<PAGE>
MESSAGE
FROM THE CHAIRMAN
A
gainst the backdrop of solid economic growth, remarkably low inflation
numbers and a very favorable interest rate environment, the equity markets
turned in another impressive performance for the first six months of 1998.
Large-capitalization stocks lead the way with the Standard & Poor's 500 Stock
Index gaining 17.7% for the first half of the year. What makes this performance
all the more remarkable is the fact that it is coming on the heels of three
consecutive years of superior performance. Small-capitalization stocks
significantly underperformed larger-cap stocks for the first six months of 1998,
with the Russell 2000 Index up only 4.9%. International equities, as measured by
the Morgan Stanley EAFE (Europe, Australia, and Far East) Index, performed well,
rising 16.1% over this year's first half.
The current economic expansion is well into its seventh year, and while no
recession is in sight, economic growth may moderate. Interest rates have
benefited from the low inflation numbers that continue to be posted, but there
is concern in some quarters that with labor markets tightening on a national
basis, unit labor costs will begin moving up, putting upward pressure on prices.
Moreover, the "Asian Flu" is having some negative impact on corporate earnings.
All of these factors reinforce the uncertainty of the future and the wisdom of
having both a well-diversified portfolio and a realistic set of expectations
about how that portfolio will perform over the next several years.
The following pages include comments from our money managers on their
portfolios. We believe the Investors Mark Series Fund has an outstanding stable
of seasoned investment professionals who can provide consistently solid results
throughout the inevitable economic and market cycles. As always, we welcome your
questions and comments.
Sincerely,
[/S/ ROBERT N. SAWYER]
Robert N. Sawyer
Chairman
PORTFOLIO MANAGEMENT REVIEW
LARGE CAP VALUE
Unfortunately for value-oriented investors, the growth style has continued to
dominate the market, rewarding the largest growth companies with even higher P/E
multiples. Many of these are consumer staple growth companies such as Coca-Cola,
Gillette and Procter & Gamble as well as Eli Lilly, Pfizer, Warner Lambert and
other pharmaceuticals, that trade at multiples of 33 to 53 times 1998 estimated
earnings, or technology growth companies such as Microsoft, Cisco and Dell which
trade at multiples of 62, 53 and 47 times estimated 1998 earnings, respectively.
Twenty-three of the 500 stocks in the Standard & Poor's Index sell at over 50
times 1998 earnings.
The biggest fifty companies, which are 10% of the total number of companies,
now account for over 51% of the weight in the S&P 500. This helps to explain why
managers have continued to have a hard time outperforming the index. The fifty
companies in the S&P 500 with the highest market capitalizations had average
total returns of 28.5% for the six months, while the other 450 companies had
average returns of only 10.5%. Among the biggest 50, those that yielded less
than the S&P 500 had average returns of 38.0%. This was more than double the
18.3% average return of those that yielded more than the index. A greater
disparity existed between the lower and higher yielders among the smallest 450
companies, where the lower yielders returned 16.0% versus the higher yielders'
5.3%. Perhaps the greatest irony in all of this analysis is that a relatively
paltry 5.3% return over the last six months is good in the context of normal
equity returns over long periods of time.
Since we don't concentrate in the largest companies (we own six of the largest
fifty), and we tend to own higher yielding stocks, large-capitalization value
has not been where the fairest winds have been blowing. However, like the
weather, market fashions change. The only broad sectors in the Portfolio to beat
the market during the first half were technology, healthcare and consumer
cyclicals. Although we were underweight relative to the S&P 500 in the first
two, our technology holdings outperformed the
1
<PAGE>
S&P sector. In consumer cyclicals, where we were more heavily weighted than the
index, our retail shares did well, but our auto related, publishing and footwear
stocks lagged. Our underweights in the underperforming energy, transportation
and utilities sectors helped, but not enough to offset weakness in our forest
products and aerospace holdings that were adversely impacted by the Asian
malaise.
The Portfolio continues to have attractive valuation characteristics. The
average price/earnings ratio based on estimated earnings for the next four
quarters for the companies in the Portfolio is only 17.1 times, compared with
25.3 times for the S&P 500 companies. The average price to book value of the
Portfolio's companies is 2.4, compared to 4.3 for the S&P 500 companies, and the
current gross yield of 1.9% is over 45% higher than the S&P 500 yield of 1.3%.
These characteristics should work to the advantage of the Portfolio when the
market's single-minded preference for highly priced growth shares wanes in favor
of the historically less volatile and less risky value style.
TOP HOLDINGS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
% of Net Assets
---------------
<S> <C>
Xerox.................................. 3.0
Chase Manhattan........................ 3.0
American Express....................... 2.9
Harcourt General....................... 2.8
Sears Roebuck & Co..................... 2.8
</TABLE>
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Since
Ended Commencement
6/30/98 11/13/97
---------- ------------
<S> <C> <C>
Large Cap Value........................ 13.31% 9.87%
</TABLE>
DAVID L. BABSON & CO. INC.
LARGE CAP GROWTH
For the past six months, the U.S. economy has been strong amid continued
global effects from the Asian crisis. Large-cap stocks perform well in a strong
economy. They also are considered the equity investment of choice when markets
are volatile because of their historical stability and liquidity. Combined,
these two factors helped boost the performance of the Portfolio. For the six
month period ended June 30, 1998, the Portfolio posted a total return (price
change and reinvested distributions) of 18.11%, beating both the LIPPER growth
fund peer group (1,012 funds) return of 15.11% and the unmanaged Standard &
Poor's 500 Index return of 17.71%.
Several sectors contributed to the positive return on the Portfolio. The U.S.
consumer has benefited from the extremely favorable economic conditions;
therefore, retail companies have benefited from strong consumer spending. These
companies included the Portfolio's holdings in global consumer franchises such
as Gillette, Procter & Gamble and Disney. Other top performers in the retail
sector were Home Depot and Kohl's. Home Depot's profits were driven by record
sales of new and existing homes. Kohl's, a Midwestern value-priced retailer, is
benefiting from its East Coast expansion.
Additionally, our healthcare holdings Merck, Medtronic and Pfizer continued to
perform well due to their strong product lines. Rounding out top performers were
telecommunications equipment companies Lucent, Cisco Systems and Ericsson that
continue to benefit from the dramatic worldwide need to upgrade
telecommunications infrastructures to accommodate voice, video and data
services.
The first quarter is usually tough for certain technology companies, but this
year's seasonal slowness was exacerbated by the turmoil in Asia. Some of the
Portfolio's holdings suffered due to earnings concerns as well, such as Motorola
and Intel. However, our long-term outlook for the technology sector continues to
be favorable because we believe companies will continue to purchase new
technology in order to compete globally. We invest in technology companies that
we think will benefit from this trend; for example, we are owners of Microsoft,
Cisco
2
<PAGE>
Systems and Tellabs. These companies have excellent product lines and are less
susceptible to economic downturns because of their market dominance. Another
example is Intel. We own this microprocessor manufacturer because, like
Coca-Cola and Gillette, it is the dominant company in its industry around the
globe.
Oil services was another disappointing sector as companies suffered from
decreasing oil prices. Holdings Schlumberger and Falcon Drilling underperformed.
However, our long-term outlook for this area is favorable so we will continue to
hold these companies. The positions we sold included McDonald's after it
experienced continued decreases in same-store sales growth. We also sold Wells
Fargo, Baker-Hughes and Thermal-Electron due to weaker than expected earnings.
Our long-term outlook for large-cap companies remains positive despite the
possibility that growth for some of these companies may decelerate sometime in
the future due to the Asian crisis. Therefore, we will focus on companies that
have proved their ability to deliver consistent earnings despite the overall
strength or weakness of the general market. We believe that the U.S. economy
will slow in the second half of 1998. If that does occur, then growth stocks
will continue to outperform as investors pay a premium for the consistent
earnings growth that they can provide.
TOP HOLDINGS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
% of Net Assets
---------------
<S> <C>
Cisco Systems.......................... 4.3
Lucent Technologies.................... 3.9
American Express....................... 3.6
Travelers.............................. 3.6
Medtronic.............................. 3.5
</TABLE>
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Since
Ended Commencement
6/30/98 11/13/97
---------- ------------
<S> <C> <C>
Large Cap Growth....................... 18.11% 26.50%
</TABLE>
STEIN ROE & FARNHAM INC.
MID CAP EQUITY
The outperformance of the Standard & Poor's 500 Index compared to the mid cap
index during the second quarter of 1998 was the widest we have experienced since
the fourth quarter of 1992. The pattern of the last several years of
large-capitalization stocks outperforming smaller-capitalization stocks was
particularly pronounced with the unmanaged S&P 500 increasing in value by 3.3%
while the unmanaged S&P Midcap and unmanaged Russell 2000 indices were down
- -2.1% and -4.7%, respectively for the three month period ended June 30, 1998.
More specifically, the short-term performance of the Portfolio was disappointing
due to three interrelated factors. First, stock selection during the period was
subpar. Second, the market's reaction to valuation factors was perverse in
several key sectors. Finally, returns in the period were highly concentrated
among a relatively small group of large companies.
Our proprietary equity multifactor ranking system performed only modestly well
in the first half of 1998, with the top ranked stocks producing returns only
slightly better than our investable universe. Of the factors used in our ranking
system, the earnings related factors were the strongest discriminators. Other
factors, primarily the price/earnings ratio, did not demonstrate their
historical efficiency. The strongest contributing sectors for the quarter were
basic industries, early cyclicals and growth cyclicals. Poor stock selection
results were seen in technology, energy and consumer staple.
The second quarter was characterized by continued focus on the turmoil in
Asia, with much of the attention focused on Japan. The problems in Asia have
also begun to impact the profitability of corporate America, even beyond the
technology industry, as companies such as 3M preannounced disappointing
earnings. Despite the weakness in Asia, however, the U.S. economy continues to
grow at a moderate rate. For many U.S. companies, the strength in Europe has
more than offset the weakness in Asia.
3
<PAGE>
We firmly believe that our underlying focus on identifying stocks with
reasonable valuations and above average earnings and growth expectations will
enable us to continue to outperform over the long term. We are well positioned
for the period when stocks outside of the few largest-capitalization companies
again excel. While the profitability of many U.S. companies is under pressure,
our Portfolio companies continue to report both positive earnings gains and
earnings that are on average well ahead of Wall Street expectations. We continue
to maintain low levels of cash in the Portfolio and believe that the strong
relative gains seen in the S&P 500 have created a real valuation opportunity. We
remain confident that the consistent pursuit of our investment disciplines will
continue to lead to strong, long-term performance on both an absolute and a
relative basis.
TOP HOLDINGS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
% of Net Assets
---------------
<S> <C>
BellSouth.............................. 2.5
Schering Plough........................ 2.3
Ameritech.............................. 2.2
Gannett................................ 2.1
Safeway................................ 2.0
</TABLE>
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Since
Ended Commencement
6/30/98 11/13/97
---------- ------------
<S> <C> <C>
Mid Cap Equity......................... 10.11% 15.69%
</TABLE>
STANDISH, AYER & WOOD, INC.
