<PAGE>
MESSAGE
TO OUR SHAREHOLDERS
I
am pleased to bring you the first Investors Mark Series Fund report for the
period from November 13, 1997 (commencement) through December 31, 1997. In
the future, the Fund will issue two reports per year, with the annual report
containing audited financials. The remainder of this and future reports will be
devoted to the Portfolio Management Review, in which each subadvisor will
discuss investment philosophies, strategies and holdings of their Portfolio. We
recommend that you read this report carefully and retain it for future
reference.
The rigorous selection process produced a collection of investment choices
that represents each of the major investment disciplines, yet you will notice
the Portfolios share common attributes. All are managed by investment firms
notable for their investment performance over time, in-depth fundamental
investment research, and disciplined, process-oriented approaches to investing.
I will regularly monitor and evaluate the investment options based on investment
performance, market conditions, and changing customer needs.
Various marketing and promotional efforts are underway, and we expect assets
under management to increase significantly in the coming months. We welcome the
new investors who have joined us, and we look forward to continuing our efforts
to provide you with consistent, favorable returns in the future.
Sincerely,
[/S/ ROBERT N. SAWYER]
Robert N. Sawyer
President
PORTFOLIO MANAGEMENT REVIEW
LARGE CAP VALUE
The stock market goes through cycles of shifting its style preference between
growth and value. Although there was a brief shift to value during the third
quarter, the problems in East Asia caused a knee-jerk return to the security of
the high-quality growth companies that had weakened in the third quarter after
dominating the market for so long. Investors' current concerns about the level
of the stock market and the more defensive nature of the large capitalization
value style may combine to shift market preference the way of the Large Cap
Value Portfolio.
Many of the "nifty 50" stocks that have driven the S&P to new highs are
selling at price/earnings (P/E) multiples in the 30s, 40s, 50s and even higher.
In the words of an old finance professor, the market is discounting their future
cashflows into the hereafter. While these high-quality companies surely deserve
to sell at some premium, multiples this high constitute a risk we prefer not to
take. That's why we do not own those companies selling over 30 times earnings.
We look forward to a year of challenge and opportunity. Following three years
of stock market returns over 20%, we are not expecting a repeat. Whatever the
market throws at us, we will continue to follow our discipline . . . a
discipline that we believe can produce a solid, long-term record.
TOP HOLDINGS AS OF 12/31/97
Wallace Computer
Illinova Corp.
Xerox Corp.
National City Corp.
Chase Manhattan Corp.
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Return Since
Commencement
11/13/97
------------
<S> <C>
Large Cap Value........................ (2.86%)
</TABLE>
DAVID L. BABSON & CO. INC.
1
<PAGE>
LARGE CAP GROWTH
Investors returned to high-quality, large-cap growth stocks about the same time
we opened the Large Cap Growth Portfolio. The turmoil in Asia, market volatility
and the fear of a slowdown of worldwide growth in 1998 sent individuals back to
the relative safety and earnings predictability of the large-cap growth leaders.
This worked in our favor as the pharmaceutical, financial services and consumer
product companies all performed well for the Portfolio.
It is our belief that the Asian currency crisis will exert downward pressure
on worldwide economic growth and inflation in 1998. As a result, investors will
pay a premium for companies that have shown they can grow earnings in a sluggish
economic environment and the companies that make up the Portfolio have
historically proven their ability to do so.
We will continue to emphasize the stocks of issuers we believe are quality
growth companies with exceptional earnings growth, superior returns on
investment and above-average earnings stability. It is our objective to purchase
these stocks at a modest price, relative to future earnings potential, in an
effort to capture the positive effect of compounded earnings growth rates.
TOP HOLDINGS AS OF 12/31/97
Cendant Corp.
Travelers Inc.
Federal National Mortgage Association (FNMA)
Gillette Co.
Eli Lilly & Co.
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Return Since
Commencement
11/13/97
------------
<S> <C>
Large Cap Growth....................... 7.10%
</TABLE>
STEIN ROE & FARNHAM, INC.
MID CAP EQUITY
The predominant theme throughout the fourth quarter was the market's response to
the "Asian crisis." Concern vacillated between lower exports to the region
(which would hurt export intensive domestic companies, such as semiconductor
capital equipment), and Southeast Asian companies exporting their way out of
their difficulties (which could pressure prices of U.S. products and possibly
lead to deflation). Although the actual impact of the crisis is not yet evident
and is unlikely to be seen in any official government data for several months,
we believe the impact from Asia's problems will be felt in the U.S. economy.
This is a challenging environment for our company-by-company approach to stock
selection. We expect to experience a better investing climate going forward as
Asian concerns and year-end cross currents work their way through the market.
Over the years, we have found that patience pays at these times as persistent
dislocation between share prices and company fundamentals is unsustainable.
While we concentrate our investments in the stocks of mid-sized U.S. companies,
we will continue to look for opportunities across the market cap spectrum.
Relative to the overall market, we expect modest returns for the Mid Cap
Equity Portfolio in 1998. It is possible that concerns about overvaluation of
the stock market and the deflationary impact of the economic problems in Korea,
Thailand, Malaysia and the rest of Asia could lead to a major decline in stock
prices. However, it is more likely that the U.S. economy will lose some vitality
to slowing exports, but not enough to cause serious damage. Strong U.S.
corporate profitability (which continues to be driven by improved efficiency),
low interest rates and abundant liquidity throughout the financial system all
support the case for further equity gains.
TOP HOLDINGS AS OF 12/31/97
Schering-Plough
Gannett, Inc.
Ameritech Corp.
British Petroleum
Ford Motor Co.
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Return Since
Commencement
11/13/97
---------------------
<S> <C>
Mid Cap Equity......................... 5.07%
</TABLE>
STANDISH, AYER & WOOD, INC.
2
<PAGE>
SMALL CAP EQUITY
Small-cap stocks weakened in the fourth quarter following a period of relative
outperformance. However, as the quarter progressed the growth potential and
valuation characteristics of the Small Cap Equity Portfolio's holdings became
more attractive. With three times the earnings growth rate, but at a comparable
valuation to large-cap stocks (as measured by the S&P 500 Index), we believe the
Portfolio is well positioned for the year ahead.
In our investment strategy of seeking long-term capital appreciation, we favor
companies whose managements have an owner/operator, risk-averse orientation and
a demonstrated ability to create wealth for investors. Attractive company
characteristics include unit growth, favorable cost structures or competitive
positions, and financial strength that enables management to execute business
strategies under difficult conditions. A company is attractively valued when its
stock can be purchased at a meaningful discount to the value of the underlying
business.
TOP HOLDINGS AS OF 12/31/97
CB Commercial Real Estate Services
Fiserv, Inc.
Metro Networks
Alternative Resources
Interim Services
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Return Since
Commencement
11/13/97
------------
<S> <C>
Small Cap Equity....................... (2.80%)
</TABLE>
STEIN ROE & FARNHAM, INC.
GROWTH & INCOME
The Growth & Income Portfolio seeks long-term growth of capital and income with
minimal fluctuation in market value by investing in large, seasoned companies in
sound financial condition that are expected to show above-average price
appreciation. During the past year, the stock market enjoyed returns above
historical averages due to an environment of solid economic growth, low
inflation and strong corporate profit gains. We foresee the economy slowing
significantly in 1998. While profit growth should also slow, inflation should
remain moderate, keeping long-term bond rates below 6%.
Given the economic climate we are forecasting, equities could still produce
positive total returns over the next twelve months. However, companies whose
profits and performance usually track the economy and depend on price increases
to offset rising costs (such as construction companies), may find it difficult
to maintain, much less increase, their profits. While we remain somewhat
defensively positioned, we anticipate building up our "economy sensitive" stocks
as the economy cools because some of the most attractively priced stocks today
fall into that category. We also see the stocks of insurance companies
benefiting from industry-wide consolidation and cost-cutting efforts.
Of course, an extended bull market can affect our investment strategy, but
because we emphasize thorough research on each stock we select for the
Portfolio, we believe we can produce attractive total returns going forward.
TOP HOLDINGS AS OF 12/31/97
Deere & Co.
Chubb Corp.
Hewlett-Packard Co.
Minnesota Mining & Manufacturing (3M)
H.J. Heinz & Co.
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Return Since
Commencement
11/13/97
------------
<S> <C>
Growth & Income........................ 4.25%
</TABLE>
LORD, ABBETT & CO.
3
<PAGE>
BALANCED
The Balanced Portfolio continued to build core holdings during the month of
December. At fiscal year-end 1997, common stocks comprised 25% of total assets.
Stock holdings were concentrated in industry groups believed to have favorable
prospects in 1998 and to be relatively immune to the turmoil in Asia. These
industries included financial (banks and insurance), defense, retail, drugs, oil
service and oil refining. Given our more modest return expectations for the
stock market, our targeted asset allocation is roughly 1/3 stocks, 1/3
convertible bonds and 1/3 high-yield corporate bonds. We believe structuring the
Portfolio to generate a high component of current income will be beneficial to
investors in the coming year.
Our strategy with convertible securities -- securities with the right to
convert to the common stock of the issuers at predetermined prices -- is to
target companies whose stock prices and business fundamentals are out of favor
but believed to be bottoming. By purchasing those convertible securities
offering high current yields, we in a sense "get paid while we wait" for the
underlying stock to turn around. The typical holding period is two to three
years. We are currently targeting the technology and oil service industries with
this strategy.
The Portfolio is cautiously building exposure to high-yield corporate bonds.
The yields available have moved sharply lower and the risk/reward trade-off is
much less favorable than in the past several years. The key to success in this
market for 1998 will be in using strong fundamental research to locate niche
bonds offering both high yields and healthy business fundamentals.
