000 1,840,494
-----------
Total Japan 37,300,439
-----------
Netherlands (4.4%)
Aegon N.V. (Insurance) ................................. 98,480 8,574,929
Akzo Nobel N.V. (Chemicals) ............................ 11,300 2,514,571
Elsevier N.V. (Media--Broadcasting and
Publishing) .......................................... 147,030 2,221,256
Heineken Holding N.V., Class A (Beverages,
Food and Tobacco) .................................... 128,750 4,244,991
Royal Dutch Petroleum Co. N.V. (Oil and Gas) ........... 36,800 2,042,731
-----------
Total Netherlands 19,598,478
-----------
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- --------------
<S> <C> <C>
Portugal (1.0%)
Estabelecimentos Jeronimo Martins & Filho, SA
(Food Retailers) ..................................... 28,400 $ 1,365,231
Portugal Telecom SA (Communications) ................... 61,950 3,285,425
-----------
Total Portugal 4,650,656
-----------
Singapore (0.2%)
City Developments Ltd. (Real Estate) ................... 302,000 846,446
-----------
Sweden (3.8%)
AGA AB., B Shares (Chemicals) .......................... 119,000 1,821,117
Skandia Forsakrings AB (Insurance) ..................... 552,200 7,896,460
Telefonaktiebolaget LM Ericsson ADR
(Communications) ..................................... 246,016 7,042,208
-----------
Total Sweden 16,759,785
-----------
Switzerland (8.6%)
Ciba Specialty Chemicals AG (Chemicals) ................ 32,406 4,170,950
Clariant AG (Chemicals) ................................ 10,362 6,841,344
Credit Suisse Group (Banking) .......................... 34,215 7,631,724
Nestle SA (Beverages, Food and Tobacco) ................ 3,141 6,738,276
Novartis AG--Registered Shares
(Pharmaceuticals) .................................... 2,961 4,939,240
Novartis AG (Pharmaceuticals) .......................... 2,356 3,933,154
Union Bank of Switzerland (Banking) .................... 2,102 3,917,547
-----------
Total Switzerland 38,172,235
-----------
United States (0.2%)
AMP Ltd. (Insurance)* .................................. 75,900 890,474
-----------
Total Common Stocks (Cost $343,323,126) 413,389,352
-----------
PREFERRED STOCKS (1.8%)
Germany (1.8%)
SAP AG-Vorzug (Computer Software and
Processing) .......................................... 11,814 8,028,245
-----------
Total Preferred Stocks (Cost $3,897,568) 8,028,245
-----------
RIGHTS (0.0%)
Hong Kong (0.0%)
Hong Kong and China Gas Co. Ltd. (Oil and
Gas)* ................................................ 20 1
-----------
Total Rights (Cost $0) 1
-----------
</TABLE>
22 See Notes to Schedule of Investments.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount Value
-------------- ---------------
<S> <C> <C>
CONVERTIBLE PREFERRED (0.3%)
Japan (0.3%)
Softbank Corp. (Computer Software and
Processing) 0.50%, due 3/29/02 .........[yen]188,000,000 $ 1,258,503
------------
Total Convertible Preferred (Cost $936,533) 1,258,503
------------
CORPORATE BONDS (0.3%)
United States (0.3%)
IBJ Preferred Capital Co. LLC (Financial
Services)** ............................. 665,000 608,804
Sumitomo Bank Treasury Co. LLC (Financial
Services)** ............................. 776,000 764,846
------------
Total United States 1,373,650
------------
Total Corporate Bonds (Cost $1,441,000) 1,373,650
------------
TOTAL INVESTMENTS (95.3%) (Cost $349,598,227(a)) 424,049,751
Other assets less liabilities (4.7%) 20,827,260
------------
Total Net Assets (100.0%) $444,877,011
============
Notes to Schedule of Investments
(a) The cost of investments for federal income tax
purposes amounts to $349,598,227. Unrealized gains
and losses, based on identified tax cost at
June 30, 1998, are as follows:
Unrealized gains ................................... $88,375,627
Unrealized losses .................................. (13,924,103)
------------
Net unrealized gain .............................. $74,451,524
============
</TABLE>
* Non-income producing security.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 1998, the market
value of this security amounted to $1,373,650 or 0.31% of net assets.
Category percentages are based on total net assets.
23
<PAGE>
T. Rowe Price Growth Equity Portfolio
Schedule of Investments
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
COMMON STOCKS (92.3%)
Advertising (0.8%)
Omnicom Group Inc. ............................. 79,600 $ 3,970,050
------------
Aerospace and Defense (2.2%)
Allied Signal, Inc. ............................ 160,100 7,104,438
Teleflex Inc. .................................. 86,200 3,275,600
------------
10,380,038
------------
Banking (7.2%)
Banc One Corp. ................................. 41,800 2,332,963
Banca Fideuram SpA (Italy) ..................... 175,900 1,003,826
Citicorp ....................................... 25,800 3,850,650
First Union Corp. .............................. 64,700 3,768,775
Mellon Bank Corp. .............................. 25,600 1,782,400
NationsBank Corp. .............................. 62,356 4,770,234
Northern Trust Corp. ........................... 21,600 1,647,000
Norwest Corp. .................................. 162,600 6,077,175
Societe Generale., Class A (France) ............ 9,300 1,934,966
Toronto-Dominion Bank (Canada) ................. 69,200 3,135,625
Wells Fargo & Co. .............................. 9,000 3,321,000
------------
33,624,614
------------
Beverages, Food and Tobacco (2.4%)
Pepsico, Inc. .................................. 110,700 4,559,456
Philip Morris Co., Inc. ........................ 142,100 5,595,188
Unilever N.V. (Netherlands) .................... 12,200 963,038
------------
11,117,682
------------
Chemicals (0.4%)
Rhone-Polenc., Class A (France) ................ 30,200 1,704,576
------------
Commercial Services (1.3%)
Halliburton Co. ................................ 70,400 3,137,200
H&R Block, Inc. ................................ 29,400 1,238,475
Service Corp. International .................... 40,100 1,719,288
------------
6,094,963
------------
Communications (5.9%)
AirTouch Communications, Inc.* ................. 59,200 3,459,500
Alcatel Alsthom (France) ....................... 5,900 1,202,168
Alcatel Alsthom Compagnie Generale
d'electricite ADR (France) ................... 1,000 40,688
Ascend Communications, Inc.* ................... 28,300 1,402,619
AT&T Corp. ..................................... 26,900 1,536,663
CIENA Corp.* ................................... 15,300 1,065,263
MCI Communications Corp. ....................... 59,400 3,452,625
Nokia Oyj ADR (Finland) ........................ 5,000 362,813
