<PAGE>
MEMBER OF
THE DEFENSIVE EQUITY PORTFOLIO 100% NO-LOAD-TM-
OF ANALYTIC OPTIONED EQUITY FUND, INC. MUTUAL FUND COUNCIL
- ----------------------
August 6, 1997
Dear Fellow Shareholders:
The net asset value for the Defensive Equity Portfolio of the Analytic
Optioned Equity Fund increased 10.0% per share for the quarter and 11.5% per
share for the six months ending June 30, 1997 compared to 17.4 % and 20.4% for
the S&P 500 Index for the same periods. At quarter end, the Fund's share price
was $15.97 after paying its 76th consecutive quarterly dividend from net
investment income of $0.02.
Over the most recent 10 years, the net total return was 163.1%. This 10 year
return is equivalent to an annualized growth rate of 10.2%, well ahead of the
3.5% average annual rate of inflation (consumer price index) over this period.
Over this most recent 10 year period your Fund's return was achieved with 42%
less risk than the S&P 500 Index as measured by Standard Deviation.
Six-Month Market Review
During the first six months of 1997, the S&P 500 has appreciated almost as
much as it did during all of 1996. The rapid rise in the S&P 500 during the
second quarter of this year caught most analysts by surprise. It is always very
tempting during such rapid advances to make the portfolio less defensive.
However, doing so would violate your Fund's investment philosophy of providing
equity market exposure with less than average volatility. By maintaining a
defensive posture your Fund is able to produce relatively predictable and
consistent results in a variety of different market environments.
The past two and one-half years have seen unprecedented growth in the stock
market. We, along with many other analysts, believe the market is overvalued by
historical standards. However, with inflation worldwide very low and the
continuing emergence of a global economy, one would expect continued growth. As
we evaluate the levels of call option premiums, investors expect continued
growth over the short term (three months). Beyond that, call premium levels
suggest a less bullish stance and more uncertainty in the market. Because no one
knows with certainty which direction the market will move, your Fund continues
committed to its proven strategy of remaining virtually fully invested in a
well-diversified portfolio of higher quality stocks on which options are sold.
Your Fund is well-positioned to protect against market declines and to gain from
market advances.
COMPLETE INVESTMENT RECORD FROM INCEPTION 7/1/78 TO 6/30/97
(PERCENTAGE)
<TABLE>
<CAPTION>
THE DEFENSIVE EQUITY
PORTFOLIO
OF THE
ANALYTIC OPTIONED EQUITY FUND S&P 500 INDEX
----------------------------- --------------
<S> <C> <C>
Average Annual Compound Total Return 11.65 16.80
Standard Deviation (Risk Level) 8.98 14.54
Beta 0.57 1.00
</TABLE>
<PAGE>
We are pleased to report that your Fund was featured in the May issue of
MONEY MAGAZINE. In an article entitled "Funds That Refuse To Lose", MONEY
evaluated 386 mutual funds that have had the same portfolio manager for the past
10 years. Only 10 of those funds had not lost money over that 10 year period
including your Fund. We believe that the unique approach utilized by your Fund
makes it an integral part of your overall asset allocation.
Should you ever have any questions regarding your Fund's investment strategy
or results, please call us at 1-800-374-2633.
WE APPRECIATE AND THANK YOU FOR INVESTING WITH US.
<TABLE>
<S> <C>
/s/ Harindra de Silva /s/ Charles L. Dobson
Harindra de Silva, Ph.D., CFA Charles L. Dobson
President Executive Vice President & Portfolio Manager
</TABLE>
*The investment returns quoted in this letter represent past returns, net of
all fees and expenses. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
2
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO OF ANALYTIC OPTIONED EQUITY FUND
TOTAL RETURN
GROWTH OF $10,000 INVESTMENT 7/1/87--6/30/97
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THOUSANDS AOEF S & P 500 CPI
<S> <C> <C> <C>
Jun-87 $10,000 $10,000 $10,000
Sep-87 $10,399 $10,662 $10,126
Dec-87 $9,229 $8,249 $10,165
Mar-88 $9,683 $8,734 $10,262
Jun-88 $10,176 $9,310 $10,394
Sep-88 $10,358 $9,346 $10,552
Dec-88 $10,669 $9,636 $10,614
Mar-89 $11,120 $10,313 $10,772
Jun-89 $11,648 $11,221 $10,931
Sep-89 $12,415 $12,416 $11,010
Dec-89 $12,561 $12,671 $11,107
Mar-90 $12,513 $12,288 $11,336
Jun-90 $12,786 $13,061 $11,442
Sep-90 $11,841 $11,261 $11,689
Dec-90 $12,755 $12,269 $11,785
Mar-91 $13,621 $14,055 $11,891
Jun-91 $13,632 $14,026 $11,979
Sep-91 $14,132 $14,781 $12,085
Dec-91 $14,450 $16,017 $12,147
Mar-92 $14,509 $15,608 $12,270
Jun-92 $14,769 $15,915 $12,349
Sep-92 $14,947 $16,408 $12,446
Dec-92 $15,342 $17,245 $12,499
Mar-93 $15,893 $17,984 $12,649
Jun-93 $16,009 $18,077 $12,719
Sep-93 $16,269 $18,539 $12,781
Dec-93 $16,373 $18,968 $12,842
Mar-94 $16,058 $18,244 $12,966
Jun-94 $16,265 $18,319 $13,036
Sep-94 $16,875 $19,221 $13,160
Dec-94 $16,777 $19,216 $13,186
Mar-95 $17,818 $21,087 $13,336
Jun-95 $18,849 $23,088 $13,433
Sep-95 $19,749 $24,923 $13,494
Dec-95 $20,392 $26,408 $13,521
Mar-96 $21,253 $27,844 $13,714
Jun-96 $22,056 $29,101 $13,802
Sep-96 $22,567 $29,991 $13,899
Dec-96 $23,592 $32,502 $13,970
Mar-97 $23,903 $33,350 $14,093
Jun-97 $26,305 $39,173 $14,106
Average Annual Compound Total Return
Since Inception 5 Years 10 Years
AOEF 11.7 12.2 10.1
S&P 500 16.8 19.8 14.7
Past performance is not predictive of future
performance.