TOP HOLDINGS AS OF 12/31/97
Integrated Device Technologies, 5.50%, 2002
convertible bond
Wiser Oil Co., 9.50%, 2007 corporate bond
Intevac, Inc., 6.50%, 2004 convertible bond
ICO, Inc., $1.6875 convertible preferred stock
HMT Technology, 5.75%, 2004 convertible bond
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Return Since
Commencement
11/13/97
------------
<S> <C>
Balanced............................... 0.18%
</TABLE>
KORNITZER CAPITAL MANAGEMENT, INC.
INTERMEDIATE FIXED INCOME
The decline in interest rates that occurred in late November through December
worked in favor of the Intermediate Fixed Income Portfolio as we moved quickly
to invest cash during the start-up phase. The decline in rates was due partly to
the turmoil in world markets that began in Asia. Investors took a "flight to
quality," snatching up high-grade U.S. bonds and thus raising the prices of
bonds while yields, which move in the opposite direction of prices, declined.
Looking for the most attractive yield spreads in this environment, we targeted
U.S. Treasuries and corporate securities. Mortgage-backed securities offered a
mixed bag of attractive returns, along with significant risks of prepayments and
refinancings. Accordingly, we structured the Portfolio with an overweighting in
U.S. Treasuries and corporate bonds and an underweighting in mortgage-backed
securities.
Going forward, we expect to further diversify the Portfolio by introducing
asset-backed securities, bank bonds and Yankee bonds (obligations of foreign
governments and corporations issued in the U.S.). We foresee no recession nor
major alteration in interest rates, so our emphasis will be on securing superior
current yield and emphasizing careful credit analysis in keeping with our goal
of seeking a high level of current income while maintaining liquidity and
stability of principal.
TOP HOLDINGS AS OF 12/31/97
U.S. Treasury Notes, 5.625%, 11/30/98
U.S. Treasury Notes, 6.25%, 10/31/01
U.S. Treasury Bonds, 8.125%, 8/15/19
FNMA, 7%, 11/1/27
FHLMC, 6%, 4/1/11
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Return Since
Commencement
11/13/97
------------
<S> <C>
Intermediate Fixed Income.............. 1.27%
</TABLE>
STANDISH, AYER & WOOD, INC.
4
<PAGE>
GLOBAL FIXED INCOME
The investment objective of the Global Fixed Income Portfolio is to maximize
total return and generate a market level of return while preserving both
liquidity and principal. With this in mind, we structured the Portfolio with an
overweighting in the dollar bloc nations, a modest underweighting in Europe and
a sizable underweighting in Japan. In addition, we kept the duration slightly
longer than the benchmark index, the J.P. Morgan Global Hedged Index, to take
advantage of falling interest rates resulting from the strong flight to quality
that took place in the fourth quarter.
Looking forward, we believe that slower economic growth and lower inflation in
most countries will have a positive influence on the bond markets. We will
maintain a long duration relative to the index as long as this favorable
environment exists and we will maintain our weightings as stated above. Within
Europe, we favor Germany and markets such as the U.K. that offer attractive
spreads relative to Germany, yet will not be participating in the first round of
monetary union that begins January 1, 1999. We will also continue to follow our
policy of hedging currency exposure into the U.S. dollar to minimize volatility
in investment results.
TOP HOLDINGS AS OF 12/31/97
U.S. Treasury Notes, 5.625%, 11/30/98
U.S. Treasury Notes, 6.25%, 10/31/01
U.S. Treasury Notes, 8.125%, 8/15/19
Swedish Government Bond, 6%, 2/9/05
Australian Government Bond, 9%, 9/15/04
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Return Since
Commencement
11/13/97
------------
<S> <C>
Global Fixed Income.................... 1.70%
</TABLE>
STANDISH INTERNATIONAL MANAGEMENT CO., L.P.
MONEY MARKET
The Money Market Portfolio had a good start-up during the month of November as
we invested the initial funds within the first few days of management. In the
very short end of the yield curve, interest rates remained constant or even rose
modestly during the month of December and we were able to invest funds from
maturities to take advantage of the somewhat higher rates. The Portfolio is
currently a little over $1 million consisting of three different government
agency issuers with an average maturity of approximately 80 days.
Going forward, the Portfolio will continue to invest primarily in U.S.
Treasury and agency securities, focusing more on the higher yielding agencies to
build in a yield advantage over other money market portfolios. We expect no
major movements in interest rates over the next few months as investors sort out
the future direction of the economy and of Federal Reserve Board policy and
their impact on the short end of the yield curve. We will continue to work
toward our goal of earning the highest possible level of current income while
preserving capital and maintaining liquidity.
Money market funds are neither insured nor guaranteed by the U.S. Government.
There is no assurance that the fund will maintain a stable net asset value of
one dollar per share.
TOP HOLDINGS AS OF 12/31/97
FHLMC, 5.80%, 1/5/98
FHLMC, 5.42%, 1/21/98
FHLMC, 5.52%, 7/21/98
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Return Since
Commencement
11/13/97
------------
<S> <C>
Money Market........................... 0.71%
</TABLE>
STANDISH, AYER & WOOD, INC.
PERFORMANCE DATA CONTAINED IN THIS REPORT IS FOR PAST PERIODS ONLY. PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND SHARE
VALUE WILL FLUCTUATE, AND REDEMPTION VALUE MAY BE MORE OR LESS THAN
ORIGINAL COST.
5
<PAGE>
LARGE CAP
VALUE
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 97.19%
BASIC MATERIALS -- 4.34%
1,000 duPont (E.I.) deNemours & Co..................... $ 60,062
1,300 Millennium Chemicals, Inc........................ 30,631
500 USX-U.S. Steel Group............................. 15,489
-------------
106,182
CAPITAL GOODS -- 4.54%
1,300 Dana Corp........................................ 61,750
500 Lockheed Martin Corp............................. 49,250
-------------
111,000
CONSUMER CYCLICAL -- 12.20%
1,100 Harcourt General, Inc............................ 60,225
4,900 K mart Corp...................................... 56,656
2,500 The Limited, Inc................................. 63,750
900 Penney (J.C.), Inc............................... 54,281
1,400 Sears, Roebuck & Co.............................. 63,350
-------------
298,262
ENERGY -- 5.06%
800 Atlantic Richfield Co............................ 64,100
1,100 Royal Dutch Petroleum Co......................... 59,606
-------------
123,706
FINANCIAL -- 27.48%
800 Aetna, Inc....................................... 56,450
700 Allstate Corp.................................... 63,613
700 American Express Co.............................. 62,475
600 Chase Manhattan Corp............................. 65,700
300 General Re Corp.................................. 63,600
1,000 National City Corp............................... 65,750
400 SLM Holding Corp................................. 55,650
1,200 Student Loan Corp................................ 59,250
600 Transamerica Corp................................ 63,900
1,100 Travelers Group, Inc............................. 59,263
500 U.S. Bancorp..................................... 55,969
-------------
671,620
HEALTH CARE -- 5.22%
1,900 Tenet Healthcare Corp.*.......................... 62,937
1,300 United Healthcare Corp........................... 64,594
-------------
127,531
MISCELLANEOUS -- 27.25%
1,200 Boeing Co........................................ 58,725
1,600 Diageo PLC....................................... 60,600
1,200 Hanson PLC, ADR.................................. 27,675
2,500 Illinova Corp.................................... 67,344
400 Martin Marietta Materials, Inc................... 14,625
2,500 Overseas Shipholding Group, Inc.................. 54,531
1,400 Potlatch Corp.................................... 60,200
2,000 Reebok International Ltd.*....................... 57,625
1,800 Wallace Computer Services, Inc................... 69,975
1,300 Weyerhaeuser Co.................................. 63,782
2,000 Willamette Industries, Inc....................... 64,375
900 Xerox Corp....................................... 66,431
-------------
665,888
TECHNOLOGY -- 4.98%
4,500 Apple Computer, Inc.*............................ 59,062
600 International Business Machines Corp............. 62,738
-------------
121,800
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
TRANSPORTATION & SERVICES -- 3.57%
500 CSX Corp......................................... 26,744
1,600 KLM Royal Dutch Airlines......................... 60,400
-------------
87,144
UTILITIES -- 2.55%
1,500 Texas Utilities Co............................... 62,344
-------------
TOTAL COMMON STOCKS
(Cost $2,453,304)........................................... 2,375,477
-------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.50%
$110,000 UMB Bank, n.a., 5.80% due 1/2/98 (Collateralized
by $112,234
U.S. Treasury Notes, 5.875%
due 2/28/99)
(Cost $110,000).............................. 110,000
-------------
TOTAL INVESTMENTS -- 101.69%
(Cost $2,563,304)........................................... $ 2,485,477
Other assets less liabilities -- (1.69%).................... (41,367)
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $9.69 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 252,144 shares outstanding)..................... $ 2,444,110
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1997, WAS $2,563,304. NET UNREALIZED DEPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $77,827, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $30,632 AND UNREALIZED DEPRECIATION OF $108,459.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
LARGE CAP
GROWTH
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
- -------------------------------------------------------------------------
COMMON STOCKS -- 96.74%
CONSUMER CYCLICAL -- 12.85%
500 Disney (Walt) Co................................. $ 49,531
900 General Electric Co.............................. 66,039
1,000 Home Depot, Inc.................................. 58,875
800 Illinois Tool Works, Inc......................... 48,100
800 Kohl's Corp.*.................................... 54,500
-------------
277,045
CONSUMER STAPLES -- 11.95%
900 Coca-Cola Co..................................... 59,962
700 Gillette Co...................................... 70,306
1,400 Philip Morris Cos., Inc.......................... 63,438
800 Procter & Gamble Co.............................. 63,850
-------------
257,556
ENERGY -- 7.70%
1,100 Baker Hughes, Inc................................ 47,988
1,100 ENSCO International, Inc......................... 36,850
1,200 Marine Drilling Co.*............................. 24,900
700 Schlumberger Ltd................................. 56,350
-------------
166,088
FINANCIAL -- 19.06%
700 American Express Co.............................. 62,475
500 American International Group, Inc................ 54,375
400 Citicorp......................................... 50,575
1,300 Federal National Mortgage Assn................... 74,181
900 Schwab (Charles) Corp............................ 37,744
1,500 Travelers Group, Inc............................. 80,813
150 Wells Fargo & Co................................. 50,916
-------------
411,079
HEALTH CARE -- 14.73%
800 Johnson & Johnson................................ 52,700
1,000 Lilly (Eli) & Co................................. 69,625
1,200 Medtronic, Inc................................... 62,775
500 Merck & Co., Inc................................. 53,125
600 Pfizer, Inc...................................... 44,736
700 United Healthcare Corp........................... 34,781
-------------
317,742
MISCELLANEOUS -- 9.51%
3,200 Cendant Corp.*................................... 110,015
1,000 First Data Corp.................................. 29,250
1,300 Paychex, Inc..................................... 65,813
-------------
205,078
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