Telecom Italia Mobile SpA (Italy) .............. 291,500 1,784,155
Telecomunicacoes Brasileiras S/A Telebras
ADR (Brazil) ................................. 30,100 3,286,544
Tellabs, Inc.* ................................. 45,400 3,251,775
Vodafone Group PLC (Great Britain) ............. 88,200 1,119,964
Worldcom, Inc.* ................................ 115,500 5,594,531
------------
27,559,308
------------
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Computer Software and Processing (8.8%)
Adobe Systems, Inc. ............................ 39,100 $ 1,659,306
America Online, Inc. ........................... 12,400 1,314,400
Automatic Data Processing, Inc. ................ 42,800 3,119,050
BMC Software, Inc. ............................. 111,600 5,796,225
Cadence Design Systems, Inc.* .................. 76,100 2,378,125
Cap Gemini SA (France) ......................... 4,800 754,779
First Data Corp. ............................... 124,200 4,137,413
Getronics N.V. (Netherlands) ................... 41,282 2,143,225
Microsoft Corp. ................................ 66,200 7,174,425
Networks Associates, Inc.* ..................... 61,800 2,958,675
Oracle Systems Corp. ........................... 118,900 2,920,481
Parametric Technology Co. ...................... 170,100 4,613,963
Sterling Commerce, Inc.* ....................... 56,000 2,716,000
------------
41,686,067
------------
Computers and Information (2.1%)
Cisco Systems, Inc. ............................ 34,350 3,162,347
Dell Computer Corp. ............................ 17,500 1,624,219
EMC Corp. ...................................... 63,100 2,827,669
Hewlett-Packard Co. ............................ 39,300 2,353,088
------------
9,967,323
------------
Cosmetics and Personal Care (0.9%)
Gillette Co. ................................... 36,600 2,074,763
Proctor & Gamble Co. ........................... 26,100 2,376,731
------------
4,451,494
------------
Diversified (0.7%)
Hutchison Whampoa Ltd. (Hong Kong) ............. 604,100 3,188,863
------------
Electronics (4.0%)
Analog Devices, Inc.* .......................... 140,200 3,443,663
CBS Corp. ...................................... 113,900 3,616,325
Intel Corp. .................................... 51,800 3,839,675
Linear Technology Corp. ........................ 23,700 1,429,406
Maxim Intergrated Products, Inc.* .............. 86,800 2,750,475
Philips Electronics N.V. (Netherlands) ......... 9,900 833,079
Raytheon Co., Class B .......................... 33,900 2,004,338
Teradyne, Inc.* ................................ 5,000 133,750
Xilinx, Inc.* .................................. 20,100 683,400
------------
18,734,111
------------
Entertainment and Leisure (2.2%)
Granada Group PLC (Great Britain) .............. 144,200 2,653,280
Hasbro, Inc. ................................... 64,300 2,527,794
Mattel, Inc. ................................... 31,800 1,345,538
Walt Disney Co. ................................ 34,700 3,645,669
------------
10,172,281
------------
Environmental Controls (1.8%)
Rentokil Initial PLC (Great Britain) ........... 366,200 2,635,322
USA Waste Services, Inc.* ...................... 114,100 5,633,688
------------
8,269,010
------------
</TABLE>
24 See Notes to Schedule of Investments.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
--------------- -----------------
<S> <C> <C>
Financial Services (2.7%)
Berkshire Hathaway Inc., Class A* ................ 730 $ 5,716,265
Cendant Corp.* ................................... 78,500 1,638,688
HSBC Holdings (Hong Kong) ........................ 44,000 1,076,148
Mutual Risk Management Ltd. ...................... 121,200 4,416,225
------------
12,847,326
------------
Food Retailers (1.1%)
Safeway, Inc. .................................... 126,200 5,134,763
------------
Forest Products and Paper (0.9%)
Kimberly-Clark de Mexico, SA de CV (Mexico) ...... 311,700 1,082,347
Kimberly-Clark Corp. ............................. 63,300 2,903,888
------------
3,986,235
------------
Health Care Providers (2.0%)
Healthsouth Corp. ................................ 174,100 4,646,294
United Healthcare Corp. .......................... 71,800 4,559,300
------------
9,205,594
------------
Heavy Machinery (0.5%)
Mannesmann AG (Germany) .......................... 23,000 2,366,792
------------
Home Construction, Furnishings and Appliances (2.6%)
General Electric Co. ............................. 135,200 12,303,200
------------
Industrial--Diversified (2.4%)
Tomkins PLC (Great Britain) ...................... 673,100 3,655,337
Tyco International Ltd. .......................... 119,700 7,541,100
------------
11,196,437
------------
Insurance (6.1%)
Ace, Ltd. (Bermuda) .............................. 118,300 4,613,700
Fairfax Financial Holdings Ltd* .................. 13,000 5,070,153
Fairfax Financial Holdings Ltd. ADR (Canada)** 1,200 455,224
Partner Re Ltd. (Bermuda) ........................ 115,900 5,910,900
Travelers Property Casualty Corp. ................ 87,500 5,304,688
Travelers Property Casualty Corp., Class A ....... 56,300 2,413,863
UNUM Corp. ....................................... 86,900 4,822,950
------------
28,591,478
------------
Lodging (0.7%)
Hilton Hotels Corp. .............................. 84,300 2,402,550
Mirage Resorts, Inc.* ............................ 36,500 777,906
------------
3,180,456
------------
Media--Broadcasting and Publishing (3.2%)
Cox Communications, Inc., Class A* ............... 34,900 1,690,469
Schibsted ASA (Norway) ........................... 59,300 998,523
Tribune Co. ...................................... 74,700 5,140,294
TV Azteca, S.A. de C.V. ADR (Mexico) ............. 53,100 574,144
VNU--Verenigde Nederlandse
Uitgeversbedrijven N.V. (Netherlands) .......... 115,600 4,203,944
Wolters Kluwer N.V. (Netherlands) ................ 18,502 2,542,079
------------
15,149,453
------------
Medical and Bio-Technology (0.1%)
Honeywell, Inc. .................................. 8,000 668,500
------------
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------------- -----------------
<S> <C> <C>
Medical Supplies (1.6%)
Guidant Corp. .................................... 18,100 $ 1,290,756
Johnson & Johnson ................................ 48,300 3,562,125
Tenet Healthcare Corp.* .......................... 81,900 2,559,375
------------
7,412,256
------------
Metals (2.6%)
Danaher Corp. .................................... 225,700 8,280,369
Masco Corp. ...................................... 67,300 4,071,650
------------
12,352,019
------------
Mining (0.5%) ....................................