</TABLE>
YEARLY RISK COMPARISON
1/1/87--12/31/96
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AOEF S & P 500
<S> <C> <C>
87 17.5791 36.6951
88 3.17386 5.6692
89 4.49586 7.38831
90 12.5315 20.5969
91 5.63219 12.3046
92 1.88552 6.48213
93 2.74096 3.08515
94 4.91682 7.15594
95 2.62219 3.4785
96 1.9678 4.48378
Standard Deviation, %
</TABLE>
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
Please note that one cannot invest in an unmanaged index.
The investment returns quoted represent past returns, net of all fees and
expenses. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
3
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Outstanding Options
-------------------------------------------------------
Investments Market Value
----------------------- --------------------
Number of Market Shares Expiration Exercise Options Options
COMMON STOCKS Shares Value Optioned Date Price Bought Sold
--------- ----------- --------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
AEROSPACE & DEFENSE--2.38% OF NET ASSETS
Boeing Co. 10,000 $ 530,625 5,000 Aug '97 $ 52.50 $ $ 15,625
5,000 Nov '97 60.00 10,000
McDonnell Douglas Corp. 4,000 274,000 4,000 Aug '97 70.00 11,750
Northrop Grumman Corp. 3,000 263,437 3,000 Aug '97 80.00 26,437
Raytheon Co. 5,000 255,000 5,000 Nov '97 50.00 19,063
----------- ----------
1,323,062 82,875
----------- ----------
AUTO RELATED--0.73%
Goodyear Tire & Rubber Co. 3,000 189,937 3,000 Jul '97 55.00 25,125
T R W, Inc. 4,000 227,250 4,000 Jul '97 55.00 8,750
----------- ----------
417,187 33,875
----------- ----------
AUTOS & TRUCKS--1.79%
Chrysler Corp. 7,000 229,752 7,000 Oct '97 35.00 7,000
Ford Motor Co. 6,000 226,565 4,500 Dec '97 40.00 9,000
General Motors Corp. 9,100 506,822 5,000 Dec '97 60.00 10,625
4,100 Sep '97 60.00 4,100
----------- ----------
963,139 30,725
----------- ----------
BANKS/SAVINGS & LOANS--7.70%
Banc One Corp. 5,500 266,406 2,000 Nov '97 45.00 11,750
Bank of New York, Inc. 8,700 378,450 4,000 Oct '97 40.00 20,250
1,900 Jan '98 50.00 2,494
Bankamerica Corp. 10,000 645,625 10,000 Oct '97 70.00 25,000
Barnett Banks, Inc. 16,000 840,000 8,000 Jul '97 45.00 59,000
8,000 Oct '97 50.00 34,000
Chase Manhattan Corp. 3,000 291,188 3,000 Sep '97 110.00 4,125
Citicorp 6,100 735,431 3,000 July '97 120.00 10,875
3,100 Oct '97 130.00 13,175
Fleet Norstar Financial Group 5,000 316,250 5,000 Oct '97 60.00 27,812
J.P. Morgan & Co. 4,000 417,500 4,000 Sep '97 110.00 12,000
Nationsbank, Corp. 6,000 387,000 6,000 Aug '97 60.00 45,000
----------- ----------
4,277,850 265,481
----------- ----------
BREWERY/SPIRITS & TOBACCO--0.38%
Seagram Co., Ltd. 5,000 201,250 5,000 Aug '97 42.50 2,812
----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
<TABLE>
<CAPTION>
Outstanding Options
-------------------------------------------------------
Investments Market Value
----------------------- --------------------
Number of Market Shares Expiration Exercise Options Options
COMMON STOCKS (CONTINUED) Shares Value Optioned Date Price Bought Sold
--------- ----------- --------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BROADCAST RADIO & TELEVISION--0.34%
Viacom Inc., Class A** 5,800 170,737 5,800 Aug '97 40.00 725
Viacom Inc., Class B** 226 6,780
----------- ----------
177,517 725
----------- ----------
BUILDING/PACKAGE MATERIALS--0.37%
Armstrong World Industries, Inc. 3,000 $ 220,125 3,000 Sep '97 $ 65.00 $ $ 27,750
----------- ----------
CHEMICALS--2.58%
Dow Chemical Co. 3,000 261,375 3,000 Sep '97 85.00 15,750
Du Pont (E.I.) De Nemours Co. 12,000 754,500 12,000 Oct '97 52.50 135,000
Grace (W R) & Co. 800 44,100
Hercules, Inc. 5,000 239,375
Monsanto Co. 5,000 215,313 5,000 Oct '97 40.00 21,250
----------- ----------
1,514,663 172,000
----------- ----------
COMPUTER SERVICES/SOFTWARE--5.55%
Cisco Systems, Inc.** 10,500 704,812 5,500 Jul '97 60.00 44,000
5,000 Oct '97 65.00 41,250
First Data Corp. 5,000 219,688 5,000 Aug '97 40.00 24,688
Microsoft Corp.** 12,000 1,516,500 3,000 Jul '97 125.00 15,000
3,000 Oct '97 125.00 36,000
3,000 Oct '97 130.00 27,000
3,000 Oct '97 140.00 15,375
NCR Corp. 1,218 36,236
Oracle Systems** 9,600 483,600 9,600 Dec '97 55.00 42,000
Seagate Technology** 5,000 175,937
----------- ----------
3,136,773 245,313
----------- ----------
COMPUTERS--2.64%
Compaq Computer Corp.** 4,000 397,000 4,000 Jul '97 95.00 28,000
International Business Machines Corp. 11,800 1,064,213 5,800 Jul '97 85.00 39,150
6,000 Oct '97 100.00 18,000
----------- ----------
1,461,213 85,150
----------- ----------
COSMETICS & PERSONAL CARE--0.88%
Avon Products, Inc. 1,800 127,013
Gillette Co. 4,000 379,000 4,000 Sep '97 85.00 45,500
----------- ----------
506,013 45,500
----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Outstanding Options
-------------------------------------------------------
Investments Market Value
----------------------- --------------------
Number of Market Shares Expiration Exercise Options Options