- -------------------------------------------------------------------------
TECHNOLOGY -- 20.94%
1,200 Cisco Systems, Inc.*............................. 66,900
1,300 Ericsson (L.M.) Telephone Cl. B.................. 48,506
600 Intel Corp....................................... 42,150
600 Lucent Technologies.............................. 47,925
400 Microsoft Corp.*................................. 51,700
800 Motorola, Inc.................................... 45,650
1,000 Tellabs, Inc.*................................... 52,875
1,000 Thermo Electron Corp.*........................... 44,500
1,700 WorldCom, Inc.*.................................. 51,425
-------------
451,631
-------------
TOTAL INVESTMENTS -- 96.74%
(Cost $1,946,054)......................................... $ 2,086,219
Other assets less liabilities -- 3.26%.................... 70,282
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $10.71 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 201,448 shares outstanding)................... $ 2,156,501
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1997, WAS $1,946,054. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $140,165, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $176,333 AND UNREALIZED DEPRECIATION OF $36,168.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
MID CAP
EQUITY
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
- --------------------------------------------------------------------------
COMMON STOCKS -- 98.60%
BASIC MATERIALS -- 1.77%
300 Lubrizol Corp.................................... $ 11,062
1,000 Lyondell Petrochemical........................... 26,500
-------------
37,562
CAPITAL GOODS -- 13.11%
400 Caterpillar, Inc................................. 19,425
500 Deere & Co....................................... 29,156
800 Ford Motor Co.................................... 38,950
600 Ingersoll-Rand Co................................ 24,300
300 PACCAR, Inc...................................... 15,750
200 Precision Castparts Corp......................... 12,062
400 Raychem Corp..................................... 17,225
600 SCI Systems, Inc.*............................... 26,137
300 Southdown, Inc................................... 17,700
200 Sundstrand Corp.................................. 10,075
100 Thiokol Corp..................................... 8,125
500 Timken Co........................................ 17,187
300 USG Corp.*....................................... 14,700
800 USX-Marathon Group............................... 27,000
-------------
277,792
CONSUMER CYCLICAL -- 14.88%
200 Airborne Freight................................. 12,426
300 Alberto-Culver Co................................ 9,619
200 Albertson's Inc.................................. 9,476
300 CompUSA, Inc.*................................... 9,300
500 Deluxe Corp...................................... 17,250
200 Federated Department Stores*..................... 8,613
700 Gannett, Inc..................................... 43,269
500 GTECH Holdings Corp.*............................ 15,969
400 Gymboree Corp.................................... 10,950
200 Jones Apparel Group, Inc.*....................... 8,600
300 Liz Claiborne, Inc............................... 12,544
700 Nautica Enterprises*............................. 16,276
300 Navistar International*.......................... 7,360
200 Richfood Holdings, Inc........................... 5,650
600 Ross Stores, Inc................................. 21,826
600 Safeway, Inc.*................................... 37,950
400 Sysco Corp....................................... 18,226
300 TJX Cos., Inc.................................... 10,313
500 Tommy Hilfiger Corp.*............................ 17,563
300 Xerox Corp....................................... 22,144
-------------
315,324
CONSUMER STAPLES -- 16.77%
300 Avery Dennison Corp.............................. 13,425
300 Bergen Brunswig Cl. A............................ 12,637
400 Bristol-Myers Squibb............................. 37,850
100 Clorox Co........................................ 7,906
300 Coors (Adolph) Cl. B............................. 9,975
400 Dexter Corp...................................... 17,275
500 Dole Food Co..................................... 22,875
200 Hershey Foods Corp............................... 12,387
1,000 Interstate Bakeries Corp......................... 37,375
200 Lear Corp.*...................................... 9,500
400 Oakwood Homes.................................... 13,275
700 Owens-Illinois*.................................. 26,556
600 Philip Morris Co., Inc........................... 27,187
1,000 Schering-Plough.................................. 62,125
300 Universal Foods.................................. 12,675
1,000 Watson Pharmaceuticals, Inc.*.................... 32,437
-------------
355,460
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
- --------------------------------------------------------------------------
ENERGY -- 7.19%
500 British Petroleum ADR............................ 39,843
200 Camco International, Inc......................... 12,737
200 Coastal Corp..................................... 12,387
400 ENSCO International*............................. 13,400
500 Global Marine, Inc.*............................. 12,250
300 Pennzoil Co...................................... 20,043
600 Phillips Petroleum Co............................ 29,175
400 USX-U.S. Steel Group............................. 12,500
-------------
152,335
FINANCIAL -- 21.79%
100 Ahmanson (H.F.) & Co............................. 6,694
500 BankAmerica Corp................................. 36,500
600 Bear Stearns Cos................................. 28,500
100 Citicorp......................................... 12,644
100 Comerica, Inc.................................... 9,026
700 Conseco, Inc..................................... 31,807
300 Duke Reality Investments......................... 7,276
100 FelCor Suite Hotels, Inc......................... 3,550
500 First Union Corp................................. 25,626
300 Golden West Financial Co......................... 29,344
900 Money Store, The................................. 18,900
200 Old Republic International Corp.................. 14,912
800 Omnicom Group.................................... 33,900
100 PMI Group, The................................... 7,202
400 Prentiss Properties Trust........................ 11,175
300 SouthTrust Corp.................................. 19,031
700 Standard & Poor's 500 Depository Receipts........ 67,857
300 Starwood Lodging Trust........................... 17,362
200 Stewart Enterprises, Inc. Cl. A.................. 9,325
500 SunAmerica, Inc.................................. 21,375
600 Torchmark Corp................................... 25,237
450 Travelers Group, Inc............................. 24,243
-------------
461,486
HEALTH CARE -- 3.62%
1,300 Biomet, Inc.*.................................... 33,312
400 Health Care & Retirement*........................ 16,100
200 Shared Medical Systems........................... 13,200
300 Sybron Corp.*.................................... 14,081
-------------
76,693
TECHNOLOGY -- 9.03%
500 Aeroquip-Vickers, Inc............................ 24,531
400 Cadence Designs System, Inc.*.................... 9,800
500 Compaq Computer Corp............................. 28,218
600 Computer Assoc. Int'l Inc........................ 31,725
500 Harris Corp...................................... 22,937
600 Storage Technology*.............................. 37,162
800 Symantec Corp.*.................................. 17,550
500 Tech Data Corp.*................................. 19,437
-------------
191,360
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SHARES COMPANY MARKET VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION & SERVICES -- 3.45%
400 Tidewater, Inc................................... 22,050
200 UAL Corp.*....................................... 18,500
400 U S Airways Group, Inc.*......................... 25,000
300 Yellow Corp...................................... 7,537
-------------
73,087
UTILITIES -- 6.99%
500 Ameritech Corp................................... 40,250
300 Bell Atlantic Corp............................... 27,300
500 BellSouth Corp................................... 28,156
200 Century Telephone Enterprises.................... 9,962
800 Cincinnati Bell, Inc............................. 24,800
300 FPL Group, Inc................................... 17,756
-------------
148,224
TOTAL COMMON STOCKS
(Cost $1,996,905).......................................... 2,089,323
-------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
- --------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.90%
$19,000 State Street Bank and Co., 4.25% due 1/02/98
(Collateralized by $20,149 U.S. Treasury
Notes, 5.625% due 10/31/99)
(Cost $19,000)............................... 19,000
-------------
TOTAL INVESTMENTS -- 99.50%
(Cost $2,015,905).......................................... $ 2,108,323
Other assets less liabilities -- 0.50%..................... 10,592
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $10.49 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 201,972 shares outstanding).................... $ 2,118,915
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1997, WAS $2,015,905. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $92,418, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $130,025 AND UNREALIZED DEPRECIATION OF $37,607.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
SMALL CAP
EQUITY
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
- -------------------------------------------------------------------------
COMMON STOCKS -- 97.04%
BASIC MATERIALS -- 6.91%
2,100 ChemFirst, Inc................................... $ 59,325
1,800 Chirex, Inc.*.................................... 31,725
3,500 Nanophase Technologies*.......................... 44,406
-------------
135,456
CONSUMER CYCLICAL -- 15.95%
1,800 CMP Media, Inc. CL. A*........................... 31,050
2,400 Metro Networks*.................................. 78,600
1,800 Nu Skin Asia Pacific Cl. A*...................... 32,850
1,500 Superior Industries Intl., Inc................... 40,219
1,800 Triarc Cos. Cl. A*............................... 49,050
2,200 US Central European Media*....................... 55,550
1,600 USA Floral Products*............................. 25,200
-------------
312,519
ENERGY -- 6.40%
700 Barrett Resources Co.*........................... 21,175
800 Devon Energy Corp................................ 30,800
900 Hanover Compressor*.............................. 18,394
3,600 Meridian Resource Co.*........................... 34,425
700 Renaissance Energy*.............................. 20,651
-------------
125,445
FINANCIAL -- 28.45%
2,700 C B Commercial Real Estate Services*............. 86,906
1,700 Fiserv, Inc.*.................................... 83,513
300 Investors Financial Services..................... 13,800
1,200 LaSalle Partners*................................ 42,750
2,800 Meadowbrook Insurance Group...................... 72,975
100 National Bancorp Alaska.......................... 12,650
1,500 Paula Financial*................................. 34,500
2,300 Reckson Associates Realty........................ 58,363
1,100 Security Capital Group*.......................... 35,750
1,100 Spieker Properties............................... 47,163
1,300 SPSS, Inc.*...................................... 25,025
1,700 20th Century Industries.......................... 44,200
-------------
557,595
HEALTH CARE -- 13.49%
2,700 Biosource International*......................... 17,212
1,100 Ligand Pharmaceutical*........................... 14,162
900 Schein (Henry), Inc.*............................ 31,500
1,600 Sola International*.............................. 52,000
800 Teva Pharmaceutical Industries ADR............... 37,850
1,500 Urologix, Inc.*.................................. 27,187
2,700 Uroquest Medical Corp.*.......................... 7,088
2,100 Xomed Surgical Products*......................... 50,400
1,500 Young Innovations, Inc.*......................... 27,000