Newmont Mining Corp. ............................. 91,900 2,171,138
------------
Oil and Gas (2.9%) ...............................
Chevron Corp. .................................... 24,900 2,068,256
Mobil Corp. ...................................... 54,700 4,191,388
Royal Dutch Petroleum Co. N.V. (Netherlands) ..... 130,700 7,163,994
------------
13,423,638
------------
Pharmaceuticals (8.9%)
American Home Products Corp. ..................... 79,800 4,129,650
Biogen, Inc.* .................................... 59,200 2,900,800
Bristol-Myers Squibb Co. ......................... 70,300 8,080,106
Eli Lilly and Co. ................................ 34,500 2,279,156
Genentech, Inc.* ................................. 52,100 3,536,288
Merck & Co., Inc. ................................ 42,900 5,737,875
Novartis AG--Registered Shares (Switzerland) ..... 1,460 2,435,424
Pfizer, Inc. ..................................... 50,600 5,499,588
Warner-Lambert Co. ............................... 68,400 4,745,250
Zeneca Group PLC (Great Britain) ................. 56,300 2,417,781
------------
41,761,918
------------
Real Estate (2.2%)
Crescent Real Estate Equities Co. ................ 99,000 3,328,875
Security Capital U.S. Realty (Luxumbourg)* ....... 228,100 3,033,730
Starwood Lodging Trust ........................... 83,700 4,043,756
------------
10,406,361
------------
Restaurants (0.5%)
McDonald's Corp. ................................. 32,100 2,214,900
------------
Retailers (4.3%)
Autozone, Inc.* .................................. 94,000 3,002,125
Circuit City Stores--Circuit City Group .......... 26,300 1,232,813
CVS Corp. ........................................ 74,600 2,904,738
Home Depot, Inc. ................................. 49,900 4,144,819
Kohl's Corp.* .................................... 25,600 1,328,000
Rite Aid Corp. ................................... 44,900 1,686,556
Tag Heuer International SA (Switzerland) ......... 11,850 1,125,793
Tag Heuer International SA ADR (Switzerland) ..... 46,200 433,125
Wal-Mart Stores, Inc. ............................ 73,800 4,483,350
------------
20,341,319
------------
Supermarkets (0.3%)
Fred Myer, Inc.* ................................. 30,000 1,275,000
------------
</TABLE>
25
<PAGE>
T. Rowe Price Growth Equity Portfolio
Schedule of Investments
June 30, 1998 (continued) (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Market
Shares Value
---------- --------------
<S> <C> <C>
Textiles, Clothing and Fabrics (0.6%)
Sara Lee Corp. ................................ 53,800 $ 3,009,438
-----------
Transportation (0.7%)
Carnival Corp., Class A ....................... 80,200 3,177,925
-----------
U.S. Government (4.2%)
Federal Home Loan Mortgage Corp. .............. 254,600 11,982,098
Federal National Mortgage Association ......... 103,900 6,311,925
SLM Holding Corp. ............................. 31,650 1,550,850
-----------
19,844,873
-----------
Total Common Stocks (Cost $376,541,376) 432,941,399
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
--------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (8.2%)
Du Pont (E I) de Nemours, Commercial Paper,
5.53%, 07/23/98 ....................................... $11,780,000 11,725,714
Southern New England Telephone Co.,
Commercial Paper, 5.55%, 07/20/98** ................... 7,625,000 7,585,032
IBM Credit Corp., Commercial Paper, 5.50%,
07/08/98 .............................................. 2,524,000 2,513,203
Natural Rural Utilities Cooperative Finance
Corp., Commercial Paper, 5.51%, 07/30/98 .............. 500,000 495,255
Ciesco LP, Commercial Paper, 6.20%, 07/01/98 ............ 2,642,000 2,641,545
Federal Home Loan Mortgage Corp.,
Commercial Paper, 5.45%, 08/05/98 ..................... 482,000 478,789
Pfizer, Inc., Commercial Paper, 5.51%,
07/20/98** ............................................ 12,955,000 12,891,549
----------
Total Short-Term Investments (Cost $38,331,087) 38,331,087
----------
TOTAL INVESTMENTS (100.5%) (Cost $414,872,463(a)) 471,272,486
Other assets less liabilities (-0.5%) (2,413,897)
-----------
Total Net Assets (100.0%) $468,858,589
============
Notes to Schedule of Investments
(a) The cost of investments for federal income
tax purposes amounts to $414,872,463. Unrealized
gains and losses, based on identified tax cost at
June 30, 1998, are as follows:
Unrealized gains .................................... $ 65,007,127
Unrealized losses ................................... (8,607,104)
------------
Net unrealized gain ............................ $ 56,400,023
============
</TABLE>
* Non-income producing security.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 1998, the market
value of this security amounted to $20,931,805 or 4.46% of net assets.
Category percentages are based on total net assets.
26 See Notes to Financial Statements.
<PAGE>
Portfolio Partners, Inc.