COMMON STOCKS (CONTINUED) Shares Value Optioned Date Price Bought Sold
--------- ----------- --------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ELECTRONICS--9.61%
Applied Materials, Inc.** 5,000 $ 354,063 5,000 Jul '97 $ 65.00 $ $ 43,750
Emerson Electric Co. 7,000 385,437 7,000 Dec '97 60.00 9,625
General Electric Co. 28,000 1,830,500 5,500 Jul '97 70.00 1,375
12,000 Sep '97 55.00 135,000
5,000 Sep '97 65.00 19,375
5,500 Dec '97 70.00 16,500
Hewlett-Packard Co. 13,000 728,000 5,000 Aug '97 60.00 5,000
4,000 Nov '97 55.00 20,500
4,000 Nov '97 60.00 13,000
Intel Corp. 10,000 1,418,125 5,000 Jul '97 150.00 10,000
5,000 Jul '97 155.00 5,625
Motorola, Inc. 9,000 684,000 4,500 Jan '97 75.00 39,375
4,500 Jul '97 60.00 76,500
----------- ----------
5,400,125 395,625
----------- ----------
ELECTRIC/GAS/WATER UTILITIES--3.17%
American Electric Power Co. 5,000 210,000
Consolidated Edison of New York 3,300 97,144
Dominion Resources, Inc. 5,000 183,125
Duke Power Co. 5,000 239,688
F P L Group, Inc. 5,000 230,312 5,000 Sep '97 50.00 1,250
P G & E Corp. 8,000 194,000
Public Service Enterprise Group, Inc. 6,000 150,000
Southern Co. 16,000 350,000
----------- ----------
1,654,269 1,250
----------- ----------
ENTERTAINMENT/ADVERTISING--1.04%
The Walt Disney Co. 7,000 561,750 3,500 Jul '97 80.00 4,813
3,500 Oct '97 80.00 14,875
----------- ----------
561,750 19,688
----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
<TABLE>
<CAPTION>
Outstanding Options
-------------------------------------------------------
Investments Market Value
----------------------- --------------------
Number of Market Shares Expiration Exercise Options Options
COMMON STOCKS (CONTINUED) Shares Value Optioned Date Price Bought Sold
--------- ----------- --------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL SERVICES & BROKERS--3.37%
American Express Co. 3,300 $ 245,850 3,300 Jul '97 $ 70.00 $ $ 18,150
Federal Home Loan Mortgage Corp. 5,000 171,875 5,000 Jul '97 32.50 15,000
Federal National Mortgage Association 7,000 305,375 7,000 Dec '97 50.00 10,063
Merrill Lynch & Co. 12,000 715,500 12,000 Jan '98 65.00 52,500
Morgan Stanley, Dean Witter, Discover & Co. 10,000 430,625 5,000 Jul '97 45.00 2,500
5,000 Oct '97 45.00 13,437
----------- ----------
1,869,225 111,650
----------- ----------
FOOD--1.53%
Heinz (H.J.) Co. 1,500 69,188
Kellogg Co. 5,000 428,125 5,000 Sep '97 90.00 15,937
Wrigley Wm. Jr. Co. 5,000 335,000 5,000 Sep '97 65.00 21,563
----------- ----------
832,313 37,500
----------- ----------
FOOD PROCESSING & WHOLESALE--6.59%
Campbell Soup Co. 10,000 500,000 5,000 Nov '97 50.00 14,062
5,000 Nov '97 55.00 5,000
Coca-Cola Co. 22,000 1,485,000 7,000 Aug '97 65.00 47,250
5,000 Aug '97 70.00 15,625
5,000 Nov '97 70.00 28,125
5,000 Nov '97 75.00 16,250
Conagra, Inc. 2,000 128,250 2,000 Sep '97 60.00 12,250
Pepsico, Inc. 16,000 601,000 6,000 Jul '97 32.50 33,750
5,000 Jul '97 40.00 8,750
5,000 Oct '97 35.00 19,687
Philip Morris Companies, Inc. 21,000 931,875 7,500 Sep '97 48.375 10,781
7,500 Sep '97 55.00 3,750
----------- ----------
3,646,125 215,280
----------- ----------
FOREST PRODUCTS & PAPER--1.36%
International Paper Co. 5,000 242,812 5,000 Oct '97 45.00 25,938
Kimberly Clark Corp. 10,000 497,500 5,000 Jul '97 55.00 1,094
5,000 Oct '97 57.50 3,750
----------- ----------
740,312 30,782
----------- ----------
HOME--CONSTRUCTION/TOOLS/FURNISHING--0.50%
Whirlpool Corp. 5,000 272,812 5,000 Sep '97 55.00 12,188
----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Outstanding Options
-------------------------------------------------------
Investments Market Value
----------------------- --------------------
Number of Market Shares Expiration Exercise Options Options
COMMON STOCKS (CONTINUED) Shares Value Optioned Date Price Bought Sold
--------- ----------- --------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
HOUSEHOLD PRODUCTS/WARES--2.07%
Clorox Co. 2,500 $ 330,000 2,500 Jul '97 $125.00 $ $ 19,375
Procter & Gamble Co. 6,000 847,500 3,000 Jul '97 125.00 47,250
3,000 Oct '97 135.00 35,250
----------- ----------
1,177,500 101,875
----------- ----------
INSURANCE--3.94%
Allstate Corp. 5,070 370,110 5,000 Jul '97 65.00 50,625
American International Group, Inc. 3,000 448,125 3,000 Jan '98 150.00 33,000
Cigna Corp. 3,500 621,250 3,500 Jul '97 165.00 46,156
Loews Corp. 4,000 400,500 4,000 Sep '97 110.00 8,000
Torchmark Corp. 900 64,125
Travelers Group, Inc. 5,000 315,313 5,000 Sep '97 60.00 30,625
----------- ----------
2,219,423 168,406
----------- ----------
MACHINE CONSTRUCTION/DIVERSIFIED--0.46%
Deere & Co. 5,000 274,375 5,000 Dec '97 50.00 36,563
----------- ----------
MEDICAL SUPPLIES & SERVICES--1.78%
Becton Dickinson & Co. 6,000 303,750 6,000 Dec '97 55.00 13,500
C.R. Bard, Inc. 5,000 181,562 5,000 Jul '97 30.00 33,750
Columbia HCA/Healthcare Corp. 7,500 294,844 2,500 Aug '97 45.00 1,094
5,000 Nov '97 45.00 2,969