SMALL CAP EQUITY
Small-cap stocks continued to lag their larger-cap counterparts despite
relatively better earnings growth in the small stock sector. This has been the
case ever since October 1997 when the currency crisis in Asia caused many
investors to flee to the relative safety of large-cap stocks. For the six month
period ended June 30,
1998, the Portfolio returned -6.69%, underperforming the unmanaged Russell 2000
Index and its LIPPER small-cap peer group (623 funds) which returned 4.93% and
6.01%, respectively. For the same period, the Russell 2000, the proxy for the
small-cap market, trailed the large-cap unmanaged Standard & Poor's 500 Index by
12.78 percentage points.
Prices on small-cap stocks have suffered from indifference, with the second
quarter of 1998 the most difficult quarter for these stocks this decade.
Indexers, mutual funds, and large foreign institutions have all favored
large-cap stocks. If past phases of market activity are any indication of what's
to come, however, investors should again favor the excellent growth potential
and reasonable valuations of the small-cap sector. In the meantime, we are using
this opportunity to purchase very attractive stocks at inexpensive prices.
Two sectors that underperformed for the Portfolio were energy and technology.
Our oil and gas exploration and production holdings, including Barrett Resources
and Meridian Resource, suffered from the weakened outlook for oil and gas
prices. During the first quarter, we reduced our exposure to the energy sector
from 6.4% to 2.7% of total net assets, an underweighted position relative to the
Russell 2000, because, in our opinion, energy prices still look uncertain going
forward. Technology holdings that impacted the Portfolio's performance included
AVX Corp., Kent Electronics, Artesyn Technologies and Andrew Corp. Earnings
growth expectations were reduced on these companies as demand from Asia slowed.
4
<PAGE>
Contributing positively to the Portfolio was LaSalle Partners, rising 24.7%
over the past six months reflecting higher commercial real estate activity.
Xomed Surgical Products increased 24.2% as its market share for less-invasive
surgical products rose. Also, Metamor Worldwide, benefiting from the trend
toward outsourcing of information technology staff and consulting services,
increased 36.7% over the last six months.
Small-cap stocks are as cheap relative to larger-cap stocks as they've been at
any time during the past twenty years. The earnings growth outlook for small
stocks remains favorable. This suggests to us that this sector has the potential
for long-term outperformance with moderate shorter-term risk. We continue to add
to our positions in companies that emphasize experienced management, financial
strength and evidence of a sustainable competitive advantage.
TOP HOLDINGS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
% of Net Assets
---------------
<S> <C>
Metro Networks......................... 5.9
CB Richard Ellis Services.............. 5.3
Xomed Surgical Products................ 4.6
Meadowbrook Insurance.................. 4.5
Sola International..................... 4.1
</TABLE>
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Since
Ended Commencement
6/30/98 11/13/97
---------- ------------
<S> <C> <C>
Small Cap Equity....................... -6.69% -9.30%
</TABLE>
STEIN ROE & FARNHAM INC.
GROWTH & INCOME
U.S. financial markets became unnerved during the latter part of the second
quarter by mounting concerns over the impact of the Asian crisis and its fallout
on corporate earnings. The resulting preference for a select list of large
capitalization growth stocks did not reward the Portfolio's strategy of seeking
undervalued stocks with good long-term potential and moderate risk. The
disparity between returns of large-cap growth stocks and the broader market
continued to widen with the unmanaged Standard & Poor's 500 Growth Index
returning 5.9% for the period versus 0.5% for the unmanaged S&P 500 Value Index
and 3.3% for the unmanaged S&P 500 Index for the three month period ended June
30, 1998.
Additionally, the Portfolio was adversely impacted by its food and household
products holdings as some near-term earnings disappointments prompted investors
to reevaluate these stocks. Similarly, the Portfolio's underweighted position in
healthcare stocks, where earnings are strong but valuations rich, contributed to
the lackluster total return (price change and reinvested distributions) of
- -0.52% for the quarter ended June 30, 1998.
Consequently, we made some modest adjustments to take advantage of a
continuation of favorable economic conditions in the U.S. as well as the
likelihood of more turmoil in Asia. We reduced the Portfolio's food and
household product holdings in addition to its commodity exposure. Also, we moved
some of our utility exposure to more dynamic, domestically oriented names.
Specifically, we added to our AT&T and USA Waste Services holdings, two
companies with very attractive valuations that we believe are strongly
positioned in rapidly consolidating industries.
5
<PAGE>
The economy is expected to slow from the torrid pace of the last six months,
especially in the consumer and export sectors. We believe this slowdown will
cause the more moderate earnings growth seen in recent quarters to extend into
the second half of the year. As a result, we anticipate the stock market will
continue to be driven by the outlook for inflation and the prospect for
continued favorable interest rates. We believe our value-oriented Portfolio will
prove most effective over the longer term. The flight-to-quality issue, which is
manifest in the largest-capitalization stocks outperforming everything in sight
by a wide margin, is reminiscent of times when the outlook on the market was
uncertain. In the past when these extreme conditions existed, opportunity was
created. We are thus positioning the Portfolio to capitalize on these
opportunities when these conditions abate.
TOP HOLDINGS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
% of Net Assets
---------------
<S> <C>
Morgan Stanley/Dean Witter............. 2.4
Emerson Electric....................... 2.3
IBM.................................... 2.2
AT&T................................... 2.2
Chubb.................................. 2.1
</TABLE>
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Since
Ended Commencement
6/30/98 11/13/97
---------- ------------
<S> <C> <C>
Growth & Income........................ 9.51% 14.17%
</TABLE>
LORD, ABBETT & CO.
BALANCED
The Balanced Portfolio generated total returns (price change and reinvested
distributions) of -2.83% and 3.61% for the three and six month periods ended
June 30, 1998. The average balanced fund (417 funds/3 mo. and 409 funds/6 mo.),
as measured by LIPPER ANALYTICAL SERVICES, registered returns of 1.15% and 8.95%
for the same periods. The Portfolio carried little cash, but had a relatively
low allocation to common stocks. Allocation to common stocks at June 30 was 37%
versus well over 50% for the average balanced fund. The Portfolio's
underperformance was due to a combination of this low exposure to stocks and a
sell-off in the Portfolio's convertible holdings, which are mostly smaller
companies. Unlike large companies, small company stocks and convertible
securities performed poorly during the period.
Particularly hard hit during the period were technology convertibles, which
make up some 20% of assets. Our investment in semiconductor, disk drive and
computer capital equipment convertibles have proven to be early, but the yields
at purchase were attractive and we are being paid handsomely to wait for the
next industry upturn. When the upturn begins, the Portfolio should benefit
nicely.
The Portfolio's asset allocation is driven by a philosophy that emphasizes
CONSISTENT performance and a low level of price volatility. Its normal
combination of roughly 1/3 blue chip stocks, 1/3 high-yield corporate bonds and
1/3 high-yield convertible securities produces a high level of current income
and positions the Portfolio for reasonable capital appreciation during a rising
stock market. This general allocation also provides flexibility to add to stocks
during substantial market corrections. Portfolio allocation at June 30 was 37.0%
stocks, 47.4% convertible securities, 13.4% corporate bonds and 2.2% cash. The
mix between corporate bonds and convertible securities is a function of relative
yields and availability. Just recently, high-yielding corporate bonds have
become more attractive and we would expect to increase their exposure.
6
<PAGE>
Now let us talk about the financial markets in more detail. Thus far, the U.S.
has escaped a serious problem by leading the efforts to contain the Asian
financial crisis. Had the collapse of currencies and flight of capital earlier
in the year spread to China, South America, Latin America and Japan, U.S.
markets would likely have fared much worse. Those Asian countries most affected
by the crisis are now experiencing economic recessions or depressions. Without
containment, much of the world might now be headed for recession. Our concern is
there still remains the risk that the crisis could repeat itself with both Japan
and China as central players. Currency devaluation remains a key concern for
both countries as they face intense competition in export markets. We are
monitoring the situation closely and believe the risk warrants a continuing
conservative allocation to equities.
TOP HOLDINGS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
% of Net Assets
---------------
<S> <C>
Bethlehem Steel $3.50 convertible
preferred............................ 4.9
United Refining 10.75%-07 corporate
bond................................. 4.5
Integrated Device Technologies 5.50%-02
convertible bond..................... 3.8
Elcor common stock..................... 3.7
VLSI Technology 8.25%-05 convertible
bond................................. 3.6
</TABLE>
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Since
Ended Commencement
6/30/98 11/13/97
---------- ------------
<S> <C> <C>
Balanced............................... 3.61% 3.81%
</TABLE>
KORNITZER CAPITAL MANAGEMENT, INC.
INTERMEDIATE FIXED INCOME
The Portfolio posted a total return (price change and reinvested
distributions) of 3.68% versus 3.92% for the Lehman Brothers Aggregate for the
six month period ended June 30, 1998. Returns were aided by holdings in
mortgages and lower-rated corporate bonds as well as by the Portfolio's
duration. The intermediate maturity position detracted from performance as this
part of the yield curve underperformed slightly.
Our duration, or interest rate sensitivity, is slightly longer than that of
the benchmark, which benefited the Portfolio to a small degree as interest rates
declined in the second quarter. We will continue this policy over the near term
as we see no reason for interest rates to rise significantly in the coming
months. Holdings are concentrated in three sectors: U.S. Treasuries, mortgages,
and corporate bonds. It is important to note that the Treasury allocation
declined substantially while we increased our corporate and mortgage holdings.
Although Treasuries are safe, liquid and secure, they are also the lowest
returning vehicle in the bond market. As such, we seek to maximize the return
for our investors by concentrating assets in higher yielding securities-except
during flight-to-quality periods. Now that much of the international crisis is
behind us and the economy continues to moderate, we feel we can safely lower our
allocation to Treasuries.
The key factors to our investment position are our expectation of value at the
sector selection and individual issue levels as opposed to value coming from
duration or yield curve positioning. Thus, with our conclusion that interest
rates will now be in a channel from 5 1/2 to 6% as opposed to our earlier
projection of 5 3/4 to 6 1/4%, value will come from the upfront advantage in the
yield spread of a security over comparable duration U.S. Treasuries.
7
<PAGE>
The next six months should reflect an economy growing slower than the first
quarter of 1998, but not moving into recession. We believe the brunt of lower
inventory growth and further, but diminishing, fallout from the Asian crisis
will have been borne by the second quarter. Prepayment and refinancing fears
should abate as there is no indication that the Federal Reserve will change
interest rates over the near term. As such, we have bolstered our position in
mortgages. Non-Treasuries should be the key to strong returns from bonds on both
an absolute and real basis, especially lower-quality corporates in the
industrial and finance categories. We will continue to keep a lid on bank bonds
due to concern over margin pressures. Relative returns, as compared to
alternative asset classes such as stocks, should be better, but they remain
extremely difficult to predict accurately.