-------------
264,399
MISCELLANEOUS -- 14.04%
3,400 Alternative Resources*........................... 78,413
1,000 American Itailian Pasta Cl. A*................... 25,000
2,200 Ballantyne of Omaha*............................. 39,600
1,400 COREStaff, Inc.*................................. 37,100
600 G & K Services, Inc.............................. 25,200
2,700 Interim Services, Inc.*.......................... 69,862
-------------
275,175
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
- -------------------------------------------------------------------------
TECHNOLOGY -- 10.74%
3,100 AVX Corp......................................... 57,157
1,500 Barra, Inc....................................... 36,187
1,000 Computer Products, Inc.*......................... 22,625
1,000 Danka Business Systems ADR....................... 15,937
200 Fisher Cos.*..................................... 24,000
1,500 Kent Electronics Corp.*.......................... 37,687
1,200 Sheldahl, Inc.*.................................. 16,800
-------------
210,393
UTILITIES -- 1.06%
1,200 Western Wireless Cl. A*.......................... 20,850
-------------
TOTAL INVESTMENTS -- 97.04%
(Cost $1,953,297)......................................... $ 1,901,832
Other assets less liabilities -- 2.96%.................... 57,914
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $9.72 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 201,621 shares outstanding)................... $ 1,959,746
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1997, WAS $1,953,297. NET UNREALIZED DEPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $51,465, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $77,994 AND UNREALIZED DEPRECIATION OF $129,459.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
GROWTH AND
INCOME
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
- -------------------------------------------------------------------------
COMMON STOCKS -- 95.23%
BASIC MATERIALS -- 4.92%
525 Bowater, Inc..................................... $ 23,329
200 Dow Chemical Co.................................. 20,300
675 Lyondell Petrochemical........................... 17,888
325 Rohm & Haas Co................................... 31,119
350 USX-U.S. Steel Group............................. 10,937
-------------
103,573
CAPITAL GOODS -- 9.57%
1,100 Deere & Co....................................... 64,144
275 Eaton Corp....................................... 24,544
600 Emerson Electric Co.............................. 33,863
700 Fort James Corp.................................. 26,775
275 Georgia-Pacific Corp............................. 16,706
625 International Paper.............................. 26,953
38 Raytheon......................................... 1,876
275 Timber Group..................................... 6,239
-------------
201,100
CONSUMER CYCLICAL -- 9.88%
900 Corning, Inc..................................... 33,413
675 Deluxe Corp...................................... 23,287
600 General Motors Corp.............................. 36,375
600 Liz Claiborne, Inc............................... 25,088
100 Penney (J.C.), Inc............................... 6,031
525 Toys "R" Us, Inc.*............................... 16,505
350 V.F. Corp........................................ 16,078
800 Wal-Mart Stores, Inc............................. 31,550
350 Whirlpool Corp................................... 19,250
-------------
207,577
CONSUMER STAPLES -- 12.97%
800 Archer-Daniels-Midland........................... 17,350
1,250 ConAgra, Inc..................................... 41,016
200 Crown Cork & Seal Inc............................ 10,025
1,000 Fortune Brands, Inc.............................. 37,062
925 Heinz (H.J.) Co.................................. 47,002
450 International Flavor & Fragrances................ 23,175
900 Kimberly-Clark Corp.............................. 44,381
200 Pioneer Hi-Bred International.................... 21,450
550 Sara Lee Corp.................................... 30,972
-------------
272,433
ENERGY -- 7.19%
501 Coastal Corp..................................... 31,031
200 Chevron Corp..................................... 15,400
500 ENI S.p.A. ADS ADR............................... 28,531
600 Mobil Corp....................................... 43,313
450 SBC Communications, Inc.......................... 32,962
-------------
151,237
FINANCIAL -- 21.03%
225 Aegon............................................ 20,166
200 Aetna, Inc....................................... 14,113
625 American General Corp............................ 33,789
200 BankAmerica Corp................................. 14,600
300 BankBoston Corp.................................. 28,181
200 Chase Manhattan Corp............................. 21,900
750 Chubb Corp....................................... 56,719
100 Cigna Corp....................................... 17,306
250 Comerica, Inc.................................... 22,563
350 First Chicago NBD................................ 29,225
300 First Union Corp................................. 15,375
300 Mellon Bank Corp................................. 18,187
550 Morgan Stanley, Dean Witter...................... 32,519
550 Providian Financial Corp......................... 24,853
250 St. Paul Cos..................................... 20,515
300 Transamerica Corp................................ 31,950
625 Washington Mutual................................ 39,883
-------------
441,844
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
- -------------------------------------------------------------------------
HEALTH CARE -- 5.43%
450 American Home Products........................... 34,425
775 Baxter International............................. 39,089
550 SmithKline Beecham............................... 28,291
100 Warner-Lambert Co................................ 12,400
-------------
114,205
MISCELLANEOUS -- 4.08%
600 Minnesota Mining & Manufacturing................. 49,237
800 Sonat, Inc....................................... 36,600
-------------
85,837
TECHNOLOGY -- 7.86%
550 EMC Corp......................................... 15,090
800 Hewlett-Packard Co............................... 50,000
375 International Business Machines.................. 39,211
725 Motorola, Inc.................................... 41,370
1,000 Seagate Technology, Inc.*........................ 19,250
-------------
164,921
UTILITIES -- 12.30%
950 Baltimore Gas & Electric......................... 32,359
325 Bell Atlantic Corp............................... 29,575
825 Carolina Power & Light........................... 35,011
700 CINergy Corp..................................... 26,819
550 Consolidated Natural Gas......................... 33,275
575 Duke Power Co.................................... 31,841
800 First Energy Corp................................ 23,200
550 FPL Group........................................ 32,553
500 PacifiCorp....................................... 13,656
-------------
258,289
TOTAL COMMON STOCKS
(Cost $1,916,766)......................................... 2,001,016
-------------
CONVERTIBLE PREFERRED STOCKS -- 2.90%
400 Aetna, Inc....................................... 28,600
500 Occidental Petroleum............................. 32,375
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $62,803)............................................ 60,975
-------------
TOTAL INVESTMENTS -- 98.13%
(Cost $1,979,569)......................................... $ 2,061,991
Other assets less liabilities -- 1.87%.................... 39,153
-------------
TOTAL NET ASSETS --100.00%
(equivalent to $10.41 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 201,751 shares outstanding)................... $ 2,101,144
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1997, WAS $1,979,569. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $82,422, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $125,973 AND UNREALIZED DEPRECIATION OF $43,551.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
BALANCED
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 24.64%
BASIC MATERIALS -- 3.49%
400 Aluminum Company of America...................... $ 28,150
900 Republic Group, Inc.............................. 14,737
1,000 Texas Industries, Inc............................ 45,000
-------------
87,887
CAPITAL GOODS -- 4.86%
1,000 Blount International, Inc........................ 26,687
500 Cummins Engine, Inc.............................. 29,531
200 Lockheed Martin Corp............................. 19,700
500 TRW, Inc......................................... 26,688
500 York International Corp.......................... 19,781
-------------
122,387
CONSUMER CYCLICAL -- 3.24%
500 Chrysler Corp.................................... 17,594
1,000 Dillard's, Inc................................... 35,250
1,000 K mart Corp...................................... 11,562
500 Modine Manufacturing Co.......................... 17,062
-------------
81,468
CONSUMER STAPLES -- 0.62%
1,000 Pilgram's Pride Corp............................. 15,563
-------------
ENERGY -- 7.45%
500 Coastal Corp..................................... 30,969
1,500 McDermott Intl., Inc............................. 54,938
1,500 United Meridian Corp.*........................... 42,188
7,500 Wainoco Oil Corp.*............................... 59,531
-------------
187,626
FINANCIAL -- 2.79%
300 Chase Manhattan Corp............................. 32,850
500 Fleet Financial Group............................ 37,469
-------------
70,319
TECHNOLOGY -- 1.15%
1,500 Seagate Technology, Inc.*........................ 28,875
-------------
UTILITIES -- 1.04%
500 GTE Corp......................................... 26,125
-------------
TOTAL COMMON STOCKS
(Cost $637,936)............................................. 620,250
-------------
CONVERTIBLE PREFERRED STOCKS -- 7.58%
1,500 Best Buy Cap LP.................................. 74,062
4,000 ICO, Inc......................................... 91,000
500 K Mart Financing................................. 25,813
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $183,550)............................................. 190,875
-------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
CORPORATE BONDS -- 9.57%
$ 50,000 Argosy Gaming Co.,
13.25% due 6/01/04........................... 52,500
50,000 CompUSA, 9.5% due 6/15/20........................ 51,250
40,000 K mart Funding, Series G,
9.44% due 12/01/14........................... 38,650
100,000 Wiser Oil Co., 9.5% due 5/15/07.................. 98,500
-------------
TOTAL CORPORATE BONDS
(Cost $240,625)............................................. 240,900
-------------
CONVERTIBLE CORPORATE BONDS -- 15.59%
55,000 Allwaste, Inc., 7.25% due 6/01/14................ 53,075
100,000 HMT Technology, 5.75% due 1/15/04................ 88,125
125,000 Integrated Device Technologies,
5.5% due 6/01/02............................. 105,782
100,000 Intevac, Inc., cv, 6.5% due 3/01/04.............. 92,500
53,000 Wainoco Oil, 7.75% due 6/01/14................... 53,066
-------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost $392,642)............................................. 392,548
-------------
U.S. GOVERNMENT SECURITIES -- 21.85%
550,000 U.S. Treasury Bill,
4.473% due 1/22/98
(Cost $550,000).............................. 550,000
-------------
REPURCHASE AGREEMENT -- 20.65%
520,000 UMB Bank, n.a., 5.80% due 1/02/98 (Collateralized
by $530,838 U.S. Treasury Notes,
5.875% due 2/28/99)
(Cost $520,000).............................. 520,000
-------------
TOTAL INVESTMENTS -- 99.88%
(Cost $2,524,753)........................................... $ 2,514,573
Other assets less liabilities -- 0.12%...................... 3,125
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $9.96 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 252,689 shares outstanding)..................... $ 2,517,698
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1997, WAS $2,524,753. NET UNREALIZED DEPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $10,180, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $34,412 AND UNREALIZED DEPRECIATION OF $44,592.