Fresensius Medical Care** 877 25,543
Fresensius Medical Care-Preferred Shares** 800 46
United States Surgical Corp. 5,000 186,250 5,000 Oct '97 37.50 14,375
----------- ----------
991,995 65,688
----------- ----------
METALS & MINING--0.63%
Aluminum Co. of America 3,000 226,125 3,000 Jul '97 75.00 8,625
Barrick Gold, Corp. 5,000 110,000 5,000 Jul '97 25.00 312
----------- ----------
336,125 8,937
----------- ----------
MISCELLANEOUS MANUFACTURING--2.10%
Allied Signal Corp. 5,000 420,000 5,000 Sep '97 75.00 51,250
Eastman Kodak Co. 3,500 268,625 3,500 Jul '97 90.00 437
Minnesota Mining & Manufacturing Co. 5,000 510,000 5,000 Jul '97 90.00 53,750
----------- ----------
1,198,625 105,437
----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
<TABLE>
<CAPTION>
Outstanding Options
-------------------------------------------------------
Investments Market Value
----------------------- --------------------
Number of Market Shares Expiration Exercise Options Options
COMMON STOCKS (CONTINUED) Shares Value Optioned Date Price Bought Sold
--------- ----------- --------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE/BUSINESS EQUIPMENT--0.73%
Ikon Office Solutions 2,500 $ 62,344
Xerox Corp. 5,000 394,375 5,000 Oct '97 $ 65.00 $ $ 76,250
----------- ----------
456,719 76,250
----------- ----------
OIL/GAS DOMESTIC--2.48%
Atlantic Richfield Co. 10,000 705,000 10,000 Jul '97 135.00 35,000
El Paso Natural Gas Co. 586 32,230
Enron Corp. 5,000 204,063 5,000 Oct '97 40.00 12,188
Pennzoil Co. 2,000 153,500 1,000 Jul '97 55.00 21,875
Tenneco, Inc. 6,300 284,681 6,300 Nov '97 45.00 16,931
----------- ----------
1,379,474 85,994
----------- ----------
OIL/GAS INTERNATIONAL--6.35%
Amoco Corp. 4,500 391,219 4,500 Nov '97 90.00 15,750
Chevron Corp. 5,000 369,687 5,000 Dec '97 80.00 10,312
Exxon Corp. 25,000 1,537,500 4,000 Jul '97 55.00 27,500
9,000 Jul '97 57.50 36,000
10,000 Oct '97 57.50 56,250
2,000 Oct '97 60.00 8,500
Mobil Corp. 12,000 838,500 12,000 Nov '97 65.00 90,000
Texaco, Inc. 4,000 435,000 4,000 Oct '97 110.00 22,500
----------- ----------
3,571,906 266,812
----------- ----------
OIL EQUIPMENT/EXPLORATION & SERVICES--0.70%
Halliburton Co. 5,000 396,250 5,000 Oct '97 80.00 31,250
----------- ----------
PAPER & PACKAGING--0.04%
Unisource Worldwide, Inc. 1,250 20,000
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Outstanding Options
-------------------------------------------------------
Investments Market Value
----------------------- --------------------
Number of Market Shares Expiration Exercise Options Options
COMMON STOCKS (CONTINUED) Shares Value Optioned Date Price Bought Sold
--------- ----------- --------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PHARMACEUTICAL & BIOTECHNOLOGY--9.95%
Allergan, Inc. 5,100 $ 162,244 5,100 Oct '97 $ 30.00 $ $ 18,806
American Home Products Corp. 6,000 459,000 6,000 Jul '97 65.00 70,500
Amgen, Inc. 5,000 290,625 5,000 Jul '97 70.00 625
Bristol Myers Squibb Co. 10,000 810,000 5,000 Jul '97 80.00 16,250
5,000 Sep '97 70.00 60,625
Eli Lilly & Co. 10,000 1,093,125 5,000 Oct '97 85.00 129,375
5,000 Oct '97 90.00 103,750
Johnson & Johnson 15,000 965,625 5,000 Jul '97 55.00 45,000
5,000 Jul '97 60.00 21,875
5,000 Oct '97 60.00 31,250
Merck & Co. 7,500 776,250 7,500 Jul '97 95.00 65,625
Molecular Biosystems, Inc.** 16 144
Pfizer, Inc. 6,000 717,000 3,000 Aug '97 120.00 19,125
3,000 Aug '97 130.00 8,438
Warner-Lambert Co. 5,000 621,250 5,000 Jul '97 100.00 120,000
----------- ----------
5,895,263 711,244
----------- ----------
PRINT AND PUBLISHING--0.51%
Times Mirror Co., Class A 5,000 276,250 5,000 Sep '97 60.00 9,062
----------- ----------
RAILROAD/TRUCKING/MISCELLANEOUS--0.26%
C.S.X. Corp. 2,000 111,000
Newport News Shipbuilding 1,260 24,491
-----------
135,491
-----------
RESTAURANT & LODGING--1.09%
Hilton Hotels Corp. 10,000 265,625 5,000 Jul '97 30.00 625
5,000 Oct '97 30.00 2,969
McDonald's Corp. 3,500 169,094 3,500 Sep '97 55.00 1,313
Mirage Resorts, Inc.** 5,800 146,450 5,800 Aug '97 25.00 8,700
----------- ----------
581,169 13,607
----------- ----------
RETAIL--GENERAL/DEPARTMENT--3.18%
Dayton-Hudson Corp. 9,000 478,688 4,500 Jul '97 45.00 38,250
4,500 Oct '97 45.00 42,188
Gap, Inc 7,000 272,125 7,000 Sep '97 35.00 38,500
J.C. Penney Co. 5,500 287,031 5,500 Nov '97 55.00 7,047
Nordstrom, Inc. 5,000 245,312 5,000 Jul '97 45.00 19,375
Sears Roebuck & Co. 10,000 537,500 5,000 Jul '97 55.00 4,375
5,000 Oct '97 55.00 15,625
----------- ----------
1,820,656 165,360
----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
<TABLE>
<CAPTION>
Outstanding Options
-------------------------------------------------------
Investments Market Value
----------------------- --------------------
Number of Market Shares Expiration Exercise Options Options
COMMON STOCKS (CONTINUED) Shares Value Optioned Date Price Bought Sold
--------- ----------- --------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