TOP HOLDINGS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
% of Net Assets
---------------
<S> <C>
US T-note 5.875% 11/15/99.............. 13.6
US T-bond 8.125% 8/15/19............... 8.9
GNMA 7% 7/15/28........................ 6.8
FHLMC Gold 6% 4/01/11.................. 6.1
Simon Debartolo Grp 7.125% 6/24/05..... 3.4
</TABLE>
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Since
Ended Commencement
6/30/98 11/13/97
---------- ------------
<S> <C> <C>
Intermediate Fixed Income.............. 3.68% 5.00%
</TABLE>
STANDISH, AYER & WOOD, INC.
GLOBAL FIXED INCOME
Despite record low yields, the European and Japanese bond markets produced the
best returns during the first half of the year. The currency crisis in Asia,
recession and banking problems in Japan, and weakness in other emerging markets
caused global investors to favor the highest quality securities, government
bonds, resulting in wider spreads to many corporate bonds. In this environment,
the Portfolio produced a total return (price change and reinvested
distributions) of 3.17% during the six month period ended June 30, 1998,
underperforming the 5.04% return for the J.P. Morgan Global Hedged Bond Index.
Country selection had a negative impact on the performance of the Portfolio.
Overweight positions in the U.S. and the U.K. markets, a small weighting in
South Africa and an underweight position in Japan lead to the underperformance
for the period. On the other hand, our overweight positions in Sweden and
Germany contributed positively to results. Credit market spreads widened as the
uncertainty in Asia and other high-risk markets sparked a flight to quality.
This reduced the yield advantage that the Portfolio usually gains from its
corporate bond positions.
While final demand remains extremely robust in the U.S., growth is expected to
moderate later this year as excess inventories unwind. Subdued inflationary
pressures, an expected slowdown and the uncertainty emanating from Asia will
likely keep Fed policy on hold in the coming months. Of course, a sudden
reversal in any of these conditions would warrant a different response from the
Fed.
The European economic recovery is well underway. The recent improvement in
growth is finally starting to feed through to the labor markets. However, enough
slack exists in the economy to prevent an upsurge in inflation. This favorable
inflation backdrop suggests interest rates in Europe should remain low in the
coming months.
8
<PAGE>
Until recently, the Japanese government maintained the proposed stimulus
measures would sufficiently lift the economy, but the recent downturn has cast
doubt over the sustainability of a rebound. Recent intervention tactics have
given the current government a window of opportunity to address its problems.
The government must speed up banking sector reforms, implement large scale
permanent tax cuts and actively encourage deregulation.
The Portfolio maintains overweight positions in the U.S. and non-core European
bond markets. We continue to favor the markets not participating in monetary
union at its inception in January 1999, such as the U.K. and Sweden, as
attractive yield spreads still exist relative to EMU participants.
Underweighting core European bond markets continues as growth appears to be
gaining momentum and convergence opportunities are limited. We likewise plan to
hold our underweight position in Japan as the likelihood for significant capital
appreciation is limited with nominal yields at historic lows. The position in
South Africa has been reduced to less than 0.5%.
Our approach of adding value through the non-dollar corporate bond markets
where the opportunities are the greatest has not changed. Going forward, our
expertise in the credit markets should be a significant advantage over other
global market participants. We continue to favor hedging currency exposures into
the U.S. dollar and maintaining a modest short position in the Japanese yen.
TOP HOLDINGS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
% of Net Assets
---------------
<S> <C>
US T-note 6.25% 10/31/01............... 7.0
US T-note 5.625% 11/98................. 5.9
Sweden Kingdom 1035 6% 2/9/05.......... 4.0
Deutschland Rep 6% 7/4/07.............. 3.8
Denmark Govt. 7% 12/15/04.............. 3.4
</TABLE>
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Since
Ended Commencement
6/30/98 11/13/97
---------- ------------
<S> <C> <C>
Global Fixed Income.................... 3.17% 4.92%
</TABLE>
STANDISH INTERNATIONAL MANAGEMENT, L.P.
MONEY MARKET
Short-term interest rates declined sharply in January, only to reverse course
in February as the Fed indicated that strong economic fundamentals would not
lead to an ease in monetary policy despite the problems in Asia. In March,
interest rates began moving higher as the market braced for the possibility that
the Fed would tighten monetary policy when market participants began to view the
U.S. economy as more resilient to the problems in Asia than originally expected.
By the beginning of the second quarter, Asia again took center stage as it
became clear that its problems would not be quickly remedied. Market
participants were particularly concerned that the weak Japanese yen would
exacerbate the region's problems. Specifically, a weak yen could make it more
difficult for smaller countries like Indonesia and Thailand to export their way
back to economic health. In addition, U.S. exporters would also be disadvantaged
with a strong dollar relative to Asian currencies. As a result, interest rates
traded lower throughout the second quarter by 3-22 basis points in the short to
intermediate part of the curve and by 25-35 in the longer end, resulting in a
flatter yield curve. On June 30, the spread between the two-year Treasury note
and the 30-year Treasury bond fell to 17 basis points from 31 basis points on
March 31. The yield on the 30-year Treasury bond traded at 5.57%, the lowest
since October of 1993.
In the front end of the curve, yields on agency discount notes remain
attractive relative to Treasuries; therefore, we have an overweighted position
here. The Portfolio will also include commercial paper when yields are
attractive relative to discount notes. For the second quarter, the Portfolio
returned 1.34% versus 1.26% for the Donoghue Index. For the first six months of
1998, it returned 2.60% versus 2.53% for the index. Since commencement
(11/13/97), the Portfolio returned 3.33% versus 2.97%. The average maturity
between 30-35 days has been maintained.
9
<PAGE>
Recent economic reports suggest the U.S. economy has begun to experience a
much-awaited moderation in economic growth. June non-farm payrolls rose 205,000,
down from 300,000 the previous two months. The unemployment rate ticked up to
4.5% from 4.3% in May. Also, growth in hourly earnings has remained stable at
4.1% year over year ending June.
At last month's Federal Open-Market Committee meeting, members voted 10-2 to
keep monetary policy steady and to retain an asymmetrical bias to tighten. The
two members who voted to raise interest rates cited continued growth in the
money supply and high real estate prices. However, the Fed is expected to remain
neutral for the balance of the year given Asia's economic problems and the
favorable inflation trend in the U.S.
INVESTMENT RESULTS -- TOTAL RETURN
<TABLE>
<CAPTION>
Six Months Since
Ended Commencement
6/30/98 11/13/97
---------- ------------
<S> <C> <C>
Money Market........................... 2.60% 3.33%
</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.
10
<PAGE>
LARGE CAP
VALUE
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
- ------------------------------------------------------------------------
COMMON STOCKS -- 98.01%
BASIC MATERIALS -- 13.60%
1,130 duPont (E.I.) deNemours & Co..................... $ 84,326
400 Martin Marietta Materials, Inc................... 18,000
1,160 Millennium Chemicals, Inc........................ 39,295
1,800 Potlatch Corp.................................... 75,600
2,030 USX-U.S. Steel Group............................. 66,990
1,400 Weyerhaeuser Co.................................. 64,663
2,000 Willamette Industries, Inc. ..................... 64,000
------------
412,874
CAPITAL GOODS -- 6.09%
1,400 Boeing Co........................................ 62,387
1,300 Dana Corp. ...................................... 69,550
500 Lockheed Martin Corp............................. 52,937
------------
184,874
CONSUMER CYCLICAL -- 15.38%
1,450 Harcourt General, Inc............................ 86,275
3,920 K mart Corp...................................... 75,460
2,210 The Limited, Inc................................. 73,206
1,030 Penney (J.C.), Inc. ............................. 74,482
2,600 Reebok Int'l. Ltd................................ 71,987
1,400 Sears, Roebuck & Co.............................. 85,488
------------
466,898
CONSUMER STAPLES -- 2.35%
1,482 Diageo PLC....................................... 71,414
------------
ENERGY -- 4.85%
950 Atlantic Richfield Co............................ 74,219
1,330 Royal Dutch Petroleum Co......................... 72,901
------------
147,120
FINANCIAL -- 27.94%
900 Aetna, Inc....................................... 68,512
800 Allstate Corp.................................... 73,250
770 American Express Co.............................. 87,780
1,200 Chase Manhattan Corp............................. 90,600
300 General Re Corp.................................. 76,050
1,100 National City Corp............................... 78,100
1,700 SLM Holding Corp................................. 83,300
1,450 Student Loan Corp................................ 68,241
600 Transamerica Corp................................ 69,075
1,250 Travelers Group, Inc. ........................... 75,781
1,800 U.S. Bancorp..................................... 77,400
------------
848,089
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
HEALTHCARE -- 4.32%
1,900 Tenet Healthcare Corp............................ 59,375
1,130 United Healthcare Corp........................... 71,755
------------
131,130
MISCELLANEOUS -- 1.44%
1,440 Hanson PLC, ADR ................................. 43,650
------------
TECHNOLOGY -- 10.74%
2,800 Apple Computer, Inc. ............................ 80,325
680 International Business Machines Corp............. 78,072
3,200 Wallace Computer Services, Inc. ................. 76,000
900 Xerox Corp....................................... 91,462
------------
325,859
TRANSPORTATION & SERVICES -- 6.25%
1,590 CSX Corp......................................... 72,345
2,020 KLM Royal Dutch Airlines......................... 82,694
1,700 Overseas Shipholding Group, Inc.................. 34,638
------------
189,677
UTILITIES -- 5.05%
2,500 Illinova Corp.................................... 75,000
1,880 Texas Utilities Co............................... 78,255
------------
153,255
TOTAL INVESTMENTS -- 98.01%............................... $ 2,974,840
Other assets less liabilities -- 1.99%.................... 60,265
------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $10.98 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 276,510 shares outstanding)................... $ 3,035,105
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
LARGE CAP
GROWTH
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 95.93%
CONSUMER CYCLICAL -- 18.54%
500 Disney (Walt) Co................................. $ 52,531
900 General Electric Co.............................. 81,900
1,000 Home Depot, Inc.................................. 83,063
800 Illinois Tool Works, Inc......................... 53,350
1,600 Kohl's Corp...................................... 83,000
500 Phillips Electronics............................. 42,500
1,000 Time-Warner, Inc................................. 85,438
------------
481,782
CONSUMER STAPLES -- 10.64%
900 Coca-Cola Co..................................... 76,950
1,400 Gillette Co...................................... 79,363
800 Procter & Gamble Co.............................. 72,850
600 Unilever......................................... 47,362
------------
276,525
ENERGY -- 2.71%
700 R&B Falcon Corp.................................. 15,838
800 Schlumberger Ltd................................. 54,650
------------
70,488
FINANCIAL -- 18.38%
800 American Express Co.............................. 91,200