Statements of Assets and Liabilities
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MFS Emerging MFS Research
Equities Portfolio Growth Portfolio
-------------------- ------------------
<S> <C> <C>
Assets:
Investments, at market value .............. $ 944,814,298 $453,729,331
Cash ...................................... 42,431,813 21,246,142
Cash denominated in foreign currencies..... -- --
Receivable for:
Dividends and interest ................... 310,341 479,681
Investments sold ......................... 209,715 1,908,597
Fund shares sold ......................... -- 8,258
Recoverable foreign taxes ................ 5,589 21,584
Gross unrealized gain on forward foreign
currency exchange contracts .............. -- --
------------- ------------
Total Assets ........................... 987,771,756 477,393,593
------------- ------------
Liabilities:
Payable for:
Investments purchased .................... 4,384,400 1,454,487
Fund shares redeemed ..................... 913,360 2,446,084
Foreign currency overdraft ............... -- --
Administrative services fees payable ...... 100,219 56,415
Advisory fees payable ..................... 521,644 263,267
Gross unrealized loss on forward foreign
currency exchange contracts .............. 210 --
------------- ------------
Total Liabilities ...................... 5,919,833 4,220,253
------------- ------------
NET ASSETS ................................ $ 981,851,923 $473,173,340
============= ============
Net assets represented by:
Paid-in Capital ........................... $ 836,283,414 $409,265,194
Net unrealized gain (loss) on
investments, open futures contracts
and foreign currency related
translations ............................. 135,189,136 63,981,344
Undistributed (distributions in excess of)
net investment income .................... 341,559 592,495
Accumulated net realized gain (loss) on
investments .............................. 10,037,814 (665,693)
------------- ------------
NET ASSETS ................................ $ 981,851,923 $473,173,340
============= ============
Capital Shares, $.001 par value:
Outstanding .............................. 19,050,142 41,299,245
Net Assets ............................... $ 981,851,923 $473,173,340
Net Asset Value, offering and
redemption price per share (net
assets divided by shares outstanding) $ 51.54 $ 11.46
Cost of investments ....................... $ 809,625,132 $389,747,962
Cost of cash denominated in foreign
currencies ............................... $ -- $ --
<CAPTION>
MFS Value Scudder International T. Rowe Price Growth
Equity Portfolio Growth Portfolio Equity Portfolio
------------------ ----------------------- ----------------------
<S> <C> <C> <C>
Assets:
Investments, at market value .............. $ 165,677,502 $ 424,049,751 $ 471,272,486
Cash ...................................... 14,497,837 21,704,747 424
Cash denominated in foreign currencies..... -- 7,184,495 --
Receivable for:
Dividends and interest ................... 283,052 595,604 313,452
Investments sold ......................... 2,568,855 3,721,030 2,560,594
Fund shares sold ......................... 18,786 -- 13,504
Recoverable foreign taxes ................ 43,454 559,210 39,611
Gross unrealized gain on forward foreign
currency exchange contracts .............. -- -- 518
------------- ------------- -------------
Total Assets ........................... 183,089,486 457,814,837 474,200,589
------------- ------------- -------------
Liabilities:
Payable for:
Investments purchased .................... 2,441,427 9,886,572 4,912,911
Fund shares redeemed ..................... 19,580 2,689,548 --
Foreign currency overdraft ............... 1,249,113 -- 148,559
Administrative services fees payable ...... 35,972 72,114 56,106
Advisory fees payable ..................... 93,527 288,456 224,424
Gross unrealized loss on forward foreign
currency exchange contracts .............. 39,650 1,136 --
------------- ------------- -------------
Total Liabilities ...................... 3,879,269 12,937,826 5,342,000
------------- ------------- -------------
NET ASSETS ................................ $ 179,210,217 $ 444,877,011 $ 468,858,589
============= ============= =============
Net assets represented by:
Paid-in Capital ........................... $ 151,749,399 $ 360,964,932 $ 398,979,721
Net unrealized gain (loss) on
investments, open futures contracts
and foreign currency related
translations ............................. 18,069,451 74,445,136 56,396,693
Undistributed (distributions in excess of)
net investment income .................... 539,181 3,117,204 2,149,175
Accumulated net realized gain (loss) on
investments .............................. 8,852,186 6,349,739 11,333,000
------------- ------------- -------------
NET ASSETS ................................ $ 179,210,217 $ 444,877,011 $ 468,858,589
============= ============= =============
Capital Shares, $.001 par value:
Outstanding .............................. 5,044,432 26,108,609 9,226,302
Net Assets ............................... $ 179,210,217 $ 444,877,011 $ 468,858,589
Net Asset Value, offering and
redemption price per share (net
assets divided by shares outstanding) $ 35.53 $ 17.04 $ 50.82
Cost of investments ....................... $ 147,570,243 $ 349,598,227 $ 414,872,463
Cost of cash denominated in foreign
currencies ............................... $ -- $ 7,272,143 $ --
</TABLE>
See Notes to Financial Statements. 27
<PAGE>
Portfolio Partners, Inc.
Statements of Operations
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MFS Emerging MFS Research
Equities Portfolio Growth Portfolio
-------------------- ------------------
<S> <C> <C>
Investment Income:
Dividends ................................... $ 476,507 $ 2,101,350
Interest .................................... 1,818,348 274,488
------------- ------------
2,294,855 2,375,838
Foreign taxes withheld on dividends .......... (4,724) (36,371)
------------- ------------
Total investment income ................... 2,290,131 2,339,467
------------- ------------
Investment Expenses:
Investment advisory fee ...................... 3,002,160 1,523,787
Administrative services fees ................. 575,638 326,527
------------- ------------
Total expenses ............................ 3,577,798 1,850,314
------------- ------------
Net investment income ........................ (1,287,667) 489,153
------------- ------------
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on:
Sale of investments ......................... 2,342,157 3,989,386
Futures, foreign currency and forward
foreign currency exchange
contracts .................................. 8,839,474 (8,513)
------------- ------------
Net realized gain (loss) on
investments, futures, foreign
currency and forward foreign
currency exchange contracts ................ 11,181,631 3,980,873
------------- ------------
Net change in unrealized gain or (loss) on:
Investments ................................. 146,232,615 66,768,249
Futures, foreign currency and forward
foreign currency exchange
contracts .................................. (2,122,969) (95)
------------- ------------
Net change in unrealized gain or (loss)
on investments, futures, foreign
currency and forward foreign
currency exchange contracts ................ 144,109,646 66,768,154
------------- ------------
Net realized and change in unrealized
gain or (loss) on investments, futures,
foreign currency and forward foreign
currency exchange contracts ................. 155,291,277 70,749,027
------------- ------------
Net increase (decrease) in net assets
resulting from operations ................... $ 154,003,610 $ 71,238,180
============= ============
<CAPTION>
MFS Value Scudder International T. Rowe Price Growth
Equity Portfolio Growth Portfolio Equity Portfolio
------------------ ----------------------- ----------------------
<S> <C> <C> <C>
Investment Income:
Dividends ................................... $ 801,854 $ 5,212,092 $ 2,315,617
Interest .................................... 269,194 496,160 939,704
------------ ------------ ------------
1,071,048 5,708,252 3,255,321
Foreign taxes withheld on dividends .......... (54,435) (579,642) (82,083)
------------ ------------ ------------
Total investment income ................... 1,016,613 5,128,610 3,173,238
------------ ------------ ------------
Investment Expenses:
Investment advisory fee ...................... 511,235 1,644,870 1,262,718
Administrative services fees ................. 196,629 411,265 315,679
------------ ------------ ------------
Total expenses ............................ 707,864 2,056,135 1,578,397
------------ ------------ ------------
Net investment income ........................ 308,749 3,072,475 1,594,841
------------ ------------ ------------
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on:
Sale of investments ......................... 9,079,043 6,315,444 9,567,672
Futures, foreign currency and forward
foreign currency exchange
contracts .................................. (14,407) (3,438) (10,155)
------------ ------------ ------------
Net realized gain (loss) on
investments, futures, foreign
currency and forward foreign
currency exchange contracts ................ 9,064,636 6,312,006 9,557,517
------------ ------------ ------------
Net change in unrealized gain or (loss) on:
Investments ................................. 16,233,542 68,586,416 51,338,733
Futures, foreign currency and forward
foreign currency exchange
contracts .................................. (30,782) 2,998 (9,212)
------------ ------------ ------------
Net change in unrealized gain or (loss)
on investments, futures, foreign
currency and forward foreign
currency exchange contracts ................ 16,202,760 68,589,414 51,329,521
------------ ------------ ------------
Net realized and change in unrealized
gain or (loss) on investments, futures,
foreign currency and forward foreign
currency exchange contracts ................. 25,267,396 74,901,420 60,887,038
------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................... $ 25,576,145 $ 77,973,895 $ 62,481,879