RETAIL--GROCERY/DRUG--0.34%
Winn-Dixie Stores, Inc. 5,000 $ 186,250 5,000 Jul '97 $ 35.00 $ $ 11,250
----------- ----------
SPECIALTY RETAIL/WHOLESALE--1.21%
Home Depot, Inc. 5,000 344,687 5,000 Nov '97 60.00 56,250
NIKE, Inc. 6,000 350,250 6,000 Jul '97 60.00 9,000
----------- ----------
694,937 65,250
----------- ----------
TELECOMMUNICATION UTILITIES--8.20%
American Telephone & Telegraph 19,500 683,719
Ameritech Corp. 10,000 679,375 5,000 Oct '97 70.00 13,125
Bell Atlantic Corp. 5,000 379,375
Bellsouth Corp. 14,400 667,800
G T E Corp. 7,500 329,062
M C I Communications 10,000 382,813
Nynex Corp. 8,500 489,813
SBC Communications, Inc. 9,000 556,875
U S West, Inc. 3,000 113,062
----------- ----------
4,281,894 13,125
----------- ----------
TELECOMMUNICATIONS & EQUIPMENT--0.72%
Lucent Technologies, Inc. 15 1,081
Northern Telecom, Ltd. 5,000 455,000 5,000 Sep '97 75.00 81,875
----------- ----------
456,081 81,875
----------- ----------
TRANSPORTATION--0.66%
Union Pacific Corp. 5,000 352,500 5,000 Aug '97 70.00 7,500
----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND JUNE 30, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Outstanding Options
-------------------------------------------------------
Investments Market Value
----------------------- --------------------
Number of Market Shares Expiration Exercise Options Options
COMMON STOCKS (CONTINUED) Shares Value Optioned Date Price Bought Sold
--------- ----------- --------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
WASTE DISPOSAL--0.20%
Waste Management Inc. 3,500 $ 112,437 3,500 Aug '97 $ 32.50 $ $ 6,344
----------- ----------
TOTALS $55,991,043 $3,847,998
----------- ----------
----------- ----------
TOTAL COMMON STOCKS--107.50%
(Cost $39,164,501) 55,991,043
TOTAL OPTIONS SOLD--(7.39%)
(Premiums ($2,107,212)) (3,847,998)
CASH EQUIVALENTS--0.05%
SEI Daily Income Prime Obligation Fund
5.44% (Cost 27,534) 27,534
EXCESS OTHER LIABILITIES OVER ASSETS
(NET)--(0.16%) (84,540)
-----------
NET ASSETS--100% $52,086,039
-----------
-----------
</TABLE>
**NON-INCOME PRODUCING SECURITY
________________________________________________________________________________
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
Percent of Percent of
Net Assets Net Assets
---------- ----------
<S> <C> <C> <C>
1. General Electric Co. 3.2% 6. International Business Machines Corp. 1.9%
2. Microsoft Corp. 2.7 7. Philip Morris Companies, Inc. 1.8
3. Exxon Corp. 2.7 8. Johnson & Johnson 1.7
4. Intel Corp. 2.7 9. Eli Lilly & Co. 1.7
5. Coca Cola Co. 2.6 10. Procter & Gamble Co. 1.5
</TABLE>
*REDUCED BY OPTIONS SOLD
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Securities portfolio at market value (identified cost $39,164,501)................................. $55,991,043
Cash equivalents................................................................................... 27,534
Accrued interest receivable........................................................................ 12,416
Receivable for investments sold.................................................................... 107,885
Receivable for portfolio shares sold............................................................... 9,768
Dividends receivable............................................................................... 71,848
-----------
Total assets..................................................................................... 56,220,494
-----------
LESS LIABILITIES:
Options outstanding at market value (premiums received $2,107,212)................................. 3,847,998
Accrued expenses................................................................................... 39,018
Payable for investments purchased.................................................................. 72,915
Payable for shares redeemed........................................................................ 36,826
Dividends payable.................................................................................. 1,980
Payable to custodian bank.......................................................................... 135,718
-----------
Total liabilities................................................................................ 4,134,455
-----------
NET ASSETS........................................................................................... $52,086,039
-----------
-----------
REPRESENTED BY:
Paid in capital.................................................................................... $35,612,568
Undistributed net investment income................................................................ 22,881
Undistributed net realized gains................................................................... 1,364,833
Net unrealized appreciation of investments......................................................... 15,085,757
-----------
$52,086,039
-----------
-----------