500 American Int'l. Group, Inc....................... 73,000
1,300 Federal National Mortgage Assn................... 78,975
1,500 Household Int'l.................................. 74,625
900 NationsBank Corp................................. 68,850
1,500 Travelers Group, Inc............................. 90,937
------------
477,587
HEALTHCARE -- 14.17%
800 Johnson & Johnson................................ 59,000
1,000 Lilly (Eli) & Co................................. 66,063
1,400 Medtronic, Inc................................... 89,250
500 Merck & Co., Inc................................. 66,875
800 Pfizer, Inc...................................... 86,950
------------
368,138
MISCELLANEOUS -- 7.10%
1,200 Alcatel Alsthom.................................. 48,825
2,700 Cendant Corp..................................... 56,363
1,950 Paychex, Inc..................................... 79,340
------------
184,528
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
TECHNOLOGY -- 24.39%
1,200 Cisco Systems, Inc............................... 110,475
2,800 Ericsson (L.M.) Telephone Cl. B.................. 80,150
800 Intel Corp....................................... 59,300
1,200 Lucent Technologies.............................. 99,825
700 Microsoft Corp................................... 75,863
1,000 PeopleSoft....................................... 47,000
1,100 Tellabs, Inc..................................... 78,788
1,700 WorldCom, Inc.................................... 82,343
------------
633,744
TOTAL COMMON STOCKS................................................ 2,492,792
------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.23%
$ 110,000 UMB Bank, n.a.,
5.05% due 7/01/98
(Collateralized by
U.S. Treasury Notes,
5.75% due 9/30/99)........................... 110,000
------------
TOTAL INVESTMENTS -- 100.16%....................................... $ 2,602,792
Other assets less liabilities -- (0.16%)........................... (4,203)
------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $12.65 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 205,441 shares outstanding)............................ $ 2,598,589
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
MID CAP
EQUITY
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
COMMON STOCKS -- 99.02%
BASIC MATERIALS -- 0.76%
600 Lyondell Petrochemical........................... $ 18,263
------------------
CAPITAL GOODS -- 9.27%
300 Crane............................................ 14,569
700 Deere & Co....................................... 37,013
500 Ingersoll-Rand Co................................ 22,031
400 Kaufman & Broad Home............................. 12,700
300 Precision Castparts Corp......................... 16,012
300 Lancaster Colony................................. 11,362
900 SCI Systems, Inc................................. 33,862
300 Southdown, Inc................................... 21,412
400 Sundstrand Corp.................................. 22,900
500 Timken Co........................................ 15,406
300 USG Corp......................................... 16,237
------------------
223,504
CONSUMER CYCLICAL -- 19.20%
200 American Greetings............................... 10,188
1,000 CKE Restaurants.................................. 41,250
200 Federated Department Stores...................... 10,762
400 Furniture Brands Int'l........................... 11,225
700 Gannett, Inc..................................... 49,744
400 General Nutrition Co............................. 12,450
200 Hillenbrand Industries........................... 12,000
400 Interim Services................................. 12,850
400 Jones Apparel Group, Inc......................... 14,625
500 Kroger Co........................................ 21,437
300 Liz Claiborne, Inc............................... 15,675
1,000 Nautica Enterprises.............................. 26,813
1,100 Navistar Int'l................................... 31,762
400 Richfood Holdings, Inc........................... 8,275
400 Ross Stores, Inc................................. 17,200
1,200 Safeway, Inc..................................... 48,825
300 Service Corp. Int'l.............................. 12,862
200 Supervalu, Inc................................... 8,875
600 TJX Cos., Inc.................................... 14,475
600 Tommy Hilfiger Corp.............................. 37,500
300 VF Corp.......................................... 15,450
400 Wolverine World Wide............................. 8,675
200 Xerox Corp....................................... 20,325
------------------
463,243
CONSUMER STAPLES -- 9.52%
500 Amgen, Inc....................................... 32,687
600 Bergen Brunswig Cl. A............................ 27,825
400 Dexter Corp...................................... 12,725
1,000 Interstate Bakeries Corp......................... 33,188
700 Owens-Illinois................................... 31,325
600 Philip Morris Co., Inc........................... 23,625
600 Schering-Plough.................................. 54,975
600 Universal Foods.................................. 13,312
------------------
229,662
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
ENERGY -- 6.36%
504 British Petroleum ADR............................ 44,478
200 Coastal Corp..................................... 13,962
600 ENSCO Int'l...................................... 10,425
300 Exxon Corp....................................... 21,394
200 Mobil Corp....................................... 15,325
700 Rowan Cos., Inc.................................. 13,606
100 Seacor Smith, Inc................................ 6,131
100 Veritas DGC Inc.................................. 4,994
700 USX-U.S. Steel Group............................. 23,100
------------------
153,415
FINANCIAL -- 21.77%
400 Americredit Corp................................. 14,275
900 Amsouth Bancorp.................................. 35,381
300 Apartment Inv. Mgmt.............................. 11,850
400 Charter One Financial............................ 13,475
400 Chase Manhattan Corp............................. 30,200
300 Comerica, Inc.................................... 19,875
500 Conseco, Inc..................................... 23,375
400 Federal National Mortgage........................ 24,300
100 FelCor Suite Hotels, Inc......................... 3,138
300 Golden West Financial Co......................... 31,894
1,050 North Fork Bancorp............................... 25,659
600 Old Republic Int'l. Corp......................... 17,588
300 PMI Group, The................................... 22,013
400 Prentiss Properties Trust........................ 9,725
600 Relistar Financial Corp.......................... 28,800
600 Republic New York Co............................. 37,763
300 SLM Holding Corp................................. 14,700
200 Standard & Poor's 400 Mid-Cap Depository
Receipts..................................... 13,925
800 Standard & Poor's 500 Depository Receipts........ 90,650
300 Starwood Lodging Trust........................... 14,494
500 SunAmerica, Inc.................................. 28,719
400 Webster Financial Co............................. 13,300
------------------
525,099
HEALTHCARE -- 6.89%
200 Amerisource Health............................... 13,138
200 ATL Ultrasound, Inc.............................. 9,125
1,100 Biomet, Inc...................................... 36,369
400 Guidant Corp..................................... 28,525
600 Health Care & Retirement......................... 23,663
500 Integrated Health Service........................ 18,750
200 Shared Medical Systems........................... 14,688
700 Tenet Healthcare Corp............................ 21,875
------------------
166,133
</TABLE>
13
<PAGE>
MID CAP
EQUITY (CONTINUED)
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
SHARES COMPANY MARKET VALUE
--------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 13.85%
400 Aeroquip-Vickers, Inc............................ 23,350
800 American Power Conversion........................ 24,000
700 Apple Computer................................... 20,081
600 Autodesk, Inc.................................... 23,175
600 Computer Assoc. Int'l Inc........................ 33,338
400 Cordant Technologies............................. 18,450
700 DSP Communications............................... 9,625
500 Harris Corp...................................... 22,344
900 Networks Association............................. 43,088
800 Storage Technology............................... 34,700
500 Sun Microsystem, Inc............................. 21,719
1,600 Symantec Corp.................................... 41,800
200 United Technologies.............................. 18,500
------------------
334,170
TRANSPORTATION & SERVICES -- 2.82%
200 Alaska Air Group................................. 10,912
500 American West Airline............................ 14,281
200 AMR Corp. Delaware............................... 16,650
800 US Freightways Corp.............................. 26,275
------------------
68,118
UTILITIES -- 8.58%
1,200 Ameritech Corp................................... 53,850
400 A T & T Corp..................................... 22,850
900 BellSouth Corp................................... 60,412
600 Century Telephone Enterprises.................... 27,525
300 FPL Group, Inc................................... 18,900
500 U S West, Inc.................................... 23,500
------------------
207,037
TOTAL COMMON STOCKS.............................................. 2,388,644
------------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.95%
$ 23,000 State Street Bank and Co.,
4.25% due 7/01/98
(Collateralized by
U.S. Treasury Notes,
8.75% due 5/15/17)........................... 23,000
------------------
TOTAL INVESTMENTS -- 99.97%...................................... $ 2,411,644
Other assets less liabilities -- 0.03%........................... 606
------------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $11.55 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 208,931 shares outstanding).......................... $ 2,412,250
------------------
------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
SMALL CAP
EQUITY
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
- -------------------------------------------------------------------------
COMMON STOCKS -- 96.04%
BASIC MATERIALS -- 2.67%
2,000 ChemFirst, Inc................................... $ 50,500
------------
CAPITAL GOODS -- 2.20%
1,000 Hubbell, Inc. Cl. B.............................. 41,625
------------
CONSUMER CYCLICAL -- 27.35%
2,500 CMP Media, Inc. Cl. A............................ 43,750
2,500 Columbia Sportswear.............................. 47,500
2,100 Complete Management, Inc......................... 8,268
1,700 Metamor Worldwide................................ 59,818
2,500 Metro Networks................................... 107,813
2,300 Nu Skin Asia Pacific Cl. A....................... 44,850
1,600 Regis Corp....................................... 47,300
1,200 School Specialty, Inc............................ 19,650
400 Superior Industries Intl., Inc................... 11,275
2,700 Triarc Cos. Cl. A................................ 59,231
3,100 US Central European Media........................ 67,038
------------
516,493
CONSUMER STAPLES -- 1.93%
1,300 Silgan Holdings, Inc............................. 36,400
------------
ENERGY -- 2.71%
500 Barrett Resources Co............................. 18,719
4,600 Meridian Resource Co............................. 32,487
------------
51,206
FINANCIAL -- 18.29%
2,900 CB Richard Ellis Services, Inc................... 96,969
300 Fiserv, Inc...................................... 12,741
1,100 LaSalle Partners................................. 48,950
3,000 Meadowbrook Insurance Group...................... 81,562
800 National Bancorp Alaska.......................... 24,700
1,800 Paula Financial.................................. 36,225
1,300 SPSS, Inc........................................ 44,175
------------
345,322
HEALTHCARE -- 18.25%
2,800 Biosource Int'l.................................. 15,575
1,500 Ligand Pharmaceutical............................ 19,313
1,200 Schein (Henry), Inc.............................. 55,350
2,000 Shire Pharmaceutical............................. 42,750
2,300 Sola Int'l....................................... 75,181