============ ============ ============
</TABLE>
28 See Notes to Financial Statements.
<PAGE>
Portfolio Partners, Inc.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MFS Emerging
Equities Portfolio
MFS Emerging Period from
Equities Portfolio November 28, 1997
Six Months Ended (commencement
June 30, 1998 of operations)
(Unaudited) to December 31, 1997
-------------------- ----------------------
<S> <C> <C>
Operations:
Net investment income ............ $ (1,287,667) $ 1,629,226
Net realized gain (loss) on
investments, futures, foreign
currency and forward foreign
currency exchange contracts ..... 11,181,631 (1,143,817)
Net change in unrealized gain or
(loss) on investments, futures,
foreign currency, and forward
foreign currency exchange
contracts ....................... 144,109,646 (8,920,510)
------------- -------------
Net increase (decrease) in net
assets resulting from
operations ..................... 154,003,610 (8,435,101)
------------- -------------
Fund Share Transactions:
Proceeds from shares sold ....... 153,357,232 824,137,595
Payments for shares redeemed..... (93,617,112) (47,614,301)
------------- -------------
Net increase in net assets
from fund share transactions 59,740,120 776,523,294
------------- -------------
Change in net assets ............ 213,743,730 768,088,193
Net Assets:
Beginning of period ............. 768,108,193 20,000
------------- -------------
End of period ................... $ 981,851,923 $ 768,108,193
============= =============
End of period net assets
includes undistributed net
investment income .............. $ 341,559 $ 1,629,226
============= =============
Share Transactions:
Number of shares sold ........... 3,083,007 19,024,246
Number of shares redeemed ....... (1,932,801) (1,124,771)
------------- -------------
Net increase ................... 1,150,206 17,899,475
============= =============
<CAPTION>
MFS Research
Growth Portfolio
MFS Research Period from MFS Value
Growth Portfolio November 28, 1997 Equity Portfolio
Six Months Ended (commencement Six Months Ended
June 30, 1998 of operations) June 30, 1998
(Unaudited) to December 31, 1997 (Unaudited)
------------------ ---------------------- -----------------
<S> <C> <C> <C>
Operations:
Net investment income ............ $ 489,153 $ 81,976 $ 308,749
Net realized gain (loss) on
investments, futures, foreign
currency and forward foreign
currency exchange contracts ..... 3,980,873 (4,625,200) 9,064,636
Net change in unrealized gain or
(loss) on investments, futures,
foreign currency, and forward
foreign currency exchange
contracts ....................... 66,768,154 (2,786,810) 16,202,760
------------- ------------- -------------
Net increase (decrease) in net
assets resulting from
operations ..................... 71,238,180 (7,330,034) 25,576,145
------------- ------------- -------------
Fund Share Transactions:
Proceeds from shares sold ....... 59,858,601 412,691,854 22,185,966
Payments for shares redeemed..... (57,471,574) (5,833,687) (3,060,055)
------------- ------------- -------------
Net increase in net assets
from fund share transactions 2,387,027 406,858,167 19,125,911
------------- ------------- -------------
Change in net assets ............ 73,625,207 399,528,133 44,702,056
Net Assets:
Beginning of period ............. 399,548,133 20,000 134,508,161
------------- ------------- -------------
End of period ................... $ 473,173,340 $ 399,548,133 $ 179,210,217
============= ============= =============
End of period net assets
includes undistributed net
investment income .............. $ 592,495 $ 103,342 $ 539,181
============= ============= =============
Share Transactions:
Number of shares sold ........... 5,456,061 41,744,286 640,940
Number of shares redeemed ....... (5,302,506) (600,618) (94,097)
------------- ------------- -------------
Net increase ................... 153,555 41,143,668 546,843
============= ============= =============
</TABLE>
See Notes to Financial Statements. 29
<PAGE>
Portfolio Partners, Inc.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MFS Value
Equity Portfolio Scudder International
Period from Growth Portfolio
November 28, 1997 Six Months
(commencement of Ended
operations) June 30, 1998
to December 31, 1997 (Unaudited)
---------------------- -----------------------
<S> <C> <C>
From Operations:
Net investment income ............... $ 241,611 $ 3,072,475
Net realized gain (loss) on
investments, futures, foreign
currency and forward foreign
currency exchange contracts ........ (223,629) 6,312,006
Net change in unrealized gain or
(loss) on investments, futures,
foreign currency, and forward
foreign currency exchange
contracts .......................... 1,866,691 68,589,414
------------- --------------
Net increase (decrease) in net
assets resulting from
operations ........................ 1,884,673 77,973,895
------------- --------------
Fund Share Transactions:
Proceeds from shares sold ........... 133,258,100 154,622,739
Payments for shares redeemed ........ (654,612) (165,919,800)
Net increase in net assets from
fund share transactions ........... 132,603,488 (11,297,061)
------------- --------------
Change in net assets ................ 134,488,161 66,676,834
Net Assets:
Beginning of period ................. 20,000 378,200,177
------------- --------------
End of period ....................... $ 134,508,161 $ 444,877,011
============= ==============
End of period net assets includes
undistributed net investment
income ............................. $ 230,432 $ 3,117,204
============= ==============
Share Transactions:
Number of shares sold ............... 4,519,003 9,664,587
Number of shares redeemed ........... (22,092) (10,384,244)
------------- --------------
Net increase ....................... 4,496,911 (719,657)
============= ==============
<CAPTION>
Scudder International T. Rowe Price Growth
Growth Portfolio Equity Portfolio
Period from T. Rowe Price Growth Period from
November 28, 1997 Equity Portfolio November 28, 1997
(commencement Six Months Ended (commencement
of operations) June 30, 1998 of operations)
to December 31, 1997 (Unaudited) to December 31, 1997
