<PAGE>
N-30D Table of Contents
Frank Russell Investment Company Fund Name N-30D Page
- ------------------------------------------ ----------
Institutional Funds . . . . . . . . . . . . . . . . . . . . . . . 2
Equity I. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Equity II . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Equity III. . . . . . . . . . . . . . . . . . . . . . . . . . 31
Equity Q. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
International . . . . . . . . . . . . . . . . . . . . . . . . 50
Fixed Income I. . . . . . . . . . . . . . . . . . . . . . . . 69
Fixed Income II . . . . . . . . . . . . . . . . . . . . . . . 86
Fixed Income III. . . . . . . . . . . . . . . . . . . . . . . 95
Notes to Financial Statements . . . . . . . . . . . . . . . . 107
Manager, Money Managers and Service Providers . . . . . . . . 117
Russell Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Diversified Equity. . . . . . . . . . . . . . . . . . . . . . 121
Special Growth. . . . . . . . . . . . . . . . . . . . . . . . 134
Equity Income . . . . . . . . . . . . . . . . . . . . . . . . 150
Quantitative Equity . . . . . . . . . . . . . . . . . . . . . 159
International Securities. . . . . . . . . . . . . . . . . . . 171
Diversified Bond. . . . . . . . . . . . . . . . . . . . . . . 191
Volatility Constrained Bond . . . . . . . . . . . . . . . . . 209
Multistrategy Bond. . . . . . . . . . . . . . . . . . . . . . 217
Notes to Financial Statements . . . . . . . . . . . . . . . . 229
Manager, Money Managers and Service Providers . . . . . . . . 241
Specialty Funds . . . . . . . . . . . . . . . . . . . . . . . . . 242
Real Estate Securities. . . . . . . . . . . . . . . . . . . . 245
Emerging Markets. . . . . . . . . . . . . . . . . . . . . . . 252
Equity T. . . . . . . . . . . . . . . . . . . . . . . . . . . 266
Limited Volatility Tax Free . . . . . . . . . . . . . . . . . 274
Money Market. . . . . . . . . . . . . . . . . . . . . . . . . 285
US Government Money Market. . . . . . . . . . . . . . . . . . 292
Tax Free Money Market . . . . . . . . . . . . . . . . . . . . 298
Notes to Financial Statements . . . . . . . . . . . . . . . . 309
Manager, Money Managers and Service Providers . . . . . . . . 317
<PAGE>
FRANK RUSSELL INVESTMENT
COMPANY
Frank Russell Investment Company
is a "series mutual fund" with 28
different investment portfolios.
These financial statements report
on eight Funds, each of which has
distinct investment objectives and
strategies.
FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
Responsible for overall management
and administration of the Funds.
FRANK RUSSELL COMPANY
Consultant to Frank Russell
Investment Management Company.
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
SEMIANNUAL REPORT
JUNE 30, 1997
(UNAUDITED)
TABLE OF CONTENTS
Page
Letter to Our Clients. . . . . . . . . . . . . . . . . 1
Equity I Fund. . . . . . . . . . . . . . . . . . . . . 2
Equity II Fund . . . . . . . . . . . . . . . . . . . . 14
Equity III Fund. . . . . . . . . . . . . . . . . . . . 28
Equity Q Fund. . . . . . . . . . . . . . . . . . . . . 36
International Fund . . . . . . . . . . . . . . . . . . 48
Fixed Income I Fund. . . . . . . . . . . . . . . . . . 68
Fixed Income II Fund . . . . . . . . . . . . . . . . . 86
Fixed Income III Fund. . . . . . . . . . . . . . . . . 96
Notes to Financial Statements. . . . . . . . . . . . . 108
Manager, Money Managers and Service Providers. . . . . 118
FRANK RUSSELL INVESTMENT COMPANY - INSTITUTIONAL FUNDS
Copyright -C- Frank Russell Company 1997. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. The performance as of April 1, 1995 is reported gross of
investment advisory fees. For periods thereafter, performance and yields are
reported net of investment advisory fees but gross of investment services fees,
descriptions of which can be obtained from the investment advisor. Investment
services fees and other account expenses will reduce performance (e.g., an
investment services fee of 0.2% of average managed assets will reduce a 10.0%
annual return to 9.8%). The performance quoted represents past performance and,
except for a money market fund, the investment return and principal value of an
investment will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. An investment in a money market fund is neither
insured nor guaranteed by the US government. There can be no assurance that a
money market fund will be able to maintain a stable net asset value of $1.00 per
share. Investments in securities of non-US issuers and foreign currencies
involve investment risks different than those of US issuers; the Prospectus
contains further information and details regarding these risks. Russell Fund
Distributors, Inc., is the distributor of Frank Russell Investment Company.
<PAGE>
FRANK RUSSELL
INVESTMENT COMPANY
909 A Street
Tacoma, Washington 98402
Fax 253-596-2497
800-832-6688
TO OUR CLIENTS
Frank Russell Investment Company is pleased to present its 1997 Semiannual
Report. This report covers information on the Funds' first six months of our
sixteenth year in operation.
We continue to focus on the benefits of multi-manager, multi-style
diversification in structuring our funds. We remain committed to providing our
clients with superior investment solutions across each of our multiple manager
and style funds. These efforts proved worthwhile in the first half of 1997, as
our funds performed well against their benchmarks and attracted many new
investors, creating significant growth in assets.
Frank Russell Investment Management Company continuously evaluates the funds we
offer our clients. Each fund is carefully monitored by Russell's investment
professionals to ensure the most appropriate investment advisors and strategies
are utilized within each fund. The Advisors are monitored by the Frank Russell
Investment Management Company, using the expertise and advice of the consulting
group within Frank Russell Company.
Since the close of 1996 we have increased our number of investment offerings.
In June, we reopened the Money Market Fund to direct client investment. This
Fund received the IBC Money Fund Report Award for the highest 12-month total
return for 1996 in the Taxable Institutions-Only category, from IBC Financial
Data, Inc. in January of this year. We are also pleased to announce the
availability of our five new funds of funds products, the LifePoints-Registered
Trademark-Strategy Funds. Each of these funds invests in a different
combination of other underlying funds which, in turn, invest in different
combinations of stocks, bonds and cash equivalents. We believe these funds
provide our clients with additional flexibility in meeting their goals.
We look forward to the remainder of 1997 and continuing to earn your support by
exceeding your expectations. Thank you for your continued confidence and
investment with Frank Russell Investment Company.
Sincerely,
/S/ George F. Russell, Jr. /s/ Lynn L. Anderson
George F. Russell, Jr. Lynn L. Anderson
Chairman President and Chief Executive Officer
Frank Russell Company Frank Russell Investment Company
All persons dealing with FRANK RUSSELL INVESTMENT COMPANY, a Massachusetts
business trust, must look solely to the Trust for the enforcement of any claim
against the Trust, as the Trustees, officers, agents or Shareholders of the
Trust assume no personal liability whatsoever for the obligations entered
into on behalf of the Trust.
[LOGO]
Tacoma London Sydney
New York Zurich Tokyo
Toronto Paris Auckland
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 91.9%
BASIC INDUSTRIES - 5.5%
Air Products & Chemicals, Inc. 14,000 $ 1,138
Albemarle Corp. 32,500 685
Alumax, Inc. (a) 2,800 106
Aluminum Co. of America 47,300 3,565
ASARCO, Inc. 10,300 315
Bethlehem Steel Corp. (a) 11,500 120
Boliden Ltd. (a) 211,800 1,127
Bowater, Inc. 6,500 301
Consolidated Papers, Inc. 1,500 81
Crown Cork & Seal Co., Inc. 58,500 3,126
Cyprus Amax Minerals Co. 10,400 255
Cytec Industries, Inc. 2,900 108
Dexter Corp. 25,000 800
Dow Chemical Co. 12,500 1,089
Eastman Chemical Co. 32,500 2,064
Ethyl Corp. 7,800 72
FMC Corp. (a) 2,400 191
Fort Howard Corp. (a) 3,000 152
Gaylord Container Corp. Class A (a) 333,800 2,566
Goodrich (B.F.) Co. 10,500 455
Great Lakes Chemical Corp. 600 31
Hexcel Corp. (a) 108,700 1,875
Illinois Tool Works, Inc. 24,800 1,238
IMC Global, Inc. 21,700 760
Inland Steel Industries, Inc. 32,200 841
International Specialty Products (a) 2,400 34
James River Corp. of Virginia 65,100 2,409
Lone Star Technologies, Inc. (a) 58,700 1,680
Lubrizol Corp. 12,800 537
Mark IV Industries, Inc. 12,700 305
Mead Corp. 18,100 1,127
Minnesota Mining & Manufacturing Co. 32,000 3,264
Monsanto Co. 211,400 9,103
Nalco Chemical Co. 4,900 189
Owens-Illinois, Inc. (a) 1,700 53
P.H. Glatfelter Co. 10,000 200
Pechiney S.A. - ADR 41,900 817
Phelps Dodge Corp. 9,000 767
Potlatch Corp. 7,800 353
Praxair, Inc. 49,600 2,778
Precision Castparts Corp. 7,300 435
Reynolds Metals Co. 27,700 1,974
Rhone Poulenc SA - ADR 28,951 1,205
Sealed Air Corp. (a) 4,000 190
Sigma Aldrich Corp. 1,600 56
Sonoco Products Co. 14,500 441
St. Laurent Paperboard, Inc. (a) 65,000 1,012
Stone Container Corp. 88,200 1,262
Union Carbide Corp. 11,200 527
USX-U.S. Steel Group 18,600 652
Vitro Sociedad Anonima - ADR (a) 60,000 675
Westvaco Corp. 38,200 1,201
Whittaker Corp. New (a) 149,400 1,662
Witco Chemical Corp. 17,900 679
----------
58,648
----------
CAPITAL GOODS - 5.3%
AGCO Corp. 5,400 194
Albany International Corp. Class A 51,100 1,150
Alcatel Alsthom Compagnie
Generale d'Electricite - ADR (a) 92,036 2,324
Arrow Electronics, Inc. (a) 8,500 452
Boston Scientific Corp. (a) 31,500 1,935
Briggs & Stratton Corp. 13,500 675
Browning-Ferris Industries, Inc. 400 13
Caterpillar, Inc. 21,900 2,352
Cooper Industries, Inc. 27,200 1,353
Crane Co. 13,300 556
Cummins Engine Co., Inc. 19,700 1,390
DSC Communications Corp. (a) 18,300 407
Exide Corp. 88,400 1,939
Far East Levingston (a) 33,300 113
Foster Wheeler Corp. 47,800 1,936
General Electric Co. 160,700 10,506
Giant Cement Holding, Inc. (a) 33,900 623
Harnischfeger Industries, Inc. 19,900 826
Harsco Corp. 23,800 964
Ingersoll-Rand Co. 47,600 2,939
Johnson Controls, Inc. 31,900 1,310
Kaiser Ventures, Inc. (a) 50,000 550
Magna International, Inc. Class A 32,500 1,956
Mannesmann AG - ADR 3,000 1,337
Martin Marietta Materials, Inc. 300 10
National Service Industries, Inc. 1,200 58
Novellus Systems, Inc. (a) 19,700 1,694
Parker-Hannifin Corp. 29,600 1,796
Philips Electronics - ADR 37,000 2,659
Safeguard Scientifics, Inc. 700 22
SPS Technologies, Inc. (a) 26,600 1,882
Tecumseh Products Co. Class A 15,500 928
Tyco International, Ltd. (a) 87,100 6,059
2 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
U.S. Filter Corp. New (a) 60,100 $ 1,638
USA Waste Services, Inc. (a) 39,500 1,526
Weatherford Enterra, Inc. (a) 9,000 347
Westinghouse Electric Corp. 26,200 605
----------
57,024
----------
CONSUMER BASICS - 19.9%
Abbott Laboratories 52,000 3,471
ALZA Corp. (a) 9,800 284
American Home Products Corp. 101,500 7,765
American Stores Co. 33,000 1,629
Apria Healthcare Group, Inc. (a) 55,000 976
Archer-Daniels-Midland Co. 133,870 3,146
Astra AB Class A - ADR 181,333 3,445
Baxter International, Inc. 87,100 4,551
Bergen Brunswig Corp. Class A 300 8
Beverly Enterprises, Inc. (a) 30,400 494
Biomet, Inc. 67,300 1,253
Bristol-Myers Squibb Co. 120,460 9,757
Campbell Soup Co. 37,600 1,880
Cardinal Health, Inc. 34,570 1,979
Centocor, Inc. (a) 50,100 1,553
Chiquita Brands International, Inc. 53,700 738
ChiRex, Inc. (a) 70,000 831
Chiron Corp. 2,400 50
Coca-Cola Co. (The) 143,400 9,680
Coca-Cola Enterprises, Inc. 63,000 1,449
Colgate-Palmolive Co. 36,400 2,375
Columbia/HCA Healthcare Corp. 225,150 8,851
Corning, Inc. 40,600 2,258
CPC International, Inc. 16,200 1,495
CVS Corp. 18,500 948
Dole Food, Inc. 26,400 1,129
Fletcher's Fine Foods, Ltd. (a) 20,000 190
General Nutrition Companies, Inc. (a) 13,400 374
Genzyme Corp. 7,900 218
Gillette Co. 57,800 5,477
Great Atlantic & Pacific Tea Co., Inc. 17,400 473
Health Management Associates Class A (a) 40,600 1,157
HealthCare COMPARE (a) 16,400 859
HEALTHSOUTH Rehabilitation Corp. 15,600 389
Heinz (H.J.) Co. 1,100 51
Hillenbrand Industries, Inc. 900 43
Hormel (George A.) & Co. 16,800 452
Hudson Foods, Inc. 53,500 873
Humana, Inc. (a) 8,000 185
IBP, Inc. 40,200 935
International Multifoods Corp. 68,400 1,719
Interneuron Pharmaceuticals, Inc. (a) 5,100 103
Interstate Bakeries Corp. 400 24
IVAX Corp. (a) 64,500 722
Johnson & Johnson 151,300 9,740
Lilly (Eli) & Co. 24,000 2,624
Lincare Holdings, Inc. (a) 10,800 464
Matrix Pharmaceutical, Inc. (a) 91,800 602
McCormick & Co., Inc. 3,200 81
McKesson Corp. 18,400 1,426
Medtronic, Inc. 31,450 2,547
Merck & Co., Inc. 115,550 11,959
Mylan Laboratories, Inc. 230,000 3,393
Oxford Health Plans, Inc. (a) 24,100 1,729
PepsiCo, Inc. 283,100 10,634
Pfizer, Inc. 133,550 15,959
Philip Morris Cos., Inc. 568,650 25,234
PhyCor, Inc. (a) 6,200 213
Procter & Gamble Co. 36,300 5,127
Quaker Oats Co. 19,100 857
Quorum Health Group, Inc. (a) 18,500 657
Ralston-Purina Group 11,900 978
RJR Nabisco Holdings Corp. 59,020 1,948
Rykoff-Sexton, Inc. 67,100 1,564
Sara Lee Corp. 39,900 1,661
Schering-Plough Corp. 123,000 5,889
Smithkline Beecham PLC - ADR 40,000 3,665
Standard Commercial Corp. 30,000 521
Tenet Healthcare Corp. (a) 62,850 1,858
Total Renal Care Holdings, Inc. (a) 4,300 173
U.S. Surgical Corp. 29,800 1,110
Unilever NV 16,500 3,597
United Healthcare Corp. 77,800 4,046
Universal Corp. 41,500 1,318
US Bioscience, Inc. (a) 100,563 968
W. R. Grace & Co. 61,600 3,396
Warner-Lambert Co. 11,000 1,367
Watson Pharmaceuticals, Inc. (a) 2,800 118
Weis Markets, Inc. 2,800 80
Wellpoint Health Networks, Inc. Class A (a) 18,806 862
----------
214,604
----------
Equity I Fund 3
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CONSUMER DURABLES - 2.0%
Aktiebolaget Electrolux - ADR 20,000 $ 1,440
Chrysler Corp. 86,400 2,835
Cooper Tire & Rubber Co. 152,800 3,362
Eaton Corp. 9,500 829
Elsag Bailey Process Automation NV (a) 72,500 1,332
Ford Motor Co. 176,300 6,655
Leggett & Platt, Inc. 5,700 245
PACCAR, Inc. 21,800 1,011
Sunbeam Oster, Inc. 27,000 1,019
Whirlpool Corp. 58,000 3,166
----------
21,894
----------
CONSUMER NON-DURABLES - 7.2%
Barry (R.G.) Corp. (a) 116,100 1,408
Bed Bath & Beyond, Inc. (a) 5,300 161
Borders Group, Inc. 6,700 162
Burlington Industries, Inc. (a) 36,100 433
Canandaigua Wine, Inc. Class A (a) 11,200 379
CompUSA, Inc. 13,600 292
Costco Companies, Inc. (a) 10,200 335
Dayton Hudson Corp. 123,200 6,553
Dillard's, Inc. Class A 30,900 1,070
Dollar Tree Stores, Inc. (a) 3,100 156
Eastman Kodak Co. 54,800 4,206
Estee Lauder Companies Class A 1,100 55
Federated Department Stores, Inc. (a) 25,900 900
Fruit of the Loom, Inc. Class A (a) 12,000 372
Gap, Inc. 95,000 3,693
Hills Store Co. (a) 23,426 81
Home Depot, Inc. (The) 95,000 6,549
Ikon Office Solutions, Inc. 49,500 1,234
Intimate Brands, Inc. Class A 1,900 40
Jones Apparel Group, Inc. 30,700 1,466
Kellwood Co. 50,300 1,396
Kmart Corp. (a) 152,600 1,869
Kohl's Corp. (a) 42,700 2,260
Limited, Inc. (The) 165,000 3,341
Liz Claiborne, Inc. 8,400 392
Lowe's Cos., Inc. 58,300 2,164
Mark Bros. Jewelers, Inc. (a) 30,000 368
Mattel, Inc. 263,343 8,921
May Department Stores Co. 36,900 1,744
Michaels Stores, Inc. (a) 53,900 1,142
Newell Co. 15,300 606
NIKE, Inc. Class B 36,500 2,131
Nine West Group, Inc. (a) 19,700 752
Nordstrom, Inc. 1,800 88
Payless ShoeSource, Inc. (a) 9,200 503
PeopleSoft, Inc. 7,700 406
Phar-Mor, Inc. (a) 101,900 631
Pluma, Inc. (a) 13,000 200
Polaroid Corp. 13,100 727
Rayonier, Inc. 2,000 84
Sears Roebuck & Co. 175,300 9,422
Tiffany & Co. 8,100 374
TJX Cos., Inc. 19,100 504
Toys "R" Us, Inc. (a) 105,000 3,675
V.F. Corp. 500 42
Wal-Mart Stores, Inc. 81,600 2,759
Warnaco Group, Inc. Class A 19,300 615
Zale Corp. (a) 50,200 996
----------
77,657
----------
CONSUMER SERVICES - 3.0%
AMR Corp. (a) 22,400 2,072
Boyd Gaming Corp. (a) 81,900 471
Brinker International, Inc. (a) 45,900 654
Carnival Corp. Class A 77,900 3,213
Continental Airlines, Inc. Class B 13,300 465
Cracker Barrel Old Country Store, Inc. 4,200 111
Darden Restaurants, Inc. 18,200 165
Delta Air Lines, Inc. 13,700 1,123
Disney (Walt) Co. 65,600 5,264
Grand Casinos, Inc. (a) 1,200 18
Harrah's Entertainment, Inc. (a) 30,700 560
Hilton Hotels Corp. 32,100 853
International Game Technology 6,200 110
King World Productions, Inc. 32,400 1,134
KLM Royal Dutch Airlines 51,091 1,577
Lone Star Steakhouse & Saloon (a) 500 13
Marriot International, Inc. 9,200 565
MGM Grand, Inc. (a) 6,300 233
Mirage Resorts, Inc. (a) 9,000 227
Northwest Airlines Corp. Class A (a) 84,000 3,056
Promus Hotel Corp. (a) 1,000 39
Servico, Inc. (a) 78,500 1,168
UAL Corp. (a) 121,200 8,673
USAir Group, Inc. (a) 3,000 105
----------
31,869
----------
4 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
ENERGY - 6.5%
Amerada Hess Corp. NPV 63,400 $ 3,523
Amoco Corp. 54,300 4,721
Apache Corp. 34,700 1,128
Ashland, Inc. 9,200 427
Atlantic Richfield Co. 46,200 3,257
Baker Hughes, Inc. 99,600 3,853
Bellwether Exploration Co. (New)(a) 10,000 99
British Petroleum Co. PLC - ADR 87,060 6,519
Burlington Resources, Inc. 12,100 534
Crown Centennial Petroleum Co. Class B (a) 98,000 1,458
Dresser Industries, Inc. 1,200 45
Enron Oil & Gas Co. 12,000 218
ENSCO International, Inc. (a) 8,600 454
Enserch Exploration, Inc. (a) 1,000 11
Exxon Corp. 126,820 7,799
Global Marine, Inc. (a) 2,600 60
Halliburton Co. 1,700 135
Kerr-McGee Corp. 21,300 1,350
LTV Corp. 25,700 366
Lyondell Petrochemical Co. 26,000 567
Mapco, Inc. 29,800 939
McDermott International, Inc. 50,300 1,468
Mobil Corp. 24,100 1,684
Murphy Oil Corp. 21,700 1,058
Noble Drilling Corp. (a) 65,000 1,467
Occidental Petroleum Corp. 38,200 957
Petroleum Heat & Power, Inc. Class A 359,833 967
Phillips Petroleum Co. 74,600 3,264
Rowan Cos., Inc. (a) 18,400 519
Royal Dutch Petroleum Co. 63,200 3,437
Santa Fe International, Corp. (a) 5,500 187
Schlumberger, Ltd. 23,500 2,938
Smith International, Inc. (a) 5,500 334
Sun Co., Inc. 1,200 37
Texaco, Inc. 26,700 2,904
Tosco Corp. 86,200 2,581
Transocean Offshore, Inc. 33,600 2,440
Union Pacific Resources Group, Inc. 3,400 85
Union Texas Petroleum Holdings, Inc. 2,200 45
Unocal Corp. 37,400 1,451
USX-Marathon Group 129,400 3,735
Valero Energy Corp. 33,000 1,195
Western Atlas, Inc. (a) 200 14
----------
70,230
----------
FINANCE - 16.1%
AEGON NV (American Registered) 1,640 115
Aetna, Inc. 53,000 5,426
AFLAC, Inc. 70,000 3,308
Ahmanson (H.F.) & Co. 71,300 3,066
Allmerica Financial Corp. 6,100 243
Allstate Corp. 92,666 6,765
AMBAC, Inc. 12,400 947
American Express Co. 49,600 3,695
American General Corp. 6,088 291
American International Group, Inc. 83,700 12,503
AmSouth Bancorp 38,200 1,444
ARM Financial Group, Inc. Class A (a) 5,300 106
Banc One Corp. 40,330 1,953
BankAmerica Corp. 47,800 3,086
BankBoston Corp. 32,100 2,313
Barnett Banks, Inc. 41,200 2,163
Bear Stearns Cos., Inc. 26,668 912
Beneficial Corp. 10,800 767
Charter One Financial, Inc. 1,500 81
Chase Manhattan Corp. 120,892 11,734
Chubb Corp. (The) 41,700 2,789
Citicorp 43,600 5,257
Coast Savings Financial, Inc. (a) 27,200 1,236
Comerica, Inc. 22,600 1,537
Commerce Bancshares, Inc. 2,150 97
Conseco, Inc. 72,144 2,669
Countrywide Credit Industries, Inc. 47,700 1,488
Danielson Holding Corp. (a) 128,300 1,010
Dime Bancorp, Inc. 16,300 285
Edwards (A.G.), Inc. 17,200 735
Equitable Companies, Inc. 14,900 495
Everest Re Holdings, Inc. 17,600 697
Federal Home Loan Mortgage Corp. 63,600 2,186
Federal National Mortgage Association 166,300 7,255
First America Bank Corp. 1,650 75
First American Corp. 1,600 61
First Chicago NBD Corp. 21,501 1,301
First Empire State Corp. 500 169
First Union Corp. 29,800 2,757
Firstar Corp. 6,500 198
Fleet Financial Group, Inc. 19,100 1,208
General Re Corp. 27,300 4,969
Golden West Financial Corp. 21,100 1,477
Great Western Financial Corp. 40,400 2,172
Green Tree Financial Corp. 14,200 506
Equity I Fund 5
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Hartford Financial Services Group (The), Inc. 9,100 $ 753
Household International Corp. 44,000 5,167
Jefferson-Pilot Corp. 27,261 1,905
Lehman Brothers Holdings, Inc. 27,700 1,122
Liberty Corp. 10,900 444
MBIA, Inc. 16,600 1,873
MBNA Corp. 235,275 8,617
Mercantile Bankshares Corp. 5,600 223
Mercury General Corp. 2,300 167
Merrill Lynch & Co., Inc. 114,000 6,797
MGIC Investment Corp. 20,600 988
Money Store, Inc. 5,300 151
Morgan Stanley, Dean Witter Discover and Co. 188,550 8,119
National City Corp. 15,700 824
NationsBank Corp. 75,500 4,870
Northern Trust Corp. 21,100 1,021
Norwest Corp. 29,800 1,676
Ohio Casualty Corp. 10,400 455
Old Republic International Corp. 69,650 2,111
Pacific Century Financial Corp. 16,800 777
PaineWebber Group, Inc. 40,900 1,432
PNC Bank Corp. 34,200 1,424
Progressive Corp. 9,600 835
Provident Companies, Inc. 25,771 1,379
Providian Financial Corp. 6,200 199
Republic New York Corp. 1,800 194
Robert Half International, Inc. (a) 1,500 71
Salomon, Inc. 40,500 2,253
Scor SA - ADR 14,900 605
Signet Banking Corp. 26,700 961
SouthTrust Corp. 58,400 2,416
Star Banc Corp. 6,400 270
State Street Corp. 13,200 611
Student Loan Marketing Association 3,900 495
SunAmerica, Inc. 1,000 49
SunTrust Banks, Inc. 60,000 3,304
Torchmark Corp. 12,400 884
Transamerica Financial Corp. 14,100 1,319
Transatlantic Holdings, Inc. 5,700 566
U.S. Bancorp of Oregon 4,900 314
Uniao de Bancos Brasileiros S.A. - GDR (a) 29,700 1,103
Unitrin, Inc. 1,200 73
Wachovia Corp. 14,600 851
Zurich Reins Centre Holdings, Inc. 4,100 161
----------
173,376
----------
GENERAL BUSINESS - 3.6%
AccuStaff, Inc. (a) 32,400 767
ACNielsen Corp. (a) 27,100 532
America Online, Inc. (a) 19,300 1,074
American Greetings Corp. Class A 21,700 803
Ascend Communications, Inc. (a) 69,200 2,716
Automatic Data Processing, Inc. 148,100 6,961
Central Newspapers, Inc. Class A 12,700 910
Clear Channel Communications, Inc. 16,000 984
Comdisco, Inc. 16,200 421
Cox Communications, Inc. Class A (a) 51,600 1,238
CUC International, Inc. 56,800 1,466
Ecolab, Inc. 2,700 129
Figgie International Holdings, Inc. Class A (a) 80,300 1,084
First Data Corp. 68,900 3,027
GTECH Holdings Corp. (a) 1,800 58
Harland (John H.) Co. 13,800 315
Knight-Ridder, Inc. 1,200 59
Manpower, Inc. 12,500 556
Medaphis Corp. (a) 2,100 21
Meredith Corp. 9,300 270
Metromedia International Group, Inc. (a) 27,500 349
New York Times Co. Class A 64,200 3,178
Nextel Communications, Inc. Class A (a) 3,300 62
Olsten Corp. 3,900 76
Omnicom Group, Inc. 10,400 641
Quintiles Transnational Corp. (a) 13,200 917
SBC Communications, Inc. 32,000 1,980
Scripps (E.W.) Co. Class A 900 37
Service Corp. International 39,400 1,295
Sinclair Broadcast Group, Inc. Class A (a) 900 27
Staples, Inc. (a) 50,900 1,177
Stewart Enterprises, Inc. Class A 3,700 154
Tele-Communications, Inc. Class A 75,000 1,111
Tele-Communications, Inc. Series A New 49,450 1,174
Tribune Co. 46,000 2,211
Unisource Worldwide, Inc. 71,600 1,147
Viad Corp. 2,600 51
----------
38,978
----------
6 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
MISCELLANEOUS - 0.9%
American Real Estate Partners, L.P. (a) 140,242 $ 1,893
Apollo Group, Inc. Class A (a) 1,900 67
Boston Properties, Inc. (a) 31,100 855
Canadian Hotel Income Properties (a) 200,600 1,017
Catellus Development Corp. (a) 100,700 1,825
Chris Craft Industries, Inc. 2,300 111
Great Lakes REIT, Inc. 21,700 357
Koger Equity, Inc. 20,000 365
Mercer International, Inc. 63,000 595
Newhall Land & Farming Co. 58,800 1,272
Public Storage, Inc. 7,500 219
Waste Management, Inc. New (a) 13,300 427
----------
9,003
----------
SHELTER - 0.2%
Armstrong World Industries, Inc. 6,500 477
Centex Corp. 16,800 683
Johns Manville Corp. 10,200 120
USG Corp. (a) 22,600 825
Vulcan Materials Co. 1,400 110
----------
2,215
----------
TECHNOLOGY - 13.9%
ADC Telecommunications, Inc. 4,600 154
Altera Corp. 32,500 1,641
AMP, Inc. 8,000 334
AVX Corp. 600 16
BE Aerospace, Inc. (a) 107,300 3,380
Boeing Co. 90,100 4,781
Cadence Design Systems, Inc. (a) 14,500 486
CAE, Inc. 96,700 770
Cambridge Technology Partners, Inc. (a) 4,700 148
CDW Computer Centers, Inc. 2,700 143
Cisco Systems, Inc. (a) 192,100 12,895
COMPAQ Computer Corp. (a) 131,800 13,081
Curtiss-Wright Corp. 16,900 984
Dell Computer Corp. 37,400 4,390
Doncasters PLC - ADR (a) 1,000 23
Electronic Data Systems Corp. 80,000 3,280
Ericsson (LM) Telephone Co. Class B - ADR 71,783 2,826
General Dynamics Corp. 6,200 465
Harris Corp. 2,500 210
HBO & Co. 33,700 2,321
Hewlett-Packard Co. 158,000 8,848
Honeywell, Inc. 35,000 2,656
Imation Corp. (a) 41,900 1,105
Information Resources, Inc. (a) 40,000 565
Intel Corp. 130,100 18,417
International Business Machines Corp. 94,500 8,523
Iomega Corp. (a) 11,300 225
KLA Instruments Corp. (a) 28,700 1,399
Komag, Inc. (a) 21,300 349
Learning Co., Inc. (The)(a) 166,900 1,565
Lexmark International Group, Inc. Class A (a) 19,600 595
Litton Industries, Inc. (a) 6,400 309
Lockheed Martin Corp. 34,200 3,542
Longview Fibre Co. 50,300 836
LSI Logic Corp. (a) 48,300 1,546
MEMC Electronic Materials, Inc. (a) 46,300 1,516
Micro Warehouse, Inc. (a) 9,500 163
Micron Electronics, Inc. (a) 14,000 249
Microsoft Corp. 105,600 13,352
Molex, Inc. Class A 18,500 642
National Semiconductor Corp. (a) 10,000 306
Northern Telecom, Ltd. 23,200 2,111
Northrop Grumman Corp. 25,500 2,239
Oracle Systems Corp. (a) 50,850 2,558
Quantum Corp. 15,600 317
Read-Rite Corp. (a) 5,900 123
Rockwell International Corp. 12,600 743
SCI Systems, Inc. (a) 7,000 446
Seagate Technology 59,500 2,094
Sensormatic Electronics Corp. 87,000 1,120
Sequent Computer Systems, Inc. (a) 43,500 916
Siemens AG - ADR New (a) 4,300 253
Sun Microsystems, Inc. 11,000 409
Sybase, Inc. (a) 400 6
Symbol Technologies, Inc. 14,600 491
Tandem Computers, Inc. (a) 10,400 211
Tandy Corp. 11,300 633
Tektronix, Inc. 3,400 204
Tellabs, Inc. 19,200 1,070
Teradyne, Inc. (a) 16,500 648
Texas Instruments, Inc. 11,000 925
Thomas & Betts Corp. 5,800 305
TRW, Inc. 23,200 1,318
United Technologies Corp. 28,700 2,382
Xerox Corp. 85,200 6,720
Xilinx, Inc. (a) 47,100 2,308
----------
149,586
----------
Equity I Fund 7
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
TRANSPORTATION - 1.0%
Arkansas Best Corp. (a) 50,000 $ 450
Caliber Systems, Inc. 7,600 283
CNF Transportation, Inc. 10,950 353
Johnstown America Industries, Inc. (a) 50,300 296
Kansas City Southern Industries, Inc. 1,900 123
Nordic American Tanker Shipping, Ltd.
1997 Warrants (a) 375,200 1,876
Norfolk Southern Corp. 29,000 2,922
OMI Corp. (a) 95,400 912
Ryder System, Inc. 98,100 3,237
Tidewater, Inc. 7,800 343
----------
10,795
----------
UTILITIES - 6.8%
Airtouch Communications, Inc. (a) 184,800 5,059
Alltel Corp. 2,900 97
AT&T Corp. 56,013 1,964
Baltimore Gas & Electric Co. 2,100 56
Bell Atlantic Corp. 25,900 1,965
BellSouth Corp. 70,604 3,274
Boston Edison Co. 23,000 607
Calenergy, Inc. (a) 24,200 920
Centerior Energy Corp. 6,900 77
Central Maine Power Co. 37,000 458
Century Telephone Enterprises, Inc. 28,200 950
CMS Energy Corp. 3,300 116
Coastal Corp. 22,100 1,175
Columbia Gas System, Inc. 7,100 463
Delmarva Power & Light Co. 11,800 225
DTE Energy Co. 123,700 3,417
Edison International 177,400 4,413
Enova Corp. 117 3
Enron Corp. 11,900 486
ENSERCH Corp. 26,800 596
Entergy Corp. 130,800 3,581
GPU, Inc. 58,600 2,102
Illinova Corp. 9,400 207
IPALCO Enterprises, Inc. 5,000 156
KU Energy Corp. 6,500 222
Long Island Lighting Co. 45,700 1,051
Lucent Technologies, Inc. 32,000 2,306
MCI Communications Corp. 66,200 2,532
Montana Power Co. 9,100 211
National Fuel & Gas Co. 9,800 411
New England Electric System 2,100 78
New York State Electric & Gas Corp. 54,000 1,127
Niagara Mohawk Power Corp. (a) 259,400 2,221
NICOR, Inc. 18,600 667
NIPSCO Industries, Inc. 4,700 194
Northeast Utilities 53,100 508
NYNEX Corp. 54,300 3,129
OGE Energy Corp. 500 23
Pacific Enterprises 800 27
PacifiCorp. 11,100 244
Peoples Energy Corp. 7,300 273
Pinnacle West Capital Corp. 22,100 664
Potomac Electric Power Co. 57,200 1,323
PP&L Resources, Inc. 4,300 86
Public Service Co. of Colorado 800 33
Public Service Enterprise Group, Inc. 84,300 2,108
Sonat, Inc. 34,200 1,753
Southern New England Telecommunications Corp. 32,400 1,260
Telefonos de Mexico SA Series L - ADR 80,000 3,820
Telephone & Data Systems, Inc. 900 34
U.S. West Communications Group 44,900 1,692
Unicom Corp. 134,800 2,999
Union Electric Co. 10,500 396
United States Cellular Corp. (a) 5,900 175
Western Resources, Inc. 12,000 389
WorldCom, Inc. 277,510 8,862
----------
73,185
----------
TOTAL COMMON STOCKS
(cost $761,404) 989,064
----------
CONVERTIBLE PREFERRED STOCKS - 0.2%
Elsag Bailey Financing Trust (a) 9,300 388
Elsag Bailey Financing Trust (144A) 18,200 760
Glendale Federal Bank Series E 18,400 1,196
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $1,824) 2,344
----------
8 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
PREFERRED STOCKS - 0.6%
Cooper Industries, Inc. 40,400 $ 929
Nokia Corp. - ADR 76,400 5,635
----------
TOTAL PREFERRED STOCKS
(cost $5,693) 6,564
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 6.4%
Frank Russell Investment Company
Money Market Fund
due on demand (b) $ 63,385 63,385
United States Treasury Notes
5.750% due 10/31/97 (c) 5,700 5,704
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $69,089) 69,089
----------
TOTAL INVESTMENTS
(identified cost $838,010)(d) - 99.1% 1,067,061
OTHER ASSETS AND LIABILITIES,
NET - 0.9% 9,268
----------
NET ASSETS - 100.0% $1,076,329
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
PLC - Public Limited Company
144A - Represents private placement security for qualified buyers according to
rule 144A of the Security Act of 1933.
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
S & P 500 Index Futures Contracts
expiration date 09/97 139 $ (413)
S & P 400 Midcap Index Futures Contracts
expiration date 09/97 66 128
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ (285)
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at $5,704 were held as
collateral by the custodian in connection with futures contracts purchased
by the Fund.
The accompanying notes are an integral part of the financial statements.
Equity I Fund 9
<PAGE>
EQUITY I FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $838,010)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 1,067,061
Receivables: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,643
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,495
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 764
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,102,963
LIABILITIES
Payables:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,297
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,466
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 583
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 474
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,634
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,076,329
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,730
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,619
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,044
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (285)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741,912
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,076,329
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($1,076,329,243 divided by 30,936,314 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34.79
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 Equity I Fund
<PAGE>
EQUITY I FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,709
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,018
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,802
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,996
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
----------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,496
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,306
----------------
REALIZED AND UNREALIZED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3) . . . . . . . . . . . . . . . . . . . .
Net realized gain (loss) from: . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,507
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,943 112,450
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,606
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (139) 48,467
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,917
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 166,223
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Equity I Fund 11
<PAGE>
EQUITY I FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,306 $ 12,119
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,450 110,958
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 48,467 65,403
----------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 166,223 188,480
----------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,576) (12,119)
In excess of net investment income . . . . . . . . . . . . . . . . . . . . . . . . -- (104)
Net realized gain on investment. . . . . . . . . . . . . . . . . . . . . . . . . . (27,647) (104,791)
----------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (30,223) (117,014)
----------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . . (21,624) 138,990
----------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 114,376 210,456
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 961,953 751,497
----------------- -----------------
End of period (including undistributed net investment income of
$2,730 at June 30, 1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,076,329 $ 961,953
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Equity I Fund
<PAGE>
EQUITY I FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . $ 30.34 $ 28.00 $ 23.32 $ 24.91 $ 25.00 $ 25.17
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . .17 .42 .52 .62 .60 .61
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . 5.22 5.96 7.71 (.41) 2.18 1.54
---------- ---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations 5.39 6.38 8.23 .21 2.78 2.15
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . (.08) (.42) (.52) (.62) (.60) (.62)
Net realized gain on investments . . . . (.86) (3.62) (3.03) (.94) (2.11) (1.70)
In excess of net realized gain on
investments . . . . . . . . . . . . . . -- -- -- (.24) (.16) --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . (.94) (4.04) (3.55) (1.80) (2.87) (2.32)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . $ 34.79 $ 30.34 $ 28.00 $ 23.32 $ 24.91 $ 25.00
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a)(c) . . . . . . . . . . 18.11 23.58 35.94 0.79 11.61 9.02
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) 1,076,329 961,953 751,497 547,242 514,356 410,170
Ratios to average net assets (%)(b)(c):
Operating expenses . . . . . . . . . . .70 .71 .59 .12 .14 .15
Net investment income. . . . . . . . . 1.07 1.38 1.91 2.52 2.36 2.53
Portfolio turnover rate (%)(b) . . . . . 118.48 99.51 92.04 75.02 91.87 71.14
Average commission rate paid per share
of security ($ omitted). . . . . . . . .0545 .0464 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
(c) For periods prior to April 1, 1995, Fund performance operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
Equity I Fund 13
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 93.3%
BASIC INDUSTRIES - 4.1%
Advanced Technologies Laboratories, Inc. (a) 19,100 $ 817
Agrium, Inc. 54,500 627
AK Steel Holding Corp. 7,900 349
Albemarle Corp. 14,300 301
Alumax, Inc. (a) 8,200 311
Amcast Industrial Corp. 2,100 52
ASARCO, Inc. 17,100 524
Atchison Casting Corp. (a) 6,000 100
Bethlehem Steel Corp. (a) 54,700 571
Bowater, Inc. 13,300 615
Brush Wellman, Inc. 3,700 77
Buckeye Cellulose Corp. (a) 4,000 135
BWay Corp. (a) 6,000 139
CalMat Co. 3,000 64
Cambrex Corp. 5,400 215
Carbide/Graphite Group, Inc. (The)(a) 4,000 92
Carpenter Technology Corp. 6,100 279
ChemFirst, Inc. 5,500 149
Chesapeake Corp. 800 27
Cincinnati Milacron, Inc. 14,400 374
Cleveland-Cliffs, Inc. 4,900 200
Commonwealth Industries, Inc. 200 4
Consolidated Papers, Inc. 7,900 427
Crompton & Knowles Corp. 22,500 501
Devon Energy Corp. 5,600 206
Dexter Corp. 8,300 266
Ethyl Corp. 20,900 193
Fort Howard Corp. (a) 10,000 506
Fuller (H.B.) Co. 4,400 242
Goodrich (B.F.) Co. 6,100 264
Inland Steel Industries, Inc. 30,600 799
International Specialty Products (a) 7,000 98
Lubrizol Corp. 17,700 742
Millennium Chemicals, Inc. 23,400 532
Minerals Technologies, Inc. 30,000 1,125
Mueller Industries, Inc. (a) 5,800 254
National Steel Corp. Class B (a) 97,100 1,632
Olin Corp. 21,700 848
Penwest, Ltd. 4,000 129
Pope & Talbot, Inc. 2,700 44
Potlatch Corp. 8,600 389
Premark International, Inc. 26,200 701
Rouge Steel Co. Class A 2,200 37
Schulman (A.), Inc. 5,000 123
Scotts Co. (The) Class A (a) 8,100 235
Slater Steel, Inc. 10,000 121
Titanium Metals Corp. (a) 27,300 862
Tredegar Industries, Inc. 1,100 61
Universal Stainless & Alloy Products, Inc. (a) 9,000 116
Wellman, Inc. 10,500 182
Witco Chemical Corp. 1,900 72
Wolverine Tube, Inc. (a) 4,000 112
----------
17,841
----------
CAPITAL GOODS - 4.1%
ABC Rail Products Corp. (a) 7,000 120
ABT Building Products Corp. (a) 1,800 46
AFC Cable Systems, Inc. (a) 5,000 133
American Buildings Co. New (a) 5,000 135
ANTEC Corp. (a) 10,000 117
AptarGroup, Inc. 30,900 1,398
Aviall, Inc. (a) 63,800 893
Avondale Industries, Inc. (a) 5,300 111
Baldor Electric Co. 2,800 83
Barnes Group, Inc. 7,000 207
BMC West Corp. (a) 8,000 96
Cable Design Technologies Corp. (a) 5,000 147
Charter Power Systems, Inc. (a) 3,000 113
Cohu, Inc. 39,500 1,225
Columbus McKinnon Corp. 39,000 726
Comfort Systems USA, Inc. (a) 14,600 228
Core Industries, Inc. 32,600 807
Cummins Engine Co., Inc. 12,300 868
EVI, Inc. 22,000 924
Farr Co. 9,000 137
Flow International Corp. (a) 10,000 95
Fluke Corp. 2,700 160
Franklin Electric Co., Inc. 2,500 122
Gardner Denver Machinery, Inc. 29,800 857
Giant Cement Holding, Inc. (a) 7,000 129
Gleason Corp. 2,500 116
Global Industrial Technologies, Inc. (a) 6,800 139
Halter Marine Group, Inc. (a) 3,700 89
Harmon Industries, Inc. 7,000 145
Hughes Supply, Inc. 5,000 200
Juno Lighting, Inc. 3,600 58
Kaydon Corp. 8,400 417
Martin Marietta Materials, Inc. 10,600 343
National Service Industries, Inc. 10,300 502
NCI Building Systems, Inc. (a) 31,900 1,029
Park Electrochemical Corp. 3,100 82
Plantronics, Inc. New (a) 3,000 150
Powell Industries, Inc. (a) 8,000 117
RDO Equipment Co. Class A (a) 6,000 134
Regal-Beloit Corp. 33,000 864
Rexel, Inc. (a) 8,700 161
Robbins & Myers, Inc. 2,900 95
14 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Scotman Industries, Inc. 1,400 $ 40
Shelter Components Corp. 8,000 95
SIFCO Industries 55,000 784
SPS Technologies, Inc. (a) 900 64
Superior Services, Inc. (a) 5,700 133
Synalloy Corp. 7,000 118
Timken Co. 29,000 1,031
Tractor Supply Co. (a) 6,000 105
Triumph Group, Inc. New (a) 5,000 155
U.S. Filter Corp. New (a) 19,100 520
Westinghouse Air Brake Co. 2,800 56
Zurn Industries, Inc. 5,500 158
----------
17,777
----------
CONSUMER BASICS - 10.2%
800 - JR CIGAR, Inc. (a) 8,700 181
ABR Information Services, Inc. 10,300 297
American Oncology Resources, Inc. (a) 38,500 645
AmeriSource Health Corp. Class A (a) 23,800 1,187
Arbor Health Care Co. (a) 4,000 124
ARV Assisted Living, Inc. (a) 10,000 110
Bergen Brunswig Corp. Class A 14,750 411
Bindley Western Industries, Inc. 3,800 87
Biogen, Inc. 21,000 711
Bob Evans Farms, Inc. 9,405 159
Bush Boake Allen, Inc. (a) 600 19
Central Sprinkler Corp. (a) 5,700 144
Chemed Corp. 1,900 71
Church and Dwight Co., Inc. 4,600 123
Coca-Cola Bottling Co. 19,500 926
Coherent, Inc. (a) 17,500 780
Cohr, Inc. (a) 30,600 558
Covance, Inc. (a) 37,500 724
Coventry Corp. (a) 16,200 246
Cross (A.T.) Co. Class A 4,900 62
Curative Technologies, Inc. (a) 44,900 1,291
Dean Foods Co. 18,300 739
Dekalb Genetics Corp. Class B 2,600 207
DePuy, Inc. (a) 4,300 99
Dura Pharmaceuticals, Inc. 31,100 1,236
Earthgrains Co. 25,000 1,639
Einstein/Noah Bagel Corp. (a) 1,600 19
Equity Corp. International 35,000 847
Fleming Cos., Inc. 23,700 427
General Nutrition Companies, Inc. (a) 41,500 1,157
Health Care & Retirement Corp. (a) 26,500 884
Health Management Associates Class A (a) 35,000 998
Healthcare Services Group, Inc. (a) 10,000 115
Heartland Express, Inc. 9,700 227
Herbalife International, Inc. 37,100 598
Home Health Corp. of America, Inc. (a) 12,000 114
ICN Pharmaceuticals, Inc. 38,500 1,104
Immucor Corp. (a) 8,000 78
Incyte Pharmaceuticals, Inc. (a) 10,000 647
International Multifoods Corp. 3,200 80
Interstate Bakeries Corp. 4,600 273
Jones Medical Industries, Inc. 39,100 1,857
Lincare Holdings, Inc. (a) 46,100 1,982
Maxxim Medical, Inc. (a) 7,500 130
Medical Resources, Inc. (a) 61,800 1,020
Medicis Pharmaceutical Corp. Class A 57,950 2,883
Michael Foods, Inc. 11,600 215
Nature's Sunshine Products, Inc. 8,000 143
NBTY, Inc. (a) 62,400 1,732
Northland Cranberries, Inc. Class A 7,000 113
NovaCare, Inc. (a) 112,400 1,560
Pediatric Services of America, Inc. (a) 6,500 130
Pediatrix Medical Group (a) 15,000 687
PhyMatrix Corp. (a) 16,100 248
Physio-Control International Corp. (a) 9,000 133
Physiometrix, Inc. (a) 25,000 69
Prime Hospitality Corp. (a) 7,400 146
Protocol Systems, Inc. (a) 9,000 71
Regency Health Services, Inc. (a) 1,300 20
Renal Treatment Centers, Inc. (a) 27,300 734
Res-Care, Inc. (a) 6,000 113
Respironics, Inc. (a) 6,000 124
Ruddick Corp. 3,500 58
Rykoff-Sexton, Inc. 2,000 47
Sabratek Corp. (a) 23,000 644
Safeskin Corp. 43,800 1,289
Safety 1st, Inc. (a) 9,900 54
Schultz Sav-O Stores, Inc. 40,500 719
Schweitzer-Mauduit International, Inc. 5,900 221
Smucker (J.M.) Co. 3,100 67
Snap-On Tools Corp. 11,600 457
Sola International, Inc. (a) 37,000 1,240
Starrett (L.S.) Co. Class A 23,000 733
Strategic Distribution, Inc. (a) 25,160 94
Suiza Foods Corp. (a) 25,000 1,025
Sun Healthcare Group, Inc. (a) 19,100 398
Tootsie Roll Industries, Inc. 18,128 807
Total Renal Care Holdings, Inc. (a) 21,200 852
United Natural Foods, Inc. (a) 6,000 122
Universal Corp. 12,100 384
Universal Health Services, Inc. Class B (a) 11,400 439
UroCor, Inc. (a) 15,000 135
Weider Nutrition International, Inc. Class A 9,500 151
----------
44,390
----------
Equity II Fund 15
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CONSUMER DURABLES - 1.4%
Aftermarket Technology Corp. (a) 20,000 $ 440
Arctic Cat, Inc. 4,300 45
Arvin Industries, Inc. 8,700 237
Best Buy Co., Inc. (a) 14,600 217
Borg-Warner Automotive, Inc. 9,100 492
Coachmen Industries, Inc. 37,500 642
CORT Business Services Corp. (a) 34,000 1,003
Ethan Allen Interiors, Inc. 24,400 1,391
Excel Industries, Inc. 7,000 136
Holophane Corp. (a) 6,000 115
Kimball International, Inc. Class B 1,000 40
La-Z-Boy Chair Co. 1,300 47
Lithia Motors, Inc., Class A (a) 9,100 100
Maxim Group, Inc. (a) 10,000 110
Myers Industries, Inc. 2,400 41
National Presto Industries, Inc. 1,000 40
O'Sullivan Industries Holdings, Inc. (a) 5,100 84
Pillowtex Corp. 6,000 132
Pronet, Inc. (a) 35,000 136
Schult Homes Corp. 4,200 67
Toro Co. 4,700 178
Triangle Pacific Corp. (a) 1,700 54
West, Inc. 1,300 37
Wynn's International, Inc. 7,100 201
----------
5,985
----------
CONSUMER NON-DURABLES - 7.0%
Abercrombie & Fitch Co. Class A (a) 52,300 968
Block Drug Co., Inc. Class A 13,028 567
Brown Group, Inc. 6,100 114
Burlington Coat Factory Warehouse Corp. (a) 76,800 1,498
Burlington Industries, Inc. (a) 4,400 53
Canandaigua Wine, Inc. Class A (a) 11,500 390
Carson Pirie Scott & Co. (a) 6,400 203
Cash America International, Inc. 9,838 103
Cole National Corp. Class A (a) 3,000 132
Coors (Adolph) Co. Class B 14,500 382
CPI Corp. 200 4
Daisytek International Corp. (a) 4,000 157
Dollar Tree Stores, Inc. (a) 10,600 534
Dress Barn, Inc. (a) 12,300 239
Gadzooks, Inc. (a) 18,800 367
Genesco, Inc. (a) 26,900 382
Goody's Family Clothing, Inc. (a) 61,600 1,686
Guest Supply, Inc. (a) 7,500 71
Guilford Mills, Inc. 4,800 100
Guitar Center, Inc. (a) 7,000 118
Handleman Co. (a) 4,100 26
Hartmarx Corp. (a) 7,300 60
Helen of Troy, Ltd. New (a) 5,000 128
Huffy Corp. 3,000 44
Innovex, Inc. 41,200 1,190
Just For Feet, Inc. 63,100 1,096
Kellwood Co. 38,700 1,074
Land's End, Inc. (a) 4,000 118
MacFrugals Bargains Close Outs, Inc. (a) 8,700 237
Mercantile Stores, Inc. 3,700 233
Meyer (Fred), Inc. (a) 7,200 372
Morningstar Group, Inc. (a) 5,600 164
Movado Group, Inc. 48,875 1,222
Nautica Enterprises, Inc. (a) 68,200 1,803
Nutramax Products, Inc. New (a) 8,000 102
Pacific Sunwear of California 14,600 471
Payless ShoeSource, Inc. (a) 17,500 957
PeopleSoft, Inc. 20,000 1,055
Petco Animal Supplies, Inc. (a) 4,000 120
Quaker Fabric Corp. New (a) 8,000 130
Rayonier, Inc. 9,000 379
Ross Stores, Inc. 68,800 2,245
Russ Berrie & Co., Inc. 3,300 72
Russell Corp. 5,100 151
Samsonite Corp. (a) 34,700 1,531
Shopko Stores, Inc. 62,700 1,599
Springs Industries, Inc. 6,800 359
SuperValu, Inc. 22,000 759
The Men's Wearhouse, Inc. (a) 20,100 633
Tiffany & Co. 24,000 1,108
TJX Cos., Inc. 50,000 1,319
Urban Outfitters, Inc. (a) 7,000 95
Value City Department Stores, Inc. (a) 10,000 81
Video Update, Inc. Class A (a) 25,000 111
Waban, Inc. (a) 30,500 982
Windmere Corp. 21,600 354
----------
30,448
----------
CONSUMER SERVICES - 2.4%
AAR Corp. 59,800 1,932
Atlas Air, Inc. (a) 17,500 604
Aztar Corp. (a) 10,000 71
CKE Restaurants, Inc. (a) 26,100 825
GC Companies, Inc. (a) 1,000 46
Harvey's Casino Resorts 700 12
Hollywood Entertainment Corp. (a) 31,800 727
King World Productions, Inc. 20,600 721
La Quinta Motor Inns, Inc. 9,500 208
Lodgenet Entertainment Corp. (a) 7,000 68
Luby's Cafeterias, Inc. 33,500 668
Marcus Corp. 900 22
16 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Midwest Express Holdings, Inc. 5,000 $ 137
O'Charleys, Inc. (a) 8,000 134
Patriot American Hospitality, Inc. 33,000 842
Recoton Corp. (a) 6,000 78
Red Roof Inns, Inc. (a) 11,400 205
Regis Corp. 5,000 116
Ruby Tuesday, Inc. (a) 3,900 88
Ryan's Family Steak Houses, Inc. (a) 119,600 1,017
ShoLodge, Inc. (a) 10,000 147
Showbiz Pizza Time, Inc. (a) 16,700 440
Sunstone Hotel Investors, Inc. 21,500 312
USAir Group, Inc. (a) 29,700 1,040
----------
10,460
----------
ENERGY - 6.1%
AGL Resources, Inc. 400 8
Alamco, Inc. (a) 8,000 123
Basin Exploration, Inc. (a) 91,100 706
BJ Services Co. (a) 17,500 938
Cabot Oil & Gas Corp. Class A 5,900 104
Catalytica, Inc. (a) 9,000 105
Cliffs Drilling Co. 42,800 1,562
Coho Energy, Inc. (a) 13,181 140
Cross Timbers Oil Co. 48,750 938
Energen Corp. 1,700 57
ENSCO International, Inc. (a) 26,512 1,399
Evergreen Resources, Inc. (a) 16,000 164
Giant Industries, Inc. 54,000 854
Global Industries, Inc. 24,000 558
Global Marine, Inc. (a) 32,200 749
Helmerich & Payne, Inc. 29,100 1,677
HS Resources, Inc. (a) 1,600 22
Hugoton Energy Corp. (a) 10,000 139
Indiana Energy, Inc. 100 2
Laclede Gas Co. 1,100 24
Lomak Petroleum, Inc. 47,300 843
Louis Dreyfus Natural Gas Corp. (a) 400 7
LTV Corp. 54,400 775
Marine Drilling Co, Inc. (a) 93,900 1,831
Mesa, Inc. 3,500 20
MidAmerican Energy Holdings Co. 12,400 215
Mitchell Energy & Development Corp. 3,400 74
Newpark Resources, Inc. New (a) 15,200 513
Noble Drilling Corp. (a) 40,000 902
NUI Corp. 1,200 27
Oryx Energy Co. (a) 28,700 606
Parallel Petroleum Corp. (a) 19,800 97
Parker & Parsley Petroleum Co. 27,500 973
Pennzoil Co. 8,700 668
Pool Energy Services Co. (a) 53,300 966
Quaker State Oil Refining Corp. 11,200 171
Questar Corp. 8,500 343
Reading & Bates Corp. (a) 20,000 535
Rowan Cos., Inc. (a) 59,400 1,674
Smith International, Inc. (a) 8,500 516
Snyder Oil Corp. 17,000 312
Tesoro Petroleum Corp. (a) 12,300 182
Transocean Offshore, Inc. 12,000 871
Tuboscope Vetco International Corp. (a) 8,000 159
Union Texas Petroleum Holdings, Inc. 19,500 408
UTI Energy Corp. (a) 3,000 138
Varco International, Inc. (a) 20,100 648
Vintage Petroleum, Inc. 39,600 1,218
Wiser Oil Co. 35,500 655
----------
26,616
----------
FINANCE - 20.4%
Affiliated Community Bancorp, Inc. 32,500 764
AlBank Financial Corp. 27,800 1,098
Allied Group, Inc. 2,250 85
Allmerica Financial Corp. 5,900 235
American Bankers Insurance Group, Inc. 33,300 2,102
American Eagle Group, Inc. 16,700 8
American Financial Group, Inc. 4,000 170
AMRESCO, Inc. (a) 53,400 1,148
AmSouth Bancorp 4,500 170
AmVestors Financial Corp. 3,300 62
ARM Financial Group, Inc. Class A (a) 2,600 52
Associated Banc-Corp. 1,200 47
Astoria Financial Corp. 30,400 1,440
Bank United Corp. Class A 7,000 266
BankAtlantic Bancorp, Inc. Class A 11,750 165
BankAtlantic Bancorp, Inc. Class B 48,000 672
Bay View Capital Corp. 3,600 94
Bear Stearns Cos., Inc. 63,940 2,186
Berkley (W.R.) Corp. 18,000 1,046
Capital RE Corp. 2,500 134
Capstead Mortgage Corp. (a) 11,300 279
Capsure Holdings Corp. 6,800 88
CCB Financial Corp. 1,000 73
Central Fidelity Banks, Inc. 2,300 82
Centris Group, Inc. 52,500 1,109
Centura Banks, Inc. 1,300 60
CFI ProServices, Inc. (a) 7,000 126
Charter One Financial, Inc. 26,935 1,451
CitiFed Bancorp, Inc. 6,000 229
City National Corp. 34,900 840
Cityscape Financial Corp. 24,200 479
Equity II Fund 17
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CNB Bancshares, Inc. 1,050 $ 43
Colonial BancGroup, Inc. 57,500 1,394
Comerica, Inc. 5,900 401
Commerce Bancorp, Inc. 1,575 61
Commerce Bancshares, Inc. 2,600 118
Community First Bankshares, Inc. 30,500 1,163
Compass Bancshares, Inc. 9,900 332
Conseco, Inc. 29,000 1,073
CorVel Corp. (a) 4,000 115
Countrywide Credit Industries, Inc. 17,400 543
Cullen Frost Bankers, Inc. 4,000 169
Delphi Financial Group, Inc. 31,008 1,194
Delta Financial Corp. (a) 7,000 134
Deposit Guaranty Corp. 4,300 135
Dime Community Bancorp, Inc. 32,700 654
Donaldson, Lufkin & Jenrette, Inc. 20,500 1,225
Donegal Group, Inc. 40,100 977
Downey Financial Corp. 5,432 128
Enhance Financial Services Group, Inc. 3,600 158
Envoy Corp. New (a) 38,600 1,283
Everest Re Holdings, Inc. 24,200 959
Executive Risk, Inc. 23,000 1,196
EXEL, Ltd. 17,000 897
F&M National Corp. 2,000 52
Fidelity National Financial 5,721 97
Financial Fed Corp. (a) 6,000 132
Financial Security Assurance Holdings, Ltd. 4,000 156
First American Corp. 23,400 898
First American Financial Corp. 2,900 113
First Commerce Corp. 17,100 750
First Commercial Corp. 1,000 41
First Empire State Corp. 500 168
First Federal Savings Bank of Colorado, Inc. 4,300 82
First Financial Caribbean Corp. 4,000 126
First Hawaiian Creditcorp, Inc. 2,500 85
First Midwest Bancorp, Inc. 1,300 41
First Mortgage Corp. (a) 15,500 54
First Republic Bancorp, Inc. (a) 7,200 167
First Savings Bank of Washington Bancorp, Inc. 2,300 51
First Security Corp. 14,900 407
First Virginia Banks, Inc. 4,600 277
FirstFed Financial Corp. (a) 1,700 53
FIRSTPLUS Financial Group, Inc. 35,900 1,221
Flushing Financial Corp. 6,200 136
Fremont General Corp. 79,950 3,218
Great Financial Corp. 2,100 74
Greenpoint Financial Corp. 8,300 552
Guarantee Life Companies, Inc. 1,800 45
Guaranty National Corp. 3,300 79
HCC Insurance Holdings, Inc. 24,000 641
Hibernia Corp. 23,600 329
Horace Mann Educators Corp. 7,300 358
Imperial Bancorp 2,970 86
Imperial Credit Industries, Inc. 95,416 1,962
Interra Financial, Inc. 1,800 75
Jefferies Group, Inc. 25,000 1,425
Keystone Financial, Inc. 2,550 79
Klamath First Bancorp, Inc. 500 9
Legg Mason, Inc. 20,000 1,076
Lehman Brothers Holdings, Inc. 35,300 1,430
Leucadia National Corp. 37,200 1,151
Liberty Corp. 1,100 45
Liberty Financial Cos., Inc. 1,000 50
Life Bancorp, Inc. 1,500 39
Life Re Corp. 2,100 98
Life USA Holding, Inc. New (a) 12,700 180
Litchfield Financial Corp. 7,350 120
Long Island Bancorp, Inc. 6,900 250
MAF Bancorp, Inc. 29,411 1,232
Magna Group, Inc. 7,000 243
Markel Corp. (a) 12,500 1,600
McDonald & Co. Investments 2,700 124
Medical Assurance, Inc. 400 16
Mercantile Bankshares Corp. 7,000 279
Mercury General Corp. 2,500 182
Mid Ocean, Ltd. 19,000 996
ML Bancorp, Inc. 6,600 125
Money Store, Inc. 56,300 1,605
NAC Reinsurance Corp. 9,900 479
North American Mortgage Co. 7,300 173
North Fork Bancorporation, Inc. 21,200 453
Ohio Casualty Corp. 6,100 267
Old Kent Financial Corp. 5,880 317
Old National Bancorp 1,050 46
Old Republic International Corp. 23,600 715
ONBANCorp, Inc. 7,700 392
One Valley Bancorp of West Virginia, Inc. 1,250 53
Orion Capital Corp. 3,300 243
Pacific Century Financial Corp. 10,200 472
Penn Treaty American Corp. (a) 4,000 123
Peoples Bank (Bridgeport, CT.) 7,000 181
Peoples Heritage Financial Group 39,312 1,479
Popular, Inc. 36,800 1,472
Presidential Life Corp. 2,800 54
Price (T. Rowe) & Associates, Inc. 20,000 1,033
Provident Bankshares Corp. 1,323 55
Provident Financial Group, Inc. 8,500 361
Queens County Bancorp 3,999 182
Reinsurance Group Of America 1,000 58
18 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Reliance Group Holdings, Inc. 34,600 $ 411
RenaissanceRe Holdings, Ltd. 30,500 1,163
Republic Bancorp, Inc. 3,900 56
Riggs National Corp. 10,300 209
RLI Corp. 3,800 138
Robert Half International, Inc. (a) 28,400 1,337
Selective Insurance Group, Inc. 24,600 1,184
Signet Banking Corp. 17,400 626
Sotheby's Holdings Co., Inc. Class A 45,000 759
Southern Pacific Funding Corp. 7,000 116
SouthTrust Corp. 17,500 724
Sovereign Bancorp, Inc. 70,506 1,075
St. Francis Capital Corp. 3,000 111
St. Paul Bancorp, Inc. 5,700 189
State Auto Financial Corp. 4,800 108
SunAmerica, Inc. 57,600 2,808
Susquehanna Bancshares, Inc. 1,000 39
T R Financial Corp. 11,200 281
TCF Financial Corp. 24,000 1,185
Trans Financial, Inc. 1,900 53
Transatlantic Holdings, Inc. 18,500 1,836
Trenwick Group, Inc. 36,000 1,350
Trustmark Corp. 1,600 45
Union Planters Corp. 25,002 1,297
United Fire & Casualty Co. 25,575 959
Unitrin, Inc. 3,900 238
USF&G Corp. 38,800 931
Valley National Bancorp 2,310 63
Vesta Insurance Group, Inc. 23,500 1,016
Washington Federal, Inc. 9,120 234
Washington Mutual, Inc. 24,800 1,482
Webster Financial Corp. 18,000 815
Westamerica Bancorporation 16,200 1,219
Western National Corp. 5,200 139
WFS Financial, Inc. 7,800 125
Whitney Holding Corp. 1,000 42
----------
88,963
----------
GENERAL BUSINESS - 9.2%
AccuStaff, Inc. (a) 102,200 2,421
ADVO, Inc. (a) 2,900 47
American Business Information, Inc. (a) 7,000 149
American Greetings Corp. Class A 57,300 2,120
American Residential Services, Inc. (a) 4,800 112
Assisted Living Concepts, Inc. (a) 4,000 110
Banta Corp. 26,400 716
BISYS Group, Inc. New (a) 30,000 1,258
Bowne & Co., Inc. 8,500 296
Cablevision Systems Corp. Class A (a) 3,900 214
CACI International, Inc. Class A (a) 9,000 137
Caribiner International, Inc. 24,000 783
Celeritek, Inc. (a) 10,000 120
Central Newspapers, Inc. Class A 31,800 2,278
Children's Comprehensive Services, Inc. New (a) 6,300 85
Cognos, Inc. (a) 51,700 1,609
Coinmach Laundry Corp. (a) 7,000 166
Comarco, Inc. (a) 5,000 94
DeVRY, Inc. 31,900 861
Ennis Business Forms, Inc. 47,450 457
G & K Services, Inc. Class A 9,100 334
General Communication, Inc. Class A (a) 16,000 128
Gibson Greetings, Inc. (a) 3,600 81
Grey Advertising 4,000 1,284
Hooper Holmes, Inc. 6,000 138
Houghton Mifflin Co. 14,500 968
Iron Mountain, Inc. (a) 5,000 146
Jones Intercable, Inc. Class A (a) 50,500 631
Knight-Ridder, Inc. 17,000 834
Kronos, Inc. (a) 5,300 139
Lee Enterprises, Inc. 37,000 976
Mail Boxes Etc (a) 4,000 111
McClatchy Newspapers, Inc. Class A 36,200 1,063
McGraw-Hill Co., Inc. 12,500 735
META Group, Inc. (a) 24,300 516
Metzler Group, Inc. (a) 31,000 992
MicroAge, Inc. (a) 64,200 1,180
National Data Corp. 28,000 1,213
New England Business Service, Inc. 2,100 55
Outdoor Systems, Inc. 10,750 408
Party City Corp. (a) 7,000 113
Paychex, Inc. 26,250 1,007
Pegasus Communications Corp. Class A (a) 10,000 105
Personnel Group of America, Inc. (a) 7,400 213
Pinkerton's, Inc. New (a) 900 28
Protection One, Inc. (a) 9,000 121
Pulitzer Publishing Co. 15,000 795
Quintiles Transnational Corp. (a) 17,500 1,216
RCM Technologies, Inc. (a) 300 3
Registry, Inc. (The)(a) 6,200 285
Richey Electronics, Inc. (a) 12,000 94
Saga Communications Class A 6,250 116
SCP Pool Corp. (a) 5,000 104
SFX Broadcasting, Inc. Class A (a) 3,500 147
Sovran Self Storage, Inc. 26,700 781
Standard Register Co. 2,100 64
Steris Corp. (a) 20,000 743
Stone & Webster, Inc. 2,100 90
Systems & Computer Technology Corp. (a) 3,200 85
Equity II Fund 19
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
TRM Copy Centers Corp. (a) 10,000 $ 105
True North Communications, Inc. 4,200 104
Unisource Worldwide, Inc. 7,500 120
United Television, Inc. 7,200 697
United Wisconsin Services, Inc. 2,200 74
Universal Outdoor Holdings, Inc. (a) 29,100 1,015
Valassis Communications, Inc. (a) 40,400 970
Viad Corp. 16,100 310
Viking Office Products, Inc. (a) 20,000 378
Wackenhut Corp. 5,000 120
Wackenhut Corrections Corp. (a) 30,000 874
Washington Post Co. Class B 3,600 1,433
Young Broadcasting Corp. Class A (a) 27,000 878
Zilog, Inc. (a) 35,500 675
----------
39,828
----------
MISCELLANEOUS - 3.0%
Apollo Group, Inc. Class A (a) 20,100 709
Applied Extrusion Technologies, Inc. (a) 12,000 141
Arden Realty Group, Inc. 30,000 780
Castle & Cook, Inc. New (a) 6,000 99
Citation Corp. (a) 12,200 209
Consolidated Graphics, Inc. 42,700 1,783
Cornell Corrections, Inc. (a) 8,000 132
Cuno, Inc. (a) 7,000 114
CWM Mortgage Holdings, Inc. (a) 7,600 182
FRP Properties, Inc. (a) 4,000 106
Geon Co. 7,300 148
Griffon Corp. (a) 77,600 1,062
Ha-Lo Industries, Inc. 5,000 116
Hirsch International Group Class A 6,250 137
Insignia Financial Group, Inc. Class A (a) 31,000 562
Jabil Circuit, Inc. (a) 18,200 1,517
Landair Services, Inc. (a) 9,000 128
Learning Tree International, Inc. 15,100 670
Leather Factory, Inc. (a) 60,000 34
Mark VII, Inc. (a) 4,000 128
McWhorter Technologies, Inc. (a) 1,800 43
NN Ball & Roller, Inc. 8,000 97
On Assignment, Inc. (a) 21,500 833
PXRE Corp. 38,486 1,183
Racing Champions Corp. (a) 16,800 256
Romac International, Inc. (a) 10,400 341
Spieker Properties, Inc. 18,000 633
Supreme Industries, Inc. Class A 15,750 136
Tracor, Inc. New (a) 6,600 164
Waste Industries, Inc. (a) 14,000 245
Webb (Del E.) Corp. 5,500 89
Wyant Corp. (a) 79,000 326
Youth Services International, Inc. (a) 8,000 97
----------
13,200
----------
SHELTER - 2.6%
Cameron Ashley, Inc. (a) 10,000 139
Centex Construction Products, Inc. 5,700 111
Centex Corp. 36,700 1,491
Crossmann Communities, Inc. (a) 5,100 103
Dayton Superior Corp. Class A (a) 15,500 198
Deltic Timber Corp. 2,900 85
Florida Rock Industries, Inc. 700 28
Johns Manville Corp. 28,600 338
Lennar Corp. 35,000 1,118
Lone Star Industries, Inc. 4,300 195
NVR, Inc. (a) 3,400 52
Pacific Greystone Corp. (a) 7,800 125
Plum Creek Timber Co. L.P. 25,900 832
PLY-GEM Industries, Inc. 4,700 85
Pulte Corp. 8,200 283
Ryland Group, Inc. 6,700 95
Smith (Charles E.) Residential Realty, Inc. 29,000 837
Southdown, Inc. 40,200 1,754
St. Joe Corp. 12,000 1,005
Standard Pacific Corp. 14,100 145
Toll Brothers, Inc. (a) 36,500 671
U.S. Home Corp. (a) 5,000 133
USG Corp. (a) 25,600 934
Vulcan Materials Co. 5,800 455
----------
11,212
----------
TECHNOLOGY - 16.1%
ACX Technologies, Inc. (a) 10,100 227
ADC Telecommunications, Inc. 42,600 1,422
Amplicon, Inc. 5,000 114
Applied Magnetics Corp. (a) 21,900 496
Aspen Technologies, Inc. 27,500 1,033
Avid Technology, Inc. (a) 6,100 161
Avnet, Inc. 11,500 661
Banctec, Inc. (a) 39,300 1,019
BDM International, Inc. 48,000 1,092
Bell Industries 52,729 824
Berg Electronics Corp. (a) 24,500 880
Boole & Babbage, Inc. 4,500 94
Brightpoint, Inc. 25,500 830
Burr-Brown Corp. 21,800 749
Cambridge Technology Partners, Inc. (a) 29,000 914
20 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CBT Group PLC - ADR (a) 30,400 $ 1,900
CDW Computer Centers, Inc. 11,900 631
Channell Commercial Corp. (a) 8,000 106
Ciber, Inc. (a) 10,900 373
Complete Business Solutions, Inc. (a) 5,000 120
Compuware Corp. 66,800 3,190
Comverse Technology, Inc. New (a) 34,500 1,798
Curtiss-Wright Corp. 2,000 117
Cypress Semiconductor Corp. (a) 15,100 219
Cyrix Corp. (a) 39,400 842
Dallas Semiconductor Corp. 30,900 1,213
Data Processing Corp. (a) 5,000 115
Data Transmission Network Corp. 6,000 188
Davox Corp. 32,000 1,142
DH Technology, Inc. (a) 7,000 112
Digital Lightwave, Inc. (a) 18,000 153
Discreet Logic, Inc. (a) 6,200 102
Dr. Solomon's Group PLC - ADR (a) 45,500 1,155
DSP Group, Inc. (a) 6,000 89
DST Systems, Inc. (a) 31,500 1,049
Electromagnetic Sciences, Inc. (a) 5,000 86
Electronic Arts (a) 40,600 1,365
Electronics For Imaging, Inc. 20,000 944
Encad, Inc. (a) 24,900 1,033
Esterline Corp. (a) 5,800 204
Evans & Sutherland Computer Corp. (a) 1,500 41
Exar Corp. (a) 6,000 129
Fairchild Corp. (The) Class A (a) 100 2
Furon Co. 3,100 97
Fusion Systems Corp. (a) 2,400 95
Gateway 2000, Inc. 28,800 934
Harbinger Corp. 37,300 1,044
HNC Software, Inc. (a) 19,900 756
Hyperion Software Corp. (a) 97,800 2,176
InaCom Corp. (a) 21,900 676
Input/Output, Inc. (a) 3,000 54
Integrated Circuit Systems, Inc. (a) 6,000 135
Jack Henry & Assocociates, Inc. 50,000 1,213
Kaman Corp. Class A 9,000 135
KLA Instruments Corp. (a) 13,000 634
Kulicke & Soffa Industries, Inc. (a) 38,700 1,250
Landauer, Inc. 5,000 116
Littlefuse, Inc. 32,000 888
Litton Industries, Inc. (a) 28,300 1,367
Lo-Jack Corp. (a) 10,000 144
Marshall Industries (a) 4,200 156
MasTec, Inc. 29,300 1,386
McAfee Associates, Inc. 30,750 1,937
Melita International Corp. (a) 16,000 198
Molex, Inc. Class A 32,500 1,127
Oak Technology, Inc. (a) 34,300 334
Par Technology Corp. (a) 15,000 135
Photronics, Inc. (a) 2,000 95
Pittway Corp. Class A 19,561 973
Platinum Technology, Inc. (a) 42,300 560
PMC - Sierra, Inc. (a) 3,700 97
Premenos Technology Corp. (a) 11,600 99
Progress Software Corp. (a) 7,100 114
Quantum Corp. 49,400 1,003
Read-Rite Corp. (a) 2,200 46
Rogue Wave Software (a) 17,100 214
Rohr, Inc. (a) 19,500 428
Sandisk Corp. (a) 10,000 146
Saville Systems Ireland PLC - ADR (a) 25,400 1,321
Security Dynamics Technologies, Inc. 14,500 533
Simulation Sciences, Inc. (a) 7,700 115
SMART Modular Technologies, Inc. (a) 27,600 932
Software Spectrum, Inc. (a) 4,000 51
Storage Technology Corp. (a) 24,300 1,081
Stratus Computer, Inc. (a) 31,100 1,555
Structural Dynamics Research Corp. (a) 82,300 2,160
Sykes Enterprises, Inc. 28,600 736
Symantec Corp. (a) 46,200 901
Tandem Computers, Inc. (a) 26,700 541
TB Wood's Corporation 8,000 117
Tech-Sym Corp. (a) 24,000 801
Tellabs, Inc. 18,000 1,004
Teradyne, Inc. (a) 16,500 648
Thiokol Corp. 23,300 1,631
Thomas & Betts Corp. 7,500 394
Transaction Systems Architects, Inc. Class A 20,000 685
Unitrode Corp. (a) 18,800 947
USCS International, Inc. (a) 4,100 134
Veritas Software Corp. 29,829 1,491
Viasoft, Inc. 10,800 548
VideoServer, Inc. (a) 45,400 590
Voice Control Systems, Inc. (a) 12,000 57
Wall Data, Inc. (a) 5,900 156
Watkins-Johnson Co. 8,500 261
Western Digital Corp. 33,200 1,050
----------
70,136
----------
TRANSPORTATION - 3.3%
Airborne Freight Corp. 13,600 569
AirNet Systems, Inc. (a) 8,100 133
Alexander & Baldwin, Inc. 2,700 71
America West Holding Corp. Class B (a) 25,700 373
Equity II Fund 21
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Caliber Systems, Inc. 27,900 $ 1,039
CNF Transportation, Inc. 10,700 345
Consolidated Freightways Corp. (a) 27,700 454
GATX Corp. 10,100 583
Genesee & Wyoming, Inc. Class A (a) 16,400 430
Hvide Marine, Inc. Class A (a) 6,000 132
Kansas City Southern Industries, Inc. 3,200 206
Kirby Corp. (a) 3,100 57
Knight Transportation, Inc. (a) 4,000 98
MTL, Inc. (a) 37,500 872
Navistar International Corp. (a) 15,700 271
Offshore Logistics, Inc. (a) 35,000 661
Overseas Shipholding Group, Inc. 2,700 53
Roadway Express, Inc. 11,800 270
Rural/Metro Corp. (a) 28,500 826
Seacor Holdings, Inc. (a) 27,800 1,454
Transport Corp. of America (a) 10,000 131
Trico Marine Services, Inc. 66,500 1,450
Trinity Industries, Inc. 25,500 810
Wisconsin Central Transportation Corp. (a) 31,000 1,153
Yellow Corp. (a) 77,300 1,720
----------
14,161
----------
UTILITIES - 3.4%
Advanced Fibre Communications (a) 12,000 725
Aliant Communications, Inc. 5,000 97
American Water Works, Inc. 10,000 214
Aquarion Co. 1,000 27
Bay State Gas Co. 1,100 29
Black Hills Corp. 1,000 28
Boston Edison Co. 12,400 327
Brooklyn Union Gas Co. (The) 8,500 243
CellStar Corp. 53,400 1,635
Cellular Communications of Puerto Rico, Inc. (a) 27,500 467
Centennial Cellular Corp. Class A (a) 61,000 945
Central Hudson Gas & Electric Corp. 4,400 152
Central Louisiana Electric Co., Inc. 116 3
Century Telephone Enterprises, Inc. 12,800 431
CILCORP, Inc. 2,300 95
Commonwealth Energy System 2,000 48
CTG Resources, Inc. 1,000 22
Delmarva Power & Light Co. 10,100 193
E'town Corp. 300 9
Eastern Enterprises, Inc. 5,700 198
Empire District Electric Co. 1,400 24
Enova Corp. 13,500 325
Hawaiian Electric Industries, Inc. 5,900 228
Idaho Power Co. 5,400 169
Illinova Corp. 18,000 396
IPALCO Enterprises, Inc. 1,750 55
MDU Resources Group, Inc. 1,900 46
Montana Power Co. 19,000 441
National Fuel & Gas Co. 7,500 315
Nevada Power Co. 14,500 308
New England Electric System 7,900 292
New Jersey Resources Corp. 2,600 82
New York State Electric & Gas Corp. 9,100 190
Niagara Mohawk Power Corp. (a) 45,900 393
NIPSCO Industries, Inc. 3,600 149
Northwest Natural Gas Co. 2,550 67
ONEOK, Inc. 8,300 267
Orange & Rockland Utilities, Inc. 1,900 64
Pennsylvania Enterprises, Inc. 1,700 43
Peoples Energy Corp. 6,500 243
Piedmont Natural Gas Co., Inc. 4,005 103
Pinnacle West Capital Corp. 17,800 535
Public Service Co. of New Mexico 18,100 324
Public Service Co. of North Carolina, Inc. 1,700 33
Puget Sound Power & Light Co. 19,100 506
Rochester Gas & Electric Corp. 12,900 272
Sierra Pacific Resources 9,900 317
SIG Corp., Inc. 1,500 38
Southwestern Energy Co. 3,400 44
Tel-Save Holdings, Inc. 69,100 1,045
TNP Enterprises, Inc. 8,700 202
United Illuminating Co. 4,300 133
United Water Resources, Inc. 4,200 81
UtiliCorp United, Inc. 14,000 408
Washington Gas & Light Co. 7,700 193
Washington Water Power Co. 10,600 208
Western Resources, Inc. 7,500 243
WICOR, Inc. 3,200 125
----------
14,795
----------
TOTAL COMMON STOCKS
(cost $319,924) 405,812
----------
CONVERTIBLE PREFERRED STOCKS - 0.2%
Callon Petroleum Co. Series A 2,000 74
Finova Finance Trust 13,000 748
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $719) 822
----------
22 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 0.1%
Central Garden & Pet Co. (conv.)
6.000% due 11/15/03 $ 100 $ 106
Titan Corp. (conv.)
8.250% due 11/01/03 100 137
----------
Total Long-Term Investments
(cost $224) 243
----------
SHORT-TERM INVESTMENTS - 6.7%
Frank Russell Investment Company
Money Market Fund
due on demand (b) 27,849 27,849
United States Treasury Notes
5.750% due 10/31/97 (c) 1,400 1,401
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $29,250) 29,250
----------
TOTAL INVESTMENTS
(identified cost $350,117)(d) - 100.3% 436,127
OTHER ASSETS AND LIABILITIES,
NET - (0.3%) (1,271)
----------
NET ASSETS - 100.0% $ 434,856
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with
futures contracts purchased by the Fund.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
PLC - Public Limited Company
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 400 Midcap Index Futures Contracts
expiration date 09/97 129 $ 220
S&P 500 Index Futures Contracts
expiration date 09/97 21 86
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased ( ) $ 306
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at $1,401 were held
as collateral by the custodian in connection with futures contracts
purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
Equity II Fund 23
<PAGE>
EQUITY II FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (execpt
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $350,117)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 436,127
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,998
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440,766
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,183
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 305
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 148
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,910
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 434,856
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 506
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,730
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,010
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,172
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 434,856
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($434,856,147 divided by 13,186,275 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32.98
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 Equity II Fund
<PAGE>
EQUITY II FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,901
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
----------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,704
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,430
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,809
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 895
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,321
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,818
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12,158
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,983
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) 34,148
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,306
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 47,201
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Equity II Fund 25
<PAGE>
EQUITY II FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 895 $ 1,711
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . 12,158 40,938
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . 34,148 13,891
------------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . 47,201 56,540
------------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . (585) (1,695)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . (7,664) (40,870)
------------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . (8,249) (42,565)
------------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions
(Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,949 72,414
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . 68,901 86,389
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365,955 279,566
------------------- -----------------
End of period (including undistributed net investment income of
$506 and $195, respectively) . . . . . . . . . . . . . . . . . . . . . . . $ 434,856 $ 365,955
------------------- -----------------
------------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 Equity II Fund
<PAGE>
EQUITY II FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . $ 30.05 $ 28.88 $ 25.00 $ 26.58 $ 27.71 $ 26.32
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income. . . . . . . . . . . . . . . . . . .07 .16 .27 .36 .32 .30
Net realized and unrealized gain (loss) on investments . 3.52 4.96 6.80 (.86) 3.97 3.13
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations. . . . . . . . 3.59 5.12 7.07 (.50) 4.29 3.43
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . (.05) (.16) (.29) (.31) (.31) (.30)
Net realized gain on investments . . . . . . . . . . . . (.61) (3.79) (2.90) (.21) (4.72) (1.74)
In excess of net realized gain on investments . . . . . -- -- -- (.56) (.39) --
-------- -------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . . (.66) (3.95) (3.19) (1.08) (5.42) (2.04)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . $ 32.98 $ 30.05 $ 28.88 $ 25.00 $ 26.58 $ 27.71
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a)(c) . . . . . . . . . . . . . . . . . . 12.15 18.51 28.67 (2.60) 16.70 13.31
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . 434,856 365,955 279,566 202,977 171,421 120,789
Ratios to average net assets (%)(b)(c):
Operating expenses . . . . . . . . . . . . . . . . . . .95 .95 .83 .23 .34 .32
Net investment income. . . . . . . . . . . . . . . . . .47 .52 .97 1.46 1.14 1.10
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . 94.21 120.78 89.31 58.04 87.25 43.33
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . . . .0406 .0381 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
(c) For periods prior to April 1, 1995, Fund performance operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
Equity II Fund 27
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 97.6%
Basic Industries - 7.5%
Alcan Aluminum, Ltd. 2,300 $ 80
Alumax, Inc. (a) 35,600 1,351
Bowater, Inc. 14,100 652
Crown Cork & Seal Co., Inc. 23,500 1,256
Crown Vantage, Inc. (a) 10,940 79
Cyprus Amax Minerals Co. 35,700 875
Dow Chemical Co. 5,900 514
Eastman Chemical Co. 29,600 1,880
FMC Corp. (a) 14,100 1,120
Great Lakes Chemical Corp. 15,900 833
James River Corp. of Virginia 40,400 1,495
Mark IV Industries, Inc. 10,900 262
Mead Corp. 23,800 1,482
Phelps Dodge Corp. 4,200 358
Potlatch Corp. 11,800 534
Reynolds Metals Co. 17,000 1,211
Rohm & Haas Co. 9,500 856
Sonoco Products Co. 14,800 450
Temple-Inland, Inc. 12,300 664
USX-U.S. Steel Group 10,700 375
Westvaco Corp. 18,400 577
----------
16,904
----------
CAPITAL GOODS - 5.4%
Briggs & Stratton Corp. 7,900 395
Browning-Ferris Industries, Inc. 19,800 658
Caterpillar, Inc. 22,700 2,437
Deere & Co. 9,900 543
Foster Wheeler Corp. 30,700 1,243
General Electric Co. 28,600 1,870
Harnischfeger Industries, Inc. 19,600 813
Harsco Corp. 9,100 369
Hitachi, Ltd. - ADR 7,100 802
Johnson Controls, Inc. 33,200 1,363
Matsushita Electric Industrial Co., Ltd. - ADR 3,300 675
Parker-Hannifin Corp. 3,800 231
Silicon Valley Group, Inc. (a) 7,500 197
Tecumseh Products Co. Class A 9,800 588
----------
12,184
----------
CONSUMER BASICS - 9.4%
Archer-Daniels-Midland Co. 92,842 2,182
Baxter International, Inc. 25,300 1,322
Beverly Enterprises, Inc. (a) 35,800 582
Black & Decker Corp. 16,800 625
Bristol-Myers Squibb Co. 32,700 2,649
Columbia/HCA Healthcare Corp. 35,000 1,376
Foundation Health Systems, Inc. (a) 19,410 588
Great Atlantic & Pacific Tea Co., Inc. 15,500 421
IBP, Inc. 63,300 1,472
McKesson Corp. 15,900 1,232
PepsiCo, Inc. 40,200 1,510
Philip Morris Cos., Inc. 19,100 848
RJR Nabisco Holdings Corp. 78,000 2,574
Sara Lee Corp. 25,600 1,066
Schering-Plough Corp. 32,800 1,570
Tenet Healthcare Corp. (a) 29,500 871
UST Corp. 12,100 335
----------
21,223
----------
CONSUMER DURABLES - 4.0%
Chrysler Corp. 83,200 2,730
Ford Motor Co. 95,600 3,609
General Motors Corp. 8,800 490
Whirlpool Corp. 39,400 2,150
----------
8,979
----------
CONSUMER NON-DURABLES - 3.8%
Burlington Industries, Inc. (a) 38,500 462
Dayton Hudson Corp. 48,300 2,569
Dillard's, Inc. Class A 7,500 260
Eastman Kodak Co. 11,700 898
Fruit of the Loom, Inc. Class A (a) 11,200 347
JC Penney & Co., Inc. 19,700 1,028
Kmart Corp. (a) 40,700 499
Sears Roebuck & Co. 16,500 887
SuperValu, Inc. 6,200 214
Wal-Mart Stores, Inc. 45,200 1,528
----------
8,692
----------
CONSUMER SERVICES - 3.2%
AMR Corp. (a) 24,800 2,294
Brinker International, Inc. (a) 29,500 420
Carnival Corp. Class A 33,200 1,370
Disney (Walt) Co. 8,000 642
Harrah's Entertainment, Inc. (a) 18,700 341
King World Productions, Inc. 17,300 605
UAL Corp. (a) 23,600 1,688
----------
7,360
----------
ENERGY - 11.6%
Amerada Hess Corp. NPV 39,100 2,172
Amoco Corp. 13,800 1,200
Apache Corp. 8,300 270
28 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Ashland, Inc. 4,500 $ 209
Atlantic Richfield Co. 49,000 3,455
British Petroleum Co. PLC - ADR 18,924 1,417
Elf Aquitaine - ADR 7,800 425
Exxon Corp. 51,500 3,167
Kerr-McGee Corp. 22,100 1,401
Louisiana Land & Exploration Co. 5,200 297
LTV Corp. 25,700 366
Mapco, Inc. 24,400 769
Mobil Corp. 15,400 1,076
Murphy Oil Corp. 31,300 1,526
Occidental Petroleum Corp. 85,903 2,153
Oryx Energy Co. (a) 12,800 270
Phillips Petroleum Co. 46,000 2,013
Santa Fe Energy Resources, Inc. (a) 40,000 588
Texaco, Inc. 13,300 1,446
Unocal Corp. 20,400 791
USX-Marathon Group 23,000 663
Valero Energy Corp. 20,100 729
----------
26,403
----------
FINANCE - 23.7%
Aetna, Inc. 25,000 2,559
Ahmanson (H.F.) & Co. 34,500 1,484
Allstate Corp. 67,831 4,952
AMBAC, Inc. 10,400 794
American General Corp. 10,900 520
Banc One Corp. 37,830 1,832
BankAmerica Corp. 48,800 3,151
BankBoston Corp. 37,300 2,688
Barnett Banks, Inc. 11,500 604
Beneficial Corp. 24,000 1,706
Chase Manhattan Corp. 51,588 5,007
Chubb Corp. (The) 36,100 2,414
Everest Re Holdings, Inc. 12,400 491
Federal National Mortgage Association 44,300 1,933
First Chicago NBD Corp. 23,391 1,415
First Security Corp. 15,000 410
First Union Corp. 19,300 1,785
Firstar Corp. 29,700 906
Hartford Life, Inc. Class A (a) 2,500 94
John Alden Financial Corp. 11,100 232
KeyCorp 21,200 1,185
MBIA, Inc. 15,300 1,726
Mid Ocean, Ltd. 10,500 551
Morgan (J.P.) & Co., Inc. 5,300 553
Morgan Stanley, Dean Witter Discover and Co. 81,400 3,505
NationsBank Corp. 20,200 1,303
Ohio Casualty Corp. 14,000 613
Pacific Century Financial Corp. 4,500 208
PMI Group, Inc. (The) 12,700 792
PNC Bank Corp. 51,500 2,144
Provident Companies, Inc. 13,400 717
Reliance Group Holdings, Inc. 34,300 407
Salomon, Inc. 26,100 1,452
SouthTrust Corp. 34,800 1,440
St. Paul Cos., Inc. 3,400 259
TIG Holdings, Inc. 25,900 809
Transamerica Financial Corp. 9,100 851
Wachovia Corp. 6,200 362
----------
53,854
----------
GENERAL BUSINESS - 2.7%
American Greetings Corp. Class A 21,900 810
Reader's Digest Association, Inc. Class A 8,800 252
SBC Communications, Inc. 46,581 2,882
Tribune Co. 30,300 1,456
Viacom, Inc. Class B (a) 22,900 687
----------
6,087
----------
MISCELLANEOUS - 1.5%
CarrAmerica Realty Corp. 18,000 518
Chelsea GCA Realty, Inc. 6,900 262
Colonial Properties Trust 16,700 491
Geon Co. 14,500 294
Health & Rehabilitation Properties Trust 9,700 182
Oasis Residential, Inc. 12,500 294
Prentiss Properties Trust 15,000 384
Public Storage, Inc. 22,600 661
United Dominion Realty Trust, Inc. 20,300 288
----------
3,374
----------
SHELTER - 0.2%
Evans Withycombe Residential, Inc. 10,100 210
Lafarge Corp. 13,100 321
----------
531
----------
TECHNOLOGY - 8.3%
Amdahl Corp. (a) 30,000 263
Boeing Co. 14,600 775
COMPAQ Computer Corp. (a) 14,900 1,479
Data General Corp. (a) 19,100 497
Electronic Data Systems Corp. 2,700 111
Hewlett-Packard Co. 20,500 1,148
Equity III Fund 29
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Intel Corp. 12,500 $ 1,770
International Business Machines Corp. 61,700 5,565
Lexmark International Group, Inc. Class A (a) 11,900 361
MEMC Electronic Materials, Inc. (a) 27,400 897
Northrop Grumman Corp. 15,000 1,317
Rockwell International Corp. 8,100 478
Seagate Technology 23,200 816
Storage Technology Corp. (a) 6,000 267
Tandy Corp. 15,300 857
Tektronix, Inc. 8,300 498
TRW, Inc. 18,400 1,044
VLSI Technology, Inc. (a) 31,300 737
----------
18,880
----------
TRANSPORTATION - 0.9%
Burlington Northern, Inc. 7,200 647
Ryder System, Inc. 39,200 1,294
----------
1,941
----------
UTILITIES - 15.4%
AT&T Corp. 49,500 1,736
BCE, Inc. 40,906 1,145
Bell Atlantic Corp. 16,600 1,260
BellSouth Corp. 54,100 2,509
Boston Edison Co. 13,700 361
Century Telephone Enterprises, Inc. 25,000 842
Coastal Corp. 17,000 904
DTE Energy Co. 29,700 820
Edison International 92,000 2,289
Entergy Corp. 101,200 2,770
Equitable Resources, Inc. 16,100 457
GPU, Inc. 39,600 1,421
Illinova Corp. 8,400 185
MCI Communications Corp. 43,100 1,649
MCN Corp. 6,400 196
New England Electric System 8,000 296
New York State Electric & Gas Corp. 27,500 574
Niagara Mohawk Power Corp. (a) 48,800 418
NYNEX Corp. 89,700 5,169
Pacific Enterprises 12,600 424
PacifiCorp. 39,000 858
Peco Energy Co. 28,000 588
PG&E Corp. 26,700 647
Potomac Electric Power Co. 36,300 839
Public Service Enterprise Group, Inc. 1,500 38
Southern New England Telecommunications Corp. 29,100 1,131
Texas Utilities Co. 32,000 1,102
U.S. West Communications Group 67,400 2,540
Unicom Corp. 8,300 185
WorldCom, Inc. 46,600 1,488
----------
34,841
----------
TOTAL COMMON STOCKS
(cost $181,541) 221,253
----------
CONVERTIBLE PREFERRED STOCKS - 0.1%
Atlantic Richfield Co. 19,100 411
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $472) 411
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 2.1%
Frank Russell Investment Company
Money Market Fund
due on demand (b) $ 3,726 3,726
United States Treasury Notes
5.750% due 10/31/97 (c) 1,000 1,001
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $4,727) 4,727
----------
TOTAL INVESTMENTS
(identified cost $186,740)(d) - 99.8% 226,391
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 428
----------
NET ASSETS - 100.0% $ 226,819
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
NPV - No Par Value
PLC - Public Limited Company
The accompanying notes are an integral part of the financial statements.