1,900 Urologix, Inc.................................... 16,150
2,700 Uroquest Medical Corp............................ 7,088
2,700 Xomed Surgical Products.......................... 84,038
1,900 Young Innovations, Inc........................... 29,213
------------
344,658
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
- -------------------------------------------------------------------------
MISCELLANEOUS -- 7.64%
3,900 Alternative Resources............................ 48,263
5,700 Ballantyne of Omaha.............................. 47,738
1,500 Interim Services, Inc............................ 48,188
------------
144,189
TECHNOLOGY -- 15.00%
2,900 Artesyn Technologies, Inc........................ 46,400
2,200 AVX Corp......................................... 35,336
1,700 Barra, Inc....................................... 41,650
1,500 Black Box Corp................................... 49,781
400 Fisher Cos....................................... 28,600
1,500 Kent Electronics Corp............................ 27,468
800 National Computer System......................... 19,400
1,400 Radiant Systems.................................. 20,300
10,000 Video Update..................................... 14,375
------------
283,310
TOTAL INVESTMENTS -- 96.04%................................ $ 1,813,703
Other assets less liabilities -- 3.96%..................... 74,760
------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $9.07 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 208,116 shares outstanding).................... $ 1,888,463
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
GROWTH AND
INCOME
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
- ------------------------------------------------------------------------
COMMON STOCKS -- 97.71%
BASIC MATERIALS -- 4.68%
500 Bowater, Inc..................................... $ 23,625
300 Dow Chemical Co.................................. 29,006
400 duPont (E.I.) deNemours & Co..................... 29,850
675 Lyondell Petrochemical........................... 20,545
200 Rohm & Haas Co................................... 20,788
------------
123,814
CAPITAL GOODS -- 6.38%
1,000 Deere & Co....................................... 52,875
1,000 Emerson Electric Co.............................. 60,375
1,100 Fort James Corp. ................................ 48,950
275 Georgia-Pacific Corp............................. 6,342
------------
168,542
CONSUMER CYCLICAL -- 13.62%
600 Corning, Inc..................................... 20,850
400 Dow Jones & Co., Inc............................. 22,300
500 Eastman Kodak Co................................. 36,531
500 General Motors Corp.............................. 33,406
600 Liz Claiborne, Inc............................... 31,350
700 May Department Stores Co......................... 45,850
500 Penney (J.C.), Inc............................... 36,156
1,000 V.F. Corp. ...................................... 51,500
900 Wal-Mart Stores, Inc............................. 54,675
400 Whirlpool Corp................................... 27,500
------------
360,118
CONSUMER STAPLES -- 11.02%
1,200 Archer-Daniels-Midland........................... 23,250
600 Bestfoods, Inc................................... 34,837
900 ConAgra, Inc..................................... 28,519
500 Crown Cork & Seal Inc............................ 23,750
1,000 Fortune Brands, Inc.............................. 38,438
600 Heinz (H.J.) Co.................................. 33,675
400 International Flavor & Fragrances................ 17,375
500 Kimberly-Clark Corp.............................. 22,937
300 Ralston Purina Group............................. 35,044
550 Sara Lee Corp.................................... 33,562
------------
291,387
ENERGY -- 10.58%
600 British Petroleum Co............................. 52,950
501 Coastal Corp..................................... 34,976
500 ENI S.p.A. ADS ADR............................... 32,500
1,200 FirstEnergy Corp................................. 36,900
600 Mobil Corp....................................... 45,975
1,200 Occidental Petroleum Corp........................ 32,400
1,100 SBC Communications, Inc.......................... 44,000
------------
279,701
FINANCIAL -- 22.66%
400 Allstate Corp.................................... 36,625
700 American General Corp............................ 49,831
300 BankAmerica Corp................................. 25,931
400 BankBoston Corp. ................................ 22,250
1,000 Banc One Corp.................................... 55,813
100 Bankers Trust Corp............................... 11,606
400 Chase Manhattan Corp............................. 30,200
700 Chubb Corp....................................... 56,263
400 Cigna Corp....................................... 27,600
600 First Union Corp................................. 34,950
200 Ford Motor Co. Delaware.......................... 11,800
500 Jefferson-Pilot Corp............................. 28,969
500 Mellon Bank Corp................................. 34,813
700 Morgan Stanley, Dean Witter...................... 63,963
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
- ------------------------------------------------------------------------
100 Progressive Corp. Ohio........................... 14,100
800 St. Paul Cos..................................... 33,650
300 Transamerica Corp................................ 34,538
600 Washington Mutual................................ 26,063
------------
598,965
HEALTHCARE -- 6.26%
800 American Home Products........................... 41,400
800 Baxter Int'l..................................... 43,050
500 Columbia HCA/Healthcare.......................... 14,563
500 Pharmacia & UpJohn, Inc. ........................ 23,063
400 SmithKline Beecham............................... 24,200
300 United Healthcare Corp........................... 19,050
------------
165,326
MISCELLANEOUS -- 2.17%
400 First Data Corp.................................. 13,325
500 Sonat, Inc....................................... 19,313
500 USA Waste Services, Inc.......................... 24,687
------------
57,325
TECHNOLOGY -- 9.94%
1,000 A T & T Corp..................................... 57,125
500 Compaq Computer Corp............................. 14,188
600 EMC Corp......................................... 26,887
500 Hewlett-Packard Co............................... 29,937
500 International Business Machines.................. 57,406
1,000 Seagate Technology, Inc.......................... 23,812
800 Sun Microsystems................................. 34,750
200 United Technologies Corp......................... 18,500
------------
262,605
TRANSPORTATION -- 2.18%
200 Delta Air Lines, Inc............................. 25,850
400 U.S. Airways Group, Inc.......................... 31,700
------------
57,550
UTILITIES -- 8.22%
500 Baltimore Gas & Electric......................... 15,531
800 Bell Atlantic Corp............................... 36,500
825 Carolina Power & Light........................... 35,784
300 Consolidated Natural Gas......................... 17,663
700 Duke Power Co.................................... 41,475
500 FPL Group ....................................... 38,750
800 WorldCom, Inc.................................... 31,500
------------
217,203
TOTAL COMMON STOCKS....................................... 2,582,536
------------
CONVERTIBLE PREFERRED STOCK -- 1.14%
400 Aetna, Inc....................................... 30,050
------------
PREFERRED STOCK -- 0.84%
300 Houston Industries............................... 22,350
------------
TOTAL INVESTMENTS -- 99.69%............................... $ 2,634,936
Other assets less liabilities -- 0.31%.................... 8,139
------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $11.40 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 231,851 shares outstanding)................... $ 2,643,075
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
BALANCED
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
- --------------------------------------------------------------------------
COMMON STOCKS -- 37.01%
BASIC MATERIALS -- 3.31%
3,000 Republic Group, Inc.............................. $ 63,000
2,000 Steel Dynamics, Inc.............................. 27,750
------------
90,750
CAPITAL GOODS -- 1.55%
400 Lockheed Martin Corp............................. 42,350
------------
CONSUMER CYCLICAL -- 4.69%
1,500 Dillard's, Inc................................... 62,156
3,000 K mart Corp...................................... 57,750
250 Modine Manufacturing Co.......................... 8,656
------------
128,562
CONSUMER STAPLES -- 1.46%
2,000 Pilgram's Pride Corp............................. 40,000
------------
ENERGY -- 12.57%
4,000 Elcor Corp....................................... 101,000
7,500 Frontier Oil Corp................................ 62,812
500 McDermott (J.Ray) SA............................. 20,750
2,500 McDermott Intl., Inc............................. 86,094
1,950 Ocean Energy, Inc................................ 38,147
1,000 Triton Energy Ltd................................ 35,687
------------
344,490
FINANCIAL -- 6.13%
1,000 American Financial Group......................... 43,313
600 Chase Manhattan Corp............................. 45,300
1,000 CIT Group, Inc. Cl. A............................ 37,500
500 Fleet Financial Group............................ 41,750
------------
167,863
HEALTHCARE -- 1.46%
300 Merck & Co., Inc................................. 40,125
------------
TECHNOLOGY -- 3.41%
2,000 Diebold, Inc..................................... 57,750
1,500 Seagate Technology, Inc.......................... 35,719
------------
93,469
TRANSPORTATION -- 1.41%
1,300 Southwest Airlines Co............................ 38,513
------------
UTILITIES -- 1.02%
500 GTE Corp......................................... 27,813
------------
TOTAL COMMON STOCKS......................................... 1,013,935
------------
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
- --------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 19.29%
3,000 Bethlehem Steel.................................. 133,688
2,000 Cyprus Amax Minerals Co.......................... 90,500
4,000 Freeport McMoRan................................. 78,000
4,000 ICO, Inc......................................... 84,000
1,000 K mart Financing................................. 70,000
3,000 Tesoro Petroleum Corp............................ 47,812
500 Texas Industries, Inc............................ 24,250
------------
TOTAL CONVERTIBLE PREFERRED STOCKS.......................... 528,250
------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
- --------------------------------------------------------------------------
CORPORATE BONDS -- 13.41%
50,000 Argosy Gaming Co.,
13.25% due 6/01/04........................... 56,500
50,000 CompUSA, 9.5% due 6/15/20........................ 51,250
40,000 K mart Funding, Series G,
9.44% due 12/01/14........................... 44,528
125,000 United Refining, 10.75% due 6/15/07.............. 121,562
100,000 Wiser Oil Co., 9.5% due 5/15/07.................. 93,500
------------
TOTAL CORPORATE BONDS....................................... 367,340
------------
CONVERTIBLE CORPORATE BONDS -- 28.12%
55,000 Allwaste, Inc., 7.25% due 6/01/14................ 33,619
50,000 Argosy Gaming, 12.00% due 6/01/01................ 49,312
50,000 Danka Business, 6.75% due 4/01/02................ 44,000
125,000 HMT Technology, 5.75% due 1/15/04................ 90,625
125,000 Integrated Device Technologies,
5.50% due 6/01/02............................ 103,750
125,000 Intevac, Inc., 6.50% due 3/01/04................. 107,812
75,000 Key Energy, 5.00% due 9/15/04.................... 57,188
100,000 Micron Technology, 7.00% due 7/01/04............. 93,375
100,000 National Semiconductor 144A,
6.50% due 10/01/02........................... 91,750
100,000 VLSI Technology, 8.25% due 10/01/05.............. 98,875
------------
TOTAL CONVERTIBLE CORPORATE BONDS...........................
770,306
------------
TOTAL INVESTMENTS -- 97.83%.................................
$ 2,679,831
Other assets less liabilities -- 2.17%......................
59,576
------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $10.32 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 265,428 shares outstanding).....................