----------------------- ---------------------- ---------------------
<S> <C> <C> <C>
From Operations:
Net investment income ............... $ 40,929 $ 1,594,841 $ 532,313
Net realized gain (loss) on
investments, futures, foreign
currency and forward foreign
currency exchange contracts ........ 41,533 9,557,517 1,797,504
Net change in unrealized gain or
(loss) on investments, futures,
foreign currency, and forward
foreign currency exchange
contracts .......................... 5,855,722 51,329,521 5,067,172
------------- ------------- -------------
Net increase (decrease) in net
assets resulting from
operations ........................ 5,938,184 62,481,879 7,396,989
------------- ------------- -------------
Fund Share Transactions:
Proceeds from shares sold ........... 392,303,919 43,501,761 375,624,450
Payments for shares redeemed ........ (20,061,926) (8,318,661) (11,847,829)
Net increase in net assets from
fund share transactions ........... 372,241,993 35,183,100 363,776,621
------------- ------------- -------------
Change in net assets ................ 378,180,177 97,664,979 371,173,610
Net Assets:
Beginning of period ................. 20,000 371,193,610 20,000
------------- ------------- -------------
End of period ....................... $ 378,200,177 $ 468,858,589 $ 371,193,610
============= ============= =============
End of period net assets includes
undistributed net investment
income ............................. $ 44,729 $ 2,149,175 $ 554,334
============= ============= =============
Share Transactions:
Number of shares sold ............... 28,251,298 888,704 8,787,184
Number of shares redeemed ........... (1,424,473) (174,471) (275,583)
------------- ------------- -------------
Net increase ....................... 26,826,825 714,233 8,511,601
============= ============= =============
</TABLE>
30 See Notes to Financial Statements.
<PAGE>
Portfolio Partners, Inc.
Notes to Financial Statements
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
1. Organization
Aetna Life Insurance and Annuity Company ("Aetna") created Portfolio Partners,
Inc. (the "Company") to serve as an investment option underlying Aetna's
variable insurance products. The Company is an open-end management investment
company registered under the Investment Company Act of 1940 (the "1940 Act").
It was incorporated under the laws of Maryland on May 7, 1997. The Articles of
Incorporation permit the Company to offer separate series ("Portfolios"), each
of which has its own investment objective, policies and restrictions.
The Company currently consists of five diversified Portfolios: MFS Value Equity
Portfolio ("MFS Value Equity"), MFS Emerging Equities Portfolio ("MFS Emerging
Equities"), MFS Research Growth Portfolio ("MFS Research Growth"), Scudder
International Growth Portfolio ("Scudder International Growth") and T. Rowe
Price Growth Equity Portfolio ("T. Rowe Price Growth Equity"). Aetna serves as
the Investment Advisor and the principal underwriter to each Portfolio.
Massachusetts Financial Services ("MFS") serves as sub-advisor to MFS Value
Equity, MFS Emerging Equities and MFS Research Growth. Scudder Kemper
Investments, Inc. ("Scudder") serves as sub-advisor to Scudder International
Growth and T. Rowe Price Associates, Inc. ("T. Rowe") serves as sub-advisor to
T. Rowe Price Growth Equity. Shares of each Portfolio were first made available
to the public on November 28, 1997.
The following is a brief description of each Portfolio's investment objective:
MFS Emerging Equities seeks to provide long-term growth of capital. Dividend
and interest income from portfolio securities, if any, is incidental to MFS
Emerging Equities' investment objective;
MFS Research Growth seeks long-term growth of capital and future income;
MFS Value Equity seeks capital appreciation. Dividend income, if any, is
considered incidental to MFS Value Equity's objective of capital appreciation;
Scudder International Growth seeks long-term growth of capital primarily
through a diversified portfolio of marketable foreign equity securities; and
T. Rowe Price Growth Equity seeks long-term growth of capital and, secondarily,
to increase dividend income by investing primarily in common stocks of well
established growth companies.
2. Summary of Significant Accounting Policies
A. Valuation of Investments
The accompanying financial statements of the Portfolios have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
amounts reported therein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net assets
of the Portfolios.
Securities of the Portfolios are generally valued by independent pricing
services. The values for equity securities traded on registered securities
exchanges are based on the last sale price or, if there has been no sale that
day, at the mean of the last bid and asked price on the exchange where the
security is principally traded. Securities traded over-the-counter are valued
at the last sale price or at the last bid price if there has been no sale that
day. Short-term debt securities that have a maturity date of more than sixty
days will be valued at the mean of the last bid and asked price obtained from
principal market makers. Long-term debt securities are valued at the mean of
the last bid and asked price of such securities obtained from a broker that is
a market-maker in the securities or a service providing quotations based upon
the assessment of market-makers in those securities.
Options are valued at the mean of the last bid and asked price on the exchange
where the option is primarily traded. Stock index futures contracts and
interest rate futures contracts are valued daily at a settlement price based on
rules of the exchange where the futures contract is primarily traded.
The accounting records of the Portfolios are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the prevailing rates of exchange
at the end of each day. Purchases and sales of securities, income receipts, and
expense payments are translated into U.S. dollars at the prevailing exchange
rate on the respective date of the transactions.
31
<PAGE>
Portfolio Partners, Inc.