* NON-INCOME PRODUCING SECURITY
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
INTERMEDIATE
FIXED INCOME
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
CORPORATE BONDS -- 25.80%
$ 50,000 Bradley Operating LP,
7.00% due 11/15/04........................... $ 50,158
75,000 Crescent Real Estate,
7.125% due 9/15/07........................... 76,189
50,000 Criimi Mae, Inc., 9.125% due 12/01/02............ 50,438
50,000 Lehman Brothers, med. term nts.,
6.625% due 12/27/02.......................... 50,259
50,000 MMI Cap Trust, nts.,
7.625% due 12/15/27.......................... 50,442
75,000 Simon Debartolo, med. term nts,
7.125% due 6/24/05........................... 76,428
25,000 Southland Corp., deb. nts.,
4.50% due 6/15/04............................ 20,375
50,000 Tenet Healthcare Corp.,
8.00% due 1/15/05............................ 51,250
50,000 Upm-Kymmene Corp., nts.,
7.45% due 11/26/27........................... 50,475
50,000 USA Waste Services, Inc.,
6.509% due 12/15/02.......................... 49,926
-------------
TOTAL CORPORATE BONDS
(Cost $522,025)............................................. 525,940
-------------
GOVERNMENT SPONSORED -- 14.72%
150,870 Federal Home Loan Mortgage Corp.
6.00% due 4/01/11............................ 148,807
149,888 Federal National Mortgage Assn.
7.00% due 11/01/27........................... 151,174
-------------
TOTAL GOVERNMENT SPONSORED
(Cost $298,493)............................................. 299,981
-------------
U.S. GOVERNMENT SECURITIES -- 57.36%
U.S. Treasury Notes
450,000 5.625% due 11/30/98.......................... 450,140
325,000 6.25% due 10/31/01........................... 330,789
75,000 5.75% due 8/15/03............................ 75,094
U.S. Treasury Bond...............................
250,000 8.125%, due 8/15/19.......................... 312,969
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $1,163,113)........................................... 1,168,992
-------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.08%
22,000 State Street Bank and Trust Co., 4.25% due
1/02/98 (Collateralized by $25,297 U.S.
Treasury Notes,
8.125% due 5/15/21)
(Cost $22,000)............................... 22,000
-------------
TOTAL INVESTMENTS -- 98.96%
(Cost $2,005,631)........................................... $ 2,016,913
Other assets less liabilities -- 1.04%...................... 21,125
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $10.06 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 202,552 shares outstanding)..................... $ 2,038,038
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1997, WAS $2,006,361. NET UNREALIZED APPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $10,552, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $10,762 AND UNREALIZED DEPRECIATION OF $210.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
GLOBAL FIXED
INCOME
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT* DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
CORPORATE BONDS -- 17.96%
ITALY -- 3.03%
$235,000,000 BTPS, 7.25% due 11/01/26**....................... $ 154,626
-------------
UNITED KINGDOM -- 5.99%
50,000 Birmghm Mdshre Bld Soc, 9.125% due 1/05/06....... 91,412
50,000 Northern Rock, nts., 9.375% due 10/17/21......... 100,340
50,000 P & O Steam Nav, deb nts., 11.50% due 7/03/14.... 113,658
-------------
305,410
UNITED STATES -- 8.94%
50,000 Bradley Operating LP, 7.00% due 11/15/04......... 50,158
75,000 Crescent Real Estate, 7.125% due 9/15/07......... 76,189
50,000 Criimi Mae Inc., 9.125% due 12/01/02............. 50,438
50,000 Lehman Brothers, med. term nts., 6.625% due
12/27/02..................................... 50,258
50,000 MMI Cap Trust, nts., 7.625% due 12/15/27......... 50,442
75,000 Simon Debartolo, med. term nts., 7.125% due
6/24/05...................................... 76,428
50,000 Tenet Healthcare Corp., 8.00% due 1/15/05........ 51,250
50,000 UPM-Kymmene Corp., nts., NC, 7.45% due
11/26/27..................................... 50,474
-------------
455,637
TOTAL CORPORATE BONDS
(Cost $904,495)................................................. 915,673
-------------
GOVERNMENT BONDS -- 40.08%
AUSTRALIA -- 6.00%
250,000 Australian Govt., bond, 9.00% due 9/15/04........ 190,674
150,000 Australian Govt., nts., 10.00% due 10/15/02...... 115,080
-------------
305,754
DENMARK -- 3.36%
1,075,000 Denmark Govt., 7.00% due 12/15/04................ 171,546
-------------
GERMANY -- 8.78%
250,000 Deutschland Republic, 6.00% due 1/04/07.......... 145,572
220,000 Deutschland Republic, 7.375% due 1/03/05......... 137,679
275,000 Deutschland Republic, 6.50% due 7/15/03.......... 164,273
-------------
447,524
JAPAN -- 4.66%
13,000,000 Italy Euroyen, nts., 5.125% due 7/29/03.......... 118,815
13,000,000 Spanish Kingdom Euroyen, 5.75% due 3/23/02....... 118,563
-------------
237,378
<CAPTION>
FACE
AMOUNT* DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
NEW ZEALAND -- 4.40%
210,000 Federal National Mortgage Assn., nts., 7.25% due
6/20/02...................................... 119,619
180,000 New Zealand Govt., nts., 7.00% due 7/15/09....... 104,731
-------------
224,350
SWEDEN -- 3.74%
1,500,000 Sweden Kingdom, 6.00% due 2/09/05................ 190,768
-------------
UNITED KINGDOM -- 9.14%
85,000 UK Gilt Treasury, 7.00% due 11/06/01............. 142,062
100,000 UKT Gilt, nts., 7.75% due 9/08/06................ 179,933
75,000 UKT Gilt, 9.50% due 10/25/04..................... 144,472
-------------
466,467
TOTAL GOVERNMENT BONDS
(Cost $2,102,591)............................................... 2,043,787
-------------
U.S. GOVERNMENT SPONSORED -- 5.88%
150,811 Federal Home Loan Mortgage Corp., 6.00% due
3/01/11...................................... 148,748
149,888 Federal National Mortgage Assn., 7.00% due
11/01/27..................................... 151,174
-------------
TOTAL U.S. GOVERNMENT SPONSORED
(Cost $298,436)................................................. 299,922
-------------
U.S. GOVERNMENT SECURITIES -- 31.15%
U.S. Treasury Notes
550,000 5.625% due 11/30/98.......................... 550,173
350,000 6.25% due 10/31/01........................... 356,234
75,000 6.25% due 6/30/02............................ 76,547
100,000 5.75% due 8/15/03............................ 100,125
115,000 6.50% due 8/15/05............................ 120,031
100,000 6.25% due 2/15/07............................ 103,250
U.S. Treasury Bond
225,000 8.125% due 8/15/19........................... 281,672
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $1,580,478)............................................... 1,588,032
-------------
<CAPTION>
SHARES EXPIRATION DATE/EXERCISE PRICE MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
CALL OPTIONS PURCHASED -- 0.10%
German Deutschmark
250,000 6.5%, Jan 98 / 107.71........................ 2,780
90,000 6.5%, Dec 98 / 109.53........................ 1,111
175,000 6.5%, Dec 98 / 105.01........................ 1,187
-------------
TOTAL CALL OPTIONS PURCHASED
(Cost $3,083)................................................... 5,078
-------------
PUT OPTIONS PURCHASED -- 0.10%
Japanese Yen
250,000 Dec 98 / 135................................. 4,950
-------------
TOTAL PUT OPTIONS PURCHASED
(Cost $5,500)................................................... 4,950
-------------
</TABLE>
14
<PAGE>
GLOBAL FIXED
INCOME (CONTINUED)
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.86%
$ 44,000 State Street Bank and Trust Co.,
4.25% due 1/02/98
(Collateralized by $46,177
U.S. Treasury Notes,
5.875% due 1/31/99)
(Cost $44,000)............................... 44,000
-------------
TOTAL INVESTMENTS -- 96.13%
(Cost $4,938,583)........................................... $ 4,901,442
Other assets less liabilities -- 3.87%...................... 197,423
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $10.09 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 505,179 shares outstanding)..................... $ 5,098,865
-------------
-------------
</TABLE>
FOR FEDERAL INCOME TAX PURPOSES, THE IDENTIFIED COST OF INVESTMENTS OWNED AT
DECEMBER 31, 1997, WAS $4,938,583. NET UNREALIZED DEPRECIATION FOR FEDERAL
INCOME TAX PURPOSES WAS $37,141, WHICH IS COMPRISED OF UNREALIZED APPRECIATION
OF $22,932 AND UNREALIZED DEPRECIATION OF $60,073.