$ 2,739,407
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
INTERMEDIATE
FIXED INCOME
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
SHARES COMPANY MARKET VALUE
- --------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 0.97%
500 Equity Office Prop............................... $ 22,125
------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
- --------------------------------------------------------------------------
CORPORATE BONDS -- 39.13%
$ 10,000 American Standard,
8.125% due 2/15/03........................... 9,945
10,000 American Standard,
7.625% due 2/15/10........................... 9,875
50,000 Bradley Operating LP,
7.00% due 11/15/04........................... 50,555
50,000 City National Corp.,
6.375% due 1/15/08........................... 49,756
50,000 Conseco Financial, nts.,
6.80% due 6/15/05............................ 50,214
75,000 Crescent Real Estate,
7.125% due 9/15/07........................... 75,781
50,000 Criimi Mae, Inc., 9.125% due 12/01/02............ 49,625
25,000 Flag Ltd., 144A, 8.25% due 1/30/08............... 25,250
25,000 Homeside Lending, 6.75% due 8/01/04.............. 25,607
25,000 IMC Global, Inc., nts.,
6.55% due 1/15/05............................ 24,946
50,000 Lehman Brothers, med. term nts., 6.625% due
12/27/02..................................... 50,773
50,000 MMI Cap Trust, nts.,
7.625% due 12/15/27.......................... 51,460
25,000 North Fork Cap Trust,
8.00% due 12/15/27........................... 26,412
25,000 NVR, Inc., sr. nts.,
8.00% due 6/01/05............................ 24,812
20,000 Orion Cap Trust, 144A,
7.701% due 4/15/28........................... 20,766
25,000 Panama, 144A nts.,
7.875% due 2/13/02........................... 24,462
75,000 Simon Debartolo, med. term nts., 7.125% due
6/24/05...................................... 76,407
25,000 Southland Corp., deb. nts.,
4.50% due 6/15/04............................ 20,500
50,000 Tenet Healthcare Corp.,
8.00% due 1/15/05............................ 51,572
25,000 Tricon Global Rest,
7.45% due 5/15/05............................ 25,023
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
- --------------------------------------------------------------------------
50,000 UPM-Kymmene Corp., nts.,
7.45% due 11/26/27........................... 52,079
50,000 USA Waste Services, Inc.,
6.50% due 12/15/02........................... 50,344
25,000 Westinghouse Credit,
8.875% due 6/14/14........................... 28,264
20,000 Westpoint Steven, 144,
7.875% due 6/15/02........................... 20,126
------------
TOTAL CORPORATE BONDS....................................... 894,554
------------
GOVERNMENT SPONSORED -- 27.72%
Federal Home Loan Mortgage Corp.
6.00% due 4/01/11............................ 138,288
6.50% due 4/01/28................................ 74,004
Federal National Mortgage Assn.
6.50% due 3/01/28............................ 49,107
Government National Mortgage Assn.
8.00% due 11/15/17........................... 20,086
8.00% due 8/15/26................................ 47,971
8.00% due 9/15/26................................ 52,330
8.00% due 11/15/26............................... 23,834
7.50% due 6/15/27................................ 24,962
7.00% due 7/15/28................................ 203,188
------------
TOTAL GOVERNMENT SPONSORED.................................. 633,770
------------
U.S. GOVERNMENT SECURITIES -- 23.39%
U.S. Treasury Notes
305,000 5.875% due 11/15/99.............................. 306,430
U.S. Treasury Bonds
155,000 8.125% due 8/15/19........................... 200,095
25,000 6.625% due 2/15/27........................... 28,250
------------
TOTAL U.S. GOVERNMENT SECURITIES............................ 534,775
------------
COLLATERAL MORTGAGE OBLIGATION -- 1.11%
25,000 Oakwood Mortgage Inv.,
7.75% due 2/15/28............................ 25,297
------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT -- 6.69%
$153,000 State Street Bank and Trust Co.,
4.25% due 7/01/98
(Collateralized by
U.S. Treasury Notes,
7.25% due 5/15/16)........................... 153,000
------------
TOTAL INVESTMENTS -- 99.01%................................. $ 2,263,521
Other assets less liabilities -- 0.99%...................... 22,650
------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $10.43 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 219,231 shares outstanding)..................... $ 2,286,171
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
GLOBAL FIXED
INCOME
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT* DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
CORPORATE BONDS -- 28.23%
ARGENTINA -- 1.88%
$ 100,000 Argentina FRN,
9.15% due 11/30/02........................... $ 99,375
------------
DENMARK -- 0.77%
274,000 Denmark Realkredit,
8.00% due 10/01/26........................... 40,763
------------
JAPAN -- 2.87%
15,000,000 IBRD Global, 5.25% due 3/20/02................... 124,927
3,000,000 IBRD Global, 4.75% due 12/20/04.................. 26,394
------------
151,321
SOUTH AFRICA -- 0.42%
800,000 Euro Bank Recon & De,
0.00% due 12/31/15........................... 11,950
2,800,000 IBRD Global Zar, nts.,
0.00% due 12/31/25........................... 10,456
------------
22,406
UNITED KINGDOM -- 6.11%
50,000 Birmghm Mdshre Bld Soc,
9.125% due 1/05/06........................... 93,999
50,000 Northern Rock, nts.,
9.375% due 10/17/21.......................... 108,537
50,000 P & O Steam Nav, deb. nts., 11.50% due 7/03/14... 119,636
------------
322,172
UNITED STATES -- 16.18%
10,000 American Standard,
8.125% due 2/15/03........................... 9,945
10,000 American Standard,
7.625% due 2/15/10........................... 9,875
50,000 Bradley Operating LP,
7.00% due 11/15/04........................... 50,555
50,000 City National Corp.,
6.375% due 1/15/08........................... 49,756
50,000 Conseco Financial Notes,
6.80% due 6/15/05............................ 50,215
75,000 Crescent Real Estate,
7.125% due 9/15/07........................... 75,781
50,000 Criimi Mae Inc.,
9.125% due 12/01/02.......................... 49,625
25,000 Homeside Lending,
6.75% due 8/01/04............................ 25,607
25,000 Flag Ltd., 144A,
8.25% due 1/30/08............................ 25,250
50,000 Lehman Brothers, med. term nts., 6.625% due
12/27/02..................................... 50,773
50,000 MMI Cap Trust, nts.,
7.625% due 12/15/27.......................... 51,460
25,000 Niagra Mohawk Power,
7.75% due 10/01/08........................... 25,781
25,000 NVR, Inc., sr. nts.,
8.00% due 6/01/05............................ 24,812
25,000 Panama, 144A nts.,
7.875% due 2/13/02........................... 24,463
100,000 SB Treasury Comp.,
9.40% due 12/20/49........................... 98,563
75,000 Simon Debartolo, med. term nts., 7.125% due
6/24/05...................................... 76,407
50,000 Smithfield Foods, Inc.,
7.625% due 2/15/08........................... 50,750
50,000 Tenet Healthcare Corp.,
8.00% due 1/15/05............................ 51,572
<CAPTION>
FACE
AMOUNT* DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
50,000 UPM-Kymmene Corp., nts., NC, 7.45% due
11/26/27..................................... 52,079
------------
853,269
TOTAL CORPORATE BONDS........................................... 1,489,306
------------
GOVERNMENT BONDS -- 38.67%
AUSTRALIA -- 0.76%
55,000 Australian Govt.,
9.00% due 9/15/04............................ 40,299
------------
DENMARK -- 3.32%
1,075,000 Denmark Govt.,
7.00% due 12/15/04........................... 174,835
------------
GERMANY -- 14.23%
195,000 Deutschland Republic,
6.50% due 7/15/03............................ 117,690
220,000 Deutschland Republic,
7.375% due 1/03/05........................... 140,214
65,000 Deutschland Republic,
8.375% due 1/03/05........................... 39,985
185,000 Deutschland Republic,
6.00% due 1/04/07............................ 110,980
320,000 Deutschland Republic,
6.00% due 7/04/07............................ 192,619
150,000 German Unity Fund,
8.50% due 2/20/01............................ 91,800
90,000 Treuhandanstalt, 7.50% due 9/09/04............... 57,468
------------
750,756
JAPAN -- 7.70%
5,000,000 Italy Euroyen, 5.125% due 7/29/03................ 42,983
5,000,000 Italy Euroyen, 5.00% due 12/15/04................ 44,075
12,000,000 Italy Euroyen, nts.,
3.75% due 6/08/05............................ 99,278
3,000,000 South Africa, 3.35% due 6/17/04.................. 21,936
13,000,000 Spanish Kingdom Euroyen,
5.75% due 3/23/02............................ 109,886
10,000,000 Spanish Kingdom Euroyen,
4.75% due 3/14/05............................ 87,880
------------
406,038
NORWAY -- 0.77%
300,000 Norway Govt., 7.00% due 5/31/01.................. 40,752
------------
SWEDEN -- 4.53%
300,000 Sweden Govt., 5.00% due 1/15/04.................. 38,107
1,500,000 Sweden Kingdom,
6.00% due 2/09/05............................ 200,535
------------
238,642
UNITED KINGDOM -- 7.36%
85,000 UK Gilt Treasury, deb. nts.,
10.00% due 2/26/01........................... 152,182
80,000 UKT Gilt, nts., 9.50% due 4/18/05................ 157,861
40,000 UKT Gilt, 8.50% due 7/16/07...................... 78,368
------------
388,411
TOTAL GOVERNMENT BONDS.......................................... 2,039,733
------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
--------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT SPONSORED -- 5.50%
139,609 Federal Home Loan Mortgage Corp., 6.00% due
3/01/11...................................... 138,506
149,178 Federal National Mortgage Assn., 7.00% due
11/01/27..................................... 151,514
------------
TOTAL U.S. GOVERNMENT SPONSORED................................. 290,020
------------
U.S. GOVERNMENT SECURITIES -- 22.47%
U.S. Treasury Notes
300,000 5.625% due 11/30/98.......................... 300,469
130,000 6.625% due 6/30/01........................... 133,819
350,000 6.25% due 10/31/01........................... 357,328
55,000 6.625% due 4/30/02........................... 57,028
60,000 6.50% due 8/15/05............................ 63,357
U.S. Treasury Bonds
51,276 3.375% due 1/15/07........................... 49,690
65,000 8.125% due 8/15/19........................... 83,911
100,000 6.625% due 2/15/27........................... 113,000
U.S. Government Agency Strips
50,000 0.00% due 8/15/09............................ 26,873
------------
TOTAL U.S. GOVERNMENT SECURITIES................................ 1,185,475
------------
<CAPTION>
SHARES COMPANY MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 0.42%
500 Equity Office.................................... 22,125
------------
<CAPTION>
SHARES EXPIRATION DATE/EXERCISE PRICE MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
CALL OPTIONS PURCHASED -- 0.27%
German Deutschmark
85,000 6.0%, Aug 98 / 108.10........................ 377
85,000 5.625%, Nov 98 / 103.20...................... 898
90,000 5.625%, Dec 98 / 104.35...................... 712
90,000 6.0%, Dec 98 / 108.445....................... 324
175,000 6.0%, Dec 98 / 109.81........................ 300
175,000 6.0%, May 99 / 106.78........................ 1,462
Japanese Yen
100,000 Nov 98 / 145.00.............................. 1,540
14,000,000 2.6%, Nov 98 / 108.516....................... 895
200,000 Dec 98 / 145.00.............................. 2,880
6,500,000 2.6%, Dec 98 / 109.811....................... 336
50,000 Jun 99 / 150.00.............................. 770
125,000 Jun 99 / 155.00.............................. 2,050
United States Dollar
50,000 5.625%, Jul 98 / 101.39...................... 4
150,000 6.125%, Jul 98 / 105.015..................... 12
50,000 5.625%, Nov 98 / 103.906..................... 203
100,000 6.125%, Nov 98 / 109.16...................... 1,281
50,000 5.625%, Dec 98 / 104.859..................... 125
------------
TOTAL CALL OPTIONS PURCHASED.................................... 14,169
------------
<CAPTION>
SHARES EXPIRATION DATE/EXERCISE PRICE MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
PUT OPTIONS PURCHASED -- 0.30%
Italian Lire
90,000,000 6.75%, Jul 97 / 105.29....................... 263
182,500,000 6.75%, Jul 97 / 107.69....................... 1,165
90,000,000 6.75%, Feb 00 / 105.49....................... 286
Japanese Yen
21,500,000 3.00%, June 98 / 110.00...................... 3,785
21,500,000 3.00%, Dec 98 / 111.40....................... 3,028
14,000,000 2.00%, Jan 99 / 99.910....................... 563
180,000 Apr 99 / 73.50............................... 2,218
150,000 May 99 / 145.00.............................. 3,210
United States Dollar
105,000 Aug 98 / 1.78................................ 378
100,000 May 99 / 1.70................................ 760
------------
TOTAL PUT OPTIONS PURCHASED..................................... 15,656
------------
<CAPTION>
FACE
AMOUNT DESCRIPTION MARKET VALUE
<C> <S> <C>
--------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.14%
$ 60,000 State Street Bank and Trust Co.,
4.25% due 7/01/98
(Collateralized by
U.S. Treasury Notes,
12.50% due 8/15/14).......................... 60,000
------------
TOTAL INVESTMENTS -- 97.00%..................................... $ 5,116,484
Other assets less liabilities -- 3.00%.......................... 158,298
------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $10.41 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 506,530 shares outstanding)......................... $ 5,274,782
------------
------------
</TABLE>
*FACE AMOUNT OF FOREIGN BOND IS REFLECTED IN LOCAL CURRENCY WHILE MARKET VALUE
IS REFLECTED IN U.S. DOLLARS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
MONEY
MARKET
STATEMENT OF NET ASSETS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
FACE
AMOUNT DESCRIPTION MARKET VALUE
- --------------------------------------------------------------------------
GOVERNMENT SPONSORED -- 100.41%
Federal Farm Credit Banks Discount Notes
$108,000 5.35% due 8/03/98............................ $ 107,470
Federal Home Loan Mortgage Corp. Discount Notes
130,000 5.50% due 7/02/98............................ 129,980
200,000 5.42% due 7/21/98............................ 199,398
100,000 5.44% due 8/20/98............................ 99,245
204,000 5.39% due 9/01/98............................ 202,106
Federal National Mortgage Assn. Discount Notes
124,000 5.405% due 7/10/98........................... 123,832
25,000 5.60% due 7/27/98............................ 24,899
176,000 5.41% due 8/20/98............................ 174,678
------------
TOTAL INVESTMENTS -- 100.41%................................ $ 1,061,608
Other assets less liabilities -- (0.41%).................... (4,346)
------------
TOTAL NET ASSETS -- 100.00%
(equivalent to $1.00 per share; 500,000,000
shares of $.001 par value capital shares
authorized; 1,057,262 shares outstanding)................... $ 1,057,262
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
(This page has been intentionally left blank.)