Notes to Financial Statements
June 30, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies (continued)
B. Option Contracts
MFS Emerging Equities, MFS Value Equity and T. Rowe Price Growth Equity may
invest in put and call options if as a result not more than 5% of their total
assets would be invested in premiums for those options. MFS Emerging Equities,
MFS Value Equity and Scudder International Growth may only write covered call
options.
Option contracts are valued daily and unrealized gains or losses are recorded
based upon the last sales price on the principal exchange on which the options
are traded.
The Portfolios will realize a gain or loss upon the expiration or closing of
the option contract. When an option is exercised, the proceeds on sales of the
underlying security for a written call option, the purchase cost of the
security for a written put option, or the cost of the security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Realized and unrealized gains or losses on option contracts are reflected in
the accompanying financial statements.
The risk in writing a call option is that the Portfolios give up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in buying an option is that the Portfolios pay a
premium whether or not the option is exercised. Risks may also arise from an
illiquid secondary market or from the inability of counterparties to meet the
terms of the contract.
C. Futures and Forward Foreign Currency Exchange Contracts
MFS Research Growth may not purchase futures or options on futures or
securities. Scudder International Growth may enter into futures and options on
futures contracts for hedging purposes only. MFS Emerging Equities and the MFS
Value Equity may enter into future contracts to the extent that the value of
securities and other underlying obligations does not exceed 50% of total assets
of the Portfolio. T. Rowe Price Growth Equity may enter into futures contracts
to the extent that the value of securities and other underlying obligations
does not exceed 100% of total assets of the Portfolio.
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. The Portfolios sell futures
contracts as a hedge against declines in the value of portfolio securities. The
Portfolios may purchase futures contracts to manage the risk of changes in
interest rates, equity prices, currency exchange rates or in anticipation of
future purchases and sales of portfolio securities.
Upon entering into a futures contract, a Portfolio is required to deposit with
a broker an amount (initial margin) equal to a percentage of the purchase price
indicated by the futures contract. Subsequent deposits (variation margin) are
received or paid each day by the Portfolio equal to the daily fluctuations in
the market value of the contract. These amounts are recorded by the Portfolio
as unrealized gains or losses. When a contract is closed, the Portfolio 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 at the time it was closed.
Futures contracts held by the Portfolios are closed prior to expiration.
A forward foreign currency exchange contract is an agreement to pay or receive
specific amounts of a currency at a future date in exchange for another
currency at an agreed upon exchange rate. The Portfolios, where authorized, may
use forward foreign currency exchange contracts to hedge certain foreign
currency assets or liabilities. Contracts are recorded at market value and
marked-to-market daily.
The risks associated with futures and forward foreign currency exchange
contracts may arise from an imperfect correlation between the change in market
value of the securities held by the Portfolios and the price of the contracts.
Risks may also arise from an illiquid secondary market or from the inability of
counterparties to meet the terms of the contracts.
Realized and unrealized gains or losses on futures and forward foreign currency
exchange contracts are reflected in the accompanying financial statements. The
amounts at risk under such futures and forward foreign currency exchange
contracts may exceed the amounts reflected in the financial statements. The
notional amounts (economic exposure) of these contracts are disclosed in the
Schedules of Investments and in Note 6 of the Notes to Financial Statements.
For federal income tax purposes, any futures and forward foreign currency
exchange contracts which remain open at fiscal year end are marked-to-market
and the resultant net gain or loss is reported to shareholders as federal
taxable income.
32
<PAGE>
Portfolio Partners, Inc.
Notes to Financial Statements
June 30, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies (continued)
D. Illiquid and Restricted Securities
Illiquid securities are securities that are not readily marketable. Disposing
of illiquid investments may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for the Portfolios to sell them
promptly at an acceptable price. Each Portfolio may invest up to 15% of its net
assets in illiquid securities.
Restricted securities are subject to legal or contractual restrictions on
resale and may not be publicly sold without registration under the Securities
Act of 1933 ("1933 Act"), under Rule 144A or, are securities offered pursuant
to Section 4(2) of the 1933 Act. Each Portfolio may invest more than 15% of its
net assets in restricted securities which have been determined to be liquid
under guidelines established by the Board of Directors.
Illiquid and restricted securities are valued using market quotations when
readily available. In the absence of market quotations, restricted securities
are valued based upon their fair value determined under procedures approved by
the Board of Directors.
E. Delayed Delivery Transactions
The Portfolios may purchase or sell securities on a when-issued or delayed
delivery basis. The price of the underlying securities and date when the
securities will be delivered and paid for are fixed at the time the transaction
is negotiated. The market value of the securities purchased or sold are
identified in the Portfolios' schedule of investments. Losses may arise due to
changes in the market value of the securities or from the inability of
counterparties to meet the terms of the contract. A Portfolio will segregate
assets at its custodian in an amount equal to the market value of securities
purchased on a when-issued or delayed delivery basis.
F. Federal Income Taxes
As qualified regulated investment companies, the Portfolios are relieved of
federal income and excise taxes by distributing substantially all of their net
taxable investment income and capital gains, if any, in compliance with the
applicable provisions of the Internal Revenue Code. Therefore, no provision for
income taxes has been made in the accompanying financial statements.
G. Distributions
Distributions from net investment income are based on taxable net income.
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for foreign currency transactions,
investments in certain foreign issuers that derive a majority of their income
from passive investments (e.g., interest or dividends) and deferred losses on
wash sales.
H. Other
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on trade date. Interest
income is recorded on an accrual basis. Discounts and premiums on securities
purchased are accreted or amortized, respectively, using an effective yield
method over the life of the security. Dividend income and stock splits are
recorded on the ex-dividend date. Realized gains and losses from investment
transactions are determined on an identified cost basis.
3. Investment Advisory and Administrative Service Agreements
Each Portfolio pays the Investment Advisor an annual fee expressed as a
percentage of its average daily net assets. As certain of the Portfolios' net
assets exceed predetermined thresholds, lower advisory fees apply. Below are
the Portfolios' investment advisory fee ranges and the effective rates as of
June 30, 1998:
<TABLE>
<CAPTION>
Fee Range Effective Rate
----------- ---------------
<S> <C> <C>
MFS Emerging Equities .70%-.65% .68%
MFS Research Growth .70%-.65% .70%
MFS Value Equity .65% .65%
Scudder International Growth .80% .80%
T. Rowe Price Growth Equity .60% .60%
</TABLE>
33
<PAGE>
Portfolio Partners, Inc.