*FACE AMOUNT OF FOREIGN BOND IS REFLECTED IN LOCAL CURRENCY WHILE MARKET VALUE
IS REFLECTED IN U.S. DOLLARS.
**SECURITY IS HELD IN CONNECTION WITH OPEN COVERED CALL OPTION CONTRACTS.
MONEY
MARKET
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
GOVERNMENT SPONSORED -- 98.84%
Federal Home Loan Mortgage Corp. Discount Notes
$515,000 5.80% due 1/05/98............................ $ 514,668
300,000 5.52% due 1/27/98............................ 298,804
200,000 5.42% due 7/21/98............................ 193,948
-------------
TOTAL GOVERNMENT SPONSORED
(Cost $1,007,420)........................................... 1,007,420
-------------
REPURCHASE AGREEMENT -- 1.18%
12,000 State Street Bank and Trust Co.,
4.25% due 1/02/98
(Collateralized by $12,569
U.S. Treasury Notes,
10.75% due 2/15/03)
(Cost $12,000)............................... 12,000
-------------
TOTAL INVESTMENTS -- 100.02%
(Cost $1,019,420)........................................... $ 1,019,420
Other assets less liabilities -- (0.02%).................... (151)
-------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $1.00 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 1,019,269 shares outstanding)................... $ 1,019,269
-------------
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
STATEMENTS OF ASSETS
AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP
VALUE GROWTH EQUITY
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (identified
cost $2,563,304, $1,946,054,
$2,015,905, $1,953,297, $1,979,569,
$2,524,753, $2,005,631, $4,938,583,
and $1,019,420, respectively)...... $ 2,485,477 $ 2,086,219 $ 2,108,323
Cash................................. 64,258 71,384 580
Dividends receivable................. 1,283 1,436 2,820
Interest receivable.................. 17 -- 2
Forward foreign currency contracts
receivable......................... -- -- --
Receivables for investments sold..... -- 7,525 24,060
----------------- ----------------- -----------------
Total assets................... 2,551,035 2,166,564 2,135,785
----------------- ----------------- -----------------
LIABILITIES AND NET ASSETS:
Fees payable......................... 2,979 2,475 2,514
Options written...................... -- -- --
Payable for investments purchased.... 103,946 7,588 14,356
----------------- ----------------- -----------------
Total liabilities.............. 106,925 10,063 16,870
----------------- ----------------- -----------------
NET ASSETS............................. $ 2,444,110 $ 2,156,501 $ 2,118,915
----------------- ----------------- -----------------
----------------- ----------------- -----------------
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in
capital)........................... $ 2,520,901 $ 2,014,620 $ 2,019,985
Accumulated undistributed (over
distributed) net investment
income............................. 1,036 917 373
Accumulated undistributed net
realized gain (loss) on sale of
investments and foreign currency
transactions....................... -- 799 6,139
Net unrealized appreciation
(depreciation) in value of
investments and translation of
assets and liabilities in foreign
currency........................... (77,827) 140,165 92,418
----------------- ----------------- -----------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES............................... $ 2,444,110 $ 2,156,501 $ 2,118,915
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Capital shares, $.001 par value
Authorized........................... 500,000,000 500,000,000 500,000,000
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Outstanding.......................... 252,144 201,448 201,972
----------------- ----------------- -----------------
----------------- ----------------- -----------------
NET ASSET VALUE PER SHARE.............. $ 9.69 $ 10.71 $ 10.49
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP GROWTH INTERMEDIATE GLOBAL MONEY
EQUITY & INCOME BALANCED FIXED INCOME FIXED INCOME MARKET
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (identified
cost $2,563,304, $1,946,054,
$2,015,905, $1,953,297, $1,979,569,
$2,524,753, $2,005,631, $4,938,583,
and $1,019,420, respectively)...... $ 1,901,832 $ 2,061,991 $ 2,514,573 $ 2,016,913 $ 4,901,442 $ 1,019,420
Cash................................. 83,196 44,048 22,982 952 5,093 516
Dividends receivable................. 868 3,504 386 -- -- --
Interest receivable.................. -- -- 16,925 22,345 100,124 12
Forward foreign currency contracts
receivable......................... -- -- -- -- 109,957 --
Receivables for investments sold..... -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total assets................... 1,985,896 2,109,543 2,554,866 2,040,210 5,116,616 1,019,948
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES AND NET ASSETS:
Fees payable......................... 2,700 2,464 2,970 2,172 6,776 679
Options written...................... -- -- -- -- 10,975 --
Payable for investments purchased.... 23,450 5,935 34,198 -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities.............. 26,150 8,399 37,168 2,172 17,751 679
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS............................. $ 1,959,746 $ 2,101,144 $ 2,517,698 $ 2,038,038 $ 5,098,865 $ 1,019,269
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in
capital)........................... $ 2,016,120 $ 2,017,638 $ 2,526,689 $ 2,025,600 $ 5,052,217 $ 1,019,269
Accumulated undistributed (over
distributed) net investment
income............................. 748 1,084 1,189 1,173 (13,775) --
Accumulated undistributed net
realized gain (loss) on sale of
investments and foreign currency
transactions....................... (5,657) -- -- (17) (4,943) --
Net unrealized appreciation
(depreciation) in value of
investments and translation of
assets and liabilities in foreign
currency........................... (51,465) 82,422 (10,180) 11,282 65,366 --
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES............................... $ 1,959,746 $ 2,101,144 $ 2,517,698 $ 2,038,038 $ 5,098,865 $ 1,019,269
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Capital shares, $.001 par value
Authorized........................... 500,000,000 500,000,000 500,000,000 500,000,000 500,000,000 500,000,000
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Outstanding.......................... 201,621 201,751 252,689 202,552 505,179 1,019,269
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
NET ASSET VALUE PER SHARE.............. $ 9.72 $ 10.41 $ 9.96 $ 10.06 $ 10.09 $ 1.00
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
17
<PAGE>
STATEMENTS
OF OPERATIONS
From November 13, 1997 (commencement) to December 31, 1997
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP
VALUE GROWTH EQUITY
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends.......................... $ 1,447 $ 2,029 $ 4,663
Interest........................... 8,848 1,363 1,589
----------------- ----------------- -----------------
10,295 3,392 6,252
----------------- ----------------- -----------------
Expenses (Note 2):
Management fees.................... 2,648 2,200 2,234
Custody and accounting fees........ 4,735 4,735 5,441
Other expenses..................... 1,825 1,825 1,825
----------------- ----------------- -----------------
Total expenses before
reimbursement.................. 9,208 8,760 9,500
Less: expense reimbursement...... (6,229) (6,285) (6,986)
----------------- ----------------- -----------------
Net expenses..................... 2,979 2,475 2,514
----------------- ----------------- -----------------
Net investment income............ 7,316 917 3,738
----------------- ----------------- -----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions............ -- 799 6,139
Foreign currency transactions...... -- -- --
----------------- ----------------- -----------------
Net realized gain (loss) from
investment and foreign currency
transactions................... -- 799 6,139
----------------- ----------------- -----------------
Change in unrealized appreciation
(depreciation) during the period
from:
Investments........................ (77,827) 140,165 92,418
Translation of assets and
liabilities in foreign
currencies....................... -- -- --
----------------- ----------------- -----------------
Net unrealized appreciation
(depreciation)................... (77,827) 140,165 92,418
----------------- ----------------- -----------------
Net gain (loss) on investments
and foreign currencies......... (77,827) 140,964 98,557
----------------- ----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS...... $ (70,511) $ 141,881 $ 102,295
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
<TABLE>
<CAPTION>
GLOBAL
SMALL CAP GROWTH INTERMEDIATE FIXED MONEY
EQUITY & INCOME BALANCED FIXED INCOME INCOME MARKET
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends.......................... $ 2,085 $ 5,484 $ 3,663 $ -- $ -- $ --
Interest........................... 1,363 1,082 15,066 16,826 42,612 7,826
--------- --------- --------- ------------ --------- ---------
3,448 6,566 18,729 16,826 42,612 7,826
--------- --------- --------- ------------ --------- ---------
Expenses (Note 2):
Management fees.................... 2,443 2,190 2,640 1,629 5,082 544
Custody and accounting fees........ 4,715 4,715 4,715 4,932 8,557 4,284
Other expenses..................... 1,825 1,825 1,825 1,825 1,825 1,825
--------- --------- --------- ------------ --------- ---------
Total expenses before
reimbursement.................. 8,983 8,730 9,180 8,386 15,464 6,653
Less: expense reimbursement...... (6,283) (6,266) (6,210) (6,214) (8,688) (5,974)
--------- --------- --------- ------------ --------- ---------
Net expenses..................... 2,700 2,464 2,970 2,172 6,776 679
--------- --------- --------- ------------ --------- ---------
Net investment income............ 748 4,102 15,759 14,654 35,836 7,147
--------- --------- --------- ------------ --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions............ (5,657) -- -- (17) (23,092) --
Foreign currency transactions...... -- -- -- -- 8,635 --
--------- --------- --------- ------------ --------- ---------
Net realized gain (loss) from
investment and foreign currency