23
<PAGE>
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP
VALUE GROWTH EQUITY
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (identified
cost $2,751,788, $2,043,120,
$2,228,344, $1,936,962, $2,377,100,
$2,715,150, $2,243,342, $5,171,684,
and $1,061,608, respectively)...... $ 2,974,840 $ 2,602,792 $ 2,411,644
Cash................................. 59,759 -- 154
Dividends receivable................. 2,369 1,464 2,778
Interest receivable.................. -- -- --
Currency contracts................... -- -- --
Options sold......................... -- -- --
Receivables for investments sold..... -- -- 11,746
----------------- ----------------- -----------------
Total assets................. 3,036,968 2,604,256 2,426,322
----------------- ----------------- -----------------
LIABILITIES AND NET ASSETS:
Cash overdraft....................... -- 4,425 --
Fees payable......................... 1,863 1,242 735
Options written...................... -- -- --
Currency contracts................... -- -- --
Dividends payable.................... -- -- --
Payable for investments purchased.... -- -- 13,337
----------------- ----------------- -----------------
Total liabilities............ 1,863 5,667 14,072
----------------- ----------------- -----------------
NET ASSETS............................. $ 3,035,105 $ 2,598,589 $ 2,412,250
----------------- ----------------- -----------------
----------------- ----------------- -----------------
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in
capital)........................... $ 2,767,441 $ 2,057,202 $ 2,094,752
Accumulated undistributed (over
distributed) net investment
income............................. 24,172 786 4,572
Accumulated undistributed net
realized gain (loss) on sale of
investments and foreign currency
transactions....................... 20,440 (19,071) 129,626
Net unrealized appreciation
(depreciation) in value of
investments and translation of
assets and liabilities in foreign
currency........................... 223,052 559,672 183,300
----------------- ----------------- -----------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES............................... $ 3,035,105 $ 2,598,589 $ 2,412,250
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Capital shares, $.001 par value
Authorized........................... 500,000,000 500,000,000 500,000,000
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Outstanding.......................... 276,510 205,441 208,931
----------------- ----------------- -----------------
----------------- ----------------- -----------------
NET ASSET VALUE PER SHARE.............. $ 10.98 $ 12.65 $ 11.55
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<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 $2,751,788, $2,043,120,
$2,228,344, $1,936,962, $2,377,100,
$2,715,150, $2,243,342, $5,171,684,
and $1,061,608, respectively)...... $ 1,813,703 $ 2,634,936 $ 2,679,831 $ 2,263,521 $ 5,116,484 $ 1,061,608
Cash................................. 82,213 3,979 85,767 12 -- 424
Dividends receivable................. 670 5,326 867 -- -- --
Interest receivable.................. -- -- 22,201 24,698 118,359 --
Currency contracts................... -- -- -- -- 71,491 --
Options sold......................... -- -- -- -- 4,244 --
Receivables for investments sold..... 11,919 -- -- 202,672 -- --
------------ ------------ ------------ ------------ ------------ ------------
Total assets................. 1,908,505 2,644,241 2,788,666 2,490,903 5,310,578 1,062,032
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES AND NET ASSETS:
Cash overdraft....................... -- -- -- -- 12,344 --
Fees payable......................... 1,042 1,166 1,446 1,160 2,961 --
Options written...................... -- -- -- -- 11,012 --
Currency contracts................... -- -- -- -- 9,479 --
Dividends payable.................... -- -- -- -- -- 4,770
Payable for investments purchased.... 19,000 -- 47,813 203,572 -- --
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities............ 20,042 1,166 49,259 204,732 35,796 4,770
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS............................. $ 1,888,463 $ 2,643,075 $ 2,739,407 $ 2,286,171 $ 5,274,782 $ 1,057,262
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS CONSIST OF:
Capital (capital stock and paid-in
capital)........................... $ 2,078,447 $ 2,337,267 $ 2,653,496 $ 2,195,603 $ 5,066,040 $ 1,057,262
Accumulated undistributed (over
distributed) net investment
income............................. (3,996) 17,450 61,875 63,899 126,054 --
Accumulated undistributed net
realized gain (loss) on sale of
investments and foreign currency
transactions....................... (62,729) 30,522 59,355 6,490 72,388 --
Net unrealized appreciation
(depreciation) in value of
investments and translation of
assets and liabilities in foreign
currency........................... (123,259) 257,836 (35,319) 20,179 10,300 --
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES............................... $ 1,888,463 $ 2,643,075 $ 2,739,407 $ 2,286,171 $ 5,274,782 $ 1,057,262
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
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.......................... 208,116 231,851 265,428 219,231 506,530 1,057,262
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
NET ASSET VALUE PER SHARE.............. $ 9.07 $ 11.40 $ 10.32 $ 10.43 $ 10.41 $ 1.00
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
25
<PAGE>
STATEMENT
OF OPERATIONS
Six months ended June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID CAP
VALUE GROWTH EQUITY
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends.......................... $ 33,888 $ 8,670 $ 13,306
Interest........................... 1,595 1,164 702
--------------- --------------- ---------------
35,483 9,834 14,008
--------------- --------------- ---------------
Expenses (Note 2):
Management fees.................... 11,474 9,401 9,251
Custody and accounting fees........ 4,757 3,863 7,742
Professional fees.................. 6,719 6,719 6,584
Other expenses..................... 1,549 1,548 3,000
--------------- --------------- ---------------
Total expenses before
reimbursement.................. 24,499 21,531 26,577
Less: expense reimbursement...... (12,152) (11,566) (16,768)
--------------- --------------- ---------------
Net expenses..................... 12,347 9,965 9,809
--------------- --------------- ---------------
Net investment income............ 23,136 (131) 4,199
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Realized gain (loss) from:
Investment transactions............ 20,440 (19,870) 123,487
Foreign currency transactions...... -- -- --
--------------- --------------- ---------------
Net realized gain (loss) from
investment and foreign currency
transactions................... 20,440 (19,870) 123,487
--------------- --------------- ---------------
Change in unrealized appreciation
(depreciation) during the period
from:
Investments........................ 300,879 419,507 90,882
Translation of assets and
liabilities in foreign
currencies....................... -- -- --
--------------- --------------- ---------------
Net unrealized appreciation
(depreciation)................... 300,879 419,507 90,882
--------------- --------------- ---------------
Net gain (loss) on investments
and foreign currencies......... 321,319 399,637 214,369
--------------- --------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS...... $ 344,455 $ 399,506 $ 218,568
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<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.......................... $ 4,135 $ 26,757 $ 16,724 $ -- $ -- $ --
Interest........................... 1,039 -- 55,578 70,639 164,191 28,787
--------- --------- --------- ------------ --------- ---------
5,174 26,757 72,302 70,639 164,191 28,787
--------- --------- --------- ------------ --------- ---------
Expenses (Note 2):
Management fees.................... 9,524 9,918 10,844 6,564 19,330 2,075
Custody and accounting fees........ 3,837 4,396 4,268 6,776 8,158 4,166
Professional fees.................. 6,719 6,584 6,719 6,807 6,584 6,361
Other expenses..................... 1,558 1,522 1,549 3,010 3,056 2,994
--------- --------- --------- ------------ --------- ---------
Total expenses before
reimbursement.................. 21,638 22,420 23,380 23,157 37,128 15,596
Less: expense reimbursement...... (11,720) (12,029) (11,764) (15,244) (12,766) (13,753)
--------- --------- --------- ------------ --------- ---------
Net expenses..................... 9,918 10,391 11,616 7,913 24,362 1,843
--------- --------- --------- ------------ --------- ---------
Net investment income............ (4,744) 16,366 60,686 62,726 139,829 26,944
--------- --------- --------- ------------ --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Realized gain (loss) from:
Investment transactions............ (57,072) 30,522 59,355 6,507 (55,046) --
Foreign currency transactions...... -- -- -- -- 132,377 --
--------- --------- --------- ------------ --------- ---------
Net realized gain (loss) from
investment and foreign currency
transactions................... (57,072) 30,522 59,355 6,507 77,331 --
--------- --------- --------- ------------ --------- ---------
Change in unrealized appreciation
(depreciation) during the period
from:
Investments........................ (71,794) 175,414 (25,139) 8,897 (7,053) --
Translation of assets and
liabilities in foreign
currencies....................... -- -- -- -- (48,013) --
--------- --------- --------- ------------ --------- ---------
Net unrealized appreciation
(depreciation)................... (71,794) 175,414 (25,139) 8,897 (55,066) --
--------- --------- --------- ------------ --------- ---------
Net gain (loss) on investments
and foreign currencies......... (128,866) 205,936 34,216 15,404 22,265 --
--------- --------- --------- ------------ --------- ---------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS...... $(133,610) $ 222,302 $ 94,902 $ 78,130 $162,094 $ 26,944
--------- --------- --------- ------------ --------- ---------
--------- --------- --------- ------------ --------- ---------
</TABLE>
27