Net asset value, purchase and redemption price per outstanding capital share (100,000,000 shares of
no par capital shares authorized, 3,261,064 capital shares outstanding).......................... $ 15.97
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
-------------- --------------------
<S> <C> <C>
OPERATIONS:
Net investment income..................................................... $ 225,297 $ 694,100
Net realized gain on investments and options.............................. 1,364,428 2,783,447
Change in unrealized appreciation on investments and options.............. 4,093,377 3,607,945
-------------- --------------------
Increase in net assets from operations.................................. 5,683,102 7,085,492
-------------- --------------------
DISTRIBUTION TO SHAREHOLDERS:
From net investment income................................................ (202,416) (700,644)
From net realized gains................................................... -- (2,598,524)
-------------- --------------------
Decrease in net assets from distributions............................... (202,416) (3,299,168)
-------------- --------------------
FUND SHARE TRANSACTIONS:
Proceeds from sales of 307,200 and 865,241 capital shares for six months
ended June 30, 1997 and year ended December 31, 1996, respectively...... 4,659,834 11,970,173
Proceeds from 11,775 and 192,456 capital shares issued upon reinvestment
of distributions for six months ended June 30, 1997 and year ended
December 31, 1996, respectively......................................... 176,815 2,761,283
Cost of 706,633 and 624,996 capital shares redeemed for six months ended
June 30, 1997 and year ended December 31, 1996, respectively............ (10,715,100) (8,681,585)
-------------- --------------------
Increase (decrease) in net assets from fund share transactions............ (5,878,451) 6,049,871
-------------- --------------------
Net increase (decrease) in net assets..................................... (397,765) 9,836,195
Net assets, beginning of period......................................... 52,483,804 42,647,609
-------------- --------------------
Net assets, end of period............................................... $ 52,086,039 $ 52,483,804
-------------- --------------------
-------------- --------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................ $ 50,433
Dividend............................................ 516,173
-----------
Total investment income............................. 566,606
-----------
EXPENSES:
Investment advisory and management fees............. 193,933
Administrative Fees................................. 59,022
Audit and tax fees.................................. 17,594
Printing fees....................................... 16,890
Registration fees................................... 21,113
Custodian fees...................................... 15,515
Directors' fees and expenses........................ 7,038
Legal fees.......................................... 4,574
Miscellaneous fees.................................. 5,630
-----------
Net expenses...................................... 341,309
-----------
Net investment income............................. 225,297
-----------
REALIZED & UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND OPTIONS:
Net realized gain on investments.................... 2,572,532
Net realized loss on options........................ (1,208,104)
-----------
Total net realized gain........................... 1,364,428
Net change in unrealized appreciation (depreciation)
on investment and option transactions............. 4,093,377
-----------
Net realized and unrealized gain on investment and
option transactions............................... 5,457,805
-----------
Net increase in net assets from operations........ $ 5,683,102
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Defensive Equity Portfolio of Analytic Optioned Equity Fund, Inc. (the
"Fund"), is registered under the Investment Company Act of 1940, as amended, as
a diversified, no-load, open-end management investment company.
The Fund's investment objective is to obtain a greater long-term total return
and smaller fluctuations in quarterly return from a diversified, hedged common
stock portfolio than would be realized from the same portfolio unhedged. The
Fund attempts to achieve this objective by investing primarily in dividend
paying common stocks on which options are traded on national securities
exchanges, in securities convertible into common stocks, and selling covered
call options and secured put options. The Fund may also hedge its securities by
purchasing put and call options on its portfolio securities, purchasing put and
selling call options on the same securities, and engaging in transactions in
stock index and interest rate futures, stock index options, and options on stock
index and interest rate futures.
The following is a summary of the Fund's significant accounting policies.