transactions................... (5,657) -- -- (17) (14,457) --
--------- --------- --------- ------------ --------- ---------
Change in unrealized appreciation
(depreciation) during the period
from:
Investments........................ (51,465) 82,422 (10,180) 11,282 (44,591) --
Translation of assets and
liabilities in foreign
currencies....................... -- -- -- -- 109,957 --
--------- --------- --------- ------------ --------- ---------
Net unrealized appreciation
(depreciation)................... (51,465) 82,422 (10,180) 11,282 65,366 --
--------- --------- --------- ------------ --------- ---------
Net gain (loss) on investments
and foreign currencies......... (57,122) 82,422 (10,180) 11,265 50,909 --
--------- --------- --------- ------------ --------- ---------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS...... $ (56,374) $ 86,524 $ 5,579 $ 25,919 $ 86,745 $ 7,147
--------- --------- --------- ------------ --------- ---------
--------- --------- --------- ------------ --------- ---------
</TABLE>
19
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
From November 13, 1997 (commencement) to December 31, 1997
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP
VALUE GROWTH EQUITY
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income................ $ 7,316 $ 917 $ 3,738
Net realized gain (loss) from
investment and foreign currency
transactions....................... -- 799 6,139
Net unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities in foreign currency
during the period.................. (77,827) 140,165 92,418
----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations....................... (70,511) 141,881 102,295
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income................ (6,280) -- (3,365)
----------- ----------- -----------
Total distributions to
shareholders..................... (6,280) -- (3,365)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold............ 2,503,501 2,003,500 2,005,500
Net asset value of shares issued for
reinvestment of distributions...... 6,280 -- 3,365
----------- ----------- -----------
Net increase from capital share
transactions..................... 2,509,781 2,003,500 2,008,865
----------- ----------- -----------
Total increase in net assets..... 2,432,990 2,145,381 2,107,795
NET ASSETS:
Beginning of period.................. 11,120 11,120 11,120
----------- ----------- -----------
End of period (including
undistributed (over distributed)
net investment income of $1,036,
$917, $373, $748, $1,084, $1,189,
$1,173, ($13,775), and $0,
respectively)...................... $ 2,444,110 $ 2,156,501 $ 2,118,915
----------- ----------- -----------
----------- ----------- -----------
*Shares issued and repurchased:
Number of shares sold................ 250,363 200,336 200,524
Number of shares issued for
reinvestment of distributions...... 669 -- 336
----------- ----------- -----------
Net increase....................... 251,032 200,336 200,860
----------- ----------- -----------
----------- ----------- -----------
**Distributions to shareholders:
Income dividends per share........... $ 0.025 -- $ 0.0167
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP GROWTH INTERMEDIATE GLOBAL MONEY
EQUITY & INCOME BALANCED FIXED INCOME FIXED INCOME MARKET
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income................ $ 748 $ 4,102 $ 15,759 $ 14,654 $ 35,836 $ 7,147
Net realized gain (loss) from
investment and foreign currency
transactions....................... (5,657) -- -- (17) (14,457) --
Net unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities in foreign currency
during the period.................. (51,465) 82,422 (10,180) 11,282 65,366 --
----------- ----------- ----------- ------------- ------------- ------------
Net increase (decrease) in net
assets resulting from
operations....................... (56,374) 86,524 5,579 25,919 86,745 7,147
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income................ -- (3,018) (14,570) (13,481) (40,097) (7,147)
----------- ----------- ----------- ------------- ------------- ------------
Total distributions to
shareholders..................... -- (3,018) (14,570) (13,481) (40,097) (7,147)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold............ 2,005,000 2,003,500 2,500,999 2,001,000 5,001,000 1,001,011
Net asset value of shares issued for
reinvestment of distributions...... -- 3,018 14,570 13,480 40,097 7,147
----------- ----------- ----------- ------------- ------------- ------------
Net increase from capital share
transactions..................... 2,005,000 2,006,518 2,515,569 2,014,480 5,041,097 1,008,158
----------- ----------- ----------- ------------- ------------- ------------
Total increase in net assets..... 1,948,626 2,090,024 2,506,578 2,026,918 5,087,745 1,008,158
NET ASSETS:
Beginning of period.................. 11,120 11,120 11,120 11,120 11,120 11,111
----------- ----------- ----------- ------------- ------------- ------------
End of period (including
undistributed (over distributed)
net investment income of $1,036,
$917, $373, $748, $1,084, $1,189,
$1,173, ($13,775), and $0,
respectively)...................... $ 1,959,746 $ 2,101,144 $ 2,517,698 $ 2,038,038 $ 5,098,865 $ 1,019,269
----------- ----------- ----------- ------------- ------------- ------------
----------- ----------- ----------- ------------- ------------- ------------
*Shares issued and repurchased:
Number of shares sold................ 200,509 200,341 250,101 200,100 500,101 1,001,011
Number of shares issued for
reinvestment of distributions...... -- 298 1,476 1,340 3,966 7,147
----------- ----------- ----------- ------------- ------------- ------------
Net increase....................... 200,509 200,639 251,577 201,440 504,067 1,008,158
----------- ----------- ----------- ------------- ------------- ------------
----------- ----------- ----------- ------------- ------------- ------------
**Distributions to shareholders:
Income dividends per share........... -- $ 0.015 $ 0.058 $ 0.067 $ 0.08 $ 0.007
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL
STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified open-end management investment company of the series type. Shares
of the Fund are distributed to a variable annuity separate account of Business
Men's Assurance Company of America. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements.
A. SECURITY VALUATION -- Securities traded on U.S. or foreign securities
exchanges or included in a national market system are valued at the last quoted
sales price; securities for which there were no sales reported are valued at the
mean between the bid and ask prices; exchange listed options are valued at the
last sales price; bonds and other securities for which market quotations are not
readily available are valued at fair value according to methods selected in good
faith by the board of directors. Securities with maturities of 60 days or less
when acquired or subsequently within 60 days of maturity are valued at amortized
cost, which approximates market value.
Pursuant to Rule 2a-7 of the Investment Company Act of 1940 (as amended),
securities in the Money Market Portfolio are valued at amortized cost, which
approximates market value, in order to maintain a constant net asset value of $1
per share.
B. OPTIONS -- When a call or put option is written, an amount equal to the
premium received is recorded as a liability. The liability is marked-to-market
daily to reflect the current market value of the option written. When a written
option expires, a gain is realized in the amount of the premium originally
received. If a closing purchase contract is entered into, a gain or loss is
realized in the amount of the original premium less the cost of the closing
transaction. If a written call is exercised, a gain or loss is realized from the
sale of the underlying security, and the proceeds from such sale are increased
by the premium originally received. If a written put option is exercised, the
amount of the premium originally received reduces the cost of the security which
is purchased upon exercise of the option.
Purchased options are recorded as investments. If a purchased option expires, a
loss is realized in the amount of the cost of the option. If a closing
transaction is entered into, a gain or loss is realized, to the extent that the
proceeds from the sale are greater or less than the cost of the option. If a put
option is exercised, a gain or loss is realized from the sale of the underlying
security by adjusting the proceeds from such sale by the amount of the premium
originally paid. If a call option is exercised, the cost of the security
purchased upon exercise is increased by the premium originally paid.
C. FOREIGN CURRENCY TRANSLATION -- All assets and liabilities expressed in
foreign currencies are converted into U.S. dollars based on current exchange
rates at the end of the period. The effects of changes in foreign currency
exchange rates on investments in securities are included in net realized and
unrealized gain or loss of investments in the Statement of Operations.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- The Global Fixed Income Portfolio
entered into forward foreign currency contracts as a way of managing foreign
exchange rate risk. The portfolio may enter into these contracts to fix the U.S.
dollar value of a security that it has agreed to buy or sell for the period
between the date the trade was entered into and the date the security is
delivered and paid for. These contracts may also be used to hedge the U.S.
dollar value of securities owned which are denominated in foreign currencies.
Foreign forward currency contracts are valued each day at the close of the New
York Stock Exchange at the forward rate, and are marked-to-market daily. The
change in market value is recorded as an unrealized gain or loss. When the
contract is closed, a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and closed is recorded.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, there could be exposure to risks (limited
to the amount of unrealized gains) if the counterparties to the contracts are
unable to meet the terms of their contracts.