30 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 500 Index Futures Contracts
expiration date 09/97 7 $ (17)
S&P Barra Value Futures Contracts
expiration date 09/97 10 (44)
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ (61)
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at $1,001 were held
as collateral by the custodian in connection with futures contracts
purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
Equity III Fund 31
<PAGE>
EQUITY III FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $186,740)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 226,391
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,849
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
----------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,757
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,388
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 134
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 44
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,938
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 226,819
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,017
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,896
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,651
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,248
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 226,819
----------------
----------------
NET ASSET VALUE, offering and redemption price per
share:($226,818,719 divided by 6,809,583 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33.31
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
32 Equity III Fund
<PAGE>
EQUITY III FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,749
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,947
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 659
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,098
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,888
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704 24,592
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,752
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84) 7,668
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,260
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 34,358
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Equity III Fund 33
<PAGE>
EQUITY III FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,098 $ 4,993
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . 24,592 33,675
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . 7,668 4,076
------------------- -------------------
Net increase (decrease) in net assets resulting from operations. . . . . . 34,358 42,744
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,081) (5,022)
In excess of net investment income . . . . . . . . . . . . . . . . . . . . . -- (14)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . (8,070) (30,909)
------------------- -------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . (9,151) (35,945)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share
transactions (Note 6). . . . . . . . . . . . . . . . . . . . . . . . . . . (20,166) (7,562)
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . 5,041 (763)
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221,778 222,541
------------------- -------------------
End of period (including undistributed net investment income of
$1,017 at June 30, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . $ 226,819 $ 221,778
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
34 Equity III Fund
<PAGE>
EQUITY III FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . $ 29.68 $ 29.11 $ 24.18 $ 27.05 $ 26.75 $ 27.08
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . .30 .70 .82 .93 .89 .98
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . 4.58 5.10 7.73 (.85) 2.99 2.24
---------- ---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations . 4.88 5.80 8.55 .08 3.88 3.22
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . (.15) (.71) (.83) (.91) (.90) (.99)
Net realized gain on investments. . . . . . (1.10) (4.52) (2.79) (1.94) (2.68) (2.56)
In excess of net realized gain on
investments . . . . . . . . . . . . . . . . -- -- -- (.10) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions . . . . . . . . . . . (1.25) (5.23) (3.62) (2.95) (3.58) (3.55)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . $ 33.31 $ 29.68 $ 29.11 $ 24.18 $ 27.05 $ 26.75
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a)(c) . . . . . . . . . . . . 16.87 20.90 35.96 1.16 14.95 12.30
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . 226,819 221,778 222,541 177,807 181,630 166,782
Ratios to average net assets (%)(b)(c):
Operating expenses . . . . . . . . . . . . .78 .79 .65 .17 .16 .20
Net investment income. . . . . . . . . . . 1.92 2.23 2.90 3.39 3.09 3.57
Portfolio turnover rate (%)(b) . . . . . . . 153.00 100.78 103.40 85.92 76.77 84.56
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . .0402 .0447 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
(c) For periods prior to April 1, 1995, Fund performance operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
Equity III Fund 35
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 98.0%
BASIC INDUSTRIES - 5.0%
Air Products & Chemicals, Inc. 4,800 $ 390
Albemarle Corp. 14,400 303
Allegheny Teldyne, Inc. 26,700 721
Aluminum Co. of America 31,900 2,404
ASARCO, Inc. 41,400 1,268
Bethlehem Steel Corp. (a) 57,600 601
Betz Laboratories, Inc. 9,200 607
Boise Cascade Corp. 7,600 268
Bowater, Inc. 8,500 393
Champion International Corp. 18,500 1,022
Chesapeake Corp. 6,000 203
Cincinnati Milacron, Inc. 4,700 122
Consolidated Papers, Inc. 6,400 346
Crompton & Knowles Corp. 6,200 138
Cyprus Amax Minerals Co. 3,800 93
Cytec Industries, Inc. 3,900 146
Dexter Corp. 1,700 54
Diamond Offshore Drilling, Inc. (a) 6,700 523
Dow Chemical Co. 146,700 12,781
du Pont (E.I.) de Nemours & Co. 125,200 7,872
Eastman Chemical Co. 6,600 419
Fort Howard Corp. (a) 52,900 2,675
Freeport-McMoRan Copper & Gold, Inc. Class A 22,400 655
Georgia Gulf Corp. 2,700 78
Inco, Ltd. 500 15
Inland Steel Industries, Inc. 54,300 1,419
International Specialty Products (a) 7,300 103
Kimberly-Clark Corp. 30,000 1,493
Mead Corp. 8,900 554
NL Industries, Inc. 900 13
Nucor Corp. 32,700 1,848
Owens-Illinois, Inc. (a) 22,400 694
Phelps Dodge Corp. 22,600 1,925
PPG Industries, Inc. 2,500 145
Praxair, Inc. 49,500 2,772
Premark International, Inc. 7,600 203
Rohm & Haas Co. 2,700 243
Sealed Air Corp. (a) 3,000 143
Sigma Aldrich Corp. 17,100 597
Temple-Inland, Inc. 9,400 508
Union Camp Corp. 9,700 485
Union Carbide Corp. 52,800 2,485
USX-U.S. Steel Group 25,900 908
Wausau Paper Mills Co. 6,100 115
Worthington Industries, Inc. 31,100 571
----------
51,321
----------
CAPITAL GOODS - 6.3%
Aeroquip-Vickers, Inc. 4,600 217
Anixter International, Inc. (a) 4,900 84
Boston Scientific Corp. (a) 76,600 4,706
Caterpillar, Inc. 103,700 11,135
Cooper Industries, Inc. 83,700 4,164
Cummins Engine Co., Inc. 63,800 4,502
Deere & Co. 27,000 1,482
Dover Corp. 37,000 2,276
Emerson Electric Co. 36,700 2,021
Exide Corp. 3,900 86
Fluor Corp. 13,902 767
Foster Wheeler Corp. 6,700 271
General Electric Co. 271,900 17,775
General Signal Corp. 6,200 270
Grainger (W.W.), Inc. 8,200 641
Halter Marine Group, Inc. (a) 3,897 94
Harnischfeger Industries, Inc. 8,100 336
Harsco Corp. 5,400 219
Ingersoll-Rand Co. 40,400 2,495
ITT Industries, Inc. 20,600 530
Johnson Controls, Inc. 29,200 1,199
Martin Marietta Materials, Inc. 8,802 285
NACCO Industries, Inc. Class A 1,800 102
Novellus Systems, Inc. (a) 9,100 783
Parker-Hannifin Corp. 6,800 413
Raychem Corp. 28,900 2,149
Republic Industries, Inc. (a) 17,900 445
Tyco International, Ltd. (a) 70,900 4,932
Weatherford Enterra, Inc. (a) 17,500 674
Wheelabrator Technologies, Inc. 15,200 234
----------
65,287
----------
CONSUMER BASICS - 20.1%
Abbott Laboratories 7,900 527
Albertson's, Inc. 26,800 978
ALZA Corp. (a) 60,200 1,746
American Home Products Corp. 102,100 7,811
American Stores Co. 16,600 820
Amgen, Inc. 25,600 1,486
Apria Healthcare Group, Inc. (a) 17,300 307
Archer-Daniels-Midland Co. 191,981 4,512
Bausch & Lomb, Inc. 5,600 264
Beverly Enterprises, Inc. (a) 83,200 1,352
Biogen, Inc. 52,800 1,789
Black & Decker Corp. 17,900 666
Bristol-Myers Squibb Co. 139,580 11,306
Cardinal Health, Inc. 36,100 2,067
36 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Coca-Cola Co. (The) 175,400 $ 11,840
Columbia/HCA Healthcare Corp. 163,900 6,443
ConAgra, Inc. 44,408 2,848
Corning, Inc. 51,500 2,865
CPC International, Inc. 7,300 674
Dura Pharmaceuticals, Inc. 5,000 199
Fleming Cos., Inc. 28,900 520
Forest Labs, Inc. (a) 8,500 354
General Mills, Inc. 18,700 1,218
General Nutrition Companies, Inc. (a) 9,500 265
Gillette Co. 21,800 2,066
Health Care & Retirement Corp. (a) 32,000 1,068
HEALTHSOUTH Corp. 90,700 2,262
Heinz (H.J.) Co. 19,700 909
Humana, Inc. (a) 88,000 2,035
Immune Response Corp. (a) 7,700 59
Interstate Bakeries Corp. 11,300 670
Johnson & Johnson 120,000 7,725
Kellogg Co. 25,800 2,209
Lincare Holdings, Inc. (a) 3,500 151
Meditrust 14,900 594
Merck & Co., Inc. 233,307 24,147
Nabisco Holdings Corp. Class A 6,400 255
NovaCare, Inc. (a) 6,200 86
Omnicare, Inc. 25,700 806
PepsiCo, Inc. 316,500 11,889
Perrigo Co. (a) 15,000 188
Pfizer, Inc. 36,800 4,398
Philip Morris Cos., Inc. 326,000 14,466
PhyCor, Inc. (a) 28,000 963
Pioneer Hi-Bred International, Inc. 7,500 600
Procter & Gamble Co. 81,700 11,540
Quaker Oats Co. 119,200 5,349
Ralston-Purina Group 13,100 1,077
RJR Nabisco Holdings Corp. 204,700 6,755
Rubbermaid, Inc. 21,300 634
Safeway, Inc. (a) 124,875 5,760
Sara Lee Corp. 800 33
Schering-Plough Corp. 212,200 10,159
Sybron International Corp. (a) 2,600 104
Tenet Healthcare Corp. (a) 174,000 5,144
U.S. Surgical Corp. 28,700 1,069
Unilever NV 18,600 4,055
United Healthcare Corp. 45,700 2,375
Universal Corp. 4,100 129
Warner-Lambert Co. 60,702 7,541
Watson Pharmaceuticals, Inc. (a) 7,700 323
Wellpoint Health Networks, Inc. Class A (a) 95,603 4,385
----------
206,835
----------
CONSUMER DURABLES - 2.9%
AutoZone, Inc. (a) 16,300 384
Best Buy Co. (a) 45,800 681
Chrysler Corp. 58,000 1,903
Cooper Tire & Rubber Co. 10,200 224
Dana Corp. 32,900 1,250
Eaton Corp. 12,700 1,109
Ford Motor Co. 365,300 13,790
General Motors Corp. 110,200 6,137
Goodyear Tire & Rubber Co. 20,200 1,279
Kimball International, Inc. Class B 15,300 612
Lear Corp. (a) 8,500 377
Leggett & Platt, Inc. 3,300 142
Modine Manufacturing Co. 3,600 107
Whirlpool Corp. 25,800 1,409
----------
29,404
----------
CONSUMER NON-DURABLES - 6.1%
Alberto Culver Co. Class B 23,300 652
Anheuser-Busch Cos., Inc. 62,000 2,600
Avon Products, Inc. 12,900 910
Bed Bath & Beyond, Inc. (a) 5,100 155
Block Drug Co., Inc. Class A 9,682 421
Blyth Industries, Inc. 17,850 602
Borders Group, Inc. 40,900 987
Brunswick Corp. 35,600 1,113
Cintas Corp. 800 55
Circuit City Stores, Inc. 10,600 377
CompUSA, Inc. 3,500 75
Coors (Adolph) Co. Class B 1,800 47
Costco Companies, Inc. (a) 14,100 464
Dayton Hudson Corp. 214,300 11,398
Eastman Kodak Co. 15,700 1,205
Estee Lauder Companies Class A 13,200 663
Federated Department Stores, Inc. (a) 22,500 782
Fieldcrest Cannon, Inc. (a) 3,000 57
Fingerhut Cos., Inc. 6,100 106
Fruit of the Loom, Inc. Class A (a) 13,000 403
Gap, Inc. 26,400 1,026
Hartmarx Corp. (a) 10,500 87
Home Depot, Inc. (The) 93,900 6,473
Intimate Brands, Inc. Class A 6,600 139
JC Penney & Co., Inc. 25,600 1,336
Jones Apparel Group, Inc. 25,000 1,194
Kohl's Corp. (a) 22,600 1,196
Liz Claiborne, Inc. 6,100 284
Mattel, Inc. 52,200 1,768
May Department Stores Co. 6,600 312
Newell Co. 35,800 1,419
NIKE, Inc. Class B 10,600 619
Equity Q Fund 37
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Nine West Group, Inc. (a) 3,600 $ 137
Nordstrom, Inc. 6,800 333
PeopleSoft, Inc. 1,000 53
Ross Stores, Inc. 122,600 4,000
Seagram Co., Ltd. 28,100 1,131
Sears Roebuck & Co. 49,800 2,677
SuperValu, Inc. 7,500 259
Tiffany & Co. 7,400 342
Toys "R" Us, Inc. (a) 31,500 1,103
V.F. Corp. 3,700 314
Wal-Mart Stores, Inc. 367,700 12,433
Woolworth Corp. (a) 70,800 1,699
----------
63,406
----------
CONSUMER SERVICES - 2.2%
AMR Corp. (a) 3,700 342
Boyd Gaming Corp. (a) 4,200 24
Circus Circus Enterprises, Inc. (a) 14,400 355
Cracker Barrel Old Country Store, Inc. 4,500 119
Delta Air Lines, Inc. 41,500 3,403
Disney (Walt) Co. 82,800 6,645
Extended Stay America, Inc. 10,900 162
Harrah's Entertainment, Inc. (a) 16,700 305
HFS, Inc. (a) 17,500 1,015
Hilton Hotels Corp. 53,000 1,408
International Game Technology 21,500 382
ITT Corp. (a) 19,300 1,179
King World Productions, Inc. 45,600 1,596
McDonald's Corp. 300 14
MGM Grand, Inc. (a) 5,500 204
Mirage Resorts, Inc. (a) 31,300 790
Primadonna Resorts, Inc. (a) 12,300 238
Promus Hotel Corp. (a) 49,000 1,899
Ruby Tuesday, Inc. (a) 26,800 601
Southwest Airlines Co. 12,500 323
UAL Corp. (a) 25,400 1,817
----------
22,821
----------
ENERGY - 7.6%
Amoco Corp. 17,500 1,521
Anadarko Petroleum Corp. 15,100 906
Ashland, Inc. 19,800 918
Atlantic Richfield Co. 23,600 1,664
Baker Hughes, Inc. 74,100 2,867
BJ Services Co. (a) 8,700 467
Burlington Resources, Inc. 34,400 1,518
Chevron Corp. 12,300 909
ENSCO International, Inc. (a) 34,600 1,825
Exxon Corp. 428,200 26,334
Halliburton Co. 25,400 2,013
Helmerich & Payne, Inc. 3,000 173
LTV Corp. 118,000 1,682
Lyondell Petrochemical Co. 19,400 423
Mobil Corp. 149,700 10,460
Pennzoil Co. 19,100 1,466
Phillips Petroleum Co. 127,400 5,574
Pogo Producing Co. 8,400 325
Questar Corp. 2,600 105
Royal Dutch Petroleum Co. 149,600 8,135
Schlumberger, Ltd. 12,000 1,500
Tesoro Petroleum Corp. (a) 5,100 76
Texaco, Inc. 41,900 4,557
Tosco Corp. 43,300 1,296
Ultramar Diamond Shamrock Corp. 2,800 91
Unocal Corp. 5,200 202
USX-Marathon Group 35,800 1,034
Valero Energy Corp. 9,500 343
----------
78,384
----------
FINANCE - 17.4%
Advanta Corp. Class B 4,600 163
AEGON N.V. (American Registered) 3,299 231
Aetna, Inc. 900 92
Ahmanson (H.F.) & Co. 83,800 3,603
Alex Brown, Inc. 4,200 297
Allstate Corp. 46,814 3,417
AMBAC, Inc. 24,600 1,879
American General Corp. 35,900 1,714
American International Group, Inc. 159,600 23,840
American National Insurance Co. 5,900 515
AmSouth Bancorp 87,150 3,295
Associates First Capital Corp. Class A 3,200 178
Banc One Corp. 143,148 6,934
BankAmerica Corp. 229,400 14,811
BankBoston Corp. 6,500 468
Bankers Trust New York Corp. 7,800 679
Barnett Banks, Inc. 49,300 2,588
Bear Stearns Cos., Inc. 126,068 4,310
Beneficial Corp. 6,100 433
Central Fidelity Banks, Inc. 4,400 156
Charter One Financial, Inc. 5,000 269
Chase Manhattan Corp. 4,100 398
Chubb Corp. (The) 300 20
CIGNA Corp. 29,500 5,236
Citicorp 2,410 291
38 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
City National Corp. 7,400 $ 178
CNA Financial Corp. (a) 7,700 812
Comerica, Inc. 42,700 2,904
Commerce Bancshares, Inc. 7,775 352
Conseco, Inc. 27,700 1,025
ContiFinancial Corp. (a) 4,800 175
CoreStates Financial Corp. 32,300 1,736
Crestar Financial Corp. 12,500 486
Dime Bancorp, Inc. 11,500 201
Edwards (A.G.), Inc. 54,400 2,326
Equifax, Inc. 5,000 186
Equitable Companies, Inc. 22,700 755
Everest Re Holdings, Inc. 6,900 273
Federal Home Loan Mortgage Corp. 66,200 2,276
Federal National Mortgage Association 184,000 8,027
FINOVA Group, Inc. 2,800 214
First America Bank Corp. 3,450 158
First Chicago NBD Corp. 76,781 4,645
First Commerce Corp. 1,800 79
First Union Corp. 31,400 2,905
First Virginia Banks, Inc. 3,200 193
Firstar Corp. 16,200 494
Fleet Financial Group, Inc. 119 8
General Re Corp. 3,400 619
Golden West Financial Corp. 26,400 1,848
Great Western Financial Corp. 15,600 839
Hartford Financial Services Group (The), Inc. 8,200 679
Hibernia Corp. 12,900 180
Household International Corp. 10,500 1,233
Jefferson-Pilot Corp. 3,000 210
John Alden Financial Corp. 12,200 255
KeyCorp 24,600 1,375
Lehman Brothers Holdings, Inc. 127,400 5,160
Lincoln National Corp. 9,600 618
Marsh & McLennan Cos., Inc. 82,800 5,910
MBIA, Inc. 11,300 1,275
Mercantile Bancorp, Inc. 8,700 529
Merrill Lynch & Co., Inc. 1,400 83
Money Store, Inc. 6,200 177
Morgan (J.P.) & Co., Inc. 35,800 3,737
Morgan Stanley, Dean Witter Discover and Co. 114,840 4,945
National City Corp. 21,500 1,129
NationsBank Corp. 140,547 9,065
North Fork Bancorporation, Inc. 7,000 150
Ohio Casualty Corp. 2,100 92
Old Kent Financial Corp. 5,460 294
Old Republic International Corp. 35,100 1,064
Pacific Century Financial Corp. 13,000 601
PaineWebber Group, Inc. 23,800 833
PMI Group, Inc. (The) 5,900 368
PNC Bank Corp. 4,850 202
Progressive Corp. 3,000 261
Providian Financial Corp. 28,100 903
Regions Financial Corp. 6,414 203
Republic New York Corp. 6,200 667
Robert Half International, Inc. (a) 15,400 725
Salomon, Inc. 12,400 690
Signet Banking Corp. 71,000 2,556
SouthTrust Corp. 50,600 2,094
St. Paul Cos., Inc. 4,200 320
Star Banc Corp. 24,200 1,022
State Street Corp. 6,000 278
SunTrust Banks, Inc. 18,900 1,041
TCF Financial Corp. 3,700 183
Torchmark Corp. 18,200 1,297
Transamerica Financial Corp. 11,100 1,039
Travelers Property Casualty Corp. Class A 11,500 459
Travelers, Inc. 198,933 12,545
Union Planters Corp. 3,300 171
UnionBanCal Corp. 1,400 101
United Carolina Bancshares, Inc. 1,200 62
Unitrin, Inc. 1,200 73
UNUM Corp. 7,000 293
Valley National Bancorp 800 21
Wachovia Corp. 23,800 1,387
Washington Federal, Inc. 5,100 130
Washington Mutual, Inc. 14,300 853
Wells Fargo & Co. 1,900 511
Wilmington Trust Corp. 1,000 45
----------
179,625
----------
GENERAL BUSINESS - 4.9%
AccuStaff, Inc. (a) 37,000 876
ADT, Ltd. (a) 10,300 340
Ascend Communications, Inc. (a) 18,700 734
Automatic Data Processing, Inc. 61,500 2,891
Belo (A.H.) Corp. Class A 9,600 400
BHC Communications, Inc. Class A 2,700 323
Central Newspapers, Inc. Class A 2,000 143
Cox Communications, Inc. Class A (a) 4,800 115
Deluxe Corp. 19,400 662
Donnelley (R.R.) & Sons Co. 26,400 967
Dun & Bradstreet Corp. 108,600 2,851
Ecolab, Inc. 8,500 406
First Data Corp. 70,000 3,076
Equity Q Fund 39
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Fiserv, Inc. (a) 19,900 $ 888
Gannett Co., Inc. 51,200 5,056
Knight-Ridder, Inc. 41,800 2,051
Meredith Corp. 18,900 548
Metromedia International Group, Inc. (a) 30,500 387
Moore Corp., Ltd. 107,100 2,109
New York Times Co. Class A 27,600 1,366
Omnicom Group, Inc. 5,600 345
Paging Network, Inc. (a) 13,700 120
SBC Communications, Inc. 116,114 7,185
Service Corp. International 17,800 585
Sinclair Broadcast Group, Inc. Class A (a) 2,400 73
SPS Transaction Services, Inc. (a) 800 15
Stone & Webster, Inc. 2,000 85
TCI Satellite Entertainment, Inc. Class A (a) 6,600 52
Tele-Communications, Inc. Class A 107,800 1,597
Time Warner, Inc. 184,600 8,907
Tribune Co. 39,100 1,879
Viacom, Inc. Class B (a) 76,400 2,292
Washington Post Co. Class B 3,600 1,432
----------
50,756
----------
MISCELLANEOUS - 0.5%
Security Capital Pacific Trust 51,700 1,183
Tenneco, Inc. (a) 12,600 569
Waste Management, Inc. 93,300 2,997
----------
4,749
---------
SHELTER - 0.8%
Centex Corp. 41,700 1,694
Johns Manville Corp. 10,100 119
Louisiana Pacific Corp. 6,900 146
Masco Corp. 45,500 1,900
Owens-Corning Fiberglas Corp. 9,900 427
Pulte Corp. 15,600 539
USG Corp. (a) 36,100 1,318
Vulcan Materials Co. 9,000 707
Weyerhaeuser Co. 28,100 1,460
----------
8,310
----------
TECHNOLOGY - 13.9%
ADC Telecommunications, Inc. 18,200 607
AlliedSignal, Inc. 53,800 4,519
Applied Materials, Inc. (a) 17,400 1,231
Autodesk, Inc. 5,800 222
Bay Networks, Inc. (a) 30,800 818
BMC Software, Inc. 23,600 1,307
Boeing Co. 90,200 4,786
Cabletron Systems, Inc. 24,000 680
Cadence Design Systems, Inc. (a) 24,200 811
Cisco Systems, Inc. (a) 94,300 6,330
Coltec Industries, Inc. (a) 13,200 257
COMPAQ Computer Corp. (a) 53,300 5,290
Computer Associates International, Inc. 16,900 941
Digital Equipment Corp. (a) 27,100 960
Electronic Data Systems Corp. 30,400 1,246
EMC Corp. (a) 38,300 1,494
Gateway 2000, Inc. 19,200 623
General Dynamics Corp. 74,700 5,603
General Instrument Corp. (a) 12,800 320
General Motors Corp. Class H 32,600 1,883
Harris Corp. 14,800 1,243
HBO & Co. 64,900 4,470
Honeywell, Inc. 11,200 850
Input/Output, Inc. (a) 3,700 67
Intel Corp. 117,300 16,605
International Business Machines Corp. 103,400 9,325
Lexmark International Group, Inc. Class A (a) 108,100 3,284
Litton Industries, Inc. (a) 16,400 792
McDonnell Douglas Corp. 51,400 3,521
MEMC Electronic Materials, Inc. (a) 2,000 66
Micro Warehouse, Inc. (a) 17,800 305
Micron Electronics, Inc. (a) 7,100 126
Micron Technology, Inc. (a) 13,400 535
Microsoft Corp. 114,100 14,427
Motorola, Inc. 82,600 6,278
National Semiconductor Corp. (a) 95,300 2,919
Northern Telecom, Ltd. 600 55
Northrop Grumman Corp. 11,300 992
Oracle Systems Corp. (a) 97,800 4,921
Perkin-Elmer Corp. 12,500 995
Pitney Bowes, Inc. 63,000 4,379
Quantum Corp. 51,800 1,052
Raytheon Co. 13,300 678
Read-Rite Corp. (a) 10,700 223
SCI Systems, Inc. (a) 29,700 1,893
Seagate Technology 24,300 855
Sensormatic Electronics Corp. 12,500 161
Silicon Graphics, Inc. (a) 12,100 182
Solectron Corp. (a) 5,100 357
Storage Technology Corp. (a) 48,600 2,163
Stratus Computer, Inc. (a) 40,400 2,020
40 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Sun Microsystems, Inc. 152,800 $ 5,682
Symantec Corp. (a) 90,900 1,773
Symbol Technologies, Inc. 6,500 219
Teradyne, Inc. (a) 23,600 926
Thermo Instrument Systems, Inc. (a) 2,800 86
Thiokol Corp. 3,300 231
Thomas & Betts Corp. 19,900 1,046
United Technologies Corp. 19,100 1,584
Xerox Corp. 70,800 5,583
Xilinx, Inc. (a) 4,400 215
----------
143,012
----------
TRANSPORTATION - 1.2%
Burlington Northern, Inc. 12,400 1,114
Caliber Systems, Inc. 16,900 630
CNF Transportation, Inc. 3,100 100
Consolidated Freightways Corp. (a) 1,500 25
CSX Corp. 20,000 1,110
GATX Corp. 13,900 803
Kansas City Southern Industries, Inc. 6,900 445
Norfolk Southern Corp. 8,900 897
Overseas Shipholding Group, Inc. 4,900 96
Ryder System, Inc. 2,800 92
Tidewater, Inc. 62,600 2,754
Trinity Industries, Inc. 11,800 375
Union Pacific Corp. 50,700 3,574
Yellow Corp. (a) 7,100 158
----------
12,173
----------
UTILITIES - 9.1%
360 Communications Co. (a) 21,600 370
AES Corp. (a) 15,400 1,090
Airtouch Communications, Inc. (a) 79,400 2,174
Aliant Communications, Inc. 1,000 19
Allegheny Power System, Inc. 3,800 101
American Electric Power Co., Inc. 15,700 659
Ameritech Corp. 89,400 6,074
AT&T Corp. 48,300 1,694
Baltimore Gas & Electric Co. 6,000 160
Bell Atlantic Corp. 50,912 3,863
BellSouth Corp. 107,650 4,992
Brooklyn Union Gas Co. (The) 2,000 57
Calenergy, Inc. (a) 27,200 1,034
Central Louisiana Electric Co., Inc. 10,300 290
CINergy Corp. 30,900 1,076
CMS Energy Corp. 5,900 208
Coastal Corp. 33,200 1,766
Consolidated Edison Co. 51,500 1,516
Dominion Resources, Inc. 18,100 663
DTE Energy Co. 14,300 395
Duke Power Co. 36,658 1,757
Enron Corp. 78,200 3,192
Entergy Corp. 290,100 7,941
GPU, Inc. 6,300 226
GTE Corp. 109,800 4,817
Houston Industries, Inc. 80,500 1,726
Illinova Corp. 7,100 156
Long Island Lighting Co. 149,400 3,436
Lucent Technologies, Inc. 85,600 6,169
MCI Communications Corp. 77,200 2,953
MDU Resources Group, Inc. 600 14
National Fuel & Gas Co. 6,000 252
New England Electric System 6,400 237
New York State Electric & Gas Corp. 18,500 386
Northeast Utilities 13,100 125
Northern States Power Co. 28,600 1,480
NYNEX Corp. 43,800 2,524
OGE Energy Corp. 1,000 46
PacifiCorp. 53,500 1,177
Peco Energy Co. 32,500 683
Peoples Energy Corp. 15,500 580
Pinnacle West Capital Corp. 22,400 673
Potomac Electric Power Co. 11,300 261
PP&L Resources, Inc. 28,100 560
Public Service Enterprise Group, Inc. 100,500 2,513
Southern Co. 46,300 1,013
Sprint Corp. 44,300 2,331
Texas Utilities Co. 59,500 2,049
TransCanada Pipelines, Ltd. 4,500 91
U.S. West Communications Group 38,900 1,466
U.S. West Media Group (a) 101,900 2,063
Unicom Corp. 120,100 2,672
Union Electric Co. 34,800 1,312
UtiliCorp United, Inc. 26,500 772
Western Resources, Inc. 67,200 2,180
Wisconsin Energy Corp. 10,700 266
WorldCom, Inc. 160,200 5,115
----------
93,415
----------
TOTAL COMMON STOCKS
(cost $768,774) 1,009,498
----------
Equity Q Fund 41
<PAGE>
EQUITY Q FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
SHORT-TERM INVESTMENTS - 2.2%
Frank Russell Investment Company
Money Market Fund, due on demand (b) $ 21,782 $ 21,782
United States Treasury Notes
5.750% due 10/31/97 (c) 1,300 1,301
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $23,083) 23,083
----------
TOTAL INVESTMENTS
(identified cost $791,857)(d) - 100.2% 1,032,581
OTHER ASSETS AND LIABILITIES,
NET - (0.2%) (1,946)
----------
NET ASSETS - 100.0% $1,030,635
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
NV - Nonvoting
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 400 Midcap Index Futures Contracts
expiration date 09/97 33 $ 53
S&P 500 Index Futures Contracts
expiration date 09/97 37 130
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 183
----------
----------
(#) At June 30, 1996, United States Treasury Notes valued at $1,301 were held
as collateral by the custodian in connection with futures contracts
purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
42 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $791,857)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 1,032,581
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,535
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,039,356
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,370
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 551
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 141
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,721
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,030,635
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,076
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,226
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,724
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708,154
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,030,635
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($1,030,635,329 divided by 27,159,818 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37.95
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Equity Q Fund 43
<PAGE>
EQUITY Q FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,510
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
----------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,044
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,716
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,144
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,900
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,637
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,320 78,957
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,964
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 77,208
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,165
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 162,065
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
44 Equity Q Fund
<PAGE>
EQUITY Q FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,900 $ 13,142
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,957 91,060
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . 77,208 54,875
------------------- -------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . 162,065 159,077
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,824) (13,142)
In excess of net investment income . . . . . . . . . . . . . . . . . . . . . . -- (120)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . (23,244) (85,727)
------------------- -------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . (26,068) (98,989)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . 76,357 137,935
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 212,354 198,023
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 818,281 620,258
------------------- -------------------
End of period (including undistributed net investment income of
$3,076 at June 30, 1997). . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,030,635 $ 818,281
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Equity Q Fund 45
<PAGE>
EQUITY Q FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . $ 32.94 $ 30.40 $ 24.43 $ 26.03 $ 25.23 $ 24.90
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . .22 .58 .59 .69 .66 .67
Net realized and unrealized gain (loss) on investments . 5.82 6.33 8.52 (0.41) 2.71 1.73
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations. . . . . . . . 6.04 6.91 9.11 0.28 3.37 2.40
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . (.11) (.58) (.61) (.69) (.66) (.68)
In excess of net investment income . . . . . . . . . . . -- (.01) -- -- -- --
Net realized gain on investments . . . . . . . . . . . . (.92) (3.78) (2.53) (.97) (1.85) (1.39)
In excess of net realized gain on investments. . . . . . -- -- -- (.22) (.06) --
-------- -------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . . (1.03) (4.37) (3.14) (1.88) (2.57) (2.07)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . $ 37.95 $ 32.94 $ 30.40 $ 24.43 $ 26.03 $ 25.23
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a)(c) . . . . . . . . . . . . . . . . . . 18.65 23.67 37.91 .99 13.80 9.97
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ($000 omitted) . . . . . . . . 1,030,635 818,281 620,259 430,661 382,939 290,357
Ratios to average net assets (%)(b)(c):
Operating expenses . . . . . . . . . . . . . . . . . . .70 .71 .58 .11 .15 .18
Net investment income. . . . . . . . . . . . . . . . . 1.31 1.80 2.07 2.74 2.50 2.80
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . 108.45 74.59 74.00 45.87 54.69 58.35
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . . . .0347 .0332 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
(c) For periods prior to April 1, 1995, Fund performance operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net
of investment management fees but gross of anyinvestment services fees. See
Note 4.
46 Equity Q Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 89.8%
ARGENTINA - 0.2%
Banco de Galicia y Buenos Aires Class B New - ADR (a) 6,637 $ 174
Banco Frances del Rio la Plata - ADR 6,973 227
Naviera Perez Companc Class B 50,462 405
Sociedad Comercial del Plata - ADR (a) 1,928 64
Telecom Argentina SA Class B - ADR 1,485 78
Telefonica de Argentina Class B - ADR 11,490 398
Transportadora de Gas Del Sur Class B - ADR 5,591 70
YPF Sociedad Anonima Class D - ADR 13,726 422
----------
1,838
----------
AUSTRALIA - 3.3%
Amcor, Ltd. 230,170 1,531
Australia & New Zealand Bank Group, Ltd. 388,398 2,906
Australian Gas & Light Co. 55,966 330
Australian National Industries, Ltd. 419,483 514
Boral, Ltd. 554,207 1,747
Broken Hill Proprietary Co. 410,125 6,039
Burns Philip & Co., Ltd. 98,000 182
Caltex Australia 100,000 342
Commonwealth Installment Receipt Trustee, Ltd. 28,000 246
CSR, Ltd. 304,900 1,182
Eastern Aluminum 236,000 235
Eltin, Ltd. 265,500 502
Fairfax (John) 35,000 83
Foster's Brewing Group, Ltd. 297,300 553
GIO Australia Holdings 276,973 858
Lend Lease Corp. 10,123 214
Mayne Nickless, Ltd. 47,300 276
National Australia Bank, Ltd. 69,845 1,001
National Mutual Holdings, Ltd. 61,000 99
News Corp. 399,957 1,919
Pacific Magazines & Printing 101,000 276
Pasminco, Ltd. 240,000 488
Publishing Broadcasting, Ltd. 41,030 237
QNI, Ltd. 320,000 578
RGC Limited 176,782 648
Santos, Ltd. 315,000 1,326
Southcorp Holdings, Ltd. 158,800 595
St. George Bank, Ltd. 28,000 186
Tabcorp. Holdings, Ltd. 45,000 245
Wesfarmers 54,456 515
Western Mining Corp., Ltd. 904,946 5,711
Westfield Trust 393,000 808
Westpac Banking Corp. 304,000 1,831
Woodside Petroleum, Ltd. 35,000 302
Woolworth's Ltd. 80,000 263
----------
34,768
----------
AUSTRIA - 0.2%
Brau-Union Goess-Reininghaus-Osterreichische Brau 2,528 152
Creditanstalt-Bankverein 9,800 572
EVN Energ-Versorg 440 57
Flughafen Wien AG 1,534 65
Oester Brau Beteil 1,562 92
VA Technologie AG (BR) 2,300 421
Voest-Alpine Stahl AG (a) 10,000 453
Wienerberger Baustoff 1,600 329
----------
2,141
----------
BELGIUM - 0.5%
Credit Communal Holding Dexia NPV 7,302 784
Electrabel NPV 2,702 579
Fortis AG 2,300 475
Generale de Banque NPV 1,199 462
Groupe Bruxelles Lambert NPV 2,800 469
Kredietbank NPV 3,126 1,260
PetroFina SA NPV 1,720 651
UCB Capital NPV 99 314
----------
4,994
----------
BRAZIL - 0.5%
CEMIG SA - ADR 8,844 455
Centrais Eletricas Brasileiras Electrobras SA - ADR 2,000 57
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar (Regd) - GDR 6,240 142
Eletrobras (centrais) NPV 764,130 427
Sider Nacional cia NPV 3,558,460 117
Telecomunicacoes Brasileiras - ADR (144A) 417 63
Telecomunicacoes Brasileiras - ADR 20,043 3,042
Telecomunicacoes de Sao Paulo - NPV (a) 61,873 18
Telecomunicacoes de Sao Paulo SA (a) 82,332 27
Usinas Siderurgicas de Minas - ADR 24,555 269
White Martins SA - NPV 31,010 92
----------
4,709
----------
48 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CANADA - 3.1%
Air Canada, Inc. (a) 120,000 $ 808
Alcan Aluminum, Ltd. 63,850 2,178
Avenor, Inc. 40,000 776
Barrick Gold Corp. 50,900 1,104
Barrick Gold Corp. (US Regd) 34,900 768
BCE, Inc. NPV 70,126 1,950
Canadian Imperial Bank of Commerce 31,000 781
Canadian National Railway Co. 6,300 274
Canadian Pacific, Ltd. 45,100 1,275
Corel Corp. (a) 6,000 40
Cott Corp. 6,500 69
Dofasco, Inc. NPV 30,101 570
Donohue, Inc. Class A 29,000 620
Hudson's Bay Co. 81,000 1,789
Imasco, Ltd. 99,025 2,868
Imperial Oil, Ltd. 25,000 1,281
Inco, Ltd. 85,631 2,574
Laidlaw, Inc. Class B 40,000 552
Magna International, Inc. Class A 37,800 2,272
MDS, Inc. Class B 3,200 70
National Bank of Canada 171,500 2,142
Newbridge Networks Corp. (a) 17,311 742
Noranda, Inc. 50,300 1,084
Nova Scotia Power, Inc. 33,200 343
Petro-Canada 65,700 1,066
Renaissance Energy, Ltd. (a) 18,900 517
Rogers Communications, Inc. Class B (a) 80,000 501
Royal Bank of Canada 5,040 228
Royal Bank of Canada (US Regd) 50,000 2,269
Stelco, Inc. Series A (a) 65,000 485
Suncor, Inc. NPV 21,656 580
TELUS Corp. 18,000 326
Torstar Corp. Class B 15,200 474
----------
33,376
----------
CHILE - 0.1%
Administradora de Fondos de Pensiones
Provida SA - ADR 1,300 28
Chile Fund, Inc. 3,862 101
Chilectra SA - ADR 6,335 182
Chilgener SA - ADR 4,370 122
Compania de Telecomunicaciones de Chile SA - ADR 6,136 202
Enersis SA - ADR 5,809 207
Santa Isabel SA - ADR 3,400 111
----------
953
----------
CHINA - 0.1%
Huaneng Power International, Inc. - ADR Series N (a) 24,400 622
Yizheng Chemical Fibre Class H 651,000 116
----------
738
----------
CZECH REPUBLIC - 0.0%
SPT Telecom AS (a) 690 72
----------
72
----------
DENMARK - 0.5%
Bang & Olufsen Holding Series B 14,000 864
Coloplast AS Class B (Regd) 7,350 490
Den Danske Bank 2,860 278
Jyske Bank AS (Regd) 7,400 637
Novo Nordisk AS Series B 6,000 654
Ostasiatiske Kompagni (a) 20,000 473
Tele Danmark AS Series B 11,100 578
Tele Danmark Class B - ADR 32,100 838
Unidanmark Class A (Regd) 3,300 186
----------
4,998
----------
FINLAND - 0.7%
Enso OY Series A 71,000 656
Kymmene OY 58,000 1,340
Metra AB Series B 19,300 582
Nokia AB Series A 17,508 1,308
Nokia AB Series K 16,300 1,215
Outokumpu OY Class A 47,500 942
OY Tamro AB 36,000 250
Pohjola Series B 9,900 294
Rauma Group (The) 6,500 149
Valmet Corp. Series A 42,100 727
----------
7,463
----------
FRANCE - 6.6%
Accor SA 4,221 632
Alcatel Alsthom 33,461 4,191
Alcatel Alsthom Compagnie
Generale d'Electricite - ADR (a) 67,500 1,704
Assurances Generales de France 15,466 494
AXA - UAP 22,308 1,387
Banque Nationale Paris 14,390 593
Boiron 1,500 183
Canal Plus (a) 3,970 773
Carrefour SA 3,822 2,776
49 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Chargeurs International SA 1,366 $ 79
Christian Dior 3,780 624
Cie de St. Gobain 17,647 2,573
Clarins 3,114 414
Compagnie Bancaire SA 1,214 155
Credit Commercial de France 13,500 572
Credit Local de France 11,634 1,132
Credit Local de France (Regd) 1,775 173
Credit National 2,902 165
Credit National (a) 14 1
D.M.C. Dollfuss-Mieg (a) 5,400 92
Dexia France (Regd) 1,180 115
Eaux (cie Generale) 57,677 7,390
Elf Aquitaine - ADR 31,500 1,715
Elf Aquitaine SA 23,504 2,536
Eridania Beghin-Say 4,768 714
Galeries Lafayette 300 124
Groupe Danone 5,903 975
GTM - Entrepose 2,700 135
Guilbert SA 1,891 268
Havas 1,790 129
L'Air Liquide 5,652 897
L'Oreal (Societe)(a) 718 303
Lafarge Corp. SA (BR) 7,545 469
Lagardere Groupe (Regd) 28,900 839
Lapeyre (BR) 4,390 291
Legrand 1,519 268
Legris Industries SA 1,800 85
LVMH Moet-Hennessy 4,347 1,169
Lyonnais Eaux Dumez 20,780 2,093
Michelin (Cie Gen) Class B (Regd) 34,080 2,047
Nord-Est 15,000 331
Pathe SA 1,136 225
Pechiney International Class A 24,082 949
Peugeot SA 7,590 734
Pinault-Printemps Redoute SA 2,461 1,183
Primagaz CIE 2,655 235
Promodes 2,650 1,032
Renault (a) 65,758 1,664
Rexel SA 529 162
Rhone Poulenc SA - ADR 24,700 1,028
Sanofi SA 13,763 1,349
Schneider SA 29,726 1,582
Scor SA 15,000 604
Sefimeg (Regd) 1,000 64
SEITA 14,250 451
SGS Thomson Microelectronics (a) 9,800 774
Sidel SA 22,484 1,741
Simco (Regd) 1,700 135
Societe Generale 31,194 3,482
SociteteGenerale (a) 141 16
Sodexho 1,411 722
Synthelabo 5,150 670
Thomson-CSF 28,618 737
Total Co. SA Class B 49,594 5,013
TV Francaise (TFI) 12,733 1,138
Union des Assurances Federales 7,640 898
Union Financiere de France Banque SA 2,100 249
Usinor Sacilor 138,453 2,497
Valeo 3,950 246
Vallourec (Usin) 460 29
----------
71,215
----------
GERMANY - 5.5%
Adidas AG 8,900 985
Allianz AG (Regd)(a) 3,420 716
AVA ALG Handels VB (a) 1,480 421
BASF AG 14,874 550
Bayer AG 116,807 4,489
Bayer Motoren Werk 72 60
Bayerische Hypotheken-und Wechsel Bank AG 75,879 2,269
Bilfinger & Berger BAU AG (a) 5,350 218
Buderus AG 1,447 796
Commerzbank AG 27,160 769
Continental AG 33,500 832
Daimler-Benz AG 89,036 7,224
Degussa AG (a) 1,000 53
Deutsche Bank AG 40,289 2,354
Deutsche Lufthansa AG 8,700 167
Deutsche Pfandbrief & Hypothekenbank AG 3,770 217
Deutsche Telekom AG 18,183 438
Dresdner Bank AG 51,120 1,767
Fresenius Medical Care AG - ADR (a) 41,360 1,205
Fried, Krupp AG Hoesch 6,000 1,173
GEA AG 2,397 944
Gehe AG 17,920 1,223
Gerresheimer Glas AG 4,550 78
Hannover Rueckversicherungs AG 4,500 281
Hoechst AG 172,801 7,330
Hornback Baumarkt AG 1,949 82
IKB Deutsche Industriebank AG (a) 2,250 45
M.A.N. AG 600 185
50 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Mannesmann AG 8,829 $ 3,933
Merck KGAA 2,600 115
Metro AG (a) 5,300 581
Muenchener Rueckversicherungs 476 1,335
Praktiker Bau und Heimwerkemaerkte AG 2,245 40
Rhoen - Klinikum AG 3,402 449
SAP AG 7,970 1,599
Schering AG 6,374 681
Siemens AG 61,718 3,664
Tarkett AG 19,484 503
Veba AG 90,963 5,111
Veba International Finance 1998 Warrants (a) 1,300 455
Viag AG 2,800 1,273
Volkswagen International AG 1,360 1,042
Volkswagen International AG 1998 Warrants (a) 1,420 594
Wella Aktiengesellschaft 350 234
----------
58,480
----------
HONG KONG - 3.2%
Bank of East Asia, Ltd. 160 1
Cathay Pacific Airways 511,000 1,059
Cheung Kong Holdings, Ltd. 247,000 2,439
China Light & Power 39,000 221
Dao Heng Bank Group, Ltd. 103,000 564
Dickson Concepts International, Ltd. (New)(a) 146,000 531
First Pacific Co. 402,154 514
Great Eagle Holdings 78,510 259
Guangshen Railway Co., Ltd. 1,593,000 699
Guoco Group, Ltd. 183,000 964
Hang Lung Development Co. 250,000 458
Hang Seng Bank 115,000 1,640
Henderson Land Development Co., Ltd. 99,000 879
Hong Kong & China Gas Co., Ltd. 451,824 904
Hong Kong Electric Holding, Ltd. 557,000 2,243
HSBC Holdings (UK Regd) PLC 150,000 4,511
Hutchison Whampoa, Ltd. 621,000 5,371
National Mutual Asia 273,000 303
New World Development Co., Ltd. 569,232 3,395
Shanghai Petrochemical Class H 792,000 190
Sing Tao (a) 90,000 34
Sun Hung Kai Properties, Ltd. 261,200 3,144
Swire Pacific, Ltd. Class A 256,000 2,305
Swire Pacific, Ltd. Class B 180,000 273
Tai Cheung Holdings 73,000 58
Television Broadcast 168,000 755
Wharf Holdings 217,000 940
Wing Lung Bank 860 5
----------
34,659
----------
IRELAND - 0.2%
Allied Irish Banks 143,000 1,091
Independent Newspapers PLC 125,000 738
Waterford Wedgwood (Units) 465,000 609
----------
2,438
----------
ITALY - 3.5%
Assicurazioni Generali SPA 29,000 527
Banca Commerciale Italiana 138,000 286
Banca Pop di Bergamo CV 19,500 289
Banca Pop di Milano 201,343 1,207
Banco Ambrosiano Veneto 10,000 29
Banco Ambrosiano Veneto di Risp 27,000 39
Banco Fideuram SPA 162,755 532
Credito Italiano 763,258 1,397
Edison 50,000 249
ENI SPA - ADR 19,600 1,115
Ente Nazionale Idrocarburi SPA (Regd) 371,576 2,104
Fiat SPA 1,776,778 6,398
Fiat SPA di Risp 240,326 452
Fila Holdings SPA - ADR 12,400 415
Finmeccanica SPA (a) 306,455 210
Gewiss SPA 19,000 327
Gucci Group NV 4,255 274
Industrie Natuzzi SPA - ADR 29,572 758
Istituto Mobiliare Italiano SPA 80,243 722
Istituto Mobiliare Italiano SPA - ADR 39,000 1,063
Istituto Nazionale Delle Assicurazioni 1,422,327 2,168
Italgas (Soc. Ital.) 48,591 157
Luxottica Group SPA - ADR 11,400 773
Magneti Marelli SPA 52,500 89
Mediaset SPA 39,000 166
Mediolanum SPA 22,881 258
Mondadori (Arnoldo) Editore SPA 9,300 54
Montedison SPA New (a) 566,000 374
Olivetti & Cie SPA (a) 5,582,523 1,582
Parmalat Finanziaria SPA 149,000 211
Rinascente (LA) 15,500 86
International Fund 51
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Sasib SPA di Risp NC 35,000 $ 69
Seat SPA (a) 123,910 40
Seat SPA di Risp (a) 61,790 13
Simint SPA (a) 100,000 609
SOFAP 125,000 113
Stet 1,117,414 6,509
Stet di Risp 739,500 2,567
Telecom Italia di Risp 66,800 132
Telecom Italia Mobile SPA 286,246 925
Telecom Italia Mobile SPA - di Risp 334,018 596
Telecom Italia SPA 611,403 1,961
----------
37,845
----------
JAPAN - 25.0%
Advantest 4,920 378
Alps Electric Co. 25,000 349
Amada Co., Ltd. 49,000 432
Aoki International 22,000 392
Aoyama Trading Co. 50,000 1,605
Apic Yamada Corp. 25,200 367
Asahi Bank, Ltd. 175,000 1,489
Brother Industries 165,000 711
Canon Sales Co., Inc. 16,300 380
Canon Sales Co., Inc. 1997 Warrants (a) 330 39
Canon, Inc. 210,000 5,716
Central Glass Co. 197,000 574
Chugai Pharmaceutical Co. 67,000 602
Chuo Trust & Banking 7,000 46
Citizen Watch Co., Ltd. 34,000 262
Cosmo Oil Co. 92,000 440
Credit Saison Co. 76,400 1,866
CSK Corp., Ltd. 10,000 379
Dai Ichi Kangyo Bank 140,000 1,905
Dai Ichi Pharmaceutical Co. 138,000 2,432
Dai Nippon Screen Manufacturing Co. 41,000 386
Dai-Tokyo Fire & Marine 196,000 1,135
Daido Steel Co. 50,000 161
Daiei, Inc. 245,000 1,571
Daifuku Machinery Co. 11,000 145
Daiken Corp. 91,000 572
Daito Trust Construction 28,990 341
Daiwa Bank 350,000 1,658
Daiwa Danchi Co., Ltd. (a) 85,000 349
Daiwa House Industries Co. 121,000 1,478
Daiwa Kosho Lease Co., Ltd. 112,000 866
Daiwa Securities 388,000 3,060
DDI Corp. 487 3,595
Dowa Mining Co. Series 5 1997 Warrants (a) 17 5
East Japan Railway 344 1,765
Ebara Corp. 70,000 1,050
Eisai Co. 17,300 328
Fanuc Co. 11,900 457
Fuji Denki Reiki 26,000 204
Fuji Electric Co. 130,000 590
Fuji Machine Manufacturing Co. 17,000 616
Fuji Oil Co. 78,000 536
Fuji Photo Film Co. 55,000 2,212
Fujikura 58,000 541
Fujitsu, Ltd. 47,000 652
Fujitsu, Ltd. Series 2 1999 Warrants (a) 29 97
Fukui Bank 122,000 452
Fukuoka Bank 450 3
Furukawa Co., Ltd. 71,000 255
Furukawa Electric Co. 256,000 1,628
Gakken Co. 100,000 526
General Sekiyu KK 32,000 212
Gunze, Ltd. 160,000 729
Heiwa Corp. 36,000 707
Hitachi Credit Co., Ltd. 36,000 697
Hitachi Metals 58,000 423
Hitachi Zosen Corp. 72,000 286
Hitachi, Ltd. 676,000 7,549
Hokkaido Electric 14,400 258
Hokuriku Bank 120,000 411
Honda Motor Co., Ltd. 40,000 1,204
Hyakugo Bank 40,000 229
Inax Corp. 25,000 187
Industrial Bank of Japan 101,000 1,568
Intec, Inc. 52,000 694
Isetan Co. 59,000 731
Ishihara Sangyo (a) 168,000 497
Ishikawajima-Harima Heavy Industries 340,000 1,335
Ito-Yokado Co., Ltd. 98,000 5,686
Itoham Foods, Inc. 95,000 524
Izumi Co. 33,000 484
Izumiya Co., Ltd. 58,000 931
Japan Synthetic Rubber 70,000 598
Japan Tobacco, Inc. 77 608
Jeol 50,000 329
Kamei Corp. 78,000 857
52 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Kao Corp. 284,000 $ 3,940
Kawasaki Heavy Industries 462,000 2,148
Kawasaki Kisen (a) 170,000 343
Kawasho Corp. 163,000 506
Keihin Electric Express 480 2
Keiyo Bank, Ltd. 175,000 731
Keyence Corp. 100 15
Kinki Coca-Cola Bottling 25,000 342
Kinki Nippon Railway 770 5
Kirin Beverage Corp. 28,000 489
Kissei Pharmaceutical Co. 100 2
Koa Fire & Marine 83,000 502
Kokuyo Co., Ltd. 22,000 595
Komatsu Forklift Co., Ltd. 61,000 495
Komori Corp. 21,000 498
Kumagai Gumi Co. 48,000 80
Kuraray Co., Ltd. 52,000 517
Kurimoto Iron Works 55,000 424
Kyocera Corp. 64,000 5,081
Kyodo Printing Co. 20,000 192
Kyushu Electric Power 5,100 88
Long Term Credit Bank Japan 131,000 566
Mabuchi Motor Co. 26,300 1,526
Makita Corp. 105,000 1,539
Marui Co., Ltd. 48,000 892
Maruichi Steel Tube 29,000 481
Matsumotokiyoshi 7,400 314
Matsushita Electric Industrial Co., Ltd. 261,000 5,260
Matsuzakaya Co. 70,000 517
Mikuni Coca-Cola Bottling 22,000 326
Minebea Co., Ltd. 129,000 1,373
Mitsubishi Corp. 42,000 524
Mitsubishi Electric Corp. 321,000 1,795
Mitsubishi Estate Co., Ltd. 61,000 883
Mitsubishi Heavy Industries 705,000 5,407
Mitsubishi Paper Mills 35,000 137
Mitsubishi Rayon 74,000 305
Mitsubishi Trust & Banking 187,000 2,953
Mitsui & Co. 262,000 2,514
Mitsui Fudosan Co., Ltd. 104,000 1,434
Mitsui Marine & Fire Insurance Co., Ltd. 37,000 267
Mitsui Mining & Smelting 109,000 484
Mitsui Petrochemical Industry 23,000 111
Murata Manufacturing Co., Ltd. 122,000 4,854
Nagase & Co. 31,000 245
Namco 58,500 2,256
Nankai Electric Railway 450 2
National House Industrial 13,000 171
NEC Corp. 267,000 3,727
Nichido Fire & Marine 400 3
Nichiei Co., Ltd. 11,000 1,276
Nichimo Co. 88,000 269
Nippon Denso Co. 65,000 1,554
Nippon Express Co. 117,000 934
Nippon Fire & Marine 90,000 485
Nippon Hodo Co. 13,000 112
Nippon Oil Co. 176,000 963
Nippon Steel Corp. 1,438,000 4,592
Nippon Telegraph & Telephone Corp. 456 4,376
Nishimatsu Construction 171,000 1,194
Nissan Diesel Motor Co. 77,000 299
Nissan Motor Co., Ltd. 691,000 5,359
Nissei Sangyo Co. 26,000 318
NKK Corp. 450,000 966
Nomura Securities 418,000 5,762
North Pacific Bank 100,000 481
NSK, Ltd. 107,000 688
NTT Data Communications Systems Corp. 81 3,131
Obayashi Corp. 106,000 709
Oji Paper Co., Ltd. 86,000 532
Okamura Corp. 74,000 491
Ono Pharmaceutical 14,000 493
Pioneer Electronics Corp. 205,000 4,972
Promise Co., Ltd. 8,700 498
Ricoh Co., Ltd. 58,000 759
Rohm Co. 25,000 2,574
Sakura Bank, Ltd. 461,000 3,531
Sangetsu Co. 6,000 128
Sankyo Aluminum 50,000 161
Sankyo Co. 47,000 1,579
Sankyo Co., Ltd. 36,000 1,080
Sankyo Seiko Co. 100,000 474
Secom Co. 14,000 1,027
Sega Enterprises 8,300 275
Seino Transportation 36,000 389
Sekisui Chemical Co., Ltd. 151,000 1,528
Sekisui House, Ltd. 120,000 1,214
Seven-Eleven Japan NPV 6,300 476
Sharp Corp. 259,000 3,570
Shiga Bank, Ltd. 41,000 208
Shikoku Electric Power 41,200 701
Shimachu Co., Ltd. 15,000 450
Shin-Etsu Chemical Co. 36,400 965
Shin-Etsu Chemical Co. 2000 Warrants (a) 158 425
International Fund 53
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Shiseido Co., Ltd. 112,000 $ 1,847
Shohkoh Fund & Co., Ltd. 900 272
Showa Shell Sekiyu 60,000 565
Snow Brand Milk 45,000 232
Sony Corp. 145,700 12,699
Stanley Electric 182,000 942
Sumitomo Bakelite Co., Ltd. 65,000 525
Sumitomo Bank 188,000 3,084
Sumitomo Corp. 93,000 884
Sumitomo Electric Industries 100,000 1,675
Sumitomo Forestry 122,000 1,341
Sumitomo Marine & Fire 33,000 271
Sumitomo Metal Industries, Ltd. 636,000 1,809
Sumitomo Realty & Development 580,000 5,111
Sumitomo Rubber Industries 120,000 807
Sumitomo Trust & Banking 513,000 5,505
Tadano 45,000 320
Taisei Corp. 306,000 1,418
TDK Corp. 23,000 1,688
Teijin, Ltd. 127,000 598
Toc Co. 36,000 427
Toda Corp. 70,000 490
Toho Bank 65,000 400
Tohoku Electric Power 15,700 279
Tokai Rika Co. 37,000 292
Tokio Marine & Fire Insurance Co. 157,000 2,055
Tokyo Broadcasting 74,000 1,517
Tokyo Electric Power 90,000 1,892
Tokyo Electronics 11,500 550
Tokyo Steel Manufacturing 25,000 279
Toppan Printing 55,000 864
Torii Pharmaceutical Co., Ltd. 22,800 535
Toshiba Corp. 213,000 1,370
Tostem Corp. 20,000 553
Toyo Seikan Kaisha, Ltd. 400 9
Toyo Trust & Banking 214,000 1,802
Toyota Motor Corp. 185,000 5,455
Tsubakimoto Chain 77,000 470
UNY Co., Ltd. 24,000 469
West Japan Railway Co. 732 2,867
Yamaha Motor Co. 80,000 796
Yamanouchi Pharmaceutical 61,000 1,639
Yamato Kogyo Co. 42,000 414
Yamato Transport 100,000 1,225
Yamazaki Baking Co., Ltd. 25,000 441
Yasuda Fire & Marine Insurance Co., Ltd. (The) 88,000 591
Yodogawa Steel Works, Ltd. 45,000 275
Yokohama Rubber Co., Ltd. 300,000 1,282
Yurtec Corp. 11,550 133
----------
266,125
----------
MALAYSIA - 1.2%
Affin Holdings Berhad 331,000 787
Berjaya Industrial Berhad 38,000 37
Berjaya Sports 94,000 443
Carlsberg Brewery Malaysia Berhad 171,000 881
Commerce Asset Holdings Berhad 505,694 1,332
Commerce Asset Holdings Berhad Rights (a) 130,224 11
Ekran Berhad 14,000 27
Genting Berhad 81,000 388
IND Oxygen, Inc. 498,000 568
Kumpulan Guthrie 204,000 323
Multi Purpose Holding Berhad 154,000 216
Perusahaan Otomobl 99,000 463
Petronas Dagangan 1999 Warrants (a) 428,000 499
Renong Berhad 1,097,000 1,434
Resorts World Berhad 581,000 1,749
Sime Darby Berhad (Resident Shares) 315,600 1,050
Sime UEP Properties Berhad 41,000 89
Tanjong PLC 298,000 1,027
Technical Resource Industries Berhad (a) 79,000 136
Tenaga Nasional Berhad 131,000 638
Time Engineering Berhad 88,000 134
United Engineers Berhad 138,000 996
----------
13,228
----------
MEXICO - 0.3%
Cemex SA de CV Class B NPV 39,709 193
Cifra SA de CV - ADR 229,623 421
Compania Cervecerias Unidas SA - ADR 3,214 70
Empresa Nacional de Electric - ADR 9,929 224
Fomento Economico Mexicano SA de CV Series B NPV 26,557 158
Gruma SA - ADR (a) 10,354 204
Gruma SA Series B NPV (a) 45,148 210
Grupo Financiero Banamex AC Series B NPV (a) 82,052 211
Grupo Financiero Banamex AC Series L NPV (a) 3,655 9
Grupo Industrial Maseca Series B NPV 131,263 144
54 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Grupo Modelo SA Series C 27,752 $ 192
Grupo Television SA de CV - GDR (a) 2,709 82
Kimberly-Clark, Mexico Class A NPV 78,044 314
Panamerican Beverages, Inc. Class A 12,354 407
Telefonos de Mexico SA Series L - ADR 16,479 788
----------
3,627
----------
NETHERLANDS - 5.3%
ABN Amro Holdings NV (a) 138,531 2,583
Aegon NV 12,836 896
Ahold NV 10,985 927
AKZO Nobel NV 1,729 237
AKZO Nobel NV - ADR 15,800 1,088
Baan Company, NV (a) 3,187 216
Baan Company, NV (US Regd)(a) 3,710 255
Boskalis Westminster CVA 16,564 325
CSM NV CVA 14,527 728
DSM NV (BR) 4,400 438
Elsevier NV 143,998 2,406
European Vinyls Corp. International NV 1,400 35
Fortis Amev NV 17,022 758
Hagemeyer NV (a) 3,656 189
Heineken NV 2,200 375
Hollandsche Beton Groep NV 3,658 834
Hunter Douglas NV 10,408 885
ING Groep NV 156,240 7,203
KNP BT (Kon) NV 46,442 1,058
Moeara Enim Petroleum NPV 48 1,088
Nedlloyd Groep NV 30,000 867
Nutricia Verenigde Bedrijven CVA 2,750 434
Otra NV 3,590 58
Philips Electronics 90,860 6,508
Philips Electronics - ADR 14,300 1,028
Polygram 38,806 2,036
Royal Dutch Petroleum Co. (a) 196,476 10,310
Royal PTT Nederland NV 7,971 313
Royal PTT Nederland NV 20,000 793
Unilever NV CVA 16,820 3,541
Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit 204,058 4,512
Wereldhave NV 3,300 195
Wolters Kluwer CVA 29,207 3,557
----------
56,676
----------
NEW ZEALAND - 0.3%
Air New Zealand Class B 189,036 578
Carter Holt Harvey 35,941 93
Fletcher Challenge Building 57,598 173
Fletcher Challenge Energy 64,798 196
Fletcher Challenge Forest Division 3,776 5
Fletcher Challenge Paper 36,797 89
Fletcher Challenge, Ltd. (Forests Division) 137,287 203
Lion Nathan, Ltd. 222,100 563
Telecom Corp. of New Zealand, Ltd. 180,700 921
Tranz Rail Holdings, Ltd. - NPV 12,000 68
Wrightson Limited 300,000 192
----------
3,081
----------
NORWAY - 0.8%
Bergesen DY AS Series A 4,130 98
Christiania Bank OG Kreditkasse 141,049 481
Kvaerner Industries AS Series B 10,000 559
Norsk Hydro AS 40,806 2,221
Olav Thon Eiendomsselskap AS 17,600 490
Orkla AS 17,209 1,270
Orkla AS Series B Free 11,483 779
Saga Petroleum AS Series B 8,070 141
Schibsted AS 69,600 1,377
Storebrand ASA Series A (a) 149,200 890
----------
8,306
----------
PANAMA - 0.0%
Banco Latinoamericano de
Exportaciones SA Class E 1,820 78
----------
78
----------
PERU - 0.0%
CREDICORP, Ltd. 3,720 82
Telefonica Del Peru SA Class B - ADR 5,660 148
----------
230
----------
PORTUGAL - 0.1%
Jeronimo Martins SGPS 16,890 1,180
----------
1,180
----------
RUSSIA - 0.0%
Gazprom - ADR 2,780 48
----------
48
----------
International Fund 55
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
SINGAPORE - 1.1%
City Developments 28,000 $ 274
DBS Land 81,000 256
Development Bank of Singapore, Ltd. (Alien Market) 180,000 2,266
Fraser & Neave 31,000 221
Hong Kong Land Holdings, Ltd. (a) 293,282 780
Jardine Strategic Holdings, Ltd. (a) 322,437 1,219
Jardine Strategic Holdings, Ltd.
1997 Warrants (a) 21,310 1
1998 Warrants (a) 11,437 5
Keppel Corp. (a) 17,000 76
Keppel Corp., Ltd. Series A (a) 4,750 21
Mandarin Oriental International, Ltd. (a) 386,780 503
Overseas Chinese Banking (Alien Market) 103,999 1,077
Overseas Union Bank (Alien Market) 81,000 504
Overseas Union Bank, Ltd. Rights (Alien Market)(a) 16,200 22
Singapore Airlines, Ltd. (Alien Market) 123,000 1,101
Singapore Land 155,800 708
Singapore Press Holdings (Alien Market) 55,600 1,120
United Industrial Corp., Ltd. 141,000 107
United Overseas Bank, Ltd. (Alien Market) 162,779 1,673
Wing Tai Holdings, Ltd. 59,000 169
----------
12,103
----------
SOUTH KOREA - 0.1%
Kookmin Bank 6,645 95
Korea Electric Power Corp. 11,600 346
Pohang Iron & Steel 1,800 129
Samsung Electronics, Ltd. 4,042 321
Shin Han Bank (a) 3,940 49
----------
940
----------
SPAIN - 2.5%
Acerinox SA 4,500 843
Aguas de Barcelona (a) 57 2
Argentaria 15,072 844
Banco Bilbao Vizcaya (Regd) 20,230 1,643
Banco Popular Espanol (Regd) 11,697 2,866
Banco Santander SA (Regd)(a) 24,684 761
Centros Commerciales Pryca 39,100 846
Corp. Fin. Reunida (a) 200,000 842
Corporacion Bancaria de Espana SA 55,300 1,569
Dragados y Construcciones SA 6,600 137
Empresa Nacional de Electricidad 21,594 1,813
Fuerzas Electricat Series A 73,300 699
Gas Natural SDG SA 2,115 462
Gas Y Electricidad SA Series 2 15,239 818
Hidroelectrica del Cantabrico SA 20,600 836
Iberdrola SA 139,333 1,759
Obrascon SA 7,000 108
Prosegur CIA de Seguridad SA (Regd) 55,000 672
Repsol - ADR 34,800 1,477
Repsol SA 30,143 1,274
Tabacalera SA Series A (Regd) 11,600 623
Telefonica de Espana 173,227 5,008
Viscofan Envoltura 25,500 596
----------
26,498
----------
SWEDEN - 3.3%
ABB AB Series A (a) 30,000 421
ABB AB Series B (a) 50,000 698
Astra AB Series A (a) 433,164 8,064
Astra AB Series B (a) 101,864 1,797
Atlas Copco AB Series B 17,190 449
Autoliv, Inc. (a) 19,330 743
Avesta-Sheffield 131,500 1,521
BT Industries AB 35,000 701
Diligentia AB (a) 22,930 279
Electrolux AB Series B 25,174 1,816
Esselte AB Series B 3,570 84
Granges AB (a) 5,155 68
Hennes and Mauritz AB Series B (a) 46,390 1,631
Hoganas AB B Shares 18,300 609
Incentive AB Series B Free 17,800 1,627
Kinnevik Investment Series B 27,400 763
Marieberg Tidnings Series A 36,000 894
Munksjo AB 50,800 522
Nordbanken AB 8,500 287
OM Gruppen AB 21,200 658
Pharmacia & Upjohn, Inc. 32,000 1,112
Sandvik AB Series B 20,830 591
Scania AB Series B 40,200 1,226
Scania Aktiebolag Series A - ADR 14,200 421
Scania Aktiebolag Series B - ADR 6,200 184
Scribona AB Series B Free 4,140 48
Skand Enskilda Barken Series A 35,300 381
56 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Skandia Group Foersakerings Free 65,850 $ 2,426
SKF AB Series A Free 39,300 978
Svenska Handelsbank Series A 28,400 903
Telefonaktiebolaget Ericsson (LM)
Series B 71,420 2,812
Tornet Fastighets AB 31,000 366
----------
35,080
----------
SWITZERLAND - 5.2%
Adia SA 2,499 959
Baer Holdings AG (BR) 330 505
BBC Brown Boveri (BR) 1,046 1,583
Bobst AG (BR) 475 807
Bobst SA - AG 325 258
Ciba Specialty Chemicals AG (a) 6,134 567
CS Holdings (Regd) 3,055 392
Fischer (Georg) AG (BR) 748 1,040
Holderbank Financiere Glarus AG (BR) 390 368
Liechtenstein Global Trust AG 1,790 1,097
Magazine Zum Globus (a) 1,200 649
Nestle SA (Regd) 4,186 5,522
Novartis AG (Regd) 11,641 18,610
Phoenix Mecano (BR) 800 416
Publicitas Holdings SA - (Regd) 2,000 381
Richemont Series A (BR) 300 434
Roche Holdings Genusscheine AG NPV 1,077 9,741
Sarna Kunststoff Holdings AG (Regd) 250 248
Schweiz Bankgesellsch (BR) 1,850 2,116
Schweiz Ruckversicher (Regd) 1,320 1,867
Schweizerischer Bankverein (Regd)(a) 13,435 3,593
SGS Holding (BR) 450 962
SMH AG Neuenburg (Regd) 8,900 1,205
Sulzer AG (Regd) 800 686
Zurich Versicherungsgesellschaft (Regd) 2,600 1,036
----------
55,042
----------
THAILAND - 0.0%
Advanced Information Services
(Alien Market) 12,400 82
Bangkok Bank (Alien Market) 16,900 116
Siam Cement Co. (Alien Market) 5,350 80
----------
278
----------
UNITED KINGDOM - 16.4%
Abbey National PLC 69,000 942
Airtours PLC 65,000 1,258
Allied Colloids PLC 411,857 861
Allied Lyons 174,000 1,252
Amersham International PLC 28,600 762
Anglian Water PLC 97,400 1,062
Argos PLC 69,404 630
ASDA-MFI Group PLC 1,192,296 2,462
Associated British Ports PLC 122,000 521
B.A.T. Industries PLC 195,500 1,750
Barclays Bank PLC 40,200 798
BASS PLC 76,000 928
BG PLC 68,500 251
Britannic Assurance PLC 63,000 850
British Aerospace PLC 157,938 3,515
British Airways PLC 127,000 1,448
British Petroleum Co. PLC 561,094 6,980
British Steel PLC 127,600 318
British Telecom PLC 352,707 2,620
BTR PLC 515,666 1,765
Bunzl PLC 245,000 793
Burmah Castrol PLC 50,000 846
Cable & Wireless PLC 347,360 3,182
Cable & Wireless PLC - SP ADR 34,767 971
Cadbury Schweppes PLC 251,228 2,242
Caradon PLC (a) 127,423 427
Centrica PLC (a) 68,500 83
Coats Viyella PLC 57,000 120
Commercial Union Assurance Co. PLC 148,000 1,556
Compass Group PLC 159,900 1,789
Costain Group PLC (a) 8,200 6
Courtaulds PLC 115,000 649
Courtaulds Textile Co. PLC 120,000 613
Cowie Group PLC 149,166 892
Dalgety PLC 156,000 670
Devro International PLC 210,000 1,186
E D & F Man Group PLC 140,000 457
Electrocomponents PLC 50,000 372
EMI Group PLC 55,000 989
First Leisure Corp. PLC 120,000 619
Flextech PLC (a) 42,500 460
General Cable PLC (a) 168,900 458
General Electric Co. PLC 80,100 479
GKN PLC 9,000 154
Glaxo Wellcome PLC 334,542 6,922
International Fund 57
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Glynwed International PLC 223,200 $ 864
Granada Group PLC 57,000 750
Grand Metropolitan PLC 265,000 2,551
Great University Stores PLC 149,000 1,512
Guardian Royal Exchange PLC 734,000 3,319
Guinness PLC 288,180 2,822
Hanson PLC (a) 87,375 434
Heywood Williams Group PLC 21,666 74
Hillsdown Holdings PLC 483,876 1,366
HSBC Holdings 10,600 314
HSBC Holdings PLC 153,000 4,710
Huntingdon International Holdings PLC - ADR (a) 53,200 286
Hyder PLC 37,333 504
Imperial Chemical Industries PLC 147,500 2,049
Imperial Tobacco Group PLC 154,400 992
Invesco PLC 327,600 1,920
Kingfisher PLC 220,457 2,504
Ladbroke Group, Ltd. PLC 976,705 3,839
Laing (John) PLC Class A NV 45,800 284
Laird Group PLC 130,830 760
Lloyds TSB Group PLC 266,208 2,735
London Clubs International 200,000 1,259
London Electricity PLC 12,700 149
LucasVarity PLC 841,500 2,915
Manchester United PLC 125,000 1,253
Medeva PLC 180,000 770
MEPC PLC 85,000 696
National Westminster Bank PLC 367,185 4,938
Norwich Union PLC (a) 56,665 300
Orange PLC (a) 60,787 200
Pace Micro Technology PLC 190,000 215
Pilkington Brothers PLC 221,000 508
Powell Duffryn PLC 68,000 505
Powergen PLC 152,048 1,808
Premier Farnell PLC 94,000 731
Provident Financial PLC 104,000 970
Racal Electronics PLC 291,800 1,166
Railtrack Group PLC 100,000 1,037
Rank Group PLC 159,750 1,012
Redland PLC 23,033 130
Reed International 353,920 3,418
RMC Group PLC 60,000 972
Rolls-Royce PLC 37,370 143
Royal & Sun Alliance Insurance Group PLC 99,000 732
Royal Bank of Scotland Group PLC 233,500 2,185
RTZ Corp. PLC (Regd) 221,553 3,861
Safeway PLC 481,000 2,784
Sainsbury (J.) PLC 273,432 1,657
Scapa Group PLC 28,048 99
Scottish Power PLC 323,000 2,098
Sears PLC 1,037,500 1,175
Sevren Trent Water PLC 50,000 649
Shell Transportation & Trading PLC (Regd) 1,275,300 8,707
Smith & Nephew PLC 835,000 2,322
Smith (David S.) Holdings PLC 108,383 339
SmithKline Beecham PLC 193,690 3,566
Somerfield PLC 426,000 1,284
South West Water PLC 93,100 1,090
Southern Electric PLC 39,876 294
Stagecoach Holdings PLC 113,333 1,195
Stakis PLC 330,442 572
T & N PLC 301,000 717
Tarmac, Ltd. PLC 386,261 798
Taylor Woodrow PLC 235,000 689
Tesco Store Holdings PLC 99,463 615
Thorn PLC 305,000 863
Tomkins PLC 832,210 3,603
Trinity Holdings PLC 100,000 425
Unilever PLC 11,100 318
United Newspaper, Ltd. PLC 193,200 2,241
Vendome PLC 87,000 648
Vickers, Ltd. PLC 188,700 641
Vodafone Group PLC 1,254,627 6,122
Wessex Water PLC 230,000 1,559
Williams Holdings PLC 76,666 415
Willis Corroon Group PLC 248,700 530
WPP Group PLC 230,000 940
Zeneca Group PLC 60,000 1,985
----------
175,310
----------
VENEZUELA - 0.0%
CIA Anon Nacional
Telefonos de Venezuela - ADR 3,760 162
----------
162
----------
TOTAL COMMON STOCKS
(cost $815,673) 958,679
----------
58 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
PREFERRED STOCKS - 1.4%
AUSTRALIA - 0.3%
News Corp., Ltd. 348,999 $ 1,377
Sydney Harbour Casino
Holdings, Ltd. (a) 1,046,962 1,646
----------
3,023
----------
AUSTRIA - 0.0%
Bank Austria AG (a) 16,800 515
----------
515
----------
BRAZIL - 0.4%
Banco Bradesco SA NPV 29,664,054 299
Banco Itau SA (Regd) 301,000 169
Brahma (cia Cervej) NPV 443,989 338
Brasmotor SA NPV 529,000 118
CEMIG SA 4,869,699 251
Cim Port Itau (Cia) 370,920 127
Coteminas (Cia Tec) NPV 288,490 113
Lojas Americanas NPV (a) 5,224,000 71
Petroleo Brasileiro SA NPV 1,358,948 377
Telecomunicacoes - NPV 1,827,460 597
Telecomunicacoes Brasileiras - NPV 4,900,228 743
Telecomunicacoes de Minas Gerais
Class B NPV 828,000 147
Telecomunicacoes de Minas Gerais Rights (a) 10,270 2
Telecomunicacoes do Rio de Janeiro SA NPV 780,000 120
Telecomunicacoes do Rio Janeiro SA NPV (a) 92,476 14
Uniao de Bancos Brasileiros NPV 9,166,000 336
Usiminas Uni Sd Mg NPV 7,599 85
----------
3,907
----------
GERMANY - 0.7%
Bayer Motoren Werk 900 510
Draegerwerk AG 750 17
Dyckerhoff AG 250 90
Fielmann AG 2,133 64
GEA AG 840 326
Hornbach Holding AG 2,890 245
Jungheinrich 900 148
Krones AG NV 1,210 494
M.A.N. AG 2,100 532
Porsche AG 900 1,197
RWE AG 38,465 1,339
SAP AG 1,250 259
Volkswagen AG 2,540 1,427
Wella AG 100 68
----------
6,716
----------
ITALY - 0.0%
Fiat SPA 155,816 288
----------
288
----------
NETHERLANDS - 0.0%
International Nederlanden CVA 2,901 15
----------
15
----------
TOTAL PREFERRED STOCKS
(cost $10,678) 14,464
----------
PRINCIPAL
AMOUNT
(000)
----------
LONG-TERM INVESTMENTS - 0.6%
BELGIUM - 0.0%
Kredietbank (conv.)
5.750% due 12/31/03 BEF 2,000 81
----------
81
----------
ITALY - 0.0%
Italy, Republic of (conv.)
6.500% due 06/28/01 ITL 210,000 135
----------
135
----------
JAPAN - 0.6%
Bank of Tokyo - Cayman
Finance, Ltd. (Perpetual Maturity)
4.250% due 03/29/49 JPY 290,000 3,403
STB Cayman Capital, Ltd. (conv.)
0.500% due 10/01/07 100,000 981
Sumitomo Wiring Systems (conv.)
0.900% due 09/30/08 45,000 422
Yamanouchi Pharmaceutical (conv.)
1.250% due 03/31/14 90,000 1,239
----------
6,045
----------
International Fund 59
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
----------- ----------
MALAYSIA - 0.0%
Multi Purpose Holdings Berhad
3.000% due 11/13/01 MYR 293 $ 99
Renong Berhad (conv.)
4.000% due 05/22/01 59 18
----------
117
----------
TOTAL LONG-TERM INVESTMENTS
(cost $5,920) 6,378
----------
SHORT-TERM INVESTMENTS - 7.0%
UNITED STATES - 7.0%
Frank Russell Investment Company
Money Market Fund
due on demand (b) $ 65,863 65,863
United States Treasury Notes
5.750% due 10/31/97 (c) 8,350 8,357
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $74,219) 74,220
----------
TOTAL INVESTMENTS
(identified cost $906,490)(d) - 98.8% 1,053,741
OTHER ASSETS AND LIABILITIES,
NET - 1.2% 13,358
----------
NET ASSETS - 100.0% $1,067,099
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
GDS - Global Depositary Share
NPV - No Par Value
NV - Nonvoting
PLC - Public Limited Company
144A - Represents private placement security for qualified buyers
according to rule 144A of the Securities Act of 1933.
FOREIGN CURRENCY ABBREVIATIONS:
ATS - Australian schilling
BEF - Belgian franc
DEM - German mark
GBP - British pound
HKD - Hong Kong dollar
ITL - Italian lira
JPY - Japanese yen
MYR - Malaysian ringgit
NLG - Dutch guilder
NZD - New Zealand dollar
PTE - Portuguese escudo
SEK - Swedish krona
SGD - Singapore dollar
USD - U.S. dollar
The accompanying notes are an integral part of the financial statements.
60 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
FTSE - 100 Index
Futures Contracts (UK)
expiration date 09/97 177 $ (659)
TOPIX Index
Futures Contracts (Japan)
expiration date 09/97 309 710
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 51
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at $8,357 were held
as collateral by the custodian in connection with futures contracts
purchased by the Fund.
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ---------------------------------------------------- ---------- ----------
Basic Industries 7.4% $ 78,729
Capital Goods 8.0 85,278
Consumer Basics 12.2 129,723
Consumer Durable Goods 8.3 89,111
Consumer Non-Durables 5.2 55,821
Consumer Services 2.3 25,081
Energy 6.1 65,246
Finance 16.7 178,276
General Business 5.0 52,991
Miscellaneous 5.7 60,947
Shelter 2.0 20,881
Technology 3.8 41,031
Transportation 1.4 14,714
Utilities 7.1 75,313
Long-Term Investments 0.6 6,379
Short-Term Investments 7.0 74,220
---------- ----------
Total Investments 98.8 1,053,741
Other Assets and Liabilities, Net 1.2 13,358
---------- ----------
NET ASSETS 100% $1,067,099
---------- ----------
---------- ----------
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- ---------------------------------------------------- ---------- ----------
Europe 35.6 $ 380,106
Japan 25.6 272,170
United Kingdom 16.5 175,310
Pacific Basin 9.6 102,935
Latin America 1.5 15,504
United States (Short-Term Investments) 7.0 74,220
Other 3.0 33,496
---------- ----------
Total Investments 98.8 1,053,741
Other Assets and Liabilities, Net 1.2 13,358
---------- ----------
NET ASSETS 100% $1,067,099
---------- ----------
---------- ----------
The accompanying notes are an integral part of the financial statements.
International Fund 61
<PAGE>
INTERNATIONAL FUND
FOREIGN CURRENCY EXCHANGE CONTRACTS (Note 2)
June 30, 1997 (Unaudited)
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- --------------------- ---------------- ----------- --------------
USD 67 BEL 2,417 07/01/97 $ ---
USD 742 GBP 446 07/01/97 1
USD 205 ITL 349,467 07/02/97 --
USD 516 JPY 58,996 07/01/97 (1)
USD 136 SGD 195 07/01/97 --
DEM 1,024 USD 588 07/01/97 2
GBP 65 USD 108 07/02/97 --
GBP 22 USD 36 07/03/97 --
GBP 318 USD 528 07/07/97 (1)
HKD 450 USD 58 07/03/97 --
ITL 555,418 USD 328 07/01/97 1
ITL 908,315 USD 540 07/02/97 5
ITL 354,766 USD 210 07/03/97 1
ITL 1,029,461 USD 606 07/07/97 --
JPY 142,557 USD 1,254 07/01/97 10
JPY 30,355 USD 265 07/02/97 --
MYR 2 USD 1 07/02/97 --
NLG 22 USD 11 07/02/97 --
NZD 5 USD 3 07/01/97 --
PTE 11,554 USD 66 07/01/97 --
SEK 1,894 USD 246 07/01/97 1
SEK 3,503 USD 453 07/02/97 --
--------------
$ 19
--------------
--------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- --------------------- ---------------- ----------- --------------
USD 456 FRF 2,672 07/31/97 $ (1)
USD 31,491 GBP 19,000 09/26/97 67
USD 7,500 HKD 58,103 07/11/97 (1)
USD 658 HKD 5,101 07/27/97 --
USD 44,632 JPY 5,000,000 09/26/97 (455)
DEM 6,101 USD 3,553 09/18/97 35
HKD 58,103 USD 7,499 07/11/97 1
ITL 14,919,000 USD 8,771 09/18/97 13
--------------
$ (341)
--------------
--------------
The accompanying notes are an integral part of the financial statements.
62 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Amounts in
thousands(except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $906,490)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,053,741
Foreign currency holdings (identified cost $14,305). . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,304
Forward foreign currency exchange contracts (cost $104,560)(Note 2). . . . . . . . . . . . . . . . . . . . 104,170
Foreign currency exchange spot contracts (cost $6,968)(Note 2) . . . . . . . . . . . . . . . . . . . . . . 6,968
Receivables: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,460
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,329
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,076
Foreign taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,347
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,197,395
LIABILITIES
Payables:
Bank overdraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 591
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,896
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580
Accrued fees to affiliates (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . 732
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688
Daily variation margin on futures contracts (Notes 2 and 3) . . . . . . . . . . . . 350
Forward foreign currency exchange contracts (cost $104,560)(Note 2) . . . . . . . . 104,511
Foreign currency exchange spot contracts (cost $6,968)(Note 2). . . . . . . . . . . 6,948
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,296
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,067,099
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,462
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,298
Unrealized appreciation (depreciation) on: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,251
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Foreign currency related transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (407)
Shares of beneficial interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 882,180
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,067,099
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($1,067,098,978 divided by 26,446,289 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40.35
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
International Fund 63
<PAGE>
INTERNATIONAL FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,322
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,538
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350
Less foreign taxes withheld. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,553)
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,657
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,635
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 983
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,974
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,683
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,260
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,497
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 1,353 35,110
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,636
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,028
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (148) 48,516
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,626
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 91,309
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
64 International Fund
<PAGE>
INTERNATIONAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,683 $ 10,544
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,110 36,433
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . 48,516 20,126
------------------- -------------------
Net increase (decrease) in net assets resulting from operations . . . . . . . 91,309 67,103
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:. . . . . . . . . . . . . . . . . . . . . . . .
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,210) (8,574)
Net realized gain on investment. . . . . . . . . . . . . . . . . . . . . . . . . (10,408) (33,014)
------------------- -------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . . (11,618) (41,588)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . 43,028 122,088
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . 122,719 147,603
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944,380 796,777
------------------- -------------------
End of period (including undistributed net investment income
of $4,462 and accumulated distributions in excess of
net investment income of $2,011, respectively) . . . . . . . . . . . . . . . . $ 1,067,099 $ 944,380
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
International Fund 65
<PAGE>
INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . $ 37.39 $ 36.26 $ 34.28 $ 37.34 $ 28.92 $ 31.96
---------- ---------- ---------- ---------- ---------- ----------
Income From Investment Operations:
Net investment income. . . . . . . . . . . . . .30 .44 .48 .61 .58 .67
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . . . 3.11 2.41 3.16 .65 9.63 (2.62)
---------- ---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations. . . 3.41 2.85 3.64 1.26 10.21 (1.95)
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . (.05) (.35) (.64) (.36) (.57) (.67)
In excess of net investment income . . . . . . -- -- (.08) -- (.16) --
Net realized gain on investments . . . . . . . (.40) (1.37) (.94) (3.73) (1.06) (.42)
In excess of net realized gain on
investments. . . . . . . . . . . . . . . . . -- -- -- (.23) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . (.45) (1.72) (1.66) (4.32) (1.79) (1.09)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . $ 40.35 $ 37.39 $ 36.26 $ 34.28 $ 37.34 $ 28.92
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a)(c) . . . . . . . . . . . . . 9.24 7.98 10.71 5.38 35.56 (6.11)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . 1,067,099 944,380 796,777 674,180 562,497 348,869
Ratios to average net assets (%)(b)(c):
Operating expenses, net. . . . . . . . . . . 1.35 1.04 .88 .32 .39 .45
Operating expenses, gross. . . . . . . . . . 1.35 1.05 .89 .34 .41 .46
Net investment income. . . . . . . . . . . . 1.59 1.20 1.41 1.63 1.83 2.46
Portfolio turnover rate (%)(b) . . . . . . . . 85.79 42.69 36.78 71.09 62.04 48.99
Per share amount of fees waived ($ omitted). . -- .0025 .0041 .0093 .0091 .0030
Average commission rate paid per share
of security ($ omitted)(d) . . . . . . . . . .0032 .0038 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
(c) For periods prior to April 1, 1995, fund performance operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any services fees. See Note 4.
(d) In certain foreign markets the relationship between the translated U.S.
dollar price per share and commission paid per share may vary from that of
domestic markets.
66 International Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 93.8%
ASSET-BACKED SECURITIES - 10.4%
Advanta Home Equity Loan Trust
Series 1991-1 Class A
9.000% due 02/25/06 $ 66 $ 68
AFC Home Equity Loan Trust
Series 1996-2 Class 1A3
7.590% due 09/25/27 2,030 2,056
Capita Equipment Receivables Trust
Series 1996-1 Class A-4
6.280% due 06/15/00 1,030 1,030
Case Equipment Loan Trust
Series 1996 - B Class A3
6.650% due 09/15/03 4,410 4,439
Chase Manhattan Credit Card Master Trust
Series 1996-4 Class A
6.730% due 02/15/03 1,215 1,225
Chevy Chase Auto Receivables Trust
Series 1997-1 Class A
6.500% due 10/15/03 959 962
Citibank Credit Card Master Trust I
Series 1997-3 Class A
6.839% due 02/10/04 (c) 1,100 1,098
Contimortgage Home Equity Loan Trust
Mortgage Pass-thru Certificate
Series 1994-4 Class A6
8.270% due 12/15/24 625 639
Series 1995-1 Class A2-A
8.600% due 06/15/25 146 147
Series 1996-4 Class A-9
6.880% due 01/15/28 1,500 1,486
Series 1997-2 Class A6
7.120% due 03/15/16 825 825
Discover Card Trust
Series 1992-B Class A
6.800% due 06/16/00 935 938
Federal Housing Authority: Project Citi 68
7.430% due 06/27/21 1,541 1,521
Fingerhut Master Trust
Series 1996-1 Class A
6.450% due 02/20/02 6,300 6,318
General Motors Acceptance Corp.
Grantor Trust Series 1997-A Class A
6.500% due 04/15/02 2,303 2,311
Green Tree Financial Corp.
Series 1997 - 1 Class M1
7.220% due 03/15/28 1,300 1,285
Green Tree Recreational Equipment
Series 1997-3 Class A1
6.550% due 07/15/28 4,315 4,314
Greenwich Capital Acceptance, Inc.
Mortgage Pass-thru Certificate
Series 1993 Class LB-1
7.140% due 04/25/23 (c) 874 883
Key Auto Finance Trust
Series 1997-1 Class A-3
6.150% due 03/15/04 720 714
Lehman Pass-thru Securities, Inc.
Series 1991-2 Class A-1
8.000% due 03/20/99 106 107
Metris Master Trust
Series 1997 - 1 Class A
6.870% due 10/20/05 840 850
Mortgage Capital Funding, Inc.
Series 1996-MC1 Class A2B
7.900% due 02/15/06 950 986
Navistar Financial Owner Trust
Series 1997 - A Class A3
6.750% due 03/15/02 1,770 1,786
Oakwood Mortgage Investors, Inc.
Series 1996-B Class A2
6.800% due 10/15/26 (c) 1,500 1,504
Onyx Acceptance Grantor Trust
Series 1997-1 Class A
6.550% due 09/15/03 (c) 2,193 2,207
Preferred Credit Corp.
Series 1997-1 Class A6
7.590% due 07/25/26 1,050 1,065
Premier Auto Trust
Series 1996-4 Class A-4
6.400% due 10/06/01 3,470 3,476
Prudential Home Mortgage Securities Co.
Series 1992-38 Class A-8
6.950% due 11/25/22 1,640 1,521
Series 1993-52 Class A-1
8.454% due 11/25/23 (c) 2,961 3,042
Residential Funding Mortgage Securities I, Inc.
Series 1997-S4 Class A-5
7.000% due 03/25/12 1,387 1,364
Resolution Trust Corp.
Mortgage Pass-thru Certificate
Series 1992-C2 Class A-1
9.000% due 10/25/22 24 24
Series 1994-C1 Class C
8.000% due 06/25/26 1,200 1,227
Series 1994-C2 Class D
8.000% due 04/25/25 281 287
Series 1995-C1 Class C
6.900% due 02/25/27 (c) 400 395
68 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
JUNE 30, 1997 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-thru Certificate
Series 1994-16
8.290% due 11/25/24 (c) $ 1,794 $ 1,848
Saxon Asset Securities Trust
Series 1997-1 Class AF2
7.085% due 07/25/20 2,500 2,506
Sears Credit Account Master Trust II
Series 1996-2 Class A
6.500% due 10/15/03 535 537
Sears Mortgage Securities Corp.
Series 1992 Class A
7.587% due 10/25/22 (c) 2,578 2,630
Sears Savings Bank
Mortgage Pass-thru Certificate
Series 1992-A Class A
8.552% due 05/25/32 (c) 867 863
Team Fleet Financing Corp.
Series 1997-1 Class A
7.350% due 05/15/03 1,975 2,004
The Money Store Home Equity Loan Trust
Series 1994-D Class A-4
8.750% due 09/15/20 150 156
Series 1996-A Class A-5
6.850% due 06/15/19 1,050 1,052
Series 1996-B Class A-5
7.180% due 12/15/14 425 430
Wal-Mart Stores, Inc.
Series 1994-B3
8.800% due 12/30/14 360 404
WFS Financial Owner Trust
Series 1997-B Class A3
6.300% due 06/20/99 1,950 1,950
World Omni Automobile Lease
Securitization Trust
Series 1996 - B Class A-2
6.200% due 11/15/02 775 777
Series 1997 - Class A-2
6.750% due 06/25/03 (c) 2,000 2,014
Series 1997-A Class A-4
6.900% due 06/25/03 3,825 3,857
Series 1997-A Class B
7.300% due 06/25/03 (c) 850 850
----------
73,978
----------
CORPORATE BONDS AND NOTES - 14.4%
Ahmanson Capital Trust I Series A
8.360% due 12/01/26 525 528
Air Products & Chemicals, Inc.
8.750% due 04/15/21 300 338
Allegiance Corp.
7.300% due 10/15/06 450 450
America West Airlines, Series A
6.850% due 07/02/09 590 575
American Express Co.
8.500% due 08/15/01 45 48
American General Finance Corp.
8.500% due 06/15/99 800 830
American Stores Co.
8.000% due 06/01/26 450 460
Analog Devices, Inc.
6.625% due 03/01/00 225 224
Appalachian Power Co.
6.800% due 03/01/06 1,250 1,224
Aristar, Inc.
6.300% due 07/15/00 1,040 1,027
Associates Corp. of North America
6.250% due 03/15/99 1,520 1,519
Associates Corp. of North America
Series H (MTN)
7.090% due 04/11/03 400 404
AT&T Corp.
8.625% due 12/01/31 440 464
Atlantic Richfield Co.
9.125% due 08/01/31 700 841
AVCO Financial Services, Inc.
7.250% due 07/15/99 415 421
8.500% due 10/15/99 655 682
6.000% due 08/15/02 400 385
Baltimore Gas & Electric Co.
6.500% due 02/15/03 550 542
Banc One Corp.
7.250% due 08/01/02 790 804
Bank of New York, Inc.
7.875% due 11/15/02 500 523
Bank One, Columbus, Ohio
7.375% due 12/01/02 195 199
BankAmerica Corp.
6.850% due 03/01/03 425 425
Barnett Bank, Inc.
6.900% due 09/01/05 665 652
Baxter International, Inc.
7.650% due 02/01/27 200 202
Bell Telephone Co. of Pennsylvania
8.350% due 12/15/30 645 737
BellSouth Telecommunications
7.000% due 12/01/2095 295 280
Fixed Income I Fund 69
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Beneficial Corp.
8.400% due 05/15/08 $ 757 $ 845
Carolina Power & Light Co.
6.875% due 08/15/23 250 229
Case Corp.
7.250% due 08/01/05 395 398
7.250% due 01/15/16 150 141
Caterpillar Financial Services (MTN)
9.500% due 02/06/07 80 93
Caterpillar, Inc.
8.000% due 02/15/23 600 630
Central Fidelity Banks, Inc.
8.150% due 11/15/02 280 294
Central Power & Light Co. Series FF
6.875% due 02/01/03 550 551
Champion International Corp.
6.400% due 02/15/26 570 542
Chesapeake & Potomac Telephone Co.
8.375% due 10/01/29 405 465
Chevron Corp. Profit Sharing Savings Plan
Trust Fund
8.110% due 12/01/04 385 403
Chrysler Corp.
7.450% due 03/01/27 475 469
Chrysler Financial Corp.
9.500% due 12/15/99 445 475
Cincinnati Gas & Electric Co.
7.200% due 10/01/23 250 235
CIT Group Holdings, Inc. (MTN)
6.625% due 06/28/99 1,575 1,587
6.700% due 05/02/00 500 503
Citicorp
9.500% due 02/01/02 195 215
7.125% due 06/01/03 75 76
Coca Cola Enterprises, Inc.
7.000% due 10/01/26 665 676
Commercial Credit Group, Inc.
6.000% due 06/15/00 500 491
5.750% due 07/15/00 255 249
8.700% due 06/15/10 795 904
Commonwealth Edison Co. Series 85
7.375% due 09/15/02 1,120 1,137
Conagra, Inc. (MTN)
8.100% due 05/20/02 300 315
Consolidated Natural Gas Co.
8.625% due 12/01/11 108 114
Consolidated Rail Corp.
Pass-thru Certificate Structured Note
Series 1995 Class A
6.760% due 05/25/15 589 577
Constitution Capital Trust I
9.150% due 04/15/27 700 727
CoreStates Capital Corp.
5.875% due 10/15/03 750 708
Corporate Property Investors
7.875% due 03/15/16 2,025 2,053
Dayton Hudson Corp.
9.750% due 07/01/02 425 475
Discover Credit Corp. (MTN)
8.350% due 04/27/99 465 481
Dole Food Co., Inc.
6.750% due 07/15/00 280 280
Duke Power Co.
7.000% due 07/01/33 1,030 948
Eastman Chemical Co.
6.375% due 01/15/04 800 777
Eaton Corp.
7.000% due 04/01/11 545 517
Equitable Life Assurance Society
7.700% due 12/01/15 975 974
Federal Realty Investment Trust
7.480% due 08/15/26 1,000 1,000
First Bank Systems, Inc.
8.000% due 07/02/04 650 684
First Chicago Corp.
8.875% due 03/15/02 600 648
First Fidelity Bancorp
9.625% due 08/15/99 415 441
First Interstate Bancorp (MTN)
9.375% due 01/23/02 225 243
First Union Institutional Capital Trust I
8.040% due 12/01/26 100 100
First Union National Bank, Newark (MTN)
7.125% due 10/15/06 330 329
Fleet Financial Group, Inc.
8.125% due 07/01/04 675 713
Florida Residential Property & Casualty
Insurance Co., Series A
7.250% due 07/01/02 2,100 2,111
Ford Motor Credit Co.
8.375% due 01/15/00 425 443
Ford Motor Credit Co. (MTN)
6.000% due 02/27/01 1,450 1,416
6.290% due 03/05/01 865 853
Fortune Brands, Inc.
8.625% due 11/15/21 500 559
7.875% due 01/15/23 100 103
General Electric Capital Corp.
8.300% due 09/20/09 470 516
6.660% due 05/01/18 (c) 1,025 1,028
70 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
General Motors Acceptance Corp.
6.625% due 10/01/02 $ 1,845 $ 1,828
Goldman Sachs Group L.P. (MTN)
7.200% due 03/01/07 950 954
Grand Metropolitan Investment Corp.
7.450% due 04/15/35 425 450
Great Atlantic & Pacific Tea, Inc.
7.750% due 04/15/07 2,050 2,085
Hertz Corp.
9.000% due 11/01/09 390 444
Household Finance Corp.
6.375% due 06/30/00 750 745
International Lease Finance Corp.
5.750% due 01/15/99 685 680
6.375% due 02/15/02 1,200 1,183
International Paper Co.
9.400% due 06/01/02 600 663
ITT Corp.
6.250% due 11/15/00 700 684
ITT Industries, Inc.
7.400% due 11/15/25 865 837
Jackson National Life Insurance Co.
8.150% due 03/15/27 500 510
JC Penney & Co., Inc.
7.250% due 04/01/02 1,050 1,068
JPM Capital Trust I
7.540% due 01/15/27 285 273
Kansas Gas & Electric Co.
6.500% due 08/01/05 200 192
Kern River Funding Corp. Series B
6.720% due 09/30/01 1,025 1,021
Liberty Mutual Insurance Co.
7.875% due 10/15/26 1,025 1,009
Lockheed Martin Corp.
7.750% due 05/01/26 800 819
Martin Marietta Corp.
7.000% due 03/15/11 325 310
Mellon Bank, NA
7.625% due 09/15/07 510 526
Mellon Capital II Series B
7.995% due 01/15/27 370 369
Merry Land & Investment, Inc.
6.875% due 11/01/03 175 170
Morgan Stanley Group, Inc.
8.875% due 10/15/01 175 188
8.100% due 06/24/02 175 184
Nabisco, Inc.
6.700% due 06/15/02 325 321
NationsBank Corp.
6.625% due 01/15/98 250 251
New England Telephone & Telegraph Co.
7.875% due 11/15/29 430 455
Northwestern Bell Telephone Co.
7.750% due 05/01/30 455 458
Norwest Corp. Series H (MTN)
6.750% due 06/15/07 150 147
Norwest Financial, Inc.