SECURITIES VALUATION--Common stocks and outstanding options (collectively
referred to as securities) are stated at market value. Securities traded on
securities exchanges are valued at the last sale price on the day of the
valuation or, in the absence of a sale that day, at the mean between the last
current bid and asked prices. Short-term investments that have remaining
maturities of sixty days or less at time of purchase are valued at amortized
cost, if it approximates market value.
INVESTMENT INCOME AND SECURITIES TRANSACTIONS--Dividend income is recorded on
the ex-dividend date and interest income is accrued as earned. Interest income
on bonds is not reduced by amortization of premium paid but is increased by
amortization of any discount. Securities transactions are accounted for on the
trade date (the date the order to buy or sell is executed). Realized gains or
losses from securities transactions are reported on an identified cost basis for
both financial statement and Federal income tax purposes.
OPTION ACCOUNTING PRINCIPLES--Covered call options and secured put options are
written on the Fund's portfolio in order (i) to achieve, through the receipt of
premiums, a higher long-term return than would be received from the same
portfolio unhedged and (ii) to reduce the fluctuation in this total return. When
the Fund writes a call or put option, an amount equal to the premium received by
the Fund is included in the Fund's Statement of Assets and Liabilities as an
asset and an equivalent liability. The amount of the liability will be
subsequently marked-to-market to reflect the current market value of the option
written. The current market value of a traded option is the last sale price or,
in the absence of a sale, the mean between the last current bid and asked
prices.
When a call expires on its stipulated expiration date, or if the Fund enters
into a closing purchase transaction, the Fund will realize a gain (or loss if
the cost of the closing purchase transaction exceeds the premium
16
<PAGE>
received when the call option was written) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option
will be extinguished. When a call option is exercised, the Fund will realize a
gain or loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
When the Fund writes a put option, cash equal to the exercise price is placed in
an interest-bearing escrow account to secure the outstanding put option. When a
put option expires, or if the Fund enters into a closing purchase transaction,
the Fund will realize a gain or loss on the option transaction, the cash is
released from escrow, and the liability related to such option is extinguished.
When a put option is exercised, the Fund uses the cash in escrow to purchase the
security, the cost of the security is reduced by the premium originally
received, and no gain or loss is recognized.
FUND SHARE VALUATION--Fund shares are sold and redeemed on a continuing basis at
net asset value. Net asset value per share is determined daily as of the close
of trading of the New York Stock Exchange on each day the Exchange is open for
trading by dividing the total value of the Fund's investments and other assets,
less the sum of liabilities and the value of outstanding options, by the number
of Fund shares outstanding.
FEDERAL INCOME TAXES--It is the Fund's intention to continue to comply with the
provisions of the Internal Revenue Code enabling it to qualify as a regulated
investment company and, in the manner provided therein, to distribute all of its
taxable income to its shareholders. Accordingly, no provision for income taxes
has been made.
The cost of investments and options for Federal income tax purposes at June 30,
1997 was approximately $37,085,000. Net unrealized appreciation of $15,086,000
was comprised of aggregate gross unrealized appreciation of $17,601,000 less
aggregate gross depreciation of $2,515,000.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents at June 30, 1997 consist of
cash on deposit and money market funds valued at cost, which approximates market
value.
USE OF ESTIMATES--The financial statements have been prepared in conformity with
generally accepted accounting principles. The preparation of the accompanying
financial statements requires management to make estimates and assumptions that
effect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from these estimates.
2. INVESTMENT ADVISORY AGREEMENT AND "AFFILIATED PERSONS"
Analytic-TSA Global Asset Management, Inc. is the investment adviser (the
"Adviser") of the Fund. The Adviser is a wholly-owned subsidiary of United Asset
Management Corporation, a holding company that purchased all of the voting
common stock of the Adviser on May 9, 1985. The Adviser, subject to the control
and direction of the Fund's board of directors, manages and supervises the
investment operations of the Fund and the composition of its portfolio,
including the writing of options and makes recommendations to the Fund's board
of directors as to investment policies.
As compensation for furnishing investment advisory, management, and other
services, and costs and expenses assumed, pursuant to the Investment Management
Agreement the Fund pays the Adviser an annual fee equal to 0.75% of the first $
100,000,000 of average daily net assets, 0.65% of the next $100,000,000 of
average daily net assets, and 0.55% of average net assets in excess of
$200,000,000. At June 30, 1997, five officers and one director of the Fund are
also officers and director of the Adviser.
17
<PAGE>
3. ADMINISTRATION SERVICES
Effective May 15, 1997, UAM Fund Services, Inc. (the "Administrator"), a
wholly-owned subsidiary of United Asset Management Corporation, provides and
oversees administrative, fund accounting, dividend disbursing and transfer agent
services to the Fund under a Fund Administration Agreement (the "Administration
Agreement"). Pursuant to the Agreement, the Administrator is entitled to receive
annual fees, (computed daily and payable monthly, of 0.19% of the first $200
million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2 billion
of the combined aggregate net assets; plus 0.05% of the combined aggregate net
assets in excess of $3 billion.) The fees are allocated among the portfolios of
other funds administered by UAM Fund Services, Inc. and the Analytic Series
Funds on the basis of their relative net assets and are subject to a graduated
minimum fee schedule per portfolio which rises from $2,000 per month, upon
inception of a portfolio, to $70,000 annually after two years. In addition, the
Administrator receives a Portfolio-specific monthly fee of 0.06% of the average
daily net assets of the Fund. Also effective May 15, 1997 the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), a wholly owned subsidiary of the Chase Manhattan Bank, under
which CGFSC agrees to provide certain services, including but not limited to,
administration, fund accounting, dividend disbursing, and transfer agent
services. Pursuant to the Mutual Funds Services Agreement, the Administrator
pays CGFSC a monthly fee. For the period May 15, 1997 to June 30, 1997, UAM Fund
Services, Inc. earned $11,244 from the Portfolio as Administrator of which
$7,194 was paid to CGFSC for their services.