E. EXPENSE LIMITATIONS -- Investors Mark Advisor, LLC, (the Advisor), has
voluntarily agreed to pay certain operating expenses in an amount that limits
the total operating expenses of the portfolios to an annual rate of .50% of
average daily net assets for the Money Market Portfolio; .80% of average daily
net assets for the Intermediate Fixed Income Portfolio; .90% of average daily
net assets for Mid Cap Equity Portfolio, Large Cap Value Portfolio, Large Cap
Growth Portfolio, Growth & Income Portfolio and Balanced Portfolio; 1.00% of
average daily net assets for the Global Fixed Income Portfolio and 1.05% of
average daily net assets for the Small Cap Equity Portfolio. This expense
limitation may be modified or terminated at the discretion of the Advisor at any
time without notice to shareholders after the expiration of 12 months from the
date shares of the Fund were first offered to the public.
22
<PAGE>
F. FEDERAL INCOME TAXES -- The Fund complied with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
therefore, no provision for federal or state tax is required.
G. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the securities are purchased or sold. Dividend income
and distributions to shareholders are recorded on the ex-dividend date. Realized
gains and losses from investment transactions and unrealized appreciation and
depreciation of investments are reported on the identified cost basis.
H. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from such
estimates.
2. ADVISORY FEES
Advisory fees were paid to the Advisor based on an annual percentage of average
daily net assets. Listed below are advisory fees payable as a percentage of
average net assets.
<TABLE>
<CAPTION>
PORTFOLIO ADVISORY FEE
<S> <C>
- -----------------------------------------------------
Large Cap Value........................ 0.80%
Large Cap Growth....................... 0.80%
Mid Cap Equity......................... 0.80%
Small Cap Equity....................... 0.95%
Growth & Income........................ 0.80%
Balanced............................... 0.80%
Intermediate Fixed Income.............. 0.60%
Global Fixed Income.................... 0.75%
Money Market........................... 0.40%
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the period ended December 31, 1997, (excluding
maturities of short-term commercial notes and repurchase agreements) are as
follows:
<TABLE>
<CAPTION>
PROCEEDS
PORTFOLIO PURCHASES FROM SALES
<S> <C> <C>
- -------------------------------------------------------
Large Cap Value........................ $ 2,453,304 $ --
Large Cap Growth....................... 1,952,780 7,525
Mid Cap Equity......................... 2,260,050 269,284
Small Cap Equity....................... 2,113,797 154,844
Growth & Income........................ 1,979,569 --
Balanced............................... 1,454,225 --
Intermediate Fixed Income.............. 2,537,926 553,555
Global Fixed Income.................... 5,980,769 1,094,042
</TABLE>
4. OPTIONS WRITTEN
The following call options written were outstanding for the Global Fixed Income
Portfolio as of December 31, 1997:
<TABLE>
<CAPTION>
ISSUER (CURRENCY)/EXPIRATION DATE/ NUMBER OF
EXERCISE PRICE CONTRACTS VALUE
<S> <C> <C>
- -------------------------------------------------------
Italian Lira
BTPS/Jan 98/113.12..................... 2,350,000 $ 5,513
Japanese Yen/Dec 98/115.00............. 2,500 5,462
-------
Total (premiums received, $5,946)...... $10,975
-------
-------
</TABLE>
There were no call options closed, expired or exercised during the period ended
December 31, 1997.
5. FORWARD FOREIGN CURRENCY CONTRACTS
Following is a summary of forward foreign currency contracts that were
outstanding at December 31, 1997, for the Global Fixed Income Portfolio:
<TABLE>
<CAPTION>
FOREIGN AMOUNT TO BE NET UNREALIZED
SETTLEMENT CURRENCY U.S. $ VALUE RECEIVED IN APPRECIATION
DATE TO BE DELIVERED AS OF 12/31/97 U.S. $ (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
German Deutschmark..................... 1/9/98 733,137 $ 407,661 $ 424,761 $ 17,100
Australian Dollar...................... 1/27/98 459,758 299,486 319,591 20,105
New Zealand Dollar..................... 1/28/98 427,750 247,950 266,916 18,966
Japanese Yen........................... 2/5/98 31,831,177 244,648 254,385 9,737
Swedish Krona.......................... 2/12/98 1,033,680 130,776 137,622 6,846
Swedish Krona.......................... 2/12/98 518,343 65,578 68,746 3,168
Italian Lira........................... 3/11/98 252,983,375 143,561 149,099 5,538
Danish Krone........................... 5/6/98 1,140,521 167,549 174,418 6,869
British Pound.......................... 5/14/98 464,252 759,005 779,943 20,938
German Deutschmark..................... 5/29/98 93,000 52,116 53,378 1,262
Hong Kong Dollar....................... 12/29/98 497,817 60,991 60,600 (391)
Hong Kong Dollar....................... 12/30/98 328,004 40,181 40,000 (181)
--------------- ------------- ---------------
$ 2,619,502 $ 2,729,459 $ 109,957
--------------- ------------- ---------------
--------------- ------------- ---------------
</TABLE>
23
<PAGE>
FINANCIAL
HIGHLIGHTS
CONDENSED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD
FROM NOVEMBER 13, 1997 (COMMENCEMENT) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP
VALUE GROWTH EQUITY
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
Net asset value, beginning of period... $ 10.00 $ 10.00 $ 10.00
---------- ---------- ----------
Income from investment operations:
Net investment income.............. 0.0291 0.0046 0.0185
Net gains or (losses) on securities
(both realized and unrealized)... (0.3141) 0.7054 0.4882
---------- ---------- ----------
Total from investment operations..... (0.2850) 0.7100 0.5067
---------- ---------- ----------
Less distributions:
Dividends from net investment
income........................... (0.0250) -- (0.0167)
---------- ---------- ----------
Total distributions.................. (0.0250) -- (0.0167)
---------- ---------- ----------
Net asset value, end of period......... $ 9.69 $ 10.71 $ 10.49
---------- ---------- ----------
---------- ---------- ----------
Total return........................... (2.86%) 7.10% 5.07%
Ratios/Supplemental Data
Net assets, end of period (in
millions)............................ $ 2.4 $ 2.2 $ 2.1
Ratio of expenses to average net
assets............................... 0.90% 0.90% 0.90%
Ratio of net investment income (loss)
to average net assets................ 2.21% 0.33% 1.34%
Ratio of expenses to average net assets
before voluntary expense
reimbursement........................ 2.78% 3.19% 3.40%
Ratio of net investment income to
average net assets before voluntary
expense reimbursement................ 0.33% (1.96%) (1.16%)
Portfolio turnover rate................ -- -- 13.11%
Average commission paid per equity
share traded......................... $ 0.0576 $ 0.1115 $ 0.0219
</TABLE>
PERFORMANCE RATIOS ARE ANNUALIZED, EXCEPT TOTAL RETURN.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE GLOBAL
SMALL CAP GROWTH FIXED FIXED MONEY
EQUITY & INCOME BALANCED INCOME INCOME MARKET
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income.............. 0.0037 0.0204 0.0627 0.0728 0.0887 0.0071
Net gains or (losses) on securities
(both realized and unrealized)... (0.2837) 0.4046 (0.0447) 0.0542 0.0813 --
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations..... (0.2800) 0.4250 0.0180 0.1270 0.1700 0.0071
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment
income........................... -- (0.0150) (0.0580) (0.0670) (0.0800) (0.0071)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions.................. -- (0.0150) (0.0580) (0.0670) (0.0800) (0.0071)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period......... $ 9.72 $ 10.41 $ 9.96 $ 10.06 $ 10.09 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total return........................... (2.80%) 4.25% 0.18% 1.27% 1.70% 0.71%
Ratios/Supplemental Data
Net assets, end of period (in
millions)............................ $ 2.0 $ 2.1 $ 2.5 $ 2.0 $ 5.1 $ 1.0
Ratio of expenses to average net
assets............................... 1.05% 0.90% 0.90% 0.80% 1.00% 0.50%
Ratio of net investment income (loss)
to average net assets................ 0.29% 1.50% 4.78% 5.40% 5.29% 5.26%
Ratio of expenses to average net assets
before voluntary expense
reimbursement........................ 3.49% 3.19% 2.78% 3.09% 2.28% 4.90%
Ratio of net investment income to
average net assets before voluntary
expense reimbursement................ (2.15%) (0.79%) 2.90% 3.11% 4.01% 0.86%
Portfolio turnover rate................ 8.35% -- -- 39.21% 25.39% --
Average commission paid per equity
share traded......................... $ 0.0842 $ 0.0694 $ 0.0502 n/a n/a n/a
</TABLE>
25
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF INVESTORS MARK SERIES FUND, INC.
We have audited the accompanying statements of assets and liabilities,
including the statements of net assets, of Investors Mark Series Fund, Inc. (the
Fund) (comprised of the Large Cap Value, Large Cap Growth, Mid Cap Equity, Small
Cap Equity, Growth & Income, Balanced, Intermediate Fixed Income, Global Fixed
Income and Money Market portfolios) as of December 31, 1997, the related
statements of operations and changes in net assets, and financial highlights for
the period from November 13, 1997 (commencement) to December 31, 1997. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1997, by correspondence with
the custodian. As to securities relating to uncompleted transactions, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios of the Fund at December 31, 1997, the results of their
operations, the changes in their net assets, and the financial highlights for
the period from November 13, 1997 (commencement) to December 31, 1997, in
conformity with generally accepted accounting principles.
[SIGNATURE]
Kansas City, Missouri
February 13, 1998
26
<PAGE>
THIS REPORT HAS BEEN PREPARED FOR THE INFORMATION OF THE SHAREHOLDERS OF
INVESTORS MARK SERIES FUND, INC. AND IS NOT TO BE CONSTRUED AS AN OFFERING OF
THE SHARES OF THE FUND. SHARES OF THE FUND ARE OFFERED ONLY BY THE
PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED FROM BUSINESS MEN'S
ASSURANCE COMPANY OF AMERICA.
27