6.375% due 11/15/01 750 740
6.250% due 11/01/02 425 415
6.375% due 11/15/03 650 634
NYNEX Corp.
9.550% due 05/01/10 582 661
Occidental Petroleum Corp.
10.125% due 11/15/01 255 286
Occidental Petroleum Corp. (MTN)
8.500% due 11/09/01 295 312
Pacific Bell
7.500% due 02/01/33 660 636
Pennsylvania Power & Light Co.
6.875% due 03/01/04 1,200 1,198
Pennzoil Co.
10.125% due 11/15/09 215 263
PepsiCo, Inc.
7.625% due 12/18/98 360 367
Philadelphia Electric Co. Series 1992
7.500% due 01/15/99 200 203
Philip Morris Cos., Inc.
6.950% due 06/01/06 380 381
7.650% due 07/01/08 395 403
Pitney Bowes Credit Corp.
8.550% due 09/15/09 780 881
Praxair, Inc.
6.850% due 06/15/05 880 873
Ralston Purina Co.
7.875% due 06/15/25 845 861
Realty Income Corp.
7.750% due 05/06/07 1,500 1,520
Republic New York Corp.
9.750% due 12/01/00 130 142
8.250% due 11/01/01 240 253
RJR Nabisco, Inc.
8.625% due 12/01/02 400 411
Roche Holdings, Inc.
Zero Coupon due 05/06/12 650 280
Rockwell International Corp.
8.875% due 09/15/99 300 315
Fixed Income I Fund 71
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Seagram Co., Ltd.
8.350% due 01/15/22 $ 740 $ 797
Sears Roebuck Acceptance Corp.
Series II (MTN)
6.690% due 04/30/01 975 974
Service Corp. International
7.375% due 04/15/04 550 564
Shopping Center Associates
6.750% due 01/15/04 750 731
Signet Bank
7.800% due 09/15/06 750 774
Simon Debartolo Group L.P.
6.875% due 11/15/06 500 486
Smith Barney Holdings, Inc.
7.000% due 03/15/04 800 799
Suntrust Banks, Inc.
7.375% due 07/01/02 575 589
Temple Inland, Inc.
7.250% due 09/15/04 575 580
Tenneco Corp.
10.200% due 03/15/08 725 882
Texaco Capital, Inc.
9.750% due 03/15/20 225 279
8.875% due 09/01/21 440 509
Texas Utilities Electric Co.
9.500% due 08/01/99 1,370 1,447
TIG Capital Trust I
8.597% due 01/15/27 1,225 1,249
Time Warner Entertainment Co., L.P.
10.150% due 05/01/12 400 485
8.375% due 03/15/23 925 950
8.375% due 07/15/33 525 536
Time Warner, Inc.
6.773% due 08/15/00 (c) 750 751
7.975% due 08/15/04 450 464
8.110% due 08/15/06 900 935
8.180% due 08/15/07 900 937
Transamerica Financial Corp.
8.375% due 02/15/98 360 365
Union Carbide Chemicals & Plastics
7.875% due 04/01/23 835 851
Union Oil Co. (MTN)
9.400% due 02/15/11 390 456
Union Pacific Corp.
7.600% due 05/01/05 350 358
Union Pacific Railroad Trust
Pass-thru Certificate Series 1996-A2
7.060% due 05/15/03 450 453
United Technologies Corp.
8.750% due 03/01/21 445 509
US West Capital Funding, Inc.
7.900% due 02/01/27 950 960
Virginia Electric & Power Co.
8.750% due 04/01/21 335 354
Wachovia Corp.
6.800% due 06/01/05 280 277
Washington Real Estate Investment Trust
7.250% due 08/13/06 1,000 992
Wells Fargo & Co.
6.875% due 04/01/06 500 491
Whirlpool Corp.
9.500% due 06/15/00 400 429
Willamette Industries, Inc.
7.850% due 07/01/26 750 770
World Financial Properties Tower
Series 1996 WBF-B
6.910% due 09/01/13 1,318 1,275
----------
101,642
----------
EURODOLLAR BONDS - 0.6%
Mexico (United Mexican States)
7.875% due 08/06/01 (c) 3,000 3,009
Skandinaviska Enskilda Banken
8.125% due 09/06/49 (c)(g) 1,000 1,051
----------
4,060
----------
MORTGAGE-BACKED SECURITIES - 33.7%
ACLC Franchise Loan Receivables
1997 Pass Thru Class A-1
7.120% due 03/15/12 1,000 1,000
BKD Commercial Mortgage Trust
Series 1997-C1 Class B
7.218% due 04/25/00 (c) 1,350 1,358
Chase Commercial Mortgage Securities Corp.
Series 1997-1 Class E
7.370% due 12/19/07 (c) 1,000 975
CSFB Finance Co., Ltd.
Series 1995-A Class A
7.542% due 11/15/05 (c) 450 443
Federal Home Loan Mortgage Corp.
Pool # D6-0929 8.000% due 06/01/25 737 756
Pool # D6-0991 8.000% due 06/01/25 349 357
Pool # D6-1272 8.000% due 06/01/25 284 292
Pool # D5-9294 9.000% due 03/01/25 591 625
72 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Federal Home Loan Mortgage Corp.
7.500% 15 year TBA (b) $ 420 $ 426
6.000% 15 Year TBA (b) 4,635 4,468
8.000% 15 Year TBA (b) 375 385
6.500% 30 Year TBA (b) 875 838
7.500% 30 Year TBA (b) 1,710 1,716
8.000% 30 Year TBA (b) 8,950 9,160
Federal Home Loan Mortgage Corp.
Participation Certificate
Group # 17-0164 9.000% due 05/01/16 136 144
Group # 17-0170 9.000% due 06/01/16 119 127
Group # 17-0171 9.000% due 06/01/16 254 269
Group # 17-0181 9.000% due 08/01/16 61 64
Group # 17-0195 9.000% due 10/01/16 319 339
Group # 17-0196 9.000% due 10/01/16 189 200
Group # 17-0197 9.000% due 10/01/16 404 429
Group # 17-0204 9.000% due 11/01/16 87 93
Group # 17-0208 9.000% due 12/01/16 92 98
Group # 26-0607 12.000% due 06/01/14 203 230
Group # 27-8582 9.000% due 10/01/16 36 38
Group # 28-4634 9.000% due 01/01/17 1 1
Group # 30-0025 12.500% due 04/01/16 321 367
Group # 30-5382 9.000% due 12/01/17 43 45
Group # A0-0690 9.000% due 02/01/20 1,581 1,691
Group # C0-0109 8.000% due 04/01/22 1,277 1,316
Group # C0-0335 7.500% due 05/01/24 321 323
Group # C0-0398 9.000% due 05/01/25 426 451
Group # C0-0475 8.500% due 08/01/26 23 23
Group # C8-0328 7.500% due 07/01/25 331 333
Group # C8-0370 6.500% due 12/01/25 983 943
Group # C8-0385 6.500% due 03/01/26 629 603
Group # C8-0415 8.500% due 07/01/26 458 476
Group # C8-0458 9.000% due 10/01/26 37 39
Group # D2-7264 7.500% due 11/01/22 277 279
Group # D4-7783 6.500% due 01/01/24 131 126
Group # D5-3905 7.500% due 06/01/24 249 251
Group # D5-6375 7.500% due 09/01/24 266 268
Group # D5-6485 7.500% due 09/01/24 587 591
Group # D5-9553 8.500% due 04/01/25 358 372
Group # D5-9633 9.000% due 04/01/25 187 198
Group # D5-9707 9.000% due 04/01/25 13 13
Group # D6-0224 9.000% due 05/01/25 123 130
Group # D6-1528 8.000% due 07/01/25 629 645
Group # D6-3713 8.000% due 09/01/25 344 353
Group # D6-3752 8.000% due 09/01/25 476 488
Group # D6-3859 6.500% due 09/01/25 469 449
Group # D6-4296 8.000% due 10/01/25 391 401
Group # D6-4458 8.000% due 09/01/25 346 355
Group # D6-4826 6.500% due 10/01/25 52 49
Group # D6-4861 8.000% due 10/01/25 634 650
Group # D6-4978 6.500% due 11/01/25 865 830
Group # D6-5028 8.000% due 11/01/25 317 325
Group # D6-5188 8.000% due 11/01/25 308 315
Group # D6-5348 6.500% due 10/01/25 421 404
Group # D6-5450 6.500% due 11/01/25 1,946 1,867
Group # D6-5854 8.000% due 11/01/25 25 26
Group # D6-5938 6.500% due 12/01/25 989 948
Group # D6-6409 8.000% due 12/01/24 684 701
Group # D6-7251 7.500% due 01/01/25 53 53
Group # D6-8007 6.500% due 02/01/26 164 158
Group # D6-8984 6.000% due 03/01/26 210 196
Group # D6-9054 6.000% due 03/01/26 884 823
Group # D6-9568 6.500% due 03/01/26 203 195
Group # D6-9743 6.500% due 04/01/26 788 756
Group # D6-9789 6.500% due 04/01/26 249 238
Group # D6-9853 6.500% due 04/01/26 443 425
Group # D7-0051 6.500% due 04/01/26 514 493
Group # D7-0251 6.500% due 04/01/26 958 919
Group # D7-0602 6.500% due 03/01/26 188 181
Group # D7-8436 6.500% due 02/01/27 480 460
Group # D7-8461 6.000% due 02/01/27 198 184
Group # D8-0414 8.000% due 06/01/27 449 460
Group # D8-0526 8.000% due 06/01/27 937 959
Group # D8-0527 8.000% due 06/01/27 386 395
Group # E0-0279 6.500% due 02/01/09 164 162
Group # E0-0333 8.000% due 08/01/09 208 214
Group # E0-0454 8.000% due 10/01/11 97 100
Group # E0-0482 6.500% due 04/01/12 535 524
Group # E0-0493 8.000% due 05/01/12 237 243
Group # E2-0123 7.500% due 08/01/09 265 270
Group # E2-0145 7.500% due 11/01/09 204 207
Group # E2-0153 8.000% due 01/01/10 66 68
Group # E2-0216 6.500% due 01/01/16 568 557
Group # E2-0238 6.500% due 05/01/11 1,857 1,824
Group # E5-6830 6.500% due 02/01/09 379 373
Group # E5-6953 6.500% due 02/01/09 56 55
Group # E5-9472 7.500% due 08/01/09 111 113
Group # E5-9512 7.500% due 08/01/09 159 161
Group # E5-9554 7.500% due 08/01/09 636 648
Group # E5-9577 7.500% due 09/01/09 386 393
Group # E5-9921 7.500% due 11/01/09 97 98
Group # E5-9923 7.500% due 11/01/09 210 214
Group # E5-9926 7.500% due 11/01/09 124 126
Group # E5-9932 7.500% due 11/01/09 283 288
Group # E5-9955 7.500% due 11/01/09 35 36
Group # E6-0172 8.000% due 02/01/10 506 521
Fixed Income I Fund 73
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Group # E6-0173 8.000% due 02/01/10 $ 230 $ 236
Group # E6-0194 8.000% due 03/01/10 105 108
Group # E6-1256 6.000% due 09/01/10 307 298
Group # E6-2525 6.000% due 02/01/11 302 292
Group # E6-2966 6.500% due 02/01/11 66 65
Group # E6-3864 6.500% due 04/01/11 165 162
Group # E6-3866 6.500% due 04/01/11 100 99
Group # E6-3916 6.500% due 04/01/11 25 25
Group # E6-4114 6.000% due 05/01/11 190 183
Group # E6-4927 6.000% due 07/01/11 700 676
Group # E6-5408 7.500% due 09/01/11 97 99
Group # E6-6524 6.500% due 03/01/12 774 759
Group # E6-6546 6.000% due 03/01/12 201 194
Group # G0-0279 7.500% due 12/01/24 819 825
Group # M1-4825 7.000% due 08/01/97 12 12
Group # M8-0446 7.000% due 10/01/03 24 24
Group # E4-9739 7.000% due 05/01/08 86 86
Pool # G00505 6.500% due 12/01/25 1,049 1,006
Pool # E60386 8.000% due 04/01/10 82 85
Pool # E62831 6.500% due 01/01/11 539 530
Federal Home Loan Mortgage Corp.
Series K Class K-5
7.760% due 05/01/12 1,862 1,858
Series 1552 Class D
5.500% due 02/15/14 (c) 1,000 995
Federal National Mortgage Association
Pool # 040208 8.000% due 01/01/02 2 2
Pool # 040403 8.000% due 01/01/02 2 2
Pool # 040841 8.000% due 01/01/02 66 67
Pool # 041060 8.000% due 02/01/02 115 117
Pool # 042014 8.000% due 03/01/02 4 4
Pool # 042675 8.000% due 02/01/02 6 6
Pool # 043467 8.000% due 03/01/02 3 3
Pool # 046329 8.000% due 04/01/02 5 5
Pool # 047205 8.000% due 05/01/02 45 45
Pool # 047293 8.000% due 05/01/02 11 11
Pool # 047565 8.000% due 07/01/02 74 75
Pool # 047690 8.000% due 05/01/02 5 5
Pool # 048419 8.000% due 06/01/02 57 57
Pool # 048902 8.000% due 06/01/02 75 76
Pool # 049385 8.000% due 06/01/02 10 11
Pool # 049441 8.000% due 06/01/02 4 4
Pool # 050752 7.000% due 05/01/00 412 414
Pool # 050758 7.000% due 06/01/00 126 126
Pool # 050762 6.500% due 07/01/08 447 441
Pool # 050974 6.500% due 01/01/09 946 933
Pool # 050991 6.500% due 02/01/24 35 34
Pool # 051057 8.000% due 06/01/02 74 75
Pool # 053628 8.000% due 07/01/02 65 66
Pool # 053865 8.000% due 07/01/02 24 24
Pool # 061217 8.000% due 05/01/03 16 16
Pool # 065408 7.875% due 09/01/18 (c) 324 341
Pool # 067922 8.000% due 07/01/03 280 284
Pool # 070424 8.000% due 06/01/02 9 10
Pool # 076261 8.000% due 12/01/03 172 175
Pool # 087274 8.000% due 08/01/04 99 101
Pool # 120778 8.000% due 03/01/17 61 63
Pool # 124542 7.000% due 11/01/99 664 668
Pool # 125335 7.500% due 06/01/24 250 251
Pool # 153690 8.000% due 07/01/02 165 168
Pool # 156065 8.000% due 09/01/02 233 236
Pool # 156799 8.000% due 03/01/05 158 161
Pool # 178066 7.000% due 09/01/99 405 408
Pool # 183514 8.000% due 08/01/22 280 289
Pool # 187852 10.500% due 08/01/10 6 6
Pool # 190251 8.000% due 11/01/23 142 147
Pool # 190506 6.500% due 12/01/08 652 643
Pool # 190924 6.500% due 06/01/09 669 660
Pool # 190962 6.500% due 07/01/09 411 406
Pool # 207010 6.500% due 04/01/09 30 29
Pool # 208101 6.500% due 05/01/00 77 77
Pool # 211454 7.000% due 05/01/00 160 161
Pool # 216515 6.500% due 06/01/08 45 44
Pool # 220817 6.500% due 06/01/08 23 23
Pool # 223595 6.500% due 07/01/08 84 83
Pool # 234968 6.500% due 09/01/08 186 183
Pool # 248444 6.500% due 05/01/09 175 173
Pool # 250009 6.500% due 04/01/09 777 766
Pool # 250030 7.000% due 05/01/24 1,972 1,943
Pool # 250345 7.000% due 09/01/25 1,219 1,196
Pool # 250804 9.000% due 11/01/26 38 40
Pool # 250836 7.000% due 02/01/27 183 179
Pool # 250842 9.000% due 12/01/26 728 767
Pool # 250920 7.500% due 12/01/99 (c) 149 151
Pool # 250971 7.000% due 06/01/27 490 480
Pool # 251117 9.000% due 05/01/27 233 245
Pool # 263021 6.500% due 05/01/09 52 51
Pool # 266371 6.500% due 01/01/01 310 309
Pool # 269791 6.500% due 05/01/09 328 323
Pool # 270990 6.500% due 02/01/01 43 43
Pool # 270992 6.500% due 02/01/01 220 219
Pool # 273185 6.500% due 04/01/24 1,019 981
Pool # 274657 6.500% due 04/01/24 716 689
Pool # 275276 7.500% due 06/01/24 288 290
Pool # 276075 6.500% due 04/01/09 521 514
Pool # 276207 6.500% due 04/01/24 210 202
74 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Pool # 277038 7.000% due 05/01/24 $ 2,967 $ 2,924
Pool # 277550 6.500% due 04/01/09 293 289
Pool # 279004 7.000% due 04/01/24 189 186
Pool # 279137 6.500% due 05/01/09 456 450
Pool # 280352 6.500% due 05/01/09 202 199
Pool # 280980 6.500% due 05/01/09 42 42
Pool # 280984 6.500% due 05/01/09 1,445 1,425
Pool # 281297 6.500% due 05/01/09 374 369
Pool # 281298 6.500% due 05/01/09 202 199
Pool # 281439 6.500% due 04/01/09 240 237
Pool # 282305 7.000% due 05/01/24 579 571
Pool # 283040 6.500% due 05/01/09 369 363
Pool # 283486 6.500% due 05/01/09 385 380
Pool # 283500 7.000% due 05/01/24 500 493
Pool # 283947 7.500% due 06/01/24 192 193
Pool # 284279 7.000% due 05/01/24 425 419
Pool # 284451 6.500% due 05/01/09 407 402
Pool # 284577 6.500% due 05/01/09 724 714
Pool # 285147 7.000% due 06/01/24 730 719
Pool # 286122 7.000% due 06/01/24 86 85
Pool # 287464 6.500% due 06/01/09 387 381
Pool # 287716 7.500% due 09/01/24 698 703
Pool # 289234 6.500% due 06/01/09 587 579
Pool # 289660 7.500% due 08/01/24 186 187
Pool # 290876 7.500% due 07/01/24 513 516
Pool # 293571 9.000% due 01/01/25 76 81
Pool # 295187 6.500% due 09/01/09 50 49
Pool # 303297 8.500% due 05/01/25 106 110
Pool # 303555 7.000% due 09/01/25 622 611
Pool # 309300 7.000% due 07/01/03 78 79
Pool # 312495 7.000% due 07/01/25 615 605
Pool # 312998 7.000% due 07/01/25 142 139
Pool # 313117 6.000% due 09/01/11 1,980 1,916
Pool # 315120 6.500% due 08/01/25 347 332
Pool # 316786 7.000% due 07/01/25 659 647
Pool # 316938 7.000% due 07/01/25 320 315
Pool # 317437 8.500% due 07/01/25 814 847
Pool # 317797 6.500% due 09/01/25 250 239
Pool # 319197 6.500% due 08/01/25 304 291
Pool # 319622 7.000% due 08/01/25 643 631
Pool # 319647 7.000% due 08/01/25 226 222
Pool # 319761 7.000% due 08/01/25 581 570
Pool # 320080 7.000% due 08/01/25 1,804 1,776
Pool # 324205 7.000% due 09/01/25 2,060 2,021
Pool # 325005 6.500% due 10/01/25 265 254
Pool # 325202 7.000% due 10/01/26 182 179
Pool # 325229 7.000% due 10/01/25 1,036 1,017
Pool # 326413 7.000% due 10/01/25 164 161
Pool # 326703 6.500% due 11/01/25 345 331
Pool # 327963 6.500% due 11/01/25 307 294
Pool # 329025 6.500% due 11/01/25 374 358
Pool # 329286 6.500% due 10/01/25 373 357
Pool # 329978 6.500% due 11/01/25 289 277
Pool # 332456 6.500% due 01/01/26 72 69
Pool # 332461 6.500% due 01/01/26 454 435
Pool # 334888 6.500% due 02/01/26 4,106 3,948
Pool # 340281 7.000% due 10/01/03 379 380
Pool # 345582 6.500% due 05/01/26 571 546
Pool # 346095 7.500% due 05/01/03 406 411
Pool # 346212 7.000% due 04/01/26 240 236
Pool # 346441 8.000% due 10/01/26 26 26
Pool # 348062 7.500% due 07/01/26 988 991
Pool # 348448 7.500% due 06/01/03 69 70
Pool # 348851 7.500% due 06/01/26 513 515
Pool # 349196 7.500% due 08/01/03 80 81
Pool # 351415 7.500% due 07/01/26 626 629
Pool # 351416 7.500% due 07/01/26 438 440
Pool # 351999 7.500% due 08/01/26 88 88
Pool # 352092 7.000% due 09/01/03 231 232
Pool # 352979 7.500% due 07/01/26 318 319
Pool # 353000 8.000% due 09/01/26 33 33
Pool # 353390 7.500% due 08/01/03 1,201 1,219
Pool # 353616 7.000% due 10/01/26 671 657
Pool # 356100 8.000% due 09/01/11 245 252
Pool # 359116 7.000% due 12/01/26 98 96
Pool # 359701 7.000% due 10/01/26 123 120
Pool # 362148 7.000% due 11/01/26 141 138
Pool # 364320 7.000% due 02/01/27 472 462
Pool # 365147 7.000% due 03/01/27 263 258
Pool # 365304 8.000% due 11/01/26 743 760
Pool # 365362 7.000% due 12/01/26 401 393
Pool # 366127 9.000% due 12/01/26 194 204
Pool # 367081 9.000% due 12/01/26 758 798
Pool # 367468 7.000% due 12/01/26 647 634
Pool # 367700 7.000% due 12/01/26 178 174
Pool # 367935 7.000% due 02/01/27 121 118
Pool # 368062 7.000% due 12/01/26 664 650
Pool # 369319 6.500% due 04/01/27 361 345
Pool # 369454 6.500% due 01/01/27 493 471
Pool # 370192 7.000% due 01/01/27 116 114
Pool # 371071 7.000% due 02/01/27 205 201
Pool # 371077 7.000% due 03/01/27 582 570
Pool # 373792 7.000% due 04/01/27 400 392
Pool # 373869 6.000% due 03/01/12 825 795
Pool # 377154 6.500% due 04/01/27 496 474
Pool # 379031 7.000% due 05/01/27 603 591
Fixed Income I Fund 75
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Federal National Mortgage Association
(REMIC)
8.000% due 07/25/23 $ 1,925 $ 2,031
Federal National Mortgage Association
(REMIC)
Series G92-36 Class A
7.000% due 04/25/15 417 420
Series 1992-158 Class ZZ
7.750% due 08/25/22 430 407
Federal National Mortgage Association
7.000% 30 Year TBA (b) 2,075 2,033
7.500% 30 Year TBA (b) 1,700 1,704
8.000% 30 Year TBA (b) 2,180 2,228
9.000% 30 Year TBA (b) 375 395
Principal Only Strip
Series 108 Class 1
Zero Coupon due 03/25/20 205 155
First Union Lehman Brothers Commercial Trust
Series 1997 - C1 Class C
7.440% due 04/18/07 950 966
Government National Mortgage Association
Pool # 006248 8.500% due 06/15/05 68 71
Pool # 008528 6.875% due 10/20/24 (c) 3,523 3,613
Pool # 139796 9.500% due 03/15/16 109 118
Pool # 146110 9.500% due 05/15/16 27 29
Pool # 148211 9.500% due 02/15/16 88 95
Pool # 148618 8.500% due 08/15/16 21 22
Pool # 152577 9.000% due 10/15/16 75 81
Pool # 152837 9.000% due 10/15/16 36 39
Pool # 154592 9.000% due 04/15/16 272 292
Pool # 157439 9.000% due 05/15/16 179 192
Pool # 157532 8.500% due 07/15/16 44 46
Pool # 161209 9.000% due 08/15/16 157 168
Pool # 161412 9.000% due 05/15/16 48 52
Pool # 161598 9.000% due 06/15/16 83 89
Pool # 164705 9.000% due 09/15/16 390 419
Pool # 165541 8.500% due 07/15/16 99 105
Pool # 168336 9.000% due 08/15/20 17 18
Pool # 173346 9.000% due 10/15/16 108 116
Pool # 173661 8.500% due 08/15/16 317 335
Pool # 174110 8.500% due 11/15/16 280 296
Pool # 174840 9.000% due 10/15/16 180 193
Pool # 175753 9.000% due 10/15/16 83 90
Pool # 177139 9.000% due 11/15/16 71 76
Pool # 177163 9.000% due 10/15/16 61 66
Pool # 179721 10.500% due 09/15/20 36 40
Pool # 180669 8.500% due 04/15/17 35 37
Pool # 181250 9.000% due 11/15/16 108 116
Pool # 183409 8.500% due 10/15/16 190 201
Pool # 183690 8.500% due 01/15/17 125 132
Pool # 186094 8.500% due 03/15/17 553 584
Pool # 186658 9.000% due 11/15/16 228 245
Pool # 188014 9.000% due 12/15/16 118 126
Pool # 188459 8.500% due 05/15/17 92 97
Pool # 188531 8.500% due 05/15/17 95 100
Pool # 193313 9.000% due 11/15/16 157 169
Pool # 194421 8.500% due 01/15/17 84 88
Pool # 194842 9.000% due 11/15/16 8 9
Pool # 195538 9.000% due 11/15/16 49 52
Pool # 195910 8.500% due 12/15/16 80 84
Pool # 196521 8.500% due 01/15/17 343 362
Pool # 196528 8.500% due 02/15/17 260 275
Pool # 197003 8.500% due 02/15/17 78 83
Pool # 197387 8.500% due 01/15/17 460 486
Pool # 198202 8.500% due 01/15/17 140 147
Pool # 199668 8.500% due 02/15/17 228 241
Pool # 199686 8.000% due 03/15/17 127 131
Pool # 200712 8.500% due 02/15/17 299 315
Pool # 201206 8.500% due 02/15/17 172 182
Pool # 201795 8.500% due 02/15/17 138 145
Pool # 204153 8.500% due 01/15/17 168 177
Pool # 204268 8.500% due 02/15/17 102 107
Pool # 210896 8.500% due 04/15/17 499 527
Pool # 212049 8.500% due 05/15/17 243 257
Pool # 213265 8.500% due 03/15/17 161 170
Pool # 213365 8.000% due 04/15/17 27 28
Pool # 225968 8.500% due 07/15/17 182 192
Pool # 266892 7.000% due 06/15/23 319 315
Pool # 273024 10.500% due 08/15/20 42 47
Pool # 285402 10.500% due 05/15/20 37 41
Pool # 290338 10.500% due 06/15/20 714 793
Pool # 290680 10.500% due 08/15/20 72 81
Pool # 294919 10.500% due 09/15/20 15 16
Pool # 295408 10.500% due 08/15/20 65 72
Pool # 297998 10.500% due 11/15/20 111 124
Pool # 299159 10.500% due 11/15/20 84 93
Pool # 300795 10.500% due 12/15/20 59 66
Pool # 301683 10.500% due 01/15/21 117 130
Pool # 321967 7.000% due 05/15/23 289 285
Pool # 332559 7.000% due 04/15/23 118 116
Pool # 336092 7.000% due 09/15/23 126 125
Pool # 336136 7.000% due 04/15/23 106 105
Pool # 336166 7.000% due 02/15/23 256 252
Pool # 336917 7.000% due 05/15/23 612 604
Pool # 337344 7.000% due 08/15/23 301 297
Pool # 337419 7.000% due 06/15/23 434 428
76 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Pool # 337470 7.000% due 07/15/23 $ 80 $ 79
Pool # 339059 7.000% due 10/15/23 130 128
Pool # 342398 7.000% due 06/15/23 427 421
Pool # 342805 7.000% due 06/15/23 100 99
Pool # 343557 7.000% due 05/15/23 299 295
Pool # 343608 7.000% due 05/15/23 207 205
Pool # 343620 7.000% due 06/15/23 471 465
Pool # 343632 7.000% due 07/15/23 303 299
Pool # 346058 7.000% due 01/15/24 701 691
Pool # 346836 7.000% due 10/15/23 102 101
Pool # 347901 7.000% due 06/15/23 53 52
Pool # 348875 7.000% due 07/15/23 289 285
Pool # 348895 7.000% due 07/15/23 380 375
Pool # 349383 7.000% due 06/15/23 87 86
Pool # 351270 7.000% due 07/15/23 86 85
Pool # 352114 7.500% due 08/15/23 240 242
Pool # 355230 7.000% due 09/15/23 412 407
Pool # 356693 7.000% due 08/15/23 321 317
Pool # 356952 7.000% due 06/15/23 494 488
Pool # 358427 7.000% due 09/15/23 308 304
Pool # 358542 7.000% due 07/15/23 404 398
Pool # 358565 7.000% due 05/15/23 433 428
Pool # 360181 7.000% due 08/15/23 114 112
Pool # 361056 6.500% due 08/15/08 152 150
Pool # 364136 7.000% due 08/15/23 126 124
Pool # 364600 7.000% due 08/15/23 142 140
Pool # 365356 8.500% due 05/15/25 471 489
Pool # 366793 7.000% due 05/15/24 2,030 2,002
Pool # 368988 6.500% due 03/15/09 214 212
Pool # 371476 8.500% due 05/15/25 348 362
Pool # 372318 6.500% due 02/15/26 2,063 1,974
Pool # 372850 7.000% due 01/15/24 601 593
Pool # 375084 8.500% due 05/15/25 38 39
Pool # 377593 6.500% due 10/15/10 180 178
Pool # 379303 8.000% due 10/15/25 47 48
Pool # 380787 8.500% due 03/15/25 46 48
Pool # 384597 8.500% due 04/15/25 36 38
Pool # 384905 8.000% due 11/15/25 160 164
Pool # 386725 8.500% due 04/15/25 86 89
Pool # 391913 8.000% due 09/15/25 170 174
Pool # 393341 8.000% due 02/15/27 295 302
Pool # 393405 6.500% due 05/15/26 2,229 2,132
Pool # 394904 6.500% due 06/15/09 422 417
Pool # 395148 6.500% due 04/15/09 184 182
Pool # 398254 8.000% due 09/15/25 146 149
Pool # 398956 8.000% due 11/15/26 343 351
Pool # 401433 8.000% due 06/15/25 1,411 1,444
Pool # 405443 8.500% due 04/15/25 44 46
Pool # 405560 8.500% due 01/15/26 369 383
Pool # 405602 6.500% due 04/15/26 2,499 2,391
Pool # 406442 8.500% due 11/15/25 579 602
Pool # 407310 8.500% due 04/15/25 505 526
Pool # 407417 8.500% due 05/15/25 436 453
Pool # 407573 8.000% due 06/15/25 1,220 1,249
Pool # 408311 7.500% due 05/15/26 1,978 1,984
Pool # 408425 9.000% due 09/15/26 65 68
Pool # 408528 8.500% due 02/15/25 454 472
Pool # 408764 8.000% due 09/15/25 57 58
Pool # 409053 8.000% due 10/15/26 285 292
Pool # 410387 7.500% due 03/15/27 989 992
Pool # 412421 8.500% due 04/15/25 776 807
Pool # 413514 8.500% due 09/15/25 820 852
Pool # 414589 8.500% due 09/15/25 35 36
Pool # 415018 6.500% due 01/15/26 934 894
Pool # 417294 6.500% due 03/15/26 2,088 1,998
Pool # 417693 8.500% due 09/15/25 100 104
Pool # 421700 6.500% due 03/15/26 3,595 3,439
Pool # 421782 6.500% due 03/15/26 1,956 1,871
Pool # 423447 7.000% due 01/15/11 264 265
Pool # 423517 6.500% due 04/15/26 866 828
Pool # 423605 8.000% due 08/15/26 294 300
Pool # 423607 8.000% due 08/15/26 655 670
Pool # 423903 8.000% due 07/15/26 610 625
Pool # 424023 8.500% due 09/15/26 62 64
Pool # 426032 6.500% due 04/15/26 24 23
Pool # 426033 6.500% due 04/15/26 396 379
Pool # 426395 8.000% due 08/15/26 562 575
Pool # 426906 6.500% due 07/15/26 2,154 2,061
Pool # 427495 6.500% due 03/15/26 2,011 1,924
Pool # 428588 8.500% due 09/15/26 446 463
Pool # 429391 6.500% due 03/15/26 1,422 1,360
Pool # 430050 8.000% due 09/15/26 348 356
Pool # 436491 8.500% due 09/15/26 113 117
Pool # 436683 8.000% due 09/15/26 93 96
Pool # 439883 7.500% due 05/15/27 1,978 1,983
Pool # 439891 7.500% due 05/15/27 39 39
Pool # 441340 8.000% due 12/15/26 292 299
Pool # 448541 7.500% due 04/15/27 1,978 1,983
Pool # 450738 7.500% due 05/15/27 896 898
Pool # 424276 6.500% due 03/15/26 211 202
Government National Mortgage Association
7.000% 30 Year TBA (b) 3,666 3,598
7.500% 30 Year TBA (b) 1,870 1,875
8.000% 30 Year TBA (b) 10,000 10,231
Guaranteed Export Trust
Series 1996-A
6.550% due 06/15/04 910 910
Fixed Income I Fund 77
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Housing Securities, Inc.
Series 1994-2 Class A1
6.500% due 07/25/09 $ 1,204 $ 1,174
Merrill Lynch Mortgage Investors, Inc.
Series 1995-C2 Class D
7.970% due 06/15/21 (c) 817 829
Series 1996-C2 Class A-1
6.690% due 11/21/28 591 588
Series 1997-C1 Class A-1
6.950% due 06/18/29 (c) 1,555 1,566
Mid-St Trust II Class A-3 CMO
9.350% due 04/01/98 253 257
PNC Mortgage Securities Corp.
Series 1994-3 Class A-1
7.500% due 06/18/10 559 557
Residential Accredited Loans, Inc.
Series 1996-QS1 Class AI4
6.900% due 01/25/26 3,000 2,925
Resolution Trust Corp.
Series 1995 - C1 Class D
6.900% due 02/25/27 900 886
United States Department of Veteran Affairs
REMIC
Series 1992-1 Class 2-E
7.750% due 03/15/16 775 791
Vanderbilt Mortgage & Finance, Inc.
Series 1997 - B Class 1A-3
6.975% due 08/07/11 1,215 1,215
----------
238,495
----------
NON-US BONDS - 0.0%
Finland, Republic of
5.875% due 02/27/06 325 307
----------
307
----------
UNITED STATES GOVERNMENT AGENCIES - 4.2%
Federal Home Loan Bank
6.450% due 03/13/02 2,625 2,604
Federal National Mortgage Association (MTN)
6.170% due 12/30/03 1,755 1,693
7.780% due 09/29/06 255 257
6.940% due 03/19/07 1,550 1,535
7.190% due 05/29/26 1,715 1,718
7.270% due 07/27/26 605 615
Government Backed Trust Certificates
Class 1-C
9.250% due 11/15/01 10,745 11,409
Series 2-E
9.400% due 05/15/02 2,208 2,343
Series T-3
9.625% due 05/15/02 (c) 2,404 2,554
Resolution Funding Corp.
8.875% due 07/15/20 2,275 2,752
8.625% due 01/15/21 1,400 1,655
8.625% due 01/15/30 240 290
----------
29,425
----------
UNITED STATES GOVERNMENT TREASURIES - 27.4%
United States Treasury Bonds
10.750% due 05/15/03 9,880 11,932
10.750% due 08/15/05 26,970 34,016
11.750% due 02/15/10 540 704
12.750% due 11/15/10 3,270 4,538
13.875% due 05/15/11 3,365 4,977
12.000% due 08/15/13 2,190 3,083
13.250% due 05/15/14 365 557
7.250% due 05/15/16 1,785 1,862
7.500% due 11/15/16 145 155
8.750% due 05/15/17 4,845 5,829
8.875% due 08/15/17 960 1,169
8.125% due 08/15/19 9,775 11,151
7.875% due 02/15/21 6,780 7,560
8.125% due 08/15/21 4,405 5,044
8.000% due 11/15/21 250 283
7.250% due 08/15/22 1,575 1,644
7.125% due 02/15/23 4,955 5,104
6.250% due 08/15/23 3,510 3,249
6.875% due 08/15/25 1,000 1,004
6.500% due 11/15/26 5,000 4,795
United States Treasury Notes
5.625% due 01/31/98 1,200 1,200
5.375% due 05/31/98 1,150 1,146
8.250% due 07/15/98 2,685 2,749
6.250% due 07/31/98 240 241
9.250% due 08/15/98 60 62
4.750% due 08/31/98 3,190 3,149
6.125% due 08/31/98 1,080 1,083
4.750% due 10/31/98 40 39
5.500% due 11/15/98 3,845 3,822
78 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
5.125% due 11/30/98 $ 1,700 $ 1,681
5.625% due 11/30/98 7,400 7,366
5.875% due 02/28/99 1,100 1,097
5.875% due 03/31/99 480 479
6.500% due 04/30/99 1,035 1,043
6.750% due 06/30/99 1,000 1,012
6.875% due 07/31/99 1,250 1,268
8.000% due 08/15/99 995 1,032
6.875% due 08/31/99 2,325 2,359
7.750% due 11/30/99 8,550 8,848
7.750% due 01/31/00 4,300 4,457
5.875% due 02/15/00 835 828
7.125% due 02/29/00 615 628
6.875% due 03/31/00 4,720 4,797
6.250% due 08/31/00 7,995 7,990
5.750% due 10/31/00 1,115 1,097
6.250% due 04/30/01 4,315 4,303
6.625% due 07/31/01 6,620 6,682
6.500% due 08/31/01 4,165 4,185
6.375% due 09/30/01 1,560 1,560
6.250% due 10/31/01 3,705 3,688
5.750% due 08/15/03 770 744
6.875% due 05/15/06 215 219
6.500% due 10/15/06 415 413
6.625% due 05/15/07 3,200 3,226
United States Treasury Principal Only Strip
Zero Coupon due 05/15/18 1,500 355
----------
193,504
----------
YANKEE BONDS - 3.1%
African Development Bank
9.750% due 12/15/03 425 490
6.875% due 10/15/15 775 740
8.800% due 09/01/19 535 621
Alberta, Province of
9.250% due 04/01/00 265 283
Asian Development Bank
8.000% due 04/30/01 295 309
8.500% due 05/02/01 295 314
6.250% due 10/24/05 400 389
Crown Cork & Seal Finance PLC
7.000% due 12/15/06 850 842
Hydro Quebec
Series GH
8.250% due 04/15/26 605 643
International American Development Bank
7.000% due 06/15/25 1,770 1,729
6.950% due 08/01/26 220 225
International Bank for
Reconstruction & Development
8.625% due 10/15/16 350 408
Manitoba, Province of
9.250% due 04/01/20 335 402
Metropolitano de Lisboa
7.420% due 10/15/16 1,000 1,021
Montell Financial Co., B.V.
8.100% due 03/15/27 1,400 1,438
National Westminster Bank PLC
1.000% due 04/29/49 (g) 1,050 1,079
New Brunswick, Province of
9.750% due 05/15/20 320 397
Newfoundland, Province of
10.000% due 12/01/20 150 188
Noranda Forest, Inc.
6.875% due 11/15/05 350 341
Nordbanken AB
7.250% due 10/30/06 1,025 1,018
Nova Scotia, Province of
9.125% due 05/01/21 685 801
Quebec, Province of
7.125% due 02/09/24 770 724
Saskatchewan, Province of
6.625% due 07/15/03 100 99
8.000% due 07/15/04 1,290 1,365
Societe Generale
7.850% due 04/29/49 (c)(g) 1,825 1,868
St. George Bank, Ltd.
7.150% due 10/01/05 975 970
Svenska Handelsbanken
7.125% due 03/29/49 (c)(g) 1,000 977
Taiwan Semiconductor
Manufacturing Co., Ltd. (conv.)
Zero Coupon due 07/03/02 875 875
Wharf International Finance, Ltd.
7.625% due 03/13/07 1,050 1,045
----------
21,601
----------
TOTAL LONG-TERM INVESTMENTS
(cost $656,557) 663,012
----------
Fixed Income I Fund 79
<PAGE>
FIXED INCOME I FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
OPTIONS PURCHASED - 0.0%
United States Treasury Notes
Sept 99.99 Put (e) 2,200* $ 10
----------
TOTAL OPTIONS PURCHASED
(cost $20) 10
----------
PREFERRED STOCKS - 0.6%
Banco Bilbao Vizcaya
International - ADR 10,000 281
Credit Lyonnais Capital 100,000 2,450
Credit Lyonnais Capital S.C.A. - ADR 23,000 582
TIG Holdings, Inc. 8,000 782
----------
TOTAL PREFERRED STOCKS
(cost $4,340) 4,095
----------
PRINCIPAL
AMOUNT
SHORT-TERM INVESTMENTS - 10.3% (000)
Federal Home Loan Mortgage ----------
Discount Note
5.440% due 09/16/97 (f) $ 3,000 2,965
Federal National Mortgage Association
Discount Note
5.530% due 09/15/97 (f) 2,000 1,977
5.620% due 09/24/97 (f) 2,545 2,511
Frank Russell Investment Company
Money Market Fund, due on demand (a) 65,311 65,311
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $72,764) 72,764
----------
TOTAL INVESTMENTS
(identified cost $733,681)(d) - 104.7% 739,881
OTHER ASSETS AND LIABILITIES,
NET - (4.7%) (33,033)
----------
NET ASSETS - 100.0% $ 706,848
----------
----------
(a) At cost, which approximates market.
(b) Forward commitment. See Note 2.
(c) Adjustable or floating rate securities.
(d) See Note 2 for federal income tax information.
(e) Nonincome-producing security.
(f) Rate noted is yield-to-maturity.
(g) Perpetual floating rate note.
* Represents 1 over-the-counter contract.
ABBREVIATIONS:
ADR - American Depositary Receipt
CMO - Collateralized Mortgage Obligation
MTN - Medium Term Note
PLC - Public Limited Company
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
The accompanying notes are an integral part of the financial statements.
80 Fixed Income I Fund
<PAGE>
FIXED INCOME I FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $733,681)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . $ 739,881
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 966
Receivables:
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,780
Investments sold (regular settlement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,755
Investments sold (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,877
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,919
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765,178
LIABILITIES
Payables:
Investments purchased (regular settlement). . . . . . . . . . . . . . . . . . . . . . $ 13,843
Investments purchased (delayed settlement)(Note 2). . . . . . . . . . . . . . . . . . 44,033
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Accrued fees to affiliates (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . 209
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,330
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 706,848
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,593
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,472)
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703,176
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 706,848
---------------
---------------
NET ASSET VALUE, offering and redemption price per share:
($706,847,890 divided by 33,318,044 shares of $.01 par value
shares of beneficial interest outstanding). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21.22
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Fixed Income I Fund 81
<PAGE>
FIXED INCOME I FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,517
Dividends from Money Market Fund (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,285
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393
---------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,195
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,010
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Bookkeeping service fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,414
---------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,781
---------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,427)
Options written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . . . 65 (1,333)
---------------
Net change in unrealized appreciation or depreciation of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,197)
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . . . (45) (1,242)
--------------- ---------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,575)
---------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . . $ 20,206
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
82 Fixed Income I fund
<PAGE>
FIXED INCOME I FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED), DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,781 $ 43,329
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . (1,333) 244
Net change in unrealized appreciation or depreciation . . . . . . . . . (1,242) (19,436)
------------------- -------------------
Net increase (decrease) in net assets resulting from operations. . . 20,206 24,137
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . (12,532) (42,773)
------------------- -------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . (12,532) (42,773)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions
(Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,275 43,218
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . 43,949 24,582
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . 662,899 638,317
------------------- -------------------
End of period (including undistributed net investment income
of $11,593 and $1,343, respectively) . . . . . . . . . . . . . . . . $ 706,848 $ 662,899
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Fixed Income I Fund 83
<PAGE>
FIXED INCOME I FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 20.99 $ 21.59 $ 19.59 $ 21.74 $ 21.61 $ 22.29
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . .70 1.38 1.42 1.46 1.50 1.63
Net realized and unrealized gain (loss) on investments. . . . (.08) (.62) 2.02 (2.06) .72 (.07)
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations. . . . . . . . . . .62 .76 3.44 (.60) 2.22 1.56
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . (.39) (1.36) (1.44) (1.44) (1.50) (1.62)
In excess of net investment income. . . . . . . . . . . . . . -- -- -- -- (.01) --
Net realized gain on investments. . . . . . . . . . . . . . . -- -- -- -- (.58) (.62)
In excess of net realized gain on investments . . . . . . . . -- -- -- (.11) -- --
-------- -------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . . . . (.39) (1.36) (1.44) (1.55) (2.09) (2.24)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 21.22 $ 20.99 $ 21.59 $ 19.59 $ 21.74 $ 21.61
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a)(c) . . . . . . . . . . . . . . . . . . . . . 3.02 3.75 18.03 (2.97) 10.46 7.26
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . . 706,848 662,899 638,317 496,038 533,696 530,857
Ratios to average net assets (%)(b)(c):
Operating expenses . . . . . . . . . . . . . . . . . . . . .42 .42 .35 .10 .09 .10
Net investment income. . . . . . . . . . . . . . . . . . . 6.79 6.57 6.82 7.06 6.71 7.45
Portfolio turnover rate (%)(b). . . . . . . . . . . . . . . . 169.79 147.31 138.05 173.97 173.27 211.26
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
(c) For periods prior to April 1, 1995, Fund performance operating expenses,
and net investment income do not include any managemet fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
84 Fixed Income I Fund
<PAGE>
FIXED INCOME II FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 95.2%
ASSET-BACKED SECURITIES - 36.2%
Advanta Home Equity Loan Trust
Series 1994-1 Class A-2
6.300% due 07/25/25 $ 45 $ 44
AFC Home Equity Loan Trust
Series 1993-2 Class A
6.000% due 01/20/13 241 235
Series 1997-1 Class A
5.910% due 03/25/27 (c) 694 694
AFC Mortgage Loan Trust
Series 1996-3 Class 1A2
7.220% due 02/25/27 350 353
ALPS Pass-thru Trust
Series 1994-1 Class A-2
7.150% due 11/15/97 (c) 291 292
American Express Credit Account
Master Trust
Series 1996-1 Class A
6.800% due 12/15/03 4,250 4,293
Banc One Auto Grantor Trust
Series 1997-A Class A
6.270% due 11/20/03 4,500 4,489
Chase Credit Card Master Trust
Series 1996-4 Class A
5.817% due 07/15/06 (c) 1,000 999
Chase Manhattan Auto Owner Trust
Series 1997-A Class A3
6.250% due 11/15/00 5,390 5,383
Chase Manhattan Credit Card Master Trust
Series 1996-4 Class A
6.730% due 02/15/03 4,500 4,538
Chase Manhattan Grantor Trust
Pass-thru Certificate
Series 1996-A Class A
5.200% due 02/15/02 1,592 1,575
Series 1996-B Class A
6.610% due 09/15/02 1,505 1,511
Chevy Chase Auto Receivables Trust
Series 1996-2 Class A
5.900% due 07/15/03 1,217 1,209
Series 1997-2 Class A
6.350% due 01/15/04 1,750 1,749
Copel Capital Funding Corp.
Series 1997-A Class A3
6.270% due 04/20/05 (c) 1,000 999
Discover Card Master Trust I
Series 1994-2 Class A
6.037% due 10/16/04 (c) 1,500 1,512
EQCC Home Equity Loan Trust
Series 1993-4 Class A
5.725% due 12/15/08 47 46
Series 1994-1 Class A
5.800% due 03/15/09 378 370
First Chicago Master Trust II
Credit Card Certificates
Series 1994-L
7.150% due 04/15/01 4,500 4,570
First Security Auto Grantor Trust
Series 1997-A Class A
6.300% due 08/15/03 1,360 1,350
First USA Credit Card Master Trust
Series 1997-4 Class A
5.897% due 02/17/10 (c) 1,000 1,000
Ford Credit Auto Lease Trust
Series 1996-1 Class A2
5.800% due 05/15/99 2,300 2,293
Ford Credit Grantor Trust
Series 1995-B Class A
5.900% due 10/15/00 961 959
General Motors Acceptance Corp.
Grantor Trust
Series 1997-A Class A
6.500% due 04/15/02 1,382 1,386
Green Tree Financial Corp.
Series 1994-A Class A
6.900% due 02/15/04 590 589
Series 1995-A Class A
7.250% due 07/15/05 431 432
Honda Auto Receivables Grantor Trust
Series 1995-A Class A
6.200% due 12/15/00 522 523
Merrill Lynch Credit Corp.
Series 1996-B Class A
6.087% due 07/15/21 (c) 883 884
Nationsbank Auto Owner Trust
Series 1996-A Class A3
6.375% due 07/15/00 2,750 2,760
Nationsbank Credit Card Master Trust
Series 1995-1 Class A
6.450% due 04/15/03 3,850 3,845
Newcourt Receivables Asset Trust
Series 1996-2 Class A
6.870% due 06/20/04 285 286
Olympic Automobile Receivables Trust
Series 1996-D Class CTFS
6.125% due 04/15/02 4,600 4,575
86 Fixed Income II Fund
<PAGE>
FIXED INCOME II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Olympic Automobile Receivables Trust
Series 1997-A Class A2
6.125% due 01/01/99 $ 1,200 $ 1,204
Peoples Bank Credit Card Master Trust
Series 1996-1 Class A
5.837% due 11/15/04 (c) 500 500
PNC Student Loan Trust I
Series 1997-2 Class A3
6.314% due 01/25/01 (c) 5,000 4,993
Prudential Home Mortgage Securities
Series 1994-19 Class A2
7.050% due 05/25/24 737 737
Remodelers Home Improvement Loan
Series 1995-3 Class A2
6.800% due 12/20/07 327 327
Residential Asset Securitization Trust
Series 1996-A8 Class A1
8.000% due 12/25/26 767 778
Series 1997-A1 Class A
7.000% due 03/25/27 748 752
Series 1997-A5 Class A3
7.125% due 07/25/27 1,500 1,496
Resolution Trust Corp.
Mortgage Pass-thru Certificate
Series 1992-M3 Class A1
7.750% due 07/25/30 73 73
Sears Credit Account Master Trust II
Series 1995-4 Class A
6.250% due 01/15/03 4,000 4,007
Series 1996-2 Class A
6.500% due 10/15/03 1,500 1,506
SPNB Home Equity Loan
Series 1991-1 Class B
8.150% due 06/15/20 543 546
Student Loan Marketing Association
Series 1997-2 Class CTFS
5.840% due 10/25/12 (c) 500 500
The Money Store Home Equity Loan Trust
Series 1993-D Class A-1
5.675% due 12/15/08 628 610
Series 1996-B Class A3
6.820% due 02/15/10 503 504
TLFC IV Equipment Lease Trust
Series 1996 Class A
5.980% due 11/20/02 449 448
WFS Financial Owner Trust
Series 1996-D Class A3
6.050% due 07/20/01 (c) 4,500 4,476
World Omni Automobile Lease
Securitization Trust
Series 1996-B Class A3
6.250% due 11/15/02 1,100 1,096
Series 1996-B Class B
6.850% due 11/15/02 (c) 350 349
Series 1997- Class A2
6.750% due 06/25/03 (c) 5,500 5,539
----------
86,184
----------
CORPORATE BONDS AND NOTES - 18.1%
Ahmanson (H.F.)
9.875% due 11/15/99 875 939
Bank of Boston Corp.
9.500% due 08/15/97 995 999
Banponce Corp.
Series 2 (MTN)
5.750% due 03/01/99 1,375 1,356
Bear Stearns Co., Inc.
7.625% due 09/15/99 1,125 1,152
Beneficial Corp. (MTN)
8.170% due 11/09/99 1,125 1,165
Capital One Bank (MTN)
6.844% due 06/13/00 1,150 1,146
Chase Manhattan Corp.
10.125% due 11/01/00 259 285
5.937% due 12/05/09 (c) 200 196
Enterprise Rent-A-Car USA
Finance Co. (MTN)
7.875% due 03/15/98 1,100 1,112
ERP Operating, L.P.
6.589% due 12/22/97 (c) 700 702
8.500% due 05/15/99 1,050 1,083
Finova Capital Corp.
6.450% due 06/01/00 400 397
First Chicago Corp.
9.000% due 06/15/99 500 523
First Union Corp.
6.750% due 01/15/98 750 753
First USA Bank
8.200% due 02/15/98 250 253
Fleet Financial Group, Inc.
6.000% due 10/26/98 600 598
Fixed Income II Fund 87
<PAGE>
FIXED INCOME II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
General Motors Acceptance Corp.
7.012% due 04/01/20 (c) $ 994 $ 993
General Motors Acceptance Corp. (MTN)
7.500% due 07/22/99 925 944
7.465% due 07/25/19 1,448 1,464
Greyhound Financial Corp.
9.670% due 07/01/97 750 751
GTE Corp.
10.750% due 09/15/17 1,150 1,218
Heller Financial, Inc. (MTN)
5.862% due 03/01/99 (c) 1,000 1,003
Hertz Corp.
9.500% due 05/15/98 675 694
6.500% due 04/01/00 450 448
Homeside Lending, Inc. (MTN)
6.875% due 06/30/02 1,200 1,195
International Lease Finance Corp.
5.750% due 12/15/99 1,000 980
ITT Corp.
6.250% due 11/15/00 1,075 1,051
JC Penney & Co., Inc. (MTN)
6.375% due 09/15/00 1,125 1,116
Lehman Brothers Holdings, Inc.
Series E (MTN)
7.110% due 09/27/99 1,500 1,516
Series IBC (MTN)
7.000% due 05/13/99 800 807
MBNA Corp.
Series B (MTN)
6.500% due 09/15/00 1,000 995
Merrill Lynch & Co., Inc. (MTN)
7.260% due 03/25/02 1,425 1,426
Midlantic Corp.
9.250% due 09/01/99 375 395
News America Holdings, Inc.
7.500% due 03/01/00 800 816
Occidental Petroleum Corp. (MTN)
5.950% due 11/09/98 1,225 1,219
Salomon, Inc.
6.700% due 12/01/98 500 502
7.750% due 05/15/00 500 514
6.700% due 07/05/00 500 500
Salomon, Inc. CMT Floater (MTN)
6.299% due 04/05/99 (c) 1,100 1,100
Smith Barney Holdings, Inc.
5.500% due 01/15/99 650 643
7.980% due 03/01/00 765 791
Taubman Realty Group, L.P.
8.000% due 06/15/99 1,350 1,377
Time Warner, Inc.
9.625% due 05/01/02 1,350 1,492
Toyota Motor Credit Corp. (MTN)
6.063% due 02/15/02 (c) 700 674
Transamerica Financial Corp.
9.875% due 01/01/98 775 790
UCFC Home Equity Loan Trust
Series 1996-D1 Class A3
6.541% due 11/15/13 675 672
USF&G Corp.
7.000% due 05/15/98 1,150 1,159
Wellsford Residential
Property Trust (MTN)
6.132% due 11/24/99 (c) 1,300 1,302
----------
43,206
----------
MORTGAGE-BACKED SECURITIES - 8.9%
Bear Stearns Mortgage Securities, Inc.
7.000% due 11/25/27 925 916
BKD Commercial Mortgage Trust
Series 1997-C1 Class B
7.218% due 04/25/00 (c) 850 855
CMC Securities Corp. II
Series 1993-2G Class A1
7.193% due 11/25/23 (c) 1,057 1,061
Federal Home Loan Mortgage Corp.
Participation Certificate
Group # 23-0114 7.375% due 03/01/06 (c) 220 223
Group # 25-1211 6.250% due 06/01/07 134 134
Group # 85-0105 9.000% due 09/01/05 235 244
Group # D2-9159 7.500% due 10/01/07 360 365
Group # D3-2311 8.500% due 12/01/17 698 726
Group # G5-0258 7.500% due 05/01/00 374 377
Group # G5-0259 7.500% due 03/01/02 179 180
Group # G5-0297 7.500% due 10/01/00 134 135
Group # G5-0307 7.500% due 08/01/00 305 308
Federal Home Loan Mortgage Corp.
Series 1714 Class E
6.250% due 09/15/18 650 646
Federal National Mortgage Association
Pool # 040063 8.500% due 12/01/08 130 135
Pool # 124671 7.500% due 04/01/09 675 683
Pool # 295575 8.500% due 08/01/01 575 595
Pool # 303751 8.000% due 10/01/09 987 1,015
88 Fixed Income II Fund
<PAGE>
FIXED INCOME II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Pool # 359448 8.500% due 12/01/10 $ 880 $ 916
Pool # 364703 7.000% due 06/01/04 974 979
Federal National Mortgage Association
7.000% 7 year TBA (d) 2,000 2,006
Federal National Mortgage Association
Grantor Trust
Series 1996-T6 Class C
6.200% due 02/26/01 1,436 1,406
Federal National Mortgage Association
REMIC Trust Series 1993-108 Class 108B
Zero Coupon due 12/25/16 24 23
REMIC Trust Series 1993-186 Class Z
5.850% due 07/25/06 1,602 1,572
REMIC Trust Series 1994-012 Class PE
5.750% due 04/25/07 600 589
REMIC Trust Series 1994-39 Class PB
5.750% due 06/25/12 65 65
Government National Mortgage Association
5.500% 1 Year TBA (c)(d) 2,000 1,977
Government National Mortgage Association
Pool # 780285 9.500% due 11/15/25 641 695
Pool # 780487 7.250% due 12/15/26 1,520 1,542
Residential Accredited Loans, Inc.
Series 1997 Class A1
7.500% due 08/15/27 550 553
Resolution Trust Corp.
Series 1995-2 Class C1
7.450% due 05/25/29 (c) 261 259
----------
21,180
----------
MUNICIPAL BONDS - 0.4%
Philadelphia, Pennsylvania,
Authority for Industrial Development
Class A
6.480% due 06/15/04 900 899
----------
899
----------
UNITED STATES GOVERNMENT
TREASURIES - 29.9%
United States Treasury Notes
5.500% due 11/15/98 11,800 11,730
5.125% due 11/30/98 9,700 9,591
6.250% due 03/31/99 705 707
6.500% due 04/30/99 6,500 6,549
6.375% due 05/15/99 38,865 39,059
5.875% due 11/15/99 650 646
6.875% due 03/31/00 175 178
6.375% due 05/15/00 2,610 2,619
----------
71,079
----------
YANKEE BONDS - 1.7%
Household International
5.250% due 10/15/98 1,150 1,136
Ontario, Province of
15.250% due 08/31/12 500 537
11.500% due 03/10/13 760 818
Quebec, Province of
13.250% due 09/15/14 450 528
Westpac Banking, Ltd.
7.875% due 10/15/02 1,000 1,047
----------
4,066
----------
TOTAL LONG-TERM INVESTMENTS
(cost $226,887) 226,614
----------
NUMBER
OF
SHARES
----------
PREFERRED STOCKS - 0.1%
Texaco Capital Series B 15,000 339
----------
TOTAL PREFERRED STOCKS
(cost $375) 339
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 5.4%
Federal Home Loan Mortgage
Discount Notes
5.580% due 09/30/97 (e) $ 250 246
Federal National Mortgage Association
Discount Notes (e)
5.510% due 09/09/97 2,000 1,979
5.440% due 09/19/97 1,500 1,482
5.560% due 10/20/97 500 492
Frank Russell Investment Company
Money Market Fund, due on demand (a) 7,747 7,747
World Bank Discount Notes
5.460% due 09/22/97 (e) 1,000 988
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $12,933) 12,934
----------
Fixed Income II Fund 89
<PAGE>
FIXED INCOME II FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
MARKET
VALUE
(000)
----------
TOTAL INVESTMENTS
(identified cost $240,195)(b) - 100.7% $ 239,887
OTHER ASSETS AND LIABILITIES,
NET - (0.7%) (1,766)
----------
NET ASSETS - 100.0% $ 238,121
----------
----------
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
(c) Adjustable or floating rate security.
(d) Forward commitment. See Note 2.
(e) Rate noted is yield-to-maturity (unaudited).
ABBREVIATIONS:
MTN - Medium Term Note
REMIC - Real Estate Mortage Investment Conduit
The accompanying notes are an integral part of the financial statements.
90 Fixed Income II Fund
<PAGE>
FIXED INCOME II FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $240,195)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . $ 239,887
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318
Receivables:
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,900
Investments sold (regular settlement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,528
Investments sold (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,495
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246,488
LIABILITIES
Payables:
Investments purchased (regular settlement). . . . . . . . . . . . . . . . . . . . . . $ 475
Investments purchased (delayed settlement)(Note 2). . . . . . . . . . . . . . . . . . 7,516
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
Accrued fees to affiliates (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . 126
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,367
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 238,121
---------------
---------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,448
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,598)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . (308)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,451
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 238,121
---------------
---------------
NET ASSET VALUE, offering and redemption price per share:
($238,121,278 divided by 12,833,295 shares of $.01 par value
shares of beneficial interest outstanding). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18.55
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Fixed Income II Fund 91
<PAGE>
FIXED INCOME II FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,917
Dividends from Money Market Fund (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520
---------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,437
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 581
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Bookkeeping service fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 766
---------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,671
---------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (367)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . . (131)
---------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (498)
---------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . . $ 6,173
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
92 Fixed Income II Fund
<PAGE>
FIXED INCOME II FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,671 $ 11,273
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (367) (1,911)
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . (131) (87)
------------------- -------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . 6,173 9,275
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,625) (11,259)
------------------- -------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . . (3,625) (11,259)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share
transactions (Note 6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,590 41,390
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 15,138 39,406
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,983 183,577
------------------- -------------------
End of period (including undistributed net investment income
of $3,448 and $402, respectively). . . . . . . . . . . . . . . . . . . . . . . $ 238,121 $ 222,983
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Fixed Income II Fund 93
<PAGE>
FIXED INCOME II FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 18.36 $ 18.55 $ 17.98 $ 18.99 $ 18.56 $ 19.68
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . .52 1.04 1.16 1.21 .84 1.35
Net realized and unrealized gain (loss) on investments. . . . (.04) (.19) .59 (1.07) .44 (.83)
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations. . . . . . . . . . .48 .85 1.75 .14 1.28 .52
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . (.29) (1.04) (1.18) (1.15) (.71) (1.36)
Net realized gain on investments. . . . . . . . . . . . . . . -- -- -- -- -- (.28)
Tax return of capital . . . . . . . . . . . . . . . . . . . . -- -- -- -- (.14) --
-------- -------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . . . . (.29) (1.04) (1.18) (1.15) (.85) (1.64)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 18.55 $ 18.36 $ 18.55 $ 17.98 $ 18.99 $ 18.56
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a)(c) . . . . . . . . . . . . . . . . . . . . . 2.60 4.76 9.95 .82 6.98 2.74
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . . 238,121 222,983 183,577 144,030 138,619 182,735
Ratios to average net assets (%)(b)(c):
Operating expenses . . . . . . . . . . . . . . . . . . . . .66 .70 .58 .19 .16 .19
Net investment income. . . . . . . . . . . . . . . . . . . 5.76 5.70 6.41 6.52 6.16 7.21
Portfolio turnover rate (%)(b). . . . . . . . . . . . . . . . 183.84 264.40 269.31 233.75 229.07 330.58
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
(c) For periods prior to April 1, 1995, Fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
94 Fixed Income II Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 85.1%
ASSET-BACKED SECURITIES - 4.8%
American Airlines, Inc. Series 1990-P
10.600% due 03/04/09 $ 1,013 $ 1,267
Asset Securitization Corp.
Series 1996-MD6 Class A1C
7.040% due 11/13/26 800 792
Series 1997 D-4 Class A1D
7.490% due 04/14/29 650 661
Series 1997- MD7 Class A1B
7.410% due 01/13/30 160 162
CIT RV Grantor Trust
Series 1994-A Class A
4.900% due 07/15/09 655 640
Cityscape Home Equity Loan Trust
Pass-thru Certificate
Series 1996-2 Class A2
7.200% due 08/25/26 850 858
EQCC Home Equity Loan Trust
Series 1996-4 Class A1
5.790% due 12/15/02 1,582 1,582
Fleetwood Credit Corp. Grantor Trust
Series 1994-B Class A
6.750% due 03/15/10 403 401
Fund America Investors Corp. II
Pass-thru Certificate
Series 1993-F Class A-1
5.400% due 09/25/09 101 96
Green Tree Financial Corp.
Series 1995-5 Class A3
6.250% due 10/15/25 600 599
Series 1995-6 Class A3
6.650% due 11/15/25 560 563
Series 1995-8 Class A2
6.150% due 12/15/26 (b) 888 888
Greenwich Capital Acceptance, Inc.
Series 1994 Class A-1
8.670% due 11/25/24 (b) 260 264
Merrill Lynch Mortgage Investors, Inc.
Mortgage Pass-thru Certificate
Series 1996-C2 Class A2
6.820% due 11/21/28 (b) 340 335
Metris Master Trust Series 1997 - 1 Class A
6.870% due 10/20/05 1,010 1,022
Morgan Stanley Capital I, Inc.
Mortgage Pass-thru Certificate
Series 1996 - WF1 Class X
1.420% due 01/15/13 (b) 3,450 257
Prudential Home Mortgage Securities Co.
Mortgage Pass-thru Certificate
Series 189
10.000% due 11/01/19 14 14
Series 1992-51 Class A-8
8.000% due 02/25/23 439 443
Resolution Trust Corp.
Mortgage Pass-thru Certificate
Series 1995-1 Class 2-C
7.500% due 10/25/28 (b) 325 327
Series 1995-C1 Class C
6.900% due 02/25/27 (b) 300 296
Resolution Trust Corp.
Series 1994 - C2 Class G
8.000% due 04/25/25 296 289
Series 1994-1 Class M-2
7.750% due 09/25/29 416 418
Salomon Bros Mortgage Securities VII, Inc.
Mortgage Pass-thru Certificate
Series 1994-16 Class A
8.290% due 11/25/24 (b) 718 739
Series 1997 Class A2
7.174% due 03/25/25 (b) 490 499
Structured Asset Securities Corp.
Mortgage Pass-thru Certificate
Series 1996-CFL Class A1C
5.944% due 02/25/28 470 466
Series 1996-CFL Class C
6.525% due 02/25/28 300 303
The Money Store Home Equity Loan Trust
Series 1996-B Class A5
7.180% due 12/15/14 825 835
The Money Store Trust
Series 1996-A Class A5
6.850% due 06/15/19 800 801
UCFC Home Equity Loan Trust
Series 1994-B Class A-6
7.100% due 06/10/23 158 159
----------
15,976
----------
CORPORATE BONDS AND NOTES - 24.6%
A.H. Belo Corp.
6.875% due 06/01/02 850 850
Aames Financial Corp.
9.125% due 11/01/03 475 483
96 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Advanta National Bank
6.450% due 10/30/00 $ 825 $ 796
AFC Capital Trust I
8.207% due 02/03/27 900 918
AK Steel Corp.
10.750% due 04/01/04 700 753
Albank Capital Trust
9.270% due 06/06/27 600 606
American Airlines Class A-1
9.710% due 01/02/07 348 406
American Standard, Inc.
10.875% due 05/15/99 375 399
Amerus Capital I Series A
8.850% due 02/01/27 475 482
AMR Corp. (MTN)
9.950% due 03/07/01 1,000 1,098
Anchor Bancorp, Inc.
8.937% due 07/09/03 150 156
Armco, Inc.
9.375% due 11/01/00 265 266
Azteca Holdings SA
11.000% due 06/15/02 475 479
Banesto Delaware, Inc.
8.250% due 07/28/02 1,000 1,055
Bank United Corp.
8.875% due 05/01/07 1,050 1,086
Banponce Trust I Series A
8.327% due 02/01/27 450 455
Bear Stearns Capital Trust I
7.000% due 01/15/27 (b) 475 470
Beaver Valley Funding Corp.
9.000% due 06/01/17 1,110 1,122
Beaver Valley Funding Corp. II
8.625% due 06/01/07 198 202
BellSouth Capital Funding Corp.
6.040% due 11/15/26 750 736
BellSouth Telecommunications, Inc.
5.850% due 11/15/45 1,100 1,082
Capital One Bank (MTN)
8.125% due 03/01/00 325 336
6.875% due 04/24/00 400 402
Century Communications Corp.
9.500% due 08/15/00 450 466
Chase Manhattan Corp.
7.250% due 06/01/07 310 311
Chevy Chase Savings Bank
9.250% due 12/01/05 500 501
Citicorp
7.200% due 06/15/07 605 606
Cleveland Electric Illum Co.
9.375% due 03/01/17 1,000 1,043
CMS Energy Corp.
9.500% due 10/01/97 (b) 1,000 1,021
Coast Savings Financial, Inc.
10.000% due 03/01/00 275 286
Colonial Realty L.P.
7.500% due 07/15/01 825 835
Compass Trust I Series A
8.230% due 01/15/27 350 349
Conseco Financing Trust III
8.796% due 04/01/27 675 698
Contifinancial Corp.
8.375% due 08/15/03 1,050 1,079
Continental Airlines, Inc.
9.500% due 12/15/01 1,020 1,062
Delta Air Lines, Inc.
10.375% due 02/01/11 330 413
Dime Bancorp Trust I Series A
9.330% due 05/06/27 300 312
EnviroSource, Inc.
9.750% due 06/15/03 295 286
Equitable Life Assurance Society
7.700% due 12/01/15 500 500
ERAC USA Finance Co. (MTN)
6.350% due 01/15/01 800 785
ERP Operating, L.P.
8.500% due 05/15/99 425 438
Federal Realty Investment Trust
8.875% due 01/15/00 725 762
First Nationwide Holdings
12.500% due 04/15/03 1,625 1,812
10.625% due 10/01/03 450 493
First Tennessee Capital I Series A
8.070% due 01/06/27 575 565
First USA Bank
5.850% due 02/22/01 475 461
First USA Capital Trust I
9.330% due 01/15/27 975 1,087
Gaylord Container Corp. Step Up Bond
12.750% due 05/15/05 (b) 330 361
General Motors Acceptance Corp. (MTN)
7.375% due 04/15/99 750 763
8.500% due 01/31/00 600 627
6.625% due 04/24/00 600 600
Fixed Income III Fund 97
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Goldman Sachs Group, L.P.
6.375% due 06/15/00 $ 1,050 $ 1,040
Great Atlantic & Pacific Tea, Inc.
7.750% due 04/15/07 1,125 1,144
Greenwich Air Services, Inc.
10.500% due 06/01/06 375 436
Haven Capital Trust I
10.460% due 02/01/27 350 354
Homeside, Inc.
11.250% due 05/15/03 241 280
ICG Holdings, Inc. Step Up Bond
11.625% due 03/15/07 500 300
Imperial Capital Trust I
9.980% due 12/31/26 250 254
Imperial Credit Industries, Inc., Series B
9.875% due 01/15/07 700 679
Interpool Capital Trust
9.875% due 02/15/27 500 506
ISP Holdings, Inc. Series B
9.000% due 10/15/03 250 259
Jones Intercable, Inc.
9.625% due 03/15/02 475 498
Long Island Lighting Co.
9.000% due 11/01/22 865 947
Markel Capital Trust I
8.710% due 01/01/46 325 328
Merck and Co., Series B (MTN)
5.760% due 05/03/37 1,900 1,908
Merrill Lynch & Co., Inc.
6.000% due 01/15/01 300 294
MFS Communications, Inc. Step Up Bond
Zero Coupon due 01/15/06 1,400 1,109
Nabisco, Inc.
8.000% due 01/15/00 2,000 2,061
National Westminster
5.938% due 12/31/99 (b) 580 529
Nextel Communications, Inc. Step Up Bond
Zero Coupon due 09/01/03 555 480
Niagara Mohawk Power Corp.
5.875% due 09/01/02 475 440
Noranda, Inc.
8.625% due 07/15/02 775 828
Norfolk Southern Corp.
6.950% due 05/01/02 460 463
7.800% due 05/15/27 160 164
7.050% due 05/01/37 750 761
North Atlantic Energy Corp. Series A
9.050% due 06/01/02 180 182
NWA Trust
13.875% due 06/21/08 90 106
NWCG Holdings Corp.
Zero Coupon due 06/15/99 1,075 945
Ocwen Federal Bank
12.000% due 06/15/05 325 355
Ocwen Financial Corp.
11.875% due 10/01/03 650 710
Onbank Capital Trust I
9.250% due 02/01/27 450 458
Orion Capital Trust I
8.730% due 01/01/37 225 226
Prime Succession Acquisition Co.
10.750% due 08/15/04 400 439
Providian Capital I Series A
9.525% due 02/01/27 500 511
Prudential Insurance Co. of America
6.875% due 04/15/03 700 690
Public Service Co., New Hampshire
Series B
9.170% due 05/15/98 1,500 1,521
Residential Reina, Ltd. Class A2
11.448% due 12/15/08 (b) 1,000 1,000
Revlon Worldwide
Zero Coupon due 03/15/01 1,600 1,084
Riggs National Corp.
9.650% due 06/15/09 875 971
Rose Hills Acquisition Corp.
9.500% due 11/15/04 475 493
Safeway, Inc.
10.000% due 12/01/01 400 443
Salomon, Inc.
7.000% due 05/15/99 250 252
7.750% due 05/15/00 500 514
Salomon, Inc. (MTN)
7.125% due 08/01/99 425 428
6.625% due 11/30/00 625 621
Seagate Technology, Inc.
7.450% due 03/01/37 1,100 1,105
Smith Barney Holdings, Inc.
7.980% due 03/01/00 325 336
Sovereign Capital Trust I
9.000% due 04/01/27 975 977
Spieker Properties, LP
6.950% due 12/15/02 500 492
Summit Communications Group, Inc.
10.500% due 04/15/05 595 641
Tanger Properties LP
8.750% due 03/11/01 350 355
98 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Taubman Realty Group, L.P.
8.000% due 06/15/99 $ 450 $ 459
Tenet Healthcare Corp.
9.625% due 09/01/02 260 280
7.875% due 01/15/03 380 382
8.625% due 12/01/03 330 342
8.000% due 01/15/05 400 402
Time Warner Entertainment Co., L.P.
8.375% due 03/15/23 1,000 1,027
Time Warner, Inc.
6.773% due 08/15/00 (b) 625 626
7.975% due 08/15/04 375 387
8.110% due 08/15/06 750 779
8.180% due 08/15/07 750 781
9.150% due 02/01/23 535 591
6.850% due 01/15/26 1,965 1,933
Toledo Edison Co.
8.700% due 09/01/02 500 515
Toledo Edison Co. (MTN)
8.000% due 12/31/98 500 507
Transco Energy Co.
9.375% due 08/15/01 500 544
Travelers Capital II
7.750% due 12/01/36 1,250 1,213
Travelers Property Casualty Corp.
7.750% due 04/15/26 700 706
Trenwick Capital Trust I
8.820% due 02/01/37 575 584
TU Electrical Capital V
8.175% due 01/30/37 600 597
Turner Broadcasting Systems, Inc.
8.375% due 07/01/13 575 596
UCC Investors Holding, Inc. Step Up Bond
Zero Coupon due 05/01/05(b) 230 213
Union Planters Trust Capital
8.200% due 12/15/26 675 662
United Companies Financial Corp.
8.375% due 07/01/05 575 573
United Dominion Realty Trust, Inc.
7.250% due 01/15/07 475 475
United Technologies Corp.
8.875% due 11/15/19 170 197
USAir, Inc.
10.000% due 07/01/03 310 318
USF&G Corp.
8.375% due 06/15/01 250 262
Webster Capital Trust I
9.360% due 01/29/27 225 232
Wellsford Residential Property Trust
9.375% due 02/01/02 475 517
----------
81,777
----------
EURODOLLAR BONDS - 3.1%
Argentina, Republic of
Series L
6.750% due 03/31/05 (b) 1,940 1,824
Series 10
5.625% due 04/01/00 (b) 437 425
Auxiliaire Du Credit
5.750% due 09/25/02 (b) 600 578
Cemex SA (MTN)
8.500% due 08/31/00 1,000 1,009
Credit Fonc France
8.000% due 01/14/02 560 582
Credit Lyonnais
6.813% due 09/19/49 (e) 360 356
Fifth Mexican Acceptance Corp. Class A
8.000% due 12/15/98 800 192
Greater Bejing First Expressway
9.500% due 06/15/07 160 163
Indah Kiat Finance Mautitius, Ltd.
10.000% due 07/01/07 550 546
Mexico (United Mexican States)
11.375% due 09/15/16 540 608
Midland Bank
6.063% due 12/31/49 (e) 60 54
Poland, Government of
6.938% due 10/27/24 (b) 460 450
Russia Vnesh Interest
12.000% due 12/31/16 900 687
Skandinaviska Enskilda Banken
7.500% due 03/29/49 (e) 910 903
8.125% due 09/06/49 475 499
Skandinaviska Enskilda
Series 1 (MTN)
6.625% due 03/29/49 (b)(e) 490 483
TFM SA de CV
10.250% due 06/15/07 185 188
TFM SA de CV Step Up Bond
Zero Coupon due 06/15/09 1,090 629
----------
10,176
----------
MORTGAGE-BACKED SECURITIES - 30.8%
Asset Securitization Corp.
Mortgage Pass-thru Certificate
Series 1995-MD4 Class A1
7.100% due 08/13/29 958 969
Collateralized Mortgage Securities Corp.
Series J Class J-5 CMO
7.985% due 05/01/17 1,673 1,697
FDIC REMIC Trust
Series 1994-C1 Class 2A-2
7.850% due 09/25/25 319 321
Fixed Income III Fund 99
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Federal Home Loan Mortgage Corp.
6.500% 15 Year TBA (d) $ 4,350 $ 4,266
6.000% 15 Year TBA Gold (d) 1,800 1,735
6.500% 30 Year TBA (d) 12,000 11,494
Federal Home Loan Mortgage Corp.
Participation Certificate
Group # 17-0214 8.500% due 02/01/17 1,280 1,344
Group # C0-0473 7.500% due 08/01/26 792 795
Group # D6-3632 7.000% due 09/01/25 1,557 1,530
Group # D6-9873 6.500% due 04/01/26 764 733
Group # D7-3397 7.500% due 08/01/26 2 2
Group # E0-0485 7.000% due 05/01/12 1,578 1,576
Group # G0-0453 6.500% due 03/01/26 484 464
Group # G0-0613 7.000% due 12/01/25 4,604 4,525
Group # G0-0617 7.000% due 12/01/25 58 57
Group # G0-0620 7.000% due 12/01/25 1,023 1,008
Group # G0-0715 7.000% due 12/01/25 4,086 4,052
Group # G0-0718 7.000% due 06/01/27 4,102 4,069
Group # G1-0487 7.000% due 03/01/11 859 861
Group # G1-0547 6.000% due 06/01/11 1,980 1,914
Group # G1-0691 6.000% due 05/01/12 644 620
Federal Home Loan Mortgage Corp.
Participation Certificate
Series 1014 Class E
7.950% due 02/15/20 750 759
Series 1754 Class A
8.500% due 09/15/20 2,270 2,317
Federal Home Loan Mortgage Corp.
Series 1037 Class Z
9.000% due 02/15/21 1,727 1,820
Series 1934 Class AB
6.000% due 08/15/07 1,200 1,179
Federal National Mortgage Association
Pool # 124032 10.000% due 02/01/05 314 329
Pool # 250329 7.000% due 08/01/25 272 266
Pool # 250375 6.500% due 09/01/25 1,831 1,753
Pool # 250730 7.000% due 09/01/29 972 952
Pool # 265289 7.000% due 05/01/24 80 79
Pool # 265560 7.841% due 01/01/24 (b) 1,995 2,056
Pool # 275296 7.000% due 07/01/24 417 411
Pool # 280365 7.000% due 05/01/24 681 671
Pool # 303192 8.500% due 03/01/25 936 973
Pool # 303197 8.500% due 03/01/25 185 192
Pool # 303383 7.000% due 12/01/09 519 521
Pool # 303555 7.000% due 09/01/25 2,010 1,973
Pool # 303784 7.000% due 03/01/11 2,239 2,238
Pool # 307564 7.000% due 06/01/25 843 829
Pool # 312494 7.000% due 07/01/25 399 393
Pool # 313232 8.500% due 05/01/25 690 718
Pool # 316651 7.000% due 08/01/25 1,919 1,883
Pool # 316681 7.000% due 07/01/25 841 828
Pool # 317262 7.000% due 07/01/25 307 302
Pool # 319580 7.000% due 08/01/25 106 104
Pool # 319640 7.000% due 08/01/25 436 427
Pool # 324205 7.000% due 09/01/25 692 679
Pool # 325918 7.000% due 10/01/25 331 325
Pool # 334652 6.500% due 01/01/26 793 759
Pool # 366948 6.000% due 03/01/12 924 891
Pool # 390286 6.000% due 05/01/12 1,045 1,008
Federal National Mortgage Association REMIC
Series 1992-10 Class ZD
8.000% due 11/25/21 1,540 1,532
Government National Mortgage Association
Pool # 008288 7.125% due 09/20/23 (b) 617 635
Pool # 008302 6.875% due 10/20/23 (b) 1,013 1,038
Pool # 008496 7.125% due 09/20/24 (b) 4,401 4,530
Pool # 008528 6.875% due 10/20/24 (b) 2,466 2,529
Pool # 008530 6.875% due 10/20/24 (b) 2,104 2,159
Pool # 345644 7.500% due 03/15/24 70 71
Pool # 346746 7.000% due 09/15/23 530 523
Pool # 352050 7.000% due 10/15/23 422 417
Pool # 380893 7.500% due 03/15/24 348 350
Pool # 385362 8.000% due 05/15/25 180 184
Pool # 385370 8.000% due 06/15/25 162 166
Pool # 390348 8.000% due 05/15/25 688 704
Pool # 393814 8.000% due 07/15/25 243 249
Pool # 410757 8.000% due 05/15/25 187 191
Pool # 410838 8.000% due 11/15/25 188 192
Pool # 413170 8.000% due 10/15/25 597 611
Pool # 416844 8.000% due 08/15/25 636 651
Pool # 417192 7.000% due 01/15/26 1,634 1,603
Pool # 421389 6.500% due 04/15/26 489 468
Pool # 80053 6.000% due 03/20/27 2,860 2,883
Pool # 008346 6.875% due 12/20/23 (b) 708 726
Government National Mortgage Association
6.500% 30 Year TBA (d) 5,000 4,783
8.000% 30 Year TBA (d) 500 512
Merrill Lynch Mortgage Investors, Inc.
Mortgage Pass-thru Certificate
Series 1995-C2 Class D
8.210% due 06/15/21 (b) 649 659
Morgan Stanley Capital I, Inc.
Series HFI Class A2
7.270% due 07/15/29 400 406
Series WFI Class A2
7.220% due 07/15/29 500 509
100 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Paine Webber Mortgage Acceptance Corp. IV
Mortgage Pass-thru Certificate
Series 1995-M1 Class A
6.700% due 01/15/07 $ 720 $ 719
Ryland Mortgage Securities Corp. CMO
Series 1993-8 Class A
7.960% due 09/25/23 (b) 547 553
----------
102,220
----------
MUNICIPAL BONDS - 0.5%
New Jersey Economic Development Authority
Series A
7.425% due 02/15/29 900 900
Series B
Zero Coupon due 02/15/08 900 425
Zero Coupon due 02/15/11 1,150 428
----------
1,753
----------
UNITED STATES GOVERNMENT
AGENCIES - 0.5%
Tennessee Valley Authority
5.980% due 04/01/36 1,730 1,744
----------
1,744
----------
UNITED STATES GOVERNMENT
TREASURIES - 18.7%
United States Treasury Bond
8.125% due 08/15/19 1,125 1,283
7.625% due 02/15/25 6,050 6,625
United States Treasury Notes
5.625% due 01/31/98 475 475
6.125% due 03/31/98 10,000 10,031
5.125% due 11/30/98 2,150 2,126
5.625% due 11/30/98 3,625 3,609
5.750% due 12/31/98 1,350 1,346
6.875% due 07/31/99 250 254
8.500% due 02/15/00 350 369
7.125% due 02/29/00 425 434
6.125% due 07/31/00 400 399
5.750% due 10/31/00 155 153
5.625% due 11/30/00 400 392
6.375% due 03/31/01 2,400 2,403
6.250% due 04/30/01 1,300 1,296
6.625% due 06/30/01 13,530 13,657
6.250% due 10/31/01 12,900 12,839
5.750% due 08/15/03 1,080 1,043
7.875% due 11/15/04 720 777
6.500% due 08/15/05 1,475 1,471
6.875% due 05/15/06 125 128
United States Treasury
Principal Only Strip
Zero Coupon due 05/15/18 2,025 478
United States Treasury Security
Interest Only Strips
Zero Coupon due 2/15/19 2,050 461
----------
62,049
----------
YANKEE BONDS - 2.1%
Bombril SA
8.000% due 08/26/98 400 397
Brazil, Republic of, Series EI-L
6.875% due 04/15/06 1,292 1,193
Crown Packaging Enterprise, Ltd.
Step Up Bond
14.000% due 08/01/06 300 15
Fresh Delmonte Produce Series B
10.000% due 05/01/03 1,440 1,487
Montell Financial Co., B.V.
8.100% due 03/15/27 700 719
Rogers Cantel, Inc.
9.375% due 06/01/08 675 712
Royal Bank Canada
6.000% due 06/14/85 (b) 270 246
Santander Finnish Issuances
6.775% due 09/30/49 (b) 250 249
St. George Bank, Ltd.
7.150% due 10/01/05 775 771
Videotron Holdings PLC Step Up Bond
Zero Coupon due 08/15/05 (b) 210 175
Videotron Holdings PLC Step Up bond
Zero Coupon due 07/01/04 (b) 1,060 955
----------
6,919
----------
TOTAL LONG-TERM INVESTMENTS
(cost $279,634) 282,614
----------
Fixed Income III Fund 101
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
OPTIONS PURCHASED - 0.0%
United States Treasury Notes
Sept 99.99 Put (h) 2,300* $ 10
----------
TOTAL OPTIONS PURCHASED
(cost $21) 10
----------
PREFERRED STOCKS - 1.7%
American RE Capital 18,100 467
Australia & New Zealand
Banking Group, Ltd. 7,200 195
California Federal Bank
of Los Angeles Series B 4,500 496
California Federal Preferred Capital Corp.
Series A 44,250 1,143
Credit Lyonnais Capital S.C.A. - ADR 3,500 90
El Paso Electric Co. Series A8 4,114 465
Equity Residential Properties Trust 5,600 144
Highwood Properties, Inc. Series A 1,025 1,024
Long Island Lighting Co. Series QQ 16,900 429
Texaco Capital Series B 4,000 91
Time Warner, Inc. 1,038 1,142
----------
TOTAL PREFERRED STOCKS
(cost $5,456) 5,686
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 18.6%
AT&T Capital Corp. Series 4 (MTN)
6.275% due 06/09/98 $ 1,050 1,050
Federal Home Loan Bank Consolidated
Discount Notes
5.560% due 09/12/97 (g) 1,000 989
Federal Home Loan Mortgage
Discount Notes
5.520% due 08/12/97 (a)(g) 1,000 994
5.640% due 09/04/97 (f)(g) 50 50
Federal Home Loan Mortgage Corp.
5.950% due 06/19/98 5,000 5,004
Federal National Mortgage Association
Discount Notes
5.440% due 09/19/97 (g) 1,000 988
Frank Russell Investment Company
Money Market Fund,
due on demand (a) 52,108 52,108
United States Treasury Bills (f)(g)
5.075% due 07/03/97 (a) 90 90
5.200% due 08/21/97 (a) 250 248
5.010% due 10/02/97 130 127
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $61,642) 61,648
----------
TOTAL INVESTMENTS
(identified cost $346,753)(c) - 105.4% 349,958
OTHER ASSETS AND LIABILITIES,
NET - (5.4%) (17,900)
----------
NET ASSETS - 100.0% $ 332,058
----------
----------
(a) At cost, which approximates market.
(b) Adjustable or floating rate security.
(c) See Note 2 for federal income tax information.
(d) Forward Commitment. See Note 2.
(e) Perpetual floating rate note.
(f) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(g) Rate noted is yield-to-maturity (unaudited).
(h) Nonincome-producing security.
* Number of contracts.
ABBREVIATIONS:
ADR - American Depositary Receipt
CMO - Collateralized Mortgage Obligation
MTN - Medium Term Note
PLC - Public Limited Company
REMIC - Real Estate Mortgage Investment Conduit
The accompanying notes are an integral part of the financial statements.
102 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
Eurodollar Financial Futures Contracts
expiration date 09/97 10 $ (1)
Eurodollar Financial Futures Contracts
expiration date 12/97 10 (2)
Eurodollar Financial Futures Contracts
expiration date 03/98 10 (2)
United States Treasury 5 Year Note
Futures Contracts
expiration date 09/97 17 2
United States Treasury 5 Year Note
Futures Contracts
expiration date 03/98 91 (66)
United States Treasury 10 Year Note
Futures Contracts
expiration date 03/98 246 (48)
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ (117)
----------
----------
(#) At June 30, 1997, United States Government Securities valued at $515 were
held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
Fixed Income III Fund 103
<PAGE>
FIXED INCOME III FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $346,753)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . $ 349,958
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
Receivables:
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,478
Investments sold (regular settlement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,192
Investments sold (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,174
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
---------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,445
LIABILITIES
Payables:
Investments purchased (regular settlement). . . . . . . . . . . . . . . . . . . . . . $ 5,522
Investments purchased (delayed settlement)(Note 2). . . . . . . . . . . . . . . . . . 30,434
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Accrued fees to affiliates (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . 176
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Daily variation margin on futures contracts (Notes 2 and 3) . . . . . . . . . . . . . 143
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,387
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 332,058
---------------
---------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,895
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,749)
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,205
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (117)
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326,484
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 332,058
---------------
---------------
NET ASSET VALUE, offering and redemption price per share:
($332,057,570 divided by 32,068,155 shares of $.01 par value
shares of beneficial interest outstanding). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.35
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
104 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousand
<S> <C> <C>
INVESTMENT INCOME:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,454
Dividends from Money Market Fund (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,226
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
---------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,887
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 847
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Bookkeeping service fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Amortization of deferred organization expenses. . . . . . . . . . . . . . . . . . . . 3
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,081
---------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,806
---------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (271)
Options written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . . . 252 360
---------------
Net change in unrealized appreciation or depreciation of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Options written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . . . (229) 581
--------------- ---------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 941
---------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . . $ 10,747
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Fixed Income III Fund 105
<PAGE>
FIXED INCOME III FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,806 $ 17,058
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 (496)
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . 581 (2,840)
------------------- ------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . 10,747 13,722
------------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,797) (17,125)
In excess of net investment income. . . . . . . . . . . . . . . . . . . . . . . -- (262)
------------------- ------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . (4,797) (17,387)
------------------- ------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6) . . 34,031 43,277
------------------- ------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . 39,981 39,612
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292,077 252,465
------------------- ------------------
End of period (including undistributed net investment income of
$4,895 and accumulated distributions in excess of net investment
income of $114, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . $ 332,058 $ 292,077
------------------- ------------------
------------------- ------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
106 Fixed Income III Fund
<PAGE>
FIXED INCOME III FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993**
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . $ 10.17 $ 10.34 $ 9.37 $ 10.44 $ 10.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . .31 .64 .67 .66 .49
Net realized and unrealized gain (loss) on investments. . . . . . . . . .03 (.16) .97 (1.07) .52
-------- -------- -------- -------- --------
Total Income From Investment Operations. . . . . . . . . . . . . . . .34 .48 1.64 (.41) 1.01
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . (.16) (.64) (.67) (.66) (.48)
In excess of net investment income. . . . . . . . . . . . . . . . . . . -- (.01) -- -- --
Net realized gain on investments. . . . . . . . . . . . . . . . . . . . -- -- -- -- (.08)
In excess of net realized gain on investments . . . . . . . . . . . . . -- -- -- -- (.01)
-------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . . (.16) (.65) (.67) (.66) (.57)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . $ 10.35 $ 10.17 $ 10.34 $ 9.37 $ 10.44
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN (%)(a)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.41 4.88 17.99 (3.89) 10.22
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . . . . . . . 332,058 292,077 252,465 166,620 124,234
Ratios to average net assets (%)(b)(c):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . .70 .73 .61 .20 .20
Operating expenses, gross . . . . . . . . . . . . . . . . . . . . . .70 .73 .61 .20 .40
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 6.38 6.32 6.83 7.02 6.30
Portfolio turnover rate (%)(c). . . . . . . . . . . . . . . . . . . . . 291.40 144.26 141.37 134.11 181.86
Per share amount of fees waived ($ omitted) . . . . . . . . . . . . . . -- -- -- -- .0003
Per share amount of fees reimbursed ($ omitted) . . . . . . . . . . . . -- -- -- -- .0154
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period January 29, 1993 (commencement of operations) to
December 31, 1993.
(a) Periods less than one year are not annualized.
(b) For periods prior to April 1, 1995, Fund performance operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
(c) The ratios for the periods ended June 30, 1997 and December 31, 1993 are
annualized.
Fixed Income III Fund 107
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 28 different investment portfolios, referred to as
"Funds", of which 23 are in operation as of June 30, 1997. These
financial statements report on eight Funds, each of which has distinct
investment objectives and strategies. The Investment Company is registered
under the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. It is organized and operates as a
Massachusetts business trust under an amended master trust agreement dated
July 26, 1984. The Investment Company's master trust agreement permits the
Board of Trustees to issue an unlimited number of full and fractional
shares of beneficial interest at a $.01 par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Funds in the preparation of these
financial statements.
SECURITY VALUATION: United States equity and fixed-income securities
listed and traded principally on any national securities exchange are
valued on the basis of the last sale price or, lacking any sale, at the
closing bid price, on the primary exchange on which the security is
traded. United States over-the-counter equity and fixed-income securities
and options are valued on the basis of the closing bid price. Futures
contracts are valued on the basis of the last sale price. Many
fixed-income securities do not trade each day and, thus, last sale or bid
prices are frequently not available. Fixed-income securities, therefore,
may be valued using prices provided by a pricing service when such prices
are believed to reflect the fair market value of such securities.
International equity and fixed-income securities traded on a national
securities exchange are valued on the basis of the last sale price.
International securities traded over the counter are valued on the basis
of the mean of bid prices. In the absence of a last sale or mean bid
price, respectively, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the
fair market value of such securities.
Money Market instruments held by the Funds maturing within 60 days of the
valuation date are valued at "amortized cost" unless the Board of Trustees
determines that amortized cost does not represent fair value.
The Funds may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
INVESTMENT TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost incurred by each money manager
within a particular fund. The Funds may lend portfolio securities but have
not done so during the six months ended June 30, 1997.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short-term premiums/discounts are amortized/accreted for
both tax and financial reporting purposes.
FEDERAL INCOME TAXES: As a Massachusetts business trust, each Fund is a
separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to each Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
It is each Fund's intention to qualify as a regulated investment company
and distribute all of its taxable income. Therefore, no federal income tax
provision was required for the Funds. From November 1, 1996 to December
31, 1996, the Fixed Income II Fund incurred net realized capital losses of
$193,749. As permitted by tax regulations, the Fixed Income II Fund
intends to elect to defer these losses and treat them as arising in the
year ending December 31, 1997.
108 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
At December 31, 1996, certain Funds had net tax basis capital loss
carryforwards which may be applied against any net realized taxable gains
in each succeeding year or until their respective expiration dates,
whichever occurs first. Available capital loss carryforwards and
expiration dates are as follows:
<TABLE>
<CAPTION>
12/31/01 12/31/02 12/31/03 12/31/04 TOTALS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Fixed Income I $ -- $(11,500,516) $ -- $ -- $(11,500,516)
Fixed Income II (948,478) (3,534,633) (698,949) (1,824,408) (7,006,468)
Fixed Income III -- (2,010,657) -- (518,716) (2,529,373)
</TABLE>
The aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of June 30, 1997 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- -----------------------------------------------
<S> <C> <C> <C> <C>
Equity I $ 887,828,737 $ 189,569,851 $ (10,337,588) $ 179,232,263
Equity II 353,821,927 88,791,121 (6,486,048) 82,305,073
Equity III 192,894,585 35,220,415 (1,724,000) 33,496,415
Equity Q 815,362,613 223,026,432 (5,808,045) 217,218,387
International 935,627,689 163,887,845 (31,470,534) 132,417,31
Fixed Income I 734,257,322 8,685,168 (3,061,490) 5,623,678
Fixed Income II 240,330,203 824,219 (1,267,422) (443,203)
Fixed Income III 346,738,103 4,687,274 (1,461,377) 3,225,897
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: For all Funds, income
dividends and capital gain distributions, if any, are recorded on the
ex-dividend date. Dividends are generally declared and paid quarterly,
except for the International Fund, which generally declares and pays
dividends annually. Capital gain distributions are generally declared and
paid annually. An additional distribution may be paid by the Funds to
avoid imposition of federal income tax on any remaining undistributed
capital gains and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting
period may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in options, futures, forward contracts, passive foreign
investment companies, foreign-denominated investments, mortgage-backed
securities, and certain securities sold at a loss. Accordingly, a Fund may
periodically make a reclassification among certain of its capital accounts
without impacting its net asset value.
EXPENSES: The Funds will pay their own expenses other than those expressly
assumed by the Management Company. Most expenses can be directly
attributed to the individual Funds. Expenses which cannot be directly
attributed are allocated among all funds principally based on their
relative net assets.
DEFERRED ORGANIZATION EXPENSES: Organization and initial registration
costs of the Fixed Income III Fund have been deferred and are being
amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Funds may engage in repurchase agreements with
several financial institutions whereby a Fund, through its custodian,
receives delivery of the underlying securities. Each Fund's Money Manager
will monitor repurchase agreements daily to determine that the market
value (including accrued interest) of the underlying securities at Fedwire
closing
Notes to Financial Statements 109
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
time remains at least equal to 102% of the repurchase price. The Money
Manager will notify the Seller to immediately increase the collateral on
the repurchase agreement to 102% of the repurchase price if collateral
value falls below 102%.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts and transactions of
the Funds are translated into U.S. dollars on the following basis:
(a) Market value of investment securities, other assets and liabilities
at the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the
closing rate of exchange prevailing on the respective trade
dates of such transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from: sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets
and liabilities, other than investments in securities, at period-end, as a
result of changes in the exchange rates.
It is not practical to isolate that portion of the results of operations
of the Funds that arises as a result of changes in exchange rates from
that portion that arises from changes in market prices of investments
during the year. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. However, for federal income tax
purposes the Funds do isolate the effects of changes in foreign exchange
rates from the fluctuations arising from changes in market prices for
realized gain (or loss) on debt obligations.
DERIVATIVES: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Funds' Prospectus and Statement
of Additional Information, the Funds may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
They include options, futures, swaps, forwards, structured notes and
stripped securities. These instruments offer unique characteristics and
risks that assist the Funds in meeting their investment strategies.