Prior to May 15, 1997, the Adviser served as the administrator, fund accounting
and transfer agent to the Analytic Funds. For its service, the Adviser received
annual fees, computed daily and payable monthly, based on the number of accounts
and the average daily net assets of each portfolio. For the period January 1,
1997 to May 14, 1997 the Adviser earned $47,778 from the Portfolio as
Administrator.
4. INVESTMENT ACTIVITY
For the six months ended June 30, 1997, the cost basis of purchases and proceeds
of sales of investments aggregated $6,604,718, and $12,670,832 (including
$908,525 premiums for call options exercised), respectively. Transactions in
option contracts written were as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
----------- -------------
<S> <C> <C>
Outstanding at beginning of year.................. 7,582 1,929,290
Options written................................... 12,211 3,228,684
Options terminated in closing purchase
transactions.................................... (6,456) (1,744,491)
Options expired................................... (1,685) (397,746)
Options exercised................................. (4,239) (908,525)
----------- -------------
Outstanding at June 30, 1997...................... 7,413 2,107,212
----------- -------------
----------- -------------
</TABLE>
18
<PAGE>
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31
1997 ----------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
------------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 14.38 $ 13.26 $ 11.12 $ 11.96 $ 11.97 $ 12.29
------------- --------- --------- --------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.07 0.20 0.24 0.31 0.33 0.27
Net realized or unrealized gains (losses) on
investments and options....................... 1.58 1.87 2.14 (0.02) 0.48 0.48
------------- --------- --------- --------- ------- -------
Total from investment operations.............. 1.65 2.07 2.38 0.29 0.81 0.75
------------- --------- --------- --------- ------- -------
LESS DISTRIBUTIONS:
From net investment income...................... 0.06 0.20 0.24 0.31 0.33 0.29
From net realized gains......................... -- 0.75 0.00 0.82 0.49 0.78
------------- --------- --------- --------- ------- -------
Total distributions............................. 0.06 0.95 0.24 1.13 0.82 1.07
------------- --------- --------- --------- ------- -------
Net asset value, end of period.................... $ 15.97 $ 14.38 $ 13.26 $ 11.12 $ 11.96 $ 11.97
------------- --------- --------- --------- ------- -------
------------- --------- --------- --------- ------- -------
TOTAL RETURN...................................... 11.50% 15.66% 21.52% 2.47% 6.73% 6.17%
------------- --------- --------- --------- ------- -------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000).................. $52,086 $ 52,484 $ 42,648 $ 48,254 $76,948 $91,561
Ratio of expenses to average net assets........... 1.32%* 1.34%(1) 1.38%(1) 1.10% 1.07% 1.02%
Ratio of net investment income to average net
assets........................................... 0.87%* 1.43% 1.87% 3.45% 2.51% 2.33%
Portfolio turnover rate........................... 12.41% 43.17% 32.37% 48.71% 36.19% 81.73%
Average commission rate(2)........................ $0.0421 $0.0446 $0.0442
</TABLE>
(1) Gross of expenses paid indirectly through broker arrangements. With the
expense reduction from brokerage arrangements, the ratio of expenses to
average net assets would have been 1.23% and 1.22% for the years ended
December 31, 1996 and 1995, respectively.
(2) The formula for calculating the average commission rate is total commission
paid divided by the total shares purchased and sold. Each option contract is
100 shares.
* Annualized.
19
<PAGE>
<TABLE>
<S> <C>
OFFICERS AND DIRECTORS
CHAIRMAN OF THE
BOARD OF DIRECTORS... Michael F. Koehn
DIRECTOR............. Michael D. Butler
DIRECTOR............. Robertson Whittemore
PRESIDENT............ Harindra de Silva
EXECUTIVE VICE
PRESIDENT AND
SECRETARY............ Charles L. Dobson
TREASURER............ Gregory M. McMurran
SENIOR VICE
PRESIDENT............ Angelo A. Cavello
SENIOR VICE
PRESIDENT............ Marie Nastasi Arlt
</TABLE>
INVESTMENT ADVISOR
Analytic-TSA Global Asset Managment, Inc.
700 South Flower Street, Suite 2400
Los Angeles, CA 90017
TRANSFER AGENT, DIVIDEND DISBURSEMENT AGENT,
AND SHAREHOLDER RELATIONS SERVICING AGENT
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
CUSTODIAN
The Union Bank of California, N.A.
Mutual Fund Services
475 Sansome Street, 11th Floor
San Francisco, CA 94111
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, CA 90071
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
1000 Wilshire Blvd.
Los Angeles, CA 90017
THE DEFENSIVE EQUITY PORTFOLIO
OF ANALYTIC OPTIONED EQUITY FUND
The Analytic Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02108
Phone: (800) 374-2633
ANALYTICFUNDS
THE DEFENSIVE
EQUITY PORTFOLIO
- ----------------------
OF ANALYTIC OPTIONED
EQUITY FUND
SEMI-ANNUAL REPORT
JUNE 30, 1997
MEMBER OF
100% NO-LOAD-TM-
MUTUAL FUND COUNCIL
- ----------------------------------------------------------------