Notes to Financial Statements
June 30, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
3. Investment Advisory and Administrative Service Agreements (continued)
Under the terms of separate Subadvisory Agreements between the Investment
Advisor and each subadvisor, each subadvisor is responsible for the investment
and reinvestment of cash and securities for each Portfolio in exchange for fees
payable by the Investment Advisor, which are expressed as a percentage of the
average daily net assets of each Portfolio. For the six months ended June 30,
1998, the Investment Advisor paid MFS $ 2,735,734 for MFS Emerging Equities,
MFS Research Growth, and MFS Value Equity, paid Scudder $851,135 for Scudder
International Growth, and paid T. Rowe $841,812 for T. Rowe Price Growth Equity
in accordance with the terms of each agreement.
Under an Administrative Services Agreement between the Company and Aetna, Aetna
provides all administrative services necessary for the Company's operations and
is responsible for the supervision of the Company's other service providers.
Aetna also assumes all ordinary recurring direct costs of the Company, such as
custodian fees, director's fees, transfer agency fees and accounting fees. As
compensation for these services, Aetna receives a monthly fee from each
Portfolio at an annual rate based on the average daily net assets of each
Portfolio as follows:
<TABLE>
<CAPTION>
Portfolio Rate
- -------------------------------------------- ----------
<S> <C>
MFS Emerging Equities ................ 0.13%
MFS Research Growth .................. 0.15%
MFS Value Equity ..................... 0.25%
Scudder International Growth ......... 0.20%
T. Rowe Price Growth Equity .......... 0.15%
</TABLE>
Each Portfolio's aggregate expenses are limited to the advisory and
administrative service fees disclosed above. Aetna has agreed to reimburse the
Portfolios for expenses and/or waive its fees, so that, through at least April
30, 1999, the aggregate of each Portfolio's expenses will not exceed the
combined investment advisory and administrative service fees rate shown above.
4. Purchases and Sales of Investment Securities
Purchases and sales of investment securities, excluding short-term investments,
for the six months ended June 30, 1998 were:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
----------------- -------------------
<S> <C> <C>
MFS Emerging Equities $230,057,792 $ 16,590,900
MFS Research Growth 209,800,986 215,921,106
MFS Value Equity 108,661,758 90,567,569
Scudder International Growth 108,169,638 119,777,145
T. Rowe Price Growth Equity 145,296,294 111,356,629
</TABLE>
5. Capital Loss Carryforwards
At December 31, 1997, for federal income tax purposes, the Portfolios had the
following capital loss carryforwards:
<TABLE>
<CAPTION>
Capital Loss Year of
Portfolio Carryforward Expiration
- --------------------------- -------------- -----------
<S> <C> <C>
MFS Research Growth $ 4,589,027 2005
MFS Value Equity 164,092 2005
</TABLE>
- --------------------------------------------------------------------------------
The Board of Directors will not distribute any realized capital gains until the
above capital loss carryforwards have been used to offset future capital gains
or until they expire.
34
<PAGE>
Portfolio Partners, Inc.
Notes to Financial Statements
June 30, 1998 (unaudited) (continued)
- --------------------------------------------------------------------------------
6. Forward Foreign Currency Exchange Contracts
At June 30, 1998, MFS Emerging Equities, MFS Value Equity, Scudder
International Growth and T. Rowe Price Growth Equity had open forward foreign
currency exchange contracts that obligate each Portfolio to deliver or receive
currencies at specified future dates. The net unrealized gain (loss) of ($210),
($39,650), ($1,136) and $518, respectively, on these contracts are included in
the accompanying financial statements. The terms of the open contracts are as
follows:
MFS Emerging Equities
<TABLE>
<CAPTION>
Foreign Currency U.S. Dollar U.S. Dollar Value Net Unrealized
Currency and Exchange Date Units Sold Proceeds at June 30, 1998 Gain (Loss)
- ------------------------------- ------------------ ------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Sale Contract
Great British Pound, 07/06/98 50,793 $84,570 $84,780 $ (210)
=======
</TABLE>
MFS Value Equity
<TABLE>
<CAPTION>
Foreign Currency U.S. Dollar U.S. Dollar Value Net Unrealized
Currency and Exchange Date Units Sold Proceeds at June 30, 1998 Gain (Loss)
- ---------------------------- ------------------ ------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Sale Contract
Hong Kong Dollar, 01/12/99 6,312,125 $754,317 $793,967 $ (39,650)
==========
</TABLE>
Scudder International Growth
<TABLE>
<CAPTION>
Foreign Currency U.S. Dollar U.S. Dollar Value Net Unrealized
Currency and Exchange Date Units Purchased/Sold Cost/Proceeds at June 30, 1998 Gain (Loss)
- ------------------------------- ---------------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Purchase Contract
Japanese Yen, 07/01/98 2,253,266 $ 15,896 $ 16,309 $ 413
=======
Sale Contracts
Great British Pound, 07/01/98 134,529 224,341 224,611 $ (270)
Great British Pound, 07/06/98 292,039 486,216 487,454 (1,238)
Italian Lira, 07/02/98 10,803,925 6,097 6,084 13
Swedish Krona, 07/02/98 93,366 11,664 11,713 (49)
Swedish Krona, 07/06/98 11,421 1,428 1,423 (5)
----------
$(1,549)
=========
</TABLE>
T. Rowe Price Growth Equity
<TABLE>
<CAPTION>
Foreign Currency U.S. Dollar U.S. Dollar Value Net Unrealized
Currency and Exchange Date Units Purchased Cost at June 30, 1998 Gain (Loss)
- ---------------------------- ------------------ ------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Purchase Contract
French Franc, 07/31/98 1,744,551 $288,809 $289,327 $ 518
=====
</TABLE>
7. Authorized Capital Shares
The Company is authorized to issue a total of 1.0 billion shares of common
stock with a par value of $0.001 per share. The shares may be issued in series
(i.e. portfolios) having separate assets and liabilities and separate
investment objectives and policies. Upon liquidation of a Portfolio, its
shareholders are entitled to share pro rata in the net assets of that portfolio
available for distribution to shareholders. Aetna utilizes the Portfolios as
funding options for certain of their variable annuities and variable life
separate accounts. At June 30, 1998, Aetna owned all shares of beneficial
interest of the Portfolios.
35
<PAGE>
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