The Funds typically use derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by certain Funds through the use of options and futures to earn
"market-like" returns with their excess and liquidity reserve cash
balances. Hedging is used by some funds to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in a Fund. By
purchasing certain instruments, Funds may more effectively achieve the
desired portfolio characteristics that assist them in meeting their
investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks are
generally categorized as market risk, liquidity risk and counterparty or
credit risk.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio
purchases and sales of securities denominated in a foreign currency,
certain Funds may enter into forward foreign currency exchange spot
contracts and forward foreign currency exchange contracts ("contracts").
The International Fund may enter into foreign currency forward overlays on
liquidity reserve balances. Additionally, from time to time the
International, Fixed Income I, Fixed Income II and Fixed Income III Funds
may enter into contracts to hedge certain foreign currency-denominated
assets. Contracts are recorded at market value. Certain risks may arise
upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and are generally
limited to the amount of unrealized gain on the contracts, if any, that
are recognized in the Statement of Assets and Liabilities. Realized gains
or losses arising from such transactions are included in net realized gain
(or loss) from foreign currency-related transactions. Open contracts at
June 30, 1997, are presented on the Statement of Net Assets for the
applicable Funds.
FORWARD COMMITMENTS: The Funds may contract to purchase securities for a
fixed price at a future date beyond customary settlement time (not to
exceed 120 days)(i.e., a "forward commitment," "delayed settlement" or
"when issued" transaction, e.g., to be announced ("TBA")) consistent with
a Fund's ability to manage its investment portfolio and meet redemption
requests. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Funds may dispose of a forward commitment
transaction prior to settlement if it is appropriate to do so and realize
short-term gains (or losses) upon such sale. When effecting such
110 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
transactions, cash or liquid high-grade debt obligations of the Fund in a
dollar amount sufficient to make payment for the portfolio securities to
be purchased will be segregated on the Fund's records at the trade date
and maintained until the transaction is settled. A forward commitment
transaction involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date or the other party to the
transaction fails to complete the transaction.
OPTIONS: The Funds may purchase and sell (write) call and put options on
securities and securities indices, provided such options are traded on a
national securities exchange or in an over-the-counter market. These Funds
may also purchase and sell put and call options on foreign currencies. The
domestic equity Funds may utilize options to equitize liquidity reserve
balances.
When a Fund writes a covered 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 as an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current
market value of the option written. The Fund receives a premium on the
sale of a call option but gives up the opportunity to profit from any
increase in stock value above the exercise price of the option, and when
the Fund writes a put option it is exposed to a decline in the price of
the underlying security. If an option which the Fund has written either
expires on its stipulated expiration date or the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or loss, if the
cost of a closing purchase transaction exceeds the premium received when
the option was sold) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is
extinguished. If a call option which the Fund has written is exercised,
the Fund realizes a capital gain or loss from the sale of the underlying
security, and the proceeds from such sale are increased by the premium
originally received. When a put option which a Fund has written is
exercised, the amount of the premium originally received will reduce the
cost of the security which a Fund purchases upon exercise of the option.
Realized gains (losses) on purchased options are included in net realized
gain (loss) from investments.
The Funds' use of written options involves, to varying degrees, elements
of market risk in excess of the amount recognized in the Statement of
Assets and Liabilities. The face or contract amounts of these instruments
reflect the extent of the Funds' exposure to off balance sheet risk. The
risks may be caused by an imperfect correlation between movements in the
price of the instrument and the price of the underlying securities and
interest rates. The Funds' activities in written options are conducted
through regulated exchanges, which do not result in counterparty credit
risks.
FUTURES: The domestic and international equity Funds utilize futures to
equitize liquidity reserve balances. Fixed Income III Fund may utilize
futures contracts (i.e., interest rate, foreign currency and index futures
contracts) to a limited extent. The face or contract amounts of these
instruments reflect the extent of the Funds' exposure to off balance sheet
risk. The primary risks associated with the use of futures contracts are
an imperfect correlation between the change in market value of the
securities held by the Fund and the prices of futures contracts, and the
possibility of an illiquid market. Changes in the initial settlement
values of futures contracts are accounted for as unrealized appreciation
(depreciation) until the contracts are terminated, at which time realized
gains and losses are recognized.
3. INVESTMENT TRANSACTIONS
SECURITIES: During the six months ended June 30, 1997, purchases and sales
of investment securities (excluding U.S. Government and Agency obligations,
short-term investments, options, futures and repurchase agreements) were
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES PURCHASES SALES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Equity I $ 560,592,045 $ 642,327,925 International $ 407,359,128 $ 383,700,574
Equity II 185,194,388 166,741,350 Fixed Income I 106,133,056 79,236,861
Equity III 160,972,428 184,828,236 Fixed Income II 92,373,944 47,936,575
Equity Q 512,322,844 477,420,754 Fixed Income III 77,370,164 67,106,840
</TABLE>
Notes to Financial Statements 111
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Purchases and sales of U.S. Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were
as follows:
PURCHASES SALES
------------- ------------
Fixed Income I $ 451,228,188 $ 483,899,070
Fixed Income II 137,658,215 146,352,111
Fixed Income III 350,387,785 350,221,334
OPTIONS WRITTEN AND FUTURES CONTRACTS: Fund transactions in written put
options and futures contract purchases for the six months ended June 30,
1997 were as follows:
<TABLE>
<CAPTION>
EQUITY I FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 72 $ 20,605,325
Opened 579 202,575,581
Closed (446) (151,467,091)
------------- -------------
Outstanding June 30, 1997 205 $ 71,713,815
------------- -------------
------------- -------------
<CAPTION>
EQUITY II WRITTEN PUT OPTIONS FUTURES CONTRACTS
AGGREGATE
NUMBER OF PREMIUMS NUMBER OF FACE VALUE OF
CONTRACTS RECEIVED CONTRACTS CONTRACTS (1)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1996 30 $ 18,659 130 $ 24,957,997
Opened -- -- 437 81,993,416
Closed -- -- (417) (79,231,085)
Expired (30) (18,659) -- --
------------- ------------- ------------- -------------
Outstanding June 30, 1997 -- $ -- 150 $ 27,720,328
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
EQUITY III FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 23 $ 6,578,350
Opened 86 30,871,056
Closed (92) (32,039,731)
------------- -------------
Outstanding June 30, 1997 17 $ 5,409,675
------------- -------------
------------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
112 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
EQUITY Q FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 38 $ 8,595,511
Opened 267 87,543,081
Closed (235) (75,073,304)
------------- -------------
Outstanding June 30, 1997 70 $ 21,065,288
------------- -------------
------------- -------------
<CAPTION>
INTERNATIONAL FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 474 $ 67,936,821
Opened 2,071 282,341,019
Closed (2,059) (274,578,066)
------------- -------------
Outstanding June 30, 1997 486 $ 75,699,774
------------- -------------
------------- -------------
<CAPTION>
FIXED INCOME I WRITTEN PUT OPTIONS
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 -- $ --
Opened 3,200 28,758
Expired (3,200) (28,758)
------------- -------------
Outstanding June 30, 1997 -- $ --
------------- -------------
------------- -------------
<CAPTION>
FIXED INCOME III WRITTEN PUT OPTIONS FUTURES CONTRACTS
AGGREGATE
NUMBER OF PREMIUMS NUMBER OF FACE VALUE OF
CONTRACTS RECEIVED CONTRACTS CONTRACTS (1)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1996 20 $ 7,893 301 $ 33,297,875
Opened 3,200 28,757 795 90,005,399
Closed -- -- (712) (77,697,041)
Expired (3,220) (36,650) -- --
------------- ------------- ------------- -------------
Outstanding June 30, 1997 -- $ -- 384 $ 45,606,233
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
4. RELATED PARTIES
MANAGER: Frank Russell Investment Management Company ("FRIMCo" or
"Manager") operates and administers all of the Funds which comprise the
Investment Company, and manages the Money Market and the U.S. Government
Money Market Funds (the Money Market and the U.S. Government Money Market
Funds are a series of the Investment Company that are not presented in
this report). FRIMCo is a wholly owned subsidiary of Frank Russell
Company, which researches and recommends to FRIMCo, and to the Investment
Company, one or more investment management organizations to manage the
portfolio of each fund.
Notes to Financial Statements 113
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
For the six months ended June 30, 1997, the management fee paid to FRIMCo,
for the Funds listed below, in accordance with the Investment Company's
Management Agreement with that firm, amounted to $13,874,557 before
waivers. Such fee is payable monthly and is equal to the annual rate, by
Fund, shown in the table below, of the average daily net assets of the
applicable Fund.
ANNUAL RATE ANNUAL RATE
----------- -----------
Equity I 0.60% International 0.75%
Equity II 0.75 Fixed Income I 0.30
Equity III 0.60 Fixed Income II 0.50
Equity Q 0.60 Fixed Income III 0.55
The management contract also provides that if any Fund's expenses
(exclusive of interest and taxes) exceed specified limits imposed by the
Manager on an annual basis, such excess will be paid by FRIMCo. The Manager
of the Fixed III Fund voluntarily agreed to waive a portion of its 0.55%
management fee, to the extent total fund level expenses for the Fund
exceed 0.75% of its average daily net assets on an annual basis. There
were no waivers for the Fixed Income III Fund for the period ended
June 30, 1997.
BOOKKEEPING SERVICES: Fees for bookkeeping and analytic services provided
to the Funds are paid or accrued to Frank Russell Company, an affiliate of
the Investment Company. Frank Russell Company provides its Portfolio
Verification System ("PVS") and TruVP System to the Funds, pursuant to a
written Service Agreement. The PVS computerized database system records
detailed transactions data for each of the Funds necessary to prepare
various financial and Internal Revenue Service accounting reports, whereas
the TruVP System provides analytics used by the investment department. The
Funds' fees for the six months ended June 30, 1997 were $213,557. The PVS
System portion of the service agreement was terminated during 1997.
TRANSFER AGENT: The Funds have a contract with FRIMCo, for the Funds
listed above, to provide transfer agent services to the Investment
Company. Total fees for the six months ended June 30, 1997 were $970,659.
DISTRIBUTOR: Russell Fund Distributors, Inc. (the "Distributor"), a wholly
owned subsidiary of FRIMCo, is the principal Distributor for Investment
Company shares. The Distributor receives no compensation from the
Investment Company for its services.
ACCRUED FEES PAYABLE TO AFFILIATES AS OF JUNE 30, 1997 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
MANAGEMENT BOOKKEEPING TRANSFER
FEES SERVICE FEES AGENT FEES TOTALS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Equity I $ 526,840 $ 14,590 $ 42,032 $ 583,462
Equity II 260,651 10,696 33,532 304,879
Equity III 112,043 5,169 17,021 134,233
Equity Q 503,396 6,529 41,280 551,205
International 650,483 30,477 51,006 731,966
Fixed Income I 172,114 9,182 27,976 209,272
Fixed Income II 99,151 6,721 20,457 126,329
Fixed Income III 147,451 7,223 21,119 175,793
------------ ------------ ------------ ------------
$ 2,472,129 $ 90,587 $ 254,423 $ 2,817,139
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
BROKERAGE COMMISSIONS: The Funds may effect portfolio transactions through
Frank Russell Securities, Inc., an affiliate of the Manager, when a money
manager determines that the Fund will receive competitive execution,
price, and commissions. Upon completion of such transactions, Frank
Russell Securities, Inc. will refund up to 70% of the commissions paid by
that Fund after
114 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
reimbursement for research services provided to FRIMCo. Amounts retained
by Frank Russell Securities, Inc. for the six months ended June 30, 1997
were as follows:
Equity I $ 49,295 Equity III $ 28,105
Equity II 4,906 International 88,732
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $20,000 per year plus out-of-pocket
expenses. Total Trustee expenses were $50,202 for the six months ended
June 30, 1997, and were allocated to each Fund on a pro rata basis,
including 15 affiliated funds not represented herein.
5. MONEY MARKET FUND
The Funds are permitted to invest their cash reserves (i.e., monies
awaiting investment in portfolio securities suitable for the Funds'
objectives) in the Frank Russell Investment Company Money Market Fund
(a series of Frank Russell Investment Company not presented herein). As of
June 30, 1997, $307,771,000 of the Money Market Fund's net assets represents
investments by these Funds and $398,170,000 represents the investments of
other affiliated Funds not presented herein.
6. FUND SHARE TRANSACTIONS
Share transactions were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNTS
----------------------------------------- -----------------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996 (UNAUDITED) DECEMBER 31, 1996
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
EQUITY I
Proceeds from shares sold 4,626,762 8,775,051 $ 145,752,826 $ 259,990,186
Proceeds from reinvestment
of distributions 887,007 3,653,485 28,016,539 107,746,730
Payments for shares redeemed (6,280,315) (7,566,740) (195,393,007) (228,747,218)
------------------- ------------------- ------------------- -------------------
Total net increase (decrease) (766,546) 4,861,796 $ (21,623,642) $ 138,989,698
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
EQUITY II
Proceeds from shares sold 2,304,489 3,958,072 $ 68,142,073 $ 119,536,766
Proceeds from reinvestment
of distributions 251,701 1,337,201 7,587,785 38,886,095
Payments for shares redeemed (1,550,125) (2,794,591) (45,781,318) (86,009,252)
------------------- ------------------- ------------------- -------------------
Total net increase (decrease) 1,006,065 2,500,682 $ 29,948,540 $ 72,413,609
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
EQUITY III
Proceeds from shares sold 627,204 1,683,661 $ 19,125,217 $ 50,259,727
Proceeds from reinvestment
of distributions 274,343 1,116,778 8,352,490 32,500,662
Payments for shares redeemed (1,563,146) (2,974,943) (47,643,356) (90,321,893)
------------------- ------------------- ------------------- -------------------
Total net increase (decrease) (661,599) (174,504) $ (20,165,649) $ (7,561,504)
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
</TABLE>
Notes to Financial Statements 115
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
SHARES AMOUNTS
----------------------------------------- -----------------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996 (UNAUDITED) DECEMBER 31, 1996
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
EQUITY Q
Proceeds from shares sold 5,235,878 7,321,433 $ 177,040,277 $ 234,003,820
Proceeds from reinvestment
of distributions 694,378 2,845,096 23,938,329 90,801,198
Payments for shares redeemed (3,608,886) (5,729,549) (124,621,867) (186,870,315)
------------------- ------------------- ------------------- -------------------
Total net increase (decrease) 2,321,370 4,436,980 $ 76,356,739 $ 137,934,703
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
INTERNATIONAL
Proceeds from shares sold 5,067,688 7,697,721 $ 186,279,879 $ 288,204,022
Proceeds from reinvestment
of distributions 286,874 1,016,218 10,427,883 37,375,538
Payments for shares redeemed (4,162,975) (5,431,548) (153,680,260) (203,491,100)
------------------- ------------------- ------------------- -------------------
Total net increase (decrease) 1,191,587 3,282,391 $ 43,027,502 $ 122,088,460
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
FIXED INCOME I
Proceeds from shares sold 5,821,171 10,114,528 $ 121,835,213 $ 213,565,349
Proceeds from reinvestment
of distributions 497,558 1,613,448 10,240,667 33,578,468
Payments for shares redeemed (4,587,502) (9,711,571) (95,801,339) (203,926,174)
------------------- ------------------- ------------------- -------------------
Total net increase (decrease) 1,731,227 2,016,405 $ 36,274,541 $ 43,217,643
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
FIXED INCOME II
Proceeds from shares sold 3,529,738 4,900,949 $ 64,979,384 $ $90,321,507
Proceeds from reinvestment
of distributions 169,579 518,160 3,092,163 9,481,619
Payments for shares redeemed (3,013,765) (3,169,389) (55,481,711) (58,413,181)
------------------- ------------------- ------------------- -------------------
Total net increase (decrease) 685,552 2,249,720 $ 12,589,836 $ 41,389,945
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
</TABLE>
116 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
SHARES AMOUNTS
----------------------------------------- -----------------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996 (UNAUDITED) DECEMBER 31, 1996
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
FIXED INCOME III
Proceeds from shares sold 7,341,855 11,479,120 $ 74,902,326 $ 116,456,798
Proceeds from reinvestment
of distributions 443,455 1,651,840 4,434,554 16,602,395
Payments for shares redeemed (4,446,648) (8,829,297) (45,305,872) (89,782,456)
------------------- ------------------- ------------------- -------------------
Total net increase (decrease) 3,338,662 4,301,663 $ 34,031,008 $ 43,276,737
------------------- ------------------- ------------------- -------------------
------------------- ------------------- ------------------- -------------------
</TABLE>
7. DIVIDENDS
On July 1, 1997, the Board of Trustees declared the following dividends from
net investment income payable on July 10, 1997, to shareholders of record on
July 2, 1997:
Equity I $ 0.0884 Fixed Income I $ 0.3414
Equity II 0.0385 Fixed Income II 0.2700
Equity III 0.1497 Fixed Income III 0.1559
Equity Q 0.1134
Notes to Financial Statements 117
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
TRUSTEES
George F. Russell, Jr., Chairman
Lynn L. Anderson
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Lynn L. Anderson, President and Chief Executive Officer
Peter Apanovitch, Manager of Short Term Investment Funds
George W. Weber, Treasurer and Chief Accounting Officer
Randall P. Lert, Director of Investments
Karl Ege, Secretary and General Counsel
MANAGER AND TRANSFER AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CONSULTANT
Frank Russell Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRES
909 A Street
Tacoma, WA 98402
(800) RUSSEL4
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 - One Commerce Square
Philadelphia, PA 19103-7098
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS
EQUITY I
Alliance Capital Management L.P., Minneapolis, MN
Barclays Global Fund Advisors, San Francisco, CA
Equinox Capital Management, Inc., New York, NY
INVESCO Capital Management, Inc., Atlanta, GA
Lincoln Capital Management Company, Chicago, IL
Peachtree Asset Management, Atlanta, GA
Schneider Capital Management, Wayne, PA
Suffolk Capital Management, Inc., New York, NY
Trinity Investment Management Corporation, Boston, MA
EQUITY II
Delphi Management, Inc., Boston, MA
Fiduciary International, Inc., New York, NY
GlobeFlex Capital, L.P., San Diego, CA
Jacobs Levy Equity Management, Inc., Roseland, NJ
Sirach Capital Management, Inc., Seattle, WA
Wellington Management Company LLP, Boston, MA
EQUITY III
Brandywine Asset Management, Inc., Wilmington, DE
Equinox Capital Management, Inc., New York, NY
Trinity Investment Management Corporation, Boston, MA
EQUITY Q
Barclays Global Fund Advisors, San Francisco, CA
Franklin Portfolio Associates Trust, Boston, MA
J.P. Morgan Investment Management, Inc., New York, NY
INTERNATIONAL
J.P. Morgan Investment Management, Inc., New York, NY
Marathon Asset Management Limited, London, England
Oechsle International Advisors, Boston, MA
Rowe Price-Fleming International, Inc., Baltimore, MD
Sanford C. Bernstein & Co., Inc., New York, NY
The Boston Company Asset Management, Inc., Boston, MA
FIXED INCOME I
Lincoln Capital Management Company, Chicago, IL
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
FIXED INCOME II
BlackRock Financial Management, New York, NY
Standish, Ayer & Wood, Inc., Boston, MA
STW Fixed Income Management, Ltd., Hamilton, Bermuda
FIXED INCOME III
BEA Associates, New York, NY
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUNDS AND IS SUBMITTED
FOR THE GENERAL INFORMATION OF SHAREHOLDERS AND IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS ACCOMPANIED OR PRECEDED BY AN
EFFECTIVE PROSPECTUS. NOTHING HEREIN CONTAINED IS TO BE CONSIDERED AN OFFER OF
SALE OR A SOLICITATION OF AN OFFER TO BUY SHARES OF FRANK RUSSELL INVESTMENT
COMPANY. SUCH OFFERING IS MADE ONLY BY PROSPECTUS, WHICH INCLUDES DETAILS AS TO
OFFERING PRICE AND OTHER MATERIAL INFORMATION.
118 Manager, Money Managers and Service Providers
<PAGE>
FRANK RUSSELL INVESTMENT
COMPANY
Frank Russell Investment Company
is a "series mutual fund" with 28
different investment portfolios.
These financial statements report
on eight Funds, each of which has
distinct investment objectives and
strategies.
FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
Responsible for overall management
and administration of the Funds.
FRANK RUSSELL COMPANY
Consultant to Frank Russell
Investment Management Company.
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
SEMIANNUAL REPORT
JUNE 30, 1997
(UNAUDITED)
TABLE OF CONTENTS
Page
Letter to Our Clients . . . . . . . . . . . . . . 1
Diversified Equity Fund . . . . . . . . . . . . . 2
Special Growth Fund . . . . . . . . . . . . . . . 16
Equity Income Fund. . . . . . . . . . . . . . . . 32
Quantitative Equity Fund. . . . . . . . . . . . . 42
International Securities Fund . . . . . . . . . . 54
Diversified Bond Fund . . . . . . . . . . . . . . 74
Volatility Constrained Bond Fund. . . . . . . . . 92
Multistrategy Bond Fund . . . . . . . . . . . . . 100
Notes to Financial Statements . . . . . . . . . . 112
Manager, Money Managers and Service Providers . . 124
FRANK RUSSELL INVESTMENT COMPANY - RUSSELL FUNDS
Copyright -C- Frank Russell Company 1997. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. The performance quoted represents past performance and,
except for a money market fund, the investment return and principal value of an
investment will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. An investment in a money market fund is neither
insured nor guaranteed by the US government. There can be no assurance that a
money market fund will be able to maintain a stable net asset value of $1.00 per
share. Investments in securities of non-US issuers and foreign currencies
involve investment risks different than those of US issuers; the Prospectus
contains further information and details regarding these risks. Income from
tax-free funds may be subject to an alternative minimum tax, or state and local
taxes. Russell Fund Distributors, Inc., is the distributor of Frank Russell
Investment Company.
<PAGE>
FRANK RUSSELL
INVESTMENT COMPANY
909 A Street
Tacoma, Washington 98402
Fax 253-596-2497
800-832-6688
TO OUR CLIENTS
Frank Russell Investment Company is pleased to present its 1997 Semiannual
Report. This report covers information on the Funds' first six months of our
sixteenth year in operation.
We continue to focus on the benefits of multi-manager, multi-style
diversification in structuring our funds. We remain committed to providing our
clients with superior investment solutions across each of our multiple manager
and style funds. These efforts proved worthwhile in the first half of 1997, as
our funds performed well against their benchmarks and attracted many new
investors, creating significant growth in assets.
Frank Russell Investment Management Company continuously evaluates the funds we
offer our clients. Each fund is carefully monitored by Russell's investment
professionals to ensure the most appropriate investment advisors and strategies
are utilized within each fund. The Advisors are monitored by the Frank Russell
Investment Management Company, using the expertise and advice of the consulting
group within Frank Russell Company.
Since the close of 1996 we have increased our number of investment offerings.
In June, we reopened the Money Market Fund to direct client investment. This
Fund received the IBC Money Fund Report Award for the highest 12-month total
return for 1996 in the Taxable Institutions-Only category, from IBC Financial
Data, Inc. in January of this year. We are also pleased to announce the
availability of our five new funds of funds products, the LifePoints-Registered
Trademark- Strategy Funds. Each of these funds invests in a different
combination of other underlying funds which, in turn, invest in different
combinations of stocks, bonds and cash equivalents. We believe these funds
provide our clients with additional flexibility in meeting their goals.
We look forward to the remainder of 1997 and continuing to earn your support by
exceeding your expectations. Thank you for your continued confidence and
investment with Frank Russell Investment Company.
Sincerely,
/s/ George F. Russell, Jr. /s/ Lynn L. Anderson
George F. Russell, Jr. Lynn L. Anderson
Chairman President and Chief Executive Officer
Frank Russell Company Frank Russell Investment Company
All persons dealing with FRANK RUSSELL INVESTMENT COMPANY, a Massachusetts
business trust, must look solely to the Trust for the enforcement of any claim
against the Trust, as the Trustees, officers, agents or Shareholders of the
Trust assume no personal liability whatsoever for the obligations entered into
on behalf of the Trust.
[LOGO]
Tacoma London Sydney
New York Zurich Tokyo
Toronto Paris Auckland
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 90.9%
BASIC INDUSTRIES - 5.3%
Air Products & Chemicals, Inc. 10,800 $ 877
Albemarle Corp. 12,900 272
Aluminum Co. of America 42,700 3,219
ASARCO, Inc. 10,600 325
Bethlehem Steel Corp. (a) 6,700 70
Boliden Ltd. (a) 173,200 922
Bowater, Inc. 1,400 65
Consolidated Papers, Inc. 1,400 76
Crown Cork & Seal Co., Inc. 47,600 2,544
Cyprus Amax Minerals Co. 1,800 44
Cytec Industries, Inc. 1,100 41
Dexter Corp. 20,000 640
Dow Chemical Co. 11,500 1,002
Eastman Chemical Co. 27,300 1,734
Ethyl Corp. 2,200 20
First Brands Corp. 600 14
Fort Howard Corp. (a) 4,300 217
Gaylord Container Corp. Class A (a) 293,700 2,258
Goodrich (B.F.) Co. 9,900 429
Great Lakes Chemical Corp. 2,300 120
Hexcel Corp. (a) 95,000 1,639
Illinois Tool Works, Inc. 20,700 1,034
IMC Global, Inc. 20,000 700
Inland Steel Industries, Inc. 28,600 747
International Specialty Products (a) 3,300 46
James River Corp. of Virginia 50,900 1,883
Lone Star Technologies, Inc. (a) 40,000 1,145
Lubrizol Corp. 8,500 356
Mead Corp. 14,300 890
Minnesota Mining & Manufacturing Co. 24,475 2,496
Monsanto Co. 178,800 7,700
Nalco Chemical Co. 3,500 135
Owens-Illinois, Inc. (a) 3,300 102
Pechiney S.A. - ADR 45,000 878
Phelps Dodge Corp. 6,200 528
Potlatch Corp. 9,100 412
Praxair, Inc. 37,000 2,072
Precision Castparts Corp. 11,400 680
Reynolds Metals Co. 20,900 1,489
Rhone Poulenc SA - ADR 23,481 977
Sealed Air Corp. (a) 3,300 157
Sequa Corp. (a) 10,000 564
Sonoco Products Co. 13,000 396
St. Laurent Paperboard, Inc. (a) 50,000 778
St. Laurent Paperboard, Inc. (units)(a) 10,000 156
Stone Container Corp. 80,900 1,158
Union Carbide Corp. 10,800 508
USX-U.S. Steel Group 21,400 750
Westvaco Corp. 21,600 679
Whittaker Corp. (a) 85,000 946
Witco Chemical Corp. 10,000 379
----------
47,269
----------
CAPITAL GOODS - 5.1%
AGCO CORP. 5,800 208
Albany International Corp. Class A 55,000 1,238
Alcatel Alsthom Compagnie Generale
d'Electricite - ADR (a) 87,903 2,220
Arrow Electronics, Inc. (a) 2,900 154
Ball Corp. 15,000 451
Boston Scientific Corp. (a) 29,300 1,800
Briggs & Stratton Corp. 7,700 385
Browning-Ferris Industries, Inc. 500 17
Caterpillar, Inc. 17,300 1,858
Cooper Industries, Inc. 21,400 1,065
Crane Co. 9,600 401
Cummins Engine Co., Inc. 16,600 1,171
DSC Communications Corp. (a) 15,600 347
Exide Corp. 60,000 1,316
Foster Wheeler Corp. 37,700 1,527
General Electric Co. 116,800 7,636
Harnischfeger Industries, Inc. 19,800 822
Harsco Corp. 15,000 608
Hubbell, Inc. Class B 1,100 48
Ingersoll-Rand Co. 47,500 2,933
Johnson Controls, Inc. 32,000 1,314
Kaiser Ventures, Inc. (a) 78,900 868
Magna International, Inc. Class A 23,000 1,384
Mannesmann AG - ADR 2,000 891
Martin Marietta Materials, Inc. 300 10
National Service Industries, Inc. 2,500 122
Novellus Systems, Inc. (a) 16,500 1,419
Parker-Hannifin Corp. 29,700 1,802
Philips Electronics - ADR 20,000 1,437
Safeguard Scientifics, Inc. 600 19
SPS Technologies, Inc. (a) 14,200 1,005
Tecumseh Products Co. Class A 11,300 677
Tyco International, Ltd. (a) 72,500 5,043
U.S. Filter Corp. New (a) 48,600 1,324
USA Waste Services, Inc. (a) 30,400 1,174
Weatherford Enterra, Inc. (a) 5,700 219
Westinghouse Electric Corp. 20,700 479
----------
45,392
----------
CONSUMER BASICS - 20.1%
Abbott Laboratories 42,000 2,803
2 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Alliance Pharmaceutical Corp. (a) 35,000 $ 346
ALZA Corp. (a) 8,500 246
American Home Products Corp. 80,900 6,189
American Stores Co. 29,000 1,432
Apria Healthcare Group, Inc. (a) 45,000 799
Archer-Daniels-Midland Co. 78,487 1,844
Astra AB Class A - ADR 141,333 2,685
Baxter International, Inc. 66,200 3,459
Bergen Brunswig Corp. Class A 375 10
Beverly Enterprises, Inc. (a) 18,000 292
Biomet, Inc. 80,500 1,499
Bristol-Myers Squibb Co. 98,300 7,962
Campbell Soup Co. 32,300 1,615
Cardinal Health, Inc. 27,950 1,600
Centocor, Inc. (a) 37,000 1,147
Chiquita Brands International, Inc. 43,600 599
ChiRex, Inc. (a) 97,500 1,158
Chiron Corp. 2,100 44
Coca-Cola Co. (The) 128,600 8,681
Coca-Cola Enterprises, Inc. 48,800 1,122
Colgate-Palmolive Co. 33,400 2,179
Columbia/HCA Healthcare Corp. 186,650 7,338
Corning, Inc. 30,000 1,669
CPC International, Inc. 20,900 1,929
CVS Corp. 14,800 759
Dole Food, Inc. 31,600 1,351
General Nutrition Companies, Inc. (a) 11,000 307
Genzyme Corp. 7,300 202
Gillette Co. 48,623 4,607
Great Atlantic & Pacific Tea Co., Inc. 15,100 411
Health Management Associates Class A (a) 30,800 878
HealthCare COMPARE (a) 13,900 728
HEALTHSOUTH Rehabilitation Corp. 13,000 324
Heinz (H.J.) Co. 1,200 55
Hillenbrand Industries, Inc. 800 38
Hudson Foods, Inc. 30,000 489
Humana, Inc. (a) 17,100 395
IBP, Inc. 40,700 946
Integrated Health Services, Inc. 27,000 1,040
International Multifoods Corp. 43,500 1,093
Interneuron Pharmaceuticals, Inc. (a) 4,900 99
Johnson & Johnson 114,000 7,339
Lilly (Eli) & Co. 20,700 2,263
Lincare Holdings, Inc. (a) 6,600 284
Matrix Pharmaceutical, Inc. (a) 5,900 39
McCormick & Co., Inc. 1,800 45
McKesson Corp. 15,300 1,186
Medtronic, Inc. 25,600 2,074
Merck & Co., Inc. 89,100 9,222
Mylan Laboratories, Inc. 185,000 2,729
North American Vaccine, Inc. (a) 20,000 386
Oxford Health Plans, Inc. (a) 17,600 1,263
PepsiCo, Inc. 227,600 8,549
Pfizer, Inc. 105,400 12,595
Philip Morris Cos., Inc. 463,525 20,569
PhyCor, Inc. (a) 7,000 241
Procter & Gamble Co. 30,700 4,336
Quaker Oats Co. 19,900 893
Quorum Health Group, Inc. (a) 12,500 444
Ralston-Purina Group 8,400 690
RJR Nabisco Holdings Corp. 50,200 1,657
Rykoff-Sexton, Inc. 50,000 1,166
Sara Lee Corp. 31,550 1,313
Savannah Foods & Industries, Inc. 30,000 527
Schering-Plough Corp. 97,400 4,663
Smithkline Beecham PLC - ADR 34,000 3,115
Standard Commercial Corp. 29,934 520
Tenet Healthcare Corp. (a) 54,875 1,622
Total Renal Care Holdings, Inc. (a) 3,600 145
Tyson Foods, Inc. Class A 10,000 190
U.S. Surgical Corp. 31,500 1,173
Unilever NV 13,600 2,965
United Healthcare Corp. 61,100 3,177
Universal Corp. 34,800 1,105
US Bioscience, Inc. (a) 75,750 729
W. R. Grace & Co. 60,300 3,324
Warner-Lambert Co. 14,300 1,777
Watson Pharmaceuticals, Inc. (a) 2,300 97
Weis Markets, Inc. 2,000 58
Wellpoint Health Networks, Inc. Class A (a) 14,237 653
----------
177,492
----------
CONSUMER DURABLES - 2.0%
Electrolux AB - ADR 15,000 1,080
Chrysler Corp. 73,100 2,399
Cooper Tire & Rubber Co. 110,200 2,424
Eaton Corp. 8,000 698
Elsag Bailey Process Automation NV (a) 50,000 919
Ford Motor Co. 134,693 5,085
General Motors Corp. 2,800 156
Lear Corp. (a) 10,600 470
Leggett & Platt, Inc. 4,200 181
PACCAR, Inc. 16,600 770
Standard Products Co. 15,000 379
Sunbeam Oster, Inc. 15,000 566
UNC, Inc. (a) 21,500 314
Whirlpool Corp. 45,200 2,466
----------
17,907
----------
Diversified Equity Fund 3
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CONSUMER NON-DURABLES - 7.4%
Anheuser-Busch Cos., Inc. 6,100 $ 256
Barry (R.G.) Corp. (a) 90,000 1,091
Bed Bath & Beyond, Inc. (a) 3,600 109
Borders Group, Inc. 13,700 331
Canandaigua Wine, Inc. Class A (a) 35,000 1,186
CompUSA, Inc. 10,900 234
Costco Companies, Inc. (a) 1,700 56
Dayton Hudson Corp. 107,600 5,723
Dollar Tree Stores, Inc. (a) 1,300 65
Eastman Kodak Co. 49,000 3,761
Estee Lauder Companies Class A 900 45
Federated Department Stores, Inc. (a) 33,300 1,157
Fruit of the Loom, Inc. Class A (a) 10,400 322
Gap, Inc. 72,000 2,799
Hills Store Co. (a) 17,926 62
Home Depot, Inc. (The) 73,900 5,094
Ikon Office Solutions, Inc. 38,300 955
Intimate Brands, Inc. Class A 3,200 67
Jones Apparel Group, Inc. 24,600 1,175
Kellwood Co. 50,000 1,387
Kmart Corp. (a) 115,600 1,416
Kohl's Corp. (a) 35,600 1,885
Limited, Inc. (The) 133,000 2,693
Liz Claiborne, Inc. 6,700 312
Lowe's Cos., Inc. 47,600 1,767
Mark Bros. Jewelers, Inc. (a) 80,000 980
Mattel, Inc. 198,041 6,709
May Department Stores Co. 31,500 1,488
Newell Co. 11,400 452
NIKE, Inc. Class B 32,200 1,880
Nine West Group, Inc. (a) 19,300 737
Nordstrom, Inc. 2,500 123
Payless ShoeSource, Inc. (a) 15,300 837
PeopleSoft, Inc. 9,200 485
Phar-Mor, Inc. (a) 98,500 609
Pluma, Inc. (a) 35,400 544
Polaroid Corp. 14,000 777
Rayonier, Inc. 1,300 55
Salant Corp. (a) 149,400 448
Sears Roebuck & Co. 145,700 7,831
Tiffany & Co. 6,600 305
TJX Cos., Inc. 23,300 615
Toys "R" Us, Inc. (a) 85,000 2,975
V.F. Corp. 1,400 119
Wal-Mart Stores, Inc. 65,600 2,218
Warnaco Group, Inc. Class A 16,300 520
Zale Corp. (a) 33,000 654
----------
65,309
----------
CONSUMER SERVICES - 2.9%
AMR Corp. (a) 17,700 1,637
Brinker International, Inc. (a) 36,300 517
Carnival Corp. Class A 62,000 2,558
Continental Airlines, Inc. Class B 12,800 447
Cracker Barrel Old Country Store, Inc. 3,200 84
Darden Restaurants, Inc. 8,400 76
Delta Air Lines, Inc. 11,200 918
Disney (Walt) Co. 54,600 4,382
Grand Casinos, Inc. (a) 900 13
Harrah's Entertainment, Inc. (a) 20,700 378
Hilton Hotels Corp. 21,600 574
International Game Technology 5,100 91
King World Productions, Inc. 24,800 868
KLM Royal Dutch Airlines 35,272 1,089
Lone Star Steakhouse & Saloon (a) 500 13
Marriot International, Inc. 7,800 479
MGM Grand, Inc. (a) 4,400 163
Mirage Resorts, Inc. (a) 9,100 230
Northwest Airlines Corp. Class A (a) 64,100 2,332
Promus Hotel Corp. (a) 1,400 54
Servico, Inc. (a) 64,700 962
UAL Corp. (a) 102,500 7,335
USAir Group, Inc. (a) 2,900 102
----------
25,302
----------
ENERGY - 6.4%
Amerada Hess Corp. NPV 54,200 3,011
Amoco Corp. 44,250 3,847
Apache Corp. 27,100 881
Ashland, Inc. 12,500 580
Atlantic Richfield Co. 35,200 2,482
Baker Hughes, Inc. 82,300 3,184
British Petroleum Co. PLC - ADR 67,038 5,019
Burlington Resources, Inc. 8,700 384
Crown Centennial Petroleum Co. Class B (a) 62,000 922
Dresser Industries, Inc. 900 33
Enron Oil & Gas Co. 10,600 192
ENSCO International, Inc. (a) 7,900 417
Enserch Exploration, Inc. (a) 900 10
Exxon Corp. 98,900 6,082
Halliburton Co. 5,300 420
Kerr-McGee Corp. 21,500 1,363
LTV Corp. 14,800 211
Lyondell Petrochemical Co. 20,000 436
Mapco, Inc. 24,700 778
McDermott International, Inc. 40,000 1,167
Mobil Corp. 19,000 1,328
Murphy Oil Corp. 19,400 946
4 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Occidental Petroleum Corp. 60,700 $ 1,521
Petroleum Heat & Power, Inc. Class A 253,844 682
Phillips Petroleum Co. 53,000 2,319
Questar Corp. 500 20
Rowan Cos., Inc. (a) 50,000 1,409
Royal Dutch Petroleum Co. 48,000 2,610
Santa Fe International Corp. (a) 4,500 153
Schlumberger, Ltd. 20,200 2,525
Smith International, Inc. (a) 4,700 285
Sun Co., Inc. 3,200 99
Texaco, Inc. 20,300 2,208
Tosco Corp. 58,680 1,757
Transocean Offshore, Inc. 23,100 1,678
Ultramar Diamond Shamrock Corp. 4,900 160
Union Pacific Resources Group, Inc. 5,900 147
Unocal Corp. 37,900 1,471
USX-Marathon Group 93,700 2,706
Valero Energy Corp. 33,700 1,222
----------
56,665
----------
FINANCE - 15.9%
AEGON N.V. (American Registered Shares) 1,588 111
Aetna, Inc. 40,600 4,156
AFLAC, Inc. 57,000 2,693
Ahmanson (H.F.) & Co. 60,300 2,593
Allmerica Financial Corp. 4,100 163
Allstate Corp. 62,008 4,527
AMBAC, Inc. 9,000 687
American Express Co. 42,700 3,181
American General Corp. 4,317 206
American International Group, Inc. 63,662 9,510
AmSouth Bancorp 32,200 1,218
ARM Financial Group, Inc. Class A (a) 4,400 88
Banc One Corp. 31,950 1,548
BankAmerica Corp. 37,800 2,440
BankBoston Corp. 27,700 1,996
Barnett Banks, Inc. 27,900 1,465
Bear Stearns Cos., Inc. 20,352 696
Beneficial Corp. 13,500 959
Charter One Financial, Inc. 4,000 215
Chase Manhattan Corp. 97,600 9,473
Chubb Corp. (The) 32,900 2,200
Citicorp 38,700 4,666
Coast Savings Financial, Inc. (a) 22,900 1,041
Comerica, Inc. 14,100 959
Commerce Bancshares, Inc. 2,150 97
Conseco, Inc. 59,368 2,197
CoreStates Financial Corp. 7,300 392
Danielson Holding Corp. (a) 100,000 787
Dime Bancorp, Inc. 12,400 217
Edwards (A.G.), Inc. 17,700 757
Equitable Companies, Inc. 13,500 449
Everest Reinsurance Holdings, Inc. 18,300 725
Federal Home Loan Mortgage Corp. 46,800 1,609
Federal National Mortgage Association 129,900 5,667
First America Bank Corp. 3,000 137
First American Corp. 5,200 200
First Chicago NBD Corp. 16,995 1,028
First Union Corp. 15,400 1,425
Fleet Financial Group, Inc. 15,600 987
General Re Corp. 21,200 3,858
Golden West Financial Corp. 5,100 357
Great Western Financial Corp. 37,600 2,021
Green Tree Financial Corp. 12,100 431
Hartford Financial Services Group (The), Inc. 9,400 778
Horace Mann Educators Corp. 6,300 309
Household International Corp. 36,100 4,239
Jefferson-Pilot Corp. 2,900 203
Lehman Brothers Holdings, Inc. 18,200 737
Liberty Corp. 12,000 489
Loews Corp. 5,200 521
MBIA, Inc. 15,300 1,726
MBNA Corp. 186,075 6,815
Mercantile Bankshares Corp. 4,200 167
Mercury General Corp. 2,800 204
Merrill Lynch & Co., Inc. 102,200 6,094
MGIC Investment Corp. 14,400 690
Money Store, Inc. 1,100 31
Morgan Stanley, Dean Witter Discover and Co. 178,815 7,700
National City Corp. 8,700 457
NationsBank Corp. 59,900 3,864
Northern Trust Corp. 9,100 440
Norwest Corp. 25,600 1,440
Old Republic International Corp. 73,800 2,237
Pacific Century Financial Corp. 11,700 541
PaineWebber Group, Inc. 35,800 1,253
PNC Bank Corp. 46,300 1,927
Progressive Corp. 7,100 618
Provident Companies, Inc. 17,027 911
Providian Financial Corp. 6,000 193
Reliastar Financial Corp. 15,000 1,097
Republic New York Corp. 2,600 279
Robert Half International, Inc. (a) 700 33
Salomon, Inc. 32,000 1,780
Scor SA - ADR 15,600 634
Signet Banking Corp. 23,200 835
Diversified Equity Fund 5
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
SouthTrust Corp. 54,300 $ 2,247
St. Paul Cos., Inc. 12,800 976
Star Banc Corp. 2,400 101
State Street Corp. 9,000 416
Student Loan Marketing Association 3,400 432
SunAmerica, Inc. 1,000 49
SunTrust Banks, Inc. 49,000 2,698
Torchmark Corp. 9,500 677
Transamerica Financial Corp. 11,200 1,048
Transatlantic Holdings, Inc. 3,900 387
U.S. Bancorp of Oregon 3,700 237
Uniao de Bancos Brasileiros S.A. - GDR (a) 28,300 1,051
Unitrin, Inc. 300 18
Wachovia Corp. 10,700 624
Zurich Reins Centre Holdings, Inc. 3,600 142
----------
140,477
----------
GENERAL BUSINESS - 3.3%
AccuStaff, Inc. (a) 30,100 713
ACNielsen Corp. (a) 27,100 532
America Online, Inc. (a) 14,100 784
American Greetings Corp. Class A 18,300 677
Ascend Communications, Inc. (a) 52,400 2,057
Automatic Data Processing, Inc. 121,750 5,722
Central Newspapers, Inc. Class A 10,200 731
Clear Channel Communications, Inc. 10,800 664
Comdisco, Inc. 11,400 296
Cox Communications, Inc. Class A (a) 36,900 886
CUC International, Inc. 41,000 1,058
Ecolab, Inc. 4,000 191
Figgie International Holdings, Inc. Class A (a) 67,000 905
First Data Corp. 56,600 2,487
Harland (John H.) Co. 7,000 160
Interpublic Group Cos., Inc. 3,000 184
Manpower, Inc. 7,300 325
Meredith Corp. 8,100 235
Metromedia International Group, Inc. (a) 25,000 317
New York Times Co. Class A 10,500 520
Nextel Communications, Inc. Class A (a) 3,900 74
Olsten Corp. 2,300 45
Omnicom Group, Inc. 5,100 314
Omnipoint Corp. (a) 1,400 23
Paging Network, Inc. (a) 2,300 20
Pittston Brink's Group 600 18
Quintiles Transnational Corp. (a) 14,200 987
SBC Communications, Inc. 24,900 1,541
Scripps (E.W.) Co. Class A 900 37
Service Corp. International 31,700 1,042
Sinclair Broadcast Group, Inc. Class A (a) 500 15
Staples, Inc. (a) 34,300 793
Stewart Enterprises, Inc. Class A 3,700 154
Tele-Communications, Inc. Class A 60,000 889
Tele-Communications, Inc. Series A 38,050 904
Tribune Co. 35,100 1,687
Unisource Worldwide, Inc. 38,900 622
Viad Corp. 2,200 42
----------
28,651
----------
MISCELLANEOUS - 1.0%
American Real Estate Partners, L.P. (a) 86,626 1,169
Arden Realty Group, Inc. 40,000 1,040
Boston Properties, Inc. (a) 25,500 701
Canadian Hotel Income Properties (a) 166,200 842
Catellus Development Corp. (a) 80,000 1,450
Chris Craft Industries, Inc. 3,100 150
Great Lakes REIT, Inc. 18,200 299
Koger Equity, Inc. 10,000 182
Mercer International, Inc. 81,800 772
Newhall Land & Farming Co. 42,900 928
Public Storage, Inc. 23,300 682
United Dominion Realty Trust, Inc. 12,600 179
Waste Management, Inc. 14,000 450
----------
8,844
----------
SHELTER - 0.2%
Armstrong World Industries, Inc. 2,200 161
Centex Corp. 10,400 423
Johns Manville Corp. 600 7
Lafarge Corp. 11,500 282
Masco Corp. 1,200 50
St. Lawrence Cement Inc. Class A 38,200 368
USG Corp. (a) 16,500 602
----------
1,893
----------
TECHNOLOGY - 13.6%
ADC Telecommunications, Inc. 5,800 194
Altera Corp. 27,500 1,389
AMP, Inc. 7,000 292
BE Aerospace, Inc. (a) 90,000 2,835
Boeing Co. 72,400 3,842
Cadence Design Systems, Inc. (a) 10,350 347
CAE, Inc. 95,000 757
Cambridge Technology Partners, Inc. (a) 1,700 54
CDW Computer Centers, Inc. 2,900 154
6 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Cisco Systems, Inc. (a) 155,700 $ 10,451
COMPAQ Computer Corp. (a) 106,600 10,580
Dell Computer Corp. 29,800 3,498
Doncasters PLC - ADR (a) 27,700 640
Electronic Data Systems Corp. 65,000 2,665
Ericsson (LM) Telephone Co. Class B - ADR 56,770 2,235
General Dynamics Corp. 5,600 420
Guidant Corp. 600 51
Harris Corp. 1,800 151
HBO & Co. 32,800 2,259
Hewlett-Packard Co. 129,100 7,230
Honeywell, Inc. 23,300 1,768
Imation Corp. (a) 30,000 791
Information Resources, Inc. (a) 15,000 212
Intel Corp. 106,100 15,020
International Business Machines Corp. 78,450 7,075
Iomega Corp. (a) 2,000 40
KLA Instruments Corp. (a) 26,300 1,282
Komag, Inc. (a) 14,600 239
Learning Co., Inc. (The)(a) 130,000 1,219
Lexmark International Group, Inc. Class A (a) 23,700 720
Litton Industries, Inc. (a) 4,800 232
Lockheed Martin Corp. 25,000 2,589
LSI Logic Corp. (a) 36,600 1,171
MEMC Electronic Materials, Inc. (a) 33,800 1,107
Micro Warehouse, Inc. (a) 9,800 168
Micron Electronics, Inc. (a) 9,700 173
Microsoft Corp. 85,100 10,760
Molex, Inc. Class A 13,000 451
National Semiconductor Corp. (a) 7,700 236
Northern Telecom, Ltd. 15,400 1,401
Northrop Grumman Corp. 17,800 1,563
Oracle Systems Corp. (a) 42,900 2,158
Quantum Corp. 13,400 272
Read-Rite Corp. (a) 4,900 102
Rockwell International Corp. 8,300 490
SCI Systems, Inc. (a) 4,900 312
Seagate Technology 47,400 1,668
Sensormatic Electronics Corp. 68,000 875
Sequent Computer Systems, Inc. (a) 55,000 1,158
Shared Medical Systems 2,400 129
Siemens AG - ADR New (a) 3,600 211
Sun Microsystems, Inc. 7,800 290
Sundstrand Corp. 1,400 78
Symbol Technologies, Inc. 9,950 335
Tandem Computers, Inc. (a) 5,900 119
Tandy Corp. 11,600 650
Tektronix, Inc. 8,100 486
Tellabs, Inc. 9,000 502
Teradyne, Inc. (a) 13,100 514
Texas Instruments, Inc. 11,000 925
Thomas & Betts Corp. 4,100 215
TRW, Inc. 19,300 1,096
United Technologies Corp. 20,300 1,685
Xerox Corp. 66,900 5,277
Xilinx, Inc. (a) 40,200 1,970
----------
119,778
----------
TRANSPORTATION - 1.0%
BT Shipping, Ltd. - ADR (a) 155,000 620
Caliber Systems, Inc. 7,000 261
CNF Transportation, Inc. 8,600 277
Covenant Transport, Inc. Class A (a) 2,000 32
Johnstown America Industries, Inc. (a) 85,000 499
Kansas City Southern Industries, Inc. 1,400 90
Kirby Corp. (a) 50,000 913
Nordic American Tanker Shipping, Ltd.
1997 Warrants (a) 58,400 292
Norfolk Southern Corp. 23,900 2,408
OMI Corp. (a) 36,500 349
Ryder System, Inc. 85,400 2,818
Tidewater, Inc. 6,700 295
----------
8,854
----------
UTILITIES - 6.7%
Airtouch Communications, Inc. (a) 152,000 4,161
AT&T Corp. 44,100 1,546
Baltimore Gas & Electric Co. 2,600 69
Bell Atlantic Corp. 20,500 1,555
BellSouth Corp. 84,600 3,923
Boston Edison Co. 19,900 525
Calenergy, Inc. (a) 13,200 502
Central Maine Power Co. 46,400 574
Century Telephone Enterprises, Inc. 34,900 1,176
CMS Energy Corp. 900 32
Columbia Gas System, Inc. 19,500 1,272
Delmarva Power & Light Co. 9,900 189
DQE, Inc. 600 17
DTE Energy Co. 113,600 3,138
Edison International 133,700 3,326
Enron Corp. 9,500 388
ENSERCH Corp. 21,000 467
Entergy Corp. 112,500 3,080
GPU, Inc. 45,900 1,647
Hawaiian Electric Industries, Inc. 500 19
Illinova Corp. 2,100 46
Diversified Equity Fund 7
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
IPALCO Enterprises, Inc. 5,500 $ 172
KU Energy Corp. 5,000 171
Long Island Lighting Co. 29,100 669
Lucent Technologies, Inc. 23,900 1,722
MCI Communications Corp. 52,300 2,000
MCN Corp. 6,000 184
Montana Power Co. 8,100 188
National Fuel & Gas Co. 6,700 281
New England Electric System 12,000 444
New York State Electric & Gas Corp. 5,200 109
Niagara Mohawk Power Corp. (a) 197,500 1,691
NICOR, Inc. 14,600 524
NIPSCO Industries, Inc. 3,100 128
Northeast Utilities 39,800 381
Northern States Power Co. 900 47
NYNEX Corp. 53,200 3,066
OGE Energy Corp. 700 32
Pacific Enterprises 900 30
PacifiCorp. 900 20
Peoples Energy Corp. 6,800 255
Pinnacle West Capital Corp. 15,200 457
Potomac Electric Power Co. 45,200 1,045
PP&L Resources, Inc. 6,400 128
Public Service Co. of Colorado 3,500 145
Public Service Enterprise Group, Inc. 60,100 1,502
Sonat, Inc. 26,700 1,368
Southern New England Telecommunications Corp. 28,100 1,092
Telefonos de Mexico SA Series L - ADR 61,600 2,941
U.S. West Communications Group 7,400 279
Unicom Corp. 135,500 3,015
Union Electric Co. 10,700 403
United States Cellular Corp. (a) 2,000 59
Western Resources, Inc. 13,000 422
WorldCom, Inc. 215,420 6,880
----------
59,502
----------
TOTAL COMMON STOCKS
(cost $623,027) 803,335
----------
CONVERTIBLE PREFERRED STOCKS - 0.2%
Elsag Bailey Financing Trust (144A)(a) 22,600 944
Glendale Federal Bank Series E 17,100 1,111
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $1,588) 2,055
----------
PREFERRED STOCKS - 0.5%
Cooper Industries, Inc. 12,500 287
Nokia Corp. - ADR 59,900 4,418
----------
TOTAL PREFERRED STOCKS
(cost $4,106) 4,705
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 7.0%
Frank Russell Investment Company
Money Market Fund
due on demand (b) $ 57,454 57,454
United States Treasury Notes
5.750% due 10/31/97 (c) 4,100 4,103
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $61,557) 61,557
----------
TOTAL INVESTMENTS
(identified cost $690,278)(d) - 98.6% 871,652
OTHER ASSETS AND LIABILITIES,
NET - 1.4% 12,119
----------
NET ASSETS - 100.0% $ 883,771
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with
futures contracts purchased by the Fund.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
PLC - Public Limited Company
The accompanying notes are an integral part of the financial statements.
8 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- -------------
FUTURES CONTRACTS
(Notes 2 and 3)
S & P 500 Index Futures Contracts
expiration date 09/97 123 $ (102)
S & P 400 Midcap Index Futures Contracts
expiration date 09/97 65 96
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ (6)
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at $4,103 were held
as collateral by the custodian in connection with futures contracts
purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
Diversified Equity Fund 9
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $690,278)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 871,652
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,453
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,665
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,994
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901,764
LIABILITIES
Payables:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,897
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,362
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,498
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 640
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 438
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,993
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 883,771
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,844
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,428
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,376
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633,943
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 883,771
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
Class S ($882,437,597 divided by 18,550,001 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47.57
----------------
----------------
Class C ($1,333,640 divided by 28,055 shares of $.01 par value . . . . . . . . . . . . . . . . . . . .
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47.54
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,844
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,058
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
----------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,958
EXPENSES (Notes 1, 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,008
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Registration fees
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Distribution fees - Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholder servicing fees - Class C . . . . . . . . . . . . . . . . . . . . . . . 1
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,571
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,387
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,094
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,239 70,333
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,553
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 55,885
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,218
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 129,605
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Diversified Equity Fund 11
<PAGE>
DIVERSIFIED EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,387 $ 7,130
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,333 81,288
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . 55,885 40,582
------------------- -------------------
Net increase (decrease) in net assets resulting from operations . . . . . . 129,605 129,000
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - Class S. . . . . . . . . . . . . . . . . . . . . . . . (1,543) (7,130)
In excess of net investment income - Class S . . . . . . . . . . . . . . . . . -- (54)
Net realized gain on investments - Class S . . . . . . . . . . . . . . . . . . (17,707) (80,193)
------------------- -------------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . (19,250) (87,377)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . 73,725 127,423
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . 184,080 169,046
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699,691 530,645
------------------- -------------------
End of period (including undistributed net investment income of
$1,844 at June 30, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 883,771 $ 699,691
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 Diversified Equity Fund
<PAGE>
DIVERSIFIED EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding
throughout each year or period and other performance information derived
from the financial statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . $ 41.45 $ 38.62 $ 32.26 $ 34.88 $ 35.60 $ 36.36
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . .19 .48 .60 .58 .56 .60
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . 7.05 8.15 10.63 (.49) 3.03 2.30
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations. . . 7.24 8.63 11.23 .09 3.59 2.90
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . (.09) (.48) (.60) (.58) (.55) (.61)
Net realized gain on investments . . . . . . . (1.03) (5.32) (4.27) (1.87) (3.76) (3.05)
In excess of net realized gain on investments. -- -- -- (.26) -- --
-------- -------- -------- -------- -------- --------
Total Distributions . . . . . . . . . . . . (1.12) (5.80) (4.87) (2.71) (4.31) (3.66)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . $ 47.57 $ 41.45 $ 38.62 $ 32.26 $ 34.88 $ 35.60
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . 17.73 23.29 35.17 (0.01) 10.53 8.32
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . 882,437 699,691 530,645 414,036 388,420 337,549
Ratios to average net assets (%)(b):
Operating expenses . . . . . . . . . . . . . .93 .94 .95 .95 .96 .98
Net investment income . . . . . . . . . . . .88 1.18 1.56 1.73 1.54 1.69
Portfolio turnover rate (%)(b) . . . . . . . . 123.75 99.90 92.53 57.53 99.80 77.02
Average commission rate paid per share
of security ($ omitted) . . . . . . . . . . .0534 .0465 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
Diversified Equity Fund 13
<PAGE>
DIVERSIFIED EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding
throughout each year or period and other performance information derived
from the financial statements.
<TABLE>
<CAPTION>
1997*
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45.55
-----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .02
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . 1.97
-----------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.99
-----------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47.54
-----------------
-----------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.98
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,334
Ratios to average net assets (%)(b):
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.63
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.75
Average commission rate paid per share of security ($000 omitted). . . . . . . . . . . . . . . . . . . .0534
</TABLE>
* For the period May 26, 1997 (commencement of sale) to June 30, 1997
(Unaudited)
(a) Periods less than one year are not annualized. Total return represents
performance for the period May 26, 1997 to June 30, 1997.
(b) The ratios for the period ended June 30, 1997 are annualized.
14 Diversified Equity Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 93.3%
BASIC INDUSTRIES - 4.0%
Advanced Technologies Laboratories, Inc. (a) 19,000 $ 812
Agrium, Inc. 83,500 960
AK Steel Holding Corp. 8,000 353
Albemarle Corp. 12,400 261
Alumax, Inc. (a) 11,800 448
Amcast Industrial Corp. 2,000 50
ASARCO, Inc. 18,300 560
Atchison Casting Corp. (a) 6,000 100
Bethlehem Steel Corp. (a) 56,200 587
Bowater, Inc. 13,500 624
Brush Wellman, Inc. 3,100 65
Buckeye Cellulose Corp. (a) 3,900 132
BWay Corp. (a) 7,000 163
Cambrex Corp. 5,600 223
Carbide/Graphite Group, Inc. (The)(a) 4,000 92
Carpenter Technology Corp. 7,500 343
ChemFirst, Inc. 5,700 155
Cincinnati Milacron, Inc. 1,200 31
Cleveland-Cliffs, Inc. 4,200 171
Commonwealth Industries, Inc. 2,300 45
Consolidated Papers, Inc. 7,950 429
Crompton & Knowles Corp. 24,600 547
Dexter Corp. 8,500 272
Ethyl Corp. 18,100 167
Fort Howard Corp. (a) 15,000 758
Fuller (H.B.) Co. 4,500 248
Goodrich (B.F.) Co. 6,200 269
Inland Steel Industries, Inc. 27,300 713
International Specialty Products (a) 9,700 136
Lubrizol Corp. 17,300 726
Millennium Chemicals, Inc. 29,900 680
Minerals Technologies, Inc. 36,100 1,354
Mueller Industries, Inc. (a) 5,800 254
National Steel Corp. Class B (a) 103,100 1,733
Olin Corp. 20,600 805
Oregon Steel Mills, Inc. 10,300 205
Penwest, Ltd. 4,000 129
Pope & Talbot, Inc. 3,700 61
Potlatch Corp. 8,900 403
Precision Castparts Corp. 2,500 149
Premark International, Inc. 26,700 714
Rouge Steel Co. Class A 1,200 20
Schulman (A.), Inc. 4,800 118
Scotts Co. (The) Class A (a) 8,300 241
Slater Steel, Inc. 10,000 121
Titanium Metals Corp. (a) 28,900 912
Tredegar Industries, Inc. 1,300 72
Universal Stainless & Alloy Products, Inc. (a) 10,000 129
Wellman, Inc. 11,900 207
Wolverine Tube, Inc. (a) 5,000 139
----------
18,886
----------
CAPITAL GOODS - 4.2%
ABC Rail Products Corp. (a) 8,000 137
ABT Building Products Corp. (a) 2,700 69
AFC Cable Systems, Inc. (a) 6,000 160
American Buildings Co. New (a) 4,000 108
ANTEC Corp. (a) 11,000 129
Aptargroup, Inc. 32,600 1,475
Aviall, Inc. (a) 68,800 963
Avondale Industries, Inc. (a) 5,300 111
Baldor Electric Co. 3,800 112
Barnes Group, Inc. 6,800 201
BMC West Corp. (a) 8,000 96
Cable Design Technologies Corp. (a) 5,000 147
Calgon Carbon Corp. 12,200 169
Charter Power Systems, Inc. (a) 4,000 150
Cohu, Inc. 53,000 1,643
Columbus McKinnon Corp. 50,000 931
Comfort Systems USA, Inc. (a) 15,200 238
Core Industries, Inc. 42,400 1,049
Cummins Engine Co., Inc. 12,000 847
EVI, Inc. 22,300 937
Farr Co. 10,500 160
Flow International Corp. (a) 10,000 95
Fluke Corp. 2,600 154
Franklin Electric Co., Inc. 3,000 146
Gardner Denver Machinery, Inc. 33,200 955
General Signal Corp. 5,300 231
Giant Cement Holding, Inc. (a) 8,000 147
Gleason Corp. 2,600 121
Global Industrial Technologies, Inc. (a) 6,300 129
Halter Marine Group, Inc. (a) 3,700 89
Harmon Industries, Inc. 7,000 145
Hughes Supply, Inc. 5,100 204
Juno Lighting, Inc. 3,200 51
Kaydon Corp. 8,700 432
Martin Marietta Materials, Inc. 10,900 353
National Service Industries, Inc. 9,800 477
NCI Building Systems, Inc. (a) 32,300 1,042
Park Electrochemical Corp. 7,300 192
Plantronics, Inc. New (a) 3,000 150
Powell Industries, Inc. (a) 10,000 146
16 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
RDO Equipment Co. Class A (a) 6,000 $ 134
Regal-Beloit Corp. 35,700 935
Rexel, Inc. (a) 8,900 165
Robbins & Myers, Inc. 3,000 98
Scotman Industries, Inc. 800 23
Shelter Components Corp. 9,062 108
SIFCO Industries 69,000 983
SPS Technologies, Inc. (a) 800 57
Superior Services, Inc. (a) 6,200 145
Synalloy Corp. 7,000 118
Timken Co. 26,400 939
Tractor Supply Co. (a) 7,000 123
Triumph Group, Inc. New (a) 5,000 155
U.S. Filter Corp. New (a) 20,900 569
Westinghouse Air Brake Co. 2,900 58
Zurn Industries, Inc. 5,600 161
----------
19,862
----------
CONSUMER BASICS - 10.2%
800 - JR CIGAR, Inc. (a) 9,100 189
ABR Information Services, Inc. 10,700 309
American Oncology Resources, Inc. (a) 39,900 668
AmeriSource Health Corp. Class A (a) 24,400 1,217
Arbor Health Care Co. (a) 4,000 124
ARV Assisted Living, Inc. (a) 12,000 132
Bergen Brunswig Corp. Class A 19,750 551
Bindley Western Industries, Inc. 3,800 87
Biogen, Inc. 29,000 982
Bob Evans Farms, Inc. 5,000 85
Bush Boake Allen, Inc. (a) 2,000 62
Central Sprinkler Corp. (a) 5,700 144
Chemed Corp. 1,500 56
Church and Dwight Co., Inc. 4,600 123
Coca-Cola Bottling Co. 25,000 1,188
Coherent, Inc. (a) 20,000 891
Cohr, Inc. (a) 32,000 584
Covance, Inc. (a) 45,000 869
Coventry Corp. (a) 17,100 260
Cross (A.T.) Co. Class A 4,700 60
Curative Technologies, Inc. (a) 48,900 1,406
Dean Foods Co. 18,700 755
Dekalb Genetics Corp. Class B 2,600 207
DePuy, Inc. (a) 4,400 101
Dura Pharmaceuticals, Inc. 32,200 1,280
Earthgrains Co. 26,200 1,718
Einstein/Noah Bagel Corp. (a) 5,000 60
Equity Corp. International 32,000 774
Fleming Cos., Inc. 24,600 443
General Nutrition Companies, Inc. (a) 43,600 1,215
Health Care & Retirement Corp. (a) 27,500 918
Health Management Associates Class A (a) 36,000 1,026
Healthcare Services Group, Inc. (a) 10,000 115
Heartland Express, Inc. 10,200 238
Herbalife International, Inc. 40,100 647
Home Health Corp. of America, Inc. (a) 12,000 114
ICN Pharmaceuticals, Inc. 41,700 1,196
Immucor Corp. (a) 10,000 98
Incyte Pharmaceuticals, Inc. (a) 9,800 635
International Multifoods Corp. 5,600 141
Interstate Bakeries Corp. 5,300 314
Jones Medical Industries, Inc. 41,000 1,948
Lincare Holdings, Inc. (a) 51,500 2,215
Maxxim Medical, Inc. (a) 8,000 139
Medical Resources, Inc. (a) 66,900 1,104
Medicis Pharmaceutical Corp. Class A. 62,800 3,124
Michael Foods, Inc. 12,700 235
Nature's Sunshine Products, Inc. 8,000 143
NBTY, Inc. (a) 66,000 1,832
Northland Cranberries, Inc. Class A 8,000 129
NovaCare, Inc. (a) 124,100 1,722
Outback Steakhouse, Inc. (a) 13,400 323
Pediatric Services of America, Inc. (a) 7,000 140
Pediatrix Medical Group (a) 20,000 916
PhyMatrix Corp. (a) 16,800 258
Physio-Control International Corp. (a) 9,000 133
Physiometrix, Inc. (a) 30,000 83
Prime Hospitality Corp. (a) 8,400 166
Protocol Systems, Inc. (a) 9,000 71
Quest Diagnostics, Inc. (a) 7,800 160
Renal Treatment Centers, Inc. (a) 28,100 755
Res-Care, Inc. (a) 7,000 131
Respironics, Inc. (a) 6,000 124
Ruddick Corp. 3,600 59
Rykoff-Sexton, Inc. 2,600 61
Sabratek Corp. (a) 24,000 672
Safeskin Corp. 48,400 1,425
Safety 1st, Inc. (a) 11,900 65
Schultz Sav-O Stores, Inc. 51,000 905
Schweitzer-Mauduit International, Inc. 6,000 225
Smucker (J.M.) Co. 2,400 52
Snap-On Tools Corp. 10,800 425
Sola International, Inc. (a) 37,500 1,256
Starrett (L.S.) Co. Class A 28,500 908
Strategic Distribution, Inc. (a) 28,250 106
Suiza Foods Corp. (a) 26,000 1,066
Special Growth Fund 17
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Sun Healthcare Group, Inc. (a) 17,700 $ 368
Tootsie Roll Industries, Inc. 18,540 825
Total Renal Care Holdings, Inc. (a) 22,300 896
United Natural Foods, Inc. (a) 7,000 143
Universal Corp. 11,300 359
Universal Health Services, Inc. Class B (a) 5,800 223
UroCor, Inc. (a) 18,000 162
Weider Nutrition International, Inc. Class A 10,700 170
----------
48,204
----------
CONSUMER DURABLES - 1.5%
Aftermarket Technology Corp. (a) 20,500 451
Arctic Cat, Inc. 4,100 43
Arvin Industries, Inc. 8,300 226
Borg-Warner Automotive, Inc. 18,000 973
Coachmen Industries, Inc. 50,200 860
CORT Business Services Corp. (a) 38,500 1,136
Ethan Allen Interiors, Inc. 29,200 1,664
Excel Industries, Inc. 8,000 156
Holophane Corp. (a) 7,000 135
Kimball International, Inc. Class B 1,000 40
La-Z-Boy Chair Co. 1,300 47
Lithia Motors, Inc., Class A (a) 10,000 110
Maxim Group, Inc. (a) 11,000 121
Myers Industries, Inc. 2,300 39
National Presto Industries, Inc. 1,000 40
O'Sullivan Industries Holdings, Inc. (a) 4,300 71
Pillowtex Corp. 7,000 154
Pronet, Inc. (a) 40,000 155
Schult Homes Corp. 4,200 67
Toro Co. 4,800 182
Triangle Pacific Corp. (a) 1,700 53
United Auto Group, Inc. (a) 2,900 55
West, Inc. 1,300 37
Wynn's International, Inc. 7,750 220
----------
7,035
----------
CONSUMER NON-DURABLES - 6.8%
Abercrombie & Fitch Co. Class A (a) 51,700 956
Block Drug Co., Inc. Class A 21,681 943
Brown Group, Inc. 9,100 170
Burlington Coat Factory Warehouse Corp. (a) 78,300 1,527
Burlington Industries, Inc. (a) 100 1
Canandaigua Wine, Inc. Class A (a) 10,900 369
Carson Pirie Scott & Co. (a) 5,900 187
Cash America International, Inc. 6,698 70
Cole National Corp. Class A (a) 4,000 176
Coors (Adolph) Co. Class B 13,400 353
CPI Corp. 2,800 59
Daisytek International Corp. (a) 4,000 157
Dollar Tree Stores, Inc. (a) 10,900 549
Dress Barn, Inc. (a) 13,200 257
Fingerhut Cos., Inc. 15,900 277
Gadzooks, Inc. (a) 20,100 392
Genesco, Inc. (a) 28,800 409
Goody's Family Clothing, Inc. (a) 66,600 1,823
Guest Supply, Inc. (a) 8,900 85
Guilford Mills, Inc. 4,950 103
Guitar Center, Inc. (a) 7,000 118
Handleman Co. (a) 4,200 27
Hartmarx Corp. (a) 6,900 57
Helen of Troy, Ltd. New (a) 5,000 128
Huffy Corp. 2,100 31
Innovex, Inc. 40,600 1,172
Johnston Industries, Inc. 29,950 191
Just For Feet, Inc. 64,600 1,122
Kellwood Co. 41,800 1,160
Land's End, Inc. (a) 3,800 113
MacFrugals Bargains Close Outs, Inc. (a) 5,400 147
Meyer (Fred), Inc. (a) 7,300 377
Movado Group, Inc. 55,250 1,381
Nautica Enterprises, Inc. (a) 70,700 1,869
Nutramax Products, Inc. New (a) 10,000 128
Pacific Sunwear of California 15,400 497
Payless ShoeSource, Inc. (a) 16,800 919
PeopleSoft, Inc. 20,500 1,081
Petco Animal Supplies, Inc. (a) 5,000 150
Quaker Fabric Corp. New (a) 9,000 146
Rayonier, Inc. 9,000 379
Ross Stores, Inc. 73,200 2,388
Russ Berrie & Co., Inc. 3,300 72
Russell Corp. 5,200 154
Samsonite Corp. (a) 32,800 1,447
Shopko Stores, Inc. 64,900 1,655
Springs Industries, Inc. 6,900 364
SuperValu, Inc. 22,400 773
The Men's Wearhouse, Inc. (a) 21,500 677
Tiffany & Co. 24,500 1,132
TJX Cos., Inc. 55,000 1,451
Urban Outfitters, Inc. (a) 10,000 136
Value City Department Stores, Inc. (a) 11,000 89
Video Update, Inc. Class A (a) 25,000 111
Waban, Inc. (a) 39,000 1,256
Windmere Corp. 18,300 300
----------
32,061
----------
18 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CONSUMER SERVICES - 2.4%
AAR Corp. 65,400 $ 2,113
Atlas Air, Inc. (a) 18,000 621
CKE Restaurants, Inc. (a) 27,400 867
GC Companies, Inc. (a) 700 32
Harvey's Casino Resorts 2,000 35
Hollywood Entertainment Corp. (a) 30,800 705
King World Productions, Inc. 21,000 735
La Quinta Motor Inns, Inc. 10,500 230
Lodgenet Entertainment Corp. (a) 8,000 78
Luby's Cafeterias, Inc. 43,500 867
Marcus Corp. 1,100 27
Midwest Express Holdings, Inc. 5,100 140
O'Charleys, Inc. (a) 10,000 168
Patriot American Hospitality, Inc. 34,000 867
Recoton Corp. (a) 7,000 91
Red Roof Inns, Inc. (a) 11,600 209
Regis Corp. 6,000 139
Ruby Tuesday, Inc. (a) 3,000 67
Ryan's Family Steak Houses, Inc. (a) 151,300 1,286
ShoLodge, Inc. (a) 10,133 149
Showbiz Pizza Time, Inc. (a) 17,300 456
Sunstone Hotel Investors, Inc. 22,400 325
USAir Group, Inc. (a) 30,400 1,064
----------
11,271
----------
ENERGY - 6.5%
AGL Resources, Inc. 3,500 72
Alamco, Inc. (a) 10,000 154
Basin Exploration, Inc. (a) 110,000 853
BJ Services Co. (a) 17,500 938
Cabot Oil & Gas Corp. 5,400 95
Catalytica, Inc. (a) 10,000 116
Cliffs Drilling Co. 42,900 1,566
Coho Energy, Inc. (a) 94,480 1,004
Cross Timbers Oil Co. 61,500 1,184
Dailey Petroleum Services Corp. (a) 2,000 13
Energen Corp. 1,900 64
ENSCO International, Inc. (a) 26,950 1,422
Evergreen Resources, Inc. (a) 18,000 185
Giant Industries, Inc. 69,000 1,091
Global Industries, Inc. 25,500 593
Global Marine, Inc. (a) 34,100 793
Helmerich & Payne, Inc. 29,100 1,677
Hugoton Energy Corp. (a) 10,000 139
Laclede Gas Co. 1,200 26
Lomak Petroleum, Inc. 48,100 857
LTV Corp. 51,700 737
Marine Drilling Co, Inc. (a) 99,800 1,946
MidAmerican Energy Holdings Co. 12,600 218
Mitchell Energy & Development Corp. 2,200 48
Newpark Resources, Inc. New (a) 16,600 560
Noble Drilling Corp. (a) 38,500 869
NUI Corp. 1,300 29
Oryx Energy Co. (a) 20,000 423
Parallel Petroleum Corp. (a) 21,600 105
Parker & Parsley Petroleum Co. 33,000 1,167
Pennzoil Co. 8,800 675
Pool Energy Services Co. (a) 54,800 993
Quaker State Oil Refining Corp. 9,900 151
Questar Corp. 10,800 436
Reading & Bates Corp. (a) 20,000 535
Rowan Cos., Inc. (a) 69,100 1,948
Santa Fe Energy Resources, Inc. (a) 9,700 142
Santa Fe International Corp. (a) 22,000 748
Smith International, Inc. (a) 8,900 541
Snyder Oil Corp. 15,800 290
TEPPCO Partners, L.P. 10,600 485
Tesoro Petroleum Corp. (a) 12,500 185
Transocean Offshore, Inc. 12,000 871
Tuboscope Vetco International Corp. (a) 7,000 139
Union Texas Petroleum Holdings, Inc. 18,100 379
UTI Energy Corp. (a) 3,000 138
Varco International, Inc. (a) 20,900 674
Vintage Petroleum, Inc. 45,500 1,399
Wiser Oil Co. 46,400 855
----------
30,528
----------
FINANCE - 20.1%
AlBank Financial Corp. 30,400 1,201
Allied Group, Inc. 3,900 148
Allmerica Financial Corp. 6,000 239
American Bankers Insurance Group, Inc. 36,500 2,304
American Eagle Group, Inc. 18,300 9
AMRESCO, Inc. (a) 55,800 1,200
AmSouth Bancorp 9,100 344
AmVestors Financial Corp. 3,400 64
ARM Financial Group, Inc. Class A (a) 2,900 58
Astoria Financial Corp. 30,500 1,445
Bank United Corp. Class A 7,000 266
Bankatlantic Bancorp, Inc. Class A 83,593 1,170
Bay View Capital Corp. 3,600 95
Bear Stearns Cos., Inc. 71,298 2,438
Berkley (W.R.) Corp. 27,100 1,575
Capital RE Corp. 2,500 134
Capstead Mortgage Corp. (a) 17,800 439
Capsure Holdings Corp. 6,500 84
Special Growth Fund 19
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CCB Financial Corp. 1,000 $ 73
Centris Group, Inc. 67,100 1,417
CFI ProServices, Inc. (a) 8,000 144
Charter One Financial, Inc. 25,345 1,365
CitiFed Bancorp, Inc. 6,000 230
City National Corp. 34,500 830
Cityscape Financial Corp. 25,300 501
CMAC Investment Corp. 600 29
CNB Bancshares, Inc. 1,135 46
Colonial BancGroup, Inc. 64,800 1,571
Comerica, Inc. 7,200 490
Commerce Bancorp, Inc. 1,155 45
Commerce Bancshares, Inc. 2,500 113
Community First Bankshares, Inc. 31,300 1,193
Compass Bancshares, Inc. 6,750 226
Conseco, Inc. 28,700 1,062
CorVel Corp. (a) 5,000 144
Countrywide Credit Industries, Inc. 18,000 561
Cullen Frost Bankers, Inc. 4,000 169
Delphi Financial Group, Inc. 31,150 1,199
Delta Financial Corp. (a) 7,500 143
Deposit Guaranty Corp. 4,300 135
Dime Community Bancorp, Inc. 32,200 644
Donaldson, Lufkin & Jenrette, Inc. 25,500 1,524
Downey Financial Corp. 6,390 151
Enhance Financial Services Group, Inc. 2,500 110
Envoy Corp. New (a) 40,600 1,350
Everest Re Holdings, Inc. 24,600 975
Executive Risk, Inc. 24,000 1,248
EXEL, Ltd. 21,000 1,108
F&M National Corp. 1,900 49
Fidelity National Financial 4,730 80
Financial Fed Corp. (a) 7,000 154
Financial Security Assurance Holdings, Ltd. 5,300 206
First American Corp. 23,800 913
First American Financial Corp. 2,300 90
First Commerce Corp. 20,300 891
First Commercial Corp. 1,200 49
First Empire State Corp. 500 169
First Federal Savings Bank of Colorado, Inc. 4,300 82
First Financial Caribbean Corp. 4,000 126
First Hawaiian Creditcorp, Inc. 2,500 85
First Midwest Bancorp, Inc. 1,400 44
First Mortgage Corp. (a) 23,200 81
First Republic Bancorp, Inc. (a) 11,000 256
First Savings Bank of Washington Bancorp, Inc. 2,100 46
First Security Corp. 15,150 414
First Virginia Banks, Inc. 4,700 283
FirstFed Financial Corp. (a) 1,200 37
FIRSTPLUS Financial Group, Inc. 34,800 1,183
Flushing Financial Corp. 6,300 139
Fremont General Corp. 90,575 3,646
Great Financial Corp. 3,000 105
Greenpoint Financial Corp. 8,600 572
Guarantee Life Companies, Inc. 1,600 40
Guaranty National Corp. 2,900 70
HCC Insurance Holdings, Inc. 25,400 678
Hibernia Corp. 22,500 314
Horace Mann Educators Corp. 9,300 456
HUBCO, Inc. 1,957 56
Imperial Bancorp 3,432 99
Imperial Credit Industries, Inc. 101,402 2,085
Interra Financial, Inc. 1,800 75
Jefferies Group, Inc. 23,000 1,311
Keystone Financial, Inc. 2,700 84
Klamath First Bancorp, Inc. 3,100 59
Legg Mason, Inc. 20,700 1,114
Lehman Brothers Holdings, Inc. 35,900 1,454
Leucadia National Corp. 37,800 1,169
Liberty Corp. 1,100 45
Liberty Financial Cos., Inc. 1,000 50
Life Bancorp, Inc. 2,800 72
Life USA Holdings, Inc. New (a) 13,500 192
Litchfield Financial Corp. 7,350 120
Long Island Bancorp, Inc. 6,900 250
MAF Bancorp, Inc. 31,811 1,332
Magna Group, Inc. 5,600 195
Markel Corp. (a) 13,000 1,664
McDonald & Co. Investments 400 18
Mercury General Corp. 2,500 182
Mid Ocean, Ltd. 23,500 1,232
ML Bancorp, Inc. 6,800 129
Money Store, Inc. 59,700 1,701
NAC Reinsurance Corp. 9,400 455
North American Mortgage Co. 6,900 163
North Fork Bancorporation, Inc. 21,600 462
Ohio Casualty Corp. 6,200 271
Old Kent Financial Corp. 5,565 300
Old National Bancorp 1,050 46
Old Republic International Corp. 23,300 706
ONBANCorp, Inc. 12,800 651
One Valley Bancorp of West Virginia, Inc. 2,500 105
Orion Capital Corp. 4,200 310
Pacific Century Financial Corp. 12,100 560
Penn Treaty American Corp. (a) 5,000 153
20 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Peoples Bank (Bridgeport, CT) 10,200 $ 264
Peoples Heritage Financial Group 46,640 1,755
Popular, Inc. 37,300 1,492
Presidential Life Corp. 2,800 54
Price (T. Rowe) & Associates, Inc. 20,900 1,079
Provident Bankshares Corp. 2,205 91
Provident Financial Group, Inc. 8,600 366
Queens County Bancorp 3,999 182
Reinsurance Group Of America 1,600 92
Reliance Bancorp, Inc. 2,500 74
Reliance Group Holdings, Inc. 35,100 417
RenaissanceRe Holdings, Ltd. 38,500 1,468
Republic Bancorp, Inc. 2,970 42
Riggs National Corp. 9,700 196
RLI Corp. 3,400 124
Robert Half International, Inc. (a) 30,200 1,421
Selective Insurance Group, Inc. 25,900 1,246
Signet Banking Corp. 16,500 594
Silicon Valley Bancshares (a) 3,800 171
Sotheby's Holdings Co., Inc. Class A 45,000 759
Southern Pacific Funding Corp. 8,000 133
SouthTrust Corp. 23,000 952
Sovereign Bancorp, Inc. 87,972 1,342
St. Francis Capital Corp. 3,000 111
St. Paul Bancorp, Inc. 5,725 190
State Auto Financial Corp. 4,900 110
Sterling Bancshares, Inc. 10,000 188
SunAmerica, Inc. 60,200 2,935
Susquehanna Bancshares, Inc. 1,300 51
T R Financial Corp. 11,200 281
TCF Financial Corp. 24,000 1,185
Trans Financial, Inc. 3,400 95
Transatlantic Holdings, Inc. 25,900 2,570
Trenwick Group, Inc. 36,750 1,378
Trustmark Corp. 1,600 45
Union Planters Corp. 32,475 1,685
United Fire & Casualty Co. 24,450 917
Unitrin, Inc. 4,000 244
USF&G Corp. 36,800 883
UST Corp. 1,600 36
Valley National Bancorp 2,415 65
Vesta Insurance Group, Inc. 24,500 1,060
Washington Federal, Inc. 9,290 238
Washington Mutual, Inc. 25,300 1,512
Webster Financial Corp. 22,500 1,018
Westamerica Bancorporation 16,700 1,257
Western National Corp. 4,900 131
WFS Financial, Inc. 8,800 141
Whitney Holding Corp. 1,000 42
----------
94,819
----------
GENERAL BUSINESS - 9.3%
AccuStaff, Inc. (a) 112,300 2,660
Advo Systems, Inc. (a) 3,000 49
American Business Information, Inc. (a) 7,000 149
American Greetings Corp. Class A 66,500 2,461
American Residential Services, Inc. (a) 5,000 116
Assisted Living Concepts, Inc. (a) 4,000 111
Banta Corp. 30,800 835
BHC Communications, Inc. Class A 1,000 120
BISYS Group, Inc. New (a) 30,000 1,258
Bowne & Co., Inc. 8,700 303
Cablevision Systems Corp. Class A (a) 4,000 220
CACI International, Inc. Class A (a) 9,000 137
Caribiner International, Inc. 24,000 783
Celeritek, Inc. (a) 10,000 120
Central Newspapers, Inc. Class A 31,400 2,249
Children's Comprehensive Services, Inc. New (a) 6,400 86
Cognos, Inc. (a) 54,100 1,684
Coinmach Laundry Corp. (a) 8,000 190
Comarco, Inc. (a) 5,000 94
DeVRY, Inc. 32,500 878
Ennis Business Forms, Inc. 60,375 581
G & K Services, Inc. Class A 9,000 331
General Communication, Inc. Class A (a) 16,000 128
Gibson Greetings, Inc. (a) 3,700 83
Grey Advertising 4,400 1,412
Hooper Holmes, Inc. 6,000 138
Houghton Mifflin Co. 16,000 1,068
Iron Mountain, Inc. (a) 5,000 146
Jones Intercable, Inc. Class A (a) 65,000 813
Knight-Ridder, Inc. 23,800 1,168
Kronos, Inc. (a) 5,200 137
Lee Enterprises, Inc. 44,500 1,174
Mail Boxes Etc (a) 5,000 139
McClatchy Newspapers, Inc. Class A 38,775 1,139
McGraw-Hill, Inc. 20,500 1,206
META Group, Inc. (a) 24,000 510
Metzler Group, Inc. (a) 31,500 1,008
MicroAge, Inc. (a) 67,400 1,238
National Data Corp. 30,000 1,299
New England Business Service, Inc. 2,100 55
Outdoor Systems, Inc. 11,350 431
Party City Corp. (a) 8,000 129
Paychex, Inc. 27,000 1,036
Pegasus Communications Corp. Class A (a) 10,000 105
Personnel Group of America, Inc. (a) 8,200 236
Pinkerton's, Inc. New (a) 1,000 31
Protection One, Inc. (a) 12,000 162
Quintiles Transnational Corp. (a) 17,500 1,216
RCM Technologies, Inc. (a) 300 3
Special Growth Fund 21
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Registry, Inc. (The)(a) 6,800 $ 313
Richey Electronics, Inc. (a) 12,000 95
Saga Communications Class A 6,640 123
SCP Pool Corp. (a) 6,000 125
SFX Broadcasting, Inc. Class A (a) 4,000 168
Sovran Self Storage, Inc. 27,500 804
Standard Register Co. 3,100 95
Steris Corp. (a) 25,000 928
Stone & Webster, Inc. 2,500 107
Systems & Computer Technology Corp. (a) 3,600 95
Tranzonic Companies (The) Class A 26,400 554
TRM Copy Centers Corp. (a) 11,000 116
True North Communications, Inc. 4,300 106
Unisource Worldwide, Inc. 18,400 294
United Television, Inc. 9,000 871
United Wisconsin Services, Inc. 2,100 71
Universal Outdoor Holdings, Inc. (a) 30,600 1,067
Valassis Communications, Inc. (a) 44,100 1,058
Viad Corp. 16,400 316
Viking Office Products, Inc. (a) 20,000 378
Wackenhut Corp. 6,000 144
Wackenhut Corrections Corp. (a) 32,500 946
Washington Post Co. Class B 4,500 1,791
Young Broadcasting Corp. Class A (a) 29,000 942
Zilog, Inc. (a) 43,400 824
----------
43,956
----------
MISCELLANEOUS - 3.0%
Apollo Group, Inc. Class A (a) 21,700 765
Applied Extrusion Technologies, Inc. (a) 12,000 141
Arden Realty Group, Inc. 30,000 780
Castle & Cook, Inc. New (a) 6,000 99
Citation Corp. (a) 12,100 207
Consolidated Graphics, Inc. 52,800 2,204
Cornell Corrections, Inc. (a) 9,000 149
Cuno, Inc. (a) 7,000 114
CWM Mortgage Holdings, Inc. (a) 11,400 273
FRP Properties, Inc. (a) 4,000 106
Geon Co. 7,400 150
Griffon Corp. (a) 90,600 1,240
Ha-Lo Industries, Inc. 6,000 140
Hirsch International Group Class A 6,250 137
Insignia Financial Group, Inc. Class A (a) 31,000 562
Jabil Circuit, Inc. (a) 18,600 1,551
Landair Services, Inc. (a) 10,000 143
Learning Tree International, Inc. 16,300 723
Leather Factory, Inc. (a) 60,000 34
Mark VII, Inc. (a) 4,000 128
McWhorter Technologies, Inc. (a) 1,800 43
NN Ball & Roller, Inc. 9,300 113
On Assignment, Inc. (a) 22,000 852
PXRE Corp. 43,559 1,339
Racing Champions Corp. (a) 17,600 268
Romac International, Inc. (a) 11,000 360
Spieker Properties, Inc. 23,000 809
Supreme Industries, Inc. Class A 16,800 145
Tracor, Inc. New (a) 6,700 167
Waste Industries, Inc. (a) 14,700 257
Webb (Del E.) Corp. 5,500 89
Youth Services International, Inc. (a) 8,000 97
----------
14,185
----------
SHELTER - 2.8%
Cameron Ashley, Inc. (a) 10,000 139
Centex Construction Products, Inc. 6,300 123
Centex Corp. 39,500 1,605
Crossmann Communities, Inc. (a) 6,000 122
Dayton Superior Corp. Class A (a) 16,900 215
Deltic Timber Corp. 3,000 88
Elcor Chemical Corp. 100 3
Johns Manville Corp. 28,700 339
Lennar Corp. 42,500 1,357
Lone Star Industries, Inc. 5,100 231
NVR, Inc. (a) 3,500 53
Pacific Greystone Corp. (a) 8,800 141
Plum Creek Timber Co. L.P. 33,000 1,060
PLY-GEM Industries, Inc. 4,500 82
Pulte Corp. 7,800 270
Ryland Group, Inc. 6,400 90
Smith (Charles E.) Residential Realty, Inc. 39,500 1,141
Southdown, Inc. 46,700 2,037
St. Joe Corp. 15,100 1,265
Standard Pacific Corp. 13,600 139
Toll Brothers, Inc. (a) 55,000 1,011
U.S. Home Corp. (a) 5,100 135
USG Corp. (a) 28,100 1,026
Vulcan Materials Co. 6,600 518
----------
13,190
----------
TECHNOLOGY - 15.9%
ACX Technologies, Inc. (a) 10,500 236
ADC Telecommunications, Inc. 43,900 1,465
Amplicon, Inc. 5,000 114
Applied Magnetics Corp. (a) 22,000 498
Aspen Technology, Inc. 27,500 1,033
Avid Technology, Inc. (a) 8,400 222
Avnet, Inc. 14,000 805
22 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Banctec, Inc. (a) 41,000 $ 1,063
BDM International, Inc. 52,000 1,183
Bell Industries 64,309 1,005
Berg Electronics Corp. (a) 24,400 877
Boole & Babbage, Inc. 6,000 125
Brightpoint, Inc. 28,000 912
Burr-Brown Corp. 21,700 746
Cambridge Technology Partners, Inc. (a) 30,000 945
CBT Group PLC - ADR (a) 36,500 2,281
CDW Computer Centers, Inc. 12,400 657
Channell Commercial Corp. (a) 10,000 133
Ciber, Inc. (a) 11,300 386
Complete Business Solutions, Inc. (a) 5,000 120
Compuware Corp. 71,400 3,409
Comverse Technology, Inc. New (a) 35,300 1,840
Curtiss-Wright Corp. 2,000 117
Cypress Semiconductor Corp. (a) 16,000 232
Cyrix Corp. (a) 42,600 911
Dallas Semiconductor Corp. 32,900 1,291
Data Processing Corp. (a) 6,000 138
Data Transmission Network Corp. 6,000 188
Davox Corp. 33,950 1,212
DH Technology, Inc. (a) 7,000 112
Digital Lightwave, Inc. (a) 20,000 170
Discreet Logic, Inc. (a) 6,900 113
Dr. Solomon's Group PLC - ADR (a) 50,000 1,269
DSP Group, Inc. (a) 7,000 104
DST Systems, Inc. (a) 30,000 999
Electromagnetic Sciences, Inc. (a) 5,000 86
Electronic Arts (a) 43,300 1,456
Electronics For Imaging, Inc. 20,000 944
Encad, Inc. (a) 25,300 1,050
Esterline Corp. (a) 5,900 208
Evans & Sutherland Computer Corp. (a) 2,400 66
Exar Corp. (a) 8,000 172
Fairchild Corp. (The) Class A (a) 1,100 20
Furon Co. 1,800 56
Fusion Systems Corp. (a) 3,600 142
Gateway 2000, Inc. 31,600 1,025
Harbinger Corp. 40,900 1,145
HNC Software, Inc. (a) 23,300 885
Hyperion Software Corp. (a) 105,100 2,338
InaCom Corp. (a) 24,600 760
Input/Output, Inc. (a) 3,000 54
Integrated Circuit Systems, Inc. (a) 6,000 135
Jack Henry & Assocociates, Inc. 53,000 1,285
Kaman Corp. Class A 12,000 180
KLA Instruments Corp. (a) 14,500 707
Kulicke & Soffa Industries, Inc. (a) 39,500 1,276
Landauer, Inc. 4,300 100
Littlefuse, Inc. 40,000 1,110
Litton Industries, Inc. (a) 31,600 1,527
Lo-Jack Corp. (a) 10,000 144
Marshall Industries (a) 4,000 149
MasTec, Inc. 30,100 1,424
McAfee Associates, Inc. 32,900 2,073
Melita International Corp. (a) 17,000 210
Molex, Inc. Class A 33,750 1,171
Oak Technology, Inc. (a) 34,900 340
Par Technology Corp. (a) 16,000 144
Photronics, Inc. (a) 3,000 142
Pittway Corp. Class A 24,467 1,217
Platinum Technology, Inc. (a) 44,400 588
PMC - Sierra, Inc. (a) 4,100 107
Premenos Technology Corp. (a) 11,600 99
Progress Software Corp. (a) 7,200 115
Quantum Corp. 53,900 1,095
Rogue Wave Software (a) 16,800 210
Rohr, Inc. (a) 19,600 430
Sandisk Corp. (a) 10,000 146
Saville Systems Ireland PLC - ADR (a) 27,500 1,430
Security Dynamics Technologies, Inc. 15,300 562
Simulation Sciences, Inc. (a) 6,400 95
SMART Modular Technologies, Inc. (a) 30,200 1,019
Software Spectrum, Inc. (a) 4,000 51
Storage Technology Corp. (a) 24,700 1,099
Stratus Computer, Inc. (a) 32,500 1,625
Structural Dynamics Research Corp. (a) 85,400 2,242
Sykes Enterprises, Inc. 29,800 767
Symantec Corp. (a) 49,600 967
Tandem Computers, Inc. (a) 16,300 330
TB Wood's Corporation 8,000 117
Tech-Sym Corp. (a) 31,500 1,051
Tellabs, Inc. 28,000 1,561
Teradyne, Inc. (a) 20,782 816
Thiokol Corp. 24,600 1,722
Thomas & Betts Corp. 5,000 263
Transaction Systems Architects, Inc. Class A 20,000 685
Unitrode Corp. (a) 20,400 1,028
USCS International, Inc. (a) 4,300 141
Veritas Software Corp. 30,294 1,515
Viasoft, Inc. 11,400 578
VideoServer, Inc. (a) 48,900 636
Voice Control Systems, Inc. (a) 15,000 71
Wall Data, Inc. (a) 5,600 148
Watkins-Johnson Co. 8,500 261
Western Digital Corp. 33,800 1,069
----------
75,291
----------
Special Growth Fund 23
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
TRANSPORTATION - 3.3%
Airborne Freight Corp. 17,300 $ 724
AirNet Systems, Inc. (a) 9,000 147
Alexander & Baldwin, Inc. 3,500 91
America West Holding Corp. Class B (a) 21,300 309
Caliber Systems, Inc. 30,200 1,125
Circle International Group, Inc. 2,200 58
CNF Transportation, Inc. 15,400 497
Consolidated Freightways Corp. (a) 27,500 450
GATX Corp. 7,000 404
Genesee & Wyoming, Inc. Class A (a) 16,800 441
Hvide Marine, Inc. Class A (a) 6,000 132
Kansas City Southern Industries, Inc. 3,200 206
Kirby Corp. (a) 4,400 80
Knight Transportation, Inc. (a) 6,000 147
MTL, Inc. (a) 47,000 1,093
Navistar International Corp. (a) 20,900 361
Offshore Logistics, Inc. (a) 38,000 717
Overseas Shipholding Group, Inc. 2,800 55
Pittston Burlington Group 2,000 56
Roadway Express, Inc. 12,000 275
Rural/Metro Corp. (a) 39,000 1,131
Seacor Holdings, Inc. (a) 31,200 1,632
Transport Corp. of America (a) 12,000 158
Trico Marine Services, Inc. 70,700 1,542
Trinity Industries, Inc. 31,900 1,013
Wisconsin Central Transportation Corp. (a) 32,000 1,190
Yellow Corp. (a) 79,000 1,758
----------
15,792
----------
UTILITIES - 3.3%
Advanced Fibre Communications (a) 12,500 755
Aliant Communications, Inc. 5,100 99
American Water Works, Inc. 7,400 158
Aquarion Co. 1,000 27
Bay State Gas Co. 1,100 29
Black Hills Corp. 1,000 29
Boston Edison Co. 11,500 303
CellStar Corp. 54,300 1,663
Cellular Communications of Puerto Rico, Inc. (a) 34,966 594
Centennial Cellular Corp. Class A (a) 76,500 1,186
Central Hudson Gas & Electric Corp. 4,600 158
Central Louisiana Electric Co., Inc. 600 17
Century Telephone Enterprises, Inc. 10,700 360
CILCORP, Inc. 2,400 99
Commonwealth Energy System 2,000 48
CTG Resources, Inc. 600 13
Delmarva Power & Light Co. 9,500 181
E'town Corp. 1,000 31
Eastern Enterprises, Inc. 4,700 163
Empire District Electric Co. 1,300 23
Enova Corp. 11,900 286
Hawaiian Electric Industries, Inc. 6,700 259
Idaho Power Co. 7,200 226
LG&E Energy Corp. 4,100 90
MDU Resources Group, Inc. 1,000 24
Montana Power Co. 19,400 450
National Fuel & Gas Co. 8,000 336
Nevada Power Co. 16,500 351
New England Electric System 5,600 207
New Jersey Resources Corp. 2,300 72
New York State Electric & Gas Corp. 19,600 409
Niagara Mohawk Power Corp. (a) 45,800 392
NIPSCO Industries, Inc. 16,300 673
Northwest Natural Gas Co. 1,800 47
ONEOK, Inc. 8,300 267
Orange & Rockland Utilities, Inc. 1,700 57
Pennsylvania Enterprises, Inc. 1,700 43
Peoples Energy Corp. 6,700 251
Piedmont Natural Gas Co., Inc. 4,100 105
Pinnacle West Capital Corp. 21,000 631
Public Service Co. of New Mexico 17,300 309
Public Service Co. of North Carolina, Inc. 1,700 33
Puget Sound Power & Light Co. 13,600 361
Rochester Gas & Electric Corp. 13,200 278
Sierra Pacific Resources 9,300 298
SIG Corp., Inc. 2,300 58
Tel-Save Holdings, Inc. 69,700 1,054
TNP Enterprises, Inc. 9,100 211
United Illuminating Co. 3,200 99
United States Cellular Corp. (a) 31,600 936
United Water Resources, Inc. 4,200 82
UtiliCorp United, Inc. 11,900 347
Washington Gas & Light Co. 7,700 194
Washington Water Power Co. 7,900 155
Western Resources, Inc. 6,000 195
WICOR, Inc. 2,900 113
----------
15,835
----------
TOTAL COMMON STOCKS
(cost $347,175) 440,915
----------
24 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CONVERTIBLE PREFERRED STOCKS - 0.2%
Callon Petroleum Co. Series A 2,500 $ 92
Finova Finance Trust 13,000 748
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $737) 840
----------
PRINCIPAL
AMOUNT
(000)
----------
LONG-TERM INVESTMENTS - 0.0%
Central Garden & Pet Co. (conv.)