<PAGE>
STATEMENTS OF CHANGES
IN NET ASSETS
Six months ended June 30, 1998 (unaudited)
<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................ $ 23,136 $ (131) $ 4,199
Net realized gain (loss) from
investment and foreign currency
transactions....................... 20,440 (19,870) 123,487
Unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currency
during the period.................. 300,879 419,507 90,882
---------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations....................... 344,455 399,506 218,568
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income................ -- -- --
---------- ---------- ----------
Total distributions to
shareholders..................... -- -- --
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold............ 250,437 43,498 75,792
Net asset value of shares issued for
reinvestment of distributions...... -- -- --
Cost of shares repurchased........... (3,897) (916) (1,025)
---------- ---------- ----------
Net increase from capital share
transactions..................... 246,540 42,582 74,767
---------- ---------- ----------
Total increase in net assets..... 590,995 442,088 293,335
NET ASSETS:
Beginning of period.................. 2,444,110 2,156,501 2,118,915
---------- ---------- ----------
End of period (including
undistributed (over distributed)
net investment income of $24,172,
$786, $4,572, $(3,996), $17,450,
$61,875, $63,899, $126,054, and $0,
respectively)...................... $3,035,105 $2,598,589 $2,412,250
---------- ---------- ----------
---------- ---------- ----------
*Shares issued and repurchased:
Number of shares sold................ 24,709 4,068 7,046
Number of shares issued for
reinvestment of distributions...... -- -- --
Number of shares repurchased......... (343) (75) (87)
---------- ---------- ----------
Net increase....................... 24,366 3,993 6,959
---------- ---------- ----------
---------- ---------- ----------
**Distributions to shareholders:
Income dividends per share........... $ -- $ -- $ --
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<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................ $ (4,744) $ 16,366 $ 60,686 $ 62,726 $ 139,829 $ 26,944
Net realized gain (loss) from
investment and foreign currency
transactions....................... (57,072) 30,522 59,355 6,507 77,331 --
Unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currency
during the period.................. (71,794) 175,414 (25,139) 8,897 (55,066) --
---------- ---------- ---------- ------------ ------------ -----------
Net increase (decrease) in net
assets resulting from
operations....................... (133,610) 222,302 94,902 78,130 162,094 26,944
DISTRIBUTIONS TO SHAREHOLDERS FROM:**
Net investment income................ -- -- -- -- -- (26,944)
---------- ---------- ---------- ------------ ------------ -----------
Total distributions to
shareholders..................... -- -- -- -- -- (26,944)
INCREASE FROM CAPITAL SHARE TRANSACTIONS:*
Proceeds from shares sold............ 62,790 321,366 128,072 170,346 13,852 99,361
Net asset value of shares issued for
reinvestment of distributions...... -- -- -- -- -- 17,383
Cost of shares repurchased........... (463) (1,737) (1,265) (343) (29) (78,751)
---------- ---------- ---------- ------------ ------------ -----------
Net increase from capital share
transactions..................... 62,327 319,629 126,807 170,003 13,823 37,993
---------- ---------- ---------- ------------ ------------ -----------
Total increase in net assets..... (71,283) 541,931 221,709 248,133 175,917 37,993
NET ASSETS:
Beginning of period.................. 1,959,746 2,101,144 2,517,698 2,038,038 5,098,865 1,019,269
---------- ---------- ---------- ------------ ------------ -----------
End of period (including
undistributed (over distributed)
net investment income of $24,172,
$786, $4,572, $(3,996), $17,450,
$61,875, $63,899, $126,054, and $0,
respectively)...................... $1,888,463 $2,643,075 $2,739,407 $ 2,286,171 $ 5,274,782 $ 1,057,262
---------- ---------- ---------- ------------ ------------ -----------
---------- ---------- ---------- ------------ ------------ -----------
*Shares issued and repurchased:
Number of shares sold................ 6,540 30,253 12,860 16,712 1,354 99,361
Number of shares issued for
reinvestment of distributions...... -- -- -- -- -- 17,383
Number of shares repurchased......... (45) (153) (121) (33) (3) (78,751)
---------- ---------- ---------- ------------ ------------ -----------
Net increase....................... 6,495 30,100 12,739 16,679 1,351 37,993
---------- ---------- ---------- ------------ ------------ -----------
---------- ---------- ---------- ------------ ------------ -----------
**Distributions to shareholders:
Income dividends per share........... $ -- $ -- $ -- $ -- $ -- $ .03
</TABLE>
29
<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.
30
<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 June 30, 1998, (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........................ $ 447,400 $ 127,122
Large Cap Growth....................... 560,306 552,509
Mid Cap Equity......................... 2,002,858 1,915,344
Small Cap Equity....................... 862,576 821,838
Growth & Income........................ 1,160,631 793,622
Balanced............................... 1,752,291 555,670
Intermediate Fixed Income.............. 1,756,654 1,629,294
Global Fixed Income.................... 4,489,990 4,243,305
</TABLE>
4. OPTIONS WRITTEN
The following put options written were outstanding for the Global Fixed Income
Portfolio as of June 30, 1998:
<TABLE>
<CAPTION>
ISSUER (CURRENCY)/EXPIRATION DATE/ NUMBER OF
EXERCISE PRICE CONTRACTS VALUE
<S> <C> <C>
- -------------------------------------------------------
German Deutschemark/ May 99/1.850...... 1,000 $ (1,680)
German Deutschemark/ Feb 00/104.570.... 1,850 (1,361)
New Zealand Dollar/ Apr 99/65.250...... 1,800 (2,851)
U.S. Dollars/Jul 98/99.828............. 500 (39)
U.S. Dollars/Aug 98/1.710.............. 1,050 (11)
U.S. Dollars/Nov 98/91.250............. 1,000 (93)
U.S. Dollars/Nov 98/97.000............. 500 (172)
U.S. Dollars/Dec 98/97.531............. 500 (282)
U.S. Dollars/Mar 99/108.000............ 1,000 (209)
U.S. Dollars/May 99/1.620.............. 1,000 (340)
U.S. Dollars/Jun 99/123.500............ 1,250 (3,974)
---------
Total (premiums received, $15,007)..... $ (11,012)
---------
---------
</TABLE>
Transactions in options written for Global Fixed Income Portfolio for the six
months ended June 30, 1998 were as follows:
CALL OPTIONS WRITTEN
<TABLE>
<CAPTION>
NUMBER OF PREMIUM
CONTRACTS AMOUNT
<S> <C> <C>
- -------------------------------------------------------
Balance at December 31, 1997........... 2,352,500 $ 5,946
Opened................................. 2,000 6,765
Expired................................ (2,350,000) (2,161)
Closing Buys........................... (4,500) (10,550)
----------- --------
Balance at June 30, 1998............... -- $ --
----------- --------
----------- --------
</TABLE>
PUT OPTIONS WRITTEN
<TABLE>
<CAPTION>
NUMBER OF PREMIUM
CONTRACTS AMOUNT
<S> <C> <C>
- -------------------------------------------------------
Balance at December 31, 1997........... -- $ --
Opened................................. 81,500 20,116
Expired................................ (1,000) (610)
Closing Buys........................... (69,050) (4,499)
---------------- --------------
Balance at June 30, 1998............... 11,450 $ 15,007
---------------- --------------
---------------- --------------
</TABLE>
31
<PAGE>
NOTES TO FINANCIAL
STATEMENTS (CONTINUED)
5. FORWARD FOREIGN CURRENCY CONTRACTS
Following is a summary of forward foreign currency contracts that were
outstanding at June 30, 1998, for the Global Fixed Income Portfolio:
<TABLE>
<CAPTION>
FOREIGN AMOUNT TO BE NET UNREALIZED
SETTLEMENT CURRENCY U.S. $ VALUE RECEIVED IN APPRECIATION
CONTRACTS TO SELL CURRENCY DATE TO BE DELIVERED AS OF 6/30/98 U.S. $ (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Argentine Peso......................... 10/6/98-4/6/99 76,250 $ 75,040 $ 75,000 $ (40)
Australian Dollar...................... 8/5/98-3/11/99 494,095 306,325 324,625 18,300
German Deutschemark.................... 7/9/98-4/22/99 1,694,889 939,849 939,944 95
Danish Krone........................... 8/6/98-9/16/98 1,502,911 218,559 220,945 2,386
British Pound.......................... 9/16/98-11/16/98 420,569 696,391 682,138 (14,253)
Greek Drachma.......................... 4/22/99 11,393,750 35,693 34,483 (1,210)
Hong Kong Dollar....................... 12/29/98 1,153,825 145,550 141,947 (3,603)
Japanese Yen........................... 7/28/98-11/27/98 81,260,375 590,990 639,248 48,258
Norweigen Krone........................ 7/16/98 316,395 41,289 41,719 430
New Zealand Dollar..................... 3/11/99 91,026 46,519 52,986 6,467
Swedish Krona.......................... 7/17/98-8/12/98 1,856,154 232,396 230,934 (1,462)
South African Rand..................... 10/20/98 527,765 84,830 100,953 16,123
-------------- ------------- ---------------
$ 3,413,431 $ 3,484,922 $ 71,491
-------------- ------------- ---------------
-------------- ------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
FOREIGN AMOUNT TO BE NET UNREALIZED
SETTLEMENT CURRENCY U.S. $ VALUE RECEIVED IN APPRECIATION
CONTRACTS TO BUY CURRENCY DATE TO BE DELIVERED AS OF 6/30/98 U.S. $ (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Australian Dollar...................... 8/5/98-3/11/99 478,562 $ 296,697 $ 300,549 $ (3,852)
German Deutschmark..................... 7/15/98-4/22/99 157,299 87,571 87,325 246
Greek Drachma.......................... 4/22/99 37,050,000 116,064 113,321 2,743
Hong Kong Dollar....................... 12/29/98-12/30/98 497,817 62,802 63,263 (461)
New Zealand Dollar..................... 3/11/99 89,007 45,487 50,262 (4,775)
South African Rand..................... 10/20/98-10/23/98 167,000 26,847 30,227 (3,380)
-------------- ------------- ---------------
$ 635,468 $ 644,947 $ (9,479)
-------------- ------------- ---------------
-------------- ------------- ---------------
</TABLE>
32
<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.
33