6.000% due 11/15/03 $ 100 106
Titan Corp. (conv.)
8.250% due 11/01/03 100 137
----------
TOTAL LONG-TERM INVESTMENTS
(cost $224) 243
----------
SHORT-TERM INVESTMENTS - 6.6%
Frank Russell Investment Company
Money Market Fund due on demand (b) 30,004 30,004
United States Treasury Notes
5.75% due 10/31/97 (c) 1,400 1,401
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $31,405) 31,405
----------
TOTAL INVESTMENTS
(identified cost $379,541)(d) - 100.1% 473,403
OTHER ASSETS AND LIABILITIES,
NET - (0.1%) (675)
----------
NET ASSETS - 100.0% $ 472,728
----------
----------
(a) Non income-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with
futures contracts purchased by the Fund.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
PLC - Public Limited Company
The accompanying notes are an integral part of the financial statements.
Special Growth Fund 25
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 500 Index Futures Contracts
expiration date 09/97 14 $ 231
S&P 400 Midcap Index Futures Contracts
expiration date 09/97 167 210
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 441
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at
$1,401 were held as collateral by the custodian in
connection with futures contracts purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
26 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $379,541)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 473,403
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,622
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,332
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,589
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481,349
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,400
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,542
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 414
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 151
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,621
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 472,728
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 355
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,727
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,862
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363,238
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 472,728
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
Class S ($470,800,078 divided by 10,496,780 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44.85
----------------
----------------
Class C ($1,927,635 divided by 43,123 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44.70
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Special Growth Fund 27
<PAGE>
SPECIAL GROWTH FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amount in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,055
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 843
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,966
EXPENSES (Notes 1, 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,948
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Registration fees
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Distribution fees - Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Shareholder servicing fees - Class C . . . . . . . . . . . . . . . . . . . . . . . 1
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,397
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,480
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,542
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 16,034
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,678
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 35,135
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,169
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 51,738
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 569 $ 988
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,034 44,803
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 35,135 14,118
------------------- -------------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 51,738 59,909
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (446) (1,043)
Net realized gain on investments
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,256) (45,015)
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20) (87)
------------------- -------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . . (8,722) (46,145)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . . 35,754 66,516
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 78,770 80,280
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393,958 313,678
------------------- -------------------
End of period (including undistributed net investment income of
$355 and $231, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 472,728 $ 393,958
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Special Growth Fund 29
<PAGE>
SPECIAL GROWTH FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $ 40.79 $ 39.17 $ 33.47 $ 35.82 $ 36.63 $ 34.47
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . .05 .12 .18 .16 .07 .05
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 4.89 6.87 9.25 (.71) 5.22 4.22
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations. . . . 4.94 6.99 9.43 (.55) 5.29 4.27
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . (.05) (.12) (.21) (.10) (.07) (.06)
Net realized gain on investments . . . . . . . . (.83) (5.25) (3.52) (.85) (6.03) (2.05)
In excess of net realized gain on investments. . -- -- -- (.85) -- --
-------- -------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . (.88) (5.37) (3.73) (1.80) (6.10) (2.11)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $ 44.85 $ 40.79 $ 39.17 $ 33.47 $ 35.82 $ 36.63
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . 12.30 18.65 28.52 (3.71) 15.48 12.52
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . 470,800 393,048 313,678 229,077 188,891 134,913
Ratios to average net assets (%)(b):
Operating expenses . . . . . . . . . . . . . . 1.17 1.19 1.22 1.20 1.31 1.33
Net investment income. . . . . . . . . . . . . .28 .28 .49 .50 .19 .14
Portfolio turnover rate (%)(b) . . . . . . . . . 91.72 118.13 87.56 55.40 91.97 42.20
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . .0413 .0384 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
30 Special Growth Fund
<PAGE>
SPECIAL GROWTH FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996**
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 40.75 $ 43.48
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . (.05) (.02)
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . 4.83 1.63
---------- ----------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . 4.78 1.61
---------- ----------
LESS DISTRIBUTIONS:
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (.83) (4.34)
---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44.70 $ 40.75
---------- ----------
---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.92 4.04(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . 1,928 910
Ratios to average net assets (%)(c):
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.85 1.89
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . (.41) (.38)
Portfolio turnover rate (%)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 91.72 118.13
Average commission rate paid per share
of security ($ omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0413 .0384
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31, 1996.
(a) Periods less than one year are not annualized.
(b) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(c) The ratios for the periods ended June 30, 1997 and December 31, 1996 are
annualized.
Special Growth Fund 31
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 96.3%
BASIC INDUSTRIES - 7.1%
Alcan Aluminum, Ltd. 2,100 $ 73
Alumax, Inc. (a) 31,400 1,191
Bowater, Inc. 13,700 634
Crown Cork & Seal Co., Inc. 17,800 951
Crown Vantage, Inc. (a) 9,040 66
Cyprus Amax Minerals Co. 20,900 512
Dow Chemical Co. 2,000 174
Eastman Chemical Co. 30,700 1,949
FMC Corp. (a) 23,500 1,867
Great Lakes Chemical Corp. 14,800 775
James River Corp. of Virginia 37,900 1,402
Mead Corp. 22,600 1,407
Phelps Dodge Corp. 4,000 341
Potlatch Corp. 10,200 462
Premark International, Inc. 7,400 198
Reynolds Metals Co. 16,800 1,197
Sonoco Products Co. 12,300 374
Temple-Inland, Inc. 11,900 643
USX-U.S. Steel Group 18,500 649
Westvaco Corp. 16,600 521
----------
15,386
----------
CAPITAL GOODS - 5.2%
Briggs & Stratton Corp. 11,200 560
Browning-Ferris Industries, Inc. 19,200 638
Caterpillar, Inc. 21,300 2,287
Deere & Co. 9,200 505
Foster Wheeler Corp. 28,800 1,166
General Electric Co. 26,800 1,752
Harnischfeger Industries, Inc. 18,100 751
Harsco Corp. 6,000 243
Hitachi, Ltd. - ADR 6,700 757
Johnson Controls, Inc. 28,800 1,183
Matsushita Electric Industrial Co., Ltd. - ADR 3,100 634
Silicon Valley Group, Inc. (a) 7,000 184
Tecumseh Products Co. Class A 9,600 575
----------
11,235
----------
CONSUMER BASICS - 9.4%
American Stores Co. 9,500 469
Archer-Daniels-Midland Co. 83,707 1,967
Baxter International, Inc. 23,700 1,238
Beverly Enterprises, Inc. (a) 34,900 567
Black & Decker Corp. 16,200 602
Bristol-Myers Squibb Co. 30,750 2,491
Columbia/HCA Healthcare Corp. 32,950 1,295
Foundation Health Systems, Inc. (a) 18,190 551
IBP, Inc. 58,000 1,349
McKesson Corp. 14,100 1,093
PepsiCo, Inc. 37,800 1,420
Philip Morris Cos., Inc. 17,900 794
RJR Nabisco Holdings Corp. 66,540 2,196
Sara Lee Corp. 24,100 1,003
Schering-Plough Corp. 30,800 1,475
Tenet Healthcare Corp. (a) 27,200 804
UST Corp. 11,600 322
Warner-Lambert Co. 5,000 622
----------
20,258
----------
CONSUMER DURABLES - 3.9%
Chrysler Corp. 69,000 2,264
Ford Motor Co. 97,000 3,662
General Motors Corp. 8,700 484
Whirlpool Corp. 36,400 1,986
----------
8,396
----------
CONSUMER NON-DURABLES - 4.0%
Burlington Industries, Inc. (a) 37,100 445
Dayton Hudson Corp. 58,800 3,127
Eastman Kodak Co. 10,800 829
Fruit of the Loom, Inc. Class A (a) 11,100 344
JC Penney & Co., Inc. 19,200 1,002
Kmart Corp. (a) 38,200 468
Sears Roebuck & Co. 15,500 833
Wal-Mart Stores, Inc. 42,500 1,438
----------
8,486
----------
CONSUMER SERVICES - 3.3%
AMR Corp. (a) 23,700 2,192
Brinker International, Inc. (a) 27,700 395
Carnival Corp. Class A 31,200 1,287
Delta Air Lines, Inc. 3,100 254
Disney (Walt) Co. 7,400 594
Harrah's Entertainment, Inc. (a) 20,500 374
King World Productions, Inc. 15,200 532
UAL Corp. (a) 20,200 1,446
----------
7,074
----------
ENERGY - 11.3%
Amerada Hess Corp. NPV 37,000 2,056
Amoco Corp. 13,075 1,137
Apache Corp. 7,800 254
Ashland, Inc. 4,200 195
Atlantic Richfield Co. 48,600 3,426
32 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
British Petroleum Co. PLC - ADR 17,688 $ 1,324
Elf Aquitaine - ADR 8,200 446
Exxon Corp. 48,700 2,995
Kerr-McGee Corp. 20,000 1,268
Louisiana Land & Exploration Co. 4,900 280
LTV Corp. 23,400 333
Mapco, Inc. 23,100 728
Mobil Corp. 14,600 1,020
Murphy Oil Corp. 28,900 1,409
Occidental Petroleum Corp. 70,800 1,774
Oryx Energy Co. (a) 12,000 254
Phillips Petroleum Co. 38,400 1,680
Santa Fe Energy Resources, Inc. (a) 37,500 551
Texaco, Inc. 12,500 1,359
Unocal Corp. 16,100 625
USX-Marathon Group 29,500 852
Valero Energy Corp. 8,000 289
----------
24,255
----------
FINANCE - 23.7%
Aetna, Inc. 23,900 2,447
Ahmanson (H.F.) & Co. 32,400 1,393
Allstate Corp. 61,820 4,513
AMBAC, Inc. 9,900 756
American General Corp. 10,200 487
Banc One Corp. 35,910 1,739
BankAmerica Corp. 45,800 2,957
BankBoston Corp. 33,400 2,407
Barnett Banks, Inc. 10,800 567
Beneficial Corp. 19,800 1,407
Chase Manhattan Corp. 46,168 4,481
Chubb Corp. (The) 34,100 2,280
Citicorp 1,800 217
Everest Re Holdings, Inc. 11,700 464
Federal National Mortgage Association 41,600 1,815
First Chicago NBD Corp. 21,942 1,327
First Union Corp. 27,300 2,525
Fleet Financial Group, Inc. 15,000 949
Hartford Life, Inc. Class A (a) 2,400 90
Horace Mann Educators Corp. 8,100 397
Jefferson-Pilot Corp. 5,900 412
John Alden Financial Corp. 9,800 205
Loews Corp. 4,800 481
Mid Ocean, Ltd. 9,800 514
Morgan (J.P.) & Co., Inc. 5,000 522
Morgan Stanley, Dean Witter Discover and Co. 75,800 3,264
NationsBank Corp. 19,000 1,226
Old Republic International Corp. 12,900 391
PMI Group, Inc. (The) 11,900 742
PNC Bank Corp. 41,800 1,740
Provident Companies, Inc. 13,000 696
Reliance Group Holdings, Inc. 32,800 390
Salomon, Inc. 24,500 1,363
SouthTrust Corp. 31,200 1,291
St. Paul Cos., Inc. 22,900 1,746
Student Loan Marketing Association 3,200 406
TIG Holdings, Inc. 24,300 759
Transamerica Financial Corp. 8,500 795
Wachovia Corp. 15,500 904
----------
51,065
----------
GENERAL BUSINESS - 2.6%
American Greetings Corp. Class A 15,300 566
Reader's Digest Association, Inc. Class A 8,200 235
SBC Communications, Inc. 47,579 2,944
Tribune Co. 27,000 1,298
Viacom, Inc. Class B (a) 18,100 543
----------
5,586
----------
MISCELLANEOUS - 1.3%
Chelsea GCA Realty, Inc. 6,200 236
Colonial Properties Trust 15,100 444
Geon Co. 14,900 302
Health & Rehabilitation Properties Trust 7,200 135
Oasis Residential, Inc. 13,300 313
Prentiss Properties Trust 10,100 259
Public Storage, Inc. 25,400 743
United Dominion Realty Trust, Inc. 28,500 403
----------
2,835
----------
SHELTER - 0.3%
Evans Withycombe Residential, Inc. 11,600 241
Lafarge Corp. 16,200 397
----------
638
----------
TECHNOLOGY - 8.1%
Amdahl Corp. (a) 30,500 267
Boeing Co. 13,600 722
COMPAQ Computer Corp. (a) 14,000 1,390
Data General Corp. (a) 18,300 476
Hewlett-Packard Co. 19,300 1,081
Intel Corp. 11,600 1,642
Equity Income Fund 33
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
International Business Machines Corp. 58,300 $ 5,258
Lexmark International Group, Inc. Class A (a) 11,200 340
Lockheed Martin Corp. 1,600 166
MEMC Electronic Materials, Inc. (a) 24,500 802
Northrop Grumman Corp. 17,900 1,572
Rockwell International Corp. 5,000 295
Seagate Technology 21,900 771
Storage Technology Corp. (a) 5,800 258
Tandy Corp. 5,600 314
Tektronix, Inc. 7,700 462
TRW, Inc. 17,100 971
VLSI Technology, Inc. (a) 29,300 689
----------
17,476
----------
TRANSPORTATION - 0.8%
Burlington Northern, Inc. 6,800 611
Ryder System, Inc. 33,200 1,096
----------
1,707
----------
UTILITIES - 15.3%
AT&T Corp. 46,900 1,644
BCE, Inc. 38,200 1,070
Bell Atlantic Corp. 15,600 1,184
BellSouth Corp. 65,600 3,042
Boston Edison Co. 13,800 364
Century Telephone Enterprises, Inc. 23,000 775
Columbia Gas System, Inc. 18,300 1,194
DTE Energy Co. 34,200 945
Edison International 91,800 2,284
Entergy Corp. 110,300 3,019
Equitable Resources, Inc. 15,400 437
GPU, Inc. 22,300 800
MCI Communications Corp. 39,966 1,529
New England Electric System 18,500 685
Niagara Mohawk Power Corp. (a) 44,800 384
NYNEX Corp. 72,900 4,201
PacifiCorp. 37,600 827
Peco Energy Co. 26,800 563
PG&E Corp. 24,400 592
Potomac Electric Power Co. 34,200 791
Public Service Enterprise Group, Inc. 22,100 553
Southern New England Telecommunications Corp. 26,900 1,046
Texas Utilities Co. 29,800 1,025
U.S. West Communications Group 65,100 2,452
WorldCom, Inc. 43,800 1,398
----------
32,807 32,804
----------
TOTAL COMMON STOCKS
(cost $169,984) 207,201
----------
CONVERTIBLE PREFERRED STOCKS - 0.2%
Atlantic Richfield Co. 17,900 385
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $444) 385
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 3.0%
Frank Russell Investment Company
Money Market Fund
due on demand (b) $ 5,615 5,615
United States Treasury Notes
5.750% due 10/31/97 (c) 1,000 1,001
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $6,616) 6,616
----------
TOTAL INVESTMENTS
(identified cost $177,044)(d) - 99.5% 214,202
OTHER ASSETS AND LIABILITIES,
NET - 0.5% 1,043
----------
NET ASSETS - 100.0% $ 215,245
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
NPV - No Par Value
PLC - Public Limited Company
The accompanying notes are an integral part of the financial statements.
34 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
S & P 500 Index Futures Contracts
expiration date 09/97 13 $ 47
S & P Barra Value Futures Contracts
expiration date 09/97 8 (36)
-----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 11
-----------
-----------
(#) At June 30, 1997, United States Treasury Notes valued at $1,001 were held
as collateral by the custodian in connection with futures contracts
purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
Equity Income Fund 35
<PAGE>
EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $177,044)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 214,202
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,685
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,006
-----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218,919
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,629
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 772
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 146
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 59
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,674
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 215,245
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 873
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,883
Unrealized appreciation (depreciation) on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,158
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,272
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 215,245
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
Class S ($214,991,828 divided by 4,749,626 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45.27
----------------
----------------
Class C ($253,420 divided by 5,594 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45.30
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,480
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,712
EXPENSES (Notes 1, 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 796
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Registration fees
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Distribution fees - Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholder servicing fees - Class C . . . . . . . . . . . . . . . . . . . . . . . 1
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,035
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,677
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,212
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,253 21,465
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,340
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 9,369
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,834
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 32,511
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Equity Income Fund 37
<PAGE>
EQUITY INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,677 $ 3,812
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,465 25,079
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 9,369 8,001
------------------- -------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . 32,511 36,892
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (804) (3,811)
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (1)
In excess of net investment income
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (48)
Net realized gain on investments
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,449) (23,810)
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) (12)
------------------- -------------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (8,259) (27,682)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . . (4,261) 5,928
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 19,991 15,138
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,254 180,116
------------------- -------------------
End of period (including undistributed net investment income of
$873 at June 30, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 215,245 $ 195,254
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
38 Equity Income Fund
<PAGE>
EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . $ 40.22 $ 38.43 $ 32.21 $ 35.90 $ 35.32 $ 36.54
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . .35 .82 .94 .90 .83 .99
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 6.43 7.03 10.08 (.70) 3.69 3.08
---------- ---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations. . . . 6.78 7.85 11.02 .20 4.52 4.07
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . (.17) (.82) (.97) (.89) (.83) (1.00)
In excess of net investment income . . . . . . . -- (.01) -- -- -- --
Net realized gain on investments . . . . . . . . (1.56) (5.23) (3.83) (3.00) (3.11) (4.29)
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . (1.73) (6.06) (4.80) (3.89) (3.94) (5.29)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . $ 45.27 $ 40.22 $ 38.43 $ 32.21 $ 35.90 $ 35.32
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . 17.32 21.45 34.76 .69 13.23 11.51
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . 214,992 195,132 180,116 144,285 149,532 134,365
Ratios to average net assets (%)(b):
Operating expenses . . . . . . . . . . . . . . 1.04 1.07 1.06 1.04 1.05 1.08
Net investment income. . . . . . . . . . . . . 1.69 2.03 2.51 2.56 2.23 2.68
Portfolio turnover rate (%)(b) . . . . . . . . . 165.88 106.40 92.40 89.91 78.72 95.07
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . .0399 .0441 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
Equity Income Fund 39
<PAGE>
EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996*
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . $ 40.22 $ 41.86
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . .19 .10
Net realized and unrealized gain (loss) on investments . . . . . . . . 6.45 2.39
---------- ----------
Total Income From Investment Operations. . . . . . . . . . . . . . . 6.64 2.49
---------- ----------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . -- (.18)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . (1.56) (3.95)
---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . . (1.56) (4.13)
---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . $ 45.30 $ 40.22
---------- ----------
---------- ----------
TOTAL RETURN (%)(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 16.89 6.23(a)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . 253 122
Ratios to average net assets (%)(c):
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . 1.77 1.77
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . .94 1.50
Portfolio turnover rate (%)(c) . . . . . . . . . . . . . . . . . . . . 165.88 106.40
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . . . . . . . . . . .0399 .0441
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(b) Periods less than one year are not annualized.
(c) The ratios for the periods ended June 30, 1997 and December 31, 1996 are
annualized.
40 Equity Income Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 96.2%
BASIC INDUSTRIES - 4.9%
Air Products & Chemicals, Inc. 4,000 $ 325
Albemarle Corp. 5,800 122
Allegheny Teldyne, Inc. 21,600 583
Aluminum Co. of America 21,300 1,606
ASARCO, Inc. 23,500 720
Bethlehem Steel Corp. (a) 43,700 456
Betz Laboratories, Inc. 7,700 508
Boise Cascade Corp. 6,100 215
Bowater, Inc. 6,100 282
Champion International Corp. 12,400 685
Chesapeake Corp. 7,300 246
Cincinnati Milacron, Inc. 3,600 93
Consolidated Papers, Inc. 4,600 248
Crompton & Knowles Corp. 5,100 114
Cyprus Amax Minerals Co. 6,100 150
Cytec Industries, Inc. 3,000 112
Diamond Offshore Drilling, Inc. (a) 5,200 406
Dow Chemical Co. 117,600 10,246
du Pont (E.I.) de Nemours & Co. 84,000 5,282
Eastman Chemical Co. 9,700 616
Fort Howard Corp. (a) 45,000 2,275
Freeport-McMoRan Copper & Gold, Inc. Class A 19,800 579
Georgia Gulf Corp. 1,900 55
Inland Steel Industries, Inc. 50,200 1,312
Kimberly-Clark Corp. 25,200 1,254
Mead Corp. 6,900 430
NL Industries, Inc. 1,200 17
Nucor Corp. 30,700 1,735
Owens-Illinois, Inc. (a) 18,700 580
Phelps Dodge Corp. 20,900 1,780
PPG Industries, Inc. 5,100 296
Praxair, Inc. 46,300 2,593
Premark International, Inc. 4,200 112
Rohm & Haas Co. 2,100 189
Sealed Air Corp. (a) 1,800 86
Sigma Aldrich Corp. 24,100 842
Temple-Inland, Inc. 7,300 394
Union Camp Corp. 5,300 265
Union Carbide Corp. 54,700 2,574
USX-U.S. Steel Group 24,100 845
Wausau Paper Mills Co. 4,000 76
Wellman, Inc. 1,900 33
Worthington Industries, Inc. 24,100 441
----------
41,778
----------
CAPITAL GOODS - 6.2%
Aeroquip-Vickers, Inc. 3,600 170
Anixter International, Inc. (a) 3,700 64
Boston Scientific Corp. (a) 62,900 3,864
Caterpillar, Inc. 88,900 9,546
Cooper Industries, Inc. 88,300 4,393
Crane Co. 6,000 251
Cummins Engine Co., Inc. 44,000 3,105
Deere & Co. 12,100 664
Dover Corp. 25,800 1,587
Emerson Electric Co. 28,500 1,569
Exide Corp. 2,700 59
Fluor Corp. 10,700 590
Foster Wheeler Corp. 5,200 211
General Electric Co. 218,600 14,291
General Signal Corp. 4,800 209
Grainger (W.W.), Inc. 6,300 493
Halter Marine Group, Inc. (a) 3,027 73
Harnischfeger Industries, Inc. 6,300 261
Harsco Corp. 5,300 215
Ingersoll-Rand Co. 42,400 2,618
ITT Industries, Inc. 15,900 409
Johnson Controls, Inc. 11,700 480
Martin Marietta Materials, Inc. 6,697 217
NACCO Industries, Inc. Class A 1,100 62
Novellus Systems, Inc. (a) 11,800 1,015
Parker-Hannifin Corp. 2,800 170
Raychem Corp. 21,400 1,592
Republic Industries, Inc. (a) 27,700 689
Tyco International, Ltd. (a) 49,900 3,471
Weatherford Enterra, Inc. (a) 7,900 304
Wheelabrator Technologies, Inc. 12,200 188
----------
52,830
----------
CONSUMER BASICS - 19.5%
Albertson's, Inc. 21,100 770
ALZA Corp. (a) 47,500 1,378
American Home Products Corp. 79,500 6,082
American Stores Co. 9,600 474
Apria Healthcare Group, Inc. (a) 13,400 238
Archer-Daniels-Midland Co. 152,299 3,579
Bausch & Lomb, Inc. 4,300 203
Beverly Enterprises, Inc. (a) 73,000 1,186
Biogen, Inc. 42,100 1,426
Black & Decker Corp. 13,900 517
Bristol-Myers Squibb Co. 94,500 7,654
Cardinal Health, Inc. 30,750 1,760
Coca-Cola Co. (The) 130,000 8,775
Columbia/HCA Healthcare Corp. 124,600 4,898
ConAgra, Inc. 54,350 3,485
42 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Corning, Inc. 64,300 $ 3,577
CPC International, Inc. 5,700 526
Dura Pharmaceuticals, Inc. 4,700 187
Fleming Cos., Inc. 28,700 517
Forest Labs, Inc. (a) 6,800 283
General Mills, Inc. 14,800 964
General Nutrition Companies, Inc. (a) 7,600 212
Gillette Co. 14,750 1,398
Health Care & Retirement Corp. (a) 23,300 778
HEALTHSOUTH Corp. 83,300 2,077
Heinz (H.J.) Co. 15,500 715
Humana, Inc. (a) 54,600 1,263
Immune Response Corp. (a) 3,400 26
Interstate Bakeries Corp. 11,000 652
Johnson & Johnson 121,500 7,822
Kellogg Co. 20,100 1,721
Lincare Holdings, Inc. (a) 4,100 176
Meditrust 17,300 690
Merck & Co., Inc. 188,770 19,538
Mine Safety Appliances Co. 600 36
Nabisco Holdings Corp. Class A 5,000 199
Omnicare, Inc. 13,300 417
PepsiCo, Inc. 259,800 9,759
Perrigo Co. (a) 11,200 140
Pfizer, Inc. 30,200 3,609
Philip Morris Cos., Inc. 247,400 10,978
PhyCor, Inc. (a) 22,400 770
Pioneer Hi-Bred International, Inc. 5,700 456
Procter & Gamble Co. 65,300 9,224
Quaker Oats Co. 96,200 4,317
Ralston-Purina Group 10,200 838
RJR Nabisco Holdings Corp. 167,200 5,518
Rubbermaid, Inc. 14,000 416
Safeway, Inc. (a) 98,185 4,529
Schering-Plough Corp. 184,400 8,828
Sybron International Corp. (a) 2,100 84
Tenet Healthcare Corp. (a) 143,200 4,233
U.S. Surgical Corp. 27,600 1,028
Unilever NV 14,800 3,226
United Healthcare Corp. 35,500 1,846
Universal Corp. 3,300 105
UST Corp. 1,700 47
Warner-Lambert Co. 47,600 5,914
Watson Pharmaceuticals, Inc. (a) 6,000 253
Wellpoint Health Networks, Inc. Class A (a) 84,051 3,856
----------
166,173
----------
CONSUMER DURABLES - 2.8%
AutoZone Inc. (a) 13,100 309
Best Buy Co. (a) 38,500 573
Chrysler Corp. 53,500 1,755
Cooper Tire & Rubber Co. 12,600 277
Dana Corp. 23,400 889
Eaton Corp. 9,800 856
Ford Motor Co. 295,600 11,159
General Motors Corp. 90,500 5,040
Goodyear Tire & Rubber Co. 15,700 994
Kimball International, Inc. Class B 9,800 392
Lear Corp. (a) 6,600 293
Modine Manufacturing Co. 11,500 342
Whirlpool Corp. 20,700 1,129
----------
24,008
----------
CONSUMER NON-DURABLES - 6.2%
Anheuser-Busch Cos., Inc. 48,300 2,026
Avon Products, Inc. 10,500 741
Bed Bath & Beyond, Inc. (a) 4,300 131
Block Drug Co., Inc. Class A 8,911 388
Blyth Industries, Inc. 15,000 506
Borders Group, Inc. 33,500 808
Brunswick Corp. 27,100 847
Cintas Corp. 800 55
Circuit City Stores, Inc. 8,500 302
CompUSA, Inc. 19,000 408
Coors (Adolph) Co. Class B 5,700 150
Dayton Hudson Corp. 171,300 9,111
Eastman Kodak Co. 17,800 1,366
Estee Lauder Companies Class A 11,100 558
Federated Department Stores, Inc. (a) 18,100 629
Fieldcrest Cannon, Inc. (a) 2,600 49
Fingerhut Cos., Inc. 14,400 251
Fruit of the Loom, Inc. Class A (a) 9,100 282
Gap, Inc. 21,200 824
Hartmarx Corp. (a) 11,300 93
Home Depot, Inc. (The) 61,500 4,240
Intimate Brands, Inc. Class A 3,000 63
JC Penney & Co., Inc. 19,900 1,039
Jones Apparel Group, Inc. 23,900 1,141
Kohl's Corp. (a) 21,400 1,133
Land's End, Inc. (a) 1,700 50
Liz Claiborne, Inc. 12,000 559
Mattel, Inc. 39,200 1,328
Newell Co. 28,300 1,121
NIKE, Inc. Class B 8,900 520
Nine West Group, Inc. (a) 3,100 118
Nordstrom, Inc. 1,400 69
Quantitative Equity Fund 43
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
PeopleSoft, Inc. 6,100 $ 322
Ross Stores, Inc. 100,000 3,263
Seagram Co., Ltd. 21,900 881
Sears Roebuck & Co. 69,400 3,730
SuperValu, Inc. 6,000 207
Tiffany & Co. 4,300 199
Toys "R" Us, Inc. (a) 24,800 868
Tultex Corp. (a) 6,300 39
V.F. Corp. 3,100 263
Wal-Mart Stores, Inc. 300,700 10,167
Woolworth Corp. (a) 57,900 1,390
----------
52,235
----------
CONSUMER SERVICES - 2.2%
AMR Corp. (a) 3,700 342
Boyd Gaming Corp. (a) 3,500 20
Circus Circus Enterprises, Inc. (a) 11,600 286
Delta Air Lines, Inc. 28,200 2,312
Disney (Walt) Co. 75,900 6,091
Extended Stay America, Inc. 9,500 141
Harrah's Entertainment, Inc. (a) 13,300 243
HFS, Inc. (a) 14,000 812
Hilton Hotels Corp. 35,600 946
International Game Technology 16,700 296
ITT Corp. (a) 15,100 922
King World Productions, Inc. 21,000 735
McDonald's Corp. 200 10
MGM Grand, Inc. (a) 4,800 178
Mirage Resorts, Inc. (a) 24,300 613
Primadonna Resorts, Inc. (a) 13,300 257
Promus Hotel Corp. (a) 32,800 1,271
Ruby Tuesday, Inc. (a) 30,800 691
Southwest Airlines Co. 9,900 256
UAL Corp. (a) 22,100 1,581
USAir Group, Inc. (a) 8,300 291
----------
18,294
----------
ENERGY - 7.8%
Amoco Corp. 15,400 1,339
Anadarko Petroleum Corp. 12,200 732
Ashland, Inc. 16,100 747
Atlantic Richfield Co. 19,800 1,396
Baker Hughes, Inc. 58,530 2,264
BJ Services Co. (a) 6,200 332
Burlington Resources, Inc. 26,200 1,156
Chevron Corp. 8,000 592
ENSCO International, Inc. (a) 25,800 1,361
Exxon Corp. 344,144 21,165
Halliburton Co. 21,900 1,736
LTV Corp. 85,800 1,223
Lyondell Petrochemical Co. 12,800 279
Mobil Corp. 113,400 7,924
Pennzoil Co. 17,700 1,358
Phillips Petroleum Co. 158,000 6,912
Pogo Producing Co. 6,800 263
Questar Corp. 2,200 89
Royal Dutch Petroleum Co. 124,400 6,764
Schlumberger, Ltd. 12,600 1,575
Tesoro Petroleum Corp. (a) 6,600 98
Texaco, Inc. 42,300 4,600
Tosco Corp. 26,700 799
Ultramar Diamond Shamrock Corp. 2,100 68
Unocal Corp. 4,600 179
USX-Marathon Group 27,600 797
Valero Energy Corp. 15,000 544
----------
66,292
----------
FINANCE - 17.1%
Advanta Corp. Class B 3,700 131
Aegon 4,380 307
Aetna, Inc. 700 72
Ahmanson (H.F.) & Co. 74,700 3,212
Alex Brown, Inc. 3,000 212
Allstate Corp. 37,579 2,743
AMBAC, Inc. 14,700 1,123
American General Corp. 39,100 1,867
American International Group, Inc. 127,300 19,015
American National Insurance Co. 1,800 157
AmSouth Bancorp 73,200 2,768
Associates First Capital Corp. Class A 2,600 144
Banc One Corp. 109,031 5,281
BankAmerica Corp. 187,600 12,112
BankBoston Corp. 7,000 504
Bankers Trust New York Corp. 6,300 548
Barnett Banks, Inc. 37,400 1,964
Bear Stearns Cos., Inc. 109,026 3,727
Beneficial Corp. 4,600 327
Central Fidelity Banks, Inc. 1,100 39
Charter One Financial, Inc. 4,000 216
Chase Manhattan Corp. 2,500 243
Chubb Corp. (The) 300 20
CIGNA Corp. 26,500 4,704
Citicorp 1,900 229
City National Corp. 8,900 214
CNA Financial Corp. (a) 7,900 833
44 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Comerica, Inc. 49,500 $ 3,366
Commerce Bancshares, Inc. 3,425 155
Conseco, Inc. 22,000 814
ContiFinancial Corp. (a) 3,800 139
CoreStates Financial Corp. 19,800 1,064
Crestar Financial Corp. 9,500 369
Dime Bancorp, Inc. 9,200 161
Edwards (A.G.), Inc. 42,000 1,796
Equifax, Inc. 4,100 152
Equitable Companies, Inc. 18,900 628
Everest Reinsurance Holdings, Inc. 5,700 226
Federal Home Loan Mortgage Corp. 52,600 1,808
Federal National Mortgage Association 137,100 5,981
FINOVA Group, Inc. 2,200 168
First America Bank Corp. 3,600 165
First Chicago NBD Corp. 39,852 2,411
First Commerce Corp. 1,400 61
First Empire State Corp. 200 67
First Union Corp. 25,100 2,322
First Virginia Banks, Inc. 2,500 151
Firstar Corp. 13,000 397
Fleet Financial Group, Inc. 140 9
General Re Corp. 1,700 309
Golden West Financial Corp. 17,500 1,225
Great Western Financial Corp. 12,200 656
Hartford Financial Services Group (The), Inc. 6,400 530
Hibernia Corp. 10,000 139
Household International Corp. 9,300 1,092
John Alden Financial Corp. 10,300 216
Kansas City Life Insurance Co. 1,300 103
KeyCorp 11,100 620
Lehman Brothers Holdings, Inc. 120,800 4,892
Lincoln National Corp. 8,600 554
Loews Corp. 3,100 310
Marsh & McLennan Cos., Inc. 62,400 4,454
MBIA, Inc. 5,800 654
Mercantile Bancorp, Inc. 6,800 413
Mercantile Bankshares Corp. 4,600 183
Money Store, Inc. 5,000 143
Morgan (J.P.) & Co., Inc. 26,800 2,797
Morgan Stanley, Dean Witter, Discover and Co. 92,550 3,985
National City Corp. 16,600 872
NationsBank Corp. 124,486 8,029
North Fork Bancorporation, Inc. 5,600 120
Northern Trust Corp. 3,100 150
Ohio Casualty Corp. 2,100 92
Old Kent Financial Corp. 4,305 232
Old Republic International Corp. 26,050 790
Pacific Century Financial Corp. 6,400 296
PaineWebber Group, Inc. 20,500 718
PMI Group, Inc. (The) 4,700 293
PNC Bank Corp. 5,005 208
Progressive Corp. 2,700 235
Providian Financial Corp. 29,200 938
Regions Financial Corp. 4,800 152
Republic New York Corp. 4,800 516
Robert Half International, Inc. (a) 14,900 701
Salomon, Inc. 9,700 540
Signet Banking Corp. 58,500 2,106
SouthTrust Corp. 42,700 1,767
St. Paul Cos., Inc. 3,200 244
Star Banc Corp. 45,000 1,901
State Street Corp. 5,200 241
SunTrust Banks, Inc. 15,900 876
TCF Financial Corp. 3,000 148
Torchmark Corp. 14,500 1,033
Transamerica Financial Corp. 9,000 842
Travelers Property Casualty Corp. Class A 12,200 487
Travelers, Inc. 158,133 9,972
Union Planters Corp. 2,500 130
UnionBanCal Corp. 1,900 137
United Carolina Bancshares, Inc. 900 46
Unitrin, Inc. 2,050 125
UNUM Corp. 5,400 227
Valley National Bancorp 1,300 35
Wachovia Corp. 19,400 1,131
Washington Federal, Inc. 4,100 105
Washington Mutual, Inc. 10,900 651
Wells Fargo & Co. 1,300 350
Wilmington Trust Corp. 1,300 59
----------
145,892
----------
GENERAL BUSINESS - 4.6%
AccuStaff, Inc. (a) 44,400 1,052
ADT, Ltd. (a) 6,200 205
Ascend Communications, Inc. (a) 14,000 549
Automatic Data Processing, Inc. 48,900 2,298
Belo (A.H.) Corp. Class A 7,100 296
BHC Communications, Inc. Class A 2,900 347
Central Newspapers, Inc. Class A 1,200 86
Cox Communications, Inc. Class A (a) 3,700 89
Deluxe Corp. 15,000 512
Donnelley (R.R.) & Sons Co. 20,500 751
Dun & Bradstreet Corp. 102,800 2,698
Ecolab, Inc. 2,700 129
First Data Corp. 53,400 2,346
Quantitative Equity Fund 45
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Fiserv, Inc. (a) 21,300 $ 950
Gannett Co., Inc. 47,000 4,641
Knight-Ridder, Inc. 33,200 1,629
Meredith Corp. 7,400 215
Metromedia International Group, Inc. (a) 12,600 160
Moore Corp., Ltd. 69,800 1,374
New York Times Co. Class A 22,100 1,094
Paging Network, Inc. (a) 11,000 97
SBC Communications, Inc. 53,745 3,325
Scripps (E.W.) Co. Class A 700 29
Service Corp. International 13,900 457
Sinclair Broadcast Group, Inc. Class A (a) 1,900 58
SPS Transaction Services, Inc. (a) 1,200 22
TCI Satellite Entertainment, Inc., Class A (a) 5,300 42
Tele-Communications, Inc. Class A 83,400 1,235
Time Warner, Inc. 146,500 7,069
Tribune Co. 30,100 1,447
Viacom, Inc. Class B (a) 79,700 2,391
Washington Post Co. Class B 4,300 1,711
----------
39,304
----------
MISCELLANEOUS - 0.4%
Security Capital Pacific Trust 38,800 888
Tenneco, Inc. (a) 9,900 447
Waste Management, Inc. 69,400 2,229
----------
3,564
----------
SHELTER - 0.7%
Centex Corp. 32,700 1,329
Johns Manville Corp. 8,400 99
Louisiana Pacific Corp. 5,400 114
Masco Corp. 35,100 1,465
Owens-Corning Fiberglas Corp. 7,900 341
Pulte Corp. 9,400 325
USG Corp. (a) 33,200 1,212
Vulcan Materials Co. 4,400 345
Weyerhaeuser Co. 18,500 962
----------
6,192
----------
TECHNOLOGY - 13.5%
ADC Telecommunications, Inc. 15,800 527
AlliedSignal, Inc. 41,700 3,503
Applied Materials, Inc. (a) 25,800 1,825
Autodesk, Inc. 4,700 180
Bay Networks, Inc. (a) 23,500 624
BMC Software, Inc. 19,100 1,058
Boeing Co. 66,500 3,529
Cabletron Systems, Inc. 18,700 529
Cadence Design Systems, Inc. (a) 15,100 506
Cisco Systems, Inc. (a) 73,400 4,927
Coltec Industries, Inc. (a) 10,300 201
COMPAQ Computer Corp. (a) 47,600 4,724
Computer Associates International, Inc. 12,900 718
Cubic Corp. 800 21
Digital Equipment Corp. (a) 43,600 1,545
Electronic Data Systems Corp. 23,700 972
EMC Corp. (a) 29,200 1,139
Gateway 2000, Inc. 16,000 519
General Dynamics Corp. 68,700 5,153
General Instrument Corp. (a) 10,000 250
General Motors Corp. Class H 28,900 1,669
Harris Corp. 11,500 966
HBO & Co. 37,400 2,576
Input/Output, Inc. (a) 2,800 51
Intel Corp. 93,400 13,222
International Business Machines Corp. 80,600 7,269
Lexmark International Group, Inc. Class A (a) 39,100 1,188
Litton Industries, Inc. (a) 10,500 507
McDonnell Douglas Corp. 43,000 2,945
MEMC Electronic Materials, Inc. (a) 1,700 56
Micro Warehouse, Inc. (a) 12,100 207
Micron Electronics, Inc. (a) 4,700 84
Microsoft Corp. (a) 94,800 11,986
Motorola, Inc. 70,400 5,350
National Semiconductor Corp. (a) 57,900 1,773
Northern Telecom, Ltd. 11,300 1,028
Northrop Grumman Corp. 9,400 825
Oracle Systems Corp. (a) 74,800 3,763
Perkin-Elmer Corp. 10,100 804
Pitney Bowes, Inc. 56,700 3,941
Quantum Corp. 41,000 833
Raytheon Co. 16,700 852
Read-Rite Corp. (a) 8,400 175
SCI Systems, Inc. (a) 22,700 1,447
Seagate Technology 20,400 718
Sensormatic Electronics Corp. 9,500 122
Silicon Graphics, Inc. (a) 13,500 203
Solectron Corp. (a) 4,200 294
Storage Technology Corp. (a) 38,600 1,718
Stratus Computer, Inc. (a) 40,100 2,005
Sun Microsystems, Inc. 123,300 4,585
Symantec Corp. (a) 72,500 1,414
Symbol Technologies, Inc. 5,300 178
46 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Tandy Corp. 800 $ 45
Teradyne, Inc. (a) 9,200 361
Thermo Instrument Systems, Inc. (a) 7,500 230
Thiokol Corp. 1,500 105
Thomas & Betts Corp. 17,300 909
United Technologies Corp. 15,000 1,245
Xerox Corp. 60,300 4,756
Xilinx, Inc. (a) 4,000 196
----------
115,051
----------
TRANSPORTATION - 1.2%
Burlington Northern, Inc. 9,600 863
Caliber Systems, Inc. 13,600 507
CNF Transportation, Inc. 14,300 461
Consolidated Freightways Corp. (a) 1,400 23
CSX Corp. 14,800 821
GATX Corp. 13,000 751
Kansas City Southern Industries, Inc. 6,500 419
Norfolk Southern Corp. 6,700 675
Overseas Shipholding Group, Inc. 4,100 81
Ryder System, Inc. 2,200 73
Tidewater, Inc. 63,100 2,776
Trinity Industries, Inc. 8,700 276
Union Pacific Corp. 36,500 2,573
Yellow Corp. (a) 7,900 176
----------
10,475
----------
UTILITIES - 9.1%
360 Communications Co. (a) 16,800 288
AES Corp. (a) 12,900 913
Airtouch Communications, Inc. (a) 55,100 1,508
Allegheny Power System, Inc. 2,900 77
American Electric Power Co., Inc. 22,800 958
Ameritech Corp. 77,400 5,258
AT&T Corp. 37,100 1,301
Baltimore Gas & Electric Co. 4,400 117
Bell Atlantic Corp. 49,830 3,781
BellSouth Corp. 88,700 4,113
Brooklyn Union Gas Co. (The) 1,600 46
Calenergy, Inc. (a) 22,200 844
Central Louisiana Electric Co., Inc. 9,200 259
CINergy Corp. 23,400 815
CMS Energy Corp. 4,500 159
Coastal Corp. 24,300 1,292
Consolidated Edison Co. 49,800 1,466
Dominion Resources, Inc. 14,000 513
DTE Energy Co. 11,100 307
Duke Power Co. 28,408 1,362
Edison International 23,100 575
Enron Corp. 61,300 2,502
Entergy Corp. 169,800 4,648
GPU, Inc. 26,500 951
GTE Corp. 85,300 3,742
Houston Industries, Inc. 67,800 1,453
Illinova Corp. 5,500 121
Long Island Lighting Co. 98,200 2,259
Lucent Technologies, Inc. 79,800 5,751
MCI Communications Corp. 60,800 2,326
MDU Resources Group, Inc. 2,000 48
National Fuel & Gas Co. 4,500 189
New England Electric System 5,000 185
New York State Electric & Gas Corp. 34,100 712
Niagara Mohawk Power Corp. (a) 12,400 106
Northeast Utilities 10,100 97
Northern States Power Co. 24,000 1,242
NYNEX Corp. 15,500 893
OGE Energy Corp. 800 36
PacifiCorp. 44,200 972
Peco Energy Co. 26,400 554
Peoples Energy Corp. 10,700 401
Pinnacle West Capital Corp. 5,600 168
Potomac Electric Power Co. 9,100 210
PP&L Resources, Inc. 23,700 472
Public Service Co. of Colorado 1,800 75
Public Service Co. of New Mexico 7,000 125
Public Service Enterprise Group, Inc. 100,100 2,502
Southern Co. 32,200 704
Sprint Corp. 34,500 1,816
Texas Utilities Co. 53,800 1,853
TransCanada Pipelines, Ltd. 5,100 103
U.S. West Communications Group 47,200 1,779
U.S. West Media Group (a) 79,900 1,618
Unicom Corp. 100,400 2,234
Union Electric Co. 30,200 1,138
UtiliCorp United, Inc. 36,300 1,057
Western Resources, Inc. 48,100 1,560
Wisconsin Energy Corp. 8,300 206
WorldCom, Inc. 139,400 4,452
----------
77,212
----------
TOTAL COMMON STOCKS
(cost $623,973) 819,300
----------
Quantitative Equity Fund 47
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
SHORT-TERM INVESTMENTS - 4.0%
Frank Russell Investment Company
Money Market Fund, due on demand (b) $ 31,742 $ 31,742
United States Treasury Notes
5.750% due 10/31/97 (c) 2,100 2,102
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $33,843) 33,844
----------
TOTAL INVESTMENTS
(identified cost $657,816)(d) - 100.2% 853,144
OTHER ASSETS AND LIABILITIES,
NET - (0.2%) (1,262)
----------
NET ASSETS - 100.0% $ 851,882
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with futures contracts
purchased by the Fund.
(d) See Note 2 for federal income tax information.
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
S & P 500 Index Futures Contracts
expiration date 09/97 46 $ 365
S & P 400 Midcap Index Futures Contracts
expiration date 09/97 54 89
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 454
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at $2,102 were held
as collateral by the custodian in connection with futures contracts
purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
48 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $657,816)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 853,144
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,276
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,617
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,036
-----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861,073
LIABILITIES
Payables:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 807
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,056
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,416
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 595
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 187
-----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,191
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 851,882
-----------------
-----------------
NET ASSETS CONSIST OF: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,240
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,367
Unrealized appreciation (depreciation) on: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,328
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593,268
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 851,882
-----------------
-----------------
NET ASSET VALUE, offering and redemption price per share:
Class S ($850,408,873 divided by 22,412,718 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37.94
-----------------
-----------------
Class C ($1,472,765 divided by 38,908 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37.85
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Quantitative Equity Fund 49
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,815
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,720
EXPENSES (Notes 1, 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,893
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Registration fees
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Distribution fees - Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholder servicing fees - Class C . . . . . . . . . . . . . . . . . . . . . . . 1
-----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,381
-----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,339
-----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,301
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,324 60,625
-----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,018
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 769 64,787
----------------- -----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,412
-----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 129,751
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
50 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,339 $ 9,109
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,625 70,157
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . . 64,787 41,332
------------------- -------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . 129,751 120,598
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,098) (9,111)
Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (1)
In excess of net investment income
Class S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (80)
Net realized gain on investments
Class S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,834) (70,285)
Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (25)
------------------- -------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . . . (22,945) (79,502)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . . . 80,829 134,203
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . 187,635 175,299
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664,247 488,948
------------------- -------------------
End of period (including undistributed net investment income of
$2,240 at June 30, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 851,882 $ 664,247
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Quantitative Equity Fund 51
<PAGE>
QUANTITATIVE EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . $ 33.05 $ 30.76 $ 24.84 $ 26.44 $ 25.82 $ 25.88
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . .19 .51 .50 .49 .45 .49
Net realized and unrealized gain (loss) on investments . 5.81 6.24 8.72 (.19) 2.69 1.67
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations. . . . . . . . 6.00 6.75 9.22 .30 3.14 2.16
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . (.10) (.51) (.51) (.49) (.45) (.49)
Net realized gain on investments . . . . . . . . . . . . (1.01) (3.95) (2.79) (1.41) (2.07) (1.73)
-------- -------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . . (1.11) (4.46) (3.30) (1.90) (2.52) (2.22)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . $ 37.94 $ 33.05 $ 30.76 $ 24.84 $ 26.44 $ 25.82
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . 18.49 23.08 37.69 .19 12.56 8.67
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . 850,409 663,925 488,948 380,592 314,647 244,870
Ratios to average net assets (%)(b):
Operating expenses . . . . . . . . . . . . . . . . . . .91 .93 .93 .94 .98 1.02
Net investment income. . . . . . . . . . . . . . . . . 1.17 1.59 1.71 1.95 1.68 1.94
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . 104.87 74.33 78.83 45.97 62.48 59.19
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . . . .0347 .0331 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
52 Quantitative Equity Fund
<PAGE>
QUANTITATIVE EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996**
-------------- --------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 33.05 $ 33.81
-------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .06 .05
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . 5.79 1.87
-------------- --------------
Total Income From Investment Operations. . . . . . . . . . . . . . . . . . . . . 5.85 1.92
-------------- --------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.04) (.08)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (1.01) (2.60)
-------------- --------------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.05) (2.68)
-------------- --------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37.85 $ 33.05
-------------- --------------
-------------- --------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.01 5.91(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . 1,473 322
Ratios to average net assets (%)(c):
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.62 1.65
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 .81
Portfolio turnover rate (%)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 104.87 74.33
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0347 .0331
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31,
1996.
(a) Periods less than one year are not annualized.
(b) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(c) The ratios for the periods ended June 30, 1997 and December 31, 1996 are
annualized.
Quanititative Equity Fund 53
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 88.4%
Argentina - 0.2%
Banco de Galicia y Buenos Aires Class B New - ADR (a) 3,410 $ 90
Banco Frances del Rio la Plata - ADR 5,554 181
Naviera Perez Companc Class B 40,162 323
Sociedad Comercial del Plata - ADR (a) 1,556 52
Telecom Argentina SA Class B - ADR 1,280 67
Telefonica de Argentina Class B - ADR 9,510 329
Transportadora de Gas Del Sur Class B - ADR 4,760 60
YPF Sociedad Anonima Class D - ADR 10,778 330
----------
1,432
----------
AUSTRALIA - 3.2%
Amcor, Ltd. 198,742 1,322
Australia & New Zealand Bank Group, Ltd. 306,742 2,295
Australian Gas & Light Co. 53,079 313
Australian National Industries, Ltd. 176,270 216
Boral, Ltd. 419,427 1,322
Broken Hill Proprietary Co. 321,314 4,731
Burns Philip & Co., Ltd. 78,000 145
Caltex Australia 100,000 342
Commonwealth Installment Receipt Trustee, Ltd. 22,000 194
CSR, Ltd. 245,200 951
Eastern Aluminum 272,000 271
Eltin, Ltd. 199,126 376
Fairfax (John) 29,000 69
Foster's Brewing Group, Ltd. 232,400 432
GIO Australia Holdings 244,510 758
Lend Lease Corp. 7,185 152
Mayne Nickless, Ltd. 36,300 212
National Australia Bank, Ltd. 54,393 780
National Mutual Holdings, Ltd. 48,000 78
News Corp. 310,181 1,489
Pacific Magazines & Printing 81,000 222
Pasminco, Ltd. 280,000 569
Publishing Broadcasting, Ltd. 36,360 210
QNI, Ltd. 226,000 408
RGC Limited 137,125 503
Santos, Ltd. 225,000 947
Southcorp Holdings, Ltd. 139,500 523
St. George Bank, Ltd. 23,000 153
Tabcorp. Holdings, Ltd. 36,000 196
Wesfarmers 64,705 612
Western Mining Corp., Ltd. 698,690 4,409
Westfield Trust 284,000 584
Westpac Banking Corp. 241,200 1,453
Woodside Petroleum, Ltd. 28,000 240
Woolworth's, Ltd. 100,435 329
----------
27,806
----------
AUSTRIA - 0.2%
Brau-Union Goess-Reininghaus - Osterreichische Brau 1,346 81
Creditanstalt-Bankverein 7,800 455
Flughafen Wien AG 1,323 56
Oester Brau Beteil 1,200 71
VA Technologie AG (BR) 2,000 366
Voest-Alpine Stahl AG (a) 8,000 362
Wienerberger Baustoff 1,300 268
----------
1,659
----------
BELGIUM - 0.5%
Credit Communal Holding/Dexia NPV 4,687 503
Electrabel NPV 2,168 465
Fortis AG 3,000 620
Generale de Banque NPV 968 373
Groupe Bruxelles Lambert NPV 2,200 369
Kredietbank NPV 2,610 1,052
PetroFina SA NPV 1,370 519
UCB Capital NV 79 249
----------
4,150
----------
BRAZIL - 0.4%
CEMIG SA - ADR 6,892 355
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar (Regd) - GDR 4,750 108
Eletrobras (centrais) NPV 655,618 367
Sider Nacional cia NPV 3,980,000 131
Telecomunicacoes Brasileiras - ADR (144A) 355 54
Telecomunicacoes Brasileiras - ADR 16,269 2,469
Telecomunicacoes de Sao Paulo SA (a) 64,444 21
Telecomunicacoes de Sao Paulo - NPV (a) 37,771 11
Usinas Siderurgicas de Minas - ADR 19,363 212
White Martins SA - NPV 24,695 72
----------
3,800
----------
54 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CANADA - 3.3%
Air Canada, Inc. (a) 100,000 $ 673
Alcan Aluminum, Ltd. 52,340 1,785
Avenor, Inc. 35,000 679
Barrick Gold Corp. 40,000 868
Barrick Gold Corp. (US Regd) 27,100 596
BCE, Inc. NPV 54,900 1,527
Canadian Imperial Bank of Commerce 49,600 1,250
Canadian National Railway Co. 4,900 213
Canadian Pacific, Ltd. 46,900 1,326
Corel Corp. (a) 4,600 30
Cott Corp. 5,600 60
Dofasco, Inc. NPV 24,100 456
Donohue, Inc. Class A 47,400 1,013
Hudson's Bay Co. 77,000 1,701
Imasco, Ltd. 76,300 2,210
Imperial Oil, Ltd. 19,600 1,004
Inco, Ltd. 66,087 1,987
Laidlaw, Inc. Class B 32,000 441
Magna International, Inc. Class A 30,000 1,803
MDS, Inc. Class B 2,500 54
National Bank of Canada 153,000 1,911
Newbridge Networks Corp. (a) 13,300 570
Noranda, Inc. 40,000 862
Nova Scotia Power, Inc. 27,500 284
Petro-Canada 50,000 811
Renaissance Energy, Ltd. (a) 15,000 410
Rogers Communications, Inc. Class B (a) 70,000 438
Royal Bank of Canada 4,000 181
Royal Bank of Canada (US Regd) 42,000 1,906
Stelco, Inc. Series A (a) 56,800 424
Suncor, Inc. NPV 15,700 421
TELUS Corp. 13,900 252
Torstar Corp. Class B 22,600 706
----------
28,852
----------
CHILE - 0.1%
Administradora de Fondos de Pensiones Provida SA - ADR 1,208 26
Chile Fund, Inc. 3,030 79
Chilectra SA - ADR 6,425 185
Chilgener SA - ADR 4,052 113
Compania de Telecomunicaciones de Chile SA - ADR 2,992 99
Enersis SA - ADR 4,419 157
Santa Isabel SA - ADR 2,762 90
----------
749
----------
CHINA - 0.1%
Huaneng Power International, Inc. - ADR Series N (a) 23,100 589
Yizheng Chemical Fibre Class H 555,000 99
----------
688
----------
CZECH REPUBLIC - 0.0%
SPT Telecom AS (a) 580 61
----------
61
----------
DENMARK - 0.4%
Bang & Olufsen Holding Series B 10,000 617
Coloplast AS Class B (Regd) 5,250 350
Den Danske Bank 2,225 216
Jyske Bank AS (Regd) 5,700 491
Novo Nordisk AS Series B 4,700 512
Ostasiatiske Kompagni (a) 17,000 402
Tele Danmark AS Series B 7,600 396
Tele Danmark Class B - ADR 25,100 655
Unidanmark Class A (Regd) 2,600 147
----------
3,786
----------
FINLAND - 0.7%
Enso OY Series A 18,000 166
Enso OY Series R 35,700 330
Kymmene OY 45,400 1,049
Metra AB Series B 14,900 449
Nokia AB Series A 11,244 840
Nokia AB Series K 10,100 753
Outokumpu OY Class A 37,200 738
OY Tamro AB 29,000 201
Pohjola Series B 7,900 234
Rauma Group (The) 5,300 121
Valmet Corp. Series A 45,700 791
----------
5,672
----------
FRANCE - 6.7%
Accor SA 3,391 508
Alcatel Alsthom 25,650 3,212
Alcatel Alsthom Compagnie Generale d'Electricite - ADR 54,900 1,386
Assurances Generales de France 11,910 381
International Securities Fund 55
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
AXA - UAP 18,832 $ 1,171
Banque Nationale Paris 10,151 418
Boiron 1,700 208
Canal Plus (a) 4,000 779
Carrefour SA 3,087 2,242
Chargeurs International SA 1,039 60
Christian Dior 3,010 497
Cie de St. Gobain 14,320 2,088
Clarins 2,956 393
Compagnie Bancaire SA 954 122
Credit Commercial de France 11,300 479
Credit Local de France 9,362 911
Credit Local de France (Regd) 1,347 131
Credit National 2,322 132
D.M.C. Dollfuss-Mieg (a) 5,000 85
Dexia France (Regd) 900 88
Eaux (cie Generale) 46,816 5,999
Elf Aquitaine - ADR 24,700 1,345
Elf Aquitaine SA 19,065 2,057
Eridania Beghin-Say 3,795 568
Galeries Lafayette 250 104
Groupe Danone 4,620 763
GTM - Entrepose 1,900 95
Guilbert SA 1,535 217
Havas 1,450 104
L'Air Liquide 4,499 714
L'Oreal (Societe)(a) 611 257
Lafarge Corp. SA (BR) 5,511 343
Lagardere Groupe (Regd) 22,600 656
Lapeyre (BR) 3,750 249
Legrand 1,209 213
Legris Industries SA 1,500 71
LVMH Moet-Hennessy 3,622 974
Lyonnais Eaux Dumez 16,695 1,682
Michelin (Cie Gen) Class B (Regd) 27,264 1,637
Nord-Est 11,000 243
Pathe SA 1,039 206
Pechiney International Class A 30,735 1,211
Peugeot SA 5,890 569
Pinault-Printemps Redoute SA 2,004 963
Primagaz CIE 1,761 156
Promodes 2,250 876
Renault (a) 51,476 1,303
Rexel SA 429 132
Rhone Poulenc SA - ADR 19,300 803
Sanofi SA 11,613 1,138
Schneider SA 24,146 1,285
Scor SA 12,000 483
Sefimeg (Regd) 800 51
SEITA 10,950 347
SGS Thomson Microelectronics (a) 7,800 616
Sidel SA 17,235 1,334
Simco (Regd) 1,300 103
Societe Generale 25,929 2,894
Sodexho 1,330 681
Synthelabo 4,100 534
Thomson-CSF 22,201 572
Total Co. SA Class B 38,143 3,855
TV Francaise (TFI) 7,852 701
Union des Assurances Federales 6,000 705
Union Financiere de France Banque SA 1,500 178
Usinor Sacilor 108,342 1,955
Valeo 3,450 215
Vallourec (Usin) 360 23
----------
57,471
----------
GERMANY - 5.3%
Adidas AG 6,900 764
Allianz AG (Regd)(a) 2,410 504
AVA ALG Handels VB (a) 1,250 355
BASF AG 10,450 386
Bayer AG 96,204 3,697
Bayer Motoren Werk 381 315
Bayerische Hypotheken-und Wechsel Bank AG 57,700 1,725
Bilfinger & Berger BAU AG (a) 4,610 188
Buderus AG 1,093 602
Commerzbank AG 22,330 632
Continental AG 24,900 618
Daimler-Benz AG 69,690 5,654
Deutsche Bank AG 31,919 1,865
Deutsche Lufthansa AG 5,500 105
Deutsche Pfandbrief & Hypothekenbank AG 2,750 158
Deutsche Telekom AG 14,759 355
Dresdner Bank AG 44,660 1,544
Fresenius Medical Care AG - ADR (a) 23,340 680
Fried, Krupp AG Hoesch 5,100 997
GEA AG 1,782 702
Gehe AG 14,065 960
Gerresheimer Glas AG 3,500 60
56 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Hannover Rueckversicherungs AG 3,700 $ 233
Hoechst AG 135,679 5,755
Hornback Baumarkt AG 1,135 48
IKB Deutsche Industriebank AG (a) 1,750 35
M.A.N. AG 450 139
Mannesmann AG 6,802 3,030
Merck KGAA 2,100 93
Metro AG (a) 3,600 394
Muenchener Rueckversicherungs 379 1,063
Praktiker Bau und Heimwerkemaerkte AG 2,084 37
Rhoen - Klinikum AG 2,764 364
SAP AG 2,820 566
Schering AG 6,012 642
Siemens AG 50,152 2,978
Tarkett AG 17,423 450
Veba AG 70,280 3,949
Veba International Finance 1998 Warrants (a) 1,186 415
Viag AG 2,500 1,137
Volkswagen International AG 1,054 808
Volkswagen International AG 1998 Warrants (a) 1,300 545
Wella Aktiengesellschaft 150 102
----------
45,649
----------
HONG KONG - 3.2%
Cathay Pacific Airways 383,000 793
Cheung Kong Holdings, Ltd. 214,000 2,113
China Light & Power 32,000 181
Dao Heng Bank Group, Ltd. 80,000 438
Dickson Concepts International, Ltd. (New)(a) 123,000 448
First Pacific Co. 318,615 407
Great Eagle Holdings 60,470 199
Guangshen Railway Co., Ltd. 1,168,500 513
Guoco Group, Ltd. 156,000 822
Hang Lung Development Co. 192,000 352
Hang Seng Bank 87,000 1,241
Henderson Land Development Co., Ltd. 56,000 497
Hong Kong & China Gas Co., Ltd. 324,720 650
Hong Kong Electric Holding, Ltd. 521,000 2,098
HSBC Holdings (UK Regd) PLC 127,200 3,826
Hutchison Whampoa, Ltd. 423,000 3,658
National Mutual Asia 217,000 241
New World Development Co., Ltd. 458,421 2,734
Shanghai Petrochemical Class H 680,000 163
Sing Tao 546,000 204
Sun Hung Kai Properties, Ltd. 211,000 2,540
Swire Pacific, Ltd. Class A 202,500 1,823
Swire Pacific, Ltd. Class B 140,000 212
Tai Cheung Holdings 56,000 44
Television Broadcast 153,000 687
Wharf Holdings 154,000 668
Wing Lung Bank 660 5
----------
27,557
----------
IRELAND - 0.2%
Allied Irish Banks 112,000 854
Independent Newspapers PLC 90,000 531
Waterford Wedgwood (Units) 275,000 361
----------
1,746
----------
ITALY - 3.5%
Assicurazioni Generali SPA 23,000 418
Banca Commerciale Italiana 145,000 300
Banca Pop di Bergamo CV 16,000 237
Banca Pop di Milano 147,000 881
Banco Ambrosiano Veneto 7,000 20
Banco Ambrosiano Veneto di Risp 22,000 32
Banco Fideuram SPA 130,275 426
Credito Italiano 596,674 1,092
Edison 40,000 199
ENI SPA - ADR 16,000 910
Ente Nazionale Idrocarburi SPA (Regd) 289,967 1,642
Fiat SPA 1,398,469 5,036
Fiat SPA di Risp 163,000 306
Fila Holdings SPA - ADR 8,000 268
Finmeccanica SPA (a) 233,545 160
Gewiss SPA 10,000 172
Gucci Group NV 3,457 223
Industrie Natuzzi SPA - ADR 27,412 702
Istituto Mobiliare Italiano SPA 57,180 515
Istituto Mobiliare Italiano SPA - ADR 23,800 649
Istituto Nazionale Delle Assicurazioni 1,116,988 1,702
Italgas (Soc. Ital.) 41,000 133
Luxottica Group SPA - ADR 7,900 536
Magneti Marelli SPA 40,000 68
Mediaset SPA 31,000 132
Mediolanum SPA 18,576 210
Mondadori (Arnoldo) Editore SPA 7,400 43
Montedison SPA New (a) 451,000 298
Olivetti & Cie SPA (a) 5,364,899 1,520
Parmalat Finanziaria SPA 118,000 167
Rinascente (LA) 13,100 73
International Securities Fund 57
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Sasib SPA di Risp NC 60,000 $ 118
Seat SPA (a) 61,100 13
Seat SPA di Risp (a) 105,830 34
Simint SPA (a) 100,000 609
Stet 882,339 5,140
Stet di Risp 627,500 2,178
Telecom Italia di Risp 54,100 107
Telecom Italia Mobile SPA 230,534 745
Telecom Italia Mobile SPA - di Risp 297,073 530
Telecom Italia SPA 454,929 1,459
----------
30,003
----------
JAPAN - 24.2%
Advantest 3,420 263
Alps Electric Co. 21,000 293
Amada Co., Ltd. 42,000 370
Aoki International 18,000 320
Aoyama Trading Co. 40,600 1,304
Apic Yamada Corp. 19,300 281
Asahi Bank, Ltd. 135,000 1,148
Ashikaga Bank 137,000 502
Brother Industries 166,000 715
Canon Sales Co., Inc. 11,200 261
Canon Sales Co., Inc. 1997 Warrants (a) 330 39
Canon, Inc. 161,000 4,382
Central Glass Co. 151,000 440
Chugai Pharmaceutical Co. 23,000 207
Chuo Trust & Banking 70,000 464
Citizen Watch Co., Ltd. 23,000 177
Cosmo Oil Co. 73,000 349
Credit Saison Co. 61,650 1,506
CSK Corp., Ltd. 8,000 303
Dai Ichi Kangyo Bank 108,000 1,470
Dai Ichi Pharmaceutical Co. 128,000 2,256
Dai Nippon Screen Manufacturing Co. 36,000 339
Dai-Tokyo Fire & Marine 181,000 1,049
Daido Steel Co. 55,000 178
Daiei, Inc. 184,000 1,180
Daifuku Machinery Co. 9,000 119
Daiken Corp. 65,000 408
Daito Trust Construction 23,350 275
Daiwa Bank 293,000 1,388
Daiwa Danchi Co., Ltd. (a) 65,000 267
Daiwa House Industries Co. 102,000 1,246
Daiwa Kosho Lease Co., Ltd. 77,000 595
Daiwa Securities 278,000 2,193
DDI Corp. 335 2,473
East Japan Railway 302 1,549
Ebara Corp. 44,000 660
Eisai Co. 18,050 342
Fanuc Co. 10,000 384
Fuji Denki Reiki 21,000 165
Fuji Electric Co. 123,000 558
Fuji Machine Manufacturing Co. 14,000 507
Fuji Oil Co. 60,000 412
Fuji Photo Film Co. 46,000 1,850
Fujikura 40,000 373
Fujitsu, Ltd. 44,000 610
Fujitsu, Ltd. 1999 Warrants Series 2 (a) 23 77
Fukui Bank 110,000 408
Fukuoka Bank 450 3
Furukawa Co., Ltd. 57,000 204
Furukawa Electric Co. 192,000 1,221
Gakken Co. 72,000 379
General Sekiyu KK 26,000 172
Gunze, Ltd. 122,000 556
Heiwa Corp. 20,000 393
Hitachi Credit Co., Ltd. 29,000 562
Hitachi Metals 43,000 313
Hitachi Zosen Corp. 62,000 247
Hitachi, Ltd. 565,000 6,310
Hokkaido Electric 11,700 209
Honda Motor Co., Ltd. 31,000 933
Hyakugo Bank 35,000 200
Inax Corp. 21,000 157
Industrial Bank of Japan 82,000 1,273
Intec, Inc. 40,000 534
Isetan Co. 46,000 570
Ishihara Sangyo (a) 134,000 396
Ishikawajima-Harima Heavy Industries 250,000 982
Ito-Yokado Co., Ltd. 76,000 4,409
Itoham Foods, Inc. 72,000 397
Izumi Co. 26,000 381
Izumiya Co., Ltd. 49,000 787
Japan Synthetic Rubber 41,000 351
Japan Tobacco, Inc. 63 497
Jeol 50,000 329
Kamei Corp. 61,000 671
Kao Corp. 222,000 3,080
Kawasaki Heavy Industries 357,000 1,660
Kawasaki Kisen (a) 125,000 252
Kawasho Corp. 122,000 379
Keihin Electric Express 360 2
Keiyo Bank, Ltd. 30,000 125
Keyence Corp. 80 12
58 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Kinki Coca-Cola Bottling 17,000 $ 233
Kinki Nippon Railway 170 1
Kirin Beverage Corp. 24,000 419
Koa Fire & Marine 67,000 405
Kokuyo Co., Ltd. 17,000 460
Komatsu Forklift Co., Ltd. 52,000 422
Komori Corp. 15,000 356
Kumagai Gumi Co. 41,000 68
Kuraray Co., Ltd. 40,000 398
Kurimoto Iron Works 35,000 270
Kyocera Corp. 49,500 3,930
Kyodo Printing Co. 23,000 221
Kyokuto Boeki 35,000 192
Kyushu Electric Power 3,900 67
Long Term Credit Bank Japan 120,000 518
Mabuchi Motor Co. 19,600 1,137
Makita Corp. 87,000 1,275
Marui Co., Ltd. 39,000 725
Maruichi Steel Tube 23,000 381
Matsumotokiyoshi 8,200 348
Matsushita Electric Industrial Co., Ltd. 214,000 4,313
Matsuzakaya Co. 56,000 413
Mikuni Coca-Cola Bottling 23,000 341
Minebea Co., Ltd. 105,000 1,118
Mitsubishi Corp. 33,000 412
Mitsubishi Electric Corp. 245,000 1,370
Mitsubishi Estate Co., Ltd. 45,000 652
Mitsubishi Heavy Industries 488,000 3,742
Mitsubishi Paper Mills 30,000 117
Mitsubishi Rayon 53,000 218
Mitsubishi Trust & Banking 143,000 2,258
Mitsui & Co. 206,000 1,977
Mitsui Fudosan Co., Ltd. 91,000 1,254
Mitsui Marine & Fire Insurance Co., Ltd. 30,000 217
Mitsui Mining & Smelting 110,000 488
Mitsui Petrochemical Industry 20,000 96
Murata Manufacturing Co., Ltd. 80,000 3,183
Nagase & Co. 25,000 198
Namco 48,000 1,851
National House Industrial 11,000 145
NEC Corp. 222,000 3,099
Nichido Fire & Marine 450 3
Nichiei Co., Ltd. 7,000 812
Nichimo Co. 78,000 238
Nippon Denso Co. 57,000 1,363
Nippon Express Co. 89,000 710
Nippon Fire & Marine 73,000 394
Nippon Hodo Co. 11,000 95
Nippon Oil Co. 149,000 815
Nippon Steel Corp. 1,115,000 3,560
Nippon Telegraph & Telephone Corp. 356 3,417
Nishi Nippon Bank 354 2
Nishimatsu Construction 142,000 991
Nissan Diesel Motor Co. 62,000 241
Nissan Motor Co., Ltd. 551,000 4,274
Nissei Sangyo Co. 36,000 440
NKK Corp. 337,000 723
Nomura Securities 333,000 4,590
North Pacific Bank 20,000 96
NSK, Ltd. 84,000 540
NTT Data Communications Systems Corp. 62 2,396
Obayashi Corp. 80,000 535
Odakyu Electric Railway 290 2
Oji Paper Co., Ltd. 69,000 427
Okamura Corp. 60,000 398
Ono Pharmaceutical 11,000 388
Pioneer Electronics Corp. 161,000 3,905
Promise Co., Ltd. 7,000 401
Ricoh Co., Ltd. 17,000 222
Rohm Co. 19,000 1,956
Sakura Bank, Ltd. 339,000 2,597
Sangetsu Co. 6,000 128
Sankyo Aluminum 35,000 113
Sankyo Co. 41,000 1,377
Sankyo Co., Ltd. 30,000 900
Sankyo Seiko Co. 96,000 455
Secom Co. 14,000 1,027
Sega Enterprises 6,800 225
Seino Transportation 28,000 303
Sekisui Chemical Co., Ltd. 124,000 1,255
Sekisui House, Ltd. 96,000 972
Seven-Eleven Japan NPV 5,200 393
Sharp Corp. 206,000 2,840
Shiga Bank, Ltd. 37,000 188
Shikoku Electric Power 35,700 607
Shimachu Co., Ltd. 12,000 360
Shin-Etsu Chemical Co. 29,050 770
Shin-Etsu Chemical 2000 Warrants (a) 137 368
Shiseido Co., Ltd. 83,000 1,369
Shohkoh Fund & Co., Ltd. 700 212
Showa Aircraft Industry 21,000 141
Showa Shell Sekiyu 50,300 474
Sintokogio 25,000 197
Snow Brand Milk 36,000 185
Sony Corp. 115,300 10,049
Stanley Electric 130,000 673
International Securities Fund 59
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Sumitomo Bakelite Co., Ltd. 55,000 $ 444
Sumitomo Bank 137,000 2,247
Sumitomo Corp. 69,000 656
Sumitomo Electric Industries 74,000 1,240
Sumitomo Forestry 92,000 1,011
Sumitomo Marine & Fire 26,000 213
Sumitomo Metal Industries, Ltd. 492,000 1,399
Sumitomo Realty & Development 446,000 3,930
Sumitomo Rubber Industries 88,000 592
Sumitomo Trust & Banking 382,000 4,099
Tadano 60,000 426
Taisei Corp. 237,000 1,098
TDK Corp. 18,000 1,321
Teijin, Ltd. 92,000 433
Toc Co. 29,000 344
Toda Corp. 50,000 350
Toho Bank 52,000 320
Tohoku Electric Power 11,500 205
Tokai Rika Co. 29,000 229
Tokio Marine & Fire Insurance Co. 127,000 1,662
Tokyo Broadcasting 62,000 1,271
Tokyo Electric Power 70,000 1,472
Tokyo Electronics 10,000 478
Tokyo Steel Manufacturing 19,000 212
Toppan Printing 48,000 754
Torii Pharmaceutical Co., Ltd. 12,200 286
Toshiba Corp. 172,000 1,106
Tostem Corp. 16,000 443
Toyo Seikan Kaisha, Ltd. 300 7
Toyo Trust & Banking 130,000 1,094
Toyota Motor Corp. 146,000 4,305
Tsubakimoto Chain 60,000 366
UNY Co., Ltd. 19,000 371
West Japan Railway Co. 590 2,311
Yamaha Motor Co. 64,000 637
Yamanouchi Pharmaceutical 41,000 1,102
Yamato Kogyo Co. 34,000 335
Yamato Transport 80,000 998
Yamazaki Baking Co., Ltd. 21,000 370
Yasuda Fire & Marine Insurance Co., Ltd. (The) 33,000 222
Yodogawa Steel Works, Ltd. 36,000 220
Yokohama Rubber Co., Ltd. 195,000 834
Yurtec Corp. 11,550 134
----------
208,548
----------
MALAYSIA - 1.2%
Affin Holdings Berhad 276,000 656
Berjaya Industrial Berhad 30,000 29
Berjaya Sports 76,000 358
Carlsberg Brewery Malaysia Berhad 120,000 618
Commerce Asset Holdings Berhad 406,192 1,070
Commerce Asset Holdings Berhad Rights (a) 112,837 9
Genting Berhad 63,000 302
IND Oxygen, Inc. 429,000 490
Kumpulan Guthrie 204,000 323
Multi Purpose Holdings Berhad 125,000 175
Perusahaan Otomobl 77,000 360
Petronas Dagangan 1999 Warrants (a) 275,000 320
Petronas Dagangan Berhad 18,000 43
Renong Berhad 900,000 1,177
Resorts World Berhad 448,000 1,349
Sime Darby Berhad (Resident Shares) 243,800 811
Sime UEP Properties Berhad 31,000 67
Tanjong PLC 236,000 813
Technical Resource Industries Berhad (a) 91,000 156
Tenaga Nasional Berhad 102,000 498
Time Engineering Berhad 69,000 105
United Engineers Berhad 101,000 729
----------
10,458
----------
MEXICO - 0.4%
Cemex SA de CV Class B NPV 33,360 162
Cemex SA de CV NPV 67,657 294
Cifra SA de CV - ADR 182,757 335
Compania Cervecerias Unidas SA - ADR 2,702 59
Empresa Nacional de Electric - ADR 7,939 179
Fomento Economico Mexicano SA de CV Series B NPV 21,157 126
Gruma SA - ADR (a) 8,127 161
Gruma SA Series B NPV (a) 27,670 129
Grupo Financiero Banamex AC Series B NPV (a) 76,168 196
Grupo Financiero Banamex AC Series L NPV (a) 3,238 8
Grupo Financiero Bancomer SA - ADR Class B (a) 520 5
Grupo Industrial Maseca Series B NPV 148,656 163
Grupo Modelo SA Series C 22,110 153
Grupo Television SA de CV - GDR (a) 2,156 65
60 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Kimberly-Clark, Mexico Class A NPV 60,601 $ 244
Panamerican Beverages, Inc. Class A 9,508 313
Telefonos de Mexico SA Series L - ADR 12,675 605
----------
3,197
----------
NETHERLANDS - 5.3%
ABN Amro Holdings NV (a) 110,815 2,066
Aegon NV 10,006 698
Ahold NV 8,733 737
AKZO Nobel NV 1,315 180
AKZO Nobel NV - ADR 12,200 840
Baan Co. NV (a) 3,010 207
Boskalis Westminster CVA 14,559 286
CSM NV CVA 11,452 574
DSM NV (BR) 2,481 247
Elsevier NV 116,974 1,955
European Vinyls Corp. International NV 1,100 28
Fortis Amev NV 13,847 617
Hagemeyer NV (a) 2,968 153
Heineken NV 1,700 290
Hollandsche Beton Groep NV 2,863 653
Hunter Douglas NV 8,145 693
ING Groep NV 125,204 5,773
KNP BT (Kon) NV 36,302 827
Moeara Enim Petroleum NPV 37 839
Nedlloyd Groep NV 23,800 687
Nutricia Verenigde Bedrijven CVA 2,354 372
Otra NV 2,860 46
Philips Electronics 72,370 5,184
Philips Electronics - ADR 11,400 819
Polygram 39,133 2,053
Royal Dutch Petroleum Co. (a) 156,428 8,208
Royal PTT Nederland NV 6,127 240
Royal PTT Nederland NV - ADR 15,700 622
Unilever NV CVA 13,470 2,836
Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit 159,773 3,533
Wereldhave NV 2,600 154
Wolters Kluwer CVA 23,552 2,867
----------
45,284
----------
NEW ZEALAND - 0.3%
Air New Zealand Class B 154,879 473
Carter Holt Harvey 28,355 73
Fletcher Challenge Building 45,409 137
Fletcher Challenge Energy 52,537 159
Fletcher Challenge Forest Division 2,961 4
Fletcher Challenge Paper 28,619 69
Fletcher Challenge, Ltd. (Forests Division) 107,759 159
Lion Nathan, Ltd. 186,100 472
Telecom Corp. of New Zealand, Ltd. 142,900 728
Tranz Rail Holdings, Ltd. - NPV 10,000 57
Wrightson Limited 250,000 160
----------
2,491
----------
NORWAY - 0.7%
Bergesen DY AS Series A 3,510 83
Christiania Bank OG Kreditkasse 110,386 377
Kvaerner Industries AS Series B 7,200 403
Norsk Hydro AS 35,354 1,925
Olav Thon Eiendomsselskap AS 13,700 381
Orkla AS 12,511 923
Orkla AS Series B Free 8,757 594
Saga Petroleum AS Series B 6,610 115
Schibsted AS 31,100 615
Storebrand ASA Series A (a) 105,300 628
----------
6,044
----------
PANAMA - 0.0%
Banco Latinoamericano de Exportaciones SA Class E 1,435 62
----------
62
----------
PERU - 0.0%
Credicorp, Ltd. 3,000 66
Telefonica Del Peru SA Class B - ADR 4,441 116
----------
182
----------
PORTUGAL - 0.1%
Jeronimo Martins SGPS 13,591 949
----------
949
----------
International Securities Fund 61
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
RUSSIA - 0.0%
Gazprom - ADR 1,140 $ 20
----------
20
----------
SINGAPORE - 1.1%
City Developments 22,000 215
DBS Land 69,000 218
Development Bank of Singapore, Ltd. (Alien Market) 140,000 1,763
Fraser & Neave 23,400 167
Hong Kong Land Holdings, Ltd. (a) 238,093 633
Jardine Strategic Holdings, Ltd. (a) 266,375 1,007
Jardine Strategic Holdings, Ltd. 1998 Warrants (a) 13,375 5
Keppel Corp. (a) 14,000 62
Keppel Corp., Ltd. Series A (a) 4,000 17
Mandarin Oriental International, Ltd. (a) 398,965 519
Overseas Chinese Banking (Alien Market) 81,000 838
Overseas Union Bank (Alien Market) 74,000 461
Overseas Union Bank, Ltd. Rights (Alien Market)(a) 14,800 20
Singapore Airlines, Ltd. (Alien Market) 100,000 895
Singapore Land 104,000 473
Singapore Press Holdings (Alien Market) 42,760 861
United Industrial Corp., Ltd. 120,000 91
United Overseas Bank, Ltd. (Alien Market) 133,866 1,376
Wing Tai Holdings, Ltd. 46,000 134
----------
9,755
----------
SOUTH KOREA - 0.1%
Kookmin Bank 5,500 79
Korea Electric Power Corp. 8,800 263
Pohang Iron & Steel 1,810 130
Samsung Electronics, Ltd. 3,256 259
Shin Han Bank (a) 3,330 40
----------
771
----------
SPAIN - 2.4%
Acerinox SA 3,500 656
Aguas de Barcelona (a) 46 2
Argentaria 12,139 680
Banco Bilbao Vizcaya (Regd) 15,020 1,220
Banco Popular Espanol (Regd) 9,059 2,219
Banco Santander SA (Regd)(a) 23,577 726
Centros Commerciales Pryca 23,116 500
Corp. Fin. Reunida (a) 150,000 631
Corporacion Bancaria de Espana SA 44,900 1,274
Dragados y Construcciones SA 5,300 110
Empresa Nacional de Electricidad 17,053 1,432
Fuerzas Electricat Series A 58,800 561
Gas Natural SDG SA 1,719 376
Gas Y Electricidad SA Series 2 11,926 640
Hidroelectrica del Cantabrico SA 21,500 873
Iberdrola SA 121,413 1,533
Obrascon SA 8,000 123
Prosegur CIA de Seguridad SA (Regd) 40,000 489
Repsol - ADR 27,200 1,154
Repsol SA 24,190 1,023
Tabacalera SA Series A (Regd) 9,300 499
Telefonica de Espana 131,787 3,810
Viscofan Envoltura 20,000 467
----------
20,998
----------
SWEDEN - 3.2%
ABB AB Series A (a) 25,600 359
Asea AB Series B Free 30,000 419
Astra AB Series A (a) 347,080 6,461
Astra AB Series B (a) 89,200 1,574
Atlas Copco AB Series B 14,740 385
Autoliv, Inc. (a) 15,370 591
Avesta-Sheffield 118,500 1,371
BT Industries AB 30,000 601
Diligentia AB (a) 18,370 223
Electrolux AB Series B 19,940 1,438
Esselte AB Series B 3,090 73
Granges AB (a) 4,420 59
Hennes and Mauritz AB Series B (a) 29,260 1,029
Hoganas AB B Shares 14,000 466
Incentive AB Series B Free 14,200 1,298
Kinnevik Investment Series B 21,500 599
Marieberg Tidnings Series A 28,000 695
Munksjo AB 40,900 420
Nordbanken AB 6,900 233
OM Gruppen AB 21,000 652
Pharmacia & Upjohn, Inc. 25,000 869
Sandvik AB Series B 15,050 427
Scania AB Series B 31,000 946
62 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Scania Aktiebolag Series A - ADR 11,100 $ 329
Scania Aktiebolag Series B - ADR 4,800 143
Scribona AB Series B Free 3,060 36
Skand Enskilda Barken Series A 26,700 288
Skandia Group Foersakerings Free 51,560 1,900
SKF AB Series A Free 29,000 722
Svenska Handelsbank Series A 22,000 699
Telefonaktiebolaget Ericsson (LM) Series B 57,260 2,253
Tornet Fastighets AB 25,000 293
----------
27,851
----------
SWITZERLAND - 5.1%
Adia SA 2,052 787
Baer Holdings AG (BR) 280 429
BBC Brown Boveri (BR) 919 1,391
Bobst AG (BR) 350 595
Bobst SA - AG 250 199
Ciba Specialty Chemicals AG (a) 4,627 428
CS Holdings (Regd) 2,615 336
Fischer (Georg) AG (BR) 583 811
Holderbank Financiere Glarus AG (BR) 340 321
Liechtenstein Global Trust AG 1,470 901
Magazine Zum Globus (a) 1,000 541
Nestle SA (Regd) 3,495 4,611
Novartis AG (Regd) 8,983 14,360
Phoenix Mecano (BR) 500 260
Publicitas Holdings SA - (Regd) 1,000 190
Richemont Series A (BR) 200 289
Roche Holdings Genusscheine AG NPV 852 7,706
Sarna Kunststoff Holdings AG (Regd) 200 199
Schweiz Bankgesellsch (BR) 1,450 1,659
Schweiz Ruckversicher (Regd) 1,030 1,457
Schweizerischer Bankverein (Regd)(a) 11,175 2,989
SGS Holding (BR) 450 962
SMH AG Neuenburg (Regd) 7,700 1,042
Sulzer AG (Regd) 600 513
Zurich Versicherungsgesellschaft (Regd) 2,000 795
----------
43,771
----------
THAILAND - 0.0%
Advanced Information Services (Alien Market) 9,600 64
Bangkok Bank (Alien Market) 14,200 98
Siam Cement Co. (Alien Market) 4,400 65
----------
227
----------
UNITED KINGDOM - 16.3%
Abbey National PLC 56,000 765
Airtours PLC 60,000 1,161
Allied Colloids PLC 319,100 667
Allied Lyons 123,000 885
Amersham International PLC 28,700 765
Anglian Water PLC 70,300 767
Argos PLC 54,133 491
ASDA-MFI Group PLC 960,708 1,984
Associated British Ports PLC 170,000 726
B.A.T. Industries PLC 151,600 1,357
Barclays Bank PLC 32,000 635
BASS PLC 60,000 732
Berisford PLC 400,000 959
BG PLC 58,000 212
Britannic Assurance PLC 63,000 850
British Aerospace PLC 119,319 2,656
British Airways PLC 107,000 1,220
British Petroleum Co. PLC 415,262 5,166
British Steel PLC 99,600 248
British Telecom PLC 280,060 2,080
BTR PLC 408,100 1,397
Bunzl PLC 200,000 647
Burmah Castrol PLC 39,000 660
Cable & Wireless PLC 264,500 2,423
Cable & Wireless PLC - SP ADR 27,209 760
Cadbury Schweppes PLC 229,918 2,052
Caradon PLC (a) 110,624 370
Centrica PLC (a) 58,000 71
Coats Viyella PLC 48,000 101
Commercial Union Assurance Co. PLC 122,000 1,283
Compass Group PLC 125,000 1,399
Costain Group PLC (a) 6,800 5
Courtaulds PLC 91,000 514
Courtaulds Textile Co. PLC 96,000 491
Cowie Group PLC 130,416 780
Dalgety PLC 124,000 533
Devro International PLC 85,000 480
E D & F Man Group PLC 110,000 359
Electrocomponents PLC 40,000 298
EMI Group PLC 30,000 540
First Leisure Corp. PLC 85,000 439
Flextech PLC (a) 33,800 366
General Cable PLC (a) 134,300 365
General Electric Co. PLC 63,000 377
GKN PLC 9,000 154
Glaxo Wellcome PLC 272,215 5,633
Glynwed International PLC 168,200 651
International Securities Fund 63
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Granada Group PLC 56,000 $ 737
Grand Metropolitan PLC 226,000 2,175
Great University Stores PLC 102,000 1,035
Guardian Royal Exchange PLC 500,600 2,263
Guinness PLC 238,900 2,339
Hanson PLC (a) 165,750 823
Heywood Williams Group PLC 21,041 72
Hillsdown Holdings PLC 391,051 1,104
HSBC Holdings 9,300 276
HSBC Holdings PLC 121,000 3,725
Huntingdon International Holdings PLC - ADR (a) 41,600 224
Hyder PLC 49,250 664
Imperial Chemical Industries PLC 118,300 1,643
Imperial Tobacco Group PLC 113,600 730
Invesco PLC 262,800 1,540
Kingfisher PLC 198,542 2,255
Ladbroke Group, Ltd. PLC 742,669 2,919
Laing (John) PLC Class A NV 43,000 267
Laird Group PLC 106,868 621
Lloyds TSB Group PLC 211,220 2,170
London Clubs International 110,000 692
London Electricity PLC 9,700 114
LucasVarity PLC 666,600 2,309
Manchester United PLC 60,000 602
Medeva PLC 150,000 642
MEPC PLC 59,800 490
National Westminster Bank PLC 309,101 4,157
Norwich Union PLC (a) 90,077 477
Orange PLC (a) 47,030 155
Pace Micro Technology PLC 160,000 181
Pilkington Brothers PLC 176,000 404
Powell Duffryn PLC 55,000 408
Powergen PLC 124,722 1,483
Premier Farnell PLC 75,000 583
Provident Financial PLC 72,000 671
Racal Electronics PLC 293,400 1,173
Railtrack Group PLC 80,000 830
Rank Group PLC 153,500 973
Redland PLC 17,927 102
Reed International 254,180 2,455
RMC Group PLC 48,000 778
Rolls-Royce PLC 37,037 141
Royal & Sun Alliance Insurance Group PLC 47,000 348
Royal Bank of Scotland Group PLC 215,200 2,014
RTZ Corp. PLC (Regd) 177,724 3,097
Safeway PLC 396,500 2,295
Sainsbury (J.) PLC 224,595 1,361
Scapa Group PLC 21,952 78
Scottish Power PLC 257,000 1,669
Sears PLC 799,800 906
Sevren Trent Water PLC 50,000 649
Shell Transportation & Trading PLC (Regd) 1,046,100 7,142
Smith & Nephew PLC 570,000 1,585
Smith (David S.) Holdings PLC 90,061 282
SmithKline Beecham PLC 148,000 2,725
Somerfield PLC 300,000 904
South West Water PLC 63,200 740
Stagecoach Holdings PLC 89,166 940
Stakis PLC 266,302 461
T & N PLC 241,000 574
Tarmac, Ltd. PLC 297,290 614
Taylor Woodrow PLC 212,000 621
Tesco Store Holdings PLC 65,181 403
Thorn PLC 250,000 708
Tomkins PLC 633,070 2,741
Trinity Holdings PLC 80,000 340
Unilever PLC 8,340 239
United Newspaper, Ltd. PLC 155,200 1,800
Vendome PLC 53,000 395
Vickers, Ltd. PLC 163,700 556
Vodafone Group PLC 979,850 4,781
Wessex Water PLC 171,400 1,161
Williams Holdings PLC 128,333 694
Willis Corroon Group PLC 198,200 421
WPP Group PLC 170,000 694
Zeneca Group PLC 47,000 1,553
----------
140,367
----------
VENEZUELA - 0.0%
CIA Anon Nacional Telefonos de Venezuela - ADR 2,960 128
----------
128
----------
TOTAL COMMON STOCKS
(cost $647,815) 762,184
----------
64 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
PREFERRED STOCKS - 1.4%
AUSTRALIA - 0.3%
News Corp., Ltd. 279,500 $ 1,103
Sydney Harbour Casino Holdings, Ltd. (a) 808,853 1,271
----------
2,374
----------
AUSTRIA - 0.0%
Bank Austria AG (a) 14,028 430
----------
430
----------
BRAZIL - 0.4%
Banco Bradesco SA NPV 24,087,360 243
Banco Itau SA (Regd) 253,000 142
Brahma (cia Cervej) NPV 379,465 289
Brasmotor SA NPV 445,000 99
CEMIG SA 4,668,942 241
Cim Port Itau (Cia) 313,600 108
Companhia Energetica de Sao Paulo - ADR (Regd)(a) 3,600 72
Coteminas (Cia Tec) NPV 312,000 122
Lojas Americanas NPV (a) 4,389,000 60
Petroleo Brasileiro SA NPV 1,081,486 300
Telecomunicacoes - NPV 1,441,094 471
Telecomunicacoes Brasileiras - NPV 3,876,068 588
Telecomunicacoes de Minas Gerais Class B NPV 660,000 117
Telecomunicacoes de Minas Gerais Rights (a) 8,186 1
Telecomunicacoes do Rio de Janeiro SA NPV 621,000 96
Telecomunicacoes do Rio de Janeiro SA NPV (a) 73,625 11
Uniao de Bancos Brasileiros NPV 6,974,000 256
Usiminas Uni Sd Mg NPV 5,962 66
----------
3,282
----------
GERMANY - 0.7%
Bayer Motoren Werk 600 340
Draegerwerk AG 950 21
Dyckerhoff AG 200 72
Fielmann AG 2,271 68
GEA AG 460 178
Hornbach Holding AG 2,150 182
Hugo Boss 50 60
Jungheinrich 900 148
Krones AG NV 1,147 468
M.A.N. AG 1,990 504
Porsche AG 700 931
RWE AG 31,640 1,101
SAP AG 4,395 913
Volkswagen AG 2,080 1,170
Wella AG 100 69
----------
6,225
----------
ITALY - 0.0%
Fiat SPA 123,000 227
----------
227
----------
NETHERLANDS - 0.0%
International Nederlanden CVA 2,274 11
----------
11
----------
TOTAL PREFERRED STOCKS
(cost $9,288) 12,549
----------
PRINCIPAL
AMOUNT
(000)
----------
LONG-TERM INVESTMENTS - 0.6%
BELGIUM - 0.0%
Kredietbank (conv.)
5.750% due 12/31/03 BEF 1,500 $ 61
----------
61
----------
ITALY - 0.0%
Italy, Republic of (conv.)
6.500% due 06/28/01 ITL 165,000 106
----------
106
----------
JAPAN - 0.6%
Bank of Tokyo - Cayman
Finance, Ltd. (Perpetual Maturity)
4.250% due 03/29/49 JPY 230,000 2,699
Ricoh Co., Ltd. (conv.)
1.500% due 03/29/02 33,000 435
STB Cayman Capital, Ltd. (conv.)
0.500% due 10/01/07 80,000 785
International Securities Fund 65
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Sumitomo Wiring Systems (conv.)
0.900% due 09/30/08 JPY 40,000 $ 375
Yamanouchi Pharmaceutical (conv.)
1.250% due 03/31/14 60,000 826
----------
5,120
----------
MALAYSIA - 0.0%
Multi Purpose Holdings Berhad (conv.)
3.000% due 11/13/01 MYR 258 87
Renong Berhad (conv.)
4.000% due 05/22/01 45 14
----------
101
----------
TOTAL LONG-TERM INVESTMENTS
(cost $4,985) 5,388
----------
SHORT-TERM INVESTMENTS - 8.6%
UNITED STATES - 8.6%
Frank Russell Investment Company
Money Market Fund, due on demand (b) $ 67,069 67,069
United States Treasury Notes
5.75% due 10/31/97 (c) 7,150 7,155
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $74,223) 74,224
----------
TOTAL INVESTMENTS
(identified cost $736,311)(d) - 99.0% $ 854,345
OTHER ASSETS AND LIABILITIES,
NET - 1.0% 8,293
----------
NET ASSETS - 100.0% $ 862,638
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with
futures purchased by the Fund.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
GDS - Global Depositary Share
NPV - No Par Value
NV - Nonvoting
PLC - Public Limited Company
144A - Represents private placement security for qualified
buyers according to rule 144A of the Securities Act of 1933.
FOREIGN CURRENCY ABBREVIATIONS:
ATS - Austria schilling
AUD - Australian dollar
BEF - Belgian franc
CAD - Canadian dollar
CHF - Swiss franc
DEM - German mark
ESP - Spanish peseta
FRF - French franc
GBP - British pound
HKD - Hong Kong dollar
ITL - Italian lira
JPY - Japanese yen
MYR - Malaysian ringgit
NLG - Dutch guilder
SEK - Swedish krona
SGD - Singapore dollar
USD - U.S. dollar
The accompanying notes are an integral part of the financial statements.
66 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
FTSE - 100 Index
Futures Contracts (UK) expiration date 09/97 155 $ (588)
TOPIX Index
Futures Contracts (Japan) expiration date 09/97 286 522
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures Contracts Purchased (#) $ (66)
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at
$7,155 were held as collateral by the custodian in connection
with futures contracts purchased by the Fund.
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ------------------------------------------------- ---------- ----------
Basic Industries 7.4% $ 63,518
Capital Goods 7.9 68,146
Consumer Basics 11.9 102,616
Consumer Durable Goods 8.2 70,661
Consumer Non-Durables 5.2 45,091
Consumer Services 2.3 19,475
Energy 6.0 51,744
Finance 16.4 141,694
General Business 5.0 42,875
Miscellaneous 5.5 47,222
Shelter 2.1 18,177
Technology 3.7 31,676
Transportation 1.2 11,561
Utilities 7.0 60,277
Long-Term Investments 0.6 5,388
Short-Term Investments 8.6 74,224
---------- ----------
Total Investments 99.0 854,345
Other Assets and Liabilities, Net 1.0 8,293
---------- ----------
NET ASSETS 100.0% $ 862,638
---------- ----------
---------- ----------
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- ------------------------------------------------- ---------- ----------
Europe 35.0% $ 302,094
Japan 24.8 213,667
United Kingdom 16.3 140,367
Pacific Basin 9.5 82,228
Latin America 1.4 12,831
United States (Short-Term Investments) 8.6 74,225
Other 3.4 28,933
---------- ----------
Total Investments 99.0 854,345
Other Assets and Liabilities, Net 1.0 8,293
---------- ----------
NET ASSETS 100.0% $ 862,638
---------- ----------
---------- ----------
The accompanying notes are an integral part of the financial statements.
International Securities Fund 67
<PAGE>
INTERNATIONAL SECURITIES FUND
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS (NOTE 2)
June 30, 1997 (Unaudited)
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- --------------------- ---------------- ----------- ---------------
USD 57 BEF 2,031 07/01/97 $ --
USD 771 DEM 1,338 07/01/97 (4)
USD 742 GBP 446 07/01/97 1
USD 348 GBP 209 07/03/97 --
USD 542 HKD 4,202 07/03/97 --
USD 365 JPY 41,625 07/01/97 (1)
USD 73 JPY 8,360 07/02/97 --
USD 171 NLG 334 07/01/97 (1)
USD 419 SEK 3,229 07/01/97 (1)
USD 136 SGD 195 07/01/97 --
DEM 1,144 USD 659 07/01/97 3
ESP 4,663 USD 32 07/01/97 --
GBP 51 USD 84 07/02/97 --
GBP 17 USD 28 07/03/97 --
GBP 246 USD 408 07/07/97 (1)
HKD 351 USD 45 07/03/97 --
ITL 52,428 USD 31 07/01/97 --
ITL 710,266 USD 422 07/02/97 4
ITL 277,411 USD 164 07/03/97 1
ITL 804,993 USD 474 07/07/97 --
JPY 82,166 USD 725 07/01/97 9
JPY 18,640 USD 163 07/02/97 --
NLG 18 USD 9 07/02/97 --
SEK 1,250 USD 163 07/01/97 1
SEK 2,314 USD 299 07/02/97 --
----------
$ 11
----------
----------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- --------------------- ---------------- ----------- ---------------
USD 704 AUD 4,619 07/11/97 $ (5)
USD 852 FRF 4,987 07/31/97 (4)
USD 9,886 GBP 6,000 09/26/97 80
USD 16,620 GBP 10,000 09/28/97 (11)
USD 5,022 HKD 38,908 07/11/97 (1)
USD 575 AUD 4,456 07/11/97 --
USD 26,746 JPY 3,000,000 09/26/97 (240)
AUD 163 USD 127 07/11/97 3
DEM 4,912 USD 2,861 09/18/97 28
HKD 43,364 USD 5,597 07/11/97 --
ITL 11,675,000 USD 6,864 09/18/97 10
----------
$ (140)
----------
----------
The accompanying notes are an integral part of the financial statements.
68 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $736,311)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . $ 854,345
Foreign currency holdings (Identified cost $13,763). . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,731
Forward foreign currency exchange contracts (cost $75,279)(Note 2) . . . . . . . . . . . . . . . . . . . . 75,097
Foreign currency exchange spot contracts (cost $7,329)(Note 2) . . . . . . . . . . . . . . . . . . . . . . 7,323
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,975
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,594
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,534
Foreign taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,063
-------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965,662
LIABILITIES
Payables:
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 618
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,351
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946
Accrued fees to affiliates (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . 734
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . . . 304
Forward foreign currency exchange contracts (cost $75,279)(Note 2) . . . . . . . . . . 75,237
Foreign currency exchange spot contracts (cost $7,329)(Note 2) . . . . . . . . . . . . 7,312
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,024
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 862,638
---------------
---------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,693
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,320
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,034
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66)
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (207)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717,727
---------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 862,638
---------------
---------------
NET ASSET VALUE, offering and redemption price per share:
Class S ($861,540,343 divided by 13,646,002 shares of $.01
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 63.14
---------------
---------------
Class C ($1,097,963 divided by 17,445 shares of $.01 par
value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62.94
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
International Securities Fund 69
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,724
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,205
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
Less foreign taxes withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,221)
---------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,013
EXPENSES (Notes 1, 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,631
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Registration fees
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Distribution fees - Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Shareholder servicing fees - Class C . . . . . . . . . . . . . . . . . . . . . . . . . 1
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,801
---------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,212
---------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,989
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,923
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . . . 691 25,603
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,858
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . 155 40,480
--------------- ---------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,083
---------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . . $ 71,295
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
70 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,212 $ 6,195
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,603 23,177
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . . . 40,480 20,308
------------------- -------------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . 71,295 49,680
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (315) (3,797)
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (3)
Distributions in excess of net investment income
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (2,153)
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (2)
Net realized gain on investment
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,899) (22,766)
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) (13)
------------------- -------------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . . (7,221) (28,734)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6) . . . . . 54,326 99,903
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . 118,400 120,849
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744,238 623,389
------------------- -------------------
End of period (including undistributed net investment income of
$2,693 and accumulated distributions in excess of net investment
income of $2,204, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 862,638 $ 744,238
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
International Securities Fund 71
<PAGE>
INTERNATIONAL SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 58.48 $ 56.61 $ 53.96 $ 57.95 $ 44.75 $ 49.15
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . .05 .53 .56 .44 .40 .61
Net realized and unrealized gain (loss) on investments . . . . 5.16 3.72 4.89 1.23 14.53 (4.02)
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations. . . . . . . . . . . 5.21 4.25 5.45 1.67 14.93 (3.41)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . (.02) (.31) (.88) (.04) (.38) (.68)
In excess of net investment income . . . . . . . . . . . . . . -- (.17) (.23) (.02) (.23) --
Net realized gain on investments . . . . . . . . . . . . . . . (.53) (1.90) (1.69) (5.60) (1.12) (.31)
-------- -------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . . . . . (.55) (2.38) (2.80) (5.66) (1.73) (.99)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 63.14 $ 58.48 $ 56.61 $ 53.96 $ 57.95 $ 44.75
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . 9.02 7.63 10.20 4.86 33.48 (6.94)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . 861,540 743,615 623,389 563,333 454,482 262,886
Ratios to average net assets (%)(b):
Operating expenses, net. . . . . . . . . . . . . . . . . . . 1.26 1.30 1.30 1.30 1.38 1.45
Operating expenses, gross. . . . . . . . . . . . . . . . . . 1.26 1.31 1.31 1.33 1.42 1.47
Net investment income. . . . . . . . . . . . . . . . . . . . 1.37 .91 .97 .70 .82 1.37
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . . 82.12 42.43 42.96 72.23 60.22 48.93
Per share amount of fees waived ($ omitted). . . . . . . . . . -- .0050 .0080 .0178 .0161 .0054
Average commission rate paid per share
of security ($ omitted)(c) . . . . . . . . . . . . . . . . . .0033 .0039 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
(c) In certain foreign markets the relationship between the translated U.S.
dollar price per share and commission paid per share may vary from that of
domestic markets.
72 International Securities Fund
<PAGE>
INTERNATIONAL SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996**
------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58.47 $ 58.56
------------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.56) (.03)
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . 5.56 1.68
------------- -------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . . . 5.00 1.65
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (.27)
In excess of net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . -- (.16)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (.53) (1.31)
------------- -------------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.53) (1.74)
------------- -------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62.94 $ 58.47
------------- -------------
------------- -------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.65 2.86(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . 1,098 623
Ratios to average net assets (%)(c):
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.97 2.00
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77 (.61)
Portfolio turnover rate (%)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.12 42.43
Average commission rate paid per share of security ($ omitted)(d). . . . . . . . . . . .0033 .0039
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31, 1996.
(a) Periods less than one year are not annualized.
(b) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(c) The ratios for the periods ended June 30, 1997 and December 31, 1996 are
annualized.
(d) In certain foreign markets the relationship between the translated U.S.
dollar price per share and commission paid per share may vary from that of
domestic markets.
International Securities Fund 73
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 92.0%
ASSET-BACKED SECURITIES - 8.2%
Advanta Home Equity Loan Trust
Series 1991-1 Class A
9.000% due 02/25/06 $ 66 $ 68
AFC Home Equity Loan Trust
Series 1996-2 Class 1A3
7.590% due 09/25/27 1,315 1,332
Capita Equipment Receivables Trust
Series 1996-1 Class A-4
6.280% due 06/15/00 860 860
Case Equipment Loan Trust
Series 1996-B Class A3
6.650% due 09/15/03 3,460 3,483
Chase Manhattan Credit Card Master Trust
Series 1996-4 Class A
6.730% due 02/15/03 1,685 1,699
Chevy Chase Auto Receivables Trust
Series 1997-1 Class A
6.500% due 10/15/03 2,094 2,100
Citibank Credit Card Master Trust I
Series 1997-3 Class A
6.839% due 02/10/04 (c) 980 978
Contimortgage Home Equity Loan Trust
Mortgage Pass-thru Certificate
Series 1994-3 Class A-4
7.850% due 06/01/24 435 447
Series 1994-4 Class A6
8.270% due 12/15/24 323 331
Series 1995-1 Class A2-A
8.600% due 06/15/25 82 82
Series 1996-4 Class A-9
6.880% due 01/15/28 825 818
Series 1997-2 Class A6
7.120% due 03/15/16 825 825
Discover Card Trust
Series 1992-B Class A
6.800% due 06/16/00 145 145
EQCC Home Equity Loan Trust
Series 1997-1 Class A4
7.160% due 03/15/13 900 906
Fingerhut Master Trust
Series 1996-1 Class A
6.450% due 02/20/02 4,900 4,914
General Motors Acceptance Corp.
Grantor Trust
Series 1997-A Class A
6.500% due 04/15/02 1,842 1,849
Green Tree Financial Corp.
Series 1997-1 Class M1
7.220% due 03/15/28 1,200 1,187
Series 1997-4 Class M1
7.220% due 02/15/29 925 925
Green Tree Recreational Equipment
Series 1997-3 Class A1
6.550% due 07/15/28 3,745 3,744
Key Auto Finance Trust
Series 1997-1 Class A3
6.150% due 03/15/04 1,455 1,444
Lehman Pass-thru Securities, Inc.
Series 1991-2 Class A-1
8.000% due 03/20/99 55 56
Metris Master Trust
Series 1997-1 Class A
6.870% due 10/20/05 745 754
Mortgage Capital Funding, Inc.
Series 1996-MC1 Class A2B
7.900% due 02/15/06 775 804
Navistar Financial Owner Trust
Series 1997-A Class A3
6.750% due 03/15/02 1,475 1,488
Oakwood Mortgage Investors, Inc.
Series 1996-B Class A2
6.800% due 10/15/26 (c) 1,000 1,003
Onyx Acceptance Grantor Trust
Series 1997-1 Class A
6.550% due 09/15/03 (c) 148 149
Preferred Credit Corp.
Series 1997-1 Class A6
7.590% due 07/25/26 850 862
Premier Auto Trust
Series 1996-4 Class A4
6.400% due 10/06/01 935 937
Residential Funding Mortgage Securities I, Inc.
Series 1997-S4 Class A5
7.000% due 03/25/12 991 974
Resolution Trust Corp.
Mortgage Pass-thru Certificate
Series 1992 Class A-3
10.635% due 05/25/24 (c) 431 438
Series 1994-C1 Class C
8.000% due 06/25/26 975 997
Series 1994-C2 Class D
8.000% due 04/25/25 375 383
74 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Resolution Trust Corp.
Mortgage Pass-thru Certificate
Series 1995-C1 Class C
6.900% due 02/25/27 (c) $ 350 $ 346
Series 1995-C1 Class D
6.900% due 02/25/27 775 763
Sears Credit Account Master Trust II
Series 1996-2 Class A
6.500% due 10/15/03 740 743
Sears Savings Bank
Mortgage Pass-thru Certificate
Series 1992-A Class A
8.552% due 05/25/32 (c) 867 863
Structured Asset Securities Corp.
Mortgage Pass-thru Certificate
Series 1996-CFL Class C
6.525% due 02/25/28 300 303
Team Fleet Financing Corp.
Series 1997-1 Class A
7.350% due 05/15/03 1,800 1,826
The Money Store Home Equity Loan Trust
Series 1994-D Class A-4
8.750% due 01/15/20 700 729
Wal-Mart Stores, Inc.
Series 1994-B3
8.800% due 12/30/14 315 353
WFS Financial Owner Trust
Series 1997-B Class A3
6.300% due 06/20/99 1,580 1,580
World Omni Automobile Lease
Securitization Trust
Series 1996-B Class A2
6.200% due 11/15/02 775 776
Series 1997-A Class A4
6.900% due 06/25/03 4,265 4,301
Series 1997-A Class B
7.300% due 06/25/03 (c) 750 749
----------
50,314
----------
CORPORATE BONDS AND NOTES - 14.9%
Ahmanson (H.F.) & Co.
8.250% due 10/01/02 425 450
Ahmanson Capital Trust I Series A
8.360% due 12/01/26 400 402
Air Products & Chemicals, Inc
8.750% due 04/15/21 250 282
Allegiance Corp.
7.300% due 10/15/06 475 475
7.000% due 10/15/26 130 130
America West Airlines, Series A
6.850% due 07/02/09 485 473
American Express Co.
8.500% due 08/15/01 255 271
American General Finance Corp.
8.500% due 06/15/99 570 592
American Stores Co.
8.000% due 06/01/26 290 297
Analog Devices, Inc.
6.625% due 03/01/00 125 124
Aristar, Inc.
6.300% due 07/15/00 1,270 1,255
Associates Corp. of North America
Series H (MTN)
6.250% due 03/15/99 1,010 1,009
7.090% due 04/11/03 400 404
AT&T Corp.
8.625% due 12/01/31 220 232
Atlantic Richfield Co.
9.125% due 08/01/31 550 661
AVCO Financial Services, Inc.
7.250% due 07/15/99 275 279
8.500% due 10/15/99 405 422
6.000% due 08/15/02 800 770
Baltimore Gas & Electric Co.
6.500% due 02/15/03 840 828
Bank of New York, Inc.
7.875% due 11/15/02 350 366
Bank One, Columbus, Ohio
7.375% due 12/01/02 120 123
BankAmerica Corp.
6.850% due 03/01/03 425 425
6.875% due 06/01/03 260 259
Barnett Bank, Inc.
6.900% due 09/01/05 405 397
Baxter International, Inc.
7.650% due 02/01/27 100 101
Bell Telephone Co. of Pennsylvania
8.350% due 12/15/30 355 406
BellSouth Telecommunications
7.000% due 12/01/2095 385 365
Beneficial Corp.
8.400% due 05/15/08 1,235 1,378
Boeing Co.
8.750% due 08/15/21 550 635
Diversified Bond Fund 75
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Broken Hill Property Finance USA
6.420% due 03/01/26 $ 800 $ 784
Carolina Power & Light Co.
6.875% due 08/15/23 410 375
Case Corp.
7.250% due 08/01/05 330 332
7.250% due 01/15/16 120 113
Caterpillar Financial Services (MTN)
9.500% due 02/06/07 420 489
Central Fidelity Banks, Inc.
8.150% due 11/15/02 170 178
Central Power & Light Co.
Series FF
6.875% due 02/01/03 600 601
Champion International Corp.
6.400% due 02/15/26 460 438
Chase Manhattan Corp.
6.500% due 08/01/05 300 290
Chesapeake & Potomac Telephone Co.
8.375% due 10/01/29 230 264
Chrysler Corp.
7.450% due 03/01/27 450 444
Chrysler Financial Corp.
9.500% due 12/15/99 275 293
Cincinnati Gas & Electric Co.
7.200% due 10/01/23 410 386
CIT Group Holdings, Inc.
6.350% due 07/31/98 3,000 3,014
CIT Group Holdings, Inc. (MTN)
6.625% due 06/28/99 1,200 1,209
6.700% due 05/02/00 500 503
Citicorp
9.500% due 02/01/02 120 132
7.125% due 06/01/03 390 394
Coca Cola Enterprises, Inc.
7.000% due 10/01/26 675 686
Commercial Credit Group, Inc.
5.750% due 07/15/00 295 288
8.700% due 06/15/10 380 432
Commonwealth Edison Co. Series 85
7.375% due 09/15/02 945 959
Conagra, Inc. (MTN)
8.100% due 05/20/02 300 315
Consolidated Natural Gas Co.
8.625% due 12/01/11 62 65
Consolidated Rail Corp.
Pass-thru Certificate Structured Note
Series 1995 Class A
6.760% due 05/25/15 479 469
Constitution Capital Trust I
9.150% due 04/15/27 400 415
CoreStates Capital Corp.
5.875% due 10/15/03 400 378
Corporate Property Investors
7.875% due 03/15/16 1,575 1,597
Dayton Hudson Corp.
9.750% due 07/01/02 300 335
7.500% due 07/15/06 100 102
Discover Credit Corp. (MTN)
8.350% due 04/27/99 360 372
Dole Food Co., Inc.
6.750% due 07/15/00 170 170
Duke Power Co.
7.000% due 07/01/33 695 640
Eastman Chemical Co.
6.375% due 01/15/04 420 408
7.250% due 01/15/24 300 286
Eaton Corp.
7.000% due 04/01/11 315 299
Equitable Life Assurance Society
7.700% due 12/01/15 1,575 1,574
Federal Realty Investment Trust
7.480% due 08/15/26 750 750
First Chicago Corp.
8.875% due 03/15/02 505 546
First Fidelity Bancorp
9.625% due 08/15/99 255 271
First Interstate Bancorp (MTN)
9.375% due 01/23/02 135 146
First Union Institutional Capital Trust I
8.040% due 12/01/26 225 224
First Union National Bank, Newark (MTN)
7.125% due 10/15/06 85 85
Fleet Financial Group, Inc.
8.125% due 07/01/04 595 628
Florida Residential Property
& Casualty Insurance Co., Series A
7.375% due 07/01/03 1,700 1,713
Ford Motor Credit Co. (MTN)
6.000% due 02/27/01 1,170 1,143
6.290% due 03/05/01 580 572
76 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Fortune Brands, Inc.
8.625% due 11/15/21 $ 420 $ 470
7.875% due 01/15/23 80 82
General Electric Capital Corp.
8.300% due 09/20/09 235 258
6.660% due 05/01/18 (c) 775 777
General Motors Acceptance Corp.
6.625% due 10/01/02 1,550 1,536
Goldman Sachs Group L.P. (MTN)
7.200% due 03/01/07 650 653
Grand Metropolitan Investment Corp.
7.450% due 04/15/35 300 318
Great Atlantic & Pacific Tea, Inc.
7.750% due 04/15/07 1,600 1,627
Hertz Corp.
9.000% due 11/01/09 230 262
Household Finance Corp.
6.375% due 06/30/00 1,200 1,192
International Lease Finance Corp.
5.750% due 01/15/99 455 452
6.375% due 02/15/02 400 394
ITT Industries, Inc.
7.400% due 11/15/25 715 692
Jackson National Life Insurance Co.
8.150% due 03/15/27 425 434
JC Penney & Co., Inc.
7.250% due 04/01/02 850 865
7.600% due 04/01/07 300 309
JPM Capital Trust I
7.540% due 01/15/27 225 215
Kansas Gas & Electric Co.
7.600% due 12/15/03 200 206
6.500% due 08/01/05 450 433
Liberty Mutual Insurance Co.
8.500% due 05/15/25 500 532
7.875% due 10/15/26 500 492
Lockheed Martin Corp.
7.750% due 05/01/26 600 615
May Department Stores Co.
6.875% due 11/01/05 480 475
Mellon Bank, NA
7.625% due 09/15/07 355 366
Mellon Capital II Series B
7.995% due 01/15/27 320 320
Merry Land & Investment, Inc.
7.250% due 06/15/05 750 745
Morgan Stanley Group, Inc.
8.100% due 06/24/02 125 131
Motorola, Inc.
7.500% due 05/15/25 100 102
Nabisco, Inc.
6.700% due 06/15/02 260 257
Nationsbank Corp.
6.625% due 01/15/98 170 171
7.750% due 08/15/04 450 467
New England Telephone & Telegraph Co.
7.875% due 11/15/29 235 249
Northwestern Bell Telephone Co.
7.750% due 05/01/30 630 635
Norwest Corp. Series H (MTN)
6.750% due 06/15/07 300 293
Norwest Financial, Inc.
6.250% due 11/01/02 525 513
6.375% due 11/15/03 575 561
NYNEX Corp.
9.550% due 05/01/10 375 426
Occidental Petroleum Corp.
10.125% due 11/15/01 210 236
Occidental Petroleum Corp. (MTN)
8.500% due 11/09/01 245 259
Pacific Bell
7.500% due 02/01/33 785 757
Pennsylvania Power & Light Co.
6.875% due 03/01/04 1,000 998
Pennzoil Co.
10.125% due 11/15/09 85 104
PepsiCo, Inc.
7.625% due 12/18/98 285 290
Philip Morris Cos., Inc.
6.950% due 06/01/06 295 296
7.650% due 07/01/08 310 316
Pitney Bowes Credit Corp.
8.550% due 09/15/09 460 519
Praxair, Inc.
6.850% due 06/15/05 700 695
Procter & Gamble Co.
Sharing ESOP Series A
9.360% due 01/01/21 90 108
Ralston Purina Co.
7.875% due 06/15/25 615 626
Realty Income Corp.
7.750% due 05/06/07 1,175 1,190
Diversified Bond Fund 77
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Republic New York Corp.
9.750% due 12/01/00 $ 190 $ 207
8.250% due 11/01/01 150 158
RJR Nabisco, Inc.
8.625% due 12/01/02 325 334
Rockwell International Corp.
8.875% due 09/15/99 255 268
Salomon, Inc. Series D (MTN)
6.080% due 03/10/98 2,000 2,000
Seagram Co., Ltd.
8.350% due 01/15/22 320 345
Sears Roebuck Acceptance Corp.
Series II (MTN)
6.690% due 04/30/01 375 375
Service Corp. International
7.375% due 04/15/04 560 574
Shopping Center Associates
6.750% due 01/15/04 750 731
Signet Bank
7.800% due 09/15/06 750 773
Simon Debartolo Group L.P.
6.875% due 11/15/06 800 778
Smith Barney Holdings, Inc.
7.000% due 03/15/04 950 949
Southern California Edison Co.
Series 1993-E
5.450% due 06/15/98 600 596
Suntrust Banks, Inc.
7.375% due 07/01/02 300 307
Tenneco Corp.
10.200% due 03/15/08 590 717
Texaco Capital, Inc.
9.750% due 03/15/20 440 546
8.875% due 09/01/21 220 255
Texas Utilities Electric Co.
9.500% due 08/01/99 805 850
TIG Capital Trust I
8.597% due 01/15/27 1,050 1,071
Time Warner Entertainment Co., L.P.
10.150% due 05/01/12 350 425
8.375% due 03/15/23 1,075 1,104
8.375% due 07/15/33 1,000 1,021
Time Warner, Inc.
6.773% due 08/15/00 (c) 500 501
7.975% due 08/15/04 300 310
8.110% due 08/15/06 600 623
8.180% due 08/15/07 600 625
Transamerica Financial Corp.
8.375% due 02/15/98 210 213
Transamerica Financial Corp. (MTN)
9.250% due 02/16/98 500 509
Union Carbide Chemicals & Plastics
7.875% due 04/01/23 590 601
Union Oil Co. (MTN)
9.400% due 02/15/11 470 549
Union Pacific Corp.
7.600% due 05/01/05 120 123
Union Pacific Railroad Trust
Pass-thru Certificate
Series 1996-A2
7.060% due 05/15/03 500 504
United Technologies Corp.
8.750% due 03/01/21 380 435
US West Capital Funding, Inc.
7.900% due 02/01/27 760 768
Virginia Electric & Power Co.
8.750% due 04/01/21 200 211
Wachovia Corp.
6.800% due 06/01/05 305 302
Washington Real Estate Investment Trust
7.250% due 08/13/06 750 744
Wells Fargo & Co.
6.875% due 04/01/06 500 491
Wellsford Residential Property Trust
9.375% due 02/01/02 750 815
Westvaco Corp.
9.750% due 06/15/20 115 141
Whirlpool Corp.
9.500% due 06/15/00 250 267
Willamette Industries, Inc.
7.850% due 07/01/26 520 533
Wilmington Trust
10.370% due 01/02/07 1,711 1,914
World Financial Properties Tower
Series 1996 WBF-B
6.910% due 09/01/13 1,194 1,153
----------
91,553
----------
EURODOLLAR BONDS - 0.5%
Mexico (United Mexican States)
7.875% due 08/06/01 (c) 2,000 2,006
Skandinaviska Enskilda Banken
8.125% due 09/06/49 (c)(g) 800 841
----------
2,847
----------
78 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
MORTGAGE-BACKED SECURITIES - 32.2%
ACLC Franchise Loan Receivables
1997 Pass Thru Class A1
7.120% due 03/15/12 $ 900 $ 900
American Southwest Financial Corp.
Series G Class G-4 CMO
12.250% due 11/01/14 274 312
BKD Commercial Mortgage Trust
Series 1997-C1 Class B
7.218% due 04/25/00 (c) 1,125 1,131
Chase Commercial Mortgage Securities Corp.
Series 1997-1 Class E
7.370% due 12/19/07 (c) 800 780
Citicorp Mortgage Securities, Inc.
Series 1992-1 Class A-5
8.000% due 04/25/21 1,177 1,178
Collateralized Mortgage Obligation Trust 56
Class B CMO
9.985% due 12/01/18 256 278
CSFB Finance Co., Ltd.
Series 1995-A Class A
7.542% due 11/15/05 (c) 450 443
DLJ Mortgage Acceptance Corp.
Series 1993 Class A-2 CMO
7.650% due 09/18/03 2,500 2,532
FDIC REMIC Trust
Series 1994-C1 Class 2A-2
7.850% due 09/25/25 542 546
Federal Home Loan Mortgage Corp.
6.000% 15 Year TBA (b) 5,285 5,095
7.500% 15 year TBA (b) 890 903
6.500% 30 Year TBA (b) 4,000 3,831
7.500% 30 Year TBA (b) 3,665 3,679
8.000% 30 Year TBA (b) 3,165 3,239
Federal Home Loan Mortgage Corp.
Participation Certificate
Group # 17-0171 9.000% due 06/01/16 300 319
Group # 17-0195 9.000% due 10/01/16 107 113
Group # 17-0197 9.000% due 10/01/16 13 14
Group # 17-0202 9.000% due 11/01/16 274 290
Group # 17-0203 9.000% due 11/01/16 144 153
Group # 18-1338 8.000% due 05/01/08 138 141
Group # 18-2098 8.000% due 11/01/08 23 24
Group # 18-2161 6.750% due 08/01/07 409 406
Group # 18-6664 8.500% due 02/01/08 192 199
Group # 21-7242 7.000% due 05/01/02 89 90
Group # 26-0607 12.000% due 06/01/14 101 115
Group # 28-4634 9.000% due 01/01/17 7 7
Group # 30-0025 12.500% due 04/01/16 161 185
Group # 30-8522 12.000% due 12/01/15 65 74
Group # 50-1051 7.000% due 06/01/03 367 371
Group # A0-0690 9.000% due 02/01/20 793 848
Group # C0-0140 9.000% due 07/01/22 284 303
Group # C0-0335 7.500% due 05/01/24 362 365
Group # C0-0509 7.500% due 04/01/27 1,471 1,477
Group # C0-0516 8.000% due 05/01/27 186 190
Group # C0-0525 8.000% due 06/01/27 520 538
Group # C8-0370 6.500% due 12/01/25 958 918
Group # C8-0458 9.000% due 10/01/26 37 39
Group # D2-3334 8.500% due 09/01/22 141 148
Group # D2-3590 8.500% due 09/01/22 39 40
Group # D4-7783 6.500% due 01/01/24 131 126
Group # D5-2665 7.500% due 05/01/24 63 64
Group # D5-3691 7.500% due 06/01/24 108 109
Group # D5-5057 7.500% due 07/01/24 448 451
Group # D5-7163 9.000% due 10/01/24 172 182
Group # D5-8304 7.500% due 01/01/25 582 586
Group # D5-9437 9.000% due 03/01/25 120 127
Group # D6-0132 7.500% due 05/01/25 121 122
Group # D6-0685 9.000% due 06/01/25 781 827
Group # D6-2402 6.500% due 08/01/25 85 81
Group # D6-2849 6.500% due 08/01/25 404 387
Group # D6-4174 6.500% due 09/01/25 24 23
Group # D6-4826 6.500% due 10/01/25 866 831
Group # D6-5159 6.500% due 11/01/25 443 425
Group # D6-5450 6.500% due 11/01/25 69 67
Group # D6-5479 6.500% due 11/01/25 322 309
Group # D6-5938 6.500% due 12/01/25 78 75
Group # D6-6651 6.500% due 12/01/25 462 443
Group # D6-6777 6.500% due 01/01/26 765 734
Group # D6-6779 7.500% due 01/01/26 96 96
Group # D6-7032 7.500% due 01/01/26 92 92
Group # D6-7251 7.500% due 01/01/25 866 873
Group # D6-7508 7.500% due 01/01/26 767 771
Group # D6-7637 7.500% due 11/01/24 1,074 1,083
Group # D6-7847 6.500% due 02/01/26 719 689
Group # D6-8132 6.500% due 02/01/26 193 185
Group # D6-8982 6.500% due 03/01/26 292 280
Group # D6-9153 6.000% due 03/01/26 151 140
Group # D6-9283 6.500% due 03/01/26 482 462
Group # D6-9347 6.000% due 03/01/26 827 770
Group # D6-9433 6.500% due 03/01/26 676 648
Group # D6-9765 6.500% due 04/01/26 732 702
Group # D6-9923 6.500% due 03/01/26 958 919
Diversified Bond Fund 79
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Group # D7-0441 6.500% due 04/01/26 $ 655 $ 629
Group # D7-0890 6.500% due 04/01/26 324 311
Group # D7-1161 6.500% due 05/01/26 487 467
Group # D7-7747 6.500% due 01/01/27 455 435
Group # D7-8139 6.500% due 02/01/27 60 58
Group # D7-9118 8.000% due 03/01/27 628 643
Group # D8-0116 7.500% due 04/01/27 989 993
Group # D8-0414 8.000% due 06/01/27 557 570
Group # E0-0279 6.500% due 02/01/09 164 162
Group # E0-0318 7.500% due 06/01/09 295 300
Group # E0-0332 7.500% due 08/01/09 178 181
Group # E0-0339 7.500% due 09/01/09 312 317
Group # E0-0344 7.500% due 10/01/09 209 212
Group # E0-0493 8.000% due 05/01/12 394 405
Group # E2-0145 7.500% due 11/01/09 169 172
Group # E2-0153 8.000% due 01/01/10 60 62
Group # E2-0270 8.000% due 10/01/11 568 584
Group # E4-9739 7.000% due 05/01/08 86 86
Group # E5-6296 6.500% due 01/01/09 332 328
Group # E5-6562 6.500% due 02/01/09 935 923
Group # E5-6737 6.500% due 02/01/09 201 198
Group # E5-6830 6.500% due 02/01/09 96 94
Group # E5-6953 6.500% due 02/01/09 104 103
Group # E5-9461 7.500% due 08/01/09 219 223
Group # E5-9610 7.500% due 08/01/09 213 217
Group # E5-9853 8.000% due 10/01/09 318 327
Group # E5-9955 7.500% due 11/01/09 35 36
Group # E6-2525 6.000% due 02/01/11 489 473
Group # E6-2968 6.500% due 02/01/11 259 254
Group # E6-3012 6.500% due 02/01/11 377 370
Group # E6-3170 6.000% due 03/01/11 539 521
Group # E6-3626 6.000% due 04/01/11 215 208
Group # E6-3755 6.000% due 04/01/11 74 72
Group # E6-3877 6.500% due 04/01/11 44 43
Group # E6-4011 6.000% due 05/01/11 122 118
Group # E6-4339 6.000% due 05/01/11 990 957
Group # E6-4343 6.000% due 05/01/11 76 74
Group # E6-5408 7.500% due 09/01/11 24 24
Group # E6-5462 7.500% due 10/01/11 526 534
Group # E6-6258 6.000% due 02/01/12 91 88
Group # E6-6720 6.500% due 04/01/12 199 196
Group # E6-6857 6.500% due 05/01/12 549 539
Group # G1-0329 7.500% due 02/01/10 64 65
Group # L7-0277 7.000% due 08/01/98 30 30
Group # M-4743 7.000% due 08/01/97 15 15
Group # M8-0325 7.500% due 05/01/01 230 232
Group # M8-0446 7.000% due 10/01/03 24 24
Pool # D6-7561 7.500% due 01/01/26 1,723 1,732
Pool # G00505 6.500% due 12/01/25 830 796
Federal Home Loan Mortgage Corp.
Participation Certificate
Series 1053 Class G
7.000% due 03/15/21 2,000 1,989
Federal National Mortgage Association
Pool # 030891 9.500% due 06/01/01 44 45
Pool # 038842 8.000% due 07/01/10 29 30
Pool # 042678 8.000% due 03/01/17 150 155
Pool # 046939 8.000% due 05/01/17 56 57
Pool # 047728 8.000% due 05/01/02 58 58
Pool # 050377 9.500% due 12/01/05 46 48
Pool # 050389 9.500% due 01/01/06 150 158
Pool # 050621 7.000% due 08/01/99 4 4
Pool # 050752 7.000% due 05/01/00 80 81
Pool # 050758 7.000% due 06/01/00 67 67
Pool # 050765 7.000% due 07/01/23 85 84
Pool # 050989 7.000% due 02/01/09 110 110
Pool # 052078 8.000% due 07/01/02 95 97
Pool # 053718 8.000% due 08/01/17 100 104
Pool # 054738 8.000% due 09/01/02 45 46
Pool # 055397 8.000% due 07/01/17 265 273
Pool # 057194 8.000% due 10/01/17 97 100
Pool # 061217 8.000% due 05/01/03 2 2
Pool # 061354 8.000% due 05/01/03 99 100
Pool # 062502 8.000% due 06/01/03 44 45
Pool # 063743 9.500% due 07/01/03 116 121
Pool # 064518 9.500% due 08/01/02 110 115
Pool # 070607 8.000% due 07/01/02 293 297
Pool # 070694 9.500% due 12/01/05 67 70
Pool # 087274 8.000% due 08/01/04 257 262
Pool # 103914 9.500% due 09/01/05 44 46
Pool # 110503 8.000% due 01/01/17 158 163
Pool # 120778 8.000% due 03/01/17 43 45
Pool # 124542 7.000% due 11/01/99 345 347
Pool # 124721 7.000% due 02/01/23 841 829
Pool # 124748 6.500% due 03/01/00 61 61
Pool # 125350 6.500% due 06/01/09 1,626 1,603
Pool # 127926 8.000% due 05/01/20 36 37
Pool # 145536 8.000% due 06/01/03 31 32
Pool # 157517 7.000% due 04/01/07 195 195
Pool # 183514 8.000% due 08/01/22 48 50
Pool # 187852 10.500% due 08/01/10 32 35
Pool # 190251 8.000% due 11/01/23 142 147
Pool # 190506 6.500% due 12/01/08 257 253
Pool # 190560 6.500% due 01/01/09 293 289
Pool # 190924 6.500% due 06/01/09 223 219
Pool # 204951 8.000% due 05/01/22 321 332
Pool # 208747 7.000% due 05/01/00 226 227
Pool # 210307 7.000% due 04/01/00 362 364
80 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Pool # 217364 8.000% due 01/01/22 $ 505 $ 522
Pool # 226836 7.000% due 09/01/08 209 210
Pool # 232574 6.500% due 08/01/08 396 391
Pool # 233079 7.000% due 09/01/08 76 77
Pool # 236344 7.000% due 09/01/08 176 176
Pool # 237598 7.500% due 05/01/24 196 197
Pool # 240738 6.500% due 10/01/08 170 168
Pool # 245865 6.500% due 02/01/09 241 238
Pool # 250030 7.000% due 05/01/24 986 971
Pool # 250035 6.500% due 05/01/09 47 47
Pool # 250576 7.000% due 05/01/26 974 955
Pool # 250903 9.000% due 01/01/27 903 951
Pool # 263037 6.500% due 05/01/09 355 350
Pool # 265868 6.500% due 01/01/24 137 132
Pool # 268936 6.500% due 01/01/24 1,342 1,292
Pool # 270164 6.500% due 02/01/09 600 592
Pool # 279123 6.500% due 04/01/09 292 288
Pool # 280810 6.500% due 05/01/09 186 183
Pool # 281940 6.500% due 05/01/09 353 348
Pool # 282125 6.500% due 05/01/09 79 78
Pool # 282300 6.500% due 04/01/09 644 635
Pool # 282327 7.000% due 04/01/24 1,891 1,863
Pool # 282424 6.500% due 05/01/09 391 386
Pool # 282830 7.000% due 06/01/24 28 28
Pool # 282833 7.000% due 06/01/09 144 145
Pool # 284192 6.500% due 05/01/09 98 97
Pool # 284451 6.500% due 05/01/09 50 49
Pool # 284659 7.000% due 05/01/09 231 231
Pool # 284690 7.000% due 06/01/09 259 260
Pool # 286570 7.000% due 06/01/24 757 746
Pool # 286829 7.000% due 06/01/24 257 253
Pool # 287464 6.500% due 06/01/09 117 116
Pool # 290876 7.500% due 07/01/24 34 34
Pool # 292247 7.000% due 09/01/24 532 524
Pool # 295473 7.500% due 09/01/24 138 139
Pool # 296279 7.500% due 10/01/24 488 491
Pool # 298155 6.000% due 02/01/11 844 814
Pool # 299372 8.500% due 12/01/24 289 301
Pool # 300822 8.500% due 01/01/25 1,525 1,586
Pool # 303297 8.500% due 05/01/25 138 144
Pool # 303456 6.500% due 08/01/25 532 512
Pool # 303555 7.000% due 09/01/25 1,379 1,353
Pool # 304527 8.500% due 01/01/25 332 346
Pool # 305454 9.000% due 02/01/25 67 71
Pool # 305550 8.500% due 02/01/25 441 458
Pool # 307029 7.000% due 07/01/25 770 756
Pool # 307034 8.500% due 07/01/25 959 998
Pool # 308706 8.500% due 07/01/25 1,013 1,054
Pool # 309300 7.000% due 07/01/03 430 432
Pool # 309686 8.500% due 05/01/25 755 785
Pool # 316681 7.000% due 07/01/25 678 668
Pool # 316938 7.000% due 07/01/25 274 270
Pool # 318203 7.000% due 08/01/25 712 698
Pool # 318949 7.000% due 08/01/25 747 733
Pool # 319141 7.000% due 08/01/25 53 52
Pool # 319622 7.000% due 08/01/25 616 605
Pool # 319647 7.000% due 08/01/25 651 639
Pool # 320080 7.000% due 08/01/25 279 275
Pool # 320105 7.000% due 10/01/25 735 722
Pool # 320320 7.000% due 08/01/25 884 867
Pool # 320333 7.000% due 08/01/25 116 114
Pool # 321192 8.500% due 08/01/25 45 47
Pool # 322586 6.500% due 09/01/25 233 224
Pool # 324177 8.500% due 08/01/25 1,535 1,597
Pool # 325288 6.500% due 11/01/25 566 542
Pool # 325917 6.500% due 10/01/25 192 184
Pool # 326080 6.500% due 09/01/25 118 113
Pool # 326488 6.500% due 10/01/25 240 230
Pool # 326556 6.500% due 10/01/25 777 744
Pool # 327601 6.500% due 11/01/25 211 202
Pool # 328823 6.500% due 11/01/25 235 225
Pool # 329051 6.500% due 12/01/25 99 95
Pool # 329279 6.500% due 10/01/25 247 237
Pool # 329500 6.500% due 11/01/25 216 207
Pool # 329843 6.500% due 11/01/25 307 294
Pool # 331011 6.500% due 12/01/25 133 127
Pool # 331614 6.500% due 01/01/26 289 276
Pool # 333057 7.500% due 01/01/26 114 115
Pool # 333219 6.500% due 12/01/25 182 174
Pool # 334888 6.500% due 02/01/26 185 178
Pool # 336376 6.500% due 02/01/26 150 143
Pool # 342105 7.000% due 04/01/26 649 637
Pool # 344394 7.500% due 05/01/03 269 273
Pool # 344571 7.000% due 04/01/26 1,784 1,751
Pool # 346055 7.500% due 06/01/26 460 462
Pool # 346095 7.500% due 05/01/03 232 235
Pool # 346213 7.000% due 05/01/26 1,490 1,462
Pool # 346321 7.000% due 04/01/26 581 570
Pool # 347236 7.500% due 06/01/26 278 279
Pool # 347572 7.500% due 05/01/03 618 627
Pool # 348452 7.500% due 07/01/26 206 207
Pool # 349818 7.000% due 06/01/03 391 392
Pool # 351719 6.500% due 02/01/27 485 463
Pool # 352112 8.000% due 09/01/26 62 63
Pool # 356100 8.000% due 09/01/11 115 118
Pool # 356703 9.000% due 08/01/26 163 172
Diversified Bond Fund 81
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Pool # 358703 9.000% due 11/01/26 $ 289 $ 305
Pool # 364398 8.000% due 11/01/26 496 507
Pool # 365464 7.500% due 11/01/11 361 366
Pool # 367056 7.000% due 12/01/26 81 80
Pool # 367489 6.500% due 03/01/27 528 505
Pool # 377534 6.500% due 04/01/27 461 441
Pool # 250884 7.000% due 12/01/99 178 175
Pool # 349359 7.000% due 06/01/26 789 774
Federal National Mortgage Association (REMIC)
Series 1992-10 Class ZD
8.000% due 11/25/21 1,577 1,569
Series 1994-81 Class PJ
8.000% due 07/25/23 1,550 1,635
Series G92-36 Class A
7.000% due 04/25/15 313 315
Federal National Mortgage Association
7.000% 30 Year TBA (b) 1,570 1,538
7.500% 30 Year TBA (b) 720 722
8.000% 30 Year TBA (b) 4,610 4,712
Principal Only Strip
Series 108 Class 1
Zero Coupon due 03/25/20 164 125
Interest Only Inverse Floater
Series 1993-208 Class SA
0.154% due 02/25/23 (c) 41,150 446
First Union Lehman Brothers Commercial Trust
Series 1997-C1 Class C
7.440% due 04/18/07 750 763
Government National Mortgage Association
Pool # 008148 7.000% due 02/20/23 (c) 3,871 3,977
Pool # 008303 6.875% due 10/20/23 (c) 4,496 4,614
Pool # 146110 9.500% due 05/15/16 24 26
Pool # 147480 9.500% due 03/15/16 42 46
Pool # 149590 9.000% due 05/15/16 89 96
Pool # 153267 9.500% due 04/15/16 13 14
Pool # 153617 8.500% due 03/15/17 258 272
Pool # 154050 9.500% due 05/15/16 19 21
Pool # 155749 8.500% due 06/15/16 32 34
Pool # 156576 8.500% due 01/15/17 166 175
Pool # 159956 9.000% due 06/15/16 300 322
Pool # 161666 9.000% due 08/15/16 27 29
Pool # 166178 8.500% due 07/15/16 193 204
Pool # 168336 9.000% due 08/15/20 91 97
Pool # 169824 9.000% due 11/15/16 36 39
Pool # 170662 8.500% due 08/15/16 226 239
Pool # 171553 9.000% due 07/15/16 417 448
Pool # 171772 9.000% due 10/15/16 557 598
Pool # 171776 9.000% due 11/15/16 137 147
Pool # 172035 9.000% due 08/15/16 90 96
Pool # 172723 8.500% due 07/15/16 69 72
Pool # 172908 9.000% due 09/15/16 31 34
Pool # 173049 9.000% due 07/15/16 265 284
Pool # 174840 9.000% due 10/15/16 52 56
Pool # 178046 8.500% due 05/15/17 311 328
Pool # 180290 8.500% due 11/15/16 587 619
Pool # 182526 8.500% due 02/15/17 253 268
Pool # 182616 9.000% due 06/15/17 34 36
Pool # 182643 9.000% due 10/15/16 7 8
Pool # 187956 9.000% due 11/15/16 21 23
Pool # 188448 8.500% due 03/15/17 282 297
Pool # 190486 8.000% due 03/15/17 114 119
Pool # 192748 8.500% due 08/15/17 58 61
Pool # 192883 8.500% due 01/15/17 120 127
Pool # 193242 8.500% due 01/15/17 101 106
Pool # 193800 9.000% due 10/15/16 124 133
Pool # 194001 8.500% due 02/15/17 269 284
Pool # 196932 8.500% due 04/15/17 30 31
Pool # 197268 8.500% due 05/15/17 123 129
Pool # 197400 8.500% due 01/15/17 71 75
Pool # 199031 8.500% due 01/15/17 107 113
Pool # 199531 8.500% due 02/15/17 271 286
Pool # 200712 8.500% due 02/15/17 841 887
Pool # 202144 8.500% due 02/15/17 353 373
Pool # 202883 8.500% due 03/15/17 142 150
Pool # 204828 8.500% due 02/15/17 3 3
Pool # 205426 8.500% due 02/15/17 125 132
Pool # 208209 8.000% due 05/15/17 26 27
Pool # 209198 8.500% due 03/15/17 230 243
Pool # 209432 9.000% due 05/15/17 120 129
Pool # 211127 8.500% due 03/15/17 235 248
Pool # 211129 8.500% due 06/15/17 45 47
Pool # 213365 8.000% due 04/15/17 25 26
Pool # 216928 8.500% due 05/15/17 262 276
Pool # 217536 8.500% due 05/15/17 88 93
Pool # 220383 8.500% due 07/15/17 238 251
Pool # 224505 9.000% due 07/15/17 34 37
Pool # 225968 8.500% due 07/15/17 48 51
Pool # 290338 10.500% due 06/15/20 58 64
Pool # 291365 10.500% due 07/15/20 25 28
Pool # 295123 10.500% due 10/15/20 64 72
Pool # 297999 10.500% due 12/15/20 121 134
Pool # 299159 10.500% due 11/15/20 233 259
Pool # 301982 10.500% due 01/15/21 56 62
Pool # 330230 7.000% due 06/15/23 70 69
Pool # 330867 7.000% due 11/15/22 280 276
Pool # 335301 6.500% due 03/15/09 168 167
82 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Pool # 338250 7.000% due 11/15/22 $ 458 $ 452
Pool # 340165 6.500% due 03/15/09 24 24
Pool # 340376 7.000% due 05/15/23 413 408
Pool # 342826 8.000% due 07/15/26 342 350
Pool # 343370 7.000% due 07/15/23 460 454
Pool # 345170 7.000% due 08/15/23 455 449
Pool # 347721 6.500% due 06/15/09 214 212
Pool # 347901 7.000% due 06/15/23 53 52
Pool # 350386 7.000% due 05/15/23 294 290
Pool # 350934 7.000% due 08/15/23 86 85
Pool # 351129 6.500% due 07/15/08 212 209
Pool # 352163 7.000% due 06/15/23 426 421
Pool # 352474 7.000% due 06/15/23 460 454
Pool # 354191 7.000% due 06/15/23 330 326
Pool # 355247 7.500% due 08/15/23 247 249
Pool # 355637 7.000% due 07/15/23 303 299
Pool # 356469 7.000% due 07/15/23 326 322
Pool # 356697 7.000% due 08/15/23 321 317
Pool # 356952 7.000% due 06/15/23 1,425 1,407
Pool # 357959 7.000% due 07/15/23 429 423
Pool # 358499 7.000% due 07/15/23 38 37
Pool # 358674 7.000% due 06/15/23 74 73
Pool # 364318 7.000% due 08/15/23 469 463
Pool # 364457 7.000% due 09/15/23 513 507
Pool # 366328 7.000% due 09/15/23 69 68
Pool # 366437 7.000% due 09/15/23 33 32
Pool # 366793 7.000% due 05/15/24 2,479 2,444
Pool # 368988 6.500% due 03/15/09 201 199
Pool # 370426 7.000% due 09/15/23 466 459
Pool # 371828 6.500% due 06/15/09 522 516
Pool # 372782 6.500% due 01/15/09 450 445
Pool # 379902 8.500% due 08/15/25 20 20
Pool # 380023 9.000% due 01/15/25 99 104
Pool # 380789 8.500% due 04/15/25 246 256
Pool # 383307 8.500% due 02/15/25 146 152
Pool # 385326 9.000% due 01/15/25 491 520
Pool # 387166 8.000% due 10/15/25 222 227
Pool # 389814 6.500% due 05/15/09 121 119
Pool # 390393 6.500% due 03/15/09 168 166
Pool # 393756 8.500% due 03/15/25 723 752
Pool # 398654 7.000% due 05/15/11 24 24
Pool # 405539 8.500% due 12/15/25 20 20
Pool # 408425 9.000% due 09/15/26 65 68
Pool # 408671 8.000% due 09/15/25 264 271
Pool # 409743 8.000% due 05/15/25 285 292
Pool # 409849 8.500% due 04/15/25 18 19
Pool # 410080 8.500% due 08/15/25 706 734
Pool # 410123 8.000% due 10/15/25 765 783
Pool # 410525 8.500% due 04/15/25 823 855
Pool # 411189 9.000% due 05/15/25 496 524
Pool # 411496 8.000% due 10/15/25 429 439
Pool # 411763 7.500% due 05/15/27 122 123
Pool # 411770 7.500% due 05/15/27 324 325
Pool # 412287 8.000% due 11/15/26 341 349
Pool # 412939 8.000% due 07/15/25 63 64
Pool # 413041 8.000% due 06/15/25 279 286
Pool # 413279 8.000% due 08/15/25 115 118
Pool # 413471 8.500% due 08/15/25 239 249
Pool # 418871 9.000% due 05/15/27 272 288
Pool # 419635 8.500% due 08/15/26 88 92
Pool # 419934 8.000% due 03/15/26 361 369
Pool # 421512 8.000% due 10/15/26 293 300
Pool # 422120 7.500% due 05/15/27 367 368
Pool # 423498 6.500% due 02/15/26 64 61
Pool # 423622 8.000% due 09/15/26 246 252
Pool # 423905 8.000% due 07/15/26 338 346
Pool # 425423 7.500% due 05/15/26 434 436
Pool # 426139 8.000% due 10/15/26 751 768
Pool # 426373 6.500% due 02/15/26 907 867
Pool # 428374 8.000% due 02/15/26 717 734
Pool # 429420 6.500% due 04/15/26 965 923
Pool # 429618 7.500% due 03/15/27 146 147
Pool # 433119 9.000% due 07/15/26 38 40
Pool # 435629 8.500% due 07/15/26 507 526
Pool # 440555 7.500% due 02/15/27 170 171
Pool # 442807 7.500% due 05/15/27 500 501
Pool # 446911 7.500% due 05/15/27 348 349
Pool # 447692 7.500% due 05/15/27 495 496
Pool # 450058 7.500% due 05/15/27 495 496
Pool # 818263 6.000% due 05/20/24 (c) 2,143 2,168
Government National Mortgage Association
6.500% 30 Year TBA (b) 3,000 2,870
7.000% 30 Year TBA (b) 2,015 1,978
7.500% 30 Year TBA (b) 2,285 2,291
8.000% 30 Year TBA (b) 1,000 1,023
8.500% 30 Year TBA (b) 2,000 2,078
Housing Securities, Inc.
Series 1994-2 Class A1
6.500% due 07/25/09 1,032 1,006
Merrill Lynch Mortgage Investors, Inc.
Series 1996-C2 Class A1
6.690% due 11/21/28 478 476
Series 1997-C1 Class A1
6.950% due 06/18/29 (c) 1,760 1,773
Mid-St Trust II Class A-3 CMO
9.350% due 04/01/98 229 232
Diversified Bond Fund 83
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
PNC Mortgage Securities Corp.
Series 1994-3 Class A-1
7.500% due 06/18/10 $ 280 $ 279
Ryland Acceptance Corp. Four
Series 88 Class E CMO
7.950% due 01/01/19 2,172 2,204
United States Department
of Veteran Affairs REMIC
Series 1992-1 Class 2-E
7.750% due 03/15/16 550 560
Vanderbilt Mortgage & Finance, Inc.
Series 1997-B Class 1A3
6.975% due 08/07/11 660 660
----------
197,665
----------
NON-US BONDS - 0.1%
Finland, Republic of
5.875% due 02/27/06 475 449
Italy, Republic of
6.875% due 09/27/23 150 141
----------
590
----------
UNITED STATES GOVERNMENT AGENCIES - 5.0%
Federal Home Loan Bank
6.450% due 03/13/02 4,250 4,216
Federal Home Loan Mortgage Corp.
5.950% due 06/19/98 3,000 3,002
Federal National Mortgage Association (MTN)
7.790% due 09/27/06 775 786
7.780% due 09/29/06 665 671
6.940% due 03/19/07 1,065 1,055
7.280% due 05/23/07 655 660
7.190% due 05/29/26 1,180 1,182
7.270% due 07/27/26 415 422
Government Backed Trust Certificates
Class 1-C
9.250% due 11/15/01 7,354 7,809
Series 2-E
9.400% due 05/15/02 1,038 1,101
Series T-3
9.625% due 05/15/02 (c) 4,172 4,433
Resolution Funding Corp.
8.875% due 07/15/20 3,155 3,817
8.625% due 01/15/21 880 1,041
8.625% due 01/15/30 390 471
----------
30,666
----------
UNITED STATES GOVERNMENT TREASURIES - 28.1%
United States Treasury Bonds
10.750% due 05/15/03 15,885 19,184
10.750% due 08/15/05 17,005 21,448
11.750% due 02/15/10 1,455 1,897
12.750% due 11/15/10 4,780 6,633
13.875% due 05/15/11 2,120 3,135
12.000% due 08/15/13 1,690 2,379
13.250% due 05/15/14 725 1,106
7.250% due 05/15/16 1,510 1,575
7.500% due 11/15/16 2,600 2,778
8.750% due 05/15/17 4,865 5,853
8.875% due 08/15/17 120 146
8.125% due 08/15/19 7,360 8,396
7.875% due 02/15/21 3,215 3,585
8.125% due 08/15/21 5,315 6,087
7.250% due 08/15/22 4,720 4,927
7.125% due 02/15/23 3,695 3,806
6.250% due 08/15/23 2,560 2,370
6.875% due 08/15/25 2,250 2,258
6.500% due 11/15/26 2,000 1,918
United States Treasury Notes
5.375% due 05/31/98 525 523
8.250% due 07/15/98 4,090 4,187
6.250% due 07/31/98 1,390 1,396
4.750% due 08/31/98 10 10
6.125% due 08/31/98 3,975 3,985
6.000% due 09/30/98 3,215 3,219
4.750% due 10/31/98 40 39
5.500% due 11/15/98 1,510 1,501
5.125% due 11/30/98 170 168
5.625% due 11/30/98 6,700 6,670
5.750% due 12/31/98 500 499
5.875% due 03/31/99 2,595 2,589
6.750% due 05/31/99 200 202
6.750% due 06/30/99 115 116
6.875% due 07/31/99 425 431
8.000% due 08/15/99 985 1,021
6.875% due 08/31/99 4,570 4,638
84 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
5.875% due 11/15/99 $ 1,920 $ 1,908
7.750% due 11/30/99 2,940 3,042
7.125% due 02/29/00 500 511
8.750% due 08/15/00 795 850
7.750% due 01/31/00 10,075 10,442
5.875% due 02/15/00 1,690 1,677
6.250% due 08/31/00 3,000 2,998
5.750% due 10/31/00 565 556
6.375% due 03/31/01 90 90
6.250% due 04/30/01 5,285 5,270
6.500% due 05/31/01 2,865 2,881
6.625% due 07/31/01 2,735 2,761
6.500% due 08/31/01 2,580 2,592
6.250% due 10/31/01 200 199
5.750% due 08/15/03 390 377
6.875% due 05/15/06 200 204
6.500% due 10/15/06 475 473
6.625% due 05/15/07 4,700 4,739
----------
172,245
----------
YANKEE BONDS - 3.0%
African Development Bank
9.750% due 12/15/03 325 374
6.875% due 10/15/15 745 711
8.800% due 09/01/19 295 342
Alberta, Province of
9.250% due 04/01/00 160 171
Asian Development Bank
8.000% due 04/30/01 175 183
8.500% due 05/02/01 180 192
6.250% due 10/24/05 315 306
Crown Cork & Seal Finance PLC
7.000% due 12/15/06 750 743
Hydro, Quebec
9.710% due 12/24/97 1,000 1,017
Hydro, Quebec Series GH
8.250% due 04/15/26 505 537
International American Development Bank
7.000% due 06/15/25 1,400 1,368
6.950% due 08/01/26 155 159
International Bank for
Reconstruction & Development
8.625% due 10/15/16 270 315
Manitoba, Province of
9.250% due 04/01/20 200 240
Manitoba, Province of Series CB
8.800% due 01/15/20 200 232
Metropolitano de Lisboa
7.420% due 10/15/16 750 765
Montell Financial Co., B.V.
8.100% due 03/15/27 1,325 1,361
National Westminster Bank PLC
1.000% due 04/29/49 (g) 875 899
New Brunswick, Province of
9.750% due 05/15/20 190 236
Newfoundland, Province of
10.000% due 12/01/20 90 113
Noranda Forest, Inc.
6.875% due 11/15/05 250 243
Nordbanken AB
7.250% due 10/30/06 775 770
Nova Scotia, Province of
9.125% due 05/01/21 690 806
Quebec, Province of
7.125% due 02/09/24 635 597
Saskatchewan, Province of
8.000% due 07/15/04 1,045 1,106
Societe Generale
7.850% due 04/29/49 (c)(g) 1,500 1,536
St. George Bank, Ltd.
7.150% due 10/01/05 425 423
Svenska Handelsbanken
7.125% due 03/29/49 (c)(g) 875 855
Taiwan Semiconductor
Manufacturing Co., Ltd. (conv.)
Zero Coupon due 07/03/02 750 750
Wharf International Finance, Ltd.
7.625% due 03/13/07 850 846
----------
18,196
----------
TOTAL LONG-TERM INVESTMENTS
(cost $559,213) 564,076
----------
Diversified Bond Fund 85
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
OPTIONS PURCHASED - 0.2%
United States Treasury Notes
Sept 91.09 Call (e) 15,000* $ 1,180
Sept 99.99 Put (e) 1,800* 8
----------
TOTAL OPTIONS PURCHASED
(cost $1,204) 1,188
----------
PREFERRED STOCKS - 0.2%
Credit Lyonnais Capital S.C.A. - ADR 15,700 404
TIG Holdings, Inc. 7,200 751
----------
TOTAL PREFERRED STOCKS
(cost $1,117) 1,155
----------
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
SHORT-TERM INVESTMENTS - 12.4%
Federal Home Loan Mortgage Corp.
Discount Note
5.520% due 08/12/97 (a)(f) $ 3,000 $ 2,981
5.440% due 09/16/97 (f) 2,000 1,977
Federal National Mortgage Association
Discount Note
5.700% due 09/09/97 (f) 4,000 3,957
Frank Russell Investment Company
Money Market Fund, due on demand (a) 67,487 67,487
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $76,402) 76,402
----------
TOTAL INVESTMENTS
(identified cost $637,936)(d) - 104.8% 642,821
OTHER ASSETS AND LIABILITIES,
NET - (4.8%) (29,680)
----------
NET ASSETS - 100.0% $ 613,141
----------
----------
(a) At cost, which approximates market.
(b) Forward commitment. See Note 2.
(c) Adjustable or floating rate securities.
(d) See Note 2 for federal income tax information.
(e) Nonincome-producing security.
(f) Rate noted is yield-to-maturity.
(g) Perpetual floating rate note.
* Represents 1 over-the-counter contract.
ABBREVIATIONS:
ADR - American Depositary Receipt
CMO - Collateralized Mortgage Obligation
MTN - Medium Term Note
PLC - Public Limited Company
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced Security
The accompanying notes are in integral part of the financial statements.
86 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $637,936)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 642,821
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,295
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,729
Investments sold (regular settlement). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,711
Investments sold (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,408
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,343
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667,307
LIABILITIES
Payables:
Investments purchased (regular settlement) . . . . . . . . . . . . . . . . . . . . $ 17,695
Investments purchased (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . 35,224
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 857
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 266
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,166
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 613,141
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,169
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,505)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . 4,885
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,326
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 613,141
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
Class S ($611,551,870 divided by 26,578,683 shares of $.01
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . $ 23.01
----------------
----------------
Class C ($1,589,602 divided by 68,785 shares of $.01 par
value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23.11
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Diversified Bond Fund 87
<PAGE>
DIVERSIFIED BOND FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,897
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,298
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,422
EXPENSES (Notes 1, 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,286
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Registration fees
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Distribution fees - Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Shareholder servicing fees - Class C . . . . . . . . . . . . . . . . . . . . . . . 1
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,729
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,693
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (649)
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 64 (562)
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,460)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (48) (1,508)
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,070)
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 16,623
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
88 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,693 $ 33,861
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (562) 445
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . . (1,508) (15,913)
------------------- -------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . 16,623 18,393
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,438) (33,898)
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24) (11)
In excess of net investment income
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (87)
------------------- -------------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (15,462) (33,996)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6) . . . . 56,215 57,560
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . 57,376 41,957
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555,765 513,808
------------------- -------------------
End of period (including undistributed net investment income of $3,169 and
accumulated distributions in excess of net investment income of $62,
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 613,141 $ 555,765
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Diversified Bond Fund 89
<PAGE>
DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding
throughout each year or period and other performance information derived
from the financial statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. . . . . . . . $ 22.97 $ 23.69 $ 21.53 $ 23.73 $ 23.49 $ 24.29
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . .73 1.47 1.54 1.46 1.48 1.62
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . . . . (.08) (.71) 2.18 (2.22) .83 (.10)
--------- --------- --------- --------- --------- ---------
Total Income From Investment Operations . . . . .65 .76 3.72 (.76) 2.31 1.52
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . (.61) (1.48) (1.56) (1.42) (1.48) (1.63)
In excess of net investment income. . . . . . . . -- -- -- -- (.01) --
Net realized gain on investments. . . . . . . . . -- -- -- -- (.58) (.69)
In excess of net realized gain on investments . . -- -- -- (.02) -- --
--------- --------- --------- --------- --------- ---------
Total Distributions . . . . . . . . . . . . . . (.61) (1.48) (1.56) (1.44) (2.07) (2.32)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD. . . . . . . . . . . $ 23.01 $ 22.97 $ 23.69 $ 21.53 $ 23.73 $ 23.49
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (%)(a) . . . . . . . . . . . . . . . . 2.90 3.43 17.76 (3.25) 10.02 6.57
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . 611,552 554,804 513,808 525,315 477,341 412,394
Ratios to average net assets (%)(b):
Operating expenses, net. . . . . . . . . . . . .61 .61 .59 .56 .58 .62
Operating expenses, gross . . . . . . . . . . .61 .61 .59 .56 .58 .67
Net investment income. . . . . . . . . . . . . 6.56 6.46 6.69 6.57 6.13 6.79
Portfolio turnover rate (%)(b). . . . . . . . . . 164.73 138.98 135.85 153.21 177.74 228.37
Per share amount of fees waived ($ omitted) . . . -- -- -- -- -- .0115
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not anualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
90 Diversified Bond Fund
<PAGE>
DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996**
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 22.98 $ 23.16
------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 .25
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . (.06) (.09)
------------ ------------
Total Income From Investment Operations . . . . . . . . . . . . . . . . . . . . .57 .16
------------ ------------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.44) (.34)
------------ ------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23.11 $ 22.98
------------ ------------
------------ ------------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.54 0.67(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . 1,589 962
Ratios to average net assets (%)(c):
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.31 1.31
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.87 5.75
Portfolio turnover rate (%)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 164.73 138.98
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31, 1996.
(a) Periods less than one year are not annualized.
(b) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(c) The ratios for the periods ended June 30, 1997 and December 31, 1996 are
annualized.
Diversified Bond Fund 91
<PAGE>
VOLATILITY CONSTRAINED BOND FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 91.9%
ASSET-BACKED SECURITIES - 34.8%
AFC Home Equity Loan Trust
Series 1993-2 Class A
6.000% due 01/20/13 $ 186 $ 182
AFC Mortgage Loan Trust
Series 1996-3 Class 1A2
7.220% due 02/25/27 125 126
Series 1997-1 Class A
5.910% due 03/25/27 (c) 479 479
ALPS Pass-thru Trust
Series 1994-1 Class A-2
7.150% due 11/15/97 (c) 364 365
American Express Credit Account Master Trust
Series 1996-1 Class A
6.800% due 12/15/03 3,000 3,031
Banc One Auto Grantor Trust
Series 1997-A Class A
6.270% due 11/20/03 3,400 3,392
Chase Credit Card Master Trust
Series 1996-4 Class A
5.817% due 07/15/06 (c) 500 500
Chase Manhattan Auto Owner Trust
Series 1997-A Class A3
6.250% due 11/15/00 4,060 4,055
Chase Manhattan Credit Card Master Trust
Series 1996-4 Class A
6.730% due 02/15/03 2,900 2,924
Chase Manhattan Grantor Trust
Series 1996-B Class A
6.610% due 09/15/02 978 982
Chevy Chase Auto Receivables Trust
Series 1996-2 Class A
5.900% due 07/15/03 1,007 1,000
Series 1997-2 Class A
6.350% due 01/15/04 1,000 999
Copel Capital Funding Corp.
Series 1997-A Class A3
6.270% due 04/20/05 (c) 890 889
Daimler-Benz Vehicle Trust
Series 1996-A Class A
5.850% due 12/15/03 524 524
Discover Card Master Trust I
Series 1994-2 Class A
6.037% due 10/16/04 (c) 1,000 1,008
EQCC Home Equity Loan Trust
Series 1993-4 Class A
5.725% due 12/15/08 60 59
Series 1994-1 Class A
5.800% due 03/15/09 312 305
First Chicago Master Trust II
Credit Card Certificates
Series 1994-L
7.150% due 04/15/01 3,200 3,250
First USA Credit Card Master Trust
Series 1997-4 Class A
5.897% due 02/17/10 (c) 500 500
First Security Auto Grantor Trust
Series 1997-A Class A
6.300% due 08/15/03 950 943
Ford Credit Auto Lease Trust
Series 1996-1 Class A2
5.800% due 05/15/99 900 897
Ford Credit Grantor Trust
Series 1995-B Class A
5.900% due 10/15/00 721 719
General Motors Acceptance Corp.
Grantor Trust
Series 1997-A Class A
6.500% due 04/15/02 921 924
Green Tree Financial Corp.
Series 1994-A Class A
6.900% due 02/15/04 491 491
Series 1995-A Class A
7.250% due 07/15/05 369 370
Honda Auto Receivables Grantor Trust
Series 1995-A Class A
6.200% due 12/15/00 522 523
Merrill Lynch Credit Corp.
Series 1996-B Class A
6.087% due 07/15/21 (c) 883 884
Nationsbank Auto Owner Trust
Series 1996-A Class A3
6.375% due 07/15/00 2,500 2,509
Newcourt Receivables Asset Trust
Series 1996-2 Class A
6.870% due 06/20/04 214 214
Olympic Automobile Receivables Trust
Series 1996-D Class CTFS
6.125% due 04/15/02 3,402 3,383
Series 1997-A Class A2
6.125% due 01/01/99 600 602
PNC Student Loan Trust I
Series 1997-2 Class A3
6.314% due 01/25/01 (c) 3,500 3,495
Prudential Home Mortgage Securities
Series 1994-19 Class A2
7.050% due 05/25/24 536 536
92 Volatility Constrained Bond Fund
<PAGE>
VOLATILITY CONSTRAINED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Remoldelers Home Improvement Loan
Series 1995-3 Class A2
6.800% due 12/20/07 $ 423 $ 424
Residential Asset Securitization Trust
Series 1996-A8 Class A1
8.000% due 12/25/26 499 506
Series 1997-A1 Class A
7.000% due 03/25/27 469 472
Series 1997-A5 Class A3
7.125% due 07/25/27 991 989
Resolution Trust Corp.
Mortgage Pass-thru Certificate
Series 1992-M3 Class A-1
7.750% due 07/25/30 121 121
Sears Credit Account Master Trust II
Series 1995-4 Class A
6.250% due 01/15/03 3,500 3,507
SPNB Home Equity Loan
Series 1991-1 Class B
8.150% due 06/15/20 246 247
Student Loan Marketing Association
Series 1997-2 Class CTFS
5.840% due 10/25/12 (c) 400 400
The Money Store Home Equity Loan Trust
Series 1996-B Class A3
6.820% due 02/15/10 525 526
TLFC IV Equipment Lease Trust
Series 1996 Class A
5.980% due 11/20/02 412 411
UCFC Home Equity Loan Trust
Series 1993-B1 Class A-1
6.075% due 07/25/14 116 114
WFS Financial Owner Trust
Series 1996-D Class A3
6.050% due 07/20/01 (c) 3,500 3,482
World Omni Automobile Lease
Securitization Trust
Series 1996-B Class A3
6.250% due 11/15/02 700 696
Series 1996-B Class B
6.850% due 11/15/02 (c) 400 399
Series 1997- Class A2
6.750% due 06/25/03 (c) 3,500 3,523
----------
56,877
----------
CORPORATE BONDS AND NOTES - 17.5%
Advanta National Bank
6.450% due 10/30/00 250 241
Ahmanson (H.F.)
9.875% due 11/15/99 400 429
Bank of Boston Corp.
9.500% due 08/15/97 850 853
Banponce Corp.
Series 2 (MTN)
5.750% due 03/01/99 950 937
Bear Stearns Co., Inc.
7.625% due 09/15/99 725 742
Beneficial Corp. (MTN)
8.170% due 11/09/99 700 725
Capital One Bank (MTN)
6.844% due 06/13/00 900 897
Caterpillar Financial Services (MTN)
6.100% due 07/15/99 500 497
Chase Manhattan Corp.
5.937% due 12/05/09 (c) 800 785
ERP Operating, L.P.
6.589% due 12/22/97 (c) 875 878
8.500% due 05/15/99 225 232
Finova Capital Corp.
6.450% due 06/01/00 625 621
First Chicago Corp.
9.000% due 06/15/99 500 523
First Union Corp.
6.750% due 01/15/98 410 412
General Motors Acceptance Corp.
7.012% due 04/01/20 (c) 995 995
General Motors Acceptance Corp. (MTN)
7.500% due 07/22/99 850 867
7.465% due 07/25/19 978 989
Greyhound Financial Corp.
8.500% due 02/15/99 775 800
GTE Corp.
10.750% due 09/15/17 1,200 1,271
Heller Financial, Inc. (MTN)
5.862% due 03/01/99 (c) 600 602
Hertz Corp.
6.625% due 07/15/00 650 647
Homeside Lending, Inc. (MTN)
6.875% due 06/30/02 600 597
International Lease Finance Corp.
5.750% due 12/15/99 850 833
ITT Corp.
6.250% due 11/15/00 450 440
Volatility Constrained Bond Fund 93
<PAGE>
VOLATILITY CONSTRAINED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
JC Penney & Co., Inc. (MTN)
6.375% due 09/15/00 $ 675 $ 669
Lehman Brothers Holdings, Inc.
Series E (MTN)
7.110% due 09/27/99 1,075 1,087
Series IBC (MTN)
7.000% due 05/13/99 700 706
MBNA Corp.
Series B (MTN)
6.500% due 09/15/00 375 373
Merrill Lynch & Co., Inc. (MTN)
7.260% due 03/25/02 925 926
Midlantic Corp.
9.250% due 09/01/99 450 474
News America Holdings, Inc.
7.500% due 03/01/00 700 714
Occidental Petroleum Corp. (MTN)
5.950% due 11/09/98 1,000 995
5.960% due 11/09/98 150 149
Salomon, Inc.
6.700% due 12/01/98 500 502
Salomon, Inc. CMT Floater (MTN)
6.299% due 04/05/99 (c) 1,000 1,000
Taubman Realty Group, L.P.
8.000% due 06/15/99 475 484
Time Warner, Inc.
9.625% due 05/01/02 1,025 1,133
Toyota Motor Credit Corp. (MTN)
6.063% due 02/15/02 (c) 500 481
UCFC Home Equity Loan Trust
Series 1996-D1 Class A3
6.541% due 11/15/13 225 224
USF&G Corp.
7.000% due 05/15/98 1,000 1,008
Wellsford Residential Property Trust (MTN)
6.132% due 11/24/99 (c) 850 852
----------
28,590
----------
MORTGAGE-BACKED SECURITIES - 9.2%
Bear Stearns Mortgage Securities, Inc.
7.000% due 11/25/27 750 743
BKB Commercial Mortgage Trust
Series 1997-C1 Class B
7.218% due 04/25/00 (c) 550 553
CMC Securities Corp. II
Series 1993-2G Class A1
7.193% due 11/25/23 (c) 793 795
Federal Home Loan Mortgage Corp.
Participation Certificate
Group #23-0114 7.375% due 03/01/06 (c) 323 327
Group #85-0105 9.000% due 09/01/05 313 325
Group #A0-1600 8.000% due 09/01/18 866 901
Group #A0-1607 8.500% due 06/01/11 179 186
Group #D2-9159 7.500% due 10/01/07 480 487
Group #G5-0258 7.500% due 05/01/00 269 271
Group #G5-0259 7.500% due 03/01/02 238 240
Federal Home Loan Mortgage Corp.
Series 1714 Class E
6.250% due 09/15/18 525 522
Federal National Mortgage Association
Pool #013957 8.500% due 11/01/01 169 173
Pool #019455 8.750% due 03/01/04 64 66
Pool #124671 7.500% due 04/01/09 540 546
Pool #303749 7.000% due 11/01/08 381 383
Pool #359448 8.500% due 12/01/10 792 825
Pool #364703 7.000% due 06/01/04 885 890
Federal National Mortgage Association
Grantor Trust
Series 1996-T6 Class C
6.200% due 02/26/01 1,140 1,116
Federal National Mortgage Association
REMIC Trust Series 1993-186 Class Z
5.850% due 07/25/06 1,109 1,088
REMIC Trust Series 1994-012 Class PE
5.750% due 04/25/07 400 393
Government National Mortgage Association
5.500% 1 Year TBA (d) 1,500 1,483
Government National Mortgage Association
Pool #780285 9.500% due 11/15/25 784 850
Pool #780487 7.250% due 12/15/26 1,169 1,186
Residential Accredited Loans, Inc.
Series 1997 Class A1
7.500% due 08/15/27 400 403
Resolution Trust Corp.
Series 1995-2 Class C1
7.450% due 05/25/29 (c) 317 314
----------
15,066
----------
94 Volatility Constrained Bond Fund
<PAGE>
VOLATILITY CONSTRAINED BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
MUNICIPAL BONDS - 0.4%
Philadelphia, Pennsylvania, Authority for
Industrial Development Class A
6.480% due 06/15/04 $ 650 $ 650
----------
650
----------
UNITED STATES GOVERNMENT
TREASURIES - 27.4%
United States Treasury Notes
5.500% due 11/15/98 8,000 7,952
6.500% due 04/30/99 12,000 12,090
6.375% due 05/15/99 22,600 22,713
5.875% due 11/15/99 1,250 1,242
6.875% due 03/31/00 75 76
6.375% due 05/15/00 670 673
----------
44,746
----------
YANKEE BONDS - 2.6%
Household International
5.250% due 10/15/98 850 840
Noranda Forest, Inc.
8.875% due 10/15/99 450 473
Ontario, Province of
15.250% due 08/31/12 350 376
11.500% due 03/10/13 1,240 1,335
Quebec, Province of
13.250% due 09/15/14 450 528
Westpac Banking, Ltd.
7.875% due 10/15/02 750
784
----------
4,336
----------
TOTAL LONG-TERM INVESTMENTS
(cost $150,826) 150,265
----------
NUMBER
OF
SHARES
----------
PREFERRED STOCKS - 0.3%
Texaco Capital Series B 22,000 498
----------
TOTAL PREFERRED STOCKS
(cost $550) 498
----------
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
SHORT-TERM INVESTMENTS - 5.8%
Federal National Mortgage Association
Discount Note
5.530% due 09/05/97 (e) $ 1,200 $ 1,188
Frank Russell Investment Company
Money Market Fund due on demand (a) 8,226 8,226
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $9,414) 9,414
----------
TOTAL INVESTMENTS
(identified cost $160,790)(b) - 98.0% 160,177
OTHER ASSETS AND LIABILITIES,
NET - 2.0% 3,306
----------
NET ASSETS - 100.0% $ 163,483
----------
----------
(a) At cost, which approximates market.
(b) See Note 2 for federal income tax information.
(c) Adjustable or floating rate securities.
(d) Forward commitment. See Note 2.
(e) Rate noted is yield-to-maturity (unaudited).
ABBREVIATIONS:
MTN - Medium Term Note
REMIC - Real Estate Mortgage Investment Conduit
The accompanying notes are an integral part of the financial statements.
Volatility Constrained Bond Fund 95
<PAGE>
VOLATILITY CONSTRAINED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $160,790)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,177
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,587
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,306
Investments sold (regular settlement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,031
Invesments sold (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378
-----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,475
LIABILITIES
Payables:
Investments purchased (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . . $ 3,864
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . 80
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,992
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 163,483
-----------------
-----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,222
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,976)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . (613)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,764
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 163,483
-----------------
-----------------
NET ASSET VALUE, offering and redemption price per share:
($163,482,604 divided by 8,572,539 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19.07
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
96 Volatility Constrained Bond Fund
<PAGE>
VOLATILITY CONSTRAINED BOND FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,835
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-----------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,084
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 393
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581
-----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,503
-----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (180)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . . . . . . . . . . (243)
-----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (423)
-----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . . $ 4,080
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Volatility Constrained Bond Fund 97
<PAGE>
VOLATILITY CONSTRAINED BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,503 $ 9,516
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (180) (2,355)
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . (243) 275
------------------- -------------------
Net increase (decrease) in net assets resulting from operations . . . . . . . 4,080 7,436
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,045) (8,805)
------------------- -------------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . (4,045) (8,805)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . 251 (17,315)
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . 286 (18,684)
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,197 181,881
------------------- -------------------
End of period (including undistributed net investment income of
$1,222 and $763, respectively) . . . . . . . . . . . . . . . . . . . . . . . . $ 163,483 $ 163,197
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
98 Volatility Constrained Bond Fund
<PAGE>
VOLATILITY CONSTRAINED BOND FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . $ 19.07 $ 19.21 $ 18.64 $ 19.78 $ 19.51 $ 20.33
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . .54 1.09 1.21 1.15 .82 1.34
Net realized and unrealized gain (loss) on investments . . . (.05) (.22) .58 (1.16) .45 (.88)
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations . . . . . . . . . .49 .87 1.79 (.01) 1.27 .46
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . (.49) (1.01) (1.22) (1.13) (.71) (1.28)
Tax return of capital. . . . . . . . . . . . . . . . . . . . -- -- -- -- (.29) --
-------- -------- -------- -------- -------- --------
Total Distributions . . . . . . . . . . . . . . . . . . . (.49) (1.01) (1.22) (1.13) (1.00) (1.28)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . $ 19.07 $ 19.07 $ 19.21 $ 18.64 $ 19.78 $ 19.51
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . 2.61 4.66 9.89 (.02) 6.67 2.29
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . 163,483 163,197 181,881 195,007 225,672 292,909
Ratios to average net assets (%)(b):
Operating expenses . . . . . . . . . . . . . . . . . . . . .74 .76 .71 .67 .66 .68
Net investment income . . . . . . . . . . . . . . . . . . 5.75 5.69 6.33 5.97 5.79 6.74
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . . . 203.54 311.51 256.72 182.65 220.77 312.05
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
Volatility Constrained Bond Fund 99
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
LONG-TERM INVESTMENTS - 80.0%
ASSET-BACKED SECURITIES - 4.8%
American Airlines Class A-1
9.710% due 01/02/07 $ 348 $ 406
American Airlines, Inc.
Series 1990-H
9.800% due 01/02/08 1,190 1,399
Asset Securitization Corp.
Series 1996-MD6 Class A1C
7.040% due 11/13/26 800 792
Series 1997 D-4 Class A1D
7.490% due 04/14/29 700 712
Series 1997- MD7 Class A1B
7.410% due 01/13/30 195 198
CIT RV Grantor Trust
Series 1994-A Class A
4.900% due 07/15/09 511 500
Cityscape Home Equity Loan Trust
Pass-thru Certificate
Series 1996-2 Class A2
7.200% due 08/25/26 900 909
EQCC Home Equity Loan Trust
Series 1996-4 Class A1
5.790% due 12/15/02 1,438 1,438
Fleetwood Credit Corp. Grantor Trust
Series 1994-B Class A
6.750% due 03/15/10 403 401
Fund America Investors Corp. II
Pass-thru Certificate
Series 1993-F Class A-1
5.400% due 09/25/09 127 120
GMAC Commercial Mortgage Securities, Inc.
Series 1996-C1 Class F
7.860% due 11/15/06 500 470
Green Tree Financial Corp.
Series 1995-5 Class A3
6.250% due 10/15/25 600 599
Series 1995-6 Class A3
6.650% due 11/15/25 900 904
Series 1995-8 Class A2
6.150% due 12/15/26 (b) 888 888
Greenwich Capital Acceptance, Inc.
Series 1994 Class A-1
8.670% due 11/25/24 (b) 260 264
Merrill Lynch Mortgage Investors, Inc.
Mortgage Pass-thru Certificate
Series 1996-C2 Class A2
6.820% due 11/21/28 (b) 340 335
Metris Master Trust
Series 1997 - 1 Class A
6.870% due 10/20/05 1,065 1,077
Morgan Stanley Capital I, Inc.
Mortgage Pass-thru Certificate
Series 1996 - WF1 Class X
1.420% due 01/15/13 (b) 3,450 257
Resolution Trust Corp.
Mortgage Pass-thru Certificate
Series 1994 - C2 Class G
8.000% due 04/25/25 277 270
Series 1994-1 Class M-2
7.750% due 09/25/29 416 418
Resolution Trust Corp.
Series 1995-1 Class 2-C
7.500% due 10/25/28 (b) 325 327
Series 1995-C1 Class C
6.900% due 02/25/27 (b) 300 296
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-thru Certificate
Series 1994-16
8.290% due 11/25/24 (b) 1,076 1,109
Series 1997 Class A2
7.174% due 03/25/25 (b) 500 509
Structured Asset Securities Corp.
Mortgage Pass-thru Certificate
Series 1996-CFL Class A1C
5.944% due 02/25/28 360 357
Series 1996-CFL Class C
6.525% due 02/25/28 250 253
The Money Store Home Equity Loan Trust
Series 1992-B Class A
6.900% due 07/15/07 243 245
Series 1996-B Class A5
7.180% due 12/15/14 750 760
The Money Store Trust
Series 1996-A Class A5
6.850% due 06/15/19 700 701
UCFC Home Equity Loan Trust
Series 1994-B Class A-6
7.100% due 06/10/23 276 279
----------
17,193
----------
CORPORATE BONDS AND NOTES - 22.2%
A.H. Belo Corp.
6.875% due 06/01/02 900 900
Aames Financial Corp.
9.125% due 11/01/03 475 483
Advanta National Bank
6.450% due 10/30/00 700 676
AFC Capital Trust I
8.207% due 02/03/27 900 918
100 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
AK Steel Corp.
10.750% due 04/01/04 $ 625 $ 672
Albank Capital Trust
9.270% due 06/06/27 625 631
American Standard, Inc.
10.875% due 05/15/99 350 373
Amerus Capital I Series A
8.850% due 02/01/27 500 508
AMR Corp. (MTN)
9.950% due 03/07/01 1,000 1,098
Anchor Bancorp, Inc.
8.937% due 07/09/03 375 389
Armco, Inc.
9.375% due 11/01/00 265 266
Azteca Holdings SA
11.000% due 06/15/02 525 530
Banesto Delaware, Inc.
8.250% due 07/28/02 500 527
Banponce Trust I Series A
8.327% due 02/01/27 475 480
Bear Stearns Capital Trust I
7.000% due 01/15/27 (b) 500 495
Beaver Valley Funding Corp.
9.000% due 06/01/17 1,150 1,162
Beaver Valley Funding Corp. II
8.625% due 06/01/07 198 202
BellSouth Capital Funding Corp.
6.040% due 11/15/26 800 785
BellSouth Telecommunications, Inc.
5.850% due 11/15/45 1,100 1,082
Capital One Bank (MTN)
8.125% due 03/01/00 325 336
6.875% due 04/24/00 375 377
Century Communications Corp.
9.500% due 08/15/00 425 440
Chase Manhattan Corp.
7.250% due 06/01/07 310 311
Chevy Chase Savings Bank
9.250% due 12/01/05 500 501
Citicorp
7.200% due 06/15/07 645 646
Cleveland Electric Illum Co.
9.375% due 03/01/17 1,000 1,043
CMS Energy Corp.
9.500% due 10/01/97(b) 1,000 1,021
Coast Federal Bank
13.000% due 12/31/02 375 410
Coast Savings Financial, Inc.
10.000% due 03/01/00 175 182
Colonial Realty L.P.
7.500% due 07/15/01 775 784
Commercial Federal Corp.
7.950% due 12/01/06 100 99
Compass Trust I Series A
8.230% due 01/15/27 350 349
Conseco Finance Trust III
8.796% due 04/01/27 700 724
Contifinancial Corp.
8.375% due 08/15/03 900 925
Continental Airlines, Inc.
9.500% due 12/15/01 1,030 1,072
CP Limited Partnership
8.750% due 03/02/00 500 507
Delta Air Lines, Inc.
10.375% due 02/01/11 340 425
Dime Bancorp Trust I Series A
9.330% due 05/06/27 325 338
Dime Bancorp, Inc.
10.500% due 11/15/05 320 347
EnviroSource, Inc.
9.750% due 06/15/03 295 286
Equitable Life Assurance Society
7.700% due 12/01/15 500 500
ERAC USA Finance Co. (MTN)
6.350% due 01/15/01 725 712
ERP Operating, L.P.
8.500% due 05/15/99 350 361
Federal Realty Investment Trust
8.875% due 01/15/00 650 683
First Nationwide Holdings, Inc.
12.500% due 04/15/03 1,475 1,645
First Tennessee Capital I Series A
8.070% due 01/06/27 575 565
First USA Bank
5.850% due 02/22/01 500 485
First USA Capital Trust I
9.330% due 01/15/27 1,000 1,115
Gaylord Container Corp. Step Up Bond
12.750% due 05/15/05 (b) 325 356
General Motors Acceptance Corp. (MTN)
7.375% due 04/15/99 940 956
8.500% due 01/31/00 600 627
6.625% due 04/24/00 550 550
6.900% due 07/05/00 180 181
Goldman Sachs Group, L.P.
6.375% due 06/15/00 400 396
6.200% due 02/15/01 300 294
Great Atlantic & Pacific Tea, Inc.
7.750% due 04/15/07 1,225 1,246
Multistrategy Bond Fund 101
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Greenwich Air Services, Inc.
10.500% due 06/01/06 $ 550 $ 639
Haven Capital Trust I
10.460% due 02/01/27 350 354
Homeside, Inc.
11.250% due 05/15/03 226 262
ICG Holdings, Inc. Step Up Bond
11.625% due 03/15/07 550 330
Imperial Capital Trust I
9.980% due 12/31/26 250 254
Imperial Credit Industries, Inc., Series B
9.875% due 01/15/07 675 655
Interpool Capital Trust
9.875% due 02/15/27 500 506
ISP Holdings, Inc. Series B
9.000% due 10/15/03 225 233
Jones Intercable, Inc.
9.625% due 03/15/02 500 524
Loewen Group International, Inc.
Series 3
7.750% due 10/15/01 200 202
Series 4
8.250% due 10/15/03 700 712
Long Island Lighting Co.
9.000% due 11/01/22 920 1,007
Markel Capital Trust I
8.710% due 01/01/46 325 328
Merck and Co., Series B (MTN)
5.760% due 05/03/37 2,000 2,009
Merrill Lynch & Co., Inc.
6.500% due 04/01/01 300 298
MFS Communications, Inc. Step Up Bond
Zero Coupon due 01/15/06 1,525 1,207
Nabisco, Inc.
8.000% due 01/15/00 2,000 2,061
National Westminster
5.938% due 12/31/99 (b) 590 538
Nextel Communications, Inc. Step Up Bond
Zero Coupon due 09/01/03 585 506
Niagara Mohawk Power Corp.
5.875% due 09/01/02 480 445
6.875% due 04/01/03 10 10
Noranda, Inc.
8.625% due 07/15/02 400 427
Norfolk Southern Corp.
6.950% due 05/01/02 490 493
7.800% due 05/15/27 170 175
7.050% due 05/01/37 800 812
North Atlantic Energy Corp. Series A
9.050% due 06/01/02 190 192
NWA Trust
13.875% due 06/21/08 90 106
NWCG Holdings Corp.
Zero Coupon due 06/15/99 1,175 1,033
Ocwen Federal Bank
12.000% due 06/15/05 300 327
Ocwen Financial Corp.
11.875% due 10/01/03 725 792
Onbank Capital Trust I
9.250% due 02/01/27 450 458
Orion Capital Trust I
8.730% due 01/01/37 225 226
Prime Succession Acquisition Co.
10.750% due 08/15/04 400 439
Providian Capital I Series A
9.525% due 02/01/27 500 511
Prudential Insurance Co. of America
6.875% due 04/15/03 700 690
Public Service Co., New Hampshire Series B
9.170% due 05/15/98 1,500 1,521
Residential Reina, Ltd. Class A2
11.448% due 12/15/08 (b) 1,000 1,000
Revlon Worldwide
Zero Coupon due 03/15/01 1,900 1,287
Rose Hills Acquisition Corp.
9.500% due 11/15/04 500 519
Safeway, Inc.
10.000% due 12/01/01 450 498
Salomon, Inc.
7.000% due 05/15/99 275 277
7.125% due 08/01/99 275 277
7.750% due 05/15/00 550 565
Salomon, Inc. (MTN)
6.625% due 11/30/00 750 745
Seagate Technology, Inc.
7.450% due 03/01/37 1,100 1,105
Smith Barney Holdings, Inc.
7.980% due 03/01/00 400 413
Sovereign Capital Trust I
9.000% due 04/01/27 975 977
Spieker Properties, LP
6.950% due 12/15/02 500 492
Summit Communications Group, Inc.
10.500% due 04/15/05 610 657
Tanger Properties LP
8.750% due 03/11/01 350 355
102 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
Taubman Realty Group, L.P.
8.000% due 06/15/99 $ 450 $ 459
Tenet Healthcare Corp.
9.625% due 09/01/02 285 306
7.875% due 01/15/03 380 382
8.625% due 12/01/03 340 352
8.000% due 01/15/05 500 503
Time Warner, Inc.
6.773% due 08/15/00 (b) 375 376
7.975% due 08/15/04 225 232
8.110% due 08/15/06 450 467
8.180% due 08/15/07 450 468
9.150% due 02/01/23 695 768
6.850% due 01/15/26 2,410 2,371
Toledo Edison Co.
8.700% due 09/01/02 500 515
Toledo Edison Co. (MTN)
8.000% due 12/31/98 500 507
Travelers Capital II
7.750% due 12/01/36 1,270 1,232
Travelers Property Casualty Corp.
7.750% due 04/15/26 700 706
Trenwick Capital Trust I
8.820% due 02/01/37 625 635
TU Electrical Capital V
8.175% due 01/30/37 600 597
Turner Broadcasting Systems, Inc.
8.375% due 07/01/13 850 882
UCC Investors Holding, Inc. Step Up Bond
Zero Coupon due 05/01/05 (b) 220 204
Union Planters Trust Capital
8.200% due 12/15/26 675 663
United Companies Financial Corp.
9.350% due 11/01/99 375 393
8.375% due 07/01/05 625 624
United Dominion Realty Trust, Inc.
7.250% due 01/15/07 500 501
USAir, Inc.
10.000% due 07/01/03 320 328
Webster Capital Trust I
9.360% due 01/29/27 250 258
Wellsford Residential Property Trust
9.375% due 02/01/02 475 517
----------
79,667
----------
EURODOLLAR BONDS - 2.9%
Argentina, Republic of Series L
6.750% due 03/31/05 (b) 1,940 1,824
Argentina, Republic of Series 10
5.625% due 04/01/00 (b) 437 425
Auxiliaire Du Cred
5.750% due 09/25/02 (b) 600 578
Credit Fonc France
8.000% due 01/14/02 (b) 600 623
Credit Lyonnais
6.813% due 09/19/49 (e) 360 356
Fifth Mexican Acceptance Corp. Class A
8.000% due 12/15/98 1,050 252
Greater Bejing First Expressway
9.500% due 06/15/07 170 173
Indah Kiat Finance Mautitius, Ltd.
10.000% due 07/01/07 550 546
Midland Bank
6.063% due 12/31/49 (e) 130 117
Poland, Government of
6.938% due 10/27/24 (b) 495 484
Russia Vnesh Interest
12.000% due 12/31/16 850 649
Skandinaviska Enskilda Banken
7.500% due 03/29/49 (e) 990 982
8.125% due 09/06/49 Step Up Bond (e) 475 499
Skandinaviska Enskilda Series 1 (MTN)
6.625% due 03/29/49 (b)(e) 510 504
TFM SA de CV
10.250% due 06/15/07 195 198
TFM SA de CV Step Up Bond
Zero Coupon due 06/15/09 1,160 670
United Mexican States
11.375% due 09/15/16 550 619
Videotron Holdings PLC Step Up Bond
Zero Coupon due 07/01/04 (b) 1,060 954
----------
10,453
----------
MORTGAGE-BACKED SECURITIES - 27.1%
Asset Securitization Corp.
Mortgage Pass-thru Certificate
Series 1995-MD4 Class A1
7.100% due 08/13/29 978 989
Collateralized Mortgage Securities Corp.
Series J Class J-5 CMO
7.985% due 05/01/17 2,231 2,263
Multistrategy Bond Fund 103
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
FDIC REMIC Trust
Series 1994-C1 Class 2A-2
7.850% due 09/25/25 $ 319 $ 321
Federal Home Loan Mortgage Corp.
6.000% 15 Year TBA (d) 925 892
6.500% 15 Year TBA (d) 4,350 4,266
6.500% 30 Year TBA (d) 4,300 4,119
Federal Home Loan Mortgage Corp.
Participation Certificate
Group #D6-9409 6.500% due 03/01/26 580 557
Group #D7-1567 6.500% due 05/01/26 437 419
Group #E0-0485 7.000% due 05/01/12 1,677 1,674
Group #E6-3755 6.000% due 04/01/11 990 957
Group #E6-4927 6.000% due 07/01/11 965 933
Group #G0-0613 7.000% due 12/01/25 4,604 4,525
Group #G0-0617 7.000% due 12/01/25 174 171
Group #G0-0620 7.000% due 12/01/25 1,023 1,008
Group #G0-0715 7.000% due 12/01/25 4,455 4,419
Group #G0-0718 7.000% due 06/01/27 4,473 4,437
Group #G1-0487 7.000% due 03/01/11 945 947
Federal Home Loan Mortgage Corp.
Participation Certificate
Series 1014 Class E
7.950% due 02/15/20 705 714
Series 1037 Class Z
9.000% due 02/15/21 1,727 1,820
Series 1934 Class AB
6.000% due 08/15/07 1,250 1,228
Federal National Mortgage Association
Pool #124032 10.000% due 02/01/05 314 329
Pool #190504 7.963% due 11/01/23 (c) 1,287 1,334
Pool #250359 7.000% due 10/01/25 1,180 1,158
Pool #250375 6.500% due 09/01/25 1,878 1,798
Pool #265989 6.000% due 01/01/09 1,529 1,487
Pool #276234 7.000% due 05/01/24 506 499
Pool #286017 7.000% due 06/01/24 706 695
Pool #303383 7.000% due 12/01/09 556 558
Pool #303555 7.000% due 09/01/25 1,895 1,859
Pool #303784 7.000% due 03/01/11 2,368 2,367
Pool #312494 7.000% due 07/01/25 420 413
Pool #313120 6.000% due 06/01/11 1,441 1,394
Pool #316651 7.000% due 08/01/25 280 275
Pool #316681 7.000% due 07/01/25 1,240 1,220
Pool #317262 7.000% due 07/01/25 351 346
Pool #318863 7.000% due 08/01/25 728 715
Pool #319580 7.000% due 08/01/25 790 775
Pool #324193 7.000% due 09/01/25 268 263
Pool #324205 7.000% due 09/01/25 895 879
Pool #331372 6.500% due 11/01/25 7,534 7,245
Pool #331614 6.500% due 01/01/26 429 411
Pool #334653 7.000% due 01/01/26 183 179
Pool #336399 7.000% due 02/01/26 768 753
Pool #339682 6.500% due 03/01/26 706 676
Pool #342072 6.500% due 03/01/26 642 615
Pool #367128 6.000% due 12/01/11 520 501
Federal National Mortgage Association
REMIC Series 1992-10 Class ZD
8.000% due 11/25/21 1,540 1,532
Government National Mortgage Association
Pool #008163 7.000% due 03/20/23 (b) 1,990 2,044
Pool #008288 7.125% due 09/20/23 (b) 617 635
Pool #008302 6.875% due 10/20/23 (b) 1,013 1,038
Pool #008496 7.125% due 09/20/24 (b) 4,268 4,393
Pool #008528 6.875% due 10/20/24 (b) 2,466 2,529
Pool #008530 6.875% due 10/20/24 (b) 2,104 2,159
Pool #348888 7.000% due 07/15/23 1,381 1,363
Pool #352050 7.000% due 10/15/23 929 917
Pool #366793 7.000% due 05/15/24 811 800
Pool #395392 8.500% due 04/15/25 1,902 1,977
Pool #405602 6.500% due 04/15/26 782 748
Pool #417388 6.500% due 05/15/26 62 59
Pool #80053 6.000% due 03/20/27 2,860 2,883
Government National Mortgage Association
6.500% 30 Year TBA (d) 5,000 4,783
8.000% 30 Year TBA (d) 875 895
Morgan Stanley Capital I, Inc.
Series HFI Class A2
7.220% due 05/15/27 400 406
Morgan Stanley Capital I, Inc.
Series WFI Class A2
7.220% due 07/15/29 500 509
Paine Webber Mortgage Acceptance Corp. IV
Mortgage Pass-thru Certificate
Series 1995-M1 Class A
6.700% due 01/15/07 720 718
Ryland Acceptance Corp.
Series 83 Class 83-E CMO
8.150% due 10/01/17 3 3
Ryland Mortgage Securities Corp. CMO
Series 1993-8 Class A
7.960% due 09/25/23 (b) 1,389 1,401
----------
97,195
----------
104 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
MUNICIPAL BONDS - 0.5%
New Jersey Economic Development Authority
Series A
7.425% due 02/15/29 $ 950 $ 950
Series B
Zero Coupon due 02/15/08 900 425
Zero Coupon due 02/15/11 1,200 447
----------
1,822
----------
UNITED STATES GOVERNMENT
AGENCIES - 0.5%
Tennessee Valley Authority
5.980% due 04/01/36 1,840 1,855
----------
1,855
----------
UNITED STATES GOVERNMENT
TREASURIES - 20.3%
United States Treasury Bonds
7.500% due 11/15/16 50 53
8.125% due 08/15/19 3,315 3,782
7.625% due 02/15/25 5,750 6,296
United States Treasury Notes
5.625% due 01/31/98 525 525
6.125% due 03/31/98 15,000 15,047
5.125% due 11/30/98 2,150 2,126
5.625% due 11/30/98 7,110 7,078
5.750% due 12/31/98 925 922
6.875% due 07/31/99 325 330
7.125% due 02/29/00 150 153
5.750% due 10/31/00 130 128
5.625% due 11/30/00 350 343
6.375% due 03/31/01 2,025 2,028
6.250% due 04/30/01 1,575 1,571
6.625% due 06/30/01 12,465 12,582
6.250% due 10/31/01 11,975 11,919
6.250% due 02/15/03 100 99
5.750% due 08/15/03 1,550 1,497
7.875% due 11/15/04 170 183
6.500% due 08/15/05 3,800 3,789
6.875% due 05/15/06 1,275 1,301
United States Treasury
Principal Only Strip
Zero Coupon due 11/15/99 465 403
Zero Coupon due 05/15/18 950 225
United States Treasury Security
Interest Only Strips
Zero Coupon due 02/15/19 1,775 397
----------
72,777
----------
YANKEE BONDS - 1.7%
Bombril SA
8.000% due 08/26/98 400 397
Brazil, Republic of, Series EI-L
6.875% due 04/15/06 1,292 1,193
Crown Packaging Enterprise, Ltd. Step Up Bond
14.000% due 08/01/06 300 15
Fresh Delmonte Produce Series B
10.000% due 05/01/03 1,430 1,476
Montell Financial Co., B.V.
8.100% due 03/15/27 775 796
Rogers Cantel, Inc.
9.375% due 06/01/08 675 712
Royal Bank Canada
6.000% due 06/14/85 (b) 280 255
Santander Finnish Issuances
6.775% due 09/30/49 (b) 250 249
St. George Bank, Ltd.
7.150% due 10/01/05 700 696
Videotron Holdings PLC Step Up Bond
Zero Coupon due 08/15/05 (b) 200 168
----------
5,957
----------
TOTAL LONG-TERM INVESTMENTS
(cost $284,034) 286,919
----------
NUMBER
OF
SHARES
----------
OPTIONS PURCHASED - 0.0%
United States Treasury Notes
Sept 99.99 Put (h) 2,500* 11
----------
TOTAL OPTIONS PURCHASED
(cost $22) 11
----------
PREFERRED STOCKS - 1.6%
American RE Capital 18,100 467
Australia & New Zealand
Banking Group, Ltd. 5,300 143
California Federal Bank of Los Angeles
Series B 4,475 493
California Federal Preferred Capital Corp.
Series A 46,300 1,195
Credit Lyonnais Capital S.C.A. - ADR 6,400 165
El Paso Electric Co. Series A 4,114 465
Equity Residential Properties Trust 5,000 129
Highwood Properties, Inc. Series A 1,000 998
Multistrategy Bond Fund 105
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Long Island Lighting Co. Series QQ 16,850 $ 428
Texaco Capital Series B 2,100 48
Time Warner, Inc. 1,091 1,201
----------
TOTAL PREFERRED STOCKS
(cost $5,538) 5,732
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 21.8%
AT&T Capital Corp. Series 4 (MTN)
6.275% due 06/09/98 $ 1,100 1,100
Federal Home Loan Mortgage
5.950% due 06/19/98 5,000 5,004
Federal Home Loan Mortgage
Discount Notes
5.640% due 09/04/97 (f)(g) 50 50
Federal National Mortgage Association
Discount Notes
5.750% due 09/25/97 (g) 3,000 2,960
5.780% due 10/20/97 (g) 3,000 2,950
Frank Russell Investment Company
Money Market Fund
due on demand (a) 65,608 65,608
United States Treasury Bills (f)(g)
5.075% due 07/03/97 (a) 160 160
5.150% due 08/21/97 (a) 385 382
5.010% due 10/02/97 80 80
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $78,285) 78,294
----------
TOTAL INVESTMENTS
(identified cost $367,879)(c) - 103.4% $ 370,956
OTHER ASSETS AND LIABILITIES,
NET - (3.4%) (12,081)
----------
NET ASSETS - 100.0% $ 358,875
----------
----------
(a) At cost, which approximates market.
(b) Adjustable or floating rate security.
(c) See Note 2 for federal income tax information.
(d) Forward commitment. See Note 2.
(e) Perpetual floating rate note.
(f) Held as collateral by the custodian in connection with
futures contracts purchased by the Fund.
(g) Rate noted is yield-to-maturity.
(h) Nonincome-producing security.
* Number of contracts.
ABBREVIATIONS:
ADR - American Depositary Receipt
CMO - Collateralized Mortgage Obligation
MTN - Medium Term Note
PLC - Public Limited Company
REMIC - Real Estate Mortgage Investment Conduit
The accompanying notes are an integral part of the financial statements.
106 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
---------- -------------
FUTURES CONTRACTS
(Notes 2 and 3)
Eurodollar Financial
Futures Contracts
Expiration date 09/97 10 $ (2)
Eurodollar Financial
Futures Contracts
Expiration date 12/97 10 (1)
Eurodollar Financial
Futures Contracts
Expiration date 03/98 10 (2)
United States Treasury 5 Year Note
Futures Contracts
expiration date 09/97 36 4
United States Treasury 10 Year Note
Futures Contracts
expiration date 09/97 254 24
United States Treasury 30 Year Bond
Futures Contracts
expiration date 09/97 162 (97)
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ (74)
----------
----------
(#) At June 30, 1997, United States Government Securities
valued at $672 were held as collateral by the custodian in
connection with futures contracts purchased by the Fund.
The accompanying notes are an integral part of the financial statements.
Multistrategy Bond Fund 107
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $367,879)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . $ 370,956
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,691
Investments sold (regular settlement). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,156
Investments sold (delayed settlement)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,179
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,127
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
----------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388,113
LIABILITIES
Payables:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments purchased (regular settlement) . . . . . . . . . . . . . . . . . . . . $ 5,340
Investments purchased (delayed settlement)(Note 2) . . . . . . . . . . . . . . . . 22,672
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 217
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Daily variation margin on futures contracts (Notes 2 and 3). . . . . . . . . . . . 191
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,238
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 358,875
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,753
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419
Unrealized appreciation (depreciation) on: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,077
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (74)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353,329
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 358,875
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($358,874,745 divided by 35,218,409 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.19
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
108 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,710
Dividends from Money Market Fund (Note 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,433
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,370
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,060
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Bookkeeping service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Amortization of deferred organization expenses . . . . . . . . . . . . . . . . . . 4
----------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,397
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (92)
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,305
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,065
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 884
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (195)
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . 252 994
----------------
Net change in unrealized appreciation or depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353
Futures contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249
Options written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
Foreign currency-related transactions. . . . . . . . . . . . . . . . . . . . . . . (230) 365
---------------- ----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,359
----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . . . . . . . . . $ 11,424
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Multistrategy Bond Fund 109
<PAGE>
MULTISTRATEGY BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,065 $ 15,928
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 994 534
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . 365 (2,357)
------------------- -------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . 11,424 14,105
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,227) (15,942)
In excess of net investment income . . . . . . . . . . . . . . . . . . . . . . . . -- (283)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . (446) (87)
------------------- -------------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (8,673) (16,312)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . . 50,696 88,869
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 53,447 86,662
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305,428 218,766
------------------- -------------------
End of period (including undistributed net investment income of
$1,753 and accumulated distributions in excess of net
investment income of $85, respectively). . . . . . . . . . . . . . . . . . . . . $ 358,875 $ 305,428
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
110 Multistrategy Bond Fund
<PAGE>
MULTISTRATEGY BOND FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the
financial statement.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993**
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. . . . . . . . . . . . . $ 10.11 $ 10.25 $ 9.29 $ 10.31 $ 10.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . .30 .61 .65 .58 .46
Net realized and unrealized gain (loss) on investments. . . .04 (.12) .97 (1.03) .40
-------- -------- -------- -------- --------
Total Income From Investment Operations . . . . . . . . . .34 .49 1.62 (.45) .86
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . (.25) (.61) (.66) (.57) (.46)
In excess of net investment income. . . . . . . . . . . . . -- (.01) -- -- --
Net realized gain on investments. . . . . . . . . . . . . . (.01) (.01) -- -- (.08)
In excess of net realized gain on investments . . . . . . . -- -- -- -- (.01)
-------- -------- -------- -------- --------
Total Distributions . . . . . . . . . . . . . . . . . . . (.26) (.63) (.66) (.57) (.55)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD. . . . . . . . . . . . . . . . $ 10.19 $ 10.11 $ 10.25 $ 9.29 $ 10.31
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN (%)(a) . . . . . . . . . . . . . . . . . . . . . 3.49 4.97 17.92 (4.35) 8.74
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . 358,875 305,428 218,765 173,035 98,374
Ratios to average net asssets (%)(b):
Operating expenses, net . . . . . . . . . . . . . . . . . .80 .81 .85 .85 .85
Operating expenses, gross . . . . . . . . . . . . . . . . .86 .88 .89 .90 1.20
Net investment income . . . . . . . . . . . . . . . . . . 6.19 6.19 6.61 6.26 5.60
Portfolio turnover rate (%)(b). . . . . . . . . . . . . . . 262.74 145.38 142.26 136.39 188.95
Per share amount of fees waived ($ omitted)(c). . . . . . . .0028 .0055 -- -- .0002
Per share amount of fees reimbursed ($ omitted) . . . . . . -- .0005 .0042 .0043 .0286
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period January 29, 1993 (commencement of operations)
to December 31, 1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1997 and
December 31, 1993 are annualized.
(c) See Note 4 for current period amounts.
Multistrategy Bond Fund 111
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 28 different investment portfolios, referred to as
"Funds", of which 23 are in operation as of June 30, 1997. These financial
statements report on eight Funds, each of which has distinct investment
objectives and strategies. The Investment Company is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. It is organized and operates as a
Massachusetts business trust under an amended master trust agreement dated
July 26, 1984. The Investment Company's master trust agreement permits the
Board of Trustees to issue an unlimited number of full and fractional
shares of beneficial interest at a $.01 par value. As of July 8, 1996, the
eight Funds that are reported in these financial statements have available
Class S and Class C shares. Each Class has equal rights as to assets and
voting privileges. Investment income, realized and unrealized gains and
losses and fund level expenses of a Fund are allocated on a pro rata basis
to each Class, based on relative net assets of each Class to the total net
assets of a Fund. Certain expenses may also be charged to an individual
Class for services or fees that relate specifically to that particular
Class. Class C shares are charged a 12b-1 distribution fee and a
shareholder servicing fee of 0.40% and 0.25% of average net assets,
respectively. Class S shares which are reported herein are charged no such
fees.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Funds in the preparation of these
financial statements.
SECURITY VALUATION: United States equity and fixed-income securities listed
and traded principally on any national securities exchange are valued on
the basis of the last sale price or, lacking any sale, at the closing bid
price, on the primary exchange on which the security is traded. United
States over-the-counter equity and fixed-income securities and options are
valued on the basis of the closing bid price. Futures contracts are valued
on the basis of the last sale price. Many fixed-income securities do not
trade each day and, thus, last sale or bid prices are frequently not
available. Fixed-income securities, therefore, may be valued using prices
provided by a pricing service when such prices are believed to reflect the
fair market value of such securities.
International equity and fixed-income securities traded on a national
securities exchange are valued on the basis of the last sale price.
International securities traded over the counter are valued on the basis of
the mean of bid prices. In the absence of a last sale or mean bid price,
respectively, such securities may be valued on the basis of prices provided
by a pricing service if those prices are believed to reflect the fair
market value of such securities.
Money Market instruments held by the Funds maturing within 60 days of the
valuation date are valued at "amortized cost" unless the Board of Trustees
determines that amortized cost does not represent fair value.
The Funds may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
INVESTMENT TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost incurred by each money manager
within a particular fund. The Funds may lend portfolio securities but have
not done so in during the six months ended June 30, 1997.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
AMORTIZATION AND ACCRETION: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting purposes.
All short-term premiums/discounts are amortized/accreted for both tax and
financial reporting purposes.
FEDERAL INCOME TAXES: As a Massachusetts business trust, each Fund is a
separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to each Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
112 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
It is each Fund's intention to qualify as a regulated investment company
and distribute all of its taxable income. Therefore, no federal income tax
provision was required for the Funds. From November 1, 1996 to December 31,
1996, the Volatility Constrained Bond Fund incurred net realized capital
losses of $260,466. As permitted by tax regulations, the Fund intends to
elect to defer these losses and treat them as arising in the year ending
December 31, 1997.
At December 31, 1996, certain Funds had net tax basis capital loss
carryforwards which may be applied against any net realized taxable gains
in each succeeding year or until their respective expiration dates,
whichever occurs first. Available capital loss carryforwards and expiration
dates are as follows:
<TABLE>
<CAPTION>
12/31/02 12/31/03 12/31/04 TOTALS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Diversified Bond $ (4,997,596) $ -- $ -- $ (4,997,596)
Volatility Constrained Bond (5,583,410) (1,871,605) (2,088,774) (9,543,789)
</TABLE>
The aggregate cost of investments and the composition of unrealized appreciation
and depreciation of investment securities for federal income tax purposes as of
June 30, 1997 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
<S> <C> <C> <C>
Diversified Equity $ 727,945,639 $ 152,444,013 $ (8,737,652) $ 143,706,361
Special Growth 384,159,647 96,233,756 (6,990,403) 89,243,353
Equity Income 182,129,334 33,692,307 (1,619,641) 32,072,666
Quantitative Equity 675,734,063 181,920,071 (4,510,134) 177,409,937
International Securities 748,986,280 131,893,755 (26,535,035) 105,358,720
Diversified Bond 638,023,656 7,949,968 (3,152,624) 4,797,344
Volatility Constrained Bond 160,794,137 461,048 (1,078,185) (617,137)
Multistrategy Bond 367,772,151 4,422,188 (1,238,339) 3,183,849
</TABLE>
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: For all Funds, income
dividends and capital gain distributions, if any, are recorded on the ex-
dividend date. Dividends are generally declared and paid quarterly for the
equity Funds, annually for the International Securities Fund and monthly
for the fixed income Funds. Capital gain distributions are generally
declared and paid annually. An additional distribution may be paid by the
Funds to avoid imposition of federal income tax on any remaining
undistributed capital gains and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in options, futures, forward contracts, passive foreign
investment companies, foreign-denominated investments, mortgage-backed
securities, and certain securities sold at a loss. Accordingly, a Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
EXPENSES: The Funds, and when appropriate each Class, will pay their own
expenses other than those expressly assumed by Frank Russell Investment
Management Company. Most expenses can be directly attributed to the
individual Funds. Expenses which cannot be directly attributed are
allocated among all funds principally based on their relative net assets.
In addition, Class C shares will pay 12b-1 and shareholder servicing fees
along with other expenses that may be attributable to that class.
Notes to Financial Statements 113
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DEFERRED ORGANIZATION EXPENSES: Organization and initial registration costs
of Multistrategy Bond Fund have been deferred and are being amortized over
60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Funds may engage in repurchase agreements with
several financial institutions whereby a Fund, through its custodian,
receives delivery of the underlying securities. Each Fund's Money Manager
will monitor repurchase agreements daily to determine that the market value
(including accrued interest) of the underlying securities at Fedwire
closing time remains at least equal to 102% of the repurchase price. The
Money Manager will notify the Seller to immediately increase the collateral
on the repurchase agreement to 102% of the repurchase price if collateral
value falls below 102%.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts and transactions of
the Funds are translated into U.S. dollars on the following basis:
(a) Market value of investment securities, other assets and
liabilities at the closing rate of exchange on the valuation
date.
(b) Purchases and sales of investment securities and income at the
closing rate of exchange prevailing on the respective trade dates
of such transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from: sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Funds' books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets and
liabilities, other than investments in securities, at period-end, as a
result of changes in the exchange rates.
It is not practical to isolate that portion of the results of operations of
the Funds that arises as a result of changes in exchange rates from that
portion that arises from changes in market prices of investments during the
year. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. However, for federal income tax purposes the
Funds do isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
DERIVATIVES: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Funds' Prospectus and Statement
of Additional Information, the Funds may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
They include options, futures, swaps, forwards, structured notes and
stripped securities. These instruments offer unique characteristics and
risks that assist the Funds in meeting their investment strategies.
The Funds typically use derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by certain Funds through the use of options and futures to earn
"market-like" returns with their excess and liquidity reserve cash
balances. Hedging is used by some Funds to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in a Fund. By purchasing
certain instruments, Funds may more effectively achieve the desired
portfolio characteristics that assist them in meeting their investment
objectives. Depending on how the derivatives are structured and utilized,
the risks associated with them may vary widely. These risks are generally
categorized as market risk, liquidity risk and counterparty or credit risk.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio
purchases and sales of securities denominated in a foreign currency,
certain Funds may enter into forward foreign currency exchange spot
contracts and forward foreign currency exchange contracts ("contracts").
The International Securities Fund may enter into foreign currency forward
overlays on liquidity reserve balances. Additionally, from time to time the
International Securities, Diversified Bond, Volatility Constrained Bond and
Multistrategy Bond Funds may enter into contracts to hedge certain foreign
currency-denominated assets. Contracts are recorded at market value.
Certain risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts
and are generally limited to the amount of unrealized gain on the
contracts, if any, that are recognized in the Statement of Assets and
Liabilities. Realized gains or losses arising from such transactions are
included in net realized gain (or loss) from foreign currency-related
transactions. Open contracts at June 30, 1997, are presented on the
Statement of Net Assets for the applicable Funds.
114 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FORWARD COMMITMENTS: The Funds may contract to purchase securities for a
fixed price at a future date beyond customary settlement time (not to
exceed 120 days)(i.e., a "forward commitment", "delayed settlement" or
"when issued" transaction, e.g., to be announced ("TBA")) consistent with a
Fund's ability to manage its investment portfolio and meet redemption
requests. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Funds may dispose of a forward commitment
transaction prior to settlement if it is appropriate to do so and realize
short-term gains (or losses) upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund in a
dollar amount sufficient to make payment for the portfolio securities to be
purchased will be segregated on the Fund's records at the trade date and
maintained until the transaction is settled. A forward commitment
transaction involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date or the other party to the
transaction fails to complete the transaction.
OPTIONS: The Funds may purchase and sell (write) call and put options on
securities and securities indices, provided such options are traded on a
national securities exchange or in an over-the-counter market. These Funds
may also purchase and sell put and call options on foreign currencies. The
domestic equity Funds may utilize options to equitize liquidity reserve
balances.
When a Fund writes a covered 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 as an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current
market value of the option written. The Fund receives a premium on the sale
of a call option but gives up the opportunity to profit from any increase
in stock value above the exercise price of the option, and when the Fund
writes a put option it is exposed to a decline in the price of the
underlying security. If an option which the Fund has written either expires
on its stipulated expiration date or the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss, if the cost of a
closing purchase transaction exceeds the premium received when the option
was sold) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
call option which the Fund has written is exercised, the Fund realizes a
capital gain or loss from the sale of the underlying security, and the
proceeds from such sale are increased by the premium originally received.
When a put option which a Fund has written is exercised, the amount of the
premium originally received will reduce the cost of the security which a
Fund purchases upon exercise of the option. Realized gains (losses) on
purchased options are included in net realized gain (loss) from
investments.
The Funds' use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets
and Liabilities. The face or contract amounts of these instruments reflect
the extent of the Funds' exposure to off balance sheet risk. The risks may
be caused by an imperfect correlation between movements in the price of the
instrument and the price of the underlying securities and interest rates.
The Funds' activities in written options are conducted through regulated
exchanges, which do not result in counterparty credit risks.
FUTURES: The domestic and international equity Funds utilize futures to
equitize liquidity reserve balances. Multistrategy Bond Fund may utilize
futures contracts (i.e., interest rate, foreign currency and index futures
contracts) to a limited extent. The face or contract amounts of these
instruments reflect the extent of the Funds' exposure to off balance sheet
risk. The primary risks associated with the use of futures contracts are an
imperfect correlation between the change in market value of the securities
held by the Fund and the prices of futures contracts and the possibility of
an illiquid market. Changes in the initial settlement values of futures
contracts are accounted for as unrealized appreciation (depreciation) until
the contracts are terminated, at which time realized gains and losses are
recognized.
3. INVESTMENT TRANSACTIONS
SECURITIES: During the six months ended June 30, 1997, purchases and sales
of investment securities (excluding U.S. Government and Agency obligations,
short-term investments, options, futures and repurchase agreements) were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES PURCHASES SALES
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Diversified Equity $ 477,644 258 $ 447,009,010 International Securities $ 325,323,482 $ 287,654,923
Special Growth 201,867,278 174,245,282 Diversified Bond 95,026,323 62,154,568
Equity Income 156,617,400 161,675,040 Volatility Constrained Bond 47,912,530 35,400,957
Quantitative Equity 437,972,457 368,339,204 Multistrategy Bond 77,451,292 64,188,132
</TABLE>
Notes to Financial Statements 115
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Purchases and sales of U.S. Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
PURCHASES SALES
--------------- ---------------
Diversified Bond $ 380,144,630 $ 377,564,858
Volatility Constrained Bond 101,347,694 115,608,749
Multistrategy Bond 318,684,151 313,337,142
OPTIONS WRITTEN AND FUTURES CONTRACTS: Fund transactions in written put
options and futures contract purchases for the six months ended June 30,
1997 were as follows:
<TABLE>
<CAPTION>
DIVERSIFIED EQUITY FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 129 $ 35,917,221
Opened 443 147,055,877
Closed (384) (118,804,950)
------------- -------------
Outstanding June 30, 1997 188 $ 64,168,148
------------- -------------
------------- -------------
<CAPTION>
SPECIAL GROWTH WRITTEN PUT OPTIONS FUTURES CONTRACTS
AGGREGATE
NUMBER OF PREMIUMS NUMBER OF FACE VALUE OF
CONTRACTS RECEIVED CONTRACTS CONTRACTS (1)
------------- ------------- ------------- -------------
Outstanding December 31, 1996 20 $ 12,440 167 $ 29,276,827
Opened -- -- 482 85,636,726
Closed -- -- (468) (84,940,715)
Expired (20) (12,440) -- --
------------- ------------- ------------- -------------
Outstanding June 30, 1997 -- $ -- 181 $ 29,972,838
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
EQUITY INCOME FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 27 $ 8,642,750
Opened 83 30,784,717
Closed (89) (31,866,279)
------------- -------------
Outstanding June 30, 1997 21 $ 7,561,188
------------- -------------
------------- -------------
<CAPTION>
QUANTITATIVE EQUITY FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 92 $ 26,023,400
Opened 322 99,394,453
Closed (314) (97,577,378)
------------- -------------
Outstanding June 30, 1997 100 $ 27,840,475
------------- -------------
------------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
116 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
INTERNATIONAL SECURITIES FUTURES CONTRACTS
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 283 $ 41,086,759
Opened 1,632 225,151,481
Closed (1,474) (197,782,086)
------------- -------------
Outstanding June 30, 1997 441 $ 68,456,154
------------- -------------
------------- -------------
<CAPTION>
DIVERSIFIED BOND WRITTEN PUT OPTIONS
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------- -------------
<S> <C> <C>
Outstanding December 31, 1996 -- $ --
Opened 2,600 23,430
Expired (2,600) (23,430)
------------- -------------
Outstanding June 30, 1997 -- $ --
------------- -------------
------------- -------------
<CAPTION>
MULTISTRATEGY BOND WRITTEN PUT OPTIONS FUTURES CONTRACTS
AGGREGATE
NUMBER OF PREMIUMS NUMBER OF FACE VALUE OF
CONTRACTS RECEIVED CONTRACTS CONTRACTS (1)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1996 19 $ 7,498 339 $ 37,553,938
Opened 3,250 45,677 960 107,900,999
Closed (19) (7,498) (817) (89,130,614)
Exercised (3,250) (45,677) -- --
------------- ------------- ------------- -------------
Outstanding June 30, 1997 -- $ -- 482 $ 56,324,323
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
4. RELATED PARTIES
MANAGER: Frank Russell Investment Management Company ("FRIMCo" or
"Manager") operates and administers all of the Funds which comprise the
Investment Company, and manages the Money Market and U.S. Government Money
Market Funds (two series of the Investment Company not presented in this
report). FRIMCo is a wholly owned subsidiary of Frank Russell Company,
which researches and recommends to FRIMCo, and to the Investment Company,
one or more investment management organizations to manage the portfolio of
each Fund.
For the six months ended June 30, 1997, the management fee paid to FRIMCo,
for the Funds listed below, in accordance with the Investment Company's
Management Agreement with that firm, amounted to $15,014,020 before
waivers. Such fee is payable monthly and is equal to the annual rate, by
Fund, shown in the table below, of the average daily net assets of the
applicable Fund.
<TABLE>
<CAPTION>
ANNUAL RATE ANNUAL RATE
----------- -----------
<S> <C> <C> <C>
Diversified Equity 0.78% International Securities 0.95%
Special Growth 0.95 Diversified Bond 0.45
Equity Income 0.80 Volatility Constrained Bond 0.50
Quantitative Equity 0.78 Multistrategy Bond 0.65
</TABLE>
Notes to Financial Statements 117
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The management contract also provides that if any Fund's expenses
(exclusive of interest and taxes) exceed specified limits imposed by the
Manager on an annual basis, such excess will be paid by FRIMCo. The Manager
has voluntarily agreed to waive a portion of its 0.65% management fee for
the Multistrategy Bond Fund, to the extent that total fund level expenses
for this Fund exceed 0.80% of its average daily net assets on an annual
basis. The total amount of such waivers for the six months ended June 30,
1997 was $91,739.
BOOKKEEPING SERVICES: Fees for bookkeeping and analytic services provided
to the Funds are paid or accrued to Frank Russell Company, an affiliate of
the Investment Company. Frank Russell Company provides its Portfolio
Verification System ("PVS") and TruVP System to the Funds, pursuant to a
written Service Agreement. The PVS computerized database system records
detailed transactions data for each of the Funds necessary to prepare
various financial and Internal Revenue Service accounting reports, whereas
the TruVP System provides analytics used by the investment department. The
Funds' total fees for the six months ended June 30, 1997 were $194,634. The
PVS system portion of the service agreement was terminated during 1997.
TRANSFER AGENT: The Funds have a contract with FRIMCo, for the Funds listed
above, to provide transfer agent services to the Investment Company. Total
fees for the six months ended June 30, 1997 were $1,380,862.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has adopted a
Distribution Plan pursuant to Rule 12b-1 (the "Plan") under the 1940 Act.
Under this Plan, the Investment Company is authorized to make payments to
the Distributor, or any Selling Agents, as defined in the Plan, an amount
(the "12b-1 Fee") for sales support services provided, and related expenses
incurred which are primarily intended to result in the sale of the Class C
Shares subject to the Distribution Plan.
The Investment Company has entered into a Distribution Agreement with
Russell Fund Distributors (the "Distributor") which is a wholly-owned
subsidiary of FRIMCo to promote and offer shares of Class S and Class C of
the Investment Company. The Distributor may enter into sub-distribution
agreements with other non-affiliated parties (the "Selling/Servicing
Agents"). The amounts paid to the Distributor for distribution services
relating to Class C are included in the accompanying Statements of
Operations. The Distributor receives no compensation from the Investment
Company for its services relating to distributing the Class S Shares.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments to the Distributor
or any Servicing Agent for any activities or expenses primarily intended to
assist, support or service the Servicing Agents' clients who beneficially
own Class C Shares of the Funds. The amounts paid to the Distributor for
shareholder services relating to Class C are included in the accompanying
Statements of Operations.
The 12b-1 Fee payments shall not exceed .75% of the average daily net
assets of a Fund's Class C Shares on an annual basis. Currently the Board
of Trustees has determined to assess a 12b-1 Fee equal to .40% of the
average daily net assets. The shareholder servicing payments shall not
exceed .25% of the average daily net assets of a Fund's Class C Shares on
an annual basis. The Investment Company does not pay for unreimbursed
expenses of the Distributor including amounts expended by the Distributor
in excess of amounts received by it from the Investment Company, interest,
carrying or other financial charges in connection with excess amounts
expended, or the Distributor's overhead expenses. However, the Distributor
may be able to recover such amount or more from future payments made by the
Investment Company under the Distribution plan.
ACCRUED FEES PAYABLE TO AFFILIATES AS OF JUNE 30, 1997 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
SHAREHOLDER
MANAGEMENT BOOKKEEPING TRANSFER DISTRIBUTION SERVICING
FEES SERVICE FEES AGENT FEES FEES FEES TOTALS
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Diversified Equity $ 569,225 $ 15,166 $ 55,121 $ 498 $ 311 $ 640,321
Special Growth 357,779 10,168 44,196 1,413 883 414,439
Equity Income 123,498 4,771 17,620 237 147 146,273
Quantitative Equity 538,305 6,163 48,511 973 608 594,560
International Securities 659,124 23,297 49,797 939 587 733,744
Diversified Bond 222,509 8,484 33,343 1,312 820 266,468
Volatility Constrained Bond 65,978 4,806 9,082 -- -- 79,866
Multistrategy Bond 173,027 7,682 35,885 -- -- 216,594
------------ ------------ ------------ ------------ ------------ ------------
$ 2,709,445 $ 80,537 $ 293,555 $ 5,372 $ 3,356 $ 3,092,265
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
118 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
BROKERAGE COMMISSIONS: The Funds may effect portfolio transactions through
Frank Russell Securities, Inc., an affiliate of the Manager, when a money
manager determines that the Fund will receive competitive execution, price,
and commissions. Upon completion of such transacitons, Frank Russell
Securities, Inc. will refund up to 70% of the commissions paid by that Fund
after reimbursement for research services provided to FRIMCo. Amounts
retained by Frank Russell Securities, Inc. for the six months ended June
30, 1997 were as follows:
Diversified Equity $ 41,415 Equity Income $ 25,400
Special Growth 4,554 International Securities 43,125
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $20,000 per year plus out-of-pocket
expenses. Total Trustee expenses were $50,202 for the six months ended June
30, 1997, and were allocated to each Fund and Class, where appropriate, on
a pro rata basis, including 15 affiliated funds not presented herein.
5. MONEY MARKET FUND
The Funds are permitted to invest their cash reserves (i.e., monies
awaiting investment in portfolio securities suitable for the Funds'
objectives) in the Frank Russell Investment Company Money Market Fund (a
series of Frank Russell Investment Company not presented herein). As of
June 30, 1997, $333,205,000 of the Money Market Fund's net assets
represents investments by these Funds and $372,736,000 represents the
investments of other affiliated Funds not presented herein.
6. FUND SHARE TRANSACTIONS
Share transactions for each Class of shares were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNTS
------------------------------------------ -------------------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996 (UNAUDITED) DECEMBER 31, 1996
------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
DIVERSIFIED EQUITY
CLASS S
Proceeds from shares sold 4,060,948 5,614,599 $ 176,128,865 $ 230,097,300
Proceeds from reinvestment
of distributions 343,218 1,642,850 14,858,829 66,106,841
Payments for shares redeemed (2,734,520) (4,119,044) (118,541,595) (168,781,509)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 1,669,646 3,138,405 72,446,099 127,422,632
------------------- -------------------- -------------------- --------------------
CLASS C*
Proceeds from shares sold 28,136 -- 1,282,292 --
Proceeds from reinvestment
of distributions -- -- -- --
Payments for shares redeemed (80) -- (3,778) --
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 28,056 -- 1,278,514 --
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 1,697,702 3,138,405 $ 73,724,613 $ 127,422,632
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
</TABLE>
* Share transactions for Diversified Equity Class C are for the period
May 26, 1997 (commencement of sale of shares) to June 30, 1997.
Notes to Financial Statements 119
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
SHARES AMOUNTS
------------------------------------------ -------------------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996 (UNAUDITED) DECEMBER 31, 1996
------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
SPECIAL GROWTH
CLASS S
Proceeds from shares sold 2,590,789 3,804,912 $ 104,709,465 $ 156,927,623
Proceeds from reinvestment
of distributions 151,866 820,671 6,240,845 32,324,567
Payments for shares redeemed (1,882,909) (2,997,309) (76,023,400) (123,713,625)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 859,746 1,628,274 34,926,910 65,538,565
------------------- -------------------- -------------------- --------------------
CLASS C
Proceeds from shares sold 22,065 22,414 878,336 980,934
Proceeds from reinvestment
of distributions 1 1 9 43
Payments for shares redeemed (1,277) (82) (51,085) (3,301)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 20,789 22,333 827,260 977,676
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 880,535 1,650,607 $ 35,754,170 $ 66,516,241
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
EQUITY INCOME
CLASS S
Proceeds from shares sold 853,112 1,393,790 $ 35,395,940 $ 55,293,883
Proceeds from reinvestment
of distributions 131,617 446,910 5,424,201 17,486,574
Payments for shares redeemed (1,086,401) (1,675,865) (45,175,712) (66,979,445)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) (101,672) 164,835 (4,355,571) 5,801,012
------------------- -------------------- -------------------- --------------------
CLASS C
Proceeds from shares sold 7,484 3,036 301,353 127,066
Proceeds from reinvestment
of distributions 1 1 17 41
Payments for shares redeemed (4,929) -- (206,793) --
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 2,556 3,037 94,577 127,107
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) (99,116) 167,872 $ (4,260,994) $ 5,928,119
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
</TABLE>
120 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
SHARES AMOUNTS
------------------------------------------ -------------------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996 (UNAUDITED) DECEMBER 31, 1996
------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
QUANTITATIVE EQUITY
CLASS S
Proceeds from shares sold 4,756,832 6,980,352 $ 164,647,384 $ 225,170,427
Proceeds from reinvestment
of distributions 500,240 1,823,635 17,276,494 58,110,154
Payments for shares redeemed (2,935,004) (4,608,884) (102,108,659) (149,407,184)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 2,322,068 4,195,103 79,815,219 133,873,397
------------------- -------------------- -------------------- --------------------
CLASS C
Proceeds form shares sold 29,982 9,741 1,043,671 329,240
Proceeds from reinvestment
of distributions 1 1 12 27
Payments for shares redeemed (819) -- (29,991) --
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 29,164 9,742 1,013,692 329,267
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 2,351,232 4,204,845 $ 80,828,911 $ 134,202,664
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
INTERNATIONAL SECURITIES
CLASS S
Proceeds from shares sold 2,855,427 4,161,163 $ 165,121,703 $ 242,904,319
Proceeds from reinvestment
of distributions 95,037 365,866 5,408,576 21,034,288
Payments for shares redeemed (2,021,269) (2,822,528) (116,591,501) (164,668,819)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 929,195 1,704,501 53,938,778 99,269,788
------------------- -------------------- -------------------- --------------------
CLASS C
Proceeds from shares sold 7,170 10,652 409,025 633,353
Proceeds from reinvestment
of distributions 1 1 5 17
Payments for shares redeemed (375) (2) (21,815) (62)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 6,796 10,651 387,215 633,308
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 935,991 1,715,152 $ 54,325,993 $ 99,903,096
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
</TABLE>
Notes to Financial Statements 121
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
SHARES AMOUNTS
------------------------------------------ -------------------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996 (UNAUDITED) DECEMBER 31, 1996
------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
DIVERSIFIED BOND
CLASS S
Proceeds from shares sold 6,295,313 9,067,853 $ 143,843,973 $ 208,139,587
Proceeds from reinvestment
of distributions 370,604 790,678 8,432,520 18,102,789
Payments for shares redeemed (4,238,394) (7,398,945) (96,677,881) (169,652,552)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 2,427,523 2,459,586 55,598,612 56,589,824
------------------- -------------------- -------------------- --------------------
CLASS C
Proceeds from shares sold 30,274 42,495 692,112 984,717
Proceeds from reinvestment
of distributions 1 1 7 2
Payments for shares redeemed (3,341) (645) (75,452) (15,022)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 26,934 41,851 616,667 969,697
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 2,454,457 2,501,437 $ 56,215,279 $ 57,559,521
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
VOLATILITY CONSTRAINED BOND
CLASS S
Proceeds from shares sold 2,493,132 3,498,329 $ 47,478,069 $ 66,587,891
Proceeds from reinvestment
of distributions 134,569 296,985 2,554,330 5,642,187
Payments for shares redeemed (2,613,602) (4,705,618) (49,781,138) (89,544,794)
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 14,099 (910,304) $ 251,261 $ (17,314,716)
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
MULTISTRATEGY BOND
CLASS S
Proceeds from shares sold 9,318,076 14,210,027 $ 94,069,515 $ 142,635,388
Proceeds from reinvestment
of distributions 711,750 1,325,784 7,164,176 13,293,418
Payments for shares redeemed (5,009,734) (6,685,533) (50,538,047) (67,059,749)
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 5,020,092 8,850,278 $ 50,695,644 $ 88,869,057
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
</TABLE>
There was no activity in Class C shares for Volatility Constrained Bond and
Multistrategy Bond Funds.
122 Notes to Financial Statements
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. DIVIDENDS
On July 1, 1997, the Board of Trustees declared the following dividends
from net investment income payable on July 10, 1997, to shareholders of
record on July 2, 1997:
<TABLE>
<S> <C> <C> <C>
Diversified Equity - Class S $ 0.0993 Quantitative Equity - Class C $ 0.0388
Diversified Equity - Class C 0.0670 Diversified Bond - Class S 0.1222
Special Growth - Class S 0.0342 Diversified Bond - Class C 0.0625
Equity Income - Class S 0.1817 Volatility Constrained Bond 0.0948
Equity Income - Class C 0.0610 Multistrategy Bond 0.0518
Quantitative Equity - Class S 0.0998
</TABLE>
Notes to Financial Statements 123
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
TRUSTEES
George F. Russell, Jr., Chairman
Lynn L. Anderson
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Lynn L. Anderson, President and Chief Executive Officer
Peter Apanovitch, Manager of Short Term Investment Funds
George W. Weber, Treasurer and Chief Accounting Officer
Randall P. Lert, Director of Investments
Karl Ege, Secretary and General Counsel
MANAGER AND TRANSFER AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CONSULTANT
Frank Russell Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) RUSSEL4
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 - One Commerce Square
Philadelphia, PA 19103-7098
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS
DIVERSIFIED EQUITY
Alliance Capital Management L.P., Minneapolis, MN
Barclays Global Fund Advisors, San Francisco, CA
Equinox Capital Management, Inc., New York, NY
INVESCO Capital Management, Inc. Atlanta, GA
Lincoln Capital Management Company, Chicago, IL
Peachtree Asset Management, Atlanta, GA
Schneider Capital Management, Wayne, PA
Suffolk Capital Management, Inc., New York, NY
Trinity Investment Management Corporation, Boston, MA
SPECIAL GROWTH
Delphi Management, Inc., Boston, MA
Fiduciary International, Inc., New York, NY
GlobeFlex Capital, L.P., San Diego, CA
Jacobs Levy Equity Management, Inc., Roseland, NJ
Sirach Capital Management, Inc., Seattle, WA
Wellington Management Company LLP, Boston, MA
EQUITY INCOME
Brandywine Asset Management, Inc., Wilmington, DE
Equinox Capital Management, Inc., New York, NY
Trinity Investment Management Corporation, Boston, MA
QUANTITATIVE EQUITY
Barclays Global Fund Advisors, San Francisco, CA
Franklin Portfolio Associates Trust, Boston, MA
J.P. Morgan Investment Management, Inc., New York, NY
INTERNATIONAL SECURITIES
J.P. Morgan Investment Management, Inc., New York, NY
Marathon Asset Management Limited, London, England
Oechsle International Advisors, Boston, MA
Rowe Price-Fleming International, Inc., Baltimore, MD
Sanford C. Bernstein & Co., Inc., New York, NY
The Boston Company Asset Management, Inc., Boston, MA
DIVERSIFIED BOND
Lincoln Capital Management Company, Chicago, IL
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
VOLATILITY CONSTRAINED BOND
BlackRock Financial Management, New York, NY
Standish, Ayer & Wood, Inc., Boston, MA
STW Fixed Income Management, Ltd., Hamilton, Bermuda
MULTISTRATEGY BOND
BEA Associates, New York, NY
Pacific Investment Management Company, Newport Beach, CA
Standish, Ayer & Wood, Inc., Boston, MA
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUNDS AND IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS AND IS NOT AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS ACCOMPANIED OR PRECEDED BY
AN EFFECTIVE PROSPECTUS. NOTHING HEREIN CONTAINED IS TO BE CONSIDERED AN
OFFER OF SALE OR A SOLICITATION OF AN OFFER TO BUY SHARES OF FRANK RUSSELL
INVESTMENT COMPANY. SUCH OFFERING IS MADE ONLY BY PROSPECTUS, WHICH INCLUDES
DETAILS AS TO OFFERING PRICE AND OTHER MATERIAL INFORMATION.
124 Manager, Money Managers and Service Providers
<PAGE>
FRANK RUSSELL INVESTMENT
COMPANY
Frank Russell Investment Company
is a "series mutual fund" with 28
different investment portfolios.
These financial statements report
on seven Funds, each of which has
distinct investment objectives and
strategies.
FRANK RUSSELL INVESTMENT
MANAGEMENT COMPANY
Responsible for overall management
and administration of the Funds.
FRANK RUSSELL COMPANY
Consultant to Frank Russell
Investment Management Company.
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
SEMIANNUAL REPORT
JUNE 30, 1997
(UNAUDITED)
TABLE OF CONTENTS
Page
Letter to Our Clients. . . . . . . . . . . . . . . . . 1
Real Estate Securities Fund. . . . . . . . . . . . . . 2
Emerging Markets Fund . . . . . . . . . . . . . . . . 10
Equity T Fund. . . . . . . . . . . . . . . . . . . . . 24
Limited Volatility Tax Free Fund . . . . . . . . . . . 32
Money Market Fund. . . . . . . . . . . . . . . . . . . 44
U.S. Government Money Market Fund. . . . . . . . . . . 52
Tax Free Money Market Fund . . . . . . . . . . . . . . 58
Notes to Financial Statements. . . . . . . . . . . . . 69
Manager, Money Managers and Service Providers. . . . . 77
FRANK RUSSELL INVESTMENT COMPANY - SPECIALTY FUNDS
Copyright -C- Frank Russell Company 1997. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. The performance quoted represents past performance and,
except for a money market fund, the investment return and principal value of an
investment will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. An investment in a money market fund is neither
insured nor guaranteed by the US government. There can be no assurance that a
money market fund will be able to maintain a stable net asset value of $1.00 per
share. Investments in securities of non-US issuers and foreign currencies
involve investment risks different than those of US issuers; the Prospectus
contains further information and details regarding these risks. Income from
tax-free funds may be subject to an alternative minimum tax, or state and local
taxes. Russell Fund Distributors, Inc., is the distributor of Frank Russell
Investment Company.
<PAGE>
FRANK RUSSELL
INVESTMENT COMPANY
909 A Street
Tacoma, Washington 98402
Fax 253-596-2497
800-832-6688
TO OUR CLIENTS
Frank Russell Investment Company is pleased to present its 1997 Semiannual
Report. This report covers information on the Funds' first six months of our
sixteenth year in operation.
We continue to focus on the benefits of multi-manager, multi-style
diversification in structuring our funds. We remain committed to providing our
clients with superior investment solutions across each of our multiple manager
and style funds. These efforts proved worthwhile in the first half of 1997, as
our funds performed well against their benchmarks and attracted many new
investors, creating significant growth in assets.
Frank Russell Investment Management Company continuously evaluates the funds we
offer our clients. Each fund is carefully monitored by Russell's investment
professionals to ensure the most appropriate investment advisors and strategies
are utilized within each fund. The Advisors are monitored by the Frank Russell
Investment Management Company, using the expertise and advice of the consulting
group within Frank Russell Company.
Since the close of 1996 we have increased our number of investment offerings.
In June, we reopened the Money Market Fund to direct client investment. This
Fund received the IBC Money Fund Report Award for the highest 12-month total
return for 1996 in the Taxable Institutions-Only category, from IBC Financial
Data, Inc. in January of this year. We are also pleased to announce the
availability of our five new funds of funds products, the LifePoints-Registered
Trademark- Strategy Funds. Each of these funds invests in a different
combination of other underlying funds which, in turn, invest in different
combinations of stocks, bonds and cash equivalents. We believe these funds
provide our clients with additional flexibility in meeting their goals.
We look forward to the remainder of 1997 and continuing to earn your support by
exceeding your expectations. Thank you for your continued confidence and
investment with Frank Russell Investment Company.
Sincerely,
/s/ George F. Russell, Jr. /s/ Lynn L. Anderson
George F. Russell, Jr. Lynn L. Anderson
Chairman President and Chief Executive Officer
Frank Russell Company Frank Russell Investment Company
All persons dealing with FRANK RUSSELL INVESTMENT COMPANY, a Massachusetts
business trust, must look solely to the Trust for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or Shareholers of
the Trust assume no personal liability whatsoever for the obligations entered
into on behalf of the Trust.
[LOGO]
Tacoma London Sydney
New York Zurich Tokyo
Toronto Paris Auckland
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS (b) - 93.9%
APARTMENT - 18.8%
Ambassador Apartments Inc. 83,100 $ 2,067
Avalon Properties, Inc. 342,500 9,804
Bay Apartment Communities, Inc. 93,200 3,448
BRE Properties, Inc. 136,800 3,437
Camden Property Trust 289,400 9,152
Colonial Properties Trust 181,200 5,323
Columbus Realty Trust 363,900 8,279
Equity Residential Properties Trust 70,800 3,363
Essex Property Trust Inc. 125,900 4,045
Evans Withycombe Residential, Inc. 199,900 4,148
Irvine Apartment Communities, Inc. 175,500 5,177
Merry Land & Investment Company, Inc. 106,300 2,305
Mid-America Apartment Communities, Inc. 91,500 2,568
Oasis Residential, Inc. 247,000 5,805
Post Properties, Inc. 183,900 7,460
Security Capital Atlantic Inc. 220,800 5,285
Security Capital Pacific Trust 17,500 400
Smith (Charles E.) Residential Realty, Inc. 282,300 8,151
Summit Properties, Inc. 225,800 4,657
United Dominion Realty Trust 155,838 2,211
----------
97,085
----------
HEALTH CARE - 2.5%
American Retirement Corp. (a) 152,700 2,710
Healthcare Realty Trust, Inc. 50,900 1,419
Nationwide Health Properties, Inc. 42,700 939
Sunrise Assisted Living, Inc. (a) 230,100 8,054
----------
13,122
----------
HOTELS - 3.2%
Boykin Lodging Company 78,600 1,882
Bristol Hotel Co. (a) 152,400 5,867
FelCor Suite Hotels, Inc. 98,200 3,658
Golf Trust of America Inc. 47,900 1,332
Homestead Village Properties, Inc. 9,276 165
Homestead Village Properties, Inc.
1997 Warrants (a) 6,224 53
RFS Hotel Investors, Inc. 196,300 3,533
----------
16,490
----------
MANUFACTURED HOMES - 1.1%
Manufactured Home Communities, Inc. 33,200 766
Sun Communities, Inc. 143,800 4,826
----------
5,592
----------
OFFICE/INDUSTRIAL - 31.1%
Arden Realty Group, Inc. 120,800 3,141
Beacon Properties Corp. 205,000 6,842
Bedford Property Investors, Inc. 10,000 201
Boston Properties Inc. (a) 161,500 4,441
Cali Realty Corp. 376,500 12,801
CarrAmerica Realty Corp. 479,950 13,798
Catellus Development Corp. (a) 213,000 3,861
CenterPoint Properties Corp. 171,800 5,455
Cousins Properties, Inc. 325,300 9,027
Crescent Operating, Inc. (a) 47,820 574
Crescent Real Estate Equities, Inc. 478,200 15,183
Highwoods Properties, Inc. 383,300 12,266
Kilroy Realty Corp. 235,900 5,956
Liberty Property Trust 248,800 6,189
Meridian Industrial Trust, Inc. 140,200 3,295
Pacific Gulf Properties, Inc. 145,000 3,190
Prentiss Properties Trust 399,200 10,229
Reckson Associates Realty Corp. 334,300 7,689
Security Capital Industrial Trust 487,000 10,470
Spieker Properties, Inc. 408,600 14,378
Trizec Hahn Corp. 192,800 4,121
Weeks Corp. 240,700 7,522
----------
160,629
----------
OUTLET CENTERS - 4.5%
Chelsea GCA Realty, Inc. 179,100 6,806
Horizon Group, Inc. 232,700 3,127
Prime Retail, Inc. 518,000 6,960
Tanger Factory Outlet Centers, Inc. 243,600 6,547
----------
23,440
----------
REGIONAL MALLS - 16.4%
CBL & Associates Properties, Inc. 240,900 5,782
DeBartolo Realty Corp. 518,700 16,598
General Growth Properties 322,500 10,804
J.P. Realty, Inc. 277,200 7,519
Macerich Co. (The) 331,300 9,194
Mills Corp. 210,700 5,834
Rouse Co. (The) 563,400 16,620
Taubman Centers, Inc. 661,700 8,767
Urban Shopping Centers, Inc. 121,100 3,860
----------
84,978
----------
2 Real Estate Securities Fund Specialty Funds
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
SELF STORAGE - 3.4%
Public Storage, Inc. 498,300 $ 14,575
Shurgard Storage Centers, Inc. 64,100 1,795
Storage Trust Realty 53,300 1,413
----------
17,783
----------
SHOPPING CENTER - 12.9%
Bradley Real Estate, Inc. 134,500 2,589
Commercial Net Lease Realty 43,100 660
Developers Diversified Realty Corp. 345,000 13,800
Federal Realty Investment Trust 248,600 6,712
Glimcher Realty Trust 409,100 8,438
Kimco Realty Corp. 211,600 6,718
Kranzco Realty Trust 215,600 3,665
Malan Realty Investors, Inc. 79,100 1,404
New Plan Realty Trust 38,400 847
Vornado Realty Trust 247,800 17,873
Weingarten Realty Investors, Inc. 91,700 3,875
----------
66,581
----------
TOTAL COMMON STOCKS
(cost $389,203) 485,700
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 5.9%
Frank Russell Investment Company
Money Market Fund,
due on demand (c) $ 30,637 30,637
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $30,637) 30,637
----------
TOTAL INVESTMENTS
(identified cost $419,840)(d) - 99.8% 516,337
OTHER ASSETS AND LIABILITIES,
NET- 0.2% 901
----------
NET ASSETS - 100.0% $ 517,238
----------
----------
(a) Nonincome-producing security.
(b) All common stocks held are Real Estate Investment
Trusts with the exception of the following:
American Retirement Corp.
Bristol Hotel Co.
Catellus Development Corp.
Crescent Operating, Inc.
Rouse Co. (The)
Sunrise Assisted Living, Inc.
Trizec Hahn Corp.
(c) At cost, which approximates market.
(d) See Note 2 for federal income tax information.
The accompanying notes are an integral part of the financial statements.
Specialty Funds Real Estate Securities Fund 3
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $419,840)(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . $ 516,337
Receivables:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,586
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,251
----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,370
LIABILITIES
Payables:
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,717
Fund shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 950
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . 404
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,132
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 517,238
----------------
----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,825
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,348
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 96,497
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396,397
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 517,238
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
Class S ($517,062,594 divided by 17,134,530 shares of $.01
par value shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . $ 30.18
----------------
----------------
Class C ($175,790 divided by 5,831 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30.15
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4 Real Estate Securities Fund Specialty Funds
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,453
Dividends from Money Market Fund (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741
----------------
Total Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,194
EXPENSES (Notes 1, 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,980
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
Bookkeeping service fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Registration fees
Class S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Distribution fees - Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Shareholder servicing fees - Class C. . . . . . . . . . . . . . . . . . . . . . . . 1
----------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,372
----------------
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,822
----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,784
Net change in unrealized appreciation or depreciation of
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,916)
----------------
Net gain (loss) on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,868
----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . $ 27,690
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds Real Estate Securities Fund 5
<PAGE>
REAL ESTATE SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,822 $ 19,518
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,784 24,667
Net change in unrealized appreciation or depreciation. . . . . . . . . . . . . . . (1,916) 75,950
------------------- -------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . 27,690 120,135
------------------- -------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,808) (18,705)
Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (1)
Net realized gain on investments
Class S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,185) (18,473)
Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (4)
------------------- -------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . (9,995) (37,183)
------------------- -------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . . 53,822 71,779
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 71,517 154,731
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,721 290,990
------------------- -------------------
End of period (including undistributed net investment income of
$5,825 and $812, respectively). . . . . . . . . . . . . . . . . . . . . . . . . $ 517,238 $ 445,721
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6 Real Estate Securities Fund Specialty Funds
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS S
The following table includes selected data for a share outstanding
throughout each year or period and other performance information derived
from the financial statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. . . . . . . . . . . . $ 29.19 $ 23.51 $ 22.53 $ 22.76 $ 21.50 $ 19.33
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . .65 1.39 1.32 1.25 1.05 1.08
Net realized and unrealized gain (loss) on investments. . .97 6.89 1.03 .40 2.68 2.16
--------- --------- --------- --------- --------- ---------
Total Income From Investment Operations . . . . . . . . 1.62 8.28 2.35 1.65 3.73 3.24
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . (.36) (1.34) (1.35) (1.23) (1.04) (1.07)
Net realized gain on investments. . . . . . . . . . . . . (.27) (1.26) -- (.45) (1.43) --
In excess of net realized gain on investments . . . . . . -- -- -- (.20) -- --
Tax return of capital . . . . . . . . . . . . . . . . . . -- -- (.02) -- -- --
--------- --------- --------- --------- --------- ---------
Total Distributions . . . . . . . . . . . . . . . . . . (.63) (2.60) (1.37) (1.88) (2.47) (1.07)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD. . . . . . . . . . . . . . . $ 30.18 $ 29.19 $ 23.51 $ 22.53 $ 22.76 $ 21.50
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
TOTAL RETURN (%)(a) . . . . . . . . . . . . . . . . . . . . 5.66 36.81 10.87 7.24 17.42 17.29
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . 517,062 445,619 290,990 209,208 145,167 75,902
Ratios to average net assets (%)(b):
Operating expenses . . . . . . . . . . . . . . . . . . 1.02 1.04 1.04 1.05 1.11 1.20
Net investment income. . . . . . . . . . . . . . . . . 4.66 5.64 6.10 5.65 4.52 5.60
Portfolio turnover rate (%)(b) . . . . . . . . . . . . . 42.50 51.75 23.49 45.84 58.38 19.72
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . . . .0618 .0631 N/A N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
Specialty Funds Real Estate Securities Fund 7
<PAGE>
REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS - CLASS C
The following table includes selected data for a share outstanding
throughout each year or period and other performance information derived
from the financial statements.
<TABLE>
<CAPTION>
1997* 1996**
--------- ---------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29.18 $ 26.67
--------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 .24
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . .95 3.85
--------- ---------
Total Income From Investment Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.52 4.09
LESS DISTRIBUTIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.28) (.32)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.27) (1.26)
--------- ---------
Total Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.55) (1.58)
--------- ---------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30.15 $ 29.18
--------- ---------
--------- ---------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.31 15.75(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 101
Ratios to average net assets (%)(c):
Operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.73 1.77
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08 5.31
Portfolio turnover rate (%)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.50 51.75
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0618 .0631
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period November 4, 1996 (commencement of sale) to December 31, 1996.
(a) Periods less than one year are not annualized.
(b) Total return represents performance for the period November 4, 1996 to
December 31, 1996.
(c) The ratios for the periods ended June 30, 1997 and December 31, 1996 are
annualized.
8 Real Estate Securities Fund Specialty Funds
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 80.6%
ARGENTINA - 4.7%
Astra cia Argentina de Petro 198,760 $ 421
Banco Frances del Rio la Plata - ADR 43,760 1,422
Capex SA Series A 49,200 463
Cementera Argentina Class B (a) 77,962 495
Central Puerto SA Class B 120,000 367
Comercial de Plata (a) 181,100 590
Cresud SA (a) 349,500 780
Inversiones Y Representaciones 121,429 531
Inversiones Y Representaciones SA - GDR 6,224 272
Molinos Rio Plata 101,050 395
Naviera Perez Companc Class B 176,431 1,417
Perez Companc SA Class B - ADR 33,680 539
Quilmes Industrial (Regd)(a) 55,000 564
Siderar SA Series A 325,300 1,337
Telecom Argentina Class B 87,122 455
Telecom Argentina SA Class B - ADR 10,400 546
Telefonica de Argentina Class B 150,000 518
Telefonica de Argentina Class B - ADR 78,300 2,711
Transportadora de Gas del Sur SA Class B 280,000 678
YPF Sociedad Anonima Class D - ADR 116,000 3,567
----------
18,068
----------
AUSTRALIA - 0.5%
Lihir Gold, Ltd. (a) 444,200 742
Orogen Minerals, Ltd. 430,000 1,232
----------
1,974
----------
AUSTRIA - 0.3%
Nafta (a) 655 21
Tabak AS (a) 3,500 820
Wielkopolski Bank Kredytowy SA (a) 50,600 290
----------
1,131
----------
BANGLADESH - 0.0%
Apex Tannery, Ltd. 4,600 69
Beximco Infusions (a) 7,500 86
----------
155
----------
BRAZIL - 6.7%
CELESC SA - GDR 700 98
CEMIG SA - ADR 39,300 2,024
Companhia Paranaense de Energia-Copel - ADR 45,400 897
Copene Petroquimica do Nordeste SA - ADR 50,300 918
Electrolux do Brasil SA - ADR 52,500 473
Eletrobras (centrais) NPV 731,000 409
Forca E Luz (Cia Paul) NPV 14,187,000 2,385
Makro Atacadista - GDS (a) 60,000 750
Makro Atacadista SA - GDR 44,300 554
Petroleo Brasileiro Petrobras SA - ADR 42,000 1,178
Rhodia Ster SA NPV (a) 129,820 37
Sabesp 1,890,000 576
Souza Cruz NPV 70,920 748
Telecomunicacoes Brasileiras - ADR 38,920 5,906
Telecomunicacoes Brasileiras - ADR (144A) 88 13
Telecomunicacoes Brasileiras NPV 46,223,900 6,269
Telecomunicacoes de Sao Paulo SA (a) 76,047 25
Telecomunicacoes de San Paulo - NPV (a) 19,113 6
Uniao de Bancos Brasileiros SA - GDR (a) 23,500 872
Votorantim Celulose e Papel SA - ADR (a) 29,700 449
White Martins SA - NPV 374,738 1,096
----------
25,683
----------
CHILE - 4.0%
Administradora de Fondos de
Pensiones Provida SA - ADR 15,870 347
Antofagasta Holdings PLC 240,000 1,838
Banco de Santiago - ADR 20,000 510
Banco Santander Chile Series A - ADR 29,300 432
Chilgener SA - ADR 30,000 840
Compania de Telecomunicaciones de Chile SA - ADR 83,593 2,759
Embotelladora Andina SA - ADR Series A 26,000 557
Embotelladora Andina SA - ADR Series B 46,000 960
Enersis SA - ADR 70,755 2,516
Laboratorio Chile SA - ADR 30,000 851
Madeco SA - ADR 17,142 420
Maderas Y Sinteticos Sociedad - ADR 25,400 422
Quinenco SA - ADR (a) 73,800 1,365
Sociedad Quimica Y Minera de
Chile SA - ADR 15,630 1,035
Supermercados Unimarc SA - ADR (a) 21,400 402
----------
15,254
----------
CHINA - 0.4%
China Steel Corp. - ADR 15,191 324
Heilongjiang Electric Power Co., Ltd. Class B (a) 550,000 440
Huaneng Power International, Inc. - ADR Series N (a) 28,700 732
Yizheng Chemical Fibre Class H 800,000 143
----------
1,639
----------
10 Emerging Markets Fund Specialty Funds
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COLOMBIA - 0.2%
Banco de Colombia - GDR 30,400 $ 178
Cementos Diamante SA Class B - ADR 31,200 398
----------
576
----------
CROATIA - 0.2%
Pliva D. D. - GDR (a) 29,826 485
Pliva D. D. - GDR (144A)(a) 18,200 296
----------
781
----------
CZECH REPUBLIC - 1.2%
Ameriyah Cement Co. (a) 17,500 426
Central European Media Enterprises, Ltd. Class A (a) 47,446 1,234
Cokoladovny AS (a) 1,600 195
Cokoladovny AS (a) 2,189 267
Czechoslovakian Value Fund (Units)(a) 62,000 380
Czechoslovakian Value Fund 1998 Warrants (a) 1,800 1
Elektrarny Opatovice AS 2,200 288
Komercni Banka AS - GDR (a) 8,100 166
Komercni Banka AS - GDR (144A) 17,000 349
Komercni Banka IF (a) 29,900 445
Privat Fonds (a) 34,753 407
Vseobecny Investment Fund (a) 79,775 165
Vynosovy Investment Fund (a) 42,800 217
----------
4,540
----------
ECUADOR - 0.2%
La Cemento National - GDR (a) 3,700 751
La Cemento Nacional CA - GDR (a) 700 142
----------
893
----------
EGYPT - 0.4%
Al Ahram Beverage Co. - GDR (a) 27,000 552
Al Ahram Beverage Co. - GDR (144A) 17,900 366
Commercial International Bank (Regd) - GDR 30,050 627
Torah Portland Cement Co. (a) 8,100 205
----------
1,750
----------
GABON - 0.1%
Elf Gabon 1,100 261
----------
261
----------
GHANA - 0.3%
Ashanti Goldfields, Ltd. - ADR 107,200 1,253
----------
1,253
----------
GREECE - 1.5%
Athens Medical Center SA (Regd) 56,550 454
Ergo Bank (Regd) 30,000 1,802
Ergo Bank SA (a) 13,260 797
Hellenic Bottling 34,000 1,257
Hellenic Telecommunication
Organization SA 22,000 517
Hellenic Telecommunication
Organization SA Rights (a) 22,000 3
National Mortgage Bank 5,850 353
National Mortgage Bank (a) 1,170 71
Titan Cement Co. 9,800 482
----------
5,736
----------
HONG KONG - 3.0%
Alco Holdings 1,000,000 106
Alco Holdings, Ltd. 1998 Warrants (a) 100,000 1
Beijing Enterprises Holdings, Ltd. (a) 124,000 781
Beijing Yanhua Petrochemical Co., Ltd. Class H (a) 1,222,000 265
Chen Hsong Holding 1,900,000 1,104
China Resources Enterprise, Ltd. 258,000 1,265
Citic Pacific, Ltd. 100,000 625
Concord Land Development Co., Ltd. 38,240 42
Goldlion Holdings, Ltd. 894,000 499
Guandong Investments, Ltd. 1999 Warrants (a) 58,200 27
Guangdong Investment 582,000 875
Jiangsu Expressway Co., Ltd. Class H (a) 1,298,000 461
New World Infrastructure, Ltd. (a) 160,000 452
Peregrine Investment Holdings, Ltd.
- Formosa Chemical (a) 370,000 538
Peregrine Investment Holdings, Ltd.
- Hung Sheng Construction (a) 220,000 376
Peregrine Investment Holdings, Ltd.
- Primax 2000 Warrants (a) 204,000 605
Peregrine Investment Holdings, Ltd.
- United World (a) 195,000 466
Shanghai Industrial Holdings, Ltd. 90,000 560
Star Telecom International Holdings, Ltd. (a) 892,000 253
Tingyi (Cayman Island) Holding Co. 3,683,000 918
Union Bank of Hong Kong, Ltd. 95,000 275
Yue Yuen Industrial Holdings 312,800 648
Zhejiang Expressway Co., Ltd. Series H (a) 1,624,000 395
----------
11,537
----------
HUNGARY - 1.7%
Borsodchem - GDR 42,000 1,649
Magyar Olaj Es Gas 30,400 674
Specialty Funds Emerging Markets Fund 11
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Mol Magyar Olay-Es Gazipari - GDS (a) 80,000 $ 1,790
Richter Gedeon , Ltd. - GDR 24,152 2,222
Zalakeramia Reszvenytarsasag - GDR 25,400 198
----------
6,533
----------
INDIA - 3.0%
Bajaj Auto, Ltd. - GDR (a) 32,300 1,110
Bajaj Auto, Ltd. - GDR (144A) 18,200 625
EIH, Ltd. - GDR (a) 47,350 781
Genesis India Investment Co. (a) 330,000 3,369
Global Tele-Systems Group, Inc. (a) 525 10
I.T.C., Ltd.- GDR (a) 39,000 712
Indian Hotels Co., Ltd. - GDR (a) 7,000 166
Indian Hotels Co., Ltd. - GDS (a) 37,100 881
Indo Gulf Fertilizers & Chemicals - GDR (a) 158,200 166
Larsen & Toubro, Ltd. - GDR (a) 42,400 731
Perusahaan Persero Telekom - ADR 15,300 497
Raymond Woollen Mills, Ltd. - GDR (a) 5,100 22
State Bank of India - GDR (a) 13,000 345
Tata Engineering & Locomotive Co., Ltd. (a) 13,800 212
Tata Engineering & Locomotive Co., Ltd. - GDR (144A) 14,000 215
Videsh Sanchar Nigam, Ltd. (a) 60,000 1,245
Videsh Sanchar Nigam, Ltd. - GDR (a) 17,600 365
----------
11,452
----------
INDONESIA - 3.8%
Bimantara Citra (Alien Market) 318,500 557
Gudang Garam (Alien Market) 158,000 663
Indosat (Alien Market) 140,000 419
Inti Indorayon Utama (Alien Market) 275,000 192
London Sumatra (Alien Market) 87,000 275
Matahari Putra Prima (Alien Market) 1,145,000 2,307
Modern Photo Film Co. (Alien Market) 35,000 124
Mulia Industrindo - IDR (Alien Market) 1,049,000 550
Ometraco Finance (Alien Market)(a) 700,000 669
Pabrik Kertas Tjiwi Kimia (Alien Market) 509,081 591
Pakuwon Jati (Alien Market) 402,000 211
PT Bank Niaga (Alien Market) 205,000 582
PT Ciputra Development (Alien Market) 160,000 160
PT Hanjaya Mandala Sampoerna (Alien Market)(a) 156,000 595
PT Indorama Synthetics (Alien Market)(a) 1,440 1
PT Kalbe Farma (Alien Market)(a) 202,000 270
PT Lippo Bank (Alien Market) 592,500 609
PT Lippo Securities (Alien Market) 570,000 404
PT Lippo Securities (Alien Market)(a) 290,000 206
PT Ometraco Corp. 2000 Warrants (Alien Market)(a) 75,000 46
PT Tempo Scan Pacific (Alien Market) 240,000 538
Putra Surya Multidana (Alien Market)(a) 127,000 202
Ramayana Lestari (Alien Market)(a) 500,000 1,439
Semen Cibinong (Alien Market) 825,600 2,164
Semen Gresik (Alien Market) 258,500 579
Unilever Indonesia (Alien Market) 19,000 336
----------
14,689
----------
ISRAEL - 0.4%
Elbit, Ltd. 200 1
Elbit Medical Imaging, Ltd. (a) 200 1
Elbit Systems, Ltd. 200 2
Supersol, Ltd. 168,000 539
Teva Pharmaceutical Industries, Ltd. 7,220 466
Teva Pharmaceutical Industries, Ltd. - ADR 4,900 317
----------
1,326
----------
LEBANON - 0.3%
Solidere - GDR (a) 55,000 978
----------
978
----------
LUXEMBOURG - 0.6%
Millicom International Cellular SA (a) 43,000 2,053
Tata Engineering & Locomotive Co.
- GDR (a) 21,800 335
----------
2,388
----------
MALAYSIA - 6.6%
Arab Malaysian Corp. Berhad 533,000 1,985
Arab Malaysian Finance (Alien Market) 430,000 911
DCB Holdings Berhad 216,000 685
Genting Berhad 135,000 647
Genting International (CLOB Line)(a) 162,000 478
Golden Hope Plantation 463,000 796
Guinness Anchor Berhad 104,000 231
Hong Leong Bank Berhad 135,000 340
Hong Leong Bank Berhad Rights (a) 16,875 3
Hong Leong Industries Berhad 187,400 594
IJM Corp. Berhad 364,000 764
IND Oxygen, Inc. 1,162,000 1,326
Kian Joo Can Factory 122,000 527
Kuala Lumpur Kepong 314,000 778
Land & General Berhad 138,000 159
12 Emerging Markets Fund Specialty Funds
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Leader Universal Holdings 165,000 $ 297
Lion Corp. Berhad 32,000 61
London & Pacific Insurance Co. Berhad 1,600 8
Malakoff Bhd 52,000 227
Malaysia Mining Corp. 494,800 541
Malaysian Assurance Alliance Berhad 165,137 962
Malaysian International Shipping Corp. (Alien Market) 87,000 226
Malaysian Tobacco 243,000 337
Matsushita Electric Co. Berhad 40,000 333
Nestle Berhad 55,000 412
New Straits Times 242,000 1,419
Nylex Berhad 354,500 604
O.Y.L. Industries Berhad 99,000 628
Oriental Holdings Berhad 198,000 1,490
Perlis Plantations 160,000 469
Perusahaan Otomobl 112,000 524
Phileo Allied Berhad 412,500 745
Phileo Allied Berhad Rights (a) 275,000 196
Public Bank Berhad 50,000 71
Public Bank Berhad (Alien Market) 341,000 532
Public Finance Berhad (Alien Market) 495,000 761
Renong Berhad 325,000 425
Resorts World Berhad 66,000 199
Shell Refining (Malaysia) 147,000 466
Sistem Televisyen Malaysia Berhad 260,000 531
Tan Chong Motor Holdings 450,000 849
Tanjong PLC 168,000 579
Telekom Malaysia 32,000 149
United Engineers Berhad 106,000 763
----------
25,028
----------
MEXICO - 7.6%
Accel SA de CV Series B - NPV (a) 783,000 211
Acer Computec Latino America SA de CV - NPV (a) 72,000 252
Alfa SA de CV Class A NPV 488,771 3,333
Carso Global Telecom Series A1 NPV 52,950 213
Cemex SA de CV Class B NPV 215,400 1,049
Cemex SA de CV NPV 301,640 1,309
Cifra SA de CV 32,773 61
Cifra SA de CV - ADR 240,000 438
Cifra SA de CV Class B NPV 170,000 317
Cifra SA de CV Class C NPV 97,960 157
Compania Cervecerias Unidas SA - ADR 22,700 497
Corporacion Industrial Sanluis SA de CV - CPO (Units) 62,000 459
Cydsa SA Series A NPV 114,300 312
Desc SA de CV NPV 1,714 13
Desc Sociedad de Fomento Industrial
SA de CV Series B NPV (a) 55,200 404
Empresa Nacional de Electric - ADR 52,400 1,182
Empresas ICA Sociedad - ADR 79,600 1,279
Empresas La Moderna SA de CV - ADR (a) 21,586 461
Empresas La Moderna SA de CV Class A NPV (a) 59,000 314
Fomento Economico Mexicano SA de CV Series B NPV 359,000 2,137
Grupo Carso Series A NPV 64,500 450
Grupo Casa Autrey SA de CV - ADR 11,000 223
Grupo Financiero Banamex AC Series B NPV (a) 126,000 323
Grupo Financiero Bancomer Series B NPV (a) 330,000 159
Grupo Modelo SA Series C 87,700 608
Grupo Radio Centro SA de CV - ADR 26,400 310
Herdez Class B NPV 300,000 155
Industrias Penoles NPV 103,700 495
Kimberly-Clark, Mexico Class A NPV 345,000 1,389
Panamerican Beverages, Inc. Class A 58,000 1,907
Ponderosa Industrial SA de CV Series B - NPV (a) 460,000 380
Seguros Comercial America NPV Series B (a) 87,000 261
Sigma Alimentos, SA Series B 35,000 379
Telefonos de Mexico SA Series L - ADR 152,350 7,274
Transportacion Maritima Mexicana
SA de CV - ADR Series A 80,000 389
----------
29,100
----------
MOROCCO - 0.3%
Banque Marocaine Du Commerce
Exterieur - GDR 59,835 1,158
----------
1,158
----------
NETHERLANDS - 0.3%
Ceteco Holding NV CVA 25,827 1,270
----------
1,270
----------
PAKISTAN - 0.6%
Adamjee Insurance 6,562 15
Dewan Salmon Fibre 12,360 11
DG Kahn Cement (a) 28,314 9
Fauji Fertilizer 153,300 302
Hub Power Co. (a) 38,800 960
Pakistan State Oil 102,187 824
Pakistan Telecommunications Corp. (a) 160,000 121
----------
2,242
----------
Specialty Funds Emerging Markets Fund 13
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
PANAMA - 0.2%
Banco Latinoamericano de Exportaciones SA Class E 14,000 $ 604
----------
604
----------
PAPUA NEW GUINEA - 0.5%
Oil Search, Ltd. (Australia Regd) 700,000 1,904
----------
1,904
----------
PERU - 1.6%
Cementos Norte Pacasmayo SA Class T 252,464 392
Compania de Minas Buenaventura Series B - ADR 29,400 579
CPT Telefonica del Peru Class B 289,098 775
Credicorp, Ltd. 45,775 1,007
Ferreyros SA - ADR 9,200 219
Telefonica Del Peru SA Class B - ADR 125,200 3,278
----------
6,250
----------
PHILIPPINES - 2.7%
Ayala Land, Inc. Class B 431,272 397
Bacnotan Consolidated 161,178 238
Belle Corporation (a) 1,806,000 527
DMCI Holdings, Inc. (a) 1,353,400 446
Enron Global Power & Pipelines L.L.C. 35,000 1,166
Far East Bank & Trust Co. 123,288 309
Filinvest Land (a) 1,425,600 357
First Philippine Holdings Class B 254,767 353
International Container (a) 503,000 257
JG Summit Holdings, Inc. Series B 868,000 178
La Tondena Distillers, Inc. 75,000 181
Manila Electric Co. Class B 297,347 1,466
Manila Mining Corp. Class B (a) 90,230,256 44
Metro Pacific Corp. Class A 599,568 130
Music Corp. (a) 610,000 318
PCI Leasing & Finance, Inc. (a) 477,000 90
Petron Corp. 2,414,400 613
Philippine Long Distance Telephone Co. 3,400 110
Philippine Long Distance Telephone Co. - ADR 34,800 2,236
Philippine National Bank (a) 42,212 286
Republic Glass Holdings Corp. 595,000 54
San Miguel Corp. Class B 90,750 239
Uniwide Holdings, Inc. (a) 1,150,000 227
----------
10,222
----------
POLAND - 0.1%
Bank Handlowy W. Warszawie (a) 15,600 180
Bank Slaski SA 3,400 243
Polifarb-Cieszyn SA (a) 12,964 66
----------
489
----------
PORTUGAL - 1.8%
Banco Comercial Portuguese (Regd) 19,600 370
Capital Portugal (a) 4,060 615
Cimpor Cimentos de Portugal 57,500 1,340
Corp. Ind. Norte 6,300 345
Electricidade de Portugal SA (a) 14,000 257
Inparsa Industria e Participacoes SA (a) 3,850 39
Portugal Telecom SA - ADR 13,100 526
Sonae Investimentos SA 71,400 2,985
Unicer-Uniao Cervj (Regd) 14,900 250
----------
6,727
----------
RUSSIA - 3.4%
Irkutskenergo - Russian Depositary Trust (a) 35 2,345
Lukoil - Russian Depositary Trust (a) 5 494
Lukoil Oil Co. - ADR 32,900 2,566
Mosenergo - ADR 23,200 1,009
SFMT, Inc. (a) 2,000 37
Surgutneftegaz - ADR 23,700 1,256
Tatneft - ADR (a) 4,600 492
Tatneft - ADR (144A) 33,000 3,531
Trade House GUM - ADR 6,200 508
Ukraine Enterprise Corp. (a) 31,000 56
Vimpel-Communications - ADR (a) 17,300 658
----------
12,952
----------
SINGAPORE - 0.1%
Thakral Corp., Ltd. (a) 200,000 204
----------
204
----------
SLOVAKIA - 0.1%
Slovakofarna AS 2,200 242
----------
242
----------
SOUTH AFRICA - 5.4%
Amalgamated Banks of South Africa 181,600 1,303
Anglo America Coal 2,183 134
Anglo American Industrial Corp. 2,110 93
14 Emerging Markets Fund Specialty Funds
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Anglovaal Holdings, Ltd. 29,100 $ 776
Barlow, Ltd. 54,600 594
De Beers Centenary AG 25,926 957
De Beers Consolidated Mines, Ltd. - ADR 4,957 183
Del Monte Royal Food, Ltd. 829,600 430
Ellerine Holdings, Ltd. 19,502 139
Engen, Ltd. 39,891 199
Foodcorp, Ltd. 15,679 119
Gencor, Ltd. 127,160 586
Gencor, Ltd. - ADR 54,679 252
Highstone Property 630,000 181
Highveld Steel & Vanadium Corp., Ltd. 200,200 750
Iscor 1,199,693 793
JCI, Ltd. 107,600 828
JD Group, Ltd. 63,700 393
Kersaf Investments, Ltd. 76,600 533
Lonrho PLC 628,757 1,347
Malbak, Ltd. NPV 289,800 460
Nampak, Ltd. - ADR 19,260 81
New Clicks Holdings, Ltd. 52,792 57
PepsiCo International, Inc. (a) 2,000 174
Rembrandt Group, Ltd. 145,752 1,555
Safmarine & Rennie Holdings, Ltd. 168,700 413
Sappi, Ltd. 124,900 1,129
Sasol NPV 402,494 5,278
South African Druggists, Ltd. - NPV 23,053 190
Trans Natal Coal Corp., Ltd. 115,600 763
----------
20,690
----------
SOUTH KOREA - 3.8%
Bank of Seoul (a) 30,000 124
Daewoo Corp. 48,000 390
Dong-Ah Construction - EDR (a) 12,838 121
Dong-Ah Construction Industrial Co. 6,500 123
Hana Bank - GDR (a) 34,500 499
Hankook Tire Manufacturing 17 1
Hanshin Securities 17,000 224
Hanwha Chemical Corp. (a) 80,499 635
Housing & Commercial Bank, Korea 33,240 554
Hyundai Engineering & Construction (a) 18,025 463
Hyundai Merchant Marine (a) 9,000 169
Hyundai Motor Co. - GDR (a) 41,100 422
Kookmin Bank 269 4
Korea Electric Power Corp. 67,700 2,020
Korea Mobile Telecommunications Corp. 123 63
LG Semiconductor Co. 10,000 390
Pohang Iron & Steel 16,370 1,172
Pohang Iron & Steel - ADR 11,700 374
Samsung Co. 88 1
Samsung Electronics Co. - GDR (a) 10,603 615
Samsung Electronics, Ltd. 7,187 571
Samsung Electronics, Ltd. - GDS (a) 54,602 1,474
Shin Han Bank (a) 84,730 1,050
Ssangyong Cement Co., Ltd. 43,400 523
Ssangyong Oil Refining Co., Ltd. 62,620 1,269
Tae Young Corp. 16,000 786
Yukong, Ltd. 20,001 485
----------
14,522
----------
SRI LANKA - 0.2%
Aitken Spence & Co. 15,865 50
Ceylon Theaters, Ltd. Rights (a) 6,830 16
Ceylon Theatre, Ltd. 6,830 24
Development Finance Corp. 94,999 463
Hayleys 16,720 73
John Keells Holdings, Ltd. 34,828 182
National Development Bank 9,800 43
----------
851
----------
SWITZERLAND - 0.3%
Holderbank Financiere Glarus AG (BR) 1,392 1,315
----------
1,315
----------
TAIWAN - 4.8%
Advanced Semiconductor Engineering - GDR (a) 38,599 767
Asia Cement Corp. - GDR 72,009 1,158
China Steel Corp. - GDS (a) 71,873 1,534
Compal Electronics 1997 Warrants (a) 169,000 669
Delta Electronic Industrial (a) 205,000 1,268
Evergreen Marine Corp. - GDR (a) 31,886 538
Hocheng Group Corp. - GDR (a) 120,539 964
Macronix International Co., Ltd. - ADR (a) 49,000 1,397
Peregrnie Investment Holdings, Ltd.
- China Development 2000 Warrants (a) 490,000 2,529
President Enterprises - GDS (a) 61,000 1,235
Siliconware Precision Industries Co.
- GDR (a) 117,600 1,999
Yageo Corp. - GDR (a) 145,151 2,939
Yageo Corp. - GDR (144A)(a) 45,378 919
Yang Ming Marine Transport - GDR (a) 25,200 302
----------
18,218
----------
Specialty Funds Emerging Markets Fund 15
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
THAILAND - 2.3%
Advanced Information Services (Alien Market) 43,400 $ 310
Bangkok Bank (Alien Market) 109,400 752
Central Pattana Public Co., Ltd. (Alien Market) 82,700 115
Ch Karnchang Public Co., Ltd. (Alien Market) 52,100 137
Electricity Generating PLC (Alien Market) 204,410 501
Grammy Entertainment PLC 14,000 156
Grammy Entertainment PLC (Alien Market) 28,000 292
Industrial Finance Corp. of Thailand (Alien Market) 460,000 586
Krung Thai Bank PLC (Alien Market) 56,500 59
Land & House (Alien Market) 56,000 117
Lanna Lignite Public Co. (Alien Market) 36,500 242
Peregrine Thailand 1998 Warrants (a) 17,600 262
Phatra Thanakit Co. (Alien Market) 58,300 72
Pizza Public Co., Ltd. (Alien Market) 97,000 498
Precious Shipping (Alien Market) 137,000 375
PTT Exploration & Production PLC (Alien Market) 143,200 2,078
Regional Container Line (Alien Market) 22,300 135
Robinson Department Store PLC (Alien Market) 660,100 255
Sahaviriya Steel Industries PLC (Alien Market)(a) 491,300 85
Siam Cement Co. (Alien Market) 31,200 540
Siam Makro Public Co., Ltd. (Alien Market) 171,300 469
Swedish Motor Public Co., Ltd. (Alien Market) 164,900 76
TelecomAsia (Alien Market)(a) 461,400 534
Thai Farmers Bank (Alien Market) 39,000 166
Thai Farmers Bank PLC 2002 Warrants (Alien Market)(a) 4,875 3
----------
8,815
----------
TURKEY - 1.3%
Akansa Cimento AS 2,500,000 345
Aygaz 725,000 149
Efes Sinai Yatirim (a) 615,138 44
EGE Biracilik Ve Malt Sanayii 2,700,000 627
Erciyas Biracilik Ve Malt Sanayii 284,500 34
Eregli Demir Ve Celik Fabrikalari 2,221,000 370
Koc Holding 1,709,000 403
Migros 540,750 382
Otosan 165,000 88
Sarkuysan Elektrolitik Bakir 4,245,000 472
T Garanti Bankasi 3,547,000 134
T Garanti Bankasi Group (a) 4,335,221 163
T Sise Cam (a) 10,806,000 684
Tat Konserve Sanayii 531,820 39
Trakya Cam Sanayii AS 1,144,234 50
Yapi Kredi Bankasi 18,072,500 414
Yapi ve Kredi Bankasi AS (a) 24,036,424 550
----------
4,948
----------
UNITED KINGDOM - 0.3%
Lonrho PLC 465,816 985
----------
985
----------
VENEZUELA - 2.2%
CIA Anon Nacional Telefonos de Venezuela - ADR 88,446 3,814
Electricidad de Caracas (Regd) 532,428 853
Mavesa SA - ADR 151,875 1,538
Siderurgica Venezolana Sivensa - ADR 395,000 2,012
Siderurgica Venezolana Sivensa - GDR (144A) 35,909 182
----------
8,399
----------
ZIMBABWE - 0.6%
Delta Corp. 1,211,544 1,859
Reunion Mining PLC (a) 250,000 422
----------
2,281
----------
TOTAL COMMON STOCKS
(cost $258,701) 308,013
----------
16 Emerging Markets Fund Specialty Funds
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
CONVERTIBLE PREFERRED STOCKS - 0.0%
PHILIPPINES - 0.0%
Philippine Long Distance - GDS 2,800 $ 93
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $104) 93
----------
PREFERRED STOCKS - 11.0%
ARGENTINA - 0.3%
Quilmes Industrial Quinsa Societe - ADR 92,950 1,081
----------
1,081
----------
BRAZIL - 10.1%
Banco Bradesco SA NPV 451,470,720 4,550
Banco Itau SA (Regd) 809,000 453
Brahma (cia Cervej) NPV 543,000 414
Brasmotor SA NPV 4,575,000 1,020
Casa Anglo Bras SA NPV 2,524,000 120
CEMIG - ADR 25,623 1,307
CEMIG SA 44,753,776 2,307
Ceval Alimentos SA - ADR (a) 78,100 937
Ceval Alimentos SA NPV 15,847,000 185
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar NPV 9,500,000 216
Companhia Energetica de Sao Paulo - ADR (Regd)(a) 55,900 1,122
Companhia Energetica de Sao Paulo NPV (a) 10,225,000 684
Companhia Paranaense de Energia - Copel 57,640,000 1,071
Copene Petroquimica do Nordestse Series A (Regd) 715,000 265
Coteminas (Cia Tec) NPV 2,305,105 899
Duratex SA (BR) 3,364,000 178
Electrobras Series B NPV 4,921,000 2,935
Industrias Klabin de Papel e Celulose SA NPV 1,214,928 1,185
Industrias Romi SA NPV 3,310,700 68
Iochpe Maxion SA - ADR (a) 232,300 668
Itausa Investimentos Itau SA 800,000 736
Kepler Weber SA NPV (a) 3,200 16
Lojas Americanas NPV (a) 30,900,000 419
Lojas Renner SA NPV 6,000,000 308
Marcopolo SA NPV 3,268,000 584
Metalurgica Schulz NPV 850,000 13
Odebrecht SA NPV 11,793,000 101
Papel Simao NPV 20,700,000 625
Petro Ipiranga (cia) NPV 79,100,000 1,287
Petrobras Distribuidora NPV 7,372,500 192
Petroleo Brasileiro SA NPV 16,488,866 4,580
Refrigeracao Parana SA NPV 285,893,440 454
Telecomunicacoes NPV 1,726,000 564
Telecomunicacoes Brasileiras NPV 27,535,542 4,177
Telecomunicacoes de Minas Gerais Class B NPV 2,700,000 478
Telecomunicacoes de Minas Gerais Rights (a) 33,489 6
Telecomunicacoes do Rio de Janeiro SA NPV 3,097,448 478
Telecomunicacoes do Rio de Janeiro SA NPV (a) 553,369 85
Uniao de Bancos Brasileiros NPV 29,020,000 1,064
Usiminas Uni Sd Mg NPV 62,200 692
Vale Rio Doce (cia) NPV 39,367 870
Weg SA 630,000 433
----------
38,746
----------
COLOMBIA - 0.1%
Gran Cadena de Almacenes Class B - ADR 23,920 245
----------
245
----------
GREECE - 0.0%
Delta Dairy 1,440 13
----------
13
----------
RUSSIA - 0.5%
Fleming Russia Securities Fund (a) 53,458 1,283
Lukoil Holding Oil Co. - ADR 15,800 427
----------
1,710
----------
TOTAL PREFERRED STOCKS
(cost $27,617) 41,795
----------
PRINCIPAL
AMOUNT
(000)
----------
LONG-TERM INVESTMENTS - 1.2%
BRAZIL - 0.0%
Casa Anglo Series 2 (conv.)
1.000% due 11/01/99 BRL 3 187
----------
187
----------
Specialty Funds Emerging Markets Fund 17
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
PRINICPAL MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
INDONESIA - 0.0%
Modernland Realty (conv.)(c)
6.000% due 04/01/03 IDR 30 $ 18
----------
18
----------
MALAYSIA - 0.2%
Arab Malaysian Finance
(Alien Market)(conv.)
7.500% due 12/31/02 MYR 34 11
Telekom Malaysia Berhad (conv.)
4.000% due 10/30/04 $ 720 658
----------
669
----------
SOUTH AFRICA - 0.1%
Barlow International Investments (conv.)
7.000% due 09/20/04 320 397
----------
397
----------
SOUTH KOREA - 0.1%
Shinwon Corp. (conv.)
0.500% due 12/31/08 520 525
----------
525
----------
TAIWAN - 0.5%
Far Eastern Dept. Stores (conv.)
3.000% due 07/06/01 301 326
Nan Ya Plastics Corp. (conv.)
1.750% due 07/19/01 50 71
United Microelectronics
Corp., Ltd. (conv.)
1.250% due 06/08/04 420 1,385
----------
1,782
----------
UNITED STATES - 0.3%
Pacific Concord Finance, Ltd. (conv.)
4.750% due 12/10/98 990 1,069
----------
1,069
----------
TOTAL LONG-TERM INVESTMENTS
(cost $4,035) 4,647
----------
SHORT-TERM INVESTMENTS - 8.3%
UNITED STATES - 8.3%
Frank Russell Investment Company
Money Market Fund, due on demand (b) 31,669 31,669
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $31,669) 31,669
----------
TOTAL INVESTMENTS
(identified cost $322,126)(d) - 101.1% 386,217
OTHER ASSETS AND LIABILITIES,
NET - (1.1)% (4,087)
----------
NET ASSETS - 100.0% $ 382,130
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Adjustable or floating rate securities.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
ADR - American Depositary Receipt
EDR - European Depositary Receipt
GDR - Global Depositary Receipt
GDS - Global Depositary Share
NPV - No Par Value
PLC - Public Limited Company
RDC - Russian Depositary Trust Certificates
SEC - Shareholders Equity Certificates
144A - Represents private placement security for qualified buyers according to
rule 144A of the Securities Act of 1933.
FOREIGN CURRENCY ABBRECIATIONS:
ATS - Austrian schilling
BRL - Brazilian real
CZK - Czech koruna
HKD - Hong Kong dollar
IDR - Indonesian rupiah
MXN - Mexican peso
MYR - Malaysian ringgit
PHP - Philippine peso
THB - Thailand baht
TRL - Turkish lira
ZAR - South African rand
The accompanying notes are an integral part of the financial statements.
18 Emerging Markets Fund Specialty Funds
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (000)
- ------------------------------------------------- ---------- ----------
Basic Industries 9.8% $ 37,565
Capital Goods 5.8 22,329
Consumer Basics 9.0 34,302
Consumer Durable Goods 3.6 13,760
Consumer Non-Durables 3.3 12,488
Consumer Services 1.2 4,499
Energy 10.8 41,413
Finance 12.3 46,940
General Business 5.7 21,809
Miscellaneous 6.3 24,172
Shelter 2.4 9,306
Technology 3.3 12,524
Transportation 0.7 2,450
Utilities 17.4 66,344
Short-Term Investments 8.3 31,669
Long-Term Investments 1.2 4,647
---------- ----------
Total Investments 101.1 386,217
Other Assets and Liabilities, Net (1.1) (4,087)
---------- ----------
NET ASSETS 100.0% $ 382,130
---------- ----------
---------- ----------
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS (000)
- ------------------------------------------------- ---------- ----------
Latin America 38.1% $ 145,756
Pacific Basin 29.3 111,839
Eurasia 18.0 68,925
Africa 7.1 26,959
United States (Short-Term Investments) 8.3 31,669
United States (Long-Term Investments) 0.3 1,069
---------- ----------
Total Investments 101.1 386,217
Other Assets and Liabilities, Net (1.1) (4,087)
---------- ----------
NET ASSETS 100.0% $ 382,130
---------- ----------
---------- ----------
FOREIGN CURRENCY EXCHANGE SPOT CONTRACTS
(Note 2)
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- -------------- ------------- ---------- --------------
USD 74 CZK 2,405 07/02/97 --
USD 151 IDR 366,002 07/02/97 --
USD 333 MXN 2,640 07/01/97 (1)
USD 52 PHP 1,383 07/02/97 --
USD 31 TRL 4,619,966 07/02/97 --
USD 234 ZAR 1,057 07/01/97 (1)
USD 64 ZAR 64 07/03/97 --
ATS 10 USD 1 07/01/97 --
BRL 188 USD 174 07/01/97 (1)
HKD 131 USD 17 07/03/97 --
IDR 5,415 USD 2 07/02/97 --
MYR 24 USD 10 07/01/97 --
PHP 22 USD 1 07/01/97 --
TRL 12,002,547 USD 81 07/01/97 --
--------------
$ (3)
--------------
--------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
(Note 2)
UNREALIZED
CONTRACTS TO IN EXCHANGE APPRECIATION
DELIVER FOR SETTLEMENT (DEPRECIATION)
(000) (000) DATE (000)
- -------------- ------------- ---------- --------------
THB 27,220 USD 1,010 11/21/97 3
THB 13,583 USD 504 11/21/97 1
THB 37,218 USD 1,381 11/21/97 3
--------------
$ 7
--------------
--------------
The accompanying notes are an integral part of the financial statements.
Specialty Funds Emerging Markets Fund 19
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $322,126)(Note 2) . . . . . . . . . . . . . . . . $ 386,217
Foreign currency holdings (identified cost $4,745) . . . . . . . . . . . . . . . . . . . 4,620
Forward foreign currency exchange contracts (cost $2,895)(Note 2). . . . . . . . . . . . 2,895
Foreign currency exchange spot contracts (cost $1,225)(Note 2) . . . . . . . . . . . . . 1,222
Receivables: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,288
Investments sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,556
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 771
Foreign taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398,586
LIABILITIES
Payables:
Bank overdraft. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,877
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . 8,356
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . 407
Accrued fees to affiliates (Note 4) . . . . . . . . . . . . . . . . 426
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 277
Forward foreign currency exchange contracts (cost $2,895)(Note 2). . . 2,888
Foreign currency exchange spot contracts (cost $1,225)(Note 2) . . . . 1,225
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,456
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 382,130
-----------------
-----------------
NET ASSETS CONSIST OF:
Accumulated distributions in excess of net investment income . . . . . . . . . . . . . . $ (2,022)
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . (659)
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,091
Foreign currency-related transactions . . . . . . . . . . . . . . . . . . . . . . . . (116)
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,576
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 382,130
-----------------
-----------------
NET ASSET VALUE, offering and redemption price per share:
($382,130,435 divided by 26,030,211 shares of $.01 par value
shares of beneficial interest outstanding). . . . . . . . . . . . . . . . . . . . . . $ 14.68
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 Emerging Markets Fund Specialty Funds
<PAGE>
EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,036
Dividends from Money Market Fund (Note 5) . . . . . . . . . . . . . . . . . . . . . . 785
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Less foreign taxes withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (297)
-----------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,617
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,959
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 449
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . 231
Bookkeeping service fees. . . . . . . . . . . . . . . . . . . . . . 33
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . 14
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . 35
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Amortization of deferred organization expenses. . . . . . . . . . . 4
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,751
-----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,866
-----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,872
Foreign currency-related transactions . . . . . . . . . . . . . . . (370) 6,502
----------------
Net change in unrealized appreciation or depreciation of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,873
Foreign currency-related transactions . . . . . . . . . . . . . . . (80) 49,793
---------------- -----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,295
-----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . $ 58,161
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds Emerging Markets Fund 21
<PAGE>
EMERGING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,866 $ 1,770
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,502 831
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . 49,793 20,295
------------------- -----------------
Net increase (decrease) in net assets resulting from operations . . . . . . . . 58,161 22,896
------------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (1,543)
In excess of net investment income. . . . . . . . . . . . . . . . . . . . . . . . (2,022) (1,918)
------------------- -----------------
Total Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . (2,034) (3,461)
------------------- -----------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6) . . . 54,513 79,382
------------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 110,640 98,817
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,490 172,673
------------------- -----------------
End of period (including accumulated distributions in excess of
net investment income of $2,022 and $1,854, respectively). . . . . . . . . . . $ 382,130 $ 271,490
------------------- -----------------
------------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 Emerging Markets Fund Specialty Funds
<PAGE>
EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993**
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . $ 12.35 $ 11.16 $ 12.25 $ 13.90 $ 10.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . .09 .10 .11 .15 .07
Net realized and unrealized gain (loss) on investments. . . 2.33 1.26 (1.12) (1.24) 4.09
---------- ---------- ---------- ---------- ----------
Total Income From Investment Operations . . . . . . . . . 2.42 1.36 (1.01) (1.09) 4.16
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . -- (.08) (.03) (.10) (.07)
In excess of net investment income. . . . . . . . . . . . . (.09) (.09) (.02) (.10) (.01)
Net realized gain on investments. . . . . . . . . . . . . . -- -- -- (.31) (.18)
In excess of net realized gain on investments . . . . . . . -- -- (.03) (.05) --
---------- ---------- ---------- ---------- ----------
Total Distributions. . . . . . . . . . . . . . . . . . . (.09) (.17) (.08) (.56) (.26)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . $ 14.68 $ 12.35 $ 11.16 $ 12.25 $ 13.90
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a)(c) . . . . . . . . . . . . . . . . . . . . 19.63 12.26 (8.21) (5.83) 41.83
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . 382,130 271,490 172,673 127,271 65,457
Ratios to average net assets (%)(b)(c):
Operating expenses, net. . . . . . . . . . . . . . . . . 1.87 1.71 1.75 .80 .80
Operating expenses, gross. . . . . . . . . . . . . . . . 1.87 1.72 1.80 .83 1.60
Net investment income. . . . . . . . . . . . . . . . . . 1.15 .77 .88 1.10 1.33
Portfolio turnover rate (%)(b). . . . . . . . . . . . . . . 45.63 34.62 71.16 57.47 89.99
Per share amount of fees waived ($ omitted) . . . . . . . . -- .0006 .0022 .0044 .0016
Per share amount of fees reimbursed ($ omitted) . . . . . . -- -- .0032 .0017 .0420
Average commission rate paid per share
of security ($ omitted)(d) . . . . . . . . . . . . . . . .0025 .0007 N/A N/A N/A
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period January 29, 1993 (commencement of operations) to December
31, 1993.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods ended June 30, 1997 and December 31, 1993, are
annualized.
(c) For periods prior to April 1, 1995, Fund performance operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment management fees but gross of any investment services fees. See
Note 4.
(d) In certain foreign markets the relationship between the translated U.S.
dollar price per share and commission paid per share may vary from that of
domestic markets.
Specialty Funds Emerging Markets Fund 23
<PAGE>
EQUITY T FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
COMMON STOCKS - 94.6%
BASIC INDUSTRIES - 5.8%
Allegheny Teldyne, Inc. 5,800 $ 157
Aluminum Co. of America 3,500 264
Crompton & Knowles Corp. 8,900 198
Cytec Industries, Inc. 3,500 131
Diamond Offshore Drilling, Inc. (a) 900 70
Dow Chemical Co. 3,000 261
du Pont (E.I.) de Nemours & Co. 15,400 968
Freeport-McMoRan Copper & Gold, Inc.
Class A 1,600 47
Kimberly-Clark Corp. 4,800 239
Mead Corp. 2,500 156
Nucor Corp. 400 23
Temple-Inland, Inc. 5,100 275
Union Carbide Corp. 9,600 451
----------
3,240
----------
CAPITAL GOODS - 4.6%
Boston Scientific Corp. (a) 3,100 190
Caterpillar, Inc. 100 11
Cooper Industries, Inc. 2,300 114
Emerson Electric Co. 1,400 77
Fluor Corp. 900 50
Foster Wheeler Corp. 900 36
General Electric Co. 12,200 798
Grainger (W.W.), Inc. 5,300 414
ITT Industries, Inc. 1,300 33
Johnson Controls, Inc. 15,000 616
Newport News Shipbuilding, Inc. 60 1
Raychem Corp. 400 30
Tyco International, Ltd. (a) 3,200 223
----------
2,593
----------
CONSUMER BASICS - 20.6%
Albertson's, Inc. 3,400 124
ALZA Corp. (a) 14,900 432
American Home Products Corp. 8,900 681
Apria Healthcare Group, Inc. (a) 500 9
Bausch & Lomb, Inc. 1,700 80
Black & Decker Corp. 500 19
Bristol-Myers Squibb Co. 8,800 713
Campbell Soup Co. 800 40
Coca-Cola Co. (The) 16,400 1,107
Colgate-Palmolive Co. 400 26
Columbia/HCA Healthcare Corp. 7,700 303
CPC International, Inc. 1,000 92
Forest Labs, Inc. (a) 2,800 117
General Mills, Inc. 3,100 202
General Nutrition Companies, Inc. (a) 100 3
Gillette Co. 4,100 388
Health Care & Retirement Corp. (a) 5,700 190
Heinz (H.J.) Co. 200 9
Humana, Inc. (a) 8,400 194
Johnson & Johnson 1,700 109
Kellogg Co. 2,400 206
Lilly (Eli) & Co. 900 98
Merck & Co., Inc. 4,600 476
PepsiCo, Inc. 17,900 672
Pfizer, Inc. 6,000 717
Philip Morris Cos., Inc. 19,000 843
Pioneer Hi-Bred International, Inc. 800 64
Procter & Gamble Co. 8,000 1,130
Ralston-Purina Group 4,000 329
Rubbermaid, Inc. 1,700 51
Sara Lee Corp. 1,800 75
Schering-Plough Corp. 5,600 268
Tenet Healthcare Corp. (a) 4,200 124
Unilever NV 3,300 719
United Healthcare Corp. 3,300 172
Warner-Lambert Co. 5,800 721
----------
11,503
----------
CONSUMER DURABLES - 2.2%
AutoZone Inc. (a) 3,000 71
Chrysler Corp. 4,800 158
Eaton Corp. 100 9
Ford Motor Co. 8,600 325
General Motors Corp. 1,800 100
Goodyear Tire & Rubber Co. 5,600 355
Whirlpool Corp. 3,600 195
----------
1,213
----------
CONSUMER NON-DURABLES - 4.9%
Anheuser-Busch Cos., Inc. 4,800 201
Avon Products, Inc. 300 21
Circuit City Stores, Inc. 8,400 299
Dayton Hudson Corp. 200 11
Eastman Kodak Co. 3,800 292
Federated Department Stores, Inc. (a) 3,300 115
Fruit of the Loom, Inc. Class A (a) 2,500 78
Mattel, Inc. 2,400 81
Nine West Group, Inc. (a) 5,100 195
Penney (J.C.) Co., Inc. 800 42
Seagram Co., Ltd. 3,700 149
Sears Roebuck & Co. 8,000 430
24 Equity T Fund Specialty Funds
<PAGE>
EQUITY T FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Toys "R" Us, Inc. (a) 4,000 $ 139
Wal-Mart Stores, Inc. 20,900 706
----------
2,759
----------
CONSUMER SERVICES - 1.1%
Choice Hotels International, Inc. (a) 300 5
Circus Circus Enterprises, Inc. (a) 5,200 128
Disney (Walt) Co. 300 24
Extended Stay America, Inc. 1,700 25
Harrah's Entertainment, Inc. (a) 7,000 128
Hilton Hotels Corp. 100 3
International Game Technology 7,600 135
ITT Corp. (a) 800 49
McDonald's Corp. 1,000 48
Mirage Resorts, Inc. (a) 2,500 63
----------
608
----------
ENERGY - 8.5%
Amoco Corp. 2,100 183
Anadarko Petroleum Corp. 3,800 228
Ashland, Inc. 4,500 209
Atlantic Richfield Co. 600 42
Baker Hughes, Inc. 100 4
Cooper Cameron Corp. 400 19
Exxon Corp. 24,100 1,482
Global Marine, Inc. (a) 100 2
Mobil Corp. 11,200 783
Pogo Producing Co. 2,300 89
Royal Dutch Petroleum Co. 22,400 1,218
Schlumberger, Ltd. 1,500 188
Smith International, Inc. (a) 200 12
Texaco, Inc. 200 22
Tosco Corp. 8,100 242
Valero Energy Corp. 1,500 53
----------
4,776
----------
FINANCE - 16.1%
AEGON NV (American Registered) 2,780 195
Aetna, Inc. 2,100 215
Ahmanson (H.F.) & Co. 1,500 65
American General Corp. 200 10
American International Group, Inc. 6,100 911
Banc One Corp. 14,213 688
BankAmerica Corp. 1,800 116
Bear Stearns Cos., Inc. 1,770 61
Beneficial Corp. 5,100 362
Charter One Financial, Inc. 1,700 92
Chase Manhattan Corp. 300 29
Chubb Corp. (The) 200 13
CIGNA Corp. 400 71
Citicorp 900 109
CoreStates Financial Corp. 3,600 194
Crestar Financial Corp. 668 26
Dime Bancorp, Inc. 2,600 46
Edwards (A.G.), Inc. 5,200 222
Federal National Mortgage Association 16,300 711
First Chicago NBD Corp. 8,300 502
First Union Corp. 100 9
Firstar Corp. 2,200 67
Fleet Financial Group, Inc. 1,100 70
General Re Corp. 200 36
Great Western Financial Corp. 700 38
Hartford Financial Services Group (The), Inc. 900 74
Hibernia Corp. 1,300 18
Household International Corp. 400 47
Lincoln National Corp. 500 32
Marsh & McLennan Cos., Inc. 5,200 371
MBIA, Inc. 2,000 226
Morgan Stanley, Dean Witter Discover and Co. 7,270 313
NationsBank Corp. 12,432 802
Pacific Century Financial Corp. 3,500 162
PMI Group, Inc. (The) 700 44
Providian Financial Corp. 6,400 206
Republic New York Corp. 1,900 204
Salomon, Inc. 5,800 323
SouthTrust Corp. 5,200 215
TCF Financial Corp. 2,300 114
Transamerica Financial Corp. 4,200 393
Travelers, Inc. 2,500 158
Washington Federal, Inc. 11,250 287
Washington Mutual, Inc. 400 23
Wells Fargo & Co. 500 134
----------
9,004
----------
GENERAL BUSINESS - 4.7%
ADT, Ltd. (a) 7,800 257
Donnelley (R.R.) & Sons Co. 2,900 106
First Data Corp. 15,300 672
SBC Communications, Inc. 6,800 421
Service Corp. International 2,400 79
TCI Satellite Entertainment, Inc. Class A (a) 1,340 11
Specialty Funds Equity T Fund 25
<PAGE>
EQUITY T FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
NUMBER MARKET
OF VALUE
SHARES (000)
---------- ----------
Tele-Communications, Inc. Class A 24,900 $ 369
Time Warner, Inc. 10,525 508
Viacom, Inc. Class B (a) 6,800 204
----------
2,627
----------
MISCELLANEOUS - 0.8%
Waste Management, Inc. 14,200 456
----------
456
----------
SHELTER - 0.1%
Owens-Corning Fiberglas Corp. 1,200 52
USG Corp. (a) 300 11
----------
63
----------
TECHNOLOGY - 14.5%
AlliedSignal, Inc. 7,700 647
Applied Materials, Inc. (a) 600 42
Boeing Co. 4,600 244
Cabletron Systems, Inc. 1,200 34
Cisco Systems, Inc. (a) 5,600 376
Coltec Industries, Inc. (a) 5,500 107
COMPAQ Computer Corp. (a) 3,500 347
Computer Associates International, Inc. 1,200 67
Dell Computer Corp. 800 94
Electronic Data Systems Corp. 700 29
EMC Corp. (a) 6,500 254
General Dynamics Corp. 400 30
Harris Corp. 2,600 218
Hewlett-Packard Co. 700 39
Intel Corp. 8,200 1,161
International Business Machines Corp. 8,500 767
Lockheed Martin Corp. 1,000 104
McDonnell Douglas Corp. 6,600 452
Microsoft Corp. (a) 7,300 923
Motorola, Inc. 400 30
National Semiconductor Corp. (a) 2,500 77
NCR Corp. (a) 62 2
Northrop Grumman Corp. 300 26
Oracle Systems Corp. (a) 9,400 473
Perkin-Elmer Corp. 4,800 382
Quantum Corp. 8,900 181
Sensormatic Electronics Corp. 20,700 267
Sun Microsystems, Inc. 8,300 309
Symbol Technologies, Inc. 2,300 77
Texas Instruments, Inc. 1,000 84
Xerox Corp. 3,600 283
----------
8,126
----------
TRANSPORTATION - 1.8%
Burlington Northern, Inc. 1,900 171
CNF Transportation, Inc. 500 16
Consolidated Freightways Corp. (a) 250 4
CSX Corp. 5,300 294
Southwest Airlines Co. 5,200 135
Union Pacific Corp. 5,300 374
----------
994
----------
UTILITIES - 8.9%
360 Communications Co. (a) 800 14
AT&T Corp. 2,800 98
Bell Atlantic Corp. 2,700 205
Consolidated Edison Co. 10,400 306
Dominion Resources, Inc. 4,700 172
DTE Energy Co. 5,300 146
Duke Power Co. 7,206 345
Enron Corp. 7,100 290
Entergy Corp. 6,400 175
GTE Corp. 9,800 430
Illinova Corp. 13,800 304
Lucent Technologies, Inc. 1,300 94
MCI Communications Corp. 6,100 233
New England Electric System 500 19
Northern States Power Co. 600 31
NYNEX Corp. 4,600 265
Peco Energy Co. 2,700 57
Sprint Corp. 14,000 737
U.S. West Communications Group 500 19
U.S. West Media Group (a) 13,300 269
Unicom Corp. 1,000 22
WorldCom, Inc. 23,010 735
----------
4,966
----------
TOTAL COMMON STOCKS
(cost $45,584) 52,928
----------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENTS - 5.0%
Frank Russell Investment Company
Money Market Fund,
due on demand (b) $ 2,659 2,659
United States Treasury Notes
5.750% due 10/31/97 (c) 150 150
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,809) 2,809
----------
26 Equity T Fund Specialty Funds
<PAGE>
EQUITY T FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
MARKET
VALUE
(000)
----------
TOTAL INVESTMENTS
(identified cost $48,393)(d) - 99.6% $ 55,737
OTHER ASSETS AND LIABILITIES,
NET - 0.4% 193
----------
NET ASSETS - 100.0% $ 55,930
----------
----------
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral by the custodian in connection with futures
contracts purchased.
(d) See Note 2 for federal income tax information.
ABBREVIATIONS:
NV - Nonvoting
UNREALIZED
NUMBER APPRECIATION
OF (DEPRECIATION)
CONTRACTS (000)
--------- --------------
FUTURES CONTRACTS
(Notes 2 and 3)
S&P 500 Index Futures Contracts
expiration date 09/97 4 $ 7
----------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (#) $ 7
----------
----------
(#) At June 30, 1997, United States Treasury Notes valued at $150 were held as
collateral by the custodian in connection with futures contracts purchased
by the Fund.
The accompanying notes are an integral part of the financial statements.
Specialty Funds Equity T Fund 27
<PAGE>
EQUITY T FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $48,393)(Note 2). . . . . . . . . . . . . . . . . $ 55,737
Receivables:
Dividends and interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Deferred organization expenses (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 21
-----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,016
LIABILITIES
Payables:
Accrued fees to affiliates (Note 4) . . . . . . . . . . . . . . . . $ 42
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 31
Daily variation margin on futures contracts (Notes 2 and 3) . . . . 13
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,930
-----------------
-----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 182
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . 243
Unrealized appreciation (depreciation) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,344
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,110
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,930
-----------------
-----------------
NET ASSET VALUE, offering and redemption price per share:
($55,930,203 divided by 4,414,439 shares of $.01 par value
shares of beneficial interest outstanding). . . . . . . . . . . . . . . . . . . . . . $ 12.67
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 Equity T Fund Specialty Funds
<PAGE>
EQUITY T FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 294
Dividends from Money Market Fund (Note 5) . . . . . . . . . . . . . . . . . . . . . . 62
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-----------------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . 10
Bookkeeping service fees. . . . . . . . . . . . . . . . . . . . . . 1
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . 5
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . 27
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Amortization of deferred organization expenses. . . . . . . . . . . 2
----------------
Expenses before reductions. . . . . . . . . . . . . . . . . . . . . 208
Expense reductions (Note 4) . . . . . . . . . . . . . . . . . . . . (31)
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
-----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
-----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . 223 269
----------------
Net change in unrealized appreciation or depreciation of:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,647
Futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . 7 6,654
---------------- -----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,923
-----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . $ 7,105
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds Equity T Fund 29
<PAGE>
EQUITY T FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE PERIOD
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996*
------------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 182 $ 46
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 (26)
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . 6,654 697
------------------- ------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . 7,105 717
------------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (46)
In excess of net investment income. . . . . . . . . . . . . . . . . . . . . . . . -- (2)
------------------- ------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . . -- (48)
------------------- ------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6) . . . 28,894 19,262
------------------- ------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 35,999 19,931
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,931 --
------------------- ------------------
End of period (including undistributed net investment income of
$182 at June 30, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,930 $ 19,931
------------------- ------------------
------------------- ------------------
</TABLE>
*For the period October 7, 1996 (commencement of operations) to
December 31, 1996.
The accompanying notes are an integral part of the financial statements.
30 Equity T Fund Specialty Funds
<PAGE>
EQUITY T FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996**
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . $ 10.61 $ 10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .04 .03
Net realized and unrealized gain (loss) on investments. . . . . . . . . . . . 2.02 .61
---------- ----------
Total Income From Investment Operations. . . . . . . . . . . . . . . . . . 2.06 .64
---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (.03)
---------- ----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.67 $ 10.61
---------- ----------
---------- ----------
TOTAL RETURN (%)(a)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.42 6.10
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . . . . . . . . . . . 55,930 19,931
Ratios to average net assets (%)(b)(c):
Operating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . 1.00 1.00
Operating expenses, gross. . . . . . . . . . . . . . . . . . . . . . . . . 1.18 2.83
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03 1.62
Portfolio turnover rate (%)(b). . . . . . . . . . . . . . . . . . . . . . . . 8.44 8.86
Average commission rate paid per share
of security ($ omitted). . . . . . . . . . . . . . . . . . . . . . . . . . .0300 .0301
Per share amount of fees waived ($ omitted)(d). . . . . . . . . . . . . . . . .0071 .0143
Per share amount of fees reimbursed ($ omitted) . . . . . . . . . . . . . . . -- .0194
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
** For the period October 7, 1996 (commencement of operations) to
December 31, 1996.
(a) Periods less than one year are not annualized.
(b) The ratios for the periods June 30, 1997 and October 7, 1996 (commencement
of operations) to December 31, 1996 are annualized.
(c) Fund performance, operating expenses, and net investment income are
reported net of investment management fees paid to the Manager or money
managers, but gross of any investment services fees. See Note 4.
(d) See Note 4 for current period amounts.
Specialty Funds Equity T Fund 31
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE MARKET
AMOUNT OF VALUE
(000) COUPON MATURITY (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 101.5%
ALABAMA - 0.7%
Jefferson County, Alabama Sewer Revenue, Series A (a) $ 500 5.000% 02/01/05 $ 506
----------
506
----------
ALASKA - 2.8%
North Slope Borough, Alaska, Zero Coupon, Series B, General Obligation (a) 375 0.000 06/30/99 343
North Slope Borough, Alaska, Zero Coupon, Series A (a) 1,385 0.000 06/30/00 1,206
North Slope Borough, Alaska, Zero Coupon, Series A (a) 500 0.000 06/30/99 458
----------
2,007
----------
ARIZONA - 2.2%
Arizona State Transportation Board, Series A, Special Obligations
Revenue (pre-refunded 07/01/01) 1,425 6.450 07/01/06 1,553
----------
1,553
----------
CALIFORNIA - 6.4%
California Health Facilities Financing, Series D, Health Care Revenue (a) 665 5.750 07/01/98 677
California State Public Works Lease, Series A, State and Local
Appropriation (a) 500 5.100 12/01/98 508
California State Public Works Lease, State and Local Appropriation (a) 600 5.250 12/01/98 611
California, State of, General Obligation (a) 850 6.100 11/01/01 912
Los Angeles County, California, California Transportation
Participation Certificate, Series B, Tax Revenue 760 5.900 07/01/00 790
Sacramento, California, Municipal Utility District, Series Z, Utility
Revenue (a) 1,000 6.000 07/01/01 1,063
----------
4,561
----------
COLORADO - 0.7%
Denver, Colorado, City and County, General Obligation 500 5.950 08/01/97 501
----------
501
----------
CONNECTICUT - 3.2%
Bridgeport, Connecticut, Series A, General Obligation (a) 1,150 5.250 09/01/99 1,176
Connecticut State Unemployment, Series A, Compensation Revenue (a) 1,125 5.000 11/15/99 1,146
----------
2,322
----------
DISTRICT OF COLUMBIA - 1.4%
District of Columbia, Series A, General Obligation (a) 500 7.250 06/01/98 515
District of Columbia, Series A, General Obligation (a) 500 5.500 04/01/01 512
----------
1,027
----------
</TABLE>
32 Limited Volatility Tax Free Fund Specialty Funds
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE MARKET
AMOUNT OF VALUE
(000) COUPON MATURITY (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FLORIDA - 2.4%
Hillsborough County, Florida, Zero Coupon, Series A
Utility Refunding Revenue (a) $ 1,000 0.000% 08/01/99 $ 915
Jacksonville, Florida, Pollution Control Revenue 100 4.000 (b) 05/01/29 100
Orange County, Florida, Series A, School Board (a) 575 4.700 08/01/01 581
St. Lucie County, Florida, Pollution Control Revenue 100 4.000 (b) 03/01/27 100
----------
1,696
----------
GEORGIA - 1.7%
Atlanta, Georgia, Airport Facilities Revenue (a) 500 5.500 01/01/01 518
Burke County, Georgia, Development Authority Pollution
Control Revenue 200 4.000 (b) 04/01/32 200
Chatham County, Georgia, Series A, Hospital Authority Revenue (a) 500 5.000 01/01/00 508
----------
1,226
----------
GUAM - 0.7%
Guam Government, Series A, General Obligation 500 5.750 08/15/99 509
----------
509
----------
HAWAII - 1.6%
Honolulu, Hawaii, City & County General, Series B, General Obligation 1,150 5.000 10/01/02 1,175
----------
1,175
----------
ILLINOIS - 5.7%
Chicago, Illinois, Series C, General Obligation (a) 1,500 6.250 10/31/01 1,602
Illinois Health Facilities Authority Revenue, Series A (a) 500 5.000 10/01/00 505
Illinois Health Facilities Authority Revenue, Series A (a) 250 4.800 10/01/99 253
Illinois Health Facilities Authority, Series C, Special Obligation
Revenue (pre-refunded 04/01/99) 500 7.500 04/01/18 537
Illinois State, General Obligation (a) 500 5.375 05/01/01 517
Illinois, State of, General Obligation (pre-refunded 06/01/98) 625 5.800 06/01/98 636
----------
4,050
----------
IOWA - 1.4%
Iowa Student Loan Liquidity Corp., Series A, Student Loan Revenue 1,000 6.000 03/01/98 1,013
----------
1,013
----------
KENTUCKY - 1.4%
McCracken County, Kentucky, Hospital Revenue, Series A,
Health Care Revenue (a) 1,000 5.700 11/01/00 1,040
----------
1,040
----------
</TABLE>
Specialty Funds Limited Volatility Tax Free Fund 33
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE MARKET
AMOUNT OF VALUE
(000) COUPON MATURITY (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
LOUISIANA - 2.2%
Lafayette, Louisiana, Public Power Authority Electric Revenue (a) $ 500 4.500% 11/01/99 $ 504
Louisiana Public Facilities Authority Revenue, Health Care Revenue 500 5.500 10/15/99 514
Louisiana State of, Series A, General Obligation (a) 500 6.000 08/01/00 524
----------
1,542
----------
MARYLAND - 1.4%
Maryland State, Stadium Authority Lease Revenue Convention
Center Expansion (a) 1,000 5.375 12/15/00 1,034
----------
1,034
----------
MICHIGAN - 7.5%
Michigan Municipal Bond Authority Revenue, Series B, State and
Local Appropriations (a) 550 6.900 05/01/99 576
Michigan State Building Authority Revenue, Series I 375 5.400 10/01/03 390
Michigan State Hospital Finance Authority Revenue, Series A 500 5.000 07/01/02 509
Michigan State Hospital Finance Authority Revenue, Series S 500 5.500 08/15/00 514
Michigan State Trunk Line, Series A, Special Obligation Revenue
(pre-refunded 08/15/99) 400 7.000 08/15/17 430
Michigan State Underground Storage Tank Assurance Authority,
Series I (a) 2,900 5.000 05/01/99 2,941
----------
5,360
----------
MINNESOTA - 4.6%
Minneapolis St. Paul, Minnesota Metropolitan Council, Series D,
General Obligation 535 5.900 09/01/97 537
Minnesota State Revenue, Series A (a) 1,500 5.000 06/30/99 1,525
Minnesota, State of, General Obligation 500 6.400 08/01/98 513
Minnesota, State of, General Obligation 700 5.600 10/01/99 722
----------
3,297
----------
NEW JERSEY - 3.8%
New Jersey State Transportation Corporation Capital Grant Anticipation
Notes, Series A 670 4.900 09/01/01 681
New Jersey State Transportation Corporation Capital Grant Anticipation
Notes, Series A 1,000 5.000 09/01/00 1,018
Ocean County, New Jersey, Utilities Authority Waste Water Revenue 1,000 5.000 01/01/01 1,021
----------
2,720
----------
NEW MEXICO - 1.6%
New Mexico, Mortgage Finance Authority Revenue, Series A1 1,100 6.200 01/01/01 1,139
----------
1,139
----------
</TABLE>
34 Limited Volatility Tax Free Fund Specialty Funds
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE MARKET
AMOUNT OF VALUE
(000) COUPON MATURITY (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NEW YORK - 9.4%
Municipal Assistance Corp. New York, New York, Series E $ 1,000 4.700% 07/01/02 $ 1,008
Municipal Assistance Corp. New York, New York, Series L 500 4.500 07/01/02 499
New York City, New York, Series H, General Obligation 750 5.250 08/01/03 759
New York State Dormitory Authority Revenue 500 5.000 07/01/00 506
New York State Dormitory Authority Revenue 500 4.900 05/15/00 505
New York State Dormitory Authority Revenue, Series A 375 6.000 02/15/03 395
New York State Dormitory Authority Revenue, Series A 375 6.000 08/15/04 397
New York State Urban Development Corp. Revenue, Series 7 125 5.500 01/01/01 128
New York, New York, Series A, General Obligation 500 5.700 08/01/02 517
New York, New York, Series C, General Obligation 500 6.125 08/01/01 524
New York, New York, Series D, General Obligation 350 6.000 02/01/99 358
New York, New York, Series E, General Obligation 500 5.300 08/01/03 507
New York, New York, Series F, General Obligation 500 5.300 08/01/03 507
New York, New York, Series L, General Obligation 150 5.000 08/01/01 150
----------
6,760
----------
OHIO - 2.9%
Cleveland, Ohio, City School District Revenue Anticipation Notes (a) 555 5.000 06/01/00 565
Cuyahoga County, Ohio, Hospital Revenue (a) 1,000 5.000 02/15/00 1,015
Lorain County, Ohio, Hospital Revenue 500 4.750 09/01/00 506
----------
2,086
----------
OKLAHOMA - 0.4%
Stillwater, Oklahoma, Series A, Medical Center Authority 300 5.550 05/15/01 303
----------
303
----------
PENNSYLVANIA - 2.7%
Lehigh County, Pennsylvania, Special Obligation Revenue
(pre-refunded 08/01/00)(a) 500 6.900 08/01/11 546
Pennsylvania State First Series (a) 500 5.250 05/15/99 510
Pennsylvania, State of, General Obligation 500 5.300 07/01/99 511
Philadelphia, Pennsylvania, Zero Coupon, Water & Sewer Revenue (a) 500 0.000 10/01/02 389
----------
1,956
----------
PUERTO RICO - 0.7%
Commonwealth of Puerto Rico 500 5.500 07/01/01 517
----------
517
----------
RHODE ISLAND - 1.4%
Rhode Island Housing & Mortgage Finance Authority, Series A,
Housing Revenue (a) 1,000 5.150 07/01/01 1,018
----------
1,018
----------
</TABLE>
Specialty Funds Limited Volatility Tax Free Fund 35
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE MARKET
AMOUNT OF VALUE
(000) COUPON MATURITY (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SOUTH CAROLINA - 2.1%
Piedmont, South Carolina, Municipal Power Agency Service, Series A,
Utility Revenue (a) $ 500 5.700% 01/01/98 $ 505
South Carolina Public Service Authority Revenue, Series B, Utility
Revenue (a) 500 5.000 01/01/99 506
Spartanburg County, South Carolina, Social Health Services, Inc.
Hospital Revenue (a) 500 4.400 04/15/01 498
----------
1,509
----------
SOUTH DAKOTA - 0.9%
South Dakota State Lease Revenue, Series B, State and Local Appropriation 650 5.700 09/01/97 652
----------
652
----------
TENNESSEE - 0.9%
Metropolitan Government, Nashville & Davidson County, Tennessee,
Health & Education 615 5.250 05/01/01 625
----------
625
----------
TEXAS - 7.6%
Abilene, Texas, Health Facilities Development Corp., Medical Center A,
Health Care Revenue (a) 500 5.100 09/01/99 509
Arlington, Texas, Independent School District, General Obligation 600 5.150 02/15/99 610
Austin, Texas, Zero Coupon, General Obligation (a) 645 0.000 09/01/97 641
Austin, Texas, Zero Coupon, General Obligation
(pre-refunded 09/01/97)(a) 30 0.000 09/01/97 30
Denison, Texas, Hospital Authority Revenue 500 5.250 08/15/01 506
San Antonio, Texas, General Obligation 1,000 5.000 08/01/00 1,009
Texas, State of, Series C, General Obligation 1,500 5.000 04/01/99 1,522
University of Texas, University Revenues, Series A 605 5.000 08/15/03 616
----------
5,443
----------
UTAH - 6.4%
Intermountain Power Agency, Series B, Utility Revenue (a) 500 5.250 07/01/99 510
Intermountain Power Agency, Series B, Utility Revenue 500 7.200 07/01/99 525
Intermountain Power Agency, Series C, Utility Revenue (a) 1,500 5.500 07/01/99 1,537
Intermountain Power Agency, Series C, Utility Revenue 1,000 4.700 07/01/02 1,004
Intermountain Power Agency, Series E, Utility Revenue 500 5.250 07/01/01 514
Utah State, Building Ownership Authority, Series A, Lease Revenue 500 5.500 05/15/00 514
----------
4,604
----------
</TABLE>
36 Limited Volatility Tax Free Fund Limited Volatility Tax Free Fund
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE MARKET
AMOUNT OF VALUE
(000) COUPON MATURITY (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
VIRGINIA - 1.8%
Virginia Public Building Authority Revenue, Staff and Local Appropriation $ 500 5.100% 08/01/99 $ 509
Virginia, State of, General Obligation 740 5.375 06/01/99 759
----------
1,268
----------
WASHINGTON - 10.5%
CDP King County III, Washington, Lease Revenue (a) 1,000 4.600 06/01/03 992
Clark County, Washington Public Utility District Number 1, Utility
Revenue (a) 500 5.000 01/01/99 505
Washington State Public Power Supply System, Series A, Utility Revenue 280 5.000 07/01/00 283
Washington State Public Power Supply System, Series A, Utility Revenue 1,500 5.450 07/01/00 1,537
Washington State Public Power Supply System, Series B, Utility Revenue 650 7.200 07/01/99 684
Washington State Public Power Supply System, Series B, Utility Revenue 500 5.000 07/01/00 506
Washington, State of, Series R 500 5.000 07/01/99 508
Washington, State of, Series C, General Obligation 2,000 5.500 07/01/99 2,051
Washington, State of, Series R-92 B, General Obligation 500 5.750 09/01/97 502
----------
7,568
----------
WYOMING - 0.4%
Lincoln County, Wyoming Pollution Control Revenue, Project B 200 4.100 (b) 11/01/14 200
Lincoln County, Wyoming Pollution Control Revenue, Project C 100 4.100 (b) 11/01/14 100
----------
300
----------
TOTAL MUNICIPAL BONDS (cost $72,002) 72,887
----------
SHORT-TERM TAX-EXEMPT OBLIGATIONS - 0.4%
Harris County, Texas, Industrial Development Corp., Series B, daily demand 300 4.050 (b) 03/01/24 300
----------
TOTAL SHORT-TERM TAX-EXEMPT OBLIGATIONS (cost $300) 300
----------
TOTAL INVESTMENTS (identified cost $72,302)(c) - 101.9% 73,187
OTHER ASSETS AND LIABILITIES, NET - (1.9%) (1,355)
----------
NET ASSETS - 100.0% $ 71,832
----------
----------
</TABLE>
(a) Bond is insured by AMBAC, FGIC, or MBIA.
(b) Adjustable or floating rate security.
(c) See Note 2 for federal income tax information.
ABBREVIATIONS:
AMBAC - AMBAC Indemnity Corporation
FGIC - Financial Guaranty Insurance Company
MBIA - Municipal Bond Investors Assurance
The accompanying notes are an integral part of the financial statements.
Specialty Funds Limited Volatility Tax Free Fund 37
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
QUALITY RATINGS AS A % OF MARKET VALUE
AAA 59%
AA 28
A 4
BBB 9
--------
100%
--------
--------
ECONOMIC SECTOR EMPHASIS AS A % OF MARKET VALUE
General Obligation 34%
Utility Revenue 18
State and Community Lease 13
Health Care Revenue 12
Refunded 5
Housing Revenue 3
University Revenue 2
Student Loan Revenue 1
Other 12
--------
100%
--------
--------
The accompanying notes are an integral part of the financial statements.
38 Limited Volatility Tax Free Fund Specialty Funds
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at market (identified cost $72,302)(Note 2). . . . . . . . . . . . . . . . . $ 73,187
Receivables:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,284
Investments sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Fund shares sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
-----------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,645
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . $ 2,706
Fund shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . 29
Accrued fees to affiliates (Note 4) . . . . . . . . . . . . . . . . 40
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 38
----------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,813
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,832
-----------------
-----------------
NET ASSETS CONSIST OF:
Undistributed net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 256
Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . (1,023)
Unrealized appreciation (depreciation) on investments. . . . . . . . . . . . . . . . . . 885
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,680
-----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,832
-----------------
-----------------
NET ASSET VALUE, offering and redemption price per share:
($71,832,007 divided by 3,406,108 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . $ 21.09
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds Limited Volatility Tax Free Fund 39
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,643
EXPENSES (Notes 2 and 4):
Management fees . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172
Custodian fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . 28
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . 3
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . 11
Trustees' fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
-----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,388
-----------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Notes 2 and 3)
Net realized gain (loss) from investments. . . . . . . . . . . . . . . . . . . . . . . . (38)
Net change in unrealized appreciation or depreciation of investments . . . . . . . . . . 17
-----------------
Net gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21)
-----------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . . . . . . $ 1,367
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
40 Limited Volatility Tax Free Fund Specialty Funds
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE PERIOD
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,388 $ 2,518
Net realized gain (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38) (15)
Net change in unrealized appreciation or depreciation . . . . . . . . . . . . . . 17 (626)
------------------- ------------------
Net increase (decrease) in net assets resulting from operations. . . . . . . . 1,367 1,877
------------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,132) (2,536)
In excess of net investment income. . . . . . . . . . . . . . . . . . . . . . . . -- (3)
------------------- ------------------
Total Distributions to Shareholders. . . . . . . . . . . . . . . . . . . . . . (1,132) (2,539)
------------------- ------------------
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6) . . . 5,253 3,168
------------------- ------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 5,488 2,506
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,344 63,838
------------------- ------------------
End of period (including undistributed net investment income of
$256 at June 30, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,832 $ 66,344
------------------- ------------------
------------------- ------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds Limited Volatility Tax Free Fund 41
<PAGE>
LIMITED VOLATILITY TAX FREE FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . $ 21.02 $ 21.24 $ 20.48 $ 21.45 $ 21.03 $ 20.85
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . .42 .85 .81 .86 .94 1.01
Net realized and unrealized gain (loss) on investments. . (.01) (.21) .77 (.97) .42 .18
-------- -------- -------- -------- -------- --------
Total Income From Investment Operations. . . . . . . . .41 .64 1.58 (.11) 1.36 1.19
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . . . . (.34) (.86) (.82) (.86) (.94) (1.01)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . $ 21.09 $ 21.02 $ 21.24 $ 20.48 $ 21.45 $ 21.03
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a). . . . . . . . . . . . . . . . . . . . . 1.99 3.07 7.81 (0.54) 6.58 5.85
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . . . . 71,832 66,344 63,838 48,975 51,211 38,399
Ratios to average net assets (%)(b):
Operating expenses . . . . . . . . . . . . . . . . . . .75 .75 .74 .72 .75 .80
Net investment income. . . . . . . . . . . . . . . . . 4.06 4.02 3.91 4.14 4.40 4.89
Portfolio turnover rate (%)(b). . . . . . . . . . . . . . 35.46 74.34 73.91 71.71 24.05 18.21
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
42 Limited Volatility Tax Free Fund Specialty Funds
<PAGE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
---------- ------ --------- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES - 15.7%
Beta Finance, Inc. $ 5,000 5.930% 03/16/98 $ 5,000
Carolina Medical Plan, Inc. (a) 20,000 5.670 06/01/22 20,000
Chase Manhattan Credit Card Trust 12,933 7.400 09/16/97 12,935
Chrysler Financial Corp. (MTN) 10,000 7.480 03/09/98 10,095
Ford Holdings Inc. 13,426 9.250 07/15/97 13,443
Goldman Sachs Group L.P. (a) 25,000 5.625 08/27/97 25,000
Merrill Lynch & Co., Inc. (a) 25,000 5.690 06/01/98 25,000
----------
TOTAL CORPORATE BONDS AND NOTES (cost $111,473) 111,473
----------
EURODOLLAR BONDS AND NOTES - 3.7%
Ford Credit Europe (MTN) 1,025 6.875 10/10/97 1,028
Societe Generale (MTN) 25,000 5.590 07/01/98 24,982
----------
TOTAL EURODOLLAR BONDS AND NOTES (cost $26,010) 26,010
----------
YANKEE BONDS AND NOTES - 2.1%
Bayerische Landesbank 5,000 6.250 04/15/98 5,004
Canadian Imperial Bank 5,000 5.940 03/17/98 4,999
Westpac Banking Corp. 5,000 5.970 03/23/98 4,998
----------
TOTAL YANKEE BONDS AND NOTES (cost $15,001) 15,001
----------
EURODOLLAR CERTIFICATES OF DEPOSIT - 1.4%
Commerzbank 10,000 5.890 03/06/98 9,995
----------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (cost $9,995) 9,995
----------
YANKEE CERTIFICATES OF DEPOSIT - 8.6%
Bank of Tokyo Mitsubishi 10,000 5.800 08/28/97 10,000
Bank of Tokyo Mitsubishi 5,000 5.870 12/29/97 5,000
Bank of Tokyo Mitsubishi 5,000 6.000 03/04/98 5,000
Bank of Tokyo Mitsubishi 4,000 6.280 04/02/98 4,000
Canadian Imperial Bank 25,000 5.580 07/02/97 25,000
Rabobank 10,000 6.200 04/09/98 9,992
Westpac Banking Corp. 2,000 5.830 01/15/98 1,996
----------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (cost $60,988) 60,988
----------
DOMESTIC COMMERCIAL PAPER - 34.7%
Alpha Finance Corp. 10,000 5.850 03/03/98 10,000
Bavaria TRR Corp. 15,000 5.590 07/10/97 14,979
Bavaria TRR Corp. 18,000 5.600 07/16/97 17,958
Centric Funding Corp. 16,000 5.565 07/02/97 15,998
Centric Funding Corp. 6,600 5.590 08/19/97 6,550
</TABLE>
44 Money Market Fund Specialty Funds
<PAGE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
---------- ------ --------- ----------
<S> <C> <C> <C> <C>
Chrysler Financial Corp $ 25,000 5.580% 07/01/97 $ 25,000
Corestates Capital Corp. (a) 25,000 5.630 07/29/97 25,000
First Chicago Financial Corp. 10,000 5.640 07/02/97 9,998
First Chicago Financial Corp. 20,000 5.539 07/07/97 19,982
General Electric Capital Corp. 6,000 5.640 07/07/97 5,994
General Electric Capital Corp. 29,000 5.700 07/09/97 29,000
General Motors Acceptance Corp. 5,000 5.340 08/20/97 4,963
General Motors Acceptance Corp. 9,000 5.780 10/08/97 8,857
Pegasus Two Ltd. 8,000 5.600 07/10/97 7,989
Pegasus Two Ltd. 7,000 5.680 08/05/97 6,961
Redwood Receivable Corp. 30,000 6.300 07/01/97 30,000
Texas Agricultural Financial Authority 7,000 5.670 07/10/97 6,990
----------
TOTAL DOMESTIC COMMERCIAL PAPER (cost $246,219) 246,219
----------
EURODOLLAR COMMERCIAL PAPER - 11.3%
Banco BCN Barclays Ltd. 10,000 5.620 12/08/97 9,750
Banco Real SA Grand Cayman 17,000 5.760 10/03/97 16,744
Credit Suisse 34,000 5.807 07/28/97 34,000
Ford Credit Canada Ltd. 20,000 5.624 07/16/97 19,953
----------
TOTAL EURODOLLAR COMMERCIAL PAPER (cost $80,447) 80,447
----------
EURODOLLAR TIME DEPOSITS - 16.3%
Bank of Montreal 15,000 5.625 07/11/97 15,000
Bank of Nova Scotia 21,000 5.562 07/01/97 21,000
Bank of Tokyo Mitsubishi Ltd. 10,000 5.812 10/01/97 10,000
Industrial Bank of Japan 25,000 6.750 07/01/97 25,000
Societe Generale 10,000 6.010 10/28/97 10,000
Sumitomo Bank 15,000 5.740 07/11/97 15,000
Sumitomo Bank 20,000 5.781 08/05/97 20,000
----------
TOTAL EURODOLLAR TIME DEPOSITS (cost $116,000) 116,000
----------
UNITED STATES GOVERNMENT AGENCIES - 4.3%
Aid to Chile Guaranteed Note (LIBOR Floater)(a) 12,926 6.031 06/01/05 12,939
Aid to INH Portugal Guaranteed Note (LIBOR Floater)(a) 12,500 6.098 12/01/17 12,718
Federal Home Loan Bank 5,000 5.875 02/26/98 5,000
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES (cost $30,657) 30,657
----------
TOTAL INVESTMENTS (amortized cost $696,790) - 98.1% 696,790
----------
</TABLE>
Specialty Funds Money Market Fund 45
<PAGE>
MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)
----------
<S> <C>
REPURCHASE AGREEEMENTS - 9.6%
Agreement with HSBC and Chase Bank (Tri-Party) of $25,000
acquired June 30, 1997 at 6.250% to be repurchased at $25,004 on July 1, 1997 collateralized by:
$25,630 Federal Farm Credit Bank Discount Notes, due 07/17/97 to 09/15/97, valued at $25,500. $ 25,000
Agreement with Lehman Brothers and Chase Bank (Tri-Party) of $42,764
acquired June 30, 1997 at 6.150% to be repurchased at $42,771 on July 1, 1997 collateralized by:
$13,030 Federal Farm Credit Bank Notes, due 07/01/97 to 04/01/98 valued at $13,204; and
$23,010 Federal Home Loan Bank Discount Notes, due 09/01/97 to 05/12/98, valued at $23,290; and
$6,795 Federal National Mortgage Association Notes, due 08/14/97 valued at $7,113. 42,764
----------
TOTAL REPURCHASE AGREEMENTS (identified cost $67,764) 67,764
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS (cost $764,554)(b) - 107.7% 764,554
OTHER ASSETS AND LIABILITIES, NET - (7.7%) (54,604)
----------
NET ASSETS - 100.0% $ 709,950
----------
----------
</TABLE>
* The interest rate for all securities with a maturity greater
than thirteen months has an automatic reset feature resulting in an
effective maturity of thirteen months or less.
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is
the same as shown above.
ABBREVIATIONS:
LIBOR - London Interbank Offered Rate
MTN - Medium Term Note
The accompanying notes are an integral part of the financial statements.
46 Money Market Fund Specialty Funds
<PAGE>
MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 696,790
Repurchase agreements (identified cost $67,764)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 67,764
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,750
----------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768,304
LIABILITIES
Payables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,278
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,982
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,354
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 709,950
----------------
----------------
NET ASSETS CONSIST OF:
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,099
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702,851
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 709,950
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($709,949,854 divided by 709,949,854 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds Money Market Fund 47
<PAGE>
MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,597
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 737
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
----------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (737)
----------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,464
----------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,464
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
48 Money Market Fund Specialty Funds
<PAGE>
MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,464 $ 31,584
------------------- -------------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 16,464 31,584
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,464) (31,584)
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . . 213,018 (36,711)
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . 213,018 (36,711)
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496,932 533,643
------------------- -------------------
End of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 709,950 $ 496,932
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds Money Market Funds 49
<PAGE>
MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each year or period and other performance information derived
from the financial statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . .0277 .0549 .0601 .0447 .0342 .0403
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . (.0277) (.0549) (.0601) (.0447) (.0342) (.0403)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD. . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN (%)(a)(b). . . . . . . . . . . . . . . . 2.81 5.63 6.19 4.57 3.48 4.11
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . 709,950 496,932 533,643 502,302 415,998 347,464
Ratios to average net assets (%)(b)(c):
Operating expenses, net . . . . . . . . . . . . . .05 .05 .06 .05 .07 .08
Operating expenses, gross . . . . . . . . . . . . .30 .30 .26 .05 .07 .08
Net investment income . . . . . . . . . . . . . . 5.60 5.49 6.01 4.49 3.38 4.04
Per share amount of fees waived ($ omitted)(d). . . .0012 .0025 .0020 -- -- --
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) For periods prior to April 1, 1995, fund performance, operating expenses,
and net investment income do not include any management fees paid to the
Manager or money managers. For periods thereafter, they are reported net of
investment advisory fees. See Note 4.
(c) The ratios for the period ended June 30, 1997 are annualized.
(d) See Note 4 for current period amounts.
50 Money Market Fund Specialty Funds
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
UNITED STATES GOVERNMENT AGENCIES - 72.1%
Aid to Sri Lanka Guaranteed Note (Libor Floater)(a) $ 3,750 6.098% 06/15/12 $ 3,789
Aid to Chile Guaranteed Note (Libor Floater)(a) 6,074 6.031 06/01/05 6,080
Federal Farm Credit Bank 21,055 5.930 07/01/97 21,055
Federal Farm Credit Bank Discount Note 3,385 5.420 01/12/98 3,286
Federal Farm Credit Bank (a) 5,000 5.570 04/17/98 4,998
Federal Home Loan Bank 2,500 5.795 07/07/97 2,500
Federal Home Loan Bank 2,595 5.640 08/19/97 2,594
Federal Home Loan Bank 1,000 5.790 09/08/97 1,000
Federal Home Loan Bank 2,000 5.695 09/22/97 1,999
Federal Home Loan Bank 1,000 7.870 12/15/97 1,008
Federal Home Loan Bank 1,050 5.135 01/12/98 1,047
Federal Home Loan Bank 1,000 5.610 01/26/98 1,000
Federal Home Loan Bank 5,000 5.420 02/06/98 4,981
Federal Home Loan Bank 3,000 5.135 03/04/98 2,985
Federal Home Loan Bank 4,000 5.670 03/05/98 3,991
Federal Home Loan Bank 1,000 5.260 04/27/98 993
Federal Home Loan Bank 2,000 6.280 05/05/98 2,001
Federal Home Loan Bank 1,000 6.200 05/06/98 1,000
Federal Home Loan Bank (a) 3,000 5.250 08/14/97 2,999
Federal National Mortgage Association 2,690 8.050 07/14/97 2,692
Federal National Mortgage Association 1,035 8.800 07/25/97 1,037
Federal National Mortgage Association 3,000 5.640 09/03/97 2,998
Federal National Mortgage Association 2,300 9.550 09/10/97 2,315
Federal National Mortgage Association 1,835 5.400 12/05/97 1,834
Federal National Mortgage Association 2,500 6.050 01/12/98 2,503
Federal National Mortgage Association 2,000 5.375 01/13/98 1,993
Federal National Mortgage Association 5,000 8.650 02/10/98 5,085
Federal National Mortgage Association 1,500 5.250 03/25/98 1,490
Federal National Mortgage Association 3,000 5.730 04/13/98 2,993
Federal National Mortgage Association (MTN) 5,000 6.010 07/17/97 5,001
Federal National Mortgage Association (MTN)(a) 5,250 5.250 07/28/97 5,248
Federal National Mortgage Association (MTN) 2,000 6.520 09/15/97 2,003
Federal National Mortgage Association (MTN) 1,000 7.560 02/06/98 1,010
Federal National Mortgage Association (MTN)(a) 1,500 6.000 02/17/98 1,503
Federal National Mortgage Association (MTN) 1,000 5.400 03/18/98 997
Federal National Mortgage Association (MTN)(a) 2,000 5.200 04/30/98 1,985
Federal National Mortgage Association (MTN) 3,460 5.250 06/02/99 3,438
Federal National Mortgage Association (MTN) 1,000 6.410 07/10/98 1,000
Federal Home Loan Mortgage Corp. 10,000 6.500 07/03/97 10,000
Federal Home Loan Mortgage Corp. 1,000 7.970 07/07/97 1,000
Federal Home Loan Mortgage Corp. 1,000 5.200 08/04/97 999
Federal Home Loan Mortgage Corp. 2,000 5.190 03/11/98 1,991
Federal Home Loan Mortgage Corp. 1,000 5.400 03/16/98 997
Secondary Market Services 10,000 5.520 07/28/97 9,959
Secondary Market Services 13,265 5.585 08/07/97 13,189
</TABLE>
52 U.S. Government Money Market Fund Specialty Funds
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Student Loan Marketing Association (a) $ 5,000 5.240% 10/14/97 $ 4,996
Student Loan Marketing Association (a) 2,000 5.070 07/12/99 1,996
Tennessee Valley Authority 2,000 7.875 09/15/97 2,008
Tennessee Valley Authority (call date 09/15/97) 2,200 7.875 09/15/01 2,209
----------
TOTAL UNITED STATES GOVERNMENT AGENCIES 165,775
----------
TOTAL INVESTMENTS (amortized cost $165,775) - 72.1% 165,775
----------
REPURCHASE AGREEMENTS - 28.0%
Agreement with HSBC and Chase Bank (Tri-Party) of $16,000
acquired June 30, 1997 at 6.15% to be repurchased at $16,003 on July 1, 1997, collateralized by:
$2,715 Federal Farm Credit Bank Discount Notes, due 11/03/97 to 2/13/98, valued at $2,804; and
$5,305 Federal Home Loan Bank Discount Notes, due 8/01/97 to 2/23/98, valued at$5,382; and
$4,850 Federal National Mortgage Association, due 01/12/98 to 05/11/98, valued at $4,968; and
$2,680 Federal Home Loan Mortgage Association, due 07/07/97 to 01/27/98, valued at $2,793; and
$385 Resolution Funding Strip, due 10/15/97 to 01/15/98 valued at $374. 16,000
Agreement with Lehman Brothers and Chase Bank (Tri-Party) of $48,434
acquired June 30, 1997 at 6.15% to be repurchased at $48,442 on July 1, 1997, collateralized by:
$6,355 Federal Farm Credit Bank Discount Notes, due 07/01/97 to 05/26/98, valued at $6,520; and
$27,010 Federal National Mortgage Association Discount Notes, due 01/16/98, valued at $26,181; and
$16,170 Federal National Mortgage Association, due 07/10/97 to 05/13/98, valued at $16,560; and
$138 Resolution Funding Strip, due 01/15/98, valued at $134. 48,434
----------
TOTAL REPURCHASE AGREEMENTS (identified cost $64,434) 64,434
----------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS (cost $230,209)(b) - 100.1% 230,209
OTHER ASSETS AND LIABILITIES, NET - (0.1%) (223)
----------
NET ASSET - 100.0% $ 229,986
----------
----------
</TABLE>
* The interest rate for all securities with a maturity greater
than thirteen months has an automatic reset feature resulting in an
effective maturity of thirteen months or less.
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is
the same as shown above.
ABBREVIATIONS:
LIBOR - London Interbank Offered Rate
MTN - Medium Term Note
The accompanying notes are an integral part of the financial statements.
Specialty Funds U.S. Government Money Market Fund 53
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 165,775
Repurchase agreements (identified cost $64,434)(Note 2). . . . . . . . . . . . . . . . . . . . . . . . . 64,434
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,925
----------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,134
LIABILITIES
Payables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,040
Investments purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,020
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 53
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,148
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 229,986
----------------
----------------
NET ASSETS CONSIST OF:
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,686
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 229,986
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($229,986,248 divided by 229,986,248 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
54 U.S. Government Money Market Fund Specialty Funds
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,560
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 294
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
----------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 488
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (294)
----------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,366
----------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,366
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds U.S. Government Money Market Fund 55
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- --------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,366 $ 10,145
------------------- --------------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 6,366 10,145
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,366) (10,145)
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions (Note 6). . . . (9,739) 89,784
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . (9,739) 89,784
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239,725 149,941
------------------- --------------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 229,986 $ 239,725
------------------- --------------------
------------------- --------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
56 U.S. Government Money Market Fund Specialty Funds
<PAGE>
U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each year or period and other performance information derived
from the financial statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . .0269 .0526 .0580 .0380 .0284 .0347
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . . (.0269) (.0526) (.0580) (.0380) (.0284) (.0347)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD. . . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $1.0000 $1.0000
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a) . . . . . . . . . . . . . . . . . 2.72 5.40 5.98 3.87 2.88 3.53
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . . 229,986 239,725 149,941 112,077 95,410 153,976
Ratios to average net assets (%):
Operating expenses, net (b)(c). . . . . . . . . . .17 .25 .32 .57 .49 .41
Operating expenses gross (b)(c) . . . . . . . . . .43 .50 .51 .57 .49 .41
Net investment income (b) . . . . . . . . . . . . 5.66 5.27 5.82 3.91 2.85 3.47
Per share amount of fees waived ($ omitted)(c). . . .0012 .0025 .0019 -- -- --
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
(c) See Note 4 for current period amounts.
Specialty Funds U.S. Government Money Market Fund 57
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ALABAMA - 1.2%
Mobile, Alabama Industrial Development Revenue, weekly demand $ 1,150 4.375%(2) 12/01/97 $ 1,150
----------
1,150
----------
ALASKA - 1.3%
City and Borough of Juneau, Alaska General Obligation Bonds (a) 410 6.000 01/01/98 414
Alaska State Housing Financial Corp. Revenue (pre-refunded
07/01/97)(a)(b) 155 6.125 12/01/07 155
Anchorage, Alaska Electric Utilities Revenue, Series C (a) 650 3.650 12/01/97 650
----------
1,219
----------
ARIZONA - 4.5%
Maricopa County, Arizona Industrial Development Authority
Revenue, weekly demand 800 4.625 (2) 10/01/04 800
Pima County, Arizona Industrial Development Authority Revenue,
weekly demand 2,700 4.200 (2) 10/01/22 2,700
Tucson, Arizona Industrial Development Authority, Series A,
weekly demand 650 4.250 (2) 06/01/15 650
----------
4,150
----------
CALIFORNIA - 0.5%
Ravenswood, California City School District Tax and Revenue
Anticipation Notes 500 4.500 07/08/97 500
----------
500
----------
COLORADO - 1.4%
Colorado Multi-family Housing Financing Authority, weekly demand 1,150 4.250 (2) 06/01/05 1,150
Colorado Multi-family Housing Financing Authority, Series A,
weekly demand 175 4.250 (2) 11/01/09 175
----------
1,325
----------
DELAWARE - 0.7%
Delaware Economic Development Authority Multi-family Revenue,
weekly demand 650 4.300 (2) 12/01/15 650
----------
650
----------
DISTRICT OF COLUMBIA - 0.2%
District of Columbia General Obligation, Series B-3, daily demand 200 4.100 (1) 06/01/03 200
----------
200
----------
FLORIDA - 4.8%
Boca Raton, Florida Industrial Development Authority Revenue,
weekly demand 425 4.500 (2) 12/01/14 425
Broward County, Florida Multi-family Housing Revenue, weekly demand 2,525 4.375 (2) 12/01/10 2,525
Lee County, Florida Industrial Development Authority Revenue,
weekly demand 1,200 4.250 (2) 04/01/10 1,200
Saint Cloud, Florida Utilities Revenue 250 5.800 08/01/97 250
----------
4,400
----------
</TABLE>
58 Tax Free Money Market Fund Specialty Funds
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
GEORGIA - 4.7%
De Kalb County, Georgia Housing Authority Multi-family Housing
Revenue, weekly demand $ 200 4.200%(2) 12/15/15 $ 200
De Kalb County, Georgia Private Hospital Authority Revenue
Anticipation Certificates, Series A, weekly demand 3,400 4.200 (2) 03/01/24 3,400
Residential Apartments I Portfolio CERT Trust, 1996 Series A,
weekly demand (e) 720 4.350 (2) 12/01/02 720
----------
4,320
----------
HAWAII - 0.5%
State of Hawaii General Obligation, Series BO 500 6.250 08/01/97 501
----------
501
----------
ILLINOIS - 12.7%
East Peoria, Illinois Multi-family Housing Revenue, weekly demand 1,820 4.375 (2) 06/01/08 1,820
Illinois Development Finance Authority Industrial Revenue,
weekly demand 3,000 4.625 (2) 12/01/05 3,000
Illinois Development Finance Authority Pollution Control Revenue,
daily demand 1,000 4.250 (1) 12/01/08 1,000
Illinois Development Finance Authority Revenue, quarterly demand 700 3.950 (4) 08/01/25 700
Illinois Development Finance Authority Revenue, weekly demand 1,250 4.250 (2) 09/01/26 1,250
Illinois Educational Facilities Authority Revenue, weekly demand 1,335 4.450 (2) 01/01/18 1,335
Illinois Health Facilities Authority Revenue, Series B, weekly demand 800 4.200 (2) 08/15/22 800
St. Clair County, Illinois Industrial Development Board Revenue,
weekly demand 1,000 4.625 (2) 10/01/15 1,000
Troy Grove, Illinois Revenue, weekly demand 750 5.015 (2) 05/01/10 750
----------
11,655
----------
INDIANA - 6.2%
Crawfordsville, Indiana Community School Corp. Tax Anticipation Notes 600 4.250 12/31/97 601
Crown Point, Indiana Tax Anticipation Notes 1,100 3.950 12/31/97 1,101
Lake Central School Corporation Industry Tax Anticipation Notes 2,975 4.250 12/31/97 2,979
Lawrence, Indiana Central High School Building Corp. First
Mortgage, Series 1990 (a) 250 6.700 07/01/97 250
Residential Apartments I Portfolio CERT Trust, 1996 Series A,
weekly demand (e) 740 4.350 (2) 12/01/02 740
----------
5,671
----------
IOWA - 2.2%
Des Moines, Iowa Private College Revenue, Series B (pre-refunded
12/01/97)(b) 370 6.700 12/01/99 382
Des Moines, Iowa Private College Revenue, Series B (pre-refunded
12/01/97)(b) 715 6.800 12/01/09 738
Iowa Higher Education Loan Authority Revenue, daily demand 400 4.350 (1) 04/01/27 400
Residential Apartments I Portfolio CERT Trust, 1996 Series A,
weekly demand (e) 540 4.350 (2) 12/01/02 540
----------
2,060
----------
KANSAS - 1.1%
Shawnee County, Kansas General Obligation, Series 1 1,000 4.250 02/01/98 1,000
----------
1,000
----------
</TABLE>
Specialty Funds Tax Free Money Market Fund 59
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
KENTUCKY - 0.6%
Elsmere, Kentucky Industrial Building Revenue, semiannual demand $ 555 3.850%(5) 02/01/06 $ 555
----------
555
----------
MAINE - 0.1%
Baileyville, Maine Pollution Control Revenue, weekly demand 100 4.250 (2) 06/01/05 100
----------
100
----------
MARYLAND - 0.9%
Montgomery County, Maryland Industrial Development Revenue,
monthly demand 800 3.850 (3) 04/01/14 800
----------
800
----------
MICHIGAN - 6.8%
Lansing, Michigan Economic Development Corp., semiannual demand 2,000 3.850 (5) 05/01/15 2,000
Livonia, Michigan Economic Development Corp., semiannual demand 300 3.950 (5) 11/15/04 300
McDonald Tax Exempt Mortgage Bond Trust, thirteen month demand (d) 152 4.250 (6) 01/15/09 152
Michigan State Job Development Authority Revenue, weekly demand 225 4.375 (2) 10/01/08 225
Michigan State Job Development Authority Revenue, monthly demand 1,100 3.750 (3) 11/01/14 1,100
Michigan State Strategic Fund Industrial Development Revenue,
weekly demand 2,370 4.229 (2) 11/01/01 2,370
Northville, Michigan Economic Development Corporation, Ltd.
Obligation Revenue, weekly demand 150 4.250 (2) 05/01/14 150
----------
6,297
----------
MINNESOTA - 2.8%
Mendota Heights, Minnesota Commercial Development, weekly demand 1,605 4.250 (2) 12/01/15 1,605
Minneapolis, Minnesota General Obligation, Series A, weekly demand 1,000 4.180 (2) 12/01/05 1,000
----------
2,605
----------
MISSISSIPPI - 0.4%
DeSoto County, Mississippi Industrial Development Revenue,
weekly demand 400 4.867 (2) 12/01/08 400
----------
400
----------
MISSOURI - 0.8%
St. Louis, Missouri Industrial Development Authority Revenue,
weekly demand 700 4.550 (2) 08/30/97 700
----------
700
----------
NEVADA - 0.2%
Henderson, Nevada Public Improvement Trust Housing Revenue,
Series II-B, weekly demand 125 4.250 (2) 08/01/26 125
----------
125
----------
</TABLE>
60 Tax Free Money Market Fund Specialty Funds
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NEW YORK - 3.9%
Lindenhurst, New York University Free School District Tax
Anticipation Notes $ 1,000 4.250% 06/24/98 $ 1,002
Little Falls, New York City School District Bond Anticipation
Notes, Series A 1,040 4.250 09/19/97 1,041
North Hempstead, New York Bond Anticipation Notes, Series A 1,500 4.000 01/29/98 1,500
----------
3,543
----------
OHIO - 10.2%
Auglaize County, Ohio General Obligation 500 4.100 12/01/97 501
Buckeye, Ohio Tax-Exempt Mortgage Bond Trust, semiannual demand 365 4.000 (5) 02/01/05 365
Canal Winchester, Ohio Bond Anticipation Notes 900 4.500 08/13/97 900
Cincinnati & Hamilton County, Ohio Port Authority Revenue,
quarterly demand 345 3.900 (4) 09/01/99 345
Citizens Federal Tax-Exempt Mortgage Bond Trust, semiannual demand 60 3.600 (5) 09/01/08 60
Clermont County, Ohio Economic Development Revenue, semiannual demand 215 4.000 (5) 05/01/12 215
Cuyahoga County, Ohio Industrial Development Revenue, semiannual demand 160 3.900 (5) 06/01/99 160
Franklin County, Ohio Industrial Development Revenue, semiannual demand 505 3.700 (5) 04/01/15 505
Franklin County, Ohio Industrial Development Revenue, semiannual demand 160 3.850 (5) 11/01/15 160
Mahoning County, Ohio Industrial Development Revenue, Series A,
weekly demand 10 4.200 (2) 10/01/00 10
Mahoning County, Ohio Industrial Development Revenue, Series B,
weekly demand 55 4.200 (2) 10/01/00 55
McDonald Tax Exempt Mortgage Bond Trust, thirteen month demand (d) 711 4.250 (6) 01/15/09 711
Ohio State Air Quality Development Authority Pollution Control Revenue,
Series C, annual demand 1,000 4.400 (7) 09/01/18 1,001
Ohio State Economic Development Revenue, semiannual demand 790 3.700 (5) 03/01/98 790
Ohio State Higher Educational Facilities Community College
Revenue, weekly demand 670 4.150 (2) 09/01/20 670
Scioto County, Ohio Health Care Facilities, semiannual demand 710 3.900 (5) 12/01/15 710
Stark County, Ohio Health Care Facilities, semiannual demand 1,675 3.650 (5) 09/15/16 1,675
Trumbull County, Ohio Industrial Development Revenue, weekly demand 515 4.200 (2) 04/01/04 515
----------
9,348
----------
OKLAHOMA - 3.1%
Creek County, Oklahoma Industrial Development Authority Revenue,
semiannual demand 1,290 4.050 (5) 12/01/05 1,290
Muskogee, Oklahoma, Industrial Development Revenue, weekly demand 1,090 4.400 (2) 12/01/15 1,090
Tulsa County, Oklahoma Industrial Development Authority Revenue,
semiannual demand 500 3.850 (5) 12/15/08 500
----------
2,880
----------
OREGON - 0.9%
Hillsboro, Oregon Graduate Institute Revenue, weekly demand 850 4.200 (2) 08/01/11 850
----------
850
----------
PENNSYLVANIA - 5.5%
Allegheny County, Pennsylvania Hospital Development Authority
Revenue, Series A, weekly demand 400 4.200 (2) 03/01/99 400
Commonwealth Tax-Exempt Mortgage Bond Trust, semiannual demand 700 4.100 (5) 11/01/05 700
Delaware County, Pennsylvania Industrial Development Authority
Solid Waste Revenue, Series A, weekly demand 100 4.150 (2) 12/01/18 100
</TABLE>
Specialty Funds Tax Free Money Market Fund 61
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
McDonald Tax Exempt Mortgage Bond Trust, thirteen month demand (d) $ 152 4.250%(6) 01/15/09 $ 152
Montgomery County, Pennsylvania Industrial Development Authority
Revenue, weekly demand 1,400 4.200 (2) 12/30/15 1,400
Pennsylvania State Higher Education Facilities Revenue,
semiannual demand 900 3.850 (5) 06/01/07 900
Sayre, Pennsylvania Health Care Facilities Authority Revenue,
Series A, weekly demand (a) 800 4.150 (2) 12/01/20 800
Sayre, Pennsylvania Health Care Facilities Authority Revenue,
Series F, weekly demand (a) 300 4.150 (2) 12/01/20 300
Schuylkill County, Pennsylvania Industrial Development Authority
Resource Recovery Revenue, weekly demand 100 4.200 (2) 12/01/02 100
Schuylkill County, Pennsylvania Industrial Development Authority
Resource Recovery Revenue, daily demand 200 4.050 (1) 12/01/11 200
----------
5,052
----------
SOUTH CAROLINA - 1.1%
Lexington, South Carolina Water & Sewer Revenue Bond Anticipation Notes 1,000 4.750 10/01/97 1,001
----------
1,001
----------
SOUTH DAKOTA - 1.9%
Sioux Falls, South Dakota Industrial Development Revenue, weekly demand 1,775 4.250 (2) 06/01/06 1,775
----------
1,775
----------
TENNESSEE - 1.5%
Franklin County, Tennessee Health & Educational Facilities Revenue,
monthly demand 1,400 4.000 (3) 09/01/10 1,400
----------
1,400
----------
TEXAS - 3.7%
Alice, Texas Independent School District General Obligation 275 4.900 08/15/97 275
Harris County, Texas Health Facilities Development Revenue,
weekly demand 2,100 4.150 (2) 08/15/26 2,100
Richardson, Texas Independent School District General Obligation,
Series A, annual demand 1,000 3.620 (7) 08/15/22 1,000
----------
3,375
----------
VIRGINIA - 3.8%
Harrisonburg, Virginia Redevelopment & Multi-family Housing
Revenue, annual demand 1,000 3.500 (7) 02/01/26 1,000
Norfolk, Virginia Industrial Development Authority Revenue,
weekly demand 1,075 4.250 (2) 03/01/16 1,075
Virginia State Housing Development Authority Revenue, weekly demand 1,450 4.300 (2) 09/01/17 1,450
----------
3,525
----------
</TABLE>
62 Tax Free Money Market Fund Specialty Funds
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL DATE
AMOUNT OF VALUE
(000) RATE MATURITY* (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
WASHINGTON - 1.5%
Washington State Nonprofit Housing Revenue, daily demand $ 1,200 5.600%(1) 01/01/27 $ 1,200
Washington State Student Loan Finance Association, weekly demand 200 4.375 (2) 01/01/01 200
----------
1,400
----------
WEST VIRGINIA - 1.1%
Marshall County, West Virginia Pollution Control Revenue, weekly demand 1,000 4.300 (2) 03/01/26 1,000
----------
1,000
----------
WISCONSIN - 7.0%
Janesville, Wisconsin School District Tax and Revenue Anticipation Notes 500 3.910 09/25/97 500
Kettle Moraine School District, Wisconsin Tax and Revenue
Anticipation Notes 500 4.010 08/22/97 500
Lodi, Wisconsin School District Tax and Revenue Anticipation Notes 1,750 4.000 10/17/97 1,750
Maple Dale Indian Hill, Wisconsin School District Tax and
Revenue Anticipation Notes 700 4.190 08/20/97 700
Slinger, Wisconsin School District Tax and Revenue Anticipation Notes 1,500 4.090 10/03/97 1,500
Tomah, Wisconsin Area School District Tax and Revenue Anticipation Notes 1,000 4.190 09/17/97 1,000
Westby, Wisconsin Area School District Tax and Revenue Anticipation Notes 500 3.960 10/30/97 501
----------
6,451
----------
TOTAL INVESTMENTS (amortized cost $91,983)(c) - 99.8% 91,983
OTHER ASSETS AND LIABILITIES, NET - 0.2% 140
----------
NET ASSETS - 100.0% $ 92,123
----------
----------
</TABLE>
(a) Bond is insured by AMBAC, FGIC, or MBIA.
(b) Pre-refunded: These bonds are collateralized by U.S. Treasury securities,
which are held in escrow by a trustee and used to pay principal and
interest in the tax-exempt issue and to retire the bonds in full at the
earliest refunding date.
(c) The cost for federal income tax purposes is the same as shown above.
(d) Multi-State bond issue including Ohio, Pennsylvania, and Michigan.
(e) Multi-State bond issue including Georgia, Indiana, and Iowa.
* All securities with a maturity date greater than thirteen months have a
demand feature, or an optional or mandatory put, or are pre-refunded
resulting in an effective maturity of thirteen months or less.
Variable Rate:
(1) Daily
(2) Weekly
(3) Monthly
(4) Quarterly
(5) Semiannual
(6) Thirteen-month
(7) Annual
The accompanying notes are an integral part of the financial statements.
Specialty Funds Tax Free Money Market Fund 63
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF NET ASSETS, CONTINUED
June 30, 1997 (Unaudited)
QUALITY RATINGS AS A % OF MARKET VALUE ++
VMIG1 or SP-1 91%
P1 8
VMIG2 1
----------
100%
----------
----------
ECONOMIC SECTOR EMPHASIS AS A % OF MARKET VALUE
General Obligation 25%
Industrial Revenue Bonds 21
Education Revenue 20
Housing Revenue 20
Healthcare Revenue 9
Pollution Control Revenue 4
Utility Revenue 1
----------
100%
----------
----------
++ VMIG1: The highest short-term municipal note credit rating given by
Moody's Investors Services to notes with a demand feature which
are of the "best quality."
VMIG2: The highest short-term municipal note credit rating given by
Moody's Investors Services to notes with a demand feature which
are of "high quality."
SP-1: The highest short-term municipal note credit rating given by
Standard & Poor's Corporation to notes with a "very strong or
strong capacity to pay principal and interest."
P1: The highest tax-exempt commercial paper rating given by Moody's
Investors Services to commercial paper with a "superior capacity
for repayment."
The accompanying notes are an integral part of the financial statements.
64 Tax Free Money Market Fund Specialty Funds
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in
thousands (except
per share amount)
<S> <C> <C>
ASSETS
Investments at amortized cost which approximates market (Note 2) . . . . . . . . . . . . . . . . . . . . $ 91,983
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 729
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
----------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,732
LIABILITIES
Payables:
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 291
Investments purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256
Accrued fees to affiliates (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 29
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
----------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,123
----------------
----------------
NET ASSETS CONSIST OF:
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 921
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,202
----------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,123
----------------
----------------
NET ASSET VALUE, offering and redemption price per share:
($92,122,526 divided by 92,122,526 shares of $.01 par value
shares of beneficial interest outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds Tax Free Money Market Fund 65
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,989
EXPENSES (Notes 2 and 4):
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 132
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Transfer agent fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trustees' fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
----------------
Expenses before reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
Expense reductions (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . (53)
----------------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
----------------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,818
----------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,818
----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
66 Tax Free Money Market Fund Specialty Funds
<PAGE>
TAX FREE MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Amounts in thousands
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,818 $ 3,086
------------------- -------------------
Net increase in net assets resulting from operations. . . . . . . . . . . . . . 1,818 3,086
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,818) (3,086)
FROM FUND SHARE TRANSACTIONS:
Net increase (decrease) in net assets from Fund share transactions
(Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,084) 24,207
------------------- -------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . (10,084) 24,207
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,207 78,000
------------------- -------------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,123 $ 102,207
------------------- -------------------
------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Specialty Funds Tax Free Money Market Fund 67
<PAGE>
TAX FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each year or period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
1997* 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . .0172 .0329 .0370 .0279 .0251 .0304
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Net investment income . . . . . . . . . . . . . . (.0172) (.0329) (.0370) (.0279) (.0251) (.0304)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD. . . . . . . . . . . $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN (%)(a) . . . . . . . . . . . . . . . . 1.73 3.35 3.76 2.83 2.55 3.09
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period ($000 omitted). . . . . 92,123 102,207 78,000 100,819 68,154 73,203
Ratios to average net assets (%)(b):
Operating expenses, net . . . . . . . . . . . . .32 .42 .48 .40 .43 .45
Operating expenses, gross . . . . . . . . . . . .42 .42 .48 .40 .43 .45
Net investment income . . . . . . . . . . . . . 3.45 3.28 3.69 2.84 2.52 3.03
</TABLE>
* For the six months ended June 30, 1997 (Unaudited).
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended June 30, 1997 are annualized.
68 Tax Free Money Market Fund Specialty Funds
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
mutual fund with 28 different investment portfolios, referred to as "Funds"
of which 23 are in operation as of June 30, 1997. These financial
statements report on seven Funds, each of which has distinct investment
objectives and strategies. The Investment Company is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. It is organized and operates as a
Massachusetts business trust under an amended master trust agreement dated
July 26, 1984. The Investment Company's master trust agreement permits the
Board of Trustees to issue an unlimited number of full and fractional
shares of beneficial interest at a $.01 par value. As of July 8, 1996, the
Real Estate Securities and Emerging Markets Funds have available Class S
and Class C shares. Each Class has equal rights as to assets and voting
privileges. Investment income, realized and unrealized gains and losses and
fund level expenses of a Fund are allocated on a pro rata basis to each
Class, based on relative net assets of each Class to the total net assets
of a Fund. Certain expenses may also be charged to an individual Class for
services or fees that relate specifically to that particular Class. Class C
shares are charged a 12b-1 distribution fee and a shareholder servicing fee
of 0.40% and 0.25% of average daily net assets, respectively. Class S
shares which are reported herein are charged no such fees.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Funds in the preparation of these
financial statements.
SECURITY VALUATION: United States equity and fixed-income securities listed
and traded principally on any national securities exchange are valued on
the basis of the last sale price or, lacking any sale, at the closing bid
price, on the primary exchange on which the security is traded. United
States over-the-counter equity and fixed-income securities and options are
valued on the basis of the closing bid price. Futures contracts are valued
on the basis of the last sale price. Many fixed-income securities do not
trade each day and, thus, last sale or bid prices are frequently not
available. Fixed-income securities, therefore, may be valued using prices
provided by a pricing service when such prices are believed to reflect the
fair market value of such securities.
International equity and fixed-income securities traded on a national
securities exchange are valued on the basis of the last sale price.
International securities traded over the counter are valued on the basis of
the mean of bid prices. In the absence of a last sale or mean bid price,
respectively, such securities may be valued on the basis of prices provided
by a pricing service if those prices are believed to reflect the fair
market value of such securities.
The Money Market, U.S. Government Money Market and the Tax Free Money
Market Funds' portfolio investments are valued on the basis of "amortized
cost," a method by which each portfolio instrument is initially valued at
cost, and thereafter a constant accretion/amortization to maturity of any
discount/premium is assumed. All three Funds utilize the amortized cost
valuation method in accordance with Rule 2a-7 of the Investment Company Act
of 1940, as amended. Money market instruments maturing within 60 days of
the valuation date held by Funds other than the Money Market, U.S.
Government Money Market and Tax Free Money Market Funds are also valued at
amortized cost unless the Board of Trustees determines that amortized cost
does not represent fair value.
Municipal investments of the Limited Volatility Tax Free Fund are appraised
or priced by an independent pricing source, approved by the Board of
Trustees, which utilizes information with respect to bond transactions,
quotations from bond dealers, market transactions in comparable securities,
and various relationships between securities.
The Funds may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
INVESTMENT TRANSACTIONS: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost incurred by each money manager
within a particular fund. The Funds, except Limited Volatility Tax Free
and Tax Free Money Market Funds, may lend portfolio securities but have
not done so during the six months ended June 30, 1997.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis. Distributions from Real
Estate Investment Trusts ("REITs") owned by the Real Estate Securities Fund
may have as their components dividend income, capital gains and/or returns
of capital. Distributions that are deemed to be capital gains or returns
Specialty Funds Notes to Financial Statements 69
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
of capital by the trusts are treated by the Fund, respectively, as an
adjustment to its realized capital gains or its cost of the investment. The
exact amount to be adjusted can be ascertained only at the end of each
REIT's fiscal year when finally determined and reported by the various
trusts.
AMORTIZATION AND ACCRETION: Premiums and discounts for the Limited
Volatility Tax Free Fund, all zero-coupon bond discounts, and original
issue discounts are amortized/accreted for both tax and financial reporting
purposes. All short-term premiums/discounts are amortized/accreted for both
tax and financial reporting purposes.
FEDERAL INCOME TAXES: As a Massachusetts business trust, each Fund is a
separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to each Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
It is each Fund's intention to qualify as a regulated investment company
and distribute all of its taxable income. Therefore, no federal income tax
provision was required for the Funds. From November 1, 1996 to December 31,
1996, the Money Market, Equity T and U.S. Government Money Market Funds
incurred net realized capital losses of $529, $25,924 and $1,594,
respectively. As permitted by tax regulations, the Money Market, Equity T
and U.S. Government Money Market Funds intend to elect to defer these
losses and treat them as arising in the year ending December 31, 1997.
At December 31, 1996, certain Funds had net tax basis capital loss
carryforwards which may be applied against any realized net taxable gains
in each succeeding year or until their respective expiration dates,
whichever occurs first. Available capital loss carryforwards and expiration
dates are as follows:
<TABLE>
<CAPTION>
12/31/97 12/31/98 12/31/99 12/31/02 12/31/03 12/31/04 TOTALS
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging Markets $ -- $ -- $ -- $ -- $ (5,407,487) $ -- $ (5,407,487)
Limited Volatility Tax Free (103,283) (26,604) (383,404) (345,504) (110,634) (15,075) (984,504)
Money Market -- -- -- -- (42,377) (814) (43,191)
U.S. Government Money Market -- -- -- (1,309) (4,913) (3,331) (9,553)
</TABLE>
The aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of June 30, 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Real Estate Securities $ 420,745,785 $ 96,886,803 $ (1,295,588) $ 95,591,215
Emerging Markets 321,933,382 87,000,088 (22,716,470) 64,283,618
Equity T 48,392,428 7,493,592 (149,020) 7,344,572
Limited Volatility Tax Free 72,302,128 900,681 (15,809) 884,872
</TABLE>
REDEMPTION FEES: In general, shares of the Equity T Fund may be redeemed at
net asset value. However, upon the redemption or exchange of shares held by
shareholders of the Fund, a redemption fee of 1% of the current net asset
value of the shares will be assessed and retained by the Fund for the
benefit of the remaining shareholders. The redemption fee is included in
additional paid-in capital in the accompanying Statement of Assets and
Liabilities.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: For all Funds, income
dividends and capital gain distributions, if any, are recorded on the ex-
dividend date. Dividends are generally declared and paid monthly for the
Limited Volatility Tax Free Fund; quarterly for the Real Estate Securities
Fund and annually for the Equity T and Emerging Markets Funds. The Money
Market, U.S. Government Money Market and Tax Free Money Market Funds
declare and record dividends daily and pay them monthly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Funds to avoid imposition of federal income
tax on any remaining undistributed capital gains and net investment income.
70 Notes to Financial Statements Specialty Funds
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP"). As
a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting period
may differ significantly from distributions during such period. The
differences between tax regulations and GAAP primarily relate to
investments in options, futures, forward contracts, passive foreign
investment companies, foreign-denominated investments, mortgage-backed
securities, and certain securities sold at a loss. Accordingly, a Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
EXPENSES: The Funds, and when appropriate each Class, will pay their own
expenses other than those expressly assumed by Frank Russell Investment
Management Company. Most expenses can be directly attributed to the
individual Funds. Expenses which cannot be directly attributed are
allocated among all funds principally based on their relative net assets.
In addition, Class C shares will pay 12b-1 and shareholder servicing fees
along with other expenses that may be attributable to that Class.
DEFERRED ORGANIZATION EXPENSES: Organization and initial registration costs
of the Emerging Markets and Equity T Funds have been deferred and are being
amortized over 60 months on a straight-line basis.
REPURCHASE AGREEMENTS: The Funds may engage in repurchase agreements with
several financial institutions whereby a Fund, through its custodian,
receives delivery of the underlying securities. Each Fund's Money
Manager will monitor repurchase agreements daily to determine that the
market value (including accrued interest) of the underlying securities
at Fedwire closing time remains at least equal to 102% of the repurchase
price. The Money Manager will notify the Seller to immediately increase
the collateral on the repurchase agreement to 102% of the repurchase
price if collateral value falls below 102%.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Emerging
Markets Fund are maintained in U.S. dollars. Foreign currency amounts and
transactions of the Fund are translated into U.S. dollars on the following
basis:
(a) Market value of investment securities, other assets and
liabilities at the closing rate of exchange on the valuation
date.
(b) Purchases and sales of investment securities and income at the
closing rate of exchange prevailing on the respective trade dates
of such transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets and
liabilities, other than investments in securities, at period-end, as a
result of changes in the exchange rates.
It is not practical to isolate that portion of the results of operations of
the Emerging Markets Fund that arises as a result of changes in exchange
rates from that portion that arises from changes in market prices of
investments during the year. Such fluctuations are included with the net
realized and unrealized gain or loss from investments. However, for federal
income tax purposes the Fund does isolate the effects of changes in foreign
exchange rates from the fluctuations arising from changes in market prices
for realized gain (or loss) on debt obligations.
DERIVATIVES: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Funds' Prospectus and Statement
of Additional Information, certain Funds may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
They include options, futures, swaps, forwards, structured notes and
stripped securities. These instruments offer unique characteristics and
risks that assist the Funds in meeting their investment strategies.
Funds typically use derivatives in three ways: cash equitization, hedging,
and return enhancement. Cash equitization is a technique that may be used
by certain Funds through the use of options and futures to earn
"market-like" returns with their excess and liquidity reserve cash
balances. Hedging is used by some Funds to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in a Fund. By purchasing
certain instruments, Funds may more effectively achieve the desired
portfolio characteristics that assist them in meeting their investment
objectives. Depending on how the derivatives are structured and utilized,
the risks associated with them may vary widely. These risks are generally
categorized as market risk, liquidity risk and counterparty or credit risk.
Specialty Funds Notes to Financial Statements 71
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
Emerging Markets Fund may enter into foreign currency exchange spot
contracts and forward foreign currency exchange contracts ("contracts").
Additionally, from time to time the Emerging Markets Fund may enter into
contracts to hedge certain foreign currency-denominated assets. Contracts
are recorded at market value. Certain risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of its contracts and are generally limited to the amount of
unrealized gain on the contracts, if any, that are recognized in the
Statement of Assets and Liabilities. Realized gains or losses arising from
such transactions are included in net realized gain (or loss) from foreign
currency-related transactions. Open contracts at June 30, 1997, are
presented on the Statement of Net Assets.
INVESTMENT IN EMERGING MARKETS: Investing in emerging markets may involve
special risks and considerations not typically associated with investing in
the United States markets. These risks include revaluation of currencies,
high rates of inflation, repatriation, restrictions on income and capital,
and future adverse political and economic developments. Moreover,
securities issued in these markets may be less liquid, subject to
government ownership controls, delayed settlements, and their prices more
volatile than those of comparable securities in the United States.
FUTURES: The Equity T Fund utilizes futures to equitize liquidity reserve
balances. The face or contract amounts of these instruments reflect the
extent of the Fund's exposure to off balance sheet risk. The primary risks
associated with the use of futures contracts are an imperfect correlation
between the change in market value of the securities held by the Fund and
the prices of futures contracts and the possibility of an illiquid market.
Changes in the initial settlement values of futures contracts are accounted
for as unrealized appreciation (depreciation) until the contracts are
terminated, at which time realized gains and losses are recognized.
3. INVESTMENT TRANSACTIONS
SECURITIES: During the six months ended June 30, 1997, purchases and sales
of investment securities (excluding U.S. Government and Agency obligations,
short-term investments, options, futures and repurchase agreements) were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES PURCHASES SALES
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Real Estate Securities $ 127,792,584 $ 92,894,183 Equity T $ 36,556,488 $ 8,149,641
Emerging Markets 117,073,779 66,927,389 Limited Volatility 20,274,286 11,670,762
</TABLE>
Money Market purchases, sales and maturities of securities (excluding U.S.
Government and Agency obligations and repurchase agreements) were
$7,584,651,731, $82,103,916 and $7,243,591,926, respectively. Purchases,
sales and maturities of U.S. Government and Agency obligations (excluding
repurchase agreements) were $5,002,344, $10,545,320 and $53,900,000,
respectively.
U.S. Government Money Market purchases and maturities of U.S. Government
and Agency obligations (excluding repurchase agreements) were $556,628,424
and $607,583,684, respectively. There were no sales for the six months
ended June 30, 1997.
Tax Free Money Market purchases, sales and maturities of short-term tax
exempt obligations were $188,246,184, $187,021,200 and $14,725,000,
respectively.
FUTURES CONTRACTS: Fund transactions in futures contract purchases for the
six months ended June 30, 1997 were as follows:
EQUITY T FUTURES CONTRACTS
-----------------------------
AGGREGATE
NUMBER OF FACE VALUE OF
CONTRACTS CONTRACTS (1)
------------- -------------
Outstanding December 31, 1996 -- $ --
Opened 16 6,607,660
Closed (12) (4,833,797)
------------- -------------
Outstanding June 30, 1997 4 1,773,863
------------- -------------
------------- -------------
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
72 Notes to Financial Statements Specialty Funds
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. RELATED PARTIES
MANAGER: Frank Russell Investment Management Company ("FRIMCo" or
"Manager") operates and administers all of the Funds which comprise the
Investment Company, and manages the Money Market and the U.S. Government
Money Market Funds. FRIMCo is a wholly owned subsidiary of Frank Russell
Company, which researches and recommends to FRIMCo, and to the Investment
Company, one or more investment management organizations to manage the
portfolio of each Fund.
For the six months ended June 30, 1997, the management fee paid to the
FRIMCo, for the Funds listed below, in accordance with the Investment
Company's Management Agreement with that firm, amounted to $5,351,189
before waivers. Such fee is payable monthly and is equal to the annual
rate, by Fund, shown in the table below, of the average daily net assets of
the applicable Fund.
<TABLE>
<CAPTION>
ANNUAL RATE ANNUAL RATE
----------- -----------
<S> <C> <C> <C>
Real Estate Securities 0.85% Money Market 0.25%
Emerging Markets 1.20 Tax Free Money Market 0.25
Equity T 0.75 U.S. Government Money Market 0.25
Limited Volatility Tax Free 0.50
</TABLE>
The management contract also provides that if any Fund's expenses
(exclusive of interest and taxes) exceed specified limits imposed by the
Manager on an annual basis, such excess will be paid by FRIMCo. The Manager
has voluntarily agreed to waive a portion of its 1.20% management fee for
the Emerging Markets Fund, to the extent total fund level expenses for the
Fund exceed 1.95% of its average daily net assets on an annual basis. There
were no waivers by the Manager for the six months ended June 30, 1997.
The Manager has voluntarily agreed to waive a portion of its 0.75%
management fee for the Equity T Fund, up to the full amount of that fee,
equal to the amount by which the Fund's total operating expenses exceed
1.00% of the Fund's average daily net assets on an annual basis. In
addition, the Manager has voluntarily agreed to reimburse the Fund for any
remaining Fund operating expenses after the Manager waivers which exceed
1.00% of the Fund's average daily net assets on an annual basis. The amount
of such waiver for the six months ended June 30, 1997 was $31,246.
The Manager has voluntarily agreed to waive its 0.25% management fee for
the Money Market and U.S. Government Money Market Funds. The amount of such
waivers for the six months ended June 30, 1997 were $736,724 and $293,944,
respectively.
Effective January 1, 1997, the Manager has voluntarily agreed to waive
0.10% management fee for the Tax Free Money Market Fund. The amount of such
waiver for the six months ended June 30, 1997 was $52,798.
BOOKKEEPING SERVICES: Fees for bookkeeping and analytics services provided
to the Funds are paid or accrued to Frank Russell Company, an affiliate of
the Investment Company. Frank Russell Company provides its Portfolio
Verification System ("PVS") and TruVP System to the Real Estate Securities,
Emerging Markets and Equity T Funds, pursuant to a written Service
Agreement. The PVS computerized database system records detailed
transactions data for each of the Funds necessary to prepare various
financial and Internal Revenue Service accounting reports, whereas the
TruVP System provides analytics used by the investment department. Total
fees for the six months ended June 30, 1997 for the Real Estate Securities,
Emerging Markets and Equity T Funds were $40,072. The PVS system portion of
the service agreement was terminated during 1997.
TRANSFER AGENT: The Funds have a contract with FRIMCo, for the Funds listed
above, to provide transfer agent services to the Investment Company. Total
fees for the six months ended June 30, 1997 were $668,572.
DISTRIBUTOR AND SHAREHOLDER SERVICING: The Investment Company has adopted a
Distribution Plan pursuant to Rule 12b-1 (the "Plan") under the 1940 Act.
Under this Plan, the Investment Company is authorized to make payments to
the Distributor, or any Selling Agents, as defined in the Plan, an amount
(the "12b-1 Fee") for sales support services provided, and related expenses
incurred which are primarily intended to result in the sale of the Class C
Shares subject to the Distribution Plan.
Specialty Funds Notes to Financial Statements 73
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The Investment Company has entered into a Distribution Agreement with
Russell Fund Distributors (the "Distributor") which is a wholly-owned
subsidiary of FRIMCo to promote and offer shares of Class S and Class C of
the Investment Company. The Distributor may enter into sub-distribution
agreements with other non-affiliated parties (the "Selling/Servicing
Agents"). The amounts paid to the Distributor for distribution services
relating to Class C are included in the accompanying Statements of
Operations. The Distributor receives no compensation from the Investment
Company for its services relating to distributions of the Class S Shares.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments to the Distributor
or any Servicing Agent for any activities or expenses primarily intended to
assist, support or service the Servicing Agents' clients who beneficially
own Class C Shares of the Funds. The amounts paid to the Distributor for
shareholder services relating to Class C are included in the accompanying
Statements of Operations.
The 12b-1 Fee payments shall not exceed .75% of the average daily net
assets of a Fund's Class C Shares on an annual basis. Currently the Board
of Trustees has determined to assess a 12b-1 Fee equal to .40% of the
average daily net assets. The shareholder servicing payments shall not
exceed .25% of the average daily net assets of a Fund's Class C Shares on
an annual basis. The Investment Company does not pay for unreimbursed
expenses of the Distributor including amounts expended by the Distributor
in excess of amounts received by it from the Investment Company interest,
carrying or other financing charges in connection with excess amounts
expended, or the Distributor's overhead expenses. However, the Distributor
may be able to recover such amount or more from future payments made by the
Investment Company under the Distribution plan.
ACCRUED FEES PAYABLE TO AFFILIATES AS OF JUNE 30, 1997 WERE AS FOLLOWS:
<TABLE>
<CAPTION>
SHAREHOLDER
MANAGEMENT BOOKKEEPING TRANSFER DISTRIBUTION SERVICING
FEES SERVICE FEES AGENT FEES FEES FEES TOTALS
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Real Estate Securities $ 349,406 $ 3,406 $ 50,584 $ 144 $ 90 $ 403,630
Emerging Markets 365,301 11,557 49,515 -- -- 426,373
Equity T 37,455 1,479 2,573 -- -- 41,507
Limited Volatility Tax Free 29,137 -- 10,720 -- -- 39,857
U.S. Government Money Market -- -- 52,560 -- -- 52,560
Tax Free Money Market 11,811 -- 16,990 -- -- 28,801
------------ ------------ ------------ ------------ ------------ ------------
$ 793,110 $ 16,442 $ 182,942 $ 144 $ 90 $ 992,728
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
BOARD OF TRUSTEES: The Investment Company pays each of its Trustees not
affiliated with FRIMCo a retainer of $20,000 per year plus out-of-pocket
expenses. Total Trustee expenses were $50,202 for the six months ended
June 30, 1997, and were allocated to each Fund and Class, where
appropriate, on a pro rata basis, including 16 other affiliated funds not
presented herein.
5. MONEY MARKET FUND
The Real Estate Securities, Emerging Markets and Equity T Funds are
permitted to invest their cash reserves (i.e., monies awaiting investment
in portfolio securities suitable for the Funds' objectives) in the Frank
Russell Investment Company Money Market Fund. As of June 30, 1997,
$64,965,000 of the Money Market Fund's net assets represents investments by
these Funds and $640,976,000 represents the investments of other affiliated
Funds not presented herein.
74 Notes to Financial Statements Specialty Funds
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. FUND SHARE TRANSACTIONS
Share transactions for each Class of shares were as follows:
<TABLE>
<CAPTION>
SHARES DOLLARS
------------------------------------------ -------------------------------------------
FOR THE SIX MONTHS FOR THE YEAR FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996 (UNAUDITED) DECEMBER 31, 1996
------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
REAL ESTATE SECURITIES
CLASS S
Proceeds from shares sold 3,934,702 5,017,237 $ 113,967,887 $ 125,244,724
Proceeds from reinvestment
of distributions 285,984 1,176,858 8,249,046 30,943,033
Payments for shares redeemed (2,353,051) (3,303,765) (68,462,781) (84,501,911)
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 1,867,635 2,890,330 53,754,152 71,685,846
------------------- -------------------- -------------------- --------------------
CLASS C
Proceeds form shares sold 2,885 3,474 83,279 92,731
Proceeds from reinvestment
of distributions 1 1 8 16
Payments for shares redeemed (530) -- (15,448) --
------------------- -------------------- -------------------- --------------------
Net increase (decrease) 2,356 3,475 67,839 92,747
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 1,869,991 2,893,805 $ 53,821,991 $ 71,778,593
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
EMERGING MARKETS
CLASS S
Proceeds from shares sold 6,479,888 10,179,422 $ 87,672,349 $ 124,450,513
Proceeds from reinvestment
of distributions 129,403 256,419 1,762,464 3,073,769
Payments for shares redeemed (2,570,980) (3,913,806) (34,921,824) (48,141,914)
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 4,038,311 6,522,035 $ 54,512,989 $ 79,382,368
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
EQUITY T
Proceeds from shares sold 2,570,373 1,875,109 $ 29,286,334 $ 19,221,884
Proceeds from reinvestment
of distributions -- 4,338 -- 44,985
Payments for shares redeemed (34,931) (450) (391,854) (4,671)
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 2,535,442 1,878,997 $ 28,894,480 $ 19,262,198
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
LIMITED VOLATILITY TAX FREE
Proceeds from shares sold 1,428,976 1,424,169 $ 29,956,790 $ 30,027,835
Proceeds from reinvestment
of distributions 40,197 84,366 842,314 1,775,094
Payments for shares redeemed (1,218,924) (1,357,561) (25,545,877) (28,634,470)
------------------- -------------------- -------------------- --------------------
Total net increase (decrease) 250,249 150,974 $ 5,253,227 $ 3,168,459
------------------- -------------------- -------------------- --------------------
------------------- -------------------- -------------------- --------------------
</TABLE>
Specialty Funds Notes to Financial Statements 75
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ON A CONSTANT DOLLAR BASIS
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1997 ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------- -------------------
<S> <C> <C>
MONEY MARKET
Proceeds from shares sold 3,838,380,168 5,832,269,612
Proceeds from reinvestment of
distributions -- 90,874
Payments for shares redeemed (3,625,362,314) (5,869,071,366)
------------------- -------------------
Total net increase (decrease) 213,017,854 (36,710,880)
------------------- -------------------
------------------- -------------------
U.S. GOVERNMENT MONEY MARKET
Proceeds from shares sold 330,368,612 695,162,232
Proceeds from reinvestment
of distributions 5,054,811 7,499,618
Payments for shares redeemed (345,162,201) (612,878,224)
------------------- -------------------
Total net increase (decrease) (9,738,778) 89,783,626
------------------- -------------------
------------------- -------------------
TAX FREE MONEY MARKET
Proceeds from shares sold 108,034,722 214,968,815
Proceeds from reinvestment
of distributions 1,017,669 1,064,604
Payments for shares redeemed (119,136,900) (191,826,042)
------------------- -------------------
Total net increase (decrease) (10,084,509) 24,207,377
------------------- -------------------
------------------- -------------------
</TABLE>
There was no activity for Class C shares for the Emerging Markets Fund.
7. DIVIDENDS
On July 1, 1997, the Board of Trustees declared the following dividends
from net investment income payable on July 10, 1997, to shareholders of
record on July 2, 1997:
Real Estate Securities - Class S $0.3396
Real Estate Securities - Class C 0.2620
Limited Volatility Tax Free 0.0750
76 Notes to Financial Statements Specialty Funds
<PAGE>
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 832-6688
In Washington (253) 627-7001
TRUSTEES
George F. Russell, Jr., Chairman
Lynn L. Anderson
Paul E. Anderson
Paul Anton, PhD
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Lynn L. Anderson, President and Chief Executive Officer
Peter Apanovitch, Manager of Short Term Investment Funds
George W. Weber, Treasurer and Chief Accounting Officer
Randall P. Lert, Director of Investments
Karl Ege, Secretary and General Counsel
MANAGER AND TRANSFER AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CONSULTANT
Frank Russell Company
909 A Street
Tacoma, WA 98402
MONEY MANAGERS
REAL ESTATE SECURITIES
AEW Capital Management, L.P., Boston, MA
Cohen & Steers Capital Management, New York, NY
EMERGING MARKETS
Genesis Asset Managers, Ltd., London, England
J.P. Morgan Investment Management, Inc., New York, NY
Montgomery Asset Management, L.P., San Francisco, CA
EQUITY T FUND
J.P. Morgan Investment Management, INC., New York, NY
LIMITED VOLATILITY TAX FREE
MFS Institutional Advisors, INC., Boston, MA
T. Rowe Price Associates, INC., Baltimore, MD
MONEY MARKET
Frank Russell Investment Management CO., Tacoma, WA
U.S. GOVERNMENT MONEY MARKET
Frank Russell Investment Management CO., Tacoma, WA
TAX FREE MONEY MARKET
Weiss, Peck & Greer, L.L.C., New York, NY
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) RUSSEL4
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 - One Commerce Square
Philadelphia, PA 19103-7098
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
THIS REPORT IS PREPARED FROM THE BOOKS AND RECORDS OF THE FUNDS AND IS
SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS AND IS NOT AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS ACCOMPANIED OR PRECEDED BY
AN EFFECTIVE PROSPECTUS. NOTHING HEREIN CONTAINED IS TO BE CONSIDERED AN
OFFER OF SALE OR A SOLICITATION OF AN OFFER TO BUY SHARES OF FRANK RUSSELL
INVESTMENT COMPANY. SUCH OFFERING IS MADE ONLY BY PROSPECTUS, WHICH INCLUDES
DETAILS AS TO OFFERING PRICE AND OTHER MATERIAL INFORMATION.
Specialty Funds Manager, Money Managers and Service Providers 77
